CULP, INC. EMPLOYEES' RETIREMENT BUILDER PLAN
FINANCIAL STATEMENTS AND
SUPPLEMENTAL INFORMATION
Years Ended December 31, 2002, 2001 and 2000
Culp, Inc. Employees' Retirement Builder Plan
------------------------------------------------------
TABLE OF CONTENTS
Page No.
Independent Auditors' Report.......................................... 1
Financial Statements
Statements of Net Assets Available for Benefits..................... 2
Statements of Changes in Net Assets Available for Benefits.......... 3
Notes to Financial Statements....................................... 4
Supplemental Schedule
Schedule of Assets (Held at End of Year)............................ 8
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Retirement Committee of the
Culp, Inc. Employees' Retirement Builder Plan
High Point, North Carolina
We have audited the accompanying statements of net assets available for benefits
of the Culp, Inc. Employees' Retirement Builder Plan as of December 31, 2002 and
2001 and the related statements of changes in net assets available for benefits
for each of the years in the three year period ended December 31, 2002. These
financial statements are the responsibility of the Plan Administrator. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Culp,
Inc. Employees' Retirement Builder Plan as of December 31, 2002 and 2001 and the
changes in its net assets available for plan benefits for each of the years in
the three year period ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated, in all material respects, in relation to the basic financial statements
taken as a whole.
Dixon Odom PLLC
March 18, 2003
Page 1
CULP, INC. EMPLOYEES' RETIREMENT BUILDER PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2002 and 2001
ASSETS 2002 2001
----------------- -------------------
Investments, at fair value $34,285,310 $30,855,428
----------------- -------------------
Receivables
Employer contributions - 167,193
Employee contributions - 258,219
----------------- -------------------
- 425,412
----------------- -------------------
Cash - 3,649
----------------- -------------------
TOTAL ASSETS 34,285,310 31,284,489
LIABILITIES
Accounts payable - 687
----------------- -------------------
NET ASSETS AVAILABLE
FOR BENEFITS $34,285,310 $31,283,802
================= ===================
Page 2
CULP, INC. EMPLOYEES' RETIREMENT BUILDER PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Years Ended December 31, 2002, 2001 and 2000
2002 2001 2000
-------------- -------------- --------------
ADDITIONS TO NET ASSETS ATTRIBUTED TO
Investment income (loss)
Net income from investment in common
trust funds $ 400,611 $ 736,876 $ 744,413
Net loss from investment in registered
investment company funds (2,685,003) (2,153,575) (901,894)
Appreciation (depreciation) in fair value of
Culp, Inc. stock fund 5,147,577 1,052,504 (2,273,253)
Net increase in insurance CSV 7,623 - -
Interest income from participant loan fund - - 85
-------------- -------------- --------------
2,870,808 (364,195) (2,430,649)
Contributions
Employer 1,868,366 2,030,704 2,380,830
Employee 2,934,591 3,192,956 3,758,942
Direct rollovers 14,101 15,758 82,835
-------------- -------------- --------------
TOTAL ADDITIONS 7,687,866 4,875,223 3,791,958
-------------- -------------- --------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO
Benefits paid to participants 4,466,413 5,499,417 3,179,149
Net insurance expense - 6,134 8,133
Trustee fees 115,729 133,067 65,048
Administrative fees 104,216 44,510 98,794
-------------- -------------- --------------
TOTAL DEDUCTIONS 4,686,358 5,683,128 3,351,124
-------------- -------------- --------------
NET INCREASE (DECREASE) 3,001,508 (807,905) 440,834
NET ASSETS AVAILABLE
FOR BENEFITS
Beginning of year 31,283,802 32,091,707 31,650,873
-------------- -------------- --------------
END OF YEAR $ 34,285,310 $ 31,283,802 $ 32,091,707
============== ============== ==============
Page 3
CULP, INC. EMPLOYEES' RETIREMENT BUILDER PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2002, 2001 and 2000
------------------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
-------------------
The financial statements of the Plan are prepared using the accrual method of
accounting.
Estimates
---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires the plan administrator to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results may differ from those estimates.
Valuation of Investments and Income Recognition
-----------------------------------------------
Investments in common trust funds are stated at fair value based on the values
of the respective instruments held by each fund as determined by the quoted
market prices on the last day of the plan year. Investments in common stocks are
stated at fair value as determined by the quoted market prices on the last day
of the plan year. Shares of registered investment companies are valued at quoted
market prices which represent the net asset values of shares held.
Purchases and sales of investments are reported on a trade date basis. Income
from investments is reported as earned on the accrual basis. Dividends are
recorded on the ex-dividend date.
Payment of Benefits
-------------------
Benefits are recorded when paid.
NOTE B - DESCRIPTION OF PLAN
The following description of the Culp, Inc. Employees' Retirement Builder Plan
(the "Plan") provides only general information. Participants should refer to the
summary plan description for a more complete description of the Plan's
provisions.
General
-------
The Plan is a defined contribution plan covering all full-time employees of
Culp, Inc. (the "Company") and its subsidiaries who have one year of service and
are age twenty-one or older. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
Page 4
NOTE B - DESCRIPTION OF PLAN (Continued)
Contributions
-------------
The Plan was established in 1982 as a profit-sharing plan to which contributions
determined by the Board of Directors of Culp, Inc. could be made on a
discretionary basis. No profit-sharing contributions were made during 2002, 2001
or 2000.
