UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 28, 2007
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Culp, Inc.
----------
(Exact Name of Registrant as Specified in its Charter)
North Carolina 0-12781 56-1001967
- ----------------------------- ------------------------ --------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1823 Eastchester Drive
High Point, North Carolina 27265
----------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(336) 889-5161
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former name or address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
INDEX
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Page
----
Item 2.02 - Results of Operations and Financial Condition 3
Item 9.01(d) - Exhibits 3
Signature 4
Exhibits
2
Item 2.02 - Results of Operations and Financial Condition
On August 28, 2007, the Company issued a news release to announce its financial
results for the first quarter ended July 29, 2007. The news release is attached
hereto as Exhibit 99(a).
Also on August 28, 2007, the Company released a Financial Information Release
containing additional financial information and disclosures about the Company's
first quarter ended July 29, 2007. The Financial Information Release is attached
hereto as Exhibit 99(b).
The news release and Financial Information Release contain disclosures about
free cash flow, a non-GAAP performance measure, that management believes
provides useful information to investors because it measures the Company's
available cash flow for potential debt repayment, stock repurchases and
additions to cash and cash equivalents. In addition, the news release and
Financial Information Release contain proforma income statement information,
which reconciles the reported and projected income statement information with
proforma results, which exclude restructuring and related charges. The Company
has included this proforma information in order to show operational performance
excluding the effects of restructuring and related charges that are not expected
to occur on a regular basis. Management believes this presentation aids in the
comparison of financial results among comparable financial periods. In addition,
this information is used by management to make operational decisions about the
Company's business, is used in certain financial covenants in the Company's loan
agreements, and is used by the Company as a financial goal for purposes of
determining management incentive bonuses.
Forward Looking Information. This report and the exhibits hereto contain
statements that may be deemed "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. 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 the company's future operations,
production levels, sales, SG&A or other expenses, margins, gross profit,
operating income, earnings or other performance measures. 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 the company's 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 the Company
adversely. Changes in consumer tastes or preferences toward products not
produced by the Company could erode demand for the Company's products. In
addition, strengthening of the U.S. dollar against other currencies could make
the Company's products less competitive on the basis of price in markets outside
the United States. Also, economic and political instability in international
areas could affect the company's operations or sources of goods in those areas,
as well as demand for the company's products in international markets. The
Company's level of success in integrating the acquisition of assets from the
International Textile Group, Inc. and in capturing and retaining sales to
customers related to the acquisition will affect the Company's ability to meet
its sales goals. Finally, unanticipated delays or costs in executing
restructuring actions could cause the cumulative effect of restructuring actions
to fail to meet the objectives set forth by management. Other factors that could
affect the matters discussed in forward-looking statements are included in the
company's periodic reports filed with the Securities and Exchange Commission,
including the "Risk Factors" section in the company's most recent annual report
of Form 10-K filed with the Securities and Exchange Commission on July 19, 2007
for the fiscal year ended April 29, 2007.
Item 9.01 (d) -- Exhibits
99(a) News Release dated August 28, 2007
99(b) Financial Information Release dated August 28, 2007
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CULP, INC.
(Registrant)
By: /s/ Kenneth R. Bowling
----------------------
Chief Financial Officer
(principal financial officer)
By: /s/ Thomas B. Gallagher, Jr.
----------------------------
Corporate Controller
(principal accounting officer)
Dated: August 28, 2007
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4
EXHIBIT INDEX
Exhibit Number Exhibit
-------------- -------
99(a) News Release dated August 28, 2007
99(b) Financial Information Release dated August 28, 2007
Exhibit 99(a)
Culp Announces First Quarter Results for Fiscal 2008
HIGH POINT, N.C.--(BUSINESS WIRE)--Aug. 28, 2007--Culp, Inc.
(NYSE: CFI) today reported financial and operating results for the
first quarter ended July 29, 2007.
Overview
For the three months ended July 29, 2007, net sales were $65.2
million, up 4.2 percent compared with $62.6 million a year ago. The
company reported net income of $851,000, or $0.07 per diluted
share, for the first quarter of fiscal 2008, compared with net income
of $132,000, or $0.01 per diluted share, for the first quarter of
fiscal 2007. The financial results for the first quarter of fiscal
2008 included $624,000, or $0.05 per diluted share, in restructuring
and related charges, after taxes. Excluding these charges, net income
for the first fiscal quarter was $1.5 million, or $0.12 per diluted
share. The first quarter fiscal 2008 results reflect a significantly
higher tax rate due primarily to higher taxable income from the
company's U.S. operations compared with the prior year period. The
financial results for the first quarter of fiscal 2007 include
after-tax restructuring and related charges of $985,000, or $0.08 per
diluted share. Excluding these charges, net income for the first
fiscal quarter of 2007 was $1.1 million, or $0.09 per diluted share.
