CULP - Earnings call transcript Q3 2022

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Operator

Good morning and welcome to Culp, Inc.

Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I’d now like to turn the call over to Ms. Dru Anderson. ahead. go Please

Dru Anderson

morning to Good quarter to Culp the fiscal Thank the and company’s call review third results conference XXXX. you. welcome for of the

contain that As and condition the morning’s me start, of about state we call business, let prospects will forward-looking company. financial statements the this

that beliefs differ the performance because are uncertainties. are statements in including statements of by not Form These risks Forward-looking or filings our historical statements materially of filings, or XX-Q. events fact. include and indicated that future are actual the statements could company various results risks from expectations and recent forward-looking of SEC Form most The and described projections, about the XX-K on or uncertainties company’s otherwise regular

not to on undertake You forward-looking and as to made today speaks reliance or such We of today. place update statements revise undue each to forward-looking statement only statements. obligation are no cautioned

that, President presentation Iv ahead, go will the website to available With Executive financial on of now company’s as webcast measurements. discussing X-K over with this during directly call, the addition, press turn Chief call Culp, financial company’s included the financial to financial comparable and part A an In of website in I at information Officer. on will GAAP culp.com. most call. posted sir. to as to measurement exhibit slide the be today’s company’s summary the these release tables supporting yesterday is the measurements is also the non-GAAP and non-GAAP A filed the company of included Please reconciliation the

Iv Culp

are you begin the strategic investors. Bowling, President I like Dru our the will Financial conference with Culp much, and to Ken I on and today and our welcome our financial Officer Chief segments. to and your Ken and and thank for us Fabrics quarter. joining today. fiscal each business. quarter the then comments business to And Chumbley, then for questions. opening so the would will some be will me call analysts specific review objectives our you I And Ken results on pleased Boyd the quarterly will of then of call with the we take you Upholstery outlook. will fourth call actions With good you morning to review Thank and that, update after XXXX operating briefly

our Mattress they expected, quarter As the significantly despite performance. our were did of and quarter challenged third in with year. compared being generally Fabrics stable a affected business factors reflect demand last as our of by in somewhat was the convergence expectations for line that Sales tempered third to products

some from we also have impact We pricing taken. saw actions the

period years approximately compared ago, X the nicely As to same the up XX%. sales at were quarter pre-pandemic for

our Mattress more was business. of our and design needs have the than the strength strategy business pressured Despite environment. for to profitability and particularly of emphasis segments, on the in remains the quarter product-driven continue our our execute solid innovation of fundamentals headwinds, However, to Fabrics the customers. we servicing in our expected, support each our financial with creativity, In we current an evolving business

Notably, and programs diversified and consistently capitalize third to delivery face market us we customer chain cover sewn will capacity commitments supply to the Our robust platform our expand to and quarter, to third our already chain our support numerous our future business of and and planned new for which resiliency. strong upholstery us mattress kits in have and opened on global meet during supply allow growth also and to complement cut build facility sewn challenges the are Haiti enabled expanding we opportunities. nearshore well-positioned

new ahead a cut get of in made those and costs. investments and including protect past new also rising High to innovation a X supply this balance during balance We in expenditures the That months, chain North Carolina, in customers disruption. our our against raw business also to valued inventory material considerable sewn and campus inventory higher and Haiti, have Point, facility support

of position has now but cash the a cash declined during strategic to fourth we investments, As during these our XXXX, quarter. result stabilize position our fiscal expect

while Importantly, facing cost understand intent it’s our our demand and we desire profits, and grow to and that environment. are uncertain always we revenues an

might will arise. our laser-focused expense line whatever revenue be keeping generating cash structure and on We in with backdrop

of into Looking XXXX. fourth focused number the and quarter ahead, fiscal initiatives for we have continuing a

Fabrics objective Our grow doing division sales first is so. to focusing Mattress in our on specifically and

business that waiting are our is rollout. won with by new Fabrics rollouts The customers product to placements customers Mattress planned seeing for we for them we have new significant Our and timing normally will commence this would summer. some quarter have delays of year. third at the we start our launches now or the But customer we been have calendar in expect and seen these

especially have both sales look to the at where sewn rebound covers, customers we opportunities business, growth cover sewn in of We our has and delayed sales for our timing but inventory orders. Mattress in new Fabrics

enhanced team and to Fabrics are more tailored with a relationship sales rendering more our also develop our our reorganizing business within re-imagined to personal service Mattress We sales XD continue our customers and sales speed-to-market. effort leveraging and our offering much

