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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1998
Commission File No. 0-12781
CULP, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1001967
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or other organization)
101 S. Main St., High Point, North Carolina 27261-2686
(Address of principal executive offices) (zip code)
(336) 889-5161
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to the filing
requirements for at least the past 90 days.
YES X NO
Common shares outstanding at August 2, 1998: 12,995,021
Par Value: $.05
INDEX TO FORM 10-Q
For the period ended August 2, 1998
Part I - Financial Information.
Page
- ------------------------------------------
Item 1. Unaudited Interim Consolidated Financial Statements:
Consolidated Statements of Income (Loss)--Three Months Ended I-1
August 2, 1998 and August 3, 1997
Consolidated Balance Sheets-August 2, 1998, August 3, 1997 and May 3, 1998 I-2
Consolidated Statements of Cash Flows---Three Months Ended August 2, 1998 I-3
and August 3, 1997
Consolidated Statements of Shareholders' Equity I-4
Notes to Consolidated Financial Statements I-5
Sales by Product Category/Business Unit I-10
International Sales by Geographic Area I-11
Item 2. Management's Discussion and Analysis of Financial I-12
Condition and Results of Operations
Part II - Other Information
- -------------------------------------
Item 6. Exhibits and Reports on Form 8-K II-1-II-7
Signature II-8
Item 1. Financial Statements
CULP, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THREE MONTHS ENDED AUGUST 2, 1998 AND AUGUST 3, 1997
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------
Amounts Percent of Sales
--------------------- --------------------
August 2, August 3, % Over
1998 1997 (Under) 1999 1998
--------- ---------- ---------- --------- ---------
Net sales $ 110,667 99,498 11.2 % 100.0 % 100.0 %
Cost of sales 97,056 82,765 17.3 % 87.7 % 83.2 %
--------- ---------- ---------- --------- ---------
Gross profit 13,611 16,733 (18.7) % 12.3 % 16.8 %
Selling, general and
administrative expenses 14,473 10,916 32.6 % 13.1 % 11.0 %
--------- ---------- ---------- --------- ---------
Income (loss) from operations (862) 5,817 (114.8) % (0.8)% 5.8 %
Interest expense 2,361 1,280 84.5 % 2.1 % 1.3 %
Interest income (53) (90) (41.1) % (0.0)% (0.1)%
Other expense (income), net 770 242 218.2 % 0.7 % 0.2 %
--------- ---------- ---------- --------- ---------
Income (loss) before
income taxes (3,940) 4,385 (189.9) % (3.6)% 4.4 %
Income taxes * (1,300) 1,535 (184.7) % 33.0 % 35.0 %
--------- ---------- ---------- --------- ---------
Net income (loss) $ (2,640) 2,850 (192.6) % (2.4)% 2.9 %
========= ========== ========== ========= =========
Net income (loss) per share ($0.20) $0.23 (187.0) %
Net income (loss) per share,
assuming dilution ($0.20) $0.22 (190.9) %
Dividends per share $0.0350 $0.0350 0.0 %
Average shares outstanding 13,000 12,631 2.9 %
Average shares outstanding,
assuming dilution 13,203 12,929 2.1 %
* Percent of sales column is calculated as a % of income (loss) before income
taxes.
CULP, INC.
CONSOLIDATED BALANCE SHEETS
AUGUST 2, 1998, AUGUST 3, 1997 AND MAY 3, 1998
Unaudited
(Amounts in Thousands)
Amounts Increase
---------------------------
August 2, August 3, (Decrease) *
---------------------- May 3,
1998 1997 Dollars Percent 1998
------------- ---------- ---------- --------- -------
Current assets
Cash and cash investments $ 1,520 1,843 (323) (17.5) % 2,312
Accounts receivable 63,833 54,086 9,747 18.0 % 73,773
Inventories 79,358 60,715 18,643 30.7 % 78,594
Other current assets 7,511 6,126 1,385 22.6 % 7,808
------------- ---------- ---------- --------- -------
Total current assets 152,222 122,770 29,452 24.0 % 162,487
Restricted investments 4,074 8,186 (4,112) (50.2) % 4,021
Property, plant & equipment, net 127,287 97,128 30,159 31.1 % 128,805
Goodwill 54,798 22,111 32,687 147.8 % 55,162
Other assets 4,317 3,124 1,193 38.2 % 4,340
------------- ---------- ---------- --------- -------
Total assets $ 342,698 253,319 89,379 35.3 % 354,815
============= ========== ========== ========= =======
Current liabilities
Current maturities of
long-term debt $ 3,250 100 3,150 3,150.0 % 3,325
Accounts payable 31,710 20,154 11,556 57.3 % 37,214
Accrued expenses 13,856 11,972 1,884 15.7 % 17,936
Income taxes payable 0 1,575 (1,575) (100.0)% 1,282
------------- ---------- ---------- --------- -------
Total current liabilities 48,816 33,801 15,015 44.4 % 59,757
Long-term debt 154,383 96,016 58,367 60.8 % 152,312
Deferred income taxes 11,227 9,965 1,262 12.7 % 11,227
------------- ---------- ---------- --------- -------
Total liabilities 214,426 139,782 74,644 53.4 % 223,296
Shareholders' equity 128,272 113,537 14,735 13.0 % 131,519
------------- ---------- ---------- --------- -------
Total liabilities and
shareholders' equity $ 342,698 253,319 89,379 35.3 % 354,815
============= ========== ========== ========= =======
Shares outstanding 12,995 12,650 345 2.7 % 13,007
============= ========== ========== ========= =======
* Derived from audited financial statements.
