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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~January 2726, ~~2024~~2025

Commission File No. 1-12597

CULP, INC.

(Exact name of registrant as specified in its charter)

    North Carolina

    56-1001967

    (State or other jurisdiction of
incorporation or other organization)

    (I.R.S. Employer
Identification No.)

1823 Eastchester Drive
410 W. English Road 5th Floor
High Point, North Carolina	~~27265-1402~~27262
(Address of principal executive offices)	(zip code)


1823 Eastchester Drive
High Point, North Carolina, 27265-1402
(Former address of principal executive offices)

(336) 889-5161

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


		Name of Each Exchange
Title of Each Class	Trading Symbol(s)	On Which Registered
Common Stock, par value $.05/ Share	CULP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period after the registrant was required to submit such files). ☒ Yes No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common shares outstanding as of ~~December~~March 67, ~~2024~~2025: 12,559,129

Par Value: $0.05 per share

INDEX TO FORM 10-Q

For the period ended ~~October~~January 2726, ~~2024~~2025

	Part I - Financial Statements	Page
Item 1.	Financial Statements: (Unaudited)	I-1
	Consolidated Statements of Net Loss — Three Months Ended October 27, 2024, and October 29, 2023	I-1
	Consolidated Statements of Net Loss — Three Months Ended January 26, 2025, and January 28, 2024	I-1
	Consolidated Statements of Net Loss — Six Months Ended October 27, 2024, and October 29, 2023	I-2
	Consolidated Statements of Net Loss — Nine Months Ended January 26, 2025, and January 28, 2024	I-2
	Consolidated Statements of Comprehensive Loss – Three Months and Six Months Ended October 27, 2024, and October 29, 2023	I-3
	Consolidated Statements of Comprehensive Loss – Three Months and Nine Months Ended January 26, 2025, and January 28, 2024	I-3
	Consolidated Balance Sheets — October 27, 2024, October 29 2023, and April 28, 2024	I-4
	Consolidated Balance Sheets — January 26, 2025, January 28 2024, and April 28, 2024	I-4
	Consolidated Statements of Cash Flows — Six Months Ended October 27, 2024, and October 29, 2023	I-5
	Consolidated Statements of Cash Flows — Nine Months Ended January 26, 2025, and January 28, 2024	I-5
	Consolidated Statements of Shareholders’ Equity – Six Months Ended October 27, 2024	I-6
	Consolidated Statements of Shareholders’ Equity – Nine Months Ended January 26, 2025	I-6
	Consolidated Statements of Shareholders’ Equity – Six Months Ended October 29, 2023	I-7
	Consolidated Statements of Shareholders’ Equity – Nine Months Ended January 28, 2024	I-7
	Notes to Consolidated Financial Statements	I-8
	Cautionary Statement Concerning Forward-Looking Information	I-3332
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	I-3433
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	I-5150
Item 4.	Controls and Procedures	I-5150
	Part II - Other Information
Item 1.	Legal Proceedings	II-1
Item 1A.	Risk Factors	II-1
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	II-12
Item 5.	Other Information	II-12
Item 6.	Exhibits	II-23
Signatures		II-34

Item 1: Financial Statements

CULP, INC.

CONSOLIDATED STATEMENTS OF NET LOSS

FOR THE THREE MONTHS ENDED ~~OCTOBER~~JANUARY 2726, ~~2024~~2025, AND ~~OCTOBER~~JANUARY 2928, ~~2023~~2024

UNAUDITED

(Amounts in Thousands, Except for Per Share Data)

	THREE MONTHS ENDED
	October 27,			October 29,
	January 26,			January 28,
	2024			2023
	2025			2024
Net sales	$	5552,~~674~~253		$	5860,~~725~~418
Cost of sales		(4945,~~684~~906	)		(5052,~~775~~715	)
Gross profit		56,~~990~~347			7,~~950~~703
Selling, general and administrative expenses		(98,~~359~~579	)		(109,~~045~~493	)
Restructuring expense		(2,031	)		(144	)
Restructuring (expense) credit		(1,655	)		50
Loss from operations		(53,~~400~~887	)		(21,~~239~~740	)
Interest expense		(3063	)		—
Interest income		~~244~~255			~~282~~284
Other (expense) income		(508	)		49
Other income (expense)		15			(705	)
Loss before income taxes		(53,~~694~~680	)		(12,~~908~~161	)
Income tax benefit (expense)		50			(516	)
Income tax expense		(446	)		(1,027	)
Net loss		(54,~~644~~126	)	$	(23,~~424~~188	)
Net loss per share - basic	$	(0.4533	)	$	(0.1926	)
Net loss per share - diluted	$	(0.4533	)	$	(0.1926	)
Average shares outstanding, basic		12,~~513~~559			12,~~456~~470
Average shares outstanding, diluted		12,~~513~~559			12,~~456~~470

See accompanying notes to consolidated financial statements.

I-1

CULP, INC.

CONSOLIDATED STATEMENTS OF NET LOSS

FOR THE ~~SIX~~NINE MONTHS ENDED ~~OCTOBER~~JANUARY 2726, ~~2024~~2025, AND ~~OCTOBER~~JANUARY 2928, ~~2023~~2024

UNAUDITED

(Amounts in Thousands, Except for Per Share Data)

	SIX MONTHS ENDED
	NINE MONTHS ENDED
	October 27,			October 29,
	January 26,			January 28,
	2024			2023
	2025			2024
Net sales	$	~~112~~164,~~211~~464		$	~~115~~175,~~387~~804
Cost of sales		(~~101~~147,~~145~~050	)		(~~100~~153,~~352~~067	)
Gross profit		1117,~~066~~414			1522,~~035~~737
Selling, general and administrative expenses		(1827,~~655~~235	)		(1929,~~874~~366	)
Restructuring expense		(46,~~662~~317	)		(~~482~~432	)
Loss from operations		(1216,~~251~~138	)		(57,~~321~~061	)
Interest expense		(58121	)		—
Interest income		~~507~~761			~~627~~911
Other (expense) income		(913	)		145
Other expense		(898	)		(560	)
Loss before income taxes		(1216,~~715~~396	)		(46,~~549~~710	)
Income tax expense		(~~190~~635	)		(12,~~217~~244	)
Net loss	$	(1217,~~905~~031	)	$	(58,~~766~~954	)
Net loss per share - basic	$	(1.0336	)	$	(0.4772	)
Net loss per share - diluted	$	(1.0336	)	$	(0.4772	)
Average shares outstanding, basic		12,~~491~~514			12,~~394~~419
Average shares outstanding, diluted		12,~~491~~514			12,~~394~~419

See accompanying notes to consolidated financial statements.

I-2

CULP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~OCTOBER~~JANUARY 2726, ~~2024~~2025, AND ~~OCTOBER~~JANUARY 2928, ~~2023~~2024

UNAUDITED

(Amounts in Thousands)

	THREE MONTHS ENDED
	October 27,			October 29,
	January 26,			January 28,
	2024			2023
	2025			2024
Net loss	$	(54,~~644~~126	)	$	(23,~~424~~188	)
Unrealized holding gain (loss) on investments, net of tax		23			(82	)
Unrealized holding (loss) gain on investments, net of tax		(5	)		94
Comprehensive loss	$	(54,~~621~~131	)	$	(23,~~506~~094	)

	SIX MONTHS ENDED
	NINE MONTHS ENDED
	October 27,			October 29,
	January 26,			January 28,
	2024			2023
	2025			2024
Net loss	$	(1217,~~905~~031	)	$	(58,~~766~~954	)
Unrealized holding gain (loss) on investments, net of tax		103			(25	)
Unrealized holding gain on investments, net of tax		98			69
Comprehensive loss	$	(1216,~~802~~933	)	$	(58,~~791~~885	)

See accompanying notes to consolidated financial statements.

I-3

CULP, INC.

CONSOLIDATED BALANCE SHEETS

~~OCTOBER~~JANUARY 2726, ~~2024~~2025, ~~OCTOBER~~JANUARY 2928, ~~2023~~2024, AND APRIL 28, 2024

UNAUDITED

(Amounts in Thousands)

	October 27,		October 29,			April 28,
	January 26,		January 28,			April 28,
	2024		2023			2024*
	2025		2024			2024*
Current assets:
Cash and cash equivalents	$	105,~~531~~279	$	1512,~~214~~585		$	10,012
Short-term investments - rabbi trust		~~919~~1,753		937			903
Accounts receivable, net		2223,~~330~~159		23,~~036~~686			21,138
Inventories		4548,~~132~~599		4446,~~465~~877			44,843
Short-term note receivable		522		256			264
Short-term notes receivable		526		260			264
Current income taxes receivable		~~979~~1,137		~~340~~476			350
Assets held for sale		32,~~301~~214		—			—
Other current assets		32,~~187~~619		4,~~346~~237			3,371
Total current assets		8685,~~901~~286		8889,~~594~~058			80,881
Property, plant and equipment, net		2625,~~510~~939		34,~~664~~021			33,182
Right of use assets		46,~~239~~103		6,~~874~~952			6,203
Intangible assets		1,~~688~~594		21,~~064~~970			1,876
Long-term investments - rabbi trust		76,~~105~~250		67,~~995~~083			7,102
Long-term note receivable		1,324		1,596			1,462
Long-term notes receivable		1,254		1,530			1,462
Deferred income taxes		~~559~~490		~~472~~531			518
Other assets		~~661~~639		~~901~~853			830
Total assets	$	~~128~~127,~~987~~555	$	~~142~~141,~~160~~998		$	132,054
Current liabilities:
Line of credit - China	$	4,074	$	—		$	—
Lines of credit	$	5,384	$	—		$	—
Accounts payable - trade		32,~~373~~717		2729,~~903~~793			25,607
Accounts payable - capital expenditures		~~602~~439		~~298~~19			343
Operating lease liability - current		12,~~108~~025		2,~~540~~524			2,061
Deferred compensation - current		~~919~~1,753		937			903
Deferred revenue		~~1,129~~697		~~853~~1,798			1,495
Accrued expenses		6,~~196~~079		87,~~106~~300			6,726
Accrued restructuring		~~863~~723		—			—
Income taxes payable - current		~~1,165~~828		~~998~~1,070			972
Total current liabilities		4850,~~429~~645		4143,~~635~~441			38,107
Operating lease liability - long-term		13,~~958~~127		2,~~431~~656			2,422
Income taxes payable - long-term		1,~~378~~400		2,~~055~~072			2,088
Deferred income taxes		6,~~624~~582		56,~~663~~177			6,379
Deferred compensation - long-term		6,~~975~~151		6,~~748~~856			6,929
Total liabilities		6567,~~364~~905		5861,~~532~~202			55,925
Commitments and Contingencies (Notes 11, 17, and 18)
Shareholders' equity
Preferred stock, $0.05 par value, authorized 10,000,000		—		—			—
Common stock, $0.05 par value, authorized 40,000,000 shares, issued and outstanding 12,559,129 at October 27, 2024; 12,469,903 at October 29, 2023, and 12,469,903 at April 28, 2024		628		624			624
Common stock, $0.05 par value, authorized 40,000,000 shares, issued and outstanding 12,559,129 at January 26, 2025; 12,469,903 at January 28, 2024, and 12,469,903 at April 28, 2024		628		624			624
Capital contributed in excess of par value		45,~~303~~461		44,~~581~~843			45,011
Accumulated earnings		1713,~~471~~345		3835,~~429~~241			30,376
Accumulated other comprehensive income (loss)		221		(6	)		118
Accumulated other comprehensive income		216		88			118
Total shareholders' equity		6359,~~623~~650		8380,~~628~~796			76,129
Total liabilities and shareholders' equity	$	~~128~~127,~~987~~555	$	~~142~~141,~~160~~998		$	132,054

* Derived from audited consolidated financial statements.

See accompanying notes to consolidated financial statements.

I-4

CULP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~SIX~~NINE MONTHS ENDED ~~OCTOBER~~JANUARY 2726, ~~2024~~2025, AND ~~OCTOBER~~JANUARY 2928, ~~2023~~2024

UNAUDITED

(Amounts in Thousands)

	SIX MONTHS ENDED
	NINE MONTHS ENDED
	October 27,			October 29,
	January 26,			January 28,
	2024			2023
	2025			2024
Cash flows from operating activities:
Net loss	$	(1217,~~905~~031	)	$	(58,~~766~~954	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		34,~~077~~288			34,~~251~~897
Non-cash inventory credit		(~~309~~1,022	)		(21,~~001~~978	)
Amortization		~~200~~301			~~193~~291
Stock-based compensation		~~364~~522			~~485~~747
Deferred income taxes		~~204~~231			~~(283~~172	)
Gain on sale of equipment		(27	)		(~~278~~284	)
Non-cash restructuring expenses		2,~~178~~143			~~379~~330
Foreign currency exchange loss (gain)		~~237~~(97	)		(~~697~~347	)
Changes in assets and liabilities:
Accounts receivable		(12,~~162~~029	)		1,~~644~~040
Inventories		~~117~~(2,730	)		~~2,304~~—
Other current assets		~~194~~737			(1,~~355~~190	)
Other assets		~~107~~98			(~~123~~107	)
Accounts payable – trade		67,~~506~~184			~~(495~~963	)
Deferred revenue		(~~366~~798	)		~~(339~~606	)
Accrued restructuring		~~875~~753			—
Accrued expenses and deferred compensation		(~~738~~335	)		(~~762~~1,437	)
Income taxes		(1,~~185~~613	)		(~~633~~719	)
Net cash used in operating activities		(29,~~633~~425	)		(45,~~476~~970	)
Cash flows from investing activities:
Capital expenditures		(12,~~578~~440	)		(13,~~972~~249	)
Proceeds from the sale of equipment		~~527~~1,450			~~309~~363
Proceeds from note receivable		~~180~~270			~~150~~240
Proceeds from the sale of investments (rabbi trust)		~~462~~699			~~986~~1,224
Purchase of investments (rabbi trust)		(~~378~~599	)		(~~472~~704	)
Net cash used in investing activities		(~~787~~620	)		(~~999~~2,126	)
Cash flows from financing activities:
Procceds from line credit - China		4,010			—
Procceds from lines credit		7,898			—
Payments on lines of credit		(2,500	)		—
Common stock surrendered for withholding taxes payable		(68	)		(146	)
Net cash provided by (used in) financing activities		35,~~942~~330			(146	)
Effect of exchange rate changes on cash and cash equivalents		(318	)		(~~129~~137	)
Increase (decrease) in cash and cash equivalents		519			(5,750	)
Decrease in cash and cash equivalents		(4,733	)		(8,379	)
Cash and cash equivalents at beginning of period		10,012			20,964
Cash and cash equivalents at beginning of year		10,012			20,964
Cash and cash equivalents at end of period	$	105,~~531~~279		$	1512,~~214~~585

See accompanying notes to consolidated financial statements.

I-5

CULP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE ~~SIX~~NINE MONTHS ENDED ~~OCTOBER~~JANUARY 2726, ~~2024~~2025

UNAUDITED

(Dollars in thousands, except share data)

								Capital			~~Capital~~			Accumulated							~~Accumulated~~
								Contributed			~~Contributed~~			Other				Total			~~Other~~			~~Total~~
	Common Stock							in Excess			~~in Excess~~Accumulated			Comprehensive		~~Accumulated~~		Shareholders'			~~Comprehensive~~			~~Shareholders'~~
	Shares			Amount		~~Amount~~		of Par Value			~~of Par Value~~Earnings			Income		~~Earnings~~		Equity			~~Income~~			~~Equity~~
Balance, April 28, 2024 *		12,469,903		$	624	$	~~624~~	$	45,011		$	4530,~~011~~376		$	118	$	~~30,376~~	$	76,129		$	~~118~~		$	~~76,129~~
Net loss		—			—		—		—			—(7,261	)		—		~~(7,261~~	)	(7,261	)		—			~~(7,261~~	)
Stock-based compensation		—			—		—		176			~~176~~—			—		—		176			—			~~176~~
Unrealized gain on investments		—			—		—		—			—			80		—		80			80			80
Balance, July 28, 2024		12,469,903		$	624	$	~~624~~	$	45,187		$	4523,~~187~~115		$	198	$	~~23,115~~	$	69,124		$	~~198~~		$	~~69,124~~
Net loss		—			—		—		—			—(5,644	)		—		~~(5,644~~	)	(5,644	)		—			~~(5,644~~	)
Stock-based compensation		—			—		—		188			~~188~~—			—		—		188			—			~~188~~
Unrealized gain on investments		—			—		—		—			—			23		—		23			23			23
Common stock issued in connection with the vesting of time-based restricted stock units		102,720			5		5		(5	)		(5—	)		—		—		—			—			—
Common stock surrendered in connection with payroll withholding taxes		(13,494	)		(1	)	(1	)	(67	)		~~(67~~—	)		—		—		(68	)		—			~~(68~~	)
Balance, October 27, 2024		12,559,129		—$	628		~~628~~	$	45,303	—	$	4517,~~303~~471		—$	221		~~17,471~~	$	63,623	—		~~221~~	—		~~63,623~~
Net loss		—			—				—			(4,126	)		—				(4,126	)
Stock-based compensation		—			—				158			—			—				158
Unrealized loss on investments		—			—				—			—			(5	)			(5	)
Balance, January 26, 2025		12,559,129		$	628			$	45,461		$	13,345		$	216			$	59,650

* Derived from audited consolidated financial statements.

See accompanying notes to consolidated financial statements.

I-6

CULP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE ~~SIX~~NINE MONTHS ENDED ~~OCTOBER~~JANUARY 2928, ~~2023~~2024

UNAUDITED

(Dollars in thousands, except share data)

							Capital						Accumulated
							Contributed						Other			Total
	Common Stock						in Excess			Accumulated			Comprehensive			Shareholders'
	Shares			Amount			of Par Value			Earnings			Income (Loss)			Equity
Balance, April 30, 2023 *		12,327,414		$	616		$	44,250		$	44,195		$	19		$	89,080
Net loss		—			—			—			(3,342	)		—			(3,342	)
Stock-based compensation		—			—			322			—			—			322
Unrealized gain on investments		—			—			—			—			57			57
Immediately vested common stock award		16,616			1			(1	)		—			—			—
Balance, July 30, 2023		12,344,030		$	617		$	44,571		$	40,853		$	76		$	86,117
Net loss		—			—			—			(2,424	)		—			(2,424	)
Stock-based compensation		—			—			163			—			—			163
Unrealized loss on investments		—			—			—			—			(82	)		(82	)
Common stock issued in connection with the vesting of time-based restricted stock units		151,653			8			(8	)		—			—			—
Common stock surrendered in connection with payroll withholding taxes		(25,780	)		(1	)		(145	)		—			—			(146	)
Balance, October 29, 2023		12,469,903		$	624		$	44,581		$	38,429		$	(6	)	$	83,628
Net loss		—			—			—			(3,188	)		—			(3,188	)
Stock-based compensation		—			—			262			—			—			262
Unrealized gain on investments		—			—			—			—			94			94
Balance, January 28, 2024		12,469,903		$	624		$	44,843		$	35,241		$	88		$	80,796

* Derived from audited consolidated financial statements.

See accompanying notes to consolidated financial statements.

I-7

Culp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Culp, Inc. and its majority-owned subsidiaries (the “company”) include all adjustments that are, in the opinion of management, necessary for fair presentation of the results of operations and financial position. All these adjustments are of a normal recurring nature. Results of operations for interim periods may not be indicative of future results. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements that are included in the company’s ~~annual~~Annual ~~report~~Report on Form 10-K filed with the Securities and Exchange Commission on July 12, 2024, for the fiscal year ended April 28, 2024.

The company's ~~six-~~nine months ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, each represent 2639-week periods.

