SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 1, 1998
Commission File No. 0-12781
CULP, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1001967
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or other organization)
101 S. Main St., High Point, North Carolina 27261-2686
(Address of principal executive offices) (zip code)
(336) 889-5161
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to the filing
requirements for at least the past 90 days.
YES X NO
Common shares outstanding at November 1, 1998: 12,995,021
Par Value: $.05
INDEX TO FORM 10-Q
For the period ended November 1, 1998
Part I - Financial Information.
Page
- -------------------------------------------------
Item 1. Unaudited Interim Consolidated Financial Statements:
Consolidated Statements of Income (Loss)--Three and Six Months Ended
November 1, 1998 and November 2, 1997 I-1
Consolidated Balance Sheets-November 1, 1998, November 2, 1997
and May 3, 1998 I-2
Consolidated Statements of Cash Flows---Six Months Ended
November 1, 1998 and November 2, 1997 I-3
Consolidated Statements of Shareholders' Equity I-4
Notes to Consolidated Financial Statements I-5
Sales by Product Category/Business Unit I-10
International Sales by Geographic Area I-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations I-12
- ------------------------------------------------------------------------------
Part II - Other Information
Item 4 --Submission of Matters to a Vote of Security Holders II-1
Item 6. Exhibits and Reports on Form 8-K II-1
Signature II-9
CULP, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 1, 1998 AND NOVEMBER 2, 1997
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------- -----------------------------
November 1, November 2, % Over
1998 1997 (Under) 1999 1998
-------------- --------------- ------------- -------------- -------------
Net sales $ 128,159 122,926 4.3 % 100.0 % 100.0 %
Cost of sales 107,685 100,191 7.5 % 84.0 % 81.5 %
-------------- --------------- ------------- -------------- -------------
Gross profit 20,474 22,735 (9.9) % 16.0 % 18.5 %
Selling, general and
administrative expenses 15,474 13,632 13.5 % 12.1 % 11.1 %
-------------- --------------- ------------- -------------- -------------
Income from operations 5,000 9,103 (45.1) % 3.9 % 7.4 %
Interest expense 2,464 1,820 35.4 % 1.9 % 1.5 %
Interest income (19) (72) (73.6) % (0.0) % (0.1) %
Other expense (income), net 604 425 42.1 % 0.5 % 0.3 %
-------------- --------------- ------------- -------------- -------------
Income before income taxes 1,951 6,930 (71.8) % 1.5 % 5.6 %
Income taxes * 644 2,425 (73.4) % 33.0 % 35.0 %
-------------- --------------- ------------- -------------- -------------
Net income $ 1,307 4,505 (71.0) % 1.0 % 3.7 %
============== =============== ============= ============== =============
Net income per share $0.10 $0.36 (72.2) %
Net income per share, assuming dilution $0.10 $0.35 (71.4) %
Dividends per share $0.035 $0.035 0.0 %
Average shares outstanding 12,995 12,668 2.6 %
Average shares outstanding, assuming dilution 13,120 12,980 1.1 %
SIX MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------- -----------------------------
November 1, November 2, % Over
1998 1997 (Under) 1999 1998
-------------- --------------- ------------- -------------- ----------
Net sales $ 238,826 222,424 7.4 % 100.0 % 100.0 %
Cost of sales 204,741 182,956 11.9 % 85.7 % 82.3 %
-------------- --------------- ------------- -------------- ------------
Gross profit 34,085 39,468 (13.6) % 14.3 % 17.7 %
Selling, general and
administrative expenses 29,947 24,548 22.0 % 12.5 % 11.0 %
-------------- --------------- ------------- -------------- ------------
Income from operations 4,138 14,920 (72.3) % 1.7 % 6.7 %
Interest expense 4,825 3,100 55.6 % 2.0 % 1.4 %
Interest income (72) (162) (55.6) % (0.0) % (0.1) %
Other expense (income), net 1,374 667 106.0 % 0.6 % 0.3 %
-------------- --------------- ------------- -------------- ------------
Income (loss) before income taxes (1,989) 11,315 (117.6) % (0.8) % 5.1 %
Income taxes * (656) 3,960 (116.6) % 33.0 % 35.0 %
-------------- --------------- ------------- -------------- ------------
Net income (loss) $ (1,333) 7,355 (118.1) % (0.6) % 3.3 %
============== =============== ============= ============== ============
Net income (loss) per share ($0.10) $0.58 (117.2) %
Net income (loss) per share, assuming dilution ($0.10) $0.57 (117.5) %
Dividends per share $0.07 $0.07 0.0 %
Average shares outstanding 12,998 12,649 2.8 %
Average shares outstanding, assuming dilution 13,175 12,953 1.7 %
* Percent of sales column is calculated as a % of income (loss) before income
taxes.
CULP, INC.
CONSOLIDATED BALANCE SHEETS
NOVEMBER 1, 1998, NOVEMBER 2, 1997 AND MAY 3, 1998
Unaudited
(Amounts in Thousands)
Amounts
--------------------------------- Increase (Decrease) * May 3,
November 1, November 2, --------------------------------
1998 1997 Dollars Percent 1998
---------------- --------------- ---------------- ------------- ------------
Current assets
Cash and cash investments $ 1,177 1,209 (32) (2.6) % 2,312
Accounts receivable 72,998 74,314 (1,316) (1.8) % 73,773
Inventories 72,392 70,192 2,200 3.1 % 78,594
Other current assets 7,230 6,136 1,094 17.8 % 7,808
------------ --------------- ---------------- ------------- ------------
Total current assets 153,797 151,851 1,946 1.3 % 162,487
Restricted investments 3,409 8,258 (4,849) (58.7) % 4,021
Property, plant & equipment, net 126,050 107,377 18,673 17.4 % 128,805
Goodwill 54,433 49,778 4,655 9.4 % 55,162
Other assets 4,333 3,715 618 16.6 % 4,340
------------ --------------- ---------------- ------------- ------------
Total assets $ 342,022 320,979 21,043 6.6 % 354,815
============ =============== ================ ============= ============
Current liabilities
Current maturities of long-term debt $ 1,678 100 1,578 1,578.0 % 3,325
Accounts payable 32,640 36,709 (4,069) (11.1) % 37,214
Accrued expenses 17,143 15,175 1,968 13.0 % 17,936
Income taxes payable 0 1,034 (1,034) (100.0) % 1,282
------------ --------------- ---------------- ------------- ------------
Total current liabilities 51,461 53,018 (1,557) (2.9) % 59,757
Long-term debt 150,210 139,991 10,219 7.3 % 152,312
Deferred income taxes 11,227 9,965 1,262 12.7 % 11,227
------------ --------------- ---------------- ------------- ------------
Total liabilities 212,898 202,974 9,924 4.9 % 223,296
Shareholders' equity 129,124 118,005 11,119 9.4 % 131,519
------------ --------------- ---------------- ------------- ------------
Total liabilities and
shareholders' equity $ 342,022 320,979 21,043 6.6 % 354,815
============ =============== ================ ============= ============
Shares outstanding 12,995 12,687 308 2.4 % 13,007
============ =============== ================ ============= ============
* Derived from audited financial statements.
