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) November 18, 1999
CULP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-12781 56-1001967
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
101 South Main Street
High Point, North Carolina 27260
(Address of principal executive offices)
(336) 889-5161
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Item 5. Other Events
See attached Press Release (3 pages) and Financial Information Release (10
pages), both dated November 18, 1999, related to the fiscal 2000 second quarter
ended October 31, 1999.
Forward Looking Information. This Report contains statements that could be
deemed "forward-looking statements" within the meaning of the federal securities
laws. Such statements are inherently subject to risks and uncertainties.
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 characterized by qualifying words
such as "expect," "believe," "estimate," "plan" and "project" and their
derivatives. 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. Because of the
significant percentage of the Company's sales derived from international
shipments, 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. Additionally, economic and political instability in
international areas could affect the demand for the Company's products.
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: Phillip W. Wilson
Vice President and
Chief Financial Officer
Dated: November 18, 1999
FOR IMMEDIATE RELEASE
CULP REPORTS SECOND QUARTER NET INCOME
----------------------
EARNINGS GAIN REFLECTS CONTINUED IMPROVEMENT IN PROFITABILITY
HIGH POINT, N. C. (Nov. 18, 1999) - Culp, Inc. (NYSE: CFI) today reported
results for the second quarter and first six months of its 2000 fiscal year.
For the three months ended October 31, 1999, Culp reported net sales
increased to $129.5 million compared with $128.2 million a year ago. The company
reported net income for the quarter of $3.2 million, or $0.27 per share diluted,
compared with $1.3 million, or $0.10 per share diluted, in the year-earlier
period.
The results for the second quarter brought net sales for the first half of
fiscal 2000 to $245.5 million compared with $238.8 million a year ago. The
company reported net income for the first half of $4.8 million, or $0.39 per
share diluted, compared with a net loss of $1.3 million, or $0.10 per share
diluted, in the year-earlier period.
"We had expected that the results for our second fiscal quarter would
signal continued bottom-line progress for Culp," said Robert G. Culp, III, chief
executive officer. "The gains not only for the quarter but also for the first
half provide gratifying endorsement of the changes made over the past year to
establish sustained, positive momentum in sales and achieve improved operating
productivity. We are confident about the potential for further improvement and
recognize the importance of maintaining these initiatives."
"An ongoing focus for Culp is developing closer working partnerships with
customers. We are finding that our vertical integration is an important asset in
that regard. Culp's control over more of the steps in manufacturing upholstery
fabrics and ticking complements the breadth of our product lines. Our increased
capacity for producing yarn is proving to be especially valuable. A majority of
the yarn we produce through the Culp Yarn operations is now being used by our
own fabric divisions. Although this internalization is affecting the
year-to-year comparisons in net sales, having our own yarn facilities is
assisting our efforts to provide manufacturers with fashionable designs that
enhance the value of their furniture in the retail marketplace."
Culp added, "We are continuing to realize gains in Culp's fundamental
competitive position. Industry trends appear generally favorable at this time
although most retailers and manufacturers appear to be maintaining close control
over inventories. This, in turn, is reducing our lead time for orders which
understandably adds uncertainty to the company's results over the near term. We
remain committed to the investments necessary to support our longer term
expansion. Our capital expenditures for fiscal 2000 are now expected to be more
than double the $10.7 million invested during last year. These funds are being
used both to modernize and expand the company's manufacturing and distribution
capability.
"We are pleased that our strong financial position is enabling us to fund
these capital expenditures and still maintain an ongoing stock repurchase
program. During the second quarter, we invested an additional $5.5 million to
repurchase our shares. We currently have remaining authorization from the Board
of Directors to invest $3.6 million in this program. We believe that these
repurchases will prove to be a sound investment of the company's capital."
Culp, Inc. is one of the world's largest marketers of upholstery fabrics
for furniture and is a leading marketer of mattress ticking for bedding. The
Company's fabrics are used principally in the production of residential and
commercial furniture and bedding products.
CULP, INC.
