Tommy Bruno: Yes, sure. Budd, it’s really, for us, improving our gross profit is really a combination of working on our mix, working on improving previous programs that weren’t costed in line with the market conditions through COVID. As it related to operational efficiencies, we continue to really push our supply chain for best cost position on raw materials as well as continuous improvement, quality and manufacturing efficiency initiatives in Stokesdale and in Canada. Other initiatives we’re doing is making sure that we’re really leveraging our global platform for efficiency and profitability and balancing those together with our manufacturing assets.
Budd Bugatch : And Tommy, can you kind of maybe characterize the importance of that? Was pricing more important than the operational efficiencies? How do you — what’s the relative mix between the two?
Tommy Bruno: Yes. That’s a really — I don’t want to take the easy way out of this question. I would say that they’re equally important Budd, because we had some programs that weren’t profitable that we had to reshift away. But we also have opportunities through a challenging COVID environment to really engage and drive operational improvement as the macro environment and raw materials opportunities have come along. So we’re focused equally on both of them.
Budd Bugatch : And so do we think about them as 50-50 kind of improvement? You get 50% of the improved gross margin from pricing and 50% from pricing that you can finally get a hold of or get either through new programs or realigning previously unprofitably priced programs and 50% through operational efficiencies?
Tommy Bruno: Yes, sir. I would characterize it as 50-50.
Robert Culp : And what I get excited about Budd from what Tommy is working on, I agree. It’s both half and half, better pricing and better cost improvement. What makes me excited watching it is the business is gradually picking up. We are — and we’re doing that internally by gaining market position. We’ve been around this mattress business for some time, and we know our position is strong, and we’re going to have periods where demand is going to be really high. We just hope that will start to turn a little bit to our favor. And having all these operational improvements in place will benefit so much more when that happens. And I think something he said is really important to realize we always want to leverage our strong global options.
That’s going to always be important, and if we get the right product priced and manufacturing them in the right places, so the right things for U.S., right things for Canada, we write things for Asia, right things for Haiti, that’s where we really have the ability when the cylinders start firing to generate strong profit. So really good work being done and being prepared for the turnaround.
Budd Bugatch : Okay. Turning to CUF, Read is embedded within CUF and that’s — and you said that Read for this quarter looks like about 1/3 of the revenue, so somewhere around $9 million for Read. How did that compare to last year for Read in the first quarter. What was that comparison like?
Boyd Chumbley: Yes, Budd, this is Boyd. And last year, first quarter, we were around 25% for that — that’s the total hospitality business as a percentage of our total sales, which is the way we characterize that. So 25% last year versus 33% this year and that exchange was gaining throughout the year last fiscal year.
Budd Bugatch : I see. And so then on that basis and Read’s gross margin, how would you characterize that versus the fleet margin, the average margin in CUF?
Ken Bowling: Yes, Budd, this is Ken. As we — the critical point that we made was Reed had dramatic improvement year-over-year from last year. In fact, we were at a loss last year. Now we’re making money. The margin is comparable to the overall margin right now for CUF, Obviously, we want to continue to grow both as we make progress over the coming quarters. But we’re just excited that, that business has really improved and really contributing this year.
Budd Bugatch : Okay. That’s great. And turning a little bit to the future now, and I know that the guidance for the second quarter in the midst of a very uncertain macro environment has been tough, and we appreciate what you did give. But if you also did say you’re looking to make operating profitability for the second half of the year. And I’m trying to make sure I understand, is that — do you think you’ll be operating profitable for all of the second half of the year? Or you think you’ll be operating profitable for the entire year based upon the improvements that you’re seeing in the second half of the year? How do we think about that?
Robert Culp : Yes. Thank you, Budd. Good question. And the way we’re talking about that is certainly, we aren’t — because we’re coming from the first couple of quarters, we aren’t forecasting operating profitability for the entire year. But we do believe somewhere in that back half of our year will have months and a quarter that will turn to consolidated operating profitability. We don’t know if it’s going to be the end of third, going to fourth, but somewhere in the second half. And a lot of that, we aren’t dependent to keep sequentially improving on the macro demand. But if that happens faster, we’ll turn faster. But even without — if demand at current levels, we will have a quarter in the back half that turns profitable, most likely towards the end of the year, Budd.
Budd Bugatch : And so even if it does not sufficiently to make the second half overall profitable, but just in the particular quarter in which you reach operating profitability? Is that what you’re saying?
Robert Culp : Yes, that’s what — that’s — now we hope your first statement is right. But that’s what today we’re saying. We’re not saying for the whole second half. We’re saying we’ll turn to profitability in the second half.
Budd Bugatch : In the second half. Okay. And looking further down the road, so now going from the near term, intermediate term to a little bit longer term, you continue to exude confidence and comfort longer term. And I think that if I got your message even stronger now than it might have been even in some of the past calls, can you kind of give us a framing of what that looks like? Tell us what we should think about success when you get to success in the longer term.
Robert Culp : Yes, certainly, Budd, thank you for picking up on that. We are — we certainly understand that we’re in a tough period. We’re recovering from an even tougher period, but there’s a lot of confidence in all of us its executive management that we see brighter times for the business. We see where we’re positioned. We see our innovative products and the platform we have to service customers and we know that our industry is, generally over our history, been a stable slow growing industry. We haven’t been used to these ups and downs that we’ve had in the last two, three years. That’s been — that’s taken a toll on our results. But as we get to some stability and the teams that we have in place operating in both divisions are really confidence inspiring.
So when we look out into beyond ’24 and to ’25, ’26, I mean we’re back to double-digit operating incomes in mattress fabrics and high single-digit operating income percentages in upholstery fabrics. And we’d like to go past that. But that’s our first target to recover to and I guess it depends on your horizon of medium to long term, but we would see that happening in our medium term as we look out forward.
Budd Bugatch : Okay. So that gets us to the margin side of that. And then in terms of the top line, you think you can match the industry’s slow growing low to mid-single-digit kind of growth over time top line?
