<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) May 30, 1996
CULP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
North Carolina 0-12781 56-1001967
<S> <C> <C>
(State or other jurisdiction of (Commission File No.) (IRS Employer Identification No.)
incorporation)
</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 (attached) dated May 30, 1996 related to year-end earnings for
the period ended April 28, 1996.
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
Vice President and
Chief Financial Officer
By: Stephen T. Hancock
Stephen T. Hancock
General Accounting Manager
Dated: May 30, 1996
<PAGE>
(CULP LOGO APPEARS HERE)
NEWS RELEASE Contact:
Frank Saxon
Vice President
Chief Financial Officer
FOR IMMEDIATE RELEASE
CULP REPORTS RECORD SALES AND EARNINGS FOR FISCAL 1996
--------------------
EARNINGS UP FOR SEVENTH CONSECUTIVE YEAR
HIGH POINT, North Carolina (May __, 1996) - Culp, Inc. (Nasdaq/NM:CULP) today
reported record sales and earnings for the fourth quarter and fiscal year ended
April 28, 1996.
Net sales for the quarter increased 19.6% to $102.2 million compared
with $85.4 million a year ago. Net income for the quarter rose 18.2% to $4.1
million, or $0.36 per share, compared with $3.4 million, or $0.31 per share, in
the fourth quarter of fiscal 1995.
For the 1996 fiscal year, net sales totaled $351.7 million, up 14.2%
from $308.0 million in fiscal 1995. Net income for the year rose 12.3% to $11.0
million, or $0.98 per share, up from $9.8 million, or $0.87 per share, in fiscal
1995.
"Fiscal 1996 marked the seventh consecutive year in which Culp has
attained higher net income," said Robert G. Culp, III, chief executive officer.
"Each quarter during the year included record sales and earnings compared with
the respective year-earlier periods and the fourth quarter represented the
fourteenth consecutive quarter of record earnings. Although we received some
benefit during fiscal 1996 from the full-year inclusion of Rayonese Textile, the
gains in both net sales and net income for the year principally reflected growth
in our existing business units."
Culp continued, "Higher sales of both upholstery fabrics and mattress
ticking contributed to the 14.2% gain in net sales for the year. For fiscal
1996, international shipments accounted for $80.9 million, or 23.0 %, of net
sales, up from 18% in fiscal 1995. Culp's international sales have risen more
than tenfold since fiscal 1990. Without that incremental business, we would
still have compiled a well above-average record and would rank as one of the top
marketers of upholstery fabrics in the United States. However, the contribution
from increased sales to customers outside the United States has markedly
accelerated our progress and enabled us to achieve a stronger competitive
posture on a worldwide basis.
-MORE-
<PAGE>
CULP Reports 1996 Records
Page 2
May 30, 1996
- --------------------------------------------------------------------------------
"Aided by a growing presence in the Middle East, Asia and the Far East,
we shipped fabrics to more than 50 countries during fiscal 1996. We are
continuing to add new customers, are considering establishing sales offices in
selected areas and plan to introduce new products as part of an aggressive plan
to capitalize on this momentum. Our success in building Culp's global presence
relates directly to our continuous quality improvement process that remains a
cornerstone of our growth initiatives. The tangible returns realized thus far
from this effort have reinforced the teamwork throughout the Culp organization
and confirmed the importance of delivering consistently high levels of service
to each customer. The company's ongoing progress is also attributable to our
stepped-up investment in personnel and equipment for the development of
innovative and fashionable designs. Having computer-aided flexibility to
generate new designs has increasingly become an integral asset to our overall
marketing programs."
Culp concluded, "In the fourth quarter, we achieved the milestone of
surpassing $100 million in net sales for the first time ever for a three-month
period. Although there are conflicting projections about the trend in the
economy and interest rates over the next several quarters, the sentiment among
manufacturers and retailers of home furnishings seems generally optimistic at
this time. The current pace of our incoming orders and production schedules
casts a positive outlook about the company's near-term prospects, but our
primary focus remains on extending Culp's long-term record of progress."
Culp, Inc. is a leading manufacturer and marketer of fabrics for the
furniture, bedding and institutional furnishings markets.
CULP, INC.
