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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 27, 2004
Culp, Inc.
(Exact Name of Registrant as Specified in its Charter)
North Carolina 0-12781 56-1001967
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
101 South Main Street
High Point, North Carolina 27260
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(Address of Principal Executive Offices)
(Zip Code)
(336) 889-5161
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(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))
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Report, by Culp, Inc (the "company"), and the exhibits attached hereto
contain statements that may be deemed "forward-looking statements" within the
meaning of the federal securities laws, including the Private Securities
Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and
Section 27A of the Securities and Exchange Act of 1934). Such statements are
inherently subject to risks and uncertainties. Further, forward-looking
statements are intended to speak only as of the date on which they are made.
Forward-looking statements are statements that include projections, expectations
or beliefs about future events or results or otherwise are not statements of
historical fact. Such statements are often but not always characterized by
qualifying words such as "expect," "believe," "estimate," "plan" and "project"
and their derivatives, and include but are not limited to statements about 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. 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.
ITEM 2.05. COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES.
On October 27, 2004, the company announced a strategic plan and restructuring
initiative that involves disposal of assets and resulting charges to be incurred
by the company. This information was filed under Item 7.01 of Form 8-K and was
not filed under Item 2.05. This Form 8-K is being amended to report the
information regarding charges to the company under Item 2.05 and to update the
disclosures regarding estimates of costs. See Exhibit 99.1 for the information
required to be filed under this Item. The company reported actual results for
its second fiscal quarter on November 23, 2004, and a Form 8-K was filed on that
date to report those results. The company is also updating the disclosures made
in the October 27 Form 8-K to show updated total estimated costs associated with
the restructuring initiative (disposal activities) of approximately $15 million,
made up of approximately $1.3 million of termination benefits, approximately
$300,000 of contract termination costs, and $13.4 million of estimated costs
associated with fixed asset write-downs and accelerated depreciation,
dismantling, disposal and moving equipment and related assets, in addition to
the goodwill impairment charge of approximately $5 million described in Item
2.06 below. Total estimated costs, including the goodwill impairment charge, are
$20 million, with total cash charges estimated at $5.5 million.
ITEM 2.06. MATERIAL IMPAIRMENTS.
On October 27, 2004, the company announced a strategic plan and restructuring
initiative that involves a charge for impairment of goodwill in the amount of
approximately $5 million. This information was filed under Item 7.01 of Form 8-K
and was not filed under Item 2.06. This Form 8-K is being amended to report the
information regarding goodwill impairment charges under Item 2.06. See Exhibit
99.1 for the information required to be filed under this Item. The company
reported actual results for its second fiscal quarter on November 23, 2004, and
a Form 8-K was filed on that date to report those results.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(c) The following exhibits are filed as part of this report:
99.1 - Press Release dated October 27, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 3, 2004 Culp, Inc.
By: /s/ Kenneth R. Bowling
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Kenneth R. Bowling
Vice President-Finance,
Treasurer (Authorized to
sign on behalf of the
registrant and also signing
as principal accounting
officer)
EXHIBIT INDEX
Exhibit Number Exhibit
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99.1 Press Release dated October 27, 2004
Exhibit 99.1
Culp Announces Revised Earnings
Expectations for Second Quarter 2005;
Company Outlines Strategic Plans Expected to
Achieve $14 Million in Annual Savings
HIGH POINT, N.C.--(BUSINESS WIRE)--Oct. 27, 2004--Culp, Inc.
(NYSE:CFI) today announced that, based on quarterly results to date
and estimates, it expects earnings for the second fiscal quarter
ending October 31, 2004, to be in the range of $0.02 to $0.04 per
diluted share, excluding restructuring and related goodwill and asset
impairment charges. These projected results are lower than the
company's previously announced expectation of $0.13 to $0.17 per
diluted share for the period.
Commenting on the announcement, Robert G. Culp, III, chairman and
chief executive officer of Culp, Inc., said, "Our revised expectations
for the second fiscal quarter reflect weaker-than-expected demand for
upholstery fabrics and lower-than-expected operating margins in
mattress fabrics. While we had anticipated the normal seasonal pick-up
in demand this fall, current shipments indicate that sales in the
upholstery fabrics segment will be down approximately 15 percent from
the same period a year ago. Overall, the retail furniture business has
not demonstrated signs of a meaningful recovery from the summer
slowdown. Additionally, demand for upholstery fabrics has been
affected by the continuing consumer preference for leather furniture
and increased competition from imported fabrics, including
cut-and-sewn kits, primarily from Asia. While our mattress fabrics
segment sales are expected to approximate last year's second quarter,
industry-wide pricing pressures and inventory markdowns primarily
related to certain customer start-up programs have affected our
margins in this segment. Furthermore, both operating segments are
experiencing higher raw material costs. Together, these factors have
contributed to our lower overall profitability for the quarter."
