content: 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) April 30, 1997
  
                                     CULP, INC.
  
              (Exact name of registrant as specified in its charter)
  
  
          North Carolina                  0-12781                56-1001967
  
   (State or other jurisdiction    (Commission File No.)       (IRS Employer
         of incorporation)                                  Identification No.)
  
  
  
                               101 South Main Street
                         High Point, North Carolina  27260
                     (Address of principal executive offices)
                                  (910) 889-5161
               (Registrant's telephone number, including area code)
  
  
  
  
  
           (Former name or former address, if changed since last report)
  
  
  
  
  
  
  
  
  
  
  <PAGE>
  
  
  
  Item 5. Other Events
  
  See Press  Release  (attached)  dated April 30, 1997 related to the  acquisition
  of the Upholstery Fabrics division of Phillips Industries, Inc.
  
  See Financial Information Release (attached).
  
  Forward  Looking   Information.   The  discussion  in  this  Form  8-K  contains
  forward-looking   statements   that  are   inherently   subject   to  risks  and
  uncertainties.  Factors  that  could  influence  the  matters  discussed  in the
  forward-looking  statements  include  negotiation  of  a  definitive  agreement,
  which could affect the  structure  or  substance  of the  proposed  transaction,
  and the economic performance of the business acquired.
  
  
  
  
  
                                    SIGNATURES
  
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned hereunto duly authorized.
  
  
                                      CULP, INC.
                                      (Registrant)
  
  
                                By:    Franklin N.Saxon
                                       Senior Vice President and
                                       Chief Financial Officer
  
  
                                By:    Stephen T. Hancock
                                       Stephen T. Hancock
                                       General Accounting Manager
  
  
  
  
  
  
  
                                     - MORE -
  
  
  
  <PAGE>
  
  
  FOR IMMEDIATE RELEASE
  
  
                  CULP TO ACQUIRE THE UPHOLSTERY FABRICS DIVISION
                              OF PHILLIPS INDUSTRIES
  
                         TRANSACTION VALUED AT $47 MILLION
  
  HIGH POINT,  North  Carolina  (April 30,  1997) Culp,  Inc.  (NYSE:  CFI) today
  announced  that it has signed a letter of intent to acquire  the  business  and
  certain  assets  relating to the  upholstery  fabric  businesses  operating  as
  Phillips Weaving Mills,  Phillips Velvet Mills,  Phillips Printing and Phillips
  Mills.  These operating units are owned by Phillips  Industries,  Inc. which is
  a privately  owned  corporation  based in High Point,  North Carolina and owned
  by Dave  Phillips,  former  Secretary  of  Commerce  for  the  State  of  North
  Carolina.  Closing of the  transaction,  which is subject to a definitive asset
  purchase  agreement  and certain  other  conditions  set forth in the letter of
  intent,  is  expected  within the next 60 days.  The  transaction  is valued at
  approximately  $47  million  and  involves  the  purchase  of assets  for cash,
  notes,  consulting  services and a non-compete  agreement.  In addition,  there
  is  the  assumption  of  certain  liabilities  and  contracts  as  well  as the
  issuance of an option for 100,000  shares of stock  valued at the market  price
  on the day of closing.
  
        "We are  excited  about  the  opportunity  to  acquire  this  outstanding
  company and for Phillips to operate as a new business  unit of Culp,"  remarked
  Robert G. Culp,  III,  chief  executive  officer.  "Phillips  is a  successful,
  well-managed  company  that has achieved a strong  competitive  position as one
  of the nation's leading  suppliers of upholstery  fabrics.  Phillips  generated
  sales  of  approximately  $53  million  in  1996  from a broad  line  of  woven
  jacquards,  prints and  velvets  with  innovative  designs.  These are  product
  categories  in  which  Culp  also  has  an  extensive   marketing  effort.  The
  addition  of  Phillips  will  expand the range of our  designs  and our product
  versatility  and  thereby  equip us to meet  more of the  needs  of  customers.
  Dave  Phillips  said,  "Culp is a great  company  that  provides  an  excellent
  opportunity   for   Phillips  to  utilize   Culp's   manufacturing   resources,
  accelerate its growth and expand the volume of international sales."
  
