UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 28, 2005
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Culp, Inc.
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(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))
Forward-Looking Statements
This report 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.
Item 2.02 Results of Operations and Financial Condition.
On May 2, 2005, Culp, Inc. (the "Company") issued a news release disclosing
preliminary estimates of financial results for its fiscal fourth quarter ended
May 1, 2005, and also announcing a restructuring plan in the Company's domestic
upholstery fabrics business. The news release is attached hereto as Exhibit
99.1.
The news release contains disclosures about expected earnings excluding
restructuring and related charges, a non-GAAP performance measure, as well as a
reconciliation between this performance measure and expected earnings calculated
in accordance with generally accepted accounting procedures. The Company has
included the disclosure about expected earnings excluding restructuring and
related charges 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,
and is used by the Company as a financial goal for purposes of determining
management incentive bonuses.
Item 2.05 Costs Associated with Exit or Disposal Activities.
On May 2, 2005, the Company announced a restructuring plan for its domestic
upholstery fabrics business that involves disposal of assets and restructuring
charges to be incurred by the Company. The news release announcing these matters
is attached hereto as Exhibit 99.1. The Company's board determined to take the
actions described in Exhibit 99.1 at a meeting on April 28, 2005, for the
reasons explained in the news release. As described in the release, the
restructuring plan is expected to result in total pre-tax charges of
approximately $13.0 million ($8.7 million on an after-tax basis); of which $10.0
million is expected to be non-cash items and $3.0 million is expected to result
in cash expenditures. The charges are expected to be made up of approximately
$1.9 million in termination benefits, approximately $300,000 in contract
termination costs, and $10.8 million of estimated costs associated with fixed
asset write-downs and accelerated depreciation, dismantling, disposal and moving
equipment and related assets. The implementation of the restructuring plan is
anticipated to be completed by August 2005.
Item 9.01. Financial Statements and Exhibits.
(c) The following exhibits are filed as part of this report:
99.1 - News Release dated May 2, 2005.
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: May 3, 2005
Culp, Inc.
By: /s/ Franklin N. Saxon
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Franklin N. Saxon
President and Chief Operating Officer
EXHIBIT INDEX
Exhibit Number Exhibit
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99.1 News Release dated May 2, 2005
Exhibit 99.1
Culp Announces Preliminary Results for Fourth
Quarter 2005; Company Outlines Restructuring Plan for Domestic
Upholstery Fabrics Business Expected to Realize $11 Million in Annual
Cost Reductions
HIGH POINT, N.C.--(BUSINESS WIRE)--May 2, 2005--Culp, Inc.
(NYSE:CFI) today announced that based on preliminary quarterly results
and estimates, it expects to report a loss in the range of $0.13 to
$0.17 per diluted share for the fourth fiscal quarter ended May 1,
2005, excluding restructuring and related charges. These preliminary
results reflect a greater loss than the company's previously announced
expectation of a loss of $0.03 to $0.08 per diluted share in the
period, excluding restructuring and related charges. The company
currently estimates that restructuring and related charges of
approximately $2.8 million, net of taxes, or $0.24 per diluted share,
were incurred during the fourth fiscal quarter related to the
company's previous restructuring plan announced in October 2004. The
company's restructuring plan for its domestic upholstery fabrics
business, announced today and discussed more fully below, includes an
additional $4.9 million, net of taxes, or $0.43 per diluted share, in
restructuring and related charges for the fourth fiscal quarter. Total
restructuring and related charges are now estimated to be $7.7
million, or $0.67 per diluted share, and the company expects to report
a net loss for the fourth fiscal quarter of $0.80 to $0.84 per diluted
share. (A reconciliation of the estimated net loss per share
calculation has been set forth on page 3.)
Commenting on the announcement, Robert G. Culp, III, chairman and
chief executive officer of Culp, Inc., said, "Compared with the
previously announced expectation, our preliminary results for the
fourth fiscal quarter primarily reflect lower-than-expected demand for
domestically produced upholstery fabrics, and significant
manufacturing variances and production constraints related to the
recent restructuring activities in our decorative fabrics operation.
Also, additional corporate expenses, primarily professional fees, were
incurred during the fourth quarter that are not expected to have a
recurring effect on our financial results going forward."
