What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2025-07-11 compared with 2024-07-12 · 477 added, 416 removed, 979 unchanged (48% of the section changed)

2 unchanged sentences

Interest Rates

We are exposed to market risk from changes in interest rates on our revolving credit agreements.

Effective January 19, 2023, we entered into a second amended and restated U.S.

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 Federal Reserve Bank of New York's secured overnight fund rate (SOFR), as defined in the Amended Agreement.

The interest rate under the Amended Agreement as of April 28, 2204, was 6.81%.

As of April 28, 2024, there were no outstanding borrowings under the Amended Agreement.

Effective on 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 (2.95% as of April 28, 2024).

There were no borrowings outstanding under this agreement as of April 28, 2024.

Our previously existing revolving credit agreement with another financial institution in China bears interest at a rate determined by the Chinese government at the time of borrowing, and is not directly determined by a published interest rate benchmark.

There were no borrowings outstanding under this agreement as of April 28, 2024.

We are exposed to market risk from changes in interest rates regarding our credit agreements.

Revolving Credit Agreement – United States

revolving credit agreement ("Credit Agreement") with Wells Fargo Bank N.A., permits both base rate borrowings and borrowings that require interest to 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.

The interest rate under the Credit Agreement as of April 27, 2025, was 5.78%.

As of April 27, 2025, outstanding borrowings under the Credit Agreement totaled $4.6 million.

Credit Agreements - China Operations

Effective November 5, 2024, we entered into an unsecured credit agreement with the Bank of China that provides for a 10.0 million RMB ($1.4 million USD as of April 27, 2025) working capital loan.

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 2.60% as of April 27, 2025.

As of April 27, 2025, the outstanding balance under the working capital loan was 10.0 million RMB ($1.4 million USD).

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 of up to 29.0 million RMB ($4.0 million USD as of April 27, 2025).

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 April 27, 2025).

As of April 27, 2025, the outstanding balance under this agreement was 29.0 million RMB ($4.0 million USD).

During the first quarter of fiscal 2026 we entered into unsecured working loan agreements with ABC that provide for 21 million RMB ($2.9 million USD as of borrowing dates ranging from May 12, 2025 through May 28, 2025).

Interest is charged under these agreements at variable rates based on the China LPR at the time of the borrowing minus 50 basis points (2.60% as of borrowing dates ranging from May 12, 2025 through May 28, 2025).

Currently, we have supplier financing arrangements that bear interest at a fixed rate, which is paid in full at the time of borrowing and therefore borrowings under these agreements are not subject to future changes in the market rate of interest.

Foreign Currency

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We have audited the accompanying consolidated balance sheets of Culp, Inc.

(a North Carolina corporation) and subsidiaries (the “Company”) as of April 28, 2024 and April 30, 2023, the related consolidated statements of net loss, comprehensive loss, shareholders’ equity, and cash flows for each of the three years in the period ended April 28, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 28, 2024 and April 30, 2023, and the results of its operations and its cash flows for each of the three years in the period ended April 28, 2024, in conformity with accounting principles generally accepted in the United States of America.

(a North Carolina corporation) and subsidiaries (the “Company”) as of April 27, 2025 and April 28, 2024, the related consolidated statements of net loss, comprehensive loss, shareholders’ equity, and cash flows for each of the three years in the period ended April 27, 2025, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of April 27, 2025 and April 28, 2024, and the results of its operations and its cash flows for each of the three years in the period ended April 27, 2025, in conformity with accounting principles generally accepted in the United States of America .

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

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accounts receivable, net

short-term note receivable

short-term notes receivable

current income taxes receivable

assets held for sale

other current assets

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intangible assets

long-term note receivable

long-term notes receivable

deferred income taxes

LIABILITIES AND SHAREHOLDERS' EQUITY

current liabilities:

lines of credit - current

accounts payable - trade

3 unchanged sentences

deferred revenue

accrued restructuring

accrued expenses

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total current liabilities

lines of credit - long term

operating lease liability - long-term

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CONSOLIDATED STATEM ENTS OF NET LOSS

For the years ended April 28, 2024,April 30, 2023, and May 1, 2022

For the years ended April 27, 2025, April 28, 2024, and April 30, 2023

(dollars in thousands, except per share data)

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restructuring expense

(loss) income from operations

loss from operations

interest expense

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the years ended April 28, 2024, April 30, 2023, and May 1, 2022

other comprehensive income (loss)

For the years ended April 27, 2025, April 28, 2024, and April 30, 2023

unrealized holding gain (loss) on investments

reclassification adjustment for realized loss included in

total unrealized gain (loss) on investments

comprehensive loss

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Comprehensive

and May 1, 2022

and April 30, 2023

Balance, May 1, 2022

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vesting of performance-based restricted

common stock issued in connection with

vesting of time-based restricted

immediately vested common stock awards

1 unchanged sentence

with payroll withholding taxes

common stock repurchased

dividends paid

Balance, May 1, 2022

Balance, April 30, 2023

stock-based compensation

unrealized loss on investments

common stock issued in connection with

vesting of performance-based restricted

unrealized gain on investments

common stock issued in connection with

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vesting of time-based restricted

immediately vested common stock awards

common stock surrendered in connection

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CONSOLIDATED STATEM ENTS OF CASH FLOWS

For the years ended April 28, 2024, April 30, 2023, and May 1, 2022

For the years ended April 27, 2025, April 28, 2024, and April 30, 2023

(dollars in thousands)

cash flows from operating activities:

adjustments to reconcile net loss income to net cash (used in) provided by

operating activities:

non-cash inventory (credit) charges

adjustments to reconcile net loss to net cash (used in)

provided by operating activities:

non-cash inventory (credit) charge

stock-based compensation

deferred income taxes

gain on sale of property, plant, and equipment

gain on sale of equipment

non-cash restructuring expense

realized loss from the sale of investments

foreign currency exchange (gain) loss

foreign currency exchange gain

changes in assets and liabilities:

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accounts payable-trade

accrued expenses and deferred compensation

deferred revenue

accrued restructuring

accrued expenses and deferred compensation

net cash (used in) provided by operating activities

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proceeds from the sale of property, plant and equipment

proceeds from note receivable

proceeds from the sale of short-term investments (available for sale)

proceeds from the sale and maturity of investments (held to maturity)

purchase of short-term investments (available for sale)

purchase of investments (held-to-maturity)

proceeds from notes receivable

proceeds from the sale of investments (rabbi trust)

purchase of investments (rabbi trust)

net cash (used in) provided by investing activities

net cash provided by (used in) investing activities

cash flows from financing activities:

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payments associated with lines of credit

dividends paid

repurchases of common stock

common stock surrendered for payroll withholding taxes

payments for debt issuance costs

net cash used in financing activities

net cash provided by (used in) financing activities

effect of exchange rate changes on cash and cash equivalents

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Description of Business

Our operations are classified into two business segments:

Our operations are classified into two reportable segments:

mattress fabrics and upholstery fabrics.

1 unchanged sentence

The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers.

Currently, we have mattress fabric manufacturing operations located in Stokesdale, North Carolina, and Quebec, Canada, and a mattress cover operation located in Ouanaminthe, Haiti.

During the last half of fiscal 2023, we rationalized our domestic cut and sewn cover platform, which included the termination of agreements to lease two facilities located in High Point, North Carolina and moved our R&D and prototyping capabilities from these facilities to our facility located in Stokesdale, North Carolina.

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, that includes a gradual discontinuation of operations and sale of the company's manufacturing facility located in Quebec, Canada;

(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;

Currently, we have a mattress fabric manufacturing operation located in Stokesdale, North Carolina, and a sewn mattress cover operation located in Ouanaminthe, Haiti.

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 the closure and sale of the company's manufacturing facility and related land (collectively referred to as the "Property") located in Quebec, Canada;

(2) move a portion of the knitting and finishing capacity from the company's Property 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;

and (4) consolidate the company's two leased facilities related to the sewn mattress cover operation located in Ouanaminthe, Haiti, and reduce other operation expenses at this location.

See Note 8 to the consolidated statements regarding our restructuring activities.

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.

See Note 10 to the consolidated financial statements for further details regarding the restructuring activities announced on May 1, 2024.

All the above restructuring activities related to this announcement have been completed, including the sale of the Property located in Quebec, Canada, effective April 30, 2025.

See Note 8 located in the notes to the consolidated financial statements for further details regarding the sale of the Property.

During the last half of fiscal 2023, we rationalized our domestic cut and sewn cover platform, which included the termination of agreements to lease two facilities located in High Point, North Carolina, and moved our R&D and prototyping capabilities from these facilities to our facility located in Stokesdale, North Carolina.

Upholstery Fabrics

The upholstery fabrics segment develops, sources, manufactures, and sells fabrics to customers in the residential, commercial, and hospitality industries, and supplies window treatment products to customers in the commercial and hospitality industries.

We have upholstery fabric operations located in Shanghai, China and Burlington, NC.

During the fourth quarter of fiscal 2024, we established a wholly-owned subsidiary, Culp Fabrics Vietnam Limited, with an administrative office located in Ho Chi Minh City, Vietnam, for the purpose of enhancing our strategic sourcing opportunities and to further diversify our supply chain in Asia.

During the third quarter of fiscal 2022, we commenced operation of a new leased facility in Ouanaminthe, Haiti dedicated to the production of cut and sewn upholstery kits.

Due to significant decline in demand for cut and sewn upholstery kits, we terminated the agreement to lease this facility during the third quarter of fiscal 2023, and we relocated a scaled down upholstery cut and sewn operation into our existing mattress cover facility also located in Ouanaminthe, Haiti, during the fourth quarter of fiscal 2023.

During the first quarter of fiscal 2024, demand for upholstery cut and sew kits declined more than previously anticipated, resulting in the strategic action to discontinue production of upholstery cut and sew kits in Haiti.

See Notes 8 and 9 of the consolidated financial statements for further details regarding this restructuring plan.

Additionally, Read Window Products, LLC (“Read”), a wholly-owned subsidiary with operations located in Knoxville, TN, provides window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation for Read’s products, to customers in the hospitality and commercial industries.

The upholstery fabrics segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers.

As of April 27, 2025, we had upholstery fabric operations located in Shanghai, China, and Burlington, North Carolina.

During the fourth quarter of fiscal 2024, we established a wholly-owned subsidiary, Culp Fabrics Vietnam Limited, 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.

On April 24, 2025, we announced that we will close our leased facility operated by our upholstery fabrics segment located in Burlington, North Carolina, and transition its production and distribution activities utilizing a shared management model within our owned facility located in Stokesdale, North Carolina.

Our Stokesdale, North Carolina facility has historically been solely operated by our mattress fabrics segment.

We expect this transition to be substantially completed by December 31, 2025.

During fiscal 2023, Culp Upholstery Fabrics - Haiti, Ltd.

entered into an agreement to terminate a lease agreement for a facility located in Ouanaminthe, Haiti, and relocated a scaled down upholstery cut and sewn kits operation into our existing mattress cover facility also located in Ouanaminthe, Haiti.

During the first quarter of fiscal 2024, demand for upholstery cut and sew kits declined more than previously anticipated, resulting in a strategic action to discontinue production of upholstery cut and sewn kits in Haiti.

See Note 10 of the consolidated financial statements for further details regarding this restructuring plan.

Additionally, Read Window Products, LLC (“Read”), a wholly-owned subsidiary with operations located in Knoxville, Tennessee, and our upholstery fabrics facility located in Burlington, North Carolina, 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.

The activities located at our Burlington, North Carolina, facility will transition to our facility located in Stokesdale, North Carolina, as part of our previously announced shared management model noted above.

Basis of Presentation

1 unchanged sentence

generally accepted accounting principles.

Certain amounts presented in prior periods have been reclassified to conform to the current period financial statement presentation.

Non-cash charges totaling $ 1.9 million for markdowns of inventory based on our policy for aged inventory were reclassified from the line item "inventories" to the line item "non-cash inventory charges" in the Consolidated Statement of Cash Flows for the year ended May 1, 2022.

This reclassification did not have an effect on previously reported net cash (used in) provided by operating activities and (decrease) increase in cash and cash equivalents.

Principles of Consolidation

1 unchanged sentence

All significant intercompany balances and transactions have been eliminated in consolidation.

The accounts of our subsidiaries located in Shanghai, China, and Ho Chi Minh City, Vietnam are consolidated as of April 30, a calendar month end, which is required by the respective governments under which they are organized.

No events occurred related to the difference between our fiscal year end on the Sunday closest to April 30 and our Chinese or Vietnamese subsidiaries year end of April 30 that materially affected the company’s financial position, results of operations, or cash flows for fiscal years 2024, 2023, or 2022.

The accounts of our subsidiaries located in Shanghai, China, and Ho Chi Minh City, Vietnam, are consolidated as of April 30th, a calendar month end, which is required by the respective governments under which they are organized.

No events occurred related to the difference between our fiscal year end on the Sunday closest to April 30 and our Chinese and Vietnamese subsidiaries year end of April 30 that materially affected the company’s financial position, results of operations, and cash flows for fiscal years 2025, 2024, or 2023.

Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30.

Fiscal 2024, 2023, and 2022 each included 52-week periods.

Fiscal 2025, 2024, and 2023 each comprised 52-week periods.

Use of Estimates

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Accounts Receivable and Current Expected Credit Losses

Substantially all our accounts receivable were due from manufacturers in the bedding and furniture industries.

Substantially all of our accounts receivable were due from manufacturers in the bedding and furniture industries.

We grant credit to customers and generally do not require collateral.

1 unchanged sentence

As of the end of each reporting period, we assess the credit risk of our customers within our accounts receivable portfolio.

risk assessment includes the respective customer’s (i) financial position;

risk assessment includes the respective customer’s:

(i) financial position;

(ii) past payment history;

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We do not have any off-balance sheet credit exposure related to our customers.

We account for inventories at the lower of first-in, first-out (FIFO) cost or net realizable value.

We account for inventories at the lower of first-in, first-out (FIFO) cost basis or net realizable value.

Management continuously examines inventory to determine if there are indicators that the carrying value exceeds its net realizable value.

Experience has shown that the most significant indicators of the need for inventory markdowns are the age of the inventory and the planned discontinuance of certain patterns.

As a result, we provide inventory valuation write-downs based upon established percentages based on the age of the inventory that are continually evaluated as events and market conditions require.

Our inventory aging categories are six, nine, twelve, and fifteen months.

We also provide inventory valuation write-downs based on the planned discontinuance of certain patterns based on the current market values at that time as compared to their current carrying values.

Historical experience has shown that the most significant indicators that would require inventory markdowns are the age of the inventory and the planned discontinuance of certain patterns.

As a result, we provide inventory valuation markdowns based upon established percentages associated with the age of inventory that are continually evaluated and based on historical experience and judgment.

