Culp Announces Results for Fourth Quarter and Fiscal 2017
Company Announces Special Cash Dividend of
Fiscal 2017 Full Year Highlights
-
Net sales were
$309.5 million , down 1.1 percent compared with the prior year, with mattress fabric sales up 2.4 percent, a record year, and upholstery fabric sales down 6.1 percent over the prior year. -
Pre-tax income was
$29.7 million , the highest annual pre-tax income in Culp’s history, and a 6.4 percent increase compared with the previous record of$27.9 million in pre-tax income for fiscal 2016.
-
Net income was
$22.3 million , or$1.78 per diluted share, compared with net income of$16 .9 million, or$1.36 per diluted share, in fiscal 2016. - Return on capital was 32 percent, equal to last year’s record performance.
-
Cash flow from operations was
$33.0 million , up from$26.8 million in fiscal 2016. Free cash flow for the year was strong at$18.3 million , up 20 percent compared with$15.2 million last year, after spending$14.0 million in capital expenditures, including vendor-financed payments and investment inHaiti . -
Cash and cash equivalents, short-term investments and long-term
investments held-to-maturity totaled
$54.2 million , up 29 percent and a record level, compared with$42 .1 million at the end of the previous fiscal year, with no debt outstanding. -
Capital expenditures, including vendor-financed payments and
investment in
Haiti , totaled$14.0 million , compared with$11.5 million a year ago. -
For fiscal 2017, the company paid
$6.3 million in dividends, of which$2.6 million was for a special dividend.
Fiscal 2017 Fourth Quarter Highlights
-
Net sales were
$77.4 million , with both mattress fabric sales and upholstery fabric sales relatively flat compared with the fourth quarter last year. -
Pre-tax income was
$7.0 million , which included approximately$250,000 of plant consolidation expenses, down 2.3 percent compared with$7.2 million in the fourth quarter of fiscal 2016. - The GAAP effective income tax rate was 11.1 percent; the consolidated adjusted effective income tax rate was 17.5 percent
-
Net income was
$6.2 million , or$0.49 per diluted share, compared with net income of$3 .6 million, or$0.29 per diluted share, in the prior year period. -
The company announced a special cash dividend of
$0.21 per share, equal to last year’s payment and the fifth special dividend in the past six fiscal years, and a quarterly cash dividend of$0.08 per share, both payable inJuly 2017 .
Financial Outlook for First Quarter Fiscal 2018
-
The projection for first quarter fiscal 2018 is for overall sales to
be comparable to the previous year’s first quarter. Pre-tax income for
the first quarter of fiscal 2018 is expected to be in the range of
$7.8 million to $8.4 million . Included in this range is approximately$300,000 of expected plant consolidation expenses. Pre-tax income for the first quarter of fiscal 2017 was$8 .5 million. The company expects fiscal 2018 to be another solid year for free cash flow.
Overview
For the fourth quarter ended
Net sales for fiscal 2017 were
Commenting on the results,
“Throughout fiscal 2017, we demonstrated consistent execution of our product-driven strategy in both businesses, as a result of our relentless focus on design creativity and product innovation. Our ability to offer a diverse product mix and meet the changing demands of our customers has served us well in the marketplace. At the same time, we have continued to make substantial investments in our mattress fabric business to enhance our production capabilities, improve our operating efficiencies and continue to provide exceptional customer service. Our newest product introductions and ability to reach different market segments have produced favorable results for the upholstery fabric business, and we look forward to the opportunities ahead to build on this momentum.
“We are pleased to announce today that our Board of Directors approved a
special cash dividend of
Mattress Fabric Segment
Sales for this segment were
“Our results for the fourth quarter were in line with expectations, reflecting consistent execution of our strategy during a period of disruption in the mattress industry and a soft retail sales environment,” said Iv Culp, president of Culp’s mattress fabric division. “Overall, we were pleased to meet our objectives for the quarter.
“Notably, we delivered another record performance in fiscal 2017, topping the previous year’s results with the highest annual mattress fabric sales and profits in Culp’s history. Our focus on design and innovation continues to distinguish our products in the marketplace. Having a favorable product mix of mattress fabrics and sewn covers across most price points and style trends has allowed us to execute our diversification strategy and enhance our strong value proposition.
