SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 6, 1996
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
INCORPORATION) IDENTIFICATION 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 (ATTACHED) DATED NOVEMBER 6, 1996 RELATED TO SECOND-QUARTER
EARNINGS FOR THE PERIOD ENDED OCTOBER 27, 1996.
SEE PRESS RELEASE (ATTACHED) DATED OCTOBER 16, 1996 RELATED TO THOMAS M.
BYRNES JOINING THE COMPANY AS VICE PRESIDENT OF MARKETING FOR THE CULP
TEXTURES BUSINESS UNIT.
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
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
BY: STEPHEN T. HANCOCK
STEPHEN T. HANCOCK
GENERAL ACCOUNTING MANAGER
DATED: DECEMBER 19, 1996
-2-
(Culp logo)
CULP
FOR IMMEDIATE RELEASE Contact:
FRANKLIN N. SAXON
Senior Vice President &
Chief Financial Officer
CULP REPORTS RECORD SECOND QUARTER SALES AND EARNINGS
EARNINGS PER SHARE INCREASE 22%
HIGH POINT, North Carolina (November 6, 1996) A Culp, Inc. today reported sales
and earnings for the second quarter and first half of its 1997 fiscal year.
For the three months ended October 27, 1996, Culp reported that net
sales increased 16% to $105.2 million compared with $90.7 million a year ago.
Net income for the quarter increased 24% to $3.7 million or $0.33 per share,
compared with $3.0 million, or $0.27 per share, in the second quarter of fiscal
1996.
The gains for the second quarter brought net sales for the first half
to $195.7 million, up 20% from $163.0 million in the first six months of fiscal
1996. Net income for the first half was $5.9 million, or $0.52 per share, up 31%
from $4.5 million, or $0.40 per share, in the year-earlier period.
"This marks the 16th consecutive quarter in which we have reported
higher earnings versus the comparable year-earlier period," remarked Robert G.
Culp, III, Chief Executive Officer. "We had started fiscal 1997 on a strong note
in the first quarter, and these gains mark a continuation of that positive
momentum in our business. Demand for our upholstery fabrics has been generally
strong in each of our major product categories, and shipments of mattress
ticking are also up. We are continuing to realize significant growth in
international sales which rose 32% for the quarter. Our business with U.S.-based
customers increased 12% from year ago, reflecting our success in supplying more
of the fabric needs of current accounts as well as achieving a broadening in our
customer base."
Culp noted, "We are particularly pleased that the growth in sales is
being accompanied by an improvement in profitability. Our goal of delivering
more value to customers has meant a considerable investment of funds in
expanding and modernizing our manufacturing resources.
-MORE-
Culp, Inc. [ ] P.O. Box 2686 [ ] 101 S. Main Street [ ] High Point, NC
27261-2686 [ ] 910-868-6266 [ ] Fax 910-887-7089
CULP Reports Second Quarter Gains
Page 2
November 6, 1996
We are also broadening our use of computer-aided design equipment, and related
internal systems, to develop new patterns. Earning a reasonable return on this
additional invested capital is essential for us to continue providing new
fabrics and innovative designs with consistently high quality and service. A
principal factor which has aided our margins has been the increased volume which
has led to higher productivity and greater economies of scale at our
manufacturing facilities. We have also benefited from a shift in our product mix
toward fabrics with higher margins.
"Our financial position remains one of the strongest in the textile
industry. Aided by the internally generated funds available from operations, we
are maintaining an aggressive capital spending program. We have recently
increased our capital spending plans for fiscal 1997 to approximately $21
million. The thrust of this additional investment, which would represent a new
annual total for Culp, will be on expanding capacity as well as taking advantage
of opportunities to become more vertically integrated to reduce costs and
improve our flexibility to respond to customers' needs."
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
OCTOBER 27, OCTOBER 29,
1996 1995
-------------------- -------------------
Net sales $ 105,204,000 $ 90,672,000
Net income $ 3,710,000 $ 3,000,000
Earnings per share $ 0.33 $ 0.27
SIX MONTHS ENDED
OCTOBER 27, OCTOBER 29,
1996 1995
-------------------- -------------------
Net sales $ 195,733,000 $ 163,029,000
Net income $ 5,920,000 $ 4,515,000
Earnings per share $ 0.52 $ 0.40
-MORE-
(Culp logo)
CULP
NEWS RELEASE Contact:
KENNETH M. LUDWIG
Senior Vice President,
Human Resources
FOR IMMEDIATE RELEASE
High Point, North Carolina, (October 16, 1996) --- Culp, Inc. has announced that
Thomas M. Byrnes has joined the firm as vice president of marketing for the Culp
Textures business unit. In this capacity, he will report to Howard L. Dunn,
president and chief operating officer.
