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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) June 3, 2002
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)
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(Former name or former address, if changed since last report)
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Item 5. Other Events
See attached Press Release (x pages) and Financial Information Release (13
pages), both dated June 3, 2002, related to the fiscal 2002 fourth quarter and
year ended April 28, 2002.
Forward Looking Information. This Report contains statements that may 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: Franklin N. Saxon
-------------------
Executive Vice President and
Chief Financial Officer
FOR IMMEDIATE RELEASE
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
HIGH POINT, N. C. (June 3, 2002) -- Culp, Inc. (NYSE: CFI) today reported
financial results for its fourth fiscal quarter and year ended April 28, 2002,
including net income before restructuring 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 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,
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 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 fabrics and 14.6% for
mattress ticking, 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 our capacity, streamline our operations and
solidify Culp's leadership in the continued long-term growth projected for the
home furnishings industry. The gross profit margin 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 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 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 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 No. 142, "Goodwill and Other Intangible 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 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 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 or cash flow from operations and will not affect the
Company's compliance with the terms of its lending agreements. 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" 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.
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* $ 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* $ 0.35 $ (0.30)
Average shares outstanding:
Basic 11,230,000 11,210,000
Diluted 11,457,000 11,210,000
* 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.
- END -
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED APRIL 28, 2002 AND APRIL 29, 2001
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
----------------------------------------------------------------------
Amounts Percent of Sales
-------------------------- -------------------------
April 28, April 29, % Over
2002 2001 (Under) 2002 2001
------------ ------------ ------------ ----------- ------------
Net sales $ 108,397 101,071 7.2 % 100.0 % 100.0 %
Cost of sales 85,379 85,978 (0.7)% 78.8 % 85.1 %
------------ ------------ ------------ ----------- ------------
Gross profit 23,018 15,093 52.5 % 21.2 % 14.9 %
Selling, general and
administrative expenses (1) 14,236 10,617 34.1 % 13.1 % 10.5 %
Restructuring expense 9,065 3,121 190.5 % 8.4 % 3.1 %
------------ ------------ ------------ ----------- ------------
Income (loss) from operations (283) 1,355 (120.9)% (0.3)% 1.3 %
Interest expense 2,056 2,284 (10.0)% 1.9 % 2.3 %
Interest income (77) (6) 1,183.3 % (0.1)% (0.0)%
Other expense (income), net 1,067 1,209 (11.7)% 1.0 % 1.2 %
------------ ------------ ------------ ----------- ------------
Loss before income taxes (3,329) (2,132) (56.1)% (3.1)% (2.1)%
Income taxes (2) (1,744) (705) (147.4)% 52.4 % 33.1 %
------------ ------------ ------------ ----------- ------------
Net loss $ (1,585) (1,427) (11.1)% (1.5)% (1.4)%
============ ============ ============ =========== ============
Net loss per share ($0.14) ($0.13) (7.7)%
Net loss per share, assuming dilution ($0.14) ($0.13) (7.7)%
Net income per share, excluding
restructuring and related charges,
assuming dilution (3) $0.36 $0.13 176.9 %
Average shares outstanding 11,255 11,212 0.4 %
Average shares outstanding, assuming
dilution 11,255 11,212 0.4 %
TWELVE MONTHS ENDED
----------------------------------------------------------------------
Amounts Percent of Sales
-------------------------- -------------------------
April 28, April 29, % Over
2002 2001 (Under) 2002 2001
------------ ------------ ------------ ----------- ------------
Net sales $ 381,878 409,810 (6.8)% 100.0 % 100.0 %
Cost of sales 319,021 353,823 (9.8)% 83.5 % 86.3 %
------------ ------------ ------------ ----------- ------------
62,857 55,987 12.3 % 16.5 % 13.7 %
Selling, general and
administrative expenses (1) 48,059 50,366 (4.6)% 12.6 % 12.3 %
Restructuring expense 10,368 5,625 84.3 % 2.7 % 1.4 %
------------ ------------ ------------ ----------- ------------
Income (loss) from operations 4,430 (4) * 1.2 % (0.0)%
Interest expense 7,907 9,114 (13.2)% 2.1 % 2.2 %
Interest income (176) (46) 282.6 % (0.0)% (0.0)%
Other expense (income), net 2,839 3,336 (14.9)% 0.7 % 0.8 %
------------ ------------ ------------ ----------- ------------
Loss before income taxes (6,140) (12,408) 50.5 % (1.6)% (3.0)%
Income taxes (2) (2,700) (4,097) 34.1 % 44.0 % 33.0 %
------------ ------------ ------------ ----------- ------------
Net loss $ (3,440) (8,311) 58.6 % (0.9)% (2.0)%
============ ============ ============ =========== ============
Net loss per share ($0.31) ($0.74) 58.1 %
Net loss per share, assuming dilution ($0.31) ($0.74) 58.1 %
Net income (loss) per share, excluding
restructuring and related charges,
assuming dilution (3) $0.35 ($0.30) 216.7 %
Average shares outstanding 11,230 11,210 0.2 %
Average shares outstanding, assuming
dilution 11,230 11,210 0.2 %
* Calculated % not meaningful
(1) Includes bad debt expense of $1.2 million ($792,000 or $0.07 per share
diluted, after taxes) and $121,000 for the fourth quarter of fiscal 2002 and
2001, respectively; and $4,172,000 ($2,753,000 or $0.25 per share diluted, after
taxes) and $309,000 ($207,000 or $.02 per share diluted, after taxes) for fiscal
2002 and 2001, respectively.
