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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 1, 2004
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 X NO
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 1, 2004: 11,547,759
Par Value: $.05
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INDEX TO FORM 10-Q
For the period ended August 1, 2004
Part I - Financial Statements. Page
- ------------------------------------------ -------
Item 1. Unaudited Interim Consolidated Financial Statements:
Consolidated Statements of Income--Three Months Ended August 1, 2004
and August 3, 2003 I-1
Consolidated Balance Sheets--August 1, 2004, August 3, 2003 and
May 2, 2004 I-2
Consolidated Statements of Cash Flows--Three Months Ended August 1,
2004 and August 3, 2003 I-3
Consolidated Statements of Shareholders' Equity I-4
Notes to Consolidated Financial Statements I-5
Item 2. Management's Discussion and Analysis of Financial I-13
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About I-19
Market Risk
Item 4. Controls and Procedures I-20
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 LOSS
FOR THE THREE MONTHS ENDED AUGUST 1, 2004 AND AUGUST 3, 2003
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED)
--------------------------------------------------------------------------
Amounts Percent of Sales
------------------------------------ -----------------------------
August 1, August 3, % Over August 1, August 3,
2004 2003 (Under) 2004 2003
------------ ------------ ------------- ------------- --------------
Net sales $ 67,849 73,676 (7.9) % 100.0 % 100.0 %
Cost of sales 59,174 62,198 (4.9) % 87.2 % 84.4 %
------------ ------------ ------------- ------------- --------------
Gross profit 8,675 11,478 (24.4) % 12.8 % 15.6 %
Selling, general and
administrative expenses 9,280 10,516 (11.8) % 13.7 % 14.3 %
Restructuring credit (138) 0 100.0 % (0.2)% 0.0 %
------------ ------------ ------------- ------------- --------------
Income (loss) from operations (467) 962 (148.5) % (0.7)% 1.3 %
Interest expense 940 1,497 (37.2) % 1.4 % 2.0 %
Interest income (27) (122) (77.9) % (0.0)% (0.2)%
Other expense 214 239 (10.5) % 0.3 % 0.3 %
------------ ------------ ------------- ------------- --------------
Loss before income taxes (1,594) (652) 144.5 % (2.3)% (0.9)%
Income taxes * (542) (241) 124.9 % 34.0 % 37.0 %
------------ ------------ ------------- ------------- --------------
Net loss $ (1,052) (411) (156.0) % (1.6)% (0.6)%
============ ============ ============= ------------- --------------
Net loss per share, basic $ (0.09) (0.04) (125.0) %
Net loss per share, diluted $ (0.09) (0.04) (125.0) %
Average shares outstanding, basic 11,547 11,515 0.3 %
Average shares outstanding, diluted 11,547 11,515 0.3 %
* Percent of sales column is calculated as a % of loss before income taxes.
See accompanying notes to consolidated financial statements.
CULP, INC.
CONSOLIDATED BALANCE SHEETS
AUGUST 1, 2004, AUGUST 3, 2003, AND MAY 2, 2004
Unaudited
(Amounts in Thousands)
Amounts Increase
------------------------ (Decrease)
August 1, August 3, ------------------------- * May 2,
2004 2003 Dollars Percent 2004
----------- ----------- ---------- ------------- -----------
Current assets:
Cash and cash equivalents $ 11,946 15,094 (3,148) (20.9)% 14,568
Short-term investments 0 15,014 (15,014) (100.0)% 0
Accounts receivable 24,242 24,227 15 0.1 % 30,719
Inventories 52,083 49,275 2,808 5.7 % 49,045
Deferred income taxes 9,256 12,303 (3,047) (24.8)% 9,256
Other current assets 1,645 4,001 (2,356) (58.9)% 1,634
----------- ----------- ---------- ------------- -----------
Total current assets 99,172 119,914 (20,742) (17.3)% 105,222
Property, plant & equipment, net 78,880 83,299 (4,419) (5.3)% 77,770
Goodwill 9,240 9,240 0 0.0 % 9,240
Other assets 1,307 1,934 (627) (32.4)% 1,496
----------- ----------- ---------- ------------- -----------
Total assets $ 188,599 214,387 (25,788) (12.0)% 193,728
=========== =========== ========== ============= ===========
Current liabilities:
Current maturities of long-term debt $ 545 517 28 5.4 % 528
Accounts payable 14,857 18,648 (3,791) (20.3)% 15,323
Accrued expenses 10,880 12,856 (1,976) (15.4)% 13,028
Accrued restructuring costs 4,656 7,141 (2,485) (34.8)% 4,968
Income taxes payable 606 0 606 100.0 % 1,850
----------- ----------- ---------- ------------- -----------
Total current liabilities 31,544 39,162 (7,618) (19.5)% 35,697
Long-term debt, less current maturities 50,519 76,034 (25,515) (33.6)% 50,502
Deferred income taxes 4,138 3,851 287 7.5 % 4,138
----------- ----------- ---------- ------------- -----------
Total liabilities 86,201 119,047 (32,846) (27.6)% 90,337
Shareholders' equity 102,398 95,340 7,058 7.4 % 103,391
----------- ----------- ---------- ------------- -----------
Total liabilities and
shareholders' equity $ 188,599 214,387 (25,788) (12.0)% 193,728
=========== =========== ========== ============= ===========
Shares outstanding 11,548 11,515 33 0.3 % 11,547
=========== =========== ========== ============= ===========
* 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 1, 2004 AND AUGUST 3, 2003
Unaudited
(Amounts in Thousands)
THREE MONTHS ENDED
--------------------------
Amounts
--------------------------
