CULP, INC. EMPLOYEES' RETIREMENT BUILDER PLAN
FINANCIAL STATEMENTS AND
SUPPLEMENTAL INFORMATION
Years Ended December 31, 2003, 2002 and 2001
Culp, Inc. Employees' Retirement Builder Plan
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TABLE OF CONTENTS
Page No.
Independent Auditors' Report.......................................... 1
Financial Statements
Statements of Net Assets Available for Benefits..................... 2
Statements of Changes in Net Assets Available for Benefits.......... 3
Notes to Financial Statements....................................... 4
Supplemental Schedule
Schedule of Assets (Held at End of Year)............................ 8
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INDEPENDENT AUDITORS' REPORT
To the Retirement Committee of the
Culp, Inc. Employees' Retirement Builder Plan
High Point, North Carolina
We have audited the accompanying statements of net assets available for benefits
of the Culp, Inc. Employees' Retirement Builder Plan as of December 31, 2003 and
2002 and the related statements of changes in net assets available for benefits
for each of the years in the three-year period ended December 31, 2003. These
financial statements are the responsibility of the Plan Administrator. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Culp,
Inc. Employees' Retirement Builder Plan as of December 31, 2003 and 2002 and the
changes in its net assets available for plan benefits for each of the years in
the three-year period ended December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated, in all material respects, in relation to the basic financial statements
taken as a whole.
Dixon Huges PLLC
June 8, 2004
Page 1
CULP, INC. EMPLOYEES' RETIREMENT BUILDER PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2003 and 2002
ASSETS 2003 2002
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Investments, at fair value $ 4,145,334 $34,285,310
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Receivables
Employer contributions 125,266 -
Employee contributions 195,328 -
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320,594 -
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Cash 34,056,430 -
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NET ASSETS AVAILABLE
FOR BENEFITS $38,522,358 $34,285,310
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See accompanying notes. Page 2
CULP, INC. EMPLOYEES' RETIREMENT BUILDER PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Years Ended December 31, 2003, 2002 and 2001
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2003 2002 2001
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ADDITIONS TO NET ASSETS ATTRIBUTED TO
Investment income (loss)
Net income from investment in common
trust funds $ 767,676 $ 400,611 $ 736,876
Net income (loss) from investment in registered
investment company funds 2,773,028 (2,685,003) (2,153,575)
Appreciation in fair value of Culp, Inc.
stock fund 1,024,349 5,147,577 1,052,504
Net increase in insurance CSV - 7,623 -
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4,565,053 2,870,808 (364,195)
Contributions
Employer 1,649,725 1,868,366 2,030,704
Employee 2,623,673 2,934,591 3,192,956
Direct rollovers 372 14,101 15,758
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TOTAL ADDITIONS 8,838,823 7,687,866 4,875,223
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DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO
Benefits paid to participants 4,403,726 4,466,413 5,499,417
Trustee fees 105,750 115,729 133,067
Administrative fees
92,299 104,216 44,510
Net insurance expense - - 6,134
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TOTAL DEDUCTIONS 4,601,775 4,686,358 5,683,128
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NET INCREASE (DECREASE) 4,237,048 3,001,508 (807,905)
NET ASSETS AVAILABLE
FOR BENEFITS
Beginning of year 34,285,310 31,283,802 32,091,707
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END OF YEAR $ 38,522,358 $ 34,285,310 $ 31,283,802
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See accompanying notes. Page 3
CULP, INC. EMPLOYEES' RETIREMENT BUILDER PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2003, 2002 and 2001
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NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
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The financial statements of the Plan are prepared using the accrual method of
accounting.
Estimates
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The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the plan
administrator to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results may differ from those
estimates.
Valuation of Investments and Income Recognition
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Investments in common trust funds are stated at fair value based on the values
of the respective instruments held by each fund as determined by the quoted
market prices on the last day of the plan year. Investments in common stocks are
stated at fair value as determined by the quoted market prices on the last day
of the plan year. Shares of registered investment company funds are valued at
quoted market prices which represent the net asset values of shares held.
Purchases and sales of investments are reported on a trade date basis. Income
from investments is reported as earned on the accrual basis. Dividends are
recorded on the ex-dividend date.
Payment of Benefits
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Benefits are recorded when paid.
NOTE B - DESCRIPTION OF PLAN
The following description of the Culp, Inc. Employees' Retirement Builder Plan
(the "Plan") provides only general information. Participants should refer to the
summary plan description for a more complete description of the Plan's
provisions.
General
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The Plan is a defined contribution plan covering all full-time employees of
Culp, Inc. (the "Company") and its subsidiaries who have one year of service and
are age twenty-one or older. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
Page 4
NOTE B - DESCRIPTION OF PLAN (Continued)
Contributions
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The Plan was established in 1982 as a profit-sharing plan to which contributions
determined by the Board of Directors of Culp, Inc. could be made on a
discretionary basis. No profit-sharing contributions were made during the years
ended December 31, 2003, 2002 or 2001.
In January 1999, the Plan was amended to include safe harbor provisions. The
Company makes matching contributions equal to 100% of the participant's
contribution up to the first 3% of annual compensation plus 50% of the next 2%
of compensation. Participants may elect to have contributions invested in 1%
increments in a value fund, a stable investment fund, a Culp, Inc. stock fund,
an equity growth fund or a balanced fund. Contributions are subject to certain
limitations. Prior to August 31, 2001, participants could invest in life
insurance policies.
