SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
[x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Culp,Inc
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
(LOGO)
CULP
101 South Main Street
Post Office Box 2686
High Point, North Carolina 27261-2686
Telephone: (336) 889-5161
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
September 25, 2001
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TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Culp, Inc. (the "company") will
be held at the Radisson Hotel, 135 South Main Street, High Point, North
Carolina on Tuesday, September 25, 2001 at 9:00 a.m. local time, for
the purpose of considering and acting on the following matters:
(1) To adopt a resolution fixing the number of directors
constituting the entire board at nine (9);
(2) To elect three (3) directors;
(3) To ratify the appointment of KPMG LLP as the independent
auditors of the company for the current fiscal year; and
(4) To transact such other business as may properly come before
the meeting, or any adjournment or adjournments thereof.
Only shareholders of record as of the close of business on July
23, 2001 are entitled to notice of and to vote at the Annual Meeting
and any adjournment or adjournments thereof.
Whether or not you expect to be present at the Annual Meeting,
please complete, date and sign the enclosed form of proxy and return it
promptly in the enclosed envelope. If you attend the meeting, your
proxy will be returned to you upon request.
The Proxy Statement accompanying this notice sets forth further
information concerning the items listed above and the use of the
enclosed proxy. You are urged to study this information carefully.
The Annual Report of the company also accompanies this notice.
By Order of the Board of Directors,
/s/Kathy J. Hardy
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KATHY J. HARDY
Corporate Secretary
August 20, 2001
(LOGO)
CULP
Proxy Statement
---------------
INTRODUCTION
This Proxy Statement is furnished to the shareholders of Culp,
Inc. (hereinafter sometimes referred to as the "company") by the
company's Board of Directors in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders of the company to
be held on Tuesday, September 25, 2001, at 9:00 a.m. at the Radisson
Hotel, 135 South Main Street, High Point, North Carolina, and at any
adjournment or adjournments thereof. Action will be taken at the Annual
Meeting on the items described in the proxy statement, and on any other
business that properly comes before the meeting.
This Proxy Statement and accompanying form of proxy are first
being mailed to shareholders on or about August 20, 2001.
Whether or not you expect to attend the Annual Meeting, please
complete, date and sign the accompanying form of proxy and return it
promptly to ensure that your shares are voted at the meeting. Any
shareholder giving a proxy may revoke it at any time before a vote is
taken: (i) by duly executing a proxy bearing a later date; (ii) by
executing a notice of revocation in a written instrument filed with the
secretary of the company; or (iii) by appearing at the meeting and
notifying the secretary of the intention to vote in person. Unless a
contrary choice is specified, all shares represented by valid proxies
received pursuant to this solicitation, and not revoked before they are
exercised, will be voted for the adoption of the resolution fixing the
number of directors at nine (9), for the election of the three (3)
directors named as nominees in this Proxy Statement, and for the
ratification of the appointment of KPMG LLP as the independent auditors
of the company for the current fiscal year. The proxy also confers
discretionary authority upon the persons named therein, or their
substitutes, with respect to any other business that may properly come
before the meeting. Unless otherwise stated herein, each matter
submitted to the shareholders will be approved if more votes are cast
in favor of the proposal than the votes cast against the proposal. A
shareholder abstaining from the vote on a proposal and any broker
non-votes will be counted as present for purposes of determining
whether a quorum is present, but will be counted as not having voted on
the proposal in question. This means that in cases where a majority of
the shares represented is required to approve a proposal, an abstention
will have the effect of a vote against the proposal in question.
The company will bear the entire cost of preparing this Proxy
Statement and of soliciting proxies. Proxies may be solicited by
employees of the company, either personally, by special letter, or by
telephone. The company also will request brokers and others to send
solicitation material to beneficial owners of the company's stock and
will reimburse them for this purpose upon request.
1
PRINCIPAL HOLDERS OF VOTING SECURITIES
Only shareholders of record at the close of business on July 23,
2001 will be entitled to vote at the Annual Meeting or any adjournment
or adjournments thereof. The number of outstanding shares entitled to
vote at the meeting is 11,221,158.
The following table lists the beneficial ownership of the
company's common stock ("Common Stock") with respect to: (i) each
person known by the company to be the beneficial owner of more than
five percent of such Common Stock, as shown on the last public filing
made by each such person, and (ii) all executive officers, directors
and nominees of the company as a group, a total of 11 persons, as of
July 23, 2001.
Number of Shares Percent of
Title of Name and Address of Beneficially Outstanding
Class Beneficial Owner Owned (1) Shares
- ----------- ------------------- ---------------- -----------
Common Stock, Robert G. Culp, III 3,039,283 (2) 26.7%
par value, 903 Forrest Hill Drive
$.05 per share High Point, NC 27262
Winsal & Company 2,408,750 (3) 21.5%
c/o First Union Corporation
401 S. Tryon Street
Fiduciary Operations NC1151
Charlotte, NC 28288-1151
Dimensional Fund Advisors Inc. 986,140 (4) 8.8%
Ocean Avenue, 11th Floor
Santa Monica, CA 90401
T. Rowe Price Associates, Inc. 1,026,900 (5) 9.2%
100 East Pratt Street
Baltimore, Maryland 21289-1009
U. S. Bancorp 562,635 (6) 5.0%
601 2nd Avenue, South
Minneapolis, Minnesota 55402-4302
George McFadden 998,800 (7) 8.9%
745 Fifth Avenue
Suite 1400
New York, NY 10151
All executive officers, directors 3,722,103 (8) 32.0%
and nominees as a group (11 persons)
(1) References in this proxy statement to immediately exercisable
options refer to options that are currently exercisable or
exercisable within 60 days.
(2) These shares include all of the shares listed below that also are
beneficially owned in the name of Winsal & Company as trustee of
the Robert G. Culp, Jr. Family Trust, all of which shares Robert
G. Culp, III has the right to vote and jointly (with Winsal &
Company) has the right to invest. (See Note (3) below); also
includes 63,338 shares held of record by Susan B. Culp, the wife
of Mr. Culp, the beneficial ownership of which shares Mr. Culp
disclaims, 7,698 shares owned by Mr. Culp's wife as custodian for
his daughter, the beneficial ownership of which shares Mr. Culp
disclaims, and includes 170,500 shares subject to options owned by
Mr. Culp that are immediately exercisable.
2
(3) All of these shares also are included in the shares listed above
for Robert G. Culp, III (See Note (2) above). Includes 709,375
shares held of record by Winsal & Company for the benefit of Judith
C. Walker, sister of Robert G. Culp, III; 505,000 shares held of
record by Winsal & Company for the benefit of Harry R. Culp,
brother of Robert G. Culp, III; and 1,194,375 shares held of record
by Winsal & Company for the benefit of Robert G. Culp, III, all of
which shares Robert G. Culp, III has the right to vote and jointly
(with Winsal & Company) has the right to invest.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), an investment
advisor registered under Section 203 of the Investment Advisors Act
of 1940, furnishes investment advice to four investment companies
registered under the Investment Company Act of 1940, and serves as
investment manager to certain other investment vehicles, including
commingled group trusts. (These investment companies and investment
vehicles are the "Portfolios"). In its role as investment advisor
and investment manager, Dimensional possessed both voting and
investment power over 986,140 shares of the company's stock as of
June 30, 2001. The Portfolios own all securities reported in this
statement, and Dimensional disclaims beneficial ownership of such
securities.