August 1, August 3,
2004 2003
------------ -----------
Cash flows from operating activities:
Net loss $ (1,052) (411)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 3,362 3,444
Amortization of other assets 37 45
Stock-based compensation 52 53
Restructuring credit (138)
Changes in assets and liabilities:
Accounts receivable 6,477 8,032
Inventories (3,038) 277
Other current assets (11) (797)
Other assets 206 256
Accounts payable 112 (845)
Accrued expenses (2,148) (1,215)
Accrued restructuring (228) (602)
Income taxes payable (1,244) (349)
------------ -----------
Net cash provided by operating activities 2,387 7,888
------------ -----------
Cash flows from investing activities:
Capital expenditures (4,375) (1,875)
Purchases of short-term investments 0 (5,038)
------------ -----------
Net cash used in investing activities (4,375) (6,913)
------------ -----------
Cash flows from financing activities:
Payments on vendor-financed capital expenditures (675) (287)
Proceeds from issuance of long-term debt 34 51
Proceeds from common stock issued 7 0
------------ -----------
Net cash used in financing activities (634) (236)
------------ -----------
Increase (decrease) in cash and cash equivalents (2,622) 739
Cash and cash equivalents at beginning of period 14,568 14,355
------------ -----------
Cash and cash equivalents at end of period $ 11,946 15,094
============ ===========
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
Common Stock Contributed Total
-------------------------- in Excess Unearned Retained Shareholders'
Shares Amount of Par Value Compensation Earnings Equity
- ---------------------------------------------------------------------------------------------------------------------------
Balance, April 27, 2003 11,515,459 $ 576 39,749 (559) 55,999 $ 95,765
- ---------------------------------------------------------------------------------------------------------------------------
Net income 7,220 7,220
Stock-based compensation 210 210
Common stock issued in connection
with stock option plans 31,175 2 194 196
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Balance, May 2, 2004 11,546,634 $ 578 39,943 (349) 63,219 $ 103,391
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Net loss (1,052) (1,052)
Stock-based compensation 52 52
Common stock issued in connection
with stock option plans 1,125 0 7 7
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Balance, August 1, 2004 11,547,759 $ 578 39,950 (297) 62,167 $ 102,398
==========================================================================================================================
See accompanying notes to consolidated financial statements.
Culp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
I-5
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Culp,
Inc. and subsidiaries (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 16, 2004 for the fiscal year ended
May 2, 2004. Certain items in the fiscal 2004 consolidated financial
statements have been reclassified to conform with the current presentation.
The company's three months ended August 1, 2004 and August 3, 2003
represent 13 and 14 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
1, 2004 and August 3, 2003.
(dollars in thousands, except per share data)
August 1, 2004 August 3, 2003
- ------------------------------------------------------------------------------
Net loss, as reported $ (1,052) $ (411)
Add: Total stock-based employee
compensation expense included in
net income, net of tax 35 33
Deduct: Total stock-based employee
compensation expense determined under
fair value-based method for all awards,
net of tax (122) (95)
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Pro forma net loss $ (1,139) (473)
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Loss per share:
Basic - as reported $ (0.09) $ (0.04)
Basic - pro forma (0.10) (0.04)
Diluted - as reported (0.09) (0.04)
Diluted - pro forma (0.10) (0.04)
==============================================================================
3. Accounts Receivable
A summary of accounts receivable follows:
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(dollars in thousands) August 1, 2004 May 2, 2004
- ------------------------------------------------------------------------------
Customers $ 26,554 $ 33,064
Allowance for doubtful accounts (1,266) (1,442)
Reserve for returns and allowances (1,046) (903)
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$ 24,242 $ 30,719
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A summary of the activity in the allowance for doubtful accounts follows:
Three months ended
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(dollars in thousands) August 1, 2004 August 3, 2003
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Beginning balance $ (1,442) $ (1,558)
Provision for bad debt expense 199 (40)
Net write-offs (23) 40
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Ending balance $ (1,266) $ (1,558)
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==============================================================================
4. Inventories
Inventories are carried at the lower of cost or market. Cost is
determined using the FIFO (first-in, first-out) method.
