Exhibit 99(a)
Culp Announces Fiscal 2005 Results
HIGH POINT, N.C.--(BUSINESS WIRE)--June 20, 2005--Culp, Inc.
(NYSE: CFI) today reported financial and operating results for the
fourth quarter and fiscal year ended May 1, 2005.
Overview
For the three months ended May 1, 2005, net sales were $74.2
million, compared with net sales of $85.1 million a year ago. The
company reported a net loss of $7.7 million, or $0.67 per diluted
share, for the fourth quarter of fiscal 2005, compared with net income
of $3.7 million, or $0.32 per diluted share, for the fourth quarter of
fiscal 2004. The financial results for the fourth quarter of fiscal
2005 include after-tax restructuring and related charges of $6.4
million, or $0.55 per diluted share. Excluding these charges, net loss
for the fourth fiscal quarter was $1.4 million, or $0.12 per diluted
share. The results for the fourth quarter of fiscal 2004 include an
after-tax credit of $0.7 million, or $0.06 per diluted share, related
to the company's restructuring reserves. (A reconciliation of the net
income (loss) and net income (loss) per share calculations has been
set forth on Page 5.)
For the fiscal year ended May 1, 2005, the company reported net
sales of $286.5 million compared with $318.1 million for the same
period a year ago. Net loss for fiscal 2005 was $17.9 million, or
$1.55 per diluted share, compared with net income of $7.2 million, or
$0.61 per diluted share, for fiscal 2004. Excluding restructuring and
related charges and goodwill impairment, net loss for fiscal 2005 was
$3.4 million, or $0.30 per diluted share. Fiscal 2005 included 52
weeks versus 53 weeks for the same period of fiscal 2004.
Commenting on the company's results for the fourth quarter and
fiscal 2005, Robert G. Culp, III, chief executive officer of Culp,
Inc., said, "Throughout fiscal 2005, we have worked hard to address
both the challenges and opportunities facing our industry and Culp's
business. Many of the strategic changes we now have underway are
affecting our bottom line in the short term as we position Culp for
improved profitability in fiscal 2006. We believe we are taking the
necessary steps to enhance our competitive position in today's global
marketplace."
Mattress Fabrics Segment
Mattress fabric (known as mattress ticking) sales were $27.0
million in the fourth quarter of fiscal 2005 compared with $27.2
million for the fourth quarter of fiscal 2004. Operating income for
this segment improved to $2.2 million, or 8.2 percent of sales,
compared with $1.6 million, or 6.2 percent of sales, in the third
quarter of fiscal 2005. Operating income was $3.6 million, or 13.1
percent of sales, for the prior-year period. Compared with the fourth
quarter of fiscal 2004, operating margins in this segment were
affected by close-out sales and manufacturing variances related to the
relocation of mattress ticking looms. Additionally, the mattress
fabrics segment has been affected throughout fiscal 2005 by
industry-wide pricing pressures as well as higher raw material costs.
"We continue to be optimistic about our mattress ticking business
in spite of industry-wide pricing pressures," said Culp. "While sales
for the quarter were slightly behind the same period last year in
absolute dollars, we sold over three percent more yards of ticking
than we did a year ago. We are on schedule with our capital project
designed to enhance efficiencies and further reduce our operating
costs going forward. The relocation of ticking looms from an
upholstery fabric plant to existing mattress ticking facilities in the
U.S. and Canada is underway and is expected to be completed on
schedule by August 2005. In addition, we are in the process of
installing new weaving machines that are faster and more efficient
than the equipment they will replace. We believe these changes in our
manufacturing operations will significantly enhance our globally
competitive cost structure, and we look forward to the opportunity to
extend our leadership position in the mattress ticking business."
Upholstery Fabrics Segment
Sales for this segment were $47.2 million in the fourth quarter of
fiscal 2005, an 18.6 percent decline compared with $58.0 million in
the fourth quarter of fiscal 2004. Overall, sales for the quarter
continued to reflect the lower demand industry-wide for U.S. produced
upholstery fabrics that Culp has experienced throughout fiscal 2005.
