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                       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) February 24, 2003

                                   CULP, INC.

             (Exact name of registrant as specified in its charter)


         North Carolina                  0-12781                56-1001967
(State or other jurisdiction of   (Commission File No.)       (IRS Employer
         incorporation)                                    Identification No.)



                             101 South Main Street
                       High Point, North Carolina  27260
                   (Address of principal executive offices)
                                (336) 889-5161
             (Registrant's telephone number, including area code)





         (Former name or former address, if changed since last report)





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Item 5. Other Events See attached Press Release (5 pages) and Financial Information Release (13 pages), both dated February 24, 2003, related to the fiscal 2003 third quarter ended January 26, 2003. Forward Looking Information. This Report 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 (Section 27A of the Securities Act of 1933 and Section 27A of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties. Further, Forward looking statements are intended to speak only as of the date on which they are made. Forward-looking statements are statements that include projections, expectations or beliefs about future events of results or otherwise are not statements of historical fact. Such statements are often but not always characterized by qualifying words such as "expect," "believe," "estimate," "plan' and "project" and their derivatives, and include but are not limited to statements about expectations for the company's future sales, gross profit margins, SG&A or other expenses, and earnings, as well as any statements regarding the company's view of estimates of the company's future results by analysts. 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. Finally, unanticipated delays or costs in executing restructuring actions could cause the cumulative effect of restructuring actions to fail to meet the objectives set forth by management. Other factors that could affect the matters discussed in forward looking statements are included in the company's periodic reports filed with the Securities and Exchange Commission. SIGNATURE 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 ----------------- Executive Vice President and Chief Financial Officer Dated: February 24, 2003

NEWS RELEASE Investor Contact: Kathy J. Hardy Media Contact: Kenneth M. Ludwig Corporate Secretary Senior Vice President, 336-888-6209 Human Resources 336-889-5161 CULP ANNOUNCES THIRD QUARTER 2003 RESULTS ------------------------------ GROSS MARGIN IMPROVEMENT REFLECTS MORE PROFITABLE SALES MIX AND EFFECTIVE COST MANAGEMENT HIGH POINT, N.C. (February 24, 2003) - Culp, Inc. (NYSE: CFI) today reported financial and operating results for the third quarter and nine months ended January 26, 2003. The highlights include: o Third quarter 2003 diluted earnings per share of $0.16 up from $0.04 in the prior year period (excluding restructuring and related charges in 2003 and goodwill amortization in 2002) o Gross profit margin of 18.3% (excluding restructuring related charges) is highest in fifteen years for the company's third quarter o Cash position increased to $38.5 million, up from $10.4 million a year ago, after the repayment of $12.3 million in debt o Company sees further margin improvement and is comfortable with published analysts estimates of $0.41 to $0.44 per share for the fourth quarter of 2003 For the three months ended January 26, 2003, net sales were $79.3 million compared with $90.6 million a year ago. The company reported net income, excluding restructuring and related charges, of $1.9 million, or $0.16 per diluted share, versus net income of $400,000, or $0.04 per diluted share, in the third quarter of fiscal 2002, excluding restructuring and related charges, and goodwill amortization. The financial results for the third quarter include a total of $397,000 in restructuring and related charges, all of which reflect previously announced restructuring initiatives. Including restructuring and related charges, the company reported net income of $1.7 million, or $0.14 per diluted share, for the third quarter of fiscal 2003. (A reconciliation to the net income and earnings per share calculations has been set forth on Page 5.) For the nine months ended January 26, 2003, the company reported net sales of $248.8 million, compared with $273.5 million for the same period a year ago. Excluding restructuring and related charges and the cumulative effect of accounting change, net income for the first nine months of fiscal 2003 was $5.1 million, or $0.43 per diluted share. This compares with net income of $447,000, or $0.04 per diluted share, excluding restructuring and related charges, and goodwill amortization for the prior-year period. Including restructuring charges and the cumulative effect of accounting change, the company reported a net loss for the first nine months of fiscal 2003 of $28.2 million, or $2.46 per diluted share.

CFI Announces Third Quarter Results Page 3 February 24, 2003 As previously announced, due to the adoption of a new accounting standard, "Goodwill and Other Intangible Assets," the company recorded a non-cash goodwill impairment charge, net of income taxes, of $24.2 million, or $2.11 per diluted share, in the first quarter of 2003 related to the goodwill associated with its Culp Decorative Fabrics ("CDF") division. The charge, recorded as "cumulative effect of accounting change," has no effect on operating income or cash flow from operations. "Despite a challenging business climate, our strategic focus on increasing the profitability of our sales mix and carefully managing our costs allowed us to achieve meaningful year-over-year improvement in profitability in the third quarter of 2003," remarked Robert G. Culp, III, chief executive officer of Culp, Inc. "Clearly our sales efforts have been affected by the overall softness in consumer spending for home furnishings. In addition, the discontinuation of the wet printed flock business at the end of 2002, and our recent initiatives to eliminate unprofitable or low margin product lines, contributed to the 12.5% year-over-year decline in third quarter sales. However, we believe our ability to drive high profit margins in a difficult sales environment demonstrates the inherent value of our strategy. More importantly, we believe it confirms the scalability of our business and the significant opportunity to leverage earnings when our top line regains momentum. "In today's uncertain market conditions, we believe it is a business imperative to maintain a strong, liquid balance sheet. Our results reflect the continued progress in increasing cash flow from operations and effectively managing our working capital. Notably, we have reduced our long-term debt by $12.3 million from the end of fiscal 2002, and by a total of $41.3 million since the end of fiscal 2000, less than three years ago. Through the first nine months of this year, free cash flow from operations was $17.9 million, compared with $10.7 million for the same period last year. (A reconciliation to the free cash flow calculations has been set forth on Page 5.) At the end of the third quarter, our balance sheet reflects $38.5 million in cash and cash investments, a considerable improvement over $10.4 million a year ago. With the build-up in our cash position, we intend to further strengthen our balance sheet by prepaying an additional $12.7 million in debt during the fourth quarter. As a result, we will reduce our long-term debt by a total of $25.0 million in 2003, a significant accomplishment. "Our previously announced restructuring initiatives related to our CDF division continue to make measurable progress. With the completion of the transfer of the Chattanooga, Tennessee, manufacturing operations to other plants at the end of our second quarter, we are now focused on achieving our targeted levels of operating efficiencies in the remaining CDF locations. We are realizing savings from the reduced fixed manufacturing costs as a result of this consolidation. Essentially we can now weave in two plants close to what was formerly produced in three, and still maintain the capacity to meet our foreseeable levels of customer demand. Culp added, "Looking ahead, we believe that fiscal 2003 will reflect considerable progress in meeting our key objectives to improve profitability and generate cash flow. While the sales environment can still be characterized as very challenging, we believe the year-over-year decline in our fourth quarter sales will approximate the trend for this quarter. However, with solid gross profit margins and significant reductions in operating costs, we remain comfortable with the range of published analysts earnings estimates of $0.41 to $0.44 per diluted share for the fourth fiscal quarter, excluding previously announced restructuring and related charges. Culp's financial results over the last few quarters and our business outlook clearly demonstrate our strategic focus on improving the profitability of our sales mix, increasing margins and return on invested capital, and generating free cash flow."

