Culp Revises Expectations for Fourth Quarter Fiscal 2022

Culp, Inc. (NYSE: CULP) (together with its consolidated subsidiaries, “CULP”) today announced that, based on current estimates, the company is lowering its expectations for net sales and income (loss) from operations for the fourth quarter of fiscal 2022 due primarily to COVID-related shutdowns affecting the company’s operations in China and further weakening in domestic mattress industry sales. The company now expects net sales for the fourth quarter to be down significantly as compared to the fourth quarter of fiscal 2021 and expects a consolidated operating loss in the range of $(6.5) million to $(7.5) million for the quarter. The company expects to end the fourth quarter with approximately $10 million in cash and no outstanding borrowings. These updated expectations are based on information available at the time of this press release and reflect certain assumptions by management regarding the duration and projected impact of the shutdowns affecting the company’s operations in China, as well as other business conditions, consumer trends, and geopolitical events, which could differ materially from the assumptions used.

CULP also announced today that it has executed a non-binding term sheet (the “Term Sheet”) with the lender of its existing domestic credit facility for a revolving credit facility of up to $40 million (the “Credit Facility”), secured by the company’s assets. This proposed Credit Facility will replace the company’s existing unsecured credit facility that is set to expire in August 2022. The company’s borrowing availability under the new Credit Facility will be based on a calculation using the company’s accounts receivable and inventory levels, determined on a monthly basis. The company estimates that it will have approximately $32 million of borrowing availability upon closing of the new facility, which, over time, is projected to be greater than the availability under the existing facility. The completion of the Credit Facility is subject to the parties entering into applicable definitive agreements, which may contain additional or different terms from those described herein.

Commenting on the announcements, Iv Culp, president and chief executive officer of Culp, Inc., said, “The fourth quarter of fiscal 2022 has been challenged by the unexpected shutdowns of our China facilities due to the COVID-related restrictions imposed by China’s government. First, our thoughts are with our dedicated China associates who are experiencing extended quarantine lockdowns in connection with these shutdowns. Our China operations have been closed since April 1, 2022, which has prevented us from shipping goods in both our upholstery fabrics and our sewn mattress cover business. We initially expected these shutdowns would be very short-term, and that we would have an opportunity to ship orders before the end of the fourth quarter. However, we now expect the closures to continue for at least the entire month of April, which will prevent us from making up any of these delayed sales before the end of the fiscal 2022 year.