UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 6, 2006
Culp, Inc.
(Exact Name of Registrant as Specified in its Charter)
North Carolina 0-12781 56-1001967
- ---------------------------- ------------------------ -------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1823 Eastchester Drive
High Point, North Carolina 27265
----------------------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(336) 889-5161
-----------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
--------------------------------------------------------------------------
(Former name or address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
INDEX
-----
Page
Item 1.01 - Entry into a Material Definitive Agreement 3
Item 2.02 - Results of Operations and Financial Condition 4
Item 9.01(d) - Exhibits 4
Signature 5
Exhibits
2
Item 1.01 - Entry into a Material Definitive Agreement
On December 6, 2006, Culp, Inc. (the "Company") entered into a Second Amendment
to Note Purchase Agreements (the "Amendment"), a copy of which is attached
hereto as Exhibit 99(c). The Amendment amends the Note Purchase Agreements with
the holders of the Company's currently outstanding unsecured senior notes (the
"Notes"), which are payable over an average remaining term of three years
beginning March 2007 through March 2010. The holders of the Notes are identified
in Exhibit 99(c). The Amendment changes the financial covenants applicable to
the Company in a way that provides additional flexibility to account for recent
changes and potential additional changes that the Company has made or could make
to its business and the accounting consequences of those changes, including
asset write downs for closed facilities and a valuation allowance against the
Company's deferred tax assets. The Amendment also reduces the Company's
outstanding debt, without the payment of a prepayment penalty, and raises the
interest rate payable on the remaining outstanding Notes. A summary of the terms
of the Amendment, which is qualified by reference to the complete text of the
Amendment, is as follows:
o Upon execution of this amendment, the Company will prepay $3 million
in principal amount and interest on the Notes, without prepayment
penalty or "make whole" premium.
o An increase in the interest rate on the Notes from 7.76% to 8.80%,
effective December 1, 2006.
o A change in the calculation of consolidated net worth and tangible net
worth for purposes of financial covenant compliance, such that
restructuring expenses and related costs associated with previously
announced restructuring initiatives and any future restructuring
initiatives involving the remaining U.S. upholstery facilities will
not be counted against the Company's net worth.
o A similar change in the calculation of net worth such that a write
down or "valuation allowance" under GAAP against the Company's
deferred tax assets would not be counted as a reduction of the
Company's net worth for purposes of financial covenant compliance.
o A provision providing for prepayments of the Notes (at the option of
the noteholders and without prepayment penalty) to the extent that the
Company's cash balances exceed $8 million at the end of each fiscal
quarter.
o Covenants regarding the use of net proceeds from sales of assets.
o An increase in the amount of other debt allowed to be incurred by the
Company, including a provision that would allow for debt of up to $5
million in the Company's China subsidiary.
o Other changes to financial covenants, including limits on capital
expenditures and restrictions on the payment of dividends or stock
repurchases.
o Additional negative covenants to restrict certain changes in the
Company's business or methods of operation and certain business
transactions.
o A decrease in the cross-default provision to cover any debt in an
amount of $1 million or more.
3
Item 2.02 - Results of Operations and Financial Condition
On December 6, 2006, the Company issued a news release to announce its financial
results for the second quarter ended October 29, 2006. The news release is
attached hereto as Exhibit 99(a).
Also on December 6, 2006, the Company released a Financial Information Release
containing additional financial information and disclosures about the Company's
second quarter ended October 29, 2006. The Financial Information Release is
attached hereto as Exhibit 99(b).
The news release and Financial Information Release contain disclosures about
free cash flow, 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 and cash equivalents. In addition, the news release and
Financial Information Release contain proforma income statement information,
which reconciles the reported and projected income statement information with
proforma results, which exclude restructuring and related charges. The Company
has included this proforma information in order to show operational performance
excluding the effects of restructuring and related charges that are not expected
to occur on a regular basis. Management believes this presentation aids in the
comparison of financial results among comparable financial periods. In addition,
this information is used by management to make operational decisions about the
Company's business, is used in certain financial covenants in the Company's loan
agreement, and is used by the Company as a financial goal for purposes of
determining management incentive bonuses.
Forward Looking Information. This report and the exhibits 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 the company's future operations,
production levels, sales, SG&A or other expenses, margins, gross profit,
operating income, earnings or other performance measures. 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. Changes in consumer tastes or preferences toward products not
produced by the Company could erode demand for the Company's products. 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, including the "Risk Factors"
section in the company's most recent annual report of Form 10-K filed with the
Securities and Exchange Commission on July 26, 2006 for the fiscal year ended
April 30, 2006.
Item 9.01 (d) -- Exhibits
99(a) News Release dated December 6, 2006
99(b) Financial Information Release dated December 6, 2006
99(c) Second Amendment to Note Purchase Agreement
4
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 hereunto duly authorized.
CULP, INC.
(Registrant)
By: /s/Franklin N. Saxon
--------------------
President
By: Kenneth R. Bowling
------------------
Vice President-Finance, Treasurer
Dated: December 6, 2006
5
Exhibit 99(a)
Culp Announces Second Quarter Results for Fiscal 2007
HIGH POINT, N.C.--(BUSINESS WIRE)--Dec. 6, 2006--Culp, Inc. (NYSE:
CFI) today reported financial and operating results for the fiscal
2007 second quarter and six months ended October 29, 2006.
Overview
For the three months ended October 29, 2006, net sales were $59.0
million compared with $67.0 million a year ago. The company reported
net income of $812,000, or $0.07 per diluted share, for the second
quarter of fiscal 2007 compared with a net loss of $4.2 million, or
$0.36 per diluted share, for the second quarter of fiscal 2006. The
financial results for the second quarter of fiscal 2007 include
$233,000, or $0.02 per diluted share, in restructuring and related
charges, after taxes. Excluding these charges, net income for the
second fiscal quarter was $1,045,000, or $0.09 per diluted share. The
results for the second quarter of fiscal 2006 include restructuring
and related charges of $3.8 million, or $0.33 per diluted share, after
taxes. Excluding these charges, net loss for the second fiscal quarter
of 2006 was $332,000, or $0.03 per diluted share. (A reconciliation of
the net income (loss) and net income (loss) per share calculations has
been set forth on Page 6.)
For the six months ended October 29, 2006, the company reported
net sales of $121.6 million compared with $129.3 million for the same
period a year ago. Net income for the first six months of fiscal 2007
was $946,000, or $0.08 per diluted share, compared with a net loss of
$8.1 million, or $0.70 per diluted share, for the same period last
year. Excluding restructuring and related charges, net income for the
first six months of fiscal 2007 was $2.2 million, or $0.19 per diluted
share. Excluding restructuring and related charges, net loss for the
first six months of fiscal 2006 was $960,000, or $0.08 per diluted
share.
Robert G. Culp, III, chairman of the board and chief executive
officer of Culp, Inc., said, "We are pleased with our solid execution
during a challenging period for the retail home furnishing industry.
While our top line results reflect the furniture industry slowdown and
related inventory correction, we continued to make progress in
improving our operating performance in both mattress ticking and
upholstery fabrics. The changes we have made in each of our operating
segments have enabled us to operate more efficiently, even on lower
volumes."
Mattress Fabrics Segment
Mattress fabric (known as mattress ticking) sales for the second
quarter were $23.5 million, a 2.1 percent decline compared with $24.0
million for the second quarter of fiscal 2006. On a unit volume basis,
total yards sold decreased by 7.9 percent compared with the second
quarter of fiscal 2006. This trend primarily reflects a decline in
demand for printed ticking, a less popular category. However, sales of
knitted ticking continued to increase, reflecting changing customer
demand. Although prices on the key product lines have trended lower,
the average selling price of $2.28 per yard for mattress ticking for
the second quarter of fiscal 2007 was slightly higher than the average
selling price of $2.16 per yard for the second quarter last year, due
to the shift in product mix to increased sales of substantially higher
priced knitted ticking. Operating income for this segment was $2.5
million, or 10.5 percent of sales, compared with $1.7 million, or
6.9 percent of sales, for the prior-year period.
Culp noted, "We showed significant improvement in our operating
performance in mattress ticking over the same period a year ago, with
operating income up approximately 48 percent and operating margins
over 10 percent for the first time in two years. These results reflect
solid productivity gains as we are now realizing the full benefits of
our $10.0 million capital project implemented over the past two years.
Demand for knitted ticking continues to grow as our customers are now
using more knits on the top of the mattress and woven jacquards on the
sides. We expect this product line, which carries a higher average
selling price, to represent a higher percentage of our mattress
ticking business in fiscal 2007. Overall, we are pleased with the
trends in our mattress ticking business in a challenging market
environment. We have continued to make steady progress with key
customers and believe we have further enhanced our solid competitive
position in mattress ticking."
Upholstery Fabrics Segment
Sales for this segment were $35.5 million, a 17.4 percent decline
compared with $43.0 million in the second quarter of fiscal 2006.
Total yards sold declined by 18.1 percent, while average selling
prices were down less than one percent compared with the second
quarter of fiscal 2006. Sales of upholstery fabrics reflect higher
sales of non-U.S. produced fabrics, and continued very weak demand
industry wide for U.S. produced fabrics, driven by consumer preference
for leather and suede furniture and other imported fabrics, including
an increasing amount of cut and sewn kits. Sales of non-U.S. produced
fabrics were $20.6 million in the second quarter, up 65 percent over
the prior year period, while sales of U.S. produced fabrics were $14.9
million, down 51 percent from the second quarter of fiscal 2006.
Operating income for the upholstery fabrics segment for the second
quarter of fiscal 2007 was $393,000 compared with an operating loss of
$69,000 for the same period a year ago. These results reflect
significantly higher gross profit related to non-U.S. produced fabrics
and substantially lower gross profit related to U.S. produced fabrics.
Additionally, selling, general and administrative expenses were down
8.0 percent over the same period last year.
