Financial Performance - Consolidated net sales for the third quarter of fiscal 2025 decreased by 13.5% to $52.3 million compared to $60.4 million in the prior year[194]. - Gross profit for the third quarter of fiscal 2025 was $6.3 million, down 17.6% from $7.7 million in the prior year, resulting in a gross margin of 12.1%[194]. - Loss from operations for the third quarter of fiscal 2025 was $3.9 million, a 123.4% increase compared to a loss of $1.7 million in the prior year[194]. - The company recorded a net loss of $4.1 million for the third quarter of fiscal 2025, compared to a net loss of $3.2 million in the prior year, reflecting a 29.4% increase[194]. - Income from operations for Q3 fiscal 2025 was $679,000, down 67.5% from $2.1 million in Q3 fiscal 2024[239]. - Gross profit for Q3 fiscal 2025 was $4.228 million, a decrease of 30.9% from $6.122 million in Q3 fiscal 2024[239]. Sales and Revenue Trends - Mattress fabrics sales decreased by 4.6% in the third quarter and 4.2% in the first nine months of fiscal 2025, while upholstery fabrics sales decreased by 22.3% in the third quarter and 8.8% in the first nine months[195]. - Net sales for Q3 fiscal 2025 were $28.6 million, an increase of $2.9 million or 11.2% compared to Q4 fiscal 2024[227]. - Upholstery fabrics sales decreased by 22.3% in Q3 fiscal 2025 compared to the prior-year period[236]. - Accounts receivable decreased by $671,000, or 5.5%, due to a 22.3% decline in net sales during Q3 fiscal 2025 compared to Q3 fiscal 2024[248]. - Net sales for Q3 fiscal 2025 were $52.3 million, an increase of $2.7 million, or 5.5%, compared to $49.5 million in Q4 fiscal 2024[299]. Expenses and Costs - The company incurred restructuring expenses of $1.7 million in the third quarter of fiscal 2025, compared to a credit of $50,000 in the prior year[194]. - SG&A expenses decreased by 11.9% to $3.549 million in Q3 fiscal 2025 from $4.030 million in Q3 fiscal 2024[239]. - Restructuring expenses totaled $169,000 for the nine months ended January 26, 2025, compared to $472,000 for the same period in 2024[252]. - The company expects proceeds from the sale of its Canadian facility to exceed the cash restructuring charges incurred[221]. Cash Flow and Liquidity - Cash and cash equivalents decreased to $5.3 million as of January 26, 2025, down from $10.0 million as of April 28, 2024, primarily due to net cash used in operating activities of $9.4 million[206]. - Net cash used in operating activities was $9.4 million during the first nine months of fiscal 2025, an increase of $3.4 million from $6.0 million in the same period of fiscal 2024[287]. - As of January 26, 2025, the company had cash totaling $5.3 million, a decrease of $4.7 million from $10.0 million as of April 28, 2024[286]. - The company’s cash balance may be adversely affected by factors such as customer demand trends, supply chain disruptions, and geopolitical events[291]. Tax and Deferred Tax - The effective income tax rate for the nine-month period ended January 26, 2025, was adversely affected by a higher pre-tax loss of $16.8 million compared to $11.3 million in the prior year[203]. - The effective income tax rate for the nine-month period ended January 26, 2025, was (3.9%), significantly improved from (33.4%) for the nine-month period ended January 28, 2024[266]. - The company recorded a deferred income tax liability of $5.1 million for unremitted withholding taxes from foreign subsidiaries[276]. - The company had gross unrecognized income tax benefits of $1.4 million as of January 26, 2025, which could favorably affect future income tax expense[279]. Inventory and Accounts Receivable - Inventory increased by $3.5 million, or 12.4%, compared to January 28, 2024, due to restructuring activities[228]. - Inventory increased to $48.6 million as of January 26, 2025, compared to $46.9 million as of January 28, 2024, due to purchases for the Fiscal 2025 Restructuring Plan[300]. - Accounts receivable increased by $1.6 million, or 16.0%, compared to April 28, 2024, reflecting longer payment trends[227]. - Days' sales outstanding increased to 37 days for Q3 fiscal 2025, compared to 35 days for Q3 fiscal 2024[226]. Strategic Initiatives - The company established a wholly owned subsidiary in Vietnam to enhance strategic sourcing capabilities and diversify its supply chain in Asia[191]. - The company is exploring additional strategic actions to enhance profitability amid current soft market conditions[217]. - The company expects continued challenges in residential sales due to muted conditions in the home furnishings industry[241]. Capital Expenditures and Assets - Capital expenditures totaled $2.4 million during the first nine months of fiscal 2025, down from $3.2 million in the same period of fiscal 2024[305]. - Property, plant, and equipment decreased to $24.2 million as of January 26, 2025, due to reduced capital spending[232]. - Outstanding borrowings under an unsecured credit agreement in China totaled $4.0 million at an interest rate of 2.95% as of January 26, 2025[319]. Dividends - The company suspended its quarterly cash dividend on June 29, 2022, and did not make any dividend payments during the first nine months of fiscal 2025[295].

Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $52.3 million, down 13.5% compared to the prior year period [40] - The company reported a loss from operations of $3.9 million, which included $2.3 million in restructuring expenses [40] - Adjusted loss from operations was $1.6 million, an improvement from $1.9 million in the prior year period [40] - Consolidated adjusted EBITDA for the quarter was close to breakeven at a negative $123,000, a sequential improvement from negative $1.3 million in Q2 [42] Business Line Data and Key Metrics Changes - Mattress fabrics segment sales were $28.6 million, down 4.6% year-over-year and 4.8% sequentially [43] - Operating loss for the mattress fabrics segment was $433,000, improved from a loss of $1.6 million a year ago [44] - Upholstery fabrics segment sales were $23.6 million, down 22.3% year-over-year and 7.8% sequentially [45] - Hospitality contract business sales increased significantly year-over-year and slightly sequentially, contributing to 40% of upholstery fabrics total sales for the quarter [21] Market Data and Key Metrics Changes - Consolidated sales for Q3 were down due to ongoing weakness in the home furnishings and bedding industries [16] - Specific pressure on residential upholstery fabric sales was noted, exacerbated by inventory adjustments from a large customer [17] - The hospitality contract portion of the upholstery fabrics segment is expected to drive solid long-term growth [22] Company Strategy and Development Direction - The company is focused on returning to profitability despite a challenging demand environment, with operational adjustments aimed at cost and efficiency improvements [24] - A restructuring plan has been largely completed, with expected annualized savings of $10 million to $11 million [25] - The company is targeting further strategic actions to create more cost and operating efficiencies across its businesses [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sustained profitability and growth in fiscal 2026, assuming no significant worsening in industry sales levels [24] - The company anticipates continued industry sales pressure due to macroeconomic factors and tariff uncertainties [55] - Management expects consolidated net sales for Q4 to show some year-over-year growth, driven by the mattress fabrics segment [55] Other Important Information - The company has entered into a conditional agreement for the sale of its Canadian facility, expecting to receive between $6 million and $8 million in cash proceeds [14] - The company reported a net debt position of $105,000 as of the end of Q3 [49] - Capital expenditures for the first nine months of the fiscal year were $2.4 million, projected to be approximately $3 million to $3.5 million for the entire fiscal year [51] Q&A Session Summary Question: Change in guidance regarding profitability - Management confirmed expectations for a return to profitability in early fiscal 2026, despite current demand levels [60][62] Question: Market share growth in mattress and hospitality segments - Management indicated continued market share growth in both mattress and hospitality segments, with new customer projects underway [63][67] Question: Additional restructuring savings - Management discussed an additional $1 million in annualized savings expected to start in Q4, related to personnel and professional fees [84][86] Question: Impact of tariffs on production - Management noted that only about 30% of upholstery fabrics are tariff impacted, with strategies in place to mitigate these effects [99][100] Question: Consolidation in the mattress industry - Management views industry consolidation as a net positive, providing opportunities for growth and service to larger customers [106][109]