secure service and our and new expertise global platform managers also of personnel are the utilizing to effectively We of our brand opportunities. the experience talent our

also our new location for raving believe from success we various atmosphere of all High opportunities And and continue we Customers amazing the same in the our time presenting development an for are are will to have been location. see businesses the from we show space. and years, our in this design yards divisions innovation center at design and first the in The collaborating. products at across about our We teams have Point. Condon

champion also further our to Show fabrics, real week. capability featuring mattress global express X We an we the and service have flexibility. years will offering Trade first quick-ship show line the next This trade ISPA and curated in is be a of option

in performance, encompassing technical and We will fabric both development and also forming aesthetics on and debut sustainability new collections processes. luxury focusing

New we LiveSmart the business, and brands will our excellent remain the sustainability. on future portfolio and of We in and of performance, LiveSmart very marketing innovation our are service both. executing ease offering products, paramount about the our Upholstery acceptance excited their continue with Fabrics durability is for we cleaning, of In strength marketplace.

that the We for continue sales, to again our about hotels will for work and also redundancy as pushing we uncertain and building our we In begin will consumers chain are are office our as global as to maximize tandem important we the of is and have supply optimize equally flexibility also return critical. recovery and Proper increasing sales through these optimistic and to times business renovate service efficiency customer platforms. hospitality with plan reestablished travelers. the

in where USA, and six they is Canada, platform offering China, they our vital and our how and success meet Turkey multi-country sourcing Vietnam production Haiti, are Our to capabilities customers allows to countries, and with the and business global an we we want have it year last excellent both have with advantage proven to do service In our service our throughout competitive record. us. businesses, with customers presence to us

establishing product to as critically look is we output platform As strategic we in we the to profitability. all mix ahead, are these to important is A meet going complete facilities platforms more balanced balance be overall demand. our from and across heavy global lifting

and our already and this the is kits Haiti, we This covers now commented, two enhancement already third sewn our and of again and building upholstery in recent facility capabilities in mattress operational new for week. is for operation. facilities I As growing are cut cut most that operation is our with every Haiti existing sewn

will is solid work our regardless top position. a and and environment. our a we emphasis priority the continue achieve objective with to to maintain stabilizing this cash solid Another mentioned, on sheet liquidity. as of balance we industry managing strong Notably, And

formalized We available which strategy, on allocation capital following website. our is continue will our

and macro and protect our to strategically investment in utilize will generate pressure. inventory disruptions We from and/or reduce us to sales cost

costs to have continue control as we and overheads corporate will our SG&A fiscal year. this done We just

made have we in anticipate do near-term. needs capital recent We and major expenditures already not the significant in years

costs continuing will our on quarterly our to response overall sheet manage in with reward we balance focused shareholders industry Overall, dividend. strength to We the maintaining and remain diligently aggressively environment. regular

Although as businesses I mitigate the working price offset we both do actions rising additional in included current certainly the with to help are quarter fourth costs. mentioned, other challenges during effect initiatives to the of our expect as continue taking we near-term, well further increases just pressures these to

some employees. seeing improvement on focused and in are labor we We trained are intentionally newly conditions existing and retaining

inspiring our that, worldwide I also is support We product the me competitive completion the such Love. our participated spirit demonstrate back about proud diversified global want their strength February, and more be Culp’s their to optimistic and offerings product of I first part Their to mix continue team. our normalized very Mattress named, results came meaningful remain those With thank business for their you their who value to look the review to to in future long-term innovative over I thank we Fabrics financial way. for quarter. dedicated to We will turn as our local for contributing employees fourth quarter. facilities the global am of see And Share world of during a our the profitable Ken the initiative, now celebrate communities Also lastly, In of to the call I forward need. deliver the around to will to platform. Culp. want opportunities resiliency ahead long-term just to and the a in our of aptly shareholders. giving in success all A the employees and and commitment for to Culp’s special to growth

Ken Bowling

Iv. Thanks,

Investor to cover call, the our measures. on earlier mentioned have As website posted presentations key Relations slide to performance we

