<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 February 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)
(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 February 1, 1998: 12,699,916
Par Value: $.05
<PAGE>
INDEX TO FORM 10-Q
February 1, 1998
Part I - Financial Information.
Page
- ------------------------------------------
- -------
Item 1. Consolidated Financial Statements:
Statements of Income--Three and Nine Months Ended I-1
February 1, 1998 and January 26, 1997
Balance Sheets-February 1, 1998, January 26, 1997, and April 27, 1997 I-2
Statements of Cash Flows---Nine Months Ended February 1, 1998 I-3
and January 26, 1997
Statements of Shareholders' Equity I-4
Notes to Financial Statements I-5
Sales by Product Category/Business Unit I-11
International Sales by Geographic Area I-12
Item 2. Management's Discussion and Analysis of Financial I-13
Condition and Results of Operation
Part II - Other Information
- -------------------------------------
Item 1. Legal Proceedings II-1
Item 2. Change 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-6
Signatures II-7
<PAGE>
CULP, INC.
CONSOLIDATED INCOME STATEMENTS
FOR THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 1, 1998 AND JANUARY 26, 1997
(Amounts in Thousands, Except for Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------
Amounts Percent of Sales
--------------------- --------------------
February January % Over
1, 26,
1998 1997 (Under) 1998 1997
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 118,457 97,468 21.5 % 100.0 % 100.0 %
Cost of sales 97,554 80,317 21.5 % 82.4 % 82.4 %
---------- ---------- --------- --------- ---------
Gross profit 20,903 17,151 21.9 % 17.6 % 17.6 %
Selling, general and
administrative expenses 13,162 10,760 22.3 % 11.1 % 11.0 %
---------- ---------- --------- --------- ---------
Income from operations 7,741 6,391 21.1 % 6.5 % 6.6 %
Interest expense 2,180 1,228 77.5 % 1.8 % 1.3 %
Interest income (73) (73) 0.0 % (0.1) % (0.1) %
Other expense (income), net 492 421 16.9 % 0.4 % 0.4 %
---------- ---------- --------- --------- ---------
Income before income taxes 5,142 4,815 6.8 % 4.3 % 4.9 %
Income taxes * 1,140 1,805 (36.8) % 22.2 % 37.5 %
---------- ---------- --------- --------- ---------
Net income $ 4,002 3,010 33.0 % 3.4 % 3.1 %
========== ========== ========= ========= =========
Net income per share $0.32 $0.27 18.5 %
Net income per share
(assuming dilution) $0.31 $0.26 19.2 %
Dividends per share $0.0350 $0.0325 7.7 %
Average shares outstanding 12,692 11,342 11.9 %
Average shares outstanding
(assuming dilution) 12,986 11,653 11.4 %
NINE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------
Amounts Percent of Sales
--------------------- --------------------
February January % Over
1, 26,
1998 1997 (Under) 1998 1997
---------- ---------- --------- --------- ---------
Net sales $ 340,881 293,201 16.3 % 100.0 % 100.0 %
Cost of sales 280,510 241,008 16.4 % 82.3 % 82.2 %
---------- ---------- --------- --------- ---------
Gross profit 60,371 52,193 15.7 % 17.7 % 17.8 %
Selling, general and
administrative expenses 37,710 33,328 13.1 % 11.1 % 11.4 %
---------- ---------- --------- --------- ---------
Income from operations 22,661 18,865 20.1 % 6.6 % 6.4 %
Interest expense 5,280 3,652 44.6 % 1.5 % 1.2 %
Interest income (235) (190) 23.7 % (0.1) % (0.1) %
Other expense (income), net 1,159 1,117 3.8 % 0.3 % 0.4 %
---------- ---------- --------- --------- ---------
Income before income taxes 16,457 14,286 15.2 % 4.8 % 4.9 %
Income taxes * 5,100 5,356 (4.8) % 31.0 % 37.5 %
---------- ---------- --------- --------- ---------
Net income $ 11,357 8,930 27.2 % 3.3 % 3.0 %
========== ========== ========= ========= =========
Net income per share $0.90 $0.79 13.9 %
Net income per share
(assuming dilution) $0.88 $0.77 14.3 %
Dividends per share $0.1050 $0.0975 7.7 %
Average shares outstanding 12,663 11,317 11.9 %
Average shares outstanding
(assuming dilution) 12,964 11,618 11.6 %
* Percent of sales column is calculated as a % of income before income taxes.
</TABLE>
<PAGE>
CULP, INC.
