Culp, Inc. (NYSE:CFI) Q4 2019 Earnings Conference Call Transcript

Jun 13, 2019 • 11:00 am ET

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Culp, Inc. (NYSE:CFI) Q4 2019 Earnings Conference Call Transcript

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Presentation
Executive
Franklin N. Saxon

accessories and home goods. We are continuing to learn about and develop this new platform, which supports both business-to-consumer and business-to-business sales of finished bedding accessory and home goods products. As Ken noted, our operating results were affected by additional product roll-out cost for new products as well as reduced demand for legacy products, primarily mattress pads. We believe this legacy business was affected by the import turmoil in the mattress industry. We're encouraged by more recent sales trends on legacy products, as well as our progress related to new product introductions. We remain excited about and are committed to opportunities to capitalize on new products and this new sales channel for Culp.

Ken, will now review the outlook for the first quarter and then we'll take your question.

Executive
Kenneth R. Bowling

At this time, we expect overall sales to be slightly higher as compared with the first quarter of fiscal 2019. The first quarter of fiscal 2020, we'll have one more week than the first quarter of the prior year or 14 weeks compared with 13 weeks. We expect mattress fabric sales to be moderately up compared with the first quarter fiscal 2019, and operating income and margins also are expected to be moderately up as compared with the previous year's first quarter.

In our upholstery fabrics segment, we expect first quarter sales to be moderately down compared with the first quarter of last year as we continue to operate in an environment of trade uncertainty and soft retail demand. Operating income and margins are also expected to be moderately down compared with the same period a year ago.

In our home accessories segment, we expect first quarter sales to be moderately up compared with the fourth quarter of fiscal 2019, with no full period of comparison for the first quarter of fiscal 2019 based on the June 22, 2018 investment date for eLuxury. We expect an operating loss for the first quarter that is comparable to the fourth quarter of fiscal 2019. Considering these factors, the company expects to report pre-tax income for the first fiscal quarter of 2020 in the range of $2.5 million to $3.2 million. Pre-tax income for last year's first quarter was $1.9 million, which included $2.0 million in restructuring and related charges.

Based on current projection, capital expenditures for fiscal 2020 are expected to be in the $6.5 million to $7.0 million range, as we continue with a maintenance level of capital expenditures. We expect depreciation and amortization to be approximately $9 million for fiscal 2020. Finally, we expect another good year of free cash flow comparable to the prior year.

With that, we'll now take your questions.