Q2 2026 Culp Inc Earnings Call

December 11, 2025

Speaker #1: Good day, and welcome to the Culp Inc. second quarter fiscal 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: Good day and welcome to the Culp Inc. Q4 FY 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw the question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Dru Anderson. Please go ahead.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone star then two.

Speaker #1: Please note this event is being recorded. I would now like to turn the conference phone over to Dru Anderson. To withdraw the question, please press 'go ahead.'

Speaker #2: Good morning, and welcome to the CULP conference call to review the company's results for the second quarter of fiscal 2026. 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.

Dru Anderson: Good morning and welcome to the Culp conference call to review the company's results for Q2 of fiscal 2026. 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. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results.

Speaker #2: 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.

Speaker #2: These risks and uncertainties are described in our regular FEC filings, including the company's most recent filings on form 10-K and form uncertainties that we do not presently know about or that we currently consider to 10-Q.

Speaker #2: our business operations and financial results. You are cautioned not to place undue reliance on forward-looking statements made today. And each such statement speaks only as of today.

Dru Anderson: You are cautioned not to place undue reliance on forward-looking statements made today, and each such 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 tables to the press release, included as an exhibit to the company's Form 8-K filed yesterday and posted on the company's website at culp.com. An investor relations presentation is also available on the company's website as part of the webcast of today's call. I will now turn the call over to Robert Culp, President and Chief Executive Officer of Culp. Please go ahead.

You are cautioned not to place undue reliance on forward-looking statements made today, and each such 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 tables to the press release, included as an exhibit to the company's Form 8-K filed yesterday and posted on the company's website at culp.com. An investor relations presentation is also available on the company's website as part of the webcast of today's call. I will now turn the call over to Robert Culp, President and Chief Executive Officer of Culp. Please go ahead.

Speaker #2: 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 tables to the press release included as an exhibit to the company's Form 8-K filed yesterday and posted on the company's website at additionalrisksandweculp.com.

Speaker #2: An investor relations presentation is also available on the company's website as part of the webcast of today's call. I will now turn the call over to IV CULP, President and Chief Executive Officer of CULP.

Speaker #2: Please go ahead.

Speaker #3: Thank you, Dru. Good morning, and thank you to everyone for joining us today. With me on the call is Ken Bowling, our Chief Financial Officer.

Robert Culp: Thank you, Dru. Good morning and thank you to everyone for joining us today. With me on the call is Ken Bowling, our Chief Financial Officer. Before I begin, Robert Culp, I do want to briefly pause and wish one of our longest and most loyal investors, John Baum, a happy birthday. John, we appreciate you and wish you all the best. I will now begin the call with some detailed comments. As mentioned in the introduction, we have posted a slide presentation to our website. It provides some information that is supplemental to what we will speak about today and to our results and strategies. That slide presentation is simply entitled "CULP INC Q2, FY26 Supplemental Information." Ken will then review the financial results for the quarter, and after that, I'll briefly review our business outlook for the remainder of fiscal 26, and we will take some questions.

Iv Culp: Thank you, Dru. Good morning and thank you to everyone for joining us today. With me on the call is Ken Bowling, our Chief Financial Officer. Before I begin, Robert Culp, I do want to briefly pause and wish one of our longest and most loyal investors, John Baum, a happy birthday. John, we appreciate you and wish you all the best. I will now begin the call with some detailed comments. As mentioned in the introduction, we have posted a slide presentation to our website. It provides some information that is supplemental to what we will speak about today and to our results and strategies. That slide presentation is simply entitled "CULP INC Q2, FY26 Supplemental Information." Ken will then review the financial results for the quarter, and after that, I'll briefly review our business outlook for the remainder of fiscal 26, and we will take some questions.

Speaker #3: Before I begin, Robert Larks, I do want to briefly pause and wish one of our longest and most loyal investors, John Baum, a happy birthday.

Speaker #3: John, we appreciate you and wish you all the best. I will now begin the call with some detailed comments. As mentioned in the introduction, we have posted a slide presentation to our website.

Speaker #3: It provides some information that is supplemental to what we will speak about today and to our results and strategies. That slide presentation is simply entitled "CULP Incorporated: Second Quarter Fiscal Year 26 Supplemental Information." Ken will then review the financial results for the quarter.

Speaker #3: I'll briefly review our business outlook for the remainder of fiscal 2026, and after that, we will take some questions. At a headline level, our results for the second quarter were similar to our first quarter.

Robert Culp: At a headline level, our results for Q2 were similar to our Q1 in the sense that we continued our push to improve our operating performance and make significant progress throughout our business in the face of challenging macro conditions. It's well documented and likely familiar to all of you that the home furnishings industry has been abysmal from an actual unit sold perspective. The tide generally remains out for housing and related furniture purchases, and we are improving our business gradually and in spite of these conditions. While we are seeing some encouraging signs of demand stabilization and sales growth in our bedding business, we have still yet to see the broad market recovery across home furnishings that many in the industry think could soon be pending.

At a headline level, our results for Q2 were similar to our Q1 in the sense that we continued our push to improve our operating performance and make significant progress throughout our business in the face of challenging macro conditions. It's well documented and likely familiar to all of you that the home furnishings industry has been abysmal from an actual unit sold perspective. The tide generally remains out for housing and related furniture purchases, and we are improving our business gradually and in spite of these conditions. While we are seeing some encouraging signs of demand stabilization and sales growth in our bedding business, we have still yet to see the broad market recovery across home furnishings that many in the industry think could soon be pending.

Speaker #3: In the sense that we continued our push to improve our operating performance and make significant progress throughout our business in the face of challenging macro conditions.

Speaker #3: It's well documented and likely familiar to all of you that the home furnishings industry has been abysmal from an actual unit sold perspective. The tide generally remains out for housing and related furniture purchases, and we are improving our business gradually and in spite of these conditions.

Speaker #3: While we are seeing some encouraging signs of demand stabilization and sales growth and are betting on business, we have still yet to see the broad market recovery across home furnishings that many in the industry think could soon be pending.

Speaker #3: The macroeconomic data remains stubbornly low, with consumer confidence down based on a variety of factors and the housing market working through challenges, including some of the highest levels of unsold homes in years as well as higher interest rates.

Robert Culp: The macroeconomic data remains stubbornly low, with consumer confidence down based on a variety of factors and the housing market working through challenges, including some of the highest levels of unsold homes in years, as well as higher interest rates. There is acute pressure on housing affordability, which continues to put downward pressure on unit sales across the entire industry. We illustrate some of these dynamics and impacts on pages 12 through 18 of our supplemental deck, which again is posted on our website. In the face of a difficult top line environment, we've continued to focus on two overarching strategies at CULP: winning market share and adjusting our cost structure to both achieve profitability in the current market cycle and position CULP to accelerate growth when conditions ultimately improve without the need for additional investment.

The macroeconomic data remains stubbornly low, with consumer confidence down based on a variety of factors and the housing market working through challenges, including some of the highest levels of unsold homes in years, as well as higher interest rates. There is acute pressure on housing affordability, which continues to put downward pressure on unit sales across the entire industry. We illustrate some of these dynamics and impacts on pages 12 through 18 of our supplemental deck, which again is posted on our website. In the face of a difficult top line environment, we've continued to focus on two overarching strategies at CULP: winning market share and adjusting our cost structure to both achieve profitability in the current market cycle and position CULP to accelerate growth when conditions ultimately improve without the need for additional investment.

Speaker #3: There is acute pressure on housing affordability, which continues to put downward pressure on unit sales across the entire industry. We illustrate some of these dynamics and impacts on pages 12 through 18 of our supplemental deck, which again is posted on our face of the difficult top-line website.

Speaker #3: In the environment, we've continued to focus on two overarching strategies at CULP. Winning market share both achieves profitability and positions CULP to accelerate growth when conditions ultimately improve without the need for additional investment.

Speaker #3: That last point is one I'd like to re-emphasize, because with the adjustments platform, which we will talk about in detail today, we have made modifications to optimize our capacity to absorb additional production driven by any uptick in demand, without the need to spend significant capital dollars.

Robert Culp: That last point is one I'd like to re-emphasize because with the adjustments we've made to optimize our platform that we'll talk about in detail today, we have the capacity to absorb additional production driven by any uptick in demand without the need to spend significant capital dollars. Our team has been aggressive, and we have made great progress on both of these key strategies. With respect to market share, we believe that our ability to sequentially increase our overall sales in Q2, despite having one less week than Q1, and to increase sales in our bedding segment both sequentially and year over year in this demand environment are a testament to our growing share with key customers. Our stylish and innovative products, along with our global platform for bedding and upholstery fabrics, continue to provide a unique and increasingly valuable proposition for customers.

That last point is one I'd like to re-emphasize because with the adjustments we've made to optimize our platform that we'll talk about in detail today, we have the capacity to absorb additional production driven by any uptick in demand without the need to spend significant capital dollars. Our team has been aggressive, and we have made great progress on both of these key strategies. With respect to market share, we believe that our ability to sequentially increase our overall sales in Q2, despite having one less week than Q1, and to increase sales in our bedding segment both sequentially and year over year in this demand environment are a testament to our growing share with key customers. Our stylish and innovative products, along with our global platform for bedding and upholstery fabrics, continue to provide a unique and increasingly valuable proposition for customers.

Speaker #3: Our team has been aggressive, and we have made great progress on both of these key strategies. With respect to market share, we believe that our ability to sequentially increase our overall sales in the second quarter, despite having one less week than the first quarter, and to increase sales in our betting segment both sequentially and year over year in this demand environment are a testament to our growing share with key customers.

Speaker #3: Our stylish and innovative products, along with our global platform for betting and upholstery fabrics, continue to provide a unique and increasingly valuable proposition for customers.

Speaker #3: Moreover, we believe that the consolidation activity we are seeing downstream especially in the betting market bolsters our competitive position with key customers. Our experience has been that larger customers generally gravitate to the reliability of suppliers with compliant multi-location manufacturing flexibility.

Robert Culp: Moreover, we believe that the consolidation activity we are seeing downstream, especially in the bedding market, bolsters our competitive position with key customers. Our experience has been that larger customers generally gravitate to the reliability of suppliers with compliant multi-location manufacturing flexibility, scale-driven cost advantages, and above all, the proven track record of product innovation and on-time performance that we offer. The supply chain complexities presented by the new global trade and tariff landscape actually provide us with additional competitive advantages, particularly as the pace of new tariff implementation settles and we have more time to react with product strategies and pricing adjustments. Recent evidence of this are the surcharges and cost adjustments we will be implementing in response to the most recent round of increased and, in some cases, unexpected tariffs on Turkey, Haiti, and other imports during Q2.

Moreover, we believe that the consolidation activity we are seeing downstream, especially in the bedding market, bolsters our competitive position with key customers. Our experience has been that larger customers generally gravitate to the reliability of suppliers with compliant multi-location manufacturing flexibility, scale-driven cost advantages, and above all, the proven track record of product innovation and on-time performance that we offer. The supply chain complexities presented by the new global trade and tariff landscape actually provide us with additional competitive advantages, particularly as the pace of new tariff implementation settles and we have more time to react with product strategies and pricing adjustments. Recent evidence of this are the surcharges and cost adjustments we will be implementing in response to the most recent round of increased and, in some cases, unexpected tariffs on Turkey, Haiti, and other imports during Q2.

Speaker #3: Scale-driven cost advantages and above all, the proven track record of product innovation and on-time performance that we offer. The supply chain complexities presented by the new global trade and tariff landscape competitive advantages.

Speaker #3: Particularly as the pace of new tariffs actually provides us with additional implementation windows, we have more time to react with product strategies and pricing adjustments.

Speaker #3: Recent evidence of this are the surcharges and cost adjustments we will be implementing in response to the most recent round of increased, and in some cases unexpected, tariffs on turkey, Haiti, and other imports during the second quarter.

Speaker #3: As we've said before, the winners and a fluid trade environment are very likely to be companies that can give customers multiple geographic manufacturing options to better navigate tariff impacts.

Robert Culp: As we've said before, the winners in a fluid trade environment are very likely to be companies that can give customers multiple geographic manufacturing options to better navigate tariff impacts. Unlike some of our competitors, we've been very intentional over the years in building out a multi-location strategy with robust domestic manufacturing, as well as nearshore and multiple offshore operations. A map of our manufacturing and sourcing locations is included on page 19 of the supplemental slide deck. Today, for mattress fabric products, we have our expanded US platform for production, finishing, and distribution, as well as long-time supply partners in Turkey and Asia. For cut-and-sewn mattress cover products, we have our nearshore production in Haiti, which is situated directly on the border of the Dominican Republic, as well as Asia supply chains in both Vietnam and China.

As we've said before, the winners in a fluid trade environment are very likely to be companies that can give customers multiple geographic manufacturing options to better navigate tariff impacts. Unlike some of our competitors, we've been very intentional over the years in building out a multi-location strategy with robust domestic manufacturing, as well as nearshore and multiple offshore operations. A map of our manufacturing and sourcing locations is included on page 19 of the supplemental slide deck. Today, for mattress fabric products, we have our expanded US platform for production, finishing, and distribution, as well as long-time supply partners in Turkey and Asia. For cut-and-sewn mattress cover products, we have our nearshore production in Haiti, which is situated directly on the border of the Dominican Republic, as well as Asia supply chains in both Vietnam and China.

Speaker #3: Unlike some of our competitors, we've been very intentional over the years in building out a multi-location strategy with robust domestic manufacturing, as well as nearshore and multiple offshore operations.

Speaker #3: A map of our manufacturing and sourcing locations is included on page 19 of the supplemental slide deck. Today, for mattress fabric products, we have our expanded US platform for production finishing as long-time supply partners in Turkey and Asia.

Speaker #3: For cut and sewn mattress cover products, we have our nearshore production in Haiti, which is and distribution as well situated directly on the border of the Dominican Republic.

Speaker #3: As well as Asia supply chains in both Vietnam and China. In upholstery, we have a well-established Asia presence with solid and growing Vietnam supply options for both fabrics and sewn kits.

Robert Culp: In upholstery, we have a well-established Asian presence with solid and growing Vietnam supply options for both fabrics and sewn kits. We also continue assessing various options in other parts of the world. Notably, only approximately 30% of our China-produced fabrics ship in the US, so we have some protection currently from fluctuating tariffs in that scenario. For window treatments, we have our US platform for drapery and roller shades, as well as several strategic supply partners. Bottom line, there is no slam-dunk strategy for handling the current tariff environment, but we believe our global production footprint, improved ability to pivot our platform as necessary, provide customers with country of origin and speed-to-market optionality that is unique, and we can provide them preferred delivery and customer service wherever they want to be supplied.

In upholstery, we have a well-established Asian presence with solid and growing Vietnam supply options for both fabrics and sewn kits. We also continue assessing various options in other parts of the world. Notably, only approximately 30% of our China-produced fabrics ship in the US, so we have some protection currently from fluctuating tariffs in that scenario. For window treatments, we have our US platform for drapery and roller shades, as well as several strategic supply partners. Bottom line, there is no slam-dunk strategy for handling the current tariff environment, but we believe our global production footprint, improved ability to pivot our platform as necessary, provide customers with country of origin and speed-to-market optionality that is unique, and we can provide them preferred delivery and customer service wherever they want to be supplied.

Speaker #3: And we also continue assessing various options in other parts of the world. Notably, only approximately 30% of our China-produced fabrics ship in the US.

Speaker #3: So we have some protection currently from several strategic supply scenarios. For window treatments, we have our U.S. platform for drapery and roller shades, as well as fluctuating tariffs in that.

Speaker #1: We believe our global production footprint and ability to pivot our platform as necessary provide customers with country of origin and speed to market optionality.

Speaker #1: That is and we can provide them unique preferred delivery and customer service wherever they be supplied want to . We feel strongly that tariffs can ultimately be advantage for into an turned but the pace of legislative change creates a compensate lag with pricing and or before we can product strategy .

Robert Culp: We feel strongly that tariffs can ultimately be turned into an advantage for Culp, but the pace of legislative change creates a lag before we can compensate with pricing and/or product strategy. Turning to our operating performance for the quarter, I'd like to take a moment to review everything our team has done to drive the improvement we've seen in recent periods. There has been a truly formidable amount of work done on our platform, beginning with the restructuring project completed last fiscal year. That project was quite comprehensive and involved the consolidation of our North American bedding operations, including the closure and sale of our Canada facility, expansion of knitting and finish capacity to our US facility, transition of our Danmask lines to a sourcing model, consolidation of our Haiti cut-and-sew operations, and the reduction of our bedding workforce by almost 35%.

We feel strongly that tariffs can ultimately be turned into an advantage for Culp, but the pace of legislative change creates a lag before we can compensate with pricing and/or product strategy. Turning to our operating performance for the quarter, I'd like to take a moment to review everything our team has done to drive the improvement we've seen in recent periods. There has been a truly formidable amount of work done on our platform, beginning with the restructuring project completed last fiscal year. That project was quite comprehensive and involved the consolidation of our North American bedding operations, including the closure and sale of our Canada facility, expansion of knitting and finish capacity to our US facility, transition of our Danmask lines to a sourcing model, consolidation of our Haiti cut-and-sew operations, and the reduction of our bedding workforce by almost 35%.

Speaker #1: Turning to our operating performance for the quarter, I'd like to take a moment to review everything our team has done to drive the improvement we've seen in recent periods.

Speaker #1: There has been truly formidable amount of work done on platform , beginning restructuring project completed last our fiscal year . That project was quite comprehensive and a the involved consolidation of our North American betting including the operations , closure and sale of our Canada facility .

Speaker #1: Expansion of knitting and finished capacity to the U.S. facility. Transition of our lines to sourcing our damask. Consolidation of our operations in Haiti.

Speaker #1: Cut and model sew operations . And the reduction of our betting workforce by almost 35% . We also rationalized our upholstery finishing operation in China and significantly reduced our overall administrative G&A expenses .

Robert Culp: We also rationalized our upholstery finishing operation in China and significantly reduced our overall administrative SG&A expenses as part of the project. A summary of those actions is detailed on page 8 of the supplemental deck. We continue to expect approximately $11 million in annualized cost, $11 million in annualized cost savings and efficiency gains from this project, and we've already seen those gains begin to reflect in our financial performance over the prior several quarters. The actions in our bedding platform have been particularly impactful, with gross profitability in that business almost tripling year over year in the first half of fiscal 2026 and driving over 20% improvement in our consolidated operating results for the quarter. We followed up that restructuring project with an initiative to integrate our two former standalone divisions, mattress and upholstery, or what we used to call CHF and CUF, into a unified CULP-branded business.

