Good day and welcome to the Culp Incorporated Fourth Quarter 2015 Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Ms. Dru Anderson. Please go ahead.

Thank you. Good morning and welcome to the Culp conference call to review the company's results for the fourth quarter and fiscal 2015. As we start, let me express that some statements made in this call will be forward-looking statements. Forward-looking statements are statements that include projections, expectations or beliefs about future events or results or otherwise are not statements of historical facts. Actual performance of the company may differ from that projected in such statements. Investors should refer to statements filed by the company with the SEC, including the Form 8-K filed yesterday for a discussion of those factors that could affect Culp's operations and the forward-looking statements made in this call. The information being provided today is of this date only and Culp expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in expectations. In addition, during this call, the company will be discussing non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the most directly comparable GAAP financial measurements is included as a schedule to the company's 8-K filed yesterday. This information is also available on the Investor Relations section of the company's website at www.culp.com. A slide presentation with supporting summary financial information and additional quarterly performance charts are also available on the company's website as part of the webcast of today's call. I will now turn the call over to Frank Saxon, President and Chief Executive Officer. Please go ahead, sir.

Good morning and thank you for joining us today. I would like to welcome you to the Culp quarterly conference call with analysts and investors. With me on the call today is Ken Bowling, our Chief Financial Officer. I will begin the call today with some brief comments and Ken will then update everyone on the financial results for the quarter and the year. I will then update you on the strategic actions in each of our businesses and after that Ken will review the first quarter business outlook. Culp delivered another solid performance in 2015. As we achieved higher sales reported to 21% increase in pretax income and earned a return on capital of 29%. Notably this is the sixth consecutive year of overall sales growth and a new record year for mattresses fabric sales. Throughout the year we have continued to execute our strategy with a focus on design creativity and product innovation supported by exceptional service for our customers. Together these efforts have driven our sales performance both with existing customers and new customers. Our ability to sustain excellence in creating innovative fabrics that meet changing customer demand is an important advantage for us. We remind ourselves every day that we compete in a fashion and product driven business. As a result of our progress over the last year we believe we have enhanced our leadership position in both businesses and we look forward to continued success in the year ahead. Importantly, we achieved excellent pre-cash flow of 15.1 million in the year just ended up from 13.8 million. As a result we were pleased to announce yesterday that our Board of Directors approved a special cash dividend of $0.40 per share which is in-line with our capital allocation strategy. Also the Board approved our regular quarterly cash dividend of $0.06 per share. This action reflects our strong financial performance and our commitment to delivering value to our shareholders. At the same time we have the financial strengthen to make strategic investments necessary to enhance and expand our production capabilities and take advantage of additional growth opportunities this coming year and in the future. I will now turn the call over to Ken who will review the financial results for the quarter.

Thank you, Frank. As mentioned earlier on the call we have posted slide presentations to our investor relations website that cover key quarterly and annual performance measures. We have also posted our capital allocation strategy. Total sales for this quarter were 78.8 million up 6.5% from the fourth quarter of last year. For the year sales were 310 million up 8% over last year. It is important to note that this fiscal year had 53 weeks compared with 52 weeks the year before. On a pretax basis for the quarter we reported income of 6.7 million or 8.5% of sales compared with 4.1 million last year reflecting a 62% increase. For the year we reported pretax income of 23 million or 7.4% of sales compared with 19 million in the year earlier or 6.6% of sales last year. Adjusted net income for the quarter a non-GAAP measure was 5.6 million or $0.45 per share up 67% from the prior year period. For the year adjusted net income was 19.4 million up 23% compared with last year. Overall annualized return on capital was 29% compared with 26% last fiscal year. The company's overall adjusted effective income tax rate for fiscal 2015 was 15.7% compared with 17.6% for the same period last year. This adjusted effective income tax rate are ongoing estimated cash tax rate represents income tax expense for Culp's non-U.S. entities divided consolidated income before taxes. This information is important because the company currently does not pay cash taxes in the U.S. nor do we expect to for a number of years due to approximately $32 million in loss carry-forwards as of the end of this fiscal 2015. It is important to note that our NOL balance has been reduced by $31 million over the last four fiscal years at…

Thank you, Ken. I will now provide you an update on both of our operating segments. It will start with mattress fabrics. Our mattress fabrics business had another strong performance in the fourth quarter pushing our annual sales to a new record level in fiscal 2015. These results reflect solid execution of the strategic plan that we laid out at the beginning of the year with consistent growth and progress throughout the year. The fourth quarter results clearly demonstrate that the success of this plan as we more fully realized the benefits of the 9.5 million capital investment program. We were very pleased with our sales growth this year which has outpaced the overall industry growth. Our focus on design and innovation sets us apart in the mattress fabric marketplace and we continue to have favorable placements with new product roll-outs to our customers. Our product mix of mattress fabrics and sown mattress covers across all price points and style trends has allowed us to execute our vision to deliver a full design package from fabric to finished covers. Our design team has done an excellent job and we have continued to support this efforts with investments in the latest technologies and software including an enhanced new website to leverage our talents and our Culp home fashion's brand. We also made notable progress in our operating performance during fiscal 2015 with the most significant improvement evident in the fourth quarter as we neared completion of our expansion projects. In addition to the greater operating efficiencies we were able to benefit from some lower input cost and fewer weather disruptions than we experienced during the fourth quarter of the previous year. While we still have some work to do to complete with a new equipment, our capital investment have already met…

