<PAGE>
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 11, 1995
CULP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
North Carolina 0-12781 56-1001967
(State or other jurisdiction of (Commission File No.) (IRS Employer Identification
incorporation) No.)
</TABLE>
101 South Main Street
High Point, North Carolina 27260
(Address of principal executive offices)
(910) 889-5161
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
See Press Release related to first quarter earnings dated
August 11, 1995 (attached).
See Financial Information Release (attached).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CULP, INC.
(Registrant)
By: Franklin N. Saxon
Franklin N. Saxon
Vice President and
Chief Financial Officer
By: Stephen T. Hancock
Stephen T. Hancock
General Accounting Manager
Dated: August 11, 1995
-2-
<PAGE>
FOR IMMEDIATE RELEASE
CULP REPORTS HIGHER FIRST QUARTER SALES AND PROFITS
REFLECTING BENEFIT FROM RAYONESE ACQUISITION
HIGH POINT, North Carolina (August 11, 1995) - Culp, Inc. today
reported higher sales and earnings for the first quarter of its 1996
fiscal year.
For the three months ended July 30, 1995, Culp reported net
sales of $72.4 million compared with $66.3 million a year ago. Net
income for the quarter totaled $1,515,000, or $0.14 per share,
compared with $1,450,000, or $0.13 per share, in the first quarter of
fiscal 1995.
Commenting on the results, Robert G. Culp, III, chief
executive officer, said, "We are pleased to report sales and profit
gains for our first fiscal quarter in spite of the significant sales
weakness in the U.S. furniture industry during the quarter and the raw
material price increases we have received over the last year. We
were aided in the first quarter by strong growth in mattress
ticking and exports and by the inclusion of Rayonese Textile which
was acquired during the fourth quarter of last year. As we had
anticipated, however, the overall trend in incoming orders for our
domestic upholstery fabrics did slow during the period. This pattern,
which initially became evident toward the close of our fiscal 1995 year,
appeared to reflect caution by furniture manufacturers about the outlook
for consumer spending."
Culp commented, "We are encouraged that the pace of demand
has accelerated somewhat in recent weeks, perhaps reflecting the
easing in interest rates and generally stronger prevailing forecasts
for the economy. We would expect to benefit from a continuation
of this strengthening, but our primary managerial focus continues to
be enhancing Culp's fundamental position as one of the largest
suppliers of fabrics for the home furnishings industry. One clear
measure of this commitment is the considerable investment Culp has made
in recent years in modernizing and expanding manufacturing capacity.
Including the record capital spending of $18 million in fiscal 1995, we
have spent $70 million over the past five years principally for
production equipment and facility modernization. The
-MORE-
CULP Reports First Quarter Results
Page 2
August 11, 1995
<PAGE>
magnitude of the decision to maintain efficient manufacturing facilities
is evident by considering that our capital base at the close of fiscal
1995 was $144 million. For fiscal 1996, we expect a lower level of
spending because of the completion of several modernization programs
during the past year."
Culp said, "This investment program is a vital part of our
overall objective of delivering superior value and service to
customers. Although industry conditions will remain a factor
influencing our short-term performance, our emphasis is building a
market position which will yield an above-average record of long-term
progress."
Culp, Inc. is a leading manufacturer and marketer of
fabrics for the furniture, bedding, and institutional furnishings
markets. The company's common shares are traded on The Nasdaq Stock
Market (National Market) under the symbol CULP.
CULP, INC.