We allocation have strategy. also posted our capital

third share quarter of up by operating quarter for will diluted in from in the this income the in share prior compared were sales for are in of which or was an $X.X per I period. abnormally $XXX,XXX operations quarter, diluted sales impacted net a compared company million, significantly of from fiscal year million minutes. comment for per were period. Net a the Net on tax or diluted quarter. more $X loss for with detail The third reported will performance moment. year million divisional compared few highlights with the in per X.X% million share the the net income income rate discuss year I period. the Here the earnings and loss prior with $X.XX Notably, prior third for year the $X.X high financial $X.XX operations $XX.X

incentive an namely of accrued factors. to inefficiencies this period $XX.X XX the a and adjusted our quarter percent within $X.X compensation this overall increase Mattress the expense. quarter raw global to trailing several Consolidated among or SG&A the partially XX%. the by performance was a compared pressures operating year return rate reflecting sales last significant by as and These locations Our net to fiscal operating tax due on came Canada, for million and for well effective same and XX.X% XX-month inefficiencies between rapid due freight, with period mix improvement SG&A Fabrics tax same X.X% jurisdictions. at platform to same or due continued The year year-over-year affected other Canadian compared is the in rise year in to and in months of for for X.X% were foreign for income headwinds, offset was third effective EBITDA ago. fiscal due impacting shortages costs of company’s the total its labor company’s material as period of total XXX% operating X%. for the unfavorable mix of the net the the product the U.S. expense basis, U.S. our was labor Trailing in income lower ago. year, third for a quarter sales of On sales XX% to the of primarily period was lower compared a U.S. rate The million income XX.X% capital year

our fiscal third losses quarter incurred of U.S. the the last year. third as pre-tax of During fiscal year, with operations higher we this quarter from compared

this and income our tax that our foreign consolidated from period. located of prior as foreign China earned is we income compared and by incurred year from to Canada, the the third As jurisdictions a much of taxable income during taxable stemmed expense higher taxable all the in our since was result, quarter than fiscal year income our jurisdictions

approximately for tax currently payments projecting this $X.X income We fiscal million are of year. cash

will the versus timing dollar year located payments this annual be subsidiaries Importantly, are rates current the our projections, and our capital tax over in placed exchange for and cash the as management’s be China income changes relation our associated only earnings fiscal of in China operations significant foreign into with estimated from projections projects can actual year well when to Canada as in affected U.S. by service. foreign

take let’s at business our segments. a Now, look

million, compared of segment, last quarter. and the Sales compared pricing to were Mattress were last quarter, quarter as surcharge included that down which $XX.X Fabrics effect the during for were relatively third sales fiscal stable For in to third year’s year. period, X.X% the the actions

tempered income products. by slowdowns, as However, customer as a cover affected of Sales consumer was top year as inflationary million for X.X% income some operating on of Operating ago, performance of compared X.X% spending the with impact new well with year at mattress $X.X by the an in resurgence compared significant seasonal $X.X with ago. quarter line million margin well disruptions was our weather as facilities. and launching a traditional COVID delays the in also sales widespread were weakness pressures of

all fiscal performance due for In our the unfavorable to demand, service ability mix by infers our our locations. production, North higher product unbalanced to in global offshore amounts quarter, across inefficiencies pressured offshore was impact operating Canadian third which committed operating were year An this efficiency product maximizing with locations. an costs unfavorable onshore, as cover of impacted our production significantly third U.S. and mainly we Our our platform quarter fixed of locations. and within mix the American not and in nearshore of we

holiday Canada and by are quarter costs, mitigate implementing Our normal to also certain rising record increases was fourth selective quarter at the performance to ongoing further targeted take due levels in our for We January during and freight, costs, quarter did and absenteeism training labor operating including U.S. to of in to additional shutdowns action pressures. the new during and offset labor material and COVID of locations. inefficiencies raw due the third inefficiencies price also inflationary employees pricing these we help the hiring challenges, affected higher

products, million, in relationships, year well the sales compared the up platform we portfolio prior performance sales success from quarter strong third our our above to year. the our sales performance For products. robust period. pre-pandemic Asia, especially and benefit product LiveSmart by $XX.X were demand when for prior even the supplier strategy stable the including continued continue remained of in Demand and This the our of innovation solid levels, Upholstery our an long-term over growth segment, during popularity driven Fabrics was for X.X% to

also by the actions Our pricing the surcharge supplemented sales were that were results and effective quarter. during

during business. line year to income million a income margin top pandemic-related from with Additionally, performance in continued our ago, Read impacts million X.X% contract with pre both with recover Hospitality for business from our and was in of $X.X Products operating quarter higher third hospitality business quarter the sales a year – Window X.X% $X.X the compared ago. with an compared Operating our

the China currency and Our operating costs higher fluctuations facility, raw Read was foreign Haiti in pricing unfavorable contribution and in began in from portion start-up We this our our third a latter freight continued rise quarter. Window material actions part results action new operating business. quarter our to a help the during and costs, Products took by for of affected of the cover favorably performance to costs, lower additional the impact

of impact we with cost better fourth lag a lag. the it’s our cost the Upholstery although performance up price quarter a price the from action. business Notably, will keeping the for done temporary pricing Although this affected the quarter, have third benefit in pressures, with Fabrics full we during been in temporary operating job additional

our materials. segment, quarter, be for For normalized changes pressure the fourth inflation more to are assuming raw or there expect not for more we this do cost