A summary of inventories follows:
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(dollars in thousands) August 1, 2004 May 2, 2004
- ------------------------------------------------------------------------------
Raw materials $ 22,792 $ 21,015
Work-in-process 2,888 2,489
Finished goods 26,403 25,541
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$ 52,083 $ 49,045
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==============================================================================
5. Accounts Payable
A summary of accounts payable follows:
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(dollars in thousands) August 1, 2004 May 2, 2004
- ------------------------------------------------------------------------------
Accounts payable-trade $ 13,550 $ 13,438
Accounts payable-capital expenditures 1,307 1,885
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$ 14,857 $ 15,323
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==============================================================================
6. Accrued Expenses
A summary of accrued expenses follows:
- ------------------------------------------------------------------------------
(dollars in thousands) August 1, 2004 May 2, 2004
- ------------------------------------------------------------------------------
Compensation, commissions and
related benefits $ 5,444 $ 8,040
Interest 1,435 459
Accrued rebates 1,650 2,258
Other 2,351 2,271
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$ 10,880 $ 13,028
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==============================================================================
7. Long-Term Debt
A summary of long-term debt follows:
- ------------------------------------------------------------------------------
(dollars in thousands) August 1, 2004 May 2, 2004
- ------------------------------------------------------------------------------
Unsecured term notes $ 49,975 $ 49,975
Canadian government loan 1,089 1,055
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51,064 51,030
Less current maturities (545) (528)
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$ 50,519 $ 50,502
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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 1, 2004, there were $634,000 in outstanding
letters of credit in support of inventory purchases and no borrowings
outstanding under the agreement. The credit facility, which was due to
expire in August 2004, has been extended to August 2005.
The unsecured term notes are payable over an average remaining term of
five years beginning March 2006 through 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 1,
2004, the company was in compliance with these financial covenants.
The principal payment requirements of long-term debt during the next
five fiscal years are: 2005 - $545,000; 2006 - $8,079,000; 2007 -
$7,535,000; 2008 - $19,835,000; and 2009 - $7,535,000.
8. Cash Flow Information
Payments for interest and income taxes follow:
Three months ended
- ------------------------------------------------------------------------------
(dollars in thousands) August 1, 2004 August 3, 2003
- ------------------------------------------------------------------------------
Interest $ 23 $ 38
Income taxes 701 200
- ------------------------------------------------------------------------------
==============================================================================
The non-cash portion of capital expenditures representing vendor
financing totaled $5,000 and $39,000 for the three months ended August 1,
2004 and August 3, 2003, respectively.
==============================================================================
9. Restructuring and Asset Impairment Charges
A summary of accrued restructuring follows:
- ------------------------------------------------------------------------------
(dollars in thousands) August 1, 2004 May 2, 2004
- ------------------------------------------------------------------------------
Fiscal 2003 CDF $ 4,624 $ 4,834
Wet Printed Flock 0 100
Fiscal 2001 CDF 32 34
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$ 4,656 $ 4,968
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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.
The following summarizes the fiscal 2005 activity in the restructuring
accrual:
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Employee Lease
Termination Termination and
(dollars in thousands) Benefits Other Exit Costs Total
- ------------------------------------------------------------------------------
Balance, May 2, 2004 $ 500 4,334 4,834
Paid in fiscal 2005 (20) (190) (210)
- ------------------------------------------------------------------------------
Balance, August 1, 2004 $ 480 4,144 4,624
- ------------------------------------------------------------------------------
Wet Printed Flock Restructuring
In August 2004, assets held for sale consisting of land and a building
valued at $180,000 in the other assets line of the May 2, 2004 Consolidated
Balance Sheet were sold, resulting in a restructuring credit of $54,000. An
additional restructuring credit of $84,000 was recognized relating to the
write-off of the remaining reserve balance, which consisted of building
related exit costs.