Condensed Financial Highlights
<TABLE>
<CAPTION>
Three Months Ended
April 28, April 30,
1996 1995
<S> <C> <C>
Net sales $ 102,162,000 $ 85,441,000
Net income 4,050,000 3,425,000
Earnings per share $ 0.36 $ 0.31
Fiscal Year Ended
April 28, April 30,
1996 1995
Net sales $ 351,667,000 $ 308,026,000
Net income 10,980,000 9,775,000
Earnings per share $ 0.98 $ 0.87
</TABLE>
-END-
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE AND TWELVE MONTHS ENDED APRIL 28, 1996 AND APRIL 30, 1995
(Amounts in Thousands, Except for Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Sales
April 28, April 30, % Over
1996 1995 (Under) 1996 1995
<S> <C> <C> <C> <C> <C>
Net sales $ 102,162 85,441 19.6 % 100.0 % 100.0 %
Cost of sales 82,957 69,039 20.2 % 81.2 % 80.8 %
Gross profit 19,205 16,402 17.1 % 18.8 % 19.2 %
Selling, general and
administrative expenses 11,300 9,205 22.8 % 11.1 % 10.8 %
Income from operations 7,905 7,197 9.8 % 7.7 % 8.4 %
Interest expense 1,352 1,374 (1.6)% 1.3 % 1.6 %
Interest income (92) (3) ** % (0.1)% (0.0)%
Other expense (income), net 365 470 (22.3)% 0.4 % 0.6 %
Income before income taxes 6,280 5,356 17.3 % 6.1 % 6.3 %
Income taxes * 2,230 1,931 15.5 % 35.5 % 36.1 %
Net income $ 4,050 3,425 18.2 % 4.0 % 4.0 %
Average shares outstanding 11,284 11,205 0.7 %
Net income per share $0.36 $0.31 16.1 %
Dividends per share $0.0275 $0.025 10.0 %
TWELVE MONTHS ENDED (AUDITED)
Amounts Percent of Sales
April 28, April 30, % Over
1996 1995 (Under) 1996 1995
Net sales $ 351,667 308,026 14.2 % 100.0 % 100.0 %
Cost of sales 289,129 253,345 14.1 % 82.2 % 82.2 %
Gross profit 62,538 54,681 14.4 % 17.8 % 17.8 %
Selling, general and
administrative expenses 39,068 33,432 16.9 % 11.1 % 10.9 %
Income from operations 23,470 21,249 10.5 % 6.7 % 6.9 %
Interest expense 5,316 4,715 12.7 % 1.5 % 1.5 %
Interest income (92) (64) 43.8 % (0.0)% (0.0)%
Other expense (income), net 956 1,082 (11.6)% 0.3 % 0.4 %
Income before income taxes 17,290 15,516 11.4 % 4.9 % 5.0 %
Income taxes * 6,310 5,741 9.9 % 36.5 % 37.0 %
Net income $ 10,980 9,775 12.3 % 3.1 % 3.2 %
Average shares 11,234 11,203 0.3 %
Net income per share $0.98 $0.87 12.6 %
Dividends per share $0.11 $0.10 10.0 %
</TABLE>
* Percent of sales column is calculated as a % of income before income taxes.
** Measurement is not meaningful.
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
APRIL 28, 1996, AND APRIL 30, 1995
(Audited, Amounts in Thousands)
<TABLE>
<CAPTION>
Amounts Increase
April 28, April 30, (Decrease)
1996 1995 Dollars Percent
<S> <C> <C> <C> <C>
Current assets
Cash and cash investments $ 498 1,393 (895) (64.2)%
Accounts receivable 52,038 44,252 7,786 17.6 %
Inventories 47,395 45,771 1,624 3.5 %
Other current assets 4,191 3,194 997 31.2 %
Total current assets 104,122 94,610 9,512 10.1 %
Restricted investments 5,250 795 4,455 560.4 %
Property, plant & equipment, net 76,961 75,805 1,156 1.5 %
Goodwill 22,871 22,600 271 1.2 %
Other assets 2,440 1,189 1,251 105.2 %
Total assets $ 211,644 194,999 16,645 8.5 %
Current Liabilities
Current maturities of long-term debt $ 7,100 11,555 (4,455) (38.6)%
Accounts payable 27,308 32,250 (4,942) (15.3)%
Accrued expenses 12,564 11,532 1,032 8.9 %
Income taxes payable 197 661 (464) (70.2)%
Total current liabilities 47,169 55,998 (8,829) (15.8)%
Long-term debt 74,941 62,187 12,754 20.5 %
Deferred income taxes 8,088 5,418 2,670 49.3 %
Total liabilities 130,198 123,603 6,595 5.3 %
Shareholders' equity 81,446 71,396 10,050 14.1 %
Total liabilities and
stockholders' equity $ 211,644 194,999 16,645 8.5 %
