- ------------------------------------------------------------------
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 15, 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 (3 pages) and Financial Information Release (9
pages), both dated November 15, 2000, related to the fiscal 2001 second
quarter ended October 29, 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: November 15, 2000
FOR IMMEDIATE RELEASE
CULP REPORTS SECOND QUARTER EARNINGS
HIGH POINT, N. C. (Nov. 15, 2000) - Culp, Inc. (NYSE: CFI) today reported
results for the second quarter of its 2001 fiscal year.
For the three months ended October 29, 2000, Culp reported net sales of
$111.0 million compared with $129.5 million a year ago. The company reported
net income for the quarter of $342,000, or $0.03 per share diluted, compared
with net income of $3.2 million, or $0.27 per share diluted, in the
year-earlier period.
The results for the second quarter brought net sales for the first half
of fiscal 2001 to $212.9 million compared with $245.5 million a year ago. The
company reported a net loss for the first half of $1.4 million, or $0.13 per
share diluted, compared with net income of $4.8 million, or $0.39 per share
diluted, in the year-earlier period.
Robert G. Culp, III, chief executive officer, commented, "We had
expected a profit recovery for the second fiscal quarter, and our results
represent a definite improvement from the first three months. We are
encouraged by the overall placements that we had at the most recent industry
trade show, but the benefit to Culp will depend importantly on the strength of
retail sales during the important holiday marketing period for the furniture
and bedding offered with Culp-manufactured fabrics and ticking. The
relatively high consumer confidence and employment levels are positive
measures; but retail demand remains sluggish, especially in the promotional
categories of the home furnishings market, and the strength of the dollar
against other currencies is having an adverse impact on our international
sales.
"Our sales of fabrics to customers outside the United States during the
second quarter were down 26% from a year ago. The wide geographic breadth of our
international business makes it difficult to generalize about any economic
trends that may be affecting our business. Customer feedback endorses the appeal
of our designs, and we believe that the long-term dynamics driving demand in
these markets remain favorable. The current strength in the U.S. dollar,
however, is a significant factor that is likely to cause a further drop in our
international sales in both the third and fourth quarters. We have taken steps
to reduce expenses related to this portion of our business. These actions
involved severance costs in the second period, but the resulting savings will
benefit subsequent periods."
Culp added, "The current weakness in international sales makes us
especially cautious about the outlook for our results over the remainder of
this fiscal year. The combination of that trend and the seasonal decline in
net sales normally experienced in the third fiscal quarter may cause us to
report a modest net loss for the third period. We expect to close the year on
a profitable note in the final quarter, but are uncertain at this time whether
the expected improvement in the fourth period will leave us in the black for
the year as a whole. Through the first half, we generated $21.2 million in
cash from operations and used $16.8 million to reduce debt and payables
related to capital expenditures. Although a strategic objective is to reduce
our debt further, we are committing the funds necessary to maintain modern,
efficient manufacturing capacity and effective information systems. We remain
confident about Culp's fundamental competitive position and believe that our
capacity and breadth of lines are especially important attributes within an
industry that is continuing to consolidate at all levels."
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.
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.
CULP, INC.
Condensed Financial Highlights
(Unaudited)
Three Months Ended
-------------------------------
October 29, October 31,
2000 1999
-------------- -------------
Net sales $ 110,981,000 $ 129,542,000
Net income $ 342,000 $ 3,160,000
Net income per share:
Basic $ 0.03 $ 0.27
Diluted $ 0.03 $ 0.27
Average shares outstanding:
Basic 11,209,000 11,749,000
Diluted 11,270,000 11,868,000
Six Months Ended
-------------------------------
October 29, October 31,
2000 1999
-------------- -------------
Net sales $ 212,859,000 $ 245,479,000
Net income (loss) $ (1,414,000) $ 4,757,000
Net income (loss) per share:
Basic $ (0.13) $ 0.40
Diluted $ (0.13) $ 0.39
Average shares outstanding:
Basic 11,209,000 11,906,000
Diluted 11,282,000 12,044,000
- END -
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 29, 2000 AND OCTOBER 31, 1999
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Sales
---------------------------- ---------------------------
October 29, October 31, % Over
2000 1999 (Under) 2001 2000
------------- ------------- ------------ ------------- ------------
Net sales $ 110,981 129,542 (14.3) % 100.0 % 100.0 %
Cost of sales 94,094 105,835 (11.1) % 84.8 % 81.7 %
------------- ------------- ------------ ------------- ------------
Gross profit 16,887 23,707 (28.8) % 15.2 % 18.3 %
Selling, general and
administrative expenses 13,491 16,035 (15.9) % 12.2 % 12.4 %
------------- ------------- ------------ ------------- ------------
Income from operations 3,396 7,672 (55.7) % 3.1 % 5.9 %
Interest expense 2,285 2,484 (8.0) % 2.1 % 1.9 %
Interest income (15) (16) (6.3) % (0.0)% (0.0)%
Other expense (income), net 575 416 38.2 % 0.5 % 0.3 %
------------- ------------- ------------ ------------- ------------
Income before income taxes 551 4,788 (88.5) % 0.5 % 3.7 %
Income taxes * 209 1,628 (87.2) % 37.9 % 34.0 %
------------- ------------- ------------ ------------- ------------
Net income $ 342 3,160 (89.2) % 0.3 % 2.4 %
============= ============= ============ ============= ============
Net income per share $0.03 $0.27 (88.9) %
Net income per share, assuming dilution $0.03 $0.27 (88.9) %
Dividends per share $0.035 $0.035 0.0 %
Average shares outstanding 11,209 11,749 (4.6) %
Average shares outstanding, assuming dilution 11,270 11,868 (5.0) %
SIX MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Sales
---------------------------- ---------------------------
October 29, October 31, % Over
2000 1999 (Under) 2001 2000
------------- ------------- ------------ ------------- ------------
Net sales $ 212,859 245,479 (13.3) % 100.0 % 100.0 %
Cost of sales 181,798 201,360 (9.7) % 85.4 % 82.0 %
------------- ------------- ------------ ------------- ------------
Gross profit 31,061 44,119 (29.6) % 14.6 % 18.0 %
Selling, general and
administrative expenses 27,269 31,073 (12.2) % 12.8 % 12.7 %
------------- ------------- ------------ ------------- ------------
Income from operations 3,792 13,046 (70.9) % 1.8 % 5.3 %
Interest expense 4,608 4,900 (6.0) % 2.2 % 2.0 %
Interest income (22) (33) (33.3) % (0.0)% (0.0)%
Other expense (income), net 1,316 971 35.5 % 0.6 % 0.4 %
------------- ------------- ------------ ------------- ------------
Income (loss) before income taxes (2,110) 7,208 (129.3) % (1.0)% 2.9 %
Income taxes * (696) 2,451 (128.4) % 33.0 % 34.0 %
------------- ------------- ------------ ------------- ------------
Net income (loss) $ (1,414) 4,757 (129.7) % (0.7)% 1.9 %
============= ============= ============ ============= ============
Net income (loss) per share ($0.13) $0.40 (132.5) %
Net income (loss) per share, assuming dilution ($0.13) $0.39 (133.3) %
Dividends per share $0.07 $0.07 0.0 %
Average shares outstanding 11,209 11,906 (5.9) %
Average shares outstanding, assuming dilution 11,282 12,044 (6.3) %
* Percent of sales column is calculated as a % of income (loss)
before income taxes.
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
OCTOBER 29, 2000, OCTOBER 31, 1999 AND APRIL 30, 2000
Unaudited
(Amounts in Thousands)
Amounts Increase
------------------------------------- (Decrease)
October 29, October 31, ----------------------------- * April 30,
2000 1999 Dollars Percent 2000
------------------- -------------- -------------- ----------- ----------
Current assets
Cash and cash investments $ 744 790 (46) (5.8)% 1,007
Accounts receivable 63,991 69,749 (5,758) (8.3)% 75,223
Inventories 72,967 78,234 (5,267) (6.7)% 74,471
Other current assets 11,003 8,865 2,138 24.1 % 10,349
------------------- -------------- -------------- ----------- ----------
Total current assets 148,705 157,638 (8,933) (5.7)% 161,050
Restricted investments 0 1,085 (1,085) (100.0)% 0
Property, plant & equipment, net 120,023 124,318 (4,295) (3.5)% 126,407
Goodwill 49,176 50,571 (1,395) (2.8)% 49,873
Other assets 5,406 5,064 342 6.8 % 5,548
------------------- -------------- -------------- ----------- ----------
Total assets $ 323,310 338,676 (15,366) (4.5)% 342,878
=================== ============== ============== =========== ==========
Current liabilities
Current maturities of long-term debt $ 1,678 1,678 0 0.0 % 1,678
Accounts payable 30,351 38,427 (8,076) (21.0)% 37,287
Accrued expenses 22,404 22,947 (543) (2.4)% 22,108
Income taxes payable 0 1,786 (1,786) (100.0)% 0
------------------- -------------- -------------- ----------- ----------
Total current liabilities 54,433 64,838 (10,405) (16.0)% 61,073
Long-term debt 125,079 133,875 (8,796) (6.6)% 135,808
Deferred income taxes 17,459 14,583 2,876 19.7 % 17,459
------------------- -------------- -------------- ----------- ----------
Total liabilities 196,971 213,296 (16,325) (7.7)% 214,340
Shareholders' equity 126,339 125,380 959 0.8 % 128,538
------------------- -------------- -------------- ----------- ----------
Total liabilities and
shareholders' equity $ 323,310 338,676 (15,366) (4.5)% 342,878
=================== ============== ============== =========== ==========
Shares outstanding 11,209 11,320 (111) (1.0)% 11,209
=================== ============== ============== =========== ==========
* Derived from audited financial statements.
CULP, INC.
FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 29, 2000 AND OCTOBER 31, 1999
Unaudited
(Amounts in Thousands)
SIX MONTHS ENDED
--------------------------------
Amounts
-----------------------------
October 29, October 31,
2000 1999
-------------- -------------
Cash flows from operating activities:
Net income (loss) $ (1,414) 4,757
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 10,043 9,516
Amortization of intangible assets 798 798
Changes in assets and liabilities:
Accounts receivable 11,232 754
Inventories 1,504 (11,164)
Other current assets (654) 768
Other assets 241 (186)
Accounts payable (859) 7,937
Accrued expenses 296 1,921
Income taxes payable 0 1,786
-------------- -------------
Net cash provided by operating activities 21,187 16,887
-------------- -------------
Cash flows from investing activities:
Capital expenditures (3,659) (10,524)
Purchases of restricted investments 0 (27)
Purchase of investments to fund deferred compensation liability (200) 0
Sale of restricted investments 0 2,282
-------------- -------------
Net cash used in investing activities (3,859) (8,269)
-------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 0 5,333
Principal payments on long-term debt (10,729) (11,770)
Change in accounts payable-capital expenditures (6,077) 4,803
Dividends paid (785) (822)
Payments to acquire common stock 0 (5,901)
Proceeds from common stock issued 0 20
-------------- -------------
Net cash used in financing activities (17,591) (8,337)
-------------- -------------
Increase (decrease) in cash and cash investments (263) 281
Cash and cash investments at beginning of period 1,007 509
-------------- -------------
Cash and cash investments at end of period $ 744 790
============== =============
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
OCTOBER 29, 2000
FISCAL 00 FISCAL 01
------------ ---------------------------------------------------- --------------
Q2 Q1 Q2 Q3 Q4 LTM (5)
------------ ---------------------------------------------------- --------------
INVENTORIES
Inventory turns 5.5 4.7 5.1
RECEIVABLES
Days sales in receivables 49 49 52
Percent current & less than 30
days past due 96.7% 91.5% 94.7%
WORKING CAPITAL
Current ratio 2.4 3.2 2.7
Working capital turnover (4) 4.4 4.3 4.2
Operating working capital (4) $109,556 $108,509 $106,607
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 7.8% 8.0% 7.9%
Percent property, plant &
equipment are depreciated 49.1% 51.1% 52.6%
Capital expenditures $22,559 (1) $2,289 $1,370
PROFITABILITY
Return on average total capital 7.3% (0.3%) 2.7% 3.6%
Return on average equity 10.0% (5.5%) 1.1% 2.5%
Net income (loss) per share $0.27 ($0.16) $0.03 $0.28
Net income (loss) per share (diluted) $0.27 ($0.16) $0.03 $0.28
LEVERAGE (3)
Total liabilities/equity 170.1% 157.4% 155.9%
Funded debt/equity 107.2% 108.3% 100.3%
Funded debt/capital employed 51.7% 52.0% 50.1%
Funded debt $134,468 $136,828 $126,757
Funded debt/EBITDA (LTM) (6) 3.08 3.46 3.59
EBITDA/Interest expense, net (LTM) 4.6 4.2 3.8
OTHER
Book value per share $11.08 $11.28 $11.27
Employees at quarter end 3,962 3,722 3,623
Sales per employee (annualized) $129,000 $108,000 $121,000
Capital employed (3) $259,848 $263,218 $253,096
Effective income tax rate 34.0% 34.0% 37.9%
EBITDA (2) $12,412 $5,114 $8,203 $35,150
EBITDA/net sales 9.6% 5.0% 7.4% 7.7%
(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 29, 2000 AND OCTOBER 31, 1999
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------------
Amounts
------------------------ Percent of Total Sales
October 29, October 31, % Over --------------------------
Segment/Division 2000 1999 (Under) 2001 2000
- --------------------------------- ----------- ----------- -------------- ----------- ------------
Upholstery Fabrics
Culp Decorative Fabrics $ 46,792 56,897 (17.8) % 42.2 % 43.9 %
Culp Velvets/Prints 32,073 41,783 (23.2) % 28.9 % 32.3 %
Culp Yarn 4,134 4,358 (5.1) % 3.7 % 3.4 %
----------- ----------- -------------- ----------- ------------
82,999 103,038 (19.4) % 74.8 % 79.5 %
Mattress Ticking
Culp Home Fashions 27,982 26,504 5.6 % 25.2 % 20.5 %
----------- ----------- -------------- ----------- ------------
* $ 110,981 129,542 (14.3) % 100.0 % 100.0 %
=========== =========== ============== =========== ============
SIX MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------------
Amounts
------------------------ Percent of Total Sales
October 29, October 31, % Over --------------------------
Segment/Division 2000 1999 (Under) 2001 2000
- --------------------------------- ----------- ----------- -------------- ----------- ------------
Upholstery Fabrics
Culp Decorative Fabrics $ 88,325 107,413 (17.8) % 41.5 % 43.8 %
Culp Velvets/Prints 62,147 77,992 (20.3) % 29.2 % 31.8 %
Culp Yarn 7,453 8,487 (12.2) % 3.5 % 3.5 %
----------- ----------- -------------- ----------- ------------
157,925 193,892 (18.6) % 74.2 % 79.0 %
Mattress Ticking
Culp Home Fashions 54,934 51,587 6.5 % 25.8 % 21.0 %
----------- ----------- -------------- ----------- ------------
* $ 212,859 245,479 (13.3) % 100.0 % 100.0 %
=========== =========== ============== =========== ============
* U.S. sales were $87,022 and $97,216 for the second quarter of fiscal 2001 and
fiscal 2000, respectively; and $169,312 and $189,340 for the six months of
fiscal 2001 and fiscal 2000, respectively. The percentage decrease in U.S. sales
was 10.5% for the second quarter and a decrease of 10.6% for the six months.
CULP, INC. FINANCIAL INFORMATION RELEASE
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 29, 2000 AND OCTOBER 31, 1999
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts
----------------------------- Percent of Total Sales
October 29, October 31, % Over ----------------------------
Geographic Area 2000 1999 (Under) 2001 2000
- ------------------------------- -------------- ------------- ------------ ------------- -----------
North America (Excluding USA) $ 9,556 9,912 (3.6) % 39.9 % 30.7 %
Europe 1,807 6,069 (70.2) % 7.5 % 18.8 %
Middle East 5,489 8,960 (38.7) % 22.9 % 27.7 %
Far East & Asia 5,590 5,357 4.3 % 23.3 % 16.6 %
South America 279 630 (55.7) % 1.2 % 1.9 %
All other areas 1,238 1,398 (11.4) % 5.2 % 4.3 %
-------------- ------------- ------------ ------------- -----------
$ 23,959 32,326 (25.9) % 100.0 % 100.0 %
============== ============= ============ ============= ===========
SIX MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts
----------------------------- Percent of Total Sales
October 29, October 31, % Over ----------------------------
Geographic Area 2000 1999 (Under) 2001 2000
- ------------------------------- -------------- ------------- ------------ ------------- -----------
North America (Excluding USA) $ 17,951 17,588 2.1 % 41.2 % 31.3 %
Europe 3,259 8,998 (63.8) % 7.5 % 16.0 %
Middle East 10,532 15,952 (34.0) % 24.2 % 28.4 %
Far East & Asia 8,826 9,666 (8.7) % 20.3 % 17.2 %
South America 585 1,250 (53.2) % 1.3 % 2.2 %
All other areas 2,394 2,685 (10.8) % 5.5 % 4.8 %
-------------- ------------- ------------ ------------- -----------
$ 43,547 56,139 (22.4) % 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 second quarter represented
21.6% and 25.0% for 2001 and 2000, respectively. Year-to-date international
sales represented 20.5% and 22.9% of total sales 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 46,792 88,325
Culp Velvets/Prints 30,074 32,073 62,147
Culp Yarn 3,319 4,134 7,453
----------------------------------------------
74,926 82,999 157,925
Mattress Ticking
Culp Home Fashions 26,952 27,982 54,934
----------------------------------------------
101,878 110,981 212,859
==============================================
Segment/Division
- -------------------------------
Upholstery Fabrics
Culp Decorative Fabrics (17.8) (17.8) (17.8)
Culp Velvets/Prints (16.9) (23.2) (20.3)
Culp Yarn (19.6) (5.1) (12.2)
----------------------------------------------
(17.5) (19.4) (18.6)
Mattress Ticking
Culp Home Fashions 7.5 5.6 6.5
----------------------------------------------
(12.1) (14.3) (13.3)
===============================================
Overall Growth Rate
Internal (without acquisitions) (12.1) (14.3) (13.3)
External - - -
===============================================
(12.1) (14.3) (13.3)
===============================================
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and six month periods ended October 29, 2000 and October 31, 1999
INCOME STATEMENT COMMENTS
GENERAL - For the second quarter, net sales decreased 14.3% to $111.0
million compared to the same quarter of fiscal 2000; and the company reported
net income of $342,000, or $0.03 per share diluted (based on 11,270,000 average
shares outstanding) versus $0.27 per share diluted (based on 11,868,000 average
shares outstanding). For the first six months of fiscal 2001, net sales
decreased 13.3% to $212.9 million, and the company reported a net loss of $1.4
million, or $0.13 per share diluted (based on 11,282,000 average shares
outstanding), versus net income of $4.8 million, or $0.39 per share diluted
(based on 12,044,000 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 second 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 second quarter of fiscal 2000, upholstery
fabric sales decreased 19.4% to $83.0 million and mattress ticking sales
increased 5.6% to $28.0 million (See Sales by Segment/Division schedule on Page
5 and Sales by Segment/Division - Trend Analysis on Page 7). International sales
were down 25.9% for the quarter and 22.4% for the first six months.
The company had expected that results for the second quarter would be down
from the year-earlier period but would represent an improvement compared with
the first quarter. Key factors influencing the year-to-year comparisons were
further increases in the relative strength of the dollar, which affects Culp's
sales to customers outside the United States, and a continued weakness in
consumer spending on home furnishings, especially in the promotional price
category. Also affecting the promotional price category was the bankruptcy of a
major furniture retailer which impacted the domestic demand for upholstered
furniture. The decline in sales of upholstery fabrics was offset in part by
increased sales from 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.
Sales in the company's third fiscal quarter are typically lower than in the
second period due to holidays and scheduled, seasonal plant shutdowns. Based on
that historical pattern and current trends, the company believes that it may
report a loss in the third quarter. The trend in results over the remainder of
this fiscal 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 28.8% for the second quarter versus a
year ago and decreased as a percentage of net sales from 18.3% to 15.2%. The
decline was due principally to lower sales volume for the period which led to
unfavorable cost variances in the company's upholstery fabrics operation. The
company has taken steps to lower expenses by consolidating certain operations
and reducing personnel, but these actions were not sufficient to offset the
impact of the significantly lower sales.
SG&A EXPENSES - SG&A expenses for the second quarter decreased as a
percentage of sales from 12.4% to 12.2%. The dollar amount of these expenses
declined 15.9% from a year ago, reflecting the company's actions to reduce
expenses and the fact that a portion of these expenses is variable based on the
level of sales. Partially offsetting these reductions are higher severance
costs.
INTEREST EXPENSE - Interest expense of $2.3 million for the second quarter
was down slightly from $2.5 million in the prior year due to slightly lower
average borrowings.
OTHER EXPENSE (INCOME), NET - Other expense (income) for the second quarter
totaled $575,000 compared with $416,000 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 six months was 33.0% versus
34.0% in the year-earlier period.
EBITDA - Due principally to the lower earnings for the period, EBITDA for
the second quarter decreased 34% to $8.2 million from $12.4 million in the prior
year.
BALANCE SHEET COMMENTS
WORKING CAPITAL - Accounts receivable as of October 29, 2000 decreased 8.3%
from the year-earlier level, due principally to the lower sales for the period.
Days sales outstanding increased to 52 days at October 29, 2000 compared with 49
a year ago. The aging of accounts receivable was 94.7% current and less than 30
days past due versus 96.7% a year ago. Inventories at the close of the second
quarter decreased 6.7% from a year ago. Inventory turns for the second quarter
were 5.1 versus 5.5 for the year-earlier period. Operating working capital
(comprised of accounts receivable, inventory and accounts payable) was $106.6
million at October 29, 2000, down from $109.6 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. Spending through the first half totaled $3.7 million.
Depreciation for fiscal 2001 is estimated to be $20.5 million.
LONG-TERM DEBT - The company's funded debt-to-capital ratio was 50.1% at
October 29, 2000 compared with 51.7% a year ago. Funded debt was $126.8 million
at October 29, 2000 compared with $134.5 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 six months of fiscal
2001.