Condensed Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
July 30, July 31,
1995 1994
<S> <C> <C>
Net sales $ 72,357,000 $ 66,349,000
Net income $ 1,515,000 $ 1,450,000
Earnings per share $ 0.14 $ 0.13
Average shares outstanding 11,207,000 11,198,000
</TABLE>
-END-
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(Page 1 of 8)
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED JULY 30, 1995 AND JULY 31, 1994
(Amounts in Thousands, Except for Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Sales
July 30, July 31, % Over
1995 1994 (Under) 1996 1995
<S> <C> <C> <C> <C> <C>
Net sales 72,357 66,349 9.1 % 100.0 % 100.0 %
Cost of sales 60,159 55,249 8.9 % 83.1 % 83.3 %
Gross profit 12,198 11,100 9.9 % 16.9 % 16.7 %
Selling, general and
administrative expenses 8,454 7,569 11.7 % 11.7 % 11.4 %
Income from operations 3,744 3,531 6.0 % 5.2 % 5.3 %
Interest expense 1,297 1,077 20.4 % 1.8 % 1.6 %
Interest income 0 (23) (100.0)% 0.0 % (0.0)%
Other expense (income), net 107 177 (39.5)% 0.1 % 0.3 %
Income before income taxes 2,340 2,300 1.7 % 3.2 % 3.5 %
Income taxes * 825 850 (2.9)% 35.3 % 37.0 %
Net income 1,515 1,450 4.5 % 2.1 % 2.2 %
Average shares outstanding 11,207 11,198 0.1 %
Net income per share $0.14 $0.13 7.7 %
Dividends per share $0.0275 $0.025 10.0 %
</TABLE>
* Percent of sales column is calculated as a % of income before income taxes.
<PAGE>
(Page 2 of 8)
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
JULY 30, 1995, JULY 31, 1994 AND APRIL 30, 1995
(Unaudited, Amounts in Thousands)
<TABLE>
<CAPTION>
Amounts Increase
July 30, July 31, (Decrease) * April 3
1995 1994 Dollars Percent 1995
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash investments 988 380 608 160.0 % 1,393
Accounts receivable 38,243 33,173 5,070 15.3 % 44,252
Inventories 49,363 40,229 9,134 22.7 % 45,771
Other current assets 3,553 2,391 1,162 48.6 % 3,194
Total current assets 92,147 76,173 15,974 21.0 % 94,610
Restricted investments 0 2,202 (2,202) (100.0)% 795
Property, plant & equipment, net 75,744 66,535 9,209 13.8 % 75,805
Goodwill 22,391 18,588 3,803 20.5 % 22,600
Other assets 2,443 1,087 1,356 124.7 % 1,189
Total assets 192,725 164,585 28,140 17.1 % 194,999
Current Liabilities
Current maturities of long-term debt 11,555 4,508 7,047 156.3 % 11,555
Accounts payable 25,864 19,772 6,092 30.8 % 32,250
Accrued expenses 8,520 7,505 1,015 13.5 % 11,532
Income taxes payable 1,139 1,224 (85) (6.9)% 661
Total current liabilities 47,078 33,009 14,069 42.6 % 55,998
Long-term debt 67,662 64,187 3,475 5.4 % 62,187
Deferred income taxes 5,361 3,477 1,884 54.2 % 5,418
Total liabilities 120,101 100,673 19,428 19.3 % 123,603
Shareholders' equity 72,624 63,912 8,712 13.6 % 71,396
Total liabilities and
stockholders' equity 192,725 164,585 28,140 17.1 % 194,999
Shares outstanding 11,210 11,205 5 0.0 % 11,205
</TABLE>
* Derived from audited financial statements.
