-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OlXjkUTZP6LGWEsb27oTBlk5wR2zSuptov/paxkLNDi1rzGJpyOQKSKwoko4E/0W V551ULWyQo+oZpHrgYq1IQ== 0000723603-97-000008.txt : 19970526 0000723603-97-000008.hdr.sgml : 19970526 ACCESSION NUMBER: 0000723603-97-000008 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970427 ITEM INFORMATION: Other events FILED AS OF DATE: 19970523 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CULP INC CENTRAL INDEX KEY: 0000723603 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILLS, COTTON [2211] IRS NUMBER: 561001967 STATE OF INCORPORATION: NC FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12597 FILM NUMBER: 97613280 BUSINESS ADDRESS: STREET 1: 101 S MAIN ST CITY: HIGH POINT STATE: NC ZIP: 27261-2686 BUSINESS PHONE: 9108895161 MAIL ADDRESS: STREET 1: P O BOX 2686 STREET 2: 101 S MAIN ST CITY: HIGH POINT STATE: NC ZIP: 27261 8-K 1 CULP, INC. 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------- Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ------------ Date of Report (Date of earliest event reported) May 22, 1997 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) (910) 889-5161 (Registrant's telephone number, including area code) ------------------------------------------------ (Former name or former address, if changed since last report) ================================================================================ FOR IMMEDIATE RELEASE CULP REPORTS RECORD SALES AND EARNINGS FOR FISCAL 1997 EARNINGS INCREASE FOR EIGHTH CONSECUTIVE YEAR HIGH POINT, North Carolina (May 22, 1997) Culp, Inc. (NYSE:CFI) today reported higher sales and earnings for the fourth quarter and fiscal year ended April 27, 1997. Net sales for the quarter increased 3% to $105.7 million compared with $102.2 million a year ago. Net income for the quarter rose 20% to $4.8 million, or $0.39 per share, compared with $4.1 million, or $0.36 per share, in the fourth quarter of fiscal 1996. For the 1997 fiscal year, net sales totaled $398.9 million, up 13% from $351.7 million in fiscal 1996. Net income for the year rose 25% to $13.8 million, or $1.18 per share, up from $11.0 million, or $0.98 per share, in fiscal 1996. "Fiscal 1997 marked the eighth consecutive year in which Culp has attained higher net income," said Robert G. Culp, III, chief executive officer. "Each quarter during the year included record sales and earnings compared with the respective year-earlier periods. The fourth quarter by itself represented the 18th consecutive quarter of record earnings. We are particularly pleased that the gains in both net sales and net income for the year reflect internal growth in our existing business units." Culp continued, "Business within the United States did slow during our second half, but we still achieved an 8% gain in sales to U.S.-based accounts for the year. International shipments provided a major impetus to our growth by increasing 31% to $101.6 million and accounting for 25% of net sales, up from 22% in fiscal 1996. The pattern of increased sales to customers outside the United States has markedly accelerated our progress and enabled us to achieve a stronger competitive position on a worldwide basis. Only a few years ago, our shipments outside the United States were largely confined to the nearby North American markets of Canada and Mexico. Customers there now represent less than one-third of Culp's shipments outside the United States. Europe has become our largest international market for fabrics, and we now ship considerable volume to distributors in the Middle East, Asia and the Far East. "As our worldwide stature has risen in recent years, we have increasingly identified the importance of the design of new patterns and textures. To deliver value, our fabrics must enhance the retail appeal of customers' products. We have responded to this need with the addition of experienced personnel and the investment in new computer-aided design systems. We have also emphasized the importance of cooperating