-----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, B0MC56ra1FnYQf9t/gCbVkwefBHsVZfq4XhpPkwiZ0Sa8LdngkQEH6bA+ZD9O1qX W86i346SZr4/P2pOdEHdjA== 0000723603-99-000002.txt : 19990218 0000723603-99-000002.hdr.sgml : 19990218 ACCESSION NUMBER: 0000723603-99-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990131 ITEM INFORMATION: FILED AS OF DATE: 19990217 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: SEC FILE NUMBER: 001-12597 FILM NUMBER: 99544520 BUSINESS ADDRESS: STREET 1: 101 S MAIN ST CITY: HIGH POINT STATE: NC ZIP: 27261-2686 BUSINESS PHONE: 3368895161 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 1/31/99 - ------------------------------------------------------------------ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------- Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ------------- Date of Report (Date of earliest event reported) February 17, 1999 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 (2 pages) and Financial Information Release (10 pages), both dated February 17, 1999, related to the fiscal 1999 third quarter ended January 31, 1999. Forward Looking Information. This Report contains statements that could be deemed "forward-looking statements" within the meaning of the federal securities laws. 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 by international shipments, strengthening of the U. S. dollar against other currencies could make the Company's products less competitive on the basis of price in markets outside the United States. Additionally, economic and political instability in international areas could affect the demand for the Company's products. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CULP, INC. (Registrant) By: Phillip W. Wilson Vice President and Chief Financial Officer Dated: February 17, 1999 FOR IMMEDIATE RELEASE CULP REPORTS THIRD QUARTER EARNINGS HIGH POINT, N.C. (Feb. 17, 1999) - Culp, Inc. (NYSE:CFI) today reported earnings for the third fiscal quarter ended January 31, 1999. For the three months ended January 31, 1999, Culp reported that net sales amounted to $112.1 million compared with $118.5 million a year ago. Net income for the quarter was $1.5 million, or $0.12 per share diluted, compared with $4.0 million, or $0.31 per share diluted. Net sales for the first nine months totaled $350.9 million compared with $340.9 million in the first nine months of fiscal 1998. Net income for the first nine months amounted to $206,000, or $0.02 per share diluted, versus $11.4 million, or $0.88 per share diluted. "We are continuing to achieve operational progress as a result of the organizational restructuring completed earlier this year," said Robert G. Culp, III, chief executive officer. "The third fiscal quarter is historically not the strongest period of the year for our business due to seasonal factors. Although net income for the third quarter was lower than a year ago, the level of profitability did improve from the second period. We believe the underlying momentum is positive in several key corporate areas. Customer service has been enhanced as a result of the decision to combine our various operations by major product categories. This alignment is encouraging closer working relationships with accounts and assisting us in the vital process of creating new fabric designs and textures. Our intent is to link design resources with manufacturing capabilities in order to provide the marketplace with innovative designs that offer compelling value for furniture and bedding manufacturers." Culp added, "As we have indicated, we believe the impact of the changes that have been implemented will continue into fiscal 2000. We are confident about the fundamental growth opportunities for Culp both in the United States and internationally and are encouraged by the continuing favorable trends in measures such as consumer confidence, employment levels and mortgage rates that have an important influence on consumer spending on home furnishings." Culp, Inc. 