(5) These securities are owned by various individual and
institutional investors as of March 31, 2001, including T. Rowe
Price Small Cap Value Fund, which owns 600,000 shares, representing
5.3% of the shares outstanding, which T. Rowe Price Associates,
Inc. (Price Associates) serves as investment advisor with power to
direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Securities Exchange
Act of 1934, Price Associates is deemed to be a beneficial owner of
such securities; however, Price Associates expressly disclaims that
it is, in fact, the beneficial owner of such securities.
(6) As of March 31, 2001, these shares are owned by various trust
accounts established for individuals for whom one or more
affiliated banks of U.S. Bancorp serve as trustee with power to
direct investments and/or sole power to vote the shares. For
purposes of reporting requirements of the Securities Exchange Act
of 1934, U. S. Bancorp is deemed to be the beneficial owner of
such shares; however, U.S. Bancorp disclaims beneficial ownership
of all such shares.
(7) Based solely upon information obtained from a Schedule 13D/A
filed with the Securities and Exchange Commission on February 9,
2001. Mr. McFadden has the sole power to vote or to direct the
vote of, and sole power to dispose of or direct the disposition of,
305,050 shares. Mr. McFadden shares the power to vote or direct the
vote of, or the power to dispose or direct the disposition of, a
further 693,750 shares as follows. Mr. McFadden serves as
co-trustee of a trust under the will of Alexander B. McFadden,
deceased, which holds 257,150 shares. Mr. McFadden also serves as
co-trustee of a trust dated September 22, 1971 for the benefit of
Elizabeth Cutting McFadden which holds 129,150 shares. Mr.
McFadden's wife, Carol O. McFadden, holds 49,150 shares. Mr.
McFadden has been granted the power to vote, or direct the vote,
and the power to dispose, or direct the disposition of, 129,150
shares held by his brother John H. McFadden and 129,150 shares held
by his former wife Lesley Taylor. Mr. McFadden disclaims
beneficial ownership of all shares reported herein other than
those which he owns directly and those held by the trust under
the will of Alexander B. McFadden, deceased, of which he is
beneficiary.
(8) Includes 424,750 shares subject to options owned by certain
officers and directors that are immediately exercisable.
3
PROPOSAL 1: PROPOSAL TO FIX THE NUMBER OF DIRECTORS AT NINE
The company's bylaws provide that the number of directors
constituting the Board of Directors shall be not less than nine nor
more than fifteen, as determined from time to time by a vote of the
shareholders. The shareholders fixed the number of directors at ten at
the company's Annual Meeting held September 28, 1993, and at the same
time directors were elected to bring the number of directors on the
board to ten. However, as a result of resignations over several recent
years, the board has operated with nine members and one vacancy. More
recently, due to the resignation of a director on May 31, 2001, the
number of directors has been reduced to eight. As noted above, the
company's bylaws provide that the number of directors constituting the
full board shall not be less than nine. The Board of Directors
believes it is desirable (and the bylaws provide) for the company to
operate with a board of at least nine members divided into three
classes that serve a term of three years each. North Carolina law and
New York Stock Exchange rules require that a board that consists of
three classes of directors having three-year terms must be composed of
at least nine members, and the board has found that it has been able to
operate effectively with nine directors. For these reasons, the board
proposes that the shareholders set the number of directors at nine, a
reduction from the current number of ten. The Board of Directors
proposes that the following resolution be adopted by the shareholders:
RESOLVED, that the number of directors constituting the entire
board of directors of Culp, Inc. be fixed at nine (9).
The board recognizes that fixing the number of directors at nine will
result in one vacancy on the board if all of the current directors
continue on the board (including the three nominees being proposed for
re-election at the Annual Meeting). It is anticipated that the vacancy
will be filled by the board as soon as a desirable candidate is
selected and qualified (see Proposal 2 below).
PROPOSAL 2: ELECTION OF DIRECTORS
Assuming that the resolution described above is approved by the
shareholders, the number of directors constituting the board will be
fixed at nine.
The company's bylaws provide that the Board of Directors shall be
divided into three classes of directors with staggered three-year
terms, so that one class or approximately one-third of the Board of
Directors will be elected every year. At the Annual Meeting the
shareholders will be asked to elect three directors. The three
directors whose terms expire at the 2001 Meeting of Shareholders
(Howard L. Dunn, Jr., H. Bruce English, and Earl N. Phillips, Jr.) have
been nominated for re-election.
Due to the recent (May 31, 2001) resignation of a director, there
is a vacancy on the board in the class of directors whose terms expire
in 2002. The company expects to identify a candidate to fill this
vacancy, but has not been able to do so in time to include that
candidate as a nominee for election by the shareholders at the 2001
Annual Meeting. Accordingly, only the three nominees listed above are
proposed for election at the Annual Meeting of Shareholders. The
company is currently considering a number of potential candidates to
fill the remaining vacancy on the board, and it is likely that a
candidate will be selected and qualified before the time of the 2002
Annual Meeting. In that case, the company's bylaws provide that the
vacancy on the board may be filled by the members of the Board of
Directors until the next annual meeting of shareholders. If the board
acts to fill the vacancy, it is expected that the new director selected
(or another candidate) would be nominated for election by the
shareholders to a full three-year term on the board at the following
annual meeting of shareholders.
In the absence of specifications to the contrary, proxies will be
voted for the election of each of the three (3) nominees listed in the
table below, and an equal number of votes will be cast for each
nominee. In no case will proxies be voted for more than three
nominees. The persons who receive the highest number of votes for
election at the Annual Meeting will be elected as directors. If, at or
before the time of the meeting, any of the nominees becomes unavailable
for any reason, the proxy holders have the discretion to vote for a
substitute nominee or nominees. The board currently knows of no reason
why any of the nominees listed below is likely to become unavailable.
4
NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
three (3) nominees for election to the Board of Directors, and the
other directors and executive officers of the company:
Shares and Percent
Year Year of Common Stock
Became Term Beneficially Owned
Name and Age Position with Company (1) Director Expires As of July 23, 2001 Notes
- ------------- ------------------------- -------- ------- ------------------- -----
Nominees
- --------
Howard L. Dunn, Jr., 63 President and Chief Operating 1972 2001 362,870 (6)
Officer; Director 3.2%
H. Bruce English, 67 Director 2000 2001 6,875 (2)(13)
Earl N. Phillips, Jr., 61 Director 1992 2001 37,100 (2)(7)
Directors and
- -------------
Executive Officers
- ------------------
Robert G. Culp, III, 54 Chairman of the Board and 1972 2003 3,039,283 (3)
Chief Executive Officer; 26.7%
Director
Patrick B. Flavin, 54 Director 1999 2003 69,675 (2)(4)
Patrick H. Norton, 79 Director 1987 2003 64,841 (2)(5)
Franklin N. Saxon, 49 Executive Vice President, 1987 2002 43,416 (2)(8)
Chief Financial Officer, and
President, Culp Velvets/Prints
Division; Director
Judith C. Walker, 58 Director 1999 2002 9,375 (2)(9)
Kenneth M. Ludwig, 48 Senior Vice President, N/A N/A 53,915 (2)(10)
Human Resources,and
Assistant Secretary
Rodney A. Smith, 53 Senior Vice President and N/A N/A 16,660 (2)(11)
President,Culp Yarn Division
Phillip W. Wilson, 45 Vice President, Finance N/A N/A 18,093 (2)(12)
And Treasurer
(1) Officers of the company are elected by the Board of Directors
each year. The present officers were elected by the board on
June 12, 2001.
