0001157523-12-003309.txt : 20120613 0001157523-12-003309.hdr.sgml : 20120613 20120613170857 ACCESSION NUMBER: 0001157523-12-003309 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20120613 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20120613 DATE AS OF CHANGE: 20120613 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: 0429 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12597 FILM NUMBER: 12905679 BUSINESS ADDRESS: STREET 1: 1823 EASTCHESTER DRIVE CITY: HIGH POINT STATE: NC ZIP: 27265 BUSINESS PHONE: 3368895161 MAIL ADDRESS: STREET 1: P O BOX 2686 CITY: HIGH POINT STATE: NC ZIP: 27265 8-K 1 a50305270.htm CULP, INC. 8-K a50305270.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)     June 13, 2012

Culp, Inc.
(Exact Name of Registrant as Specified in its Charter)


North Carolina
  
1-12597
  
56-1001967
(State or Other Jurisdiction
of Incorporation)
  
(Commission File Number)
  
(I.R.S. Employer
Identification No.)

1823 Eastchester Drive
High Point, North Carolina  27265
(Address of Principal Executive Offices)
(Zip Code)

(336) 889-5161
(Registrant’s Telephone Number, Including Area Code)

Not Applicable
(Former name or address, if changed from last report)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 
 
 
INDEX


 
 
Page
   
Item 2.02 – Results of Operations and Financial Condition
3
   
Item 9.01(d) - Exhibits 4
   
Signature 5
   
Exhibits 6
 
 
2
 
 
This report and the exhibits attached hereto contain “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 27A of the Securities and Exchange Act of 1934).  Such statements are inherently subject to risks and uncertainties.  Further, forward looking statements are intended to speak only as of the date on which they are made, and we disclaim any duty to update such statements.  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 but not always characterized by qualifying words such as “expect,” “believe,” “estimate,” “plan” and “project” and their derivatives, and include but are not limited to statements about expectations for our future operations, production levels, sales, gross profit margins, operating income, SG&A, or other expenses, earnings, and other performance measures, as well as any statements regarding future economic or industry trends or future developments. 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 our 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 us adversely. Changes in consumer tastes or preferences toward products not produced by us could erode demand for our products. Changes in the value of the U.S. dollar versus other currencies could affect our financial results because a significant portion of our operations are located outside the United States. Strengthening of the U.S. dollar against other currencies could make our products less competitive on the basis of price in markets outside the United States, and strengthening of currencies in Canada, and China can have a negative impact on our sales of products produced in those places. Also, economic and political instability in international areas could affect our operations or sources of goods in those areas, as well as demand for our products in international markets. Further information about these factors, as well as other factors that could affect our future operations or financial results and the matters discussed in forward-looking statements, are included in Item 1A “Risk Factors” section in our Form 10-K filed with the Securities and Exchange Commission on July 15, 2011 for the fiscal year ended May 1, 2011.

Item 2.02 – Results of Operations and Financial Condition

On June 13, 2012, we issued a news release to announce our financial results for the fourth quarter and fiscal year ended April 29, 2012.  The news release is attached hereto as Exhibit 99(a).

Also on June 13, 2012, we released a Financial Information Release containing additional financial information and disclosures about our fourth quarter and fiscal year ended April 29, 2012.  The Financial Information Release is attached hereto as Exhibit 99(b).

The news release and Financial Information Release contain disclosures about free cash flow, a non-GAAP liquidity measure that we define as net cash provided by operating activities, less cash capital expenditures, plus any proceeds from sales of fixed assets, and the effects of exchange rate changes on cash and cash equivalents.  Details of these calculations and a reconciliation to information from our GAAP financial statements is set forth in the Financial Information Release.  Management believes the disclosure of free cash flow provides useful information to investors because it measures our available cash flow for potential debt repayment, stock repurchases and additions to cash and cash equivalents.  We note, however, that not all of the company’s free cash flow is available for discretionary spending, as we have mandatory debt payments and other cash requirements that must be deducted from our cash available for future use.  In operating our business, management uses free cash flow to make decisions about what commitments of cash to make for operations, such as capital expenditures (and financing arrangements for these expenditures), purchases of inventory or supplies, SG&A expenditure levels, compensation, and other commitments of cash, while still allowing for adequate cash to meet known future commitments for cash, such as debt repayment.

The news release and Financial Information Release contain disclosures about return on capital, both for the entire company and for individual business segments.  We define return on capital as operating income (on an annualized basis if at a point other than the end of the fiscal year) divided by average capital employed.  Operating income excludes certain non-recurring charges, and average capital employed is calculated over rolling two – five fiscal periods, depending on which quarter is being presented.  Details of these calculations and a reconciliation to information from our GAAP financial statements is set forth in the Financial Information Release.  We believe return on capital is an accepted measure of earnings efficiency in relation to capital employed, but it is a non-GAAP performance measure that is not defined or calculated in the same manner by all companies.  This measure should not be considered in isolation or as an alternative to net income or other performance measures, but we believe it provides useful information to investors by comparing the operating income we produce to the asset base used to generate that income.  Also, annualized operating income does not necessarily indicate results that would be expected for the full fiscal year.  We note that, particularly for return on capital measured at the segment level, not all assets and expenses are allocated to our operating segments, and there are assets and expenses at the corporate (unallocated) level that may provide support to a segment’s operations and yet are not included in the assets and expenses used to calculate that segment’s return on capital.  Thus, the average return on capital for the company’s segments will generally be different from the company’s overall return on capital.  Management uses return on capital to evaluate the company’s earnings efficiency and the relative performance of its segments.
 
 
 
 

The news release and Financial Information Release contain disclosures about our consolidated adjusted effective income tax rate, which is a non-GAAP liquidity measure that represents our estimated cash expenditures for income taxes.  The consolidated adjusted effective income tax rate is calculated by eliminating the non-cash items that affect our GAAP income tax expense, including adjustments to valuation allowances for deferred tax assets, reductions in income taxes due to net operating loss (NOL) carry forwards, and non-cash foreign income tax expenses.  Currently we do not pay income taxes in the U.S. due to NOL carryforward amounts, and thus the consolidated adjusted effective income tax rate represents income tax expense for our subsidiaries located in China and Canada. A reconciliation of our consolidated adjusted effective income tax rate to our consolidated effective GAAP income tax rate is set forth in the Financial Information Release.  We believe this information is useful to investors because it demonstrates the amount of cash, as a percentage of income before income taxes, expected to be required to fund our income tax liabilities incurred for the periods reported.  Our consolidated income tax expense on a GAAP basis can vary widely over different reporting periods due to the effects of non-cash items, and we believe the calculation of our consolidated adjusted effective tax rate is helpful in comparing financial reporting periods and the amount of income tax liability that we are or will be required to pay to taxing authorities in cash. We also note that, because the consolidated adjusted effective income tax rate used to calculate adjusted net income is based on annualized amounts and estimates, adjusted net income for any quarter or year-to-date period does not necessarily indicate results that could be expected for the full fiscal year. In addition, non-cash reductions in our U.S. NOL carryforwards are based on pre-tax losses in prior periods and will not be available to reduce taxes on current earnings once the NOL carryforward amounts are utilized.  Management uses the consolidated adjusted effective income rate to analyze the effect that income tax expenditures are likely to have on cash balances and overall liquidity.

The news release and Financial Information Release contains disclosures about our adjusted net income, which is a non-GAAP performance measure that incorporates the consolidated adjusted effective income tax rate discussed in the preceding paragraph.  Adjusted net income is calculated by multiplying the consolidated adjusted effective income tax rate by the amount of income before income taxes shown on our income statement.  Because the consolidated adjusted effective income tax rate eliminates non-cash items that affect our GAAP income tax expense, adjusted net income is intended to demonstrate the amount of net income that would be generated by our operations if only the cash portions of our income tax expense are deducted from income before income taxes.  As noted above, our consolidated income tax expense on a GAAP basis can vary widely over different reporting periods due to the effect of non-cash items, and we believe the calculation of adjusted net income is useful to investors because it eliminates these items and aids in the analysis of comparable financial periods by reflecting the amount of earnings available after the deduction of tax liabilities that are paid in cash.  Adjusted net income should not be viewed in isolation by investors and should not be used as a substitute for net income calculated in accordance with GAAP.  We also note that, because the consolidated adjusted effective income tax rate used to calculate adjusted net income is based on annualized amounts and estimates, adjusted net income for any quarter or year-to-date period does not necessarily indicate results that could be expected for the full fiscal year.  In addition, the limitations on the usefulness of consolidated adjusted effective income tax rates described in the preceding paragraph also apply to the usefulness of adjusted net income, since consolidated adjusted effective income tax rates are used to calculate adjusted net income.  Management uses adjusted net income to help it analyze the company’s earnings and performance after taking certain tax matters into account when comparing comparable quarterly and year-to-date periods.