CULP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 2, 1998 AND AUGUST 3, 1997
Unaudited
(Amounts in Thousands)
THREE MONTHS ENDED
------------------------
Amounts
----------------------
August 2, August 3,
1998 1997
----------- ----------
Cash flows from operating activities:
Net income (loss) $ (2,640) 2,850
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 4,376 3,256
Amortization of intangible assets 398 181
Changes in assets and liabilities:
Accounts receivable 9,940 2,605
Inventories (764) (7,252)
Other current assets 297 (676)
Other assets (11) (147)
Accounts payable (3,017) (5,852)
Accrued expenses (4,080) (2,923)
Income taxes payable (1,282) (5)
--------- ----------
Net cash provided by (used in) operating activities 3,217 (7,963)
--------- ----------
Cash flows from investing activities:
Capital expenditures (2,858) (9,153)
Purchases of restricted investments (53) (8,590)
Sale of restricted investments 0 11,422
----------- ----------
Net cash used in investing activities (2,911) (6,321)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 2,071 19,500
Principal payments on long-term debt (75) (25)
Change in accounts payable-capital expenditures (2,487) (3,897)
Dividends paid (455) (443)
Common stock issued (purchased) (152) 162
----------- ----------
Net cash provided by (used in)financing activities (1,098) 15,297
----------- ----------
Increase (decrease) in cash and cash investments (792) 1,013
Cash and cash investments at beginning of period 2,312 830
----------- ----------
Cash and cash investments at end of period $ 1,520 1,843
=========== ==========
CULP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except per share data)
Capital
Common Stock Contributed Total
---------------------- in Excess Retained Shareholders'
Shares Amount of Par Value Earnings Equity
--------------------------------------------------------------------------------------------------------
Balance, April 27, 1997 12,608,759 $ 630 $ 33,899 $ 76,260 $ 110,789
Cash dividends ($0.14 per share) (1,786) (1,786)
Net income 15,513 15,513
Common stock issued in connection
with stock option plans 114,051 6 997 1,003
Common stock issued in connection
with acquisition of Artee
Industries,Incorporated's assets 284,211 14 5,386 5,400
Stock options issued in connection
with acquisition of Phillips' assets 600 600
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Balance, May 3, 1998 13,007,021 650 40,882 89,987 131,519
Cash dividends ($0.035 per share) (455) (455)
Net loss (2,640) (2,640)
Common stock issued in connection
with stock option plans 1,000 8 8
Common stock purchased (13,000) (41) (119) (160)
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Balance, August 2, 1998 12,995,021 $ 650 $ 40,849 $ 86,773 $ 128,272
========================================================================================================
Culp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Culp, Inc.
and subsidiary, include all adjustments, consisting only of normal, recurring
adjustments and accruals, which are, in the opinion of management, necessary for
fair presentation of the results of operations and financial position. Results
of operations for interim periods may not be indicative of future results. The
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements, which are incorporated by
reference in the company's annual report on Form 10-K filed with the Securities
and Exchange Commission on July 31, 1998 for the fiscal year ended May 3, 1998.
The three-month period ended August 2, 1998 includes the results of Phillips,
Wetumpka and Artee which were acquired on August 5, 1997, December 30, 1997 and
February 2, 1998, respectively.
================================================================================
2. Accounts Receivable
A summary of accounts receivable follows (dollars in thousands):
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August 2, 1998 May 3, 1998
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Customers $ 65,295 $ 75,695
Allowance for doubtful accounts (816) (1,244)
Reserve for returns and allowances (646) (678)
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$ 63,833 $ 73,773
================================================================================
3. Inventories
Inventories are carried at the lower of cost or market. Cost is determined
for substantially all inventories using the LIFO (last-in, first-out) method.
A summary of inventories follows (dollars in thousands):
- --------------------------------------------------------------------------------
August 2, 1998 May 3, 1998
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Raw materials $ 47,829 $ 45,319
Work-in-process 6,395 6,608
Finished goods 30,527 31,017
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Total inventories valued at FIFO cost 84,751 82,944
Adjustments of certain inventories to the
LIFO cost method (2,364) (2,364)
Adjustments of certain inventories to market (3,029) (1,986)
- --------------------------------------------------------------------------------
$ 79,358 $ 78,594
================================================================================
4. Restricted Investments
Restricted investments were purchased with proceeds from industrial revenue
bond issues and are invested pending application of such proceeds to project
costs or repayment of the bonds. The investments are stated at cost which
approximates market value.
5. Accounts Payable
A summary of accounts payable follows (dollars in thousands):
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August 2, 1998 May 3, 1998
- --------------------------------------------------------------------------------
Accounts payable-trade $ 31,323 $ 34,340
Accounts payable-capital expenditures 387 2,874
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$ 31,710 $ 37,214
==============================================================================
6. Accrued Expenses
A summary of accrued expenses follows (dollars in thousands):
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August 2, 1998 May 3, 1998
- --------------------------------------------------------------------------------
Compensation and benefits $ 8,819 $ 12,212
Other 5,037 5,724
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$ 13,856 $ 17,936
================================================================================
7. Long-Term Debt
A summary of long-term debt follows (dollars in thousands):
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August 2, 1998 May 3, 1998
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Senior unsecured notes $ 75,000 $ 75,000
Industrial revenue bonds and other obligations 34,712 34,787
Revolving credit facility 36,000 30,000
Revolving line of credit 2,071 6,000
Obligations to sellers 9,850 9,850
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157,633 155,637
Less current maturities (3,250) (3,325)
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$ 154,383 $ 152,312
================================================================================
On April 2, 1998, the company completed the sale of $75,000,000 of senior
unsecured notes (the "Notes") in a private placement to insurance companies. The
Notes have a fixed coupon rate of 6.76% and an average term of 10 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
an unsecured 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 $88,000,000. The agreement requires
payment of a quarterly facility fee in advance.
The company's $6,000,000 revolving line of credit expires on August 31,
1999. However, the line of credit will automatically be extended for an
additional three-month period on each November 30, February 28, May 31 and
August 31 unless the bank notifies the company that the line of credit will not
be extended.
The industrial revenue bonds (IRBs) are generally due in balloon maturities
which occur at various dates from 2006 to 2013. The IRBs are collateralized by
restricted investments of $4,074,000 and letters of credit for the outstanding
balance of the IRBs and certain interest payments due thereunder.
The company's loan agreements require, among other things, that the company
maintain compliance with certain financial ratios. At August 2, 1998, the
company was in compliance with these required financial covenants.
At August 2, 1998, the company had three interest rate swap agreements with
a bank in order to reduce its exposure to floating interest rates on a portion
of its variable rate borrowings. The following table summarizes certain data
regarding the interest rate swaps:
notational amount interest rate expiration date
$15,000,000 7.3% April 2000
$ 5,000,000 6.9% June 2002
$ 5,000,000 6.6% July 2002
The estimated amount at which the company could terminate these agreements
as of August 2, 1998 is approximately $459,000. Net amounts paid under these
agreements increased interest expense by approximately $59,000 in 1999 and
$60,000 in 1998. 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.
8. Cash Flow Information
Payments for interest and income taxes during the period were (dollars in
thousands)
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1999 1998
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.
Interest $ 1,231 $ 1,231
Income taxes 1,637 445
================================================================================
9. Foreign Exchange Forward Contracts
The company generally enters into foreign exchange forward and option
contracts as a hedge against its exposure to currency fluctuations on firm
commitments to purchase certain machinery and equipment and raw materials and
certain anticipated Canadian dollar expenses of the company's Canadian
subsidiary. The company had no outstanding foreign exchange forward and option
contracts as of August 2, 1998.