  
  CULP To Acquire Phillips Industries
  Page 2
  April 30, 1997
  -------------------------------------------------------------------------------
  
  
        Culp commented,  "The  acquisition of Phillips would represent the latest
  in a series of  acquisitions  over the past  several  years  that  have  helped
  position Culp as the world's  largest  manufacturer  and marketer of upholstery
  fabrics for  furniture.  Coupled with a major  capital  investment  initiative,
  these  transactions  have  served  not  only to  establish  us as a  vertically
  integrated  marketing  organization  but also to broaden our product line.  The
  trend is clearly  toward  further  consolidation  within  the home  furnishings
  industry,  making  it  imperative  for us to  meet  the  standards  imposed  on
  suppliers  by  large  furniture  manufacturers.  We  are  pleased  that  Culp's
  strong  balance  sheet has  supported  our  continuing  programs to meet higher
  product  quality and delivery  requirements as well as our interest in pursuing
  strategic acquisitions of complementary businesses."
  
        The  assets  that  Culp  has  agreed  to  acquire  include  manufacturing
  facilities in Monroe and Jamestown,  North  Carolina.  The facilities at Monroe
  produce  woven  jacquards,  and the plant at Jamestown  manufactures  woven and
  tufted  velvets.   Additionally,   the  purchase  includes  a  printed  fabrics
  converting  business  located in High  Point.  The  transaction  also  includes
  distribution  centers in High Point,  North Carolina,  Tupelo,  Mississippi and
  Los Angeles, California.
  
        Culp is the largest  manufacturer  and marketer of  furniture  upholstery
  fabrics  in the  world and is a  leading  producer  of  mattress  ticking.  The
  company's  fabrics are used  principally in the  production of residential  and
  commercial furniture and bedding products.
  
  
                                       -30-
  
  
  <PAGE>
  
  
  
  Dated:  April 30, 1997
  
  
                     CULP, INC. FINANCIAL INFORMATION RELEASE
   ACQUISITION OF THE UPHOLSTERY FABRICS DIVISION OF PHILLIPS INDUSTRIES, INC.
                                  April 30, 1997
  
   A.    Acquisition Summary
  
       On April 30, 1997, Culp signed a LETTER OF INTENT to purchase the
  business and certain assets and assume certain liabilities of  the upholstery
  fabrics division of Phillips Industries, Inc. (consisting of Phillips Weaving
  Mills, Inc. , Phillips Velvet Mills, Inc., Phillips Printing, Inc. and
  Phillips Mills, Inc. - hereinafter collectively referred to as "Phillips
  Mills" or "Phillips").  The transaction value is estimated at $ 46.6 million
  and includes cash , notes,  assumption of debt, and  stock options, as well
  as non-compete and consulting agreements.  The acquisition will be accounted
  for as a purchase, and therefore the results of Phillips Mills from the
  closing date, which is expected in thirty to sixty days,  will be included in
  Culp's results.
  
       The company believes the transaction will be  considered an "asset
  purchase"  for income tax  purposes, and therefore any goodwill would be
  deductible for tax purposes over a 15 year period, and assets acquired and
  liabilities assumed would be recorded at their fair market values.  The
  company estimates that  income taxes could be reduced by approximately  $ 14
  million as a result of the deductibility of goodwill , the non-compete and
  consulting agreements , and the fair market value adjustment of the assets
  purchased, particularly fixed assets.
  
