Log in
E-mail
Password
Show password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
  1. Homepage
  2. Equities
  3. United States
  4. Nyse
  5. Culp, Inc.
  6. News
  7. Summary
    CULP   US2302151053

CULP, INC.

(CULP)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

CULP : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

09/10/2021 | 01:14pm EDT
The following analysis of financial condition and results of operations should
be read in conjunction with the consolidated financial statements and notes and
other exhibits included elsewhere in this report.

General

Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30. The three months ended August 1, 2021, and August 2, 2020, both represent 13-week periods.


Our operations are classified into two business segments: mattress fabrics and
upholstery fabrics. The mattress fabrics segment manufactures, sources, and
sells fabrics and mattress covers primarily to bedding manufacturers. We have
mattress fabric operations located in Stokesdale, NC, High Point, NC, and
Quebec, Canada. Additionally, we acquired the remaining fifty percent ownership
interest in our former unconsolidated joint venture in Ouanaminthe, Haiti,
during the fourth quarter of fiscal 2021. As a result, we are now the sole owner
with full control of this cut and sewn mattress cover operation (see Note 3 of
the consolidated financial statements for further details regarding this
business combination).

The upholstery fabrics segment develops, sources, manufactures, and sells
fabrics primarily to residential and commercial furniture manufacturers. We have
upholstery fabric operations located in Shanghai, China, and Burlington, NC. We
also commenced construction on a new leased facility in Haiti during the fourth
quarter of last fiscal year. This new operation will be dedicated to production
of cut and sewn upholstery kits and is expected to begin operating during the
second quarter of this fiscal year. Additionally, Read Window Products, LLC
("Read"), a wholly-owned subsidiary with operations located in Knoxville, TN,
provides window treatments and sourcing of upholstery fabrics and other
products, as well as measuring and installation services of Read's products, to
customers in the hospitality and commercial industries. Read also supplies soft
goods such as decorative top sheets, coverlets, duvet covers, bed skirts,
bolsters, and pillows.

Executive Summary


We evaluate the operating performance of our business segments based upon income
(loss) from operations before certain unallocated corporate expenses, asset
impairments, restructuring credit (expense) and related charges, and other
non-recurring items. Cost of sales in each segment includes costs to develop,
manufacture, or source our products, including costs such as raw material and
finished good purchases, direct and indirect labor, overhead, and incoming
freight charges. Unallocated corporate expenses primarily represent compensation
and benefits for certain executive officers and their support staff, all costs
associated with being a public company, and other miscellaneous expenses.

Results of Continuing Operations



                                                         Three Months Ended
(dollars in thousands)                           August 1, 2021      August 2, 2020          Change
Net sales                                       $         83,047     $        64,464          28.8%
Gross profit                                              12,499               9,901          26.2%
Gross profit margin                                         15.1 %              15.4 %       (30)bp
Selling, general, and administrative expenses              9,181               8,018          14.5%
Income from operations                                     3,318               1,883          76.2%
Operating margin                                             4.0 %               2.9 %        110bp
Income before income taxes                                 3,155               1,524         107.0%
Income tax expense                                           905               4,324         (79.1)%
Net income (loss)                                          2,250              (2,733 )        N.M.








Net Sales

Overall, our net sales for the first quarter of fiscal 2022 increased by 28.8%
compared with the same period a year ago, with mattress fabrics sales increasing
19.3% and upholstery fabrics sales increasing 41.0%. The first quarter of fiscal
2021 was negatively affected by the economic disruption caused by the COVID-19
pandemic, especially during the early part of the quarter.

The increase in net sales in both segments reflects increased demand for both
our mattress and residential upholstery fabric products, as well as our ability
to meet this demand and respond quickly to the needs of our customers through
our flexible global platform and the support of our long-term supplier
relationships. It also reflects a price increase that was effective during the
quarter for both divisions, which increased our consolidated net sales by
approximately 2.5%.

                                      I-28


--------------------------------------------------------------------------------

See the Segment Analysis section below for further details.

Income Before Income Taxes

Our income before income taxes for the first quarter of fiscal 2022 was $3.2 million, compared with $1.5 million for the prior-year period.


Our improved operating performance for the first quarter of fiscal 2022
primarily reflects higher sales as compared with the same period a year ago,
partially offset by higher freight and raw material costs, unfavorable foreign
exchange rate fluctuations associated with our operations in China and Canada,
and operating inefficiencies due to labor shortages in the U.S. and Canada.

See the Segment Analysis section below for further details.

Income Taxes


We recorded income tax expense of $905,000, or 28.7% of income before income
taxes, for the three-month period ended August 1, 2021, compared with income tax
expense of $4.3 million, or 283.7% of income before income taxes, for the
three-month period ended August 2, 2020. Our effective income tax rate during
the first quarter of fiscal 2022 was negatively affected, but not nearly to the
extent as in the first quarter of fiscal 2021, by the mix of taxable income that
is mostly earned by our foreign operations located in China and Canada, which
have higher income tax rates than the U.S. This is due mostly to higher annual
forecasted taxable income from our U.S. operations as of the end of the first
quarter of fiscal 2022 compared with the annual forecasted taxable income as of
the end of the first quarter of fiscal 2021, which was affected by the ongoing
disruption and uncertain economic conditions relating to the COVID-19 pandemic
during the first quarter of fiscal 2021. Income tax expense during the first
quarter of fiscal 2021 was also affected by a $3.7 million net income tax
charge, which consisted of a $7.2 million non-cash income tax charge to record a
full valuation allowance against the company's U.S. net deferred income tax
assets, partially offset by a $3.5 million non-cash income tax benefit that
re-established certain U.S. federal net operating loss carryforwards in
connection with U.S.Treasury regulations regarding the Global Intangible Low
Taxed Income ("GILTI") tax provisions of the Tax Cuts and Jobs Act of 2017.

Refer to Note 13 of the consolidated financial statements for further details regarding our provision for income taxes.

Liquidity

As of August 1, 2021, our cash and cash equivalents, short-term investments (available for sale), and short-term and long-term investments (held-to-maturity) (collectively "cash and investments") totaled $44.0 million compared with $46.9 million as of May 2, 2021.


The decrease in our cash and investments from the end of fiscal 2021 was mostly
due to (i) $2.0 million of capital expenditures primarily related to our
mattress fabrics segment and our innovation campus located in downtown High
Point, NC, (ii) a cash payment of $1.4 million for a regular quarterly dividend
payment to shareholders, and (iii) common stock repurchases totaling $723,000,
partially offset by (iv) net cash provided by operating activities totaling $1.6
million.

