8-K 1 0001.txt 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) November 15, 2000 CULP, INC. (Exact name of registrant as specified in its charter) North Carolina 0-12781 56-1001967 (State or other jurisdiction (Commission File No.) (IRS Employer of incorporation) Identification No.) 101 South Main Street High Point, North Carolina 27260 (Address of principal executive offices) (336) 889-5161 (Registrant's telephone number, including area code) (Former name or former address, if changed since last report) ------------------------------------------------------------------- Item 5. Other Events See attached Press Release (3 pages) and Financial Information Release (9 pages), both dated November 15, 2000, related to the fiscal 2001 second quarter ended October 29, 2000. Forward Looking Information. This Report contains statements that may be deemed "forward-looking statements" within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Such statements are inherently subject to risks and uncertainties. Forward-looking statements are statements that include projections, expectations or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by qualifying words such as "expect," "believe," "estimate," "plan" and "project" and their derivatives. Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on the Company's business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect the Company adversely. Because of the significant percentage of the Company's sales derived from international shipments, strengthening of the U. S. dollar against other currencies could make the Company's products less competitive on the basis of price in markets outside the United States. Additionally, economic and political instability in international areas could affect the demand for the Company's products. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CULP, INC. (Registrant) By: Phillip W. Wilson Vice President and Chief Financial Officer Dated: November 15, 2000 FOR IMMEDIATE RELEASE CULP REPORTS SECOND QUARTER EARNINGS HIGH POINT, N. C. (Nov. 15, 2000) - Culp, Inc. (NYSE: CFI) today reported results for the second quarter of its 2001 fiscal year. For the three months ended October 29, 2000, Culp reported net sales of $111.0 million compared with $129.5 million a year ago. The company reported net income for the quarter of $342,000, or $0.03 per share diluted, compared with net income of $3.2 million, or $0.27 per share diluted, in the year-earlier period. The results for the second quarter brought net sales for the first half of fiscal 2001 to $212.9 million compared with $245.5 million a year ago. The company reported a net loss for the first half of $1.4 million, or $0.13 per share diluted, compared with net income of $4.8 million, or $0.39 per share diluted, in the year-earlier period. Robert G. Culp, III, chief executive officer, commented, "We had expected a profit recovery for the second fiscal quarter, and our results represent a definite improvement from the first three months. We are encouraged by the overall placements that we had at the most recent industry trade show, but the benefit to Culp will depend importantly on the strength of retail sales during the important holiday marketing period for the furniture and bedding offered with Culp-manufactured fabrics and ticking. The relatively high consumer confidence and employment levels are positive measures; but retail demand remains sluggish, especially in the promotional categories of the home furnishings market, and the strength of the dollar against other currencies is having an adverse impact on our international sales. "Our sales of fabrics to customers outside the United States during the second quarter were down 26% from a year ago. The wide geographic breadth of our international business makes it difficult to generalize about any economic trends that may be affecting our business. Customer feedback endorses the appeal of our designs, and we believe that the long-term dynamics driving demand in these markets remain favorable. The current strength in the U.S. dollar, however, is a significant factor that is likely to cause a further drop in our international sales in both the third and fourth quarters. We have taken steps to reduce