The company also announced a major restructuring plan within the
domestic upholstery fabrics business designed to reduce costs,
increase asset utilization and improve profitability. The
restructuring plan includes consolidation of the company's velvet
fabrics manufacturing operations, additional fixed manufacturing cost
reductions in the decorative fabrics operation and significant
reductions in selling, general and administrative expenses within the
upholstery fabrics segment. Another important element of the
restructuring plan will be a substantial reduction in raw material and
finished goods stock keeping units to simplify manufacturing
processes, increase productivity and reduce inventories.
The company will be relocating velvet production equipment from
the manufacturing facility in Burlington, North Carolina, to its other
velvet plant in Anderson, South Carolina, resulting in significant
reduction of fixed manufacturing costs. The Burlington facility will
then be utilized as an inspection and distribution facility for
fabrics imported from offshore sources and for finished goods
warehousing of domestically produced upholstery fabrics. The company
also will combine its sales, design and customer service activities
for Culp Decorative Fabrics and Culp Velvets/Prints, the two divisions
within the upholstery fabrics segment. As a result, the company will
list for sale two buildings in Burlington, consisting of approximately
140,000 square feet. These initiatives will significantly reduce the
company's selling, general and administrative expenses. Overall, these
restructuring actions will reduce the number of employees by
approximately 225 people, representing approximately 17 percent of
those in Culp's domestic upholstery fabrics business.
Culp noted, "Due to the continuing competitive pressure on demand
for domestically produced upholstery fabrics, we are taking aggressive
steps to adjust our cost structure and align our U.S. manufacturing
capacity with current and expected demand. By consolidating our
manufacturing operations and merging the key functions for the two
divisions within the upholstery fabrics segment, we will significantly
reduce our operating costs and utilize our domestic operations more
efficiently. Ultimately, we believe our customers will benefit from
having one dedicated team focused on providing the upholstery fabrics
that our customers desire. Nonetheless, we deeply regret that these
changes require some very difficult personnel decisions, and we are
mindful of the impact of these initiatives on our associates."
The implementation of these restructuring initiatives will begin
immediately and is expected to be completed by August 2005. The
company expects the restructuring actions to result in total pre-tax
charges of approximately $13 million ($8.7 million on an after-tax
basis), of which $10 million is expected to be non-cash items. Of the
total charges, the company estimates that approximately $7.3 million
($4.9 million, net of taxes, or $0.43 per diluted share) will be
recorded in the fourth quarter of fiscal 2005. The remaining charges
are expected to be recorded in the first quarter of fiscal 2006.
Culp added, "As a result of the manufacturing consolidations and
other initiatives announced today, we expect to realize cost
reductions from fourth-quarter levels of approximately $11 million on
an annualized basis, of which approximately $6 million will be in
selling, general and administrative costs and approximately $5 million
will be in fixed manufacturing costs.
"Once these initiatives are completed, Culp will have six
manufacturing facilities operating in the upholstery fabrics segment,
including one facility in China. Our primary focus in our U.S.
upholstery manufacturing operations is to restore profitability. We
are committed to taking whatever additional steps are necessary to
achieve profitable domestic operations.
"At the same time, we are excited about our leadership position
with respect to our mattress fabrics segment and our growth prospects
in our offshore upholstery fabrics business. During the fourth fiscal
quarter, sales of upholstery fabrics produced outside of our U.S.
manufacturing plants were up 75 percent over the same period last year
and accounted for approximately 25 percent of Culp's overall
upholstery fabric sales."
The company expects to announce financial results for the fourth
quarter and fiscal year ended May 1, 2005, in mid-June.
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 Estimated Range of Net Loss Per Share
to Estimated Range of Pro Forma Net Loss Per Share
(Unaudited)
Three Months
Ended May 1,
2005
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Estimated range of net loss per share $(0.80)-$(0.84)
Estimated restructuring and related charges,
net of income taxes 0.67
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Estimated range of pro forma net loss per share $(0.13)-$(0.17)
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CONTACT: Culp, Inc.
Investor Contact:
Kathy J. Hardy, 336-888-6209
or
Media Contact:
Kenneth M. Ludwig, 336-889-5161