- --------------------------------------------------------------------------------
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) June 5, 2001
CULP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-12781 56-1001967
(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation) Identification No.)
101 South Main Street
High Point, North Carolina 27260
(Address of principal executive offices)
(336) 889-5161
(Registrant's telephone number, including area code)
_____________________________________________________________________________
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
Item 5. Other Events
See attached Press Release (3 pages) and Financial Information Release (10
pages), both dated June 5, 2001, related to the fiscal 2001 fourth quarter and
year ended April 29, 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: June 5, 2001
FOR IMMEDIATE RELEASE
CULP REPORTS FISCAL 2001 RESULTS INCLUDING RESTRUCTURING CHARGE
----------------------
FOURTH QUARTER INCLUDES PROFIT OF $0.13 PER SHARE
BEFORE RESTRUCTURING AND RELATED CHARGES
HIGH POINT, N. C. (June 5, 2001) -- As anticipated, Culp, Inc. (NYSE: CFI)
today reported a loss for its fourth quarter and full 2001 fiscal year due to
charges from the Company's announced actions to reduce costs and increase
efficiency and due to the industry-wide slowdown in demand in the home
furnishings industry. The company indicated that excluding restructuring and
related charges, it was profitable in the fourth fiscal quarter and expects to
operate profitably for fiscal 2002 as a whole.
For the three months ended April 29, 2001, Culp reported net sales of
$101.1 million compared with $129.4 million a year ago. Including
restructuring costs, the Company reported a net loss for the quarter of $1.4
million, or $0.13 per share diluted, compared with net income of $3.2 million,
or $0.28 per share diluted, in the year-earlier period.
Net sales for fiscal 2001 totaled $409.8 million compared with
$488.1-million in the year-earlier period. Including restructuring costs, the
Company reported a net loss for fiscal 2001 of $8.3 million, or $0.74 per
share diluted, compared with net income of $9.4 million, or $0.80 per share
diluted, in fiscal 2000.
Robert G. Culp, III, chief executive officer, commented, "We had
expected to report a net loss for the fourth quarter and full year because of
the actions we are taking to reduce costs and ensure Culp's competitive
position during this period of reduced demand. Although several key
demographic trends suggest basic, underlying growth in demand for home
furnishings, our fiscal 2001 year proved to be a challenging time for Culp and
the industry as a whole. We believe that the longer term outlook is positive
based on the growth projected for such fundamental indicators as new household
formations, but the current slowdown in business is clearly going to persist
into our fiscal 2002 year. The impact of this softness in incoming orders on
our income statement is being aggravated by the continuing decline in
international sales that are being affected by the high relative value of the
U.S. dollar against foreign currencies.
Culp noted that the company earned $1.4 million, or $0.13 per share, in
the fourth fiscal quarter before restructuring and related charges. He added,
"Our goal is to restore consistent profitability for Culp. We are encouraged
by the performance in the fourth quarter when our efficiency was significantly
affected by the relocation of key manufacturing equipment and other major
operational changes. Looking at fiscal 2002, we believe that sales for the
first fiscal quarter, which is not typically a seasonally strong period for
our business, will trail the year-earlier level of $101.9 million. Although
this will likely result in a loss for the period, excluding charges related to
the restructuring, we believe that this will be less than the loss of $1.8
million, or $0.16 per share, in the year-earlier period. Results in
subsequent quarters will be aided by more of the benefit of the restructuring
plan and other actions we are taking to reduce costs. For fiscal 2002 as a
whole, we are optimistic about reporting net earnings that will represent a
rewarding turnaround and reinforce our potential to restore the company's
historical level of profitability.
"We recognize the cyclical factors that historically have influenced
demand for housing and home furnishings and remain confident about Culp's
opportunity to progress as one of the leading suppliers of upholstery fabrics
and mattress ticking. Current market conditions have required us, however, to
downsize and consolidate our operations. The total charges from the
restructuring and cost reduction initiatives are now expected to approximate
$8.5 million. This is up from our earlier estimate of $6.0 million due
principally to additional relocation costs related to the consolidation of
capacity in our Culp Decorative Fabrics unit. We recorded $7.4 million of
these costs during fiscal 2001 and expect to complete these steps during the
first half of fiscal 2002. Our target is to achieve annualized cost
reductions of at least $12 million when this program is fully implemented."
