CULP INC - FORM 8-K - EX-99.(B) - EXHIBIT 99(B) - November 29, 2010

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Exhibit 99(b)
Page 1 of 7

CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF NET INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 2010 AND NOVEMBER 1, 2009
(UNAUDITED)
(Amounts in Thousands, Except for Per Share Data)
   
THREE MONTHS ENDED  
 
Amounts   Percent of Sales
October 31, November 1, % Over October 31, November 1,
2010   2009   (Under)   2010   2009    
 
Net sales

 

$

48,879 49,716 (1.7 ) % 100.0 % 100.0 %
Cost of sales   41,270     40,582   1.7   %   84.4   % 81.6   %
Gross profit 7,609 9,134 (16.7 ) % 15.6 % 18.4 %
 
Selling, general and
administrative expenses 4,202 5,385 (22.0 ) % 8.6 % 10.8 %
Restructuring credit   -     (184 ) N.M.   0.0   % (0.4 ) %
Income from operations 3,407 3,933 (13.4 ) % 7.0 % 7.9 %
 
Interest expense 225 342 (34.2 ) % 0.5 % 0.7 %
Interest income (49 ) (16 ) 206.3 % (0.1 ) % (0.0 ) %
Other expense   30     103   (70.9 ) %   0.1   % 0.2   %
Income before income taxes 3,201 3,504 (8.6 ) % 6.5 % 7.0 %
 
Income taxes*   (801 )   625   N.M.   (25.0 ) % 17.8   %
Net income

 

$

4,002     2,879   39.0   %   8.2   % 5.8   %
 
Net income per share-basic $ 0.31 $ 0.23 34.8 %
Net income per share-diluted $ 0.30 $ 0.22 36.4 %
Average shares outstanding-basic 12,932 12,671 2.1 %
Average shares outstanding-diluted 13,167 12,852 2.5 %
 
 
 
SIX MONTHS ENDED
 
Amounts   Percent of Sales
October 31, November 1, % Over October 31, November 1,
2010   2009   (Under)   2010   2009    
 
Net sales

 

$

104,791 95,193 10.1 % 100.0 % 100.0 %
Cost of sales   87,473     78,473   11.5   %   83.5   % 82.4   %
Gross profit 17,318 16,720 3.6 % 16.5 % 17.6 %
 
Selling, general and
administrative expenses 9,416 10,280 (8.4 ) % 9.0 % 10.8 %
Restructuring credit   (8 )   (343 ) N.M.   (0.0 ) % (0.4 ) %
Income from operations 7,910 6,783 16.6 % 7.5 % 7.1 %
 
Interest expense 435 699 (37.8 ) % 0.4 % 0.7 %
Interest income (87 ) (28 ) 210.7 % (0.1 ) % (0.0 ) %
Other expense   83     617   (86.5 ) %   0.1   % 0.6   %
Income before income taxes 7,479 5,495 36.1 % 7.1 % 5.8 %
 
Income taxes*   (270 )   740   N.M.   (3.6 ) % 13.5   %
Net income

 

$

7,749     4,755   63.0   %   7.4   % 5.0   %
 
Net income per share-basic $ 0.60 $ 0.38 57.9 %
Net income per share-diluted $ 0.59 $ 0.37 59.5 %
Average shares outstanding-basic 12,901 12,662 1.9 %
Average shares outstanding-diluted 13,186 12,804 3.0 %
 
* Percent of sales column for income taxes is calculated as a % of income before income taxes.