Condensed Financial Highlights
(Unaudited)
Three Months Ended
----------------------------------------------
October 31, 1999 November 1, 1998
---------------- ----------------
Net sales $ 129,542,000 $ 128,159,000
Net income $ 3,160,000 $ 1,307,000
Net income per share:
Basic $ 0.27 $ 0.10
Diluted $ 0.27 $ 0.10
Average shares outstanding:
Basic 11,749,000 12,995,000
Diluted 11,868,000 13,120,000
Six Months Ended
---------------------------------------------
October 31, 1999 November 1, 1998
---------------- ----------------
Net sales $ 245,479,000 $ 238,826,000
Net income (loss) $ 4,757,000 $ (1,333,000)
Net income (loss) per share:
Basic $ 0.40 $ (0.10)
Diluted $ 0.39 $ (0.10)
Average shares outstanding:
Basic 11,906,000 12,998,000
Diluted 12,044,000 13,175,000
This release contains statements that could be deemed "forward-looking
statements" within the meaning of the federal securities laws. Such statements
are inherently subject to risks and uncertainties. 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 characterized by qualifying words such as "expect,"
"believe," "estimate," "plan" and "project" and their derivatives. 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. Because of the significant percentage of the company's sales
derived from international shipments, 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. Additionally, economic and
political instability in international areas could affect the demand for the
company's products. -END-
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 1999 AND NOVEMBER 1, 1998
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------- -----------------------------
October 31, November 1, % Over
1999 1998 (Under) 2000 1999
-------------- --------------- ------------- -------------- -------------
Net sales $ 129,542 128,159 1.1 % 100.0 % 100.0 %
Cost of sales 105,835 107,685 (1.7)% 81.7 % 84.0 %
-------------- --------------- ------------- -------------- -------------
Gross profit 23,707 20,474 15.8 % 18.3 % 16.0 %
Selling, general and
administrative expenses 16,035 15,474 3.6 % 12.4 % 12.1 %
-------------- --------------- ------------- -------------- -------------
Income from operations 7,672 5,000 53.4 % 5.9 % 3.9 %
Interest expense 2,484 2,464 0.8 % 1.9 % 1.9 %
Interest income (16) (19) (15.8)% (0.0)% (0.0)%
Other expense (income), net 416 604 (31.1)% 0.3 % 0.5 %
-------------- --------------- ------------- -------------- -------------
Income before income taxes 4,788 1,951 145.4 % 3.7 % 1.5 %
Income taxes * 1,628 644 152.8 % 34.0 % 33.0 %
-------------- --------------- ------------- -------------- -------------
Net income $ 3,160 1,307 141.8 % 2.4 % 1.0 %
============== =============== ============= ============== =============
Net income per share $0.27 $0.10 170.0 %
Net income per share, assuming dilution $0.27 $0.10 170.0 %
Dividends per share $0.035 $0.035 0.0 %
Average shares outstanding 11,749 12,995 (9.6)%
Average shares outstanding, assuming dilution 11,868 13,120 (9.5)%
SIX MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------- -----------------------------
October 31, November 1, % Over
1999 1998 (Under) 2000 1999
-------------- --------------- ------------- -------------- -------------
Net sales $ 245,479 238,826 2.8 % 100.0 % 100.0 %
Cost of sales 201,360 204,741 (1.7)% 82.0 % 85.7 %
-------------- --------------- ------------- -------------- -------------
Gross profit 44,119 34,085 29.4 % 18.0 % 14.3 %
Selling, general and
administrative expenses 31,073 29,947 3.8 % 12.7 % 12.5 %
-------------- --------------- ------------- -------------- -------------
Income from operations 13,046 4,138 215.3 % 5.3 % 1.7 %
Interest expense 4,900 4,825 1.6 % 2.0 % 2.0 %
Interest income (33) (72) (54.2)% (0.0)% (0.0)%
Other expense (income), net 971 1,374 (29.3)% 0.4 % 0.6 %
-------------- --------------- ------------- -------------- -------------
Income (loss) before income 7,208 (1,989) 462.4 % 2.9 % (0.8)%
taxes
Income taxes * 2,451 (656) 473.6 % 34.0 % 33.0 %
-------------- --------------- ------------- -------------- -------------
Net income (loss) $ 4,757 (1,333) 456.9 % 1.9 % (0.6)%
============== =============== ============= ============== =============
Net income (loss) per share $0.40 ($0.10) 500.0 %
Net income (loss) per share, assuming dilution $0.39 ($0.10) 490.0 %
Dividends per share $0.07 $0.07 0.0 %
Average shares outstanding 11,906 12,998 (8.4)%
Average shares outstanding, assuming dilution 12,044 13,175 (8.6)%
* Percent of sales column is calculated as a % of income (loss) before
income taxes.