Culp concluded, "It is especially noteworthy that we generated
sufficient cash from operations for fiscal 2001 to reduce debt and payables
related to capital expenditures by $31.2 million. We were in compliance with
our credit agreement at the end of the fiscal year and are expecting that
internally generated funds will allow us to continue strengthening our balance
sheet during fiscal 2002. Our capital expenditures during fiscal 2001
declined from $22.6 million to $8.1 million, and we are budgeting new
investments of only $4 million for fiscal 2002."
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 xisting 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
Three Months Ended
-------------------------------
April 29, April 30,
2001 2000
-------------- -------------
Net sales $ 101,071,000 $ 129,419,000
Net income (loss) $ (1,427,000) $ 3,191,000
Net income (loss) per share:
Basic $ (0.13) $ 0.28
Diluted $ (0.13) $ 0.28
Average shares outstanding:
Basic 11,212,000 11,213,000
Diluted 11,212,000 11,298,000
Fiscal Year Ended
-------------------------------
April 29, April 30,
2001 2000
-------------- -------------
Net sales $ 409,810,000 $ 488,079,000
Net income (loss) $ (8,311,000) $ 9,380,000
Net income (loss) per share:
Basic $ (0.74) $ 0.81
Diluted $ (0.74) $ 0.80
Average shares outstanding:
Basic 11,210,000 11,580,000
Diluted 11,210,000 11,681,000
-END-
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED APRIL 29, 2001 AND APRIL 30, 2000
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
-------------------------------------------------------------------
Amounts Percent of Sales
------------------------- ----------------------
April 29, April 30, % Over
2001 2000 (Under) 2001 2000
----------- ------------ ----------- ----------- ---------
Net sales $ 101,071 129,419 (21.9)% 100.0 % 100.0
Cost of sales 85,978 107,342 (19.9)% 85.1 % 82.9
----------- ------------ ----------- ----------- ---------
Gross profit 15,093 22,077 (31.6)% 14.9 % 17.1
Selling, general and
administrative expenses 10,617 14,913 (28.8)% 10.5 % 11.5
Restructuring expense 3,121 0 100.0 % 3.1 % 0.0
----------- ------------ ----------- ----------- ---------
Income from operations 1,355 7,164 (81.1)% 1.3 % 5.5
Interest expense 2,284 2,255 1.3 % 2.3 % 1.7
Interest income (6) (10) (40.0)% (0.0)% (0.0)
Other expense (income), net 1,209 366 230.3 % 1.2 % 0.3
----------- ------------ ----------- ----------- ---------
Income (loss) before income taxes (2,132) 4,553 (146.8)% (2.1)% 3.5
Income taxes * (705) 1,362 (151.8)% 33.1 % 29.9
----------- ------------ ----------- ----------- ---------
Net income (loss) $ (1,427) 3,191 (144.7)% (1.4)% 2.5
=========== ============ =========== =========== =========
Net income (loss) per share ($0.13) $0.28 (146.4)%
Net income (loss) per share, assuming dilution ($0.13) $0.28 (146.4)%
Dividends per share $0 $0.035 (100.0)%
Average shares outstanding 11,212 11,213 (0.0)%
Average shares outstanding, assuming dilution 11,212 11,298 (0.8 %
TWELVE MONTHS ENDED
-------------------------------------------------------------------
Amounts Percent of Sales
------------------------- ----------------------
April 29, April 30, % Over
2001 2000 (Under) 2001 2000
----------- ------------ ----------- ----------- ---------
Net sales $ 409,810 488,079 (16.0)% 100.0 % 100.0
Cost of sales 353,823 403,414 (12.3)% 86.3 % 82.7
----------- ------------ ----------- ----------- ---------
Gross profit 55,987 84,665 (33.9)% 13.7 % 17.3
Selling, general and
administrative expenses 50,366 59,935 (16.0)% 12.3 % 12.3
Restructuring expense 5,625 0 100.0 % 1.4 % 0.0
----------- ------------ ----------- ----------- ---------
Income (loss) from operations (4) 24,730 (100.0)% (0.0)% 5.1
Interest expense 9,114 9,521 (4.3)% 2.2 % 2.0
Interest income (46) (51) (9.8)% (0.0)% (0.0)
Other expense (income), net 3,336 1,566 113.0 % 0.8 % 0.3
----------- ------------ ----------- ----------- ---------
Income (loss) before income taxes (12,408) 13,694 (190.6)% (3.0)% 2.8
Income taxes * (4,097) 4,314 (195.0)% 33.0 % 31.5
----------- ------------ ----------- ----------- ---------
Net income (loss) $ (8,311) 9,380 (188.6)% (2.0)% 1.9
=========== ============ =========== =========== =========
Net income (loss) per share ($0.74) $0.81 (191.4)%
Net income (loss) per share, assuming dilution ($0.74) $0.80 (192.5)%
Dividends per share $0.105 $0.14 (25.0)%
Average shares outstanding 11,210 11,580 (3.2)%
Average shares outstanding, assuming dilution 11,210 11,681 (4.0)%
* Percent of sales column is calculated as a % of income (loss) before income taxes.
