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) June 2, 1995
CULP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-12781 56-1001967
(State or other (Commission File (IRS Employer
jurisdiction of No.) 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 fourth quarter earnings dated June 2,
1995 (attached).
See Financial Information Release (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: June 2, 1995
-2-
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS & YEARS ENDED APRIL 30, 1995 AND MAY 1, 1994
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Sales
April 30, May 1 % Over
1995 1994 (Under) 1995 1994
Net sales 85,441 77,232 10.6 % 100.0 % 100.0 %
Cost of sales 69,039 62,491 10.5 % 80.8 % 80.9 %
Gross profit 16,402 14,741 11.3 % 19.2 % 19.1 %
Selling, general and
administrative expenses 9,205 8,455 8.9 % 10.8 % 10.9 %
Income from operations 7,197 6,286 14.5 % 8.4 % 8.1 %
Interest expense 1,374 884 55.4 % 1.6 % 1.1 %
Interest income (3) (23) (87.0)% (0.0)% (0.0)%
Other expense (income), net 470 425 10.6 % 0.6 % 0.6 %
Income before income taxes 5,356 5,000 7.1 % 6.3 % 6.5 %
Income taxes * 1,931 1,800 7.3 % 36.1 % 36.0 %
Net income 3,425 3,200 7.0 % 4.0 % 4.1 %
Average shares outstanding 11,205 11,174 0.3 %
Income per share $0.31 $0.29 6.9 %
Dividends per share $0.025 $0.020 25.0 %
YEARS ENDED (AUDITED)
Amounts Percent of Sales
April 30, May 1, % Over
1995 1994 (Under) 1995 1994
Net sales 308,026 245,049 25.7 % 100.0 % 100.0 %
Cost of sales 253,345 202,426 25.2 % 82.2 % 82.6 %
Gross profit 54,681 42,623 28.3 % 17.8 % 17.4 %
Selling, general and
administrative expenses 33,432 27,858 20.0 % 10.9 % 11.4 %
Income from operations 21,249 14,765 43.9 % 6.9 % 6.0 %
Interest expense 4,715 2,515 87.5 % 1.5 % 1.0 %
Interest income (64) (79) (19.0)% (0.0)% (0.0)%
Other expense (income), net 1,082 350 ** 0.4 % 0.1 %
Income before income taxes 15,516 11,979 29.5 % 5.0 % 4.9 %
Income taxes * 5,741 4,314 33.1 % 37.0 % 36.0 %
Net income 9,775 7,665 27.5 % 3.2 % 3.1 %
Average shares 11,203 11,076 1.1 %
Income per share $0.87 $0.69 26.1 %
Dividends per share $0.10 $0.08 25.0 %
* Percent of sales column is calculated as a % of income before income taxes.
** Measurement is not meaningful.
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1995 AND MAY 1, 1994
(Audited, Amounts in Thousands)
Amounts Increase
April 30, May 1, (Decrease)