at all corporate levels to ensure that design is not just expressed but delivered. A tangible expression of this commitment is the new Howard L. Dunn Design Center which is planned for completion later this fiscal year. The center will consolidate most of our design resources, thereby providing an exceptional environment for creativity and imagination." Culp is the world's largest manufacturer and marketer of upholstery fabrics for furniture and is a leading producer of mattress ticking for bedding. The Company's fabrics are used principally in the production of residential and commercial furniture and bedding products. CULP, INC. Condensed Financial Highlights Three Months Ended April 27, April 28, 1997 1996 ---- ---- Net sales $ 105,678,000 $ 102,162,000 Net income 4,840,000 4,050,000 ------------------ ----------------- Earnings per share $ 0.39 $ 0.36 ------------------ ----------------- Fiscal Year Ended ----------------- April 27, April 28, 1997 1996 ---- ---- Net sales $ 398,879,000 $ 351,667,000 Net income 13,770,000 10,980,000 ----------------- ----------------- Earnings per share $ 1.18 $ 0.98 ----------------- ----------------- -END- -2- Item 5. Other Events See Press Release (attached) dated May 22, 1997 related to fourth quarter and year-end earnings for the period ended April 27, 1997. See Financial Information Release (attached). Forward Looking Information. The discussion in this Form 8-K may contain statements that could be deemed forward-looking statements, which are inherently subject to risks and uncertainties. Factors that could influence the matters discussed 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 adversely affect the company. SIGNATURES 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: Franklin N. Saxon Senior Vice President and Chief Financial Officer By: Stephen T. Hancock Stephen T. Hancock General Accounting Manager Dated: May 22, 1997 (Page 1 of 11) CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED INCOME STATEMENTS FOR THE THREE MONTHS AND TWELVE MONTHS ENDED APRIL 27, 1997 AND APRIL 28, 1996 (Amounts in Thousands, Except for Per Share Data) THREE MONTHS ENDED (UNAUDITED) Amounts Percent of Sales ---------------- April 27, April 28, % Over 1997 1996 (Under) 1997 1996 --------- -------- ------- ------- ------- Net sales $ 105,678 102,162 3.4 % 100.0 % 100.0 % Cost of sales 85,386 82,957 2.9 % 80.8 % 81.2 % Gross profit 20,292 19,205 5.7 % 19.2 % 18.8 % Selling, general and administrative expenses 11,730 11,300 3.8 % 11.1 % 11.1 % Income from operations 8,562 7,905 8.3 % 8.1 % 7.7 % Interest expense 1,019 1,352 (24.6)% 1.0 % 1.3 % Interest income (90) (92) ** % (0.1)% (0.1)% Other expense (income), net 404 365 10.7 % 0.4 % 0.4 % Income before income taxes 7,229 6,280 15.1 % 6.8 % 6.1 % Income taxes * 2,389 2,230 7.1 % 33.0 % 35.5 % Net income $ 4,840 4,050 19.5 % 4.6 % 4.0 % Average shares outstanding 12,546 11,284 11.2 % Net income per share $0.39 $0.36 8.3 % Dividends per share $0.0325 $0.0275 18.2 % TWELVE MONTHS ENDED Amounts Percent of Sales ------- ---------------- April 27, April 28, % Over 1997 1996 (Under) 1997 1996 --------- -------- ------- ------- ------- Net sales $ 398,879 351,667 13.4 % 100.0 % 100.0 % Cost of sales 326,394 289,129 12.9 % 81.8 % 82.2 % Gross profit 72,485 62,538 15.9 % 18.2 % 17.8 % Selling, general and administrative expenses 45,058 39,068 15.3 % 11.3 % 11.1 % Income from operations 27,427 23,470 16.9 % 6.9 % 6.7 % Interest expense 4,671 5,316 (12.1)% 1.2 % 1.5 % Interest income (280) (92) ** % (0.1)% (0.0)% Other expense (income), net 1,521 956 59.1 % 0.4 % 0.3 % Income before income taxes 21,515 17,290 24.4 % 5.4 % 4.9 % Income taxes * 7,745 6,310 22.7 % 36.0 % 36.5 % Net income $ 13,770 10,980 25.4 % 3.5 % 3.1 % Average shares outstanding 11,624 11,234 3.5 % Net income per share $1.18 $0.98 20.4 % Dividends per share $0.1300 $0.1100 18.2 % * Percent of sales column is calculated as a % of income before income taxes. ** Measurement is not meaningful.