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1999, NOVEMBER 1, 1998 AND MAY 2, 1999
Unaudited
(Amounts in Thousands)
Amounts Increase
---------------------------------------
October 31, November 1, (Decrease) * May 2,
---------------------------------
1999 1998 Dollars Percent 1999
-------------------- --------------- ---------------- ------------- -----------
Current assets
Cash and cash investments $ 790 1,177 (387) (32.9)% 509
Accounts receivable 69,749 72,998 (3,249) (4.5)% 70,503
Inventories 78,234 72,392 5,842 8.1 % 67,070
Other current assets 8,865 7,230 1,635 22.6 % 9,633
-------------------- --------------- ---------------- ------------- ------------
Total current assets 157,638 153,797 3,841 2.5 % 147,715
Restricted investments 1,085 3,409 (2,324) (68.2)% 3,340
Property, plant & equipment, net 124,318 126,050 (1,732) (1.4)% 123,310
Goodwill 50,571 54,433 (3,862) (7.1)% 51,269
Other assets 5,064 4,333 731 16.9 % 4,978
-------------------- --------------- ---------------- ------------- ------------
Total assets $ 338,676 342,022 (3,346) (1.0)% 330,612
==================== =============== ================ ============= ============
Current liabilities
Current maturities of long-term debt $ 1,678 1,678 0 0.0 % 1,678
Accounts payable 38,427 32,640 5,787 17.7 % 25,687
Accrued expenses 22,947 17,143 5,804 33.9 % 21,026
Income taxes payable 1,786 0 1,786 100.0 % 0
-------------------- --------------- ---------------- ------------- ------------
Total current liabilities 64,838 51,461 13,377 26.0 % 48,391
Long-term debt 133,875 150,210 (16,335) (10.9)% 140,312
Deferred income taxes 14,583 11,227 3,356 29.9 % 14,583
-------------------- --------------- ---------------- ------------- ------------
Total liabilities 213,296 212,898 398 0.2 % 203,286
Shareholders' equity 125,380 129,124 (3,744) (2.9)% 127,326
-------------------- --------------- ---------------- ------------- ------------
Total liabilities and
shareholders' equity $ 338,676 342,022 (3,346) (1.0)% 330,612
==================== =============== ================ ============= ============
Shares outstanding 11,320 12,995 (1,675) (12.9) % 12,079
==================== =============== ================ ============= ============
* Derived from audited financial statements.
CULP, INC. FINANCIAL
INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1999 AND NOVEMBER 1, 1998
Unaudited
(Amounts in Thousands)
SIX MONTHS ENDED
--------------------------------
Amounts
--------------------------------
October 31, November 1,
1999 1998
--------------- ---------------
Cash flows from operating activities:
Net income (loss) $ 4,757 (1,333)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 9,516 9,198
Amortization of intangible assets 798 829
Changes in assets and liabilities:
Accounts receivable 754 775
Inventories (11,164) 6,202
Other current assets 768 578
Other assets (186) (93)
Accounts payable 7,937 (2,395)
Accrued expenses 1,921 (793)
Income taxes payable 1,786 (1,282)
--------------- ---------------
Net cash provided by operating activities 16,887 11,686
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (10,524) (6,443)
Purchases of restricted investments (27) (66)
Sale of restricted investments 2,282 678
--------------- ---------------
Net cash used in investing activities (8,269) (5,831)
--------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 5,333 2,535
Principal payments on long-term debt (11,770) (6,284)
Change in accounts payable-capital expenditures 4,803 (2,179)
Dividends paid (822) (910)
Payments to acquire common stock (5,901) (160)
Proceeds from common stock issued 20 8
--------------- ---------------
Net cash used in financing activities (8,337) (6,990)
--------------- ---------------
Increase (decrease) in cash and cash investments 281 (1,135)
Cash and cash investments at beginning of period 509 2,312
--------------- ---------------
Cash and cash investments at end of period $ 790 1,177
=============== ===============
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