10. Net Income (Loss) Per Share
The following table reconciles the numerators and denominators of net
income (loss) per share and net income (loss) per share, assuming dilution for
the three-month periods ended August 2, 1998 and August 3, 1997:
THREE MONTHS ENDED
----------------------------------------------------------------------
August 2, 1998 August 3, 1997
--------------------------------- ----------------------------------
(Amounts in thousands, (Loss) Shares Per Share Income Shares Per Share
except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ---------- --------- ----------- ------------ --------
Net income (loss)
per share ($2,640) 13,000 ($0.20) $2,850 12,631 $0.23
========= ========
Effect of dilutive
securities:
Options - 203 - 298
----------- ---------- ----------- ----------
Net income (loss) per share,
assuming dilution ($2,640) 13,203 ($0.20) $2,850 12,929 $0.22
=========== ========== ========= =========== ========== ========
11. New Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures About
Segments of an Enterprise and Related Information," effective for periods
beginning after December 15, 1997. The purpose of this standard is to disclose
disaggregated information which provides information about the operating
segments an enterprise engages in, consistent with the way management reviews
financial information to make decisions about the enterprise's operating
matters. The company will comply with the requirements of this standard for
fiscal year end 1999.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
provisions of SFAS No. 133 are effective for financial statements beginning
after June 15, 1999, although early adoption is allowed. The company has not
determined the financial impact of adopting this SFAS and has not determined if
it will adopt its provisions prior to its effective date.
CULP, INC.
SALES BY PRODUCT CATEGORY/BUSINESS UNIT
FOR THREE MONTHS ENDED AUGUST 2, 1998 AND AUGUST 3, 1997
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------------
Amounts Percent of Total
Sales
------------------ -------------------
August 2, August 3, % Over
1998 1997 (Under) 1999 1998
Product Category/Business Unit
- ------------------------- -------- -------- ---------- -------- ---------
Upholstery Fabrics
Culp Decorative Fabrics $ 51,445 39,814 29.2 % 46.5 % 40.0 %
Culp Velvets/Prints 29,994 38,397 (21.9)% 27.1 % 38.6 %
-------- -------- ---------- -------- ---------
81,439 78,211 4.1 % 73.6 % 78.6 %
Mattress Ticking
Culp Home Fashions 22,632 21,287 6.3 % 20.5 % 21.4 %
Yarn
Culp Yarn 6,596 0 100.0 % 6.0 % 0.0 %
-------- -------- ---------- -------- ---------
* $ 110,667 99,498 11.2 % 100.0% 100.0 %
======== ======== ========== ======== =========
* U.S. sales were $84,310 and $74,407 for the first three months of fiscal 1999
and fiscal 1998, respectively. The percentage increase in U.S. sales was 13.3%
for the three months.
CULP, INC.
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THREE MONTHS ENDED AUGUST 2, 1998 AND AUGUST 3, 1997
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
-------------------------------------------------------
Amounts Percent of Total
Sales
--------------------- ---------------------
August 2, August % Over
3,
Geographic Area 1998 1997 (Under) 1999 1998
- ----------------------- ---------- --------- --------- --------- ---------
North America
(Excluding USA) $ 7,253 7,044 3.0 % 27.5 % 28.1 %
Europe 3,683 4,440 (17.0)% 14.0 % 17.7 %
Middle East 8,300 6,564 26.4 % 31.5 % 26.2 %
Far East & Asia 4,868 5,464 (10.9)% 18.5 % 21.8 %
South America 1,000 339 195.0 % 3.8 % 1.4 %
All other areas 1,253 1,240 1.0 % 4.8 % 4.9 %
---------- --------- --------- --------- ---------
$ 26,357 25,091 5.0 % 100.0 % 100.0 %
========== ========= ========= ========= =========
International sales, and the percentage of total sales, for each of the last
seven fiscal years follows: fiscal 1992-$ 37,913 (20%); fiscal 1993-$ 41,471
(21%); fiscal 1994-$ 44,038 (18%); fiscal 1995-$ 57,971 (19%); fiscal 1996-
$77,397 (22%); fiscal 1997-$ 101,571 (25%); and fiscal 1998-$ 137,223 (29%).
International sales for the current quarter represented 23.8% and 25.2% for 1999
and 1998, respectively.
Certain amounts for fiscal year 1998 have been reclassified to conform with the
fiscal year 1999 presentation.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 2.
The following analysis of the financial condition and results of operations
should be read in conjunction with the Financial Statements and Notes and other
exhibits included elsewhere in this report.
Overview
For the three months ended August 2, 1998, net sales rose 11.2% to $110.7
million compared with $99.5 million in the year-earlier period. The net loss for
the quarter totaled ($2.6) million, or ($0.20) per share, compared with net
income of $2.9 million, or $0.23 per share, for the first quarter of fiscal
1998. Sales increased due to sales of $15.7 million from Phillips Mills and
Artee, which were acquired in fiscal 1998, offset by a decline in sales of
certain products for the Culp Velvets/Prints division that are primarily
marketed internationally. During the quarter, demand for Culp Velvets/Prints
products being shipped directly or indirectly into the emerging markets of
Russia and other former Soviet countries, India and Eastern Europe experienced a
pronounced slowdown. All of these areas are generally experiencing very weak
economic conditions which, in turn, have affected demand for furniture and other
home furnishings. This decline in international sales was offset by increased
sales of other products into other regions, principally the Middle East, and
from international sales related to Phillips Mills. Excluding the contribution
from acquired operations, sales of upholstery fabrics to US-based manufacturers
were down 5.5% for the quarter from a year ago. This portion of the company's
business has been generally soft throughout fiscal 1998 and into the beginning
of fiscal 1999. Demand for the company's products is dependent on the various
factors which affect consumer purchases of upholstered furniture and bedding
including housing starts and sales of existing homes, the level of consumer
confidence, prevailing interest rates for home mortgages and the availability of
consumer credit.