Also, we provide inventory valuation markdowns associated with restructuring activities and on the planned discontinuance of certain patterns based on the current market values at that time of assessment as compared to their current carrying values.

Based on current unfavorable industry macroeconomic conditions in the home furnishings and bedding industries, it is possible that estimates used by management to determine the write down of inventory to its net realizable value could be materially different from the actual amounts of our results.

These differences could result in higher than expected markdowns of inventory, which could adversely affect the company’s results of operations and financial condition in the near term.

During the fourth quarter of fiscal 2025, we assessed the percentages associated with the age of our inventory and the related aging categories.

This assessment was based on a change in current market trends related to extended life cycles for finished goods inventory.

As a result of our assessment, we recorded a total non-cash inventory credit of $ 1.7 million for both our mattress fabrics and upholstery fabrics segments due to a change in accounting estimate related to the finished goods inventory markdown reserve.

The $ 1.7 million non-cash inventory credit was recorded within cost of sales in our fiscal 2025 Consolidated Statement of Net Loss.

Based on the above policy, we recorded a non-cash inventory (credit) charge within the Consolidated Statements of Net Loss of $( 2.4 ) million, $( 1.6 ) million, and $ 5.8 milli on during fiscal 2025, 2024, and 2023, respectively.

The $ 5.8 million charge during fiscal 2023 includes an additional $ 2.9 million charge for the write-down of inventory to its net realizable value associated with our mattress fabrics segment.

As of April 27, 2025, and April 28, 2024, the reserve for inventory markdowns was $ 7.8 million and $ 9.6 million, respectively.

Property, Plant, and Equipment

2 unchanged sentences

Maintenance, repairs, and minor renewals are expensed as incurred.

When properties or equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed and amounts received on disposal greater than or less than the book value of assets sold are credited or charged to (loss) income from operations.

When property, plant, or equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed and amounts received on disposal greater than or less than the book value of property, plant, or equipment sold are credited or charged to (loss) income from operations.

Management reviews long-lived assets, which consist principally of property, plant, and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered.

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All monetary foreign currency asset and liability accounts are remeasured into U.S.

dollars at year-end exchange rates.

Non-monetary assets and liabilities such as property, plant, and equipment and right of use assets are recorded at historical exchange rates.

Foreign currency revenues and expenses are remeasured at average exchange rates in effect during the year, except for certain expenses related to balance sheet amounts remeasured at historical exchange rates, such as depreciation expense.

Exchange gains and losses from remeasurement of foreign currency denominated monetary assets and liabilities are recorded in the other expense line item in the Consolidated Statements of Net Loss in the period in which they occur.

A summary of our foreign currency exchange gains (losses) by geographic area follows:

dollars at year-end foreign currency exchange rates.

Non-monetary assets and liabilities such as property, plant, and equipment and right of use assets are recorded at historical foreign currency exchange rates.

Foreign currency revenues and expenses are remeasured at average foreign currency exchange rates in effect during the year, except for certain expenses related to balance sheet amounts remeasured at historical foreign currency exchange rates, such as depreciation expense.

Foreign currency exchange rate gains and losses from remeasurement of foreign currency denominated monetary assets and liabilities are recorded in the other expense line item in the Consolidated Statements of Net Loss in the period in which they occur.

A summary of our foreign currency exchange rate gains (losses) by geographic area follows:

(dollars in thousands)

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ASC Topic 350 requires us to assess indefinite-lived intangible assets such as our tradename for impairment annually (the last day of our fiscal year) or between annual tests if we believe certain indicators of impairment exist.

Such indicators could include but are not limited to (1) deterioration in the environment of the industry and markets in which we operate, (2) unanticipated competition, (3) a deterioration in general economic conditions, (4) an overall decline in financial performance, such as negative and declining cash flows, or a decline in actual or planned revenue or earnings compared with actual and projected results or relevant prior periods, and (5) a decrease in the price per share of our common stock.

Such indicators could include but are not limited to:

(1) deterioration in the environment of the industry and markets in which we operate, (2) unanticipated competition, (3) a deterioration in general economic conditions, (4) an overall decline in financial performance, such as negative and declining cash flows, or a decline in actual or planned revenue or earnings compared with actual and projected results or relevant prior periods, and (5) a decrease in the price per share of our common stock.

As a result, we first assess qualitative factors, such as the indicators outlined above, to determine whether it is more likely than not that the fair value of our tradename is less than its carrying amount.

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If the carrying amount of our tradename exceeds the tradename's fair value, an impairment loss is recognized in an amount equal to that excess.

No asset impairment charges were recorded during fiscal 2024, 2023, or 2022, as it relates to indefinite-lived intangible assets.

See Note 6 of the consolidated financial statements for further details of our assessments of impairment, conclusions reached, and the result of our annual impairment test relating to our indefinite-live intangible asset (i.e.

As a result of our annual impairment assessment as of April 27, 2025, we recorded an asset impairment charge totaling $ 540,000 , which represents the entire carrying value of our Read tradename.

This charge was classified as restructuring expense in our fiscal 2025 consolidated statement of net loss.

No asset impairment charges were recorded during fiscal 2024 and 2023 related to indefinite-lived intangible assets.

See Note 6 of the consolidated financial statements for further details of our assessment of impairment, conclusions reached, and the result of our annual impairment test relating to our indefinite-live intangible asset (i.e.

Deferred Income Taxes – Overall

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The transaction price is typically allocated to performance obligations based upon stand-alone selling prices.

We elected the practical expedient to not adjust the transaction price for the effects of a significant financing component because the period between the satisfaction of the performance obligation and the customer’s payment is generally one year or less.

We did not disclose the value of unsatisfied performance obligations as substantially all of any unsatisfied performance obligations as of April 27, 2025, will be satisfied within one year or less.

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Stock-Based Compensation

Our equity incentive plans are described more fully in Note 13 to the notes to the consolidated financial statements.

Our equity incentive plans are described in more detail in Note 15 to the notes to the consolidated financial statements.

ASC Topic 718 Compensation – Stock Compensation requires that all stock-based compensation be recognized as compensation expense in the financial statements and that such cost be measured at the grant date for awards issued to employees and the company’s board of directors.

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The accompanying consolidated financial statements include certain financial instruments, and the fair market value of such instruments may differ from amounts reflected on a historical basis.

These financial instruments include our short-term and long-term investments related to a rabbi trust that sets aside funds for participants in our deferred compensation plan and are classified as available-for-sale.

The fair value measurements of our financial instruments are described more fully in Note 14 of the consolidated financial statements.

The carrying amount of cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued expenses approximate their fair value because of the short maturity of these financial instruments.

These financial instruments include our short-term and long-term investments

related to a rabbi trust that sets aside funds for participants in our deferred compensation plan and are classified as available-for-sale.

The fair value measurements of our financial instruments are described in more detail in Note 16 of the consolidated financial statements.

The carrying amount of cash and cash equivalents, accounts receivable, other current assets, accounts payable, lines of credit - current, and accrued expenses approximates their fair value because of the short maturity of these financial instruments.

The carrying amount of our lines of credit - long term approximates its fair value because the respective variable rates of interest associated with the lines of credit are comparable to the market rate of interest.

Recently Adopted Accounting Pronouncements

There were not any recently adopted accounting pronouncements during fiscal 2024.

(i) significant segment expenses that are regularly provided to the Chief Operating Decision Maker (CODM) that are included within each measure of segment profit or loss, (ii) other segment items by reportable segment as defined by ASU 2023-07, and (iii) the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of each segment's profit or loss in assessing segment performance and deciding how to allocate resources.

ASU 2023-07 became effective during the fourth quarter of fiscal 2025 , and therefore, we applied this new guidance in our fiscal 2025 consolidated financial statements.

This guidance did not have an impact on our results of operations and financial condition, but did have a material impact on the disclosures required in the notes to the consolidated financial statements, which are disclosed in Note 19 of the consolidated financial statements.

Recently Issued Accounting Pronouncements

Effective November 27, 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07 Improvements to Reportable Segment Disclosures which enhances disclosure requirements to segment reporting including (i) significant segment expenses that are regularly provided to the Chief Operating Decision Maker (CODM) that are included within each measure of segment profit or loss, (ii) other segment items by reportable segment as defined by ASU 2023-07, and (iii) the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of each segment's profit or loss in assessing segment performance and deciding how to allocate resources.

ASU 2023-07 is effective for public entities starting in annual periods beginning after December 15, 2023 (i.e., our fiscal 2025 annual report) and interim periods beginning after December 15, 2024 (i.e., first quarter of fiscal 2026 interim report).

Management is currently evaluating the effects ASU 2023-07 will have on the notes to the consolidated financial statements.

Effective December 14, 2023, the FASB issued ASU 2023-09 Improvements to Income Tax Disclosures, which is an update to Topic 740, Income Taxes.

The amendments in this update relate to improvements regarding the transparency of income tax disclosures by

requiring consistent categories and greater disaggregation by jurisdiction of information included in the effective income tax rate reconciliation and for income taxes paid.

Also, the amendments allow investors to better assess an entity's (i) capital allocation decisions, (ii) worldwide operations, and (iii) related tax risks, tax planning, and operational opportunities that affect the effective income tax rate and prospects for future cash flows.

The amendments in this update relate to improvements regarding the transparency of income tax disclosures by requiring consistent categories and greater disaggregation by jurisdiction of information included in the effective income tax rate reconciliation and for income taxes paid.

Also, the amendments allow investors to better assess an entity's:

(i) capital allocation decisions, (ii) worldwide operations, and (iii) related tax risks, tax planning, and operational opportunities that affect the effective income tax rate and prospects for future cash flows.

The other amendments in this update improve the effectiveness and comparability of disclosures relating to pretax income (or loss) and income tax expense (or benefit) and remove disclosures that are no longer considered cost beneficial or relevant.

1 unchanged sentence

Early adoption is permitted.

The company expects that the adoption ASU 2023-09 will not have an impact on our results of operations and financial condition, but will have a material impact on the disclosures required in the notes to the consolidated financial statements, which are disclosed in Note 11.

The company expects that the adoption of ASU 2023-09 will not have an impact on our results of operations and financial condition, but will have a material impact on the disclosures required in the notes to the consolidated financial statements, which are disclosed in Note 12 of the consolidated financial statements.

In November 2024, the FASB issued ASU 2024 - 03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (“ASU 2024-03 ” ), which is an update to Topic 220, Income Statement - Reporting Comprehensive Income.

ASU 2024-03 enhances transparency and decision-usefulness of expense disclosures in response to investors' requests for more detailed, disaggregated expense information, enabling a clearer understanding of a public business entity's performance and cost structure.

The amendments improve disclosure requirements in financial statement notes for specific expense categories including:

(a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, (e) certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as other disaggregation requirements, (f) qualitative description of amounts remaining in relevant expense captions that are not necessarily disaggregated quantitatively, as well as (g) the total amount of selling expenses, and in annual reporting periods, the entity's definition of selling expense.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, (i.e., our fiscal 2028 annual report) and interim reporting periods beginning after December 15, 2027 (i.e., first quarter of fiscal 2029 interim report).

Early adoption is permitted.

The company is currently evaluating ASU 2024-03 to determine the impact it will have on its consolidated financial statements and related disclosures.

Currently, there are no new accounting pronouncements that are expected to have a material effect on our consolidated financial statements.

12 unchanged sentences

As of April 27, 2025, and April 28, 2024, we assessed the credit risk of our customers within our accounts receivable portfolio.

Our risk assessment includes the respective customer’s (i) financial position;

Our risk assessment includes the respective customer’s:

(i) financial position;

(ii) past payment history;

14 unchanged sentences

The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers.

The upholstery fabrics segment develops, sources, manufactures, and sells fabrics to customers in the residential, commercial, and hospitality industries.

In addition, the upholstery fabrics segment includes Read, which provides window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation services for Read’s products, to customers in the hospitality and commercial industries.

The upholstery fabrics segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality manufacturers.

In addition, the upholstery fabrics segment includes Read and our facility located in Burlington, North Carolina, 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.

Our primary performance obligations include the sale of mattress fabrics and upholstery fabrics, as well as the performance of customized fabrication and installation services for Read’s products associated with window treatments.

Significant Judgments

2 unchanged sentences

Certain contracts relating to customized fabrication and installation services associated with Read require upfront customer deposits that result in a contract liability which is recorded on the Consolidated Balance Sheets as deferred revenue.

Revenue on contract liabilities associated with customized fabrication and installation services is generally recognized within one year as the satisfaction of performance obligations is generally one year or less.

If upfront deposits or prepayments are not required, customers may be granted terms which generally range from 15 - 60 days.

Our terms are customary within the industries in which we operate and are not considered financing arrangements.

During the fourth quarter of fiscal 2023, we entered into a contract with an upholstery fabrics customer that required the customer to pay us an upfront license fee payment totaling $ 250,000 to use a certain trademark for a period of three years commencing in fiscal 2024 and extending through fiscal 2026.

During the fourth quarter of fiscal 2023, we entered into a contract with an upholstery fabrics customer that required the customer to pay us an upfront license fee totaling $ 250,000 to use a certain trademark for a period of three years commencing in fiscal 2024 and extending through fiscal 2026.

There were no contract assets recognized as of April 27, 2025, or April 28, 2024.

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Ending Balance

As of April 28, 2024, deferred revenue of $ 1.5 million pertained to (i) upfront customer deposits associated with customized fabrication and installation services related to Read totaling $ 1.3 million and (ii) an upfront license fee paid to us for the licensing of a certain trademark to be used by an upholstery fabrics customer totaling $ 167,000 .

As of April 30, 2023, deferred revenue of $ 1.2 million pertained to (i) upfront customer deposits associated with customized fabrication and installation services related to Read totaling $ 942,000 and (ii) an upfront license fee paid to us for the licensing of a certain trademark to be used by an upholstery fabrics customer totaling $ 250,000 .

As of April 27, 2025, deferred revenue of $ 422,000 pertained to:

(i) upfront customer deposits associated with customized fabrication and installation services related to Read totaling $ 339,000, and (ii) an upfront license fee paid to us for the licensing of a certain trademark to be used by an upholstery fabrics customer totaling $ 83,000 .

As of April 28, 2024, deferred revenue of $ 1.5 million pertained to:

(i) upfront customer deposits associated with customized fabrication and installation services related to Read totaling $ 1.3 million, and (ii) an upfront license fee paid to us for the licensing of a certain trademark to be used by an upholstery fabrics customer totaling $ 167,000 .

As of April 30, 2023, deferred revenue of $ 1.2 million pertained to:

(i) upfront customer deposits associated with customized fabrication and installation services related to Read totaling $ 942,000, and (ii) an upfront license fee paid to us for the licensing of a certain trademark to be used by an upholstery fabrics customer totaling $ 250,000 .

