Culp Announces Year-end Fiscal 2004 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 fourth quarter and fiscal year ended May 2, 2004. The highlights for the quarter and fiscal year include: --Gross profit margin of 18.4% for the quarter and 18.3% for the fiscal year --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. sales up 9.4% for the quarter and nearly 7.0% for the fiscal year --Debt-to-capital ratio reduced to 33.0%, the lowest level for Culp since fiscal 1993 --Free cash flow of $15.4 million for the fiscal year For the three months ended May 2, 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 $85.1 million, a 5.8% decrease compared with $90.4 million a year ago. The company reported net income of $3.7 million, or $0.32 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, for the fourth quarter of fiscal 2004. The results for the fourth quarter of fiscal 2004 include a credit of $1.0 million, or $0.06 per diluted share, related to the company's 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). reserves. Excluding this amount, net income for the fourth fiscal quarter of fiscal 2004 was $0.26 per diluted share. The company reported net income of $3.3 million, or $0.28 per diluted share, including restructuring and related charges for the fourth quarter of fiscal 2003. The financial results for the fourth quarter of fiscal 2003 include a total of $1.0 million in restructuring and related charges included in cost of sales. Excluding these charges, net income for the fourth fiscal quarter of 2003 was $3.9 million, or $0.33 per diluted share. (A reconciliation to the net income and earnings per share calculations and free cash flow has been set forth on Page 5.) For the fiscal year ended May 2, 2004, the company reported net sales of $318.1 million, a 6.3% decrease compared with $339.6 million for the same period a year ago. Net income for fiscal 2004 was $7.2 million, or $0.61 per diluted share, compared with a net loss of $24.9 million, or $2.17 per diluted share, including restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and the cumulative effect of accounting change, for fiscal 2003. Excluding the credit for the company's restructuring reserves described above, and a charge of $1.7 million, or $0.10 per diluted share, in the third fiscal quarter related to the early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt, net income for fiscal 2004 was $7.6 million, or $0.65 per diluted share. Excluding restructuring and related charges and the cumulative effect of accounting change, net income for fiscal 2003 was $9.0 million, or $0.77 per diluted share. "As previously announced, our fourth quarter performance reflects lower-than-expected sales of 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," remarked 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, chief executive officer of Culp, Inc. "This segment continues to face demand pressure from both the current consumer preference for leather furniture as well as 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. Given the lower sales volume, gross profit margin 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. for this segment declined to 16.8% in the fourth quarter compared with 18.3% in the prior year period, excluding restructuring related charges. To enhance our competitive position, we are aggressively pursuing offshore sourcing initiatives, including the development of our China operations. As a result, we are significantly increasing sales of upholstery fabrics produced outside of the company's U.S. manufacturing plants. "Our mattress ticking business has continued to gain momentum throughout fiscal 2004. Sales in this segment were up 9.4% for the fourth quarter and nearly 7.0% for the fiscal year, due to better industry demand and continued gains with key customers. These gains reflect Culp's design leadership, exceptional customer service and low cost operations. This growth trend is particularly meaningful in light of the bedding industry's ongoing transition to selling predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. 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, which utilize about one-third less fabric. We expect that the mattress ticking business will account for an increasing percentage of the company's overall sales and profitability in fiscal 2005. "Strengthening our balance sheet has been an important focus for Culp in fiscal 2004," Culp continued. "With the $25.0 million prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. on $75.0 million of outstanding senior notes in the third fiscal quarter, our 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 $50.5 million compared with $76.0 million a year ago. Notably, we have reduced our long-term debt by a total of $86.0 million over the past four years. 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 improved to 33.0% at the end of fiscal 2004, compared with 44.4% a year ago. As such, we have considerably improved our financial position and have greater financial flexibility to pursue our strategic initiatives." Commenting on the business outlook, Culp added, "The first quarter of our fiscal year, which includes the summer months, is typically the slowest period for Culp and the furniture industry due in part to 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. In addition, in fiscal 2005, our first fiscal quarter will be 13 weeks versus 14 weeks last year. We are seeing a definite 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. in orders reflecting weaker retail activity throughout the furniture industry. Given these factors, we expect our consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: sales for the first quarter will show a greater year-over-year decline than we experienced this past quarter. We believe the upholstery fabrics segment will continue to be affected by competitive