Three Months Ended August 2, 1998 Compared with Three Months Ended
August 3, 1997
Net Sales. Net sales for the first quarter increased by $11.2 million, or
11.2%, compared with the year-earlier period. The company's sales of upholstery
fabrics increased $3.2 million, or 4.1%, compared with the prior year. Phillips
Mills, which was acquired on August 5, 1997, contributed $9.1 million in
incremental net sales for the quarter. The decline in net sales, excluding that
incremental contribution, was due primarily to the results of Culp
Velvets/Prints, which has experienced a material slowdown in international
shipments, especially to areas such as Russia which have encountered significant
economic difficulties. Sales from the Culp Decorative Fabrics business unit were
up slightly from a year ago excluding the benefit of Phillips Mills. Sales from
the Culp Home Fashions unit, which principally consists of mattress ticking and
bedding products, rose 6.3% from a year ago. International sales, consisting
primarily of upholstery fabrics, increased to $26.4 million, up 5.0% from a year
ago. International shipments accounted for 23.8% of the company's sales for the
first quarter, down from 25.2% a year ago. During the first quarter, demand for
fabrics marketed by Culp Velvets/Prints slowed markedly in certain international
regions that had been primary export areas for the company. This slowdown, which
the company believes is industry-wide and linked to economic difficulties in
these areas, is expected to affect the company's results into the second half of
fiscal 1999.
Gross Profit and Cost of Sales. Gross profit for the first quarter
decreased by $3.1 million and amounted to 12.3% of net sales compared with 16.8%
a year ago. The company was affected by an under absorption of fixed costs as a
result of the decline in sales in certain business units, especially in those
product categories where international sales represented a significant portion
of sales. Competitive pressures were also responsible for lower margins in other
product categories. The year-to-year comparisons were influenced by having one
less week in the period versus a year ago. The cost of raw materials continues
to remain relatively stable. The significant slowdown in international sales of
certain fabrics, combined with other competitive issues, will likely lead to
lower gross profit compared with the prior year into the second half of fiscal
1999.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased as a percentage of net sales to 13.1% compared
with 11.0% a year ago. As noted above, the company was affected by less than
expected sales in certain product categories. Compared with a year ago, the
company is incurring higher expenses related to expanded resources for designing
and sampling fabrics with new patterns and textures and higher costs for
marketing programs.
Interest Expense. Net interest expense for the first quarter of $2.3
million was up from $1.2 million a year ago due principally to borrowings
related to the acquisitions of Phillips Mills and Artee. The company has also
incurred higher borrowings from a year ago to finance capital expenditures and
additional working capital requirements.
Other Expense. Other expense increased to $770,000 for the first quarter
compared with $242,000 for the year-earlier period, principally due to the
amortization of goodwill associated with the acquisitions of Phillips Mills and
Artee and to the writeoff of certain fixed assets.
Income Taxes. The effective tax rate for the first quarter was 33.0%
compared with 35.0% in the year-earlier period.
Net Income (Loss) Per Share. The net loss per share for the first quarter
totaled ($0.20) compared with net income per share of $0.23 a year ago.
Liquidity and Capital Resources
Liquidity. Cash and cash investments were $1.5 million as of August 2,
1998, compared with $2.3 million at the end of fiscal 1998. Funded debt
(long-term debt, including current maturities, less restricted investments)
increased to $153.6 million at the close of the first quarter, up from $87.9
million as of August 3, 1997 and $151.6 million at the end of fiscal 1998. As a
percentage of total capital (funded debt plus total shareholders' equity), the
company's borrowings amounted to 54.5% as of August 2, 1998, compared with 43.6%
as of August 3, 1997 and 53.5% at the end of fiscal 1998. The company's working
capital as of August 2, 1998 was $103.4 million compared with $102.7 million at
the close of fiscal 1998.
Because of seasonal factors, the company typically generates the majority
of its cash from operating activities during the second fiscal half. Cash of
$3.2 million was provided by operating activities during the first quarter,
consisting of $2.1 million from earnings (net loss plus depreciation and
amortization) and $1.1 million from changes in working capital. Capital
expenditures during the first quarter totaled $2.9 million. Financing activities
used $1.1 million in cash, consisting of a $2.5 million decrease in accounts
payable-capital expenditures, $0.5 million of dividends paid, $0.2 million for
purchase of common stock, and offset by $2.1 million in proceeds from issuance
of long-term debt.
Financing Arrangements. As of August 2, 1998, the company had outstanding
balances of $36 million under a $88 million syndicated five-year, unsecured,
multi-currency revolving credit facility. The company also has $75 million of
senior unsecured notes ("Notes") with insurance companies. The Notes have a
fixed coupon rate of 6.76% and an average term of 10 years. In addition, the
company has a total of $34.7 million in outstanding industrial revenue bonds
("IRBs") which have been used to finance capital expenditures. The IRBs are
collateralized by restricted investments of $4.1 million as of August 2, 1998
and letters of credit for the outstanding balance of the IRBs and certain
interest payments due thereunder.
In July 1998, the company amended the syndicated revolving credit facility
to decrease the facility from $100 million to $88 million and amend certain
covenants. As of August 2, 1998, the company was in compliance with the required
financial covenants of its loan agreements. If the company experiences continued
losses or substantially lower earnings compared to prior comparable periods, the
financial results could cause the company to be out of compliance with the
financial covenants under its revolving credit facility. The company intends to
work with its lenders under the revolving credit facility in order to amend
covenants or make other arrangements to prevent a default from occurring under
this facility.
As of August 2, 1998, the company had three interest rate swap agreements
to reduce its exposure to floating interest rates on a $25 million notional
amount. The effect of these contracts is to "fix" the interest rate payable on
$25 million of the company's bank borrowings at a weighted average rate of 7.1%.
The company also enters into foreign exchange forward and option contracts to
hedge against currency fluctuations with respect to firm commitments to purchase
certain machinery, equipment, raw materials and certain anticipated Canadian
dollar expenses of the company's Canadian subsidiary.
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. The company anticipates spending $10-$15 million in fiscal 1999.
The company believes that cash flows from operations and funds available under
existing credit facilities will be sufficient to fund capital expenditures and
working capital requirements for the foreseeable future.
Seasonality
The company's business is slightly seasonal, with increased sales during
the company's second and fourth fiscal quarters. This seasonality results from
one-week closings of the company's manufacturing facilities, and the facilities
of most of its customers in the United States, during the first and third
quarters for the holiday weeks including July 4th and Christmas.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures About
Segments of an Enterprise and Related Information," effective for periods
beginning after December 15, 1997. The purpose of this standard is to disclose
disaggregated information which provides information about the operating
segments an enterprise engages in, consistent with the way management reviews
financial information to make decisions about the enterprise's operating
matters. The company will comply with the requirements of this standard for
fiscal year end 1999.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
provisions of SFAS No. 133 are effective for financial statements beginning
after June 15, 1999, although early adoption is allowed. The company has not
determined the financial impact of adopting this SFAS and has not determined
if it will adopt its provisions prior to its effective date.
Year 2000 Considerations
Management has developed a plan to modify the company's information
technology to recognize the year 2000. The plan has three distinct areas of
focus - traditional information systems, technology used in support areas, and
preparedness of suppliers and customers.
