Producer Culp Turning Corner

Don Hogsett, July 3, 2006

Steering toward a turnaround in a sweeping overhaul of operations after years of being pounded by the rising tide of low-cost off-shore imports, fabric producer Culp parlayed stronger margins, lower costs and big gains in its core upholstery business into a small, but nonetheless dramatic, fourth-quarter operating profit of $1.1 million, climbing back from a year-before loss of $3.7 million.

Still weighed down by $3.7 million in restructuring costs to pay for the turnaround, Culp generated a sharply narrowed net loss of $1.5 million, down more than 80% from a year-before deficit of $7.7 million.

Starting to stabilize somewhat after a string of daunting double-digit losses, sales were off a more modest 4.7%, to $70.7 million from $74.2 million.

Driving much of the big improvement was a profit rebound in Culp's core upholstery fabrics business, which generated an operating profit of $1.1 million, reversing a $2.0 million loss in last year's closing quarter. Hacking away at costs while rebuilding upholstery margins, the business threw off a small profit during the fourth quarter despite a modest decline in sales, down 1.2% to $46.6 million from $47.2 million last year.

The smaller mattress ticking business remained solidly profitable, if not as much so as last year, throwing off an operating profit of $2.0 million, down 8.6% from $2.2 million.

Supporting the overall gain in operating profit, average gross margin recovered substantially, widening by 350 basis points, or 3.5 percentage points, to 10.7% from 7.2% a year ago. Gross margin dollars jumped up by 41.8%, to $7.6 million from $5.3 million.

Hacking away at overhead, Culp slashed expenses by 300 basis points, or 3.0 percentage points, to 9.2% of sales from 12.2% last year. That translated to a cash savings of $2.6 million, which fell straight to the bottom line.

Culp Inc.

Qtr. 4/30 (x000) 2006 2005 % change
a. Fourth-quarter results include $3.7 million in restructuring costs, down 54.3% from $8.1 million during the same period a year ago; interest income of $48,000, up 33.3% from $36,000 last year; miscellaneous expenses of $152,000, up 87.7% from $81,000 last year; and an income-tax benefit of $2.2 million, compared with $5.0 million a year ago.
b. 12-month results include restructuring costs of $10.3 million, down 1.0% from $10.4 million during 2005; interest income of $126,000, up 6.0% from $134,000 the prior year; miscellaneous expenses of $634,000, up 22.6% from $517,000 a year ago; and an income-tax benefit of $8.1 million, compared with $10.9 million the preceding year. 2005 results include a $5.1 million goodwill impairment charge.
Sales $70,718 $74,183 -4.7
Oper. income (EBIT) 1,109 (3,700)
Net income (1,534)a (7,730)a
Per share (diluted) (0.13) (0.67)
Average gross margin 10.7% 7.2%
SG&A expenses 9.2% 12.2%
12 months 2006 2005 %change
Sales 261,101 286,498 -8.9
Oper. income (EBIT) (5,086) (9,200)
Net income (11,796)b (17,852)b
Per share (diluted) (1.02) (1.55)
Average gross margin 9.1% 9.1%
SG&A expenses 11.1% 12.3%

First Quarter Segment Results

Sales 2006 2005 % change
Upholstery fabrics $46,616 $47,165 -1.2
Mattress ticking 24,102 27,018 -10.8
Operating Income 2006 2005 % change
Upholstery fabrics 1,140 (2,018)
Mattress ticking 2,032 2,223 -8.6

Featured Video

  • Live From New York: Fashion Comes Across the Pond

    Camera Icon More Videos

Subscribe to
Home & Textiles Today eDaily
Receive the news you need to know about the trends in the industry delivered right to your inbox.


HTT Cover October 2017

See the October 2017 issue of Home & Textiles Today. In this issue, we look at the Top 25 Online Retailers.  H&TT's exclusive annual ranking of the biggest online sellers of home textiles finds that while pure play etailers continue to fly, bricks & clicks are digging into omnichannel. See details!