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 period ended January 29, 1995
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)
(910) 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 January 29, 1995: 11,204,766
Par Value: $.05
INDEX TO FORM 10-Q
January 29, 1995
Page
Part I - Financial Information. ------
------------------------------------------
Item 1. Financial Statements:
Statements of Income--Three and Nine Months Ended I-1
January 29, 1995 and January 30, 1994
Balance Sheets--January 29, 1995 and May 1, 1994
Statements of Cash Flows--Nine Months Ended I-3
January 29, 1995 and January 30, 1994
Statements of Shareholders' Equity I-4
Notes to Financial Statements I-5
Sales by Business Unit I-8
Export Sales by Geographic Area I-9
Item 2. Management's Discussion and Analysis of Financial I-10
Condition and Results of Operation
Part II - Other Information
-------------------------------------
Item 1. Legal Proceedings II-1
Item 2. Changes in Securities II-1
Item 3. Default Upon Senior Securities II-1
Item 4. Submission of Matters to a Vote of Security Holders II-1
Item 5. Other Information II-1
Item 6. Exhibits and Reports on Form 8-K II-1 - II-5
Signatures II-6
CULP, INC.
INCOME STATEMENTS
FOR THE THREE MONTHS & NINE MONTHS ENDED JANUARY 29, 1995 AND JANUARY 30, 1994
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Sales
January 29,January 30, % Over
1995 1994 (Under) 1995 1994
Net sales 77,791 67,031 16.1 % 100.0 % 100.0 %
Cost of sales 64,785 55,350 17.0 % 83.3 % 82.6 %
Gross profit 13,006 11,681 11.3 % 16.7 % 17.4 %
Selling, general and
administrative expenses 8,295 7,798 6.4 % 10.7 % 11.6 %
Income from operations 4,711 3,883 21.3 % 6.1 % 5.8 %
Interest expense 1,120 899 24.6 % 1.4 % 1.3 %
Interest income (14) (11) 27.3 % (0.0)% (0.0)%
Other expense (income), net 245 91 169.2 % 0.3 % 0.1 %
Income before income taxes 3,360 2,904 15.7 % 4.3 % 4.3 %
Income taxes * 1,260 1,129 11.6 % 37.5 % 38.9 %
Net income 2,100 1,775 18.3 % 2.7 % 2.6 %
Average shares outstanding 11,205 11,098 1.0 %
Earnings per share $0.19 $0.16 18.8 %
Dividends per share $0.025 $0.020 25.0 %
NINE MONTHS ENDED (UNAUDITED)
Amounts Percent of Sales
January 29,January 30, % Over
1995 1994 (Under) 1995 1994
Net sales 222,585 167,600 32.8 % 100.0 % 100.0 %
Cost of sales 184,306 139,931 31.7 % 82.8 % 83.5 %
Gross profit 38,279 27,669 38.3 % 17.2 % 16.5 %
Selling, general and
administrative expenses 24,227 19,189 26.3 % 10.9 % 11.4 %
Income from operations 14,052 8,480 65.7 % 6.3 % 5.1 %
Interest expense 3,341 1,632 104.7 % 1.5 % 1.0 %
Interest income (61) (56) 8.9 % (0.0)% (0.0)%
Other expense (income), net 612 (75) ** 0.3 % (0.0)%
Income before income taxes 10,160 6,979 45.6 % 4.6 % 4.2 %
Income taxes * 3,810 2,514 51.6 % 37.5 % 36.0 %
Net income 6,350 4,465 42.2 % 2.9 % 2.7 %
Average shares 11,203 11,043 1.4 %
Earnings per share $0.57 $0.40 42.5 %
Dividends per share $0.075 $0.06 25.0 %
* Percent of sales column is calculated as a % of income before income taxes.
** Measurement is not meaningful.
I-1
CULP, INC.