Item 9.01 (d) -- Exhibits

99(a) News Release dated June 13, 2012

99(b) Financial Information Release dated June 13, 2012
 
 
 
 
 
SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
    CULP, INC.
    (Registrant)
     
     
  By: /s/ Kenneth R. Bowling
    Chief Financial Officer
    (principal financial officer)
     
  By:
/s/ Thomas B. Gallagher, Jr.
    Corporate Controller
    (principal accounting officer)
 
Dated:  June 13, 2012

 
5
 

EXHIBIT INDEX

 
Exhibit Number               Exhibit
   
99(a) News Release dated June 13, 2012
99(b) Financial Information Release dated June 13, 2012
 
 
6
 EX-99.A 2 a50305270ex99_a.htm EXHIBIT 99(A) a50305270ex99_a.htm
Exhibit 99(a)
 
Logo
 
 
 
Investor Contact:
Kenneth R. Bowling
  
Media Contact:
Teresa A. Huffman
 
Chief Financial Officer
    
Vice President, Human Resources
 
336-881-5630
    
336-889-5161

CULP ANNOUNCES RESULTS FOR FOURTH QUARTER AND FISCAL 2012 
Board of Directors Initiates a Quarterly Dividend and
Authorizes Additional Share Repurchases

HIGH POINT, N.C. (June 13, 2012) ─ Culp, Inc. (NYSE: CFI) today reported financial and operating results for the fourth quarter and fiscal year ended April 29, 2012.

Fiscal 2012 fourth quarter highlights:

§  
Net sales were $75.7 million, up 25.4 percent, with mattress fabric sales up 23.3 percent and upholstery fabric sales up 28.4 percent.  This is the company’s highest quarterly sales level in eight years.

§  
Pre-tax income increased 17 percent to $5.5 million.

§  
Adjusted net income (non-GAAP) was $4.5 million, or $0.35 per diluted share, for the current quarter, compared with $3.9 million, or $0.30 per diluted share, for the prior year period.   (Adjusted net income is calculated using estimated income tax expense for Culp’s foreign subsidiaries. See the reconciliation to net income on page 7).  Net income (GAAP) was $3.4 million, or $0.27 per diluted share, compared with net income of $6.0 million, or $0.45 per diluted share, in the prior year.

§  
The company announced today the initiation of a quarterly cash dividend of $0.03 per share, commencing in the first quarter of fiscal 2013, implying an annual cash dividend of $0.12 per share.

§  
The company also announced today the authorization of additional share repurchases, increasing authorized repurchases up to $5.0 million.

Fiscal 2012 full year highlights:

§  
Net sales were $254.4 million, up 17.4 percent, with mattress fabric sales up 18.9 percent and upholstery fabric sales up 15.4 percent.

§  
Pre-tax income decreased 6.0 percent to $14.2 million.

§  
Adjusted net income (non-GAAP) was $11.6 million, or $0.90 per diluted share, in fiscal 2012 compared with $12.6 million, or $0.96 per diluted share, in fiscal 2011.  (See reconciliation to net income on page 7).  Net income (GAAP) was $13.3 million, or $1.03 per diluted share, compared with $16.2 million, or $1.22 per diluted share, in the prior year period.

§  
The company’s financial position remained strong during fiscal 2012 with a total cash position of $31.0 million at year end and total debt of $10.0 million.

§  
The company repurchased 624,459, or 4.7 percent of its outstanding shares, for $5.4 million.

§  
The projection for the first quarter of fiscal 2013 is for overall sales to increase approximately 6 to 11 percent.  Pre-tax income is expected to be in the range of $3.6 million to $4.4 million.  Pre-tax income for the first quarter of fiscal 2012 was $3.0 million.
 
 
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CFI Announces Results for Fourth Quarter and Fiscal 2012
Page 2
June 13, 2012

Quarterly Dividend and Share Repurchase Program
The company announced that its Board of Directors has approved the payment of a quarterly cash dividend of $.03 per share, to be paid on or about July 16, 2012, to shareholders of record as of the close of business on July 2, 2012.  The company anticipates paying a cash dividend each quarter, with expected payment dates in October, January, April and July.  The announcement today implies an annual cash dividend of $0.12 per share.  Future dividend payments are subject to Board approval and may be adjusted at the Board’s discretion as business needs or market conditions change.

In addition, the company announced that its Board of Directors has approved a new authorization for the company to acquire up to $5.0 million of its common stock.  This action replaces a similar authorization to acquire up to $7.0 million of common stock, of which $5.4 million was used during fiscal 2012 to repurchase 624,459 shares.  These purchases represented 4.7 percent of shares outstanding when the program began in June 2011.

Commenting on this announcement, Frank Saxon, president and chief executive officer of Culp, Inc., said, “The opportunity to initiate a quarterly dividend and to increase the share repurchase program reflects our solid and consistent financial performance and strong balance sheet, along with the leadership position we have achieved in each of our businesses.  These actions reinforce our confidence in the company’s future and our commitment to generating value for our shareholders.”
 
Overview
For the three months ended April 29, 2012, net sales were $75.7 million, a 25.4 percent increase compared with $60.4 million a year ago.  The company reported net income (GAAP) of $3.4 million, or $0.27 per diluted share, for the fourth quarter of fiscal 2012, compared with  net income (GAAP) of $6.0 million, or $0.45 per diluted share, for the fourth quarter of fiscal 2011.  Net income for the fourth quarter of fiscal 2012 includes a $2.1 million income tax expense, while net income for the previous year period included an income tax benefit of $1.3 million.
 
Given the volatility in the income tax area during fiscal 2012 and previous years, the company is reporting adjusted net income (non-GAAP), which is calculated using estimated income tax expense for its foreign subsidiaries.  (A presentation of adjusted net income and reconciliation to net income is set forth on page 7). The company currently does not incur cash income tax expense in the U.S., nor does it expect to in the forseeable future, due to its $60 million in U.S. net operating loss carryforwards. Therefore, for the fourth quarter of fiscal 2012, adjusted net income was $4.5 million, or $0.35 per diluted share, compared with $3.9 million, or $0.30 per diluted share, for fiscal 2011.  On a pre-tax basis, the company reported income of $5.5 million compared with pre-tax income of $4.7  million for the fourth quarter of fiscal 2011.

Net sales for fiscal 2012 were $254.4 million, up 17.4 percent compared with net sales of $216.8 million in fiscal 2011.  Net income for fiscal 2012 was $13.3 million, or $1.03 per diluted share, compared with $16.2 million, or $1.22 per diluted share, in fiscal 2011.  Net income for fiscal 2012 included a $902,000 income tax expense, while net income for fiscal 2011 included an income tax benefit of $1.1 million.  Adjusted net income for fiscal 2012 was $11.6 million, or $0.90 per diluted share, compared with $12.6 million, or $0.96 per diluted share, in fiscal 2011.  On a pre-tax basis, the company reported income of $14.2 million for fiscal 2012, compared with pre-tax income of $15.1 million in fiscal 2011.

Saxon continued, “We are pleased with our fourth quarter performance, highlighted by continued strong sales momentum with the highest overall quarterly sales in eight years.  These results reflect improved industry demand and the benefits of our outstanding design capabilities and lean global manufacturing platform.  Culp has a strong competitive position in both mattress fabrics and upholstery fabrics as we have continued to offer a wide range of innovative products that meet the changing style demands of our customers.
 
 
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CFI Announces Results for Fourth Quarter and Fiscal 2012
Page 3
June 13, 2012
 
“Notably, our financial position is the strongest in the company’s history,” Saxon added.  “This represents an important competitive advantage in today’s economic climate, and provides us with excellent flexibility to pursue our growth initiatives and an opportunity to enhance shareholder value through our expanded share repurchase program and new dividend announced today.”

Mattress Fabrics Segment
Mattress fabric sales for the fourth quarter were $43.4 million, up 23.3 percent compared with $35.2 million for the fourth quarter of fiscal 2011.  For the year, mattress fabric sales were $145.5 million, up 18.9 percent compared with fiscal 2011.

“Our mattress fabrics business had a strong fourth quarter performance, ending fiscal 2012 with the highest annual sales in our history,” said Iv Culp, president of Culp’s mattress fabrics division.  “We had solid gains across all major product categories, highlighted by a recent resurgence in sales of our woven damask product line.  The overall sales trend reflects a growing consumer demand for better bedding and a higher quality mattress fabric as some segments of the mattress industry are demanding more decorative products.  Culp is well positioned to meet this demand as a leading provider of an innovative and diverse line of products in every major category, supported by exceptional customer service.  We also have the ability to leverage our flexible manufacturing platform and outstanding design capabilities for developing new products that meet the demands of leading customers in the bedding industry.