CONSOLIDATED BALANCE SHEETS
FEBRUARY 1, 1998, JANUARY 26, 1997 AND APRIL 27, 1997
(Unaudited, Amounts in Thousands)
<TABLE>
<CAPTION>
Amounts Increase
-----------------------
February 1, January (Decrease) *
26, April
27,
--------------------
1998 1997 Dollars Percent 1997
------------ --------- --------- -------- -------
Current assets
<S> <C> <C> <C> <C> <C>
Cash and cash investments $ 348 406 (58) (14.3)% 830
Accounts receivable 73,109 50,157 22,952 45.8 % 56,691
Inventories 75,032 50,755 24,277 47.8 % 53,463
Other current assets 7,202 3,701 3,501 94.6 % 5,450
------------ --------- --------- -------- -------
Total current assets 155,691 105,019 50,672 48.3 % 116,434
Restricted investments 3,976 11,778 (7,802) (66.2)% 11,018
Property, plant & equipment, net 113,658 86,146 27,512 31.9 % 91,231
Goodwill 48,558 22,413 26,145 116.7 % 22,262
Other assets 5,439 2,906 2,533 87.2 % 3,007
------------ --------- --------- -------- -------
Total assets $ 327,322 228,262 99,060 43.4 % 243,952
============ ========= ========= ======== =======
Current liabilities
Current maturities of
long-term debt $ 1,120 6,100 (4,980) (81.6)% 100
Accounts payable 35,921 20,833 15,088 72.4 % 29,903
Accrued expenses 12,683 15,644 (2,961) (18.9)% 15,074
Income taxes payable 1,941 1,753 188 10.7 % 1,580
------------ --------- --------- -------- -------
Total current liabilities 51,665 44,330 7,335 16.5 % 46,657
Long-term debt 144,079 86,266 57,813 67.0 % 76,541
Deferred income taxes 9,965 8,088 1,877 23.2 % 9,965
------------ --------- --------- -------- -------
Total liabilities 205,709 138,684 67,025 48.3 % 133,163
Shareholders' equity 121,613 89,578 32,035 35.8 % 110,789
------------ --------- --------- -------- -------
Total liabilities and
shareholders' equity $ 327,322 228,262 99,060 43.4 % 243,952
============ ========= ========= ======== =======
Shares outstanding 12,700 11,352 1,348 11.9 % 12,609
============ ========= ========= ======== =======
* Derived from audited financial statements.
</TABLE>
<PAGE>
CULP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED FEBRUARY 1, 1998 AND JANUARY 26, 1997
(Unaudited, Amounts in Thousands)
NINE MONTHS ENDED
----------------------
<TABLE>
<CAPTION>
Amounts
--------------------
February 1, January 26,
1998 1997
----------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 11,357 8,930
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 10,660 9,440
Amortization of intangible assets 883 634
Changes in assets and liabilities, net of
effects of businesses acquired:
Accounts receivable (16,418) 1,881
Inventories (16,330) (3,360)
Other current assets (1,752) 466
Other assets (1,942) (642)
Accounts payable 8,783 (2,213)
Accrued expenses (2,175) 3,080
Income taxes payable 361 1,556
--------- ---------
Net cash provided by (used in)
operating activities (6,573) 19,772
--------- ---------
Cash flows from investing activities:
Capital expenditures (28,183) (18,625)
Purchases of restricted investments (8,724) (9,681)
Purchase of investments to fund deferred (581) 0
compensation liability
Sale of restricted investments 15,766 3,177
Businesses acquired (37,156) 0
--------- ---------
Net cash used in investing activities (58,878) (25,129)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 77,600 15,900
Principal payments on long-term debt (9,042) (5,575)
Change in accounts payable-capital expenditures (2,765) (4,262)
Dividends paid (1,333) (1,103)
Proceeds from common stock issued 509 305
--------- ---------
Net cash provided by financing activities 64,969 5,265
--------- ---------
Decrease in cash and cash investments (482) (92)
Cash and cash investments at beginning of period 830 498
--------- ---------
Cash and cash investments at end of period $ 348 406
========= =========
</TABLE>
<PAGE>
Culp, Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Capital
Contributed Total
Common in Excess Retained Shareholders'
Stock
----------------------------
Shares Amount of Par Value Earnings Equity
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, April 28, 1996 11,290,300 $ 565 $ 16,878 $ 64,003 $ 81,446
Proceeds from public offering
of 1,200,000 shares 1,200,000 60 16,235 16,295
Cash dividends (1,513) (1,513)
($0.13 per share)
Net income 13,770 13,770
Common stock issued in
connection with stock
option plan 118,459 5 786 791
- ---------------------------------------------------------------------------------------------------------------
Balance, April 27, 1997 12,608,759 630 33,899 76,260 110,789
Cash dividends
($.105 per share) (1,333) (1,333)
Net income 11,357 11,357
Common stock issued in
connection with stock
option plans 91,157 5 795 800
- ---------------------------------------------------------------------------------------------------------------
Balance, February 1, 1998 12,699,916 $ 635 $ 34,694 $ 86,284 $ 121,613
===============================================================================================================
</TABLE>
<PAGE>
Culp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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 1997 have been reclassified to conform with