Prior to joining Culp, Byrnes was with the Mastercraft division of Collin and
Aikman for 10 years, most recently as vice president of marketing. Previously,
he was a sales representative for Chromatex, Inc.
Culp, Inc. is a leading manufacturer and marketer of fabrics for the furniture,
bedding and institutional furnishings markets. The company operates plants in
the Carolinas, Georgia, Pennsylvania and Canada.
Culp, Inc. [ ] P.O. Box 2686 [ ] 101 S. Main Street [ ] High Point, NC
27261-2686 [ ] 910-889-5161 [ ] Fax 910-889-7245
(Page 1 of 10)
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
THREE MONTHS ENDED (UNAUDITED)
----------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------- -------------------------
OCTOBER 27, October 29, % Over
1996 1995 (Under) 1997 1996
------------------------------ ----------- ---------- -----------
Net sales $ 105,204 90,672 16.0% 100.0% 100.0
Cost of sales 86,082 74,565 15.4% 81.8% 82.2
------------------------------ ----------- ---------- -----------
Gross profit 19,122 16,107 18.7% 18.2% 17.8
Selling, general and
administrative expenses 11,704 9,675 21.0% 11.1% 10.7
------------------------------ ----------- ---------- -----------
Income from operations 7,418 6,432 15.3% 7.1% 7.1
Interest expense 1,242 1,388 (10.5%) 1.2% 1.5
Interest income (60) 0 ** % (0.1)% 0.0
Other expense (income), net 301 219 37.4% 0.3% 0.2
------------------------------ ----------- ---------- -----------
Income before income taxes 5,935 4,825 23.0% 5.6% 5.3
Income taxes * 2,225 1,825 21.9% 37.5% 37.8
------------------------------ ----------- ---------- -----------
Net income $ 3,710 3,000 23.7% 3.5% 3.3
============================== =========== ========== ===========
Average shares outstanding 11,312 11,211 0.9%
Net income per share $0.33 $0.27 22.2%
Dividends per share $0.0325 $0.0275 18.2%
SIX MONTHS ENDED (UNAUDITED)
----------------------------------------------------------------
Amounts Percent of Sales
-------------------------- -------------------------
OCTOBER 27, October 29, % Over
1996 1995 (Under) 1997 1996
-------------------------- ---------- ------------- ---------
Net sales $ 195,733 163,029 20.1% 100.0% 100.0
Cost of sales 160,691 134,724 19.3% 82.1% 82.6
------------------------ ----------- ------------- ---------
Gross profit 35,042 28,305 23.8% 17.9% 17.4
Selling, general and
administrative expenses 22,568 18,129 24.5% 11.5% 11.1
------------------------ ----------- ------------- ---------
Income from operations 12,474 10,176 22.6% 6.4% 6.2
Interest expense 2,424 2,685 (9.7)% 1.2% 1.6
Interest income (117) 0 ** % (0.1)% 0.0
Other expense (income), net 696 326 113.5% 0.4% 0.2
------------------------ ----------- ------------- ---------
Income before income taxes 9,471 7,165 32.2% 4.8% 4.4
Income taxes * 3,551 2,650 34.0% 37.5% 37.0
------------------------ ----------- ------------- ---------
Net income $ 5,920 4,515 31.1% 3.0% 2.8
======================== =========== ============= =========
Average shares outstanding 11,304 11,209 0.9%
Net income per share $0.52 $0.40 30.0%
Dividends per share $0.0650 $0.0550 18.2%
* PERCENT OF SALES COLUMN IS CALCULATED AS A % OF INCOME BEFORE INCOME TAXES.