(2) Less than one percent (1%).
5
(3) Includes 2,408,750 shares held of record by Winsal & Company for
the benefit of Robert G. Culp, III, Judith C. Walker and Harry R.
Culp, all of which shares Robert G. Culp, III has the right to
vote and jointly (with Winsal & Company) has the right to invest;
includes 63,338 shares held of record by Susan B. Culp, wife of
Robert G. Culp, III, the beneficial ownership of which shares Mr.
Culp, III disclaims, 7,698 shares owned by Mr. Culp's wife as
custodian for his daughter, the beneficial ownership of which
shares Mr. Culp disclaims, and 170,500 shares subject to options
owned by Mr. Culp that are immediately exercisable.
(4) Includes 58,600 shares held by Flavin, Blake Investors, L.P., a
partnership in which Mr. Flavin is a partner, and in an account
that is managed by Flavin, Blake & Co., L.P., an investment
manager of which Mr. Flavin is a principal, under an arrangement
that provides compensation directly or indirectly to Mr. Flavin
based in whole or in part upon the performance of the investment,
as to which shares Mr. Flavin disclaims beneficial ownership.
Includes 7,400 shares held in an account that is managed by
Flavin, Blake & Co., L.P., an investment manager of which Mr.
Flavin is a principal under an arrangement that provides
compensation directly or indirectly to Mr. Flavin based in whole
or in part upon the performance of the investment, as to which
shares Mr. Flavin disclaims beneficial ownership. Also includes
1,875 shares subject to options owned by Mr. Flavin that are
immediately exercisable.
(5) Includes 5,000 shares owned by the Estate of LaVerne Norton,
deceased wife of Mr. Norton, and 15,000 shares subject to options
owned by Mr. Norton that are immediately exercisable.
(6) Includes 68,125 shares owned by Patricia Dunn, wife of Mr. Dunn,
92,625 shares subject to options owned by Mr. Dunn that are
immediately exercisable, and approximately 13,123 shares owned
through the company's 401(k) plan.
(7) Includes 100 shares owned by Sally Phillips, wife of Mr.
Phillips, and 15,000 shares subject to options owned by Mr.
Phillips that are immediately exercisable.
(8) Includes 43,000 shares subject to options owned by Mr. Saxon that
are immediately exercisable.
(9) Includes 9,375 shares subject to options owned by Ms. Walker that
are immediately exercisable.
(10) Includes 45,500 shares subject to options owned by Mr. Ludwig
that are immediately exercisable, and approximately 8,415 shares
owned through the company's 401(k) plan.
(11) Includes 15,000 shares subject to options owned by Mr. Smith that
are immediately exercisable, and approximately 1,660 shares owned
by Mr. Smith through the company's 401(k) plan.
(12) Includes 15,000 shares subject to options owned by Mr. Wilson that
are immediately exercisable, and approximately 1,593 shares
owned by Mr. Wilson through the company's 401(k) plan.
(13) Includes 1,875 shares subject to options owned by Mr. English
that are immediately exercisable.
Nominees:
HOWARD L. DUNN, JR. is one of the founders of the company and
served as vice president of manufacturing and product development from
1972 until 1988, when the board elected Mr. Dunn executive vice
president. The board elected Mr. Dunn president and chief operating
officer in 1993.
H. BRUCE ENGLISH was employed by the Monsanto Company, a highly
diversified manufacturer of chemicals and other products, for forty
years until his retirement in early 1997. During his service, he
worked in various divisions and capacities. From 1975 to retirement,
he was operating head of a number of business units, including business
director - Acrilan from 1989 to 1997.
6
EARL N. PHILLIPS, JR. is a co-founder of First Factors
Corporation, an asset-based lending firm located in High Point, North
Carolina. First Factors Corporation was acquired by GE Capital in
1998, and Mr. Phillips served as chairman and chief executive officer
of GE Capital First Factors until his retirement in 2000. He
currently serves as president and chief executive officer of Phillips
Interests, an investment and real estate development company.
Other Officers and Directors:
ROBERT G. CULP, III is one of the founders of the company and was
executive vice president and secretary until 1981 when he was elected
by the board to serve as president. The board elected Mr. Culp chief
operating officer in 1985, and chief executive officer in 1988. In
1990, the Board of Directors elected Mr. Culp chairman of the board.
He was elected to serve as a member of the North Carolina board of
First Union National Bank in 1998, and was elected to serve as a member
of the board of directors of Stanley Furniture Company, Inc. in
Stanleytown, Virginia in 1999. Mr. Culp also serves as a trustee of
High Point University. He is the brother of Harry R. Culp and Judith
C. Walker.
PATRICK B. FLAVIN co-founded Flavin, Blake & Co., Inc. in 1992
and is president and chief investment officer of that investment
management company. He currently serves as a member of the board of
directors of FastChannel Network, Inc., Renaissance, Inc., and Landmark
Technology Partners, Inc., all of which are private companies. At
FastChannel Network, Inc. and Renaissance, Inc., Mr. Flavin is chairman
of the audit committee of the board.
PATRICK H. NORTON joined La-Z-Boy Incorporated, a furniture
manufacturing and marketing company located in Monroe, Michigan, in
1981 as senior vice president of sales and marketing. Mr. Norton
served in this position until 1997 when he was elected chairman of the
board of La-Z-Boy Incorporated. He currently serves as a member of the
board of directors of the American Furniture Manufacturers Association.
FRANKLIN N. SAXON has been employed by the company since 1981,
serving in various capacities, including chief financial officer from
1985 to 1998. In 1998, the board elected Mr. Saxon senior vice
president and president of the Culp Velvets/Prints Division. At the
June 12, 2001 board meeting, he was elected executive vice president,
chief financial officer and president, Culp Velvets/Prints Division.
JUDITH CULP WALKER was a practicing attorney with Keziah, Gates
and Samet in High Point, North Carolina from 1987 through 1995. She is
the sister of Robert G. Culp, III. She has served previously as a
director of the company from 1993 to 1996.
KENNETH M. LUDWIG joined the company in 1985 as director of
personnel. The board elected Mr. Ludwig vice president, human
resources in 1986 and senior vice president, human resources in 1996.