“We are especially pleased to achieve these outstanding results during a
period of major transition across our production facilities. Throughout
the past year, we have made substantial investments and significant
changes within our multi-country production facilities that will enable
us to build upon our success and improve our service to customers. Our
expansion projects in
“Our results for the year include a growing contribution from CLASS, our
mattress cover business. Importantly, CLASS has allowed us to develop
new products with our core customers and to reach new customers and
additional market segments, especially the Internet ‘bed in a box’
space, with solid growth prospects. Along with our other consolidation
projects in
“Looking ahead, we are well positioned to execute our strategy in spite
of the current uncertainty in the mattress industry. We have a solid
market position throughout the industry with strong customer
relationships in all product categories. More importantly, we have
worked hard to create a sustainable production and distribution platform
that will favorably position
Upholstery Fabric Segment
Sales for this segment were
“Our results for the fourth quarter of fiscal 2017 were in line with
expectations,” noted
“For fiscal 2017, while the modest decline in annual sales reflects the
soft retail environment for residential furniture that has persisted for
most of the past fiscal year, we were able to grow margins and report
comparable profitability to last year. In spite of the market
challenges, we continued to execute our product-driven strategy with a
sustained focus on innovation and creative designs, offering a more
diverse product mix and expanding our sales into new markets. Over the
past year, we made progress in each of these key areas of focus. Our
design team has done an outstanding job in keeping pace with current
style trends and meeting the changing demands of our customers. Notably,
our ‘performance line’ of highly durable, stain-resistant upholstery
fabrics was a strong performer for
“While we faced a generally weaker sales environment in the residential furniture market, we achieved meaningful sales growth in the hospitality area, which accounted for a higher percentage of our overall sales in fiscal 2017 compared with the prior year. This trend is encouraging, as we continue our focus on diversifying our sales mix.
“Our global production capabilities provide a strong competitive
advantage for
“Looking ahead, in spite of uncertain retail market conditions, we have
many reasons to be optimistic about the opportunities for our upholstery
fabric business. Our recent showing at the April furniture market was
encouraging with strong placements for
Balance Sheet
“We are pleased to end fiscal 2017 with a strong financial position,”
added
“As we look to fiscal 2018, we expect another solid year of free cash flow, with capital expenditures expected to be comparable to fiscal 2017 and modest projected growth in working capital. We are well positioned to make the capital investments and any potential acquisitions that may develop to support our growth strategy, as well as continue to return funds to our shareholders,” added Bowling.
Dividends and Share Repurchases
Consistent with its capital allocation strategy to return funds to
shareholders through dividends and share repurchases, the company
announced that its Board of Directors has approved the payment of a
special cash dividend of
The company did not repurchase any shares in fiscal 2017, leaving
Since
Financial Outlook for First Quarter Fiscal 2018
Commenting on the outlook for the first quarter of fiscal 2018, Saxon remarked, “At this time, we expect overall sales to be comparable to the first quarter of fiscal 2017.
“With ongoing uncertainty in the mattress industry, we expect first
quarter sales in our mattress fabric business to be slightly lower than
the first quarter of fiscal 2017, which was an exceptionally strong
first quarter performance. Operating income and margins in this segment,
including approximately
“In our upholstery fabrics business, we expect first quarter sales to be slightly higher compared with the first quarter of fiscal 2017. We believe the upholstery fabrics segment’s operating income and margins will be slightly higher compared with the same quarter of last year.
“Considering these factors, the company expects to report pre-tax income
for the first fiscal quarter of 2018 in the range of
“Based on our current budget, capital expenditures for fiscal 2018 are expected to be comparable to the previous year. Additionally, the company expects another solid year of free cash flow, even after another year of high capital expenditures and modest growth in working capital.”
In closing, Saxon remarked, “We are pleased with Culp’s performance in
fiscal 2017 and our ability to execute our strategy in an uncertain
market environment. Our success reflects our capacity to leverage our
outstanding design capabilities and deliver a diverse range of
innovative fabrics that keep pace with customer demand and style trends.
At the same time, we are identifying new market opportunities and
positioning
About the Company
This press release contains “forward-looking statements” within the
meaning of the federal securities laws, including the Private Securities
Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933
and Section 27A of the Securities and Exchange Act of 1934). Such
statements are inherently subject to risks and uncertainties. Further,
forward looking statements are intended to speak only as of the date on
which they are made, and we disclaim any duty to update such statements.
Forward-looking statements are statements that include projections,
expectations or beliefs about future events or results or otherwise are
not statements of historical fact. Such statements are often but
not always characterized by qualifying words such as “expect,”
“believe,” “estimate,” “plan” and “project” and their derivatives, and
include but are not limited to statements about expectations for our
future operations, production levels, sales, profit margins,
profitability, operating income, capital expenditures, working capital
levels, income taxes, SG&A or other expenses, pre-tax income, earnings,
cash flow, and other performance measures, as well as any statements
regarding future economic or industry trends or future developments.