Revenue recognized during the period that was included in the contract liability balance at the beginning of the period was $ 1.4 million, $ 1.0 million, and $ 520,000 for fiscal years 2025, 2024, and 2023, respectively

Disaggregation of Revenue

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finished goods

Measurement of Inventory to Net Realizable Value

We recorded a non-cash inventory (credit) charge of $( 1.6 ) million, $ 5.8 million, and $ 1.9 million during fiscal 2024, 2023, and 2022, respectively.

We recorded a non-cash inventory credit of $ 1.6 million during fiscal 2024, which mostly represents adjustments for markdowns of inventory estimated based on the company's policy for aged inventory that was on hand as of April 28, 2024.

This $ 1.6 million non-cash credit stems from promotional programs to reduce aged raw materials and finished goods inventory, coupled with aligning inventory purchases with consumer demand trends, and relates mostly to the mattress fabrics segment.

The $ 1.6 million also includes a $ 40,000 charge associated with the upholstery fabrics segment related to markdowns of inventory associated with the discontinuation of production of cut and sewn upholstery kits at our facility located in Ouanaminthe, Haiti.

We recorded a non-cash inventory charge o f $ 5.8 million during fiscal 2023, which represented a $ 2.9 million charge for the write down of inventory to its net realizable value associated with our mattress fabrics segment (see below section titled Mattress Fabrics Segment - Net Realizable Value for further details), a $ 2.8 million charge related to markdowns of inventory estimated based on our policy for aged inventory on hand as of April 30, 2023, and a $ 98,000 charge related to the loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China.

The $ 2.8 million non-cash charge associated with the markdowns of inventory noted above resulted from a significant decrease in consumer demand for both business segments, as well as aged inventory resulting from an increase in inventory purchases to protect against supply chain disruptions and support our customers.

Mattress Fabrics Segment - Net Realizable Value

During the second quarter of fiscal 2023, our mattress fabrics segment experienced a 35.8 % decline in net sales compared with the second quarter of fiscal 2022.

This decline in net sales led to a significant decrease in gross margin to ( 8.7 %) (excluding a non-cash inventory charge of $ 3.8 million recorded during the second quarter of fiscal 2023), as compared with gross margin of 15.0 % during the second quarter of fiscal 2022.

The significant decline in net sales and profitability during the second quarter of fiscal 2023 stemmed from a greater than anticipated decline in consumer discretionary spending on mattress products, which we believe was driven by the following factors:

(i) inflationary effects of commodities such as gas, food, and other necessities;

(ii) a significant increase in interest rates;

(iii) the pulling forward of demand for home goods products during the early years of the COVID-19 pandemic, which demand then shifted to travel, leisure, and other services;

and (iv) excess inventory held by customers due to the decline in consumer demand.

Based on this evidence, management conducted a thorough review of its mattress fabrics inventory and, as a result, recorded a charge of $ 2.9 million within cost of sales to write down inventory to its net realizable value.

This $ 2.9 million charge was based on management's best estimates of product sales prices, customer demand trends, and its plans to transition to new products.

We recorded a non-cash inventory charge of $ 1.9 million during fiscal 2022, which represents adjustments for markdowns of inventory estimated based on the company's policy for aged inventory that was on hand as of May 1, 2022.

This $ 1.9 million charge stems from the COVID-19 related shutdowns that affected our upholstery fabric operations located in China during the fourth quarter of fiscal 2022, as well as aged inventory resulting from an increase in inventory purchases to protect against supply chain disruptions and support our customers.

As of April 28, 2024, we reviewed our mattress fabrics and upholstery fabrics inventories to determine if any additional write-downs, in excess of the amount recorded based on our policy for aged inventory, were necessary.

Based on our assessment, no additional write-downs of inventories to their net realizable value were recorded for the twelve months ended April 28, 2024, other than the markdowns of inventory associated with our upholstery fabrics segment restructuring activities described more fully in Note 8 of the consolidated financial statements.

Based on current unfavorable industry macroeconomic conditions, it is possible that estimates used by management to determine the write down of inventory to its net realizable value could be materially different from the actual amounts or results.

These differences could result in higher than expected markdowns of inventory, which could adversely affect the company’s results of operations and financial condition in the near term.

PROPERTY, PLANT, AND EQUIPMENT

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Non-compete agreement, net

A summary of the change in the carrying amount of our tradename follows:

(dollars in thousands)

beginning balance

loss on impairment

ending balance

Our tradename pertains to Read, a separate reporting unit within our upholstery fabrics segment.

This tradename was determined to have an indefinite useful life at the time of its acquisition, and therefore is not being amortized.

However, we are required to assess this tradename annually or between annual tests if we believe indicators of impairment exist.

Accordingly, on the annual testing date, April 28, 2024, we performed an impairment assessment of Read's tradename.

Our assessment consisted of a quantitative impairment test utilizing the relief from royalty method to determine the fair value of Read's tradename and comparing the fair value of the tradename to its respective carrying amount.

Based on this quantitative test, the fair value of the trade name exceeded its carrying amount and consequently no impairment was recorded during the twelve months ending April 28, 2024.

This tradename was determined to have an indefinite useful life at the time of its acquisition, and therefore was not amortized.

We are required to assess our tradename for impairment annually or between annual tests if we believe indicators of impairment exist.

Accordingly, we performed our annual impairment assessment of Read's tradename as of April 27, 2025.

Initially, we performed a qualitative assessment in which we concluded it was more-likely-than-not the fair value of Read's tradename was less than its carrying amount.

This conclusion was based on management's decision, announced on April 24, 2025, to strategically transform the company's operating model by combining certain activities within the mattress fabrics and upholstery fabrics business segments and becoming one integrated and Culp-branded business.

Since the company is transforming to a single Culp-branded business, Read's tradename will be phased out during fiscal 2026, and will no longer be used to market upholstery fabric products to customers associated with the hospitality industry.

Consequently , we recorded an asset impairment charge totaling $ 540,000 , which represents the entire carrying value of our Read tradename.

This charge was classified as restructuring expense within our fiscal 2025 consolidated statement of net loss.

Customer Relationships

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Our customer relationships are amortized on a straight-line basis over useful lives ranging from nine to seventeen years .

The gross carrying amount of our customer relationships was $ 3.1 million as of April 28, 2024, and April 30, 2023.

Accumulated amortization for these customer relationships was $ 2.1 million and $ 1.8 million as of April 28, 2024, and April 30, 2023, respectively.

The gross carrying amount of our customer relationships were $ 3.1 million as of April 27, 2025, and April 28, 2024.

Accumulated amortization for our customer relationships were $ 2.4 million and $ 2.1 million as of April 27, 2025, and April 28, 2024, respectively.

The remaining amortization expense for the next five fiscal years and thereafter follows:

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FY 2030 - $ 51,000 .

and thereafter - $ 51,000 .

The weighted average amortization period for our customer relationships is 3.0 years as of April 27, 2025.

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The gross carrying amount of this non-compete agreement was $ 2.0 million as of April 27, 2025, and April 28, 2024.

Accumulated amortization for this non-compete agreement was $ 1.7 million and $ 1.6 million as of April 28, 20 24, and April 30, 2023.

Accumulated amortization for this non-compete agreement was $ 1.8 million and $ 1.7 million as of April 27, 20 25, and April 28, 2024, respectively.

The remaining amortization expense for the next five years and thereafter follows:

1 unchanged sentence

FY 2027 - $ 76,000 ;

and FY 2028 - $ 74,000 .

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The mattress fabrics segment experienced a significant cumulative operating loss totaling $ 36.4 million commencing in the second quarter of fiscal 2023, and continuing through the fourth quarter of fiscal 2025.

We believe this significant cumulative operating loss stemmed from a decline in consumer discretionary spending on mattress products, which we believe was

driven by the following factors:

We believe this significant cumulative operating loss stemmed from a decline in consumer discretionary spending on mattress products, which we believe was driven by the following factors:

(i) inflationary effects of commodities such as gas, food, and other necessities;

(ii) a significant increase in interest rates;

(iii) the pulling forward of demand for home goods products during the early years of the COVID-19 pandemic, which demand has now shifted to travel, leisure, and other services;

(iii) the pulling forward of demand for home goods products during the early years of the COVID-19 pandemic with such demand shifting to travel, leisure, and other services;

and (iv) excess inventory held by customers due to the decline in consumer demand.

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If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized for the excess of the carrying amount over the fair value of the asset group.

The carrying amount of the Mattress Asset Group totaled $ 33.7 million, which represents property, plant, and equipment of $ 31.5 million, right of use assets of $ 1.6 million, customer relationships of $ 306,000 , and a non-compete agreement of $ 301,000 .

The total carrying amount of the Mattress Asset Group did not exceed the sum of its future undiscounted cash flows from its use and disposition.

The carrying amount of the Mattress Asset Group totaled $ 23.9 million, which represents property, plant, and equipment of $ 23.3 million, right of use assets of $ 125,000 , customer relationships of $ 255,000 , and a non-compete agreement of $ 226,000 .

The total carrying amount of the Mattress Asset Group did not exceed the sum of its expected future undiscounted cash flows from its use and disposition.

As a result, we determined there was no impairment associated with the Mattress Asset Group as of April 27, 2025.

Impairment of Definite Lived Assets - Read

As of April 28, 2024, management reviewed the long-lived assets associated with Read, a separate reporting unit within our upholstery fabrics segment.

Read's long-lived assets consist of property, plant, and equipment, a right of use asset, and finite-lived intangible assets (collectively known as "Read's Asset Group").

Read's Asset Group was reviewed for impairment because events and changes in circumstances occurred that indicated the carrying amount of the Read's Asset Group may not be recoverable.

As a result, we performed an assessment to determine if any impairment indicators existed.

Based on this assessment we concluded that indicators of impairment did exist, such as unfavorable financial performance in that we have incurred net operating losses during the last three fiscal years, which stem from (i) a tight labor supply and wage inflation, (ii) processing and pricing inefficiencies associated with customization and installation services, (iii) an unfavorable mix of small scale and larger scale projects;

and (iv) changes in management and key personnel.

Based on the above evidence, we were required to determine the recoverability of Read's Asset Group, which is classified as held and used, by comparing the carrying amount of Read's Asset Group to the sum of the future undiscounted cash flows expected to result from its use and eventual disposition.

If the carrying amount of an asset group exceeds its estimated future undiscounted cash flows, an impairment charge is recognized for the excess of the carrying amount over the fair value of the asset group.

As of April 28, 2024, the carrying amount of Read's Asset Group totaled $ 1.8 million, which represents customer relationships of $ 728,000 , right of use asset of $ 725,000 , and property, plant, and equipment of $ 390,000 .

The total carrying amount of Read's Asset Group did not exceed the sum of its future undiscounted cash flows from its use and eventual disposition.

As a result, we determined there was no impairment associated with Read's Asset Group as of April 28, 2024.

NOTES RECEIVABLE

Culp Upholstery Fabrics - Haiti, Ltd.

("CUF Haiti")

In connection with the restructuring activity of our upholstery fabrics cut and sew operation located in Ouanaminthe, Haiti, effective January 24, 2023, CUF Haiti entered into an agreement to terminate a lease of a facility (“Termination Agreement”).

See Note 10 of the consolidated financial statements for further details regarding this restructuring activity.

Pursuant to the terms of the original lease agreement (the “Original Lease”), CUF Haiti was required to pay in advance $ 2.8 million for the full amount of rent due prior to the commencement of the Original Lease, with the initial lease term set to expire on December 31, 2029 .

Pursuant to the terms of the Termination Agreement, the Original Lease was formally terminated when CUF Haiti vacated and returned possession of the leased facility to the lessor.

After CUF Haiti vacated and returned possession of the leased facility, a third party (the “Lessee”) took possession of this facility, and the Lessee agreed to pay CUF Haiti $ 2.4 million in the form of a note receivable over a period commencing on April 1, 2023, and ending on December 31, 2029, based on the terms stated in the Termination Agreement.

In connection with the Termination Agreement, an affiliate of the Lessee guaranteed payment in full of all amounts due and payable to CUF Haiti by the Lessee, and CUF Haiti has been fully and unconditionally discharged from all of its remaining obligations under the Original Lease.

As of the end of our third quarter of fiscal 2023, the carrying amount of the note receivable totaling $ 2.4 million wa s recorded at its fair value of $ 2.0 million, which represented the present value of future discounted cash flows based on the payment amounts and timing of such payments due from the Lessee as stated in the Termination Agreement.

Consequently, since the fair value of the note receivable was less than its carrying amount, we recorded a restructuring charge of $ 434,000 during the third quarter of fiscal 2023 to reduce the note receivable’s carrying amount to its reported fair value.

We used an interest rate of 6.0 % to determine the present value of the future discounted cash flows , based on significant unobservable inputs and assumptions determined by management such as:

(i) the credit characteristics of the Lessee and guarantor of the Termination Agreement;

(ii) the length of the payment terms as defined in the Termination Agreement;

(iii) the payment terms as defined in the Termination Agreement are denominated in USD;

and (iv) the fact that the facility is located in, and the Lessee and guarantor conduct business in, Haiti, a foreign country.

Since management used

significant unobservable inputs and assumptions to determine the fair value of this note receivable, this note receivable was classified as Level 3 within the fair value hierarchy (see Note 16 for further explanation of the fair value hierarchy).

Effective May 1, 2023, CUF Haiti formally assigned the $ 2.4 million note receivable to Culp, Inc (its U.S.

parent company).

The following table represents the remaining future principal payments as of April 27, 2025:

(dollars in thousands)

Undiscounted value of note receivable

unearned interest income

Present value of note receivable

As of April 27, 2025, this note receivable totaled $ 1.5 million, of which $ 280,000 and $ 1.2 million were classified as short-term note receivable and long-term note receivable, respectively.

As of April 28, 2024, this note receivable totaled $ 1.7 million, of which $ 264,000 and $ 1.5 million were classified as short-term note receivable and long-term note receivable, respectively.

We classified amortization of unearned interest income totaling $ 96,000 and $ 111,000 within interest income on our consolidated statements of net loss during fiscal 2025 and fiscal 2024, respectively.

As of April 27, 2025, we believe there is no expected credit loss related to the collectability of this note receivable, as the Lessee has made all the required payments stated in the Termination Agreement.

We will continue to evaluate the facts and circumstances at the end of each reporting period to determine if an expected credit loss is deemed necessary.

Culp Home Fashions - Haiti, Ltd.

("CHF Haiti")

Effective August 2, 2024, CHF Haiti entered into an agreement to terminate a lease of a facility ("CHF Termination Agreement").

