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 January 28, 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)
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 January 28, 2001: 11,211,158
Par Value: $.05
INDEX TO FORM 10-Q
For the period ended January 28, 2001
Part I - Financial Statements. Page
- -------------------------------------------------
Item 1. Unaudited Interim Consolidated Financial Statements:
Consolidated Statements of Income (Loss)-Three and Nine Months Ended
January 28, 2001 and January 30, 2000 I-1
Consolidated Balance Sheets-January 28, 2001, January 30, 2000 and
April 30, 2000 I-2
Consolidated Statements of Cash Flows---Nine Months Ended January 28,2001
and January 30, 2000 I-3
Consolidated Statements of Shareholders' Equity I-4
Notes to Consolidated Financial Statements I-5
Sales by Segment/Division I-12
International Sales by Geographic Area I-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations I-14
Item 3. Quantitative and Qualitative Disclosures About Market Risk I-19
Part II - Other Information
- -------------------------------------
Item 6. Exhibits and Reports on Form 8-K II-1
Signature II-8
Item 1: Financial Statements
CULP, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
-------------------------------------------------------------------------
Amounts Percent of Sales
--------------------------- --------------------------
January 28, January 30, % Over
2001 2000 (Under) 2001 2000
------------- ------------- ------------ ------------ ------------
Net sales $ 95,880 113,181 (15.3) % 100.0 % 100.0 %
Cost of sales 86,047 94,712 (9.1) % 89.7 % 83.7 %
------------- ------------- ------------ ------------ ------------
Gross profit 9,833 18,469 (46.8) % 10.3 % 16.3 %
Selling, general and
administrative expenses 12,480 13,949 (10.5) % 13.0 % 12.3 %
Restructuring expense 2,504 0 100.0 % 2.6 % 0.0 %
------------- ------------- ------------ ------------ ------------
Income (loss) from operations (5,151) 4,520 (214.0) % (5.4)% 4.0 %
Interest expense 2,222 2,366 (6.1) % 2.3 % 2.1 %
Interest income (18) (8) 125.0 % (0.0)% (0.0)%
Other expense (income), net 811 229 254.1 % 0.8 % 0.2 %
------------- ------------- ------------ ------------ ------------
Income (loss) before income taxes (8,166) 1,933 (522.5) % (8.5)% 1.7 %
Income taxes * (2,696) 501 (638.1) % 33.0 % 25.9 %
------------- ------------- ------------ ------------ ------------
Net income (loss) $ (5,470) 1,432 (482.0) % (5.7)% 1.3 %
============= ============= ============ ============ ============
Net income (loss) per share ($0.49) $0.13 (476.9) %
Net income (loss) per share, assuming dilution ($0.49) $0.13 (476.9) %
Dividends per share $0.035 $0.035 0.0 %
Average shares outstanding 11,211 11,296 (0.8) %
Average shares outstanding, assuming dilution 11,211 11,389 (1.6) %
NINE MONTHS ENDED (UNAUDITED)
-------------------------------------------------------------------------
Amounts Percent of Sales
--------------------------- --------------------------
January 28, January 30, % Over
2001 2000 (Under) 2001 2000
------------- ------------- ------------ ------------ ------------
Net sales $ 308,739 358,660 (13.9) % 100.0 % 100.0 %
Cost of sales 267,845 296,072 (9.5) % 86.8 % 82.5 %
------------- ------------- ------------ ------------ ------------
Gross profit 4O,894 62,588 (34.7) % 13.2 % 17.5 %
Selling, general and
administrative expenses 39,749 45,022 (11.7) % 12.9 % 12.6 %
Restructuring expense 2,504 0 100.0 % 0.8 % 0.0 %
------------- ------------- ------------ ------------ ------------
Income (loss) from operations (1,359) 17,566 (107.7) % (0.4)% 4.9 %
Interest expense 6,830 7,266 (6.0) % 2.2 % 2.0 %
Interest income (40) (41) (2.4) % (0.0)% (0.0)%
Other expense (income), net 2,127 1,200 77.3 % 0.7 % 0.3 %
------------- ------------- ------------ ------------ ------------
Income (loss) before income taxes (10,276) 9,141 (212.4) % (3.3)% 2.5 %
Income taxes * (3,392) 2,952 (214.9) % 33.0 % 32.3 %
------------- ------------- ------------ ------------ ------------
Net income (loss) $ (6,884) 6,189 (211.2) % (2.2)% 1.7 %
============= ============= ============ ============ ============
Net income (loss) per share ($0.61) $0.53 (215.1) %
Net income (loss) per share, assuming dilution ($0.61) $0.52 (217.3) %
Dividends per share $0.105 $0.105 0.0 %
Average shares outstanding 11,209 11,703 (4.2) %
Average shares outstanding, assuming dilution 11,209 11,816 (5.1) %
* Percent of sales column is calculated as a % of income (loss)
before income taxes.
CULP, INC.
CONSOLIDATED BALANCE SHEETS
JANUARY 28, 2001, JANUARY 30, 2000 AND APRIL 30, 2000
Unaudited
(Amounts in Thousands)
Amounts Increase
----------------------------------- (Decrease) (1)(2)
January 28, (2)January 30, ----------------------------- April 30,
2001 2000 Dollars Percent 2000
------------------- -------------- -------------- ----------- ----------
Current assets
Cash and cash investments $ 292 568 (276) (48.6) % 1,007
Accounts receivable 54,474 65,788 (11,314) (17.2) % 75,223
Inventories 67,156 80,874 (13,718) (17.0) % 74,471
Other current assets 13,706 9,016 4,690 52.0 % 10,349
------------------- -------------- -------------- ----------- ----------
Total current assets 135,628 156,246 (20,618) (13.2) % 161,050
Restricted investments 0 1,047 (1,047) (100.0) % 0
Property, plant & equipment, net 116,207 123,303 (7,096) (5.8) % 126,407
Goodwill 48,827 50,222 (1,395) (2.8) % 49,873
Other assets 2,256 6,490 (4,234) (65.2) % 6,650
------------------- -------------- -------------- ----------- ----------
Total assets $ 302,918 337,308 (34,390) (10.2) % 343,980
=================== ============== ============== =========== ==========
Current liabilities
Current maturities of long-term debt $ 2,159 1,678 481 28.7 % 1,678
Accounts payable 27,084 35,347 (8,263) (23.4) % 37,287
Accrued expenses 15,417 20,878 (5,461) (26.2) % 22,108
Income taxes payable 0 903 (903) (100.0) % 0
------------------- -------------- -------------- ----------- ----------
Total current liabilities 44,660 58,806 (14,146) (24.1) % 61,073
Long-term debt 119,213 137,052 (17,839) (13.0) % 135,808
Deferred income taxes 17,459 14,583 2,876 19.7 % 17,459
------------------- -------------- -------------- ----------- ----------
Total liabilities 181,332 210,441 (29,109) (13.8) % 214,340
Shareholders' equity 121,586 126,867 (5,281) (4.2) % 129,640
------------------- -------------- -------------- ----------- ----------
Total liabilities and
shareholders' equity $ 302,918 337,308 (34,390) (10.2) % 343,980
=================== ============== ============== =========== ==========
Shares outstanding 11,211 11,216 (5) (0.0) % 11,209
=================== ============== ============== =========== ==========
(1) Derived from audited financial statements.
