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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) December 12, 2006
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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 (I.R.S. Employer
of Incorporation) File Number) 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. 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 of the Company's most recent annual report on Form
10-K.
Item 2.05 Costs Associated with Exit or Disposal Activities.
On December 14, 2006, the Company announced changes to its U.S. upholstery
manufacturing strategy, including the consolidation of its U.S. upholstery
facilities and the closing of two manufacturing plants, which will involve exit
and disposal charges to be incurred by the Company. The news release announcing
these matters is attached hereto as Exhibit 99(a). The Company's board of
directors determined to take the actions described in Exhibit 99(a) at a meeting
on December 12, 2006, for the reasons explained in the news release. As
described in the release, the actions being taken are expected to result in
total pre-tax charges of approximately $7.3 million, of which $5.4 million is
expected to be non-cash items and $1.9 million is expected to result in cash
expenditures. The Company anticipates the charges to be made up of approximately
$766,000 in termination benefits, approximately $2.3 million in inventory
write-downs, and $4.2 million of estimated costs associated with fixed asset
write-downs, accelerated depreciation and other costs related to dismantling,
disposal and moving equipment and related assets. The charges are expected to be
incurred in the Company's third and fourth quarters of fiscal 2007, with some
possible carryover to fiscal 2008. The plant consolidation and closings are
expected to be completed by the end of April 2007.
Item 9.01. Financial Statements and Exhibits.
(c) The following exhibits are filed as part of this report:
99.1 - News Release dated December 14, 2006.
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 14, 2006
Culp, Inc.
By: /s/ Kenneth R. Bowling
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Kenneth R. Bowling
Vice President-Finance, Treasurer
EXHIBIT INDEX
Exhibit Number Exhibit
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99.1 News Release dated December 14, 2006
Exhibit 99.1
Culp Announces Revised U.S. Upholstery Fabrics Manufacturing Strategy
HIGH POINT, N.C.--(BUSINESS WIRE)--Dec. 14, 2006--Culp, Inc.
(NYSE: CFI) today announced a revised U.S. upholstery fabrics
manufacturing strategy with the consolidation of the company's U.S.
upholstery fabrics manufacturing facilities and the outsourcing of its
specialty yarn production. This process will involve closing the
company's weaving plant located in Graham, North Carolina, and closing
the yarn plant located in Lincolnton, North Carolina. The company will
transfer certain production from the Graham plant to its Anderson,
South Carolina, and Shanghai, China, facilities as well as a small
portion to contract weavers. The company will continue to operate one
upholstery fabrics plant in Anderson, which will produce velvets and
decorative fabrics.
Commenting on the announcement, Robert G. Culp, III, chairman of
the board and chief executive officer of Culp, Inc., said, "We have
made considerable progress in changing our product strategy, reducing
our manufacturing complexities and improving our cost structure in the
U.S. upholstery fabrics business. At the same time, we have been
aggressively growing our China-produced business. However, the lower
sales volumes in our decorative fabrics and yarn plants are having a
significant impact on the profitability of our overall upholstery
fabrics business. By further consolidating our U.S. manufacturing
operations and utilizing lower-cost manufacturing alternatives, we are
reducing our operating costs and improving our domestic capacity
utilization. We have been highly successful with our China platform
and continue to be encouraged by the progress we are making in selling
non-U.S. produced products.
"We believe we are making progress toward creating a sustainable
upholstery fabrics business model that will meet current customer
demand," Culp added. "We believe the Anderson plant continues to be
the low-cost U.S. producer for velvet fabrics and we are pleased with
the trends in customer placements of new product introductions. We
also have capacity in Anderson to absorb some of the decorative fabric
production from Graham and we believe this plant will continue to be
an important element of our overall upholstery fabrics business.
"As a result of the two plant closures, we will be eliminating
approximately 185 positions. We deeply regret the impact these actions
will have on the people and communities involved. We are committed to
providing employment and benefit assistance to the extent possible,
and Culp associates at both plants qualify for Trade Adjustment
Assistance benefits, which include, among other things, training
programs to learn a new trade. We will begin this transition
immediately and expect to substantially complete this process by the
end of April 2007," concluded Culp.
The company expects the restructuring actions to result in total
pre-tax charges of approximately $7.3 million ($5.8 million on an
after-tax basis), of which $5.4 million is expected to be non-cash
items. Of the total charges, the company estimates that approximately
$4.1 million ($3.3 million, net of taxes, or $0.28 per diluted share)
will be recorded in the third quarter of fiscal 2007. The remaining
charges are expected to be recorded in the fourth quarter of fiscal
2007, with some possible carryover to fiscal 2008. As a result of
these activities, Culp will have only one U.S. manufacturing facility
operating in the upholstery fabrics segment with book value of
property and equipment of $1.5 million and approximately 150
employees.
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.
CONTACT: Culp, Inc.
Investor Contact:
Kenneth R. Bowling, 336-881-5630
Vice President of Finance
or
Media Contact:
Kenneth M. Ludwig, 336-889-5161
Senior Vice President, Human Resources