expenses related to this portion of our business. These actions involved severance costs in the second period, but the resulting savings will benefit subsequent periods." Culp added, "The current weakness in international sales makes us especially cautious about the outlook for our results over the remainder of this fiscal year. The combination of that trend and the seasonal decline in net sales normally experienced in the third fiscal quarter may cause us to report a modest net loss for the third period. We expect to close the year on a profitable note in the final quarter, but are uncertain at this time whether the expected improvement in the fourth period will leave us in the black for the year as a whole. Through the first half, we generated $21.2 million in cash from operations and used $16.8 million to reduce debt and payables related to capital expenditures. Although a strategic objective is to reduce our debt further, we are committing the funds necessary to maintain modern, efficient manufacturing capacity and effective information systems. We remain confident about Culp's fundamental competitive position and believe that our capacity and breadth of lines are especially important attributes within an industry that is continuing to consolidate at all levels." Culp, Inc. is one of the world's largest marketers of upholstery fabrics for furniture and is a leading marketer of mattress ticking for bedding. The Company's fabrics are used principally in the production of residential and commercial furniture and bedding products. This release contains statements that may be deemed "forward-looking statements" within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Such statements are inherently subject to risks and uncertainties. Forward-looking statements are statements that include projections, expectations or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by qualifying words such as "expect," "believe," "estimate," "plan" and "project" and their derivatives. Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, consumer confidence, trends in disposable income and general economic conditions. Decreases in these economic indicators could have a negative effect on the company's business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect the company adversely. Because of the significant percentage of the company's sales derived from international shipments, strengthening of the U.S. dollar against other currencies could make the company's products less competitive on the basis of price in markets outside the United States. Additionally, economic and political instability in international areas could affect the demand for the company's products. CULP, INC. Condensed Financial Highlights (Unaudited) Three Months Ended ------------------------------- October 29, October 31, 2000 1999 -------------- ------------- Net sales $ 110,981,000 $ 129,542,000 Net income $ 342,000 $ 3,160,000 Net income per share: Basic $ 0.03 $ 0.27 Diluted $ 0.03 $ 0.27 Average shares outstanding: Basic 11,209,000 11,749,000 Diluted 11,270,000 11,868,000 Six Months Ended ------------------------------- October 29, October 31, 2000 1999 -------------- ------------- Net sales $ 212,859,000 $ 245,479,000 Net income (loss) $ (1,414,000) $ 4,757,000 Net income (loss) per share: Basic $ (0.13) $ 0.40 Diluted $ (0.13) $ 0.39 Average shares outstanding: Basic 11,209,000 11,906,000 Diluted 11,282,000 12,044,000 - END - CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 29, 2000 AND OCTOBER 31, 1999 (Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED) -------------------------------------------------------------------------- Amounts Percent of Sales ---------------------------- --------------------------- October 29, October 31, % Over 2000 1999 (Under) 2001 2000 ------------- ------------- ------------ ------------- ------------ Net sales $ 110,981 129,542 (14.3) % 100.0 % 100.0 % Cost of sales 94,094 105,835 (11.1) % 84.8 % 81.7 % ------------- ------------- ------------ ------------- ------------ Gross profit 16,887 23,707 (28.8) % 15.2 % 18.3 % Selling, general and administrative expenses 13,491 16,035 (15.9) % 12.2 % 12.4 % ------------- ------------- ------------ ------------- ------------ Income from operations 3,396 7,672 (55.7) % 3.1 % 5.9 % Interest expense 2,285 2,484 (8.0) % 2.1 % 1.9 % Interest income (15) (16) (6.3) % (0.0)% (0.0)% Other expense (income), net 575 416 38.2 % 0.5 % 0.3 % ------------- ------------- ------------ ------------- ------------ Income before income taxes 551 4,788 (88.5) % 0.5 % 3.7 % Income taxes * 209 1,628 (87.2) % 37.9 % 34.0 % ------------- ------------- ------------ ------------- ------------ Net income $ 342 3,160 (89.2) % 0.3 % 2.4 % ============= ============= ============ ============= ============ Net income per share $0.03 $0.27 (88.9) % Net income per share, assuming dilution $0.03 $0.27 (88.9) % Dividends per share $0.035 $0.035 0.0 % Average shares outstanding 11,209 11,749 (4.6) % Average shares outstanding, assuming dilution 11,270 11,868 (5.0) % SIX MONTHS ENDED (UNAUDITED) -------------------------------------------------------------------------- Amounts Percent of Sales ---------------------------- --------------------------- October 29, October 31, % Over 2000 1999 (Under) 2001 2000 ------------- ------------- ------------ ------------- ------------ Net sales $ 212,859 245,479 (13.3) % 100.0 % 100.0 % Cost of sales 181,798 201,360 (9.7) % 85.4 % 82.0 % ------------- ------------- ------------ ------------- ------------ Gross profit 31,061 44,119 (29.6) % 14.6 % 18.0 % Selling, general and administrative expenses 27,269 31,073 (12.2) % 12.8 % 12.7 % ------------- ------------- ------------ ------------- ------------ Income from operations 3,792 13,046 (70.9) % 1.8 % 5.3 % Interest expense 4,608 4,900 (6.0) % 2.2 % 2.0 % Interest income (22) (33) (33.3) % (0.0)% (0.0)% Other expense (income), net 1,316 971 35.5 % 0.6 % 0.4 % ------------- ------------- ------------ ------------- ------------ Income (loss) before income taxes (2,110) 7,208 (129.3) % (1.0)% 2.9 % Income taxes * (696) 2,451 (128.4) % 33.0 % 34.0 % ------------- ------------- ------------ ------------- ------------ Net income (loss) $ (1,414) 4,757 (129.7) % (0.7)% 1.9 % ============= ============= ============ ============= ============ Net income (loss) per share ($0.13) $0.40 (132.5) % Net income (loss) per share, assuming dilution ($0.13) $0.39 (133.3) % Dividends per share $0.07 $0.07 0.0 % Average shares outstanding 11,209 11,906 (5.9) % Average shares outstanding, assuming dilution 11,282 12,044 (6.3) %
* Percent of sales column is calculated as a % of income (loss) before income taxes. CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED BALANCE SHEETS OCTOBER 29, 2000, OCTOBER 31, 1999 AND APRIL 30, 2000 Unaudited (Amounts in Thousands)
Amounts Increase ------------------------------------- (Decrease) October 29, October 31, ----------------------------- * April 30, 2000 1999 Dollars Percent 2000 ------------------- -------------- -------------- ----------- ---------- Current assets Cash and cash investments $ 744 790 (46) (5.8)% 1,007 Accounts receivable 63,991 69,749 (5,758) (8.3)% 75,223 Inventories 72,967 78,234 (5,267) (6.7)% 74,471 Other current assets 11,003 8,865 2,138 24.1 % 10,349 ------------------- -------------- -------------- ----------- ---------- Total current assets 148,705 157,638 (8,933) (5.7)% 161,050 Restricted investments 0 1,085 (1,085) (100.0)% 0 Property, plant & equipment, net 120,023 124,318 (4,295) (3.5)% 126,407 Goodwill 49,176 50,571 (1,395) (2.8)% 49,873 Other assets 5,406 5,064 342 6.8 % 5,548 ------------------- -------------- -------------- ----------- ---------- Total assets $ 323,310 338,676 (15,366) (4.5)% 342,878 =================== ============== ============== =========== ========== Current liabilities Current maturities of long-term debt $ 1,678 1,678 0 0.0 % 1,678 Accounts payable 30,351 38,427 (8,076) (21.0)% 37,287 Accrued expenses 22,404 22,947 (543) (2.4)% 22,108 Income taxes payable 0 1,786 (1,786) (100.0)% 0 ------------------- -------------- -------------- ----------- ---------- Total current liabilities 54,433 64,838 (10,405) (16.0)% 61,073 Long-term debt 125,079 133,875 (8,796) (6.6)% 135,808 Deferred income taxes 17,459 14,583 2,876 19.7 % 17,459 ------------------- -------------- -------------- ----------- ---------- Total liabilities 196,971 213,296 (16,325) (7.7)% 214,340 Shareholders' equity 126,339 125,380 959 0.8 % 128,538 ------------------- -------------- -------------- ----------- ---------- Total liabilities and shareholders' equity $ 323,310 338,676 (15,366) (4.5)% 342,878 =================== ============== ============== =========== ========== Shares outstanding 11,209 11,320 (111) (1.0)% 11,209 =================== ============== ============== =========== ==========
