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Culp Loss Same as Last Year

High Point, N.C. — Hobbled by falling sales, thinning margins and more than $4 million in restructuring costs, fabric producer Culp Inc. recorded a $4.2 million loss, virtually unchanged from a $4.2 million prior-year deficit.

Generating much of the loss, sales dropped 11.1 percent, to $67 million from $75.4 million last year, with both business segments, mattress and upholstery fabrics, putting up double-digit sales declines.

Taking a big bite out of the bottom line, Culp recorded a $4.4 million restructuring charge — almost twice the size of a $1.3 million charge a year ago — as it pays for a sweeping overhaul of its U.S. operations, battered by low-cost imports.

Putting profits under even greater pressure, average gross margin narrowed 440 basis points, or 4.4 percentage points, to 8.3 percent from 12.7 percent during the same period a year ago. Hit by the falling sales and narrowed margins, gross margin dollars declined 42 percent, to $5.6 million from $10 million.

On the upside, the company continued to hack away at costs, paring operating expenses 200 basis points, or 2 percentage points, to 9.7 percent of sales from 11.7 percent the prior year. Measured in absolute dollars, costs were reduced 26.2 percent, to $6.5 million from $8.8 million, yielding a cash savings of $2.3 million.

Robert Culp III, chairman and CEO, commented that during the last six months, “We have been implementing ambitious strategic plans,” and added, “we are pleased with how much we have accomplished this year.” Culp said, “Although the transition to a leaner and more agile business model is affecting our reported financial results, we believe we are taking the right steps to be competitive and position the company for growth over the long term in today's global marketplace.”

Culp Inc.

Qtr. 10/30 (x000) 2005 2004 % change
(loss)
a. Second quarter results include $4.4 million in restructuring costs, compared with $1.3 million during the same period a year ago; $19,000 in interest income, compared with $29,000 last year; $214,000 in miscellaneous expense, compared with $173,000 a year ago; and an income tax benefit of $2.4 million vs. $2.6 million a year ago. Results in the prior-year quarter include a $5.1 million charge for goodwill impairment.
b. Six month results include $6.2 million in restructuring costs, compared with $1.2 million last year; $35,000 in interest income, compared with $56,000 a year ago; $347,000 in miscellaneous expenses, compared with $387,000 last y ear; and an income tax benefit of $4.6 million vs. $3.1 million a year ago. Results in the year-before period include a $5.1 million charge for goodwill impairment.
Sales $67,006 $75,406 -11.1
Oper. income (EBIT) (975) 729
Net income (4,152)a (4,193)a
Per share (diluted) (0.36) (0.36)
Average gross margin 8.3% 12.7%
SG&A expenses 9.7% 11.7%
Six months
Sales 129,348 143,255 -9.7
Oper. income (EBIT) (4,274) 124
Net income (8,093)b (5,245)b
Per share (diluted) (0.70) (0.45)
Average gross margin 9.4% 12.7%
SG&A expenses 12.7% 12.6%


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