Upholstery Fabrics Segment
The company also announced a major restructuring plan designed to
reduce costs, increase asset utilization and improve profitability
within the upholstery fabrics segment. Culp added, "We have made
substantial progress over the past several years with our previous
restructuring initiatives. However, with the continued competitive
pressure on demand in this segment, we are moving forward with our
plans to further adjust our cost structure and bring our U.S.
manufacturing capacity in line with current and expected demand. The
restructuring plan principally involves consolidation of the company's
decorative fabrics weaving operations by closing Culp's facility in
Pageland, South Carolina, and consolidating those operations into the
Graham, North Carolina facility. Additionally, we will be
consolidating our yarn operations by integrating the production of the
Cherryville, North Carolina plant into the company's Shelby, North
Carolina facility. Another important element of the restructuring plan
will be a substantial reduction in certain raw material and finished
goods stock keeping units, or SKUs, to reduce manufacturing
complexities and lower costs. We will continue to identify and
eliminate products that are not generating acceptable volumes or
margins. Finally, we are making significant reductions in our selling,
general and administrative expenses. Overall, these restructuring
actions will reduce the number of associates by approximately 250
people, representing approximately 14 percent of those in Culp's
upholstery fabrics segment."
Culp noted, "The restructuring plan within the upholstery fabrics
segment involves very difficult decisions. We regret that these
measures were necessary, and recognize the impact of these initiatives
will be deeply felt by affected employees, their families and their
communities."
The implementation of these restructuring initiatives will begin
immediately and is expected to be completed by May 1, 2005, the end of
the current fiscal year. The company expects the restructuring actions
to result in total pre-tax charges of approximately $21 million ($14
million on an after-tax basis). Approximately $15 million of the
pre-tax amount is expected to be non-cash items, including
approximately $5 million for goodwill impairment. Of the total
charges, the company estimates that approximately $7.5 million ($5
million, net of taxes, or $0.43 per diluted share) will be incurred in
the second fiscal quarter. The remaining charges are expected to be
recorded in the third and fourth quarters of fiscal 2005, as incurred.
Including the restructuring and related goodwill and asset impairment
charges, the company expects to report a loss for the second fiscal
quarter of $0.41 to $0.39 per diluted share. (A reconciliation of the
earnings (loss) per share calculations has been set forth on Page 3.)
Culp added, "As a result of these plant consolidations and other
cost-reduction initiatives, we expect to realize annual savings of
approximately $9.5 million, of which approximately $4.0 million will
be in fixed manufacturing costs, an estimated $2.0 million in variable
manufacturing costs, and approximately $3.5 million in selling,
general and administrative costs.
"Once these initiatives are completed, Culp will have seven
manufacturing facilities operating in the upholstery fabrics segment,
including one facility in China. We believe this configuration will
allow us to utilize our domestic operations more efficiently,
especially for our promotional, commercial fabric and make-to-order
businesses. At the same time, we intend to continue aggressively
pursuing our strategy to source upholstery fabrics that we do not
manufacture in the U.S. As we have previously noted, sales of
upholstery fabrics produced outside of our U.S. manufacturing plants
are accounting for an increasing percentage of Culp's overall
upholstery fabric sales. We believe that blending efficient domestic
manufacturing with an aggressive offshore manufacturing and sourcing
strategy allows us to offer a compelling value proposition and better
meet the demands of our customers. We are confident we are pursuing
the right strategic direction for Culp, one that will more effectively
position the company in today's global marketplace."
Mattress Fabrics Segment
"While we have continued to realize meaningful gains with key
customers in our mattress fabrics (known as mattress ticking) segment,
we believe there are areas for margin improvement," Culp continued.
"In order to further reduce our manufacturing costs, we will be
consolidating our mattress fabric manufacturing into our two plants
located in Quebec, Canada, and Stokesdale, North Carolina. This
project will involve relocation of ticking looms from an upholstery
fabric plant and the purchase of new looms that are faster and more
efficient than the equipment they will replace. Our capital
expenditures for this project are expected to be approximately $7
million over the current and next fiscal year. This project will begin
in November 2004 and we expect it to be completed by August 2005.
"We believe these changes in our manufacturing operations will
significantly enhance our globally competitive cost structure in this
segment. We anticipate the company will realize approximately $4.5
million in annualized savings as a result of this capital project. We
look forward to the opportunity to strengthen our competitive position
in the mattress ticking business," Culp concluded.
The company expects to announce financial results for the second
quarter ending October 31, 2004, on or about November 23, 2004.
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
expectations for the company's future operations, production levels,
sales, expenses, profit margins, 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. 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. 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.
Culp Inc.
Reconciliation of Projected Range of Net Loss Per Share
to Projected Range of Pro Forma Net Income Per Share
(Unaudited)
Three Months Ending
October 31,
2004
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Projected range of net loss per share $(0.41)-$(0.39)
Projected restructuring and related charges,
net of income taxes 0.43
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Projected range of pro forma net income
per share $ 0.02 -$ 0.04
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CONTACT: Culp, Inc., High Point
Investor Contact:
Kathy J. Hardy, 336-888-6209
or
Media Contact:
Kenneth M. Ludwig, 336-889-5161