We also rationalized our upholstery finishing operation in China and significantly reduced our overall administrative SG&A expenses as part of the project. A summary of those actions is detailed on page 8 of the supplemental deck. We continue to expect approximately $11 million in annualized cost, $11 million in annualized cost savings and efficiency gains from this project, and we've already seen those gains begin to reflect in our financial performance over the prior several quarters. The actions in our bedding platform have been particularly impactful, with gross profitability in that business almost tripling year over year in the first half of fiscal 2026 and driving over 20% improvement in our consolidated operating results for the quarter. We followed up that restructuring project with an initiative to integrate our two former standalone divisions, mattress and upholstery, or what we used to call CHF and CUF, into a unified CULP-branded business.

Speaker #1: As part of the project . A summary of those actions is detailed on page deck eight of the supplemental . continue to We expect approximately 11 million in annualized cost , $11 million in annualized cost savings and efficiency gains from this project already seen those .

Speaker #1: begin to reflect in our financial performance over the prior several quarters . The actions in our betting platform have been particularly impactful And we've with gross profitability in that business almost tripling year over year in the first half of fiscal 2026 .

Speaker #1: And driving over a 20% improvement in our consolidated operating results for the quarter. We followed up that restructuring project with an initiative to integrate our two former standalone divisions, Mattress and Upholstery, or what we used to call CHF and QF, into a unified CULP Inc. branded business.

Speaker #1: substantive The actions of this reorganization are detailed on ten of the page deck supplemental . As part of this integration , which we are calling Project Blaze , we transitioned our division presidents into company Chief Commercial Officer and Chief Operating officer roles blended other and operations , resources and personnel .

Robert Culp: The substantive actions of this reorganization are detailed on page 10 of the supplemental deck. As part of this integration, which we are calling Project Blaze, we transitioned our division presidents into company-wide chief commercial officer and chief operating officer roles and blended other operations, resources, and personnel. We are also in the final stages of transitioning our US upholstery distribution and window treatment operations from leased facilities into our owned campus in Stokesdale, North Carolina. Both of these consolidations are on track to begin positively impacting our results in late Q3 and the remainder of the second half of fiscal 2026. Together with other integration initiatives, they are expected to generate annualized cost savings and efficiency gains of approximately $3.5 million. We also recently implemented price adjustments intended to address baseline tariff uncertainty and rationalize gross margins.

The substantive actions of this reorganization are detailed on page 10 of the supplemental deck. As part of this integration, which we are calling Project Blaze, we transitioned our division presidents into company-wide chief commercial officer and chief operating officer roles and blended other operations, resources, and personnel. We are also in the final stages of transitioning our US upholstery distribution and window treatment operations from leased facilities into our owned campus in Stokesdale, North Carolina. Both of these consolidations are on track to begin positively impacting our results in late Q3 and the remainder of the second half of fiscal 2026. Together with other integration initiatives, they are expected to generate annualized cost savings and efficiency gains of approximately $3.5 million. We also recently implemented price adjustments intended to address baseline tariff uncertainty and rationalize gross margins.

Speaker #1: We are also in the final stages of transitioning our U.S. upholstery distribution and window treatment operations from leased facilities into our owned campus in Stokesdale, North Carolina.

Speaker #1: Both of these consolidations are on track to begin positively impacting our results in late Q3 , and the remainder of the second half of fiscal 26 .

Speaker #1: And together with other integration initiatives , are expected to generate annualized savings and efficiency cost gains of approximately $3.5 million . recently We also adjustments price address intended to baseline tariff uncertainty and rationalize gross margins .

Speaker #1: expect We these adjustments to generate approximately $2.5 million in annualized margin improvement in betting segment , and that began in late And as second quarter .

Robert Culp: We expect these adjustments to generate approximately $2.5 million in annualized margin improvement in our bedding segment, and that began in late Q2. As I previously mentioned, we are initiating additional surcharges and other product strategies in response to new tariffs during the quarter that will be effective in late Q3 and all of Q4. Importantly, we are not done with our work to enhance our operating profile and generate profitability across market cycles, including the current one. We are moving forward with additional measures involving the reduction of our leased facility footprint in China that should be completed this fiscal year, and we are identifying further SG&A and other cost reductions.

We expect these adjustments to generate approximately $2.5 million in annualized margin improvement in our bedding segment, and that began in late Q2. As I previously mentioned, we are initiating additional surcharges and other product strategies in response to new tariffs during the quarter that will be effective in late Q3 and all of Q4. Importantly, we are not done with our work to enhance our operating profile and generate profitability across market cycles, including the current one. We are moving forward with additional measures involving the reduction of our leased facility footprint in China that should be completed this fiscal year, and we are identifying further SG&A and other cost reductions.

Speaker #1: I previously mentioned that we are initiating additional surcharges and other product strategies in response to new tariffs. That will be effective in late Q3.

Speaker #1: And all of Q4, importantly, we are not done enhancing our work to improve our operating profile and generate profitability across markets, including the current one.

Speaker #1: We are moving forward with additional measures involving the reduction of our leased facility footprint in China completed this fiscal year that should be .

Speaker #1: are identifying further SGA and other cost reductions commensurate with our warehouse consolidation . We have also worked to rightsize and effectively manage inventory , recognizing some non-cash impairments and related charges .

Robert Culp: Commensurate with our warehouse consolidation, we have also worked to right-size and effectively manage inventory, recognizing some non-cash impairments and related charges in Q2, while focusing on turning aged inventory into cash and filling our warehouse with strategic inventory that our customers prefer. As we eventually move into Q4 and then to fiscal year 2027, we will have a much cleaner and strategic inventory and distribution platform in North Carolina to better service our markets and customers. From an all-in perspective, starting with our restructuring project in fiscal 2025 and continuing through the completion of these other initiatives I mentioned, we expect to enter fiscal 2027 with a benefit of over $20 million in annualized cost savings and enhancements going forward. The overall summary of this is on page 11 of the supplemental deck.

Commensurate with our warehouse consolidation, we have also worked to right-size and effectively manage inventory, recognizing some non-cash impairments and related charges in Q2, while focusing on turning aged inventory into cash and filling our warehouse with strategic inventory that our customers prefer. As we eventually move into Q4 and then to fiscal year 2027, we will have a much cleaner and strategic inventory and distribution platform in North Carolina to better service our markets and customers. From an all-in perspective, starting with our restructuring project in fiscal 2025 and continuing through the completion of these other initiatives I mentioned, we expect to enter fiscal 2027 with a benefit of over $20 million in annualized cost savings and enhancements going forward. The overall summary of this is on page 11 of the supplemental deck.

Speaker #1: In Q2, while focusing on turning aged inventory into cash, we are filling and warehouse our inventory strategically based on what our customers prefer. As we eventually move into Q4 and then to fiscal year '27, we will have a much cleaner and strategic inventory and distribution platform in North Carolina to better service our markets and customers.

Speaker #1: From an all in perspective . Starting with our restructuring project in fiscal 25 and continuing through the completion of these other initiatives , I mentioned , we expect to enter fiscal 27 with the benefit of over $20 million in annualized cost and savings enhancements going forward .

Speaker #1: The overall summary of this is on page 11 of the supplemental deck. I am extremely proud of how our team has embraced the challenge in history, conditions, and sees the opportunity to transform our business into a leaner and more agile organization.

Robert Culp: I am extremely proud of how our team has embraced the challenge in its reconditions and seized the opportunity to transform our business into a leaner and more agile organization. Turning to our bedding business specifically, summarized on page 5 of the supplemental deck, the sales momentum we have recently seen in that business, again, including both sequential and year-over-year growth during the quarter, is highly encouraging. A lot of this activity was generated by some nice trends in our knit fabric and sewn cover product lines, which are areas we believe we have a lot of white space to drive profitable growth with our restructured bedding platform. We feel good about our current product offerings in this business and believe that our go-to-market strategies are on point.

I am extremely proud of how our team has embraced the challenge in its reconditions and seized the opportunity to transform our business into a leaner and more agile organization. Turning to our bedding business specifically, summarized on page 5 of the supplemental deck, the sales momentum we have recently seen in that business, again, including both sequential and year-over-year growth during the quarter, is highly encouraging. A lot of this activity was generated by some nice trends in our knit fabric and sewn cover product lines, which are areas we believe we have a lot of white space to drive profitable growth with our restructured bedding platform. We feel good about our current product offerings in this business and believe that our go-to-market strategies are on point.

Speaker #1: Turning to our betting business, specifically summarized on page five of the supplemental deck, the sales momentum we have recently seen in that business.

Speaker #1: Again , including both and year over year growth sequential the quarter , is encouraging highly . A lot of this activity was generated by some nice trends in our knit fabric and sewn product cover lines , which are areas we believe we have a lot of white space to drive growth profitable .

Speaker #1: With our restructured betting platform , we feel good about our current product offerings in this business and believe that our go to market strategies are on point .

Speaker #1: Also, as I mentioned, we are seeing some indications that the betting market is stabilizing. There continues to be more industry commentary indicating that the betting market is due for an increase in unit activity driven by historical product replacement cycles.

Robert Culp: Also, as I mentioned, we are seeing some indications that the bedding market is stabilizing, and there continues to be more industry commentary indicating that the bedding market is due for an increase in unit activity driven by historical product replacement cycles. The industry consensus view supports that we're now over four years into a period of demand down cycle. We included in our presentations on pages 16 through 18 some excerpts from recent research published by UBS, indicating that the current market downturn has now extended beyond the typical duration of prior downturns, and there is a significant amount of pent-up demand relative to historic trends as a result. We generally agree with that view and believe that the industry is due for an increase in unit activity, although the timing of that is, of course, the critical question that no one knows for certain.

Also, as I mentioned, we are seeing some indications that the bedding market is stabilizing, and there continues to be more industry commentary indicating that the bedding market is due for an increase in unit activity driven by historical product replacement cycles. The industry consensus view supports that we're now over four years into a period of demand down cycle. We included in our presentations on pages 16 through 18 some excerpts from recent research published by UBS, indicating that the current market downturn has now extended beyond the typical duration of prior downturns, and there is a significant amount of pent-up demand relative to historic trends as a result. We generally agree with that view and believe that the industry is due for an increase in unit activity, although the timing of that is, of course, the critical question that no one knows for certain.

Speaker #1: The industry consensus view supports that we're now over four years into a period of demand down cycle . We included in our presentations on pages 16 through 18 , some excerpts from recent research published by UBS , indicating market that the downturn current has now extended beyond the typical duration of prior downturns .

Speaker #1: And there is a significant amount of pent-up demand relative to storage trends. As a result, we generally agree with that view and believe that the industry is due for an uptick in unit activity.

Speaker #1: Although the timing of that increase is of course , the critical question that certain no one knows for . Turning to our upholstery summarized on page six of the supplemental business , Market conditions , there deck are comparably more pressuring sales , which had a notable unsettled and expected consolidated gross profit dollars during the quarter .

Robert Culp: Turning to our upholstery business, summarized on page 6 of the supplemental deck, market conditions there are comparably more unsettled and pressuring sales, which had a notable impact on our expected consolidated gross profit dollars during the quarter. The current weakness in consumer sentiment and housing is still heavily dampening buying activity, particularly among the lower and middle-income segments that the prevailing portion of our residential fabric customers typically target. Despite the difficult environment, we were pleased to be able to maintain relatively stable sales within our US residential fabric customer base during the quarter, while our residential sales to customers in China and other foreign countries declined due to what appeared to be more challenged revenue conditions in those markets. The macroeconomic uncertainties also impacted our hospitality and commercial upholstery business, with many hotel, office, and other public space projects temporarily delayed in recent periods.

Turning to our upholstery business, summarized on page 6 of the supplemental deck, market conditions there are comparably more unsettled and pressuring sales, which had a notable impact on our expected consolidated gross profit dollars during the quarter. The current weakness in consumer sentiment and housing is still heavily dampening buying activity, particularly among the lower and middle-income segments that the prevailing portion of our residential fabric customers typically target. Despite the difficult environment, we were pleased to be able to maintain relatively stable sales within our US residential fabric customer base during the quarter, while our residential sales to customers in China and other foreign countries declined due to what appeared to be more challenged revenue conditions in those markets. The macroeconomic uncertainties also impacted our hospitality and commercial upholstery business, with many hotel, office, and other public space projects temporarily delayed in recent periods.

Speaker #1: The current weakness in consumer sentiment and housing is still heavily dampening buying activity, particularly among the lower and middle-income segments that the prevailing portion of our residential customers' fabric typically target.

Speaker #1: Despite the difficult environment, we were pleased to be able to maintain relatively stable sales within our U.S. residential fabric customer base during the quarter.

Speaker #1: While our residential sales to customers in China and other foreign countries declined due to what appeared to be more challenged , revenue conditions than those markets .

Speaker #1: The macroeconomic uncertainty is also impacted . Our commercial hospitality and upholstery business , with many hotel other , office and public space projects temporarily delayed in recent periods .

Speaker #1: However, that important part remains a key aspect of our upholstery strategy, and we continue to believe it will drive solid long-term growth.

Robert Culp: However, that business remains an important part of our upholstery strategy, and we continue to believe it should drive solid long-term growth over time. Despite the challenging top-line environment for home furnishings, we continue to maintain a strong competitive position and believe that the foundation is there to grow upholstery over the long term. We have market-leading innovation and design capabilities along with a flexible platform, and we continue to gain new opportunities by segmenting our product and sales strategies to focus on mid- to upper-price-point furniture, as well as the value segment. Our product lines have continued to generate positive reactions to industry events and shows, including the recent furniture market and the Interwoven Fabric Show, both in High Point, which will ultimately lead to winning placements with customers.

Iv Culp: However, that business remains an important part of our upholstery strategy, and we continue to believe it should drive solid long-term growth over time. Despite the challenging top-line environment for home furnishings, we continue to maintain a strong competitive position and believe that the foundation is there to grow upholstery over the long term. We have market-leading innovation and design capabilities along with a flexible platform, and we continue to gain new opportunities by segmenting our product and sales strategies to focus on mid- to upper-price-point furniture, as well as the value segment. Our product lines have continued to generate positive reactions to industry events and shows, including the recent furniture market and the Interwoven Fabric Show, both in High Point, which will ultimately lead to winning placements with customers.

Speaker #1: Despite the top line environment for home furnishings , we continue to maintain a strong competitive challenging position and believe that the foundation is there to grow upholstery over the long term .

Speaker #1: We have market leading innovation and design capabilities , along with the flexible platform , and we continue to gain new opportunities by segmenting our product and sales strategies to focus on mid to upper price point furniture , as well as the value segment .

Speaker #1: Our product lines have generate positive continued to reactions at industry events and shows , including the recent furniture market and the Interwoven Fabric Show , both in High Point , which will ultimately lead to winning placements with customers .

Speaker #1: Furthermore , with the uncertainty around tariffs , we are able to offer customers options via multiple our extensive Asia operations , including Vietnam , while also having the consider flexibility to options in other regions to enable a preferred response .

Robert Culp: Furthermore, with the uncertainty around tariffs, we are able to offer customers multiple options via our extensive Asia operations, including Vietnam, while also having the flexibility to consider options in other regions to enable a preferred response. We are encouraged that we were able to maintain solid gross margins on our upholstery business during Q2, despite lower-than-expected sales. Nonetheless, we are heavily focused on integrating that business with our bedding business and generating operating improvement. Our upholstery business is already relatively asset-light and less capital-intensive compared to our bedding business and its vertical manufacturing platform, and it's been consistently profitable. The consolidations of our US upholstery distribution and window treatment manufacturing into a shared management model, along with the reduction of our facility footprint in China, should enhance further our upholstery profitability in the near term and position it to accelerate when top-line conditions cycle favorably.

Furthermore, with the uncertainty around tariffs, we are able to offer customers multiple options via our extensive Asia operations, including Vietnam, while also having the flexibility to consider options in other regions to enable a preferred response. We are encouraged that we were able to maintain solid gross margins on our upholstery business during Q2, despite lower-than-expected sales. Nonetheless, we are heavily focused on integrating that business with our bedding business and generating operating improvement. Our upholstery business is already relatively asset-light and less capital-intensive compared to our bedding business and its vertical manufacturing platform, and it's been consistently profitable. The consolidations of our US upholstery distribution and window treatment manufacturing into a shared management model, along with the reduction of our facility footprint in China, should enhance further our upholstery profitability in the near term and position it to accelerate when top-line conditions cycle favorably.

Speaker #1: We are encouraged that we were able to maintain solid gross margins on our business during the second quarter , despite lower than expected sales .

Speaker #1: Nonetheless , we are heavily focused on integrating that business with our betting business and generating operating improvement . Our upholstery business is relatively already asset light and capital intensive compared to our business betting , and manufacturing its vertical platform , and it's been consistently profitable .

Speaker #1: consolidations of our The upholstery distribution and window treatment manufacturing into a shared management model , along with the reduction of our facility footprint in , should China enhance further our upholstery profitability in the near term and position it to accelerate when line conditions top cycle favorably .

Speaker #1: In closing , I want to emphasize that we are now in the final inning , so to speak , of a comprehensive , multi-phase transformation of our business .

Robert Culp: In closing, I want to emphasize that we are now in the final inning, so to speak, of a comprehensive multi-phase transformation of our business. We will finish the fiscal year with a rationalized and fully optimized global platform for both bedding and upholstery products that we believe will create a significant long-term value for shareholders. Our key investment highlights are included on page 21 of our supplemental slide deck. To be clear, we are committed to alter strategies and make changes within our business to adjust to market demand. Our highest priorities in the near term remain returning CULP to overall profitability in the current cycle and effectively managing our debt levels, and I can assure you that we will not take our eye off of those goals.

In closing, I want to emphasize that we are now in the final inning, so to speak, of a comprehensive multi-phase transformation of our business. We will finish the fiscal year with a rationalized and fully optimized global platform for both bedding and upholstery products that we believe will create a significant long-term value for shareholders. Our key investment highlights are included on page 21 of our supplemental slide deck. To be clear, we are committed to alter strategies and make changes within our business to adjust to market demand. Our highest priorities in the near term remain returning CULP to overall profitability in the current cycle and effectively managing our debt levels, and I can assure you that we will not take our eye off of those goals.