The following summarizes the fiscal 2005 activity in the CVP
restructuring accrual:
- ------------------------------------------------------------------------------
Employee Lease
Termination Termination and
(dollars in thousands) Benefits Other Exit Costs Total
- ------------------------------------------------------------------------------
Balance, May 2, 2004 $ 0 100 100
Adjustments in fiscal 2005 0 (84) (84)
Paid in fiscal 2005 0 (16) (16)
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Balance, August 1, 2004 $ 0 0 0
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Fiscal 2001 CDF Restructuring
The following summarizes the fiscal 2005 activity in the CDF
restructuring accrual:
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Employee Lease
Termination Termination and
(dollars in thousands) Benefits Other Exit Costs Total
- ------------------------------------------------------------------------------
Balance, May 2, 2004 $ 34 0 34
Paid in fiscal 2005 (2) 0 (2)
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Balance, August 1, 2004 $ 32 0 32
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==============================================================================
10. Comprehensive 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 1, 2004 August 3, 2003
- ------------------------------------------------------------------------------
Net loss $ (1,052) $ (411)
Unrealized loss in fair value of
short-term investments 0 (67)
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Net comprehensive loss $ (1,052) $ (478)
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==============================================================================
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 1, 2004 August 3, 2003
- ------------------------------------------------------------------------------
Weighted average common
shares outstanding, basic 11,547 11,515
Effect of dilutive stock options 0 0
- ------------------------------------------------------------------------------
Weighted average common
shares outstanding, diluted 11,547 11,515
- ------------------------------------------------------------------------------
Options to purchase 437,125 shares and 588,500 shares of common stock
were not included in the computation of diluted loss per share for the three
months ended August 1, 2004 and August 3, 2003, respectively, because the
exercise price of the options was greater than the average market price of
the common shares.
Options to purchase 541,700 shares and 365,250 shares of common stock
were not included in the computation of diluted net loss per share for the
three months ended August 1, 2004 and August 3, 2003, respectively, because
the company incurred a net loss for the period.
==============================================================================
12. Segment Information
The company's operations are classified into two segments:
mattress fabrics and upholstery fabrics. The mattress fabrics segment
principally manufactures and sells fabrics to bedding manufacturers. The
upholstery fabrics segment principally manufactures and sells fabrics
primarily to residential and commercial (contract) furniture manufacturers.
The upholstery fabrics segment consists of two divisions: Culp Decorative
Fabrics and Culp Velvets/Prints. Since these divisions have similar products,
manufacturing processes, customers, methods of distribution, and economic
characteristics, they are aggregated for segment reporting purposes.
Effective May 3, 2004, the company began evaluating the operating
performance of its segments based upon income from operations before
restructuring and related charges or credits and certain unallocated corporate
expenses. Previously, the company evaluated operating segment performance based
upon gross profit. Operating income (loss) for the prior period and gross profit
for both periods by segment is presented for comparative purposes. Unallocated
corporate expenses represent primarily compensation and benefits for certain
executive officers and all costs related to being a public company. Segment
assets include assets used in the operation of each segment and consist of
accounts receivable, inventories, and property, plant and equipment. The company
no longer allocates goodwill to its operating segments for the purposes of
evaluating operating performance.
Financial information for the company's operating segments follow:
Three months ended
- ------------------------------------------------------------------------------
(dollars in thousands) August 1, 2004 August 3, 2003
- ------------------------------------------------------------------------------
Net sales:
Mattress Fabrics $ 25,953 $ 27,220
Upholstery Fabrics 41,896 46,456
- ------------------------------------------------------------------------------
$ 67,849 $ 73,676
- ------------------------------------------------------------------------------
Gross profit:
Mattress Fabrics $ 4,794 $ 6,072
Upholstery Fabrics 3,956 5,406
Restructuring related charges (75) (1) 0
- ------------------------------------------------------------------------------
$ 8,675 $ 11,478
- ------------------------------------------------------------------------------
Operating income (loss):
Mattress Fabrics $ 2,899 $ 4,144
Upholstery Fabrics (2,619) (1,719)
Unallocated corporate (810) (1,463)
Restructuring related charges
and credits 63 (2) 0
- ------------------------------------------------------------------------------
$ (467) $ 962
- ------------------------------------------------------------------------------
(1) Restructuring related charges represent equipment dismantling charges
and are included in the cost of sales line item in the Consolidated
Statement of Loss.
(2) Restructuring related charges and credits represent the $75,000 in
equipment dismantling charges, offset by $138,000 in restructuring
credits (see note 9). Restructuring credits are included in the
restructuring credit line item in the Consolidated Statement of Loss.
These restructuring related charges and credits relate to the Upholstery
Fabrics segment.
Balance sheet information for the company's operating segments follow:
- ------------------------------------------------------------------------------
(dollars in thousands) August 1, 2004 May 2, 2004
- ------------------------------------------------------------------------------
Segment assets:
Mattress Fabrics $ 45,860 $ 47,691
Upholstery Fabrics 105,496 109,843
- ------------------------------------------------------------------------------
Total segment assets 151,356 157,534
Non-segment assets:
Cash and cash equivalents 11,946 14,568
Deferred income taxes 9,256 9,256
Other current assets 1,645 1,634
Property, plant & equipment 3,849 0
Goodwill 9,240 9,240
Other assets 1,307 1,496
- ------------------------------------------------------------------------------
Total assets $ 188,599 $ 193,728
- ------------------------------------------------------------------------------
Three months ended
- ------------------------------------------------------------------------------
(dollars in thousands) August 1, 2004 August 3, 2003
- ------------------------------------------------------------------------------
Capital expenditures:
Mattress Fabrics $ 430 $ 66
Upholstery Fabrics 237 1,774
Unallocated corporate (3) 3,875 0
- ------------------------------------------------------------------------------
$ 4,542 $ 1,840
- ------------------------------------------------------------------------------
Depreciation expense:
Mattress Fabrics $ 916 $ 945
Upholstery Fabrics 2,446 2,499
Unallocated Corporate 0 0
- ------------------------------------------------------------------------------
$ 3,362 $ 3,444
- ------------------------------------------------------------------------------
(3) Unallocated corporate capital expenditures for fiscal 2005 represent
primarily capital spending for the new corporate office building.
