Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Interest Rates
We are exposed to market risk from changes in interest rates regarding our credit agreements.
Revolving Credit Agreement – United States
Our U.S. 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 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 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.
Foreign Currency
We are exposed to market risk from changes in the value of foreign currencies for our subsidiaries domiciled in Canada, China, and Vietnam. We try to maintain a natural hedge by keeping a balance of our assets and liabilities denominated in the local currency of our subsidiaries domiciled in Canada, China, and Vietnam. However, there is no assurance that we will be able to continually maintain this natural hedge. Our foreign subsidiaries use the U.S. dollar as their functional currency. A substantial portion of the company’s imports purchased outside the U.S. are denominated in U.S. dollars. 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.
47
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Culp, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Culp, Inc. (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
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion .
Critical audit matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2007.
Charlotte, North Carolina
July 17, 2026
48
C U LP, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data and preferred and common stock shares)
May 3, 2026, and April 27, 2025
2026
2025
Current assets
Cash and cash equivalents
$
8,273
$
5,629
Short-term investments - rabbi trust
1,477
1,325
Accounts receivable, net
20,369
21,844
Inventories
47,494
49,309
Short-term notes receivable
297
280
Income taxes receivable
142
—
Assets held for sale
—
2,177
Other current assets
2,645
2,970
Total current assets
80,697
83,534
Property, plant & equipment
21,013
24,836
Right of use assets
2,984
5,908
Intangible assets
355
960
Long-term investments - rabbi trust
4,991
5,722
Long-term notes receivable
885
1,182
Deferred income taxes
503
637
Other assets
562
591
Total assets
$
111,990
$
123,370
Current liabilities
Lines of credit - current
$
12,129
$
8,114
Accounts payable - trade
25,730
27,323
Accounts payable - capital expenditures
236
23
Operating lease liabilities - current
956
2,394
Deferred compensation - current
1,477
1,325
Deferred revenue
281
422
Accrued restructuring
47
610
Accrued expenses
4,103
5,333
Income taxes payable - current
—
1,420
Total current liabilities
44,959
46,964
Lines of credit - long-term
7,000
4,600
Operating lease liabilities - long-term
1,027
2,535
Income taxes payable - long-term
983
790
Deferred income taxes
4,883
5,155
Deferred compensation - long-term
4,991
5,686
Total liabilities
63,843
65,730
Commitments and contingencies (Notes 11, 13, and 14)
Shareholders' equity:
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 12,662,784 at May 3, 2026
and 12,559,129 at April 27, 2025
633
628
Capital contributed in excess of par value
46,133
45,589
Accumulated earnings
1,062
11,273
Accumulated other comprehensive income
319
150
Total equity
48,147
57,640
Total liabilities and equity
$
111,990
$
123,370
The accompanying notes are an integral part of these consolidated financial statements.
49
C ULP, INC.
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)
2026
2025
2024
Net sales
$
203,482
$
213,237
$
225,333
Cost of sales
( 178,322
)
( 188,170
)
( 197,394
)
Gross profit
25,160
25,067
27,939
Selling, general and administrative expenses
( 34,668
)
( 35,705
)
( 38,611
)
Restructuring credit (expense)
2,323
( 7,739
)
( 636
)
Loss from operations
( 7,185
)
( 18,377
)
( 11,308
)
Interest expense
( 759
)
( 231
)
( 11
)
Interest income
1,073
915
1,174
Other expense, net
( 1,414
)
( 1,018
)
( 625
)
Loss before income taxes
( 8,285
)
( 18,711
)
( 10,770
)
Income tax expense
( 1,926
)
( 392
)
( 3,049
)
Net loss
$
( 10,211
)
$
( 19,103
)
$
( 13,819
)
Net loss per share-basic
$
( 0.81
)
$
( 1.53
)
$
( 1.11
)
Net loss per share-diluted
$
( 0.81
)
$
( 1.53
)
$
( 1.11
)
The accompanying notes are an integral part of these consolidated financial statements.
50
CULP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the years ended May 3, 2026, April 27, 2025, and April 28, 2024
2026
2025
2024
Net loss
$
( 10,211
)
$
( 19,103
)
$
( 13,819
)
Unrealized holding gain on investments, net of tax
Unrealized gain on investments
203
32
99
Reclassification adjustment for realized gain
included in net loss
( 34
)
—
—
Total unrealized gain on investments
169
32
99
Comprehensive loss
$
( 10,042
)
$
( 19,071
)
$
( 13,720
)
The accompanying notes are an integral part of the consolidated financial statements.
51
CULP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(dollars in thousands, except common stock shares)
Capital
Accumulated
Contributed
Other
For the years ended May 3, 2026, April 27, 2025,
Common Stock
in Excess
Accumulated
Comprehensive
Total
and April 28, 2024
Shares
Amount
of Par Value
Earnings
Income
Equity
Balance, April 30, 2023
12,327,414
$
616
$
44,250
$
44,195
$
19
$
89,080
Net loss
—
—
—
( 13,819
)
—
( 13,819
)
Stock-based compensation
—
—
915
—
—
915
Unrealized gain on investments
—
—
—
—
99
99
Common stock issued in connection with
vesting of time-based restricted
stock units
151,653
8
( 8
)
—
—
—
Immediately vested common stock awards
16,616
1
( 1
)
—
—
—
common stock surrendered in connection
with payroll withholding taxes
( 25,780
)
( 1
)
( 145
)
—
—
( 146
)
Balance, April 28, 2024
12,469,903
624
45,011
30,376
118
76,129
Net loss
—
—
—
( 19,103
)
—
( 19,103
)
Stock-based compensation
—
—
650
—
—
650
Unrealized gain on investments
—
—
—
—
32
32
Common stock issued in connection with
vesting of time-based restricted
stock units
102,720
5
( 5
)
—
—
—
Common stock surrendered in connection
with payroll withholding taxes
( 13,494
)
( 1
)
( 67
)
—
—
( 68
)
Balance, April 27, 2025
12,559,129
628
45,589
11,273
150
57,640
Net loss
—
—
—
( 10,211
)
—
( 10,211
)
Stock-based compensation
—
—
625
—
—
625
Unrealized gain on investments
—
—
—
—
169
169
Common stock issued in connection with
vesting of time-based restricted
stock units
120,530
6
( 6
)
—
—
—
Common stock surrendered in connection
with payroll withholding taxes
( 16,875
)
( 1
)
( 75
)
—
—
( 76
)
Balance, May 3, 2026
12,662,784
$
633
$
46,133
$
1,062
$
319
$
48,147
See accompanying notes to consolidated financial statements.
52
CULP, INC.
CONSOLIDATED STATEM ENTS OF CASH FLOWS
For the years ended May 3, 2026, April 27, 2025, and April 28, 2024
(dollars in thousands)
2026
2025
2024
Cash flows from operating activities:
Net loss
$
( 10,211
)
$
( 19,103
)
$
( 13,819
)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation
4,105
5,440
6,521
Non-cash inventory charge (credit)
2,050
( 2,423
)
( 1,628
)
Amortization
321
405
390
Stock-based compensation
625
650
915
Deferred income taxes
( 138
)
( 1,343
)
387
Realized gain on sale of invesments (rabbi trust)
( 34
)
—
—
Gain on sale of equipment
( 4
)
( 27
)
( 299
)
Non-cash restructuring (credit) expense
( 3,315
)
2,708
330
Foreign currency exchange loss (gain)
1,269
( 145
)
( 593
)
Changes in assets and liabilities:
Accounts receivable
1,567
( 722
)
3,559
Inventories
7
( 2,059
)
1,593
Other current assets
390
384
( 329
)
Other assets
111
114
( 115
)
Accounts payable - trade
( 2,458
)
1,852
( 2,926
)
Deferred revenue
( 141
)
( 1,073
)
303
Accrued restructuring
( 563
)
633
—
Accrued expenses and deferred compensation
( 1,471
)
( 2,456
)
( 1,870
)
Income taxes
( 1,481
)
( 485
)
( 643
)
Net cash used in operating activities
( 9,371
)
( 17,650
)
( 8,224
)
Cash flows from investing activities:
Capital expenditures
( 596
)
( 2,947
)
( 3,711
)
Proceeds from the sale of property, plant and equipment
1,103
1,945
385
Proceeds from note receivable
5,093
610
330
Proceeds from the sale of investments (rabbi trust)
1,413
1,725
1,449
Purchase of investments (rabbi trust)
( 631
)
( 735
)
( 884
)
Net cash provided by (used in) investing activities
6,382
598
( 2,431
)
Cash flows from financing activities:
Proceeds from lines of credit
16,415
21,648
4,166
Payments on lines of credit
( 10,687
)
( 8,907
)
( 4,146
)
Payments of debt issuance costs
( 169
)
—
—
Common stock surrendered for withholding taxes payable
( 76
)
( 68
)
( 146
)
Net cash provided by (used in) financing activities
5,483
12,673
( 126
)
Effect of exchange rate changes on cash and cash equivalents
150
( 4
)
( 171
)
Increase (decrease) in cash and cash equivalents
2,644
( 4,383
)
( 10,952
)
Cash and cash equivalents at beginning of year
5,629
10,012
20,964
Cash and cash equivalents at end of year
$
8,273
$
5,629
$
10,012
The accompanying notes are an integral part of these consolidated financial statements.