Page 2 of 7

CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 2010, NOVEMBER 1, 2009 AND MAY 2, 2010
Unaudited
(Amounts in Thousands)
 
 
Amounts   Increase
October 31, November 1, (Decrease) * May 2,
2010 2009 Dollars Percent 2010
 
Current assets
Cash and cash equivalents $ 15,262 19,575 (4,313 ) (22.0 ) % 18,295
Short-term investments 4,035 - 4,035 100.0 % 3,023
Accounts receivable 14,810 16,771 (1,961 ) (11.7 ) % 19,822
Inventories 29,435 21,834 7,601 34.8 % 26,002
Deferred income taxes 176 58 118 203.4 % 150
Assets held for sale 123 160 (37 ) (23.1 ) % 123
Income taxes receivable 477 384 93 24.2 % 728
Other current assets 1,234 972 262 27.0   % 1,698
Total current assets 65,552 59,754 5,798 9.7 % 69,841
 
Property, plant & equipment, net 31,225 24,795 6,430 25.9 % 28,403
Goodwill 11,462 11,462 - 0.0 % 11,462
Deferred income taxes 1,391 - 1,391 100.0 % 324
Other assets 2,278 2,769 (491 ) (17.7 ) % 2,568
 
Total assets $ 111,908 98,780 13,128 13.3   % 112,598
 
 
 
Current liabilities
Current maturities of long-term debt $ 2,396 4,863 (2,467 ) (50.7 ) % 196
Current portion of obligation under a capital lease - 280 (280 ) (100.0 ) % -
Accounts payable - trade 17,992 16,416 1,576 9.6 % 22,278
Accounts payable - capital expenditures 253 377 (124 ) (32.9 ) % 567
Accrued expenses 5,665 6,455 (790 ) (12.2 ) % 9,613
Accrued restructuring 287 345 (58 ) (16.8 ) % 324
Income taxes payable - current 90 329 (239 ) (72.6 ) % 224
Total current liabilities 26,683 29,065 (2,382 ) (8.2 ) % 33,202
 
Accounts payable - capital expenditures - 188 (188 ) (100.0 ) % -
Income taxes payable - long-term 3,890 3,603 287 8.0 % 3,876
Deferred income taxes 622 1,078 (456 ) (42.3 ) % 982
Long-term debt , less current maturities 9,209 11,568 (2,359 ) (20.4 ) % 11,491
 
Total liabilities 40,404 45,502 (5,098 ) (11.2 ) % 49,551
 
Shareholders' equity 71,504 53,278 18,226 34.2   % 63,047
 
Total liabilities and
shareholders' equity $ 111,908 98,780 13,128 13.3   % 112,598
 
Shares outstanding 13,199 12,888 311 2.4   % 13,052
 
* Derived from audited financial statements.

Page 3 of 7

CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2010 AND NOVEMBER 1, 2009
Unaudited
(Amounts in Thousands)
 
 
SIX MONTHS ENDED
 
Amounts
October 31,   November 1,
2010   2009  
 
Cash flows from operating activities:
Net income $ 7,749 4,755
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,097 2,052
Amortization of other assets 258 286
Stock-based compensation 204 440
Deferred income taxes (1,183 ) 8
Restructuring expenses, net of gain on sale of related assets - (113 )
Loss on impairment of equipment 4 60
Excess tax benefits related to stock-based compensation (270 ) -
Foreign currency exchange losses 60 554

Changes in assets and liabilities

Accounts receivable 5,110 1,356
Inventories (3,363 ) 2,147
Other current assets 477 286
Other assets (45 ) (31 )
Accounts payable (4,493 ) (671 )
Accrued expenses (4,112 ) (126 )
Accrued restructuring (37 ) (508 )
Income taxes 121   181  
Net cash provided by operating activities 2,577   10,676  
 
Cash flows from investing activities:
Capital expenditures (5,076 ) (1,976 )
Purchase of short-term investments (1,012 ) -
Proceeds from the sale of equipment 27   285  
Net cash used in investing activities (6,061 ) (1,691 )
 
Cash flows from financing activities:
Payments on vendor-financed capital expenditures (188 ) (797 )
Payments on capital lease obligation - (346 )
Payments on long-term debt (80 ) -
Debt issuance costs (27 ) (15 )
Excess tax benefits related to stock-based compensation 270 -
Proceeds from common stock issued 511   45  
Net cash provided by (used in) financing activities 486   (1,113 )
 