BALANCE SHEETS
JANUARY 29, 1995, JANUARY 30, 1994 AND MAY 1, 1994
(Unaudited, Amounts in Thousands)
Amounts Increase
January 29, January 30, (Decrease) * May 1,
1995 1994 Dollars Percent 1994
Current assets
Cash and cash investments 317 287 30 10.5 % 2,693
Accounts receivable 40,547 35,024 5,523 15.8 % 36,743
Inventories 44,314 39,668 4,646 11.7 % 36,596
Other current assets 2,920 2,285 635 27.8 % 2,227
Total current assets 88,098 77,264 10,834 14.0 % 78,259
Restricted investments 1,602 3,577 (1,975) (55.2)% 2,923
Property, plant & equipment, net 69,373 60,333 9,040 15.0 % 64,004
Cost in excess of net assets of business
acquired, net 18,850 16,886 1,964 11.6 % 18,706
Other assets 1,215 933 282 30.2 % 1,056
Total assets 179,138 158,993 20,145 12.7 % 164,948
Current Liabilities
Current maturities of long-term debt 6,100 2,674 3,426 128.1 % 3,050
Accounts payable 24,126 20,504 3,622 17.7 % 28,466
Accrued expenses 10,082 6,712 3,370 50.2 % 8,158
Income taxes payable 1,391 1,551 (160) (10.3)% 636
Total current liabilities 41,699 31,441 10,258 32.6 % 40,310
Long-term debt 65,711 66,293 (582) (0.9)% 58,512
Deferred income taxes 3,477 2,005 1,472 73.4 % 3,477
Total liabilities 110,887 99,739 11,148 11.2 % 102,299
Shareholders' equity 68,251 59,254 8,997 15.2 % 62,649
Total liabilities and
stockholders' equity 179,138 158,993 20,145 12.7 % 164,948
Shares outstanding 11,205 11,174 31 0.3 % 11,177
* Derived from audited financial statements.
** Measurement is not meaningful.
I-2
CULP, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 29, 1995 AND JANUARY 30, 1994
(Unaudited, Amounts in Thousands)
NINE MONTHS ENDED
Amounts
January 29, January 30,
1995 1994
Cash flows from operating activities:
Net income 6,350 4,465
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 8,237 5,909
Amortization of intangible assets 458 112
Provision for deferred income taxes (272) 0
Changes in assets and liabilities:
Accounts receivable (3,804) 1,249
Inventories (7,718) (6,797)
Other current assets (421) (321)
Other assets (761) (318)
Accounts payable (4,340) (3,188)
Accrued expenses 1,924 (532)
Income taxes payable 755 138
Net cash provided by (used in) operating activities 408 717
Cash flows from investing activities:
Capital expenditures (13,606) (10,161)
Purchases of restricted investments (60) (3,577)
Proceeds from sale of restricted investments 1,381 0
Business acquired 0 (38,703)
Net cash provided by (used in) investing activities (12,285) (52,441)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 20,000 43,902
Principal payments on long-term debt (9,751) (1,517)
Net increase (decrease) in bank overdrafts 0 2,139
Dividends paid (840) (590)
Proceeds from sale of common stock 92 858
Net cash provided by (used in) financing activities 9,501 44,792
Increase (decrease) in cash and cash investments (2,376) (6,932)
Cash and cash investments at beginning of period 2,693 7,219
Cash and cash investments at end of period 317 287
I-3
Culp, Inc.
STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
(Amounts in thousands, except per share data)
Capital
Contributed Total
Common Stock in Excess Retained Shareholders'
Shares Amount of Par Value Earnings Equity
Balance, May 2, 1993 7,259,161 $ 362 $ 15,333 $ 38,826 $ 54,521
Cash dividends (887) (887)
($.08 per share)
Net income 7,665 7,665
Common stock issued in
connection with stock
option plan 212,140 11 1,339 1,350
Three-for-two stock split 3,706,052 185 (185)
Balance, May 1, 1994 11,177,353 $ 558 $ 16,487 $ 45,604 $ 62,649
Cash dividends (840) (840)
($.075 per share)
Net income 6,350 6,350
Common stock issued in
connection with stock
option plan 27,413 2 90 92
Balance, January 29, 1995 11,204,766 $ 560 $ 16,577 $ 51,114 $ 68,251
I-4
Culp, Inc.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The financial information included herein is unaudited; however,
such information reflects all adjustments which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods.
Certain amounts for fiscal year 1994 have been reclassified to
conform with the fiscal year 1995 presentation. Such reclassifications
had no effect on net income as previously reported. All such adjustments
are of a normal recurring nature.