2. Significant Accounting Policies

As of ~~October~~January 2726, ~~2024~~2025, there were no changes in the nature of our significant accounting policies or the application of those policies from those reported in our ~~annual~~Annual ~~report~~Report on Form 10-K for the year then ended April 28, 2024.

Recently Adopted Accounting Pronouncements

There were no recently adopted accounting pronouncements through the ~~second~~third quarter of fiscal 2025.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ~~2023-07~~ ("ASU") 2023-07") Improvements to Reportable Segment Disclosures ("ASU 2023-07") which enhances disclosure requirements to segment reporting including (i) significant segment expenses that are regularly provided to the Chief Operating Decision Maker (CODM) that are included within each measure of segment profit or loss, (ii) other segment items by reportable segment as defined by ASU 2023-07, and (iii) the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of each segment's profit or loss in assessing segment performance and deciding how to allocate resources. ASU 2023-07 is effective for public entities starting in annual periods beginning after December 15, 2023, (i.e., our fiscal 2025 annual report) and interim periods beginning after December 15, 2024 (i.e., first quarter of fiscal 2026 interim report). The company expects that the adoption of ASU 2023-07 will not have an impact on our results of operations and financial condition, but will have a material impact on the disclosures required in the notes to the consolidated financial statements, which are disclosed in Note 14.

In December 2023, the FASB issued ASU 2023-09 Improvements to Income Tax Disclosures ("ASU 2023-09"), which is an update to Topic 740, Income Taxes ~~("ASU 2023-09")~~. 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 is effective for public entities starting in annual periods beginning after December 15, 2024 (i.e., our fiscal 2026 annual report). Early adoption is permitted. The company expects that the adoption of ASU 2023-09 will not have an impact on our results of operations and financial condition, but will have a material impact on the disclosures required in the notes to the consolidated financial statements, which are disclosed in Note 15.

In November 2024, the FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (“ASU 2024-03”) which is an update to Topic 220, Income Statement - Reporting Comprehensive Income. ASU 2024-03 enhances transparency and decision-usefulness of expense disclosures in response to investors' requests for more detailed, disaggregated expense information, enabling a clearer understanding of a public business entity's performance and cost structure. The amendments improve disclosure requirements in financial statement notes for specific expense categories including: (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, (e) certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as other disaggregation requirements, (f) qualitative description of amounts remaining in relevant expense captions that are not

I-8

necessarily disaggregated quantitatively, as well as (g) the total amount of selling expenses, and in annual reporting periods, the entity's definition of selling expense. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, (i.e., our fiscal 2028 annual report) and interim reporting periods beginning after December 15, 2027 (i.e., first quarter of fiscal 2029 interim report). Early adoption is permitted. The company is currently evaluating ASU 2024-03 to determine the impact it will have on its consolidated financial statements and related disclosures.

3. Allowance for Doubtful Accounts

A summary of the activity in the allowance for doubtful accounts follows:

	Six months ended
	Nine months ended
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024
Beginning balance	$	356	$	342
Provision for bad debts		~~162~~150		~~228~~349
Write-offs, net of recoveries		—1		(2930	)
Ending balance	$	~~518~~507	$	~~541~~661

During the ~~six~~nine-month periods ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, we assessed the credit risk of our customers within our accounts receivable portfolio. Our risk assessment includes the respective customers’ (i) financial position; (ii) past payment history; (iii) management’s general ability; 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 $~~518~~507,000 and $~~541~~661,000 as of ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, respectively.

4. Revenue from Contracts with Customers

Nature of Performance Obligations

Our operations are classified into two business segments: mattress fabrics and upholstery fabrics. The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. The upholstery fabrics segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers. In addition, the upholstery fabrics segment includes Read Window Products LLC (“Read”), which provides window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation services for Read’s products, to customers in the hospitality and commercial industries. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows.

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

Contract Assets & Liabilities

Certain contracts, primarily those for customized fabrication and installation services associated with Read, require payments in advance in the form of customer deposits that result in a contract liability which is recorded in the Consolidated Balance Sheets as deferred revenue. If payments in advance 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 ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, or April 28, 2024.

A summary of the activity associated with deferred revenue follows:

	Six months ended
	Nine months ended
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025			~~October~~January 2928, ~~2023~~2024
Beginning balance	$	1,495		$	1,192
Revenue recognized on contract liabilities		(13,~~901~~134	)		(12,~~986~~893	)
Payments received for services not yet rendered		12,~~535~~336			13,~~647~~499
Ending balance	$	~~1,129~~697		$	~~853~~1,798

I-9

Disaggregation of Revenue

The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the three-month period ~~ending~~ended ~~October~~January 2726, ~~2024~~2025:

Mattress

Upholstery

(dollars in thousands)

Fabrics

Total

Products transferred at a point in time

3028,~~074~~642

2220,~~502~~345

5248,~~576~~987

Services transferred over time

—

3,~~098~~266

Total Net Sales

3028,~~074~~642

2523,~~600~~611

5552,~~674~~253

The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the ~~six~~nine-month period ~~ending~~ended ~~October~~January 2726, ~~2024~~2025:

Mattress

Upholstery

(dollars in thousands)

Fabrics

Total

Products transferred at a point in time

5886,~~150~~792

4768,~~967~~312

~~106~~155,~~117~~104

Services transferred over time

—

69,~~094~~360

Total Net Sales

5886,~~150~~792

5477,~~061~~672

~~112~~164,~~211~~464

Mattress

Upholstery

(dollars in thousands)

Fabrics

Total

Products transferred at a point in time

3130,~~377~~021

2428,~~194~~604

5558,~~571~~625

Services transferred over time

—

31,~~154~~793

Total Net Sales

3130,~~377~~021

2730,~~348~~397

5860,~~725~~418

Mattress

Upholstery

(dollars in thousands)

Fabrics

Total

Products transferred at a point in time

6090,~~599~~619

4877,~~968~~572

~~109~~168,~~567~~191

Services transferred over time

—

57,~~820~~613

Total Net Sales

6090,~~599~~619

5485,~~788~~185

~~115~~175,~~387~~804

5. Inventories

Inventories are carried at the lower of cost or net realizable value. Cost is determined using the FIFO (first-in, first-out) method.

A summary of inventories follows:

(dollars in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024		April 28, 2024
Raw materials	$	65,~~224~~502	$	8,~~433~~214	$	6,214
Work-in-process		12,~~787~~371		2,~~196~~388		1,854
Finished goods		3740,~~121~~726		3336,~~836~~275		36,775
	$	4548,~~132~~599	$	4446,~~465~~877	$	44,843

Measurement of Inventory to Net Realizable Value

I-10

WeMeasurement ~~recorded a non-cash inventory credit~~ of Inventory ~~$(309,000) for the six months ended October 27, 2024, related~~ to ~~adjustments~~Net ~~made~~Realizable ~~to our inventory markdowns reserve estimated based on our policy for aged inventory for both the mattress and upholstery fabrics segments.~~Value

We recorded a non-cash inventory net credit of $(21.0) million for the ~~six~~nine months ended ~~October~~January 2926, ~~2023.~~2025, ~~The~~which ~~non-cash~~represents ~~inventory credit of $(2.0) million represented a $(2.1) million credit related to~~ adjustments made to our inventory ~~markdown~~markdowns reserve estimated based on our policy for aged inventory for both ~~our~~the mattress and upholstery fabrics segments, ~~partially~~(see ~~offset~~Note by10 ~~a net restructuring related charge~~ of ~~$101,000. This net restructuring related charge represented markdowns of inventory totaling $179,000 during~~ the ~~first~~consolidated ~~quarter~~financial ofstatements ~~fiscal~~for ~~2024,~~further ~~partially~~details ~~offset~~regarding bymarkdowns ~~a gain on disposal~~ of inventory ~~totaling~~associated ~~$78,000~~with ~~during~~ the ~~second~~Fiscal ~~quarter~~2025 ofRestructuring ~~fiscal 2024, both of which related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti during the respective periods. Of the $(2.0~~Plan) ~~million non-cash inventory credit for the first half of fiscal 2024, $(1~~.~~5) million and $(453,000) pertained to our mattress fabrics and upholstery fabrics segments, respectively.~~

We recorded a non-cash inventory net credit of $2.0 million for the nine months ended January 28, 2024. This non-cash inventory credit represents a credit of $2.0 million related to adjustments made to our inventory markdown reserve estimated based on our policy for aged inventory for both our mattress and upholstery fabrics segments, partially offset by a charge of $40,000 which represents markdowns of inventory related to the discontinuance of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti.

Assessment

As of ~~October~~January 2726, ~~2024~~2025, we reviewed our mattress fabrics and upholstery fabrics inventories to determine if any additional ~~write-downs,~~reductions of inventory in excess of the amount recorded based on our policy for aged inventory, were necessary. Based on our assessment, no additional write- downs of inventories to their net realizable value were recorded for the ~~six~~nine months ended ~~October~~January 2726, ~~2024~~2025, other than the markdowns of inventory associated with our restructuring activities described in Note 10 of the consolidated financial statements.

Based on the current unfavorable macroeconomic conditions related to the home furnishings and bedding industry, it is possible that estimates used by management to determine the write down of inventory to its net realizable value could be materially different from the actual amounts or our results. These differences could result in higher than expected inventory provisions, which could adversely affect the company’s results of operations and financial condition in the near term.

6. Intangible Assets

A summary of intangible assets follows:

(dollars in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024		April 28, 2024
Tradename	$	540	$	540	$	540
Customer relationships, net		~~885~~809		1,~~185~~110		1,035
Non-compete agreement, net		~~263~~245		~~339~~320		301
	$	1,~~688~~594	$	21,~~064~~970	$	1,876

Tradename

Our tradename pertains to Read, a separate reporting unit within the upholstery fabrics segment. This tradename was determined to have an indefinite useful life at the time of its acquisition, and therefore is not being amortized. However, we are required to assess this tradename annually or between annual tests if we believe indicators of impairment exist. Based on our assessment as of ~~October~~January 2726, ~~2024~~2025, no indicators of impairment existed, and therefore we did not record any asset impairment charges associated with our tradename through the ~~second~~third quarter of fiscal 2025.

Customer Relationships

A summary of the change in the carrying amount of our customer relationships follows:

	Six months ended
	Nine months ended
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025			~~October~~January 2928, ~~2023~~2024
Beginning balance	$	1,035		$	1,335
Amortization expense		(~~150~~226	)		(~~150~~225	)
Ending balance	$	~~885~~809		$	1,~~185~~110

I-11

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

The gross carrying amount of our customer relationships was $3.1 million as of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively. Accumulated amortization for these customer relationships was $2.23 million, $12.90 million, and $2.1 million as of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively.

The remaining amortization expense for each of the next five fiscal years and thereafter are as follows: FY 2025 - $~~151~~75,000; FY 2026 - $301,000; FY 2027 - $280,000; FY 2028 - $51,000; FY 2029 - $51,000; and thereafter - $51,000.

The weighted average amortization period for our customer relationships was 3.42 years as of ~~October~~January 2726, ~~2024~~2025.

Non-Compete Agreement

A summary of the change in the carrying amount of our non-compete agreement follows:

	Six months ended
	Nine months ended
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025			~~October~~January 2928, ~~2023~~2024
Beginning balance	$	301		$	377
Amortization expense		(3856	)		(3857	)
Ending balance	$	~~263~~245		$	~~339~~320

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

The gross carrying amount of our non-compete agreement was $2.0 million as of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively. Accumulated amortization for our non-compete agreement was $1.8 million, $1.7 million, and $1.7 million as of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively.

The remaining amortization expense for each of the next five years and thereafter are as follows: FY 2025 - $3819,000; FY 2026 - $76,000; FY 2027 - $76,000; FY 2028 - $7374,000.

The weighted average amortization period for the non-compete agreement was 3.53 years as of ~~October~~January 2726, ~~2024~~2025.

Impairment of Definite Lived Assets - Mattress Fabrics Segment

As of ~~October~~January 2726, ~~2024~~2025, management reviewed the long-lived assets associated with our mattress fabrics segment, which consisted of property, plant, and equipment, right of use assets, and definite-lived intangible assets (collectively known as the "Mattress Asset Group"), for impairment, as events and changes in circumstances occurred that indicated the carrying amount of the Mattress Asset Group may not be recoverable. The mattress fabrics segment experienced a significant cumulative operating loss totaling $3235.63 million commencing in the second quarter of fiscal 2023, and continuing through the ~~second~~third quarter of fiscal 2025. We believe this significant cumulative operating loss stemmed from a decline in consumer discretionary spending on mattress products, which we believe was driven by the following factors: (i) inflationary effects of commodities such as gas, food, and other necessities; (ii) a significant increase in interest rates; (iii) the pulling forward of demand for home goods products during the early years of the COVID-19 pandemic, which demand has now shifted to travel, leisure, and other services; and (iv) excess inventory held by customers due to the decline in consumer demand.

Based on the above evidence, we were required to determine the recoverability of the Mattress Asset Group, which is classified as held and used, by comparing the carrying amount of the Mattress Asset Group to the sum of the future undiscounted cash flows expected to result from its use and eventual disposition. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized for the excess of the carrying amount over the fair value of the asset group. The carrying amount of the Mattress Asset Group totaled $2524.59 million, which represents property, plant, and equipment of $24.72 million, right of use assets of $~~275~~200,000, customer relationships of $~~281~~268,000, and a non-compete agreement of $~~263~~245,000. The total carrying amount of the Mattress Asset Group did not exceed the sum of its future undiscounted cash flows from its use and disposition. As a result, we determined there was no impairment associated with the Mattress Asset Group as of ~~October~~January 2726, ~~2024~~2025.

7. Note Receivables

I-12

~~Culp Upholstery Fabrics Haiti, Ltd~~7. ~~("CUF~~Notes ~~Haiti")~~Receivable

InCulp ~~connection~~Upholstery ~~with~~Fabrics ~~the~~- ~~restructuring activity of our upholstery fabrics cut and sew operation located in Ouanaminthe,~~ Haiti, ~~effective~~Ltd. ~~January 24, 2023,~~ ("CUF Haiti ~~entered into an agreement to terminate a lease of a facility (“Termination Agreement”~~")~~. See Note 10 of the consolidated financial statements for further details regarding this restructuring activity.~~

~~Pursuant~~In toconnection ~~the~~with ~~terms of~~ the ~~original~~restructuring ~~lease~~activity ~~agreement~~within ~~(the~~our ~~“Original~~upholstery ~~Lease”),~~fabrics ~~CUF~~cut ~~Haiti~~and ~~was~~sew ~~required~~operation tolocated ~~pay~~ in ~~advance~~Ouanaminthe, ~~$2.8 million for the full amount of rent due prior to the commencement of the Original Lease~~Haiti, ~~and~~effective ~~the~~January ~~initial lease term was set to expire on December 31~~24, ~~2029. Pursuant to the terms of the Termination Agreement~~2023, ~~the Original Lease was formally terminated when~~ CUF Haiti ~~vacated~~entered ~~and~~into ~~returned~~an ~~possession~~agreement ~~of the leased facility~~ to ~~the~~terminate ~~lessor.~~a ~~After~~lease ~~CUF Haiti vacated and returned possession~~ of ~~the~~a ~~leased~~ facility, ~~a third party~~ (~~the~~ “Lessee”) took possession of this facility, and the Lessee agreed to pay CUF Haiti $2.4 million in the form of a note receivable over a period commencing on April 1, 2023, and ending on December 31, 2029, based on the terms stated in the Termination Agreement”). InSee ~~connection~~Note ~~with~~10 ~~Termination Agreement, an affiliate~~ of the ~~Lessee~~consolidated ~~has~~financial ~~guaranteed~~statements ~~payment~~for infurther ~~full~~details ofregarding ~~all~~this ~~amounts~~restructuring ~~due and payable to CUF Haiti by the Lessee, and CUF Haiti has been fully and unconditionally discharged from all of its remaining obligations under the Original Lease~~activity.

Pursuant to the terms of the original lease agreement (the “Original Lease”), CUF Haiti was required to pay in advance $2.8 million for the full amount of rent due prior to the commencement of the Original Lease, and the initial lease term was set to expire on December 31, 2029. Pursuant to the terms of the Termination Agreement, the Original Lease was formally terminated when CUF Haiti vacated and returned possession of the leased facility to the lessor. After CUF Haiti vacated and returned possession of the leased facility, a third party (the “Lessee”) took possession of this facility, and the Lessee agreed to pay CUF Haiti $2.4 million in the form of a note receivable over a period commencing on April 1, 2023, and ending on December 31, 2029, based on the terms stated in the Termination Agreement. In connection with the Termination Agreement, an affiliate of the Lessee has guaranteed payment in full of all amounts due and payable to CUF Haiti by the Lessee, and CUF Haiti has been fully and unconditionally discharged from all of its remaining obligations under the Original Lease.

As of the end of our third quarter of fiscal 2023, the carrying amount of the note receivable totaling $2.4 million was recorded at its fair value of $2.0 million, which represented the present value of future discounted cash flows based on the payment amounts and timing of such payments due from the Lessee as stated in the Termination Agreement. We used an interest rate of 6% to determine the present value of the future discounted cash flows, based on significant unobservable inputs and assumptions determined by management such as (i) the credit characteristics of the Lessee and guarantor of the Termination Agreement; (ii) the length of the payment terms as defined in the Termination Agreement; (iii) the payment terms as defined in the Termination Agreement being denominated in USD; and (iv) the fact that the facility is located in, and the Lessee and guarantor conduct business in, Haiti, a foreign country. Since management used significant unobservable inputs and assumptions to determine the fair value of this note receivable, this note receivable was classified as Level 3 within the fair value hierarchy (see Note 12 for further explanation of the fair value hierarchy).

Effective May 1, ~~2024~~2023, CUF Haiti formally assigned the $2.4 million note receivable to Culp, Inc. (its U.S. ~~Parent~~parent).

The following table represents the remaining future principal payments as of ~~October~~January 2726, ~~2024~~2025:

(dollars in thousands)
2025	$	~~180~~90
2026		360
2027		360
2028		360
2029		360
Thereafter		240
Undiscounted value of note receivable	$	1,~~860~~770
Less: unearned interest income		(~~264~~240	)
Present value of note receivable	$	1,~~596~~530

As of ~~October~~January 2726, ~~2024~~2025, this note receivable totaled $1.65 million, of which $~~272~~276,000 and $1.3 million were classified as short-term note receivable and long-term note receivable, respectively. As of ~~October~~January 2928, ~~2023~~2024, this note receivable totaled $1.98 million, of which $~~256~~260,000 and $1.65 million were classified as short-term note receivable and long-term note receivable, respectively. As of April 28, 2024, this note receivable totaled $1.7 million, of which $264,000 and $1.5 million were classified as short-term note receivable and long-term note receivable, respectively.

We classified amortization of unearned interest income totaling $5074,000 and $5785,000 within interest income on our consolidated statements of net loss during the ~~six~~nine-month periods ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, respectively.

As of ~~October~~January 2726, ~~2024~~2025, we believe there is no expected credit loss related to the collectability of this note receivable, as the Lessee has made all of the required principal payments stated in the Termination Agreement. We will continue to evaluate the facts and circumstances at the end of each reporting period to determine if an expected credit loss is deemed necessary.

