2 unchanged sentences
Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30.
−Removed: The nine months ended January 26, 2025, and January 28, 2024, both represent 39-week periods.
+Added: The company's three months ended August 3, 2025, and July 28, 2024, represent 14-week and 13-week periods, respectively.
+Added: We refer to the three months ended August 3, 2025 as the "first quarter" and the three months ended July 28, 2024 as the "comparable quarter".
Our operations are classified into two business segments:
−Removed: mattress fabrics and upholstery fabrics.
−Removed: Mattress Fabrics
−Removed: The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers.
+Added: bedding (formerly known as mattress fabrics) and upholstery (formerly known as upholstery fabrics).
+Added: The bedding segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers.
Currently, we have a mattress fabrics manufacturing operation located in Stokesdale, North Carolina, and a sewn mattress cover operation located in Ouanaminthe, Haiti.
−Removed: On April 29, 2024 (the first quarter of fiscal 2025), our board of directors made a decision to (1) consolidate the company's North American mattress fabrics operations, including a gradual discontinuation of operations and sale of the company's manufacturing facility located in Quebec, Canada;
−Removed: (2) move a portion of the knitting and finishing capacity from the company's manufacturing facility located in Quebec, Canada, to the company's manufacturing facility located in Stokesdale, North Carolina;
+Added: On April 29, 2024 (the first quarter of fiscal 2025), our board of directors made a decision to:
+Added: (1) consolidate the company's North American mattress fabrics operations, including the closure and sale of the company's manufacturing facility and related land ("collectively referred to as the "Property") located in Quebec, Canada;
+Added: (2) move a portion of the knitting and finishing capacity from the facility located in Quebec, Canada, to the company's manufacturing facility located in Stokesdale, North Carolina;
(3) transition the mattress fabrics segment's weaving operation to a strategic sourcing model through the company's long standing supply partners;
−Removed: and (4) consolidate the company's sewn mattress cover operation located in Ouanaminthe, Haiti, from two leased facilities into one building and reduce other operating expenses at this location;
+Added: (4) consolidate the company's sewn mattress cover operation located in Ouanaminthe, Haiti, from two leased facilities into one building and reduce other operating expenses at this location;
and (5) reduce unallocated corporate expenses and shared service expenses.
−Removed: See Note 10 of the consolidated financial statements for further details regarding our restructuring activities.
−Removed: Upholstery Fabrics
−Removed: The upholstery fabrics segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers.
−Removed: We have upholstery fabric operations located in Shanghai, China, and Burlington, North Carolina.
−Removed: During the fourth quarter of fiscal 2024, we established a wholly owned subsidiary, Culp Fabrics Vietnam Company Ltd., with an administrative office located in Ho Chi Minh City, Vietnam, for the purpose of enhancing our strategic sourcing capabilities and to further diversify our supply chain in Asia.
−Removed: Additionally, Read Window Products, LLC (“Read”), a wholly owned subsidiary with operations located in Knoxville, Tennessee, and Burlington, North Carolina (established during the first quarter of fiscal 2025 within an existing upholstery fabrics facility), provides window treatments and sourcing of upholstery fabrics and other products, as well as related measuring and installation services, to customers in the hospitality and commercial markets.
+Added: See Note 10 of the consolidated financial statements for further details regarding this restructuring activity.
+Added: The upholstery segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers.
+Added: Currently, we have upholstery fabric operations located in Shanghai, China, Burlington, North Carolina, and Vietnam.
+Added: Also, Read Window Products, LLC (“Read”), is a wholly owned subsidiary that operates a leased facility in Knoxville, Tennessee, which provides window treatments and sourcing of upholstery fabrics and other products, as well as related measuring and installation services, to customers in the hospitality and commercial markets.
Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows.
+Added: On April 24, 2025 (the fourth quarter of fiscal 2025), the company announced a strategic transformation of its operating model that will combine certain activities within the bedding and upholstery business segments and create one integrated Culp-branded business.
+Added: As part of this strategic transformation, we will close our leased facilities operated by our upholstery segment located in Burlington, North Carolina and Knoxville, Tennessee and will transition their production and distribution activities to a shared management model within our owned facility located in Stokesdale, North Carolina, which has historically been solely operated by our bedding segment.
Executive Summary
−Removed: We evaluate the operating performance of our business segments based upon (loss) income from operations before certain unallocated corporate expenses and other items that are not expected to occur on a regular basis.
−Removed: Cost of sales for each business segment includes costs to develop, manufacture, and/or source our products, including costs such as raw material and finished good purchases, direct and indirect labor, overhead, and incoming freight charges.
−Removed: Unallocated corporate expenses primarily represent compensation and benefits for certain executive officers and their support staff, all costs associated with being a public company, amortization of intangible assets, and other miscellaneous expenses.
−Removed: Results of Operations
+Added: Consolidated Results of Operations
Three Months Ended
(dollars in thousands)
−Removed: Selling, general, and administrative expenses
−Removed: Restructuring expense (credit)
−Removed: Loss from operations
−Removed: Operating margin
−Removed: Loss before income taxes
−Removed: Income tax expense
−Removed: Nine Months Ended
−Removed: (dollars in thousands)
+Added: Gross profit margin
Selling, general, and administrative expenses
−Removed: Restructuring expense
−Removed: Loss from operations
+Added: Restructuring credit (expense )
+Added: Income (loss) from operations
Operating margin
−Removed: Loss before income taxes
+Added: Income (loss) before income taxes
Income tax expense
−Removed: Overall, our consolidated net sales for the third quarter of fiscal 2025 decreased by 13.5% compared with the same period a year ago, with mattress fabrics sales decreasing 4.6% and upholstery fabrics sales decreasing 22.3%.
−Removed: Our consolidated net sales for the first nine months of fiscal 2025 decreased by 6.5% compared with the same period a year ago, with mattress fabrics sales decreasing 4.2% and upholstery fabrics sales decreasing 8.8%.
−Removed: We continue to see sales in key areas of our business impacted by macroeconomic and market conditions outside of our control.
−Removed: The year-over-year decrease in net sales for our mattress fabrics segment for both the third quarter and the first nine months of fiscal 2025 was driven primarily by continuing demand weakness in the domestic bedding industry and was also impacted by fewer shipping days due to weather-related disruptions.
−Removed: The year-over-year decrease in net sales for our upholstery fabrics segment for both the third quarter and the first nine months of fiscal 2025 was driven primarily by persistent softness in the home furnishings industry.
−Removed: Sales for the third quarter also reflect a related order reduction from a significant customer to better align its inventory with the low demand environment, as well as fewer shipping days due to weather-related disruptions.
−Removed: Despite what remains a challenging landscape across the industries in which we compete, we have made significant investments and enhancements to our production platform and go-to-market strategies that we believe will generate opportunities to increase sales and market share when overall business conditions ultimately improve.
+Added: Overall, our consolidated net sales for the first quarter of fiscal 2026 decreased by 10.3% compared with the same period a year ago, with bedding sales remaining flat and upholstery sales decreasing 20.4%.
+Added: Sales in both of our business segments continue to be limited by overall softness across the home furnishings industry driven by macroeconomic factors outside of our control.
+Added: The prolonged period of low demand in the mattress fabric market continued through the first quarter of fiscal 2026, impacting performance within our bedding segment and resulting in sales generally in line with the prior year period despite the first quarter having one additional week compared to the prior year period.
+Added: Nonetheless, we were able to achieve growth in our knit fabric product lines and continued to gain additional market share among key mattress fabric customers during the quarter.
+Added: Net sales in our upholstery segment decreased year-over-year due to continued weakness in the residential furniture market coupled with tariff-related challenges.
+Added: The record-high tariffs on China-produced goods in the fourth quarter of fiscal 2025 essentially shut down residential upholstery order flow for approximately five weeks, and that disruption had a significant delayed impact on sales in the first quarter of fiscal 2026.
+Added: The year-over-year decrease in sales in our upholstery segment continued to be impacted by an uneven comparison driven by abnormally heavy purchases by a major residential fabric customer in the first half of fiscal 2025, which is a dynamic that we expect to normalize in ensuing periods.
+Added: Although the markets in which we operate continue to face challenges, our investments and efforts to build-out and refine a production platform with a strong United States base supplemented by nearshore and offshore foreign locations provides our customers with increasingly valuable optionality for their supply chains and go-to-market strategies in the currently fluid trade and regulatory environments.
+Added: As such, we believe that we are positioned to both continue to win market share now and increase sales when business conditions improve.
See the Segment Analysis section below for further details.
−Removed: Loss Before Income Taxes
−Removed: Overall, our loss before income taxes for the third quarter of fiscal 2025 was $(3.7) million, compared with loss before income taxes of $(2.2) million for the prior-year period, while our loss before income taxes for the first nine months of fiscal 2025 was $(16.4) million, compared with loss before income taxes of $(6.7) million for the prior-year period.
−Removed: Loss before income taxes for both the third quarter and the first nine months of fiscal 2025, as compared to the prior-year periods, was negatively affected by lower sales and by manufacturing inefficiencies primarily related to the significant restructuring activity underway that mostly related to the mattress fabrics segment, along with a restructuring and restructuring related charge of $2.3 million during the third quarter of fiscal 2025, as compared to a restructuring and restructuring related credit of $(111,000) during the third quarter of fiscal 2024, and a restructuring and restructuring related charge of $7.8 million during the first nine months of fiscal 2025, as compared to a restructuring related charge of $472,000 during the first nine months of fiscal 2024.
+Added: Gross profit for the first quarter of fiscal 2026 was $7.2 million, an increase of $2.1 million or 42.4%, compared with gross profit of $5.1 million for the first quarter of fiscal 2025, with bedding gross profit increasing $3.3 million and upholstery gross profit decreasing $1.2 million.
+Added: The significant improvement in consolidated gross profit was driven by cost reductions and efficiency gains in our bedding segment resulting from our fiscal 2025 restructuring initiatives, and was partly offset by lower upholstery sales.
See the Segment Analysis section below for further details.
−Removed: We recorded income tax expense of $635,000, or (3.9%) of loss before income taxes, for the nine-month period ended January 26, 2025, compared with income tax expense of $2.2 million, or (33.4%) of loss before income taxes, for the nine-month period ended January 28, 2024.
−Removed: Our consolidated effective income tax rates for the first nine months of fiscal 2025 and 2024 were both adversely affected by the mix of earnings between our U.S.
−Removed: operations and foreign subsidiaries, as our taxable income stems mostly from our operations located in China, which has a higher income tax rate than the U.S.
−Removed: In addition, during the first nine months of fiscal 2025 and the first nine months of 2024, we incurred pre-tax losses associated with our U.S.
−Removed: operations for which an income tax benefit was not recorded due to a full valuation allowance applied against our U.S.
−Removed: net deferred income tax assets.
−Removed: The income tax charge associated with the full valuation allowance applied against our U.S.
−Removed: net deferred income tax assets was higher during the first nine months of fiscal 2025 compared with the first nine months of fiscal 2024, as our $(16.8) million U.S.
−Removed: pre-tax loss incurred during the first nine months of fiscal 2025 was greater than the $(11.3) million U.S.
−Removed: pre-tax loss incurred during the first nine months of fiscal 2024.
−Removed: During the first nine months of fiscal 2025, we incurred a greater consolidated pre-tax loss totaling $(16.4) million compared with $(6.7) million during the first nine months of fiscal 2024.
−Removed: As a result, the principal differences between income tax expense at the U.S.
−Removed: federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during the first nine months of fiscal 2024, as compared with the first nine months of fiscal 2025.
+Added: Income (Loss) Before Income Taxes
+Added: Overall, our income before income taxes for the first quarter of fiscal 2026 was $1.1 million, compared with loss before income taxes of $(7.0) million for the same period a year ago.
+Added: First quarter operating performance, relative to performance in the prior-year period, benefited from a rationalized and more efficient manufacturing platform in the bedding segment following the extensive restructuring initiatives completed last year, which included, among other actions, the consolidation of operations in Canada into our U.S.
+Added: manufacturing base in North Carolina.
+Added: Operating performance for the quarter also benefited from an approximately $3.5 million restructuring credit associated with a gain on the sale of our manufacturing facility in Canada that was slightly offset by other restructuring and related expenses.
+Added: Excluding restructuring and related credits and expenses, operating performance improved significantly year-over-year as a result of the more streamlined bedding segment platform, although this improvement was partially offset by comparatively lower gross profit in our upholstery segment.
+Added: We have several initiatives underway related to the integration of our two former divisions that should strengthen our operating profile as we progress through fiscal 2026.
+Added: The anticipated cost and efficiency benefits resulting from the transition of upholstery operations at our leased facility in Burlington, North Carolina, to a shared management model within our owned U.S.
+Added: location should begin to impact our results during our second quarter.
+Added: Moreover, we recently initiated a similar transition of operations in our Read Window business at a leased facility in Tennessee that should begin to positively impact profitability in the third quarter.
+Added: Once fully implemented, we expect these consolidations to significantly reduce our operating costs.