   B.    What products does Phillips Mills market ; and what are annual sales
     by product line?
  
       The company believes Phillips Mills is about the 9th largest upholstery
  fabric supplier in the United States. According to the audited financial
  statements  for the latest two fiscal years of Phillips Mills ending December
  31, 1996 and December 31, 1995, sales were $53 million and $48 million,
  respectively; and sales by product line for those fiscal periods were:  woven
  jacquards -- $37 million and   $35 million ;  prints (primarily using flock
  and cotton base fabrics) -- $11 million and $9 million ;  and velvets (woven
  and tufted) --  $5  million and $4 million. EBITDA for Phillips Mills for the
  year ended December 31, 1996 was approximately $6.1 million (which excludes
  certain non-recurring items); this information was derived from the audited
  financial statements of Phillips Mills for the year ended December 31, 1996.
  
  C. What are the capabilities of Phillips Mills and where are they located?
  
       Phillips Mills is headquartered in High Point, North Carolina with a
  jacquard weaving operation in Monroe, NC (near Charlotte), a velvet weaving
  and tufting operation in Jamestown, NC (near High Point) and a printed
  fabrics converting operation in High Point.  Phillips  also operates
  distribution warehouses in High Point, NC, Tupelo, MS , and Los Angeles, CA
  and has showrooms in High Point, NC and Tupelo, MS.  Phillips Mills employs
  about 325 people, all of which are non union and are located in North
  Carolina.
  <PAGE>
  
  Page 2 of 4
  
  
  
        The Phillips Mills'  design department creates all of its patterns
  internally with its staff of designers and stylists, using state-of-the-art
  CAD (computer-aided design) equipment. Their products are sold by
  independent sales agents in the United States and  in  international markets.
  Approximately 25 % of Phillips Mills annual sales volume is outside of the
  United States and this business includes sales to customers in about 15
  countries.  Additionally, Phillips Mills carries an "in-stock" program of
  certain products in its regional warehouses in High Point, Tupelo and Los
  Angeles to service small to medium furniture manufacturers on a
  "just-in-time" basis.
  
       The woven jacquard operation is  modern and is comprised of two
  facilities totalling approximately 140,000 square feet on 15 acres of land.
  The plants include about 70 Dornier jacquard looms, as well as warping and
  texturing capabilities. About half of the looms have electronic jacquard
  heads and there are some air-jet weaving machines. All finishing and
  additional fabric processing are outsourced. All yarns, mostly made from
  polypropylene,  polyester, acrylic and cotton fibers,  are  purchased from
  outside suppliers .
  
        The velvet facility, about 50,000 square feet, includes about 22
  machines, both weaving and tufting, as well as warping and surface finishing
  capabilities. All finishing  processes are outsourced. All yarns, mostly made
  from acrylic, polyester and polypropylene fibers, are purchased from outside
  suppliers.
  
         The printed fabrics converting operation  purchases greige, or
  unfinished, fabrics from outside suppliers and has those fabrics printed by a
  commission printer who  utilizes designs created by Phillips Mills.
  Approximately two thirds of the annual volume in this product line is
  wet-printed flock fabrics, and about one third is cotton prints and other
  items.
  
  
   D.    What's the composition of the transaction value (dollars in thousands)?
  
          Purchase of  certain assets                       $ 37,100
          Non-compete agreement                                5,000
          Consulting agreement                                 1,000
          Interest-bearing debt with banks and equipment
            vendors, assumed or paid at closing                3,000
          Acquisition costs  (legal, accounting,,
            Professional, etc.)                                  500
                                                            --------
  
              Transaction value                             $ 46,600
                                                            ========
  
  
  
  
  
  
  <PAGE>
  
  Page 3 of 4
  
  
  E.    How will the acquisition be financed (dollars in thousands)?
  
          Bank debt (1)                                     $ 33,300
          Note payable to sellers  (2)                         7,300
          Non-compete agreement (3)                            5,000
          Consulting agreement (4)                             1,000
          Stock options   (5)                                 _______
  
              Transaction value                              $46,600
                                                             =======
  