(2) Percent of sales column is calculated as a % of income (loss) before income
taxes.
(3) Excludes restructuring and related charges of $9.7 million ($5.8 million or
$.51 per share diluted, after taxes) and $4.2 million ($2.8 million or $.26 per
share diluted, after taxes ) for the fourth quarter of fiscal 2002 and fiscal
2001, respectively; and $12.2 million ($7.4 million or $.66 per share diluted,
after taxes) and $7.4 million ($5.0 million or $.44 per share diluted, after
taxes) for fiscal 2002 and 2001, respectively.
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
APRIL 28, 2002 and APRIL 29, 2001
(Amounts in Thousands)
Amounts Increase
--------------------------- (Decrease)
April 28, April 29, ----------------------
2002 2001 Dollars Percent
------------- ---------- ---------- ---------
Current assets
Cash and cash investments $ 31,993 1,207 30,786 2,550.6 %
Accounts receivable 43,366 57,849 (14,483) (25.0)%
Inventories 57,899 59,997 (2,098) (3.5)%
Other current assets 13,413 7,856 5,557 70.7 %
------------- ---------- ---------- ---------
Total current assets 146,671 126,909 19,762 15.6 %
Property, plant & equipment, net 89,772 112,322 (22,550) (20.1)%
Goodwill 47,083 48,478 (1,395) (2.9)%
Other assets 4,187 1,871 2,316 123.8 %
------------- ---------- ---------- ---------
Total assets $ 287,713 289,580 (1,867) (0.6)%
============= ========== ========== =========
Current liabilities
Current maturities of long-term debt $ 1,483 2,488 (1,005) (40.4)%
Accounts payable 24,327 27,371 (3,044) (11.1)%
Accrued expenses 18,905 17,153 1,752 10.2 %
Income taxes payable 0 1,268 (1,268) 0.0 %
------------- ---------- ---------- ---------
Total current liabilities 44,715 48,280 (3,565) (7.4)%
Long-term debt 107,001 109,168 (2,167) (2.0)%
Deferred income taxes 16,932 10,330 6,602 63.9 %
------------- ---------- ---------- ---------
Total liabilities 168,648 167,778 870 0.5 %
Shareholders' equity 119,065 121,802 (2,737) (2.2)%
------------- ---------- ---------- ---------
Total liabilities and
shareholders' equity $ 287,713 289,580 (1,867) (0.6)%
============= ========== ========== =========
Shares outstanding 11,320 11,221 99 0.9 %
============= ========== ========== =========
CULP, INC.
FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED APRIL 28, 2002 AND APRIL 29, 2001
(Amounts in Thousands)
TWELVE MONTHS ENDED
--------------------------
Amounts
--------------------------
April 28, April 29,
2002 2001
------------ ------------
Cash flows from operating activities:
Net loss $ (3,440) (8,311)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 17,274 19,391
Amortization of intangible and other assets 1,575 1,591
Amortization of deferred compensation 144 360
Provision for deferred income taxes (1,452) (5,394)
Restructuring expense 10,368 5,625
Changes in assets and liabilities:
Accounts receivable 14,483 17,374
Inventories 2,098 14,474
Other current assets 2,504 827
Other assets (311) 171
Accounts payable 998 (4,530)
Accrued expenses (796) (6,767)
Income taxes payable (1,268) 1,268
------------ ------------
Net cash provided by operating activities 42,177 36,079
------------ ------------
Cash flows from investing activities:
Capital expenditures (4,729) (8,050)
Sales of investments related to deferred compensation plan 0 4,547
------------ ------------
Net cash used in investing activities (4,729) (3,503)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 0 564
Principal payments on long-term debt (3,172) (26,394)
Change in accounts payable-capital expenditures (4,042) (5,386)
Dividends paid 0 (1,177)
Proceeds from common stock issued 552 17
--------------------------
Net cash used in financing activities (6,662) (32,376)
------------ ------------
Increase in cash and cash investments 30,786 200
Cash and cash investments at beginning of period 1,207 1,007
------------ ------------
Cash and cash investments at end of period $ 31,993 1,207
============ ============
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
APRIL 28, 2002
FISCAL 01 FISCAL 02
------------- ------------------------------------------------------ --------------
Q4 Q1 Q2 Q3 Q4 LTM (3)
------------- ------------------------------------------------------ --------------
INVENTORIES
Inventory turns 5.4 5.1 5.4 5.1 5.8
RECEIVABLES
