Good day. And welcome to Culp's Second Quarter 2020 Earnings Conference Call. Today's call is being recorded. At this time for opening remarks and introductions, I’d like to turn the call over to Ms. Dru Anderson. Please go ahead.

Thank you. Good morning. And welcome to the Culp conference call to review the company's results for the second quarter of fiscal 2020. 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 Form10-K and Form 10-Q. You are cautioned not to place undue reliance on forward-looking statements made today and ache statement speaks only as of today. We undertake no obligation to update or to revise forward-looking statements. In addition, during this call, the company will be discussing non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the most directly comparable GAAP financial measurements is included in the schedule to the company's 8-K filed yesterday and posted on the company's Web site at culp.com. A slide presentation, which supporting summary financial information and additional performance charts, are also available on the Web site as part of the webcast of today's call. With respect to certain forward-looking free cash flow information, the comparable GAAP and reconciling information is not available without unreasonable efforts, and its significance is similar to the significance of the historical free cash flow information, which is available in the company's 8-K filed yesterday and posted on the company's Web site. I will now turn the call over to Frank Saxon, Chairman and Chief Executive Officer of Culp. Please go ahead, sir.

Thank you, Dru. Good morning, everyone and thank you for joining us today. I would like to welcome you to the Culp quarterly conference call with analysts and investors. With me on the call today is Iv Culp, President and Chief Operating Officer; Ken Bowling, our Chief Financial Officer; and Boyd Chumbley, President of our Upholstery Fabrics Business. As we previously announced, Iv will be taking over the role of CEO of Culp, effective January 1, and I will be assuming the role of Executive Chairman. These changes are part of our longstanding succession planning process designed to provide continuity and a natural leadership evolution as the company continues to execute its growth strategy. Having worked with Iv for over 20 years, I'm confident he is well prepared and has the vision, skills, experience and leadership capabilities necessary to be a great CEO. Iv will assume responsibilities for oversight of each of the company's divisions, while I will remain actively involved in day-to-day operations with specific responsibility for corporate shared services. I look forward to working with Iv as we transition to the new positions. I'll now begin the call with some brief comments, and 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 review the third quarter outlook and then we'll be happy to take your questions. We are pleased with our performance for the second quarter of this fiscal year. While we had a modest drop in overall sales compared with the prior year period, we had improved operating performance in both our mattress fabrics and upholstery fabrics businesses. We believe the domestic mattress industry is working to stabilize from the disruption related to low cost mattress imports from China, and the continuing variability in the market is evidenced in recent industry sales reports. We're monitoring the development and demand trends among our legacy mattress customers, and the rapidly growing rolled pack or boxed bedding segment. With our broad product mix and flexible manufacturing platform, we've been able to respond to these changing demand trends. Additionally, while our upholstery fabrics business has been affected by ongoing trade disputes and international tariffs, we were pleased with our ability to make supply chain adjustments to address these challenges and meet the needs of our customers. We also continued to refine our strategies for Culp Home Fashions, our finished products business. And we believe we are making some good progress in positioning this business for sequential improvement. We remain focused on leveraging this new online sales channel to expand our market reach with new products and customers. In each of our businesses, we're maintaining our product driven emphasis with an unwavering commitment to product innovation and creative design. With the support of our global platform, we are confident we can sustain our strong competitive advantage and respond to the changing demand trends of our diverse customer base. Importantly, we have the financial strength to pursue our growth plans and to continue returning funds to shareholders. We're proud to announce another dividend increase commencing in the third quarter, marking our seventh consecutive year of increasing the annual dividends. 