Dru Anderson - Investor Relations Frank Saxon - President and Chief Executive Officer Ken Bowling - Chief Financial Officer Iv Culp - Division President, Mattress Fabrics

Bobby Griffin - Raymond James John Baugh - Stifel Marco Rodriguez - Stonegate Capital Markets

Good day, and welcome to the Culp’s First Quarter 2019 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the conference over to Ms. Dru 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 first quarter of fiscal 2019. 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 this morning, and each such statement speaks only as of today. We undertake no obligation to update or revise forward-looking statements. In addition during this call, the Company will be discussing non-GAAP financial measurements. A reconciliation of the non-GAAP financial measurements to the most directly comparable GAAP financial measurements is included as a schedule to the Company's 8-K filed yesterday and posted on the Company's Web site at culp.com. A slide presentation with supporting summary financial information and additional performance charts are also available on the Company's Web site as part of the webcast to today's call. I will now turn the call over to Frank Saxon, President and Chief Executive Officer. Please go ahead, sir.

Thank you, Dru, and good morning everyone. And thanks for joining us today on the call. 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 and Iv Culp, our Division President of the Mattress Fabrics Business. I'll begin the call with some brief comments and then Ken will then review the financial results for the quarter. I'll then update you on the strategic actions in each of our segments. After that, Ken will review our second quarter fiscal '19 business outlook and then Iv, Ken and I will be happy to take your questions. As expected, our results for the first quarter reflect challenging bedding industry conditions, resulting primarily from the significant increase of low-priced imported mattresses from China. We estimate now that total mattress imports represent approximately 20% of U.S. industry shipment, up substantially over the last few years. We are pleased however that even with substantially lower sales of mattress fabrics from a year ago we achieved an operating income margin in this business of 8%. Additionally, we are optimistic that the U.S. bedding industry could benefit in the near term from relief on the U.S. trade laws to address this situation. If and when such action would occur, we believe it will favorably affect our business and the domestic mattress industry going forward. With regard to our upholstery fabrics business, we were pleased with the improved sales performance for the first quarter, which included additional contribution from the Read Window Products Company acquired at the end of last fiscal year. Overall, our operating performance for the first quarter was affected by lower sales in mattress fabric and unfavorable currency exchange rate in China, and the impact of closing our Anderson, South Carolina upholstery fabrics operations. While we are experiencing considerable headwinds, we are optimistic that we will begin to see improvement in our quarterly results in the second half of the fiscal year. The incremental sales from Read and our upholstery fabrics business and the expected contribution in sales to our mattress fabrics segment from our investment in eLuxury completed during the first quarter, will support our product-driven and diversification strategy. For both businesses, we remain focused on offering creative designs and innovative products that meet the changing demand of our customers. Importantly, we have the financial strength to support our business in this current environment, and we are well positioned for continued growth as market conditions evolve. I’ll now turn the call over to Ken who will review the financial results for the quarter.