OCTOBER 31, 1999
FISCAL 99 FISCAL 00
------------- --------------------------------------------------------- ---------------
Q2 Q1 Q2 Q3 Q4 LTM
------------- --------------------------------------------------------- ---------------
INVENTORIES
Inventory turns 5.7 5.4 5.5
RECEIVABLES
Days sales in receivables 52 45 49
Percent current & less than 30
days past due 94.9% 93.2% 96.7%
WORKING CAPITAL
Current ratio 3.0 3.1 2.4
Working capital turnover (4) 4.4 4.4 4.4
Operating working capital (4) $112,750 $111,222 $109,556
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 8.4% 8.0% 7.8%
Percent property, plant &
equipment are depreciated 45.0% 49.0% 49.1%
Capital expenditures $10,689 (1) $2,420 $8,104
PROFITABILITY
Return on average total capital 4.2% 4.8% 7.3% 5.8%
Return on average equity 4.1% 5.0% 10.0% 7.2%
Net income per share $0.10 $0.13 $0.27 $0.75
Net income per share (diluted) $0.10 $0.13 $0.27 $0.74
LEVERAGE (3)
Total liabilities/equity 164.9% 155.9% 170.1%
Funded debt/equity 115.0% 106.3% 107.2%
Funded debt/capital employed 53.5% 51.5% 51.7%
Funded debt $148,479 $136,222 $134,468
Funded debt/EBITDA (LTM) (6) 3.95 3.33 3.08
EBITDA/Interest expense, net(LTM) 4.2 4.3 4.6
OTHER
Book value per share $9.94 $10.64 $11.08
Employees at quarter end 4,014 4,050 3,962
Sales per employee (annualized) $124,000 $116,000 129,000
Capital employed (3) $277,603 $264,349 $259,848
Effective income tax rate 33.0% 34.0% 34.0%
EBITDA (2) $9,649 $9,977 $12,412 $43,445
EBITDA/net sales 7.5% 8.6% 9.6% 8.9%
(1) Expenditures for entire year
(2) Earnings before interest, income taxes, and depreciation & amortization.
(3) Long-term debt, funded debt and capital employed are all net of restricted
investments.
(4) Working capital for this calculation is accounts receivable, inventories
and accounts payable.
(5) LTM represents "Latest Twelve Months"
(6) EBITDA includes capitalized interest and pro forma amounts for
acquisitions.
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES BY SEGMENT/DIVISION
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 1999 AND NOVEMBER 1, 1998
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- ----------------------------
October 31, November 1, % Over
Segment/Division 1999 1998 (Under) 2000 1999
- ------------------------------------ ------------ ------------ --------------- ------------- ------------
Upholstery Fabrics
Culp Decorative Fabrics $ 56,897 59,573 (4.5)% 43.9 % 46.5 %
Culp Velvets/Prints 41,783 38,728 7.9 % 32.3 % 30.2 %
Culp Yarn 4,358 6,367 (31.6)% 3.4 % 5.0 %
------------ ------------ --------------- ------------- ------------
103,038 104,668 (1.6)% 79.5 % 81.7 %
Mattress Ticking
Culp Home Fashions 26,504 23,491 12.8 % 20.5 % 18.3 %
------------ ------------ --------------- ------------- ------------
* $ 129,542 128,159 1.1 % 100.0 % 100.0 %
============ ============ =============== ============= ============
SIX MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- ----------------------------
October 31, November 1, % Over
Segment/Division 1999 1998 (Under) 2000 1999
- ------------------------------------ ------------ ------------ --------------- ------------- ------------
Upholstery Fabrics
Culp Decorative Fabrics $ 107,413 111,018 (3.2)% 43.8 % 46.5 %
Culp Velvets/Prints 77,992 68,722 13.5 % 31.8 % 28.8 %
Culp Yarn 8,487 12,963 (34.5)% 3.5 % 5.4 %
------------ ------------ --------------- ------------- ------------
193,892 192,703 0.6 % 79.0 % 80.7 %
Mattress Ticking
Culp Home Fashions 51,587 46,123 11.8 % 21.0 % 19.3 %
------------ ------------ --------------- ------------- ------------
* $ 245,479 238,826 2.8 % 100.0 % 100.0 %
============ ============ =============== ============= ============
* U.S. sales were $97,216 and $94,472 for the second quarter of fiscal 2000 and
fiscal 1999, respectively; and $189,340 and $178,782 for the six months of
fiscal 2000 and fiscal 1999, respectively. The percentage increase in U.S. sales
was 2.9% for the second quarter and an increase of 5.9% for the six months.