1995 1994 Dollars Percent
Current assets
Cash and cash investments 1,393 2,693 (1,300) (48.3)%
Accounts receivable 44,252 36,743 7,509 20.4 %
Inventories 45,771 36,596 9,175 25.1 %
Other current assets 3,194 2,227 967 43.4 %
Total current assets 94,610 78,259 16,351 20.9 %
Restricted investments 795 2,923 (2,128) (72.8)%
Property, plant & equipment, net 75,805 64,004 11,801 18.4 %
Goodwill 22,600 18,706 3,894 20.8 %
Other assets 1,189 1,056 133 12.6 %
Total assets 194,999 164,948 30,051 18.2 %
Current Liabilities
Current maturities of long-term debt 11,555 3,050 8,505 278.9 %
Accounts payable 32,250 28,466 3,784 13.3 %
Accrued expenses 11,532 8,158 3,374 41.4 %
Income taxes payable 661 636 25 3.9 %
Total current liabilities 55,998 40,310 15,688 38.9 %
Long-term debt 62,187 58,512 3,675 6.3 %
Deferred income taxes 5,418 3,477 1,941 55.8 %
Total liabilities 123,603 102,299 21,304 20.8 %
Shareholders' equity 71,396 62,649 8,747 14.0 %
Total liabilities and
stockholders' equity 194,999 164,948 30,051 18.2 %
Shares outstanding 11,205 11,177 28 0.2 %
** Measurement is not meaningful.
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1995 AND MAY 1, 1994
(Audited, Amounts in Thousands)
YEARS ENDED
Amounts
April 30, May 1,
1995 1994
Cash flows from operating activities:
Net income 9,775 7,665
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 11,257 8,497
Amortization of intangible assets 628 344
Provision for deferred income taxes 1,373 1,118
Changes in assets and liabilities:
Accounts receivable (5,515) (1,839)
Inventories (7,281) (4,330)
Other current assets (310) (304)
Other assets (518) (389)
Accounts payable 2,319 7,023
Accrued expenses 2,180 539
Income taxes payable 25 (401)
Net cash provided by (used in) operating activities 13,933 17,923
Cash flows from investing activities:
Capital expenditures (18,058) (16,764)
Purchases of restricted investments (57) (3,593)
Proceeds from sale of restricted investments 2,185 670
Businesses acquired (10,455) (38,205)
Net cash provided by (used in) investing activities (26,385) (57,892)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 23,455 49,203
Principal payments on long-term debt (11,275) (14,223)
Net increase (decrease) in bank overdrafts 0 0
Dividends paid (1,120) (887)
Proceeds from sale of common stock 92 1,350
Net cash provided by (used in) financing activities 11,152 35,443
Increase (decrease) in cash and cash investments (1,300) (4,526)
Cash and cash investments at beginning of period 2,693 7,219
Cash and cash investments at end of period 1,393 2,693
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
APRIL 30, 1995
FISCAL 94 FISCAL 95
Q4 Q1 Q2 Q3 Q4
INVENTORIES
Inventory turns 6.6 5.8 6.2 6.0 6.1
RECEIVABLES
Days sales in receivables 43 42 50 44 47
Percent current & less than 30
days past due (Trade only) 99.0% 98.5% 99.4% 98.9% 98.7%
WORKING CAPITAL
Current ratio 1.9 2.3 2.0 2.1 1.7
Working capital turnover 5.7 5.7 5.8 5.5 5.6
Working capital $37,949 $43,164 $42,964 $46,399 $38,612
Working capital as a % of sales 12.3% 16.3% 13.7% 14.9% 11.3%
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 9.2% 8.9% 8.8% 9.2% 9.0%
Percent property, plant &
equipment are depreciated 43.3% 43.6% 44.0% 45.0% 43.6%
Capital expenditures $16,764 (1 $5,153 $5,031 $3,422 $3,481
PROFITABILITY
Net profit margin 4.1% 2.2% 3.6% 2.7% 4.0%
Gross profit margin 19.1% 16.7% 18.1% 16.7% 19.2%
Operating income margin 8.1% 5.3% 7.4% 6.1% 8.4%
SG & A expenses/net sales 10.9% 11.4% 10.7% 10.7% 10.8%
Return on beginning capital employed 15.8% 4.8% 9.2% 6.9% 11.3%
Return on beginning equity 23.5% 9.3% 17.9% 13.4% 21.9%
Earnings per share $0.29 $0.13 $0.25 $0.19 $0.31
LEVERAGE (3)
Interest & dividend coverage 5.0 2.5 4.0 3.2 4.1
Total liabilities/equity 158.6% 154.1% 166.1% 160.1% 172.0%
Long-term debt/equity 88.7% 97.0% 93.1% 93.9% 86.0%
Funded debt/equity 93.6% 104.0% 102.1% 102.9% 102.2%
Funded debt/capital employed 48.3% 51.0% 50.5% 50.7% 50.5%
Funded debt $58,639 $66,493 $67,846 $70,209 $72,947
Funded debt/EBITDA (LTM) 3.97 2.55 2.28 2.26 2.28
OTHER
Book value per share $5.60 $5.70 $5.93 $6.09 $6.37
Employees at quarter end 2,537 2,579 2,604 2,656 2,762
Sales per employee (annualized) $124,000 $104,000 $121,000 $118,000 $126,000
Capital employed (3) $121,288 $130,405 $134,277 $138,460 $144,343
Effective income tax rate 36.0% 37.0% 37.8% 37.5% 36.1%
EBITDA (2) $8,681 $6,112 $8,500 $7,523 $9,917
EBITDA/net sales 11.2% 9.2% 10.8% 9.7% 11.6%
(1) Expenditures for entire year
(2) Earnings before interest, income taxes, and depreciation & amortization.
