Culp earns profit as sales fall 25.4%

Ticking, fabric segments both profitable

Larry Thomas -- Furniture Today, June 24, 2009

HIGH POINT — Culp Inc., a major supplier of upholstery fabric and mattress ticking, said sales fell 25.4% in the quarter ended May 3, but the company recorded a profit if $1.7 million.

The company said sales were weak in both business segments and said there were no short-term indications that business conditions would improve.

"We have been diligent in our efforts to carefully manage our working capital, generate cash and reduce our debt substantially through this unprecedented economic downturn," said Frank Saxon, president and CEO.

Sales for the most recent quarter — the fourth quarter of Culp's fiscal year — totaled $47.8 million. That's down from $64 million in the same quarter last year.

The quarterly profit, which equals 13 cents per share, compares with net income of $2.08 million or 16 cents per share in the same period last year.

Saxon said the mattress ticking segment had an operating profit of $3.5 million, with operating margins exceeding last year's fourth fiscal quarter.

The upholstery fabric segment, meanwhile, had an operating profit of $660,000, reversing operating losses of $2.2 million in the first half of the fiscal year.

"The implementation of our profit improvement plan, initiated during the second quarter of this fiscal year, has exceeded our expectations," Saxon said of the upholstery fabrics business. "The consolidation of our China operations during the second and third quarters, and significant reductions in selling, general and administrative expenses have lowered our costs by at least $6 million on an annual basis."

Sales of upholstery fabrics were down 28% from last year's fourth fiscal quarter, while mattress ticking sales were 23% below the same quarter last year.

For the fiscal year ended May 3, companywide sales were $203.9 million, down 19.7% from $254 million in the previous fiscal year.

Culp recorded a net loss of $38.8 million or $3.07 per share for the year. The figure included a non-cash charge of $27.2 million for a valuation allowance against the company's net deferred tax assets.

In the previous fiscal year, the company had net income of $5.4 million or 42 cents per share.

Saxon said the company is projecting that mattress ticking sales will be down 22% to 27% in the first quarter of the new fiscal year, while upholstery fabric sales will be down an estimated 20% to 25%.

He said the company expects to report pre-tax income of $1.4 million to $2.2 million for the quarter.