Participant Accounts
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Each participant's account is credited with the participant's contribution and
an allocation of (a) the Company's contribution and (b) Plan earnings, and
charged with an allocation of administrative expenses. Allocations are based on
participant earnings or account balances, as defined. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account.
Vesting
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Participants are immediately vested in their profit-sharing accounts and their
401(k) contributions, including the matching contributions from the Company and
actual earnings thereon.
Payment of Benefits
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On termination of service, death, disability or retirement, participants receive
a lump-sum distribution. Life insurance purchased through the Plan could be
converted to cash or transferred to the participant.
Page 5
NOTE B - DESCRIPTION OF PLAN (Continued)
Insurance
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In 2002, all insurance contracts with Great Southern Life were terminated and
the cash surrender values of the policies were added to the respective
participants' accounts. Net cash value received was $49,913.
NOTE C - INVESTMENTS
The following table presents the fair value of investments at December 31, 2003
and 2002. Investments that represent 5% or more of the Plan's net assets are
separately identified.
2003 2002
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Investments at fair value as determined by
quoted market price:
Common trust fund:
Stable Investment Fund * $ - $ 18,366,208
Registered investment company funds:
Evergreen Select Balanced Fund * - 4,255,063
Evergreen Stock Selector Fund * - 3,254,340
American Century Equity Growth Fund 10,575 3,585,438
Culp, Inc. common stock * 4,134,759 4,824,261
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$ 4,145,334 $ 34,285,310
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Investments at December 31, 2003 are significantly lower than at December 31,
2002 due to the liquidation of the majority of the investments in anticipation
of the transfer of these assets to a new trustee subsequent to the plan
year-end. Refer to Note G -Subsequent Event.
The Plan's investments (including gains and losses on investments bought and
sold, as well as held during the year) appreciated (depreciated) in value as
follows:
2003 2002 2001
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Common trust fund:
Stable Investment Fund * $ 767,676 $ 400,611 $ 736,876
Registered investment company funds** 2,773,028 (2,685,003) (2,153,575)
Culp, Inc. common stock * 1,024,349 5,147,577 1,052,504
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$4,565,053 $ 2,863,185 $ (364,195)
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* indicates party-in-interest
**amounts shown are party-in-interest with the
exception of the change in value related to the American Century Equity Growth
Fund. These amounts are $1,046,943 for 2003, $488,506 for 2002 and $(188,108)
for 2001.
Page 6
NOTE D - PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA.
NOTE E - INCOME TAX STATUS
The Plan obtained its last determination letter on November 4, 2002, in which
the Internal Revenue Service stated that the Plan, as then designed, constituted
a qualified trust under Section 401(a) of the Internal Revenue Code and is
therefore exempt from federal income taxes under provisions of Section 501. The
Plan has been amended since receiving the determination letter. However, the
Plan administrator and the Plan's tax counsel believe that the Plan is designed
and currently being operated in compliance with the applicable requirements of
the Internal Revenue Code. Therefore, they believe that the Plan was qualified
and the related trust was tax-exempt as of the financial statement dates.
NOTE F - PARTY-IN-INTEREST TRANSACTIONS
Certain plan investments are shares of mutual funds managed by Wachovia
(formerly First Union National Bank). Wachovia is the trustee as defined by the
Plan and, therefore, these transactions qualify as party-in-interest.
Recordkeeping and trustee fees paid by the Plan to Wachovia amounted to $198,049
in 2003, $219,945 in 2002 and $177,577 in 2001. Additional party - in - interest
information is indicated in Note C.
NOTE G - SUBSEQUENT EVENT
The Culp, Inc. Employees' Retirement Builder Plan changed its trustee from
Wachovia to MFS effective January 2, 2004. In conjunction with this change,
participants were temporarily unable to direct or diversify investments, obtain
hardship withdrawals, or obtain distributions from the Plan during the mandatory
blackout periods which began December 2003 and ceased on January 30, 2004.
During this period, participants' accounts were liquidated and transferred to
similar investment vehicles offered by MFS, with the exception of the Culp, Inc.
Stock Fund, which was treated as an in-kind transfer. Concurrent with the end of
the blackout periods on January 30, 2004, participants had the option to invest
in an additional six funds including a bond fund, a specialty real estate fund,
two mid-cap growth funds, a small blend growth fund and foreign small-mid cap
growth fund.
Page 7
SUPPLEMENTAL INFORMATION
CULP, INC. EMPLOYEES' RETIREMENT BUILDER PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
EIN: 56-1001967
PLAN NUMBER 001
December 31, 2003
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(c) Description of Investment
Including Maturity Date,
(b) Identity of Issue, Borrower, Rate of Interest, Collateral, (e) Current
(a) Lessor, or Similar Party Par or Maturity Value (d) Cost ** Value
-------- ------------------------------------------- ---------------------------------- ----------- ------------
* Culp, Inc. 514,158.4328 shares, common $4,134,759
American Century Equity Growth Fund 539.56 units $10,575
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$4,145,334
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* Indicates party - in - interest
** Cost information omitted for participant-directed investments.