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 primarily in the production of residential and commercial furniture and bedding products. CULP, INC. Condensed Financial Highlights (Unaudited) Three Months Ended January 31, February 1, 1999 1998 Net sales $112,093,000 $118,457,000 Net income 1,539,000 4,002,000 Net income per share Basic $ 0.12 $ 0.32 Diluted $ 0.12 $ 0.31 Average shares outstanding Basic 12,995,000 12,692,000 Diluted 13,124,000 12,986,000 Nine Months Ended January 31, February 1, 1999 1998 Net sales $350,919,000 $340,881,000 Net income 206,000 11,357,000 Net income per share Basic $ 0.02 $ 0.90 Diluted $ 0.02 $ 0.88 Average shares outstanding Basic 12,997,000 12,663,000 Diluted 13,171,000 12,964,000 This release contains statements that could be deemed "forward-looking statements," within the meaning of the federal securities laws. 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 by 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. -END- CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 31, 1999 AND FEBRUARY 1, 1998
(Amounts in Thousands, Except for Per Share Data) THREE MONTHS ENDED (UNAUDITED) ----------------------------------------------------------- Amounts Percent of Sales ---------------------- -------------------- January 31, February 1, % Over 1999 1998 (Under) 1999 1998 ---------- ---------- -------------- --------- --------- Net sales $ 112,093 118,457 (5.4)% 100.0 % 100.0 % Cost of sales 92,911 97,554 (4.8)% 82.9 % 82.4 % ---------- ---------- -------------- --------- --------- Gross profit 19,182 20,903 (8.2)% 17.1 % 17.6 % Selling, general and administrative expenses 14,100 13,162 7.1 % 12.6 % 11.1 % ---------- ---------- -------------- --------- --------- Income from operations 5,082 7,741 (34.3)% 4.5 % 6.5 % Interest expense 2,308 2,180 5.9 % 2.1 % 1.8 % Interest income (10) (73) (86.3)% (0.0)% (0.1)% Other expense (income), net 492 492 0.0 % 0.4 % 0.4 % ---------- ---------- -------------- --------- --------- Income before income taxes 2,292 5,142 (55.4)% 2.0 % 4.3 % Income taxes * 753 1,140 (33.9)% 32.9 % 22.2 % ---------- ---------- -------------- --------- --------- Net income $ 1,539 4,002 (61.5)% 1.4 % 3.4 % ========== ========== ============== ========= ========= Net income per share $0.12 $0.32 (62.5)% Net income per share, assuming dilution $0.12 $0.31 (61.3)% Dividends per share $0.035 $0.035 0.0 % Average shares outstanding 12,995 12,692 2.4 % Average shares outstanding, assuming dilution 13,124 12,986 1.1 % NINE MONTHS ENDED (UNAUDITED) ----------------------------------------------------------- Amounts Percent of Sales ---------------------- -------------------- January 31, February 1, % Over 1999 1998 (Under) 1999 1998 ---------- ---------- -------------- --------- --------- Net sales $ 350,919 340,881 2.9 % 100.0 % 100.0 % Cost of sales 297,652 280,510 6.1 % 84.8 % 82.3 % ---------- ---------- -------------- --------- --------- Gross profit 53,267 60,371 (11.8)% 15.2 % 17.7 % Selling, general and administrative expenses 44,047 37,710 16.8 % 12.6 % 11.1 % ---------- ---------- -------------- --------- --------- Income from operations 9,220 22,661 (59.3)% 2.6 % 6.6 % Interest expense 7,133 5,280 35.1 % 2.0 % 1.5 % Interest income (82) (235) (65.1)% (0.0)% (0.1)% Other expense (income), net 1,866 1,159 61.0 % 0.5 % 0.3 % ---------- ---------- -------------- --------- --------- Income before income taxes 303 16,457 (98.2)% 0.1 % 4.8 % Income taxes * 97 5,100 (98.1)% 32.0 % 31.0 % ---------- ---------- -------------- --------- --------- Net income $ 206 11,357 (98.2)% 0.1 % 3.3 % ========== ========== ============== ========= ========= Net income per share $0.02 $0.90 (97.8)% Net income per share,assuming dilution $0.02 $0.88 (97.7)% Dividends per share $0.105 $0.105 0.0 % Average shares outstanding 12,997 12,663 2.6 % Average shares outstanding, assuming dilution 13,171 12,964 1.6 %
* Percent of sales column is calculated as a % of income before income taxes. CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED BALANCE SHEETS JANUARY 31, 1999, FEBRUARY 1, 1998 AND MAY 3, 1998 Unaudited