** MEASUREMENT IS NOT MEANINGFUL.
(Page 2 of 10)
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
OCTOBER 27, 1996, OCTOBER 29, 1995 AND APRIL 28, 1996
(UNAUDITED, AMOUNTS IN THOUSANDS)
AMOUNTS
----------------------- Increase
(Decrease)
OCTOBER 27, October 29, --------------------- * April 28,
1996 1995 Dollars Percent 1996
---------- ---------- ---------- --------- ------------
Current assets
Cash and cash investments $ 744 930 (186) (20.0)% 498
Accounts receivable 52,202 46,930 5,272 11.2% 52,038
Inventories 52,300 49,632 2,668 5.4% 47,395
Other current assets 3,697 3,415 282 8.3% 4,167
---------- ---------- ---------- --------- ------------
Total current assets 108,943 100,907 8,036 8.0% 104,098
Restricted investments 5,379 0 5,379 5,274
Property, plant & equipment, net 80,316 73,876 6,440 8.7% 76,961
Goodwill 22,568 23,189 (621) (2.7)% 22,871
Other assets 2,321 2,432 (111) (4.6)% 2,440
---------- ---------- ---------- --------- ------------
Total assets $ 219,527 200,404 19,123 9.5% 211,644
========== ========== ========== ========= ============
Current Liabilities
Current maturities of long-term debt $ 7,100 11,555 (4,455) (38.6)% 7,100
Accounts payable 26,936 30,175 (3,239) (10.7)% 27,308
Accrued expenses 16,841 11,075 5,766 52.1% 12,564
Income taxes payable 836 1,729 (893) (51.6)% 197
---------- ---------- ---------- --------- ------------
Total current liabilities 51,713 54,534 (2,821) (5.2)% 47,169
Long-term debt 72,891 65,137 7,754 11.9% 74,941
Deferred income taxes 8,088 5,382 2,706 50.3% 8,088
---------- ---------- ---------- --------- ------------
Total liabilities 132,692 125,053 7,639 6.1% 130,198
Shareholders' equity 86,835 75,351 11,484 15.2% 81,446
---------- ---------- ---------- --------- ------------
Total liabilities and
shareholders' equity $ 219,527 200,404 19,123 9.5% 211,644
========== ========== ========== ========= ============
Shares outstanding 11,339 11,219 120 1.1% 11,290
========== ========== ========== ========= ============
* DERIVED FROM AUDITED FINANCIAL STATEMENTS.
(Page 3 of 10)
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(Unaudited, Amounts In Thousands)
SIX MONTHS ENDED
-------------------------------------
Amounts
October 27, October 29,
1996 1995
------------ -------------
Cash flows from operating activities:
Net income $ 5,920 4,515
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 6,321 6,138
Amortization of intangible assets 444 358
Provision for deferred income taxes 0 (36)
Changes in assets and liabilities:
Accounts receivable (164) (2,678)
Inventories (4,905) (3,861)
Other current assets 470 (221)
Other assets (22) (23)
Accounts payable 3,220 1,632
Accrued expenses 4,277 (457)
Income taxes payable 639 1,068
------------ -------------
Net cash provided by (used in) operating activities 16,200 6,435
------------ -------------
Cash flows from investing activities:
Capital expenditures (9,676) (5,090)
Purchases of restricted investments (107) 0
Purchase of investments to fund deferred compensation liability 0 (1,286)
Proceeds from sale of restricted investments 2 795
------------ -------------
Net cash provided by (used in) investing activities (9,781) (5,581)
------------ -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 1,000 6,000
Principal payments on long-term debt (3,050) (3,050)
Change in accounts payable-capital expenditures (3,592) (3,707)
Dividends paid (735) (617)
Proceeds from sale of common stock 204 57
------------ -------------
Net cash provided by (used in) financing activities (6,173) (1,317)
------------ -------------
Increase (decrease) in cash and cash investments 246 (463)
Cash and cash investments at beginning of period 498 1,393
------------ -------------
Cash and cash investments at end of period $ 744 930
============ =============
(Page of 4 of 10)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
OCTOBER 27, 1996
FISCAL 96 FISCAL 97