Culp said, "While we continued to see solid growth in sales of
non-U.S. produced upholstery fabrics, continued substantial weakness
in our U.S. business accounted for the overall segment sales decline
during the second quarter. Sales of our non-U.S. produced fabrics
represented 58 percent of total upholstery fabric sales for the second
quarter, compared with 29 percent a year ago. Culp has built an
industry-leading operation in China over the last three years designed
to accommodate the growing customer demand for products sourced
outside the U.S. We believe this wholly-owned platform is the key
driver of our future growth in upholstery fabrics. We are aggressively
expanding our capabilities in China with a strong focus on product
innovation, quality and global logistics. Culp now employs 450 people
and has five buildings totaling about 300,000 square feet located near
Shanghai, China.
"With respect to our U.S. operations, we have made considerable
progress in changing our product strategy, reducing our manufacturing
complexities and improving our cost structure," added Culp. "However,
the lower sales volumes are having a significant impact on our
expected operating results. Therefore, during the second quarter we
made the decision to further reduce our employment levels across our
remaining three U.S. manufacturing plants to more appropriately
support current demand. Currently, U.S. 'manufacturing' employment in
the upholstery fabrics segment is 320 people compared with 534 people
at the end of fiscal 2006 and 1,484 at the end of fiscal 2005. In
light of the continuing sharp declines in demand for U.S. produced
fabrics, we will continue to evaluate our domestic strategy and
production requirements. We remain committed to taking whatever
additional steps are necessary to achieve profitable U.S. upholstery
fabric operations, and the company could take additional restructuring
actions in the near future."
Balance Sheet
"Carefully managing our financial position is an important area of
focus in fiscal 2007," Culp noted. "At the end of the second fiscal
quarter, our balance sheet reflects $9.7 million in cash and cash
equivalents, unchanged from the amount at the end of fiscal 2006.
While we have built our inventories through the first six months of
fiscal 2007 in both operating segments, we are taking the necessary
steps to reduce these levels over the second half of this fiscal year.
As of October 29, 2006, we also have $1.6 million in assets held for
sale, which we expect will be sold over the next twelve months. Our
capital spending plans for fiscal 2007 are expected to approximate
$2.5 million, with $2.0 million already incurred for the year to date
period."
Outlook
Commenting on the outlook for the third quarter of fiscal 2007,
Culp remarked, "While we are encouraged by the substantial progress we
have made in the first half of this year, we see a continuation of the
slowdown in the retail furniture market as high gas prices, shaky
consumer confidence and a weaker housing market are adversely
affecting sales in the furniture industry. Additionally, we believe
there continue to be surplus inventories throughout the furniture
retail and manufacturing supply chain, as an increasing amount of
products are sourced from Asia with much longer lead times. Overall,
we expect our third quarter sales to be approximately 12 to 15 percent
lower than sales for the third quarter of fiscal 2006. We expect sales
in our mattress ticking segment will show about the same decline as
the 2.1 percent decline we had in the second quarter of fiscal 2007.
Operating income in this segment is expected to improve over the same
period last year due to our growing knitted ticking business and the
benefits from our recent capital project. In the upholstery fabrics
segment, we expect continued growth in sales of fabrics produced
outside the U.S., although the year-over-year growth rate is expected
to be considerably lower than the previous quarter. Sales of
domestically produced upholstery fabrics are expected to reflect very
weak demand, resulting in an estimated 15 to 20 percent overall
segment decline year-over-year. Due to the continued substantial
weakness in U.S. produced sales and a lower growth rate in non U.S.
produced sales, we believe the upholstery fabric segment's operating
results for the third quarter will show year-over-year improvement,
but will reflect a significant operating loss for the quarter.
Operating loss for the upholstery fabrics segment for the third
quarter of fiscal 2006 was $1.7 million.
"Considering these factors, we expect the company to report a net
loss in the third quarter in the range of ($0.06) to ($0.10) per
diluted share, excluding restructuring and related charges for
previously announced restructuring initiatives. This is management's
best estimate at present, recognizing that future financial results
are difficult to predict because the upholstery fabrics industry is
undergoing a dramatic transition and many internal changes are still
underway within the company. The actual results will depend primarily
upon the level of demand throughout the quarter, the company's
progress with respect to restructuring activities for our domestic
upholstery fabrics operations and the impact of raw material costs."
The company estimates that restructuring and related charges for
previously announced restructuring initiatives of approximately
$200,000 ($160,000 net of taxes, or $0.01 per diluted share) will be
incurred during the third fiscal quarter. Including these
restructuring and related charges, the company expects to report a net
loss for the third fiscal quarter in the range of ($0.07) to ($0.11)
per diluted share. (A reconciliation of the projected net loss per
share calculation has been set forth on Page 6.) This projected range
does not include additional charges that could be incurred in the
third quarter from any new restructuring initiatives.
In closing, Culp remarked, "While the furniture industry is going
through a very difficult cycle, we continue to move Culp forward and
believe we are taking the right steps to extend the leadership
positions we enjoy in both of our operating segments. The diversity of
our business is a key strength for Culp, with 75 percent of the
company's total sales from mattress fabrics and non-US produced
upholstery fabrics. We have built a solid competitive position in
mattress ticking and continue to expand our relationships with key
customers. Our non-U.S. produced upholstery fabrics are now the
driving force behind our upholstery fabrics business, and we are
aggressively expanding our capabilities and pursuing opportunities for
further innovation and expansion. We continue to evaluate our U.S.
upholstery fabric strategy and operations and believe we are making
progress toward creating a sustainable business model that will meet
current customer demand. Our primary objective is to restore Culp to
profitability in fiscal 2007 and position the company for growth over
the long term in today's global marketplace."
About the Company
Culp, Inc. is one of the world's largest marketers of mattress
fabrics for bedding and upholstery fabrics for furniture. The
company's fabrics are used principally in the production of bedding
products and residential and commercial upholstered furniture.
This release contains statements that may be deemed
"forward-looking statements" within the meaning of the federal
securities laws, including the Private Securities Litigation Reform
Act of 1995 (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
the company's future operations, production levels, sales, SG&A or
other expenses, margins, gross profit, operating income, earnings or
other performance measures. 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. Changes in consumer
tastes or preferences toward products not produced or marketed by the
company could erode demand for the company's products. 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, including the "Risk Factors" section in the
company's most recent annual report on form 10-K.
CULP, INC.
Condensed Financial Highlights
(Unaudited)
Three Months Ended Six Months Ended
------------------------- ---------------------------
October 29, October 30, October 29, October 30,
2006 2005 2006 2005
------------ ------------ ------------- -------------
Net sales $59,040,000 $67,006,000 $121,625,000 $129,348,000
Net income
(loss) $ 812,000 $(4,152,000) $ 946,000 $ (8,093,000)
Net income
(loss) per
share:
Basic $ 0.07 $ (0.36) $ 0.08 $ (0.70)
Diluted $ 0.07 $ (0.36) $ 0.08 $ (0.70)
Net income
(loss) per
share, diluted,
excluding
restructuring
and related
charges(1) $ 0.09 $ (0.03) $ 0.19 $ (0.08)
Average shares
outstanding:
Basic 11,686,000 11,559,000 11,679,000 11,555,000
Diluted 11,689,000 11,559,000 11,682,000 11,555,000
(1) Excludes restructuring and related charges of $365,000 ($233,000
or $0.02 per diluted share, after taxes) for the second quarter of
fiscal 2007. Excludes restructuring and related charges of $1.5
million ($1.2 million, or $0.10 per diluted share, after taxes) for
the first six months of fiscal 2007.
Excludes restructuring and related charges of $6.2 million ($3.8
million, or $0.33 per diluted share, after taxes) for the second
quarter of fiscal 2006. Excludes restructuring and related charges
of $11.5 million ($7.1 million, or $0.62 per diluted share, after
taxes) for the first six months of fiscal 2006.
CULP, INC.
Reconciliation of Net Income (Loss) as Reported
to Pro Forma Net Income (Loss)
(Unaudited)
Three Months Ended Six Months Ended
------------------------ ------------------------
October 29, October 30, October 29, October 30,
2006 2005 2006 2005
----------- ------------ ----------- ------------
Net income (loss), as
reported $ 812,000 $(4,152,000) $946,000 $(8,093,000)
Restructuring and
related charges, net
of income taxes 233,000 3,820,000 1,218,000 7,133,000
----------- ------------ ----------- ------------
Pro forma net income
(loss) $1,045,000 $ (332,000) $2,164,000 $ (960,000)
=========== ============ =========== ============
Reconciliation of Net Income (Loss) Per Share as Reported to
Pro Forma Net Income (Loss) Per Share
(Unaudited)
Three Months Ended(2) Six Months Ended(2)
----------------------- -----------------------
October 29, October 30, October 29, October 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net income (loss), per
diluted share, as
reported $ 0.07 $ (0.36) $ 0.08 $ (0.70)
Restructuring and
related charges, net
of income taxes 0.02 0.33 0.10 0.62
----------- ----------- ----------- -----------
Net income (loss) per
diluted share,
adjusted $ 0.09 $ (0.03) $ 0.19 $ (0.08)
=========== =========== =========== ===========
(2) Per share numbers have been rounded
Reconciliation of Projected Range of Net Loss Per Share
to Projected Range of Pro Forma Net Loss Per Share
(Unaudited)
Three Months Ending
January 28, 2007
----------------------
Projected range of net loss per diluted share $(0.07)-$(0.11)
Projected restructuring and related charges, net
of income taxes 0.01
----------------------
Projected range of pro forma net loss per
diluted share $(0.06)-$(0.10)
======================
CONTACT: Culp, Inc.