(Amounts in Thousands) Amounts --------------------------- Increase January 31, February 1, (Decrease) * ---------------------- May 3, 1999 1998 Dollars Percent 1998 ------------- ---------- ---------- --------- ------- Current assets Cash and cash investments $ 655 348 307 88.2 % 2,312 Accounts receivable 63,090 73,109 (10,019) (13.7)% 73,773 Inventories 69,210 75,032 (5,822) (7.8)% 78,594 Other current assets 7,560 7,202 358 5.0 % 7,808 ------------- ---------- ---------- --------- ------- Total current assets 140,515 155,691 (15,176) (9.7)% 162,487 Restricted investments 3,416 3,976 (560) (14.1)% 4,021 Property, plant & equipment, net 125,885 113,658 12,227 10.8 % 128,805 Goodwill 51,615 48,558 3,057 6.3 % 55,162 Other assets 5,017 5,439 (422) (7.8)% 4,340 ------------- ---------- ---------- --------- ------- Total assets $ 326,448 327,322 (874) (0.3) % 354,815 ============= ========== ========== ========= ======= Current liabilities Current maturities of long-term debt $ 1,678 1,120 558 49.8 % 3,325 Accounts payable 25,808 35,921 (10,113) (28.2)% 37,214 Accrued expenses 17,317 12,683 4,634 36.5 % 17,936 Income taxes payable 0 1,941 (1,941) (100.0)% 1,282 ------------- ---------- ---------- --------- ------- Total current liabilities 44,803 51,665 (6,862) (13.3)% 59,757 Long-term debt 140,210 144,079 (3,869) (2.7)% 152,312 Deferred income taxes 11,227 9,965 1,262 12.7 % 11,227 ------------- ---------- ---------- --------- ------- Total liabilities 196,240 205,709 (9,469) (4.6)% 223,296 Shareholders'equity 130,208 121,613 8,595 7.1 % 131,519 ------------- ---------- ---------- --------- ------- Total liabilities and shareholders' equity $ 326,448 327,322 (874) (0.3)% 354,815 ============= ========== ========== ========= ======= Shares outstanding 12,995 12,700 295 2.3 % 13,007 ============= ========== ========== ========= =======
* Derived from audited financial statements. CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JANUARY 31, 1999 AND FEBRUARY 1, 1998 Unaudited (Amounts in Thousands)
NINE MONTHS ENDED ------------------------ Amounts ---------------------- January 31, February 1, 1999 1998 ----------- ---------- Cash flows from operating activities: Net income $ 206 11,357 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 13,785 10,660 Amortization of intangible assets 1,174 883 Changes in assets and liabilities: Accounts receivable 10,546 (16,418) Inventories 9,984 (16,330) Other current assets 303 (1,752) Other assets (95) (1,942) Accounts payable (8,609) 8,783 Accrued expenses (973) (2,175) Income taxes payable (1,282) 361 ----------- --------- Net cash provided by (used in) operating activities 25,039 (6,573) ----------- --------- Cash flows from investing activities: Capital expenditures (8,500) (28,183) Purchases of restricted investments (73) (8,724) Purchase of investments to fund deferred compensation liability (735) (581) Sale of restricted investments 678 15,766 Businesses acquired 0 (37,156) ----------- --------- Net cash used in investing activities (8,630) (58,878) ----------- --------- Cash flows from financing activities: Proceeds from issuance of long-term debt 2,535 77,600 Principal payments on long-term debt (16,284) (9,042) Change in accounts payable-capital expenditures (2,800) (2,765) Dividends paid (1,365) (1,333) Common stock issued (purchased) (152) 509 ----------- -------- Net cash provided by (used in) financing activities (18,066) 64,969 ----------- --------- Decrease in cash and cash investments (1,657) (482) Cash and cash investments at beginning of period 2,312 830 ----------- --------- Cash and cash investments at end of period $ 655 348 =========== =========
CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL ANALYSIS JANUARY 31, 1999
FISCAL 98 FISCAL 99 -------- --------------------------------------- --------- Q3 Q1 Q2 Q3 Q4 LTM -------- --------------------------------------- --------- INVENTORIES Inventory turns 5.4 4.9 5.7 5.2 RECEIVABLES Days sales in receivables 52 48 52 47 Percent current & less than 30 days past due 94.1% 93.8% 94.9% 94.1% WORKING CAPITAL Current ratio 3.0 3.1 3.0 3.1 Working capital turnover (4) 4.7 4.5 4.4 4.4 Operating working capital (4) $112,220 $111,481 $112,750 $106,492 PROPERTY, PLANT & EQUIPMENT Depreciation rate 7.4% 7.7% 8.4% 7.9% Percent property, plant & equipment are depreciated 44.8% 43.8% 45.0% 46.1% Capital expenditures $35,879 (1) $2,858 $3,585 $2,057 PROFITABILITY Return on average total capital 8.3% (1.6%) 4.2% 4.5% 3.8% Return on average equity 13.4% (8.1%) 4.1% 4.7% 3.4% Net income (loss) per share $0.32 ($0.20) $0.10 $0.12 $0.34 Net income (loss) per share (diluted) $0.31 ($0.20) $0.10 $0.12 $0.33 LEVERAGE (3) Total liabilities/equity 169.2% 167.2% 164.9% 150.7% Funded debt/equity 116.1% 119.7% 115.0% 106.3% Funded debt/capital employed 53.7% 54.5% 53.5% 51.5% Funded debt $141,223 $153,559 $148,479 $138,472 Funded debt/EBITDA (LTM) (6) 2.95 3.75 3.95 3.91 EBITDA/Interest expense, net (LTM) 7.5 4.9 4.2 3.9 OTHER Book value per share $9.58 $9.87 $9.94 $10.02 Employees at quarter end 3,771 4,230 4,014 3,949 Sales per employee (annualized) $129,000 $103,000 $124,000 $113,000 Capital employed (3) $262,836 $281,831 $277,603 $268,680 Effective income tax rate 22.2% 33.0% 33.0% 32.9% EBITDA (2) $11,390 $3,142 $9,649 $9,522 $34,109 EBITDA/net sales 9.6% 2.8% 7.5% 8.5% 7.0%