Shares outstanding 11,290 11,205 85 0.8 %
</TABLE>
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE INE MONTHS ENDED APRIL 28, 1996 AND APRIL 29, 1995
(Audited, Amounts in Thousands)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
Amounts
January 28, January 29,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $10,890 9,775
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 12,348 11,257
Amortization of intangible assets 748 628
Provision for deferred income taxes 2,210 1,373
Changes in assets and liabilities:
Accounts receivable (7,786) (5,515)
Inventories (1,624) (7,281)
Other current assets (537) (310)
Other assets (103) (518)
Accounts payable (1,077) 159
Accrued expenses 1,032 2,180
Income taxes payable (464) 25
Net cash provided by (used in) operating activities 15,727 11,773
Cash flows from investing activities:
Capital expenditures (14,385) (18,058)
Purchases of restricted investments (6,019) (57)
Purchase of investment to fund deferred compensation liability (1,286) 0
Proceeds from sale of restricted investments 1,564 2,185
Business acquired 0 (10,455)
Net cash provided by (used in) investing activities (20,126) (26,385)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 19,854 23,455
Principal payments on long-term debt (11,555) (11,275)
Change in accounts payable-capital expenditures (3,865) 2,160
Dividends paid (1,236) (1,120)
Proceeds from sale of common stock 306 92
Net cash provided by (used in) financing activities 3,504 13,312
Increase (decrease) in cash and cash investments (895) (1,300)
Cash and cash investments at beginning of period 1,393 2,693
Cash and cash investments at end of period $ 498 1,393
</TABLE>
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
APRIL 28, 1996
<TABLE>
<CAPTION>
FISCAL 95 FISCAL 96
------------------ -------------------------------------------------------
Q4 Q1 Q2 Q3 Q4
------------------ -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVENTORIES
Inventory turns 6.1 5.1 6.0 5.7 6.8
RECEIVABLES
Days sales in receivables 47 45 47 43 46
Percent current & less than 30
days past due 98.7% 97.0% 98.2% 99.0% 99.0%
WORKING CAPITAL
Current ratio 1.7 2.0 1.9 2.1 2.2
Working capital turnover 5.6 5.4 5.4 5.3 5.3
Working capital $38,612 $45,069 $46,373 $52,266 $56,953
Working capital as a % of sales 11.3% 15.6% 12.8% 15.1% 13.9%
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 9.0% 8.9% 8.9% 8.9% 8.3%
Percent property, plant &
equipment are depreciated 43.6% 44.9% 46.7% 48.0% 47.7%
Capital expenditures $18,058 (1) $3,006 $2,084 $2,620 $6,675
PROFITABILITY
Net profit margin 4.0% 2.1% 3.3% 2.8% 4.0%
Gross profit margin 19.2% 16.9% 17.8% 17.4% 18.8%
Operating income margin 8.4% 5.2% 7.1% 6.2% 7.7%
SG & A expenses/net sales 10.8% 11.7% 10.7% 11.1% 11.1%
Return on beginning capital employed 11.3% 4.2% 8.3% 6.7% 11.2%
Return on beginning equity 21.9% 8.5% 16.8% 13.5% 22.7%
Earnings per share $0.31 $0.14 $0.27 $0.22 $0.36
LEVERAGE (3)
Interest & dividend coverage 4.1 2.3 3.7 3.2 4.6
Total liabilities/equity 172.0% 165.4% 166.0% 154.7% 153.4%
Long-term debt/equity 86.0% 93.2% 86.4% 87.7% 92.0%
Funded debt/equity 102.2% 109.1% 101.8% 102.6% 94.3%
Funded debt/capital employed 50.5% 52.2% 50.4% 50.6% 48.5%
Funded debt $72,947 $79,217 $76,692 $79,667 $76,791
Funded debt/EBITDA (LTM) 2.28 2.42 2.27 2.29 2.16
OTHER
Book value per share $6.37 $6.48 $6.72 $6.89 $7.21
Employees at quarter end 2,762 2,773 2,847 2,886 2,966
Sales per employee (annualized) $126,000 $105,000 $129,000 $121,000 $140,000