Investor Contact:
Kenneth R. Bowling
Vice President of Finance
336-881-5630
or
Media Contact:
Kenneth M. Ludwig
Senior Vice President, Human Resources
336-889-5161
Exhibit 99(b)
Page 1 of 7
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 29, 2006 AND OCTOBER 30, 2005
(UNAUDITED)
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED
--------------------------------------------------------------------------
Amounts Percent of Sales
----------------------------- ----------------------------
October 29, October 30, % Over October 29, October 30,
2006 2005 (Under) 2006 2005
-------------- -------------- --------------- --------------- ------------
Net sales $ 59,040 67,006 (11.9) % 100.0 % 100.0 %
Cost of sales 51,049 61,455 (16.9) % 86.5 % 91.7 %
-------------- -------------- --------------------------------------------
Gross profit 7,991 5,551 44.0 % 13.5 % 8.3 %
Selling, general and
administrative expenses 6,273 6,526 (3.9) % 10.6 % 9.7 %
Restructuring (credit) expense (264) 4,412 (106.0) % (0.4) % 6.6 %
-------------- -------------- --------------------------------------------
Income (loss) from operations 1,982 (5,387) 136.8 % 3.4 % (8.0)%
Interest expense 938 942 (0.4) % 1.6 % 1.4 %
Interest income (51) (19) 168.4 % (0.1) % (0.0)%
Other expense 338 214 57.9 % 0.6 % 0.3 %
-------------- -------------- --------------------------------------------
Income (loss) before income taxes 757 (6,524) 111.6 % 1.3 % (9.7)%
Income taxes* (55) (2,372) (97.7) % (7.3) % 36.4 %
-------------- -------------- --------------------------------------------
Net income (loss) $ 812 (4,152) 119.6 % 1.4 % (6.2)%
============== ============== ============================================
Net income (loss) per share-basic $0.07 ($0.36) 119.4 %
Net income (loss) per share-diluted $0.07 ($0.36) 119.4 %
Net income (loss) per share, diluted,
excluding restructuring $0.09 ($0.03) 400.0 %
and related charges (see proforma statement
on page 6)
Average shares outstanding-basic 11,686 11,559 1.1 %
Average shares outstanding-diluted 11,689 11,559 1.1 %
SIX MONTHS ENDED
-------------------------------------------------------------------------
Amounts Percent of Sales
----------------------------- ----------------------------
October 29, October 30, % Over October 29, October 30,
2006 2005 (Under) 2006 2005
-------------- -------------- --------------- --------------- ------------
Net sales $ 121,625 129,348 (6.0) % 100.0 % 100.0 %
Cost of sales 105,574 117,240 (10.0) % 86.8 % 90.6 %
-------------- -------------- --------------------------------------------
Gross profit 16,051 12,108 32.6 % 13.2 % 9.4 %
Selling, general and
administrative expenses 12,846 16,382 (21.6) % 10.6 % 12.7 %
Restructuring expense 466 6,238 (92.5) % 0.4 % 4.8 %
-------------- -------------- --------------------------------------------
Income (loss) from operations 2,739 (10,512) 126.1 % 2.3 % (8.1)%
Interest expense 1,888 1,892 (0.2) % 1.6 % 1.5 %
Interest income (97) (35) 177.1 % (0.1) % (0.0)%
Other expense 60 347 (82.7) % 0.0 % 0.3 %
-------------- -------------- --------------------------------------------
Income (loss) before income taxes 888 (12,716) 107.0 % 0.7 % (9.8)%
Income taxes* (58) (4,623) (98.7) % (6.5) % 36.4 %
-------------- -------------- --------------------------------------------
Net income (loss) $ 946 (8,093) 111.7 % 0.8 % (6.3)%
============== ============== ============== ============== ===========
Net income (loss) per share-basic $0.08 ($0.70) 111.4 %
Net income (loss) per share-diluted $0.08 ($0.70) 111.4 %
Net income (loss) per share, diluted,
excluding restructuring $0.19 ($0.08) 337.5 %
and related charges (see proforma statement
on page 7)
Average shares outstanding-basic 11,679 11,555 1.1 %
Average shares outstanding-diluted 11,682 11,555 1.1 %
* Percent of sales column for income taxes is calculated as a % of income (loss) before income taxes.
Page 2 of 7
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
OCTOBER 29, 2006, OCTOBER 30, 2005 AND APRIL 30, 2006
Unaudited
(Amounts in Thousands)
Amounts Increase
-------------------------------
October 29, October 30, (Decrease) * April 30,
------------------------------
2006 2005 Dollars Percent 2006
--------------- -------------- -------------- --------------- --------------
Current assets
Cash and cash equivalents $ 9,706 12,883 (3,177) (24.7)% 9,714
Accounts receivable 23,286 26,919 (3,633) (13.5)% 29,049
Inventories 44,430 43,449 981 2.3 % 36,693
Deferred income taxes 7,120 7,054 66 0.9 % 7,120
Assets held for sale 1,571 - 1,571 100.0 % 3,111
Other current assets 1,506 1,846 (340) (18.4)% 1,287
--------------- -------------- -------------- --------------- --------------
Total current assets 87,619 92,151 (4,532) (4.9)% 86,974
Property, plant & equipment, net 42,487 54,212 (11,725) (21.6)% 44,639
Goodwill 4,114 4,114 - 0.0 % 4,114
Deferred income taxes 22,023 14,541 7,482 51.5 % 20,176
Other assets 1,354 1,521 (167) (11.0)% 1,564
--------------- -------------- -------------- --------------- --------------
Total assets $ 157,597 166,539 (8,942) (5.4)% 157,467
=============== ============== ============== =============== ==============
Current liabilities
Current maturities of long-term
debt $ 7,742 8,346 (604) (7.2)% 8,060
Accounts payable 18,540 16,613 1,927 11.6 % 20,835
Accrued expenses 9,001 10,669 (1,668) (15.6)% 7,845
Accrued restructuring 3,017 5,486 (2,469) (45.0)% 4,054
Income taxes payable 3,880 1,023 2,857 279.3 % 2,488
--------------- -------------- -------------- --------------- --------------
Total current liabilities 42,180 42,137 43 0.1 % 43,282
Long-term debt , less current maturities 39,554 46,584 (7,030) (15.1)% 39,662
--------------- -------------- -------------- --------------- --------------
Total liabilities 81,734 88,721 (6,987) (7.9)% 82,944
Shareholders' equity 75,863 77,818 (1,955) (2.5)% 74,523
--------------- -------------- -------------- --------------- --------------
Total liabilities and
shareholders' equity $ 157,597 166,539 (8,942) (5.4)% 157,467
=============== ============== ============== =============== ==============
Shares outstanding 11,687 11,559 128 1.1 % 11,655
=============== ============== ============== =============== ==============
* Derived from audited financial statements
Page 3 of 7
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 29, 2006 AND OCTOBER 30, 2005
Unaudited
(Amounts in Thousands)
SIX MONTHS ENDED
-----------------------------
Amounts
-----------------------------
October 29, October 30,
2006 2005
-------------- --------------
Cash flows from operating activities:
Net income (loss) $ 946 (8,093)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation 3,364 9,836
Amortization of other assets 41 51
Stock-based compensation 287 104
Deferred income taxes (1,847) (4,455)
Restructuring (credit) expense (364) 3,092
Changes in assets and liabilities:
Accounts receivable 5,763 1,905
Inventories (7,737) 7,050
Other current assets (219) 845
Other assets 148 149
Accounts payable (1,965) (5,623)
Accrued expenses 1,156 1,113
Accrued restructuring (1,037) (364)
Income taxes payable 1,392 (521)
-------------- --------------
Net cash (used in) provided by operating activities (72) 5,089
-------------- --------------
Cash flows from investing activities:
Capital expenditures (1,705) (4,875)
Proceeds from the sale of buildings and equipment 2,738 3,950
-------------- --------------
Net cash provided by (used in) investing activities 1,033 (925)
-------------- --------------
Cash flows from financing activities:
Payments on vendor-financed capital expenditures (670) (799)
Payments on long-term debt (426) -
Proceeds from issuance of long-term debt - 4,380
Proceeds from common stock issued 127 31
-------------- --------------
Net cash (used in) provided by financing activities (969) 3,612
-------------- --------------
(Decrease) increase in cash and cash equivalents (8) 7,776
Cash and cash equivalents at beginning of period 9,714 5,107
-------------- --------------
Cash and cash equivalents at end of period $ 9,706 12,883
============== ==============
Free Cash Flow (1) $ 291 3,365
============== ==============
(1) Free Cash Flow reconciliation is as follows: 2nd Qtr 2nd Qtr
FY 2007 FY 2006
------------------------------
A) Net cash (used in) provided by operating activities $ (72) 5,089
B) Minus: Capital Expenditures (1,705) (4,875)
C) Add: Proceeds from the sale of buildings and equipment 2,738 3,950
D) Minus: Payments on vendor-financed capital expenditures (670) (799)
-------------- --------------
$ 291 3,365
============== ==============
Page 4 of 7
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES, GROSS PROFIT AND OPERATING INCOME (LOSS) BY SEGMENT
FOR THE THREE MONTHS ENDED OCTOBER 29, 2006 AND OCTOBER 30, 2005
(Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED)
----------------------------------------------------------------------------------
Amounts Percent of Total Sales
------------------------------- --------------------------------
October 29, October 30, % Over October 29, October 30,
Net Sales by Segment 2006 2005 (Under) 2006 2005
- ----------------------------------- -------------- -------------- --------------- --------------- ----------------
Mattress Fabrics $ 23,494 23,990 (2.1)% 39.8 % 35.8 %
Upholstery Fabrics 35,546 43,016 (17.4)% 60.2 % 64.2 %
-------------- -------------- --------------- --------------- ----------------
Net Sales $ 59,040 67,006 (11.9)% 100.0 % 100.0 %
============== ============== =============== =============== ================
Gross Profit by Segment Gross Profit Margin
- ----------------------------------- --------------------------------
Mattress Fabrics $ 4,144 3,302 25.5 % 17.6 % 13.8 %
Upholstery Fabrics 4,138 4,000 3.5 % 11.6 % 9.3 %
-------------- -------------- --------------- --------------- ----------------
Subtotal 8,282 7,302 13.4 % 14.0 % 10.9 %
Restructuring related charges (291)(1) (1,751)(3) (83.4)% (0.5)% (2.6) %
-------------- -------------- --------------- --------------- ----------------
Gross Profit $ 7,991 5,551 44.0 % 13.5 % 8.3 %
============== ============== =============== =============== ================
Selling, General and Administrative
expenses by Segment Percent of Sales
- ----------------------------------- --------------------------------
Mattress Fabrics $ 1,674 1,636 2.3 % 7.1 % 6.8 %
Upholstery Fabrics 3,745 4,069 (8.0)% 10.5 % 9.5 %
Unallocated Corporate expenses 824 821 0.4 % 1.4 % 1.2 %
-------------- -------------- --------------- --------------- ----------------
6,243 6,526 (4.3)% 10.6 % 9.7 %
Restructuring related charges 30 (1) - 100.0 % 0.1 % 0.0 %
-------------- -------------- --------------- --------------- ----------------
Selling, General and
Administrative expenses $ 6,273 6,526 (3.9)% 10.6 % 9.7 %
============== ============== =============== =============== ================
Operating Income (loss) by Segment Operating Income (Loss) Margin
- ----------------------------------- --------------------------------
Mattress Fabrics $ 2,470 1,666 48.3 % 10.5 % 6.9 %
Upholstery Fabrics 393 (69) 669.6 % 1.1 % (0.2) %
Unallocated corporate expenses (824) (821) 0.4 % (1.4)% (1.2) %
-------------- -------------- --------------- --------------- ----------------
Subtotal 2,039 776 162.8 % 3.5 % 1.2 %
Restructuring credit (expense) 264 (2) (4,412)(4) (106.0)% 0.4 % (6.6) %
Restructuring related charges (321)(1) (1,751)(3) (81.7)% (0.5)% (2.6) %
-------------- -------------- --------------- --------------- ----------------
Operating income (loss) $ 1,982 (5,387) 136.8 % 3.4 % (8.0) %
============== ============== =============== =============== ================
Depreciation by Segment
- -----------------------------------
Mattress Fabrics $ 918 893 2.8 %
Upholstery Fabrics 744 1,417 (47.5)%
-------------- -------------- ---------------
Subtotal 1,662 2,310 (28.1)%
Accelerated Depreciation - 1,355 (100.0)%
-------------- -------------- ---------------
Total Depreciation $ 1,662 3,665 (54.7)%
============== ============== ===============
Notes:
(1)The $291,000 and $30,000 represents restructuring related charges for other operating costs associated with the
closing of plant facilities.