Days sales in receivables 52 51 47 43 36
Percent current & less than 30
days past due 95.5% 91.9% 92.7% 96.0% 98.7%
WORKING CAPITAL
Current ratio 2.6 2.8 2.8 3.2 3.3
Working capital turnover (2) 4.0 4.1 4.1 4.2 4.5
Operating working capital (2) $90,475 $86,586 $84,346 $84,233 $76,938
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 7.4% 7.2% 7.1% 7.1% 7.3%
Percent property, plant &
equipment are depreciated 54.9% 56.2% 58.1% 59.0% 59.8%
Capital expenditures $8,050 (1) $1,602 $686 $1,105 $1,336
PROFITABILITY
Return on average total capital (6) 4.8% (0.1%) 3.9% 2.4% 9.5% 3.8%
Return on average equity (6) 4.7% (4.5%) 3.2% 0.7% 14.0% 3.3%
Net income (loss) per share ($0.13) ($0.26) $0.08 $0.02 ($0.14) ($0.31)
Net income (loss) per share (diluted) ($0.13) ($0.26) $0.08 $0.02 ($0.14) ($0.31)
Net income (loss) per share, excluding
restructuring and related charges,
(diluted) (5) $0.13 ($0.12) $0.09 $0.02 $0.36 $0.35
LEVERAGE
Total liabilities/equity 137.7% 136.6% 136.8% 129.6% 141.6%
Funded debt/equity 91.7% 93.1% 92.3% 91.7% 91.1%
Funded debt/capital employed 47.8% 48.2% 48.0% 47.8% 47.7%
Funded debt $111,656 $110,652 $110,583 $110,087 $108,484
Funded debt/EBITDA (LTM) (4) 4.23 4.26 4.26 3.64 3.29
OTHER
Book value per share $10.85 $10.59 $10.68 $10.62 $10.52
Employees at quarter end 3,127 3,018 3,018 3,015 3,010
Sales per employee (annualized) $122,000 $113,000 $128,000 $120,523 $143,930
Capital employed $233,458 $229,461 $230,421 $230,999 $227,549
Effective income tax rate 33.1% 34.0% 34.0% 34.0% 52.4%
EBITDA (4) $10,363 $4,731 $8,315 $6,862 $13,068 $32,976
EBITDA/net sales (4) 10.3% 5.5% 8.6% 7.6% 12.1% 8.6%
(1) Expenditures for entire year
(2) Working capital for this calculation is accounts receivable, inventories and
accounts payable.
(3) LTM represents "Latest Twelve Months"
(4) EBITDA includes earnings before interest, income taxes, depreciation,
amortization, all restructuring and related charges and certain non-cash
charges, as defined by the company's credit agreement.
(5) Excludes restructuring and related charges of $12.2 million ($7.4 million or
$.66 per share diluted, after taxes) for the last twelve months.
(6) Excludes restructuring and related charges
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES BY PRODUCT GROUP
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED APRIL 28, 2002 AND APRIL 29, 2001
(Amounts in thousands)
THREE MONTHS ENDED
------------------------------------------------------------
Amounts Percent of Total Sales
-------------------- -----------------------
April 28, April 29, % Over
Product Group 2002 2001 (Under) 2002 2001
------------------------------ --------- --------- ------------ ---------- ----------
Upholstery Fabrics
Culp Decorative Fabrics $ 42,973 41,046 4.7 % 39.6 % 40.6 %
Culp Velvets/Prints 34,594 31,327 10.4 % 31.9 % 31.0 %
Culp Yarn 1,494 2,417 (38.2)% 1.4 % 2.4 %
--------- --------- ------------ ---------- ----------
79,061 74,790 5.7 % 72.9 % 74.0 %
Mattress Ticking
Culp Home Fashions 29,336 26,281 11.6 % 27.1 % 26.0 %
--------- --------- ------------ ---------- ----------
* $ 108,397 101,071 7.2 % 100.0 % 100.0 %
========= ========= ============ ========== ==========
TWELVE MONTHS ENDED
------------------------------------------------------------
Amounts Percent of Total Sales
-------------------- -----------------------
April 28, April 29, % Over
Product Group 2002 2001 (Under) 2002 2001
------------------------------ --------- --------- ------------ ---------- ----------
Upholstery Fabrics
Culp Decorative Fabrics $ 152,505 170,326 (10.5)% 39.9 % 41.6 %
Culp Velvets/Prints 119,119 122,105 (2.4)% 31.1 % 29.8 %
Culp Yarn 5,306 12,581 (57.8)% 1.4 % 3.1 %
--------- --------- ------------ ---------- ----------
276,930 305,012 (9.2)% 72.5 % 74.4 %
Mattress Ticking
Culp Home Fashions 104,948 104,798 0.1 % 27.5 % 25.6 %
--------- --------- ------------ ---------- ----------
* $ 381,878 409,810 (6.8)% 100.0 % 100.0 %
========= ========= ============ ========== ==========
* U.S. sales were $94,760 and $85,314 for the fourth quarter of fiscal 2002 and
fiscal 2001, respectively; and $ 328,377 and $331,986 for the twelve months of
fiscal 2002 and 2001, respectively. The percentage increase in U.S. sales was
11.1% for the fourth quarter and a decrease of 1.1% for the twelve months.
