Culp Announces First Quarter Fiscal 2005 Results.HIGH POINT, N.C. -- Culp, Inc. (NYSE NYSE See: New York Stock Exchange :CFI CFI abbr. cost, freight, and insurance ) today reported financial and operating results for the first quarter of fiscal 2005 ended August 1, 2004. The highlights include: --Mattress fabrics segment average weekly sales up 2.7 percent during period of transition to one-sided one-sid·ed adj. 1. Favoring one side or group; partial or biased: a one-sided view. 2. Characterized by the domination of one competitor over another: mattresses. --Aggressive expansion of offshore sourcing capabilities, resulting in sales of sourced upholstery upholstery, general term for household fittings, hangings, curtains, cushions, and covers. It refers to stuffed, padded, and spring-cushioned furniture, such as chairs and sofas, or to the usually decorative materials and fabrics that cover them. fabrics more than doubling over the same period last year. --Long-term debt-to-capital ratio of 33.3 percent compared with 44.5 percent a year ago. --Earnings expectation for the second quarter of fiscal 2005 is net income of $0.13 to $0.17 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Overview For the three months ended August 1, 2004, net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight were $67.8 million compared with $73.7 million a year ago, a 7.9 percent decline. The first quarter of fiscal 2005 included 13 weeks versus 14 weeks for the same quarter of fiscal 2004. The company reported a net loss of $1,052,000, or $0.09 per diluted share, for the first quarter of fiscal 2005 compared with a net loss of $411,000, or $0.04 per diluted share, for the first quarter of fiscal 2004. Excluding restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and related charges and credits of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $42,000, net of income taxes, the net loss for the first quarter of fiscal 2005 was $1,094,000, or $0.09 per diluted share. "Considering one less week's sales, our average weekly sales for the first fiscal quarter of 2005 were $5.2 million compared with $5.3 million in the prior-year period, a decrease of less than 1.0 percent," commented Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. G. Culp, III, chairman of the board and chief executive officer of Culp, Inc. "The first quarter of our fiscal year is typically the slowest period for Culp and the furniture industry with scheduled plant vacation VACATION. That period of time between the end of one term and beginning of another. During vacation, rules and orders are made in such cases as are urgent, by a judge at his chambers. shutdowns. The seasonal slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. , combined with the continued weakness in consumer demand for furniture throughout the summer, accounted for this modest drop. We believe our competitive position is strong and we are excited about the growth opportunities in our mattress ticking ticking a coat color pigmentation pattern in which hairs of one color are distributed in small groups throughout the background color, e.g. Australian cattle dog. Called also speckling. business and our offshore sourcing strategy." Mattress Fabrics Segment Mattress fabric (known as mattress ticking) sales were $26.0 million compared with $27.2 million for the first quarter of fiscal 2004, a 4.7 percent decline. As noted, these results reflect a 13-week period versus a 14-week period last year. Average weekly sales for the first quarter of fiscal 2005 were $2.0 million compared with $1.9 million in the prior-year period, an increase of 2.7 percent. This increase is especially noteworthy considering our customers' recent transition to one-sided mattresses, which utilize one-third less fabric. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for this segment was $2.9 million, or 11.2 percent of sales, compared with $4.1 million, or 15.2 percent of sales, for the prior-year period. Operating income was primarily affected by one week's less sales for the quarter and inventory markdowns related to certain customer programs. These factors are expected to have significantly less impact on the segment's second quarter results. Culp remarked, "We are seeing positive trends in our mattress ticking business and continue to make gains with key customers. Consumer trends and the attractiveness of this product category for retailers favor further growth in bedding demand, and we believe that Culp is well positioned to benefit from this growth as a leading provider of mattress ticking. Additionally, unlike upholstery fabrics, the mattress fabric business is not being threatened by Asian imports because of the relatively low average price points and labor content and the just-in-time just-in-time - dynamic translation delivery requirements The stipulation that requires that an item of materiel must be delivered in the total quantity required by the date required. of this business. Further, Asian imports of finished mattresses have been limited to less than four percent of the U.S. market because of high shipping costs as well as the customized product lines and strong brand name recognition associated with mattresses. With our leadership in product design, superior customer service and delivery performance, and a globally competitive cost structure, we expect that the mattress ticking business will account for an increasing percentage of Culp's overall sales and profitability in fiscal 2005." Upholstery Fabrics Segment Sales for this segment were $41.9 million, a 9.8 percent decline compared with $46.5 million in the first quarter of fiscal 2004. Average weekly sales for the first quarter of fiscal 2005 were $3.2 million compared with $3.3 million in the prior year period, a decrease of 2.9 percent. Sales of upholstery fabrics reflect soft demand by furniture retailers during the summer months. Additional factors affecting the demand for upholstery fabrics are the current consumer preference for leather furniture and increased competition from imported fabrics, including cut and sewn sewn v. A past participle of sew. sewn Verb a past participle of sew Adj. 1. kits, primarily from Asia. "It has become increasingly evident that competitive forces in the global marketplace are significantly changing the face of the furniture and the upholstery fabrics industries," added Culp. "However, we believe that Culp has made significant progress in adapting our business model to take advantage of this transition and position ourselves more effectively in this environment. First, we have significantly adjusted our cost structure and domestic manufacturing capacity over the past several years. Second, we have focused on design