(2) As restated (see note 13 to the consolidated financial statements)
CULP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000
Unaudited
(Amounts in Thousands)
NINE MONTHS ENDED
-----------------------------
Amounts
-----------------------------
January 28, January 30,
2001 2000
-------------- -------------
Cash flows from operating activities:
Net income (loss) $ (6,884) 6,189
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 14,781 14,481
Amortization of intangible assets 1,196 1,197
Amortization of deferred compensation 303 180
Restructuring expense 2,504 0
Changes in assets and liabilities:
Accounts receivable 20,749 4,715
Inventories 7,315 (13,804)
Other current assets (3,357) 617
Other assets 226 (560)
Accounts payable (4,536) 4,619
Accrued expenses (8,076) (328)
Income taxes payable 0 903
-------------- -------------
Net cash provided by operating activities 24,221 18,209
-------------- -------------
Cash flows from investing activities:
Capital expenditures (6,532) (14,474)
Purchases of restricted investments 0 (35)
Sale of investments related to deferred compensation plan 4,547 0
Sale of restricted investments 0 2,328
-------------- -------------
Net cash used in investing activities (1,985) (12,181)
-------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 564 8,510
Principal payments on long-term debt (16,678) (11,770)
Change in accounts payable-capital expenditures (5,667) 5,041
Dividends paid (1,177) (1,218)
Payments to acquire common stock 0 (6,552)
Proceeds from common stock issued 7 20
-------------- -------------
Net cash used in financing activities (22,951) (5,969)
-------------- -------------
Increase (decrease) in cash and cash investments (715) 59
Cash and cash investments at beginning of period 1,007 509
-------------- -------------
Cash and cash investments at end of period $ 292 568
============== =============
CULP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except share and per share data)
Capital
Common Stock Contributed Total
-------------------------- in Excess Retained Shareholders'
Shares Amount of Par Value Earnings Equity
-------------------------------------------------------------------------------------------------------------------
Balance, May 2, 1999 (1) 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 (1) 11,208,720 560 35,266 93,814 129,640
Cash dividends ($0.105 per share) (1,177) (1,177)
Net loss (6,884) (6,884)
Common stock issued in connection
with stock option plans 2,438 1 6 7
-------------------------------------------------------------------------------------------------------------------
Balance, January 28, 2001 11,211,158 $ 561 $ 35,272 $ 85,753 $ 121,586
===================================================================================================================
(1) As restated (see note 13 to the consolidated financial statements)
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, which are, in the opinion of management,
necessary for fair presentation of the results of operations and financial
position. During the quarter, a $3.2 million non-cash restructuring charge was
recorded (see note 12 to the financial statements). All other adjustments are of
a normal recurring nature except as disclosed in note 13 to the financial
statements. 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
included in the company's annual report on Form 10-K filed with the Securities
and Exchange Commission for the fiscal year ended April 30, 2000.
================================================================================
================================================================================
2. Accounts Receivable
A summary of accounts receivable follows (dollars in thousands):
- --------------------------------------------------------------------------------
January 28, 2001 April 30, 2000
- --------------------------------------------------------------------------------
Customers $ 57,109 $ 77,981
Allowance for doubtful accounts (1,501) (1,477)
Reserve for returns and allowances (1,134) (1,281)
- --------------------------------------------------------------------------------
$ 54,474 $ 75,223
================================================================================
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):
- --------------------------------------------------------------------------------
January 28, 2001 April 30, 2000
- --------------------------------------------------------------------------------
Raw materials $ 35,953 $ 43,661
Work-in-process 5,056 5,970
Finished goods 27,040 25,733
- --------------------------------------------------------------------------------
Total inventories valued at FIFO cost 68,049 75,364
Adjustments of certain inventories to the
LIFO cost method (893) (893)
- --------------------------------------------------------------------------------
$ 67,156 $ 74,471
================================================================================
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):
- --------------------------------------------------------------------------------
January 28, 2001 April 30, 2000
- --------------------------------------------------------------------------------
Accounts payable-trade $ 21,943 $ 26,479
Accounts payable-capital expenditures 5,141 10,808
- --------------------------------------------------------------------------------
$ 27,084 $ 37,287
================================================================================
6. Accrued Expenses
A summary of accrued expenses follows (dollars in thousands):
- --------------------------------------------------------------------------------
January 28, 2001 April 30, 2000
- --------------------------------------------------------------------------------
Compensation and benefits $ 6,513 $ 14,748
Other 8,904 7,360
- --------------------------------------------------------------------------------
$ 15,417 $ 22,108
================================================================================
7. Long-Term Debt
A summary of long-term debt follows (dollars in thousands):
- --------------------------------------------------------------------------------
January 28, 2001 April 30, 2000
- --------------------------------------------------------------------------------
Senior unsecured notes $ 75,000 $ 75,000
Industrial revenue bonds and other
obligations 33,016 32,452
Revolving credit facility 10,000 25,000
Obligations to sellers 3,356 5,034
- --------------------------------------------------------------------------------
121,372 137,486
Less current maturities (2,159) (1,678)
- --------------------------------------------------------------------------------
$ 119,213 $ 135,808
================================================================================
The senior unsecured notes have a fixed coupon rate of 6.76% and an average
remaining term of 8 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
specified pricing 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 January 28, 2001, the interest rate was 9.74% (LIBOR plus 4.00%).
The company's $6,000,000 revolving line of credit expires on February 28,
2002. However, the line of credit will automatically be extended for an
additional three-month period on each May 31, August 31, November 30 and
February 28 unless the bank notifies the company that the line of credit will
not be extended. At January 28, 2001, no borrowings were outstanding under the
revolving line of credit.
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
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
January 28, 2001 was 4.00%.
The company's loan agreements require, among other things, that the company
maintain compliance with certain financial ratios. At January 28, 2001, the
company was in compliance with these amended financial covenants.
At January 28, 2001, the company had two 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:
notional amount interest rate expiration date
-------------------------------------------------------
$ 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 January 28, 2001 is approximately $140,000. Net amounts received/paid
under interest rate swap agreements decreased interest expense by approximately
$26,000 for the nine months of fiscal 2001 and increased interest expense by
approximately $216,000 for the nine months of fiscal 2000. 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):
- --------------------------------------------------------------------------------
2001 2000
- --------------------------------------------------------------------------------
.
Interest $ 5,650 $ 6,202
Income taxes, net of $29 and $1,826 in refunds in 2001
and 2000, respectively 319 1,398
================================================================================
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 and anticipated transactions to purchase certain machinery and
equipment and raw materials. The company had approximately $16,161,000 of
outstanding foreign exchange forward contracts as of January 28, 2001.
