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) February 20, 2001
CULP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-12781 56-1001967
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
101 South Main Street
High Point, North Carolina 27260
(Address of principal executive offices)
(336) 889-5161
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Item 5. Other Events
See attached Press Release (3 pages) and Financial Information Release (10
pages), both dated February 20, 2001, related to the fiscal 2001 third quarter
ended January 28, 2001.
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: February 20, 2001
FOR IMMEDIATE RELEASE
CULP REPORTS THIRD QUARTER RESULTS
INCLUDING RESTRUCTURING CHARGE
----------------------
SAVINGS OF $12 MILLION EXPECTED FROM ACTIONS TO REDUCE COSTS
HIGH POINT, N. C. (Feb. 20, 2001) -- As anticipated, Culp, Inc.
(NYSE: CFI) today reported a loss for its third fiscal quarter
that reflects the widespread contraction in demand that the home
furnishings industry has encountered as well as charges from the
Company's announced actions to reduce costs and increase
efficiency.
For the three months ended January 28, 2001, Culp reported
net sales of $95.9 million compared with $113.2 million a year
ago. Including previously announced restructuring costs, the
Company reported a net loss for the quarter of $5.5 million, or
$0.49 per share diluted, compared with net income of $1.4 million,
or $0.13 per share diluted, in the year-earlier period.
Net sales for the first nine months of fiscal 2001 totaled
$308.7 million compared with $358.7-million in the year-earlier
period. Including previously announced restructuring costs, the
Company reported a net loss for the first nine months of $6.9
million, or $0.61 per share diluted, compared with net income of
$6.2 million, or $0.52 per share diluted, in the year-earlier
period.
Robert G. Culp, III, chief executive officer, commented, "Our
results for the third fiscal quarter reflect the contraction in
demand that we had identified at mid year and which we again
highlighted publicly last month. We have found widespread
softness in orders for upholstery fabrics for U.S. furniture
sales, especially in the promotional categories of the market.
This appears to be an industry-wide pattern that became evident
with the well-publicized deceleration in spending by consumers
that began during the fourth calendar quarter of 2000. The
weakness that we have been experiencing in international sales is
also persisting. We have obtained little relief in terms of the
high relative value of the U.S. dollar against foreign currencies
compared with a year ago. Our sales of fabrics to customers
outside the United States during the third quarter were down 31%
from the year-earlier period.
"We are continuing our fundamental mission of marketing new
fabric patterns and textures that help our customers meet the
needs of consumers. At the same time, we understand that
execution of this strategy demands stringent containment of
expenses during the difficult period in which we are operating.
The restructuring plan we announced last month is well underway.
As we began executing the initial phase of this program to reduce
costs, we recognized that the severity of the current downturn in
demand necessitated a more aggressive effort. We have accordingly
decided to consolidate additional capacity in the Culp Decorative
Fabrics division and have taken steps that will lower our selling,
general and administrative expenses significantly. The total
charge from the restructuring, cost reduction and inventory
adjustment initiatives is expected to exceed $6.0 million, about
half of which should represent non-cash items. We recognized $3.2
million of restructuring charges and special costs in the third
quarter, and most of the balance will be reflected in our results
for the fourth fiscal period. Our target is to achieve annualized
cost reductions of at least $12 million when these steps are fully
implemented."
Culp added, "We are continuing to manage our balance sheet to
maximize the return on our financial assets and generated
sufficient cash from operations through the first nine months to
reduce debt and payables related to capital expenditures by $21.8
million. We recently amended our credit facility and were in
compliance with the revised terms as of the close of the third
quarter. As a result of the amendments to that facility, the
Company is restricted from paying cash dividends at this time.
Although we respect Culp's heritage of paying a quarterly cash
dividend for 18 consecutive years, we recognize the priority of
conserving cash to enhance our financial liquidity during this
challenging period.