(Page 2 of 11) CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED BALANCE SHEETS APRIL 27,1997 AND APRIL 28, 1996 (Amounts in Thousands) Amounts Increase April 27, April 28, (Decrease) 1997 1996 Dollars Percent --------- --------- ------- ------- Current assets Cash and cash investments $ 830 498 332 66.7 % Accounts receivable 56,691 52,038 4,653 8.9 % Inventories 53,463 47,395 6,068 12.8 % Other current assets 5,450 4,191 1,259 30.0 % ------- ------- ------ ---- Total current assets 116,434 104,122 12,312 11.8 % Restricted investments 11,018 5,250 5,768 109.9 % Property, plant & equipment, net 91,231 76,961 14,270 18.5 % Goodwill 22,262 22,871 (609) (2.7)% Other assets 3,007 2,440 567 23.2 % ------- ------ ------ ---- Total assets $ 243,952 211,644 32,308 15.3 % ======== ======= ====== ==== Current Liabilities Current maturities of long-term debt $ 100 7,100 (7,000) (98.6)% Accounts payable 29,903 27,308 2,595 9.5 % Accrued expenses 15,074 12,564 2,510 20.0 % Income taxes payable 1,580 197 1,383 702.0 % ------ ------ ----- ----- Total current liabilities 46,657 47,169 (512) (1.1)% Long-term debt 76,541 74,941 1,600 2.1 % Deferred income taxes 9,965 8,088 1,877 23.2 % ------ ----- ----- ---- Total liabilities 133,163 130,198 2,965 2.3 % Shareholders' equity 110,789 81,446 29,343 36.0 % ------- ------ ------ ---- Total liabilities and shareholders' equity $ 243,952 211,644 32,308 15.3 % ======= ======= ====== ==== Shares outstanding 12,609 11,290 1,319 11.7 % ------- ------ ----- ----
(Page 3 of 11) CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED APRIL 27, 1997 AND APRIL 28, 1996 (Amounts in Thousands) TWELVE MONTHS ENDED ------------------- Amounts April 27, April 28, 1997 1996 --------- --------- Cash flows from operating activities: Net income $ 13,770 10,980 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 12,688 12,348 Amortization of intangible assets 810 748 Provision for deferred income taxes 966 2,210 Changes in assets and liabilities: Accounts receivable (4,653) (7,786) Inventories (6,068) (1,624) Other current assets (348) (537) Other assets (205) (103) Accounts payable 2,586 (1,077) Accrued expenses 2,510 1,032 Income taxes payable 1,383 (464) ------ ------ Net cash provided by operating activities 23,439 15,727 ------ ------ Cash flows from investing activities: Capital expenditures (26,958) (14,385) Purchases of restricted investments (9,770) (6,019) Purchase of investments to fund deferred compensation liability (563) (1,286) Sale of restricted investments 4,002 1,564 ------- ------- Net cash used in investing activities (33,289) (20,126) ------- ------- Cash flows from financing activities: Proceeds from issuance of long-term debt 54,500 19,854 Principal payments on long-term debt (59,900) (11,555) Change in accounts payable-capital expenditures 9 (3,865) Dividends paid (1,513) (1,236) Proceeds from common stock issued 17,086 306 ------- ------ Net cash provided by financing activities 10,182 3,504 ------- ------ Increase (decrease) in cash and cash investments 332 (895) Cash and cash investments at beginning of period 498 1,393 ------ ----- Cash and cash investments at end of period $ 830 498
====== ===== (Page 4 of 11) CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL ANALYSIS APRIL 27, 1997 FISCAL 96 FISCAL 97 ----------- ------------------------------------------ Q4 Q1 Q2 Q3 Q4 LTM ---- ---- ---- ---- ---- --- INVENTORIES Inventory turns 6.8 6.0 6.6 6.2 6.6 RECEIVABLES Days sales in receivables 46 43 45 47 49 Percent current & less than 30 days past due 99.0% 99.3% 99.9% 99.8% 99.1% WORKING CAPITAL Current ratio 2.2 2.2 2.1 2.4 2.5 Working capital turnover 5.3 5.4 5.4 5.3 5.3 Working capital $56,953 $53,635 $57,230 $60,689 $69,777 Working capital as a % of sales (4) 13.9% 14.8% 13.6% 15.6% 16.5% PROPERTY, PLANT & EQUIPMENT Depreciation rate 8.3% 8.3% 8.1% 7.5% 7.5% Percent property, plant & equipment are depreciated 47.7% 