CULP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 1, 1998 AND NOVEMBER 2, 1997
Unaudited
(Amounts in Thousands)
SIX MONTHS ENDED
----------------------------------
Amounts
--------------------------------
November 1, November 2,
1998 1997
--------------- ---------------
Cash flows from operating activities:
Net income (loss) $ (1,333) 7,355
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 9,198 6,869
Amortization of intangible assets 829 533
Changes in assets and liabilities:
Accounts receivable 775 (17,623)
Inventories 6,202 (11,813)
Other current assets 578 (686)
Other assets (93) (188)
Accounts payable (2,395) 10,668
Accrued expenses (793) 295
Income taxes payable (1,282) (546)
--------------- ---------------
Net cash provided by (used in) operating activities 11,686 (5,136)
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (6,443) (19,216)
Purchases of restricted investments (66) (8,662)
Purchase of investments to fund deferred compensation liability 0 (581)
Sale of restricted investments 678 11,422
Business acquired 0 (36,628)
--------------- ---------------
Net cash used in investing activities (5,831) (53,665)
--------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 2,535 63,500
Principal payments on long-term debt (6,284) (50)
Change in accounts payable-capital expenditures (2,179) (3,862)
Dividends paid (910) (889)
Common stock issued (purchased) (152) 481
--------------- ---------------
Net cash provided by (used in) financing activities (6,990) 59,180
--------------- ---------------
Increase (decrease) in cash and cash investments (1,135) 379
Cash and cash investments at beginning of period 2,312 830
--------------- ---------------
Cash and cash investments at end of period $ 1,177 1,209
=============== ===============
CULP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except per share data)
Capital
Common Stock Contributed Total
------------------------------- in Excess Retained Shareholders'
Shares Amount of Par Value Earnings Equity
----------------------------------------------------------------------------------------------------------------------------------
Balance, April 27, 1997 12,608,759 $ 630 $ 33,899 $ 76,260 $ 110,789
Cash dividends ($0.14 per share) (1,786) (1,786)
Net income 15,513 15,513
Common stock issued in connection
with stock option plans 114,051 6 997 1,003
Common stock issued in connection with acquisition
of Artee Industries, Incorporated's assets 284,211 14 5,386 5,400
Stock options issued in connection
with acquisition of Phillips' assets 600 600
----------------------------------------------------------------------------------------------------------------------------------
Balance, May 3, 1998 13,007,021 650 40,882 89,987 131,519
Cash dividends ($0.07 per share) (910) (910)
Net loss (1,333) (1,333)
Common stock issued in connection
with stock option plans 1,000 8 8
Common stock purchased (13,000) (41) (119) (160)
----------------------------------------------------------------------------------------------------------------------------------
Balance, November 1, 1998 12,995,021 $ 650 $ 40,849 $ 87,625 $ 129,124
=================================================================================================================================
Culp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Culp, Inc.
and subsidiary, include all adjustments, consisting only of normal, recurring
adjustments and accruals, which are, in the opinion of management, necessary for
fair presentation of the results of operations and financial position. Results
of operations for interim periods may not be indicative of future results. The
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements, which are incorporated by
reference in the company's annual report on Form 10-K filed with the Securities
and Exchange Commission on July 31, 1998 for the fiscal year ended May 3, 1998.
The three and six month periods ended November 1, 1998 includes the results of
Phillips, Wetumpka and Artee which were acquired on August 5, 1997, December 30,
1997 and February 2, 1998, respectively.
================================================================================
================================================================================
2. Accounts Receivable
A summary of accounts receivable follows (dollars in thousands):
- --------------------------------------------------------------------------------
November 1, 1998 May 3, 1998
- --------------------------------------------------------------------------------
Customers $ 75,061 $ 75,695
Allowance for doubtful accounts (1,338) (1,244)
Reserve for returns and allowances (725) (678)
- --------------------------------------------------------------------------------
$ 72,998 $ 73,773
================================================================================
3. Inventories
Inventories are carried at the lower of cost or market. Cost is determined
for substantially all inventories using the LIFO (last-in, first-out) method.
A summary of inventories follows (dollars in thousands):
- --------------------------------------------------------------------------------
November 1, 1998 May 3, 1998
- --------------------------------------------------------------------------------
Raw materials $ 43,079 $ 45,319
Work-in-process 6,129 6,608
Finished goods 28,461 31,017
- ------------------------------------------------------------------------------
Total inventories valued at FIFO cost 77,669 82,944
Adjustments of certain inventories to the
LIFO cost method (2,364) (2,364)
Adjustments of certain inventories to market (2,913) (1,986)
- --------------------------------------------------------------------------------
$ 72,392 $ 78,594
================================================================================
4. Restricted Investments
Restricted investments were purchased with proceeds from industrial revenue
bond issues and are invested pending application of such proceeds to project
costs or repayment of the bonds. The investments are stated at cost which
approximates market value.