The initiative for traditional information systems started as far back as
1992 and has substantially completed the assessment, required changes and
testing of the company's operational systems (order entry, billing, sales,
finished goods) and financial systems (payroll, human resources, accounts
payable, accounts receivable, general ledger, fixed assets). Currently the
company is focused on the remaining systems that support the company's
manufacturing processes and plans to be substantially complete by May 1, 1999.
The second area of focus has been an assessment of non-traditional
information technology which includes the electronics in equipment such as
telephone switches and manufacturing equipment. A plan, targeted to be
substantially complete by December 31, 1998, has been formed to evaluate all
these components at every location, to be followed during 1999 with installation
and testing of required changes.
The third area of focus is to communicate with suppliers and vendors to
understand their level of compliance and assure a constant flow of materials to
support business plans. Communication to date has shown a high level of
awareness and planning by these parties.
Formal contingency plans will not be formulated until the company has
identified specific areas where there is a substantial risk of year 2000
problems occurring, and no such areas are identified as of this date.
The plan is being administered by a team of internal staff and management
and the cost of this initiative, principally represented by internal resources,
is not expected to be material to the company's results of operations or
financial position. This project is not expected to have a significant effect on
the company's operations, though no assurance can be given in this regard.
Forward-Looking Information
The company's quarterly report on Form 10-Q contains statements that could
be deemed "forward-looking statements," within the meaning of the federal
securities laws. 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. In
addition, 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, and economic and political instability in international areas
could affect the demand for the company's products.
Culp, Inc.
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are filed as part of this report or
incorporated by reference. Management contracts, compensatory plans,
and arrangements are marked with an asterisk (*).
3(i) Articles of Incorporation of the Company, as
amended, were filed as Exhibit 3(i) to the
Company's Form 10-Q for the quarter ended January
29, 1995, filed March 15, 1995, and are
incorporated herein by reference.
3(ii) Restated and Amended Bylaws of the Company,
as amended, were filed as Exhibit 3(b) to the
Company's Form 10-K for the year ended April 28,
1991, filed July 25, 1991, and are incorporated
herein by reference.
10(a) Loan Agreement dated December 1, 1988 with
Chesterfield County, South Carolina relating to
Series 1988 Industrial Revenue Bonds in the
principal amount of $3,377,000 was filed as
Exhibit 10(n) to the Company's Form 10-K for the
year ended April 29, 1989, and is incorporated
herein by reference.
10(b) Loan Agreement dated November 1, 1988 with the
Alamance County Industrial Facilities and
Pollution Control Financing Authority relating to
Series A and B Industrial Revenue Refunding Bonds
in the principal amount of $7,900,000, was filed
as exhibit 10(o) to the Company's Form 10-K for
the year ended April 29, 1990, and is
incorporated herein by reference.
10(c) Loan Agreement dated January 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 19,
1990, filed on July 15, 1990, and is incorporated
herein by reference.
10(d) Loan Agreement dated as of December 1, 1993
between Anderson County, South Carolina and the
Company relating to $6,580,000 Anderson County,
South Carolina Industrial Revenue Bonds (Culp,
Inc. Project) Series 1993, was filed as Exhibit
10(o) to the Company's Form 10-Q for the quarter
ended January 30, 1994, filed March 16, 1994, and
is incorporated herein by reference.
10(e) 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) Amendment and Restatement of the Employee's
Retirement Builder Plan of the Company dated May
1, 1981 with amendments dated January 1, 1990 and
January 8, 1990 were filed as Exhibit 10(p) to
the Company's Form 10-K for the year ended May 3,
1992, filed on August 4, 1992, and is
incorporated herein by reference. (*)
10(j) First Amendment of Lease Agreement dated July 27,
1992 with Partnership 74 Associates was filed as
Exhibit 10(n) to the Company's Form 10-K for the
year ended May 2, 1993, filed on July 29, 1993,
and is incorporated herein by reference.
10(k) Second Amendment of Lease Agreement dated April
16, 1993, with Partnership 52 Associates was
filed as Exhibit 10(l) to the Company's Form
10-K for the year ended May 2, 1993, filed on
July 29, 1993, and is incorporated herein by
reference.
10(l) 1993 Stock Option Plan was filed as Exhibit 10(o)
to the Company's Form 10-K for the year ended May
2, 1993, filed on July 29, 1993, and is
incorporated herein by reference. (*)
10(m) First Amendment to Loan Agreement dated as of
December 1, 1993 by and between The Guilford
County Industrial Facilities and Pollution
Control Financing Authority and the Company was
filed as Exhibit 10(p) to the Company's Form
10-Q, filed on March 15, 1994, and is
incorporated herein by reference.
10(n) First Amendment to Loan Agreement dated as of
December 16, 1993 by and between The Alamance
County Industrial Facilities and Pollution
Control Financing Authority and the Company was
filed as Exhibit 10(q) to the Company's Form
10-Q, filed on March 15, 1994, and is
incorporated herein by reference.
10(o) First Amendment to Loan Agreement dated as of
December 16, 1993 by and between Chesterfield
County, South Carolina and the Company was filed
as Exhibit 10(r) to the Company's Form 10-Q,
filed on March 15, 1994, and is incorporated
herein by reference.
10(p) Amendment to Lease dated as of November 4, 1994,
by and between the Company and RDC, Inc. was
filed as Exhibit 10(w) to the Company's Form
10-Q, for the quarter ended January 29, 1995,
filed on March 15, 1995, and is incorporated
herein by reference.
10(q) Amendment to Lease Agreement dated as of December
14, 1994, by and between the Company and
Rossville Investments, Inc. (formerly known as A
& E Leasing, Inc.). was filed as Exhibit 10(y) to
the Company's Form 10-Q, for the quarter ended
January 29, 1995, filed on March 15, 1995, and is
incorporated herein by reference.
10(r) Interest Rate Swap Agreement between Company and
First Union National Bank of North Carolina dated
April 17, 1995, was filed as Exhibit 10(aa) to
the Company's Form 10-K for the year ended April
30, 1995, filed on July 26, 1995, and is
incorporated herein by reference.
10(s) Performance-Based Stock Option Plan, dated June
21, 1994, was filed as Exhibit 10(bb) to the
Company's Form 10-K for the year ended April 30,
1995, filed on July 26, 1995, and is incorporated
herein by reference. (*)
10(t) Interest Rate Swap Agreement between Company and
First Union National Bank of North Carolina,
dated May 31, 1995 was filed as exhibit 10(w) to
the Company's Form 10-Q for the quarter ended
July 30, 1995, filed on September 12, 1995, and
is incorporated herein by reference.