--------------- ----------------------------------------------------
Q2 Q1 Q2 Q3 Q4
--------------- ----------------------------------------------------
INVENTORIES
Inventory turns 6.0 6.0 6.6
RECEIVABLES
Days sales in receivables 47 43 45
Percent current & less than 30
days past due 98.2% 99.3% 99.9
WORKING CAPITAL
Current ratio 1.9 2.2 2.1
Working capital turnover 5.4 5.4 5.4
Working capital $ 46,373 $ 53,635 $ 57,230
Working capital as a % of sales 12.8% 14.8% 13.6%
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 8.9% 8.3% 8.1%
Percent property, plant &
equipment are depreciated 46.7% 48.2% 48.6%
Capital expenditures $ 14,385 $ 4,475 $ 5,201
PROFITABILITY
Net profit margin 3.3% 2.4% 3.5%
Gross profit margin 17.8% 17.6% 18.2%
Operating income margin 7.1% 5.6% 7.1%
SG & A expenses/net sales 10.7% 12.0% 11.1%
Return on average total capital 8.3% 5.7% 9.3%
Return on average equity 16.8% 10.7% 17.4%
Earnings per share $ 0.27 $ 0.20 $ 0.33%
LEVERAGE (3)
Total liabilities/equity 166.0% 149.9% 152.8%
Long-term debt/equity 86.4% 85.1% 83.9%
Funded debt/equity 101.8% 87.3% 85.9%
Funded debt/capital employed 50.4% 46.6% 46.2%
Funded debt $ 76,692 $ 72,772 $ 74,612
Funded debt/EBITDA (LTM) 2.27 1.98 1.97
OTHER
Book value per share $ 6.72 $ 7.37 $ 7.66
Employees at quarter end 2,847 3,020 3,098
Sales per employee (annualized) $ 129,000 $ 120,000 $ 138,000
Capital employed (3) $ 152,043 $ 156,128 $ 161,447
Effective income tax rate 37.8% 37.5% 37.5%
EBITDA (2) $ 9,494 $ 8,003 $ 10,540
EBITDA/net sales 10.5% 8.8% 10.0%
(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.
(Page 5 of 10)
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES BY PRODUCT CATEGORY/BUSINESS UNIT
FOR THREE MONTHS AND SIX MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED (UNAUDITED)
----------------------------------------------------------------------------
Amounts Percent of Total Sales
---------------------------- ---------------------------
OCTOBER 27, October 29, % Over
Product Category/Business Unit 1996 1995 (Under) 1997 1996
- ---------------------------------------- ------------ ----------- ---------- ---------- -------------
Upholstery Fabrics
Culp Textures $ 24,001 22,715 5.7% 22.8% 25.1
Rossville/Chromatex 21,722 17,960 20.9% 20.6% 19.8
--------- ---------- ---------- ---------- -------------
45,723 40,675 12.4% 43.5% 44.9
Velvets/Prints 40,233 32,081 25.4% 38.2% 35.4
--------- ---------- ---------- ---------- -------------
85,956 72,756 18.1% 81.7% 80.2
Mattress Ticking
Culp Home Fashions (1) 19,248 17,916 7.4% 18.3% 19.8
--------- ---------- ---------- ---------- -------------
* $ 105,204 90,672 16.0% 100.0% 100.0
========= ========== ========== ========== =============
SIX MONTHS ENDED (UNAUDITED)
-------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------ ---------------------------
OCTOBER 27, October 29, % Over
Product Category/Business Unit 1996 1995 (Under) 1997 1996
- ------------------------------------------- ---------- ----------- ---------- ----------- -------------
Upholstery Fabrics
Culp Textures $ 44,802 40,299 11.2% 22.9% 24.7
Rossville/Chromatex 39,887 33,318 19.7% 20.4% 20.4
--------- ----------- ---------- ------------ --------------
84,689 73,617 15.0% 43.3% 45.2
Velvets/Prints 75,100 55,604 35.1% 38.4% 34.1
--------- ----------- ---------- ------------ --------------
159,789 129,221 23.7% 81.6% 79.3
Mattress Ticking
Culp Home Fashions (1) 35,944 33,808 6.3% 18.4% 20.7
--------- ----------- ---------- ------------ --------------
* $ 195,733 163,029 20.1% 100.0% 100.0
========= =========== ========== ============ ==============
*US. DOMESTIC SALES WERE $79,304 AND $71,112 FOR THE THREE MONTHS OF FISCAL 1997
AND FISCAL 1996, RESPECTIVELY; AND $149,860 AND $129,025 FOR THE SIX MONTHS OF
FISCAL 1997 AND FISCAL 1996, RESPECTIVELY.
THE PERCENTAGE INCREASES IN U.S. DOMESTIC SALES WAS 11.5% FOR THE THREE MONTHS
AND 16.1% FOR THE SIX MONTHS.
