Culp Reports Fourth Quarter Earnings of $0.36 Per Share Before Restructuring and Related Charges; Expects Year-to-Year Improvement to Continue in Fiscal 2003.Business Editors HIGH POINT, N.C.--(BUSINESS WIRE)--June 3, 2002 Culp, Inc. (NYSE NYSE See: New York Stock Exchange :CFI CFI abbr. cost, freight, and insurance ) today reported financial results for its fourth fiscal quarter and year ended April 28, 2002, including net income before 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 changes for the fourth quarter that was up sharply from the year earlier period. For the three months ended April 28, 2002, Culp reported 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 of $108.4 million, up 7.2% compared with $101.1 million a year ago. Excluding restructuring and related charges in each period, net income for the fourth quarter of fiscal 2002 totaled $4.2 million, or $0.36 per share 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. , versus $1.4 million, or $0.13 per share diluted, in the year-earlier period. Including restructuring and related charges in each period, Culp reported a net loss for the fourth quarter of fiscal 2002 of $1.6 million, or $0.14 per share diluted, compared with a net loss of $1.4 million, or $0.13 per share diluted, in the year-earlier quarter. Net sales for fiscal 2002 totaled $381.9 million, compared with $409.8 million in the year-earlier period. Excluding restructuring and related charges in each year, Culp reported net income for fiscal 2002 of $4.0 million, or $0.35 per share diluted, compared with a net loss of $3.3 million, or $0.30 per share diluted, in the year-earlier period. Including restructuring and related charges, the Company reported a net loss of $3.4 million, or $0.31 per share diluted, for fiscal 2002 and a net loss of $8.3 million, or $0.74 per share diluted, for the year-earlier period. Culp indicated that bad debt expense for the fourth quarter of fiscal 2002 totaled $1.2 million ($0.07 per share after taxes) versus $121,000 in the year-earlier period. Bad debt expense for fiscal 2002 totaled $4.2 million ($0.25 per share after taxes) compared with $309,000 in fiscal 2001. The restructuring and related charges during the fourth quarter of fiscal 2002 relate to the previously announced plan to exit and sell the wet printed flock business and related assets. The action involves closing a printing facility and flocking operations and reducing related selling and administrative expenses. The total charge from exiting this business was $9.7 million, approximately $8.2 million of which represented non-cash items. Culp estimates the annual after-tax carrying costs Carrying costs Costs that increase with increases in the level of investment in current assets. to maintain the facilities until the assets are sold will be approximately $200,000, or $0.02 per diluted share. During fiscal 2002, sales of wet printed flock fabrics contributed $17.1 million, or 4.5% of total sales, and the Company estimates that the business resulted in an after-tax net loss of $1.3 million, or $0.12 per diluted share. "Our earnings for the fourth quarter extended the positive momentum that we established in the third quarter," remarked Robert G. Culp, III, chief executive officer. "We benefited from an especially strong performance in April. One of the changes that makes short-term forecasts more difficult for us is how much lead times in our industry have become shortened. Our ability to provide manufacturers with one of the broadest choices of fabrics available and to offer flexible, prompt shipping schedules are two of the fundamental competitive strengths playing to Culp's advantage. We believe our gain in sales for the quarter can be attributed in large part to our success in gaining market share. Although the overall 7.2% increase from a year ago was modest, our increased sales to U.S.-based manufacturers was somewhat offset by a continuing decline in international sales. Sales to U.S.-based manufacturers for the quarter rose 10.0% for 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 and 14.6% for 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. , gains that we believe send a strong signal affirming the success of our design programs and overall competitive position. Providing value to furniture and bedding manufacturers demands not only competitive pricing but also textures and patterns that consumers find appealing. "We are starting to realize more of the benefit of the various actions we have taken to rationalize ra·tion·al·ize v. 1. To make rational. 