the fiscal year 1998 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 three months and nine months ended
February 1, 1998 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):
- --------------------------------------------------------------------------------
February 1, 1998 April 27, 1997
- --------------------------------------------------------------------------------
Customers $ 74,744 $ 58,568
Allowance for doubtful accounts (1,146) (1,500)
Reserve for returns and allowances ( 489) (377)
- --------------------------------------------------------------------------------
$ 73,109 $ 56,691
================================================================================
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):
- --------------------------------------------------------------------------------
February 1, 1998 April 27, 1997
- --------------------------------------------------------------------------------
Raw materials $ 45,183 $ 32,025
Work-in-process 5,838 4,627
Finished goods 28,391 20,212
- --------------------------------------------------------------------------------
Total inventories valued at FIFO cost 79,412 56,864
Adjustments of certain inventories to the LIFO
cost method (4,380) (3,401)
- --------------------------------------------------------------------------------
$ 75,032 $ 53,463
================================================================================
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):
- --------------------------------------------------------------------------------
February 1, 1998 April 27, 1997
- --------------------------------------------------------------------------------
Accounts payable-trade $ 32,939 $ 24,156
Accounts payable-capital expenditures 2,982 5,747
- --------------------------------------------------------------------------------
$ 35,921 $ 29,903
================================================================================
<PAGE>
6. Accrued Expenses
A summary of accrued expenses follows (dollars in thousands):
- --------------------------------------------------------------------------------
February 1, 1998 April 27, 1997
- --------------------------------------------------------------------------------
Compensation and benefits $ 8,771 $ 10,217
Other 3,912 4,857
- --------------------------------------------------------------------------------
$ 12,683 $ 15,074
================================================================================
7. Long-Term Debt
A summary of long-term debt follows (dollars in thousands):
- --------------------------------------------------------------------------------
February 1, 1998 April 27, 1997
- --------------------------------------------------------------------------------
Industrial revenue bonds and other obligations $ 34,066 $ 31,641
Revolving credit facility 105,000 41,000
Revolving line of credit 1,033 4,000
- --------------------------------------------------------------------------------
Seller note payable 5,100 -0-
145,199 76,641
Less current maturities (1,120) (100)
- --------------------------------------------------------------------------------
$ 144,079 $ 76,541
===============================================================================
7. Long-Term Debt (continued)
On April 23, 1997, the company entered into a revolving credit agreement
(the "Credit Agreement") providing for a five-year unsecured multi-currency
revolving credit facility with a syndicate of banks in the United States and
Europe. The Credit Agreement provides for a revolving loan commitment of
$125,000,000 which declines $5,000,000 at each of four annual dates beginning in
April 1998. The agreement requires payment of a quarterly facility fee in
advance.
The company has a $6,000,000 revolving line of credit which expires on
February 28, 1999 and will automatically be extended for an additional
three-month period on each, May 31, August 31, November 30, and February 28,
unless the bank notifies the company that the line of credit will not be
extended.
On July 17, 1997, the company obtained $8,500,000 of new industrial revenue
bond (IRB) financing related to the expansion of its plant and equipment at its
Lumberton, North Carolina facility. The final maturity of this IRB is the year
2014. The remaining IRBs are substantially due in one-time payments at various
dates from 2006 to 2013 and are collateralized by restricted investments of
$3,976,000 and letters of credit for $35,041,000 at February 1, 1998.
During the third fiscal quarter of 1998, the Company repaid $6,000,000 in
IRB financing related to its Burlington, NC facility due to capital expenditures
in the jurisdiction approaching the statutory limit as provided by federal tax
laws.
During the third fiscal quarter of 1998, the Company obtained a $15,000,000
revolving credit line which expires on March 31, 1998. No borrowings were
outstanding during the third fiscal quarter of 1998 or at February 1, 1998. The
line of credit was obtained due to short-term working capital needs.