==============================================================================
ITEM 2.
CAUTIONARY STATEMENT CONCERNING 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 operations or
success, sales, gross profit margins, SG&A or other expenses, and earnings, as
well as any statements regarding future economic or industry trends or future
developments. 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 other periodic reports
filed with the Securities and Exchange Commission.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
The following analysis of 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, Inc., which we sometimes refer to as the company, manufactures and
markets mattress fabrics (known as mattress ticking and used for covering
mattresses and box springs) and upholstery fabrics primarily for use in
furniture manufacturing (residential and commercial). The company's executive
offices are located in High Point, North Carolina. The company was organized as
a North Carolina corporation in 1972 and made its initial public offering in
1983. Since 1997, the company has been listed on the New York Stock Exchange and
traded under the symbol "CFI."
Management believes that Culp is one of the two largest producers of mattress
fabrics in North America, as measured by total sales, and one of the three
largest marketers of upholstery fabrics for furniture in North America, again
measured by total sales. The company's fabrics are used primarily in the
production of bedding products and residential and commercial upholstered
furniture, including sofas, recliners, chairs, loveseats, 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 "good" and
"better" priced categories of furniture and bedding.
The company's fiscal year is the 52 or 53 week period ending on the Sunday
closest to April 30. The first quarter of fiscal 2005 included 13 weeks versus
14 weeks for the same period of fiscal 2004. The company's operating segments
are mattress fabrics and upholstery fabrics, with related divisions organized
within those segments. In mattress fabrics, Culp Home Fashions markets a broad
array of fabrics used by bedding manufacturers. In upholstery fabrics, Culp
Decorative Fabrics markets jacquard and dobby woven fabrics for residential and
commercial furniture and yarn for use primarily by the company, with some
outside sales. Culp Velvets/Prints markets velvet, printed fabrics and
microdenier suedes used primarily for residential furniture.
Effective May 3, 2004, the company began allocating selling, general and
administrative expenses to its operating segments and began evaluating the
operating performance of its segments based upon income (loss) from operations
before restructuring and related charges or credits and certain unallocated
corporate expenses. Previously, the company evaluated operating segment
performance based upon gross profit. Operating income (loss) for the prior
period and gross profit for both periods by segment is presented for comparative
purposes. Unallocated corporate expenses represent primarily compensation and
benefits for certain executive officers and all costs related to being a public
company. Segment assets include assets used in the operation of each segment and
consist of accounts receivable, inventories, and property, plant and equipment.
The company no longer allocates goodwill to its operating segments for the
purposes of evaluating operating performance.
The following tables set forth the company's sales, gross profit and operating
income (loss) by segment/division for the three months ended August 1, 2004 and
August 3, 2003.
CULP, INC.
