- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
-------------
Date of Report (Date of earliest event reported) February 14, 2000
CULP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-12781 56-1001967
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
101 South Main Street
High Point, North Carolina 27260
(Address of principal executive offices)
(336) 889-5161
(Registrant's telephone number, including area code)
-------------------------------------------------------------
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
<PAGE>
Item 5. Other Events
See attached Press Release (3 pages) and Financial Information Release (10
pages), both dated February 14, 2000, related to the fiscal 2000 third quarter
ended January 30, 2000.
Forward Looking Information. This Report contains statements that could be
deemed "forward-looking statements" within the meaning of the federal securities
laws, including the Private Securities Litigation Reform Act of 1995. Such
statements are inherently subject to risks and uncertainties. Forward-looking
statements are statements that include projections, expectations or beliefs
about future events or results or otherwise are not statements of historical
fact. Such statements are often characterized by qualifying words such as
"expect," "believe," "estimate," "plan and "project" and their derivatives.
Factors that could influence the matters discussed in such statements include
the level of housing starts and sales of existing homes, consumer confidence,
trends in disposable income, and general economic conditions. Decreases in these
economic indicators could have a negative effect on the Company's business and
prospects. Likewise, increases in interest rates, particularly home mortgage
rates, and increases in consumer debt or the general rate of inflation, could
affect the Company adversely. Because of the significant percentage of the
Company's sales derived from international shipments, strengthening of the U. S.
dollar against other currencies could make the Company's products less
competitive on the basis of price in markets outside the United States.
Additionally, economic and political instability in international areas could
affect the demand for the Company's products.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CULP, INC.
(Registrant)
By: Phillip W. Wilson
Vice President and
Chief Financial Officer
Dated: February 14, 2000
<PAGE>
FOR IMMEDIATE RELEASE
CULP REPORTS HIGHER THIRD QUARTER SALES AND EARNINGS PER SHARE
----------------------
NINE-MONTH GAINS UNDERSCORE IMPROVED PROFITABILITY
HIGH POINT, N. C. (Feb. 14, 2000) - Culp, Inc. (NYSE: CFI) today reported
increased sales and earnings per share for the third quarter and first nine
months of its 2000 fiscal year.
For the three months ended January 30, 2000, Culp reported net sales $113.2
million, up from $112.1 million a year ago. The company reported net income for
the quarter of $1.4 million, or $0.13 per share diluted, compared with $1.5
million, or $0.12 per share diluted, in the year-earlier period.
Net sales for the first nine months of fiscal 2000 totaled $358.7 million,
up from $350.9 million a year ago. The company reported net income for the first
nine months of $6.2 million, or $0.52 per share diluted, compared with net
income of $206,000, or $0.02 per share diluted, in the year-earlier period.
Robert G. Culp, III, chief executive officer, commented, "As we enter the
fourth fiscal quarter, the trends in our business are not as strong as
anticipated; but results for the nine months affirm our expectation that fiscal
2000 as a whole is going to represent a year of solid improvement for Culp. The
third fiscal quarter is historically not the strongest period of the year for
our business due to seasonal factors. We did achieve higher sales, and the gain
in earnings per share for the three months highlights the benefit of our ongoing
stock repurchase program. Our business during the quarter underscores how the
lead times are continuing to shorten for furniture manufacturers to order
materials, including our fabrics and mattress ticking. We believe that this
structural change in the industry's supply chain is fundamentally playing to
Culp's strengths, but it is more difficult for us to forecast sales on a
short-term basis.
"Economic conditions appear to be favoring a relatively high level of
consumer demand for home furnishings. Reports from furniture retailers generally
support that the industry environment is positive. Our challenge is to
capitalize on the product breadth, proven manufacturing resources and
demonstrated commitment to customer service that comprise the hallmark of Culp.
A key element that links each of these components is a comprehensive design
program to assure our customers that their products will successfully meet
consumer demand. We have the benefit of a fully integrated manufacturing process
including state-of-the-art yarn manufacturing capability and are excited about
the opportunity to use the design process as a means of building even stronger
working relationships with customers."
Culp added, "We have the competitive advantage of access to sufficient
capital to continue modernizing and expanding our physical assets while
broadening our use of information technology in all aspects of our operations.
