Culp Inc (CULP) 2012 Q2 法說會逐字稿

Good day, and welcome to the Culp Incorporated second quarter results conference call. Today's call is being recorded. And at this time, for opening remarks and introductions I'd like to turn the call over to Ms. Drew Anderson. Please go ahead, ma'am.

Thank you. Good morning, and welcome to the Culp conference call to review the Company's results for the second quarter of fiscal 2012. As we start, let me express that some statements made in this call will be forward-looking statements. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results or otherwise, are not statements of historical fact. Actual performance of the Company may differ from that projected in such statements. Investors should refer to statements filed by the Company with the Securities and Exchange Commission, including the Form 8-K filed yesterday, for a discussion of those factors that could affect Culp's operations in the forward-looking statements made in this call. The information being provided today is of this date only, and Culp expressly disclaims any obligation to release publicly, any updates or revisions to these forward-looking statements to reflect any changes in expectations.

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 as a schedule to the Company's 8-K filed yesterday. This information is also available on the Investor Relations section of the Company's website at www.Culp.com. A slide presentation with supporting summary financial information is also available on the website as part of the webcast of today's call. I will now turn the call over to Frank Saxon, President and Chief Executive Officer of Culp. Please go ahead, sir

Thank you, Drew. Good morning, everyone, and thanks 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 is Ken Bowling, our Chief Financial Officer. I will begin the call with some brief comments about Culp. And then I will then review -- turn it over to Ken for the financial results for the quarter. I'll then update you on the strategic actions in each of our businesses. After that, Ken will review the third quarter outlook. And then we'll be happy to take any questions.

Now, looking at the second quarter, we are pleased with the positive sales trends for the quarter, and through the first half of fiscal 2012. Both of our businesses had impressive sales gains, in spite of an uncertain global economic environment. We are well-positioned to build further on this sales momentum. These trends reflect the success of our various sales and marketing initiatives, along with the benefits of our excellent design capabilities, and efficient manufacturing platforms.

Overall, our profitability and margins are down somewhat compared with a year ago, primarily due to higher raw material costs in both businesses, and the currency impact in our Upholstery Fabrics business. We have established a strong competitive position in both Mattress Fabrics and Upholstery Fabrics, as we have continued to deliver innovative products that meet the changing demands of our customers. As always, our primary focus is on outstanding service for our customers as a financially stable and trusted supplier. Looking ahead, we have a solid foundation and the ability to support our growth initiatives, while creating value for our shareholders through our stock repurchase program. I'll now turn the call over to Ken, who will review the financial results for the quarter.

Thank you, Frank. Total sales for this quarter were $58 million, up 19% from the second quarter of last year. Operating income for the quarter was $3 million, compared with $3.4 million a year ago. SG&A was up 36%, to due mostly to higher expenses within the upholstery fabric segment. I will comment more on SG&A in a minute.

On a pre-tax basis, we reported income of $2.9 million, compared with pre-tax income of $3.2 million for the second quarter of last year. Net income was $6.3 million, or $0.49 per share for the second quarter this fiscal year, compared with net income of $4 million or $0.30 per share for the second quarter of last year. Net income for the second quarter of this year included an income tax benefit of $3.4 million, while net income for the previous year period included an $801,000 income tax benefit. The income tax benefit for the second quarter of this year includes a $4.4 million non-cash reversal of a portion of our valuation allowance against net deferred tax assets in the US. The Company's overall adjusted effective income tax rate as of the second quarter of this year was 18%, compared with 15.4% for the second quarter of last year. This adjusted effective rate represents income tax expense for Culp's non-US entities, divided by consolidated income before taxes. This information is important, because the Company currently does not pay cash taxes in the US, nor does it expect to in the foreseeable future due to it's $60 million in US federal and state loss carryforwards. Overall return on capital was 19% through the second quarter of this fiscal year, compared with 25% for the same period a year ago. Average capital employed at the end of this quarter was $66 million, compared with $63 million for the same time last year.