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 that cover key performance measures. We have also posted our capital allocation strategy. Here are the financial highlights for the second quarter. Net sales were $72.6 million, down 5.7% compared with the prior year period. On a pre-tax basis, the company reported income of $4.1 million compared with pre-tax income of $4.3 million for the second quarter of last year. The financial results for the second quarter of last fiscal year included a net benefit of $543,000 in restructuring and related charges and credits and other non-recurring items due mostly to the closure of the company's Anderson, South Carolina, production facility. Excluding this net credit, pre-tax income for the second quarter of last year was $3.7 million. Net income attributable to Culp, Inc. shareholders was $2.3 million or $0.19 per diluted share for the second quarter compared with net income of $2.9 million or $0.23 per diluted share for the prior year period. The result for the second quarter of last fiscal year included the restructuring related credit I just noted. The effective income tax rate for the second quarter of this fiscal year was 46.2% compared with 29.8% for the same period a year ago. The increase in the company's effective income tax rate reflects a significant increase in the company's Global Intangible Low Taxed Income or GILTI Tax, which represents a U.S. income tax on the company's foreign earnings. A continued shift in mix of taxable income that is mostly earned by the company's foreign operations located in China and Canada at higher income tax rates in relation to the U.S. has also contributed to this increase in the company's effective tax rate. And importantly, income taxes incurred in the U.S. on a cash basis for this fiscal year are expected to be minimal due to the projected utilization of the company's U.S. Federal net operating loss carry forwards. Looking ahead for the rest of this fiscal year, we estimate that our consolidated effective income tax rate will be in the 45% to 48% range based on the facts we note today. The effective income tax rate can be affected over the fiscal year by the mix and timing of actual earnings from our U.S. operations and foreign subsidiaries located in China and Canada versus annual projections. Notably, the U.S. Treasury Department and Internal Revenue Service have issued newly proposed regulations that, if and when enacted and if enacted as proposed, could provide us with some relief from the GILTI tax under the proposed GILTI high tax exception election beginning in fiscal 2021 or later subject to the timing of the enactment. The proposed GILTI higher tax exception election is not available until the proposed regulations are finalized and effective. Trailing 12-month adjusted EBITDA at the end of second quarter of this fiscal year was $22.5 million or 7.6% of sales. Consolidated return on capital for the trailing 12-month period was 10.7%. Now let's take a look at our business segments, the mattress fabric sales were $35.5 million, down 4.7% compared to last year's second quarter. Operating income for the quarter was $3.3 million compared with $2.9 million a year ago with an operating income margin of 9.3% compared with 7.8% a year ago. We delivered an improved operating performance for the second quarter despite the modest decline in sales. Our recent investments in infrastructure and our focused efforts to rationalize both fabric and sewn cover production in the most cost-effective locations improved our operating efficiency. We also benefited from more favorable raw material prices compared with the second quarter last fiscal year. Return on capital for the trailing 12-month period for mattress fabrics was 16.2%. For the upholstery fabric segment, sales for the second quarter were $33.9 million, down to 3.2% over the prior year. Operating income for the quarter was $3.5 million compared with $2.7 million a year ago with an operating income margin of 10.2% compared with 7.8% a year ago. Our improved operating performance for the second quarter reflects the more favorable product mix due to the marketing success of our branded new products and diversification of our customer base to improve more hospitality business. We've also benefited from an unfavorable currency exchange rate as compared to a year ago. Return on capital for the trailing 12 month period for the upholstery fabric segment continues to be impressive, coming in at 61%. The Home Accessories segment, which includes the operations of eLuxury, reported $3.3 million of sales for the second quarter compared with $4.8 million a year ago. Operating loss for the quarter was $350,000, which was in line with expectations and sequentially improved from [$530,000] loss we experienced in the first quarter. We'll comment more on operating performance later. Here are the balance sheet highlights. We reported $47.2 million of total cash and investments and outstanding borrowings of $925,000 for a total cash position and total net cash position of $46.3million. For the first six months of this fiscal year, we incurred $2.4 million of capital expenditures and spent $2.5 million on regular quarterly dividends. Cash flow from operations and free cash flow was $8.2 million and $5.6 million respectively for the first six months of this year compared with cash flow from operation and free cash flow of $6.6 million and $3.6 million respectively for the prior year period. This reflects $1.6 million and $2 million year-over-year improvement in cash flow from operations and free cash flow respectively. The company did not repurchase any shares in the second quarter. With respect to our share repurchase program as reported last quarter, the board approved an increase in the authorization for the company's required common stock from $1.7 million previously available back to a total of $5 million. With that, I'll turn call back over to Frank.