Capital employed (3) $144,343 $151,841 $152,043 $157,290 $158,237
Effective income tax rate 36.1% 35.3% 37.8% 37.2% 35.5%
EBITDA (2) $9,917 $6,852 $9,494 $8,450 $10,814
EBITDA/net sales 11.6% 9.5% 10.5% 9.8% 10.6%
</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>
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES BY BUSINESS UNIT
FOR THREE MONTHS AND TWELVE MONTHS ENDED APRIL 28, 1996
AND APRIL 30, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
April 28, April 30, % Over
Business Units 1996 1995 (Under) 1996 1995
<S> <C> <C> <C> <C> <C>
Upholstery Fabrics
Flat Wovens
Culp Textures $ 23,400 21,738 7.6 % 22.9 % 25.4 %
Rossville/Chromatex 22,318 16,470 35.5 % 21.8 % 19.3 %
45,718 38,208 19.7 % 44.8 % 44.7 %
Velvets/Prints 38,280 31,413 21.9 % 37.5 % 36.8 %
83,998 69,621 20.7 % 82.2 % 81.5 %
Mattress Ticking
Culp Home Fashions (1) * 18,164 15,820 14.8 % 17.8 % 18.5 %
** $ 102,162 85,441 19.6 % 100.0 % 100.0 %
TWELVE MONTHS ENDED (AUDITED)
Amounts Percent of Total Sales
April 28, April 30, % Over
Business Units 1996 1995 (Under) 1996 1995
Upholstery Fabrics
Flat Wovens
Culp Textures $ 84,384 85,125 (0.9)% 24.0 % 27.6 %
Rossville/Chromatex 74,203 63,765 16.4 % 21.1 % 20.7 %
158,587 148,890 6.5 % 45.1 % 48.3 %
Velvets/Prints 125,701 106,803 17.7 % 35.7 % 34.7 %
284,288 255,693 11.2 % 80.8 % 83.0 %
Mattress Ticking
Culp Home Fashions (1) * 67,379 52,333 28.8 % 19.2 % 17.0 %
** $ 351,667 308,026 14.2 % 100.0 % 100.0 %
</TABLE>
* Includes Rayonese shipments of $1,976 and $1,351 for the three months of
fiscal 1996 and fiscal 1995, respectively; and $7,708 and $1,351 for the twelve
months of fiscal 1996 and fiscal 1995, respectively. The percent increase in
sales without Rayonese was 19.1 % for the three months and 12.2 % for the twelve
months.
** U.S. Domestic sales were $78,137 and $67,979 for the three months of fiscal
1996 and fiscal 1995, respectively; and $274,270 and $250,055 for the twelve
months of fiscal 1996 and fiscal 1995, respectively. The percent increase in
U.S. Domestic sales were 14.9% for the three months and 9.7% for the twelve
months.
(1) Formerly known as Culp Ticking
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THREE MONTHS AND TWELVE MONTHS ENDED APRIL 28, 1996
AND APRIL 30, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
April 28, April 30, % Over
Geographic Area 1996 1995** (Under) 1996 1995
<S> <C> <C> <C> <C> <C>
North America (Excluding USA $6,660 4,775 39.5 % 27.7 % 27.3 %
Europe 5,774 6,240 (7.5)% 24.0 % 35.7 %
Middle East 5,969 1,575 279.0 % 24.8 % 9.0 %
Far East & Asia 3,834 2,628 45.9 % 16.0 % 15.1 %
South America 778 1,222 (36.3)% 3.2 % 7.0 %
All other areas 1,010 1,022 (1.2)% 4.2 % 5.9 %
* $2,4025 17,462 37.6 % 100.0 % 100.0 %
TWELVE MONTHS ENDED (AUDITED)
Amounts Percent of Total Sales
April 28, April 30, % Over
Geographic Area 1996 1995** (Under) 1996 1995
North America (Excluding USA$ $ 23,528 16,707 40.8 % 30.4 % 28.8 %
Europe 18,927 19,177 (1.3)% 24.5 % 33.1 %
Middle East 15,609 6,081 156.7 % 20.2 % 10.5 %
Far East & Asia 12,124 8,969 35.2 % 15.7 % 15.5 %
South America 2,753 3,749 (26.6)% 3.6 % 6.5 %
All other areas 4,456 3,288 35.5 % 5.8 % 5.7 %
* $7,7397 57,971 33.5 % 100.0 % 100.0 %
</TABLE>
* Includes Rayonese shipments of $1,976 and $1,351 for the three months of
fiscal 1996 and fiscal 1995, respectively; and $7,708 and $1,351 for the twelve
months of fiscal 1996 and fiscal 1995, respectively. The percent increase in
sales without Rayonese was 36.9 % for the three months and 23.1% for the twelve
months.