+Added: We recorded income tax expense of $1.4 million, or 120.3% of income before income taxes, for the first quarter, compared with income tax expense of $240,000 or (3.4%) of loss before income taxes, for the comparable period.
+Added: Our consolidated effective income tax rates were adversely affected by the mix of earnings between our U.S.
+Added: operations and foreign subsidiaries, as our taxable income stemmed from our operations located in China and a gain from the sale of Property located in Canada during the first quarter of fiscal 2026 (see Notes 8 and 10 of the consolidated financial statements for further details), which jurisdictions have higher income tax rates than the U.S.
+Added: In addition, we applied a full valuation allowance against our U.S.
+Added: deferred income tax assets during the first quarters of fiscal 2026 and 2025, respectively.
+Added: Consequently, an income tax benefit was not recognized for pre-tax losses associated with our U.S.
+Added: operations totaling ($3.3) million and ($7.0) million that were incurred during the first quarters of fiscal 2026 and 2025, respectively.
+Added: Lastly, our consolidated effective income tax rates were also adversely affected by pre-tax losses associated with our Haitian operations, which are not subject to income tax.
+Added: Our Haitian operations are located in an economic zone that permits a 0% income tax rate for the first fifteen years of operations, for which we have seven years remaining.
+Added: As a result of the 0% income tax rate , an income tax benefit was not recognized for the pre-tax losses associated with our Haitian operations totaling $(362,000) and $(633,000) that were incurred during the first quarters of fiscal 2026 and 2025, respectively.
+Added: During the first quarter of fiscal 2026, we earned a lower consolidated pre-tax income totaling $1.1 million, compared with a significantly higher consolidated pre-tax loss of $(7.0) million.
+Added: As a result, we reported a positive effective income tax rate during the first quarter of fiscal 2026, compared with a negative effective income tax rate during the first quarter of fiscal 2025.
+Added: Accordingly, the principal differences between our income tax expense at the U.S.
+Added: Federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during the first quarter of fiscal 2026, compared with the first quarter of fiscal 2025.
Refer to Note 15 of the consolidated financial statements for further details regarding our provision for income taxes.
−Removed: As of January 26, 2025, our cash and cash equivalents (collectively, “cash”) totaled $5.3 million, which represents a decrease of $4.7 million compared with cash of $10.0 million as of April 28, 2024.
−Removed: This decrease was primarily attributable to (i) net cash used in operating activities totaling $9.4 million, and (ii) capital expenditures totaling $2.4 million, partially offset by (iii) net borrowings from our lines of credit totaling $5.4 million and (iv) proceeds from the sale of equipment of $1.5 million.
−Removed: Our net cash used in operating activities was $9.4 million during the first nine months of fiscal 2025, an increase of $3.4 million compared with net cash used in operating activities of $6.0 million during the first nine months of fiscal 2024.
−Removed: This trend mostly reflects (i) a significant decrease in cash earnings, (ii) an increase in inventory purchases to maintain an appropriate level during the company's restructuring activities, as described below in the section titled “—Segment Analysis—Mattress Fabrics Segment—Restructuring Activities,” and (iii) an increase in accounts receivable primarily due to longer payment trends related to a higher sales mix with customers with longer credit terms, partially offset by higher accounts payable due to an increase in inventory purchases from significant vendors who extended their payment terms during the first nine months of fiscal 2025 compared with the first nine months fiscal 2024.
−Removed: As of January 26, 2025, we had outstanding borrowings totaling $5.4 million under a line of credit agreement associated with our operations located in China.
+Added: As of August 3, 2025, our cash and cash equivalents (collectively, “cash”) totaled $11.1 million, which represents an increase of $5.5 million compared with cash of $5.6 million as of April 27, 2025.
+Added: This increase was due mostly to (i) net borrowings on our lines of credit of $5.3 million, an increase of $1.3 million compared to the comparable quarter, and (ii) proceeds from the sale of property, plant, and equipment totaling $966,000, partially offset by net cash used in operating activities of $(695,000).
+Added: Our net cash used in operating activities of $(695,000) increased during the first quarter of fiscal 2026, compared with net cash used in operating activities of $(206,000) during the first quarter of fiscal 2025.
+Added: This trend mostly reflects:
+Added: (i) an increase in inventory related to strategically sourcing certain fabrics that have longer lead times to acquire, rising prices, and tariffs imposed
+Added: trade policy;
+Added: (ii) a decrease in accounts payable due to a decrease in consumer demand along with timing of vendor payments as the first quarter of fiscal 2026 represented a 14-week period compared with a 13-week period for the first quarter of fiscal 2025;
+Added: partially offset by (i) a decrease in cash losses and (ii) a decrease in accounts receivable due to a decrease in net sales for the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025 that was partially offset by longer payment trends during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025.
+Added: We had outstanding borrowings totaling $18.1 million under our line of credit agreements, of which $11.1 million and $7.0 million were reported in line of credit-current and line of credit-long term, respectively, on the August 3, 2025, Consolidated Balance Sheet.
Segment Analysis
−Removed: Mattress Fabrics Segment
+Added: Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer ("CEO"), who regularly reviews the financial results of the company on a consolidated and business segment basis for the purpose of evaluating financial and operating performance and allocation of resources to the individual segments noted above.
+Added: Beginning in the first quarter of fiscal 2026, the CODM decided to use net sales and gross profit excluding items that are not expected to occur on a regular basis (i.e.
+Added: restructuring activities) as the primary measure of segment profit or loss.
+Added: Previously, segment performance was primarily evaluated based on net sales and income (loss) from operations before unallocated corporate expenses and other items that are not expected to occur on a regular basis (i.e., restructuring activities).
+Added: This change was made to align with internal management reporting and the decision-making processes affected by the strategic transformation of the company's operating model announced on April 24, 2025, which combined certain activities within the bedding and upholstery business segments and created one integrated Culp-branded business.
+Added: The CODM evaluates segment performance based on (i) net sales, (ii) cost of sales, (iii) gross profit excluding items that are not expected to occur on a regular basis (i.e.
+Added: restructuring related charges and credits), (iv) assets used in operations, which generally include accounts receivable, inventory, property, plant, and equipment, right of use assets, and assets held for sale;
+Added: and (v) capital spending.
+Added: Cost of sales for each segment includes costs to develop, manufacture, or source our products, including costs such as raw material and finished goods purchases, direct and indirect labor, overhead, and incoming freight charges.
+Added: Intangible assets are not included in segment assets, as these assets are not used by the CODM to evaluate the respective segment’s operating performance and allocate resources to the individual segments.
+Added: Bedding Segment
Three Months Ended
(dollars in thousands)
−Removed: Gross profit margin
−Removed: Selling, general, and administrative expenses
−Removed: Restructuring expense
−Removed: Loss from operations
−Removed: Operating margin
−Removed: Nine Months Ended
−Removed: (dollars in thousands)
+Added: Gross profit (loss)
Gross profit margin
−Removed: Selling, general, and administrative expenses
−Removed: Restructuring expense
−Removed: Loss from operations
−Removed: Operating margin
−Removed: Mattress fabrics sales decreased 4.6% in the third quarter of fiscal 2025 compared to the prior-year period.
−Removed: Mattress fabrics sales decreased 4.2% in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024.
−Removed: The sales declines in the mattress fabrics segment stem primarily from what remains a muted demand environment across the domestic mattress market driven by macroeconomic uncertainty among consumers and its impacts on residential real estate markets and discretionary spending.
−Removed: However, during the quarter we continued to execute on a variety of significant measures designed to align our manufacturing costs and capacity with the slower buying activity evident across the mattress industry.
−Removed: As planned, we completed the vast majority of the restructuring initiatives in our mattress fabrics segment announced earlier in fiscal 2025, including the closure of our Canadian manufacturing operations and related consolidation of equipment and resources.
−Removed: As a result, we believe we are now better positioned to service customers in the U.S.
−Removed: market through our vertical, textiles-forward facility in North Carolina.
−Removed: See “—Restructuring Activities” below for further details.
−Removed: Moving forward, we expect the current general economic and consumer uncertainty to present challenges, but we believe our execution on plans to restructure our platform and refine our go-to-market strategies should position our mattress fabrics segment for sales momentum and market share gains when the macroeconomic fundamentals begin to shift and provide the necessary foundation for a recovery cycle in the mattress industry.
−Removed: The potential ongoing geopolitical disruptions related to conflicts in Ukraine and the Middle East, as well as the potential impact of future tariffs, depend on factors beyond our control and we cannot reasonably estimate the impact of these items on our mattress fabrics segment.
−Removed: Moreover, we note that if these situations worsen and shipping disruptions occur or new tariffs are imposed on our products, the impact on our operations and/or on our suppliers, customers, consumers, and the global economy could adversely affect our financial performance.
−Removed: Gross Profit, Selling, General & Administrative Expenses, and Loss from Operations
−Removed: Loss from operations was $433,000 for the third quarter of fiscal 2025, compared to loss from operations of $1.6 million for the third quarter of fiscal 2024.
−Removed: Loss from operations was $5.0 million for the first nine months of fiscal 2025, compared to loss from operations of $3.9 million for the first nine months of fiscal 2024.
−Removed: Loss from operations for both the third quarter and the first nine months of fiscal 2025, as compared to the prior-year periods, was impacted by lower sales and manufacturing inefficiencies primarily related to the above-referenced restructuring activities.
−Removed: However, with nearly all of the restructuring initiatives now completed, we are beginning to see the cost savings and efficiency
−Removed: improvements anticipated from those initiatives positively impact our results.
−Removed: See “—Restructuring Activities” below for further details.
−Removed: Looking ahead, we enter our fourth quarter a more streamlined business, with greater operating efficiencies, a lower fixed cost and SG&A expense structure, and an agile, global production platform with domestic, nearshore and offshore locations.
−Removed: Moreover, we continue to explore the viability of additional strategic actions to enhance profitability under the current soft market conditions and better leverage any tailwinds flowing from an eventual recovery.
−Removed: Restructuring Activities
−Removed: On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to (1) consolidate the company's North American mattress fabrics operations, including a gradual discontinuation of operations and sale of the company's manufacturing facility located in Quebec, Canada;
−Removed: (2) move a portion of the knitting and finishing capacity from the company's manufacturing facility located in Quebec, Canada, to the company's manufacturing facility located in Stokesdale, North Carolina;
−Removed: (3) transition the mattress fabrics segment's weaving operation to a strategic sourcing model through the company's long standing supply partners;
−Removed: (4) consolidate the company's sewn mattress cover operation located in Ouanaminthe, Haiti, from two leased facilities into one building and reduce other operating expenses at this location;
−Removed: and (5) reduce unallocated corporate expenses and shared service expenses.
−Removed: As of the end of the third quarter of fiscal 2025, production at our facility located in Quebec, Canada has been discontinued and we have entered into a conditional contract for the sale of the facility, subject to due diligence and other conditions.
−Removed: The consolidation of our sewn mattress cover operations located in Haiti was completed during the first quarter of fiscal 2025.
−Removed: For fiscal 2025, these actions are expected to result in restructuring and restructuring related charges of approximately $8.5 million, of which approximately $5.3 million is expected to be cash expenditures.
−Removed: The $8.5 million of estimated restructuring and restructuring related charges represents approximately $8.3 million and $155,000 associated with the mattress fabrics and upholstery fabrics segments, respectively.
−Removed: The $8.5 million of estimated restructuring and restructuring related charges associated with our mattress fabrics segment represents (i) associated costs of $3.3 million mostly related to relocating equipment from our facility in Quebec, Canada to our facility in Stokesdale, North Carolina, (ii) additional depreciation expense related to the shortening of useful lives of equipment associated with the gradual discontinuance of our operations located in Canada noted above totaling $1.3 million, (iii) employee termination benefits of $1.4 million, (iv) $1.5 million related to losses on disposal and valuation of inventory, and (v) lease termination costs of $849,000, partially offset by net gains on the disposal of equipment totaling $42,000.
−Removed: These restructuring and restructuring related charges exclude any expected gain from the sale of the Canadian facility, which is expected to ultimately reduce the amount of the restructuring charges incurred.
−Removed: Based on changes in business and current unfavorable economic conditions related to the home furnishings and bedding industries, it is possible that the above estimates provided by management to determine restructuring and restructuring related charges incurred during fiscal 2025 could be materially different from our actual results, and therefore could adversely affect the success of this restructuring plan.
−Removed: The above-referenced conditional agreement for the sale of our Canadian facility includes a purchase price of $15.5 million CAD ($10.8 million USD as of January 26, 2025) contingent on the satisfaction of certain due diligence and closing conditions.
−Removed: Assuming the completion of the transaction, the company currently expects the proceeds from the sale (net of all taxes and commissions) to exceed the amount of cash restructuring charges incurred.
