<PAGE>
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 October 27, 1996
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 October 27, 1996: 11,338,577
Par Value: $.05
<PAGE>
INDEX TO FORM 10-Q
October 27, 1996
Part I - Financial Information. Page
- ------------------------------------------ ------
Item 1. Consolidated Financial Statements:
Statements of Income--Three and Six Months Ended I-1
October 27, 1996, and October 29, 1995
Balance Sheets--October 27, 1996, October 29, 1995, and April 28, 1996 I-2
Statements of Cash Flows---Six Months ended October 27, 1996 and
October 29, 1995 I-3
Statements of Shareholders' Equity I-4
Notes to Financial Statements I-5
Sales by Product Category/Business Unit I-8
International 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-2
Item 6. Exhibits and Reports on Form 8-K II-2-II-6
Signatures II-7
<PAGE>
CULP, INC.
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
<TABLE>
<CAPTION>
Amounts Percent of Sales
October 27, October 29, % Over
1996 1995 (Under) 1997 1996
----------- ----------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net sales $ 105,204 90,672 16.0% 100.0% 100.0%
Cost of sales 86,082 74,565 15.4% 81.8% 82.2%
----------- ----------- --------- --------- --------
Gross profit 19,122 16,107 18.7% 18.2% 17.8%
Selling, general and
administrative expenses 11,704 9,675 21.0% 11.1% 10.7%
----------- ----------- --------- --------- --------
Income from operations 7,418 6,432 15.3% 7.1% 7.1%
Interest expense 1,242 1,388 (10.5)% 1.2% 1.5%
Interest income (60) 0 **% (0.1)% 0.0%
Other expense (income), net 301 219 37.4% 0.3% 0.2%
----------- ----------- --------- --------- --------
Income before income taxes 5,935 4,825 23.0% 5.6% 5.3%
Income taxes* 2,225 1,825 21.9% 37.5% 37.8%
----------- ----------- --------- --------- --------
Net income $ 3,710 3,000 23.7% 3.5% 3.3%
============ =========== ========= ========= ========
Average shares outstanding 11,312 11,211 0.9%
Net income per share $0.33 $0.27 22.2%
Dividends per share $0.0325 $0.0275 18.2%
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED (UNAUDITED)
Amounts Percent of Sales
October 27, October 29, % Over
1996 1995 (Under) 1997 1996
----------- ----------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net sales $ 195,733 163,029 20.1% 100.0% 100.0%
Cost of sales 160,691 134,724 19.3% 82.1% 82.6%
----------- ----------- --------- --------- --------
Gross profit 35,042 28,305 23.8% 17.9% 17.4%
Selling, general and
administrative expenses 22,568 18,129 24.5% 11.5% 11.1%
----------- ----------- --------- --------- --------
Income from operations 12,474 10,176 22.6% 6.4% 6.2%
Interest expense 2,424 2,685 (9.7)% 1.2% 1.6%
Interest income (117) 0 **% (0.1)% 0.0%
Other expense (income), net 696 326 113.5% 0.4% 0.2%
----------- ----------- --------- --------- --------
Income before income taxes 9,471 7,165 32.2% 4.8% 4.4%
Income taxes* 3,551 2,650 34.0% 37.5% 37.0%
----------- ----------- --------- --------- --------
Net income $ 5,920 4,515 31.1% 3.0% 2.8%
=========== =========== ========= ========= ========
Average shares outstanding 11,304 11,209 0.9%
Net income per share $0.52 $0.40 30.0%
Dividends per share $0.0650 $0.0550 18.2%
</TABLE>
*Percent of sales column is calculated as a % of income before income taxes.
**Measurement is not meaningful.
I-1
<PAGE>
CULP, INC.
