Culp(CULP) - 2025 Q4 - Annual Results

Executive Summary & Business Overview President and CEO's Comments Culp's CEO highlighted fiscal 2025 restructuring to improve cost structure and market positioning amidst revenue and tariff uncertainty - Fiscal 2025 focused on cost structure transformation and market positioning due to challenging revenue and tariff uncertainty[2] - Completed restructuring plan, including Canada facility sale and mattress fabrics consolidations, is yielding benefits like lower fixed costs and increased efficiencies[3] - Integration of Culp Upholstery Fabrics and Culp Home Fashions is expected to improve scale efficiencies and generate additional savings in fiscal 2026[4] - Credit facility with Wells Fargo extended for three years, providing additional flexibility and liquidity[4] Company Overview Culp, Inc. is a leading North American marketer of mattress and upholstery fabrics, with global manufacturing and sourcing capabilities - Culp, Inc. is a major marketer of mattress and upholstery fabrics in North America[20] - Global manufacturing and sourcing operations are located in the United States, China, Haiti, Turkey, and Vietnam[20] Fiscal Year 2025 Financial Highlights Fourth Quarter Financial Highlights Culp reported flat Q4 FY2025 net sales, reduced GAAP operating loss, improved net loss, and achieved positive Adjusted EBITDA Fourth Quarter Financial Performance | Metric | Q4 FY2025 (Millions) | Q4 FY2024 (Millions) | Change (%) | | :-------------------------------- | :------------------- | :------------------- | :--------- | | Consolidated Net Sales | $48.8 | $49.5 | (1.5)% | | Mattress Fabric Sales | $27.1 | $25.8 | 5.3% | | Upholstery Fabric Sales | $21.7 | $23.8 | (8.9)% | | GAAP Consolidated Loss from Operations | $(2.2) | $(4.2) | (47.3)% | | Non-GAAP Operating Loss | $(0.704) | $(4.0) | (82.5)% | | Net Loss | $(2.1) | $(4.9) | (57.4)% | | Diluted EPS | $(0.17) | $(0.39) | (56.4)% | | Adjusted EBITDA | $0.559 | $(2.2) | N.M. | - Improvement in operating loss and Adjusted EBITDA driven by cost and efficiency benefits from restructuring and lower inventory markdowns[8] - Mattress fabrics segment showed continued momentum and significant improvement in operating loss[8] - Upholstery fabrics segment maintained profitability despite low-revenue industry and tariff challenges[8] Full Year Financial Highlights Full year FY2025 saw consolidated net sales decrease, GAAP operating loss widen, but non-GAAP operating loss improved Full Year Financial Performance | Metric | FY2025 (Millions) | FY2024 (Millions) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Consolidated Net Sales | $213.2 | $225.3 | (5.4)% | | Mattress Fabric Sales | $113.9 | $116.4 | (2.1)% | | Upholstery Fabric Sales | $99.3 | $109.0 | (8.8)% | | GAAP Consolidated Loss from Operations | $(18.4) | $(11.3) | 62.5% | | Non-GAAP Operating Loss | $(9.0) | $(10.6) | (15.1)% | | Net Loss | $(19.1) | $(13.8) | 38.2% | | Diluted EPS | $(1.53) | $(1.11) | 37.8% | - Non-GAAP operating loss improvement driven by cost and efficiency benefits from restructuring and lower inventory markdowns[8] Restructuring Plan Update Restructuring Plan Update The restructuring plan, completed with the Quebec facility sale, is expected to yield $10.0-$11.0 million in annualized savings - Restructuring plan completed with the sale of the Quebec, Canada manufacturing facility on April 30, 2025[10] - Expected annualized savings and operating improvements from the restructuring plan are $10.0-$11.0 million[10] Restructuring Plan Financials | Metric | FY2025 (Millions) | | :-------------------------------- | :------------------ | | Total Restructuring Expenses | $9.4 | | Cash Expenditures for Restructuring | $5.6 | | Funding from Asset Sales (FY2025) | $2.3 | | Expected Net Cash Proceeds from Canada Facility Sale (FY2026) | $3.0 - $3.5 | Business Segment Highlights Mattress Fabrics Segment Mattress Fabrics segment reported Q4 sales increase and significant operating loss improvement from restructuring and higher gross margins Mattress Fabrics Segment Performance | Metric | Q4 FY2025 (Millions) | Q4 FY2024 (Millions) | Change (%) | FY2025 (Millions) | FY2024 (Millions) | Change (%) | | :------------------- | :------------------- | :------------------- | :--------- | :------------------ | :------------------ | :--------- | | Sales | $27.1 | $25.8 | 5.3% | $113.9 | $116.4 | (2.1)% | | Operating (Loss) | $(0.217) | $(2.9) | (92.6)% | $(5.2) | $(6.8) | (23.5)% | - Q4 operating loss improvement driven by higher gross margins from lower fixed costs, operating efficiency from restructuring, and lower inventory markdowns[13] - Full-year operating performance improved consistently despite lower sales, driven by the same factors as Q4[13] Upholstery Fabrics Segment Upholstery Fabrics segment experienced Q4 sales decline due to market softness, but operating income increased from favorable mix and lower SG&A Upholstery Fabrics Segment Performance | Metric | Q4 FY2025 (Millions) | Q4 FY2024 (Millions) | Change (%) | FY2025 (Millions) | FY2024 (Millions) | Change (%) | | :------------------- | :------------------- | :------------------- | :--------- | :------------------ | :------------------ | :--------- | | Sales | $21.7 | $23.8 | (8.9)% | $99.3 | $109.0 | (8.8)% | | Operating Income | $1.1 | $0.975 | 8.0% | $4.1 | $5.8 | (29.9)% | - Q4 sales decline attributed to soft home furnishings market, lower residential customer sales, tariff uncertainty, and Chinese New Year timing[14] - Q4 operating income improvement partially offset by lower inventory markdowns, favorable mix of higher-margin hospitality/contract sales (42% of segment sales), and lower SG&A[16] Financial Position and Liquidity Balance Sheet, Cash Flow, and Liquidity Culp maintained $5.6 million cash and $12.7 million debt, with $27.0 million total liquidity, and extended its credit facility Balance Sheet Summary | Metric | April 27, 2025 (Millions) | April 28, 2024 (Millions) | Change (%) | | :-------------------------------- | :------------------------ | :------------------------ | :--------- | | Total Cash | $5.6 | $10.0 | (43.8)% | | Outstanding Debt | $12.7 | $0 | N.M. | | Total Assets | $123.37 | $132.05 | (6.6)% | | Total Liabilities | $65.73 | $55.93 | 17.5% | | Shareholders' Equity | $57.64 | $76.13 | (24.3)% | - Total liquidity as of April 27, 2025, was approximately $27.0 million, including $5.6 million cash and $21.4 million borrowing availability[16] - Domestic credit facility with Wells Fargo Bank extended for three years on June 12, 2025, with borrowing capacity up to $30 million (plus $10 million accordion)[16] Cash Flow Summary | Metric | FY2025 (Millions) | FY2024 (Millions) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Cash Flow from Operations | $(17.7) | $(8.2) | 115.3% | | Free Cash Flow | $(17.1) | $(10.8) | 58.3% | | Capital Expenditures | $2.9 | $3.7 | (21.6)% | - Negative cash flow from operations and free cash flow primarily due to operating losses, $5.6 million in non-recurring cash restructuring charges, and strategic capital investments[16] Financial Outlook Financial Outlook Culp provides limited annual guidance due to macro-economic uncertainty, expecting mattress fabric sales growth and continued residential upholstery pressure - No specific financial guidance provided due to macro-economic uncertainty and tariff fluidity; only limited annual guidance[21] - Anticipates year-over-year sales growth in mattress fabrics and continued sales pressure in