−Removed: The following summarizes the restructuring and restructuring related charges for the mattress fabrics segment for the three-month and nine-month periods ended January 26, 2025:
−Removed: Three Months Ended
−Removed: Nine Months Ended
−Removed: (dollars in thousands)
−Removed: January 26, 2025
−Removed: January 26, 2025
−Removed: Additional depreciation expense for shortened useful lives of equipment
−Removed: Employee termination benefits
−Removed: Lease termination costs
−Removed: Other associated costs
−Removed: Loss on disposal, valuation, and markdowns of inventory
−Removed: Net gain on disposal of equipment
−Removed: Restructuring expense and restructuring related charges (1) (2)
−Removed: (1) Of the total $2.3 million restructuring and restructuring related charges, $1.8 million and $624,000 were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three-month period ended January 26, 2025.
−Removed: (2) Of the total $7.7 million restructuring and restructuring related charges, $6.2 million and $1.5 million were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the nine-month period ended January 26, 2025.
−Removed: Refer to Note 10 of the consolidated financial statements for further details.
+Added: Net sales were flat during the first quarter of fiscal 2026 compared to the prior-year period.
+Added: During the quarter, our bedding segment’s markets were affected by low consumer demand primarily attributable to a macroeconomic environment that limited discretionary spending and housing activity, leading to continued softness in the domestic mattress sector.
+Added: The current tariff environment and related cost uncertainty and price fluidity also impacted sales activity during the quarter.
+Added: Despite these overall market conditions, we saw improvement in some areas such as knit fabrics during the quarter, and we continued to win programs with key customers.
+Added: Looking ahead, we are focused on growing placements and market share to increase revenue, but expect continued sales pressure due to the current macroeconomic environment.
+Added: We believe that significant future sales growth is dependent upon a broad industry
+Added: recovery cycle along with improved economic and global trade stability.
+Added: Moreover, ongoing geopolitical risks, including the conflicts in Ukraine and the Middle East, could also disrupt global markets and affect our sales.
+Added: Gross Profit (Loss)
+Added: Gross profit was $2.9 million for the first quarter of fiscal 2026, compared with gross loss of $(326,000) for the first quarter of fiscal 2025.
+Added: The cost reductions and efficiency improvements generated by restructuring initiatives in our bedding segment drove the strong turnaround in gross profit compared to the loss in the comparable quarter.
+Added: With the restructuring now fully completed and price adjustments taking effect in the second quarter of fiscal 2026, we anticipate continued profitability improvement and potential future gains supported by our segment integration initiatives and resulting shared management model.
Segment assets
4 unchanged sentences
(dollars in thousands)
−Removed: January 26, 2025
−Removed: January 28, 2024
+Added: August 3, 2025
+Added: July 28, 2024
April 27, 2025
3 unchanged sentences
Assets held for sale
+Added: Total Segment Assets
Refer to Note 14 of the consolidated financial statements for disclosures regarding determination of our segment assets.
Accounts Receivable
−Removed: As of January 26, 2025, accounts receivable increased by $144,000, or 1.3%, compared with January 28, 2024.
−Removed: This increase in accounts receivable is mostly due to longer payment trends during the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, as we experienced a higher sales mix with customers with longer credit terms.
−Removed: Accordingly, days’ sales outstanding increased to 37 days for the third quarter of fiscal 2025, as compared to 35 days for the third quarter of fiscal 2024.
−Removed: As of January 26, 2025, accounts receivable increased by $1.6 million, or 16.0%, compared with April 28, 2024.
−Removed: This trend reflects an increase in net sales for the the third quarter of fiscal 2025 compared with the fourth quarter of fiscal 2024.
−Removed: Net sales for the third quarter were $28.6 million, an increase of $2.9 million, or 11.2%, compared with net sales of $25.8 million during the fourth quarter of fiscal 2024.
−Removed: In addition, the increase in accounts receivable was due to longer payment trends during the third quarter of fiscal 2025 compared with the fourth of fiscal 2024, as we experienced a higher sales mix with customers with longer credit terms.
−Removed: Accordingly, days’ sales outstanding increased to 37 days for the third quarter of fiscal 2025, as compared to 35 days for the fourth quarter of fiscal 2024.
−Removed: As of January 26, 2025, inventory increased by $3.5 million, or 12.4%, compared with January 28, 2024.
−Removed: In connection with the restructuring activity described above in “Restructuring Activities,” this trend represents an increase in finished goods inventory to accommodate customers while the weaving operation was transitioned to a strategic sourcing model and knitting and finishing capacity was relocated from the manufacturing facility in Quebec, Canada, to our facility in Stokesdale, North Carolina.
−Removed: This increase in finished goods inventory was partially offset by lower raw material purchases related to the gradual discontinuation of operations at the company's manufacturing facility located in Quebec, Canada, as described above in “Restructuring Activities”.
−Removed: As of January 26, 2025, inventory increased by $3.7 million, or 13.4%, compared with April 28, 2024.
−Removed: This trend reflects the effect of the restructuring activity described in the preceding paragraph.
−Removed: In addition, the increase in inventory represents an increase in net sales of $2.9 million, or 11.2%, during the third quarter of fiscal 2025, as compared with the fourth quarter of fiscal 2024.
−Removed: Inventory turns were 3.4 for the third quarter of fiscal 2025, as compared with 4.0 for the third quarter of fiscal 2024 and 3.6 for the fourth quarter of fiscal 2024.
+Added: As of August 3, 2025, accounts receivable slightly increased by $122,000, or 1.2%, compared with July 28, 2024.
+Added: This slight increase reflects longer payment trends during the first quarter of fiscal 2026, as a significant customer utilized more cash discounts during the first quarter of fiscal 2025 and such utilization of cash discounts did not recur during fiscal 2026.
+Added: Accordingly, days’ sales outstanding increased to 36 days for the first quarter of fiscal 2026, from 33 days for the first quarter of fiscal 2025.
+Added: As of August 3, 2025, accounts receivable decreased by $360,000, or 3.4%, compared with April 27, 2025.
+Added: This trend reflects a decrease in net sales for the first quarter of fiscal 2026 compared with the fourth quarter of fiscal 2025.
+Added: Net sales of $28.0 million during the first quarter of fiscal 2026, which were based on a 14-week period, were lower based on a weekly average, as compared with net sales of $27.1 million during the fourth quarter of fiscal 2025, which were based on a 13-week period.
+Added: Days’ sales outstanding was 36 days for the first quarter of fiscal 2026, as compared to 35 days for the fourth quarter of fiscal 2025.
+Added: As of August 3, 2025, inventory increased by $9.8 million, or 38.9%, compared with July 28, 2024.
+Added: In connection with the restructuring activity announced on May 1, 2024 (see Note 10 of the consolidated financial statements for further details), the increase in inventory reflects a transition to strategically source certain mattress fabrics with long-standing supply partners.
+Added: As a result of this increased sourcing, more finished goods inventory is required to be on hand due to longer lead times to acquire products and accommodate our customers.
+Added: In addition, the increase in inventory is also due to rising costs to produce and source inventory, along with tariffs imposed by U.S.
+Added: trade policies related to imported products.
+Added: As of August 3, 2025, inventory increased by $1.8 million, or 5.4%, compared with April 27, 2025.
+Added: This increase in inventory is due to rising costs to produce and source inventory, along with tariffs imposed by U.S.
+Added: trade policies related to imported products.
+Added: Inventory turns were 2.9 for the first quarter of fiscal 2026, as compared with 4.3 for the first quarter of fiscal 2025 and 2.9 for the fourth quarter of fiscal 2025.
Property, Plant, & Equipment
−Removed: During fiscal 2024 and continuing through the third quarter of fiscal 2025, property, plant, and equipment has steadily decreased due to reduced capital spending stemming from current unfavorable macro-economic conditions within the home furnishings and bedding industries, as well as the actions taken as described above in “Restructuring Activities.”
−Removed: The $24.2 million as of January 26, 2025, represents property, plant, and equipment of $23.0 million, $221,000, and $973,000 located in the U.S., Canada, and Haiti, respectively.
−Removed: The $32.3 million as of January 28, 2024, represents property, plant, and equipment of $21.9 million, $9.8 million, and $600,000 located in the U.S., Canada, and Haiti, respectively.
−Removed: The $31.5 million as of April 28, 2024, represents property, plant, and equipment of $21.5 million, $9.4 million, and $555,000 located in the U.S., Canada, and Haiti, respectively.
+Added: Property, plant, and equipment has steadily decreased due to reduced capital spending stemming from current unfavorable macro-economic conditions within the home furnishings and bedding industries, as well as restructuring initiatives commencing at the beginning of fiscal 2025 and continuing through the first quarter of fiscal 2026.
+Added: See note 10 of the consolidated financial statements for further details and description of our restructuring activities.
+Added: The $22.1 million as of August 3, 2025, represents property, plant, and equipment of $21.2 million and $888,000 located in the U.S., and Haiti, respectively.
+Added: The $28.8 million as of July 28, 2024, represents property, plant, and equipment of $20.9 million, $7.4 million, and $511,000 located in the U.S., Canada, and Haiti, respectively.
+Added: The $23.3 million as of April 27, 2025, represents property, plant, and equipment of $22.3 million, and $955,000 located in the U.S.
+Added: and Haiti, respectively.
Right of Use Assets
−Removed: During fiscal 2024 and continuing through the third quarter of fiscal 2025, right of use assets have steadily decreased due to rent expense incurred over the terms of the existing lease agreements.
−Removed: In addition, in connection with the restructuring activity described above in “Restructuring Activities,” right of use assets (i) decreased due to the termination of an agreement to lease a facility located in Ouanaminthe, Haiti, and (ii) shortened the period of use associated with two leased facilities located in Quebec, Canada.
−Removed: The $200,000 as of January 26, 2025, represents a right of use asset in Haiti.
−Removed: The $1.8 million as of January 28, 2024, represents right of use assets of $1.2 million and $604,000 located in Haiti and Canada, respectively.
−Removed: The $1.6 million as of April 28, 2024, represents right of use assets of $1.1 million and $545,000 located in Haiti and Canada, respectively.
+Added: Right of use assets have steadily decreased due to restructuring initiatives commencing at the beginning of fiscal 2025 and continuing through the first quarter fiscal 2026.
+Added: In connection with these restructuring initiatives, right of use assets decreased due mostly to the termination of an agreement to lease a facility located in Ouanaminthe, Haiti, and the shortening of the period of use associated with two leased facilities located in Quebec, Canada.
+Added: The $50,000 as of August 3, 2025, represents a right of use asset located in Haiti.
+Added: The $568,000 as of July 28, 2024, represents right of use assets of $350,000 and $218,000 located in Haiti and Canada, respectively.
+Added: The $125,000 as of April 27, 2025, represents a right of use asset located in Haiti.
Assets Held for Sale
−Removed: As of January 26, 2025, and in connection with actions described above in “Restructuring Activities,” we classified a building and certain equipment relating to our Canadian operations in Quebec, Canada, as held for sale.
+Added: Assets held for sale are associated with our restructuring initiatives commencing at the beginning of fiscal 2025 and continuing through the first quarter.
+Added: of fiscal 2026.
Refer to Note 8 of the consolidated financial statements for further details.
−Removed: Upholstery Fabrics Segment
−Removed: Three Months Ended
−Removed: (dollars in thousands)
−Removed: Nine Months Ended
−Removed: (dollars in thousands)
−Removed: Upholstery fabrics sales decreased 22.3% in the third quarter of fiscal 2025 compared to the prior-year period.
−Removed: Upholstery fabrics sales decreased 8.8% in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024.
−Removed: While we were encouraged to see sales growth in certain channels of our upholstery fabrics segment during the quarter, the continued sluggish demand in our residential business driven by what remains a weakened home furnishings industry drove these year-over-year declines in overall sales in the segment.
−Removed: The impacts of this market dynamic were particularly acute in our residential business due to resulting lower ordering activity from a significant customer as it managed its inventory levels to better align with the soft industry demand.
−Removed: We were able to achieve sales increases in other areas of our residential business during the quarter and we saw growth trends in the luxury and value residential product channels.
−Removed: Moreover, market conditions and customer demand in our hospitality/contract business are more robust and we saw growth across all channels in that business, including Read, during the quarter.
−Removed: The potential ongoing geopolitical disruptions related to conflicts in Ukraine and the Middle East, as well as the potential impact of future tariffs, depend on factors beyond our control and we cannot reasonably estimate the impact of these items on our upholstery fabrics segment.
−Removed: Moreover, we note that if these situations worsen and shipping disruptions occur or new tariffs are imposed on our products, the impact on our operations and/or on our suppliers, customers, consumers, and the global economy could adversely affect our financial performance.
−Removed: Gross Profit, Selling, General & Administrative Expenses, and Income from Operations
+Added: Upholstery Segment
Three Months Ended
(dollars in thousands)
−Removed: Selling, general, and administrative expenses
−Removed: Restructuring expense (credit)
−Removed: Income from operations
−Removed: Operating margin
−Removed: Nine Months Ended
−Removed: (dollars in thousands)
−Removed: Selling, general, and administrative expenses
−Removed: Restructuring expense
−Removed: Income from operations
−Removed: Operating margin
−Removed: Income from operations was $679,000 for the third quarter of fiscal 2025, compared to $2.1 million for the third quarter of fiscal 2024.