(A reconciliation of net income and net income per share has been set
forth on Page 6.)
Frank Saxon, chief executive officer of Culp, Inc., said, "We are
off to an encouraging start for the first quarter of fiscal 2008 with
overall higher sales and improved profitability compared with the same
period last year. Our performance primarily reflects the significant
gains made in our mattress fabrics business. The acquisition of the
mattress fabrics product line of International Textile Group, Inc.'s
Burlington House Division ("ITG"), acquired at the end of the third
quarter of fiscal 2007, has furthered our growth strategy in this
segment. The upholstery fabrics segment continued to face significant
industry-wide challenges during the quarter. However, with our China
platform and the aggressive restructuring of our U.S. upholstery
fabric operations, we believe we are now better positioned to meet
these challenges, remain profitable and benefit from any upturn in
overall demand."
Mattress Fabrics Segment
Mattress fabric (known as mattress ticking) sales for the first
quarter were $36.5 million, a 67 percent increase compared with $21.8
million for the first quarter of fiscal 2007. This trend reflects the
incremental sales related to the company's acquisition of ITG's
mattress fabrics product line and organic growth. Mattress fabric
sales represented over 56 percent of total company sales. On a unit
volume basis, total yards sold increased by 58 percent compared with
the first quarter of fiscal 2007. The average selling price of $2.44
per yard for the first quarter of fiscal 2008 increased six percent
over the same period a year ago, reflecting a shift in product mix
toward more knitted fabrics. Operating income for this segment was
$3.8 million, or 10.3 percent of sales, compared with $1.9 million, or
8.5 percent of sales, for the prior-year period. These operating
results also include transition costs of approximately $500,000
incurred during the first quarter of fiscal 2008.
"The mattress fabrics business continues to be a bright spot for
Culp with sales up 67 percent over the same period a year ago, "said
Saxon. "The bedding industry has remained strong in spite of the
ongoing issues in the housing industry, primarily due to a steady
replacement business. The integration of the additional production and
sales has gone well, and we have been pleased with our customer
retention rate following the ITG acquisition. We have also experienced
meaningful organic growth, especially with knitted ticking, which is a
growing product category and has a higher average selling price. The
results for the quarter were affected by modestly higher raw material
costs and the strengthening of the Canadian currency as compared to
the same period last year. For fiscal 2008, we are focused on
maintaining our high level of execution and service for our customers,
effectively managing an increased amount of working capital and
pursuing opportunities to enhance our leadership position in the
mattress fabrics industry."
Upholstery Fabrics Segment
Sales for this segment, which include both fabric and cut and sewn
kits, were $28.7 million, a 30 percent decline compared with $40.7
million in the first quarter of fiscal 2007. Total fabric yards sold
declined by 38 percent, while average selling prices were the same as
for the first quarter of fiscal 2007. Sales of cut and sewn kits were
up significantly over the same period last year. Upholstery fabrics
sales reflect very weak demand industry wide, as well as continued
soft demand for U.S. produced upholstery fabrics driven by consumer
preference for leather and suede furniture and other imported fabrics,
including an increasing amount of cut and sewn kits. Sales of non-U.S.
produced fabrics were $18.9 million in the first quarter, down 20
percent over the prior year period, while sales of U.S. produced
fabrics were $9.8 million, down 43 percent from the first quarter of
fiscal 2007. Operating income for the upholstery fabrics segment for
the first quarter of fiscal 2008 was $450,000 compared with $1.6
million for the same period a year ago.
Saxon remarked, "The results for the upholstery fabrics segment
reflect the very difficult operating environment for the retail
furniture industry. Discretionary consumer spending for furniture
continues to be very soft due to a slowing economy, weak housing
market and high energy prices. Likewise, demand for upholstery fabrics
has continued to decline, especially for U.S. produced fabrics. While
our non-U.S. operations now account for over 65 percent of all
upholstery fabric sales, those sales have also been affected by the
overall weak demand.
