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Improved performance in mattress fabrics at Culp

02
Dec '09
Culp, Inc. reported financial and operating results for the second quarter ended November 1, 2009.

Highlights for the second quarter of fiscal 2010 include the following:

• Net sales were $49.7 million, down five percent from the second quarter last year, with mattress fabrics segment sales up one percent from a year ago and upholstery fabric segment sales down eleven percent. The five percent change is the smallest year over year decline since the third quarter of fiscal 2008.
• Net income was $2.9 million, or $0.22 per diluted share, compared with a net loss of $40.9 million, or $3.23 per share in the prior year period. The net loss for last year's second quarter included $31.2 million in charges for the establishment of a valuation allowance against substantially all of the company's net deferred tax assets and $11.8 million in restructuring and related charges.
• The mattress fabrics business achieved higher profitability on comparable sales from the prior year, in spite of continued weak consumer demand in the bedding industry.
• The upholstery fabrics business showed a significant profit turnaround for the second quarter, reversing an operating loss in the second quarter of the prior year. This performance was in the face of continued challenging furniture industry conditions.
• Cash flow from operations was $6.1 million for the second quarter and $10.7 million for the first six months of fiscal 2010. This performance is due to consistent profitability in mattress fabrics, the profit turnaround in upholstery fabrics and continued outstanding working capital management in both segments.
• The company's financial position continued to strengthen significantly during the second quarter, with an ending cash balance of $19.6 million and total debt, which includes current maturities of long-term debt plus long-term debt, of $16.4 million. Cash and cash equivalents have grown by almost $8 million since the end of fiscal 2009, while debt has remained the same. This is the first time in over 30 years where the company's cash position exceeded total debt.
• The projection for third quarter fiscal 2010 is for overall sales to increase approximately five percent over the prior year period, with both business segments expecting similar sales gains. This would be the company's first overall sales gain in two years, and the first sales gain in upholstery fabrics in three years. Pre-tax income for the third quarter of fiscal 2010 is expected to be in the range of $2.1 to $2.9 million.

Overview

Commenting on the results, Frank Saxon, president and chief executive officer of Culp, Inc., said, “Our improved performance for the second quarter of fiscal 2010 reflects the benefits of a leaner and more efficient operating platform and aggressive marketing initiatives. We are especially pleased with the turnaround in profitability for our upholstery fabrics business and continued solid profitability in our mattress fabrics segment, in spite of ongoing industry wide demand challenges facing both businesses. We have further enhanced Culp's competitive position in both businesses with a keen focus on execution for our customers and additional investments in our mattress fabrics business. Our financial position is the strongest in the company's history and is providing us with a sound foundation in these uncertain economic times.”


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