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Culp Posts Q2 Profit

Culp Inc., High Point, N.C., reported its second consecutive quarterly profit following a string of losses going back to the first quarter of fiscal year 2005. The upholstery and mattress ticking fabrics manufacturer posted a net profit of $812,000, or 7 cents per diluted share, for the fiscal-year 2007 second quarter (Q2) ended Oct. 29, 2006, compared with a Q2 2006 net loss of $4.2 million, or 36 cents per share. Net sales totaling $59 million were $8 million lower than the year-earlier quarterly sales of $67 million.

For the first six months of fiscal 2007, sales totaled $121.6 million, compared with $129.3 million for the first half of 2006; and net income totaled $946,000, or 8 cents per diluted share, compared with a loss of $8.1 million, or 70 cents per share, for the same year-earlier period.

“We are pleased with our solid execution during a challenging period for the retail home furnishing industry,” said Robert G. Culp III, chairman and CEO, Culp Inc. “While our top line results reflect the furniture industry slowdown and related inventory correction, we continued to make progress in improving our operating performance in both mattress ticking and upholstery fabrics. The changes we have made in each of our operating segments have enabled us to operate more efficiently, even on lower volumes.”

In the mattress ticking segment, the company reported lower sales, reflecting reduced demand for printed ticking, although knitted ticking sales continued a growth trend that is expected to endure. Total Q2 sales were $23.5 million, compared with $24 million for the year-earlier period.

Upholstery fabric sales declined from $43 million in Q2 2006 to $35.5 million in the most recent quarter. While US-produced fabric sales dropped 51 percent to $14.9 million, non-US-produced fabric sales grew by 65 percent to $20.6 million. Continuing weakness in the US-produced upholstery fabric segment has led the company to reduce its domestic employee base to 320 people at the end of Q2 2007 from 534 at the end of fiscal 2006 and 1,484 at the end of fiscal 2005, Culp noted.

“In light of the continuing sharp declines in demand for US-produced fabrics, we will continue to evaluate our domestic strategy and production requirements,” he said. “We remain committed to taking whatever additional steps are necessary to achieve profitable US upholstery fabric operations, and the company could take additional restructuring actions in the near future.”

December 12, 2006