- --------------------------------------------------------------------------------
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) August 22, 2000
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 (2 pages) and Financial Information Release (9
pages), both dated August 22, 2000, related to the fiscal 2001 first quarter
ended July 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: August 22, 2000
FOR IMMEDIATE RELEASE
CULP REPORTS FIRST QUARTER RESULTS
HIGH POINT, N. C. (Aug. 22, 2000) - Culp, Inc. (NYSE: CFI) today reported
results for the first quarter of its 2001 fiscal year that were in line with
the preliminary outlook for the quarter that the Company had publicly released
last month.
For the three months ended July 30, 2000, Culp reported net sales of
$101.9 million compared with $115.9 million a year ago. The company reported
a net loss for the quarter of $1.8 million, or $0.16 per share diluted,
compared with net income of $1.6 million, or $0.13 per share diluted, in the
year-earlier period.
Robert G. Culp, III, chief executive officer, commented, "As we
indicated last month, we encountered a definite slowing in incoming orders
during the quarter. Our first fiscal quarter is not a seasonally strong
period for our business; and as a result of the lower-than-expected sales and
some plant consolidation expenses, we did not operate profitably for the
period. Based on current trends in our business, we believe that we will
achieve a profit recovery in the second fiscal quarter but still expect
earnings to be down from a year ago. Our results for fiscal 2001 as a whole
will depend importantly on the overall trend in consumer spending on home
furnishings. We are encouraged that the traditional measures that influence
demand such as consumer confidence and employment levels remain strong, but
the rise in interest rates since the start of calendar 2000 clearly poses some
concern. The relative strength of the dollar is another factor that will
influence our progress because of the impact this has on our international
sales."
Culp added, "A vital strategic focus remains capitalizing further on the
consolidation within the home furnishings industry. Having one of the
broadest arrays of fabrics, together with modern manufacturing facilities,
positions Culp well to work with the major furniture manufacturers who have
been steadily gaining market share in recent years. It is essential that we
combine the consistent development of appealing designs with our extensive
manufacturing resources. We are pleased with the momentum that Culp has
achieved in the trade acceptance of our latest patterns and finishes. Over
the balance of the current fiscal year, we expect that these placements on our
customers' furniture lines will translate into an increasing trend in orders."
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
-------------------------------
July 30, 2000 Aug. 1, 1999
-------------- -------------
Net sales $ 101,878,000 $ 115,937,000
Net income (loss) $ (1,756,000) $ 1,597,000
Net income (loss) per share:
Basic $ (0.16) $ 0.13
Diluted $ (0.16) $ 0.13
Average shares outstanding:
Basic 11,209,000 12,063,000
Diluted 11,292,000 12,219,000
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 (LOSS)
FOR THE THREE MONTHS ENDED JULY 30, 2000 AND AUGUST 1, 1999
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
----------------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------ ------------------------------
July 30, August 1, % Over
2000 1999 (Under) 2001 2000
-------------- -------------- ------------- -------------- --------------
Net sales $ 101,878 115,937 (12.1) % 100.0 % 100.0 %
Cost of sales 87,704 95,525 (8.2) % 86.1 % 82.4 %
-------------- -------------- ------------- -------------- --------------
Gross profit 14,174 20,412 (30.6) % 13.9 % 17.6 %
Selling, general and
administrative expenses 13,778 15,038 (8.4) % 13.5 % 13.0 %
-------------- -------------- ------------- -------------- --------------
Income from operations 396 5,374 (92.6) % 0.4 % 4.6 %
Interest expense 2,323 2,416 (3.8) % 2.3 % 2.1 %
Interest income (7) (17) (58.8) % (0.0) % (0.0)%
Other expense (income), net 741 555 33.5 % 0.7 % 0.5 %
-------------- -------------- ------------- -------------- --------------
Income (loss) before income taxes (2,661) 2,420 (210.0) % (2.6) % 2.1 %
Income taxes * (905) 823 (210.0) % 34.0 % 34.0 %
-------------- -------------- ------------- -------------- --------------
Net income (loss) $ (1,756) 1,597 (210.0) % (1.7) % 1.4 %
============== ============== ============= ============== ==============
Net income (loss) per share ($0.16) $0.13 (223.1) %
Net income (loss) per share, assuming dilution ($0.16) $0.13 (223.1) %
Dividends per share $0.035 $0.035 0.0 %
Average shares outstanding 11,209 12,063 (7.1) %
Average shares outstanding, assuming dilution 11,292 12,219 (7.6) %
* Percent of sales column is calculated as a % of income (loss) before
income taxes.