CULP, INC. FINANCIAL INFORMATION RELEASE
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 1999 AND NOVEMBER 1, 1998
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
October 31, November 1, % Over
Geographic Area 1999 1998 (Under) 2000 1999
- ---------------------------------- --------------- -------------- -------------- ------------- ------------
North America (Excluding USA) $ 9,912 8,502 16.6 % 30.7 % 25.2 %
Europe 6,069 7,223 (16.0)% 18.8 % 21.4 %
Middle East 8,960 10,060 (10.9 % 27.7 % 29.9 %
Far East & Asia 5,357 5,435 (1.4)% 16.6 % 16.1 %
South America 630 1,238 (49.1)% 1.9 % 3.7 %
All other areas 1,398 1,229 13.8 % 4.3 % 3.6 %
--------------- -------------- -------------- ------------- ------------
$ 32,326 33,687 (4.0)% 100.0 % 100.0 %
=============== ============== ============== ============= ============
SIX MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
October 31, November 1, % Over
Geographic Area 1999 1998 (Under) 2000 1999
- ---------------------------------- --------------- -------------- -------------- ------------- ------------
North America (Excluding USA) $ 17,588 15,755 11.6 % 31.3 % 26.2 %
Europe 8,998 10,906 (17.5)% 16.0 % 18.2 %
Middle East 15,952 18,360 (13.1)% 28.4 % 30.6 %
Far East & Asia 9,666 10,303 (6.2)% 17.2 % 17.2 %
South America 1,250 2,238 (44.1)% 2.2 % 3.7 %
All other areas 2,685 2,482 8.2 % 4.8 % 4.1 %
--------------- -------------- -------------- ------------- ------------
$ 56,139 60,044 (6.5)% 100.0 % 100.0 %
=============== ============== ============== ============= ============
International sales, and the percentage of total sales, for each of the last
five fiscal years follows: fiscal 1995-$57,971 (19%); fiscal 1996-$77,397 (22%);
fiscal 1997-$101,571 (25%); fiscal 1998-$137,223 (29%); and fiscal 1999-$113,354
(23%). International sales for the second quarter represented 25.0% and 26.3%
for 2000 and 1999, respectively. Year-to-date international sales represented
22.9% and 25.1% of total sales for 2000 and 1999, respectively.
Culp, Inc.
SALES BY SEGMENT/DIVISION - TREND ANALYSIS
1998 vs 1999 vs 2000
Unaudited
(Amounts in thousands)
Fiscal 1998 Fiscal 1999
---------------------------------------------- ----------------------------------------------
Segment/Division Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics 39,814 56,781 53,415 60,155 210,165 51,445 59,573 50,520 60,520 222,058
Culp Velvets/Prints 38,397 43,928 44,020 45,044 171,389 29,994 38,728 34,949 40,402 144,073
Culp Yarn - - 761 7,115 7,876 6,596 6,367 4,088 4,462 21,513
---------------------------------------------- ----------------------------------------------
78,211 100,709 98,196 112,314 389,430 88,035 104,668 89,557 105,384 387,644
Mattress Ticking
Culp Home Fashions 21,287 22,217 20,261 23,520 87,285 22,632 23,491 22,536 26,781 95,440
---------------------------------------------- ----------------------------------------------
99,498 122,926 118,457 135,834 476,715 110,667 128,159 112,093 132,165 483,084
============================================== ==============================================
Percent increase(decrease) from prior year:
Segment/Division
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics 2.2 24.2 35.8 37.7 25.3 29.2 4.9 (5.4) 0.6 5.7
Culp Velvets/Prints 10.1 9.2 9.0 9.9 9.5 (21.9) (11.8) (20.6) (10.3) (15.9)
Culp Yarn - - 100.0 100.0 100.0 100.0 100.0 437.2 (37.3) 173.1
---------------------------------------------- ----------------------------------------------
5.9 17.2 23.2 32.6 20.1 12.6 3.9 (8.8) (6.2) (0.5)
Mattress Ticking
Culp Home Fashions 27.5 15.4 14.2 12.0 16.9 6.3 5.7 11.2 13.9 9.3
---------------------------------------------- ----------------------------------------------
9.9 16.8 21.5 28.5 19.5 11.2 4.3 (5.4) (2.7) 1.3
============================================== ==============================================
Overall Growth Rate
Internal (without acquisitions) 9.9 6.6 9.2 11.6 9.3 (4.6) (0.9) (8.5) (2.7) (4.1)
External - 10.2 12.3 16.9 10.2 15.8 5.2 3.1 - 5.4
---------------------------------------------- ----------------------------------------------
9.9 16.8 21.5 28.5 19.5 11.2 4.3 (5.4) (2.7) 1.3
============================================== ==============================================
Culp, Inc.