10. Net Income (Loss) Per Share
The following tables reconcile the numerators and denominators of net
income (loss) per share and net income (loss) per share, assuming dilution for
the three and nine months ended January 28, 2001 and January 30, 2000:
THREE MONTHS ENDED
----------------------------------------------------------------------------------
January 28, 2001 January 30, 2000
-------------------------------------- ---------------------------------------
(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 ($5,470) 11,211 ($0.49) $1,432 11,296 $0.13
========= ========
Effect of dilutive
securities:
Options - - - 93
--------- ----------- ---------- ----------
Net income (loss) per
share, assuming
dilution ($5,470) 11,211 ($0.49) $1,432 11,389 $0.13
========= =========== ========= ========== ========== ========
NINE MONTHS ENDED
-----------------------------------------------------------------------------------
January 28, 2001 January 30, 2000
-------------------------------------- ------------------------------------------
(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 ($6,884) 11,209 ($0.61) $6,189 11,703 $0.53
========= =========
Effect of dilutive
securities:
Options - - - 113
---------- ----------- ----------- ----------
Net income (loss) per
share, assuming
dilution ($6,884) 11,209 ($0.61) $6,189 11,816 $0.52
========== =========== ========= =========== ========== =========
11. 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.
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 and gross profit for the company's operating segments for the three
months ended January 28, 2001 and January 30, 2000 are as follows:
(dollars in thousands):
- --------------------------------------------------------------------------------
January 28, 2001 January 30, 2000
- --------------------------------------------------------------------------------
Net sales
Upholstery Fabrics $ 72,297 $ 87,978
Mattress Ticking 23,583 25,203
- --------------------------------------------------------------------------------
$ 95,880 $ 113,181
================================================================================
Gross Profit
Upholstery Fabrics $ 4,158 $ 11,951
Mattress Ticking 5,675 6,518
- --------------------------------------------------------------------------------
$ 9,833 $ 18,469
================================================================================
Sales and gross profit for the company's operating segments for the nine
months ended January 28, 2001 and January 30, 2000 are as follows:
(dollars in thousands):
- --------------------------------------------------------------------------------
January 28, 2001 January 30, 2000
- --------------------------------------------------------------------------------
Net sales
Upholstery Fabrics $ 230,222 $ 281,870
Mattress Ticking 78,517 76,790
- --------------------------------------------------------------------------------
$ 308,739 $ 358,660
================================================================================
Gross Profit
Upholstery Fabrics $ 21,426 $ 43,558
Mattress Ticking 19,468 19,030
- --------------------------------------------------------------------------------
$ 40,894 $ 62,588
================================================================================
Inventories for the company's operating segments as of January 28, 2001 and
January 30, 2000 are as follows:
(dollars in thousands):
- --------------------------------------------------------------------------------
January 28, 2001 January 30, 2000
- --------------------------------------------------------------------------------
Inventories
Upholstery Fabrics $ 49,954 $ 65,788
Mattress Ticking 17,202 15,086
- --------------------------------------------------------------------------------
$ 67,156 $ 80,874
================================================================================
12. 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 a restructuring charge of $3.2
million in the third quarter. A portion of this restructuring charge ($0.7
million) has been classified as a component of cost of sales.
The restructuring charge consisted of $1.4 million for the write-down of
fixed assets to net realizable value, $0.7 million for employee termination
benefits, $0.7 million for losses on inventory write-downs which has been
classified as a component of cost of sales, and $0.4 million for lease
termination costs and other contractual obligations.
Subsequent to January 28, 2001, the company announced additional plans for
consolidating manufacturing operations and a facility closure. As a result, the
company currently expects additional restructuring charges and special costs of
approximately $3 million to be reflected primarily in the results for the fourth
quarter of fiscal 2001.
13. Restatement
During January 2001, the company terminated the nonqualified deferred
compensation plan covering officers and certain other associates. 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 resulted in an amount greater than had previously been recorded by the
company which was attributable to gains that occurred in 1999 and 1998. In order
to properly reflect these gains, the company restated its financial statements
and certain disclosures previously reported in its financial statements as of
April 30, 2000 and January 30, 2000. The effect of the correction for these
gains increased other assets and retained earnings by $1,102,000 in the
consolidated balance sheets as of April 30, 2000 and January 30, 2000,
respectively.
CULP, INC.
SALES BY SEGMENT/DIVISION
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
-----------------------------------------------------
Amounts Percent of Total Sales
------------------- ---------------------
January 28, January 30, % Over
Segment/Division 2001 2000 (Under) 2001 2000
- ---------------------------- --------- --------- ----------- --------- ---------
Upholstery Fabrics
Culp Decorative Fabrics $ 40,955 49,654 (17.5) % 42.7 % 43.9 %
Culp Velvets/Prints 28,631 34,050 (15.9) % 29.9 % 30.1 %
Culp Yarn 2,711 4,274 (36.6) % 2.8 % 3.8 %
--------- --------- ----------- --------- ---------
72,297 87,978 (17.8) % 75.4 % 77.7 %
Mattress Ticking
Culp Home Fashions 23,583 25,203 (6.4) % 24.6 % 22.3 %
--------- --------- ----------- --------- ---------
* $ 95,880 113,181 (15.3) % 100.0 % 100.0 %
========= ========= =========== ========= =========
NINE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------
Amounts Percent of Total Sales
------------------- ---------------------
January 28, January 30, % Over
Segment/Division 2001 2000 (Under) 2001 2000
- ---------------------------- --------- --------- ----------- --------- ---------
Upholstery Fabrics
Culp Decorative Fabrics $ 129,280 157,067 (17.7) % 41.9 % 43.8 %
Culp Velvets/Prints 90,778 112,042 (19.0) % 29.4 % 31.2 %
Culp Yarn 10,164 12,761 (20.4) % 3.3 % 3.6 %
--------- --------- ----------- --------- ---------
230,222 281,870 (18.3) % 74.6 % 78.6 %
Mattress Ticking
Culp Home Fashions 78,517 76,790 2.2 % 25.4 % 21.4 %
--------- --------- ----------- --------- ---------
* $ 308,739 358,660 (13.9) % 100.0 % 100.0 %
========= ========= =========== ========= =========
* U.S. sales were $77,360 and $86,359 for the third quarter of fiscal 2001 and
fiscal 2000, respectively; and $246,672 and $275,699 for the nine months of
fiscal 2001 and fiscal 2000, respectively. The percentage decrease in U.S. sales
was 10.4% for the third quarter and a decrease of 10.5% for the nine months.
CULP, INC.
