Culp narrows loss; uph. posts 4Q operating profit
By Larry Thomas -- Furniture Today, July 2, 2006
High Point — Major fabric and ticking supplier Culp Inc. narrowed the net loss in its fourth quarter, with the beleaguered upholstery fabric segment posting an operating profit for the first time in two years.
Company officials said the improved results demonstrate that Culp's restructuring, which has seen the company slash domestic production and open a factory in China, is working.
"We remain confident that we are taking the right steps," said Chairman and CEO Rob Culp. "The fourth quarter was a defining point for us."
Sales for the quarter ended April 30 dropped 4.7% to $70.7 million. The quarterly net loss, including one-time restructuring charges, totaled $1.5 million, or 13 cents per share. That was well below the net loss of $7.7 million, or 67 cents per share, in last year's fourth quarter.
Upholstery fabric sales were off 1.2% to $46.6 million, while mattress ticking sales fell 10.8% to $24.1 million.
For the year, Culp cut its net loss to $11.8 million, or $1.02 per share. In the previous year, the loss was $17.9 million, or $1.55 per share. Full-year sales declined 8.9% to $261.1 million.
In a conference call with securities analysts, Rob Culp noted that $20.3 million, or about 44% of upholstery fabric sales, came from the company's factory in China. He said the facility has been "running flat out for over a year" and will undergo a second capacity increase later this year.
Culp also acknowledged the company is having problems making on-time deliveries, laying much of the blame on supply-chain problems domestically and in China.
"We're dealing with a very elementary supply chain in upholstery fabric in China," he told analysts. "It's not a capacity issue. We like to say we're a victim of our own success."
But he said the situation domestically might be worse because of difficulty obtaining yarn. "The yarn industry is just in turmoil," said Frank Saxon, Culp's president and chief operating officer. "And we don't think it will get much better in fiscal '07."
| Culp Inc. | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 4/30 | 2006 | 2005 | Change |
| (a) Includes pretax restructuring charges of $3.7 million in the 2006 quarter and $8.1 million in the 2005 quarter and income tax benefits of $2.2 million in the 2006 quarter and $5 million in the 2005 quarter. (b) Includes pretax restructuring charges of $10.3 million in the 2006 year and $10.4 million in the 2005 year and income tax benefits of $8.1 million in the 2006 year and $10.9 million in the 2005 year. The 2005 year also includes a $5.1 million pretax charge for goodwill impairment. |
|||
| Sales | $70,718,000 | $74,183,000 | (4.7%) |
| Operating income | 1,109,000 | (3,700,000) | — |
| Net income (a) | (1,534,000) | (7,730,000) | — |
| Earnings per share | (0.13) | (0.67) | — |
| Year ended 4/30 | 2006 | 2005 | Change |
| Sales | $261,101,000 | $286,498,000 | (8.9%) |
| Operating income | (5,086,000) | (9,200,000) | — |
| Net income (b) | (11,796,000) | (17,852,000) | — |
| Earnings per share | (1.02) | (1.55) | — |
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