At this time we expect overall sales to be up 1% to 4% as compared with the first quarter of fiscal 2015. It is important to note that the first quarter of fiscal 2016 will have one less week than the first quarter of the previous year or 13 weeks compared with 14 weeks. We expect first quarter sales on our mattress fabrics business to be up 4% to 8% as compared with the same period a year ago. Operating income and margins in this segment are expected to be moderately higher compared with the same period a year ago. In our upholstery fabrics business we expect first quarter sales to be slightly lower compared with the first quarter of last year. We believe the upholstery fabric segments operating income and margins will be flat when compared with the same quarter of last year. Considering these factors we expect to report pretax income for the first quarter of fiscal 2016 in the range of 5.2 million to 5.7 million. Pretax income for last year's first quarter was 5.5 million. In addition based on our current budget capital expenditures for fiscal 2016 are expected to be approximately 7.5 million to 9 million primarily related to our mattress fabrics business. Depreciation and amortization including stock based compensation is expected to be approximately 7 million. Finally the company expects as Frank indicated earlier another good year of free cash flow even after a higher than normal level of capital expenditures and modest growth and working capital. Frank?

We’re pleased with Culp's performance in fiscal 2015 and our ability to execute our strategy and enhance our leadership position in a global marketplace. Our consistent top line growth reflects our ability to leverage our outstanding design capabilities and deliver a wide-range of innovative fabrics that keep pace with customer demand and style trends. We’re well-positioned to support this continued growth in both businesses with our flexible and scalable global manufacturing platform backed by exceptional customer service. At the same time we have maintained a solid financial position in generating strong free cash flow allowing us to reward our shareholders with significant dividend payments and share repurchases. Above all we’re committed to outstanding performance for our customers as a financially stable and trusted source for innovative fabrics. We’re very excited about the opportunities before us as we look ahead to fiscal 2016 and beyond. With that we will now take your questions.

[Operator Instructions]. We will take our first question from Kevin Tracey of Oberon Asset Management.

First could you help me breakdown the growth in your mattress fabric segment for the year, maybe first between growth in terms of unit sales versus pricing and then secondly how many points of growth do you think are being added from your mattress covers business?

Kevin, it's a very good question. Unfortunately none of that do we breakout. Let me give you, Ken and I both will give you some overall comments. Most of the growth in the year is with unit growth rather than ASPs. And then we did have the growth in the mattress cover business was up marginally for the year so not a lot for the year certainly for the fourth quarter but not for the year.

And then can you just help us understand what we should expect going forward? It would seem like you’re growing like it's well above market growth rates and you’ve kind of pointed us towards GDP growth in the past as a good metric attracting the market growth and the growth was just very strong this year and the forecast for the first quarter for more good growth. So how should we think about the -- like it's a growth over the next 3 to 5 years in this business?

What we have indicated before to all of the investment community is that we with the share that we already have in the industry, we believe we would grow at certainly at, at least industry growth plus some market share. Obviously you point out correctly we seem to be growing faster than that and while I certainly hope that will continue I think I would stick with the comments we have made that we plan and hope to grow at somewhat more than the industry growth. I think the factors that are contributing to us performing above those that longer term guidance we have given is the success from our innovative fabrics. We just simply getting better at that than maybe -- as a result we’re gaining more placements with more customers and then when you couple that with the exceptional service we’re providing you know the customers come to trust us and as the industry players are getting bigger and consolidating more amongst fewer larger people they need large suppliers that they can't trust and rely on and the demand is also from the larger customers are getting more. They are not going to be less and so it takes a larger well-capitalized company with modern equipment and the resources we have to take care of them. So maybe Kevin, the strategy of focusing on innovation and modernizing our equipment appears to be working pretty well and at a level higher than our expectations.

And what do you reckon your market share is at today?

That’s not a number we publish and there is no market, there is no really private or public data on that so I will just say that it's a significant piece of that market. I would tell you we believe we are equal to our size, it's equal to the combined size of number two and number three competitor.

And then just last quick question on the margin, is it a reasonable expectation for the mattress business 11.5% to 12.5%, still are you slightly kind of raw material prices have improved and you certainly did a lot better than that in the fourth quarter, just wanted to check in on that.

Yes. I think I would still stay with the 11.5% to 12.5% over the long haul, last year 12.1% margin as you note and this year certainly looks like growth in margin with the CapEx program we’re doing with the benefit of the lower input cost but we do have to remember we’re benefitting from these lower oil prices right now and we have been in this business a long-time and we have seen a lot of volatility in oil over the years. Maybe we’re now in a period where the trading range of oil isn't going to be so volatility, maybe it's $45 to $75 a barrel instead of $40 to $150. And so I hesitate to up that target range because we’re certainly now benefiting from the lower input cost that the lower energy prices are bringing to us.

The other thing too is when you look at how we have been performing I mean the 11.5% to 12% margin I mean that -- we have to remember we got to stay competitive and also 35% or so percent return on capital I mean those together is really outstanding performance. So we have to measure all that plus we have to from time to time we will get pressure from our customers on pricing pressure, so all those kind of mix into to our pricing and our projected margin as we look out in the future.

Yes, I think Kevin we definitely -- there is a lot of advantages to our key customers getting larger but as they get larger they demand more and that does include price. Nevertheless, I mean I think there is an opportunity while oil prices are favorable to exceed that long term margin target range.

[Operator Instructions]. We have no further phone questions at this time.

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

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