=================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------- Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ------------- Date of Report (Date of earliest event reported) November 9, 1995 CULP, INC. (Exact name of registrant as specified in its charter) 101 South Main Street High Point, North Carolina 27260 (Address of principal executive offices) (910) 889-5161 (Registrant's telephone number, including area code) (Former name or former address, if changed since last report) ===================================================================
North Carolina 0-12781 56-1001967 (State or other jurisdiction of (Commission File No.) (IRS Employer Identification incorporation) No.) Item 5. Other Events See Press Release (attached) dated November 9, 1995 related to second quarter earnings for the period ended October 29, 1995. See Financial Information Release (attached). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CULP, INC. (Registrant) By: Franklin N. Saxon Franklin N. Saxon Vice President and Chief Financial Officer By: Stephen T. Hancock General Accounting Manager Dated: November 9, 1995 -2- (CULP LOGO APPEARS HERE) FOR IMMEDIATE RELEASE CULP REPORTS GAINS FOR SECOND QUARTER -------------------- FIRST HALF RESULTS REFLECT INCREASED SALES AND EARNINGS HIGH POINT, North Carolina (November 9, 1995) - Culp, Inc. today reported higher sales and earnings for the second quarter and first half of its 1996 fiscal year. For the three months ended October 29, 1995, Culp reported net sales of $90.7 million, an increase of 16%, compared with $78.4 million a year ago. Net income for the quarter totaled $3.0 million, or $0.27 per share, compared with $2.8 million, or $0.25 per share, in the second quarter of fiscal 1995. The gains for the second quarter brought net sales for the first half to $163.0 million, up from $144.8 million in the first six months of fiscal 1995. Net income for the first half was $4.5 million, or $0.40 per share, up from $4.3 million, or $0.38 per share, in the year-earlier period. Commenting on the results, Robert G. Culp, III, Chief Executive Officer, said, "Culp's gains for the second quarter are especially gratifying because they were achieved against the backdrop of continued caution by retailers about the near-term outlook for consumer spending on home furnishings. Our ability to counter this trend was aided significantly by increased exports of upholstery fabrics, but shipments during the quarter to U.S.-based customers were also up from a year ago. We did receive a benefit during the second quarter from the inclusion of Rayonese Textile, which was acquired during the fourth quarter of fiscal 1995, but recorded a 13% gain in sales even without that incremental business. Acquisitions over the past two years have significantly broadened the company's product offerings, enabling us to supply more of our existing customers' needs while supporting an aggressive marketing initiative to expand Culp's overall base of business." Culp remarked, "The overall trend in purchases of home furnishings certainly remains an important factor underlying Culp's performance, but we are continuing to capitalize on -MORE- CULP Reports Second Quarter Gains Page 2 November 9, 1995 - ------------------------------------------------------------------------------- opportunities to enhance the company's basic competitive stance. The steady increase in sales to other customers outside the United States is serving as a tangible measure of the return from the considerable investment we have made to establish -- and meet -- world-class standards for service, quality and value. Over the past six years through fiscal 1995, our exports rose more than tenfold. The continuation of that growth in the current fiscal year reflects our firm commitment to utilize our resources as effectively as possible, operating efficiently and containing costs while increasing our capabilities to offer customers innovative, market-driven fabric designs. "We recognize the caution prevailing