* Derived from audited financial statements. CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED OCTOBER 29, 2000 AND OCTOBER 31, 1999 Unaudited (Amounts in Thousands)
SIX MONTHS ENDED -------------------------------- Amounts ----------------------------- October 29, October 31, 2000 1999 -------------- ------------- Cash flows from operating activities: Net income (loss) $ (1,414) 4,757 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 10,043 9,516 Amortization of intangible assets 798 798 Changes in assets and liabilities: Accounts receivable 11,232 754 Inventories 1,504 (11,164) Other current assets (654) 768 Other assets 241 (186) Accounts payable (859) 7,937 Accrued expenses 296 1,921 Income taxes payable 0 1,786 -------------- ------------- Net cash provided by operating activities 21,187 16,887 -------------- ------------- Cash flows from investing activities: Capital expenditures (3,659) (10,524) Purchases of restricted investments 0 (27) Purchase of investments to fund deferred compensation liability (200) 0 Sale of restricted investments 0 2,282 -------------- ------------- Net cash used in investing activities (3,859) (8,269) -------------- ------------- Cash flows from financing activities: Proceeds from issuance of long-term debt 0 5,333 Principal payments on long-term debt (10,729) (11,770) Change in accounts payable-capital expenditures (6,077) 4,803 Dividends paid (785) (822) Payments to acquire common stock 0 (5,901) Proceeds from common stock issued 0 20 -------------- ------------- Net cash used in financing activities (17,591) (8,337) -------------- ------------- Increase (decrease) in cash and cash investments (263) 281 Cash and cash investments at beginning of period 1,007 509 -------------- ------------- Cash and cash investments at end of period $ 744 790 ============== =============
CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL ANALYSIS OCTOBER 29, 2000
FISCAL 00 FISCAL 01 ------------ ---------------------------------------------------- -------------- Q2 Q1 Q2 Q3 Q4 LTM (5) ------------ ---------------------------------------------------- -------------- INVENTORIES Inventory turns 5.5 4.7 5.1 RECEIVABLES Days sales in receivables 49 49 52 Percent current & less than 30 days past due 96.7% 91.5% 94.7% WORKING CAPITAL Current ratio 2.4 3.2 2.7 Working capital turnover (4) 4.4 4.3 4.2 Operating working capital (4) $109,556 $108,509 $106,607 PROPERTY, PLANT & EQUIPMENT Depreciation rate 7.8% 8.0% 7.9% Percent property, plant & equipment are depreciated 49.1% 51.1% 52.6% Capital expenditures $22,559 (1) $2,289 $1,370 PROFITABILITY Return on average total capital 7.3% (0.3%) 2.7% 3.6% Return on average equity 10.0% (5.5%) 1.1% 2.5% Net income (loss) per share $0.27 ($0.16) $0.03 $0.28 Net income (loss) per share (diluted) $0.27 ($0.16) $0.03 $0.28 LEVERAGE (3) Total liabilities/equity 170.1% 157.4% 155.9% Funded debt/equity 107.2% 108.3% 100.3% Funded debt/capital employed 51.7% 52.0% 50.1% Funded debt $134,468 $136,828 $126,757 Funded debt/EBITDA (LTM) (6) 3.08 3.46 3.59 EBITDA/Interest expense, net (LTM) 4.6 4.2 3.8 OTHER Book value per share $11.08 $11.28 $11.27 Employees at quarter end 3,962 3,722 3,623 Sales per employee (annualized) $129,000 $108,000 $121,000 Capital employed (3) $259,848 $263,218 $253,096 Effective income tax rate 34.0% 34.0% 37.9% EBITDA (2) $12,412 $5,114 $8,203 $35,150 EBITDA/net sales 9.6% 5.0% 7.4% 7.7% (1) Expenditures for entire year. (2) Earnings before interest, income taxes, and depreciation & amortization. (3) Long-term debt, funded debt and capital employed are all net of restricted investments. (4) Working capital for this calculation is accounts receivable, inventories and accounts payable. (5) LTM represents "Latest Twelve Months" (6) EBITDA includes capitalized interest and pro forma amounts for acquisitions.