Capital expenditures are expected to total approximately $23 million for fiscal
2000, up from $10.7 million in fiscal 1999. We have also invested $6.6 million
through the first nine months to repurchase more of our shares. We currently
have remaining authorization from the Board of Directors to invest an additional
$7.9 million in this program."
Culp, Inc. is one of the world's largest marketers of upholstery fabrics
for furniture and is a leading marketer of mattress ticking for bedding. The
Company's fabrics are used principally in the production of residential and
commercial furniture and bedding products.
<PAGE>
CULP, INC.
Condensed Financial Highlights
(Unaudited)
Three Months Ended
January 30, January 31,
2000 1999
Net sales $ 113,181,000 $ 112,093,000
Net income $ 1,432,000 $ 1,539,000
Net income per share:
Basic $ 0.13 $ 0.12
Diluted $ 0.13 $ 0.12
Average shares outstanding:
Basic 11,296,000 12,995,000
Diluted 11,389,000 13,124,000
Nine Months Ended
January 30, January 31,
2000 1999
Net sales $ 358,660,000 $ 350,919,000
Net income $ 6,189,000 $ 206,000
Net income per share:
Basic $ 0.53 $ 0.02
Diluted $ 0.52 $ 0.02
Average shares outstanding:
Basic 11,703,000 12,997,000
Diluted 11,816,000 13,171,000
This release contains statements that could be deemed "forward-looking
statements" within the meaning of the federal securities laws, including the
Private Securities Litigation Reform Act of 1995. Such statements are inherently
subject to risks and uncertainties. Forward-looking statements are statements
that include projections, expectations or beliefs about future events or results
or otherwise are not statements of historical fact. Such statements are often
characterized by qualifying words such as "expect," "believe," "estimate,"
"plan" and "project" and their derivatives. Factors that could influence the
matters discussed in such statements include the level of housing starts and
sales of existing homes, consumer confidence, trends in disposable income and
general economic conditions. Decreases in these economic indicators could have a
negative effect on the company's business and prospects. Likewise, increases in
interest rates, particularly home mortgage rates, and increases in consumer debt
or the general rate of inflation, could affect the company adversely. Because of
the significant percentage of the company's sales derived from international
shipments, strengthening of the U.S. dollar against other currencies could make
the company's products less competitive on the basis of price in markets outside
the United States. Additionally, economic and political instability in
international areas could affect the demand for the company's products.
- END -
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 30, 2000 AND JANUARY 31, 1999
(Amounts in Thousands, Except for Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------- -----------------------------
January 30, January 31, % Over
2000 1999 (Under) 2000 1999
-------------- --------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $ 113,181 112,093 1.0 % 100.0 % 100.0 %
Cost of sales 94,712 92,911 1.9 % 83.7 % 82.9 %
-------------- --------------- ------------- -------------- -------------
Gross profit 18,469 19,182 (3.7)% 16.3 % 17.1 %
Selling, general and
administrative expenses 13,949 14,100 (1.1)% 12.3 % 12.6 %
-------------- --------------- ------------- -------------- -------------
Income from operations 4,520 5,082 (11.1)% 4.0 % 4.5 %
Interest expense 2,366 2,308 2.5 % 2.1 % 2.1 %
Interest income (8) (10) (20.0)% (0.0)% (0.0)%
Other expense (income), net 229 492 (53.5)% 0.2 % 0.4 %
-------------- --------------- ------------- -------------- -------------
Income before income taxes 1,933 2,292 (15.7)% 1.7 % 2.0 %
Income taxes * 501 753 (33.5)% 25.9 % 32.9 %
-------------- --------------- ------------- -------------- -------------
Net income $ 1,432 1,539 (7.0)% 1.3 % 1.4 %
============== =============== ============= ============== =============
Net income per share $0.13 $0.12 8.3 %
