Culp (CULP) 8-K Results of Operations and Financial Condition

Exhibit 99(b)

Page 1 of 9 

CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF NET INCOME
FOR THREE MONTHS ENDED JULY 30, 2017 AND JULY 31, 2016
(UNAUDITED)
(Amounts in Thousands, Except for Per Share Data)
	THREE MONTHS ENDED
	Amounts									Percent of Sales
	July 30,			July 31,			% Over			July 30,			July 31,
	2017			2016			(Under)			2017			2016
Net sales	$	79,533			80,682			(1.4	)%		100.0	%		100.0	%
Cost of sales		63,068			62,263			1.3	%		79.3	%		77.2	%
Gross profit		16,465			18,419			(10.6	)%		20.7	%		22.8	%
Selling, general and
administrative expenses		9,501			9,746			(2.5	)%		11.9	%		12.1	%
Income from operations		6,964			8,673			(19.7	)%		8.8	%		10.7	%
Interest income		(131	)		(25	)		424.0	%		(0.2	)%		(0.0	)%
Other expense		353			152			132.2	%		0.4	%		0.2	%
Income before income taxes		6,742			8,546			(21.1	)%		8.5	%		10.6	%
Income taxes		1,640			3,233			(49.3	)%		24.3	%		37.8	%
Loss from investment in unconsolidated joint venture		118			-			100.0	%		0.1	%		0.0	%
Net income	$	4,984			5,313			(6.2	)%		6.3	%		6.6	%
Net income per share-basic	$	0.40		$	0.43			(7.0	)%
Net income per share-diluted	$	0.40		$	0.43			(7.0	)%
Average shares outstanding-basic		12,399			12,286			0.9	%
Average shares outstanding-diluted		12,590			12,463			1.0	%

Page 2 of 9

CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
JULY 30, 2017, JULY 31, 2016, AND APRIL 30, 2017
Unaudited
(Amounts in Thousands)
	Amounts				Increase
	July 30,		July 31,		(Decrease)						* April 30,
	2017		2016		Dollars			Percent			2017
Current assets
Cash and cash equivalents	$	18,322		45,549		(27,227	)		(59.8	)%		20,795
Short-term investments		2,469		2,434		35			1.4	%		2,443
Accounts receivable		22,140		22,690		(550	)		(2.4	)%		24,577
Inventories		55,227		48,131		7,096			14.7	%		51,482
Other current assets		3,441		2,294		1,147			50.0	%		2,894
Total current assets		101,599		121,098		(19,499	)		(16.1	)%		102,191
Property, plant & equipment, net		52,912		41,745		11,167			26.8	%		51,651
Goodwill		11,462		11,462		-			0.0	%		11,462
Deferred income taxes		436		1,942		(1,506	)		(77.5	)%		419
Long-term Investments - Held-To-Maturity		30,907		-		30,907			100.0	%		30,945
Long-term Investments - Rabbi Trust		6,714		4,611		2,103			45.6	%		5,466
Investment in unconsolidated joint venture		1,477		-		1,477			100.0	%		1,106
Other assets		2,397		2,502		(105	)		(4.2	)%		2,394
Total assets	$	207,904		183,360		24,544			13.4	%		205,634
Current liabilities
Accounts payable - trade	$	29,112		26,708		2,404			9.0	%		29,101
Accounts payable - capital expenditures		5,647		627		5,020			800.6	%		4,767
Accrued expenses		6,075		6,890		(815	)		(11.8	)%		11,947
Income taxes payable - current		884		358		526			146.9	%		287
Total current liabilities		41,718		34,583		7,135			20.6	%		46,102
Line of credit		5,000		7,000		(2,000	)		(28.6	)%		-
Accounts payable - capital expenditures		-		-		-			0.0	%		1,322
Income taxes payable - long-term		487		3,779		(3,292	)		(87.1	)%		467
Deferred income taxes		4,253		1,532		2,721			177.6	%		3,593
Deferred compensation		6,769		5,031		1,738			34.5	%		5,520
Total liabilities		58,227		51,925		6,302			12.1	%		57,004
Shareholders' equity		149,677		131,435		18,242			13.9	%		148,630
Total liabilities and
shareholders' equity	$	207,904		183,360		24,544			13.4	%		205,634
Shares outstanding		12,441		12,307		134			1.1	%		12,357

* Derived from audited financial statements.