Culp Home Fashions Haiti, Ltd. ("CHF Haiti")

I-13

~~Effective~~Culp ~~August~~Home 2,Fashions ~~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 is entitled to a payment of $250,000 from the lessor for payment made in advance based on the terms of the original lease agreement at the earlier of February 18, 2025 or 15 days after a new lease with a third party lessee is signedLtd. ~~In connection with the~~ ("CHF ~~Termination Agreement, CHF~~ Haiti ~~has been fully and unconditionally discharged from all of its remaining obligations under this lease.~~")

AsEffective ofAugust ~~October 27~~2, 2024, weCHF ~~believe~~Haiti ~~there~~entered isinto noan ~~expected~~agreement ~~credit~~to ~~loss~~terminate ~~related~~a lease of a facility (“CHF Termination Agreement”). Pursuant to the ~~collectability~~terms of ~~this~~the ~~note~~CHF ~~receivable.~~Termination WeAgreement, ~~will~~CHF ~~continue~~Haiti is entitled to ~~evaluate~~a ~~the~~payment ~~facts~~of ~~and~~$250,000 ~~circumstances~~from the lessor at the ~~end~~earlier of ~~each~~February ~~reporting~~28, ~~period~~2025, toor ~~determine~~15 ifdays anafter ~~expected~~a ~~credit~~new ~~loss~~lease with a third party lessee is ~~deemed~~signed. ~~necessary~~In connection with the CHF Termination Agreement, CHF Haiti has been fully and unconditionally discharged from all of its remaining obligations under this lease.

As of January 26, 2025, there is no expected credit loss related to the collectability of this note receivable as it was paid in full on February 28, 2025, (fourth quarter of fiscal 2025) in accordance with the terms of the agreement.

8. Assets Held for Sale

AIn ~~summary~~connection with the closure of our mattress fabrics manufacturing facility located in Quebec, Canada, (see Note 10 of the consolidated financial statements for further details regarding our Fiscal 2025 Restructuring Plan), we had assets held for sale ~~follows:~~totaling $2.2 million that are presented separately on the January 26, 2025, consolidated balance sheet, and are no longer being depreciated.

(dollars in thousands)	October 27, 2024		October 29, 2023		April 28, 2024
Mattress Fabrics Segment - U.S.	$	358	$	—	$	—
Mattress Fabrics Segment - Canada		2,943		—		—
	$	3,301	$	—	$	—

During the third quarter of fiscal 2025, we determined that the carrying value of the assets classified as held for sale were less than or equal to their fair value. The fair value used in this determination was based on quoted market prices and from third party buyer sales offers which are either directly or indirectly observable, and therefore we believe this information is classified as Level 2 within the fair value hierarchy (see Note 12 for further explanation of the fair value hierarchy).

The carrying values of these assets held for sale totaling $3.3 million are presented separately on the October 27, 2024, consolidated balance sheet and are no longer being depreciated.

During the second quarter of fiscal 2025, we determined that the carrying value of the assets classified as held for sale were less than or equal to their fair value. The fair value used in the determination was based on quoted market prices and from third party buyer sales offers which are either directly or indirectly observable, and therefore we believe are classified as Level 2 within the fair value hierarchy (see Note 12 for further explanation of the fair value hierarchy). Consequently, we did not have to record an impairment loss on these assets.

9. Accrued Expenses

A summary of accrued expenses follows:

(dollars in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024		April 28, 2024
Compensation, commissions and related benefits	$	32,~~547~~318	$	43,~~540~~771	$	4,204
Other accrued expenses		23,~~649~~761		3,~~566~~529		2,522
	$	6,~~196~~079	$	87,~~106~~300	$	6,726

10. Restructuring Activities

Mattress Fabrics Segment, Upholstery Fabrics Segment, and Unallocated Corporate

Fiscal 2025 Restructuring Plan

On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to (1) consolidate the company's North American mattress fabrics operations, including a gradual discontinuation of operations and sale of the company's manufacturing facility located in Quebec, Canada; (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, NCNorth Carolina; (3) transition the mattress fabrics segment's weaving operation to a strategic sourcing model through the company's long standing supply partners; (4) consolidate the company's ~~two leased facilities related to the~~ sewn mattress cover operation located in Ouanaminthe, Haiti, from two leased facilities into one building and reduce other operating expenses at this location; as well as (5) reduce unallocated corporate expenses and shared service expenses.

As of the end of the third quarter of fiscal 2025, production at our facility located in Quebec, Canada has been discontinued and we have entered into a conditional agreement for the sale of this facility, subject to due diligence and other conditions. The consolidation of our sewn mattress cover operation located in Haiti was completed during the first quarter of fiscal 2025. For fiscal 2025, these actions are expected to result in restructuring and restructuring related charges of approximately $8.5 million, of which approximately $5.3 million is expected to be cash expenditures. The $8.5 million of estimated restructuring and restructuring related charges represents approximately $8.3 million and $155,000 associated with the mattress fabrics and upholstery fabrics segments, respectively.

The $8.3 million of estimated restructuring and restructuring related charges associated with our mattress fabrics segment represents (i) other associated costs of $3.3 million mostly related to relocating equipment from our facility in Quebec, Canada to

I-14

Weour ~~expect~~facility in Stokesdale, North Carolina, (ii) additional depreciation expense related to the ~~gradual~~shortening ~~discontinuance~~of useful lives of ~~operations~~equipment ~~and~~associated with the ~~closure~~gradual discontinuance of ~~the~~our ~~facility~~operations located in ~~Quebec,~~ Canada ~~will~~noted beabove ~~completed~~totaling by$1.3 ~~the~~million, ~~end~~(iii) ofemployee ~~the~~termination ~~third~~benefits ~~quarter~~ of ~~fiscal 2025~~$1. ~~The~~4 ~~consolidation~~million, ~~activity~~(iv) ~~associated~~$1.5 ~~with~~million ~~the~~related ~~sewn~~to ~~mattress~~losses ~~cover~~on ~~operation~~disposal ~~located~~and invaluation ~~Haiti~~of ~~was~~inventory, ~~completed~~and ~~during~~(v) ~~the~~lease ~~first~~termination ~~quarter~~costs of ~~fiscal~~$849,000, ~~2025. During~~partially ~~fiscal~~offset ~~2025,~~by ~~these~~net ~~actions~~gains ~~are~~on ~~expected~~the todisposal ~~result~~of inequipment totaling $42,000. These restructuring and restructuring related charges exclude any expected gain from the sale of ~~approximately~~the ~~$7.3~~Canadian ~~million~~facility, which would ultimately reduce the amount of ~~which~~the ~~approximately~~restructuring $4charges incurred.4 ~~million~~Based ison ~~expected~~changes in business and current unfavorable economic conditions related to bethe ~~cash~~home ~~expenditures. The~~furnishings ~~$7.3~~and ~~million~~bedding ofindustries, ~~estimated~~it is possible that the above estimates provided by management, to determine restructuring and restructuring related charges ~~represents~~incurred ~~approximately~~during ~~$7.2~~fiscal ~~million~~2025 ~~and~~could ~~$147,000~~be ~~associated~~materially ~~with~~different from the ~~mattress~~actual ~~fabrics~~results, and ~~upholstery~~therefore ~~fabrics~~could ~~segments,~~adversely ~~respectively~~affect the success of this restructuring plan.

The ~~$7.2~~above-referenced ~~million~~conditional ofagreement ~~estimated~~for ~~restructuring~~the ~~and~~sale ~~restructuring related charges associated with our mattress fabrics segment represents (i) other associated costs~~ of ~~$2.7 million mostly related to relocating equipment from~~ our ~~facility~~Canadian ~~in Quebec, Canada to our~~ facility inincludes ~~Stokesdale,~~a ~~NC,~~purchase ~~(ii)~~price ~~additional depreciation expense related to the shortening~~ of ~~useful lives of equipment associated with the gradual discontinuance of our operations located in Canada noted above totaling~~ $115.35 million, ~~(iii)~~CAD ~~employee termination benefits of $1.3 million,~~ (~~iv)~~ $110.18 million ~~related~~USD toas ~~losses on disposal and valuation~~ of ~~inventory~~January 26, ~~and (v~~2025) ~~lease termination costs of $860~~,~~000,~~ ~~(vi)~~contingent ~~partially offset by net gains~~ on the ~~disposal~~satisfaction of ~~equipment~~certain ~~totaling~~due ~~$110,000. These~~diligence ~~restructuring~~ and ~~restructuring~~closing ~~related~~conditions. ~~charges~~Assuming ~~exclude any expected gain on~~ the ~~sale~~completion of ~~real estate associated with~~ the ~~closure of the Canadian facility~~transaction, the ~~amount~~company ~~of which is~~ currently ~~undetermined~~expects ~~but which will ultimately reduce~~ the ~~amount of the restructuring charges incurred. Based on management's internal analysis we expect cash~~ proceeds from the sale ~~of real estate~~ (net of all taxes and commissions) to exceed the amount of cash restructuring charges incurred. in connection with the Fiscal 2025 Restructuring Plan.

~~Based~~The onfollowing ~~changes~~summarizes inaccrued ~~business and current industry economic conditions, it is possible that the above estimates provided by management to determine~~ restructuring ~~and~~costs ~~restructuring~~for ~~related charges incurred during fiscal 2025, and proceeds generated from~~ the ~~sale~~nine-month ofperiod ~~the~~ended ~~manufacturing~~January ~~facility located in Quebec~~26, ~~Canada,~~2025: ~~could be materially different from our actual results, and therefore could adversely affect the success of this restructuring plan.~~

The following summarizes accrued restructuring costs for the six-month period ending October 27, 2024:


	Employee			Other
	Termination			Associated
(dollars in thousands)	Benefits			Costs			Total
Beginning balance	$	—		$	—		$	—
Expenses incurred		1,535			2,730			4,265
Change in estimate adjustments		(107	)		—			(107	)
Payments		(896	)		(2,509	)		(3,405	)
Foreign currency exchange remeasurement		(14	)		(16	)		(30	)
Ending Balance	$	518		$	205		$	723

	Employee			Other
	Termination			Associated
(dollars in thousands)	Benefits			Costs			Total
Beginning balance	$	—		$	—		$	—
Expenses incurred		1,302			1,217			2,519
Change in estimate adjustments		(50	)		—			(50	)
Payments		(453	)		(1,140	)		(1,593	)
Foreign currency exchange remeasurement		(8	)		(5	)		(13	)
Ending Balance	$	791		$	72		$	863

The following summarizes restructuring and restructuring related charges for the three-month and nine-month periods ended January 26, 2025:

The following summarizes restructuring and restructuring related charges for the three-month and six-month periods ending October 27, 2024:


	Three Months Ended			Nine Months Ended
(dollars in thousands)	January 26, 2025			January 26, 2025
Additional depreciation expense for shortened useful lives of equipment	$	—		$	1,339
Employee termination benefits		176			1,428
Other associated costs		1,512			2,730
Loss on disposal, valuation, and markdowns of inventory		624			1,509
Lease termination costs		—			849
Net gain on disposal of equipment		(33	)		(43	)
Restructuring expense and restructuring related charges (1) (2)	$	2,279		$	7,812

	Three Months Ended			Six Months Ended
(dollars in thousands)	October 27, 2024			October 27, 2024
Additional depreciation expense for shortened useful lives of equipment	$	465		$	1,340
Employee termination benefits		563			1,252
Other Associated Costs		929			1,217
Loss on disposal and markdowns of inventory		769			885
Lease termination costs		179			849
Net gain on disposal of equipment		(105	)		(10	)
Restructuring expense and restructuring related charges (1) (2)	$	2,800		$	5,533

(1) Of the total $2.3 million restructuring and restructuring related charges, $1.7 million and $624,000 were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three-month period ending January 26, 2025. The $2.3 million mostly relates to the mattress fabrics segment.

(12) Of the total $27.8 million restructuring and restructuring related charges, $26.03 million and $~~769,000~~1.5 million were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the ~~three~~nine-month period ending ~~October~~January 2726, ~~2024~~2025. Of ~~the~~The ~~total~~ $27.8 million, ~~$2.8~~mostly ~~million~~relates ~~and $29,000 relate~~ to the mattress fabrics ~~and upholstery fabrics segments, respectively~~segment.

(2) Of the total $5.5 million restructuring and restructuring related charges, $4.6 million and $885,000 were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the six-month period ending October 27, 2024. Of the total $5.5 million, $5.4 million and $147,000 relate to the mattress fabrics and upholstery fabrics segments, respectively.

I-15

Upholstery Fabrics Segment

Shanghai, China

Upholstery Fabrics Finishing Operation

During the fourth quarter of fiscal 2024, we closed our upholstery fabrics finishing in China operation to align with current demand trends and will continue to leverage our strategic supply relationships to meet customer finishing needs ~~in China~~. This restructuring activity ~~was completed during the first quarter of fiscal 2025 and resulted in cumulative restructuring and restructuring related charges totaling $218,000.~~

~~The following summarizes the activity in accrued restructuring costs for the six~~I-~~month period ending October 27, 2024:~~ 15

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

The following summarizes the activity in accrued restructuring costs for the nine-month period ended January 26, 2025:


(dollars in thousands)	Total
Beginning balance (1)	$	3
Expenses incurred (2)		14
Payments		(17	)
Ending balance	$	—

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

(2) Expenses incurred represent other associated costs and were recognized in our Consolidated Statement of Net Loss for the ~~six~~ nine-month period ~~ending~~ended ~~October~~January 2726, ~~2024~~2025.

Ouanaminthe, Haiti

Cut and Sew Upholstery Fabrics Operation

During the third quarter of fiscal 2023, Culp Upholstery Fabrics - Haiti, Ltd. ("CUF Haiti") entered into an agreement to terminate a lease associated with aone facility, and, in turn, moved the production of upholstery cut and sewn kits to an existing facility leased by Culp Home Fashions - Haiti, Ltd. ("CHF Haiti") during the fourth quarter of fiscal 2023. Both CUF Haiti and CHF Haiti are ~~indirectly~~indirect wholly-owned subsidiaries of the company. During the first quarter of fiscal 2024, demand for upholstery cut and sewn kits declined more than previously anticipated, resulting in the strategic action to discontinue the production of upholstery cut and ~~sew~~sewn kits in Haiti.

The following summarizes our restructuring (credit) expense and restructuring related ~~charges~~ (~~credits~~credit) charge for the three months and ~~six~~nine months ~~ending~~ended ~~October~~January 2928, ~~2023~~2024:

	Three Months Ended			~~Six~~Nine Months Ended
(dollars in thousands)	~~October~~Janaury 2928, ~~2023~~2024			~~October~~Janaury 2928, ~~2023~~2024
Employee termination benefits	$	2—		$	103
Impairment loss - equipment		142			379
Impairment loss - leasehold improvements and equipment		—			329
(Gain) loss on disposal and markdowns of inventory		(78	)		101
Gains on sale of equipment		(50	)		—
Restructuring expense and restructuring related (credits) charges (1) (2)	$	66		$	583
(Gain) loss on disposal and markdowns of inventory		(61	)		40
Restructuring expense and restructuring related (credits) charges (1) (2)	$	(111	)	$	472

(1) Of the total $66(111,000), $~~144~~(50,000) and ($78(61,000) were recorded within restructuring ~~expense~~credit and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three-month period ~~ending~~ended ~~October~~January 2928, ~~2023~~2024.

(2) Of the total $~~583~~472,000, $~~482~~432,000 and $~~101~~40,000 were recorded within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the ~~six~~nine-month period ~~ending~~ended ~~October~~January 2928, ~~2023~~2024.

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

I-16

11. Lines of Credit

Revolving Credit Agreement – United States

Culp, Inc., as borrower (the “borrower”), and Read, as guarantor (the “Guarantor”), are parties to an agreement (the "ABL Credit Agreement") by and among the borrower, the Guarantor and Wells Fargo Bank, National Association, as the lender (the “Lender”), to establish an asset-based revolving credit facility (the “ABL Facility”). The proceeds from the ABL Facility may be used to pay fees and expenses related to the ABL Facility and provide funding for ongoing working capital and general corporate purposes.

I-16

The ABL Facility may be used for revolving credit loans and letters of credit from time to time up to a maximum principal amount of $35.0 million, subject to the limitations described below. The ABL Facility contains a sub-facility that allows the company to issue letters of credit in an aggregate amount not to exceed $1.0 million. The amount available under the ABL Facility is limited by a borrowing base consisting of certain eligible accounts receivable and inventory, reduced by specified reserves, as follows:

•

85% of eligible accounts receivable, plus

•

the least of:

the sum of:

▪

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

▪

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

▪

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

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 foreign currency exchange rates and (C) consistent with most recent appraisals received and acceptable to Lender.

$22.5 million; and

An amount equal to 200% of eligible accounts receivable,

minus

•

applicable reserves.

The ABL Facility permits both base rate borrowings and borrowings based upon daily simple SOFR (the secured overnight financing rate administered by the Federal Reserve Bank of New York (or its successor)). Borrowings under the ABL Facility bear interest at an annual rate equal to daily simple SOFR plus 150 basis points (if the average monthly excess availability under the ABL Facility is greater than 50%) or 175 basis points (if the average monthly excess availability under the ABL Facility is less than or equal to 50%) or 50 basis points above base rate (if the average monthly excess availability under the ABL Facility is greater than 50%) or 75 basis points above base rate (if the average monthly excess availability under the ABL Facility is less than or equal to 50%), as applicable, with a fee on unutilized commitments at an annual rate of 37.5 basis points and an annual servicing fee of $12,000.

The ABL Facility matures on January 19, 2026. The ABL Facility may be prepaid from time to time, in whole or in part, without a prepayment penalty or premium. 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.

I-17

The borrower’s obligations under the ABL Facility (and certain related obligations) are guaranteed by the Guarantor. In addition, the ABL Credit Agreement requires that the borrower's future domestic subsidiaries guarantee the ABL Facility on a senior secured basis (such future domestic subsidiaries, together with the Guarantor and the borrower, the "Loan Parties"). The borrower's obligations under the ABL Facility are secured by first priority liens and other security interests on all assets of the Loan Parties, subject to certain exceptions and permitted liens.

Cash Dominion. Under the terms of the ABL Facility, if (i) an event of default has occurred or (ii) excess borrowing availability under the ABL Facility (based on the lesser of $35.0 million and the borrowing base) (the “Excess Availability”) falls below $7.0 million, at such time, the Loan Parties will become subject to cash dominion, which will require prepayment of loans under the ABL Facility with the cash deposited in certain deposit accounts of the Loan Parties, including a concentration account, and will restrict the Loan Parties’ ability to transfer cash from their concentration account. Such cash dominion period (a “Dominion Period”) shall end when Excess Availability shall be equal to or greater than $7.0 million for a period of 60 consecutive days and no event of default is continuing.

I-17

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 $7.0 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 $5.25 million. Such compliance period shall end when Excess Availability shall be equal to or greater than $5.25 million for a period of 60 consecutive days and no event of default is continuing.

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

•

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.

Overall

Interest is charged at a rate (applicable interest rate of 65.3380%, ~~and~~ 6.8081%, and 6.81% as of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively) calculated using the Applicable Margin over SOFR based on the borrower's excess availability under the ABL Facility, as defined in the ABL Credit Agreement.

There were $925,000, $535,000, and $535,000 of outstanding letters of credit provided by the ABL Credit Agreement as of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively. As of ~~October~~January 2726, ~~2024~~2025, the borrower had $~~465~~75,000 remaining for the issuance of additional letters of credit under the ABL Credit Agreement.

There were no borrowings outstanding under the ABL Credit Agreement as of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively. ~~In addition, on November 25, 2024, we borrowed $2.5 million under the ABL Credit Agreement.~~

As of ~~October~~January 2726, ~~2024~~2025, our available borrowings calculated under the provisions of the ABL Credit Agreement totaled $2223.2 million of which we borrowed $6.0 million from January 27, 2025, through March 7, 2025.

Denominated in Chinese Yuan Renminbi (“RMB”)

Agricultural Bank of China - ~~29.0 Million~~ RMB Unsecured Credit Agreement

Effective on March 20, 2024, we entered into an unsecured credit agreement denominated in RMB, that provides for a line of credit up to 29.0 million RMB ($4.10 million USD as of ~~October~~January 2726, ~~2024~~2025). ~~The~~Of this 29.0 million RMB line of credit, ~~expires~~9.6 million RMB, 9.7 million RMB, and 9.7 million RMB expire on March 187, 2025, March 8, 2025, and March 9, 2025, respectively. Interest charged under this agreement is based on the Loan Prime Rate ("LPR") in China minus 50 basis points at the time of borrowing, which represents 2.95%.

