Exhibit 99(b)
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 30, 2005 AND FEBRUARY 1, 2004
(UNAUDITED)
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED
------------------------------------------------------------
Amounts Percent of Sales
----------------------- -------------------------
January 30, February 1, % Over January 30, February 1,
2005 2004 (Under) 2005 2004
----------- ----------- ---------- ------------ ------------
Net sales $ 69,060 76,561 (9.8)% 100.0 % 100.0 %
Cost of sales 66,493 62,093 7.1 % 96.3 % 81.1 %
----------- ----------- ---------- ------------ ------------
Gross profit 2,567 14,468 (82.3)% 3.7 % 18.9 %
Selling, general and
administrative expenses 8,191 10,282 (20.3)% 11.9 % 13.4 %
Restructuring expense 1,135 0 100.0 % 1.6 % 0.0 %
----------- ----------- ---------- ------------ ------------
Income (loss) from operations (6,759) 4,186 (261.5)% (9.8)% 5.5 %
Interest expense 912 1,534 (40.5)% 1.3 % 2.0 %
Interest income (42) (113) (62.8)% (0.1)% (0.1)%
Early extinguishment of debt 0 1,672 (100.0)% 0.0 % 2.2 %
Other expense 49 229 (78.6)% 0.1 % 0.3 %
----------- ----------- ---------- ------------ ------------
Income (loss) before income taxes (7,678) 864 (988.7)% (11.1)% 1.1 %
Income taxes* (2,801) 112 (2,600.9)% 36.5 % 13.0 %
----------- ----------- ---------- ------------ ------------
Net income (loss) $ (4,877) 752 (748.5)% (7.1)% 1.0 %
=========== =========== ========== ============ ============
Net income (loss) per share-basic ($0.42) $0.07 (700.0)%
Net income (loss) per share-diluted ($0.42) $0.06 (800.0)%
Net income (loss) per share, diluted, excluding
restructuring and related charges and early
extinguishment of debt ($0.13) $0.16 (181.3)%
(see pro-forma statement on page 7)
Average shares outstanding-basic 11,550 11,529 0.2 %
Average shares outstanding-diluted 11,550 11,859 (2.6)%
NINE MONTHS ENDED
-----------------------------------------------------------
Amounts Percent of Sales
----------------------- -------------------------
January 30, February 1 % Over January 30, February 1,
2005 2004 (Under) 2005 2004
----------- ----------- ---------- ------------ ------------
Net sales $ 212,315 232,968 (8.9)% 100.0 % 100.0 %
Cost of sales 191,506 190,283 0.6 % 90.2 % 81.7 %
----------- ----------- ---------- ------------ ------------
Gross profit 20,809 42,685 (51.2)% 9.8 % 18.3 %
Selling, general and
administrative expenses 26,309 31,089 (15.4)% 12.4 % 13.3 %
Goodwill impairment 5,126 0 100.0 % 2.4 % 0.0 %
Restructuring expense 2,289 0 100.0 % 1.1 % 0.0 %
----------- ----------- ---------- ------------ ------------
Income (loss) from operations (12,915) 11,596 (211.4)% (6.1)% 5.0 %
Interest expense 2,789 4,540 (38.6)% 1.3 % 1.9 %
Interest income (98) (356) (72.5)% (0.0)% (0.2)%
Early extinguishment of debt 0 1,672 (100.0)% 0.0 % 0.7 %
Other expense 436 536 (18.7)% 0.2 % 0.2 %
----------- ----------- ---------- ------------ ------------
Income (loss) before income taxes (16,042) 5,204 (408.3)% (7.6)% 2.2 %
Income taxes* (5,920) 1,717 (444.8)% 36.9 % 33.0 %
----------- ----------- ---------- ------------ ------------
Net income (loss) $ (10,122) 3,487 (390.3)% (4.8)% 1.5 %
=========== =========== ========== =========== ============
Net income (loss) per share-basic ($0.88) $0.30 (393.3)%
Net income (loss) per share-diluted ($0.88) $0.30 (393.3)%
Net income (loss) per share, diluted, excluding restructuring
and related charges, goodwill impairment, and
early extinguishment of debt (see pro-forma statement on
page 8) ($0.18) $0.39 (146.2)%
Average shares outstanding-basic 11,549 11,522 0.2 %
Average shares outstanding-diluted 11,549 11,764 (1.8)%
* Percent of sales column for income taxes is calculated as a % of income (loss) before income taxes.