5. Accounts Payable
A summary of accounts payable follows (dollars in thousands):
- --------------------------------------------------------------------------------
November 1, 1998 May 3, 1998
- --------------------------------------------------------------------------------
Accounts payable-trade $ 31,945 $ 34,340
Accounts payable-capital expenditures 695 2,874
- --------------------------------------------------------------------------------
$ 32,640 $ 37,214
================================================================================
6. Accrued Expenses
A summary of accrued expenses follows (dollars in thousands):
- --------------------------------------------------------------------------------
November 1, 1998 May 3, 1998
- --------------------------------------------------------------------------------
Compensation and benefits $ 11,417 $ 12,212
Other 5,726 5,724
- --------------------------------------------------------------------------------
$ 17,143 $ 17,936
================================================================================
7. Long-Term Debt
A summary of long-term debt follows (dollars in thousands):
- --------------------------------------------------------------------------------
November 1, 1998 May 3, 1998
- --------------------------------------------------------------------------------
Senior unsecured notes $ 75,000 $ 75,000
Industrial revenue bonds and other obligations 35,176 34,787
Revolving credit facility 35,000 30,000
Revolving line of credit 0 6,000
Obligations to sellers 6,712 9,850
- --------------------------------------------------------------------------------
151,888 155,637
Less current maturities (1,678) (3,325)
- --------------------------------------------------------------------------------
$ 150,210 $ 152,312
================================================================================
On April 2, 1998, the company completed the sale of $75,000,000 of senior
unsecured notes (the "Notes") in a private placement to insurance companies. The
Notes have a fixed coupon rate of 6.76% and an average term of 10 years. The
principal payments become due from March 2006 to March 2010 with interest
payable semi-annually.
The company's revolving credit agreement (the "Credit Agreement") provides
an unsecured multi-currency revolving credit facility, which expires in April
2002, with a syndicate of banks in the United States. The Credit Agreement
provides for a revolving loan commitment of $88,000,000. The agreement requires
payment of a quarterly facility fee in advance. In October 1998, the company
amended the Credit Agreement and certain covenants therein. Additionally, the
amendment increased the interest rate 0.375% to 6.5313% (LIBOR plus 1.125%) on
borrowings outstanding at November 1, 1998.
The company's $6,000,000 revolving line of credit expires on November 30,
1999. However, the line of credit will automatically be extended for an
additional three-month period on each February 28, May 31, August 31 and
November 30 unless the bank notifies the company that the line of credit will
not be extended.
The industrial revenue bonds (IRBs) are generally due in balloon maturities
which occur at various dates from 2006 to 2013. The IRBs are collateralized by
restricted investments of $3,409,000 and letters of credit for the outstanding
balance of the IRBs and certain interest payments due thereunder.
The company's loan agreements require, among other things, that the company
maintain compliance with certain financial ratios. At November 1, 1998, the
company was in compliance with the amended financial covenants.
At November 1, 1998, the company had three interest rate swap agreements
with a bank in order to reduce its exposure to floating interest rates on a
portion of its variable rate borrowings. The following table summarizes certain
data regarding the interest rate swaps:
notational amount interest rate expiration date
$ 15,000,000 7.3% April 2000
$ 5,000,000 6.9% June 2002
$ 5,000,000 6.6% July 2002
The estimated amount at which the company could terminate these agreements
as of November 1, 1998 is approximately $998,000. Net amounts paid under these
agreements increased interest expense by approximately $119,000 and $120,000 for
the six months of fiscal 1999 and 1998, respectively. Management believes the
risk of incurring losses resulting from the inability of the bank to fulfill its
obligation under the interest rate swap agreements to be remote and that any
losses incurred would be immaterial.
8. Cash Flow Information
Payments for interest and income taxes during the period were (dollars in
thousands)
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
.
Interest $ 4,974 $ 3,115
Income taxes 2,067 4,488
================================================================================
9. Foreign Exchange Forward Contracts
The company generally enters into foreign exchange forward and option
contracts as a hedge against its exposure to currency fluctuations on firm
commitments to purchase certain machinery and equipment and raw materials and
certain anticipated Canadian dollar expenses of the company's Canadian
subsidiary. The company had no outstanding foreign exchange forward and option
contracts as of November 1, 1998.
10. Net Income (Loss) Per Share
The following tables reconcile the numerators and denominators of net
income (loss) per share and net income (loss) per share, assuming dilution for
the three and six months ended November 1, 1998 and November 2, 1997:
THREE MONTHS ENDED
November 1, 1998 November 2, 1997
-------------------------------------- ---------------------------------------
(Amounts in thousands, Income Shares Per Share Income Shares Per Share
except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------------------- ----------- ------------- -------- ----------- ------------ --------
Net income per
share $1,307 12,995 $0.10 $4,505 12,668 $0.36
========= ========
Effect of dilutive
securities:
Options - 125 - 312
Net income per share,
assuming dilution $1,307 13,120 $0.10 $4,505 12,980 $0.35
=========== ============= ======== ========== =========== =========
SIX MONTHS ENDED
November 1, 1998 November 2, 1997
-------------------------------------- ---------------------------------------
(Amounts in thousands, (Loss) Shares Per Share Income Shares Per Share
except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------------------- ----------- ------------- -------- ----------- ------------ --------
Net income (loss)
per share ($1,333) 12,998 ($0.10) $7,355 12,649 $0.58
======== ========
Effect of dilutive
securities:
Options - 177 - 304
Net income (loss) per share,
assuming dilution ($1,333) 13,175 ($0.10) $7,355 12,953 $0.57
=========== ============= ======== ========== =========== =========
CULP, INC.
SALES BY PRODUCT CATEGORY/BUSINESS UNIT
FOR THE THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 1, 1998 AND NOVEMBER 2, 1997
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- ----------------------------
November 1, November 2, % Over
Product Category/Business Unit 1998 1997 (Under) 1999 1998
- ------------------------------------ ------------ ------------ --------------- ------------- ------------
Upholstery Fabrics
Culp Decorative Fabrics $ 59,573 56,781 4.9 % 46.5 % 46.2 %
Culp Velvets/Prints 38,728 43,928 (11.8) % 30.2 % 35.7 %
------------ ------------ --------------- ------------- ------------
98,301 100,709 (2.4) % 76.7 % 81.9 %
Mattress Ticking
Culp Home Fashions 23,491 22,217 5.7 % 18.3 % 18.1 %
Yarn
Culp Yarn 6,367 0 100.0 % 5.0 % 0.0 %
------------ ------------ --------------- ------------- ------------
* $ 128,159 122,926 4.3 % 100.0 % 100.0 %
============ ============ =============== ============= ============
SIX MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Total Sales
-------------------------- ----------------------------
November 1, November 2, % Over
Product Category/Business Unit 1998 1997 (Under) 1999 1998
- ------------------------------------ ------------ ------------ --------------- ------------- ------------
Upholstery Fabrics
Culp Decorative Fabrics $ 111,018 96,595 14.9 % 46.5 % 43.4 %
Culp Velvets/Prints 68,722 82,325 (16.5) % 28.8 % 37.0 %
------------ ------------ --------------- ------------- ------------
179,740 178,920 0.5 % 75.3 % 80.4 %
Mattress Ticking
Culp Home Fashions 46,123 43,504 6.0 % 19.3 % 19.6 %
Yarn
Culp Yarn 12,963 0 100.0 % 5.4 % 0.0 %
------------ ------------ --------------- ------------- ------------
* $ 238,826 222,424 7.4 % 100.0 % 100.0 %
============ ============ =============== ============= ============
* U.S. sales were $94,472 and $87,622 for the second quarter of fiscal 1999 and
fiscal 1998, respectively; and $178,782 and $162,029 for the six months of
fiscal 1999 and fiscal 1998, respectively. The percentage increase in U.S. sales
was 7.8% for the second quarter and an increase of 10.3% for the six months.