Here are the results for our operating segments. For Mattress Fabrics, we reported $35.2 million in sales for the second quarter, up 24% compared with sales of $28.3 million for the same period last year. Operating income for this segment was $3.8 million, compared with $3.3 million last year. Operating income margin was 10.8% of sales, compared with 11.7% of sales for the prior year period. SG&A was up 25%, due primarily to higher sales. On a percent of sales basis, however, the 6% rate remained unchanged from the same period last year. Return on capital for the Mattress Fabric segment was 26% through the second quarter of this fiscal year, compared with 29% for the same period a year ago. Capital employed from Mattress Fabrics was $53 million at the end of this quarter, compared with $55 million a year ago.

Now turning to Upholstery Fabrics. Sales for the second quarter were $22.8 million, representing an 11% increase from $20.5 million in the second quarter of last year. Sales of China-produced fabrics, which include Culp Europe, were $19.9 million in the second quarter this fiscal year, a 16% gain over the prior year period, while sales of US produced fabrics were $2.9 million, down 15% from the second quarter of last year. Overall, the Upholstery Fabrics segment reported operating income of $19,000 or 0.1% of sales, compared with operating income of $802,000 or 3.9% of sales for the second quarter of last year. SG&A was up significantly compared to the prior year, and approximately two-thirds of this increase was due primarily to start-up expenses associated with Culp Europe, and favorable reserve adjustments booked during Q2 of last year in the bad debt and incentive compensation areas. Return on capital for Upholstery Fabrics segment was 16% through the second quarter of this fiscal year, compared with 39% for the same period a year ago. Capital employed at the end of the second quarter of this year was $13 million, compared with $12 million a year ago.

Now turning to the balance sheet. We have remained focused on maintaining a strong balance sheet in this uncertain economic environment. As of October 30, our balance sheet reflected $24.3 million in cash and cash equivalents and short-term investments. Total debt at the end of the second quarter of this fiscal year was $9.2 million. We made a $2.2 million scheduled principal payment on this debt during the second quarter. Our next scheduled principal payment of $2.2 million is due next August.

As announced in our last call, our Board of Directors authorized an additional $2 million, for total authorization of $7 million, as part of the share repurchase program originally announced on June 16 of this year. As of November 25, approximately $5.1 million had been spent for 585,000 shares, representing a 4.4% of shares outstanding at the beginning of the share repurchase program. Our strong financial position provides us the opportunity to continue to execute our global growth strategy, while also creating value for our shareholders through share repurchases.

Looking ahead to the rest of fiscal 2012, we continue to be encouraged by the opportunities for generating free cash flow, principally from net income plus depreciation and other non-cash expenses. With respect to uses of cash for fiscal 2012, we expect CapEx spending to be in the $4 million range, of which we have spent $2.6 million through the second quarter. Additionally, we expect a modest working capital investment to support higher sales. We have already made our scheduled $2.2 million debt payment, and have spent $4.8 million through the end of the second quarter of the approved $7 million of our stock repurchase program. Frank?

Thanks, Ken. I'll now provide you an update on both of our operating segments. And let's start with Mattress Fabrics. Our Mattress Fabrics business delivered a strong performance in the second quarter, reflecting improved industry demand, and our sales and marketing initiatives. Our ability to leverage recent investments in our production facilities, along with the expanded capacity, has enhanced our ability to serve our customers. Additionally, our outstanding design capabilities and product innovation have created additional sales opportunities with customers who are leading suppliers in the bedding industry. We are well-positioned with a diverse product line that meets the current market demand in all product categories, especially with the shift to specialty bedding.

We have worked diligently to manage our production costs in light of recent sustained increases in raw material prices. We have also continued to look for alternative sources of yarns and raw materials, without compromising quality or production efficiency. While the higher cost and pricing pressures affected our operating margins for the second quarter, we were encouraged that raw material prices have at least stabilized following several quarters of upward volatility. We are pleased with the trends in our Mattress Fabrics business, and expect to build on this momentum. We have a strong operating structure, with an efficient and scalable manufacturing platform, supported by excellent product design, superior customer service, reliable delivery performance and consistent quality and value.

Now I'll comment on the Upholstery Fabrics area. We are encouraged by the favorable sales trends in this business and the sales momentum we are building, in spite of the continued weakness in the US housing market, and the uncertain global economic situation. These results were primarily driven by sales of our China-produced fabrics, which also includes Culp Europe. Customer response to these products has continued to be favorable, as we have focused on offering innovative designs and high quality at competitive prices. We have been pleased with our recent sales and marketing initiatives that have resulted in increased placements with key US customers, local China market customers, and a growing list of international customers. We'll continue to focus on leveraging our China platform to drive our growth in this fiscal year.