(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 YEARS ENDED APRIL 30, 1995
AND MAY 1, 1994
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
April 30, May 1, % Over
Business Units 1995 1994 (Under) 1995 1994
Upholstery Fabrics
Flat Wovens
Existing Culp 21,738 21,127 2.9 % 25.4 % 27.4 %
Rossville/Chromatex 16,470 16,717 (1.5)% 19.3 % 21.6 %
38,208 37,844 1.0 % 44.7 % 49.0 %
Velvets/Prints 31,413 27,916 12.5 % 36.8 % 36.1 %
69,621 65,760 5.9 % 81.5 % 85.1 %
Mattress Ticking 15,820 11,472 37.9 % 18.5 % 14.9 %
85,441 77,232 10.6 % 100.0 % 100.0 %
YEARS ENDED (AUDITED)
Amounts Percent of Total Sales
April 30, May 1, % Over
Business Units 1995 1994 (Under) 1995 1994
Upholstery Fabrics
Flat Wovens
Existing Culp 85,125 78,317 8.7 % 27.6 % 32.0 %
Rossville/Chromatex 63,765 31,047 N/A 20.7 % N/A
148,890 109,364 36.1 % 48.3 % 44.6 %
Velvets/Prints 106,803 97,036 10.1 % 34.7 % 39.6 %
255,693 206,400 23.9 % 83.0 % 84.2 %
Mattress Ticking 52,333 38,649 35.4 % 17.0 % 15.8 %
308,026 245,049 25.7 % 100.0 % 100.0 %
CULP, INC. FINANCIAL INFORMATION RELEASE
EXPORT SALES BY GEOGRAPHIC AREA
FOR THREE MONTHS AND YEARS ENDED APRIL 30, 1995
AND MAY 1, 1994
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
April 30, May 1, % Over
Geographic Area 1995 1994 (Under) 1995 1994
North America (Excluding USA) 4,681 4,051 15.6 % 24.5 % 28.2 %
Europe 5,872 5,376 9.2 % 30.7 % 37.4 %
South America 574 331 73.4 % 3.0 % 2.3 %
Far East & Asia 2,838 1,716 65.4 % 14.9 % 12.0 %
Middle East 1,547 545 183.9 % 8.1 % 3.8 %
All other areas 3,588 2,346 52.9 % 18.8 % 16.3 %
19,100 14,365 33.0 % 100.0 % 100.0 %
YEARS ENDED (AUDITED)
Amounts Percent of Total Sales
April 30, May 1, % Over
Geographic Area 1995 1994 (Under) 1995 1994
North America (Excluding USA) 14,024 12,128 15.6 % 25.0 % 27.5 %
Europe 18,579 17,334 7.2 % 33.1 % 39.4 %
South America 2,213 1,248 77.3 % 3.9 % 2.8 %
Far East & Asia 8,838 5,529 59.8 % 15.8 % 12.5 %
Middle East 5,986 1,740 244.0 % 10.7 % 4.0 %
All other areas 6,459 6,059 6.6 % 11.5 % 13.8 %
56,099 44,038 27.4 % 100.0 % 100.0 %
(Page 7 of 8)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and twelve month periods ended April 30, 1995
INCOME STATEMENT COMMENTS
(Bullet) NET SALES - Upholstery fabric sales increased 5.9% to
$69.6 million and mattress ticking sales increased 37.9% to $15.8
million for the quarter. All business units [Flat Wovens
(includes Rossville/Chromatex), Mattress Ticking and
Velvets/Prints] reported sales gains for the quarter, including a strong
increase in Mattress Ticking. Comments on current backlogs and
incoming order rates versus last year are as follows: Mattress
Ticking - up significantly; Flat Wovens - down significantly overall,
with strength in the Rossville dobby product line and significant
weakness in the Culp dobby line ; and in Velvets/Prints - up
slightly, with particular strength in the wet prints product line.