53
CULP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Our operations are classified into two reportable segments: bedding and upholstery.
Bedding
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 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 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.
Upholstery
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. Read's operations were moved from Knoxville, Tennessee to Stokesdale, North Carolina.
Basis of Presentation
The consolidated financial statements of the company have been prepared in accordance with U.S. generally accepted accounting principles.
Principles of Consolidation
Overall
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
54
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.
Fiscal Year
Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30. Fiscal 2026, 2025, and 2024 comprised 53-week, 52-week, and 52-week periods, respectively.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposit and money market accounts. We consider all highly liquid instruments with original maturities of three months or less to be cash equivalents.
A summary of our cash and cash equivalents by geographic area follows:
May 3,
April 27,
(dollars in thousands)
2026
2025
United States
$
1,049
$
151
China
4,153
4,723
Canada
3,000
701
Vietnam
26
38
Haiti
36
8
Cayman Islands
9
8
$
8,273
$
5,629
Throughout the year, we have cash balances regarding our U.S. operations of more than the federally insured amounts on deposit with a financial institution. We have not experienced any credit losses regarding such accounts. Management believes we are not exposed to any significant credit risk related to cash and cash equivalents.
Rabbi Trust Investments
We have a rabbi trust to set aside funds for participants of our deferred compensation plan (the “Plan”) that enables our participants to credit their contributions to various investment options of the Plan. 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 $ 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
Substantially all of our accounts receivable were due from manufacturers in the bedding and furniture industries. We grant credit to customers and generally do not require collateral. We record an allowance for doubtful accounts that reflects estimates of probable credit losses. As of the end of each reporting period, we assess the credit risk of our customers within our accounts receivable portfolio. Our risk assessment includes the respective customer’s: (i) financial position; (ii) past payment history; (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 is completed, we assign credit grades to our customers, which, in turn, are used to determine our allowance for doubtful accounts. We do not have any off-balance sheet credit exposure related to our customers.
55
Inventories
We account for inventories at the lower of first-in, first-out (FIFO) cost basis or net realizable value. Management continuously examines inventory to determine if there are indicators that the carrying value exceeds its net realizable value. Historical experience has shown that the most significant indicators that would require inventory markdowns are the age of the inventory and the planned discontinuance of certain patterns. As a result, we provide inventory valuation markdowns based upon established percentages associated with the age of inventory that are continually evaluated and based on historical experience and judgment. Also, we provide inventory valuation markdowns associated with restructuring activities and on the planned discontinuance of certain patterns based on the current market values at that time of assessment as compared to their current carrying values.
Based on current unfavorable industry macroeconomic conditions in the home furnishings and bedding industries, it is possible that estimates used by management to determine the write down of inventory to its net realizable value could differ materially from our actual results. These differences could result in higher than expected markdowns of inventory, which could adversely affect the company’s results of operations and financial condition in the near term.
During the fourth quarter of fiscal 2025, we assessed the percentages associated with the age of our inventory and the related aging categories. This assessment was based on a change in current market trends related to extended life cycles for finished goods inventory. As a result of our assessment, we recorded a total non-cash inventory credit of $ 1.7 million for both our 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 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
Property, plant, and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Major renewals and betterments are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. 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.
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. 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. After the impairment loss is recognized, the adjusted carrying amount is the new accounting basis. Assets to be disposed of by sale are reported at the lower of the carrying value or fair value less cost to sell when the company has committed to a disposal plan and would be reported separately as assets held for sale in the Consolidated Balance Sheets.
Interest Costs
Total interest costs incurred were $ 759,000 , $ 231,000 and $ 11,000 during fiscal 2026, 2025, and 2024, respectively.
We capitalize interest costs incurred on funds used to construct property, plant, and equipment. The capitalized interest is recorded as part of the asset to which it relates and is depreciated over the asset’s estimated useful life. No interest costs for the construction of qualifying fixed assets were capitalized during fiscal 2026, 2025, or 2024.
Foreign Currency Adjustments
The United States dollar is the functional currency for the company’s Canadian, Chinese, and Vietnamese subsidiaries. All monetary foreign currency asset and liability accounts are remeasured into U.S. dollars at year-end foreign currency exchange rates. Non-
monetary assets and liabilities such as property, plant, and equipment and right of use assets are recorded at historical foreign currency exchange rates. Foreign currency revenues and expenses are remeasured at average foreign currency exchange rates in effect during the year, except for certain expenses related to balance sheet amounts remeasured at historical foreign currency exchange rates, such as depreciation expense. Foreign currency exchange rate gains and losses from remeasurement of foreign currency denominated monetary assets and liabilities are recorded in the other expense line item in the Consolidated Statements of Net Loss in the period in which they occur.
56
A summary of our foreign currency exchange rate (loss) gain by geographic area follows:
(dollars in thousands)
2026
2025
2024
China
$
( 1,369
)
$
141
$
604
Canada
100
( 23
)
( 58
)
Vietnam
—
( 1
)
( 1
)
$
( 1,269
)
$
117
$
545
Intangible Assets
Tradename
In accordance with ASC Topic 350 , Intangibles – Goodwill and Other, our business was classified into three reporting units during fiscal 2026: 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. Such indicators could include but are not limited to: (1) deterioration in the environment of the industry and markets in which we operate, (2) unanticipated competition, (3) a deterioration in general economic conditions, (4) an overall decline in financial performance, such as negative and declining cash flows, or a decline in actual or planned revenue or earnings compared with actual and projected results or relevant prior periods, and (5) a decrease in the price per share of our common stock. As a result, we first assess qualitative factors, such as the indicators outlined above, to determine whether it is more likely than not that the fair value of our tradename is less than its carrying amount. If we conclude that it is more likely than not that the fair value of our tradename is less than its carrying amount, we would conduct a quantitative impairment test. The quantitative impairment test would involve comparing the fair value of our tradename with its carrying value. We would estimate the fair value of our tradename using an income, discounted cash flows, or market approach, as appropriate, that would require management assumptions (i.e., unobservable inputs). 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 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.
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Income Taxes
Deferred Income Taxes – Overall
Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the financial statement carrying amounts and the tax basis of our assets, liabilities, U.S. 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 in the period that includes the enactment date.
Deferred Income Taxes – Valuation Allowance
We evaluate our deferred income taxes to determine if a valuation allowance is required. We assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more-likely-than-not” standard, with significant weight being given to evidence that can be objectively verified. Since we operate in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law.
Deferred Income Taxes – Undistributed Earnings from Foreign Subsidiaries
We assess whether the undistributed earnings from our foreign subsidiaries will be reinvested indefinitely or eventually distributed to our U.S. parent company. We are required to record a deferred tax liability for undistributed earnings from foreign subsidiaries that will not be reinvested indefinitely. 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 % 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. parent company.
