Culp sales spike in third quarter

BRIEFLY
Culp third quarter
Net sales $72.4 million
Mattress fabric sales $38.5 million
Upholstery fabric sales $33.8 million

Fabric supplier Culp Inc. had net sales in its fiscal third quarter ending Jan. 26, of $72.4 million, an increase of 13.6% as compared with the same quarter in fiscal 2013.

The High Point, N.C.-based company’s upholstery fabric sales rose 20.1% to $33.8 million in the third quarter, as compared with the prior-year quarter.

“Our upholstery fabrics business had an outstanding performance,” said Frank Saxon, Culp president and chief executive officer. “The higher than expected sales primarily reflect continued positive customer response tour innovative designs and diverse product offering. In addition, we experienced a greater than expected level of sales in the third quarter as customers anticipated longer lead times related to the Chine New Year holiday, which occurred in late January. Notably, sales of China-produced fabrics accounted for 92% of upholstery fabric sales.”

Mattress fabric sales were $38.5 million, up 8.5% as compared with the third quarter of 2013.

Commenting on ticking sales, Iv Culp, Culp mattress fabrics division president, said, “Our mattress fabrics business had a solid sales performance. … We now offer a complete array of innovative fabrics and mattress covers to all major players across all categories in the mattress industry. Our operating results for the third quarter were affected by higher than expected transition costs in Culp-Lava … We expect significant improvement in our operating efficiencies and margins going forward. … Culp had an outstanding showing at the recent Las Vegas bedding market with strong placements from key customers for both mattress fabrics and covers.”

Pretax income for the quarter was $4.6 million, a 2% increase as compared with the prior-year quarter.

Net income (using generally accepted accounting practices) was $8.4 million, or $0.68 per diluted share and included a $3.78 million income tax benefit, as compared with GAAP net income of $2.8 million, or $0.23 per diluted share, in the third quarter of fiscal 2013. Adjusted net income (non-GAAP) in the third quarter of 2014 was essentially flat at $3.9 million, or $0.31 per diluted share.

Culp said its financial position remained strong with a total cash position of $30.4 million and total debt of $5 million. The company generated $8 million in cash flow through the first nine months of fiscal 2014, after investing $6.2 million in working capital and $2.7 million in capital expenditures.

The company paid a $0.05 share dividend during the quarter. Its board of directors approved a quarterly cash dividend of $0.05 per share to be paid on or about April 15.

“We continued to build upon our sales momentum thus far in fiscal 2014, with a 14% sales gain for the third quarter compared with a year ago,” Saxon said. “These favorable results are primarily product related, as we continue to experience excellent customer response to our creative designs and innovative fabrics. We have worked diligently—as our top strategic priority—to drive product innovation throughout our company. It is very encouraging to see significant tangible progress resulting from these efforts with increased sales to existing key customers as well as new customers.… We are on track to have another outstanding year of solid sales growth, consistent profitability and excellent free cash flow.”

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