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 (Section 27A of the Securities Act of 1933 and Section 27A of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties. Further, forward-looking statements are intended to speak only as of the date on which they are made. 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 but not always characterized by qualifying words such as "expect," "believe," "estimate," "plan" and "project" and their derivatives, and include but are not limited to statements about expectations for the company's future sales, gross profit margins, SG&A or other expenses, and earnings, as well as any statements regarding the company's view of estimates of the company's future results by analysts. 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. Finally, unanticipated delays or costs in executing restructuring actions could cause the cumulative effect of restructuring actions to fail to meet the objectives set forth by management. Other factors that could affect the matters discussed in forward-looking statements are included in the company's periodic reports filed with the Securities and Exchange Commission.

CFI Announces Third Quarter Results Page 5 February 24, 2003 CULP, INC. Condensed Financial Highlights (Unaudited) Three Months Ended ------------------------- January 26, January 27, 2003 2002 ---------- ------------ Net sales $79,292,000 $ 90,618,000 Net income $ 1,667,000 $ 170,000 Net income per share: Basic $ 0.15 $ 0.02 Diluted $ 0.14 $ 0.02 Net income per share, diluted, excluding restructuring and related charges and goodwill amortization* $ 0.16 $ 0.04 Average shares outstanding: Basic 11,485,000 11,221,000 Diluted 11,714,000 11,304,000 Nine Months Ended ------------------------ January 26, January 27, 2003 2002 ------------ ------------ Net sales $ 248,753,000 $ 273,481,000 ------------ ------------ Loss before cumulative effect of accounting change $ (4,008,000) $ (1,855,000) Cumulative effect of accounting change, net of income taxes (24,151,000) -0- ------------ ------------ Net loss $ (28,159,000) $ (1,855,000) ============ ============ Basic and diluted loss per share: Loss before cumulative effect of accounting change $ (0.35) $ (0.17) Cumulative effect of accounting change (2.11) 0.00 ------------ ------------ Net loss $ (2.46) $ (0.17) ============ ============ Net income per share, diluted, excluding restructuring and related charges, goodwill amortization and cumulative effect of accounting change** $ 0.43 $ 0.04 Average shares outstanding: Basic 11,450,000 11,221,000 Diluted 11,775,000 11,281,000 * Excludes restructuring and related charges of $397,000 ($240,000, or $0.02 per diluted share, after taxes) for the third quarter of fiscal 2003. Excludes goodwill amortization of $350,000 ($230,000, or $0.02 per diluted share, after taxes) for the third quarter of fiscal 2002. ** Excludes cumulative effect of accounting change, net of income taxes, of $24.2 million ($2.11 per diluted share) for the first nine months of fiscal 2003. Excludes restructuring and related charges of $14.9 million ($9.1 million, or $0.80 per diluted share, after taxes) for the first nine months of fiscal 2003. Excludes restructuring and related charges of $2.5 million ($1.6 million, or $0.15 per share diluted, after taxes) and goodwill amortization of $1.1 million ($690,000, or $0.06 per diluted share, after taxes) for the first nine months of fiscal 2002.

CULP, INC. Reconciliation of Net Income (Loss) as Reported to Pro Forma Net Income (Unaudited) Three Months Ended Nine Months Ended ------------------------- ------------------------- January 26, January 27, January 26, January 27, 2003 2002 2003 2002 ----------- ------------ ------------ ------------ Net income (loss) $1,667,000 $ 170,000 $(28,159,000) $(1,855,000) Cumulative effect of accounting change, net of income taxes -- -- 24,151,000 -- Restructuring and related charges, net of income taxes 240,000 -- 9,114,000 1,612,000 Goodwill amortization, net of income taxes -- 230,000 -- 690,000 ----------- ------------ ------------ ------------ Net income, adjusted $1,907,000 $ 400,000 $5,106,000 $ 447,000 =========== ============ ============ ============ Reconciliation of Net Income (Loss) Per Share as Reported to Pro Forma Net Income Per Share (Unaudited) Diluted net income (loss) per share $ 0.14 $ 0.02 $ (2.46) $ (0.17) Cumulative effect of accounting change, net of income taxes -- -- 2.11 -- Restructuring and related charges, net of income taxes 0.02 -- 0.80 0.15 Goodwill amortization, net of income taxes -- 0.02 -- 0.06 Effect of dilutive stock options -- -- (0.02) -- ----------- ------------ ------------ ------------ Diluted net income per share, adjusted $ 0.16 $ 0.04 $ 0.43 $ 0.04 =========== ============ ============ ============ Reconciliation of Cash Flow from Operations to Free Cash Flow (Unaudited) Nine Months Ended January 26, January 27, 2003 2002 ----------- ------------ Cash flow from operations $23,864,000 $18,381,000 Capital expenditures (9,076,000) (3,393,000) Change in accounts payable- capital expenditures 3,074,000 (4,267,000) ----------- ------------ Free cash flow $17,862,000 $10,721,000 =========== ============

CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 26, 2003 AND JANUARY 27, 2002 (Amounts in Thousands, Except for Per Share Data) THREE MONTHS ENDED (UNAUDITED) -------------------------------------------------------------------------- Amounts Percent of Sales ----------------------------- ---------------------------- January 26, January 27, % Over 2003 2002 (Under) 2003 2002 -------------- ------------- ------------- ---------------- ---------- Net sales $ 79,292 90,618 (12.5)% 100.0 % 100.0 % Cost of sales 65,504 77,110 (15.1)% 82.6 % 85.1 % -------------- ------------- ------------- ---------------- ---------- Gross profit 13,788 13,508 2.1 % 17.4 % 14.9 % Selling, general and administrative expenses 9,798 11,038 (11.2)% 12.4 % 12.2 % Restructuring expense (354) 0 (100.0)% (0.4)% 0.0 % -------------- ------------- ------------- ---------------- ---------- Income from operations 4,344 2,470 75.9 % 5.5 % 2.7 % Interest expense 1,665 1,820 (8.5)% 2.1 % 2.0 % Interest income (143) (42) 240.5 % (0.2)% (0.0)% Other expense (income), net 192 435 (55.9)% 0.2 % 0.5 % -------------- ------------- ------------- ---------------- ---------- Income before income taxes 2,630 257 923.3 % 3.3 % 0.3 % Income taxes * 963 87 1,006.9 % 36.6 % 34.0 % -------------- ------------- ------------- ---------------- ---------- Net Income $ 1,667 170 880.6 % 2.1 % 0.2 % ============== ============= ============= ================ ========== Net Income per share-basic $0.15 $0.02 650.0 % Net Income per share-diluted $0.14 $0.02 600.0 % Net income per share, diluted, excluding restructuring $0.16 $0.04 300.0 % and related charges and goodwill amortization (see proforma statement on page 7) Average shares outstanding-basic 11,485 11,221 2.4 % Average shares outstanding-diluted 11,714 11,304 3.6 % NINE MONTHS ENDED (UNAUDITED) ----------------------------------------------------------------------- Amounts Percent of Sales ----------------------------- ---------------------------- January 26, January 27, % Over 2003 2002 (Under) 2003 2002 -------------- ------------- ------------- ---------------- ---------- Net sales $ 248,753 273,481 (9.0)% 100.0 % 100.0 % Cost of sales 207,368 233,642 (11.2)% 83.4 % 85.4 % -------------- ------------- ------------- ---------------- ---------- Gross profit 41,385 39,839 3.9 % 16.6 % 14.6 % Selling, general and administrative expenses 29,716 33,823 (12.1)% 11.9 % 12.4 % Restructuring expense 13,006 1,303 898.2 % 5.2 % 0.5 % -------------- ------------- ------------- ---------------- ---------- Income (loss) from operations (1,337) 4,713 (128.4)% (0.5)% 1.7 % Interest expense 5,244 5,851 (10.4)% 2.1 % 2.1 % Interest income (414) (99) 318.2 % (0.2)% (0.0)% Other expense (income), net 645 1,772 (63.6)% 0.3 % 0.6 % -------------- ------------- ------------- ---------------- ---------- Loss before income taxes (6,812) (2,811) (142.3)% (2.7)% (1.0)% Income taxes * (2,804) (956) 193.3 % 41.2 % 34.0 % -------------- ------------- ------------- ---------------- ---------- Loss before cumulative effect of accounting change (4,008) (1,855) (116.1)% (1.6)% (0.7)% ================ ========== Cumulative effect of accounting change, net of income taxes (24,151) 0 -------------- ------------- Net loss $ (28,159) (1,855) ============== ============= Basic loss per share: Loss before cumulative effect of accounting change $ (0.35) (0.17) (111.7)% Cumulative effect of accounting change (2.11) 0.00 (100.0)% -------------- ------------- ---------- Net loss (2.46) (0.17) (1,387.6)% ============== ============= ========== Diluted loss per share: Loss before cumulative effect of accounting change $ (0.35) (0.17) (111.7)% Cumulative effect of accounting change (2.11) 0.00 (100.0)% -------------- ------------- ---------- Net loss (2.46) (0.17) (1,387.6)% ============== ============= ========== Net income per share, diluted, excluding restructuring $0.43 $0.04 N/A and related charges, goodwill amortization and cumulative effect of accounting change (see proforma statement on page 8) Average shares outstanding-basic 11,450 11,221 2.0 % Average shares outstanding-diluted 11,450 11,221 2.0 % * Percent of sales column for income taxes is calculated as a % of income (loss) before income taxes.

CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED BALANCE SHEETS JANUARY 26, 2003, JANUARY 27, 2002, AND APRIL 28, 2002 Unaudited (Amounts in Thousands) Amounts Increase ------------------------------ (Decrease) January 26, January 27, ------------------------- * April 28, 2003 2002 Dollars Percent 2002 --------------- ------------- ---------- ------------- ------------ Current assets Cash and cash investments $ 38,480 10,359 28,121 271.5 % 31,993 Accounts receivable 32,427 46,171 (13,744) (29.8)% 43,366 Inventories 53,560 59,398 (5,838) (9.8)% 57,899 Other current assets 15,339 9,323 6,016 64.5 % 13,413 --------------- ------------- ---------- ------------- ------------ Total current assets 139,806 125,251 14,555 11.6 % 146,671 Property, plant & equipment, net 85,396 102,457 (17,061) (16.7)% 89,772 Goodwill 9,240 47,432 (38,192) (80.5)% 47,083 Other assets 2,311 1,641 670 40.8 % 4,187 --------------- ------------- ---------- ------------- ------------ Total assets $ 236,753 276,781 (40,028) (14.5)% 287,713 =============== ============= ========== ============= ============ Current liabilities Current maturities of long-term debt $ 13,133 3,127 10,006 320.0 % 1,483 Accounts payable 21,924 21,336 588 2.8 % 24,327 Accrued expenses 14,646 13,652 994 7.3 % 16,460 Accrued restructuring 8,465 1,363 7,102 521.1 % 2,445 --------------- ------------- ---------- ------------- ------------ Total current liabilities 58,168 39,478 18,690 47.3 % 44,715 Long-term debt 83,008 106,960 (23,952) (22.4)% 107,001 Deferred income taxes 3,502 10,330 (6,828) (66.1)% 16,932 --------------- ------------- ---------- ------------- ------------ Total liabilities 144,678 156,768 (12,090) (7.7)% 168,648 Shareholders' equity 92,075 120,013 (27,938) (23.3)% 119,065 --------------- ------------- ---------- ------------- ------------ Total liabilities and shareholders' equity $ 236,753 276,781 (40,028) (14.5)% 287,713 =============== ============= ========== ============= ============ Shares outstanding 11,487 11,221 266 2.4 % 11,320 =============== ============= ========== ============= ============ * Derived from audited financial statements.

