
Culp Inc., based in High Point, N.C., and its consolidated subsidiaries reported financial and operating results for the second quarter of fiscal year (FY) 2025.
FY25 second quarter financial highlights
- Consolidated net sales of $55.7 million
- Mattress fabrics segment sales up 7.1% sequentially
- 70.7% sequential reduction in mattress fabrics operating loss as reconstruction progresses; the upholstery fabrics segment continues to be profitable
- GAAP consolidated loss from operations of $5.4 million, including $2.8 million in restructuring expenses and related charges
- Non-GAAP loss from operations of $2.6 million
- Although sequentially improved, operating performance for the quarter was affected by lower sales and manufacturing inefficiencies related to the significant restructuring activity in the mattress fabrics segment
- $10.5 million in cash, $4.1 million in outstanding borrowings used to fund worldwide working capital and restructuring initiatives
- Net cash position of $6.5 million
“For the second quarter [of FY25], we continued to experience weakened industry demand conditions, with accelerated softness in our residential upholstery fabrics business that resulted in lower-than-expected sales. However, we remain encouraged by our strategic approach, our comprehensive restructuring process, and the growth we expect from market share penetration, along with an eventual normalized environment. In spite of the 5% decline in consolidated, year-over-year revenue for the second quarter [of FY25], we believe we are outperforming the industry average.
“In our upholstery fabrics segment, sales for our residential fabrics business were affected by further weakness in residential home furnishing sales. While we expected some pressure during the period, we experienced larger impacts from customers adjusting their inventory levels to align with demand after a more robust ordering period during the first quarter. This included a significant temporary reduction in orders from a large customer during the second quarter, which is also expected to affect sales during the third quarter. Conversely, revenue for our hospitality/contract fabric business remained solid during the second quarter, and overall, we remain pleased with the upholstery fabrics segment’s continuing profitability, supported by our asset-light platform,” says Culp.
Restructuring update
The restructuring plan announced on May 1, 2024, primarily focused on the company’s mattress fabrics segment, continues to progress as planned. The consolidation of the company’s sewn mattress cover operation in Haiti was completed during the first quarter, and the consolidation of the company’s North American mattress fabrics operation is nearing completion, including the phased wind-down and closure of its manufacturing facility in Canada. The company discontinued knitting production at this facility during the second quarter (end of September), and completed damask weaving production in November. The optimization and relocation of certain knitting and finishing equipment from the Canadian facility to the mattress fabrics manufacturing facility in Stokesdale, N.C., is also underway, with completion planned in the third quarter of FY25.
The company still expects to generate $10–11 million in annualized savings and operating improvements after the restructuring initiatives are fully implemented by the end of the third quarter, with most of the restructuring benefit realized during the fourth quarter of FY2025.
In addition, based on restructuring activities that have been completed along with updated estimates on those that remain in process, the company now expects to incur total restructuring and restructuring-related costs and charges of $7.3 million in FY2025, of which $4.4 million is now expected to be cash expenditures. The company expects to fund close to $2 million of the cash costs with proceeds from the sale of excess manufacturing equipment and proceeds from a building lease termination in Haiti.
Second Quarter Fiscal 2025 Results versus Second Quarter Fiscal 2024 Results
- Net sales were $55.7 million, down 5.2% compared with the prior-year period, with mattress fabrics sales down 4.2% and upholstery fabrics sales down 6.4%.
- Loss from operations was $5.4 million, which included $2.8 million in restructuring expenses and related charges during the period, compared with a loss from operations of $2.2 million in the period prior, which included $66,000 in restructuring and related charges.
- The adjusted loss from operations was $2.6 million, compared with an adjusted loss from operations of $2.2 million for the the prior year. Operating performance compared to the second quarter of fiscal 2024 was negatively affected by lower sales in both segments and by manufacturing inefficiencies primarily related to the significant restructuring activity underway in the mattress fabrics segment.
- Net loss was $5.6 million, compared with a net loss of $2.4 million for the prior-year period. The effective tax rate for the second quarter was 0.9%, reflecting the company’s mix of taxable income between its U.S. and foreign jurisdictions during the period.