RODNEY A. SMITH joined the company in 1997 as manager of the
Phillips Weaving operation. The board elected Mr. Smith vice president
and president, Culp Yarn Division in 1998, and senior vice president
and president, Culp Yarn Division in 1999. Prior to joining the
company, Mr. Smith served in management positions with various
manufacturers of dobby and jacquard home furnishings fabrics, including
vice president of manufacturing for Elite Textiles Ltd. from 1995 to
1996, and technical director for Hoffman Mills from 1996 to 1997.
PHILLIP W. WILSON joined the company in October 1997 as director
of logistics. Prior to joining the company, Mr. Wilson was a partner
in a CPA firm since 1987. Through his partnership, he provided
consulting services to the company. Additionally, Mr. Wilson was the
company's internal auditor from March 1993 until he was elected to the
position of vice president and chief financial officer by the board in
June 1998. At the June 12, 2001 board meeting, he was elected vice
president, finance and treasurer.
7
BOARD COMMITTEES AND ATTENDANCE
There are four standing committees of the Board of Directors:
Executive Committee, Audit Committee, Compensation Committee, and
Nominating Committee.
The Executive Committee, the members of which are Messrs. Culp,
Dunn, and Saxon, may exercise the full authority of the Board of
Directors when the board is not in session, except for certain powers
related to borrowing, electing certain officers, and other powers that
may not lawfully be delegated to board committees.
The Audit Committee recommends annually to the Board of Directors
the appointment of the independent auditors of the company, discusses
and reviews in advance the scope and the fees of the annual audit and
reviews the results thereof with the independent auditors. The
auditors meet with the Audit Committee to discuss audit and financial
reporting issues. The committee reviews the company's significant
accounting policies, major internal accounting controls, reports from
the company's internal auditor, the Annual Report to shareholders, and
the Annual Report on Form 10-K filed with the Securities and Exchange
Commission. In addition, the committee reviews and approves all
significant transactions between the company and any related party.
Members of the Audit Committee during the fiscal year ended April
29, 2001 were Earl N. Phillips, Jr., chairman, Robert T. Davis, and
Patrick B. Flavin. Mr. Davis resigned from the Board of Directors
effective May 31, 2001. The current members of the committee,
appointed by the board on June 12, 2001, are H. Bruce English,
Chairman, Patrick B. Flavin, and Earl N. Phillips, Jr. All members of
the Audit Committee meet the independence requirement of the New York
Stock Exchange, meaning that no member of the committee has any
business relationship or transaction with the company, except where the
company's Board of Directors has determined in its business judgment
that the relationship does not interfere with the director's exercise
of independent judgment.
The Compensation Committee approves matters relating to
compensation, including fringe benefits and benefit plans for
management and directors of the company, and reports to the Board of
Directors from time to time as to its recommendation on compensation
and policies for both management and directors. The committee also
administers the company's stock option plans. The members of this
committee are Messrs. Norton and Flavin.
The members of the Nominating Committee, which recommends
nominees for election to the Board of Directors, during fiscal 2001
were Messrs. Culp and Norton. The nominees for election to the Board
of Directors contained in this Proxy Statement have been chosen by the
Nominating Committee. Recommendations from shareholders for nominees
to the Board of Directors will be considered by the Nominating
Committee if made in writing addressed to any member of the Nominating
Committee at the company's main office. In order to be considered,
such recommendations must be received at least 120 days prior to the
date of the meeting at which directors are to be elected.
During the fiscal year ended April 29, 2001, the Board of
Directors had four meetings and one Consent to Action without Meeting;
the Audit Committee four meetings; the Compensation Committee three
meetings; and the Nominating Committee one meeting and one Consent to
Action without Meeting. Each board member attended at least 75% of the
aggregate number of the meetings of the Board of Directors and of the
committees on which he served. Under current management practices, the
Executive Committee exists mainly to act in place of the board in cases
where time constraints or other considerations make it impractical to
convene a meeting of the entire board or to obtain written consents
from all board members. The Executive Committee held several informal
meetings during fiscal 2001, and took action on two occasions by
written consent. All significant management decisions requiring action
by the Board of Directors were considered and acted upon by the full
board.
8
AUDIT COMMITTEE REPORT
The Audit Committee operates under a written charter adopted by
the Board of Directors, a copy of which is attached to this proxy
statement as Appendix A. As described more fully in the charter, the
primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing the
company's financial reports and information, systems of internal
controls, and accounting, auditing and financial reporting processes.
Management has the primary responsibility for the financial
statements and the reporting process. The company's independent
auditors, which for the fiscal year 2001 was KPMG LLP ("KPMG"), are
responsible for expressing an opinion on the conformity of the
company's audited financial statements to accounting principles
generally accepted in the United States of America. The Audit
Committee has reviewed and discussed with management and KPMG the
audited financial statements as of and for the year ended April 29,
2001. The Audit Committee has discussed with KPMG the matters required
to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). In addition, the Audit
Committee has received from KPMG the written disclosures and letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and discussed with them their
independence from the company and its management. The Audit Committee
also has considered whether KPMG's provision of any information
technology services or other non-audit services to the company is
compatible with the concept of auditor independence.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in the company's Annual Report on Form
10-K for the year ended April 29, 2001 for filing with the Securities
and Exchange Commission.
The foregoing report has been furnished by members of the Audit
Committee.
H. Bruce English, Chairman
Patrick B. Flavin
Earl N. Phillips, Jr.
FEES PAID TO INDEPENDENT AUDITORS
For the fiscal year ended April 29, 2001, the aggregate fees
billed to the company by KPMG LLP are as follows:
Audit Fees $ 95,025
Financial Information Systems Design
And Implementation Fees 0
All Other Fees 61,835
---------
Total Fees $156,860
=========
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends that the shareholders ratify the
board's appointment of KPMG LLP to serve as the auditors for the
company for the fiscal year ending April 28, 2002. The Audit
Committee recommended such appointment to the board. KPMG LLP served
as the independent auditors for the company for the last eleven fiscal
years. Representatives of the firm are expected to attend the Annual
Meeting and will have the opportunity to make any statements they
consider appropriate and to respond to shareholders' questions. If
the appointment of KPMG is not ratified by the shareholders, the Board
of Directors will consider whether to replace KPMG or retain the firm
for the current year as the company's auditors. The proposal to
ratify the appointment will be approved upon the vote of a majority of
the votes cast on the proposal.
9
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth
compensation paid by the company in the forms specified therein for the
years ended April 29, 2001, April 30, 2000, and May 2, 1999 to (i) the
chief executive officer of the company and (ii) the company's four most
highly compensated executive officers other than the chief executive.