(2)The $264,000 restructuring credit represents $354,000 for asset movement costs, $333,000 for lease termination and
other exit costs, a credit of $53,000 for write-downs of a building and equipment, a credit of $437,000 for sales
proceeds received on equipment with no carrying value associated with the closing of plant facilities, and a credit
of $461,000 associated with employee termination benefits.
(3)The $1.8 million represents restructuring related charges of $1.4 million for accelerated depreciation, $331,000
for inventory markdowns, and $65,000 for other operating costs associated with the closing of plant facilities.
(4)The $4.4 million represents restructuring charges of $2.1 million for write-downs of buildings and equipment, $1.6
million for employee termination benefits, $395,000 for asset movement costs and $328,000 for lease termination
costs.
Page 5 of 7
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES, GROSS PROFIT AND OPERATING INCOME (LOSS) BY SEGMENT
FOR THE SIX MONTHS ENDED OCTOBER 29, 2006 AND OCTOBER 30, 2005
(Amounts in thousands)
SIX MONTHS ENDED (UNAUDITED)
------------------------------------------------------------------------------------
Amounts Percent of Total Sales
---------------------------------- ---------------------------------
October 29, October 30, % Over October 29, October 30,
Net Sales by Segment 2006 2005 (Under) 2006 2005
- ----------------------------------- ----------------- -------------- ------------- ---------------- ----------------
Mattress Fabrics $ 45,339 46,905 (3.3)% 37.3 % 36.3 %
Upholstery Fabrics 76,286 82,443 (7.5)% 62.7 % 63.7 %
----------------- -------------- ------------- ---------------- ----------------
Net Sales $ 121,625 129,348 (6.0)% 100.0 % 100.0 %
================= ============== ============= ================ ================
Gross Profit by Segment Gross Profit Margin
- ----------------------------------- ---------------------------------
Mattress Fabrics $ 7,665 6,397 19.8 % 16.9 % 13.6 %
Upholstery Fabrics 9,423 7,957 18.4 % 12.4 % 9.7 %
----------------- -------------- ------------- ---------------- ----------------
Subtotal 17,088 14,354 19.0 % 14.0 % 11.1 %
Restructuring related charges (1,037)(1) (2,246)(3) (53.8)% (0.9)% (1.7) %
----------------- -------------- ------------- ---------------- ----------------
Gross Profit $ 16,051 12,108 32.6 % 13.2 % 9.4 %
================= ============== ============= ================ ================
Selling, General and Administrative
expenses by Segment Percent of Sales
- ----------------------------------- ---------------------------------
Mattress Fabrics $ 3,337 3,373 (1.1)% 7.4 % 7.2 %
Upholstery Fabrics 7,453 8,405 (11.3)% 9.8 % 10.2 %
Unallocated Corporate expenses 2,026 1,582 28.1 % 1.7 % 1.2 %
----------------- -------------- ------------- --------------- ----------------
Subtotal 12,816 13,360 (4.1)% 10.5 % 10.3 %
Restructuring related charges 30 (1) 3,022 (4) (99.0)% 0.0 % 2.3 %
----------------- -------------- ------------- ---------------- ----------------
Selling, General and
Administrative expenses $ 12,846 16,382 (21.6)% 10.6 % 12.7 %
================= ============== ============= ================ ================
Operating Income (loss) by Segment Operating Income (Loss) Margin
- ----------------------------------- ---------------------------------
Mattress Fabrics $ 4,328 3,024 43.1 % 9.5 % 6.4 %
Upholstery Fabrics 1,970 (448) 539.7 % 2.6 % (0.5) %
Unallocated corporate expenses (2,026) (1,582) 28.1 % (1.7)% (1.2) %
----------------- -------------- ------------- ---------------- ----------------
Subtotal 4,272 994 329.8 % 3.5 % 0.8 %
Restructuring expense (466)(2) (6,238)(5) (92.5)% (0.4)% (4.8) %
Restructuring related charges (1,067)(1) (5,268)(6) (79.7)% (0.9)% (4.1) %
----------------- -------------- ------------- ---------------- ----------------
Operating income (loss) $ 2,739 (10,512) 126.1 % 2.3 % (8.1) %
================= ============== ============= ================ ================
Depreciation by Segment
- -----------------------------------
Mattress Fabrics $ 1,860 1,749 6.3 %
Upholstery Fabrics 1,504 3,216 (53.2)%
----------------- -------------- -------------
Subtotal 3,364 4,965 (32.2)%
Accelerated Depreciation - 4,871 (100.0)%
----------------- -------------- -------------
Total Depreciation $ 3,364 9,836 (65.8)%
================= ============== =============
Notes:
(1) The $1.1 million represents restructuring related charges of $798,000 for other operating costs associated with the
closing of plant facilities and $239,000 for inventory markdowns. The $30,000 represents restructuring related charges
for other operating costs associated with the closing of plant facilities.
(2) The $466,000 represents restructuring charges of $740,000 for asset movement costs, $327,000 for lease termination
and other exit costs, $62,000 for net write-downs of buildings and equipment, a credit of $226,000 for employee
termination benefits, and a credit of $437,000 for sales proceeds received on equipment with no carrying value
associated with the closing of plant facilities.
(3) The $2.3 million represents restructuring related charges of $1.9 million of accelerated depreciation, $331,000 for
inventory markdowns, and $65,000 for other operating costs associated with the closing of plant facilities.
(4) The $3.0 million represents accelerated depreciation.
(5) The $6.2 million represents restructuring charges of $2.9 million for write-downs of buildings and equipment, $1.6
million for asset movement costs, $1.4 million for employee termination benefits, and $378,000 for lease termination
costs.
(6) The $5.3 million represents restructuring related charges of $4.9 million for accelerated depreciation, $331,000 for
inventory markdowns, and $65,000 for other operating costs associated with the closing of plant facilities.
Page 6 of 7
CULP, INC.
PROFORMA CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)
FOR THE THREE MONTHS ENDED OCTOBER 29, 2006 AND OCTOBER 30, 2005
(Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED
--------------------------------------------------------------------------------------
As Reported October 29, 2006
October 29, % of % of Proforma Net % of
2006 Sales Adjustments Sales of Adjustments Sales
-------------------------- -------------------------- ------------------------------
Net sales $ 59,040 100.0% 0 59,040 100.0%
Cost of
sales 51,049 86.5% (291) -0.5%(1) 50,758 86.0%
-------------------------- -------------------------- ------------------------------
Gross profit 7,991 13.5% (291) -0.5% 8,282 14.0%
Selling,
general
and
administrative expenses 6,273 10.6% (30) -0.1%(1) 6,243 10.6%
Restructuring (credit)
expense (264) -0.4% 264 0.4%(2) 0 0.0%
-------------------------- -------------------------- ------------------------------
Income (loss)
from
operations 1,982 3.4% (57) -0.1% 2,039 3.5%
Interest
expense 938 1.6% 0 0.0% 938 1.6%
Interest
income (51) -0.1% 0 0.0% (51) -0.1%
Other
expense 338 0.6% (308) -0.5%(3) 30 0.1%
-------------------------- -------------------------- ------------------------------
Income (loss)
before income
taxes 757 1.3% (365) -0.6%(6) 1,122 1.9%
Income
taxes (8) (55) -7.3% (132) 36.2% 77 6.9%
-------------------------- -------------------------- ------------------------------
Net income
(loss) $ 812 1.4% (233) -0.4% 1,045 1.8%
========================== ========================== ==============================
Net income (loss) per
share-basic $0.07 ($0.02) $0.09
Net income (loss) per
share-diluted $0.07 ($0.02) $0.09
Average shares
outstanding-basic 11,686 11,686 11,686
Average shares
outstanding-diluted 11,689 11,686 11,689
THREE MONTHS ENDED
------------------------------------------------------------------------------------------
As Reported October 30, 2005 Proforma
October 30, % of % of Proforma Net % of % Over
2005 Sales Adjustments Sales of Adjustments Sales (Under)
------------------------- ------------------- ---------------------- ----------------
Net sales 67,006 100.0% 0 67,006 100.0% -11.9%
Cost of
sales 61,455 91.7% (1,751) -2.6%(4) 59,704 89.1% -15.0%
------------------------- ------------------- ---------------------- ----------------
Gross profit 5,551 8.3% (1,751) -2.6% 7,302 10.9% 13.4%
Selling,
general
and
administrative expenses 6,526 9.7% 0 0.0% 6,526 9.7% -4.3%
Restructuring (credit)
expense 4,412 6.6% (4,412) -6.6%(5) 0 0.0% 0.0%
------------------------- ------------------- ---------------------- ----------------
Income (loss)
from
operations (5,387) -8.0% (6,163) -9.2% 776 1.2% 162.8%
Interest
expense 942 1.4% 0 0.0% 942 1.4% -0.4%
Interest
income (19) 0.0% 0 0.0% (19) 0.0% 168.4%
Other
expense 214 0.3% 0 0.0% 214 0.3% -86.0%
------------------------- ------------------- ---------------------- ----------------
Income (loss)
before income
taxes (6,524) -9.7% (6,163) -9.2%(7) (361) -0.5% -410.8%
Income
taxes (8) (2,372) 36.4% (2,343) 38.0% (29) 8.0% -366.6%
------------------------- ------------------- ---------------------- ----------------
Net income
(loss) (4,152) -6.2% (3,820) -5.7% (332) -0.5% -414.6%
========================= =================== ====================== ================
Net income (loss) per
share-basic ($0.36) ($0.33) ($0.03)
Net income (loss) per
share-diluted ($0.36) ($0.33) ($0.03)
Average shares
outstanding-basic 11,559 11,559 11,559
Average shares
outstanding-diluted 11,559 11,559 11,559
Notes:
(1) The $291,000 and $30,000 represent restructuring related charges for other operating costs associated
with the closing of plant facilities.