−Removed: Income from operations was $3.0 million for the first nine months of fiscal 2025, compared to income from operations of $4.8 million for the first nine months of fiscal 2024.
−Removed: The declines in upholstery fabrics profitability for the third quarter and the first nine months of fiscal 2025, as compared to the prior-year periods, primarily reflect lower sales, which were offset somewhat by lower SG&A expense and lower fixed costs during both periods.
−Removed: However, the actions we completed during the first quarter of fiscal 2025 to restructure our upholstery fabrics finishing operation in China and optimize our Asian platform continue to positively impact our operating performance (see “—Restructuring Activities—Shanghai, China—Upholstery Fabrics Finishing Operation” below).
−Removed: Despite the difficult demand environment in our residential business and resulting lower sales bases during our third quarter and first nine months of fiscal year 2025, these cost-structure and operational enhancements were instrumental in our ability to achieve profitability in each of those sales-pressured periods while also maintaining the service levels our customers rely upon and expect.
−Removed: Looking ahead, we expect sales in our residential business to continue to be challenged by the muted conditions in the home furnishings industry and for that dynamic to impact profitability until macroeconomic conditions improve.
−Removed: However, our lower fixed cost and SG&A expense structure should allow us to better navigate the difficult environment in our residential fabrics business and leverage the more robust demand we are seeing in our hospitality/commercial fabrics business.
−Removed: In addition, we believe that there are other meaningful opportunities to increase operational efficiency and reduce cost across our business, and we plan to continue pursuing measures to optimize our platform.
−Removed: Restructuring Activities
−Removed: Shanghai, China
−Removed: Upholstery Fabrics Finishing Operation
−Removed: During the fourth quarter of fiscal 2024, we closed our upholstery fabrics finishing operation in Shanghai, China, to align with demand trends and further leverage our strategic supply relationships to meet customer finishing needs.
−Removed: This restructuring activity
−Removed: was completed during the first quarter of fiscal 2025 and resulted in cumulative restructuring and restructuring related charges totaling $218,000.
−Removed: Ouanaminthe, Haiti
−Removed: Cut and Sew Upholstery Fabrics Operation
−Removed: During the third quarter of fiscal 2023, Culp Upholstery Fabrics - Haiti, Ltd.
−Removed: ("CUF Haiti") entered into an agreement to terminate a lease agreement associated with one facility, and in turn moved the production of upholstery cut and sewn kits to another existing facility leased by Culp Home Fashions - Haiti, Ltd.
−Removed: ("CHF Haiti") during the fourth quarter of fiscal 2023.
−Removed: Both CUF Haiti and CHF Haiti are indirect wholly owned subsidiaries of the company.
−Removed: During the first quarter of fiscal 2024, demand for upholstery cut and sewn kits declined more than previously anticipated, resulting in the strategic action to discontinue the production of upholstery cut and sewn kits in Haiti.
−Removed: This restructuring activity was completed during the third quarter of fiscal 2024 and resulted in cumulative restructuring and restructuring related charges of $1.3 million.
−Removed: The following summarizes our restructuring expense (credit) and restructuring related charge (credit) for all restructuring activities for the upholstery fabrics segment for the three months ended January 26, 2025, and January 28, 2024:
−Removed: Three Months Ended
+Added: Upholstery fabrics sales decreased 20.4% during the first quarter of fiscal 2026 compared to the comparable quarter.
+Added: The year-over-year sales decline in our upholstery segment was driven primarily by what remains a muted demand climate for residential upholstery fabric due to continuing overall weakness across the home furnishings industry.
+Added: First quarter upholstery fabric sales were also impacted by market uncertainty stemming from the global trade and tariff landscape, including the lagging effects of the historically high tariffs on China-produced products in the prior quarter that essentially grounded residential upholstery order flow for approximately five weeks.
+Added: In addition, a purchasing cadence deviation by a large residential upholstery customer last year, including a notable spike in last year’s first quarter, resulted in an uneven year-over-year comparison this quarter that we expect to normalize as we move through fiscal 2026.
+Added: We continue to expect the soft industry demand backdrop for home furnishings to affect our residential fabric business going forward, while demand in our hospitality/commercial fabric business is expected to remain relatively solid.
+Added: However, as conditions improve and a broad market recovery begins, we believe our upholstery segment is well positioned for growth through our size and scale efficiencies, innovative product offerings including our popular LiveSmart® performance line, flexible and multi-location production platform, and long-term supplier relationships.
+Added: Notably, the potential ongoing geopolitical disruptions related to conflicts in Ukraine and the Middle East remain unknown and depend on factors beyond our control.
+Added: At this time, we cannot reasonably estimate the impact on our upholstery fabrics segment, but we note that if conditions worsen in these situations, including shipping disruptions related to conflicts in the Middle East, the impact on our operations, and/or on our suppliers, customers, consumers, and the global economy, could adversely affect our financial performance.
Three Months Ended
(dollars in thousands)
−Removed: January 26, 2025
−Removed: January 28, 2024
−Removed: Other associated costs
−Removed: Gain on sale of equipment
−Removed: Gain on disposal of inventory
−Removed: Restructuring expense (credit) and restructuring related credit (3) (4)
−Removed: (1) The $8,000 relates to our U.S.
−Removed: upholstery fabrics operations under the Fiscal 2025 Restructuring Plan, which is described more fully in Note 10 of the consolidated financial statements.
−Removed: (2) The total $(111,000) is related to the closure of our upholstery cut and sewn kits operation located in Ouanaminthe, Haiti, as described above.
−Removed: (3) The total $8,000 was recorded within restructuring expense in the Consolidated Statement of Net Loss for the three-month period ended January 26, 2025.
−Removed: (4) Of the $(111,000) total, $(50,000) and $(61,000) were recorded within restructuring expense (credit) and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three-month period ended January 28, 2024.
−Removed: The following summarizes our restructuring expense and restructuring related charges for all restructuring activities for the upholstery fabrics segment for the nine months ended January 26, 2025, and January 28, 2024:
−Removed: Nine Months Ended
−Removed: Nine Months Ended
−Removed: (dollars in thousands)
−Removed: January 26, 2025
−Removed: January 28, 2024
−Removed: Employee termination benefits
−Removed: Impairment loss - equipment
−Removed: Other associated costs
−Removed: Loss on disposal and markdowns of inventory
−Removed: Restructuring expense and restructuring related charge (3) (4)
−Removed: (1) Of the $169,000, $155,000 relates to our U.S.
−Removed: upholstery fabrics operations under the Fiscal 2025 Restructuring Plan, which is described more fully in Note 10 of the consolidated financial statements.
−Removed: In addition, the $169,000 includes $14,000 related to the closure of our upholstery fabrics finishing operation located in Shanghai, China, as described above.
−Removed: (2) The total $472,000 related to the closure of our upholstery cut and sewn kits operation located in Ouanaminthe, Haiti, as described above.
−Removed: (3) The total $169,000 was recorded within restructuring expense in the Consolidated Statement of Net Loss for the nine-month period ending January 26, 2025.
−Removed: (4) Of the $472,000 total, $432,000 and $40,000 were recorded within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the nine-month period ended January 28, 2024.
+Added: Gross profit was $4.3 million for the first quarter of fiscal 2026, compared to gross profit of $5.5 million for the first quarter of fiscal 2025.
+Added: The decrease in upholstery fabrics profitability for the first quarter of fiscal 2026, as compared to the prior-year period, primarily reflects the impact of lower sales.
+Added: We believe that the anticipated cost and efficiency benefits resulting from the transition of operations in our Read Window business at a leased facility in Tennessee to a shared management model within our owned U.S.
+Added: location in North Carolina will begin to impact our results during our third quarter.
+Added: Once fully implemented, we expect this consolidation to significantly improve profitability in our upholstery segment.
+Added: Looking forward, the residential home furnishings sector continues to face challenges stemming from evolving consumer spending patterns, global trade negotiations and tariff increases, inflation, declining home sales, and other macroeconomic factors impacting discretionary purchases.
+Added: Consequently, we anticipate that the low-demand environment for residential upholstery fabrics may continue to affect profitability until the market enters a recovery cycle.
+Added: However, we expect the solid demand in our hospitality and commercial upholstery fabrics business to continue, and for the fixed cost reductions resulting from the consolidation of our Read Window operations in connection with our divisional integration initiative to elevate the profitability profile of our upholstery segment.
+Added: We will also consider further operational adjustments as necessary to align with prevailing demand trends while ensuring continued high-quality service for our customers.
Segment Assets
3 unchanged sentences
(dollars in thousands)
−Removed: January 26, 2025
−Removed: January 28, 2024
+Added: August 3, 2025
+Added: July 28, 2024
April 27, 2025
2 unchanged sentences
Right of use assets
+Added: Total Segment Assets
Refer to Note 14 of the consolidated financial statements for disclosures regarding determination of our segment assets.
Accounts Receivable
−Removed: As of January 26, 2025, accounts receivable decreased by $671,000, or 5.5%, as compared with January 28, 2024.
−Removed: This decrease in accounts receivable was due to a decline in net sales of 22.3% during the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, as described in the section above titled "Segment Analysis-Upholstery Fabrics-Net Sales." The decrease in accounts receivable due to the decline in net sales was mostly offset by longer payment trends during the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, due to a higher sales mix with customers with longer credit terms.
−Removed: Additionally, a timing difference in cash receipts from certain significant customers during the last week of the third quarter of fiscal 2024 relative to cash receipts during the third quarter of fiscal 2025 also affected our accounts receivable.
−Removed: Accordingly, days’ sales outstanding for this segment increased to 42 days for the third quarter of fiscal 2025, compared with 31 days for the third quarter of fiscal 2024.
−Removed: As of January 26, 2025, accounts receivable increased by $417,000, or 3.7%, compared with April 28, 2024.
−Removed: This increase in accounts receivable is mostly due to longer payment trends during the third quarter of fiscal 2025 compared with the fourth quarter of fiscal 2024, as we experienced a higher sales mix with customers with longer credit terms.
−Removed: Accordingly, days’ sales outstanding for this segment increased to 42 days for the third quarter of fiscal 2025, compared with 37 days for the fourth quarter of fiscal 2024.
−Removed: As of January 26, 2025, inventory decreased by $1.7 million, or 9.1%, compared with January 28, 2024.
−Removed: This decrease in inventory primarily represents the decrease in net sales during the third quarter of fiscal 2025 compared with the prior-year period, as described in the above section titled "Segment Analysis-Upholstery Fabrics-Net Sales."
−Removed: As of January 26, 2025, inventory remained flat compared with April 28, 2024.
−Removed: This trend reflects net sales for the third quarter of fiscal 2025 of $23.6 million, which remained flat as compared with net sales of $23.8 million for the fourth quarter of fiscal 2024.
−Removed: Inventory turns were 4.2 for the third quarter of fiscal 2025, compared with 5.1 for the third quarter of fiscal 2024 and 4.4 for the fourth quarter of fiscal 2024.
+Added: As of August 3, 2025, accounts receivable decreased by $3.3 million, or 28.9%, as compared to July 28, 2024.
+Added: This trend reflects a decrease in net sales for the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025.
+Added: Net sales of $22.6 million during the first quarter of fiscal 2026, which were based on a 14-week period, were much lower based on a weekly average, as compared with net sales of $28.5 million during the first quarter of fiscal 2025, which were based on a 13-week period.
+Added: Days’ sales outstanding was 33 days for the first quarter of fiscal 2026, as compared with 32 days for the first quarter of fiscal 2025.
+Added: As of August 3, 2025, accounts receivable decreased by $3.1 million, or 27.5%, compared to April 27, 2025.
+Added: This decrease in accounts receivable is mostly due to shorter payment trends during the first quarter of fiscal 2026, as we experienced a higher sales mix with customers who had longer credit terms during the fourth quarter of fiscal 2025, as compared with the first quarter of fiscal 2026.
+Added: Accordingly, days’ sales outstanding decreased to 33 days for the first quarter of fiscal 2026, from 46 days for the fourth quarter of fiscal 2025.
+Added: As of August 3, 2025, inventory decreased by $1.4 million, or 8.4%, compared with July 28, 2024.
+Added: This decrease in inventory mostly represents a decrease in net sales during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025.
+Added: sales of $22.6 million during the first quarter of fiscal 2026, which were based on a 14-week period, were much lower based on a weekly average, as compared with net sales of $28.5 million during the first quarter of fiscal 2025, which were based on a 13-week period.
+Added: The decrease in inventory due to the decline in net sales was partially offset by rising costs to produce and source inventory, along with tariffs imposed by U.S.
+Added: trade policies related to imported products.
+Added: As of August 3, 2025, inventory decreased by $1.0 million or 6.3%, compared with April 27, 2025.
+Added: This trend reflects a decrease in net sales for the first quarter of fiscal 2026 compared with the fourth quarter of fiscal 2025.
