UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 2003
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
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES NO X
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the latest practical date:
Common shares outstanding at August 3, 2003: 11,515,459
Par Value: $.05
INDEX TO FORM 10-Q
For the period ended August 3, 2003
Part I - Financial Statements. Page
- ------------------------------------------ -------
Item 1. Unaudited Interim Consolidated Financial Statements:
Consolidated Statements of Income (Loss) - Three Months Ended
August 3, 2003 and July 28, 2002 I-1
Consolidated Balance Sheets - August 3, 2003, July 28, 2002 and
April 27, 2003 I-2
Consolidated Statements of Cash Flows - Three Months Ended
August 3, 2003 and July 28, 2002 I-3
Consolidated Statements of Shareholders' Equity - Year Ended
April 27, 2003 and Three Months Ended August 3, 2003 I-4
Notes to Consolidated Financial Statements I-5
Item 2. Management's Discussion and Analysis of Financial I-14
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About I-22
Market Risk
Item 4. Controls and Procedures I-22
Part II - Other Information
- ------------------------------------
Item 6. Exhibits and Reports on Form 8-K II-1
Signature II-2
Item 1: Financial Statements
CULP, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED AUGUST 3, 2003 AND JULY 28, 2002
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------
Amounts Percent of Sales
------------------------------------ -------------------------
August 3, July 28, % Over August 3, July 28,
2003 2002 (Under) 2003 2002
---------- ---------- ----------- ------------ ------------
Net sales $ 73,676 86,008 (14.3) % 100.0 % 100.0 %
Cost of sales 62,103 72,154 (13.9) % 84.3 % 83.9 %
---------- ---------- ----------- ------------ ------------
Gross profit 11,573 13,854 (16.5) % 15.7 % 16.1 %
Selling, general and
administrative expenses 10,605 10,437 1.6 % 14.4 % 12.1 %
---------- ---------- ---------- ----------- ------------
Income from operations 968 3,417 (71.7) % 1.3 % 4.0 %
Interest expense 1,497 1,903 (21.3) % 2.0 % 2.2 %
Interest income (122) (150) (18.7) % (0.2)% (0.2)%
Other expense 245 211 16.1 % 0.3 % 0.2 %
---------- ---------- ----------- ------------ ------------
Income (loss) before income taxes (652) 1,453 (144.9) % (0.9)% 1.7 %
Income taxes * (241) 538 (144.8) % 37.0 % 37.0 %
---------- ---------- ----------- ------------ ------------
Income (loss) before cumulative effect of accounting change (411) 915 (144.9) % (0.6) % 1.1 %
Cumulative effect of accounting change, net of income taxes 0 (24,151)
---------- ----------
Net loss $ (411) (23,236)
========== ==========
Basic income (loss) per share:
Income (loss) before cumulative effect of accounting
change $ (0.04) 0.08 (144.4) %
Cumulative effect of accounting change 0.00 (2.12) 100.0 %
---------- ---------- ---------
Net loss $ (0.04) (2.04) 98.3 %
========== ========== =========
Diluted income (loss) per share:
Income (loss) before cumulative effect of accounting
change $ (0.04) 0.08 (145.9) %
Cumulative effect of accounting change 0.00 (2.12) 100.0 %
---------- ---------- ---------
Net loss $ (0.04) (2.04) 98.3 %
========== ========== =========
Average shares outstanding 11,515 11,383 1.2 %
Average shares outstanding, assuming dilution 11,515 11,765 (2.1) %
* Percent of sales column is calculated as a % of income (loss) before income taxes.
See accompanying notes to consolidated financial statements.
CULP, INC.
CONSOLIDATED BALANCE SHEETS
AUGUST 3, 2003, JULY 28, 2002, AND APRIL 27, 2003
Unaudited
(Amounts in Thousands)
Amounts Increase
---------------------- (Decrease)
August 3, July 28, ---------------------- * April 27,
2003 2002 Dollars Percent 2003
----------- --------- ---------- ----------- -----------
Current assets
Cash and cash equivalents $ 15,094 25,071 (9,977) (39.8) % 14,355
Short-term investments 15,014 0 15,014 100.0 % 10,043
Accounts receivable, net 24,227 34,719 (10,492) (30.2) % 32,259
Inventories 49,275 59,721 (10,446) (17.5) % 49,552
Deferred income taxes 12,303 9,447 2,856 30.2 % 12,303
Other current assets 4,001 4,251 (250) (5.9) % 3,204
----------- --------- ---------- ----------- -----------
Total current assets 119,914 133,209 (13,295) (10.0) % 121,716
Property, plant & equipment, net 83,299 89,201 (5,902) (6.6) % 84,962
Goodwill 9,240 9,503 (263) (2.8) % 9,240
Other assets 1,934 4,046 (2,112) (52.2) % 2,235
----------- --------- ---------- ----------- -----------
Total assets $ 214,387 235,959 (21,572) (9.1) % 218,153
=========== ========= ========== =========== ===========
Current liabilities
Current maturities of long-term debt $ 517 455 62 13.6 % 500
Accounts payable 18,648 23,678 (5,030) (21.2) % 19,874
Accrued expenses 12,856 13,375 (519) (3.9) % 14,071
Accrued restructuring 7,141 1,864 5,277 283.1 % 7,743
Income taxes payable 0 0 0 100.0 % 349
----------- --------- ---------- --------- -----------
Total current liabilities 39,162 39,372 (210) (0.5) % 42,537
Long-term debt, less current maturities 76,034 96,078 (20,044) (20.9) % 76,000
Deferred income taxes 3,851 3,502 349 10.0 % 3,851
----------- --------- ---------- ----------- -----------
Total liabilities 119,047 138,952 (19,905) (14.3) % 122,388
Shareholders' equity 95,340 97,007 (1,667) (1.7) % 95,765
----------- --------- ---------- ----------- -----------
Total liabilities and
shareholders' equity $ 214,387 235,959 (21,572) (9.1) % 218,153
=========== ========= ========== =========== ===========
Shares outstanding 11,515 11,483 32 0.3 % 11,515
=========== ========= ========== =========== ===========
* Derived from audited financial statements.