SUMMARY COMPENSATION TABLE
========================================================================
Annual Compensation
Name and ------------------- Long-Term Compensation All Other
Principal Position Year Salary $ Bonus $ Option Grants # Compensation
- ------------------ ---- -------- ------- --------------- ------------
(1)(2)
------
Robert G. Culp, III 2001 405,240 -0- 18,000 82,733(3)
Chairman of the Board and 2000 400,000 68,000 8,000 83,751
Chief Executive Officer 1999 284,000 -0- 30,000 80,180
Howard L. Dunn, Jr. 2001 354,585 -0- 16,000 52,745(3)
President and 2000 350,000 59,500 5,000 58,152
Chief Operating Officer 1999 241,000 -0- 25,000 49,480
Franklin N. Saxon 2001 227,122 -0- 10,000 87,871(4)
Executive Vice President, 2000 225,000 33,233 3,000 46,689
Chief Financial Officer, 1999 161,000 20,000 25,000 40,767
and President, Culp
Velvets/Prints Division
Kenneth M. Ludwig 2001 176,651 -0- 8,000 61,576(4)
Senior Vice President, 2000 175,000 17,850 3,000 30,584
Human Resources, and 1999 134,000 15,000 20,000 25,028
Assistant Secretary
Rodney A .Smith (5) 2001 176,009 -0- 5,000 7,641
Senior Vice President and 2000 175,000 13,388 3,000 7,333
President, Culp Yarn Division 1999 116,000 15,000 20,000 1,547
(1) Includes the company's matching contribution to such officers'
accounts under the Employee Retirement Builder 401(k) Plan.
(2) Includes reportable interest on deferred compensation. In 2001
these amounts were $12,495 for Mr. Culp; $11,015 for Mr. Dunn;
$13,039 for Mr. Saxon; $2,873 for Mr. Ludwig; and $84 for Mr. Smith.
(3) Includes annual premiums of $61,000 paid by the company for
split-dollar life insurance on the life of Mr. Culp, and $31,267 for
split-dollar life insurance on the life of Mr. Dunn.
(4) Includes supplemental deferred compensation payments of $66,411
to Mr. Saxon, and $51,653 to Mr. Ludwig.
(5) Mr. Smith became an executive officer of the company effective
September 15, 1998.
========================================================================
10
Option Grants Table. The following table sets forth certain
information concerning grants of stock options to the executive
officers named in the Summary Compensation Table during the year ended
April 29, 2001.
STOCK OPTION GRANTS IN FISCAL 2001
===============================================================================================================
Potential Realizable Value at
% of Total Assumed Annual Rates of
Options Market Stock Price Appreciation
Granted to Exercise or Price on For Option Term
Options Employees in Base Price Date of Expiration -----------------
Name Granted Fiscal Year (%) ($/Share) Grant Date 5%($) 10%($)
------- --------------- --------- -------- ---------- ------ ------
Robert G.Culp, III 18,000 15.1 3.03 3.03 3/28/06 15,059 33,724
Howard L. Dunn, Jr. 16,000 13.4 3.03 3.03 3/28/06 13,385 29,577
Franklin N. Saxon 10,000 8.4 3.03 3.03 3/28/06 8,366 18,486
Kenneth M. Ludwig 8,000 6.7 3.03 3.03 3/28/06 6,693 14,789
Rodney A. Smith 5,000 4.2 3.03 3.03 3/28/06 4,183 9,242
==============================================================================================================
Option Exercises and Year-End Value Table. The following table
sets forth certain information concerning exercises of stock options
during fiscal 2001 by the executive officers named in the Summary
Compensation Table, and options held by such officers at the end of
fiscal 2001.
AGGREGATED OPTION EXERCISES IN FISCAL 2001
AND FISCAL 2001 YEAR-END OPTION VALUES (1)
- --------------------------------------------------------------------------------
Number of Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End(#) at Fiscal Year-End($)(2)
-------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Robert G. Culp, III 164,500 61,000 141,220 133,310
Howard L. Dunn, Jr. 87,625 49,000 99,022 101,820
Franklin N. Saxon 38,000 35,000 -0- 58,700
Kenneth M. Ludwig 41,500 30,000 26,950 54,860
Rodney A. Smith 11,000 17,000 -0- 9,600
(1) No options were exercised in fiscal 2001.
(2) Closing price of company stock at April 29, 2001 was $4.95.
11
Severance Protection Plan. In September 1989, the company
adopted a Severance Protection Plan, which covers certain officers
("Executives") of the company. Pursuant to the Severance Protection
Plan, the company and covered Executives have entered into written
agreements that do not become effective except upon a change in control
(as defined in such agreements) of the company. If a change in control
occurs, the agreements provide that the Executive will be entitled to
continued employment with the company with the same basic
responsibilities and compensation as before the change in control for a
period of one year. If the Executive is terminated, demoted or has his
pay or benefits reduced for reasons other than good cause, or if the
Executive terminates his employment voluntarily after serving nine
months of the one-year employment period, the Executive is entitled to
a lump sum payment equal to the Executive's base salary plus bonus
during the twelve months immediately preceding the termination of
employment. The plan does not prevent the company from terminating the
Executive for cause at any time. The purpose of the Severance
Protection Plan is to ensure the company continuity of management and
the Executive continuity of employment in the event of any actual or
threatened change in control of the company. The plan is not intended
to alter materially the compensation and benefits a covered Executive
could reasonably expect in the absence of such a change in control. As
of April 29, 2001, the company's potential obligation pursuant to the
Severance Protection Plan was $1,294,973, which is the amount that
would be expended by the company under the Plan if all of the
designated executives were terminated or otherwise entitled to benefits
after a change in control of the company.
COMPENSATION OF DIRECTORS
Directors who are also employees of the company do not receive
additional compensation for service as directors. Non-employee
directors receive $15,000 per year for participation as a member of the
Board of Directors; $5,000, $3,000, and $2,000 per year for serving on
the Audit Committee, Compensation Committee and Nominating Committee,
respectively; and an annual stock option grant of 1,875 shares. In
support of the company's cost reduction initiatives, the board
unanimously elected to lower non-employee director fees to $12,750 for
fiscal 2002, and to $4,250, $2,550, and $1,700 for fiscal 2002 for
serving on the Audit Committee, Compensation Committee and Nominating
Committee, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee, both of whom are
non-employee directors, are Patrick H. Norton, Chairman, and Patrick B.
Flavin. No member of the Compensation Committee serves on the
compensation committee of another corporation that has a business
relationship with the company. Mr. Norton is chairman of the board of
La-Z-Boy Incorporated, and the company had sales of approximately $45.2
million, 11.0% of the company's net sales, to La-Z-Boy Incorporated in
fiscal 2001.
COMPENSATION COMMITTEE REPORT
The following is a report of the Compensation Committee on
compensation of executive officers for the fiscal year ended April 29,
2001.
The Compensation Committee has traditionally based compensation
for the company's executive officers on three primary factors: (1)
compensation paid to executive officers at comparable firms in the
company's industry, (2) the individual executive's performance and
contribution to the company, and (3) the financial performance of the
company. In general, the committee has set base salaries for
executives relying most heavily on the first two factors mentioned
above, and has linked executive compensation to the third factor, the
company's financial performance, through (a) incentive cash bonuses
that are based on the annual financial results of the company and (b)
periodic grants of stock options to executive officers. These basic
policies were continued during fiscal 2001.