Speaker #1: We will finish the fiscal year with a rationalized and fully optimized global platform for both bedding and upholstery products that we believe will create a significant long term value for shareholders key .

Speaker #1: investment highlights are Our included on page 21 for Supplemental Slide Deck to be clear , we are committed to ultra strategies and make changes within our business to adjust to market demand .

Speaker #1: Our highest priorities in the near term remain returning Culp to overall profitability in the current cycle and effectively managing our debt levels . And I can assure you that we will not take our eye off of those goals .

Speaker #1: With that, I'll now turn the call over to Kenneth Bowling, who will review the financial results for the second quarter, and then I will review our outlook for the remainder of fiscal 2026.

Robert Culp: With that, I'll now turn the call over to Ken, who will review the financial results for the quarter, and then I'll review our outlook for the remainder of fiscal 2026. Thanks, If. Here are the financial highlights for the second quarter. Consolidated net sales for the second quarter were $53.2 million, a sequential improvement from the first quarter sales of $50.7 million, which included an extra week, and a decline from prior year period sales of $55.7 million. The year-over-year decline was driven primarily by the continued industry-wide softness and the tariff-related uncertainty that If discussed. Consolidated gross profit for the quarter was $5.8 million, or 10.9% of sales, compared to the prior year period gross profit of $6 million, or 10.8% of sales.

With that, I'll now turn the call over to Ken, who will review the financial results for the quarter, and then I'll review our outlook for the remainder of fiscal 2026.

Speaker #1: Thanks , Yves . Here are the financial highlights for the second quarter . Consolidated net sales for the second quarter were 53.2 million , a sequential improvement from the first quarter sales of 50.7 million , which included an extra week .

Ken Bowling: Thanks, If. Here are the financial highlights for the second quarter. Consolidated net sales for the second quarter were $53.2 million, a sequential improvement from the first quarter sales of $50.7 million, which included an extra week, and a decline from prior year period sales of $55.7 million. The year-over-year decline was driven primarily by the continued industry-wide softness and the tariff-related uncertainty that If discussed. Consolidated gross profit for the quarter was $5.8 million, or 10.9% of sales, compared to the prior year period gross profit of $6 million, or 10.8% of sales.

Speaker #1: And a decline from prior year period sales of 55.7 million . The over year year driven decline was primarily by the continued industrywide softness and the tariff related uncertainty that I've discussed .

Speaker #1: Consolidated gross profit for the quarter was 5.8 million , or 10.9% of sales , compared to the prior year period . Gross profit of 6 million , or 10.8% of sales , excluding restructuring related expenses .

Speaker #1: Adjusted consolidated gross profit for the quarter was 6.7 million , or 12.6% of sales , compared to the prior year period . Adjusted gross profit of 6.8 million , or 12.1% of sales .

Robert Culp: Excluding restructuring-related expenses, adjusted consolidated gross profit for the quarter was $6.7 million, or 12.6% of sales, compared to the prior year period adjusted gross profit of $6.8 million, or 12.1% of sales. This gross profit improvement was driven primarily by cost and efficiency gains from the restructuring of our bedding segment completed last year. SG&A expense for the quarter was $8.7 million, an approximate 7% improvement compared with SG&A expense for the prior year period, reflecting cost savings from our restructuring initiative. Loss from operations was $3.5 million for the quarter, compared to the prior year period loss of operations of $5.4 million. Excluding restructuring-related expenses, adjusted operating loss for the quarter was $2 million, compared to the prior year period adjusted operating loss of $2.6 million.

Excluding restructuring-related expenses, adjusted consolidated gross profit for the quarter was $6.7 million, or 12.6% of sales, compared to the prior year period adjusted gross profit of $6.8 million, or 12.1% of sales. This gross profit improvement was driven primarily by cost and efficiency gains from the restructuring of our bedding segment completed last year. SG&A expense for the quarter was $8.7 million, an approximate 7% improvement compared with SG&A expense for the prior year period, reflecting cost savings from our restructuring initiative. Loss from operations was $3.5 million for the quarter, compared to the prior year period loss of operations of $5.4 million. Excluding restructuring-related expenses, adjusted operating loss for the quarter was $2 million, compared to the prior year period adjusted operating loss of $2.6 million.

Speaker #1: This gross profit improvement was driven primarily by cost and efficiency gains from the restructuring of our segment , betting completed last year . SG&A expense for the quarter was 8.7 million , an approximate compared with 7% improvement expense for SGA the prior year period , reflecting cost from our savings restructuring initiatives .

Speaker #1: Loss from operations was 3.5 million for the quarter , compared to the prior year period . Loss of operations of 5.4 million . restructuring Excluding expenses and related .

Speaker #1: Adjusted loss for the operating quarter was $2 million compared to the prior year period. Adjusted for the prior operating loss of $2.6 million, EBITDA adjusted for the impacts of restructuring-related expenses, based stock compensation, and other non-cash charges was a negative $1 million for the second quarter, an improvement on lower sales compared to negative $1,001.1 million in the prior year period.

Robert Culp: EBITDA adjusted for the impacts of restructuring-related expenses, stock-based compensation, and other non-cash charges was a negative $1 million for the second quarter, an improvement on lower sales compared to negative $1.1 million in the prior year period. Our year-over-year operating performance improvement for the second quarter benefited primarily from continued momentum in our bedding segment, driven by the positive impacts of last year's restructuring. Operating performance also benefited from the continued profitability in the upholstery fabric segment, despite the low revenue industry environment and tariff-related challenges I spoke to. The effective income tax rate for the second quarter was a negative 5.1% compared to 0.9% for the same period a year ago and continues to be impacted by the company's mix of earnings between our US and foreign subsidiaries. Our income tax payments totaled $1.7 million for the first six months of this fiscal year.

EBITDA adjusted for the impacts of restructuring-related expenses, stock-based compensation, and other non-cash charges was a negative $1 million for the second quarter, an improvement on lower sales compared to negative $1.1 million in the prior year period. Our year-over-year operating performance improvement for the second quarter benefited primarily from continued momentum in our bedding segment, driven by the positive impacts of last year's restructuring. Operating performance also benefited from the continued profitability in the upholstery fabric segment, despite the low revenue industry environment and tariff-related challenges I spoke to. The effective income tax rate for the second quarter was a negative 5.1% compared to 0.9% for the same period a year ago and continues to be impacted by the company's mix of earnings between our US and foreign subsidiaries. Our income tax payments totaled $1.7 million for the first six months of this fiscal year.

Speaker #1: Our year over year operating performance improvement for the second quarter benefited primarily from continued momentum in our betting segment , driven by the positive impacts of last year's restructuring . Operating performance also benefited from the continued profitability in the upholstery fabric segment .

Speaker #1: Despite the lower the low industry environment revenue and tariff related challenges . Yves spoke to effective income the tax rate for the second quarter was a negative 5.1% , compared to 0.9% for the same period a year ago , and continues to be impacted by the company's mix of Between our earnings .

Speaker #1: U.S. foreign and subsidiaries . Our income tax payments totaled first six months of this fiscal year Importantly , . as of the end of last fiscal year , we had 88.1 million in US federal net operating loss carryforwards with related future income tax benefits of 18.5 million .

Robert Culp: Importantly, as of the end of last fiscal year, we had $88.1 million in US federal net operating loss carry forwards, with related future income tax benefits of $18.5 million. Before we take a look at our operating segments, once again, please note that following the integration of our two former divisions, we now refer to our CHF mattress fabrics business as our bedding segment and our CUF upholstery fabrics business as our upholstery segment. Moreover, as part of that integration, we now manage and assess SG&A expenses on a consolidated basis. As a result, we no longer report operating performance at the segment level, just down to the gross profit level. For the bedding segment, sales for the second quarter were $30.8 million, up approximately 10% sequentially from the first quarter and up over 2% compared to the prior year period.

Importantly, as of the end of last fiscal year, we had $88.1 million in US federal net operating loss carry forwards, with related future income tax benefits of $18.5 million. Before we take a look at our operating segments, once again, please note that following the integration of our two former divisions, we now refer to our CHF mattress fabrics business as our bedding segment and our CUF upholstery fabrics business as our upholstery segment. Moreover, as part of that integration, we now manage and assess SG&A expenses on a consolidated basis. As a result, we no longer report operating performance at the segment level, just down to the gross profit level. For the bedding segment, sales for the second quarter were $30.8 million, up approximately 10% sequentially from the first quarter and up over 2% compared to the prior year period.

Speaker #1: take a look at our segments operating once again , please note that following the integration of our two former divisions , we now refer to our CHF mattress Fabrics business as our bedding segment and our QF upholstery Fabrics business as our poultry segment .

Speaker #1: Moreover , as part of integration , we now manage and that assess SG&A as on expenses a consolidated basis . As a result , we no longer report operating performance at the segment level , just down to the gross profit level .

Speaker #1: For the bedding segment, sales for the second quarter were $30.8 million, up approximately 10% sequentially from the first quarter and up over 2% compared to the prior period.

Speaker #1: As Yves spoke, sales continued to be pressured by low industry demand and challenges from spending and housing market consumer trends. But we were able to continue our trend of winning share in key targeted areas.

Robert Culp: As I spoke to, sales continued to be pressured by low industry demand and challenges from consumer spending, and housing market trends, but we were able to continue our trend of winning share in key targeted areas. The restructured cost platform in our bedding segment drove a gross profit of $3.1 million, or 10.1% of sales, a 200 basis points improvement from the prior year period. We were pleased to see the profitability momentum in this segment continue during the quarter. For the upholstery fabric segment, sales for the second quarter were $22.4 million, sequentially flat with the first quarter and down approximately 12% compared to the prior year period. This year-over-year decline stemmed from continued softness in the home furnishings market and corresponding weakness in the residential upholstery channel, as well as additional pressure on demand from tariffs.

As I spoke to, sales continued to be pressured by low industry demand and challenges from consumer spending, and housing market trends, but we were able to continue our trend of winning share in key targeted areas. The restructured cost platform in our bedding segment drove a gross profit of $3.1 million, or 10.1% of sales, a 200 basis points improvement from the prior year period. We were pleased to see the profitability momentum in this segment continue during the quarter. For the upholstery fabric segment, sales for the second quarter were $22.4 million, sequentially flat with the first quarter and down approximately 12% compared to the prior year period. This year-over-year decline stemmed from continued softness in the home furnishings market and corresponding weakness in the residential upholstery channel, as well as additional pressure on demand from tariffs.

Speaker #1: The restructured cost platform in our bedding segment drove a gross profit of 3.1 million , or 10.1% of sales , a 200 basis point improvement prior year from the period We were .

Speaker #1: pleased to see the profitability momentum in this segment continued during the quarter . For the upholstery fabric segment , sales for the second quarter were 22.4 million sequentially flat , with the first quarter and down approximately 12% compared to the prior year period This .

Speaker #1: The year-over-year decline stemmed from continued softness in the home furnishings market and corresponding weakness in the residential upholstery channel, as well as additional pressure on demand from tariffs.

Speaker #1: Gross profit in the upholstery segment was 3.6 million , or 16.1% of sales , down from 4.3 million , or 16.9% of sales in the prior year period , and driven largely by lower comparable sales .

Robert Culp: Gross profit in the upholstery segment was $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales in the prior year period, and driven largely by lower comparable sales. Now, I'll turn to the balance sheet. We reported $10.7 million total cash and $18.3 million in outstanding debt as of the end of Q2, with a net debt position of $7.6 million as compared to a net debt position of $7.1 million at the end of Q1. The outstanding debt was primarily incurred to fund worldwide working capital, and restructuring activities, but also includes approximately $3 million incurred voluntarily to take advantage of borrowing opportunities at current preferred rates in China. We continue to believe this decision was prudent given today's challenging economic environment, and uncertain trade relations.

Gross profit in the upholstery segment was $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales in the prior year period, and driven largely by lower comparable sales. Now, I'll turn to the balance sheet. We reported $10.7 million total cash and $18.3 million in outstanding debt as of the end of Q2, with a net debt position of $7.6 million as compared to a net debt position of $7.1 million at the end of Q1. The outstanding debt was primarily incurred to fund worldwide working capital, and restructuring activities, but also includes approximately $3 million incurred voluntarily to take advantage of borrowing opportunities at current preferred rates in China. We continue to believe this decision was prudent given today's challenging economic environment, and uncertain trade relations.

Speaker #1: turn the balance sheet Now I'll . We reported 10.7 million in total cash and 18.3 million in outstanding debt as of the end of the second quarter .

Speaker #1: With a net debt position of 7.6 million , as compared to a debt net position of 7.1 million at the end of the first quarter .

Speaker #1: The outstanding debt was primarily incurred to fund worldwide working capital and restructuring activities, but also includes approximately $3 million incurred voluntarily to take advantage of borrowing opportunities at current preferred rates in China.

Speaker #1: We continue to believe this decision was prudent given today's challenging economic environment and uncertain trade relations . Further , we were able to invest these proceeds into a high yield account savings in China at a rate higher than the interest rate paid on the debt .

Robert Culp: Further, we were able to invest these proceeds into a high-yield savings account in China at a rate materially higher than the interest rate paid on the debt. This strategy more than covers our interest costs for the debt, while at the same time giving us significant flexibility in managing our worldwide cash position. Cash flow from operations was -$1.2 million for the first six months of this fiscal year and primarily driven by operating losses, which compares favorably to the -$2.6 million in the prior year period. Adjusted for capital expenditures, proceeds from the sale of PP&E, and other items, pre-cash flow was just about break-even at $10,000 and down favorably from a -$3.4 million in the prior year period. Generating free cash flow and reducing our debt continue to be among our highest priorities.

Further, we were able to invest these proceeds into a high-yield savings account in China at a rate materially higher than the interest rate paid on the debt. This strategy more than covers our interest costs for the debt, while at the same time giving us significant flexibility in managing our worldwide cash position. Cash flow from operations was -$1.2 million for the first six months of this fiscal year and primarily driven by operating losses, which compares favorably to the -$2.6 million in the prior year period. Adjusted for capital expenditures, proceeds from the sale of PP&E, and other items, pre-cash flow was just about break-even at $10,000 and down favorably from a -$3.4 million in the prior year period. Generating free cash flow and reducing our debt continue to be among our highest priorities.

Speaker #1: This strategy more than covers our interest costs for the debt, while at the same time giving us significant flexibility in managing our cash worldwide position.

Speaker #1: Cash flow from operations was a -1.2 million for the first six months of this fiscal year , primarily driven by operating and losses , which compares favorably to negative two point year 6 million in the prior period .

Speaker #1: Adjusted for capital expenditures, proceeds from the sale of PPE, and other items, free cash flow was just about break even at $10,000, down favorably from a negative $3.4 million in the prior year period. Generating free cash flow and reducing our debt continue to be among our highest priorities.

Speaker #1: Capital expenditures were only 218,000 for the year to date period , down from 1.6 million in the prior year period , with lower spending driven by strategic efforts to closely manage capital and focus on maintenance projects and initiatives .

Robert Culp: Capital expenditures were only $218,000 for the year-to-date period, down from $1.6 million in the prior year period, with lower spending driven by strategic efforts to closely manage capital and focus on maintenance projects and initiatives with a quick payback. We expect capital spending for fiscal 2026 to be lower than fiscal 2025 levels, as we continue to spend only as necessary. Our liquidity as of the end of the second quarter was approximately $28.1 million and consisted of $10.7 million in cash and $17.4 million in borrowing availability under our domestic credit facility. As a reminder of liquidity purposes, the net book value for our owned manufacturing campus in North Carolina as of the end of the quarter was around $12 million and has an estimated market value of $40 to 45 million. Our liquidity highlights are briefly summarized on page 7 of the supplemental deck.

Capital expenditures were only $218,000 for the year-to-date period, down from $1.6 million in the prior year period, with lower spending driven by strategic efforts to closely manage capital and focus on maintenance projects and initiatives with a quick payback. We expect capital spending for fiscal 2026 to be lower than fiscal 2025 levels, as we continue to spend only as necessary. Our liquidity as of the end of the second quarter was approximately $28.1 million and consisted of $10.7 million in cash and $17.4 million in borrowing availability under our domestic credit facility. As a reminder of liquidity purposes, the net book value for our owned manufacturing campus in North Carolina as of the end of the quarter was around $12 million and has an estimated market value of $40 to 45 million. Our liquidity highlights are briefly summarized on page 7 of the supplemental deck.

Speaker #1: With a quick payback , we expect capital spending spending for fiscal 2026 to be lower than fiscal 2025 levels . As we continue to spend only as necessary , our liquidity as of the end of the second quarter was approximately 28.1 million and consisted of 10.7 million in cash and 17.4 million in borrowing availability .

Speaker #1: Under our credit facility . As a reminder of liquidity purposes , the net book value for our owned manufacturing campus in North Carolina as of the end quarter , of the was around $12 million and has an estimated market value of Our liquidity 40 to 45 million .

Speaker #1: highlights are briefly summarized on page seven of the supplemental deck . With that , I'll turn the call back over to Yves to discuss the general outlook for the third quarter .

Speaker #1: And then take your we will questions . Thank you . Ken .

Robert Culp: With that, I'll turn the call back over to If to discuss the general outlook for Q3, and then we will take your questions. Thank you, Ken. Due to the market and macroeconomic uncertainty and the fluid tariff landscape we've talked about today, we are only providing limited forward guidance at this time. Despite what we anticipate to remain a challenging demand environment for home furnishings in the near term, the pressured sales in both of our businesses, we currently expect steady consolidated sales performance in Q3 and throughout the remainder of fiscal 2026, with higher expectations for the bedding segment.

With that, I'll turn the call back over to If to discuss the general outlook for Q3, and then we will take your questions.

Speaker #2: Due to the market and macroeconomic uncertainty fluid and the tariff landscape , we've talked about today , we're only providing limited forward guidance at this time , despite what we anticipate to remain a challenging demand environment for furnishings in the near The term .

Iv Culp: Thank you, Ken. Due to the market and macroeconomic uncertainty and the fluid tariff landscape we've talked about today, we are only providing limited forward guidance at this time. Despite what we anticipate to remain a challenging demand environment for home furnishings in the near term, the pressured sales in both of our businesses, we currently expect steady consolidated sales performance in Q3 and throughout the remainder of fiscal 2026, with higher expectations for the bedding segment.