“While we are pleased with the increased sales, our operating margins for the quarter and fiscal year were affected by higher raw material costs and continued pricing pressures compared with market conditions a year ago.  We are encouraged that raw material prices have come down from their peak levels and appear to have stabilized in the fourth quarter.  We expect subsequent quarters will show gradual improvement in our raw material costs.

New Joint Marketing Venture in Mattress Covers - Culp-Lava Applied Sewn Solutions
“We continue to look for opportunities to expand our current custom, value-added business platform and keep pace with changing industry demand trends, added Culp.  “As such, we have entered into a joint marketing agreement with A. Lava & Son Co., a leading provider of mattress covers based in Chicago, to design, produce and market mattress covers.  A. Lava & Son Co. brings a solid reputation built on superior workmanship and expertise to this synergistic relationship.  We are excited about the opportunities to leverage our outstanding design capabilities, from mattress fabrics to finished covers, with a proven market leader in this growing product category.  This new venture, known as Culp-Lava Applied Sewn Solutions, represents a natural progression of Culp’s mattress fabrics business as we continue to capitalize on growth opportunities in more innovative product offerings.  We will establish a new manufacturing facility with production expected to begin the second quarter of fiscal 2013.  As a result, Culp-Lava Applied Sewn Solutions will have two mirrored manufacturing facilities to better serve our growing customer base and meet current and expected demand trends in the bedding industry.  We believe this new venture highlights our commitment to enhance Culp’s leadership position in the bedding industry with an expanded and flexible manufacturing platform, supported by exceptional design, superior customer service, reliable delivery performance and consistent quality and value.”

Upholstery Fabrics Segment
Sales for this segment were $32.3 million for the fourth quarter, a 28.4 percent improvement compared with sales of $25.2 million in the fourth quarter of fiscal 2011.  For the year, upholstery fabric sales totaled $108.9 million, a 15.4 percent increase compared with $94.4 million in fiscal 2011.

“We are encouraged by the continued growth in sales in our upholstery fabrics business with our highest quarterly sales in five years,” noted Saxon.  “These results reflect improved industry demand and outstanding response to our innovative designs and new product introductions from key customers.  Sales of our China produced fabrics were the main driver of our growth for the fourth quarter and fiscal year as we have focused on offering high quality products at excellent values.  China produced fabrics now account for over 85 percent of all Culp’s upholstery fabrics sales.  This platform has played a significant role in our global development in fiscal 2012 with increased placements with key U.S. customers, local China market customers and a growing list of international customers.  .
 
 
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CFI Announces Results for Fourth Quarter and Fiscal 2012
Page 4
June 13, 2012
 
“We were especially pleased with the sales and profit improvement during the fourth quarter from our U.S. operation with increased demand for both velvets and woven texture fabrics,” added Saxon.  “Our actions in the second quarter to align U.S. capacity with expected demand and increase prices had a favorable impact on profitability.  We are also encouraged by new placements with our U.S. produced fabrics and are expecting further growth in sales and profitability from this operation during the first quarter of fiscal 2013.”

Saxon continued, “We continue to make progress in the development of our Culp Europe operation, located in Poland.  We are encouraged by the initial response from several of the largest furniture manufacturers and retailers in Europe.  For fiscal 2012, Culp Europe sales accounted for approximately three percent of our total upholstery fabrics sales and we expect this percentage to increase further over the next fiscal year.  While we experienced a small operating loss for fiscal 2012 due to start-up costs, we expect Culp Europe to make a more meaningful contribution  in the next fiscal year.

Balance Sheet
“Throughout fiscal 2012, we have remained diligent in maintaining a strong financial position,” added Saxon.  “As of April 29, 2012, we reported $31.0 million in cash and cash equivalents and short-term investments, unchanged from the balance at the end of fiscal 2011.  Total debt was $10.0 million, which includes long-term debt plus current maturities of long-term debt and line of credit, compared with $11.5 million at the end of last fiscal year.  We are pleased with our ability to maintain the same cash balance compared with the end of fiscal 2011, even after spending $5.4 million for share repurchases, $5.9 million in capital expenditures and increasing working capital by $6.9 million to meet increasing business demands.”

Outlook
Commenting on the outlook for the first quarter of fiscal 2013, Saxon remarked, “We expect overall sales to be 6 to 11 percent higher than the first quarter of last year.

“We expect sales in our mattress fabrics segment to be to 8 to 13 percent higher than the same period a year ago.  Operating income and margins in this segment are expected to be significantly higher than the same period a year ago.

“In our upholstery fabrics segment, we expect sales to be 2 to 7 percent higher as compared with the previous year’s first quarter results, although recent trends in incoming orders reflect a softening of demand momentum.  We believe the upholstery fabric segment’s operating income and margin will be significantly higher than the same quarter of last year.

“Considering these factors, the company expects to report pre-tax income for the first fiscal quarter of 2013 in the range of $3.6 million to $4.4 million.  Pretax income for last year’s first quarter was $3.0 million.

In closing, Saxon remarked, “Our results for fiscal 2012 demonstrate Culp’s ability to succeed in spite of a challenging period of economic uncertainty.  Throughout the year, we continued to build upon our strong competitive position in both business segments.  Our commitment to product innovation and creativity, along with our scalable and global manufacturing platforms, are key advantages, allowing us to meet the changing demands of our customers.  At the same time, Culp is well positioned for further profitable growth as the housing market gradually recovers.  As we begin fiscal 2013, we have the financial strength to pursue our strategic initiatives and continue to generate added value for our shareholders through dividends and share repurchases.  Above all, we are committed to outstanding performance for our customers as a financially stable and trusted source for innovative fabrics.  We are very excited about the opportunities before us to enhance our leadership position in the year ahead.”

 
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CFI Announces Results for Fourth Quarter and Fiscal 2012
Page 5
June 13, 2012
 
About the Company
Culp, Inc. is one of the world’s largest marketers of mattress fabrics for bedding and upholstery fabrics for furniture.  The company’s fabrics are used principally in the production of bedding products and residential and commercial upholstered furniture.

This release contains “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 27A of the Securities and Exchange Act of 1934).  Such statements are inherently subject to risks and uncertainties.  Further, forward-looking statements are intended to speak only as of the date on which they are made.  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 but not always characterized by qualifying words such as “expect,” “believe,” “estimate,” “plan” and “project” and their derivatives, and include but are not limited to statements about the company’s future operations, production levels, sales, SG&A or other expenses, margins, gross profit, operating income, earnings or other performance measures.  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.  Changes in consumer tastes or preferences toward products not produced by the company could erode demand for the company’s products.  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, and strengthening of currencies in Canada and China can have a negative impact on the company’s sales in the U.S. of products produced in those countries.  Also, economic and political instability in international areas could affect the company’s operations or sources of goods in those areas, as well as demand for the company’s products in international markets.  Other factors that could affect the matters discussed in forward-looking statements are included in the company’s periodic reports filed with the Securities and Exchange Commission, including the “Risk Factors” section in the company’s most recent annual report on Form 10-K filed with the Securities and Exchange Commission on July 15, 2011, for fiscal year ended May 1, 2011.

 
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CFI Announces Results for Fourth Quarter and Fiscal 2012
Page 6
June 13, 2012
 
CULP, INC.
Condensed Financial Highlights
(Unaudited)

 
Three Months Ended
  
Fiscal Year Ended
  
 
April 29,
  
May 1,
  
April 29,
  
May 1,
  
 
2012
  
2011
  
2012
  
2011
  
   
Net sales $ 75,711,000   $ 60,363,000   $ 254,443,000   $ 216,806,000  
Income before income taxes
 $ 5,494,000   $ 4,675,000   $ 14,198,000   $ 15,062,000  
Net income
 $ 3,423,000   $ 5,990,000   $ 13,296,000   $ 16,164,000  
Net income per share:
                        
Basic
 $ 0.27   $ 0.46   $ 1.05   $ 1.25  
Diluted
 $ 0.27   $ 0.45   $ 1.03   $ 1.22  
   
Adjusted net income
 $ 4,478,000   $ 3,922,000   $ 11,571,000   $ 12,637,000  
Adjusted net income per share:
                        
Basic
 $ 0.36   $ 0.30   $ 0.91   $ 0.98  
Diluted
 $ 0.35   $ 0.30   $ 0.90   $ 0.96  
   
Average shares outstanding:
                        
Basic
   12,513,000     13,030,000     12,711,000     12,959,000  
Diluted
   12,695,000     13,217,000     12,866,000     13,218,000  

Presentation of Adjusted Net Income and Adjusted Income Taxes (1)

 
Three Months Ended
  
Fiscal Year Ended
  
 
April 29,
  
May 1,
  
April 29,
  
May 1,
  
 
2012
  
2011
  
2012
  
2011
  
   
Income before income taxes
 $ 5,494,000   $ 4,675,000   $ 14,198,000   $ 15,062,000  
Adjusted income taxes (2)
 $ 1,016,000   $ 753,000   $ 2,627,000   $ 2,425,000  
Adjusted net income
 $ 4,478,000   $ 3,922,000   $ 11,571,000   $ 12,637,000  

(1)  
Culp, Inc. currently does not incur cash income tax expense in the U.S. due to its $59.9 million in net operating loss carryforwards.  Adjusted net income is calculated using only income tax expense for the company’s subsidiaries in Canada and China.

