FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Conso Products Company <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CNSO)") else Response.Write("(NASDAQ: CNSO)") end if %>
513 North Duncan Bypass
P.O. Box 326
Union, SC 29379
(864) 427-9004

UNION CITY, Ca., November 13, 1996/FOOLWIRE/ --- Conso Products Company reported their first quarter fiscal 1997 results this morning. Their earnings on a post-split basis for the quarter were $0.23 per share. On a pre-split basis that equates to $0.35 per share which was the latest analyst projection of their earnings for the quarter.

[PLEASE NOTE: Conso reported that an information sheet went out on the wire this morning from S&P that shows some current quarter estimates of earnings by analysts which are incorrect. The information that is included shows estimated earnings projections which do not agree with what Conso has received from the analysts. Robinson Humphries (Smith Barney) has current earnings estimates for this quarter of $0.35 per share before the stock split, which would take it down to between $0.22 and $0.23 per share and Conso's earnings came in at $0.23 per share. The other earnings projections that are out there are in the same area. Conso will call S&P and see that it is corrected. Later on in the call it was mentioned that First Call estimates (which show consensus estimates of $0.25 per share) are also incorrect.]

GENERAL COMMENTS. The first quarter continued Conso's record of outstanding financial performance at the Conso US operations. While sales for the quarter in the US were up only 2.6% from the prior year period, margin rates continued to expand to 41.4%, up from 38.4% in the prior year. The 1996 margin rate is before reporting a one-time provision for the discontuation of their embroidery operation. In analyzing their sales for the quarter, two things stand out. First quarter sales in fiscal 1996 were very strong in the US, up almost 37%. This was well above the 1996 fiscal year increase of 28% at Conso US. In the past quarter, they were going up against large increases from the year before. Secondly, at the end of fiscal 1996, many of their large manufacturers and large retail orders were due for shipment and they succeeded in shipping almost all of these before the end of the fiscal year. At the end of fiscal 1995, the shipping schedules did not fall out this way. Therefore, their open order file was considerably larger in 1995 fiscal year end than at the end of fiscal 1996. This was a factor they could not anticipate in May when they set their 1997 sales budget. Therefore, first quarter 1997 shipments were adversely impacted by a relatively small open order file when the quarter began.

INCOMING ORDERS. They also see the impact of strong business in the prior year in incoming orders. New orders were up 8.3% in the US from the first quarter of fiscal 1996. Remember that incoming orders in the 1996 first quarter were very strong so large favorable comparisons are difficult to achieve. In the months ahead, as the prior year numbers approach the average for last year, they believe comparisons will be more favorable.

INVENTORY. Inventory at Conso US increased only $70,000 during the first quarter. They expect inventory levels to remain relatively constant during the next few months.

NEW BUILDINGS. Work continues on their two major construction products. They have begun to clear land for additional parking space at their Union facility. Utility relocation is underway. They have awarded the contract for the new warehouse facility. Preparation of the building site will begin in early December. Completion of the warehouse building is scheduled for April 30, 1997. Planning for the new dye house is nearly complete. The contract for this building will be awarded in December. Construction on this facility should be complete by mid-1997. Both projects are progressing steadily and they remain enthusiastic about the prospects of occupying these new quarters in the months ahead.

US OPERATIONS SUMMARY. The past quarter was another good one for the Conso US operation. Financial results were impressive and they are well positioned to continue their growth trend as the fiscal year progresses.

BRITISH TRIMMINGS. At the last conference call in August they reported that incoming orders at their main unit were picking up in line with the improving UK economy and reflecting the steady market penetration of their catalog. This trend is continuing. Incoming orders from the start of fiscal 1997 through November 7th are up by a healthy 21.8%. A substantial amount of this increase was in manufacturing specials and orders with delivery periods of many weeks rather than the two to three days on stock lines. Thus, the affect of increased orders has not yet come through into shipments.

UK SALES. BT Group sales were down by 7.1% for the quarter. The gross margin, however, was up from 31% to 35.6% of sales. 1.1% of this was accounted for by the correction of a purchase price variance error in the second half of fiscal 1996 and the balance by improved activity.

STRONG ORDER GROWTH. Operating income increased by 35% or $110,000. The suddenness and size of the recovery has resulted in an order book increase from 495,000 pounds at the start of fiscal 1997 to a November 7th figure of fractionally over 1 million pounds. Action has been taken to reduce this and invoice sales in October through November 7th show an increase of 9.1% over 1996 and they expect this figure to continue to grow.