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------
Amounts Percent of Total Sales
------------------------ -----------------------
January 28, January 30, % Over
Geographic Area 2001 2000 (Under) 2001 2000
- -------------------------- ------------ ---------- ---------- ---------- ----------
North America (Excluding USA) $ 8,226 8,476 (2.9)% 44.4 % 31.6 %
Europe 1,669 4,698 (64.5)% 9.0 % 17.5 %
Middle East 3,924 8,140 (51.8)% 21.2 % 30.3 %
Far East & Asia 4,277 4,422 (3.3)% 23.1 % 16.5 %
South America 147 523 (71.9)% 0.8 % 1.9 %
All other areas 277 563 (50.8)% 1.5 % 2.1 %
------------ ---------- ---------- ---------- ----------
$ 18,520 26,822 (31.0)% 100.0 % 100.0 %
============ ========== ========== ========== ==========
NINE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------
Amounts Percent of Total Sales
------------------------ -----------------------
January 28, January 30, % Over
Geographic Area 2001 2000 (Under) 2001 2000
- -------------------------- ------------ ---------- ---------- ---------- ----------
North America (Excluding USA) $ 26,177 26,064 0.4 % 42.2 % 31.4 %
Europe 4,928 13,696 (64.0)% 7.9 % 16.5 %
Middle East 14,456 24,092 (40.0)% 23.3 % 29.0 %
Far East & Asia 13,103 14,088 (7.0)% 21.1 % 17.0 %
South America 732 1,773 (58.7)% 1.2 % 2.1 %
All other areas 2,671 3,248 (17.8)% 4.3 % 3.9 %
------------ ---------- ---------- ---------- ----------
$ 62,067 82,961 (25.2)% 100.0 % 100.0 %
============ ========== ========== ========== ==========
International sales, and the percentage of total sales, for each of the last
five fiscal years follows: fiscal 1996-$77,397 (22%); fiscal 1997-$101,571
(25%); fiscal 1998-$137,223 (29%); fiscal 1999-$113,354 (23%); and fiscal
2000-$111,104 (23%). International sales for the third quarter represented 19.3%
and 23.7% for 2001 and 2000, respectively. Year-to-date international sales
represented 20.1% and 23.1% of total sales for 2001 and 2000, respectively.
Item 2.
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 and other
exhibits included elsewhere in this report.
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 (or 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.
Culp's worldwide leadership as a marketer of upholstery fabrics and
mattress ticking has been achieved through internal expansion and the
integration of strategic acquisitions.
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 used by Culp
and also marketed to outside customers. In mattress ticking, Culp Home Fashions
markets a broad array of fabrics used by bedding manufacturers.
Three and Nine Months ended January 28, 2001 compared with Three and Nine Months
ended January 30, 2000
Net Sales. Net sales for the third quarter of fiscal 2001 decreased by
15.3% to $95.9 million. Sales of upholstery fabrics decreased 17.8% to $72.3
million, and sales of mattress ticking decreased 6.4% to $23.6 million. Net
sales for the first nine months of fiscal 2001 decreased by $49.9 million, or
13.9%, compared with the year-earlier period. The company's sales of upholstery
fabrics decreased $51.6 million, or 18.3%, for the first nine months compared
with the prior year. Conversely, the company's sales of mattress ticking
increased $1.7 million, or 2.2%, for the first nine months compared with the
prior year. International sales were down 31.0% and 25.2% for the quarter and
nine months, respectively. Key factors influencing the year-to-year comparisons
for the third quarter and the first nine months were continued weakness in
consumer spending on home furnishings, especially in the promotional price
category, and an adverse impact on exports from the strength in the U.S. dollar
compared with a year ago. The slowdown in industry-wide demand also led to a
decline in sales at Culp Home Fashions (primarily mattress ticking) for the
third quarter. Culp's sales of mattress ticking were up 2.2% for the first nine
months.
The fourth fiscal quarter of the year is historically a strong period for the
company's sales. Based on current trends, however, the company does not expect
to report a profit for the fourth quarter, including restructuring and special
costs, and for fiscal 2001 as a whole.
Gross Profit and Cost of Sales. Gross profit declined 46.8% for the third
quarter versus a year ago and decreased as a percentage of net sales from 16.3%
to 10.3%. For the first nine months, gross profit decreased 34.7% to $40.9
million and decreased as a percentage of net sales from 17.5% to 13.2%. The
decline was due principally to lower sales volume for the period which led to
unfavorable cost variances in the company's upholstery fabrics operation. The
company has taken steps to lower expenses by consolidating certain operations
and reducing personnel, but these actions were not sufficient to offset the
impact of the significantly lower sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the third quarter increased as a percentage of sales
from 12.3% to 13.0%. For the first nine months, these expenses increased as a
percentage of sales to 12.9% versus 12.6% for the prior year. The dollar amount
of these expenses declined 10.5% and 11.7% for the quarter and nine months,
respectively, reflecting the company's actions to reduce expenses, but the
lower-than-expected sales caused the increase in these costs as a percentage of
sales.
Restructuring Expense. During the third quarter, 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 exceed $6.0
million, about half of which should represent non-cash items. The company
recognized $3.2 million of restructuring charges and special costs in the third
quarter, and most of the balance is expected to be reflected in results for the
fourth fiscal period. The company expects to realize annualized cost reductions
of at least $12 million when these steps are fully implemented.
Interest Expense. Interest expense of $2.2 million and $6.8 million for the
third quarter and first nine months, respectively, was down $0.1 million and
$0.4 million, respectively, from a year ago due to lower average borrowings.
Based on the terms of the amended credit facility, the company expects interest
expense to be higher in the next few quarters even with lower average
borrowings.
Other Expense. Other expense increased to $0.8 million and $2.1 million for the
third quarter and first nine months of 2001, respectively, versus $0.2 million
and $1.2 million, respectively, for the year-earlier periods. These increases
were principally due to lower investment income on assets related to the
nonqualified deferred compensation plan. This plan was terminated during the
third quarter, as discussed below.
Income Taxes. The effective tax rate for the first nine months of fiscal 2001
was 33.0%, up slightly from 32.3% for the year-earlier period.
Net Income (Loss) Per Share. Net loss per share for the third quarter of fiscal
2001 totaled ($0.49) per share diluted (based on 11,211,000 average shares
outstanding during the period) compared with net income of $0.13 per share
diluted (based on 11,389,000 average shares outstanding during the period) a
year ago. For the first nine months, the company reported a net loss of ($0.61)
per share diluted (based on 11,209,000 average shares outstanding during the
period) compared with net income of $0.52 per share diluted (based on 11,816,000
average shares outstanding during the period) in the prior year.
Liquidity and Capital Resources
Liquidity. Cash and cash investments were $0.3 million as of January 28, 2001,
compared with $0.6 million at January 30, 2000, and $1.0 million at the end of
fiscal 2000. Funded debt (long-term debt, including current maturities, less
restricted investments) was $121.4 million at January 28, 2001, compared with
$137.7 million at January 30, 2000 and $137.5 million at April 30, 2000. As a
percentage of total capital (funded debt plus total stockholders' equity), the
company's borrowings amounted to 50.0% at January 28, 2001, compared with 52.0%
at January 30, 2000 and 51.5% at April 30, 2000. The company's working capital
as of January 28, 2001 was $91.0 million, compared with $97.4 million as of
January 30, 2000, and $100.0 million at the close of fiscal 2000.