Uncertain Income Tax Positions
We recognize an income tax benefit for a tax position taken or expected to be taken on an income tax return if the more-likely-than-not recognition threshold is met by the end of the reporting period, or is effectively settled through examination, litigation, or negotiation, or if the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired. The income tax effect recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. Penalties and interest related to uncertain income tax positions are recorded as income tax expense. Significant judgment is required in the identification of uncertain income tax positions and in the estimation of penalties and interest on uncertain income tax positions.
Revenue from Contracts with Customers
Revenue Recognition
Revenue is recognized upon the transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We determined that our customer purchase orders represent contracts. 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, 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. The point in time when control transfers to the customer depends on the contractually agreed upon shipping terms, but typically occurs once the product has been shipped or once it has been delivered to a location specified by the customer. For certain warehousing arrangements, transfer of control to the customer is deemed to have occurred when the customer pulls the inventory for use in their production.
Revenue associated with our customized fabrication services, which are performed on various types of window treatments, is recognized over time once the customized products are deemed to have no alternative use and for which we have an enforceable right to payment for the services performed. Revenue for our customized fabrication services is recognized over time using the output method based on units produced. Revenue associated with our installation services for our own products is also recognized over time as the customer receives and consumes the benefits of the promised installation services. Revenue associated with our installation services is recognized over time using the output method based on units installed.
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Transaction Price
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 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
Revenue is measured as the amount of consideration we expect to receive in exchange for the transfer of the promised products and services. The amount of consideration we expect to receive changes due to variable consideration associated with allowances for sales returns, early payment discounts, and volume rebates that we offer to customers. 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 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. Estimates of allowances for sales returns are based on historical data, current potential product return issues, and known sales returns for which customers have been granted authorization. Known sales returns for which customers have been granted permission to return products for a refund or credit continue to be recorded as a contra account receivable. Estimates for potential future sales returns and related customer accommodations are recorded within accrued expenses. We record estimates for sales returns on a gross basis rather than a net basis, and an estimate for a right of return asset is recorded in other current assets and cost of goods sold. Variable consideration associated with early payment cash discounts are estimated using current payment trends and historical data on a customer-by-customer basis. The variable consideration associated with volume rebates is based on the portion of the rebate earned relative to the total amount of rebates the customer is expected to earn over the rebate period, as determined using historical data and projections.
We evaluated the nature of our warranties related to our contracts with customers and determined that any such warranties are assurance-type warranties that cover only compliance with agreed upon specifications, and therefore are not considered separate performance obligations.
Shipping and Handling Costs
Revenue received for shipping and handling costs, which is immaterial for all periods presented, is included in net sales. Shipping costs, principally freight, that comprise payments to third-party shippers are classified as cost of sales. Handling costs represent finished goods warehousing costs incurred to store, move, and prepare products for shipment in the company’s various distribution facilities. Handling costs were $ 4.2 million, $ 4.6 million, and $ 4.6 million during fiscal 2026, 2025, and 2024, respectively, and are included in selling, general and administrative expenses.
Sales and Other Taxes
Sales and other taxes collected from customers and remitted to governmental authorities are presented on a net basis and, as such, are excluded from revenues.
Leases
We lease manufacturing facilities, office space, distribution centers, and equipment under operating lease arrangements. We determine if an arrangement is a lease at its inception if it conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Operating leases with an initial term of 12 months or less are not recognized in our Consolidated Balance Sheets. We account for lease components separately from non-lease components. We recognize a right of use asset and lease liability on the commencement date of a lease arrangement based on the present value of lease payments over the lease term.
A lease term may include renewal options if it is reasonably certain that the option to renew a lease period will be exercised. A renewal option is considered reasonably certain to be exercised if there is a significant economic incentive to exercise the renewal option on the date a lease arrangement is commenced.
For our leases, an estimated incremental borrowing rate (“IBR”) is utilized, based on information available at the inception of the lease. The IBR represents an estimate of the interest rate we would use at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.
59
Stock-Based Compensation
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-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. If certain performance targets are not expected to be achieved, compensation expense will not be recorded, and any previously recognized compensation expense will be reversed.
Fair Value of Financial Instruments
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 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. The carrying amount of our lines of credit - long term approximates its fair value because the respective variable rates of interest associated with the lines of credit are comparable to the market rate of interest.
Recently Adopted Accounting Pronouncements
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. Also, the amendments allow investors to better assess an entity's: (i) capital allocation decisions, (ii) worldwide operations, and (iii) related tax risks, tax planning, and operational opportunities that affect the effective income tax rate and prospects for future cash flows. The other amendments in this update improve the effectiveness and comparability of disclosures relating to pretax income (or loss) and income tax expense (or benefit) and remove disclosures that are no longer considered cost beneficial or relevant. 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. 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 12.
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 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). Early adoption is permitted. The company is currently evaluating ASU 2024-03 to determine the impact it will have on its consolidated financial statements and related disclosures.
Currently, there are no new accounting pronouncements that are expected to have a material effect on our consolidated financial statements.
60
2. ACCOUNTS RECEIVABLE
A summary of accounts receivable follows:
May 3,
April 27,
April 28,
(dollars in thousands)
2026
2025
2024
Customers
$
21,082
$
22,799
$
21,660
Allowance for doubtful accounts
( 589
)
( 651
)
( 356
)
Allowance for cash discounts
( 112
)
( 108
)
( 113
)
Reserve for returns and allowances and discounts
( 12
)
( 196
)
( 53
)
$
20,369
$
21,844
$
21,138
A summary of the activity in the allowance for doubtful accounts follows:
(dollars in thousands)
2026
2025
2024
Beginning balance
$
( 651
)
$
( 356
)
$
( 342
)
Provision for bad debts
( 196
)
( 342
)
( 276
)
Write-offs, net of recoveries
258
47
262
Ending balance
$
( 589
)
$
( 651
)
$
( 356
)
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: (i) financial position; (ii) past payment history; (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 $ 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:
(dollars in thousands)
2026
2025
2024
Beginning balance
$
( 304
)
$
( 166
)
$
( 124
)
Provision for returns and allowances and discounts
( 978
)
( 1,423
)
( 1,173
)
Credits issued and discounts taken
1,158
1,285
1,131
Ending balance
$
( 124
)
$
( 304
)
$
( 166
)
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Nature of Performance Obligations
Our operations are classified into two business segments: 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.
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Significant Judgments
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 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. If upfront deposits or prepayments are not required, customers may be granted terms which generally range from 15 - 60 days. Our terms are customary within the industries in which we operate and are not considered financing arrangements.
There were no contract assets recognized as of May 3, 2026, or April 27, 2025.
A summary of the activity of deferred revenue follows:
(dollars in thousands)
Fiscal 2026
Fiscal 2025
Fiscal 2024
Beginning balance
$
422
$
1,495
$
1,192
Revenue recognized on contract liabilities
( 2,051
)
( 3,980
)
( 3,932
)
Payments received for services not yet rendered
1,910
2,907
4,235
Ending balance
$
281
$
422
$
1,495
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 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 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
The following table presents our disaggregated revenue related to operations by segment, timing of revenue recognition, and product sales versus services rendered for fiscal 2026:
(dollars in thousands)
Bedding
Upholstery
Total
Products transferred at a point in time
$
116,593
$
80,044
$
196,637
Services transferred over time
—
6,845
6,845
Total Net Sales
$
116,593
$
86,889
$
203,482
The following table presents our disaggregated revenue related to operations by segment, timing of revenue recognition, and product sales versus services rendered for fiscal 2025:
(dollars in thousands)
Bedding
Upholstery
Total
Products transferred at a point in time
$
113,906
$
87,322
$
201,228
Services transferred over time
—
12,009
12,009
Total Net Sales
$
113,906
$
99,331
$
213,237
62
The following table presents our disaggregated revenue related to operations by segment, timing of revenue recognition, and product sales versus services rendered for fiscal 2024:
(dollars in thousands)
Bedding
Upholstery
Total
Products transferred at a point in time
$
116,370
$
98,976
$
215,346
Services transferred over time
—
9,987
9,987
Total Net Sales
$
116,370
$
108,963
$
225,333
4. INVENTORIES
A summary of inventories follows:
(dollars in thousands)
May 3,
2026
April 27,
2025
Raw materials
$
5,573
$
5,733
Work-in-process
1,989
2,747
Finished goods
39,932
40,829
$
47,494
$
49,309
5. PROPERTY, PLANT, AND EQUIPMENT
A summary of property, plant, and equipment follows:
(dollars in thousands)
Depreciable lives
(in years)
May 3,
2026
April 27,
2025
Land and improvements
0 - 10
$
596
$
596
Buildings and improvements
7 - 40
25,435
25,286
Leasehold improvements
**
1,934
2,044
Machinery and equipment
3 - 15
46,068
50,361
Data processing equipment and software
3 - 7
9,047
8,500
Office furniture and equipment
3 - 10
1,164
1,250
Capital projects in progress
139
549
84,383
88,586
Accumulated depreciation
( 63,370
)
( 63,750
)