"Considering the tough market conditions, we were pleased to
report a profitable performance in upholstery fabrics, primarily
driven by our non-U.S. operations. We have significantly improved our
cost structure with substantially lower U.S. manufacturing costs and
lower selling, general and administrative expenses for the first
quarter of fiscal 2008, which were down 14 percent from the fourth
quarter of fiscal 2007. We have also reduced our inventory levels in
the upholstery fabrics segment by almost $10 million, or 31 percent,
since the first quarter of fiscal 2007. In addition, we are encouraged
by the favorable trends we are seeing in fabric placements with many
customers for the upcoming furniture market in October.
"We are excited about our progress in China and today we have a
substantial wholly-owned operation with over 450 associates. In fiscal
2008, our focus will be on improving gross profit from our U.S.
manufacturing operations, developing differentiated products, building
upon our capabilities in the China platform and improving our supply
chain performance," said Saxon.
Balance Sheet
"Maintaining a strong balance sheet will continue to be an
important priority for Culp in fiscal 2008," added Saxon. "At the end
of the first fiscal quarter, our balance sheet reflected $9.0 million
in cash and cash equivalents. Total debt and outstanding balances on
our lines of credit were $38.6 million compared with $47.3 million a
year earlier. During the first quarter of fiscal 2008, we prepaid $2.2
million in long term debt scheduled for payment in March 2008. We also
prepaid an additional $1.0 million in early August. Our debt to
capital ratio has improved significantly and was 32 percent at the end
of the first quarter, compared with 39 percent a year earlier. As of
July 29, 2007, we also had $1.9 million in assets held for sale, which
we expect will be sold in fiscal 2008."
Outlook
Commenting on the outlook for the second quarter of fiscal 2008,
Saxon remarked, "We believe our mattress fabrics segment will continue
to perform well, however, we see little indication for a meaningful
change in the trends in our upholstery fabrics segment. Overall, we
expect our second quarter sales to be slightly higher than the second
quarter of last year.
We expect sales in our mattress fabrics segment to be up 50 to 55
percent for the second quarter. Operating income in this segment is
also expected to improve substantially compared with the prior year
period due to higher sales volume, full production schedules and the
completion of the ITG integration.
"In our upholstery fabrics segment, we expect sales to be down
approximately 20 to 25 percent for the second quarter, due primarily
to lower sales of U.S. produced fabrics. We believe the upholstery
fabric segment's operating results will reflect a small operating
profit with continued solid gross profit margins in our non-U.S.
produced business and lower selling, general and administrative
expenses as compared to the first quarter of the current fiscal year.
We are estimating approximately $450,000 of restructuring and related
charges during the second fiscal quarter for the continued operating
costs of closed U.S. facilities. However, these charges will continue
to decline over the course of fiscal 2008, as these facilities are
sold and as leases expire. At this point, we estimate that we will
incur an additional $200,000 of restructuring and related charges over
the second half of fiscal 2008 for previously announced restructuring
initiatives."
"Considering these factors, we expect the company to report net
income in the second quarter in the range of $0.12 to $0.15 per
diluted share, excluding restructuring and related charges for
previously announced restructuring initiatives. The second quarter
fiscal 2008 results will reflect a significantly higher tax rate
compared to the previous year due primarily to higher taxable income
from the company's U.S. operations compared with the prior year
period. This is management's best estimate at present, recognizing
that future financial results are difficult to predict because the
upholstery fabrics industry is undergoing a dramatic transition and
many internal changes are still underway within the company. The
actual results will depend primarily upon the level of demand
throughout the quarter," said Saxon.
The company estimates that restructuring and related charges of
approximately $450,000 ($293,000 net of taxes, or $0.02 per diluted
share) will be incurred during the second fiscal quarter. Including
the restructuring and related charges, the company expects to report
net income for the second fiscal quarter in the range of $0.10 to
$0.13 per diluted share. (A reconciliation of the projected net income
per share calculation has been set forth on Page 6.)
In closing, Saxon remarked, "We are optimistic about Culp's
prospects for fiscal 2008. We are beginning to benefit from the
important strategic decisions made and implemented during the past few
years. Most of the difficult, yet necessary, restructuring moves in
upholstery fabrics are now behind us. The ITG acquisition has
significantly enhanced our solid competitive position in mattress
fabrics. As a result, Culp enters fiscal 2008 a leaner, more efficient
operation with leadership positions in both of our operating segments.
Mattress fabrics will be the key driver of our growth in fiscal 2008.