The company's cash flow from operations was $24.2 million for the first nine
months of fiscal 2001, consisting of $11.9 million from operations (net loss
plus depreciation, amortization and restructuring expense) plus $12.3 million
from the decrease in working capital. The decrease in working capital was
primarily due to a $20.7 million decrease in accounts receivable and a $7.3
million decrease in inventories offset by a $8.1 million decrease in accrued
expenses, a $4.5 million decrease in accounts payable and a $3.4 million
increase in other current assets.
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. Over the past two fiscal
years, the company has invested $12.2 million to repurchase a total of 1.8
million shares. No purchases were made during the first nine months of fiscal
2001, and under the terms of its amended credit facility, the company is
currently restricted from any stock repurchases.
Financing Arrangements. Culp has outstanding $75 million of senior unsecured
notes with a fixed coupon rate of 6.76% and an average remaining term of eight
years.
Culp has a $25 million syndicated, multi-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. The amendment
also increased the interest rate from LIBOR plus 1.10% to 1.60% to LIBOR plus
2.50% to 4.25%. The specified pricing matrix is based on the company's debt to
EBITDA ratio, as defined by the facility. The amended facility also limits
capital expenditures and prohibits dividends and common stock repurchases at
this time. As of January 28, 2001, the company had outstanding balances of $10
million under the credit facility.
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 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 letter of credit fee percentage as of January 28, 2001 was
4.00%.
The company's loan agreements require, among other things, that the company
maintain compliance with certain financial ratios. As of January 28, 2001, the
company was in compliance with these amended financial covenants.
As of January 28, 2001, the company had two interest rate swap agreements to
reduce its exposure to floating interest rates on a $10 million notional amount.
The effect of these contracts is to "fix" the interest rate payable on $10
million of the company's variable rate borrowings at a weighted average rate of
6.8%. 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. The company had approximately $16.2 million of outstanding foreign
exchange forward contracts as of January 28, 2001.
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 for the first nine months of fiscal 2001
totaled $6.5 million compared with $14.5 million in the year-earlier period. The
company plans for total capital spending for fiscal 2001 and 2002 to be
approximately $8 million and $4 million, respectively.
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.
Restatement
During January 2001, the company terminated the nonqualified deferred
compensation plan covering officers and certain other associates. 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 resulted in an amount greater than had previously been recorded by the
company which was attributable to gains that occurred in 1999 and 1998. In order
to properly reflect these gains, the company restated its financial statements
and certain disclosures previously reported in its financial statements as of
April 30, 2000 and January 30, 2000. The effect of the correction for these
gains increased other assets and retained earnings by $1,102,000 in the
consolidated balance sheets as of April 30, 2000 and January 30, 2000,
respectively.
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 relatively stronger 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.
Forward-Looking Information
The company's quarterly report on Form 10-Q 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.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." As amended, this new standard is effective
for fiscal years beginning after June 15, 2000, which will be effective for the
company's fiscal year 2002. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The company has not
determined the financial impact of adopting this SFAS.
Item 3. 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. 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 January 28, 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
the industrial revenue bonds. To lower or limit overall borrowing costs, the
company enters 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 quarterly
basis, the amounts, if any, by which the company's interest payments covered by
swap agreements differ from those of the counterparty. These amounts are
recorded as adjustments to interest expense. The fair value of the swap
agreements and changes in fair value resulting from changes in market interest
rates are not recognized in the consolidated financial statements. The annual
impact on the company's results of operations of a 100 basis point interest rate
increase on the January 28, 2001 outstanding balance of the variable rate debt
would be approximately $410,000 irrespective of any swaps associated with this
debt.
The company's exposure to fluctuations in foreign currency exchange rates is due
primarily to a foreign subsidiary domiciled in Canada and 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 firm
commitments and anticipated transactions to purchase certain machinery,
equipment and raw materials. The Canadian subsidiary is not material to the
company's consolidated results of operations; therefore, a 10% change in the
exchange rate at January 28, 2001 would not have a significant impact on the
company's results of operations or financial position. In addition, the company
had approximately $16.2 million of outstanding foreign exchange forward
contracts as of January 28, 2001. As a result, any change in exchange rates
would not have a significant impact on the company's results of operations or
financial position as the foreign exchange forward contracts have "fixed" the
exchange rate with respect to these purchase commitments and anticipated
transactions.
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.
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) 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, 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(nn) 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(oo) 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(pp) 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(qq) 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(rr) 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(ss) 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.
10(tt) Second Amendment to Reimbursement and Security
Agreements dated January 26, 2001, made by and
between Culp, Inc. and Wachovia Bank, N.A.
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed during the period covered
by this report:
(1)Form 8-K dated November 15, 2000, included under Item 5,
Other Events, the Company's press release for quarterly earnings
and the Financial Information Release relating to certain
financial information for the quarter ended October 29, 2000.
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: March 14, 2001 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 sign-
ing as principal financial officer)
Exhibit 10(ss)
FIFTH AMENDMENT TO CREDIT AGREEMENT
(With SunTrust Secured Tranche)
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as of
January 26, 2001 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 (the "Documentation Agent"), and
WACHOVIA BANK, N.A., FIRST UNION NATIONAL BANK and SUNTRUST BANK (formerly known
as SunTrust Bank, Atlanta)(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, as amended by First Amendment to Credit Agreement dated as of July 22,
1998, Second Amendment to Credit Agreement dated as of October 26, 1998, Third
Amendment to Credit Agreement dated as of April 28, 2000, and Fourth Amendment
to Credit Agreement dated as of July 30, 2000 (as so amended, the "Credit
Agreement"); and
WHEREAS, the Borrower has requested, and the Agent, the Documentation Agent
and the Banks have agreed to certain amendments 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. Amendments to Section-1.01. (a) The following new definitions are hereby
added to Section 1.01 of the Credit Agreement in alphabetical order as follows:
"Capital Expenditures" means for any period the sum of all capital
expenditures incurred during such period by the Borrower and its
Consolidated Subsidiaries, as determined in accordance with GAAP.
"Consolidated Net Worth" has the meaning set forth in the Borrower's
Note Purchase Agreement dated as of March 4, 1998, relating to the
Borrower's 6.76% Series A Notes due March 15, 2008, and 6.76% Series B
Notes due March 15, 2010.
"Restricted Payment" means (i) any dividend or other distribution on
any shares of the Borrower's Capital Stock (except dividends payable solely
in shares of its Capital Stock) or (ii) any payment on account of the
purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's Capital Stock (except shares acquired upon the conversion
thereof into other shares of its Capital Stock) or (b) any option, warrant
or other right to acquire shares of the Borrower's Capital Stock.
