Culp, Inc.

Good day, ladies and gentlemen, and welcome to the Culp's third quarter 2021 earnings conference call. Today's call is being recorded, and at this time, for opening remarks and introductions, I would like to turn the call over to Ms. Drew Anderson. Please go ahead.

Thank you. Good morning, and welcome to the Culp conference call to review the company's results for the third quarter of fiscal 2021. As we start, let me state that this morning's call will contain forward-looking statements about the business, financial condition, and prospects of the company. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results, or otherwise are not statements of historical fact. The actual performance of the company could differ materially from that indicated by the forward-looking statements because of various risks and uncertainties. These risks and uncertainties are described in our regular SEC filings, including the company's most recent filings on Form 10-K and Form 10-Q. You are cautioned not to place undue reliance on forward-looking statements made today, and each such statement speaks only as of today. We undertake no obligation to update or to revise forward-looking statements. In addition, during this call, the company will be discussing non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the most directly comparable GAAP financial measurements is included in either the tables to the press release included as an exhibit to the company's 8K filed yesterday and posted on the company's website at colp.com or in the slide presentation with supporting summary financial information that is also available on the company's website as part of the webcast of today's call. I will now turn the call over to Ev Culp, President and Chief Executive Officer. Please go ahead, sir.

Thank you, and good morning. Thank you very much for joining us today. I would like to welcome you to the Culp quarterly conference call with analysts and investors. With me on the call today are Tim Bolling, our Chief Financial Officer, and Boyd Sumley, our President of Appalachian Fabrics. I will begin the call with some opening comments. And Ken will then review the financial results for the quarter. I will then update you on the strategic actions in each of our operating segments. And after that, Ken will review our fourth quarter fiscal 2021 business outlook. And of course, we'll then be happy to take your questions. Okay, so we are energized by our financial performance for the third quarter of fiscal 2021. These results reflect strong growth in sales and operating performance compared to the prior year period as well as exceptional execution of our product-driven strategy in the continued resilience of our robust global platform. These results would not have been possible without the hard work and perseverance of our dedicated team of associates around the world. Their determination and diligence, including strict adherence to safety protocols to help minimize the spread of COVID-19, have enabled us to continue operating our business with minimal disruption while also meeting the rapidly changing needs of our customers. We are tremendously grateful for their tireless efforts and unwavering commitment to operational excellence during this unprecedented time. We are encouraged by the performance of both our mattress fabrics and upholstery fabric segments during the quarter. Our growth in both segments was driven by a combination of strong demand for our products and the benefits of market share gains from product innovation. As consumers have remained focused on the home environment, our diversified manufacturing and sourcing capabilities, along with our stable supply chain, have allowed us to effectively service the increased demand from both new and existing customers. Our design and innovation emphasis, along with our strengthening virtual and digital marketing services, are helping us gain greater market share in both businesses. As we are winning additional placement to brick and mortar retail, and in online e-commerce channels. In addition to our positive momentum in sales and operating performance, our cash flows and balance sheet also remain strong, and we ended the quarter with $51.8 million in total cash and investments with no outstanding debt. While we are pleased with this cash position going into the fourth quarter of fiscal 2021, it is important to note that our cash will be affected by our strategic investments in working capital and planned capital expenditures which will be more robust during the fourth quarter. In addition, our fourth quarter expenditures will include the recent acquisition of the remaining 50% ownership interest in our Haiti cut and sew operation. These strategic investments are important for us to bolster our supply chains and our efficiencies in preparation for what we expect will be a strong fiscal 2022. We are also pleased to announce our Board of Directors has reinstated our share repurchase program. which was previously suspended in April 2020 due to pandemic-related uncertainty. While our primary focus with our capital allocation strategy remains investment for organic growth and, of course, maintaining our regular quarterly dividend, we do believe it is important to have the ability to acquire shares at opportunistic price points. Looking ahead, we are very optimistic regarding the ongoing strength of industry demand trends and we believe our business will continue with solid performance during the fourth quarter of fiscal 2021 and extending into fiscal 2022. We are also pleased with the recent fourth quarter acquisition of the remaining 50 percent ownership interest in our Hayden's Firm mattress cover platform, which has proven to be an ideal near-shore location for this growing business. The benefit of this strategic investment comes from enhancing the capacity of this operation which has always been set up as a pure manufacturing center that supports our domestic sales growth and promotes our fabric to sewn cover model. We have a preferred supply chain for our mattress covers, utilizing cold fabrics in an onshore, nearshore, and offshore strategy. When evaluating expectations for the fourth quarter, it is critical to understand that the full impact of this year's shutdowns for the Chinese New Year holiday affects us entirely in the fourth quarter, as compared to other years when the timing of the holiday is split between Q3 and Q4. Sequentially, as compared to our third quarter performance, this is significant pressure for upholstery fabrics, as we effectively lose three to four weeks of production and sales. We do expect further near-term pressures relating to foreign currency fluctuations in China, as well as continued constraints in our customer supply chain for foam and other non-fabric components, which could delay their scheduled delivery of our fabric orders. We are learning of more potential farm shortages for our customers in both furniture and mattresses, and we understand this could temporarily mute some of our anticipated revenue growth in Q4. Also, while raw material and commodity costs have remained relatively stable for the first nine months of fiscal year, We do expect some increase in these costs as well as increased freight costs to affect our businesses in the near term. Notably, we are announcing price increases in both divisions during the fourth quarter to help mitigate the ongoing pressures just mentioned. Nevertheless, we are confident in our ability to withstand these headwinds, and we believe we will deliver solid results in the fourth quarter in preparation for a strong fiscal 2022 year. We are especially excited by our mattress fabric segment, which is expected to continue its strong rebound in Q4. We are well-precision for growth and look forward to opportunities ahead for both our business segments, with continuing opportunities to capture market share. I'll now turn the call over to Ken, who will review the financial results for the quarter.