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
JANUARY 30, 2005, FEBRUARY 1, 2004 AND MAY 2, 2004
Unaudited
(Amounts in Thousands)
Amounts Increase
------------------------ (Decrease)
January 30, February 1, ------------------- * May 2,
2005 2004 Dollars Percent 2004
----------- ----------- ---------- -------- ---------
Current assets
Cash and cash equivalents $ 13,020 8,932 4,088 45.8 % 14,568
Accounts receivable 26,681 28,282 (1,601) (5.7)% 30,719
Inventories 46,649 52,000 (5,351) (10.3)% 49,045
Deferred income taxes 4,910 12,303 (7,393) (60.1)% 9,256
Other current assets 1,088 2,610 (1,522) (58.3)% 1,634
----------- ----------- ---------- -------- ---------
Total current assets 92,348 104,127 (11,779) (11.3)% 105,222
Property, plant & equipment, net 71,024 78,909 (7,885) (10.0)% 77,770
Goodwill 4,114 9,240 (5,126) (55.5)% 9,240
Deferred income taxes 7,115 0 7,115 100.0 % 0
Other assets 1,330 1,577 (247) (15.7)% 1,496
----------- ----------- ---------- -------- ---------
Total assets $ 175,931 193,853 (17,922) (9.2)% 193,728
=========== =========== ========== ======== =========
Current
liabilities
Current maturities of long-term debt $ 584 544 40 7.4 % 528
Accounts payable 15,580 17,790 (2,210) (12.4)% 15,323
Accrued expenses 9,568 12,901 (3,333) (25.8)% 13,028
Accrued restructuring 5,093 6,353 (1,260) (19.8)% 4,968
Income taxes payable 1,690 2,428 (738) (30.4)% 1,850
----------- ----------- ---------- -------- ---------
Total current liabilities 32,515 40,016 (7,501) (18.7)% 35,697
Long-term debt , less current maturities 49,975 50,519 (544) (1.1)% 50,502
Deferred income taxes 0 3,851 (3,851) (100.0)% 4,138
----------- ----------- ---------- -------- ---------
Total liabilities 82,490 94,386 (11,896) (12.6)% 90,337
Shareholders' equity 93,441 99,467 (6,026) (6.1)% 103,391
----------- ----------- ---------- -------- ---------
Total liabilities and
shareholders' equity $ 175,931 193,853 (17,922) (9.2)% 193,728
=========== =========== ========== ======== =========
Shares outstanding 11,550 11,529 21 0.2 % 11,547
=========== =========== ========== ======== =========
* Derived from audited financial statements
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 30, 2005 AND FEBRUARY 1, 2004
Unaudited
(Amounts in Thousands)
NINE MONTHS ENDED
----------------------------
Amounts
-----------------------------
January 30, February 1,
2005 2004
-------------- -------------
Cash flows from operating activities:
Net income (loss) $ (10,122) 3,487
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 14,505 10,294
Amortization of other assets 100 136
Stock-based compensation 157 157
Goodwill impairment 5,126 0
Deferred income taxes (6,907) 0
Restructuring expense 2,289 0
Changes in assets and liabilities:
Accounts receivable 4,038 3,977
Inventories 2,396 (2,448)
Other current assets 546 594
Other assets 120 522
Accounts payable 1,659 544
Accrued expenses (3,460) (1,170)
Accrued restructuring (1,733) (1,390)
Income taxes payable (160) 2,079
-------------- -------------
Net cash provided by operating activities 8,554 16,782
-------------- -------------
Cash flows from investing activities:
Capital expenditures (8,216) (4,097)
Purchases of short-term investments 0 10,043
-------------- -------------
Net cash (used in) provided by investing
activities (8,216) 5,946
-------------- -------------
Cash flows from financing activities:
Payments on vendor-financed capital expenditures (1,430) (2,772)
Payments on long-term debt (471) (25,437)
Proceeds from common stock issued 15 58
-------------- -------------
Net cash used in financing activities (1,886) (28,151)
-------------- -------------
Decrease in cash and cash equivalents (1,548) (5,423)
Cash and cash equivalents at beginning of period 14,568 14,355
-------------- -------------
Cash and cash equivalents at end of period $ 13,020 8,932
============== =============
Free Cash Flow (1) $ (1,092) 9,913
============== =============
- --------------------------------------------------------------------------------------------------------------
(1) Free Cash Flow reconciliation is as follows: 3rd Qtr 3rd Qtr
FY 2005 FY 2004
-----------------------------
A) Net cash provided by operating activities 8,554 16,782
B) Minus: Capital Expenditures (8,216) (4,097)
C) Minus: Payments on vendor-financed capital expenditures (1,430) (2,772)
-------------- -------------
(1,092) 9,913
============== =============
- --------------------------------------------------------------------------------------------------------------
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL ANALYSIS
January 30, 2005
FISCAL 04 FISCAL 05
------------- ---------------------------------------------------------
Q3 Q1 Q2 Q3 Q4
------------- ---------------------------------------------------------
INVENTORIES
Inventory turns 4.7 4.7 5.2 5.6
RECEIVABLES
Days sales in receivables 31 30 32 32
WORKING
CAPITAL
Current ratio 2.6 3.1 3.0 2.8
Operating working capital turnover (1) 5.3 5.1 4.9 4.9
Operating working capital (1) $62,492 $61,468 $59,926 $57,750
PROPERTY, PLANT & EQUIPMENT
Depreciation rate 6.2% 6.1% 6.1%(4) 6.0% (4)
Percent property, plant &
equipment are depreciated 64.0% 64.2% 64.9%(4) 65.0% (4)
Capital expenditures $6,747 (2) $4,543 $1,008 $2,660
LEVERAGE
Total
liabilities/equity 94.9% 84.2% 85.3% 88.3%
Long-term debt/equity 51.3% 49.9% 52.1% 54.1%
Long-term debt/capital employed (3) 33.9% 33.3% 34.1% 35.1%
Long-term debt $51,063 $51,064 $51,163 $50,559
OTHER
Book value per share $8.63 $8.87 $8.51 $8.09
Employees at quarter end 2,350 2,235 2,165 2,091
Sales per employee (annualized) $129,682 $119,190 $137,102 $129,812
Capital employed (3) $150,530 $153,462 $149,428 $144,000
(1) Working capital for this calculation is accounts receivable, inventories and accounts payable.