Financial Performance - Consolidated net sales for Q3 fiscal 2025 were $52.3 million, down 6.1% sequentially and down 13.5% year-over-year[3][12]. - Net loss for the quarter was $(4.1) million, an improvement from a net loss of $(5.6) million in the prior quarter[3][12]. - Adjusted EBITDA was close to break-even at negative $(123,000), a sequential improvement of approximately $1.1 million despite $3.4 million less in sales compared to the previous quarter[3][4]. - Net sales for the three months ended January 26, 2025, were $52,253,000, a decrease of 13.5% compared to $60,418,000 for the same period in 2024[26]. - Gross profit for the three months ended January 26, 2025, was $6,347,000, down 17.6% from $7,703,000 in the prior year, resulting in a gross margin of 12.1%[26]. - The net loss for the three months ended January 26, 2025, was $4,126,000, representing a 29.4% increase from a net loss of $3,188,000 in the same period last year[26]. - For the nine months ended January 26, 2025, net sales were $164,464,000, a decline of 6.5% from $175,804,000 in the prior year[30]. - The net loss for the nine months ended January 26, 2025, was $17,031,000, a 90.2% increase compared to a net loss of $8,954,000 for the same period in 2024[30]. Segment Performance - Mattress fabrics segment achieved a 58.3% sequential reduction in operating loss, following a 70.7% reduction in the previous quarter[3][4]. - Sales for the mattress fabrics segment were $28.6 million, down 4.6% year-over-year, while upholstery fabrics segment sales were $23.6 million, down 22.3% year-over-year[15]. - Mattress Fabrics segment sales decreased by 4.6% to $28,642,000, while Upholstery Fabrics segment sales fell by 22.3% to $23,611,000[44]. - Mattress Fabrics segment gross profit decreased by 18.9% to $4,862,000, while Upholstery Fabrics segment gross profit fell by 16.2% to $14,061,000[47]. - Upholstery fabrics segment achieved an operating income of $3,981,000, with an average capital employed of $7,853,000, yielding a return of 50.7%[69]. Restructuring and Operational Changes - The company expects to generate $10.0 million to $11.0 million in annualized savings and operating improvements following the restructuring[9]. - The company is focusing on restructuring its mattress fabric operations to return the segment to profitability[23]. - Restructuring expenses for the three months ended January 26, 2025, amounted to $1,655,000, compared to a credit of $50,000 in the same period last year[26]. - The company incurred a restructuring expense of $6.317 million during the nine months ending January 26, 2025, primarily due to consolidating operations and facility closures[63]. - Restructuring-related charges for the third quarter amounted to $624,000, impacting the cost of sales due to the discontinuation of operations at the Quebec manufacturing facility[51]. Cash Flow and Liquidity - Cash flow from operations for the first nine months of fiscal 2025 was negative $(9.4) million, primarily affected by operating losses and non-recurring cash restructuring charges[19]. - The company anticipates receiving approximately $6.0 million to $8.0 million in cash proceeds from the sale of Canadian real estate, contingent on due diligence and closing conditions[11][19]. - The company plans to use cash proceeds from the real estate sale to pay off outstanding borrowings and bolster liquidity[5][19]. - Free cash flow for the nine months ended January 26, 2025, was negative at $(10,063,000), worsening from $(8,233,000) in the prior year[43]. - Cash and cash equivalents dropped significantly by 58.1% to $5,279,000 from $12,585,000 year-over-year[36]. Balance Sheet and Assets - Total current assets decreased by 4.2% to $85,286,000 compared to $89,058,000 in the previous year[36]. - Total liabilities increased by 11.0% to $67,905,000 from $61,202,000 year-over-year[36]. - Shareholders' equity decreased by 26.2% to $59,650,000 compared to $80,796,000 in the previous year[36]. - The company had a net (debt) cash position of $(105,000) as of January 26, 2025, compared to a net cash position of $12,585,000 in the previous year[39]. - Total assets as of January 26, 2025, amounted to $127,555,000, compared to $132,054,000 as of April 28, 2024[71]. Future Outlook - The company expects continued sequential improvement in adjusted EBITDA and a foundation for a return to consolidated operating income in fiscal 2026[19]. - The company is focusing on improving operational efficiency and exploring market expansion opportunities in the upcoming quarters[70]. - The company is focusing on improving operational efficiency and exploring new market opportunities to enhance future performance[76].