among retailers and manufacturers which suggests a challenging environment for Culp during the important second half of our fiscal year. The current momentum in our incoming orders, however, remains generally positive; and we are confident that our strategic plan is sound for building on the company's longer term success which includes increased sales and net earnings in each of the past five years." Culp, Inc. is a leading manufacturer and marketer of fabrics for the furniture, bedding, and institutional furnishings markets. The company's common shares are traded on The Nasdaq Stock Market (National Market) under the symbol CULP. CULP, INC. Condensed Financial Highlights (Unaudited)
Three Months Ended October 29, October 30, 1995 1994 Net sales $ 90,672,000 $ 78,445,000 Net income $ 3,000,000 $ 2,800,000 Earnings per share $ 0.27 $ 0.25 Six Months Ended October 29, October 30, 1995 1994 Net sales $ 163,029,000 $ 144,794,000 Net income $ 4,515,000 $ 4,250,000 Earnings per share $ 0.40 $ 0.38 -END- (Page 1 of 9) CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED INCOME STATEMENTS FOR THE THREE AND SIX MONTHS ENDED OCTOBER 29, 1995 AND OCTOBER 30, 1994 (Amounts in Thousands, Except for Per Share Data)
THREE MONTHS ENDED (UNAUDITED) Amounts Percent of Sales October 29, October 30, % Over 1995 1994 (Under) 1996 1995 Net sales 90,672 78,445 15.6 % 100.0 % 100.0 % Cost of sales 74,565 64,272 16.0 % 82.2 % 81.9 % Gross profit 16,107 14,173 13.6 % 17.8 % 18.1 % Selling, general and administrative expenses 9,675 8,363 15.7 % 10.7 % 10.7 % Income from operations 6,432 5,810 10.7 % 7.1 % 7.4 % Interest expense 1,388 1,144 21.3 % 1.5 % 1.5 % Interest income 0 (24) (100.0)% 0.0 % (0.0)% Other expense (income), net 219 190 15.3 % 0.2 % 0.2 % Income before income taxes 4,825 4,500 7.2 % 5.3 % 5.7 % Income taxes * 1,825 1,700 7.4 % 37.8 % 37.8 % Net income 3,000 2,800 7.1 % 3.3 % 3.6 % Average shares outstanding 11,211 11,205 0.1 % Net income per share $0.27 $0.25 8.0 % Dividends per share $0.0275 $0.025 10.0 %
SIX MONTHS ENDED (UNAUDITED) Amounts Percent of Sales October 29, October 30, % Over 1995 1994 (Under) 1996 1995 Net sales 163,029 144,794 12.6 % 100.0 % 100.0 % Cost of sales 134,724 119,521 12.7 % 82.6 % 82.5 % Gross profit 28,305 25,273 12.0 % 17.4 % 17.5 % Selling, general and administrative expenses 18,129 15,932 13.8 % 11.1 % 11.0 % Income from operations 10,176 9,341 8.9 % 6.2 % 6.5 % Interest expense 2,685 2,221 20.9 % 1.6 % 1.5 % Interest income 0 (47) (100.0)% 0.0 % (0.0)% Other expense (income), net 326 367 (11.2)% 0.2 % 0.3 % Income before income taxes 7,165 6,800 5.4 % 4.4 % 4.7 % Income taxes * 2,650 2,550 3.9 % 37.0 % 37.5 % Net income 4,515 4,250 6.2 % 2.8 % 2.9 % Average shares 11,209 11,202 0.1 % Net income per share $0.40 $0.38 5.3 % Dividends per share $0.055 $0.05 10.0 % * Percent of sales column is calculated as a % of income before income taxes. (Page 2 of 9) CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED BALANCE SHEETS OCTOBER 29, 1995, OCTOBER 30, 1994 AND APRIL 30, 1995 (Unaudited, Amounts in Thousands) * Derived from audited financial statements.
Amounts Increase October 29, October 30, (Decrease) * April 30, 1995 1994 Dollars Percent 1995 Current assets Cash and cash investments 930 257 673 261.9 % 1,393 Accounts receivable 46,930 42,727 4,203 9.8 % 44,252 Inventories 49,632 42,504 7,128 16.8 % 45,771 Other current assets 3,415 2,510 905 36.1 % 3,194 Total current assets 100,907 87,998 12,909 14.7 % 94,610 Restricted investments 0 1,624 (1,624) (100.0)% 795 Property, plant & equipment, net 73,876 68,848 5,028 7.3 % 75,805 Goodwill 23,189 18,725 4,464 23.8 % 22,600 Other assets 2,432 1,209 1,223 101.2 % 1,189 Total assets 200,404 178,404 22,000 12.3 % 194,999 Current Liabilities Current maturities of long-term debt 11,555 6,008 5,547 92.3 % 11,555 Accounts payable 30,175 28,685 1,490 5.2 % 32,250 Accrued expenses 11,075 8,688 2,387 27.5 % 11,532 Income taxes payable 1,729 1,653 76 4.6 % 661 Total current liabilities 54,534 45,034 9,500 21.1 % 55,998 Long-term debt 65,137 63,462 1,675 2.6 % 62,187 Deferred income taxes 5,382 3,477 1,905 54.8 % 5,418 Total liabilities 125,053 111,973 13,080 11.7 % 123,603 Shareholders' equity 75,351 66,431 8,920 13.4 % 71,396 Total liabilities and stockholders' equity 200,404 178,404 22,000 12.3 % 194,999 Shares outstanding 11,219 11,205 14 0.1 % 11,205 (Page 3 of 9) CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED OCTOBER 29, 1995 AND OCTOBER 30, 1994 (Unaudited, Amounts in Thousands)