Speaker #2: Pressure sales in both of our businesses resulted in steady consolidated sales performance in the third quarter and throughout fiscal 2026, higher with expectations for the embedding segment.

Speaker #2: Moreover, we see cost efficiency and benefits flowing from the transformation of our bedding and upholstery platforms, along with recent pricing drive actions to improve gross G&A and lower costs, resulting in continued significant operating improvement in loss and near break-even to positive adjusted EBITDA for the third quarter.

Robert Culp: Moreover, we expect the cost and efficiency benefits flowing from the transformation of our bedding and upholstery platforms, along with recent pricing action to drive improving gross profit and lower SG&A, resulting in continued significant improvement in operating loss and near break-even to positive adjusted EBITDA for Q3. As Ken spoke to, while we intend to continue utilizing borrowings as necessary under our credit facilities during fiscal 2026 to fund working capital needs, as well as integration and efficiency initiatives, we will continue to aggressively manage liquidity and capital expenditures to prioritize free cash flow. On that point, we are owed approximately $4.7 million in cash in Q4 on the sale of our Canada facility, and we anticipate that those funds may be received earlier, perhaps in Q3. Thank you again for your time listening today, and we'll now take some questions.

Moreover, we expect the cost and efficiency benefits flowing from the transformation of our bedding and upholstery platforms, along with recent pricing action to drive improving gross profit and lower SG&A, resulting in continued significant improvement in operating loss and near break-even to positive adjusted EBITDA for Q3. As Ken spoke to, while we intend to continue utilizing borrowings as necessary under our credit facilities during fiscal 2026 to fund working capital needs, as well as integration and efficiency initiatives, we will continue to aggressively manage liquidity and capital expenditures to prioritize free cash flow. On that point, we are owed approximately $4.7 million in cash in Q4 on the sale of our Canada facility, and we anticipate that those funds may be received earlier, perhaps in Q3. Thank you again for your time listening today, and we'll now take some questions.

Speaker #2: spoke As Ken to . While we intend to continue borrowings as utilizing under our credit facilities to earn fiscal 26 to fund working capital needs as well as integration and efficiency initiatives , we will continue to aggressively manage liquidity and capital expenditures to prioritize free cash flow .

Speaker #2: On that point , we are owed approximately $4.7 million in cash in the fourth quarter on the sale of our Canada facility , and we anticipate that those funds may be received earlier .

Speaker #2: Perhaps in the third quarter. Thank you for your time listening today. And we're now taking questions.

Speaker #3: now begin We will answer question and session . To question , you may ask a press star then one on your touch tone phone .

Robert Culp: We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Doug Lane with Water Tower Research. Please go ahead. Again, that's Doug Lane with Water Tower Research. Operator, I'm wondering if he's dialed in on the other line. Can you. I'm sorry. Can you hear me now? Yes, sir. We got you, Doug. There you go. Good morning. Sorry about that.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Doug Lane with Water Tower Research. Please go ahead. Again, that's Doug Lane with Water Tower Research.

Speaker #3: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then two.

Speaker #3: At this time, we will pause momentarily to roster. Our first question comes from Doug Lane with Water Tower Research. Please go ahead.

Speaker #3: Again, that's Doug Lane with WaterTower Research.

Speaker #2: Operator I'm wondering if he's dialed in on the on the other line .

Iv Culp: Operator, I'm wondering if he's dialed in on the other line.

Speaker #1: Can you . I'm sorry . Can you hear me .

Speaker #4: Now ?

Speaker #2: Yes, sir. We got you, Doug.

Doug Lane: Can you. I'm sorry. Can you hear me now?

Speaker #1: There you go .

Speaker #2: Good morning .

Speaker #4: Sorry about that . Yeah , I was encouraged to see the free flow cash break even . And the use from a cash from operations .

Iv Culp: Yes, sir. We got you, Doug.

Ken Bowling: There you go. Good morning.

Doug Lane: Sorry about that. Yeah, I was encouraged to see the free cash flow at break-even and the use from cash from operations, the cash use from operations being cut in half. So all the work you're doing is starting to come through, and I'm just trying to get a feel for where we are in the realization of all these cost savings. I know in the implementation, if you said you're in the late innings, but of that $20 million on slide 11, about how much of that do you think is already being realized in the P&L, and how much is still to come?

Robert Culp: Yeah, I was encouraged to see the free cash flow at break-even and the use from cash from operations, the cash use from operations being cut in half. So all the work you're doing is starting to come through, and I'm just trying to get a feel for where we are in the realization of all these cost savings. I know in the implementation, if you said you're in the late innings, but of that $20 million on slide 11, about how much of that do you think is already being realized in the P&L, and how much is still to come? Yeah, Doug, thank you for that question. It's a lot.

Speaker #4: use from operations being cut The cash in half . So all the work you're doing is starting to come through , and I'm just trying to get a feel for where we are in the realization of all these cost savings .

Speaker #4: I know in the implementation , you said you're in the late innings , but of that 20 million on slide 11 about how much of that do you think is already being realized in the PNL and how much is still to come ?

Speaker #2: Yeah . Thank you for that question . It's a lot . I tried to , you know , regurgitate all the stuff we've done over the last couple fiscal years , and it's really when you think about it and write it down and script it the way we have , it's it's considerable amount of effort .

Iv Culp: Yeah, Doug, thank you for that question. It's a lot.

Robert Culp: I tried to regurgitate all the stuff we've done over the last couple of fiscal years, and it's really, when you think about it and write it down and script it the way we have, it's a considerable amount of effort. So it's coming in at different phases. Obviously, the big work we did with our Canada facility is really helping us this year. That's in. The additional savings that we did and the price adjustments to deal with baseline tariffs, that all started to impact us maybe in late Q2. Then the new things we've announced, or the plans with consolidating warehouses, moving our reed window production, and further adjustments, are really a late Q3 impact.

I tried to regurgitate all the stuff we've done over the last couple of fiscal years, and it's really, when you think about it and write it down and script it the way we have, it's a considerable amount of effort. So it's coming in at different phases. Obviously, the big work we did with our Canada facility is really helping us this year. That's in. The additional savings that we did and the price adjustments to deal with baseline tariffs, that all started to impact us maybe in late Q2. Then the new things we've announced, or the plans with consolidating warehouses, moving our reed window production, and further adjustments, are really a late Q3 impact.

Speaker #2: So it's coming in different phases. We had, obviously, the big work we did with our Canada facility, which is really helping this year.

Speaker #2: That's us this in the additional savings that we did and the price adjustments to deal with baseline tariffs . That all started to us impact , maybe in late Q2 .

Speaker #2: And then the new things we've announced or the plans with consolidating warehouses and moving our read window production, and further adjustments, are really a late Q3 impact.

Speaker #2: So, by the time we get to Q4, we would expect to have the majority of everything done, and we would have as clean of pictures.

Robert Culp: So by the time we get to Q4, we would expect to have the majority of everything done, and we would have as clean of pictures we could have from a cost standpoint. Now, unfortunately, what that's doing is just we're continuing to re-optimize the platform to deal with very challenged conditions. So we're not banking on any kind of improvement. We hope and have feelings that it could start to come, but we're just doing all we can do to restructure the platform so that Q4 quarter is clean quarter, and all gears turn towards being profitable in this cycle. And then when the business turns, we don't have to have capacity to really start showing more fruitful results on top of that. So I hope that helps. No, that does help.

So by the time we get to Q4, we would expect to have the majority of everything done, and we would have as clean of pictures we could have from a cost standpoint. Now, unfortunately, what that's doing is just we're continuing to re-optimize the platform to deal with very challenged conditions. So we're not banking on any kind of improvement. We hope and have feelings that it could start to come, but we're just doing all we can do to restructure the platform so that Q4 quarter is clean quarter, and all gears turn towards being profitable in this cycle. And then when the business turns, we don't have to have capacity to really start showing more fruitful results on top of that. So I hope that helps.

Speaker #2: We could have from a cost standpoint . Now , unfortunately , what that's doing is just we're continuing to re-optimize the platform to deal with very challenged conditions .

Speaker #2: So we're not banking on any kind of improvement . We hope and have feelings that it to come , could start but we're just doing all we can do to restructure the platform .

Speaker #2: So that Q4 quarter is a clean quarter, and all gears turn towards being profitable in this cycle. And when the business turns, we don't have to add capacity to really start showing more fruitful results.

Speaker #2: On top of that, I hope that helps.

Speaker #4: No , that does help . It sounds like heading into fiscal 27 , you'll have a pretty , pretty clean run rate here .

Doug Lane: No, that does help.

Speaker #4: Then it's a question of just the benefit of the next up whenever cycle. That happens, we know it's going to happen, and we just don't know when.

Robert Culp: It sounds like heading into fiscal 2027, you'll have a pretty clean run rate here, and then it's just a question of the benefit of the next upcycle whenever that happens. It's going to happen; we just don't know when. Yeah, and I guess I would say 100% yes. Fiscal 2027 will be a very clean position heading into the market. What we don't know is if it continues to lag or for some reason it were to get worse. We don't believe that's the case, but if it did, we'd take more action. I just think I want investors to be clear that we are positioning ourselves to do whatever it takes to adjust to the demand cycle. And unfortunately, we've had things that have been lagging more than we expected, so we make more changes.

It sounds like heading into fiscal 2027, you'll have a pretty clean run rate here, and then it's just a question of the benefit of the next upcycle whenever that happens. It's going to happen; we just don't know when.

Speaker #2: Yeah . And I guess I would say I just 100% yes , we have a very fiscal 27 will be a very clean position heading into the market .

Iv Culp: Yeah, and I guess I would say 100% yes. Fiscal 2027 will be a very clean position heading into the market. What we don't know is if it continues to lag or for some reason it were to get worse. We don't believe that's the case, but if it did, we'd take more action. I just think I want investors to be clear that we are positioning ourselves to do whatever it takes to adjust to the demand cycle. And unfortunately, we've had things that have been lagging more than we expected, so we make more changes.

Speaker #2: We don't know what we will do if it continues to lag, or if for some reason it were to get worse. However, we don't believe that's the case.

Speaker #2: But if it did, we'd take more action. I just think I want investors to be clear that we are positioning ourselves to do whatever it takes to adjust to the demand cycle.

Speaker #2: It's unfortunately , we've had things that have been lagging more than we expected , so we make more changes . But optimistically , clean .

Speaker #2: We're in Q4 2026 and maybe even in the fourth quarter, and hope to see some demand that’s moving the right way—at least a little bit.

Robert Culp: But optimistically, we're clean in 2027 and maybe even in Q4 and hope to see some demand that gets moving the right way, at least a little bit. Is there any way? Have you done any math on what the incremental margin would be on the next point of sales growth? So as sales start to move up, what would be the contribution margin from that incremental point of sales? Yeah, Doug, this is Ken, and we've said this before. I mean, we've got so much built-up leverage in our ability to capitalize on any increase in sales. And as I said, I mean, we've got all the cost reductions to be implemented in the Q4. And so we're going to be able to gain a lot of those sales dollars as far as the contribution margin is concerned. I mean, we're set on SG&A.

But optimistically, we're clean in 2027 and maybe even in Q4 and hope to see some demand that gets moving the right way, at least a little bit.

Speaker #4: Is there any way have you done any math on what the incremental margin would be on the next point of sales growth ? So sales start as to move up , what would be the contribution that margin from incremental point of sales ?

Doug Lane: Is there any way? Have you done any math on what the incremental margin would be on the next point of sales growth? So as sales start to move up, what would be the contribution margin from that incremental point of sales?

Speaker #1: Yeah . Doug , this is Ken . And we've we've said this before . I mean , we've got so much build up leverage in our ability to capitalize on any increase in sales .

Ken Bowling: Yeah, Doug, this is Ken, and we've said this before. I mean, we've got so much built-up leverage in our ability to capitalize on any increase in sales. And as I said, I mean, we've got all the cost reductions to be implemented in the Q4. And so we're going to be able to gain a lot of those sales dollars as far as the contribution margin is concerned. I mean, we're set on SG&A.

Speaker #1: And as I've said , I mean , we've got the all the cost reductions to be implemented in the in the fourth quarter .

Speaker #1: And so, you know, we're going to be able to gain a lot of those sales dollars as far as the contribution margin is concerned.

Speaker #1: I mean , we're we're set on a we've got we've got fixed costs in place . So we're going to be able to keep a significant amount of those incremental dollars as we grow , as we grow the business based on the platform we have today .

Robert Culp: We've got fixed costs in place, so we're going to be able to keep a significant amount of those incremental dollars as we grow the business based on the platform we have today. Got it. That makes sense. I know you mentioned new tariffs in Turkey and Haiti. Can you give us a feel for when were those implemented, and when do you think you'll be able to benefit from whatever mitigation efforts you put in place for them? Certainly. I think I'm trying so hard to have Doug, you, and other investors understand tariffs have been a real, I mean, it's just been a real pit to the business. I mean, it's been so disruptive the way they've come in. But optimistically, we feel like we can handle it. We've gotten better at this, and we believe because of our platform, it's actually an advantage.

We've got fixed costs in place, so we're going to be able to keep a significant amount of those incremental dollars as we grow the business based on the platform we have today.

Speaker #4: Got it . That makes sense . And I know you mentioned new tariffs in Turkey and Haiti . Can you give us a feel for when were those implemented and when do you think you'll be able to benefit from whatever mitigation efforts you put in place for them

Doug Lane: Got it. That makes sense. I know you mentioned new tariffs in Turkey and Haiti. Can you give us a feel for when were those implemented, and when do you think you'll be able to benefit from whatever mitigation efforts you put in place for them?

Speaker #2: think I'm trying hard to so have Doug , you and other investors understand tariffs have been a real I mean , they've just been a real pit business .

Iv Culp: Certainly. I think I'm trying so hard to have Doug, you, and other investors understand tariffs have been a real, I mean, it's just been a real pit to the business. I mean, it's been so disruptive the way they've come in. But optimistically, we feel like we can handle it. We've gotten better at this, and we believe because of our platform, it's actually an advantage.

Speaker #2: I to the mean , it's been so disruptive the way they've come But in . optimistically , we feel like we can handle it .

Speaker #2: We've gotten better at this . And we we believe because of our platform it's actually an advantage . So it's like any kind of , you know , when you think about strengths and weaknesses , they can sometimes be both .

Speaker #2: And I think tariffs have been a challenge on the industry and our impacting sales . But I do think for us they can become a strength because we have ways to navigate it .

Robert Culp: So it's like any kind of, when you think about strengths and weaknesses, they can sometimes be both. And I think tariffs have been a challenge on the industry and are impacting sales, but I do think for us they can become a strength because we have ways to navigate it. So to answer your question directly, what happened in Turkey and Haiti? We had a baseline of tariffs, and then Turkey, for example, went from a 10% to a 15%. It just got changed on the reciprocal part of the ending of Liberation Day. So we had to deal with that extra 5% that wasn't planned. And that comes in immediately. We are built on that day one, and it can take us 60 days with a customer or with a strategy to adjust that. So that's a lag for us.

So it's like any kind of, when you think about strengths and weaknesses, they can sometimes be both. And I think tariffs have been a challenge on the industry and are impacting sales, but I do think for us they can become a strength because we have ways to navigate it. So to answer your question directly, what happened in Turkey and Haiti? We had a baseline of tariffs, and then Turkey, for example, went from a 10% to a 15%. It just got changed on the reciprocal part of the ending of Liberation Day. So we had to deal with that extra 5% that wasn't planned. And that comes in immediately. We are built on that day one, and it can take us 60 days with a customer or with a strategy to adjust that. So that's a lag for us.

Speaker #2: So, to answer your question directly, it's what's happening to what happened in Turkey and Haiti. We had a baseline of tariffs, and then Turkey, for example, went from a 10% to a 15%.

Speaker #2: just It got changed on the reciprocal of the part ending of Day . So we had to deal with that extra 5% . That wasn't planned .

Speaker #2: And that comes in immediately . We are built on that day one , and it could take us 60 days with a customer or with a strategy to adjust that .

Speaker #2: So that's a lag for us . Haiti . We had eight years of tariff free treatment from regulation in Haiti , and all of a sudden that because of government .

Robert Culp: Haiti, we had eight years of tariff-free treatment from regulation in Haiti, and all of a sudden, because of government, I'll call it dysfunction or delay, there's been a lag on renewing that agreement. We think it will get renewed, but in the short term, we've gone from zero tariff to 15% overnight. So we have to adjust that, and we will adjust it and believe we can easily adjust it, but not as quick as the pain. So that's why it's at least a 60-day lag for us with the change in tariff to then change the strategy or pass that price. That's what we've been working on really for the last - ever since the announcement of tariffs, we've been working on that, and we do feel close to the end, but it's knock on wood what tomorrow might bring.

Haiti, we had eight years of tariff-free treatment from regulation in Haiti, and all of a sudden, because of government, I'll call it dysfunction or delay, there's been a lag on renewing that agreement. We think it will get renewed, but in the short term, we've gone from zero tariff to 15% overnight. So we have to adjust that, and we will adjust it and believe we can easily adjust it, but not as quick as the pain. So that's why it's at least a 60-day lag for us with the change in tariff to then change the strategy or pass that price. That's what we've been working on really for the last - ever since the announcement of tariffs, we've been working on that, and we do feel close to the end, but it's knock on wood what tomorrow might bring.

Speaker #2: I'll call it dysfunction or delay. There has been a lag on renewing that agreement. We think it will get renewed.

Speaker #2: But in the short term , we've gone from zero tariff to 15% almost overnight . So we have to adjust that and we will adjust it .

Speaker #2: And believe it's we can easily adjust it . But not as quick as the as the pain . So that's why it's at least a 60 day lag for us with the change in tariff to then change the strategy or pass that price .

Speaker #2: And that's what we've been working on really , for the last ever since the announcement of tariffs , we've been working on that .

Speaker #2: And we do feel close to the end . But it's , you know , knock on wood , what tomorrow might bring .

Speaker #4: And the tariff situation, on a week-to-week basis, is it still somewhat volatile, or do you think it's settled a little bit?