Pursuant to the terms of the CHF Termination Agreement, CHF Haiti was entitled to a payment of $ 250,000 from the lessor at the earlier of February 28, 2025, or 15 days after a new lease with a third party is signed.

In connection with the CHF Termination Agreement, CHF Haiti has been fully and unconditionally discharged from all its remaining obligations under this lease.

During the fourth quarter of fiscal 2025, CHF Haiti received the full payment of $ 250,000 .

ASSETS HELD FOR SALE

As of April 27, 2025, we classified the Property (as defined in note one of the consolidated financial statements) located in Quebec, Canada as held for sale totaling $ 2.2 million, which is presented separately in the consolidated balance sheet as of April 27, 2025, and is no longer being depreciated.

See Note 10 in the consolidated financial statements for further details regarding the restructuring activities announced on May 1, 2024 (first quarter of fiscal 2025).

Effective April 30, 2025 (first quarter of fiscal 2026), we closed on the sale of our Property located in Quebec, Canada, pursuant to which we will record a gain from this sale totaling $ 4.0 million USD that will be recorded within restructuring expense (credit) in the consolidated statement of net income (loss) for the first quarter of fiscal 2026.

The sale of our property was pursuant to an amended agreement effective April 2, 2025, which incorporated an original agreement and prior amendment (collectively referred to as the "Sales Agreement"), to sell our Property located in Quebec, Canada to a third party.

Pursuant to the Sales Agreement, the total sales price for this Property was $ 8.6 million CAD ($ 6.2 million USD as of April 30, 2025), of which $ 750,000 CAD ($ 543,000 USD as of April 27, 2025) was received in the fourth quarter of fiscal 2025 and recorded within accrued expenses in the Consolidated Balance Sheet, $ 1.3 million CAD ($ 905,000 USD as of April 30, 2025) was received at closing in the first quarter of fiscal 2026, with the remaining balance of $ 6.6 million CAD ($ 4.8 million USD as of April 30, 2025) to be received along with interest earned at rates ranging from 6 % to 10 % over a period of six to twelve months, as specified in the Sales Agreement.

ACCRUED EXPENSES

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RESTRUCTURING ACTIVITIES

Upholstery Fabrics Segment

Description of Activities

Mattress Fabrics Segment, Upholstery Fabrics Segment, and Unallocated Corporate - Initiated During Fiscal 2025

Restructuring Activities Announced May 1, 2024

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 the closure and sale of the Property located in Quebec, Canada, (2) move a portion of the knitting and finishing capacity from that facility 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;

(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;

as well as (5) reduce unallocated corporate and shared service expenses.

All of the above restructuring activities related to this announcement have been completed, including the sale of the Property located in Quebec, Canada, effective April 30, 2025 (first quarter of fiscal 2026).

Accordingly, we expect to record a gain from this sale totaling $ 4.0 million that will be recorded in restructuring expense (credit) in the consolidated statement of net income (loss) for the first quarter of fiscal 2026.

See Note 8 located in the notes to the consolidated financial statements for further details regarding the sale of the Property.

During fiscal 2025, we incurred restructuring and restructuring related charges totaling $ 8.7 million related to the above mentioned initiatives, of which $ 8.5 million and $ 154,000 relate to the mattress fabrics and upholstery fabrics segments, respectively.

As mentioned above, the restructuring activities related to this announcement were completed during the first quarter of fiscal 2026.

Accordingly, we expect to record a restructuring credit of $ 3.8 million for the first quarter of fiscal 2026, which reflects the gain on the sale of Property located in Quebec, Canada, partially offset by other expected restructuring expenses.

Overall, we expect cumulative restructuring and restructuring related charges of approximately $ 4.9 million related to this initiative, most of which relates to the mattress fabrics segment.

Restructuring Activities Announced April 24, 2025

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 mattress fabrics and upholstery fabrics business segments and create an integrated Culp-branded business.

As part of this strategic transformation , we will close our leased facility operated by our upholstery fabrics segment located in Burlington, North Carolina, and transition its production and distribution activities utilizing a shared management model within our owned facility located in Stokesdale, North Carolina.

Our Stokesdale, North Carolina facility has historically been solely operated by our mattress fabrics segment.

During fiscal 2025, we incurred restructuring expense of $ 676,000 related to this strategic transformation, of which $ 540,000 and $ 136,000 relate to unallocated corporate and the upholstery fabrics segment, respectively.

The estimated cumulative restructuring and restructuring related charges for these initiatives is expected to be $ 1.5 million, of which $ 288,000 is expected to be cash expenditures.

The $ 1.5 million of estimated cumulative restructuring and restructuring related charges associated with these activities represents:

(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);

(ii) a non-cash charge of $ 425,000 associated with markdowns and other inventory related adjustments;

(iii) non-cash lease termination costs of $ 224,000 ;

(iv) cash charges for employee termination benefits of $ 173,000 , and (v) cash charges for facility consolidation and relocation expenses of $ 115,000 .

We expect the initiatives associated with this strategic transformation to be substantially completed by December 31, 2025.

The following summarizes restructuring and restructuring related charges associated with the above announcements for the year ended April 27, 2025:

(dollars in thousands)

April 27, 2025

Additional depreciation expense for shortened useful lives of equipment

Employee termination benefits

Impairment of intangible asset

Facility consolidation and relocation expenses

Loss on disposal, valuation, and markdowns of inventory

Lease termination costs

Other associated costs

Net gain on sale of equipment

Restructuring expense and restructuring related charges (1) (2) (3)

(1 ) Of the total $ 9.3 million, $ 7.7 million and $ 1.6 million were recorded within restructuring expense and cost of sales, respectively, in the fiscal 2025 Consolidated Statement of Net Loss.

(2) Of the total $ 9.3 million, $ 8.7 million and $ 676,000 relate to the restructuring activities announced on May 1, 2024, and the strategic transformation initiatives announced on April 24, 2025, respectively.

(3 ) Of the total $ 9.3 million, $ 8.5 million, $ 540,000 , and $ 290,000 relate to the mattress fabrics segment, unallocated corporate, and the upholstery fabrics segment, respectively.

The following summarizes accrued restructuring costs for the two plans described above for the year ended April 27, 2025:

Facility Consolidation

and Relocation

(dollars in thousands)

Beginning balance

Expenses incurred

Change in estimate adjustments

Foreign currency exchange remeasurement

Ending Balance

Upholstery Fabrics Segment - Restructuring Activities Initiated During Fiscal 2024 and 2023

Ouanaminthe, Haiti

During the third quarter of fiscal 2023, Culp Upholstery Fabrics Haiti, Ltd.

("CUF Haiti") entered into an agreement to terminate a lease associated with a facility, and in turn moved the production of upholstery cut and sewn kits to an existing facility leased by Culp Home Fashions Haiti, Ltd.

("CHF Haiti") during the fourth quarter of fiscal 2023.

Both CUF Haiti and CHF Haiti are indirectly wholly-owned

subsidiaries of the company.

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 sew kits in Haiti.

This restructuring activity commenced during the third quarter of fiscal 2023 and was completed during the third quarter of fiscal 2024, resulting in a cumulative restructuring and restructuring related charges of $ 1.3 million of which $ 781,000 and $ 472,000 were incurred during fiscal 2024 and fiscal 2023, respectively.

See Note 9 of the consolidated financial statements for further details regarding the agreement to terminate the above mentioned lease agreement and a related note receivable.

Shanghai, China

Cut and Sew Upholstery Fabrics Operation

During the second quarter of fiscal 2023, we closed our cut and sew upholstery fabrics operation, which included the termination of an agreement to lease a building.

This strategic action, along with the further use of our Asian supply chain, was our response to declining consumer demand for cut and sew products, by adjusting our operating costs to better align with the lower demand.

This restructuring activity was completed during the third quarter of fiscal 2023, and as a result we incurred a cumulative restructuring and restructuring related charge of $ 713,000 during the second and third quarters of fiscal 2023.

During the third quarter of fiscal 2023, CUF Haiti entered into an agreement to terminate a lease associated with one of its facilities and moved the production of upholstery cut and sewn kits to an existing facility leased by CHF Haiti during the fourth quarter of fiscal 2023.

Both CUF Haiti and CHF Haiti are indirect wholly-owned subsidiaries of the company.

This restructuring activity commenced during the third quarter of fiscal 2023 and was completed during the third quarter of fiscal 2024 and resulted in a cumulative restructuring and restructuring related charge of $ 1.3 million.

See Note 7 of the consolidated financial statements for further details regarding the agreement to terminate the above mentioned lease and the establishment of a note receivable.

Shanghai, China

Upholstery Fabrics Finishing Operation

During the fourth quarter of fiscal 2024, we closed our upholstery fabrics finishing operation to align with current demand trends and we continue to leverage our strategic supply relationships to meet customer finishing needs in China.

This restructuring activity is expected to be completed by the end of the first quarter of fiscal 2025.

Financial Information

The following summarizes our restructuring expense and restructuring related charges noted above for the twelve months ending April 28, 2024, and April 30, 2023:

During the fourth quarter of fiscal 2024, we closed our upholstery fabrics finishing operation in China to align with current demand trends.

This restructuring activity was completed during the first quarter of fiscal 2025 and resulted in a cumulative restructuring and restructuring related charge totaling $ 218,000 .

Cut and Sewn Upholstery Fabrics Operation

During the second quarter of fiscal 2023, we closed our cut and sewn upholstery fabrics operation, which included a termination of an agreement to lease a building.

This strategic action was our response to declining consumer demand for cut and sew products, by adjusting our operating costs to better align with lower demand.

This restructuring activity was completed during the third quarter of fiscal 2023, and resulted in a cumulative restructuring and restructuring related charge of $ 713,000 during the second and third quarters of fiscal 2023.

The following summarizes restructuring expense and restructuring related charges associated with our upholstery fabrics segment's restructuring activities initiated during fiscal 2024 and 2023, for fiscal years 2025, 2024, and 2023:

(dollars in thousands)

1 unchanged sentence

Lease termination costs

Impairment loss - leasehold improvements and equipment

Impairment loss - property, plant, and equipment

Loss on disposal and markdowns of inventory

1 unchanged sentence

Restructuring expense and restructuring related charges (1) (2) (3)

(1) Of the total $ 676,000 , $ 636,000 and $ 40,000 were recorded within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the twelve-month period ending April 28, 2024.

(2) Of the total $ 1.5 million, $ 1.4 million and $ 98,000 were recorded within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the twelve-month period ending April 30, 2023.

The following summarizes the activity in accrued restructuring for fiscal 2024:

(1 ) The total $ 14,000 was recorded within restructuring expense in the fiscal 2025 Consolidated Statement of Net Loss.

(2) Of the total $ 676,000 , $ 636,000 and $ 40,000 were recorded within restructuring expense and cost of sales, respectively, in the fiscal 2024 Consolidated Statement of Net Loss.

(3 ) Of the total $ 1.5 million, $ 1.4 million and $ 98,000 were recorded within restructuring expense and cost of sales, respectively, in the fiscal 2023 Consolidated Statement of Net Loss.

The following summarizes the activity in accrued restructuring associated with our upholstery fabrics segment's restructuring activities initiated during fiscal 2024 and 2023, for fiscal years ended 2025, 2024, and 2023:

(dollars in thousands)

Beginning of year balance

Balance, May 1, 2022

Accrual established in fiscal 2023

Expenses incurred

End of year balance (1)

(1) Accrued restructuring of $ 3,000 was reported within accrued expenses in the Consolidated Balance Sheets for the period ending April 28, 2024.

The following summarizes the activity in accrued restructuring for fiscal 2023:

(dollars in thousands)

Beginning of year balance

Balance, April 30, 2023

Accrual established in fiscal 2024

Expenses incurred

End of year balance

Mattress Fabrics Segment and Unallocated Corporate

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;

(3) transition the mattress fabrics segment's weaving operation to a strategic sourcing model through the company's long standing supply partners;

(4) consolidate the company's two leased facilities related to the sewn mattress cover operation located in Ouanaminthe, Haiti, and reduce other operating expenses at this location;

as well as (5) reduce unallocated corporate expenses and shared service expenses, with targeted annualized savings of $ 1.5 million.

We expect the gradual discontinuance of operations and the closure of the facility located in Quebec, Canada will be completed by December 31, 2024.

We expect the consolidation activity associated with the sewn mattress cover operation located in Haiti will be completed during the first quarter of fiscal 2025.

These actions are expected to result in estimated restructuring and restructuring related costs and charges of approximately $ 8.0 million, of which approximately $ 2.5 million is expected to be cash expenditures.

The costs include cash charges of approximately $ 1.1 million associated with expected ongoing operating losses and other exit and disposal expenses related to the company's manufacturing plant in Quebec, Canada;

cash charges of approximately $ 1.4 million for employee termination costs;

a non-cash charge of approximately $ 2.3 million associated with accelerated depreciation and losses on the sale of equipment;

a non-cash charge of approximately $ 2.1 million associated with write-downs and other inventory related adjustments;

and a non-cash charge of approximately $ 650,000 associated with accelerated rent amortization for a leased building in Haiti.

These restructuring charges and restructuring related costs and charges exclude any expected gain on the sale of real estate associated with the closure of the Canadian facility, the amount of which is currently undetermined but which will ultimately reduce the amount of the restructuring charges incurred.

Based on management's internal analysis we expect cash proceeds from the sale of real estate (net of all taxes and commissions) to exceed the amount of restructuring charges incurred.

Also, management estimates that the realizable fair market value of the long-lived assets at the Canadian and Haitian facilities exceed their net book value, and for that reason, no charges for impairment of long-lived assets (other than the restructuring charges noted above) are expected to be recorded in the connection with this decision for either location.

Based on changes in business and current industry economic conditions, it is possible that the above estimates provided by management to determine the annual cost savings, restructuring and restructuring related charges, and proceeds generated from the sale of the manufacturing facility located in Quebec, Canada, could be materially different from our actual results, and therefore could adversely affect the success of this restructuring plan.

NOTE RECEIVABLE

In connection with the restructuring activity of our upholstery fabrics cut and sew operation located in Ouanaminthe, Haiti (see Note 8 of the consolidated financial statements for further details) , effective January 24, 2023, CUF Haiti entered into an agreement to terminate a lease of a facility (“Termination Agreement”).

Pursuant to the terms of the Termination Agreement, the Original Lease was formally terminated when CUF Haiti vacated and returned possession of the leased facility to the lessor.

In connection with the Termination Agreement, an affiliate of the Lessee guaranteed payment in full of all amounts due and payable to

CUF Haiti by the Lessee, and CUF Haiti has been fully and unconditionally discharged from all of its remaining obligations under the Original Lease.

As of the end of our third quarter of fiscal 2023, the gross carrying amount of the note receivable totaling $ 2.4 million was recorded at its fair value of $ 2.0 million, which represented the present value of future discounted cash flows based on the payment amounts and timing of such payments due from the Lessee as stated in the Termination Agreement.