Effect of exchange rate changes on cash and cash equivalents (35 ) (94 )
 
(Decrease) increase in cash and cash equivalents (3,033 ) 7,778
 
Cash and cash equivalents at beginning of period 18,295   11,797  
 
Cash and cash equivalents at end of period $ 15,262   19,575  
 
 
Free Cash Flow (1) $ (2,425 ) 7,748  
 
 
 
(1) Free Cash Flow reconciliation is as follows: 2nd Qtr 2nd Qtr
  FY 2011   FY 2010
A) Net cash provided by operating activities $ 2,577 10,676
B) Minus: Capital Expenditures (5,076 ) (1,976 )
C) Add: Proceeds from the sale of buildings and equipment 27 285
D) Minus: Payments on vendor-financed capital expenditures (188 ) (797 )
E) Minus: Payments on capital lease obligation - (346 )
F) Add: Excess tax benefits related to stock-based compensation 270 -
G) Effects of exchange rate changes on cash and cash equivalents (35 ) (94 )
$ (2,425 ) 7,748  

Page 4 of 7

CULP, INC. FINANCIAL INFORMATION RELEASE
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE THREE MONTHS ENDED OCTOBER 31, 2010 AND NOVEMBER 1, 2009
(Unaudited)
 
(Amounts in thousands)
 
 
THREE MONTHS ENDED
 
Amounts   Percent of Total Sales
October 31,   November 1, % Over October 31,   November 1,
Net Sales by Segment 2010   2009   (Under) 2010     2009    
 
Mattress Fabrics $ 28,335 28,202 0.5 % 58.0 % 56.7 %
Upholstery Fabrics 20,544   21,514   (4.5 ) % 42.0   % 43.3   %
 
Net Sales $ 48,879   49,716   (1.7 ) % 100.0   % 100.0   %
 
 
Gross Profit by Segment

Gross Profit Margin

 
Mattress Fabrics $ 5,030 5,896 (14.7 ) % 17.8 % 20.9 %
Upholstery Fabrics 2,579   3,281   (21.4 ) % 12.6   % 15.3   %
Subtotal 7,609 9,177 (17.1 ) % 15.6 % 18.5 %
 
Restructuring related charges -   (43 ) (1 ) (100.0 ) % 0.0   % (0.1 ) %
 
Gross Profit $ 7,609   9,134   (16.7 ) % 15.6   % 18.4   %
 
 
Selling, General and Administrative expenses by Segment Percent of Sales
 
Mattress Fabrics $ 1,704 1,856 (8.2 ) % 6.0 % 6.6 %
Upholstery Fabrics 1,777 2,183 (18.6 ) % 8.6 % 10.1 %
Unallocated Corporate expenses 721   1,346   (46.4 ) % 1.5   % 2.7   %
Selling, General and Administrative expenses 4,202   5,385   (22.0 ) % 8.6   % 10.8   %
 
 
Operating Income (loss) by Segment Operating Income (Loss) Margin
 
Mattress Fabrics $ 3,326 4,041 (17.7 ) % 11.7 % 14.3 %
Upholstery Fabrics 802 1,097 (26.9 ) % 3.9 % 5.1 %
Unallocated corporate expenses (721 ) (1,346 ) (46.4 ) % (1.5 ) % (2.7 ) %
Subtotal 3,407 3,792 (10.2 ) % 7.0 % 7.6 %
 
Restructuring and related credit -   141   (2 ) (100.0 ) % 0.0   % 0.3   %
 
Operating income $ 3,407   3,933   (13.4 ) % 7.0   % 7.9   %
 
 
Depreciation by Segment
 
Mattress Fabrics $ 944 880 7.3 %
Upholstery Fabrics 139   240   (42.1 ) %
Subtotal 1,083   1,120   (3.3 ) %
 
 
Notes:
 
(1) The $43 restructuring related charge represents other operating costs associated with a closed plant facility.
 