SALES, GROSS PROFIT AND OPERATING INCOME (LOSS) BY SEGMENT/DIVISION
FOR THE THREE MONTHS ENDED AUGUST 1, 2004 AND AUGUST 3, 2003
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------------------------
Amounts Percent of Total Sales
----------------- ------------------------
August 1, August 3, % Over August 1, August 3,
Net Sales by Segment 2004 2003 (Under) 2004 2003
- --------------------------------------- -------- -------- ---------- ----------- -----------
Mattress Fabrics
Culp Home Fashions $ 25,953 27,220 (4.7) % 38.3 % 36.9 %
-------- -------- ---------- ----------- -----------
Upholstery Fabrics
Culp Decorative Fabrics 23,919 29,617 (19.2) % 35.3 % 40.2 %
Culp Velvets/Prints 17,977 16,839 6.8 % 26.5 % 22.9 %
-------- -------- ---------- ----------- -----------
41,896 46,456 (9.8) % 61.7 % 63.1 %
-------- -------- ---------- ----------- -----------
Net Sales $ 67,849 73,676 (7.9) % 100.0 % 100.0 %
======== ======== ========== =========== ===========
Gross Profit by Segment Gross Profit Margin
- --------------------------------------- ------------------------
Mattress Fabrics $ 4,794 6,072 (21.0) % 18.5 % 22.3 %
Upholstery Fabrics 3,956 5,406 (26.8) % 9.4 % 11.6 %
Restructuring related charges (1) (75) 0 100.0 % (0.1)% 0.0 %
-------- -------- ---------- ----------- -----------
Gross Profit $ 8,675 11,478 (24.4) % 12.8 % 15.6 %
======== ======== ========== =========== ===========
Operating Income (Loss) by Segment Operating Income (Loss) Margin
- --------------------------------------- ------------------------
Mattress Fabrics $ 2,899 4,144 (30.0) % 11.2 % 15.2 %
Upholstery Fabrics (2,619) (1,719) (52.4) % (6.3)% (3.7)
Unallocated corporate expenses (810) (1,463) 44.6 % (1.2)% (2.0)%
Restructuring related charges and
credits (1) 63 0 100.0 % 0.1 % 0.0 %
-------- -------- ---------- ----------- -----------
Operating Income (Loss) $ (467) 962 (148.5) % (0.7)% 1.3 %
======== ======== ========== =========== ===========
Depreciation by Segment
- ---------------------------------------
Mattress Fabrics $ 916 944 (3.0) %
Upholstery Fabrics 2,446 2,499 (2.1) %
-------- -------- ----------
Total Depreciation Expense $ 3,362 3,444 (2.4) %
======== ======== ==========
(1) Restructuring related charges represent equipment dismantling charges and
are included in the cost of sales line item in the Consolidated Statement of
Loss. Restructuring related charges and credits represent the $75,000 in
equipment dismantling charges, offset by $138,000 in restructuring credits (see
accompanying note 9). Restructuring credits are included in the restructuring
credit line item in the Consolidated Statement of Loss. These restructuring
related charges and restructuring credits are associated with the Upholstery
Fabrics segment.
Three Months ended August 1, 2004 compared with Three Months ended August 3,
2003
The first quarter of the fiscal year is typically the slowest period for the
company and the furniture industry due to scheduled plant vacation shutdowns.
The seasonal slowdown, combined with the continued weakness in consumer demand
for furniture throughout the summer, accounted for a modest drop in sales. In
addition, the first quarter of fiscal 2005 included 13 weeks versus 14 weeks for
the same period of fiscal 2004. For the first quarter of fiscal 2005, net sales
decreased 7.9% to $67.8 million. Average weekly sales for the first quarter of
fiscal 2005 were $5.2 million compared with $5.3 million in the prior year
period, a decrease of less than 1.0%. The company reported a net loss of
$1,052,000, or $0.09 per share diluted in the first quarter of fiscal 2005,
compared with a net loss of $411,000, or $0.04 per share diluted, in the first
quarter of fiscal 2004. Restructuring and related charges and credits of
approximately $42,000, net of income taxes, were included in the net loss for
the first quarter of fiscal 2005.
Mattress Fabrics Segment
Net Sales -- Mattress fabric sales (known as mattress ticking) for the
first quarter of fiscal 2005 decreased 4.7% to $26.0 million compared with $27.2
million for the same period a year ago. As noted above, these results reflect a
13 week period versus a 14 week period last year. Average weekly sales for the
first quarter of fiscal 2005 were $2.0 million compared with $1.9 million in the
prior year period, an increase of 2.7%. While sales, on a comparable basis,
continue to be affected by the recent customers' transition to one-sided
mattresses, which utilize one-third less fabric, the mattress ticking segment
experienced higher sales, on an average weekly basis, by expanding business with
certain key accounts. Also, mattress manufacturers are currently incurring
higher costs for other mattress components, such as steel, as well as costs
associated with flame retardant requirements. As a result of these increased
costs, mattress manufacturers are placing additional pressure on mattress
ticking prices, and in some instances manufacturers are moving to lower priced
ticking.
Mattress ticking yards sold during the first quarter of fiscal 2005 were 10.8
million compared with 10.5 million yards in the first quarter of last year. The
average selling price was $2.38 per yard for the first quarter, compared to
$2.57 per yard in the same quarter last year, a decrease of 7.4%.
Operating income -- For the first quarter of fiscal 2005, the mattress
fabrics segment reported operating income of $2.9 million, or 11.2% of sales,
compared with $4.1 million, or 15.2% of sales, for the prior year period.
Operating income was primarily impacted by fewer sales weeks and inventory
markdowns related to certain customer programs. These factors are expected to
have significantly less impact on the segment's second quarter results.
Upholstery Fabrics Segment
Net Sales -- Upholstery fabric sales for the first quarter of fiscal 2005
decreased 9.8% to $41.9 million when compared to the first quarter of fiscal
2004. Average weekly sales for the first quarter of fiscal 2005 were $3.2
million compared with $3.3 million in the prior year period, a decrease of 2.9%.