Thanks, Frank. As mentioned earlier on the call, we have posted slide presentations to our Investor Relations Web site to cover key performance measures. We have also posted our capital allocation strategy. Here are the financial highlights for the first quarter; net sales were $71.5 million, down 10% compared with prior year. Pretax income for the first quarter was $1.9 million compared with $6.7 million last year; pretax income margin was 2.7% compared with 8.5% a year ago. Impact in the quarter were divisional gross profit pressures, which we will cover in more detail shortly, somewhat offset by a significant reduction in SG&A due primarily to much lower incentive compensation costs as compared to the same time last year. These results also included $2 million in restructuring related charges for the plant closure of our Anderson, South Carolina facility. Excluding these restructuring related charges, pretax income for the first quarter was $4 million. Importantly, the pretax results included a full quarter of operating performance for Read Window Products and only five week for eLuxury given the timing of the transaction closing. Net income attributable to Culp Inc. shareholders for the quarter was 957,000 or $0.08 per diluted share, compared with $5 million or $0.40 per share last year. Again, the results for the first quarter included $2 million in restructuring and related charges. The effective income tax rate was 46.5% for the quarter compared with 24.3% for the first quarter of last fiscal year. The increase was primarily due to the mix of pretax income favoring our foreign income tax jurisdictions that are taxed at higher income and withholding tax rates compared to the U.S. federal statutory rate of 21%. Looking ahead to the rest of this fiscal year, we estimate that our consolidated effective income tax rate will be in the 33% to 35% range based on the facts we know today. Also, as commented on last quarter, we have approximately $7 million in NOLs to apply against this year's U.S. taxable income. This fact coupled with the ability to now immediately expense all U.S. capital expenditures is expected to result in minimal U.S. cash taxes paid this fiscal year. This expectation excludes the mandatory repatriation tax payments that began this fiscal year and are spread over eight years. These expectations are based on facts we know today. Trailing 12 months adjusted EBITDA was $32.7 million or 10.4% of LTM sales compared with $38.1 million or 12.4% of LTM sales for the same period a year ago. LTM consolidated return on capital was 21.4% compared with 28.8% a year ago. Now let's take a look at our two businesses. For mattress fabrics, sales were $37 million, down 24% compared to last year's first quarter. Operating income was $2.8 million compared with $6.4 million a year ago with an operating income margin of 7.6% compared with 13.1% a year ago. Operating income was primarily pressured by lower sales, which impacted manufacturing efficiencies and fixed costs absorption, offset somewhat by lower incentive compensation expense. LTM and return on capital from mattress fabrics was 28.6%. For upholstery fabric, sales for the first quarter were $34.5 million, up 11% over the prior year. Operating income was $2.5 million for the quarter compared with $2.9 million for the same time last year. Operating income margin was 7.3% compared with 9.3% last year. The decrease in operating income and margins was primary affected by an unfavorable currency exchange rate in China. LTM return on capital for the upholstery fabrics business was 53.7%. Here are the balance sheet highlights. We reported $39.3 million in total cash and investments and $4 million outstanding on the Company's line of credit for net cash position of $35.3 million. During the first quarter, we spent $2.2 million of capital expenditures including vendor financed payments, funded $11.6 million for the reinvestment and spent $1.1 million on regular dividend. Consistent with the first quarter previous years, we borrowed funds for working capital requirements at the beginning of the first of fiscal year and we expect to reduce this outstanding debt as soon as possible. The Company repurchased approximately 3, 000 shares at the end of the first quarter at an average price of about $24 per share, leaving 4.9 million available under the share repurchase program. With that, I'll turn the call back over to Frank.