Our net cash provided by operating activities was $1.6 million during the first
quarter of fiscal 2022, compared with $10.6 million during the first quarter of
fiscal 2021. This decrease was mostly due to (i) increased inventory purchases
due to increased sales volume, (ii) annual incentive plan award payments made
during the first quarter of fiscal 2022 (compared with minimal payments made
during the first quarter of fiscal 2021), (iii) an increase in income tax
payments due primarily to an Alternative Minimum Tax credit refund of $745,000
received during the first quarter of fiscal 2021 that did not recur during
fiscal 2022, and a withholding tax payment made to the Chinese government of
$533,000 during the first quarter (such payment was not made until the third
quarter of fiscal 2021), and (iv) payments relating to our new building lease
associated with our upholstery cut and sewn operation located in Haiti,
partially offset by (v) improved cash collections on accounts receivable
resulting from more customers taking advantage of early payment discounts and
their continuing return to making payments based on normal credit terms, rather
than the extended terms previously granted in response to the COVID-19 pandemic.

As of August 1, 2021, there were no outstanding borrowings under our lines of credit.


Dividend Program

On September 1, 2021, our board of directors approved a quarterly cash dividend of $0.11 per share. This payment will be made on October 18, 2021, to shareholders of record as of October 11, 2021.

                                      I-29



--------------------------------------------------------------------------------


During the first quarter of fiscal 2022, dividend payments totaled $1.4 million,
which represented a quarterly dividend payment of $0.11 per share. During the
first quarter of fiscal 2021, dividend payments totaled $1.3 million, which
represented a quarterly dividend payment of $0.105 per share.

Common Stock Repurchases


In March 2020, our board of directors approved an authorization for us to
acquire up to $5.0 million of our common stock. Under the common stock
repurchase program, shares may be purchased from time to time in open market
transactions, block trades, through plans established under the Securities
Exchange Act Rule 10b5-1, or otherwise. The number of shares purchased, and the
timing of such purchases, will be based on working capital requirements, market
and general business conditions, and other factors, including alternative
investment opportunities.

During the first quarter of fiscal 2022, we repurchased 48,686 shares of common stock at a cost of $723,000. As a result, as of August 1, 2021, we had $4.3 million available for additional repurchases of our common stock.


During the first quarter of fiscal 2021, we did not repurchase any shares of our
common stock.

Segment Analysis

Mattress Fabrics Segment



                                                         Three Months Ended
(dollars in thousands)                           August 1, 2021      August 2, 2020         Change
Net sales                                       $         43,058     $        36,103        19.3%
Gross profit                                               6,795               4,608        47.5%
Gross profit margin                                         15.8 %              12.8 %      300bp
Selling, general, and administrative expenses              3,184               2,763        15.2%
Income from operations                                     3,611               1,845        95.7%
Operating margin                                             8.4 %               5.1 %      330bp





Net Sales

Mattress fabrics sales increased 19.3% in the first quarter of fiscal 2022 compared to the prior-year period, which was adversely affected by disruption from the COVID-19 pandemic.


The increase in mattress fabrics net sales for the quarter reflects an increase
in demand driven by the continued strength of our product offerings. It was also
supplemented by a price increase implemented during the quarter to help offset
certain inflationary pressures, which increased net sales by approximately
3.0%.

During the quarter, the strength and flexibility of our global manufacturing and
sourcing operations in the U.S., Canada, Haiti, Asia, and Turkey enabled us to
support current demand levels and serve the needs of our mattress fabrics and
cover customers. We maintained our focus on product innovation, creative
designs, and customer marketing during the quarter, and we further expanded our
digital design platform to offer enhanced accessibility for our
customers. Demand trends for sewn mattress covers also remained strong, as our
on-shore, near-shore, and off-shore supply chain strategy, as well as our
fabric-to-cover model, continued to provide a preferred platform that provides
customers with the agility and value they need for their business.

Looking ahead, we are faced with some continued near-term pressures relating to
labor shortages and ongoing customer capacity limitations due to supply chain
disruption for non-fabric components, but we expect that most of these headwinds
are temporary. Additionally, the ongoing impact of the COVID-19 pandemic remains
unknown and depends on factors beyond our knowledge or control, including the
duration and severity of the outbreak, actions taken to contain its spread and
mitigate the public health and economic effects, the short- and long-term
disruption of the global economy, consumer confidence, unemployment, employee
health, and the financial health of our customers, suppliers, and distribution
channels. At this time, we cannot reasonably estimate the ongoing impact of the
COVID-19 pandemic on our mattress fabrics segment; however, if conditions
relating to the pandemic worsen, the disruption could adversely affect our
operations and financial performance.

Gross Profit, Selling, General & Administrative Expenses, and Operating Income


The increase in mattress fabrics profitability during the first quarter of
fiscal 2022, as compared to the prior-year period, was primarily due to the
higher mattress fabrics sales noted above, somewhat offset by increased raw
material prices, freight costs, unfavorable foreign currency fluctuations in
Canada and China, and inefficiencies due to labor shortages at our facilities in
the U.S. and Canada. Our previously implemented price increase helped cover some
inflationary pressures. However, with the continued rapid rise in labor,
freight, and raw material costs, we are implementing a surcharge during the
second quarter to

                                      I-30
--------------------------------------------------------------------------------

further mitigate these pressures. This surcharge will not take effect until midway through the second quarter, resulting in a temporary cost-price lag that will affect our profitability during the period.

We expect continued near-term inflationary pressures relating to increasing labor, freight, and raw material costs, as well as ongoing foreign currency fluctuations in China and Canada. We believe most of these headwinds are temporary and will be mitigated to some extent by the surcharge noted above, as well as our ongoing efforts to control costs.

CLASS International Holdings, Ltd. ("CIH")


Effective January 1, 2017, Culp International Holdings, Ltd. ("Culp
International"), a wholly-owned subsidiary of the company, entered into a joint
venture agreement pursuant to which Culp International owned 50% of Class
International Holdings, Ltd. ("CIH"). During the fourth quarter of fiscal 2021,
Culp International acquired the remaining 50% ownership interest in CIH from its
former joint venture partner, such that we are now the sole owner with full
control of CIH. CIH produces cut and sewn mattress covers and is housed in two
facilities totaling 120,000 square feet, located in a modern industrial park on
the northeastern border of Haiti. We believe having sole ownership of this
operation enhances our capacity and increases our flexibility by having
near-shore capabilities that help us meet the needs of our mattress cover
customers. See Note 3 of the consolidated financial statements for further
details regarding this business combination.

Segment assets

Segment assets consist of accounts receivable, inventory, property, plant, and equipment, right of use assets, and investment in unconsolidated joint venture.




(dollars in thousands)                            August 1, 2021      August 2, 2020       May 2, 2021
Accounts receivable                               $        18,016$        15,585$      20,427
Inventory                                                  31,778              20,070            30,047
Property, plant & equipment                                40,881              39,597            41,264
Right of use assets                                         4,058                 832             4,278
Investment in unconsolidated joint venture                      -               1,759                 -
                                                  $        94,733$        77,843$      96,016

Refer to Note 12 of the consolidated financial statements for disclosures regarding determination of our segment assets.