(b) The following definition contained in Section 1.01 of the Credit
Agreement is amended by deleting it in its entirety and substituting the
following therefor, in alphabetical order:
"EBITDA" means at any time the sum of the following, determined on a
consolidated basis for the Borrower and its Consolidated Subsidiaries, at
the end of each Fiscal Quarter, for the Fiscal Quarter just ended and the 3
immediately preceding Fiscal Quarters (and with respect to any Acquisition
which is made during such 4 Fiscal Quarter period, the Consolidated
Subsidiary acquired in such Acquisition shall be included as if it had been
a Consolidated Subsidiary prior to the commencement of such 3 Fiscal
Quarter period): (i) Consolidated Net Income; plus (ii) Consolidated Net
Interest Expense; plus (iii) taxes on income; plus (iv) depreciation; plus
(v) amortization; plus (vi) cash charges described on Schedule 1.01(E)
attached hereto and made a part hereof not exceeding $3,400,000 in the
aggregate through the first Fiscal Quarter of Fiscal Year 2002, and other
non-cash charges.
Schedule 1.01(E) described in the foregoing amended definition of
EBITDA is attached to the Credit Agreement in the form of Schedule 1.01(E)
attached to this Amendment and made a part hereof.
3. 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 January 26, 2001 to the first
Performance Pricing Determination Date after January 26, 2001, (x) for any
Base Rate Loan, 1.35%, and (y) for any Euro-Dollar Loan or Foreign Currency
Loan, 4.00%; and
(ii) from and after the first Performance Pricing Determination Date
after January 26, 2001, (x) for any Base Rate Loan, 1.35% and (y) for each
Euro-Dollar Loan or Foreign Currency 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
<= 3.0 to 1.0 2.50%
> 3.0 to 1.0 but
<= 3.5 to 1.0 3.00%
> 3.5 to 1.0 but
<= 4.0 to 1.0 3.50%
> 4.0 to 1.0 but
<= 4.5 to 1.0 4.00%
> 4.50 to 1.0 4.25%
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.
4. Amendment to Section 2.07(a). Section 2.07(a) of the Credit Agreement hereby
is amended by deleting it in its entirety and substituting the following
therefor:
(a) The Borrower shall pay to the Agent, for the ratable account of
each Bank, a facility fee, calculated in the manner provided in the last
paragraph of Section 2.06(a)(ii), on the aggregate amount of such Bank's
Commitment (without taking into account the amount of the outstanding Loans
made by such Bank), at a rate per annum equal to: (i) for the period
commencing on January 26, 2001 to and including the first Performance
Pricing Determination Date occurring after January 26, 2001, .500%; and
(ii) from and after the first Performance Pricing Determination Date
occurring after January 26, 2001, the percentage determined on each
Performance Pricing Determination Date by reference to the table set forth
below and the Debt/EBITDA Ratio for the quarterly or annual period ending
immediately prior to such Performance Pricing Determination Date:
Debt/EBITDA Ratio Facility Fee
<= 3.0 to 1.0 .375%
> 3.0 to 1.0 but
<= 3.5 to 1.0 .375%
> 3.5 to 1.0 but
<= 4.0 to 1.0 .375%
> 4.0 to 1.0 but
<= 4.5 to 1.0 .500%
> 4.50 to 1.0 .500%
Such facility fees shall accrue from and including January 26, 2001 to
(but excluding the Termination Date) and shall be payable on each March 31,
June 30, September 30 and December 31 and on the Termination Date.
5. Amendment to Section 5.17. Clause (l) and the proviso contained at the end of
Section 5.17 of the Credit Agreement hereby are amended by deleting them in
their entirety and substituting the following therefor:
(l) Liens not otherwise permitted by the foregoing paragraphs of this
Section securing Debt (other than indebtedness represented by the Notes),
and Debt of Subsidiaries not otherwise permitted by paragraph (j), in an
aggregate principal amount at any time outstanding not to exceed 15% of
Consolidated Net Worth.
Provided the sum of (A) the aggregate amount of Debt secured by Liens permitted
by the foregoing paragraphs (a) through (h) and (l), plus (B) Debt of
Subsidiaries permitted by paragraph (l), shall not at any time exceed an
aggregate amount equal to 15% of Consolidated Net Worth.
6. Amendment to Section 5.19. Section 5.19 of the Credit Agreement hereby is
amended by deleting it in its entirety and substituting the following therefor:
SECTION 5.19. Interest and Leases Coverage. At the end of each Fiscal
Quarter, the Interest and Leases Coverage Ratio shall not have been less
than: (i) for the period from and including the third Fiscal Quarter of
Fiscal Year 2000 through and including the second Fiscal Quarter of Fiscal
Year 2002, 1.75 to 1.0; (ii) for the period after the second Fiscal Quarter
of Fiscal Year 2002 through and including the third Fiscal Quarter of
Fiscal Year 2002, 2.00 to 1.0; and (iii) at all times thereafter, 2.25 to
1.0.
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. At the end of each Fiscal Month, the
Debt/EBITDA Ratio shall be less than (i) for the period from and including
the third Fiscal Quarter of Fiscal Year 2000 through and including the
fourth Fiscal Quarter of Fiscal Year 2001, 4.90 to 1.0; (ii) for the period
after the fourth Fiscal Quarter of Fiscal Year 2001 through and including
the first Fiscal Quarter of Fiscal Year 2002, 4.60 to 1.0; (iii) for the
period after the first Fiscal Quarter of Fiscal Year 2002 through and
including the second Fiscal Quarter of Fiscal Year 2002, 4.30 to 1.0; (iv)
for the period after the second Fiscal Quarter of Fiscal Year 2002 through
and including the third Fiscal Quarter of Fiscal Year 2002, 3.90 to 1.0;
(v) for the period after the third Fiscal Quarter of Fiscal Year 2002
through and including the fourth Fiscal Quarter of Fiscal Year 2002, 3.65
to 1.0; and (vi) for each period thereafter, 3.50 to 1.0.
8. New Section 5.23. A new Section 5.23 is hereby added to the Credit Agreement
as follows:
SECTION 5.23. Restricted Payments. The Borrower will not declare or
make any Restricted Payment at any time at which the Debt/EBITDA Ratio for
the prior Fiscal Month is equal to or greater than 3.00 to 1.00.
9. New Section 5.24. A new Section 5.24 is hereby added to the Credit Agreement
as follows:
SECTION 5.24. Capital Expenditures. Capital Expenditures will not
exceed (i) for the period from and including the third Fiscal Quarter of
Fiscal Year 2000 through and including the fourth Fiscal Quarter of Fiscal
Year 2001, $1,500,000; (ii) for the period after the fourth Fiscal Quarter
of Fiscal Year 2001 through and including the fourth Fiscal Quarter of
Fiscal Year 2002, $4,000,000; and (iii) for each Fiscal Year thereafter, an
amount not exceeding 50% of the Borrower's depreciation for such period
determined in accordance with GAAP.
10. 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, except to the extent that any representation or warranty related to
an earlier specified date, and with specific reference to this Amendment and all
other loan documents executed and/or delivered in connection herewith.
11. 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.
12. 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.
13. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
14. Section References. Section titles and references used in this 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.
15. No Default. To induce the Agent, the Documentation Agent and the Banks to
enter into this 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.
16. 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.
17. Governing Law. This Amendment shall be governed by and construed and
interpreted in accordance with, the laws of the State of Georgia.