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
JULY 30, 2000, AUGUST 1, 1999 AND APRIL 30, 2000
Unaudited
(Amounts in Thousands)
Amounts Increase
------------------------------ (Decrease)
July 30, August 1, -------------------------- * April 30,
2000 1999 Dollars Percent 2000
------------ ------------ ------------ ----------- ------------
Current assets
Cash and cash investments $ 1,654 1,097 557 50.8 % 1,007
Accounts receivable 58,851 61,984 (3,133) (5.1) % 75,223
Inventories 74,600 75,337 (737) (1.0) % 74,471
Other current assets 11,565 10,860 705 6.5 % 10,349
------------ ------------ ------------ ----------- ------------
Total current assets 146,670 149,278 (2,608) (1.7) % 161,050
Restricted investments 0 1,684 (1,684) (100.0) % 0
Property, plant & equipment, net 123,636 120,971 2,665 2.2 % 126,407
Goodwill 49,525 50,920 (1,395) (2.7) % 49,873
Other assets 5,550 4,969 581 11.7 % 5,548
------------ ------------ ------------ ----------- ------------
Total assets $ 325,381 327,822 (2,441) (0.7) % 342,878
============ ============ ============ =========== ============
Current liabilities
Current maturities of long-term debt $ 1,678 1,678 0 0.0 % 1,678
Accounts payable 24,942 26,099 (1,157) (4.4) % 37,287
Accrued expenses 19,762 20,309 (547) (2.7) % 22,108
Income taxes payable 0 798 (798) (100.0) % 0
------------ ------------ ------------ ----------- ------------
Total current liabilities 46,382 48,884 (2,502) (5.1) % 61,073
Long-term debt 135,150 136,228 (1,078) (0.8) % 135,808
Deferred income taxes 17,459 14,583 2,876 19.7 % 17,459
------------ ------------ ------------ ----------- ------------
Total liabilities 198,991 199,695 (704) (0.4) % 214,340
Shareholders' equity 126,390 128,127 (1,737) (1.4) % 128,538
------------ ------------ ------------ ----------- ------------
Total liabilities and
shareholders' equity $ 325,381 327,822 (2,441) (0.7) % 342,878
============ ============ ============ =========== ============
Shares outstanding 11,209 12,040 (831) (6.9) % 11,209
============ ============ ============ =========== ============
* Derived from audited financial
statements.