48.2% 48.6% 47.9% 47.4% Capital expenditures $14,385 (1 $4,475 $5,201 $8,949 $8,333 PROFITABILITY Net profit margin 4.0% 2.4% 3.5% 3.1% 4.6% 3.5% Gross profit margin 18.8% 17.6% 18.2% 17.6% 19.2% 18.2% Operating income margin 7.7% 5.6% 7.1% 6.6% 8.1% 6.9% SG & A expenses/net sales 11.1% 12.0% 11.1% 11.0% 11.1% 11.3% Return on average total capital 11.2% 5.7% 9.3% 7.5% 11.7% 8.4% Return on average equity 22.7% 10.7% 17.4% 14.1% 20.9% 15.2% Earnings per share $0.36 $0.20 $0.33 $0.27 $0.39 $1.18 LEVERAGE (3) Total liabilities/equity 153.4% 149.9% 152.8% 154.8% 120.2% Funded debt/equity 94.3% 87.3% 85.9% 90.0% 59.2% Funded debt/capital employed 48.5% 46.6% 46.2% 47.4% 37.2% Funded debt $76,791 $72,772 $74,612 $80,588 $65,623 Funded debt/EBITDA (LTM) 2.16 1.98 1.97 2.09 1.67 EBITDA/Interest expense, net (LTM) 9.0 OTHER Book value per share $7.21 $7.37 $7.66 $7.89 $8.79 Employees at quarter end 2,966 3,020 3,098 3,143 3,146 Sales per employee (annualized) $140,000 $120,000 $138,000 $125,000 $134,000 Capital employed (3) $158,237 $156,128 $161,447 $170,166 $176,412 Effective income tax rate 35.5% 37.5% 37.5% 37.5% 33.0% EBITDA (2) $10,814 $8,003 $10,540 $9,279 $11,582 $39,404 EBITDA/net sales 10.6% 8.8% 10.0% 9.5% 11.0% 9.9% (1) Expenditures for entire year (2) Earnings before interest, income taxes, and depreciation & amortization. (3) Total liabilities, 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"
(Page 5 of 11) CULP, INC. FINANCIAL INFORMATION RELEASE SALES BY PRODUCT CATEGORY/BUSINESS UNIT FOR THREE MONTHS AND TWELVE MONTHS ENDED APRIL 27, 1997 AND APRIL 28, 1996 (Amounts in thousands) THREE MONTHS ENDED (UNAUDIITED) ---------------------------------------------------- Amounts Percent of Total Sales ------------------- ---------------------- April 27 April 28, % Over Product Category/Business 1997 1996 (Under) 1997 1996 - ----- ------------------- -------- -------- ------- ---- ---- Upholstery Fabrics Culp Textures $ 23,027 23,400 (1.6)% 21.8 % 22.9 % Rossville/Chromatex 20,672 22,318 (7.4)% 19.6 % 21.8 % ------ ------ ---- ---- ---- 43,699 45,718 (4.4)% 41.4 % 44.8 % Velvets/Prints 40,980 38,261 7.1 % 38.8 % 37.5 % ------ ------ ---- ---- ---- 84,679 83,979 0.8 % 80.1 % 82.2 % Culp Home Fashions 20,999 18,183 15.5 % 19.9 % 17.8 % ------ ------ ---- ---- ---- * $105,678 102,162 3.4 % 100.0% 100.0 % ======== ======= ==== ===== ===== TWELVE MONTHS ENDED ---------------------------------------------------- Amounts Percent of Total Sales ------------------- ---------------------- April 27 April 28. %Over Product Category/Business 1997 1996 (Under) 1997 1996 - ------------------------- -------- -------- ------- ---- ---- Upholstery Fabrics Culp Textures $ 88,218 84,384 4.5 % 22.1 % 24.0 % Rossville/Chromatex 79,512 74,203 7.2 % 19.9 % 21.1 % ------ ------ ---- ----- ----- 167,730 158,587 5.8 % 42.1 % 45.1 % Velvets/Prints 156,467 125,701 24.5 % 39.2 % 35.7 % ------- ------- ---- ----- ----- 324,197 284,288 14.0 % 81.3 % 80.8 % Culp Home Fashions 74,682 67,379 10.8 % 18.7 % 19.2 % ------- -------- ---- ----- ----- $398,879 351,667 13.4 % 100.0% 100.0 % ======== ======= ==== ===== =====
*U.S. sales were $76,517 and $78,137 for the three months of fiscal 1997 and fiscal 1996, respectively; and $297,308 and $274,270 for the twelve months of fiscal 1997 and fiscal 1996, respectively. The percentage decrease in U.S. sales was 2.0% for the three months and an increase of 8.4% for the twelve months. (Page 6 of 11) CULP, INC. FINANCIAL INFORMATION RELEASE INTERNATIONAL SALES BY GEOGRAPHIC AREA FOR THREE MONTHS AND TWELVE MONTHS ENDED APRIL 27, 1997 AND APRIL 28, 1996 (Amounts in thousands) THREE MONTHS ENDED (UNAUDITED) ------------------------------------------------- Amounts Percent of Total Sales ------------------- ---------------------- April 27, April 28, %Over Geographic Area 1997 1996 (Under) 1997 1996 - ----------------------------- --------- --------- ------- ---- ---- North