The lower sales primarily reflect soft demand by furniture retailers, as well as
current consumer preference for leather furniture and increased competition from
imported fabrics, including cut and sewn kits, primarily from Asia.
With the company's offshore sourcing efforts, including the China platform, the
company is experiencing higher sales of upholstery fabric products produced
outside of the company's U.S. manufacturing plants. These sales, which include
microdenier suedes and fabrics produced at the company's China plant, increased
162% over the prior year period and accounted for approximately $5.5 million, or
13.1% of upholstery fabric sales for the quarter. Offshore sourced fabrics of
$2.1 million accounted for approximately 4.5% of upholstery fabric sales for the
same period last year.
Upholstery fabric yards sold during the first quarter were 9.3 million versus
10.6 million in the first quarter of fiscal 2004, a decline of 12.3%. Average
selling price was $4.25 per yard for the first quarter compared with $4.13 per
yard in the same quarter of last year, an increase of 2.9%, due to higher
average selling prices in both the CDF and CVP divisions.
Operating income (loss) -- Operating loss for the first quarter of fiscal
2005 was $2.6 million, or 6.3% of sales, compared with a loss of $1.7 million,
or 3.7% of sales, for the same period last year. The segment loss in each period
was primarily due to underutilization of the company's U.S. manufacturing
capacity. If sales continue to be under pressure in the upholstery fabrics
segment, management is prepared to take the necessary actions to further adjust
the company's cost structure and U.S. capacity, as the company has demonstrated
in recent years.
Other Corporate Expenses
Selling, General and Administrative Expenses -- SG&A expenses of $9.3
million for the first quarter of fiscal 2005 decreased approximately $1.2
million, or 11.8%, from the prior year amount. As a percent of net sales, SG&A
expenses decreased to 13.7% from 14.3% the previous year, due mostly to lower
professional fees.
Unallocated Corporate Expenses - The unallocated corporate expense category
includes certain items that have not been allocated to the company's segments.
The major components of unallocated corporate expenses include compensation and
benefits for certain executive officers and all costs related to being a public
company. For the first quarter of fiscal 2005, unallocated corporate expenses
totaled $810,000 compared with $1.5 million for the same period last year,
reflecting a substantial decrease in professional fees.
Interest Expense (Income) - Interest expense for the first quarter declined
to $940,000 from $1.5 million the previous year due to lower borrowings
outstanding. Interest income decreased to $27,000 from $122,000 the previous
year due to lower invested balances in fiscal 2005.
Income Taxes -- The effective tax rate (taxes as a percentage of pretax
income (loss)) for the first quarter of fiscal 2005 was 34.0% compared with
37.0% for the same period last year.
Liquidity and Capital Resources
Liquidity --The company's sources of liquidity include cash and cash
equivalents, cash flow from operations and amounts available under its revolving
credit line. These sources have been adequate for day-to-day operations and
capital expenditures. The company expects these sources of liquidity to continue
to be adequate for the foreseeable future. Cash and cash equivalents as of
August 1, 2004 decreased to $11.9 million from $14.6 million at the end of
fiscal 2004, primarily reflecting cash flow from operations of $2.4 million and
capital expenditures and payments on vendor financed capital expenditures of
$5.0 million.
Working Capital --Accounts receivable as of August 1, 2004 increased 0.1%
from the year-earlier level. Days sales outstanding totaled 30 days at August 1,
2004 compared with 32 days a year ago. Inventories at the close of the first
quarter increased 5.7% from a year ago. Inventory turns for the first quarter
were 4.7 versus 5.0 for the year-earlier period. Operating working capital
(comprised of accounts receivable and inventories, less trade accounts payable)
was $61.5 million at August 1, 2004, up from $54.9 million a year ago.
Financing Arrangements -- The company's long-term debt of $51.1 million is
unsecured and is comprised of $50.0 million in outstanding senior notes, with a
fixed interest rate of 7.76%, and a $1.1 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
1, 2004. The term of the bank agreement, which was due to expire in August 2004,
has been extended to August 2005. The first scheduled principal payment on the
$50.0 million senior notes is due March 2006 in the amount of $7.5 million. The
Canadian government loan is repaid in annual installments of approximately
$500,000 per year. The company was in compliance with all financial covenants in
its loan agreements as of August 1, 2004.
Capital Expenditures -- Capital spending for the first quarter of fiscal
2005 was $4.5 million, including approximately $3.9 million for the purchase of
a building that will serve as the company's new corporate offices and as new
space for the company's showrooms. The company expects the annual operating
costs of the new building to be significantly lower than the lease and related
costs associated with the current facilities. Depreciation for the first quarter
was $3.4 million, and is estimated at $13.5 million for the full fiscal year.