While sales and profitability of the Velvets/Prints business unit
continued to be below target levels in the fourth quarter, results
were improved from the first and second quarters.
Export sales were up 33.0% for the quarter and 27.4% for the twelve
months, with strength in all areas. Sales into Europe were up 9.2%
for the quarter, a continuation of the positive trend that began in
the second 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 U.S. residential furniture industry has softened
considerably during the last several months, and is finally
affecting our U.S. upholstery fabric business, particularly in the
Flat Woven business unit. The company believes this softening
is temporary and that business will be significantly better,
beginning with our second fiscal quarter. The trend of interest rates
has clearly turned downward, with mortgage rates becoming much more
attractive.
(Bullet) GROSS PROFIT - The gross profit increase of 11.3% for
the quarter reflects a continuation of the significant improvement
from Mattress Ticking and slight improvements in Velvets/Prints and
Flat Wovens. In the first quarter of fiscal 1996, overall gross
profit margins will be affected by the sales weakness in our Flat
Wovens business unit, the significant sales gains in the Mattress
Ticking business unit (including products out of Rayonese) and
moderate sales gains in the Velvets/Prints business unit.
(Bullet) S,G & A EXPENSES - S,G&A expenses for the quarter were
down as a percentage of sales to 10.8% from 10.9% and for the year
were down to 10.9% from 11.4%.
(Bullet) INTEREST EXPENSE - The increase for the quarter is due
to additional borrowings related to the Rayonese acquisition,
capital expenditures and higher levels of working capital
necessary to support sales growth, and to higher interest rates. During
April and May 1995, the company entered into two interest rate swap
agreements that effectively provide for (1) a fixed rate of 7.34%
for five years on $15.0 million of its bank borrowings; and (2)
a fixed rate of 6.85% for seven years on $5.0 million of its bank
borrowings.
(Bullet) OTHER EXPENSE (INCOME), NET - This expense includes
several items: amortization related to the Rossville/Chromatex
and Rayonese goodwill ($500,000); amortization of debt issue costs
($126,000); and other miscellaneous items.
(Bullet) INCOME TAXES - The effective tax rate for the year
increased slightly due to the higher level of pretax income.
(Bullet) EBITDA - EBITDA for the quarter increased $1.2 million,
or 14.2%, from last year's fourth quarter, and represented 11.6% of net
sales compared with 11.2% of net sales last year.
(page 8 of 8)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE - continued
for the three and twelve month periods ended April 30, 1995
BALANCE SHEET COMMENTS
(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. The remaining balance will be drawn down in the first
quarter of fiscal 1996.
(Bullet) PROPERTY, PLANT AND EQUIPMENT, NET - Capital
expenditures were $18.1 million and depreciation expense was $11.3
million for the twelve months. For fiscal 1996, the capital budget is
$10.0 million. Of this total, $2.5 million of capital expenditures
relates to Rayonese. Depreciation expense for fiscal 1996 is
expected to be approximately $13.5.
(Bullet) LONG-TERM DEBT - At April 30, 1995, the company had
$15.8 million in IRB borrowings, $10.0 million in borrowings under its
revolving credit facility, $41.5 million in a term facility, $1.0
million in a subordinated note payable and $5.5 million in a
convertible note payable. The current maturities of $11.6
includes $6.0 million repayment of the term loan, $100,000
repayment of IRBs and $5.5 million of the convertible note
payable because the note is callable by the holder, beginning March
6, 1996.
(Bullet) RAYONESE TEXTILE INC. PURCHASE - On March 6, 1995, the
company completed the acquisition of Rayonese Textile Inc.