(2) The $264,000 restructuring credit represents $354,000 for asset movement costs, $333,000 for lease
termination and other exit costs, a credit of $53,000 for write-downs of a building and equipment, a
credit of $437,000 for sales proceeds received on equipment with no carrying value associated with the
closing of plant facilities, and a credit of $461,000 associated with employee termination benefits.
(3) The $308,000 represents sales proceeds received on equipment with no carrying value associated with the
closing of plant facilities.
(4) The $1.8 million represents restructuring related charges of $1.4 million for accelerated depreciation,
$331,000 for inventory markdowns, and $65,000 for other operating costs associated with the closing of
plant facilities.
(5) The $4.4 million represents $2.1 million for write-downs of buildings and equipment, $1.6 million for
employee termination benefits, $395,000 for asset movement costs and $328,000 for lease termination costs.
(6) Of this total charge, $418,000 represent cash charges and the credit of $53,000 for write-downs of a
building and equipment represent a non-cash gain.
(7) Of this total charge, $2.4 million and $3.8 million represent cash and non-cash charges, respectively.
(8)The percent of net sales column for income taxes is calculated as a % of income (loss) before income
taxes.
Page 7 of 7
CULP, INC.
PROFORMA CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)
FOR THE SIX MONTHS ENDED OCTOBER 29, 2006 AND OCTOBER 30, 2005
(Amounts in Thousands, Except for Per Share Data)
SIX MONTHS ENDED
-------------------------------------------------------------------------------------
As Reported October 29, 2006
October 29, % of % of Proforma Net % of
2006 Sales Adjustments Sales of Adjustments Sales
-------------------------- -------------------------- -----------------------------
Net sales $ 121,625 100.0% 0 121,625 100.0%
Cost of
sales 105,574 86.8% (1,037) -0.9%(1) 104,537 86.0%
-------------------------- -------------------------- -----------------------------
Gross profit 16,051 13.2% (1,037) -0.9% 17,088 14.0%
Selling, general and
administrative expenses 12,846 10.6% (30) 0.0%(1) 12,816 10.5%
Restructuring expense 466 0.4% (466) -0.4%(2) 0 0.0%
-------------------------- -------------------------- -----------------------------
Income (loss)
from
operations 2,739 2.3% (1,533) -1.3% 4,272 3.5%
Interest
expense 1,888 1.6% 0 0.0% 1,888 1.6%
Interest
income (97) -0.1% 0 0.0% (97) -0.1%
Other
expense 60 0.0% 0 0.0% 60 0.0%
-------------------------- -------------------------- -----------------------------
Income (loss)
before income
taxes 888 0.7% (1,533) -1.3%(6) 2,421 2.0%
Income
taxes (8) (58) -6.5% (315) 20.5% 257 10.6%
-------------------------- -------------------------- -----------------------------
Net income
(loss) $ 946 0.8% (1,218) -1.0% 2,164 1.8%
========================== ========================== =============================
Net income (loss) per
share-basic $0.08 ($0.10) $0.19
Net income (loss) per
share-diluted $0.08 ($0.10) $0.19
Average shares
outstanding-basic 11,679 11,679 11,679
Average shares
outstanding-diluted 11,682 11,679 11,682
SIX MONTHS ENDED
----------------------------------------------------------------------------------------
As Reported October 30, 2005 Proforma
October 30, % of % of Proforma Net % of % Over
2005 Sales Adjustments Sales of Adjustments Sales (Under)
-------------------- ------------------- ---------------------- ------------------
Net sales 129,348 100.0% 0 129,348 100.0% -6.0%
Cost of
sales 117,240 90.6% (2,246) -1.7%(3) 114,994 88.9% -9.1%
-------------------- ------------------- ---------------------- ------------------
Gross profit 12,108 9.4% (2,246) -1.7% 14,354 11.1% 19.0%
Selling, general and
administrative expenses 16,382 12.7% (3,022) -2.3%(4) 13,360 10.3% -4.1%
Restructuring expense 6,238 4.8% (6,238) -4.8%(5) 0 0.0% 0.0%
-------------------- ------------------- ---------------------- ------------------
Income (loss)
from
operations (10,512) -8.1% (11,506) -8.9% 994 0.8% 329.8%
Interest
expense 1,892 1.5% 0 0.0% 1,892 1.5% -0.2%
Interest
income (35) 0.0% 0 0.0% (35) 0.0% 177.1%
Other
expense 347 0.3% 0 0.0% 347 0.3% -82.7%
-------------------- ------------------- ---------------------- ------------------
Income (loss)
before income
taxes (12,716) -9.8% (11,506) -8.9%(7) (1,210) -0.9% -300.1%
Income
taxes (8) (4,623) 36.4% (4,373) 38.0% (250) 20.7% -202.8%
-------------------- ------------------- ---------------------- ------------------
Net income
(loss) (8,093) -6.3% (7,133) -5.5% (960) -0.7% -325.4%
==================== =================== ====================== ==================
Net income (loss) per
share-basic ($0.70) ($0.62) ($0.08)
Net income (loss) per
share-diluted ($0.70) ($0.62) ($0.08)
Average shares
outstanding-basic 11,555 11,555 11,555
Average shares
outstanding-diluted 11,555 11,555 11,555
Notes:
(1) The $1.1 million represents restructuring related charges of $798,00 for other operating costs associated with the
closing of plant facilities and $239,000 for inventory markdowns. The $30,000 represents restructuring related charges
for other operating costs associated with the closing of plant facilities.
(2) The $466,000 represents restructuring charges of $740,000 for asset movement costs, $327,000 for lease termination
and other exit costs, $62,000 for net write-downs of buildings and equipment, a credit of $226,000 for employee
termination benefits, and a credit of $437,000 for sales proceeds received on equipment with no carrying value
associated with the closing of plant faciilties.
(3) The $2.3 million represents restructuring related charges of $1.9 million of accelerated depreciation, $331,000 for
inventory markdowns, and $65,000 for other operating costs associated with the closing of plant facilities.
(4) The $3.0 million represents accelerated depreciation.
(5) The $6.2 million represents $2.9 million for write-downs of buildings and equipment, $1.6 million for asset movement
costs, $1.4 million for employee termination benefits, and $378,000 for lease termination costs.
(6) Of this total charge, $1.2 million and $301,000 represent cash and non-cash charges, respectively.
(7) Of this total charge, $3.4 million and $8.1 million represent cash and non-cash charges, respectively.
(8) The percent of net sales column for income taxes is calculated as a % of income (loss) before income taxes.
Exhibit 99(c)
SECOND AMENDMENT TO NOTE PURCHASE AGREEMENTS
THIS SECOND AMENDMENT TO NOTE PURCHASE AGREEMENTS, dated as of the 6th
day of December, 2006 (this "Amendment"), is made by and between Culp, Inc., a
North Carolina corporation (the "Company"), and the holders of Notes (as defined
in the Note Purchase Agreements referred to below) listed on Schedule A (the
"Noteholders").
RECITALS
A. The Company and certain financial institutions or entities have heretofore
entered into separate and several Note Purchase Agreements, each dated as of
March 4, 1998, as amended by that certain First Amendment to Note Purchase
Agreements, dated as of January 31, 2002 (collectively, the "Note Purchase
Agreements"), pursuant to which the Company has issued its $20,000,000 7.76%
Series A Senior Notes due March 15, 2008 collectively (the "Series A Notes") and
its $55,000,000 7.76% Series B Senior Notes due March 15, 2010 (collectively,
the "Series B Notes", and together with the Series A Notes, the "Notes").
Capitalized terms used herein without definition shall have the meanings given
to them in the Note Purchase Agreements.
B. The Company has requested that the Noteholders amend the Note Purchase
Agreements as set forth herein, and the Noteholders have agreed to effect such
amendments upon the terms and conditions set forth herein.
STATEMENT OF AGREEMENT
The parties hereto agree as follows:
1. Interest Rate. Effective December 1, 2006, the principal amount of the
Notes will bear interest at a rate equal to 8.80% per annum. Accordingly, all
references in the Note Purchase Agreements to "7.76%" as the rate of interest
applicable to the Notes shall be deemed to read "8.80%," and all references in
the Note Purchase Agreements to "9.76%" as the rate of interest applicable to
overdue payments of principal, interest or any Make-whole Amount shall be deemed
to read "10.80%."
2. Amendment to Section 5.15. Section 5.15 of each of the Note Purchase
Agreements is amended by replacing the reference to "March 8, 1998" with "the
Second Amendment Effective Date".
3. Amendment to Section 8. Section 8 of each of the Note Purchase
Agreements is amended by adding a new Section 8.2A, immediately following
Section 8.2, as follows:
Section 8.2A Mandatory Offers of Prepayment.