Thanks Ken. And I'll start with Mattress Fabrics segment. As expected, our sales for the first quarter reflect the significant disruptions and uncertainties surrounding the mattress industry compared with conditions a year ago. We've continued to face soft demand trends related to the rapid growth of low-cost imported mattresses from China. The influx of these products has significantly disrupted the domestic mattress business and affected many of our customers. As a leader in mattress fabrics and sewn covers, we felt a disproportionate impact with reduced orders from our major customers during the first quarter. In addition, ongoing changes with a large mattress retailer have created more uncertainty throughout the industry supply chain, which also affected our distribution. Despite these challenges, we continue to see consistent placements from customers, and we have strong established customers' relationships and expect to see our business normalize as these market conditions improve. We've remain focused on our product diversification strategy with a favorable product mix of mattress fabrics and sewn covers. Although, we experienced lower sales for our class business, our mattress fabric cover business compared to the first quarter last year, we are pleased with the recent trends. We are expanding our business with existing customers and we are also seeing orders from new customers in the growing boxed bedding space. We are well-positioned to support this business with global production facilities in North Carolina, Haiti, and China. We recently launched our new line of bedding accessories marketing under the brand name Comfort Supply Company by Culp, and we remain excited about the opportunities to extend our market reach in this area. As we have identified additional marketing channels, we have also implemented the new digital marketing strategy and expanded our social media presence to enhance Culp's brand awareness and increased sales, especially with younger consumers. During the first quarter, we completed our previously announced majority ownership investment in eLuxury, an ecommerce company offering bedding accessories and home goods direct to consumers. This strategic investment substantially expands our addressable market. It provides an important new sales channel for Culp in the bedding accessories and home goods area and it expands our ability to participate in the rapidly growing e-commerce direct-to-consumer space. We have already developed and are beginning to launch our Phase 1 product offering, which we are also -- and we are creating innovative new items to be marketed through this exciting platform. We believe eLuxury will enhance our strong value proposition and we expect to see meaningful sales contribution from this business category by the second half of this fiscal year. We have been aggressive over the past two years as we have worked to create a sustainable, efficient platform with enhanced capacity and distribution capability. The flexibility and scalability of this platform have served us well, especially during the difficult market conditions we faced in the first quarter. We continue to focus on maximizing the efficiency of our operations and aligning our costs in tandem with current and expected demand. In addition, we have reduced our capital expenditure budget for the year and deferred certain projects to next year. Overall, our manufacturing and service platforms are in excellent condition worldwide, and we're excited about the benefit we will realize from our recent work. Looking ahead, we see continued uncertainty in the near term in the mattress industry that could affect short-term demand trends and our operating performance. We are optimistic, however, that the proposed relief being sought by the bedding industry under U.S. trade laws to address the impact of imported low-priced mattresses from China will be favorable for our business. Assuming such actions if and when they are done or successful and factoring in the incremental sales from eLuxury, we expect our mattress fabrics business and operating performance will improve in the second half of this fiscal year. We have a solid core business and a strong competitive position across all product categories from fabric to sewn covers. Furthermore, we have a comprehensive strategy in place to expand our market reach with complementary products and new sales channels. Now, I’ll turn to the Upholstery Fabric segment. Our Upholstery Fabric sales were in line with expectations for the first quarter of this year with an 11% growth in sales compared with the first quarter a year ago. Our ability to execute our product driven strategy and diversify our customer base has been the key driver of sales performance. Culp's creative designs and innovative products continue to resonate with our global customer base. Our results reflect consistent organic growth with our China produced fabrics as we continue to see favorable demand trends for our popular line of performance fabrics. Our sales for the quarter also included the first full quarter of financial results for Read Window Products. And we are very pleased with the successful integration of this business as we achieved our anticipated financial and operating objectives for the quarter. Looking ahead, we're excited about the additional growth opportunities Read provides as we extend our reach further into the hospitality market. We continue to diversify our sales with additional end-user markets and customers, as well as expand our sales in certain other geographic markets. Additionally, we are pleased with the continued growth of fabrics sold for stationary, furniture applications in the residential area. As expected, our operating performance for the first quarter was primarily affected by unfavorable currency exchange rate in China. Although, we did see some benefits from a weakening currency late in the quarter and that has continued into the second quarter. In addition, we incurred $2 million in restructuring related charges for the previously announced closing of our Anderson, South Carolina facility. We expect to recover, most of these costs over the next two quarters from the sale of our plant and equipment in Anderson with anticipated proceeds of $1.7 million to $2 million. Also, we are on schedule to cease production in Anderson at the end of August. Looking ahead, currently the impacts of proposed tariff are uncertain. We continue to monitor this situation and the potential impact on our business and if additional tariffs would be implemented, we'll determine an appropriate response at that time. Additionally, we continue to monitor the gradual increase in raw material costs in China. Despite these uncertainties, we believe Culp is well-positioned to benefit from the uptick in demand and home furnishings and the more stable market conditions. Ken will now review the outlook for the second quarter and then we'll take your question.

We expect overall sales to be down approximately 5% compared with the second quarter of last year, which includes contributions from our two recent acquisitions. We expect sales, operating income and margins in our mattress fabrics segment to show sequential improvement but to be lower than the second quarter of last fiscal year. Assuming bedding industry relief materializes on the U.S. rate laws and business conditions improve, we expect to see more normalized trends in the second half of this fiscal year that are more in line with the prior year. In our Upholstery Fabrics segment, we expect sales to be slightly higher compared to the same time last year. Operating income and margins are expected be slightly up compared with the same period a year ago assuming more favorable trends in currency exchange rate and the elimination of operating losses associated with the Anderson facility. Considering these factors, the Company expects to report pretax income for the second fiscal quarter of $3.6 million to $4.6 million, excluding any restructuring related charges and credits. Pretax income for last year’s second quarter was $6.2 million. Our performance for the second half of this fiscal year is currently expected to be more in line with results achieved during the second half of last fiscal year. Based on our current budgets, capital expenditures for this fiscal year expected to be in the $6 million to $6.5 million range as we have moved to a more maintenance level of capital expenditures. Depreciation and amortization, including stock-based compensation for this fiscal year is expected to be approximately $9 million. With that we'll now take your questions.

[Operator Instructions] And we will take our first question from Bobby Griffin from Raymond James.