(2) Expenditures for entire year.
(3) Capital employed represents long-term debt plus stockholders equity; Long-term debt is long-term debt plus
current maturities of long-term debt.
(4) Property, plant & equipment ratios are calculated excluding accelerated depreciation of approximately $4.3
million and $215,000 in the 3rd and 2nd quarters, respectively.
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES, GROSS PROFIT AND OPERATING INCOME (LOSS) BY SEGMENT/DIVISION
FOR THE THREE MONTHS ENDED JANUARY 30, 2005 AND FEBRUARY 1, 2004
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- -------------------------------
January 30, February 1, % Over January 30, February 1,
Net Sales by Segment 2005 2004 (Under) 2005 2004
- ------------------------------------ ------------ ----------- --------- --------------- ---------------
Mattress Fabrics
Culp Home Fashions $ 25,576 25,114 1.8 % 37.0 % 32.8 %
------------ ----------- --------- --------------- ---------------
Upholstery Fabrics
Culp Decorative Fabrics 25,051 29,678 (15.6)% 36.3 % 38.8 %
Culp Velvets/Prints 18,433 21,769 (15.3)% 26.7 % 28.4 %
------------ ----------- --------- --------------- ---------------
43,484 51,447 (15.5)% 63.0 % 67.2 %
------------ ----------- --------- --------------- ---------------
Net Sales $ 69,060 76,561 (9.8)% 100.0 % 100.0 %
============ =========== ========= =============== ===============
Gross Profit by Segment Gross Profit Margin
- ------------------------------------ -------------------------------
Mattress Fabrics $ 3,478 5,093 (31.7)% 13.6 % 20.3 %
Upholstery Fabrics 3,391 9,375 (63.8)% 7.8 % 18.2 %
Restructuring related charges (1) (4,302) 0 100.0 % (6.2)% 0.0 %
------------ ----------- --------- --------------- ---------------
Gross Profit $ 2,567 14,468 (82.3)% 3.7 % 18.9 %
============ =========== ========= =============== ===============
Operating Income (loss) by Segment Operating Income (Loss) Margin
- ------------------------------------ -------------------------------
Mattress Fabrics $ 1,589 3,039 (47.7)% 6.2 % 12.1 %
Upholstery Fabrics (2,010) 2,260 (188.9)% (4.6)% 4.4 %
Unallocated corporate expenses (901) (1,113) (19.0)% (1.3)% (1.5)%
Goodwill impairment 0 0 (100.0)% 0.0 % 0.0 %
Restructuring and related charges
and credits (1) (5,437) 0 (100.0)% (7.9)% 0.0 %
------------ ----------- --------- --------------- ---------------
Operating income (loss) $ (6,759) 4,186 (261.5)% (9.8)% 5.5 %
============ =========== ========= =============== ===============
Depreciation by Segment
- ------------------------------------
Mattress Fabrics $ 912 (2) 937 (2.7)%
Upholstery Fabrics 2,330 (2) 2,475 (5.9)%
------------ ----------- ---------
Total Depreciation $ 3,242 3,412 (5.0)%
============ =========== =========
(1) The $4.3 million represents restructuring related charges for accelerated depreciation. The $5.4
million represents accelerated depreciation, asset movement costs, and fixed asset write downs.
(2) Excludes accelerated depreciation of approximately $4.3 million associated with plant and equipment
scheduled to be disposed of over the next three months.