  
   (1) Source is Culp's  recently  completed  $125  million  revolving  credit
       facility. This assumes all of Phillips' bank and equipment vendor debt will
       be repaid at closing;
   (2) The key terms are:  interest rate of 6%, payable quarterly; five year term
       with one  payment at  maturity;  unsecured;
   (3) Payable in equal annual payments of $1.0 million for five years,  beginning
       one year from  closing ;
   (4) Payable  in equal  annual  payments  of $ 0.2 million for five years,
       beginning one year from closing;
   (5) The company is granting a stock option in the amount of 100,000 shares
       with an option term of six years;  the  option's  exercise price is Culp's
       stock price on the closing date;
  
   F.    What does Culp view as the principal business reasons for acquiring
     Phillips Mills ?
  
        The following is a summary of Culp's goals and the key elements of its
  business plan for Phillips Mills:
  
        1.     APPLY CULP'S MANUFACTURING CAPABILITIES AND RESOURCES TO
          PHILLIPS ESTABLISHED BUSINESS
  
       Culp believes that Phillips has established several important market niches
       in  its  three  product  lines  (woven  jacquards,   prints  and  velvets),
       especially with its focus on the casual contemporary styling category. Culp
       plans to make  available its  extensive and low cost  vertically-integrated
       manufacturing  capabilities to the business that Phillips has  established,
       as well as to its current product development initiatives. Thereby, it will
       further leverage Phillips' marketing capability,  which has its strength in
       design and styling, sales and distribution. .
  
  <PAGE>
  
       Page 4 of 4
  
  
       2.    VERTICALLY  INTEGRATE FINISHING
  
       Phillips Mills outsources its finishing  requirements for all product lines
       (over  11  million  yards  per  year) at an  average  cost  believed  to be
       substantially  higher than Culp's manufacturing cost to finish its fabrics.
       Over the  course of the  first  year,  Culp  would  plan to  finish  all of
       Phillips Mills fabrics in Culp's existing plants.
  
       3.     ADDRESS YARN COSTS
  
       Culp  believes it can lower raw material  yarn costs for  Phillips  both by
       using yarns  internally  produced  by the company and by applying  the yarn
       prices that Culp receives from outside yarn suppliers to the yarn purchases
       of Phillips.
  
       4.    VERTICALLY INTEGRATE PRINTING AND FLOCKED GREIGE
               GOODS
  
       Phillips  currently  designs and  converts its printed  fabrics,  which are
       about  two-thirds  wet-printed  flock fabrics and one-third  other fabrics.
       With  Culp's  new  printing  facility  in  Lumberton,  NC and its new flock
       coating  line in  Burlington,  NC, it can begin  (over time)  printing  the
       Phillips  requirements,  as well  as  supplying  the  flock  base  fabrics.
       Additionally,  Phillips  Mills  purchases  other woven base fabrics for its
       printed  fabrics  product  line that could  possibly  be produced at Culp's
       Rayonese facility, which manufactures woven greige (or unfinished) fabrics.
  
       5.    INCREASE INTERNATIONAL MARKETING EFFORTS
  
       About 25% of Phillips  Mills sales are  outside of the United  States,  and
       this  market  area has been  growing  well  over  the  last two  years  for
       Phillips.  With Culp's  distribution  network and  expertise  in  servicing
       international  customers  , the company  plans to  increase  the efforts to
       promote Phillips Mills products in international markets.
  
       6.    ORGANIZE  FIFTH BUSINESS UNIT
  
       Culp plans to operate  Phillips Mills as its fifth  business  unit,  taking
       advantage of the skilled management team that has been in place for several
       years at Phillips.  With this organizational  strategy, Culp believes there
       should be minimal disruption to Phillips customers.
  