SIX MONTHS ENDED Amounts October 29, October 30, 1995 1994 Cash flows from operating activities: Net income 4,515 4,250 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 6,138 5,340 Amortization of intangible assets 358 298 Provision for deferred income taxes (36) (272) Changes in assets and liabilities: Accounts receivable (2,678) (5,984) Inventories (3,861) (5,908) Other current assets (221) (11) Other assets (1,309) (470) Accounts payable (2,075) (901) Accrued expenses (457) 530 Income taxes payable 1,068 1,017 Net cash provided by (used in) operating activities 1,442 (2,111) Cash flows from investing activities: Capital expenditures (5,090) (10,184) Purchases of restricted investments 0 (46) Proceeds from sale of restricted investments 795 1,345 Business acquired 0 0 Net cash provided by (used in) investing activities (4,295) (8,885) Cash flows from financing activities: Proceeds from issuance of long-term debt 6,000 8,000 Principal payments on long-term debt (3,050) (92) Net increase (decrease) in bank overdrafts 0 1,120 Dividends paid (617) (560) Proceeds from sale of common stock 57 92 Net cash provided by (used in) financing activities 2,390 8,560 Increase (decrease) in cash and cash investments (463) (2,436) Cash and cash investments at beginning of period 1,393 2,693 Cash and cash investments at end of period 930 257 (Page 4 of 9) CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL ANALYSIS OCTOBER 29, 1995 (1) Expenditures for entire year (2) Earnings before interest, income taxes, and depreciation & amortization. (3) Total liabilities, long-term debt, funded debt and capital employed are all net of restricted investments.
FISCAL 95 FISCAL 96 Q2 Q1 Q2 Q3 Q4 INVENTORIES Inventory turns 6.2 5.1 6.0 RECEIVABLES Days sales in receivables 50 45 47 Percent current & less than 30 days past due (Trade only) 99.4% 97.0% 98.2% WORKING CAPITAL Current ratio 2.0 2.0 1.9 Working capital turnover 5.8 5.8 5.7 Working capital $42,964 $45,069 $46,373 Working capital as a % of sales 13.7% 15.6% 12.8% PROPERTY, PLANT & EQUIPMENT Depreciation rate 8.8% 8.9% 8.9% Percent property, plant & equipment are depreciated 44.0% 44.9% 46.7% Capital expenditures $18,058 (1) $3,006 $1,203 PROFITABILITY Net profit margin 3.6% 2.1% 3.3% Gross profit margin 18.1% 16.9% 17.8% Operating income margin 7.4% 5.2% 7.1% SG & A expenses/net sales 10.7% 11.7% 10.7% Return on beginning capital employed 9.2% 4.2% 8.3% Return on beginning equity 17.9% 8.5% 16.8% Earnings per share $0.25 $0.14 $0.27 LEVERAGE (3) Interest & dividend coverage 4.0 2.3 3.7 Total liabilities/equity 166.1% 165.4% 166.0% Long-term debt/equity 95.5% 93.2% 86.4% Funded debt/equity 102.1% 109.1% 101.8% Funded debt/capital employed 50.5% 52.2% 50.4% Funded debt $67,846 $79,217 $76,692 Funded debt/EBITDA (LTM) 2.28 2.42 2.27 OTHER Book value per share $5.93 $6.48 $6.72 Employees at quarter end 2,604 2,773 2,847 Sales per employee (annualized) $121,000 $105,000 $129,000 Capital employed (3) $134,277 $151,841 $152,043 Effective income tax rate 37.8% 35.3% 37.8% EBITDA (2) $8,528 $6,852 $9,494 EBITDA/net sales 10.9% 9.5% 10.5% (Page 5 of 9) CULP, INC. FINANCIAL INFORMATION RELEASE SALES BY BUSINESS UNIT FOR THREE MONTHS AND SIX MONTHS ENDED OCTOBER 29, 1995 AND OCTOBER 30, 1994 (Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED) Amounts Percent of Total Sales October 29, October 30, % Over Business Units 1995 1994 (Under) 1996 1995 Upholstery Fabrics Flat Wovens Culp Textures 22,715 22,834 (0.5)% 25.1 % 29.1 % Rossville/Chromatex 