Thanks Ken. I will start with the Mattress Fabrics segment. Our results for the second quarter reflect changing market dynamics as the mattress industry attempts to recover from the turmoil surrounding the influx of Chinese imports and the subsequent anti-dumping measures. While demand is softer in our legacy business, we experienced favorable demand trends for mattress covers from customers in the popular and expanding boxed bedding space. As a result, CLASS, our sewn mattress cover business, delivered an exceptionally strong performance for the second quarter and we are optimistic about additional opportunities with existing and new customers. Our robust supply platform for covers, including our production locations in the U.S., Haiti and Asia, supports diversification and creates the strong competitive advantage for Culp with the versatility and scalability necessary to serve our customers in an expanding global environment. Our ability to offer a broad product mix with a relentless commitment to product innovation distinguishes Culp in the marketplace. The recent addition of a dedicated innovation team ensures we're developing and offering the latest technologies and forward looking products to our customers. We've also expanded our creative staff to offer enhanced design capabilities that complement our innovation strategy, and we are releasing a new digital library platform during the third quarter to support our marketing efforts. We're excited about these opportunities to further leverage our capabilities and expand our reach. Looking ahead, we believe Culp is well positioned in the marketplace, especially as industry conditions improve with a more stable demand environment. We are meeting the changing demands of our customers with creative design, innovative products and an efficient global platform, with the critical abilities to provide vertical product offerings from fabrics to sewn covers. We also intend to expand the footprint of our CLASS sewn cover operations in Haiti and Asia during the second half of this fiscal year, giving us further flexibility and capacity for serving the needs of customers in the box bedding space. We look forward to the opportunities ahead in our mattress fabrics business. I'll now turn to the Upholstery Fabrics segment. Our sales in this segment were in line with expectations for the second quarter. The slight drop in sales over the prior year reflects the continued soft retail environment for residential partnerships, and ongoing issues surrounding the international trade agreements and the associated tariffs, as well as the loss of a product category due to the closure of our Anderson, South Carolina manufacturing facility during the second quarter of last fiscal year. We're satisfied with the execution of our plants during the quarter as we benefited from strong product innovation. We experienced favorable demand trends from our residential and furniture customers for our popular line of highly durable stain resistant LiveSmart performance fabrics. Our recent introduction of LiveSmart Evolve, a new line of fabrics featuring the same performance, combined with recycled fibers, has been very well received as a product that fulfills the desires of environmentally conscious consumers. We are focused on promoting these brands and are pleased with the strong customer placements for these products, following a successful October furniture market. We also recently launched a new outdoor product line, LiveSmart Outdoor, which pairs performance with the ability to withstand the outdoor elements. This product line builds on the strength of our LiveSmart brand and has been well received at recent showings. Additionally, our overall sales reflect growth trends within our hospitality customers as we continued to expand our market reach into this segment. Read Window Products, or RWP, our window treatment and installation services business, supports this strategy and we are optimistic about the future contribution from RWP. We have also recently strengthened our creative team to further support our commitment to creating innovative products and creative designs that meet the changing demands of our customers. Additionally, we've made supply chain adjustments and product engineering changes to mitigate the impact of recently imposed tariffs and to meet the needs of customers. We've continued to develop our strategic partner relationships in Vietnam for additional sourcing of our cut and sewn kits, and we will further pursue this opportunity, along with other sourcing options to support our customers through the ongoing trade disputes between the U.S. and China. Going forward, while geopolitical uncertainties remain, we're optimistic about the opportunity for Culp. We believe we have a strong strategy in place for upholstery fabrics and are very well positioned for the long term. Next I'll review our newest business segment, Culp Home Fashion. The sales and operating performance for our Home Accessories segment were in line with expectations as we further refined our business model. We are working diligently to execute new strategies with a more aggressive approach to the business-to-business market, along with greater customer diversification and new online retail marketplaces. We have implemented key initiatives that are already driving improvement and creating greater long term opportunity. We also remain dedicated to improving our performance on Amazon, a principal sales channel for our legacy e-commerce business. As noted in recent press reports, the Amazon Marketplace and many other trusted third party sellers have been affected by new sellers operating outside of Amazon's normal terms of service. We are collaboratively discussing several options and rationalizing our offerings to enhance the sales channel. In addition, we continue to develop new products that are synergistic with the company's core businesses. And we're excited about the opportunity to leverage the sales channel and reach new customers for Culp. Tim will now review the outlook for the third and fourth quarters and the second half of this fiscal year, and then we'll be glad to take your questions. In the outlook, I will comment specifically on the expectations for the third quarter but I will also touch on the fourth quarter given how we see our businesses performing during the second half of this fiscal year. We expect overall sales to be comparable to the third quarter of last year. We expect mattress fabric sales to be slightly down and operating income and margins to be moderately down compared to the third quarter last year. The third quarter is a traditionally slower sales period and is affected by the loss of multiple weeks of production and distribution for our CLASS covered business as a result of government mandated holiday shutdowns in Haiti, and the timing of Chinese New Year. The impact of these seasonal shutdowns during this period are greater this year as compared to the third quarter of last fiscal year, because the CLASS sewn cover business is a more significant part of our current operations. For the fourth quarter of this fiscal year, we can expect sales to increase slightly and operating income and margins to be significantly up as compared to the fourth quarter of last fiscal year. We anticipate benefits from a return to strong through for CLASS cover business, continued improvement in overall industry conditions and improved operating efficiencies across all product lines. As a result, we expect sales for the second half of this fiscal year to be comparable to sales as compared to second half of last fiscal year and operating income and margins for the period are expected to be moderately higher as compared with the second half of the prior year. In our Upholstery Fabrics segment, we expect third quarter sales and operating income and margins to be comparable to the same period last year. Similarly, for the second half of this fiscal year, we also expect sales and operating income and margins to be comparable to the second half of last fiscal year. In our Home Accessories segment, we expect third quarter sales to be slightly down compared with third quarter of last fiscal year. We expect an operating loss for the quarter but with meaningful improvement as compared to the second quarter. For the fourth quarter, we expect operating performance to be near breakeven as we continue to refine our strategies and focus on higher margin products. Considering these factors, as well as increased unallocated corporate expenses due mostly for the comparison to last year's reversal of accrued incentive compensation costs, the company expects to report pre-tax income for the third quarter in the range of $3.2 million to $3.8 million, excluding any restructuring and related charges or credits and impairment charges, if any. Pre-tax income for last year's third quarter was $4.3 million, which included a net charge of approximately $769,000 in restructuring in related charges and credits, and other non-recurring items. Excluding these charges, pre-tax income for the third quarter of last fiscal year was $5 million. The company currently expects our performance for the fourth quarter of this fiscal year to be significantly better than the results achieved in the fourth quarter of last fiscal year. And as a result, our performance for the second half of this fiscal year is currently expected to be better than results achieved during the prior year period. Based on our current budget, capital expenditures for fiscal 2020 are expected to be in the $7.5 million to $8 million range and depreciation and amortization is expected to be approximate $9 million for the year. Additionally, given the current outlook, free cash flow for fiscal 2020 is expected to be comparable to last year results, even with an uncertain geopolitical environment. As a reminder, cash flow from operations last year was $13.9 million and free cash flow for the year was $11.5 million. With that, we'll now take your questions.