10(u) Interest Rate Swap Agreement between Company and
First Union National Bank of North Carolina,
dated July 7, 1995 was filed as exhibit 10(x) to
the Company's Form 10-Q for the quarter ended
July 30, 1995, filed on September 12, 1995, and
is incorporated herein by reference.
10(v) Second Amendment of Lease Agreement dated June
15, 1994 with Partnership 74 Associates was filed
as Exhibit 10(v) to the Company's Form 10-Q for
the quarter ended October 29, 1995, filed on
December 12, 1995, and is incorporated herein by
reference.
10(w) Lease Agreement dated November 1, 1993 by and
between the Company and Chromatex, Inc. was filed
as Exhibit 10(w) to the Company's Form 10-Q for
the quarter ended October 29, 1995, filed on
December 12, 1995, and is incorporated herein by
reference.
10(x) Lease Agreement dated November 1, 1993 by and
between the Company and Chromatex Properties,
Inc. was filed as Exhibit 10(x) to the Company's
Form 10-Q for the quarter ended October 29, 1995,
filed on December 12, 1995, and is incorporated
herein by reference.
10(y) Amendment to Lease Agreement dated May 1, 1994 by
and between the Company and Chromatex Properties,
Inc. was filed as Exhibit 10(y) to the Company's
Form 10-Q for the quarter ended October 29, 1995,
filed on December 12, 1995, and is incorporated
herein by reference.
10(z) Canada-Quebec Subsidiary Agreement on
Industrial Development (1991), dated January 4,
1995, was filed as Exhibit 10(z) to the Company's
Form 10-Q for the quarter ended October 29, 1995,
filed on December 12, 1995, and is incorporated
herein by reference.
10(aa) Loan Agreement between Chesterfield County, South
Carolina and the Company dated as of April 1,
1996 relating to Tax Exempt Adjustable Mode
Industrial Development Bonds (Culp, Inc.
Project) Series 1996 in the aggregate principal
amount of $6,000,000 was filed as Exhibit 10(aa)
to the Company's Form 10-K for the year ended
April 28, 1996, and is incorporated herein by
reference.
10(bb) Loan Agreement between the Alamance County
Industrial Facilities and Pollution Control
Financing Authority, North Carolina and the
Company, dated December 1, 1996, relating to Tax
Exempt Adjustable Mode Industrial Development
Revenue Bonds, (Culp, Inc. Project Series 1996)
in the aggregate amount of $6,000,000 was filed
as Exhibit 10(cc) to the Company's Form 10-Q for
the quarter ended January 26, 1997, and is
incorporated herein by reference.
10(cc) Loan Agreement between Luzerne County,
Pennsylvania and the Company, dated as of
December 1, 1996, relating to Tax-Exempt
Adjustable Mode Industrial Development Revenue
Bonds (Culp, Inc. Project) Series 1996 in the
aggregate principal amount of $3,500,000 was
filed as Exhibit 10(dd) to the Company's Form
10-Q for the quarter ended January 26, 1997, and
is incorporated herein by reference.
10(dd) Second Amendment to Lease Agreement between
Chromatex Properties, Inc. and the Company, dated
April 17, 1997 was filed as Exhibit 10(dd) to
the Company's Form 10-K for the year ended April
27, 1997, and is incorporated herein by reference.
10(ee) Lease Agreement between Joseph E. Proctor (doing
business as JEPCO) and the Company, dated April
21, 1997 was filed as Exhibit 10(ee) to the
Company's Form 10-K for the year ended April 27,
1997, and is incorporated herein by reference.
10(ff) $125,000,000 Revolving Loan Facility dated April
23, 1997 by and among the Company and Wachovia
Bank of Georgia, N.A., as agent, and First Union
National Bank of North Carolina, as documentation
agent was filed as Exhibit 10(ff) to the
Company's Form 10-K for the year ended April 27,
1997, and is incorporated herein by reference.
10(gg) Revolving Line of Credit for $4,000,000 dated
April 23, 1997 by and between the Company and
Wachovia Bank of North Carolina, N.A. was filed as
Exhibit 10(gg) to the Company's Form 10-K for the
year ended April 27, 1997, and is incorporated
herein by reference.
10(hh) Reimbursement and Security Agreement between Culp,
Inc. and Wachovia Bank of North Carolina, N.A.,
dated as of April 1, 1997, relating to $3,337,000
Principal Amount, Chesterfield County, South
Carolina Industrial Revenue Bonds (Culp, Inc.
Project) Series 1988 was filed as Exhibit 10(hh)
to the Company's Form 10-K for the year ended
April 27, 1997, and is incorporated herein by
reference.
Additionally, there are Reimbursement and Security
Agreements between Culp, Inc. and Wachovia Bank of
North Carolina, N.A., dated as of April 1, 1997 in
the following amounts and with the following
facilities:
$7,900,000 Principal Amount, Alamance County
Industrial Facilities and Pollution Control
Financing Authority Industrial Revenue Refunding
Bonds (Culp, Inc. Project) Series A and B.
$4,500,000 Principal Amount, Guilford County
Industrial Facilities and Pollution Control
Financing Authority Industrial Development Revenue
Bonds (Culp, Inc. Project) Series 1989.
$6,580,000 Principal Amount, Anderson County South
Carolina Industrial Revenue Bonds (Culp, Inc.
Project) Series 1993.
$6,000,000 Principal Amount, Chesterfield County,
South Carolina Tax-Exempt Adjustable Mode
Industrial Development Revenue Bonds (Culp, Inc.
Project) Series 1996.
$6,000,000 Principal Amount, The Alamance County
Industrial Facilities and Pollution Control
Financing Authority Tax-exempt Adjustable Mode
Industrial Development Revenue Bonds (Culp, Inc.
Project) Series 1996.
$3,500,000 Principal Amount, Luzerne County
Industrial Development Authority Tax-Exempt
Adjustable Mode Industrial Development Revenue
Bonds (Culp, Inc. Project) Series 1996.
10(ii) Loan Agreement and Reimbursement and Security
Agreement dated
July 1, 1997 with the Robeson County Industrial
Facilities and Pollution Control Financing
Authority relating to the issuance of Tax-Exempt
Adjustable Mode Industrial Development Revenue
Bonds (Culp, Inc. Project), Series 1997 in the
aggregate principal amount of $8,500,000 was filed
as Exhibit 10(ii) to the Company's Form 10-Q for
the quarter ended August 3, 1997, and is
incorporated herein by reference.