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
APRIL 29, 2001 AND APRIL 30, 2000
(Amounts in Thousands)
Amounts Increase
------------------------------ (Decrease)
April 29, (1) April 30, ----------------------------
2001 2000 Dollars Percent
-------------- ------------- ------------ -----------
Current assets
Cash and cash investments $ 1,207 1,007 200 19.9 %
Accounts receivable 57,849 75,223 (17,374) (23.1) %
Inventories 59,997 74,471 (14,474) (19.4) %
Other current assets 7,856 10,349 (2,493) (24.1) %
-------------- ------------- ------------ -----------
Total current assets 126,909 161,050 (34,141) (21.2) %
Property, plant & equipment, net 112,322 126,407 (14,085) (11.1) %
Goodwill 48,478 49,873 (1,395) (2.8) %
Other assets 1,871 6,650 (4,779) (71.9) %
-------------- ------------- ------------ -----------
Total assets $ 289,580 343,980 (54,400) (15.8) %
============== ============= ============ ===========
Current liabilities
Current maturities of long-term debt $ 2,488 1,678 810 48.3 %
Accounts payable 27,371 37,287 (9,916) (26.6) %
Accrued expenses 17,153 22,108 (4,955) (22.4) %
Income taxes payable 1,268 0 1,268 100.0 %
-------------- ------------- ------------ -----------
Total current liabilities 48,280 61,073 (12,793) (20.9) %
Long-term debt 109,168 135,808 (26,640) (19.6) %
Deferred income taxes 10,330 17,459 (7,129) (40.8) %
-------------- ------------- ------------ -----------
Total liabilities 167,778 214,340 (46,562) (21.7) %
Shareholders' equity 121,802 129,640 (7,838) (6.0) %
-------------- ------------- ------------ -----------
Total liabilities and
shareholders' equity $ 289,580 343,980 (54,400) (15.8) %
============== ============= ============ ===========
Shares outstanding 11,221 11,209 12 0.1 %
============== ============= ============ ===========
(1) As restated (see Restatement paragraph within Financial Narrative)
CULP, INC. FINANCIAL
INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED APRIL 29, 2001 AND APRIL 30, 2000
(Amounts in Thousands)
TWELVE MONTHS ENDED
------------------------------
Amounts
------------------------------
April 29, April 30,
2001 2000
-------------- --------------
Cash flows from operating activities:
Net income (loss) $ (8,311) 9,380
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 19,391 19,462
Amortization of intangible assets 1,591 1,596
Amortization of deferred compensation 360 250
Provision for deferred income taxes (5,394) 2,176
Restructuring expense 5,625 0
Changes in assets and liabilities:
Accounts receivable 17,374 (4,720)
Inventories 14,474 (7,401)
Other current assets 827 (16)
Other assets 171 (770)
Accounts payable (4,530) 1,029
Accrued expenses (6,767) 890
Income taxes payable 1,268 0
-------------- --------------
Net cash provided by operating activities 36,079 21,876
-------------- --------------
Cash flows from investing activities:
Capital expenditures (8,050) (22,559)
Purchases of restricted investments 0 (40)
Sale of investments related to deferred compensation plan 4,547 0