CULP, INC. FINANCIAL INFORMATION RELEASE CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JANUARY 26, 2003 AND JANUARY 27, 2002 Unaudited (Amounts in Thousands) NINE MONTHS ENDED ---------------------------- Amounts ---------------------------- January 26, January 27, 2003 2002 ------------- ------------- Cash flows from operating activities: Net loss $ (28,159) (1,855) Adjustments to reconcile net loss to net cash provided by operating activities: Cumulative effect of accounting change, net of income taxes 24,151 0 Depreciation 10,554 13,214 Amortization of intangible and other assets 286 1,177 Amortization of stock based compensation 158 92 Restructuring expense 13,006 1,303 Changes in assets and liabilities: Accounts receivable 10,939 11,678 Inventories 4,339 599 Other current assets (1,885) (1,453) Other assets 295 (19) Accounts payable (5,477) (1,768) Accrued expenses (1,551) (1,156) Accrued restructuring (2,792) (2,163) Income taxes payable 0 (1,268) ------------- ------------- Net cash provided by operating activities 23,864 18,381 ------------- ------------- Cash flows from investing activities: Capital expenditures (9,076) (3,393) ------------- ------------- Net cash used in investing activities (9,076) (3,393) ------------- ------------- Cash flows from financing activities: Principal payments of long-term debt (12,343) (1,569) Change in accounts payable-capital expenditures 3,074 (4,267) Proceeds from common stock issued 968 0 ------------- ------------- Net cash used in financing activities (8,301) (5,836) ------------- ------------- Increase in cash and cash investments 6,487 9,152 Cash and cash investments at beginning of period 31,993 1,207 ------------- ------------- Cash and cash investments at end of period $ 38,480 10,359 ============= ============= Free Cash Flow (1) $ 17,862 10,721 ============= ============= (1) Free Cash Flow is defined as net cash provided by operating activities less capital expenditures plus or minus the change in accounts

CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL ANALYSIS JANUARY 26, 2003 FISCAL 02 FISCAL 03 ---------------- ---------------------------------------------------------------- Q3 Q1 Q2 Q3 Q4 LTM (3) ---------------- ---------------------------------------------------------------- INVENTORIES Inventory turns 5.1 4.9 4.9 4.8 RECEIVABLES Days sales in receivables 43 34 36 34 WORKING CAPITAL Current ratio 3.2 3.4 3.0 3.1 Operating working capital turnover (2) 4.2 4.7 4.8 4.9 Operating working capital (2) $84,233 $70,762 $68,492 $64,063 PROPERTY, PLANT & EQUIPMENT Depreciation rate 7.1% 6.4% 6.5% 6.2% Percent property, plant & equipment are depreciated 59.0% 60.6% 61.5% 61.0% Capital expenditures $4,729 (1) $3,070 $2,258 $3,748 PROFITABILITY Net income (loss) per share (basic) $0.02 $0.08 (5) ($0.57) $0.15 ($0.49) (5) Net income (loss) per share (diluted) $0.02 $0.08 (5) ($0.57) $0.14 ($0.49) (5) Net income (loss) per share (diluted) $0.04 (6) $0.08 (5) $0.19 (7) $0.16 (8) $0.81 (9) Return on average total capital 2.8% (6) 3.6% (5) 6.8% (7) 6.0% (8) 6.8% (9) Return on average equity 1.5% (6) 3.1% (5) 9.4% (7) 8.0% (8) 9.2% (9) LEVERAGE Total liabilities/equity 129.6% 143.2% 160.8% 157.1% Funded debt/equity 91.7% 99.5% 106.9% 104.4% Funded debt/capital employed 47.8% 49.9% 51.7% 51.1% Funded debt $110,087 $96,533 $96,558 $96,141 Funded debt/EBITDA (LTM) (4) 3.64 2.71 2.67 2.57 LEVERAGE (NET OF CASH AND CASH INVESTMENTS) (10) Total liabilities/equity N/A N/A 122.0% 115.3% Funded debt/equity N/A N/A 68.1% 62.6% Funded debt/capital employed N/A N/A 40.5% 38.5% Funded debt N/A N/A $61,521 57,661 Funded debt/EBITDA (LTM) (4) N/A N/A 1.70 1.54 OTHER Book value per share $10.62 $8.45 $7.87 $8.02 Employees at quarter end 3,015 2,900 2,568 2,534 Sales per employee (annualized) $120,523 $116,163 $122,272 $124,306 Capital employed $230,999 $193,540 $186,884 $188,216 Effective income tax rate (11) 34.0% 37.0% 37.0% 37.0% EBITDA (4) $6,859 $7,356 $8,810 $8,118 $37,352 EBITDA/net sales (4) 8.1% 8.6% 10.5% 10.2% 10.5% (1) Expenditures for entire year (2) Working capital for this calculation is accounts receivable, inventories and accounts payable (3) LTM represents "Latest Twelve Months" (4) EBITDA includes earnings before interest, income taxes, depreciation, amortization, all restructuring and related charges, certain non-cash charges and cumulative effect of accounting change, as defined by the company's credit agreement (5) Excludes cumulative effect of accounting change made during first quarter fiscal 2003 (6) Excludes goodwill amortization expense of $350,000 ($230,000 or $0.02 per share diluted, after taxes) (7) Excludes restructuring and related charges of $14.5 million ($8.9 million or $.77 per share diluted, after taxes) (8) Excludes restructuring related charges of $751,000 and a restructuring credit of $354,000 (net $397,000 or $0.02 per share, diluted after taxes) (9) Excludes restructuring and related charges of $9.7 million ($5.8 million or $.51 per share diluted, after taxes) and $14.5 million ($8.9 million or $0.78 per share diluted, after taxes) for the fourth quarter fiscal 2002 and second quarter fiscal 2003, respectively, and $24.2 million cumulative effect of accounting change for the first quarter of fiscal 2003. Also excludes goodwill amortization expense of $350,000 ($230,000 or $.02 per share diluted, after taxes) for the fourth quarter of fiscal 2002 (10) The cash balance of $35.0 million and $38.5 million has been excluded from total liabilities, funded debt and capital employed to arrive at the ratios in this section for the second and third quarter of fiscal 2003, respectively (11) Effective income tax rate excludes restructuring and related charges

