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) February 13, 1995
CULP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-12781 56-1001967
(State or other jurisdiction of (Commission File No.) (IRS Employer Identification
incorporation) No.)
101 South Main Street
High Point, North Carolina 27260
(Address of principal executive offices)
(910) 889-5161
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Item 5. Other Events
See Press Release related to third quarter earnings dated February
13, 1995 (attached).
See Financial Information Release related to third quarter ended
January 29, 1995 (attached).
SIGNATURES
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: Franklin N. Saxon
Franklin N. Saxon
Vice President and
Chief Financial Officer
By: Stephen T. Hancock
Stephen T. Hancock
General Accounting Manager
Dated: February 13, 1995
-2-
FOR IMMEDIATE RELEASE
CULP REPORTS HIGHER QUARTERLY SALES AND EARNINGS
--------------------------------------
EARNINGS PER SHARE UP 43% FOR FIRST NINE MONTHS OF FISCAL 1995
HIGH POINT, North Carolina (February 13, 1995)---Culp, Inc.
(Nasdaq/NM:CULP) today reported record sales and earnings for the
third fiscal quarter ended January 29, 1995.
Net sales for the quarter increased 16% to $77.8 million
compared with $67.0 million a year ago. Net income for the quarter
rose 18% to $2.1 million, or $0.19 per share, compared with $1.8
million, or $0.16 per share, in the third quarter of fiscal 1994.
The gains for the third quarter brought net sales for the
first nine months to $222.6 million, up 33% from $167.6 million in
the first nine months of fiscal 1994. Net income for the first
nine months rose 42% to $6.4 million, or $0.57 per share, up from
$4.5 million, or $0.40 per share, in the year-earlier period.
"These results mark the highest third-quarter sales and net
income ever for Culp," said Robert G. Culp, III, chief executive
officer. "We have benefited throughout the current fiscal year
from favorable-year-to-year comparisons at each of the Company's
business units. Mattress ticking and exports of upholstery fabrics
have shown particularly sharp growth, and each of those categories
remained very strong in the third quarter. Since the
Rossville/Chromatex division was included in most of the third
quarter a year ago, we are particularly pleased with the 16% gain
recorded in sales."
Culp remarked, "We did not receive any contribution in the
quarter from the acquisition of Rayonese Textile since that
acquisition is not expected to close until next month. We have
progressed in plans for a significant capital expansion program at
Rayonese to capitalize on the increasing global demand for wide
jacquard fabrics. That incremental spending should bring the
Company's total capital expenditures for fiscal 1995 to
approximately $21 million, up from $16.8 million in fiscal 1994.
-MORE-
"We have been aided thus far in fiscal 1995 by a favorable
underlying trend in consumer spending on home furnishings.
Although there is concern about the possible impact of the higher
prevailing interest rates on demand for residential furniture, our
focus remains on building Culp's fundamental competitive position.
The acquisition of Rossville/Chromatex a year ago and the most
recent announcement regarding the purchase of Rayonese Textile
represent only the latest in a series of strategic steps over the
last several years to strengthen the Company's market stance in an
industry which is continuing to consolidate. We are finding Culp's
expanded resources to be a definite asset in working with large
furniture and bedding manufacturers which are accounting for an
ever-increasing percentage of total shipments.
Culp concluded, "We recognize the ongoing importance of
containing operating costs and achieving higher manufacturing
productivity. We also must maintain a sound financial position in
order to have modern equipment and facilities and to have the
flexibility to seize additional opportunities to expand our
existing operations."
Culp, Inc. is a leading manufacturer and marketer of fabrics
for the furniture, bedding and institutional furnishings markets.
CULP, INC.