Factors that could influence the matters discussed in such statements
include the level of housing starts and sales of existing homes,
consumer confidence, trends in disposable income, and general economic
conditions. Decreases in these economic indicators could have a
negative effect on our business and prospects. Likewise,
increases in interest rates, particularly home mortgage rates, and
increases in consumer debt or the general rate of inflation, could
affect us adversely. Changes in consumer tastes or preferences toward
products not produced by us could erode demand for our products. Changes
in the value of the U.S. dollar versus other currencies could affect our
financial results because a significant portion of our operations are
located outside
CULP, INC. Condensed Financial Highlights (Unaudited) |
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Three Months Ended |
Fiscal Year Ended |
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April 30, |
May 1, |
April 30, |
May 1, |
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2017 |
2016 |
2017 |
2016 |
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Net sales | $ | 77,350,000 | $ | 77,253,000 | $ | 309,544,000 | $ | 312,860,000 | ||||||||
Income before income taxes | $ | 6,999,000 | $ | 7,167,000 | $ | 29,696,000 | $ | 27,898,000 | ||||||||
Net income | $ | 6,198,000 | $ | 3,601,000 | $ | 22,334,000 | $ | 16,935,000 | ||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 0.50 | $ | 0.29 | $ | 1.81 | $ | 1.38 | ||||||||
Diluted | $ | 0.49 | $ | 0.29 | $ | 1.78 | $ | 1.36 | ||||||||
Average shares outstanding: | ||||||||||||||||
Basic | 12,340,000 | 12,257,000 | 12,312,000 | 12,302,000 | ||||||||||||
Diluted | 12,567,000 | 12,434,000 | 12,518,000 | 12,475,000 |
Consolidated Adjusted Effective Income Tax Rate For the Twelve Months Ended April 30, 2017, and May 1, 2016 (Unaudited) (Amounts in Thousands) |
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TWELVE MONTHS ENDED | ||||||||||||
Amounts | ||||||||||||
April 30, | May 1, | |||||||||||
2017 | 2016 | |||||||||||
Consolidated Effective GAAP Income Tax Rate | (1) | 24.7% | 39.3% | |||||||||
Non-Cash U.S. Income Tax Expense | (18.2)% | (20.3)% | ||||||||||
Reversal of Foreign Uncertain Income Tax Position | 11.6% | 0.0% | ||||||||||
Other Non-Cash Foreign Income Tax Expense | (0.6)% | (0.4)% | ||||||||||
Consolidated Adjusted Effective Income Tax Rate | (2) | 17.5% | 18.6% | |||||||||
(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. |
Reconciliation of Free Cash Flow For the Twelve Months Ended April 30, 2017, and May 1, 2016 (Unaudited) (Amounts in thousands) |
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Twelve Months Ended |
Twelve Months Ended |
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April 30, 2017 | May 1, 2016 | |||||||||
Net cash provided by operating activities | $ | 32,981 | $ | 26,795 | ||||||
Minus: Capital expenditures | (11,858 | ) | (11,475 | ) | ||||||
Minus: Investment in unconsolidated joint venture | (1,129 | ) | - | |||||||
Add: Proceeds from the sale of equipment | 141 | 233 | ||||||||
Minus: Payments on life insurance policy | (18 | ) | (18 | ) | ||||||
Minus: Payments on vendor-financed capital expenditures | (1,050 | ) | - | |||||||
Minus: Purchase of long-term investments (Rabbi Trust) | (1,351 | ) | (1,649 | ) | ||||||
Add: Excess tax benefits related to stock-based compensation | 657 | 841 | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (56 | ) | 498 | |||||||
Free Cash Flow | $ | 18,317 | $ | 15,225 |
Reconciliation of Return on Capital For the Twelve Months Ended April 30, 2017, and May 1, 2016 (Unaudited) (Amounts in thousands) |
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Twelve Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||
April 30, 2017 | May 1, 2016 |
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Consolidated Income from Operations | $ | 30,078 | $ | 28,338 | ||||||||||||||||||||||||||
Average Capital Employed (2) | 95,055 | 88,691 | ||||||||||||||||||||||||||||
Return on Average Capital Employed (1) | 31.6 | % | 32.0 | % | ||||||||||||||||||||||||||
Average Capital Employed | ||||||||||||||||||||||||||||||
April 30, 2017 | January 29, 2017 | October 30, 2016 | July 31, 2016 | May 1, 2016 | ||||||||||||||||||||||||||
Total assets | $ | 205,634 | $ | 191,056 | $ | 179,127 | $ | 183,360 | $ | 175,142 | ||||||||||||||||||||