Sale of restricted investments 0 3,380
-------------- --------------
Net cash used in investing activities (3,503) (19,219)
-------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 564 9,543
Principal payments on long-term debt (26,394) (14,047)
Change in accounts payable-capital expenditures (5,386) 10,571
Dividends paid (1,177) (1,611)
Payments to acquire common stock 0 (6,636)
Proceeds from common stock issued 17 21
-------------- --------------
Net cash used in financing activities (32,376) (2,159)
-------------- --------------
Increase in cash and cash investments 200 498
Cash and cash investments at beginning of period 1,007 509
-------------- --------------
Cash and cash investments at end of period $ 1,207 1,007
============== ==============
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
APRIL 29, 2001
FISCAL 00 FISCAL 01
---------------- -------------------------------------------------- ----------
Q4 (6) Q1 (6) Q2 (6) Q3 Q4 LTM (4)
---------------- -------------------------------------------------- ----------
INVENTORIES
Inventory turns 5.5 4.7 5.1 4.9 5.4
RECEIVABLES
Days sales in receivables 53 49 52 48 52
Percent current & less than 30
days past due 93.5% 91.5% 94.7% 94.4% 95.5%
WORKING CAPITAL
Current ratio 2.6 3.2 2.7 3.0 2.6
Working capital turnover (3) 4.4 4.3 4.2 4.1 4.0
Operating working capital (3) $112,407 $108,509 $106,607 $94,546 $90,475
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 7.9% 8.0% 7.9% 7.5% 7.4%
Percent property, plant &
equipment are depreciated 49.6% 51.1% 52.6% 53.8% 54.9%
Capital expenditures $22,559 (1) $2,289 $1,370 $2,873 $1,518
PROFITABILITY
Return on average total capital 7.2% (0.3%) 2.7% (6.4%) 0.2% (0.9%)
Return on average equity 10.0% (5.5%) 1.1% (17.6%) (4.7%) (6.6%)
Net income (loss) per share $0.28 ($0.16) $0.03 ($0.49) ($0.13) ($0.74)
Net income (loss) per share (diluted) $0.28 ($0.16) $0.03 ($0.49) ($0.13) ($0.74)
LEVERAGE
Total liabilities/equity 165.3% 156.1% 154.6% 149.1% 137.7%
Funded debt/equity 106.1% 107.3% 99.5% 99.8% 91.7%
Funded debt/capital employed 51.5% 51.8% 49.9% 50.0% 47.8%
Funded debt $137,486 $136,828 $126,757 $121,372 $111,656
Funded debt/EBITDA (LTM) (5) 3.08 3.44 3.57 4.28 4.23
EBITDA/Interest expense, net (LTM) 4.7 4.2 3.9 2.8 2.0
OTHER
Book value per share $11.57 $11.37 $11.37 $10.85 $10.85
Employees at quarter end 3,825 3,722 3,623 3,486 3,127
Sales per employee (annualized) $133,000 $108,000 $121,000 $108,000 $122,000
Capital employed $267,126 $264,320 $254,198 $242,958 $233,458
Effective income tax rate 29.9% 34.0% 37.9% 33.0% 33.1%
EBITDA (2) $12,248 $5,177 $8,265 ($648) $5,208 $18,002
EBITDA/net sales 9.5% 5.1% 7.4% (0.7%) 5.2% 4.4%
(1) Expenditures for entire year
(2) Earnings before interest, income taxes, and depreciation & amortization.
(3) Working capital for this calculation is accounts receivable, inventories and accounts payable.
(4) LTM represents "Latest Twelve Months"
(5) EBITDA includes capitalized interest and certain cash and non-cash charges, as defined by the company's credit agreement.