Now operations year. months million our total and the flow respectively, Cash debt $XX.X as X in I’ll million cash This the last negative fiscal fiscal as the million, and reported of first balance of investments of flow this and in and of We investments and facility to cash total million for credit year. $XX.X no outstanding and cash no $XX.X were debt million free with sheet. negative of from compares revolving under the end third $XX.X turn $XX end quarter. unsecured the outstanding

to As the our fiscal during affected in flow improve by cash of from in ahead position invest higher our our disruption free first uses inventory year Year following Chinese valued supply New an we were levels business, million to flow chain protect support strategically investment customers the raw of cash this against X months ahead $XX.X continue and and to and of of operations to the our get to costs, rising holiday. cash: material in-stock of

higher increase of was revaluation the of material inventory. raw XX% approximately this our through result a of Importantly, costs

Haiti $X.X equipment extended new million expenditures lease as our well and operations new cut accounts capital granted opposed expenditures, payable in in and to point, to terms terms campus. normal for previously innovation related building payments with upholstery building increased for $X.X add start-up as IT will – and credit to machinery, investment million new return expenses for including Another pandemic. the as expenditures our associated sew our response in to the our COVID-XX to payments the and investments

fiscal repurchase and in of third paid Additionally, we fiscal during first not company months X did $X.X current during this the million quarterly share available $X.X on repurchases. our repurchase shares $X.X share year, any the million The under spent program. leaving quarter regular dividends of million approximately this year,

uncertain we position and allocation Iv on execution Finally, maintaining during as financial capital strategy remain our strong times. these focused disciplined discussed, of a

on Based the investment significant positively company we for to conditions as our future Over normalize. in the turn call we the expect position cash the total I’ll business organic course in over the quarter. our have With for of committed this current investments that, during year, Iv. strategically and cash remainder funds business uses for of outlook to this year, to and external fiscal stabilize growth fiscal fourth expected of our

Iv Culp

to give you, beginning has creative customer division, each product are innovation, very on focused more attention. I’ll a in with quarter. opportunities in about the this throughout global remained market, existing has reach customers. to Culp personalized and business, us about the offering our show the market new model Las the with our advantage comments positive evolving with Thank response the and to and had headwinds strength Vegas platform sourcing Mattress us This capabilities. flexibility Fashions continues excited our enabled just operations few offshore we recent a Home designs of of and competitive the Ken. for from expand segment. manufacturing support preferred across Despite the Also, needs and customers onshore, a customers favorable provide Fabrics nearshore We and

product strong Looking ahead, we year. about and are development enthusiastic next new placements for fiscal our opportunities

Rising However, during and costs additional implementing are it these also delays to lead costs. product new higher the mitigate weakening there additional mattress domestic is industry, may demand price some we continue targeted further the to our but quarter profitability, rollouts. fourth pressure impact in temporary and to of increases

We managing committed costs, remain a also the reducing and to improving and and our controlling mix quarter retaining normalized we operating during product efficiencies. expect more fourth our talent inventory,

increasing look our forward to from reducing months. finally products third January, facility Upholstery sales pleased quarter. startup $XX.X Now the notably, a the growth and also by costs started fiscal sales is quarterly and for Haiti We highest the we production the the third Fabrics better-than-expected XXXX We the in our during were on the new quarter excited since shipping quarter. the million to open comments level year. over in facility were upcoming few We And segment. in

continue headwinds fourth Looking ahead, pressure the during current of our some quarter. the near-term results we expect may to

peak stay-at-home level the a fabric new compared during the in as residential to products. which sales growth for industry furnishings the the experienced in We post-COVID surge, our of temper also for home expect may slowdown residential business

demand the to New Additionally, generally the despite be and trends. quarter fall encouraged the But performance we which favorable Chinese fourth will sequentially these operating fourth substantially holiday, our the remain for as Year conditions, affected external sales by timing the quarter. quarter within the compared by of third

leverage are with products, navigate flexible expand along in ability and advantage Asian these our sustain we supply competitive capacity our platform, our We innovative product-driven partners to Haiti to chain our and pressures in market strategy and reach. confident stable as our expanded

forward well to continue to valued positioned and We look we long-term, the support for are as opportunities the we ahead our customers.