Total liabilities | (57,004 | ) | (48,742 | ) | (43,178 | ) | (51,925 | ) | (46,330 | ) | ||||||||||||||||||||
Subtotal | $ | 148,630 | $ | 142,314 | $ | 135,949 | $ | 131,435 | $ | 128,812 | ||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||
Cash and cash equivalents | (20,795 | ) | (15,659 | ) | (13,910 | ) | (45,549 | ) | (37,787 | ) | ||||||||||||||||||||
Short-term investments | (2,443 | ) | (2,410 | ) | (2,430 | ) | (2,434 | ) | (4,359 | ) | ||||||||||||||||||||
Long-term investments - Held-to-Maturity | (30,945 | ) | (30,832 | ) | (31,050 | ) | - | - | ||||||||||||||||||||||
Long-term investments - Rabbi Trust | (5,466 | ) | (5,488 | ) | (4,994 | ) | (4,611 | ) | (4,025 | ) | ||||||||||||||||||||
Income taxes receivable | - | - | - | - | (155 | ) | ||||||||||||||||||||||||
Deferred income taxes - non-current | (419 | ) | (422 | ) | (581 | ) | (1,942 | ) | (2,319 | ) | ||||||||||||||||||||
Income taxes payable - current | 287 | 217 | 513 | 358 | 180 | |||||||||||||||||||||||||
Income taxes payable - long-term | 467 | 1,817 | 3,734 | 3,779 | 3,841 | |||||||||||||||||||||||||
Deferred income taxes - non-current | 3,593 | 2,924 | 1,699 | 1,532 | 1,483 | |||||||||||||||||||||||||
Line of credit | - | - | - | 7,000 | - | |||||||||||||||||||||||||
Deferred compensation | 5,520 | 5,327 | 5,171 | 5,031 | 4,686 | |||||||||||||||||||||||||
Total Capital Employed | $ | 98,429 | $ | 97,788 | $ | 94,101 | $ | 94,599 | $ | 90,357 | ||||||||||||||||||||
Average Capital Employed (2) | $ | 95,055 | ||||||||||||||||||||||||||||
May 1, 2016 | January 31, 2016 | November 1, 2015 | August 2, 2015 | May 3, 2015 | ||||||||||||||||||||||||||
Total assets | $ | 175,142 | $ | 173,551 | $ | 168,947 | $ | 166,879 | $ | 171,300 | ||||||||||||||||||||
Total liabilities | (46,330 | ) | (48,477 | ) | (45,972 | ) | (48,154 | ) | (51,873 | ) | ||||||||||||||||||||
Subtotal | $ | 128,812 | $ | 125,074 | $ | 122,975 | $ | 118,725 | $ | 119,427 | ||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||
Cash and cash equivalents | (37,787 | ) | (31,713 | ) | (31,176 | ) | (25,933 | ) | (29,725 | ) | ||||||||||||||||||||
Short-term investments | (4,359 | ) | (4,259 | ) | (6,320 | ) | (6,336 | ) | (10,004 | ) | ||||||||||||||||||||
Long-term investments - Rabbi Trust | (4,025 | ) | (3,590 | ) | (3,279 | ) | (2,893 | ) | (2,415 | ) | ||||||||||||||||||||
Income taxes receivable | (155 | ) | (23 | ) | (75 | ) | (142 | ) | (229 | ) | ||||||||||||||||||||
Deferred income taxes - non-current | (2,319 | ) | (4,312 | ) | (3,415 | ) | (4,405 | ) | (5,169 | ) | ||||||||||||||||||||
Current maturities of long-term debt | - | - | - | 2,200 | 2,200 | |||||||||||||||||||||||||
Income taxes payable - current | 180 | 622 | 305 | 392 | 325 | |||||||||||||||||||||||||
Income taxes payable - long-term | 3,841 | 3,480 | 3,655 | 3,634 | 3,792 | |||||||||||||||||||||||||
Deferred income taxes - non-current | 1,483 | 1,209 | 1,206 | 1,071 | 982 | |||||||||||||||||||||||||
Deferred compensation | 4,686 | 4,495 | 4,421 | 4,280 | 4,041 | |||||||||||||||||||||||||
Total Capital Employed | $ | 90,357 | $ | 90,983 | $ | 88,297 | $ | 90,593 | $ | 83,225 | ||||||||||||||||||||
Average Capital Employed (2) | $ | 88,691 | ||||||||||||||||||||||||||||
Notes: | ||||||||||||||||||||||||||||||
(1) Return on average capital employed represents operating income for the fiscal 2017 or 2016 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, current maturities of long-term debt, line of credit, noncurrrent deferred tax assets and liabilities, income taxes receivable and payable, and deferred compensation. |
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(2) Average capital employed used for the twelve months ending April 30, 2017 was computed using the five quarterly periods ending April 30, 2017, January 29, 2017, October 30, 2016, July 31, 2016 and May 1, 2016. Average capital employed used for the twelve months ending May 1, 2016 was computed using the five quarterly periods ending May 1, 2016, January 31, 2016, November 1, 2015, August 2, 2015 and May 3, 2015. |
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View source version on businesswire.com: http://www.businesswire.com/news/home/20170613006378/en/
Source:
Culp, Inc.
Investor Contact:
Kenneth R. Bowling, 336-881-5630
Chief
Financial Officer
or
Media Contact:
Teresa A. Huffman,
336-889-5161
Vice President, Human Resources