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) May 31, 2000
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)
(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 May 31, 2000, related to the fiscal 2000 fourth quarter and
year ended April 30, 2000.
Forward Looking Information. This Report contains statements that may be deemed
"forward-looking statements" within the meaning of the federal securities laws,
including the Private Securities Litigation Reform Act of 1995. 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: May 31, 2000
FOR IMMEDIATE RELEASE
CULP REPORTS SHARPLY HIGHER FISCAL 2000 EARNINGS
----------------------
GAINS HIGHLIGHT IMPROVED PROFITABILITY
HIGH POINT, N. C. (May 31, 2000) - Culp, Inc. (NYSE: CFI) today reported
increased sales and net income per share for the fiscal year ended April 30,
2000.
Net sales for the 2000 fiscal year totaled $488.1 million, up from $483.1
million in fiscal 1999. The company reported net income for the year of $9.4
million, or $0.80 per share diluted, compared with net income of $3.1 million,
or $0.24 per share diluted, in fiscal 1999.
Net sales for the fourth quarter totaled $129.4 million compared with
$132.2 million a year ago. The company reported net income for the quarter of
$3.2 million, or $0.28 per share diluted, compared with $2.9 million, or $0.23
per share diluted, in the year-earlier period.
"Our results for the year as a whole signaled a gratifying increase in
Culp's profitability and highlight the underlying strength of our organization,"
said Robert G. Culp, III, chief executive officer. "We had stated that our
primary goal for fiscal 2000 was to achieve continued improvement in Culp's
performance. We achieved meaningful progress toward that objective and now must
sustain the momentum by capitalizing even more effectively on our assets. This
was the first full year in which the realignment of our operating units was in
place, and we are very encouraged by the higher efficiency and improved customer
service that is resulting from this new structure. We are continuing to
emphasize the importance of building strong working relationships with existing
customers because of the ongoing consolidation that is occurring in the home
furnishings industry. We are also pursuing opportunities to broaden our sales
base further in the United States and internationally.
"We believe that Culp's breadth of offerings and the extent of our
manufacturing resources equip us well to gain additional market share. As the
home furnishings industry continues to change to meet consumers' demands, a
major challenge is how to maintain a broad selection of competitive fabrics and
yet meet much shorter lead times. As a fully integrated marketer, Culp has the
ability to include customers actively in all aspects of the manufacturing
process, starting with the vital design stage. This involvement encourages a
close partnership that enhances our functional support of a customer's marketing
campaigns and helps us identify important styling trends. One of the hallmarks
of our progress during fiscal 2000 was the increasingly positive response of the
marketplace to Culp's designs. We ended the year on an especially strong note
with outstanding showroom placements of our fabrics at the major High Point
spring market. We are encouraged by that endorsement of Culp's design team and
indeed believe that our personnel and manufacturing resources are very well
aligned to market appealing fabrics and mattress ticking that add true value to
our customers' products."
Commenting on the company's ongoing stock repurchase program, Culp noted,
"Over the past two years, we have invested $12.2 million to repurchase the
company's common stock. The immediate impact of these transactions is reflected
in the higher earnings per share for 2000. The effect of the lower number of
shares outstanding will continue in future periods, and the company plans to
consider additional repurchases based on market conditions and our analysis of
investment alternatives. We currently have authorization from the Board of
Directors to invest an additional $7.8 million in this program. Culp's sound
financial position is enabling us to execute this program while making the
investments necessary to modernize and expand our capacity.
"Regarding our prospects for fiscal 2001, the trend toward higher interest
rates poses an obvious concern; but one of the strengths of the home furnishings
industry is the historical resiliency of demand to short-term changes in the
level of new residential construction. Other economic factors that traditionally
influence purchases of furniture and bedding, such as employment levels and
consumer confidence, appear favorable at this time."