SALES BY SEGMENT/DIVISION - TREND ANALYSIS
1998 vs 1999 vs 2000
Unaudited
(Amounts in thousands)
Fiscal 2000
-----------------------------------------------
Segment/Division Q1 Q2 Q3 Q4 TOTAL
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics 50,516 56,897 107,413
Culp Velvets/Prints 36,209 41,783 77,992
Culp Yarn 4,129 4,358 8,487
-----------------------------------------------
90,854 103,038 193,892
Mattress Ticking
Culp Home Fashions 25,083 26,504 51,587
-----------------------------------------------
115,937 129,542 245,479
===============================================
Percent increase(decrease) from prior year:
Segment/Division
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics (1.8) (4.5) (3.2)
Culp Velvets/Prints 20.7 7.9 13.5
Culp Yarn (37.4) (31.6) (34.5)
-----------------------------------------------
3.2 (1.6) 0.6
Mattress Ticking
Culp Home Fashions 10.8 12.8 11.8
-----------------------------------------------
4.8 1.1 2.8
===============================================
Overall Growth Rate
Internal (without acquisitions) 4.8 1.1 2.8
External - - -
================================================
4.8 1.1 2.8
================================================
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and six month periods ended October 31, 1999 and November 1, 1998
INCOME STATEMENT COMMENTS
GENERAL - For the second quarter, net sales increased 1.1% to $129.5
million; and net income amounted to $3.2 million, or $0.27 per share diluted,
versus $1.3 million, or $0.10 per share diluted, a year ago. For the six months
ended October 31, 1999, net sales increased 2.8% to $245.5 million; and net
income amounted to $4.8 million, or $0.39 per share diluted, compared with a net
loss of $1.3 million, or $0.10 per share diluted, in the year-earlier period.
The company's strategic plan encompasses several competitive initiatives:
Broad Product Offering - continuing to market one of the broadest product
lines in upholstery fabrics and mattress ticking. Through its extensive
manufacturing capabilities, the company competes in every major category
except leather;
Diverse Global Customer Base - increasing its penetration into other
end-use markets in addition to U.S. residential furniture, such as bedding,
international, commercial furniture and juvenile furniture. The company has
long-standing relationships with most major upholstery furniture
manufacturers, but is not reliant on a single customer or a small group of
dominant customers. No one customer accounted for more than 9% of net sales
during the second quarter of fiscal 2000;
Design Innovation - continuing to invest in the design of upholstery
fabrics and ticking with appealing patterns and textures. An integral
component of the value Culp provides to customers is supplying fabrics that
are fashionable and meet current consumer preferences. The company's
principal design resources are consolidated in a single facility that
provides advanced CAD systems and promotes a sharing of innovative designs
among the divisions;
Vertical Integration - operating as a vertically integrated manufacturer
and taking advantage of economies that can be gained by producing the raw
material components that are used in the manufacture of its products; and
Additional Acquisitions - investing in selective acquisitions complementary
to existing segments.
NET SALES - Compared with the second quarter of last year, upholstery
fabric sales decreased 1.6% to $103.0 million and mattress ticking sales
increased 12.8% to $26.5 million (See Sales by Segment/Division schedule on Page
5 and Sales by Segment/Division - Trend Analysis on Page 7). International sales
were down 4.0% for the quarter.
During the first quarter of fiscal 1999, the company implemented a major
reorganization from six business units to four divisions. This new corporate
alignment grouped related operations together and was accompanied by several
changes in managerial positions. The company believes that benefits of this move
have included improved customer service, more effective use of design resources
and increased manufacturing efficiency. Aided by these factors, the company has
achieved higher sales of upholstery fabrics to U.S.-based accounts in the first
half of fiscal 2000. Most of these gains have been offset by a continued decline
in international sales. The trend of weakness in international sales, which the
company believes has also affected other manufacturers of upholstery fabrics,
has persisted since the close of fiscal 1998. During fiscal 1999, the company
took steps to mitigate the impact of this industry-wide trend by significantly
curtailing production schedules for certain international-targeted fabrics,
introducing a new line of printed cotton upholstery fabrics and shifting its
marketing focus to geographic areas where demand appeared more favorable. The
company has a diversified global base of customers and is seeking to broaden
that further to minimize exposure to economic uncertainties in any geographic
area.