We used an interest rate of 6.0 % to determine the present value of the future discounted cash flows, which was based on significant unobservable inputs and assumptions determined by management such as (i) the credit characteristics of the Lessee and guarantor of the Termination Agreement;

(ii) the length of the payment terms as defined in the Termination Agreement;

(iii) the payment terms as defined in the Termination Agreement being denominated in USD;

and (iv) the fact that the facility is located in, and the Lessee and guarantor conduct business in, Haiti, a foreign country.

Since management used significant unobservable inputs and assumptions to determine the fair value of this note receivable, this note receivable was classified as Level 3 within the fair value hierarchy (see Note 14 for further explanation of the fair value hierarchy).

Effective May 1, 2023, CUF Haiti formally assigned the $ 2.4 million note receivable to Culp, Inc (US.

The following table represents the remaining future principal payments as of April 28, 2024:

Balance, April 28, 2024 (1)

Expense incurred

Balance, April 27, 2025

(1 ) Accrued restructuring was reported within accrued expenses within the Consolidated Balance Sheet as of April 28, 2024.

LINES OF CREDIT

The summary of borrowings under our lines of credit follows:

(dollars in thousands)

Undiscounted value of note receivable

unearned interest income

Present value of note receivable

As of April 28, 2024, note receivable totaled $ 1.7 million, of which $ 264,000 and $ 1.5 million were classified as short-term note receivable and long-term note receivable, respectively.

As of April 30, 2023, note receivable totaled $ 1.9 million, of which $ 219,000 and $ 1.7 million were classified as short-term note receivable and long-term not receivable, respectively.

We classified amortization of unearned interest income totaling $ 111,000 and $ 10,000 within interest income on our consolidated statements of net loss during fiscal 2024 and fiscal 2023, respectively.

Wells Fargo - U.S.

revolving line of credit

Agricultural Bank of China - revolving line of credit

Agricultural Bank of China - supplier financing arrangements

Bank of China - working capital loan

Lines of credit (1)

(1) Of the total $ 12.7 million, $ 8.1 million and $ 4.6 million were recorded within lines of credit - current and lines of credit - long-term, respectively, within the Consolidated Balance Sheet as of April 27, 2025.

Revolving Credit Agreement – United States

On January 19, 2023, Culp, Inc., as borrower (the “company”), and Read, as guarantor (the “Guarantor”), entered into a Second Amended and Restated Credit Agreement (the “ABL Credit Agreement”), by and among the company, the Guarantor and Wells Fargo Bank, National Association, as the lender (the “Lender”), to establish an asset-based revolving credit facility (the “ABL Facility”).

The proceeds from the ABL Facility may be used to pay fees and expenses related to the ABL Facility and to provide funding for ongoing working capital and general corporate purposes.

The ABL Credit Agreement amends, restates and supersedes, and serves as a replacement for, the Amended and Restated Credit Agreement (the “Amended Agreement”), dated as of June 24, 2022, and the First Amendment to the Amended Agreement dated as of August 19, 2022, as amended, by and between the company and the Lender.

The ABL Facility may be used for revolving credit loans and letters of credit from time to time up to a maximum principal amount of $ 35.0 million, subject to the limitations described below.

The ABL Facility contains a sub-facility that allows the company to issue

letters of credit in an aggregate amount not to exceed $ 1 million.

The amount available under the ABL Facility is limited by a borrowing base consisting of certain eligible accounts receivable and inventory, reduced by specified reserves, as follows:

On June 12, 2025, Culp, Inc., as borrower (the “Company”), and Read and Culp Fabrics Global, LLC, each a wholly owned domestic subsidiary of the Company, as guarantors (collectively, the “Guarantors”), entered into a Third Amendment to the Second Amended and Restated Credit Agreement (the “Third Amendment”), by and among the Company, the Guarantors and Wells Fargo Bank, National Association, as lender (the “Lender”).

The Third Amendment amends the Second Amended and Restated Credit Agreement dated as of January 19, 2023, (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”), an asset-based revolving credit facility (the “ABL Facility”).

Proceeds from the ABL Facility may be used to pay fees and expenses related to the ABL Facility and to provide funding for ongoing working capital and general corporate purposes.

The Credit Agreement amended, restated and superseded, and served as a replacement for, the Amended and Restated Credit Agreement, dated as of June 24, 2022, as amended, by and between the Company and the Lender.

Pursuant to the Third Amendment, the term of the ABL Facility was extended for three years and now matures on June 12, 2028 .

Pursuant to the Credit Agreement, the ABL Facility contains the following terms:

The ABL Facility may be used for revolving credit loans and letters of credit from time to time up to a maximum principal amount of $ 30.0 million, which may be increased upon mutual agreement by up to $ 10.0 million via an accordion feature , subject to the limitations described below.

The Company may issue letters of credit under a sub-facility within the ABL Facility in an aggregate amount not to exceed $ 2 million.

The amount available unde r the ABL Facility is limited by a borrowing base consisting of certain eligible accounts receivable and inventory, reduced by specified reserves, as follows:

• 85 % of eligible accounts receivable, plus

• the least of:

• lesser of (i) 65 % of eligible inventory valued at cost based on a first-in first-out basis (net of intercompany profits) and (ii) 85 % of the net-orderly-liquidation value percentage of eligible inventory, plus

• the least of (i) 65 % of eligible in-transit inventory valued at cost based on a first-in first-out basis (net of intercompany profits), (ii) 85 % of the net-orderly-liquidation value percentage of eligible in-transit inventory, and (iii) $ 5.0 million, plus

• the lesser of (i) 65 % of eligible raw material inventory valued at cost based on a first-in first-out basis (net of intercompany profits) and (ii) 85 % of the net-orderly-liquidation value percentage of eligible raw material inventory

i) the sum of:

o lesser of (i) 65 % of eligible inventory valued at cost based on a first-in first-out basis (net of intercompany profits) and (ii) 85 % of the net-orderly-liquidation value percentage of eligible inventory, plus

o the least of (i) 65 % of eligible in-transit inventory valued at cost based on a first-in first-out basis (net of intercompany profits), (ii) 85 % of the net-orderly-liquidation value percentage of eligible in-transit inventory, and (iii) $ 4.0 million, plus

o the lesser of (i) 65 % of eligible raw material inventory valued at cost based on a first-in first-out basis (net of intercompany profits) and (ii) 85 % of the net-orderly-liquidation value percentage of eligible raw material inventory

In each case, the net-orderly-liquidation value is calculated based on the lower of (i) a first-in first-out basis and (ii) market value, and is (A) net of intercompany profits, (B) net of write-ups and write-downs in value with respect to currency exchange rates and (C) consistent with most recent appraisals received and acceptable to Lender.

• $ 22.5 million;

• An amount equal to 200 % of eligible accounts receivable.

• applicable reserves.

The ABL Facility permits both base rate borrowings and borrowings based upon daily simple SOFR (the secured overnight financing rate administered by the Federal Reserve Bank of New York (or its successor)).

Borrowings under the ABL Facility bear interest at an annual rate equal to daily simple SOFR plus 150 basis points (if the average monthly excess availability under the ABL Facility is greater than 50%) or 175 basis points (if the average monthly excess availability under the ABL Facility is less than or equal to 50%) or 50 basis points above base rate (if the average monthly excess availability under the ABL Facility is greater than 50%) or 75 basis points above base rate (if the average monthly excess availability under the ABL Facility is less than or equal to 50%), as applicable, with a fee on unutilized commitments at an annual rate of 37.5 basis points and an annual servicing fee of $ 12,000 .

The ABL Facility matures on January 19, 2026 .

The ABL Facility may be prepaid from time to time, in whole or in part, without a prepayment penalty or premium.

ii) $ 20.0 million;

iii) An amount equal to 200 % of eligible accounts receivable.

• minus applicable reserves.

The ABL Facility permits both base rate borrowings and borrowings that bear interest at annual rate equal to daily simple SOFR (the secured overnight financing rate administered by the Federal Reserve Bank of New York (or its successor)), in each case, plus an Applicable Margin equal to:

(i) 75 basis points for base rate borrowings and 175 basis points for SOFR-based borrowings (if the average monthly excess availability under the ABL Facility is greater than 66 2/3%), (ii) 100 basis points for base rate borrowings and 200 basis points for SOFR-based borrowings (if the average monthly excess availability under the ABL Facility is less than or equal to 66 2/3% and greater than 33 1/3%), or (iii) 125 basis points for base rate borrowings and 225 basis points for SOFR-based borrowings (if the average monthly excess availability under the ABL Facility is less than or equal to 33 1/3%), as applicable, with a fee on unutilized commitments at an annual rate of 37.5 basis points (if usage is equal to or greater than 50% of the maximum credit available under the ABL Facility) or 50 basis points (if usage is less than 50% of the maximum credit available under the ABL Facility).

Outstanding balances associated with the ABL Facility may be prepaid from time to time, in whole or in part, without a prepayment penalty or premium.

In addition, customary mandatory prepayments of the loans under the ABL Facility are required upon the occurrence of certain events including, without limitation, outstanding borrowing exposures exceeding the borrowing base and certain dispositions of assets outside of the ordinary course of business.

Accrued interest is payable monthly in arrears.

The company’s obligations under the ABL Facility (and certain related obligations) are (a) guaranteed by the Guarantor and each of the company’s future domestic subsidiaries is required to guarantee the ABL Facility on a senior secured basis (such guarantors and the company, the “Loan Parties”) and (b) secured by all assets of the Loan Parties, subject to certain exceptions.

The Company’s obligations under the ABL Facility (and certain related obligations) are:

(a) guaranteed by the Guarantors and each of the company’s future domestic subsidiaries is required to guarantee the ABL Facility on a senior secured basis (such guarantors and the company, the “Loan Parties”) and (b) secured by all assets of the Loan Parties, subject to certain exceptions.

The liens and other security interests granted by the Loan Parties on the collateral for the benefit of the Lender under the ABL Facility are, subject to certain permitted liens, first-priority .

Cash Dominion.

Under the terms of the ABL Facility, if (i) an event of default has occurred or (ii) excess borrowing availability under the ABL Facility (based on the lesser of $ 35.0 million and the borrowing base) (the "Excess Availability") falls below $ 7.0 million at such time, the Loan Parties will become subject to cash dominion, which will require prepayment of loans under the ABL Facility with the cash deposited in certain deposit accounts of the Loan Parties, including a concentration account, and will restrict the Loan Parties' ability to transfer cash from their concentration account.

Under the terms of the ABL Facility, if:

(i) an event of default has occurred or (ii) excess borrowing availability under the ABL Facility (based on the lesser of $ 30.0 million and the borrowing base) (the "Excess Availability") falls below 6.0 million at such time, the Loan Parties will become subject to cash dominion, which will require prepayment of loans under the ABL Facility with the cash deposited in certain deposit accounts of the Loan Parties, including a concentration account, and will restrict the Loan Parties' ability to transfer cash from their concentration account.

Such cash dominion period (a "Dominion Period') shall end when Excess Availability shall be equal to or greater than $ 6.0 million for a period of 60 consecutive days and no event of default is continuing.

Financial Covenants.

The ABL Facility contains a springing covenant requiring that the company's fixed charge coverage ratio be no less than 1.10 to 1.00 during any period that (i) an event of default has occurred or (ii) Excess Availability under the ABL Facility falls

The ABL Facility contains a springing covenant requiring that the Company's fixed charge coverage ratio be no less than 1.10 to 1.00 during any period that:

(i) an event of default has occurred or (ii) Excess Availability under the ABL Facility falls

below $ 4.5 million at such time.

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Affirmative and Restrictive Covenants.

The ABL Credit Agreement governing the ABL Facility contains customary representations and warranties, affirmative and negative covenants (subject, in each case, to exceptions and qualifications) and events of defaults, including covenants that limit the company's ability to, among other things:

The Credit Agreement governing the ABL Facility contains customary representations and warranties, affirmative and negative covenants (subject, in each case, to exceptions and qualifications) and events of defaults, including covenants that limit the company's ability to, among other things:

• incur additional indebtedness;

5 unchanged sentences

• enter into transactions with affiliates

Interest is charged under the ABL Credit Agreement at a rate (applicable interest rate of 6.81 % and 6.30 % as of April 28, 2024, and April 30, 2023, respectively) calculated using the Applicable Margin over SOFR based on the company's excess availability under the ABL Facility, as defined in the ABL Agreement.

There were $ 535,000 , and $ 275,000 of outstanding letters of credit provided by the ABL Credit Agreement as of April 28, 2024, and April 30, 2023, respectively.

As of April 28, 2024, we had $ 465,000 remaining for the issuance of additional letters of credit under the ABL Credit Agreement.

There were no borrowings outstanding under the ABL Credit Agreement as of April 28, 2024 and April 30, 2023, respectively.

As of April 28, 2024, our available borrowings calculated under the provisions of the ABL Credit Agreement totaled $ 18.5 million.

Revolving Credit Agreements - China Operations

Denominated in Chinese Yuan Renminbi ("RMB")

Agricultural Bank of China

Effective on March 20, 2024, we entered into an unsecured credit agreement denominated in RMB, that provided for a line of credit up to 29 million RMB ($ 4.0 million USD as of April 28, 2024).

Of this 29 million RMB line of credit, 9.6 million RMB, 9.7 million RMB, and 9.7 million RMB expires on March 7, 2025, March 8, 2025, and March 9, 2025, respectively.

Interest charged under this agreement is based on the Loan Prime Rate ("LPR") in China minus 50 basis points ( 2.95 % as of April 28, 2024).

There were no borrowings outstanding under this agreement as of April 28, 2024.

Also on March 20, 2024, we entered into an additional unsecured credit agreement denominated in RMB that provided for a line of credit of up to 1 million RMB, which such agreement expired on April 26, 2024 , after borrowings made during the fourth quarter of fiscal 2024 were repaid in full during the fourth quarter of fiscal 2024.

Bank of China

Also, we have an unsecured credit agreement denominated in RMB with another bank located in China that provides for a line of credit of up to 35 million RMB ($ 4.8 million USD as of April 28, 2024).

Interest charged under this agreement is based on an interest rate determined by the Chinese government at the time of borrowing .

This agreement is set to expire on October 24, 2024 .

Our borrowing capacity of 35 million RMB is restricted to certain consolidated net sales and consolidated profitability requirements as defined in the agreement.

These requirements relate to our total consolidated Culp Inc.

entity as a whole.

Currently, Culp Inc.

does not meet the

consolidated net sales and consolidated profitability requirements set forth in the agreement;

and therefore, we cannot borrow under this agreement.

There were no borrowings outstanding under either of these agreement as of April 28, 2024 and April 30, 2023, respectively.