17,960 15,758 14.0 % 19.8 % 20.1 % 40,675 38,592 5.4 % 44.9 % 49.2 % Velvets/Prints 32,081 26,439 21.3 % 35.4 % 33.7 % 72,756 65,031 11.9 % 80.2 % 82.9 % Mattress Ticking 17,916 * 13,414 33.6 % 19.8 % 17.1 % 90,672 78,445 15.6 % 100.0 % 100.0 % SIX MONTHS ENDED (UNAUDITED) Amounts Percent of Total Sales October 29, October 30, % Over Business Units 1995 1994 (Under) 1996 1995 Upholstery Fabrics Flat Wovens Culp Textures 40,299 42,447 (5.1)% 24.7 % 29.3 % Rossville/Chromatex 33,318 30,898 7.8 20.4 % 21.3 73,617 73,345 0.4 % 45.2 % 50.7 % Velvets/Prints 55,604 47,083 18.1 % 34.1 % 32.5 % 129,221 120,428 7.3 % 79.3 % 83.2 % Mattress Ticking 33,808 * 24,366 38.8 % 20.7 % 16.8 % 163,029 144,794 12.6 % 100.0 % 100.0 % * Includes Rayonese shipments of $2,053 for the three months and $3,822 for the six months. The percent increase in sales without Rayonese was 20.0% for the three months and 17.4% for the six months. On a consolidated basis, without Rayonese shipments, the percent sales increase for the three months was 13.0% and for the six months was 10.0%. (Page 6 of 9) CULP, INC. FINANCIAL INFORMATION RELEASE EXPORT AND FOREIGN SALES BY GEOGRAPHIC AREA FOR THREE MONTHS AND SIX MONTHS ENDED OCTOBER 29, 1995 AND OCTOBER 30, 1994 (Amounts in thousands)
THREE MONTHS ENDED (UNAUDITED) Amounts Percent of Total Sales October 29, October 30, % Over Geographic Area 1995 1994 (Under) 1996 1995 North America (Excluding USA) 6,223 4,184 48.7 % 31.8 % 28.7 % Europe 4,297 3,892 10.4 % 22.0 % 26.7 % Middle East 3,437 1,905 80.4 % 17.6 % 13.1 % Far East & Asia 3,079 2,086 47.6 % 15.7 % 14.3 % South America 397 876 (54.7)% 2.0 % 6.0 % All other areas 2,127 1,652 28.8 % 10.9 % 11.3 % 19,560 * 14,595 34.0 % 100.0 % 100.0 % SIX MONTHS ENDED (UNAUDITED) Amounts Percent of Total Sales October 29, October 30, % Over Geographic Area 1995 1994 (Under) 1996 1995 North America (Excluding USA) 10,790 7,793 38.5 % 31.7 % 30.3 % Europe 7,482 6,890 8.6 % 22.0 % 26.8 % Middle East 5,549 2,768 100.5 % 16.3 % 10.8 % Far East & Asia 4,841 4,131 17.2 % 14.2 % 16.1 % South America 843 1,184 (28.8)% 2.5 % 4.6 % All other areas 4,499 2,938 53.1 % 13.2 % 11.4 % 34,004 * 25,704 32.3 % 100.0 % 100.0 % * Includes Rayonese shipments of $2,053 for the three months and $3,822 for the six months. The percent increase in sales without Rayonese was 20.0% for the three months and 17.4% for the six months. (Page 7 of 9) Culp, Inc. SALES BY BUSINESS UNIT - TREND ANALYSIS 1994 vs 1995 vs 1996 (Amounts in thousands) (Page 8 of 9) CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE FOR THE THREE AND SIX MONTHS PERIOD ENDED OCTOBER 29, 1995 INCOME STATEMENT COMMENTS (Bullet) GENERAL - The company is pleased to report solid sales and profit gains for its second fiscal quarter in spite of the significant sales weakness in the U. S. retail furniture and bedding industries during the last six months and the raw material price increases which the company has received over the last year. This quarter's performance marks the twelfth consecutive quarter of record earnings and the tenth consecutive quarter of record sales. Additionally, for the first six months, the company achieved a return on shareholders' equity of 12.6%. The company attributes this successful record to, among other things, two key growth strategies: (1) a focus on markets, other than U.S. Residential Furniture, such as Bedding, Export, Contract and Home Textiles, in order to reduce our dependency on one cyclical and geographical area; and (2) investment in the creative side of our business -- the company has significantly increased the resources (both designers and CAD systems) dedicated to the design and product development areas in each business unit over the last eighteen months. (Bullet) NET SALES - Upholstery fabric sales increased 11.9% to $72.8 million and mattress ticking sales increased 33.6% to $17.9 million for the quarter in comparison to the same quarter of last year. (See Sales by Business Unit schedule on page 5 and Sales by Business Unit - Trend Analysis