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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 29, 2001
Commission File No. 0-12781
CULP, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1001967
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or other organization)
101 S. Main St., High Point, North Carolina 27261-2686
(Address of principal executive offices) (zip code)
(336) 889-5161
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.05/Share
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 ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation SK is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of July 23, 2001, 11,221,158 shares of common stock were
outstanding. The aggregate market value of the voting stock held by
non-affiliates of the registrant on that date was $30,563,511 based on the
closing sales price of such stock as quoted on the New York Stock Exchange
(NYSE), assuming, for purposes of this report, that all executive officers
and directors of the registrant are affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Part III
Portions of the Company's Proxy Statement dated August 20, 2001 in
connection with its Annual Meeting of Shareholders to be held on September
26, 2000 are incorporated by reference into Items 10, 11, 12 and 13.
CULP, INC.
FORM 10-K REPORT
TABLE OF CONTENTS
Item No. Page
PART I
1. Business
Overview............................................................3
Segments............................................................4
Business Strategy...................................................5
Capital Expenditures................................................6
Overview of Industry................................................6
Overview of Residential Furniture Industry..........................6
Overview of Commercial Furniture Industry...........................7
Overview of Bedding Industry........................................7
Products............................................................8
Manufacturing......................................................10
Product Design and Styling.........................................10
Distribution.......................................................11
Sources and Availability of Raw Materials..........................11
Competition........................................................12
Technology.........................................................12
Environmental and Other Regulations................................13
Employees..........................................................13
Customers and Sales................................................13
Net Sales by Geographic Area.......................................14
Backlog............................................................14
2. Properties............................................................15
3. Legal Proceedings.....................................................16
4. Submission of Matters to a Vote of Security Holders...................16
PART II
5. Market for the Registrant's Common Stock
and Related Stockholder Matters.....................................16
6. Selected Financial Data...............................................17
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................18
7A. Quantitative and Qualitative Disclosures
About Market Risk...................................................24
8. Consolidated Financial Statements and Supplementary Data..............25
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..............................43
PART III
10. Directors and Executive Officers of the
Registrant..........................................................43
11. Executive Compensation................................................43
12. Security Ownership of Certain
Beneficial Owners and Management....................................43
13. Certain Relationships and Related
Transactions........................................................43
PART IV
14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K.............................................44
Documents filed as part of this report................................44
Exhibits..............................................................45
Reports on Form 8-K...................................................50
Financial Statement Schedules.........................................50
Signatures ...........................................................51
PART I
ITEM 1. BUSINESS
Overview
Culp, Inc. (the Company) manufactures and markets upholstery fabrics
and mattress tickings primarily for use in the furniture (residential,
commercial and juvenile) and bedding industries on a worldwide basis. The
Company's executive offices are located in High Point, North Carolina. The
Company was organized as a North Carolina corporation in 1972 and made its
initial public offering in 1983. Since 1997, the Company has been listed on
the New York Stock Exchange and traded under the symbol "CFI."
Culp is one of the largest integrated marketers of furniture upholstery
fabrics in the world and is a leading global producer of mattress fabrics
(known as mattress ticking). The Company's fabrics are used principally in
the production of residential and commercial furniture and bedding products,
including sofas, recliners, chairs, loveseats, sectionals, sofa-beds, office
seating, panel systems and mattress sets. Culp markets one of the broadest
product lines in its industry, with a wide range of fabric constructions,
patterns, colors, textures and finishes. This breadth is made possible by
Culp's extensive manufacturing capabilities that include a variety of
weaving, printing and finishing operations and the ability to produce various
yarns and unfinished base fabrics (known as greige goods) used in its
products. Although most of the Company's competitors emphasize one
particular type of fabric, Culp competes in every major category except
leather, which accounts for a relatively small portion of the residential
furniture market. Culp's staff of over 60 designers and support personnel
utilize Computer Aided Design (CAD) systems to develop the Company's own
patterns and styles. Culp's product line currently includes more than 3,000
upholstery fabric patterns and 1,000 mattress-ticking styles. Although Culp
markets fabrics at most price levels, the Company has emphasized fabrics that
have a broad appeal in the "good" and "better" price categories of furniture
and bedding.
Culp markets its products worldwide, with sales to customers in over 50
countries. Total sales were $409.8 million in fiscal 2001, and the Company's
international sales totaled $77.8 million during fiscal 2001. Shipments to
U.S.-based customers continue to account for most of the Company's sales, but
Culp's global presence has led to a significant proportion of sales to
international accounts (19% of net sales for fiscal 2001). The Company's
network of 22 international sales agents represents Culp's products in major
furniture and bedding markets outside the United States.
Culp has twelve (12) manufacturing facilities, with a combined total of
2.2 million square feet, that are located in North Carolina (8), South
Carolina (2), Tennessee (1) and Quebec, Canada (1). The Company's
distribution system is designed to offer customers fast, responsive
delivery. Products are shipped directly to customers from the Company's
manufacturing facilities, as well as from three regional distribution
facilities strategically located in High Point, North Carolina, Los Angeles,
California, and Tupelo, Mississippi, which are areas with a high
concentration of furniture manufacturing. Additionally, the Company
maintains an inventory of upholstery fabrics at a warehouse facility in Grand
Rapids, Michigan to supply large commercial furniture manufacturers in that
area.
Segments
The Company's operating segments are upholstery fabrics and mattress
ticking, with related divisions organized within those segments. The
divisions within upholstery fabrics are Culp Decorative Fabrics, Culp
Velvets/Prints and Culp Yarn. The division within mattress ticking is Culp
Home Fashions. Each division is accorded considerable autonomy and is
responsible for designing, manufacturing and marketing its respective product
lines. Significant synergies exist among the divisions, including the sharing
of common raw materials made internally, such as polypropylene yarns, certain
dyed and spun yarns, greige goods and printed heat-transfer paper. Products
manufactured at one division's facility are commonly transferred to another
division's facility for additional value-added processing steps. The
following table sets forth certain information for each of the Company's
segments/divisions.
Culp's Segments/Divisions
FISCAL 2001 PRODUCT LINES
NET SALES (BASE CLOTH, IF
SEGMENT DIVISION (in millions) APPLICABLE)
- ------------------ ----------------------- ----------- --------------------
Upholstery Fabrics Culp Decorative Fabrics $170.3 Woven jacquards
Woven dobbies
Culp Velvets/Prints $122.1 Wet prints (flocks)
Heat-transfer prints
(jacquard, flock)
Cotton prints
Woven velvets
Tufted velvets
(woven polyester)
Culp Yarn $ 12.6 Pre-dyed spun yarns
Chenille yarns
Mattress Ticking Culp Home Fashions $104.8 Woven jacquards
Heat-transfer prints
(jacquard, knit,
sheeting)
Pigment prints
(jacquard, knit,
sheeting, non-woven)
Culp Decorative Fabrics. Culp Decorative Fabrics manufactures and
markets jacquard and dobby woven fabrics used primarily for residential and
commercial furniture. During 2001, the Company implemented a restructuring
plan designed to increase efficiencies and eliminate cost. The Company
consolidated the operations from the Monroe, North Carolina and West
Hazleton, Pennsylvania facilities into the remaining facilities, which
resulted in the closure of these operations. Culp Decorative Fabrics'
manufacturing facilities are located in Burlington and Graham, North
Carolina, Pageland, South Carolina, and Chattanooga, Tennessee. Culp
Decorative Fabrics has become increasingly vertically integrated,
complementing its extensive weaving capabilities with the ability to extrude,
dye and texturize yarn. The designs marketed by Culp Decorative Fabrics
range from intricate, complicated patterns such as floral and abstract
designs to patterns associated with casual living styles that are popular
with motion furniture. Culp Decorative Fabrics accounts for the majority of
the Company's sales to the commercial furniture market. The Company
maintains an inventory at a third-party warehouse in Grand Rapids, Michigan
to supply fabrics marketed by Culp Decorative Fabrics to large commercial
furniture manufacturers on a "just in time" basis.
Culp Velvets/Prints. Culp Velvets/Prints manufactures and markets a
broad range of printed and velvet fabrics. These include wet-printed designs
on flock base fabrics, heat-transfer prints on jacquard and flock base
fabrics, cotton prints, woven velvets and tufted velvets. These fabrics
typically offer manufacturers richly colored patterns and textured surfaces.
Recent product development improvements in manufacturing processes have
significantly enhanced the quality of printed flock fabrics which are
principally used for residential furniture. These fabrics are also used for
other upholstered products such as baby car seats. These fabrics are
manufactured at Burlington, North Carolina, Anderson, South Carolina, and
Lumberton, North Carolina.
Culp Yarn. Culp Yarn manufactures and markets a variety of pre-dyed
spun yarns, including WrapSpun(TM), open-end spun and chenille yarns. In 2001,
as part of the Company's restructuring plans, the Company exited the carpet
and ring-spun apparel markets. This action resulted in the closure of the
facility in Wetumpka, Alabama. Culp Yarn operates manufacturing facilities
in Shelby, Cherryville, and Lincolnton, North Carolina. Most of the
production of Culp Yarn is used internally by other Culp divisions. The
external sales are directed to the upholstery fabric market, and a portion of
these shipments are to competitors of Culp. Culp Yarn has provided Culp more
control over its supply of spun and chenille yarns and complemented the
Company's increased emphasis on developing new designs.
Culp Home Fashions. Culp Home Fashions principally markets mattress
ticking to bedding manufacturers. These fabrics encompass woven jacquard
ticking as well as heat-transfer and pigment-printed ticking on a variety of
base fabrics, including jacquard, knit, poly/cotton sheeting and non-woven
materials. Culp Home Fashions has successfully blended its diverse printing
and finishing capabilities with its access to a variety of base fabrics to
offer innovative designs to bedding manufacturers for mattress products.
Printed jacquard fabrics offer customers better values with designs and
textures of more expensive fabrics. Jacquard greige goods printed by Culp
Home Fashions are primarily provided by the division's Rayonese facility.
Culp Home Fashions' manufacturing facilities are located in Stokesdale, North
Carolina and St. Jerome, Quebec.
Business Strategy
The Company's plan to maintain leadership in the global upholstery
fabric and mattress ticking segments is based on a business strategy that
includes four main initiatives:
Customer Service and Vertical Integration - continuing to enhance the
competitive value of its upholstery fabrics and mattress ticking through a
company-wide initiative to raise efficiency and improve customer service.
Important aspects of this program have included attaining more consistent
product quality, improving delivery standards and offering more innovative
designs. The Company's ability to realize progress in these areas in the
past has been aided significantly by becoming more vertically integrated
through capital expansion projects and strategic acquisitions.
Representative steps have included adding capacity for producing unfinished
jacquard greige goods, extruding polypropylene yarn and most recently,
manufacturing spun and specialty yarn.
Broad Product Offering - continuing to market one of the broadest
product lines in upholstery fabrics and mattress ticking, consistent with
customer demand. Through its extensive manufacturing capabilities, the
Company competes in every major category except leather.
Diverse Global Customer Base - increasing its penetration into other
end-use markets in addition to U.S. residential furniture, such as bedding,
international, commercial furniture and juvenile furniture.
Design Innovation - continuing to invest in personnel and other
resources for the design of upholstery fabrics and ticking with appealing
patterns and textures. An integral component of the value Culp provides to
customers is supplying fabrics that are fashionable and meet current consumer
preferences. The Company's principal design resources are now consolidated
in a single facility that provides advanced CAD systems and promotes a
sharing of innovative designs among the divisions.
Capital Expenditures
Since fiscal 1996, the Company has invested $104.1 million in capital
expenditures to expand its manufacturing capacity, install more efficient
production equipment and vertically integrate its operations. These
expenditures have included, among other things, the installation of narrow
and wide-width weaving machines and additional printing equipment to support
the growth in woven and printed upholstery fabrics and mattress ticking. The
Company spent approximately $8.1 million in capital expenditures during
fiscal 2001, primarily for modernization. This level of capital spending was
below the $22.6 million in capital expenditures during fiscal 2000. Projects
to modernize existing facilities encompassed several investments in looms and
finishing equipment throughout the Company's operations. The Company is
currently planning on capital expenditures for fiscal 2002 of approximately
$4 million.
Overview of Industry
Culp markets products worldwide to a broad array of manufacturers that
operate in three principal markets and several specialty markets:
Residential furniture. This market includes upholstered furniture sold
to consumers. Products include sofas, sleep sofas, chairs,
motion/recliners, sectionals and occasional furniture items.
Commercial furniture. This market includes upholstered office seating
and modular office systems sold primarily for use in offices (including
home offices) and other institutional settings.
Bedding. This market includes mattress sets as well as other related
home furnishings.
Specialty markets. These markets include juvenile furniture (baby car
seats and other baby items), hospitality (furniture used in hotels and
other lodging establishments), "top of the bed" (comforters and
bedspreads), outdoor furniture, recreational vehicle seating,
automotive aftermarket (slip-on seat covers), retail fabric stores and
specialty yarn.
Overview of Residential Furniture Industry
The upholstery fabric industry is highly competitive, particularly
among manufacturers in similar market niches. American Furniture
Manufacturers Association, a trade association, reports that manufacturers of
residential furniture in the United States shipped products valued at
approximately $26 billion (wholesale) during 2000. Approximately 42% of this
furniture is believed to consist of upholstered products. The upholstered
furniture market has grown from $5.4 billion in 1991 to $10.9 billion in 2000.
Trends in demand for upholstery fabric and mattress ticking generally
parallel changes in consumer purchases of furniture and bedding. Factors
influencing consumer purchases of home furnishings include the number of
household formations, growth in the general population, the demographic
profile of the population, consumer confidence, employment levels, the amount
of disposable income, geographic mobility, housing starts and existing home
sales. The long-term trend in demand for furniture and bedding has been one
of moderate growth, although there have been some occasional periods of a
modest downturn in sales due principally to changes in economic conditions.