$
21,013
$
24,836
** Shorter of life of lease or useful life .
6. INTANGIBLE ASSETS
A summary of intangible assets follows:
(dollars in thousands)
May 3,
2026
April 27,
2025
Tradename
$
—
$
—
Customer relationships, net
204
734
Non-compete agreement, net
151
226
$
355
$
960
63
Tradename
A summary of the change in the carrying amount of our tradename follows:
(dollars in thousands)
2026
2025
2024
Beginning balance
$
—
$
540
$
540
Loss on impairment
—
( 540
)
-
Ending balance
$
—
$
—
$
540
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 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 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.
Customer Relationships
A summary of the change in the carrying amount of our customer relationships follows:
(dollars in thousands)
2026
2025
2024
Beginning balance
$
734
$
1,035
$
1,335
Loss on impairment
( 291
)
—
—
Amortization expense
( 239
)
( 301
)
( 300
)
Ending balance
$
204
$
734
$
1,035
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 ; FY 2028 - $ 51,000 ; FY 2029 - $ 51,000 ; FY 2030 - $ 51,000 .
The weighted average amortization period for our customer relationships is 4.0 years as of May 3, 2026.
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Non-Compete Agreement
A summary of the change in the carrying amount of our non-compete agreement follows:
(dollars in thousands)
2026
2025
2024
Beginning balance
$
226
$
301
$
377
Amortization expense
( 75
)
( 75
)
( 76
)
Ending balance
$
151
$
226
$
301
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 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; 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 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.
7. NOTES RECEIVABLE
Culp Inc. (U.S. Parent)
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
65
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 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. (its U.S. Parent).
The following table represents the remaining future principal payments of the Culp Inc. (U.S. Parent) note receivable as of May 3, 2026:
(dollars in thousands)
2027
$
360
2028
360
2029
360
2030
240
Undiscounted value of note receivable
$
1,320
Less: unearned interest income
( 138
)
Present value of note receivable
$
1,182
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 $ 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. ("CHF Haiti")
Effective August 2, 2024, CHF Haiti entered into an agreement to terminate a lease of a facility ("CHF Termination Agreement"). Pursuant to the terms of the CHF Termination Agreement, CHF Haiti was entitled to a payment of $ 250,000 from the lessor at the earlier of February 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 .
8. ASSETS HELD FOR SALE
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).
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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.
9. ACCRUED EXPENSES
A summary of accrued expenses follows:
(dollars in thousands)
May 3,
2026
April 27,
2025
Compensation and related benefits
$
2,249
$
2,534
Other
1,854
2,799
$
4,103
$
5,333
10. RESTRUCTURING ACTIVITIES
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 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; 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 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
67
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 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
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 .
The following summarizes restructuring (credit) expense and restructuring related charges associated with all the restructuring activities described above:
(dollars in thousands)
2026
2025
2024
Net (gain) loss from the sale and impairment of property, plant, and equipment
$
( 3,754
)
$
( 16
)
$
329
Loss on disposal, valuation, and markdowns of inventory
931
1,621
40
Facility consolidation and relocation expenses
543
2,437
—
Impairment of intangible asset
291
540
—
Other associated costs
284
1,038
—
Employee termination benefits
164
1,552
307
Additional depreciation expense for shortened useful lives of equipment
112
1,339
—
Lease termination costs
37
849
—
Restructuring (credit) expense and restructuring related charges (1) (2) (3)
$
( 1,392
)
$
9,360
$
676
(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:
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Employee
Other
Facility Consolidation
Termination
Associated
and Relocation
(dollars in thousands)
Benefits
Costs
Costs
Total
Balance, April 30, 2023
$
—
$
—
$
—
$
—
Expenses incurred
307
—
—
307
Change in estimate adjustments
—
—
—
—
Payments
( 304
)
—
—
( 304
)
Effects of foreign currency
—
—
—
—
Balance, April 28, 2024 (1)
3
—
—
3
Expenses incurred
1,667
1,046
2,437
5,150
Change in estimate adjustments
( 115
)
( 8
)
—
( 123
)
Payments
( 1,022
)
( 940
)
( 2,435
)
( 4,397
)
Effects of foreign currency
( 11
)
( 10
)
( 2
)
( 23
)
Balance, April 27, 2025
522
88
—
610
Expenses incurred
265
300
549
1,114
Change in estimate adjustments
( 101
)
( 16
)
( 6
)
( 123
)
Payments
( 649
)
( 372
)
( 533
)
( 1,554
)
Effects of foreign currency
—
—
—
—
Balance, May 3, 2026
$
37
$
—
$
10
$
47
(1 ) Accrued restructuring was reported within accrued expenses within the Consolidated Balance Sheet as of April 28, 2024.
11. LINES OF CREDIT
The summary of outstanding borrowings under our lines of credit follows:
(dollars in thousands)
May 3,
2026
April 27,
2025
Wells Fargo - U.S. revolving line of credit
$
7,000
$
4,600
Agricultural Bank of China - supplier financing arrangements
1,893
2,751
Agricultural Bank of China - working capital loan (executed May 2025)
3,071
—
Agricultural Bank of China - working capital loan (executed March 2026)
4,241
—
Agricultural Bank of China - revolving line of credit
—
3,988
Bank of China - working capital loan
1,462
1,375
China Construction Bank Corporation - working capital loan
1,462
—
Lines of credit (1)
$
19,129
$
12,714
(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, 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 matures on June 12, 2028 .
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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.
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:
• 85 % of eligible accounts receivable, plus
• the least of:
i) the sum of:
o lesser of (i) 65 % of eligible inventory valued at cost based on a first-in first-out basis (net of intercompany profits) and (ii) 85 % of the net-orderly-liquidation value percentage of eligible inventory, plus
o the least of (i) 65 % of eligible in-transit inventory valued at cost based on a first-in first-out basis (net of intercompany profits), (ii) 85 % of the net-orderly-liquidation value percentage of eligible in-transit inventory, and (iii) $ 4.0 million, plus
o the lesser of (i) 65 % of eligible raw material inventory valued at cost based on a first-in first-out basis (net of intercompany profits) and (ii) 85 % of the net-orderly-liquidation value percentage of eligible raw material inventory.
In each case, the net-orderly-liquidation value is calculated based on the lower of (i) a first-in first-out basis and (ii) market value, and is (A) net of intercompany profits, (B) net of write-ups and write-downs in value with respect to currency exchange rates and (C) consistent with most recent appraisals received and acceptable to Lender.
ii) $ 20.0 million; and
iii) An amount equal to 200 % of eligible accounts receivable.
• minus applicable reserves.