(6) As restated (see Restatement paragraph within Financial Narrative)
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES BY SEGMENT/DIVISION
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED APRIL 29, 2001 AND APRIL 30, 2000
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------ ----------------------------
April 29, April 30, % Over
Segment/Division 2001 2000 (Under) 2001 2000
- ----------------------------------- ----------- ----------- -------------- ------------ -------------
Upholstery Fabrics
Culp Decorative Fabrics $ 41,046 56,130 (26.9) % 40.6 % 43.4 %
Culp Velvets/Prints 31,327 39,501 (20.7) % 31.0 % 30.5 %
Culp Yarn 2,417 4,809 (49.7) % 2.4 % 3.7 %
----------- ----------- -------------- ------------ -------------
74,790 100,440 (25.5) % 74.0 % 77.6 %
Mattress Ticking
Culp Home Fashions 26,281 28,979 (9.3) % 26.0 % 22.4 %
----------- ----------- -------------- ------------ -------------
* $ 101,071 129,419 (21.9) % 100.0 % 100.0 %
=========== =========== ============== ============ =============
TWELVE MONTHS ENDED
------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------ ----------------------------
April 29, April 30, % Over
Segment/Division 2001 2000 (Under) 2001 2000
- ----------------------------------- ----------- ----------- -------------- ------------ -------------
Upholstery Fabrics
Culp Decorative Fabrics $ 170,326 213,197 (20.1) % 41.6 % 43.7 %
Culp Velvets/Prints 122,105 151,543 (19.4) % 29.8 % 31.0 %
Culp Yarn 12,581 17,570 (28.4) % 3.1 % 3.6 %
----------- ----------- -------------- ------------ -------------
305,012 382,310 (20.2) % 74.4 % 78.3 %
Mattress Ticking
Culp Home Fashions 104,798 105,769 (0.9) % 25.6 % 21.7 %
----------- ----------- -------------- ------------ -------------
* $ 409,810 488,079 (16.0) % 100.0 % 100.0 %
=========== =========== ============== ============ =============
* U.S. sales were $85,314 and $101,276 for the fourth quarter of fiscal 2001 and
fiscal 2000, respectively; and $331,986 and $376,975 for the twelve months of
fiscal 2001 and fiscal 2000, respectively. The percentage decrease in U.S. sales
was 15.8% for the fourth quarter and a decrease of 11.9% for the twelve months.
CULP, INC. FINANCIAL INFORMATION RELEASE
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED APRIL 29, 2001 AND APRIL 30, 2000
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
April 29, April 30, % Over
Geographic Area 2001 2000 (Under) 2001 2000
- ---------------------------------- --------------- ------------- -------------- ------------- -------------
North America (Excluding USA) $ 7,872 9,968 (21.0) % 50.0 % 35.4 %
Europe 1,334 2,655 (49.8) % 8.5 % 9.4 %
Middle East 3,375 8,837 (61.8) % 21.4 % 31.4 %
Far East & Asia 2,394 5,014 (52.3) % 15.2 % 17.8 %
South America 296 570 (48.1) % 1.9 % 2.0 %
All other areas 486 1,099 (55.8) % 3.1 % 3.9 %
--------------- ------------- -------------- ------------- -------------
$ 15,757 28,143 (44.0) % 100.0 % 100.0 %
=============== ============= ============== ============= =============
TWELVE MONTHS ENDED
---------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
April 29, April 30, % Over
Geographic Area 2001 2000 (Under) 2001 2000
- ---------------------------------- --------------- ------------- -------------- ------------- -------------
North America (Excluding USA) $ 34,049 36,032 (5.5) % 43.8 % 32.4 %
Europe 6,262 16,351 (61.7) % 8.0 % 14.7 %
Middle East 17,831 32,929 (45.9) % 22.9 % 29.6 %
Far East & Asia 15,497 19,102 (18.9) % 19.9 % 17.2 %
South America 1,028 2,343 (56.1) % 1.3 % 2.1 %
All other areas 3,157 4,347 (27.4) % 4.1 % 3.9 %
--------------- ------------- -------------- ------------- -------------
$ 77,824 111,104 (30.0) % 100.0 % 100.0 %
=============== ============= ============== ============= =============
International sales, and the percentage of total sales, for each of the last
five fiscal years follows: fiscal 1997-$101,571 (25%); fiscal 1998-$137,223
(29%); fiscal 1999-$113,354 (23%); fiscal 2000-$111,104 (23%); and fiscal
2001-$77,824 (19%). International sales for the fourth quarter represented 15.6%
and 21.7% 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 41,046 170,326
Culp Velvets/Prints 30,074 32,073 28,631 31,327 122,105
Culp Yarn 3,319 4,134 2,711 2,417 12,581
----------------------------------------------------------------
74,926 82,999 72,297 74,790 305,012
Mattress Ticking