So first, I want to maybe just think about it a little bit more high level. But assuming we get some type of trade release in the next three weeks and months, or month or so, here on imports from China. What is the steps in there that happens during the process, and when could we actually start to see the duty put in place and maybe some of the relief in the import numbers that we monitor from the trade organization?

I'll be glad to relate what I hear, I’m certainly not a trade lawyer but -- and we're not part of the petitioner group but we do hear a general outline of the timetable. So the key dates, it seems to us, are from the date of the filing 45 to 60 days following that the Department of Commerce will issue a preliminary ruling. And then from that date the next key point -- so that’s a significant time. So it's relatively short timeframe where a preliminary ruling is issued. Then another key date is when the cash deposits on duties begin to be put in place, and that’s in the range of four to six months from the filing date. Having said that, what we hear, experience teaches folks is that you can begin to see some impact certainly around or possibly before the preliminary ruling date. In fact, we're hearing some things already that where some customers are beginning to think about realignment of their supply chains, which give us as a positive sign in our view. So I think that’s the two key dates, Bobby, the preliminary ruling and then when cash deposits begin to be realized. So what that means to us is why we said second half of the year, we believe we are going to begin to see some relief beginning in our third quarter and hopefully in the beginning of the third quarter, which is the month of November. Certainly, more of it go in the fourth quarter, fourth fiscal quarter, which is February to April.

I did also want to touch on the Anderson facility and the closures. From a modeling standpoint, just to help us think about it. Last year, Anderson was about 6% of upholstery sales. Is there opportunity to make up some of those sales with the China platform? Or should we just assume that 6% goes away over the next four quarters as we will roll pass the closure?

No, I think we're seeing organic growth continued organic growth from our China produced sales, definitely believe we're going to make some of that up, maybe not all but certainly some, because what happened is we've been able to replace those placements with China produced products with certain customers.

And then I guess lastly from me, I know it's still early on. But maybe any color or early learnings with the eLuxury acquisition, if you care to share. And maybe could be helpful if -- when I guess the timeframe of when we could maybe start seeing some of the cross-selling efforts take place between some Culp products in the eLuxury Web site and brand?

I think that's a great question for Iv. So Iv has responsibility for the eLuxury business, and he is working closely with them.

We're probably or for sure, I’m more excited about that investment for Culp and for eLuxury than we were, when we started researching it. It's been so far a terrific eye opening experience for us and we see really innumerable opportunities. I have already learnt a lot from Paul Saunders and his team, and Paul is the CEO of eLuxury. And just to understanding and us learning what it means to get high quality products available to be listed in a high quality way and then sold with some intention has been very helpful to us. So we have all the tools we need; we have terrific products of our own; we have great sourcing relationships that we can leverage around the world and just the matter how much we can do and how quickly can do it on. It does take some time to get things listed properly and to get things in the right keywords, and things to drive the sales. But we’re already in process with five or six stage one products a couple of those have already hit the websites and more to be coming. And it's important to note, these also through our eLuxury owned branded site, as well as all the other marketplace places, including Amazon and others where we'll have success. So we’re thrilled about that, it's coming. It just takes a little time to get it marketed well, so that should start impacting us very imminently.

I appreciate the color, and good to hear that it's off to a great start. I'll go ahead and jump back in the queue. And best of luck through the remainder of your fiscal year.

And Bobby, I'll add just a couple of comments to Eve's comments. And we are, as he said, we're we were just really excited about the working with the Paul and his team. We're more exciting today than we were in the initial stages. The culture of Paul's business and our business seemed have fit already like a glove working together, they've already, Eve and Paul have already been to China, looking at product development opportunities. We're learning a lot working with Paul and the team, and just it's off to a very good start. And we're pleased and it's just going take a little time to get things going, get the supply chains working. But one of the strengths we talked about in this marriage was that Culp has such broad product capability from China, the Hades or the U.S., Upholstery Fabrics, Mattress Fabrics and we have a lot and lots of opportunities to develop product they can go over eLuxury and the other marketplace. So it's just a couple of added comments there.

I appreciate it, thanks. Thank you again and best of luck for the remainder of the fiscal year.

Moving on, we'll take our next question from John Baugh with Stifel.

I was curious and maybe this is for Eve. Have your bedding customers, in your few, got there inventory down fully to reset for all the turmoil? Or is there a further pain to go there in Q2 or beyond?