Financial Performance - Net sales for the three months ended October 27, 2024, were $55,674,000, a decrease of 3.6% compared to $58,725,000 for the same period in 2023[7]. - Gross profit for the three months ended October 27, 2024, was $5,990,000, down 24.6% from $7,950,000 in the prior year[7]. - Net loss for the three months ended October 27, 2024, was $5,644,000, compared to a net loss of $2,424,000 for the same period in 2023, representing an increase of 133.3%[7]. - For the six months ended October 27, 2024, net sales were $112,211,000, a decrease of 2.0% from $115,387,000 in the same period in 2023[9]. - The net loss for the six months ended October 27, 2024, was $12,905,000, compared to a net loss of $5,766,000 for the same period in 2023, indicating a 124.5% increase in losses[9]. - The company reported a comprehensive loss of $5,621,000 for the three months ended October 27, 2024, compared to a comprehensive loss of $2,506,000 for the same period in 2023[11]. Assets and Liabilities - Total current assets as of October 27, 2024, were $86,901,000, a decrease from $88,594,000 as of October 29, 2023[15]. - Total liabilities as of October 27, 2024, were $65,364,000, an increase from $58,532,000 as of October 29, 2023[15]. - Cash and cash equivalents as of October 27, 2024, were $10,531,000, down from $15,214,000 as of October 29, 2023[15]. - The total shareholders' equity as of October 27, 2024, was $63,623 thousand, down from $76,129 thousand as of April 28, 2024, reflecting a decline of 16%[21]. - Total assets decreased from $142.2 million on October 29, 2023, to $129.0 million on October 27, 2024, representing a decline of approximately 9.3%[132]. Cash Flow and Capital Expenditures - Cash flows used in operating activities were $2,633 thousand for the six months ended October 27, 2024, a decrease of 41% compared to $4,476 thousand for the same period in 2023[19]. - Capital expenditures for the six months ended October 27, 2024, were $1,578 thousand, down 20% from $1,972 thousand for the same period in 2023[19]. - Capital expenditures for the six months ending October 27, 2024, amounted to $1.8 million, down from $2.2 million in the same period of the previous year, representing a decrease of about 18.9%[140]. Restructuring and Operational Changes - The company reported a significant increase in non-cash restructuring expenses, which rose to $2,178 thousand for the six months ended October 27, 2024, compared to $379 thousand in the same period of 2023[19]. - The company expects restructuring charges of approximately $7.3 million for fiscal 2025, with $4.4 million expected to be cash expenditures[74]. - Restructuring charges related to the mattress fabrics segment are estimated at $7.2 million, including $2.7 million for relocating equipment and $1.3 million for employee termination benefits[75]. - The company recorded restructuring expenses of $2.8 million for the three-month period ending October 27, 2024, and $5.5 million for the six-month period[78]. - Culp Upholstery Fabrics Haiti, Ltd. discontinued the production of upholstery cut and sewn kits due to a decline in demand, which was more than previously anticipated[82]. Segment Performance - Net sales for the mattress fabrics segment decreased to $30.1 million for the three months ended October 27, 2024, compared to $31.4 million for the same period in 2023, representing a decline of 4.1%[120]. - Net sales for the upholstery fabrics segment decreased to $25.6 million for the three months ended October 27, 2024, down from $27.3 million in the prior year, a decrease of 6.3%[120]. - Total segment gross profit decreased to $6.8 million for the three months ended October 27, 2024, compared to $7.9 million for the same period in 2023, a decline of 14.1%[120]. - The company reported a total segment loss from operations of $2.6 million for the three months ended October 27, 2024, compared to a loss of $2.2 million for the same period in 2023[120]. Financing and Credit Facilities - The company has an asset-based revolving credit facility (ABL Facility) with a maximum principal amount of $35.0 million, which can be used for working capital and general corporate purposes[87]. - As of October 27, 2024, the available borrowings under the ABL Facility totaled $22.6 million, with no outstanding borrowings reported[97]. - The company entered into an unsecured credit agreement in RMB for a line of credit up to 29.0 million RMB ($4.1 million USD) effective March 20, 2024[99]. - A new credit agreement was established on November 5, 2024, providing borrowing capacity up to 35.0 million RMB ($4.9 million USD), with a working capital loan of 10.0 million RMB ($1.4 million USD) already utilized[99]. Tax and Deferred Income - The effective income tax rate for the six months ending October 27, 2024, was (1.5%), a significant decrease from (26.8%) for the same period in 2023[142]. - The company recorded a full valuation allowance against its U.S. net deferred income tax assets due to ongoing significant pre-tax losses[148]. - As of October 27, 2024, the total gross unrecognized income tax benefits amounted to $1.4 million, an increase from $1.2 million as of October 29, 2023[153]. Stock and Compensation - The fair value of performance-based restricted stock units expected to vest as of October 27, 2024, was $333,000[172]. - The company recorded compensation expense of $33,000 for performance-based restricted stock units for the six months ended October 27, 2024, compared to $23,000 for the same period in 2023[171]. - Time-based restricted stock units totaling 103,320 vested during the six-month period ending October 27, 2024, with a fair value of $581,000[175]. Legal and Compliance - The company is involved in legal proceedings but does not expect these actions to have a material adverse effect on its financial position[186].

