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Culp Upholstery fabrics results shows substantial turnaround in Q3
04
Mar '09
Culp Inc reported financial and operating results for the third quarter and nine months ended February 1, 2009.

Overview:
For the three months ended February 1, 2009, net sales were $44.6 million, down 26.3 percent compared with $60.5 million a year ago. The company reported a net loss of $450,000, or $0.04 per diluted share for the third quarter of fiscal 2009, compared with net income of $903,000, or $0.07 per diluted share, for the third quarter of fiscal 2008. On a pre-tax basis, the company reported income of $17,000, compared with pre-tax income of 643,000 for the third quarter of fiscal 2008.

The pre-tax results for the third quarter of fiscal 2009 included non-cash restructuring and related charges of approximately $504,000 related to fixed assets and inventories, and cash charges of $273,000 in restructuring and related charges pertaining to asset disposal costs and lease and employee terminations, both in the upholstery fabrics segment. Excluding these charges in both periods, the company reported pre-tax income of $794,000 for the third quarter of fiscal 2009, compared with pre-tax income of $1.4 million for the third quarter of fiscal 2008.

For the nine months ended February 1, 2009, the company reported net sales of $ 156.2 million compared with $190.0 million for the same period a year ago. Net loss for the first nine months of fiscal 2009 was $40.5 million, or $3.20 per diluted share, compared with net income of $3.3 million, or $0.26 per diluted share, for the same period last year. This net loss included a $30.5 million non-cash charge through the third quarter for the establishment of a valuation allowance against all of the company's deferred tax assets.

On a pre-tax basis, the company reported a loss of $9.1 million, compared with pre-tax income of $3.4 million for the first nine months of fiscal 2008. The pre-tax results for the first nine months of fiscal 2009 included non-cash restructuring and related charges of approximately $11.5 million related to fixed assets and inventories and cash charges of $1.5 million in restructuring and related charges pertaining to asset disposal costs and lease and employee terminations, both in the upholstery fabrics segment.

Excluding these charges in both periods, pre-tax income for the first nine months of fiscal 2009 was $3.9 million, compared with pre-tax income of $5.7 million for the first nine months of fiscal 2008.

Frank Saxon, chief executive officer of Culp, Inc., said, “We are pleased with our solid execution through what has been and continues to be an extremely challenging business environment. While our sales reflect the sharp decline in discretionary consumer spending, especially for furniture, we believe we have effectively managed our operations with a leaner and more agile operating platform.

Our upholstery fabrics sales have been the hardest hit by the economic downturn, but this segment was still profitable in the third quarter as a result of the successful implementation of our profit improvement plan. The mattress fabrics business has been much steadier through the economic downturn, and we had continued margin improvement compared with the prior year period.

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