       7.    SEEK "BACK OFFICE" AND DISTRIBUTION EFFICIENCIES
  
       As it has experienced in its previous  acquisitions,  Culp plans to realize
       operating  efficiencies in the administrative  (MIS, credit,  financial and
       accounting, human resources) and distribution areas.
metadata_documents: [{"type": "8-K", "sequence": "1", "description": "CULP, INC. 8-K", "secsgml_size_bytes": 17432}]
metadata_filer: {"company-data": {"conformed-name": "CULP INC", "cik": "0000723603", "assigned-sic": "2211", "irs-number": "561001967", "state-of-incorporation": "NC", "fiscal-year-end": "0430"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-12597", "film-number": "97591252"}, "business-address": {"street1": "101 S MAIN ST", "city": "HIGH POINT", "state": "NC", "zip": "27261-2686", "phone": "9108895161"}, "mail-address": {"street1": "P O BOX 2686", "street2": "101 S MAIN ST", "city": "HIGH POINT", "state": "NC", "zip": "27261"}}
text: 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) April 30, 1997
  
                                     CULP, INC.
  
              (Exact name of registrant as specified in its charter)
  
          North Carolina                  0-12781                56-1001967
  
   (State or other jurisdiction    (Commission File No.)       (IRS Employer
         of incorporation)                                  Identification No.)
  
                               101 South Main Street
                         High Point, North Carolina  27260
                     (Address of principal executive offices)
                                  (910) 889-5161
               (Registrant's telephone number, including area code)
  
           (Former name or former address, if changed since last report)
  Item 5. Other Events
  
  See Press  Release  (attached)  dated April 30, 1997 related to the  acquisition
  of the Upholstery Fabrics division of Phillips Industries, Inc.
  
  See Financial Information Release (attached).
  
  Forward  Looking   Information.   The  discussion  in  this  Form  8-K  contains
  forward-looking   statements   that  are   inherently   subject   to  risks  and
  uncertainties.  Factors  that  could  influence  the  matters  discussed  in the
  forward-looking  statements  include  negotiation  of  a  definitive  agreement,
  which could affect the  structure  or  substance  of the  proposed  transaction,
  and the economic performance of the business acquired.
  
                                    SIGNATURES
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned hereunto duly authorized.
  
                                      CULP, INC.
                                      (Registrant)
  
                                By:    Franklin N.Saxon
                                       Senior Vice President and
                                       Chief Financial Officer
  
                                By:    Stephen T. Hancock
                                       Stephen T. Hancock
                                       General Accounting Manager
  
                                     - MORE -
  FOR IMMEDIATE RELEASE
  
                  CULP TO ACQUIRE THE UPHOLSTERY FABRICS DIVISION
                              OF PHILLIPS INDUSTRIES
  
                         TRANSACTION VALUED AT $47 MILLION
  
  HIGH POINT,  North  Carolina  (April 30,  1997) Culp,  Inc.  (NYSE:  CFI) today
  announced  that it has signed a letter of intent to acquire  the  business  and
  certain  assets  relating to the  upholstery  fabric  businesses  operating  as
  Phillips Weaving Mills,  Phillips Velvet Mills,  Phillips Printing and Phillips
  Mills.  These operating units are owned by Phillips  Industries,  Inc. which is
  a privately  owned  corporation  based in High Point,  North Carolina and owned
  by Dave  Phillips,  former  Secretary  of  Commerce  for  the  State  of  North
  Carolina.  Closing of the  transaction,  which is subject to a definitive asset
  purchase  agreement  and certain  other  conditions  set forth in the letter of
  intent,  is  expected  within the next 60 days.  The  transaction  is valued at
  approximately  $47  million  and  involves  the  purchase  of assets  for cash,
  notes,  consulting  services and a non-compete  agreement.  In addition,  there
  is  the  assumption  of  certain  liabilities  and  contracts  as  well  as the
  issuance of an option for 100,000  shares of stock  valued at the market  price
  on the day of closing.
  