CHIP Investor Presentation December 2024 1 Forward Looking Statements 2 This presentation contains "forward-looking statements" within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties that may cause actual events and results to differ materially from such statements. Forward-looking ...

Financial Data and Key Metrics - Consolidated revenue for Q2 declined by 5% year-over-year, with net sales of $55.7 million [10][33] - The company reported an operating loss of $5.4 million, including $2.8 million in restructuring expenses, compared to a loss of $2.2 million in the prior year period [33] - Adjusted EBITDA for the 12-month period ending with Q2 was negative $1.3 million, compared to negative $240,000 in the prior year [36] - Net loss for Q2 was $5.6 million, or $0.45 per diluted share, compared to a net loss of $2.4 million, or $0.19 per diluted share, in the prior year period [35] Business Segment Performance Mattress Fabrics Segment - Sales for the mattress fabrics segment were $30.1 million, down 4.2% year-over-year but up 7.1% sequentially [38] - Operating loss for the segment was $1 million, a 70.7% sequential improvement from Q1, driven by restructuring progress [11][39] - The segment is expected to return to profitability in the second half of fiscal 2025 [11] Upholstery Fabrics Segment - Sales for the upholstery fabrics segment were $25.6 million, down 6.4% year-over-year and 10% sequentially [41] - Operating income for the segment was $615,000, down from $1.4 million in the prior year, impacted by lower sales and unfavorable foreign exchange rates [42] - Hospitality contract fabric sales remained solid, representing 35% of the segment's total sales [16] Market and Geographic Performance - The company has expanded its North American capacity with strong supply chain operations in Asia, including Vietnam and Turkey [13] - Foreign exchange rates in China negatively impacted Q2 results, but a favorable currency impact is expected in Q3 [18] - The company has fully ceased production in Canada and is transitioning to a sourcing model, improving margins [12][24] Strategic Direction and Industry Competition - The company is focused on restructuring to return to profitability, with the majority of restructuring activities expected to be completed by Q3 [12][19] - The mattress fabrics segment is a critical catalyst for recovery, with expected annualized cost savings of $10 million to $11 million [27] - The company is enhancing its product offerings, including the LiveSmart brand of performance fabrics, to meet customer demand for functionality and sustainability [15] Management Commentary on Operating Environment and Outlook - Management remains optimistic about the company's strategic approach and expects to return to positive adjusted EBITDA in the second half of fiscal 2025 [31][49] - The company anticipates continued pressure on sales in the residential upholstery fabrics segment but expects to achieve positive consolidated adjusted operating income by Q4 [49] - The restructuring process is expected to result in significant operational improvements and cost savings, positioning the company for growth as market conditions improve [32] Other Important Information - The company has $10.5 million in cash and $4.1 million in outstanding debt under its China credit line as of Q2 [45] - Capital expenditures for the first six months of fiscal 2025 were $1.6 million, with full-year projections of $3.5 million to $4 million [44] - The company expects to sell its Canadian facility in Q4, with net proceeds estimated at $6 million to $8 million [29][30] Q&A Session Summary Question: Market Share and Order Growth in Mattress Fabrics - The company is gaining market share in the mattress fabrics segment, driven by product innovation and strategic placements [54] - Positive momentum is expected to continue through Q3 and Q4, with new programs scheduled to launch [55] Question: Upholstery Fabrics Demand and Inventory Adjustments - The decline in upholstery fabrics sales is attributed to customers adjusting inventory levels due to soft industry demand, with some customers over-ordering in Q1 [59] - The company remains optimistic about the segment's potential, with strong customer interest in new products [58] Question: Contract and Hospitality Business Performance - The hospitality contract business is outperforming, driven by strong demand for hotel-related fabrics and window treatments, offsetting declines in office furniture sales [60][62] Question: Mattress Fabrics Restructuring Economics - The company expects annualized cost savings of at least $10 million from the restructuring, with significant operating leverage potential as sales grow [65][66] Question: Tariff Risks and Supply Chain Flexibility - The company is well-positioned to handle potential tariff changes, with a flexible supply chain and a strong U S manufacturing base for mattress fabrics [69][70][71] - The upholstery fabrics segment is largely insulated from tariff risks due to its asset-light model and global supplier relationships [73]