residential upholstery[21] - Expects meaningful operating improvement from restructuring benefits and fiscal 2026 division integration, especially after Q1[21] - Will continue to use credit facilities for working capital and growth but will aggressively manage liquidity and capital expenditures, prioritizing free cash flow[21] Additional Information Conference Call Culp, Inc. will host a conference call on June 26, 2025, at 9:00 a.m. ET to discuss Q4 and full fiscal year 2025 results - Conference call for Q4 and FY2025 results scheduled for June 26, 2025, at 9:00 a.m. ET[19] - Webcast and replay available on the company's investor relations website[19] Investor Relations Contact Ken Bowling, EVP, CFO, and Treasurer, serves as the investor relations contact for Culp, Inc - Investor Relations Contact: Ken Bowling, EVP, CFO, and Treasurer[21] Forward-Looking Statements & Risk Factors Forward-Looking Statements & Risk Factors Forward-looking statements are subject to risks and uncertainties, including market conditions, economic trends, tariffs, and restructuring success - Forward-looking statements are subject to risks and uncertainties that may cause actual events and results to differ materially[22] - Key risk factors include housing market, consumer confidence, economic conditions, interest rates, inflation, consumer tastes, tariffs/trade policy, currency fluctuations, international instability, public health epidemics, asset impairments, and rising costs[23][24] - Success of mattress fabric operations restructuring and integration of mattress and upholstery fabric segments are critical for future performance[24] - The company does not assume any obligation to update forward-looking statements after the release date, unless required by federal securities laws[25] Consolidated Financial Statements Consolidated Statements of Net Loss - Three Months Ended April 27, 2025 Unaudited consolidated statements of net loss for Q4 FY2025 and Q4 FY2024, detailing sales, costs, and operating results Consolidated Net Loss - Three Months | Metric (Thousands) | April 27, 2025 | April 28, 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Net sales | $48,773 | $49,528 | (1.5)% | | Cost of sales | $(41,120) | $(44,327) | (7.2)% | | Gross profit | $7,653 | $5,201 | 47.1% | | Selling, general and administrative expenses | $(8,470) | $(9,245) | (8.4)% | | Restructuring expense | $(1,422) | $(204) | N.M. | | Loss from operations | $(2,239) | $(4,248) | (47.3)% | | Net loss | $(2,073) | $(4,865) | (57.4)% | | Net loss per share - diluted | $(0.17) | $(0.39) | (56.4)% | Consolidated Statements of Net Loss - Twelve Months Ended April 27, 2025 Unaudited consolidated statements of net loss for full fiscal years 2025 and 2024, detailing full-year performance metrics Consolidated Net Loss - Twelve Months | Metric (Thousands) | April 27, 2025 | April 28, 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Net sales | $213,237 | $225,333 | (5.4)% | | Cost of sales | $(188,170) | $(197,394) | (4.7)% | | Gross profit | $25,067 | $27,939 | (10.3)% | | Selling, general and administrative expenses | $(35,705) | $(38,611) | (7.5)% | | Restructuring expense | $(7,739) | $(636) | N.M. | | Loss from operations | $(18,377) | $(11,308) | 62.5% | | Net loss | $(19,103) | $(13,819) | 38.2% | | Net loss per share - diluted | $(1.53) | $(1.11) | 37.8% | Consolidated Balance Sheets Unaudited condensed consolidated balance sheets as of April 27, 2025, and April 28, 2024, detailing assets, liabilities, and equity Consolidated Balance Sheet Summary | Metric (Thousands) | April 27, 2025 | April 28, 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Cash and cash equivalents | $5,629 | $10,012 | (43.8)% | | Total current assets | $83,534 | $80,881 | 3.3% | | Property, plant & equipment, net | $24,836 | $33,182 | (25.2)% | | Total assets | $123,370 | $132,054 | (6.6)% | | Total current liabilities | $46,964 | $38,107 | 23.2% | | Total liabilities | $65,730 | $55,925 | 17.5% | | Shareholders' equity | $57,640 | $76,129 | (24.3)% | Summary of Cash and Debt Summary of the company's cash and debt position as of April 27, 2025, and April 28, 2024, highlighting net debt Cash and Debt Position | Metric (Thousands) | April 27, 2025 | April 28, 2024 | | :-------------------------------- | :------------- | :------------- | | Cash and cash equivalents | $5,629 | $10,012 | | Lines of credit - current | $8,114 | $0 | | Lines of credit - long-term | $4,600 | $0 | | Net (debt) cash position | $(7,085) | $10,012 | Consolidated Statements of Cash Flows Unaudited consolidated statements of cash flows for FY2025 and FY2024, detailing operating, investing, and financing activities Consolidated Cash Flows | Metric (Thousands) | April 27, 2025 | April 28, 2024 | | :-------------------------------- | :------------- | :------------- | | Net cash used in operating activities | $(17,650) | $(8,224) | | Net cash provided by (used in) investing activities | $598 | $(2,431) | | Net cash provided by (used in) financing activities | $12,673 | $(126) | | Decrease in cash and cash equivalents | $(4,383) | $(10,952) | | Cash and cash equivalents at end of year | $5,629 | $10,012 | Reconciliation of Free Cash Flow Reconciliation of free cash flow for the twelve months ended April 27, 2025, and April 28, 2024 Free Cash Flow Reconciliation | Metric (Thousands) | April 27, 2025 | April 28, 2024 | | :-------------------------------- | :------------- | :------------- | | Net cash used in operating activities | $(17,650) | $(8,224) | | Capital expenditures | $(2,947) | $(3,711) | | Proceeds from asset sales | $1,945 | $385 | | Free Cash Flow | $(17,056) | $(10,826) | Statements of Operations by Segment - Three Months Ended April 27, 2025 Unaudited statements of operations by segment for Q4 FY2025 and Q4 FY2024, detailing sales, gross profit, and operating results Segment Operations - Three Months | Metric (Thousands) | Mattress Fabrics (Q4 FY25) | Upholstery Fabrics (Q4 FY25) | Total (Q4 FY25) | Mattress Fabrics (Q4 FY24) | Upholstery Fabrics (Q4 FY24) | Total (Q4 FY24) | | :-------------------------------- | :------------------------- | :-------------------------- | :-------------- | :------------------------- | :-------------------------- | :-------------- | | Net Sales | $27,114 | $21,659 | $48,773 | $25,750 | $23,778 | $49,528 | | Gross Profit | $3,075 | $4,691 | $7,653 | $292 | $4,909 | $5,201 | | (Loss) Income from Operations | $(217) | $1,053 | $(2,239) | $(2,929) | $975 | $(4,248) | Statements of Operations by Segment - Twelve Months Ended April 27, 2025 Unaudited statements of operations by segment for full fiscal years 2025 and 2024, showing full-year segment performance Segment Operations - Twelve Months | Metric (Thousands) | Mattress Fabrics (FY25) | Upholstery Fabrics (FY25) | Total (FY25) | Mattress Fabrics (FY24) | Upholstery Fabrics (FY24) | Total (FY24) | | :-------------------------------- | :------------------------ | :------------------------ | :------------- | :------------------------ | :------------------------ | :------------- | | Net Sales | $113,906 | $99,331 | $213,237 | $116,370 | $108,963 | $225,333 | | Gross Profit | $7,936 | $18,752 | $25,067 | $6,289 | $21,690 | $27,939 | | (Loss) Income from Operations | $(5,235) | $4,057 | $(18,377) | $(6,845) | $5,787 | $(11,308) | Reconciliation of Selected Income Statement Information to Adjusted Results - Three Months Reconciliation of selected income statement information to adjusted results for Q4 FY2025 and