Accounts Receivable


As of August 1, 2021, accounts receivable increased by $2.4 million, or 15.6%,
compared with August 2, 2020. This increase reflects the significant increase in
net sales during the first quarter of fiscal 2022 compared with the first
quarter of fiscal 2021. Net sales during the first quarter of fiscal 2021 were
adversely affected by the economic disruption caused by the COVID-19 pandemic.
Although we experienced a substantial increase in net sales during the first
quarter of fiscal 2022, the increase in accounts receivable was partially offset
by improved cash collections during the first quarter of fiscal 2022 as compared
with the first quarter of fiscal 2021. The improved cash collections are due to
more customers taking advantage of early payment discounts, as well as their
continued return to making payments based on normal credit terms as opposed to
the extended terms previously granted in response to the COVID-19 pandemic.

As of August 1, 2021, accounts receivable decreased by $2.4 million, or 11.8%,
compared with May 2, 2021. This decrease reflects improved cash collections
during the first quarter of fiscal 2022 compared with the fourth quarter of
fiscal 2021, as more customers started taking advantage of early payment
discounts and also continued their return to making payments based on normal
credit terms, as opposed to extended terms previously granted in response to the
COVID-19 pandemic.

Days' sales outstanding was 37 days for the first quarter of fiscal 2022, compared with 39 days for the first quarter of fiscal 2021 and 43 days for the fourth quarter of fiscal 2021.

Inventory


As of August 1, 2021, inventory increased by $11.7 million, or 58.3%, compared
August 2, 2020. This increase reflects the significant increase in net sales
during the first quarter of fiscal 2022 as compared with the first quarter of
fiscal 2021. Net sales during the first quarter of fiscal 2021 were adversely
affected by the economic disruption caused by the COVID-19 pandemic.

As of August 1, 2021, inventory modestly increased by $1.7 million, or 5.8%,
compared with May 2, 2021. This increase represents management's ability to
maintain a consistent level of inventory that reflects our focus on inventory
management and

                                      I-31
--------------------------------------------------------------------------------


aligning our inventory purchases to reflect current demand trends. Net sales
during the first quarter of fiscal 2022 and the fourth quarter of fiscal 2021
were $43.1 million and $42.9 million, respectively.

Inventory turns were 4.7 for the first quarter of fiscal 2022, compared with 5.9
for the first quarter of fiscal 2021 and 4.2 for the fourth quarter of fiscal
2021.

Property, Plant, & Equipment



The $40.9 million as of August 1, 2021, represents property, plant, and
equipment of $27.6 million, $12.4 million, and $875,000 located in the U.S.,
Canada, and Haiti, respectively. The $39.6 million as of August 2, 2020,
represents property, plant, and equipment of $27.0 million and $12.6 million
located in the U.S. and Canada, respectively. The $41.3 million as of May 2,
2021, represents property, plant, and equipment of $28.4 million, $12.0 million,
and $855,000 located in the U.S., Canada, and Haiti, respectively.

Property, plant, and equipment amounts are comparable for the periods presented as capital expenditures have been made commensurate with depreciation expense.

Right of Use Assets


The $4.1 million as of August 1, 2021, represents right of use assets of $2.3
million, $1.4 million, and $355,000 located Haiti, the U.S., and Canada,
respectively. The $832,000 as of August 2, 2020, represents right of use assets
of $535,000 and $297,000 located in Canada and the U.S., respectively. The $4.3
million as of May 2, 2021, represents right of use assets of $2.4 million, $1.4
million, and $400,000 located in Haiti, the U.S., and Canada, respectively.

As of August 1, 2021, and May 2, 2021, right of use assets have increased significantly from August 2, 2020. This increase mostly represents (i) $2.5 million that related to building leases acquired from Class International Holdings, Ltd. ("CIH"); and (ii) $879,000 that related to the renewal and amendment of a building lease located in the U.S. associated with our mattress cover operation.

Investment in Unconsolidated Joint Venture


As of August 2, 2020, our investment in unconsolidated joint venture represented
our 50% ownership in CIH and was accounted for under the equity method in
accordance with ASC Topic 823. Accordingly, the carrying value of our investment
in CIH was reported as a single line item in the Consolidated Balance Sheets
titled "Investment in unconsolidated joint venture". Effective February 1, 2021,
we entered into an agreement with our former joint venture partner to acquire
the remaining 50% interest in CIH. Pursuant to this transaction, we are now the
sole owner with full control over CIH. Accordingly, our consolidated financial
statements now include all of the accounts of CIH, and any significant
intercompany balances and transactions have been eliminated. Furthermore, the
equity method will no longer be used and the former investment in unconsolidated
joint venture is now included in the net assets of our now 100% interest in CIH

See Note 3 to the consolidated financial statements for further details.


Upholstery Fabrics Segment

Net Sales



                                           Three Months Ended
(dollars in thousands)   August 1, 2021                August 2, 2020                 % Change
Non-U.S. Produced        $        38,222        96 %   $        26,011        92 %         46.9 %
U.S. Produced                      1,767         4 %             2,350         8 %        (24.8 )%
Total                    $        39,989       100 %   $        28,361       100 %         41.0 %



Upholstery fabrics sales increased 41.0% in the first quarter of fiscal 2022
compared to the prior-year period, which was adversely affected by disruption
from the COVID-19 pandemic.



The increase in upholstery fabrics net sales for the quarter reflects a
significant increase in demand for our residential upholstery business compared
to the prior-year period, partially offset by lower sales for Read Window
Products in our hospitality business, which remained under significant pressure
from the ongoing COVID-19 disruption that continues to affect the travel and
leisure industries. The increase in net sales for the first quarter also
reflects a price increase that was implemented on products sold in the U.S. to
help offset unfavorable foreign currency exchange rate fluctuations associated
with our operations in China. This price increase accounted for approximately
1.5% of net sales for the quarter.

.

                                      I-32


--------------------------------------------------------------------------------


Our residential upholstery fabrics business continued to benefit from growth in
our market reach, the flexibility of our Asian platform, and the success of our
product innovation strategy, including the continued popularity of our
LiveSmart® product portfolio. Our highly durable, stain-resistant LiveSmart®
performance fabrics, as well as our LiveSmart Evolve® performance plus
sustainability fabrics, are important drivers of growth in our residential
business. These product lines continued to experience strong demand trends
amidst consumer desire for cleanability, ease of maintenance, and
environmentally-conscious products.