Net income per share, assuming dilution $0.13 $0.12 8.3 %
Dividends per share $0.035 $0.035 0.0 %
Average shares outstanding 11,296 12,995 (13.1)%
Average shares outstanding, assuming dilution 11,389 13,124 (13.2)%
NINE MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------- -----------------------------
January 30, January 31, % Over
2000 1999 (Under) 2000 1999
-------------- --------------- ------------- -------------- -------------
Net sales $ 358,660 350,919 2.2 % 100.0 % 100.0 %
Cost of sales 296,072 297,652 (0.5)% 82.5 % 84.8 %
-------------- --------------- ------------- -------------- -------------
Gross profit 62,588 53,267 17.5 % 17.5 % 15.2 %
Selling, general and
administrative expenses 45,022 44,047 2.2 % 12.6 % 12.6 %
-------------- --------------- ------------- -------------- -------------
Income from operations 17,566 9,220 90.5 % 4.9 % 2.6 %
Interest expense 7,266 7,133 1.9 % 2.0 % 2.0 %
Interest income (41) (82) (50.0)% (0.0)% (0.0)%
Other expense (income), net 1,200 1,866 (35.7)% 0.3 % 0.5 %
-------------- --------------- ------------- -------------- -------------
Income before income taxes 9,141 303 2,916.8 % 2.5 % 0.1 %
Income taxes * 2,952 97 2,943.3 % 32.3 % 32.0 %
-------------- --------------- ------------- -------------- -------------
Net income $ 6,189 206 2,904.4 % 1.7 % 0.1 %
============== =============== ============= ============== =============
Net income per share $0.53 $0.02 2,550.0 %
Net income per share, assuming dilution $0.52 $0.02 2,500.0 %
Dividends per share $0.105 $0.105 0.0 %
Average shares outstanding 11,703 12,997 (10.0)%
Average shares outstanding, assuming dilution 11,816 13,171 (10.3)%
</TABLE>
* Percent of sales column is calculated as a % of income before income
taxes.
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
JANUARY 30, 2000, JANUARY 31, 1999 AND MAY 2, 1999
Unaudited
(Amounts in Thousands)
<TABLE>
<CAPTION>
Amounts Increase
--------------------------------------- (Decrease) * May 2,
January 30, January 31, ---------------------------------
2000 1999 Dollars Percent 1999
-------------------- --------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash investments $ 568 655 (87) (13.3)% 509
Accounts receivable 65,788 63,090 2,698 4.3 % 70,503
Inventories 80,874 69,210 11,664 16.9 % 67,070
Other current assets 9,016 7,560 1,456 19.3 % 9,633
-------------------- --------------- ---------------- ------------- ------------
Total current assets 156,246 140,515 15,731 11.2 % 147,715
Restricted investments 1,047 3,416 (2,369) (69.4)% 3,340
Property, plant & equipment, net 123,303 125,885 (2,582) (2.1)% 123,310
Goodwill 50,222 51,615 (1,393) (2.7)% 51,269
Other assets 5,388 5,017 371 7.4 % 4,978
-------------------- --------------- ---------------- ------------- ------------
Total assets $ 336,206 326,448 9,758 3.0 % 330,612
==================== =============== ================ ============= ============
Current liabilities
Current maturities of long-term debt $ 1,678 1,678 0 0.0 % 1,678
Accounts payable 35,347 25,808 9,539 37.0 % 25,687
Accrued expenses 20,878 17,317 3,561 20.6 % 21,026
Income taxes payable 903 0 903 100.0 % 0
-------------------- --------------- ---------------- ------------- ------------
Total current liabilities 58,806 44,803 14,003 31.3 % 48,391
Long-term debt 137,052 140,210 (3,158) (2.3)% 140,312
Deferred income taxes 14,583 11,227 3,356 29.9 % 14,583
-------------------- --------------- ---------------- ------------- ------------
Total liabilities 210,441 196,240 14,201 7.2 % 203,286
Shareholders' equity 125,765 130,208 (4,443) (3.4)% 127,326
-------------------- --------------- ---------------- ------------- ------------
Total liabilities and
shareholders' equity $ 336,206 326,448 9,758 3.0 % 330,612
==================== =============== ================ ============= ============
Shares outstanding 11,216 12,995 (1,779) (13.7)% 12,079
==================== =============== ================ ============= ============
</TABLE>
* Derived from audited financial statements.