the questions. general we discuss for then to of some going outlook year, fiscal and this will fourth is Ken the quarter Now take

Ken Bowling

well we exchange to Although disruption. are our environment, and strategy and flexible significant navigate in customer macroeconomic market, product-driven continue over positioned inflationary rates chain in uncertainty near-term global foreign including pressures, fluctuation supply with labor long-term challenging we a the currency the platform,

quarter for be expect last consolidated be certain compared quarter to fiscal fiscal sales fourth year. and We are ongoing as of year and fiscal to of the to of reflects available trends this this to this lower last we for business year regarding of of fourth expectations net Notably, at fourth of quarter for the call fourth impact fourth and slightly the year, comparable the the quarter our year expect the on the time and assumptions the by the of company’s operating this projected fiscal information headwinds. quarter management fiscal income based

to the fiscal amortization million $X.X based $X current year. Additionally, are is million fiscal of and to expenditures expected million this to million. be now in this to for $X.X Depreciation expectations, for year range be expected approximately on $X.X capital

With as has will Finally, that, priority, a flow on we our focused fiscal in will we cash questions. XXXX. be top already your now Iv as aggressively free mentioned, take generating

Operator

[Operator Instructions] Tower Research. Budd Please First question ahead. Bugatch, comes Water from go

Budd Bugatch

and of just Iv us maybe high a you bit level. can Boyd. Iv, give little Ken, a morning, Good

of a color. – you add you that are it? future and give longer-term trends great said seeing those is Maybe what on into you And a little Are optimism of in are new the customers had You seeing that Mattress opportunities there some lot placements. the Fabrics you’ve you that? could

Iv Culp

materialize that had be QX. that we talking understand some the Yes. this recognize it expectation would QX. it thought might And in Thank you, really just we business it like materializing you been horizon, we some now We coming Budd. And some service we’ve solid there in summertime. that on the of may but on back and the we quarter, To in look, looks just platform. see have about things in now it, that’s of be a the a of built little color some give yes,

customers the ability be meet to have want our in location serviced. they any We where to

develop We today, also have just we’re sewn with XD our an and outstanding some marketing then products excellent way personnel highly opportunity fabrics just and rendering both the services some really covers skilled new items. – it talent new to bed And or see it’s we’ve or retail the we we whether placements are just customers traditional in seeing box, if we customers, be existing just won. that

retailers just we’re or names so of we we know just that there. people it without or specific – – And customers it’s be, might giving

strong get is the for the and materialize. of We’ve now So platform for us we heavy the optimism for business. waiting lifting to the in – to place, these we’re done really just kind

those in new resetting business big current cost is marketplace. to us we things but a is get help So okay, the at as business existing

Budd Bugatch

has – And it you that said seeing just some chain them delay What’s programs? disruptions the supply caused see better that you’re and have do labor. dissipating? their You to been

those we’re So problems. looks coming the to backside like maybe of

Iv Culp

across every this be our items needed hope but can’t different was the were some I customers but time, other there is speculate material significant on going to at same of there there a of issue speak degree our it’s so. Yes, that that could post – this, of I’m customers, But make COVID. some not to situations, surge to I a mattresses. just product, business And shortages, general such

catch and have down, on out that so up. kind on I of the slowed just get And cadence that normal they lines as now, think – was to customers been has just as going to retailers industry because changing up the started caught want

that not normalized lot has some are there for any think breadth to now back get a feel up does I a is and very to people So thing, taken – we just the favorable catching be I’m but it’s more Culp. one starting conditions and think it will sure industry

Budd Bugatch

Got you ever that’s good it. to Nobody Or just endemic, resistance much getting the but resistance increases, those Are to We’ve a it’s seen long not as it? had we coming? throughout And seeing take that it? on are things that price you’ve likes are it much the any is pricing. but word, as that just understanding economy.