America (Excluding USA)$ 6,924 6,421 7.8 % 23.7 % 26.7 % Europe 7,672 5,774 32.9 % 26.3 % 24.0 % Middle East 9,769 5,997 62.9 % 33.5 % 25.0 % Far East & Asia 3,753 4,114 (8.8)% 12.9 % 17.1 % South America 140 621 (77.4% 0.5 % 2.6 % All other areas 903 1,098 (17.7% 3.1 % 4.6 % ------ ----- ----- ----- ----- $ 29,161 24,025 21.4 % 100.0 % 100.0% ======= ====== ==== ===== ===== TWELVE MONTHS ENDED (UNAUDITED) ----------------------------------------------- Amounts Percent of Total Sales ------- ---------------------- April 27, April 28, %Over Geographic Area 1997 1996 (Under) 1997 1996 - ----------------------------- --------- --------- ------- ---- ---- North America (Excluding USA)$ 27,479 23,528 16.8 % 27.1 % 30.4 % Europe 25,245 18,927 33.4 % 24.9 % 24.5 % Middle East 23,505 15,609 50.6 % 23.1 % 20.2 % Far East & Asia 19,646 12,124 62.0 % 19.3 % 15.7 % South America 2,604 2,753 (5.4)% 2.6 % 3.6 % All other areas 3,092 4,456 (30.6% 3.0 % 5.8 % ------- ------ ----- ----- ---- $ 101,571 77,397 31.2 % 100.0 % 100.0% ======= ====== ==== ===== =====
International sales, and the percentage of total sales, for each of the last seven fiscal years follows: fiscal 1991-$ 20,295 (12%); fiscal 1992-$ 34,094 (18%); fiscal 1993-$ 40,729 (20%); fiscal 1994-$ 44,038 (18%); fiscal 1995- $57,971 (19%); fiscal 1996-$ 77,397 (22%); and fiscal 1997-$ 101,571 (25%). Certain amounts for fiscal year 1996 have been reclassified to conform with the fiscal year 1997 presentation. Culp, Inc. SALES BY BUSINESS UNIT - TREND ANALYSIS 1995 vs 1996 vs 1997 (Amounts in thousands) Fiscal 1995 Fiscal 1996 ---------------------------------------- ------------------------------------------------- Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL ------ ------ ------ ------ ----- ----- ------ ------ ------ ------ Product Category/Business Unit - ------------------------------ Upholstery Fabrics Culp Textures 19,613 22,834 20,940 21,738 85,125 17,584 22,715 20,685 23,400 84,384 Rossville/Chromatex 15,140 15,758 16,397 16,476 63,765 15,358 17,960 18,567 22,318 74,203 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ 34,753 38,592 37,337 38,208 148,890 32,942 40,675 39,252 45,718 158,587 Velvets/Prints 20,644 26,439 28,307 31,413 106,803 23,523 32,081 31,836 38,261 125,701 55,397 65,031 65,644 69,621 255,693 56,465 72,756 71,088 83,979 284,288 Mattress Ticking Culp Home Fashions 10,952 13,414 12,147 15,820 52,333 15,892 17,916 15,388 18,183 67,379 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ 66,349 78,445 77,791 85,441 308,026 72,357 90,672 86,476 102,162 351,667 ====== ====== ====== ====== ======= ====== ====== ====== ======= ======= Percent increase(decrease)from prior year: ------------------------------------------- Product Category/Business Units - ------------------------------- Upholstery Fabrics Culp Textures 12.4 13.8 6.4 2.9 8.7 (10.3) (0.5) (1.2) 7.6 (0.9) Rossville/Chromatex 100.0 100.0 14.4 (1.5) 105.4 1.4 14.0 13.2 35.5 16.4 ----- ----- ---- ---- ----- --- ---- ---- ---- ---- 99.2 92.3 9.8 1.0 36.1 (5.2) 5.4 5.1 19.7 6.5 Velvets/Prints (1.2) 7.8 19.4 12.5 10.1 13.9 21.3 12.5 21.8 17.7 ---- --- ---- ---- ---- ---- ---- ---- ---- ---- 44.5 45.8 13.7 5.9 23.9 1.9 11.9 8.3 20.6 11.2 Mattress Ticking Culp Home Fashions 32.7 42.8 27.4 37.9 35.4 45.1 33.6 26.7 14.9 28.8 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 42.4 45.3 15.7 10.6 25.7 9.1 15.6 11.2 19.6 14.2 ==== ==== ==== ==== ==== === ==== ==== ==== ==== Overall Growth Rate ------------------- Internal (without acquistions) 9.9 16.1 15.7 8.8 12.5 6.4 13.0 8.7 19.6 12.3 External 32.5 29.2 - 1.8 13.2 2.7 2.6 2.5 1.9 ---- ---- ---- --- ---- --- --- --- --- 42.4 45.3 15.7 10.6 25.7 9.1 15.6 11.2 19.6 14.2 ==== ==== ==== ==== ==== === ==== ==== ==== ====