Page 3 of 9

CULP, INC. FINANCIAL INFORMATION RELEASE
SUMMARY OF CASH AND INVESTMENTS
JULY 30, 2017 AND JULY 31, 2016, AND APRIL 30, 2017
Unaudited
(Amounts in Thousands)
			Amounts
	July 30,		July 31,		April 30,
	2017		2016		2017*
Cash and cash equivalents	$	18,322	$	45,549	$	20,795
Short-term investments		2,469		2,434		2,443
Long-term investments (Held-To-Maturity)		30,907		-		30,945
Total Cash and Investments	$	51,698	$	47,983	$	54,183

* Derived from audited financial statements.

Page 4 of 9

CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 30, 2017 AND JULY 31, 2016
Unaudited
(Amounts in Thousands)
	THREE MONTHS ENDED
	Amounts
	July 30,			July 31,
	2017			2016
Cash flows from operating activities:
Net income	$	4,984			5,313
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation		1,807			1,761
Amortization of assets		82			52
Stock-based compensation		757			761
Deferred income taxes		643			593
Realized loss on sale of short-term investments		-			12
Loss on sale of equipment		-			9
Loss from investment in unconsolidated joint venture		118			-
Foreign currency exchange loss (gain)		35			(62	)
Changes in assets and liabilities:
Accounts receivable		2,524			611
Inventories		(3,539	)		(1,808	)
Other current assets		(467	)		158
Other assets		(47	)		19
Accounts payable		(397	)		3,036
Accrued expenses and deferrred compensation		(4,704	)		(4,631	)
Income taxes		608			375
Net cash provided by operating activities		2,404			6,199		(2	)
Cash flows from investing activities:
Capital expenditures		(2,260	)		(3,139	)
Investment in unconsolidated joint venture		(489	)		-
Proceeds from the sale of short-term investments		-			2,000
Purchase of short-term investments		(12	)		(21	)
Proceeds from the sale of long-term investments (Rabbi Trust)		49			-
Purchase of long-term investments (Rabbi Trust)		(1,267	)		(559	)
Net cash used in investing activities		(3,979	)		(1,719	)
Cash flows from financing activities:
Proceeds from line of credit		5,000			7,000
Payments on vendor-financed capital expenditures		(1,250	)		-
Dividends paid		(3,608	)		(3,445	)
Common stock surrendered for withholding taxes payable		(1,135	)		(280	)
Proceeds from common stock issued		5			11
Net cash (used in) provided by financing activities		(988	)		3,286		(2	)
Effect of exchange rate changes on cash and cash equivalents		90			(4	)
(Decrease) increase in cash and cash equivalents		(2,473	)		7,762
Cash and cash equivalents at beginning of period		20,795			37,787
Cash and cash equivalents at end of period	$	18,322			45,549
Free Cash Flow (1)	$	(2,723	)		2,497		(2	)
(1)  Free Cash Flow reconciliation is as follows:
	FY 2018			FY 2017
A) Net cash provided by operating activities	$	2,404			6,199
B)  Minus:   Capital Expenditures		(2,260	)		(3,139	)
C)  Minus:   Investment in unconsolidated joint venture		(489	)		-
D)  Minus:   Payments on vendor-financed capital expenditures		(1,250	)		-
E)   Plus:       Proceeds from the sale of long-term investments (Rabbi Trust)		49			-
F)   Minus:   Purchase of long-term investments (Rabbi Trust)		(1,267	)		(559	)
G)   Effects of exchange rate changes on cash and cash equivalents		90			(4	)
	$	(2,723	)		2,497

(2) During the first quarter of fiscal 2018, we adopted ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." Accordingly, we reclassified certain amounts on our Statement of Cash Flows for the three months ended July 31, 2016 to conform to the current year's presentation. As a result, our net cash provided by operating activities increased by $447 which was fully offset by a corresponding decrease of $447 to our net cash provided by financing activities. Additionally, our free cash flow increased $280.

