What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2026-07-17 compared with 2025-07-11 · 573 added, 552 removed, 904 unchanged (55% of the section changed)

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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.

The interest rate under the Credit Agreement as of May 3, 2026, was 5.64%.

As of May 3, 2026, outstanding borrowings under the Credit Agreement totaled $7.0 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).

Effective November 7, 2025, we entered into an unsecured credit agreement with the Bank of China ("BOC") that provides for a 10.0 million RMB ($1.5 million USD as of May 3, 2026) working capital loan.

Interest is based on a fixed rate of 2.5%, and therefore borrowings under this agreement are not subject to future changes in the market rate of interest.

As of May 3, 2026, the outstanding balance under this working capital loan was 10.0 million RMB ($1.5 million USD).

During May 2025 (first quarter of fiscal 2026), we entered into unsecured loan agreements with the Agricultural Bank of China ("ABC") totaling 21.0 million RMB ($3.1 million USD as of May 3, 2026), which agreements were paid in full during May 2026 (first quarter of fiscal 2027).

Interest was based on fixed rates ranging from 2.5% to 2.6%.

and therefore borrowings under this agreement were not subject to future changes in the market rate of interest.

As of May 3, 2026, the outstanding balance under this agreement was 21.0 million RMB ($3.1 million USD).

Effective March 3, 2026, we entered into an unsecured credit agreement with ABC that provides a 29.0 million RMB ($4.2 million USD as of May 3, 2026) working capital loan.

Interest is based on a fixed rate 2.4%, and therefore borrowings under this agreement are not subject to future changes in the market rate of interest.

As of May 3, 2026, the outstanding balance under this agreement was 29.0 million RMB ($4.2 million USD).

Effective March 17, 2026, we entered into an unsecured credit agreement with the China Construction Bank of China ("CCB") that includes 20.0 million RMB ($2.9 million USD as of May 3, 2026) that can be used in the form of a working capital loan and supplier financing agreements.

Interest is based on a fixed rate of 2.3%, and therefore borrowings under this agreement are not subject to future changes in the market rate of interest.

As of May 3, 2026, the outstanding balance under this agreement was 10.0 million RMB ($1.5 million USD).

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.

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are denominated in U.S.

A 10% change in the above exchange rates as of April 27, 2025, would not have materially affected our results of operations or financial position.

A 10% change in the above exchange rates as of May 3, 2026, would not have materially affected our results of operations or financial position.

CONSOLIDATED FINANCIAL STATEMENTS

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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 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 .

(a North Carolina corporation) and subsidiaries (the “Company”) as of May 3, 2026 and April 27, 2025, the related consolidated statements of net loss, comprehensive loss, shareholders’ equity, and cash flows for each of the three years in the period ended May 3, 2026, 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 May 3, 2026 and April 27, 2025, and the results of its operations and its cash flows for each of the three years in the period ended May 3, 2026, in conformity with accounting principles generally accepted in the United States of America .

Basis for opinion

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(dollars in thousands, except per share data and preferred and common stock shares)

April 27, 2025, and April 28, 2024

May 3, 2026, and April 27, 2025

Current assets

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Short-term notes receivable

current income taxes receivable

Income taxes receivable

Assets held for sale

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Total current assets

property, plant and equipment, net

Property, plant & equipment

Right of use assets

long-term investments - rabbi trust

Intangible assets

Long-term investments - rabbi trust

Long-term notes receivable

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Accounts payable - capital expenditures

operating lease liability - current

Operating lease liabilities - current

Deferred compensation - current

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Lines of credit - long-term

operating lease liability - long-term

Operating lease liabilities - long-term

Income taxes payable - long-term

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Preferred stock, $ .05 par value, authorized 10,000,000 shares,

no shares issued and outstanding at May 3, 2026, and

April 27, 2025, respectively

Common stock, $ .05 par value, authorized 40,000,000

shares, issued and outstanding 12,559,129 at April 27, 2025

shares, issued and outstanding 12,662,784 at May 3, 2026

and 12,559,129 at April 27, 2025

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The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEM ENTS OF NET LOSS

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

CONSOLIDATED STATEMENTS OF NET LOSS

For the years ended May 3, 2026, April 27, 2025, and April 28, 2024

(dollars in thousands, except per share data)

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Selling, general and administrative expenses

restructuring expense

Restructuring credit (expense)

Loss from operations

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Interest income

other expense

Other expense, net

Loss before income taxes

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

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

unrealized holding gain (loss) on investments

For the years ended May 3, 2026, April 27, 2025, and April 28, 2024

Unrealized holding gain on investments, net of tax

Unrealized gain on investments

Reclassification adjustment for realized gain

included in net loss

Total unrealized gain on investments

Comprehensive loss

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(dollars in thousands, except common stock shares)

For the years ended April 27, 2025, April 28, 2024,

For the years ended May 3, 2026, April 27, 2025,

Comprehensive

and April 28, 2024

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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with payroll withholding taxes

Balance, April 27, 2025

Balance, May 3, 2026

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEM ENTS OF CASH FLOWS

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

For the years ended May 3, 2026, April 27, 2025, and April 28, 2024

(dollars in thousands)

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Adjustments to reconcile net loss to net cash used in

provided by operating activities:

non-cash inventory (credit) charge

operating activities:

Non-cash inventory charge (credit)

Stock-based compensation

Deferred income taxes

Realized gain on sale of invesments (rabbi trust)

Gain on sale of equipment

non-cash restructuring expense

foreign currency exchange gain

Non-cash restructuring (credit) expense

Foreign currency exchange loss (gain)

Changes in assets and liabilities:

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Accrued expenses and deferred compensation

net cash (used in) provided by operating activities

Net cash used in operating activities

Cash flows from investing activities:

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Proceeds from the sale of property, plant and equipment

proceeds from notes receivable

Proceeds from note receivable

Proceeds from the sale of investments (rabbi trust)

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Proceeds from lines of credit

payments associated with lines of credit

common stock surrendered for payroll withholding taxes

payments for debt issuance costs

Payments on lines of credit

Payments of debt issuance costs

Common stock surrendered for withholding taxes payable

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

(decrease) increase in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

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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.

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

bedding and upholstery.

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

Currently, we have a bedding 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;

(1) consolidate the company's North American bedding 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 Property located in Quebec, Canada to the company's manufacturing facility located in Stokesdale, North Carolina;

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

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 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.

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

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

See Notes 7 and 8 to the consolidated financial statements for further details regarding the sale of the Property and determination of fair value.

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

As of May 3, 2026, we have upholstery operations located in Stokesdale, North Carolina, and Shanghai, China, as well as a wholly-owned subsidiary, Culp Fabrics Vietnam Limited, which has an administrative office located in Ho Chi Minh City, Vietnam.

The purpose of this office in Vietnam is to enhance our strategic sourcing capabilities and to further diversify our supply chain in Asia.

On April 24, 2025 (the fourth quarter of fiscal 2025), the company announced a strategic transformation of its operating model that combined certain activities within the bedding and upholstery segments and created one integrated Culp-branded business.

As part of this strategic transformation, we closed a leased facility in Burlington, North Carolina, and a leased facility located in Knoxville, Tennessee, each operated by our upholstery segment and transitioned their production and distribution activities to a shared management model within our owned facility located in Stokesdale, North Carolina, which had historically been operated solely by our bedding segment.

This transition was completed during the fourth quarter of fiscal 2026.

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

Additionally, the upholstery segment includes Read Window Products LLC (“Read”), a wholly-owned subsidiary that 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.

Read's operations were moved from Knoxville, Tennessee to Stokesdale, North Carolina.

Basis of Presentation

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Principles of Consolidation

The consolidated financial statements include the accounts of the company and its subsidiaries.

The consolidated financial statements include the accounts Culp, Inc.

(the "company") and its subsidiaries.

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 30th, a calendar month end, which is required by the respective governments under which they are organized.

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 2026, 2025, or 2024.

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

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

Fiscal 2026, 2025, and 2024 comprised 53-week, 52-week, and 52-week periods, respectively.

Use of Estimates

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The investments associated with the rabbi trust consist of investments in a money market fund and various mutual funds that are classified as available-for-sale.

Our rabbi trust investments classified as available-for-sale were recorded at their fair value of $ 7.0 million and $ 8.0 million as of April 27, 2025, and April 28, 2024, respectively.

These investments had accumulated unrealized gains totaling $ 150,000 and $ 118,000 as of April 27, 2025, and April 28, 2024, respectively.

The fair value of our investments associated with our rabbi trust approximates their cost basis and reside with our U.S.

Our rabbi trust investments classified as available-for-sale were recorded at their fair value of $ 6.5 million and $ 7.0 million as of May 3, 2026 and April 27, 2025, respectively.

As of May 3, 2026, and April 27, 2025, these investments had accumulated unrealized gains totaling $ 319,000 and $ 150,000 , respectively.

As of May 3, 2026, and April 27, 2025, the cost basis associated with these investments was $ 6.1 million and $ 6.9 million, respectively.

Accounts Receivable and Current Expected Credit Losses

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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:

Our risk assessment includes the respective customer’s:

(i) financial position;

(ii) past payment history;

(iii) management’s general ability;

(iii) management’s general ability to operate its business;

and (iv) historical loss experience;

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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.

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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.

As a result of our assessment, we recorded a total non-cash inventory credit of $ 1.7 million for both our bedding and upholstery 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.

Based on the above policy, we recorded a non-cash inventory charge (credit) within the Consolidated Statements of Net Loss of $ 2.1 million, $( 2.4 ) million, and $( 1.6 ) million during fiscal 2026, 2025, and 2024, respectively.

As of May 3, 2026, and April 27, 2025, the reserve for inventory markdowns was $ 8.0 million and $ 7.8 million, respectively.