** Certain amounts for fiscal 1995 have been reclassified to conform with the
presentation for fiscal 1996.
<PAGE>
Culp, Inc.
SALES BY BUSINESS UNIT - TREND ANALYSIS
1994 vs 1995 vs 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1995 Fiscal 1996
Business Units Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Upholstery Fabrics
Flat Wovens
Culp Textures 17,444 20,073 19,673 21,127 78,317 19,613 22,834 20,940 21,738 85,125 17,584 22,715 20,685 23,400 84,384
Rossville/Chromatex 0 0 14,330 16,717 31,047 15,140 15,758 16,397 16,470 63,765 15,358 17,960 18,567 22,318 74,203
17,444 20,073 34,003 37,844109,364 34,753 38,592 37,337 38,208 148,890 32,942 40,675 39,252 45,718 158,587
Velvets/Prints 20,888 24,518 23,714 27,916 97,036 20,644 26,439 28,307 31,413 106,803 23,523 32,081 31,836 38,280 125,720
38,332 44,591 57,717 65,760206,400 55,397 65,031 65,644 69,621 255,693 56,465 72,756 71,088 83,998 284,307
Mattress Ticking
Culp Home Fashions 8,251 9,395 9,531 11,472 38,649 10,952 13,414 12,147 15,820 52,333 15,892 17,916 15,388 18,164 67,360
46,583 53,986 67,248 77,232245,049 66,349 78,445 77,791 85,441 308,026 72,357 90,672 86,476 102,162 351,667
Percent increase(decrease) from prior year:
Business Units
Upholstery Fabrics
Flat Wovens
Culp Textures (6.5) (5.2) 3.8 0.3 (1.9) 12.4 13.8 6.4 2.9 8.7 (10.3) (0.5) (1.2) 7.6 (0.9)
Rossville/Chromatex N/A N/A N/A N/A N/A 100.0 100.0 14.4 (1.5) 105.4 1.4 14.0 13.2 35.5 16.4
(6.5) (5.2) 79.4 79.7 37.0 99.2 92.3 9.8 1.0 36.1 (5.2) 5.4 5.1 19.7 6.5
Velvets/Prints 7.4 16.5 10.0 8.3 10.5 (1.2) 7.8 19.4 12.5 10.1 13.9 21.3 12.5 21.9 17.7
0.6 5.7 42.5 40.4 23.1 44.5 45.8 13.7 5.9 23.9 1.9 11.9 8.3 20.7 11.2
Mattress Ticking
Culp Home Fashions 7.5 10.4 27.6 21.2 16.7 32.7 42.8 27.4 37.9 35.4 45.1 33.6 26.7 14.8 28.7
1.7 6.4 40.2 37.2 22.0 42.4 45.3 15.7 10.6 25.7 9.1 15.6 11.2 19.6 14.2
</TABLE>
(1) Formerly known as Culp Ticking
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and twelve month periods ended April 28, 1996
INCOME STATEMENT COMMENTS
o GENERAL - The company is pleased to report that sales increased 19.6% and net
income increased 18.2% for the fourth quarter. This performance marks the
fourteenth consecutive quarter of record earnings and the twelfth consecutive
quarter of record sales. For the year, sales increased 14.2% and net income
increased 12.3%. The year's performance marks the seventh consecutive year of
increased earnings and the sixth year of higher sales. The fourth quarter and
year's results are especially noteworthy because they were achieved in spite of
significant sales weakness in the U.S. retail furniture and bedding markets and
moderate increases in raw material prices over the prior year. For the last five
years, the company has achieved a compound annual growth rate from net earnings
and net sales of 30.5% and 15.1%, respectively. Additionally, the company
achieved a return on beginning shareholders' equity of 15.4% for the year, the
third consecutive year above 14.0%. The return on average total capital was 9.5%
for the year, which was the third consecutive year above 9.0%
The company attributes this record to, among other things, three key
growth strategies: (1) a focus on markets other than U.S. Residential Furniture,
such as Bedding, Export, Contract, Juvenile and Home Textiles, in order to
reduce dependency on one cyclical and geographical area; (2) the investment in
the creative aspect 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 two years; and (3)
investment in highly selective and accretive acquisitions in businesses we know
and understand and that strengthen existing marketing positions.