CULP, INC. FINANCIAL INFORMATION RELEASE
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED APRIL 28, 2002 AND APRIL 29, 2001
(Amounts in thousands)
THREE MONTHS ENDED
-----------------------------------------------------------------
Amounts Percent of Total Sales
------------------------- ------------------------
April 28, April 29, % Over
Geographic Area 2002 2001 (Under) 2002 2001
--------------------------- ------------ ----------- ----------- ---------- ----------
North America (Excluding USA) $ 9,010 7,872 14.5 % 66.1 % 50.0 %
Europe 176 1,334 (86.8)% 1.3 % 8.5 %
Middle East 1,422 3,375 (57.9)% 10.4 % 21.4 %
Far East & Asia 2,289 2,394 (4.4)% 16.8 % 15.2 %
South America 411 296 38.9 % 3.0 % 1.9 %
All other areas 329 486 (32.3)% 2.4 % 3.1 %
------------ ----------- ----------- ---------- ----------
$ 13,637 15,757 (13.5)% 100.0 % 100.0 %
============ =========== =========== ========== ==========
TWELVE MONTHS ENDED
-----------------------------------------------------------------
Amounts Percent of Total Sales
------------------------- ------------------------
April 28, April 29, % Over
Geographic Area 2002 2001 (Under) 2002 2001
--------------------------- ------------ ----------- ----------- ---------- ----------
North America (Excluding USA) $ 32,033 34,049 (5.9) % 60.0 % 43.8 %
Europe 2,291 6,262 (63.4) % 4.3 % 8.0 %
Middle East 6,226 17,831 (65.1) % 11.6 % 22.9 %
Far East & Asia 10,703 15,497 (30.9) % 20.0 % 19.9 %
South America 902 1,028 (12.3) % 1.7 % 1.3 %
All other areas 1,346 3,157 (57.4) % 2.5 % 4.1 %
------------ ----------- ----------- ---------- ----------
$ 53,501 77,824 (31.3) % 100.0 % 100.0 %
============ =========== =========== ========== ==========
International sales, and the percentage of total sales, for each of the last
three fiscal years follows: fiscal 2000-$111,104 (23%); fiscal 2001-$77,824
(19%);fiscal 2002 $53,501 (14%). International sales for the fourth quarter
represented 13% and 16% for fiscal 2002 and 2001, respectively.
CULP, INC.
PROFORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED APRIL 28, 2002 AND APRIL 29, 2001
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
-------------------------------------------------------------------------------
April 28, April 29,
As Reported 2002 2001
April 28, % of Reclassification Proforma Net % of Proforma Net % of % Over
2002 Net Sales & Adjustments of Restructuring Net Sales of Restructuring Net Sales (Under)
----------------- ---------------- --------------------------- ---------------- --------- -------
Net sales $ 108,397 100.0% 108,397 100.0% 101,071 100.0% 7.2%
Cost of sales 85,379 78.8% (619) (2) 84,760 78.2% 84,853 84.0% (6) -0.1%
----------------- ---------------- --------------------------- ---------------- --------- -------
Gross profit 23,018 21.2% (619) 23,637 21.8% 16,218 16.0% 45.7%
Selling, general and
administrative expenses 14,236 13.1% (1,244) 12,992 12.0% 10,496 10.4% 23.8%
Bad debt expense 1,244 1,244 1.5% 121 0.1% 928.1%
Restructuring expense 9,065 8.4% (9,065) (3) 0 0.0% 0 0.0% (6) 0.0%
----------------- ---------------- --------------------------- ---------------- --------- -------
Income (loss) from
operations (283) -0.3% (9,684) 9,401 8.7% 5,601 5.5% 67.8%
Interest expense 2,056 1.9% 0 2,056 1.9% 2,284 2.3% -10.0%
Interest income (77) -0.1% 0 (77) -0.1% (6) 0.0% 1183.3%
Other expense (income), net 1,067 1.0% 0 1,067 1.0% 1,209 1.2% -11.7%
----------------- ---------------- --------------------------- ---------------- --------- -------
Income (loss) before
income taxes (3,329) -3.1% (9,684) 6,355 5.9% 2,114 2.1% 200.6%
Income taxes (1) (1,744) 52.4% (3,905) 2,161 34.0% (4) 700 33.1% 208.8%
----------------- ---------------- --------------------------- ---------------- --------- -------
Net income (loss) $ (1,585) -1.5% (5,779) 4,194 3.9% 1,414 1.4% 196.6%
================= ================ =========================== ================ ========= =======
Net income (loss) per share ($0.14) ($0.51) $0.37 $0.13
Net income (loss) per share,
assuming dilution ($0.14) ($0.51) $0.36 $0.13
Average shares outstanding 11,255 11,255 11,255 11,212
Average shares outstanding,
assuming dilution 11,255 11,255 11,564 (5) 11,276 (5)
Notes:
(1) Percent of sales column is calculated as a % of income (loss) before income
taxes.
(2) The $619,000 represents inventory write-downs incurred due to the exit of
the wet printed flock upholstery fabric business.
(3) The $9.1 million represents restructuring charges related to the exit of the
wet printed flock upholstery fabric business as follows: $1.4 million in
plant closing costs, and $7.6 million in non-cash write-downs to net
realizable value of property, plant and equipment.
(4) Pre-restructuring income tax rate is 34%
(5) Incremental shares of 309,000 for fiscal 2002 and 64,000 for fiscal 2001
included in fully diluted calculation
(6) $1.1 million of Culp Decorative Fabrics (CDF) and Culp Yarn (CYN)
restructuring related charges are excluded from the cost of sales total;
and, $3.1 million in CDF and CYN restructuring charges are excluded to
arrive at the proforma amounts.
CULP, INC.
PROFORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE TWELVE MONTHS ENDED APRIL 28,
2002 AND APRIL 29, 2001
(Amounts in Thousands, Except Per Share Data)
TWELVE MONTHS ENDED
-------------------------------------------------------------------------------
April 28, April 29,
As Reported 2002 2001
April 28, % of Reclassification Proforma Net % of Proforma Net % of % Over
2002 Net Sales & Adjustments of Restructuring Net Sales of Restructuring Net Sales (Under)
----------------- ---------------- --------------------------- ---------------- --------- -------
Net sales $ 381,878 100.0% 381,878 100.0% 409,810 100.0% -6.8%
Cost of sales 319,021 83.5% (1,825) (2) 317,196 83.1% 352,018 85.9% (6) -9.9%
----------------- ---------------- --------------------------- ---------------- --------- -------
Gross profit 62,857 16.5% (1,825) 64,682 16.9% 57,792 14.1% 11.9%
Selling, general and
administrative expenses 48,059 12.6% (4,172) 43,887 11.5% 50,057 12.2% -12.3%
Bad debt expense 4,172 4,172 1.3% 309 0.1% 1250.2%
Restructuring expense 10,368 2.7% (10,368) (3) 0 0.0% 0 0.0% (6) 0.0%
----------------- ---------------- --------------------------- ---------------- --------- -------
Income (loss) from
operations 4,430 1.2% (12,193) 16,623 4.4% 7,426 1.8% 123.8%
Interest expense 7,907 2.1% 0 7,907 2.1% 9,114 2.2% -13.2%
Interest income (176) 0.0% 0 (176) 0.0% (46) 0.0% 282.6%
Other expense (income), net 2,839 0.7% 0 2,839 0.7% 3,336 0.8% -14.9%
----------------- ---------------- --------------------------- ---------------- --------- -------
Income (loss) before
income taxes (6,140) -1.6% (12,193) 6,053 1.6% (4,978) -1.2% -221.6%
Income taxes (1) (2,700) 44.0% (4,758) 2,058 34.0% (4) (1,643) 33.0% -225.3%
----------------- ---------------- --------------------------- ---------------- --------- -------
Net income (loss) $ (3,440) -0.9% (7,435) 3,995 1.0% (3,335) -0.8% -219.8%
================= ================ =========================== ================ ========= =======
Net income (loss) per share ($0.31) ($0.66) $0.36 ($0.30)
Net income (loss) per share,
assuming dilution ($0.31) ($0.66) $0.35 ($0.30)
Average shares outstanding 11,230 11,230 11,230 11,210
Average shares outstanding,
assuming dilution 11,230 11,230 11,457 (5) 11,210
Notes:
(1) Percent of sales column is calculated as a % of income (loss) before income
taxes.
(2) The $1.8 million in restructuring related charges are as follows: $1.2
million in CDF and CYN charges; and $619,000 in wet printed flock charges.
(3) The $10.4 million in restructuring charges are as follows: $1.3 million,
relating to CDF and CYN; and $9.1 million relating to wet printed flock
business.
(4) Pre-restructuring income tax rate is 34%
(5) Incremental shares of 227,000 included in fully diluted calculation
(6) $1.8 million of CDF and CYN restructuring related charges are excluded from
the cost of sales total; and $5.6 million in CDF and CYN restructuring
charges are excluded to arrive at the proforma amounts.
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and twelve month periods ended April 28, 2002 and April 29, 2001
INCOME STATEMENT COMMENTS
GENERAL - For the fourth quarter, net sales increased 7.2% to 108.4
million; and the company reported net income, excluding restructuring and
related charges, of $4.2 million, or $0.36 per share diluted, versus net income
of $1.4 million, or $0.13 per share diluted, in the fourth quarter of fiscal
2001, also excluding restructuring and related charges. For fiscal 2002, net
sales decreased 6.8% to $381.9 million; and the company reported net income of
$4.0 million, or $0.35 per share diluted, excluding restructuring and related
charges, versus a net loss of $3.3 million, or $0.30 per share diluted, a year
ago, also excluding restructuring and related charges. As described below in
"SG&A EXPENSES," a significant factor affecting the fourth quarter and the
entire 2002 fiscal year was bad debt expense of $1.2 million and $4.2 million,
respectively ($0.07 and $0.25 per share, respectively, on an after-tax basis).
This compares with bad debt expense of $121,000 and $309,000 for the fourth
quarter and fiscal year of 2001, respectively. After restructuring and related
charges, the company reported a net loss for the fourth quarter of 2002 of $1.6
million, or $0.14 per share diluted, versus a net loss of $1.4 million, or $0.13
per share diluted, for the fourth quarter of 2001. After restructuring and
related charges, the company reported a net loss of $3.4 million, or $0.31 per
share diluted, for 2002, and a net loss of $8.3 million, or $0.74 per share
diluted, for 2001.
PROFORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS) -- The company has
included, within this financial information release, proforma income statements
for the fourth quarter and fiscal year of 2002 which reconcile the reported
income statements for those periods with proforma results excluding the effects
of the restructuring and related charges incurred by the company during fiscal
2002. Additionally, the proforma results for 2002 are compared with the proforma
results of the fourth quarter and fiscal year 2001, excluding restructuring and
related charges. (See PROFORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS) on pages
7 and 8 of this financial information release.)