CULP, INC. FINANCIAL INFORMATION RELEASE SALES BY SEGMENT/DIVISION FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 29, 2000 AND OCTOBER 31, 1999 (Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED) --------------------------------------------------------------------- Amounts ------------------------ Percent of Total Sales October 29, October 31, % Over -------------------------- Segment/Division 2000 1999 (Under) 2001 2000 --------------------------------- ----------- ----------- -------------- ----------- ------------ Upholstery Fabrics Culp Decorative Fabrics $ 46,792 56,897 (17.8) % 42.2 % 43.9 % Culp Velvets/Prints 32,073 41,783 (23.2) % 28.9 % 32.3 % Culp Yarn 4,134 4,358 (5.1) % 3.7 % 3.4 % ----------- ----------- -------------- ----------- ------------ 82,999 103,038 (19.4) % 74.8 % 79.5 % Mattress Ticking Culp Home Fashions 27,982 26,504 5.6 % 25.2 % 20.5 % ----------- ----------- -------------- ----------- ------------ * $ 110,981 129,542 (14.3) % 100.0 % 100.0 % =========== =========== ============== =========== ============ SIX MONTHS ENDED (UNAUDITED) --------------------------------------------------------------------- Amounts ------------------------ Percent of Total Sales October 29, October 31, % Over -------------------------- Segment/Division 2000 1999 (Under) 2001 2000 --------------------------------- ----------- ----------- -------------- ----------- ------------ Upholstery Fabrics Culp Decorative Fabrics $ 88,325 107,413 (17.8) % 41.5 % 43.8 % Culp Velvets/Prints 62,147 77,992 (20.3) % 29.2 % 31.8 % Culp Yarn 7,453 8,487 (12.2) % 3.5 % 3.5 % ----------- ----------- -------------- ----------- ------------ 157,925 193,892 (18.6) % 74.2 % 79.0 % Mattress Ticking Culp Home Fashions 54,934 51,587 6.5 % 25.8 % 21.0 % ----------- ----------- -------------- ----------- ------------ * $ 212,859 245,479 (13.3) % 100.0 % 100.0 % =========== =========== ============== =========== ============ * U.S. sales were $87,022 and $97,216 for the second quarter of fiscal 2001 and fiscal 2000, respectively; and $169,312 and $189,340 for the six months of fiscal 2001 and fiscal 2000, respectively. The percentage decrease in U.S. sales was 10.5% for the second quarter and a decrease of 10.6% for the six months.
CULP, INC. FINANCIAL INFORMATION RELEASE INTERNATIONAL SALES BY GEOGRAPHIC AREA FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 29, 2000 AND OCTOBER 31, 1999 (Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED) -------------------------------------------------------------------------- Amounts ----------------------------- Percent of Total Sales October 29, October 31, % Over ---------------------------- Geographic Area 2000 1999 (Under) 2001 2000 ------------------------------- -------------- ------------- ------------ ------------- ----------- North America (Excluding USA) $ 9,556 9,912 (3.6) % 39.9 % 30.7 % Europe 1,807 6,069 (70.2) % 7.5 % 18.8 % Middle East 5,489 8,960 (38.7) % 22.9 % 27.7 % Far East & Asia 5,590 5,357 4.3 % 23.3 % 16.6 % South America 279 630 (55.7) % 1.2 % 1.9 % All other areas 1,238 1,398 (11.4) % 5.2 % 4.3 % -------------- ------------- ------------ ------------- ----------- $ 23,959 32,326 (25.9) % 100.0 % 100.0 % ============== ============= ============ ============= =========== SIX MONTHS ENDED (UNAUDITED) -------------------------------------------------------------------------- Amounts ----------------------------- Percent of Total Sales October 29, October 31, % Over ---------------------------- Geographic Area 2000 1999 (Under) 2001 2000 ------------------------------- -------------- ------------- ------------ ------------- ----------- North America (Excluding USA) $ 17,951 17,588 2.1 % 41.2 % 31.3 % Europe 3,259 8,998 (63.8) % 7.5 % 16.0 % Middle East 10,532 15,952 (34.0) % 24.2 % 28.4 % Far East & Asia 8,826 9,666 (8.7) % 20.3 % 17.2 % South America 585 1,250 (53.2) % 1.3 % 2.2 % All other areas 2,394 2,685 (10.8) % 5.5 % 4.8 % -------------- ------------- ------------ ------------- ----------- $ 43,547 56,139 (22.4) % 100.0 % 100.0 % ============== ============= ============ ============= =========== International sales, and the percentage of total sales, for each of the last five fiscal years follows: fiscal 1996-$77,397 (22%); fiscal 1997-$101,571 (25%); fiscal 1998-$137,223 (29%); fiscal 1999-$113,354 (23%); and fiscal 2000-$111,104 (23%). International sales for the second quarter represented 21.6% and 25.0% for 2001 and 2000, respectively. Year-to-date international sales represented 20.5% and 22.9% of total sales for 2001 and 2000, respectively.