18. Conditions Precedent. This Amendment shall become effective only upon (i)
execution and delivery of this Amendment by each of the parties hereto, (ii)
payment to the Agent of a fully-earned and non-refundable fee in an aggregate
amount equal to $115,000, payable to the Banks on a pro rata basis with respect
to their Commitments, (iii) pursuant to Section 2.08, the Borrower shall have
delivered to the Agent an irrevocable notice of reduction of the Unused
Commitments, on a pro rata basis, to an aggregate amount not exceeding
$25,000,000, effective simultaneously with the execution and delivery of this
Amendment, and (iv) Borrower shall have delivered to the Agent an irrevocable
notice of reduction of the Unused Commitments, on a pro rata basis, to an
aggregate amount not exceeding $20,000,000, effective January 31, 2002. A
default by the Borrower under this Amendment shall be an Event of Default under
the Credit Agreement.
19. Restructuring of the Loans and Collateral Security. The Borrower agrees on
or before March 23, 2001, to (a) execute and deliver (i) an amendment reasonably
satisfactory to the Banks in all respects with respect to the Credit Agreement
whereby (A) a portion of the Loans held by SunTrust Bank outstanding on such
date equal to $998,634 is converted into a term loan held solely by SunTrust
Bank (the "SunTrust Term Loan"), and (B) under its Commitment, SunTrust will not
be obligated to fund its pro rata share of Loans until SunTrust Bank's pro rata
share of all the outstanding Loans (after giving effect to any requested Loan)
is greater than $998,634; and (ii) new Notes reflecting such amendment and
evidencing such SunTrust Term Loan and the other Notes held by SunTrust Bank,
(b) execute and deliver in favor of the Agent, for the benefit of SunTrust Bank
and the issuers of letters of credit (the "LC Issuers") securing the payment of
the Borrower's industrial revenue bonds (such bonds being referred to herein as
the "Bonds") issued as (1) Chesterfield County, South Carolina Industrial
Revenue Bonds (Series 1996) in the original principal amount of $3,377,000, (2)
Alamance County, South Carolina Industrial Facilities and Pollution Control
Financing Authority Industrial Revenue Refunding Bonds (Series A and B) in the
original principal amount of $7,900,000, and (3) Robeson County, South Carolina
Industrial Facilities and Pollution Control Financing Authority Industrial
Development Revenue Bonds (Series 1997) in the original principal amount of
$8,500,000, a security agreement whereby the Borrower grants the Agent a first
priority and only security interest in and to the Borrower's accounts receivable
and general intangibles to secure the SunTrust Term Loan and the Borrower's
reimbursement obligations to the LC Issuers with respect to the Bonds, along
with UCC financing statements reasonably requested by the Agent in connection
therewith (the Borrower agreeing to reimburse the Agent for any recording fees,
taxes and other expenses incurred in connection with the perfection of the
Agent's security interest); (c) an opinion of Robinson, Bradshaw & Hinson,
counsel for the Borrower, substantially in the form of Exhibit B to the Credit
Agreement and opining (i) that, as of the date of execution and delivery of such
security agreement, the Credit Agreement as amended and such security agreement
do not conflict with any material agreement to which the Borrower is a party,
including, without limitation, that certain Note Purchase Agreement dated as of
March 4, 1998, (ii) as to the perfection of the security interests created by
such security agreement, and (iii) as to such additional matters relating to the
transactions contemplated hereby as the Agent or any Bank may reasonably
request; (d) a certificate substantially in the form of Exhibit G to the Credit
Agreement, signed by a principal financial officer of the Borrower, to the
effect that (i) no Default has occurred and is continuing on the date of such
amendment and security agreement, and (ii) the representations and warranties of
the Borrower contained in Article IV of the Credit Agreement are true on and as
of such date; (e) a certificate of the Borrower, signed by the Secretary or an
Assistant Secretary of the Borrower substantially in the form of Exhibit H to
the Credit Agreement, certifying as to the names, true signatures and incumbency
of the officer or officers of the Borrower authorized to execute and deliver
such amendment, security agreement and UCC financing statements, and certified
copies of the following items: (i) the Borrower's Certificate of Incorporation,
(ii) the Borrower's Bylaws, (iii) a certificate of the Secretary of State of the
State of North Carolina as to the existence of the Borrower as a North Carolina
corporation, and (iv) the action taken by the Board of Directors of the Borrower
authorizing the Borrower's execution, delivery and performance of such
amendment, the security agreement and such UCC financing statements; and (f) to
take such further actions as the Agent shall reasonably request in connection
therewith. The failure of the Borrower to perform its obligations under this
paragraph 19, time being of the essence, shall constitute an Event of Default
under the Credit Agreement.
IN WITNESS WHEREOF, the Borrower, the Agent, the Documentation Agent
and each of the Banks has caused this Amendment to be duly executed, under
seal, by its duly authorized officer as of the day and year first above
written.
CULP, INC.,
(SEAL)
as Borrower
By: __________________________________
Title:
WACHOVIA BANK, N.A.,
as Agent and as a
Bank (SEAL)
By: __________________________________
Title:
FIRST UNION NATIONAL BANK,
as Documentation Agent and as a Bank(SEAL)
By: __________________________________
Title:
SUNTRUST BANK,
as a Bank (SEAL)
By: __________________________________
Title:
Exhibit 10(tt)
SECOND AMENDMENT TO REIMBURSEMENT AND SECURITY AGREEMENTS
THIS SECOND AMENDMENT TO REIMBURSEMENTI AND SECURITY AGREEMENTS, dated
January 26, 2001 (this "Amendment"), is made by and between Culp, Inc., a
North Carolina corporation ("Company"), and Wachovia Bank, N.A., a national
banking association (the "Bank"). This Amendment amends the Reimbursement
Agreements defined below. All capitalized terms not otherwise defined in
this Amendment shall have the meanings assigned to them in the
Reimbursement Agreements.
RECITALS
A. The Company and the Bank are parties to seven separate
Reimbursement and Security Agreements (as amended by that First Amendment
thereto dated as of November 14, 2000, collectively, the "Reimbursement
Agreements"), each dated as of April 1, 1997 (except for item (vii) which
is dated as of July 1, 1997), with respect to (i) $3,377,000 original
principal amount Chesterfield County South Carolina Industrial Revenue
Bonds (Series 1988); (ii) $6,000,000 original principal amount Chesterfield
County, South Carolina Industrial Revenue Bonds (Series 1996); (iii)
$6,580,000 original principal amount Anderson County, South Carolina
Industrial Revenue Bonds (Series 1993); (iv) $4,500,000 original principal
amount Guilford County Industrial Facilities and Pollution Control
Financing Authority Industrial Development Revenue Bonds (Series 1989); (v)
$7,900,000 original principal amount Alamance County Industrial Facilities
and Pollution Control Financing Authority Industrial Revenue Refunding
Bonds (Series A and B); (vi) $3,500,000 original principal amount Luzerne
County Industrial Development Revenue Bonds (Series 1996); and (vii)
$8,500,000 original principal amount Robeson County Industrial Facilities
and Pollution Control Financing Authority Industrial Development Revenue
Bonds (Series 1997).