+Added: Net sales of $22.6 million during the first quarter of fiscal 2026, which were based on a 14-week period, were lower based on a weekly average, as compared with net sales of $21.7 million during the fourth quarter of fiscal 2025, which were based on a 13-week period.
+Added: The decrease in inventory due to the decline in net sales was partially offset by rising costs to produce and source inventory, along with tariffs imposed by U.S.
+Added: trade policies related to imported products.
+Added: Inventory turns were 4.8 for the first quarter of fiscal 2026, as compared with 5.3 for the first quarter of fiscal 2025 and 4.0 for the fourth quarter of fiscal 2025.
Property, Plant, & Equipment
−Removed: As of January 26, 2025, property, plant, and equipment remained relatively flat compared with January 28, 2024, and April 28, 2024, respectively.
+Added: As of August 3, 2025, property, plant, and equipment remained relatively flat compared with July 28, 2024, and April 27, 2025, respectively.
This trend is mainly due to a reduced level of capital spending commensurate with current unfavorable macro-economic conditions within the home furnishings industry.
−Removed: The $1.1 million as of January 26, 2025, represents property, plant, and equipment of $1.0 million and $83,000 located in the U.S.
+Added: The $956,000 as of August 3, 2025, represents property, plant, and equipment of $897,000 and $59,000 located in the U.S.
and China, respectively.
−Removed: The $1.2 million as of January 28, 2024, represents property, plant, and equipment of $1.1 million and $134,000 located in the U.S.
+Added: The $1.1 million as of July 28, 2024, represents property, plant, and equipment of $990,000 and $108,000 located in the U.S.
and China, respectively.
−Removed: The $1.1 million as of April 28, 2024, represents property, plant, and equipment of $1.0 million and $120,000 located in the U.S.
+Added: The $1.0 million as of April 27, 2025, represents property, plant, and equipment of $940,000 and $70,000 located in the U.S.
and China, respectively.
Right of Use Assets
−Removed: As of January 26, 2025, right of use assets increased compared with January 28, 2024, and April 28, 2024, respectively.
−Removed: This increase represents the renewal of certain lease agreements associated with our operations located in China totaling $1.9 million, partially offset by rent expense incurred over the terms of the existing respective lease agreements.
−Removed: The $2.6 million as of January 26, 2025, represents right of use assets of $1.9 million and $764,000 located in China and U.S., respectively.
−Removed: The $2.3 million as of January 28, 2024, represents right of use assets of $944,000 and $1.4 million located in China and U.S., respectively.
−Removed: The $2.0 million as of April 28, 2024, represents right of use assets of $1.3 million and $709,000 located in the U.S.
+Added: As of August 3, 2025, right of use assets increased by $681,000 or 46.1%, as compared with July 28, 2024.
+Added: This increase represents the renewal of certain lease agreements associated with our operations located in China, partially offset by rent expenses incurred over the terms of the existing respective lease agreements.
+Added: As of August 3, 2025, right of use assets decreased by $519,000, or 19.4%, as compared with April 27, 2025.
+Added: This decrease mostly represents rent expense incurred over the terms of the existing respective lease agreements.
+Added: The $2.2 million as of August 3, 2025, represents right of use assets of $1.4 million and $771,000 located in China and the U.S., respectively.
+Added: The $1.5 million as of July 28, 2024, represents right of use assets of $1.1 million and $393,000 located in the U.S.
and China, respectively.
+Added: The $2.7 million as of April 27, 2025, represents right of use assets of $1.7 million and $1.0 million located in China and the U.S., respectively.
Consolidated - Other Income Statement Categories
1 unchanged sentence
(dollars in thousands)
−Removed: January 26, 2025
−Removed: January 28, 2024
−Removed: SG&A expenses
−Removed: Interest expense
−Removed: Interest income
−Removed: Other (income) expense
−Removed: Nine Months Ended
−Removed: (dollars in thousands)
−Removed: January 26, 2025
−Removed: January 28, 2024
+Added: August 3, 2025
+Added: July 28, 2024
SG&A expenses
+Added: Restructuring credit (expense)
Interest expense
2 unchanged sentences
Selling, General, and Administrative Expenses ("SG&A")
−Removed: The decrease in selling, general, and administrative expenses during the third quarter and the first nine months of fiscal 2025, as compared to the third quarter and first nine months of fiscal 2024, is primarily due to (i) lower incentive compensation that mostly relates to annual bonuses reflecting unfavorable financial results in relation to pre-established performance targets;
−Removed: (ii) lower employee compensation due to the company's restructuring activities described in the section titled "- Segment Analysis-Mattress Fabrics Segment-Restructuring Activities";
−Removed: and (iii) lower professional and consulting fees.
+Added: The slight decrease in selling, general, and administrative expenses during the first quarter of fiscal 2026, as compared to the first quarter of fiscal 2025, was primarily due to:
+Added: (i) a decrease in net sales of 10.3% during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025;
+Added: (ii) lower professional fees;
+Added: and (iii) cost reduction initiatives in connection with our restructuring and integration activities announced on May 1, 2024, and April 24, 2025 (see Note 10 of the consolidated financial statements for further details and descriptions of our restructuring initiatives);
+Added: partially offset by additional SG&A expenses
+Added: incurred during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, as the first quarters of fiscal 2026 and 2025 represented 14-week and 13-week periods, respectively.
+Added: Restructuring Credit (Expense)
+Added: Restructuring Activities Announced May 1, 2024
+Added: On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to:
+Added: (i) consolidate the company's North American mattress fabrics operations, including the closure and sale of the Property located in Quebec, Canada;
+Added: (ii) move a portion of the knitting and finishing capacity from the company's manufacturing facility located in Quebec, Canada, to the company's manufacturing facility located in Stokesdale, North Carolina;
+Added: (iii) transition the bedding segment's weaving operation to a strategic sourcing model through the company's long standing supply partners;
+Added: (iv) consolidate the company's sewn mattress cover operation located in Ouanaminthe, Haiti, from two leased facilities into one building and reduce other operating expenses at this location;
+Added: as well as (v) reduce unallocated corporate and shared service expenses.
+Added: As of the end of the first quarter of fiscal 2026, all of the above restructuring activities related to this announcement have been completed, including the sale of the Property and certain equipment located at Quebec, Canada.
+Added: Accordingly, we recorded a gain from the sale of the Property and equipment totaling $4.0 million that was classified within restructuring credit in the Consolidated Statement of Net Loss for the period ending August 3, 2025.
+Added: See notes 7 and 8 of the consolidated financial statements for further details regarding the Sales Agreement associated with the sale of the Property and determination of fair value regarding the Property and equipment.
+Added: During the three months ended August 3, 2025, we recorded a restructuring credit of $3.9 million that was mostly related to the gain on sale of the Property noted above and was solely related to the bedding segment.
+Added: Since the inception of this restructuring initiative, we incurred cumulative restructuring and restructuring related charges totaling $4.8 million, most of which related to the bedding segment.
+Added: Restructuring Activities Announced April 24, 2025
+Added: On April 24, 2025 (fourth quarter of fiscal 2025), the company announced a strategic transformation of its operating model that will combine certain activities within the bedding and upholstery business segments and create one integrated Culp-branded business.
+Added: As part of this strategic transformation, we will close our leased facilities operated by our upholstery segment located in Burlington, North Carolina, and Knoxville, Tennessee, and will transition their production and distribution activities utilizing a shared management model within our owned facility located in Stokesdale, North Carolina.
+Added: Our Stokesdale, North Carolina facility has historically been solely operated by our bedding segment.
+Added: During the three months ended August 3, 2025, we incurred restructuring expense of $349,000 related to this strategic transformation, of which $256,000 and $93,000 related to the bedding and upholstery segments, respectively.
+Added: The estimated cumulative restructuring and restructuring related charges for this initiative are expected to be $2.2 million, of which $674,000 is expected to be cash expenditures.
+Added: The $2.2 million of estimated cumulative restructuring and restructuring related charges associated with this initiative represents:
+Added: (i) a non-cash charge for impairment of Read's tradename totaling $540,000 (see Note 6 located in the notes to the consolidated financial statements for further details);
+Added: (ii) a non-cash charge of $450,000 associated with the disposal and markdowns of inventory;
+Added: (iii) non-cash lease termination costs of $125,000;
+Added: (iv) non-cash accelerated depreciation expense, along with impairments and losses on disposal of fixed assets totaling $424,000;
+Added: (v) cash charges for employee termination benefits of $207,000;
+Added: (vi) cash charges for facility consolidation and relocation expenses of $432,000;
+Added: and (vii) cash charges for other associated costs of $35,000.
+Added: We expect the initiatives associated with this strategic transformation to be substantially completed by December 31, 2025.
+Added: The following summarizes restructuring (credit) expense associated with the above announcements for the three month periods ended August 3, 2025, and July 28, 2024:
+Added: Three Months Ended
+Added: Three Months Ended
+Added: (dollars in thousands)
+Added: August 3, 2025
+Added: July 28, 2024
+Added: Additional depreciation expense for shortened useful lives
+Added: Employee termination benefits
+Added: Lease Termination Costs
+Added: Facility consolidation and relocation expenses
+Added: Net (gain) loss on sale and impairment of property, plant, and equipment
+Added: Other Associated Costs
+Added: Loss on disposal and markdowns of inventory
+Added: Restructuring (credit) expense and restructuring related charge (1) (2)
+Added: (1) The total $3.5 million credit was classified within restructuring credit in the Consolidated Statement of Net Loss for the three-month period ended August 3, 2025.
+Added: The $3.5 million restructuring credit mostly related to the bedding segment.
+Added: (2) Of the total $2.7 million restructuring and restructuring related charges, $2.6 million and $116,000 were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three month period ended July 28, 2024.
+Added: The $2.7 million expense mostly related to the bedding fabrics segment.
Interest Expense
−Removed: Interest expense mostly represents our borrowings totaling $5.4 million under our lines of credit agreement associated with our operations located in China.
+Added: The increase in interest expense reflects increased borrowings under line of credit agreements associated with our operations located in the U.S.
Interest Income
−Removed: The decreases in interest income are due to lower average cash balances during the third quarter and first nine months of fiscal 2025, compared with the third quarter and first nine months of fiscal 2024.
−Removed: Other (Income) Expense
+Added: The decrease in interest income is due to lower average cash balances during the first quarter of fiscal 2026, compared with the first quarter of fiscal 2025.
+Added: Other Expense
Management is required to assess certain economic factors to determine the currency of the primary economic environment in which our foreign subsidiaries operate.
1 unchanged sentence
dollar was determined to be the functional currency of our operations located in China, Canada, and Vietnam.
−Removed: The change in other income (expense) during the third quarter and first nine months of fiscal 2025, compared with prior-year periods, were due mostly to changes in the foreign currency exchange rates applied against our balance sheet accounts denominated in Chinese Renminbi to determine the corresponding U.S.
+Added: The change in other expense during the first quarter of fiscal 2026, compared with the first quarter of fiscal 2025, was due primarily to less favorable foreign currency exchange rates applied against our balance sheet accounts denominated in Chinese Renminbi to determine the corresponding U.S.
dollar financial reporting amounts.
−Removed: During the third quarter of fiscal 2025, we reported a foreign currency exchange gain associated with our operations located in China totaling $305,000, compared with a foreign currency exchange loss of $(290,000) during the third quarter of fiscal 2024.
−Removed: During the first nine months of fiscal 2025, we reported a foreign currency exchange gain associated with our operations located in China totaling $74,000, compared with a foreign currency exchange gain of $389,000 during the first nine months of fiscal 2024.
−Removed: The $74,000 foreign currency exchange gain related to our operations in China was mostly non-cash and was partially offset by $23,000 of income tax expense, which will increase our income tax payments and withholding tax payments associated with future earnings and profits repatriated from our operations located in China to the company's U.S.
−Removed: The income tax expense of $23,000 was associated with taxable foreign currency exchange gains based on more favorable foreign currency exchange rates applied against balance sheet accounts denominated in U.S.
+Added: During the first quarter of fiscal 2026, we incurred a foreign currency exchange rate loss associated with our operations located in China totaling $189,000, compared with a foreign currency exchange rate loss of $45,000 incurred during the first quarter of fiscal 2025.
+Added: The $189,000 foreign currency exchange rate loss described above was mostly non-cash and offset by an income tax benefit of $119,000.
+Added: The income tax benefit of $119,000 was associated with tax deductible foreign currency exchange rate losses based on less favorable foreign currency exchange rates applied against balance sheet accounts denominated in U.S.
dollars to determine the corresponding Chinese Renminbi local currency amounts.
−Removed: The foreign currency exchange rate gains (losses) related to our U.S.
−Removed: dollar denominated balance sheet accounts associated with our operations located in China are considered taxable income or tax deductible, as we incur income tax expense (benefit) and pay income taxes in China's local currency.
+Added: The foreign currency exchange rate loss derived from U.S.
+Added: dollar denominated balance sheet accounts is considered tax deductible, as we incur income tax expense and pay income taxes in China's local currency.