12
As it has done in each of the past several years, the committee
reviewed published proxy information for firms in the company's
industry, including many of the companies included in the Performance
Comparison data in the table below. Based upon this review and based
on general knowledge of the industry, the committee had concluded in
recent years that the base salaries paid to the company's executive
officers have been significantly below those generally prevailing in
the company's industry and for other manufacturing companies of similar
size. For this reason, in prior recent years a larger portion of the
compensation paid to the company's executives had been based on
incentive compensation (cash bonuses and stock options) that is
dependent upon the company's financial results. During the past
several years, the committee had become concerned that the proportion
of executive compensation represented by incentive compensation was too
large and that the company would not be able to retain key employees
unless compensation was adjusted to bring salaries and other cash
compensation paid to executive officers more in line with industry
standards. As discussed in the committee's 2000 report, an effort was
made during fiscal 2000 to increase the proportion of total
compensation represented by base salary and to bring cash compensation
closer to that paid at comparable companies, by granting significant
increases in salary to the company's executives, including the Chief
Executive Officer. The committee believes that, even after the increases
in salary that became effective during fiscal 2000, total cash compensation
paid to the company's executives remained generally lower than comparable
compensation paid to many or most executives in the company's industry.
This is especially true of the company's Chief Executive Officer.
During fiscal 2001, annual increases in base salaries for the company's
officers were made in August 2000. The average salary increase for the
executives in the Summary Compensation Table was 3.6%, and the percentage
increase for the Chief Executive Officer was 4%. In February of 2001, base
salaries for the company's executive officers were reduced by 6.5% as part of
the company's firmwide cost reduction efforts. The net effect was the
relatively small (less than 2%) increases in executive salaries for the full
year reflected in the Summary Compensation Table.
Under the company's Management Incentive Plan, certain executives
and key associates (including those in the Summary Compensation Table)
are selected by the Compensation Committee (based on management
recommendations) to receive annual cash bonuses based on the company's
financial results. The Compensation Committee (based on the
recommendations of management) sets performance targets for the company
in terms of financial measurements judged by the committee to be
relevant indicators of management and corporate performance. Cash
bonuses are then awarded to the executives participating in the plan
pursuant to a formula that pays a percentage of the maximum bonus award
established by the committee for each participating executive based
upon the percentages of the performance targets the company achieves in
a fiscal year. The cash bonuses shown in the Summary Compensation
Table for 1999 and 2000 were paid under this plan. No bonuses were
paid under the plan in 2001 because the company did not experience
positive net earnings for the year, which was the financial measurement
target under the Management Incentive Plan for fiscal 2001.
The committee maintains a policy of providing incentives for
executives to promote the creation of shareholder value, so that
executive officers' long-term interests will be aligned with those of
the company's shareholders. To that end, the committee periodically
approves the grant of stock options to executive officers under the
company's stock option plans. The Compensation Committee believes that
the company's option plans have been successful in helping the company
attract and retain skilled management to focus on efforts to increase
the company's earnings and returns for its shareholders.
Periodic grants of incentive stock options are made to the
executive officers and selected other employees under the company's
Incentive Stock Option Plan, which was adopted by the company and
approved by the company's shareholders in 1993. These options are
granted at exercise prices equal to the fair market value of the
underlying shares at the time the option is granted.
In addition to the Incentive Stock Option Plan, the company
adopted two Performance-Based Option Plans under which options were
granted to senior management with exercise prices significantly below
fair market value of the underlying shares, but which do not become
exercisable unless the company achieves certain growth rates in its
earnings or until approximately nine years after grant. The purpose of
these plans is to provide incentive to senior management to maximize
the company's earnings potential and to make a significant portion of
executive compensation contingent on meeting earnings targets. In
1994, the company adopted (and the shareholders subsequently approved)
the 1994 Performance-Based Option Plan, which provided for the one-time
grant to executives of options that could become exercisable after the
announcement of earnings for fiscal 1997 only if the company met a
targeted compound growth rate of 13% over that three-year period
(otherwise these options would not become exercisable until January 1,
2003). The company's reported earnings for fiscal 1997 were at a level
that allowed the options to become exercisable in May of 1997,
13
and represented a compound growth rate of 20% for the three years which
ended April 27, 1997. In 1997, the company adopted (and the
shareholders approved) the 1997 Performance-Based Option Plan. This
plan is similar in concept to the 1994 Performance-Based Option Plan,
in that it provided for the one-time grant to executives of options
that could become exercisable if the company's earnings reached a
specific target by the end of fiscal 1999. Otherwise, the options do
not become exercisable until January 1, 2006. The earnings target
under the 1997 Performance-Based Option Plan was not met, and thus the
options under this plan will not become exercisable until January 1,
2006.
The Compensation Committee approved grants of stock options to
certain officers and employees under the Incentive Stock Option Plan
during fiscal 2001 to increase the opportunity of these employees to
participate in the growth of the company and the value of its stock.
The specific levels of options granted generally reflected the level of
responsibility of the employees and officers receiving the option
awards and the committee's judgment about the direct link between the
employee's performance and decisions and the company's financial
results. For that reason, more senior officers received larger awards,
and the President and the Chief Executive Officer each received a
significantly larger award than other officers did.
A supplemental deferred compensation plan was adopted during
fiscal 1998 for two of the company's Senior Vice Presidents. This plan
provides for additional deferred compensation payments for the benefit
of the specified Senior Vice Presidents in the amount of fifteen
percent of such officers' base salary for the fiscal year. The
committee adopted this plan for the specified officers in lieu of
providing split dollar life insurance plans such as those provided for
the Chief Executive Officer and the President, as discussed below.
The compensation for the Chief Executive Officer is determined
under the same policies and practices used for all of the company's
executive officers, as discussed above. In addition, the company has
provided a split-dollar life insurance plan for the Chief Executive
Officer for many years; this program was continued in fiscal 2001 and
now includes a split-dollar life insurance plan for the President. The
committee believes this type of plan provides a cost-effective means of
providing this benefit, since the company expects to recover the cost
of premium payments on the plan from the cash value of proceeds of the
insurance policy.
The foregoing report has been furnished by the members of the
Compensation Committee.
Patrick H. Norton, Chairman
Patrick B. Flavin
14
PERFORMANCE COMPARISON
The following graph shows changes over the five-year period ended
April 29, 2001 in the value of $100 invested in (1) the Common Stock of
the company, (2) the New York Stock Exchange Market Index, and (3) the
Textile Manufacturing Index reported by Media General Financial
Services, Richmond, Virginia, consisting of forty (40) companies
(including the company) in the textile industry. The graph shows
year-end values for an investment in each of the three investments
described, assuming the reinvestment of dividends and excluding any
trading commissions or taxes.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG CULP, INC.,
NYSE MARKET INDEX AND MG GROUP INDEX
(Performance Graph appears here. See table below for plot points.)
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Culp, Inc. 100 139 150 66 48 40
NYSE 100 120 170 190 195 194
MG Group Index 100 123 146 92 65 58
ASSUMES $100 INVESTED ON APRIL 28, 1996
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDED APRIL 29,2001
15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lease Transactions. During fiscal 2001, the company leased two
(2) industrial facilities from partnerships owned by certain of the
company's executive officers, directors, principal shareholders and
members of their immediate families. Principals of these related
entities include Robert G. Culp, III, Judith C. Walker (sister of
Robert G. Culp, III and a director), and Harry R. Culp (brother of
Robert G. Culp, III). These facilities contain a total of 340,000
square feet of floor space. The company also leases its headquarters
office space (40,128 square feet) from Phillips Interests. Earl N.