CULP, INC.
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 1, 1998 AND NOVEMBER 2, 1997
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
November 1, November 2, % Over
Geographic Area 1998 1997 (Under) 1999 1998
- ---------------------------------- --------------- -------------- -------------- ------------- ------------
North America (Excluding USA) $ 8,502 8,162 4.2 % 25.2 % 23.1 %
Europe 7,223 6,624 9.0 % 21.4 % 18.8 %
Middle East 10,060 7,439 35.2 % 29.9 % 21.1 %
Far East & Asia 5,435 9,720 (44.1) % 16.1 % 27.5 %
South America 1,238 1,216 1.8 % 3.7 % 3.4 %
All other areas 1,229 2,143 (42.7) % 3.6 % 6.1 %
--------------- -------------- -------------- ------------- ------------
$ 33,687 35,304 (4.6) % 100.0 % 100.0 %
=============== ============== ============== ============= ============
SIX MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- ------------------------------
November 1, November 2, % Over
Geographic Area 1998 1997 (Under) 1999 1998
- ---------------------------------- --------------- -------------- -------------- ------------- ------------
North America (Excluding USA) $ 15,755 15,206 3.6 % 26.2 % 25.2 %
Europe 10,906 11,125 (2.0) % 18.2 % 18.4 %
Middle East 18,360 14,003 31.1 % 30.6 % 23.2 %
Far East & Asia 10,303 15,662 (34.2) % 17.2 % 25.9 %
South America 2,238 1,462 53.1 % 3.7 % 2.4 %
All other areas 2,482 2,937 (15.5) % 4.1 % 4.9 %
--------------- -------------- -------------- ------------- ------------
$ 60,044 60,395 (0.6) % 100.0 % 100.0 %
=============== ============== ============== ============= ============
International sales, and the percentage of total sales, for each of the last
seven fiscal years follows: fiscal 1992-$ 37,913 (20%); fiscal 1993-$ 41,471
(21%); fiscal 1994-$ 44,038 (18%); fiscal 1995-$ 57,971 (19%); fiscal 1996-$
77,397 (22%); fiscal 1997-$ 101,571 (25%); and fiscal 1998-$ 137,223 (29%) .
International sales for the second quarter represented 26.3% and 28.7% for 1999
and 1998, respectively. Year-to-date international sales represented 25.1% and
27.2% of total sales for 1999 and 1998, respectively.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following analysis of the financial condition and results of operations
should be read in conjunction with the Financial Statements and Notes and
other exhibits included elsewhere in this report.
Overview
For the three months ended November 1, 1998, net sales rose 4.3% to $128.2
million compared with $122.9 million in the year-earlier period. Net income
for the quarter totaled $1.3 million, or $0.10 per share diluted, compared
with net income of $4.5 million, or $0.35 per share diluted, for the second
quarter of fiscal 1998. Net sales for the quarter, excluding Artee
Industries, decreased .9% versus the same quarter of last year. Artee
Industries was acquired at the beginning of the fourth quarter of fiscal
1998. During the quarter, demand for Culp Velvets/Prints products being
shipped directly or indirectly into the emerging markets of Russia and other
former Soviet countries, India and Eastern Europe continued to experience a
slowdown, which began after the close of fiscal 1998. All of these areas are
generally experiencing very weak economic conditions which, in turn, have
affected demand for furniture and other home furnishings. This decline in
international sales was offset by increased sales of other products into
other regions, principally the Middle East, and from increased international
sales related to Phillips Mills. Sales of upholstery fabrics to US-based
manufacturers were down 1.4% for the quarter from a year ago. This portion
of the company's business has been generally soft throughout fiscal 1998 and
into the first half of fiscal 1999. Demand for the company's products is
dependent on the various factors which affect consumer purchases of
upholstered furniture and bedding including housing starts and sales of
existing homes, the level of consumer confidence, prevailing interest rates
for home mortgages and the availability of consumer credit.
Three and Six Months ended November 1, 1998 compared with Three and Six
Months ended November 2, 1997
Net Sales. For the three months ended November 1, 1998, net sales rose
4.3% to $128.2 million compared with $122.9 million in the year-earlier
period. For the first six months, net sales increased by $16.4 million or
7.4%, compared with the year earlier period. The increase in sales for the
second quarter was due to inclusion of sales of $6.4 million from Artee
Industries, which was acquired in February 1998. The increase in sales for
the first six months was due to inclusion of sales of $22.1 million from
Artee Industries and Phillips Mills. Phillips Mills was acquired in August
1997. These incremental sales were offset by a decline in sales of certain
products of the Culp Velvets/Prints division that are primarily marketed
internationally. Sales for the second quarter and first six months from Culp
Velvets/Prints decreased $5.2 million and $13.6 million, respectively, from
the prior year periods. These were declines of 11.8% and 16.5%,
respectively. A large percentage of the company's international sales have
been generated in recent years by shipments directly or indirectly to
customers in the emerging markets of Russia and other former Soviet
countries, India and Eastern Europe. All of these areas are experiencing
very weak economic conditions which, in turn, have affected demand for
furniture and other home furnishings. The company has significantly
curtailed production schedules for these fabrics and has shifted its
marketing focus for this product category to geographic areas where demand is
more favorable. International sales have increased from a year ago in other
regions, notably the Middle East.
Sales for the second quarter and first six months from the Culp Decorative
Fabrics business unit increased $2.8 million and $14.4 million,
respectively, increases of 4.9% and 14.9%, respectively, from a year ago.