creativity and product development to provide breadth and innovation in the fabrics offered to our customers to meet changing consumer preferences. Third, we have implemented a dual strategy to aggressively develop offshore sourcing capabilities for Culp. In fiscal 2003 we put in place the necessary resources to begin sourcing from Asia certain upholstery fabrics that we do not manufacture, and we have continued to expand these resources. The other component of Culp's offshore sourcing strategy is our China operation, where we are now well underway with our manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. and our fabric shipments to customers. Sales of upholstery fabrics produced outside of our U.S. manufacturing plants, which include the popular micro-denier suedes and fabrics produced at our China facility, accounted for approximately $5.5 million, or 13.1 percent, of upholstery fabric sales for the quarter. Sourced fabrics accounted for approximately $2.1 million, or 4.5 percent of upholstery fabric sales for the same period last year." Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the upholstery fabrics segment was $2.6 million, or 6.1 percent of sales, compared with a loss of $1.7 million, or 3.7 percent of sales, for the same period last year. The segment loss in each period was primarily due to underutilization of the company's U.S. manufacturing capacity. Culp noted, "If sales continue to be under pressure in the upholstery fabrics segment, we are prepared to take the necessary actions to further adjust our cost structure and U.S. capacity, as we have demonstrated in recent years." Balance Sheet "One of our key financial objectives for fiscal 2005 is to continue to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the strength of our balance sheet," added Culp. "At the end of the first fiscal quarter, our balance sheet reflects approximately $12.0 million in cash and cash equivalents. Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. now stands at $51.1 million compared with $76.6 million a year ago. As a result, our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. debt-to-capital ratio is now 33.3 percent compared with 44.5 percent a year ago. Our balance sheet is sound with significantly lower debt, excellent liquidity and the financial flexibility to pursue our strategic initiatives." Outlook Commenting on the business outlook, Culp said, "Mattress ticking sales have already picked up during the early part of our second quarter. For the current quarter, we expect sales in this segment to be moderately ahead of second quarter sales last year and expect that operating income will approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. last year's level. With respect to the upholstery fabrics segment, the outlook remains uncertain for a sustained recovery in retail furniture business conditions. We are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that upholstery fabric sales will also pick up in the fall, as is seasonally typical in the furniture industry. For the second quarter, upholstery fabrics segment sales are expected to decrease less than the first quarter decline of 9.8 percent. While we do expect to be profitable in the upholstery fabrics segment, operating income will be down considerably from last year's second quarter. At this time, we expect to report net income in the range of $0.13 to $0.17 per share diluted, with the actual results depending primarily on the level of demand throughout the quarter. We believe the excellence in our design creativity, the strength in our mattress ticking business, the aggressive expansion of our offshore sourcing capabilities and our sound balance sheet effectively position Culp in today's marketplace." 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 statements that may be deemed "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by qualifying words such as "expect," "believe," "estimate," "plan" and "project" and their derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. , and include but are not limited to statements about expectations for the company's future sales, operating income, gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. , SG&A or other expenses, and earnings. 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 disposable income Portion of an individual's income over which the recipient has complete discretion. To assess disposable income, it is necessary to determine total income, including not only wages and salaries, interest and dividend payments, and business profits, but also , and general economic conditions. Decreases in these economic indicators Economic indicators The key statistics of the economy that reveal the direction the economy is heading in; for example, the unemployment rate and the inflation rate. 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. In addition, 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 United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Also, economic and political instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability. detrusor 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. Finally, unanticipated delays or costs in executing restructuring actions could cause the cumulative effect of restructuring actions to fail to meet the objectives set forth by management. 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.
CULP, INC.
Condensed Financial Highlights
(Unaudited)
Three Months Ended
----------------------------
August 1, August 3,
2004 2003
------------ ------------
Net sales $ 67,849,000 $ 73,676,000
============ ============
Net loss $ (1,052,000) $ (411,000)
============ ============
Basic and diluted net loss per share:
Basic $ (0.09) $ (0.04)
Diluted $ (0.09) $ (0.04)
============ ============
Average shares outstanding:
Basic 11,547,000 11,515,000
Diluted 11,547,000 11,515,000
Reconciliation of Net Loss as Reported to Pro Forma Net Loss
(Unaudited)
Three Months Ended
----------------------------
August 1, August 3,
2004 2003
------------ ------------
Net loss, as reported $ (1,052,000) $ (411,000)
Restructuring and related charges
(credits), net of income taxes (42,000) 0
------------ ------------
Pro forma net loss $ (1,094,000) $ (411,000)
============ ============
Reconciliation of Net Loss Per Share as Reported to
Pro Forma Net Loss Per Share
(Unaudited)
Three Months Ended
----------------------------
August 1, August 3,
2004 2003
------------ ------------
Net loss per share, as reported $ (0.09) $ (0.04)
Restructuring and related charges
(credits), net of income taxes 0 0
------------ ------------
Pro forma net loss per share $ (0.09) $ (0.04)
============ ============
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