(a) Within five (5) Business Days after any Asset Disposition (other than
(i) Asset Dispositions in any fiscal year of the Company with an aggregate
value not to exceed $250,000 and (ii) other Asset Dispositions made between
the Second Amendment Effective Date and the date of maturity of the Series
B Notes with an aggregate value not to exceed $1,000,000), the Company
shall give written notice of such Asset Disposition to each holder of
Notes, which notice shall contain and constitute an offer to prepay the
Notes as described in subparagraph (d) below in an amount equal to 100% of
the Net Cash Proceeds received by such Person in connection with such Asset
Disposition. Nothing contained in this subparagraph (a) shall permit the
Company or any of its Subsidiaries to make any Asset Disposition other than
in accordance with Section 10.5.
(b) Within five (5) Business Days after the issuance or incurrence by the
Company or any of its Subsidiaries of any Priority Debt (including Priority
Debt permitted under Section 10.2) or capital stock, the Company shall give
written notice of such issuance or incurrence of Debt or capital stock to
each holder of Notes, which notice shall contain and constitute an offer to
prepay the Notes as described in subparagraph (d) below in an amount equal
to 100% of the Net Cash Proceeds received by such Person in connection with
such issuance or incurrence. The provisions of this subsection shall not be
deemed to be implied consent to any such issuance or incurrence of Debt
otherwise prohibited by the terms and conditions of this Agreement.
(c) Within fifteen (15) Business Days after the end of each fiscal quarter
of the Company, the Company shall give written notice to each holder of
Notes of an offer to prepay the Notes as described in subparagraph (d)
below in an amount equal to the Excess Cash as of the last day of such
fiscal quarter, unless Excess Cash as of the last day of such fiscal
quarter does not exceed $250,000.
(d) The offer to prepay Notes contemplated by subparagraphs (a) through (c)
above shall be an offer to prepay, in accordance with and subject to this
Section, scheduled principal installments of the Notes of both Series in
chronological order (first to principal installments due on March 15, 2007,
second to principal installments due on March 15, 2008, third to principal
installments due on March 15, 2009 and finally to principal installments
due on March 15, 2010) on a date specified in such offer (the "Proposed
8.2A Prepayment Date"), which Proposed 8.2A Prepayment Date shall be not
less than 15 days and not more than 30 days after the date of the offer
(and if the Proposed Prepayment Date is not specified in such offer, the
Proposed Prepayment Date shall be the first Business Day after the 30th day
after the date of such offer).
(e) A holder of Notes may accept the offer to prepay made pursuant to this
Section by causing a notice of such acceptance to be delivered to the
Company at least five days prior to the Proposed 8.2A Prepayment Date. If
the offer is rejected by any holder of Notes (either explicitly or through
the absence of an acceptance delivered in accordance with the preceding
sentence), the Company at least four days prior to the Proposed 8.2A
Prepayment Date shall give written notice to each holder of Notes that has
accepted the offer to prepay (the "Accepting Holders"), in which notice the
Company shall (i) state the aggregate outstanding principal amount of Notes
in respect of which the offer has been rejected (the "Rejected
2
Prepayment"), and (ii) offer to increase the prepayment of the Notes of the
Accepting Holders by an amount equal to the Rejected Prepayment, such
further prepayment to be applied to scheduled principal installments of the
Notes held by the Accepting Holders in chronological order.
(f) Prepayment of the Notes to be prepaid pursuant to this Section shall be
made, together with interest accrued on the amount so prepaid, but without
Make-Whole Amount or other premium, on the applicable Proposed 8.2A
Prepayment Date.
4. Amendment to Section 8.4. Section 8.4 of each of the Note Purchase
Agreements is hereby replaced in its entirety with the following:
Section 8.4 Allocation of Partial Prepayments. In the case of partial
prepayment of the Notes (other than a prepayment pursuant to Section 8.2 or
Section 8.2A), the principal amount of the Notes to be prepaid shall be
allocated among all of the Notes of both Series at the time outstanding in
proportion, as nearly as practicable, to the respective unpaid principal
amounts thereof not theretofore called for prepayment. In the case of an
offer of partial prepayment of the Notes pursuant to Section 8.2A, the
principal amount of the Notes offered to be prepaid shall be allocated
among all of the Notes (or if the offer is made under Section 8.2A(e), all
of the Notes of the Accepting Holders) of both Series at the time
outstanding in proportion, as nearly as practicable, to the respective
scheduled principal installments on such Notes next due and payable in
chronological order, and with respect to each scheduled principal payment,
shall be allocated pro rata among the holders, or the Accepting Holders, as
appropriate, to whom such scheduled payment is due.
5. Amendment to Section 10.1. Section 10.1 of each of the Note Purchase
Agreements is hereby replaced in its entirety with the following:
Section 10.1. Certain Financial Limits. The Company shall not at any time
permit:
(a) Tangible Net Worth to be less than the sum of (i) $60,000,000, plus
(ii) an aggregate amount equal to 50% of its Consolidated Net Income (but,
in each case, only if a positive number) for each completed fiscal quarter
beginning with the fiscal quarter ended January 27, 2002, plus (iii) an
amount equal to Restructuring Charges for each completed fiscal quarter
beginning with the fiscal quarter ended January 28, 2007; or
(b) Capital Expenditures of the Company and its Subsidiaries to exceed (i)
$3,000,000 in the aggregate during the Company's 2007 fiscal year, (ii)
$4,000,000 in the aggregate during the Company's 2008 fiscal year and (iii)
for any fiscal year of the Company thereafter, the sum of (A) $4,000,000
and (B) such additional amount of Capital Expenditures that may be incurred
without causing the Company to have a Fixed Charge Coverage Ratio (measured
3
for the most recently ended four fiscal quarters of the Company for which
financial statements have been delivered to the holders of the Notes and
giving pro forma effect to the incurrence of such additional Capital
Expenditures as if they had been incurred during such period) of less than
2.25:1.0.
6. Amendment to Section 10.2(a). Section 10.2(a) of each of the Note
Purchase Agreements is hereby amended by (a) replacing the reference to "10% of
Consolidated Net Worth" in subparagraph (3)(ii) thereof with "15% of
Consolidated Net Worth" and (b) replacing subparagraph (4) thereof in its
entirety with the following:
(4) Notwithstanding the foregoing, (i) Consolidated Funded Debt shall not
at any time exceed: (A) 65% of Tangible Capitalization during the period
from the Effective Date of the First Amendment (as defined therein) through
April 30, 2003; (B) 57% of Tangible Capitalization during the period from
May 1, 2003 through April 30, 2004; and (C) 50% of Tangible Capitalization
at any time thereafter; and (ii) from and after the Effective Date of the
First Amendment (as defined therein), the Company will not, and will not
permit any Subsidiaries to, declare or make, or incur any liability to
declare or make, any Restricted Payment, unless the Fixed Charge Coverage
Ratio (measured for the most recently ended four fiscal quarters of the
Company for which financial statements have been delivered to the holders
of the Notes and giving pro forma effect to such Restricted Payment as if
it had been paid during such period) is at least equal to 2.25:1.00.
7. Addition of New Sections 10.2(c) and 10.2(d). Section 10.2 of each of
the Note Purchase Agreements is further amended by inserting the following
paragraphs (c) and (d) at the end of such Section:
(c) Without limitation of the foregoing restrictions, the Company shall not
at any time permit Priority Debt to exceed 15% of Consolidated Net Worth.
(d) The Net Cash Proceeds of the issuance or incurrence of any Priority
Debt shall be applied in accordance with Section 8.2A(b).
8. Amendment to Section 10.3. Section 10.3 of each of the Note Purchase
Agreements is amended by replacing subparagraph (k) of such Section in its
entirety with the following:
(k) other Liens not otherwise permitted by paragraphs (a) through (j)
securing Debt other than the principal credit facilities of the Company and
its Subsidiaries from time to time; provided that after giving effect to
the imposition of such Lien and the incurrence of the obligation secured
thereby, Priority Debt shall not exceed 15% of Consolidated Net Worth.
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9. Amendment to Section 10.5. Section 10.5 of each of the Note Purchase
Agreements is amended by replacing such Section in its entirety with the
following:
Section 10.5 Sale of Assets, etc. Except as permitted under Section 10.4,
the Company will not, and will not permit any of its Subsidiaries to, make
any Asset Disposition unless:
(a) in the good faith opinion of the Company, the Asset Disposition is in
exchange for consideration having a Fair Market Value at least equal to
that of the property exchanged and is in the best interest of the Company
or such Subsidiary; and
(b) immediately prior to and after giving effect to the Asset Disposition,
no Default or Event of Default would exist; and
(c) immediately after giving effect to the Asset Disposition, the
Disposition Value of all property that was the subject of any Asset
Disposition occurring in the then current fiscal year of the Company would
not exceed 15% of Consolidated Assets as of the end of the then most
recently ended fiscal quarter of the Company; and
(d) the Net Cash Proceeds from the Asset Disposition are applied in
accordance with Section 8.2A(a).
10. Amendment to Section 10. Section 10 of each of the Note Purchase
Agreements is amended by adding the following as new Sections 10.7 through
10.11:
Section 10.7. Sale and Lease-Back. The Company will not, and will not
permit any Subsidiary to, enter into or permit to remain in effect any Sale
and Leaseback Transaction with any Person.
Section 10.8. Sale or Discount of Receivables. The Company will not, and
will not permit any Subsidiary to, sell with recourse, or discount or
otherwise sell for less than the face value thereof, any of its notes or
accounts receivable.
Section 10.9. Change in Business. The Company will not, and will not permit
any Subsidiary to, enter into any business other than the business
presently conducted by the Company and its Subsidiaries and businesses
reasonably related thereto.
