Mattress and upholstery fabrics maker Culp, Inc. made a net loss of $40.9 million for the second quarter of fiscal 2009, versus net income of $1.6 million in the same period a year ago.

Included in the net loss was a non-cash charge in the amount of $31.2M for the establishment of a valuation allowance against all of the company's net deferred tax assets. The company also recorded restructuring and related charges, including fixed asset impairment charges, of $11.8 million related to its upholstery fabrics segment.

Frank Saxon, chief executive officer, said, "The results for the second quarter include several substantial charges primarily related to the economic impact of the unprecedented business environment we are facing. These charges are mostly non-cash and do not have any significant effect on our operations or compliance with our loan covenants. Our financial position remains solid and we have generated $6.9 million in cash flow from operations in the first six months of this fiscal year."

For the three months ended November 2, 2008, net sales were $52.3M. compared with $64.3M. in the corresponding period of fiscal 2008.

Sales in the company's mattress fabrics business fell by 22% to $28M. from $36M. a year ago. Unit volumes fell by 25% but average selling prices were higher due principally to product mix. Operating profit was down by 15% to $3.3M. vs. $3.9M previously.

In its upholstery fabrics business sales fell by 14.5% to $24.2M. compared with $28.3M. in the second quarter of fiscal 2008. Sales of U.S. produced fabrics fell by 46% year-on-year to $6.1M., the result of very weak demand industry wide, as well as continued soft demand for U.S. produced upholstery fabrics driven by a consumer preference for leather and suede furniture and other imported furniture and fabrics, said the company. Culp's sales of non-U.S. produced products were $18.1M. up by 7%, driven by a significant gain in cut and sewn kits. Overall, the upholstery fabrics business reduced its operating loss to $0.8M. versus a loss of $1.4M. for the first quarter of this fiscal year.

Mr Saxon commented that the company expected sales in both its mattress fabrics and upholstery fabrics businesses to be down by approximately 25% to 30% in the third quarter this year compared to a year ago. Mattress segment operating income margin is expected to remain in the mid-to-upper single digit percent range while the upholstery is likely to report results in the range of breakeven to moderate loss, Mr Saxon commented.