Without having full visibility of that, I do believe that a lot of progress was made in that with that over Q1. We do see a better situation today and looking forward and we already expect to see that and with Labor Day around the corner, we’re optimistic for a good holiday there. So yes, I think there are in general, much better position but there are some programs that were scheduled to launch over the summer. And for us Q1 is a typically very strong quarter and Q1 has involved a lot of holiday in the high summer sales. And there probably are few things that may not recover, and then may be some inventory in the system than they have to be discounted and covered. But for us at Culp, we have a very high emphasis on inventory in Q2 and we’re going to making solid adjustment to there. It's big emphasis for us and with a little wind in the sales, no pun intended, in the real we can do it faster.

And then we are right upon the important Labor Day event, and there is so much statics or noise in your results in the bedding industry, in general. I'm wondering if there's any sense from your seat what kind of Labor Day we're going have, in terms of if you were somehow able to take out the mattress firm noise and expecting yourself from the low-end Chinese imports, which have accelerated here according to customs data. Is there any way to discern how the marketplace is close excess factors, or that’s just not an analysis you can do?

Yes, I think it's hard for me to see and to be able to tell. Although, we see and we forecast sequential improvement for Q2, it's hard to decipher exactly where that's coming from. I do think it's important, we referenced that our sales for Q1 was across the board, it wasn’t really just impacted by a certain customer or a certain retail. It was really across all segments we sell that were somewhat depressed. As Frank mentioned, we already see some supply chain realignment going on; there is opportunities coming for some supply chain shift; we do think retail will be stronger; and Labor Day, we expect the stronger business. But in general, there is more activity and more developments happening that feels real to us. So no one whether that’s Labor Day promo or just a general improvement, it's hard to tell.

And then my last question is China, and maybe we can talk currency first and what you anticipate the impact there swift back half for next few quarters? And then -- I don’t know what might happen if we got 25% tariff, what steps would you take, and how would you think that might impact your business? How fast can you adjust assume there will be some negative impact to earnings but just curious your thoughts around that and your planning around that, if any?

We will take the currency piece first, the currency over the last four months, as you know, has probably moved significantly weakened ¥6.3 for the dollar through this morning just over 6.8. So we -- our view is and it's not worth a lot, but I’ll tell you our view is that as these trade discussions are going on and a weakening of the Chinese economy, it is probably going to stay weaker. Don't know if it will get any weaker than it, but it's moved a lot already which certainly helps us a weaker currency. So we are certainly hoping it will stay in this, potentially weaken further. That may depend upon the level of tariffs that ultimately come down. The more tariffs they come down, it seems to us the weaker the currency, and vice versa. In terms of the tariffs, our view is in looking at other negotiations that are happened in the current administration that there is likely to not end up at 25%. It's likely to end up at something considerably less. And let's say if it ends up at 10%, which was the original proposal then that’s a manageable level the currency has already moved almost that much already from 6.3 to 6.8. Speculating, if there were to be 25%, I think some of the outcomes that that might be, that will really be punitive mostly on finished goods imports of furniture into the U.S., which would be in a way helpful to us. When we look at the global upholstery fabric supply chains, there really isn't any other country. And as we've said on this call numerous times, we're constantly looking around the globe to look at other sources, whether it's India or Turkey or Malaysia or Indonesia, South Korea wherever Mexico. And there just aren't any other good sources of upholstery fabrics reliable, as cost-effective as China, even domestic there is not. Even with 25% increase if that would happen, we just don't see where we would go. It's going to stay in China and us, it will affect all the players and people will have to raise their prices. But again I just don't think our view is that's not going happen and there will be something less than that.

Thanks for your answers and good luck.

John, one other thing people talk a lot about Vietnam, there is no upholstery fabric in Vietnam. So you've seen case goods go there, you hear about furniture. So that’s not the place people can go. What China did to the U.S. textile industry and the European was wipe-out the houses, big fiber mills, milling plants, it wiped out the infrastructure. So there is just not a lot other places to go for us, we'll continue to look at that as well.

[Operator Instructions] Moving no, we'll take our next question from Marco Rodriguez from Stonegate Capital Markets.