Property, Plant, and Equipment

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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.

In accordance with ASC Topic 360, Property, Plant, and Equipment, management reviews its property, plant, and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered.

Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of the asset to future net undiscounted cash flows expected to be generated by the asset.

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Total interest costs incurred were $ 759,000 , $ 231,000 and $ 11,000 during fiscal 2026, 2025, and 2024, respectively.

No interest costs were incurred during fiscal 2023.

We capitalize interest costs incurred on funds used to construct property, plant, and equipment.

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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.

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:

A summary of our foreign currency exchange rate (loss) gain by geographic area follows:

(dollars in thousands)

Indefinite-Lived Intangible Assets

Intangible Assets

In accordance with ASC Topic 350 , Intangibles – Goodwill and Other, our business was classified into three reporting units during fiscal 2026:

mattress fabrics, upholstery fabrics, and Read.

bedding, upholstery, and Read.

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.

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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.

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.

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

This charge was classified within restructuring expense in our fiscal 2025 Consolidated Statement of Net Loss.

No asset impairment charges were recorded during fiscal 2026 or fiscal 2024 related to indefinite-lived intangible assets.

Customer Relationships

In accordance with ASC Topic 360 Property, Plant, and Equipment , management reviews its finite-lived intangible assets (i.e., customer relationships and non-compete agreement) for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered.

Recoverability of finite-lived intangible assets to be held and used is measured by a comparison of the carrying amount of the asset to future net undiscounted cash flows expected to be generated by the asset.

If the carrying amount of an asset 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.

During the third quarter of fiscal 2026, we assessed Read's customer relationships for impairment as certain indicators for impairment existed, and accordingly, we believed it was more-likely-than-not that the fair value of Read's customer relationships was less than its carrying amount.

Based on this assessment, we recorded an asset impairment charge totaling $ 291,000 , which represents the entire carrying amount of Read's customer relationships.

This charge was classified within restructuring expense in our fiscal 2026 Consolidated Statement of Net Loss.

No asset impairment charges were recorded during fiscal 2025 or fiscal 2024 related to finite-lived intangible assets.

See Note 6 to the consolidated financial statements for further details of our assessment of impairment, conclusions reached, and the result of our impairment test relating to our finite-lived and indefinite-lived intangible assets.

Deferred Income Taxes – Overall

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loss carryforwards, and foreign income tax credits at income tax rates expected to be in effect when such amounts are realized or settled.

The effect on deferred income taxes of a change in tax rates is recognized in income tax (expense) benefit in the period that includes the enactment date.

The effect on deferred income taxes of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.

Deferred Income Taxes – Valuation Allowance

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As a result of the 2017 Tax Cuts and Jobs Act, a U.S.

corporation is allowed a 100 % dividend received deduction for earnings and profits received from a 10 % owned foreign corporation.

corporation is allowed a 100 % dividend received deduction for earnings and profits received from a 10 % or more owned foreign corporation.

Therefore, a deferred tax liability will only be required for unremitted withholding taxes associated with earnings and profits generated by our foreign subsidiaries that will ultimately be repatriated to the U.S.

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In addition to customer purchase orders, we also have supply contracts with certain customers that define standard terms and conditions.

Our contracts generally include promises to sell upholstery fabrics, mattress fabrics, or home goods products.

In addition, we provide fabrication and installation services for our own products associated with customized window treatments.

Our contracts generally include promises to sell upholstery, bedding, or home goods products.

In addition, we provide window treatments and related customized fabrication and installation services to customers in the hospitality and commercial markets.

Revenue associated with sales of our products is recognized at the point in time when control of the promised goods has been transferred to the customer.

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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.

We elected the practical expedient to not adjust the transaction price for the effects of a significant financing component because the performance obligation is part of a contract that has an original expected duration of one year or less.

We did not disclose the value of unsatisfied performance obligations as substantially all of any unsatisfied performance obligations as of May 3, 2026, will be satisfied within one year or less.

Revenue Measurement

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The amount of variable consideration included in the transaction price is only included in net sales to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur in a future period.

Our mattress fabrics and upholstery fabrics segments only allow product returns to the extent that the products or services did not meet the contractually agreed upon specifications at the time of sale.

Our bedding and upholstery segments only allow product returns to the extent that the products or services did not meet the contractually agreed upon specifications at the time of sale.

Customers must receive authorization prior to returning products.

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Stock-Based Compensation

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

Our equity incentive plans are described in more detail in Note 15 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.

Compensation expense for time-vested restricted stock unit awards is amortized on a straight-line basis over the respective vesting period.

Compensation expense for time-based restricted stock unit awards is amortized on a straight-line basis over the respective vesting period.

Compensation expense for performance-based restricted stock unit awards is recorded based on an assessment each reporting period to determine the probability of whether or not certain performance targets will be met and how many common stock shares are expected to be earned as of the end of the vesting period.

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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 in more detail in Note 16 of the consolidated financial statements.

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 to 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.

1 unchanged sentence

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

Effective December 14, 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2023-09 Improvements to Income Tax Disclosures ("ASU 2023-09" ), 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.

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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.

ASU 2023-09 is effective for public entities starting in annual periods beginning after December 15, 2024 (i.e., our fiscal 2026 annual report).

Early adoption is permitted.

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.

ASU 2023-09 became effective during the fourth quarter of fiscal 2026 , and we applied this new guidance retrospectively in our fiscal 2026 annual consolidated financial statements.

Recently Issued Accounting Pronouncements

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.

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

(i) inventory purchases, (ii) employee compensation, (iii) depreciation, and (iv) intangible asset amortization, as well as (v) 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).

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

As of May 3, 2026, 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:

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(ii) past payment history;

(iii) management’s general ability;

(iii) management’s general ability to operate its business;

and (iv) historical loss experience;

as well as (v) any other ongoing economic conditions.

After our risk assessment was completed, we assigned credit grades to our customers, which, in turn, were used to determine our allowance for doubtful accounts totaling $ 651,000 and $ 356,000 as of April 27, 2025, and April 28, 2024, respectively.

After our risk assessment was completed, we assigned credit grades to our customers, which, in turn, were used to determine our allowance for doubtful accounts totaling $ 589,000 , $ 651,000 , and $ 356,000 as of May 3, 2026, April 27, 2025, and April 28, 2024, respectively.

A summary of the activity in the allowance for returns and allowances and discounts follows:

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Our operations are classified into two business segments:

mattress fabrics and upholstery fabrics.

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 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 products associated with window treatments.

bedding (formerly known as mattress fabrics) and upholstery (formerly known as upholstery fabrics).

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

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

In addition, the upholstery segment includes Read, a wholly-owned subsidiary that 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.

On April 24, 2025 (fourth quarter of fiscal 2025), the company announced a strategic transformation of its operating model that combined certain activities within the bedding and upholstery business segments to create one integrated Culp-branded business.

As part of this strategic transformation, we closed a leased facility in Burlington, North Carolina, and a leased facility located in Knoxville, Tennessee, each operated by our upholstery segment, and transitioned their production and distribution activities utilizing a shared management model within our owned facility located in Stokesdale, North Carolina.

See note 10 to the consolidated financial statements for further details regarding this strategic transformation initiative.

Our primary performance obligations include the sale of bedding and upholstery products, as well as the performance of customized fabrication and installation services associated with window treatments.

Significant Judgments

See Note 1 of the consolidated financial statements for disclosure of our accounting policies regarding our significant judgments associated with revenue recognition, determining our transaction prices, and revenue measurement.

See Note 1 to the consolidated financial statements for disclosure of our accounting policies regarding our significant judgments associated with revenue recognition, determining our transaction prices, and revenue measurement.

Contract Assets & Liabilities

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.

Certain contracts relating to customized fabrication and installation services associated with Read require upfront customer deposits that result in a contract liability that 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.

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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 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.

There were no contract assets recognized as of May 3, 2026, or April 27, 2025.

A summary of the activity of deferred revenue follows:

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As of May 3, 2026, deferred revenue of $ 281,000 pertained solely to upfront customer deposits associated with customized fabrication and installation services related to Read.

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 .

(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 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 $ 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

(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 customer totaling $ 167,000 .

Revenue recognized during the period that was included in the contract liability balance at the beginning of the period was $ 422,000, $ 1.4 million, and $ 1.0 million, for fiscal years 2026, 2025, and 2024, respectively

Disaggregation of Revenue

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

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

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.

We were required to assess our tradename for impairment annually or between annual tests if we believed indicators of impairment existed.

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 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 bedding and upholstery business segments and creating one integrated Culp-branded business.

Since the company is transforming to a single Culp-branded business, Read's tradename is being phased out and will no longer be used to market upholstery products to customers.

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

This charge was classified as restructuring expense within our fiscal 2025 Consolidated Statement of Net Loss.

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Loss on impairment

Amortization expense

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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 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:

FY 2026 - $ 301,000 ;

Our customer relationships related to our bedding segment and Read were amortized on a straight-line basis over useful lives of seventeen and nine years, respectively.

As of February 1, 2026 (third quarter of fiscal 2026), management performed a qualitative assessment of Read's customer relationships, as certain indicators of impairment existed, and accordingly, we believed it was more-likely-than-not the fair value of Read's customer relationships were less than its carrying amount.

Management's conclusion was based on a significant decline in net sales during the first nine months of fiscal 2026 that was more than anticipated.

Read's net sales during the first nine months of fiscal 2026 totaled $ 4.8 million, a decrease of $ 4.9 million, or 50.8 %, compared with net sales of $ 9.7 million during the first nine months of fiscal 2025.