See accompanying notes to consolidated financial statements.
CULP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 3, 2003 AND JULY 28, 2002
Unaudited
(Amounts in Thousands)
THREE MONTHS ENDED
----------------------
Amounts
----------------------
August 3, July 28,
2003 2002
---------- ----------
Cash flows from operating activities:
Net loss $ (411) (23,236)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Cumulative effect of accounting change, net of income taxes 0 24,151
Depreciation 3,444 3,641
Amortization of other assets 45 159
Stock-based compensation 53 52
Changes in assets and liabilities:
Accounts receivable 8,032 8,647
Inventories 277 (1,822)
Other current assets (797) (114)
Other assets 256 (18)
Accounts payable (845) (2,366)
Accrued expenses (1,215) (3,085)
Accrued restructuring expenses (602) (581)
Income taxes payable (349) 0
---------- ----------
Net cash provided by operating activities 7,888 5,428
---------- ----------
Cash flows used in investing activities:
Capital expenditures (1,875) (1,109)
Purchases of short-term investments (5,038) 0
---------- ----------
Net cash used in investing activities (6,913) (1,109)
---------- ----------
Cash flows used in financing activities:
Payments on vendor-financed capital expenditures (287) (244)
Proceeds from issuance of long-term debt 51 0
Principal payments of long-term debt 0 (11,951)
Proceeds from common stock issued 0 954
---------- ----------
Net cash used in financing activities (236) (11,241)
---------- ----------
Increase (decrease) in cash and cash equivalents 739 (6,922)
Cash and cash equivalents at beginning of period 14,355 31,993
---------- ----------
Cash and cash equivalents at end of period $ 15,094 25,071
========== ==========
See accompanying notes to consolidated financial statements.
CULP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except share and per share data)
Capital Accumulated
Common Stock Contributed Other Total
----------------------- in Excess Unearned Retained Comprehensive Shareholders'
Shares Amount of Par Value Compensation Earnings Income Equity
- ----------------------------------- ------------ --------- ----------- ---------- ----------- --------- ---------------
Balance, April 28, 2002 11,319,584 $ 566 38,375 (769) 80,886 7 $ 119,065
Net loss (24,887) (24,887)
Net loss on cash flow hedges (7) (7)
Stock-based compensation 210 210
Common stock issued in connection
with stock option plans 195,875 10 1,374 1,384
- ----------------------------------- ------------ --------- ----------- ---------- ----------- --------- ---------------
Balance, April 27, 2003 11,515,459 $ 576 39,749 (559) 55,999 0 $ 95,765
- ----------------------------------- ------------ --------- ----------- ---------- ----------- --------- ---------------
Net loss (411) (411)
Net loss on short-term investments (67) (67)
Stock-based compensation 53 53
- ----------------------------------- ------------ --------- ----------- ---------- ----------- --------- ---------------
Balance, August 3, 2003 11,515,459 $ 576 39,749 (506) 55,588 (67) $ 95,340
=================================== ============ ========= =========== ========== =========== ========= ===============
See accompanying notes to 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 (the "company") include all adjustments, which are, in the
opinion of management, necessary for fair presentation of the results of
operations and financial position. All of these adjustments are of a normal
recurring nature except as disclosed in note 9 to the consolidated 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 on July 28, 2003 for the fiscal year ended April 27,
2003.
The company's three months ended August 3, 2003 and July 28, 2002 represent 14
and 13 week periods, respectively.
================================================================================
2. Stock-Based Compensation
Compensation costs related to employee stock option plans are recognized
utilizing the intrinsic value-based method prescribed by APB No. 25, Accounting
for Stock Issued to Employees, and related Interpretations. The company has
adopted the disclosure requirements of SFAS No. 123, Accounting for Stock- Based
Compensation, as amended by SFAS No. 148. Accordingly, compensation cost is
recorded over the vesting period of the options based upon the difference in
option price and fair market price at the date of grant, if any.
The following table illustrates the effect on net loss and loss per share
if the company had applied the fair value recognition provisions of SFAS No.
123, as amended by SFAS No. 148, for the three months ended August 3, 2003 and
July 28, 2003.
- --------------------------------------------------------------------------------
(dollars in thousands, except per share data) August 3, 2003 July 28, 2002
- --------------------------------------------------------------------------------
Net loss, as reported $ (411) $ (23,236)
Add: Total stock-based employee
compensation expense included in
net loss, net of tax 33 17
Deduct: Total stock-based employee
compensation expense determined under
fair value-based method for all awards,
net of tax (95) (56)
- --------------------------------------------------------------------------------
Pro forma net loss $ ( 473) $ (23,275)
- --------------------------------------------------------------------------------
Loss per share:
Basic - as reported $ (0.04) $ (2.04)
Basic - pro forma (0.04) (2.04)
Diluted - as reported $ (0.04) $ (2.04)
Diluted - pro forma (0.04) (2.04)
================================================================================
3. Accounts Receivable
A summary of accounts receivable follows:
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 April 27, 2003
- --------------------------------------------------------------------------------
Customers $ 26,491 $ 34,580
Allowance for doubtful accounts (1,558) (1,558)
Reserve for returns and allowances (707) (763)
- --------------------------------------------------------------------------------
$ 24,227 $ 32,259
- --------------------------------------------------------------------------------
A summary of the activity in the allowance for doubtful accounts follows:
- --------------------------------------------------------------------------------
Three months ended
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 July 28, 2002
- --------------------------------------------------------------------------------
Beginning balance $ (1,558) $ (2,465)
Provision for bad debt (40) (347)
Net write-offs 40 134
- --------------------------------------------------------------------------------
Ending balance $ (1,558) $ (2,678)
================================================================================
4. Inventories
Inventories are carried at the lower of cost or market. Cost is determined
for substantially all inventories using the LIFO (last-in, first-out) method.