-MORE- Culp, Inc. SALES BY BUSINESS UNIT - TREND ANALYSIS (CONTINUED) 1995 vs 1996 vs 1997 (Amounts in thousands) Fiscal 1997 ----------- Q1 Q2 Q3 Q4 TOTAL ----- ------ ------ ------ ------- Product Category/Business Unit Upholstery Fabrics Culp Textures 20,801 24,001 20,389 23,027 88,218 Rossville/Chromatex 18,165 21,722 18,953 20,672 79,512 38,966 45,723 39,342 43,699 167,730 Velvets/Prints 34,867 40,233 40,387 40,980 156,467 73,833 85,956 79,729 84,679 324,197 Mattress Ticking Culp Home Fashions 16,696 19,248 17,739 20,999 74,682 90,529 105,204 97,468 105,678 398,879 Percent increase(decrease) fro Product Category/Business Unit Upholstery Fabrics Culp Textures 18.3 5.7 (1.4) (1.6) 4.5 Rossville/Chromatex 18.3 20.9 2.1 (7.4) 7.2 18.3 12.4 0.2 (4.4) 5.8 Velvets/Prints 48.2 25.4 26.9 7.1 24.5 30.8 18.1 12.2 0.8 14.0 Mattress Ticking Culp Home Fashions 5.1 7.4 15.3 15.5 10.8 25.1 16.0 12.7 3.4 13.4 Overall Growth Rate Internal (without acquistions) 25.1 16.0 12.7 3.4 13.4 External 25.1 16.0 12.7 3.4 13.4
(Page 8 of 11) CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three and twelve month periods ended April 27, 1997 and April 28, 1996 INCOME STATEMENT COMMENTS GENERAL - Net sales increased 3.4% to $105.7 million and net income increased 19.5% to $4.8 million for the fourth quarter, as compared with the fourth quarter of last year. This performance marks the eighteenth consecutive quarter of record earnings and the sixteenth consecutive quarter of record sales (based on comparable year-earlier periods). The company's net profit margin increased to 4.6% from 4.0% for the quarter. For the twelve months, sales increased 13.4% to $398.9 million and net income increased 25.4% to $13.8 million. The company's net profit margin increased to 3.5% from 3.1% for the twelve months. Also, the company achieved a return on average shareholder's equity of 15.2% for the latest twelve months. For the last five years, the company has achieved a compound annual growth rate in net income and net sales of 36% and 16% respectively. The company attributes this consistent record to several key competitive strengths: Diverse Global Customer Base - penetrating other end-use markets in addition to U. S. residential furniture, such as bedding, international, commercial furniture and juvenile furniture; sales to these other markets accounted for approximately 50% of net sales during the fourth quarter; additionally, no one customer accounted for more than 7% of sales during fiscal 1997; Design Innovation - investing in the creative aspect of our business - the company has significantly increased the resources (both designers and computer-aided design (CAD) systems) dedicated to the design and product development areas in each business unit; the company's in-house design staff now includes over 50 people. Additionally, the company is building a state-of-the-art design center in Burlington, North Carolina that will bring together most of its design resources in one location; Vertical Integration - realizing additional manufacturing integration by producing internally various raw material components that are used in the manufacture of its products; and Ability to Integrate Acquisitions - investing in selective, accretive acquisitions in businesses which we know and understand and that strengthen existing marketing positions. NET SALES - Compared with the fourth quarter of last year, upholstery fabric sales increased 0.8% to $84.7 million and mattress ticking sales increased 15.5% to $21.0 million for the quarter (See Sales by Business Unit schedule on Page 5 and Sales by Business Unit - Trend Analysis on Page 7). The growth in upholstery fabric sales for the fourth quarter reflects the following changes: Velvets/Prints - up 7.1%; Rossville/Chromatex - down 7.4%; and Culp Textures down 1.6%. Within the Velvets/Prints business unit, sales of the company's wet printed flock product line increased 59.8% versus the fourth quarter of last year. Sales of printed jacquards increased 31.3% versus the same quarter of last year. The company's sales to U.S. customers