(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 PRODUCT CATEGORY/BUSINESS UNIT FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 31, 1999 AND FEBRUARY 1, 1998 (Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED) --------------------------------------------------- Amounts Percent of Total Sales ------------------ ------------------- January 31, February 1, % Over Product 1999 1998 (Under) 1999 1998 Category/Business Unit - ------------------------- --------- --------- ---------- -------- -------- Upholstery Fabrics Culp Decorative Fabrics $ 50,520 53,415 (5.4)% 45.1 % 45.1 % Culp Velvets/Prints 34,949 44,020 (20.6)% 31.2 % 37.2 % -------- -------- ---------- -------- --------- 85,469 97,435 (12.3)% 76.2 % 82.3 % Mattress Ticking Culp Home Fashions 22,536 20,261 11.2 % 20.1 % 17.1 % Yarn Culp Yarn 4,088 761 437.2 % 3.6 % 0.6 % -------- -------- ---------- -------- --------- * $ 112,093 118,457 (5.4)% 100.0% 100.0 % ======== ======== ========== ======== ========= NINE MONTHS ENDED (UNAUDITED) --------------------------------------------------- Amounts Percent of Total Sales ------------------ ------------------- January 31, February 1, % Over Product 1999 1998 (Under) 1999 1998 Category/Business Unit - ------------------------- --------- --------- ---------- -------- --------- Upholstery Fabrics Culp Decorative Fabrics $ 161,538 150,010 7.7 % 46.0 % 44.0 % Culp Velvets/Prints 103,671 126,345 (17.9)% 29.5 % 37.1 % -------- -------- ---------- -------- --------- 265,209 276,355 (4.0)% 75.6 % 81.1 % Mattress Ticking Culp Home Fashions 68,659 63,765 7.7 % 19.6 % 18.7 % Yarn Culp Yarn 17,051 761 2,140.6 % 4.9 % 0.2 % -------- -------- ---------- -------- --------- * $ 350,919 340,881 2.9 % 100.0% 100.0 % ======== ======== ========== ======== =========
* U.S. sales were $88,152 and $79,873 for the third quarter of fiscal 1999 and fiscal 1998, respectively; and $266,934 and $242,123 for the nine months of fiscal 1999 and fiscal 1998, respectively. The percentage increase in U.S. sales was 10.4% for the third quarter and an increase of 10.2% for the nine months. CULP, INC. FINANCIAL INFORMATION RELEASE INTERNATIONAL SALES BY GEOGRAPHIC AREA FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 31, 1999 AND FEBRUARY 1, 1998 (Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED) ------------------------------------------------------- Amounts Percent of Total Sales --------------------- --------------------- January 31, February 1, % Over Geographic Area 1999 1998 (Under) 1999 1998 - ----------------------- ----------- ---------- --------- --------- --------- North America (Excluding USA) $ 7,280 7,562 (3.7)% 30.4 % 19.6 % Europe 3,881 11,581 (66.5)% 16.2 % 30.0 % Middle East 6,711 9,326 (28.0)% 28.0 % 24.2 % Far East & Asia 4,993 7,957 (37.3)% 20.9 % 20.6 % South America 555 1,230 (54.9)% 2.3 % 3.2 % All other areas 521 928 (43.9)% 2.2 % 2.4 % ---------- --------- --------- --------- --------- $ 23,941 38,584 (38.0)% 100.0 % 100.0 % ========== ========= ========= ========= ========= NINE MONTHS ENDED (UNAUDITED) ------------------------------------------------------- Amounts Percent of Total Sales --------------------- --------------------- January 31, February 1, % Over Geographic Area 1999 1998 (Under) 1999 1998 - ----------------------- ---------- --------- --------- --------- --------- North America (Excluding USA)$ 23,035 22,574 2.0 % 27.4 % 22.9 % Europe 14,787 22,811 (35.2)% 17.6 % 23.1 % Middle East 25,071 23,452 6.9 % 29.9 % 23.7 % Far East & Asia 15,296 23,951 (36.1)% 18.2 % 24.3 % South America 2,793 3,487 (19.9)% 3.3 % 3.5 % All other areas 3,003 2,483 20.9 % 3.6 % 2.5 % ---------- --------- --------- --------- --------- $ 83,985 98,758 (15.0)% 100.0 % 100.0 % ========== ========= ========= ========= =========