LOOKING FORWARD. The BT 1997 catalog has been finalized and is with the printers. This completes the updating and rationalization of the BT products into proper collections and previews of the new ranges with leading customers have been very positive. This catalog has a retail priced option so that, for the first time, the private consumer will be able to easily view their full collection and to know the full retail price. The communication gap between BT as manufacturers and the ultimate consumer will have been closed. They are optimistic of this development combined with the encouraging recent sales trend and the general UK economic growth will result in an improving financial performance in the current quarter.

PRODUCTION CUT BACK IN LINE WITH OPEN ORDERS. Due to the slight reduction in the open order balance in the US during the first quarter, they took steps in production to reduce their labor costs to keep them in line with sales. At the end of the first quarter they have reduced their weekly average production hours by 16%. This was accomplished partly by a reduction in employee levels from 445 to 417 at the end of the quarter. This reduction of 28 employees or 6% was accomplished through attrition, not by layoffs. The balance of the labor reduction was through a reduction in overtime hours which was made possible through process improvements.

STAFFING. They are building up their management staff at Conso due to their past growth rate and in anticipation of this growth rate continuing. Jim Early joins them as Special Projects Manager and will head up expansion projects. Gerald Wallace is their new Capital Assets Manager and will take over their Purchasing function working closely with British Trimmings for worldwide sourcing. Finally, Bill Taylor has taken over production responsibilities at Union to allow Bill Stewart to spend more time at British Trimmings.

MATERIAL COSTS. They had two favorable reductions at the end of the last quarter of the prior year. Cotton went from $1.86 per pound to $1.77 per pound which is a 5% discount. This reduction, based on their monthly average of 61,000 pounds equates to a savings of $5,500 per month. They also received an 8% reduction in corrugated prices. Due to the various sizes of the boxes they use it is very difficult to calculate this annualized savings. The rest of their material costs were flat and they do not anticipate any increases at this time.

HANDWORK OPERATION IN MEXICO. This operation was also undergoing process improvements. Comparing first quarter of this fiscal year to last year, they produced 161,500 dozen this year compared to 154,000 dozen last year for an increase of 5%. At the same time, they had a 4% decrease in their level of employees. Here again, the reduction was achieved through attrition, not layoffs.

EFFORTS TO CUT BT MFG. COSTS. Charlie White, their industrial engineer, is at BT now working with the management team to implement additional process improvements over the next two months. Bill Stewart will be spending the first 6-9 months at BT to assist their management in continuing to lower their manufacturing costs and help implement additional Conso systems.

BUSINESS DEVELOPMENTS. They are in the midst of publishing their 1997 catalogs. Going to press now are 110,000 Conso catalogs, 50% of which are personalized for 15 of their major distributors. They are also publishing 50,000 issues of the British Trimmings catalog, 20% of which are personalized for 12 of the major distributors and 60,000 of the Claesson catalogs for decorative accessories, 45% of which are being personalized for 10 major distributors. They are also publishing in December 75,000 copies of their Volume Two of How to Use Decorative Trimmings in Home Decorating, this volume being nearly 3 times bigger than Volume One and eagerly awaited by customers. They are gearing up now for two of their major trade and exhibitions in January. At the first they will be introducing a new line of trim made from acrylic yarn. The second show is in Germany and is the world's largest textile show. For the first time Conso, British Trimmings, and Claesson will all be together in one major booth in one location at this show.

NEW PRODUCTS. They will have the Sarah Cooper collection new this year in the 1997 catalog, that is a leather look and cotton line which is unique for them and unique for the industry. They have been working on it with several furniture manufacturers for a couple of markets. They are excited about it and it has been very well received. Another new collection is the Cabaret which is a combination of yarns featuring primarily a chenille. It is a moderately priced line, also received very well at market. In the Conso catalog they are bringing in 4 more of British Trimmings' collections which they introduced this past year in the UK and the names are the Cambridge, Balmoral, Bloomsberg, and the Oxford. The changes in the UK in the catalog are fairly fundamental because they brought out their first catalog after the acquisition by Conso having to leave in a lot of products which didn't make entire sense in a collection format. So, they totally restructured their upholstery ranges which were previously known as the Spur collection. These have been divided into Oxford and Cambridge, the one essentially a matte on rayon look and the other one a shinier filament rayon look. They took the opportunity to bring the colors up to date, introduce some new products, and make the ranges far easier for customers to understand. They had a collection of odd-ball ranges which they lumped together under the heading of Classics. That's been taken apart and put together again and essentially has been split into the Balmoral collection which is a very high quality chenille-based range, and the Miller range. There are some minor changes and range extensions, but those are the four fundamental new collections and they are extremely optimistic about this.