"We appreciate the response of our organization to these
difficult, but necessary actions. Culp has developed a strong
culture of teamwork over the years, and the decisions involving
personnel reductions have been especially hard. Although we are
starting to benefit from the steps to lower costs, we expect to
report a loss for fiscal 2001 as a whole based on current trends.
We are confident about the basic value we add to the manufacturers
of upholstered furniture and bedding and are optimistic about a
longer-term recovery in our financial performance."
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
--------------------------
January 28, January 30,
2001 2000
------------ ------------
Net sales $95,880,000 $113,181,000
Net income (loss) $(5,470,000) $ 1,432,000
Net income (loss) per share:
Basic $ (0.49) $ 0.13
Diluted $ (0.49) $ 0.13
Average shares outstanding:
Basic 11,211,000 11,296,000
Diluted 11,211,000 11,389,000
Nine Months Ended
---------------------------
January 28, January 30,
2001 2000
------------ ------------
Net sales $308,739,000 $358,660,000
Net income (loss) $(6,884,000) $ 6,189,000
Net income (loss) per share:
Basic $ (0.61) $ 0.53
Diluted $ (0.61) $ 0.52
Average shares outstanding:
Basic 11,209,000 11,703,000
Diluted 11,209,000 11,816,000
-END-
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
-------------------------------------------------------------------------
Amounts Percent of Sales
--------------------------- --------------------------
January 28, January 30, % Over
2001 2000 (Under) 2001 2000
------------- ------------- ------------ ------------ ------------
Net sales $ 95,880 113,181 (15.3) % 100.0 % 100.0 %
Cost of sales 86,047 94,712 (9.1) % 89.7 % 83.7 %
------------- ------------- ------------ ------------ ------------
Gross profit 9,833 18,469 (46.8) % 10.3 % 16.3 %
Selling, general and
administrative expenses 12,480 13,949 (10.5) % 13.0 % 12.3 %
Restructuring expense 2,504 0 100.0 % 2.6 % 0.0 %
------------- ------------- ------------ ------------ ------------
Income (loss) from operations (5,151) 4,520 (214.0) % (5.4)% 4.0 %
Interest expense 2,222 2,366 (6.1) % 2.3 % 2.1 %
Interest income (18) (8) 125.0 % (0.0)% (0.0)%
Other expense (income), net 811 229 254.1 % 0.8 % 0.2 %
------------- ------------- ------------ ------------ ------------
Income (loss) before income taxes (8,166) 1,933 (522.5) % (8.5)% 1.7 %
Income taxes * (2,696) 501 (638.1) % 33.0 % 25.9 %
------------- ------------- ------------ ------------ ------------
Net income (loss) $ (5,470) 1,432 (482.0) % (5.7)% 1.3 %
============= ============= ============ ============ ============
Net income (loss) per share ($0.49) $0.13 (476.9) %
Net income (loss) per share, assuming dilution ($0.49) $0.13 (476.9) %
Dividends per share $0.035 $0.035 0.0 %
Average shares outstanding 11,211 11,296 (0.8) %
Average shares outstanding, assuming dilution 11,211 11,389 (1.6) %
NINE MONTHS ENDED (UNAUDITED)
-------------------------------------------------------------------------
Amounts Percent of Sales
--------------------------- --------------------------
January 28, January 30, % Over
2001 2000 (Under) 2001 2000
------------- ------------- ------------ ------------ ------------
Net sales $ 308,739 358,660 (13.9) % 100.0 % 100.0 %
Cost of sales 267,845 296,072 (9.5) % 86.8 % 82.5 %
------------- ------------- ------------ ------------ ------------
Gross profit 4O,894 62,588 (34.7) % 13.2 % 17.5 %