        "We are  excited  about  the  opportunity  to  acquire  this  outstanding
  company and for Phillips to operate as a new business  unit of Culp,"  remarked
  Robert G. Culp,  III,  chief  executive  officer.  "Phillips  is a  successful,
  well-managed  company  that has achieved a strong  competitive  position as one
  of the nation's leading  suppliers of upholstery  fabrics.  Phillips  generated
  sales  of  approximately  $53  million  in  1996  from a broad  line  of  woven
  jacquards,  prints and  velvets  with  innovative  designs.  These are  product
  categories  in  which  Culp  also  has  an  extensive   marketing  effort.  The
  addition  of  Phillips  will  expand the range of our  designs  and our product
  versatility  and  thereby  equip us to meet  more of the  needs  of  customers.
  Dave  Phillips  said,  "Culp is a great  company  that  provides  an  excellent
  opportunity   for   Phillips  to  utilize   Culp's   manufacturing   resources,
  accelerate its growth and expand the volume of international sales."
  
  CULP To Acquire Phillips Industries
  Page 2
  April 30, 1997
  -------------------------------------------------------------------------------
  
        Culp commented,  "The  acquisition of Phillips would represent the latest
  in a series of  acquisitions  over the past  several  years  that  have  helped
  position Culp as the world's  largest  manufacturer  and marketer of upholstery
  fabrics for  furniture.  Coupled with a major  capital  investment  initiative,
  these  transactions  have  served  not  only to  establish  us as a  vertically
  integrated  marketing  organization  but also to broaden our product line.  The
  trend is clearly  toward  further  consolidation  within  the home  furnishings
  industry,  making  it  imperative  for us to  meet  the  standards  imposed  on
  suppliers  by  large  furniture  manufacturers.  We  are  pleased  that  Culp's
  strong  balance  sheet has  supported  our  continuing  programs to meet higher
  product  quality and delivery  requirements as well as our interest in pursuing
  strategic acquisitions of complementary businesses."
  
        The  assets  that  Culp  has  agreed  to  acquire  include  manufacturing
  facilities in Monroe and Jamestown,  North  Carolina.  The facilities at Monroe
  produce  woven  jacquards,  and the plant at Jamestown  manufactures  woven and
  tufted  velvets.   Additionally,   the  purchase  includes  a  printed  fabrics
  converting  business  located in High  Point.  The  transaction  also  includes
  distribution  centers in High Point,  North Carolina,  Tupelo,  Mississippi and
  Los Angeles, California.
  
        Culp is the largest  manufacturer  and marketer of  furniture  upholstery
  fabrics  in the  world and is a  leading  producer  of  mattress  ticking.  The
  company's  fabrics are used  principally in the  production of residential  and
  commercial furniture and bedding products.
  
                                       -30-
  Dated:  April 30, 1997
  
                     CULP, INC. FINANCIAL INFORMATION RELEASE
   ACQUISITION OF THE UPHOLSTERY FABRICS DIVISION OF PHILLIPS INDUSTRIES, INC.
                                  April 30, 1997
  
   A.    Acquisition Summary
  
       On April 30, 1997, Culp signed a LETTER OF INTENT to purchase the
  business and certain assets and assume certain liabilities of  the upholstery
  fabrics division of Phillips Industries, Inc. (consisting of Phillips Weaving
  Mills, Inc. , Phillips Velvet Mills, Inc., Phillips Printing, Inc. and
  Phillips Mills, Inc. - hereinafter collectively referred to as "Phillips
  Mills" or "Phillips").  The transaction value is estimated at $ 46.6 million
  and includes cash , notes,  assumption of debt, and  stock options, as well
  as non-compete and consulting agreements.  The acquisition will be accounted
  for as a purchase, and therefore the results of Phillips Mills from the
  closing date, which is expected in thirty to sixty days,  will be included in
  Culp's results.
  
       The company believes the transaction will be  considered an "asset
  purchase"  for income tax  purposes, and therefore any goodwill would be
  deductible for tax purposes over a 15 year period, and assets acquired and
  liabilities assumed would be recorded at their fair market values.  The
  company estimates that  income taxes could be reduced by approximately  $ 14
  million as a result of the deductibility of goodwill , the non-compete and
  consulting agreements , and the fair market value adjustment of the assets
  purchased, particularly fixed assets.
  