Additionally, the line of credit requires payment of interest on any outstanding
borrowings at an interest rate based on LIBOR. Subsequent to February 1, 1998,
the Company borrowed $9,200,000 and $6,500,000, respectively, for a period of 7
days and 10 days, respectively.
The company's loan agreements require, among other things, that the company
maintain compliance with certain positive and negative financial covenants. At
February 1, 1998, the company was in compliance with these required financial
covenants.
At February 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 amounts 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 company believes it could terminate these agreements as of February 1,
1998 for approximately $690,000. Net amounts paid under these agreements
increased interest expense by approximately $156,000 in 1998 and $216,000 in
1997. 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.
<PAGE>
8. Cash Flow Information
Payments for interest and income taxes during the period were (dollars in
thousands)
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
.
Interest $ 5,254 $ 3,437
Income taxes 4,720 4,003
================================================================================
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.
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. The contracts outstanding at February 1, 1998
mature at various dates in fiscal 1998.
10. Acquisition
On August 5, 1997, the company completed the purchase of the business and
certain assets relating to the upholstery fabric businesses operating as
Phillips Weaving Mills, Phillips Velvet Mills, Phillips Printing and Phillips
Mills. Based on the terms of the asset purchase agreement, the transaction is
valued at approximately $37,000,000 which included cash, seller debt retired, a
note payable to the seller and acquisition costs. The consideration for the
acquisition also included stock options and an agreement for contingent payments
to the selling companies within three years following closing that could range
from $0 to $5,500,000, depending upon the future sales performance of the
Phillips jacquard fabric product line. The transaction has an effective date of
August 4, 1997.
The acquisition has been accounted for by the purchase method of
accounting, and accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based on the estimated fair market values
at the date of acquisition. The cost in excess of net assets of business
acquired will be amortized on the straight-line method over 40 years. The
preliminary estimated fair values of assets and liabilities acquired are
summarized below:
Inventories $ 4,916,000
Property, plant and equipment 3,799,000
Cost in excess of net assets of business acquired 28,732,000
Accrued expenses (447,000)
-------------
$ 37,000,000
=============
11. Income Taxes
The effective tax rate for the third quarter was 22.2% and for the nine months
was 31.0% compared with 37.5% in the year-earlier periods. The lower rate was
due principally to increased tax benefits related To the Company's foreign sales
corporation. The amount of these benefits recorded for the third quarter
reflected operating results for both the current quarter and certain prior
periods. The reduced tax rate also reflected a higher proportion of earnings
from the Company's Canadian subsidiary that is taxed at a lower effective rate.
The Company is estimating the effective tax rate to be 31.0% for the fourth
quarter of fiscal 1998.
12. Subsequent Event
On February 2, 1998, the Company completed the purchase of the business and
substantially all the assets relating to the yarn manufacturing business
operating as Artee Industries, Incorporated. Based on the value of the
definitive asset purchase agreement, the transaction value at closing is
estimated to be $18,000,000 (including issuance of Culp common stock, cash, a
note and assumption of certain liabilities). Terms of the purchase also provide
the opportunity for additional consideration of up to $7,600,000 contingent upon
the profitability of Artee during Culp's fiscal year ending May 2, 1999. The
acquisition will be accounted for as a purchase, and the results of Artee will
therefore be included in Culp's results from the closing date.
13. New Accounting Standard
During the third fiscal quarter of 1998, the Company adopted the Financial
Accounting Standards Board's Statement of Financial Accounting Standard No. 128,
"Earnings per Share" which is effective for financial statements issued for
interim and annual periods ending after December 15, 1997. The new standard
specifies the computation, presentation and disclosure requirements for earnings
per share for entities with publicly-held common stock, and also requires
retroactive restatement of all other periods presented.
The following table illustrates the reconciliation of the numerators and
denominators of net income per
share and net income per share, assuming dilution:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------
February 1, 1998 January 26, 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:
<S> <C> <C> <C> <C> <C> <C>
Net income $4,002 12,692 $0.32 $3,010 11,342 $0.27
======== =======
Effect of dilutive
securities:
Options - 294 - 311
---------- ---------- --------- ----------
Net income per share,
Assuming dilution $4,002 12,986 $0.31 $3,010 11,653 $0.26
========== ========== ======== ========= ========== =======
13. New Accounting Standard (continued)
Nine Months Ended
-------------------------------------------------------------------------------
February 1, 1998 January 26, 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:
Net income $11,357 12,663 $0.90 $8,930 11,317 $0.79
======== =======
Effect of dilutive
securities:
Options - 301 - 301
---------- ---------- --------- ----------
Net income per share,
assuming dilution $11,357 12,964 $0.88 $8,930 11,618 $0.77
========== ========== ======== ========= ========== =======
</TABLE>
14. Segment Reporting
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information",
effective for fiscal years 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 is 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 fiscal year 1999.