The Company believes that demographic trends support the outlook for
continued long-term growth in the U.S. residential furniture and bedding
industries. In particular, as "baby boomers" (people born between 1946 and
1964) mature to the 35-to-64 year age range over the next decade, they will
be reaching their highest earning power. Consumers in these age groups tend
to spend more on home furnishings, and the increasing number of these
individuals favors higher demand for furniture and related home furnishings.
Statistics also show that the average size of new homes has increased in
recent years, and that is believed to have resulted in increased purchases of
furniture per home.
There is an established trend toward consolidation at all levels within
the home furnishings industry. Furniture/Today has reported that the ten
largest residential furniture manufacturers accounted for 41% of the
industry's total shipments in 2000, up from a 23% share in 1985. This trend
is expected to continue, particularly because of the need to invest
increasing capital to maintain modern manufacturing and distribution
facilities as well as to provide the sophisticated computer-based systems and
processes necessary to interface in the supply chain between retailers and
suppliers. This trend toward consolidation is resulting in fewer, but
larger, customers for upholstery fabric manufacturers. The Company believes
that this environment favors larger upholstery fabric manufacturers capable
of supplying a broad range of product choices at the volumes required by
major furniture manufacturers on a timely basis.
Culp's international sales declined 30% in 2001 to $77.8 million,
following an industry-wide trend. Although Culp's international sales will
continue to be influenced significantly by the value of the U.S. dollar
relative to other currencies, the company has a diversified global base of
customers and is seeking to broaden that further to minimize exposure to
economic uncertainties in any geographic area. Production costs of fabrics
involve a relatively low labor component, which provides an advantage for a
company with modern, efficient manufacturing equipment and systems. The
large size of the furniture market within the United States has helped
establish an upholstery fabrics industry that features ready access to a
variety of raw materials, larger manufacturers with lower costs resulting
from economies of scale and the availability of new designs and patterns.
The Company believes that these characteristics assist Culp in competing in
international markets.
Overview of Commercial Furniture Industry
The commercial furniture market in the United States represents annual
shipments by manufacturers valued at approximately $13.3 billion. Seating
and office systems, which represent the primary uses of upholstery in this
industry, represented annual sales of approximately $8.1 billion annually.
At the manufacturing level, the industry is highly concentrated. The top
five manufacturers of commercial furniture account for over 70% of total
industry shipments. Although demand for commercial furniture can be affected
by general economic trends, the historical pattern has been one of generally
steady growth.
Dealers aligned with specific furniture brands account for over half of
industry shipments of commercial furniture. Some shift in the distribution
of commercial furniture has occurred in recent years in conjunction with the
growth in national and regional chains featuring office supplies.
Overview of Bedding Industry
According to data compiled by the International Sleep Products
Association ("ISPA"), the domestic conventional bedding market, which
generated estimated wholesale revenues of $4.5 billion during calendar year
2000, includes approximately 800 manufacturers of mattress sets. The
conventional bedding market accounts for approximately 90% of the domestic
bedding market. Approximately 71% of the conventional bedding manufactured in
the U.S. is sold to furniture stores and specialty sleep shops. Most of the
remaining 29% is sold to department stores, national mass merchandisers,
membership clubs and factory direct stores. Approximately 70% of
conventional bedding is sold for replacement purposes and the average time
lapse between mattress purchases is approximately 11 years.
Products
As described above, the Company's products include upholstery fabrics
and mattress ticking.
UPHOLSTERY FABRICS. The Company derives the majority of its revenues
from the sale of upholstery fabrics primarily to the residential and
commercial (contract) furniture markets. Sales of upholstery fabrics totaled
74% of sales for fiscal 2001. The Company has emphasized fabrics and
patterns that have broad appeal at promotional to medium prices, generally
ranging from $2.20 per yard to $9.50 per yard.
MATTRESS TICKING. The Company also manufactures mattress ticking
(fabric used for covering mattresses and box springs) for sale to bedding
manufacturers. Sales of mattress ticking constituted 26% of sales in fiscal
2000. The Company has emphasized fabrics and patterns which have broad
appeal at prices generally ranging from $1.20 to $8.00 per yard.
The Company's upholstery fabrics and mattress ticking can each be
broadly grouped under the three main categories of wovens, prints and
velvets. The following table indicates the product lines within each of
these categories, a brief description of their characteristics and
identification of their principal end-use markets.
Culp Fabric Categories
----------------------
Upholstery Fabrics Characteristics Principal Markets
- ------------------ --------------- ------------------
Wovens:
Jacquards Elaborate, complex designs such as florals Residential
and tapestries in traditional, transitional furniture
and contemporary styles. Woven on Commercial
intricate looms using a wide variety of furniture
synthetic and natural yarns.
Dobbies Geometric designs such as plaids, stripes Residential
and solids in traditional and country furniture
styles. Woven on less complicated looms Commercial
using a variety of weaving constructions furniture
and primarily synthetic yarns.
Prints:
Wet prints Contemporary patterns with deep, rich Residential
colors on a nylon flock base fabric for a furniture
very soft texture and excellent Juvenile
wearability. Produced by screen printing furniture
directly onto the base fabric.
Heat-transfer Sharp, intricate designs on flock or Residential
prints jacquard base fabrics. Plush feel furniture
(flocks), deep colors (jacquards) and Juvenile
excellent wearability. Produced by using furniture
heat and pressure to transfer color from
printed paper onto base fabric.
Cotton prints A broad variety of designs featuring deep, Residential
rich colors printed on woven cotton base furniture
fabrics with excellent wearability.
Produced by screen printing directly onto
the base fabric.
Velvets:
Woven velvets Basic designs such as plaids and Residential
semi-plains in traditional and furniture
contemporary styles with a plush feel.
Woven with a short-cut pile using various
weaving methods and synthetic yarns.
Tufted velvets Lower cost production process of velvets in Residential
which synthetic yarns are punched into a furniture
base polyester fabric for texture. Similar
designs as woven velvets.
Mattress Ticking Characteristics Principal Markets
- ---------------- --------------- -----------------
Wovens:
Jacquards Florals and other intricate designs. Woven Bedding
on complex looms using a wide variety of
synthetic and natural yarns.
Prints:
Heat-transfer Sharp, detailed designs. Produced by using Bedding
prints heat and pressure to transfer color from
printed paper onto base fabrics, including
woven jacquards, knits and poly/cotton
sheetings.
Pigment prints Variety of designs produced economically by Bedding
screen printing pigments onto a variety of
base fabrics, including jacquards, knits,
poly/cotton sheeting and non-wovens.
================================================================================
Although fabrics marketed for upholstery applications and those used
for mattress ticking may have similar appearances, mattress ticking must be
manufactured on weaving and printing equipment in wider widths to accommodate
the physical size of box springs and mattresses. The Company's products
include all major types of coverings, except for leather, that manufacturers
use today for furniture and bedding. The Company also markets fabrics for
certain specialty markets, but these do not currently represent a material
portion of the Company's business.
Manufacturing
Substantially all of the upholstery fabric and mattress ticking
currently marketed by Culp is produced at the Company's twelve (12)
manufacturing facilities. These plants encompass a total of 2.2-million
square feet and include yarn extrusion, spinning, dyeing and texturizing
equipment, narrow and wide-width jacquard looms, dobby and woven velvet
looms, tufting machines, printing equipment for pigment, heat-transfer and
wet printing, fabric finishing equipment and various types of surface
finishing equipment (such as washing, softening and embossing). The Company
maintains ISO-9002 registration at the facilities that service the commercial
market, which include its weaving plants in Graham, North Carolina, Pageland,
South Carolina and Chattanooga, Tennessee, as well as its finishing plant in
Burlington, North Carolina.
The Company's woven fabrics are made from various types of synthetic
and natural yarn, such as polypropylene, polyester, acrylic, rayon, nylon or
cotton. Yarn is woven into various fabrics on jacquard, dobby or velvet
weaving equipment. Once the weaving is completed, the fabric can be printed
or finished using a variety of processes. The Company currently extrudes and
spins a portion of its own needs for yarn and purchases the remainder from
outside suppliers. Culp produces internally a substantial amount of its
needs for spun and chenille yarns. The Company also supplies other fabric
manufacturers with spun yarns manufactured by Culp Yarn. Culp purchases a
significant amount of greige goods (unfinished, uncolored base fabrics) from
other suppliers to be printed at the Company's plants, but has increased its
internal production capability for jacquard greige goods at Rayonese in
Quebec, Canada.
The Company's flock coating line produces flock greige goods to be used
primarily as the base cloth for wet and heat-transfer-printed flock
products. Flock fabrics are produced by the application of very short nylon
fibers onto a poly/cotton woven base fabric to create a velvet effect.
During the flock coating process, the fibers are bonded onto the base fabric
with an adhesive substance by utilizing an electrostatic charging procedure
which causes the fibers to vertically align with the base fabric.
Tufted velvet fabrics are produced by tufting machines which insert an
acrylic or polypropylene yarn through a polyester woven base fabric creating
loop pile surface material which is then sheared to create a velvet surface.
Tufted velvet fabrics are typically lower-cost fabrics utilized in the
Company's lower-priced product mix.
The Company's printing operations include pigment and heat-transfer
methods, as well as wet printing. The Company also produces its own printed
heat-transfer paper, another component of vertical integration.
Product Design and Styling
Consumer tastes and preferences related to upholstered furniture and
bedding change, albeit gradually, over time. The use of new fabrics and
designs remains an important consideration for manufacturers to distinguish
their products at retail and to capitalize on even small changes in preferred
colors, patterns and textures. Culp's success is largely dependent on the
Company's ability to market fabrics with appealing designs and patterns.
Culp has a staff of over 60 designers and support personnel involved in the
design and development of new patterns and styles, including designers with
experience in designing products for specific international markets. Culp
uses computer aided design (CAD) systems in the development of new fabrics,
which assists the Company in providing a very flexible design program. These
systems have enabled the Company's designers to experiment with new ideas and
involve customers more actively in the process. The use of CAD systems also
has supported the Company's emphasis on integrating manufacturing
considerations into the early phase of a new design. The Company's designers
are located in the Howard L. Dunn, Jr. design center to support the sharing
of design ideas and CAD and other technologies. The design center has
enhanced the Company's merchandising and marketing efforts by providing an
environment in which customers can be shown new products as well as
participate in product development initiatives.
The process of developing new designs involves maintaining an awareness
of broad fashion and color trends both in the United States and
internationally. These concepts are blended with input from the Company's
customers to develop new fabric designs and styles. Most of these designs
are introduced by Culp at major trade conferences that occur twice a year in
the United States (January and July) and annually in several major
international markets.
Distribution
The majority of the Company's products are shipped directly from its
distribution centers at or near manufacturing facilities. This "direct ship"
program is primarily utilized by large manufacturers. Generally, small and
medium-size residential furniture manufacturers use one of the Company's
three regional distribution facilities which have been strategically
positioned in areas which have a high concentration of residential furniture
manufacturers - High Point, North Carolina, Los Angeles, California and
Tupelo, Mississippi. In addition, the Company maintains an inventory of
upholstery fabric at a warehouse in Grand Rapids, Michigan to supply large
commercial furniture manufacturers in that area on a "just in time" basis.
The Company closely monitors demand in each distribution territory to decide
which patterns and styles to hold in inventory. These products are available
on demand by customers and are usually shipped within 48 hours of receipt of
an order. Substantially all of the Company's shipments of mattress ticking
are made from its manufacturing facilities in Stokesdale, North Carolina and
St. Jerome, Quebec, Canada.
In international markets, Culp sells primarily to distributors that
maintain inventories of upholstery fabrics for resale to furniture
manufacturers.
Sources and Availability of Raw Materials
Raw materials account for more than half of the Company's total
production costs. The Company purchases various types of synthetic and
natural yarns (polypropylene, polyester, acrylic, nylon, rayon and cotton),
synthetic staple fibers (acrylic, rayon, polypropylene, polyester), various
types of greige goods (poly/cotton wovens and flocks, polyester wovens,
poly/rayon and poly/cotton jacquard wovens, polyester knits, poly/cotton
sheeting and non-wovens), polypropylene resins, nylon flock fibers, rayon
staple, latex adhesives, dyes and chemicals from a variety of suppliers. The
Company has made a significant investment in becoming more vertically
integrated and producing more of its jacquard greige goods, polypropylene
yarns, package dyed yarns and printed heat-transfer paper internally. As a
result, a larger portion of its raw materials are comprised of more basic
commodities such as rayon staple, undyed yarns, polypropylene resin chips,
certain polyester warp yarns, unprinted heat-transfer paper and unflocked
poly/cotton base fabric. Although the Company is dependent upon one supplier
for all of its nylon flock fibers and upon one supplier of acrylic staple,
most of the Company's raw materials are available from more than one primary
source. The prices of such materials fluctuate depending upon current supply
and demand conditions and the general rate of inflation. Many of the
Company's basic raw materials are petrochemical products or are produced from
such products, and therefore the Company's raw material costs are
particularly sensitive to changes in petrochemical prices. Generally, the
Company has not had significant difficulty in obtaining raw materials.
Competition
In spite of the trend toward consolidation in the upholstery fabric
market, the Company competes against a large number of producers, ranging
from large manufacturers comparable in size to the Company to small producers
and marketers of specialty fabrics. The Company believes its principal
upholstery fabric competitors are the Burlington House Fabrics division of
Burlington Industries, Inc., Joan Fabrics Corporation (including its
Mastercraft division), Microfibres, Inc., and Quaker Fabric Corporation.
Conversely, the mattress ticking market is concentrated in a few
relatively large suppliers. The Company believes its principal mattress
ticking competitors are Bekaert Textiles B.V., Blumenthal Print Works, Inc.,
the Burlington House Fabrics division of Burlington Industries, Inc. and
Tietex, Inc. Although the Company is one of the largest suppliers of
furniture upholstery fabrics and a leading supplier of mattress ticking to
the bedding industry, some of the Company's competitors are larger overall
and have greater financial resources than the Company. Competition for the
Company's products is based primarily on price, design, quality, timing of
delivery and service.
Technology
Culp views the proper use of technology as an integral part of an
effective and responsive business. The Company continues to evaluate and
employ technology that will help to achieve higher levels of service to
customers and bring operating efficiencies to the manufacturing process.