Looking ahead, we are encouraged by the demand trends in our residential
upholstery business. We expect that certain near-term headwinds, including
customer supply chain constraints and ongoing pandemic-related disruptions such
as quarantine and shutdown requirements currently affecting our sourcing
partners in Vietnam, may temporarily pressure our business during fiscal
2022. However, we believe that our flexible Asian platform and the addition of
our new facility in Haiti near the end of the second quarter, as well as our
long-term supplier relationships and product-driven strategy, will benefit us as
we navigate these challenges.

Notably, the ongoing economic and health effects of the COVID-19 pandemic, as
well as the duration of such effects, remain unknown and depend on factors
beyond our control. At this time, we cannot reasonably estimate the ongoing
impact of the pandemic on our upholstery fabrics segment, but note that if
conditions worsen, the impact on our employees, suppliers, consumers, and the
global economy could adversely affect our operations and financial performance.

Gross Profit, Selling, General & Administrative Expenses, and Operating Income



                                                          Three Months Ended
(dollars in thousands)                           August 1, 2021        August 2, 2020         Change
Gross profit                                               5,704                 5,293         7.8%
Gross profit margin                                         14.3 %                18.7 %      (440)bp
Selling, general, and administrative expenses              3,437                 3,180         8.1%
Income from operations                                     2,267                 2,113         7.3%
Operating margin                                             5.7 %                 7.5 %      (180)bp



The decrease in upholstery fabrics profitability for the first quarter of fiscal
2022, as compared to the prior-year period, primarily reflects a dramatic
increase in freight costs, unfavorable foreign currency fluctuations associated
with our operations in China, lower sales in Read, and start-up costs for our
new Haiti facility.



Looking ahead, we expect that further pressures relating to rising freight and
U.S. labor costs, as well as ongoing China foreign exchange rate fluctuations
and additional start-up costs for our new facility in Haiti, may temporarily
pressure our profitability during fiscal 2022. Our previously implemented price
increase has helped offset foreign currency exchange rate fluctuations to some
extent, as intended, but we are implementing an additional freight surcharge
during the second quarter to help mitigate a continued rise in freight costs.

Segment Assets

Segment assets consist of accounts receivable, inventory, property, plant, and equipment, and right of use assets.



(dollars in thousands)        August 1, 2021      August 2, 2020       May 2, 2021
Accounts receivable           $        16,992$        14,308$      17,299
Inventory                              26,835              20,332            25,870
Property, plant & equipment             2,080               1,634             1,925
Right of use assets                     5,984               3,802             5,945
                              $        51,891$        40,076$      51,039

Refer to Note 12 of the consolidated financial statements for disclosures regarding determination of our segment assets.

Accounts Receivable


As of August 1, 2021, accounts receivable increased by $2.7 million, or 18.8%,
compared with August 2, 2020. This increase reflects the significant increase in
net sales during the first quarter of fiscal 2022, as compared with the first
quarter of fiscal 2021. Net sales during the first quarter of fiscal 2021 were
adversely affected by the economic disruption caused by the COVID-19 pandemic.
Although we experienced a substantial increase in net sales during the first
quarter of fiscal 2022, the increase in accounts receivable was partially offset
by improved cash collections during the first quarter of fiscal 2022 as compared
with the first quarter of fiscal 2021. The improved cash collections were due to
our customers' continuing return to making payments based on normal credit terms
as opposed to the extended terms previously granted in response to the COVID-19
pandemic.

                                      I-33
--------------------------------------------------------------------------------


As of August 1, 2021, accounts receivable modestly decreased by 1.8%, as
compared with May 2, 2021. This decrease reflects improved cash collections due
to our customers' continuing return to making payments based on normal credit
terms as opposed to extended terms previously granted in response to the
COVID-19 pandemic. Although we experienced a substantial improvement in cash
collections during the first quarter of fiscal 2022, the decrease in accounts
receivable was partially offset by an increase in net sales during the first
quarter of fiscal 2022, as compared with the fourth quarter of fiscal 2021, due
to plant shutdowns for the Chinese New Year holiday that occurred during the
fourth quarter of fiscal 2021. Net sales were $40.0 million during the first
quarter of fiscal 2022, an increase of $3.9 million, or 10.8%, compared with
$36.1 million during the fourth quarter of fiscal 2021.

Days' sales outstanding were 38 days during the first quarter of fiscal 2022, as
compared with 44 days during the first quarter of fiscal 2021 and 42 days during
the fourth quarter of fiscal 2021.

Inventory


As of August 1, 2021, inventory increased by $6.5 million, or 32.0%, compared
with August 2, 2020. This increase reflects the significant increase in net
sales during the first quarter of fiscal 2022 compared with the first quarter of
fiscal 2021. Net sales during the first quarter of fiscal 2021 were adversely
affected by the economic disruption caused by the COVID-19 pandemic.

As of August 1, 2021, inventory increased by $1.0 million, or 3.7%, compared
with May 2, 2021. This increase reflects the increase in net sales during the
first quarter of fiscal 2022, compared with the fourth quarter of fiscal 2021,
due to plant shutdowns for the Chinese New Year holiday that occurred during
that period, as noted above. Net sales were $40.0 million during the first
quarter of fiscal 2022, an increase of $3.9 million, or 10.8%, compared with
$36.1 million during the fourth quarter of fiscal 2021.

Inventory turns were 4.9 for the first quarter of fiscal 2022, as compared with 4.3 for the first quarter of fiscal 2021 and 4.6 for the fourth quarter of fiscal 2021.

Property, Plant, & Equipment


The $2.1 million as of August 1, 2021, represents property, plant, and equipment
of $1.1 million, $830,000, and $130,000 located in the U.S., China, and Haiti,
respectively. The $1.6 million as of August 2, 2020, represents property, plant,
and equipment of $1.2 million and $456,000 located in the U.S. and China,
respectively. The $1.9 million as of May 2, 2021, represents property, plant,
and equipment of $1.1 million and $850,000 located in the U.S. and China,
respectively.

Property, plant, and equipment amounts are comparable for the periods presented as capital expenditures have been made commensurate with depreciation expense.

Right of Use Assets


The $6.0 million as of August 1, 2021, represents right of use assets of $4.6
million and $1.4 million located in China and the U.S., respectively. The $3.8
million as of August 2, 2020, represents right of use assets of $3.1 million and
$710,000 located in China and the U.S., respectively. The $5.9 million as of May
2, 2021, represents right of use assets of $5.0 million and $952,000 located in
China and the U.S., respectively.

Effective April 9, 2021, we entered into an agreement to lease a 90,000 square
foot facility located in a modern industrial park on the northeastern border of
Haiti. The lease term is expected to commence during the second quarter of
fiscal 2022, after construction of the facility has been completed, and at such
time, we will have control of the facility based on the terms of the lease. As a
result, right of use assets are expected to increase by $2.8 million at the
commencement of the lease.