In addition, the decline in Read's net sales and profitability during the first nine months of fiscal 2026 were also attributable to the closure of Read's facility located in Knoxville, Tennessee, and the transition of certain production activities to our manufacturing facility located in Stokesdale, North Carolina, as well as strategically sourcing production and materials with long-standing supply partners.

Based on this uncertainty, we recorded an asset impairment charge totaling $ 291,000 which represented the entire carrying value of Read's customer relationships.

This charge was classified within restructuring credit within our fiscal 2026 Consolidated Statement of Net Loss.

The gross carrying amount of our customer relationships were $ 868,000 and $ 3.1 million as of May 3, 2026 and April 27, 2025, respectively.

Accumulated amortization for our customer relationships were $ 664,000 and $ 2.4 million as of May 3, 2026 and April 27, 2025, respectively.

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

FY 2027 - $ 51,000 ;

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FY 2030 - $ 51,000 .

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

The weighted average amortization period for our customer relationships is 4.0 years as of May 3, 2026.

Non-Compete Agreement

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Our non-compete agreement is associated with a prior acquisition by our mattress fabrics segment and is amortized on a straight-line basis over the fifteen-year life of the agreement.

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 $ 1.8 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:

FY 2026 - $ 76,000 ;

Our non-compete agreement is associated with a prior acquisition by our bedding segment and is amortized on a straight-line basis over the fifteen-year life of the agreement.

The gross carrying amount of this non-compete agreement was $ 2.0 million as of May 3, 2026, and April 27, 2025, respectively.

Accumulated amortization for this non-compete agreement was $ 1.9 million and $ 1.8 million as of May 3, 2026, and April 27, 2025 , respectively.

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

FY 2027 - $ 76,000 ;

and FY 2028 - $ 75,000 .

The weighted average amortization period for the non-compete agreement is 3.0 years as of April 27, 2025.

Impairment of Definite Lived Assets - Mattress Fabrics Segment

As of April 27, 2025, management reviewed the long-lived assets associated with our mattress fabrics segment, which consisted of property, plant, and equipment, right of use assets, and definite-lived intangible assets (collectively known as the "Mattress Asset Group"), for impairment, as events and changes in circumstances occurred that indicated the carrying amount of the Mattress Asset Group may not be recoverable.

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:

The weighted average amortization period for the non-compete agreement is 2.0 years as of May 3, 2026.

Impairment of Definite Lived Assets - Bedding Segment

As of May 3, 2026, management reviewed the long-lived assets associated with our bedding segment, which consisted of property, plant, and equipment and definite-lived intangible assets (collectively known as the "Bedding Asset Group"), for impairment, as events and changes in circumstances occurred that indicated the carrying amount of the Bedding Asset Group may not be recoverable.

The bedding segment has experienced significant cumulative operating losses since the second quarter of fiscal 2023, and continuing through the fourth quarter of fiscal 2026.

We believe the significant cumulative operating losses started from a decline in consumer discretionary spending on bedding products, which we believe stemmed from 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 with such demand shifting to travel, leisure, and other services;

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

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

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

Based on the above evidence, we were required to determine the recoverability of the Bedding Asset Group, which is classified as held and used, by comparing the carrying amount of the Bedding 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 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 $ 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.

The carrying amount of the Bedding Asset Group totaled $ 20.1 million, which represents property, plant, and equipment of $ 19.8 million, customer relationships of $ 204,000 , and a non-compete agreement of $ 151,000 .

The total carrying amount of the Bedding 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 Bedding Asset Group as of May 3, 2026.

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.

Effective January 24, 2023, Culp Upholstery Fabrics - Haiti, Ltd.

("CUF Haiti") entered into an agreement to terminate a lease ("CUF Termination Agreement") of a facility located in Ouanaminthe, Haiti.

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

Subsequently, a third party (the "Lessee") took possession of this facility and 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 CUF Termination Agreement.

In addition, as described in the CUF 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 was fully and unconditionally discharged from all of its remaining obligations under the Original Lease.

The initial gross carrying amount of this note receivable was $ 2.4 million and 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 CUF Termination Agreement.

We used an interest rate of 6 % 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;

(i) the credit

characteristics of the Lessee and guarantor of the CUF Termination Agreement;

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

(iii) the payment terms as defined in the CUF 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:

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 of the consolidated financial statements for further explanation of the fair value hierarchy).

Effective May 1, 2023, CUF Haiti formally assigned this note receivable to Culp, Inc.

The following table represents the remaining future principal payments of the Culp Inc.

Parent) note receivable as of May 3, 2026:

(dollars in thousands)

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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 May 3, 2026, this note receivable totaled $ 1.2 million, of which $ 297,000 and $ 885,000 were classified as short-term note receivable and long-term note receivable, respectively.

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.

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 classified amortization of unearned interest income totaling $ 80,000 , $ 96,000 and $ 111,000 within interest income on our consolidated statements of net loss during fiscal 2026, 2025, and 2024, respectively.

As of May 3, 2026, 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.

Rayonese Textile Inc.

In connection with the sale of the company's Property located in Quebec, Canada, we entered into 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 to a third party (the "Buyer") with a closing date of April 30, 2025.

Pursuant to the Sales Agreement, the total sales price for the Property was $ 8.6 million CAD ($ 6.2 million USD as of April 30, 2025), with $ 2.0 million CAD ($ 1.4 million USD as of April 30, 2025) paid prior to and at closing, and the remaining balance of $ 6.6 million CAD ($ 4.8 million USD as of April 30, 2025) due by April 30, 2026.

Interest was earned on the note receivable at rates ranging from 6 % to 10 % and collected monthly as specified in the Sales Agreement.

During the fourth quarter of fiscal 2026, we received cash proceeds for the remaining balance of $ 6.6 million CAD ($ 4.7 million USD).

Refer to Notes 8 and 10 to the consolidated financial statements for further details of the sale of the Property and a description of our restructuring activities.

Culp Home Fashions - Haiti, Ltd.

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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.

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 18, 2025, or 15 days after a new lease with a third party lessee was signed.

In connection with the CHF Termination Agreement, CHF Haiti has been 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.

As of May 3, 2026, no assets were classified as held for sale as a result of the completion of our restructuring activities during fiscal 2026 (see Note 10 to the consolidated financial statements for a description of the restructuring activities announced on May 1, 2024, and April 24, 2025).

In connection with our restructuring activity announced on May 1, 2024, we classified certain assets as held for sale totaling $ 2.2 million as of April 27, 2025, which mostly related to the Property associated with the closure of our operations located in Quebec, Canada.

We determined that the fair value of the Property exceeded its carrying value, and therefore no impairment charge was recorded during fiscal 2025.

The fair value of the Property was based on quoted market prices from third party sales offers, which we believe are significant observable inputs, and therefore we believe this information is classified as Level 2 within the fair value hierarchy (See Note 16 to the consolidated financial statements for further explanation of the fair value hierarchy).

During the first quarter of fiscal 2026, we sold the Property and recognized a gain from this sale totaling $ 4.0 million that was classified within restructuring credit in the fiscal 2026 Consolidated Statement of Net Loss.

See Note 7 to the consolidated financial statements for further details regarding the Sales Agreement associated with the sale of the Property.

ACCRUED EXPENSES

A summary of accrued expenses follows:

(dollars in thousands)

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RESTRUCTURING 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;

(1) consolidate the company's North American bedding operations, including the closure and sale of the Property 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;

(3) transition the bedding 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.

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

These restructuring activities were completed by the end of the second quarter of fiscal 2026, including the sale of Property located in Quebec, Canada.

Accordingly, we recorded a gain from the sale of this Property totaling $ 4.0 million that was classified within restructuring credit in the fiscal 2026 Consolidated Statement of Net Loss.

See Notes 7 and 8 to the consolidated financial statements for further details regarding the Sales Agreement associated with the sale of Property and determination of fair value.

Since the inception of this restructuring initiative, we have incurred cumulative restructuring and restructuring related charges totaling $ 5.3 million, most of which is related to the bedding segment.

Of this total $ 5.3 million, $ 7.2 million represents a cash restructuring and restructuring related charge partially offset by $( 1.9 ) million represents a non-cash restructuring credit.

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

On April 24, 2025 (fourth quarter of fiscal 2025), the company announced a strategic transformation of its operating model that combined certain activities within the bedding and upholstery segments and created one integrated Culp-branded business.

As part of this strategic transformation , we closed a leased facility located in Burlington, North Carolina and a leased facility in Knoxville, Tennessee, each operated by our upholstery segment, and transitioned their production and distribution activities to a shared management model within our owned facility located in Stokesdale, North Carolina, which had historically been operated solely by our bedding segment.

These restructuring activities were completed by the end of the fourth quarter of fiscal 2026.

Since the inception of this restructuring initiative, we have incurred restructuring and restructuring related charges totaling $ 2.7 million, of which $ 1.4 million represents a cash restructuring and related charge and $ 1.3 million represents a non-cash restructuring charge.

Upholstery Segment - Other Restructuring Activities Prior to Fiscal 2025

Ouanaminthe, Haiti

Cut and Sew Upholstery Fabrics Operation

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.

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

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.

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 production of upholstery cut and sewn kits in Haiti.

This restructuring activity commenced during the third quarter of fiscal 2023 and was completed during the third quarter of fiscal 2024.

It resulted in a cumulative restructuring and restructuring related charge of $ 1.3 million.

See Note 7 to 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 in China to align with current demand trends.

