Culp restructuring nets 4Q loss

Don Hogsett, June 18, 2001

Weighed down by ongoing restructuring costs aimed at lowering costs, and hobbled by sharply falling sales in a weak environment for home fashions products, Culp Inc., a key supplier of decorative fabrics and upholstery, recorded a fourth-quarter loss of $1.4 million, compared with a prior-year profit of $3.2 million.

Acting as a drag on the bottom line, sales in the closing quarter fell by 21.9 percent, to $101.1 million from $129.4 million last year, a shortfall of more than $28 million.

Taking another big bite out of profits, Culp recorded an ongoing, pre-tax charge of $3.1 million earmarked for cost-cutting programs. Excluding restructuring costs, the company posted a profit of $1.4 million, or 13 cents a share, said Robert Culp III, ceo.

"Our goal is to restore consistent profitability" for the company, said Culp. "We are encouraged by the performance in the fourth quarter, when our efficiency was significantly affected by the relocation of key manufacturing equipment and other major operational changes."

Going forward, Culp said he expects a loss in the first quarter to be followed by a turn-around later in the year as cost-cutting programs kick in. Culp said, "Sales for the first fiscal quarter, which is not typically a seasonally strong period for our business, will trail the year-earlier level of $101.9 million. Although this will likely result in a loss for the period, excluding charges related to the restructuring, we believe that this will be less than the loss of $1.8 million, or 16 cents per share, in the year-earlier period. Results in subsequent quarters will be aided by more of the benefit of the restructuring plan and other actions we are taking to reduce costs."

Hampered by weak sales, average gross margin contracted by 220 basis points, to 14.9 percent from 17.1 percent a year ago. But more than offsetting eroding margins, costs were cut by 100 basis points despite the lower level of sales, to 10.5 percent of sales from 11.5 percent last year.

Culp Inc.

Qtr. 4/29 (x000) 2001 2000 % CHG
a-Fourth-quarter results include a pre-tax restructuring charge of $3.1 million; miscellaneous expenses of $1.2 million, compared with $366,000 a year ago; and an income-tax credit of $705,000, compared with a tax liability of $1.4 million last year. The company recorded a pre-tax loss of $2.1 million vs. a year-ago pre-tax profit of $4.6 million.
b-12-month results include restructuring costs of $5.6 million; miscellaneous expenses of $3.3 million, compared with $1.6 million last year; and an income-tax benefit of $4.1 million , compared with a tax liability last year of $4.3 million. The company posted a pre-tax loss of $12.4 million, compared with a prior-year pre-tax profit $13.7 million.
Sales $101,070 $129,419 -21.9
Oper. income (EBIT) 4,476 7,164 -37.5
Net income (1,427)a 3,191a
Per share (diluted) (0.13) 0.28
Average gross margin 14.9% 17.1%
SG&A expenses 10.5% 11.5%
12 months
Sales 409,810 488,079 -16.0
Oper. income (EBIT) 5,621 24,730 -77.3
Net income (8,311)b 9,380b
Per share (diluted) (0.74) 0.80
Average gross margin 13.7% 17.3%
SG&A expenses 12.3% 12.3%

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