INTERNATIONAL SALES. Sales were up nicely in all but one major geographic location. Overall, sales outside the US and UK increased to $1.9 million, a 17.5% increase over the same period last year. Western Hemisphere sales were up 30%, Pacific Rim sales were up 34.8%. Sales in the Middle East increased 31.2% while sales in continental Europe were down by 13.5%, primarily due to a large order that occurred in the prior year but did not recur in the current year.

CONSOLIDATED RESULTS. Consolidated net sales was $17 million for the quarter, ended relatively flat against the backdrop of an exceptional quarterly increase in the first quarter of the prior year, nearly 50% ahead of the average increase for the last couple of year. They are encouraged that sales so far in the second quarter through November 7th are up 7.7% overall as well as incoming orders and shipments in both the US and the UK, with US incoming orders up 7.3% and 7.1% respectively and the UK with incoming orders up 9.4% and shipments up 9.1%.

MARGINS. They are also pleased to report that the momentum created below the revenue line continues with a margin on sales for the quarter up to 39.8% from the prior year's 36.2% before the provision of $250,000 or 1.5% of sales which was recorded in the prior year's first quarter for the discontinuance of the embroidery operation. Their long-term goal for consolidated gross margin is 40%, so they came very close. Their long-term goals for gross margin by division would be 42% (Conso US) and 39% (BT). The increases in gross margin continued as a result of the price increases effected early in the calendar year, the effect of previous and continuing process improvements in production operations, and a 0.4% of sales improvement from a $60,000 immaterial difference in the manual calculation of purchase price variances at British Trimmings in the second half of fiscal 1996.

ACCOUNTING CHANGES. Certain of the prior year's amounts have been reclassified between cost of goods sold and SG&A costs to conform to the current quarter's presentation, since British Trimmings is now reporting in the full standard costing format used at Conso US.

EXPENSES. Distribution expenses remain relatively flat at 4.2% of sales while selling expenses increased to 12% of sales with the addition of certain product managers, marketing and other customer support since the first quarter last year which were related to the Claesson acquisition, workers supplies, and the introduction of the Wendy Cushing trimmings line. General and administrative expenses, on the other hand, decrease $82,000 as the company continued to monitor administrative expenses closely.

OPERATING INCOME. As a result of the improving margin and relatively flat SG&A costs, operating income increased approximately $800,000 from 12.2% of sales to 17% of sales. Interest expense declined significantly as cash flow improved with the company generating about $2 million more in cash flow in the current quarter than it generated in the prior year's quarter. This has resulted in an invested cash balance in the US of approximately the same amount and a reduction in interest expense.

CREDIT FACILITIES & USE OF CASH. The excess cash has not been sent to British Trimmings since British Trimmings has been encouraged to borrow their funds in UK pounds through the UK branch of Conso's lender as a natural hedge against currency fluctuations. The company has renegotiated its borrowing facilities and the new facility effective November 25th will result in an increase in the revolving loan from $10 million to $15 million and a redution in the interest rate down to around the 6.4% range for the US and 6.9% for the UK borrowings at current interest rates. The reduced rate will assist in the increase in interest expense they anticipate in connection with more borrowings with the building expansions. In connection with the refinancing, the $2 million of excess cash will be used to pay off the Conso US real estate term loan which has a fixed interest rate of 9%.

TAX RATE. The effective income tax rate edged up to 37% since there were no employee increases at the South Carolina location and the company was unable to record any additional Jobs Tax Credit. They had talked about a 33% rate and have talked specifically about Jobs Tax Credits because that is the biggest thing that can have an impact on the effective tax rate. They have been very strong in cautioning everyone that if they do in fact go flat in the personnel in South Carolina they are not going to be able to report those credits. They try to react as quickly as they can to any changes in their open order book or production demands and that's what they've done now. The credits aren't nearly as nice at this point as it is to not have to pay the additional wages if they don't need to. Right now, looking forward and considering that they will be adding personnel in calendar 1997. To be conservative, use a 37% tax rate for the balance of the fiscal year, although they hope to be qualifying for more tax credits in the third and fourth quarters.

NET INCOME. With the continued improvements in margins, tight cost controls, and the reduction in interest expense more than offsetting the increase in the effective tax rate, net income for the quarter ended up a healthy $377,000 or 27.7%. Accordingly they are pleased to report an increase in earnings per share of $0.23 compared to the prior year's quarter of $0.18 per share after the effect of both the 3-for-2 stock split declared in September of 1995 and 1996. Since June 29, 1996 and as a result of the increase in cash flow, their working capital has improved from $19.5 million to $20.7 million. Their current ratio has improved from 2.4 to 2.47. And their interest bearing debt position has improved from 31% of equity to 28% of equity.

They remain well positioned as they look forward to the future quarters. They are still comfortable with $1.00-$1.05 earnings estimate for the year.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.