While our upholstery fabrics business is being affected by the
extremely challenging conditions in the furniture industry, we believe
we have the right strategy in place to meet these challenges and take
advantage of the opportunities presented. Our China platform has
positioned Culp to be competitive in a changing marketplace and to be
a leader in our industry. We are now the sole U.S. supplier of velvet
fabrics and believe we can continue to maintain a U.S. upholstery
fabrics operation that supports customer demand. Overall, we remain
confident in our ability to execute our strategy and deliver value to
both our customers and shareholders."
About the Company
Culp, Inc. is one of the world's largest marketers of mattress
fabrics for bedding and upholstery fabrics for furniture. The
company's fabrics are used principally in the production of bedding
products and residential and commercial upholstered furniture.
This release contains statements that may be deemed
"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. 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
the company's future operations, production levels, sales, SG&A or
other expenses, margins, gross profit, operating income, earnings or
other performance measures. 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 the company's 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 the company adversely. Changes in consumer
tastes or preferences toward products not produced or marketed by the
company could erode demand for the company's products. The company's
level of success in integrating its recent acquisition and in
capturing and retaining sales to customers related to the acquisition
will affect the company's ability to meet its sales and profit goals.
In addition, strengthening of the U.S. dollar against other currencies
could make the company's products less competitive on the basis of
price in markets outside the United States. Also, economic and
political instability in international areas could affect the
company's operations or sources of goods in those areas, as well as
demand for the company's products in international markets. Finally,
unanticipated delays or costs in executing restructuring actions could
cause the cumulative effect of restructuring actions to fail to meet
the objectives set forth by management. Other factors that could
affect the matters discussed in forward-looking statements are
included in the company's periodic reports filed with the Securities
and Exchange Commission, including the "Risk Factors" section in the
company's most recent annual report on Form 10-K.
CULP, INC.
Condensed Financial Highlights
(Unaudited)
Three Months Ended
------------------------
July 29, July 30,
2007 2006
----------- -----------
Net sales $65,230,000 $62,585,000
Income before income taxes $ 1,311,000 $ 129,000
Net income $ 851,000 $ 132,000
Net income per share:
Basic $ 0.07 $ 0.01
Diluted $ 0.07 $ 0.01
Income before income taxes, excluding
restructuring and related charges(a) $ 2,286,000 $ 1,298,000
Net income, excluding restructuring and
related charges(a) $ 1,475,000 $ 1,117,000
Net income per share, diluted, excluding
restructuring and related charges(a) $ 0.12 $ 0.09
Average shares outstanding:
Basic 12,583,000 11,672,000
Diluted 12,728,000 11,770,000
(a) Excludes restructuring and related charges of $975,000 ($624,000
or $0.05 per diluted share, after taxes) for the first quarter of
fiscal 2008. Excludes restructuring and related charges of $1.2
million ($985,000 or $0.08 per diluted share, after taxes) for the
first quarter of fiscal 2007. (See reconciliation on the following
page)
CULP, INC.
Reconciliation of Income before income taxes as Reported to Pro Forma
Income before income taxes
(Unaudited)
Three Months Ended
------------------------
July 29, July 30,
2007 2006
----------- -----------
Income before income taxes, as reported $ 1,311,000 $ 129,000
Restructuring and related charges 975,000 1,169,000
----------- -----------
Pro forma income before income taxes $ 2,286,000 $ 1,298,000
=========== ===========
Reconciliation of Net Income as Reported to Pro Forma Net Income
(Unaudited)
Three Months Ended
------------------------
July 29, July 30,
2007 2006
----------- -----------
Net income, as reported $ 851,000 $ 132,000
Restructuring and related charges, net of
income taxes 624,000 985,000
----------- -----------
Pro forma net income $ 1,475,000 $ 1,117,000
=========== ===========
Reconciliation of Net Income Per Share as Reported to Pro Forma Net
Income Per Share
(Unaudited)
Three Months Ended
------------------------
July 29, July 30,
2007 2006
----------- -----------
Net income per diluted share $ 0.07 $ 0.01
Restructuring and related charges, net of
income taxes 0.05 0.08
----------- -----------
Pro forma net income per diluted share $ 0.12 $ 0.09
=========== ===========
Reconciliation of Projected Range of Net Income Per Share to Projected
Range of Pro Forma Net Income Per Share
(Unaudited)
Three Months Ending
October 28, 2007
------------------------
Projected range of net income per diluted
share $0.10 - $0.13
Projected restructuring and related charges,
net of income taxes 0.02
------------------------
Projected range of pro forma net income per
diluted share $0.12 - $0.15
========================
CONTACT: Culp, Inc.