Some key initiatives include:
- - Use of the Internet has continued to be an important component of our
work. CulpLink provides real-time information for the Company's
customers including order status, shipping and invoice documentation,
sales history, and inventory availability. Additionally, CulpLink has
been expanded to satisfy some key business to business strategies with
the Company's customers.
- - Our Intranet initiative, named CulpNet, was deployed to improve
efficiency within the company and reduce paper. Forms, charts, and
other internal reporting have been converted to CulpNet to achieve cost
savings and improve communications.
- - Culp has continued to invest in technology to aid the design process.
CAD, digital imaging, and electronic interfaces to the production
equipment have allowed significant savings in terms of speed and ease
of development.
- - Culp continues to expand shop floor systems in the use of scanners,
radio frequency devices, bar-coding, and process documentation
throughout the Company's manufacturing and distribution systems.
Inventories and manufacturing processes are tracked by these systems to
provide customer service and operational management with real time
information for better customer service and a more efficient
operation. All of these systems operate on redundant computer hardware
and fiber optic backbones to effectively minimize downtime to the
Company's production processes.
Environmental and Other Regulations
The Company is subject to various federal and state laws and
regulations, including the Occupational Safety and Health Act and federal and
state environmental laws, as well as similar laws governing its Rayonese
facility in Canada. The Company periodically reviews its compliance with
such laws and regulations in an attempt to minimize the risk of violations.
The Company's operations involve a variety of materials and processes
that are subject to environmental regulation. Under current law,
environmental liability can arise from previously owned properties, leased
properties and properties owned by third parties, as well as from properties
currently owned and leased by the Company. Environmental liabilities can also
be asserted by adjacent landowners or other third parties in toxic tort
litigation.
In addition, under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), and analogous
state statutes, liability can be imposed for the disposal of waste at sites
targeted for cleanup by federal and state regulatory authorities. Liability
under CERCLA is strict as well as joint and several.
The Company has accrued reserves for environmental matters based on
information presently available. Based on this information and the Company's
established reserves, the Company does not believe that environmental matters
will have a material adverse effect on either the Company's financial
condition or results of operations. However, there can be no assurance that
the costs associated with environmental matters will not increase in the
future.
Employees
As of April 29, 2001, the Company had approximately 3,100 employees,
compared to approximately 3,800 at the end of fiscal 2000. All of the hourly
employees at the Rayonese facility in Canada (approximately 7% of the
Company's workforce) are represented by a union. The collective bargaining
agreement with respect to the Rayonese hourly employees expires in February
2002. The Company is not aware of any efforts to organize any more of its
employees and believes its relations with its employees are good.
Customers and Sales
Culp's size, broad product line, diverse manufacturing base and
effective distribution system enable it to market products to over 2,000
customers. Major customers are leading manufacturers of upholstered
furniture, including Bassett, Furniture Brands International (Broyhill,
Thomasville and Action), Lifestyles International (Berkline, Benchcraft,
Drexel, Henredon and others), Flexsteel and La-Z-Boy (Bauhaus,
England/Corsair, LADD Furniture and others). Representative customers for
the Company's fabrics for commercial furniture include Herman Miller, HON
Industries and Steelcase. In the mattress ticking area, Culp's customer base
includes leading bedding manufacturers such as Sealy, Serta, Simmons and
Spring Air. Culp's customers also include many small and medium-size
furniture and bedding manufacturers. In international markets, Culp sells
upholstery fabrics primarily to distributors that maintain inventories for
resale to furniture manufacturers.
The following table sets forth the Company's net sales by geographic
area by amount and percentage of total net sales for the three most recent
fiscal years.
Net Sales by Geographic Area
----------------------------
(dollars in thousands)
Fiscal 2001 Fiscal 2000 Fiscal 1999
----------- ----------- -----------
United States $331,986 81.0% $376,975 77.2% $369,730 76.5%
North America
(excluding U.S.) 34,049 8.3 36,032 7.4 31,102 6.5
Europe 6,262 1.5 16,351 3.4 19,578 4.1
Middle East 17,831 4.4 32,929 6.7 33,996 7.0
Asia and Pacific Rim 15,497 3.8 19,102 3.9 21,371 4.4
South America 1,028 0.2 2,343 0.5 3,484 0.7
All other areas 3,157 0.8 4,347 0.9 3,823 0.8
--------- ---- -------- ----- -------- -----
Subtotal
(International) 77,824 19.0 111,104 22.8 113,354 23.5
--------- ---- -------- ----- -------- -----
Total $409,810 100.0% $488,079 100.0% $483,084 100.0%
========= ====== ======== ====== ======== ======
Backlog
Because a large portion of the Company's customers have an opportunity
to cancel orders, it is difficult to predict the amount of the backlog that
is "firm." Many customers may cancel orders before goods are placed into
production, and some may cancel at a later time. In addition, the Company
markets a significant portion of its sales through its regional warehouse
system from in-stock order positions. On April 29, 2001, the portion of the
backlog with confirmed shipping dates prior to June 3, 2001 was $32.3
million, and on April 30, 2000, the portion of the backlog with confirmed
shipping dates prior to June 4, 2000 was $39.1 million.
ITEM 2. PROPERTIES
The Company's headquarters are located in High Point, North Carolina,
and the Company currently operates twelve (12) manufacturing facilities and
three (3) regional distribution facilities. The following is a summary of the
Company's principal administrative, manufacturing and distribution
facilities. The manufacturing facilities are organized by segment.
Approx.
Total Area Expiration
Location Principal Use (Sq. Ft.) of Lease (2)
- -------- ------------- ---------- ------------
- - Headquarters and Distribution
Centers: (1)
High Point, North Carolina Corporate headquarters 40,000 2015
Burlington, North Carolina Design Center 30,000 Owned
Los Angeles, California Regional distribution 33,000 2007
- - Upholstery Fabrics:
Graham, North Carolina Manufacturing 341,000 Owned
Burlington, North Carolina Manufacturing and
distribution 302,000 Owned
Pageland, South Carolina Manufacturing 96,000 Owned
Burlington, North Carolina Distribution and Yarn
Warehouse 112,500 Owned
Chattanooga, Tennessee Manufacturing and
distribution 290,000 2018
Burlington, North Carolina Manufacturing and
distribution 275,000 2021
Lumberton, North Carolina Manufacturing 107,000 Owned
Anderson, South Carolina Manufacturing 99,000 Owned
High Point, North Carolina Regional distribution 65,000 2008
Tupelo, Mississippi Regional distribution 57,000 2018
Shelby, North Carolina Manufacturing 101,000 Owned
Lincolnton, North Carolina Manufacturing 78,000 Owned
Cherryville, North Carolina Manufacturing 135,000 Owned
- - Mattress Ticking:
Stokesdale, North Carolina Manufacturing and
distribution 220,000 Owned
St. Jerome, Quebec, Canada Manufacturing and
distribution 202,000 Owned
------------------------------------------------
(1) Properties are used jointly by Upholstery Fabrics and Mattress Ticking
(2) Includes all options to renew
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings to which the Company, or its
subsidiaries, is a party or of which any of their property is the subject
that are required to be disclosed under this item.
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of shareholders during
the fourth quarter ended April 29, 2001.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
STOCK AND RELATED STOCKHOLDER MATTERS
Registrar and Transfer Agent
EquiServe Trust Company, N.A.
c/o EquiServe
Post Office Box 43012
Providence, Rhode Island 02940-3012
(800) 633-4236
www.equiserve.com
Stock Listing
Culp, Inc. common stock is traded on the New York Stock Exchange under
the symbol CFI. As of April 29, 2001, Culp, Inc. had approximately 2,400
shareholders based on the number of holders of record and an estimate of
individual participants represented by security position listings.
Analyst Coverage
These analysts cover Culp, Inc.:
BB&T Capital Markets - Joel Havard
First Union Capital Markets - John Baugh, CFA
C.L. King & Associates - Tom Lewis
Raymond, James & Associates - Budd Bugatch, CFA
Wachovia Securities, Inc. - Kay Norwood, CFA
See Item 6, Selected Financial Data, for market and dividend
information regarding the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA (SELECTED ANNUAL DATA)
percent five-year
change growth
fiscal fiscal fiscal fiscal fiscal 2001/2000 rate
(amounts in thousands, except per share amounts) 2001 2000 1999 1998 1997 (6) (6)
- ---------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA (5)
net sales $ 409,810 488,079 483,084 476,715 398,879 (16.0)% 3.1%
cost of sales 353,823 403,414 406,976 393,154 326,394 (12.3) 4.1
- ---------------------------------------------------------------------------------------------------------------------------
gross profit 55,987 84,665 76,108 83,561 72,485 (33.9) (2.2)
S G & A expenses 50,366 59,935 59,968 52,987 45,058 (16.0) 5.2
restructuring expense 5,625 0 0 0 0 100.0 100.0
- ---------------------------------------------------------------------------------------------------------------------------
income (loss) from operations (4) 24,730 16,140 30,574 27,427 N.M N.M
interest expense 9,114 9,521 9,615 7,117 4,671 (4.3) 11.4
interest income (46) (51) (195) (304) (280) (9.8) (12.9)
other expense 3,336 1,566 1,864 1,358 1,521 113.0 28.4
- ---------------------------------------------------------------------------------------------------------------------------
income (loss) before income taxes (12,408) 13,694 4,856 22,403 21,515 N.M N.M
income taxes (4,097) 4,314 1,206 6,336 7,745 N.M N.M
- ---------------------------------------------------------------------------------------------------------------------------
net income (loss) (8,311) 9,380 3,650 16,067 13,770 N.M N.M
- ---------------------------------------------------------------------------------------------------------------------------
EBITDA (3) $ 18,002 44,472 34,645 45,645 39,404 (59.5) (12.8)
depreciation 19,391 19,462 18,549 14,808 12,688 (0.4) 9.4
cash dividends 1,177 1,611 1,788 1,786 1,513 (26.9) (1.0)
- ---------------------------------------------------------------------------------------------------------------------------
weighted average shares outstanding 11,210 11,580 12,909 12,744 11,624 (3.2) 0.0
weighted average shares outstanding,
assuming dilution 11,210 11,681 13,064 13,042 11,929 (4.0) (1.2)
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA (5)
net income (loss) $ (0.74) 0.81 0.28 1.26 1.18 N.M% N.M%
net income (loss), assuming dilution (0.74) 0.80 0.28 1.23 1.15 N.M N.M
cash dividends 0.105 0.14 0.14 0.14 0.13 (25.0) (0.9)
book value 10.85 11.57 10.63 10.15 8.79 (6.2) 8.5
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA (5)
working capital $ 78,629 99,977 99,324 102,730 69,777 (21.4)% 6.7%
property, plant and equipment, net 112,322 126,407 123,310 128,805 91,231 (11.1) 7.9
total assets 289,580 343,980 331,714 355,369 243,952 (15.8) 6.5
capital expenditures 8,050 22,559 10,689 35,879 26,958 (64.3) (11.0)
long-term debt 109,168 135,808 140,312 152,312 76,541 (19.6) 7.8
funded debt (1) 111,656 137,486 138,650 151,616 65,623 (18.8) 7.8
shareholders' equity 121,802 129,640 128,428 132,073 110,789 (6.0) 8.4
capital employed (4) 233,458 267,126 267,078 283,689 176,412 (12.6) 8.1
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS & OTHER DATA (5)
gross profit margin 13.7% 17.3% 15.8% 17.5% 18.2%
operating income (loss) margin (0.0) 5.1 3.3 6.4 6.9
net income (loss) margin (2.0) 1.9 0.8 3.4 3.5
EBITDA margin 4.4 9.1 7.2 9.6 9.9
effective income tax rate 33.0 31.5 24.8 28.3 36.0
funded debt-to-total capital ratio (1) 47.8 51.5 51.9 53.4 37.2
return on average total capital (0.9) 6.0 3.6 8.6 10.1
return on average equity (6.6) 7.3 2.8 13.5 15.2
working capital turnover 4.0 4.4 4.3 4.7 5.3
days sales in receivables 50 49 49 49 49
inventory turnover 5.1 5.4 5.6 5.8 6.4
- ---------------------------------------------------------------------------------------------------------
STOCK DATA
stock price
high $ 7.25 11.06 19.13 22.19 19.63
low 1.63 5.00 5.13 16.50 11.50
close 4.95 5.81 8.25 18.88 16.63
P/E ratio (2)
high (6) N.M 13.7 67.6 17.6 16.6
low (6) N.M 6.2 18.1 13.1 9.7
daily average trading volume (shares) 16.2 15.8 30.4 16.0 19.7
- ---------------------------------------------------------------------------------------------------------
(1) Funded debt includes long- and short-term debt, less restricted investments.
(2) P/E ratios based on trailing 12-month net income (loss) per share.
(3) EBITDA represents earnings before interest, income taxes, depreciation and amortization.
(4) Capital employed includes funded debt and shareholders' equity.
(5) Phillips, Wetumpka and Artee included in consolidated results from their fiscal 1998 acquisitions by Culp.
(6) N.M - Not meaningful
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the financial condition and results of
operations should be read in conjunction with the Financial Statements and
Notes thereto.
Overview
Culp is one of the largest integrated marketers in the world for
upholstery fabrics for furniture and is one of the leading global producers
of mattress fabrics (ticking). The company's fabrics are used primarily in
the production of residential and commercial upholstered furniture and
bedding products, including sofas, recliners, chairs, love seats, sectionals,
sofa-beds, office seating and mattress sets. Although Culp markets fabrics
at most price levels, the company emphasizes fabrics that have broad appeal
in the promotional and popular-priced categories of furniture and bedding.
The company's operating segments are upholstery fabrics and mattress
ticking, with related divisions organized within those segments. In
upholstery fabrics, Culp Decorative Fabrics markets jacquard and dobby woven
fabrics for residential and commercial furniture. Culp Velvets/Prints
markets a broad range of printed and velvet fabrics used primarily for
residential and juvenile furniture. Culp Yarn manufactures specialty filling
yarn that is primarily used by Culp. In mattress ticking, Culp Home Fashions
markets a broad array of fabrics used by bedding manufacturers.
