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Culp lowers Q3'FY14 pre-tax income from earlier forecast

May 13, 2014 (United States Of America)

Culp, Inc. announced that, based on unaudited preliminary results and current estimates, the company expects pre-tax income to be in the range of $4.0 million to $4.3 million for the fourth quarter of fiscal 2014. These projected results are lower than the company’s previously announced expectation of $5.0 million to $5.9 million in pre-tax income for the quarter.
 
Overall sales for the fourth quarter of fiscal 2014 are expected to be up approximately 5 percent, with mattress fabrics sales up approximately 7 percent and upholstery fabrics sales up approximately 3 percent. These sales results are in line with previously announced expectations.
 
Commenting on the announcement, Frank Saxon, president and chief executive officer of Culp, Inc., said, “While our overall sales for the fourth quarter were in line with our projected range, our operating profit and margins were affected by several factors, most of which related to the mattress fabrics division. The adverse weather conditions experienced in many parts of the country this winter affected our mattress fabrics locations with at least a week of lost production. The strain from these weather events forced some extraordinary operational measures to meet the ongoing sales demand. 
 
“During the quarter, we also had higher than expected demand for our premium decorative knitted mattress fabrics, which created additional pressures on our production throughput and operating efficiencies. In order to meet the growing demand and to address efficiency challenges, we are increasing knitted fabric production at both our U.S. and Canadian facilities. In addition, we are expanding our Stokesdale, North Carolina, building in order to increase and enhance our finishing capabilities and improve our production flow. 
 
“This capacity expansion is expected to be completed by the end of November 2014. We also experienced continued growth in demand for new mattress covers, with major placements from key customers. While our margins in this business showed significant improvement compared with the fiscal third quarter, we experienced short-term production challenges due to absorbing new product placements. Overall, we are pleased with the demand trends in our mattress fabrics business as we continue to outpace the industry, and believe we are taking the necessary steps to address our recent production-related issues.
 
“In our upholstery fabrics division, operating results were affected by a couple of factors. We experienced very strong shipments in the third quarter, with a 20 percent year over year sales increase, as our customers anticipated the Chinese New Year holiday shutdown. As a result, we had a much slower than expected start to the fourth quarter. Adverse weather conditions in the U.S. also affected our operating results early in the quarter because of weak customer demand. During the quarter, we also experienced lower than anticipated sales for our Culp Europe operation, which contributed to the division’s lower gross profit. However, we are encouraged that our sales demand and operating margins, except for Culp Europe, returned to normal levels later in the fourth quarter.

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