Condensed Financial Highlights
(Unaudited)
Three Months Ended
January 29, January 30,
1995 1994
Net sales $ 77,791,000 $ 67,031,000
Net income 2,100,000 1,775,000
Earnings per share $ 0.19 $ 0.16
Nine Months Ended
January 29, January 30,
1995 1994
Net sales $222,585,000 $167,600,000
Net income 6,350,000 4,465,000
Earnings per share $ 0.57 $ 0.40
-END-
CULP, INC. FINANCIAL INFORMATION RELEASE
INCOME STATEMENTS
FOR THE THREE MONTHS & NINE MONTHS ENDED JANUARY 29, 1995 AND JANUARY 30, 1994
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Sales
January 29, January 30, % Over
1995 1994 (Under) 1995 1994
Net sales 77,791 67,031 16.1 % 100.0 % 100.0 %
Cost of sales 64,785 55,350 17.0 % 83.3 % 82.6 %
Gross profit 13,006 11,681 11.3 % 16.7 % 17.4 %
Selling, general and
administrative expenses 8,295 7,798 6.4 % 10.7 % 11.6 %
Income from operations 4,711 3,883 21.3 % 6.1 % 5.8 %
Interest expense 1,120 899 24.6 % 1.4 % 1.3 %
Interest income (14) (11) 27.3 % (0.0)% (0.0)%
Other expense (income), net 245 91 169.2 % 0.3 % 0.1 %
Income before income ta 3,360 2,904 15.7 % 4.3 % 4.3 %
Income taxes * 1,260 1,129 11.6 % 37.5 % 38.9 %
Net income 2,100 1,775 18.3 % 2.7 % 2.6 %
Average shares outstanding 11,205 11,098 1.0 %
Earnings per share $0.19 $0.16 18.8 %
Dividends per share $0.025 $0.020 25.0 %
NINE MONTHS ENDED (UNAUDITED)
Amounts Percent of Sales
January 29, January 30, % Over
1995 1994 (Under) 1995 1994
Net sales 222,585 167,600 32.8 % 100.0 % 100.0 %
Cost of sales 184,306 139,931 31.7 % 82.8 % 83.5 %
Gross profit 38,279 27,669 38.3 % 17.2 % 16.5 %
Selling, general and
administrative expenses 24,227 19,189 26.3 % 10.9 % 11.4 %
Income from operations 14,052 8,480 65.7 % 6.3 % 5.1 %
Interest expense 3,341 1,632 104.7 % 1.5 % 1.0 %
Interest income (61) (56) 8.9 % (0.0)% (0.0)%
Other expense (income), net 612 (75) ** 0.3 % (0.0)%
Income before income ta 10,160 6,979 45.6 % 4.6 % 4.2 %
Income taxes * 3,810 2,514 51.6 % 37.5 % 36.0 %
Net income 6,350 4,465 42.2 % 2.9 % 2.7 %
Average shares 11,203 11,043 1.4 %
Earnings per share $0.57 $0.40 42.5 %
Dividends per share $0.075 $0.06 25.0 %
* Percent of sales column is calculated as a % of income before income taxes.
** Measurement is not meaningful.
CULP, INC. FINANCIAL INFORMATION RELEASE
BALANCE SHEETS
JANUARY 29, 1995, JANUARY 30, 1994 AND MAY 1, 1994
(Unaudited, Amounts in Thousands)
Amounts Increase
January 29, January 30, (Decrease) * May 1,
1995 1994 Dollars Percent 1994
Current assets
Cash and cash investments 317 287 30 10.5 % 2,693
Accounts receivable 40,547 35,024 5,523 15.8 % 36,743
Inventories 44,314 39,668 4,646 11.7 % 36,596
Other current assets 2,920 2,285 635 27.8 % 2,227
Total current assets 88,098 77,264 10,834 14.0 % 78,259
Restricted investments 1,602 3,577 (1,975) (55.2)% 2,923
Property, plant & equipment, net 69,373 60,333 9,040 15.0 % 64,004
Cost in excess of net assets of business
acquired, net 18,850 16,886 1,964 11.6 % 18,706
Other assets 1,215 933 282 30.2 % 1,056
Total assets 179,138 158,993 20,145 12.7 % 164,948
Current Liabilities
Current maturities of long-term
debt 6,100 2,674 3,426 128.1 % 3,050
Accounts payable 24,126 20,504 3,622 17.7 % 28,466
Accrued expenses 10,082 6,712 3,370 50.2 % 8,158
Income taxes payable 1,391 1,551 (160) (10.3)% 636
Total current liabilities 41,699 31,441 10,258 32.6 % 40,310
Long-term debt 65,711 66,293 (582) (0.9)% 58,512
Deferred income taxes 3,477 2,005 1,472 73.4 % 3,477
Total liabilities 110,887 99,739 11,148 11.2 % 102,299
Shareholders' equity 68,251 59,254 8,997 15.2 % 62,649
Total liabilities and
stockholders' equity 179,138 158,993 20,145 12.7 % 164,948
Shares outstanding 11,205 11,174 31 0.3 % 11,177
* Derived from audited financial statements.