declined in the fourth quarter by 2.0 % and increased for the full year by 8.4%. International sales were up 21.4% for the quarter and 31.2% for the year, with strength in all major regions. (See International Sales by Geographic Area schedule on page 6.) All business units reported gains in international sales for the year and all business units except Rossville/Chromatex reported gains in international sales for the quarter. The company has shipped products to over 50 countries during fiscal 1997. We are encouraged by the geographical balance of our international customer base. The vast majority of international sales are denominated in U.S. dollars. (Page 9 of 11) CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three and twelve month periods ended April 27, 1997 and April 28, 1996 GROSS PROFIT - Gross profit increased of 5.7% for the quarter and 15.9% for the year versus the same periods of last year. The full year gain reflects significant increases for the Velvets/Prints and Culp Home Fashions business units, and slight increases for Rossville/Chromatex and Culp Textures. The fourth quarter results reflect a very strong gain in Culp Home Fashions and moderately lower results in the three upholstery fabric business units The overall gross profit margin increased to 19.2% for the quarter from 18.8% in the same quarter of last year. S,G&A EXPENSES - S,G&A expenses were flat as a percentage of sales at 11.1% for the fourth quarter and increased slightly to 11.3 % for the year from 11.1 % for the prior year. The increase in absolute dollars is principally due to higher sales commissions related to international sales and investments in additional design resources. INTEREST EXPENSE - The decrease for the quarter of 24.6% is primarily due to lower average borrowings outstanding , which resulted from the company's secondary stock offering that was completed early in the fourth quarter of this year. . INTEREST INCOME - Interest income is at the same level as last year's fourth quarter. OTHER EXPENSE (INCOME), NET - In the fourth quarter, other expense (income) increased to $404,000 from $365,000 in the same quarter of last year. INCOME TAXES - The effective tax rate for the year was 36.0% compared with 36.5% for fiscal 1996, due to the lower tax rate related to Canadian income and tax benefits related to international sales. EBITDA - EBITDA for the quarter increased 7.1% from last year's fourth quarter to $11.6 million, and represented 11.0% of net sales compared with 10.6% of net sales last year. For the year, EBITDA increased 10.7% from last year to $39.4 million, and represented 9.9% of net sales versus 10.1% last year. BALANCE SHEET COMMENTS WORKING CAPITAL - Accounts receivable increased 8.9% from April 1996, while sales increased 3.4% for the fourth quarter. Day's sales outstanding represented 49 days, up from 46 at April 1996. Accounts receivable increased at a faster rate than sales because of the increasing mix of international sales, which carry longer payment terms than U.S. sales. The aging of accounts receivable at April 1997 was 99.1% current and less than 30 days past due. Inventories increased 12.8% from April 1996 and inventory turns were 6.6 versus 6.8 for last year's fourth quarter. (Page 10 of 11) CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three and twelve month periods ended April 27, 1997 and April 28, 1996 PROPERTY, PLANT AND EQUIPMENT - The company has maintained a significant program of capital expenditures designed to expand capacity to support sales growth, increase vertical integration to lower product costs and control more of its supply of raw materials, and enhance manufacturing efficiencies through modernization. For fiscal 1997, the company's capital spending was $27.0 million. Major projects include the following: Expansion Projects - ($11.0 million or 40 % of the total) a) printing expansion for the wet printed