While we are pleased with the sales gain, our Upholstery Fabric results for the second quarter continued to be affected by higher raw material costs, currency impact on China-produced fabrics, and low profitability in our velvet product line, which is manufactured in our US operation. To help address these issues, we implemented a price increase for the velvet product line that went into effect mid-way through the second quarter. We also are implementing a price increase for the China-sourced fabrics during the third quarter, which will be effective for shipments during most of the fourth quarter. In addition, we've taken steps to align our velvet capacity with expected demand. Further, we are encouraged about the opportunity to increase sales of woven textured products, which we began manufacturing at our US facility just over two years ago. Notably, costs to produce this particular category of fabrics in the US are now comparable to our production cost in China. We are expecting improved profitability from the US operation in the second half of this fiscal year.

We continue to make progress with respect to our Culp Europe operation located in Poland, and we have now completed our second full quarter of sales from this location. While this operation is still in the early stages, we are encouraged by the initial sales trends, and the interest level from several of the largest furniture manufacturers and retailers in Europe. We expect to gradually grow this business, with sales contributing about 3% to 4% of our total upholstery fabric sales this fiscal year, and then increasing further over the next fiscal year. During this first year of operation, and considering the higher level of SG&A expenses necessary for our start-up, we expect to reach the break-even level for the full fiscal year. And then begin to make a more meaningful contribution to profit next year.

This strategic Poland location offers the highest concentration of furniture and bedding suppliers to the European market, low operating cost, and close proximity for shipping to customers in most European countries. Europe as a whole, represents the second largest furniture market in the world, behind North America. We are making excellent progress, building a solid foundation for the long term, and look forward to the additional growth opportunities with Culp Europe. As we move forward in fiscal 2012, our objectives are to improve the results of our US operation, make continued progress in Europe, and leverage the performance of our China-produced fabrics business.

Ken will now review the outlook for the third quarter. And then I'll have a few concluding remarks.

We expect our sales for the third quarter of fiscal 2012 to be up approximately 2% to 6% to the third quarter of last year, even though we expect the overall economic uncertainties and issues surrounding the housing market, along with high unemployment, to continue to influence consumer demand for furniture and bedding. We expect sales in our Mattress Fabrics segment to be approximately 3% to 8% higher, compared with the same period a year ago. Operating income in this segment is expected to be somewhat higher than operating income for the same period a year ago.

In our Upholstery Fabrics segment, we expect sales for the third quarter to be flat to 3% higher, compared with the same period last year. We believe the Upholstery Fabric segment's operating income will be break-even to up slightly for the quarter, primarily due to higher raw material costs and the currency impact on a year-over-year basis. As a result of the various sales initiatives and profit improvement actions, we are expecting improving results in our fourth quarter.

Considering these factors, we expect to report pre-tax income for the third fiscal quarter of this year in the range of $1.9 million to $2.8 million. This is management's best estimate at present, recognizing that future financial results are difficult to predict because of overall economic uncertainties. Also, given the volatility in the income tax area during fiscal 2011 and the first half of this fiscal year, the income tax expense or benefit and related tax rate for the third quarter of fiscal 2012 remains very difficult to project. However, assuming no additional significant tax adjustments, or discrete -- and discrete events in the third and fourth quarters, we expect our overall effective GAAP annual income tax rate to be approximately 36%. Frank?

Our success to date in fiscal '12 confirms our ability to execute against our global strategic initiatives in a dynamic and changing marketplace. We have pursued a strategy focused on exceptional design and innovation at good values, with products that meet the demands of our customers around the world. We have a lean and flexible manufacturing platform that supports this strategy, both now and as market conditions improve. In addition, we have the financial strength to aggressively pursue our growth initiatives, and create added value for our shareholders through our stock repurchase program. Culp has a leading competitive position in both businesses, and we look forward to the opportunities ahead to expand our market reach.

With that, we will now take your questions.

Thank you, Mr. Saxon. (Operator Instructions). Our first question does come from Bud Bugatch with Raymond James.

atchbudd> And congratulations on the sales performance, quite, quite impressive. I guess, let's start talking about mattress, a couple of things. One, you had a terrific performance at the sales line at 24% year-over-year. Can you kind of parse that for us and give us -- how should we think about that units versus selling price?