The second quarter increase is attributable to strong international sales
into the Middle East countries. The first six months increase is primarily
attributable to the incremental sales in the first quarter from Phillips
Mills. Sales for the second quarter and first six months from the Culp Home
Fashions unit, which principally consists of mattress ticking and bedding
products, rose 5.7% and 6.0%, respectively, increases of $1.3 million and
$2.6 million, respectively.
Gross Profit and Cost of Sales. Gross profit for the second quarter of 1999
decreased by $2.3 million and amounted to 16.0% of net sales compared with
18.5% in 1998. For the first six months, gross profit decreased by $5.4
million and amounted to 14.3% of net sales compared with 17.7% a year ago.
The company was affected by an under-absorption of fixed costs as a result of
lower-than-expected sales in certain business units, especially in certain
product categories where international sales represent a significant portion
of shipments. Competitive pressures also contributed to the decline in
margins from a year ago. The cost of raw materials is flat to slightly
lower. The continuing slowdown in international sales of certain fabrics,
combined with other competitive issues, will likely lead to lower gross
profit compared with the prior year through the second half of fiscal 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased as a percentage of net sales for the second
quarter of 1999 to 12.1% compared with 11.1% a year ago. For the first six
months, these expenses increased as a percentage of sales to 12.5% versus
11.0% for the prior year. The company was affected by lower-than-expected
sales in certain product categories. Compared with a year ago, the company
is incurring higher expenses related to expanded resources for designing and
sampling fabrics with new patterns and textures.
Interest Expense. Net interest expense for the second quarter of 1999 was
$2.4 million, up from $1.7 million in 1998 and for the first six months was
$4.8 million versus $2.9 million last year. The increase is due principally
to borrowings related to the acquisition of Artee Industries in February 1998
and Phillips Mills completed in August 1997. The company also has higher
borrowings due to financing of prior year capital expenditures.
Other Expense. Other expense increased to $604,000 and $1,374,000 for the
second quarter and first six months of 1999, respectively, compared with
$425,000 and $667,000, respectively, for the year-earlier periods,
principally due to the amortization of goodwill associated with the
acquisitions of Artee Industries and Phillips Mills and to the write-off of
certain fixed assets in the first quarter.
Income Taxes. The effective tax rate for the second quarter and first six
months of 1999 was 33.0% compared with 35.0% in the year-earlier periods.
Net Income (Loss) Per Share. Net income per share for the second quarter of
1999 totaled $0.10 per share diluted compared with $0.35 per share diluted a
year ago. For the first half, the company reported a net loss of $0.10 per
share versus net income of $0.57 per share diluted in the prior year.
Liquidity and Capital Resources
Liquidity. Cash and cash investments were $1.2 million as of November 1,
1998 and November 2, 1997, compared with $2.3 million at the end of fiscal
1998. Funded debt (long-term debt, including current maturities, less
restricted investments) was $148.5 million at the close of the second
quarter, up from $131.8 million as of November 2, 1997 and down from $151.6
million at the end of fiscal 1998. As a percentage of total capital (funded
debt plus total shareholders' equity), the company's borrowings amounted to
53.5% as of November 1, 1998, compared with 52.8% as of November 2, 1997 and
53.5% at the end of fiscal 1998. The company's working capital as of
November 1, 1998 was $102.3 million, compared with $98.8 million as of
November 2, 1997 and $102.7 million at the close of fiscal 1998.
Because of seasonal factors, the company typically generates the majority of
its cash from operating activities during the second fiscal half. Operating
activities, principally a decrease in inventories and depreciation, provided
$11.7 million during the first half. Capital expenditures during the first
half totaled $6.4 million. Financing activities, principally payments on
long-term borrowings, utilized $7.0 million in cash during the first half.
Financing Arrangements. As of November 1, 1998, the company had outstanding
balances of $35 million under a $88 million syndicated five-year,
unsecured, multi-currency revolving credit facility. The company also has
$75 million of senior unsecured notes ("Notes") with insurance companies.
The Notes have a fixed coupon rate of 6.76% and an average term of 10
years. In addition, the company has a total of $35.2 million in outstanding
industrial revenue bonds ("IRBs") which have been used to finance capital
expenditures. The IRBs are collateralized by restricted investments of $3.4
million as of November 1, 1998 and letters of credit for the outstanding
balance of the IRBs and certain interest payments due thereunder.
In October 1998, the company amended the syndicated revolving credit facility
to amend certain covenants. Additionally, the amendment increased the
interest rate 0.375% to 6.5313% (LIBOR plus 1.125%) on borrowings outstanding
at November 1, 1998.
The company's loan agreements require, among other things, that the company
maintain compliance with certain financial ratios. As of November 1, 1998,
the company was in compliance with the amended financial covenants.
As of November 1, 1998, the company had three interest rate swap agreements
to reduce its exposure to floating interest rates on a $25 million
notional amount. The effect of these contracts is to "fix" the interest rate
payable on $25 million of the company's bank borrowings at a weighted average
rate of 7.1%. The company also enters into foreign exchange forward and
option contracts to hedge against currency fluctuations with respect to firm
commitments to purchase certain machinery, equipment, raw materials and
certain anticipated Canadian dollar expenses of the company's Canadian
subsidiary.
Capital Expenditures. The company maintains an ongoing program of capital
expenditures designed to increase capacity as needed, enhance manufacturing
efficiencies through modernization and increase the company's vertical
integration. The company anticipates spending $10-$15 million in fiscal
1999. The company believes that cash flows from operations and funds
available under existing credit facilities will be sufficient to fund capital
expenditures and working capital requirements for the foreseeable future.
Seasonality
The company's business is slightly seasonal, with increased sales during the
company's second and fourth fiscal quarters. This seasonality results from
one-week closings of the company's manufacturing facilities, and the
facilities of most of its customers in the United States, during the
first and third quarters for the holiday weeks including July 4th and
Christmas.
Year 2000 Considerations
Management has developed a plan to modify the company's information
technology to recognize the year 2000. The plan has three distinct areas
of focus; namely, traditional information systems, technology used in support
areas, and preparedness of suppliers and customers.
The initiative for traditional information systems, which started in 1992,
has led to substantial completion of the assessment, required changes and
testing of the company's operational systems (order entry, billing,
sales, finished goods) and financial systems (payroll, human resources,
accounts payable, accounts receivable, general ledger, fixed assets).