Robert Culp: The tariff situation on a week-to-week basis, is it still somewhat volatile, or do you think it's settled a little bit? I believe, and I want to believe, it's starting to settle. I think that we have seen a slight reduction in some Asian tariffs. So there are things that are starting to neutralize. And again, we've become very proficient. I don't wish we were proficient, but we've become very proficient on managing tariff change, and we have ways to mitigate it. So I'm not scared or worried about that. It's just the timing sometimes that it takes to get it fixed. Well, clearly, you've been working hard in a very difficult environment, so we'll stay tuned. Thanks, Ike. Thank you, Doug. Appreciate the time. This concludes our question and answer session. I would like to turn the conference back over to Ike Culp for any closing remarks.

Speaker #2: I believe and I want to believe it's starting to settle . I think that the you know , we have seen a slight reduction in some Asian tariffs .

Doug Lane: The tariff situation on a week-to-week basis, is it still somewhat volatile, or do you think it's settled a little bit?

Iv Culp: I believe, and I want to believe, it's starting to settle. I think that we have seen a slight reduction in some Asian tariffs. So there are things that are starting to neutralize. And again, we've become very proficient. I don't wish we were proficient, but we've become very proficient on managing tariff change, and we have ways to mitigate it. So I'm not scared or worried about that. It's just the timing sometimes that it takes to get it fixed.

Speaker #2: So there are things that are starting to neutralize . And again , we've become very proficient . I don't wish we were proficient , but we've become very proficient on managing tariff change .

Speaker #2: And we have ways to mitigate it . So nothing I'm not scared or worried about that . It's just the timing sometimes that it takes to get it fixed .

Speaker #4: Well , clearly you've been working hard in a very difficult environment . So we'll stay tuned . Thanks . If .

Doug Lane: Well, clearly, you've been working hard in a very difficult environment, so we'll stay tuned. Thanks, Ike.

Speaker #2: Thank you , Doug . Appreciate the time .

Iv Culp: Thank you, Doug. Appreciate the time.

Speaker #3: concludes This our question and answer session . I turn the conference would like to back over to Yves Culp for any closing remarks .

Operator: This concludes our question and answer session. I would like to turn the conference back over to Ike Culp for any closing remarks.

Speaker #2: Thank you . Operator . And again , thank you to everyone for your participation and your interest in cult . And we certainly look forward to updating our progress next quarter .

Robert Culp: Thank you, Operator. And again, thank you to everyone for your participation and your interest in Culp, and we certainly look forward to updating our progress next quarter. Have a great day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Good day and welcome to the Culp, Inc. Second Quarter Fiscal 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw the question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Dru Anderson. Please go ahead.

Iv Culp: Thank you, Operator. And again, thank you to everyone for your participation and your interest in Culp, and we certainly look forward to updating our progress next quarter. Have a great day.

Speaker #2: Have a great day .

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day and welcome to the Culp, Inc. Second Quarter Fiscal 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw the question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Dru Anderson. Please go ahead.

Speaker #3: Good day and welcome to the CULP INC second Quarter Fiscal 2026 Earnings Conference Call participants . All will be in listen only mode .

Speaker #3: Should you need assistance , please signal a conference specialist by pressing the star key , followed by zero . After today's presentation , there will be an opportunity to ask questions , to ask a question , you may press star , then one on a touchtone phone to withdraw the question , press star , please then two .

Speaker #3: Please note this event is being recorded. I would now like to turn the floor over to Drew Anderson. Please go ahead.

Speaker #5: Good morning and welcome to the conference call to the review company's results for the second quarter of fiscal 2026 . As we start , let me state that this morning's call will contain looking forward statements about the business , financial condition and prospects of the company .

Robert Culp: Good morning and welcome to the Culp Conference Call to review the company's results for the second quarter of fiscal 2026. 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. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results.

Dru Anderson: Good morning and welcome to the Culp Conference Call to review the company's results for the second quarter of fiscal 2026. 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. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results.

Speaker #5: Forward looking statements statements are that include projections , expectations or beliefs about future events or results or otherwise are not statements of historical fact .

Speaker #5: The actual performance of the company could differ materially from that indicated by the forward-looking statements due to various risks and uncertainties.

Speaker #5: These risks and uncertainties are described in our SEC filings , including the company's most recent filings on form 10-K and form 10-q . Additional risks and uncertainties that we do not presently know about , or that we currently consider to be immaterial , may also affect our business , operations and financial results .

Speaker #5: You are cautioned not to place undue reliance on forward-looking statements made today, and each such statement speaks only as of today.

Robert Culp: You are cautioned not to place undue reliance on forward-looking statements made today, and each such 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 tables to the press release, included as an exhibit to the company's Form 8-K filed yesterday and posted on the company's website at culp.com. An investor relations presentation is also available on the company's website as part of the webcast of today's call. I will now turn the call over to Rob Culp, President and Chief Executive Officer of Culp. Please go ahead. Thank you, Dru. Good morning and thank you to everyone for joining us today.

You are cautioned not to place undue reliance on forward-looking statements made today, and each such 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 tables to the press release, included as an exhibit to the company's Form 8-K filed yesterday and posted on the company's website at culp.com. An investor relations presentation is also available on the company's website as part of the webcast of today's call. I will now turn the call over to Rob Culp, President and Chief Executive Officer of Culp. Please go ahead.

Speaker #5: 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 .

Speaker #5: A reconciliation of these non-GAAP financial measurements to the most directly comparable GAAP financial measurement is included in the tables to the press release exhibit to the , included as an Company's Form 8-K filed yesterday , and posted on the company's website at CULP INC .

Speaker #5: Com , an Investor relations presentation is also on the company's website . As part available of the webcast of today's call . I will now turn the call over to Yves Culp , President and Chief executive officer of cult .

Speaker #5: Please go ahead .

Speaker #2: Thank you . Drew . Good morning , and thank you to everyone for joining us today . With me on the call is Ken Boling , our chief financial officer .

Iv Culp: Thank you, Dru. Good morning and thank you to everyone for joining us today.

Speaker #2: Before I begin , my remarks , I do want to briefly pause . And wish one of our longest and most loyal investors , John Baum , a happy birthday .

Robert Culp: With me on the call is Ken Bowling, our Chief Financial Officer. Before I begin, Robert Culp, I do want to briefly pause and wish one of our longest and most loyal investors, John Baum, a happy birthday. John, we appreciate you and wish you all the best. I will now begin the call with some detailed comments. As mentioned in the introduction, we have posted a slide presentation to our website. It provides some information that is supplemental to what we'll speak about today and to our results and strategies. That slide presentation is simply entitled "Culp Incorporated, Second Quarter, Fiscal Year 2026 Supplemental Information." Ken will then review the financial results for the quarter, and after that, I'll briefly review our business outlook for the remainder of fiscal 2026, and we will take some questions.

With me on the call is Ken Bowling, our Chief Financial Officer. Before I begin, Robert Culp, I do want to briefly pause and wish one of our longest and most loyal investors, John Baum, a happy birthday. John, we appreciate you and wish you all the best. I will now begin the call with some detailed comments. As mentioned in the introduction, we have posted a slide presentation to our website. It provides some information that is supplemental to what we'll speak about today and to our results and strategies. That slide presentation is simply entitled "Culp Incorporated, Second Quarter, Fiscal Year 2026 Supplemental Information." Ken will then review the financial results for the quarter, and after that, I'll briefly review our business outlook for the remainder of fiscal 2026, and we will take some questions.

Speaker #2: John . We appreciate you and wish you best . I will now begin the call with some detailed comments and as mentioned in the introduction we have posted a slide presentation to our website that provides information that is some supplemental to what we about will speak today and to our results .

Speaker #2: And strategies that slide presentation is simply entitled Cope incorporated . Second quarter Fiscal Year 26 Supplemental Information . Ken will then review the financial results for the quarter .

Speaker #2: And after that , I'll briefly review our business outlook for the remainder of fiscal 26 . will take questions And we . At a headline level .

Speaker #2: Our results for the second quarter were similar to our first quarter in the sense that we continued our push to improve our operating performance and make significant progress throughout our business in the face of challenging macro conditions .

Robert Culp: At a headline level, our results for the second quarter were similar to our first quarter in the sense that we continued our push to improve our operating performance and make significant progress throughout our business in the face of challenging macro conditions. It's well documented and likely familiar to all of you that the home furnishings industry has been abysmal from an actual unit sold perspective. The tide generally remains out for housing and related furniture purchases, and we are improving our business gradually and in spite of these conditions. While we are seeing some encouraging signs of demand stabilization and sales growth in our bedding business, we have still yet to see the broad market recovery across home furnishings that many in the industry think could soon be pending.

At a headline level, our results for the second quarter were similar to our first quarter in the sense that we continued our push to improve our operating performance and make significant progress throughout our business in the face of challenging macro conditions. It's well documented and likely familiar to all of you that the home furnishings industry has been abysmal from an actual unit sold perspective. The tide generally remains out for housing and related furniture purchases, and we are improving our business gradually and in spite of these conditions. While we are seeing some encouraging signs of demand stabilization and sales growth in our bedding business, we have still yet to see the broad market recovery across home furnishings that many in the industry think could soon be pending.

Speaker #2: It's well documented and likely familiar to all of you that the home furnishings industry has been abysmal from an actual units sold perspective.

Speaker #2: The tide generally remains out for housing and related furniture purchases, and we are improving our business gradually and in conditions. While we are seeing some encouraging signs of demand stabilization and sales growth in our bedding business, we have still yet to see the broad market recovery across home furnishings that many in the industry think could soon be pending.

Speaker #2: The macroeconomic data remain stubbornly with low , consumer confidence down based on a variety of , and the housing factors market working through challenges , including some of the highest levels of unsold homes in years , as well as higher interest rates .

Robert Culp: The macroeconomic data remains stubbornly low, with consumer confidence down based on a variety of factors and the housing market working through challenges, including some of the highest levels of unsold homes in years, as well as higher interest rates. There is acute pressure on housing affordability, which continues to put downward pressure on unit sales across the entire industry. We illustrate some of these dynamics and impacts on pages 12 through 18 of our supplemental deck, which again is posted on our website. In the face of a difficult top-line environment, we've continued to focus on two overarching strategies at Culp: winning market share and adjusting our cost structure to both achieve profitability in the current market cycle and position Culp to accelerate growth when conditions ultimately improve without the need for additional investment.

The macroeconomic data remains stubbornly low, with consumer confidence down based on a variety of factors and the housing market working through challenges, including some of the highest levels of unsold homes in years, as well as higher interest rates. There is acute pressure on housing affordability, which continues to put downward pressure on unit sales across the entire industry. We illustrate some of these dynamics and impacts on pages 12 through 18 of our supplemental deck, which again is posted on our website. In the face of a difficult top-line environment, we've continued to focus on two overarching strategies at Culp: winning market share and adjusting our cost structure to both achieve profitability in the current market cycle and position Culp to accelerate growth when conditions ultimately improve without the need for additional investment.

Speaker #2: acute There is pressure on housing affordability , which continues to put downward pressure on unit sales across the entire industry . We illustrate some of these dynamics and impacts on pages 12 through 18 of our supplemental deck , which again is posted on our website In .

Speaker #2: the face of the difficult top line environment , we've continued to focus on two overarching strategies at Culp winning market share and adjusting our structure to both achieve cost profitability and the current market cycle .

Speaker #2: And position Culp to accelerate growth . When conditions ultimately improve without the need for additional investment . That last point is one I'd like to re-emphasize , because with the adjustments we've made to optimize our platform , that we'll talk about in detail today , we have the capacity to absorb additional production driven by any uptick in demand without the need to spend significant capital dollars .

Robert Culp: That last point is one I'd like to re-emphasize because with the adjustments we've made to optimize our platform that we'll talk about in detail today, we have the capacity to absorb additional production driven by any uptick in demand without the need to spend significant capital dollars. Our team has been aggressive, and we have made great progress on both of these key strategies. With respect to market share, we believe that our ability to sequentially increase our overall sales in the second quarter, despite having one less week than the first quarter, and to increase sales in our bedding segment both sequentially and year-over-year in this demand environment are a testament to our growing share with key customers. Our stylish and innovative products, along with our global platform for bedding and upholstery fabrics, continue to provide a unique and increasingly valuable proposition for customers.

That last point is one I'd like to re-emphasize because with the adjustments we've made to optimize our platform that we'll talk about in detail today, we have the capacity to absorb additional production driven by any uptick in demand without the need to spend significant capital dollars. Our team has been aggressive, and we have made great progress on both of these key strategies. With respect to market share, we believe that our ability to sequentially increase our overall sales in the second quarter, despite having one less week than the first quarter, and to increase sales in our bedding segment both sequentially and year-over-year in this demand environment are a testament to our growing share with key customers. Our stylish and innovative products, along with our global platform for bedding and upholstery fabrics, continue to provide a unique and increasingly valuable proposition for customers.

Speaker #2: team Our has been aggressive , and we have made great progress on both of these key with respect strategies to market share , we believe that our ability to sequentially increase our overall sales in the second quarter , despite having one less week than the first quarter , and to increase sales in our bedding segment , both sequentially and year over year .

Speaker #2: In this demand environment . Are a testament to our share with key customers . Our growing stylish and innovative products , along with our global platform for upholstery bedding and fabrics , continue to provide a unique and increasingly valuable proposition for customers .

Speaker #2: Moreover , we believe that the consolidation activity we are seeing downstream , betting especially in the market , bolsters our competitive position with key customers .

Robert Culp: Moreover, we believe that the consolidation activity we are seeing downstream, especially in the bedding market, bolsters our competitive position with key customers. Our experience has been that larger customers generally gravitate to the reliability of suppliers with compliant multi-location manufacturing flexibility, scale-driven cost advantages, and above all, the proven track record of product innovation and on-time performance that we offer. The supply chain complexities presented by the new global trade and tariff landscape actually provide us with additional competitive advantages, particularly as the pace of new tariff implementation settles and we have more time to react with product strategies and pricing adjustments. Recent evidence of this are the surcharges and cost adjustments we will be implementing in response to the most recent round of increased and in some cases unexpected tariffs on Turkey, Haiti, and other imports during Q2.

Moreover, we believe that the consolidation activity we are seeing downstream, especially in the bedding market, bolsters our competitive position with key customers. Our experience has been that larger customers generally gravitate to the reliability of suppliers with compliant multi-location manufacturing flexibility, scale-driven cost advantages, and above all, the proven track record of product innovation and on-time performance that we offer. The supply chain complexities presented by the new global trade and tariff landscape actually provide us with additional competitive advantages, particularly as the pace of new tariff implementation settles and we have more time to react with product strategies and pricing adjustments. Recent evidence of this are the surcharges and cost adjustments we will be implementing in response to the most recent round of increased and in some cases unexpected tariffs on Turkey, Haiti, and other imports during Q2.

Speaker #2: Our experience has been that larger customers generally gravitate to the reliability of suppliers with compliant multi-location manufacturing flexibility , scale driven cost advantages , and above all , the proven track record of innovation and on time product performance that we offer .

Speaker #2: The supply chain complexities presented by the new global trade and Tariff landscape actually provide us with additional competitive advantages , particularly as the pace of new tariff implementation settles and we have more time to react with product strategies and pricing adjustments .

Speaker #2: evidence Recent are the surcharges and cost adjustments be of this we will implementing in response to the most recent round of increased . In some cases , unexpected tariffs on Turkey , Haiti and other imports during the As said we've before , the winners and the fluid trade environment are very likely to be companies that can give .

Speaker #2: Customers multiple geographic manufacturing options to better navigate impacts tariff . Unlike some of our competitors , we've been very intentional over the years in building out a multi-location strategy with robust domestic manufacturing , as well as nearshore and offshore multiple operations .

Robert Culp: As we've said before, the winners in a fluid trade environment are very likely to be companies that can give customers multiple geographic manufacturing options to better navigate tariff impacts. Unlike some of our competitors, we've been very intentional over the years in building out a multi-location strategy with robust domestic manufacturing as well as nearshore, and multiple offshore operations. A map of our manufacturing and sourcing locations is included on page 19 of the supplemental slide deck. Today, for mattress fabric products, we have our expanded US platform for production, finishing, and distribution, as well as long-time supply partners in Turkey and Asia. For cut-and-sewn mattress cover products, we have our nearshore production in Haiti, which is situated directly on the border of the Dominican Republic, as well as Asia supply chains in both Vietnam and China.

As we've said before, the winners in a fluid trade environment are very likely to be companies that can give customers multiple geographic manufacturing options to better navigate tariff impacts. Unlike some of our competitors, we've been very intentional over the years in building out a multi-location strategy with robust domestic manufacturing as well as nearshore, and multiple offshore operations. A map of our manufacturing and sourcing locations is included on page 19 of the supplemental slide deck. Today, for mattress fabric products, we have our expanded US platform for production, finishing, and distribution, as well as long-time supply partners in Turkey and Asia. For cut-and-sewn mattress cover products, we have our nearshore production in Haiti, which is situated directly on the border of the Dominican Republic, as well as Asia supply chains in both Vietnam and China.

Speaker #2: A our map of manufacturing and sourcing locations is included on page 19 of the supplemental slide deck . Today , for mattress fabric products , we have our expanded US platform for finishing and production , distribution , as well as long time supply partners in Turkey and Asia for cut and mattress cover products .

Speaker #2: We have our nearshore production in Haiti, which is situated directly on the border of the Dominican Republic, as well as Asia.

Speaker #2: Supply chains in both Vietnam and China . In upholstery , we have a well established . Asia presence with solid and growing Vietnam supply options for both fabrics and sewn kits , and we also continue assessing various options in other parts of the world .

Robert Culp: In upholstery, we have a well-established Asia presence with solid and growing Vietnam supply options for both fabrics and sewn kits. We also continue assessing various options in other parts of the world. Notably, only approximately 30% of our China-produced fabrics ship in the US, so we have some protection currently from fluctuating tariffs in that scenario. For window treatments, we have our US platform for drapery and roller shades, as well as several strategic supply partners. Bottom line, there is no slam-dunk strategy for handling the current tariff environment, but we believe our global production footprint, improved ability to pivot our platform as necessary, provide customers with country of origin, and speed-to-market optionality that is unique, and we can provide them preferred delivery and customer service wherever they want to be supplied.

