Exhibit 99(a)
Culp Announces Fiscal 2007 Results
HIGH POINT, N.C.--(BUSINESS WIRE)--June 19, 2007--Culp, Inc.
(NYSE: CFI) today reported financial and operating results for the
fourth quarter and fiscal year ended April 29, 2007.
Overview
For the three months ended April 29, 2007, net sales were $73.2
million compared with $70.7 million a year ago, an increase of 3.5
percent. The company reported a net loss of $40,000, or $0.00 per
diluted share, for the fourth quarter of fiscal 2007, compared with a
net loss of $1.5 million, or $0.13 per diluted share, for the fourth
quarter of fiscal 2006. The financial results for the fourth quarter
of fiscal 2007 include $1.8 million, or $0.14 per diluted share, in
restructuring and related charges, after taxes. Excluding these
charges, net income for the fourth quarter of fiscal 2007 was $1.8
million, or $0.14 per diluted share. The financial results for the
fourth quarter of fiscal 2006 included $3.2 million, or $0.27 per
diluted share, in restructuring and related charges, after taxes.
Excluding these charges, net income for the fourth quarter of fiscal
2006 was $1.7 million, or $0.14 per diluted share. Included in the
$1.7 million is an income tax benefit of $661,000, or $0.06 per share,
that reflects losses from the company's U.S. operations combined with
lower tax rates on income from foreign sources.
For the fiscal year ended April 29, 2007, the company reported net
sales of $250.5 million, compared with $261.1 million for the same
period a year ago, a decrease of 4.0 percent. Net loss for fiscal 2007
was $1.3 million, or $0.11 per diluted share, compared with a net loss
of $11.8 million, or $1.02 per diluted share, last year. Excluding
restructuring and related charges, net income for fiscal 2007 was
$3.8 million, or $0.32 per diluted share. Excluding restructuring and
related charges, net loss for fiscal 2006 was $438,000, or $0.04 per
diluted share. (A reconciliation of the net income (loss) and net
income (loss) per share has been set forth on Page 6.)
Frank Saxon, chief executive officer of Culp, Inc., said, "Our
fourth quarter performance marked a solid finish to a year of
important strategic and operational changes at Culp. These results
reflect the benefits of the aggressive steps we have taken this year
to more effectively position Culp in the global marketplace. Our
mattress fabrics business has progressed well with the addition of the
mattress fabrics product line of International Textile Group, Inc.'s
Burlington House Division ("ITG"), acquired at the end of the third
fiscal quarter. This transition has gone well and we are excited about
the significant opportunities ahead for Culp in mattress fabrics.
Although market conditions have continued to be extremely challenging
in upholstery fabrics, we have worked hard to create a sustainable
upholstery fabrics business model that will meet current customer
demand. Our China platform has significantly enhanced our competitive
position in the global marketplace. We believe we have achieved a
solid leadership position in both of our businesses and look forward
to the year ahead."
Mattress Fabrics Segment
Mattress fabrics (known as mattress ticking) sales for the fourth
quarter were $38.1 million, a 58 percent improvement compared with
$24.1 million for the fourth quarter of fiscal 2006. These results
include the additional sales related to the company's acquisition of
ITG's mattress fabrics product line completed during the third quarter
of fiscal 2007, as well as some organic growth. Mattress fabrics sales
represented 52 percent of overall sales for the fourth fiscal quarter.
On a unit volume basis, total yards sold increased by 45 percent
compared with the fourth quarter of fiscal 2006. The average selling
price of $2.45 per yard for mattress fabrics for the fourth quarter of
fiscal 2007 increased nine percent compared with the fourth quarter of
last year, reflecting a shift in product mix. Operating income for
this segment was $3.9 million, or 10.3 percent of sales, compared with
$2.0 million, or 8.4 percent of sales, for the prior-year period,
reflecting higher overall volume and full plant utilization. These
operating results also include ITG transition costs of $740,000
incurred during the fourth quarter. For fiscal 2007, mattress fabrics
sales totaled 107.8 million, an increase of 15 percent over fiscal
2006, and operating income was $10.8 million, up 57 percent from $6.9
million in the prior year.