In January 1999, the Plan was amended to include safe harbor provisions.
Participants may contribute from 2% to 15% of their annual compensation as
401(k) contributions. The Company made matching contributions equal to 100% of
the participant's contribution up to the first 3% of annual compensation plus
50% of the next 2% of compensation. Participants may elect to have contributions
invested in 1% increments in a value fund, a stable investment fund, a Culp,
Inc. stock fund, an equity growth fund or a balanced fund. Contributions are
subject to certain limitations. Prior to August 31, 2001, participants could
invest in life insurance policies.
Participant Accounts
--------------------
Each participant's account is credited with the participant's contribution and
an allocation of (a) the Company's contribution and (b) Plan earnings, and
charged with an allocation of administrative expenses. Allocations are based on
participant earnings or account balances, as defined. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account.
Vesting
-------
Participants are immediately vested in their profit-sharing accounts and their
401(k) contributions, including the matching contributions from the Company and
actual earnings thereon.
Payment of Benefits
-------------------
On termination of service, death, disability or retirement, a participant may
elect to receive either a lump-sum distribution or monthly or annual
installments over a term not to exceed the lesser of fifteen years or life
expectancy of the participant and the designated beneficiary. Life insurance
purchased through the Plan could be converted to cash or transferred to the
participant.
Participant Loans
-----------------
Effective August 1, 1998, Culp, Inc. amended the Plan to allow existing loan
balances from Artee Industries, Inc. to enter the Plan. No new loans may be
established under this amendment. As of December 31, 1999, there was one loan
outstanding with a balance of $1,827. The loan was repaid in 2000.
Page 5
NOTE B - DESCRIPTION OF PLAN (Continued)
Insurance
---------
In 2002, all insurance contracts with Great Southern Life were terminated and
the cash surrender values of the policies were added to the respective
participants' accounts. Net cash value received was $49,913.
NOTE C - INVESTMENTS
The following table presents the fair value of investments at December 31, 2002
and 2001. Investments that represent 5% or more of the Plan's net assets are
separately identified.
2002 2001
----------- ------------
Investments at fair value as determined by
quoted market price:
Common trust fund:
Stable Investment Fund $ 18,366,208 $ 14,087,230
Registered investment company funds:
Evergreen Select Balanced Fund 4,255,063 5,121,896
Evergreen Stock Selector Fund 3,254,340 4,970,339
American Century Equity Growth Fund 3,585,438 4,082,390
Culp, Inc. common stock 4,824,261 2,551,283
Insurance policies - 42,290
----------- -----------
$ 34,285,310 $ 30,855,428
=========== ===========
The Plan's investments (including gains and losses on investments bought and
sold, as well as held during the year) appreciated (depreciated) in value as
follows:
2002 2001 2000
--------- ---------- ----------
Common trust fund:
Stable Investment Fund $ 400,611 $ 736,876 $ 744,413
Registered investment company funds (2,685,003) (2,153,575) (901,894)
Culp, Inc. common stock 5,147,577 1,052,504 (2,273,253)
---------- ----------- ----------
$2,863,185 $ (364,195) $(2,430,734)
========== ========== ===========
NOTE D - PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA.
Page 6
NOTE E - INCOME TAX STATUS
The Plan obtained its last determination letter on November 4, 2002, in which
the Internal Revenue Service stated that the Plan, as then designed, constituted
a qualified trust under Section 401(a) of the Internal Revenue Code and is
therefore exempt from federal income taxes under provisions of Section 501. The
Plan has been amended since receiving the determination letter. However, the
plan administrator and the Plan's tax counsel believe that the Plan is designed
and currently being operated in compliance with the applicable requirements of
the Internal Revenue Code. Therefore, they believe that the Plan was qualified
and the related trust was tax-exempt as of the financial statement dates.
NOTE F - PARTY-IN-INTEREST TRANSACTIONS
Certain plan investments are shares of mutual funds managed by Wachovia
(formerly First Union National Bank). Wachovia is the trustee as defined by the
Plan and, therefore, these transactions qualify as party-in-interest.
Recordkeeping and trustee fees paid by the Plan to Wachovia amounted to $219,945
in 2002, $177,577 in 2001 and $163,842 in 2000.
Page 7
SUPPLEMENTAL INFORMATION
CULP, INC. EMPLOYEES' RETIREMENT BUILDER PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
EIN: 56-1001967
PLAN NUMBER 001
December 31, 2002
(c) Description of Investment
Including Maturity Date,
(b) Identity of Issue, Borrower, Rate of Interest, Collateral, (e) Current
(a) Lessor, or Similar Party Par or Maturity Value (d) Cost** Value
------- ------------------------------------ ---------------------------- ---------- --------------
* Culp, Inc. 711,931.52 shares, common $ 4,824,261
* Stable Investment Fund 640,144.16 units
18,366,208
* Evergreen Select Balanced Fund 462,506.87 units, Class I
4,255,063
* Evergreen Stock Selector Fund 315,037.73 units, Class I
3,254,340
American Century Equity Growth Fund 236,039.39 units
3,585,438
--------------
$34,285,310
==============
* Indicates party-in-interest.
** Cost information omitted for participant-directed investments.
Page 8