The ABL Facility permits both base rate borrowings and borrowings that bear interest at annual rate equal to daily simple SOFR (the secured overnight financing rate administered by the Federal Reserve Bank of New York (or its successor)), in each case, plus an Applicable Margin equal to: (i) 75 basis points for base rate borrowings and 175 basis points for SOFR-based borrowings (if the average monthly excess availability under the ABL Facility is greater than 66 2/3%), (ii) 100 basis points for base rate borrowings and 200 basis points for SOFR-based borrowings (if the average monthly excess availability under the ABL Facility is less than or equal to 66 2/3% and greater than 33 1/3%), or (iii) 125 basis points for base rate borrowings and 225 basis points for SOFR-based borrowings (if the average monthly excess availability under the ABL Facility is less than or equal to 33 1/3%), as applicable, with a fee on unutilized commitments at an annual rate of 37.5 basis points (if usage is equal to or greater than 50% of the maximum credit available under the ABL Facility) or 50 basis points (if usage is less than 50% of the maximum credit available under the ABL Facility).
Outstanding balances associated with the ABL Facility may be prepaid from time to time, in whole or in part, without a prepayment penalty or premium. In addition, customary mandatory prepayments of the loans under the ABL Facility are required upon the occurrence of certain events including, without limitation, outstanding borrowing exposures exceeding the borrowing base and certain dispositions of assets outside of the ordinary course of business. Accrued interest is payable monthly in arrears.
The company’s obligations under the ABL Facility (and certain related obligations) are: (a) guaranteed by the 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
70
interests granted by the Loan Parties on the collateral for the benefit of the Lender under the ABL Facility are, subject to certain permitted liens, first-priority.
Cash Dominion. Under the terms of the ABL Facility, if: (i) an event of default has occurred or (ii) excess borrowing availability under the ABL Facility (based on the lesser of $ 30.0 million and the borrowing base) (the "Excess Availability") falls below $ 6.0 million at such time, the Loan Parties will become subject to cash dominion, which will require prepayment of loans under the ABL Facility with the cash deposited in certain deposit accounts of the Loan Parties, including a concentration account, and will restrict the Loan Parties' ability to transfer cash from their concentration account. Such cash dominion period (a "Dominion Period') shall end when Excess Availability shall be equal to or greater than $ 6.0 million for a period of 60 consecutive days and no event of default is continuing.
Financial Covenants. The ABL Facility contains a springing covenant requiring that the company's fixed charge coverage ratio be no less than 1.10 to 1.00 during any period that: (i) an event of default has occurred or (ii) Excess Availability under the ABL Facility falls 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.
Affirmative and Restrictive Covenants. The Credit Agreement governing the ABL Facility contains customary representations and warranties, affirmative and negative covenants (subject, in each case, to exceptions and qualifications) and events of defaults, including covenants that limit the company's ability to, among other things:
• incur additional indebtedness;
• make investments;
• pay dividends and make other restricted payments;
• sell certain assets;
• create liens;
• consolidate, merge, sell or otherwise dispose of all or substantially all of the company's assets; and
• enter into transactions with affiliates
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 ("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.
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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)
2026
2025
Outstanding at the beginning of the year
$
2,751
$
—
Vendor invoices financed during the year
1,892
2,743
Vendor invoices paid during the year
( 2,924
)
—
Effects of foreign currency
174
8
Ending balance
$
1,893
$
2,751
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
72
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.
Other
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 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.
12. INCOME TAXES
The components of loss before income taxes are as follows:
(dollars in thousands)
2026
2025
2024
United States
$
( 15,081
)
$
( 18,395
)
$
( 18,614
)
Foreign
6,796
( 316
)
7,844
$
( 8,285
)
$
( 18,711
)
$
( 10,770
)
Income tax expense consists of:
(dollars in thousands)
2026
2025
2024
Current income tax expense (benefit)
U.S. federal
$
2
$
( 579
)
$
42
U.S. state
5
4
—
Foreign
2,056
2,310
2,620
Total current income tax expense
2,063
1,735
2,662
Deferred income tax expense (benefit)
U.S. federal
1,642
3,872
4,505
U.S. federal loss carryforwards and credits
( 1,642
)
( 3,872
)
( 4,505
)
U.S. state
( 12
)
258
229
U.S. state carryforwards
12
( 258
)
( 229
)
Foreign
( 137
)
( 1,343
)
387
Total deferred income tax (benefit) expense
$
( 137
)
$
( 1,343
)
$
387
Total income tax expense (benefit)
U.S. federal
$
1,644
$
3,293
$
4,547
U.S. federal loss carryforwards and credits
( 1,642
)
( 3,872
)
( 4,505
)
U.S. state
( 7
)
262
229
U.S. federal & state carryforwards and credits
12
( 258
)
( 229
)
Foreign
1,919
967
3,007
Total income tax expense
$
1,926
$
392
$
3,049
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.
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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. This
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.
2026
2025
2024
Amounts
Rate
Amounts
Rate
Amounts
Rate
U.S. federal statutory income tax rate
$
( 1,740
)
21.0
%
$
( 3,929
)
21.0
%
$
( 2,262
)
21.0
%
Domestic Federal
Change in valuation allowance
2,356
( 28.4
)
3,990
( 21.3
)
3,157
( 29.3
)
Stock-Based compensation
25
( 0.3
)
59
( 0.3
)
190
( 1.8
)
Nontaxable and nondeductible items
127
( 1.5
)
( 2
)
( 0.1
)
102
( 0.9
)
Effect of Cross-border tax laws
Global intangible low-taxed income (GILTI)
340
( 4.1
)
—
—
—
—
Deemed intercompany charge
261
( 3.2
)
—
—
—
—
Other
62
( 0.7
)
—
—
—
—
Domestic state income taxes, net of federal effect (1)
Change in valuation allowance
21
( 0.3
)
309
( 1.7
)
172
( 1.6
)
Statutory income tax rate differential
( 16
)
0.2
( 305
)
1.6
( 172
)
1.6
Foreign tax effects
China
Income tax effects of local currency foreign
exchanges (losses) gains
( 540
)
6.5
97
( 0.5
)
386
( 3.6
)
Statutory income tax rate differential
134
( 1.6
)
223
( 1.2
)
246
( 2.3
)
Withholding taxes
114
( 1.4
)
477
( 2.5
)
711
( 6.6
)
Other
( 1
)
—
—
—
( 5
)
0.1
Canada
Statutory income tax rate differential
250
( 3.0
)
( 280
)
1.5
50
( 0.5
)
Withholding taxes
167
( 2.0
)
( 152
)
0.8
( 10
)
0.1
Other
5
( 0.1
)
46
( 0.2
)
1
—
Haiti
Statutory income tax rate differential
169
( 2.0
)
326
( 1.7
)
405
( 3.8
)
Other Foreign
( 1
)
—
1
—
—
—
Worldwide changes in unrecognized income
tax benefits
193
( 2.3
)
( 468
)
2.5
78
( 0.7
)
Reported income tax expense (2) (3)
$
1,926
( 23.2
)%
$
392
( 2.1
)%
$
3,049
( 28.3
)%
(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: (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. deferred income tax assets during fiscal 2026, 2025, and 2024, respectively.
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Consequently, an income tax benefit was not recognized for the pre-tax losses associated with our U.S. operations totaling $ ( 15.1 ) million, $( 18.4 ) million, and $( 18.6 ) million that were incurred during fiscal 2026, 2025, and 2024, respectively.
(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 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
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities consist of the following:
(dollars in thousands)
May 3,
2026
April 27,
2025
Deferred tax assets:
Accounts receivable
$
218
$
305
Inventories
2,424
2,128
Compensation
1,630
1,767
Liabilities and other
122
56
Intangible assets and goodwill
484
455
Property, plant, and equipment
183
178
Operating lease liability
338
744
Foreign income tax credits - U.S.
783
783
Loss carryforwards
24,230
22,521
Valuation allowance - U.S.
( 28,680
)
( 26,303
)
Total deferred tax assets
$
1,732
$
2,634
Deferred tax liabilities:
Undistributed earnings on foreign subsidiaries
$
( 4,883
)
$
( 5,155
)
Property, plant and equipment
( 645
)
( 1,010
)
Right of use assets
( 564
)
( 920
)
Other
( 20
)
( 67
)
Total deferred tax liabilities
( 6,112
)
( 7,152
)
Net deferred liabilities
$
( 4,380
)
$
( 4,518
)
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 TCJA, U.S. federal net operating loss carryforwards generated in fiscal 2019 and after do not expire. 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 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. state net operating loss carryforwards that do not expire due to conformity with U.S. federal income tax regulations. Our 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.