Selling, general and
administrative expenses 39,749 45,022 (11.7) % 12.9 % 12.6 %
Restructuring expense 2,504 0 100.0 % 0.8 % 0.0 %
------------- ------------- ------------ ------------ ------------
Income (loss) from operations (1,359) 17,566 (107.7) % (0.4)% 4.9 %
Interest expense 6,830 7,266 (6.0) % 2.2 % 2.0 %
Interest income (40) (41) (2.4) % (0.0)% (0.0)%
Other expense (income), net 2,127 1,200 77.3 % 0.7 % 0.3 %
------------- ------------- ------------ ------------ ------------
Income (loss) before income taxes (10,276) 9,141 (212.4) % (3.3)% 2.5 %
Income taxes * (3,392) 2,952 (214.9) % 33.0 % 32.3 %
------------- ------------- ------------ ------------ ------------
Net income (loss) $ (6,884) 6,189 (211.2) % (2.2)% 1.7 %
============= ============= ============ ============ ============
Net income (loss) per share ($0.61) $0.53 (215.1) %
Net income (loss) per share, assuming dilution ($0.61) $0.52 (217.3) %
Dividends per share $0.105 $0.105 0.0 %
Average shares outstanding 11,209 11,703 (4.2) %
Average shares outstanding, assuming dilution 11,209 11,816 (5.1) %
* Percent of sales column is calculated as a % of income (loss)
before income taxes.
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
JANUARY 28, 2001, JANUARY 30, 2000 AND APRIL 30, 2000
Unaudited
(Amounts in Thousands)
Amounts Increase
----------------------------------- (Decrease) (1)(2)
January 28, (2)January 30, ----------------------------- April 30,
2001 2000 Dollars Percent 2000
------------------- -------------- -------------- ----------- ----------
Current assets
Cash and cash investments $ 292 568 (276) (48.6) % 1,007
Accounts receivable 54,474 65,788 (11,314) (17.2) % 75,223
Inventories 67,156 80,874 (13,718) (17.0) % 74,471
Other current assets 13,706 9,016 4,690 52.0 % 10,349
------------------- -------------- -------------- ----------- ----------
Total current assets 135,628 156,246 (20,618) (13.2) % 161,050
Restricted investments 0 1,047 (1,047) (100.0) % 0
Property, plant & equipment, net 116,207 123,303 (7,096) (5.8) % 126,407
Goodwill 48,827 50,222 (1,395) (2.8) % 49,873
Other assets 2,256 6,490 (4,234) (65.2) % 6,650
------------------- -------------- -------------- ----------- ----------
Total assets $ 302,918 337,308 (34,390) (10.2) % 343,980
=================== ============== ============== =========== ==========
Current liabilities
Current maturities of long-term debt $ 2,159 1,678 481 28.7 % 1,678
Accounts payable 27,084 35,347 (8,263) (23.4) % 37,287
Accrued expenses 15,417 20,878 (5,461) (26.2) % 22,108
Income taxes payable 0 903 (903) (100.0) % 0
------------------- -------------- -------------- ----------- ----------
Total current liabilities 44,660 58,806 (14,146) (24.1) % 61,073
Long-term debt 119,213 137,052 (17,839) (13.0) % 135,808
Deferred income taxes 17,459 14,583 2,876 19.7 % 17,459
------------------- -------------- -------------- ----------- ----------
Total liabilities 181,332 210,441 (29,109) (13.8) % 214,340
Shareholders' equity 121,586 126,867 (5,281) (4.2) % 129,640
------------------- -------------- -------------- ----------- ----------
Total liabilities and
shareholders' equity $ 302,918 337,308 (34,390) (10.2) % 343,980
=================== ============== ============== =========== ==========
Shares outstanding 11,211 11,216 (5) (0.0) % 11,209
=================== ============== ============== =========== ==========
(1) Derived from audited financial statements.
