Culp Reports Third Quarter Results Including Restructuring Charge; Savings of $12 Million Expected From Actions to Reduce Costs.

Business Editors

HIGH POINT, N.C.--(BUSINESS WIRE)--Feb. 20, 2001

As anticipated, Culp, Inc. (NYSE:CFI) today reported a loss for its third fiscal quarter that reflects the widespread contraction in demand that the home furnishings industry has encountered as well as charges from the Company's announced actions to reduce costs and increase efficiency.

For the three months ended January 28, 2001, Culp reported net sales of $95.9 million compared with $113.2 million a year ago. Including previously announced restructuring costs, the Company reported a net loss for the quarter of $5.5 million, or $0.49 per share diluted, compared with net income of $1.4 million, or $0.13 per share diluted, in the year-earlier period.

Net sales for the first nine months of fiscal 2001 totaled $308.7 million compared with $358.7 million in the year-earlier period. Including previously announced restructuring costs, the Company reported a net loss for the first nine months of $6.9 million, or $0.61 per share diluted, compared with net income of $6.2 million, or $0.52 per share diluted, in the year-earlier period.

Robert G. Culp, III, chief executive officer, commented, "Our results for the third fiscal quarter reflect the contraction in demand that we had identified at mid year and which we again highlighted publicly last month. We have found widespread softness in orders for upholstery fabrics for U.S. furniture sales, especially in the promotional categories of the market. This appears to be an industry-wide pattern that became evident with the well-publicized deceleration in spending by consumers that began during the fourth calendar quarter of 2000. The weakness that we have been experiencing in international sales is also persisting. We have obtained little relief in terms of the high relative value of the U.S. dollar against foreign currencies compared with a year ago. Our sales of fabrics to customers outside the United States during the third quarter were down 31% from the year-earlier period.

"We are continuing our fundamental mission of marketing new fabric patterns and textures that help our customers meet the needs of consumers. At the same time, we understand that execution of this strategy demands stringent containment of expenses during the difficult period in which we are operating. The restructuring plan we announced last month is well underway. As we began executing the initial phase of this program to reduce costs, we recognized that the severity of the current downturn in demand necessitated a more aggressive effort. We have accordingly decided to consolidate additional capacity in the Culp Decorative Fabrics division and have taken steps that will lower our selling, general and administrative expenses significantly. The total charge from the restructuring, cost reduction and inventory adjustment initiatives is expected to exceed $6.0 million, about half of which should represent non-cash items. We recognized $3.2 million of restructuring charges and special costs in the third quarter, and most of the balance will be reflected in our results for the fourth fiscal period. Our target is to achieve annualized cost reductions of at least $12 million when these steps are fully implemented."

Culp added, "We are continuing to manage our balance sheet to maximize the return on our financial assets and generated sufficient cash from operations through the first nine months to reduce debt and payables related to capital expenditures by $21.8 million. We recently amended our credit facility and were in compliance with the revised terms as of the close of the third quarter. As a result of the amendments to that facility, the Company is restricted from paying cash dividends at this time. Although we respect Culp's heritage of paying a quarterly cash dividend for 18 consecutive years, we recognize the priority of conserving cash to enhance our financial liquidity during this challenging period.

"We appreciate the response of our organization to these difficult, but necessary actions. Culp has developed a strong culture of teamwork over the years, and the decisions involving personnel reductions have been especially hard. Although we are starting to benefit from the steps to lower costs, we expect to report a loss for fiscal 2001 as a whole based on current trends. We are confident about the basic value we add to the manufacturers of upholstered furniture and bedding and are optimistic about a longer-term recovery in our financial performance."

Culp, Inc. is one of the world's largest marketers of upholstery fabrics for furniture and is a leading marketer 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 may be deemed "forward-looking statements" within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Such 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 affect the Company adversely. Because of the significant percentage of the Company's sales derived from international shipments, strengthening of the U.S. dollar against other currencies could make the Company's products less competitive on the basis of price in markets outside the United States. Additionally, economic and political instability in international areas could affect the demand for the Company's products.

                              CULP, INC.
                    Condensed Financial Highlights
                              (Unaudited)

                                        Three Months Ended
                               January 28,               January 30,
                                  2001                      2000
                               -------------------------------------
Net sales                      $ 95,880,000             $113,181,000
Net income (loss)              $ (5,470,000)            $  1,432,000
Net income (loss) per share:
  Basic                        $      (0.49)            $       0.13
  Diluted                      $      (0.49)            $       0.13
Average shares outstanding:
  Basic                          11,211,000               11,296,000
  Diluted                        11,211,000               11,389,000


                                         Nine Months Ended
                               January 28,               January 30,
                                  2001                      2000
                               -------------------------------------
Net sales                      $308,739,000             $358,660,000
Net income (loss)              $ (6,884,000)            $  6,189,000
Net income (loss) per share:
  Basic                        $      (0.61)            $       0.53
  Diluted                      $      (0.61)            $       0.52
Average shares outstanding:
  Basic                          11,209,000               11,703,000
  Diluted                        11,209,000               11,816,000