<PAGE>
CULP, INC. FINANCIAL
INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 30, 2000 AND JANUARY 31, 1999
Unaudited
(Amounts in Thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------
Amounts
--------------------------------
January 30, January 31,
2000 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,189 206
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 14,481 13,785
Amortization of intangible assets 1,197 1,174
Changes in assets and liabilities:
Accounts receivable 4,715 10,546
Inventories (13,804) 9,984
Other current assets 617 303
Other assets (560) (95)
Accounts payable 4,619 (8,609)
Accrued expenses (148) (973)
Income taxes payable 903 (1,282)
--------------- ---------------
Net cash provided by operating activities 18,209 25,039
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (14,474) (8,500)
Purchases of restricted investments (35) (73)
Purchase of investments to fund deferred compensation liability 0 (735)
Sale of restricted investments 2,328 678
--------------- ---------------
Net cash used in investing activities (12,181) (8,630)
--------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 8,510 2,535
Principal payments on long-term debt (11,770) (16,284)
Change in accounts payable-capital expenditures 5,041 (2,800)
Dividends paid (1,218) (1,365)
Payments to acquire common stock (6,552) (160)
Proceeds from common stock issued 20 8
--------------- ---------------
Net cash used in financing activities (5,969) (18,066)
--------------- ---------------
Increase (decrease) in cash and cash investments 59 (1,657)
Cash and cash investments at beginning of period 509 2,312
--------------- ---------------
Cash and cash investments at end of period $ 568 655
=============== ===============
</TABLE>
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
JANUARY 30, 2000
<TABLE>
<CAPTION>
FISCAL 99 FISCAL 00
------------- --------------------------------------------------------- ---------------
Q3 Q1 Q2 Q3 Q4 LTM
------------- --------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INVENTORIES
Inventory turns 5.2 5.4 5.5 4.8
RECEIVABLES
Days sales in receivables 47 45 49 49
Percent current & less than 30
days past due 94.1% 93.2% 96.7% 97.1%
WORKING CAPITAL
Current ratio 3.1 3.1 2.4 2.7
Working capital turnover (4) 4.4 4.4 4.4 4.5
Operating working capital (4) $106,492 $111,222 $109,556 $111,315
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 7.9% 8.0% 7.8% 8.2%
Percent property, plant &
equipment are depreciated 46.1% 49.0% 49.1% 49.4%
Capital expenditures $10,689 (1) $2,420 $8,104 $3,950
PROFITABILITY
Return on average total capital 4.5% 4.8% 7.3% 4.9% 5.9%
Return on average equity 4.7% 5.0% 10.0% 4.6% 7.1%
Net income per share $0.12 $0.13 $0.27 $0.13 $0.76
Net income per share (diluted) $0.12 $0.13 $0.27 $0.13 $0.75
LEVERAGE (3)
Total liabilities/equity 150.7% 155.9% 170.1% 167.3%
Funded debt/equity 106.3% 106.3% 107.2% 109.5%
Funded debt/capital employed 51.5% 51.5% 51.7% 52.3%
Funded debt $138,472 $136,222 $134,468 $137,683
Funded debt/EBITDA (LTM) (6) 3.91 3.33 3.08 3.15
EBITDA/Interest expense, net (LTM) 3.9 4.3 4.6 4.5
OTHER
Book value per share $10.02 $10.64 $11.08 $11.21
Employees at quarter end 3,949 4,050 3,962 3,938
Sales per employee (annualized) $113,000 $116,000 $129,000 $115,000
Capital employed (3) $268,680 $264,349 $259,848 $263,448
Effective income tax rate 32.9% 34.0% 34.0% 25.9%
EBITDA (2) $9,522 $9,977 $12,412 $9,655 $43,578
EBITDA/net sales 8.5% 8.6% 9.6% 8.5% 8.9%
</TABLE>
(1) Expenditures for entire year
(2) Earnings before interest, income taxes, and depreciation & amortization.
(3) Long-term debt, funded debt and capital employed are all net of restricted
investments.
(4) Working capital for this calculation is accounts receivable, inventories
and accounts payable.
(5) LTM represents "Latest Twelve Months"
(6) EBITDA includes capitalized interest and pro forma amounts for
acquisitions.
