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Culp posts 3Q loss as sales drop 9.8%

By Furniture Today Staff -- Furniture Today, February 27, 2005

High Point — Fabric supplier Culp blamed competition from leather, microfibers and imported goods for a 9.8% sales decline and a $4.9 million net loss in its third quarter.

The company projects a similar sales drop and another loss in the current quarter, but said it is working on consolidating some of its U.S. facilities and growing its offshore sourcing.

"Clearly we are operating in a global economy," said CEO Rob Culp III, adding he believes U.S. furniture and mattress makers still will rely on U.S. sources for certain products, especially mattress ticking.

Culp reported sales of $69.1 million in the quarter ended Jan. 30. Upholstery fabric sales were down 15.5% to $43.5 million, while sales in the mattress ticking segment rose 2% to $25.6 million.

President Frank Saxon said consumer preference for leather and microfibers, and U.S. furniture manufacturers' increased use of imported fabrics, led to the upholstery segment decline.

Culp doesn't sell leather, but is sourcing some microfibers and other fabric from overseas, and has been operating a fabric plant in China for a year. Sourced product sales in the third quarter were up 92% from the same period a year earlier and accounted for almost 20% of the company's upholstery fabric sales in the quarter.

The $4.9 million net loss compares to a $752,000 profit in the year-earlier third quarter. The latest quarter's results included an after-tax charge for restructuring and related costs of $3.4 million. Excluding the charge, the net loss was $1.5 million or 13 cents per share.

Saxon said the company expects to complete its restructuring by the end of the current fiscal year, closing two plants and shifting production to other facilities.

Culp Inc.
Earnings per share are fully diluted, and all figures in parentheses are losses or declines.
Quarter ended 1/30	2005	2004	Change
(a) Includes pretax restructuring charges of $1.1 million in the 2005 quarter and $2.3 million in the 2005 nine months and income tax benefits of $2.8 million in the 2005 quarter and $5.9 million in the 2005 nine months. The 2005 nine months also includes a $5.1 million pretax goodwill impairment charge. (b) Includes a $1.7 million pretax charge in both 2004 periods for the early extinguishment of debt.
Sales	$69,060,000	$76,561,000	(9.8%)
Operating income	(5,624,000)	4,186,000	—
Net income	(a)(4,877,000)	(b)752,000	—
Earnings per share	(0.42)	0.06	—
9 months ended 1/30	2005	2004	Change
Revenues	$212,315,000	$232,968,000	(8.9%)
Operating income	(5,500,000)	11,596,000	—
Net income	(a)(10,122,000)	(b)3,487,000	—
Earnings per share	(0.88)	0.30	—

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