Financial Performance - Consolidated net sales for Q2 FY2025 were $55.7 million, a decrease of 5.2% year-over-year, with mattress fabrics sales down 4.2% and upholstery fabrics sales down 6.4%[13]. - The upholstery fabrics segment reported sales of $25.6 million for Q2 FY2025, down 6.4% year-over-year and down 10.0% sequentially[21]. - Net sales for the three months ended October 27, 2024, were $55.674 million, a decrease of 5.2% compared to $58.725 million for the same period in 2023[36]. - For the six months ended October 27, 2024, net sales were $112.211 million, a decrease of 2.8% from $115.387 million in the prior year[39]. - Net sales for the second quarter of fiscal 2025 were $55.674 million, a decrease of 5.2% compared to $58.725 million in the same period last year[48]. Profitability and Losses - GAAP consolidated loss from operations was $(5.4) million, including $2.8 million in restructuring expenses, compared to a loss of $(2.2) million in the prior-year period[15]. - The company reported a net loss of $5.644 million for the three months ended October 27, 2024, compared to a net loss of $2.424 million for the same period in 2023, representing an increase in loss of 132.8%[36]. - The company incurred a loss from operations of $12.251 million for the six months ended October 27, 2024, compared to a loss of $5.321 million for the same period in 2023, reflecting a 130.2% increase in loss[39]. - The net loss per share for the three months ended October 27, 2024, was $0.45, compared to $0.19 for the same period in 2023, indicating a 136.8% increase in loss per share[36]. - CULP reported a net loss of $20,958,000 for the trailing 12 months ended October 27, 2024, compared to a net loss of $19,415,000 for the previous year, indicating a year-over-year increase in losses[57]. Restructuring Efforts - The restructuring plan is expected to generate $10.0 - $11.0 million in annualized savings and operating improvements post-implementation[10]. - Total restructuring costs for FY2025 are now estimated at $7.3 million, with $4.4 million expected to be cash expenditures[11]. - Restructuring expenses for the three months ended October 27, 2024, totaled $2.031 million, significantly higher than $144,000 in the same period last year[36]. - Restructuring expenses for the six months ended October 27, 2024, amounted to $4.662 million, compared to $482,000 in the same period last year[39]. - The company anticipates a return to profitability post-restructuring, with expectations for improved market conditions in the future[8]. Cash Flow and Liquidity - Cash flow from operations for the first six months of FY2025 was negative $(2.6) million, an improvement from negative $(4.5) million in the same period of FY2024[26]. - As of October 27, 2024, the company reported $10.5 million in cash and $4.1 million in outstanding debt, with total liquidity of approximately $33.1 million[28]. - Free cash flow for the six months ended October 27, 2024, was $(3,423,000), an improvement from $(5,604,000) in the same period last year[47]. - Net cash used in operating activities for the six months ended October 27, 2024, was $(2,633,000), an improvement from $(4,476,000) in the same period last year[46]. Asset and Liability Management - Total current assets decreased by 1.9% to $86,901,000 compared to $88,594,000 in the previous year[41]. - Total liabilities increased by 11.7% to $65,364,000 from $58,532,000 year-over-year[41]. - Shareholders' equity decreased by 23.9% to $63,623,000 from $83,628,000 in the previous year[41]. - Accounts payable - trade increased by 16.0% to $32,373,000 compared to $27,903,000 in the previous year[41]. - Inventories increased by 1.5% to $45,132,000 from $44,465,000 year-over-year[41]. Market Conditions and Future Outlook - The company highlighted the impact of macroeconomic factors such as inflation, interest rates, and foreign currency fluctuations on its financial performance and future operations[34]. - The company anticipates continued challenges in the market, with a focus on restructuring efforts to improve operational efficiency[50]. - The overall financial outlook remains cautious due to ongoing operational losses and market conditions[73]. - The company is focusing on market expansion and new product development to improve future performance[73].

