Culp Reports Record Sales and Earnings for Fiscal 1998; Fourth Quarter Reflects Pressure On Margins.

HIGH POINT, N.C.--(BUSINESS WIRE)--June 3, 1998--Culp, Inc. (NYSE:CFI) today reported higher sales and earnings for the fiscal year ended May 3, 1998. Although the company reported lower earnings for the fourth fiscal quarter, the results for the full year marked the ninth consecutive year of record earnings for Culp.

For the 1998 fiscal year, net sales totaled $476.7 million, up 20% from $398.9 million in fiscal 1997. Net income for the year rose 13% to $15.5 million, or $1.19 per share diluted, up from $13.8 million, or $1.15 per share diluted, in fiscal 1997.

Net sales for the quarter increased 29% to $135.8 million compared with $105.7 million a year ago. Net income for the quarter totaled $4.2 million, or $0.31 per share diluted, compared with $4.8 million, or $0.38 per share diluted, in the fourth quarter of fiscal 1997.

The Company's effective tax rate for fiscal 1998 was 29% compared with 36% a year ago. The lower rate was due principally to increased tax benefits related to the Company's international sales. The reduced tax rate also reflected a higher proportion of earnings from the Company's Canadian subsidiary that is taxed at a lower effective rate.

"Net sales, net income and earnings per share each set new records for fiscal 1998 as a whole," said Robert G. Culp, III, chief executive officer. "Culp's financial performance for the full year marks an extension of our long-term record of growth. At the same time, several factors contributed to some pressure on profitability that was reflected in our fourth-quarter results. One of the most significant developments related to the $95 million that we invested during fiscal 1998 to support Culp's progress through the acquisition of additional complementary business units and various capital projects intended to expand, modernize and vertically integrate our operations. Although assimilation of the acquisitions and completion of the capital projects have generally proceeded as planned, we have experienced production inefficiencies related to the start-up of several of these initiatives. We believe these variances will prove temporary and are confident about realizing a sound long-term return from these investments."

Culp added, "Incoming orders for our upholstery fabrics and mattress ticking are generally favorable at present. One product category where demand has decidedly slowed, however, is printed flock upholstery fabrics. This has been one of our fastest-growing product groups, stimulated by significant growth in demand from international markets; notably, portions of Eastern Europe and Asia. We accordingly focused a meaningful part of our expansion on additional capacity for these fabrics. Although we believe the longer term outlook is good for increasing shipments of these fabrics, the economic difficulties that many of these regions are experiencing at present are having an understandably adverse impact on demand for home furnishings and our fabrics. We are re-directing our marketing activities to other geographic areas and expect to realize improved results as fiscal 1999 develops."

"As we start fiscal 1999, we are encouraged about the momentum that Culp has established in the development of new patterns and textures for our upholstery fabrics and mattress ticking. Our completion of the Howard L. Dunn, Jr. design center during fiscal 1998 epitomized the key role that design has in our business. We have been fortunate to add a number of talented designers with solid reputations and a willingness to test new concepts. The design teams now have a truly state-of-the-art facility, and we are pleased with their accomplishments to date. The backdrop of high consumer confidence and stable mortgage rates presents a favorable environment for spending on home furnishings in the United States. We are thus optimistic about Culp's prospects for continued progress in fiscal 1999 as a whole. We recognize that the first half of the year will be challenging and believe that the year-to-year improvement will be more likely to occur during the second half."

Culp concluded, "Purchases of existing operations and other physical assets have been an integral component of our growth for more than a decade. Although we expect to maintain an active capital investment program during fiscal 1999, the planned spending of $15 million will be less than half the $36 million spend in fiscal 1998. Our primary focus will be the maturation of the projects that have either been or are nearing completion. Culp's profitability has enabled us to support these investments while maintaining a solid financial position. Our funded debt/capital ratio totaled 54% at the close of fiscal 1998 with borrowings of $30 million against our $100 million line of credit. During the fourth quarter, we enhanced our financial flexibility further by closing a private placement of $75 million in senior unsecured notes with a fixed rate of 6.76% for 10 years."

Culp is the world's largest manufacturer and marketer of upholstery fabrics for furniture and is a leading producer of mattress ticking for bedding. The Company's fabrics are used principally in the production of residential and commercial furniture and bedding products.

This Release contains statements that could be deemed "forward-looking statements" within the meaning of the federal securities laws, which statements are inherently subject to risks and uncertainties. Forward-looking statements are statements that include projections, expectations or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by qualifying words such as "expect," "believe," "estimate," "plan" and "project" and their derivatives. Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on the Company's business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could adversely affect the Company. In addition, the value of the U.S. dollar relative to other currencies can affect the competitiveness of the Company's products in international markets. -0-

                              CULP, INC.
                    Condensed Financial Highlights

                                           Three Months Ended
                                      ---------------------------
                                         May 3,        April 27,
                                          1998           1997
                                      ------------   ------------

Net sales                             $135,834,000   $105,678,000
Net income                               4,156,000      4,840,000
Earnings per share
 Basic                                $       0.32   $       0.39
 Diluted                              $       0.31   $       0.38
Average shares outstanding
 Basic                                  12,993,000     12,546,000
 Diluted                                13,284,000     12,856,000

                                           Fiscal Year Ended
                                      ---------------------------
                                         May 3,        April 27,
                                          1998           1997
                                      ------------   ------------

Net sales                             $476,715,000   $398,879,000
Net income                              15,513,000     13,770,000
Earnings per share
 Basic                                $       1.22   $       1.18
 Diluted                              $       1.19   $       1.15
Average shares outstanding
 Basic                                  12,744,000     11,624,000
 Diluted                                13,042,000     11,929,000


    CONTACT:  Culp Inc., High Point
               Franklin N. Saxon, 910/888-6266