CULP, INC. FINANCIAL INFORMATION RELEASE SALES / GROSS PROFIT BY SEGMENT/DIVISION FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 26, 2003 AND JANUARY 27, 2002 (Amounts in thousands) THREE MONTHS ENDED (UNAUDITED) -------------------------------------------------------------------- Amounts Percent of Total Sales ------------------------------- ----------------------- January 26, January 27, % Over Segment/Division Sales 2003 2002 (Under) 2003 2002 - -------------------------------- --------------- -------------- ---------- ----------- ---------- Upholstery Fabrics Culp Decorative Fabrics $ 31,734 35,878 (11.6)% 40.0 % 39.6 % Culp Velvets/Prints 22,819 28,648 (20.3)% 28.8 % 31.6 % Culp Yarn 1,356 1,318 2.9 % 1.7 % 1.5 % --------------- -------------- ---------- ----------- ---------- 55,909 65,844 (15.1)% 70.5 % 72.7 % Mattress Ticking Culp Home Fashions 23,383 24,774 (5.6)% 29.5 % 27.3 % --------------- -------------- ---------- ----------- ---------- * $ 79,292 90,618 (12.5)% 100.0 % 100.0 % =============== ============== ========== =========== ========== Segment Gross Profit Gross Profit Margin - -------------------------------- ----------------------- Upholstery Fabrics (1) $ 8,839 6,829 29.4 % 15.8 % 10.4 % Mattress Ticking 5,700 6,679 (14.7)% 24.4 % 27.0 % --------------- -------------- ---------- ----------- ---------- $ 14,539 13,508 7.6 % 18.3 % 14.9 % =============== ============== ========== =========== ========== NINE MONTHS ENDED (UNAUDITED) -------------------------------------------------------------------- Amounts Percent of Total Sales ------------------------------- ----------------------- January 26, January 27, % Over Segment/Division Sales 2003 2002 (Under) 2003 2002 - -------------------------------- --------------- -------------- ---------- ----------- ---------- Upholstery Fabrics Culp Decorative Fabrics $ 100,324 109,531 (8.4)% 40.3 % 40.1 % Culp Velvets/Prints 69,243 84,522 (18.1)% 27.8 % 30.9 % Culp Yarn 4,702 3,816 23.2 % 1.9 % 1.4 % --------------- -------------- ---------- ----------- ---------- 174,269 197,869 (11.9)% 70.1 % 72.4 % Mattress Ticking Culp Home Fashions 74,484 75,612 (1.5)% 29.9 % 27.6 % --------------- -------------- ---------- ----------- ---------- * $ 248,753 273,481 (9.0)% 100.0 % 100.0 % =============== ============== ========== =========== ========== Segment Gross Profit Gross Profit Margin - -------------------------------- ----------------------- Upholstery Fabrics (1) $ 25,649 20,696 23.9 % 14.7 % 10.5 % Mattress Ticking 17,647 20,278 (13.0)% 23.7 % 26.8 % --------------- -------------- ---------- ----------- ---------- $ 43,296 40,974 5.7 % 17.4 % 15.0 % =============== ============== ========== =========== ========== * U.S. sales were $71,130 and $79,539 for the third quarter of fiscal 2003 and fiscal 2002, respectively; and $218,957 and $233,617 for the nine months of fiscal 2003 and 2002, respectively. The percentage decrease in U.S. sales was 10.6% for the third quarter and a decrease of 6.3% for the nine months. (1) Excludes restructuring related charges of $751,000 for the third quarter of fiscal 2003; and excludes $1.9 million and $1.2 million for the first nine months of fiscal 2003 and 2002, respectively.

CULP, INC. FINANCIAL INFORMATION RELEASE INTERNATIONAL SALES BY GEOGRAPHIC AREA FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 26, 2003 AND JANUARY 27, 2002 (Amounts in thousands) THREE MONTHS ENDED (UNAUDITED) ------------------------------------------------ Amounts --------------------------------- January 26, January 27, % Over Geographic Area 2003 2002 (Under) ---------------------------------------- ---------------- --------------- ----------- North America (Excluding USA) $ 6,648 6,613 0.5 % Europe 274 472 (41.9)% Middle East 260 598 (56.5)% Far East & Asia 765 2,924 (73.8)% South America 94 155 (39.4)% All other areas 121 318 (61.9)% ---------------- --------------- ----------- $ 8,162 11,079 (26.3)% ================ =============== =========== Percent of total sales 10.3% 12.2% NINE MONTHS ENDED (UNAUDITED) ------------------------------------------------ Amounts --------------------------------- January 26, January 27, % Over Geographic Area 2003 2002 (Under) ---------------------------------------- ---------------- --------------- ----------- North America (Excluding USA) $ 22,622 23,023 (1.7)% Europe 535 2,115 (74.7)% Middle East 1,907 4,804 (60.3)% Far East & Asia 3,748 8,414 (55.5)% South America 508 490 3.7 % All other areas 476 1,018 (53.2)% ---------------- --------------- ----------- $ 29,796 39,864 (25.3) % ================ =============== =========== Percent of total sales 12.0% 14.6% International sales, and the percentage of total sales, for each of the last three fiscal years follows: fiscal 2000-$111,104 (23%); fiscal 2001 - $77,824 (19%) and fiscal 2002 - $53,501 (14%).

CULP, INC. PROFORMA CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JANUARY 26, 2003 AND JANUARY 27, 2002 (Amounts in Thousands, Except for Per Share Data) THREE MONTHS ENDED (UNAUDITED) ---------------------------------------------------------------------------------- As Reported January 26, 2003 January 27, 2002 January 26, Reclassification Proforma Net % of Proforma Net % of % Over 2003 & Adjustments of Adjustments Net Sales of Adjustments Net Sales (Under) ------------ ------------- ---------------------- ----------------------- --------- Net sales $ 79,292 0 79,292 100.0% 90,618 100.0% -12.5% Cost of sales 65,504 (751) (3) 64,753 81.7% 77,110 85.1% -16.0% ------------ ------------- ---------------------- ----------------------- --------- Gross profit 13,788 (751) 14,539 18.3% 13,508 14.9% 7.6% Selling, general and administrative expenses 9,798 0 9,798 12.4% 11,038 12.2% -11.2% Restructuring expense (354) 354 (4) 0 0.0% 0 0.0% 0.0% ------------ ------------- ---------------------- ----------------------- --------- Income (loss) from 4,344 (397) 4,741 6.0% 2,470 2.7% 91.9% operations Interest expense 1,665 0 1,665 2.1% 1,820 2.0% -8.5% Interest income (143) 0 (143) -0.2% (42) 0.0% 240.5% Other expense (income), net 192 0 192 0.2% 85 0.1% (6) 125.9% ------------ ------------- ---------------------- ----------------------- --------- Income (loss) before 2,630 (397) 3,027 3.8% 607 0.7% 398.7% income taxes Income taxes (1) 963 (157) 1,120 37.0% 207 34.2% (2) 440.1% ------------ ------------- ---------------------- ----------------------- --------- Net income (loss) $ 1,667 (240) 1,907 2.4% 400 0.4% 377.2% ============ ============= ====================== ======================= ========= Net income (loss) per share-basic $0.15 ($0.02) $0.17 $0.04 Net income (loss) per share-diluted $0.14 ($0.02) $0.16 $0.04 Average shares outstanding-basic 11,485 11,485 11,485 11,221 Average shares outstanding-diluted 11,714 11,485 11,714 (5) 11,304 Notes: (1) Percent of net sales column for income taxes is calculated as a % of income (loss) before income taxes (2) Pre-restructuring income tax rate was 37% and 34% for the third quarter of fiscal 2003 and 2002, respectively. (3) The $751,000 represents restructuring related charges for inventory markdowns and movement of equipment related to the Chattanooga plant closing (4) The $354,000 restructuring credit represents the reversal of excess accrued employment benefit and plant security costs associated with the shutdown of the wet printed flock operation (5) Incremental shares of 229,000 for fiscal 2003 included in fully diluted calculation (6) Excludes $350,000 ($230,000 or $0.02 per share diluted, after taxes) of goodwill amortization

PROFORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THE NINE MONTHS ENDED JANUARY 26, 2002 AND JANUARY 27, 2002 (Amounts in Thousands, Except for Per Share Data) NINE MONTHS ENDED ------------------------------------------------------------------------------------------------ As Reported January 26, 2003 January 27, 2002 January 26, Reclassification Proforma Net % of Proforma Net % of % Over 2002 & Adjustments of Restructuring Net Sales of Restructuring Net Sales (Under) ------------ ------------- ---------------------- ------------------------ --------- Net sales $ 248,753 0 248,753 100.0% 273,481 100.0% -9.0% Cost of sales 207,368 (1,911) (3) 205,457 82.6% 232,507 85.0% (6) -11.6% ------------ ------------- ---------------------- ------------------------ --------- Gross profit 41,385 (1,911) 43,296 17.4% 40,974 15.0% 5.7% Selling, general and administrative expenses 29,716 0 29,716 11.9% 33,823 12.4% -12.1% Restructuring expense 13,006 (13,006) (4) 0 0.0% 0 0.0% (6) 0.0% ------------ ------------- ---------------------- ------------------------ ---------- Income (loss) from (1,337) (14,917) 13,580 5.5% 7,151 2.6% 89.9% operations Interest expense 5,244 0 5,244 2.1% 5,851 2.1% -10.4% Interest income (414) 0 (414) -0.2% (99) 0.0% 318.2% Other expense (income), net 645 0 645 0.3% 722 0.3% (7) -10.7% ------------ ------------- ---------------------- ------------------------ --------- Income (loss) before (6,812) (14,917) 8,105 3.3% 677 0.2% N/A income taxes Income taxes (1) (2,804) (5,803) 2,999 37.0% 230 34.0% (2) N/A ------------ ------------- ---------------------- ------------------------ --------- Income (loss) before cumulative effect of accounting change $ (4,008) (9,114) 5,106 2.1% 447 0.2% N/A ============ ============= ====================== ======================== ========= Net income (loss) per share-basic ($0.35) ($0.80) $0.45 $0.04 Net income (loss) per share-diluted ($0.35) ($0.80) $0.43 $0.04 Average shares outstanding-basic 11,450 11,450 11,450 11,221 Average shares outstanding-diluted 11,450 11,450 11,775 (5) 11,281 Notes: (1) Percent of net sales column for income taxes is calculated as a % of income (loss) before income taxes. (2) Pre-restructuring income tax rate was 37% and 34% for the first nine months of fiscal 2003 and 2002, respectively. (3) The $1.9 million represents restructuring related charges for inventory markdowns and movement of equipment relating to the Chattanooga plant closing (4) The $13.0 million represents restructuring charges for the shut down of the Chattanooga operation, $12.1 million, and the additional write-down of wet printed assets held for sale, $1.3 million offset by a restructuring credit of $354,000 for over accrued employee benefit and plant security costs (5) Incremental shares of 325,000 included in fully diluted calculation (6) $1.2 million ($.8 million or $0.08 per share diluted, after taxes) of CDF and CYN restructuring related charges are excluded from the cost of sales total; and $1.3 million ($.9 million or $0.07 per share, diluted, after taxes) in CDF and CYN restructuring charges are excluded to arrive at the proforma amounts (7) Excludes $1,050,000 ($690,000 or $0.06 per share diluted, after taxes) of goodwill amortization