A summary of inventories follows:
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 April 27, 2003
- --------------------------------------------------------------------------------
Raw materials $ 22,621 $ 23,269
Work-in-process 3,478 2,917
Finished goods 23,176 23,366
- --------------------------------------------------------------------------------
Total inventories valued at FIFO 49,275 49,552
Adjustments of certain inventories to LIFO 0 0
- --------------------------------------------------------------------------------
$ 49,275 $ 49,552
================================================================================
5. Accounts Payable
A summary of accounts payable follows:
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 April 27, 2003
- --------------------------------------------------------------------------------
Accounts payable-trade $ 13,544 $ 14,389
Accounts payable-capital expenditures 5,104 5,485
- --------------------------------------------------------------------------------
$ 18,648 $ 19,874
================================================================================
6. Accrued Expenses
A summary of accrued expenses follows:
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 April 27, 2003
- --------------------------------------------------------------------------------
Compensation, commissions and related $ 6,110 $ 9,683
benefits
Interest 2,234 763
Other 4,512 3,625
- --------------------------------------------------------------------------------
$ 12,856 $ 14,071
================================================================================
7. Long-Term Debt
A summary of long-term debt follows:
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 April 27, 2003
- --------------------------------------------------------------------------------
Unsecured term notes $ 75,000 $ 75,000
Canadian government loan 1,551 1,500
- --------------------------------------------------------------------------------
76,551 76,500
Less current maturities (517) (500)
- --------------------------------------------------------------------------------
$ 76,034 $ 76,000
- --------------------------------------------------------------------------------
In August 2002, the company entered into an agreement with its principal
bank lender that provides for a revolving loan commitment of $15.0 million,
including letters of credit up to $2.5 million. Borrowings under the facility
generally carry interest at the London Interbank Offered Rate plus an adjustable
margin based upon the company's debt/EBITDA ratio, as defined by the agreement.
As of August 3, 2003, there were $587,897 in outstanding letters of credit in
support of inventory purchases and no borrowings outstanding under the
agreement. The credit facility expires in August 2004.
The unsecured term notes have an average remaining term of 5 years. The
principal payments become due from March 2006 to March 2010. Interest is payable
semi-annually at a fixed coupon rate of 7.76%.
The company's loan agreements require, among other things, that the company
maintain compliance with certain financial ratios. At August 3, 2003, the
company was in compliance with these financial covenants.
The principal payment requirements of long-term debt during the next five
fiscal years are: 2004 - $500,000; 2005 - $500,000; 2006 - $11,500,000; 2007 -
$11,000,000; and 2008 - $31,000,000.
================================================================================
8. Cash Flow Information
Payments for interest and income taxes as follows:
Three months ended
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 July 28, 2002
- --------------------------------------------------------------------------------
Interest $ 38 $ 573
Income taxes 200 430
================================================================================
9. Restructuring and Asset Impairment Charges
Fiscal 2003 CDF Restructuring
In August 2002, management approved a restructuring plan within the Culp
Decorative Fabrics division aimed at lowering manufacturing costs, simplifying
the dobby fabric upholstery line, increasing asset utilization and enhancing the
division's manufacturing competitiveness. The restructuring plan principally
involved (1) consolidation of the division's weaving, finishing, yarn making and
distribution operations by closing the facility in Chattanooga, Tennessee and
integrating these functions into other plants, (2) a significant reduction in
the number of stock keeping units (SKUs) offered in the dobby product line and
(3) a net reduction in workforce of approximately 300 positions. During fiscal
2003, the total restructuring and related charges incurred were $15.0 million,
of which approximately $4.1 million represented non-cash items, including $2.8
million in impairment of property, plant and equipment and $1.3 million in
inventory write-downs. Of the total charge, $12.0 million was recorded in
restructuring expense in the 2003 Consolidated
Statement of Income (Loss); and $1.3 million, related to inventory
write-downs, and $1.7 million, related to equipment moving and relocation
expense, were recorded in cost of sales in the 2003 Consolidated Statement of
Income (Loss).
As of August 3, 2003, assets classified as held for sale consisted of
machinery and equipment with a value of $166,000 and are included in other
assets. Management anticipates the successful disposal of these assets.
The following summarizes the activity in the restructuring accrual:
- -------------------------------------------------------------------------------------------
Employee Lease
Termination Termination and
(dollars in thousands) Benefits Other Exit Costs Total
- -------------------------------------------------------------------------------------------
Accrual established in fiscal 2003 $ 1,972 $ 7,194 $ 9,166
Paid in fiscal 2003 (1,228) (949) (2,177)
- -------------------------------------------------------------------------------------------
Balance, April 27, 2003 744 6,245 6,989
Paid in fiscal 2004 ( 227) (268) (495)
- -------------------------------------------------------------------------------------------
Balance, August 3, 2003 $ 517 $ 5,977 $ 6,494
- -------------------------------------------------------------------------------------------
Wet Printed Flock Restructuring
In April 2002, management approved a plan to exit the wet printed flock
upholstery fabric business and has been actively seeking to sell the assets
related to this product line. The exit plan involved closing a printing facility
and flocking operation within the Culp Velvets/Prints division (CVP), reduction
in related selling and administrative expenses and termination of 86 employees.