Page 5 of 9

CULP, INC. FINANCIAL INFORMATION RELEASE
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE THREE MONTHS ENDED JULY 30, 2017 AND JULY 31, 2016
(Unaudited)
(Amounts in thousands)
	THREE MONTHS ENDED
	Amounts									Percent of Total Sales
	July 30,			July 31,			% Over			July 30,			July 31,
Net Sales by Segment	2017			2016			(Under)			2017			2016
Mattress Fabrics	$	48,429			50,530			(4.2	)%		60.9	%		62.6	%
Upholstery Fabrics		31,104			30,152			3.2	%		39.1	%		37.4	%
Net Sales	$	79,533			80,682			(1.4	)%		100.0	%		100.0	%
Gross Profit by Segment										Gross Profit Margin
Mattress Fabrics	$	9,760			11,901			(18.0	)%		20.2	%		23.6	%
Upholstery Fabrics		6,705			6,518			2.9	%		21.6	%		21.6	%
Gross Profit	$	16,465			18,419			(10.6	)%		20.7	%		22.8	%
Selling, General and Administrative expenses by Segment										Percent of Sales
Mattress Fabrics	$	3,391			3,499			(3.1	)%		7.0	%		6.9	%
Upholstery Fabrics		3,811			3,534			7.8	%		12.3	%		11.7	%
Unallocated Corporate expenses		2,299			2,713			(15.3	)%		2.9	%		3.4	%
Selling, General and Administrative Expenses	$	9,501			9,746			(2.5	)%		11.9	%		12.1	%
Operating Income (loss) by Segment										Operating Income (Loss) Margin
Mattress Fabrics	$	6,368			8,402			(24.2	)%		13.1	%		16.6	%
Upholstery Fabrics		2,895			2,984			(3.0	)%		9.3	%		9.9	%
Unallocated corporate expenses		(2,299	)		(2,713	)		(15.3	)%		(2.9	)%		(3.4	)%
Operating Income	$	6,964			8,673			(19.7	)%		8.8	%		10.7	%
Return on Capital (1)
Mattress Fabrics		29.7	%		44.4	%
Upholstery Fabrics		65.2	%		69.7	%
Unallocated Corporate		N/A			N/A
Consolidated		27.0	%		37.5	%
Capital Employed (2)
Mattress Fabrics	$	87,835			76,646			14.6	%
Upholstery Fabrics		19,508			17,221			13.3	%
Unallocated Corporate		879			732			N/A
Consolidated	$	108,222			94,599			14.4	%
Depreciation expense by Segment
Mattress Fabrics	$	1,612			1,556			3.6	%
Upholstery Fabrics		195			205			(4.9	)%
Depreciation expense	$	1,807			1,761			2.6	%

Notes:
(1)	See pages 7 and 8 of this financial information release for calculations.
(2)	The capital employed balances are as of July 30, 2017 and July 31, 2016.

Page 6 of 9

CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF ADJUSTED EBITDA
FOR THE TWELVE MONTHS ENDED JULY 30, 2017 AND JULY 31, 2016
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
	Quarter Ended
													Trailing 12
													Months
	10/30/2016			1/29/2017			4/30/2017			7/30/2017			7/30/2017
Net income	$	4,475		$	6,347		$	6,198		$	4,984		$	22,004
Income taxes		2,684			643			778			1,640			5,745
Interest income, net		(15	)		(124	)		(134	)		(131	)		(404	)
Depreciation and amortization expense		1,778			1,875			1,863			1,889			7,405
Stock based compensation		896			962			739			757			3,354
Adjusted EBITDA	$	9,818		$	9,703		$	9,444		$	9,139		$	38,104
	Quarter Ended
													Trailing 12
													Months
	11/1/2015			1/31/2016			5/1/2016			7/31/2016			7/31/2016
Net income	$	3,771		$	4,862		$	3,601		$	5,313		$	17,547
Income taxes		2,373			2,317			3,566			3,233			11,489
Interest income, net		(69	)		(38	)		(26	)		(25	)		(158	)
Depreciation and amortization expense		1,668			1,741			1,830			1,813			7,052
Stock based compensation		1,074			625			778			761			3,238
Adjusted EBITDA	$	8,817		$	9,507		$	9,749		$	11,095		$	39,168
% Over (Under)		11.4	%		2.1	%		-3.1	%		-17.6	%		-2.7	%