The results of operations for the nine months ended January 29,
1995 are not necessarily indicative of the results to be expected for
the full year.
2. Accounts Receivable
The company factors a certain amount of its accounts receivable,
primarily on a nonrecourse basis. The factoring arrangements are used
solely for credit purposes, and not for borrowing purposes.
A summary of accounts receivable follows (dollars in thousands):
- -----------------------------------------------------------------------------------------------------
January 29, 1995 May 1, 1994
- -----------------------------------------------------------------------------------------------------
Customers $ 38,558 $ 33,346
Factors 2,857 4,423
Allowance for doubtful accounts (517) (631)
Reserve for returns and allowances (351) (395)
- -----------------------------------------------------------------------------------------------------
$ 40,547 $ 36,743
=====================================================================================================
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):
- -----------------------------------------------------------------------------------------------------
January 29, 1995 May 1, 1994
- -----------------------------------------------------------------------------------------------------
Raw materials $ 24,660 $ 19,893
Work-in-process 3,126 3,411
Finished goods 19,630 15,315
- -----------------------------------------------------------------------------------------------------
Total inventories valued at FIFO cost 47,416 $ 38,619
Adjustments to reduce FIFO cost to LIFO (3,102) (2,023)
- -----------------------------------------------------------------------------------------------------
$ 44,314 $ 36,596
=====================================================================================================
I-5
Culp, Inc.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
4. Accounts Payable
A summary of accounts payable follows (dollars in thousands):
- -----------------------------------------------------------------------------------------------------
January 29, 1995 May 1, 1994
- -----------------------------------------------------------------------------------------------------
Bank overdraft $ 0 $ 0
Accounts payable-trade 17,651 21,023
Accounts payable-capital expenditures 6,475 7,443
- -----------------------------------------------------------------------------------------------------
$ 24,126 $ 28,466
=====================================================================================================
5. Accrued Expenses
A summary of accrued expenses follows (dollars in thousands):
- -----------------------------------------------------------------------------------------------------
January 29, 1995 May 1, 1994
- -----------------------------------------------------------------------------------------------------
Compensation $ 5,019 $ 3,554
Acquisition costs 930 839
Other 4,133 3,765
- -----------------------------------------------------------------------------------------------------
$ 10,082 $ 8,158
=====================================================================================================
6. Long-term Debt
A summary of long-term debt follows (dollars in thousands):
- -----------------------------------------------------------------------------------------------------
January 29, 1995 May 1, 1994
- -----------------------------------------------------------------------------------------------------
Secured term loan $ 43,000 $ 36,000
Industrial revenue bonds 15,811 15,929
Subordinated note payable 1,000 9,633
Revolving credit line 12,000 0
- -----------------------------------------------------------------------------------------------------
71,811 61,562
Less current maturities (6,100) (3,050)
- -----------------------------------------------------------------------------------------------------
$ 65,711 $ 58,512
=====================================================================================================
On November 7, 1994, the company amended its loan agreements, in
order to provide a significantly lower interest rate spread above LIBOR,
an additional $8.0 million in term debt to prepay the majority of the
subordinated note payable, which carried an interest rate of prime plus
one-half percent, and fewer financial covenants.
The company's loan agreements require, among other things, that the
company maintain certain financial ratios. At January 29,1995 , the
company was in compliance with these required covenants.
I-6
Culp, Inc.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
7. Subsequent Event
On March 6, 1995, the company completed the purchase of the common
stock of Rayonese Textile Inc. The transaction had an estimated value of
approximately $11 million and involved the purchase of common stock as
well as the assumption of certain liabilities.
8. Cash Flow Information
Payments for interest and income taxes during the period were
(dollars in thousands):
1995 1994
---------------- --------------
Interest $ 3,401 $ 1,300
Income taxes 3,055 2,376
I-7
CULP, INC.
