Daily News

From Home Furnishing Business

Culp, Inc. Reports 4th Quarter & Year End Results

June 27, 2024  by HFBusiness Staff in Business Strategy, Industry   

Fiscal 2024 Fourth Quarter Financial Summary

Net sales for the fourth quarter of fiscal 2024 were $49.5 million, down 19.4 percent compared with the prior-year period, with mattress fabrics sales down 16.1 percent, and upholstery fabrics sales down 22.6 percent.

Loss from operations was $(4.2) million (which included $204,000 in restructuring expense during the period), compared with a loss from operations of $(4.0) million for the prior-year period (which included $70,000 in restructuring expense during the period).

Net loss was $(4.9) million, or $(0.39) per diluted share, compared with a net loss of $(4.7) million, or $(0.38) per diluted share, for the prior-year period. The effective tax rate for the fourth quarter was negative (19.8) percent, reflecting the company’s mix of taxable income between its U.S. and foreign jurisdictions during the period.

The company maintained a solid financial position, with its balance sheet reflecting $10.0 million of total cash and no outstanding borrowings as of April 28, 2024. Total liquidity as of April 28, 2024, was $32.5 million (consisting of $10.0 million in cash and $22.5 million in borrowing availability under the company's domestic and foreign credit facilities).

Fiscal 2024 Full Year Financial Summary

Net sales for fiscal 2024 were $225.3 million, down 4.1 percent from the prior year, with mattress fabrics sales up 4.8 percent and upholstery fabrics sales down 12.1 percent.

Loss from operations was $(11.3) million (which included $676,000 in restructuring and related expenses during the period), compared with a loss from operations of $(28.5) million for the prior year (which included approximately $9.9 million relating to certain inventory impairment and other charges and restructuring and related expenses during the period).

Net loss was $(13.8) million, or $(1.11) per diluted share, compared with a net loss of $(31.5) million, or $(2.57) per diluted share, for the prior year. The effective tax rate for fiscal 2024 was negative (28.3) percent, reflecting the company's mix of taxable income between its U.S. and foreign jurisdictions during the period.

Restructuring Plan Update

The restructuring plan announced on May 1, 2024, primarily focused on the company's mattress fabrics segment, is progressing as planned.

Expect to achieve $10.0 - $11.0 million in annualized savings and operating improvements after restructuring initiatives are fully implemented by the end of the calendar year, with most of the restructuring benefit realized during the second half of fiscal 2025.

Expect a return to break-even operating results at currently depressed industry demand levels post restructuring.

Expect to incur cash restructuring and restructuring-related costs and charges of approximately $2.5 million, the majority of which are anticipated to be incurred in the first half of fiscal 2025. The company expects to fund these cash costs primarily with the sale of excess manufacturing equipment.

Expect to receive at least $10.0 - $12.0 million in cash proceeds (net of all taxes and commissions) from the sale of real estate associated with the restructuring plan.

Also expect to incur non-cash restructuring and restructuring-related costs and charges of approximately $5.4 million (excluding any gain from the sale of real estate).

Assuming the completion of all restructuring actions and the sale of associated real estate by the end of fiscal 2025, the company currently projects its cash as of the end of fiscal 2025 to be higher than its $10.0 million in cash as of the end of fiscal 2024.

CEO Commentary

Commenting on the results, Iv Culp, president and chief executive officer of Culp, Inc., said, "Our sales and operating results for the fourth quarter were in line with our expectations announced on May 1, 2024. These results reflected weakness in industry demand in both of our businesses, driven primarily by ongoing macro-economic headwinds.”

“Our sales performance for the fourth quarter was also affected to some degree by the timing of orders, as many of our larger customers experienced extremely slow conditions beginning in January. We posted solid year-over-year sales gains in both businesses during our fiscal third quarter, and we were making progress towards our stated improvement goals. However, we faced a significant decline in order levels during our fourth quarter, related to demand pressures our customers faced early in the calendar year.”

"This impact on fourth quarter revenue, along with ongoing macro-challenges, led us to take aggressive action to bring our manufacturing costs and capacity in line with current and expected demand. We announced a major restructuring plan in early May, with a primary focus on our mattress fabrics segment, and we are making steady progress on the execution of this restructuring initiative. The announced adjustments, once fully implemented, will enable us to grow more efficiently and profitably with a lower level of fixed costs.”

“Importantly, these strategic steps do not limit our ability to grow the business, but instead allow us to better optimize our global mix of manufacturing capabilities and long-term sourcing partners. Also, we are extremely grateful for the support we have received from our valued customers, suppliers, and employees, and we are confident that the strength of these relationships will help drive our recovery.”

"Despite the headwinds, there were some positive indicators within CULP’s business during fiscal 2024, including (1) significant year-over-year operating improvement (though still a loss and below intended targets); (2) consistent operating profits in our upholstery fabrics business; (3) year-over-year sales growth in our mattress fabrics segment; and (4) strong product innovation and placements in both segments, positioning us for a return to higher sales growth as macro conditions improve. We are encouraged by our solid market position in both businesses, and with our restructuring actions well underway, we believe we are on track to return to profitability post-restructuring even if market conditions remain at their currently depressed levels.”

"We also maintained a solid balance sheet during the fourth quarter, with a focus on prudent financial management, and we are taking proactive steps to ensure the long-term success of our business. We are diligently focused on executing our restructuring initiatives, and therefore strengthening our balance sheet, optimizing our operations and cost structure, and supporting our customers, while also continuing to win new placements with our innovative product portfolio.”

"As we look ahead to fiscal 2025, we expect industry conditions will remain pressured for some time, but we believe our fiscal 2024 fourth quarter revenue levels represented a bottom point for CULP. We believe the strategic actions we are taking will position us for profitable growth opportunities, and we remain committed to delivering sustainable results and enhancing value for our shareholders over the long term," added Culp.