(2)  
Represents estimated income tax expense for the company’s subsidiaries in Canada and China, calculated with a consolidated adjusted effective income tax rate of 18.5% for fiscal 2012 and 16.1% for fiscal 2011.
 
 
-MORE-
 

CFI Announces Results for Fourth Quarter and Fiscal 2012
Page 7
June 13, 2012


CONSOLIDATED ADJUSTED EFFECTIVE INCOME TAX RATE, NET INCOME AND EARNINGS PER SHARE
FOR THE TWELVE MONTHS ENDED APRIL 29, 2012 AND MAY 1, 2011
Unaudited
(Amounts in Thousands)

                               
         
TWELVE MONTHS ENDED
                
                               
          Amounts                
         
April 29,
  
May 1,
                
         
2012
  
2011
                
                               
                               
Consolidated Effective GAAP Income Tax Rate
(1)
6.4%
  
(7.3)%
                
                               
Reduction of U.S. Valuation Allowance
  
26.1%
  
33.7%
                
                               
Reduction of China Valuation Allowance
  
               -
  
8.4%
                
                               
Non-Cash U.S. Income Tax Expense
  
(13.8)%
  
(20.6)%
                
                               
Non-Cash Foreign Income Tax Expense
  
(0.2)%
  
1.9%
                
                               
Consolidated Adjusted Effective Income Tax Rate
(2)
18.5%
  
16.1%
                
                               
                               
   
                               
                               
                               
                                     
   
THREE MONTHS ENDED
   
As reported
        
April 29, 2012
  
As reported
        
May 1, 2011
   
April 29,
        
Proforma Net
  
May 1,
        
Proforma Net
   
2012
  
Adjustments
  
of Adjustments
  
2011
  
Adjustments
  
of Adjustments
                                     
Income before income taxes
   $ 5,494           $ 5,494     $ 4,675           $ 4,675  
                                             
Income taxes (3)
     2,071     $ (1,055 )     1,016       (1,315 )   $ 2,068       753  
Net income
   $ 3,423     $ 1,055     $ 4,478     $ 5,990     $ (2,068 )   $ 3,922  
                                                 
Net income per share-basic
   $ 0.27     $ (0.08 )   $ 0.36     $ 0.46     $ 0.16     $ 0.30  
Net income per share-diluted
   $ 0.27     $ (0.08 )   $ 0.35     $ 0.45     $ 0.16     $ 0.30  
Average shares outstanding-basic
     12,513       12,513       12,513       13,030       13,030       13,030  
Average shares outstanding-diluted
     12,695       12,695       12,695       13,217       13,217       13,217  
                                                 
                                                 
                                                 
   
TWELVE MONTHS ENDED
   
As reported
          
April 29, 2012
  
As reported
        
May 1, 2011
   
April 29,
          
Proforma Net
  
May 1,
        
Proforma Net
    2012  
Adjustments
  
of Adjustments
   2011  
Adjustments
  
of Adjustments
                                                 
Income before income taxes
   $ 14,198             $ 14,198     $ 15,062             $ 15,062  
                                                 
Income taxes (3)
     902     $ 1,725       2,627       (1,102 )   $ 3,527       2,425  
Net income
   $ 13,296     $ (1,725 )   $ 11,571     $ 16,164     $ (3,527 )   $ 12,637  
                                                 
Net income per share-basic
   $ 1.05     $ 0.14     $ 0.91     $ 1.25     $ 0.27     $ 0.98  
Net income per share-diluted
   $ 1.03     $ 0.13     $ 0.90     $ 1.22     $ 0.27     $ 0.96  
Average shares outstanding-basic
     12,711       12,711       12,711       12,959       12,959       12,959  
Average shares outstanding-diluted
     12,866       12,866       12,866       13,218       13,218       13,218  
 
(1)
Calculated by dividing consolidated income tax (benefit) expense by
 
consolidated income before income taxes.
   
(2)
Represents estimated cash income tax expense for our subsidiaries located
 
in Canada and China divided by consolidated income before income taxes.
   
(3)
Proforma taxes calculated using the Consolidated Adjusted Effective Income Tax Rate as reflected above.
 
-END-
 EX-99.B 3 a50305270ex99_b.htm EXHIBIT 99(B) a50305270ex99_b.htm
Exhibit 99(b)
Page 1 of 9
 
CULP, INC. FINANCIAL INFORMATION RELEASE
  
CONSOLIDATED STATEMENTS OF NET INCOME
  
FOR THE THREE MONTHS ENDED APRIL 29, 2012 AND MAY 1, 2011
  
(UNAUDITED)
  
(Amounts in Thousands, Except for Per Share Data)
  
                                   
                                   
   
THREE MONTHS ENDED
  
                                   
   
Amounts
            
Percent of Sales
   
April 29,
      
May 1,
    
% Over
    
April 29,
  
May 1,
   
2012
      
2011
    
(Under)
    
2012
  
2011
                                   
Net sales
 $ 
 75,711
      
60,363
    
25.4
  %
    
100.0
  %
  
100.0
  %
Cost of sales
  
62,013
      
49,080
    
26.4
  %
    
81.9
  %
  
81.3
  %
        Gross profit
  
13,698
      
11,283
    
21.4
  %
    
18.1
  %
  
18.7
  %
                                   
Selling, general and
                                  
  administrative expenses
  
8,031
      
6,525
    
23.1
  %
    
10.6
  %
  
10.8
  %
Restructuring expense
  
                  -
      
28
    
(100.0
) %
    
0.0
  %
  
0.0
  %
         Income from operations
  
5,667
      
4,730
    
19.8
  %
    
7.5
  %
  
7.8
  %
                                   
Interest expense
  
190
      
222
    
(14.4
) %
    
0.3
  %
  
0.4
  %
Interest income
  
(121)
      
(96)
    
26.0
  %
    
(0.2)
  %
  
(0.2
) %
Other expense (income)
  
104
      
(71)
    
N.M.
      
0.1
  %
  
(0.1
) %
         Income before income taxes
  
5,494
      
4,675
    
17.5
  %
    
7.3
  %
  
7.7
  %
                                   
Income taxes*
  
2,071
      
(1,315)
    
N.M.
      
37.7
  %
  
(28.1
) %
        Net income
 $ 
 3,423
      
5,990
    
(42.9
) %
    
4.5
  %
  
9.9
  %
                                   
Net income per share-basic
 $ 
0.27
     $
0.46
    
(41.3
) %
              
Net income per share-diluted
 $ 
0.27
     $
0.45
    
(40.0
) %
              
Average shares outstanding-basic
  
12,513
      
13,030
    
(4.0
) %
              
Average shares outstanding-diluted
  
12,695
      
13,217
    
(3.9
) %
              
 
 
 
   
                               
                               
                               
PRESENTATION OF ADJUSTED NET INCOME, ADJUSTED INCOME TAXES AND EARNINGS PER SHARE (1)
                               
                               
   
THREE MONTHS ENDED
  
                               
   
Amounts
          
Percent of Sales
   
April 29,
    
May 1,
    
% Over
  
April 29,
  
May 1,
   
2012
    
2011
    
(Under)
  
2012
  
2011
                               
                               
Income before income taxes (see above)
   $ 5,494       4,675       17.5   %     7.3   %     7.7   %
                                         
Adjusted Income taxes (2)*
     1,016       753       34.9   %     18.5   %     16.1   %
           Adjusted net income
     4,478       3,922       14.2   %     5.9   %     6.5   %
                                       A  
Adjusted net income per share-basic
   $ 0.36     $ 0.30       20.0   %                
Adjusted net income per share-diluted
   $ 0.35     $ 0.30       16.7   %                
Average shares outstanding-basic
     12,513       13,030       (4.0 ) %                
Average shares outstanding-diluted
     12,695       13,217       (3.9 ) %                
                                         
                                         
                                         
 
(1) Culp, Inc. currently does not incur cash income tax expense in the US due to its $59.9 million in net operating loss carryforwards. Therefore, adjusted net income is calculated using only income tax expense for our subsidiaries located in Canada and China. See reconciliation on page 9 of 9.
(2) Represents estimated income tax expense for our subsidiaries located in Canada and China. See reconciliation on page 9 of 9.
   