For fiscal 2005, the company anticipates capital expenditures to be
approximately $9.0 million, including the $5.7 million budgeted for the building
purchase and related renovations. The company expects that the availability of
funds under the revolving credit line and cash flow from operations will be
sufficient to fund its planned capital needs.
Cash Flow from Operations -- Cash flow from operations was $2.4 million for
the first quarter of fiscal 2005, compared with $7.9 million for the same period
last year. This decrease was primarily due to a higher inventory balances and
lower cash generated from accounts receivable balances. For the first quarter of
fiscal 2005, cash flow generated from operations, as well as a portion of
existing cash on hand, was used for capital expenditures, most of which relate
to the building purchase described above.
Seasonality
Mattress Fabrics Segment:
The ticking business and the bedding industry in general are slightly
seasonal, with sales typically being the highest in the company's first and
fourth fiscal quarters.
Upholstery Fabrics Segment:
The company's upholstery fabrics business is seasonal, with increased sales
during the company's second and fourth fiscal quarters. This seasonality results
from one-week closings of the company's manufacturing facilities, and the
facilities of most of its customers in the United States, during the company's
first and third fiscal quarters for the holiday weeks of 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 2005 that would
warrant further disclosure beyond those matters previously disclosed in the
company's Annual Report on Form 10-K for the year ended May 2, 2004.
Inflation
The cost of certain of the company's raw materials, principally fibers from
petroleum derivatives, and utility/energy costs, have increased during the past
few months due to rising oil prices; but overall operating expenses are
remaining generally stable. Factors that reasonably can be expected to influence
margins in the future include changes in raw material prices, trends in other
operating costs and overall competitive conditions.
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 1, 2004 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, any reasonably foreseeable
change in interest rates would have 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 is not material to the company's consolidated results of
operations; therefore, a 10% change in the exchange rate at August 1, 2004 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 increases in the value
of the underlying exposure.
Due to the start up of operations in China, the company does have exposure to
fluctuations in currency rates if China allows its currency to float, since it
has been essentially fixed in relation to the U.S. dollar. Currently, the risk
cannot be hedged. The amount of sales and manufacturing costs denominated in
Chinese currency is not material to the company's consolidated results of
operations; therefore, a 10% change in the exchange rate at August 1, 2004 would
not have a significant impact on the company's results of operations or
financial position.
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 principal executive officer and principal financial officer as of
August 1, 2004, and the principal executive officer and principal financial
officer have concluded that the company's disclosure controls and procedures are
adequate and effective. In addition, no change in the company's internal control
over financial reporting has occurred during, or subsequent to, the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, the company's internal control over financial reporting.
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.
31.1 Certification of Principal Executive Officer Pursuant
to Section 302 of Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer Pursuant
to Section 302 of Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer Pursuant
to Section 906 of Sarbanes-Oxley Act of 2002.
32.2 Certification of Principal Financial Officer Pursuant
to Section 906 of Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
The following reports on Form 8-K were furnished during the period covered by
this report:
Form 8-K dated May 12, 2004, included under Item 12, Results of Operations
and Financial Condition, the company's press release disclosing
management's estimates of its earnings for the fourth quarter of fiscal
year ended May 2, 2004.
Form 8-K dated May 13, 2004, included under Item 9, Regulation FD, the
company's press release announcing senior management changes.
Form 8-K dated June 16, 2004, included under Item 12, Results of
Operations and Financial Condition, the company's press release announcing
its financial results for the fourth quarter and fiscal year ended May 2,
2004.
SIGNATURES
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 10, 2004 By: /s/ Franklin N. Saxon
-----------------
Franklin N. Saxon
President and Chief Operating Officer
(Authorized to sign on behalf
of the registrant and also sign-
ing as principal financial officer)
By: /s/ Kenneth R. Bowling
------------------
Kenneth R. Bowling
Vice President-Finance, Treasurer
(Authorized to sign on behalf
of the registrant and also sign-
ing as principal accounting officer)
Exhibit 31.1
CERTIFICATION
I, Robert G. Culp, III, Chairman of the Board and Chief Executive Officer of
Culp, Inc., (principal executive officer) 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 10, 2004 /s/ Robert G. Culp,III
Robert G. Culp,III
Chairman of the Board and Chief Executive
Officer (principal executive officer)
Exhibit 31.2
CERTIFICATION
I, Franklin N. Saxon, President and Chief Operating Officer of
Culp, Inc., (principal financial officer) 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 10, 2004 /s/ Franklin N. Saxon
Franklin N. Saxon
President and Chief Operating Officer
(principal 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 1, 2004 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, (principal
executive officer) 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 (principal executive officer)
September 10, 2004
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 1, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Franklin N. Saxon,
President and Chief Operating Officer of the Company, (principal financial
officer) 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
President andChief Operating Officer
(principal financial officer)
September 10, 2004
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.