on page 7.) Three of our four business units reported substantial sales gains for the quarter: Mattress Ticking - up 33.6%; Velvets/Prints - up 21.3%; and Rossville/Chromatex up 14.0%, while our Culp Textures business unit reported essentially flat results. The percent of sales gain for Rossville/Chromatex and Culp Textures represent sharp improvement over the first quarter's sales comparisons. Comments on current backlogs and incoming order rates versus last year are as follows: Mattress Ticking - up slightly; Culp Textures up slightly overall, with strength in the jacquard product line and weakness in the dobby line; Rossville/Chromatex - - up moderately with strength in both dobby and jacquard product lines; and Velvets/Prints - up moderately, with strength in the wet prints, heat-transfer prints and woven velvet product lines. The results of the Velvets/Prints business unit were substantially improved from the second quarter of last year. The company instituted an "across-the-board" price increase of approximately 2%, generally effective for shipments after October 1, 1995. The U.S. residential and contract furniture markets have improved somewhat during the last several months from the very weak business conditions in our first fiscal quarter. The company believes this trend will continue for the balance of its fiscal year unless there is a significant change in the current favorable mortgage rate environment. Export and foreign sales, including sales from Rayonese of $2.1 million, were up 34.0% for the quarter, with particular strength in the Middle East and the Far East and Asia. The majority of the export growth is coming from the Culp Textures and Rossville/Chromatex business units, with particular strength in the jacquard product lines. The company is enjoying increasing success in marketing its upholstery fabric products internationally. We are encouraged by our growing customer base throughout the world and the increasing percentage that our Culp Textures and Rossville/Chromatex product lines represent of our total export shipments. For example, during the quarter we made our first shipment to India, one of the big emerging markets. Offsetting somewhat these positive trends, however, export shipments of mattress ticking are off considerably. The weakness resulted principally from lower shipments to Mexico and Brazil. The overall outlook for export sales gains remains good. The U.S. bedding and home textiles (particularly "top of the bed") markets have softened significantly since early August. This retail weakness is resulting in a sharply slower rate of growth in our mattress ticking business unit, which includes Rayonese. The company believes this softness is temporary and that business conditions will turn more positive in early 1996.
Fiscal 1994 Fiscal 1995 Fiscal 1996 Business Units Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL Upholstery Fabrics Flat Wovens Culp Textures 17,444 20,073 19,673 21,127 78,317 19,613 22,834 20,940 21,738 85,125 17,584 22,715 40,299 Rossville/Chromatex 0 0 14,330 16,717 31,047 15,140 15,758 16,397 16,470 63,765 15,358 17,960 33,318 17,444 20,073 34,003 37,844 109,364 34,753 38,592 37,337 38,208 148,890 32,942 40,675 0 0 73,617 Velvets/Prints 20,888 24,518 23,714 27,916 97,036 20,644 26,439 28,307 31,413 106,803 23,523 32,081 55,604 38,332 44,591 57,717 65,760 206,400 55,397 65,031 65,644 69,621 255,693 56,465 72,756 0 0 129,221 Mattress Ticking 8,251 9,395 9,531 11,472 38,649 10,952 13,414 12,147 15,820 52,333 15,892 17,916 33,808 46,583 53,986 67,248 77,232 245,049 66,349 78,445 77,791 85,441 308,026 72,357 90,672 0 0 163,029 Percent increase(decrease) from prior year: Business Units Upholstery Fabrics Flat Wovens Culp Textures (6.5) (5.2) 3.8 0.3 (1.9) 12.4 13.8 6.4 2.9 8.7 (10.3) (0.5) (5.1) Rossville/Chromatex N/A N/A N/A N/A N/A 100.0 100.0 14.4 (1.5) 105.4 1.4 14.0 7.8 (6.5) (5.2) 79.4 79.7 37.0 99.2 92.3 9.8 1.0 36.1 (5.2) 5.4 0.4 Velvets/Prints 7.4 16.5 10.0 8.3 10.5 (1.2) 7.8 19.4 12.5 10.1 13.9 21.3 18.1 