The company's long-term, 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 most major categories
except leather;
Diverse Customer Base - maintaining a diverse customer base. The company
has long-standing relationships with the major residential furniture and
bedding manufacturers. Ownership of resources in the home furnishings
industry is becoming increasingly concentrated, and the company has
successfully been able to capitalize on its size and product breadth to
supply more of the needs of existing customers.
Design Innovation - supplying fabrics that are fashionable and match
current consumer preferences. The company's principal design resources are
consolidated in a single facility that has advanced computer-assisted
design systems and promotes sharing of innovative designs across product
lines. Culp encourages active customer involvement in the entire design
process; and
Vertical Integration - operating as a vertically integrated manufacturer
and taking advantage of economies, quality, supply availability and
efficiencies that can be gained by producing the raw material components
that are used in the manufacture of its products.
EXIT OF WET PRINTED FLOCK PRODUCT LINE - The company previously announced
during the fourth quarter that it was evaluating strategic alternatives for the
capital invested in manufacturing and marketing wet printed flock upholstery
fabrics. Management took this action because of the significant decline in sales
and profitability of wet printed flocks in recent years, a decline related
principally to the strength of the U.S. dollar relative to foreign currencies as
well as a shift in consumer preferences to other styles of upholstery fabrics.
In April 2002 management approved a plan to exit the wet printed flock
upholstery fabric business and is actively seeking to sell the assets related to
this product line. The exit plan involved closing a printing facility and
flocking operations within the Culp Velvets/Prints division and a reduction in
related selling and administrative expenses. The company also recognized certain
inventory write-downs related to this product line. The total charge from the
exit plan and inventory write-down was $9.7 million, approximately $8.2 million
of which represented non-cash items. The company recorded the total charge in
the fourth quarter of fiscal 2002. Of this total, $9.1 million was recorded in
the line item "Restructuring expense" and $600,000 related to the inventory
write-downs was recorded in "Cost of sales." The company estimates the annual
after-tax carrying costs to maintain the facilities until the assets are sold
will be approximately $200,000, or $0.02 per share. During the fiscal year ended
April 28, 2002, sales of wet printed flocks contributed $17.1 million, or 4.5%,
of the company's total sales and resulted in an operating loss of $2.1 million.
The company estimates that the net loss on an after-tax basis would be
approximately $0.12 per share.
OTHER RESTRUCTURING ACTIONS - During fiscal 2001 and continuing into fiscal
2002, the company undertook a restructuring plan intended to lower operating
expenses, increase manufacturing utilization, raise productivity and position
the company to operate profitably on a 20% lower level of sales. The plan
involved the consolidation of certain fabric manufacturing capacity within the
Culp Decorative Fabrics (CDF) division, closing one of the company's four yarn
manufacturing plants within Culp Yarn, an extensive reduction in selling,
general and administrative expenses and a comprehensive SKU reduction initiative
related to finished goods and raw materials in CDF. Additionally, the plan
included consolidation of the CDF design effort into the company's Design Center
and the implementation of a common set of raw material components for CDF. The
company also recognized certain inventory write-downs related to the closed
facilities as part of this initiative. While the physical relocation and
movement of machinery and equipment involved in the restructuring was completed
by the end of the second quarter and the related fixed manufacturing cost
savings achieved, the company still has much improvement to make to reach
targeted productivity and variance levels in the CDF division. The total charge
from the restructuring, cost reduction and inventory write-down initiatives was
$9.9 million, about $3.6 million of which represented non-cash items. The
company recognized $7.4 million of restructuring and related charges during
fiscal 2001, and $2.5 million in the first nine months of fiscal 2002.
Restructuring and related charges for fiscal 2002 were recorded as $1.3 million
in the line item "Restructuring expense" and $1.2 million in "Cost of sales."
The costs reflected in "Cost of sales" are principally related to the relocation
of manufacturing equipment. Due to the restructuring plan, the company has now
realized annualized reductions of at least $14 million in fixed manufacturing
costs and SG&A expenses. Management believes the company now has a sound
footprint of efficient, world-class facilities utilizing state-of-the-art
equipment that position Culp well to meet the demands by manufacturers for
shorter lead times, reliable delivery schedules and appealing designs.
NET SALES - Compared with the year-earlier period, the company's net sales
increased 7.2% for the fourth quarter of fiscal 2002. This sales performance
represents the first quarterly sales gain in over two years, since the third
quarter of fiscal 2000. For fiscal 2002 as a whole, sales were $381.9 compared
to $409.8 in fiscal 2001.
Compared with fiscal 2001, upholstery fabric sales for the fourth quarter of
fiscal 2002 increased 5.7% to $79.1 million, and decreased 9.2% to $276.9
million for fiscal 2002 (See Sales by Segment/Division on Page 5). Reflecting a
reversal of the trends in the first three quarters, domestic upholstery fabric
sales increased by 10% to $69.0 million in the fourth quarter of fiscal 2002.
For fiscal year 2002, domestic upholstery fabric sales decreased by 3.3% to
$236.6 million. The decrease related to a decline in sales to the external yarn
market ($7.3 million), where the company exited certain businesses, and to a
decline in sales to the commercial furniture market ($4.5 million). The company
believes that it is improving its market share in the U.S. residential furniture
market because of well-received fabric placements in the Culp Decorative Fabrics
and Culp Velvets/Prints divisions. International sales of upholstery fabric for
the fourth quarter of fiscal 2002 were $10.1 million, down 15.8% from $12.0
million in the same quarter of the prior year. International sales of upholstery
fabric for fiscal 2002 were $40.3 million, down 33.2% from $60.4 million in
fiscal 2001.