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES BY SEGMENT/DIVISION
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 30, 2000 AND JANUARY 31, 1999
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- ----------------------------
January 30, January 31, % Over
Segment/Division 2000 1999 (Under) 2000 1999
- ------------------------------------ ------------ ------------ --------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Upholstery Fabrics
Culp Decorative Fabrics $ 49,654 50,520 (1.7)% 43.9 % 45.1 %
Culp Velvets/Prints 34,050 34,949 (2.6)% 30.1 % 31.2 %
Culp Yarn 4,274 4,088 4.5 % 3.8 % 3.6 %
------------ ------------ --------------- ------------- ------------
87,978 89,557 (1.8)% 77.7 % 79.9 %
Mattress Ticking
Culp Home Fashions 25,203 22,536 11.8 % 22.3 % 20.1 %
------------ ------------ --------------- ------------- ------------
* $ 113,181 112,093 1.0 % 100.0 % 100.0 %
============ ============ =============== ============= ============
NINE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- ----------------------------
January 30, January 31, % Over
Segment/Division 2000 1999 (Under) 2000 1999
- ------------------------------------ ------------ ------------ --------------- ------------- ------------
Upholstery Fabrics
Culp Decorative Fabrics $ 157,067 161,538 (2.8)% 43.8 % 46.0 %
Culp Velvets/Prints 112,042 103,671 8.1 % 31.2 % 29.5 %
Culp Yarn 12,761 17,051 (25.2)% 3.6 % 4.9 %
------------ ------------ --------------- ------------- ------------
281,870 282,260 (0.1)% 78.6 % 80.4 %
Mattress Ticking
Culp Home Fashions 76,790 68,659 11.8 % 21.4 % 19.6 %
------------ ------------ --------------- ------------- ------------
* $ 358,660 350,919 2.2 % 100.0 % 100.0 %
============ ============ =============== ============= ============
</TABLE>
* U.S. sales were $86,359 and $88,152 for the third quarter of fiscal 2000 and
fiscal 1999, respectively; and $275,699 and $266,934 for the nine months of
fiscal 2000 and fiscal 1999, respectively. The percentage decrease in U.S. sales
was 2.0% for the third quarter and an increase of 3.3% for the nine months.
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 30, 2000 AND JANUARY 31, 1999
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
January 30, January 31, % Over
Geographic Area 2000 1999 (Under) 2000 1999
- ---------------------------------- --------------- -------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
North America (Excluding USA) $ 8,476 7,280 16.4 % 31.6 % 30.4 %
Europe 4,698 3,881 21.1 % 17.5 % 16.2 %
Middle East 8,140 6,711 21.3 % 30.3 % 28.0 %
Far East & Asia 4,422 4,993 (11.4)% 16.5 % 20.9 %
South America 523 555 (5.8)% 1.9 % 2.3 %
All other areas 563 521 8.1 % 2.1 % 2.2 %
--------------- -------------- -------------- ------------- ------------
$ 26,822 23,941 12.0 % 100.0 % 100.0 %
=============== ============== ============== ============= ============
NINE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
January 30, January 31, % Over
Geographic Area 2000 1999 (Under) 2000 1999
- ---------------------------------- --------------- -------------- -------------- ------------- ------------
North America (Excluding USA) $ 26,064 23,035 13.1 % 31.4 % 27.4 %
Europe 13,696 14,787 (7.4)% 16.5 % 17.6 %
Middle East 24,092 25,071 (3.9)% 29.0 % 29.9 %
Far East & Asia 14,088 15,296 (7.9)% 17.0 % 18.2 %
South America 1,773 2,793 (36.5)% 2.1 % 3.3 %
All other areas 3,248 3,003 8.2 % 3.9 % 3.6 %
--------------- -------------- -------------- ------------- ------------
$ 82,961 83,985 (1.2)% 100.0 % 100.0 %
=============== ============== ============== ============= ============
</TABLE>
International sales, and the percentage of total sales, for each of the last
five fiscal years follows: fiscal 1995-$57,971 (19%); fiscal 1996-$77,397 (22%);
fiscal 1997-$101,571 (25%); fiscal 1998-$137,223 (29%); and fiscal 1999-$113,354
(23%). International sales for the third quarter represented 23.7% and 21.4% for
2000 and 1999, respectively. Year-to-date international sales represented 23.1%
and 23.9% of total sales for 2000 and 1999, respectively.
<PAGE>
Culp, Inc.
