-----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, M2TN8ciJtFQUf0WUPQntFvEjwbVXpp7v9S+69yd2HCky7Bh9RHfIZGJ10I3tmt5N T1p7RZt3G0CFCtGzT/GrJg== 0000723603-99-000012.txt : 19990819 0000723603-99-000012.hdr.sgml : 19990819 ACCESSION NUMBER: 0000723603-99-000012 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990801 ITEM INFORMATION: FILED AS OF DATE: 19990818 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: 99695584 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 8/1/99 - -------------------------------------------------------------------------------- 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) August 18, 1999 CULP, INC. (Exact name of registrant as specified in its charter) North Carolina 0-12781 56-1001967 (State or other jurisdiction of (Commission File No.) (IRS Employer incorporation) Identification No.) 101 South Main Street High Point, North Carolina 27260 (Address of principal executive offices) (336) 889-5161 (Registrant's telephone number, including area code) (Former name or former address, if changed since last report) - -------------------------------------------------------------------------------- Item 5. Other Events See attached Press Release (2 pages) and Financial Information Release (10 pages), both dated August 18, 1999, related to the fiscal 2000 first quarter ended August 1, 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 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: August 18, 1999 FOR IMMEDIATE RELEASE CULP REPORTS FIRST QUARTER NET INCOME HIGH POINT, N. C. (Aug. 18, 1999) - Culp, Inc. (NYSE: CFI) today reported net income of $1.6 million for the first quarter of its 2000 fiscal year. For the three months ended August 1, 1999, Culp reported net sales increased to $115.9 million compared with $110.7 million a year ago. The company reported net income for the quarter of $1.6 million, or $0.13 per share diluted, compared with a net loss of $2.6 million, or $0.20 per share diluted, in the year-earlier quarter. "The favorable year-to-year comparisons for the first quarter extend the positive momentum that we achieved as fiscal 1999 progressed," said Robert G. Culp, III, chief executive officer. "A primary goal for us in fiscal 2000 is to sustain this pattern of improvement. We are pleased with the recovery to date and are confident about realizing further gains in our level of profitability." Culp noted, "The first fiscal quarter is historically not the strongest period for our industry due to planned vacations and seasonal plant closings. That makes it difficult to gauge the underlying trend in demand. The backdrop of consumer spending on home furnishings still appears favorable, and we are optimistic about the success of the new patterns and textures that will be introduced to retailers this fall. Much of the improvement in our results relates directly to the changes we made in our management structure a year ago. We are continuing to refine our new organizational framework and believe that this realignment has strengthened our ability to capitalize on the trends within the home furnishings industry. Probably the most significant change is the ongoing consolidation at all levels within the supply chain linking manufacturers with consumers. Culp's vertical integration and broad product line equip us to develop strong working relationships with these larger companies that are seeking true corporate partners. Our objective is to provide not only the volume of fabrics and mattress ticking that these accounts need but also consistently high product quality and customer service." Culp indicated that the company is maintaining its stock repurchase program. He said, "During the first quarter, we invested an additional $393,000 to repurchase our shares. We currently have authorization from the Board of Directors to invest an additional $4.1 million in this program. Culp's financial position is enabling us to execute this program and still make the appropriate investments to expand and modernize our capacity. We believe that the repurchase of our shares at attractive market levels will prove to be a sound investment of the company's capital." 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. CULP, INC. Condensed Financial Highlights (Unaudited)