The total charge for the exit plan was $9.7 million, of which approximately $8.2
million represented non-cash items, including $7.6 million in impairment of
property, plant and equipment and $619,000 in inventory write-downs. Of the
total charge, $9.1 million was recorded in restructuring expense in the 2002
Consolidated Statement of Income (Loss), and $619,000, related to inventory
write-downs, was recorded in cost of sales in the 2002 Consolidated Statement of
Income (Loss). During the fiscal year ended April 28, 2002, sales of the wet
printed flock product contributed $17.1 million, or 4.5%, of the company's total
sales and resulted in an operating loss of approximately $2.1 million.
During fiscal 2003, an additional restructuring expense of $1.3 million was
recorded for the non-cash write-down of assets to reflect the deterioration in
market value experienced since April 2002. Due to management's continual
evaluation of the restructuring accrual, the reserve was reduced $313,000 to
reflect current estimates of future health care claims. Additionally, the
reserve was reduced $42,000 to reflect current estimates of future security
expenses and other costs.
As of August 3, 2003, assets classified as held for sale, including a
building, machinery and equipment, of $300,000 are included in other assets.
Management is actively marketing these assets and anticipates the successful
disposal of these assets.
The following summarizes the activity in the CVP restructuring accrual:
- ------------------------------------------------------------------------------------------------
Employee Lease
Termination Termination and
(dollars in thousands) Benefits Other Exit Costs Total
- ------------------------------------------------------------------------------------------------
Accrual established in fiscal 2002 $ 842 $ 610 $ 1,452
Paid in fiscal 2002 (5) (5) (10)
- ------------------------------------------------------------------------------------------------
Balance, April 28, 2002 837 605 1,442
Adjustments in fiscal 2003 (313) (42) (355)
Paid in fiscal 2003 (428) (116) (544)
- ------------------------------------------------------------------------------------------------
Balance, April 27, 2003 96 447 543
Paid in fiscal 2004 1 (24) (23)
- ------------------------------------------------------------------------------------------------
Balance, August 3, 2003 $ 97 $ 423 $ 520
-----------------------------------------------------------------------------------------------
Fiscal 2001 CDF Restructuring
During fiscal 2001 and continuing into fiscal 2002, the company undertook a
restructuring plan in its upholstery fabric segment which involved (1) the
consolidation of certain fabric manufacturing capacity within the Culp
Decorative Fabrics (CDF) division, (2) closing one of the company's four yarn
manufacturing plants within the Culp Yarn division, (3) an extensive reduction
in selling, general and administrative expenses including the termination of 110
employees and (4) a comprehensive SKU reduction initiative related to finished
goods and raw materials in CDF. The 2001 charge from the restructuring and
related costs was $7.4 million, approximately $3.4 million of which represented
non-cash items, including $2.5 million in impairment of property, plant and
equipment and $874,000 in inventory write-downs. Of the total charge, $5.6
million was recorded in restructuring expense in the 2001 Consolidated Statement
of Income (Loss); and $874,000, related to inventory write-downs, and $931,000,
related to equipment relocation costs, were recorded in cost of sales in the
2001 Consolidated Statement of Income (Loss). The 2002 charge from restructuring
and related expenses was $2.5 million, approximately $160,000 of which
represented the non-cash impairment of property, plant and equipment. Of the
total charge, $1.3 million was included in restructuring expense in the 2002
Consolidated Statement of Income (Loss), and $1.2 million, related to equipment
relocation costs, was recorded in cost of sales in the 2002 Consolidated
Statement of Income (Loss).
During fiscal 2003, as a result of management's continual evaluation of the
restructuring accrual, the reserve was reduced $275,000 to reflect current
estimates of future health care claims and increased $276,000 to reflect current
estimates of remaining lease expenses, property taxes, insurance and other exit
costs.
As of August 3, 2003, there were no assets classified as held for sale in
relation to the CDF restructuring.
The following summarizes the activity in the CDF restructuring accrual:
- ----------------------------------------------------------------------------------------------
Employee Lease
Termination Termination and
(dollars in thousands) Benefits Other Exit Costs Total
- ----------------------------------------------------------------------------------------------
Accrual established in fiscal 2001 $ 969 $ 2,116 $ 3,085
Paid in fiscal 2001 (491) (211) (702)
- ----------------------------------------------------------------------------------------------
Balance, April 29, 2001 478 1,905 2,383
Additions in fiscal 2002 925 218 1,143
Paid in fiscal 2002 (891) (1,632) (2,523)
- ----------------------------------------------------------------------------------------------
Balance, April 28, 2002 512 491 1,003
Adjustments in fiscal 2003 (275) 276 1
Paid in fiscal 2003 (202) (591) (793)
- ----------------------------------------------------------------------------------------------
Balance, April 27, 2003 35 176 211
Paid in fiscal 2004 (3) (80) (83)
- ----------------------------------------------------------------------------------------------
Balance, August 3, 2003 $ 32 $ 96 $ 128
==============================================================================================
10. Comprehensive Income (Loss)
Comprehensive loss is the total of net loss and other changes in equity,
except those resulting from investments by shareholders and distributions to
shareholders not reflected in net loss.