A real quick follow-up on that prior question on the tariffs in China, I was wondering if maybe you could delve in a little bit and discuss what you can. The pricing between yourselves and the furniture, the finished goods furniture guys, assuming that we do have a worst-case scenario where tariff rates are ultimately high, which just called that 25% rate and the prices of furniture has to go up. What are in your contract between yourselves and the furniture people there, and what levers you have that help that?

I think the only way I think I will answer that Marco is a rule of thumb that we've always used in the industry is upholstery fabric represents about 20% of the wholesale price of furniture. So that gives you some idea of where that could see them. So it's not going to be, it will be some increase to the finish furniture but maybe not a great deal since so it's only 20% of the price. Does that give you that give you some relative indication of it?

And then speaking on the upholstery fabrics looking at your guidance here for revenues in Q2, just slightly higher compared to Q2 of '18. Just trying to think through here, I mean obviously, you've got the Read acquisition that should be adding anywhere from $2.5 million to $3 million of additional revenue. Is that impact what I’m reading for slightly higher? Is that because of the Anderson facility is losing up those revenues? Can you help me think through that?

That’s exactly right, in the second quarter we have the significantly lower sales related to Anderson. So we are having a consistent effect of Read Window Products and also we are having some organic growth on the China produce side. But what's all saying that it’s a big drop in sales associated with Anderson.

And are there going to be any other additional charge you're seeing from the Anderson facility closure or are we done?

Maybe some, I mean charge wise, there is always a change that there maybe a little bit more severance or maybe very unlikely some digital inventory write downs. The main issue there is the amount of income that we're going to receive from the sales, equipment and plant that’s going to happen over the coming quarters. We guided $1.7 million to $2 million. So it's feasible with everything hits the way we hope and think that we could offset the initial $2 million pretty closely.

And will those numbers -- where will they show up in on your P&L?

If its inventory, it will be what we call related again but if it’s a sale of equipment or additional severance, it will be as a charge or a credit to the restructuring expense line item.

Then moving here real-quick here to the mattress fabrics. So I was wondering if you could just talk a little bit more about your comments on the mattress covers just the bed in the box industry. It sounds like you're getting some more traction. I think you said you signed some additional clients or won some more business. Can you just talk a little bit about how that industry is progressing for you guys, also in respect to of the dumping from the Chinese imports? And then if you have any special marketing or any marketing campaign that you might be undergoing here in the near term to accelerate that market share there?

This is Iv. And I’ll jump on that one first. We're really excited about our cotton sale business. And as we've thought about the industries for some time that was really our first step on the mattress fabrics side and there is some diversification to get into cotton sale and taking our products down another level and we're working on that more as we do eLuxury housings to get further down that chain with our products. But the cotton sale has been a terrific entrée for us. And even though some of those customers that took to that product were also have been struggling for us too, there's a lot of momentum around that business and there's a lot of opportunity that we feel. And forever we've had a lot of development in that space, but so many bed and box companies have come and gone and some have lasted. And it's been a lot of development but maybe not as much traction in some cases. And some of the big guys are now winning and we feel positioned well to do right there. What's making us so confident about that business, there’re two things; first, we do think outside of normal bed in box that everyone knows about, the companies we hear more and more beds we feel are going to go that format for convenience of delivery. So even the major traditional brands and others will do more of that product, so that’s optimistic for us, plus we just feel like we have unparalleled supply chain with really quick service, great location in North Carolina, combined with medium speed service in Haiti and what's becoming a fantastic platform from us. And then layered on third leg with our cut-and-sew platform in China, just gives us three really three strong ways to address the market. So cut-and-sew and roll packed beds feels like a very optimistic future for Culp.

[Operator Instructions] And at this time, it appears there are no further questions.

Okay, thank you, operator. I just have one concluding comment I would like to make. One thing you've heard us talk about today and in our press release, we're very pleased with the diversification of our sales, whether it's the class business that Iv has talked about eLuxury, Read, we're making a lot of progress in various markets and that diversification strategy. And we're quite optimistic about how we see the future, the Chinese import situation is temporary in our view and it will pack. So just wanted to sure everybody knows how we look at the future from our standpoint. Thank you, Operator. And again, thank everyone for your participation and your interest in Culp, and we look forward to updating you on our progress next quarter.

And at this time, this will conclude today’s conference. We do thank everyone for their participation. The audience may now disconnect.