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Deferred Income Taxes – Valuation Allowance
Assessment
We evaluate the realizability of our deferred income taxes to determine if a valuation allowance is required. We assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more-likely-than-not” standard, with significant weight being given to evidence that can be objectively verified. 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 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. Based on our assessment, we determined we still have a recent history of significant cumulative U.S. pre-tax losses, in that we experienced U.S. pre-tax losses during each of the last three fiscal years. 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 May 3, 2026, and April 27, 2025, valuation allowances against our U.S. net deferred income tax assets pertain to the following:
(dollars in thousands)
May 3,
2026
April 27,
2025
U.S. federal and state net deferred income tax assets
$
26,350
$
23,973
U.S. capital loss carryforward
2,330
2,330
$
28,680
$
26,303
A summary of the change in the valuation allowances against our U.S. net deferred income tax assets follows:
(dollars in thousands)
2026
2025
2024
Beginning balance
$
26,303
$
22,004
$
18,675
Change in valuation allowance associated with current year earnings
2,633
4,162
3,318
Change in estimate during current year
( 256
)
137
11
Ending balance
$
28,680
$
26,303
$
22,004
Deferred Income Taxes – Undistributed Earnings from Foreign Subsidiaries
We assess whether the undistributed earnings from our foreign subsidiaries will be reinvested indefinitely or eventually distributed to our U.S. 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 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. parent company. The conclusion reached from this assessment has been consistent with prior years.
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 % 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 liabi lity of $ 4.9 million and $ 5.2 million as of May 3, 2026, and April 27, 2025, respectively.
Uncertainty in Income Taxes
An unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period if the more-likely-than-not recognition threshold is met by the end of the reporting period, or is effectively settled through examination, negotiation, or litigation, or if the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired. If it is determined that any of the above conditions occur regarding our uncertain income tax positions, an adjustment to our unrecognized income tax benefit will be recorded at that time.
76
The following table sets forth the change in the company’s unrecognized income tax benefit:
(dollars in thousands)
2026
2025
2024
Beginning balance
$
790
$
1,258
$
1,179
Increases from prior period tax positions
193
224
197
Decreases from prior period tax positions
—
( 76
)
( 118
)
Lapse of applicable statute of limitations
—
( 616
)
—
Ending balance
$
983
$
790
$
1,258
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 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. United States federal and state income tax returns filed by us remain subject to examination for income tax years 2019 and subsequent. Canadian federal income tax returns filed by us remain subject to examination for income tax years 2022 and subsequent. Canadian provincial (Quebec) income tax returns filed by us remain subject to examination for income tax years 2022 and subsequent. Income tax returns associated with our operations located in China are subject to examination for income tax year 2021 and subsequent.
Income Taxes Paid
The following table sets forth income taxes paid (refunded) by jurisdiction:
(dollars in thousands)
2026
2025
2024
U.S. federal (1)
$
831
$
665
$
499
U.S. state, income tax payments, net of refunds (2)
( 4
)
—
—
Foreign
China
1,143
1,785
2,317
Canada
Federal - income tax payments, net of refunds
976
( 148
)
391
Quebec Province - income tax payments, net of refunds
615
2
77
Total Foreign
2,734
1,639
2,785
$
3,561
$
2,304
$
3,284
(1) Amounts related to U.S. federal solely relate to transition tax payments made in accordance with the TCJA.
(2) U.S. 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.
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13. LEASES
Leases
Overview
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 May 3, 2026, and April 27, 2025, are as follows:
(dollars in thousands)
May 3,
2026
April 27,
2025
Right of use assets
$
2,984
$
5,908
Operating lease liability - current
956
2,394
Operating lease liability – long-term
1,027
2,535
Supplemental Cash Flow Information
(dollars in thousands)
2026
2025
2024
Operating lease liability payments
$
2,084
$
2,391
$
2,663
Right of use assets exchanged for lease liabilities
—
2,837
978
Operating lease costs were $ 2.2 million, $ 2.9 million, and $ 3.1 million during fiscal 2026, 2025, and 2024, respectively. Short-term lease costs were $ 182,000 , $ 13,000 , and $ 34,000 during fiscal 2026, 2025, and 2024, respectively. Variable lease expense was immaterial for each of fiscal 2026, 2025, and 2024.
As of May 3, 2026, the weighted average remaining lease term and discount rate for our operating leases follows:
Weighted average lease term
3.4 years
Weighted average discount rate
5.53
%
As of April 27, 2025, the weighted average remaining lease term and discount rate for our operating leases follows:
Weighted average lease term
2.9 years
Weighted average discount rate
5.55
%
Other Information
Maturity of our operating lease liabilities for the next five fiscal years and thereafter follows:
(dollars in thousands)
Amount
2027
$
995
2028
388
2029
227
2030
229
2031
229
Thereafter
116
2,184
Less: interest
( 201
)
Present value of lease liabilities
$
1,983
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14. COMMITMENTS AND CONTINGENCIES
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.
15. STOCK-BASED COMPENSATION
Equity Incentive Plan Description
On September 16, 2015, our shareholders approved an equity incentive plan titled the Culp, Inc. 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan authorizes the grant of stock options intended to qualify as incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, time-based restricted stock units, performance-based restricted stock units, and other equity and cash related awards as determined by the Compensation Committee of our board of directors. An aggregate of 1,200,000 shares of common stock were authorized for issuance under the 2015 Plan, with certain sub-limits that would apply with respect to specific types of awards that may be issued as defined in the 2015 Plan. Effective September 27, 2023, our shareholders approved an amendment and restatement of the 2015 Plan (the "Amended and Restated Plan"). The Amended and Restated Plan authorizes the issuance of an additional 960,000 shares of common stock in addition to the shares of common stock still available for issuance under the 2015 Plan. 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 May 3, 2026, there were 387,293 shares available for future equity-based grants under the company’s Amended and Restated Plan.
79
Time-Based Restricted Stock Awards
The following table summarizes the time-based restricted stock unit activity during fiscal years 2026, 2025, and 2024:
2026
2025
2024
Shares
Shares
Shares
Outstanding at beginning of year
262,148
308,927
285,826
Granted
96,235
91,629
174,754
Vested (1)
( 119,933
)
( 103,320
)
( 151,653
)
Forfeited
( 26,689
)
( 35,088
)
—
Outstanding at end of year
211,761
262,148
308,927
(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:
Time-Based
(1)
Restricted Stock
Price
Vesting
Date of Grant
Units Awarded
Per Share
Period
September 25, 2025 (3)
80,335
$
4.17
1 year
August 7, 2025 (2)
15,900
$
4.23
3 years
January 6, 2025 (2)
21,506
$
5.69
3 years
September 26, 2024 (3)
46,823
$
5.98
1 year
August 8, 2024 (2)
23,300
$
4.65
3 years
January 8, 2024 (2)
14,758
$
5.61
31 months
September 28, 2023 (2)
100,067
$
5.59
34 months
September 28, 2023 (3)
59,929
$
5.59
1 year
(1) Price per share represents the closing price of our common stock on the date the respective award was granted.
(2) Time-based restricted stock units awarded to senior executives and key employees.
(3) Time-based restricted stock units award to outside directors.
Overall
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
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
80
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.
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, and September 28, 2023:
August 8,
January 8,
September 28,
2024
2024
2023
Closing price of our common stock
$
4.65
$
5.61
$
5.59
Expected volatility of our common stock
35.0
%
33.5
%
37.3
%
Expected volatility of peer companies
22.6 % - 104.0
%
33.7 % - 102.6
%
35.7 % - 91.5
%
Risk-free interest rate
3.90
%
4.30
%
4.90
%
Dividend yield
0.00
%
0.00
%
0.00
%
Correlation coefficient of peer companies
( 0.01 ) - 0.17
0.01 - 0.21
0.01 - 0.21
Overall
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:
(1)
(2)
Performance-Based
Restricted Stock
Restricted Stock
Units Expected
Date of Grant
Units Awarded
to Vest
Price Per Share
Vesting Period
August 7, 2025
298,909
59,782
$
4.23
(3)
3 years
August 8, 2024
488,377
—
$
5.35
(4)
3 years
January 8, 2024
8,199
4,238
$
6.23
(5)
31 months
September 28, 2023
—
—
$
6.43
(6)
34 months
(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 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.