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES, GROSS PROFIT AND OPERATING INCOME (LOSS) BY SEGMENT/DIVISION
FOR THE NINE MONTHS ENDED JANUARY 30, 2005 AND FEBRUARY 1, 2004
(Amounts in thousands)
NINE MONTHS ENDED (UNAUDITED)
------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- -----------------------------------
January 30, February 1, % Over January 30, February 1,
Net Sales by Segment 2005 2004 (Under) 2005 2004
- ------------------------------------ ----------- ----------- --------- ---------------- ------------------
Mattress Fabrics
Culp Home Fashions $ 78,414 79,122 (0.9)% 36.9 % 34.0 %
----------- ----------- --------- ---------------- ------------------
Upholstery Fabrics
Culp Decorative Fabrics 76,249 91,753 (16.9)% 35.9 % 39.4 %
Culp Velvets/Prints 57,652 62,093 (7.2)% 27.2 % 26.7 %
----------- ----------- --------- ---------------- ------------------
133,901 153,846 (13.0)% 63.1 % 66.0 %
----------- ----------- --------- ---------------- ------------------
Net Sales $ 212,315 232,968 (8.9)% 100.0 % 100.0 %
=========== =========== ========= ================ ==================
Gross Profit by Segment Gross Profit Margin
- ------------------------------------ -----------------------------------
Mattress Fabrics $ 12,735 17,494 (27.2)% 16.2 % 22.1 %
Upholstery Fabrics 13,575 25,191 (46.1)% 10.1 % 16.4 %
Restructuring related charges (1) (5,501) 0 100.0 % (2.6)% 0.0 %
----------- ----------- --------- ---------------- ------------------
Gross Profit $ 20,809 42,685 (51.2)% 9.8 % 18.3 %
=========== =========== ========= ================ ==================
Operating Income (loss) by Segment Operating Income (Loss) Margin
- ------------------------------------ -----------------------------------
Mattress Fabrics $ 7,166 11,430 (37.3)% 9.1 % 14.4 %
Upholstery Fabrics (4,417) 3,993 (210.6)% (3.3)% 2.6 %
Unallocated corporate expenses (2,748) (3,827) (28.2)% (1.3)% (1.6)%
Goodwill impairment (5,126) 0 (100.0)% (2.4)% 0.0 %
Restructuring and related charges
and credits (1) (7,790) 0 (100.0)% (3.7)% 0.0 %
----------- ----------- --------- ---------------- ------------------
Operating income (loss) $ (12,915) 11,596 (211.4)% (6.1)% 5.0 %
=========== =========== ========= ================ ==================
Depreciation by Segment
- ------------------------------------
Mattress Fabrics $ 2,743 (2) 2,823 (2.8)%
Upholstery Fabrics 7,184 (2) 7,471 (3.8)%
----------- ----------- ---------
Total Depreciation $ 9,927 10,294 (3.6)%
=========== =========== =========
(1) The $5.5 million represents restructuring related charges for inventory markdowns and accelerated
depreciation. The $7.8 million represents the $5.5 million restructuring related charges plus $2.3
million in restructuring charges for fixed asset write-downs, accrued termination benefits and asset
movement costs.
(2) Excludes accelerated depreciation of approximately $4.5 million associated with plant and equipment
scheduled to be disposed of over the next three months.
CULP, INC.
PROFORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED JANUARY 30, 2005 AND FEBRUARY 1, 2004
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED
- ------------------------------------------------------------------------------------------------------------------------
As Reported January 30, 2005
January 30, % of % of Proforma Net % of
2005 Sales Adjustments Sales of Adjustments Sales
-------------------- ------------------ ---------------------------
Net sales $ 69,060 100.0% 0 69,060 100.0%
Cost of sales 66,493 96.3% (4,302) -6.2% (1) 62,191 90.1%
-------------------- ------------------ ---------------------------
Gross profit 2,567 3.7% (4,302) -6.2% 6,869 9.9%
Selling, general and
administrative expenses 8,191 11.9% 0 0.0% 8,191 11.9%
Goodwill impairment 0 0.0% 0 0.0% 0 0.0%
Restructuring expense 1,135 1.6% (1,135) -1.6% (2) 0 0.0%
-------------------- ------------------ ---------------------------
Income (loss) from operations (6,759) -9.8% (5,437) -7.9% (1,322) -1.9%
Interest expense 912 1.3% 0 0.0% 912 1.3%
Interest income (42) -0.1% 0 0.0% (42) -0.1%
Early extinguishment of debt 0 0.0% 0 0.0% 0 0.0%
Other expense 49 0.1% 0 0.0% 49 0.1%
-------------------- ------------------ ---------------------------
Income (loss) before income taxes (7,678) -11.1% (5,437) -7.9% (2,241) -3.2%
Income taxes (2,801) 36.5% (2,050) 37.7% (3) (751) 33.5%
-------------------- ------------------ ---------------------------
Net income (loss) $ (4,877) -7.1% (3,387) -4.9% (1,490) -2.2%
==================== ================== ===========================
Net income (loss) per share-basic ($0.42) ($0.29) ($0.13)
Net income (loss) per share-diluted ($0.42) ($0.29) ($0.13)
Average shares outstanding-basic 11,550 11,550 11,550
Average shares outstanding-diluted 11,550 11,550 11,550