   
* Percent of sales column for income taxes is calculated as a % of income before income taxes.
  
 
 
 
 
 
Page 2 of 9
 
CULP, INC. FINANCIAL INFORMATION RELEASE
  
CONSOLIDATED STATEMENTS OF NET INCOME
  
FOR THE TWELVE MONTHS ENDED APRIL 29, 2012 AND MAY 1, 2011
  
(UNAUDITED)
  
(Amounts in Thousands, Except for Per Share Data)
  
                             
                             
   
TWELVE MONTHS ENDED
  
                             
   
Amounts
        
Percent of Sales
   
April 29,
    
May 1,
    
% Over
  
April 29,
  
May 1,
   
2012
    
2011
    
(Under)
  
2012
  
2011
                                 
Net sales
   $ 254,443       216,806       17.4   %     100.0   %     100.0   %
Cost of sales
     214,711       179,966       19.3   %     84.4   %     83.0   %
        Gross profit
     39,732       36,840       7.9   %     15.6   %     17.0   %
                                           
Selling, general and
                                          
  administrative expenses
     25,026       21,069       18.8   %     9.8   %     9.7   %
Restructuring expense
     -       28    
N.M.
         0.0   %     0.0   %
         Income from operations
     14,706       15,743       (6.6 ) %     5.8   %     7.3   %
                                           
Interest expense
     780       881       (11.5 ) %     0.3   %     0.4   %
Interest income
     (508 )     (240 )     111.7   %     (0.2 ) %     (0.1 ) %
Other expense
     236       40       490.0   %     0.1   %     0.0   %
         Income before income taxes
     14,198       15,062       (5.7 ) %     5.6   %     6.9   %
                                           
Income taxes*
     902       (1,102 )  
N.M.
         6.4   %     (7.3 ) %
        Net income
   $ 13,296       16,164       (17.7 ) %     5.2   %     7.5   %
                                           
Net income per share-basic
   $ 1.05     $ 1.25       (16.0 ) %                
Net income per share-diluted
   $ 1.03     $ 1.22       (15.6 ) %                
Average shares outstanding-basic
     12,711       12,959       (1.9 ) %                
Average shares outstanding-diluted
     12,866       13,218       (2.7 ) %                
                                           
     
                                           
                                           
PRESENTATION OF ADJUSTED NET INCOME, ADJUSTED INCOME TAXES AND EARNINGS PER SHARE (1)
                                           
                                           
   
TWELVE MONTHS ENDED
  
                                           
   
Amounts
              
Percent of Sales
   
April 29,
    
May 1,
    
% Over
  
April 29,
  
May 1,
    2012     2011    
(Under)
   2012   2011
                                           
                                           
Income before income taxes (see above)
   $ 14,198       15,062       (5.7 ) %     5.6   %     6.9   %
                                           
Adjusted Income taxes (2)*
     2,627       2,425       8.3   %     18.5   %     16.1   %
          Adjusted net income
     11,571       12,637       (8.4 ) %     4.5   %     5.8   %
                                           
Adjusted net income per share-basic
   $ 0.91     $ 0.98       (7.1 ) %                
Adjusted net income per share-diluted
   $ 0.90     $ 0.96       (6.2 ) %                
Average shares outstanding-basic
     12,711       12,959       (1.9 ) %                
Average shares outstanding-diluted
     12,866       13,218       (2.7 ) %                
                                           
                                           
                                           
(1) Culp, Inc. currently does not incur cash income tax expense in the US due to its $59.9 million in net operating loss carryforwards. Therefore, adjusted net income is calculated using only income tax expense for our subsidiaries located in Canada and China. See reconciliation on page 9 of 9.
(2) Represents estimated income tax expense for our subsidiaries located in Canada and China. See reconciliation on page 9 of 9.
                                           
                                           
* Percent of sales column for income taxes is calculated as a % of income before income taxes.
  
 
 
 
 
 
 
Page 3 of 9
 
CULP, INC. FINANCIAL INFORMATION RELEASE
  
CONSOLIDATED BALANCE SHEETS
  
APRIL 29, 2012 AND MAY 1, 2011
  
Unaudited
  
(Amounts in Thousands)
  
                         
   
Amounts
    
Increase
   
Aprl 29,
    
* May 1,
    
(Decrease)
   
2012
    
2011
    
Dollars
  
Percent
                         
Current assets
                        
Cash and cash equivalents
   $ 25,023     $ 23,181       1,842       7.9   %
Short-term investments
     5,941       7,699       (1,758 )     (22.8 ) %
Accounts receivable
     25,055       20,209       4,846       24.0   %
Inventories
     36,373       28,723       7,650       26.6   %
Deferred income taxes
     2,467       293       2,174       742.0   %
Assets held for sale
     15       75       (60 )     (80.0 ) %
Income taxes receivable
     -       79       (79 )     (100.0 ) %
Other current assets
     1,989       2,376       (387 )     (16.3 ) %
Total current assets
     96,863       82,635       14,228       17.2   %
                                 
Property, plant and equipment, net
     31,279       30,296       983       3.2   %
Goodwill
     11,462       11,462       -       0.0   %
Deferred income taxes
     3,205       3,606       (401 )     (11.1 ) %
Other assets
     1,907       2,052       (145 )     (7.1 ) %
                                 
Total assets
   $ 144,716     $ 130,051       14,665       11.3   %
                                 
                                 
                                 
Current liabilities
                                
Current maturities of long-term debt
   $ 2,404     $ 2,412       (8 )     (0.3 ) %
Line of credit
     889       -       889       100.0   %
Accounts payable - trade
     30,663       24,871       5,792       23.3   %
Accounts payable - capital expenditures
     169       140       29       20.7   %
Accrued expenses
     9,321       7,617       1,704       22.4   %
Accrued restructuring
     40       44       (4 )     (9.1 ) %
Deferred income taxes
     -       82       (82 )     (100.0 ) %
Income taxes payable - current
     642       646       (4 )     (0.6 ) %
Total current liabilities
     44,128       35,812       8,316       23.2   %
                                 
Income taxes payable - long-term
     4,164       4,167       (3 )     (0.1 ) %
Deferred income taxes
     705       596       109       18.3   %
Long-term debt , less current maturities
     6,719       9,135       (2,416 )     (26.4 ) %
                                 
Total liabilities
     55,716       49,710       6,006       12.1   %
                                 
Shareholders' equity
     89,000       80,341       8,659       10.8   %
                                 
Total liabilities and
                                
shareholders' equity
   $ 144,716     $ 130,051       14,665       11.3   %
                                 
Shares outstanding
     12,703       13,264       (561 )     (4.2 ) %
                                 
                                 
   * Derived from audited financial statements
                                
 
 
 
 
 
Page 4 of 9
 
CULP, INC. FINANCIAL INFORMATION RELEASE  
CONSOLIDATED STATEMENTS OF CASH FLOWS
  
FOR THE TWELVE MONTHS ENDED APRIL 29, 2012 AND MAY 1, 2011
  
Unaudited  
(Amounts in Thousands)
  
             
             
   
TWELVE MONTHS ENDED
  
             
   
Amounts
  
   
April 29,
    
May 1,
  
   
2012
    
2011
  
             
Cash flows from operating activities:
        
 
  
Net income
   $ 13,296       16,164  
Adjustments to reconcile net income to net cash
                
provided by operating activities:
                
Depreciation
     4,865       4,372  
Amortization of other assets
     243       442  
Stock-based compensation
     349       360  
Deferred income taxes
     (1,682 )     (3,390 )
Restructuring expenses, net of gain on sale of related assets     -       28  
Gain on sale of equipment
     (168 )     (22 )
Excess tax benefits related to stock-based compensation
     (64 )     (339 )
Foreign currency exchange gains
     (215 )     (115 )
Changes in assets and liabilities:
                
Accounts receivable
     (4,792 )     (199 )
Inventories
     (7,497 )     (2,579 )
Other current assets
     395       (621 )
Other assets
     (61 )     (3 )
Accounts payable
     5,426       2,110  
Accrued expenses
     1,710       (2,286 )
Accrued restructuring
     (4 )     (280 )
Income taxes
     202       1,179  
Net cash provided by operating activities
     12,003       14,821  
                 
Cash flows from investing activities:
                
Capital expenditures
     (5,890 )     (6,352 )
Purchase of short-term investments
     (4,797 )     (6,713 )
Proceeds from the sale of short-term investments
     6,707       2,037  
Proceeds from the sale of equipment
     299       79  
Net cash used in investing activities
     (3,681 )     (10,949 )
                 
Cash flows from financing activities:
                