"Our mattress fabrics business was exceptionally strong in the
fourth quarter and accounted for more than half of total company sales
for the first time in Culp's history," noted Saxon. "The acquisition
of ITG's mattress fabrics product line has enhanced our leadership
position and we have been pleased with our progress in integrating the
additional production and sales. Customer response has generally been
favorable and we believe this transaction provides the opportunity to
increase Culp's annual sales in mattress fabrics by approximately
$40 million. We were also pleased to achieve improved operating
margins in mattress fabrics even with the transition costs during the
fourth quarter. With the integration now substantially complete, we
are well positioned to solidify the gains we have achieved and
continue to build a sustained level of execution and service for our
customers."
Upholstery Fabrics Segment
Sales for this segment were $35.1 million, a 25 percent decline
compared with $46.6 million in the fourth quarter of fiscal 2006.
Total yards sold declined by 25 percent, while average selling prices
were flat compared with the fourth quarter of fiscal 2006. Sales of
upholstery fabrics reflect very weak overall industry demand as well
as continued soft demand industry wide for U.S. produced fabrics,
driven by consumer preference for leather-and suede-covered furniture
and other imported fabrics, including cut and sewn kits. Sales of U.S.
produced fabrics were $14.2 million, down 46 percent from the fourth
quarter of fiscal 2006, while sales of non-U.S. produced fabrics were
$20.9 million, up three percent over the prior year period. Operating
income for the upholstery fabrics segment for the fourth quarter of
fiscal 2007 was $863,000 compared with $1.1 million for the same
period a year ago. For fiscal 2007, sales of upholstery fabrics were
$142.7 million, a decline of 15 percent compared with fiscal 2006.
Operating income for the year was $2.3 million, reversing the previous
year's operating loss of $954,000. These results reflect higher gross
profit on non-U.S. produced fabrics, but continued low gross profit
levels related to sales of U.S. produced fabrics.
Saxon remarked, "Business conditions in the retail furniture
business have been extremely soft as a weak housing market and higher
gas prices are affecting consumer demand. Our upholstery fabrics
business mirrors the trends in the industry. With respect to our U.S.
operations, we believe we have taken the right steps to reduce our
operating costs and align our operations with current demand. As of
the end of fiscal 2007, we have only one remaining U.S. upholstery
fabrics plant in Anderson, South Carolina, which produces velvets and
a limited amount of decorative fabrics. Culp is now the only U.S.
company producing velvet fabrics for furniture manufacturers and we
believe the Anderson plant will continue to play an important role in
our upholstery fabrics business. The book value of our remaining U.S.
upholstery fabrics asset base is now $3.4 million. With our
restructuring activities substantially complete, we believe we now
have the appropriate U.S. manufacturing capacity to support current
demand.
"Our non-U.S. operations accounted for 60 percent of upholstery
fabrics sales for the fourth quarter compared with 43 percent a year
ago. However, sales of non-U.S. fabrics also are beginning to reflect
the overall softness in the furniture industry. Our China platform has
continued to grow, although at a slower rate, and we continue to
identify potential opportunities as we expand our capabilities. We
believe Culp is well positioned to meet customer demand when market
conditions improve, with our strong focus on product innovation,
quality and global logistics," added Saxon.
Balance Sheet
"One of our primary objectives for fiscal 2007 was to maintain a
strong financial position as we continued to make important strategic
changes in our operations," added Saxon. "We are pleased with the
progress we made in improving our cash position and reducing debt. At
the end of fiscal 2007, our balance sheet reflected $10.2 million in
cash and cash equivalents even as we expanded our mattress fabrics
business. Total debt was $40.8 million compared with $47.7 million at
the end of fiscal 2006. During the fourth quarter and in May, we
prepaid a total of $6.2 million in long-term debt scheduled for
payment in March 2008. Our debt to capital ratio has improved
significantly and is now 35 percent, down from 40 percent at the end
of last year. As of April 30, 2007, we also had $2.5 million in assets
held for sale, which we expect will be sold in fiscal 2008. Our
capital spending plans for fiscal year 2008 are expected to be
approximately $4.0 million and depreciation is expected to be
approximately $6.0 million."
Outlook
Commenting on the outlook for the first quarter of fiscal 2008,
Saxon said, "The current trends in our mattress fabrics segment
continue to be favorable, while business conditions remain very soft
in our upholstery fabrics segment due to weak retail furniture demand
and sharply lower demand for U.S. produced fabrics. Overall, we expect
our first quarter sales to be about the same as the first quarter of
last year. We expect sales in our mattress fabrics segment to be up 55
to 60 percent for the first quarter, reflecting the incremental ITG
sales and some organic growth. Operating income in this segment is
also expected to improve substantially compared with the prior year
period due to higher sales volume, full production schedules and the
completion of the integration of the ITG business.
"In our upholstery fabrics segment, we expect sales to be down
approximately 30 to 35 percent for the first quarter, with a modest
decline in sales of non-US produced fabrics and sharply lower sales of
U.S. produced fabrics. We believe the upholstery fabric segment's
operating results will reflect a small operating loss due to lower
sales and continued low gross profit margins in U.S. produced fabrics.
However, we are expecting continued solid gross profit margins in our
non-U.S. produced business and lower selling, general and
administrative expenses on a sequential basis for this segment, as we
have recently taken additional cost reduction actions in this area.
"Considering these factors, we expect the company to report net
income in the first quarter in the range of $0.08 to $0.12 per diluted
share, excluding restructuring and related charges for previously
announced restructuring initiatives. This is management's best
estimate at present, recognizing that future financial results are
difficult to predict because the upholstery fabrics industry is
undergoing a dramatic transition and many internal changes are still
underway within the company. The actual results will depend primarily
upon the level of demand throughout the quarter and the company's
progress with respect to restructuring activities," said Saxon.
The company estimates that restructuring and related charges for
previously announced restructuring initiatives of approximately
$500,000 ($375,000 net of taxes, or $0.03 per diluted share) will be
incurred during the first fiscal quarter. Including these
restructuring and related charges, the company expects to report
results for the first fiscal quarter in the range of net income of
$0.05 to $0.09 per diluted share. (A reconciliation of the projected
net income per share calculation has been set forth on Page 6.)
In closing, Saxon added, "We look forward to the opportunities
ahead for Culp in fiscal 2008. We believe we made considerable
progress over the past year in moving the company forward in both
business segments. With the addition of the ITG business we have
achieved a strong competitive position in mattress fabrics and this
business segment will be the key driver of Culp's growth for fiscal
2008. We have developed a growing global platform in our upholstery
fabrics business and will continue to enhance our capabilities in
China. With the aggressive strategic steps we have taken in our U.S.
upholstery fabric business, we have created a model to keep our
domestic capacity appropriately sized for the current business
environment. We are now focused on our position as the sole U.S.
manufacturer of velvet upholstery fabrics. As we begin fiscal 2008, we
are confident that Culp can approach both the opportunities and
challenges in today's global marketplace from a stronger position.
"Over the past several years, Culp has undergone a difficult and
challenging transformation in response to fundamental changes in the
marketplace. These changes were possible in large part due to the
dedicated and diligent efforts of our associates who have been
remarkably loyal and understanding during these challenging times.
With their commitment, we have taken the actions necessary to ensure
Culp's position as a key participant in today's global marketplace,"
said Saxon.
About the Company
Culp, Inc. is one of the world's largest marketers of mattress
fabrics for bedding and upholstery fabrics for furniture. The
company's fabrics are used principally in the production of bedding
products and residential and commercial upholstered furniture.
This release contains statements that may be deemed
"forward-looking statements" within the meaning of the federal
securities laws, including the Private Securities Litigation Reform
Act of 1995 (Section 27A of the Securities Act of 1933 and Section 27A
of the Securities and Exchange Act of 1934). Such statements are
inherently subject to risks and uncertainties. Further,
forward-looking statements are intended to speak only as of the date
on which they are made. Forward-looking statements are statements that
include projections, expectations or beliefs about future events or
results or otherwise are not statements of historical fact. Such
statements are often but not always characterized by qualifying words
such as "expect," "believe," "estimate," "plan" and "project" and
their derivatives, and include but are not limited to statements about
the company's future operations, production levels, sales, SG&A or
other expenses, margins, gross profit, operating income, earnings or
other performance measures. 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. Changes in consumer
tastes or preferences toward products not produced or marketed by the
company could erode demand for the company's products. The company's
level of success in integrating its recent acquisition and in
capturing and retaining sales to customers related to the acquisition
will affect the company's ability to meet its sales and profit goals.
In addition, strengthening of the U.S. dollar against other currencies
could make the company's products less competitive on the basis of
price in markets outside the United States. Also, economic and
political instability in international areas could affect the
company's operations or sources of goods in those areas, as well as
demand for the company's products in international markets. Finally,
unanticipated delays or costs in executing restructuring actions could
cause the cumulative effect of restructuring actions to fail to meet
the objectives set forth by management. Other factors that could
affect the matters discussed in forward-looking statements are
included in the company's periodic reports filed with the Securities
and Exchange Commission, including the "Risk Factors" section in the
company's most recent annual report on Form 10-K.
CULP, INC.
Condensed Financial Highlights
(Unaudited)
Three Months Ended Fiscal Year Ended
------------------------- ---------------------------
April 29, April 30, April 29, April 30,
2007 2006 2007 2006
------------ ------------ ------------- -------------
Net sales $73,196,000 $70,718,000 $250,533,000 $261,101,000
Net loss $(40,000) $(1,534,000) $(1,316,000) $(11,796,000)
Net loss per
share:
Basic $(0.00) $(0.13) $(0.11) $(1.02)
Diluted $(0.00) $(0.13) $(0.11) $(1.02)
Net income
(loss) per
share, diluted,
excluding
restructuring
and related
charges (1) $0.14 $0.14 $0.32 $(0.04)
Average shares
outstanding:
Basic 12,559,000 11,594,000 11,922,000 11,567,000
Diluted 12,559,000 11,594,000 11,922,000 11,567,000
(1) Excludes restructuring and related charges of $2.8 million ($1.8
million, or $0.14 per diluted share, after taxes) for the fourth
quarter of fiscal 2007. Excludes restructuring and related charges of
$8.4 million ($5.2 million, or $0.43 per diluted share, after taxes)
for fiscal 2007. Of the $2.8 million and $8.4 million, non-cash
charges were $1.7 million and $4.2 million, respectively.
Excludes restructuring and related charges of $4.7 million ($3.2
million, or $0.27 per diluted share, after taxes) for the fourth
quarter of fiscal 2006. Excludes restructuring and related charges of
$17.9 million ($11.4 million, or $0.98 per diluted share, after
taxes) for fiscal 2006. Of the $4.7 million and $17.9 million, non-
cash charges were $4.1 million and $13.0 million, respectively.
Reconciliation of Net Loss as Reported to Pro Forma Net (Income) Loss
(Unaudited)
Three Months Ended Fiscal Year Ended
------------------------ --------------------------
April 29, April 30, April 29, April 30,
2007 2006 2007 2006
----------- ------------ ------------ -------------
Net loss, as
reported $(40,000) $(1,534,000) $(1,316,000) $(11,796,000)
Restructuring and
related charges,
net of income
taxes 1,821,000 3,184,000 5,160,000 11,358,000
----------- ------------ ------------ -------------
Pro forma net
income (loss) $1,781,000 $1,650,000 $3,844,000 $(438,000)
=========== ============ ============ =============
Reconciliation of Net Loss Per Share as Reported to
Pro Forma Net Income (Loss) Per Share
(Unaudited)
Three Months Ended Fiscal Year Ended
------------------------ --------------------------
April 29, April 30, April 29, April 30,
2007 2006 2007 2006
----------- ------------ ------------ -------------
Net loss, as
reported $(0.00) $(0.13) $(0.11) $(1.02)
Restructuring and
related charges,
net of income
taxes 0.14 0.27 0.43 0.98
----------- ------------ ------------ -------------
Pro forma net
income (loss) per
share $0.14 $0.14 $0.32 $(0.04)
=========== ============ ============ =============
Reconciliation of Projected Range of Net Income Per Share
to Projected Range of Pro Forma Net Income Per Share
(Unaudited)
Three Months
Ending
July 29,
2007
--------------
Projected range of net income per diluted share $0.05 - $0.09
Projected restructuring and related charges, net of
income taxes 0.03
--------------
Projected range of pro forma net income per diluted
share $0.08 - $0.12
==============
CONTACT: Culp, Inc.
Investor Contact:
Kenneth R. Bowling, Chief Financial Officer
336-881-5630
or
Media Contact:
Kenneth M. Ludwig, Senior Vice President, Human Resources
336-889-5161