Culp, Inc.

Welcome to the Culp, Inc. Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. 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 fourth quarter and fiscal 2022 year. 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 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 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 Yves 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 quarterly conference call with analysts and investors. And with me on the call today are Ken Bolling, our chief financial officer, and Boyd Chumley, our president of our upholstery fabrics business. I will begin the call with some opening comments, and Ken will then review the financial results for the quarter and the full year. I will then briefly update you on the strategic actions specific to each of our operating segments. And after that, Ken will review our first quarter fiscal 2023 business outlook, and we will then be pleased to take any questions. As previously announced, our results for the fourth quarter were significantly challenged by the unexpected shutdown of our China facilities due to COVID-related restrictions affecting both of our businesses, and by further weakening in domestic mattress industry sales. However, our operating loss for the quarter was somewhat better than expected, as our mattress fabric segment experienced slightly higher sales than previously anticipated during the last two weeks of the quarter. We were also able to return a small number of employees to our Culp China locations at the end of April and facilitate product shipments in a limited capacity. Importantly, we have maintained our strong customer relationship despite this disruption, as we have balanced and diversified supply chains in both businesses. Much effort has gone into our delivery platforms, and we fully understand the importance of customer service in our competitive industry. We also entered the quarter with a higher cash position than expected, with $14.6 million in cash and investments and no outstanding borrowings. In addition, we are pleased to announce the closing of our new secured credit facility, which enhances the company's financial flexibility and is expected to provide us with sufficient liquidity to navigate the ongoing headwind. Our fiscal year last year started off strong for both of our businesses with moderate pressure on profitability and supply chain disruption. However, as the year progressed, the rapid rise in inflation, change in consumer spending patterns, COVID-related disruption, and other geopolitical events materially affected the performance of our businesses. We took several pricing and cost reduction actions throughout the year to help mitigate these pressures, but with the ongoing volatility, We are now taking additional measures to align our business to meet current demand trends and diligently manage our liquidity. These measures include reducing inventory, limiting capital expenditures and other discretionary spending, eliminating underutilized equipment, reducing production schedules, and making other workforce adjustments as needed to match demand. We are also planning to announce additional pricing action during the first quarter. We are strategically taking these steps to adapt to the near-term challenges while ensuring that we remain well-positioned to continue to meet the needs of our customers both now and when conditions normalize. In addition to these actions and considering the current and expected business environment, our board of directors has made the difficult decision to suspend the company's quarterly cash dividend. Although we are confident in our business strategy, the duration of the current challenges is unknown. and we believe that preserving capital is in the best interest of the company to support future growth opportunities and the long-term interest of our shareholders. We understand the importance of this decision for our shareholders, and we will continue to reassess our dividend policy each quarter. A key objective and a top priority is our emphasis on managing and stabilizing our solid cash position, and we will continue our emphasis on reducing inventories, limiting capital expenditures, and controlling overhead costs. Our intent is to always maintain our strong balance sheet. Our associates around the world continue to persevere, delivering innovative products, creative designs, and exceptional service for our customers. We are especially proud of the tremendous resilience of our China associates, who have energetically returned to work following eight weeks of shutdowns and are diligently working to ship product and resume operations at normalized capacity. Although these shutdowns dramatically affected sales for our residential upholstery fabrics business and our mattress cover business during the fourth quarter of fiscal 2022, and to a lesser extent, the first month of fiscal 2023, this has notably been the first instance of any material COVID-related disruption for our account operations since the pandemic began. Throughout the past few years, our Asia platform has been a reliable strength for our business, with our dedicated associates and stable supply chain partners demonstrating their capacity to meet demand. While we value the benefit provided through our Asia platform, we are focused on continuing to diversify our supply chain, and we are especially pleased with developments in Haiti. This near-shore operation gives us excellent potential to improve our reactivity to demand shifts and to service our customers better. Our Haiti platform is an excellent complement to our North American and our Asian platforms, as we believe an onshore, nearshore, and offshore balance in production will serve us well in the future. Looking ahead, we expect the prevailing macroeconomic pressures and retail softness will continue to affect our business through at least the first half of fiscal 2023. We believe our market position remains solid with new plan placements and product development opportunities that we expect to materialize as market conditions improve. As previously mentioned in our third quarter investor call, I touched on many points that we expect to be accretive to our revenue, specifically in mattress fabrics. We continue to see opportunity being generated from our innovation, design expertise, reorganized sales focus, brand management experiences, digital presentation tools, and our new innovation campus. In upholstery fabrics, we remain pleased with the growth of our LiveSmart portfolio of brands, as well as the steady return of fabric sales in our hospitality segment. Growth from these projected improvements is being stunted by weaker business conditions and delayed retail product rollouts. But we believe a core focus on product innovation will eventually be rewarded. We remain focused on generating cash, keeping our expenses in line with demand trends, and ensuring that we have adequate liquidity. Importantly, we remain optimistic about Culp's future. With all that, let me turn the call over to Ken, who will review the financial results for the quarter and the full year.