Section 10.10. Loans, Advances and Investments. The Company will not, and
will not permit any Subsidiary to, make or permit to remain outstanding any
loan or advance to, or own, purchase or acquire any stock, obligations or
securities of, or all or a substantial portion of the assets of, or any
other interest in, or make any capital contribution to, any Person (each,
an "Investment"), except that the Company or any Subsidiary may:
5
(i) make or permit to remain outstanding Investments in or to any
Wholly-Owned Subsidiary and Investments outstanding on the Second
Amendment Effective Date and listed on Schedule 10.10 or any
Investments in new Wholly-Owned Subsidiaries not in excess of
$2,000,000 in the aggregate;
(ii) acquire and own stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing
to the Company or any Subsidiary;
(iii) own, purchase or acquire (A) prime commercial paper of, and time
deposits and certificates of deposit in, United States commercial
banks (having capital, surplus and undivided profits in excess of
$100,000,000) and whose long-term unsecured debt obligations (or the
long-term unsecured debt obligations of the bank holding company
owning all of the capital stock of such bank) are rated in one of the
top three rating classifications by at least one nationally recognized
rating agency (a "Qualifying Bank"), in each case to the extent due
within one year from the date of purchase and payable in the United
States in United States dollars, direct obligations of, or obligations
guaranteed by the United States of America, or any agency acting as an
instrumentality of the United States of America pursuant to authority
granted by the Congress of the United States of America, so long as
such obligation or guarantee shall have the benefit of the full faith
and credit of the United States of America which shall have been
pledged pursuant to authority granted by the Congress of the United
States of America and (B) money market accounts with any Qualifying
Banks, which accounts invest solely in assets of the type described in
clause (A);
(iv) make or permit to remain outstanding travel and other like
advances to officers and employees in the ordinary course of business;
(v) Capital Expenditures permitted to be made pursuant to Section
10.1(c); and
(vi) make or permit to remain outstanding other Investments in an
aggregate amount not in excess of $1,000,000 at any time.
Section 10.11. Restrictive Agreements. The Company will not permit any
Subsidiary to enter into or otherwise be bound by or subject to any
contract or agreement (including, without limitation, any provision of its
certificate or articles of incorporation or bylaws) that restricts its
ability (i) to pay dividends or other distributions on account of its
stock, (ii) to create, grant or permit to exist any Liens securing the
Notes or guarantees thereof or (iii) to guaranty the obligations of the
Company under the Notes and this Agreement; provided, however, that
Subsidiaries of the Company incorporated under the laws of China may agree
to the foregoing restrictions in credit facilities with Chinese financial
institutions so long as the aggregate amount committed and lent under such
credit facilities does not exceed $5,000,000.
6
11. Amendment to Section 11.
(a) Section 11 is amended by replacing subparagraph (c) in its entirety
with the following:
(c) the Company defaults in the performance of or compliance with any
term contained in Section 10 or Section 7.1(d); or
(b) Section 11 is further amended by replacing references to
"$5,000,000" in subparagraph (f) with "$1,000,000".
12. Amendment to Schedule B. Schedule B is amended by replacing the
definitions of "Asset Disposition", "Default Rate" "Consolidated Net Worth" and
"Funded Debt" with the following:
"Asset Disposition" means any Transfer except:
(a) any Transfer from a Subsidiary to the Company or a Wholly-Owned
Subsidiary so long as immediately before and immediately after the
consummation of any such Transfer and after giving effect thereto, no
Default or Event of Default exists;
(b) any sale of real estate, machinery and equipment in connection
with the closure of the Company's upholstery fabric plants located in
Graham, North Carolina, Anderson, South Carolina and Lincolnton, North
Carolina; (ii) the sale of the Company's corporate headquarters
located in High Point, North Carolina; and (iii) the disposition of
assets described (as of the Second Amendment Effective Date) on the
Company's balance sheet as "Assets Held For Sale"; and
(c) any Transfer made in the ordinary course of business and involving
only property that is inventory held for sale.
"Consolidated Net Worth" means, at any time,
(a) the sum of (i) the par value (or value stated on the books of the
corporation) of the capital stock (but excluding Redeemable Preferred
Stock, treasury stock and capital stock subscribed but unissued) of
the Company and its Subsidiaries plus (ii) the amount of paid-in
capital and retained earnings of the Company and its Subsidiaries,
plus (iii) the amount equal to all Restructuring Charges for all
completed fiscal quarters, commencing with the fiscal quarter ended
January 28, 2007, in each case as such amounts would be shown on
consolidated financial statements of the Company and its Subsidiaries
as prepared in accordance with GAAP, minus
7
(b) to the extent included in clause (a), all amounts properly
attributable to minority interests, if any, in the stock and surplus
of Subsidiaries.
"Default Rate" means that rate of interest that is the greater of (i)
10.80% per annum or (ii) 2% over the rate of interest publicly announced
from time to time by JPMorgan Chase Bank, N.A. in New York, New York, as
its "base" or "prime" rate.
"Funded Debt" means, with respect to any Person, all Debt of such Person
which by its terms or by the terms of any instrument or agreement relating
thereto matures, or which is otherwise payable or unpaid, one year or more
from, or is directly or indirectly renewable or extendible at the option of
the obligor in respect thereof to a date one year or more (including,
without limitation, an option of such obligor under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of one year or more) from, the date of the creation thereof;
provided that Funded Debt shall include, as at any date of determination,
Current Maturities of Funded Debt. In the case of the Company "Funded Debt"
shall exclude that portion of the proceeds of the issuance of Funded Debt
of the Company consisting of industrial development revenue bonds which is
held by the trustee for such bonds pending withdrawal and application by
the Company.
13. New Definitions. The following defined terms and definitions are hereby
inserted in appropriate alphabetical order in Schedule B to each of the Note
Purchase Agreements:
"Capital Expenditures" means, as applied to any Person, all expenditures by
such Person which, in accordance with GAAP, would be classified as capital
expenditures, including without limitation Capital Leases.
"Consolidated EBITDAR" means, with reference to any period, the sum of (i)
all Consolidated Net Income, (ii) interest expense, income tax expense,
depreciation and amortization expense of the Company and its Subsidiaries
for such period (taken as a cumulative whole), as determined in accordance
with GAAP, after eliminating all offsetting debits and credits between the
Company and its Subsidiaries and all other items required to be eliminated
in the course of the preparation of consolidated financial statements of
the Company and its Subsidiaries in accordance with GAAP, and (iii)
Operating Lease Rentals, in each case for such period.
"Consolidated Fixed Charges" means, with reference to any period, the sum
of (i) (A) the Current Maturities of Funded Debt of the Company and its
Subsidiaries for such period (taken as a cumulative whole) and (B) the
interest expense of the Company and its Subsidiaries for such period (taken
as a cumulative whole), in each case as determined in accordance with GAAP,
after eliminating all offsetting debits and credits between the Company and
its Subsidiaries and all other items required to be eliminated in the
course of the preparation of consolidated financial statements of the
Company and its Subsidiaries in accordance with GAAP, (ii) Operating Lease
Rentals and (iii) Restricted Payments, in each case for such period.
8
"Excess Cash" means, as of the last day of any fiscal quarter of the
Company, the amount by which (x) the aggregate cash and cash equivalents of
the Company on hand as of the last day of such fiscal quarter exceeds (y)
$8,000,000.
"Fixed Charge Coverage Ratio" means, for any period for the Company and its
Subsidiaries measured on a consolidated basis, the ratio of (i) (A)
Consolidated EBITDAR minus (B) Capital Expenditures and income taxes paid
in cash to (ii) Consolidated Fixed Charges, in each case for such period.
"Investment" shall have the meaning set forth in Section 10.10.
"Net Cash Proceeds" means (i) with respect to any Asset Disposition, the
amount of all cash, checks, notes, instruments, and other items of payment
received (directly or indirectly) from time to time (whether as initial
consideration or through the payment of deferred consideration) by or on
behalf of such Person, in connection therewith after deducting therefrom
only (A) reasonable expenses related thereto incurred by such Person in
connection therewith and (B) taxes paid or payable to any taxing
authorities by such Person in connection therewith and (C) amounts
necessary to satisfy in full any Indebtedness secured by the assets that
are the subject of such Asset Disposition and (ii) with respect to the
issuance or incurrence of any Debt or capital stock by the Company or any
of its Subsidiaries, the aggregate amount of cash received (directly or
indirectly) from time to time (whether as initial consideration or through
the payment or disposition of deferred compensation) by or on behalf of
such Person in connection therewith, after deducting therefrom only (A)
reasonable expenses related thereto incurred by such Person in connection
therewith and (B) taxes paid to any taxing authorities by such Person in
connection therewith, to the extent, but only to the extent, that the
amounts so deducted are (1) actually paid to a Person that, except in the
case of reasonable out-of-pocket expenses, is not an Affiliate of such
Person or any of its Subsidiaries and (2) properly attributable to such
transaction or to the asset that is the subject thereof.
"Operating Lease Rentals" means, with reference to any period, all fixed
rents or charges (including as such all payments which the lessee is
obligated to make on termination of the lease or surrender of the property)
payable by the Company and its Subsidiaries (as lessee, sublessee, license,
franchisee or the like) under all leases, licenses, or other agreements for
the use or possession of real or personal property, tangible or intangible
(except Capital Leases) having a term of more than one year (whether as an
initial term or any extension or renewal thereof and including options to
renew or extend any term, whether or not exercised), during such period, of
the Company and its Subsidiaries for such period (taken as a cumulative
whole), as determined in accordance with GAAP, after eliminating all
offsetting debits and credits between the Company and its Subsidiaries and
all other items required to be eliminated in the course of the preparation
of consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP.
"Proposed Prepayment Date" shall have the meaning set forth in Section
8.2A(e).
"Rejected Prepayment" shall have the meaning set forth in Section 8.2A(f).
"Restricted Payments" means (a) dividends or other distributions or
payments on capital stock or other equity interests of the Company or any
Subsidiary (except (i) distributions in such stock or other equity
interests and (ii) dividends, distributions and payments on capital stock
of any Subsidiary paid to the Company or on a pro rata basis to all
shareholders of such Subsidiary) and (b) the redemption or acquisition of
such stock or other equity interests of the Company or any Subsidiary
(except when solely in exchange for such stock or other equity interests or
when made by any Wholly-Owned Subsidiary).