Three Months Ended --------------------------------------------- August 1, August 2, 1999 1998 ------------------- -------------------- Net sales $ 115,937,000 $ 110,667,000 Net income (loss) $ 1,597,000 $ (2,640,000) Net income (loss) per share: Basic $ 0.13 $ (0.20) Diluted $ 0.13 $ (0.20) Average shares outstanding: Basic 12,063,000 13,000,000 Diluted 12,219,000 13,203,000
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 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. -END- CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THREE MONTHS ENDED AUGUST 1, 1999 AND AUGUST 2, 1998
(Amounts in Thousands, Except for Per Share Data) THREE MONTHS ENDED (UNAUDITED) ---------------------------------------------------------------------------------- Amounts Percent of Sales ------------------------------ ------------------------------ August 1, August 2, % Over 1999 1998 (Under) 2000 1999 -------------- -------------- ------------- -------------- -------------- Net sales $ 115,937 110,667 4.8 % 100.0 % 100.0 % Cost of sales 95,525 97,056 (1.6)% 82.4 % 87.7 % -------------- -------------- ------------- -------------- -------------- Gross profit 20,412 13,611 50.0 % 17.6 % 12.3 % Selling, general and administrative expenses 15,038 14,473 3.9 % 13.0 % 13.1 % -------------- -------------- ------------- -------------- -------------- Income (loss) from operations 5,374 (862) 723.4 % 4.6 % (0.8)% Interest expense 2,416 2,361 2.3 % 2.1 % 2.1 % Interest income (17) (53) (67.9)% (0.0)% (0.0)% Other expense (income), net 555 770 (27.9)% 0.5 % 0.7 % -------------- -------------- ------------- -------------- -------------- Income (loss) before income taxes 2,420 (3,940) 161.4 % 2.1 % (3.6)% Income taxes * 823 (1,300) 163.3 % 34.0 % 33.0 % -------------- -------------- ------------- -------------- -------------- Net income (loss) $ 1,597 (2,640) 160.5 % 1.4 % (2.4)% ============== ============== ============= ============== ============== Net income (loss) per share $0.13 ($0.20) 165.0 % Net income (loss) per share, assuming dilution $0.13 ($0.20) 165.0 % Dividends per share $0.035 $0.035 0.0 % Average shares outstanding 12,063 13,000 (7.2)% Average shares outstanding, assuming dilution 12,219 13,203 (7.5)%
* Percent of sales column is calculated as a % of income (loss) before income taxes. CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED BALANCE SHEETS AUGUST 1, 1999, AUGUST 2, 1998 AND MAY 2, 1999 Unaudited (Amounts in Thousands)
Amounts Increase ----------------------------------- (Decrease) August 1, August 2, -------------------------------- * May 2, 1999 1998 Dollars Percent 1999 ----------------- --------------- ---------------- ------------- ------------ Current assets Cash and cash investments $ 1,097 1,520 (423) (27.8)% 509 Accounts receivable 61,984 63,833 (1,849) (2.9)% 70,503 Inventories 75,337 79,358 (4,021) (5.1)% 67,070 Other current assets 10,860 7,511 3,349 44.6 % 9,633 ----------------- --------------- ---------------- ------------- ------------ Total current assets 149,278 152,222 (2,944) (1.9)% 147,715 Restricted investments 1,684 4,074 (2,390) (58.7)% 3,340 Property, plant & equipment, net 120,971 127,287 (6,316) (5.0)% 123,310 Goodwill 50,920 54,798 (3,878) (7.1)% 51,269 Other assets 4,969 4,317 652 15.1 % 4,978 ----------------- --------------- ---------------- ------------- ------------ Total assets $ 327,822 342,698 (14,876) (4.3)% 330,612 ================= =============== ================ ============= ============ Current liabilities Current maturities of long-term debt $ 1,678 3,250 (1,572) (48.4)% 1,678 Accounts payable 26,099 31,710 (5,611) (17.7)% 25,687 Accrued expenses 20,309 13,856 6,453 46.6 % 21,026 Income taxes payable 798 0 798 100.0 % 0 ----------------- --------------- ---------------- ------------- ------------ Total current liabilities 48,884 48,816 68 0.1 % 48,391 Long-term debt 136,228 154,383 (18,155) (11.8)% 140,312 Deferred income taxes 14,583 11,227 3,356 29.9 % 14,583 ----------------- --------------- ---------------- ------------- ------------ Total liabilities 199,695 214,426 (14,731) (6.9)% 203,286 Shareholders' equity 128,127 128,272 (145) (0.1)% 127,326 ----------------- --------------- ---------------- ------------- ------------ Total liabilities and shareholders' equity $ 327,822 342,698 (14,876) (4.3)% 330,612 ================= =============== ================ ============= ============ Shares outstanding 12,040 12,995 (955) (7.3)% 12,079 ================= =============== ================ ============= ============ * Derived from audited financial statements.
CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED AUGUST 1, 1999 AND AUGUST 2, 1998 Unaudited (Amounts in Thousands)
THREE MONTHS ENDED -------------------------------- Amounts -------------------------------- August 1, August 2, 1999 1998 --------------- --------------- Cash flows from operating activities: Net income (loss) $ 1,597 (2,640) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 4,759 4,376 Amortization of intangible assets 399 398 Changes in assets and liabilities: Accounts receivable 8,519 9,940 Inventories (8,267) (764) Other current assets (1,227) 297 Other assets (41) (11) Accounts payable 270 (3,017) Accrued expenses (717) (4,080) Income taxes payable 798 (1,282) --------------- --------------- Net cash provided by operating activities 6,090 3,217 --------------- --------------- Cash flows from investing activities: Capital expenditures (2,420) (2,858) Purchases of restricted investments (15) (53) Sale of restricted investments 1,671 0 --------------- --------------- Net cash used in investing activities (764) (2,911) --------------- --------------- Cash flows from financing activities: Proceeds from issuance of long-term debt 3,333 2,071 Principal payments on long-term debt (7,417) (75) Change in accounts payable-capital expenditures 142 (2,487) Dividends paid (423) (455) Payments to acquire common stock (393) (160) Proceeds from common stock issued 20 8 --------------- --------------- Net cash used in financing activities (4,738) (1,098) --------------- --------------- Increase (decrease) in cash and cash investments 588 (792) Cash and cash investments at beginning of period 509 2,312 --------------- --------------- Cash and cash investments at end of period $ 1,097 1,520 =============== ===============
CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL ANALYSIS AUGUST 1, 1999
FISCAL 99 FISCAL 00 ------------- --------------------------------------------------------- --------------- Q1 Q1 Q2 Q3 Q4 LTM ------------- --------------------------------------------------------- --------------- INVENTORIES Inventory turns 4.9 5.4 RECEIVABLES Days sales in receivables 48 45 Percent current & less than 30 days past due 93.8% 93.2% WORKING CAPITAL Current ratio 3.1 3.1 Working capital turnover (4) 4.5 4.4 Operating working capital (4) $111,481 $111,222 PROPERTY, PLANT & EQUIPMENT Depreciation rate 7.7% 8.0% Percent property, plant & equipment are depreciated 43.8% 49.0% Capital expenditures $10,689 (1) $2,420 PROFITABILITY Return on average total capital (1.6%) 4.8% 5.1% Return on average equity (8.1%) 5.0% 5.7% Net income (loss) per share ($0.20) $0.13 $0.58 Net income (loss) per share (diluted) ($0.20) $0.13 $0.58 LEVERAGE (3) Total liabilities/equity 167.2% 155.9% Funded debt/equity 119.7% 106.3% Funded debt/capital employed 54.5% 51.5% Funded debt $153,559 $136,222 Funded debt/EBITDA (LTM) (6) 3.75 3.33 EBITDA/Interest expense, net (LTM) 4.9 4.3 OTHER Book value per share $9.87 $10.64 Employees at quarter end 4,230 4,050 Sales per employee (annualized) $103,000 $116,000 Capital employed (3) $281,831 $264,349 Effective income tax rate 33.0% 34.0% EBITDA (2) $3,142 $9,977 $40,682 EBITDA/net sales 2.8% 8.6% 8.3% (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 THREE MONTHS ENDED AUGUST 1, 1999 AND AUGUST 2, 1998
(Amounts in thousands) THREE MONTHS ENDED (UNAUDITED) -------------------------------------------------------------------------- Amounts Percent of Total Sales -------------------------- ---------------------------- August 1, August 2, % Over Segment/Division 1999 1998 (Under) 2000 1999 - ------------------------------------ ------------ ------------ --------------- ------------- ------------ Upholstery Fabrics Culp Decorative Fabrics $ 50,516 51,445 (1.8)% 43.6 % 46.5 % Culp Velvets/Prints 36,209 29,994 20.7 % 31.2 % 27.1 % Culp Yarn 4,129 6,596 (37.4)% 3.6 % 6.0 % ------------ ------------ --------------- ------------- ------------ 90,854 88,035 3.2 % 78.4 % 79.5 % Mattress Ticking Culp Home Fashions 25,083 22,632 10.8 % 21.6 % 20.5 % ------------ ------------ --------------- ------------- ------------ * $ 115,937 110,667 4.8 % 100.0 % 100.0 % ============ ============ =============== ============= ============