<PAGE>
(Page 3 of 8)
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 30, 1995 AND JULY 31, 1994
(Unaudited, Amounts in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
Amounts
July 30, July 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income 1,515 1,450
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 3,067 2,622
Amortization of intangible assets 148 136
Provision for deferred income taxes (57) 0
Changes in assets and liabilities:
Accounts receivable 6,009 3,570
Inventories (3,592) (3,633)
Other current assets (359) (164)
Other assets (1,276) (49)
Accounts payable (6,386) (10,535)
Accrued expenses (3,012) (653)
Income taxes payable 478 588
Net cash provided by (used in) operating activities (3,465) (6,668)
Cash flows from investing activities:
Capital expenditures (3,006) (5,153)
Purchases of restricted investments 0 (22)
Proceeds from sale of restricted investments 795 743
Business acquired 83 0
Net cash provided by (used in) investing activities (2,128) (4,432)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 7,000 7,200
Principal payments on long-term debt (1,525) (67)
Net increase (decrease) in bank overdrafts 0 1,841
Dividends paid (308) (280)
Proceeds from sale of common stock 21 93
Net cash provided by (used in) financing activities 5,188 8,787
Increase (decrease) in cash and cash investments (405) (2,313)
Cash and cash investments at beginning of period 1,393 2,693
Cash and cash investments at end of period 988 380
</TABLE>
<PAGE>
(Page 4 of 8)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
JULY 30, 1995
<TABLE>
<CAPTION>
FISCAL 95 FISCAL 96
Q1 Q1 Q2 Q3 Q4
<S> <C> <C> <C> <C> <C>
INVENTORIES
Inventory turns 5.8 5.1
RECEIVABLES
Days sales in receivables 42 45
Percent current & less than 30
days past due (Trade only) 98.5% 97.0%
WORKING CAPITAL
Current ratio 2.3 2.0
Working capital turnover 5.7 5.4
Working capital $43,164 $45,069
Working capital as a % of sales 16.3% 15.6%
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 8.9% 8.9%
Percent property, plant &
equipment are depreciated 43.6% 44.9%
Capital expenditures $18,058 (1 $3,006
PROFITABILITY
Net profit margin 2.2% 2.1%
Gross profit margin 16.7% 16.9%
Operating income margin 5.3% 5.2%
SG & A expenses/net sales 11.4% 11.7%
Return on beginning capital employed 4.8% 4.2%
Return on beginning equity 9.3% 8.5%
Earnings per share $0.13 $0.14
LEVERAGE (3)
Interest & dividend coverage 2.5 2.3
Total liabilities/equity 154.1% 165.4%
Long-term debt/equity 97.0% 93.2%
Funded debt/equity 104.0% 109.1%
Funded debt/capital employed 51.0% 52.2%
Funded debt $66,493 $79,217
Funded debt/EBITDA (LTM) 2.55 2.42
OTHER
Book value per share $5.70 $6.48
Employees at quarter end 2,579 2,773
Sales per employee (annualized) $104,000 $105,000
Capital employed (3) $130,405 $151,841
Effective income tax rate 37.0% 35.3%
EBITDA (2) $6,112 $6,852
EBITDA/net sales 9.2% 9.5%
</TABLE>
(1) Expenditures for entire year
(2) Earnings before interest, income taxes, and depreciation & amortization.
(3) Total liabilities, long-term debt, funded debt and capital employed are
all net of restricted investments.
<PAGE>
(Page 5 to 8)
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES BY BUSINESS UNIT
FOR THREE MONTHS ENDED JULY 30, 1995
AND JULY 31, 1994
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
July 30, July 31, % Over
Business Units 1995 1994 (Under) 1996 1995
<S> <C> <C> <C> <C> <C>
Upholstery Fabrics
Flat Wovens
Existing Culp 17,584 19,613 (10.3)% 24.3 % 29.6 %
Rossville/Chromatex 15,358 15,140 1.4 % 21.2 % 22.8 %
32,942 34,753 (5.2)% 45.5 % 52.4 %
Velvets/Prints 23,523 20,644 13.9 % 32.5 % 31.1 %
56,465 55,397 1.9 % 78.0 % 83.5 %
Mattress Ticking 15,892 * 10,952 45.1 % 22.0 % 16.5 %
72,357 66,349 9.1 % 100.0 % 100.0 %
</TABLE>
* Includes Rayonese Shipments of $1,769.