During the fourth quarter of fiscal 2024, we closed our upholstery 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:

The following summarizes restructuring (credit) expense and restructuring related charges associated with all the restructuring activities described above:

(dollars in thousands)

Net (gain) loss from the sale and impairment of property, plant, and equipment

Loss on disposal, valuation, and markdowns of inventory

Facility consolidation and relocation expenses

Impairment of intangible asset

Other associated costs

Employee termination benefits

Additional depreciation expense for shortened useful lives of equipment

Lease termination costs

Impairment loss - property, plant, and equipment

Loss on disposal and markdowns of inventory

Other associated costs

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

(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:

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

(1 ) Of the total $( 1.4 ) million net restructuring credit, a $( 2.3 ) million credit and a $ 931,000 charge were classified within restructuring credit and cost of sales, respectively, in the fiscal 2026 Consolidated Statement of Net Loss.

Of the total $( 1.4 ) million net restructuring credit and restructuring related charge, a credit of $( 3.1 ) million and a charge of $ 1.7 million related to bedding and upholstery segments, respectively.

Of the total $( 1.4 ) million net restructuring credit and restructuring related charge, a credit of $( 3.4 ) million and a charge of $ 2.0 million related to the restructuring activities announced on May 1, 2024, and April 24, 2025, respectively.

(2) Of the total $ 9.4 million restructuring and restructuring related charge, $ 7.7 million and $ 1.6 million were classified within restructuring expense and cost of sales, respectively, in the fiscal 2025 Consolidated Statement of Net Loss.

Of the $ 9.4 million restructuring and restructuring related charge, $ 8.5 million, $ 540,000 , and $ 290,000 related to the bedding segment, unallocated corporate, and the upholstery segment, respectively.

Of the total $ 9.4 million restructuring and restructuring related charge, $ 8.7 million and $ 676,000 related to restructuring activities announced on May 1, 2024, and April 24, 2025, respectively.

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

The entire $ 676,000 related to the upholstery segment and the other restructuring activities prior to fiscal 2025.

The following summarizes the activity in accrued restructuring for all the above restructuring activities described above:

Facility Consolidation

and Relocation

(dollars in thousands)

Balance, May 1, 2022

Accrual established in fiscal 2023

Expenses incurred

Balance, April 30, 2023

Accrual established in fiscal 2024

Expenses incurred

Change in estimate adjustments

Effects of foreign currency

Balance, April 28, 2024 (1)

Expense incurred

Expenses incurred

Change in estimate adjustments

Effects of foreign currency

Balance, April 27, 2025

Expenses incurred

Change in estimate adjustments

Effects of foreign currency

Balance, May 3, 2026

(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:

The summary of outstanding borrowings under our lines of credit follows:

(dollars in thousands)

1 unchanged sentence

revolving line of credit

Agricultural Bank of China - revolving line of credit

Agricultural Bank of China - supplier financing arrangements

Agricultural Bank of China - working capital loan (executed May 2025)

Agricultural Bank of China - working capital loan (executed March 2026)

Agricultural Bank of China - revolving line of credit

Bank of China - working capital loan

China Construction Bank Corporation - 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.

(1) Of the total $ 19.1 million, $ 12.1 million and $ 7.0 million were recorded within lines of credit - current and line of credit - long-term, respectively, within the Consolidated Balance Sheet as of May 3, 2026.

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

Revolving Credit Agreement – United States

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”).

On June 12, 2025, Culp, Inc., as borrower, 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 amended 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 Third Amendment, the term of the ABL Facility was extended for three years and 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.

On November 4, 2025 (third quarter of fiscal 2026), the company entered into a Fourth Amendment to the Second Amended and Restated Credit Agreement that increased the aggregate amount of letters of credit that could be issued by the company from $ 2.0 million to $ 3.0 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:

16 unchanged sentences

(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 .

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.

4 unchanged sentences

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.

(i) an event of default has occurred or (ii) Excess Availability under the ABL Facility falls below $ 4.5 million at such time.

Such compliance period shall end when Excess Availability shall be equal to or greater than $ 4.5 million for a period of 60 consecutive days and no event of default is continuing.

8 unchanged sentences

• enter into transactions with affiliates

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.

The applicable interest rate under the ABL Facility was 5.64 % and 5.78 % as of May 3, 2026, and April 27, 2025, respectively.

There were $ 2.8 million, and $ 925,000 of outstanding letters of credit provided by the ABL Facility as of May 3, 2026, and April 27, 2025, respectively.

As of May 3, 2026, we had $ 225,000 remaining for the issuance of additional letters of credit, based on an aggregate letters of credit amount not to exceed $ 3 million as stated in the Credit Agreement.

As of May 3, 2026, and April 27, 2025, the outstanding balances under the Credit Agreements were $ 7.0 million and $ 4.6 million, respectively, and were classified as line of credit - long-term within the Consolidated Balance Sheets.

As of May 3, 2026, our available borrowings calculated under the provisions of the Credit Agreement totaled $ 14.5 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:

Agricultural Bank of China ("ABC") Agreements

Supplier Financing Arrangements

Based on the company's request, certain suppliers entered into supply chain financing arrangements during fiscal 2026 and 2025.

As a result, 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 ABC, under a reverse factoring agreement with no recourse, and, in turn, received payments from ABC under terms that are normal and customary.

Interest was charged at a fixed rate of 2.42 % and 2.72 % for supply chain arrangements that were entered into during fiscal 2026 and fiscal 2025, respectively.

The outstanding balances of $ 1.9 million and $ 2.8 million USD were recorded within lines of credit-current in the Consolidated Balance Sheet as of May 3, 2026 and April 27, 2025, respectively.

The following summarizes the activity associated with our supply chain financing arrangements for the years ended May 3, 2026, and April 27, 2025:

(dollars in thousands)

2 unchanged sentences

Vendor invoices paid during the year

Foreign currency exchange remeasurement

Effects of foreign currency

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).

ABC - Working Capital Loans

Executed May 2025

During the first quarter of fiscal 2026, we entered into unsecured loan agreements totaling 21.0 million RMB ($ 3.1 million USD as of

May 3, 2026), which agreements expired on dates ranging from May 7, 2026 , through May 25, 2026 and were paid in full prior thereto.

Interest charged under these agreements was based on rates determined by ABC (applicable interest rates ranged from 2.5 % to 2.6 % as of May 3, 2026).

The outstanding balance associated with these agreements was $ 3.1 million USD and was classified as lines of credit - current within the Consolidated Balance Sheet as of May 3, 2026.

During the first quarter of fiscal 2027, we entered into new unsecured agreements totaling 21.0 million RMB ($ 3.1 million USD as of borrowing dates ranging from May 21, 2026 through May 26, 2026 ), and which agreements expire on dates ranging from May 20, 2027 through May 25, 2027.

Currently, interest charged under these agreements is based on an applicable interest rate of 2.3 %.

Effective March 2026

Effective March 3, 2026, we entered into an additional unsecured loan agreement totaling 29 million RMB ($ 4.2 million USD as of May 3, 2026), which agreement is set to expire on March 1, 2027 .

Interest charged under this agreement is based on an applicable interest rate of 2.4 %.

The outstanding balance under this agreement was $ 4.2 million USD and was classified as lines of credit - current within the Consolidated Balance Sheet as of May 3, 2026.

Unsecured Credit Agreement

Effective March 5, 2025, we entered into an unsecured credit agreement that provided for a line of credit up to 29.0 million RMB ($ 4.0 million USD on March 5, 2025) that expired and was paid in full on March 3, 2026 .

Interest charged under this agreement was based on an applicable interest rate of 2.6 %.

This agreement did no t have an outstanding balance as of May 3, 2026, and had a balance of $ 4.0 million as of April 27, 2025, which was classified within lines of credit-current in the respective Consolidated Balance Sheet.

Bank of China ("BOC") - Credit Agreements

Effective November 5, 2024, we entered into a credit agreement that provided for a 10.0 million RMB ($ 1.4 million USD as of November 5, 2024) unsecured working capital loan and 25.0 million RMB ($ 3.5 million USD as of November 5, 2024) 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 expired on November 6, 2025 .

Interest charged under this agreement was 2.6 %.

On November 6, 2025, (third quarter of fiscal 2026), we paid in full the outstanding balance of the 10.0 million RMB ($ 1.4 million USD) due pursuant to the above unsecured working capital loan.

Effective November 7, 2025, we entered into a new credit agreement that provides for a 10.0 million RMB ($ 1.5 million USD as of May 3, 2026) unsecured working capital loan and 25.0 million RM B ($ 3.7 million USD as of May 3, 2026) fo r 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 11, 2026 .

Interest is charged based on a fixed rate of 2.5 %.

The outstanding balance under these agreements was $ 1.5 million and $ 1.4 million USD and were classified as lines of credit-current within the Consolidated Balance Sheets as of May 3, 2026 and April 27, 2025, respectively.

In addition, as of May 3, 2026, there were no outstanding letters of credit under this agreement.

China Construction Bank Corporation ("CCB") - Credit Agreement

During the third quarter of fiscal 2026, CCB approved total borrowings of 30.0 million RMB ($ 4.4 million USD as of May 3, 2026), which includes 20.0 million RMB ($ 2.9 million USD as of May 3, 2026) that can be used in the form of a working capital loan and

supplier financing agreements, as well as a 10.0 million RMB ($ 1.5 million USD as of May 3, 2026) for letters of credit.

Effective March 17, 2026, we borrowed 10.0 million RMB ($ 1.4 million USD as of March 17, 2026), which borrowing incurs interest based on a fixed rate of 2.3 %, with the balance due on March 16, 2027.

The outstanding balance under this agreement was $ 1.5 million as of May 3, 2026, which was classified as lines of credit - current within the Consolidated Balance Sheet.

Maturity of our lines of credit for the next three years follows (with dollars in thousands):

FY 2027 - $ 12,129 ;

FY 2028 - $ 0 ;

and FY 2029 - $ 7,000 .

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

As of April 27, 2025, we were in compliance with our financial covenants.

As of May 3, 2026, we were in compliance with our financial covenants.