As of January 26, 2025, the amount outstanding was 29.0 million RMB ($4.0 million USD) which we expect to repay during the fourth quarter when the line of credit expires based on the dates noted in the preceding paragraph. Currently, we are negotiating

I-18

~~2025.~~the ~~Interest~~terms ~~charged~~for ~~under~~a renewal of this agreement, which is ~~based~~expected onto be finalized during the ~~Loan~~fourth ~~Prime~~quarter ~~Rate~~of ~~("LPR")~~fiscal in2025, ~~China~~and ~~minus~~such 50terms ~~basis~~are ~~points~~not ~~(2.60%~~expected asto ofadversely ~~October~~affect ~~27,~~our ~~2024)~~liquidity.

AsBank of ~~October~~China ~~27,~~- ~~2024, the amount outstanding was 29.0 million~~ RMB ~~($4.1~~Credit ~~million USD). There were no borrowings outstanding under this agreement as of April 28, 2024.~~ Agreement

~~Bank~~Effective November 5, 2024, we entered into a credit agreement (“Agreement”) denominated in RMB that provides 10.0 million RMB ($1.4 million USD as of ~~China~~January -26, 352025) for an unsecured working capital loan and 25.0 ~~Million~~million RMB ~~Credit~~($3.5 million USD as of January 26, 2025) for letters of credit, guarantees, and other financing arrangements secured by trade accounts receivable associated with the company’s operations located in China. The working capital loan and letters of credit expire on November 6, 2025, and July 31, 2025, respectively. Interest is charged under the Agreement based on the LPR in China minus 50 basis points at the time of borrowing which represents 2.60%.

OnAs ~~November~~of 5January 26, ~~2024 (third quarter fiscal~~ 2025), wethe ~~entered~~amount ~~into~~outstanding aunder ~~credit~~the ~~agreement~~working ~~(“Agreement”)~~capital ~~denominated in RMB that provides borrowing capacity up to 35.0 million RMB ($4.9 million USD as of November 5~~loan, ~~2024), of~~ which ~~25.0~~represents ~~million~~the ~~RMB~~total ~~($3.5~~amount ~~million USD as of November 5~~available, ~~2024)~~was ~~relates to a line of credit secured by trade accounts receivable associated with the company’s operations located in China and~~ 10.0 million RMB ($1.4 million USD ~~as of November 5, 2024~~). ~~related~~The ~~to a~~ working capital loan~~. The~~ ~~line~~was ofused ~~credit~~to ~~and~~fund certain working capital ~~loan~~expenditures ~~expire~~incurred ~~on July 31, 2025, and November 5, 2025, respectively. Interest is charged under the Agreement based on the LPR~~ in China ~~minus 50 basis points (2~~.~~60%~~ As as of ~~November~~January 526, ~~2024). The borrowing capacity regarding the 25.0 million line of credit is restricted to certain Culp~~2025, ~~Inc.~~there ~~consolidated~~were ~~net~~no ~~sales~~outstanding ~~and consolidated profitability requirements as defined in the Agreement. Currently, Culp, Inc. does not meet the consolidated net sales and consolidated profitability conditions required~~ for ~~borrowing~~letters ~~under the 25.0 million line~~ of credit~~. During~~ ~~the~~under ~~third quarter of fiscal 2025, we borrowed~~ the ~~entire 10~~Agreement.0 million ($1.4 million USD as of November 6, 2024) working capital loan to fund certain working capital expenditures incurred in China. There are no consolidated net sales and profitability requirements related to the 10.0 million working capital loan.

Overall

Our loan agreements require, among other things, that we maintain compliance with certain financial covenants. As of ~~October~~January 2726, ~~2024~~2025, we were in compliance with our financial covenants.

NoInterest ~~interest~~ payments of $16,000 were made during the ~~three~~nine-month orperiod ~~six-month~~ended ~~periods~~January ~~ending~~26, ~~October~~2025. ~~27,~~There ~~2024,~~were ~~and~~no ~~October~~interest ~~29,~~payments ~~2023~~during the nine-month period ended January 28, ~~respectively~~2024.

12. 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~~Level 1 or ~~level~~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~~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 quarter based on various factors, and it is possible that an asset or liability may be classified differently from quarter to quarter. However, we expect that changes in classifications between different levels will be rare.

I-19

Recurring Basis

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

Fair value measurements as of October 27, 2024, using:

Fair value measurements as of January 26, 2025, using:

Quoted prices

Significant

in active

other

Significant

markets for

observable

unobservable

identical assets

inputs

(amounts in thousands)

Level 1

Level 2

Level 3

Total

Assets:

U.S. Government Money Market Fund

6,~~724~~606

N/A

6,~~724~~606

Growth Allocation Mutual Funds

~~787~~835

N/A

~~787~~835

S&P 500 Index Fund

~~241~~275

N/A

~~241~~275

Moderate Allocation Mutual Fund

N/A

Other

287

N/A

287

Other

229

N/A

229

Fair value measurements as of October 29, 2023, using:

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

Quoted prices

Significant

in active

other

Significant

markets for

observable

unobservable

identical assets

inputs

(amounts in thousands)

Level 1

Level 2

Level 3

Total

Assets:

U.S. Government Money Market Fund

76,~~060~~995

N/A

76,~~060~~995

Growth Allocation Mutual Funds

~~560~~656

N/A

~~560~~656

S&P 500 Index Fund

~~126~~156

N/A

~~126~~156

Moderate Allocation Mutual Fund

N/A

Other

213

N/A

213

Other

140

N/A

140

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

Quoted prices

Significant

in active

other

Significant

markets for

observable

unobservable

identical assets

inputs

(amounts in thousands)

Level 1

Level 2

Level 3

Total

Assets:

U.S. Government Money Market Fund

6,910

N/A

6,910

Growth Allocation Mutual Funds

691

N/A

691

S&P 500 Index Fund

176

N/A

176

Moderate Allocation Mutual Fund

N/A

Other

228

N/A

228

Other

182

N/A

182

Investments - Rabbi Trust

We have a rabbi trust (the “Trust”) for the participants ofin our deferred compensation plan (the “Plan”), that enables participants to direct their contributions to various investment options under the Plan. The investments associated with the Trust consist of a money market fund and various mutual funds that are classified as available-for-sale.

As of ~~October~~January 2726, ~~2024~~2025, our investments associated with the Trust totaled $8.0 million, of which $~~919~~1.8 million,~~000~~ and $76.12 million were classified as short-term and long-term, respectively. As of ~~October~~January 2928, ~~2023~~2024, our investments associated with the Trust totaled $78.90 million, of which $937,000 and $7.01 million were classified as short-term and long-term, respectively. As of April 28, 2024, our investments associated with the Trust totaled $8.0 million, of which $903,000 and $7.1 million were classified as short-term and long-term, respectively. The investments associated with the Trust had an accumulated unrealized gain (loss) of $~~221~~216,000, $(688,000), and $118,000 as of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively.

The fair value of our long-term investments associated with the Trust approximates their cost basis.

Other

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

I-20

13. 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 shares used in the computation of basic and diluted net loss per share were 12,~~513~~559,000 and 12,~~456~~470,000 for the three months ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, respectively.

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

	Three Months Ended
(in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024
Antidilutive effect from decrease in the price per share of our common stock	-	—	1115
Antidilutive effect from net loss incurred during the fiscal quarter	~~152~~123		~~136~~81
Total unvested shares of common stock not included in
computation of diluted net loss per share		~~152~~123		~~147~~96

Weighted average shares used in the computation of basic and diluted net loss per share were 12,~~491~~514,000 and 12,~~394~~419,000 for the ~~six~~nine months ending ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, respectively.

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

	Six months ended
	Nine months ended
(in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024
antidilutive effect from decrease in the price per share of our common stock	2	—	204
antidilutive effect from net loss incurred during the fiscal year	~~119~~135		~~105~~126
total unvested shares of common stock not included in
computation of diluted net loss per share		~~121~~135		~~125~~130

14. Segment Information

Overall

Our operations are classified into two business segments: mattress fabrics and upholstery fabrics.

Mattress Fabrics

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

Upholstery Fabrics

The upholstery fabrics segment develops, ~~manufactures~~sources, ~~sources~~manufactures, and sells fabrics to customers in the residential, commercial, and hospitality industries. In addition, this segment includes Read, which provides window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation services for Read’s products, to customers in the hospitality and commercial industries. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows.

Financial Information

I-21

compensation and benefits for certain executives and their support staff, all costs associated with being a public company, amortization of intangible assets, and other miscellaneous expenses. Segment assets include assets used in the operations of each segment and consist of accounts receivable, inventories, property, plant, and equipment, and right of use assets. The mattress fabrics segment also includes assets held for sale associated with aproperty, ~~right~~plant, ~~of use asset~~ and equipment related to the ~~fiscal~~Fiscal 2025 ~~restructuring~~Restructuring ~~plan~~Plan announced on April 29, 2024 (see Note 10 to the consolidated financial statements for further details regarding this restructuring plan). Intangible assets are not included in segment assets, as these assets are not used by the Chief Operating Decision Maker to evaluate the respective segment’s operating performance, allocate resources to individual segments, or determine executive compensation.

Statements of operations for our operating segments are as follows:

	Three months ended
	October 27, 2024			October 29, 2023
	January 26, 2025			January 28, 2024
Net sales by segment:
Mattress fabrics	$	3028,~~074~~642		$	3130,~~377~~021
Upholstery fabrics		2523,~~600~~611			2730,~~348~~397
Net sales	$	5552,~~674~~253		$	5860,~~725~~418
Gross profit:
Mattress fabrics	$	2,~~444~~743		$	21,~~483~~520
Upholstery fabrics		4,~~315~~228			56,~~389~~122
Segment gross profit		6,~~759~~971			7,~~872~~642
Restructuring related (charge) credit (1)(2)		(~~769~~624	)		7861
Gross profit	$	56,~~990~~347		$	7,~~950~~703
Selling, general, and administrative expenses by segment:
Mattress fabrics	$	3,~~481~~176		$	3,~~419~~102
Upholstery fabrics		3,~~700~~549			34,~~998~~030
Unallocated corporate expenses		21,~~178~~854			2,~~628~~361
Selling, general, and administrative expenses	$	98,~~359~~579		$	109,~~045~~493
(Loss) income from operations by segment:
Mattress fabrics	$	(~~1,037~~433	)	$	(~~936~~1,582	)
Upholstery fabrics		~~615~~679			12,~~391~~092
Unallocated corporate expenses		(21,~~178~~854	)		(2,~~628~~361	)
Total segment loss from operations	$	(21,~~600~~608	)	$	(21,~~173~~851	)
Restructuring related (charge) credit (1) (2)		(~~769~~624	)		7861
Restructuring expense (3)(4)		(21,~~031~~655	)		~~(144~~50	)
Loss from operations	$	(53,~~400~~887	)	$	(21,~~239~~740	)
Interest expense		(3063	)		—
Interest income		~~244~~255			~~282~~284
Other (expense) income		(508	)		49
Other income (expense)		15			(705	)
Loss before income taxes	$	(53,~~694~~680	)	$	(12,~~908~~161	)

(1) During the three months ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, gross profit ~~from operations~~ includes restructuring related charges totaling $~~769~~624,000 for losses on the disposal and valuation of inventory related to the gradual discontinuation of operations at our manufacturing facility located in Quebec, Canada.

(2) During the three months ~~ending~~ended ~~October~~January 2928, ~~2023~~2024, gross profit ~~from operations~~ includes a restructuring related ~~credits~~credit of $7861,000 for the gain on disposal of inventory related to the discontinuation of production of cut and sewn upholstery kits at the company's facility located in Ouanaminthe, Haiti.

(3) During the three months ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, restructuring expense of $21.07 million ~~represents~~mostly ~~$2.0~~relates ~~million and $29,000, related~~ to the mattress fabrics ~~and upholstery fabrics segments, respectively~~segment. The $21.07 million of restructuring expense represents (i) $1.45 million ~~related~~for to the ~~gradual~~consolidation ~~discontinuation~~ of ~~operations~~our ~~and~~mattress ~~the~~fabrics ~~process~~operations ~~of selling the manufacturing facility~~ located in Quebec, Canada, ~~which~~into ~~includes~~our ~~employee~~facility ~~termination~~located ~~benefits~~in ~~of $505~~Stokesdale,~~000,~~ ~~additional~~North ~~depreciation~~Carolina ~~related~~and to(ii) ~~the shortening of useful lives of equipment of~~ $~~465~~176,000, ~~other~~for ~~associated~~employee ~~costs of $373,000, and lease~~ termination ~~costs of $179~~benefits,~~000,~~ partially offset by ~~gains~~(iii) ona ~~the~~net ~~disposal~~gain of ~~equipment totaling~~ $~~133~~(33,000~~; (ii~~) ~~$600,000~~for ~~related~~the toimpairment ~~relocating certain equipment~~ and ~~consolidating~~sale ~~production~~of ~~from~~equipment. ~~the~~See ~~mattress~~Note ~~fabric~~10 ~~manufacturing facility located in Quebec, Canada~~ to the ~~U.S~~consolidated ~~facility~~financial ~~located~~statements infor ~~Stokesdale,~~further ~~North~~details ~~Carolina, which includes other associated costs of $527,000, employee termination benefits of $58,000,~~ and ~~losses~~description ~~on the disposal~~ of ~~equipment~~our ~~totaling~~Fiscal ~~$15,000;~~2025 ~~(iii)~~Restructuring ~~$29,000 of other associated costs related to moving~~ Plan.

(4)The restructuring credit of $50,000 for the three months ended January 28, 2024, represents a gain on the sale of equipment related to the discontinuation of production of cut and sewn upholstery kits in Ouanaminthe, Haiti.

I-22

certain equipment from our upholstery fabrics operation located in Knoxville, Tennessee to our upholstery fabrics distribution center located in Burlington, N.C.; and (iv) $13,000 for losses on the disposal of equipment related to the consolidation of two leased facilities at our mattress cover operation located in Ouanaminthe, Haiti.


	Nine months ended
	January 26, 2025			January 28, 2024
Net sales by segment:
Mattress fabrics	$	86,792		$	90,619
Upholstery fabrics		77,672			85,185
Net sales	$	164,464		$	175,804
Gross profit:
Mattress fabrics	$	4,862		$	5,997
Upholstery fabrics		14,061			16,780
Total segment gross profit	$	18,923		$	22,777
Restructuring related charge (1) (2)		(1,509	)		(40	)
Gross profit	$	17,414		$	22,737
Selling, general, and administrative expenses by segment:
Mattress fabrics	$	9,880		$	9,913
Upholstery fabrics		11,056			11,969
Unallocated corporate expenses		6,299			7,484
Selling, general, and administrative expenses	$	27,235		$	29,366
(Loss) income from operations by segment:
Mattress fabrics	$	(5,018	)	$	(3,916	)
Upholstery fabrics		3,005			4,811
Unallocated corporate expenses		(6,299	)		(7,484	)
Total segment loss from operations	$	(8,312	)	$	(6,589	)
Restructuring related charge (1) (2)		(1,509	)		(40	)
Restructuring expense (3) (4)		(6,317	)		(432	)
Loss from operations	$	(16,138	)	$	(7,061	)
Interest expense		(121	)		—
Interest income		761			911
Other expense		(898	)		(560	)
Loss before income taxes	$	(16,396	)	$	(6,710	)

(41) During the ~~three~~nine months ~~ending~~ended ~~October~~January 2926, ~~2023~~2025, ~~restructuring~~gross ~~expense~~profit ofincludes ~~$144,000~~restructuring ~~represents~~related charges totaling $~~142,000~~1.5 ofmillion ~~impairment~~for ~~charges~~losses ~~related~~on tothe ~~equipment~~disposal and ~~$2,000~~valuation of ~~employee~~inventory ~~termination benefits~~ related to the gradual discontinuation of ~~production~~operations ofat ~~cut~~our ~~and~~manufacturing ~~sewn~~facility ~~upholstery~~located ~~kits~~ in ~~Ouanaminthe~~Quebec, ~~Haiti~~Canada.

	Six months ended
	October 27, 2024			October 29, 2023
Net sales by segment:
Mattress fabrics	$	58,150		$	60,599
Upholstery fabrics		54,061			54,788
Net sales	$	112,211		$	115,387
Gross profit:
Mattress fabrics	$	2,118		$	4,477
Upholstery fabrics		9,833			10,659
Total segment gross profit	$	11,951		$	15,136
Restructuring related charge (1) (2)		(885	)		(101	)
Gross profit	$	11,066		$	15,035
Selling, general, and administrative expenses by segment:
Mattress fabrics	$	6,704		$	6,811
Upholstery fabrics		7,506			7,939
Unallocated corporate expenses		4,445			5,124
Selling, general, and administrative expenses	$	18,655		$	19,874
(Loss) income from operations by segment:
Mattress fabrics	$	(4,586	)	$	(2,334	)
Upholstery fabrics		2,327			2,720
Unallocated corporate expenses		(4,445	)		(5,124	)
Total segment loss from operations	$	(6,704	)	$	(4,738	)
Restructuring related charge (1) (2)		(885	)		(101	)
Restructuring expense (3) (4)		(4,662	)		(482	)
Loss from operations	$	(12,251	)	$	(5,321	)
Interest expense		(58	)		—
Interest income		507			627
Other (expense) income		(913	)		145
Loss before income taxes	$	(12,715	)	$	(4,549	)

(2) During the nine months ending January 28, 2024, gross profit includes a restructuring related charge of $40,000, which represents markdowns of inventory related to the discontinuation of production of cut and sewn upholstery kits at the company's facility located in Ouanaminthe, Haiti.

(13) During the ~~six~~nine months ending ~~October~~January 2726, ~~2024~~2025, ~~gross~~restructuring ~~profit~~expense ~~from~~of ~~operations~~$6.3 ~~includes~~million mostly relates to the mattress fabrics segment. The $6.3 million restructuring expense represents (i) $2.7 million for the consolidation of our mattress fabrics operations located in Quebec, Canada into our facility located in Stokesdale, North Carolina, (ii) $1.5 million for impairment of and accelerated depreciation related ~~charges~~to ~~totaling~~property, plant, and equipment, (iii) $~~885~~1.4 million for employee termination benefits, and (iv) $849,000 for ~~losses~~lease ontermination ~~the~~costs, ~~disposal~~partially offset by a gain on sale and ~~valuation~~disposal of ~~inventory~~equipment ~~related~~totaling $(174,000). See Note 10 to the ~~gradual~~consolidated ~~discontinuation~~financial ofstatements ~~operations~~for atfurther ~~our~~details ~~manufacturing~~and ~~facility~~description ~~located~~of inour ~~Quebec,~~Fiscal ~~Canada~~2025 Restructuring Plan.

(24) ~~During~~Restructuring ~~the~~expense ~~six months ending October 29, 2023, gross profit from operations includes a net restructuring related charge~~ of $~~101~~432,000, ~~which~~for ~~represents~~the anine ~~markdown~~months ofending ~~inventory~~January ~~totaling $179~~28,~~000~~ ~~during the first quarter of fiscal~~ 2024, ~~partially~~represents ~~offset by~~ a ~~gain on disposal of inventory totaling~~ $78329,000 ~~during~~impairment ~~the~~charge ~~second~~associated ~~quarter~~with ofequipment ~~fiscal~~and ~~2024~~$103,000 ~~both~~for ofemployee ~~which~~termination benefits related to the discontinuation of production of cut and sewn upholstery kits ~~at our facility located~~ in Ouanaminthe, Haiti.