CULP, INC. FINANCIAL
INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 30, 2000 AND AUGUST 1, 1999
Unaudited
(Amounts in Thousands)
THREE MONTHS ENDED
----------------------------------
Amounts
--------------------------------
July 30, August 1,
2000 1999
--------------- ---------------
Cash flows from operating activities:
Net income (loss) $ (1,756) 1,597
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 5,060 4,759
Amortization of intangible assets 399 399
Changes in assets and liabilities:
Accounts receivable 16,372 8,519
Inventories (129) (8,267)
Other current assets (1,216) (1,227)
Other assets 147 (41)
Accounts payable (6,886) 270
Accrued expenses (2,346) (717)
Income taxes payable 0 798
--------------- ---------------
Net cash provided by operating activities 9,645 6,090
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (2,289) (2,420)
Purchases of restricted investments 0 (15)
Purchase of investments to fund deferred compensation liability (200) 0
Sale of restricted investments 0 1,671
--------------- ---------------
Net cash used in investing activities (2,489) (764)
--------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 0 3,333
Principal payments on long-term debt (658) (7,417)
Change in accounts payable-capital expenditures (5,459) 142
Dividends paid (392) (423)
Payments to acquire common stock 0 (393)
Proceeds from common stock issued 0 20
--------------- ---------------
Net cash used in financing activities (6,509) (4,738)
--------------- ---------------
Increase in cash and cash investments 647 588
Cash and cash investments at beginning of period 1,007 509
--------------- ---------------
Cash and cash investments at end of period $ 1,654 1,097
=============== ===============
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
JULY 30, 2000
FISCAL 00 FISCAL 01
------------- ------------------------------------------------ ---------------
Q1 Q1 Q2 Q3 Q4 LTM (5)
------------- ------------------------------------------------ ---------------
INVENTORIES
Inventory turns 5.4 4.7
RECEIVABLES
Days sales in receivables 45 49
Percent current & less than 30
days past due 93.2% 91.5%
WORKING CAPITAL
Current ratio 3.1 3.2
Working capital turnover (4) 4.4 4.3
Operating working capital (4) $111,222 $108,509
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 8.0% 8.0%
Percent property, plant &
equipment are depreciated 49.0% 51.1%
Capital expenditures $22,559 (1) $2,289
PROFITABILITY
Return on average total capital 4.8% (0.3%) 4.7%
Return on average equity 5.0% (5.5%) 4.8%
Net income (loss) per share $0.13 ($0.16) $0.52
Net income (loss) per share(diluted) $0.13 ($0.16) $0.52
LEVERAGE (3)
Total liabilities/equity 155.9% 157.4%
Funded debt/equity 106.3% 108.3%
Funded debt/capital employed 51.5% 52.0%
Funded debt $136,222 $136,828
Funded debt/EBITDA (LTM) (6) 3.33 3.46
EBITDA/Interest expense, net (LTM) 4.3 4.2
OTHER
Book value per share $10.64 $11.28
Employees at quarter end 4,050 3,722
Sales per employee (annualized) $116,000 $108,000
Capital employed (3) $264,349 $263,218
Effective income tax rate 34.0% 34.0%
EBITDA (2) $9,977 $5,114 $39,359
EBITDA/net sales 8.6% 5.0% 8.3%
(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 ENDED JULY 30, 2000 AND AUGUST 1, 1999
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- ----------------------------
July 30, August 1, % Over
Segment/Division 2000 1999 (Under) 2001 2000
- ------------------------------------ ------------ ------------ --------------- ------------- ------------
Upholstery Fabrics
Culp Decorative Fabrics $ 41,533 50,516 (17.8) % 40.8 % 43.6 %
Culp Velvets/Prints 30,074 36,209 (16.9) % 29.5 % 31.2 %
Culp Yarn 3,319 4,129 (19.6) % 3.3 % 3.6 %
------------ ------------ --------------- ------------- ------------
74,926 90,854 (17.5) % 73.5 % 78.4 %
Mattress Ticking
Culp Home Fashions 26,952 25,083 7.5 % 26.5 % 21.6 %
------------ ------------ --------------- ------------- ------------
* $ 101,878 115,937 (12.1) % 100.0 % 100.0 %
============ ============ =============== ============= ============
* U.S. sales were $82,290 and $92,124 for the first quarter of fiscal 2001 and
fiscal 2000, respectively. The percentage decrease in U.S. sales was 10.7% for
the first quarter.
CULP, INC. FINANCIAL INFORMATION RELEASE
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS ENDED JULY 30, 2000 AND AUGUST 1, 1999
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
July 30, August 1, % Over
Geographic Area 2000 1999 (Under) 2001 2000
- ---------------------------------- --------------- -------------- -------------- ------------- ------------
North America (Excluding USA) $ 8,395 7,676 9.4 % 42.9 % 32.2 %
Europe 1,452 2,929 (50.4) % 7.4 % 12.3 %
Middle East 5,043 6,992 (27.9) % 25.7 % 29.4 %
Far East & Asia 3,236 4,309 (24.9) % 16.5 % 18.1 %
South America 306 620 (50.6) % 1.6 % 2.6 %
All other areas 1,156 1,287 (10.2) % 5.9 % 5.4 %
--------------- -------------- -------------- ------------- ------------
$ 19,588 23,813 (17.7) % 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 first quarter represented 19.2%
and 20.5% for 2001 and 2000, respectively.