B. The Company has requested in connection with Section 8.1(f) of the
Reimbursement Agreements that the Bank consent to that certain Fifth
Amendment (the "Fifth Amendment") executed and delivered simultaneously
herewith with respect to that certain Credit Agreement, dated April 23,
1997, between the Company, and the Bank has so agreed, subject to the terms
and conditions set forth in this Amendment.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Bank hereby agree as follows:
CONSENT
1.1 Consent to Fifth Amendment. The Bank hereby consents to the execution
and delivery of the Fifth Amendment and agrees that by virtue of the amendments
set forth in the Fifth Amendment no Event of Default has occurred under Section
8.1(f) of the Reimbursement Agreements with respect to the provisions amended in
such Fifth Amendment.
AMENDMENTS
Each Reimbursement Agreement is hereby amended as follows:
2.1 Amendment of Definition of Fee Percentage. The definition of "Fee
Percentage" contained in Section-1.1 of each Reimbursement Agreement is hereby
deleted in its entirety and is replaced with the following:
"Fee Percentage" means the percentage determined on each applicable Payment
Date by reference to the table set forth below and the Debt/EBITDA Ratio for the
quarterly or annual period ending immediately prior to such Payment Date:
Debt/EBITDA Ratio Fee Percentage
<=3.00 to 1.00 2.50%
>3.00 to 1.00 but 3.00%
<=3.50 to 1.00
>3.50 to 1.00 but 3.50%
<=4.00 to 1.00
>4.00 to 1.00 but 4.00%
<=4.50 to 1.00
>4.50 to 1.00 4.25%
2.3 References to "Credit Agreement". The Company hereby agrees that
references to the "Credit Agreement" in each of the Reimbursement Agreements
shall include the Credit Agreement as in effect immediately prior to any
termination or replacement thereof, as if such termination or replacement had
not occurred, and for the purposes of Section 8.1(f) of each Reimbursement
Agreement the Credit Agreement shall be deemed to have survived such termination
or replacement, the Credit Agreement being incorporated herein by reference.
2.4 Effect of Amendment. The Company hereby reaffirms and ratifies all of
its Reimbursement Obligations under each of the Reimbursement Agreements. Except
as expressly amended hereby, each such document shall continue in full force and
effect in accordance with the provisions thereof on the date hereof. This
Amendment is intended to supplement each Reimbursement Agreement, and is not
intended to be and shall not be construed as a substitution or novation of the
original indebtedness evidenced by the Reimbursement Agreements, which shall
remain in full force and effect; and this Agreement does not extinguish the
outstanding indebtedness evidenced by the Reimbursement Agreements.
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants that:
3.1 Authorization. The execution, performance and delivery of this
Amendment are within the corporate powers of the Company and have been duly
authorized by all necessary corporate action of the Company and this Amendment
has been validly executed and delivered by the Company
3.2 Compliance with Reimbursement Agreements. The Company is in compliance
with all terms and provisions set forth in the Reimbursement Agreements to be
observed or performed by it, and no Event of Default, nor any event that upon
notice, lapse of time, or both, would constitute an Event of Default, has
occurred and is continuing.
GENERAL
4.1 Full Force and Effect. This Amendment is limited as specified and shall
not constitute a modification, acceptance or waiver of any provision of the
Reimbursement Agreements except as expressly stated herein. Except as expressly
amended hereby, the Reimbursement Agreements shall remain in full force and
effect in accordance with the provisions thereof on the date hereof.
4.2 Applicable Law. This Amendment and the rights and obligations of the
parties hereunder shall be construed in accordance with and governed by the
internal laws and judicial decisions of the State of North Carolina.
4.3 Expenses and Fees. The Company agrees to pay all out-of-pocket expenses
incurred by the Bank in connection with the preparation, execution and delivery
of this Amendment, including, without limitation, all reasonable attorney's
fees.
4.4 Headings. The headings contained in this Amendment are for the purpose
of reference only and shall not affect the construction hereof.
4.5. Collateral Security. The Company agrees on or before March 23, 2001,
to (a) execute and deliver in favor of the Bank a security agreement whereby the
Company grants the Bank a first priority and only security interest in and to
the Company's accounts receivable and general intangibles to secure the
Company's Reimbursement Obligations under the Reimbursement Agreements described
in clauses (i), (v) and (vii) in paragraph A of the Recitals to this Amendment
(the "Secured Reimbursement Obligations") and whereby the Company agrees that it
may not voluntarily prepay the bonds with respect to the Secured Reimbursement
Obligations until all other bonds that are not secured are prepaid, along with
UCC financing statements reasonably requested by the Banks in connection
therewith (the Company agreeing to reimburse the Bank for any recording fees,
taxes and other expenses incurred in connection with the perfection of the
Bank's security interest); (b) an opinion of counsel for the Company,
substantially in the form of opinions previously delivered to the Bank and
opining (i) that, as of the date of execution and delivery of such security
agreement, the Reimbursement Agreements as amended and such security agreement
do not conflict with any material agreement to which the Company is a party,
including, without limitation, that certain Note Purchase Agreement dated as of
March 4, 1998, (ii) as to the perfection of the security interests created by
such security agreement, and (iii) as to such additional matters relating to the
transactions contemplated hereby as the Bank may reasonably request; (c) a
certificate signed by a principal financial officer of the Company, to the
effect that (i) no Default or Event of Default has occurred and is continuing on
the date of such security agreement, and (ii) the representations and warranties
of the Company contained in the Reimbursement Agreements are true on and as of
such date; (d) a certificate of the Company, signed by the Secretary or an
Assistant Secretary of the Company certifying as to the names, true signatures
and incumbency of the officer or officers of the Company authorized to execute
and deliver this Amendment and such security agreement and UCC financing
statements, and certified copies of the following items: (i) the Company's
Certificate of Incorporation, (ii) the Company's Bylaws, (iii) a certificate of
the Secretary of State of the State of North Carolina as to the existence of the
Company as a North Carolina corporation, and (iv) the action taken by the Board
of Directors of the Company authorizing the Company's execution, delivery and
performance of this Amendment, the security agreement and such UCC financing
statements; and (e) to take such further actions as the Bank shall reasonably
request in connection therewith. The failure of the Company to perform its
obligations under this Section 4.5, time being of the essence, shall constitute
an Event of Default under the Reimbursement Agreements.
4.6 Conditions Precedent. This Amendment shall become effective only upon
(i) execution and delivery of this Amendment by each of the parties hereto, and
(ii) payment to the Bank of a fully-earned and non-refundable amendment fee
equal to $135,000.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed in their corporate names by their duly authorized corporate officers as
of the date first above written.
CULP, INC.
By: _________________________________
Name: _________________________________
Title:_________________________________
WACHOVIA BANK, N.A.
By: _________________________________
Name: _________________________________
Title:_________________________________