CULP, INC. FINANCIAL INFORMATION RELEASE FINANCIAL NARRATIVE for the three and nine months ended January 26, 2003 and January 27, 2002 OVERVIEW GENERAL -- For the third quarter, net sales decreased 12.5% to $79.3 million; and the company reported net income of $1.7 million, or $0.14 per share diluted versus net income of $170,000, or $0.02 per share diluted in the third quarter of fiscal 2002. Excluding restructuring and related charges and credits, earnings for the third quarter of fiscal 2003 were $1.9 million, or $0.16 per share diluted versus net income of $400,000, or $0.04 per share diluted in the third quarter of fiscal 2002, excluding goodwill amortization. The company reported further improvement in its balance sheet by reducing funded debt by $12.3 million during the first nine months of fiscal 2003 and ending the quarter with $38.5 million in cash and cash investments. During fiscal 2003, the company placed significant focus on reducing outstanding accounts receivable, including a concerted effort to collect past due accounts, shorten payment terms by offering a cash discount and resolve old items within receivable accounts. As of January 26, 2003, accounts receivable decreased 29.8% from the year earlier levels. In the third quarter, due to the decrease in past due receivable balances, there was a net reduction of $435,000 in the allowance for doubtful accounts. This compares with bad debt expense of $703,000 in the year earlier period. Additionally, as a result of this effort, the company has resolved $370,000 in old, open credits with customers which were credited to net sales during the quarter. ADOPTION OF SFAS No. 142 -- As of April 29, 2002, Culp adopted SFAS No. 142, "Goodwill and Other Intangible Assets." As a result the company recorded during the first quarter of fiscal 2003 a non-operating non-cash goodwill impairment charge of $37.6 million ($24.2 million net of taxes of $13.4 million), or $2.11 per share diluted, related to the goodwill associated with the Culp Decorative Fabrics division. PROFORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS) -- The company has included, within this financial information release, proforma income statements which reconcile the reported income statements with proforma results, which exclude restructuring and related charges, goodwill amortization and cumulative effect of accounting change. See PROFORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS) on pages 7 and 8 of this financial information release. RESTRUCTURING AND RELATED CHARGES -- The financial results for the third quarter include a total of $751,000 in restructuring related charges, which were classified in cost of sales, and a $354,000 credit classified under the restructuring expense line item. The restructuring related charges of $751,000 represent inventory markdowns and equipment relocation costs associated with the closing of the Chattanooga, Tennessee facility within the Culp Decorative Fabrics division in October 2002. The restructuring credit represents unused accrued personnel costs, principally extended health care benefit expense, relating to the exit of the wet printed flock business during April 2002. The net after tax effect of the restructuring related charges and restructuring credit reduced net income per share by $0.02 for the third quarter of fiscal 2003. The Culp Decorative Fabrics (CDF) restructuring actions are expected to significantly improve gross margins within the division, while allowing the ability to meet foreseeable levels of demand, all on a substantially lower cost base. The initiative is projected to result in annual cost savings of approximately $12 to $15 million, beginning in the third quarter of fiscal 2003. Approximately $8.0 million of these savings relate to fixed manufacturing costs and the remaining $4.0 to $7.0 million relate to variable manufacturing costs. A substantial portion of the savings from lower fixed manufacturing costs, which were achieved due to the closing of the Chattanooga, Tennessee operation at the end of the second quarter, have been realized and have contributed to the third quarter results. However, while there has been some progress on savings with variable manufacturing costs, the company expects these benefits to be realized over the next two quarters as operations within CDF achieve higher levels of efficiency. The remaining elements from the CDF Chattanooga restructuring initiative to be completed are as follows: (1) achieve targeted levels of operating efficiency for the looms transferred into the Pageland operation, which is projected to take until the end of the first quarter of fiscal 2004; (2) transfer certain finishing and warping equipment to other CDF plants by the end of this fiscal year; and (3) complete the capital expenditure projects related to the restructuring. Another important element of the CDF restructuring initiative was a major reduction in the complexity of the dobby upholstery product line, which has led to the elimination of approximately 1,500 low volume stock keeping units (SKUs) representing about 70% of the finished goods SKUs (but only 10% of sales) in that product category. This initiative is now substantially complete and has been accomplished without significant disruptions of customer relationships. The CDF restructuring is expected to result in total restructuring and related charges of approximately $15 million. The company currently estimates that this restructuring will result in additional charges of approximately $750,000 during the fourth quarter of the fiscal year, most of which relate to equipment relocation costs. INCOME STATEMENT COMMENTS UPHOLSTERY FABRIC SEGMENT (See page 5 - Sales and Gross Profit by Segment) NET SALES -- Upholstery fabric sales for the third quarter of fiscal 2003 decreased 15.1% to $55.9 million (see sales by Segment/Division on page 5). Domestic upholstery fabric sales decreased 11.9% to $50.9 million, due primarily to overall weakness in consumer demand for upholstered furniture, and other factors discussed below. International sales decreased 37.9% to $5.0 million, due primarily to the exiting of the wet printed flock fabric business in April 2002. In addition to overall softness in demand during the quarter, the sales decrease in upholstery fabrics is attributable to the company's strategy to focus on improving the profitability of its sales mix by reducing or eliminating products generating little or no profit. In the Culp Velvets/Prints division, the company discontinued its unprofitable wet printed flock business at the end of last fiscal year. This product line produced annual sales last year of approximately $17 million with approximately $2 million in operating losses. In the CDF division, the company discontinued about half of its finished goods SKUs (or approximately 10,000) over the last year, most of which were small volume items and were costly to produce. These discontinued SKUs include the dobby product line SKUs that were recently eliminated as part of the Chattanooga restructuring. The company expects this process of identifying and dropping its low profit items to continue through the balance of this fiscal year. The company believes additional factors that are likely impacting upholstery fabric sales are (1) the increasing market share of leather furniture being sold in the U.S.; and (2) the increase in imported fabrics, both in "piece goods" and "cut and sewn kits". GROSS PROFIT -- In spite of weak furniture demand, the upholstery fabric segment improved its gross profit dollars and margins significantly. Excluding restructuring related charges of $751,000 for the third quarter of fiscal 2003, gross profit dollars and margin increased to $8.8 million and 15.8% from $6.8 million and 10.4% in the third quarter of last year. The key factors behind this gain was a sharp improvement in CDF due to: (1) a more profitable sales mix; (2) the increasing productivity benefits from the CDF 2001 restructuring; and (3) the fixed cost reduction benefits from the Chattanooga closure. The company is optimistic that gross profit dollars and margins in the upholstery fabric segment will continue to improve over the next few quarters driven principally by the progress within the CDF division. More specifically within CDF, the company is focused on (1) creating and selling products with better margins; (2) continuing to reduce low profit SKUs; and (3) improving manufacturing performance, in terms of productivity and inventory obsolescence. MATTRESS TICKING SEGMENT (See page 5 - Sales and Gross Profit by Segment) NET SALES -- Mattress fabric sales for the third quarter of fiscal 2003 decreased 5.6% to $23.4 million. Sales to U.S. bedding manufacturers fell 7.2% to $20.3 million, while sales to international customers increased by 5.9% to $3.1 million. The sales decrease is due to the overall weakness in consumer demand for mattresses. GROSS PROFIT -- The mattress fabric segment (Culp Home Fashions or CHF) reported for the third quarter of fiscal 2003 lower gross profit dollars and margins of $5.7 million and 24.4%, respectively, both down from $6.7 million and 27.0% during the corresponding quarter of the prior year. The key factors impacting gross profit were lower sales and the residual impact from a high cost European sourcing agreement that ended October 31, 2002. During the quarter the division worked down its inventory position of these products by reducing production. CHF entered into this agreement with the supplier in October 2001 as part of the termination of a long-term supply relationship. The agreement provided, among other things, that the company maintain a certain level of weekly purchases through October 31, 2002. Therefore, for the first half of this fiscal year, the company was required to source products from this supplier that were significantly more expensive than products manufactured at the company's U.S. and Canadian plants in order to meet the agreement's minimum