HIGH POINT, N.C. — April 3, 2020 — Culp Inc. announced today a series of proactive measures the company has taken to preserve balance sheet strength and reduce costs in response to increasingly challenging market conditions and the impact of the COVID-19 global pandemic. These steps include:
- Completing a strategic sale of Culp’s majority interest in eLuxury LLC to the minority owner of eLuxury in order to increase liquidity and focus on its core businesses during this unprecedented environment. The company will maintain a strong working relationship with eLuxury going forward through supply and royalty arrangements designed to support eLuxury’s ongoing growth strategy and preserve an important sales channel for Culp’s core products;
- Entering an amendment to the company’s existing domestic revolving credit facility with Wells Fargo to increase the borrowing limit, decrease the minimum liquidity level, and extend the expiration date to August 15, 2022;
- Adding to the company’s cash balance by drawing down $20 million under this domestic revolving credit facility as a precautionary measure to proactively increase balance sheet flexibility during the coronavirus crisis;
- Implementing a temporary salary reduction of 50 percent for the company’s executive chairman and CEO, as well as other salary reductions for all other executive officers. Additionally, the board of directors will forego the cash portion of its compensation until further notice;
- Furloughing associates as necessary to align with demand and making other workforce adjustments and temporary salary reductions at each of the company’s divisions. While the company will not pay wages to furloughed associates, it will continue to provide certain healthcare-related benefits for those eligible;
- Suspending merit pay increases until further notice;
- Suspending the company’s share repurchase program indefinitely; and
- Aggressively reducing expenses, capital expenditures, and discretionary spending, and working with the company’s vendors and landlords to negotiate temporary terms.
Culp issued guidance for the fourth quarter of fiscal 2020 on March 4, 2020, which excluded any impact from the spread of COVID-19. Due to the extraordinary uncertainty and rapidly changing environment caused by the COVID-19 global pandemic, the company is withdrawing this previously issued guidance and is not providing an updated outlook at this time. The company expects to provide more information when it reports fourth quarter and fiscal 2020 results in June.
To date, Culp has experienced significant reductions in demand in many of its markets. The company has temporarily closed its facilities in Canada and Haiti due to government-mandated closure requirements and has reduced production schedules at other facilities due to declining demand resulting from customer and retail store closures.
Iv Culp, Culp CEO, said: “As the COVID-19 pandemic has spread across the world, Culp has been actively responding through our crisis management plan and adjusting our business operations accordingly. We are taking decisive action to protect our associates, adapt to rapidly changing conditions, serve our customers, manage liquidity, and reduce expenses.
“We believe these decisions, combined with others we have taken in recent weeks, including repurposing some of our operations to manufacture critical products needed for healthcare and other essential industries, will allow us to weather the COVID-19 market disruption and emerge from the current crisis well-positioned to meet the needs of our customers and execute our strategic plans.
“The specific actions that affect our people are the most difficult decisions we are making, and we realize the impact they will have on these associates and their families, but they are necessary to manage through this unprecedented business interruption. We hope to bring furloughed associates back and fully restore salaries as soon as possible when this crisis lifts. Until then, we will continue to monitor the situation closely and focus on managing our business to conserve cash and maintain balance sheet flexibility. We appreciate the collective efforts and support of our entire team in this trying time,” added Culp.
Posted April 5, 2020
Source: Culp Inc.