Other Income Statement Categories



                                   Three Months Ended
(dollars in thousands)    August 1, 2021        August 2, 2020      % Change
SG&A expenses            $          9,181      $          8,018          14.5 %
Interest expense                        -                    51        (100.0 )%
Interest income                        74                    58          27.6 %
Other expense                         237                   366         (35.2 )%


Selling, General, and Administrative Expenses




The increase in selling, general, and administrative expenses during the first
quarter of fiscal 2022, as compared with the first quarter of fiscal 2021, is
mostly due to our significant cost cutting measures during the fourth quarter of
fiscal 2020 that continued into the first quarter of fiscal 2021 as part of our
comprehensive response to the COVID-19 global pandemic. These

                                      I-34



--------------------------------------------------------------------------------


cost cutting measures primarily related to compensation and included (i)
temporary salary reductions, (ii) workforce adjustments to align with demand,
(iii) suspended merit pay increases, and (iv) aggressively reduced discretionary
spending such as professional fees and travel and entertainment expenses.

Interest Expense

During the first quarter of fiscal 2022, we did not incur any interest expense, as we did not have any borrowings outstanding during such time.


During the first quarter of fiscal 2021, interest expense was attributable to
interest paid on amounts borrowed during the fourth quarter of fiscal 2020 in
connection with the economic uncertainty and disruption associated with the
COVID-19 global pandemic. During the fourth quarter of fiscal 2020, we borrowed
$30.8 million under our lines of credit and applied for and received a $7.6
million loan under the SBA's Paycheck Protection Program. The total amount of
these borrowings was repaid during the first quarter of fiscal 2021.

Interest Income


Interest income reflects interest earned on our current investments of excess
cash held in (i) money market funds, (ii) bond, other fixed income, and
equity-related mutual funds, and (iii) investment-grade U.S. corporate, foreign,
and government bonds, as well as (iv) interest earned on a money market fund and
equity-related mutual fund investment associated with our rabbi trust that funds
our deferred compensation plan.

The increase in interest income during the first quarter of fiscal 2022, as
compared with the first quarter of fiscal 2021, reflects an increase in our
investments during the first quarter of fiscal 2022 as compared with the first
quarter of fiscal 2021. Our investments include short-term investments
(available for sale), short-term and long-term investments (held-to-maturity),
and long-term investments associated with our rabbi trust. These investments
totaled $26.8 million and $15.3 million as of August 1, 2021, and August 2,
2020, respectively.

Other Expense


The decrease in other expense during the first quarter of fiscal 2022, as
compared with the first quarter of fiscal 2021, was due mostly to more favorable
foreign currency exchange rates applied against balance sheet accounts
denominated in Chinese Renminbi to determine the corresponding U.S. dollar
financial reporting amounts. During the first quarter of fiscal 2022, we
reported a foreign exchange loss associated with our operations located in China
of $9,000 compared with $139,000 for the first quarter of fiscal 2021.

Income Taxes

Effective Income Tax Rate & Income Tax Expense


We recorded income tax expense of $905,000, or 28.7% of income before income
taxes, for the three-month period ending August 1, 2021, compared with income
tax expense of $4.3 million, or 283.7% of income before income taxes, for the
three-month period ending August 2, 2020.

Our effective income tax rates for the three-month periods ended August 1, 2021,
and August 2, 2020, were based upon the estimated effective income tax rate
applicable for the full year after giving effect to any significant items
related specifically to interim periods. When calculating the annual estimated
effective income tax rate for the three-month periods ended August 1, 2021, and
August 2, 2020, we were subject to a loss limitation rule in accordance with ASC
Topic 740-270-30-36(a). This loss limitation rule requires any taxable loss
associated with our U.S. or foreign operations to be excluded from the annual
estimated effective income tax rate calculation if it was determined that no tax
benefit could be recognized during the current fiscal year. The effective income
tax rate can be affected over the fiscal year by the mix and timing of actual
earnings from our U.S. operations and foreign subsidiaries located in China,
Canada, and Haiti versus annual projections, as well as changes in foreign
currency exchange rates in relation to the U.S. dollar.

                                      I-35



--------------------------------------------------------------------------------


The following schedule summarizes the principal differences between income tax
expense at the U.S. federal income tax rate and the effective income tax rate
reflected in the consolidated financial statements for the three-month periods
ending August 1, 2021, and August 2, 2020:



                                                                   Three Months Ended
                                                           August 1, 2021       August 2, 2020
U.S. federal income tax rate                                          21.0 %               21.0 %
U.S. valuation allowance                                              (3.9 )              474.4
U.S. income tax law change                                               -               (232.5 )
Withholding taxes associated with foreign jurisdictions                6.2                 10.1
Foreign income tax rate differential                                   1.6                  9.1
Global Intangible Low Taxed Income Tax ("GILTI")                       3.4                    -
Other                                                                  0.4                  1.6
                                                                      28.7 %              283.7 %




Our effective income tax rate during the first quarter of fiscal 2022 was
negatively affected, but not nearly to the extent as in the first quarter of
fiscal 2021, by the mix of taxable income that is mostly earned by our foreign
operations located in China and Canada, which have higher income tax rates than
the U.S. This is due mostly to higher annual forecasted taxable income from our
U.S. operations as of the end of the first quarter of fiscal 2022, as compared
with lower annual forecasted taxable income as of the end of the first quarter
of fiscal 2021. The annual forecasted taxable income at the end of the first
quarter of fiscal 2021 was significantly affected by the ongoing disruption and
uncertain economic conditions relating to the COVID-19 pandemic. As a result of
the increase in forecasted taxable income, the principal differences in the
above table are not as pronounced during the first quarter of fiscal 2022 as
compared with those differences during the first quarter of fiscal 2021.

GILTI



Fiscal 2021



Effective July 20, 2020, the U.S. Treasury Department finalized and enacted
previously proposed regulations regarding the GILTI tax provisions of the Tax
Cuts and Jobs Act of 2017 ("TCJA"). With the enactment of these final
regulations, we became eligible for an exclusion from GILTI if we meet the
provisions of the GILTI High-Tax exception included in these final regulations.
To meet the provisions of the GILTI high tax exception, the tested foreign
entity's effective income tax rate related to current year's earnings must be
higher than 90% of the U.S. Federal income tax rate of 21% (i.e., 18.9%). In
addition, the enactment of the new regulations and the provisions for the GILTI
High-Tax exception are retroactive to the original enactment of the GILTI tax
provision, which includes our 2019 and 2020 fiscal years.

Since we met the requirements for the High-Tax exception for our 2019 and 2020
fiscal years, we recorded a non-cash income tax benefit of $3.5 million
resulting from the re-establishment of certain U.S. federal net operating loss
carryforwards. This $3.5 million income tax benefit was recorded as a discrete
event in which its full income tax effects were recorded in the first quarter of
fiscal 2021.