Results of Operations
The following table sets forth certain items in the company's
consolidated statements of income (loss) as a percentage of net sales.
2001 2000 1999
------ ------ ------
Net sales 100.0% 100.0% 100.0%
Cost of sales 86.3 82.7 84.2
------ ------ ------
Gross profit 13.7 17.3 15.8
Selling, general and administrative
expenses 12.3 12.3 12.4
Restructuring expense 1.4 0.0 0.0
------ ------ ------
Income (loss) from operations (0.0) 5.1 3.3
Interest expense 2.2 2.0 2.0
Interest income (0.0) (0.0) (0.0)
Other expense 0.8 0.3 0.4
------ ------ ------
Income (loss) before income taxes (3.0) 2.8 1.0
Income taxes * 33.0 31.5 24.8
Net income (loss) (2.0)% 1.9% 0.8%
====== ====== ======
* Calculated as a percent of income (loss) before income taxes.
The following table sets forth the company's sales by segment and
division for each of the company's three most recent years. The table sets
forth the change in net sales for the segments and divisions as a percentage
for comparative periods included in the table.
(dollars in thousands) Amounts Percent change
- --------------------------------------------------------------------------------
2000- 1999-
segment/division 2001 2000 1999 2001 2000
- --------------------------------------------------------------------------------
Upholstery Fabrics:
Culp Decorative Fabrics $170,326 $213,197 $222,058 (20.1)% (4.0)%
Culp Velvets/Prints 122,105 151,543 144,073 (19.4) 5.2
Culp Yarn 12,581 17,570 21,513 (28.4) (18.3)
-------- -------- -------- ------- -------
305,012 382,310 387,644 (20.2) (1.4)
Mattress Ticking:
Culp Home Fashions 104,798 105,769 95,440 (0.9) 10.8
-------- -------- -------- ------- -------
$409,810 $488,079 $483,084 (16.0)% 1.0%
-------- -------- -------- ------- -------
Restructuring Actions
During 2001 the company initiated a restructuring plan intended to
lower costs, increase efficiency and position the company to operate
profitably within the current environment of reduced demand. The plan
involves the consolidation of certain manufacturing capacity, the closure of
some facilities and an extensive reduction in selling, general and
administrative expenses. The company also recognized certain inventory
write-downs as part of this initiative. The total charge from the
restructuring, cost reduction and inventory write-down initiatives is
expected to total $8.5 million, about $3.4 million of which represents
non-cash items. The company recognized $7.4 million of restructuring and
related charges during 2001 and expects to record the remaining charges
related to restructuring during the first half of 2002. The company expects
to realize annualized cost reductions of at least $12 million when these
steps are fully implemented. See Note 2 to the consolidated financial
statements.
2001 Compared with 2000
Net Sales. Net sales for 2001 decreased by $78.3 million, or 16.0%,
compared with 2000. The company's sales of upholstery fabrics decreased
20.2% to $305.0 million and mattress ticking sales decreased 0.9% to $104.8
million. Key factors influencing the year-to-year comparison were the sharp,
persistent weakness in consumer spending on home furnishings, especially in
promotional price categories, and the strength in the U.S. dollar that had an
adverse impact on exports. Culp's international sales declined 30.0% in
2001, following an industry-wide trend. Although Culp's international sales
will continue to be influenced significantly by the value of the U.S. dollar
relative to other currencies, the company has a diversified global base of
customers and is seeking to broaden that further to minimize exposure to
economic uncertainties in any geographic area.
After a number of years of increasing sales, Culp Home Fashions
(primarily mattress ticking) during 2001 recorded a decline in sales of
0.9%. The company believes that this decline was less than that experienced
for the industry as a whole, which was affected by the slowdown in consumer
spending.
Since the close of fiscal 2001, the company has continued to experience
weakness in U.S. and international demand. Looking forward to fiscal 2002,
the company recognizes that persistent weak demand will continue to present
challenges, but management is hopeful that reduced costs from its
restructuring plan will enable it to report a profit for 2002 as a whole.
Gross Profit and Cost of Sales. Gross profit declined 33.9% for fiscal
2001 and decreased as a percentage of net sales from 17.3% to 13.7%. The
decline was due principally to lower sales volume that led to unfavorable
cost variances in the company's upholstery fabrics operation. The company is
taking steps to lower expenses by consolidating certain operations and
reducing personnel, but does not expect to realize the full benefit of these
actions until the second half of 2002.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 2001 decreased 16.0% from the prior year and
accounted for 12.3% of sales for 2001 and 2000. Reflecting the momentum of
the company's actions to reduce expenses, selling, general and administrative
expenses for the fourth quarter declined 28.8% from the year-earlier period
and, as a percentage of sales, declined from 11.5% to 10.5%.
Interest Expense. Net interest expense for 2001 declined from $9.5
million to $9.1 million due to lower average borrowings, partially offset by
higher interest rates.
Other Expense. Other expense for 2001 totaled $3.3 million compared
with $1.6 million in the prior year. The increase was principally due to
lower investment income on assets related to the company's nonqualified
deferred compensation plan, mark-to-market losses on foreign currency forward
contracts for anticipated purchases in the Euro and mark-to-market losses on
interest rate swaps that no longer serve as a hedge due to the repayment of
debt.
Income Taxes. The effective tax rate for 2001 was 33.0% compared with
31.5% in the prior year. The lower rates for 2001 and 2000 as compared with
the federal statutory rate of 35% are due principally to tax benefits related
to the company's international sales and to a higher proportion of earnings
from the company's Canadian subsidiary that is taxed at a lower effective
rate. The company expects the effective tax rate for 2001 to be
approximately 34%.
Net Income (Loss) Per Share. Diluted net loss per share for 2001
totaled $0.74 compared with net income for 2000 of $0.80.
2000 Compared with 1999
Net Sales. Net sales for 2000 increased by $5.0 million, or 1.0%,
compared with 1999. The company's sales of upholstery fabrics decreased 1.4%
to $382.3 million and mattress ticking sales increased 10.8% to $105.8
million. This was the first full year in which the company operated with its
current structure of four divisions. This corporate organization, which
evolved from one in which there were six business units, groups related
operations together; and its adoption in 1999 was accompanied by several
changes in managerial positions. The company believes that this new
structure is yielding a number of benefits including improved customer
service, more effective use of design resources and increased manufacturing
efficiency. Culp believes that these factors aided its total net sales to
U.S.-based accounts for 2000, which rose 2.0% for the year.
This growth was offset by a decline of 2.0% in international sales.
After several years of above-average growth, Culp's international sales
declined 17.4% in 1999, following an industry-wide trend. The company took
steps to mitigate the impact of this trend by significantly curtailing
production schedules for certain international-targeted fabrics, introducing
a new line of printed cotton upholstery fabrics, and shifting its marketing
focus to geographic areas where demand appeared more favorable. The company
believes that the significantly smaller decline in international sales for
2000 reflects the results of these actions.
The increased sales by Culp Home Fashions (primarily mattress ticking)
during 2000 marked a continuation of the longer-term expansion that this
division had experienced. The introduction of new designs and fabric
constructions, and the advantages of the company's vertical integration, have
been significant factors in Culp's growth in mattress ticking. In
particular, the ability to manufacture the jacquard greige (unfinished) goods
that are then printed to produce mattress ticking has aided Culp in meeting
faster delivery schedules reliably and providing improved overall customer
service.
Gross Profit and Cost of Sales. Gross profit for 2000 increased 11.2%
to $84.7 million and increased as a percentage of net sales from 15.8% to
17.3%. The company has taken a number of actions to increase gross profit,
including a shift of its production capacity toward more profitable fabric
categories and substantial steps to reduce operating expenses and raise
productivity.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 2000 decreased 0.1% and accounted for 12.3% of
sales versus 12.4% in the prior year. The company has increased its
resources for the design of new fabrics and for enhanced information systems.
Interest Expense. Net interest expense of $9.5 million for 2000
compared with $9.4 million in the prior year. Although the company generally
had lower average borrowings during 2000, the reduced debt was offset by
lower capitalized interest related to capital expenditures and higher average
interest rates.
Other Expense. Other expense for 2000 totaled $1.6 million compared
with $1.9 million in the prior year. The decrease is principally due to
lower losses on disposal of fixed assets.
Income Taxes. The effective tax rate for 2000 was 31.5% compared with
24.8% in the prior year. The lower rates for 2000 and 1999 as compared with
the federal statutory rate of 35% are due principally to tax benefits related
to the company's international sales, non-taxable gains related to life
insurance contracts and to a higher proportion of earnings from the company's
Canadian subsidiary that is taxed at a lower effective rate.
Net Income Per Share. Diluted net income per share for 2000 totaled
$0.80 compared with $0.28 in fiscal 1999.
Liquidity and Capital Resources
Liquidity. Cash and cash investments were $1.2 million as of April 29,
2001 compared with $1.0 million at the end of 2000. Funded debt (long-term
debt, including current maturities) amounted to $111.7 million at the close
of 2001 versus $137.5 million at the end of 2000. As a percentage of total
capital (funded debt plus total shareholders' equity), the company's
borrowings amounted to 47.8% as of April 29, 2001 compared with 51.5% at the
end of 2000. The company's working capital as of April 29, 2001 was $78.6
million compared with $100.0 million at the close of 2000.
The company's cash flow from operations was $36.1 million for 2001,
consisting of $13.3 million from operations (net loss plus depreciation,
amortization, deferred income taxes and restructuring expense) plus $22.8
million from changes in working capital.
In separate authorizations in June 1998, March 1999, September 1999 and
December 1999, the board of directors of the company authorized the use of a
total of $20.0 million to repurchase the company's common stock. During 2000
and 1999, the company invested $12.2 million to repurchase a total of 1.8
million shares. There were no purchases during 2001 under these
authorizations, and the company is currently restricted from any additional
stock repurchases under the terms of its bank credit facility.
Financing Arrangements. Culp has $75 million of senior unsecured notes
with a fixed coupon rate of 6.76% and an average remaining term of seven
years. In addition, the company has a $25 million syndicated, mulit-currency
revolving credit facility. The facility, which expires in April 2002,
requires quarterly payments of interest on all outstanding borrowings and a
quarterly facility fee. In January 2001, the company amended the credit
facility to amend certain covenants. Additionally, the amendment increased
the interest rate from LIBOR plus 1.10% to 1.60% to LIBOR plus 2.50% to
4.25%. The interest rate matrix is based on the company's debt to EBITDA
ratio, as defined by the facility, such that a lower ratio allows for a lower
interest rate. The amended facility also limits capital expenditures and
restricts dividends and common stock repurchases. As of April 29, 2001, the
company had outstanding balances of approximately $1 million under the credit
facility. See Note 10 to the company's consolidated financial statements.
The company also has a total of $33.0 million in currently outstanding
industrial revenue bonds ("IRBs") which have been used to finance capital
expenditures. The IRBs bear interest at variable rates with a weighted
average of 8.93%, including the letter of credit fee percentage. The IRBs
are collateralized by letters of credit for the outstanding balance of the
IRBs and certain interest payments due thereunder. The January 2001
amendment to the credit facility also increased the letter of credit fees to
a range from 2.50% to 4.25%, based on the company's debt to EBITDA ratio.
The company's loan agreements require, among other things, that the
company maintain compliance with certain financial ratios. As of April 29,
2001, the company was in compliance with these amended financial covenants.
As of April 29, 2001, the company had two interest rate swap agreements
with a $10 million notional amount. During 2001, the company recorded a
mark-to-market loss of $219,000 because the interest rate swap agreements no
longer serve as a hedge due to the repayment of debt. The company also
enters into foreign exchange forward and option contracts to hedge against
currency fluctuations with respect to firm commitments and anticipated
transactions to purchase certain machinery, equipment and raw materials.
Capital Expenditures. The company maintains an ongoing program of
capital expenditures designed to increase capacity as needed, enhance
manufacturing efficiencies through modernization and increase the company's
vertical integration. Capital expenditures, primarily for modernization,
totaled $8.1 million for 2001 compared with $22.6 million for 2000. The
company anticipates capital spending of approximately $4 million in 2002.
The company believes that cash flows from operations and funds
available under its credit facilities will be sufficient for the foreseeable
future to meet its needs for normal working capital and capital spending as
permitted under the terms of the company's loan agreements.
Inflation
The cost of certain of the company's raw materials, principally fibers
from petroleum derivatives, and utility/energy costs have increased somewhat;
but overall operating expenses are remaining generally stable. Factors that
reasonably can be expected to influence margins in the future include changes
in raw material prices, trends in other operating costs and overall
competitive conditions.
Seasonality
The company's business is slightly seasonal, with increased sales
during the 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.
New Accounting Pronouncements
Effective April 30, 2001, the company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended, which
establishes accounting and reporting standards for derivative instruments and
hedging activities. SFAS No. 133 requires that an entity recognize all
derivatives as either assets or liabilities in the consolidated balance sheet
and measure those instruments at fair value. The adoption of this statement
will not have a material effect on the Company's financial condition or
results of operations. However, its application may increase the volatility
of other expense in the consolidated statements of income (loss) and other
comprehensive income (loss) in the consolidated statements of shareholders'
equity.
Forward-Looking Information
The company's annual report on Form 10-K contains statements that may
be deemed "forward-looking statements" within the meaning of the federal
securities laws, including the Private Securities Litigation Reform Act of
1995. Such statements are inherently subject to risks and uncertainties.
Forward-looking statements are statements that include projections,
expectations or beliefs about future events or results or otherwise are not
statements of historical fact. Such statements are often characterized by
qualifying words such as "expect," "believe," "estimate," "plan," and
"project" and their derivatives. Factors that could influence the matters
discussed in such statements include the level of housing starts and sales of
existing homes, consumer confidence, trends in disposable income and general
economic conditions. Decreases in these economic indicators could have a
negative effect on the company's business and prospects. Likewise, increases
in interest rates, particularly home mortgage rates, and increases in
consumer debt or the general rate of inflation, could affect the company
adversely. Because of the significant percentage of the company's sales
derived from international shipments, strengthening of the U.S. dollar
against other currencies could make the company's products less competitive
on the basis of price in markets outside the United States. Additionally,
economic and political instability in international areas could affect the
demand for the company's products.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest
rates on debt and foreign currency exchange rates. See additional
disclosures about interest rate swap agreements in the Management's
Discussion and Analysis of Financial Condition and Results of Operations in
item 7 above. The Company's market risk sensitive instruments are not entered
into for trading purposes. The Company has not experienced any significant
changes in market risk since April 29, 2001.