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
EXPORT AND FOREIGN SALES BY GEOGRAPHIC AREA
FOR THREE MONTHS ENDED JULY 30, 1995 AND JULY 31, 1994
<TABLE>
<CAPTION>
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
July 30, July 31, % Over
Geographic Area 1995 1994 (Under) 1996 1995
<S> <C> <C> <C> <C> <C>
North America (Excluding USA) 4,544 * 3,609 25.9 % 31.5 % 32.5
Europe 2,875 2,798 2.8 % 19.9 % 25.2
Middle East 2,112 863 144.7 % 14.7 % 7.8
Far East & Asia 1,639 1,876 (12.6)% 11.4 % 16.9
South America 445 308 44.5 % 3.1 % 2.8
All other areas 2,797 1,655 69.0 % 19.4 % 14.9
14,412 11,109 29.7 % 100.0 % 100.0
</TABLE>
* Includes Rayonese shipments of $1,769.
<PAGE>
(Page 7 of 8)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three month period ended July 30, 1995
INCOME STATEMENT COMMENTS
(Bullet) GENERAL - The company is pleased to report sales and
profit gains for its first fiscal quarter in spite of the significant
sales weakness in the U. S. furniture industry during the last three
months and the raw material prices the company has received over
the last year. This quarter makes the eleventh (11th) consecutive
quarter of record earnings and the ninth (9th) consecutive quarter of
record sales.
The company attributes this successful record to, among other
things, two key growth strategies: (1) a focus on related markets,
such as the Bedding, Export, Contract and Home Textiles markets, other
than the U.S. residential furniture industry in order to reduce our
dependency on one cyclical and geographic area; and (2) investment in
the creative side of our business -- the company has significantly
increased the resources (both designers and CAD systems) dedicated
to the design and product development areas in each business unit over
the last eighteen (18) months.
(Bullet) NET SALES - Upholstery fabric sales increased
1.9% to $56.5 million and mattress ticking sales increased 45.2% to
$15.9 million for the quarter. The Mattress Ticking and Velvets/Prints
business units reported substantial sales gains for the quarter -
Mattress Ticking up 45.3% and Velvets/Prints up 13.9%, while our two
other business units reported weak results - Flat Wovens down 10.3% and
Rossville/Chromatex up 1.4%. Comments on current backlogs and
incoming order rates versus last year are as follows: Mattress Ticking
- - up significantly; Flat Wovens - up slightly overall, with recent
strength in the jacquard product line and weakness in the dobby line;
and Rossville/Chromatex - up slightly with strength in its dobby product
line and weakness in its jacquard product line; and in Velvets/Prints
- - up moderately, with strength in the wet prints and heat-transfer
prints product lines. The results of the Velvets/Prints business unit
were much improved from the first quarter of last year. The company
has institutes a small "across-the-board" price increase of
approximately 2%, generally effective for shipments after October 1,
1995.
Export and foreign sales, including sales from Rayonese
of $1.8 million, were up 29.7% for the quarter, with particular
strength in the Middle East. Sales into Europe were up 2.8% for the
quarter, a continuation of the positive trend that began in the
second quarter of fiscal 1995. The majority of the export growth is
coming from the Flat Wovens and Rossville/Chromatex business units, with
particular strength in the jacquard product lines. The outlook for
export sales gains remains good.
The U.S. residential and contract furniture industries have
softened considerably during the last several months, which has
finally affected our U.S. upholstery fabric business, particularly in
the Flat Wovens and Rossville/Chromatex business units. The
company believes this softening is temporary and that business
conditions are trending more positive, beginning with our second
fiscal quarter. The trend of interest rates has turned downward, with
mortgage rates becoming more attractive.
(Bullet) GROSS PROFIT - The gross profit increase of 9.9%
for the quarter reflects significant gains in Mattress Ticking and
Velvets/Prints, which were partially offset by significant decreases in
Flat Wovens and Rossville/Chromatex. Additionally, during the quarter,
the company recorded a $150,000 credit related to the successful
resolution of a North Carolina sales tax matter. The company's margins
are being affected by the significant price increase in its raw
materials over the last year. The company has been unable to pass along
all of the costs increases it has received.