10(jj) Asset Purchase Agreement dated as of August 4,
1997 by and between Culp, Inc., Phillips Weaving
Mills, Inc., Phillips Printing Mills, Inc.,
Phillips Velvet Mills, Inc., Phillips Mills, Inc.,
Phillips Property Company, LLC, Phillips
Industries, Inc. and S. Davis Phillips was filed
as Exhibit (10jj) to the Company's Form 10-Q for
the quarter ended November 2, 1997, and is
incorporated herein by reference.
10(kk) Asset Purchase Agreement dated as of October 14,
1997 among Culp, Inc., Artee Industries,
Incorporated, Robert T. Davis, Robert L. Davis,
Trustee u/a dated 8/25/94, Robert L. Davis, Louis
W. Davis, Kelly D. England, J. Marshall Bradley,
Frankie S. Bradley and Mickey R. Bradley was filed
as Exhibit 10(kk) to the Company's Form 10-Q for
the quarter ended November 2, 1997, and is
incorporated herein by reference.
10(ll) 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(mm) 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.
27 Financial Data Schedule
(b) Reports on Form 8-K:
The following report on Form 8-K was filed during the period covered by
this report:
(1) Form 8-K dated August 20, 1998, included under Item 5, Other
Events, disclosure of the Company's press release for quarterly
earnings and the Company's Financial Information Release relating
to the financial information for the first quarter ended August
2, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CULP, INC.
(Registrant)
Date: September 16, 1998 By: s/s Phillip W. Wilson
Phillip W. Wilson
Vice President and Chief
Financial and Accounting Officer
(Authorized to sign on behalf
of the registrant and also
signing as principal financial
officer)
ATMAIN02: CREDIT AGRMT AMDMT JULY 98.DOC
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is
dated as of the 22nd day of July, 1998 among CULP, INC. (the "Borrower"),
WACHOVIA BANK, N.A. (successor by merger to Wachovia Bank of Georgia, N.A.),
as Agent (the "Agent"), FIRST UNION NATIONAL BANK (successor by merger to
First Union National Bank of North Carolina), as Documentation Agent and
WACHOVIA BANK, N.A.(successor by merger to Wachovia Bank of North Carolina,
N.A.), FIRST UNION NATIONAL BANK, SUNTRUST BANK, ATLANTA, and COOPERATIEVE
CENTRALE RAIFFEISEN-BOERENLEEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK
BRANCH (collectively, the "Banks");
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent, the Documentation Agent and the Banks
executed and delivered that certain Credit Agreement, dated as of April 23,
1997 (the "Credit Agreement");
WHEREAS, the Borrower has requested and the Agent, the Documentation
Agent and the Banks have agreed to a certain amendment to the Credit
Agreement, subject to the terms and conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Agent, the
Documentation Agent and the Banks hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each
term used herein which is defined in the Credit Agreement shall have the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall from and after the date hereof refer
to the Credit Agreement as amended hereby.
2. Amendment to Section 1.01. Section 1.01 of the Credit Agreement
hereby is amended by deleting the definition of "Commitment" and substituting
therefor the following:
8
ATMAIN02: CREDIT AGRMT AMDMT JULY 98.DOC
"Commitment" means, for each Bank, the amount set forth
opposite the name of such Bank on the signature page of this First
Amendment.
3. Amendment to Section 1.01. Section 1.01 of the Credit Agreement
hereby is amended by deleting the definition of "Commitment Reduction Date".
4. Amendment to Section 2.02. Section 2.02(a) of the Credit Agreement
hereby is amended by deleting the proviso at the end of clause (iv) thereof.
5. Amendment to Section 2.06(a). Section 2.06(a) of the Credit
Agreement hereby is amended by deleting it in its entirety and substituting
the following therefor:
(a) "Applicable Margin" means:
(i) for the period commencing on the Closing Date to and including the
first Performance Pricing Determination Date, (x) for any Base Rate Loan,
0.00%, and (y) for any Euro-Dollar Loan or Foreign Currency Loan, 0.275%; and
(ii) from and after the first Performance Pricing Determination Date
until the end of Fiscal Year 1999, (x) for any Base Rate Loan, 0.00% and (y)
for each Euro-Dollar Loan, the percentage determined on each Performance
Pricing Determination Date by reference to the table set forth below as to
such type of Loan and the Debt/EBITDA Ratio for the quarterly or annual
period ending immediately prior to such Performance Pricing Determination
Date.
Debt/EBITDA Ratio Applicable Margin
< 1.0 to 1.0 0.25%
> 1.0 to 1.0 but
< 2.0 to 1.0 0.275%
> 2.0 to 1.0 but
< 2.5 to 1.0 0.30%
> 2.5 to 1.0 but
< 3.0 to 1.0 0.3625%
> 3.0 to 1.0 but 0.55%
< 3.5 to 1.0
> 3.5 to 1.0 0.75%
and, (iii) from and after the beginning of Fiscal Year 2000, (x) for
any Base Rate Loan, 0.00% and (y) for each Euro-Dollar Loan, the percentage
determined on each Performance Pricing Determination Date by reference to the
table set forth below as to such type of Loan and the Debt/EBITDA Ratio for
the quarterly or annual period ending immediately prior to such Performance
Pricing Determination Date.
Debt/EBITDA Ratio Applicable Margin
< 1.0 to 1.0 0.25%
> 1.0 to 1.0 but
< 2.0 to 1.0 0.275%
> 2.0 to 1.0 but
< 2.5 to 1.0 0.30%
> 2.5 to 1.0 but
< 3.0 to 1.0 0.3625%
> 3.0 to 1.0 0.55%
In determining interest for purposes of this Section 2.06 and
fees for purposes of Section 2.07, the Borrower and the Banks shall refer to
the Borrower's most recent consolidated quarterly and annual (as the case may
be) financial statements delivered pursuant to Section 5.01(a) or (b), as the
case may be. If such financial statements require a change in interest
pursuant to this Section 2.06 or fees pursuant to Section 2.07, the Borrower
shall deliver to the Agent, along with such financial statements, a notice to
that effect, which notice shall set forth in reasonable detail the
calculations supporting the required change. The "Performance Pricing
Determination Date" is the date which is the last date on which such
financial statements are permitted to be delivered pursuant to Section
5.01(a) or (b), as applicable. Any such required change in interest and fees
shall become effective on such Performance Pricing Determination Date, and
shall be in effect until the next Performance Pricing Determination Date,
provided that: (x) for Fixed Rate Loans, changes in interest shall only be
effective for Interest Periods commencing on or after the Performance Pricing
Determination Date; and (y) no fees or interest shall be decreased pursuant
to this Section 2.06 or Section 2.07 if a Default is in existence on the
Performance Pricing Determination Date.