A summary of total comprehensive loss follows:
Three Months Ended
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 July 28, 2002
- --------------------------------------------------------------------------------
Net loss $ (411) $ (23,236)
Gain (loss) on foreign currency contracts,
net of taxes:
Net changes in fair value 0 173
Net loss reclassified into earnings 0 (1)
Loss in fair value of short-term investments (67) 0
- --------------------------------------------------------------------------------
Net comprehensive loss $ (478) $ (23,064)
================================================================================
11. Income (Loss) per Share
Basic income (loss) per share is computed using the weighted-average number
of shares outstanding during the period. Diluted income per share uses the
weighted-average number of shares outstanding during the period plus the
dilutive effect of stock options calculated using the treasury stock method.
Weighted average shares used in the computation of basic and diluted income
(loss) per share follows:
Three Months Ended
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 July 28, 2002
- --------------------------------------------------------------------------------
Weighted average common
shares outstanding, basic 11,515 11,383
Effect of dilutive stock options 0 382
- --------------------------------------------------------------------------------
Weighted average common
shares outstanding, diluted 11,515 11,765
- --------------------------------------------------------------------------------
Options to purchase 588,500 shares and 205,625 shares of common stock were
not included in the computation of diluted income per share for the three months
ended August 3, 2003 and July 28, 2002, respectively, because the exercise price
of the options was greater than the average market price of the common shares.
For the three months ended August 3, 2003, options to purchase 365,250
shares were not included in the computation of diluted net loss per share
because the company incurred a net loss for the quarter.
================================================================================
12. 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, 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 equivalents, short-term investments, deferred income taxes, other
current assets and other assets on a total company basis. Thus, identifiable
assets by business segment represent accounts receivable, inventories, property,
plant and equipment and goodwill.
Net sales and gross profit for the company's operating segments follow:
Three Months Ended
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 July 28, 2002
- --------------------------------------------------------------------------------
Net sales:
Upholstery Fabrics $ 46,456 $ 59,977
Mattress Ticking 27,220 26,031
- --------------------------------------------------------------------------------
$ 73,676 $ 86,008
- --------------------------------------------------------------------------------
Gross Profit:
Upholstery Fabrics $ 5,501 $ 8,000
Mattress Ticking 6,072 5,854
- --------------------------------------------------------------------------------
$ 11,573 $ 13,854
- --------------------------------------------------------------------------------
Identifiable assets, consisting of accounts receivable, inventories,
property, plant and equipment and goodwill, for the company's operating segments
follow:
- --------------------------------------------------------------------------------
(dollars in thousands) August 3, 2003 April 27, 2003
- --------------------------------------------------------------------------------
Upholstery Fabrics $ 114,235 $ 124,889
Mattress Ticking 51,806 51,124
- --------------------------------------------------------------------------------
$ 166,041 $ 176,013
Non-identifiable assets 48,346 42,140
- --------------------------------------------------------------------------------
Total assets $ 214,387 $ 218,153
================================================================================
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
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 mattress fabrics (ticking) for bedding. The company's
fabrics are used primarily in the production of residential and contract
upholstered furniture and bedding products, including sofas, recliners, chairs,
love seats, sectionals, sofa-beds, office seating and mattress sets. Although
Culp markets fabrics at most price levels, the company emphasizes fabrics that
have broad appeal in the promotional and popular-priced categories of furniture
and bedding.
The company's operating segments are upholstery fabrics and mattress
ticking, with related divisions organized within those segments. In upholstery
fabrics, Culp Decorative Fabrics markets jacquard and dobby woven fabrics for
residential and contract furniture. Culp Velvets/Prints markets a broad range of
printed and velvet fabrics used primarily for residential and juvenile
furniture. Culp Yarn manufactures specialty filling yarn that is primarily used
by Culp. In mattress ticking, Culp Home Fashions markets a broad array of
fabrics used by bedding manufacturers.
The following tables set forth the company's sales and gross profit by
segment/division and international sales by geographic area for the three months
ended August 3, 2003 and July 28, 2002.
CULP, INC.
SALES / GROSS PROFIT BY SEGMENT/DIVISION
FOR THE THREE MONTHS ENDED AUGUST 3, 2003 AND JULY 28, 2002
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
-----------------------------------------------------------------
Amounts Percent of Total Sales
--------------------------- -----------------------
August 03, July 28, % Over
Segment/Division Sales 2003 2002 (Under) 2004 2003
- ----------------------------------- --------------- ---------- ----------- ---------- -----------
Upholstery Fabrics
Culp Decorative Fabrics $ 28,008 34,771 (19.5) % 38.0 % 40.4 %
Culp Velvets/Prints 16,839 23,107 (27.1) % 22.9 % 26.9 %
Culp Yarn 1,609 2,099 (23.3) % 2.2 % 2.4 %
--------------- ---------- ----------- ---------- -----------
46,456 59,977 (22.5) % 63.1 % 69.7 %
Mattress Ticking
Culp Home Fashions 27,220 26,031 4.6 % 36.9 % 30.3 %
--------------- ---------- ----------- ---------- -----------
* $ 73,676 86,008 (14.3) % 100.0 % 100.0 %
=============== ========== =========== ========== ===========
Segment Gross Profit Gross Profit Margin
- ----------------------------------- -----------------------
Upholstery Fabrics $ 5,501 8,000 (31.2) % 11.8 % 13.3 %
Mattress Ticking 6,072 5,854 3.7 % 22.3 % 22.5 %
--------------- ---------- ----------- ---------- -----------
Gross Profit $ 11,573 13,854 (16.5) % 15.7 % 16.1 %
=============== ========== =========== ========== ===========
* U.S. sales were $65,482 and $75,585 for the first quarter of fiscal 2004 and
fiscal 2003, respectively; The percentage decrease in U.S. sales was 13.4% for
the first quarter
CULP, INC.