0.6 5.7 42.5 40.4 23.1 44.5 45.8 13.7 5.9 23.9 1.9 11.9 7.3 Mattress Ticking 7.5 10.4 27.6 21.2 16.7 32.7 42.8 27.4 37.9 35.4 45.1 33.6 38.8 1.7 6.4 40.2 37.2 22.0 42.4 45.3 15.7 10.6 25.7 9.1 15.6 12.6 CULP, INC. FINANCIAL INFORMATION RELEASE (page 9 of 9) FINANCIAL NARRATIVE - CONTINUED FOR THE THREE AND SIX MONTH PERIODS ENDED OCTOBER 29, 1995 (Bullet)GROSS PROFIT - The gross profit increase of 13.6% for the quarter reflects a significant gain in Velvets/Prints, a moderate gain in Mattress Ticking and a slight gain in Culp Textures. These increases were partially offset by a slight decrease in Rossville/Chromatex. The company's margins, in all business units, are being affected by the significant price increases in its raw materials over the last year. The company has been unable to pass along all of the cost increases it has received. For the near term (third quarter), the company is expecting gross profit gains in Velvets/Prints, Culp Textures and Rossville/ Chromatex, and a moderate decrease in Mattress Ticking. The company is hopeful that the Mattress Ticking business unit will report a favorable gross profit comparison for the fourth fiscal quarter. (Bullet) S,G & A EXPENSES - S,G&A expenses for the quarter were flat as a percentage of sales at 10.7%. This is favorable because of the significantly higher export sales commission during this quarter. (Bullet) INTEREST EXPENSE - The increase for the quarter is due to additional borrowings related to the Rayonese acquisition, capital expenditures and higher levels of working capital necessary to support sales growth. (Bullet) EBITDA - EBITDA for the quarter increased $1.0 million, or 11.5%, from last year's second quarter, and represented 10.5% of net sales compared with 10.8% of net sales last year. BALANCE SHEET COMMENTS (Bullet) WORKING CAPITAL - The increase in inventories over fiscal year end is attributable to higher raw material inventories, which are being reduced during the balance of our fiscal year. The company has made excellent progress in reducing finished goods inventory in the last two quarters, with a 6% decrease from fiscal year end and an 8% decrease from second quarter of last year. This is particularly noteworthy because the company has historically built finished goods inventory during the first half of its fiscal year. (Bullet) PROPERTY, PLANT AND EQUIPMENT - For fiscal 1996, the company has increased its capital spending plans from $11.0 million to $15.5 million due to accelerating two projects previously scheduled for fiscal 1997. The projects, scheduled to be completed during April and May 1996, involve expanding the company's production capacity for its jacquard and wet prints product lines. These new projects will have the capacity to generate an estimated $25.0 million in annual sales on a full utilization basis. The major jacquard weaving project at Rayonese, which included thirty electronic air-jet jacquard looms with a cost of $6.0 million, was completed and became fully operational during the quarter. Depreciation expense for fiscal 1996 is expected to approximate $13.5 million. For fiscal 1997, the company believes its capital spending will be in the range of $8 to $10 million. (Bullet) LONG-TERM DEBT - At October 30, 1995, the company had $15.7 million in IRB borrowings, $16.0 million in borrowings under its revolving credit facility, $38.5 million in a term facility, $1.0 million in a subordinated note payable and $5.5 million in a convertible note payable. The current maturities of $11.6 million includes: $6.0 million repayment of the term loan, $100,000 repayment of IRBs and the entire amount of the convertible note payable because the note is callable by the holder, beginning March 6, 1996. With its interest rate swap agreements totalling $25.0 million, the company has effectively "fixed" 46% of its bank borrowings ($54.5 million) at a weighted average interest rate of 7.1%. The company's funded debt to capital ratio was 50.4%, at October 30, 1995, down from 52.2% at July 30, 1995.