(2) As restated (see Restatement paragraph within Financial Narrative)
CULP, INC. FINANCIAL
INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000
Unaudited
(Amounts in Thousands)
NINE MONTHS ENDED
-----------------------------
Amounts
-----------------------------
January 28, January 30,
2001 2000
-------------- -------------
Cash flows from operating activities:
Net income (loss) $ (6,884) 6,189
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 14,781 14,481
Amortization of intangible assets 1,196 1,197
Amortization of deferred compensation 303 180
Restructuring expense 2,504 0
Changes in assets and liabilities:
Accounts receivable 20,749 4,715
Inventories 7,315 (13,804)
Other current assets (3,357) 617
Other assets 226 (560)
Accounts payable (4,536) 4,619
Accrued expenses (8,076) (328)
Income taxes payable 0 903
-------------- -------------
Net cash provided by operating activities 24,221 18,209
-------------- -------------
Cash flows from investing activities:
Capital expenditures (6,532) (14,474)
Purchases of restricted investments 0 (35)
Sale of investments related to deferred compensation plan 4,547 0
Sale of restricted investments 0 2,328
-------------- -------------
Net cash used in investing activities (1,985) (12,181)
-------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 564 8,510
Principal payments on long-term debt (16,678) (11,770)
Change in accounts payable-capital expenditures (5,667) 5,041
Dividends paid (1,177) (1,218)
Payments to acquire common stock 0 (6,552)
Proceeds from common stock issued 7 20
-------------- -------------
Net cash used in financing activities (22,951) (5,969)
-------------- -------------
Increase (decrease) in cash and cash investments (715) 59
Cash and cash investments at beginning of period 1,007 509
-------------- -------------
Cash and cash investments at end of period $ 292 568
============== =============
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
JANUARY 28, 2001
FISCAL 00 FISCAL 01
--------- -------------------------------------------- -----------
Q3 (7) Q1 (7) Q2 (7) Q3 Q4 LTM (5)
--------- -------------------------------------------- -----------
INVENTORIES
Inventory turns 4.8 4.7 5.1 4.9
RECEIVABLES
Days sales in receivables 49 49 52 48
Percent current & less than 30
days past due 97.1% 91.5% 94.7% 94.4%
WORKING CAPITAL
Current ratio 2.7 3.2 2.7 3.0
Working capital turnover (4) 4.5 4.3 4.2 4.1
Operating working capital (4) $111,315 $108,509 $106,607 $94,546
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 8.2% 8.0% 7.9% 7.5%
Percent property, plant &
equipment are depreciated 49.4% 51.1% 52.6% 53.8%
Capital expenditures $22,559 (1) $2,289 $1,370 $2,873
PROFITABILITY
Return on average total capital 4.8% (0.3%) 2.7% (6.4%) 0.9%
Return on average equity 4.5% (5.5%) 1.1% (17.6%) (2.9%)
Net income (loss) per share $0.13 ($0.16) $0.03 ($0.49) ($0.33)
Net income (loss) per share (diluted) $0.13 ($0.16) $0.03 ($0.49) ($0.33)
LEVERAGE (3)
Total liabilities/equity 165.9% 156.1% 154.6% 149.1%
Funded debt/equity 108.5% 107.3% 99.5% 99.8%
Funded debt/capital employed 52.0% 51.8% 49.9% 50.0%
Funded debt $137,683 $136,828 $126,757 $121,372
Funded debt/EBITDA (LTM) (6) 3.13 3.44 3.57 4.28
EBITDA/Interest expense, net (LTM) 4.6 4.2 3.9 2.8
OTHER
Book value per share $11.31 $11.37 $11.37 $10.85
Employees at quarter end 3,938 3,722 3,623 3,486
Sales per employee (annualized) $115,000 $108,000 $121,000 $108,000
Capital employed (3) $264,550 $264,320 $254,198 $242,958
Effective income tax rate 25.9% 34.0% 37.9% 33.0%
EBITDA (2) $9,715 $5,177 $8,265 ($648) $25,042
EBITDA/net sales 8.6% 5.1% 7.4% (0.7%) 5.7%
(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, pro forma amounts for acquisitions and
certain cash and non-cash charges, as defined by the company's credit
agreement.