INTERNATIONAL SALES BY GEOGRAPHIC AREA
FOR THE THREE MONTHS ENDED AUGUST 3, 2003 AND JULY 28, 2002
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
-----------------------------------------
Amounts
---------------------------
August 3, July 28, % Over
Geographic Area 2003 2002 (Under)
- --------------------------------- -------------- ----------- ------------
North America (Excluding USA) $ 6,372 7,550 (15.6) %
Far East & Asia 1,395 1,435 (2.8) %
All other areas 427 1,438 (70.3) %
-------------- ----------- ------------
$ 8,194 10,423 (21.4) %
============== =========== ============
Percent of total sales 11.1% 12.1%
Three Months ended August 3, 2003 compared with Three Months ended July 28, 2002
For the first quarter of fiscal 2004, net sales decreased 14.3% to $73.7
million; and the company reported a net loss of $411,000, or $0.04 per share
diluted, compared with income before the cumulative effect of accounting change
of $915,000, or $0.08 per share diluted, in the first quarter of fiscal 2003.
Including the cumulative effect of accounting change, the company reported a net
loss for the first quarter of fiscal 2003 of $23.2 million, or $2.04 per share.
In the first quarter of 2003, the company recorded a non-cash goodwill
impairment charge, net of income taxes, of $24.2 million, or $2.12 per share
diluted. The first quarter of fiscal 2004 included 14 weeks versus 13 weeks for
the same quarter of fiscal 2003.
China Initiative -- The company's previously announced initiative in China
is moving forward on schedule. The company has received all the necessary
business license approvals, and the general manager, who relocated to Shanghai,
China in May, has set up the China facility for all the related administrative
functions. As planned, the company will install finishing equipment and begin
fabric inspection, testing and distribution functions at the China facility
during the second fiscal quarter of 2004. Limited fabric finishing operations
are anticipated to begin during the third fiscal quarter of 2004. Upon
completion, the company believes the China platform will allow Culp to deliver
value to customers by linking design expertise, finishing technology and U.S.
quality standards with low-cost fabric manufacturers in China.
UPHOLSTERY FABRIC SEGMENT
NET SALES -- Upholstery fabric sales for the first quarter of fiscal 2004
decreased 22.5%, when compared to the first quarter of fiscal 2003, to $46.5
million. The decline of $13.5 million is attributable to substantially reduced
demand from customers due primarily to the overall general weakness in consumer
demand for furniture, which continued throughout the first quarter of fiscal
2004. Additional factors that are likely affecting demand for upholstery fabrics
are (1) an increase in consumer preference for leather furniture, and (2) an
increase in imported fabrics, both in "piece goods" and "cut and sewn kits."
Upholstery fabric yards sold during the first quarter were 10.8 million
versus 14.4 million in the first quarter of fiscal 2003, a decline of 25.0%.
Average selling price was $4.13 for the first quarter compared to $4.02 in the
same quarter of last year, an increase of 2.7%. This increase was due
principally to the Culp Decorative Fabrics (CDF) division. Yarn sales were $1.6
million, down from $2.1 million in first quarter of fiscal 2003.
GROSS PROFIT -- Gross profit for the first quarter of fiscal 2004 was $5.5
million, or 11.8%, versus $8.0 million, or 13.3% for the same quarter of last
year. While gross profit in the CDF division was lower than the previous year,
the majority of the decline was attributable to the Culp Velvets/Prints (CVP)
division, which experienced a significant decline in the sale of velvet fabrics.
MATTRESS TICKING SEGMENT
NET SALES -- Mattress ticking sales for the first quarter of fiscal 2004
increased 4.6%, compared to the first quarter of fiscal 2003, to $27.2 million.
This is the best quarter in terms of sales increases in over a year and reflects
an improving bedding industry environment.
Mattress ticking yards sold during the first quarter of fiscal 2004 were
10.5 million, down less than 2% from 10.7 million in the same quarter of last
year. The average selling price was $2.57 for the first quarter, compared to
$2.44 the same quarter last year, an increase of 5.3%. This increase in average
selling price reflects (a) a greater mix of woven ticking versus printed
ticking, and (b) a growing, but small, portion of the overall business that is
knitted ticking.
GROSS PROFIT -- For the first quarter of fiscal 2004, the mattress ticking
segment reported gross profit dollars and margins of $6.1 million and 22.3%,
respectively, compared with $5.9 million and 22.5% for the same period of last
year.
OTHER CORPORATE EXPENSES
Selling, General and Administrative Expenses. SG&A expenses of $10.6
million for the first quarter increased $168,000, or 1.6%, from the prior year
amount. As a percent of net sales, SG&A expenses increased to 14.4% from 12.1%
the previous year. SG&A expenses in the first quarter included higher
professional fees offset by a decrease in sales costs due to lower sales volume
and lower bad debt expense.
Interest Expense (Income). Interest expense for the first quarter declined
to $1.5 million from $1.9 million the previous year due to significantly lower
borrowings outstanding. Interest income decreased to $122,000 from $150,000 due
principally to lower interest rates earned on cash balances during the first
quarter of fiscal 2004 as compared to the same period a year ago.
Other Expense. Other expense for the first quarter of fiscal 2004 totaled
$245,000 compared with $211,000 in the prior year. The increase was principally
due to the impact of a higher Canadian exchange rate, mostly offset by lower
debt issue costs.
Income Taxes. The effective tax rate for the first quarter of fiscal 2004
and fiscal 2003 was 37%.
