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Upholstery boosts 2Q Culp sales 7.7%

HIGH POINT - Driven by a better-than-expected performance from its upholstery fabrics business, Culp Inc. said sales jumped 7.7% in the quarter ended Oct. 27.
     The company said upholstery fabric sales shot up 17% in the quarter - the second quarter of Culp's fiscal year - while mattress ticking sales edged up 1.6%.
     Net income, however, tumbled more than 60% to $3.1 million, or 25 cents per share, due to non-cash income tax benefits that were recorded in last year's second fiscal quarter.
     Total sales for the most recent quarter were $70.6 million, up from $65.6 million in the same quarter a year ago. The company said mattress ticking made up 57.1% of the total, while upholstery fabrics accounted for the remaining 42.9%.
     "We continue to experience favorable customer response to our designs and wide range of products, and we are excited about the progress we are making in product innovation and creativity," said Frank Saxon, president and CEO. "These efforts, which are our top strategic priority, are making significant contributions to our sales and profit performance, with an increasing percentage of our sales coming from recent product introductions."
     He said that was especially evident in the upholstery fabrics segment, which had higher-than expected sales due largely to very favorable response to product introductions.
     "Innovation is a critical factor for success in today's fashion-driven home furnishings business, and our design team has done an exceptional job in anticipating customers' style preferences," Saxon said. "We have increased our sales both with our key customers and through additional orders from new customers."
     The company said mattress ticking sales were in line with expectations during a period of "unsteady" demand in the mattress industry.
     "As the mattress industry has evolved into a much more decorative business, our customers are more selective in their fabric choices to achieve today's fashionable look," said Iv Culp, president of the mattress fabrics division.
     Saxon said the drop in net income occurred because last year's second quarter included a $3.74 million income tax benefit recorded because of the reversal of a valuation allowance against deferred tax assets. The most recent quarter, meanwhile, included income tax expense of $1.72 million.
     Pre-tax income for the most recent quarter rose 6.2% to $4.81 million.
For the six months ended Oct. 27, sales totaled $140.7 million. That was up 4.4% from $134.7 million in the first half of the previous fiscal year.
     Six-month net income was $6.33 million, or 51 cents per share. That was down from $11.8 million, or 94 cents per share, in the same period the previous year.
     The company also increased its common stock dividend by one cent to 5 cents per share for the third fiscal quarter.

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