International sales, and the percentage of total sales, for each of the last seven fiscal years follows: fiscal 1992-$37,913 (20%); fiscal 1993-$41,471 (21%); fiscal 1994-$44,038 (18%); fiscal 1995-$57,971 (19%); fiscal 1996-$77,397 (22%); fiscal 1997-$101,571 (25%); and fiscal 1998-$137,223 (29%) . International sales for the third quarter represented 21.4% and 32.6% for 1999 and 1998, respectively. Year-to-date international sales represented 23.9% and 29.0% of total sales for 1999 and 1998, respectively. Culp, Inc. SALES BY BUSINESS UNIT - TREND ANALYSIS 1997 vs 1998 vs 1999 Unaudited (Amounts in thousands)
Fiscal 1997 Fiscal 1998 --------------------------------------------- ------------------------------------------ Product Category/Business Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL Units - ---------------------------- Upholstery Fabrics Culp Decorative Fabrics 38,966 45,723 39,342 43,699 167,730 39,814 56,781 53,415 60,155 210,165 Culp Velvets/Prints 34,867 40,233 40,387 40,980 156,467 38,397 43,928 44,020 45,044 171,389 --------------------------------------------- ------------------------------------------ 73,833 85,956 79,729 84,679 324,197 78,211 100,709 97,435 105,199 381,554 Mattress Ticking Culp Home Fashions 16,696 19,248 17,739 20,999 74,682 21,287 22,217 20,261 23,520 87,285 Yarn Culp Yarn - - - - - - - 761 7,115 7,876 --------------------------------------------- ------------------------------------------ 90,529 105,204 97,468 105,678 398,879 99,498 122,926 118,457 135,834 476,715 ============================================= ========================================== Percent increase(decrease) from prior year: Product Category/Business Units - ---------------------------------------------------------------------------------------------------------------------------- Upholstery Fabrics Culp Decorative Fabrics 18.3 12.4 0.2 (4.4) 5.8 2.2 24.2 35.8 37.7 25.3 Culp Velvets/Prints 48.2 25.4 26.9 7.1 24.5 10.1 9.2 9.0 9.9 9.5 --------------------------------------------- ------------------------------------------ 30.8 18.1 12.2 0.8 14.0 5.9 17.2 22.2 24.2 17.7 Mattress Ticking Culp Home Fashions 5.1 7.4 15.3 15.5 10.8 27.5 15.4 14.2 12.0 16.9 Yarn Culp Yarn - - - - - - - 100.0 100.0 100.0 --------------------------------------------- ------------------------------------------ 25.1 16.0 12.7 3.4 13.4 9.9 16.8 21.5 28.5 19.5 ============================================= ========================================== Overall Growth Rate Internal (without acquisitions) 25.1 16.0 12.7 3.4 13.4 9.9 6.6 9.2 11.6 9.3 External - - - - - - 10.2 12.3 16.9 10.2 --------------------------------------------- ------------------------------------------ 25.1 16.0 12.7 3.4 13.4 9.9 16.8 21.5 28.5 19.5 ============================================= ==========================================
Culp, Inc. SALES BY BUSINESS UNIT - TREND ANALYSIS 1997 vs 1998 vs 1999 Unaudited (Amounts in thousands)
Fiscal 1999 -------------------------------------- Product Category/Business Q1 Q2 Q3 Q4 TOTAL Units - ---------------------------- Upholstery Fabrics Culp Decorative Fabrics 51,445 59,573 50,520 161,538 Culp Velvets/Prints 29,994 38,728 34,949 103,671 -------------------------------------- 81,439 98,301 85,469 265,209 Mattress Ticking Culp Home Fashions 22,632 23,491 22,536 68,659 Yarn Culp Yarn 6,596 6,367 4,088 17,051 -------------------------------------- 110,667 128,159 112,093 350,919 ====================================== Percent increase(decrease) from prior year: Product Category/Business Units - ---------------------------- ------------------------------------- Upholstery Fabrics Culp Decorative Fabrics 29.2 4.9 (5.4) 7.7 Culp Velvets/Prints (21.9) (11.8) (20.6) (17.9) -------------------------------------- 4.1 (2.4) (12.3) (4.0) Mattress Ticking Culp Home Fashions 6.3 5.7 11.2 7.7 Yarn Culp Yarn 100.0 100.0 437.2 2,140.6 -------------------------------------- 11.2 4.3 (5.4) 2.9 ====================================== Overall Growth Rate Internal (without acquisitions) (4.6) (0.9) (8.5) (4.6) External 15.8 5.2 3.1 7.5 ------------------------------------- 11.2 4.3 (5.4) 2.9 ======================================