(2) The $141 restructuring and related credit represents a credit of $200 for employee termination benefits, offset by a charge of $43 for other operating costs associated with a closed plant facility, and a charge of $16 for lease termination and other exit costs. Of this total credit, a credit of $184 was recorded in restructuring credit and a charge of $43 was recorded in cost of sales.

Page 5 of 7

CULP, INC. FINANCIAL INFORMATION RELEASE
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE SIX MONTHS ENDED OCTOBER 31, 2010 AND NOVEMBER 1, 2009
(Unaudited)
   
(Amounts in thousands)
 
 
SIX MONTHS ENDED
 
Amounts Percent of Total Sales
October 31, November 1, % Over October 31, November 1,
Net Sales by Segment 2010   2009   (Under) 2010     2009    
 
Mattress Fabrics $ 59,253 54,476 8.8 % 56.5 % 57.2 %
Upholstery Fabrics 45,538   40,717   11.8   % 43.5   % 42.8   %
 
Net Sales $ 104,791   95,193   10.1   % 100.0   % 100.0   %
 
 
Gross Profit by Segment Gross Profit Margin  
 
Mattress Fabrics $ 11,020 10,658 3.4 % 18.6 % 19.6 %
Upholstery Fabrics 6,298   6,076   3.7   % 13.8   % 14.9   %
Subtotal 17,318 16,734 3.5 % 16.5 % 17.6 %
 
Restructuring related charges -   (14 ) (2 ) (100.0 ) % 0.0   % (0.0 ) %
 
Gross Profit $ 17,318   16,720   3.6   % 16.5   % 17.6   %
 
 
Selling, General and Administrative expenses by Segment Percent of Sales
 
Mattress Fabrics $ 3,701 3,665 1.0 % 6.2 % 6.7 %
Upholstery Fabrics 3,878 4,216 (8.0 ) % 8.5 % 10.4 %
Unallocated Corporate expenses 1,837   2,399   (23.4 ) % 1.8   % 2.5   %
Subtotal 9,416   10,280   (8.4 ) % 9.0   % 10.8   %
 
 
Operating Income (loss) by Segment Operating Income (Loss) Margin
 
Mattress Fabrics $ 7,319 6,993 4.7 % 12.4 % 12.8 %
Upholstery Fabrics 2,420 1,860 30.1 % 5.3 % 4.6 %
Unallocated corporate expenses (1,837 ) (2,399 ) (23.4 ) % (1.8 ) % (2.5 ) %
Subtotal 7,902 6,454 22.4 % 7.5 % 6.8 %
 
Restructuring and related credit 8   (1 ) 329   (3 ) 97.6   % 0.0   % 0.3   %
 
Operating income $ 7,910   6,783   16.6   % 7.5   % 7.1   %
 
 
Return on Capital (4)
 
Mattress Fabrics 28.5 % 29.8 %
Upholstery Fabrics 39.1 % 38.9 %
Unallocated Corporate N/A   N/A  
Consolidated 25.2 % 23.2 %
 
Capital Employed (4)
 
Mattress Fabrics 51,357 46,983 9.3 %
Upholstery Fabrics 12,384 9,558 29.6 %
Unallocated Corporate (1,021 ) (966 ) N/A    
Consolidated 62,720   55,575   12.9   %  
 
 
Depreciation by Segment
 
Mattress Fabrics $ 1,822 1,779 2.4 %
Upholstery Fabrics 275   273   0.7   %
Subtotal 2,097   2,052   2.2   %
 
 
Notes:
 
(1) The $8 restructuring credit primarily represents a credit of $15 for employee termination benefits and a charge of $7 for lease termination and other exit costs.
 
(2) The $14 restructuring related charge represents a charge of $64 for other operating costs associated with a closed plant facility offset by a credit of $50 for the sale of inventory previously reserved for.
 