(3) During the six months ending October 27, 2024, restructuring expense of $4.7 million represents $4.5 million and $161,000, related to the mattress fabrics and upholstery fabrics segments, respectively. The $4.7 million of restructuring expense represents (i) $3.3 million related to the gradual discontinuation of operations and the process of selling the manufacturing facility located in Quebec, Canada, which includes $1.3 million of additional depreciation related to the shortening of useful lives of equipment, employee termination benefits of $1.0 million, other associated costs of $463,000, and lease termination costs of $443,000, partially offset by net gains on the disposal of equipment of $38,000; (ii) $767,000 related to relocating certain equipment and consolidating production from the mattress fabric manufacturing facility located in Quebec, Canada to the U.S facility located in Stokesdale, North Carolina, which includes other associated costs of $694,000, employee termination benefits of $58,000, and losses on the disposal of equipment totaling $15,000; (iii) $483,000 related to the consolidation of two leased facilities at our mattress cover operation located in Ouanaminthe, Haiti, which includes lease termination costs of $406,000, employee termination benefits of $48,000, other associated costs of $16,000, and losses of the disposal of equipment

I-23

of $13,000; and (iv) $161,000 related to our upholstery fabrics segment, which includes employee termination benefits of $102,000 and other associated costs of $59,000 for moving equipment from our upholstery fabrics operation located in Knoxville, Tennessee to our upholstery fabrics distribution center located in Burlington, N.C.

(4) During the six months ending October 29, 2023, restructuring expense of $482,000 represents $379,000 for impairment charge associated with equipment and $103,000 for employee termination benefits related to the discontinuation of production of cut and sewn upholstery kits in Ouanaminthe, Haiti.

Balance sheet information for our operating segments follows:

(dollars in thousands)

~~October~~January 2726, ~~2024~~2025

~~October~~January 2928, ~~2023~~2024

April 28, 2024

Segment assets:

Mattress Fabrics:

Accounts receivable

1011,~~352~~607

11,~~303~~463

10,003

Inventory

2931,~~253~~377

27,~~195~~925

27,671

Property, plant and equipment (1)

24,~~702~~210

32,~~862~~263

31,472

Right of use assets (2)

~~275~~200

1,~~969~~798

1,627

Assets held for sale (3)

32,~~301~~214

—

Total mattress fabrics assets

6769,~~883~~608

73,~~329~~449

70,773

Upholstery Fabrics:

Accounts receivable

11,~~978~~552

1112,~~733~~223

11,135

Inventory

1517,~~879~~222

1718,~~270~~952

17,172

Property, plant and equipment (4)

1,~~188~~117

1,~~175~~155

1,125

Right of use assets (5)

12,~~120~~647

12,~~992~~345

1,952

Total upholstery fabrics assets

3032,~~165~~538

3234,~~170~~675

31,384

Total segment assets

98102,~~048~~146

~~105~~108,~~499~~124

102,157

Non-segment assets:

Cash and cash equivalents

105,~~531~~279

1512,~~214~~585

10,012

Short-term investments - rabbi trust

~~919~~1,753

937

903

Short-term note receivable

522

256

264

Short-term notes receivable

526

260

264

Current income taxes receivable

~~979~~1,137

~~340~~476

350

Other current assets

32,~~187~~619

4,~~346~~237

3,371

Long-term note receivable

1,324

1,596

1,462

Long-term notes receivable

1,254

1,530

1,462

Deferred income taxes

~~559~~490

~~472~~531

518

Property, plant and equipment (6)

~~620~~612

~~627~~603

585

Right of use assets (7)

23,~~844~~256

2,~~913~~809

2,624

Intangible assets

1,~~688~~594

21,~~064~~970

1,876

Long-term investments - rabbi trust

76,~~105~~250

67,~~995~~083

7,102

Other assets

~~661~~639

~~901~~853

830

Total assets

~~128~~127,~~987~~555

~~142~~141,~~160~~998

132,054

(1)

The $24.72 million as of ~~October~~January 2726, ~~2024~~2025, represents property, plant, and equipment of $2223.20 million, $~~1.6 million~~973,000 and $~~889~~221,000 located in the U.S., ~~Canada~~Haiti, and ~~Haiti~~Canada, respectively. The $32.93 million as of ~~October~~January 2928, ~~2023~~2024, represents property, plant, and equipment of $2221.29 million, $109.08 million, and $~~661~~600,000 located in the U.S., Canada, and Haiti, respectively. The $31.5 million as of April 28, 2024, represents property, plant, and equipment of $21.5 million, $9.4 million, and $555,000 located in the U.S., Canada, and Haiti, respectively.

(2)

The $~~275~~200,000 as of ~~October~~January 2726, ~~2024~~2025, represents a right of use asset in Haiti. The $21.08 million as of ~~October~~January 2928, ~~2023~~2024, represents right of use assets of $1.32 million and $~~663~~604,000 located in Haiti, and Canada, respectively. The $1.6 million as of April 28, 2024, represents right of use assets of $1.1 million and $545,000 located in Haiti and Canada, respectively.

(3)

The $32.32 million as of ~~October~~January 2726, ~~2024~~2025, represents assets held for sale ~~of $2.9 million and $358,000~~ located in Canada ~~and the U~~.~~S., respectively.~~

(4)

The $1.1 million as of January 26, 2025, represents property, plant, and equipment of $1.0 million and $83,000 located in the U.S. and China, respectively. The $1.2 million as of January 28, 2024, represents property, plant, and equipment of $1.1 million and $134,000 located in the U.S. and China, respectively. The $1.1 million as of April 28, 2024, represents property, plant, and equipment of $1.0 million and $120,000 located in the U.S. and China, respectively.

(5)

The $2.6 million as of January 26, 2025, represents right of use assets of $1.9 million and $764,000 located in China and the U.S., respectively. The $2.3 million as of January 28, 2024, represents right of use assets of $944,000 and $1.4 million located in China and the U.S., respectively. The $2.0 million as of April 28, 2024, represents right of use assets of $1.3 million and $709,000 located in the U.S. and China, respectively.

(6)

The $612,000, $603,000, and $585,000 as of January 26, 2025, January 28, 2024, and April 28, 2024, respectively, represents property, plant, and equipment associated with unallocated corporate departments and corporate departments shared by our mattress fabrics and upholstery fabrics segments. Property, plant, and equipment associated with our corporate departments are located in the U.S.

I-24

(7)

The $13.23 million ~~as of October 27~~, ~~2024, represents property, plant, and equipment of~~ $12.18 million ~~and $95~~,~~000~~ ~~located in the U.S.,~~ and ~~China, respectively. The~~ $1.2.6 million as of ~~October~~January 2926, ~~2023~~2025, ~~represents~~January ~~property~~28, ~~plant~~2024, and ~~equipment of $1.0 million, and $140,000 located in the U.S. and China, respectively. The $1.1 million as of~~ April 28, 2024, ~~represents property~~respectively, ~~plant,~~represent ~~and~~right ~~equipment~~ of ~~$1.0~~use ~~million~~assets ~~and $120,000~~ located in the U.S.~~, and China, respectively.~~

The $1.1 million as of October 27, 2024, represents right of use assets of $925,000 and $195,000 located in the U.S., and China, respectively. The $2.0 million as of October 29, 2023, represents right of use assets of $1.2 million and $818,000 located in China and the U.S. respectively. The $2.0 million as of April 28, 2024, represents right of use assets of $1.3 million and $709,000 located in the U.S. and China, respectively.

The $620,000, $627,000, and $585,000 as of October 27, 2024, October 29, 2023, and April 28, 2024, respectively, represents property, plant, and equipment associated with unallocated corporate departments and corporate departments shared by our mattress fabrics and upholstery fabrics segments. Property, plant, and equipment associated with our corporate departments reside in the U.S.

The $2.8 million, $2.9 million, and $2.6 million as of October 27, 2024, October 29, 2023, and April 28, 2024, respectively, represent right of use assets located in the U.S.

Information about capital expenditures and depreciation expense for our operating segments follows:

	Six months ended
	Nine months ended
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024
Capital expenditures (1):
Mattress Fabrics	$	~~812~~1,469	$	12,~~948~~828
Upholstery Fabrics		~~265~~280		~~185~~219
Unallocated Corporate		~~761~~789		80167
Total capital expenditures	$	12,~~838~~538	$	23,~~213~~214
Depreciation expense:
Mattress Fabrics (2)	$	45,~~084~~166	$	24,~~922~~422
Upholstery Fabrics		~~333~~464		~~329~~475
Total depreciation expense	$	45,~~417~~630	$	34,~~251~~897

(1)

Capital expenditure amounts are stated on an accrual basis. See Consolidated Statements of Cash Flows for capital expenditure amounts on a cash basis.

(2)

During the ~~six~~nine-month period ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, depreciation expense for the mattress fabrics segment included additional depreciation expense related to the shortening of useful lives of equipment associated with the gradual discontinuation of operations at our manufacturing facility located in Quebec, Canada. The amount of additional depreciation expense was $1.3 million and was classified as restructuring expense in the Consolidated Statements of Net Loss.

I-25

15. Income Taxes

Effective Income Tax Rate

We recorded income tax expense of $~~190~~635,000, or (13.59%) of loss before income taxes, for the ~~six~~nine-month period ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, compared with income tax expense of $12.2 million, or (2633.84%) of loss before income taxes, for the ~~six~~nine-month period ~~ending~~ended ~~October~~January 2928, ~~2023~~2024.

Our effective income tax rates for the ~~six~~nine-month periods ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, were based upon the estimated effective income tax rate applicable for the full year after giving effect to any significant items related specifically to interim periods. When calculating the annual estimated effective income tax rates for the ~~six~~nine-month periods ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, we were subject to loss limitation rules. These loss limitation rules require any taxable loss associated with our U.S. or foreign operations to be excluded from the annual estimated effective income tax rate calculation if it was determined that no income tax benefit could be recognized during the current fiscal year. The effective income tax rate can be affected over the fiscal year by the mix and timing of actual earnings from our U.S. operations and foreign subsidiaries located in China, Canada, Haiti, and Vietnam versus annual projections, as well as changes in foreign currency exchange rates in relation to the U.S. dollar.

The following schedule summarizes the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements for the sixI-~~month periods ending October 27, 2024, and October 29, 2023:~~25

	October 27,			October 29,
	2024			2023
U.S. federal income tax rate		21.0	%		21.0	%
U.S. valuation allowance		(18.8	)		(32.8	)
Tax effects of local currency foreign exchange (losses) gains		(4.5	)		5.1
Uncertain income tax positions		2.6			(0.1	)
Withholding taxes associated with foreign jurisdictions		(0.7	)		(9.9	)
Foreign income tax rate differential		—			(5.7	)
Stock-based compensation		(0.4	)		(4.2	)
Other		(0.7	)		(0.2	)
	(1.5)%			(26.8)%

The following schedule summarizes the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements for the nine-month periods ended January 26, 2025, and January 28, 2024:

Our consolidated effective income tax rates for the first half of fiscal 2025 and the first half of fiscal 2024 were both adversely affected by the mix of earnings between our U.S. operations and foreign subsidiaries, as our taxable income stems mostly from our operations located in China, which has a higher income tax rate than the U.S. In addition, during the first half of fiscal 2025 and the first half of 2024, we incurred pre-tax losses associated with our U.S. operations, for which an income tax benefit was not recorded due to a full valuation allowance applied against our U.S. net deferred income tax assets. The income tax charge associated with the full valuation allowance applied against our U.S. net deferred income tax assets was higher during the first half of fiscal 2025 compared with the first half of fiscal 2024, as our $(12.4) million U.S. pre-tax loss incurred during the first half of fiscal 2025 was significantly greater than the $(5.8) million U.S. pre-tax loss incurred during the first half of fiscal 2024.


	January 26,			January 28,
	2025			2024
U.S. federal income tax rate		21.0	%		21.0	%
U.S. valuation allowance		(26.2	)		(42.0	)
Tax effects of local currency foreign exchange gain		0.7			3.8
Uncertain income tax positions		4.3			(0.1	)
Withholding taxes associated with foreign jurisdictions		(1.5	)		(8.1	)
Captial expenditure deduction - Quebec Canada		(1.1	)		—
Foreign income tax rate differential		(0.8	)		(5.2	)
Stock-based compensation		(0.4	)		(2.9	)
Other		0.1			0.1
	(3.9)%			(33.4)%

~~During~~Our consolidated effective income tax rates for the first ~~half~~nine months of fiscal 2025, weand ~~incurred~~2024 awere ~~greater~~both ~~consolidated~~adversely ~~pre-tax~~affected ~~loss~~by ~~totaling~~the ~~$(12~~mix of earnings between our U.7)S. ~~million~~operations and foreign subsidiaries, ~~compared~~as ~~with~~our ~~$(4~~taxable income stems mostly from our operations located in China, which has a higher income tax rate than the U.5)S. ~~million~~In addition, during the first ~~half~~nine months of fiscal ~~2024.~~2025 Asand athe ~~result~~first nine months of 2024, ~~the~~we ~~principal~~incurred ~~differences~~pre-tax ~~between~~losses associated with our U.S. operations for which an income tax ~~expense~~benefit atwas ~~the~~not recorded due to a full valuation allowance applied against our U.S. ~~federal~~net deferred income tax ~~rate~~assets. ~~and~~The income tax charge associated with the ~~effective~~full valuation allowance applied against our U.S. net deferred income tax ~~rate~~assets ~~reflected~~was inhigher during the ~~consolidated~~first ~~financial~~nine ~~statements~~months ~~were~~of ~~more~~fiscal ~~pronounced~~2025 ~~during~~compared with the first ~~half~~nine months of fiscal 2024, as ~~compared~~our ~~with~~$(16.8) million U.S. pre-tax loss incurred during the first ~~half~~nine months of fiscal 2025 was greater than the $(11.3) million U.S. pre-tax loss incurred during the first nine months of fiscal 2024.

During the first nine months of fiscal 2025, we incurred a greater consolidated pre-tax loss totaling $(16.4) million, compared with $(6.7) million during the first nine months of fiscal 2024. As a result, the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during the first nine months of fiscal 2024, as compared with the first nine months of fiscal 2025.

U.S. Valuation Allowance

We evaluate the realizability of our U.S. net deferred income tax assets 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 January 26, 2025, we evaluated the realizability of our U.S. net deferred income tax assets to determine if a full valuation allowance was 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 from 2022 through 2024, and we currently expect significant U.S. pre-tax losses to continue during fiscal 2025. 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 January 26, 2025, January 28, 2024, and April 28, 2024, valuation allowances against our net deferred income tax assets pertain to the following:


(dollars in thousands)	January 26, 2025		January 28, 2024		April 28, 2024
U.S. federal and state net deferred income tax assets	$	23,962	$	19,162	$	19,674
U.S. capital loss carryforward		2,330		2,330		2,330
	$	26,292	$	21,492	$	22,004

I-26

As of October 27, 2024, we evaluated the realizability of our U.S. net deferred income tax assets to determine if a full valuation allowance was 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 from 2022 through 2024, and we are currently expecting significant U.S. pre-tax losses to continue during fiscal 2025. 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 October 27, 2024, October 29, 2023, and April 28, 2024, valuation allowances against our net deferred income tax assets pertain to the following:

(dollars in thousands)	October 27, 2024		October 29, 2023		April 28, 2024
U.S. federal and state net deferred income tax assets	$	22,060	$	17,839	$	19,674
U.S. capital loss carryforward		2,330		2,330		2,330
	$	24,390	$	20,169	$	22,004

Undistributed Earnings

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 foreign subsidiaries that will not be reinvested indefinitely. As of ~~October~~January 2726, ~~2024~~2025, we assessed the liquidity requirements of our U.S. parent company and determined that our undistributed earnings and profits from our foreign subsidiaries would not be reinvested indefinitely and would eventually be distributed to our U.S. parent company. The conclusion reached from this assessment was consistent with prior reporting periods.

As a result of the 2017 Tax Cuts and Jobs Act, a U.S. corporation is allowed a 100% dividend received deduction for earnings and profits received from a 10% owned foreign corporation. 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, as of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, we recorded a deferred income tax liability of $5.01 million, $4.67 million, and $4.8 million, respectively.

Uncertain Income Tax Positions

An unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period if the more-likely-than-not recognition threshold is met by the end of the reporting period, or is effectively settled through examination, negotiation, or litigation, or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired. 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.

As of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, we had a total of $1.4 million, $1.2 million, and $1.3 million ~~total~~ of gross unrecognized income tax benefits, of which the entire amount was classified as income taxes payable – long-term in the accompanying Consolidated Balance Sheets. As of ~~October~~January 2726, ~~2024~~2025, the unrecognized tax benefit would favorably affect income tax expense in future periods by $1.4 million.

Our gross unrecognized income tax benefit of $1.4 million as of ~~October~~January 2726, ~~2024~~2025, relates to income tax positions for which significant change could occur within the next year if the statute of limitations for relevant taxing authorities to examine and challenge the tax position expires.

I-27

Income Taxes Paid

The following table sets forth taxes paid by jurisdiction:

	Six Months			Six Months
	Nine Months			Nine Months
	Ended			Ended
	October 27,			October 29,
	January 26,			January 28,
(dollars in thousands)	~~2024~~2025			~~2023~~2024
United States Transition Tax Payment		665			499
China Income Taxes, Net of Refunds		~~578~~1,566			1,~~278~~803
Canada - Income Taxes, Net of Refunds		—(219	)		~~336~~468
	$	12,~~243~~012		$	2,~~113~~770

16. 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, restricted stock units, performance-based 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 ~~the~~ issuance ofunder the 2015 ~~Plan. The Amended and Restated Plan also removed certain sub-limits that previously applied with respect to specific types of awards that may be issued under the plan.~~

~~As of October 27, 2024, there were 460,543 shares available for future equity~~I-~~based grants under the Amended and Restated Plan.~~27

Plan. The Amended and Restated Plan also removed certain sub-limits that previously applied with respect to specific types of awards that may be issued under the 2015 plan.

As of January 26, 2025, there were 451,537 shares available for future equity-based grants under the Amended and Restated Plan.

Performance-Based Restricted Stock Units

We grant performance-based restricted stock units to senior executives which could earn up to a certain number of shares of common stock if certain performance targets are met over a three-fiscal year performance period as defined in the related restricted stock unit award agreements. The number of shares of common stock that are earned based on performance targets that have been achieved may be adjusted based on a market-based total shareholder return component as defined in the related restricted stock unit award agreements.

Our performance-based restricted stock units granted to senior executives were measured based on their fair market value on the date of grant. The fair market value per share was determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock for the performance-based component.

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


	August 8,			January 8,			September 28,			August 10,
		2024		2024			2023			2022
Closing price of our common stock	$	4.65		$	5.61		$	5.59		$	5.06
Expected volatility of our common stock		35.0	%		33.5	%		37.3	%		48.2	%
Expected volatility of peer companies	22.6- 104.0		%	33.7 - 102.6		%	35.7- 91.5		%	41.6 - 105.1		%
Risk-free interest rate		3.90	%		4.3	%		4.9	%		3.13	%
Dividend yield		-	%		-	%		-	%		-	%
Correlation coefficient of peer companies	(0.01) - 0.17			0.01 - 0.21			0.01 - 0.21			0.05 - 0.23

IThe following table summarizes information related to our grants of performance-28based restricted stock units associated with senior executives that were unvested as of January 26, 2025:

The following table summarizes information related to our grants of performance-based restricted stock units associated with senior executives that were unvested as of October 27, 2024:


	(2)		(3)
	Performance-Based		Restricted Stock
	Restricted Stock		Units Expected
Date of Grant	Units Awarded		to Vest		Price Per Share			Vesting Period
August 8, 2024 (1)		505,003		50,500	$	5.35	(4)	36 months
January 8, 2024 (1)		24,598		4,238	$	6.23	(5)	31 months
September 28, 2023 (1)		192,771		—	$	6.43	(6)	34 months
August 10, 2022 (1)		146,048		—	$	5.77	(7)	3 years

(1)

	(2)		(3)
	Performance-Based		Restricted Stock
	Restricted Stock		Units Expected
Date of Grant	Units Awarded		to Vest		Price Per Share			Vesting Period
August 8, 2024 (1)		505,003		50,500	$	5.35	(4)	36 months
January 8, 2024 (1)		24,597		8,501	$	6.23	(5)	31 months
September 28, 2023 (1)		192,771		—	$	6.43	(6)	34 months
August 10, 2022 (1)		146,048		—	$	5.77	(7)	3 years

Performance-based restricted stock units awarded to senior executives.

