Culp hit hard by restructuring costs

Weighed down by $9.0 million in restructuring costs tied to the shutdown and sale of its wet printed flock business, fabric producer Culp, Inc. recorded a fourth-quarter loss of $1.6 million, compared with a prior-year deficit of $1.4 million.

But looking past the restructuring costs that mask the bottom line, operating profits almost doubled, climbing by 96.2 percent, to $8.8 million from $4.8 million last year, propelled by rising sales and stronger margins and lower interest costs.

Lending a big assist to the bottom line, sales at the producer of decorative and upholstery fabrics and mattress ticking climbed by 7.2 percent, to $108.4 million from $101.1 million a year ago. Proving another lift to profits, average gross margin widened by 630 basis points, to 21.2 percent from 14.9 percent the prior year. Gross margin dollars increased by 52.5 percent, to $23.0 million from $15.1 million. Margins benefited from an ongoing restructuring, a more profitable mix of sales and increased operating efficiency due to the higher rate of sales.

Acting as a drag, however, bad-debt expenses pushed operating costs up sharply during the closing quarter, by 260 basis points, to 13.1 percent of sales from 10.5 percent a year ago. Measured in absolute dollars, expenses, including bad debt, rose by 34.1 percent, to $14.2 million from $10.6 million last year. Excluding bad debt, operating costs rose to roughly 12.0 percent of sales from 10.5 percent last year.

"Our earnings for the fourth quarter extended the positive momentum that we established in the third quarter," said Robert Culp III, ceo. "We benefited from an especially strong performance in April."

Culp Inc.

Qtr. 4/28 (x000) 2002 2001 % change
a-Results in the fourth quarter include restructuring costs of $9.1 million, compared with $3.1 million in the year-ago period; miscellaneous expense of $1.1 million vs. $1.2 million last year; and an income-tax benefit of $1.7 million, compared with $705,000 in the prior-year quarter.
b-12-month results include $10.4 million in restructuring expense vs. $5.6 million in 2001; miscellaneous expenses of $2.8 million, down from $3.3 million last year; and an income-tax benefit of $2.7 million vs. $4.1 million last year.
Sales $108,397 $101,071 7.2
Oper. income (EBIT) 8,782 4,476 06.2
Net income (1,585)a (1,427)a
Per share (diluted) (0.14) (0.13)
Average gross margin 21.2% 14.9%
SG&A expenses 13.1% 10.5%
12 months
Sales 381,878 409,810 -6.8
Oper. income (EBIT) 14,798 5,621 163.3
Net income (3,440)b (8,311)b
Per share (diluted) (0.31) (0.74)
Average gross margin 16.5% 13.7%
SG&A expenses 12.6% 12.3%

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