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
Three Months Ended
---------------------------------------
April 30, 2000 May 2, 1999
----------------------------------------------------- -----------------
Net sales $ 129,419,000 $ 132,165,000
Net income $ 3,191,000 $ 2,896,000
Net income per share:
Basic $ 0.28 $ 0.23
Diluted $ 0.28 $ 0.23
Average shares outstanding:
Basic 11,213,000 12,645,000
Diluted 11,298,000 12,742,000
Fiscal Year Ended
---------------------------------------
April 30, 2000 May 2, 1999
- ----------------------------------------------------- ------------------
Net sales $ 488,079,000 $ 483,084,000
Net income $ 9,380,000 $ 3,102,000
Net income per share:
Basic $ 0.81 $ 0.24
Diluted $ 0.80 $ 0.24
Average shares outstanding:
Basic 11,580,000 12,909,000
Diluted 11,681,000 13,064,000
This release contains statements that may be deemed "forward-looking
statements" within the meaning of the federal securities laws, including the
Private Securities Litigation Reform Act of 1995. 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
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED APRIL 30, 2000 AND MAY 2, 1999
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------- -----------------------------
April 30, May 2, % Over
2000 1999 (Under) 2000 1999
-------------- --------------- ------------- -------------- -------------
Net sales $ 129,419 132,165 (2.1)% 100.0 % 100.0 %
Cost of sales 107,342 109,324 (1.8)% 82.9 % 82.7 %
-------------- --------------- ------------- -------------- -------------
Gross profit 22,077 22,841 (3.3)% 17.1 % 17.3 %
Selling, general and
administrative expenses 14,913 15,921 (6.3)% 11.5 % 12.0 %
-------------- --------------- ------------- -------------- -------------
Income from operations 7,164 6,920 3.5 % 5.5 % 5.2 %
Interest expense 2,255 2,482 (9.1)% 1.7 % 1.9 %
Interest income (10) (113) (91.2)% (0.0)% (0.1)%
Other expense (income), net 366 546 (33.0)% 0.3 % 0.4 %
-------------- --------------- ------------- -------------- -------------
Income before income taxes 4,553 4,005 13.7 % 3.5 % 3.0 %
Income taxes * 1,362 1,109 22.8 % 29.9 % 27.7 %
-------------- --------------- ------------- -------------- -------------
Net income $ 3,191 2,896 10.2 % 2.5 % 2.2 %
============== =============== ============= ============== =============
Net income per share $0.28 $0.23 21.7 %
Net income per share, assuming dilution $0.28 $0.23 21.7 %
Dividends per share $0.035 $0.035 0.0 %
Average shares outstanding 11,213 12,645 (11.3)%
Average shares outstanding, assuming 11,298 12,742 (11.3)%
dilution
TWELVE MONTHS ENDED
---------------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------- -----------------------------
April 30, May 2, % Over
2000 1999 (Under) 2000 1999
-------------- --------------- ------------- -------------- -------------
Net sales $ 488,079 483,084 1.0 % 100.0 % 100.0 %
Cost of sales 403,414 406,976 (0.9)% 82.7 % 84.2 %
-------------- --------------- ------------- -------------- -------------
Gross profit 84,665 76,108 11.2 % 17.3 % 15.8 %
Selling, general and
administrative expenses 59,935 59,968 (0.1)% 12.3 % 12.4 %
-------------- --------------- ------------- -------------- -------------
Income from operations 24,730 16,140 53.2 % 5.1 % 3.3 %
Interest expense 9,521 9,615 (1.0)% 2.0 % 2.0 %
Interest income (51) (195) (73.8)% (0.0)% (0.0)%
Other expense (income), net 1,566 2,412 (35.1)% 0.3 % 0.5 %
-------------- --------------- ------------- -------------- -------------
Income before income taxes 13,694 4,308 217.9 % 2.8 % 0.9 %
Income taxes * 4,314 1,206 257.7 % 31.5 % 28.0 %
-------------- --------------- ------------- -------------- -------------
Net income $ 9,380 3,102 202.4 % 1.9 % 0.6 %
============== =============== ============= ============== =============
Net income per share $0.81 $0.24 237.5 %
Net income per share, assuming dilution $0.80 $0.24 233.3 %
Dividends per share $0.14 $0.14 0.0 %
Average shares outstanding 11,580 12,909 (10.3)%
Average shares outstanding, assuming 11,681 13,064 (10.6)%
dilution
* Percent of sales column is calculated as a % of income before income
taxes.