Interest paid during fiscal years 2026, 2025, and 2024 was $ 750,000 , $ 258,000 , and $ 11,000 , respectively.

Income Tax Expense and Effective Income Tax Rate

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.

The components of loss before income taxes are as follows:

(dollars in thousands)

United States

Income tax expense consists of:

(dollars in thousands)

uncertain income tax positions

undistributed earnings – foreign subsidiaries

Current income tax expense (benefit)

Total current income tax expense

Deferred income tax expense (benefit)

federal loss carryforwards and credits

state carryforwards

Total deferred income tax (benefit) expense

Total income tax expense (benefit)

federal loss carryforwards and credits

federal & state carryforwards and credits

valuation allowance

Loss before income taxes related to our foreign and U.S.

operations consists of:

(dollars in thousands)

Total Foreign

United States

The following schedule summarizes the principal differences between the income tax expense at the federal income tax rate and the effective income tax rate reflected in the consolidated financial statements:

federal income tax rate

valuation allowance

foreign tax rate differential

income tax effects of Chinese foreign exchange gains

withholding taxes associated with foreign tax jurisdictions

uncertain income tax positions

state income taxes

Total income tax expense

The entire amount of income tax expense of $ 1.9 million, $ 392,000 , and $ 3.0 million during fiscal 2026, 2025, and 2024, respectively, was allocated to loss from continuing operations.

Disaggregating Income Tax Disclosures

On December 14, 2023, the FASB issued ASU 2023-09 which applies to all entities subject to income taxes.

This standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions.

The following table reconciles the U.S.

federal statutory income tax rate to the company's effective income tax rate.

This reconciliation is based on the retrospective adoption of ASU 2023-09, which requires reconciling items to be presented on a quantitative basis in dollars and percentages, as well as reconciling items exceeding the disclosure threshold of 5% of the expected statutory rate presented separately.

federal statutory income tax rate

Domestic Federal

Change in valuation allowance

Stock-Based compensation

consolidated effective income tax rate (2) (3)

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

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

Nontaxable and nondeductible items

Effect of Cross-border tax laws

Global intangible low-taxed income (GILTI)

Deemed intercompany charge

Domestic state income taxes, net of federal effect (1)

Change in valuation allowance

Statutory income tax rate differential

Foreign tax effects

Income tax effects of local currency foreign

exchanges (losses) gains

Statutory income tax rate differential

Withholding taxes

Statutory income tax rate differential

Withholding taxes

Statutory income tax rate differential

Other Foreign

Worldwide changes in unrecognized income

Reported income tax expense (2) (3)

(1) During fiscal 2026, state taxes in Tennessee, Kentucky, and South Carolina make up the majority (greater than 50%) of the tax effect in this category.

During fiscal 2025, state taxes in Tennessee, South Carolina, and Kentucky make up the majority (greater than 50%) of the tax effect in this category.

During fiscal 2024, state taxes in Tennessee, Mississippi, Georgia, and Wisconsin make up the majority (greater than 50%) of the tax effect in this category.

(2) Our negative consolidated effective income tax rates during fiscal 2026, 2025, and 2024, were caused by the mix of earnings between our 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.

operations and foreign subsidiaries, as our taxable income stemmed from:

(i) our operations located in China and from the gain on sale of Property located in Canada during fiscal 2026;

(ii) our operations located in China that were partially offset by a pre-tax loss incurred in Canada due to our restructuring activities during fiscal 2025;

and (iii) our operations located in both China and Canada during fiscal 2024, which such jurisdictions have higher income tax rates than the U.S.

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

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(3) Our negative consolidated effective income tax rates during fiscal 2026, 2025, and 2024 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.

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 six 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 $( 804,000 ), $( 1.6 ) million, and $( 2.1 ) million that were incurred during fiscal 2026, 2025, and 2024, respectively.

One Big Beautiful Bill Act ("OBBBA")

On July 4, 2025, OBBBA was signed into law, making several provisions of the 2017 Tax Cuts and Jobs Act ("TCJA") permanent.

Such provisions included:

(i) no change to the standard corporate tax rate of 21.0 %;

(ii) increased depreciation allowances for certain property acquired after January 19, 2025;

(iii) deduction of certain U.S.

research and development expenditures;

(iv) limitations on the deductibility of business interest expense;

and (v) modifications to GILTI and foreign-derived intangible income.

Topic 740 Income Taxes, requires the income tax effects of changes in tax laws or rates to be recognized at the date of enactment.

Accordingly, we evaluated the provisions of OBBBA and determined OBBBA did not have an impact on our consolidated effective income tax rate, consolidated income tax expense, or our U.S.

net deferred income tax assets during fiscal 2026 due to the application of a full valuation allowance against our U.S.

net deferred income tax assets described in the below section titled - U.S.

Valuation Allowance.

Deferred Income Taxes - Overall

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Foreign income tax credits - U.S.

loss carryforwards – U.S.

Loss carryforwards

Valuation allowance - U.S.

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Net deferred liabilities

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

As of May 3, 2026, our U.S.

federal net operating loss carryforward totaled $ 95.9 million, with related future income tax benefits of $ 20.1 million.

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

In accordance with the TCJA, U.S.

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

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

As of May 3, 2026, 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.

As of May 3, 2026, our U.S.

state net operating loss carryforwards totaled $ 40.3 million, with related future income tax benefits of $ 1.6 million, and have expiration dates ranging from fiscal year 2027 through fiscal 2046 , along with certain U.S.

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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.

foreign income tax credits of $ 783,000 expire in fiscal 2030 , which represents 10 years from when the associated earnings and profits from our foreign subsidiaries were repatriated to the U.S.

Deferred Income Taxes – Valuation Allowance

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Since the company operates in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law.

As of April 27, 2025, we evaluated the realizability of our U.S.

As of May 3, 2026, we evaluated the realizability of our U.S.

net deferred income tax assets to determine if a full valuation allowance was still required.

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

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.

net deferred income tax assets.

Based on our assessments as of April 27, 2025, and April 28, 2024, valuation allowances against our U.S.

Based on our assessments as of May 3, 2026, and April 27, 2025, valuation allowances against our U.S.

net deferred income tax assets pertain to the following:

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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;

(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) expiration of certain U.S.

state loss carryforwards;

and (iv) other immaterial items.

Deferred Income Taxes – Undistributed Earnings from Foreign Subsidiaries

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parent company and whether we are required to record a deferred income tax liability for those undistributed earnings from our foreign subsidiaries that will not be reinvested indefinitely.

As of April 27, 2025, we assessed the liquidity requirements of our U.S.

As of May 3, 2026, we assessed the liquidity requirements of our U.S.

parent company and determined that our undistributed earnings and profits from our foreign subsidiaries would not be reinvested indefinitely and would be eventually distributed to our U.S.

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As a result of the TCJA, a U.S.

corporation is allowed a 100 % dividend received deduction for earnings and profits received from a 10 % owned foreign corporation.

corporation is allowed a 100 % dividend received deduction for earnings and profits received from a 10 % or more owned foreign corporation.

Therefore, a deferred income tax liability will be required only for unremitted withholding taxes associated with earnings and profits generated by our foreign subsidiaries that will ultimately be repatriated to the U.S.

parent company.

As a result, we recorded a deferred income tax liability of $ 5.2 million and $ 4.8 million as of April 27, 2025, and April 28, 2024, respectively.

As a result, we recorded a deferred income tax liabi lity of $ 4.9 million and $ 5.2 million as of May 3, 2026, and April 27, 2025, respectively.

Uncertainty in Income Taxes

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Ending balance

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.

As of May 3, 2026, and April 27, 2025, we had $ 983,000 and $ 790,000 of total gro ss 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 $ 983,000 an d $ 790,000 as of May 3, 2026, and April 27, 2025, 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 $ 790,000 as of April 27, 2025, relates to income tax positions for which significant change is currently not expected within the next year.

As of May 3, 2026, and April 27, 2025, the gross amount of interest and penalties due to unrecognized tax benefits was $ 255,000 and $ 191,000 , respectively.

Our gross unrecognized income tax benefit of $ 983,000 as of May 3, 2026, 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.

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(dollars in thousands)

United States federal - Transition Tax

China - Income Taxes

Canada - Income Taxes

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 .

state, income tax payments, net of refunds (2)

Federal - income tax payments, net of refunds

Quebec Province - income tax payments, net of refunds

Total Foreign

(1) Amounts related to U.S.

federal solely relate to transition tax payments made in accordance with the TCJA.

state net income tax refunds totaling $ 4,000 represent the entire amount of U.S state net income tax refunds during fiscal 2026 and no individual U.S.

state jurisdictions exceeded the required 5% of total income tax paid disclosure threshold.

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 six years , with renewal options for additional periods ranging up to twelve years .

Balance Sheet

The right of use assets and lease liabilities associated with our operating leases as of April 27, 2025, and April 28, 2024, are as follows:

The right of use assets and lease liabilities associated with our operating leases as of May 3, 2026, and April 27, 2025, are as follows:

(dollars in thousands)

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Operating lease liability - current

Operating lease liability – noncurrent

Operating lease liability – long-term

Supplemental Cash Flow Information

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Variable lease expense was immaterial for each of fiscal 2026, 2025, and 2024.

As of April 27, 2025, the weighted average remaining lease term and discount rate for our operating leases follows:

As of May 3, 2026, the weighted average remaining lease term and discount rate for our operating leases follows:

Weighted average lease term

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Present value of lease liabilities

Related Party Lease - Mattress Fabrics Segment

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 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

As of April 27, 2025, and April 28, 2024, we had total amounts due regarding capital expenditures totaling $ 23,000 and $ 343,000 , respectively, which pertained to outstanding vendor invoices, none of which were financed.