(5) Price per share represents the fair market value per share ($ 1.11 per $1, or an increase of $ 0.62 to the closing price of our common stock on the date of grant) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($ 5.61 ) for the performance-based component of the performance-based restricted stock units granted to senior executives on January 8, 2024.
(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.
There were no performance-based restricted stock units that vested during fiscal 2026, 2025, or 2024.
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
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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.
16. FAIR VALUE
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). Determining where an asset or liability falls within that hierarchy depends on the lowest level input that is significant to the fair value measurement as a whole. An adjustment to the pricing method used within either level 1 or level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy.
The hierarchy consists of three broad levels, as follows:
Level 1 – Quoted market prices in active markets for identical assets or liabilities,
Level 2 – Inputs other than level 1 inputs that are either directly or indirectly observable, and
Level 3 – Unobservable inputs developed using the company’s estimates and assumptions, which reflect those that market participants would use.
The determination of where an asset or liability falls in the hierarchy requires significant judgment. 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.
Recurring Basis
The following tables present information about assets measured at fair value on a recurring basis:
Fair value measurements as of May 3, 2026, using:
Quoted
prices in
active markets
for identical
assets
Significant
other
observable
inputs
Significant
unobservable
inputs
(amounts in thousands)
Level 1
Level 2
Level 3
Total
Assets:
U.S. Government Money Market Fund
$
4,352
N/A
N/A
$
4,352
Growth Allocation Mutual Funds
991
N/A
N/A
991
S&P 500 Index Fund
443
N/A
N/A
443
Lord Abbett Bond Debenture Fund
397
N/A
N/A
397
Other
285
N/A
N/A
285
82
Fair value measurements as of April 27, 2025, using:
Quoted
prices in
active markets
for identical
assets
Significant
other
observable
inputs
Significant
unobservable
inputs
(amounts in thousands)
Level 1
Level 2
Level 3
Total
Assets:
U.S. Government Money Market Fund
$
5,682
N/A
N/A
$
5,682
Growth Allocation Mutual Funds
808
N/A
N/A
808
S&P 500 Index Fund
275
N/A
N/A
275
Lord Abbett Bond Debenture Fund
11
N/A
N/A
11
Other
271
N/A
N/A
271
17. NET LOSS PER SHARE
Basic net loss per share is computed using the weighted-average number of shares outstanding during the period. Diluted net loss per share uses the weighted-average number of shares outstanding during the period plus the dilutive effect of stock-based compensation calculated using the treasury stock method.
Weighted-average number of shares used in the computation of both basic and diluted net loss per share were 12,630,000 , 12,525,000 , and 12,432,000 for fiscal years 2026, 2025, and 2024, respectively.
Shares of unvested common stock that were not included in the computation of diluted net loss per share consist of the following:
(in thousands)
2026
2025
2024
Antidilutive effect from decrease in the price per share of our
common stock
—
—
—
Antidilutive effect from net loss incurred during the fiscal year
128
145
144
Total unvested shares of common stock not included in
computation of diluted net loss per share
128
145
144
18. BENEFIT PLANS
Defined Contribution Plans
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, 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.
83
Deferred Compensation Plan
We have a non-qualified deferred compensation plan (the “Plan”) covering senior executives and certain key members of management. The Plan provides for participant deferrals on a pre-tax basis that are subject to annual deferral limits by the IRS and non-elective contributions made by the company. Participant deferrals and non-elective contributions made by the company are immediately vested.
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 $ 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 $ 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.
19. SEGMENT INFORMATION
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.
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. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows. 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. 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
84
Net sales denominated in U.S. dollars accounted for 94 %, 92 %, and 92 % of total consolidated net sales in fiscal 2026, 2025, and 2024, respectively. International sales accounted for 31 %, 33 %, and 32 % of net sales during fiscal 2026, 2025, and 2024, respectively, and are summarized by geographic area as follows:
(dollars in thousands)
2026
2025
2024
North America (excluding USA) (1)
$
31,544
$
32,912
$
29,357
Far East and Asia (2)
28,963
30,586
36,334
All Other Areas
3,039
6,026
6,011
$
63,546
$
69,524
$
71,702
(1) Of this amount, $ 28.7 million, $ 28.8 million, and $ 25.1 million are attributable to shipments to Mexico in fiscal 2026, 2025, and 2024, respectively.
(2) Of this amount $ 12.6 million, $ 16.0 million, and $ 18.3 million are attributable to shipments within China in fiscal 2026, 2025, and 2024, respectively.
Sales attributed to individual countries are based upon the location to which the company ships its products for delivery to customers.
Customer Concentration
One customer within the upholstery 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.
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Financial Information
Statements of operations for our segments follow:
(dollars in thousands)
2026
2025
2024
Net sales by segment:
Bedding
$
116,593
$
113,906
$
116,370
Upholstery
86,889
99,331
108,963
Net sales
$
203,482
$
213,237
$
225,333
Cost of sales by segment:
Bedding
$
105,889
$
105,970
$
110,081
Upholstery
71,502
80,579
87,273
Total segment cost of sales
177,391
186,549
197,354
Restructuring related charge (1) (2) (3)
931
1,621
40
Cost of sales
$
178,322
$
188,170
$
197,394
Gross profit:
Bedding
$
10,704
$
7,936
$
6,289
Upholstery
15,387
18,752
21,690
Total segment gross profit
26,091
26,688
27,979
Restructuring related charge (1) (2) (3)
( 931
)
( 1,621
)
( 40
)
Gross profit
$
25,160
$
25,067
$
27,939
Selling, general, and administrative expenses
( 34,668
)
( 35,705
)
( 38,611
)
Restructuring credit (expense) (1) (2) (3)
2,323
( 7,739
)
( 636
)
Loss from operations
$
( 7,185
)
$
( 18,377
)
$
( 11,308
)
Interest expense
( 759
)
( 231
)
( 11
)
Interest income
1,073
915
1,174
Other expense
( 1,414
)
( 1,018
)
( 625
)
Loss before income taxes
$
( 8,285
)
$
( 18,711
)
$
( 10,770
)
(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.
86
Balance sheet information for our segments follow:
(dollars in thousands)
May 3,
2026
April 27,
2025
Segment assets
Bedding:
Accounts receivable
$
10,657
$
10,576
Inventory
31,757
33,293
Property, plant, and equipment (1) (2)
19,755
23,259
Assets held for sale (3)
—
2,177
Right of use assets (4)
—
125
Total bedding assets
62,169
69,430
Upholstery:
Accounts receivable
9,712
11,268
Inventory
15,737
16,016
Property, plant, and equipment (5) (6)
708
1,010
Right of use assets (7) (8)
496
2,678
Total upholstery assets
26,653
30,972
Total segment assets
88,822
100,402
Non-segment assets:
Cash and cash equivalents
8,273
5,629
Short-term investments – rabbi trust
1,477
1,325
Short-term note receivable
297
280
Current income taxes receivable
142
—
Other current assets
2,645
2,970
Long-term note receivable
885
1,182
Deferred income taxes
503
637
Property, plant, and equipment (9)
550
567
Right of use assets (10)
2,488
3,105
Intangible assets
355
960
Long-term investments - rabbi trust
4,991
5,722
Other assets
562
591
Total assets
$
111,990
$
123,370
(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.
(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 $ 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 $ 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.
87
(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)
2026
2025
2024
Capital expenditures (1):
Bedding
$
539
$
1,550
$
3,474
Upholstery
132
285
271
Non-segment
138
792
255
Total capital expenditures
$
809
$
2,627
$
4,000
Depreciation expense
Bedding
$
3,292
$
4,361
$
5,241
Upholstery
155
174
187
Selling, general, and administrative
658
905
1,093
Total depreciation expense
4,105
5,440
6,521
Accelerated depreciation expense (2) (3)
112
1,339
—
Total
$
4,217
$
6,779
$
6,521
(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 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.