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and six month periods ended October 31, 1999 and November 1, 1998
The company benefited in the second quarter from increased sales by Culp
Home Fashions (primarily mattress ticking) which has experienced a long-term
pattern of expansion. Culp's growth in mattress ticking continues to be driven
by the introduction of new designs and fabric constructions as well as the
advantages of the company's vertical integration. In particular, the ability to
manufacture the jacquard greige (or unfinished) goods that are then printed to
produce mattress ticking has aided Culp in meeting faster delivery schedules and
providing improved overall customer service.
GROSS PROFIT - Gross profit for the second quarter increased 15.8% to $23.7
million and increased as a percentage of net sales from 16.0% to 18.3%. The
increase was due principally to the actions that the company took during fiscal
1999, including a significant reduction in the capacity for manufacturing
printed flock fabrics and an intense effort to reduce operating expenses and
raise productivity.
S,G&A EXPENSES - S,G&A expenses for the second quarter increased as a
percentage of sales to 12.4% from 12.1% for the year-earlier period. The
increase principally reflects higher costs related to resources for the design
of new fabrics and information systems, as well as other increased operating
expenses intended to support a higher level of sales.
INTEREST EXPENSE - Interest expense of $2.5 million for the second quarter
was unchanged from a year ago even though the company had lower average
borrowings outstanding. The lower level of borrowings was offset by lower
capitalized interest related to capital expenditures and higher average interest
rates.
OTHER EXPENSE (INCOME), NET - Other expense (income) totaled $416,000
compared with $604,000 a year ago. The decrease is principally due to higher
investment income on the assets related to the nonqualified deferred
compensation plan.
INCOME TAXES - The effective tax rate for the quarter was 34.0%, up
slightly from 33.0% for the same quarter of last year.
EBITDA - Due principally to the increase in net income, EBITDA for the
second quarter increased to $12.4 million compared with $9.6 million a year ago.
BALANCE SHEET COMMENTS
WORKING CAPITAL - Accounts receivable as of October 31, 1999 decreased 4.5%
from the year-earlier level. Days sales outstanding decreased to 49 days at
October 31, 1999 compared with 52 a year ago. Additionally, the aging of
accounts receivable was 96.7% current and less than 30 days past due versus
94.9% at November 1, 1998. Inventories at the close of the second quarter
increased $5.8 million or 8.1% from November 1, 1998. Inventory turns for the
second quarter were 5.5 versus 5.7 for the second quarter of fiscal 1999. The
increase in inventories is primarily attributable to an increase at Culp Home
Fashions in order to support the sales growth at this division. Operating
working capital (comprised of accounts receivable, inventory and accounts
payable) was $109.6 million at October 31, 1999, down 2.8% from a year ago.
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and six month periods ended October 31, 1999 and November 1, 1998
PROPERTY, PLANT AND EQUIPMENT - During fiscal 1999 the company reduced its
capital spending to $10.7 million compared with $35.9 million in fiscal 1998
because of a focus on improving the results of the considerable investments made
during fiscal 1997 and fiscal 1998. The company is committed to investing
sufficient funds to modernize and expand its manufacturing resources and is
budgeting an increase in capital spending for fiscal 2000 to $23 million.
Depreciation for fiscal 2000 is currently estimated to be approximately $20
million.
LONG-TERM DEBT - The company's funded debt-to-capital ratio was 51.7% at
October 31, 1999, compared with 53.5% at November 1, 1998 and 52.1% at May 2,
1999. Funded debt was $134.5 million at October 31, 1999, down from $148.5
million at November 1, 1998 and $138.7 million at May 2, 1999. Funded debt
equals long-term debt, including current maturities, less restricted
investments, which represent unspent IRB funds. The decrease in funded debt from
May 2, 1999 resulted primarily from an operating cash flow of $16.9 million, an
increase in accounts payable related to capital expenditures of $4.8 million,
offset by capital expenditures of $10.5 million, repurchases of common stock of
$5.9 million and dividends paid of $0.8 million.
STOCK REPURCHASE
In separate authorizations in June 1998, March 1999 and September 1999, the
Board of Directors authorized the use of a total of $15.0 million to repurchase
the company's common stock. During fiscal 1999, the company repurchased 938,600
shares at an average price of $5.90 per share under these authorizations. During
the first half of fiscal 2000, the company repurchased 766,300 shares at an
average price of $7.70 per share.