(1) FORMERLY KNOWN AS CULP TICKING
(Page 6 of 10)
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THREE MONTHS AND SIX MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED (UNAUDITED)
-----------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- ------------------------
OCTOBER 27, October 29, % Over
Geographic Area 1996 1995 (Under) 1997 1996
- ------------------------------ ----------- ------------ --------- -------- -------
North America (Excluding USA) $ 8,016 6,223 28.8% 31.0% 31.8%
Europe 5,716 4,297 33.0% 22.1% 22.0%
Middle East 5,079 3,437 47.8% 19.6% 17.6%
Far East & Asia 5,019 3,731 34.5% 19.4% 15.8%
South America 632 397 59.2% 2.4% 2.0%
All other areas 1,438 1,475 (2.5)% 5.6% 10.9%
----------- ------------ --------- -------- -------
$ 25,900 19,560 32.4% 100.0% 100.0%
=========== ============ ========= ======== =======
SIX MONTHS ENDED (UNAUDITED)
------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- -------------------------
OCTOBER 27, October 29, % Over
Geographic Area 1996 1995 (Under) 1997 1996
- -------------------------------- ----------- ----------- --------- ---------- -----------
North America (Excluding USA) $ 14,073 10,790 30.4% 30.7% 31.7%
Europe 10,483 7,482 40.1% 22.9% 22.0%
Middle East 9,156 5,549 65.0% 20.0% 16.3%
Far East & Asia 8,815 5,979 47.4% 19.2% 14.2%
South America 999 843 18.5% 2.2% 2.5%
All other areas 2,347 3,361 (30.2)% 5.1% 13.2%
----------- ----------- --------- ---------- -----------
$ 45,873 34,004 34.9% 100.0% 100.0%
=========== =========== ========= ========== ===========
(Page 7 of 10)
CULP, INC.
SALES BY BUSINESS UNIT - TREND ANALYSIS
1995 VS 1996 VS 1997
(AMOUNTS IN THOUSANDS)
Fiscal 1995 Fiscal 1996
---------------------------------------- -----------------------------------------
Product Category/Business Units Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
-- -- -- -- ----- -- -- -- -- -----
- ------------------------------
Upholstery Fabrics
Culp Textures 19,613 22,834 20,940 21,738 85,125 17,584 22,715 20,685 23,400 84,384
Rossville/Chromatex 15,140 15,758 16,397 16,470 63,765 15,358 17,960 18,567 22,318 74,203
---------------------------------------- -----------------------------------------
34,753 38,592 37,337 38,208 148,890 32,942 40,675 39,252 45,718 158,587
Velvets/Prints 20,644 26,439 28,307 31,413 106,803 23,523 32,081 31,836 38,280 125,720
---------------------------------------- -----------------------------------------
55,397 65,031 65,644 69,621 255,693 56,465 72,756 71,088 83,998 284,307
Mattress Ticking
Culp Home Fashions (1) 10,952 13,414 12,147 15,820 52,333 15,892 17,916 15,388 18,164 67,360
---------------------------------------- -----------------------------------------
66,349 78,445 77,791 85,441 308,026 72,357 90,672 86,476 102,162 351,667
======================================== =========================================
(AMOUNTS IN THOUSANDS)
FISCAL 1997
----------------------------------------
Q1 Q2 Q3 Q4 TOTAL
Product Category/Business Units -- -- -- -- -----
- ------------------------------
Upholstery Fabrics
Culp Textures 20,801 24,001 44,802
Rossville/Chromatex 18,165 21,722 39,887
---------------------------------------
38,966 45,723 84,689
Velvets/Prints 34,867 40,233 75,100
---------------------------------------
73,833 85,956 159,789
Mattress Ticking
Culp Home Fashions (1) 16,696 19,248 35,944
---------------------------------------
90,529 105,204 195,733
=======================================
PERCENT INCREASE(DECREASE) FROM PRIOR YEAR:
- ----------------------------------------------------------------------------------------------------------------
Product Category/Business Units
- ------------------------------
Upholstery Fabrics
Culp Textures 12.4 13.8 6.4 2.9 8.7 (10.3) (0.5) (1.2) 7.6 (0.9)
Rossville/Chromatex 100.0 100.0 14.4 (1.5) 105.4 1.4 14.0 13.2 35.5 16.4
------------------------------------- --------------------------------------------
99.2 92.3 9.8 1.0 36.1 (5.2) 5.4 5.1 19.7 6.5
Velvets/Prints (1.2) 7.8 19.4 12.5 10.1 13.9 21.3 12.5 21.9 17.7
------------------------------------- --------------------------------------------
44.5 45.8 13.7 5.9 23.9 1.9 11.9 8.3 20.7 11.2
Mattress Ticking
Culp Home Fashions (1) 32.7 42.8 27.4 37.9 35.4 45.1 33.6 26.7 14.8 28.7
------------------------------------- --------------------------------------------
42.4 45.3 15.7 10.6 25.7 9.1 15.6 11.2 19.6 14.2