SALES BY BUSINESS UNIT
FOR THREE MONTHS AND NINE MONTHS ENDED JANUARY 29, 1995
AND JANUARY 30, 1994
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
Janaury 29 January 30, % Over
Business Units 1995 1994 (Under) 1995 1994
Upholstery Fabrics
Flat Wovens
Existing Culp 20,940 19,673 6.4 % 26.9 % 29.3 %
Rossville/Chromatex 16,397 14,113 16.2 % 21.1 % 21.1 %
37,337 33,786 10.5 % 48.0 % 50.4 %
Velvets/Prints 28,307 23,714 19.4 % 36.4 % 35.4 %
65,644 57,500 14.2 % 84.4 % 85.8 %
Mattress Ticking 12,147 9,531 27.4 % 15.6 % 14.2 %
77,791 67,031 16.1 % 100.0 % 100.0 %
NINE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
January 29 January 30, % Over
Business Units 1995 1994 (Under) 1995 1994
Upholstery Fabrics
Flat Wovens
Existing Culp 63,387 57,190 10.8 % 28.5 % 34.1 %
Rossville/Chromatex 47,295 14,113 N/A 21.2 % N/A
110,682 71,303 55.2 % 49.7 % 42.5 %
Velvets/Prints 75,390 69,120 9.1 % 33.9 % 41.2 %
186,072 140,423 32.5 % 83.6 % 83.8 %
Mattress Ticking 36,513 27,177 34.4 % 16.4 % 16.2 %
222,585 167,600 32.8 % 100.0 % 100.0 %
I-8
CULP, INC.
EXPORT SALES BY GEOGRAPHIC AREA
FOR THREE MONTHS AND NINE MONTHS ENDED JANUARY 29, 1995
AND JANUARY 30, 1994
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
Janaury 29 January 30, % Over
Geographic Area 1995 1994 (Under) 1995 1994
North America (Excluding USA) 2,800 2,585 8.3 % 20.1 % 25.3 %
Europe 5,821 4,827 20.6 % 41.7 % 47.2 %
South America 489 450 8.7 % 3.5 % 4.4 %
Far East & Asia 2,036 755 169.7 % 14.6 % 7.4 %
Middle East 1,703 794 114.5 % 12.2 % 7.8 %
All other areas 1,106 808 36.9 % 7.9 % 7.9 %
13,955 10,219 36.6 % 100.0 % 100.0 %
NINE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
January 29 January 30, % Over
Geographic Area 1995 1994 (Under) 1995 1994
North America (Excluding USA) 9,343 8,077 15.7 % 25.3 % 27.2 %
Europe 12,707 11,958 6.3 % 34.3 % 40.3 %
South America 1,639 917 78.7 % 4.4 % 3.1 %
Far East & Asia 6,000 3,813 57.4 % 16.2 % 12.9 %
Middle East 4,439 1,195 271.5 % 12.0 % 4.0 %
All other areas 2,871 3,713 (22.7)% 7.8 % 12.5 %
36,999 29,673 24.7 % 100.0 % 100.0 %
I-9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Analysis of Operations
Sales by major Business Unit and Export Sales by Geographic Area for
the three and nine months are set forth in separate schedules on the two
preceding pages.
Net Sales - The sales increase in upholstery fabrics for the nine
month period is primarily attributable to additional sales volume from the
Rossville/Chromatex acquisition, which was effective November 1, 1993. For
the nine month period, Rossville/Chromatex contributed sales of $47.3
million, compared to $14.1 million for the same period of last year. All
three operating units (Flat Wovens including Rossville/ Chromatex,
Mattress Ticking, and Velvets/Prints) reported sales gains for the quarter,
including strong increases in the printed mattress ticking and wet prints
upholstery fabric product lines. For the nine month period, all business
units reported sales gains, with the sales of mattress ticking and
jacquard and wet prints upholstery fabrics significantly higher.
The trends for current backlogs and incoming order rates in comparison
to last year are as follows: Mattress Ticking was up significantly, up
moderately overall for Flat Wovens, with particular strength in the
Rossville dobby product line, and in Velvets/Prints up moderately, with
particular strength in the wet prints product line and an improving trend
in the heat transfer prints product line. While sales and profitability of
the Velvets/Prints business unit continued to be below target levels in the
third quarter results were improved significantly from the first and second
quarters and, current indicators show an improving trend for the fourth
quarter of the fiscal year.
Export sales were up significantly for the quarter and the first nine
months, with strength in Europe, the Far East and Asia, and the Middle
East. Sales into Europe were up approximately 21% for the quarter, a
continuation of the positive trend which began during the second quarter of
this fiscal year. The outlook for export sales gains remains good.