In upholstery, we have a well-established Asia presence with solid and growing Vietnam supply options for both fabrics and sewn kits. We also continue assessing various options in other parts of the world. Notably, only approximately 30% of our China-produced fabrics ship in the US, so we have some protection currently from fluctuating tariffs in that scenario. For window treatments, we have our US platform for drapery and roller shades, as well as several strategic supply partners. Bottom line, there is no slam-dunk strategy for handling the current tariff environment, but we believe our global production footprint, improved ability to pivot our platform as necessary, provide customers with country of origin, and speed-to-market optionality that is unique, and we can provide them preferred delivery and customer service wherever they want to be supplied.

Speaker #2: Notably , only approximately 30% of our China produced fabrics shipped in the US . So we have some protection . Currently from fluctuating tariffs .

Speaker #2: In that scenario for window treatments, we have our U.S. platform for drapery and roller shades, as well as several strategic supply partners.

Speaker #2: Bottom line there is no slam dunk strategy for handling the current tariff environment , but we believe our global production footprint improving ability to pivot our platform as necessary , provide customers with country of origin and speed to market optionality .

Speaker #2: That is unique and we can provide them preferred delivery and customer service wherever they want to be supplied . We feel strongly that tariffs can ultimately be turned into an advantage for Culp , but the pace of legislative change creates a lag before we can compensate with pricing and or product strategy .

Robert Culp: We feel strongly that tariffs can ultimately be turned into an advantage for Culp, but the pace of legislative change creates a lag before we can compensate with pricing and/or product strategy. Turning to our operating performance for the quarter, I'd like to take a moment to review everything our team has done to drive the improvement we've seen in recent periods. There has been a truly formidable amount of work done on our platform, beginning with the restructuring project completed last fiscal year. That project was quite comprehensive and involved the consolidation of our North American bedding operations, including the closure and sale of our Kanda facility, expansion of knitting and finish capacity to our US facility, transition of our Damasc lines to a sourcing model, consolidation of our Haiti cut-and-sew operations, and the reduction of our bedding workforce by almost 35%.

We feel strongly that tariffs can ultimately be turned into an advantage for Culp, but the pace of legislative change creates a lag before we can compensate with pricing and/or product strategy. Turning to our operating performance for the quarter, I'd like to take a moment to review everything our team has done to drive the improvement we've seen in recent periods. There has been a truly formidable amount of work done on our platform, beginning with the restructuring project completed last fiscal year. That project was quite comprehensive and involved the consolidation of our North American bedding operations, including the closure and sale of our Kanda facility, expansion of knitting and finish capacity to our US facility, transition of our Damasc lines to a sourcing model, consolidation of our Haiti cut-and-sew operations, and the reduction of our bedding workforce by almost 35%.

Speaker #2: Turning to our operating performance for the quarter, I'd like to take a moment to review everything our team has done to drive the improvement we've seen in recent periods.

Speaker #2: There has been a truly amount of formidable work done on our platform , beginning with the restructuring project completed last fiscal year . That project was quite comprehensive involved the and North consolidation of our Bedding American including the operations , closure and sale of our Canada facility , expansion of knitting and to our US facility .

Speaker #2: Transition of our damask lines to a sourcing model . Consolidation of our cut and sew operations and the reduction of our bedding workforce by almost 35% .

Speaker #2: We also rationalized our upholstery finishing operation in China and significantly reduced our overall administrative expenses as part of the project . A summary of those actions is detailed on page eight of the supplemental deck .

Robert Culp: We also rationalized our upholstery finishing operation in China and significantly reduced our overall administrative SG&A expenses as part of the project. A summary of those actions is detailed on page 8 of the supplemental deck. We continue to expect approximately $11 million in annualized cost, $11 million in annualized cost savings and efficiency gains from this project, and we've already seen those gains begin to reflect in our financial performance over the prior several quarters. The actions in our bedding platform have been particularly impactful, with gross profitability in that business almost tripling year-over-year in the first half of fiscal 2026 and driving over 20% improvement in our consolidated operating results for the quarter. We followed up that restructuring project with an initiative to integrate our two former standalone divisions, mattress and upholstery, or what we used to call CHF and CUF, into a unified Culp-branded business.

We also rationalized our upholstery finishing operation in China and significantly reduced our overall administrative SG&A expenses as part of the project. A summary of those actions is detailed on page 8 of the supplemental deck. We continue to expect approximately $11 million in annualized cost, $11 million in annualized cost savings and efficiency gains from this project, and we've already seen those gains begin to reflect in our financial performance over the prior several quarters. The actions in our bedding platform have been particularly impactful, with gross profitability in that business almost tripling year-over-year in the first half of fiscal 2026 and driving over 20% improvement in our consolidated operating results for the quarter. We followed up that restructuring project with an initiative to integrate our two former standalone divisions, mattress and upholstery, or what we used to call CHF and CUF, into a unified Culp-branded business.

Speaker #2: We continue to expect approximately 11 million in annualized cost , $11 million in annualized cost savings and efficiency gains from this project . we've already And seen those gains begin to reflect in our financial performance over the several prior quarters .

Speaker #2: The actions in our betting platform have been particularly impactful, with gross profitability in that business almost tripling year over year in the first half of fiscal 2026.

Speaker #2: And driving over 20% improvement in our consolidated operating results for the quarter . We followed up that restructuring project with an initiative to integrate our two former standalone divisions , mattresses and upholstery , or what we used to call CHF and into QF a Culp branded unified business .

Speaker #2: The substantive actions of this reorganization are detailed on page ten of the supplemental deck . this As part of integration , which we are project calling Blaze , we transitioned our division presidents into companywide Chief Commercial Officer and chief Operating officer roles and blended other operations , resources and personnel .

Robert Culp: The substantive actions of this reorganization are detailed on page 10 of the supplemental deck. As part of this integration, which we are calling Project Blaze, we transitioned our division presidents into company-wide Chief Commercial Officer and Chief Operating Officer roles and blended other operations, resources, and personnel. We are also in the final stages of transitioning our US upholstery distribution and window treatment operations from leased facilities into our owned campus in Stokesdale, North Carolina. Both of these consolidations are on track to begin positively impacting our results in late Q3 and the remainder of the second half of fiscal 2026, and together with other integration initiatives, are expected to generate annualized cost savings and efficiency gains of approximately $3.5 million. We also recently implemented price adjustments intended to address baseline tariff uncertainty and rationalize gross margins.

The substantive actions of this reorganization are detailed on page 10 of the supplemental deck. As part of this integration, which we are calling Project Blaze, we transitioned our division presidents into company-wide Chief Commercial Officer and Chief Operating Officer roles and blended other operations, resources, and personnel. We are also in the final stages of transitioning our US upholstery distribution and window treatment operations from leased facilities into our owned campus in Stokesdale, North Carolina. Both of these consolidations are on track to begin positively impacting our results in late Q3 and the remainder of the second half of fiscal 2026, and together with other integration initiatives, are expected to generate annualized cost savings and efficiency gains of approximately $3.5 million. We also recently implemented price adjustments intended to address baseline tariff uncertainty and rationalize gross margins.

Speaker #2: We are also in the final stages of transitioning our upholstery distribution and window treatment operations from leased facilities into our owned campus in Stokesdale, North Carolina.

Speaker #2: Both of these consolidations track to on are begin positively impacting our results in late Q3 and the remainder of the second half of fiscal 26 .

Speaker #2: And other together with integration initiatives , are expected to generate annualized cost savings and efficiency gains of approximately $3.5 million . We also implemented recently price adjustments intended to address baseline tariff uncertainty and rationalize gross margins .

Speaker #2: We expect these adjustments to generate approximately $2.5 million in annualized margin improvement in our betting segment, which began in late Q2.

Speaker #2: And as I previously mentioned , we are initiating additional surcharges and other product strategies in response to new tariffs during the quarter that will be effective in late Q3 all of .

Speaker #2: Q4 . And Importantly , we are not done with our work to enhance our operating profile and generate profitability across market cycles , including the current one .

Speaker #2: We are moving forward with additional measures . Involving the reduction of our lease facility footprint in China that should be completed this fiscal year .

Speaker #2: And we are identifying further SG&A and other cost reductions commensurate with our warehouse have consolidation . also worked We to Rightsize and effectively manage inventory , recognizing some non-cash impairments and related charges .

Robert Culp: Commensurate with our warehouse consolidation, we have also worked to right-size and effectively manage inventory, recognizing some non-cash impairments and related charges in Q2, while focusing on turning aged inventory into cash and filling our warehouse with strategic inventory that our customers prefer. As we eventually move into Q4 and then to fiscal year 2027, we will have a much cleaner and strategic inventory and distribution platform in North Carolina to better service our markets and customers. From an all-in perspective, starting with our restructuring project in fiscal 2025 and continuing through the completion of these other initiatives I mentioned, we expect to enter fiscal 2027 with the benefit of over $20 million in annualized cost savings and enhancements going forward. The overall summary of this is on page 11 of the supplemental deck.

Commensurate with our warehouse consolidation, we have also worked to right-size and effectively manage inventory, recognizing some non-cash impairments and related charges in Q2, while focusing on turning aged inventory into cash and filling our warehouse with strategic inventory that our customers prefer. As we eventually move into Q4 and then to fiscal year 2027, we will have a much cleaner and strategic inventory and distribution platform in North Carolina to better service our markets and customers. From an all-in perspective, starting with our restructuring project in fiscal 2025 and continuing through the completion of these other initiatives I mentioned, we expect to enter fiscal 2027 with the benefit of over $20 million in annualized cost savings and enhancements going forward. The overall summary of this is on page 11 of the supplemental deck.

Speaker #2: In Q2 , while focusing turning on aged inventory into cash and filling our warehouse with strategic inventory that our customers prefer . As we eventually move into Q4 and then to fiscal year 27 .

Speaker #2: have a much We will cleaner and strategic inventory and distribution platform in North Carolina to better service our markets and customers . From an all in perspective , starting with our restructuring project in fiscal 25 and continuing through the completion of these other initiatives , I mentioned , we expect to enter fiscal 27 with the benefit of over $20 million in cost annualized savings and enhancements going forward .

Speaker #2: The overall summary of this is on page 11 of the supplemental deck . I am extremely proud of how our team has embraced the challenge in conditions and sees the opportunity to transform our business into a leaner and more agile organization .

Robert Culp: I am extremely proud of how our team has embraced the challenges, entry conditions, and seized the opportunity to transform our business into a leaner and more agile organization. Turning to our bedding business specifically, summarized on page 5 of the supplemental deck, the sales momentum we have recently seen in that business, again, including both sequential and year-over-year growth during the quarter, is highly encouraging. A lot of this activity was generated by some nice trends in our knit fabric and sewn cover product lines, which are areas we believe we have a lot of white space to drive profitable growth with our restructured bedding platform. We feel good about our current product offerings in this business and believe that our go-to-market strategies are on point.

I am extremely proud of how our team has embraced the challenges, entry conditions, and seized the opportunity to transform our business into a leaner and more agile organization. Turning to our bedding business specifically, summarized on page 5 of the supplemental deck, the sales momentum we have recently seen in that business, again, including both sequential and year-over-year growth during the quarter, is highly encouraging. A lot of this activity was generated by some nice trends in our knit fabric and sewn cover product lines, which are areas we believe we have a lot of white space to drive profitable growth with our restructured bedding platform. We feel good about our current product offerings in this business and believe that our go-to-market strategies are on point.

Speaker #2: Turning to our betting business , specifically summarized on page five of the supplemental deck , the sales momentum we have recently seen in that business , again , including both sequential and year over year growth during the quarter , is highly encouraging .

Speaker #2: A lot of this activity was generated by some nice trends in our knit fabric and sewn cover product lines , which are areas we believe we of white have a lot space to drive profitable growth .

Speaker #2: With our betting restructured platform, we feel good about our current product in this offerings business and believe that our go-to-market strategies are on point.

Speaker #2: Also , as I mentioned , we are some seeing indications that the betting market is stabilizing and there continues to be more industry commentary indicating that the betting market is due for an increase in unit activity , driven by product historical replacement cycles .

Speaker #2: The industry consensus view supports that we're now over four years into a period demand cycle down . We included in our presentations on pages 16 through 18 , some excerpts from recent research published by UBS , indicating that the current market downturn has now extended beyond the typical duration of prior downturns .

Speaker #2: There is a significant amount of pent-up demand relative to storage as a trend. As a result, we generally agree with that view and believe that the industry is due for an increase in unit activity.

Speaker #2: Although the timing of that is , of course , the critical question that no one knows for certain . Turning to our upholstery business , summarized on page six of the supplemental deck Market conditions , there are comparably more unsettled and pressuring sales , which had a impact on our notable expected consolidated gross profit dollars during the quarter .

Robert Culp: Turning to our upholstery business, summarized on page 6 of the supplemental deck, market conditions there are comparably more unsettled, and pressuring sales, which had a notable impact on our expected consolidated gross profit dollars during the quarter. The current weakness in consumer sentiment and housing is still heavily dampening buying activity, particularly among the lower and middle-income segments that the prevailing portion of our residential fabric customers typically target. Despite the difficult environment, we were pleased to be able to maintain relatively stable sales within our US residential fabric customer base during the quarter, while our residential sales to customers in China and other foreign countries declined due to what appeared to be more challenged revenue conditions in those markets. The macroeconomic uncertainties also impacted our hospitality and commercial upholstery business, with many hotel, office, and other public space projects temporarily delayed in recent periods.

Turning to our upholstery business, summarized on page 6 of the supplemental deck, market conditions there are comparably more unsettled, and pressuring sales, which had a notable impact on our expected consolidated gross profit dollars during the quarter. The current weakness in consumer sentiment and housing is still heavily dampening buying activity, particularly among the lower and middle-income segments that the prevailing portion of our residential fabric customers typically target. Despite the difficult environment, we were pleased to be able to maintain relatively stable sales within our US residential fabric customer base during the quarter, while our residential sales to customers in China and other foreign countries declined due to what appeared to be more challenged revenue conditions in those markets. The macroeconomic uncertainties also impacted our hospitality and commercial upholstery business, with many hotel, office, and other public space projects temporarily delayed in recent periods.

Speaker #2: The current weakness in consumer sentiment and housing is still heavily dampening buying activity , particularly among the lower and middle income the segments that prevailing portion of our residential fabric customers typically target Despite the .

Speaker #2: Despite a difficult environment, we were pleased to be able to maintain relatively stable sales within our U.S. residential fabric customer base during the quarter.

Speaker #2: While our residential sales to customers in China foreign countries and other declined due to what appeared to be more challenged , revenue conditions than those markets .

Speaker #2: The macroeconomic uncertainty is also impacted . Our hospitality and commercial upholstery business , with many hotel , office and other public space projects temporarily delayed and recent periods .

Speaker #2: However , that business remains an important part of our poultry strategy and we continue to believe it should drive solid long term growth over time .

Robert Culp: However, that business remains an important part of our upholstery strategy, and we continue to believe it should drive solid long-term growth over time. Despite the challenging top-line environment for home furnishings, we continue to maintain a strong competitive position and believe that the foundation is there to grow upholstery over the long term. We have market-leading innovation and design capabilities along with a flexible platform, and we continue to gain new opportunities by segmenting our product and sales strategies to focus on mid- to upper-price-point furniture as well as the value segment. Our product lines have continued to generate positive reactions to industry events and shows, including the recent furniture market and the Interwoven Fabric Show, both in High Point, which will ultimately lead to winning placements with customers.

However, that business remains an important part of our upholstery strategy, and we continue to believe it should drive solid long-term growth over time. Despite the challenging top-line environment for home furnishings, we continue to maintain a strong competitive position and believe that the foundation is there to grow upholstery over the long term. We have market-leading innovation and design capabilities along with a flexible platform, and we continue to gain new opportunities by segmenting our product and sales strategies to focus on mid- to upper-price-point furniture as well as the value segment. Our product lines have continued to generate positive reactions to industry events and shows, including the recent furniture market and the Interwoven Fabric Show, both in High Point, which will ultimately lead to winning placements with customers.

Speaker #2: Despite the challenging top line home furnishings , we continue environment for to maintain a competitive strong believe that the and foundation is there to grow upholstery over the long term .

Speaker #2: We have market leading innovation and design capabilities , with the flexible platform , and we continue to gain opportunities by segmenting our new product and sales strategies to focus on mid to upper price point furniture , as well as the value segment .

Speaker #2: Our product lines have continued to generate positive reactions to industry events and shows , including the recent furniture and the market Interwoven Fabric Show , both in High Point , which will ultimately lead to winning placements with customers .

Speaker #2: Furthermore , with the uncertainty around tariffs , we are able to offer customers multiple options via our extensive Asia operations , including Vietnam .

Robert Culp: Furthermore, with the uncertainty around tariffs, we are able to offer customers multiple options via our extensive Asia operations, including Vietnam, while also having the flexibility to consider options in other regions to enable a preferred response. We are encouraged that we were able to maintain solid gross margins on our upholstery business during the second quarter, despite lower-than-expected sales. Nonetheless, we are heavily focused on integrating that business with our bedding business and generating operating improvement. Our upholstery business is already relatively asset-light and less capital-intensive compared to our bedding business and its vertical manufacturing platform, and it's been consistently profitable. The consolidations of our US upholstery distribution, and window treatment manufacturing into a shared management model, along with the reduction of our facility footprint in China, should enhance further our upholstery profitability in the near term and position it to accelerate when top-line conditions cycle favorably.

Furthermore, with the uncertainty around tariffs, we are able to offer customers multiple options via our extensive Asia operations, including Vietnam, while also having the flexibility to consider options in other regions to enable a preferred response. We are encouraged that we were able to maintain solid gross margins on our upholstery business during the second quarter, despite lower-than-expected sales. Nonetheless, we are heavily focused on integrating that business with our bedding business and generating operating improvement. Our upholstery business is already relatively asset-light and less capital-intensive compared to our bedding business and its vertical manufacturing platform, and it's been consistently profitable. The consolidations of our US upholstery distribution, and window treatment manufacturing into a shared management model, along with the reduction of our facility footprint in China, should enhance further our upholstery profitability in the near term and position it to accelerate when top-line conditions cycle favorably.

Speaker #2: While also having the flexibility to consider options in other regions to enable a preferred response . We are encouraged that we were able to maintain solid gross margins on our poultry business during the second quarter , despite lower than expected sales .

Speaker #2: Nonetheless , we are heavily focused on integrating that business with our betting business and generating operating improvement . Our upholstery business is already relatively asset light and less capital intensive compared to our betting business , and its vertical manufacturing platform , and it's been consistently profitable .