<PAGE>
CULP, INC.
SALES BY PRODUCT CATEGORY/BUSINESS UNIT
FOR THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 1, 1998 AND JANUARY 26, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------------
Amounts Percent of Total
Sales
------------------ -------------------
February January % Over
1, 26,
Product 1998 1997 (Under) 1998 1997
Category/Business Unit
- ------------------------- -------- -------- ---------- -------- ---------
Upholstery Fabrics
<S> <C> <C> <C> <C> <C>
Culp Textures $ 21,059 20,389 3.3 % 17.8 % 20.9 %
Rossville/Chromatex 21,120 18,953 11.4 % 17.8 % 19.4 %
-------- -------- ---------- -------- ---------
42,179 39,342 7.2 % 35.6 % 40.4 %
Velvets/Prints 44,020 40,387 9.0 % 37.2 % 41.4 %
Phillips 11,236 0 100.0 % 9.5 % 0.0 %
-------- -------- ---------- -------- ---------
97,435 79,729 22.2 % 82.3 % 81.8 %
Mattress Ticking
Culp Home Fashions 20,261 17,739 14.2 % 17.1 % 18.2 %
Yarn
Artee 761 0 100.0 % 0.6 % 0.0 %
-------- -------- ---------- -------- ---------
* $ 118,457 97,468 21.5 % 100.0% 100.0 %
======== ======== ========== ======== =========
NINE MONTHS ENDED (UNAUDITED)
---------------------------------------------------
Amounts Percent of Total
Sales
------------------ -------------------
February January % Over
1, 26,
Product 1998 1997 (Under) 1998 1997
Category/Business Unit
- ------------------------- -------- -------- ---------- -------- ---------
Upholstery Fabrics
Culp Textures $ 67,206 65,191 3.1 % 19.7 % 22.2 %
Rossville/Chromatex 60,843 58,840 3.4 % 17.8 % 20.1 %
-------- -------- ---------- -------- ---------
128,049 124,031 3.2 % 37.6 % 42.3 %
Velvets/ Prints 126,345 115,487 9.4 % 37.1 % 39.4 %
Phillips 21,961 0 100.0 % 6.4 % 0.0 %
-------- -------- ---------- -------- ---------
276,355 239,518 15.4 % 81.1 % 81.7 %
Mattress Ticking
Culp Home Fashions 63,765 53,683 18.8 % 18.7 % 18.3 %
Yarn
Artee 761 0 100.0 % 0.2 % 0.0 %
-------- -------- ---------- -------- ---------
* $ 340,881 293,201 16.3 % 100.0% 100.0 %
======== ======== ========== ======== =========
</TABLE>
*U.S. sales were $ 79,873 and $70,931 for the current quarter of fiscal 1998 and
fiscal 1997, respectively; and $242,123 and $220,791 for the year to date of
fiscal 1998 and fiscal 1997, respectively. The percentage increase in U.S. sales
was 13% for the current quarter and an increase of 10% for the year to date.
<PAGE>
CULP, INC.
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 1, 1998 AND JANUARY 26, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
-----------------------------------------------------
Amounts Percent of Total
Sales
--------------------- -------------------
February January % Over
1, 26,
Geographic Area 1998 1997 (Under) 1998 1997
- ----------------------- ---------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
North America $ 7,562 6,482 16.7 % 19.6 % 24.4 %
(Excluding USA)
Europe 11,581 7,213 60.6 % 30.0 % 27.2 %
Middle East 9,326 4,580 103.6% 24.2 % 17.3 %
Far East & Asia 7,957 6,862 16.0 % 20.6 % 25.9 %
South America 1,230 855 43.9 % 3.2 % 3.2 %
All other areas 928 545 70.3 % 2.4 % 2.1 %
---------- --------- --------- --------- -------
$ 38,584 26,537 45.4 % 100.0 % 100.0 %
========== ========= ========= ========= =======
NINE MONTHS ENDED (UNAUDITED)
-----------------------------------------------------
Amounts Percent of Total
Sales
--------------------- -------------------
February January % Over
1, 26,
Geographic Area 1998 1997 (Under) 1998 1997
- ----------------------- ---------- --------- --------- --------- -------
North America $ 22,574 20,555 9.8 % 22.9 % 28.4 %
(Excluding USA)
Europe 22,811 17,573 29.8 % 23.1 % 24.3 %
Middle East 23,452 13,736 70.7 % 23.7 % 19.0 %
Far East & Asia 23,951 15,893 50.7 % 24.3 % 21.9 %
South America 3,487 2,464 41.5 % 3.5 % 3.4 %
All other areas 2,483 2,189 13.4 % 2.5 % 3.0 %
---------- --------- --------- --------- -------
$ 98,758 72,410 36.4 % 100.0 % 100.0 %
========== ========= ========= ========= =======
</TABLE>
International sales, and the percentage of total sales, for each of the last six
years follows:fiscal 1992-$ 34,094 (18%); fiscal 1993-$ 40,729 (20%); fiscal
1994-$ 44,038 (18%); fiscal 1995-$ 57,971 (19%);fiscal 1996-$ 77,397 (22%); and
fiscal 1997-$ 101,571 (25%). International sales for the current quarter
represented 33% and 27% for 1998 and 1997, respectively. Year-to-date
international sales represented 29% and 25% of total sales for 1998 and 1997,
respectively.