* U.S. sales were $92,124 and $84,310 for the three months of fiscal 2000 and fiscal 1999, respectively.The percentage increase in U.S. sales was 9.3% for the three months. CULP, INC. FINANCIAL INFORMATION RELEASE INTERNATIONAL SALES BY GEOGRAPHIC AREA FOR THREE MONTHS ENDED AUGUST 1, 1999 AND AUGUST 2, 1998 (Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED) -------------------------------------------------------------------------------- Amounts Percent of Total Sales ------------------------------- ------------------------------ August 1, August 2, % Over Geographic Area 1999 1998 (Under) 2000 1999 - ---------------------------------- --------------- -------------- -------------- ------------- ------------ North America (Excluding USA) $ 7,676 7,253 5.8 % 32.2 % 27.5 % Europe 2,929 3,683 (20.5)% 12.3 % 14.0 % Middle East 6,992 8,300 (15.8)% 29.4 % 31.5 % Far East & Asia 4,309 4,868 (11.5)% 18.1 % 18.5 % South America 620 1,000 (38.0)% 2.6 % 3.8 % All other areas 1,287 1,253 2.7 % 5.4 % 4.8 % --------------- -------------- -------------- ------------- ------------ $ 23,813 26,357 (9.7)% 100.0 % 100.0 % =============== ============== ============== ============= ============
International sales, and the percentage of total sales, for each of the last five fiscal years follows: fiscal 1995-$57,971 (19%); fiscal 1996-$77,397 (22%); fiscal 1997-$101,571 (25%); fiscal 1998-$137,223 (29%); and fiscal 1999-$113,354 (23%). International sales for the first quarter represented 20.5% and 23.8% for 2000 and 1999, respectively. Culp, Inc. SALES BY SEGMENT/DIVISION - TREND ANALYSIS 1998 vs 1999 vs 2000 Unaudited (Amounts in thousands)
Fiscal 1998 Fiscal 1999 ---------------------------------------------- ---------------------------------------------- Segment/Division Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL - ------------------------- Upholstery Fabrics Culp Decorative Fabrics 39,814 56,781 53,415 60,155 210,165 51,445 59,573 50,520 60,520 222,058 Culp Velvets/Prints 38,397 43,928 44,020 45,044 171,389 29,994 38,728 34,949 40,402 144,073 Culp Yarn - - 761 7,115 7,876 6,596 6,367 4,088 4,462 21,513 ---------------------------------------------- ---------------------------------------------- 78,211 100,709 98,196 112,314 389,430 88,035 104,668 89,557 105,384 387,644 Mattress Ticking Culp Home Fashions 21,287 22,217 20,261 23,520 87,285 22,632 23,491 22,536 26,781 95,440 ---------------------------------------------- ---------------------------------------------- 99,498 122,926 118,457 135,834 476,715 110,667 128,159 112,093 132,165 483,084 ============================================== ============================================== Percent increase(decrease) from prior year: Segment/Division - ------------------------- Upholstery Fabrics Culp Decorative Fabrics 2.2 24.2 35.8 37.7 25.3 29.2 4.9 (5.4) 0.6 5.7 Culp Velvets/Prints 10.1 9.2 9.0 9.9 9.5 (21.9) (11.8) (20.6) (10.3) (15.9) Culp Yarn - - 100.0 100.0 100.0 100.0 100.0 437.2 (37.3) 173.1 ---------------------------------------------- ---------------------------------------------- 5.9 17.2 23.2 32.6 20.1 12.6 3.9 (8.8) (6.2) (0.5) Mattress Ticking Culp Home Fashions 27.5 15.4 14.2 12.0 16.9 6.3 5.7 11.2 13.9 9.3 ---------------------------------------------- ---------------------------------------------- 9.9 16.8 21.5 28.5 19.5 11.2 4.3 (5.4) (2.7) 1.3 ============================================== ============================================== Overall Growth Rate Internal (without acquisitions) 9.9 6.6 9.2 11.6 9.3 (4.6) (0.9) (8.5) (2.7) (4.1) External - 10.2 12.3 16.9 10.2 15.8 5.2 3.1 - 5.4 ---------------------------------------------- ---------------------------------------------- 9.9 16.8 21.5 28.5 19.5 11.2 4.3 (5.4) (2.7) 1.3 ============================================== ==============================================
Culp, Inc. SALES BY SEGMENT/DIVISION - TREND ANALYSIS 1998 vs 1999 vs 2000 Unaudited (Amounts in thousands)