Culp, Inc. SALES BY SEGMENT/DIVISION - TREND ANALYSIS 1999 vs 2000 vs 2001 (Amounts in thousands)
Fiscal 1999 Fiscal 2000 ------------------------------------------------- ------------------------------------------- Segment/Division Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL ------------------------------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------- Upholstery Fabrics Culp Decorative Fabrics 51,445 59,573 50,520 60,520 222,058 50,516 56,897 49,654 56,130 213,197 Culp Velvets/Prints 29,994 38,728 34,949 40,402 144,073 36,209 41,783 34,050 39,501 151,543 Culp Yarn 6,596 6,367 4,088 4,462 21,513 4,129 4,358 4,274 4,809 17,570 ------------------------------------------------- ------------------------------------------- 88,035 104,668 89,557 105,384 387,644 90,854 103,038 87,978 100,440 382,310 Mattress Ticking Culp Home Fashions 22,632 23,491 22,536 26,781 95,440 25,083 26,504 25,203 28,979 105,769 ------------------------------------------------- ------------------------------------------- 110,667 128,159 112,093 132,165 483,084 115,937 129,542 113,181 129,419 488,079 ================================================= =========================================== Percent increase(decrease) from prior year: Segment/Division ------------------------------- Upholstery Fabrics Culp Decorative Fabrics 29.2 4.9 (5.4) 0.6 5.7 (1.8) (4.5) (1.7) (7.3) (4.0) Culp Velvets/Prints (21.9) (11.8) (20.6) (10.3) (15.9) 20.7 7.9 (2.6) (2.2) 5.2 Culp Yarn 100.0 100.0 437.2 (37.3) 173.1 (37.4) (31.6) 4.5 7.8 (18.3) ------------------------------------------------- ------------------------------------------- 12.6 3.9 (8.8) (6.2) (0.5) 3.2 (1.6) (1.8) (4.7) (1.4) Mattress Ticking Culp Home Fashions 6.3 5.7 11.2 13.9 9.3 10.8 12.8 11.8 8.2 10.8 ------------------------------------------------- ------------------------------------------- 11.2 4.3 (5.4) (2.7) 1.3 4.8 1.1 1.0 (2.1) 1.0 ================================================= =========================================== Overall Growth Rate Internal (without acquisitions) (4.6) (0.9) (8.5) (2.7) (4.1) 4.8 1.1 1.0 (2.1) 1.0 External 15.8 5.2 3.1 - 5.4 - - - - - ------------------------------------------------- ------------------------------------------- 11.2 4.3 (5.4) (2.7) 1.3 4.8 1.1 1.0 (2.1) 1.0 ================================================= =========================================== Culp, Inc. SALES BY SEGMENT/DIVISION - TREND ANALYSIS 1999 vs 2000 vs 2001 (Amounts in thousands) Fiscal 2001 ---------------------------------------------- Segment/Division Q1 Q2 Q3 Q4 TOTAL ------------------------------- -------- ------- ------- ------- ------- Upholstery Fabrics Culp Decorative Fabrics 41,533 46,792 88,325 Culp Velvets/Prints 30,074 32,073 62,147 Culp Yarn 3,319 4,134 7,453 ---------------------------------------------- 74,926 82,999 157,925 Mattress Ticking Culp Home Fashions 26,952 27,982 54,934 ---------------------------------------------- 101,878 110,981 212,859 ============================================== Segment/Division ------------------------------- Upholstery Fabrics Culp Decorative Fabrics (17.8) (17.8) (17.8) Culp Velvets/Prints (16.9) (23.2) (20.3) Culp Yarn (19.6) (5.1) (12.2) ---------------------------------------------- (17.5) (19.4) (18.6) Mattress Ticking Culp Home Fashions 7.5 5.6 6.5 ---------------------------------------------- (12.1) (14.3) (13.3) =============================================== Overall Growth Rate Internal (without acquisitions) (12.1) (14.3) (13.3) External - - - =============================================== (12.1) (14.3) (13.3) ===============================================
CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three and six month periods ended October 29, 2000 and October 31, 1999 INCOME STATEMENT COMMENTS GENERAL - For the second quarter, net sales decreased 14.3% to $111.0 million compared to the same quarter of fiscal 2000; and the company reported net income of $342,000, or $0.03 per share diluted (based on 11,270,000 average shares outstanding) versus $0.27 per share diluted (based on 11,868,000 average shares outstanding). For the first six months of fiscal 2001, net sales decreased 13.3% to $212.9 million, and the company reported a net loss of $1.4 million, or $0.13 per share diluted (based on 11,282,000 average shares outstanding), versus net income of $4.8 million, or $0.39 per share diluted (based on 12,044,000 average shares outstanding during the period), a year ago. The company's strategic plan encompasses several competitive initiatives: Broad Product Offering - continuing to market one of the broadest product lines in upholstery fabrics and mattress ticking. Through its extensive manufacturing capabilities, the company competes in every major category except leather; Diverse Global Customer Base - maintaining a diverse, global customer base. The company has long-standing relationships with most major upholstery furniture manufacturers. One customer accounted for approximately 10% of net sales during the second quarter of fiscal 2001. Ownership of the resources in the home furnishings industry is becoming increasingly concentrated, and the company is seeking to increase its business further with existing customers. Culp is also pursuing opportunities in other end-use markets in addition to U.S. residential furniture, such as bedding, international, commercial furniture and juvenile furniture; Design Innovation - continuing to invest in personnel and other resources for the design of upholstery fabrics and ticking with appealing patterns and textures. An integral component of the value Culp provides to customers is supplying fabrics that are fashionable and match current consumer preferences. The company's principal design resources are consolidated in a single facility that has advanced CAD systems and promotes a sharing of innovative designs among the divisions; Vertical Integration - operating as a vertically integrated manufacturer and taking advantage of economies that can be gained by producing the raw material components that are used in the manufacture of its products; and Additional Acquisitions - investing in selective acquisitions complementary to existing segments. NET SALES - Compared with the second quarter of fiscal 2000, upholstery fabric sales decreased 19.4% to $83.0 million and mattress ticking sales increased 5.6% to $28.0 million (See Sales by Segment/Division schedule on Page 5 and Sales by Segment/Division - Trend Analysis on Page 7). International sales were down 25.9% for the quarter and 22.4% for the first six months. The company had expected that results for the second quarter would be down from the year-earlier period but would represent an improvement compared with the first quarter. Key factors influencing the year-to-year comparisons were further increases in the relative strength of the dollar, which affects Culp's sales to customers outside the United States, and a continued weakness in consumer spending on home furnishings, especially in the promotional price category. Also affecting the promotional price category was the bankruptcy of a major furniture retailer which impacted the domestic demand for upholstered furniture. The decline in sales of upholstery fabrics was offset in part by increased sales from Culp Home Fashions (primarily mattress ticking). Culp's growth in mattress ticking continues to be driven by the introduction of new