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2000 AND MAY 2, 1999
(Amounts in Thousands)
Amounts Increase
--------------------------------------- (Decrease)
April 30, May 2, ---------------------------------
2000 1999 Dollars Percent
-------------------- --------------- ---------------- -------------
Current assets
Cash and cash investments $ 1,007 509 498 97.8 %
Accounts receivable 75,223 70,503 4,720 6.7 %
Inventories 74,471 67,070 7,401 11.0 %
Other current assets 10,349 9,633 716 7.4 %
-------------------- --------------- ---------------- -------------
Total current assets 161,050 147,715 13,335 9.0 %
Restricted investments 0 3,340 (3,340) (100.0)%
Property, plant & equipment, net 126,407 123,310 3,097 2.5 %
Goodwill 49,873 51,269 (1,396) (2.7)%
Other assets 5,548 4,978 570 11.5 %
-------------------- --------------- ---------------- -------------
Total assets $ 342,878 330,612 12,266 3.7 %
==================== =============== ================ =============
Current liabilities
Current maturities of long-term debt $ 1,678 1,678 0 0.0 %
Accounts payable 37,287 25,687 11,600 45.2 %
Accrued expenses 22,108 21,026 1,082 5.1 %
-------------------- --------------- ---------------- -------------
Total current liabilities 61,073 48,391 12,682 26.2 %
Long-term debt 135,808 140,312 (4,504) (3.2)%
Deferred income taxes 17,459 14,583 2,876 19.7 %
-------------------- --------------- ---------------- -------------
Total liabilities 214,340 203,286 11,054 5.4 %
Shareholders' equity 128,538 127,326 1,212 1.0 %
-------------------- --------------- ---------------- -------------
Total liabilities and
shareholders' equity $ 342,878 330,612 12,266 3.7 %
==================== =============== ================ =============
Shares outstanding 11,209 12,079 (870) (7.2)%
==================== =============== ================ =============
CULP, INC. FINANCIAL
INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED APRIL 30, 2000 AND MAY 2, 1999
(Amounts in Thousands)
TWELVE MONTHS ENDED
--------------------------------
Amounts
--------------------------------
April 30, May 2,
2000 1999
--------------- ---------------
Cash flows from operating activities:
Net income $ 9,380 3,102
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 19,462 18,549
Amortization of intangible assets 1,596 1,570
Provision for deferred income taxes 2,176 1,064
Changes in assets and liabilities:
Accounts receivable (4,720) 3,133
Inventories (7,401) 12,124
Other current assets (16) 522
Other assets (770) (106)
Accounts payable 1,029 (8,893)
Accrued expenses 1,082 2,736
Income taxes payable 0 (1,282)
--------------- ---------------
Net cash provided by operating activities 21,818 32,519
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (22,559) (10,689)
Purchases of restricted investments (40) (119)
Purchase of investments to fund deferred compensation liability 0 (735)
Sale of restricted investments 3,380 800
--------------- ---------------
Net cash used in investing activities (19,219) (10,743)
--------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 9,543 2,637
Principal payments on long-term debt (14,047) (16,284)
Change in accounts payable-capital expenditures 10,571 (2,637)
Dividends paid (1,611) (1,788)
Payments to acquire common stock (6,636) (5,542)
Proceeds from common stock issued 79 35
--------------- ---------------
Net cash used in financing activities (2,101) (23,579)
--------------- ---------------
Increase (decrease) in cash and cash investments 498 (1,803)
Cash and cash investments at beginning of period 509 2,312
--------------- ---------------
Cash and cash investments at end of period $ 1,007 509
=============== ===============
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
APRIL 30, 2000
FISCAL 99 FISCAL 00