Certain amounts for fiscal year 1997 have been reclassified to conform with the
fiscal year 1998 presentation. Additionally, certain amounts were reclassified
from the fiscal year 1998 second quarter presentation.
<PAGE>
Management's Discussion and Analysis of Financial Condition
And Results of Operation
I-12
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 February 1, 1998, net sales rose 22% to $118.5
million compared with $97.5 million in the year-earlier period. Net income for
the quarter totaled $4.0 million, or $0.32 per share, compared with $3.0
million, or $0.27 per share, for the third quarter of fiscal 1997. The largest
components of the increase in sales were incremental sales of $11.2 million from
the acquisition of assets related to Phillips Mills, increased sales to
customers outside the United States and higher shipments of mattress ticking.
Excluding the contribution from acquired operations, sales of upholstery fabrics
to U.S.-based manufacturers were down 3% for the quarter from a year ago. This
portion of the Company's business has been generally soft throughout fiscal
1998. Sales to customers outside the United States rose 45% for the quarter,
extending the pattern of growth in this category. International sales are
continuing to account for an increasing percentage of the Company's total sales.
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. Net income for the quarter and nine-month period was favorably impacted
by a lower effective tax rate which resulted from higher than expected tax
benefits (in the current period as well as prior periods) related to the
Company's foreign sales corporation ("FSC"), and higher estimated income in
Canada which has a lower effective tax rate.
Three Months and Nine Months Ended February 1, 1998 Compared With Three Months
and Nine Months Ended January 26, 1997
Net Sales. Net sales for the third quarter increased by $21.0 million, or 22%,
compared with the year-earlier period. Net sales for the nine months increased
by $47.7 million, or 16%, compared to the same period of last year. The
Company's sales of upholstery fabrics increased $17.7 million, or 22% in the
third quarter compared with the prior year. Upholstery fabric sales increased
$36.8 million, or 15%, for the nine month period. The principal factor
contributing to the increased sales was the contribution of $11.2 million for
the quarter and $22.0 million for the nine months from the assets purchased from
Phillips Mills effective August 4, 1997. Sales from the Velvets/Prints business
unit, which manufactures and markets fabrics especially popular in markets
outside the United States, were up 9% from the prior year for the quarter and
nine month period. Sales from the Culp Textures and Rossville/Chromatex business
units were up modestly for the quarter and nine months. Sales from the Culp Home
Fashions unit, which principally consists of mattress ticking, rose 14% from
last year's third quarter and 19% from the first nine months of last year.
Culp's sales of upholstery fabrics for furniture to U.S.-based accounts have not
generally been as strong thus far in fiscal 1998 as a year ago. The Company
believes the financial difficulties of several significant furniture retailers,
including the summer 1997 bankruptcies of Levitz and Montgomery Wards,
significantly contributed to the slower rate of growth. Overall sales to
U.S.-based residential furniture accounts, including the contribution from
acquired operations, were up 13% for the third quarter and 10% for the nine
month period. International sales, consisting primarily of upholstery fabrics,
increased to $38.6 million for the quarter, up 45% from a year ago and increased
to $98.8 million for the nine months, up 36% from a year ago. International
shipments accounted for 33% of the Company's sales for the third quarter, up
from 27% a year ago.