Notes:
As Reported February 1, 2004 Proforma
February 1, % of % of Proforma Net % of % Over
2004 Sales Adjustments Sales of Adjustments Sales (Under)
---------------------- ------------------- ----------------------- ---------
Net sales 76,561 100.0% 0 76,561 100.0% -9.8%
Cost of sales 62,093 81.1% 0 0.0% 62,093 81.1% 0.2%
---------------------- ------------------- ----------------------- ---------
Gross profit 14,468 18.9% 0 0.0% 14,468 18.9% -52.5%
Selling, general and
administrative expenses 10,282 13.4% 0 0.0% 10,282 13.4% -20.3%
Goodwill impairment 0 0.0% 0 0.0% 0 0.0% 0.0%
Restructuring expense 0 0.0% 0 0.0% 0 0.0% 0.0%
---------------------- ------------------- ----------------------- ---------
Income (loss) from operations 4,186 5.5% 0 0.0% 4,186 5.5% -131.6%
Interest expense 1,534 2.0% 0 0.0% 1,534 2.0% -40.5%
Interest income (113) -0.1% 0 0.0% (113) -0.1% -62.8%
Early extinguishment of debt 1,672 2.7% (1,672) 0.0%(4) 0 0.0% 0.0%
Other expense 229 0.3% 0 0.0% 229 0.3% -78.6%
---------------------- ------------------- ----------------------- ---------
Income (loss) before income taxes 864 1.1% 1,672 2.2% 2,536 3.3% -188.4%
Income taxes 112 13.0% 552 0.0% 664 26.2% -213.2%
---------------------- ------------------- ----------------------- ---------
Net income (loss) 752 1.0% 1,120 1.5% 1,872 2.4% -179.6%
====================== =================== ======================= =========
Net income (loss) per share-basic $0.07 $0.10 $0.16
Net income (loss) per share-diluted $0.06 $0.10 $0.16
Average shares outstanding-basic 11,529 11,529 11,529
Average shares outstanding-diluted 11,859 11,529 11,859
Notes:
(1) The $4.3 million represents restructuring related charges for accelerated depreciation.
(2) The $1.1 restructuring charges represent asset movement costs.
(3) The percent of net sales column for income taxes is calculated as a % of income (loss) before income taxes.
(4) Premium and fees paid to reduce private placement loan balance.
CULP, INC.
PROFORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE NINE MONTHS ENDED JANUARY 30, 2005 AND FEBRUARY 1, 2004
(Amounts in Thousands, Except for Per Share Data)
NINE MONTHS ENDED
- ------------------------------------------------------------------------------------------------------------------------
As Reported January 30, 2005
January 30, % of % of Proforma Net % of
2005 Sales Adjustments Sales of Adjustments Sales
-------------------- ------------------ ---------------------------
Net sales $ 212,315 100.0% 0 212,315 100.0%
Cost of sales 191,506 90.2% (5,501) -2.6% (1) 186,005 87.6%
-------------------- ------------------ ---------------------------
Gross profit 20,809 9.8% (5,501) -2.6% 26,310 12.4%
Selling, general and
administrative expenses 26,309 12.4% 0 0.0% 26,309 12.4%
Goodwill impairment 5,126 2.4% (5,126) 0.0% (2) 0 0.0%
Restructuring expense 2,289 1.1% (2,289) -1.1% (3) 0 0.0%
-------------------- ------------------ ---------------------------
Income (loss) from operations (12,915) -6.1% (12,916) -6.1% 1 0.0%
Interest expense 2,789 1.3% 0 0.0% 2,789 1.3%
Interest income (98) (0.0) 0 0.0% (98) (0.0)
Early extinguishment of debt 0 0.0% 0 0.0% 0 0.0%
Other expense 436 0.2% 0 0.0% 436 0.2%
-------------------- ------------------ ---------------------------
Income (loss) before income taxes (16,042) -7.6% (12,916) -6.1% (3,126) -1.5%
Income taxes (5,920) 36.9% (4,873) 37.7% (4) (1,047) 33.5%
-------------------- ------------------ ---------------------------
Net income (loss) $ (10,122) -4.8% (8,043) -3.8% (2,079) -1.0%
==================== ================== ===========================
Net income (loss) per share-basic ($0.88) ($0.70) ($0.18)
Net income (loss) per share-diluted ($0.88) ($0.70) ($0.18)
Average shares outstanding-basic 11,549 11,549 11,549
Average shares outstanding-diluted 11,549 11,549 11,549
As Reported February 1, 2004 Proforma
February 1, % of % of Proforma Net % of % Over
2004 Sales Adjustments Sales of Adjustments Sales (Under)
-------------------- ------------------ -------------------------- ----------
Net sales 232,968 100.0% 0 232,968 100.0% -8.9%
Cost of sales 190,283 81.7% 0 0.0% 190,283 81.7% -2.2%
-------------------- ------------------ -------------------------- ----------
Gross profit 42,685 18.3% 0 0.0% 42,685 18.3% -38.4%
Selling, general and
administrative expenses 31,089 13.3% 0 0.0% 31,089 13.3% -15.4%
Goodwill impairment 0 0.0% 0 0.0% 0 0.0% 0.0%
Restructuring expense 0 0.0% 0 0.0% 0 0.0% 0.0%
-------------------- ------------------ -------------------------- ----------
Income (loss) from operations 11,596 5.0% 0 0.0% 11,596 5.0% -100.0%
Interest expense 4,540 1.9% 0 0.0% 4,540 1.9% -38.6%
Interest income (356) -0.2% 0 0.0% (356) -0.2% -72.5%
Early extinguishment of debt 1,672 0.9% (1,672) 0.0% (5) 0 0.0% 0.0%