2. To devise self-satisfying but false or inconsistent reasons for one's behavior, especially as an unconscious defense mechanism through which irrational acts or feelings are made to appear our capacity, streamline our operations and solidify so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. Culp's leadership in the continued long-term growth projected for the home furnishings furnishings the extra type or quantity of hair on the head, tail, ears or legs, specified for a particular breed. For example, the feathers in setters, the beard in Bearded collies, the eyebrows in Schnauzers. industry. The 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. percentage of 21.2% for the fourth quarter in fact marked a new quarterly record for Culp, reflecting the benefits of our restructuring actions, a more profitable mix of sales in each division and increased operating efficiency due to the higher sales. The 53% increase in gross profit in the fourth quarter, on a much smaller gain in sales, highlights the positive leverage inherent in our business. We expect results in fiscal 2003 to reflect more of the savings from our restructuring moves, including the decision in the fourth quarter to exit the wet printed flock business." Culp added, "Our objective for fiscal 2003 is to achieve year-to-year improvement in net income each quarter, excluding the impact of the restructuring and related charges incurred during fiscal 2002. We believe that the fundamentals of our business model provide the potential for Culp's profit margin percentages to return to their historical highs. Although we do not expect to achieve those levels for fiscal 2003 as a whole, we are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that the trend during the year will be positive, establishing a strong platform for future improvement. We also expect to strengthen our balance sheet further in the coming year. Our cash position at the close of fiscal 2002 improved to $32.0 million, up from $1.2 million at the close of fiscal 2001. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses for fiscal 2002 totaled a record $42.2 million, exceeding the previous record in fiscal 2001 of $36.1 million. The new high in cash flow enabled us to reduce debt by $7.2 million and fund capital expenditures of $4.7 million. We are continuing to manage our working capital closely and are pleased with the rebound in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become to $33.0 million, up from $26.4 million in fiscal 2001, excluding restructuring and related charges." Cumulative Effect of Accounting Change Culp will adopt SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 142, "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ," effective as of the beginning of Culp's 2003 fiscal year. SFAS No. 142 represents a substantial change in accounting for goodwill. Starting in 2003, goodwill will no longer be amortized but instead will be evaluated for impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. annually, beginning with the initial date of adopting SFAS No. 142. Culp has completed a preliminary review of its goodwill and expects to record in the first quarter of fiscal 2003 a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of approximately $23 million to $27 million after taxes. The charge, which will be recorded as a "cumulative effect of change in accounting principle," will have no effect on 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. or cash flow from operations and will not affect the Company's compliance with the terms of its lending agreements Lending agreement A contract regarding funds transferred between a lender and a borrower. . The elimination of goodwill amortization is expected to result in an annual expense reduction of approximately $1.4 million, or $0.07 per share, starting in the first quarter of fiscal 2003. 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. 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 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. 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 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. . Additionally, economic and political instability in international areas could affect the demand for the Company's products.
CULP, INC.
Condensed Financial Highlights
Three Months Ended
-----------------------------
April 28, April 29,
2002 2001
------------- -------------
Net sales $ 108,397,000 $ 101,071,000
Net loss $ (1,585,000) $ (1,427,000)
Net loss per share:
Basic $ (0.14) $ (0.13)
Diluted $ (0.14) $ (0.13)
Net income per diluted share, excluding
restructuring and related charges(a) $ 0.36 $ 0.13
Average shares outstanding:
Basic 11,255,000 11,212,000
Diluted 11,564,000 11,276,000
Fiscal Year Ended
------------------------------
April 28, April 29,
2002 2001
-------------- --------------
Net sales $ 381,878,000 $ 409,810,000
Net loss $ (3,440,000) $ (8,311,000)
Net loss per share:
Basic $ (0.31) $ (0.74)
Diluted $ (0.31) $ (0.74)
Net income (loss) per diluted share,
excluding restructuring and
related charges(a) $ 0.35 $ (0.30)
Average shares outstanding:
Basic 11,230,000 11,210,000
Diluted 11,457,000 11,210,000
(a) Excludes restructuring and related charges of $9.7 million ($5.8
million or $0.51 per share diluted, after taxes) and $12.2 million
($7.4 million or $0.66 per share diluted, after taxes) for the
fiscal 2002 fourth quarter and full year results, respectively.
Excludes restructuring and related charges of $4.2 million ($2.8
million or $0.26 per share diluted, after taxes) and $7.4 million
($5.0 million or $0.44 per share diluted, after taxes) for the
fiscal 2001 fourth quarter and full year results, respectively.
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