Additionally, we met the requirements for the High-Tax exception for our 2021 fiscal year, and therefore, were not subject to GILTI tax.

Fiscal 2022

As of the end of the first quarter of fiscal 2022, we believe we will not meet the requirements for the GILTI High-Tax exception regarding our foreign subsidiaries located in Canada and Haiti, and therefore, will be subject to GILTI tax for the 2022 fiscal year.




Based on our assessment associated with our operation located in Canada, we
expect that several significant capital projects will be placed into service
during fiscal 2022, and therefore we will be eligible for a significant amount
of deductible accelerated depreciation. As a result, our current year's income
tax expense is expected to be much lower than prior fiscal years', and
therefore, our projected current effective income tax rate is expected to be
lower than the required 18.9% current effective income tax rate to meet the
GILTI High-Tax exception provision.



                                      I-36
--------------------------------------------------------------------------------




Based on our assessment associated with our operations located in Haiti, we
expect to earn taxable income that is not subject to income tax, as we are
located in an economic zone that permits a 0% income tax rate for the first
fifteen years of operations, for which we have ten years remaining. Since our
operations located in Haiti are not expected to be subject to income tax, our
projected current effective income tax rate of 0% will be lower than the
required 18.9% current effective income tax rate to meet the GILTI High-Tax
exception. Fiscal 2022 is the first fiscal year in which we expect to earn
taxable income from our operations located in Haiti.



Valuation Allowance


In accordance with ASC Topic 740, we evaluate the realizability of our deferred
income taxes to determine if a valuation allowance is required. ASC Topic 740
requires that companies assess whether a valuation allowance should be
established based on the consideration of all available evidence using a
"more-likely-than-not" standard, with significant weight being given to evidence
that can be objectively verified. Since the company operates in multiple
jurisdictions, we assess the need for a valuation allowance on a
jurisdiction-by-jurisdiction basis, considering the effects of local tax law.

As a result of the U.S. tax law change relating to the GILTI tax provisions of
the TCJA, we assessed the need for an additional valuation allowance against our
U.S. net deferred income taxes as of the end of the first quarter of fiscal
2021. GILTI represented a significant source of our U.S. taxable income during
fiscal 2019 and 2020 that offset our U.S. pre-tax losses during such years, and
which offset was reversed as a result of the retroactivity of the new GILTI
regulations. Consequently, due to the retroactivity of the new regulations, we
experienced a recent history of cumulative U.S. taxable losses during our last
two fiscal years, and we expected at the time of this assessment that our
history of U.S. pre-tax losses would continue into fiscal 2021. As a result of
the significant weight of this negative evidence, we believed it was
more-likely-than-not that our U.S. net deferred income tax assets would not be
fully realizable. Accordingly, we recorded a non-cash income tax charge of $7.0
million to provide for a full valuation allowance against our U.S. net deferred
income tax assets. This $7.0 million income tax charge was recorded as a
discrete event in which its full income tax effects were recorded during the
first quarter of fiscal 2021.

As of August 1, 2021, we evaluated the realizability of our U.S. net deferred
income tax assets to determine if a full valuation allowance was required. Based
on our assessment, we determined we have a recent history of cumulative U.S.
taxable losses, in that we experienced U.S. taxable losses during each of the
fiscal years 2020 and 2021. In addition, as of August 1, 2021, we are currently
expecting U.S. taxable income during fiscal 2022 stemming from the source of
taxable income provided by GILTI noted above. However, the cumulative losses
that we have experienced during fiscal years 2020 and 2021 significantly exceed
the U.S. taxable income expected during fiscal 2022. As a result of the
significant weight of this negative evidence, we believe it is more likely than
not that our U.S. deferred income tax assets will not be fully realizable, and
therefore we provided for a full valuation allowance against our U.S. net
deferred income tax assets.



Based on our assessments as of August 1, 2021, August 2, 2020, and May 2, 2021, valuation allowances against our net deferred income taxes pertain to the following:




(dollars in thousands)                           August 1, 2021      August 2, 2020       May 2, 2021
U.S. federal and state net deferred income tax
assets                                           $         9,221               7,830             9,344
U.S. capital loss carryforward                             2,330               2,281             2,330
                                                 $        11,551              10,111            11,674





Undistributed Earnings

Refer to Note 13 of the consolidated financial statements for disclosures regarding our assessments of our recorded deferred income tax liability balances associated with undistributed earnings from our foreign subsidiaries as of August 1, 2021, August 2, 2020, and May 2, 2021, respectively.

Uncertain Income Tax Positions

Refer to Note 13 located of the consolidated financial statements for disclosures regarding our assessments of our uncertain income tax positions as of August 1, 2021, August 2, 2020, and May 2, 2021, respectively.

                                      I-37



--------------------------------------------------------------------------------

Income Taxes Paid

The following table sets forth taxes paid (refunded) by jurisdiction:

                                                                   Three
                                                                  Months
                                                                   Ended
                                                    August 1,                August 2,
(dollars in thousands)                                 2021                     2020

United States Federal - Alternative Minimum Tax

  (AMT) credit refunds (1)                         $          -           $           (745 )
China                                                     1,408                        349
Canada                                                      280                        405
                                                   $      1,688           $              9




(1) In accordance with the provisions of the TCJA, corporate taxpayers were
eligible to treat prior AMT credit carryforwards as refundable. Accordingly, we
elected to treat our prior AMT credit carryforward balance of $1.5 million as
refundable, and as a result, 50% of the $1.5 million refundable balance was
received during the first quarter of fiscal 2021, with the remaining balance
expected to be received in fiscal 2022. In accordance with the provisions of the
U.S. federal Coronavirus Aid, Relief, and Economic Security (CARES) Act (2020),
100% of AMT credit carryforwards for years beginning in the 2019 tax year were
immediately refundable. Accordingly, we claimed credit for the remaining 50%
installment of our refundable AMT credit carryforward in May 2020. We received
our remaining 50% installment, plus interest, totaling $764,000 during the
second quarter of fiscal 2021.

Future Liquidity


We are currently projecting annual cash income tax payments of approximately
$4.2 million for fiscal 2022, compared with $3.0 million for fiscal 2021. The
increase in our income tax payments mostly represents U.S. AMT credit refunds
totaling $1.5 million that were received during fiscal 2021 that will not recur
during fiscal 2022. Our estimated cash income tax payments for fiscal 2022 are
management's current projections only and can be affected over the year by
actual earnings from our foreign subsidiaries located in China and Canada versus
annual projections, as well as changes in the foreign exchange rates associated
with our China operations in relation to the U.S. dollar.