Speaker #2: The consolidation of our U.S. poultry distribution and window treatment manufacturing into a shared management model, along with the reduction of our footprint in facility China, should enhance further our upholstery profitability in the near term and position it to accelerate when top-line conditions cycle favorably.

Speaker #2: In closing , I want to emphasize that we are now in the final inning , so to speak , of a comprehensive multi-phase transformation of our business .

Robert Culp: In closing, I want to emphasize that we are now in the final inning, so to speak, of a comprehensive multi-phase transformation of our business. We will finish the fiscal year with a rationalized and fully optimized global platform for both bedding and upholstery products that we believe will create a significant long-term value for shareholders. Our key investment highlights are included on page 21 of our supplemental slide deck. To be clear, we are committed to alter strategies and make changes within our business to adjust to market demand. Our highest priorities in the near term remain returning Culp to overall profitability in the current cycle and effectively managing our debt levels, and I can assure you that we will not take our eye off of those goals.

In closing, I want to emphasize that we are now in the final inning, so to speak, of a comprehensive multi-phase transformation of our business. We will finish the fiscal year with a rationalized and fully optimized global platform for both bedding and upholstery products that we believe will create a significant long-term value for shareholders. Our key investment highlights are included on page 21 of our supplemental slide deck. To be clear, we are committed to alter strategies and make changes within our business to adjust to market demand. Our highest priorities in the near term remain returning Culp to overall profitability in the current cycle and effectively managing our debt levels, and I can assure you that we will not take our eye off of those goals.

Speaker #2: We will finish the fiscal year with a rationalized and fully optimized global platform for both bedding and products upholstery that we believe will create a significant long term value for shareholders .

Speaker #2: Our key highlights are included on page 21 of the supplemental slide deck. To be clear, we are committed to ultra strategies and will make changes within our business to adjust to market demand.

Speaker #2: Our highest priorities in the near term remain . Returning Culp to overall profitability in the current cycle and effectively managing our debt And levels .

Speaker #2: I can assure you that we will not take our eye off of those goals . With that , I'll now turn the call over to Ken , who will review the financial results for the quarter , and then I'll our review outlook for the remainder of fiscal 26 .

Robert Culp: With that, I'll now turn the call over to Ken, who will review the financial results for the quarter, and then I'll review our outlook for the remainder of fiscal 2026. Thanks, Zip. Here are the financial highlights for the second quarter. Consolidated net sales for the second quarter were $53.2 million, a sequential improvement from the first quarter sales of $50.7 million, which included an extra week, and a decline from prior year period sales of $55.7 million. The year-over-year decline was driven primarily by the continued industry-wide softness and the tariff-related uncertainty that we have discussed. Consolidated gross profit for the quarter was $5.8 million, or 10.9% of sales, compared to the prior year period gross profit of $6 million, or 10.8% of sales.

With that, I'll now turn the call over to Ken, who will review the financial results for the quarter, and then I'll review our outlook for the remainder of fiscal 2026.

Speaker #1: Thanks , Eve . Here are the financial highlights for the second quarter . Consolidated net sales for the second quarter were $53.2 million , a sequential from the first quarter sales of improvement 50.7 million , which included an extra week and a decline from prior year sales of period 55.7 million .

Ken Bowling: Thanks, Zip. Here are the financial highlights for the second quarter. Consolidated net sales for the second quarter were $53.2 million, a sequential improvement from the first quarter sales of $50.7 million, which included an extra week, and a decline from prior year period sales of $55.7 million. The year-over-year decline was driven primarily by the continued industry-wide softness and the tariff-related uncertainty that we have discussed. Consolidated gross profit for the quarter was $5.8 million, or 10.9% of sales, compared to the prior year period gross profit of $6 million, or 10.8% of sales.

Speaker #1: The year over decline year driven was primarily by the continued industry wide softness and the tariff related uncertainty , if that discussed , consolidated gross profit for the quarter was 5.8 million , or 10.9% of sales , compared to the prior year period .

Speaker #1: Gross profit of 6 million , or 10.8% of sales , excluding restructuring related expenses . Adjusted consolidated gross profit for the quarter was 6.7 million , or 12.6% of sales , compared to the prior year period .

Robert Culp: Excluding restructuring-related expenses, adjusted consolidated gross profit for the quarter was $6.7 million, or 12.6% of sales, compared to the prior year period adjusted gross profit of $6.8 million, or 12.1% of sales. This gross profit improvement was driven primarily by cost and efficiency gains from the restructuring of our bedding segment completed last year. SG&A expense for the quarter was $8.7 million, an approximate 7% improvement compared with SG&A expense for the prior year period, reflecting cost savings from our restructuring initiative. Loss from operations was $3.5 million for the quarter, compared to the prior year period loss of operations of $5.4 million. Excluding restructuring and related expenses, adjusted operating loss for the quarter was $2 million, compared to the prior year period adjusted operating loss of $2.6 million.

Excluding restructuring-related expenses, adjusted consolidated gross profit for the quarter was $6.7 million, or 12.6% of sales, compared to the prior year period adjusted gross profit of $6.8 million, or 12.1% of sales. This gross profit improvement was driven primarily by cost and efficiency gains from the restructuring of our bedding segment completed last year. SG&A expense for the quarter was $8.7 million, an approximate 7% improvement compared with SG&A expense for the prior year period, reflecting cost savings from our restructuring initiative. Loss from operations was $3.5 million for the quarter, compared to the prior year period loss of operations of $5.4 million. Excluding restructuring and related expenses, adjusted operating loss for the quarter was $2 million, compared to the prior year period adjusted operating loss of $2.6 million.

Speaker #1: Adjusted gross profit of $6.8 million, or 12.1% of sales. This gross profit improvement was driven primarily by cost and gains efficiency from the restructuring of our bedding segment, which was completed last year.

Speaker #1: SG&A expense for the quarter was $8.7 million, an approximate 7% improvement compared with SG&A expense for the prior year period, reflecting cost savings from our restructuring initiatives.

Speaker #1: Loss from operations was 3.5 million for the quarter prior year period . Loss of operations of 5.4 million , excluding restructuring and related expenses .

Speaker #1: operating loss for the Adjusted quarter was 2 million , compared to the prior year period . Adjusted operating loss of 2.6 million EBITDA , adjusted for the impacts of restructuring related expenses , stock based compensation and other non-cash charges , was a -1 million for the second quarter and improvement on lower sales compared to negative 1.1 million in the prior year period .

Robert Culp: EBITDA adjusted for the impacts of restructuring-related expenses, stock-based compensation, and other non-cash charges was -$1 million for the second quarter, an improvement on lower sales compared to -$1.1 million in the prior year period. Our year-over-year operating performance improvement for the second quarter benefited primarily from continued momentum in our bedding segment, driven by the positive impacts of last year's restructuring. Operating performance also benefited from the continued profitability in the upholstery fabric segment, despite the low revenue industry environment and tariff-related challenges we have spoken to. The effective income tax rate for the second quarter was -5.1% compared to 0.9% for the same period a year ago and continues to be impacted by the company's mix of earnings between our US and foreign subsidiaries. Our income tax payments totaled $1.7 million for the first six months of this fiscal year.

EBITDA adjusted for the impacts of restructuring-related expenses, stock-based compensation, and other non-cash charges was -$1 million for the second quarter, an improvement on lower sales compared to -$1.1 million in the prior year period. Our year-over-year operating performance improvement for the second quarter benefited primarily from continued momentum in our bedding segment, driven by the positive impacts of last year's restructuring. Operating performance also benefited from the continued profitability in the upholstery fabric segment, despite the low revenue industry environment and tariff-related challenges we have spoken to. The effective income tax rate for the second quarter was -5.1% compared to 0.9% for the same period a year ago and continues to be impacted by the company's mix of earnings between our US and foreign subsidiaries. Our income tax payments totaled $1.7 million for the first six months of this fiscal year.

Speaker #1: Our year over year operating performance improvement for the second quarter benefited primarily from continued momentum in our betting segment , driven by the positive impacts of last year's restructuring , operating performance also benefited from the continued profitability and the poultry fabrics segment .

Speaker #1: Despite the lower the low revenue industry environment and tariff related challenges . If spoke to the effective income tax second quarter was a rate for the -5.1% compared to 0.9% for the same period a year ago .

Speaker #1: And continues to be impacted by the company's mix of earnings . Between our U.S. and foreign subsidiaries . Our income tax payments totaled 1.7 million for the first six months of this fiscal year .

Speaker #1: Importantly, as of the end of last fiscal year, we had $88.1 million in U.S. federal net operating loss carryforwards, with related future income tax benefits of $18.5 million.

Speaker #1: Before we take a look at our operating segments once again, please note that following the integration of our two former divisions, we now refer to our CHF Mattress Fabrics business as our bedding segment and our QF Upholstery Fabrics business as our poultry segment.

Speaker #1: Moreover , as part of that integration , we now manage and assess SG&A expenses as on a basis . As a result , we no longer report operating performance segment at the level , just down to the gross profit level For the .

Speaker #1: In the bedding segment, sales for the second quarter were $30.8 million, up approximately 10% sequentially from the first quarter, and up over 2% compared to the prior year period.

Speaker #1: As if to spoke to sales continued to be pressured by low industry demand and challenges from consumer spending and housing market trends, but we were able to continue our trend of winning share in key targeted areas.

Robert Culp: As I spoke to, sales continued to be pressured by low industry demand and challenges from consumer spending and housing market trends, but we were able to continue our trend of winning share in key targeted areas. The restructured cost platform in our bedding segment drove a gross profit of $3.1 million, or 10.1% of sales, a 200 basis point improvement from the prior year period. We were pleased to see the profitability momentum in this segment continue during the quarter. For the upholstery fabric segment, sales for Q2 were $22.4 million, sequentially flat with Q1 and down approximately 12% compared to the prior year period. This year-over-year decline stemmed from continued softness in the home furnishings market and corresponding weakness in the residential upholstery channel, as well as additional pressure on demand from tariffs.

As I spoke to, sales continued to be pressured by low industry demand and challenges from consumer spending and housing market trends, but we were able to continue our trend of winning share in key targeted areas. The restructured cost platform in our bedding segment drove a gross profit of $3.1 million, or 10.1% of sales, a 200 basis point improvement from the prior year period. We were pleased to see the profitability momentum in this segment continue during the quarter. For the upholstery fabric segment, sales for Q2 were $22.4 million, sequentially flat with Q1 and down approximately 12% compared to the prior year period. This year-over-year decline stemmed from continued softness in the home furnishings market and corresponding weakness in the residential upholstery channel, as well as additional pressure on demand from tariffs.

Speaker #1: The restructuring costs platform in our bedding segment drove a gross profit of 3.1 million , or 10.1% of sales , a 200 basis point improvement from the prior year period .

Speaker #1: were We pleased to see the profitability momentum in this segment continued during the quarter . For the upholstery fabric segment , sales for the quarter second were 22.4 million sequentially flat , with the first quarter and down approximately 12% compared to the prior year period .

Speaker #1: This year over year decline stemmed from continued softness in the home furnishings market and corresponding weakness in the residential upholstery channel . As well as additional pressure on demand from tariffs .

Speaker #1: Gross profit in the upholstery segment was 3.6 million , or 16.1% of sales , down from 4.3 million , or the prior year 16.9% of sales in period , and driven largely by lower comparable sales .

Robert Culp: Gross profit in the upholstery segment was $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales in the prior year period, and driven largely by lower comparable sales. Now I'll turn to the balance sheet. We reported $10.7 million in total cash and $18.3 million in outstanding debt as of the end of Q2, with a net debt position of $7.6 million as compared to a net debt position of $7.1 million at the end of Q1. The outstanding debt was primarily incurred to fund worldwide working capital and restructuring activities, but also includes approximately $3 million incurred voluntarily to take advantage of borrowing opportunities at current preferred rates in China. We continue to believe this decision was prudent given today's challenging economic environment and uncertain trade relations.

Gross profit in the upholstery segment was $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales in the prior year period, and driven largely by lower comparable sales. Now I'll turn to the balance sheet. We reported $10.7 million in total cash and $18.3 million in outstanding debt as of the end of Q2, with a net debt position of $7.6 million as compared to a net debt position of $7.1 million at the end of Q1. The outstanding debt was primarily incurred to fund worldwide working capital and restructuring activities, but also includes approximately $3 million incurred voluntarily to take advantage of borrowing opportunities at current preferred rates in China. We continue to believe this decision was prudent given today's challenging economic environment and uncertain trade relations.

Speaker #1: Now , the balance sheet we reported 10.7 million in total cash and 18.3 million in outstanding debt as of the end of the second quarter , with a net debt position of 7.6 million .

Speaker #1: As compared to a net debt position of 7.1 million at the end of the first quarter . The outstanding debt was primarily incurred to fund work working worldwide , capital and restructuring activities , but also includes approximately 3 million incurred voluntarily to take advantage of borrowing opportunities at current preferred rates .

Speaker #1: In China . We continue to believe this prudent decision was given today's economic challenging environment and uncertain trade relations . Further , we were able to invest these proceeds into a high yield savings account in China at a rate materially higher than the interest rate paid on the debt .

Robert Culp: Further, we were able to invest these proceeds into a high-yield savings account in China at a rate materially higher than the interest rate paid on the debt. This strategy more than covers our interest costs for the debt, while at the same time giving us significant flexibility in managing our worldwide cash position. Cash flow from operations was -$1.2 million for the first six months of this fiscal year and primarily driven by operating losses, which compares favorably to the -$2.6 million in the prior year period. Adjusted for capital expenditures, proceeds from the sale of PP&E, and other items, free cash flow was just about break-even at $10,000 and down favorably from the -$3.4 million in the prior year period. Generating free cash flow and reducing our debt continue to be among our highest priorities.

Further, we were able to invest these proceeds into a high-yield savings account in China at a rate materially higher than the interest rate paid on the debt. This strategy more than covers our interest costs for the debt, while at the same time giving us significant flexibility in managing our worldwide cash position. Cash flow from operations was -$1.2 million for the first six months of this fiscal year and primarily driven by operating losses, which compares favorably to the -$2.6 million in the prior year period. Adjusted for capital expenditures, proceeds from the sale of PP&E, and other items, free cash flow was just about break-even at $10,000 and down favorably from the -$3.4 million in the prior year period. Generating free cash flow and reducing our debt continue to be among our highest priorities.

Speaker #1: This strategy more than covers our interest costs for the debt . While at time giving the same us significant flexibility in managing our worldwide cash position .

Speaker #1: Cash flow from operations was a -1.2 million for the first six months of this fiscal year , and primarily driven by operating losses , which compares favorably to negative 2.6 million in the prior year period .

Speaker #1: Adjusted for capital expenditures , proceeds from the sale of PPE and other items , free cash flow was just about break even at $10,000 , and down favorably from a -3.4 million in the prior year period , generating free cash flow and reducing our debt .

Speaker #1: Continue to be our highest priorities among . Capital expenditures were only 218,000 for the year to date period , down from 1.6 million in the prior year with period , lower spending strategic efforts to closely manage capital and focus on maintenance projects and initiatives .

Speaker #1: With a quick payback , we capital expect spending , spending for fiscal 2026 to be lower than fiscal 2025 levels . As we continue to spend only as necessary , our liquidity as of the end of the second quarter was approximately 28.1 million and consisted of 10.7 million in cash and 17.4 million in borrowing availability .

Speaker #1: Under our domestic credit facility . As a reminder of liquidity purposes , the net book value for our owned manufacturing campus in North Carolina as of the end of the quarter , was around $12 million and has an estimated market value of 40 to 45 million .

Speaker #1: Our liquidity highlights are briefly on page seven of the supplemental summarized deck . With that , I'll turn the over to call back Yves to outlook discuss the general for the third quarter , then we your and will take questions .

Robert Culp: With that, I'll turn the call back over to Ip to discuss the general outlook for Q3, and then we will take your questions. Thank you, Ken. Due to the market and macroeconomic uncertainty, and the fluid tariff landscape we've talked about today, we are only providing limited forward guidance at this time. Despite what we anticipate to remain a challenging demand environment for home furnishings in the near term, the pressure sales in both of our businesses, we currently expect steady consolidated sales performance in Q3 and throughout the remainder of fiscal 2026, with higher expectations for the bedding segment.

With that, I'll turn the call back over to Ip to discuss the general outlook for Q3, and then we will take your questions.

Speaker #2: Ken Thank you . , due to the market and macroeconomic uncertainty and the fluid tariff landscape we've talked about today , we're only providing limited forward guidance at this time despite what we remain anticipate to a challenging environment for demand home furnishings in the near term .

Iv Culp: Thank you, Ken. Due to the market and macroeconomic uncertainty, and the fluid tariff landscape we've talked about today, we are only providing limited forward guidance at this time. Despite what we anticipate to remain a challenging demand environment for home furnishings in the near term, the pressure sales in both of our businesses, we currently expect steady consolidated sales performance in Q3 and throughout the remainder of fiscal 2026, with higher expectations for the bedding segment.

Speaker #2: The pressure sales in both of our businesses. We currently expect steady sales consolidated performance in the third quarter and throughout the remainder of fiscal 2026, higher with expectations for the bedding segment.

Speaker #2: Moreover , we expect the cost and efficiency benefits flowing from the transformation of our bedding and upholstery platforms , along with recent pricing action to drive improving gross profit and lower G&A , resulting in continued significant improvement in operating loss and breakeven to positive near adjusted EBITDA for the third quarter .

Robert Culp: Moreover, we expect the cost and efficiency benefits flowing from the transformation of our bedding and upholstery platforms, along with recent pricing action, to drive improving gross profit and lower SG&A, resulting in continued significant improvement in operating loss and near break-even to positive adjusted EBITDA for Q3. As Ken spoke to, while we intend to continue utilizing borrowings as necessary under our credit facilities during fiscal 2026 to fund working capital needs, as well as integration, and efficiency initiatives, we will continue to aggressively manage liquidity and capital expenditures to prioritize free cash flow. On that point, we are owed approximately $4.7 million in cash in Q4 on the sale of our Canada facility, and we anticipate that those funds may be received earlier, perhaps in Q3. Thank you again for your time listening today, and we'll now take some questions.