Gross Profit and Cost of Sales. Gross profit for the third quarter increased by
$3.8 million and amounted to 17.6% of net sales, unchanged from a year ago. For
the first nine months, gross profit increased by $8.2 million, and as a
percentage of sales decreased slightly to 17.7%. The Company's profitability is
benefiting significantly from results in the Culp Home Fashions business unit
(mattress ticking) and the incremental contribution from the acquisition of
Phillips Mills. These factors have partially been offset in fiscal 1998 by the
impact on profitability and gross margins of lower sales from certain business
units to residential furniture accounts in the United States and expansion
projects that have not reached targeted levels of productivity. These trends are
expected to continue in the fourth quarter.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the third quarter increased slightly as a percentage
of net sales to 11.1% compared with 11.0% a year ago. This category of expenses
decreased as a percentage of net sales for the nine month period from 11.4% a
year ago to 11.1%. The increase in absolute dollars for the three and nine
month periods is principally due to incremental S,G&A expenses for Phillips,
higher sales commissions related to international sales and significant
investments in additional design resources, which were offset by lower accruals
for incentive-based compensation programs.
Interest Expense. Net interest expense for the third quarter of $2.1 million was
up from $1.2 million a year ago due. Net interest expense for the nine months
was $5.0 million, up from $3.5 million last year. The increase for the quarter
is due to higher average borrowings which resulted from the Company' s
acquisition of Phillips Mills which was effective on August 4, 1997, and from
capital expenditure and working capital investments that were made during the
first nine months.
Other Expense. Other expense increased $71,000 for the third quarter compared
with a year ago, principally due to incremental amortization of goodwill
associated with the acquisition of Phillips Mills.
Income Taxes. The effective tax rate for the third quarter was 22.2% and for the
nine months was 31.0% compared with 37.5% in the year-earlier period. The lower
rate was due principally to increased tax benefits related to the Company's
foreign sales corporation. The reduced tax rate also reflected a higher
proportion of earnings from the Company's Canadian subsidiary that is taxed at a
lower effective rate. The Company is estimating the effective tax rate for the
full fiscal year at 31.0% which is down from 36% for fiscal 1997.
Earnings Per Share. Basic and diluted earnings per share for the third quarter
of fiscal 1998 totaled $0.32 and $0.31, respectively, compared with $0.27 and
$0.26, respectively, a year ago. The weighted average number of outstanding
shares (assuming dilution) increased 11.4% from a year ago, principally due to
the Company's secondary offering completed in February 1997.
Liquidity and Capital Resources
Liquidity. Cash and cash investments were $348,000 at February 1, 1998 compared
with $830,000 at the end of fiscal 1997. Funded debt (long-term debt, including
current maturities, less restricted investments) increased to $141.2 million at
the close of the third quarter, up from $80.6 million as of January 26, 1997 and
$65.6 million at the end of fiscal 1997. The increase in funded debt from April
27, 1997 resulted from the Phillips and Wetumpka acquisitions ($37.2 million),
capital expenditures ($28.2 million), an operating cash flow deficit ($6.6
million), and a decrease in accounts payable related to capital expenditures
($2.8 million). As a percentage of total capital (funded debt plus total
shareholders' equity), the Company's borrowings amounted to 53.7% at February 1,
1998 compared with 47.4% as of January 26, 1997 and 37.2% at the end of fiscal
1997. The Company's working capital as of February 1, 1998 was $104.0 million
compared with $69.8 million at the close of fiscal 1997.
The Company typically generates the majority of its cash from operating
activities during the second fiscal half. Cash of $6.6 million was used to fund
operating activities, principally increases in inventories and accounts
receivable, offset by net income, depreciation and increases in accounts payable
during the first nine months. Capital expenditures during the first nine months
totaled $28.2 million. Financing activities provided $65.0 million in cash to
fund operating activities, capital expenditures and acquisitions.
Financing Arrangements. As of February 1, 1998, the Company had outstanding
balances of $105 million under its $125 million syndicated five-year, unsecured,
revolving credit facility. The Company also has a total of $34 million in
outstanding industrial revenue bonds ("IRBs") which have been used to finance
capital expenditures. The IRBs are collateralized by restricted investments of
$4 million as of February 1, 1998 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 certain financial ratios. As of February 1, 1998, the Company was in
compliance with the required financial covenants.
As of February 1, 1998, the Company had three interest rate swap agreements in
effect 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 contracts to
hedge against currency fluctuations with respect to firm commitments to purchase
machinery, equipment and certain raw materials when those commitments are
denominated in foreign currencies.
During the fourth quarter of fiscal 1998, the Company expects to close on a
private placement of $75,000,000 of senior, unsecured notes, which are expected
to have a fixed coupon rate of 6.76% and an average term of 10 years.