purchase levels. The company had planned during the last fiscal year for the termination of this supply agreement by initiating a plan to increase capacity in the U.S. and Canadian plants beginning in the first quarter and ending by January 2003. This capacity expansion project accounts for approximately $4.5 million of the company's fiscal 2003 capital spending. This supply agreement was concluded on October 31, 2002. SG&A EXPENSES -- SG&A expenses for the third quarter declined $1.2 million, or 11.2%, from the prior year, and as a percent of net sales, SG&A expenses increased to 12.4% from 12.2%. SG&A expenses in the third quarter included a net reduction of $435,000 in the allowance for doubtful accounts, due to a decrease in past due receivable balances. This compares with bad debt expense of $703,000 in the year-earlier period. INTEREST EXPENSE (INCOME) -- Interest expense for the third quarter declined to $1.7 million from $1.8 million due to significantly lower borrowings outstanding, offset somewhat by an increase in the interest rate on the $75 million term loan. Interest income increased to $143,000 from $42,000 due to significantly higher invested cash as compared with the prior year. OTHER EXPENSE (INCOME), NET -- Other expense (income) for the third quarter of fiscal 2003 totaled $192,000 compared with $435,000 in the prior year. The decrease was principally due to the adoption of SFAS No. 142, which discontinued the amortization of goodwill. Goodwill amortization during the third quarter of fiscal year 2002 was $350,000. INCOME TAXES -- Excluding the cumulative effect of accounting change and restructuring and related charges, the effective tax rate for the nine months of fiscal 2003 was 37% compared with 34% for the year earlier period. EBITDA -- EBITDA for the third quarter of fiscal 2003 was $8.1 million compared with $6.9 million in the prior year. EBITDA includes earnings before interest, income taxes, depreciation, amortization, all restructuring and related charges, certain non-cash charges and cumulative effect of accounting change, as defined by the company's credit agreement. BALANCE SHEET COMMENTS CASH AND CASH INVESTMENTS -- Cash and cash investments as of January 26, 2003 increased to $38.5 million from $32.0 million at the end of fiscal 2002, reflecting cash flow from operations of $23.9 million for the first nine months of fiscal 2003, capital expenditures of $9.1 million, debt repayment of $12.3 million, stock issuance from the sale of exercised stock options of $1.0 million and an increase in accounts payable for capital expenditures of $3.1 million. WORKING CAPITAL -- Accounts receivable as of January 26, 2003 decreased 29.8% from the year-earlier level, due principally to the decline in international sales with their related longer credit terms, repayment of past due balances and an increase in the number of customers taking the cash discount for shorter payment terms. Days sales outstanding totaled 34 days at January 26, 2003 compared with 43 a year ago and 36 at last fiscal year end. Inventories at the close of the third quarter decreased 9.8% from a year ago. Inventory turns for the third quarter were 4.8 versus 5.1 for the year-earlier period. Operating working capital (comprised of accounts receivable, inventory and accounts payable) was $64.1 million at January 26, 2003, down from $84.2 million a year ago. PROPERTY, PLANT AND EQUIPMENT -- Capital spending for the first nine months of fiscal 2003 was $9.1 million. The company's original budget for capital spending for all of fiscal 2003 was $8.5 million, compared with $4.7 million in fiscal 2002. As part of the fiscal 2003 restructuring plan in the Culp Decorative Fabrics division, the company increased the budget by $4.5 million to $13.0 million. Depreciation for the third quarter of fiscal 2003 totaled $3.4 million, and is estimated at $14.0 million for the full fiscal year. INTANGIBLE ASSETS -- As of January 26, 2003, goodwill in the amount of $9.2 million is the company's only intangible asset. The company adopted SFAS No. 142 on April 29, 2002. During the first quarter of fiscal 2003 the company recognized an impairment charge of $37.6 ($24.2 million net of taxes of $13.4 million) upon adoption of SFAS No. 142. LONG-TERM DEBT -- As of the end of the third quarter, the company had reduced funded debt by $12.3 million from last fiscal year end. Funded debt equals long-term debt plus current maturities. Funded debt was $96.1 million at January 26, 2003, compared with $108.5 million at fiscal 2002 year end. The company's funded debt-to-capital ratio was 51.1% at January 26, 2003. The company also reports it leverage statistics in terms of funded debt, net of cash and cash investments, under the assumption it could use the cash to repay debt at any time. Therefore, funded debt, net of cash and cash investments, was $57.7 million at January 26, 2003 compared with $76.5 million at fiscal 2002 year end. In addition, the company's funded debt (net of cash and cash investments) to capital employed ratio was 38.5% and funded debt (net of cash and cash investments) to EBITDA was 1.54, which is substantially lower than the highest point level of 4.28 at January 2001. Since the end of fiscal 2000 (two years and nine months ago), the company has substantially reduced its funded debt (net of cash and cash investments) by a total of $78.8 million or 57.7%. The company entered into a new loan agreement during August 2002 with its principal bank lender that provides, among other things, for: (1) a two year $34.7 million credit facility, which includes a $15.0 million revolving credit line and $19.7 million for letters of credit for the company's industrial revenue bonds (IRB's), (2) lower interest rates based upon a pricing matrix, and (3) improved financial covenants. The company was in compliance with all covenants contained in its loan agreements as of January 26, 2003. The company has initiated the early repayment of $12.7 million of its long-term debt by March 15, 2003 and therefore has reclassified this debt to current maturities of long-term debt. The debt being repaid represents Industrial Revenue Bonds ("IRBs"). Effective with this repayment of IRBs, under the terms of the company's bank loan agreement, all collateral pledged on the company's outstanding loans will be removed. In addition, with these debt retirements, the company will have reduced its funded debt by $25.0 million during fiscal 2003, and the company is optimistic that its cash position at fiscal year end will exceed $25 million. The remaining funded debt after repayment of these IRBs will be totally unsecured and will be comprised of a $75 million term loan, with a fixed interest rate of 7.76%, $7.0 million in remaining IRBs and a $1.4 million, non-interest bearing term loan with the Canadian government. The first scheduled principal payment on the $75 million term loan is due March 2006, three years away, and it amounts to $11.0 million. The Canadian government loan is repaid in annual installments of approximately $450,000 per year. The company plans to maintain a cash reserve of at least $25 million for the foreseeable future. Cash accumulated above this level will likely be used to repay the remaining $7.0 million in IRBs over the next several quarters. The company has chosen to repay the outstanding IRBs first due to high prepayment fees and costs associated with the $75 million term loan. FREE CASH FLOW COMMENTS Free cash flow was $17.9 million for the first nine months of fiscal 2003 compared with $10.7 million for the same period of the prior year. The company defines free cash flow as cash from operations, less capital expenditures, plus or minus the change in accounts payable for capital expenditures. The key reasons for this improvement were continued improvement in accounts receivable collections, lower inventory levels, higher profits and the benefit from deferred payment terms for capital expenditures. BUSINESS OUTLOOK For the fourth quarter of fiscal 2003, the company believes consolidated sales will decline in the same range as the third quarter decrease of 12.5% while gross profit margins are expected to approximate last year's fourth quarter gross margin of 21.8%, excluding restructuring and related charges, resulting in lower gross profit dollars. More than offsetting this gross profit dollar decrease, total SG&A, interest and other expenses are expected to decline approximately $4.0 million in the fourth quarter, absent any large unusual items, from a total of $17.3 million in last year's fourth quarter. The cost reduction is due to several factors: (1) lower incentive compensation; (2) an unusually high bad debt expense of $1.2 million in last year's fourth quarter; (3) various reductions in other SG&A expenses; and (4) lower net interest expense. The lower incentive compensation expense reflects the fact that the entire fiscal 2002 amount was recorded in the fourth quarter since the company was operating at a net loss through the third quarter and therefore did not meet incentive targets. However, this year's expense was accrued more ratably over the four quarterly periods as incentive targets were realized. Therefore, with gross profit margin about the same on lower sales, and substantially lower costs, the company is comfortable with the range of published analyst's earnings estimates of $0.41 to $0.44 per share for the fourth quarter of fiscal 2003, excluding any restructuring and related charges or large unusual items. The net earnings for the fourth quarter of last year were $4.4 million, or $0.38 per share, excluding restructuring and related charges and goodwill amortization. The company's financial results over the last few quarters and its business outlook clearly demonstrate the company's strategic focus on: (1) improving the profitability of its sales mix; (2) increasing margins and return on capital employed; and (3) generating free cash flow and strengthening its balance sheet.