SALES BY SEGMENT/DIVISION - TREND ANALYSIS
1998 vs 1999 vs 2000
Unaudited
(Amounts in thousands)
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal 1999
---------------------------------------------- ----------------------------------------------
Segment/Division Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Upholstery Fabrics
Culp Decorative Fabrics 39,814 56,781 53,415 60,155 210,165 51,445 59,573 50,520 60,520 222,058
Culp Velvets/Prints 38,397 43,928 44,020 45,044 171,389 29,994 38,728 34,949 40,402 144,073
Culp Yarn - - 761 7,115 7,876 6,596 6,367 4,088 4,462 21,513
---------------------------------------------- ----------------------------------------------
78,211 100,709 98,196 112,314 389,430 88,035 104,668 89,557 105,384 387,644
Mattress Ticking
Culp Home Fashions 21,287 22,217 20,261 23,520 87,285 22,632 23,491 22,536 26,781 95,440
---------------------------------------------- ----------------------------------------------
99,498 122,926 118,457 135,834 476,715 110,667 128,159 112,093 132,165 483,084
============================================== ==============================================
Percent increase(decrease) from prior year:
Segment/Division
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics 2.2 24.2 35.8 37.7 25.3 29.2 4.9 (5.4) 0.6 5.7
Culp Velvets/Prints 10.1 9.2 9.0 9.9 9.5 (21.9) (11.8) (20.6) (10.3) (15.9)
Culp Yarn - - 100.0 100.0 100.0 100.0 100.0 437.2 (37.3) 173.1
---------------------------------------------- ----------------------------------------------
5.9 17.2 23.2 32.6 20.1 12.6 3.9 (8.8) (6.2) (0.5)
Mattress Ticking
Culp Home Fashions 27.5 15.4 14.2 12.0 16.9 6.3 5.7 11.2 13.9 9.3
---------------------------------------------- ----------------------------------------------
9.9 16.8 21.5 28.5 19.5 11.2 4.3 (5.4) (2.7) 1.3
============================================== ==============================================
Overall Growth Rate
Internal (without
acquisitions) 9.9 6.6 9.2 11.6 9.3 (4.6) (0.9) (8.5) (2.7) (4.1)
External - 10.2 12.3 16.9 10.2 15.8 5.2 3.1 - 5.4
---------------------------------------------- ----------------------------------------------
9.9 16.8 21.5 28.5 19.5 11.2 4.3 (5.4) (2.7) 1.3
============================================== ==============================================
</TABLE>
<PAGE>
Culp, Inc.
SALES BY SEGMENT/DIVISION - TREND ANALYSIS
1998 vs 1999 vs 2000
Unaudited
(Amounts in thousands)
<TABLE>
<CAPTION>
Fiscal 2000
-----------------------------------------------
Segment/Division Q1 Q2 Q3 Q4 TOTAL
- -------------------------
<S> <C> <C> <C> <C> <C>
Upholstery Fabrics
Culp Decorative Fabrics 50,516 56,897 49,654 157,067
Culp Velvets/Prints 36,209 41,783 34,050 112,042
Culp Yarn 4,129 4,358 4,274 12,761
-----------------------------------------------
90,854 103,038 87,978 281,870
Mattress Ticking
Culp Home Fashions 25,083 26,504 25,203 76,790
-----------------------------------------------
115,937 129,542 113,181 358,660
===============================================
Percent increase(decrease) from prior year:
Segment/Division
- -------------------------
Upholstery Fabrics
Culp Decorative Fabrics (1.8) (4.5) (1.7) (2.8)
Culp Velvets/Prints 20.7 7.9 (2.6) 8.1
Culp Yarn (37.4) (31.6) 4.5 (25.2)
-----------------------------------------------
3.2 (1.6) (1.8) (0.1)
Mattress Ticking
Culp Home Fashions 10.8 12.8 11.8 11.8
-----------------------------------------------
4.8 1.1 1.0 2.2
===============================================
Overall Growth Rate
Internal (without acquisitions) 4.8 1.1 1.0 2.2
External - - - -
===============================================
4.8 1.1 1.0 2.2
===============================================
<PAGE>
(Page 10 of 10)
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and nine month periods ended January 30, 2000 and January 31, 1999
INCOME STATEMENT COMMENTS
GENERAL - For the third quarter, net sales increased 1.0% to $113.2
million; and net income amounted to $1.4 million, or $0.13 per share diluted
(based on 11,389,000 average shares outstanding during the period), versus $1.5
million, or $0.12 per share diluted (based on 13,124,000 average shares
outstanding during the period), a year ago. For the nine months ended January
30, 2000, net sales increased 2.2% to $358.7 million; and net income amounted to
$6.2 million, or $0.52 per share diluted (based on 11,816,000 average shares
outstanding during the period), compared with net income of $206,000, or $0.02
per share diluted (based on 13,171,000 average shares outstanding during the
period), in the year-earlier period.