------------- --------------------------------------------------------- ---------------
Q4 Q1 Q2 Q3 Q4 LTM (5)
------------- --------------------------------------------------------- ---------------
INVENTORIES
Inventory turns 6.4 5.4 5.5 4.8 5.5
RECEIVABLES
Days sales in receivables 49 45 49 49 53
Percent current & less than 30
days past due 96.1% 93.2% 96.7% 97.1% 93.5%
WORKING CAPITAL
Current ratio 3.1 3.1 2.4 2.7 2.6
Working capital turnover (4) 4.3 4.4 4.4 4.5 4.4
Operating working capital (4) $111,886 $111,222 $109,556 $111,315 $112,407
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 8.1% 8.0% 7.8% 8.2% 7.9%
Percent property, plant &
equipment are depreciated 47.6% 49.0% 49.1% 49.4% 49.6%
Capital expenditures $10,689 (1) $2,420 $8,104 $3,950 $8,085
PROFITABILITY
Return on average total capital 6.8% 4.8% 7.3% 4.9% 7.2% 6.0%
Return on average equity 9.0% 5.0% 10.0% 4.6% 10.0% 7.4%
Net income per share $0.23 $0.13 $0.27 $0.13 $0.28 $0.81
Net income per share (diluted) $0.23 $0.13 $0.27 $0.13 $0.28 $0.80
LEVERAGE (3)
Total liabilities/equity 159.7% 155.9% 170.1% 167.3% 166.8%
Funded debt/equity 108.9% 106.3% 107.2% 109.5% 107.0%
Funded debt/capital employed 52.1% 51.5% 51.7% 52.3% 51.7%
Funded debt $138,650 $136,222 $134,468 $137,683 $137,486
Funded debt/EBITDA (LTM) (6) 4.02 3.33 3.08 3.15 3.10
EBITDA/Interest expense, net (LTM) 3.6 4.3 4.6 4.5 4.7
OTHER
Book value per share $10.54 $10.64 $11.08 $11.21 $11.47
Employees at quarter end 3,973 4,050 3,962 3,938 3,825
Sales per employee (annualized) $133,000 $116,000 $129,000 $115,000 $133,000
Capital employed (3) $265,976 $264,349 $259,848 $263,448 $266,024
Effective income tax rate 27.7% 34.0% 34.0% 25.9% 29.9%
EBITDA (2) $11,534 $9,977 $12,412 $9,655 $12,178 $44,222
EBITDA/net sales 8.7% 8.6% 9.6% 8.5% 9.4% 9.1%
(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 TWELVE MONTHS ENDED APRIL 30, 2000 AND MAY 2, 1999
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- ----------------------------
April 30, May 2, % Over
Segment/Division 2000 1999 (Under) 2000 1999
- ------------------------------------ ------------ ------------ --------------- ------------- ------------
Upholstery Fabrics
Culp Decorative Fabrics $ 56,130 60,520 (7.3)% 43.4 % 45.8 %
Culp Velvets/Prints 39,501 40,402 (2.2)% 30.5 % 30.6 %
Culp Yarn 4,809 4,462 7.8 % 3.7 % 3.4 %
------------ ------------ --------------- ------------- ------------
100,440 105,384 (4.7)% 77.6 % 79.7 %
Mattress Ticking
Culp Home Fashions 28,979 26,781 8.2 % 22.4 % 20.3 %
------------ ------------ --------------- ------------- ------------
* $ 129,419 132,165 (2.1)% 100.0 % 100.0 %
============ ============ =============== ============= ============
TWELVE MONTHS ENDED
--------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- ----------------------------
April 30, May 2, % Over
Segment/Division 2000 1999 (Under) 2000 1999
- ------------------------------------ ------------ ------------ --------------- ------------- ------------
Upholstery Fabrics
Culp Decorative Fabrics $ 213,197 222,058 (4.0)% 43.7 % 46.0 %
Culp Velvets/Prints 151,543 144,073 5.2 % 31.0 % 29.8 %
Culp Yarn 17,570 21,513 (18.3)% 3.6 % 4.5 %
------------ ------------ --------------- ------------- ------------
382,310 387,644 (1.4)% 78.3 % 80.2 %
Mattress Ticking
Culp Home Fashions 105,769 95,440 10.8 % 21.7 % 19.8 %
------------ ------------ --------------- ------------- ------------
* $ 488,079 483,084 1.0 % 100.0 % 100.0 %
============ ============ =============== ============= ============
* U.S. sales were $101,276 and $102,796 for the fourth quarter of fiscal 2000
and fiscal 1999, respectively; and $376,975 and $369,730 for the twelve months
of fiscal 2000 and fiscal 1999, respectively. The percentage change in U.S.