Additionally, we currently expect to pay minimal income taxes in the U.S. on a cash basis during fiscal 2022 due to: (i) the immediate expensing of U.S. capital expenditures, and (ii) our existing U.S. federal net operating loss carryforwards totaling $19.4 million.

Liquidity and Capital Resources

Liquidity

Overall


Currently, our sources of liquidity include cash and cash equivalents,
short-term investments (available for sale), cash flow from operations, and
amounts available under our revolving credit lines. These sources have been
adequate for day-to-day operations, capital expenditures, debt payments, common
stock repurchases, and dividend payments. We believe our cash and cash
equivalents of $26.0 million and short-term investments (available for sale) of
$9.7 million as of August 1, 2021, cash flow from operations, and the current
availability ($38.2 million) under our revolving credit lines will be sufficient
to fund our foreseeable business needs and our contractual obligations.

As of August 1, 2021, our cash and cash equivalents, short-term investments (available for sale), and short-term and long-term investments (held-to-maturity) (collectively "cash and investments") totaled $44.0 million compared with $46.9 million as of May 2, 2021.


The decrease in our cash and investments from the end of fiscal 2021 was mostly
due to (i) $2.0 million of capital expenditures primarily related to our
mattress fabrics segment and our innovation campus located in downtown High
Point, NC, (ii) a cash payment of $1.4 million for a regular quarterly dividend
payment to shareholders, and (iii) common stock repurchases totaling $723,000,
partially offset by (iv) net cash provided by operating activities totaling $1.6
million.

Our net cash provided by operating activities of $1.6 million decreased during
the first quarter of fiscal 2022, as compared with $10.6 million during the
first quarter of fiscal 2021. This decrease was mostly due to (i) increased
inventory purchases due to increased sales volume, (ii) annual incentive plan
award payments made during the first quarter of fiscal 2022 (compared with
minimal payments made during the first quarter of fiscal 2021), (iii) an
increase in income tax payments due primarily to an AMT credit refund of
$745,000 received during the first quarter of fiscal 2021 that did not recur
during fiscal 2022, and a

                                      I-38
--------------------------------------------------------------------------------


withholding tax payment made to the Chinese government of $533,000 during the
first quarter (such payment was not made until the third quarter of fiscal
2021), and (iv) payments relating to our new building lease associated with our
upholstery cut and sewn operation located in Haiti, partially offset by (v)
improved cash collections on accounts receivable resulting from more customers
taking advantage of early payment discounts and their continuing return to
making payments based on normal credit terms, rather than the extended terms
previously granted in response to the COVID-19 pandemic.

As of August 1, 2021, there were no outstanding borrowings under our lines of credit.




Our cash and cash equivalents and short-term investments (available for sale)
balance may be adversely affected by factors beyond our control, such as the
continuing uncertainty of the COVID-19 global pandemic, lower net sales due to
consumer demand, and delays in receipt of payment on accounts receivable.
Additionally, we expect our cash liquidity to be affected by strategic
investments in working capital, planned capital expenditures, and investments in
our operations located in Haiti, with a significant portion of this spending
occurring during the second quarter of fiscal 2022.

By Geographic Area

A summary of our cash and investments by geographic area follows:





(dollars in thousands)   August 1, 2021      August 2, 2020       May 2, 2021
United States            $        35,727$        41,598$      34,465
China                              5,864               3,974            10,635
Canada                             2,031               1,761             1,525
Haiti                                416                   -               220
Cayman Islands                        11                  42                 8
                         $        44,049$        47,375$      46,853

Common Stock Repurchase Program


In March 2020, our board of directors approved an authorization for us to
acquire up to $5.0 million of our common stock. Under the common stock
repurchase program, shares may be purchased from time to time in open market
transactions, block trades, through plans established under the Securities
Exchange Act Rule 10b5-1, or otherwise. The number of shares purchased, and the
timing of such purchases, will be based on working capital requirements, market
and general business conditions, and other factors, including alternative
investment opportunities.

During the first quarter of fiscal 2022, we repurchased 48,686 shares of common stock at a cost of $723,000. As a result, as of August 1, 2021, we had $4.3 million available for additional repurchases of our common stock.

During the first quarter of fiscal 2021, we did not repurchase any shares of our common stock.


Dividend Program

On September 1, 2021, our board of directors approved a quarterly cash dividend of $0.11 per share. This payment will be made on October 18, 2021, to shareholders of record as of October 11, 2021.


During the first quarter of fiscal 2022, dividend payments totaled $1.4 million,
which represented a quarterly dividend payment of $0.11 per share. During the
first quarter of fiscal 2021, dividend payments totaled $1.3 million, which
represented a quarterly dividend payment of $0.105 per share.

Our board of directors has sole authority to determine if and when we will declare future dividends, and on what terms. Future dividend payments will depend on our earnings, capital requirements, financial condition, excess availability under our lines of credit, market and economic conditions, and other factors we consider relevant.

Working Capital

Operating Working Capital


Operating working capital (accounts receivable and inventories, less accounts
payable-trade, accounts payable-capital expenditures, and deferred revenue) was
$47.6 million as of August 1, 2021, compared with $43.5 million as of August 2,
2020, and $50.2 million as of May 2, 2021. Operating working capital turnover
was 6.9 during the first quarter of fiscal 2022, compared with 5.0 during the
first quarter of fiscal 2021 and 6.4 during the fourth quarter of fiscal 2021.

                                      I-39
--------------------------------------------------------------------------------

Accounts Receivable


Accounts receivable were $35.0 million as of August 1, 2021, and increased $5.1
million, or 17.1%, compared with $29.9 million as of August 2, 2020. This
increase reflects the significant increase in net sales during the first quarter
of fiscal 2022 as compared with the first quarter of fiscal 2021. Net sales
during the first quarter of fiscal 2021 were adversely affected by the economic
disruption caused by the COVID-19 pandemic. Although we experienced a
substantial increase in net sales during the first quarter of fiscal 2022, the
increase in accounts receivable was partially offset by improved cash
collections during the first quarter of fiscal 2022 compared with the first
quarter of fiscal 2021. The improved cash collections are due to more customers
taking advantage of early payment discounts, as well as their continuing return
to making payments based on normal credit terms as opposed to the extended terms
previously granted in response to the COVID-19 pandemic.

Accounts receivable as of August 1, 2021, decreased $2.7 million, or 7.2%,
compared with $37.7 million as of May 2, 2021. This decrease reflects improved
cash collections due to more customers taking advantage of early payment
discounts, as well as their continuing return to making payments based on normal
credit terms as opposed to extended terms previously granted in response to the
COVID-19 pandemic. Although we experienced a substantial improvement in cash
collections during the first quarter of fiscal 2022, the decrease in accounts
receivable was partially offset by an increase in net sales associated with our
upholstery fabrics segment during the first quarter of fiscal 2022, as compared
with the fourth quarter of fiscal 2021, due to plant shutdowns for the Chinese
New Year holiday that occurred during the fourth quarter of fiscal 2021.