The Company's exposure to interest rate risk consists of floating
rate debt based on the London Interbank Offered Rate plus an adjustable
margin under the Company's revolving credit agreement and variable rate debt
in connection with industrial revenue bonds. To lower or limit overall
borrowing costs, the Company entered into interest rate swap agreements to
modify the interest characteristics of portions of its outstanding debt. The
agreements entitle the Company to receive or pay to the counterparty (a major
bank), on a monthly basis, the amounts, if any, by which the Company's
interest payments covered by swap agreements differ from those of the
counterparty. These amounts were recorded as adjustments to interest
expense. As of April 29, 2001, the fair value of the swap agreements and
changes in fair value resulting from changes in market interest rates are
recognized in the consolidated financial statements because the interest rate
swaps no longer serve as a hedge due to the repayment of debt. The annual
impact on the Company's results of operations of a 100 basis point interest
rate change on the April 29, 2001 outstanding balance of the variable rate
debt would be approximately $320,000 irrespective of any interest rate swaps.
The Company's exposure to fluctuations in foreign currency
exchange rates is due primarily to a foreign subsidiary domiciled in Canada
and firmly committed and anticipated purchases of certain machinery,
equipment and raw materials in foreign currencies. The Company's Canadian
subsidiary uses the United States dollar as its functional currency. The
Company generally does not use financial derivative instruments to hedge
foreign currency exchange rate risks associated with the Canadian
subsidiary. However, the Company generally enters into foreign exchange
forward and option contracts as a hedge against its exposure to currency
fluctuations on firmly committed and anticipated purchases of certain
machinery, equipment and raw materials. The Canadian subsidiary is not
material to the Company's consolidated results of operations; therefore, the
impact of a 10% change in the exchange rate at April 29, 2001 would not have
a significant impact on the Company's results of operations or financial
position. Additionally, as the Company utilizes foreign currency instruments
for hedging anticipated and firmly committed transactions, a loss in fair
value for those instruments is generally offset by increases in the value of
the underlying exposure. During 2001, mark-to-market losses on foreign
currency forward contracts for anticipated purchases in the Euro totaled
$643,000, which was included in other expense. Other foreign currency
fluctuations did not have a material impact on the Company's results of
operations and financial position during fiscal years 2001, 2000 and 1999.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
Management's Statement of Responsibility
The management of Culp, Inc. is responsible for the accuracy and consistency
of all the information contained in this annual report on Form 10-K,
including the financial statements. These statements have been prepared to
conform with accounting principles generally accepted in the United States of
America. The preparation of financial statements and related data involves
estimates and the use of judgment.
Culp, Inc. maintains internal accounting controls designed to provide
reasonable assurance that the financial records are accurate, that the assets
of the company are safeguarded, and that the financial statements present
fairly the financial position and results of operations of the Company.
KPMG LLP, the Company's independent auditors, conducts an audit in accordance
with auditing standards generally accepted in the United States of America
and provides an opinion on the financial statements prepared by management.
Their report for 2001 is presented below.
The Audit Committee of the Board of Directors reviews the scope of the audit
and the findings of the independent auditors. The internal auditor and the
independent auditors meet with the Audit Committee to discuss audit and
financial reporting issues. The Audit Committee also reviews the company's
principal accounting policies, significant internal accounting controls, the
Annual Report and annual SEC filings (Form 10-K and Proxy Statement).
Robert G. Culp, III Franklin N. Saxon
Chairman and Chief Executive Officer Executive Vice President and
May 31, 2001 Chief Financial Officer
May 31, 2001
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of Culp, Inc.:
We have audited the accompanying consolidated balance sheets of Culp, Inc.
and subsidiary as of April 29, 2001 and April 30, 2000, and the related
consolidated statements of income (loss), shareholders' equity, and cash
flows for each of the years in the three-year period ended April 29, 2001.
These consolidated financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Culp,
Inc. and subsidiary as of April 29, 2001 and April 30, 2000, and the results
of their operations and their cash flows for each of the years in the
three-year period ended April 29, 2001, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Greensboro, North Carolina
May 31, 2001
CONSOLIDATED BALANCE SHEETS
April 29, 2001 and April 30, 2000 (dollars in thousands, except share data)
2001 2000
- ------------------------------------------------------------------------------
ASSETS
current assets:
cash and cash investments $ 1,207 1,007
accounts receivable 57,849 75,223
inventories 59,997 74,471
other current assets 7,856 10,349
- ------------------------------------------------------------------------------
total current assets 126,909 161,050
property, plant and equipment, net 112,322 126,407
goodwill 48,478 49,873
other assets 1,871 6,650
- ------------------------------------------------------------------------------
total assets $289,580 343,980
- ------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
current liabilities:
current maturities of long-term debt $ 2,488 1,678
accounts payable 27,371 37,287
accrued expenses 17,153 22,108
income taxes payable 1,268 0
- ------------------------------------------------------------------------------
total current liabilities 48,280 61,073
long-term debt 109,168 135,808
deferred income taxes 10,330 17,459
- ------------------------------------------------------------------------------
total liabilities 167,778 214,340
- ------------------------------------------------------------------------------
commitments and contingencies (notes 10 and 11)
shareholders' equity:
preferred stock, $.05 par value, authorized 10,000,000
shares 0 0
common stock, $.05 par value, authorized 40,000,000
shares, issued and outstanding 11,221,158 at
April 29, 2001 and 11,208,720 at April 30, 2000 561 560
capital contributed in excess of par value 36,915 35,266
retained earnings 84,326 93,814
- ------------------------------------------------------------------------------
total shareholders' equity 121,802 129,640
- ------------------------------------------------------------------------------
total liabilities and shareholders' equity $289,580 343,980
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
For the years ended April 29, 2001, April 30, 2000,
and May 2, 1999 (dollars in thousands, except per share data) 2001 2000 1999
- -------------------------------------------------------------------------------------------
net sales $ 409,810 488,079 483,084
cost of sales 353,823 403,414 406,976
- -------------------------------------------------------------------------------------------
gross profit 55,987 84,665 76,108
selling, general and administrative expenses 50,366 59,935 59,968
restructuring expense 5,625 0 0
- -------------------------------------------------------------------------------------------
income (loss) from operations (4) 24,730 16,140
interest expense 9,114 9,521 9,615
interest income (46) (51) (195)
other expense 3,336 1,566 1,864
- -------------------------------------------------------------------------------------------
income (loss) before income taxes (12,408) 13,694 4,856
income taxes (4,097) 4,314 1,206
- -------------------------------------------------------------------------------------------
net income (loss) $ (8,311) 9,380 3,650
===========================================================================================
net income (loss) per share $ (0.74) 0.81 0.28
- -------------------------------------------------------------------------------------------
net income (loss) per share, assuming dilution $ (0.74) 0.80 0.28
===========================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
capital
For the years ended April 29, 2001 common common contributed total
April 30, 2000 and May 2, 1999 stock stock in excess of retained shareholders'
(dollars in thousands, except share data) shares amount par value earnings equity
- --------------------------------------------------------------------------------------------------
balance, May 3, 1998 13,007,021 $ 650 40,882 90,541 132,073
cash dividends ($0.14 per share) (1,788) (1,788)
net income 3,650 3,650
common stock issued in connection
with stock option plans 10,750 1 34 35
common stock purchased (938,600) (47) (2,950) (2,545) (5,542)
- --------------------------------------------------------------------------------------------------
balance, May 2, 1999 12,079,171 604 37,966 89,858 128,428
cash dividends ($0.14 per share) (1,611) (1,611)
net income 9,380 9,380
common stock issued in connection
with stock option plans 13,813 1 78 79
common stock purchased (884,264) (45) (2,778) (3,813) (6,636)
- --------------------------------------------------------------------------------------------------
balance, April 30, 2000 11,208,720 560 35,266 93,814 129,640
cash dividends ($0.105 per share) (1,177) (1,177)
net loss (8,311) (8,311)
common stock issued in connection
with stock option plans 12,438 1 1,649 1,650
- --------------------------------------------------------------------------------------------------
balance, April 29, 2001 11,221,158 $ 561 36,915 84,326 121,802
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended April 29, 2001, April 30, 2000, and May 2, 1999
(dollars in thousands) 2001 2000 1999
- --------------------------------------------------------------------------------------------------
cash flows from operating activities:
net income (loss) $ (8,311) 9,380 3,650
adjustments to reconcile net income (loss) to net cash
provided by operating activities:
depreciation 19,391 19,462 18,549
amortization of intangible assets 1,591 1,596 1,570
amortization of deferred compensation 360 250 250
provision for deferred income taxes (5,394) 2,176 1,064
restructuring expense 5,625 - -
changes in assets and liabilities:
accounts receivable 17,374 (4,720) 3,133
inventories 14,474 (7,401) 12,124
other current assets 827 (16) 522
other assets 171 (770) (654)
accounts payable (4,530) 1,029 (8,893)
accrued expenses (6,767) 890 2,486
income taxes payable 1,268 - (1,282)
- --------------------------------------------------------------------------------------------------
net cash provided by operating activities 36,079 21,876 32,519
- --------------------------------------------------------------------------------------------------
cash flows from investing activities:
capital expenditures (8,050) (22,559) (10,689)
purchase of restricted investments - (40) (119)
sale (purchase) of investments related to deferred
compensation plan 4,547 - (735)
sale of restricted investments - 3,380 800
- --------------------------------------------------------------------------------------------------
net cash used in investing activities (3,503) (19,219) (10,743)
- --------------------------------------------------------------------------------------------------
cash flows from financing activities:
proceeds from issuance of long-term debt 564 9,543 2,637
principal payments on long-term debt (26,394) (14,047) (16,284)
cash dividends paid (1,177) (1,611) (1,788)
proceeds from common stock issued 17 21 35
payments to acquire common stock - (6,636) (5,542)
change in accounts payable - capital expenditures (5,386) 10,571 (2,637)
- --------------------------------------------------------------------------------------------------
net cash used in financing activities (32,376) (2,159) (23,579)
- --------------------------------------------------------------------------------------------------
increase (decrease) in cash and cash investments 200 498 (1,803)
cash and cash investments, beginning of year 1,007 509 2,312
- --------------------------------------------------------------------------------------------------
cash and cash investments, end of year $ 1,207 1,007 509
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include the accounts of the company and its subsidiary, which is
wholly-owned. All significant intercompany balances and transactions
are eliminated in consolidation.
Description of Business - The company primarily manufactures and markets
furniture upholstery fabrics and mattress ticking for the furniture,
bedding, and related industries, with the majority of its business
conducted in the United States.
Fiscal Year - The company's fiscal year is the 52 or 53 week period
ending on the Sunday closest to April 30. Fiscal years 2001, 2000 and
1999 included 52 weeks.
Statements of Cash Flows - For purposes of reporting cash flows, the
company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash investments.
Accounts Receivable - Substantially all of the company's accounts
receivable are due from manufacturers and distributors in the markets
noted above. The company grants credit to customers, a substantial
number of which are located in the United States. Management performs
credit evaluations of the company's customers and generally does not
require collateral.
Inventories - Principally all inventories are valued at the lower of
last-in, first-out (LIFO) cost or market.
Property, Plant and Equipment - Property, plant and equipment is
recorded at cost. Depreciation is generally computed using the
straight-line method over the estimated useful lives of the respective
assets. Major renewals and betterments are capitalized. Maintenance,
repairs and minor renewals are expensed as incurred. When properties
are retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the accounts. Amounts received on
disposal less the book value of assets sold are charged or credited to
income (loss).
Interest costs of $99,000, $146,000 and $365,000 incurred during the
years ended April 29, 2001, April 30, 2000 and May 2, 1999,
respectively, for the construction of qualifying fixed assets were
capitalized and are being amortized over the related assets' estimated
useful lives.
Foreign Currency Translation - The United States dollar is the
functional currency for the company's Canadian subsidiary. Translation
gains or losses for this subsidiary are reflected in net income (loss).
Goodwill and Other Intangible Assets - Goodwill, which represents the
unamortized excess of the purchase price over the fair values of the net
assets acquired, is being amortized using the straight-line method over
40 years. The company assesses the recoverability of goodwill by
determining whether the amortization of the balance over its remaining
life can be recovered through undiscounted future operating cash flows
of the acquired businesses. The assessment of the recoverability of
goodwill will be impacted if estimated cash flows are not achieved.
Other intangible assets are included in other assets and consist
principally of debt issue costs. Amortization is computed using the
straight-line method over the respective terms of the debt agreements.
Income Taxes - Deferred taxes are recognized for the temporary
differences between the financial statement carrying amounts and the tax
bases of the company's assets and liabilities and operating loss and tax
credit carryforwards at income tax rates expected to be in effect when
such amounts are realized or settled. The effect on deferred taxes of a
change in tax rates is recognized in income (loss) in the period that
includes the enactment date.
No provision is made for income taxes which may be payable if
undistributed income of the company's Canadian subsidiary were to be
paid as dividends to the company, since the company intends that such
earnings will continue to be invested. At April 29, 2001, the amount of
such undistributed income was $21.2 million. Foreign tax credits may be
available as a reduction of United States income taxes in the event of
such distributions.
Revenue Recognition - Revenue is recognized when products are shipped to
customers. Provision is made currently for estimated product returns,
claims and allowances.