Iv Culp

happy too, because I the one Boyd likes say Yes. – comment, upholstery and within more he’s line it. front on side. would I’m been let to No

You said that one very No to likes well. do price.

done with to of pressure for couple price yes, to deal until more that product you, up now expect. price and fruition think and customers then we’ve other and need settle that passed through. with been understood I to deliver be things. So come they But I spending – pull try increase freight these to mix, we a value our what’s are We good had customers quarter fairly the some depressed we’ve date it’s need increases And combinations some to will normalized have now, with get going we don’t success of our to surcharges And and and I into permanent for have the consumer like have there. would we tell receive there of up, conditions, those. continue some have our efficiently feel operate fourth now lag if

do at whether all a want that’s Boyd, you to to challenge? been So comment

Boyd Chumbley

common taken place. I’d cost in generally, certainly industry Sure. that there about understanding a the has the is Budd, say, rising

along. do having there and this is passed approached that to So and I have this there appropriate with just in placed. think acceptance a be orders I fair is of that’s new feel we necessary degree a is generally that way

we’ve they but ever way. the market that that a proper in I think – nobody likes there an increases, it’s understanding again, it So approached necessary in is are and

Iv Culp

years it us was these customers really that placed up the gives chance we having And I costs new as think, a long business At least the but to know will savvy just introductions. probably and the for to to this, versus catch where are ago. our you’re to and time, get help product something chance in reset all Budd, new it you items

So new start that will to through. be a come products when positive

Budd Bugatch

Okay.

for more good Hospitality, you can that what like the What feeling in couple to or there. optimism Hospitality? new gives a in you talk seeing – of you you continue Just what makes about you’re me. programs

Iv Culp

in Yes. in COVID, hospitality line I’ll been, But let Boyd They for speak and traveling us to people think a through weren’t offices. weren’t has because more Budd. this product I going staying to difficult their detail, hotels.

some on development hold. of so, put or work the And remodeling was

he’s price let then cost and So pretty fabric that see I’ll in and the come for back that now how business on especially that Read we’re plus what might Boyd And to side. managing starting talk strong, Windows. about he see you to

Boyd Chumbley

again, as the the accelerated is Hospitality more – certainly in spending beginning you travel. are the a from seeing consumer Yes. just to appears general it demand as to say, devote perspective, And we segment

And in so seeing lift nice segment that and business our a we started of in yes, QX continuing.

as of seeing us think Products a considerably on pricing yes, cost says, into as of as the that more had more actions pandemic. forward it demand gone which throes where next that trends the shift within hospitality are necessitated But realized. rebound increases, which occurring the seeing the business, business have, as nice very in in were our starts accelerate again, go Read actions those the get during will the that And business, we do favorable we above we pricing quarter to I through now the we – Window will some hospitality full Iv market. including a So, also in implemented area, benefit

Budd Bugatch

new me, a bit in about for And is anything little LiveSmart. Okay. if finally coming talk there

next You some there. have great made the horizon there? on innovations What’s

Boyd Chumbley

definitely, continues driver our the be Yes. business. performance key LiveSmart Thank products you, to a And Budd. of category

of of the receptance very umbrella. the products pleased under all are with really that We

We in the the which the particular product is continuing a area. Evolve, is to growth that see are with sustainability

So, that and seems more momentum in gathering to be and acceptance marketplace. more just the

We that’s have a just new well. free flooring been launched product as

introductions And new portfolio continue add innovate well. the in to just we that the products additional as to have that have and in of and so there area we wings on

Budd Bugatch

in Culp’s last been past history I I is time of financial I but and all, for followed a challenging for solid hasn’t this time, know has fun I it’s remember seen during and about company. the my times, an your times before, am kinds these I have remained not and times. long Well, Culp worried comment in it when time condition – – been more I because would been don’t you have Okay. challenging awfully these just

So, times. all certainly, I for you congratulations these to of to hope but luck be I sure for get the good am easier company leading to going, hopefully, times all all going so. we that’s possible, and not

Iv Culp

and we in lived we whatever our very through Yes, strong weather – us. have to Board your and importance Budd. this highs aware the And you, that come it’s we there. business, may something is through have of, being Thank appreciate lows certainly financially lived we of certainly keenly comments and understand at

So, recognizing that. that’s for – thanks

Budd Bugatch

Thank luck. you. Good Yes.

Iv Culp

Thank you.

Operator

you. Thank

from Company. Anthony question next Please Sidoti Lebiedzinski comes Our & with go ahead.