sales was a decrease of 1.5% for the fourth quarter and an increase of 2.0% for
the twelve months.
CULP, INC. FINANCIAL INFORMATION RELEASE
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED APRIL 30, 2000 AND MAY 2, 1999
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
April 30, May 2, % Over
Geographic Area 2000 1999 (Under) 2000 1999
- ---------------------------------- --------------- -------------- -------------- ------------- ------------
North America (Excluding USA) $ 9,968 8,067 23.6 % 35.4 % 27.5 %
Europe 2,655 4,791 (44.6)% 9.4 % 16.3 %
Middle East 8,837 8,925 (1.0)% 31.4 % 30.4 %
Far East & Asia 5,014 6,075 (17.5)% 17.8 % 20.7 %
South America 570 691 (17.5)% 2.0 % 2.4 %
All other areas 1,099 820 34.0 % 3.9 % 2.8 %
--------------- -------------- -------------- ------------- ------------
$ 28,143 29,369 (4.2)% 100.0 % 100.0 %
=============== ============== ============== ============= ============
TWELVE MONTHS ENDED
--------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
April 30, May 2, % Over
Geographic Area 2000 1999 (Under) 2000 1999
- ---------------------------------- --------------- -------------- -------------- ------------- ------------
North America (Excluding USA) $ 36,032 31,102 15.9 % 32.4 % 27.4 %
Europe 16,351 19,578 (16.5)% 14.7 % 17.3 %
Middle East 32,929 33,996 (3.1)% 29.6 % 30.0 %
Far East & Asia 19,102 21,371 (10.6)% 17.2 % 18.9 %
South America 2,343 3,484 (32.7)% 2.1 % 3.1 %
All other areas 4,347 3,823 13.7 % 3.9 % 3.4 %
--------------- -------------- -------------- ------------- ------------
$ 111,104 113,354 (2.0) % 100.0 % 100.0 %
=============== ============== ============== ============= ============
International sales, and the percentage of total sales, for each of the last
five fiscal years follows: fiscal 1996-$77,397 (22%); fiscal 1997-$101,571
(25%); fiscal 1998-$137,223 (29%); fiscal 1999-$113,354 (23%); and fiscal
2000-$111,104 (23%). International sales for the fourth quarter represented
21.7% and 22.2% for 2000 and 1999, respectively.
Culp, Inc.