20. 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 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 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 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.
88
21. COMMON STOCK REPURCHASE PROGRAM
In March 2020, our board of directors approved an authorization for us to acquire up to $ 5.0 million of our common stock. 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 May 3, 2026, $ 3.2 million was available for additional repurchases of our common stock.
89
ITEM 9. CHANGES IN AND DISA GREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the three years ended May 3, 2026, there were no disagreements on any matters of accounting principles or practices or financial statement disclosures.
ITEM 9A. 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 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. Based upon that evaluation, we have concluded that these disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports filed by us and submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported as and when required. Further, we concluded that our disclosure controls and procedures have been designed to ensure that information required to be disclosed in reports filed by us under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, in a manner to allow timely decisions regarding the required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes: (1) maintaining records that in reasonable detail accurately and fairly reflect the transactions and disposition of assets; (2) providing reasonable assurance that the transactions are recorded as necessary for preparation of financial statements, and that receipts and expenditures are made in accordance with authorizations of management and directors; and (3) providing reasonable assurance that unauthorized acquisition, use, of disposition of assets that could have a material effect on financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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 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 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.
ITEM 9B. OTHE R INFORMATION
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).
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
90
PART III
ITEM 10. 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,” “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.
ITEM 11. EXECUT IVE COMPENSATION
Information with respect to executive compensation 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 “Executive Compensation” (except for the information appearing under the heading "Pay versus Performance") and “Compensation Committee Interlocks and Insider Participation,” which information is herein incorporated by reference.
ITEM 12. SECURITY OWNERS HIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information with respect to the security ownership of certain beneficial owners and management 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 “Beneficial Owners of 5% or More of Our Common Stock,” and “Nominees, Directors, and Executive Officers,” which information is herein incorporated by reference.
The following table sets forth information as of the end of fiscal 2026 regarding shares of our common stock that may be issued upon the exercise of equity awards previously granted and currently outstanding equity awards under the company’s equity incentive and stock option plans, as well as the number of shares available for the grant of equity awards that had not been granted as of that date.
EQUITY COMPENSATION PLAN INFORMATION
Number of
securities to be
issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights (2)
Number of securities
remaining available
for future issuance
under equity
compensation plan
(excluding securities
reflected in
column (a))
Plan Category
(a)
(b)
(c)
Equity compensation plans approved by security holders (1) (2) (3)
1,007,246
$
—
387,293
Equity compensation plans not approved by security holders
—
—
—
Total
1,007,246
$
—
387,293
(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).
91
ITEM 13. CERTAIN RELATIONSHIPS AND RELATE D TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information with respect to certain relationships and related transactions 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 “Corporate Governance – Director Independence” and “Certain Relationships and Related Transactions,” which information is herein incorporated by reference.
ITEM 14. PRINCIPAL ACCO UNTANT FEES AND SERVICES
Information with respect to accountants' fees and services 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 caption “Fees Paid to Independent Auditors,” which information is herein incorporated by reference.
92
PART IV
ITEM 15. EXHIBITS AND FIN ANCIAL STATEMENT SCHEDULES
a) DOCUMENTS FILED AS PART OF THIS REPORT:
1. Consolidated Financial Statements
The following consolidated financial statements of Culp, Inc. and its subsidiaries are filed as part of this report.
Item
Page of Annual
Report on
Form 10-K
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 )
48
Consolidated Balance Sheets – May 3, 2026, and April 27, 2025
49
Consolidated Statements of Net Loss - For the Years Ended May 3, 2026, April 27, 2025, and April 28, 2024
50
Consolidated Statements of Comprehensive Loss - For the Years Ended May 3, 2026, April 27, 2025, and April 28, 2024
51
Consolidated Statements of Shareholders’ Equity – For the Years Ended May 3, 2026, April 27, 2025, and April 28, 2024
52
Consolidated Statements of Cash Flows – For the Years Ended May 3, 2026, April 27, 2025, and April 28, 2024
53
Notes to Consolidated Financial Statements
54
2. Financial Statement Schedules
All financial statement schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto.
93
3. Exhi bits
The following exhibits are attached at the end of this report or incorporated by reference herein.
3(i)
Articles of Incorporation of the company, as amended, were filed as Exhibit 3(i) to the company’s Form 10-Q for the quarter ended July 28, 2002, filed September 11, 2002 (Commission File No. 001-12597), and are incorporated herein by reference.
3(ii)
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.
4.1*
Description of Capital Stock of the company
10.1
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. 001-12597), and is incorporated herein by reference.
10.2
First Amendment to Second Amended and Restated Credit Agreement dated as of February 21, 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 10-Q filed March 9, 2023 (Commission File No. 001-12597), and is incorporated herein by reference.
10.3
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 (Commission File No. 001-12597), and is incorporated herein by reference.
10.4
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 (Commission File No. 001-12597), and is incorporated by reference.
10.5
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.
10.6+
Culp, Inc. 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.
10.7+
Culp, Inc. 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.
10.8+
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.
10.9+
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.
10.10+
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.
10.11+
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.
10.12+
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.
10.13+
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.
10.14+
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.
10.15+
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.
94
10.16+
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 is incorporated herein by reference.
10.17+
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 (Commission File No. 001-12597), and is incorporated herein by reference.
10.18
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 (Commission File No. 001-12597), and is incorporated herein by reference.
10.19
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 .
19
Culp, Inc. 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.
21*
List of subsidiaries of the company
23*
Consent of Independent Registered Public Accounting Firm in connection with the registration statements of Culp, Inc. on Form S-8 (File Nos. 33-13310, 333-207195 and 333-274720).
24(a)*
Power of Attorney of J. Douglas Collier, dated July 6, 2026
24(b)*
Power of Attorney of Kimberly B. Gatling, dated July 6, 2026
24(c)*
Power of Attorney of Lynn D. Heatherton, dated July 6, 2026
24(d)*
Power of Attorney of Fred A. Jackson, dated July 6, 2026
24(e)*
Power of Attorney of Franklin N. Saxon, dated July 6, 2026
24(f)*
Power of Attorney of William L. Tyson, dated July 6, 2026
24(g)*
Power of Attorney of Mark Wilson, dated July 6, 2026
31(a)*
Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31(b)*
Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32(a)*
Certification of Principal Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
32(b)*
Certification of Principal Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
97
Culp, Inc. Dodd-Frank Clawback Policy, was filed as exhibit 97 to the company's Form 10-K filed July 12, 2024, and is incorporated herein by reference.
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
104
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
* Items marked with an asterisk are filed herewith.
+ Management contract or compensatory plan required to be filed under Item 15(c) of this report and Item 601 of Regulation S-K of the Securities and Exchange Commission.
ITEM 16. FORM 10-K SUMMARY
None.
95
SIGNA TURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, CULP, INC. has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 17 th day of July 2026.
CULP, INC.
By
/s/
Robert G. Culp, IV
Robert G. Culp, IV
Chief Executive Officer
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 17 th day of July 2026.
/s/
Robert G. Culp, IV _________________________________
Kimberly B. Gatling* _______________________________
Robert G. Culp, IV
Kimberly B. Gatling
Chief Executive Officer and Director
(Director)
(principal executive officer)
Franklin N. Saxon*
Lynn D. Heatherton *
Franklin N. Saxon
Lynn D. Heatherton
(Chairman of the Board of Directors)
(Director)
Fred A. Jackson*
William L. Tyson*
Fred A. Jackson
William L. Tyson
(Lead Independent Director)
(Director)
J. Douglas Collier *
Mark Wilson*
J. Douglas Collier
Mark Wilson
(Director)
(Director)
/s/
Kenneth R. Bowling
Kenneth R. Bowling
Chief Financial Officer
(principal financial officer and principal accounting officer)
* By /s/ Kenneth R. Bowling
Kenneth R. Bowling, Attorney-in-Fact, pursuant to Powers of Attorney filed with the Securities and Exchange Commission.
96