Culp(CULP) - 2025 Q3 - Quarterly Report

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$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$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$2.1 million in Q3 fiscal 2024[239]. - Gross profit for Q3 fiscal 2025 was $4.228 million, a decrease of 30.9$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$52.3 million, an increase of $2.7 million, or 5.5$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$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$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].