Stock Option Plans - SFAS No. 123, Accounting for Stock-Based
Compensation, requires disclosure of the fair value and other
characteristics of stock options (see note 12). The company has chosen
under the provisions of SFAS No. 123 to continue using the
intrinsic-value method of accounting for employee stock-based
compensation in accordance with Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees.
Fair Value of Financial Instruments - The carrying amount of cash and
cash investments, accounts receivable, other current assets, accounts
payable and accrued expenses approximates fair value because of the
short maturity of these financial instruments.
The fair value of the company's long-term debt is estimated by
discounting the future cash flows at rates currently offered to the
company for similar debt instruments of comparable maturities. The fair
value of the company's long-term debt is approximately $104 million at
April 29, 2001. See notes 10 and 16 for fair value disclosures related
to interest rate swaps and foreign currency forward contracts,
respectively.
Interest Rate Swap Agreements - Interest rate swap agreements generally
involve the exchange of fixed and floating rate interest payment
obligations without the exchange of the underlying principal amounts.
These agreements are used to effectively fix the interest rates on
certain variable rate borrowings. Net amounts paid or received are
reflected as adjustments to interest expense. During 2001, the interest
rate swaps no longer serve as a hedge due to the repayment of debt,
consequently the interest rate swaps were recorded at fair value (see
note 10).
Forward Contracts - Gains and losses related to qualifying hedges of
firm commitments to purchase fixed assets are deferred and included in
the measurement of the related foreign currency transaction when the
hedged transaction occurs. During 2001, the company adopted a policy to
manage the exposure related to purchases of inventories denominated in
the Euro through the use of forward foreign currency exchange
contracts. At April 29, 2001, the duration of these contracts is 12
months and attempts to match the anticipated payable payments.
Per Share Data - Statement of Financial Accounting Standards No. 128
requires the reporting of both net income (loss) per share and net
income (loss) per share, assuming dilution. The following table
reconciles the numerators and denominators of net income (loss) per
share and net income (loss) per share, assuming dilution:
2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
(Amounts in thousands, (Loss) Shares Per Share Income Shares Per Share Income Shares Per Share
except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)
per share $ (8,311) 11,210 $ (0.74) $ 9,380 11,580 $ 0.81 $ 3,650 12,909 $ 0.28
Effect of dilutive
securities:
Options 0 0 0 101 0 155
--------- ------- --------- ------- ------ ------- -------- ------ -------
Net income (loss) per
share, assuming dilution $ (8,311) 11,210 $ (0.74) $ 9,380 11,681 $ 0.80 $ 3,650 13,064 $ 0.28
========= ======= ========= ======= ====== ======= ======== ====== =======
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassification - Certain items in the 2000 and 1999 consolidated
financial statements have been reclassified to conform with the
presentation adopted in the current year. The reclassifications did not
impact net income as previously reported.
2. RESTRUCTURING
To reduce costs and improve efficiency, the company is streamlining
corporate structure, consolidating manufacturing operations and closing
certain facilities. In fiscal 2001, the company recorded restructuring
charges of $6.5 million. A portion of this restructuring charge,
related to the write-down of inventories ($0.9 million), has been
classified as a component of cost of sales. In addition, the company
recognized restructuring related charges, primarily costs related to
moving equipment, of $0.9 million in 2001. The company expects to
recognize additional restructuring related charges, primarily costs
related to moving equipment, of approximately $1.1 million in 2002.
The following summarizes the fiscal 2001 restructuring (amounts in
thousands):
Non-cash Paid in April 29, 2001
Charges Write-downs 2001 Reserve Balance
------- ----------- ------- ------------
Non-cash write-downs
of fixed assets to net
realizable value $2,540 2,540 - -
Non-cash write-downs
of inventories 874 874 - -
Employee termination
benefits (110 salaried
associates) 969 - 491 478
Lease termination costs
and other contractual
obligations 1,260 - 176 1,084
Other costs 856 - 35 821
------- ----------- ------- ------------
Total $6,499 3,414 702 2,383
------- ----------- ------- ------------
3. ACCOUNTS RECEIVABLE
A summary of accounts receivable follows:
(dollars in thousands) 2001 2000
- -----------------------------------------------------------------------
customers $ 60,218 77,981
allowance for doubtful accounts (1,282) (1,477)
reserve for returns and allowances (1,087) (1,281)
- -----------------------------------------------------------------------
$ 57,849 75,223
- -----------------------------------------------------------------------
4. INVENTORIES
A summary of inventories follows:
(dollars in thousands) 2001 2000
- -----------------------------------------------------------------------
inventories on the FIFO cost method
raw materials $ 31,489 43,661
work-in-process 4,748 5,970
finished goods 24,148 25,733
- -----------------------------------------------------------------------
total inventories on the FIFO cost method 60,385 75,364
adjustments of certain inventories to the LIFO
cost method (388) (893)
- -----------------------------------------------------------------------
$ 59,997 74,471
- -----------------------------------------------------------------------
5. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
depreciable lives
(dollars in thousands) (in years) 2001 2000
- -----------------------------------------------------------------------
land and improvements 10 $ 2,243 2,325
buildings and improvements 7-40 30,620 31,065
leasehold improvements 7-10 2,534 2,659
machinery and equipment 3-12 200,976 195,387
office furniture and equipment 3-10 11,517 11,583
capital projects in progress 1,125 7,930
- -----------------------------------------------------------------------
249,015 250,949
accumulated depreciation (136,693) (124,542)
- -----------------------------------------------------------------------
$ 112,322 126,407
- -----------------------------------------------------------------------
6. GOODWILL
A summary of goodwill follows:
(dollars in thousands) 2001 2000
- -----------------------------------------------------------------------
goodwill $ 55,547 55,547
accumulated amortization (7,069) (5,674)
- -----------------------------------------------------------------------
$ 48,478 49,873
- -----------------------------------------------------------------------
7. ACCOUNTS PAYABLE
A summary of accounts payable follows:
(dollars in thousands) 2001 2000
- ----------------------------------------------------------------------
accounts payable - trade $ 21,949 26,479
accounts payable - capital expenditures 5,422 10,808
- ----------------------------------------------------------------------
$ 27,371 37,287
- ----------------------------------------------------------------------
8. ACCRUED EXPENSES
A summary of accrued expenses follows:
(dollars in thousands) 2001 2000
- ----------------------------------------------------------------------
compensation and benefits $ 6,503 14,748
restructuring 2,383 0
other 8,267 7,360
- ----------------------------------------------------------------------
$ 17,153 22,108
- ----------------------------------------------------------------------
9. INCOME TAXES
A summary of income taxes follows:
(dollars in thousands) 2001 2000 1999
- ----------------------------------------------------------------------
current
federal $ (315) 657 (1,508)
state 11 45 (442)
Canadian 1,601 1,436 2,092
- ----------------------------------------------------------------------
1,297 2,138 142
- ----------------------------------------------------------------------
deferred
federal (4,565) 1,514 612
state (905) 378 279
Canadian 76 284 173
- ----------------------------------------------------------------------
(5,394) 2,176 1,064
- ----------------------------------------------------------------------
$(4,097) 4,314 1,206
- ----------------------------------------------------------------------
Income before income taxes related to the company's Canadian operation
for the years ended April 29, 2001, April 30, 2000, and May 2, 1999
was $4,400,000, $4,900,000 and $6,900,000, respectively.
The following schedule summarizes the principal differences between
income taxes at the federal income tax rate and the effective income tax
rate reflected in the consolidated financial statements:
2001 2000 1999
- ----------------------------------------------------------------------
federal income tax rate (35.0)% 35.0% 35.0%
state income taxes, net of federal
income tax benefit (4.7) 2.0 (2.2)
exempt income of foreign sales
corporation (0.4) (3.6) (2.8)
gains on life insurance contracts 5.0 (1.5) (3.9)
other 2.1 (0.4) (1.3)
- ----------------------------------------------------------------------
(33.0)% 31.5% 24.8%
- ----------------------------------------------------------------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities consist of the
following:
(dollars in thousands) 2001 2000
- ----------------------------------------------------------------------
deferred tax liabilities:
property, plant and equipment, net $ (15,753) (14,987)
goodwill (3,938) (3,175)
other (1,095) (1,324)
- ----------------------------------------------------------------------
total deferred tax liabilities (20,786) (19,486)
deferred tax assets:
accounts receivable 724 843
inventories 3,295 2,396
compensation 556 2,358
liabilities and reserves 2,021 1,381
alternative minimum tax 1,061 1,485
net operating loss carryforwards 8,028 528
- ----------------------------------------------------------------------
gross deferred tax assets 15,685 8,991
valuation allowance 0 0
- ----------------------------------------------------------------------
total deferred tax assets 15,685 8,991
- ----------------------------------------------------------------------
$ (5,101) (10,495)
======================================================================
Deferred taxes are classified in the accompanying consolidated balance
sheet captions as follows:
(dollars in thousands) 2001 2000
- ----------------------------------------------------------------------
other current assets $ 5,229 6,964
deferred income taxes (10,330) (17,459)
- ----------------------------------------------------------------------
$ (5,101) (10,495)
======================================================================
At April 29, 2001, the company had an alternative minimum tax credit
carryforward of approximately $1,061,000 for federal income tax
purposes. Federal and state net operating loss carryforwards with
related tax benefits of $8,028,000 at April 29, 2001 expire in varying
amounts through fiscal 2021. The company believes that it is more
likely than not that the results of future operations will generate
sufficient taxable income to realize the existing deferred tax assets.
Income tax refunds, net of income tax payments, were $369,000 in 2001.
Income taxes paid, net of income tax refunds, were $2,027,000 in 2000
and $2,217,000 in 1999.
10. LONG-TERM DEBT
A summary of long-term debt follows:
(dollars in thousands) 2001 2000
- ----------------------------------------------------------------------
senior unsecured notes $ 75,000 75,000
industrial revenue bonds and other obligations 32,959 32,452
revolving credit facility 999 25,000
obligations to sellers 2,698 5,034
- ----------------------------------------------------------------------
111,656 137,486
current maturities (2,488) (1,678)
- ----------------------------------------------------------------------
$109,168 135,808
- ----------------------------------------------------------------------
The senior unsecured notes have a fixed coupon rate of 6.76% and an
average remaining term of 7 years. The principal payments become due
from March 2006 to March 2010 with interest payable semi-annually.
The company's revolving credit agreement (the "Credit Agreement")
provides a multi-currency revolving credit facility, which expires in
April 2002, with a syndicate of banks in the United States. The Credit
Agreement provides for a revolving loan commitment of $25,000,000. The
agreement requires payment of a quarterly facility fee. In January
2001, the company amended the Credit Agreement to amend certain
covenants. Additionally, the amendment increased the interest rate from
LIBOR plus 1.10% to 1.60% to LIBOR plus 2.50% to 4.25%. The interest
rate matrix is based on the company's debt to EBITDA ratio, as defined
by the agreement. The amended agreement also limits capital
expenditures and restricts dividends and common stock repurchases. On
borrowings outstanding at April 29, 2001, the interest rate was 9.06%
(LIBOR plus 4.00%).
The company's $2,000,000 revolving line of credit expires in April
2002. At April 29, 2001, no borrowings were outstanding under the
revolving line of credit.
The industrial revenue bonds (IRB) are generally due in balloon
maturities which occur at various dates from 2009 to 2013. At April 29,
2001, the bonds bear interest at variable rates with a weighted average
of 8.93%, including the letter of credit fee percentage. The IRBs are
collateralized by letters of credit for the outstanding balance of the
IRBs and certain interest payments due thereunder. The January 2001
amendment to the Credit Agreement also increased the letter of credit
fees to a range from 2.50% to 4.25%, based on the company's debt to
EBITDA ratio. The letter of credit fee percentage as of April 29, 2001
was 4.00%.
The company's loan agreements require, among other things, that the
company maintain compliance with certain financial ratios. At April 29,
2001, the company was in compliance with these amended financial
covenants.
At April 29, 2001, the company had two interest rate swap agreements
with a bank. The following table summarizes certain data regarding the
interest rate swaps:
notional amount interest rate expiration date
---------------------------------------------------
$5,000,000 6.9% June 2002
$5,000,000 6.6% July 2002
During 2001, the company recorded a mark-to-market loss of $219,000
because the interest rate swaps no longer serve as a hedge due to the
repayment of debt. Net amounts received/paid under the interest rate
swaps decreased interest expense by approximately $6,000 in 2001 and
increased interest expense by approximately $262,000 in 2000 and
$308,000 in 1999. 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 principal payment requirements of long-term debt during the next
five years are: 2002 - $2,488,000; 2003 - $2,147,000; 2004 - $470,000;
2005 - $470,000; and 2006 - $11,469,000.
Interest paid during 2001, 2000 and 1999 totaled $8,950,000, $9,920,000,
and $9,579,000, respectively.
11. COMMITMENTS AND CONTINGENCIES
The company leases certain office, manufacturing and warehouse
facilities and equipment, primarily computer, and vehicles, under
noncancellable operating leases. Lease terms related to real estate
range from five to ten years with renewal options for additional periods
ranging from five to fifteen years. The leases generally require the
company to pay real estate taxes, maintenance, insurance and other
expenses. Rental expense for operating leases, net of sublease income,
was $7,907,000 in 2001; $8,162,000 in 2000; and $7,440,000 in 1999.
Future minimum rental commitments for noncancellable operating leases
are $5,375,000 in 2002; $3,796,000 in 2003; $2,841,000 in 2004;
$2,414,000 in 2005; $1,636,000 in 2006; and $2,186,000 in later years.
The company is involved in several legal proceedings and claims which
have arisen in the ordinary course of its business. These actions, when
ultimately concluded and settled, will not, in the opinion of
management, have a material adverse effect upon the financial position,
results of operations or liquidity of the company.
The company has outstanding capital expenditure commitments of
approximately $312,000 as of April 29, 2001.
12. STOCK OPTION PLANS
The company has a fixed stock option plan under which options to
purchase common stock may be granted to officers, directors and key
employees. At April 29, 2001, 1,130,176 shares of common stock were
authorized for issuance under the plan. Options are generally
exercisable from one to five years after the date of grant and generally
expire beginning five to ten years after the date of grant.