Phillips, Jr. is the president and chief executive officer of Phillips
Interests, and a director of the company.
The initial terms of the leases described above generally range
from five to ten years, with one or more five-year renewal options.
Base rent per year for the leased industrial facilities ranges from
$1.98 to $2.32 per square foot. The leases typically prohibit
assignment or subletting without the lessor's consent but such consent
may not be unreasonably withheld. The lessor is generally responsible
for maintenance only of roof and structural portions of the leased
facilities. The industrial facilities are leased on a "triple net"
basis, with the company responsible for payment of all property taxes,
insurance premiums and maintenance, other than structural maintenance.
The company believes that at the time the leases and any lease renewals
were executed the terms of all such leases were no less favorable to
the company than could have been obtained in arms-length transactions
with unaffiliated persons. The company received independent appraisals
to this effect with respect to the industrial facility leases. At the
time the company entered into the initial lease with Phillips Interests
(January 19, 1990), Mr. Phillips was not a director of the company.
Related party leases and amendments thereto are approved by the Audit
Committee and are reviewed annually by the Audit Committee. The total
amounts of rent paid by the company under the industrial facilities and
office leases during fiscal 2001 were approximately $695,000 and
$562,000, respectively.
Other Transactions. In 1998, the company purchased a business
from a group of individuals that included Robert T. Davis, who served
on the company's Board of Directors from 1998 until May 31, 2001. As
part of the purchase agreement, the former owners of the business,
including Mr. Davis, agreed to indemnify the company for costs
associated with certain environmental clean up costs for contamination
that had been identified at one of the manufacturing facilities
included in the business. The company expended approximately $130,000
to address the environmental issues at the identified site, and limited
monitoring expenses are expected in the future. The former owners of
the site disputed the necessity of all of these expenditures and the
extent of their liability to the company. In May of 2001, the company
accepted $90,000 from the former owners of this facility in full
settlement of the indemnification liability, and the parties executed
mutual releases.
Certain Business Relationships. The company had sales of
approximately $45.2 million, 11.0% of the company's net sales, to
La-Z-Boy Incorporated in fiscal 2001. Patrick H. Norton, a director
of the company, serves as chairman of the board of La-Z-Boy
Incorporated.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
company's directors, its executive officers, any persons who hold more
than ten percent of the company's common stock and certain trusts
(collectively, "insiders") to report their holdings of and transactions
in the company's Common Stock to the Securities and Exchange Commission
(the "SEC"). Specific due dates for these reports have been
established, and the company is required to disclose in this proxy
statement any late filings and any failures to file that have occurred
since April 30, 2000. Insiders must file three types of ownership
reports with the SEC: initial ownership reports, change-in-ownership
reports and year-end reports. Under the SEC's rules, insiders must
furnish the company with copies of all Section 16(a) reports that they
file. Based solely on a review of copies of these reports and on
written representations the company has received, the company believes
that since April 30, 2000, its insiders have complied with all
applicable Section 16(a) reporting requirements, except Howard L. Dunn,
Jr. failed to report one purchase of shares on a timely basis, which
transaction was subsequently reported.
========================================================================
16
YOUR DIRECTORS RECOMMEND VOTES "FOR"
- - THE RESOLUTION TO FIX THE NUMBER OF DIRECTORS CONSTITUTING THE
ENTIRE BOARD AT NINE (9)
- - THE THREE NOMINEES FOR DIRECTOR
- - THE RATIFICATION OF APPOINTMENT OF KPMG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR FISCAL 2002
17
SHAREHOLDER PROPOSALS FOR 2002 MEETING
Shareholders may submit proposals appropriate for shareholder
action at the company's Annual Meeting consistent with the regulations
of the Securities and Exchange Commission and the company's bylaws.
The nominees named in this Proxy Statement are those chosen by the
Nominating Committee of the Board of Directors. Nominations may also
be made by shareholders in accordance with the company's bylaws. The
bylaws require that such nominations be received by the company at
least 120 days prior to the Annual Meeting and shall include certain
biographical and other information about the persons nominated as
specified in the bylaws. For shareholder proposals and nominations for
director to be considered for inclusion in the Proxy Statement for the
2002 Annual Meeting, the company must receive them no later than April
28, 2002. Such proposals should be directed to Culp, Inc., Attention:
Franklin N. Saxon, Executive Vice President and Chief Financial
Officer, 101 South Main Street, Post Office Box 2686, High Point, North
Carolina 27261.
OTHER MATTERS
The company's management is not aware of any matter that may be
presented for action at the Annual Meeting other than the matters set
forth herein. Should any matters requiring a vote of the shareholders
arise, it is intended that the accompanying proxy will be voted in
respect thereof in accordance with the best judgment of the person or
persons named in the proxy, discretionary authority to do so being
included in the proxy.
By Order of the Board of Directors,
/s/ Franklin N. Saxon
-----------------
FRANKLIN N. SAXON
Executive Vice President and
Chief Financial Officer
- --------------------------------------------------------------------------------
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE
PROXY IS SOLICITED, AND TO EACH PERSON REPRESENTING THAT AS OF THE
RECORD DATE FOR THE ANNUAL MEETING HE OR SHE WAS A BENEFICIAL OWNER OF
SHARES OF THE COMPANY, ON WRITTEN REQUEST, A COPY OF THE COMPANY'S 2001
ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES THERETO.
SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO CULP, INC., ATTENTION:
KATHY J. HARDY, CORPORATE SECRETARY, 101 SOUTH MAIN STREET, P. O. BOX
2686, HIGH POINT, NORTH CAROLINA 27261.
18
Appendix A
CULP, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE
The primary function of the Audit Committee (the "Committee") is
to assist the Board of Directors of Culp, Inc., (the "Corporation") in
fulfilling its oversight responsibilities by reviewing (a) the
financial reports and other financial information provided by the
Corporation to any governmental body or the public, (b) the
Corporation's systems of internal controls regarding finance and
accounting, and (c) the Corporation's accounting, auditing, and
financial reporting processes generally. The Committee's primary
responsibilities are to:
- Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
- Review and appraise the audit performance of the Corporation's
independent accountants and internal audit.
- Provide an open avenue of communication among the independent
accountants, the internal audit, financial and senior management and
the Board of Directors.
While the Committee has the responsibilities and authority set
forth in this Charter, it is not the duty of the Committee to plan or
conduct audits or to determine that the Corporation's financial
statements are complete and accurate and are in accordance with
generally accepted accounting principles. Nor is it the duty of the
Committee to conduct investigations, to resolve any disagreements among
management and the independent accountants or to assure compliance with
laws and regulations. In determining whether to recommend the
inclusion of the Corporation's audited financial statements in the
annual report of the Corporation, the Committee is free to rely on
statements made by, and information obtained from, management and the
independent accountants.