Purchase Commitments - Capital Expenditures

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

Tariff Refunds

During fiscal 2025 and early fiscal 2026, the company incurred import duties under tariffs imposed pursuant to the International Emergency Economic Powers Act (“IEEPA”).

On February 20, 2026, the U.S.

Supreme Court ruled that such tariffs were not authorized, and on March 4, 2026, the U.S.

Court of International Trade (“CIT”) ordered U.S.

Customs and Border Protection to refund certain tariffs collected under IEEPA.

As of May 3, 2026, the company identified certain potential refunds of previously paid tariffs in accordance with the ruling by the CIT.

The company estimated the total potential recovery to be approximately $ 7.0 million, which recovery remained subject to administrative review and final liquidation of the underlying customs entries by U.S.

Customs and Border Protection.

Accordingly, this potential recovery was considered a gain contingency in accordance with ASC Topic 450, and therefore the company did not recognize a receivable related to potential tariff refunds as of May 3, 2026.

During the first quarter of fiscal 2027, the company received the entire $ 7.0 million in cash proceeds representing a final approval of these tariff refund claims.

The $ 7.0 million is expected to be recognized as a credit to inventory for inventory that is on hand and within cost of sales for inventory that has been sold during the first quarter fiscal 2027 Consolidated Balance Sheet and Consolidated Statement of Net Income (Loss), respectively.

Legal Matters

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 or settled, will not have a material adverse effect on our financial position, results of operations, or cash flows.

During the third quarter of fiscal 2026, the company received $ 1.0 million in cash proceeds in connection with the resolution of a legal matter.

The $ 1.0 million was classified within other expense, net in the fiscal 2026 Consolidated Statement of Net Loss.

Accounts Payable – Capital Expenditures

As of May 3, 2026, and April 27, 2025, we had total amounts due regarding capital expenditures totaling $ 236,000 and $ 23,000 , respectively, which pertained to outstanding vendor invoices, none of which were financed.

Purchase Commitments - Capital Expenditure s

As of May 3, 2026, and April 27, 2025, we had open purchase commitments to acquire equipment for our bedding operations totaling $ 352,000 and $ 117,000 , respectively.

STOCK-BASED COMPENSATION

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The Amended and Restated Plan also removed certain sub-limits that previously applied with respect to specific type of awards that may be issued under the plan .

As of April 27, 2025, there were 668,353 shares available for future equity-based grants under the company’s Amended and Restated Plan.

As of May 3, 2026, there were 387,293 shares available for future equity-based grants under the company’s Amended and Restated Plan.

Time-Based Restricted Stock Awards

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Outstanding at end of year

(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.

(1) During fiscal 2026, 119,933 time-based restricted stock units vested at an aggregate fair value of $ 532,000 , or $ 4.44 per share.

During fiscal 2025, 103,320 time-based restricted stock units vested at an aggregate fair value of $ 581,000 , or $ 5.63 per share.

D uring fiscal 2024, 151,653 time-based restricted stock vested at an aggregate fair value of $ 857,000 , or $ 5.65 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 2026, 2025, and 2024:

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Units Awarded

January 6, 2025 (2)

September 25, 2025 (3)

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September 26, 2024 (3)

August 8, 2024 (2)

January 8, 2024 (2)

September 28, 2023 (2)

September 28, 2023 (3)

August 10, 2022 (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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(3) Time-based restricted stock units award to outside directors.

We recorded compensation expense of $ 644,000 , $ 823,000 , and $ 808,000 within selling, general, and administrative expense for time-based restricted stock units in fiscal 2025, 2024, and 2023, respectively.

As of April 27, 2025, the remaining unrecognized compensation cost related to our time-based restricted stock units was $ 561,000 which is expected to be recognized over a weighted average vesting period of 1.4 years.

As of April 27, 2025, our time-based restricted stock unit awards that were expected to vest had a fair value totaling $ 1.0 million.

We recorded compensation expense of $ 550,000 , $ 644,000 , and $ 823,000 within selling, general, and administrative expense for time-based restricted stock units during fiscal 2026, 2025, and 2024, respectively.

As of May 3, 2026, the remaining unrecognized compensation cost related to our time-based restricted stock units was $ 291,000, which is expected to be recognized over a weighted average vesting period of 1 year.

As of May 3, 2026, our time-based restricted stock unit awards that were expected to vest had a fair value totaling $ 720,000 .

Performance-Based Restricted Stock Units

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.

The number of shares of common stock that are earned based on the performance targets that have been achieved may be adjusted based on a market-based total shareholder return component, as defined in the related restricted stock unit award agreements.

Our performance-based restricted stock units granted to senior executives were measured based on their fair market value on the date of grant.

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 August 8, 2024, January 8, 2024, September 28, 2023, and August 10, 2022:

On August 7, 2025, we granted performance-based restricted stock units to senior executives which could earn up to a certain number of shares of common stock if performance targets related to adjusted EBITDA were met over the performance period defined in the related restricted stock unit award agreements.

The number of shares of common stock that are earned based on performance targets that have been achieved are not adjusted based on a market-based total shareholder return component.

Accordingly, fair market value was measured based on the closing price of our common stock on the date of grant.

On August 8, 2024, January 8, 2024, and September 28, 2023, we granted performance-based restricted stock units to senior executives which could earn up to a certain number of shares of common stock if performance targets related to operating income were met over performance periods defined in the related restricted stock unit award agreements.

The number of shares of common stock that are earned based on performance targets that have been achieved may be adjusted based on a market-based total shareholder return component as defined in the related restricted stock unit award agreements.

Accordingly, fair market value was measured 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 on the date of grant.

September 28,

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35.7 % - 91.5

41.6 % - 105.1

Risk-free interest rate

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( 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:

The following table summarizes information related to our grants of performance-based restricted stock units to our senior executives that were unvested as of May 3, 2026:

Performance-Based

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August 7, 2025

August 8, 2024

January 8, 2024

September 28, 2023

August 10, 2022

(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.

(2) Compensation cost is based on an assessment each reporting period to determine the probability of whether or not certain performance targets will be met and how many shares are expected to be earned as of the end of the vesting period.

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

These amounts represent the number of shares that are expected to vest as of May 3, 2026.

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

(4) 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.

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(6) Price per share represents the fair market value per share ($ 1.15 per $1, or an increase of $ 0.84 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 ($ 5.59 ) for the performance-based component of the performance-based restricted stock units granted to senior executives on September 28, 2023.

(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.

There were no performance-based restricted stock units that vested during fiscal 2026, 2025, or 2024.

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

Average Price

Fiscal 2023 (1)

Fiscal 2023 (2)

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

(2) Performance-based restricted stock units vested for key employees.

(3) Dollar amounts are in thousands.

(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 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:

Date of Grant

July 3, 2023 - Fiscal 2024

April 3, 2023 - Fiscal 2023

January 3, 2023 - Fiscal 2023

October 3, 2022 - Fiscal 2023

July 1, 2022 - Fiscal 2023

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

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.

We recorded compensation expense totaling $ 75,000 , $ 6,000 , and $ 8,000 , within selling, general, and administrative expense for performance-based restricted stock units during fiscal years 2026, 2025, and 2024, respectively.

As of May 3, 2026, the remaining

unrecognized compensation expense related to our performance-based restricted stock units was $ 191,000, which is expected to be recognized over a weighted average vesting period of 2.2 years.

As of May 3, 2026, performance-based restricted stock units that are expected to vest had a fair value of $ 218,000 .

Immediately Vested Common Stock Awards - Board of Directors

No immediately vested common stock awards were granted to our board of directors during fiscal 2026 and fiscal 2025, respectively.

On July 3, 2023 (first quarter of fiscal 2024), we granted a total of 16,616 shares of common stock to certain outside directors.

These shares of common stock vested immediately and were measured at $ 5.04 per share, which represents the closing price of the company's common stock at the date of grant.

We recorded compensation expense totaling $ 84,000 within selling, general, and administrative expense related to these common stock awards during fiscal 2024.

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 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 reporting period based on various factors, and it is possible that an asset or liability may be classified differently from reporting period to reporting period.

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

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

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

Fair value measurements as of May 3, 2026, using:

active markets

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S&P 500 Index Fund

Lord Abbett Bond Debenture Fund

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

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S&P 500 Index Fund

Lord Abbett Bond Debenture Fund

NET LOSS PER SHARE

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We have defined contribution plans that cover substantially all employees and allow participants to contribute on a pre-tax basis, along with matching contributions by the company for its U.S.

and Canadian operations.

and, before it was closed our Canadian operations.

Our contributions to these plans were $ 1.0 million, $ 1.1 million, and $ 1.2 million during fiscal years 2026, 2025, and 2024, respectively.

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Our contributions to the Plan were $ 206,000 , $ 206,000 , and $ 229,000 during fiscal years 2026, 2025, and 2024, 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.

Our non-qualified deferred compensation plan liability was $ 6.5 million and $ 7.0 million as of May 3, 2026, and April 27, 2025, respectively.

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

The investment options in the Plan consist of a money market fund and various mutual funds.

The funds set aside in the Trust are subject to the claims of our general creditors in the event of the company’s insolvency, as defined in the Plan.

The investment assets of the Trust are recorded at their fair value of $ 7.0 million and $ 8.0 million as of April 27, 2025, and April 28, 2024, respectively.

The investment assets of the Trust are recorded at their fair value of $ 6.5 million and $ 7.0 million as of May 3, 2026, and April 27, 2025, respectively.

The investment assets of the Trust are classified as available for sale and accordingly, changes in their fair values are recorded in accumulated other comprehensive income.

SEGMENT INFORMATION

Our operations are classified into two reportable segments:

mattress fabrics and upholstery fabrics.

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

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.