No compensation cost has been recognized for this stock option plan as
options are granted under the plan at an option price not less than fair
market value at the date of grant.
A summary of the status of the plan as of April 29, 2001, April 30, 2000
and May 2, 1999 and changes during the years ended on those dates is
presented below:
2001 2000 1999
- ------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- ------------------------------------------------------------------------------------------------
Outstanding at
beginning of year 661,114 $ 9.98 622,052 $10.04 429,427 $11.06
Granted 130,250 3.11 49,375 8.80 209,375 7.62
Exercised (2,438) 2.82 (7,313) 2.82 (10,750) 3.28
Canceled/expired - - (3,000) 20.25 (6,000) 10.56
- ------------------------------------------------------------------------------------------------
Outstanding at
end of year 788,926 8.87 661,114 9.98 622,052 10.04
- ------------------------------------------------------------------------------------------------
Options exercisable at
year-end 549,926 10.41 461,114 10.88 422,052 11.18
Weighted-average fair value
of options granted during
the year $1.60 3.54 $2.88
================================================================================================
Options Outstanding Options Exercisable
- --------------------------------------------------------------------------------------------
Number Weighted-Avg. Number
Range of Outstanding Remaining Weighted-Avg. Exercisable Weighted-Avg.
Exercise Prices at 4/29/01 Contractual Life Exercise Price at 4/29/01 Exercise Price
- --------------------------------------------------------------------------------------------
$ 3.03 - $ 3.03 119,000 4.9 years $3.03 - $ -
$ 4.00 - $ 7.50 118,926 3.0 4.91 118,926 4.91
$ 7.63 - $ 7.63 200,000 7.4 7.63 80,000 7.63
$ 7.75 - $ 12.75 235,375 4.6 10.11 235,375 10.11
$ 13.34 - $ 20.94 115,625 5.7 18.58 115,625 18.58
------- --- ----- ------- -----
788,926 5.3 8.87 549,926 10.41
======= === ===== ======= =====
During fiscal 1995, the company adopted a stock option plan which
provided for the one-time grant to officers and certain senior managers
of options to purchase 121,000 shares of the company's common stock at
$.05 (par value) per share. As of April 29, 2001, the 58,500 options
outstanding under the plan have exercise prices of $0.05 and a
weighted-average remaining contractual life of 2.7 years. Options
exercised during fiscal 2001, 2000 and 1999 were 0, 6,500 and 0,
respectively.
During September 1997, the company's shareholders approved the 1997
performance-based option plan which provides for the one-time grant to
certain officers and certain senior managers of options to purchase
106,000 shares of the company's common stock at $1.00 per share.
Options under the plan are generally exercisable on January 1, 2006.
During fiscal 2001, 2000 and 1999, the compensation expense recorded
under APB Opinion No. 25 was $360,000, $250,000 and $250,000,
respectively.
As of April 29, 2001, the 96,000 options outstanding under the plan have
exercise prices of $1.00 and a weighted-average remaining contractual
life of 5.7 years. Options exercised during fiscal 2001, 2000 and 1999
were 10,000, 0 and 0, respectively. Had compensation cost for this
stock-based compensation plan and the fixed stock option plan with
788,926 options outstanding at April 29, 2001 been determined consistent
with SFAS No. 123, the company's net income (loss), net income (loss)
per share and net income (loss) per share, assuming dilution would have
been changed to the pro forma amounts indicated below:
(in thousands, except per share data) 2001 2000 1999
---------------------------------------------------------------------------
Net income (loss) As reported $(8,311) 9,380 3,650
Pro forma (8,548) 9,145 3,375
---------------------------------------------------------------------------
Net income (loss) per As reported $ (0.74) 0.81 0.28
share Pro forma (0.76) 0.79 0.26
---------------------------------------------------------------------------
Net income (loss) per As reported $ (0.74) 0.80 0.28
share, assuming Pro forma (0.76) 0.78 0.26
dilution
---------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant
using the Black Scholes option-pricing model with the following
weighted-average assumptions used for grants in 2001, 2000 and 1999,
respectively: dividend yield of 0%, 1.5% and 1.5%; risk-free interest
rates of 4.6%, 5.7% and 5.4%; expected volatility of 54%, 49% and 47%;
and expected lives of 5 years, 4 years and 4 years.
13. BENEFIT PLANS
The company has a defined contribution plan which covers substantially
all employees and provides for participant contributions on a pre-tax
basis and discretionary matching contributions by the company, which are
determined annually. Company contributions to the plan were $2,301,000
in 2001; $2,423,000 in 2000; and $1,612,000 in 1999.
In addition to the defined contribution plan, the company had a
nonqualified deferred compensation plan covering officers and certain
other associates. During 2001, the company terminated the nonqualified
deferred compensation plan. As a result, the company surrendered the
life insurance contracts related to the nonqualified plan in order to
pay the participants. The proceeds from those life insurance contracts
totaled $4,747,000. The company's nonqualified plan liability of $0 and
$4,788,000 at April 29, 2001 and April 30, 2000, respectively, was
included in accrued expenses in the accompanying consolidated balance
sheets. The company also had assets related to the nonqualified plan of
$0 and $4,864,000 at April 29, 2001 and April 30, 2000, respectively,
which were included in other assets in the accompanying consolidated
balance sheets.
14. SEGMENT INFORMATION
The company's operations are classified into two business segments:
upholstery fabrics and mattress ticking. The upholstery fabrics segment
principally manufactures and sells woven jacquards and dobbies, wet and
heat-transfer prints, and woven and tufted velvets primarily to
residential and commercial (contract) furniture manufacturers. The
mattress ticking segment principally manufactures and sells woven
jacquards, heat-transfer prints and pigment prints to bedding
manufacturers.
International sales, of which 91%, 94% and 94% were denominated in U.S.
dollars in 2001, 2000, and 1999, respectively, accounted for 19% of net
sales in 2001 and 23% in 2000 and 1999, and are summarized by geographic
area as follows:
(dollars in thousands) 2001 2000 1999
- ------------------------------------------------------------------------------
North America (excluding USA) $ 34,049 36,032 31,102
Europe 6,262 16,351 19,578
Middle East 17,831 32,929 33,996
Asia and Pacific Rim 15,497 19,102 21,371
South America 1,028 2,343 3,484
All other areas 3,157 4,347 3,823
- ------------------------------------------------------------------------------
$ 77,824 111,104 113,354
- ------------------------------------------------------------------------------
In 2001, one customer represented approximately 11% of consolidated net
sales. In 2000 and 1999, no customer represented over 10% of
consolidated net sales. In addition, company assets located outside the
United States are not material for any of the three years presented.
The company internally manages and reports selling, general and
administrative expenses, interest expense, interest income, other
expense and income taxes on a total company basis. Thus, profit by
business segment represents gross profit. In addition, the company
internally manages and reports cash and cash investments, accounts
receivable, other current assets, restricted investments, property,
plant and equipment, goodwill and other assets on a total company
basis. Thus, identifiable assets by business segment represent
inventories.
Sales, gross profit and inventories for the company's operating segments
are as follows:
(dollars in thousands) 2001 2000 1999
- ------------------------------------------------------------------------------
Net sales
Upholstery Fabrics $ 305,012 382,310 387,644
Mattress Ticking 104,798 105,769 95,440
- ------------------------------------------------------------------------------
$ 409,810 488,079 483,084
==============================================================================
Gross profit
Upholstery Fabrics $ 29,511 58,547 52,286
Mattress Ticking 26,476 26,118 23,822
- ------------------------------------------------------------------------------
$ 55,987 84,665 76,108
==============================================================================
Inventories
Upholstery Fabrics $ 47,129 60,305 55,565
Mattress Ticking 12,868 14,166 11,505
- ------------------------------------------------------------------------------
$ 59,997 74,471 67,070
==============================================================================
15. RELATED PARTY TRANSACTIONS
A director of the company is also an officer and director of a major
customer of the company. The amount of sales to this customer was
approximately $45,230,000 in 2001; $39,479,000 in 2000; and $34,313,000
in 1999. The amount due from this customer at April 29, 2001 was
approximately $5,399,000 and at April 30, 2000 was approximately
$3,797,000.
A director of the company is also an officer and director of the lessor
of the company's office facilities in High Point. Rent expense for the
company's office facilities was approximately $562,000 in 2001; $522,000
in 2000; and $555,000 in 1999.
Rents paid to entities owned by certain shareholders and officers of the
company and their immediate families were $695,000 in 2001 and 2000; and
$752,000 in 1999.
16. 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. The company had $1,547,000 and $4,761,000 of outstanding
foreign exchange forward contracts as of April 29, 2001 and April 30,
2000, respectively (denominated in Euros at April 29, 2001). Due to the
short maturity of these financial instruments, the fair values of these
contracts approximate the contract amounts at April 29, 2001 and April
30, 2000, respectively.
During 2001, the company adopted a policy to manage the exposure related
to purchases of inventories denominated in the Euro through the use of
forward exchange contracts. At April 29, 2001, the duration of these
contracts is 12 months and attempts to match the anticipated payable
payments. At April 29, 2001, the amount of the remaining contracts was
$11,715,000 and unrealized mark-to-market losses, recorded in accrued
expenses in the balance sheet, were $643,000. These transactions do not
qualify as hedges for financial reporting purposes and, as a result,
changes in the fair value of the contracts are recorded as other expense
in the statement of income (loss).
SELECTED QUARTERLY DATA
fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal
(amounts in thousands, 2001 2001 2001 2001 2000 2000 2000 2000
except per share amounts) 4th quarter 3rd quarter 2nd quarter 1st quarter 4th quarter 3rd quarter 2nd quarter 1st quarter
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA
net sales $ 101,071 95,880 110,981 101,878 129,419 113,181 129,542 115,937
cost of sales 85,978 86,047 94,094 87,704 107,342 94,712 105,835 95,525
- -----------------------------------------------------------------------------------------------------------------------------------
gross profit 15,093 9,833 16,887 14,174 22,077 18,469 23,707 20,412
SG & A expenses 10,617 12,480 13,491 13,778 14,913 13,949 16,035 15,038
restructuring expense 3,121 2,504 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
income (loss) from operations 1,355 (5,151) 3,396 396 7,164 4,520 7,672 5,374
interest expense 2,284 2,222 2,285 2,323 2,255 2,366 2,484 2,416
interest income (6) (18) (15) (7) (10) (8) (16) (17)
other expense 1,209 811 575 741 366 229 416 555
- -----------------------------------------------------------------------------------------------------------------------------------
income (loss) before income taxes (2,132) (8,166) 551 (2,661) 4,553 1,933 4,788 2,420
income taxes (705) (2,696) 209 (905) 1,362 501 1,628 823
- -----------------------------------------------------------------------------------------------------------------------------------
net income (loss) (1,427) (5,470) 342 (1,756) 3,191 1,432 3,160 1,597
- --------------------------------------- -------------------------------------------------------------------------------------------
EBITDA (3) $ 5,208 (648) 8,265 5,177 12,248 9,715 12,472 10,037
depreciation 4,610 4,738 4,983 5,060 4,981 4,965 4,757 4,759
cash dividends 0 392 393 392 393 396 399 423
- --------------------------------------- -------------------------------------------------------------------------------------------
weighted average shares outstanding 11,212 11,211 11,209 11,209 11,213 11,296 11,749 12,063
weighted average shares outstanding,
assuming dilution 11,212 11,211 11,270 11,209 11,298 11,389 11,868 12,219
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
net income (loss) $ (0.13) (0.49) 0.03 (0.16) 0.28 0.13 0.27 0.13
net income (loss), assuming dilution (0.13) (0.49) 0.03 (0.16) 0.28 0.13 0.27 0.13
cash dividends 0 0.035 0.035 0.035 0.035 0.035 0.035 0.035
book value 10.85 10.85 11.37 11.37 11.57 11.31 11.17 10.73
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
working capital $ 78,629 90,968 94,272 100,288 99,977 97,440 92,800 100,394
property, plant and equipment, net 112,322 116,207 120,023 123,636 126,407 123,303 124,318 120,971
total assets 289,580 302,918 324,412 326,483 343,980 337,308 339,778 328,924
capital expenditures 1,518 2,873 1,370 2,289 8,085 3,950 8,104 2,420
long-term debt 109,168 119,213 125,079 135,150 135,808 137,052 133,875 136,228
funded debt (1) 111,656 121,372 126,757 136,828 137,486 137,683 134,468 136,222
shareholders' equity 121,802 121,586 127,441 127,492 129,640 126,867 126,482 129,229
capital employed (4) 233,458 242,958 254,198 264,320 267,126 264,550 260,950 265,451
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS & OTHER DATA
gross profit margin 14.9% 10.3% 15.2% 13.9% 17.1% 16.3% 18.3% 17.6%
operating income (loss) margin 1.3 (5.4) 3.1 0.4 5.5 4.0 5.9 4.6
net income (loss) margin (1.4) (5.7) 0.3 (1.7) 2.5 1.3 2.4 1.4
EBITDA margin 5.2 (0.7) 7.4 5.1 9.5 8.6 9.6 8.7
effective income tax rate 33.1 33.0 37.9 34.0 29.9 25.9 34.0 34.0
funded debt-to-total capital ratio (1) 47.8 50.0 49.9 51.8 51.5 52.0 51.5 51.3
working capital turnover 4.0 4.1 4.2 4.3 4.4 4.5 4.4 4.4
days sales in receivables 52 48 52 49 53 49 49 45
inventory turnover 5.4 4.9 5.1 4.7 5.5 4.8 5.5 5.4
- ----------------------------------------------------------------------------------------------------------------------------------
STOCK DATA
stock price
high $ 5.25 4.13 5.69 7.25 9.88 7.50 10.31 11.06
low 2.37 1.63 3.63 4.94 5.00 5.88 6.69 7.25
close 4.95 3.63 3.88 5.81 5.81 6.00 6.94 10.13
P/E ratio (2)
high (5) N.M N.M 19.9 13.7 12.2 9.7 12.8 17.7
low (5) N.M N.M 12.7 9.3 6.2 7.6 8.3 11.6
daily average trading volume (shares) 13.0 39.1 6.6 6.7 12.0 10.0 18.8 21.9
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Funded debt includes long- and short-term debt, less restricted investments.