Other expense 536 0.2% 0 0.0% 536 0.2% -18.7%
-------------------- ------------------ -------------------------- ----------
Income (loss) before income taxes 5,204 2.2% 1,672 0.7% 6,876 3.0% -145.5%
Income taxes 1,717 33.0% 552 0.0% 2,269 33.0% -146.2%
-------------------- ------------------ -------------------------- ----------
Net income (loss) 3,487 1.5% 1,120 0.5% 4,607 2.0% -145.1%
==================== ================== ========================== ==========
Net income (loss) per share-basic $0.30 $0.10 $0.40
Net income (loss) per share-diluted $0.30 $0.10 $0.39
Average shares outstanding-basic 11,522 11,522 11,522
Average shares outstanding-diluted 11,764 11,522 11,764
Notes:
(1) The $5.5 million represents restructuring related charges for inventory markdowns and accelerated depreciation.
(2) The $5.1 million represents a goodwill impairment charge related to the Culp Decorative Fabrics division.
(3) The $2.3 million restructuring charge represents fixed asset write-downs, accrued termination benefits, and asset
movement costs.
(4) The percent of net sales column for income taxes is calculated as a % of income (loss) before income taxes.
(5) Premium and fees paid to reduce private placement loan balance.
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and nine months ended January 30, 2005 and February 1, 2004
OVERVIEW
- --------
GENERAL -- The financial results for the third quarter reflect continued soft
demand for domestically produced upholstery fabrics, pricing pressures for
mattress ticking and higher raw material costs. Additionally, because of the
scheduled holiday plant closings, the third quarter is typically a slow period
of the year. For the third quarter of fiscal 2005, consolidated net sales
decreased 9.8% to $69.1 million; and the company reported a net loss of $4.9
million, or $0.42 per share diluted, compared with net income of $752,000, or
$0.06 per diluted share, for the third quarter of fiscal 2004. The financial
results for the third quarter of fiscal 2005 include after-tax restructuring and
related charges of $3.4 million, or $0.29 per diluted share. Excluding these
charges, net loss for the third quarter of fiscal 2005 was $1.5 million or $0.13
per share diluted, versus net income of $1.9 million, or $0.16 per share
diluted, in the third quarter of fiscal 2004, excluding early extinguishment of
debt charges (see reconciliation on page 7). For the first nine months of fiscal
2005, net sales decreased 8.9% to $212.3 million; and the company reported a net
loss of $10.1 million, or $0.88 per share diluted, compared with net income of
$3.5 million or $0.30 per share diluted, for the same period last year.
Excluding restructuring and related charges and goodwill impairment, net loss
for the first nine months of fiscal 2005 was $2.1 million, or $0.18 per share
diluted, compared with net income of $4.6 million, or $0.39 per share diluted,
for the same period last year, excluding early extinguishment of debt charges
(see reconciliation on page 8). Year-to-date for fiscal 2005 included 39 weeks
versus 40 weeks for the same period of fiscal 2004.
RESTRUCTURING AND RELATED CHARGES -- The financial results for the third quarter
include a total of $5.4 million in restructuring and related charges. The
charges are made up of the following: (1) $1.0 million in restructuring expenses
related to the dismantling, moving and relocation of equipment to other company
facilities, (2) approximately $143,000 in write-down of equipment and (3) $4.3
million in accelerated depreciation associated with plant and equipment
scheduled to be disposed of, either by sale or by abandonment, by fiscal year
end. As reflected in the financial statements, restructuring and related
expenses were recorded as $1.1 million in the line item "restructuring expense"
and $4.3 million in "cost of sales." See below for additional comments on the
progress of the restructuring projects.
STATEMENT OF OPERATIONS COMMENTS
- --------------------------------
MATTRESS FABRICS SEGMENT (See page 5 - Sales, Gross Profit and Operating Income
(Loss) by Segment)
Net Sales - Mattress fabric (known as mattress ticking) sales were
$25.6 million compared with $25.1 million for the third quarter of fiscal 2004.
Mattress ticking yards sold during the third quarter of fiscal 2005 were 10.9
million compared with 10.0 million yards in the third quarter of last year, an
increase of 8.8%. This increase in yards sold is noteworthy because it occurred
as the bedding industry nears the completion of the transition to selling
predominantly one-sided mattresses, which utilize about one-third less mattress
ticking. The average selling price was $2.34 per yard for the third quarter,
compared to $2.50 per yard in the same quarter last year, a decrease of 6.4%.