The trend of increasing interest rates over the last year will likely
have an adverse impact on consumer demand for furniture and bedding at some
point, because of lower housing starts and housing resales, lower
disposable personal income and slower overall economic growth. It remains
unclear when the upward trend in interest rates will stabilize. It appears
to the company that overall U. S. residential furniture demand has weakened
over the last two months and that the near-term demand is also weaker than
a year ago.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The table below sets forth the percentage relationship to net sales of
certain items in the Statements of Income.
Three Months Ended Nine Months Ended
----------------------- ----------------------
January 29, January 30, January 29, January 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 83.3 82.6 82.8 83.5
---------- ---------- ---------- ----------
Gross profit 16.7 17.4 17.2 16.5
Selling, general and
administrative expenses 10.7 11.6 10.9 11.4
---------- ---------- ---------- ----------
Income from operations 6.1 5.8 6.3 5.1
Interest expense 1.4 1.3 1.5 1.0
Interest income 0.0 0.0 0.0 0.0
Other expense (income), net 0.3 0.1 0.3 0.0
---------- ---------- ---------- ----------
Income before
income taxes 4.3 4.3 4.6 4.2
Income taxes (*) 37.5 38.9 37.5 36.0
----------- ---------- ---------- ----------
Net income 2.7 % 2.6 % 2.9 % 2.7 %
=========== =========== ========== ==========
(*) Calculated as a percent of income before income taxes.
Gross Profit and Cost of Sales - The increase in gross profit dollars
for the nine month period is attributable to a strong contribution from the
Rossville/Chromatex acquisition. The gross profit increase for the three
month period reflects a solid contribution from flat wovens, and a
continuation of the significant improvement from mattress ticking. The
company has experienced a trend of improvement in profitability and
backlogs for the velvets/prints business unit and is expecting gains for
the fourth quarter in comparison to the same period of fiscal 1994.
Additionally, the company has been receiving moderate raw material price
increases in all areas, which are beginning to affect margins.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Selling, General and Administrative (S,G & A) Expenses - S,G & A
expenses increased in absolute dollars for the three and nine months of
this fiscal year, primarily related to the addition of the
Rossville/Chromatex division. S,G & A expenses as a percentage of sales
decreased for the three and nine months of this fiscal year. The company
continues to place a high priority on the containment of S,G & A expenses.
Additionally, the company expects this category of expenses to decrease as
a percentage of sales for fiscal 1995 as a whole in comparison to fiscal
1994, and expects that S,G & A expenses will not exceed $33 million.
Interest Expense, Interest Income - Interest expense increased for the
three and nine months periods due to additional borrowings related to
capital expenditures and higher levels of working capital necessary to
support sales growth, and to higher interest rates. Interest income
increased $5,000 compared to the first nine months of last year. The
company continues to expect interest expense to be significantly higher
than fiscal 1994 and interest income to be somewhat lower than fiscal 1994,
with interest expense for the full year in the $4.5 to $5.0 million range.
Other Expense (Income), Net - Other expense (income), net was $154,000
higher than the third quarter of fiscal 1994, and $687,000 higher than the
first nine months of fiscal 1994. The most significant item in this
category of expenses for fiscal 1995 is the amortization of costs in
excess of net assets of business acquired related to the Rossville/
Chromatex acquisition. Additionally, amortization of debt issue costs was
higher during the first nine months of fiscal 1995. Finally, the company
recognized gains on the sale of fixed assets during the third quarter and
first nine months of last year. No similar gains was realized during the
third quarter or first nine months of fiscal 1995. The company expects
other expense (income), net to approximate $800,000 for fiscal 1995.
Income Taxes - The effective tax rate for the quarter decreased
primarily because of a catch-up adjustment recorded in last year's third
quarter. For the first nine months, the effective tax rate increased
primarily due to a significantly higher level of pretax income. The
company expects the full year effective tax rate to approximate 37.5%.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Liquidity and Capital Resources
The company has continued to maintain a sound financial position
during the third quarter and the first nine months of fiscal 1995. Long
and short-term debt less restricted investments (funded debt) increased to
$70,209,000 from $58,639,000, and as a percentage of shareholders' equity
to 102.9% from 93.6% at the end of fiscal 1994. Also, funded debt as a
percentage of total capitalization was 50.7% at January 29, 1995, versus
48.3% at May 1, 1994. The company's current ratio increased to 2.1 to 1,
from 1.9 to 1 at May 1, 1994. At January 29, 1995, shareholders' equity
was $68,251,000, or $6.09 per share, an increase of 8.6% over the previous
year end.