The units, one-third of the increase, selling price, two-thirds

Okay. And what do you think about that going forward? Are -- you're actually moderating your sales guidance pretty significantly year-over-year.

And that is really due -- that's really due, Budd, to -- second half of last year was significantly stronger than the first half, in the industry performance. So the comps aren't as easy, so to speak.

And you -- you seem to be outperforming the industry. I don't think the industry was up. I know the units were not up in that -- in the comparable three months, nor was the selling price up that much. How are you talking -- how do you think about share? And you talked a little bit about specialty. Can you kind of elaborate on that?

Well, as we've said, I think we're having good success with the sales and marketing initiatives, which include most of the large customers in the industry, and with design sort of leading the way.

Any more you want to say on that or?

I think we are -- from the investments we've made over the last several years, we are well-positioned to take care of the -- any shift to specially and inner spring, where we're well-suited with whatever we need, for which ever way the industry goes.

Okay.

We've invested a lot in the knitted mattress fabric area, as you may know over the last several years, beginning with the acquisition in 2008. And that has proven to be a very good investment for us.

Okay. Talk a little bit about upholstery fabrics, then you obviously have an initiative with your Poland operation that has been a drag so far. You're pretty confident that you will see a break-even by the end of the year? And is that for the full-year or is --?

That's for the full year. That's for the full year.

And you think that -- if I read you right -- if our numbers are all right, then sales of about $3 million to $4 million?

We said, 3% to 4% of our total upholstery.

Okay. And so far, how much is Poland or Europe contributed to the sales line for the year-to-date?

Well, let's just say -- let's keep it at 3% to 4% for the whole year.

Okay. Let's talk a little bit, finally, about costs and pricing.

Okay.

You had a significant impact on the currency issue. How does that factor out over the next quarter, half year, and then over the next year? When do you start anniversarying that? And how do we think about the price increases that you've got to take on your China-sourced goods?

Okay. The price increase, we'll announce in this quarter, our third quarter, which will be effective for most of the fourth quarter, in terms of shipments. The price increase estimated impact on the quarter results is somewhere in the $0.5 million range, so a fairly significant impact. I mean, going forward, it depends on the Chinese government's position on strengthening the currency. Over the last year, it strengthened about 6.5% on a year-over-year basis. And we'll see what happens the next year. All indications are to us, that it will be somewhere in the 3% to 6% range again, over the foreseeable future.

So and -- I'm trying to quantify that impact in the quarter, I kind of -- between the cost increases and the currency impact, we kind of come up with about a $1 million drag in the quarter.

Yes. That's right, $800,000 to a $1 million, in terms of the raw material increases and currency impact.

Okay.

And then when you look at the mattress fabric, the raw material increases, somewhere around a 300 basis point impact. So these are significant increases that we've had to deal with. And so I think it makes the results, with just slight decreases in our overall profits and margins, pretty impressive given these factors we've had to deal with.

Okay. All right. Thank you very much. I'll cede my time to others, thank you.

Okay. Thanks, Budd.

Michael Corelli with Barry Vogel & Associates.

You had commented, I believe about the fourth quarter, saying that you expect it to be improved. Would that be improved versus last year, or improved versus the third quarter?

It would be improved versus the third quarter.

Okay. And as far as Culp Europe is concerned, you said 3% to 4% of sales and break-even for the year. So as far as the profitability in the upholstery fabric segment, which is down pretty dramatically in the quarter and the year-to-date, we should be looking at as more of a currency and a cost factor, and not as much of a Culp Europe drag? Or is it that the Culp Europe drag is going to become much less later in the year, but it's been a drag so far? How should we look at that?

About that way. That way.

Okay, so --

It's been a modest drag for the first half.

Okay.

Modest. And probably third quarter, could be a modest drag. But fourth quarter, with the things that we see happening and the start-up we've done, and a good bit of learning in this first year, we see it contributing nicely in the fourth quarter.

All right. And that would start, you think on a path to it, being a contribution going forward?

Correct, correct. But I will emphasize, Michael, it's -- we're very excited to be there, we've got some terrific opportunities with some of the largest players, that we certainly hope will, look like they're going to develop over the next three to six months. But it does take a while to go into a new market, with a new -- and new customers, new products -- it's just going to take a good full year to get our feet on the ground, and really make -- begin to make a meaningful contribution.