Liquidity and Capital Resources
Liquidity - The company's sources of liquidity include cash, cash
equivalents, short-term investments, cash flow from operations and amounts
available under its revolving credit line. These sources have been adequate for
day-to-day operating and capital expenditures. The company expects these sources
of liquidity to continue to be adequate for the foreseeable future. Cash, cash
equivalents and short-term investments as of August 3, 2003 increased to $30.1
million from $24.4 million at the end of fiscal 2003, reflecting free cash flow
of $5.7 million for the first quarter of fiscal 2004 (see discussion of free
cash flow below).
Accounts receivable as of August 3, 2003 decreased 30.2% from the
year-earlier level, due to lower sales volumes, the decline in international
sales, which have longer credit terms, repayment of past due balances, and an
increase in the number of customers taking the cash discount for shorter payment
terms. Days sales outstanding totaled 32 days at August 3, 2003 compared with 34
a year ago. Inventories at the close of the first quarter decreased 17.5% from a
year ago. Inventory turns for the first quarter were 5.0 versus 4.9 for the
year-earlier period. Operating working capital (comprised of accounts
receivable, inventory and accounts payable-trade) was $54.9 million at August 3,
2003, down from $70.8 million a year ago.
Financing Arrangements -- All of the company's remaining $76.6 million in
debt is totally unsecured and is comprised of a $75.0 million term loan, with a
fixed interest rate of 7.76%, and a $1.6 million non-interest bearing term loan
with the Canadian government. Additionally, the company has a $15.0 million
revolving credit line with a bank, of which no balance is outstanding at August
3, 2003. The first scheduled principal payment on the $75.0 million term loan is
due March 2006 in the amount of $11.0 million. The Canadian government loan is
repaid in annual installments of approximately $500,000 per year.
The company's long-term debt to tangible capitalization (defined as
long-term debt plus shareholders' equity minus goodwill) ratio was 47.1% at
August 3, 2003. The company was in compliance with all financial covenants in
its loan agreements as of August 3, 2003.
Capital Expenditures. -- Capital spending for first quarter of fiscal 2004
was $1.9 million. Depreciation for the first quarter was $3.4 million, and is
estimated at $14.0 million for the full fiscal year. For fiscal 2004, the
company's capital expenditures budget is $8.0 million, of which $3.0 million is
related to the company's China initiative.
Free Cash Flow. - Free cash flow is a non-GAAP performance measure that
management believes provides useful information to investors because it measures
the company's available cash flow for potential debt repayment, stock
repurchases and additions to cash, cash equivalents and short-term investments.
Free cash flow was $5.7 million for the first quarter of fiscal 2004 compared
with $4.1 million for the same period last year. Significantly contributing to
free cash flow was a reduction in accounts receivable, due primarily to lower
sales volume during the first quarter of fiscal 2004. A reconciliation of net
cash provided by operating activities to free cash flow is set forth below:
- --------------------------------------------------------------------------------
(dollars in thousands) Three Months Ended
- --------------------------------------------------------------------------------
August 3, 2003 July 28, 2002
- --------------------------------------------------------------------------------
Net cash provided by operating activities $ 7,888 $ 5,428
Minus: Capital expenditures (1,875) (1,109)
Minus: Payments on vendor-financed
capital expenditures (287) (244)
- --------------------------------------------------------------------------------
Free Cash Flow $5,726 $4,075
- --------------------------------------------------------------------------------
BUSINESS OUTLOOK
While the furniture retail environment has not demonstrated any signs of a
sustainable recovery, the company believes that there will be a modest pick up
in sales this fall, as is typical in the furniture industry. Overall, the
company expects the drop in consolidated sales for the second quarter to be
considerably less than the first quarter decline of 14.3%. While mattress
ticking segment sales are expected to be consistent with second quarter sales of
last year, upholstery fabric segment sales are expected to decrease
substantially less than the first quarter decline of 22.5%. As a result of the
lower sales in the upholstery fabric segment, the company is expecting somewhat
lower overall gross profit compared with the second quarter of last year. With
the softness in the furniture industry and the lack of visibility into the
quarter to date, it is difficult to predict the company's profitability level
for the next quarter. However, at this time the company expects to report net
income in the range of $0.12 to $0.19 per diluted share, with the actual results
depending primarily upon the level of demand throughout the quarter. The company
remains confident that the necessary actions have been taken to right-size Culp
to benefit from market share opportunities that the company believes will exist
after this challenging business cycle ends.
Inflation
The cost of the company's raw materials has been generally stable during
the past several quarters. However, during the fourth quarter of fiscal 2003 the
company experienced price increases from certain raw material vendors and
freight carriers due to rising oil prices. These price increases have moderated
somewhat during the first quarter of fiscal 2004. Any prolonged and substantial
increase in oil prices has the potential to negatively impact profits in future
quarters. Other factors that reasonably can be expected to influence margins in
the future include trends in other operating costs and overall competitive
conditions.
Seasonality
The company's business is moderately seasonal, with increased sales during
the second and fourth fiscal quarters. This seasonality results from one-week
closings of the company's manufacturing facilities, and the facilities of most
of its customers in the United States, during the first and third quarters for
the holiday weeks including July 4th and Christmas.
Critical Accounting Policies and Recent Accounting Developments
The company considered the disclosure requirements of Financial Reporting
Release No. 60 regarding critical accounting policies and Financial Reporting
Release No. 61 regarding liquidity and capital resources, certain trading
activities and related party/certain other disclosures, and concluded that there
were no material changes during the first three months of fiscal 2004 that would
warrant further disclosure beyond those matters previously disclosed in the
company's Annual Report on Form 10-K for the year ended April 27, 2003.