Page 7 of 9

CULP, INC. FINANCIAL INFORMATION RELEASE
RETURN ON CAPITAL EMPLOYED BY SEGMENT
FOR THE THREE MONTHS ENDED JULY 30, 2017
(Amounts in Thousands)
(Unaudited)
	Operating Income
	Three Months			Average			Return on
	Ended			Capital			Avg. Capital
	July 30, 2017 (1)			Employed (3)			Employed (2)
Mattress Fabrics	$	6,368		$	85,629			29.7	%
Upholstery Fabrics		2,895			17,757			65.2	%
(less: Unallocated Corporate)		(2,299	)		(60	)		N/A
Total	$	6,964		$	103,326			27.0	%
Average Capital Employed	As of the three Months Ended July 30, 2017												As of the three Months Ended April 30, 2017
	Mattress			Upholstery			Unallocated						Mattress			Upholstery			Unallocated
	Fabrics			Fabrics			Corporate			Total			Fabrics			Fabrics			Corporate			Total
Total assets	$	112,112		$	34,491		$	61,301		$	207,904		$	111,041		$	32,255		$	62,338		$	205,634
Total liabilities		(24,277	)		(14,983	)		(18,967	)		(58,227	)		(27,619	)		(16,249	)		(13,136	)		(57,004	)
Subtotal	$	87,835		$	19,508		$	42,334		$	149,677		$	83,422		$	16,006		$	49,202		$	148,630
Less:
Cash and cash equivalents		-			-			(18,322	)		(18,322	)		-			-			(20,795	)		(20,795	)
Short-term investments		-			-			(2,469	)		(2,469	)		-			-			(2,443	)		(2,443	)
Long-term investments (Held-To-Maturity)								(30,907	)		(30,907	)								(30,945	)		(30,945	)
Long-term investments (Rabbi Trust)		-			-			(6,714	)		(6,714	)		-			-			(5,466	)		(5,466	)
Deferred income taxes - non-current		-			-			(436	)		(436	)		-			-			(419	)		(419	)
Income taxes payable - current		-			-			884			884			-			-			287			287
Income taxes payable - long-term		-			-			487			487			-			-			467			467
Deferred income taxes - non-current		-			-			4,253			4,253			-			-			3,593			3,593
Line of credit		-			-			5,000			5,000			-			-			-			-
Deferred compensation		-			-			6,769			6,769			-			-			5,520			5,520
Total Capital Employed	$	87,835		$	19,508		$	879		$	108,222		$	83,422		$	16,006		$	(999	)	$	98,429
	Mattress			Upholstery			Unallocated
	Fabrics			Fabrics			Corporate			Total
Average Capital Employed (3)	$	85,629		$	17,757		$	(60	)	$	103,326

Notes:
(1)	See reconciliation per page 5 of this financial information release.
(2)	Return on average capital employed represents operating income for the three month period ending July 30, 2017 times four quarters to arrive at an annualized value then divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments, long-term investments (Held-To-Maturity), long-term investments (Rabbi Trust), noncurrent deferred income tax assets and liabilities, income taxes receivable and payable, line of credit, and deferred compensation.
(3)	Average capital employed was computed using the two periods ending July 30, 2017 and April 30, 2017.