Operating income -- For the third quarter of fiscal 2005, the mattress
fabrics segment reported operating income of $1.6 million, or 6.2% of sales,
compared with $3.0 million, or 12.1% of sales, for the prior year period.
Operating margins in this segment were affected by industry wide pricing
pressures, as well as higher raw material costs and manufacturing variances
related to the relocation of mattress ticking looms. To partially offset higher
material costs, the company is implementing a price increase of approximately
3.0 percent in this segment during the fourth quarter of this fiscal year.
As previously announced in October 2004, the company has identified
opportunities to reduce operating costs by consolidating mattress ticking
operations. This $7.0 million capital project involves relocation of ticking
looms from an upholstery fabric plant to existing mattress ticking facilities in
the U.S. and Canada and the purchase of new weaving machines that are faster and
more efficient than the equipment they will replace. This transition is well
underway and is expected to be completed as planned by August 2005. More
importantly, this transition is expected to generate $4.5 million in annual
savings.
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and nine months ended January 30, 2005 and February 1, 2004
UPHOLSTERY FABRICS SEGMENT (See page 5-Sales, Gross Profit and Operating Income
(Loss) by Segment)
Net Sales -- Upholstery fabric sales for the third quarter of fiscal
2005 decreased 15.5% to $43.5 million when compared to the third quarter of
fiscal 2004. Overall, sales of upholstery fabrics reflect continued soft demand
industry wide for U.S. produced fabrics and consumer preference for leather
furniture.
With the company's offshore sourcing efforts, including the China
platform, the company is experiencing higher sales of upholstery fabric products
produced outside of the company's U.S. manufacturing plants, which include the
popular micro-denier suedes. These sales increased 92.0% over the prior year
period and accounted for approximately $8.3 million or almost 20% of upholstery
fabric sales for the quarter. Offshore sourced fabrics of $4.3 million accounted
for approximately 8.4% of upholstery fabric sales for the same period last year.
Upholstery fabric yards sold during the third quarter were 9.5 million
versus 11.7 million in the third quarter of fiscal 2004, a decline of 19.0%.
Average selling price was $4.18 per yard for the third quarter compared with
$4.29 per yard in the same quarter of last year, a decrease of 2.6 %.
Operating income (loss) -- Operating loss for the third quarter of
fiscal 2005 was $2.0 million or 4.6% of sales, compared with operating income of
$2.3 million, or 4.4% of sales, for the same period last year. Included in the
operating loss was a favorable impact of approximately $500,000 related to a
change in the inventory aging percentages for the converted product line, which
are products sourced, primarily from Asia, by the CVP division. The change was
made in order to better reflect current market conditions and the company's
actual experiences.
The continued underutilization of U.S. capacity, higher raw material
prices and manufacturing variances related to restructuring activities affected
profit margins for the upholstery fabrics segment. The purpose of the
restructuring plan in the upholstery fabrics segment, announced in October 2004,
is to consolidate the decorative fabrics weaving and yarn operations, reduce
manufacturing complexities and lower costs, and significantly reduce selling,
general and administrative expenses. The restructuring is moving ahead as
planned and management believes that the steps taken will place the company in a
stronger position in terms of both operating efficiency and higher asset
utilization. However, management is continuing to evaluate costs and
manufacturing capacity throughout the U.S. operations and remains committed to
adjusting the domestic cost structure as necessary to keep it in line with
expected demand for U.S. produced products. Additionally, to partially offset
higher raw material prices, the company recently announced a price increase of
approximately 3.0 to 4.0 percent on most domestically produced upholstery
fabrics.
SG&A EXPENSES -- SG&A expenses of $8.2 million for the third quarter of
fiscal 2005 decreased approximately $2.1 million, or 20.3%, from the prior year
amount. As a percent of net sales, SG&A expenses decreased to 11.9% from 13.4%
the previous year, due mostly to lower incentive compensation expense and lower
sales and marketing expenses.
Unallocated Corporate Expenses - The unallocated corporate expense
category includes certain items that have not been allocated to the company's
segments (see Page 5 - Sales and Gross Profit/Operating Income (Loss) by
Segment). The major components of unallocated corporate expenses include
compensation and benefits for certain executive officers and all costs related
to being a public company. For the third quarter of fiscal 2005, unallocated
corporate expenses totaled $901,000 compared with $1.1 million for the same
period last year, reflecting a decrease in incentive compensation expense.
INTEREST EXPENSE AND INTEREST INCOME -- Interest expense for the third
quarter declined to $912,000 from $1.5 million the previous year due to lower
borrowings outstanding. Interest income decreased to $42,000 from $113,000 the
previous year due to lower invested balances in fiscal 2005.