Anthony Lebiedzinski

morning Good taking thank the for Yes. and you questions.

to sold and would your say talked you the first, retailers of in you weakness can look segments, just about wanted So one both when to higher consumers business kind just you versus – income of mattress at of line. what talk ultimately low-end major consumers on your other curious, consumer their so the just about lower-end portion products

you as So, products if and out what to far just to wondering sold as the could end seeing users? ultimately are you kind parse of

Iv Culp

to percentages. have the Culp historically a But upholstery I trying be for that And it we been tell hit good fabric market. generally you primarily question, speaking, on to range. – middle Yes. of will a it sweet spot look Anthony. our if It’s up middle of by will hard do business, at the we to the actual

mattress a cover costs that units it different have been many facility. fixed high to make broad the But more to the we normally so units, side, of from and low. the On

to be general mattress domestic be to but be. end continue American pressure to question, probably more more than or is – today get get just have think And a been to more almost we to cover don’t would with a units fabrics, effectively. certainly I platforms higher you. or some to it point. stable. the need sales And So, and is the be market is our tailored fair at just it our successful to that mean weakness. is There It mix our relatively or commentary assets have high low. North we it cover will We middle fabric mattress the of at running any may can’t with they know helps stimulus of for very business helps being us. us more being I because through to answers have the say just our it sure product the running from because tax delayed And important for there It facility. – under way your whatever doesn’t price returns lower curtailed expansion, more if our that

Anthony Lebiedzinski

you Thank helpful. definitely Definitely. for the color. very Yes. It’s

can as a plan of just the more some terms give but are that? know to the sort ones of guys over just as you impact it’s of additional can price taken strategic, XQ, it’s go So, – board, a and far as you far you like in across increases of as not so – color that what for thinking us I the you kind as the that

Ken Bowling

Hi is Ken. Anthony, this

impact You was the quarter? the how financial part mean what much – like of of

Anthony Lebiedzinski

Yes.

Ken Bowling

Yes.

I think…

Anthony Lebiedzinski

For the XQ? for quarter in what’s I implied your guidance and guess

Ken Bowling

Yes.

pretty – gain for look there upholstery, much the think I the the mean if was at price. I is all you

So, that price. was that was all – much difference pretty

For price. X% the sales about fabrics had mattress for being amount CHF, you the for of total the quarter business,

a impact without you you as a had So, business there price, that the of bit nice but a price little well. had from in fallback

Anthony Lebiedzinski

it. Got

of is you that quarter, And that. looking the for as we as Thanks that pricing? what should say expect Okay. as fourth impact to far well

Ken Bowling

Yes.

price CUF, the – have more from increase have full for of got say I effect for, you got probably effect I again, would you of the previous. the think

bit be there. have about price X.X more a of about you So, X. X% your for that got would probably then little to the amount Probably – it’s CHF, And sales. impact on impact

Anthony Lebiedzinski

guys for Thanks you as continue Ken. sheet. a obviously, have then that you mentioned, to balance And strong Okay.

is are that guys safe share you guys longer say And dividend look I the to mean your capital at after any As about cash? thoughts it up we term? you allocation, build the some still committed repurchases raising to

Iv Culp

very really allocation website. we invest of what things disciplined are the in capital everywhere. we it easily late, we with with publish available And just have – are and a like And company, see COVID question. prepared invest might Anthony, always CapEx, It’s just strategy. to a And that pressure. dividend, And further we our cost we those of continue good cost have the to as for debt. have and to to talk think business and And with carried and about, a the X-year organically I dividends the some the spoke course, conservative on it against we record Yes. now we certainly chosen or annual priority the of protect balance increasing in we as of we us dividends. for then also priorities through regular cash a any of quarterly increasing solid the period. without we inventory position And is be

can the our that’s sure, utilize. one of will – And of a for stock, So we buying in of tools terms take. we one it’s strategy

be of make cash and dividend, we with we in Just stay we really positive wanted a the conservative sure our had – a roots some cash reasons and this of felt debt. used inclusive quarter, to and taken to we balance strong lot for be to like no current have –

just kind all those of each things So, weigh against we other.

Anthony Lebiedzinski

of very Got best it. and luck going much forward. Well, thank you

Iv Culp

Anthony. you, Thank sir. Yes,

Operator

Marco go from Stonegate Our Instructions] Markets. comes [Operator Rodriguez, ahead. next Please question Capital

Marco Rodriguez

everyone. my morning taking for question. Thank you Good

Iv Culp

Good morning Marco.