[Operator Instructions] We will now take our first question from Bobby Griffin of Raymond James. Please go ahead, your line is open.

This is Alessandra Jimenez on for Bobby Griffin, thank you for taking our questions. First, can you update us on how the hospitality business is performing within the upholstery segment and how the Read Window Products integration is progressing?

Yes, this is Boyd, and we'll be happy to update you on that. We remain very pleased with the Read Window Products business and the hospitality business overall. We continue to see growth in that segment within our overall Upholstery Fabrics business. And Read Window Products, in particular, of course that acquisition has expanded our product capability to include Window Products in addition to the furniture fabrics that we were previously supplying into that segment. So we are very pleased with that and it continues our strategy to become a more full service provider to the hospitality market. So yes, we remain very positive about hospitality in general and Read in particular. We think in both areas of that, we expect to see further growth and very optimistic for that going forward.

And then can you talk about what the growth prospects of the hospitality business look like from an M&A standpoint?

We certainly are continuing to assess if there are other acquisition candidates available in this area, that's something that we are certainly staying abreast of focused on. We are continuing to see and evaluate if there's something further there that would make sense for us. And so we would stay, like to stay focused in that area and see if there's some candidates.

This is Frank, I'll add to that. And as we said on earlier calls, we would be very interested in putting more capital to work in this space. As Boyd said, we're very pleased with the Read acquisition and the management team and opportunities that we see there and definitely interested in M&A opportunities as we look ahead.

And then lastly for me, what are your expectations for mattress imports in calendar year '20? And are you concerned with the level of mattress imports that have shifted to other countries?

Alessandra, this is Iv, I really appreciate that question. And something that we are checking on pretty much every day, and you are right. The volatility and we speak about it in the press release, is continuing. And while there was a nice boost, certainly China imports have reduced and has been a nice boost to our sales numbers. But looking forward a lot that business is being relocated to other countries, primarily in Asia or other places. So it's something to keep an eye on, it's something we definitely are concerned about for the domestic market, and we'll watch it very closely. A little bit different looking forward on it is we have got such a great platform, really a robust platform, both in covered and mattress fabrics already with Culp China and what we're doing in Vietnam, that we really are seeing an opportunity to capture fabric and even covered business on those imported sales going forward. So it's much different perspective for us, perspective as we look out, we certainly would rather the business be domestic, but if it's not, we have ways of capturing our products on those imports, which we didn't have before.