CONSOLIDATED BALANCE SHEETS
OCTOBER 27, 1996, OCTOBER 29, 1995 AND APRIL 28, 1996
(Unaudited, Amounts in Thousands)
<TABLE>
<CAPTION>
Amounts Increase
October 27, October 29 (Decrease) * April 28,
1996 1995 Dollars Percent 1996
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash investments $ 744 930 (186) (20.0)% 498
Accounts receivable 52,202 46,930 5,272 11.2 % 52,038
Inventories 52,300 49,632 2,668 5.4 % 47,395
Other current assets 3,697 3,415 282 8.3 % 4,167
Total current assets 108,943 100,907 8,036 8.0 % 104,098
Restricted investments 5,379 0 5,379 5,274
Property, plant & equipment, net 80,316 73,876 6,440 8.7 % 76,961
Goodwill 22,568 23,189 (621) (2.7)% 22,871
Other assets 2,321 2,432 (111) (4.6)% 2,440
Total assets $ 219,527 200,404 19,123 9.5 % 211,644
Current Liabilities
Current maturities of long-term debt $ 7,100 11,555 (4,455) (38.6)% 7,100
Accounts payable 26,936 30,175 (3,239) (10.7)% 27,308
Accrued expenses 16,841 11,075 5,766 52.1 % 12,564
Income taxes payable 836 1,729 (893) (51.6)% 197
Total current liabilities 51,713 54,534 (2,821) (5.2)% 47,169
Long-term debt 72,891 65,137 7,754 11.9 % 74,941
Deferred income taxes 8,088 5,382 2,706 50.3 % 8,088
Total liabilities 132,692 125,053 7,639 6.1 % 130,198
Shareholders' equity 86,835 75,351 11,484 15.2 % 81,446
Total liabilities and
shareholders' equity $ 219,527 200,404 19,123 9.5 % 211,644
Shares outstanding 11,339 11,219 120 1.1 % 11,290
</TABLE>
Derived from audited financial statements.
I-2
<PAGE>
CULP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(Unaudited, Amounts in Thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
Amounts
--------------------------
October 27, October 29
1996 1995
------------ ------------
<S> <C> <C>
Net income $ 5,920 4,515
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 6,321 6,138
Amortization of intangible assets 444 358
Provision for deferred income taxes 0 (36)
Changes in assets and liabilities:
Accounts receivable (164) (2,678)
Inventories (4,905) (3,861)
Other current assets 470 (221)
Other assets (22) (23)
Accounts payable 3,220 1,632
Accrued expenses 4,277 (457)
Income taxes payable 639 1,068
------------ ------------
Net cash provided by operating activities 16,200 6,435
------------ ------------
Capital expenditures (9,676) (5,090)
Purchases of restricted investments (107) 0
Purchase of investments to fund deferred compensation liability 0 (1,286)
Proceeds from sale of restricted investments 2 795
------------ ------------
Net cash used in investing activities (9,781) (5,581)
------------ ------------
Proceeds from issuance of long-term debt 1,000 6,000
Principal payments on long-term debt (3,050) (3,050)
Change in accounts payable-capital expenditures (3,592) (3,707)
Dividends paid (735) (617)
Proceeds from sale of common stock 204 57
------------ ------------
Net cash used in financing activities (6,173) (1,317)
------------ ------------
Increase (decrease) in cash and cash investments 246 (463)
Cash and cash investments at beginning of period 498 1,393
------------ ------------
Cash and cash investments at end of period $ 744 930
============ ============
</TABLE>
I-3
<PAGE>
Culp, Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Capital
Contributed
Common Stock in Excess Total
--------------------------- Retained Shareholders'
Shares Amount of Par Value Earnings Equity
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, April 30, 1995 11,204,766 $ 560 $ 16,577 $ 54,259 $ 71,396
Cash dividends (1,236) (1,236)
($.11 per share)
Net income 10,980 10,980
Common stock issued in
connection with stock
option plan 85,534 5 301 306
---------------------------------------------------------------------------------------------------
Balance, April 28, 1996 11,290,300 $ 565 $ 16,878 $ 64,003 $ 81,446
Cash dividends (735) (735)
($.0325 per share)
Net income 5,920 5,920
Common stock issued in
connection with stock
option plan 48,277 1 203 204
---------------------------------------------------------------------------------------------------
Balance, October 27, 1996 11,338,577 $ 566 $ 17,081 $ 69,188 $ 86,835
===================================================================================================
I-4
<PAGE>
.
1. BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting of normal recurring
adjustments) which the management of the company considers necessary for a fair
statement of results for the interim periods.
Certain amounts for fiscal year 1996 have been reclassified to conform with
the fiscal year 1997 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 six months ended October 27, 1996 are not
necessarily indicative of the results to be expected for the full year.
==============================================================================
2. ACCOUNTS RECEIVABLE
A summary of accounts receivable follows (dollars in thousands):
- ------------------------------------------------------------------------------
October 27, 1996 April 28, 1996
- ------------------------------------------------------------------------------
Customers $ 53,713 $ 53,321
Factors -0- 71
Allowance for doubtful accounts (1,087) (1,016)
Reserve for returns and allowances (424) (338)
- ------------------------------------------------------------------------------
$ 52,202 $ 52,038
==============================================================================
3. INVENTORIES
Inventories are carried at the lower of cost of market. Cost is determined
for substantially all inventories using the LIFO (last-in, first-out) method.
A summary of inventories follows (dollars in thousands):
- ------------------------------------------------------------------------------
October 27, 1996 April 28, 1996
- ------------------------------------------------------------------------------
Raw materials $31,347 $29,150
Work-in-process 3,521 5,067
Finished goods 21,920 16,708
- ------------------------------------------------------------------------------
Total inventories valued at FIFO cost 56,788 50,925
Adjustments of certain inventories to the
LIFO cost method (4,488) (3,530)
- ------------------------------------------------------------------------------
$52,300 $47,395
==============================================================================
I-5
<PAGE>
Culp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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):
- ------------------------------------------------------------------------------
October 27, 1996 April 28, 1996
- ------------------------------------------------------------------------------
Accounts payable-trade $ 24,790 $ 21,570
Accounts payable-capital expenditures 2,146 5,738
- ------------------------------------------------------------------------------
$ 26,936 $ 27,308
==============================================================================
6. ACCRUED EXPENSES
A summary of accrued expenses follows (dollars in thousands):
- ------------------------------------------------------------------------------
October 27, 1996 April 28, 1996
- ------------------------------------------------------------------------------
Compensation and benefits $ 11,447 $ 8,153
Other 5,394 4,411
- ------------------------------------------------------------------------------
$ 16,841 $ 12,564
==============================================================================
7. LONG-TERM DEBT
A summary of long-term debt follows (dollars in thousands):
- ------------------------------------------------------------------------------
October 27, 1996 April 28, 1996
- ------------------------------------------------------------------------------
Industrial revenue bonds
and other obligations $ 22,191 $ 22,241
Revolving credit line 24,300 23,300
Term loan 32,500 35,500
Subordinated note payable 1,000 1,000
- -------------------------------------------------------------------------------
79,991 82,041
Less current maturities (7,100) (7,100)
- -------------------------------------------------------------------------------
$ 72,891 $ 74,941
===============================================================================
I-6
<PAGE>
Culp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The company has an unsecured loan agreement with two banks, which provides
for a $36,000,000 five-year term loan and a $33,500,000 Revolving Credit Line,
which also has a five-year term. The term loan requires monthly installments of
$500,000 and a final payment of $6,500,000 on March 1, 2001. The Revolving
Credit Line requires payment of an annual facility fee in advance.
The company's loan agreements require, among other things, that the company
maintain certain financial ratios. At October 27, 1996, the company was in
compliance with these required financial covenants.
At October 27, 1996, the company had three interest rate swap agreements 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:
notional 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
Net amounts paid under these agreements increased interest expense for the
six months ended October 27, 1996 and October 29, 1995 by approximately $158,000
and $120,000, 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.
The estimated amount at which the company could have terminated these
agreements as of October 27, 1996 is approximately $309,000.