The company's strategic plan encompasses several competitive initiatives:
Broad Product Offering - continuing to market one of the broadest product lines
in upholstery fabrics and mattress ticking. Through its extensive manufacturing
capabilities, the company competes in every major category except leather;
Diverse Global Customer Base - increasing its penetration into other end-use
markets in addition to U.S. residential furniture, such as bedding,
international, commercial furniture and juvenile furniture. The company has
long-standing relationships with most major upholstery furniture manufacturers,
but is not reliant on a single customer or a small group of dominant customers.
No one customer accounted for more than 9% of net sales during the third quarter
of fiscal 2000;
Design Innovation - continuing to invest in resources for the design of
upholstery fabrics and ticking with appealing patterns and textures. An integral
component of the value Culp provides to customers is supplying fabrics that are
fashionable and meet current consumer preferences. The company's principal
design resources are consolidated in a single facility that provides advanced
CAD systems and promotes a sharing of innovative designs among the divisions;
Vertical Integration - operating as a vertically integrated manufacturer and
taking advantage of economies that can be gained by producing the raw material
components that are used in the manufacture of its products; and
Additional Acquisitions - investing in selective acquisitions complementary to
existing segments.
NET SALES - Compared with the third quarter of last year, upholstery fabric
sales decreased 1.8% to $88.0 million and mattress ticking sales increased 11.8%
to $25.2 million (See Sales by Segment/Division schedule on Page 5 and Sales by
Segment/Division - Trend Analysis on Page 7). International sales increased
12.0% for the quarter.
During the first quarter of fiscal 1999, the company implemented a major
reorganization from six business units to four divisions. This new corporate
alignment grouped related operations together and was accompanied by several
changes in managerial positions. The company believes that benefits of this move
have included improved customer service, more effective use of design resources
and increased manufacturing efficiency. Aided by these factors, the company
achieved higher sales to U.S.-based accounts in the first half of fiscal 2000.
Although sales to U.S.-based accounts decreased 2.0% for the third quarter of
fiscal 2000, the company recorded a gain of 3.3% to these customers for the
first nine months of the fiscal year. Weakness in international sales affected
results in the first two quarters of fiscal 2000, but sales to customers outside
the United States were up 12.0% for the third quarter. The company believes that
this increase indicates that it has established a base of international sales
from which to build. This follows an industry-wide trend of declining
international sales of upholstery fabrics that began in fiscal 1999 after
several years of above-average growth. During fiscal 1999, the company took
steps to mitigate the impact of this industry-wide trend by significantly
curtailing production schedules for certain international-targeted fabrics,
introducing a new line of printed cotton upholstery fabrics and shifting its
marketing focus to geographic areas where demand appears more favorable. The
company has a diversified global base of customers and is seeking to broaden
that further to minimize exposure to economic uncertainties in any geographic
area.
The company benefited in the third quarter from increased sales by Culp Home
Fashions (primarily mattress ticking) which has experienced a long-term pattern
of expansion. Culp's growth in mattress ticking continues to be driven by the
introduction of new designs and fabric constructions as well as the advantages
of the company's vertical integration. In particular, the ability to manufacture
the jacquard greige (or unfinished) goods that are then printed to produce
mattress ticking has aided Culp in meeting faster delivery schedules and
providing improved overall customer service.
The year-to-year comparisons in the company's income statement for the third
quarter need to be considered within the context that the third fiscal quarter
is not historically the strongest period of the year due to seasonal factors.
