Summary of CULP INC - Yahoo! Finance

Entry into a Material Definitive Agreement, Results of Operations and Financial Conditio

Item 1.01 - Entry into a Material Definitive Agreement

The Company has entered into a contract dated December 4, 2008 providing for the sale of its headquarters building in High Point, North Carolina to Chris Caffey, an individual residing in Greensboro, North Carolina for a purchase price of $4,000,000. The contract also contemplates that the Company would lease the building back from the purchaser for an initial term of three years, at a rental rate of $360,240 per year, plus approximately two-thirds of the building's operating costs. The contract is subject to the purchaser's ability to obtain financing and is subject to a due diligence period extending until January 9, 2009, during which the purchaser may inspect the premises, conduct appraisals and other examinations, and during which the purchaser may terminate the contract without penalty. The transaction is also subject to approval by the Company's lenders. The closing is anticipated to occur on or before January 30, 2009. The proceeds of the sale would be used by the Company to pay down the bank loan that is currently secured by the building, which has a balance of approximately $6.2 million. The remaining balance of the loan would become an unsecured term loan from the same bank lender, subject to a one percent increase in the interest rate on the loan. The loan would be due in one repayment in June 2010. In connection with this disposal, the company determined that its carrying value of their corporate headquarters building was more than its fair value. Consequently, the company recorded an impairment charge of $795,000 in restructuring expense in the 2009 Consolidated Statement of Loss.

Item 2.02 - Results of Operations and Financial Condition

On December 4, 2008, the Company issued a news release to announce its financial results for the second quarter ended November 2, 2008. The news release is attached hereto as Exhibit 99(a).

Also on December 4, 2008, the Company released a Financial Information Release containing additional financial information and disclosures about the Company's second quarter ended November 2, 2008. The Financial Information Release is attached hereto as Exhibit 99(b).

The news release and Financial Information Release contain disclosures about free cash flow, a non-GAAP performance measure, that management believes provides useful information to investors because it measures the Company's available cash flow for potential debt repayment, stock repurchases and additions to cash and cash equivalents. In addition, the news release and Financial Information Release contain proforma income statement information, which reconciles reported and projected income statement information with proforma results, which exclude restructuring and related charges. The Company has included this proforma information in order to show operational performance excluding the effects of restructuring and related charges. Management believes this presentation aids in the comparison of financial results among comparable financial periods. In addition, this information is used by management to make operational decisions about the Company's business, is used in certain financial covenants in the Company's loan agreements, and is used by the Company as a financial goal for purposes of determining management incentive bonuses.

Item 5.02 - Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

As part of the Company's profit improvement plan and its initiatives to reduce costs, the Company's board of directors and certain senior executives agreed to reduce their compensation. The board agreed that the cash fees paid to them would be reduced by 25%, from $32,500 to $24,375 per year. In addition, Robert G. Culp, III, Chairman, agreed to reduce his annual salary from $200,000 to $150,000. Franklin N. Saxon, President and CEO, agreed to reduce his salary from $300,000 to $225,000, and Kenneth R. Bowling, Chief Financial Officer, agreed to reduce his annual salary from $175,000 to $148,750. These changes were approved by the compensation committee and board of directors on December 4, 2008.

Item 8.01 - Other Events

The company expects to file its Form 10-Q for the quarter ended November 2, 2008, on or before December 12, 2008. The financial statements contained in that filing are expected to show that the company is not in compliance with the NYSE's continued listing requirements. Under the NYSE's current listing standards, the company is required to have market capitalization over a consecutive 30 trading-day period or shareholders' equity of more than $75 million to maintain compliance with continued listing standards.