Culp, Inc.
SALES BY SEGMENT/DIVISION - TREND ANALYSIS
1999 vs 2000 vs 2001
(Amounts in thousands)
Fiscal 1999 Fiscal 2000
---------------------------------------------- ----------------------------------------------
Segment/Division Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics 51,445 59,573 50,520 60,520 222,058 50,516 56,897 49,654 56,130 213,197
Culp Velvets/Prints 29,994 38,728 34,949 40,402 144,073 36,209 41,783 34,050 39,501 151,543
Culp Yarn 6,596 6,367 4,088 4,462 21,513 4,129 4,358 4,274 4,809 17,570
---------------------------------------------- ----------------------------------------------
88,035 104,668 89,557 105,384 387,644 90,854 103,038 87,978 100,440 382,310
Mattress Ticking
Culp Home Fashions 22,632 23,491 22,536 26,781 95,440 25,083 26,504 25,203 28,979 105,769
---------------------------------------------- ----------------------------------------------
110,667 128,159 112,093 132,165 483,084 115,937 129,542 113,181 129,419 488,079
============================================== ==============================================
Percent increase(decrease) from prior year:
Segment/Division
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics 29.2 4.9 (5.4) 0.6 5.7 (1.8) (4.5) (1.7) (7.3) (4.0)
Culp Velvets/Prints (21.9) (11.8) (20.6) (10.3) (15.9) 20.7 7.9 (2.6) (2.2) 5.2
Culp Yarn 100.0 100.0 437.2 (37.3) 173.1 (37.4) (31.6) 4.5 7.8 (18.3)
---------------------------------------------- ----------------------------------------------
12.6 3.9 (8.8) (6.2) (0.5) 3.2 (1.6) (1.8) (4.7) (1.4)
Mattress Ticking
Culp Home Fashions 6.3 5.7 11.2 13.9 9.3 10.8 12.8 11.8 8.2 10.8
---------------------------------------------- ----------------------------------------------
11.2 4.3 (5.4) (2.7) 1.3 4.8 1.1 1.0 (2.1) 1.0
============================================== ==============================================
Overall Growth Rate
- --------------------------
Internal (without acquisitions) (4.6) (0.9) (8.5) (2.7) (4.1) 4.8 1.1 1.0 (2.1) 1.0
External 15.8 5.2 3.1 - 5.4 - - - - -
---------------------------------------------- ----------------------------------------------
11.2 4.3 (5.4) (2.7) 1.3 4.8 1.1 1.0 (2.1) 1.0
============================================== ==============================================
Culp, Inc.
SALES BY SEGMENT/DIVISION - TREND ANALYSIS
1999 vs 2000 vs 2001
(Amounts in thousands)
Fiscal 2001
-----------------------------------------------
Segment/Division Q1 Q2 Q3 Q4 TOTAL
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics 41,533 41,533
Culp Velvets/Prints 30,074 30,074
Culp Yarn 3,319 3,319
-----------------------------------------------
74,926 74,926
Mattress Ticking
Culp Home Fashions 26,952 26,952
-----------------------------------------------
101,878 101,878
===============================================
Percent increase(decrease) from prior year:
Segment/Division
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics (17.8) (17.8)
Culp Velvets/Prints (16.9) (16.9)
Culp Yarn (19.6) (19.6)
-----------------------------------------------
(17.5) (17.5)
Mattress Ticking
Culp Home Fashions 7.5 7.5
-----------------------------------------------
(12.1) (12.1)
===============================================
Overall Growth Rate
- --------------------------
Internal (without acquisitions) (12.1) (12.1)
External - -
-----------------------------------------------
(12.1) (12.1)
===============================================
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three months ended July 30, 2000 and August 1, 1999
INCOME STATEMENT COMMENTS
GENERAL - For the first quarter, net sales decreased 12.1% to $101.9
million; and the company reported a net loss of $1.8 million, or $0.16 per share
diluted (based on 11,292,000 average shares outstanding during the period),
versus net income of $1.6 million, or $0.13 per share diluted (based on
12,219,000 average shares outstanding during the period), a year ago.