======================================== =========================================
(1) FORMERLY KNOWN AS CULP TICKING
18.3 5.7 11.2
18.3 20.9 19.7
- ---------------------------------------
18.3 12.4 15.0
48.2 25.4 35.1
- ---------------------------------------
30.8 18.1 23.7
5.1 7.4 6.3
- ---------------------------------------
25.1 16.0 20.1
=======================================
(Page 8 of 10)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
FOR THE THREE AND SIX MONTH PERIODS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
INCOME STATEMENT COMMENTS
(Bullet) GENERAL - The company is pleased to report that sales increased 16.0%
to $105.2 million, the highest quarterly total ever, and net income increased
23.7% to $3.7 million for its second quarter, as compared with the second
quarter of last year. This performance marks the SIXTEENTH CONSECUTIVE quarter
of record earnings and the FOURTEENTH CONSECUTIVE quarter of record sales (based
on the comparable year-earlier periods). For the six months, sales increased
20.1 % to $195.7 million and net income increased 31.1% to $5.9 million. The
company's net profit margin increased to 3.5% from 3.3% for the quarter. Also,
the company achieved a return on average shareholders' equity of 15.3% for the
latest twelve months. For the last five years, the company has achieved a
compound annual growth rate in net income and net sales of 30.5% and 15.1%,
respectively.
The company attributes this record to, among other things, several key
growth strategies:
(Bullet) penetrating other markets in addition to U.S. residential
furniture, such as bedding, international, contract, juvenile and
home textiles;
(Bullet) investing in the creative aspect of our business - the company has
significantly increased the resources (both designers and
computer-aided design (CAD) systems) dedicated to the design and
product development areas in each business unit;
(Bullet) investing in selective, accretive acquisitions in businesses which
we know and understand and that strengthen existing marketing
positions; and
(Bullet) realizing additional manufacturing integration by producing
various raw material components that are used in the manufacture
of our fabrics;
(Bullet) NET SALES - Compared with the second quarter of last year, upholstery
fabric sales increased 18.1% to $86.0 million (comprises three business units)
and mattress ticking sales increased 7.4% to $19.2 million (Culp Home Fashions)
for the quarter. (See Sales by Business Unit schedule on page 5 and Sales by
Business Unit Trend Analysis on page 7.) All upholstery fabrics business units
reported solid sales gains for the quarter: Velvets/Prints - up 25.4%;
Rossville/Chromatex - up 20.9%; and Culp Textures - up 5.7%. Comments on current
backlogs and incoming order rates versus last year are as follows: Culp Home
Fashions - up moderately; Culp Textures - up slightly; Rossville/Chromatex - up
slightly; and Velvets/Prints - up significantly, with particular strength in the
wet prints and velvet product categories. The results of the Velvets/Prints
business unit were substantially improved from the second quarter of last year,
and these results continued the significant margin improvement trend established
early last fiscal year. The company's sales growth in the United States, up
11.5% for the second quarter, was especially noteworthy relative to the industry
as a whole.
International sales were up 32.4% for the quarter, with strength in all
major regions, including the Middle East, the Far East and Asia, and North
America (excluding the U.S.). (See International Sales by Geographic Area
schedule on page 6.) An increasing portion of the international growth is being
produced by the Culp Textures and Rossville/Chromatex business units. The
company is realizing increasing success in marketing its upholstery fabric
products internationally, with shipments to over 50 countries during the first
half of fiscal 1997. We are encouraged by the geographical balance of our
customer base throughout the world.
(page 9 of 10)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE - CONTINUED
FOR THE THREE AND SIX MONTH PERIODS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(Bullet) GROSS PROFIT - The gross profit increase of 18.7% for the quarter
versus the same quarter last year reflects significant gains in Velvets/Prints
and Culp Home Fashions, and a moderate gain in Rossville/Chromatex.