   B.    What products does Phillips Mills market ; and what are annual sales
     by product line?
  
       The company believes Phillips Mills is about the 9th largest upholstery
  fabric supplier in the United States. According to the audited financial
  statements  for the latest two fiscal years of Phillips Mills ending December
  31, 1996 and December 31, 1995, sales were $53 million and $48 million,
  respectively; and sales by product line for those fiscal periods were:  woven
  jacquards -- $37 million and   $35 million ;  prints (primarily using flock
  and cotton base fabrics) -- $11 million and $9 million ;  and velvets (woven
  and tufted) --  $5  million and $4 million. EBITDA for Phillips Mills for the
  year ended December 31, 1996 was approximately $6.1 million (which excludes
  certain non-recurring items); this information was derived from the audited
  financial statements of Phillips Mills for the year ended December 31, 1996.
  
  C. What are the capabilities of Phillips Mills and where are they located?
  
       Phillips Mills is headquartered in High Point, North Carolina with a
  jacquard weaving operation in Monroe, NC (near Charlotte), a velvet weaving
  and tufting operation in Jamestown, NC (near High Point) and a printed
  fabrics converting operation in High Point.  Phillips  also operates
  distribution warehouses in High Point, NC, Tupelo, MS , and Los Angeles, CA
  and has showrooms in High Point, NC and Tupelo, MS.  Phillips Mills employs
  about 325 people, all of which are non union and are located in North
  Carolina.
  Page 2 of 4
  
        The Phillips Mills'  design department creates all of its patterns
  internally with its staff of designers and stylists, using state-of-the-art
  CAD (computer-aided design) equipment. Their products are sold by
  independent sales agents in the United States and  in  international markets.
  Approximately 25 % of Phillips Mills annual sales volume is outside of the
  United States and this business includes sales to customers in about 15
  countries.  Additionally, Phillips Mills carries an "in-stock" program of
  certain products in its regional warehouses in High Point, Tupelo and Los
  Angeles to service small to medium furniture manufacturers on a
  "just-in-time" basis.
  
       The woven jacquard operation is  modern and is comprised of two
  facilities totalling approximately 140,000 square feet on 15 acres of land.
  The plants include about 70 Dornier jacquard looms, as well as warping and
  texturing capabilities. About half of the looms have electronic jacquard
  heads and there are some air-jet weaving machines. All finishing and
  additional fabric processing are outsourced. All yarns, mostly made from
  polypropylene,  polyester, acrylic and cotton fibers,  are  purchased from
  outside suppliers .
  
        The velvet facility, about 50,000 square feet, includes about 22
  machines, both weaving and tufting, as well as warping and surface finishing
  capabilities. All finishing  processes are outsourced. All yarns, mostly made
  from acrylic, polyester and polypropylene fibers, are purchased from outside
  suppliers.
  
         The printed fabrics converting operation  purchases greige, or
  unfinished, fabrics from outside suppliers and has those fabrics printed by a
  commission printer who  utilizes designs created by Phillips Mills.
  Approximately two thirds of the annual volume in this product line is
  wet-printed flock fabrics, and about one third is cotton prints and other
  items.
  
   D.    What's the composition of the transaction value (dollars in thousands)?
  
          Purchase of  certain assets                       $ 37,100
          Non-compete agreement                                5,000
          Consulting agreement                                 1,000
          Interest-bearing debt with banks and equipment
            vendors, assumed or paid at closing                3,000
          Acquisition costs  (legal, accounting,,
            Professional, etc.)                                  500
                                                            --------
  
              Transaction value                             $ 46,600
                                                            ========
  Page 3 of 4
  
  E.    How will the acquisition be financed (dollars in thousands)?
  
          Bank debt (1)                                     $ 33,300
          Note payable to sellers  (2)                         7,300
          Non-compete agreement (3)                            5,000
          Consulting agreement (4)                             1,000
          Stock options   (5)                                 _______
  
              Transaction value                              $46,600
                                                             =======
  