Compared with fiscal 2001, mattress ticking sales for the fourth quarter of
fiscal 2002 increased 11.6% to $29.3 million, and increased .1% to $104.9
million for fiscal 2002. Sales to U.S. bedding manufacturers increased 14.6% to
$25.8 million in the fourth quarter of fiscal 2002, and increased 5.0% to $91.7
million for fiscal 2002. The company believes that it is gaining market share in
the U.S. bedding market as well. International ticking sales for the fourth
quarter of fiscal 2002 were $3.6 million, down 6.1% from $3.8 million in the
same quarter of last year. International ticking sales for fiscal 2002 were
$13.2 million, down 24.5% from $17.5 million in fiscal 2001.
GROSS PROFIT - Excluding the restructuring related charges recorded in cost
of sales during 2001 and 2002, gross profit increased 45.7% for the fourth
quarter of fiscal 2002 compared with the year earlier period and increased as a
percentage of net sales to 21.8% from 16.0%. This significant improvement
reflects solid progress in gross profit dollars and margins in each of the
company's four divisions. The key factors behind these gains were: (1) a more
profitable sales mix across the divisions; (2) the benefit of the 2001
restructuring actions taken in Culp Decorative Fabrics (CDF) and Culp Yarn; and
(3) better sales volume and the related higher capacity utilization in each
division. For fiscal 2002 as a whole, gross profit, excluding restructuring
related charges, increased 11.9% compared with fiscal 2001, and increased as a
percentage of net sales to 16.9% from 14.1%. This improvement reflected strong
gross profit dollar and margin growth in the Culp Home Fashions, Culp
Velvets/Prints and Culp Yarn divisions. Offsetting these gains somewhat was a
decrease in gross profit dollars and margin in Culp Decorative Fabrics, which
occurred in the first half of fiscal 2002. The fourth quarter represented the
first year-over-year positive comparison in sales and gross profit for CDF in
nine quarters. The company is optimistic that gross profit margins in CDF can be
improved significantly over the next one to two years. In order to achieve this
margin improvement, management expects the key drivers will be (1) improving the
profitability of the current sales mix; (2) improving manufacturing performance,
in terms of productivity and inventory obsolescence; and (3) modest sales
growth.
SG&A EXPENSES - SG&A expenses were $14.2 million for the fourth quarter and
increased $3.6 million, or 34.1%, over the year earlier period. This increase
resulted primarily from bad debt expense of $1.2 million and management
incentive compensation expense of $1.8 million during the quarter. Through the
first nine months of fiscal 2002, the company had reported a net loss, after and
before restructuring charges; therefore no incentive compensation had been
earned or recorded. Without considering bad debt and incentive compensation
expense, SG&A expenses were $11.2, or 10.3% of net sales, for the fourth quarter
of fiscal 2002, compared with $10.5 million, or 10.4% of net sales, for the same
quarter of fiscal 2001. SG&A expenses were $48.1 million for fiscal 2002 as a
whole and decreased $2.3 million, or 4.6%, from fiscal 2001. The significant
factors affecting the year to year comparisons were bad debt expense of $4.2
million in fiscal 2002 versus $309,000 in fiscal 2001 and incentive compensation
expense of $1.8 million in fiscal 2002 versus $0.0 in fiscal 2001. Without
considering these factors in both years, SG&A expenses were $42.1 million, or
11.1% of net sales, for fiscal 2002, compared with $50.0 million, or 12.2% of
net sales, for fiscal 2001. This reflects a 15.8% decrease and primarily
resulted from the company's decision to reduce SG&A expenses significantly as
part of the 2001 restructuring plan.
INTEREST EXPENSE - Interest expense for the fourth quarter declined 10.0%
from $2.3 million to $2.1 million and for the fiscal year from $9.1 million to
$7.9 million due to lower borrowings outstanding and lower average interest
rates over the course of the fiscal year. Interest income increased due to the
significant build up in Cash and Cash Investments during the year.
OTHER EXPENSE (INCOME), NET - Other expense (income) for the fourth quarter
of fiscal 2002 totaled $1.1 million compared with $1.2 million in the prior
year. Goodwill amortization of $1.4 million, or $0.07 per share, is included in
Other Expense in fiscal 2002 and fiscal 2001. With the adoption of SFAS No. 142
in the first quarter of fiscal 2003, the company will no longer record goodwill
amortization.
INCOME TAXES - The effective tax rate for fiscal 2002 was 44.0% compared
with 33.0% for the year-earlier period. The higher rate resulted from the 2002
increased tax benefits related to the company's US loss, including restructuring
and related charges, and to a lower proportion of earnings from the company's
Canadian subsidiaries, as well as the recognition in 2001 of gain from
terminated life insurance contracts. The income tax rate for fiscal 2002 on
income before the restructuring and related charges was 34.0%. The company
expects the effective tax rate for fiscal 2003 to be approximately 37.0%.