==============================================================================
8. CASH FLOW INFORMATION
Payments for interest and income taxes during the period were (dollars in
thousands)
- ------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------
Interest $2,411 $ 2,870
Income taxes 2,913 1,582
==============================================================================
9. FOREIGN EXCHANGE FORWARD CONTRACTS
The company generally enters into foreign exchange forward contracts as a
hedge against its exposure to currency fluctuations on firm commitments to
purchase certain machinery and equipment and raw materials. Machinery and
equipment and raw material purchases hedged by foreign exchange forward
contracts are valued by using the exchange rate of the applicable foreign
exchange forward contract. At October 27, 1996, the company had approximately
$1,200,000 of foreign exchange forward contracts outstanding.
I-7
<PAGE>
CULP, INC.
SALES BY PRODUCT CATEGORY/BUSINESS UNIT
FOR THREE MONTHS AND SIX MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(Amounts in thousands)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
October 27, October 29, % Over
Product Category/Business Unit 1996 1995 (Under) 1997 1996
<S> <C> <C> <C> <C> <C>
Upholstery Fabrics
Culp Textures $ 24,001 22,715 5.7 % 22.8 % 25.1 %
Rossville/Chromatex 21,722 17,960 20.9 % 20.6 % 19.8 %
45,723 40,675 12.4 % 43.5 % 44.9 %
Velvets/Prints 40,233 32,081 25.4 % 38.2 % 35.4 %
85,956 72,756 18.1 % 81.7 % 80.2 %
Mattress Ticking
Culp Home Fashions 19,248 17,916 7.4 % 18.3 % 19.8 %
* $ 105,204 90,672 16.0 % 100.0% 100.0 %
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
October 27, October 29, % Over
Product Category/Business Unit 1996 1995 (Under) 1997 1996
<S> <C> <C> <C> <C> <C>
Upholstery Fabrics
Culp Textures $ 44,802 40,299 11.2 % 22.9 % 24.7 %
Rossville/Chromatex 39,887 33,318 19.7 % 20.4 % 20.4 %
84,689 73,617 15.0 % 43.3 % 45.2 %
Velvets/Prints 75,100 55,604 35.1 % 38.4 % 34.1 %
159,789 129,221 23.7 % 81.6 % 79.3 %
Mattress Ticking
Culp Home Fashions 35,944 33,808 6.3 % 18.4 % 20.7 %
* $ 195,733 163,029 20.1 % 100.0% 100.0 %
</TABLE>
*US. Domestic sales were $79,304 and $71,112 for the three months of fiscal 1997
and fiscal 1996, respectively; and $149,860 and $129,025 for the six months of
fiscal 1997 and fiscal 1996, respectively.
The percentage increases in U.S. Domestic sales was 11.5% for the three months
and 16.1% for the six months.
I-8
<PAGE>
CULP, INC.
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THREE MONTHS AND SIX MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
October 27, October 29, % Over
Geographic Area 1996 1995 (Under) 1997 1996
<S> <C> <C> <C> <C>
North America (Excluding USA) $ 8,016 6,223 28.8 % 31.0 % 31.8 %
Europe 5,716 4,297 33.0 % 22.1 % 22.0 %
Middle East 5,079 3,437 47.8 % 19.6 % 17.6 %
Far East & Asia 5,019 3,731 34.5 % 19.4 % 19.1 %
South America 632 397 59.2 % 2.4 % 2.0 %
All other areas 1,438 1,475 (2.5)% 5.6 % 7.5 %
$ 25,900 19,560 32.4 % 100.0 % 100.0 %
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
October 27, October 29, % Over
Geographic Area 1996 1995 (Under) 1997 1996
<S> <C> <C> <C>
North America (Excluding USA) $ 14,073 10,790 30.4 % 30.7 % 31.7 %
Europe 10,483 7,482 40.1 % 22.9 % 22.0 %
Middle East 9,156 5,549 65.0 % 20.0 % 16.3 %
Far East & Asia 8,815 5,979 47.4 % 19.2 % 17.6 %
South America 999 843 18.5 % 2.2 % 2.5 %
All other areas 2,347 3,361 (30.2)% 5.1 % 9.9 %
$ 45,873 34,004 34.9 % 100.0 % 100.0 %
</TABLE>
International sales were 24.6% of total sales for the three months and 23.4% of
total sales for the six months.