(Bullet) S,G & A EXPENSES - S,G&A expenses for the quarter
were up as a percentage of sales to 11.7% from 11.4%, which reflects
higher design expenses and export selling costs.
(Bullet) INTEREST EXPENSE - The increase for the quarter
is due to additional borrowings related to the Rayonese acquisition,
capital expenditures and higher levels of working capital necessary to
support sales growth. During April, May, and June 1995, the company
entered into three interest rate swap agreements that effectively
provide for (1) a fixed rate of 7.34% for five years on $15.0 million
of its bank borrowings;
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE (page 8 of 8)
FINANCIAL NARRATIVE - continued
for the three month period ended July 30, 1995
(2) a fixed rate of 6.85% for seven years on $5.0 million of its
bank borrowings; and (3) a fixed rate of 6.60% for seven years on $5.0
million of its bank borrowings.
(Bullet) OTHER EXPENSE (INCOME), NET - This expense includes
several items: amortization of goodwill and debt issue costs and
other miscellaneous items. Additionally, the company recorded a credit
of $100,000 related to the favorable settlement of an
environmental dispute with the former owner of one of the company's
facilities.
(Bullet) INCOME TAXES - The effective tax rate for the quarter
decreased primarily due to the income earned in Canada related to
Rayonese, which carries a significantly lower effective tax rate of
31.0%.
(Bullet) EBITDA - EBITDA for the quarter increased $0.7
million, or 12.1%, from last year's first quarter, and represented 9.5%
of net sales compared with 9.2% of net sales last year.
BALANCE SHEET COMMENTS
(Bullet) WORKING CAPITAL - The increase in inventories over
fiscal year end is attributable to higher raw material inventories,
which are being reduced during the same fiscal quarter. The company has
made excellent progress in reducing finished goods inventory in the
last six months. The company has historically built finished goods
inventory during its first fiscal quarter.
(Bullet) PROPERTY, PLANT AND EQUIPMENT, NET - For fiscal 1996,
the capital budget is $11.0 million. Of this total, $2.5 million of
capital expenditures relates to Rayonese. Depreciation expense for
fiscal 1996 is expected to approximate $13.5 million. The major
weaving expansion at Rayonese is proceeding well and is expected to be
completed and fully operational by the end of September 1995.
(Bullet) LONG-TERM DEBT - At July 30, 1995, the company had
$15.8 million in IRB borrowings, $17.0 million in borrowings under its
revolving credit facility, $40.0 million in a term facility,
$1.0 million in a subordinated note payable and $5.5 million in a
convertible note payable. The current maturities of $11.6 includes
$6.0 million repayment of the term loan, $100,000 repayment of
IRBs and $5.5 million of the convertible note payable because the note
is callable by the holder, beginning March 6, 1996.
(Bullet) RAYONESE TEXTILE INC. PURCHASE - On March 6,
1995, the company completed the acquisition of Rayonese Textile Inc.
("Rayonese"). (See Form 8-K, dated December 23, 1994, for more
detailed information about the purchase.) The transaction has a
preliminary estimated value of approximately $10.5 million and includes
the purchase of 100% of the Rayonese common stock and the assumption of
Rayonese's funded debt. The acquisition has been accounted for as a
purchase, and accordingly, the purchase price was allocated to the
assets acquired and liabilities assumed based on their estimated
fair values at the date of acquisition. The preliminary estimated fair
values of assets and retained liabilities acquired are summarized below:
March 6,
(dollars in thousands) 1995
Accounts receivable, net $ 2,207
Inventories 1,878
Other current assets 39
Property, plant and equipment 5,000
Goodwill 4,120
Accounts payable and accrued liabilities <2,782>
$ 10,462
The operating results of this acquisition are included in the
company's results of operations from the date of acquisition.