(2)

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 agreements.

(3)

Compensation cost is based on an assessment each reporting period to determine the probability of whether or not certain performance goals 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 were expected to vest as of ~~October~~January 2726, ~~2024~~2025.

(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 a senior executive on January 8, 2024.~~

I-28

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 a senior executive 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.

(7)

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

There were no performance-based restricted stock units that vested during the ~~six~~nine-month periods ended ~~October~~January 2726, ~~2024~~2025 and ~~October~~January 2928, ~~2023~~2024, respectively.

We recorded compensation expense of $3349,000 and $2367,000 within selling, general, and administrative expenses associated with our performance-based restricted stock unit awards for the ~~six~~nine-month periods ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, respectively. Compensation expense 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 shares are expected to be earned as of the end of the vesting period. If certain performance goals are not expected to be achieved, compensation expense would not be recorded, and any previously recognized compensation expense would be reversed.

As of ~~October~~January 2726, ~~2024~~2025, the remaining unrecognized compensation expense related to our performance-based restricted stock units was $~~283~~240,000, which is expected to be recognized over a weighted average vesting period of 2.64 years. As of ~~October~~January 2726, ~~2024~~2025, performance-based restricted stock units that are expected to vest had a fair value of $~~333~~291,000.

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Time-Based Restricted Stock Units

The following table summarizes information related to our grants of time-based restricted stock unit awards associated with senior executives, key employees, and outside directors that were unvested as of ~~October~~January 2726, ~~2024~~2025:

	Time-Based
	Restricted Stock		(1)
Date of Grant	Units Awarded		Price Per Share		Vesting Period
January 6, 2025 (3)		21,506	$	5.69	3 years
September 26, 2024 (2)		46,823	$	5.98	1 year
August 8, 2024 (3)		2317,~~300~~900	$	4.65	36 months
January 8, 2024 (3)		14,758	$	5.61	31 months
September 28, 2023 (3)		9086,~~951~~551	$	5.59	34 months
September 6, 2022 (3)		12,557	$	4.58	3 years
August 10, 2022 (3)		6462,~~753~~053	$	5.06	335 ~~years~~months

(1)

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

(2)

Time-based restricted stock units awarded to outside directors.

(3)

Time-based restricted stock units awarded to senior executives and key employees.

During the ~~six~~nine-month period ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, time-based restricted stock units totaling 103,320, vested at a fair value of $581,000, or $5.63 per share. During the ~~six~~nine-month period ~~ending~~ended ~~October~~January 2928, ~~2023~~2024, time-based restricted stock units totaling 151,~~652~~653, vested at a fair value of $857,000, or $5.65 per share.

We recorded compensation expense of $~~332~~473,000 and $~~378~~597,000 within selling, general, and administrative expenses associated with our time-based restricted stock unit awards for the ~~six~~nine-month periods ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, respectively.

As of ~~October~~January 2726, ~~2024~~2025, the remaining unrecognized compensation expense related to our time-based restricted stock units was $~~813~~731,000, which is expected to be recognized over a weighted average vesting period of 1.5 years. As of ~~October~~January 2726, ~~2024~~2025, the time-based restricted stock units that are expected to vest had a fair value totaling $1.4 million.

I-29

Immediately Vested Common Stock Awards

We granted a total of 16,616 shares of common stock to our outside directors on July 3, 2023. These shares of common stock vested immediately and were measured at their fair value on the date of the grant. The fair value of these awards was $5.04 per share on July 3, 2023, which represents the closing price of our common stock on the date of grant.

We recorded $84,000 of compensation expense within selling, general, and administrative expenses for common stock awards that immediately vested to our outside directors during the ~~six~~nine-month period ended ~~October~~January 2928, ~~2023~~2024.

17. Leases

Overview

We lease manufacturing facilities, showroom and office space, distribution centers, and equipment under operating lease arrangements. Our operating leases have remaining lease terms of one to seven 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 ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, are as follows:

(dollars in thousands)

~~October~~January 2726,~~2024~~2025

~~October~~January 2928,~~2023~~2024

April 28, 2024

Right of use assets

46,~~239~~103

6,~~874~~952

6,203

Operating lease liability - current

12,~~108~~025

2,~~540~~524

2,061

Operating lease liability – noncurrent

13,~~958~~127

2,~~431~~656

2,422

I-30

Supplemental Cash Flow Information

	Six MonthsEnded		Six MonthsEnded
	Nine MonthsEnded		Nine MonthsEnded
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024
Operating lease liability payments	$	1,~~319~~694	$	1,~~330~~992
Right of use assets exchanged for lease liabilities		—2,660		~~157~~978

Operating lease expense for the three-month periods ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, was $~~643~~683,000 and $~~781~~789,000, respectively. Operating lease expense for the ~~six~~nine-month periods ended January ~~October 27~~26, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, was $12.41 million and $12.63 million, respectively. Short-term lease and variable lease expenses were immaterial for the three-month and ~~six~~nine-month periods ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024.

Other Information

Maturity of our operating lease liabilities for the remainder of fiscal 2025, the subsequent next four fiscal years, and thereafter follows:

(dollars in thousands)
2025		~~639~~655
2026		~~942~~2,217
2027		~~607~~1,556
2028		~~225~~388
2029		227
Thereafter		576
	$	35,~~216~~619
Less: interest		(~~150~~467	)
Present value of lease liabilities	$	35,~~066~~152

~~As of October 27, 2024, the weighted average remaining lease term and discount rate for our operating leases follows:~~I-30

	October 27, 2024
Weighted average lease term (in years)	4.24
Weighted average discount rate		3.30	%

As of January 26, 2025, the weighted average remaining lease term and discount rate for our operating leases follows:

Subsequent Lease Activity


	January 26, 2025
Weighted average lease term (in years)	3.24
Weighted average discount rate		5.50	%

The lease for our corporate offices and shared service departments located in High Point, North Carolina expires on November 30, 2024 (third quarter fiscal 2025). We entered a new lease at the same location with a commencement date of December 1, 2024. Under the new lease agreement, we expect to generate annualized savings of approximately $360,000. The reduction in lease expense is part of the Fiscal 2025 Restructuring Plan described in Note 10. The lease liability and right of use asset associated with the new lease are expected to be $774,000 on the commencement date.

18. Commitments and Contingencies

Litigation

The company is involved from time to time in legal proceedings and claims which ~~have~~arise ~~arisen~~ in the ordinary course of business. Management has determined that it is not reasonably possible that ~~these~~any pending actions, when ultimately concluded and settled, will have a material adverse effect upon the consolidated financial position, consolidated results of operations, or consolidated cash flows of the company.

Accounts Payable – Capital Expenditures

As of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, we had amounts due regarding capital expenditures totaling $~~602~~439,000, $~~298~~19,000, and $343,000, respectively, which pertained to outstanding vendor invoices, none of which were financed.

Purchase Commitments – Capital Expenditures

As of ~~October~~January 2726, ~~2024~~2025, we had open purchase commitments to acquire equipment for our mattress fabrics segment totaling $~~571~~600,000.

I-31

19. 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 ~~October~~January 2726, ~~2024~~2025, the statutory surplus reserve fund represents the 50% registered capital requirement, and therefore, our subsidiary located in China is no longer required to transfer 10% of its net income in accordance with PRC accounting rules and regulations.

The transfer to this reserve must be made before distributions of any dividend to shareholders. As of ~~October~~January 2726, ~~2024~~2025, the company’s statutory surplus reserve was $4.10 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 $4.10 million, to assist with debt repayment, capital expenditures, and other expenses of the company’s business.

20. 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 the common stock repurchase program, shares may be purchased from time to time in open market transactions, block trades, through plans established under the Securities Exchange Act Rule 10b5-1, or otherwise. The number of shares purchased and the timing of such purchases are based on working capital requirements, market and general business conditions, and other factors, including alternative investment opportunities.

We did not repurchase any shares of common stock during the ~~six~~nine-month periods ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, respectively.

As of ~~October~~January 2726, ~~2024~~2025, $3.2 million is available for additional repurchases of our common stock.

I-3231

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This report contains “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties that may cause actual events and results to differ materially from such statements. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often but not always characterized by qualifying words such as “expect,” “believe,” “will,” “may,” “should,” “could,” “potential,” “continue,” “target,” “predict”, “seek,” “anticipate,” “estimate,” “intend,” “plan,” “project,” and their derivatives, and include but are not limited to statements about expectations, projections, or trends for our future operations, strategic initiatives and plans, restructuring actions, production levels, new product launches, sales, profit margins, profitability, operating (loss) income, capital expenditures, working capital levels, cost savings (including, without limitation, anticipated cost savings from restructuring actions), income taxes, SG&A or other expenses, pre-tax (loss) income, earnings, cash flow, and other performance or liquidity measures, as well as any statements regarding dividends, share repurchases, liquidity, use of cash and cash requirements, ending cash balances and cash positions, borrowing capacity, investments, potential acquisitions, cash and non-cash restructuring and restructuring-related charges, expenses, and/or credits, net proceeds from restructuring-related asset dispositions, future economic or industry trends, public health epidemics, or future developments. There can be no assurance that we will realize these expectations or meet our guidance, or that these beliefs will prove correct.

Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, demand for home furnishing products, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on our business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect us adversely. The future performance of our business depends in part on our success in conducting and finalizing acquisition negotiations and integrating acquired businesses into our existing operations. Changes in consumer tastes or preferences toward products not produced by us could erode demand for our products. Changes in tariffs or trade policy, including changes in U.S. trade enforcement priorities, or changes in the value of the U.S. dollar versus other currencies, could affect our financial results because a significant portion of our operations are located outside the United States. Strengthening of the U.S. dollar against other currencies could make our products less competitive on the basis of price in markets outside the United States, and strengthening of ~~currencies~~currency in ~~Canada and~~ China can have a negative impact on our sales of products produced ~~in those places~~there. In addition, because our foreign operations use the U.S. dollar as their functional currency, changes in the exchange rate between the local currency of those operations and the U.S dollar can affect our reported profits from those foreign operations. Also, economic or political instability in international areas could affect our operations or sources of goods in those areas, as well as demand for our products in international markets. The impact of public health epidemics on employees, customers, suppliers, and the global economy, such as the recent coronavirus pandemic, could also adversely affect our operations and financial performance. In addition, the impact of potential asset impairments, including impairments of property, plant, and equipment, inventory, or intangible assets, as well as the impact of valuation allowances applied against our net deferred income tax assets, could affect our financial results. Increases in freight costs, labor costs, and raw material prices, including increases in market prices for petrochemical products, can also significantly affect the prices we pay for shipping, labor, and raw materials, respectively, and in turn, increase our operating costs and decrease our profitability. Also, our success in diversifying our supply chain with reliable partners to effectively service our global platform could affect our operations and adversely affect our financial results. Finally, the future performance of our business also depends on our ability to successfully restructure our mattress fabric operations and return the segment to profitability. Further information about these factors, as well as other factors that could affect our future operations or financial results and the matters discussed in forward-looking statements, is included in Item 1A “Risk Factors” in our most recent Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission.

Many of these factors are macroeconomic in nature and are, therefore, beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this report as anticipated, believed, estimated, expected, intended, planned or projected. The forward-looking statements included in this report are made only as of the date of of this report. Unless required by United States federal securities laws, we neither intend nor assume any obligation to update these forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations or financial results.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes and other exhibits included elsewhere in this report.

General

Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30. The ~~six~~nine months ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024, both represent 2639-week periods.

Our operations are classified into two business segments: mattress fabrics and upholstery fabrics.

Mattress Fabrics

The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. Currently, we have a mattress ~~fabric~~fabrics manufacturing ~~operations~~operation located in Stokesdale, North Carolina, and ~~Quebec,~~a ~~Canada.~~sewn ~~We also have a~~ mattress cover operation located in Ouanaminthe, Haiti.

On April 29, 2024 (the first quarter of fiscal 2025), our board of directors made a decision to (1) consolidate the company's North American mattress fabrics operations, including a gradual discontinuation of operations and sale of the company's manufacturing facility located in Quebec, Canada; (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 mattress fabrics segment's weaving operation to a strategic sourcing model through the company's long standing supply partners; and (4) consolidate the company's sewn mattress cover operation located in Ouanaminthe, Haiti, from two leased facilities into one building and reduce other operating expenses at this location.; and (5) reduce unallocated corporate expenses and shared service expenses. See Note 10 of the consolidated financial statements for further details regarding our restructuring activities.

Upholstery Fabrics

The upholstery fabrics segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers. We have upholstery fabric operations located in Shanghai, China, and Burlington, North Carolina. During the fourth quarter of fiscal 2024, we established a wholly owned subsidiary, Culp Fabrics Vietnam ~~Limited~~Company Ltd., with an administrative office located in Ho Chi Minh City, Vietnam, for the purpose of enhancing our strategic sourcing ~~opportunities~~capabilities and to further diversify our supply chain in Asia.

Additionally, Read Window Products, LLC (“Read”), a wholly owned subsidiary with operations located in Knoxville, Tennessee, and Burlington, North Carolina (established during the first quarter of fiscal 2025 within an existing upholstery fabrics facility), provides window treatments and sourcing of upholstery fabrics and other products, as well as related measuring and installation services ~~for Read’s products~~, to customers in the hospitality and commercial ~~industries~~markets. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows.

Executive Summary

We evaluate the operating performance of our business segments based upon (loss) income from operations before certain unallocated corporate expenses and other items that are not expected to occur on a regular basis. Cost of sales for each business segment includes costs to develop, manufacture, and/or source our products, including costs such as raw material and finished good purchases, direct and indirect labor, overhead, and incoming freight charges. Unallocated corporate expenses primarily represent compensation and benefits for certain executive officers and their support staff, all costs associated with being a public company, amortization of intangible assets, and other miscellaneous expenses.

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Results of Operations

	Three Months Ended
(dollars in thousands)	~~October~~January 2726,~~2024~~2025			~~October~~January 2928, ~~2023~~2024			Change
Net sales	$	5552,~~674~~253		$	5860,~~725~~418		(513.25)%
Gross profit		56,~~990~~347			7,~~950~~703		(2417.76)%
Gross margin		1012.81	%		1312.57	%	(~~270~~60)bp
Selling, general, and administrative expenses		98,~~359~~579			109,~~045~~493		(69.86)%
Restructuring expense		2,031			144		N.M.
Restructuring expense (credit)		1,655			(50	)	N.M.
Loss from operations		(53,~~400~~887	)		(21,~~239~~740	)	~~141~~123.24%
Operating margin		(9.7.4	)%		(32.89	)%	(~~590~~450)bp
Loss before income taxes		(53,~~694~~680	)		(12,~~908~~161	)	~~198~~70.43%
Income tax benefit (expense)		50			(516	)	(109.7)%
Income tax expense		446			1,027		(56.6)%
Net loss		(54,~~644~~126	)		(23,~~424~~188	)	~~132~~29.84%

	Six Months Ended
	Nine Months Ended
(dollars in thousands)	~~October~~January 2726,~~2024~~2025			~~October~~January 2928, ~~2023~~2024			Change
Net sales	$	~~112~~164,~~211~~464		$	~~115~~175,~~387~~804		(26.85)%
Gross profit		1117,~~066~~414			1522,~~035~~737		(2623.4)%
Gross margin		910.96	%		1312.09	%	(~~310~~230)bp
Selling, general, and administrative expenses		1827,~~655~~235			1929,~~874~~366		(67.13)%
Restructuring expense		46,~~662~~317			~~482~~432		N.M.
Loss from operations		(1216,~~251~~138	)		(57,~~321~~061	)	~~130~~128.26%
Operating margin		(~~10.~~9.8	)%		(4.60	)%	(~~630~~580)bp
Loss before income taxes		(1216,~~715~~396	)		(46,~~549~~710	)	~~179~~144.54%
Income tax expense		(~~190~~635	)		(12,~~217~~244	)	(8471.47)%
Net loss		(1217,~~905~~031	)		(58,~~766~~954	)	~~123~~90.82%

Net Sales

Overall, our consolidated net sales for the ~~second~~third quarter of fiscal 2025 decreased by 513.25% compared with the same period a year ago, with mattress fabrics sales decreasing 4.26% and upholstery fabrics sales decreasing 622.43%. Our consolidated net sales for the first ~~half~~nine months of fiscal 2025 decreased by 26.85% compared with the same period a year ago, with mattress fabrics ~~sale~~sales decreasing 4.02% and upholstery fabrics sales decreasing 18.38%.

We continue to see sales in key areas of our business impacted by macroeconomic and market conditions outside of our control. The year-over-year decrease in net sales for our mattress fabrics segment for both the ~~second~~third quarter and the first ~~half~~nine months of fiscal 2025, aswas ~~compared~~driven toprimarily by continuing demand weakness in the ~~prior-year~~domestic ~~periods,~~bedding ~~reflects~~industry ~~reduced~~and ~~demand~~was asalso aimpacted ~~result~~by offewer ~~weakness~~shipping indays ~~the~~due ~~domestic~~to ~~mattress~~weather-related ~~industry~~disruptions. The year-over-year decrease in net sales for our upholstery fabrics segment for both the ~~second~~third quarter and the first ~~half~~nine months of fiscal 2025 was driven primarily by persistent softness in the home furnishings industry. Sales for the third quarter also reflect a related order reduction from a significant customer to better align its inventory with the low demand environment, as ~~compared~~well as fewer shipping days due to weather-related disruptions. Despite what remains a challenging landscape across the ~~prior-year~~industries ~~periods~~in which we compete, ~~reflects~~we ~~reduced~~have ~~demand~~made ~~for~~significant investments and enhancements to our ~~residential~~production ~~upholstery~~platform ~~fabric~~and ~~products~~go-to-market ~~due~~strategies that we believe will generate opportunities to ~~weakness~~increase insales ~~the~~and ~~residential~~market ~~home~~share ~~furnishings~~when ~~industry~~overall business conditions ultimately improve.

See the Segment Analysis section below for further details.

Loss Before Income Taxes

Overall, our loss before income taxes for the ~~second~~third quarter of fiscal 2025 was $(53.7) million, compared with loss before income taxes of $(12.92) million for the prior-year period, while our loss before income taxes for the first ~~six~~nine months of fiscal 2025 was $(1216.74) million, compared with loss before income taxes of $(46.57) million for the prior-year period.

~~Operating~~Loss ~~performance~~before income taxes for both the ~~second~~third quarter and the first ~~half~~nine months of fiscal 2025, as compared to the prior-year periods, was negatively affected by lower sales and by manufacturing inefficiencies primarily related to the significant restructuring activity underway inthat mostly related to the mattress fabrics segment, along with a restructuring and restructuring related ~~charges~~charge ~~during~~of ~~both periods (~~$2.83 million during the ~~second~~third quarter of fiscal 2025, as compared to a restructuring and restructuring related credit of $66(111,000) during the ~~second~~third quarter of fiscal 2024, and a restructuring and restructuring related charge of $57.58 million during the first ~~half~~nine months of fiscal 2025, as compared to a restructuring related charge of $~~583~~472,000 during the first ~~half~~nine months of fiscal 2024).

I-34

See the Segment Analysis section below for further details.