factors and expect sales in this segment to decline by a greater amount than the fourth quarter decline of 11.6%. Sales in our mattress ticking segment are expected to 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. sales for the prior year quarter. Based on these sales expectations and lower gross profit in the upholstery fabrics segment, and considering the seasonal slowdown and industry conditions, we expect to report a net loss of $0.08 to $0.13 per share diluted for the first fiscal quarter of 2005. The actual results will depend primarily upon the level of demand throughout the quarter. We remain 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 start to pick up in the fall, as is seasonally typical in the furniture industry. However, if sales continue to be under pressure in the upholstery fabrics segment, we are prepared to take the necessary actions to adjust our cost structure and capacity, as we have demonstrated in recent years. We believe the continued strength in our mattress ticking business, our focused efforts to develop offshore sourcing initiatives, and our proven ability to generate free cash flow are fundamental competitive advantages for Culp as we enter fiscal 2005." 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. 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, gross profit margins, SG&A or other expenses, and earnings, as well as any statements regarding the company's view of estimates of the company's future results by analysts. 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
--------------------------
May 2, April 27,
2004 2003
------------ ------------
Net sales $ 85,148,000 $ 90,406,000
============ ============
Net income $ 3,733,000 $ 3,272,000
Net income per share:
Basic $ 0.32 $ 0.28
Diluted $ 0.32 $ 0.28
Net income per share, diluted, excluding
restructuring and related charges and
credits and early extinguishment
of debt(1) $ 0.26 $ 0.33
Average shares outstanding:
Basic 11,531,000 11,496,000
Diluted 11,815,000 11,616,000
Fiscal Year Ended
--------------------------
May 2, April 27,
2004 2003
------------ ------------
Net sales $318,116,000 $339,646,000
============ ============
Income (loss) before cumulative effect
of accounting change $ 7,220,000 $ (736,000)
Cumulative effect of accounting change,
net of income taxes -- (24,151,000)
------------ ------------
Net income (loss) $ 7,220,000 $(24,887,000)
============ ============
Basic income (loss) per share:
Income (loss) before cumulative effect
of accounting change $ 0.63 $ (0.06)
Cumulative effect of accounting change 0.00 (2.11)
------------ ------------
Net income (loss) $ 0.63 $ (2.17)
============ ============
Diluted income (loss) per share:
Income (loss) before cumulative effect
of accounting change $ 0.61 $ (0.06)
Cumulative effect of accounting change 0.00 (2.11)
------------ ------------
Net income (loss) $ 0.61 $ (2.17)
============ ============
Net income per share, diluted, excluding
restructuring and related charges and
credits, early extinguishment of debt
and cumulative effect of accounting
change(2) $ 0.65 $ 0.77
Average shares outstanding:
Basic 11,525,000 11,462,000
Diluted 11,777,000 11,462,000
(1) Excludes credit for restructuring reserves of $1.0 million
($701,000, or $0.06 per diluted share, after taxes) for the
fourth quarter of fiscal 2004. Excludes restructuring and related
charges of $1.0 million ($601,000, or $0.05 per diluted share,
after taxes) for the fourth quarter of fiscal 2003.
(2) Excludes credit for restructuring reserves of $1.0 million
($701,000, or $0.06 per diluted share, after taxes) for fiscal
2004. Excludes charge for early extinguishment of debt of $1.7
million ($1.1 million, or $0.10 per diluted share, after taxes)
for fiscal 2004. Excludes cumulative effect of accounting change,
net of income taxes, of $24.2 million ($2.11 per diluted share)
for fiscal 2003. Excludes restructuring and related charges of
$15.9 million ($9.7 million, or $0.85 per diluted share, after
taxes) for fiscal 2003.
CULP, INC.
Reconciliation of Net Income (Loss) as Reported
to Pro Forma Net Income
(Unaudited)
Three Months Ended Fiscal Year Ended
---------------------- --------------------------
May 2, April 27, May 2, April 27,
2004 2003 2004 2003
---------- ---------- ------------ ------------
Net income (loss),
as reported $3,733,000 $3,272,000 $ 7,220,000 $(24,887,000)
Cumulative effect
of accounting
change, net of
income taxes -- -- -- 24,151,000
Restructuring and
related charges
(credits), net of
income taxes (701,000) 601,000 (701,000) 9,714,000
Early
extinguishment
of debt, net of
income taxes -- -- 1,120,000 --
---------- ---------- ------------ ------------
Pro forma net
income $3,032,000 $3,873,000 $ 7,639,000 $ 8,978,000
========== ========== ============ ============
Reconciliation of Net Income (Loss) Per Share as Reported
to Pro Forma Net Income Per Share
(Unaudited)
Diluted net income
(loss) per
share $ 0.32 $ 0.28 $ 0.61 $ (2.17)
Cumulative effect
of accounting
change, net of
income taxes -- -- -- 2.11
Restructuring and
related charges
(credits), net
of income taxes (0.06) 0.05 (0.06) 0.85
Early
extinguishment
of debt, net of
income taxes -- -- 0.10 --
Effect of dilutive
stock options -- -- 0.00 (0.02)
---------- ---------- ------------ ------------
Diluted net income
per share,
adjusted $ 0.26 $ 0.33 $ 0.65 $ 0.77
========== ========== ============ ============
Reconciliation of Cash Flow from Operations to Free Cash Flow
(Unaudited)
Fiscal Year Ended
--------------------------
May 2, April 27,
2004 2003
------------ ------------
Cash flow from operations $ 25,352,000 $ 31,129,000
Capital expenditures (5,976,000) (6,830,000)
Change in accounts payable-capital
expenditures (3,932,000) (1,294,000)
------------ ------------
Free cash flow $ 15,444,000 $ 23,005,000
============ ============
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