II. COMPOSITION
The Committee shall be comprised of three or more directors as
appointed by the Board, each of whom shall be an independent director
(based on criteria set forth in New York Stock Exchange rules), free
from any relationship that would interfere with the exercise of
independent judgment as a member of the Committee. All members of the
Committee shall have a working familiarity with basic finance and
accounting practices and have the ability to read and understand
fundamental financial statements, and at least one member of the
Committee shall have accounting or related financial management
expertise.
Unless the Board appoints a Chairman of the Committee, the
members of the Committee may designate a Chairman by majority vote of
the full Committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Committee may ask members of
management or others to attend any meeting and provide information or
advice as needed. As part of its responsibility to foster open
communication, the Committee should meet at least annually with
management and the independent accountants in separate executive
sessions to discuss any matters that the Committee or any of these
groups believes should be discussed privately.
19
IV. ACTIVITIES
To fulfill its responsibilities and duties the Committee shall:
Review of Documents and Reports; Audit Committee Report
- -------------------------------------------------------
1. Review this Charter at least annually and recommend its
revision by the Board, as conditions require.
2. Review the Corporation's annual financial statements and
reports or other financial information submitted to any governmental
body or the public, including any certification, report, opinion, or
review by the independent accountants.
3. Review the regular reports to management prepared by the
internal auditors and by the independent accountants, and management's
response.
4. Review with management and the independent accountants the
Corporation's quarterly financial statements prior to the release of
earnings, and also review if and to the extent review is deemed
appropriate the Form 10-Q prior to its filing. The Chairman of the
Committee may represent the entire Committee for this purpose.
5. Have the authority to retain special legal, accounting or
other consultants to advise the Committee, and otherwise to seek
information or advice in any manner it deems appropriate.
6. Provide a report to be included in each proxy statement of
the Corporation, which report shall include the name of each Committee
member and shall:
a. State whether the Committee has reviewed and discussed
the audited financial statements with management;
b. Represent that the Committee has discussed the conduct
of the audit with the independent auditors;
c. Represent that the Committee has received the written
disclosures and the letter from the independent accountants
required by Standard No. 1 of the Independence Standards
Board; and
d. State whether, based on a review of the audited
financial statements and discussions with the independent
auditors, the Committee recommended that the financial statements
be included in the annual report for filing with the Securities
and Exchange Commission.
Independent Accountants
- -----------------------
7. Recommend to the Board the selection of the independent
accountants, considering independence and effectiveness, and review and
approve the audit plan for each fiscal year, including the scope of the
proposed audit and the fees and other compensation to be paid to the
independent accountants therefor.
8. Review and discuss at least annually with the accountants
all significant relationships the accountants have with the Corporation
and others in order to determine the accountants' independence.
9. Review the performance of the independent accountants on an
annual basis, and recommend to the Board any proposed change with
respect to the independent accountants if and when circumstances
warrant.
10. Periodically consult with the independent accountants out of
the presence of management about internal controls and the completeness
and accuracy of the Corporation's financial statements.
20
11. Review any major non-audit services that have been provided
by the independent auditors and the fees therefor in order to insure
that those services have not and will not affect the independence of
the independent auditors.
Financial Reporting Processes
- -----------------------------
12. In consultation with the independent accountants, review the
integrity and adequacy of the Corporation's financial reporting
processes, both internal and external.
13. Discuss with the independent accountants their judgments
about the quality and appropriateness of the Corporation's accounting
principles as applied in its financial reporting.
14. Consider and review with the independent accountants any
significant findings and recommendations of those accountants, together
with management's responses thereto.
15. Consider, and approve if appropriate, any major changes to
the Corporation's auditing and accounting principles and practices
suggested by the independent accountants or management.
Process Improvement
- -------------------
16. Facilitate the reporting to the Committee by both management
and the independent accountants of any significant judgments made in
management's preparation of the financial statements and the view of
management and the accountants as to the appropriateness of such
judgments.
17. After completion of the annual audit, review with each of
management, the independent auditors, and the independent accountants
any significant difficulties encountered during the course of the
audit, including any restrictions on the scope of work or access to
required information.
18. Review any significant disagreement between management and
the independent accountants in connection with the preparation of the
financial statements.
19. Review with the independent accountants and management the
extent to which any changes or improvements in financial or accounting
practices that have been approved by the Committee have been
implemented.
Miscellaneous
- -------------
20. Review and approve matters related to the internal audit
function, including the scope of and changes in its plan, and the
activities, organizational structure, resources and qualifications of
the internal auditors.
21. At each meeting of the Board of Directors, report any
Committee activities since the last directors' meeting and make such
recommendations as the Committee deems appropriate.
22. Approve any letter to be included in the Corporation's
annual report or proxy statement that describes the Committee's
composition and responsibilities and how they were discharged.
23. With regard to members of the Board of Directors, review
potential conflicts of interest and related party transactions.
24. Perform any other activities consistent with this Charter,
the Corporation's bylaws and governing law that the Committee or
the Board of Directors may deem necessary or appropriate.
21
[X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- ---------------------------------- For Against Abstain
1. PROPOSAL to fix the number of directors [ ] [ ] [ ]
CULP, INC. constituting the entire board at nine (9).
- ----------------------------------
2. ELECTION OF DIRECTORS: For All With- For All
CONTROL NUMBER: Nominees hold Except
RECORD DATE SHARES: (01) Howard L. Dunn, Jr. [ ] [ ] [ ]
(02) H. Bruce English
(03) Earl N. Phillips, Jr.
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the "For
All Except" box and strike a line through the name(s) of the nominee(s). Your shares will
be voted for the remaining nominee(s).
For Against Abstain
3. PROPOSAL to ratify the appointment of KPMG [ ] [ ] [ ]
LLP as the company's independent auditors
for fiscal 2002.
4. In their discretion, the proxies are authorized to vote upon any other business that
may properly come before the meeting.
Be sure to sign and date this
Proxy. Date
- ----------------------------------
Mark box at right if an address change or comment has been noted [ ]
on the reverse side of this card.
- ----------------------------------
Shareholder sign here Co-owner sign here
DETACH CARD DETACH CARD
PROXY CULP, INC. PROXY
This Proxy is Solicited on Behalf of
the Board of Directors
The undersigned hereby appoints Robert G. Culp, III, Kathy J. Hardy and Franklin
N. Saxon, and each of them, attorneys and proxies with full power of
substitution, to act and vote as designated below the shares of common stock of
Culp, Inc. held of record by the undersigned on July 23, 2001 at the Annual
Meeting of Shareholders to be held on September 25, 2001 or any adjournment or
adjournments thereof.
This proxy will be voted as directed herein. If no direction is made, this proxy
will be voted for the adoption of the resolution fixing the number of directors
constituting the entire board at nine (9) in proposal 1; for the nominees listed
in proposal 2; and for the ratification of appointment of KPMG LLP as
independent auditors in proposal 3. If, at or before the time of the meeting,
any of the nominees listed above has become unavailable for any reason, the
proxies have the discretion to vote for a substitute nominee or nominees.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please sign exactly as name appears on this card. If signing as attorney,
administrator, executor, guardian, or trustee, please give such title. If
signing on behalf of a corporation, please give name and title of authorized
officer signing.)
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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