The applicable interest rate under the ABL Facility was 5.78 % and 6.81 % as of April 27, 2025, and April 28, 2024, respectively.

There were $ 925,000 , and $ 535,000 of outstanding letters of credit provided by the ABL Facility as of April 27, 2025, and April 28, 2024, respectively.

As of April 27, 2025, we had $ 75,000 remaining for the issuance of additional letters of credit, based on an aggregate letters of credit amount not to exceed $ 1 million as stated in the Credit Agreement.

As of April 27, 2025, our available borrowings calculated under the provisions of the Credit Agreement totaled $ 21.4 million.

Credit Agreements - China Operations

Agricultural Bank of China - Unsecured Credit Agreement

Effective March 5, 2025, we entered into an unsecured credit agreement denominated in RMB, that provides for a line of credit of up to 29.0 million RMB ($ 4.0 million USD as of April 27, 2025) and expires on March 4, 2026.

Interest charged under this agreement is based on the Loan Prime Rate ("LPR") in China minus 50 basis points (applicable interest rate of 2.60 % as of April 27, 2025).

As of April 27, 2025, the outstanding balance under this agreement was approximately $ 4.0 million USD.

Agricultural Bank of China - Supplier Financing Arrangements

Based on the company's request, certain suppliers entered into supply chain financing arrangements on April 8, 2025 and April 24, 2025, with such agreements totaling 20.0 million RMB ($ 2.8 million USD as of April 27, 2025), and expiring on dates ranging from April 2, 2026 through April 23, 2026 .

As a result of these expiration dates, we were able to extend our payment terms beyond those that are normal and customary.

The suppliers that entered into these supply chain financing arrangements assigned their receivables due from the company to the Agricultural Bank of China, under a reverse factoring agreement with no recourse, and, in turn, received payments from the Agricultural Bank of China under terms that are normal and customary.

Interest is charged under these agreements at a fixed rate of 2.72 % and was paid in full at the time these agreements became effective.

As of April 27, 2025, the outstanding balance of $ 2.8 million USD was recorded within lines of credit-current in the Consolidated Balance Sheet as of April 27, 2025.

There were no supplier financing arrangements as of April 28, 2024.

The following summarizes the activity associated with our supply chain financing arrangements for the year ended April 27, 2025:

(dollars in thousands)

Outstanding at the beginning of the year

Vendor invoices financed during the year

Vendor invoices paid during the year

Foreign currency exchange remeasurement

Ending balance

Bank of China - Credit Agreement

Effective November 5, 2024, we entered into a credit agreement (“Agreement”) denominated in RMB that provides for a 10.0 million RMB ($ 1.4 million USD as of April 27, 2025) unsecured working capital loan and 25.0 million RMB ($ 3.4 million USD as of April 27, 2025) for letters of credit, guarantees, and other financing arrangements secured by trade accounts receivable associated with the company’s operations located in China.

The working capital loan and letters of credit expire on November 6, 2025 and July 31, 2025 , respectively.

Interest is charged under the Agreement based on the LPR in C hina minus 50 basis points at the time of borrowing which represents 2.60 % as of April 27, 2025.

As of April 27, 2025, the outstanding balance under the working capital loan was approximately $ 1.4 million USD and there were no outstanding letters of credit under the Agreement

Subsequent Events

Revolving Credit Agreement - United States

Effective June 12, 2025, we entered into the Third Amendment to our U.S.

revolving credit agreement, the terms of which are described within this footnote.

Agricultural Bank of China - Working Capital Loans

During the first quarter of fiscal 2026 we entered into unsecured loan agreements that provided a total of 21.0 million RMB ($ 2.9 million USD as of borrowing dates ranging from May 12, 2025 through May 28, 2025 ), and which expire on dates ranging from May 7, 2026 through May 28, 2026.

Interest charged under these agreements is based on the LPR in China at the time of borrowing minus 50 basis points ( 2.60 % as of borrowing dates ranging from May 12, 2025 through May 28, 2025).

Our loan agreements require, among other things, that we maintain compliance with certain financial covenants.

2 unchanged sentences

Income Tax Expense and Effective Income Tax Rate

The entire amount of income tax expense of $ 3.0 million, $ 3.1 million, and $ 2.9 million during fiscal 2024, 2023, and 2022, respectively, was allocated to (loss) income from continuing operations.

The entire amount of income tax expense of $ 392,000 , $ 3.0 million, and $ 3.1 million during fiscal 2025, 2024, and 2023, respectively, was allocated to loss from continuing operations.

Income tax expense consists of:

3 unchanged sentences

federal & state carryforwards and credits

uncertain income tax positions

valuation allowance

7 unchanged sentences

valuation allowance

global intangible low taxed income tax (GILTI) (1)

foreign tax rate differential

income tax effects of Chinese foreign exchange gains and losses

income tax effects of Chinese foreign exchange gains

withholding taxes associated with foreign tax jurisdictions

3 unchanged sentences

consolidated effective income tax rate (2) (3)

(1) See the below section titled "GILTI" for further details for the GILTI tax incurred during fiscal 2022.

(1) “Other” for all periods presented represents miscellaneous adjustments that pertain to U.S.

permanent differences such as meals and entertainment and income tax provision to return adjustments.

permanent differences such as meals and entertainment, income tax provision to return adjustments, and other and miscellaneous items.

(2) Our negative consolidated effective income tax rates during fiscal 2025, 2024, and 2023, were caused by the mix of earnings between our U.S.

operations and foreign subsidiaries, as our taxable income stems from our operations located in China and Canada, which have higher income tax rates than the U.S.

operations and foreign subsidiaries, as our taxable income stemmed from our operations located in China during fiscal 2025 and both our operations located in China and Canada during fiscal 2024 and 2023, which jurisdictions have higher income tax rates than the U.S.

In addition, we applied a full valuation allowance against our U.S.

2 unchanged sentences

operations totaling $( 18.4 ) million, $( 18.6 ) million, and $( 33.5 ) million that were incurred during fiscal 2025, 2024, and 2023, respectively.

(4) During fiscal 2024, we incurred a significantly lower consolidated pre-tax loss of $( 10.8 ) million, compared with a significantly higher pre-tax loss of $( 28.4 ) million incurred during fiscal 2023.

As a result, the principal differences between income tax expense at the U.S.

federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during fiscal 2024 compared with fiscal 2023.

(5) During fiscal 2023, we incurred a significantly higher consolidated pre-tax loss totaling $( 28.4 ) million, compared with a much lower consolidated pre-tax loss totaling $( 325,000 ) during fiscal 2022.

As a result, the principal differences between income tax expense at the U.S.

federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced for fiscal 2022, compared with fiscal 2023.

(3) Our negative consolidated effective income tax rates during fiscal 2025, 2024, and 2023 were further caused by pre-tax losses associated with our Haitian operations, which are not subject to income tax.

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.

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 $( 1.6 ) million, $( 2.1 ) million, and $( 3.5 ) million that were incurred during fiscal 2025, 2024, and 2023, respectively.

Deferred Income Taxes - Overall

17 unchanged sentences

Net deferred liabilities

(1) Pertains to the company’s operations located in China.

(2) Pertains to the company’s operations located in the U.S.

As of April 27, 2025, our U.S.

federal net operating loss carryforwards totaled $ 69.6 million, with related future income tax benefits of $ 14.6 million.

federal net operating loss carryforward totaled $ 88.1 million, with related future income tax benefits of $ 18.5 million.

In accordance with the 2017 Tax Cuts and Jobs Act (“TCJA”), U.S.

federal net operating loss carryforwards generated in fiscal 2019 and after do not expire.

As of April 28, 2024, all our unused U.S.

As of April 27, 2025, all of our unused U.S.

federal net operating loss carryforwards were generated during fiscal 2019 and after, and therefore, do not expire in accordance with the TCJA.

As of April 27, 2025, our U.S.

state net operating loss carryforwards totaled $ 31.7 million, with related future income tax benefits of $ 1.3 million, have expiration dates ranging from fiscal years 2025 through 2045 .

state net operating loss carryforwards totaled $ 37.6 million, with related future income tax benefits of $ 1.5 million, and have expiration dates ranging from fiscal year 2026 through fiscal 2045 , along with certain U.S.

state net operating loss carryforwards that do not expire due to conformity with U.S.

federal income tax regulations.

foreign income tax credits of $ 783,000 have expiration dates ranging from fiscal years 2026 through 2028 , which represent 10 years from when the associated earnings and profits from our foreign subsidiaries were repatriated to the U.S.

Fiscal 2024 and 2023

We do not expect to incur GILTI tax for the 2024 tax year, as we expect to meet the GILTI High-Tax exception regarding our operations located in China and Canada, and we incurred taxable losses associated with our operations located in Haiti.

We did not incur GILTI tax for the 2023 tax year, as we met the GILTI High-Tax exception.

We did not meet the GILTI High-Tax exception for the 2021 tax year regarding our foreign operations located in China.

This was due primarily to significant income tax deductible foreign exchange losses that significantly lowered income tax expense associated with the current year’s earnings associated with our operations located in China.

As a result, the current effective income tax rate was lower than the required 18.9 % current effective income tax rate to meet the GILTI High-Tax exception.

Consequently, we incurred a non-cash income tax charge of $ 1.8 million, which charge was fully offset by a $ 1.8 million non-cash income tax benefit due to a corresponding reversal of our full valuation allowance associated with our U.S.

net deferred income tax assets.

We did not meet the GILTI High-Tax exception for the 2022 tax year regarding our operations located in Canada and Haiti.

With regards to Canada, we placed several significant capital projects into service during fiscal 2022, and therefore, were eligible for a significant amount of deductible accelerated depreciation.

As a result, our current year's income tax expense was much lower than prior fiscal years, and therefore, our current effective income tax rate was lower than the required 18.9 % current effective income tax rate to meet the GILTI High-Tax exception.

For our operations located in Haiti, taxable income or losses are not subject to income tax, as we are located in an economic zone that permits a 0 % income tax rate for the first fifteen years of operations, for which we have eight years remaining.

Since our operations located in Haiti are not subject to income tax, our current effective tax rate was 0 %, which is lower than the required 18.9 % current effective income tax rate to meet the GILTI High-Tax exception.

Although our operations located in Canada and Haiti did not meet the GILTI High-Tax exception, we incurred a nominal amount of GILTI tax for the 2022 tax year, as the losses subject to GILTI tax from our Haitian operations mostly offset the income subject to GILTI tax from our Canadian operation.

Deferred Income Taxes – Valuation Allowance

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pre-tax losses during each of the last three fiscal years.

In addition, we are currently expecting U.S.

pre-tax losses to continue into fiscal 2025.

In addition, we are currently expecting a U.S.

pre-tax loss during fiscal 2026.

As a result of the significant weight of this negative evidence, we believe it is more-likely-than-not that our U.S net deferred income tax assets will not be fully realizable, and therefore we provided for a full valuation allowance against our U.S.

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ending balance

(1) Amounts represent changes in our U.S.net deferred income tax asset balances during the current year that pertain to (i) income tax provision to return adjustments;

(1) Amounts represent changes in our U.S.

net deferred income tax asset balances during the current year that pertain to:

(i) income tax provision to return adjustments;

(ii) changes in estimates of our U.S.

effective income tax rate that pertain to U.S.

state income tax rates and apportionment percentages, (iii) recognition of an uncertain income tax position due to expiration of statute of limitations;

(iv) expiration of certain U.S.

state income tax rates and apportionment percentages, (iii) expiration of certain U.S.

state loss carryforwards;

and (v) other immaterial items.

and (iv) other immaterial items.

Deferred Income Taxes – Undistributed Earnings from Foreign Subsidiaries

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ending balance

As of April 28, 2024, and April 30, 2023, we had $ 1.3 million and $ 1.2 million of total gross unrecognized tax benefits, of which the entire amount was classified as income taxes payable - long-term in the accompanying Consolidated Balance Sheets.

These unrecognized income tax benefits would favorably affect income tax expense in future periods by $ 1.3 million and $ 1.2 million as of April 28, 2024, and April 30, 2023, respectively.

As of April 27, 2025, and April 28, 2024, we had $ 790,000 and $ 1.3 million of total gross unrecognized tax benefits, of which the entire amount was classified as income taxes payable - long-term in the accompanying Consolidated Balance Sheets.

These unrecognized income tax benefits would favorably affect income tax expense in future periods by $ 790,000 and $ 1.3 million as of April 27, 2025, and April 28, 2024, respectively.

We elected to classify interest and penalties as part of income tax expense.

As of April 27, 2025, and April 28, 2024, the gross amount of interest and penalties due to unrecognized tax benefits was $ 191,000 and $ 281,000 , respectively.

Our gross unrecognized income tax benefit of $ 1.3 million as of April 28, 2024, relates to income tax positions for which significant change is currently not expected within the next year.

This amount primarily relates to double taxation under applicable income tax treaties with foreign tax jurisdictions.

Our gross unrecognized income tax benefit of $ 790,000 as of April 27, 2025, relates to income tax positions for which significant change is currently not expected within the next year.

This amount primarily relates to taxation under applicable income tax treaties with foreign tax jurisdictions.

United States federal and state income tax returns filed by us remain subject to examination for income tax years 2019 and subsequent.

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China - Income Taxes

China - Withholding Taxes Associated with Earnings

and Profits Distribution to U.S.

Canada - Income Taxes

LEASES, COMMITMENTS, AND CONTINGENCIES

As of April 27, 2025, we leased manufacturing facilities, showroom and office space, distribution centers, and equipment under operating leases.

Our operating leases have remaining lease terms of one to seven years , with renewal options for additional periods ranging up to nine years .

Balance Sheet

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On March 23, 2023, we terminated an agreement with a partnership owned by an immediate family member of an officer of the company, pursuant to which we leased a 63,522 square foot facility for our domestic mattress cover operation.

Prior to the termination of the lease agreement, rent payments totaled $ 123,000 , and $ 148,000 during fiscal 2023 and 2022, respectively.

In accordance with the termination of the lease agreement, we were reimbursed $ 67,000 in fiscal 2023 for leasehold improvements we made to the leased property.

Prior to the termination of the lease agreement, rent payments totaled $ 123,000 during fiscal 2023.

In accordance with the termination of the lease agreement, we were reimbursed $ 67,000 during fiscal 2023 for leasehold improvements we made to the leased property.

COMMITMENTS AND CONTINGENCIES

Accounts Payable – Capital Expenditures

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Purchase Commitments - Capital Expenditures

As of April 28 2024, we had open purchase commitments to acquire equipment for our U.S.

and Canadian mattress fabrics operations totaling $ 679,000 .

As of April 27 2025, we had open purchase commitments to acquire equipment for our mattress fabrics operations totaling $ 117,000 .