The current consumer preference for leather and suede furniture and
customer selection of other imported fabrics, including cut and sewn
kits, are driving this trend. These results also reflect operating
constraints related to ongoing restructuring activities in the
decorative weaving operations. Operating loss for this segment was
$2.0 million, compared with operating income of $2.8 million for the
same period a year ago. For the fourth quarter, margins were affected
by significant manufacturing variances related to restructuring
activities, continued underutilization of domestic capacity and higher
raw material costs.
Culp noted, "As we announced in early May, we have taken very
decisive steps to bring our U.S. manufacturing capacity in line with
current demand trends. By further consolidating our manufacturing
operations and merging the key functions for the two divisions within
the upholstery fabrics segment, we are significantly reducing our
operating costs and improving our domestic capacity utilization. We
expect these restructuring actions to be substantially complete by
August 2005. Going forward, annual cost savings are anticipated to be
approximately $11 million, of which approximately $6 million will be
in selling, general and administrative costs and approximately $5
million will be in fixed manufacturing costs. We are committed to
taking whatever additional steps are necessary to keep our U.S.
manufacturing capacity in line with demand and achieve profitable
domestic operations.
"We continue to gain momentum with respect to our offshore
produced business," added Culp. "Sales of upholstery fabrics produced
outside of our U.S. manufacturing plants, which include the popular
micro-denier suedes as well as fabrics produced at our China facility,
were up 75 percent during the fourth quarter compared with the same
quarter last year, and were up 100 percent for the year. These fabrics
accounted for almost 25 percent of Culp's overall upholstery fabric
sales during the fourth quarter of fiscal 2005. Customer response has
been favorable and we are excited about the innovative products that
we are now able to offer. Our customers are receiving the same
exceptional design and quality that always have been a trademark of
Culp, but at better values. We believe Culp has an effective global
sales and sourcing strategy in place to meet the changing demands of
our customers, and we will continue to aggressively pursue additional
opportunities to expand our market reach."
Outlook
Commenting on the outlook for the first quarter of fiscal 2006,
Culp continued, "We are encouraged by the early indications for the
first quarter of fiscal 2006 as we begin to see signs that the
strategic moves we have made are starting to show positive results.
Reduced operating costs and greater efficiencies make us optimistic
about the future.
"We expect sales for the mattress ticking segment will show a
modest decrease over first quarter sales last year, reflecting
continued industry-wide pricing pressure. However, operating income
margin in this segment is expected to improve from the fourth quarter
of fiscal 2005. With respect to upholstery fabrics, we note that the
summer months are typically slow for this segment. While we expect
continued significant growth in sales of fabrics produced outside the
U.S., we believe demand for domestically produced upholstery fabrics
will continue to decline. For the first quarter of fiscal 2006, we
expect overall upholstery fabrics segment sales to decrease, but to a
much lesser extent than the fourth quarter decline because of the
strong growth trends in the sales of fabrics produced offshore. We
believe the decrease in sales of domestically produced upholstery
fabrics, combined with manufacturing costs related to ongoing
restructuring activities, will result in an operating loss for this
segment. Considering these factors, we expect the company to report a
net loss of $0.02 to $0.08 per diluted share in the first fiscal
quarter, excluding previously announced restructuring and related
charges. This is management's best estimate at present, recognizing
that future financial results are difficult to predict because the
upholstery fabrics industry is undergoing a dramatic transition and
many internal changes are underway within the company. The actual
results will depend primarily upon the level of demand throughout the
quarter, the company's progress with respect to restructuring
activities for our domestic upholstery fabrics operations, and the
implementation of our capital project in mattress ticking."
The company estimates that restructuring and related charges of
approximately $3.2 million, net of taxes, or $0.28 per diluted share,
will be incurred during the first fiscal quarter. Including the
restructuring and related charges, the company expects to report a net
loss for the first fiscal quarter of $0.30 to $0.36 per diluted share.
(A reconciliation of the projected net loss per share calculation has
been set forth on Page 5.)