Q4 FY2024, showing non-GAAP operating performance Adjusted Income Statement - Three Months | Metric (Thousands) | As Reported (Q4 FY25) | Adjustments (Q4 FY25) | Adjusted Results (Q4 FY25) | As Reported (Q4 FY24) | Adjustments (Q4 FY24) | Adjusted Results (Q4 FY24) | | :-------------------------------- | :-------------------- | :-------------------- | :------------------------- | :-------------------- | :-------------------- | :------------------------- | | Net sales | $48,773 | — | $48,773 | $49,528 | — | $49,528 | | Cost of sales | $(41,120) | $113 | $(41,007) | $(44,327) | — | $(44,327) | | Gross profit | $7,653 | $113 | $7,766 | $5,201 | — | $5,201 | | Restructuring expense | $(1,422) | $1,422 | — | $(204) | $204 | — | | Loss from operations | $(2,239) | $1,535 | $(704) | $(4,248) | $204 | $(4,044) | - Q4 FY2025 adjustments include $113,000 for inventory disposal losses in cost of sales and $1.422 million for restructuring expense[53][54] Reconciliation of Selected Income Statement Information to Adjusted Results - Twelve Months Reconciliation of selected income statement information to adjusted results for FY2025 and FY2024, providing a non-GAAP view of full-year performance Adjusted Income Statement - Twelve Months | Metric (Thousands) | As Reported (FY25) | Adjustments (FY25) | Adjusted Results (FY25) | As Reported (FY24) | Adjustments (FY24) | Adjusted Results (FY24) | | :-------------------------------- | :----------------- | :----------------- | :---------------------- | :----------------- | :----------------- | :---------------------- | | Net sales | $213,237 | — | $213,237 | $225,333 | — | $225,333 | | Cost of sales | $(188,170) | $1,621 | $(186,549) | $(197,394) | $40 | $(197,354) | | Gross profit | $25,067 | $1,621 | $26,688 | $27,939 | $40 | $27,979 | | Restructuring expense | $(7,739) | $7,739 | — | $(636) | $636 | — | | Loss from operations | $(18,377) | $9,360 | $(9,017) | $(11,308) | $676 | $(10,632) | - FY2025 adjustments include $1.6 million for inventory disposal/valuation losses in cost of sales and $7.739 million for restructuring expense[59][60] Summary of Restructuring Expense - Three Months Summary of restructuring expenses for Q4 FY2025 and Q4 FY2024, broken down by segment and type of expense Restructuring Expense - Three Months | Description (Thousands) | Upholstery Fabrics (Q4 FY25) | Mattress Fabrics (Q4 FY25) | Unallocated Corporate (Q4 FY25) | Total (Q4 FY25) | | :-------------------------------- | :--------------------------- | :--------------------------- | :------------------------------ | :-------------- | | Employee termination benefits | $112 | $12 | — | $124 | | Impairment charge related to intangible asset | — | — | $540 | $540 | | Facility consolidation and relocation expenses | — | $322 | — | $322 | | Cost incurred to ready a closed facility for sale | — | $360 | — | $360 | | Total restructuring expense | $136 | $746 | $540 | $1,422 | - Q4 FY2025 restructuring expenses primarily related to the closure of the Quebec, Canada mattress fabrics facility, initial costs for consolidating upholstery fabrics distribution, and other strategic plan expenses[65] - Q4 FY2024 restructuring expense of $204,000 was for employee termination benefits from rationalizing Shanghai upholstery fabrics finishing[66] Summary of Restructuring Expense - Twelve Months Summary of restructuring expenses for FY2025 and FY2024, providing a detailed breakdown by segment and expense type Restructuring Expense - Twelve Months | Description (Thousands) | Upholstery Fabrics (FY25) | Mattress Fabrics (FY25) | Unallocated Corporate (FY25) | Total (FY25) | | :-------------------------------- | :------------------------ | :----------------------- | :--------------------------- | :------------- | | Employee