During the last six months, the company has begun to realize lower raw
material prices for many of its raw materials. Because raw material costs
represent the largest element of cost in the company's products (over 50% of
sales), management has been actively exploring ways to lower these costs through
several key strategies:
(Bullet) global sourcing of certain commodity-type items;
(Bullet) further vertical integration of certain large-volume raw material
components;
(Bullet) monitoring existing suppliers to ensure that the company is
receiving the best possible combination of value and price; and
(Bullet) increasing the utilization of the company's various raw material
manufacturing capabilities.
(Bullet) S,G & A EXPENSES - S,G&A expenses for the quarter were up as a
percentage of sales to 11.1% from 10.7%. This increase is due primarily to
higher selling and design expenses. The increase in selling expenses is due
primarily to higher sales commissions related to international sales. The
increase in design expenses is due to more designers, outside artwork purchased,
and additional costs related to our CAD systems.
Additionally, during the second quarter (and first half) of the current
year, the company's accrual for incentive plans was significantly higher than
the comparable periods of last year.
(Bullet) INTEREST EXPENSE - The decrease for the quarter of 10.5% is primarily
due to lower average borrowings outstanding.
(Bullet) OTHER INCOME (EXPENSE), NET - For the first half, the increase is
principally due to a non-recurring write-off of certain fixed assets totalling
$175,000. Additionally, in the first quarter of last year, the company recorded
a $100,000 gain related to an environmental matter.
(Bullet) INCOME TAXES - The company estimates that the effective tax rate for
fiscal 1997 will again be about 36.5%, due to the lower tax rate related to
Canadian income and the tax benefit related to international sales.
(Bullet) EBITDA - EBITDA for the quarter increased 11.0% from last year's second
quarter to $10.5 million, and represented 10.0% of net sales compared with 10.5%
of net sales last year.
(page 10 of 10)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE - CONTINUED
FOR THE THREE AND SIX MONTH PERIODS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
BALANCE SHEET COMMENTS
(Bullet) WORKING CAPITAL - Accounts receivable increased 11.2% from October
1995, while sales increased 16.0%. Days' sales outstanding represented 45 days,
down from 47 at October 1995. The aging of accounts receivable remained
excellent, with 99.9% current and less than 30 days past due. Inventories
increased 5.4% from October 1995 and inventory turns were 6.6 versus 6.0 for
last year's second quarter. One of the company's key initiatives for fiscal 1997
is to find ways to increase inventory turns.
(Bullet) PROPERTY, PLANT AND EQUIPMENT - For fiscal 1997, the company is
planning capital spending in the $19 to $22 million range. Major projects
include:
(Bullet) weaving expansions for dobby and jacquard product lines in the
Rossville/Chromatex business unit;
(Bullet) weaving expansion for jacquard greige goods (narrow and wide) at
the company's Rayonese facility in Canada, which is part of the
Culp Home Fashions business unit;
(Bullet) printing expansion for the wet print product line in the
Velvets/Prints business unit;
(Bullet) expansion of existing yarn manufacturing capabilities; and
(Bullet) vertical integration of additional raw material items during the
second half of the current fiscal year. Depreciation expense for
fiscal 1997 is expected to approximate $14.0 million.
Although the level of capital expenditures will likely be the highest
total ever, the percentage of capital expenditures to cash flow is expected to
be the second lowest in eight years. Capital expenditures as a percentage of
cash flow (net income plus depreciation, amortization and deferred taxes) is
estimated to be in the 70% to 80% range for fiscal 1997. This is especially
encouraging because the company is in a financial position to spend aggressively
on high-return capital projects and fund the majority of these capital
expenditures from internally-generated cash flow.
(Bullet) LONG-TERM DEBT - The company's funded debt-to-capital ratio was 46.2%
at October 1996, down from 50.4% at October 1995, and the lowest level in three
years. At October 1996, the company had $22.2 million in IRB borrowings, $24.3
million in borrowings under its revolving credit facility (total commitment is
$33.5 million), $32.5 million in a term facility and $1.0 million in a
subordinated note payable. At October 1996, the company had $5.4 million in
restricted investments related to its new IRB, which represents the unexpended
project funds. Therefore, net funded debt was $74.6 million at October 1996,
compared with $76.8 million last year end and $76.7 million at October 1995. The
current maturities of $7.1 million include repayment of $6.0 million of the term
loan, $100,000 of the IRBs and $1.0 million of the subordinated note payable.
With its interest rate swap agreements totalling $25.0 million, the company has
effectively "fixed" the interest rate for 44% of its bank borrowings ($56.8
million) at a weighted average rate of 7.1%.