(3) The $329 restructuring and related credit represents a credit of $169 for employee termination benefits, a credit of $113 for sales proceeds received on equipment with no carrying value, a credit of $61 for lease termination and other exit costs, a credit of $50 for the sale of inventory previously reserved for, offset by a charge of $64 for other operating costs associated with a closed plant facility.
 
(4) See pages 6 and 7 of this financial information release for calculations.

Page 6 of 7

CULP, INC. FINANCIAL INFORMATION RELEASE  
RETURN ON CAPITAL EMPLOYED BY SEGMENT
FOR THE SIX MONTHS ENDED OCTOBER 31, 2010

(UNAUDITED)

 
 
Operating Income
Six Months Average Return on
Ended Capital Avg. Capital
October 31, 2010 (1) Employed (3) Employed (2)
 
Mattress Fabrics $ 7,319 $ 51,357 28.5 %
Upholstery Fabrics 2,420 12,384 39.1 %
(less: Unallocated Corporate)   (1,837 )   (1,021 )  

N/A

 
Total $ 7,902 $ 62,720 25.2 %
 
 
Average Capital Employed As of the three Months Ended October 31, 2010   As of the three Months Ended August 1, 2010   As of the three Months Ended May 2, 2010
Mattress Upholstery Unallocated Mattress Upholstery Unallocated Mattress Upholstery Unallocated
Fabrics Fabrics Corporate Total Fabrics Fabrics Corporate Total Fabrics Fabrics Corporate Total
 
Total assets 65,485 22,277 24,146 111,908 66,919 24,415 21,763 113,097 61,922 25,420 25,256 112,598
Total liabilities   (10,634 )   (10,275 )   (19,495

)

  (40,404 )   (14,902 )   (11,126 )   (19,943 )   (45,971 )   (14,720 )   (13,559 )   (21,272 )   (49,551 )
 
Subtotal $ 54,851 $ 12,002 $ 4,651 $ 71,504 $ 52,017 $ 13,289 $ 1,820 $ 67,126 $ 47,202 $ 11,861 $ 3,984 $ 63,047
Less:
Cash and cash equivalents - - (15,262 ) (15,262 ) - - (14,045 ) (14,045 ) - - (18,295 ) (18,295 )
Short-term investments - - (4,035 ) (4,035 ) - - (4,009 ) (4,009 ) (3,023 ) (3,023 )
Deferred income taxes - current - - (176 ) (176 ) - - (138 ) (138 ) - - (150 ) (150 )
Income taxes receivable - - (477 ) (477 ) - - (568 ) (568 ) - - (728 ) (728 )
Deferred income taxes - non-current - - (1,391 ) (1,391 ) - - (245 ) (245 ) - - (324 ) (324 )
Current maturities of long-term debt - - 2,396 2,396 - - 194 194 - - 196 196
Income taxes payable - current - - 90 90 - - 182 182 - - 224 224
Income taxes payable - long-term - - 3,890 3,890 - - 3,877 3,877 - - 3,876 3,876
Deferred income taxes - non-current - - 622 622 - - 666 666 - - 982 982
Long-term debt, less current maturities - - 9,209 9,209 - - 11,453 11,453 - - 11,491 11,491
                       
Total Capital Employed $ 54,851   $ 12,002   $ (483 ) $ 66,370   $ 52,017   $ 13,289   $ (813 ) $ 64,493   $ 47,202   $ 11,861   $ (1,767 ) $ 57,296  
 
Mattress Upholstery Unallocated
Fabrics Fabrics Corporate Total
       
Average Capital Employed (3) $ 51,357   $ 12,384   $ (1,021 ) $ 62,720  
 
Notes:
(1) Operating income excludes restructuring and related charges--see reconciliation per page 5 of this financial information release.
 