Culp Home Fashions 26,952 27,982 23,583 26,281 104,798
----------------------------------------------------------------
101,878 110,981 95,880 101,071 409,810
================================================================
Percent increase(decrease) from prior year:
Segment/Division
- ----------------------------------
Upholstery Fabrics
Culp Decorative Fabrics (17.8) (17.8) (17.5) (26.9) (20.1)
Culp Velvets/Prints (16.9) (23.2) (15.9) (20.7) (19.4)
Culp Yarn (19.6) (5.1) (36.6) (49.7) (28.4)
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(17.5) (19.4) (17.8) (25.5) (20.2)
Mattress Ticking
Culp Home Fashions 7.5 5.6 (6.4) (9.3) (0.9)
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(12.1) (14.3) (15.3) (21.9) (16.0)
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Overall Growth Rate
Internal (without acquisitions) (12.1) (14.3) (15.3) (21.9) (16.0)
External - - - - -
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(12.1) (14.3) (15.3) (21.9) (16.0)
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CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and twelve month periods ended April 29, 2001 and April 30, 2000
INCOME STATEMENT COMMENTS
GENERAL - For the fourth quarter, net sales decreased 21.9% to $101.1
million; and the company reported a net loss of $1.4 million, or $0.13 per share
diluted (based on 11,212,000 average shares outstanding) versus net income of
$3.2 million, or $0.28 per share diluted (based on 11,298,000 average shares
outstanding) in the fourth quarter of fiscal 2000. For fiscal 2001, net sales
decreased 16.0% to $409.8 million, and the company reported a net loss of $8.3
million, or $0.74 per share diluted (based on 11,210,000 average shares
outstanding), versus net income of $9.4 million, or $0.80 per share diluted
(based on 11,681,000 average shares outstanding), a year ago. The results for
the fourth quarter and fiscal 2001 included charges before taxes totaling $4.2
million and $7.4 million, respectively, for restructuring actions and inventory
write-downs. Without the restructuring and related charges, earnings would have
been $1.4 million, or $0.13 per share diluted for the fourth quarter, and the
loss would have been $3.3 million, or $0.30 per share diluted for fiscal 2001 as
a whole.
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, consistent with customer
demand. 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 resources in the home furnishings
industry is becoming increasingly concentrated, and the company has
successfully been able to capitalize on its size and product breadth to
supply more of the needs of existing customers. One customer accounted for
approximately 11% of net sales during fiscal 2001. Culp is 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 computer-assisted design systems and
promotes sharing of innovative designs across product lines. Culp
encourages active customer involvement in the entire design process; and
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.
RESTRUCTURING ACTIONS - During fiscal 2001, 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 total $8.5
million, about $3.5 million of which represents non-cash items. The company
recognized $7.4 million of restructuring and related charges during fiscal 2001
and expects to record the remaining charges related to restructuring during the
first half of fiscal 2002. The company expects to realize annualized cost
reductions of at least $12 million when these steps are fully implemented.
NET SALES - Compared with fiscal 2000, upholstery fabric sales for fiscal
2001 decreased 20.2% to $305.0 million, and mattress ticking sales decreased
0.9% to $104.8 million (See Sales by Segment/Division schedule on Page 5 and
Sales by Segment/Division - Trend Analysis on Page 7). International sales were
down 30.0% for fiscal 2001.
The company had previously announced that it did not expect to report a
profit for the full year, excluding restructuring and related charges. Key
factors influencing the year-to-year comparison were the sharp, persistent
weakness in consumer spending on home furnishings, especially in the promotional
price category, and the strength in the U.S. dollar that had an adverse impact
on exports. The slowdown in industry-wide demand also led to a decline in sales
at Culp Home Fashions (primarily mattress ticking) for the third and fourth
quarters, resulting in a slight decline in sales for the full year.