During the first quarter of fiscal 2026, we renamed our two reportable segments to better reflect our product offerings.

Our former mattress fabrics segment is now known as the bedding segment and our former upholstery fabrics segment is now known as the upholstery segment.

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

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

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;

On April 24, 2025 (the fourth quarter of fiscal 2025), the company announced a strategic transformation of its operating model that combined certain activities within the bedding and upholstery business segments and created one integrated Culp-branded business.

As part of this strategic transformation, we closed a leased facility in Burlington, North Carolina and a leased facility in Knoxville, Tennessee, each operated by our upholstery segment, and transitioned their production and distribution activities to a shared management model within our owned facility located in Stokesdale, North Carolina.

See Note 10 to the consolidated financial statements for further details regarding this strategic transformation initiative.

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 segment basis for the purpose of evaluating financial and operating performance and allocation of resources to the individual segments noted above.

Beginning in the first quarter of fiscal 2026, the CODM decided to use net sales and gross profit, excluding items that are not expected to occur on a regular basis (e.g.

restructuring activities), as the primary measure of segment profit or loss.

Previously, segment performance was primarily evaluated based on net sales and income (loss) from operations before unallocated corporate expenses and other items that are not expected to occur on a regular basis (e.g., restructuring activities).

This change was made to align with internal management reporting and the decision-making processes affected by the strategic transformation of the company's operating model announced on April 24, 2025, which combined certain activities within the bedding and upholstery segments and created one integrated Culp-branded business.

The CODM evaluates segment performance based on:

(i) net sales, (ii) cost of sales, (iii) gross profit excluding items that are not expected to occur on a regular basis (i.e., restructuring related charges and credits), (iv) assets used in operations, which generally include accounts receivable, inventory, property, plant, and equipment, right of use assets, and assets held for sale;

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.

Intangible assets are not included in segment assets, as these assets are not used by the CODM to evaluate the respective segment’s operating performance and allocate resources to the individual segments.

Net Sales Geographic Concentration

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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 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 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.

One customer within the upholstery segment represented 12 %, 11 %, and 12 % of consolidated net sales during fiscal 2026, 2025, and 2024, respectively.

No customers within the upholstery segment accounted for greater than 10% of consolidated accounts receivable, net as of May 3, 2026, and April 27, 2025.

No customers within the bedding segment represented greater than 10% of consolidated net sales during fiscal 2026 or 2024.

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

No customers within the bedding segment accounted for greater than 10% of consolidated accounts receivable, net as of May 3, 2026, and April 27, 2025.

Financial Information

Statements of operations for our business segments are as follows:

Statements of operations for our segments follow:

(dollars in thousands)

Net sales by segment:

mattress fabrics

upholstery fabrics

Cost of sales by segment:

mattress fabrics

upholstery fabrics

Total segment cost of sales

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Gross profit:

mattress fabrics

upholstery fabrics

Total segment gross profit

Restructuring related charge (1) (2) (3)

selling, general, and administrative expenses by segment:

mattress fabrics

upholstery fabrics

unallocated corporate

Selling, general, and administrative expenses

(loss) income from operations by segment:

mattress fabrics

upholstery fabrics

unallocated corporate expenses

total segment loss from operations

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

restructuring expense (2) (4) (6)

Restructuring credit (expense) (1) (2) (3)

Loss from operations

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Loss before income taxes

(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.

(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.

Balance sheet information for our business segments follow:

(1) During fiscal 2026, we incurred a restructuring related charge of $ 931,000 , which represented losses on the disposal, valuation, and markdowns of inventory related to the consolidation of our North American bedding operations, as well as the consolidation of certain facilities related to transforming our operating model to one integrated Culp branded business to reduce fixed costs and enhance operating efficiency.

During fiscal 2026, we recorded a restructuring credit of $ 2.3 million which includes a gain from the sale of the manufacturing facility located in Quebec, Canada totaling $ 4.0 million, partially offset by charges related to transforming our operating model and the consolidation of certain facilities to reduce fixed costs.

(2) During fiscal 2025, we incurred a restructuring related charge and restructuring expense of $ 1.6 million and $ 7.7 million, respectively, which mostly related to the closure of the bedding manufacturing facility located in Quebec, Canada, and the consolidation of our North American bedding manufacturing operations, as well as initial costs related to transforming our operating model and the consolidation of certain facilities to further reduce fixed costs.

(3) During fiscal 2024, we incurred a restructuring related charge and restructuring expense of $ 40,000 and $ 636,000 , respectively, which related to the discontinuation of production of cut and sewn upholstery kits at the company's facility in Ouanaminthe, Haiti, and the closure of the upholstery finishing operation located in Shanghai, China during the fourth quarter.

See Note 10 to the consolidated financial statements for further details and a description of our restructuring activities.

Balance sheet information for our segments follow:

(dollars in thousands)

Segment assets

mattress fabrics

Accounts receivable

2 unchanged sentences

Right of use assets (4)

total mattress fabrics assets

upholstery fabrics

Total bedding assets

Accounts receivable

1 unchanged sentence

Right of use assets (7) (8)

total upholstery fabrics assets

Total upholstery assets

Total segment assets

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Long-term investments - rabbi trust

(1) The $ 19.8 million as of May 3, 2026, represents property, plant, and equipment of $ 18.9 million, and $ 825,000 located in the U.S.

and Haiti, respectively.

(2) 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 $ 2.2 million as of April 27, 2025, represents assets held for sale located in Canada.

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

See Notes 7, 8, and 10 to the consolidated financial statements regarding the sale of the Property located in Quebec, 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.

(5) The $ 708,000 as of May 3, 2026, represents property, plant, and equipment of $ 642,000 , $ 37,000 , and $ 29,000 located in the U.S., Vietnam, and Haiti, 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.

(7) The $ 496,000 as of May 3, 2026, represents right of use assets of $ 421,000 and $ 75,000 located in China and the U.S., 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

(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.

(11) The $ 3.1 million as of April 27, 2025, and $ 2.6 million as of April 28, 2024, represent right of use assets associated with unallocated corporate departments and corporate departments shared by both the mattress fabrics and upholstery fabrics segments located in the U.S.

Capital expenditures and depreciation expense information for our business segments follow:

(9) The $ 550,000 as of May 3, 2026, and $ 567,000 as of April 27, 2025, represent property, plant, and equipment located in the U.S.

(10) The $ 2.5 million as of May 3, 2026, and $ 3.1 million as of April 27, 2025, represent right of use assets located in the U.S.

Capital expenditures and depreciation expense information for our segments follow:

(dollars in thousands)

Capital expenditures (1):

mattress fabrics

upholstery fabrics

unallocated corporate

Total capital expenditures

Depreciation expense

mattress fabrics (2)

upholstery fabrics

Selling, general, and administrative

Total depreciation expense

Accelerated depreciation expense (2) (3)

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

(2) During fiscal 2026, accelerated depreciation expense totaling $ 112,000 related to the upholstery segment and was classified within restructuring credit in the fiscal 2026 Consolidated Statement of Net Loss.

Accelerated depreciation expense pertained to the shortening of useful lives of equipment related to the consolidation of distribution activities from our Burlington, North Carolina facility to the manufacturing and distribution center located in Stokesdale, North Carolina.

(3) During fiscal 2025, accelerated depreciation expense totaling $ 1.3 million related to the bedding segment and was classified within restructuring expense in the fiscal 2025 Consolidated Statement of Net Loss.

Accelerated depreciation expense related to shortening of useful lives of equipment associated with the closure of our bedding operation located in Quebec, Canada.

STATUTORY RESERVES

Our subsidiary located in China was required to transfer 10 % of its net income, as determined in accordance with the People’s Republic of China (PRC) accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reached 50 % of the company’s registered capital.

As of April 27, 2025, the statutory surplus reserve fund represents the 50 % registered capital requirement, and therefore, our subsidiary located in China is no longer required to transfer 10% of its net income in accordance with PRC accounting rules and regulations.

As of May 3, 2026, the statutory surplus reserve fund represents the 50 % registered capital requirement, and therefore, our subsidiary located in China is no longer required to transfer 10% of its net income in accordance with PRC accounting rules and regulations.

The transfer to this reserve must be made before distributions of any dividend to shareholders.

As of April 27, 2025, the company’s statutory surplus reserve was $ 4.0 million.

As of May 3, 2026, the company’s statutory surplus reserve was $ 4.3 million.

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 $ 4.3 million, to assist with debt repayment, capital expenditures, and other expenses of the company’s business.

1 unchanged sentence

In March 2020, our board of directors approved an authorization for us to acquire up to $ 5.0 million of our common stock.

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.

Under this common stock repurchase program, shares may be purchased from time to time in open market transactions, block trades, through plans established under the Securities Exchange Act Rule 10b5-1, or otherwise.

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 2026, 2025, and 2024, we did no t repurchase any shares of our common stock.

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

DIVIDEND PROGRAM

On June 29, 2022 (fiscal 2023), our board of directors announced the decision to suspend the company’s quarterly cash dividend.

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 2025, fiscal 2024, or fiscal 2023, respectively.

As of May 3, 2026, $ 3.2 million was available for additional repurchases of our common stock.

CHANGES IN AND DISA GREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

During the three years ended April 27, 2025, there were no disagreements on any matters of accounting principles or practices or financial statement disclosures.

During the three years ended May 3, 2026, there were no disagreements on any matters of accounting principles or practices or financial statement disclosures.

CONTROL S AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of April 27, 2025.

We have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of May 3, 2026.

This evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer.

11 unchanged sentences

Management assessed the effectiveness of our internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control – Integrated Framework.

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 27, 2025, April 28, 2024, and April 30, 2023, which are included in Item 8.

Based on this assessment, management concluded that our internal control over financial reporting was effective as of May 3, 2026.