(2) Return on average capital employed represents operating income for the 6 month period ending October 31, 2010 times 2 to arrive at an annualized value then divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term investments, long-term debt, including current maturities, current and noncurrent deferred tax assets and liabilities, current and long-term income taxes payable, and income taxes receivable.
 
(3) Average capital employed computed using the three periods ending May 2,2010, August 1,2010, October 31, 2010.

Page 7 of 7

CULP, INC. FINANCIAL INFORMATION RELEASE
RETURN ON CAPITAL EMPLOYED BY SEGMENT
FOR THE SIX MONTHS ENDED NOVEMBER 1, 2009
(UNAUDITED)  
 
Operating Income
Six Months Average Return on
Ended Capital Avg. Capital
November 1, 2009 (1) Employed (3) Employed (2)
 
Mattress Fabrics $ 6,993 $ 46,983 29.8 %
Upholstery Fabrics 1,860 9,558 38.9 %
(less: Unallocated Corporate)   (2,399 )   (966 )   N/A  
Total $ 6,454 $ 55,575 23.2 %
 
 
 
Average Capital Employed As of the three Months Ended November 1, 2009   As of the three Months Ended August 2, 2009 As of the three Months Ended May 3, 2009
Mattress Upholstery Unallocated Mattress Upholstery Unallocated Mattress Upholstery Unallocated
Fabrics Fabrics Corporate Total Fabrics Fabrics Corporate Total Fabrics Fabrics Corporate Total
 
Total assets 56,686 19,598 22,496 98,780 57,772 16,128 18,511 92,411 58,626 22,078 14,590 95,294
Total liabilities   (10,625 )   (10,461 )   (24,416 )   (45,502 )   (10,138 )   (7,670 )   (24,427 )   (42,235 )   (11,372 )   (10,999 )   (24,892 )   (47,263 )
 
Subtotal $ 46,061 $ 9,137 $ (1,920 ) $ 53,278 $ 47,634 $ 8,458 $ (5,916 ) $ 50,176 $ 47,254 $ 11,079 $ (10,302 ) $ 48,031
Less:
Cash and cash equivalents - - (19,575 ) (19,575 ) - - (15,481 ) (15,481 ) - - (11,797 ) (11,797 )
Deferred income taxes - current - - (58 ) (58 ) - - (52 ) (52 ) - - (54 ) (54 )
Income taxes receivable - - (384 ) (384 ) - - (396 ) (396 ) - - (210 ) (210 )
Current maturities of long-term debt - - 4,863 4,863 - - 4,817 4,817 - - 4,764 4,764
Income taxes payable - current - - 329 329 - - 72 72 - - 83 83
Income taxes payable - long-term - - 3,603 3,603 - - 3,538 3,538 - - 3,264 3,264
Deferred income taxes - non-current - - 1,078 1,078 - - 1,072 1,072 - - 974 974
Long-term debt, less current maturities - - 11,568 11,568 - - 11,618 11,618 - - 11,604 11,604
                       
Total Capital Employed $ 46,061   $ 9,137   $ (496 ) $ 54,702   $ 47,634   $ 8,458   $ (728 ) $ 55,364   $ 47,254   $ 11,079   $ (1,674 ) $ 56,659  
 
 
 
Mattress Upholstery Unallocated
Fabrics Fabrics Corporate Total
       
Average Capital Employed (3) $ 46,983   $ 9,558   $ (966 ) $ 55,575  
 
 
Notes:
(1) Operating income excludes restructuring and related credits--see reconciliation per page 5 of this financial information release.
 
(2) Return on average capital employed represents operating income for the 6 month period ending November 1, 2009 times 2 to arrive at an annualized value then divided by average capital employed. Average capital employed does not include cash and cash equivalents, long-term debt, including current maturities, current and noncurrent deferred tax assets and liabilities, current and long-term income taxes payable, and income taxes receivable.
 
(3) Average capital employed computed using the three periods ending May 3,2009, August 2,2009, and November 1, 2009.

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