Fiscal 2000 ----------------------------------------------- Segment/Division Q1 Q2 Q3 Q4 TOTAL - ------------------------- Upholstery Fabrics Culp Decorative Fabrics 50,516 50,516 Culp Velvets/Prints 36,209 36,209 Culp Yarn 4,129 4,129 ----------------------------------------------- 90,854 90,854 Mattress Ticking Culp Home Fashions 25,083 25,083 ----------------------------------------------- 115,937 115,937 =============================================== Percent increase(decrease) from prior year: Segment/Division - ------------------------- Upholstery Fabrics Culp Decorative Fabrics (1.8) (1.8) Culp Velvets/Prints 20.7 20.7 Culp Yarn (37.4) (37.4) ----------------------------------------------- 3.2 3.2 Mattress Ticking Culp Home Fashions 10.8 10.8 ----------------------------------------------- 4.8 4.8 =============================================== Overall Growth Rate Internal (without acquisitions) 4.8 4.8 External - - =============================================== 4.8 4.8 ===============================================
CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three month periods ended August 1, 1999 and August 2, 1998 INCOME STATEMENT COMMENTS GENERAL - For the first quarter, net sales increased 4.8% to $115.9 million; and net income amounted to $1.6 million, or $0.13 per share diluted, versus a net loss a year ago of $2.6 million, or $0.20 per share diluted. 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 - increasing its penetration into other end-use markets in addition to U.S. residential furniture, such as bedding, international, commercial furniture and juvenile furniture. The company has long-standing relationships with most major upholstery furniture manufacturers, but is not reliant on a single customer or a small group of dominant customers. No one customer accounted for more than 9% of net sales during the first quarter of fiscal 2000; Design Innovation - continuing to invest in 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 meet current consumer preferences. The company's principal design resources are consolidated in a single facility that provides 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/divisions. NET SALES - Compared with the first quarter of last year, upholstery fabric sales increased 3.2% to $90.8 million and mattress ticking sales increased 10.8% to $25.1 million (See Sales by Segment/Division schedule on Page 5 and Sales by Segment/Division - Trend Analysis on Page 7). International sales were down 9.7% for the quarter compared to a year ago. The first fiscal quarter is historically not the strongest period of the year for Culp due to planned vacations and seasonal industry-wide plant closings. During the first quarter of fiscal 1999, the company implemented a major reorganization from six business units to four divisions. This new corporate alignment grouped related operations together and was accompanied by several changes in managerial positions. The company believes that this move is aiding its growth through improved customer service, more effective use of design resources and increased manufacturing efficiency. Results for the first quarter of fiscal 2000 include a 3.2% increase in sales of upholstery fabrics, reflecting higher sales of upholstery fabrics to U.S.-based customers that offset some further softness in international sales. The trend of weakness in international sales, which the company believes has also affected other manufacturers of upholstery fabrics, has persisted since the close of fiscal 1998. During fiscal 1999, the company took steps to mitigate the impact of this industry-wide trend by significantly curtailing production schedules for certain international-targeted fabrics, introducing a new line of printed cotton upholstery fabrics and shifting its marketing focus to geographic areas where demand appears more favorable. The company has a diversified global base of customers and is seeking to broaden that further to minimize exposure to economic uncertainties in any geographic area. CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three month periods ended August 1, 1999 and August 2, 1998 The company also benefited in the first quarter from increased sales by Culp Home Fashions (primarily mattress ticking) which has experienced a longer-term pattern of expansion. 