Days' sales outstanding were 38 days for the first quarter of fiscal 2022, as
compared with 41 days for the first quarter of fiscal 2021 and 43 days for the
fourth quarter of fiscal 2021.

Inventory


Inventory was $58.6 million as of August 1, 2021, and increased by $18.2
million, or 45.1%, compared with $40.4 million as of August 2, 2020. This
increase reflects the significant increase in net sales during the first quarter
of fiscal 2022 as compared with the first quarter of fiscal 2021. Net sales
during the first quarter of fiscal 2021 were adversely affected by the economic
disruption caused by the COVID-19 pandemic.

Inventories as of August 1, 2021, modestly increased by $2.7 million, or 4.8%,
compared with $55.9 million as of May 2, 2021. This increase is due primarily to
an increase in net sales associated with our upholstery fabrics segment during
the first quarter of fiscal 2022, as compared with the fourth quarter of fiscal
2021, due to plant shutdowns for the Chinese New Year holiday that occurred
during the fourth quarter of fiscal 2021.

Inventory turns were 4.9 for the first quarter of fiscal 2022, as compared with 5.3 for the first quarter of fiscal 2021 and 4.8 for the fourth quarter of fiscal 2021.

Accounts Payable


Accounts payable- trade, totaling $45.3 million as of August 1, 2021, increased
by $19.5 million, or 75.9%, compared with $25.7 million as of August. 2, 2020.
The increase in accounts payable- trade primarily reflects the significant
increase in net sales during the first quarter of fiscal 2022 as compared with
the first quarter of fiscal 2021.

Accounts payable- trade as of August 1, 2021, modestly increased by $2.7
million, or 6.5%, compared with $42.5 million as of May 2, 2021. This increase
is due primarily to an increase in net sales associated with our upholstery
fabrics segment during the first quarter of fiscal 2022, as compared with the
fourth quarter of fiscal 2021, due to plant shutdowns for the Chinese New Year
holiday that occurred during the fourth quarter of fiscal 2021.

Financing Arrangements


Currently, we have revolving credit agreements with banks for our U.S parent
company and our operations located in China. The purposes of our revolving lines
of credit are to support potential short-term cash needs in different
jurisdictions, mitigate our risk associated with foreign currency exchange rate
fluctuations, and ultimately repatriate earnings and profits from our foreign
subsidiaries to our U.S. parent company to take advantage of the TCJA, which
allows a U.S. corporation a 100% dividend received income tax deduction on
earnings and profits repatriated to the U.S. from 10% owned foreign
corporations.

As of August 1, 2021, we did not have any outstanding borrowings associated with our revolving credit agreements.


Our loan agreements require, among other things, that we maintain compliance
with certain financial covenants. As of August 1, 2021, we complied with these
financial covenants.

Refer to Note 9 of the consolidated financial statements for further details of our revolving credit agreements.

                                      I-40



--------------------------------------------------------------------------------

Capital Expenditures and Depreciation

Overall


Capital expenditures on a cash basis were $2.0 million during the first quarter
of fiscal 2022, compared with $500,000 for the same period a year ago. Capital
expenditures mostly related to our mattress fabrics segment and our innovation
campus located in downtown High Point, NC.

Depreciation expense was $1.7 million during the first quarter of fiscal 2022,
compared with $1.8 million for the same period a year ago. Depreciation expense
mostly related to our mattress fabrics segment for both periods.

For fiscal 2022, we are projecting cash capital expenditures to be in the range
of $10.0 million to $10.5 million. The estimated capital expenditures primarily
relate to the mattress fabrics segment. For fiscal 2022, we are projecting
depreciation expense to be approximately $7.0 million, also primarily related to
the mattress fabrics segment. These are management's current expectations only,
and changes in our business and the unknown duration and financial impact of the
COVID-19 global pandemic could cause changes in plans for capital expenditures
and expectations related to depreciation expense. Funding for capital
expenditures is expected to be from cash provided by operating activities.

Accounts Payable - Capital Expenditures


As of August 1, 2021, we had total amounts due regarding capital expenditures
totaling $48,000 that pertained to outstanding vendor invoices, none of which
were financed. The total amount outstanding of $48,000 is required to be paid
based on normal credit terms.

Purchase Commitments - Capital Expenditures


As of August 1, 2021, we had open purchase commitments (i) for the acquisition
of equipment for our mattress fabrics segment totaling $1.2 million, and (ii)
for the construction of leasehold improvements associated with our showroom and
office space located in downtown High Point, NC totaling $865,000.

Critical Accounting Policies and Recent Accounting Developments

As of August 1, 2021, there were no changes in our significant accounting policies or the application of those policies from those reported in our annual report on Form 10-K for the year ended May 2, 2021.


Refer to Note 2 of the consolidated financial statements for recently adopted
and issued accounting pronouncements since the filing of our Form 10-K for the
year ended May 2, 2021.

Contractual Obligations

There were no significant or new contractual obligations from those reported in our annual report on Form 10-K for the year ended May 2, 2021.


Effective May 7, 2021, we entered into an agreement to lease showroom and office
space encompassing 21,000 square feet located in downtown High Point, NC. The
lease term is expected to commence near the end of the second quarter of fiscal
2022, once certain lessor-owned leasehold improvements have been completed, and
at such time we will have control of the facility based on the terms of the
lease. As a result, right of use assets are expected to increase by $2.2 million
at the commencement of the lease.

Inflation


Any significant increase in our raw material costs, utility/energy costs, and
general economic inflation could have a material adverse impact on the company,
because competitive conditions have limited our ability to pass significant
operating cost increases on to customers.

                                      I-41

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses

All news about CULP, INC.
10/07CULP, INC. : Ex-dividend day for
FA
10/04CULP INC : Submission of Matters to a Vote of Security Holders (form 8-K)
AQ
09/30CULP : Adds Three New Independent Directors; John Baugh, Kimberly Gatling, and Jonathan Ke..
AQ
09/29CULP, INC. : Adds Three New Independent Directors
BU
09/29Culp, Inc. Adds Three New Independent Directors
CI
09/10CULP : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIO..
AQ
09/01CULP : Q1 2022 Earnings Call Presentation
PU
09/01CULP : ANNOUNCES RESULTS FOR FIRST QUARTER FISCAL 2022 (Form 8-K)
PU
09/01CULP : Swings to Fiscal Q1 Profit; Net sales Rise
MT
09/01CULP INC : Results of Operations and Financial Condition (form 8-K)
AQ
More news
Analyst Recommendations on CULP, INC.
More recommendations