(Page 8 of 10) CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three and nine month periods ended January 31, 1999 and February 1, 1998 INCOME STATEMENT COMMENTS GENERAL - Net sales decreased 5.4% to $112.1 million, and the company reported net income of $1.5 million compared with net income of $4.0 million for the third quarter of last year. Net sales for the quarter, excluding Artee Industries, decreased 8.5% versus the same quarter of last year. Artee Industries was acquired at the beginning of the fourth quarter of fiscal 1998. For the nine months ended January 31, 1999, the company reported net income of $206,000, or $.02 per share, compared with net income of $11.4 million, or $0.88 per share diluted, in the year-earlier period. The company continues to emphasize several key competitive strengths: Broad Product Offering - marketing one of the broadest product lines in the upholstery fabrics and mattress ticking industry. Through its extensive manufacturing capabilities, the company competes in every major category of the industry except leather; 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, and avoiding reliance upon a single customer or small group of dominant customers. No one customer accounted for more than 8% of net sales during the third quarter of fiscal 1999; Design Innovation - investing in the design of new patterns and textures. The company's state-of-the-art design center, which opened in January 1998 in Burlington, North Carolina, has enabled most of the company's design resources to be consolidated into one facility which offers advanced CAD systems for the design process; Vertical Integration - realizing additional manufacturing integration by utilizing the resources now controlled for producing the raw material components used in the manufacture of its products; and Ability to Integrate Acquisitions - investing in selective acquisitions complementary to existing business units. NET SALES - Compared with the third quarter of last year, upholstery fabric sales decreased 12.3% to $85.5 million; mattress ticking sales increased 11.2% to $22.5 million; and yarn sales contributed $4.1 million for the quarter (See Sales by Business Unit schedule on Page 5 and Sales by Business Unit - Trend Analysis on Page 7). International sales were down 38.0% for the quarter. The decline in sales of upholstery fabrics was due principally to a pronounced slowdown in international sales of wet and heat-transfer printed flock fabrics. This trend, which the company believes has also affected other manufacturers of upholstery fabrics, became apparent after the close of fiscal 1998 and has been persistent thus far in fiscal 1999. A large percentage of the company's sales of this product line were being shipped directly or indirectly to customers in the emerging markets of Russia and other former Soviet countries and Eastern Europe. All of these areas are generally experiencing very weak economic conditions which, in turn, have affected demand for furniture and other home furnishings. The company has significantly curtailed production schedules for these fabrics and has shifted its marketing focus for this product category to geographic areas where demand is more favorable. The company is seeking to build a diversified geographic base of customers internationally to minimize the exposure to economic uncertainties in any single geographic area. CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three and nine month periods ended January 31, 1999 and February 1, 1998 The increased sales over the prior year by Culp Home Fashions during the third quarter marked a continuation of the longer-term expansion that this business unit has experienced. Culp's growth in these sales has been driven by the introduction of new designs and fabric constructions as well as the advantages of the company's vertical integration. In particular, Culp's ability to manufacture the jacquard greige, or unfinished, goods that are then printed to produce mattress ticking has aided the company in meeting faster delivery schedules and providing improved overall customer service. GROSS PROFIT - Gross profit declined 8.2% for the quarter versus a year ago. The decline was due principally to lower margins at the Culp Decorative Fabrics and Culp Velvets/Prints units. Factors contributing to reduced profitability of Culp Decorative Fabrics include lower-than-expected sales and competitive pressure on pricing, especially in the jacquard product category. The lower gross profit at Culp Velvets/Prints was due to the sharp decline in international sales of printed flock fabrics. Although this business unit has taken substantial steps to reduce operating expenses, it continued to be affected by