"Restructuring Charges" means, collectively, (i) all cash and non-cash
restructuring expenses and restructuring-related costs directly related to
(A) the closing of the Company's upholstery fabric plants in Graham, North
Carolina, Anderson, South Carolina and Lincolnton, North Carolina, (B) the
previous closing of the Company's upholstery fabrics plant in Chattanooga,
Tennessee, (C) the closing of the Company's upholstery prints plant in
Burlington, North Carolina, and (D) the sale of the Company's corporate
headquarters located in High Point, North Carolina and the related costs
associated with moving such headquarters to a new location, so long as the
foregoing restructuring expenses and restructuring-related costs paid in
cash do not exceed $4,000,000 in the aggregate during the term of this
Agreement, and (ii) non-cash write-downs of deferred tax assets of the
Company accounted for as "valuation allowances."
"Sale and Leaseback Transaction" shall mean any arrangement with any Person
or to which such Person is a party providing for the leasing by the Company
or any Subsidiary of real or personal property which has been or is to be
sold or transferred by the Company or any Subsidiary to any Person to which
funds have been or are to be advanced on the security of such property or
rental obligations of the Company or any Subsidiary.
"Second Amendment" means the Second Amendment to Note Purchase Agreements,
dated as of the Second Amendment Effective Date, among the Company and the
Noteholders (as defined therein), which amends this Agreement.
"Second Amendment Effective Date" means December 6, 2006.
10
14. Amendment to Schedules. Schedules 5.4 and 5.15 of the Note Purchase
Agreements are hereby amended by replacing such Schedules in their entirety with
Schedules 5.4 and 5.15 attached hereto. The Note Purchase Agreements are further
amended by adding Schedule 10.10 attached hereto as Schedule 10.10 to each Note
Purchase Agreement.
15. Conditions to Effectiveness of this Amendment. Notwithstanding any
other provision of this Amendment and without affecting in any manner the rights
of the Noteholders hereunder, it is understood and agreed that this Amendment
shall not become effective, and the Company shall have no rights under this
Amendment, until (i) the Company has prepaid the principal amount of the Series
B Notes by an amount equal to $3,000,000, together with accrued and unpaid
interest on such principal prepayment, such principal and interest to be
allocated to the Series B Notes in proportion to the respective unpaid principal
amounts thereof and such principal amount to be applied to the scheduled
principal installments of the Series B Notes due on March 15, 2007, (ii) the
Company shall have paid the fees, charges and disbursements of counsel to the
Noteholders, incurred in connection with this Amendment and (iii) the
Noteholders shall have received each of the following documents:
(a) executed counterparts to this Amendment from the Company and each of
the Noteholders;
(b) an amended and restated Note for each Noteholder, which amended and
restated Note will provide for such increased interest rate and otherwise
be in form and substance equivalent to the Notes delivered at the Closing;
(c) a certificate certifying as to articles of incorporation, bylaws and
resolutions of the Company attached thereto and other corporate proceedings
relating to the authorization, execution and delivery of the First
Amendment, this Amendment and the Notes contemplated pursuant to
subparagraph (b) above;
(d) an opinion related to the Company and this Amendment, covering such
matters and otherwise in form and substance reasonably satisfactory to the
Noteholders; and
(e) a copy of the principal credit facility of the Company, together with
all amendments thereto.
16. Representations and Warranties. To induce the Noteholders to enter into
this Amendment, the Company represents and warrants to the Noteholders that:
(a) the execution, delivery and performance by the Company of this
Amendment (i) are within its corporate power and authority; (ii) have been
duly authorized by all necessary corporate action; (iii) will not
contravene, result in a breach of, or constitute any default under, or
result in the creation of any Lien in any property of the Company or any
Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which the Company or any Subsidiary is bound or
by which the Company or any Subsidiary or any of their respective
properties may be bound or by which the Company or any Subsidiary or any of
its respective properties may be bound or affected, (ii) conflict with or
result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary;
11
(b) this Amendment has been duly executed and delivered for the benefit of
or on behalf of the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms;
(c) after giving effect to this Amendment, the representations and
warranties contained in Section 5 of each of the Note Purchase Agreements
are true and correct in all material respects (except for any
representations or warranties that speak only as of a specific earlier
date), and no Default or Event of Default has occurred and is continuing as
of the date hereof; and
(d) the Lien Release has been consummated.
17. Miscellaneous.
17.1 Counterparts; Effectiveness. This Amendment may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. Delivery of an executed signature page to this Amendment by
facsimile or electronic mail transmission shall be effective as delivery of
a manually executed counterpart thereof. This Amendment shall become
effective on the date on which all conditions set forth in Section 16 above
have been satisfied.
17.2 Effect of Amendment. From and after the Effective Date, all references
in any Note Purchase Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import referring to such Note Purchase Agreement
shall mean and be a reference to such Note Purchase Agreement as amended by
this Amendment. This Amendment is limited as specified and shall not
constitute or be deemed to constitute an amendment, modification or waiver
of any provision of any Note Purchase Agreement except as expressly set
forth herein. Except as expressly amended hereby, the Note Purchase
Agreements shall remain in full force and effect in accordance with their
terms.
17.3 Governing Law. This Amendment shall be governed by and construed and
enforced in accordance with the laws of the State of New York, excluding
choice-of-law principles of such laws that would require the application of
the laws of a jurisdiction other than the State of New York.
17.4 Severability. To the extent any provision of this Amendment is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in any such jurisdiction, without prohibiting or
invalidating such provision in any other jurisdiction or the remaining
provisions of this Amendment in any jurisdiction.
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17.5 Successors and Assigns. This Amendment shall be binding upon, inure to
the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto and of all other holders of Notes
(including, without limitation, any subsequent holder of a Note).
17.6 Construction. The headings of the various sections and subsections of
this Amendment have been inserted for convenience only and shall not in any
way affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.
CULP, INC.
By: /s/ Kenneth R. Bowling
------------------------------------
Name: Kenneth R. Bowling
------------------------------------
Title: VP Finance, Treasurer
------------------------------------
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Robert B. Bodett
------------------------------------
Name: Robert B. Bodett
------------------------------------
Title: Authorized Signatory
By: /s/ David Walsh
------------------------------------
Name: David Walsh
------------------------------------
Title: Authorized Signatory
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
By: CIGNA INVESTMENTS, INC.
By: /s/ Lori E. Hopkins
------------------------------------
Name: Lori E. Hopkins
------------------------------------
Title: Vice President
------------------------------------
Signature Page to Second Amendment
LIFE INSURANCE COMPANY OF NORTH AMERICA
By: CIGNA INVESTMENTS, INC.
By: /s/ Lori E. Hopkins
------------------------------------
Name: Lori E. Hopkins
------------------------------------
Title: Vice President
------------------------------------
CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
on behalf of one or more separate accounts
By: CIGNA INVESTMENTS, INC.
By: /s/ Lori E. Hopkins
------------------------------------
Name: Lori E. Hopkins
------------------------------------
Title: Vice President
------------------------------------
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Jay White
------------------------------------
Name: Jay White
------------------------------------
Title: Vice President
------------------------------------
J. ROMEO & CO.
By: /s/ Vivian Tirado
------------------------------------
Name: Vivian Tirado
------------------------------------
Title: Vice President
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Signature Page to Second Amendment
HARE & CO.
By: /s/ Amy Judd
------------------------------------
Name: Amy Judd
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Title: Authorized Representative
ACE PROPERTY AND CASUALTY
INSURANCE COMPANY
By: COLUMBIA MANAGEMENT ADVISORS, INC.
By: /s/ Richard A.Hegwood
------------------------------------
Name: Richard A. Hegwood
------------------------------------
Title: Director
------------------------------------
Signature Page to Second Amendment
UNITED OF OMAHA LIFE INSURANCE COMPANY
By: /s/ Curtis R. Caldwell
------------------------------------
Name: Curtis R. Caldwell
------------------------------------
Title: Authorized Representative
MUTUAL OF OMAHA INSURANCE COMPANY
By: /s/ Curtis R. Caldwell
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Name: Curtis R. Caldwell
------------------------------------
Title: Authorized Representative
Signature Page to Second Amendment
PRUDENTIAL RETIREMENT INSURANCE ANNUITY
COMPANY
By: Prudential Investment Management, Inc.,
as Investment Manager
By: /s/ Jay White
------------------------------------
Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/ Jay White
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Vice President
Signature Page to Second Amendment
Schedule 5.4
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Subsidiaries, etc.
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List of Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
Culp International Holdings Ltd. Cayman Islands
Culp Fabrics (Shanghai) Co., Ltd. People's Republic of China
Culp Fabrics (Shanghai) International
Trading Co., Ltd. People's Republic of China
Rayonese Textile Inc. Canada
3096726 Canada Inc. Canada
Executive Officers and Directors and Affiliates
Executive Officers and Directors:
Robert G. Culp, III Chairman of the Board of Directors and Chief
Executive Officer
Franklin N. Saxon Director, President and Chief Operating Officer
Robert G. Culp, IV President, Culp Home Fashions
Kenneth M. Ludwig Senior VP- Human Resources; Corporate Secretary
Kenneth R. Bowling VP - Finance, Treasurer
Jean L.P. Brunel Director
Howard L. Dunn Director
Patrick B. Flavin Director
Kenneth R. Larson Director
Kenneth W. McAllister Director
Holder of ten percent (10%) or more of the Company's capital stock:
The Robert G. Culp, Jr. Family Trust.
Schedule 5.15
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Indebtedness
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o $75,000,000 Senior Notes
Series A Senior Notes $ 12,300,000
Series B Senior Notes $ 30,140,000
Real Estate Loan - Wachovia Bank $ 4,242,000
Canadian Government Loan $ 714,000
Revolving Line of Credit $ 8,000,00 (1)
o Vendor-Financed Equipment Purchases
Staubli $ 425,044
Picanol $ 1,261,403
o Letters of Credit
Workers Compensation $ 2,725,000
Inventory Purchases $ 219,000
Interest Rate Swap - Wachovia Real Estate Loan $ 2,170,000 (2)
(1) There were no borrowings outstanding under this agreement as of October 29,
2006.
(2) This amount represents the notional amount under this agreement.
Schedule 10.10
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Investments
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See list of Subsidiaries set forth in Schedule 5.4.