   (1) Source is Culp's  recently  completed  $125  million  revolving  credit
       facility. This assumes all of Phillips' bank and equipment vendor debt will
       be repaid at closing;
   (2) The key terms are:  interest rate of 6%, payable quarterly; five year term
       with one  payment at  maturity;  unsecured;
   (3) Payable in equal annual payments of $1.0 million for five years,  beginning
       one year from  closing ;
   (4) Payable  in equal  annual  payments  of $ 0.2 million for five years,
       beginning one year from closing;
   (5) The company is granting a stock option in the amount of 100,000 shares
       with an option term of six years;  the  option's  exercise price is Culp's
       stock price on the closing date;
  
   F.    What does Culp view as the principal business reasons for acquiring
     Phillips Mills ?
  
        The following is a summary of Culp's goals and the key elements of its
  business plan for Phillips Mills:
  
        1.     APPLY CULP'S MANUFACTURING CAPABILITIES AND RESOURCES TO
          PHILLIPS ESTABLISHED BUSINESS
  
       Culp believes that Phillips has established several important market niches
       in  its  three  product  lines  (woven  jacquards,   prints  and  velvets),
       especially with its focus on the casual contemporary styling category. Culp
       plans to make  available its  extensive and low cost  vertically-integrated
       manufacturing  capabilities to the business that Phillips has  established,
       as well as to its current product development initiatives. Thereby, it will
       further leverage Phillips' marketing capability,  which has its strength in
       design and styling, sales and distribution. .
  Page 4 of 4
  
       2.    VERTICALLY  INTEGRATE FINISHING
  
       Phillips Mills outsources its finishing  requirements for all product lines
       (over  11  million  yards  per  year) at an  average  cost  believed  to be
       substantially  higher than Culp's manufacturing cost to finish its fabrics.
       Over the  course of the  first  year,  Culp  would  plan to  finish  all of
       Phillips Mills fabrics in Culp's existing plants.
  
       3.     ADDRESS YARN COSTS
  
       Culp  believes it can lower raw material  yarn costs for  Phillips  both by
       using yarns  internally  produced  by the company and by applying  the yarn
       prices that Culp receives from outside yarn suppliers to the yarn purchases
       of Phillips.
  
       4.    VERTICALLY INTEGRATE PRINTING AND FLOCKED GREIGE
               GOODS
  
       Phillips  currently  designs and  converts its printed  fabrics,  which are
       about  two-thirds  wet-printed  flock fabrics and one-third  other fabrics.
       With  Culp's  new  printing  facility  in  Lumberton,  NC and its new flock
       coating  line in  Burlington,  NC, it can begin  (over time)  printing  the
       Phillips  requirements,  as well  as  supplying  the  flock  base  fabrics.
       Additionally,  Phillips  Mills  purchases  other woven base fabrics for its
       printed  fabrics  product  line that could  possibly  be produced at Culp's
       Rayonese facility, which manufactures woven greige (or unfinished) fabrics.
  
       5.    INCREASE INTERNATIONAL MARKETING EFFORTS
  
       About 25% of Phillips  Mills sales are  outside of the United  States,  and
       this  market  area has been  growing  well  over  the  last two  years  for
       Phillips.  With Culp's  distribution  network and  expertise  in  servicing
       international  customers  , the company  plans to  increase  the efforts to
       promote Phillips Mills products in international markets.
  
       6.    ORGANIZE  FIFTH BUSINESS UNIT
  
       Culp plans to operate  Phillips Mills as its fifth  business  unit,  taking
       advantage of the skilled management team that has been in place for several
       years at Phillips.  With this organizational  strategy, Culp believes there
       should be minimal disruption to Phillips customers.
  
       7.    SEEK "BACK OFFICE" AND DISTRIBUTION EFFICIENCIES
  
       As it has experienced in its previous  acquisitions,  Culp plans to realize
       operating  efficiencies in the administrative  (MIS, credit,  financial and
       accounting, human resources) and distribution areas.