[Operator Instructions] We will now take our next question from John Baugh of Stifel. Please go ahead.

I wanted, if I guess continue on the bedding topic on a couple things here. One, is you mentioned a lot is being relocated to other countries. Is it your view or is it just too early to call that virtually all the units from China that were coming in, will be replaced elsewhere around the world and with the U.S. producers were really pick-up nothing, or fractional or any early read on that?

I'm certainly not the expert to know that, and it is probably a little bit early to call. But I would say, we have been surprised at how much of the business that was currently -- previously imported from China has relocated to other countries. So I think the jury's still out as to whether those other countries can support it, both service wise and cost wise and quality wise as China did. So I do think there is business to be gained for domestic producers. But from internal perspective, we really do see a lot of opportunities to pick up business in these other import countries. So I'm not nearly as worried about it as I was previously, but it is something we have to march really close to see how much ends up sticking back in the U.S.

And then you mentioned the yin and yang between legacy and box bids. And I guess the question is on a margin basis for Culp, is that favorable trade as you look at it, neutral, unfavorable?

John, I think what the way I would talk about that is, there's a yin and yang in legacy, and rolled packed. And really just as we look at full industry, the industry overall sales reports were slightly negative for the last three months. And I think there's just been some companies that are doing very well and some that are not. And so as a full service full industry supplier, we're kind of feeling that. We've seen some high wins and seen some lows customer-to-customer. I do think for, generally speaking, very favorable for us to more at moves to roll pack, some covered type of business, because we are having more value in the ultimate finished product. So instead of just being a fabric we're a fabric and a selling operations, this is giving more value to the customer and allowing us to participate more in the overall cost of the product.

And then maybe the upholstery question here, gross profit margins are terrific latest quarter and six months of the lead, and I think you elucidated a few reasons there. But I guess the question simply is, how much of this is just -- how much of this is sustainable? How much of it repeats? Or can it even get stronger from here? And you're doing this with obviously some more tepid volumes, and all the tariff noise on top of it. So I'm curious as to what the longer range gross margin outlook for upholstery might be?

John, this is Boyd. To the standpoint that it's associated with our product mix, which as you know we are very focused on innovation and design, creativity, that's a big focus and strategically for us from a product standpoint. And from that standpoint, I think this is sustainable in that we are seeing growing business in our performance category of products. And as we've already started we're seeing growing percentage of our business in the hospitality segment, so both of those things are contributing to the increased profitability from a mix standpoint. We also this quarter and in some other quarters has benefited from some currency, questions of where that goes from here of course but what was some benefit to this quarter from that. So I think there is some combination of both that we really feel good about the strategic focus on innovation, product direction, but that will continue to drive good profitability for us.

Thanks Boyd. And then maybe Ken, could you touch on inventories. Look like they're purely substantially and kind of what drove that and sort of the next six months what the number looks like?

John, they are up really two areas, one in our Home Fashion business and also in eLuxury. The eLuxury side was a strategic increase related to the holiday season with new products. So we're hoping that will be burned through here as we go through the second half. With regard to mattress fabrics, that's one that the team is focused on and dedicated to get it down in the third quarter. And so we're working on that as we kind of rationalize our production schedules during the third quarter. But that's certainly how the list of projects that we need to focus on as we go into the third quarter.

And then last question for you or Frank. Can you refresh our memory on sort of where -- what price you were buying stock in at? And what thoughts you have in that regard with the equity where it's trading today? Thank you.

John, I think our key and our capital allocation strategy, which we published on the Web site. As you know, the highest priority for us are investing in our own businesses and looking at M&A opportunities. And as we just said previously, we do see opportunities in expanding the hospitality area. So that's high on our list before other capital allocation items like repurchasing stock. Now we did repurchase some a little earlier this year, [Ken]. We purchased some and that was in the 15 [multiple speakers] we expect the full range in 15, that was the range -- I don't remember exactly. But it's out there and we do have a [10b5]. And we've always said in terms of stock repurchase we are an opportunistic buyer. But our priority definitely is expanding, putting some of the capital and we're fortunate to have to work in the business. And we do see opportunities and hospitality, and that could take -- it will take some capital when the right opportunity comes along.

[Operator Instructions] We will now take our next question from Marco Rodriguez with Stonegate Capital Markets. Please go ahead.

