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Larry Thomas

Culp sales rise 7.8% but earnings decline on tax, raw materials costs

High Point, N.C. - Upholstery fabric and mattress ticking supplier Culp Inc. said its sales rose 7.8% in the fiscal first quarter ended July 31, but profits were cut in half due largely to a non-cash tax expense and higher raw materials costs.

The company reported net income of $1.82 million or 14 cents per share. That's down from $3.75 million or 28 cents per share in the same quarter last year. Pre-tax income of $2.97 million was some 30.7% below the $4.28 million from last year's fiscal first quarter.

Sales totaled $60.3 million, up from $55.9 million in the prior year quarter. The sales gain was paced by the upholstery fabrics segment, which was up 12.4%.

Mattress ticking sales were 4% ahead of the same quarter last year.

"Both of our businesses continued to deliver solid results, even though profitability is down somewhat from the same quarter of last year primarily due to higher raw material costs in mattress fabrics and lower than expected results in our U.S. upholstery fabrics operation," said Frank Saxon, president and CEO. "We announced price increases in both segments that are expected to absorb some of these additional costs going forward."

The company said mattress ticking growth was driven primarily by increases in sales of knitted fabrics, while the upholstery fabrics segment was driven largely by improved sales of products made in China. The Chinese-made fabrics have been well-received by both U.S. and international customers, Saxon said.

The upholstery fabrics business also was aided by results from Culp Europe, a sales and distribution facility based in Poland that was launched earlier this year, he said.

For the current quarter, the company is projecting a 5% to 9% increase in upholstery fabric sales and a 4% to 8% gain in mattress ticking sales.

"We are excited about the many positive initiatives we have under way and the progress we are making with a number of key customers around the world. We have made great strides in enhancing the design and creative side of both of our businesses," said Saxon. "Although strong headwinds remain throughout the economy and in our industry, we will continue to execute against our global strategic initiatives in fiscal 2012."

The company also said its board of directors approved a $2 million increase in a stock repurchase program that was announced in June. The total repurchase authorization is now $7 million, and the company said about $3.2 million was spent on share repurchases through Aug. 16.

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