EBITDA - EBITDA for the fourth quarter of fiscal 2002 increased 26.0% to
$13.1 million compared with $10.4 million for the fourth quarter of last year,
and increased 25.0% to $33.0 million for fiscal 2002 compared with $26.4 million
in fiscal 2001. EBITDA includes earnings before interest, income taxes,
depreciation, amortization, all restructuring and related charges and certain
non-cash charges, as defined by the company's credit agreement.
BALANCE SHEET COMMENTS
CASH AND CASH INVESTMENTS - Cash and cash investments as of April 28, 2002
increased to $32.0 million from $1.2 million at fiscal year end, reflecting cash
flow from operations of $42.2 million for fiscal 2002, which exceeded capital
expenditures of $4.7 million, debt repayment of $3.2 million, and reduction of
accounts payable for capital expenditures of $4.0 million. Cash and Cash
Investments increased $21.6 million during the fourth quarter due to the
significant increase in earnings, a $4.0 million income tax refund due to the
five-year net operating loss carrybacks allowable under the Job Creation and
Worker Assistance Act passed in March 2002, continued reduction in working
capital requirements, and only $1.3 million in capital expenditures and $1.6
million in debt repayments.
WORKING CAPITAL - Accounts receivable as of April 28, 2002 decreased 25.0%
from the year-earlier level, due principally to the decline in international
sales with their related longer credit terms, and an increase in the number of
customers taking the cash discount for shorter payment terms. Days sales
outstanding totaled 36 days at April 28, 2002 compared with 52 a year ago. The
aging of accounts receivable was 98.7% current and less than 30 days past due
versus 95.5% a year ago. Inventories at the close of the fourth quarter
decreased 3.5% from a year ago. Inventory turns for the fourth quarter were 5.8
versus 5.4 for the year-earlier period. Operating working capital (comprised of
accounts receivable, inventory and accounts payable) was $76.9 million at April
28, 2002, down from $90.5 million a year ago.
OTHER CURRENT ASSETS - Other current assets increased 70.7% to $13.4
million, primarily as a result of an increase in refundable income taxes of $1.7
million and the reclassification, totaling $4.2 million, of deferred tax assets
related to net operating loss carryforwards from non-current to current based on
expected fiscal 2003 utilization.
PROPERTY, PLANT AND EQUIPMENT - Capital spending for fiscal 2002 was $4.7
million, compared with $8.1 million in the year-earlier period. Depreciation for
fiscal 2002 totaled $17.3 million. The company is estimating capital
expenditures of $8.0 million for fiscal 2003 and depreciation expense of $14 to
$15 million for the year.
GOODWILL - Goodwill at April 28, 2002 was $47.1 million. The company will
adopt SFAS No.142 during its first fiscal quarter of fiscal 2003. As a result of
this adoption, the company is expecting to record a special, non-cash goodwill
impairment charge in the range of $23 million to $27 million (on an after-tax
basis) related to the goodwill associated with its Culp Decorative Fabrics
division, which amounts to $42.2 million. This charge will be reflected
separately from income from continuing operations as a cumulative effect of an
accounting change and will be presented net of related income tax expense. There
will be no impact on the company's compliance with the covenants in its loan
agreement as a result of this change.
OTHER ASSETS - Other assets increased by $2.3 million during the fiscal
year to $4.2 million at April 28, 2002. This increase is principally related to
the recording of Assets Held For Sale in conjunction with the exiting of the wet
printed flock upholstery fabric business.
LONG-TERM DEBT - The company has reduced funded debt by $3.2 million or
2.9% from the end of the last fiscal year. Funded debt equals long-term debt
plus current maturities. Funded debt was $108.5 million at April 28, 2002,
compared with $111.7 million at the end of fiscal 2001. The company's funded
debt-to-capital ratio was 47.7% at April 28, 2002, its lowest level since July
1997. During fiscal 2001, the company amended its credit facility to include
terms that restrict the payment of cash dividends and share repurchases at this
time, limit capital expenditures, increase the interest rate on its revolving
credit facility and increase the letter of credit fees on its industrial revenue
bonds (IRBs). This amended credit facility provides for a loan commitment of $10
million, and expires on August 22, 2002. The company had no outstanding
borrowings under the facility at the end of fiscal 2002. The company was in
compliance with all convenants contained in its loan agreements as of April 28,
2002.
During February 2002, the company amended its $75 million term loan with its
lenders to revise certain financial covenants so that a goodwill impairment
charge, if any, would not inadvertently cause a loan covenant violation due only
to changes in financial accounting standards. In exchange for these covenant
changes, the company agreed to increase the interest rate paid on the term loan
by 100 basis points. Therefore, the significant goodwill impairment charge
expected to be recorded in the first quarter of fiscal 2003 will not cause any
violation of its loan covenants with its lenders.
In addition, reflecting the company's improved financial results and financial
position, the company has received a loan commitment from its principal bank
lender that provides, among other things, for (1) a two year credit facility
starting at $47 million and reducing to $27 million as certain IRB repayments
are made, (2) release of the collateral securing the facility, (3) lower
interest rates based upon a pricing matrix, and (4) improved financial
covenants. In exchange for these provisions, the company would agree, among
other things, to repay approximately $20 million of its IRB debt by October
2002, and pay a credit facility fee. The company expects to close this new
credit facility during the first quarter.