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New words:
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Financial report summary
?Risks
- In addition to the other information provided in this Report, the following risk factors should be considered when evaluating the results of our operations, future prospects and an investment in shares of our Common Stock. Any of these factors could cause our actual financial results to differ materially from our historical results, and could give rise to events that might have a material adverse effect on our business, financial condition and results of operations.
- Our financial condition and results of operations have been and could likely be adversely impacted in the future by COVID-19 or other pandemics and the related negative impact on economic conditions.
- The floorcovering industry is sensitive to changes in general economic conditions and a decline in residential activity or home remodeling and refurbishment could have a material adverse effect on our business.
- We have significant levels of indebtedness that could result in negative consequences to us.
- Uncertainty in the credit market or downturns in the economy and our business could affect our overall availability and cost of credit.
- If we are not able to maintain a minimum bid price of $1 per share for our common stock, we may be subject to delisting from The NASDAQ Stock Market.
- Our stock price has been and could remain volatile, which could further adversely affect the market price of our stock, our ability to raise additional capital.
- We face intense competition in our industry, which could decrease demand for our products and could have a material adverse effect on our profitability.
- Raw material prices will vary and the inability to either offset or pass on such cost increases or avoid passing on decreases larger than the cost decrease to our customers could have a material adverse effect on our business, results of operations and financial condition.
- Disruption to suppliers of raw materials could have a material adverse effect on us.
- The long-term performance of our business relies on our ability to attract, develop and retain qualified personnel.
- We are subject to various governmental actions that may interrupt our supply of materials.
- We may experience certain risks associated with internal expansion, acquisitions, joint ventures and strategic investments.
- We are subject to various environmental, safety and health regulations that may subject us to costs, liabilities and other obligations, which could have a material adverse effect on our business, results of operations and financial condition.
- We may be exposed to litigation, claims and other legal proceedings in the ordinary course of business relating to our products or business, which could have a material adverse effect on our business, results of operations and financial condition.
- Our business operations could suffer significant losses from natural disasters, catastrophes, fire or other unexpected events.
Management Discussion
- Net Sales. Net sales for the year ended December 30, 2023 were $276.3 million compared with $303.6 in the prior period, a decrease of 9.0% for the year-over-year comparison. Fiscal year 2022 consisted of 53 weeks as compared to fiscal year 2023 at 52 weeks. On an average weekly basis, sales in fiscal year 2023 amounted to $5.3 million per week compared to $5.7 million per week in 2022, or a 7.2% decrease. The decrease in net sales in 2023 was primarily the result of lower demand within the floorcovering industry and related markets.
- Gross Profit. Gross profit, as a percentage of net sales, increased 9.0 percentage points in 2023 compared with 2022. In the fourth quarter of 2021, our primary supplier of raw materials for our nylon broadloom products announced an abrupt exit from the business and imposed exorbitantly high price increases on us at levels that we were unable to pass on to our customers. We completed the conversion of our new lower cost raw materials from multiple suppliers in the third quarter of 2022, but gross profit margins were negatively impacted throughout 2022.
- In addition, our gross profit margins in 2022 were negatively impacted by extreme increases in the cost of ocean freight for our imported inventory. The rapid pace and high level of the increases prevented us from being able to pass along all of the costs through our pricing to customers. These rates had returned to lower, more expected levels by the end of 2022. In addition, inflationary pressure also negatively impacted our gross profit margins in 2022.