The company is currently focused on modifying the remaining systems that
support the company's manufacturing processes and plans to be substantially
complete with this phase by May 1, 1999.
The second area of focus has been an assessment of non-traditional
information technology which includes the electronics in equipment such as
telephone switches and manufacturing equipment. A plan, targeted to be
substantially complete by December 31, 1998, has been formed to evaluate
all these components at every location. This step will be followed during
calendar 1999 with installation and testing of required changes.
The third area of focus is communications with suppliers and vendors to
understand their level of compliance and assure a constant flow of materials
to support business plans. Communication to date has shown a high level of
awareness and planning by these parties.
Formal contingency plans will not be formulated unless the company has
identified specific areas where there is a substantial risk of year 2000
problems occurring. No such areas have been identified.
The plan is being administered by a team of internal staff and management;
and the cost of this initiative, principally represented by internal
resources, is not expected to be material to the company's results of
operations or financial position. This project is not expected to have a
significant effect on the company's operations, though no assurance can be
given in this regard.
Forward-Looking Information
The company's quarterly report on Form 10-Q contains statements that could be
deemed "forward-looking statements," within the meaning of the federal
securities laws. 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 increasing 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.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
About Segments of an Enterprise and Related Information," effective for
periods beginning after December 15, 1997. The purpose of this standard is
to disclose disaggregated information which provides information about the
operating segments an enterprise engages in, consistent with the way
management reviews financial information to make decisions about the
enterprise's operating matters. The company will comply with the
requirements of this standard for the fiscal year ending May 2, 1999.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
provisions of SFAS No. 133 are effective for periods beginning after June 15,
1999, although early adoption is allowed. The company has not determined the
financial impact of adopting this SFAS and has not determined if it will
adopt its provisions prior to its effective date.
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the company was held in High Point,
North Carolina on September 15, 1998. Of the 12,995,021 shares of common
stock outstanding on the record date, 11,690,111 shares were present in
person or by proxy.
At the Annual Meeting, shareholders voted on:
ratifying the appointment of KPMG Peat Marwick LLP as the independent
auditors of the company for the current fiscal year, and;
the election of three directors: Howard L. Dunn, Jr., Bland W.
Worley, and Earl N. Phillips, Jr., to serve until the 2001 Annual
Meeting, and the election of one director: Robert T. Davis to serve
until the 1999 Annual Meeting.
A. Proposal to ratify the election of KPMG Peat Marwick LLP as
independent auditors of the company for fiscal year 1999:
For 11,675,261
Against 9,500
Abstain 5,350
Broker Non-Votes -0-
B. Proposal for Election of Directors:
Howard L. Dunn, Jr. Earl N. Phillips, Jr.
For 11,434,973 For 11,434,964
Against -0- Against -0-
Abstain 255,138 Abstain 255,147
Broker Non-Votes -0- Broker Non-Votes -0-
Bland W. Worley Robert T. Davis
For 11,434,704 For 11,434,464
Against -0- Against -0-
Abstain 255,407 Abstain 255,647
Broker Non-Votes -0- Broker Non-Votes -0-
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are filed as part of this report or
incorporated by reference. Management contracts, compensatory plans,
and arrangements are marked with an asterisk (*).
3(i) Articles of Incorporation of the Company, as
amended, were filed as Exhibit 3(i) to the
Company's Form 10-Q for the quarter ended January
29, 1995, filed March 15, 1995, and are
incorporated herein by reference.
3(ii) Restated and Amended Bylaws of the Company,
as amended, were filed as Exhibit 3(b) to the
Company's Form 10-K for the year ended April 28,
1991, filed July 25, 1991, and are incorporated
herein by reference.
10(a) Loan Agreement dated December 1, 1988 with
Chesterfield County, South Carolina relating to
Series 1988 Industrial Revenue Bonds in the
principal amount of $3,377,000 was filed as
Exhibit 10(n) to the Company's Form 10-K for the
year ended April 29, 1989, and is incorporated
herein by reference.
10(b) Loan Agreement dated November 1, 1988 with the
Alamance County Industrial Facilities and
Pollution Control Financing Authority relating to
Series A and B Industrial Revenue Refunding Bonds
in the principal amount of $7,900,000, was filed
as exhibit 10(o) to the Company's Form 10-K for
the year ended April 29, 1990, and is
incorporated herein by reference.
10(c) Loan Agreement dated January 5, 1990 with the
Guilford County Industrial Facilities and
Pollution Control Financing Authority, North
Carolina, relating to Series 1989 Industrial
Revenue Bonds in the principal amount of
$4,500,000, was filed as Exhibit 10(d) to the
Company's Form 10-K for the year ended April 19,
1990, filed on July 15, 1990, and is incorporated
herein by reference.
10(d) Loan Agreement dated as of December 1, 1993
between Anderson County, South Carolina and the
Company relating to $6,580,000 Anderson County,
South Carolina Industrial Revenue Bonds (Culp,
Inc. Project) Series 1993, was filed as Exhibit
10(o) to the Company's Form 10-Q for the quarter
ended January 30, 1994, filed March 16, 1994, and
is incorporated herein by reference.
10(e) Form of Severance Protection Agreement, dated
September 21, 1989, was filed as Exhibit 10(f) to
the Company's Form 10-K for the year ended April
29, 1990, filed on July 25, 1990, and is
incorporated herein by reference. (*)
10(f) Lease Agreement, dated January 19, 1990, with
Phillips Interests, Inc. was filed as Exhibit
10(g) to the Company's Form 10-K for the year
ended April 29, 1990, filed on July 25, 1990, and
is incorporated herein by reference.
10(g) Management Incentive Plan of the Company, dated
August 1986 and amended July 1989, filed as
Exhibit 10(o) to the Company's Form 10-K for the
year ended May 3, 1992, filed on August 4, 1992,
and is incorporated herein by reference. (*)
10(h) Lease Agreement, dated September 6, 1988, with
Partnership 74 was filed as Exhibit 10(h) to the
Company's Form 10-K for the year ended April 28,
1991, filed on July 25, 1990, and is incorporated
herein by reference.
10(i) Amendment and Restatement of the Employee's
Retirement Builder Plan of the Company dated May
1, 1981 with amendments dated January 1, 1990 and
January 8, 1990 were filed as Exhibit 10(p) to
the Company's Form 10-K for the year ended May 3,
1992, filed on August 4, 1992, and is
incorporated herein by reference. (*)
10(j) First Amendment of Lease Agreement dated July 27,
1992 with Partnership 74 Associates was filed as
Exhibit 10(n) to the Company's Form 10-K for the
year ended May 2, 1993, filed on July 29, 1993,
and is incorporated herein by reference.