Changes in shipments in such a quarter may not affect the absolute level of net
sales significantly but can have a material effect on margins and other measures
of profitability. The company does not believe that the decline in operating
margins in the third quarter signals a structural change in its profitability.
GROSS PROFIT - Gross profit for the third quarter declined 3.7% to $18.5
million and decreased as a percentage of net sales from 17.1% to 16.3%. Gross
profit for the nine months increased as a percentage of net sales from 15.2% to
17.5%. The company has taken a number of actions to increase gross profit,
including a significant reduction in the capacity for manufacturing printed
flock fabrics and an intense effort to reduce operating expenses and raise
productivity.
S,G&A EXPENSES - As a percentage of sales, S,G&A expenses for the third
quarter decreased to 12.3% from 12.6% for the year-earlier period and were
unchanged through the first nine months. The increase in absolute dollars for
the nine months principally reflects higher costs related to resources for the
design of new fabrics and information systems, as well as other increased
operating expenses intended to support a higher level of sales.
INTEREST EXPENSE - Interest expense of $2.4 million for the third quarter
was up from $2.3 million a year ago even though the company had lower average
borrowings outstanding. The lower level of borrowings was offset by lower
capitalized interest related to capital expenditures and higher average interest
rates.
OTHER EXPENSE (INCOME), NET - Other expense (income) totaled $229,000 for
the third quarter compared with $492,000 a year ago. The decrease is principally
due to higher investment income on assets related to the company's nonqualified
deferred compensation plan.
INCOME TAXES - The effective tax rate for the nine months was 32.3%
compared with 32.0% in the year-earlier period.
EBITDA - EBITDA for the third quarter totaled $9.7 million compared with
$9.5 million a year ago.
BALANCE SHEET COMMENTS
WORKING CAPITAL - Accounts receivable as of January 30, 2000 increased 4.3%
from the year-earlier level, due principally to changes in the mix of sales
between U.S.-based and international customers. Days sales outstanding increased
slightly to 49 days at January 30, 2000 compared with 47 a year ago.
Additionally, the aging of accounts receivable was 97.1% current and less than
30 days past due versus 94.1% at the end of the third quarter a year ago.
Inventories at the close of the third quarter increased $11.7 million or 16.9%
from a year ago, principally due to the decision to increase the company's
ability to respond quickly to customers' orders. Inventory turns for the third
quarter were 4.8 versus 5.2 for the third quarter of fiscal 1999. Operating
working capital (comprised of accounts receivable, inventory and accounts
payable) was $111.3 million at January 30, 2000, up 4.5% from a year ago.
PROPERTY, PLANT AND EQUIPMENT - During fiscal 1999 the company reduced its
capital spending to $10.7 million compared with $35.9 million in fiscal 1998
because of a focus on improving the results of the considerable investments made
during fiscal 1997 and fiscal 1998. The company is committed to investing
sufficient funds to modernize and expand its manufacturing resources and has
invested a total of $14.5 million through the first nine months of fiscal 2000.
The company is budgeting total capital spending for fiscal 2000 of approximately
$23 million. Depreciation for fiscal 2000 is currently estimated to be
approximately $20 million.
LONG-TERM DEBT - The company's funded debt-to-capital ratio was 52.3% at
January 30, 2000, compared with 51.5% at January 31, 1999 and 52.1% at May 2,
1999. Funded debt was $137.7 million at January 30, 2000, compared with $138.5
million at January 31, 1999 and $138.7 million at May 2, 1999. Funded debt
equals long-term debt, including current maturities, less restricted
investments, which represent unspent IRB funds. The decrease in funded debt from
May 2, 1999 resulted primarily from an operating cash flow of $18.2 million and
an increase in accounts payable related to capital expenditures of $5.0 million,
offset by capital expenditures of $14.5 million, repurchases of common stock of
$6.6 million and dividends paid of $1.2 million.
STOCK REPURCHASE
In separate authorizations in June 1998, March 1999, September 1999 and
December 1999, the Board of Directors authorized the use of a total of $20.0
million to repurchase the company's common stock. During fiscal 1999, the
company repurchased 938,600 shares at an average price of $5.90 per share under
these authorizations. During the first nine months of fiscal 2000, the company
invested $6.6 million to repurchase 870,539 shares at an average price of $7.53
per share.
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