designs and fabric constructions as well as the advantages of the company's vertical integration. Sales in the company's third fiscal quarter are typically lower than in the second period due to holidays and scheduled, seasonal plant shutdowns. Based on that historical pattern and current trends, the company believes that it may report a loss in the third quarter. The trend in results over the remainder of this fiscal year will be determined by a number of factors including the overall trend in consumer spending on home furnishings and the fluctuation of the dollar relative to other currencies. GROSS PROFIT - Gross profit declined 28.8% for the second quarter versus a year ago and decreased as a percentage of net sales from 18.3% to 15.2%. The decline was due principally to lower sales volume for the period which led to unfavorable cost variances in the company's upholstery fabrics operation. The company has taken steps to lower expenses by consolidating certain operations and reducing personnel, but these actions were not sufficient to offset the impact of the significantly lower sales. SG&A EXPENSES - SG&A expenses for the second quarter decreased as a percentage of sales from 12.4% to 12.2%. The dollar amount of these expenses declined 15.9% from a year ago, reflecting the company's actions to reduce expenses and the fact that a portion of these expenses is variable based on the level of sales. Partially offsetting these reductions are higher severance costs. INTEREST EXPENSE - Interest expense of $2.3 million for the second quarter was down slightly from $2.5 million in the prior year due to slightly lower average borrowings. OTHER EXPENSE (INCOME), NET - Other expense (income) for the second quarter totaled $575,000 compared with $416,000 in the prior year. The increase is principally due to lower investment income on assets related to the company's nonqualified deferred compensation plan. INCOME TAXES - The effective tax rate for the six months was 33.0% versus 34.0% in the year-earlier period. EBITDA - Due principally to the lower earnings for the period, EBITDA for the second quarter decreased 34% to $8.2 million from $12.4 million in the prior year. BALANCE SHEET COMMENTS WORKING CAPITAL - Accounts receivable as of October 29, 2000 decreased 8.3% from the year-earlier level, due principally to the lower sales for the period. Days sales outstanding increased to 52 days at October 29, 2000 compared with 49 a year ago. The aging of accounts receivable was 94.7% current and less than 30 days past due versus 96.7% a year ago. Inventories at the close of the second quarter decreased 6.7% from a year ago. Inventory turns for the second quarter were 5.1 versus 5.5 for the year-earlier period. Operating working capital (comprised of accounts receivable, inventory and accounts payable) was $106.6 million at October 29, 2000, down from $109.6 million a year ago. PROPERTY, PLANT AND EQUIPMENT - During fiscal 2000 the company's capital spending increased to $22.6 million compared with $10.7 million in the prior year. The level of capital spending in fiscal 2001 is budgeted to be approximately $16 million. Spending through the first half totaled $3.7 million. Depreciation for fiscal 2001 is estimated to be $20.5 million. LONG-TERM DEBT - The company's funded debt-to-capital ratio was 50.1% at October 29, 2000 compared with 51.7% a year ago. Funded debt was $126.8 million at October 29, 2000 compared with $134.5 million a year ago. Funded debt equals long-term debt, including current maturities, less restricted investments, which represent unspent IRB funds. STOCK REPURCHASE In separate authorizations in June 1998, March 1999, September 1999 and December 1999, the Board of Directors authorized the use of a total of $20.0 million to repurchase the company's common stock. Over the past two fiscal years, the company has invested $12.2 million to repurchase a total of 1.8 million shares. No purchases were made during the first six months of fiscal 2001.