Investor Contact:
Kenneth R. Bowling, 336-881-5630
Chief Financial Officer
or
Media Contact:
Kenneth M. Ludwig, 336-889-5161
Senior Vice President,
Human Resources
Exhibit 99(b)
Page 1 of 5
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF NET INCOME
FOR THE THREE MONTHS ENDED JULY 29, 2007 AND JULY 30, 2006
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
-------------------------------------------------------
Amounts Percent of Sales
------------------------ ------------------
July 29, July 30, % Over July 29, July 30,
2007 2006 (1) (Under) 2007 2006
----------- ----------- --------- -------- --------
Net sales $ 65,230 62,585 4.2 % 100.0 % 100.0 %
Cost of sales 56,174 54,525 3.0 % 86.1 % 87.1 %
----------- ----------- --------- -------- --------
Gross profit 9,056 8,060 12.4 % 13.9 % 12.9 %
Selling, general and
administrative expenses 6,321 6,575 (3.9)% 9.7 % 10.5 %
Restructuring expense 432 423 2.1 % 0.7 % 0.7 %
----------- ----------- -------- -------- --------
Income from operations 2,303 1,062 116.9 % 3.5 % 1.7 %
Interest expense 818 950 (13.9)% 1.3 % 1.5 %
Interest income (58) (46) 26.1 % (0.1)% (0.1)%
Other expense 232 29 700.0 % 0.4 % 0.0 %
----------- ----------- --------- -------- --------
Income before income taxes 1,311 129 916.3 % 2.0 % 0.2 %
Income taxes* 460 (3) N.M. 35.1 % (2.3)%
----------- ----------- --------- -------- --------
Net income $ 851 132 544.7 % 1.3 % 0.2 %
=========== =========== ========= ======== ========
Net income per share-basic $ 0.07 0.01 600.0 %
Net income per share-diluted $ 0.07 0.01 600.0 %
Net income per share, diluted,
excluding restructuring and
related charges (see pro-forma
statement on page 5) $ 0.12 0.09 33.3 %
Average shares outstanding-basic 12,583 11,672 7.8 %
Average shares outstanding-diluted 12,728 11,770 8.1 %
* Percent of sales column for income taxes is calculated as a % of income
before income taxes.
(1) Certain prior year amounts have been corrected to conform to current year
presentation. A credit of $307,000 regarding sales proceeds received on
equipment with no carrying value was reclassified from other expense to
restructuring expense to conform to current year presentation.
Page 2 of 5
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
JULY 29, 2007, JULY 30, 2006 AND APRIL 29, 2007
Unaudited
(Amounts in Thousands)
Increase
Amounts (Decrease)
----------------------- ----------------------
July 29, July 30, * April 29,
2007 2006 Dollars Percent 2007
----------- ----------- --------- ---------- ------------
Current assets
Cash and cash equivalents $ 9,017 8,387 630 7.5 % 10,169
Accounts receivable 23,903 26,044 (2,141) (8.2)% 29,290
Inventories 42,159 43,055 (896) (2.1)% 40,630
Deferred income taxes 5,376 7,120 (1,744) (24.5)% 5,376
Assets held for sale 1,906 2,531 (625) (24.7)% 2,499
Other current assets 1,649 2,789 (1,140) (40.9)% 1,824
----------- ----------- --------- ---------- ------------
Total current assets 84,010 89,926 (5,916) (6.6)% 89,788
Property, plant & equipment, net 36,901 42,835 (5,934) (13.9)% 37,773
Goodwill 4,114 4,114 - 0.0 % 4,114
Deferred income taxes 26,220 21,513 4,707 21.9 % 25,683
Other assets 2,831 1,542 1,289 83.6 % 2,588
----------- ----------- --------- ---------- ------------
Total assets $ 154,076 159,930 (5,854) (3.7)% 159,946
=========== =========== ========= ========== ============
Current liabilities
Current maturities of
long-term debt $ 13,849 7,739 6,110 79.0 % 16,046
Lines of credit 2,641 - 2,641 100.0 % 2,593
Accounts payable 17,995 21,247 (3,252) (15.3)% 23,585
Accrued expenses 8,484 9,130 (646) (7.1)% 8,670
Accrued restructuring 3,047 3,745 (698) (18.6)% 3,282
Income taxes payable - current 856 3,561 (2,705) (76.0)% 4,579
----------- ----------- --------- ---------- ------------
Total current liabilities 46,872 45,422 1,450 3.2 % 58,755
Income taxes payable - long-term 3,765 - 3,765 100.0 % -
Long-term debt, less current
maturities 22,094 39,601 (17,507) (44.2)% 22,114
----------- ----------- --------- ---------- ------------
Total liabilities 72,731 85,023 (12,292) (14.5)% 80,869
Shareholders' equity 81,345 74,907 6,438 8.6 % 79,077
----------- ----------- --------- ---------- ------------
Total liabilities and
shareholders' equity $ 154,076 159,930 (5,854) (3.7)% 159,946
=========== =========== ========= ========== ============
Shares outstanding 12,635 11,685 950 8.1 % 12,569
=========== =========== ========= ========== ============
* Derived from audited financial statements.
