Culp Inc. second-quarter ticking sales see strong rise

BRIEFLY
Culp second-quarter snapshot
Net income $3 million
Net sales $74 million
Ticking sales $43 million
Upholstery sales $31 million

In the second quarter of fiscal 2015, fabric supplier Culp Inc., with headquarters in High Point, North Carolina, reported net income (using generally accepted accounting principles) of $3 million, a 3% decrease compared with second-quarter 2014 results.

Net sales for the quarter, which ended Nov. 2, rose 4.8% to $74 million. Mattress fabric sales increased 6.7% to $43 million, and upholstery sales grew 2.3% to $31 million, the strongest second-quarter sales level in 10 years, Culp said.

Commenting on the ticking-segment performance, Iv Culp, president of the division said, “We are well underway with the previously announced $9.5 million expansion plan to increase our production capacity, add finishing capabilities, and improve our overall efficiency and throughput. In spite of the ongoing expansion disruptions in our operations and the related short-term production challenges in the second quarter, we are pleased with our ability to meet the higher demand with outstanding delivery performance and speed-to-market. As we continue to expand our capacity, we expect to more fully benefit from these operational improvements in the second half of fiscal 2015. These investments further demonstrate Culp’s commitment to our customers, and we look forward to the additional opportunities to grow our mattress fabrics business.”

Due to income-tax volatility in fiscal 2014 and previous years, the company reported adjusted net income (non-GAAP), which is calculated using estimated cash income tax expense for its foreign subsidiaries, of $4.1 million, or $0.33 per diluted share, unchanged from the prior-year quarter. Pre-tax income was $4.9 million, an increase of 1.6%.

Culp said its financial position remained strong, with cash and cash equivalents and short-term investments of $35.3 million, even after spending $14.7 million for dividends and expenditures during the first six months of fiscal 2015.

“Overall, our second-quarter results were in line with our expectations, and we are pleased with our consistent performance to date in fiscal 2015,” said Frank Saxon, Culp president and chief executive officer. “Our higher sales in both businesses reflect favorable customer response to our creative designs and wide range of innovative products. In addition, our scalable and flexible manufacturing platform supports our ability to compete in a fashion-driven business that is always changing. Importantly, we have the financial strength to make the strategic investments to support our continued growth, as reflected in our increased capital expenditures for fiscal 2015.

“We are also pleased that our financial performance and strong balance sheet have enabled us to reward our shareholders with a 20% increase in our quarterly cash dividend, which has doubled since June 2012. Notably, our free cash flow for the year-to-date period has been excellent, even after higher than normal capital expenditures,” Saxon added.

The company expects overall third-quarter sales to increase from 2% to 5%, due to growth in the mattress-fabric segment. Operating income and margins in ticking are expected to increase primarily due to operational improvement in the Culp-Lava sewn mattress cover business. The full-year outlook is for sales and pre-tax income to be higher than fiscal 2014, with improved profitability predicted in the second half of the year.

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