Like a WWII submarine blowing her balast tanks to shoot to the surface, the debt and restructuring charges are over for Culp, and the dawn of a clean balance sheet and the prospect of higher sales potential awaits.

Let's see, what's not to like about this 4Q09 report (besides the sales decline which is outside of Culp's control):

1. Net debt down to circa $4M at end of FY, (but roll forward 2 months to today, and net debt cut again). Net debt free at end of this FY, and cash available for potential stock repurchases. No secured debt on the balance sheet -- lines of credit free to borrow.

2. Look at that operating margin in mattress ticking: 13.3% on a YOY sales decline of 23%. Now that is impressive.

3. Even the "ball-and-chain" upholstered fabric biz turned in a 3.2% operating margin gain on horrific conditions -- the 7 years of restructuring are over.

4. EBITDA/share (TTM) of $1.15 x 5 to 6 (reasonable multiple) equates to fair value/sh of circa 6 plus (new price target of Raymond James).

5. Current BV/sh close to $3.90, but add back about $2.60/sh in tax loss carryforward benefits (after all Culp pays no federal inc tax on the next $75M of earnings), gets us to true BV/sh of circa $6.50. We are currently trading at 30% discount to NBV/sh.

6. Any uptick in sales volume will drop to the bottom line at close to the gross margin percentage, or close to 20% due to the operating expense leverage.

7. Sales comps become easier to meet or beat in the 2QFY (ending 10/31/09), certainly by 3QFY (ending 1/31/10), as consumer demand dropped off the cliff in the preceding year.

8. My guess is that ValueLine will up their estimates for this FY to 50c/sh and next year to 65c/sh. Timeliness rating will jump form 4 to 3 (maybe 2) on better than expected earnings. New report this coming week.

9. Once PPS starts jumping over 5, little more volume and a little more on the radar screens of value guys. Both LZB and ZZ figured out a way to survive, and consumer will start coming back. With Culp's sweet spot for Uph Fabs in the good to better range $2.50/sq yd), and the consumer looking for value, and Culp's customers looking for stability and innovation from their suppliers, Culp looks good. In the Mattress Tix side, Culp's competitors are either bankrupt, or losing money, and Culp's attention to their customers will only get better.

It's been a tough ride, no doubt, but with a clean balance sheet and the consumer coming back from the dead, Culp's prospects have never looked better in the last 8 years. Culp mgt has done a brilliant job on the balance sheet with working capital management and on the expense reduction side to be able to survive for the next ride. Let's enjoy it together.

"Ensign, this is the Captain speaking -- Blow the ballast tanks, RISE, RISE, RISE!"