Page 3 of 5
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 29, 2007 AND JULY 30, 2006
Unaudited
Amounts in Thousands)
THREE MONTHS ENDED
------------------------
Amounts
------------------------
July 29, July 30,
2007 2006 (1)
----------- -----------
Cash flows from operating activities:
Net income $ 851 132
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation 1,447 1,702
Amortization of other assets 90 23
Stock-based compensation 140 132
Excess tax benefit related to stock options exercised (21) -
Deferred income taxes (518) (1,337)
Restructuring expenses, net of gain on sale of related assets 160 (237)
Changes in assets and liabilities:
Accounts receivable 5,387 3,005
Inventories (1,529) (6,362)
Other current assets 175 (1,502)
Other assets (327) (6)
Accounts payable (5,251) 796
Accrued expenses (186) 1,285
Accrued restructuring (235) (309)
Income taxes payable 889 1,073
----------- -----------
Net cash provided by (used in) operating activities 1,072 (1,605)
----------- -----------
Cash flows from investing activities:
Capital expenditures (1,113) (637)
Proceeds from the sale of buildings and equipment 702 1,600
----------- -----------
Net cash (used in) provided by investing activities (411) 963
----------- -----------
Cash flows from financing activities:
Payments on vendor-financed capital expenditures (70) (428)
Payments on long-term debt (2,169) (382)
Proceeds from common stock issued 405 125
Excess tax benefit related to stock options exercised 21 -
----------- -----------
Net cash used in financing activities (1,813) (685)
----------- -----------
Decrease in cash and cash equivalents (1,152) (1,327)
Cash and cash equivalents at beginning of period 10,169 9,714
----------- -----------
Cash and cash equivalents at end of period $ 9,017 8,387
=========== ===========
Free Cash Flow (1) $ 591 (1,070)
=========== ===========
- -----------------------------------------------------------------------------------------------
(1) Free Cash Flow reconciliation is as follows:
FY 2008 FY 2007
----------- -----------
A) Net cash provided by (used in) operating activities $ 1,072 (1,605)
B) Minus: Capital Expenditures (1,113) (637)
C) Add: Proceeds from the sale of buildings and equipment 702 1,600
C) Minus: Payments on vendor-financed capital expenditures (70) (428)
----------- -----------
$ 591 (1,070)
=========== ===========
- -----------------------------------------------------------------------------------------------
(1) Certain prior year amounts have been corrected to conform to current year
presentation. A gain of $307,000 regarding sales proceeds received on
equipment with no carrying value was reclassified from gain on sale of
equipment to restructuring expenses, net of gain on sale of related assets
within net cash provided by (used in) operating activities.