Proceeds from lines of credit
     6,323       -  
Payments on lines of credit
     (5,500 )     -  
Payments on vendor-financed capital expenditures
     -       (377 )
Payments on long-term debt
     (2,404 )     (179 )
Debt issuance costs
     (37 )     (27 )
Excess tax benefits related to stock-based compensation
     64       339  
Repurchase of common stock
     (5,384 )     -  
Proceeds from common stock issued
     318       769  
Net cash (used in) provided by financing activities
     (6,620 )     525  
                 
Effect of exchange rate changes on cash and cash equivalents
     140       489  
                 
Increase in cash and cash equivalents
     1,842       4,886  
                 
Cash and cash equivalents at beginning of period
     23,181       18,295  
                 
Cash and cash equivalents at end of period
   $ 25,023       23,181  
                 
                 
Free Cash Flow (1)
   $ 6,616       8,999  
                 
                 
 
 
(1)
  
 
Free Cash Flow reconciliation is as follows:
            
        
FY 2012
    
FY 2011
  
 A)  
Net cash provided by operating activities
   $ 12,003       14,821  
 B)  
Minus:  Capital Expenditures
     (5,890 )     (6,352 )
 C)  
Add:      Proceeds from the sale of equipment
     299       79  
 D)  
Minus:  Payments on vendor-financed capital expenditures
     -       (377 )
 E)  
Add:      Excess tax benefits related to stock-based compensation
     64       339  
 F)  
Effects of exchange rate changes on cash and cash equivalents
     140       489  
        $ 6,616       8,999  
                     
 
 
 
 
 
Page 5 of 9
 
CULP, INC. FINANCIAL INFORMATION RELEASE
  
STATEMENTS OF OPERATIONS BY SEGMENT
  
FOR THE THREE MONTHS ENDED APRIL 29, 2012 AND MAY 1, 2011
  
(Unaudited)
  
(Amounts in thousands)
  
                                   
                                   
   
THREE MONTHS ENDED
  
                                   
   
Amounts
              
Percent of Total Sales
   
April 29,
  
May 1,
      
% Over
  
April 29,
  
May 1,
Net Sales by Segment
  
2012
  
2011
      
(Under)
  
2012
  
2011
                                   
Mattress Fabrics
   $ 43,389       35,187           23.3   %     57.3   %     58.3   %
Upholstery Fabrics
     32,322       25,176           28.4   %     42.7   %     41.7   %
                                             
     Net Sales
   $ 75,711       60,363           25.4   %     100.0   %     100.0   %
                                             
                                             
Gross Profit by Segment
                              
Gross Profit Margin
                                             
Mattress Fabrics
   $ 8,645       7,632           13.3   %     19.9   %     21.7   %
Upholstery Fabrics
     5,053       3,651           38.4   %     15.6   %     14.5   %
     Gross Profit
   $ 13,698       11,283           21.4   %     18.1   %     18.7   %
                                             
                                             
                                             
Selling, General and Administrative expenses by Segment
                              
Percent of Sales
                                             
Mattress Fabrics
   $ 2,967       2,395           23.9   %     6.8   %     6.8   %
Upholstery Fabrics
     3,267       2,839           15.1   %     10.1   %     11.3   %
Unallocated Corporate expenses
     1,797       1,291           39.2   %     2.4   %     2.1   %
    Selling, General and Administrative expenses
     8,031       6,525           23.1   %     10.6   %     10.8   %
                                             
                                             
Operating Income (loss) by Segment
                              
Operating Income (Loss) Margin
                                             
Mattress Fabrics
   $ 5,678       5,236           8.4   %     13.1   %     14.9   %
Upholstery Fabrics
     1,786       813           119.7   %     5.5   %     3.2   %
Unallocated corporate expenses
     (1,797 )     (1,291 )         39.2   %     (2.4 ) %     (2.1 ) %
        Subtotal
     5,667       4,758           19.1   %     7.5   %     7.9   %
                                             
Restructuring expense
     -       (28 )   (1)     (100.0 ) %     0.0   %     (0.0 ) %
                                             
       Operating income
   $ 5,667       4,730           19.8   %     7.5   %     7.8   %
                                             
                                             
Depreciation by Segment
                                            
                                             
Mattress Fabrics
   $ 1,112       1,024           8.6   %                
Upholstery Fabrics
     152       143           6.3   %                
       Subtotal
     1,264       1,167           8.3   %                
                                             
                                             
Notes:
                                            
                                             
(1) The $28 represents an impairment charge related to equipment associated with the upholstery fabrics segment that is classified as held for sale.
      
            
 
 
 
 
 
Page 6 of 9
 
CULP, INC. FINANCIAL INFORMATION RELEASE
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE TWELVE MONTHS ENDED APRIL 29, 2012 AND MAY 1, 2011
(Unaudited)
(Amounts in thousands)
                                       
                                       
   
TWELVE MONTHS ENDED
                                       
   
Amounts
              
Percent of Total Sales
   
April 29,
      
May 1,
      
% Over
  
April 29,
  
May 1,
Net Sales by Segment
  
2012
      
2011
      
(Under)
  
2012
  
2011
                                       
Mattress Fabrics
   $ 145,519           122,431           18.9   %     57.2   %     56.5   %
Upholstery Fabrics
     108,924           94,375           15.4   %     42.8   %     43.5   % 
                                                 
     Net Sales
   $ 254,443           216,806           17.4   %     100.0   %     100.0   %
                                                 
                                                 
Gross Profit by Segment
                                  
Gross Profit Margin
                                                 
Mattress Fabrics
   $ 24,825           23,248           6.8   %     17.1   %     19.0   %
Upholstery Fabrics
     14,984           13,592           10.2   %     13.8   %     14.4   %
      Subtotal
     39,809           36,840           8.1   %     15.6   %     17.0   %
                                                 
Other non-recurring charges
     (77 )   (1)     -           100.0   %     (0.0 ) %     0.0   %
                                                 
     Gross Profit
     39,732           36,840           7.9   %     15.6   %     17.0   %
                                                 
                                                 
Selling, General and Administrative expenses by Segment
                                  
Percent of Sales
                                                 
Mattress Fabrics
   $ 9,061           7,875           15.1   %     6.2   %     6.4   %
Upholstery Fabrics
     11,453           9,233           24.0   %     10.5   %     9.8   %
Unallocated Corporate expenses
     4,512           3,961           13.9   %     1.8   %     1.8   %
     Subtotal
     25,026           21,069           18.8   %     9.8   %     9.7   %
                                                 
                                                 
Operating Income (loss) by Segment
                                  
Operating Income (Loss) Margin
                                                 
Mattress Fabrics
   $ 15,764           15,373           2.5   %     10.8   %     12.6   %
Upholstery Fabrics
     3,531           4,359           (19.0 ) %     3.2   %     4.6   %
Unallocated corporate expenses
     (4,512 )         (3,961 )         13.9   %     (1.8 ) %     (1.8 ) %
        Subtotal
     14,783           15,771           (6.3 ) %     5.8   %     7.3   %
                                                 
Other non-recurring charges
     (77 )   (1)     (28 )   (2)     175.0   %     (0.0 ) %     (0.0 ) %
                                                 
     Operating income
   $ 14,706           15,743           (6.6 ) %     5.8   %     7.3   %
                                                 
                                                 
Return on Capital (3)
                                                
                                                 
Mattress Fabrics
     29.4 %         29.5 %                            
Upholstery Fabrics
     25.7 %         36.3 %                            
Unallocated Corporate
     N/A           N/A                              
Consolidated
     21.9 %         24.9 %                            
                                                 
Capital Employed (4)
                                                
                                                 
Mattress Fabrics
     53,910           52,632           2.4   %                
Upholstery Fabrics
     14,518           10,317           40.7   %                
Unallocated Corporate
     (541 )         (428 )         N/A                  
Consolidated
     67,887           62,521           8.6   %                
                                                 
                                                 
Depreciation by Segment
                                                
                                                 
Mattress Fabrics
   $ 4,275           3,820           11.9   %                
Upholstery Fabrics
     590           552           6.9   %                
     Subtotal
     4,865           4,372           11.3   %                
                                                 
 
Notes:                                                
                                                   
(1) 
The $77 represents employee termination benefits associated with our Anderson, SC plant facility.
                  
                                                   
(2) 
This $28 represents an impairment charge of $28 related to equipment associated with the upholstery fabrics segment that is classified as held for sale, a charge of $24 for lease termination and other exit costs, offset by a credit of $14 for employee termination benefits, and credit of $10 for sales proceeds received on equipment with no carrying value.
 
 
          
(3) 
See pages 7 and 8 of this financial information release for calculations.
                    
                                                   
(4) 
The capital employed balances are as of April 29, 2012 and May 1, 2011.
                    