Financial Performance - Net sales for the three months ended July 28, 2024, were $56,537,000, a slight decrease of 0.22% compared to $56,662,000 for the same period in 2023[4] - Gross profit decreased to $5,076,000, down 28.3% from $7,085,000 year-over-year[4] - The net loss for the three months ended July 28, 2024, was $7,261,000, compared to a net loss of $3,342,000 for the same period in 2023, representing a 117.3% increase in losses[4] - The company reported a comprehensive loss of $7,181,000 for the three months ended July 28, 2024, compared to $3,285,000 for the same period in 2023[6] - The company incurred a total loss from operations of $6.85 million for the three months ended July 28, 2024, compared to a loss of $3.08 million for the same period in 2023[83] - The company reported a basic net loss per share of $0.55 for the three months ended July 28, 2024, compared to a loss of $0.25 for the same period in 2023[78] Assets and Liabilities - Total current assets decreased to $82,678,000 from $88,064,000, a decline of 6.4% year-over-year[9] - Total liabilities increased to $60,015,000 from $56,785,000, reflecting a rise of 4.3%[9] - Cash and cash equivalents at the end of the period were $13,472,000, down from $16,812,000, a decrease of 19.3%[11] - As of July 30, 2023, total shareholders' equity decreased to $86,117,000 from $89,080,000 as of April 30, 2023, reflecting a net loss of $3,342,000 during the period[14] - Total segment assets decreased to $95.85 million as of July 28, 2024, from $105.09 million as of July 30, 2023[86] Inventory and Receivables - The company reported a decrease in raw materials inventory from $8,408,000 as of July 30, 2023, to $7,076,000 as of July 28, 2024[28] - Accounts receivable decreased by $964,000, or 8.7%, as of July 28, 2024, reflecting faster cash collections and a decrease in net sales[152] - Inventory increased by $699,000, or 2.8%, compared to July 30, 2023, due to increased finished goods inventory during the transition to a strategic sourcing model[154] - Inventory decreased by $2.8 million, or 14.8%, compared to July 30, 2023, reflecting management's ability to maintain appropriate inventory levels[169] Restructuring and Expenses - Restructuring expenses for the quarter were $2,631,000, significantly higher than $338,000 in the prior year[4] - The company expects restructuring charges of approximately $5.1 million in fiscal 2025, with $3.0 million expected to be cash expenditures[47] - Estimated restructuring charges for the mattress fabrics segment include $1.7 million for relocating equipment and $1.2 million for employee termination benefits[48] - The company incurred restructuring expenses of $517,000 for the three months ending July 30, 2023, including employee termination benefits and impairment losses[57] - Restructuring expenses for Q1 fiscal 2025 were $2.6 million, a significant increase of 678.4% from $338,000 in Q1 fiscal 2024[133] - The company closed its upholstery fabrics finishing operation in Shanghai, resulting in restructuring charges of $218,000 during the first quarter of fiscal 2025[56] Cash Flow and Financing - Cash and cash equivalents decreased to $13.47 million as of July 28, 2024, from $16.81 million as of July 30, 2023[86] - The company has $3.2 million available for additional repurchases of common stock as of July 28, 2024, with no shares repurchased during the three-month periods ending July 28, 2024, and July 30, 2023[123] - The ABL Facility provides a maximum principal amount of $35.0 million, with available borrowings totaling $19.2 million as of July 28, 2024[66] - The company has outstanding borrowings of $4.0 million under a line of credit associated with operations in China as of July 28, 2024[199] Taxation - The effective income tax rate for the three-month period ending July 28, 2024, was (3.4%), significantly lower than (26.5%) for the same period in 2023[12] - The company had gross unrecognized income tax benefits of $1.3 million as of July 28, 2024, which could favorably affect future income tax expense[101] - The company projects annual cash income tax payments of approximately $2.0 million associated with operations in China, while no cash income taxes are expected in the U.S. during fiscal 2025 due to existing net operating loss carryforwards of $69.6 million[188] Segment Performance - The mattress fabrics segment experienced a cumulative operating loss of $28.8 million since Q2 fiscal 2023, attributed to factors such as inflation and shifting consumer demand[37] - The mattress fabrics segment reported a net sales of $28.08 