Page 4 of 5
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES, GROSS PROFIT AND OPERATING INCOME (LOSS) BY SEGMENT
FOR THE THREE MONTHS ENDED JULY 29, 2007 AND JULY 30, 2006
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
----------------------------------------------------------
Amounts Percent of Sales
------------------- -------------------
July 29, July 30, % Over July 29, July 30,
Net Sales by Segment 2007 2006 (Under) 2007 2006
- ---------------------------------- -------- -------- ------- -------- --------
Mattress Fabrics $ 36,536 21,845 67.3% 56.0% 34.9%
Upholstery Fabrics 28,694 40,740 (29.6)% 44.0% 65.1%
-------- -------- -------- -------- --------
Net Sales $ 65,230 62,585 4.2% 100.0% 100.0%
======== ======== ======== ======== ========
Gross Profit by Segment Gross Profit Margin
- ---------------------------------- --------------------
Mattress Fabrics $ 5,805 3,521 64.9% 15.9% 16.1%
Upholstery Fabrics 3,768 5,285 (28.7)% 13.1% 13.0%
-------- -------- -------- -------- --------
Subtotal 9,573 8,806 8.7% 14.7% 14.1%
Restructuring related charges (517)(1) (746)(4) -30.7% (0.8)% (1.2)%
-------- -------- -------- -------- --------
Gross Profit $ 9,056 8,060 12.4% 13.9% 12.9%
======== ======== ======== ======== ========
Sales, General and Administrative expenses by Segment Percent of Sales
- ------------------------------------------------------- -------------------
Mattress Fabrics $ 2,042 1,663 22.8% 5.6% 7.6%
Upholstery Fabrics 3,318 3,710 (10.6)% 11.6% 9.1%
Unallocated Corporate expenses 935 1,202 (22.2)% 1.4% 1.9%
-------- -------- -------- -------- --------
Subtotal 6,295 6,575 (4.3)% 9.7% 10.5%
Restructuring related charges 26(2) - 0.0% 0.0% 0.0%
-------- -------- -------- -------- --------
Selling, General and
Administrative expenses $ 6,321 6,575 (3.9)% 9.7% 10.5%
======== ======== ======== ======== ========
Operating Income
Operating income (loss) by Segment (Loss) Margin
- ---------------------------------- ------------------
Mattress Fabrics $ 3,763 1,858 102.5% 10.3% 8.5%
Upholstery Fabrics 450 1,575 (71.4)% 1.6% 3.9%
Unallocated corporate expenses (935) (1,202) 22.2% (1.4)% (1.9)%
-------- -------- -------- -------- --------
Subtotal 3,278 2,231 46.9% 5.0% 3.6%
Restructuring expense and
restructuring related charges (975)(3) (1,169)(5) (16.6)% (1.5)% (1.9)%
-------- -------- -------- -------- --------
Operating income $ 2,303 1,062 116.9% 3.5% 1.7%
======== ======== ======== ======== ========
Depreciation by Segment
- ----------------------------------
Mattress Fabrics $ 897 942 (4.8)%
Upholstery Fabrics 550 760 (27.6)%
-------- -------- --------
Total Depreciation 1,447 1,702 (15.0)%
======== ======== ========
(1) The $517,000 represents restructuring related charges of $460,000 for other
operating costs associated with closed plant facilities and $57,000 for
inventory markdowns.
(2) The $26,000 represents other operating costs associated with a closed plant
facility.
(3) The $975,000 represents $486,000 for other operating costs associated with
closed plant facilities, $367,000 for lease termination costs, $362,000 for
write-downs of a building and equipment, $57,000 for inventory markdowns,
$54,000 for asset movement costs, a credit of $149,000 for employee
termination benefits, and a credit of $202,000 for sales proceeds received
on equipment with no carrying value. Of this total charge, $517,000,
$26,000, and $432,000 are included in cost of sales, selling, general, and
administrative expense, and restructuring expense, respectively.
(4) The $746,000 represents restructuring related charges of $507,000 for other
operating costs associated with closed plant facilities and $239,000 for
inventory markdowns.
(5) The $1.2 million represents $507,000 for other operating costs associated
with closed plant facilities, $385,000 for asset movement costs, $239,000
for inventory markdowns, $235,000 for employee termination benefits,
$116,000 for write-downs of equipment, a credit of $6,000 for lease
termination costs, and a credit of $307,000 for proceeds received on
equipment with no carrying value. Certain prior year amounts have been
corrected to conform to current year presentation. A credit of $307,000
regarding sales proceeds received on equipment with no carrying value was
reclassified from other expense to restructuring expense to conform to
current year presentation. Of this total charge, $746,000 and $423,000 are
included in cost of sales and restructuring expense, respectively.
Page 5 of 5
CULP, INC.