During the first nine months of fiscal 1995, the company reported
cash flows from operating activities of $408,000. The primary source of
operating cash flows was cash from earnings (net income plus depreciation
and amortization) of $15,045,000. Adding to this source of operating cash
flows was an increase in accrued expenses of $1,924,000 and an increase in
income taxes payable of $755,000. Significantly offsetting these sources of
operating cash flows were an increase in inventories of $7,718,000, an
increase in accounts receivable of $3,804,000, and a decrease in accounts
payable of $4,340,000. The operating cash flows of $408,000, were combined
with $20,000,000 of proceeds from the issuance of long-term debt,
$1,381,000 of proceeds from sale of restricted investments, $2,376,000
reduction of cash and proceeds from sale of common stock of $92,000 which
funded principal payments on long-term debt of $9,751,000, capital
expenditures of $13,606,000, and dividends of $840,000.
For fiscal 1995 as a whole, the company expects to generate
significantly lower cash flows from operations than fiscal 1994. The
company's fiscal 1995 capital expenditures budget is $21,000,000. This
represents a $3.5 million increase in the current year's budget, which
relates to the expansion of jacquard weaving capacity at Rayonese
(acquired on March 6, 1995). Capital
expenditures for fiscal 1995 principally involve purchases of equipment for
expansion of the company's vertical integration capabilities in yarn
manufacturing, expansion of weaving capacity at several plants and
additional hardware investments in the company's information systems.
Additionally, the company is currently estimating the fiscal 1996 capital
expenditures budget to be in the range of $10 million dollars, which will
be the lowest level of annual capital expenditures since fiscal 1990.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
At January 29, 1995, the company had $15,000,000 in available
borrowings under its existing revolving credit line. Management believes
cash investments, cash flows from operations, the revolving credit line
and the availability of additional financing will be sufficient to meet
the company's financing needs for the foreseeable future. On November 7,
1994, the company amended its loan agreements with the banks to provide a
significantly lower interest rate spread above LIBOR, an additional $8.0
million in term debt to prepay the majority of the subordinated note
payable during the third quarter, and fewer financial covenants. On March
6, 1994, the Company amended its loan agreements to increase availability
under the Company's revolving credit facility from $27,000,000 to
$33,300,000.
New Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement No. 112,
"Employers' Accounting for Postemployment Benefits." Under Statement 112,
the cost of postemployment benefits must be recognized on an accrual basis
as employees perform services to earn the benefits. Implementation of the
pronouncement is required for fiscal years beginning after December 15,
1993. The company does not know and cannot reasonably estimate the impact
of Statement 112, and plans to adopt the statement in its fiscal year 1995.
Part II - OTHER INFORMATION
-------------------------------------------
Item 1. Legal Proceedings
There are no legal proceedings that are required to
be disclosed under this item.
Item 2. Change in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
3(i) Articles of Incorporation of the company, as
amended by Articles of Amendment dated
December 21, 1994.
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 and related Letter
of Credit and Reimbursement Agreement dated
December 1, 1988 with First Union National Bank of
North Carolina were filed as Exhibit 10(n) to the
company's Form 10-K for the year ended April 29,
1989, and are incorporated herein by reference.
II-1
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, and related Letter
of Credit and Reimbursement Agreement dated
November 1, 1988 with First Union National Bank
of North Carolina were filed as exhibit 10(o) to
the company's Form 10-K for the year ended April
29, 1990, and are incorporated herein by
reference.