I wanted to follow up on the prior couple of questions here just on the M&A landscape as it relates to the hospitality business. I mean, this is an area that obviously you guys have been doing fairly well with Read Windows, something you've talked about as far as looking to allocate capital for additional acquisitions, it's been maybe about a year since we've been discussing this. Just kind of wondering, what have been sort of the holdups when it comes to these potential opportunities you had out there? Is it a valuation issue, or other sort of integration type stumbling blocks that have kind of kept you guys from pulling the trigger there?

And I think as we said earlier, we are optimistic in that space. However, before tackling the next Read Windows, so to speak, we wanted to get couple of things behind us. We wanted to see the Mattress Fabrics business and the impact of the low cost mattresses we wanted to see that stabilize. And as Iv mentioned, we're beginning to see that. And we think we'll be in a better place by the start of next fiscal year on that industry trend. And secondly, we wanted to learn more and be sure we knew well lot better the hospitality business. And the Read acquisition was 18 months ago, and we continued to learn a lot about that business, not only Read, and we gained a lot of knowledge. And I think that we will be ready by next fiscal year to do that. It has not been a valuation issue it's just been management priorities. And we wanted to, as you know and we said, we are focusing on the eLuxury acquisition and we'd like to see that improve. And it is improving over the last quarter and we see further improvement. So we'd like to get that back to close to break even before tackling something else.

Then in terms of the eLuxury and the Home Accessories segment, you guys do seem to remain pretty confident in the strategies you're rolling out there to kind of get that business to show top line growth, and then obviously to start to show profitability there. I was just wondered if maybe you can talk a little bit about that acquisition, just kind of from a high level, how you're thinking about the success compared to maybe the way you were thinking about it when you first made the acquisition? And then if you could possibly talk about conservatively, where do you think you can drive that business to where it becomes a significant driver for Culp overall?

Marco this is Iv, that's really excellent questions, and just a point of technicality. eLuxury for us is an investment versus a total acquisition. We still have really strong partners and we're working within that business that we're thrilled and excited with the way they're operating and thinking about the business. But you are right, different than we expected when we first made the investment. And I first would say there are a lot of things going well. We have really great performance with our B2B business. We're having really solid performance from a lot of new e-commerce channels. We're having a lot of really great success with some private labeling that we're doing for different customers. What's really set us back and we didn't expect was the impact of the major e-commerce channels, primarily Amazon. We saw that business to be pretty stable and would be the most exciting part of the business. And then we were pack in the bolt-on synergistic add through our operations that would make it just perform even better. But we've had to kind of reshuffle that, because Amazon has not targeted us directly, but there's been so many resellers that have found their way on to that marketplace, outside of the normal terms of service and have hijacked different listings or impacted our listings or fake reviews of their own, just become a much more competitive landscape in that major market, which is really what we invested in. So we were proud of the changes we've done. We firmly believe we're going to take this thing to a breakeven in this fiscal year. Maybe even, I believe, we can potentially start showing some profit. But there are so many things going right from the B2B synergistic standpoint and the way we're supplying that business, we need the major market that just surprised us to get back on track, and we're collaboratively working on that with we think the right contracts. But we need to prove that we can turn that around.

And in terms of the gross margin performance that you had here in the quarter, another very solid quarter. On the Mattress Fibric side, you guys have pointed out obviously the operational efficiencies and some raw material help. On the upholstery side, you had product mix, as well as FX, which I think you called out is another help in Q1. Can you maybe help us quantify some of those buckets just where those -- where you're seeing the most leverage these gross margin performances here in the first half?

Marco, this is Ken. It's hard to quantify. As we pointed out, there is significant impact this quarter. I mean, the mix issue on the upholstery side is something that has been developed overtime. The currency is one that is also definitely contributed, but that can go either way. Sometimes it's kind of hard to quantify. On the mattress side, the changes that we have made recently and also the changes that were made previously, has certainly helped and so -- but there's a lot of things going on. And of course, as we look ahead, the impact of shut downs and vacations and things like that will have an impact as well. But it's just -- we don't call them out, because they're very difficult to quantify and we do talk about sustainability that's Boyd touched on, and the risk of foreign exchange. But we just really don't go there, because it's really difficult to get it to exactly the way we want it.

No further questions over the phone at this time.

Okay. Thank you everyone for joining us on the call today. And we'll look forward to updating you after our third quarter. Have a great day.

This concludes today's call. Thank you for your participation. You may now disconnect.