** Measurement is not meaningful.
CULP, INC. FINANCIAL INFORMATION RELEASE
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 29, 1995 AND JANUARY 30, 1994
(Unaudited, Amounts in Thousands)
NINE MONTHS ENDED
Amounts
January 29, January 30,
1995 1994
Cash flows from operating activities:
Net income 6,350 4,465
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 8,237 5,909
Amortization of intangible assets 458 112
Provision for deferred income taxes (272) 0
Changes in assets and liabilities:
Accounts receivable (3,804) 1,249
Inventories (7,718) (6,797)
Other current assets (421) (321)
Other assets (761) (318)
Accounts payable (4,340) (3,188)
Accrued expenses 1,924 (532)
Income taxes payable 755 138
Net cash provided by (used in) operating activitie 408 717
Cash flows from investing activities:
Capital expenditures (13,606) (10,161)
Purchases of restricted investments (60) (3,577)
Proceeds from sale of restricted investments 1,381 0
Business acquired 0 (38,703)
Net cash provided by (used in) investing activitie (12,285) (52,441)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 20,000 43,902
Principal payments on long-term debt (9,751) (1,517)
Net increase (decrease) in bank overdrafts 0 2,139
Dividends paid (840) (590)
Proceeds from sale of common stock 92 858
Net cash provided by (used in) financing activitie 9,501 44,792
Increase (decrease) in cash and cash investments (2,376) (6,932)
Cash and cash investments at beginning of period 2,693 7,219
Cash and cash investments at end of period 317 287
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
JANUARY 29, 1995
FISCAL 94 FISCAL 95
Q3 Q1 Q2 Q3 Q4
INVENTORIES
Inventory turns 5.9 5.8 6.2 6.0
RECEIVABLES
Days sales in receivables 44 42 50 44
Percent current & less than 30
days past due (Trade only) 96.9% 98.5% 99.4% 98.9%
WORKING CAPITAL
Current ratio 2.5 2.3 2.0 2.1
Working capital turnover 6.0 6.7 7.2 6.9
Working capital $45,823 $43,164 $42,964 $46,399
Working capital as a % of sal 17.0% 16.3% 13.7% 14.9%
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 8.1% 8.9% 8.8% 9.2%
Percent property, plant &
equipment are depreciated 48.8% 43.6% 44.0% 45.0%
Capital expenditures $16,764 (1 $5,153 $5,031 $3,422
PROFITABILITY
Net profit margin 2.6% 2.2% 3.6% 2.7%
Gross profit margin 17.7% 16.7% 18.1% 16.7%
Operating income margin 5.8% 5.3% 7.4% 6.1%
SG & A expenses/net sales 11.9% 11.4% 10.7% 10.7%
Return on beginning capital e 8.8% 4.8% 9.2% 6.9%
Return on beginning equity 13.0% 9.3% 17.9% 13.4%
Earnings per share $0.16 $0.13 $0.25 $0.19
LEVERAGE (3)
Interest & dividend coverage 3.6 2.5 4.0 3.2
Total liabilities/equity 162.3% 154.1% 166.1% 160.1%
Long-term debt/equity 111.9% 100.4% 95.5% 98.5%
Funded debt/equity 110.4% 104.0% 102.1% 102.9%
Funded debt/capital employed 52.5% 51.0% 50.5% 50.7%
Funded debt $65,390 $66,493 $67,846 $70,209
Funded debt/EBITDA (LTM) 3.19 2.55 2.28 2.26
OTHER
Book value per share $5.30 $5.70 $5.93 $6.09
Employees at quarter end 2,450 2,579 2,604 2,656
Sales per employee (annualize $129,000 $104,000 $121,000 $118,000
Capital employed (3) $124,644 $130,405 $134,277 $138,460
Effective income tax rate 38.9% 37.0% 37.8% 37.5%
EBITDA (2) $6,343 $6,289 $8,528 $7,768
EBITDA/net sales 9.5% 9.5% 10.9% 10.0%
(1) Expenditures for entire year
(2) Earnings before interest, income taxes, depreciation &
amortization, and other income (expense),net
(3) Total liabilities, long-term debt, funded debt and capital
employed are all net of restricted investments.