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Income Taxes

We recorded income tax expense of $~~190~~635,000, or (13.59%) of loss before income taxes, for the ~~six~~nine-month period ended ~~October~~January 2726, ~~2024~~2025, compared with income tax expense of $12.2 million, or (2633.84%) of loss before income taxes, for the ~~six~~nine-month period ended ~~October~~January 2928, ~~2023~~2024.

Our consolidated effective income tax rates for the first ~~half~~nine months of fiscal 2025 and ~~the first half of fiscal~~ 2024 were both adversely affected by the mix of earnings between our U.S. operations and foreign subsidiaries, as our taxable income stems mostly from our operations located in China, which has a higher income tax rate than the U.S. In addition, during the first ~~half~~nine months of fiscal 2025 and the first ~~half~~nine months of ~~fiscal~~ 2024, we incurred pre-tax losses associated with our U.S. operations, for which an income tax benefit was not recorded due to a full valuation allowance applied against our U.S. net deferred income tax assets. The income tax charge associated with the full valuation allowance applied against our U.S. net deferred income tax assets was higher during the first ~~half~~nine months of fiscal 2025 compared with the first ~~half~~nine months of fiscal 2024, as our $(1216.48) million U.S. pre-tax loss incurred during the first ~~half~~nine months of fiscal 2025 was ~~significantly~~ greater than the $(511.83) million U.S. pre-tax loss incurred during the first ~~half~~nine months of fiscal 2024.

During the first ~~half~~nine months of fiscal 2025, we incurred a greater consolidated pre-tax loss totaling $(1216.74) million, compared with $(46.57) million during the first ~~half~~nine months of fiscal 2024. As a result, the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during the first ~~half~~nine months of fiscal 2024, as compared with the first ~~half~~nine months of fiscal 2025.

Refer to Note 15 of the consolidated financial statements for further details regarding our provision for income taxes.

Liquidity

As of ~~October~~January 2726, ~~2024~~2025, our cash and cash equivalents (collectively, “cash”) totaled $~~10.~~5.3 million, which represents a ~~slight~~decrease ~~increase~~of $4.7 million compared with cash of $10.0 million as of April 28, 2024. This ~~increase~~decrease was ~~mostly~~primarily ~~due~~attributable to ~~$4.0~~(i) ~~million~~net in cash ~~proceeds~~used ~~from~~in ~~borrowings~~operating onactivities atotaling ~~line~~$9.4 ofmillion, ~~credit~~and ~~associated~~(ii) ~~with~~capital ~~our~~expenditures ~~operations~~totaling ~~located~~$2.4 inmillion, ~~China~~partially ~~and~~offset ~~527,000~~by in(iii) ~~cash~~net ~~proceeds~~borrowings from ~~the~~our ~~sale~~lines of ~~equipment~~credit ~~associated~~totaling ~~with our restructuring activities, mostly offset by~~ $15.64 million inand ~~capital~~(iv) ~~expenditures~~proceeds ~~and~~from ~~$2.6~~the ~~million~~sale of ~~net~~equipment ~~cash~~of ~~used~~$1.5 ~~in operating activities~~million.

Our net cash used in operating activities was $29.64 million during the first ~~half~~nine months of fiscal 2025, aan ~~decrease~~increase of $13.94 million compared with net cash used in operating activities of $46.50 million during the first ~~half~~nine months of fiscal 2024. This trend mostly reflects (i) ana ~~increase~~significant indecrease ~~accounts payable due to an increase~~ in ~~inventory~~cash ~~purchases with significant vendors who extended their terms during the first half of fiscal 2025 compared with fiscal 2024~~earnings, ~~partially offset by~~ (ii) an increase in inventory purchases to maintain an appropriate level ~~of inventory~~ during the company's restructuring activities, as described below in the section titled “—Segment Analysis—Mattress Fabrics Segment—Restructuring Activities,” and (iii) an increase in accounts receivable primarily due to longer payment trends related to a higher sales mix with customers with longer credit terms, partially offset by higher accounts payable due to an increase in ~~net~~inventory ~~sales~~purchases from significant vendors who extended their payment terms during the ~~second~~first ~~quarter~~nine months of fiscal 2025, as compared with the ~~fourth~~first ~~quarter~~nine ofmonths fiscal 2024.

As of ~~October~~January 2726, ~~2024~~2025, we had outstanding borrowings totaling $45.14 million under a line of credit agreement associated with our operations located in China.

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Segment Analysis

Mattress Fabrics Segment

	Three Months Ended
(dollars in thousands)	~~October~~January 2726,~~2024~~2025			~~October~~January 2928, ~~2023~~2024			Change
Net sales	$	3028,~~074~~642		$	3130,~~377~~021		(4.26)%
Gross profit		2,~~444~~743			21,~~483~~520		(180.6)5%
Gross profit margin		89.16	%		75.91	%	~~20bp~~450bp
Selling, general, and administrative expenses		3,~~481~~176			3,~~419~~102		12.84%
Restructuring expense		21,~~002~~647			—		100.0%
Loss from operations		(~~1,037~~433	)		(~~936~~1,582	)	10(72.86)%
Operating margin		(31.45	)%		(35.03	)%	~~(40)bp~~380bp

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	Nine Months Ended
(dollars in thousands)	January 26, 2025			January 28, 2024			Change
Net sales	$	86,792		$	90,619		(4.2)%
Gross profit		4,862			5,997		(18.9)%
Gross profit margin		5.6	%		6.6	%	(100)bp
Selling, general, and administrative expenses		9,880			9,913		(0.3)%
Restructuring expense		6,148			—		100.0%
Loss from operations		(5,018	)		(3,916	)	28.1%
Operating margin		(5.8	)%		(4.3	)%	(150)bp

	Six Months Ended
(dollars in thousands)	October 27,2024			October 29, 2023			Change
Net sales	$	58,150		$	60,599		(4.0)%
Gross profit		2,118			4,477		(52.7)%
Gross profit margin		3.6	%		7.4	%	(380)bp
Selling, general, and administrative expenses		6,704			6,811		(1.6)%
Restructuring expense		4,501			—		100.0%
Loss from operations		(4,586	)		(2,334	)	96.5%
Operating margin		(7.9	)%		(3.9	)%	(400)bp

Net Sales

Mattress fabrics sales decreased 4.26% in the ~~second~~third quarter of fiscal 2025 compared to the prior-year period. Mattress fabrics sales decreased 4.02% in the first ~~half~~nine months of fiscal 2025 compared to the first ~~half~~nine months of fiscal 2024.

~~This~~The ~~decrease in net~~ sales ~~for~~declines ~~our~~in the mattress fabrics segment ~~for~~stem ~~both~~primarily from what remains a muted demand environment across the ~~second~~domestic mattress market driven by macroeconomic uncertainty among consumers and its impacts on residential real estate markets and discretionary spending. However, during the quarter we continued to execute on a variety of significant measures designed to align our manufacturing costs and capacity with the ~~first~~slower ~~half~~buying activity evident across the mattress industry. As planned, we completed the vast majority of the restructuring initiatives in our mattress fabrics segment announced earlier in fiscal 2025, ~~reflects~~including ~~reduced~~the ~~demand~~closure ~~due~~of our Canadian manufacturing operations and related consolidation of equipment and resources. As a result, we believe we are now better positioned to ~~weakness~~service customers in the ~~domestic~~U.S. ~~mattress~~market ~~industry~~through our vertical, ~~driven~~textiles-forward byfacility ain ~~challenging~~North ~~macroeconomic~~Carolina. ~~environment~~See ~~that~~“—Restructuring ~~has~~Activities” ~~affected~~below for further details. Moving forward, we expect the current general economic and consumer ~~discretionary~~uncertainty ~~spending~~to present challenges, but we believe our execution on plans to restructure our platform and ~~housing~~refine ~~markets~~our go-to-market strategies should position our mattress fabrics segment for sales momentum and market share gains when the macroeconomic fundamentals begin to shift and provide the necessary foundation for a recovery cycle in the mattress industry.

~~Based~~The onpotential ~~demand trends and~~ ongoing ~~macroeconomic~~geopolitical ~~challenges,~~disruptions werelated ~~took~~to ~~aggressive~~conflicts ~~action~~in ~~during~~Ukraine and the ~~first~~Middle ~~quarter~~East, ofas ~~fiscal~~well ~~2025~~as tothe ~~bring~~potential ~~our~~impact ~~manufacturing~~of ~~costs~~future ~~and~~tariffs, ~~capacity~~depend inon ~~line~~factors ~~with~~beyond ~~current~~our control and ~~expected~~we ~~demand.~~cannot Wereasonably ~~announced~~estimate athe ~~major~~impact ~~restructuring~~of ~~plan~~these ~~primarily~~items ~~focused~~ on ~~the~~our mattress fabrics segment. Moreover, ~~early~~we innote ~~the~~that ~~first~~if ~~quarter~~these ofsituations ~~fiscal~~worsen ~~2025,~~ and weshipping ~~are~~disruptions ~~making~~occur ~~steady~~or ~~progress~~new ontariffs ~~the~~are ~~execution~~imposed ofon ~~this~~our ~~restructuring plan~~products, ~~which~~the isimpact ~~expected~~on toour beoperations ~~mostly~~and/or ~~completed~~on byour ~~the~~suppliers, ~~end~~customers, ofconsumers, and the ~~third~~global ~~quarter~~economy ofcould ~~fiscal~~adversely ~~2025. See~~affect ~~“—Restructuring~~our ~~Activities”~~financial ~~below for further details~~performance.

Looking ahead, we are diligently focused on winning new placements to increase revenue and margins. However, with no ascertainable catalysts that might be expected to drive recovery in the near term, we expect the current macroeconomic environment will continue to pressure consumer spending and housing market trends (and our net sales) for some time. In the face of these macro headwinds, we are working to manage the aspects of our business we can control, including the execution of our restructuring plan. We believe the strategic actions we are taking will position us for profitable growth opportunities, but greater macro-industry and end-consumer support will be needed to drive recovery in the mattress industry and support our future sales growth. Additionally, the potential ongoing geopolitical disruptions related to wars in Ukraine and the Middle East, as well as the potential impact of future tariffs, remain unknown and depend on factors beyond our knowledge or control. These situations could cause disruption to global markets or increased costs that could adversely affect our operations and financial performance.

Gross Profit, Selling, General & Administrative Expenses, and Loss from Operations

Loss from operations was $~~1.0~~433,000 ~~million~~ for the ~~second~~third quarter of fiscal 2025, compared to loss from operations of $~~936,000~~1.6 million for the ~~second~~third quarter of fiscal 2024. Loss from operations was $45.60 million for the first ~~half~~nine months of fiscal 2025, compared to loss from operations of $2.3.9 million for the first ~~half~~nine months of fiscal 2024.

~~Operating~~Loss ~~performance~~from operations for both the ~~second~~third quarter and the first ~~half~~nine months of fiscal 2025, as compared to the prior-year periods, was ~~pressured~~impacted by lower sales ~~volumes~~ and manufacturing inefficiencies primarily related to ~~our~~the ~~significant~~above-referenced restructuring ~~initiatives~~activities. toHowever, ~~gradually~~with nearly ~~wind~~all ~~down~~of ~~our~~the ~~Canadian~~restructuring ~~operation~~initiatives ~~and~~now ~~move~~completed, ~~certain~~we ~~knitting~~are ~~equipment~~beginning to ~~our~~see ~~Stokesdale,~~the ~~North~~cost ~~Carolina,~~savings ~~manufacturing~~and ~~facility,~~efficiency ~~partially offset by lower fixed costs.~~

We expect manufacturing inefficiencies related our restructuring initiatives, as well as ongoing industry softness affecting sales volumes, will affect profitability through at least the third quarter of fiscal 2025, as we work to implement our restructuring plan to align capacity with current and expected demand. However, we expect these restructuring initiatives, once fully implemented, will enable the mattress fabrics segment to grow more efficiently and profitably with a lower level of fixed costs, even at currently depressed sales levels. See “—Restructuring Activities” below for further details. Importantly, these strategic steps do not limit our ability to grow the mattress fabrics business, but instead allow us to better optimize our global mix of manufacturing capabilities and longI-term sourcing partners. We will also consider further adjustments to right-size and restructure our operations as necessary to align with current demand levels, as well as additional reasonable pricing actions as competitive conditions permit to further mitigate and manage inflation.36

~~I-37~~improvements anticipated from those initiatives positively impact our results. See “—Restructuring Activities” below for further details.

Looking ahead, we enter our fourth quarter a more streamlined business, with greater operating efficiencies, a lower fixed cost and SG&A expense structure, and an agile, global production platform with domestic, nearshore and offshore locations. Moreover, we continue to explore the viability of additional strategic actions to enhance profitability under the current soft market conditions and better leverage any tailwinds flowing from an eventual recovery.

Restructuring Activities

On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to (1) consolidate the company's North American mattress fabrics operations, including a gradual discontinuation of operations and sale of the company's manufacturing facility located in Quebec, Canada; (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 mattress fabrics segment's weaving operation to a strategic sourcing model through the company's long standing supply partners; ~~and~~ (4) consolidate the company's ~~two leased facilities related to the~~ sewn mattress cover operation ~~into one facility~~ located in Ouanaminthe, Haiti, from two leased facilities into one building and reduce other operating expenses at this location.; and (5) reduce unallocated corporate expenses and shared service expenses.

WeAs ~~expect~~of the ~~gradual~~end ~~discontinuance~~ of ~~operations and~~ the ~~closure~~third quarter of ~~the~~fiscal 2025, production at our facility located in Quebec, Canada, ~~will~~has bebeen ~~completed~~discontinued byand ~~December~~we 31have entered into a conditional contract for the sale of the facility, ~~2024~~subject to due diligence and other conditions. The consolidation ~~activity~~of ~~associated~~our ~~with the~~ sewn mattress cover ~~operation~~operations located in Haiti was completed during the first quarter of fiscal 2025. For ~~These~~fiscal 2025, these actions are expected to result in restructuring and restructuring related charges ~~for the mattress segment~~ of approximately $78.25 million ~~during fiscal 2025~~, of which approximately $45.3 million is expected to be cash expenditures. The $8.5 million of estimated restructuring and restructuring related charges represents approximately $8.3 million and $155,000 associated with the mattress fabrics and upholstery fabrics segments, respectively.

The $78.25 million of estimated restructuring and restructuring related charges associated with our mattress fabrics segment represents (i) ~~other~~ associated costs of $23.73 million mostly related to relocating equipment from our facility in Quebec, Canada to our facility in Stokesdale, NCNorth Carolina, (ii) additional depreciation expense related to the shortening of useful lives of equipment associated with the gradual discontinuance of our operations located in Canada noted above totaling $1.3 million, (iii) employee termination benefits of $1.34 million, (iv) $1.15 million related to losses on disposal and valuation of inventory, and (v) lease termination costs of $~~860~~849,000, ~~(vi)~~ partially offset by net gains on the disposal of equipment totaling $~~110~~42,000. These restructuring and restructuring related charges exclude any expected gain onfrom the sale of ~~real estate associated with~~ the ~~closure of the~~ Canadian facility, ~~the amount of~~ which is ~~currently~~expected ~~undetermined~~to ~~but which will~~ ultimately reduce the amount of the restructuring charges incurred. Based on ~~management's~~changes ~~internal~~in ~~analysis~~business weand ~~expect~~current ~~cash~~unfavorable ~~proceeds~~economic ~~from~~conditions related to the ~~sale~~home offurnishings ~~real~~and ~~estate~~bedding ~~(net~~industries, ofit ~~all~~is ~~taxes~~possible ~~and~~that ~~commissions)~~the toabove ~~exceed~~estimates ~~the~~provided ~~amount~~by ofmanagement ~~cash~~to determine restructuring and restructuring related charges incurred during fiscal 2025 could be materially different from our actual results, and therefore could adversely affect the success of this restructuring plan.

The ~~Based~~above-referenced onconditional ~~changes~~agreement infor ~~business~~the ~~and~~sale ~~current~~of ~~industry~~our ~~economic~~Canadian ~~conditions,~~facility itincludes isa ~~possible~~purchase ~~that~~price ~~the~~of ~~above~~$15.5 ~~estimates~~million ~~provided~~CAD by($10.8 ~~management~~million toUSD ~~determine~~as ~~restructuring~~of ~~and~~January ~~restructuring~~26, ~~related~~2025) ~~charges~~contingent ~~incurred~~on ~~during~~the ~~fiscal~~satisfaction ~~2025~~of ~~and~~certain ~~proceeds~~due ~~generated~~diligence ~~from~~and closing conditions. Assuming the ~~sale~~completion of the ~~manufacturing~~transaction, ~~facility~~the ~~located~~company incurrently ~~Quebec,~~expects ~~Canada,~~the ~~could~~proceeds befrom ~~materially~~the ~~different~~sale ~~from~~(net ~~our~~of ~~actual~~all ~~results,~~taxes and ~~therefore~~commissions) ~~could~~to ~~adversely~~exceed ~~affect~~ the ~~success~~amount of ~~this~~cash restructuring ~~plan.~~charges incurred.

The following summarizes the restructuring and restructuring related charges for the mattress fabrics segment for the three-month ~~period~~and ~~ending~~nine-month ~~October~~periods 27ended January 26, ~~2024~~2025:

	Three Months Ended			~~Six~~Nine Months Ended
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025			~~October~~January 2726, ~~2024~~2025
Additional depreciation expense for shortened useful lives of equipment	$	~~465~~—		$	1,~~340~~339
Employee termination benefits		~~563~~176			1,~~150~~326
Lease termination costs		~~179~~—			849
Other Associated Costs		900			1,172
Other associated costs		1,504			2,676
Loss on disposal and markdowns of inventory		769			885
Loss on disposal, valuation, and markdowns of inventory		624			1,509
Net gain on disposal of equipment		(~~105~~33	)		(1042	)
Restructuring expense and restructuring related charges (1) (2)	$	2,~~771~~271		$	57,~~386~~657

(1) Of the total $2.8 million restructuring and restructuring related charges, $2.0 million and $769,000 were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the threeI-~~month period ending October 27, 2024.~~ 37

(21) Of the total $52.43 million restructuring and restructuring related charges, $41.58 million and $~~885~~624,000 were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the ~~six~~three-month period ~~ending~~ended ~~October~~January 2726, ~~2024~~2025.

(2) Of the total $7.7 million restructuring and restructuring related charges, $6.2 million and $1.5 million were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the nine-month period ended January 26, 2025.

Refer to Note 10 of the consolidated financial statements for further details.

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Segment assets

Segment assets consist of accounts receivable,; inventory,; property, plant, and equipment,; right of use assets,; and assets held for sale:

(dollars in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024		April 28, 2024
Accounts receivable	$	1011,~~352~~607	$	11,~~303~~463	$	10,003
Inventory		2931,~~253~~377		27,~~195~~925		27,671
Property, plant & equipment		24,~~702~~210		32,~~862~~263		31,472
Right of use assets		~~275~~200		1,~~969~~798		1,627
Assets held for sale		32,~~301~~214		—		—
	$	6769,~~883~~608	$	73,~~329~~449	$	70,773

Refer to Note 14 of the consolidated financial statements for disclosures regarding determination of our segment assets.

Accounts Receivable

As of ~~October~~January 2726, ~~2024~~2025, accounts receivable ~~decreased~~increased by $~~951~~144,000, or 81.43%, compared with ~~October~~January 2928, ~~2023~~2024. This ~~reflects~~increase ~~the~~in ~~4.2%~~accounts ~~decrease~~receivable inis ~~net~~mostly ~~sales~~due to longer payment trends during the ~~second~~third quarter of fiscal 2025, as compared towith the ~~second~~third quarter of fiscal 2024~~. In addition~~, ~~the~~as ~~decrease~~we inexperienced ~~accounts~~a ~~receivable~~higher ~~was~~sales ~~due~~mix ~~to improved payment trends~~ with ~~larger~~ customers ~~during the second quarter of fiscal 2025, compared~~ with ~~the~~longer ~~second~~credit ~~quarter of fiscal 2024~~terms. Accordingly, days’ sales outstanding ~~decreased~~increased to 3137 days for the ~~second~~third quarter of fiscal 2025, as compared to 3335 days for the ~~second~~third quarter of fiscal 2024.