flock product line in the Velvets/Prints business unit; this project includes the purchase of a facility in Lumberton, North Carolina and the installation of new printing and finishing equipment ($8.9 million is the total project, of which $ 6.0 was spent in fiscal 1997). b) Weaving expansions for the dobby and jacquard product lines in the Rossville/ Chromatex business unit ($2.3 million); and c) other projects ($2.7 million) Vertical Integration - ($ 13.0 million or 48 % of the total) a) weaving expansion for jacquard greige goods (narrow and wide-width) at the company's Rayonese facility in Canada, which is part of Culp Home Fashions business unit ($5.1 million); b) installation of the company's first flock coating line, which will produce the unprinted flocked greige goods for the wet printed flock product line ($4.0 million); c) expansion of yarn extrusion capacity; during the third quarter, the company began an $8.0 million project to approximately double its polypropylene yarn extrusion capacity over the next two years. About 20% of the capacity is expected to be operational by June 1997, another 40% throughout fiscal 1998, and the balance in early fiscal 1999 ($1.7 million in fiscal 1997; $3.2 million in fiscal 1998; and $3.1 million in fiscal 1999); d) various other projects ($2.2 million). Modernization ($3.0 million or 12% of the total) The company is currently planning capital spending of approximately $30 million during fiscal 1998, which includes about $ 8.7 million for expansion projects (29%); $12.7 million for vertical integration projects (42 %); and $8.6 million for modernization projects (29%). The key vertical integration projects include the yarn extrusion expansion, a second flock coating line and additional weaving capacity for jacquard greige goods at Rayonese. Depreciation expense for fiscal 1998 is estimated at approximately $15.6 million. (Page 11 of 11) CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three and twelve month periods ended April 27, 1997 and April 28, 1996 LONG-TERM DEBT - The company's funded debt-to-capital ratio was 37.2% at April 27, 1997, down from 48.5% at April 1996. Funded debt was $65.6 million at April 27, 1997, compared with $76.8 million last year end . (Funded debt equals long-term debt, including current maturities, less restricted investments, which represent unspent IRB funds). During the fourth quarter, the company completed the refinancing of its $65 million term loan and revolving line of credit with a syndicated, five-year $125 million unsecured, multi-currency credit facility. Terms of the new facility include reduced interest costs, less restrictive financial convenants and significant additional borrowing capacity. SECONDARY STOCK OFFERING - On February 4, 1997, the company completed the sale of 1,200,000 shares of newly issued common stock, and 640,000 shares of common stock from certain non-management shareholders for $15.00 per share. Proceeds from the offering, net of underwriter's commission and company issuance expenses, were approximately $16.3 million. The key reasons for the offering were to fund the company's growth initiatives, reduce long term debt, provide the financial basis for possible acquisitions, and to a lesser extent, enhance trading liquidity of its common stock by increasing the "float". PHILLIPS ACQUISITION -- On May 1, 1997, the company announced that it has signed a Letter of Intent to acquire the business and certain assets relating to the upholstery fabric business operating as Philips Weaving Mills, Phillips Velvets Mills, Phillips Printing and Phillips Mills. Closing of the transaction, which is subject to completion of a definitive asset purchase agreement and certain other conditions , is set forth in the Letter of Intent. The proposed transaction is disclosed in more detail in the company's Form 8-K filing, dated May 1, 1997. -----END PRIVACY-ENHANCED MESSAGE-----