Forward-Looking Information
This Report and the exhibits attached hereto contain 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
(Section 27A of the Securities Act of 1933 and Section 27A of the Securities and
Exchange Act of 1934). Such statements are inherently subject to risks and
uncertainties. Further, forward looking statements are intended to speak only as
of the date on which they are made. 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
but not always characterized by qualifying words such as "expect," "believe,"
"estimate," "plan" and "project" and their derivatives, and include but are not
limited to statements about expectations for the company's future sales, gross
profit margins, SG&A or other expenses, and earnings, as well as any statements
regarding the company's view of estimates of the company's future results by
analysts. Factors that could influence the matters discussed in such statements
include the level of housing starts and sales of existing homes, consumer
confidence, trends in disposable income, and general economic conditions.
Decreases in these economic indicators could have a negative effect on the
company's business and prospects. Likewise, increases in interest rates,
particularly home mortgage rates, and increases in consumer debt or the general
rate of inflation, could affect the company adversely. In addition,
strengthening of the U. S. dollar against other currencies could make the
company's products less competitive on the basis of price in markets outside the
United States. Also, economic and political instability in international areas
could affect the company's operations or sources of goods in those areas, as
well as demand for the company's products in international markets. Finally,
unanticipated delays or costs in executing restructuring actions could cause the
cumulative effect of restructuring actions to fail to meet the objectives set
forth by management. Other factors that could affect the matters discussed in
forward looking statements are included in the company's periodic reports filed
with the Securities and Exchange Commission.
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'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. As of August 3, 2003 there were no borrowings outstanding under the
company's revolving credit agreement. Additionally, approximately 98% of the
company's long-term debt is at a fixed rate. Thus, a change in interest rates
has no material effect on the company's interest expense.
The company's exposure to fluctuations in foreign currency exchange rates
is due primarily to a foreign subsidiary domiciled in Canada and firmly
committed and anticipated purchases of certain machinery, equipment and raw
materials in foreign currencies. The company's Canadian subsidiary uses the
United States dollar as its functional currency. The company generally does not
use financial derivative instruments to hedge foreign currency exchange rate
risks associated with the Canadian subsidiary. However, the company generally
enters into foreign exchange forward and option contracts as a hedge against its
exposure to currency fluctuations on firmly committed and anticipated purchases
of certain machinery, equipment and raw materials. The amount of
Canadian-denominated sales and manufacturing costs are not material to the
company's consolidated results of operations; therefore, a 10% change in the
exchange rate at August 3, 2003 would not have a significant impact on the
company's results of operations or financial position. Additionally, as the
company utilizes foreign currency instruments for hedging anticipated and firmly
committed transactions, a loss in fair value for those instruments is generally
offset by an increase in the value of the underlying exposure.
Item 4. Controls and Procedures
The company conducted a review and evaluation of its disclosure controls
and procedures, under the supervision and with the participation of the
company's Chief Executive Officer and Chief Financial Officer as of August 3,
2003, and the Chief Executive Officer and Chief Financial Officer have concluded
that the company's disclosure controls and procedures are adequate and
effective.
Part II - Other Information
- -----------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report.
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 July 28, 2002, filed September 11, 2002, and are
incorporated herein by reference.
3(ii) Restated and Amended Bylaws of the company, as amended June
12, 2001, were filed as Exhibit 3(ii) to the company's Form 10-Q
for the quarter ended July 29, 2001, filed September 12, 2001,
and are incorporated herein by reference.
10(a) Second Amendment to Amended and Restated Credit Agreement
dated as of June 3, 2003 among Culp, Inc and Wachovia Bank,
National Association, as agent and bank, was filed as Exhibit
10(q) to the company's Form 10-K for the year ended April 27,
2003, filed on July 28, 2003, and is incorporated herein by
reference.
31.1 Certification of Chief Executive Officer Pursuant to Section
302 of Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer Pursuant to Section
302 of Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer Pursuant to Section
906 of Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer Pursuant to Section
906 of Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
The following report on Form 8-K was furnished during the period covered by this
report:
Form 8-K dated June 9, 2003, included under Item 9, Regulation FD
Disclosure (disclosing information pursuant to Item 12, Results of
Operations and Financial Condition) the Company's press release for
quarterly earnings and the Financial Information Release relating to
certain financial information for the fourth quarter and full fiscal year
ended April 27, 2003.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CULP, INC.
(Registrant)
Date: September 17, 2003 By: /s/ Franklin N. Saxon
-----------------
Franklin N. Saxon
Executive Vice President and Chief
Financial Officer
(Authorized to sign on behalf
of the registrant and also sign-
ing as principal financial officer)
Exhibit 31.1
CERTIFICATION
I, Robert G. Culp, III, Chairman of the Board and Chief Executive Officer of
Culp, Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Culp, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: September 17, 2003 ____________________________________
Robert G. Culp,III
Chairman of the Board and Chief Executive
Officer
Exhibit 31.2
CERTIFICATION
I, Franklin N. Saxon, Executive Vice President and Chief Financial Officer of
Culp, Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Culp, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: September 17, 2003 ______________________________
Franklin N. Saxon
Executive Vice President and
Chief Financial Officer
Exhibit 32.1
Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Culp, Inc. (the "Company") on
Form 10-Q for the period ended August 3, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Robert G. Culp,III,
Chairman of the Board and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ Robert G. Culp, III
Chairman of the Board and
Chief Executive Officer
September 17, 2003
A signed original of this written statement required by Section 906, or
other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906 has been provided to Culp, Inc. and
will be retained by Culp, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
Exhibit 32.2
Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Culp, Inc. (the "Company") on
Form 10-Q for the period ended August 3, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Franklin N. Saxon,
Executive Vice President and Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ Franklin N. Saxon
Executive Vice President and
Chief Financial Officer
September 17, 2003
A signed original of this written statement required by Section 906, or
other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906 has been provided to Culp, Inc. and
will be retained by Culp, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.