Grant Thornton LLP, an independent registered public accounting firm, has audited the consolidated financial statements as of and for the years ended May 3, 2026, April 27, 2025, and April 28, 2024, 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.

Management’s report was not subject to attestation by our registered public accounting firm pursuant to Securities and Exchange Commission rules that permit us to provide only management’s report in this annual report.

During the quarter ended April 27, 2025, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the quarter ended May 3, 2026, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHE R INFORMATION

During the three months ended April 27, 2025, none of the company's directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted or terminated a "Rule 10b5-1 trading arrangement" or a "Non-Rule 10b5-1 trading arrangement" (as such terms are defined in Item 408 of Regulation S-K).

During the three months ended May 3, 2026, none of the company's directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted or terminated a "Rule 10b5-1 trading arrangement" or a "Non-Rule 10b5-1 trading arrangement" (as such terms are defined in Item 408 of Regulation S-K).

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

1 unchanged sentence

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,” “Corporate Governance – Insider Trading Policy,” 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,” “Delinquent 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

20 unchanged sentences

Equity compensation plans not approved by security holders

(1) For performance-based restricted stock unit awards, the number of shares represents the maximum number of shares with remaining performance periods that could be issued if certain performance targets are met.

The performance-based shares with remaining open performance periods total 583,971, of which 4,238 are expected to vest based on estimated operating performance relative to pre-established targets.

For time-based restricted stock unit awards, the number of shares shown represents the number of shares to be issued upon completion of the time-based vesting period for such restricted stock units.

(1) The total 1,007,246 in column (a) represents 795,485 and 211,761 of performance-based and time-based restricted stock units, respectively.

The 797,485 performance-based restricted stock unit awards included in this amount represents the maximum number of common stock shares with remaining performance periods that could be issued if certain performance targets are met, of which 64,020 common stock shares are expected to vest based on estimated operating performance relative to pre-established targets.

The 211,761 time-based restricted stock unit awards included in this amount represents the number of shares to be issued upon completion of the time-based vesting period for such restricted stock units.

(2) All of the shares shown in column (a) are issuable under restricted stock units that do not require the payment of consideration by the recipient upon vesting of the award and issuance of the shares, and therefore there is no exercise price information shown in column (b).

10 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 )

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

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

Consolidated Balance Sheets – May 3, 2026, and April 27, 2025

Consolidated Statements of Net Loss - For the Years Ended May 3, 2026, April 27, 2025, and April 28, 2024

Consolidated Statements of Comprehensive Loss - For the Years Ended May 3, 2026, April 27, 2025, and April 28, 2024

Consolidated Statements of Shareholders’ Equity – For the Years Ended May 3, 2026, April 27, 2025, and April 28, 2024

Consolidated Statements of Cash Flows – For the Years Ended May 3, 2026, April 27, 2025, and April 28, 2024

Notes to Consolidated Financial Statements

4 unchanged sentences

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.

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 (Commission File No.

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

Description of Capital Stock of the company

Second Amended and Restated Credit Agreement dated as of January 19, 2023, by and among Culp, Inc., as Borrower, Read Window Products, LLC, as Guarantor, and Wells Fargo Bank, National Association, as Lender, was filed as exhibit 10.1 to the company’s Form 8-K filed January 23, 2023 (Commission File No.

2 unchanged sentences

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.

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

001-12597), and is incorporated by reference.

Fourth Amendment to Second Amended and Restated Credit Agreement, dated as of November 4, 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 10-Q filed March 13, 2026 (Commission File No.

001-12597), and is incorporated by reference.

2015 Equity Incentive Plan, filed as Annex A to the company's 2015 Proxy Statement, filed on August 12, 2015 (Commission File No.

001-12597), and incorporated herein by reference.

Amended and Restated Equity Incentive Plan, filed as Appendix B to the company's 2023 Proxy Statement, filed on August 24, 2023 (Commission File No.

001-12597), and incorporated herein by reference.

Form of annual incentive award agreement was filed as Exhibit 10.3 to the company’s Form 10-Q dated December 12, 2025 (Commission File No.

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

Form of restricted stock unit agreement for restricted stock units granted to executive officers pursuant to the Culp, Inc., Amended and Restated Equity Incentive Plan (revised 2023) was filed as Exhibit 10.2 to the company’s Form 10-Q dated December 8, 2023 (Commission File No.

Form of Restricted Stock Unit agreement for time-based and performance-based restricted stock units granted to executive officers pursuant to the Culp, Inc., Amended and Restated Equity Incentive Plan (revised 2023) was filed as Exhibit 10.2 to the company’s Form 10-Q dated December 8, 2023 (Commission File No.

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

Form of restricted stock unit agreement for restricted stock units granted to executive officers pursuant to the 2015 Equity Incentive Plan was filed as Exhibit 10.2 to the company’s Form 10-Q dated September 9, 2021 (Commission File No.

Form of Restricted Stock Unit Award Agreement for performance-based restricted stock units granted to executive officers pursuant to the Amended and Restated Equity Incentive Plan (revised 2024), was filed as Exhibit 10.2 to the company’s Form 10-Q dated December 6, 2024 (Commission File No.

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

Form of restricted stock unit agreement for restricted stock units granted to outside directors pursuant to the Culp, Inc., Amended and Restated Equity Incentive Plan was filed as Exhibit 10.4 to the company's Form 10-Q dated December 8, 2023 (Commission File No.

Form of Restricted Stock Unit Award Agreement for time-based restricted stock units granted to executive officers pursuant to the Amended and Restated Equity Incentive Plan (revised 2025), was filed as Exhibit 10.4 to the company's Form 10-Q dated December 12, 2025 (Commission File No.

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

Written description of Non-Employee Director Compensation was filed as Exhibit 10.2 to the company’s Form 10-Q dated December 8, 2023 (Commission File No.

001-12597), and incorporated herein by reference.

Amended and Restated Equity Incentive Plan, filed as Appendix B to the company's 2023 Proxy Statement, filed on August 24, 2023 (Commission File No.

001-12597), and incorporated herein by reference.

2015 Equity Incentive Plan, filed as Annex A to the company's 2015 Proxy Statement, filed on August 12, 2015 (Commission File No.

001-12597), and incorporated herein by reference.

Deferred Compensation Plan For Certain Key Employees Amendment No.

1, was filed as Exhibit 10.2 to the company’s Form 10-K for the year ended May 3, 2015, dated July 17, 2015, and incorporated herein by reference.

Form of Restricted Stock Unit Award Agreement for restricted stock units granted to non-employee directors pursuant to the Amended and Restated Equity Incentive Plan (revised 2025), was filed as Exhibit 10.2 to the company's Form 10-Q dated December 12, 2025 (Commission File No.

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

Form of Long-Term Incentive Award Agreement for performance-based restricted stock units granted to executive officers pursuant to the Amended and Restated Equity Incentive Plan, was filed as Exhibit 10.1 to the company's Form 10-Q dated December 12, 2025 (Commission File No.

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

Amended and Restated Deferred Compensation Plan For Certain Key Employees was filed as Exhibit 10.1 to the company's Form 10-Q dated March 7, 2014 (Commission File No.

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

Amendment No.

1 to Amended and Restated Deferred Compensation Plan for Certain Key Employees, was filed as Exhibit 10.2 to the company's Form 10-K dated July 17, 2015 (Commission File No.

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

Form of change in control and noncompetition agreement.

This agreement was filed as Exhibit 10.3 to the company’s Form 10-Q dated December 12, 2007 (Commission File No.

001-12597) and incorporated herein by reference.

Amended and Restated Deferred Compensation Plan for Certain Key Employees was filed as Exhibit 10.1 to the company’s Form 10-Q dated March 7, 2014, and is incorporated herein by reference.

Cooperation Agreement, effective as of June 17, 2024, between Culp, Inc.

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.

001-12597) 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.

This agreement was filed as Exhibit 10.1 to the company's Form 8-K dated August 14, 2024 (Commission File No.

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

Cooperation Agreement, effective as of June 17, 2024, 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

and certain investors specified therein was filed as Exhibit 10.1 to the company's Form 8-K dated June 17, 2024 (Commission File No.

001-12597), 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 (Commission File No.

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

Policy on Confidential Information and Trading of Securities was filed as Exhibit 19 to the company's Form 10-K dated July 11, 2025 (Commission File No.

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

List of subsidiaries of the company

2 unchanged sentences

33-13310, 333-207195 and 333-274720).

Power of Attorney of John A.

Baugh, dated July 4, 2025

Power of Attorney of William L.

Tyson, dated July 7, 2025

Power of Attorney of Sharon A.

Decker, dated July 3, 2025

Power of Attorney of J.

Douglas Collier, dated July 6, 2026

Power of Attorney of Kimberly B.

Gatling, dated July 6, 2026

Power of Attorney of Lynn D.

Heatherton, dated July 6, 2026

Power of Attorney of Fred A.

Jackson, dated July 6, 2026

Power of Attorney of Alexander B.

Jones, dated July 3, 2025

Power of Attorney of Franklin N.

Saxon, dated July 6, 2026

Power of Attorney of William L.

Tyson, dated July 6, 2026

Power of Attorney of Mark Wilson, dated July 6, 2026

Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

5 unchanged sentences

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

8 unchanged sentences

Culp, IV _________________________________

Decker* __________________________________

Gatling* _______________________________

Chief Executive Officer and Director

2 unchanged sentences

(Lead Independent Director)

Vice President and Corporate Controller

Douglas Collier *

Douglas Collier

Chief Financial Officer

(principal accounting officer)

(principal financial officer)

(principal financial officer and principal accounting officer)

* By /s/ Kenneth R.

1 unchanged sentence

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