(7) As restated (see Restatement paragraph within Financial Narrative)
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES BY SEGMENT/DIVISION
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
-----------------------------------------------------
Amounts Percent of Total Sales
------------------- ---------------------
January 28, January 30, % Over
Segment/Division 2001 2000 (Under) 2001 2000
- ---------------------------- --------- --------- ----------- --------- ---------
Upholstery Fabrics
Culp Decorative Fabrics $ 40,955 49,654 (17.5) % 42.7 % 43.9 %
Culp Velvets/Prints 28,631 34,050 (15.9) % 29.9 % 30.1 %
Culp Yarn 2,711 4,274 (36.6) % 2.8 % 3.8 %
--------- --------- ----------- --------- ---------
72,297 87,978 (17.8) % 75.4 % 77.7 %
Mattress Ticking
Culp Home Fashions 23,583 25,203 (6.4) % 24.6 % 22.3 %
--------- --------- ----------- --------- ---------
* $ 95,880 113,181 (15.3) % 100.0 % 100.0 %
========= ========= =========== ========= =========
NINE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------
Amounts Percent of Total Sales
------------------- ---------------------
January 28, January 30, % Over
Segment/Division 2001 2000 (Under) 2001 2000
- ---------------------------- --------- --------- ----------- --------- ---------
Upholstery Fabrics
Culp Decorative Fabrics $ 129,280 157,067 (17.7) % 41.9 % 43.8 %
Culp Velvets/Prints 90,778 112,042 (19.0) % 29.4 % 31.2 %
Culp Yarn 10,164 12,761 (20.4) % 3.3 % 3.6 %
--------- --------- ----------- --------- ---------
230,222 281,870 (18.3) % 74.6 % 78.6 %
Mattress Ticking
Culp Home Fashions 78,517 76,790 2.2 % 25.4 % 21.4 %
--------- --------- ----------- --------- ---------
* $ 308,739 358,660 (13.9) % 100.0 % 100.0 %
========= ========= =========== ========= =========
* U.S. sales were $77,360 and $86,359 for the third quarter of fiscal 2001 and
fiscal 2000, respectively; and $246,672 and $275,699 for the nine months of
fiscal 2001 and fiscal 2000, respectively. The percentage decrease in U.S. sales
was 10.4% for the third quarter and a decrease of 10.5% for the nine months.
CULP, INC. FINANCIAL INFORMATION RELEASE
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------
Amounts Percent of Total Sales
------------------------ -----------------------
January 28, January 30, % Over
Geographic Area 2001 2000 (Under) 2001 2000
- -------------------------- ------------ ---------- ---------- ---------- ----------
North America (Excluding USA) $ 8,226 8,476 (2.9)% 44.4 % 31.6 %
Europe 1,669 4,698 (64.5)% 9.0 % 17.5 %
Middle East 3,924 8,140 (51.8)% 21.2 % 30.3 %
Far East & Asia 4,277 4,422 (3.3)% 23.1 % 16.5 %
South America 147 523 (71.9)% 0.8 % 1.9 %
All other areas 277 563 (50.8)% 1.5 % 2.1 %
------------ ---------- ---------- ---------- ----------
$ 18,520 26,822 (31.0)% 100.0 % 100.0 %
============ ========== ========== ========== ==========
NINE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------
Amounts Percent of Total Sales
------------------------ -----------------------
January 28, January 30, % Over
Geographic Area 2001 2000 (Under) 2001 2000
- -------------------------- ------------ ---------- ---------- ---------- ----------
North America (Excluding USA) $ 26,177 26,064 0.4 % 42.2 % 31.4 %
Europe 4,928 13,696 (64.0)% 7.9 % 16.5 %
Middle East 14,456 24,092 (40.0)% 23.3 % 29.0 %
Far East & Asia 13,103 14,088 (7.0)% 21.1 % 17.0 %
South America 732 1,773 (58.7)% 1.2 % 2.1 %
All other areas 2,671 3,248 (17.8)% 4.3 % 3.9 %
------------ ---------- ---------- ---------- ----------
$ 62,067 82,961 (25.2)% 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 third quarter represented 19.3%
and 23.7% for 2001 and 2000, respectively. Year-to-date international sales
represented 20.1% and 23.1% 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 40,955 129,280