Are any of these customers that you currently serve in the US, or anywhere else that you --?

No, these are new customers, all new, new large ones. Not many of the US customers do we see -- hardly any in Europe -- to any degree, mostly -- it's mostly the larger. And we -- you look at our business, and we're a large company supplier. That's what we do best, whether it's a large company in bedding or furniture. So we're ideally suited. We have core competency in how to supply the larger customers. And we're seeing -- and I was just there two weeks ago -- just seeing a lot of receptivity with our presence in Europe. And I'd like it to result in more sales and more profit quicker. I would like to see that. But I'm really encouraged by what I'm hearing from particularly the larger customers, are glad to have a supplier like Culp, global supplier, significant China presence, strong financial position that can meet the larger company's needs.

Okay. And as far as your cash uses, obviously, you continue to buy shares here. You should continue to generate a nice amount of cash going forward, with your limited capital needs. So should we expect you to continue to buy shares? And is there a possibility that you may continue, after you utilize the authorization, and is a dividend being considered at this point also?

First of all, when you look at our history, the second six months of our fiscal year is usually, historically been the better cash flow period for us during the year. So that's why Ken mentioned, we continued to see very good cash flow outlook for the next six months. And as you pointed out, our CapEx is lower this year, a lot of it is already spent. So we look forward to a good second half of this year, in terms of free cash flow. Our first priority is to be able to complete the $7 million share repurchase authorization that we've got. And we'll continue doing that. We're not buying a great deal of shares every day with the volume limitations, but that's our first priority. After that, which is probably going to take a little while. It depends on the activity, but that could take still a few months. Then we will evaluate our capital allocation approach at that time. We'll look at our cash position. We'll look at our outlook. And I would say, all things are on the table.

Okay. All right. I will get back in line. Thank you.

Okay. Thank you, Michael.

Thanks.

(Operator Instructions). John Baugh with Stifel Nicolaus.

The stock market is up, so we're good today. (Laughter). I guess, I wanted to dive into the bedding for a second. And you mentioned two-thirds of the increase in revenue was selling price. I'm assuming the vast majority of that is mix, but I don't like making assumptions, so confirm that or?

That would be -- that would be correct.

And that -- would that mix shift be, because of a move to specialty sleep, because those covers are typically more expensive?

I would say the -- that really the mix shift is our own mix shift, higher percentage of our sales in knitted fabrics, knitted mattress fabrics, as opposed to woven fabrics.

And I wanted to ask you on that topic --

-- and knitted fabrics, go both on specialty, and they go on inner spring as well.

Yes. And that was my question was, are you seeing a conversion of inner spring to knitted as well?

Yes, but that's been going on. There's nothing new there. That's been going on for three years. You're seeing it on the top of the mattresses, for the knits, on the inner spring.

Okay.

Nothing new there.

Okay. And correct me, and I know you don't want to talk customers on a conference call, but my recollection was that Tempur-Pedic is not a customer of yours. But -- so do I have that right, number one? And then number two, are there any of the remaining major specialty players, where you're not, quote/unquote, well-positioned?

We -- we currently sell all the majors, so I can tell you that. And we do have, which has been publicly disclosed, and we do have a restriction on selling Tempur-Pedic knitted mattress ticking. We have a non-compete agreement still in effect, that relates to the acquisition of our knitted manufacturing operation back in 2008. So that expires in just under three years. So we are not able to sell toTempur-Pedic knits, but we can sell them any other fabrics.

Right.

So we are fortunate enough to sell all of the majors. And part of the sales growth this year, certainly is sales and share gains with all of them. And -- and the mid tier people, can not -- while the majority -- some 75%, 80% is the six largest folks, there's still a lot of business in the mid tier mattress makers. And we've concentrated on them, and making good gains there as well.

And then before I jump to upholstery, I would assume that the mix to specialty, and therefore the mix to higher price points in bedding, is net-net a good thing for you?

I would say it this way. We are really -- we're positioned to do either. I mean it's --

But if it goes that way -- (multiple speakers) -- by higher selling prices and --

We are positioned well, but particularly because those products tend to use -- but not always -- tend to use knitted fabrics, which we've expanded a lot in over the last several years.