Effective Income Tax Rate
−Removed: We recorded income tax expense of $635,000, or (3.9%) of loss before income taxes, for the nine-month period ended January 26, 2025, compared with income tax expense of $2.2 million, or (33.4%) of loss before income taxes, for the nine-month period ended January 28, 2024.
−Removed: Our effective income tax rates for the nine-month periods ended January 26, 2025, and January 28, 2024, were based upon the estimated effective income tax rate applicable for the full year after giving effect to any significant items related specifically to interim periods.
−Removed: When calculating the annual estimated effective income tax rates for the nine-month periods ended January 26, 2025, and January 28, 2024, we were subject to loss limitation rules.
+Added: We recorded income tax expense of $1.4 million, or 120.3% of income before income taxes, for the three-month period ended August 3, 2025, compared with income tax expense of $240,000, or (3.4%) of loss before income taxes, for the three-month period ended July 28, 2024.
+Added: Our effective income tax rates for the three-month periods ended August 3, 2025, and July 28, 2024, were based upon the estimated effective income tax rate applicable for the full year after giving effect to any significant items related specifically to interim periods.
+Added: When calculating the annual estimated effective income tax rates for the three-month periods ended August 3, 2025, and July 28, 2024, we were subject to loss limitation rules.
These loss limitation rules require any taxable loss associated with our U.S.
or foreign operations to be excluded from the annual estimated effective income tax rate calculation if it was determined that no income tax benefit could be recognized during the current fiscal year.
−Removed: The effective income tax rate can be affected over the fiscal year by the mix and timing of actual earnings from our U.S.
+Added: The effective income tax rate can be affected over the fiscal
+Added: year by the mix and timing of actual earnings from our U.S.
operations and foreign subsidiaries located in China, Canada, Haiti, and Vietnam versus annual projections, as well as changes in foreign currency exchange rates in relation to the U.S.
The following schedule summarizes the principal differences between income tax expense at the U.S.
−Removed: federal income tax rate and the effective income tax rate reflected in the consolidated financial statements for the nine-month periods ended January 26, 2025, and January 28, 2024:
+Added: federal income tax rate and the effective income tax rate reflected in the consolidated financial statements for the three-month periods ended August 3, 2025, and July 28, 2024:
federal income tax rate
valuation allowance
−Removed: Tax effects of local currency foreign exchange gain
−Removed: Uncertain income tax positions
Withholding taxes associated with foreign jurisdictions
−Removed: Captial expenditure deduction - Quebec Canada
Foreign income tax rate differential
+Added: global intangible low tax income tax (GILTI)
+Added: Tax effects of local currency foreign exchange loss
+Added: Uncertain income tax positions
Stock-based compensation
−Removed: Our consolidated effective income tax rates for the first nine months of fiscal 2025 and 2024 were both adversely affected by the mix of earnings between our U.S.
−Removed: operations and foreign subsidiaries, as our taxable income stems mostly from our operations located in China, which has a higher income tax rate than the U.S.
−Removed: In addition, during the first nine months of fiscal 2025 and the
−Removed: first nine months of 2024, we incurred pre-tax losses associated with our U.S.
−Removed: operations, for which an income tax benefit was not recorded due to a full valuation allowance applied against our U.S.
−Removed: net deferred income tax assets.
−Removed: The income tax charge associated with the full valuation allowance applied against our U.S.
−Removed: net deferred income tax assets was higher during the first nine months of fiscal 2025 compared with the first nine months of fiscal 2024, as our $(16.8) million U.S.
−Removed: pre-tax loss incurred during the first nine months of fiscal 2025 was greater than the $(11.3) million U.S.
−Removed: pre-tax loss incurred during the first nine months of fiscal 2024.
−Removed: During the first nine months of fiscal 2025, we incurred a greater consolidated pre-tax loss totaling $(16.4) million, compared with $(6.7) million during the first nine months of fiscal 2024.
−Removed: As a result, the principal differences between income tax expense at the U.S.
−Removed: federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during the first nine months of fiscal 2024, as compared with the first nine months of fiscal 2025.
+Added: Consolidated effective income tax rate (2) (3)
+Added: (1) "Other" for all periods presented represents miscellaneous adjustments that pertain to U.S.
+Added: permanent differences such as meals and entertainment, income tax provision to return adjustments, and other and miscellaneous items.
+Added: (2) Our consolidated effective income tax rates were adversely affected by the mix of earnings between our U.S.
+Added: operations and foreign subsidiaries, as our taxable income stemmed from our operations located in China and a gain from the sale of Property located in Canada during the first quarter of fiscal 2026 (see Notes 8 and 10 of the consolidated financial statements for further details), which jurisdictions have higher income tax rates than the U.S.
+Added: In addition, we applied a full valuation allowance against our U.S.
+Added: deferred income tax assets during the first quarters of fiscal 2026 and 2025, respectively.
+Added: Consequently, an income tax benefit was not recognized for pre-tax losses associated with our U.S.
+Added: operations totaling ($3.3) million and ($7.0) million that were incurred during the first quarters of fiscal 2026 and 2025, respectively.
+Added: Lastly, our consolidated effective income tax rates were also adversely affected by pre-tax losses associated with our Haitian operations, which are not subject to income tax.
+Added: Our Haitian operations are located in an economic zone that permits a 0% income tax rate for the first fifteen years of operations, for which we have seven years remaining.
+Added: As a result of the 0% income tax rate , an income tax benefit was not recognized for the pre-tax losses associated with our Haitian operations totaling $(362,000) and $(633,000) that were incurred during the first quarters of fiscal 2026 and 2025, respectively.
+Added: (3) During the first quarter of fiscal 2026, we earned a lower consolidated pre-tax income totaling $1.1 million, compared with a significantly higher consolidated pre-tax loss of $(7.0) million.
+Added: As a result, we reported a positive effective income tax rate during the first quarter of fiscal 2026, compared with a negative effective income tax rate during the first quarter of fiscal 2025.
+Added: Accordingly, the principal differences between our income tax expense at the U.S.
+Added: Federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during the first quarter of fiscal 2026, compared with the first quarter of fiscal 2025.
+Added: One Big Beautiful Bill Act ("OBBBA")
+Added: On July 4, 2025, OBBBA was signed into law, making several provisions of the 2017 Tax Cuts and Jobs Act ("TCJA" permanent.
+Added: Such provisions include:
+Added: (i) no change to the standard corporate tax rate of 21.0%;
+Added: (ii) increased depreciation allowances for certain property acquired after January 19, 2025;
+Added: (iii) deduction of certain U.S.
+Added: research and development expenditures;
+Added: (iv) limitations on the deductibility of business interest expense;
+Added: and (v) modifications to GILTI and foreign-derived intangible income.
+Added: Topic 740 Income Taxes, requires the income tax effects of changes in tax laws or rates to be recognized at the date of enactment.
+Added: Accordingly, as of August 3, 2025, we evaluated the provisions of OBBBA and determined OBBBA did not impact our consolidated effective income tax rate, income tax expense, or our U.S.
+Added: net deferred income tax assets during the three-months ended August 3, 2025,
+Added: due to the application of a full valuation allowance applied against our U.S.
+Added: net deferred income tax assets described in the below section titled - U.S.
Valuation Allowance.
+Added: Valuation Allowance
We evaluate the realizability of our U.S.
2 unchanged sentences
Since the company operates in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law.
−Removed: As of January 26, 2025, we evaluated the realizability of our U.S.
+Added: As of August 3, 2025, we evaluated the realizability of our U.S.
net deferred income tax assets to determine if a full valuation allowance was required.
6 unchanged sentences
net deferred income tax assets.
−Removed: Based on our assessments as of January 26, 2025, January 28, 2024, and April 28, 2024, valuation allowances against our net deferred income tax assets pertain to the following:
+Added: Based on our assessments as of August 3, 2025, July 28, 2024, and April 27, 2025, valuation allowances against our net deferred income tax assets pertain to the following:
(dollars in thousands)
−Removed: January 26, 2025
−Removed: January 28, 2024
+Added: August 3, 2025
+Added: July 28, 2024
April 27, 2025
4 unchanged sentences
parent company and whether we are required to record a deferred income tax liability for those undistributed earnings from foreign subsidiaries that will not be reinvested indefinitely.
−Removed: As of January 26, 2025, we assessed the liquidity requirements of our U.S.
+Added: As of August 3, 2025, we assessed the liquidity requirements of our U.S.
parent company and determined that our undistributed earnings and profits from our foreign subsidiaries would not be reinvested indefinitely and would eventually be distributed to our U.S.
1 unchanged sentence
The conclusion reached from this assessment was consistent with prior reporting periods.
−Removed: As a result of the 2017 Tax Cuts and Jobs Act, a U.S.
−Removed: corporation is allowed a 100% dividend received deduction for earnings and profits received from a 10% owned foreign corporation.
+Added: As a result of the TCJA, a U.S.
+Added: corporation is allowed a 100% dividend-received deduction for earnings and profits received from a 10% or more owned foreign corporation.
Therefore, a deferred income tax liability will be required only for unremitted withholding taxes associated with earnings and profits generated by our foreign subsidiaries that will ultimately be repatriated to the U.S.
parent company.
−Removed: As a result, as of January 26, 2025, January 28, 2024, and April 28, 2024, we recorded a deferred income tax liability of $5.1 million, $4.7 million, and $4.8 million, respectively.
+Added: As a result, as of August 3, 2025, July 28, 2024, and April 27, 2025, we recorded a deferred income tax liability of $5.3 million, $4.9 million, and $5.2 million, respectively.
Uncertain Income Tax Positions
−Removed: An unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period if the more-likely-than-not recognition threshold is met by the end of the reporting period, or is effectively settled through examination, negotiation, or litigation, or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired.
+Added: An unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period if the more-likely-than-not recognition threshold is met by the end of the reporting period, or is effectively settled through examination, negotiation, or litigation, or if the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired.
If it is determined that any of the above conditions occur regarding our uncertain income tax positions, an adjustment to our unrecognized income tax benefit will be recorded at that time.
−Removed: As of January 26, 2025, January 28, 2024, and April 28, 2024, we had a total of $1.4 million, $1.2 million, and $1.3 million, respectively, of gross unrecognized income tax benefits, of which the entire amount was classified as income taxes payable – long-term in the accompanying Consolidated Balance Sheets.
−Removed: As of January 26, 2025, the unrecognized tax benefit would favorably affect income tax expense in future periods by $1.4 million.
−Removed: Our gross unrecognized income tax benefit of $1.4 million as of January 26, 2025, relates to income tax positions for which significant change could occur within the next year if the statute of limitations for relevant taxing authorities to examine and challenge the tax position expires.
+Added: As of August 3, 2025, July 28, 2024, and April 27, 2025, we had $841,000, $1.3 million, and $790,000 of total gross unrecognized income tax benefits, of which the entire amount was classified as income taxes payable – long-term in the accompanying Consolidated Balance Sheets.
+Added: These unrecognized income tax benefits would favorably affect income tax expense in future periods by $841,000, $1.3 million, and $790,000 as of August 3, 2025, July 28, 2024, and April 27, 2025, respectively.
+Added: Our gross unrecognized income tax benefit of $841,000 as of August 3, 2025, relates to an income tax position for which significant change is currently not expected within the next year.
Income Taxes Paid
1 unchanged sentence
(dollars in thousands)
−Removed: United States Transition Tax Payment
China Income Taxes, Net of Refunds
Canada - Income Taxes, Net of Refunds
−Removed: Future Liquidity
−Removed: Based on the restructuring plan approved by our board of directors on April 29, 2024, the timing and success of the closure of our Canadian operation, along with the sale of associated real estate, could have a significant effect on (i) the amount and timing of when and if fiscal 2025 income tax payments will be required;
−Removed: (ii) the amount and timing of withholding tax payments to the Canadian government associated with the repatriation of earnings and profits to the U.S.
−Removed: and (iii) the respective tax rates that will be applied on the sale of equipment.
−Removed: Accordingly, we believe we cannot provide a reasonable estimate of our fiscal 2025 income tax payments associated with our Canadian operation at this time.
−Removed: Currently, we are projecting annual cash income tax payments of approximately $1.8 million associated with our operations located in China.
−Removed: This estimate is management's current projection only and can be affected by actual earnings versus annual projections, changes in the foreign exchange rates in relation to the U.S.
−Removed: dollar, and the timing of when we will repatriate earnings and profits from China to our U.S.
−Removed: Currently, we do not expect to incur any income taxes in the U.S.
−Removed: on a cash basis during fiscal 2025 due to (i) the accelerated expensing of U.S.
−Removed: capital expenditures and our existing U.S.
−Removed: federal net operating loss carryforwards totaling $69.0 million as of April 28, 2024.
−Removed: As of January 26, 2025, we will be required to pay a U.S.
−Removed: federal transition tax payment, in accordance with the 2017 Tax Cuts and Jobs Act, of $831,000 by August 15, 2025.
Liquidity and Capital Resources
Currently, our sources of liquidity include cash and cash equivalents (collectively, "cash"), cash flow from operations, and amounts available under our revolving credit lines.