10(c) Loan Agreement dated January 5, 1990 with the
with the Guilford County Industrial Facilities and
Pollution Control Financing Authority, North
Carolina, relating to Series 1989 Industrial Reve-
nue Bonds in the principal amount of $4,500,000,
and related Letter of Credit and Reimbursement
Agreement dated January 5, 1990 with First Union
National Bank of North Carolina 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) 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(e) 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(f) 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(g) Management Incentive Plan of the company, dated
August 1986 and amended July 1989, was 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) Amendment and Restatement of the Employees's
Retirement Builder Plan of the company dated May
1,
II-2
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(i) 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(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) 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(l) 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, and related Letter of
Credit and Reimbursement Agreement dated as of
December 1, 1993 by and between the company and
First Union National Bank of North Carolina was
filed as Exhibit 10(o) to the company's Form 10-Q,
filed on March 15, 1994, 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, and related Reimbursement and
Security Agreement dated as of December 1, 1993
between the company and Wachovia Bank of North
Carolina, National Association was filed as
Exhibit 10(p) to the company's Form 10-Q, filed on
March 15, 1994, and is incorporated herein by
reference.
II-3
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, and related
First Amendment to Letter of Credit and
Reimbursement Agreement dated as of December 16,
1993 between First Union National Bank of North
Carolina and the company was filed as Exhibit
10(q) to the company's Form 10-Q filed, 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, and
related First Amendment to Letter of Credit and
Reimbursement Agreement dated as of December 16,
1993 by and between First Union National Bank of
North 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) 1994 Amended and Restated Credit Agreement dated
as of April 15, 1994 by and among the company,
First Union National Bank of North Carolina and
Wachovia Bank of North Carolina was filed as
Exhibit 10(r) to the company's Form 10-K, filed on
July 27, 1994, and is incorporated herein by
reference.
10(q) First Amendment to 1994 Amended and Restated
Credit Agreement dated as of April 30, 1994 by and
among the company, First Union National Bank of
North Carolina and Wachovia Bank of North Carolina
was filed as Exhibit 10(s) to the company's Form
10-K, filed on July 27, 1994, and is incorporated
herein by reference.
10(r) Interest Rate Swap Agreements between company and
NationsBank of Georgia (formerly The Citizens and
Southern National Bank) dated July 14, 1989 were
filed as Exhibit 10(t) to the company's Form 10-K,
filed on July 27, 1994, and are incorporated
herein by reference.
10(s) Second Amendment to 1994 Amended and Restated
Credit Agreement, dated as of April 30, 1994 by
and among the company, First Union Bank of
North Carolina, and Wachovia Bank of North
Carolina was filed as Exhibit 10(s) to the
company's Form 10-Q, filed on September 13,
1994, and is incorporated herein by reference.
II-4
10(t) Second Amended Memorandum of Lease with
Partnership 74, dated June 15, 1994, was filed as
Exhibit 10(t) to the company's Form 10-Q, filed on
September 13, 1994, and is incorporated herein by
reference.
10(u) Share Purchase Agreement dated as of December 22,
1994, between Masgan Inc. and Salorna Inc. as
Vendors and 3096726 Canada Inc. as Purchaser,
relating to the purchase of Rayonese Textile Inc.
10(v) Third Amendment to 1994 Amended and Restated
Credit Agreement, dated as of November 1, 1994, by
and among the company, First Union National Bank
of North Carolina, N.A. and Wachovia Bank of North
Carolina, N.A.
10(w) Amendment to Lease dated as of November 4, 1994,
by and between the company and RDC, Inc.
10(x) Amendment and Agreement dated as of December 14,
1994, by and between the company, Rossville
Investments, Inc., Rossville Companies, Inc.,
Chromatex, Inc., Rossville Velours, Inc. and RDC,
Inc.
10(y) 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.).
27 Financial Data Schedule.
(b) The following reports on Form 8-K were filed during the
period covered by this report:
(1) Form 8-K dated November 15, 1994 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 second quarter ended October 30,
1994.
(2) Form 8-K dated December 23, 1994 included under Item 5,
Other Events, disclosure of the company's press release
related to the acquisition of Rayonese Textile Inc.
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SIGNATURES
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: March 14, 1995 By: s/s Franklin N. Saxon
------------------------
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Franklin N. Saxon
Vice President and
Chief Financial Officer
(Authorized to sign on behalf
of the registrant and also
signing as principal
accounting officer)
Date: March 14, 1995 By: s/s Stephen T. Hancock
------------------------
- -----------------
Stephen T. Hancock
General Accounting Manager
(Chief Accounting Officer)
II-6