 
 
 
 
 
Page 7 of 9
 
CULP, INC. FINANCIAL INFORMATION RELEASE
RETURN ON CAPITAL EMPLOYED BY SEGMENT
FOR THE TWELVE MONTHS ENDED APRIL 29, 2012
(Amounts in Thousands)
(Unaudited)
 
    Operating                                                                    
   
Income
           Return                                                        
   
Twelve Months
    
Average
    
on
Avg.
                                                       
   
Ended
    
Capital
    
Capital
                                                        
    April 29,      Employed      Employed                                                        
   
2012 (1)
    
(3)
    
(2)
                                                        
                                                                         
Mattress Fabrics
   $ 15,764     $ 53,669       29.4 %                                                      
Upholstery Fabrics
     3,531       13,758       25.7 %                                                      
(less: Unallocated Corporate)
     (4,512 )     (56 )     N/A                                                        
Total
   $ 14,783     $ 67,372       21.9 %                                                      
                                                                               
                                                                               
                                                                               
                                                                               
Average Capital Employed
  
As of the three Months Ended April 29, 2012
    
As of the three Months Ended January 29, 2012
    
As of the three Months Ended October 30, 2011
  
   
Mattress
    
Upholstery
    
Unallocated
          
Mattress
    
Upholstery
    
Unallocated
          
Mattress
    
Upholstery
    
Unallocated
        
   
Fabrics
    
Fabrics
    
Corporate
    
Total
    
Fabrics
    
Fabrics
    
Corporate
    
Total
    
Fabrics
    
Fabrics
    
Corporate
    
Total
  
                                                                               
Total assets
     71,563       33,641       39,512       144,716       69,063       29,501       32,893       131,457       68,568       24,462       34,094       127,124  
Total liabilities
     (17,653 )     (19,123 )     (18,940 )     (55,716 )     (16,468 )     (11,929 )     (17,689 )     (46,086 )     (15,353 )     (11,253 )     (16,421 )     (43,027 )
                                                                                                 
Subtotal
   $ 53,910     $ 14,518     $ 20,572     $ 89,000     $ 52,595     $ 17,572     $ 15,204     $ 85,371     $ 53,215     $ 13,209     $ 17,673     $ 84,097  
Less:
                                                                                                
Cash and cash equivalents
     -       -       (25,023 )     (25,023 )     -       -       (15,096 )     (15,096 )     -       -       (13,795 )     (13,795 )
Short-term investments
     -       -       (5,941 )     (5,941 )     -       -       (8,511 )     (8,511 )     -       -       (10,482 )     (10,482 )
Deferred income taxes - current
     -       -       (2,467 )     (2,467 )     -       -       (2,767 )     (2,767 )     -       -       (2,659 )     (2,659 )
Income taxes receivable
     -       -       -       -       -       -       -       -       -       -       (79 )     (79 )
Deferred income taxes - non-current
     -       -       (3,205 )     (3,205 )     -       -       (3,903 )     (3,903 )     -       -       (4,540 )     (4,540 )
Current maturities of long-term debt
     -       -       2,404       2,404       -       -       2,400       2,400       -       -       2,401       2,401  
Line of credit
     -       -       889       889       -       -       875       875       -       -       -       -  
Deferred income taxes - current
     -       -       -       -       -       -       -       -       -       -       -       -  
Income taxes payable - current
     -       -       642       642       -       -       208       208       -       -       373       373  
Income taxes payable - long-term
     -       -       4,164       4,164       -       -       4,040       4,040       -       -       4,096       4,096  
Deferred income taxes - non-current
     -       -       705       705       -       -       659       659       -       -       659       659  
Long-term debt, less current maturities
     -       -       6,719       6,719       -       -       6,766       6,766       -       -       6,818       6,818  
                                                                                                 
Total Capital Employed
   $ 53,910     $ 14,518     $ (541 )   $ 67,887     $ 52,595     $ 17,572     $ (125 )   $ 70,042     $ 53,215     $ 13,209     $ 465     $ 66,889  
                                                                                                 
                                                                                                 
                                                                                                 
   
As of the three Months Ended July 31, 2011
    
As of the three Months Ended May 1, 2011
                                  
   
Mattress
    
Upholstery
    
Unallocated
            
Mattress
    
Upholstery
    
Unallocated
                                          
   
Fabrics
    
Fabrics
    
Corporate
    
Total
    
Fabrics
    
Fabrics
    
Corporate
    
Total
                                  
                                                                                                 
Total assets
     71,325       26,683       31,299       129,307       66,637       25,929       37,485       130,051                                  
Total liabilities
     (15,331 )     (13,507 )     (19,118 )     (47,956 )     (14,005 )     (15,612 )     (20,093 )     (49,710 )                                
                                                                                                 
Subtotal
   $ 55,994     $ 13,176     $ 12,181     $ 81,351     $ 52,632     $ 10,317     $ 17,392     $ 80,341                                  
Less:
                                                                                                
Cash and cash equivalents
     -       -       (14,570 )     (14,570 )     -       -       (23,181 )     (23,181 )                                
Short-term investments
     -       -       (10,443 )     (10,443 )                     (7,699 )     (7,699 )                                
Deferred income taxes - current
     -       -       (1,237 )     (1,237 )     -       -       (293 )     (293 )                                
Income taxes receivable
     -       -       (79 )     (79 )     -       -       (79 )     (79 )                                
Deferred income taxes - non-current
     -       -       (2,191 )     (2,191 )     -       -       (3,606 )     (3,606 )                                
Current maturities of long-term debt
     -       -       2,409       2,409       -       -       2,412       2,412                                  
Line of credit
     -       -       -       -       -       -       -       -                                  
Deferred income taxes - current
     -       -       82       82       -       -       82       82                                  
Income taxes payable - current
     -       -       345       345       -       -       646       646                                  
Income taxes payable - long-term
     -       -       4,178       4,178       -       -       4,167       4,167                                  
Deferred income taxes - non-current
     -       -       596       596       -       -       596       596                                  
Long-term debt, less current maturities
     -       -       9,079       9,079       -       -       9,135       9,135                                  
                                                                                                 
Total Capital Employed
   $ 55,994     $ 13,176     $ 350     $ 69,520     $ 52,632     $ 10,317     $ (428 )   $ 62,521                                  
                                                                                                 
                                                                                                 
   
Mattress
    
Upholstery
    
Unallocated
                                                                          
   
Fabrics
    
Fabrics
    
Corporate
    
Total
                                                                  
                                                                                                 
Average Capital Employed (3)
   $ 53,669     $ 13,758     $ (56 )   $ 67,372                                                                  
 
Notes:
(1)
Operating income excludes restructuring and related charges--see reconciliation per page 6 of this financial information release.
 
(2)
Return on average capital employed represents operating income for fiscal 2012 divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments, long-term debt, including current maturities, line of credit, current and noncurrent deferred tax assets and liabilities, income taxes payable, and income taxes receivable.
 
(3)
Average capital employed computed using the five periods ending May 1,2011, July 31, 2011, October 30, 2011, January 29, 2012, and April 29, 2012.
 
 
 
 
 
 
Page 8 of 9
 
CULP, INC. FINANCIAL INFORMATION RELEASE
RETURN ON CAPITAL EMPLOYED BY SEGMENT
FOR THE TWELVE MONTHS ENDED MAY 1, 2011
(Amounts in Thousands)
(Unaudited)
 
    Operating                                                                    
   
Income
           Return                                                        
   
Twelve Months
    
Average
    
on
Avg.
                                                       
   
Ended
    
Capital
    
Capital
                                                        
    May 1,      Employed      Employed                                                        
   
2011 (1)
    
(3)
    
(2)
                                                        
                                                                         
Mattress Fabrics
   $ 15,373     $ 52,131       29.5 %                                                      
Upholstery Fabrics
     4,359       11,995       36.3 %                                                      
(less: Unallocated Corporate)
     (3,961 )     (848 )     N/A                                                        
Total
   $ 15,771     $ 63,278       24.9 %                                                      
                                                                               
                                                                               
                                                                               
                                                                               
Average Capital Employed
  
As of the three Months Ended May 1, 2011
    
As of the three Months Ended January 30, 2011
    
As of the three Months Ended October 31, 2010
  
   
Mattress
    
Upholstery
    
Unallocated
          
Mattress
    
Upholstery
    
Unallocated
          
Mattress
    
Upholstery
    
Unallocated
        
   
Fabrics
    
Fabrics
    
Corporate
    
Total
    
Fabrics
    
Fabrics
    
Corporate
    
Total
    
Fabrics
    
Fabrics
    
Corporate
    
Total
  
                                                                               
Total assets
     66,637       25,929       37,485       130,051       63,830       22,623       27,424       113,877       65,485       22,277       24,146       111,908  
Total liabilities
     (14,005 )     (15,612 )     (20,093 )     (49,710 )     (9,876 )     (10,117 )     (19,784 )     (39,777 )     (10,634 )     (10,275 )     (19,495 )     (40,404 )
                                                                                                 