−Removed: As of January 26, 2025, we believe our cash of $5.3 million and the current availability under our revolving credit lines totaling $23.2 million will be sufficient to fund our foreseeable business needs, restructuring activities, capital expenditures, commitments, and contractual obligations.
−Removed: Refer to Note 11 of the consolidated financial statements for further information regarding our revolving credit lines.
−Removed: As of January 26, 2025, our cash totaled $5.3 million, which represents a decrease of $4.7 million compared with cash of $10.0 million as of April 28, 2024.
−Removed: This decrease was mostly due to (i) net cash used in operating activities totaling $9.4 million, and (ii) capital expenditures totaling $2.4 million, partially offset by (iii) net borrowings from our lines of credit totaling $5.4 million and (iv) proceeds from the sale of equipment of $1.5 million.
−Removed: Our net cash used in operating activities was $9.4 million during the first nine months of fiscal 2025, an increase of $3.4 million compared with net cash used in operating activities of $6.0 million during the first nine months of fiscal 2024.
−Removed: This trend mostly reflects (i) a significant decrease in cash earnings, (ii) an increase in inventory purchases to maintain an appropriate level during
−Removed: the company's restructuring activities, as described above in the section titled “—Segment Analysis—Mattress Fabrics Segment—Restructuring Activities,” and (iii) an increase in accounts receivable primarily due to longer payment trends related to a higher sales mix with customers with longer credit terms, partially offset by an increase in accounts payable due to an increase in inventory purchases with significant vendors who extended their terms during the first nine months of fiscal 2025 compared with the first nine months fiscal 2024.
−Removed: As of January 26, 2025, we had outstanding borrowings totaling $5.4 million under lines of credit associated with our operations located in China.
−Removed: The income taxes we pay also affect our liquidity.
−Removed: See the above section titled “ Income Taxes Paid ” for further detail.
−Removed: Our cash balance may be adversely affected by factors beyond our control, such as (i) recent customer demand trends affecting net sales, (ii) supply chain disruptions, (iii) higher interest rates and inflation, (iv) the imposition of tariffs and other trade restrictions, and (v) geopolitical events (including conflicts in Ukraine and the Middle East).
+Added: As of August 3, 2025, we believe:
+Added: (i) our cash of $11.1 million;
+Added: (ii) improvements in cash flow from operations stemming from expected cash savings from our recent restructuring activities, (iii) the current availability under our U.S.
+Added: line of credit totaling $17.6 million (refer to Note 11 of the consolidated financial statements for further details regarding our financing arrangements), and (iv) proceeds totaling $4.8 million from the collection of a note receivable associated with the sale of Property located in Quebec, Canada (see Note 7 of the consolidated financial statements for further details) will be sufficient to fund our:
+Added: (i) foreseeable business needs;
+Added: (ii) restructuring activities;
+Added: (iii) capital expenditures;
+Added: (iv) commitments;
+Added: (v) contractual obligations;
+Added: and (vi) income tax payments.
+Added: As of August 3, 2025, our cash of $11.1 million represents an increase of $5.5 million compared with cash of $5.6 million as of April 27, 2025.
+Added: This increase was due mostly to:
+Added: (i) net borrowings on our lines of credit of $5.3 million, an increase of $1.3 million compared to the comparable quarter, and (ii) proceeds from the sale of property, plant, and equipment totaling $966,000, partially offset by net cash used in operating activities of $(695,000).
+Added: Our net cash used in operating activities of $(695,000) increased during the first quarter of fiscal 2026, compared with net cash used in operating activities of $(206,000) during the first quarter of fiscal 2025.
+Added: This trend mostly reflects:
+Added: (i) an increase in inventory related to strategically sourcing certain fabrics that have longer lead times to acquire, rising prices, and tariffs imposed by U.S.
+Added: trade policy;
+Added: (ii) a decrease in accounts payable due to a decrease in consumer demand along with timing of vendor payments as the first quarter of fiscal 2026 represented a 14-week period compared with a 13-week period for the first quarter of fiscal 2025;
+Added: partially offset by (i) a decrease in cash losses;
+Added: and (ii) a decrease in accounts receivable due to a decrease in net sales for the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, that was partially offset by longer payment trends during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025.
+Added: We had outstanding borrowings totaling $18.1 million under our line of credit agreements, of which $11.1 million and $7.0 million were reported in lines of credit - current and lines of credit - long term, respectively, on the August 3, 2025, Consolidated Balance Sheet.
+Added: Our cash balance may be adversely affected by factors beyond our control, such as:
+Added: (i) recent customer demand trends affecting net sales;
+Added: (ii) increased tariffs or other changes in U.S.
+Added: trade policy related to imported products;
+Added: (iii) supply chain disruptions;
+Added: (iv) rising interest rates and inflation;
+Added: and (v) geopolitical events (including conflicts in Ukraine and the Middle East).
These factors could cause delays in receipt of payment on accounts receivable and could increase cash disbursements due to rising prices.
6 unchanged sentences
In March 2020, our board of directors approved an authorization for us to acquire up to $5.0 million of our common stock.
−Removed: Under the common stock repurchase program, shares may be purchased from time to time in open market transactions, block trades, through plans established under the Securities Exchange Act Rule 10b5-1, or otherwise.
−Removed: The number of shares purchased and the timing of such purchases are based on working capital requirements, market and general business conditions, and other factors, including alternative investment opportunities.
−Removed: We did not repurchase any shares of common stock during the nine-month periods ended January 26, 2025, or January 28, 2024, respectively.
−Removed: As of January 26, 2025, $3.2 million is available for additional repurchases of our common stock.
−Removed: On June 29, 2022, our board of directors announced the decision to suspend the company’s quarterly cash dividend, believing that preserving capital and managing our liquidity were in the company’s best interest to support future growth and the long-term interests of our shareholders.
−Removed: Accordingly, we did not make any dividend payments during the first nine months of fiscal 2025, fiscal 2024, and fiscal 2023.
−Removed: Working Capital
+Added: Under this common stock repurchase program, shares may be purchased from time to time in open market transactions, block trades, through plans established under the Securities Exchange Act Rule 10b5-1, or otherwise.
+Added: The number of shares purchased and the timing of such purchases are based on working capital requirements, market and general business conditions, and other factors.
+Added: We did not repurchase any shares of common stock during the three-month periods ended August 3, 2025, or July 28, 2024, respectively.
+Added: As of August 3, 2025, $3.2 million is available for additional repurchases of our common stock.
+Added: On June 29, 2022, our board of directors announced the decision to suspend the company’s quarterly cash dividend.
+Added: We believed that preserving capital and managing our liquidity were in the company’s best interest to support future growth and the long-term interests of our shareholders.
+Added: Accordingly, we did not make any dividend payments during the first quarter of fiscal 2026, fiscal 2025, 2024, or 2023.
+Added: Consolidated Basis - Working Capital
Operating Working Capital
−Removed: Operating working capital (the total of accounts receivable and inventories, less accounts payable-trade, less accounts payable-capital expenditures, and less deferred revenue) was $37.9 million as of January 26, 2025, compared with $39.0 million as of January 28, 2024, and $38.5 million as of April 28, 2024.
−Removed: Operating working capital turnover was 5.8 during the third quarter of fiscal 2025, compared with 5.9 during the third quarter of fiscal 2024 and 5.8 during the fourth quarter of fiscal 2024.
+Added: Operating working capital (the total of accounts receivable and inventories, less accounts payable-trade, less accounts payable-capital expenditures, and less deferred revenue) was $43.7 million as of August 3, 2025, compared with $35.1 million as of July 28, 2024, and $43.4 million as of April 27, 2025.
+Added: Operating working capital turnover was 5.4 during the first quarter of fiscal 2026, compared with 5.9 during the first quarter of fiscal 2025 and 5.7 during the fourth quarter of fiscal 2025.
Accounts Receivable
−Removed: Accounts receivable was $23.2 million as of January 26, 2025, a decrease of $527,000, or 2.2%, compared with $23.7 million as of January 28, 2024.
−Removed: This decrease in accounts receivable represents a decline in net sales of 13.5% during the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, as described in the section titled "Executive Summary-Net Sales".
−Removed: The decrease in accounts receivable due to the decline net sales was mostly offset by longer payment trends during the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, as we experienced a higher sales mix with customers with longer credit terms as well as a timing difference in cash receipts from certain significant customers associated with upholstery fabrics segment during the last week of the third quarter of fiscal 2024 relative to cash receipts during the third quarter of fiscal 2025.
−Removed: Accordingly, days’ sales outstanding increased to 39 days for the third quarter of fiscal 2025, compared with 33 days for the third quarter of fiscal 2024.
−Removed: Accounts receivable was $23.1 million as of January 26, 2025, an increase of $2.0 million, or 9.6%, compared with $21.1 million as of April 28, 2024.
−Removed: This trend was due to an increase in net sales during the third quarter of fiscal 2025, as compared to the fourth quarter of fiscal 2024.
−Removed: Net sales for the third quarter of fiscal 2025 were $52.3 million, an increase of $2.7 million, or 5.5%, compared with $49.5 million for the fourth quarter of fiscal 2024.
−Removed: In addition, the increase in accounts receivable was due to longer payment trends during the third quarter of fiscal 2025 compared with the fourth quarter of fiscal 2024, as we experienced a higher sales mix with customers with longer credit terms in both the mattress and upholstery fabrics segments.
−Removed: Accordingly, days’ sales outstanding increased to 39 days for the third quarter of fiscal 2025, compared with 36 days for the fourth quarter of fiscal 2024.
−Removed: Inventory was $48.6 million as of January 26, 2025, compared with $46.9 million and $44.8 million as of January 28, 2024, and April 28, 2024, respectively.
−Removed: This increase primarily represents purchases of inventory needed maintain an appropriate level of inventory during the company's Fiscal 2025 Restructuring Plan as described above in the section titled “—Segment Analysis — Mattress Fabrics Segment — Restructuring Activities".
−Removed: Inventory turns were 3.8 for the third quarter of fiscal 2025, as compared with 4.5 for the third quarter of fiscal 2024 and 3.9 for the fourth quarter of fiscal 2024.
+Added: Accounts receivable was $18.4 million as of August 3, 2025, a decrease of $3.2 million, or 14.8%, compared with $21.6 million as of July 28, 2024.
+Added: This trend reflects a decrease in net sales for the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, which mostly related to the upholstery segment.
+Added: Net sales of $50.7 million during the first quarter of fiscal 2026, which were based on a 14-week period, were much lower based on a weekly average, as compared with net sales of $56.5 million during the first quarter of fiscal 2025, which were based on a 13-week period.
+Added: The decrease in accounts receivable due to the decrease in net sales noted above was partially offset by longer payment trends associated with the bedding segment during the first quarter of fiscal 2026, as a significant customer utilized more cash discounts during the first quarter of fiscal 2025 and such utilization of cash discounts did not recur during the first quarter of fiscal 2026.
+Added: Accordingly, days’ sales outstanding increased to 35 days for the first quarter of fiscal 2026, from 32 days for the first quarter of fiscal 2025.
+Added: Accounts receivable was $18.4 million as of August 3, 2025, a decrease of $3.5 million, or 15.8%, compared with $21.9 million as of April 27, 2025.
+Added: The decrease in accounts receivable is mostly due to shorter payments trends associated with the upholstery segment during the first quarter of fiscal 2026, as we experienced a higher sales mix with customers who had longer credit terms during the fourth quarter of fiscal 2025, as compared with the first quarter of fiscal 2026.
+Added: Accordingly, days’ sales outstanding decreased to 35 days for the first quarter of fiscal 2026, from 40 days for the fourth quarter of fiscal 2025.
+Added: Inventory was $50.1 million as of August 3, 2025, an increase of $8.4 million, or 20.3%, compared with $41.7 million as of July 28, 2024.
+Added: In connection with the restructuring activity announced on May 1, 2024, which mostly related to the bedding segment (see Note 10 of the consolidated financial statements for further details), the increase in inventory reflects a transition to strategically source certain mattress fabrics with long-standing supply partners.
+Added: As a result of this increased sourcing, more finished goods inventory is required to be on hand due to longer lead times to acquire products and accommodate our customers.
+Added: The increase in inventory due to the above restructuring initiative was partially offset by a decrease in net sales for the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, which mostly related to the upholstery segment.
+Added: Net sales of $50.7 million during the first quarter of fiscal 2026, which were based on a 14-week period, were much lower based on a weekly average, as compared with net sales of $56.5 million during the first quarter of fiscal 2025, which were based on a 13-week period.
+Added: Also, both the bedding and the upholstery segments were affected by rising costs to produce and source inventory, along with tariffs imposed by U.S.
+Added: trade policies related to imported products.
+Added: Inventory was $50.1 million as of August 3, 2025, an increase of $800,000, or 1.6%, compared with $49.3 million as of April 27, 2025.
+Added: This increase in inventory was mostly due to rising costs to produce and source inventory, along with tariffs imposed by U.S.