Additionally, the principal financial covenants include a funded debt to total
capital ratio of 60% and a minimum shareholders' equity level. The proceeds will
be used to repay borrowings under the Company's bank credit facility.
Capital Expenditures. The Company has invested considerable additional capital
over the past several years to increase capacity to support higher sales, gain
manufacturing efficiencies and increase vertical integration to lower product
costs and control the supply of raw materials more securely. The Company
anticipates capital spending to total approximately $39 million in fiscal 1998.
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.
Phillips Mills Acquisition
On August 5, 1997, Culp completed the acquisition of the business and certain
assets relating to the upholstery fabric businesses operating as Phillips
Weaving Mills, Phillips Velvet Mills, Phillips Printing and Phillips Mills.
These operating units were purchased from Phillips Industries, Inc., a privately
owned corporation based in High Point, North Carolina. Based on the terms of the
definitive asset purchase agreement, the transaction is being valued for
accounting and reporting purposes at approximately $37 million (including cash,
retirement of debt and a non-compete agreement) under generally accepted
accounting principles. Terms of the purchase also include an option for 100,000
shares of Culp's common stock and additional compensation contingent upon
attaining specified sales objectives. (See Form 8-K, dated April 30, 1997, which
provides additional information related to the acquisition.)
Funds for the cash portion of the transaction were provided from the Company's
revolving credit facility.
Wetumpka Acquisition
On December 27, 1997, the Company completed the acquisition of the business and
certain assets relating to the Wetumpka spun yarn operation of Dan River, Inc.
for cash $1.5 million. The acquisition will be accounted for as a purchase, and
the results of Wetumpka will therefore be included in Culp's results from the
closing date. (See press release, dated December 17, 1997, which provides
additional information about the acquisition.)
Acquisition of Artee Industries
On February 2, 1998, Culp acquired the business and substantially all the assets
relating to the yarn manufacturing business operating as Artee Industries,
Incorporated. The transaction at closing is estimated at $18 million (including
issuance of 284,211 shares of Culp common stock, $2.0 million cash, a $1.6
million note and assumption of certain liabilities) Terms of the purchase also
include additional compensation of up to $7.6 million (60% in Culp common stock
and 40% in cash) contingent upon the profitability of Artee during Culp's fiscal
year ending May 2, 1999. The acquisition will be accounted for as a purchase,
and the results of Artee will therefore be included in Culp's results from the
closing date. (See Form 8-K, dated October 15, 1997, which provides additional
information related to the acquisition.)
Inflation
The Company's costs of raw materials have generally been relatively stable or
slightly down thus far in fiscal 1998. Other operating expenses, such as labor,
utilities and manufacturing supplies, have increased slightly. Competitive
conditions have not allowed the Company to offset the impact of these increases
through higher prices, thereby putting pressure on profit margins. The net
impact on margins will continue to be influenced by raw material prices, other
operating costs and competitive conditions.
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.
Forward-Looking Information
The Company's report on Form 10-Q may contain statements that could be deemed
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, which 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 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. In addition, because of the increasing
percentage of the Company's sales that is derived from shipments to customers
outside the United States, the value of the U.S. dollar relative to other
currencies can affect the competitiveness of the Company's products in
international markets.
<PAGE>
II-1
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
- -----------------------------
In December 1997, the Company sold 284,211 shares of its common stock, par
value $0.05 per share, to eight shareholders of Artee Industries,
Incorporated ("Artee") in exchange for all of the assets of Artee. The
shares were sold in reliance upon the exemption from registration provided
under Section 4(2) of the Securities Act of 1933 and Regulation D promulgated
thereunder. The resale of such securities was subsequently registered on a
registration statement on Form S-3, Registration Statement No. 333-42651.
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 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, 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) 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 28, 1996, 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 28, 1996, 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.
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 12, 1997, 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 infor- mation
for the second quarter ended November 2, 1997.
<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: March 18, 1998 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: March 18, 1998 By s/s Stephen T. Hancock
Stephen T. Hancock
General Accounting Manager
(Chief Accounting Officer)
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<RECEIVABLES> 74,744
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<OTHER-SE> 120,978
<TOTAL-LIABILITY-AND-EQUITY> 327,322
<SALES> 340,881
<TOTAL-REVENUES> 340,881
<CGS> 280,510
<TOTAL-COSTS> 280,510
<OTHER-EXPENSES> 1,159
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,280
<INCOME-PRETAX> 16,457
<INCOME-TAX> 5,100
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,357
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.88
</TABLE>