I-9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
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 October 27, 1996, net sales rose 16% to $105.2
million compared with $90.7 million in the year-earlier period. Net income for
the quarter totaled $3.7 million, or $0.33 per share, compared with $3.0
million, or $0.27 per share, for the second quarter of fiscal 1996. The increase
in sales primarily reflected higher shipments of upholstery fabrics and, to a
lesser degree, increased sales of mattress ticking to both U.S.-based and
international manufacturers. Business with U.S.-based customers
increased 12% from a year ago while sales to customers outside the United States
rose 32% for the quarter. International sales are continuing to account for an
increasing percentage of the company's total sales.
THREE AND SIX MONTHS ENDED OCTOBER 27, 1996 COMPARED WITH THREE AND SIX
MONTHS ENDED OCTOBER 29, 1995
Sales of upholstery fabrics for the second fiscal quarter increased $13.2
million, or 18%, from a year ago. Each of the business units in this product
category recorded higher sales for the quarter. Sales of mattress ticking for
the quarter rose $1.3 million, or 7%, from a year ago. International sales,
consisting primarily of upholstery fabrics, increased to $25.9 million, up 32%
from the year-earlier period. As a result of this gain, international sales
accounted for 24.6% of the company's sales for the second quarter and 23.4% for
the first half compared with 21.6% and 20.9%, respectively, a year ago.
I-10
<PAGE>
Gross profit for the second quarter and first half increased both in absolute
dollars and as a percentage of net sales. Factors contributing to the higher
profitability included the increased absorption of fixed costs as a result of
the growth in sales as well as the benefit from the company's ongoing capital
investment in equipment designed to lower manufacturing costs and raise
productivity. During the first half, the company also began to experience an
easing in the rate of increase in the cost of raw materials, and in some
instances the company has realized lower costs.
Selling, general and administrative expenses have increased as a percentage of
net sales thus far in fiscal 1997. Although the company is continuing to
emphasize cost-containment programs, planned increases in expenses related to
resources for designing new fabrics and higher selling commissions related to
international sales contributed to the higher ratio of expenses to net sales.
The accrual for incentive-based compensation plans through the first half was
also a significant factor behind the increase in these expenses.
Net interest expense of $1.2 million for the second quarter was down from $1.4
million in the year-earlier period due to lower average borrowings outstanding.
The effective tax rate for the quarter was down slightly from 37.8% a year ago.
LIQUIDITY AND CAPITAL RESOURCES
The company continues to maintain a sound financial position. Funded long- and
short-term debt decreased to $74.6 million at the close of the second quarter
versus $76.7 million a year earlier. As a percentage of total capital (funded
debt plus total shareholders' equity), the company's borrowings amounted to
46.2% as of October 27, 1996 compared with 50.4% as of October 29, 1995. The
company's current ratio as of October 27, 1996 was 2.1 compared with 1.9 a year
earlier, and shareholders' equity increased to $86.8 million as of October 27,
1996 compared with $75.4 million as of October 29, 1995
Cash flow from operating activities totaled $16.2 million for the first half
of fiscal 1997. Cash from earnings (net income plus depreciation, amortization
and deferred income taxes) contributed $12.7 million. The funds from operations
and financing activities were used principally to fund capital expenditures of
$9.7 million.
I-11
<PAGE>
The company's borrowings are through financing arrangements with two banks which
provide for a $32.5 million term loan and a $33.5 million revolving credit
agreement and letters of credit to support its industrial revenue bonds. As of
October 27, 1996, the company had $9.2 million in borrowings available under
the revolving credit agreement. In April 1996, the company amended its loan
agreements to provide for certain less stringent financial covenants and the
provision for all borrowings under the agreement to be unsecured.