6. Amendment to Section 2.09. Section 2.09 of the Credit Agreement
hereby is amended by deleting it in its entirety and substituting the
following therefor:
SECTION 2.09. Termination of Commitments. The Commitments
shall terminate on the Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due
and payable on such date.
7. Amendment to Section 5.21. Section 5.21 of the Credit Agreement
hereby is amended by deleting it in its entirety and substituting the
following therefor:
SECTION 5.21. Debt/EBITDA Ratio. The Debt/EBITDA Ratio
will at the end of each Fiscal Month (i) during Fiscal Year 1999,
be less than 4.0 to 1.0, and (ii) thereafter, be less than 3.5 to
1.0.
8. Amendment to Section 5.22. Section 5.22 of the Credit Agreement
hereby is amended by deleting it in its entirety and substituting the
following therefor:
SECTION 5.22. Acquisitions. Neither the Borrower nor any
Subsidiary shall make any Acquisitions after the Closing Date,
except that the Borrower may make any Acquisition which is (i) of
stock or assets of a Person in substantially similar lines of
business to that of the Borrower and its Subsidiaries and (ii) in
an aggregate amount for any single Acquisition or series of
related Acquisitions which does not exceed $50,000,000.
9. Amendment to Exhibit F. Exhibit F to the Credit Agreement hereby
is amended by deleting paragraph 7 thereof and substituting the following
paragraph 7 therefor:
7. Debt/EBITDA Ratio (Section 5.21)
The Debt/EBITDA Ratio will at the end of each Fiscal Month
(i) during Fiscal Year 1999, be less than 4.0 to 1.0, and (ii)
thereafter, be less than 3.5 to 1.0.
(a) Total Debt $
(b) EBITDA - Schedule 1 $
(c) Actual ratio of (a) to (b) to 1.0
Maximum ratio < ___ to 1.0
[<3.5 to 1.0]
[<4.0 to 1.0]
10. Assignment of Loans. Rabobank Nederland hereby sells and assigns
to each of the other Banks, and each other Bank hereby purchases, a pro rata
(with respect to its Commitments) interest in all of Rabobank Nederland's
rights and obligations under the Credit Agreement as of the date hereof as
more specifically set forth on Schedule 1 attached hereto.
11. Restatement of Representations and Warranties. The Borrower
hereby restates and renews each and every representation and warranty
heretofore made by it in the Credit Agreement and the other Loan Documents as
fully as if made on the date hereof and with specific reference to this First
Amendment and all other loan documents executed and/or delivered in
connection herewith.
12. Effect of Amendment. Except as set forth expressly hereinabove,
all terms of the Credit Agreement and the other Loan Documents shall be and
remain in full force and effect, and shall constitute the legal, valid,
binding and enforceable obligations of the Borrower. The amendments
contained herein shall be deemed to have prospective application only, unless
otherwise specifically stated herein.
13. Ratification. The Borrower hereby restates, ratifies and
reaffirms each and every term, covenant and condition set forth in the Credit
Agreement and the other Loan Documents effective as of the date hereof.
14. Counterparts. This First Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, and
delivered by facsimile transmission, each of which when so executed and
delivered (including by facsimile transmission) shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but
one and the same instrument.
15. Section References. Section titles and references used in this
First Amendment shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto
evidenced hereby.
16. No Default. To induce the Agent and the Banks to enter into this
First Amendment and to continue to make advances pursuant to the Credit
Agreement, the Borrower hereby acknowledges and agrees that, as of the date
hereof, and after giving effect to the terms hereof, there exists (i)-no
Default or Event of Default and (ii)-no right of offset, defense,
counterclaim, claim or objection in favor of the Borrower arising out of or
with respect to any of the Loans or other obligations of the Borrower owed to
the Banks under the Credit Agreement.
17. Further Assurances. The Borrower agrees to take such further
actions as the Agent shall reasonably request in connection herewith to
evidence the amendments herein contained to the Borrower.
18. Governing Law. This First Amendment shall be governed by and
construed and interpreted in accordance with, the laws of the State of
Georgia.
19. Conditions Precedent. This First Amendment shall become effective
only upon execution and delivery of this First Amendment by the Borrower, the
Agent and each Bank.
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks whose
signature appears below has caused this First Amendment to be duly executed,
under seal, by its duly authorized officer as of the day and year first above
written.
CULP, INC.,
as Borrower (SEAL)
By: Phillip W. Wilson
Title: Vice President and
Chief Financial Officer
COMMITMENT:
$33,600,000 WACHOVIA BANK, N.A. (successor
by merger to Wachovia Bank of
Georgia, N.A. and Wachovia Bank
North Carolina, N.A.), as Agent
and as a Bank (SEAL)
By: David G. Black
Title:
COOPERATIEVE CENTRALE
RAIFFEISEN BOERENLEEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH,
as a Bank (SEAL)
By: Theodore W. Cox
Title: Vice President
By: W. Jeffrey Vollack
Title: Senior Credit Officer
Senior Vice President
$30,400,000 FIRST UNION NATIONAL BANK
(successor by merger to
First Union National Bank
of North Carolina),
as Documentation Agent and
as a Bank (SEAL)
By: G. Mendel Lay, Jr.
Title: Senior Vice President
$24,000,000 SUNTRUST BANK, ATLANTA,
as a Bank (SEAL)
By: Bradley J. Staples
Title: Senior Vice President
Schedule 1
Prior Syndicated Loans Outstanding:
Wachovia Bank, N.A. $8,400,000
First Union National Bank $7,600,000
Suntrust Bank, Atlanta $6,000,000
Rabobank Nederland $3,000,000
Syndicated Loans Purchased from Rabobank Nederland:
Wachovia Bank, N.A. $1,145,454.55
First Union National Bank $1,036,363.64
Suntrust Bank, Atlanta $ 818,181.81
Current Syndicated Loan Balances:
Wachovia Bank, N.A. $9,545,454.55
First Union National Bank $8,636,363.64
Suntrust Bank, Atlanta $6,818,181.81
5
0000723603
Culp, Inc.
1,000
3-MOS
MAY-02-1999
MAY-04-1998
AUG-02-1998
1,520
0
65,295
(1,462)
79,358
152,222
226,375
(99,088)
342,698
48,816
0
0
0
650
127,622
342,698
110,667
110,667
97,056
97,056
14,473
0
2,361
(3,940)
(1,300)
(2,640)
0
0
0
(2,640)
(.20)
(.20)