(2) P/E ratios based on trailing 12-month net income (loss) per share.
(3) EBITDA represents earnings before interest, income taxes, depreciation and amortization.
(4) Capital employed includes funded debt and shareholders' equity.
(5) N.M - Not meaningful
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the two years ended April 29, 2001 and any subsequent
interim periods, there were no changes of accountants and/or disagreements on
any matters of accounting principles or practices or financial statement
disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to executive officers and directors of
the Company is included in the Company's definitive Proxy Statement filed
within 120 days after the end of the Company's fiscal year pursuant to
Regulation 14A of the Securities and Exchange Commission, under the caption
"Nominees, Directors and Executive Officers," which information is herein
incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is included in
the Company's definitive Proxy Statement filed within 120 days after the end
of the Company's fiscal year pursuant to Regulation 14A of the Securities and
Exchange Commission, under the caption "Executive Compensation," which
information is herein incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Information with respect to the security ownership of certain
beneficial owners and management is included in the Company's definitive
Proxy Statement filed within 120 days after the end of the Company's fiscal
year pursuant to Regulation 14A of the Securities and Exchange Commission,
under the caption "Voting Securities," which information is herein
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related
transactions is included in the Company's definitive Proxy Statement filed
within 120 days after the end of the Company's fiscal year pursuant to
Regulation 14A of the Securities and Exchange Commission, under the
subcaption "Certain Relationships and Related Transactions," which
information is herein incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
a) DOCUMENTS FILED AS PART OF THIS REPORT:
1. Consolidated Financial Statements
The following consolidated financial statements of Culp, Inc. and
subsidiary are filed as part of this report.
Page of Annual
Report on
Item Form 10-K
- ---- ---------
Consolidated Balance Sheets - April 29, 2001 and................. 27
April 30, 2000
Consolidated Statements of Income (Loss) -
for the years ended April 29, 2001,
April 30, 2000, and May 2, 1999 ............................... 28
Consolidated Statements of Shareholders' Equity -
for the years ended April 29, 2001,
April 30, 2000 and May 2, 1999 ................................ 29
Consolidated Statements of Cash Flows -
for the years ended April 29, 2001,
April 30, 2000, and May 2, 1999 ............................... 30
Consolidated Notes to Financial Statements....................... 31
Report of Independent Auditors .................................. 26
2. Financial Statement Schedules
All financial statement schedules are omitted because they are
not applicable, or not required, or because the required information is
included in the consolidated financial statements or notes thereto.
3. Exhibits
The following exhibits are attached at the end of this report, or
incorporated by reference herein. 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.
3(iii) Articles of Amendment of Culp, Inc. dated October 5,
1999 for the purpose of amending its Restated Charter
to fix the designation, preferences, limitations and
relative rights of a series of its Preferred Stock.
The Articles of Amendment of Culp, Inc. were filed as
Exhibit 3(iii) to the Company's Form 10-Q for the
quarter ended October 31, 1999, filed December 15,
1999, and are incorporated herein by reference.
10(a) Loan Agreement dated December 1, 1988 with Chesterfield
County, South Carolina relating to Series 1988
Industrial Revenue Bonds in the principal amount of
$3,377,000 was filed as Exhibit 10(n) to the Company's
Form 10-K for the year ended April 29, 1989, and is
incorporated herein by reference.
10(b) Loan Agreement dated November 1, 1988 with the Alamance
County Industrial Facilities and Pollution Control
Financing Authority relating to Series A and B
Industrial Revenue Refunding Bonds in the principal
amount of $7,900,000, was filed as exhibit 10(o) to the
Company's Form 10-K for the year ended April 29, 1990,
and is incorporated herein by reference.
10(c) Loan Agreement dated January 5, 1990 with the Guilford
County Industrial Facilities and Pollution Control
Financing Authority, North Carolina, relating to Series
1989 Industrial Revenue Bonds in the principal amount
of $4,500,000, was filed as Exhibit 10(d) to the
Company's Form 10-K for the year ended April 29, 1990,
filed on July 25, 1990, and is incorporated herein by
reference.
10(d) Loan Agreement dated as of December 1, 1993 between
Anderson County, South Carolina and the Company
relating to $6,580,000 Anderson County, South Carolina
Industrial Revenue Bonds (Culp, Inc. Project) Series
1993, was filed as Exhibit 10(o) to the Company's Form
10-Q for the quarter ended January 30, 1994, filed
March 16, 1994, and is incorporated herein by reference.
10(e) Form of Severance Protection Agreement, dated September
21, 1989, was filed as Exhibit 10(f) to the Company's
Form 10-K for the year ended April 29, 1990, filed on
July 25, 1990, and is incorporated herein by reference.
(*)
10(f) Lease Agreement, dated January 19, 1990, with Phillips
Interests, Inc. was filed as Exhibit 10(g) to the
Company's Form 10-K for the year ended April 29, 1990,
filed on July 25, 1990, and is incorporated herein by
reference.
10(g) Management Incentive Plan of the Company, dated August
1986 and amended July 1989, filed as Exhibit 10(o) to
the Company's Form 10-K for the year ended May 3, 1992,
filed on August 4, 1992, and is incorporated herein by
reference. (*)
10(h) Lease Agreement, dated September 6, 1988, with
Partnership 74 was filed as Exhibit 10(h) to the
Company's Form 10-K for the year ended April 28, 1991,
filed on July 25, 1990, and is incorporated herein by
reference.
10(i) 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(j) 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(k) 1993 Stock Option Plan was filed as Exhibit 10(o) to
the Company's Form 10-K for the year ended May 2, 1993,
filed on July 29, 1993, and is incorporated herein by
reference. (*)
10(l) 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(m) 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(n) 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(o) 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(p) 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(q) 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(r) 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(s) 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(t) 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(u) 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(v) 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(w) 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(x) 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(y) 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(z) $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(aa) 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.
$3,500,000 Principal Amount, Luzerne County Industrial
Development Authority Tax-Exempt Adjustable Mode
Industrial Development Revenue Bonds (Culp, Inc.
Project) Series 1996.
10(bb) 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(cc) Form of Note Purchase Agreement (providing for the
issuance by Culp, Inc. of its $20 million 6.76% Series
A Senior Notes due 3/15/08 and its $55 million 6.76%
Series B Senior Notes due 3/15/10), each dated March 4,
1998, between Culp, Inc. and each of the following:
1. Connecticut General Life Insurance Company;
2. The Mutual Life Insurance Company of New York;
3. United of Omaha Life Insurance Company;
4. Mutual of Omaha Insurance Company;
5. The Prudential Insurance Company of America;
6. Allstate Life Insurance Company;
7. Life Insurance Company of North America; and
8. CIGNA Property and Casualty Insurance Company
This agreement was filed as Exhibit 10(ll) to the
Company's Form 10-K for the year ended May 3, 1998, and
is incorporated herein by reference.
10(dd) First Amendment to Credit Agreement dated July 22, 1998
among Culp, Inc., Wachovia Bank, N.A., as agent, First
Union National Bank, as documentation agent, and
Wachovia Bank, N.A., First Union National Bank,
SunTrust Bank, Atlanta, and Cooperatieve Centrale
Raiffeisen-Boerenleeenbank B.A., Rabobank Nederland,
New York Branch, as lenders. This amendment was filed
as Exhibit 10(mm) to the Company's Form 10-Q for the
quarter ended August 2, 1998, and is incorporated
herein by reference.
10(ee) Second Amendment to Credit Agreement dated October 26,
1998, among Culp, Inc., Wachovia Bank, N.A., as agent,
First Union National Bank, as documentation agent, and
Wachovia Bank, N.A., First Union National Bank, and
SunTrust Bank, Atlanta, as lenders. This amendment was
filed as Exhibit 10(nn) to the Company's Form 10-Q for
the quarter ended November 1, 1998, and is incorporated
herein by reference.
10(ff) Rights Agreement, dated as of October 8, 1999, between
Culp, Inc. and EquiServe Trust Company, N.A., as Rights
Agent, including the form of Articles of Amendment with
respect to the Series A Participating Preferred Stock
included as Exhibit A to the Rights Agreement, the
forms of Rights Certificate included as Exhibit B to
the Rights Agreement, and the form of Summary of Rights
included as Exhibit C to the Rights Agreement. The
Rights Agreement was filed as Exhibit 99.1 to the
Company's Form 8-K dated October 12, 1999, and is
incorporated herein by reference.
10(gg) Third Amendment to Credit Agreement dated April 28,
2000, among Culp, Inc., Wachovia Bank, N.A., as agent,
First Union National Bank, as documentation agent, and
Wachovia Bank, N.A., First Union National Bank, and
Suntrust Bank, as lenders. This amendment was filed as
Exhibit 10(pp) to the Company's Form 10-K for the year
ended April 30, 2000, and is incorporated herein by
reference.
10(hh) Fourth Amendment to Credit Agreement dated July 30,
2000, among Culp, Inc., Wachovia Bank, N.A., as agent,
First Union National Bank, as documentation agent, and
Wachovia Bank, N.A., First Union National Bank, and
Suntrust Bank, as lenders. This amendment was filed as
Exhibit 10(qq) to the Company's Form 10-Q for the
quarter ended July 30, 2000, and is incorporated herein
by reference.
10(ii) Amendments to 1993 Stock Option Agreement dated
September 26, 2000. This amendment was filed as
Exhibit 10(rr) to the Company's Form 10-Q for the
quarter ended October 29, 2000, and is incorporated
herein by reference. (*)
10(jj) Fifth Amendment to Credit Agreement dated January 26,
2001, among Culp, Inc., Wachovia Bank, N.A., as agent,
First Union National Bank, as documentation agent, and
Wachovia Bank, N.A., First Union National Bank, and
Suntrust Bank, as lenders. This amendment was filed as
Exhibit 10(ss) to the Company's Form 10-Q for the
quarter ended January 28, 2001, and is incorporated
herein by reference.
10(kk) Second Amendment to Reimbursement and Security
Agreements dated January 26, 2001, made by and between
Culp, Inc. and Wachovia Bank, N.A. This amendment was
filed as Exhibit 10(tt) to the Company's Form 10-Q for
the quarter ended January 28, 2001, and is incorporated
herein by reference.
21 List of subsidiaries of the Company
23(a) Consent of Independent Public Auditors in connection with
the registration statements of Culp, Inc. on Form S-8
(File Nos. 33-13310, 33-37027, 33-80206, 33-62843, 333-27519,
333-59512 and 333-59514), dated March 20, 1987, September 18,
1990, June 13, 1994, September 22, 1995, May 21, 1997, April
25, 2001, and April 25, 2001.
24(a) Power of Attorney of Howard L. Dunn, Jr., dated June 29, 2001
24(b) Power of Attorney of H. Bruce English, dated June 25, 2001
24(c) Power of Attorney of Patrick B. Flavin, dated July 18, 2001
24(d) Power of Attorney of Patrick H. Norton, dated July 5, 2001
24(e) Power of Attorney of Earl N. Phillips, Jr., dated June 29, 2001
24(f) Power of Attorney of Judith C. Walker, dated June 27, 2001
b) Reports on Form 8-K:
The Company filed the following report on Form 8-K during the
quarter ended April 29, 2001:
(1) Form 8-K dated February 20, 2001, included under Item 5,
Other Events, included the Company's press release for quarterly
earnings and the Financial Information Release relating to certain
financial information for the quarter ended January 28, 2001.
c) Exhibits:
The exhibits to this Form 10-K are filed at the end of this Form
10-K immediately preceded by an index. A list of the exhibits begins
on page 52 under the subheading "Exhibits Index".
d) Financial Statement Schedules:
See Item 14(a) (2)
SIGNATURES
Pursuant to the requirements of Section 13 of the
Securities Exchange Act of 1934, CULP, INC. has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the
26th day of July 2001.
CULP, INC.
By /s/ Robert G. Culp, III
Robert G. Culp, III
(Chairman and Chief Executive Officer)
By: /s/ Franklin N. Saxon
Franklin N. Saxon
(Executive Vice President and Chief Financial
and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities indicated on the 26th day of July
2001.
/s/ Robert G. Culp, III /s/ Patrick H. Norton *
Robert G. Culp, III Patrick H. Norton
(Chairman of the (Director)
Board of Directors)
/s/ Franklin N. Saxon /s/ Judith C. Walker *
Franklin N. Saxon Judith C. Walker
(Director) (Director)
/s/ Howard L. Dunn, Jr.* /s/ H. Bruce English*
Howard L. Dunn, Jr. H. Bruce English
(Director) (Director)
/s/ Patrick B. Flavin* /s/ Earl N. Phillips, Jr.*
Patrick B. Flavin Earl N. Phillips, Jr.
(Director) (Director)
* By Franklin N. Saxon, Attorney-in-Fact, pursuant to Powers of
Attorney filed with the Securities and Exchange Commission.
EXHIBITS INDEX
Exhibit Number Exhibit
21 List of subsidiaries of the Company
23(a) Consent of Independent Public Auditors in connection with
the registration statements of Culp, Inc. on Form S-8 (File
Nos. 33-13310, 33-37027, 33-80206, 33-62843, 333-27519,
333-59512 and 333-59514), dated March 20, 1987, September
18, 1990, June 13, 1994, September 22, 1995, May 21, 1997,
April 25, 2001, and April 25, 2001.
24(a) Power of Attorney of Howard L. Dunn, Jr., dated June 29, 2001
24(b) Power of Attorney of H. Bruce English, dated June 25, 2001
24(c) Power of Attorney of Patrick B. Flavin, dated July 18, 2001
24(d) Power of Attorney of Patrick H. Norton, dated July 5, 2001
24(e) Power of Attorney of Earl N. Phillips, Jr., dated June 29, 2001
24(f) Power of Attorney of Judith C. Walker, dated June 27, 2001