The company is involved in legal proceedings and claims which have arisen in the ordinary course of business.

Management has determined that these actions, when ultimately concluded and settled, will not have a material adverse effect on our financial position, results of operations, or cash flows.

Management has determined that these actions, when ultimately concluded or settled, will not have a material adverse effect on our financial position, results of operations, or cash flows.

STOCK-BASED COMPENSATION

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2015 Equity Incentive Plan (the “2015 Plan”).

The 2015 Plan authorizes the grant of stock options intended to qualify as incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based units, and other equity and cash related awards as determined by the Compensation Committee of our board of directors.

The 2015 Plan authorizes the grant of stock options intended to qualify as incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, time-based restricted stock units, performance-based restricted stock units, and other equity and cash related awards as determined by the Compensation Committee of our board of directors.

An aggregate of 1,200,000 shares of common stock were authorized for issuance under the 2015 Plan, with certain sub-limits that would apply with respect to specific types of awards that may be issued as defined in the 2015 Plan.

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(1) During fiscal 2025, time-based restricted stock units totaling 103,320 vested at a fair value of $ 581,000 , or $ 5.63 per share.

D uring fiscal 2024, time-based restricted stock units totaling 151,652 vested at a fair value of $ 857,000 , or $ 5.65 per share.

During fiscal 2023, time-based restricted stock units totaling 32,799 vested at a fair value of $ 167,000 , or $ 5.10 per share.

The following table summarizes information related to our grants of time-based restricted stock unit awards associated with certain senior executives and key members of management during fiscal years 2025, 2024, and 2023:

Restricted Stock

Date of Grant

Stock Awarded

Units Awarded

January 6, 2025 (2)

September 26, 2024 (3)

August 8, 2024 (2)

January 8, 2024 (2)

September 28, 2023 (2)

September 28, 2023 (3)

September 6, 2022 (2)

August 10, 2022 (2)

July 22, 2021 (2)

(1) Price per share represents the closing price of our common stock on the date the respective award was granted.

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Performance-Based Restricted Stock Units

Senior Executives

We grant performance-based restricted stock units to senior executives which could earn up to a certain number of shares of common stock if certain performance targets are met over a three-fiscal year performance period, as defined in the related restricted stock unit award agreements.

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The fair market value per share was determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock for the performance-based component.

The following table provides assumptions used to determine the fair market value of the market-based total shareholder return component using the Monte Carlo simulation model on our outstanding performance-based restricted stock units granted to senior executives on January 8, 2024, September 28, 2023, August 10, 2022, and July 22, 2021:

The following table provides assumptions used to determine the fair market value of the market-based total shareholder return component using the Monte Carlo simulation model on our outstanding performance-based restricted stock units granted to senior executives on August 8, 2024, January 8, 2024, September 28, 2023, and August 10, 2022:

September 28,

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Correlation coefficient of peer companies

Key Employees

We grant performance-based restricted stock units to key employees which could earn up to a certain number of shares of common stock if certain performance targets are met over a three-fiscal year performance period, as defined in the related restricted stock unit award agreements.

Our performance-based restricted stock units granted to key employees were measured based on the fair market value (the closing price of our common stock) on the date of grant.

No market-based total shareholder return component was included in these awards.

The following table summarizes information related to our grants of performance-based restricted stock units associated with certain senior executives and key employees that were unvested as of April 28, 2024:

( 0.01 ) - 0.17

The following table summarizes information related to our grants of performance-based restricted stock units to our senior executives that were unvested as of April 27, 2025:

Performance-Based

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Vesting Period

August 8, 2024

January 8, 2024

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August 10, 2022

July 22, 2021 (1)

July 22, 2021 (2)

(1) Performance-based restricted stock units awarded to certain senior executives.

(2) Performance-based restricted stock units awarded to key employees.

(1) Amounts represent the maximum number of common stock shares that could be earned if certain performance targets are met as defined in the related restricted stock unit award agreements as of the date of grant.

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These amounts represent the number of shares that are expected to vest as of April 27, 2025.

(3) Price per share represents the fair market value per share ($ 1.15 per $1, or an increase of $ 0.70 to the closing price of our common stock on the date of grant) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($ 4.65 ) for the performance-based component of the performance-based restricted stock units granted to senior executives on August 8, 2024.

(4) Price per share represents the fair market value per share ($ 1.11 per $1, or an increase of $ 0.62 to the closing price of our common stock on the date of grant) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($ 5.61 ) for the performance-based component of the performance-based restricted stock units granted to senior executives on January 8, 2024.

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(6) Price per share represents the fair market value per share ($ 1.14 per $1, or an increase of $ 0.71 to the closing price of our common stock on the date of grant) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($ 5.06 ) for the performance-based component of the performance-based restricted stock units granted to senior executives on August 10, 2022.

(8) Price per share represents the fair market value per share ($ 1.08 per $1, or an increase of $ 1.18 to the closing price of our common stock on the date of grant) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($ 14.75 ) for the performance-based component of the performance-based restricted stock units granted to certain senior executives on July 22, 2021.

(9) Price per share represents the closing price of our common stock on the date of grant.

There were no performance-based restricted stock units that vested during fiscal 2024.

The following table summarizes information related to our performance-based restricted stock units that vested during fiscal 2023 and 2022:

There were no performance-based restricted stock units that vested during fiscal 2025 or 2024.

The following table summarizes information related to our performance-based restricted stock units that vested during fiscal 2023.

Average Price

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Fiscal 2023 (2)

Fiscal 2022 (1)

Fiscal 2022 (2)

(1) Performance-based restricted stock units vested for senior executives.

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(4) Price per share is derived from the closing prices of our common stock on the dates the respective performance-based restricted stock units vested.

We recorded a charge (credit) to compensation expense totaling $ 8,000 , $ 2,000 , and $( 81,000 ) within selling, general, and administrative expense associated with our performance-based restricted stock units for fiscal years 2024, 2023, and 2022, respectively.

Common Stock Awards

We recorded a charge to compensation expense totaling $ 6,000 , $ 8,000 , and $ 2,000 , within selling, general, and administrative expense associated with our performance-based restricted stock units for fiscal years 2025, 2024, and 2023, respectively.

As of April 27, 2025, the remaining unrecognized compensation expense related to our performance-based restricted stock units was $ 13,000 which is expected to be recognized over a weighted average vesting period of 1.2 years.

As of April 27, 2025, performance-based restricted stock units that are expected to vest had a fair value of $ 16,000 .

Common Stock Awards - Board of Directors

The following table summarizes information related to our grants of common stock to our outside directors during fiscal 2024 and 2023:

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July 1, 2022 - Fiscal 2023

April 1, 2022 - Fiscal 2022

January 3, 2022 - Fiscal 2022

October 1, 2021 - Fiscal 2022

July 1, 2021 - Fiscal 2022

(1) Price per share represents closing price of our common stock on the date of grant.

We recorded $ 84,000 , $ 335,000 , and $ 321,000 of compensation expense within selling, general, and administrative expense for these common stock awards for fiscal 2024, 2023, and 2022, respectively.

We recorded a charge to compensation expense totaling $ 84,000 and $ 335,000 , within selling, general, and administrative expense for these common stock awards during fiscal 2024 and 2023, respectively.

ASC Topic 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the company’s assumptions (unobservable inputs).

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The determination of where an asset or liability falls in the hierarchy requires significant judgment.

We evaluate our hierarchy disclosures each quarter based on a range of various factors, and it is possible that an asset or liability may be classified differently from quarter to quarter.

We evaluate our hierarchy disclosures each quarter based on various factors, and it is possible that an asset or liability may be classified differently from quarter to quarter.

However, we expect that changes in classifications between different levels will be rare.

Recurring Basis

The following tables present information about assets and liabilities measured at fair value on a recurring basis:

The following tables present information about assets measured at fair value on a recurring basis:

Fair value measurements as of April 27, 2025, using:

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Growth Allocation Mutual Funds

Moderate Allocation Mutual Fund

S&P 500 Index Fund

Fair value measurements as of April 28, 2024, using:

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Growth Allocation Mutual Funds

Moderate Allocation Mutual Fund

Nonrecurring Basis

Third and Fourth Quarters of Fiscal 2023

We classified a right of use asset associated with a leased facility as held for sale in the Consolidated Balance Sheet as of January 29, 2023 (i.e., the end of the third quarter of fiscal 2023), in connection with the restructuring activity associated with our upholstery fabrics cut and sew operation located in Haiti (which is described more fully in Note 8 of the consolidated financial statements).

This right of use asset classified as held for sale was recorded at its fair value of $ 2.0 million, which represented the present value of future discounted cash flows based on the payments and timing of such payments due from the Lessee as stated in the Termination Agreement (which is described more fully in Note 9 of the consolidated financial statements).

The interest rate used to determine the present value of the future discounted cash flows was based on significant unobservable inputs based on assumptions determined by management such as (i) the credit characteristics of the Lessee and guarantor of the Termination Agreement;

(ii) the length of the payment terms as defined in the Termination Agreement;

(iii) the payment terms as defined in the Termination Agreement being denominated in USD, and (iv) the fact that the right of use asset was located in, and the Lessee and guarantor conduct business in Haiti, a foreign country.

As a result, since management used significant unobservable inputs and assumptions to determine the fair value of this right of use asset, this right of use asset was classified as level 3 within the fair value hierarchy defined above.

During the fourth quarter of fiscal 2023, the right of use asset mentioned above was vacated and possession was returned to the Lessor, and the Lessee took possession of this right of use asset.

As a result, the right of use asset classified as held for sale as of January 29, 2023, was derecognized and a short-term and long-term note receivable was recognized based on the payments and timing of such payments due from the Lessee as stated in the Termination Agreement.

See Note 9 of the consolidated financial statements for further details regarding this note receivable.

S&P 500 Index Fund

NET LOSS PER SHARE

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Diluted net loss per share uses the weighted-average number of shares outstanding during the period plus the dilutive effect of stock-based compensation calculated using the treasury stock method.

Weighted average shares used in the computation of basic and diluted net loss per share are as follows:

(in thousands)

weighted-average common shares outstanding, basic

dilutive effect of stock-based compensation

weighted-average common shares outstanding, diluted

Weighted-average number of shares used in the computation of both basic and diluted net loss per share were 12,525,000 , 12,432,000 , and 12,283,000 for fiscal years 2025, 2024, and 2023, respectively.

Shares of unvested common stock that were not included in the computation of diluted net loss per share consist of the following:

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Deferred Compensation Plan

We have a nonqualified deferred compensation plan (the “Plan”) covering senior executives and certain key members of management.

We have a non-qualified deferred compensation plan (the “Plan”) covering senior executives and certain key members of management.

The Plan provides for participant deferrals on a pre-tax basis that are subject to annual deferral limits by the IRS and non-elective contributions made by the company.

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Our contributions to the Plan were $ 206,000 , $ 229,000 , and $ 215,000 during fiscal years 2025, 2024, and 2023, respectively.

Our nonqualified deferred compensation plan liability was $ 7.8 million and $ 8.2 million as of April 28, 2024, and April 30, 2023, respectively.

Our non-qualified deferred compensation plan liability was $ 7.0 million and $ 7.8 million as of April 27, 2025, and April 28, 2024, respectively.

We have a rabbi trust (the “Trust”) to set aside funds for the participants of the Plan that allows the participants to direct their contributions to various investment options in the Plan.

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SEGMENT INFORMATION

Our operations are classified into two business segments:

Our operations are classified into two reportable segments:

mattress fabrics and upholstery fabrics.

Mattress Fabrics

The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers.

Upholstery Fabrics

The upholstery fabrics segment develops, manufactures, sources, and sells fabrics to customers in the residential, commercial, and hospitality industries.

In addition, this segment includes Read, which provides window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation services for Read’s products, to customers in the hospitality and commercial industries.

The upholstery fabrics segment develops, manufactures, sources, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers.

In addition, the upholstery fabrics segment includes Read, a wholly-owned subsidiary with operations located in Knoxville, Tennessee and our facility located in Burlington, North Carolina, which provide window treatments and sourcing of upholstery fabrics and other products, as well as related measuring and installation 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.

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, allocation of resources to the individual segments noted above, and determining executive compensation.

Accordingly, our CODM reviews certain

financial metrics that include net sales and (loss) income from operations before unallocated corporate expenses and other items that are not expected to occur on a regular basis (i.e., restructuring activities), as well as:

(i) cost of sales, (ii) gross profit, (iii) selling, general, and administrative expenses, including unallocated corporate expenses, (iv) assets used in operations, which generally include accounts receivable, inventory, property, plant, and equipment, right of use assets, and assets held for sale;

and (v) capital spending.

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.

Unallocated corporate expenses primarily represent compensation and benefits for certain executives and their support staff, all costs associated with being a public company, amortization of intangible assets, and other miscellaneous expenses.

Intangible assets are not included in segment assets, as these assets are not used by the Chief Operating Decision Maker to evaluate the respective segment’s operating performance, allocate resources to individual segments, or determine executive compensation.

Net Sales Geographic Concentration

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(1) Of this amount, $ 28.8 million, $ 25.1 million, and $ 24.9 million are attributable to shipments to Mexico in fiscal 2025, 2024, and 2023, respectively.

(2) Of this amount $ 18.3 million, $ 20.0 million, and $ 26.9 million are attributable to shipments to China in fiscal 2024, 2023, and 2022, respectively.

Sales attributed to individual countries are based upon the location that the company ships its products to for delivery to customers.

(2) Of this amount $ 16.0 million, $ 18.3 million, and $ 20.0 million are attributable to shipments within China in fiscal 2025, 2024, and 2023, respectively.

Sales attributed to individual countries are based upon the location to which the company ships its products for delivery to customers.

Customer Concentration

One customer within the upholstery fabrics segment represented 11 %, 12 %, and 15 % of consolidated net sales during fiscal 2025, 2024, and 2023, respectively.

No customers within the upholstery fabrics segment accounted for greater than 10 % of the consolidated accounts receivable, net balance as of April 28, 2024, or April 30, 2023.

No customers within the mattress fabrics segment represented greater than 10 % of consolidated net sales during fiscal 2024, 2023, or fiscal 2022.

No customers within the mattress fabrics segment accounted for greater than 10 % of the consolidated accounts receivable, net balance as of April 28, 2024, or April 30, 2023.

No customers within the upholstery fabrics segment accounted for greater than 10% of consolidated accounts receivable, net as of April 27, 2025, and April 28, 2024.

One customer within the mattress fabrics segment represented 11 % of consolidated net sales during fiscal 2025.

No customers within the mattress fabrics segment represented greater than 10% of consolidated net sales during fiscal 2024 or 2023.

No customers within the mattress fabrics segment accounted for greater than 10% of consolidated accounts receivable, net as of April 27, 2025, and April 28, 2024.