Culp Velvets/Prints 30,074 32,073 28,631 90,778
Culp Yarn 3,319 4,134 2,711 10,164
-------------------------------------------------
74,926 82,999 72,297 230,222
Mattress Ticking
Culp Home Fashions 26,952 27,982 23,583 78,517
-----------------------------------------------
101,878 110,981 95,880 308,739
=================================================
Percent increase(decrease) from prior year:
Segment/Division
- ----------------------------
Upholstery Fabrics
Culp Decorative Fabrics (17.8) (17.8) (17.5) (17.7)
Culp Velvets/Prints (16.9) (23.2) (15.9) (19.0)
Culp Yarn (19.6) (5.1) (36.6) (20.4)
-------------------------------------------------
(17.5) (19.4) (17.8) (18.3)
Mattress Ticking
Culp Home Fashions 7.5 5.6 (6.4) 2.2
-------------------------------------------------
(12.1) (14.3) (15.3) (13.9)
=================================================
Overall Growth Rate
Internal (without acquisitions) (12.1) (14.3) (15.3) (13.9)
External - - - -
=================================================
(12.1) (14.3) (15.3) (13.9)
=================================================
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and nine months ended January 28, 2001 and January 30, 2000
INCOME STATEMENT COMMENTS
GENERAL - For the third quarter, net sales decreased 15.3% to $95.9
million; and the company reported a net loss of $5.5 million, or $0.49 per share
diluted (based on 11,211,000 average shares outstanding) versus net income of
$1.4 million, or $0.13 per share diluted (based on 11,389,000 average shares
outstanding). For the first nine months of fiscal 2001, net sales decreased
13.9% to $308.7 million, and the company reported a net loss of $6.9 million, or
$0.61 per share diluted (based on 11,209,000 average shares outstanding), versus
net income of $6.2 million, or $0.52 per share diluted (based on 11,816,000
average shares outstanding), a year ago. The results for the third quarter and
first nine months of fiscal 2001 included special charges totaling $3.2 million
before taxes for restructuring actions and inventory write-downs.
The company's long-term, 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. 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. One customer accounted for
approximately 12% of net sales during the third quarter of fiscal 2001. 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.
RESTRUCTURING ACTIONS - During the third quarter, the company initiated a
restructuring plan intended to lower costs, increase efficiency and position the
company to operate profitably within the current environment of reduced demand.
The plan involves the consolidation of certain manufacturing capacity, the
closure of some facilities and an extensive reduction in selling, general and
administrative expenses. The company also recognized certain inventory
write-downs as part of this initiative. The total charge from the restructuring,
cost reduction and inventory write-down initiatives is expected to exceed $6.0
million, about half of which should represent non-cash items. The company
recognized $3.2 million of restructuring charges and special costs in the third
quarter, and most of the balance is expected to be reflected in results for the
fourth fiscal period. The company expects to realize annualized cost reductions
of at least $12 million when these steps are fully implemented.
NET SALES - Compared with the third quarter of fiscal 2000, upholstery
fabric sales decreased 17.8% to $72.3 million and mattress ticking sales
decreased 6.4% to $23.6 million (See Sales by Segment/Division schedule on Page
5 and Sales by Segment/Division - Trend Analysis on Page 7). International sales
were down 31.0% for the quarter and 25.2% for the first nine months.
The company had previously announced that it expected to report a net loss
for the third quarter, excluding special charges. Key factors influencing the
year-to-year comparisons were continued weakness in consumer spending on home
furnishings, especially in the promotional price category, and an adverse impact
on exports from the strength in the U.S. dollar compared with a year ago. The
slowdown in industry-wide demand also led to a decline in sales at Culp Home
Fashions (primarily mattress ticking) for the third quarter. Culp's sales of
mattress ticking were up for the first nine months.
The fourth fiscal quarter of the year is historically a strong period for
the company's sales. Based on current trends, however, the company does not
expect to report a profit for fiscal 2001 as a whole.
GROSS PROFIT - Gross profit declined 46.8% for the third quarter versus a
year ago and decreased as a percentage of net sales from 16.3% to 10.3%. 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 third quarter increased as a
percentage of sales from 12.3% to 13.0%. The dollar amount of these expenses
declined 10.5% from a year ago, reflecting the company's actions to reduce
expenses, but the lower-than-expected sales caused the increase in these costs
as a percentage of sales.
INTEREST EXPENSE - Interest expense of $2.2 million for the third quarter
was down slightly from $2.4 million in the prior year due to lower average
borrowings.
OTHER EXPENSE (INCOME), NET - Other expense (income) for the third quarter
totaled $811,000 compared with $229,000 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 nine months was 33.0% versus
32.3% in the year-earlier period.
EBITDA - Due principally to the lower earnings for the period, EBITDA for
the third quarter was $(648,000) compared with $9.7 million in the prior year.
BALANCE SHEET COMMENTS
WORKING CAPITAL - Accounts receivable as of January 28, 2001 decreased
17.2% from the year-earlier level, due principally to the lower sales for the
period. Days sales outstanding declined to 48 days at January 28, 2001 compared
with 49 a year ago. The aging of accounts receivable was 94.4% current and less
than 30 days past due versus 97.1% a year ago. Inventories at the close of the
third quarter decreased 17.0% from a year ago. Inventory turns for the third
quarter were 4.9 versus 4.8 for the year-earlier period. Operating working
capital (comprised of accounts receivable, inventory and accounts payable) was
$94.5 million at January 28, 2001, down from $111.3 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, which was budgeted to be
approximately $16 million at the start of the year, is now expected to total
$8.0 million. Capital spending for fiscal 2002 is budgeted to be approximately
$4.0 million. Depreciation for fiscal 2001 is estimated to be $19.5 million.
LONG-TERM DEBT - The company's funded debt-to-capital ratio was 50.0% at
January 28, 2001 compared with 52.0% a year ago. Funded debt was $121.4 million
at January 28, 2001 compared with $137.7 million a year ago. Funded debt equals
long-term debt, including current maturities, less restricted investments, which
represent unspent IRB funds. The company has completed an amended credit
facility which includes terms that restrict the payment of cash dividends at
this time, limit capital expenditures, increase the interest rate on the
revolver from LIBOR plus 1.60% to LIBOR plus 4.00% and increase the letter of
credit fees on the IRBs from 1.10% to 4.00%. The company was in compliance with
all covenants of the amended credit facility as of January 28, 2001. The amended
credit facility lowered the amount of funds available under the facility from
$88 million to $25 million. The company had outstanding borrowings of $10.0
million under the facility at the end of the third quarter.
RESTATEMENT - During the third quarter of fiscal 2001, the company
terminated the nonqualified deferred compensation plan covering officers and
certain other associates. As a result, the company sold the assets related to
the nonqualified plan in order to pay the participants. The proceeds received
from selling those assets resulted in recognizing gains from fiscal 1999 and
1998 totaling approximately $1.1 million. As a result, the January 30, 2000 and
April 30, 2000 balance sheets were restated to properly reflect other assets and
equity.
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 repurchases were made during the first nine months of fiscal
2001, and under the terms of the amended credit facility, the company is
currently restricted from any stock repurchases.