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES BY BUSINESS UNIT
FOR THREE MONTHS AND NINE MONTHS ENDED JANUARY 29, 1995
AND JANUARY 30, 1994
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
Janaury 29 January 30, % Over
Business Units 1995 1994 (Under) 1995 1994
Upholstery Fabrics
Flat Wovens
Existing Culp 20,940 19,673 6.4 % 26.9 % 29.3
Rossville/Chromatex 16,397 14,113 16.2 % 21.1 % 21.1
37,337 33,786 10.5 % 48.0 % 50.4
Velvets/Prints 28,307 23,714 19.4 % 36.4 % 35.4
65,644 57,500 14.2 % 84.4 % 85.8
Mattress Ticking 12,147 9,531 27.4 % 15.6 % 14.2
77,791 67,031 16.1 % 100.0 % 100.0
NINE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
January 29 January 30, % Over
Business Units 1995 1994 (Under) 1995 1994
Upholstery Fabrics
Flat Wovens
Existing Culp 63,387 57,190 10.8 % 28.5 % 34.1
Rossville/Chromatex 47,295 14,113 N/A 21.2 % N/A
110,682 71,303 55.2 % 49.7 % 42.5
Velvets/Prints 75,390 69,120 9.1 % 33.9 % 41.2
186,072 140,423 32.5 % 83.6 % 83.8
Mattress Ticking 36,513 27,177 34.4 % 16.4 % 16.2
222,585 167,600 32.8 % 100.0 % 100.0
CULP, INC. FINANCIAL INFORMATION RELEASE
EXPORT SALES BY GEOGRAPHIC AREA
FOR THREE MONTHS AND NINE MONTHS ENDED JANUARY 29, 1995
AND JANUARY 30, 1994
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
Janaury 29 January 30, % Over
Geographic Area 1995 1994 (Under) 1995 1994
North America (Excluding
(USA) 2,800 2,585 8.3 % 20.1 % 25.3 %
Europe 5,821 4,827 20.6 % 41.7 % 47.2 %
South America 489 450 8.7 % 3.5 % 4.4 %
Far East & Asia 2,036 755 169.7 % 14.6 % 7.4 %
Middle East 1,703 794 114.5 % 12.2 % 7.8 %
All other areas 1,106 808 36.9 % 7.9 % 7.9 %
13,955 10,219 36.6 % 100.0 % 100.0 %
NINE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sal
January 29 January 30, % Over
Geographic Area 1995 1994 (Under) 1995 1994
North America (Excluding 9,343 8,077 15.7 % 25.3 % 27.2 %
(USA)
Europe 12,707 11,958 6.3 % 34.3 % 40.3 %
South America 1,639 917 78.7 % 4.4 % 3.1 %
Far East & Asia 6,000 3,813 57.4 % 16.2 % 12.9 %
Middle East 4,439 1,195 271.5 % 12.0 % 4.0 %
All other areas 2,871 3,713 (22.7)% 7.8 % 12.5 %
36,999 29,673 24.7 % 100.0 % 100.0 %
(Page 7 of 8)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and nine month periods ended January 29, 1995
INCOME STATEMENT COMMENTS
(bullet) NET SALES - Upholstery fabric sales increased 14.2% to $65.6
million and mattress ticking sales increased 27.4% to $12.1 million for
the quarter. All business units [Flat Wovens (includes
Rossville/Chromatex), Mattress Ticking and Velvets/Prints] reported
sales gains for the quarter, including strong increases in Mattress
Ticking and Velvets/Prints. Comments on current backlogs and incoming
order rates versus last year are as follows: Mattress Ticking - up
significantly; Flat Wovens - up slightly overall, with strength in the
Rossville dobby product line; and in Velvets/Prints - up moderately,
with particular strength in the wet prints product line and an improving
trend in the heat-transfer prints product line. While sales and
profitability of the Velvets/Prints business unit continued to be below
target levels in the third quarter, results were much improved from the
first and second quarters and current indicators show an improving trend
for the fourth quarter of the fiscal year.
Export sales were up 36.6% for the quarter and 24.7% for the nine
months, with strength in Europe, the Far East and Asia, the Middle East.
Sales into Europe were up 20.6% for the quarter, a continuation of the
positive trend began last quarter. The majority of the export growth is
coming from the Flat Wovens (including Rossville/Chromatex) business
unit, with particular strength in the jacquard product lines. The
outlook for export sales gains remains good.
The trend of increasing interest rates over the last year will
likely have an adverse impact on consumer demand for furniture and
bedding at some point, because of lower housing starts and housing
resales, lower disposable personal income and slower overall economic
growth. It remains unclear when the upward trend in interest rates will
stabilize. It appears to the company that overall U.S. residential
furniture demand has weakened over the last two months and that the near
term demand is also weaker than a year ago.
(bullet) GROSS PROFIT - The gross profit increase of 11.3% for the
quarter reflects a solid contribution from Flat Wovens, and a
continuation of the significant improvement from Mattress Ticking. We
are experiencing improving trends in profitability and backlogs for the
Velvets/Prints business unit and are expecting year over year gains for
the fourth quarter. Additionally, we have been receiving moderate raw
material price increases in all areas, which are beginning to affect
margins.
(bullet) S,G & A EXPENSES - S,G&A expenses for the quarter were down as
a percentage of sales to 10.7% from 11.6%. The company expects S,G & A
expenses for the full year to approximate $33.0 million.