o NET SALES - Upholstery fabric sales increased 20.7% to $84.0 million
and mattress ticking sales increased 14.8% to $18.2 million for the quarter. For
the year, upholstery fabric sales increased 11.2% to $284.3 million and mattress
ticking sales increased 28.8% to $67.4 million. (See Sales by Business Unit
schedule on page 5 and Sales by Business Unit - Trend Analysis on page 7.) All
four business units reported substantial sales gains for the quarter: Mattress
Ticking - up 14.8%; Velvets/Prints - up 21.9%; Rossville/Chromatex up 35.5%, and
Culp Textures - up 7.6%. Comments on current backlogs and incoming order rates
versus last year are as follows: Culp Home Fashions (formerly Culp Ticking) - up
slightly; Culp Textures - up moderately overall, with strength in the dobby
line; Rossville/Chromatex - up significantly, with strength in both its dobby
and jacquard product lines; and Velvets/Prints - up significantly, with strength
in the wet prints, tufted velvets and heat- transfer prints product lines. The
results of the Velvets/Prints business unit were substantially improved from the
fourth quarter of last year, as well as for the full year. The company's sales
growth in the United States was especially noteworthy, with a 14.9% growth rate
for the fourth quarter and a 9.7% growth rate for the year.
International sales, including sales from Rayonese of $2.0 million,
were up 37.6% for the quarter, with particular strength in the Middle East and
the Far East and Asia regions. For the year, these sales increased 33.5%,
including sales from Rayonese of $7.7 million. (See International Sales by
Geographic Area schedule on page 6.) The majority of the international growth is
being produced by the Culp Textures and Rossville/Chromatex business units, with
strength in the jacquard product lines of both units and the dobby line of
Rossville/Chromatex. The company is realizing increasing success in marketing
its upholstery fabric products internationally, with shipments to over fifty
countries during fiscal 1996. We are encouraged by the growing geographical
balance of our customer base throughout the world, as well as the increasing
percentage that our Culp Textures and Rossville/Chromatex product lines
represent of our total export shipments.
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
(page 9 of 10)
FINANCIAL NARRATIVE - continued for
the three and twelve month periods ended April 28, 1996
The U.S. bedding and home textiles (particularly "top of the bed")
markets have remained relatively weak since early August. This retail weakness
has resulted in a slower rate of growth in our Culp Home Fashions business unit,
which includes Rayonese. The company is hopeful that this softness is temporary
and that business conditions will turn more positive as the year progresses.
o GROSS PROFIT - The gross profit increase of 17.1% for the quarter reflects
significant gains in Velvets/Prints and Rossville/Chromatex and moderate gains
in Culp Textures and Culp Home Fashions. The profit improvement resulted
primarily from a higher volume of yards sold in all business units. For the
year, the gross profit increase reflects significant gains in Velvets/Prints and
Culp Home Fashions, and essentially flat results in Culp Textures and
Rossville/Chromatex. A large portion of the gain in Culp Home Fashions was due
to the contribution from Rayonese, which was acquired in March 1995. The
company's gross profit margins in all business units were significantly affected
by price increases in raw materials over the prior year. The company has been
unable to pass along much of the cost increases it has received.
During the last month, the company has begun to realize lower raw
material prices in some areas. The company believes there has been downward
pressure over the last several months on prices for many of the raw materials
used by the company. Because raw material costs are so significant to the
company, management has been actively exploring ways to lower these costs
through several key strategies: 1) global sourcing of certain commodity-type
items; 2) further vertical integration of certain large-volume raw material
components; 3) working closely with existing suppliers to ensure that the
company is receiving the best possible combination of value and price; and 4)
increasing the utilization of the company's various raw material manufacturing
capabilities.
For the near term (first quarter), trends are toward solid profit gains
in the three upholstery fabric business units, with significant increases in
Velvets/Prints and Rossville/Chromatex. With respect to the Culp Home Fashions
business unit, the company believes gross profit may be down slightly from the
first quarter of last year.
o S,G & A EXPENSES - S,G&A expenses for the quarter were up as a percentage of
sales to 11.1% from 10.8%. For the year, these expenses were up to 11.1% of
sales from 10.9%. These increases are due primarily to higher selling and design
expenses. The increase in selling expenses is due primarily to higher sales
commissions related to international sales. The increase in design expenses is
due to more designers, outside artwork purchased, and additional costs related
to our CAD systems.
o INTEREST EXPENSE - The decrease for the quarter of 1.6% is due to lower
interest rates, even though average borrowings outstanding were somewhat higher.