Marco Rodriguez

about can was the about Are bit talk And drivers reorganizing prepared Can talked sort change. also behind what of long you costs any wondering with in the sales associated force. might I that your little discuss meaningful a were remarks, you you how can you this talk if there maybe about take? then maybe – that? if maybe

Iv Culp

Yes. Marco. picking that it’s question. Thank take for time. not Thanks much Good to And up. going you,

We week, moves reallocating of to salespeople about. sweeping these way but need are to whole accounts, that’s next where here and fundamentally a pretty ahead talented strong are the some our for And be Trade talked aren’t managers just we they the moving customers sold. we ISPA brand changes, new Show, doing just which necessarily want

some have we really We And to that it that some service. that have really really way. rendering embrace advantaged gotten want just folks a traditional and some talented XD through a and with embrace work that customers

served. So, want customers we how to just to want they meet be

We side, and with reward business also the our focus want of course, margins in commission to salespeople with the then, always there. mattress for sales our the growing

performance growth. reallocating and based just margin So, kind on of personnel reallocating and

more personal in advantage going taking going selling of customers. I level be faster, to to we service are put positive think a technical efficient more of very much and strong of capabilities way it’s be a because

So, we are excited about it.

Marco Rodriguez

it. Got

maybe kind also that envisioning utilization how into second questions, focus understand. of of the it recent areas as dovetailing done one how one you into your bit you efficiencies I also out in have of additions then you of of prepared last prior that’s so? the just addressed then into labor talk your about or can Okay. And on a given your little you sort I that Can are about working sort here forward? how of the putting kind remarks know but now, maximizing And year meaningfully if capacity just capacity kind is the levels you of for go of right efficiencies. you or situation? guys maximizing kind equation the over dovetail the that or of

Iv Culp

are all Yes, efficiency up on Right. comments, talking you we need to where picking maximize we are those to about maximize plants profitability. our in

And products we things what the And job situated service all very And making have level. gone in of our have anti-dumping on, an world. is over the stage maintaining these global almost done are customers get do customers of now platform there at we of good all have stable location. to well the that any and a sales like so trying kind we to feel we is extraordinarily from

are we fabrics, to We finding for thing. profitability But really a good to in – us the these really have think ourselves And a mattress proud we whole opportunities. so of maximize really for platform. across have stable mix our it’s

run. is And want so platform running not to as we North I kind of as been it was what’s in guess full lagging QX just American

to only to we want be customers and need comments, customer ability I serviced. we America. complement it North delivering And offshore want sales are strong And the our So, the demonstrates meet need. delivering to my misunderstand with we But demand optimize, to where don’t for to sales. the happy are you they again, a

capacity position. we see North just at aren’t of cover American we need there, out come we right see because And the better that a will now have fixed But full those that the plants be much running high in these to things costs as we to of running we will. some They plants. those fruition in by demand So, some business.

Marco Rodriguez

labor Understood. aspects? And the

Iv Culp

challenges have am sorry, definitely now. labor improved some I Oh,

that’s think much, challenges factor sign-on QX, me. have – bonus, are hiring, asking in had We but we pre-pandemic, higher labor labor had what had a than we in cost all better wages our much significant That force. is we yard. major now. retraining, retaining We you with I per of is cost certainly kinds our not

stable. pricing our the is and actions labor with that absorb can we more So, situation

get good to which a equipment run able now, are We thing. is personnel to

Marco Rodriguez

And it. question Got another about pricing. of then kind dovetailing just on

box, approaching You or consumer – obviously of raising year to last that an have from materially it or be demand. they bed area been material whether inflation. guys the over be other due it’s some traditional the the to just But prices retailers, depressing might seems have in where so the it raw approaching the mattress the heard kind

customers hearing dynamics you So, your might I what there? about maybe are to am it talk thoughts what or seeing you these your be wondering can or from of as if relates sort

Iv Culp

Yes.

I I answer absolute have think it’s that. a good the question, don’t Marco. to

their as too something there aware else certainly become we Is I business. to consumers the what’s expensive. where of will about we in thought if lot spend it are to that. a does at that point happened we cost defer look a And think

look I it, I I not dodge question would think the at the don’t because way know. to

products the we are reenergize that up we rolled but see we have placed at some would things chance. marketplace. the just is situation a lot some a Trying to already why solve on that. will better will new challenging, of I pointing that’s through. new look lined keep absorbed products items, as to come new new raise And products the cost to have that to I prices think market will are the exciting way we move that that current out the can in get to of to If the consumer

Marco Rodriguez

Thank Very guys it. helpful. your Got you, time. it. I for appreciate really

Iv Culp

Marco. Thank you,

Operator

This concludes session. our question-and-answer

like closing to ahead. would back the Please for to go I conference remarks. Now turn over Mr. Culp

Iv Culp

Thank progress And to thank next you updating Culp. look day. very all and operator. you our again, in forward We you much, Have interest on participation for your your a quarter. great

Operator

presentation. The has attending you for Thank today’s conference now concluded.

disconnect. You may now

Culp (CULP) 3 Mar 222022 Q3 Earnings call transcript