(bullet) INTEREST EXPENSE - The increase for the quarter is due to
additional borrowings related to capital expenditures and higher levels
of working capital necessary to support sales growth, and to higher
interest rates. While the majority (96%) of the company's funded debt
is based upon variable interest rates (principally LIBOR), the company's
average interest rate on its funded debt is very favorable,
approximately 6.3%. The company expects interest expense for the full
year to be in the $4.5 to $5.0 million range.
(bullet) OTHER EXPENSE (INCOME), NET - The significant increase in
expense for the quarter is due to several items: higher amortization
related to the Rossville/Chromatex goodwill; higher amortization of debt
issue costs; and recognition of gains on the sale of fixed assets in
last year's third quarter. The company expects other expense (income),
net to approximate $800,000 for fiscal 1995.
(bullet) INCOME TAXES - The effective tax rate for the quarter decreased
primarily because of a "catch up" adjustment recorded in last year's
third quarter. The company expects the full year effective tax rate to
approximate 37.5%.
(bullet) EBITDA - EBITDA for the quarter increased $1.4 million, or
22.5%, from last year's third quarter, and represented 10.0% of net
sales compared with 9.5% of net sales last year.
(page 8 of 8)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE - continued
for the three and nine month periods ended January 29, 1995
BALANCE SHEET COMMENTS
(bullet) WORKING CAPITAL - The $600,000 increase in working capital
from last year's third quarter is due primarily to the increase in
receivables and inventory of $5.5 million and $4.6 million,
respectively.
(bullet) RESTRICTED INVESTMENTS - Restricted Investments reflect unspent
Industrial Revenue Bond (IRB) funds. As the funds are spent on the
capital projects, these restricted investments are reduced.
(bullet) PROPERTY, PLANT AND EQUIPMENT, NET - Capital expenditures were
$13.6 million and depreciation expense was $8.2 million for the nine
months. For fiscal 1995, the capital budget is $21.0 million. This
represents a $3.5 million increase in the current year's budget, which
relates to the expansion of jacquard weaving capacity at Rayonese.
Approximately $11.3 million of the budget relates to capacity- expansion
projects. These projects include expanding weaving capacity at
Rossville/Chromatex and in the product areas of woven velvets and
mattress ticking. These projects were completed during the second
quarter. A significant expansion is also underway for yarn
manufacturing capacity. This project is now two- thirds completed, with
full completion expected by the end of the fourth quarter. Depreciation
expense for the full year is expected to be in the $11.0 to $11.5
million range. We are estimating $10.0 million for fiscal 1996 capital
expenditures, with depreciation expense expected to be $12.5 to $13.0
million. Of this total, $2.5 million of capital expenditures relates to
Rayonese.
(bullet) LONG-TERM DEBT - At January 29, 1995, the company had $15.8
million in IRB borrowings, $12.0 million in borrowings under its
revolving credit facility, $43.0 million in a term facility and $1.0
million in a subordinated note payable. On November 7, 1994, the
company amended its loan agreements with its banks to provide: (1) a
significantly lower interest rate spread above LIBOR; (2) an additional
$8.0 million in term debt to prepay the majority of the subordinated
note payable, which carried an interest rate of prime plus one-half
percent; and (3) fewer financial covenants.
(bullet) RAYONESE TEXTILE INC. PURCHASE - On December 23, 1994, the
company announced the acquisition of Rayonese Textile Inc. ("Rayonese").
(See Form 8-K, dated December 23, 1994 for more detailed information
about the purchase.) The estimated transaction value of $11.0 million
includes the purchase of 100% of the Rayonese common stock for $7.3
million, the assumption of Rayonese's funded debt of about $3.2 million,
and acquisition costs of $.5 million. The acquisition will be accounted
for as a purchase, and therefore, the results of Rayonese from the
expected closing date (March 6, 1995) will be included in Culp's
results.
Concurrently with the signing of this purchase agreement, the company
initiated a major expansion of air-jet weaving at Rayonese. This
additional investment, which totals $6.0 million, includes thirty (30)
Picanol high speed, air-jet jacquard looms with Staubli electronic
jacquard heads. The expanded capacity will support Culp's growing
worldwide demand for its overprinted home furnishings products,
including mattress ticking, upholstery fabrics and comforters.
The purchase will be financed with a $5.5 million convertible note
payable to the sellers, $5.0 million in borrowings from the company's
existing revolving credit facility and $.5 million in assumed vendor
financing of equipment. Further details of the note payable are
described in the Form 8-K.
The company expects Rayonese to contribute positively to earnings
beginning from the closing date.