Subtotal
   $ 52,632     $ 10,317     $ 17,392     $ 80,341     $ 53,954     $ 12,506     $ 7,640     $ 74,100     $ 54,851     $ 12,002     $ 4,651     $ 71,504  
Less:
                                                                                                
Cash and cash equivalents
     -       -       (23,181 )     (23,181 )     -       -       (17,259 )     (17,259 )     -       -       (15,262 )     (15,262 )
Short-term investments
     -       -       (7,699 )     (7,699 )     -       -       (5,518 )     (5,518 )     -       -       (4,035 )     (4,035 )
Deferred income taxes - current
     -       -       (293 )     (293 )     -       -       (296 )     (296 )     -       -       (176 )     (176 )
Income taxes receivable
     -       -       (79 )     (79 )     -       -       (407 )     (407 )     -       -       (477 )     (477 )
Deferred income taxes - non-current
     -       -       (3,606 )     (3,606 )     -       -       (1,322 )     (1,322 )     -       -       (1,391 )     (1,391 )
Current maturities of long-term debt
     -       -       2,412       2,412       -       -       2,400       2,400       -       -       2,396       2,396  
Deferred income taxes - current
                     82       82       -       -       -       -       -       -       -       -  
Income taxes payable - current
     -       -       646       646       -       -       289       289       -       -       90       90  
Income taxes payable - long-term
     -       -       4,167       4,167       -       -       3,934       3,934       -       -       3,890       3,890  
Deferred income taxes - non-current
     -       -       596       596       -       -       622       622       -       -       622       622  
Long-term debt, less current maturities
     -       -       9,135       9,135       -       -       9,166       9,166       -       -       9,209       9,209  
                                                                                                 
Total Capital Employed
   $ 52,632     $ 10,317     $ (428 )   $ 62,521     $ 53,954     $ 12,506     $ (751 )   $ 65,709     $ 54,851     $ 12,002     $ (483 )   $ 66,370  
                                                                                                 
                                                                                                 
                                                                                                 
   
As of the three Months Ended August 1, 2010
    
As of the three Months Ended May 2, 2010
                                  
   
Mattress
    
Upholstery
    
Unallocated
            
Mattress
    
Upholstery
    
Unallocated
                                          
   
Fabrics
    
Fabrics
    
Corporate
    
Total
    
Fabrics
    
Fabrics
    
Corporate
    
Total
                                  
                                                                                                 
Total assets
     66,919       24,415       21,763       113,097       61,922       25,420       25,256       112,598                                  
Total liabilities
     (14,902 )     (11,126 )     (19,943 )     (45,971 )     (14,720 )     (13,559 )     (21,272 )     (49,551 )                                
                                                                                                 
Subtotal
   $ 52,017     $ 13,289     $ 1,820     $ 67,126     $ 47,202     $ 11,861     $ 3,984     $ 63,047                                  
Less:
                                                                                                
Cash and cash equivalents
     -       -       (14,045 )     (14,045 )     -       -       (18,295 )     (18,295 )                                
Short-term investments
     -       -       (4,009 )     (4,009 )                     (3,023 )     (3,023 )                                
Deferred income taxes - current
     -       -       (138 )     (138 )     -       -       (150 )     (150 )                                
Income taxes receivable
     -       -       (568 )     (568 )     -       -       (728 )     (728 )                                
Deferred income taxes - non-current
     -       -       (245 )     (245 )     -       -       (324 )     (324 )                                
Current maturities of long-term debt
     -       -       194       194       -       -       196       196                                  
Deferred income taxes - current
     -       -       -       -       -       -       -       -                                  
Income taxes payable - current
     -       -       182       182       -       -       224       224                                  
Income taxes payable - long-term
     -       -       3,877       3,877       -       -       3,876       3,876                                  
Deferred income taxes - non-current
     -       -       666       666       -       -       982       982                                  
Long-term debt, less current maturities
     -       -       11,453       11,453       -       -       11,491       11,491                                  
                                                                                                 
Total Capital Employed
   $ 52,017     $ 13,289     $ (813 )   $ 64,493     $ 47,202     $ 11,861     $ (1,767 )   $ 57,296                                  
                                                                                                 
                                                                                                 
   
Mattress
    
Upholstery
    
Unallocated
                                                                          
   
Fabrics
    
Fabrics
    
Corporate
    
Total
                                                                  
                                                                                                 
Average Capital Employed (3)
   $ 52,131     $ 11,995     $ (848 )   $ 63,278                                                                  
 
Notes:
(1)
Operating income excludes restructuring and related charges--see reconciliation per page 6 of this financial information release.
 
(2)
Return on average capital employed represents operating income for fiscal 2011 divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments, long-term debt, including current maturities, current and noncurrent deferred tax assets and liabilities, income taxes payable, and income taxes receivable.
 
(3)
Average capital employed computed using the five periods ending May 2,2010, August 1,2010, October 31, 2010, January 30, 2011, and May 1, 2011.
 
 
 
 
 
 
Page 9 of 9
 
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED ADJUSTED EFFECTIVE INCOME TAX RATE, NET INCOME AND EARNINGS PER SHARE
FOR THE TWELVE MONTHS ENDED APRIL 29, 2012 AND MAY 1, 2011
Unaudited
(Amounts in Thousands)
 
                   
                   
       
TWELVE MONTHS ENDED
    
                   
        Amounts    
       
April 29,
  
May 1,
  
       
2012
  
2011
  
                   
                   
Consolidated Effective GAAP Income Tax Rate
   (1)     6.4 %   (7.3 )%  
                     
Reduction of U.S. Valuation Allowance
         26.1 %   33.7 %  
                     
Reduction of China Valuation Allowance
         -     8.4 %  
                     
Non-Cash U.S. Income Tax Expense
         (13.8 )%   (20.6 )%  
                     
Non-Cash Foreign Income Tax Expense
         (0.2 )%   1.9 %  
                     
Consolidated Adjusted Effective Income Tax Rate
   (2)     18.5 %   16.1 %  
                     
 
                                     
                                     
                                     
                                     
 
                                     
   
THREE MONTHS ENDED
  
   
As reported
 
    
April 29, 2012
  
As reported
  
 
    
May 1, 2011
   
April 29,
        
Proforma Net
  
May 1,
          
Proforma Net
   
2012
  
Adjustments
  
of Adjustments
  
2011
    
Adjustments
  
of Adjustments
                                     
Income before income taxes
   $ 5,494           $ 5,494     $ 4,675           $ 4,675  
                                             
Income taxes (3)
     2,071     $ (1,055 )     1,016       (1,315 )   $ 2,068       753  
Net income
   $ 3,423     $ 1,055     $ 4,478     $ 5,990     $ (2,068 )   $ 3,922  
                                                 
Net income per share-basic
   $ 0.27     $ (0.08 )   $ 0.36     $ 0.46     $ 0.16     $ 0.30  
Net income per share-diluted
   $ 0.27     $ (0.08 )   $ 0.35     $ 0.45     $ 0.16     $ 0.30  
Average shares outstanding-basic
     12,513       12,513       12,513       13,030       13,030       13,030  
Average shares outstanding-diluted
     12,695       12,695       12,695       13,217       13,217       13,217  
                                                 
                                                 
 
                                                 
   
TWELVE MONTHS ENDED
    
   
As reported
            
April 29, 2012
  
As reported
            
May 1, 2011
   
April 29,
            
Proforma Net
  
May 1,
            
Proforma Net
      2012    
Adjustments
  
of Adjustments
     2011    
Adjustments
  
of Adjustments
                                                 
Income before income taxes
   $ 14,198             $ 14,198     $ 15,062             $ 15,062  
                                                 
Income taxes (3)
     902     $ 1,725       2,627       (1,102 )   $ 3,527       2,425  
Net income
   $ 13,296     $ (1,725 )   $ 11,571     $ 16,164     $ (3,527 )   $ 12,637  
                                                 
Net income per share-basic
   $ 1.05     $ 0.14     $ 0.91     $ 1.25     $ 0.27     $ 0.98  
Net income per share-diluted
   $ 1.03     $ 0.13     $ 0.90     $ 1.22     $ 0.27     $ 0.96  
Average shares outstanding-basic
     12,711       12,711       12,711       12,959       12,959       12,959  
Average shares outstanding-diluted
     12,866       12,866       12,866       13,218       13,218       13,218  
                                                 
 
(1)
Calculated by dividing consolidated income tax (benefit) expense by consolidated income before income taxes.
 
(2)
Represents estimated cash income tax expense for our subsidiaries located in Canada and China divided by consolidated income before income taxes.
 
(3)
Proforma taxes calculated using the Consolidated Adjusted Effective Income Tax Rate as reflected above.
 
 
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