Correct.

They also tend to use -- we're seeing some trend to upholstery fabrics, in some of the specialty areas. And of course, we're well-suited with that with our upholstery fabric business as well.

Yes. And then if we could talk about upholstery just for a second. Could you tell us what you're seeing between motion and stationary, as two general categories? And then refresh me on how that may or may not influence your business? Or do you not care, one category versus the other?

Okay. We sell both categories, obviously. But motion -- both categories are weak in the marketplace, but stationary is weaker than motion from our view. We are mostly a motion fabrics Company. The -- a majority of our fabrics are more in the motion customers, although we sell both.

Okay.

So we would -- and we -- so we, our view is, we're going to see the motion will continue as it has been, outperforming stationary.

And to steal Budd's favorite line is, I'm trying to plug weak into my calculator, and it's giving me, not applicable. (Laughter). What -- in your comment there, I think with industry-wide, is motion therefore still showing negative numbers? Is it flat? Slightly up? What do you think?

Well, we're better certainly, in the motion area. Better in the motion area, than the stationary, without a doubt.

And do you think that's up slightly?

Yes, that's up.

Okay.

I mean significantly, we're -- we're even though the business in the industry is not that good, we are extremely excited about all the placements. If business could ever turn, we've picked up so much share with the placements, with key customers, with the design we're doing with -- in our leather type products. It's just -- we just need business to pick up some. But in the meantime, while it's not picking up so much in the US, we're also moving internationally, with the Europe initiative, with local China market sales focus, and other countries like Australia, South Africa, some in the Middle East, to help us gain some sales, even if the US stays slow for a while.

Great. Thanks for answering my questions, Frank.

You bet. Take care.

(Operator Instructions). And we have no one else in the queue at this time, so I'd like to turn the call back over to our speakers for any closing comments. Actually, we just had Mr. Corelli from Barry Vogel Associates queue up.

Okay.

Hi, just a couple of follow-up questions. One, I know you've been working hard to try to break in Select Comfort. I know you've mentioned before in the bedding industry. And it sounds like it's possible, based on the sales increases, and some of your commentary, that maybe you're doing some business with them?

I think, Michael, what I'd say is, we do business with all of the major folks in the mattress fab -- in the mattress area now. And we'll leave it at that.

And that wasn't always the case, right?

Well, historically, yes. We, historically, we have not always sold Tempur or Select, that is true.

Okay. And as far as cash taxes, I mean how should we be looking at that this year?

15% to 18% --

Yes.

-- as Ken mentioned, and the cash taxes really represent our foreign taxes.

Right.

We paid no taxes currently. And for as far as the eye can see, for the US with a $60 million NOL. But we are paying taxes in Canada. We are paying taxes in China.

China.

And we'll start, when we start making a profit in Poland, we'll start paying taxes there. But the big places are certainly China, and then secondly, Canada.

And Michael, that's exactly why we broke that out, because we want to make sure everyone understands that we don't pay cash taxes in US. But you also have to know, that we do pay cash taxes in those foreign entities. So that's -- that's really the story behind that disclosure.

And as you can see from our numbers over the last several years, the accounting related to the US NOL --

It's very complicated.

It's very complicated. It's all over the board. First, you take it off, put all the evaluation allowance, and then you take it off. And it's just -- it's just very difficult to predict. But the key point, for shareholders is, we don't pay any taxes in the US.

Right.

Regardless of whether it's a tax benefit or tax expense. So that's why we wanted to break out this time, the effective cash rate if you will, which is our foreign tax -- our foreign tax rate.

Right.

And then lastly, just on the SG&A line, so with the investments in Europe and the currency impacts, I mean does it -- should we continue to anticipate elevated SG&A expenses?

Well, I think second quarter of last year was abnormally low. SG&A expenses second quarter were up slightly from first quarter. And you look third and fourth quarter, they will be up a little bit. They aren't going to be up meaningfully, like they were in the second quarter.

So up a little bit versus last year?

Yes.

Okay.

Because of Culp Europe, and a few other things, but nothing significant.

Okay. Thank you very much.

Thank you.

That does conclude our question and answer session. I'd like to turn the call back over to our speakers for any closing comments.

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

Thank you.

That does conclude our conference. And we really appreciate your participation.