June 25,
2009
Securities
and Exchange Commission
Division
of Corporation Finance
100 F
Street, N.E.
Mailstop
3561
Washington,
D.C. 20549-3561
Attention: H.
Christopher Owings, Assistant Director
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Culp,
Inc.
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Form
10-K for the Fiscal Year Ended April 27, 2008, filed July 10,
2008
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Form
10-Q for the Fiscal Quarter Ended February 1, 2009, filed March 13,
2009
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Definitive
Proxy Statement on Schedule 14A, filed August 26, 2008
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File
No.
1-12597
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Ladies and
Gentlemen:
We
received a letter dated June 10, 2009 from the Division of Corporate Finance
containing additional comments on the company’s filings with the Commission
listed above. We have previously responded to the first seven of
those comments. This letter is delivered in response to the final two
comments in your letter of June 10 (relating to the Definitive Proxy
Statement). The responses below use the same numbering system
included in your letter.
Voting Securities, page
4
8. Comment:
We
note your response to comment 13 in our letter dated March 23,
2009. We reissue our comment. Please disclose the natural
person(s) or public company that has the ultimate voting or investment control
over the shares held by T. Rowe Price Associates, Inc., Dimensional Fund
Advisors Inc. and Praesidium Investment Management Company, LLC.
Securities
and Exchange Commission
June 25,
2009
Page
2
__________________________________
Response:
In future
filings, we will disclose the natural person(s) or public company that has
ultimate voting or investment control in our table of five percent shareholders,
to the extent that information is known to us. For T. Rowe Price
Associates, Inc., Dimensional Fund Advisors Inc. and Praesidium Investment
Management Company, LLC, the requested information is not available to us and is
not included in filings pursuant to Section 13 of the Exchange
Act. We note that the most recent filing by Praesidium discloses that
Kevin Oram and Peter Uddo (same address as Praesidium) “may be deemed to control
Praesidium,” which is the entity that has the power to vote and invest the
shares disclosed as beneficially owned by Praesidium, and comparable information
will be disclosed in future filings, to the extent known to us.
Compensation Discussion and
Analysis, page 15
Annual incentive bonus, page
18
9. Comment:
We
note your response to comment 14 in our letter dated March 23,
2009. We note that you provided the categories of financial
performance measures such as operating income, free cash flow, and return on
capital but not the quantitative thresholds for each performance
category. In this regard, we reissue our comment. Please
disclose your quantitative thresholds or goals for your executives to receive an
annual incentive bonus or, to the extent you believe disclosure of these
thresholds or goals would result in competitive harm, provide us on a
supplemental basis a detailed explanation under Instruction 4 to Item 402(b) of
Regulation S-K for this conclusion.
Response:
In future
filings, we will disclose annual bonus performance targets to the extent that
they relate to completed years and to the extent that they include company-wide
or whole segment performance measures, as all of the performance targets did in
fiscal 2008. If the performance targets are more limited in scope in
the future (involving a specific region or segment of the company for which
financial results are not publicly disclosed) and we determine that the
disclosure of these performance targets would lead to competitive harm, we will
explain the competitive harm and further discuss how difficult it will be for
the executive or how likely it will be for the company to achieve the
undisclosed target levels, as contemplated by Instruction 4 to Item 402(b)
of Regulation S-K.
For 2008,
in addition to the information previously disclosed in the 2008 proxy statement,
a quantitative discussion of the thresholds for each performance measure would
have included the following:
The
thresholds for all named executives except Mr. Culp, IV were operating income at
$10.5 million for minimum, $14.0 million for target, $16.0 million for
maximum, and $18.0 million for super maximum. Free cash flow
thresholds were $5.0 million for minimum, $6.3 million for target, $7.8
million for maximum, and $9.3 million for super maximum. Return on
capital thresholds were 9.5% for minimum, 12.7% for target, 14.5% for maximum,
and 16.4% for super maximum.
Securities
and Exchange Commission
June 25,
2009
Page
3
__________________________________
The
thresholds for Mr. Culp, IV were based upon the performance of the mattress
fabrics segment only. These thresholds for operating income were
$12.0 million for minimum, $14.0 million for target, $15.0 million for maximum,
and $16.0 million for super maximum. The free cash flow thresholds
for the mattress fabrics segment were $16.0 million for minimum, $16.7 million
for target, $16.9 million for maximum, and $17.4 million for super
maximum. The return on capital thresholds for the mattress fabrics
segment were 28.0% for minimum, 30.0% for target, 32.0% for maximum, and 34.0%
for super maximum.
The actual
results that determined incentive bonus for all named executives except Mr.
Culp, IV were as follows: Operating income was $11.8 million, free
cash flow was $14.2 million, and return on capital was 11.4%, as calculated in
accordance with the plan. As previously disclosed in the 2008 proxy
statement, these levels represented operating income between the minimum and
target level, free cash flow at the super maximum level, and return on capital
between the minimum and target level. This resulted in an incentive
bonus of 98% of the target levels previously disclosed in the “Grants of
Plan-Based Awards” table.
For Mr.
Culp, IV, the results of the mattress fabrics segment that determined his
incentive bonus were as follows: Operating income was $14.7 million,
free cash flow was $18.5 million, and return on capital was 37.2%, as calculated
in accordance with the plan. As previously disclosed in the 2008
proxy statement, the mattress fabrics segment achieved operating income between
the target and maximum levels and reached the super maximum levels for free cash
flow and return on capital, which resulted in Mr. Culp, IV receiving an
incentive bonus of 174% of his target opportunity set forth in the “Grants of
Plan-Based Awards” table.
Conclusion
The
company acknowledges that:
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the
company is responsible for the adequacy and accuracy of the disclosure in
the filings;
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staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the
filings; and
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the
company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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Securities
and Exchange Commission
June 25,
2009
Page
4
__________________________________
We hope
that the company has adequately addressed all of the concerns included in the
staff’s letter with respect to the comments addressed in this response
letter. We appreciate your review of these responses. If
you have further comments or any questions about our responses, please contact
the undersigned at the address and telephone number listed
above. Thank you for your consideration.
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Sincerely
yours,
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Culp,
Inc.
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/s/
Kenneth R. Bowling
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Kenneth
R. Bowling
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Vice
President and Chief Financial
Officer
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