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. In particular, the ability to manufacture the jacquard greige (or unfinished) goods that are then printed to produce mattress ticking has aided Culp in meeting faster delivery schedules and providing improved overall customer service. GROSS PROFIT - Gross profit for the first quarter increased 50.0% to $20.4 million and increased as a percentage of net sales from 12.3% to 17.6%. The increase was due principally to the actions that the company took during fiscal 1999, including a significant reduction in the capacity for manufacturing printed flock fabrics and an intense effort to reduce operating expenses and raise productivity. S,G&A EXPENSES - S,G&A expenses for the first quarter declined as a percentage of sales to 13.0% from 13.1% for the year-earlier period. The decrease reflects improved economies of scale as a result of the increased net sales as well as programs throughout the company to contain operating expenses. INTEREST EXPENSE - Interest expense of $2.4 million for the first quarter was unchanged from a year ago even though the company had lower average borrowings outstanding. The lower level of borrowings were offset by lower capitalized interest related to capital expenditures and higher average interest rates. OTHER EXPENSE (INCOME), NET - Other expense (income) decreased to $555,000 for the first quarter versus $770,000 a year ago. The prior year included a non-recurring charge to write-off certain fixed assets. INCOME TAXES - The effective tax rate for the quarter was 34.0%, up slightly from 33.0% for the same quarter of last year. EBITDA - Due principally to the increase in net income from a year ago, EBITDA for the first quarter increased to $10.0 million compared with $3.1 million a year ago. BALANCE SHEET COMMENTS WORKING CAPITAL - Accounts receivable as of August 1, 1999 decreased 2.9% from the year-earlier level. Days sales outstanding decreased to 45 days at August 1, 1999 compared with 48 a year ago. Additionally, the aging of accounts receivable was 93.2% current and less than 30 days past due versus 93.8% at August 2, 1998. Inventories at the close of the first quarter decreased $4.0 million or 5.1% from August 2, 1998. Inventory turns for the first quarter were 5.4 versus 4.9 for the first quarter of fiscal 1999. The reduction in inventories is attributable to the increased focus management has placed on controlling the level of inventories. Operating working capital (comprised of accounts receivable, inventory and accounts payable) was $111.2 million at August 1, 1999, as compared with $111.5 million a year ago. The balance at May 2, 1999 was $111.9 million. CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three month periods ended August 1, 1999 and August 2, 1998 PROPERTY, PLANT AND EQUIPMENT - For fiscal 2000, the company's budgeted capital spending is $20 million. The major projects planned for upholstery fabrics are new dobby and velvet looms. The projects are intended to increase capacity for the woven velvet product line and improve efficiencies for the dobby product line as part of the company's continuing modernization effort. The major projects for mattress ticking are for weaving expansions intended to increase the capacity for jacquard greige goods. Depreciation expense for fiscal 2000 is currently estimated to be approximately $20 million. LONG-TERM DEBT - The company's funded debt-to-capital ratio was 51.5% at August 1, 1999, compared with 54.5% at August 2, 1998 and 52.1% at May 2, 1999. Funded debt was $136.2 million at August 1, 1999, down from $153.6 million at August 2, 1998 and $138.7 million at May 2, 1999. Funded debt equals long-term debt, including current maturities, less restricted investments, which represent unspent IRB funds. The decrease in funded debt from May 2, 1999 resulted primarily from an operating cash flow of $6.1 million, offset by capital expenditures of $2.4 million, dividends paid of $423,000 and repurchases of common stock of $393,000. STOCK REPURCHASE In separate authorizations in June 1998 and March 1999, the Board of Directors authorized the use of a total of $10.0 million to repurchase the company's common stock. During fiscal 1999, the company repurchased 938,600 shares at an average price of $5.90 per share under these authorizations. During the first quarter of fiscal 2000, the company repurchased 46,000 shares at an average price of $8.55 per share. -----END PRIVACY-ENHANCED MESSAGE-----