Culp, Inc.

Good day and welcome to the Culp, Inc. First Quarter Fiscal 2023 Earnings Conference Call. All participants will be in 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 like now to turn the conference over to Drew Anderson. Please go ahead.

Good morning and welcome to the CULP conference call to review the company's results for the first quarter of fiscal 2023. 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 colp.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. With that, 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 Culp quarterly conference call with analysts and investors. With me on the call today are Ken Bolling, Chief Financial Officer, and Boyd Chumley, President of our Upholstery Fabrics business. I will begin the call with some operating opening comments, and Ken will then review the financial results for the quarter. Following that, I will briefly update you on the strategic action specific to each of our operating segments, and Ken will review our second quarter fiscal 2023 business outlook. We will then be pleased to take your questions. Our results for the first quarter reflected some sequential improvement as compared to the fourth quarter of fiscal 2022. However, as expected, Sales and operating performance remain significantly pressured by slowing consumer demand in both the domestic mattress industry and the residential home pharmacies industry. The impact of this industry's softness on demand for our products has been exacerbated by an excess of retail and manufacturer inventory that continues to delay the timing of shipments and new product rollouts. Operating performance for the quarter was also affected by continued inflationary pressures, as well as reoccurring labor challenges within our mattress fabrics business and our reed window products business that resulted in increased employee training costs and operating inefficiencies during the quarter. We also had expected ramp-up costs associated with the increasing capacity at our new upholstery fabrics cut and sew facility in Haiti. Despite these ongoing headwinds, I am pleased with our unrelenting focus on working capital management, including inventory reduction, throughout the quarter. We ended Q1 with a higher cash position than expected, with $18.9 million in cash and zero outstanding borrowings. We generated cash flow from operations of $5.3 million and free cash flow of $4.5 million during the quarter. In a current period where we recognize there is macro industry sales softness, we fully understand the importance of managing our inventory and overall working capital to protect our balance sheet and prepare us for the future. Throughout the quarter, we continued to execute our product-driven strategy in each of our businesses, with an emphasis on design creativity and innovation. Following the lifting of COVID-related restrictions in China, our facilities resumed operations at normalized capacity in June, and we utilized our global manufacturing and sourcing platform throughout the quarter to meet the evolving needs of our customers. We also continue to increase our capacity at our new upholstery fabrics cut and sew facility in Haiti during the quarter. This facility is now fully staffed with its weekly production output expanding as our associates gain more training and experience. As a company overall, we are enthusiastic about growing our nearshore capacity in Haiti with two facilities for cut and sewn mattress covers and one facility for cut and sewn upholstery kits. We believe this platform provides our customers with the agility and value they need for their business. Haiti is an important location for Culp's future, and we believe we have an excellent platform for cut and sewn products across both businesses. We are also pleased to announce that Tommy Bruno will join the Mattress Fabrics leadership team as Executive Vice President next week on September 6th, and he is expected to assume the role of Division President at Sandy Brown's retirement at the end of this calendar year. Tommy joins us from Tempur-Sealy International, where he has served as the Vice President of Business Development for Alternative Channels since 2018. Prior to that, Tommy served eight years with Tempur-Sealy as Comfort Revolution's Senior Vice President and Chief Financial Officer. Tommy brings balanced experience across several disciplines, including financial, operations, strategy, and management. and his extensive knowledge of the bedding industry will help us strengthen our business. We believe Tommy is an excellent fit for our Culp culture and also for our associates at Culp Home Fashions, and we believe he will support the execution of our future strategic plans. We are especially pleased that Tommy will have the opportunity to work with Sandy during a transition period and learn from her deep knowledge of Culp Home Fashions. Tommy will continue to benefit from Sandy's experience following the planned transition, and she will continue to support the Mattress Fabrics Division as a strategic advisor. We are extremely grateful for Sandy's 39 years of leadership and dedicated service to Colt. We honor her many contributions, and we are thankful for the ongoing role she will play in our business. Looking ahead, we expect the current economic environment will continue to affect consumer spending trends. resulting in ongoing industry softness that will affect our business through at least the third quarter of fiscal 2023. We are working diligently to generate cash, reduce costs, improve efficiencies, and retain talent in the face of these significant challenges, while also ensuring we can maintain our competitive advantages and meet the needs of our consumers and customers when conditions normalize. Importantly, our market position remains solid, and we will continue to focus on our product creativity and innovation. We are excited about the expected new placements and product development opportunities, and we remain optimistic about Culp's future as the macro environment improves. I'll now turn the call over to Ken, who's going to review the financial results for the quarter.