Financial Performance Overview

The company reported strong financial results for the quarter and six-month period ended December 31, 2024. Key highlights include:

• Net income for the quarter was $9.1 million, or $1.62 per diluted share, compared to $3.1 million, or $0.57 per diluted share, in the prior year quarter.
• Net income for the six-month period was $13.2 million, or $2.38 per diluted share, compared to $3.8 million, or $0.71 per diluted share, in the prior year period.
• Net sales for the six-month period increased 9.1% to $212.5 million, driven by a $20.2 million increase in home furnishing products sold through retailers, partially offset by a $2.4 million decrease in e-commerce sales.
• Gross margin as a percentage of net sales increased 60 basis points to 21.3%, primarily due to sales volume leverage and structural cost reduction savings.
• Selling, general and administrative (SG&A) expenses decreased $1.4 million, and as a percentage of sales improved 210 basis points to 15.3%, due to sales volume leverage and investments in growth initiatives.
• The company completed the sale of its Dublin, Georgia facility, recording a pre-tax gain of $5.0 million.
• The effective tax rate for the six-month period was 25.3%, compared to 30.1% in the prior year period, primarily due to the impact of state taxes and foreign operations.

Liquidity and Capital Resources

• Working capital increased $3.2 million to $98.2 million as of December 31, 2024, primarily due to changes in current assets and liabilities.
• Net cash provided by operating activities was $9.1 million for the six-month period, compared to $17.2 million in the prior year period.
• Net cash provided by investing activities was $6.5 million, primarily from the sale of the Dublin facility and corporate-owned life insurance proceeds, offset by capital expenditures.
• Net cash used in financing activities was $8.6 million, primarily for payments on the company’s line of credit, dividends paid, and shares withheld for tax payments.
• As of December 31, 2024, the company had no outstanding borrowings on its $85 million revolving line of credit, exclusive of fees and letters of credit.

Strengths and Weaknesses

Strengths:

• Improved profitability and margins through sales volume leverage and cost savings
• Successful sale of underutilized facility, generating a significant gain
• Strong liquidity position with no outstanding debt

Weaknesses:

• Potential impact of proposed tariffs on Mexican imports, which could significantly affect the company’s cost of goods sold and profitability
• Reliance on foreign manufacturing operations and exposure to foreign currency fluctuations

Outlook

The company’s future performance will depend largely on its ability to navigate the potential impact of the proposed tariffs on Mexican imports. While the company is assessing options to mitigate the impact, the ultimate effect on its cost structure and profitability remains uncertain. Additionally, the company’s continued focus on driving sales growth, improving operational efficiency, and managing its liquidity and capital resources will be critical to its long-term success.