The company is currently planning for capital expenditures of $19 - $22 million
for fiscal 1997. The company believes that cash flows from operations,
industrial revenue bond financings and funds available under existing credit
facilities will be sufficient to fund capital expenditures and working capital
requirements during the remainder of fiscal 1997.
INFLATION
The company has experienced generally higher costs of raw materials over the
past two fiscal years. Other operating expenses, such as for manufacturing
supplies and spare parts, also increased over this period. Competitive
conditions have not allowed the company to fully offset the impact of these
increases through higher selling prices, but margins thus far in fiscal 1997
have shown some improvement from a year ago due to higher operating efficiencies
and a shift in the company's product mix toward fabrics with higher gross
margins. A continuation of these trends would likely aid the company's
profitability, but the net incremental effect on margins will continue to be
influenced by overall competitive conditions.
FORWARD-LOOKING INFORMATION
The discussion in this Form 10-Q contains forward-looking statements that are
inherently subject to risks and uncertainties. Factors that could influence the
matters discussed in the forward-looking statements include the level of housing
starts and sales of existing homes, consumer confidence and trends in disposable
income. 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 adversely affect the company.
I-12
<PAGE>
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
The Annual Meeting of Shareholders of the company was held in High Point,
North Carolina on September 17, 1996. Of the 11,302,613 shares of common stock
outstanding on the record date, 10,931,145 shares were present in person or by
proxy.
At the Annual Meeting, shareholders voted on:
a)
ratifying the appointment of KPMG Peat Marwick LLP as the
independent auditors of the company for the current fiscal
year; and
b)
the election of three directors: Harry R. Culp, Baxter P.
Freeze, and Franklin N. Saxon.
A. PROPOSAL TO RATIFY THE ELECTION OF KPMG PEAT MARWICK LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR FISCAL YEAR 1997:
For: 10,898,405
Against 687
Abstain 32,053
Broker Non-Votes -0-
B. PROPOSAL FOR ELECTION OF DIRECTORS:
Harry R. Culp Franklin N. Saxon
For: 10,519,014 For: 10,523,096
Withhold Authority 412,131 Withhold Authority 408,049
Broker Non-Votes -0- Broker Non-Votes -0-
Baxter P. Freeze
For: 10,676,908
Withhold Authority 254,237
Broker Non-Votes -0-
II-1
<PAGE>
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 or incorporated
by reference:
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.
4(a) Form of Common Stock Certificate of the company was filed as
Exhibit 4(a) to Amendment No. 1 to the company's registration
statement No. 2-85174, filed on August 30, 1983, and is
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. .
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
II-2
<PAGE>
Industrial Revenue 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) 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 were 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) 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, 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) 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 Employees'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.(*)
II-3
<PAGE>
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.
II-4
<PAGE>
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.
II-5
<PAGE>
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 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 on July 25, 1996, and is incorporated
herein by reference.
10(bb) 1996 Amended and Restated Credit Agreement dated as of April 1,
1996 by and among the company, First Union National Bank of
North Carolina and Wachovia Bank of North Carolina, N.A. was
filed as Exhibit 10(bb) to the company's Form 10-K for the year
ended April 28, 1996 on July 25, 1996, and is incorporated
herein by reference.
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 November 6, 1996, 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 27, 1996.
II-6
<PAGE>
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: December 10, 1996 By: s/s Franklin N. Saxon
Franklin N. Saxon
Sr. Vice President and
Chief Financial Officer
(Authorized to sign on behalf
of the registrant and also
signing as principal accounting
officer)
Date: December 10, 1996 By: s/s Stephen T. Hancock
Stephen T. Hancock
General Accounting Manager
(Chief Accounting Officer)
II-7
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<FISCAL-YEAR-END> APR-27-1997
<PERIOD-END> OCT-27-1996
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<TOTAL-LIABILITY-AND-EQUITY> 219,527
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