termination benefits | $214 | $1,338 | — | $1,552 | | Impairment charge related to intangible asset | — | — | $540 | $540 | | Accelerated depreciation | — | $1,339 | — | $1,339 | | Lease termination costs | — | $849 | — | $849 | | Facility consolidation and relocation expenses | $53 | $2,384 | — | $2,437 | | Total restructuring expense | $305 | $6,894 | $540 | $7,739 | - FY2025 restructuring expenses primarily associated with consolidating North American mattress fabrics operations, Haiti sewn mattress cover facilities, and upholstery fabrics distribution[69] - FY2024 restructuring expense of $636,000 included impairment charges for equipment and employee termination benefits related to Haiti and Shanghai operations[70] Consolidated Statements of Adjusted EBITDA Unaudited consolidated statements of Adjusted EBITDA for trailing twelve months and quarterly breakdowns, reconciling net loss to Adjusted EBITDA Consolidated Adjusted EBITDA | Metric (Thousands) | Q4 FY25 | Trailing 12 Months FY25 | Q4 FY24 | Trailing 12 Months FY24 | | :-------------------------------- | :------ | :-------------------- | :------ | :-------------------- | | Net loss | $(2,073) | $(19,103) | $(4,865) | $(13,819) | | Income tax expense (benefit) | $(243) | $392 | $805 | $3,049 | | Depreciation expense | $1,152 | $5,440 | $1,623 | $6,521 | | Restructuring expense | $1,422 | $7,739 | $204 | $636 | | Restructuring related charge | $113 | $1,621 | — | $40 | | Amortization expense | $104 | $405 | $99 | $390 | | Stock based compensation | $128 | $650 | $168 | $915 | | Adjusted EBITDA | $559 | $(3,540) | $(2,218) | $(3,431) | - Adjusted EBITDA for Q4 FY2025 turned positive at $559 thousand, a significant improvement from $(2,218) thousand in Q4 FY2024[72] - Trailing 12-month Adjusted EBITDA for FY2025 was $(3,540) thousand, compared to $(3,431) thousand for FY2024[72] Return on Capital Employed by Segment - Twelve Months Ended April 27, 2025 Return on Capital Employed (ROCE) by segment for FY2025, including average capital employed calculation for each segment and consolidated Return on Capital Employed by Segment - FY2025 | Segment | Adjusted Operating (Loss) Income (FY25, Thousands) | Average Capital Employed (FY25, Thousands) | Return on Avg. Capital Employed (FY25) | | :-------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------------------- | | Mattress Fabrics | $(5,235) | $55,170 | (9.5)% | | Upholstery Fabrics | $4,057 | $10,027 | 40.5% | | Unallocated Corporate | $(7,839) | $4,427 | N.M. | | Consolidated | $(9,017) | $69,624 | (13.0)% | - Upholstery Fabrics segment shows a strong positive ROCE of 40.5%, while Mattress Fabrics and Consolidated remain negative[75] - Average capital employed is calculated using five quarterly periods and excludes certain non-operating assets/liabilities[78][79] Return on Capital Employed by Segment - Twelve Months Ended April 28, 2024 Return on Capital Employed (ROCE) by segment for FY2024, including the calculation of average capital employed Return on Capital Employed by Segment - FY2024 | Segment | Adjusted Operating (Loss) Income (FY24, Thousands) | Average Capital Employed (FY24, Thousands) | Return on Avg. Capital Employed (FY24) | | :-------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------------------- | | Mattress Fabrics | $(6,845) | $63,189 | (10.8)% | | Upholstery Fabrics | $5,787 | $9,263 | 62.5% | | Unallocated Corporate | $(9,574) | $3,784 | N.M. | | Consolidated | $(10,632) | $76,235 | (13.9)% | - Upholstery Fabrics segment had a higher ROCE of 62.5% in FY2024 compared to 40.5% in FY2025, indicating a decline in profitability relative to capital employed[75][81] - Consolidated ROCE improved slightly from (13.9)% in FY2024 to (13.0)% in FY2025[75][81]