10(k) Second Amendment of Lease Agreement dated April
16, 1993, with Partnership 52 Associates was
filed as Exhibit 10(l) to the Company's Form
10-K for the year ended May 2, 1993, filed on
July 29, 1993, and is incorporated herein by
reference.
10(l) 1993 Stock Option Plan was filed as Exhibit 10(o)
to the Company's Form 10-K for the year ended May
2, 1993, filed on July 29, 1993, and is
incorporated herein by reference. (*)
10(m) First Amendment to Loan Agreement dated as of
December 1, 1993 by and between The Guilford
County Industrial Facilities and Pollution
Control Financing Authority and the Company was
filed as Exhibit 10(p) to the Company's Form
10-Q, filed on March 15, 1994, and is
incorporated herein by reference.
10(n) First Amendment to Loan Agreement dated as of
December 16, 1993 by and between The Alamance
County Industrial Facilities and Pollution
Control Financing Authority and the Company was
filed as Exhibit 10(q) to the Company's Form
10-Q, filed on March 15, 1994, and is
incorporated herein by reference.
10(o) First Amendment to Loan Agreement dated as of
December 16, 1993 by and between Chesterfield
County, South Carolina and the Company was filed
as Exhibit 10(r) to the Company's Form 10-Q,
filed on March 15, 1994, and is incorporated
herein by reference.
10(p) Amendment to Lease dated as of November 4, 1994,
by and between the Company and RDC, Inc. was
filed as Exhibit 10(w) to the Company's Form
10-Q, for the quarter ended January 29, 1995,
filed on March 15, 1995, and is incorporated
herein by reference.
10(q) Amendment to Lease Agreement dated as of December
14, 1994, by and between the Company and
Rossville Investments, Inc. (formerly known as A
& E Leasing, Inc.). was filed as Exhibit 10(y) to
the Company's Form 10-Q, for the quarter ended
January 29, 1995, filed on March 15, 1995, and is
incorporated herein by reference.
10(r) Interest Rate Swap Agreement between Company and
First Union National Bank of North Carolina dated
April 17, 1995, was filed as Exhibit 10(aa) to
the Company's Form 10-K for the year ended April
30, 1995, filed on July 26, 1995, and is
incorporated herein by reference.
10(s) Performance-Based Stock Option Plan, dated June
21, 1994, was filed as Exhibit 10(bb) to the
Company's Form 10-K for the year ended April 30,
1995, filed on July 26, 1995, and is incorporated
herein by reference. (*)
10(t) Interest Rate Swap Agreement between Company and
First Union National Bank of North Carolina,
dated May 31, 1995 was filed as exhibit 10(w) to
the Company's Form 10-Q for the quarter ended
July 30, 1995, filed on September 12, 1995, and
is incorporated herein by reference.
10(u) Interest Rate Swap Agreement between Company and
First Union National Bank of North Carolina,
dated July 7, 1995 was filed as exhibit 10(x) to
the Company's Form 10-Q for the quarter ended
July 30, 1995, filed on September 12, 1995, and
is incorporated herein by reference.
10(v) Second Amendment of Lease Agreement dated June
15, 1994 with Partnership 74 Associates was filed
as Exhibit 10(v) to the Company's Form 10-Q for
the quarter ended October 29, 1995, filed on
December 12, 1995, and is incorporated herein by
reference.
10(w) Lease Agreement dated November 1, 1993 by and
between the Company and Chromatex, Inc. was filed
as Exhibit 10(w) to the Company's Form 10-Q for
the quarter ended October 29, 1995, filed on
December 12, 1995, and is incorporated herein by
reference.
10(x) Lease Agreement dated November 1, 1993 by and
between the Company and Chromatex Properties,
Inc. was filed as Exhibit 10(x) to the Company's
Form 10-Q for the quarter ended October 29, 1995,
filed on December 12, 1995, and is incorporated
herein by reference.
10(y) Amendment to Lease Agreement dated May 1, 1994 by
and between the Company and Chromatex Properties,
Inc. was filed as Exhibit 10(y) to the Company's
Form 10-Q for the quarter ended October 29, 1995,
filed on December 12, 1995, and is incorporated
herein by reference.
10(z) Canada-Quebec Subsidiary Agreement on
Industrial Development (1991), dated January 4,
1995, was filed as Exhibit 10(z) to the Company's
Form 10-Q for the quarter ended October 29, 1995,
filed on December 12, 1995, and is incorporated
herein by reference.
10(aa) Loan Agreement between Chesterfield County, South
Carolina and the Company dated as of April 1,
1996 relating to Tax Exempt Adjustable Mode
Industrial Development Bonds (Culp, Inc.
Project) Series 1996 in the aggregate principal
amount of $6,000,000 was filed as Exhibit 10(aa)
to the Company's Form 10-K for the year ended
April 28, 1996, and is incorporated herein by
reference.
10(bb) Loan Agreement between the Alamance County
Industrial Facilities and Pollution Control
Financing Authority, North Carolina and the
Company, dated December 1, 1996, relating to Tax
Exempt Adjustable Mode Industrial Development
Revenue Bonds, (Culp, Inc. Project Series 1996)
in the aggregate amount of $6,000,000 was filed
as Exhibit 10(cc) to the Company's Form 10-Q for
the quarter ended January 26, 1997, and is
incorporated herein by reference.
10(cc) Loan Agreement between Luzerne County,
Pennsylvania and the Company, dated as of
December 1, 1996, relating to Tax-Exempt
Adjustable Mode Industrial Development Revenue
Bonds (Culp, Inc. Project) Series 1996 in the
aggregate principal amount of $3,500,000 was
filed as Exhibit 10(dd) to the Company's Form
10-Q for the quarter ended January 26, 1997, and
is incorporated herein by reference.
10(dd) Second Amendment to Lease Agreement between
Chromatex Properties, Inc. and the Company, dated
April 17, 1997 was filed as Exhibit 10(dd) to
the Company's Form 10-K for the year ended April
27, 1997, and is incorporated herein by reference.
10(ee) Lease Agreement between Joseph E. Proctor (doing
business as JEPCO) and the Company, dated April
21, 1997 was filed as Exhibit 10(ee) to the
Company's Form 10-K for the year ended April 27,
1997, and is incorporated herein by reference.