+Added: trade policies related to imported products, which such costs affected both the bedding and the upholstery segments.
+Added: Inventory turns were 3.5 for the first quarter of fiscal 2026, as compared with 4.8 for the first quarter of fiscal 2025 and 3.3 for the fourth quarter of fiscal 2025.
Accounts Payable - Trade
−Removed: As of January 26, 2025, accounts payable - trade was $32.7 million, which represents an increase compared with $29.7 million and $25.6 million as of January 28, 2024, and April 28, 2024, respectively.
−Removed: This trend mostly represents an increase in inventory purchases from significant vendors who extended credit terms during fiscal 2025, as compared with fiscal 2024.
+Added: Accounts payable - trade was $24.3 million, as of August 3, 2025, compared with $26.5 million as of July 28, 2024 and $27.3 million as of April 27, 2025.
+Added: This decrease in accounts payable as of August 3, 2025, compared with July 28, 2024 and April 27, 2025, is primarily due to a decrease in consumer demand along with timing of vendor payments, as the first quarter of fiscal 2026 represented a 14-week period, compared with 13-week periods for the first and fourth quarters of fiscal 2025.
Financing Arrangements
−Removed: Currently, we have revolving credit agreements with banks for our U.S parent company and our operations located in China.
−Removed: As of January 26, 2025, we had outstanding borrowings totaling $5.4 million under our lines of credit related to our operations located in China.
+Added: Currently, we have line of credit agreements with banks for our U.S parent company and our operations located in China.
+Added: As of August 3, 2025, we had outstanding borrowing associated with our line of credit agreements totaling $18.1 million, of which $11.1 million and $7.0 million were reported in lines of credit-current and lines of credit- long term.
Our loan agreements require, among other things, that we maintain compliance with certain financial covenants.
−Removed: As of January 26, 2025, we were in compliance with these financial covenants.
−Removed: Refer to Note 11 of the consolidated financial statements for further disclosure regarding our revolving credit agreements.
+Added: As of August 3, 2025, we were in compliance with these financial covenants.
+Added: Refer to Note 11 of the consolidated financial statements for further disclosure regarding our line of credit agreements, which includes a Third Amendment to our U.S.
+Added: revolving credit agreement effective June 12, 2025.
+Added: Refer to Note 17 of the consolidated financial statements for further disclosures regarding our lease obligations, which includes a five-year maturity schedule.
Capital Expenditures and Depreciation
−Removed: Capital expenditures on a cash basis during the first nine months of fiscal 2025 totaled $2.4 million, compared with $3.2 million during the first nine months of fiscal 2024.
−Removed: These levels of capital spending reflect reduced capital spending during the current unfavorable macro-economic conditions within the home furnishings and bedding industries.
−Removed: Depreciation expense was $5.6 million for the first nine months of fiscal 2025, compared with $4.9 million for the same period a year ago, and was mostly related to our mattress fabrics segment for both periods.
−Removed: In addition, for the first nine months of fiscal 2025, depreciation expense for the mattress fabrics segment included $1.3 million of additional depreciation expense related to the shortening of useful lives of equipment associated with the closure of our manufacturing facility located in Quebec, Canada.
−Removed: $1.3 million of additional depreciation expense was classified as restructuring expense in the Consolidated Statement of Net Loss for the nine-month period ended January 26, 2025.
−Removed: For the remainder of fiscal 2025, our capital spending will be centered on capital projects that will increase efficiencies and improve the quality of our products.
+Added: Capital expenditures on a cash basis totaled $179,000 and $501,000 for the first quarters of fiscal 2026 and 2025, respectively.
+Added: These reduced levels of capital spending reflect reduced capital spending during the current unfavorable macro-economic conditions within the home furnishings and bedding industries.
+Added: We reported depreciation expense of $1.1 million and $1.6 million for the first quarters of fiscal 2026 and 2025, respectively, which was mostly related to our bedding segment for both periods.
+Added: We reported accelerated depreciation of $22,000 that was classified within restructuring credit in the Consolidated Statement of Net loss for the three-month period ended August 3, 2025.
+Added: The $22,000 of accelerated depreciation related to the shortening of useful lives of equipment related to the consolidation of distribution activities from our Burlington, North Carolina facility to the manufacturing and distribution center located in Stokesdale, North Carolina.
+Added: We reported accelerated depreciation of $875,000 that was classified within restructuring expense in the Consolidated Statement of Net Loss for the three-month period ended July 28, 2024.
+Added: The $875,000 of accelerated depreciation related to the shortening of useful lives of equipment associated with the closure of our operations located in Quebec, Canada.
+Added: Note 10 of the consolidated financial statements for further details and descriptions of our restructuring activities announced on May 1, 2024 and April 24, 2025.
+Added: Based on current expectations, capital spending for fiscal 2026 is projected to be comparable to fiscal 2025 and will center on capital projects that will increase efficiencies, improve the quality of our products, and facilitate future growth.
Funding for capital expenditures is expected to be from cash provided by operating activities.
−Removed: Accounts Payable – Capital Expenditures
−Removed: As of January 26, 2025, we had amounts due regarding capital expenditures totaling $439,000 that pertained to outstanding vendor invoices, none of which were financed.
−Removed: The total amount outstanding of $439,000 is required to be paid based on normal credit terms.
−Removed: Purchase Commitments – Capital Expenditures
−Removed: As of January 26, 2025, we had open purchase commitments to acquire equipment for our mattress fabrics segment totaling $600,000.
Critical Accounting Policies and Recent Accounting Developments
−Removed: As of January 26, 2025, there were no changes in our significant accounting policies or the application of those policies from those reported in our Annual Report on Form 10-K for the year ended April 28, 2024.
+Added: As of August 3, 2025, there were no changes in our significant accounting policies or the application of those policies from those reported in our Annual Report on Form 10-K for the year ended April 27, 2025.
Refer to Note 2 of the consolidated financial statements for recently adopted and issued accounting pronouncements, if any, since the filing of our Form 10-K for the year ended April 27, 2025.
1 unchanged sentence
There were no significant or new contractual obligations since those reported in our Annual Report on Form 10-K for the year ended April 27, 2025.
−Removed: Any significant increase in our raw material costs, utility/energy costs, and general economic inflation could have a material adverse impact on the company because competitive conditions may limit our ability to pass significant operating cost increases on to customers.
−Removed: During fiscal 2024 and continuing through the third quarter of fiscal 2025, raw material costs started to decline due to slowing global demand;
−Removed: however, the cost of labor remained challenging during fiscal 2024 and continuing through the third quarter of fiscal 2025.
−Removed: Inflationary pressures also affected consumer spending during fiscal 2024 and continuing through the third quarter of fiscal 2025, causing a slowdown in business in both the mattress industry and the residential home furnishings industry.
−Removed: This slowdown has caused reduced demand from producers of home furnishings for our mattress fabrics and residential upholstery fabrics products during fiscal 2024 and continuing through the third quarter of fiscal 2025.
−Removed: We are unable to predict how long these trends will last, or to what extent inflationary pressures may affect the economic and purchasing cycle for home furnishing products (and therefore affect demand for our products) over the short and long term.
+Added: A meaningful rise in raw material, utility, energy or other costs, as well as broader economic inflation, could materially and adversely affect our operating results.
+Added: Competitive market dynamics have traditionally constrained our ability to fully offset such cost increases through price adjustments to customers.
+Added: In fiscal 2023 and 2024, raw material prices declined, primarily due to lower oil prices and softening global demand.
+Added: However, both years were marked by persistent challenges associated with elevated labor costs and limited labor availability.
+Added: While raw material and labor costs stabilized through fiscal 2024 and the first half of fiscal 2025, recent developments such as global trade negotiations and the implementation of new tariffs and import restrictions beginning in the fourth quarter of fiscal 2025 have begun to influence industry pricing structures and supply chain patterns.
+Added: These evolving conditions have placed upward pressure on our raw material costs, and this trend is expected to continue.
+Added: In addition, energy prices have demonstrated substantial volatility in recent fiscal years and continue to represent an unpredictable element of our cost structure.
+Added: We recently initiated price increases designed to mitigate the impacts of recent tariff actions affecting products imported into the U.S., including those imported from China.
+Added: While the majority of these price increases began to phase in and become effective as of the second quarter of fiscal 2026, the above-referenced dynamics may ultimately lead to higher input costs, with potential adverse implications for our financial performance.
+Added: Further, persistent inflationary pressures significantly curtailed consumer spending during fiscal 2023, with effects extending into fiscal 2024 and 2025.
+Added: This economic environment contributed to a broader slowdown in both the mattress and residential home furnishings markets, leading to lower demand from home furnishings manufacturers for our mattress fabrics and residential upholstery fabrics across this period.
+Added: The duration and future impact of these trends remain uncertain, and it is difficult to predict how inflationary conditions may continue to influence consumer behavior and the broader economic cycle for home furnishings products over the near and long term.
QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK
Interest Rates
−Removed: We are exposed to market risk from changes in interest rates on our revolving credit agreements.
−Removed: Effective January 19, 2023, we entered into a second amended and restated U.S.
−Removed: revolving credit agreement (the "Amended Agreement") to establish an asset-based revolving credit facility that required interest to be charged at a rate calculated using an applicable margin over the Federal Reserve Bank of New York's secured overnight fund rate (SOFR), as defined in the Amended Agreement.
−Removed: The interest rate under the Amended Agreement as of January 26, 2025, was 5.8%.
−Removed: As of January 26, 2025, there were no outstanding borrowings under the Amended Agreement.
−Removed: Effective March 20, 2024, we entered into an unsecured credit agreement with a financial institution in China denominated in RMB that requires interest to be charged at a rate based on the Loan Prime Rate ("LPR") in China minus 50 basis points at the time of borrowing, which represents 2.95%.
−Removed: There were outstanding borrowings under this agreement totaling $4.0 million as of January 26, 2025.
−Removed: On November 5, 2024, we entered into an unsecured credit agreement with another financial institution in China denominated in RMB that requires interest to be charged at a rate based on the Loan Prime Rate ("LPR") in China minus 50 basis points at the time of borrowing, which represents 2.60%.
−Removed: There were outstanding borrowings under this agreement totaling $1.4 million as of January 26, 2025.
+Added: We are exposed to market risk from changes in interest rates regarding our credit agreements.
+Added: Revolving Credit Agreements - United States
+Added: revolving credit agreement ("Credit Agreement") with Wells Fargo Bank, N.A., permits both base rate borrowings and borrowings that require interest to be be charged at a variable rate calculated using an applicable margin over SOFR (the secured overnight financing rate administered by the Federal Reserve Bank of New York (or its successor)), as defined in the Credit Agreement.
+Added: The interest rate under the Credit Agreement as of August 3, 2025, was 6.11%.
+Added: As of August 3, 2025, outstanding borrowings under the Credit Agreement totaled $7.0 million.
+Added: Credit Agreement - China Operations
+Added: On November 5, 2024, we entered into an unsecured credit agreement with the Bank in China that provides for a 10.0 million RMB ($1.4 million as of August 3, 2025) working capital loan.
+Added: Interest is charged at a variable rate under the agreement based on the China Loan Prime Rate ("China LPR") minus 50 basis points, which represents 2.6% as of August 3, 2025.
+Added: As of August 3, 2025, the outstanding balance under this working capital loan was 10.0 million RMB ($1.4 million USD).
+Added: Effective March 5, 2025, we entered into a separate unsecured credit agreement with the Agriculture Bank of China ("ABC") that provides for a line of credit up to 29.0 million RMB ($4.0 million as of August 3, 2025).
+Added: Interest is charged under this agreement at a variable rate based on the China LPR minus 50 basis points (applicable interest rate of 2.60% as of August 3, 2025).
+Added: As of August 3, 2025, the outstanding balance under this agreement was 29.0 million RMB ($4.0 million USD).
+Added: During the first quarter of fiscal 2026, we entered into unsecured working capital loan agreements with ABC that provide for 21.0 RMB ($2.9 million USD as of August 3, 2025).
+Added: Interest is charged under these agreements at variable rates based on the China LPR minus 50 basis points (applicable interest rate of 2.60% as of August 3, 2025).
+Added: As of August 3, 2025, the outstanding balance under this agreement was 21.0 million RMB ($2.9 million USD).
+Added: Currently, we have supplier financing arrangements that bear interest at a fixed rate, which were paid in full at the time of borrowings, and therefore borrowings under these arrangements are not subject to future changes in the market rate of interest.
Foreign Currency
3 unchanged sentences
Our foreign subsidiaries use the U.S.
−Removed: dollar as their functional currency.
−Removed: A substantial portion of the company’s imports purchased outside the U.S.
+Added: dollar as their functional currency and a substantial portion of the company’s imports purchased outside the U.S.
are denominated in U.S.
−Removed: A 10% change in the above exchange rates as of January 26, 2025, would not have materially affected our results of operations or financial position.
+Added: A 10% change in the above exchange rates as of August 3, 2025, would not have materially affected our results of operations or financial position.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.