Moreover, we expect the cost and efficiency benefits flowing from the transformation of our bedding and upholstery platforms, along with recent pricing action, to drive improving gross profit and lower SG&A, resulting in continued significant improvement in operating loss and near break-even to positive adjusted EBITDA for Q3. As Ken spoke to, while we intend to continue utilizing borrowings as necessary under our credit facilities during fiscal 2026 to fund working capital needs, as well as integration, and efficiency initiatives, we will continue to aggressively manage liquidity and capital expenditures to prioritize free cash flow. On that point, we are owed approximately $4.7 million in cash in Q4 on the sale of our Canada facility, and we anticipate that those funds may be received earlier, perhaps in Q3. Thank you again for your time listening today, and we'll now take some questions.

Speaker #2: As Ken spoke to while we intend to continue utilizing borrowings that's under our credit facilities to earn fiscal 26 to fund working capital needs as well as integration and efficiency initiatives , we will continue to aggressively manage liquidity and capital expenditures to prioritize free cash flow point , we are owed .

Speaker #2: $4.7 million in cash in the fourth On that quarter on the sale Canada of our facility , and we anticipate that those funds may be received earlier , perhaps in the third quarter .

Speaker #2: Thank you again for your time listening today. We're now taking some questions.

Speaker #3: We will now begin the question and answer session . To question , ask a you may press star then one on your touch tone phone .

Robert Culp: We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Doug Lane with Water Tower Research. Please go ahead. Again, that's Doug Lane with Water Tower Research. Operator, I'm wondering if he's dialed in on the other line. I'm sorry. Can you hear me now? Yes, sir. We got you, Doug. There you go. Good morning. Sorry about that.

Speaker #3: At this time , will pause we momentarily to assemble our roster . Our first question comes from Doug Water Lane with Tower Research .

Speaker #3: Please go ahead. Again, that's Doug Lane with WaterTower Research.

Speaker #2: Operator wondering if he's I'm dialed on the on the other line .

Iv Culp: Operator, I'm wondering if he's dialed in on the other line.

Speaker #1: Can you .

Speaker #4: Sorry. Can you hear me now?

Speaker #2: Yes , sir . We got you , Doug . There you go . Good morning .

Doug Lane: I'm sorry. Can you hear me now?

Speaker #4: Go . About that . Yeah , I was encouraged to see the free cash flow break even . And the use from a cash from operations .

Iv Culp: Yes, sir. We got you, Doug.

Ken Bowling: There you go. Good morning.

Doug Lane: Sorry about that.

Robert Culp: Yeah, I was encouraged to see the free cash flow at break-even and the use from cash from operations, the cash use from operations being cut in half. So all the work you're doing is starting to come through, and I'm just trying to get a feel for where we are in the realization of all these cost savings. I know in the implementation, Ip, you said you're in the late innings, but of that 20 million on slide 11, about how much of that do you think is already being realized in the P&L, and how much is still to come? Yeah, Doug, thank you for that question. It's a lot.

Yeah, I was encouraged to see the free cash flow at break-even and the use from cash from operations, the cash use from operations being cut in half. So all the work you're doing is starting to come through, and I'm just trying to get a feel for where we are in the realization of all these cost savings. I know in the implementation, Ip, you said you're in the late innings, but of that 20 million on slide 11, about how much of that do you think is already being realized in the P&L, and how much is still to come?

Speaker #4: The cash use from operations being cut in So all the half . work you're doing is starting to come through , and I'm just trying to get a feel for where we are in the realization of all these cost savings .

Speaker #4: I know in the implementation , you said you're in the late innings , but of 20 million on that slide 11 , about how much of that do you think is already being realized in the PNL and is still how much to come ?

Speaker #2: Doug , thank you for that question . It's a Yeah . lot . I tried to , you know , regurgitate all the stuff we've done over the last couple fiscal years , and it's really , when you think about it and write it down and script it the way we have , considerable amount of effort .

Iv Culp: Yeah, Doug, thank you for that question. It's a lot.

Robert Culp: I tried to regurgitate all the stuff we've done over the last couple of fiscal years, and it's really, when you think about it and write it down and script it the way we have, it's a considerable amount of effort. So it's coming in at different phases. Obviously, the big work we did with our Canada facility is really helping us this year. That's in. The additional savings that we did and the price adjustments to deal with baseline tariffs, that all started to impact us maybe in late Q2. And then the new things we've announced or the plans with consolidating warehouses, moving our reed window production, and further adjustments are really a late Q3 impact.

I tried to regurgitate all the stuff we've done over the last couple of fiscal years, and it's really, when you think about it and write it down and script it the way we have, it's a considerable amount of effort. So it's coming in at different phases. Obviously, the big work we did with our Canada facility is really helping us this year. That's in. The additional savings that we did and the price adjustments to deal with baseline tariffs, that all started to impact us maybe in late Q2. And then the new things we've announced or the plans with consolidating warehouses, moving our reed window production, and further adjustments are really a late Q3 impact.

Speaker #2: So it's coming in a different phases . We had obviously the big work we did with our Canada facility is really helping us this year .

Speaker #2: That's in the additional savings that we did and the price adjustments to deal with baseline tariffs that all started to impact us maybe in late Q2.

Speaker #2: the then And we've announced or the new things plans consolidate with and warehouses and read moving our window production and further adjustments are really a late Q3 impact .

Speaker #2: So, by the time we get to Q4, we would expect to have the majority of everything done, and we would have as clean of pictures.

Robert Culp: So by the time we get to Q4, we would expect to have the majority of everything done, and we would have as clean of pictures we could have from a cost standpoint. Now, unfortunately, what that's doing is just we're continuing to reoptimize the platform to deal with very challenged conditions. So we're not banking on any kind of improvement. We hope and have feelings that it could start to come, but we're just doing all we can do to restructure the platform so that Q4 quarter is a clean quarter and all gears turn towards being profitable in this cycle. And then when the business turns, we don't have to have capacity to really start showing more fruitful results on top of that. So I hope that helps. No, that does help.

So by the time we get to Q4, we would expect to have the majority of everything done, and we would have as clean of pictures we could have from a cost standpoint. Now, unfortunately, what that's doing is just we're continuing to reoptimize the platform to deal with very challenged conditions. So we're not banking on any kind of improvement. We hope and have feelings that it could start to come, but we're just doing all we can do to restructure the platform so that Q4 quarter is a clean quarter and all gears turn towards being profitable in this cycle. And then when the business turns, we don't have to have capacity to really start showing more fruitful results on top of that. So I hope that helps.

Speaker #2: We could have from a cost standpoint . Now , unfortunately , what that's doing is just we're continuing to . Reoptimize the platform to very deal with challenged conditions .

Speaker #2: So we're not banking on any kind of improvement . We hope and have feelings that it could start to come , but we're just we can doing all do to restructure the platform so Q4 that quarter is clean quarter and all gears turn towards profitable in this being cycle then then when the .

Speaker #2: And business turns , we don't have to add capacity to really start showing more fruitful On top of results . that . So I hope that helps .

Speaker #4: that No , help . It does sounds like heading into fiscal 27 , you'll have a pretty , pretty clean run rate here .

Doug Lane: No, that does help.

Speaker #4: And then it's just a question of the benefit of the next up that cycle . , we know happens it's going to happen .

Robert Culp: It sounds like heading into fiscal 2027, you'll have a pretty clean run rate here, and then it's just a question of the benefit of the next upcycle whenever that happens. It's going to happen; we just don't know when. Yeah, and I guess I would say 100% yes. Fiscal 2027 will be a very clean position heading into the market. What we don't know is if it continues to lag or, for some reason, it were to get worse. We don't believe that's the case, but if it did, we'd take more action. I just think I want investors to be clear that we are positioning ourselves to do whatever it takes to adjust to the demand cycle. Unfortunately, we've had things that have been lagging more than we expected, so we make more changes.

Speaker #4: Whenever

Speaker #4: We just don't know when .

Speaker #2: say I And I guess I would just 100% . Yes . We have a very fiscal 27 will be a very clean position heading into the market .

Iv Culp: Yeah, and I guess I would say 100% yes. Fiscal 2027 will be a very clean position heading into the market. What we don't know is if it continues to lag or, for some reason, it were to get worse. We don't believe that's the case, but if it did, we'd take more action. I just think I want investors to be clear that we are positioning ourselves to do whatever it takes to adjust to the demand cycle. Unfortunately, we've had things that have been lagging more than we expected, so we make more changes.

Speaker #2: What we don't is if know continues to lag or if for some reason it were to get worse , we don't believe that's the case .

Speaker #2: But if it did , take we'd more I just think I want investors to be clear that we are positioning ourselves to do whatever it takes to adjust to the demand cycle .

Speaker #2: It's and unfortunately , we've had things that have been than we lagging more expected . So we make more changes . But optimistically , we're clean in 27 and maybe even in fourth quarter and hope to see some demand .

Speaker #2: That's moving the right way . a little bit At least .

Robert Culp: But optimistically, we're clean in 2027 and maybe even in fourth quarter and hope to see some demand that's moving the right way, at least a little bit. Is there any way? Have you done any math on what the incremental margin would be on the next point of sales growth? So as sales start to move up, what would be the contribution margin from that incremental point of sales? Yeah, Doug, this is Ken, and we've said this before. I mean, we've got so much built-up leverage in our ability to capitalize on any increase in sales. As Ip said, I mean, we've got all the cost reductions to be implemented in the fourth quarter. So we're going to be able to gain a lot of those sales dollars as far as the contribution margin is concerned. I mean, we're set on SG&A.

But optimistically, we're clean in 2027 and maybe even in fourth quarter and hope to see some demand that's moving the right way, at least a little bit.

Speaker #4: Is there any way you have done the math on what the incremental margin would be on the next point of sales growth? As sales start to go up?

Speaker #4: What would be the contribution margin incremental point from that of sales ?

Speaker #1: Yeah , Doug , this is Ken we've . And said this before . we've got I mean , much so built leverage in our up ability to capitalize on increase any in .

Ken Bowling: Yeah, Doug, this is Ken, and we've said this before. I mean, we've got so much built-up leverage in our ability to capitalize on any increase in sales. As Ip said, I mean, we've got all the cost reductions to be implemented in the fourth quarter. So we're going to be able to gain a lot of those sales dollars as far as the contribution margin is concerned. I mean, we're set on SG&A.

Speaker #1: And sales as I've said , I mean , we've got the all the cost reductions to be implemented in the in the fourth quarter .

Speaker #1: And so , you know , it , be able we're going to to gain a of the lot sales dollars as far as the contribution margin is concerned .

Speaker #1: I mean , we're we're set on G&A . We've got we've got fixed in place . costs So we're going to be able to keep significant amount a of those incremental dollars as we grow , as we grow the business based on the platform we have today .

Robert Culp: We've got fixed costs in place, so we're going to be able to keep a significant amount of those incremental dollars as we grow the business based on the platform we have today. Got it. That makes sense. I know you mentioned new tariffs in Turkey and Haiti. Can you give us a feel for when were those implemented, and when do you think you'll be able to benefit from whatever mitigation efforts you put in place for them? Certainly. I think I'm trying so hard to have you and other investors understand tariffs have been a real, I mean, they've just been a real pit to the business. I mean, it's been so disruptive the way they've come in. But optimistically, we feel like we can handle it. We've gotten better at this, and we believe because of our platform, it's actually an advantage.

We've got fixed costs in place, so we're going to be able to keep a significant amount of those incremental dollars as we grow the business based on the platform we have today.

Speaker #4: Got it . That makes sense . And I know if you mentioned new tariffs in Turkey and Haiti , can you give us a feel for when were those implemented and when think you'll do you be able to benefit from whatever mitigation efforts you put in them place for ?

Speaker #2: Certainly. And I've been trying so hard to have Doug, you, and other investors understand that tariffs have been a real, I mean, they've just been a real pit to the business.

Iv Culp: Certainly. I think I'm trying so hard to have you and other investors understand tariffs have been a real, I mean, they've just been a real pit to the business. I mean, it's been so disruptive the way they've come in. But optimistically, we feel like we can handle it. We've gotten better at this, and we believe because of our platform, it's actually an advantage.

Speaker #2: I mean , it's been so disruptive the way they've come in . But optimistically , we feel like we can handle it . We've gotten better this .

Speaker #2: at And we we believe because of our platform it's actually an advantage . So it's like any kind of , you know , when you think about strengths and weaknesses , they can sometimes be both .

Robert Culp: So it's like any kind of when you think about strengths and weaknesses, they can sometimes be both. And I think tariffs have been a challenge on the industry and are impacting sales, but I do think for us, they can become a strength because we have ways to navigate it. So to answer your question directly, what's happened in Turkey and Haiti? We had a baseline of tariffs, and then Turkey, for example, went from a 10% to a 15%. It just got changed on the reciprocal part of the ending of Liberation Day. So we had to deal with that extra 5% that wasn't planned. And that comes in immediately. We are built on that day one, and it can take us 60 days with a customer or with a strategy to adjust that. So that's a lag for us.

So it's like any kind of when you think about strengths and weaknesses, they can sometimes be both. And I think tariffs have been a challenge on the industry and are impacting sales, but I do think for us, they can become a strength because we have ways to navigate it. So to answer your question directly, what's happened in Turkey and Haiti? We had a baseline of tariffs, and then Turkey, for example, went from a 10% to a 15%. It just got changed on the reciprocal part of the ending of Liberation Day. So we had to deal with that extra 5% that wasn't planned. And that comes in immediately. We are built on that day one, and it can take us 60 days with a customer or with a strategy to adjust that. So that's a lag for us.

Speaker #2: And I think tariffs have been a challenge in the industry and our impact on sales. But I do think that for us, they can become a strength because we have ways to navigate it.

Speaker #2: So to answer your question directly . what's It's happening to what happened in Turkey and Haiti . We had a baseline of tariffs and then Turkey , for example , went from a 10% to a 15% .

Speaker #2: It just got changed on the reciprocal part of the ending of Liberation Day. So we had to deal with that extra 5%.

Speaker #2: That wasn't planned . And that comes in immediately . We are build on that day one , and it could take us 60 days with a customer or with a strategy to adjust that .

Speaker #2: So that's a lag for us . Haiti . We had eight years of tariff free treatment from regulation in Haiti , and all of a sudden that because of government , I'll call it dysfunction or delay , there's there's been a lag on renewing that agreement .

Robert Culp: Haiti, we had eight years of tariff-free treatment from regulation in Haiti, and all of a sudden, because of government, I'll call it dysfunction or delay, there's been a lag on renewing that agreement. We think it will get renewed, but in the short term, we've gone from zero tariff to 15% overnight. So we have to adjust that, and we will adjust it and believe we can easily adjust it, but not as quick as the pain. So that's why it's at least a 60-day lag for us with the change in tariff to then change the strategy or pass that price. And that's what we've been working on really for the last ever since the announcement of tariffs. We've been working on that, and we do feel close to the end, but it's knock on wood what tomorrow might bring.

Haiti, we had eight years of tariff-free treatment from regulation in Haiti, and all of a sudden, because of government, I'll call it dysfunction or delay, there's been a lag on renewing that agreement. We think it will get renewed, but in the short term, we've gone from zero tariff to 15% overnight. So we have to adjust that, and we will adjust it and believe we can easily adjust it, but not as quick as the pain. So that's why it's at least a 60-day lag for us with the change in tariff to then change the strategy or pass that price. And that's what we've been working on really for the last ever since the announcement of tariffs. We've been working on that, and we do feel close to the end, but it's knock on wood what tomorrow might bring.

Speaker #2: We think it will get renewed . But in the short we've gone term , from zero tariff to 15% overnight . So we have to adjust that and we will adjust it and believe we it's can easily adjust it , but not as quick as the pain .

Speaker #2: So that's why the, as it's at least a U.S. with the 60-day lag for change in tariff to then change the strategy or pass that price.

Speaker #2: And that's what we've working on for the been last ever since the announcement of tariffs , we've been working on that . And we do feel close to end .

Speaker #2: But the you know , it's , knock on wood , what tomorrow might bring .

Speaker #4: And the tariff situation on a week to week basis . Is it's still somewhat volatile . Or do you think it settled a little bit .

Robert Culp: The tariff situation on a week-to-week basis, is it still somewhat volatile, or do you think it's settled a little bit? I believe, and I want to believe, it's starting to settle. I think that we have seen a slight reduction in some Asian tariffs. So there are things that are starting to neutralize. And again, we've become very proficient. I don't wish we were proficient, but we've become very proficient on managing tariff change, and we have ways to mitigate it. So I'm not scared or worried about that. It's just the timing sometimes that it takes to get it fixed. Well, clearly, you've been working hard in a very difficult environment, so we'll stay tuned. Thanks, Ip. Thank you, Doug. Appreciate the time. This concludes our question and answer session. I would like to turn the conference back over to Ip Culp for any closing remarks.

Speaker #2: I believe and I want to it's starting to settle . I believe think that the you know , we have seen a slight reduction in some Asian tariffs .

Doug Lane: The tariff situation on a week-to-week basis, is it still somewhat volatile, or do you think it's settled a little bit?

Speaker #2: And we have ways to mitigate it . So nothing I'm not scared or worried about that . It's just the timing . Sometimes that it takes to get it fixed .

Speaker #4: Well , clearly working hard in a you've been very difficult environment . So we'll stay tuned . Thanks . If

Speaker #4: Well , clearly working hard in a you've been very difficult environment . So we'll stay tuned . Thanks . If . you ,

Doug Lane: Well, clearly, you've been working hard in a very difficult environment, so we'll stay tuned. Thanks, Ip.

Speaker #2: Doug . Thank Appreciate the time .

Doug Lane: Thank you, Doug. Appreciate the time. This concludes our question and answer session. I would like to turn the conference back over to Ip Culp for any closing remarks.

Speaker #3: This our concludes question and answer session . I would like to turn the conference back over to Yves Culp for any closing remarks .

Speaker #2: Thank you . Operator . And again , thank you to everyone for your participation and your interest in Colt . And we certainly look forward to updating our progress next quarter .

Robert Culp: Thank you, Operator. Again, thank you to everyone for your participation and your interest in Culp, and we certainly look forward to updating our progress next quarter. Have a great day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Iv Culp: Thank you, Operator. Again, thank you to everyone for your participation and your interest in Culp, and we certainly look forward to updating our progress next quarter. Have a great day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker #2: Have a great day .

Q2 2026 Culp Inc Earnings Call

Request a DemoDemo

CULP

Culp

Earnings