Page 8 of 9

CULP, INC. FINANCIAL INFORMATION RELEASE
RETURN ON CAPITAL EMPLOYED BY SEGMENT
FOR THE THREE MONTHS ENDED JULY 31, 2016
(Amounts in Thousands)
(Unaudited)
	Operating Income
	Three Months			Average			Return on
	Ended			Capital			Avg. Capital
	July 31, 2016 (1)			Employed (3)			Employed (2)
Mattress Fabrics	$	8,402		$	75,642			44.4	%
Upholstery Fabrics		2,984			17,123			69.7	%
(less: Unallocated Corporate)		(2,713	)		(287	)		N/A
Total	$	8,673		$	92,478			37.5	%
Average Capital Employed	As of the three Months Ended July 31, 2016												As of the three Months Ended May 1, 2016
	Mattress			Upholstery			Unallocated						Mattress			Upholstery			Unallocated
	Fabrics			Fabrics			Corporate			Total			Fabrics			Fabrics			Corporate			Total
Total assets	$	92,959		$	33,550		$	56,851		$	183,360		$	94,878		$	29,463		$	50,801		$	175,142
Total liabilities		(16,313	)		(16,329	)		(19,283	)		(51,925	)		(20,241	)		(12,438	)		(13,651	)		(46,330	)
Subtotal	$	76,646		$	17,221		$	37,568		$	131,435		$	74,637		$	17,025		$	37,150		$	128,812
Less:
Cash and cash equivalents		-			-			(45,549	)		(45,549	)		-			-			(37,787	)		(37,787	)
Short-term investments		-			-			(2,434	)		(2,434	)		-			-			(4,359	)		(4,359	)
Long-term investments (Rabbi Trust)		-			-			(4,611	)		(4,611	)		-			-			(4,025	)		(4,025	)
Income taxes receivable		-			-			-			-			-			-			(155	)		(155	)
Deferred income taxes - non-current		-			-			(1,942	)		(1,942	)		-			-			(2,319	)		(2,319	)
Income taxes payable - current		-			-			358			358			-			-			180			180
Income taxes payable - long-term		-			-			3,779			3,779			-			-			3,841			3,841
Deferred income taxes - non-current		-			-			1,532			1,532			-			-			1,483			1,483
Line of credit		-			-			7,000			7,000			-			-			-			-
Deferred compensation		-			-			5,031			5,031			-			-			4,686			4,686
Total Capital Employed	$	76,646		$	17,221		$	732		$	94,599		$	74,637		$	17,025		$	(1,305	)	$	90,357
	Mattress			Upholstery			Unallocated
	Fabrics			Fabrics			Corporate			Total
Average Capital Employed (3)	$	75,642		$	17,123		$	(287	)	$	92,478

Notes:
(1)	See reconciliation per page 5 of this financial information release.
(2)	Return on average capital employed represents operating income for the three month period ending July 31, 2016 times four quarters to arrive at an annualized value then divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments, long-term investments (Rabbi Trust), noncurrent deferred income tax assets and liabilities, income taxes receivable and payable, line of credit, and deferred compensation.
(3)	Average capital employed was computed using the two periods ending July 31, 2016 and May 1, 2016.

Page 9 of 9

CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED ADJUSTED EFFECTIVE INCOME TAX RATE
FOR THE THREE MONTHS ENDED JULY 30, 2017 AND JULY 31, 2016
Unaudited
(Amounts in Thousands)
		THREE MONTHS ENDED
		Amounts
		July 30,			July 31,
		2017			2016
Consolidated Effective GAAP Income Tax Rate	(1)		24.3	%		37.8	%
Non-Cash U.S. Income Tax Expense			(17.0	)%		(19.6	)%
Excess income tax benefits related to stock-based compensation			8.2	%		-
Other Non-Cash Foreign Income Tax Expense			-			(0.4	)%
Consolidated Adjusted Effective Income Tax Rate	(2)		15.5	%		17.8	%

(1)	Calculated by dividing consolidated income tax expense by consolidated income before income taxes.
(2)	Represents estimated cash income tax expense for our subsidiaries located in Canada and China divided by consolidated income before income taxes.