("Rayonese"). (See Form 8-K, dated December 23, 1994, for more
detailed information about the purchase.) The transaction has a
preliminary estimated value of approximately $10.5 million and
includes the purchase of 100% of the Rayonese common stock and the
assumption of Rayonese's funded debt. The acquisition will be
accounted for as a purchase, and accordingly, the purchase price will
be allocated to the assets acquired and liabilities assumed based on
their estimated fair values at the date of acquisition. The
preliminary estimated fair values of assets and retained liabilities
acquired are summarized below:
March 6,
(dollars in thousands) 1995
Accounts receivable, net $ 1,994
Inventories 1,894
Other current assets 89
Property, plant and equipment 5,000
Goodwill 4,137
Accounts payable and accrued liabilities <2,659>
$ 10,455
The operating results of this acquisition are included in the
company's results of operations from the date of acquisition.
(Culp logo appears here)
NEWS RELEASE Contact:
Frank Saxon
Vice President
Chief Financial Officer
FOR IMMEDIATE RELEASE
CULP REPORTS RECORD SALES AND EARNINGS FOR FISCAL 1995
-----------------------------------
EARNINGS UP FOR SIXTH CONSECUTIVE YEAR
HIGH POINT, North Carolina (June 2, 1995---Culp, Inc.
(Nasdaq/NM:CULP) today reported record sales and earnings for the fourth
quarter and fiscal year ended April 30, 1995.
Net sales for the quarter increased 11% to $85.4 million
compared with $77.2 million a year ago. Net income for the
quarter rose 7% to $3.4 million, or $0.31 per share, compared with
$3.2 million, or $0.29 per share, in the fourth quarter of fiscal 1994.
For the 1995 fiscal year, net sales totaled $308.0 million, up 26%
from $245.3 million in fiscal 1994. Net income for the year rose 28%
to $9.8 million, or $0.87 per share, up from $7.7 million, or $0.69
per share, in fiscal 1994.
"Fiscal 1995 marked a solid return on the strategic actions we
have taken over the past several years to achieve a superior
performance," said Robert G. Culp, III, chief executive officer. "Each
quarter during the year included record sales and earnings for the
respective periods. We are especially pleased that this accomplishment
included not only positive contributions from acquired operations
but also sound gains in our existing product categories."
Culp continued, "For the year as a whole, sales of mattress
ticking and exports of upholstery fabrics were especially strong. The
inclusion of the Rossville/Chromatex division for a full year provided
particular impetus to the year-to-year gains. Our most recent
acquisition, Rayonese Textile, was included for most of the fourth
quarter; and that incremental business aided growth in the final period.
"We recognize that reaching new highs in sales and earnings for
fiscal 1995 was helped by strong retail demand for home
furnishings. More recent industry reports confirm that a slowing has
developed in consumer purchases of furniture. This pattern, and the
concern that this trend may persist for several quarters, has caused
furniture manufacturers to become more cautious about forward
commitments. We experienced tangible evidence
-MORE-
Culp, Inc. [] P.O. Box 2686 [] 101 S. Main Street [] High Point, NC
27261-2686 [] 910-888-6266 []TLX 802147 [] Fax 910-887-7089
CULP Reports Year-end Results
Page 2
June 2, 1995
of this industry-wide slowdown in the fourth quarter, and this
softness in incoming orders has carried over into the early part of
fiscal 1996."
Culp concluded, "It is interesting that similar concern was
present a year ago when we released the financial results for fiscal
1994. The apparent slowing in consumer spending, in part due to rising
interest rates, proved temporary. Although the current environment
is affecting our short-term results, our fundamental approach
continues to be positioning Culp strongly as a leading supplier of
fabrics for the home furnishings industry. We have maintained a sound
financial position while investing the funds necessary to build
competitive leadership and pursuing attractive acquisitions.
Acknowledging the near-term uncertainty that exists, we remain
confident about the company's longer term prospects."
Culp, Inc. is a leading manufacturer and marketer of fabrics for
the furniture, bedding and institutional furnishings markets.
CULP, INC.
Condensed Financial Highlights
Three Months Ended
April 30, May 1
1995 1994
Net Sales $ 85,441,000 $ 77,232,000
Net Income 3,425,000 3,200,000
Earnings per share $ 0.31 $ 0.29
Fiscal Year Ended
April 30, May 1
1995 1994
Net Sales $ 308,026,000 $ 245,049,000
Net Income 9,775,000 7,665,000
Earnings per share $ 0.87 $ 0.69
-END-