million, down from $29.22 million year-over-year, resulting in a gross loss of $326,000 compared to a gross profit of $1.99 million in the prior year[83] - The upholstery fabrics segment achieved net sales of $28.46 million, an increase from $27.44 million, with a gross profit of $5.52 million, up from $5.27 million[83] - Net sales for the upholstery fabrics segment increased by 3.7% to $28.5 million for the three months ended July 28, 2024, compared to $27.4 million in the prior year[159] Accounting Policies - As of July 28, 2024, there were no changes in significant accounting policies from the annual report for the year ended April 28, 2024[202] - The company refers to Note 2 of the consolidated financial statements for recently adopted and issued accounting pronouncements[202] - The financial results and accounting policies remain consistent with those reported in the previous annual report[202] - The company continues to monitor and apply critical accounting policies as necessary[202]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 were $56.5 million, down 0.2% compared to the prior year period [21] - The company reported a loss from operations of $6.9 million, which included $2.7 million in restructuring expenses [21] - Net loss for the first quarter was $7.3 million or $0.58 per diluted share, compared to a net loss of $3.3 million or $0.27 per diluted share for the prior year period [22] - Adjusted EBITDA for the 12-month period ending Q1 was a negative $5.7 million, showing a 66% improvement from the prior year [22] Business Segment Data and Key Metrics Changes - Mattress fabric segment sales were $28.1 million, down 3.9% year-over-year but up 9% sequentially [24] - Upholstery fabrics segment sales were $28.5 million, up 3.7% year-over-year and up 19.7% sequentially [25] - Operating income for the upholstery fabrics segment was $1.7 million with an operating margin of 6%, compared to 4.8% a year ago [26] Market Data and Key Metrics Changes - The hospitality fabrics segment accounted for approximately 33% of the upholstery fabrics segment total sales for Q1 [25] - The company noted that the hospitality industry is booming post-COVID, contributing to growth in the hospitality fabrics segment [46] Company Strategy and Development Direction - The company is undergoing a significant restructuring plan focused on the mattress fabric segment to reduce fixed costs and improve efficiency [11][12] - The restructuring is expected to yield annualized cost savings of $10 million to $11 million, primarily from the mattress fabrics division [16] - The company aims to return to positive consolidated adjusted operating income in the third quarter of fiscal 2025 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving market position in both business segments despite ongoing macroeconomic challenges [19] - The company anticipates that macro industry conditions may remain pressured during fiscal 2025, but believes the toughest conditions are behind them [19] - Management expects to return to near breakeven adjusted EBITDA in the second quarter of fiscal 2025 [31] Other Important Information - The company has completed the consolidation of its Haiti sewn mattress cover operation and is making progress in transitioning its damask weaving business to a sourcing model [14][15] - The company reported a total cash position of $13.5 million and $4 million in outstanding debt under its China credit line as of the end of Q1 [28] Q&A Session Summary Question: Can you discuss the cadence of business over the quarter? - Management noted a strong start in May, June, and July, with some weakness in July but overall feeling positive about market share [33][34] Question: Can you elaborate on the restructuring savings? - The savings are primarily from the closure of the Canadian plant, operational efficiencies, and outsourcing the damask line [35][36] Question: How will the restructuring change the business model? - The restructuring aims to reduce costs and shift to a more asset-light model, particularly in the mattress fabrics segment [42][43] Question: What is driving growth in the hospitality segment? - The hospitality industry is booming post-COVID, with new product lines and expanded roller shade capacity contributing to growth [46][47]

1 CUI P Positioning for the Future Culp Restructuring Plan – September 2024 Forward Looking Statements 2 This presentation contains "forward-looking statements" within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties that may cause actual events and results to differ materially from ...