For the year, interest expense increased 12.7%, due principally to additional
borrowings related to the Rayonese acquisition.
o INCOME TAXES - The company estimates that the effective tax rate for fiscal
1997 will again be about 36.5%, due to the lower tax rate related to the
Canadian income and the tax benefit related to international sales.
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
(page 10 of 10)
FINANCIAL NARRATIVE - continued for
the three and twelve month periods ended April 28, 1996
o EBITDA - EBITDA for the quarter increased 9.0% from last year's fourth
quarter, and represented 10.6% of net sales compared with 11.6% of net sales
last year. For the year, EBITDA increased $3.6 million or 11.1%, and represented
10.1% of net sales compared with 10.4% last year.
BALANCE SHEET COMMENTS
o WORKING CAPITAL - Accounts receivable increased 17.6% from
last year end and represented 46 days' sales outstanding, down from 47 at April
1995. The aging of accounts receivable remained excellent, with 99.0% current
and less than 30 days past due. The company experienced a relatively low level
of bad debt write-offs again for the year, at $300,000, which represents just
under 0.1% of net sales. The company continues to follow a conservative credit
policy. The increase in inventories over last year end of 3.5% is attributable
to higher raw material inventories. The company has made significant progress in
reducing finished goods inventory, with a 15% decrease from last year end. For
the quarter, inventory turns were 6.8 versus 6.1 for last year's fourth quarter.
This is the first quarter in two years that inventory turns have exceeded the
corresponding quarter of the prior year. One of the company's key initiatives
for fiscal 1997 is to find ways to increase raw material inventory turns,
principally with yarn inventories.
o PROPERTY, PLANT AND EQUIPMENT - For fiscal 1996, the company's capital
expenditures were $14.4 million. The major projects involved expanding jacquard
weaving capacity at the company's Pageland, South Carolina plant, expanding wet
print capacity and related support equipment at the company's Upholstery Prints
plant in Burlington, North Carolina, and completing the expansion project at
Rayonese related to the installation of thirty high-speed air-jet jacquard
weaving machines for the manufacture of wide and narrow greige goods.
For fiscal 1997, the company is planning capital spending in the $14 to
$17 million range. Major projects include weaving expansions for dobby and
jacquard product lines in the Rossville/Chromatex business unit, and for
jacquard greige goods at Rayonese, the company's Montreal, Canada facility.
Also, the company is planning investments in additional vertical integration
opportunities. Further major expansions of the CAD system and related
capabilities also are planned for fiscal 1997. Depreciation expense for fiscal
1997 is expected to approximate $14.0 million.
o LONG-TERM DEBT - The company's funded debt to capital ratio was 48.5% at April
28, 1996, down from 50.5% at April 30, 1995, and the lowest in 2-1/2 years. At
year end, the company had $22.2 million in IRB borrowings, $23.3 million in
borrowings under its revolving credit facility (total commitment is $33.5
million), $35.5 million in a term facility and $1.0 million in a subordinated
note payable. At April 28, 1996, the company had $5.3 million in restricted
investments related to its new IRB, which represents the unexpended project
funds. Therefore, net funded debt was $76.8 million at April 28, 1996, compared
with $72.9 million last year end and $79.7 million at January 28, 1996. The
current maturities of $7.1 million include repayment of $6.0 million of the term
loan, $100,000 of the IRBs and $1.0 million of the subordinated note payable.
With its interest rate swap agreements totalling $25.0 million, the company has
effectively "fixed" the interest rate for 43% of its bank borrowings ($58.8
million) at a weighted average rate of 7.1%.
During April 1996, the company amended its credit agreement with its
two banks, with the following key provisions: a) all borrowings became
unsecured; b) the commitment terms on the revolving credit facility and the bank
letters of credit related to the IRBs were extended to five years from thirteen
months; and c) certain financial covenants became less stringent. Additionally,
during April 1996, the company entered into a new $6.0 million IRB that provides
financing over the next three years for the weaving expansion at the
Pageland, South Carolina plant.
