Culp Announces Improved Profitability and Liquidity Expectations for First Quarter Fiscal 2021 and Anticipated Impact of Final GILTI Tax Regulations

Culp, Inc. (NYSE: CULP) today announced an updated financial outlook, based on unaudited preliminary results and current estimates, for the first quarter of fiscal 2021. The company also announced its expectations for the impact of the final regulations enacted on July 20, 2020, by the U.S. Treasury Department regarding the Global Intangible Low Taxed Income (“GILTI”) tax provisions of the U.S. tax code.

Based on better-than-expected increases in orders and shipments for both the mattress fabrics segment and upholstery fabrics segment during the latter part of the first quarter of fiscal 2021, the company now expects to report pre-tax income (GAAP) in the range of $1.3 to $1.8 million for the quarter. The company also expects to have cash and investments of approximately $47.0 million, with no outstanding debt, at the end of the quarter. These projected results are higher than the company’s previously announced expectations for operating income to be near break-even and a net cash position comparable to its $38.7 million position at the end of fiscal 2020.

These financial results for the first quarter of fiscal 2021 are preliminary and subject to change in connection with the completion of the company’s quarter-end closing process and the preparation of the unaudited financial statements for the first quarter of fiscal 2021. The company is providing this update due to the unusual circumstances resulting from the COVID-19 pandemic and related economic downturn. The company is not adopting any policy or practice of providing any updates on any aspects of its financial performance, including without limitation pre-tax income, cash position, and/or operating income, outside of the company’s customary quarterly report on financial and operating results.

Additionally, 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. Prior to this enactment, GILTI represented a significant U.S. income tax during fiscal 2019 ($2.1 million) and fiscal 2020 ($1.9 million) on the company’s foreign earnings. With the enactment of these final regulations, the company is now eligible for an exclusion from GILTI since it meets the provisions for the GILTI High-Tax exception included in the final regulations. In addition, the enactment of the new regulations and the company’s eligibility for the GILTI High-Tax exception are retroactive to the original enactment of the GILTI tax provision, which includes the company’s fiscal 2019 and fiscal 2020 years.