UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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) January 11, 2007
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Culp, Inc.
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(Exact Name of Registrant as Specified in its Charter)
North Carolina 0-12781 56-1001967
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1823 Eastchester Drive
High Point, North Carolina 27265
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(Address of Principal Executive Offices)
(Zip Code)
(336) 889-5161
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former name or address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Forward-Looking Statements
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 or results or otherwise
are not statements of historical fact. Such statements are often but not always
characterized by qualifying words such as "anticipate", expect," "believe,"
"estimate," "plan" and "project" and their derivatives, and include but are not
limited to statements about the company's future operations, production levels,
sales, SG&A or other expenses, margins, gross profit, operating income, earnings
or other performance measures. 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. Changes in
consumer tastes or preferences toward products not produced or marketed by the
company could erode demand for the company's products. The company's level of
success in integrating the acquisition described herein and in capturing and
retaining sales to customers related to the acquisition will affect the
company's ability to meet its sales goals. In addition, 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. Also,
economic and political instability in international areas could affect the
company's operations or sources of goods in those areas, as well as demand for
the company's products in international markets. 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, including the "Risk Factors" section in the
company's most recent annual report on form 10-K.
Item 1.01. Entry into a Material Definitive Agreement.
Culp, Inc. (the "Company") has entered into an Asset Purchase Agreement
(the "Agreement") dated January 11, 2007 for the purchase of certain assets from
International Textile Group, Inc. ("ITG") related to the mattress fabrics
product line of ITG's Burlington House division. ITG has announced that it is
discontinuing its U.S. mattress fabrics product line, and the Company has agreed
to purchase ITG's mattress fabrics inventory, along with certain proprietary
rights (patterns, copyrights, artwork and the like) and other records that
relate to ITG's mattress fabrics product line. The Company will not purchase any
accounts receivable, property, plant or equipment from ITG pursuant to the
Agreement, and will not assume any of ITG's liabilities other than certain open
purchase orders for finished goods. The Company anticipates that it will hire
only a limited number of ITG's employees related to ITG's mattress fabrics
product line after the transaction is completed.
The purchase price under the Agreement is $8.3 million, subject to
adjustment for a closing date inventory, to be paid with $2.5 million in cash
from an additional term loan at closing, and the remainder to be paid through
the issuance of approximately 880,000 shares of the Company's common stock (the
"Shares"), valued at $6.60 per share. Under the Agreement the Company and ITG
have agreed that, upon the closing of the asset purchase, they will enter into a
Registration Rights and Shareholder Agreement (the "Registration Agreement"),
pursuant to which ITG may demand that the Company register the Shares with the
Securities and Exchange Commission, which would allow the Shares to be sold to
the public after the registration statement becomes effective. The Registration
Agreement will contain provisions pursuant to which ITG will agree not to
purchase additional Company shares or take certain other actions to influence
control of the Company, and will agree to vote the Shares in accordance with the
recommendations of the Company's board of directors.
The Agreement provides that ITG will provide certain transition
services to the Company and will manufacture goods for the Company for a limited
period of time (expected to be approximately 120 days) after closing to support
the Company's efforts to transition the former ITG mattress fabrics products
into the Company's operations.
ITG has also agreed that it will not compete with the Company in the
mattress fabrics business for a period of four years, except for mattress
fabrics production in China for final consumption in China (meaning the mattress
fabric and the mattress on which it is used is sold only in China).
The Company's press release announcing the execution of the Agreement
is attached hereto as Exhibit 99.1. A copy of the Agreement is attached hereto
as Exhibit 10.1, and the description of the terms of the Agreement contained
herein is qualified in its entirety by reference to the full text of the
Agreement as set forth in Exhibit 10.1 hereto.
Item 3.02. Unregistered Sales of Equity Securities.
The Company has agreed to issue shares of its common stock (the "Shares")
to International Textile Group, Inc. pursuant to an Asset Purchase Agreement
(the "Agreement") dated January 11, 2007, as disclosed under item 1.01 above.
The Shares will be sold in partial payment for the "Purchased Assets" as defined
in the Agreement (principally inventory and proprietary rights). The number of
Shares to be issued under the Agreement is the number of Shares necessary to
equal $5.8 million at a price of $6.60 per share, subject to adjustment pursuant
to a closing date inventory. The Shares will be issued at the time of the
closing of the transaction contemplated by the Agreement, or as soon thereafter
as the Purchase Price under the Agreement is finalized. The closing of the
Agreement is expected to occur before the end of the Company's third fiscal
quarter, which ends on January 28, 2007. The Shares will be sold pursuant to the
exemption from registration provided by Section 4(2) of the Securities Act of
1933 (the "Act") and Rule 506 thereunder. The Shares are being sold to a single
"accredited investor" as defined in Regulation D under the Act.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit 10.1 - Asset Purchase Agreement between Culp, Inc. and
International Textile Group, Inc. dated as of January 11, 2007
Exhibit 99.1 - Press Release dated January 11, 2007
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.
Date: January 11, 2007
Culp, Inc.
By: /s/ Kenneth R. Bowling
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Kenneth R. Bowling
Vice President - Finance, Treasurer
EXHIBIT INDEX
Exhibit Number Exhibit
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10.1 Asset Purchase Agreement between Culp, Inc. and
International Textile Group, Inc. dated as of January 11,
2007
99.1 Press Release dated January 11, 2007