In closing, Culp remarked, "We have many reasons to be optimistic
about the company's prospects for the next fiscal year. The actions we
have taken over the past year to right-size our domestic upholstery
fabric capacity and streamline our operations will significantly
reduce our costs and allow us to operate more efficiently. We have a
strong competitive position in mattress ticking and look forward to
realizing the benefits of the capital project now underway in this
segment. Our offshore produced business is now thriving and will be an
important driver of our success in fiscal 2006. An integral part of
this business is Culp's China facility, and we are pleased with the
profitability and growth opportunities for this platform. We believe
we are moving Culp in the right direction. Above all, our primary
focus for the next year is to restore Culp to profitability and to
deliver results that will reward our shareholders."
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. 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.
CULP, INC.
Condensed Financial Highlights
(Unaudited)
Three Months Ended Fiscal Year Ended
----------------------- -------------------------
May 1, May 2, May 1, May 2,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Net sales $74,183,000 $85,148,000 $286,498,000 $318,116,000
Net income (loss) $(7,730,000) $3,733,000 $(17,852,000) $7,220,000
Net income (loss)
per share:
Basic $(0.67) $0.32 $(1.55) $0.63
Diluted $(0.67) $0.32 $(1.55) $0.61
Net income (loss)
per share, diluted,
excluding restructuring
and related charges
(credit), goodwill
impairment and early
extinguishment of
debt(1) $(0.12) $0.26 $(0.30) $0.65
Average shares
outstanding:
Basic 11,550,000 11,531,000 11,549,000 11,525,000
Diluted 11,550,000 11,815,000 11,549,000 11,777,000
(1) Excludes restructuring and related charges of $10.3 million
($6.4 million or $0.55 per diluted share, after taxes) for the fourth
quarter of fiscal 2005. Excludes restructuring and related charges and
goodwill impairment of $23.2 million ($14.4 million or $1.25 per
diluted share, after taxes) for fiscal 2005. For the fourth quarter
and fiscal year ended May 2, 2004, excludes credit for restructuring
reserves of $1.0 million ($701,000, or $0.06 per diluted share, after
taxes). For fiscal 2004, excludes charge for early extinguishment of
debt of $1.7 million ($1.1 million, or $0.10 per diluted share, after
taxes).
CULP, INC.
Reconciliation of Net Income (Loss) as Reported to
Pro Forma Net Income (Loss)
(Unaudited)
Three Months Ended Fiscal Year Ended
----------------------- ------------------------
May 1, May 2, May 1, May 2,
2005 2004 2005 2004
---------- ----------- ----------- -----------
Net income (loss),
as reported $(7,730,000) $3,733,000 $(17,852,000) $7,220,000
Early
extinguishment
of debt, net of
income taxes 1,120,000
Restructuring and
related charges
(credit) and
goodwill
impairment, net
of income taxes 6,380,000 (701,000) 14,423,000 (701,000)
----------- ---------- ----------- ----------
Pro forma net
income (loss) $(1,350,000) $3,032,000 $(3,429,000) $7,639,000
=========== ========== =========== ==========
Reconciliation of Net Income (Loss) Per Share as Reported
to Pro Forma Net Income Per Share
(Unaudited)
Three Months Ended Fiscal Year Ended
------------------------ ----------------------
May 1, May 2, May 1, May 2,
2005 2004 2005 2004
---------- ----------- ---------- ---------
Diluted net income
(loss) per share $(0.67) $0.32 $(1.55) $0.61
Early
extinguishment
of debt, net of
income taxes 0.10
Restructuring and
related charges
(credit) and
goodwill impairment,
net of income taxes 0.55 (0.06) 1.25 (0.06)
-------- --------- --------- ---------
Diluted net income
per share, adjusted $(0.12) $0.26 $(0.30) $0.65
======== ========= ========= =========
Reconciliation of Projected Range of Net Loss Per Share to
Projected Range of Pro Forma Net Loss Per Share
(Unaudited)
Three Months
Ending
July 31,
2005
-------------
Projected range of net loss per diluted share $(0.30)-(0.36)
Projected restructuring and related charges,
net of income taxes 0.28
-------------
Projected range of pro forma net loss per
diluted share $(0.02)-(0.08)
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CONTACT: Culp, Inc.
Investor Contact:
Kathy J. Hardy, 336-888-6209
or
Media Contact:
Kenneth M. Ludwig, 336-889-5161