PROFORMA CONSOLIDATED STATEMENTS OF NET INCOME
FOR THE THREE MONTHS ENDED JULY 29, 2007 AND JULY 30, 2006
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
-----------------------------------------------------------------
As Reported July 29, 2007
July 29, % of % of Proforma Net % of
2007 Sales Adjustments Sales of Adjustments Sales
------------------ ------------------- -------------- ------
Net sales $ 65,230 100.0% - 0.0% 65,230 100.0%
Cost of sales 56,174 86.1% (517) -0.8% (1) 55,657 85.3%
------------------ ------------------- -------------- ------
Gross profit 9,056 13.9% (517) -0.8% 9,573 14.7%
Selling, general and administrative
expenses 6,321 9.7% (26) 0.0% (2) 6,295 9.7%
Restructuring expense 432 0.7% (432) -0.7% (3) - 0.0%
------------------ ------------------- -------------- ------
Income from operations 2,303 3.5% (975) -1.5% 3,278 5.0%
Interest expense 818 1.3% - 0.0% 818 1.3%
Interest income (58) -0.1% - 0.0% (58) -0.1%
Other expense 232 0.4% - 0.0% 232 0.4%
------------------ ------------------- -------------- ------
Income before income taxes 1,311 2.0% (975) -1.5% (7) 2,286 3.5%
Income taxes (6) 460 35.1% (351) 36.0% 811 35.5%
------------------ ------------------- -------------- ------
Net income $ 851 1.3% (624) -1.0% 1,475 2.3%
================== =================== ============== ======
Net income per share-basic $ 0.07 ($0.05) $ 0.12
Net income per share-diluted $ 0.07 ($0.05) $ 0.12
Average shares outstanding-basic 12,583 12,583 12,583
Average shares outstanding-diluted 12,728 12,583 12,728
As Reported July 30, 2006 Proforma
July 30, % of % of Proforma Net % of % Over
2006 Sales Adjustments Sales of Adjustments Sales (Under)
------------------ ------------------- -------------- ------ --------
Net sales 62,585 100.0% - 0.0% 62,585 100.0% 4.2%
Cost of sales 54,525 87.1% (746) -1.2% (4) 53,779 85.9% 3.5%
------------------ ------------------- -------------- ------ --------
Gross profit 8,060 12.9% (746) -1.2% 8,806 14.1% 8.7%
Selling, general and administrative
expenses 6,575 10.5% - 0.0% 6,575 10.5% -4.3%
Restructuring expense 423 0.7% (423) -0.7% (5) - 0.0% 0.0%
------------------ ------------------- -------------- ------ --------
Income from operations 1,062 1.7% (1,169) -1.9% 2,231 3.6% 46.9%
Interest expense 950 1.5% - 0.0% 950 1.5% -13.9%
Interest income (46) -0.1% - 0.0% (46) -0.1% 26.1%
Other expense 29 0.0% - 0.0% 29 0.0% 700.0%
------------------ ------------------- -------------- ------ --------
Income before income taxes 129 0.2% (1,169) -1.9% (8) 1,298 2.1% 76.1%
Income taxes (6) (3) -2.3% (184) 15.7% 181 13.9% 348.1%
------------------ ------------------- -------------- ------ --------
Net income 132 0.2% (985) -1.6% 1,117 1.8% 32.1%
================== =================== ============== ====== ========
Net income per share-basic $ 0.01 ($0.08) $ 0.10
Net income per share-diluted $ 0.01 ($0.08) $ 0.09
Average shares outstanding-basic 11,672 11,672 11,672
Average shares outstanding-diluted 11,770 11,672 11,770
Notes:
(1) The $517,000 represents restructuring related charges of $460,000 for other
operating costs associated with closed plant facilities and $57,000 for
inventory markdowns.
(2) The $26,000 represents other operating costs associated with a closed plant
facility.
(3) The $432,000 represents $367,000 for lease termination costs, $362,000 for
write-downs of a building and equipment, $54,000 for asset movement costs,
a credit of $149,000 for employee termination benefits, and a credit of
$202,000 for sales proceeds received on equipment with no carring value.
(4) The $746,000 represents restructuring related charges of $507,000 for other
operating costs and $239,000 for inventory markdowns.
(5) The $423,000 represents $385,000 for asset movement costs, $235,000 for
employee termination benefits, $116,000 for write-downs of equipment, a
credit of $6,000 for lease termination costs, and a credit of $307,000 for
sales proceeds received on equipment with no carrying value. Certain prior
year amounts have been corrected to conform to current year presentation. A
credit of $307,000 regarding sales proceeds received on equipment with no
carrying value was reclassified from other expense to restructuring expense
to conform to current year presentation.
(6) The percent of net sales column for income taxes is calculated as a % of
income before income taxes.
(7) Of this total charge, $556,000 and $419,000 represent cash and non-cash
charges, respectively.
(8) Of this total charge, $815,000 and $354,000 represent cash and non-cash
charges, respectively.