GROSS PROFIT - Gross profit declined 33.9% for fiscal 2001 and decreased as
a percentage of net sales from 17.3% to 13.7%. The decline was due principally
to lower sales volume that led to unfavorable cost variances in the company's
upholstery fabrics operation. The company is taking steps to lower expenses by
consolidating certain operations and reducing personnel, but does not expect to
realize the full benefit of these actions until the second half of fiscal 2002.
SG&A EXPENSES - SG&A expenses for fiscal 2001 declined 16.0% from the prior
year. Reflecting the momentum of the company's actions to reduce expenses, SG&A
expenses for the fourth quarter declined 28.8% from the year-earlier period and,
as a percentage of sales, declined from 11.5% to 10.5%.
INTEREST EXPENSE - Interest expense for fiscal 2001 declined from
$9.5-million to $9.1 million due to lower average borrowings, partially offset
by higher interest rates.
OTHER EXPENSE (INCOME), NET - Other expense (income) for fiscal 2001
totaled $3.3 million compared with $1.6 million in the prior year. The increase
was principally due to lower investment income on assets related to the
company's nonqualified deferred compensation plan, mark-to-market losses on
foreign currency forward contracts for anticipated purchases in the Euro and
mark-to-market losses on interest rate swaps that became unhedged with the
repayment of debt.
INCOME TAXES - The effective tax rate for fiscal 2001 was 33.0% versus
31.5% for the prior year.
EBITDA - Due principally to the decline in earnings, EBITDA for fiscal 2001
was $18.0 million compared with $44.5 million in the prior year. EBITDA for the
fourth quarter of fiscal 2001 was $5.2 million compared with $12.2 million in
the prior year.
BALANCE SHEET COMMENTS
WORKING CAPITAL - Accounts receivable as of April 29, 2001 decreased 23.1%
from the year-earlier level, due principally to the decline in sales. Days sales
outstanding totaled 52 days at April 29, 2001 compared with 53 at the end of
fiscal 2000. The aging of accounts receivable was 95.5% current and less than 30
days past due versus 93.5% a year ago. Inventories at the close of fiscal 2001
decreased 19.4% from a year ago. Inventory turns for the fourth quarter were 5.4
versus 5.5 for the year-earlier period. Operating working capital (comprised of
accounts receivable, inventory and accounts payable) was $90.5 million at April
29, 2001, down from $112.4 million a year ago.
PROPERTY, PLANT AND EQUIPMENT - Capital spending for fiscal 2001 declined
to $8.1 million compared with $22.6 million in fiscal 2000. The company had
planned on lower expenditures and reduced the investment in new equipment
further during the year due to the pronounced slowdown in demand. The company
has lowered the budget for capital spending for fiscal 2002 to approximately
$4.0 million. Depreciation for fiscal 2001 totaled $19.4 million. Depreciation
for fiscal 2002 is currently estimated to be $17.5 million.
LONG-TERM DEBT - The company's funded debt-to-capital ratio was 47.8% at
April 29, 2001 compared with 51.5% at the close of fiscal 2000. Funded debt was
$111.7 million at April 29, 2001 compared with $137.5 million at the close of
fiscal 2000. Funded debt equals long-term debt, including current maturities.
During fiscal 2001, the company amended its credit facility to include terms
that restrict the payment of cash dividends and share repurchases 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 April 29, 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 approximately $1 million
under the facility at the end of fiscal 2001.
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 surrendered the life
insurance contracts related to the nonqualified plan in order to pay the
participants. The proceeds from those life insurance contracts resulted in an
amount greater than had previously been recorded by the company, attributable to
gains that occurred in 1999 and 1998. In order to properly reflect these gains,
the company restated its financial statements and certain disclosures previously
reported in its financial statements as of April 30, 2000. The effect of the
correction for these gains increased other assets and retained earnings by
$1,102,000 in the consolidated balance sheet as of April 30, 2000.
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. During fiscal 2000 and 1999,
the company has invested $12.2 million to repurchase a total of 1.8 million
shares. No repurchases were made during fiscal 2001, and under the terms of the
amended credit facility, the company is currently restricted from any stock
repurchases.