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. One customer accounted for approximately 10% of
net sales during the first quarter of fiscal 2001. 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 first quarter of fiscal 2000, upholstery fabric
sales decreased 17.5% to $74.9 million and mattress ticking sales increased 7.5%
to $27.0 million (See Sales by Segment/Division schedule on Page 5 and Sales by
Segment/Division - Trend Analysis on Page 7). International sales were down
17.7% for the quarter. The first fiscal quarter is historically not the
strongest period of the year for Culp due to planned vacations and seasonal
industry-wide plant closings.
The company had anticipated that the first fiscal quarter would be a
difficult year-to-year comparison, but sales proved to be considerably less than
expected. Key factors influencing the company's shipments were a slowdown in
consumer spending on home furnishings, especially in the promotional price
category, and the relative strength of the dollar which affects Culp's sales to
customers outside the United States. The decline in sales of upholstery fabrics
was offset in part by increased sales at Culp Home Fashions (primarily mattress
ticking). 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.
Based on current trends, the company presently expects to report a profit
for the second fiscal quarter, but believes that earnings will be down from the
year-earlier level. The trend in results over the remainder of this year will be
determined by a number of factors including the overall trend in consumer
spending on home furnishings and the fluctuation of the dollar relative to other
currencies.
GROSS PROFIT - Gross profit declined 30.6% for the first quarter versus a
year ago and decreased as a percentage of net sales from 17.6% to 13.9%. The
decline was due principally to lower sales volume for the period which led to
underabsorption of fixed costs in the company's upholstery fabrics operation.
The company also experienced some higher costs related to the consolidation of
the Phillips weaving plant in Monroe, NC into the Pageland, SC facility. This
move has been completed, and the company expects to benefit in subsequent
periods from reduced operating expenses.
SG&A EXPENSES - SG&A expenses for the first quarter increased as a
percentage of sales from 13.0% to 13.5%. A portion of these expenses is variable
based on the level of sales, and the dollar amount of these expenses declined
8.4% from a year ago.
INTEREST EXPENSE - Interest expense of $2.3 million for the first quarter
was down slightly from $2.4 million in the prior year due to slightly lower
average borrowings.
OTHER EXPENSE (INCOME), NET - Other expense (income) for the first quarter
totaled $741,000 compared with $555,000 in the prior year. The increase is
principally due to lower investment income on assets related to the company's
nonqualified deferred compensation plan.
INCOME TAXES - The effective tax rate for the first quarter was 34.0%,
unchanged from the first quarter of the prior year.
EBITDA - Due principally to the loss for the period, EBITDA for the first
quarter decreased 49% to $5.1 million from $10.0 million in the prior year.
BALANCE SHEET COMMENTS
WORKING CAPITAL - Accounts receivable as of July 30, 2000 decreased 5.1%
from the year-earlier level, due principally to the lower sales for the period.
Days sales outstanding increased to 49 days at July 30, 2000 compared with 45 a
year ago. The aging of accounts receivable was 91.5% current and less than 30
days past due versus 93.2% a year ago. Inventories at the close of the first
quarter decreased 1.0% from a year ago. Inventory turns for the first quarter
were 4.7 versus 5.4 for the year-earlier period. Operating working capital
(comprised of accounts receivable, inventory and accounts payable) was $108.5
million at July 30, 2000, down from $111.2 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 2001 is budgeted to be
approximately $16 million, and spending in the first quarter totaled $2.3
million. Depreciation for fiscal 2001 is estimated to be $20.5 million.
LONG-TERM DEBT - The company's funded debt-to-capital ratio was 52.0% at
July 30, 2000 compared with 51.5% a year ago. Funded debt was $136.8 million at
July 30, 2000 compared with $136.2 million a year ago. Funded debt equals
long-term debt, including current maturities, less restricted investments, which
represent unspent IRB funds.
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. No purchases were made during the first quarter of fiscal 2001
under these authorizations.