Employee Workforce Concentration

Hourly employees associated with our manufacturing facility located in Quebec, Canada (approximately 14 % of our workforce) are represented by a local unaffiliated union with a collective bargaining agreement that expires on February 1, 2026.

On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to gradually discontinue the operations and sale of the company's manufacturing facility located in Quebec, Canada.

During this gradual discontinuation of operations, hourly employees will be entitled to compensation and benefits in accordance with the collective bargaining agreement noted above.

Hourly employees associated with the mattress fabrics operation located in Quebec, Canada were represented by a local unaffiliated union with a collective bargaining agreement that was set to expire on February 1, 2026.

On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to gradually discontinue this operation with the intention to ultimately sell the related building and land.

As a result, as of April 27, 2025, there were only six hourly employees remaining to ready the building and land for sale, which such sale to a third party occurred during the first quarter of fiscal 2026.

As a result of this sale , the remaining hourly employees were terminated.

All hourly employees were provided compensation and benefits in accordance with the collective bargaining agreement noted above.

Financial Information

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.

Segment assets include assets used in the operations of each segment and consist of accounts receivable, inventories, property, plant, and equipment, and right of use assets.

Statements of operations for our business segments are as follows:

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upholstery fabrics

gross profit (loss):

cost of sales by segment:

mattress fabrics

upholstery fabrics

total segment cost of sales

restructuring related charge (1) (3) (5)

cost of sales

gross profit:

mattress fabrics

upholstery fabrics

total segment gross profit

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unallocated corporate expenses

total segment (loss) income from operations

total segment loss from operations

restructuring related charge (1) (3) (5)

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loss before income taxes

(1) Cost of sales for fiscal 2024 includes a restructuring related charge totaling $ 40,000 , which pertained to markdowns of inventory related to the discontinuation of production of cut and sewn upholstery kits at the company's facility in Ouanaminthe, Haiti.

(2) Restructuring expense of $ 636,000 for fiscal 2024 represents impairment charges related to equipment of $ 329,000 and employee termination benefits of $ 103,000 related to the discontinuation of production of cut and sewn upholstery kits at the company's facility in Ouanaminthe, Haiti.

(1) During fiscal 2025, we incurred a restructuring related charge totaling $ 1.6 million, which pertained to losses on the disposal, valuation, and markdowns of inventory related to the closure of our manufacturing facility located in Quebec, Canada.

(2) For fiscal 2025, restructuring expense of $ 7.7 million mostly relates to the mattress fabrics segment.

The $ 7.7 million restructuring expense represents costs associated with:

(i) consolidating the company's North American mattress fabrics operations, including the closure of the company's Property located in Quebec, Canada;

(ii) consolidating two leased facilities related to the sewn mattress cover operation located in Ouanaminthe, Haiti, into one facility and reducing other operating expenses at this location;

(iii) initial costs related to consolidating production and distribution activities from the upholstery fabrics distribution center located in Burlington, North Carolina to the mattress fabrics manufacturing and distribution center located in Stokesdale, North Carolina;

and (v) other expenses incurred as part of the company's strategic plan to transform it's operating model as announced on April 24, 2025.

See Note 10 located in the consolidated financial statements for further details regarding the restructuring activities announced on May 1, 2024 (first quarter of fiscal 2025) and April 24, 2025 (fourth quarter of fiscal 2025).

(3) During fiscal 2024, we incurred a restructuring related charge of $ 40,000 , which pertained to markdowns of inventory related to the discontinuation of production of cut and sewn upholstery kits at the company's facility in Ouanaminthe, Haiti.

(4) For fiscal 2024, restructuring expense of $ 636,000 represents impairment charges related to equipment of $ 329,000 and employee termination benefits of $ 103,000 related to the discontinuation of production of cut and sewn upholstery kits at the company's facility in Ouanaminthe, Haiti.

In addition, during the fourth quarter of fiscal 2024, restructuring expense of $ 204,000 was incurred for employee termination benefits related to the closure of the upholstery fabrics finishing operation located in Shanghai China.

(3) Cost of sales for fiscal 2023 includes a restructuring related charge totaling $ 98,000 , which pertained to a loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operations located in Shanghai, China.

(4) Restructuring expense of $ 1.4 million for fiscal 2023 relates to both our restructuring activities for our cut and sew upholstery fabrics operations located in Shanghai, China, which occurred during the second quarter of fiscal 2023, and located in Ouanaminthe, Haiti, which occurred during the third and fourth quarters of fiscal 2023.

(5) During fiscal 2023, we incurred a restructuring related charge totaling $ 98,000 , which pertained to loss on disposal and markdowns of inventory related to the exit of our cut and sewn upholstery fabrics operation located in Shanghai, China.

(6) For fiscal 2023, restructuring expense of $ 1.4 million relates to both our restructuring activities for our cut and sewn upholstery fabrics operations located in Shanghai, China, which occurred during the second quarter of fiscal 2023, and those located in Ouanaminthe, Haiti, which occurred during the third and fourth quarters of fiscal 2023.

Restructuring expense represents employee termination benefits of $ 507,000 , lease termination costs of $ 481,000 , impairment losses totaling $ 357,000 that relate to leasehold improvements and equipment, and $ 51,000 for other associated costs.

5 unchanged sentences

property, plant, and equipment (1) (2)

assets held for sale (3)

right of use assets (4) (5)

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long-term investments - rabbi trust

(1) 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.

(1) 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.

and Haiti, respectively.

(2) 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.

(3) 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.

(3) The $ 2.2 million as of April 27, 2025, represents assets held for sale located in Canada.

(4) The $ 125,000 as of April 27, 2025, represents right of use assets located in Haiti.

(5) 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.

(6) 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.

(7) 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.

and China, respectively.

(6) The $ 1.7 million as of April 30, 2023, represents property, plant, and equipment of $ 974,000 , $ 592,000 , and $ 105,000 located in the U.S., Haiti, and China, respectively.

(8) 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.

(9) 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.

and China, respectively

(8) The $ 2.6 million as of April 30, 2023, represents right of use assets of $ 1.5 million and $ 1.1 million located in China and the U.S., respectively.

(10) The $ 567,000 as of April 27, 2025, and $ 585,000 as of April 28, 2024, represent property, plant, and equipment associated with unallocated corporate departments and corporate departments shared by both the mattress fabrics and upholstery fabrics segments located in the U.S.

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(1) Capital expenditure amounts are stated on an accrual basis.

See the Consolidated Statement of Cash Flows for capital expenditure amounts on a cash basis.

See Consolidated Statement of Cash Flows for capital expenditure amounts on a cash basis.

(2) During fiscal 2025, depreciation expense for the mattress fabrics segment included additional depreciation expense related to the shortening of useful lives of equipment associated with the closure of operations at our manufacturing facility located in Quebec, Canada.

The amount of additional depreciation expense totaling $ 1.3 million was classified as restructuring expense in our fiscal 2025 Consolidated Statement of Net Loss.

STATUTORY RESERVES

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The statutory surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any.

The statutory surplus reserve fund may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them provided that the remaining reserve balance after such issue is not less than 25 % of the registered capital.

The statutory surplus reserve fund may be utilized for business expansion or converted

into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them provided that the remaining reserve balance after such issue is not less than 25 % of the registered capital.

The company’s subsidiary located in China can transfer funds to the parent company, except for the statutory surplus reserve of $ 4.0 million, to assist with debt repayment, capital expenditures, and other expenses of the company’s business.

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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.

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.

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.

During fiscal 2025, 2024, and 2023, we did no t repurchase any shares of our common stock.

During fiscal 2022, we repurchased 121,688 shares of our common stock at a cost of $ 1.8 million.

As of April 27, 2025, $ 3.2 million was available for additional repurchases of our common stock.

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We believed that preserving capital and managing our liquidity was in the company’s best interest to support future growth and the long-term interests of our shareholders.

Accordingly, we did no t make any dividend payments during fiscal 2024 or fiscal 2023.

During fiscal 2022, dividend payments totaled $ 5.5 million, which represented quarterly dividend payments ranging from $ 0.11 per share to $ 0.115 per share.

Accordingly, we did no t make any dividend payments during fiscal 2025, fiscal 2024, or fiscal 2023, respectively.

CHANGES IN AND DISA GREEMENTS WITH ACCOUNTANTS

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(2) providing reasonable assurance that the transactions are recorded as necessary for preparation of financial statements, and that receipts and expenditures are made in accordance with authorizations of management and directors;

and (3) providing reasonable assurance that unauthorized acquisition, use, disposition of assets that could have a material effect on financial statements would be prevented or detected on a timely basis.

and (3) providing reasonable assurance that unauthorized acquisition, use, of disposition of assets that could have a material effect on financial statements would be prevented or detected on a timely basis.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of financial statements would be prevented or detected.

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Based on this assessment, management concluded that our internal control over financial reporting was effective as of April 27, 2025.

Grant Thornton LLP, an independent registered public accounting firm, has audited the consolidated financial statements as of and for the years ended April 28, 2024, April 30, 2023, and May 1, 2022, which are included in Item 8.

Grant Thornton LLP, an independent registered public accounting firm, has audited the consolidated financial statements as of and for the years ended April 27, 2025, April 28, 2024, and April 30, 2023, which are included in Item 8.

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

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DIRECTORS, EXECUTIVE OF FICERS, AND CORPORATE GOVERNANCE

Information with respect to executive officers and directors of the company is included in the company’s definitive Proxy Statement to be filed within 120 days after the end of the company’s fiscal year pursuant to Regulation 14A of the Securities and Exchange Commission, under the captions “Nominees, Directors, and Executive Officers,” “Section 16(a) Reports,” “Corporate Governance – Code of Business Conduct and Ethics,” and “Board Committees and Attendance – Audit Committee,” which information is herein incorporated by reference.

Information with respect to executive officers and directors of the company is included in the company’s definitive Proxy Statement to be filed within 120 days after the end of the company’s fiscal year pursuant to Regulation 14A of the Securities and Exchange Commission, under the captions “Nominees, Directors, and Executive Officers,” “Section 16(a) Reports,” “Corporate Governance – Code of Business Conduct and Ethics,” “Corporate Governance – Insider Trading Policy,” and “Board Committees and Attendance – Audit Committee,” which information is herein incorporated by reference.

EXECUT IVE COMPENSATION

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Consolidated Balance Sheets – April 27, 2025, and April 28, 2024

Consolidated Statements of Net Loss - for the years ended April 28, 2024, April 30, 2023, and May 1, 2022

Consolidated Statements of Comprehensive Loss - for the years ended April 28, 2024, April 30, 2023, and May 1, 2022

Consolidated Statements of Shareholders’ Equity – for the years ended April 28, 2024, April 30, 2023, and May 1, 2022

Consolidated Statements of Cash Flows – for the years ended April 28, 2024, April 30, 2023, and May 1, 2022

Consolidated Statements of Net Loss - for the years ended April 27, 2025, April 28, 2024, and April 30, 2023

Consolidated Statements of Comprehensive Loss - for the years ended April 27, 2025, April 28, 2024, and April 30, 2023

Consolidated Statements of Shareholders’ Equity – for the years ended April 27, 2025, April 28, 2024, and April 30, 2023

Consolidated Statements of Cash Flows – for the years ended April 27, 2025, April 28, 2024, and April 30, 2023

Notes to Consolidated Financial Statements

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001-12597), and are incorporated herein by reference.

Restated and Amended Bylaws of the company, as amended July 10, 2019, were filed as Exhibit 3(ii) to the company’s Form 10-K for the year ended April 28, 2019, filed July 12, 2019 (Commission File No.

001-12597), and are incorporated herein by reference.

Amended and Restated Bylaws of the company, amended effective September 26, 2024, were filed as Exhibit 3.1 to the company's Form 8-K dated September 27, 2024, and is incorporated herein by reference.

Description of Capital Stock of the company was filed as Exhibit 4.1 to the company’s Form 10-K for the year ended May 3, 2020, filed July 17, 2020 (Commission File No.

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001-12597), and is incorporated herein by reference.

Second Amendment to Second Amended and Restated Credit Agreement dated as of April 8, 2024, by and among Culp, Inc., as Borrower, Read Window Products, LLC and Culp Fabrics Global, LLC, as Guarantors, and Wells Fargo Bank, National Association, as Lender, was filed as exhibit 10.3 to the company's Form 10-K filed July 12, 2024, and is incorporated herein by reference.

Third Amendment to Second Amended and Restated Credit Agreement, dated as of June 12, 2025, by and among Culp, Inc., as Borrower, Read Window Products, LLC and Culp Fabrics Global, LLC, as Guarantors, and Wells Fargo Bank, National Association, as Lender, was filed as Exhibit 10.1 to the company's Form 8-K filed June 16, 2025, and is incorporated by reference.

Form of annual incentive award agreement was filed as Exhibit 10.1 to the company’s Form 10-Q dated December 8, 2023 (Commission File No.

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and certain investors specified therein was filed as Exhibit 10.1 to the company's Form 8-K dated June 17, 2024, and is incorporated herein by reference.

Form of Director and Officer Indemnification Agreement.

This agreement was filed as Exhibit 10.1 to the company's Form 8-K dated August 14, 2024, and is incorporated herein by reference.

Cooperation Agreement, effective as of June 6, 2025, between Culp, Inc.

and certain investors specified therein was filed as Exhibit 10.1 to the company's Form 8-K dated June 10, 2025, and is incorporated herein by reference.

Form of Annual Incentive Award Agreement.

This agreement was filed as Exhibit 10.1 to the company's Form 10-Q dated December 6, 2024, and is incorporated herein by reference.

Form of Restricted Stock Unit Award Agreement for restricted stock units granted to executive officers pursuant to the Amended and Restated Equity Incentive Plan.

This agreement was filed as Exhibit 10.2 to the company's Form 10-Q dated December 6, 2024, and is incorporated herein by reference.

Policy on Confidential Information and Trading of Securities

List of subsidiaries of the company

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Baugh, dated July 4, 2025

Power of Attorney of Perry E.

Davis, dated July 12, 2024

Power of Attorney of William L.

Tyson, dated July 7, 2025

Power of Attorney of Sharon A.

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Jones, dated July 3, 2025

Power of Attorney of Jonathan L.

Kelly, dated July 12, 2024

Power of Attorney of Franklin N.

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Certification of Principal Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

Dodd-Frank Clawback Policy

Dodd-Frank Clawback Policy, was filed as exhibit 97 to the company's Form 10-K filed July 12, 2024, and is incorporated herein by reference.

Inline XBRL Instance Document

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(Lead Independent Director)

Vice President and Corporate Controller

Chief Financial Officer

(principal financial officer and principal accounting officer)

(principal accounting officer)

(principal financial officer)

* By /s/ Kenneth R.

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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.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk