By a News Reporter-Staff News Editor at Economics Week -- Culp, Inc. (NYSE: CFI) reported financial and operating results for the fourth quarter and fiscal year ended April 27, 2014. Fiscal 2014 Full Year Highlights Net sales were $287.2 million, up 6.8 percent from fiscal 2013, representing the fifth consecutive year of overall annual sales growth, with mattress fabrics segment sales up 4.3 percent, a record year, and upholstery fabrics segment sales up 10.2 percent over the prior year.
Pre-tax income was $19.0 million, compared with $20.3 million in fiscal 2013.
Adjusted net income (non-GAAP) was $15.7 million, or $1.26 per diluted share, compared with $17.4 million, or $1.40 per diluted share, for the prior year period. (Adjusted net income is calculated using estimated cash income tax expense. See the reconciliation to net income on page 6).
Net income (GAAP) was $17.4 million, or $1.41 per diluted share, compared with net income of $18.3 million, or $1.47 per diluted share, last year.
Return on capital was 26 percent, compared with 29 percent in fiscal 2013.
Free cash flow was $13.8 million, after investing $7.2 million in working capital, capital expenditures and other items, compared with $13.1 million in fiscal 2013.
The company's financial position remained strong with cash and cash equivalents and short term investments of $35.6 million and total debt of $5.0 million as of April 27, 2014, or a net cash position of $30.6 million, representing the highest level in the company's history. This compares to a net cash position of $21.7 million at the end of fiscal 2013. Fiscal 2014 Fourth Quarter Highlights Net sales were $74.0 million, up 5.2 percent, with mattress fabric sales up 6.9 percent and upholstery fabric sales up 2.8 percent, compared with the fourth quarter last year.
Pre-tax income was $4.1 million, compared with $5.9 million in the fourth quarter of fiscal 2013.
Adjusted net income (non-GAAP) was $3.4 million, or $0.27 per diluted share, for the current quarter, compared with $5.0 million, or $0.41 per diluted share, for the prior year period.
Net income (GAAP) was $2.7 million, or $0.22 per diluted share, compared with net income of $3.7 million, or $0.30 per diluted share, in the prior year period.
The company announced a special cash dividend of $0.40 per share and a quarterly cash dividend of $0.05 per share, both payable in July 2014.
The projection for first quarter fiscal 2015 is for overall sales to be in the range of 4 percent to 9 percent higher, compared with the previous year's first quarter. The first quarter of fiscal 2015 will be a 14-week period compared with 13 weeks in the first quarter of fiscal 2014. Pre-tax income for the first quarter of fiscal 2015 is expected to be in the range of $4.8 million to $5.7 million. Pre-tax income for the first quarter of fiscal 2014 was $5.5 million.
The company expects fiscal 2015 to be a good year for free cash flow. Overview For the fourth quarter ended April 27, 2014, net sales were $74.0 million, a 5.2 percent increase compared with $70.4 million a year ago. The company reported net income of $2.7 million, or $0.22 per diluted share, for the fourth quarter of fiscal 2014, compared with net income of $3.7 million, or $0.30 per diluted share, for the fourth quarter of fiscal 2013.
Given the volatility in the income tax area during fiscal 2014 and previous years, the company is reporting adjusted net income (non-GAAP), which is calculated using estimated cash income tax expense for its foreign subsidiaries. (A presentation of adjusted net income and a reconciliation to net income is set forth on page 6). The company currently does not incur cash income tax expense in the U.S., nor does it expect to for a number of years, due to approximately $45.7 million in U.S. net operating loss carryforwards as of the end of fiscal 2014. For the fourth quarter of fiscal 2014, adjusted net income was $3.4 million, or $0.27 per diluted share, compared with $5.0 million, or $0.41 per diluted share, for the fourth quarter of fiscal 2013. On a pre-tax basis, the company reported income of $4.1 million compared with pre-tax income of $5.9 million for the fourth quarter of fiscal 2013.
Net sales for fiscal 2014 were $287.2 million, up 6.8 percent, compared with net sales of $268.8 million in fiscal 2013. Net income for fiscal 2014 was $17.5 million, or $1.41 per diluted share, compared with $18.3 million, or $1.47 per diluted share, in fiscal 2013. Adjusted net income for fiscal 2014 was $15.7 million, or $1.26 per diluted share, compared with $17.4 million, or $1.40 per diluted share, in fiscal 2013. On a pre-tax basis, the company reported income of $19.0 million for fiscal 2014, compared with pre-tax income of $20.3 million in fiscal 2013.
Commenting on the results, Frank Saxon, president and chief executive officer of Culp, Inc., said, "Culp had another solid performance in fiscal 2014 with higher annual sales in both businesses. Notably, this is the fifth consecutive year of overall sales growth and a record year of annual sales for mattress fabrics. Throughout the year, we have continued to make outstanding progress with our strategic focus on design creativity and product innovation. These efforts have been the key driver to our sales performance, with an increasing percentage of our sales coming from our latest product introductions. Demand trends have been favorable, and our ability to sustain excellence in creating innovative fabrics season after season has been an important advantage for Culp in our fashion-driven business.
"Importantly, we achieved excellent free cash flow of $13.8 million in fiscal 2014. As a result, we are pleased to announce that our Board of Directors approved a special cash dividend of $0.40 per share, in line with our capital allocation strategy, as well as approved our regular quarterly cash dividend of $.0.05 per share. This action reflects our commitment to delivering value to our shareholders. At the same time, we have the financial strength to make strategic investments necessary to enhance and expand our production capabilities and take advantage of additional growth opportunities in fiscal 2015," added Saxon. Mattress Fabrics Segment Mattress fabric sales for the fourth quarter were $43.7 million, up 6.9 percent compared with $40.8 million for the fourth quarter of fiscal 2013. For fiscal 2014, mattress fabric sales were $160.7 million, a 4.3 percent increase compared with $154.0 million in fiscal 2013.
"Our mattress fabrics business had another solid sales performance in the fourth quarter of fiscal 2014, capping off another year of growth and record sales," said Iv Culp, president of Culp's mattress fabrics division. "These results reflect the growing consumer demand for 'better' designed bedding products. Culp is well positioned to meet this demand with a complete array of innovative fabrics and mattress covers across all leading categories. With our extensive design capabilities and technical expertise, supported by a scalable manufacturing platform and reactive capacity, we have continued to expand our business with all the major players in the bedding industry.
"As previously announced, our operating profit and margins were affected by several factors during the fourth quarter of fiscal 2014. The severe winter weather conditions experienced in many parts of the country affected our mattress fabrics locations with at least a week of lost production. The interruption placed additional pressure on our operations to meet the ongoing sales demand. During the quarter, we also had higher than expected demand for premium decorative knitted mattress fabrics, which stressed our production throughput and operating efficiencies. In order to meet this growing demand and to improve our efficiency, we are increasing knitted fabric production at all of our facilities. In addition, we are expanding our Stokesdale, North Carolina, building in order to increase and enhance our internal knit finishing capabilities and improve our production flow. This first phase of the capacity expansion is anticipated to be completed by the end of December 2014. The second phase, which will involve purchasing additional knit machines, is expected to be completed during the second half of fiscal 2015. Our projected $9.5 million in capital expenditures for fiscal 2015 demonstrates Culp's continued commitment to the future growth of our mattress fabrics business.
"We have also made continued progress in fiscal 2014 with respect to the development of Culp-Lava, our mattress cover operation," added Culp. "The demand for new mattress covers has been better than expected and we are pleased by the market response for this category. While our margins in this business showed significant improvement compared with the fiscal third quarter, we experienced short-term production challenges due to inefficiencies caused by absorbing new product placements.
"Overall, the fundamentals of our mattress fabrics business are strong, and Culp has a solid competitive position as we continue to outpace the overall industry growth. We are especially pleased with the favorable customer response to our exciting designs and new product introductions that meet today's style trends. We are excited about the opportunities ahead in fiscal 2015 to grow our business and to enhance Culp's leadership position in the bedding industry," Culp concluded. Upholstery Fabrics Segment Sales for this segment were $30.4 million for the fourth quarter, a 2.8 percent improvement compared with sales of $29.6 million in the fourth quarter of fiscal 2013. For fiscal 2014, upholstery fabric sales were $126.5 million, up 10.2 percent compared with $114.8 million in fiscal 2013.
Keywords for this news article include: Culp Inc., Economics, Investment and Finance.
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