excess manufacturing capacity and lower absorption of fixed costs during the third quarter. To help offset the pressure on gross margins, the company has instituted a number of actions. A major change involved a reorganization from six to four business units during the first quarter. This new corporate alignment grouped related operations together and was accompanied by several changes in managerial positions. Steps underway to improve profitability that are related to this realignment include a significant reduction in the capacity for manufacturing printed flock fabrics, comprehensive programs to reduce inventories and an intense effort to reduce operating expenses and raise productivity. S,G&A EXPENSES - S,G&A expenses for the third quarter rose as a percentage of sales to 12.6% from 11.1 % for the same period of last year. This increase was due principally to the shortfall in sales from the volume that the company had planned to support. The increase in absolute dollars from a year ago resulted from the Artee acquisition, increased costs in sampling new product and higher costs for credit expenses. INTEREST EXPENSE - Interest expense increased 5.9% compared with the year-earlier quarter due to higher average borrowings outstanding. The increased borrowings related principally to the acquisition during fiscal 1998 of Artee Industries and the relatively high level of capital expenditures in fiscal 1998. OTHER EXPENSE (INCOME), NET - Other expense (income) of $492,000 was comparable with the year-earlier quarter. INCOME TAXES - The effective tax rate for the quarter was 32.9% compared with 22.2% for the prior year. The lower tax rate in the prior year resulted from higher than expected tax benefits related to the company's foreign sales corporation ("FSC"). EBITDA - EBITDA for the quarter decreased to $9.5 million from $11.4 million for last year's third quarter and represented 8.5% of net sales compared with 9.6% of net sales for the same period of last year. CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three and nine month periods ended January 31, 1999 and February 1, 1998 BALANCE SHEET COMMENTS WORKING CAPITAL - Accounts receivable decreased 13.7% from February 1, 1998, while sales decreased 5.4% for the third quarter. Days sales outstanding represented 47 days, down from 52 days at February 1, 1998 and from 49 days at May 3, 1998. Additionally, the aging of accounts receivable was 94.1% current and less than 30 days past due versus 94.1% at February 1, 1998. Inventories decreased 7.8 % from February 1, 1998, and inventory turns were 5.2 versus 5.4 for last year's third quarter. The inventory decrease is due to a decrease in upholstery fabric inventories. Operating working capital (comprised of accounts receivable, inventory and accounts payable) decreased to $106.5 million at January 31, 1999, for the reasons mentioned above, from $112.2 million at February 1, 1998. The balance at May 3, 1998 was $115.2 million. PROPERTY, PLANT AND EQUIPMENT - For fiscal 1999, the company has significantly reduced its planned capital spending to $10-$15 million as compared with $35.9 million spent in fiscal 1998. Culp is focused instead on improving the results of the investments made during fiscal 1997 and fiscal 1998. The two largest projects that are currently underway for fiscal 1999 are: (a) completion of the polypropylene yarn extrusion expansion, which began in early fiscal 1998; and (b) building expansions in the Culp Home Fashions business unit to accommodate growth in the company's sales of mattress ticking. Depreciation for fiscal 1999 is currently estimated to be approximately $19 million. LONG-TERM DEBT - The company's funded debt-to-capital ratio was 51.5% at January 31, 1999, down from 53.7% at February 1, 1998 and from 53.5% at May 3, 1998. Funded debt was $138.5 million at January 31, 1999, down from $141.2 million at February 1, 1998 and from $151.6 million at May 3, 1998. (Funded debt equals long-term debt, including current maturities, less restricted investments, which represent unspent IRB funds). The decrease in funded debt from May 3, 1998 resulted primarily from an operating cash flow of $25.0 million, offset by capital expenditures of $8.5 million and a decrease in accounts payable related to capital expenditures of $2.8 million. -----END PRIVACY-ENHANCED MESSAGE-----