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and nine months ended January 30, 2005 and February 1, 2004
INCOME TAXES - The effective tax rate (taxes as a percentage of pretax
income (loss)) for the first nine months of fiscal 2005 was 36.9% compared with
33.0% for the first nine months of fiscal 2004. Excluding restructuring and
related charges and goodwill impairment, the effective tax rate for the first
nine months of fiscal 2005 was 33.5%
BALANCE SHEET COMMENTS
- ----------------------
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents as of January
30, 2005 decreased to $13.0 million from $14.6 million at the end of fiscal
2004, primarily reflecting cash flow from operations of $8.6 million, capital
expenditures and payments on vendor financed capital expenditures of $9.6
million and payments on long-term debt of $471,000.
WORKING CAPITAL -- Accounts receivable as of January 30, 2005 decreased
5.7% from the year-earlier level. Days sales outstanding totaled 32 days at
January 30, 2005 compared with 31 days a year ago. Inventories at the close of
the third quarter decreased 10.3% from a year ago. Inventory turns for the third
quarter were 5.6 versus 4.7 for the year-earlier period. Operating working
capital (comprised of accounts receivable and inventories, less trade accounts
payable) was $57.8 million at January 30, 2005, down from $ 62.5 million a year
ago.
PROPERTY, PLANT AND EQUIPMENT -- Capital spending for the first nine
months of fiscal 2005 was $8.2 million, including approximately $5.5 million for
the purchase of a building that will serve as the company's new corporate
offices and as new space for the company's showrooms. The company expects the
annual operating costs of the new building to be significantly lower than the
lease and related costs associated with the current facilities. Depreciation for
the third quarter was $7.6 million, of which approximately $4.4 million was
related to accelerated depreciation associated with plant and equipment
scheduled to be disposed of by fiscal year end. As part of the fiscal 2005
restructuring plan, the company increased the capital budget by $6.1 million to
approximately $15.6 million, of which $4.9 million relates to the mattress
ticking plant consolidation.
INTANGIBLE ASSETS -- As of January 30, 2005, $4.1 million in goodwill,
which relates to the mattress fabrics segment, was the company's only intangible
asset. In the second quarter of fiscal 2005, the company's $5.1 million in
remaining goodwill associated with the upholstery fabrics segment was written
off based on an evaluation of this segment in accordance with SFAS 142,
"Goodwill and Other Intangible Assets."
LONG-TERM DEBT -- The company's long-term debt of $50.6 million is
unsecured and is comprised of $50.0 million in outstanding senior notes, with a
fixed interest rate of 7.76%, and a $584,000, non-interest bearing term loan
with the Canadian government. Additionally, the company has a $10.0 million
revolving credit line with a bank, of which no balance was outstanding at
January 30, 2005. The current bank agreement expires in August 2005. The first
scheduled principal payment on the $50.0 million senior notes is due March 2006
in the amount of $7.5 million. The Canadian government loan is repaid in annual
installments of approximately $600,000 per year. The company was in compliance
with all financial covenants in its loan agreements as of January 30, 2005.
CASH FLOW FROM OPERATIONS COMMENTS
- ----------------------------------
Cash flow from operations was $8.6 million for the first nine months of
fiscal 2005, compared with $16.8 million for the same period last year. This
decrease was due primarily to lower profitability.
BUSINESS OUTLOOK
- ----------------
Given current market conditions, management expects to see a
year-over-year decline in overall sales performance for the fourth quarter that
is slightly higher than the sales decrease in the third fiscal quarter of 9.8%.
However, management is encouraged by recent trends in the mattress ticking
business and expects mattress ticking sales will show a modest gain over fourth
quarter sales last year. Operating income margin in this segment is expected to
improve from the third quarter and approximate the margin of 10.0 percent
reported for the second quarter of this year. With respect to the upholstery
fabrics segment, while management expects continued growth in sales of fabrics
sourced outside the U.S., the outlook remains uncertain for any recovery in
demand for domestically produced upholstery fabrics. For the fourth quarter,
upholstery fabrics segment sales are expected to decrease somewhat more than the
third quarter decline of 15.5 percent. Management believes the continued
softness in demand for domestically produced upholstery fabrics and the related
underutilization of U.S. capacity, combined with raw material price increases
the company is currently experiencing, will result in an operating loss,
although smaller than that reported in the third fiscal quarter for this
segment. In light of these factors, management expects the company to report a
net loss of $0.03 to $0.08 per diluted share in the fourth fiscal quarter,
excluding previously announced restructuring and related charges, with actual
results depending primarily on the level of demand throughout the quarter.
CULP, INC. FINANCIAL INFORMATION RELEASE
FINANCIAL NARRATIVE
for the three and nine months ended January 30, 2005 and February 1, 2004
The company estimates that restructuring and related charges of
approximately $4.0 million, net of taxes, or $0.35 per diluted share, will be
incurred during the fourth fiscal quarter. Including the restructuring and
related charges, the company expects to report a net loss for the fourth fiscal
quarter of $0.38 to $0.43 per diluted share.