Culp, Inc.

Good day and welcome to the CULP Incorporated Second Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Drew Anderson. Please go ahead.

Thank you. Good morning and welcome to the CULP conference call to review the company's results for the second quarter of fiscal 2022. 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 a 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 the non-GAAP financial measurements to the most directly comparable GAAP financial measurements, are included in the table to the press release included as an exhibit to the company's 8K filed yesterday and posted on the company's website at culp.com. A slide presentation with supporting summary financial information 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 Ives Culp, President and Chief Executive Officer of Culp. Please go ahead, sir.

Good morning, and thank you 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 Ken Bolling, our chief financial officer, and Boyd Chumley, the president of our upholstery fabrics business. For today, 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 business outlook for the third and fourth quarters of fiscal 2022. We will then be happy to take some questions. As previously announced, our results for the second quarter reflected lower than expected sales, primarily for our upholstery fabric segment. Several external factors affected our sales results for the quarter, particularly COVID-19-related shutdowns in Vietnam and customer supply chain constraints for non-fabric components. Profitability also remained pressured in both of our businesses by the continued rapid rise in freight, raw material, and labor costs. Despite these challenging macroeconomic environment situations, I'm extremely proud of how our global platform and our associates have responded over the last 18 months to build a more robust supply chain that has kept pace with demand and met the delivery needs of our valued customers. Looking ahead, we are pleased that the shutdowns in Vietnam have been lifted, but the rapidly rising costs and the disruption throughout the industry supply chains do continue, and many of our customers have delayed their previously planned rollouts and their new product launches. We also believe that many customers have excess inventory for fabric and cover products that were purchased to support their expanding backlogs as they wait for their supply chain issues to subside. As a result, we expect it could take some time for customers to work through their existing fabric and cover inventory levels. We also have some concern that inflationary pressures are causing some slowing in new business from the peak levels of last year, leading to some lower demand once customers fulfill their existing backlogs, although the demand appears to remain high when comparing to pre-COVID levels. Based on these factors, we expect that current headwinds will continue to pressure results during the second half of this fiscal year, especially during the third quarter, but we expect to see a meaningful rebound in our business beginning in the fourth quarter and continuing into next fiscal year. We are positioned very well with stronger supply chains, strategic inventory reserves, and growing opportunities as a result of our innovation and strong delivery performance. We also expect some improvement in customer supply chain disruption by the fourth quarter of this fiscal year, which is traditionally a strong seasonal period. Notably, if we meet our expectations for the third and fourth quarters, then for the full fiscal 2022 year, we will sustain significant sales gains as compared to pre-COVID levels of fiscal 2020. We are also implementing further pricing actions during the third quarter to help offset current inflationary pressures, and we do expect to open our new Haiti facility during this third quarter, which will increase our capacity for cut and sewn upholstery kits. Our strong global platform, together with our long-term supplier relationships, does continue to provide a distinct competitive advantage, allowing us to quickly respond to the evolving needs of our customers. We frequently hear positive feedback from our customers regarding the value of our supply chain and delivery record, supporting our belief that we are continuing to outperform our competitors, which will support our future growth. We also remain focused on innovation and creative designs in both of our businesses, and we are confident in our product-driven strategy. The recent opening of our new innovation campus in downtown High Point, North Carolina has been extremely well received by our customers, providing them with a hands-on, first-class experience for viewing the scope of our products from fabric to sewn cover. Our balance sheet remains solid, and I'm extremely pleased that we have once again increased our annual dividend, making this the ninth consecutive year of dividend increases. Importantly, we have the financial strength to support our business in the current environment, and we look forward to the opportunities to deliver value for our customers, employees, and shareholders in fiscal 2022 and beyond. So with that, I'll now turn the call over to Kim, who will review the financial results for the quarter.