10(ff) $125,000,000 Revolving Loan Facility dated April
23, 1997 by and among the Company and Wachovia
Bank of Georgia, N.A., as agent, and First Union
National Bank of North Carolina, as documentation
agent was filed as Exhibit 10(ff) to the
Company's Form 10-K for the year ended April 27,
1997, and is incorporated herein by reference.
10(gg) Revolving Line of Credit for $4,000,000 dated
April 23, 1997 by and between the Company and
Wachovia Bank of North Carolina, N.A. was filed as
Exhibit 10(gg) to the Company's Form 10-K for the
year ended April 27, 1997, and is incorporated
herein by reference.
10(hh) Reimbursement and Security Agreement between Culp,
Inc. and Wachovia Bank of North Carolina, N.A.,
dated as of April 1, 1997, relating to $3,337,000
Principal Amount, Chesterfield County, South
Carolina Industrial Revenue Bonds (Culp, Inc.
Project) Series 1988 was filed as Exhibit 10(hh)
to the Company's Form 10-K for the year ended
April 27, 1997, and is incorporated herein by
reference.
Additionally, there are Reimbursement and Security
Agreements between Culp, Inc. and Wachovia Bank of
North Carolina, N.A., dated as of April 1, 1997 in
the following amounts and with the following
facilities:
$7,900,000 Principal Amount, Alamance County
Industrial Facilities and Pollution Control
Financing Authority Industrial Revenue Refunding
Bonds (Culp, Inc. Project) Series A and B.
$4,500,000 Principal Amount, Guilford County
Industrial Facilities and Pollution Control
Financing Authority Industrial Development Revenue
Bonds (Culp, Inc. Project) Series 1989.
$6,580,000 Principal Amount, Anderson County South
Carolina Industrial Revenue Bonds (Culp, Inc.
Project) Series 1993.
$6,000,000 Principal Amount, Chesterfield County,
South Carolina Tax-Exempt Adjustable Mode
Industrial Development Revenue Bonds (Culp, Inc.
Project) Series 1996.
$6,000,000 Principal Amount, The Alamance County
Industrial Facilities and Pollution Control
Financing Authority Tax-exempt Adjustable Mode
Industrial Development Revenue Bonds (Culp, Inc.
Project) Series 1996.
$3,500,000 Principal Amount, Luzerne County
Industrial Development Authority Tax-Exempt
Adjustable Mode Industrial Development Revenue
Bonds (Culp, Inc. Project) Series 1996.
10(ii) Loan Agreement and Reimbursement and Security
Agreement dated July 1, 1997 with the Robeson
County Industrial Facilities and Pollution Control
Financing Authority relating to the issuance of
Tax-Exempt Adjustable Mode Industrial Development
Revenue Bonds (Culp, Inc. Project), Series 1997
in the aggregate principal amount of $8,500,000 was
filed as Exhibit 10(ii) to the Company's Form 10-Q
for the quarter ended August 3, 1997, and is
incorporated herein by reference.
10(jj) Asset Purchase Agreement dated as of August 4,
1997 by and between Culp, Inc., Phillips Weaving
Mills, Inc., Phillips Printing Mills, Inc.,
Phillips Velvet Mills, Inc., Phillips Mills, Inc.,
Phillips Property Company, LLC, Phillips
Industries, Inc. and S. Davis Phillips was filed
as Exhibit (10jj) to the Company's Form 10-Q for
the quarter ended November 2, 1997, and is
incorporated herein by reference.
10(kk) Asset Purchase Agreement dated as of October 14,
1997 among Culp, Inc., Artee Industries,
Incorporated, Robert T. Davis, Robert L. Davis,
Trustee u/a dated 8/25/94, Robert L. Davis, Louis
W. Davis, Kelly D. England, J. Marshall Bradley,
Frankie S. Bradley and Mickey R. Bradley was filed
as Exhibit 10(kk) to the Company's Form 10-Q for
the quarter ended November 2, 1997, and is
incorporated herein by reference.
10(ll) Form of Note Purchase Agreement (providing for
the issuance by Culp, Inc. of its $20 million
6.76% Series A Senior Notes due 3/15/08 and its
$55 million 6.76% Series B Senior Notes due
3/15/10), each dated March 4, 1998, between Culp,
Inc. and each of the following:
1. Connecticut General Life Insurance Company;
2. The Mutual Life Insurance Company of New York;
3. United of Omaha Life Insurance Company;
4. Mutual of Omaha Insurance Company;
5. The Prudential Insurance Company of America;
6. Allstate Life Insurance Company;
7. Life Insurance Company of North America; and
8. CIGNA Property and Casualty Insurance Company
This agreement was filed as Exhibit 10(ll) to the
Company's Form 10-K for the year ended May 3,
1998, and is incorporated herein by
reference.
10(mm) First Amendment to Credit Agreement dated July
22, 1998 among Culp, Inc., Wachovia Bank, N.A.,
as agent, First Union National Bank, as
documentation agent, and Wachovia Bank, N.A.,
First Union National Bank, SunTrust Bank,
Atlanta, and Cooperatieve Centrale
Raiffeisen-Boerenleeenbank B.A., Rabobank
Nederland, New York Branch. This amendment was
filed as Exhibit 10(mm) to the Company's Form
10-Q for the quarter ended August 2, 1998, and is
incorporated herein by reference.
10(nn) Second Amendment to Credit Agreement dated
October 26, 1998, among Culp, Inc., Wachovia
Bank, N.A., as agent, First Union National Bank,
as documentation agent, and Wachovia Bank, N.A.,
First Union National Bank, and SunTrust Bank,
Atlanta.
27 Financial Data Schedule
(b) Reports on Form 8-K:
The following report on Form 8-K was filed during the period covered by
this report:
(1) Form 8-K dated August 20, 1998, included under Item 5, Other
Events, disclosure of the Company's press release for quarterly earnings
and the Company's Financial Information Release relating to the financial
information for the first quarter ended August 2, 1998.
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 thereunto duly authorized.
CULP, INC.
(Registrant)
Date: December 16, 1998 By: s/s Phillip W. Wilson
Phillip W. Wilson
Vice President and Chief Financial
and Accounting Officer
(Authorized to sign on behalf
of the registrant and also signing
as principal financial officer)