SALES BY SEGMENT/DIVISION - TREND ANALYSIS
1998 vs 1999 vs 2000
(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
(Amounts in thousands)
Fiscal 2000
-----------------------------------------------
Segment/Division Q1 Q2 Q3 Q4 TOTAL
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics 50,516 56,897 49,654 56,130 213,197
Culp Velvets/Prints 36,209 41,783 34,050 39,501 151,543
Culp Yarn 4,129 4,358 4,274 4,809 17,570
-----------------------------------------------
90,854 103,038 87,978 100,440 382,310
Mattress Ticking
Culp Home Fashions 25,083 26,504 25,203 28,979 105,769
-----------------------------------------------
115,937 129,542 113,181 129,419 488,079
===============================================
Percent increase(decrease) from prior year:
Segment/Division
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics (1.8) (4.5) (1.7) (7.3) (4.0)
Culp Velvets/Prints 20.7 7.9 (2.6) (2.2) 5.2
Culp Yarn (37.4) (31.6) 4.5 7.8 (18.3)
-----------------------------------------------
3.2 (1.6) (1.8) (4.7) (1.4)
Mattress Ticking
Culp Home Fashions 10.8 12.8 11.8 8.2 10.8
-----------------------------------------------
4.8 1.1 1.0 (2.1) 1.0
===============================================
Overall Growth Rate
Internal (without acquisitions) 4.8 1.1 1.0 (2.1) 1.0
External - - - - -
===============================================
4.8 1.1 1.0 (2.1) 1.0
===============================================
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and twelve month periods ended April 30, 2000 and May 2, 1999
INCOME STATEMENT COMMENTS
GENERAL - For the fourth quarter, net sales decreased 2.1% to $129.4
million; and net income rose 10.2% to $3.2 million, or $0.28 per share diluted
(based on 11,298,000 average shares outstanding during the period), versus $2.9
million, or $0.23 per share diluted (based on 12,742,000 average shares
outstanding during the period), a year ago. For the year ended April 30, 2000,
net sales increased 1.0% to $488.1 million; and net income increased 202.4% to
$9.4 million, or $0.80 per share diluted (based on 11,681,000 average shares
outstanding during the period), compared with net income of $3.1 million, or
$0.24 per share diluted (based on 13,064,000 average shares outstanding during
the period), 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 - maintaining a diverse, global customer base.
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 fiscal 2000. Ownership of the resources in the home
furnishings industry is becoming increasingly concentrated, and the company
is seeking to increase its business further with existing customers. Culp
is also pursuing opportunities in other end-use markets in addition to U.S.
residential furniture, such as bedding, international, commercial furniture
and juvenile furniture;
Design Innovation - continuing to invest in personnel and other resources
for 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 match current consumer
preferences. The company's principal design resources are consolidated in a
single facility that has 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 fourth quarter of last year, upholstery
fabric sales decreased 4.7% to $100.4 million and mattress ticking sales
increased 8.2% to $29.0 million (See Sales by Segment/Division schedule on Page
5 and Sales by Segment/Division - Trend Analysis on Page 7). International sales
were down 4.2% and 2.0% for the quarter and year, respectively. For the year
ended April 30, 2000, upholstery fabric sales decreased 1.4% to $382.3 million
and mattress ticking sales increased 10.8% to $105.8 million.
Fiscal 2000 was the first full year in which the company operated with its
current structure of four divisions. This corporate organization, which evolved
from one in which there were six business units, groups related operations
together; and its adoption in fiscal 1999 was accompanied by several changes in
managerial positions. The company believes that this new structure is yielding a
number of benefits including improved customer service, more effective use of
design resources and increased manufacturing efficiency. Culp believes that
these factors aided its sales to U.S.-based accounts for fiscal 2000, which rose
2.0% for the year. This growth was offset by a decline of 2.0% in international
sales. After several years of above-average growth, Culp's international sales
declined 17.4% in fiscal 1999, following an industry-wide trend. The company
took steps to mitigate the impact of this trend by significantly
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and twelve month periods ended April 30, 2000 and May 2, 1999
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 believes that the significantly smaller decline in international sales
for fiscal 2000 reflects the results of these actions. 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.
The company continued to benefit in fiscal 2000 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 declined 3.3% for the fourth quarter versus a
year ago and decreased as a percentage of net sales from 17.3% to 17.1%. The
decline was due principally to lower sales volume at the Culp Decorative Fabrics
division, which experienced a decrease in sales of 7.3% for the quarter (and a
4.0% decrease for the year). Although this division has taken steps (including
the ongoing consolidation of the Phillips weaving plant in Monroe, NC into the
Pageland, SC facility) to reduce operating expenses, it was affected by excess
manufacturing capacity and lower absorption of fixed costs during the fourth
quarter.
Gross profit for fiscal 2000 increased 11.2% to $84.7 million and increased
as a percentage of net sales from 15.8% to 17.3% due to the reorganization noted
in the second paragraph of the "Net Sales" section above and an intense effort
to reduce operating expenses and raise productivity.
SG&A EXPENSES - SG&A expenses for the fourth quarter decreased as a
percentage of sales from 12.0% to 11.5%. The decrease is related to lower
marketing costs due primarily to 1999 including severance costs related to
termination of an international sales agent.
SG&A expenses for fiscal 2000 decreased 0.1% and accounted for 12.3% of
sales versus 12.4% in the prior year. The company has increased its resources
for the design of new fabrics and for enhanced information systems.
INTEREST EXPENSE - Interest expense of $9.5 million for fiscal 2000 was
down from $9.6 million in the prior year. Although the company generally had
lower average borrowings during fiscal 2000, the reduced debt was offset by
lower capitalized interest related to capital expenditures and higher average
interest rates.
OTHER EXPENSE (INCOME), NET - Other expense (income) for fiscal 2000
totaled $1.6 million compared with $2.4 million in the prior year. The decrease
is principally due to higher investment income on assets related to the
company's nonqualified deferred compensation plan.
INCOME TAXES - The effective tax rate for fiscal 2000 was 31.5% compared
with 28.0% in the prior year.
EBITDA - Due principally to the increase in net income, EBITDA for fiscal
2000 increased 31% to $44.2 million from $33.8 million in the prior year.
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and twelve month periods ended April 30, 2000 and May 2, 1999
BALANCE SHEET COMMENTS
WORKING CAPITAL - Accounts receivable as of April 30, 2000 increased 6.7%
from the year-earlier level, due principally to changes in the mix of accounts
receivable between U.S.-based and international customers. The company believes
that these changes are not due to any general trend toward slower receivable
collections. Days sales outstanding increased to 53 days at April 30, 2000
compared with 49 at the end of fiscal 1999. The aging of accounts receivable was
93.5% current and less than 30 days past due versus 96.1% at the end of fiscal
1999. Inventories at the close of fiscal 2000 increased $7.4 million or 11.0%
from a year ago, principally due to the decision to increase the company's
ability to respond quickly to customers' orders. Inventory turns for the fourth
quarter of fiscal 2000 were 5.5 versus 6.4 for the year-earlier period.
Operating working capital (comprised of accounts receivable, inventory and
accounts payable) was $112.4 million at April 30, 2000, up from $111.9 million a
year ago.
PROPERTY, PLANT AND EQUIPMENT - During fiscal 2000 the company's capital
spending increased to $22.6 million compared with $10.7 million in the prior
year. The level of capital spending in fiscal 1999 was significantly less than
in the past several years because of a focus on improving the return on existing
assets. Culp is committed to investing sufficient funds to modernize and expand
its manufacturing resources and information systems. The company is budgeting
total capital spending for fiscal 2001 of approximately $16 million.
Depreciation expense for fiscal 2000 increased to $19.5 million versus $18.5
million for fiscal 1999. Depreciation for fiscal 2001 is currently estimated to
be $20.5 million.
LONG-TERM DEBT - The company's funded debt-to-capital ratio was 51.7% at
April 30, 2000 compared with 52.1% at the close of fiscal 1999. Funded debt was
$137.5 million at April 30, 2000 compared with $138.7 million at the close of
fiscal 1999. Funded debt equals long-term debt, including current maturities,
less restricted investments, which represent unspent IRB funds. The decrease in
funded debt from a year ago resulted primarily from an operating cash flow of
$21.8 million and an increase in accounts payable related to capital
expenditures of $10.6 million, offset by capital expenditures of $22.6 million,
repurchases of common stock of $6.6 million and dividends paid of $1.6 million.
STOCK REPURCHASE
In separate authorizations in June 1998, March 1999, September 1999 and
December 1999, the Board of Directors authorized the use of a total of $20.0
million to repurchase the company's common stock. Over the past two fiscal
years, the company has invested $12.2 million to repurchase a total of 1.8
million shares. This includes the repurchase during fiscal 2000 of 884,264
shares at an average price of $7.50 per share under these authorizations.