As of ~~October~~January 2726, ~~2024~~2025, accounts receivable ~~remained~~increased ~~flat~~by $1.6 million, or 16.0%, compared with April 28, 2024. This trend ~~primarily~~ reflects an increase in net sales for the ~~second~~the third quarter of fiscal 2025, as compared towith the fourth quarter of fiscal 2024,. ~~offset~~Net bysales ~~faster~~for ~~cash~~the ~~collections~~third quarter were $28.6 million, asan weincrease ~~experienced~~of ~~improved~~$2.9 ~~payment~~million, ~~trends~~or 11.2%, compared with ~~larger~~net ~~customers~~sales of $25.8 million during the ~~second~~fourth quarter of fiscal ~~2025~~2024. ~~compared~~In toaddition, the ~~second~~increase ~~quarter~~in ofaccounts ~~fiscal~~receivable ~~2024.~~was ~~Net~~due ~~sales~~to ~~for~~longer payment trends during the ~~second~~third quarter of fiscal 2025 ~~were~~compared ~~$30.1~~with ~~million,~~the anfourth ~~increase~~ of ~~16.8%~~fiscal 2024, ~~compared~~as ~~with~~we ~~net~~experienced ~~sales~~a ofhigher ~~$25.8~~sales ~~million~~mix ~~during~~with ~~the~~customers ~~fourth~~with ~~quarter~~longer ofcredit ~~fiscal 2024~~terms. ~~Days~~Accordingly, days’ sales outstanding ~~decreased~~increased to 3137 days for the ~~first~~third quarter of fiscal 2025, as compared to 35 days for the fourth quarter of fiscal 2024.

Inventory

As of ~~October~~January 2726, ~~2024~~2025, inventory increased by $23.15 million, or 712.64%, compared with ~~October~~January 2928, ~~2023~~2024. In connection with the restructuring activity described above in “Restructuring Activities,” this trend represents an increase in finished goods inventory to accommodate customers while the weaving operation iswas transitioned to a strategic sourcing model and knitting and finishing capacity iswas relocated from the manufacturing facility in Quebec, Canada, to our facility in Stokesdale, North Carolina. This increase in finished goods inventory was partially offset by lower raw material purchases related to the gradual discontinuation of operations ofat the company's manufacturing facility located in Quebec, Canada, as described above in “Restructuring Activities,” ~~and also by the decrease in net sales described above~~.

As of ~~October~~January 2726, ~~2024~~2025, inventory increased by $13.67 million, or 513.74%, compared with April 28, 2024. This trend reflects the effect of the restructuring activity described in the preceding paragraph. In addition, the increase in inventory represents an increase in net sales of $42.39 million, or 1611.82%, during the ~~second~~third quarter of fiscal 2025, as compared with the fourth quarter of fiscal 2024. ~~This trend is also due to the effect of the restructuring activity described in the preceding paragraph.~~

Inventory turns were 43.14 for the ~~second~~third quarter of fiscal 2025, as compared with 4.50 for the ~~second~~third quarter of fiscal 2024 and 3.6 for the fourth quarter of fiscal 2024.

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Property, Plant, & Equipment

During fiscal 2024 and continuing through the ~~second~~third quarter of fiscal 2025, property, plant, and equipment has steadily decreased due to reduced capital spending stemming from current unfavorable macro-economic conditions within the home furnishings and bedding industries, as well as the actions taken as described above in “Restructuring Activities.”

The $24.72 million as of ~~October~~January 2726, ~~2024~~2025, represents property, plant, and equipment of $2223.20 million, $~~1.6 million~~221,000, and $~~889~~973,000 located in the U.S., Canada, and Haiti, respectively. The $32.93 million as of ~~October~~January 2928, ~~2023~~2024, represents property, plant, and equipment of $2221.29 million, $109.08 million, and $~~661~~600,000 located in the U.S., Canada, and Haiti, respectively. The $31.5 million as of April 28, 2024, represents property, plant, and equipment of $21.5 million, $9.4 million, and $555,000 located in the U.S., Canada, and Haiti, respectively.

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Right of Use Assets

During fiscal 2024 and continuing through the ~~second~~third quarter of fiscal 2025, right of use assets have steadily decreased due to rent expense incurred over the terms of the existing lease agreements. In addition, in connection with the restructuring activity described above in “Restructuring Activities,” right of use assets (i) decreased due to the termination of an agreement to lease a facility located in Ouanaminthe, Haiti, and (ii) shortened the period of use associated with two leased facilities located in Quebec, Canada.

Assets Held for Sale

As of ~~October~~January 2726, ~~2024~~2025, and in connection with actions described above in “Restructuring Activities,” we classified a building and certain equipment relating to ~~both~~ our ~~U.S. and~~ Canadian operations ~~and our building located~~ in Quebec, Canada, as held for sale. ~~The $3.3 million represents assets held for sale of $2.9 million and $358,000 located in Canada and the U.S., respectively.~~ Refer to Note 8 of the consolidated financial statements for further details.

Upholstery Fabrics Segment

Net Sales

	Three Months Ended
(dollars in thousands)	~~October~~January 2726,~~2024~~2025				~~October~~January 2928, ~~2023~~2024				% Change
Non-U.S. Produced	$	2220,~~372~~291	8786	%	$	2428,~~129~~425	8894	%		(728.36	)%
U.S. Produced		3,~~228~~320	1314	%		31,~~219~~972	126	%		068.34	%
Total	$	2523,~~600~~611	100	%	$	2730,~~348~~397	100	%		(622.43	)%

	Six Months Ended
	Nine Months Ended
(dollars in thousands)	~~October~~January 2726,~~2024~~2025				~~October~~January 2928, ~~2023~~2024				% Change
Non-U.S. Produced	$	4768,~~709~~000	88	%	$	4877,~~762~~187	8991	%		(211.29	)%
U.S. Produced		69,~~352~~672	12	%		67,~~026~~998	119	%		520.49	%
Total	$	5477,~~061~~672	100	%	$	5485,~~788~~185	100	%		(18.38	)%

Upholstery fabrics sales decreased 622.43% in the ~~second~~third quarter of fiscal 2025 compared to the prior-year period. Upholstery fabrics sales decreased 18.38% in the first ~~half~~nine months of fiscal 2025 compared to the first ~~half~~nine months of fiscal 2024. While we were encouraged to see sales growth in certain channels of our upholstery fabrics segment during the quarter, the continued sluggish demand in our residential business driven by what remains a weakened home furnishings industry drove these year-over-year declines in overall sales in the segment. The impacts of this market dynamic were particularly acute in our residential business due to resulting lower ordering activity from a significant customer as it managed its inventory levels to better align with the soft industry demand. We were able to achieve sales increases in other areas of our residential business during the quarter and we saw growth trends in the luxury and value residential product channels. Moreover, market conditions and customer demand in our hospitality/contract business are more robust and we saw growth across all channels in that business, including Read, during the quarter.

The ~~decrease~~potential inongoing ~~net~~geopolitical ~~sales~~disruptions ~~for~~related ~~our~~to ~~upholstery~~conflicts ~~fabrics~~in ~~segment~~Ukraine ~~for~~and ~~both~~ the ~~second~~Middle ~~quarter~~East, ~~and~~as well as the ~~first~~potential ~~half~~impact of ~~fiscal~~future ~~2025~~tariffs, ~~reflects~~depend ~~reduced~~on ~~demand~~factors ~~for~~beyond our ~~residential~~control ~~upholstery~~and ~~fabric~~we ~~products~~cannot asreasonably ~~compared~~estimate to the ~~prior-year~~impact ~~periods.~~of ~~This~~these ~~reduced~~items ~~demand~~on ~~was~~our ~~driven~~upholstery ~~primarily~~fabrics ~~by ongoing weakness in the residential home furnishings industry~~segment. Moreover, ~~including~~we ~~increased~~note ~~weakness~~that ~~during~~if ~~the~~these ~~second~~situations ~~quarter~~worsen ~~which~~and ~~resulted~~shipping indisruptions ~~lower~~occur ~~order~~or ~~levels~~new astariffs ~~many~~are ~~customers,~~imposed ~~including~~on aour ~~significant customer~~products, ~~adjusted~~the ~~their~~impact ~~inventory~~on ~~positions~~our tooperations ~~align~~and/or ~~with~~on ~~industry softness. Net sales for~~ our ~~hospitality/contract~~suppliers, ~~fabrics~~customers, ~~for~~consumers, ~~both the second quarter~~ and the ~~first~~global ~~half~~economy ofcould ~~fiscal~~adversely ~~2025~~affect ~~were~~our ~~relatively~~financial ~~flat compared to the prior-year periods~~performance.

Looking ahead, we expect the lower customer order levels noted above will pressure residential fabric sales during the third quarter of fiscal 2025 as some customers continue to adjust inventory positions. We also expect the soft industry demand backdrop for residential home furnishings may affect our residential business for some period of time. Despite these challenges, we believe our business is well positioned for the long term with our productI-driven strategy and innovative product offerings, including our popular portfolio of LiveSmart® performance products, supported by our flexible Asian platform and our long-term supplier relationships. We also believe overall demand remains solid for our hospitality/commercial business. 39

Notably, the potential ongoing geopolitical disruptions related to wars in Ukraine and the Middle East, as well as the potential impact of future tariffs, remain unknown and depend on factors beyond our control. At this time, we cannot reasonably estimate the impact of these items on our upholstery fabrics segment, but we note that if conditions worsen in these situations, including shipping disruptions related to wars in the Middle East, or if new tariffs are imposed on our products, the impact on our operations, and/or on our suppliers, customers, consumers, and the global economy, could adversely affect our financial performance.

I-40

Gross Profit, Selling, General & Administrative Expenses, and Income from Operations

	Three Months Ended
(dollars in thousands)	~~October~~January 2726,~~2024~~2025			~~October~~January 2928, ~~2023~~2024			Change
Gross profit	$	4,~~315~~228		$	56,~~389~~122		(1930.9)%
Gross margin		1617.9	%		1920.71	%	(~~280~~220)bp
Selling, general, and administrative expenses		3,~~700~~549			34,~~998~~030		(711.59)%
Restructuring expense		29			144		(79.9)%
Restructuring expense (credit)		8			(50	)	N.M.
Income from operations		~~615~~679			12,~~391~~092		(5567.85)%
Operating margin		2.49	%		56.19	%	(~~270~~400)bp

	Six Months Ended
	Nine Months Ended
(dollars in thousands)	~~October~~January 2726,~~2024~~2025			~~October~~January 2928, ~~2023~~2024			Change
Gross profit	$	914,~~833~~061		$	1016,~~659~~780		(716.72)%
Gross margin		18.21	%		19.57	%	(~~130~~160)bp
Selling, general, and administrative expenses		711,~~506~~056			711,~~939~~969		(57.56)%
Restructuring expense		~~161~~169			~~482~~432		(6660.69)%
Income from operations		23,~~327~~005			24,~~720~~811		(1437.45)%
Operating margin		4.3.9	%		5.06	%	(70170)bp

Income from operations was $~~615~~679,000 for the ~~second~~third quarter of fiscal 2025, compared to ~~income from operations of~~ $12.41 million for the ~~second~~third quarter of fiscal 2024. Income from operations was $2.3.0 million for the first ~~half~~nine months of fiscal 2025, compared to income from operations of $24.78 million for the first ~~half~~nine months of fiscal 2024.

The ~~decrease~~declines in upholstery fabrics profitability for the ~~second~~third quarter and the first ~~half~~nine months of fiscal 2025, as compared to the prior-year periods, primarily ~~reflects~~reflect lower sales;, ~~higher~~which ~~inventory~~were ~~markdown~~offset somewhat by lower SG&A expense ~~during~~and ~~the~~lower ~~second~~fixed ~~quarter~~costs ~~(as~~during ~~compared~~both ~~with~~periods. ~~especially~~However, ~~low~~the ~~inventory~~actions ~~markdown~~we ~~expense~~completed during the ~~prior-year~~first ~~period);~~quarter aof ~~less~~fiscal ~~favorable~~2025 ~~foreign~~to ~~exchange~~restructure ~~rate~~our ~~associated~~upholstery ~~with~~fabrics ~~this~~finishing ~~segment's~~operation ~~operations~~ in China; and ~~higher~~optimize ~~freight~~our ~~costs~~Asian platform continue to positively impact our operating performance (see “—Restructuring Activities—Shanghai, China—Upholstery Fabrics Finishing Operation” below). ~~These~~Despite ~~factors~~the ~~were~~difficult ~~offset~~demand ~~somewhat~~environment byin ~~lower~~our ~~SG&A~~residential ~~expense~~business and resulting lower ~~fixed~~sales ~~costs~~bases during ~~both~~our third quarter and first nine months of fiscal year 2025, these cost-structure and operational enhancements were instrumental in our ability to achieve profitability in each of those sales-pressured periods while also maintaining the service levels our customers rely upon and expect.

~~Based~~Looking ~~on market dynamics~~ahead, we ~~took~~expect ~~action~~sales ~~during~~in ~~the~~our ~~fourth~~residential ~~quarter~~business ofto ~~fiscal~~continue ~~2024~~ to ~~restructure~~be ~~our~~challenged ~~upholstery~~by ~~fabrics~~the ~~finishing~~muted ~~operation~~conditions in ~~China~~the tohome ~~align~~furnishings ~~with~~industry ~~current~~and ~~demand~~for ~~and~~that ~~further~~dynamic ~~leverage~~to ~~our~~impact ~~strategic~~profitability ~~supply~~until ~~relationships~~macroeconomic conditions improve. However, Weour ~~completed~~lower ~~this~~fixed ~~restructuring~~cost ~~initiative~~and ~~during~~SG&A expense structure should allow us to better navigate the ~~first~~difficult ~~quarter~~environment ofin ~~fiscal~~our ~~2025~~residential ~~(see~~fabrics ~~“—Restructuring~~business ~~Activities—Shanghai,~~and ~~China—Upholstery~~leverage ~~Fabrics~~the ~~Finishing~~more ~~Operation”~~robust ~~below)~~demand we are seeing in our hospitality/commercial fabrics business. WeIn addition, we believe ~~this~~that ~~move~~there isare ~~allowing~~other usmeaningful opportunities to increase operational efficiency and reduce cost across our ~~operating~~business, ~~costs~~and ~~while~~we ~~maintaining~~plan ~~our~~to ~~ability~~continue pursuing measures to ~~support~~optimize our ~~customers~~platform.

Looking ahead, the residential home furnishings industry remains under pressure due to shifting consumer spending trends, inflation, reduced home sales, and other macroeconomic conditions affecting discretionary consumer spending. As a result, we expect lower sales volumes in our residential business may affect our profitability until market conditions improve. However, for fiscal 2025, we expect to benefit from continued solid demand in our hospitality/commercial fabrics business; improvement in our Read business; and fixed cost savings from our strategic decision to rationalize our upholstery fabric finishing operation in China and further leverage our long-term supply relationships. We will also continue our ongoing cost reduction efforts and will consider further adjustments to rationalize our operations as necessary to align with current demand levels, while maintaining our ability to service our customers.

Restructuring Activities

Shanghai, China

Upholstery Fabrics Finishing Operation

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

I-4140

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

Ouanaminthe, Haiti

Cut and Sew Upholstery Fabrics Operation

During the third quarter of fiscal 2023, Culp Upholstery Fabrics - Haiti, Ltd. ("CUF Haiti") entered into an agreement to terminate a lease agreement associated with one facility, and in turn moved the production of upholstery cut and sewn kits to another existing facility leased by Culp Home Fashions - Haiti, Ltd. ("CHF Haiti") during the fourth quarter of fiscal 2023. Both CUF Haiti and CHF Haiti are ~~indirectly~~indirect wholly owned subsidiaries of the company. During the first quarter of fiscal 2024, demand for upholstery cut and sewn kits declined more than previously anticipated, resulting in the strategic action to discontinue the production of upholstery cut and sewn kits in Haiti. This restructuring activity was completed during the third quarter of fiscal 2024 and resulted in cumulative restructuring and restructuring related charges of $1.3 million.

The following summarizes our restructuring expense (credit) and restructuring related ~~charges~~charge (credit) for all restructuring activities for the upholstery fabrics segment for the three- months ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024:

	(1)		(2)
	Three Months Ended		Three Months Ended
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024
Employee termination benefits	$	—	$	2
Other associated costs	$	8	$	—
Impairment loss - equipment		—		142
Gain on sale of equipment		—		(50	)
Other associated costs		29		—
Gain on disposal of inventory		—		(61	)
Gain on disposal and markdowns of inventory		—		(78	)
Restructuring expense (credit) and restructuring related credit (3) (4)	$	8	$	(111	)
Restructuring expense and restructuring related charges (3) (4)	$	29	$	66

(1) The $298,000 ~~affected~~relates to our U.S. upholstery fabrics operations ~~and related to cost reductions~~ under the Fiscal 2025 Restructuring Plan, which ~~are~~is described more fully in Note 10 of the consolidated financial statements.

(2) The total $66(111,000) is related to the closure of our upholstery cut and sewn kits operation located in Ouanaminthe, Haiti, as described above.

(3) The total $298,000 was recorded within restructuring expense in the Consolidated Statement of Net Loss for the three-month period ~~ending~~ended ~~October~~January 2726, ~~2024~~2025.

(4) Of the $66(111,000) total, $~~144~~(50,000) and $(7861,000) were recorded within restructuring expense (credit) and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three-month period ~~ending~~ended ~~October~~January 2928, ~~2023~~2024.

The following summarizes our restructuring expense and restructuring related charges for all restructuring activities for the upholstery fabrics segment for the ~~six-~~nine months ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024:

	(1)		(2)
	Six Months Ended		Six Months Ended
	Nine Months Ended		Nine Months Ended
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024
Employee termination benefits	$	102	$	103
Impairment loss - equipment		—		~~379~~329
Other associated costs		5967		—
Loss on disposal and markdowns of inventory		—		~~101~~40
Restructuring expense and restructuring related (credits) charges (3) (4)	$	161	$	583
Restructuring expense and restructuring related charge (3) (4)	$	169	$	472

I-4241

(1) Of the $~~161~~169,000, $~~147~~155,000 ~~affected~~relates to our U.S. upholstery fabrics operations ~~and related cost reductions~~ under the Fiscal 2025 Restructuring Plan, which ~~are~~is described more fully in Note 10 of the consolidated financial statements. In addition, the $~~161~~169,000 includes $14,000 related to the ~~rationalization~~closure of our upholstery fabrics finishing operation located in Shanghai, China, as described above.

(2) The total $~~583~~472,000 related to the closure of our upholstery cut and sewn kits operation located in Ouanaminthe, Haiti, as described above.

(3) The total $~~161~~169,000 was recorded within restructuring expense in the Consolidated Statement of Net Loss for the ~~six~~nine-month period ending ~~October~~January 2726, ~~2024~~2025.

(4) Of the $~~583~~472,000 total, $~~482~~432,000 and $~~101~~40,000 were recorded within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the ~~six~~nine-month period ~~ending~~ended ~~October~~January 2928, ~~2023~~2024.

Segment Assets

Segment assets consist of accounts receivable,; inventory,; property, plant, and equipment,; and right of use assets:

(dollars in thousands)

~~October~~January 2726, ~~2024~~2025

~~October~~January 2928, ~~2023~~2024

April 28, 2024

Accounts receivable

11,~~978~~552

1112,~~733~~223

11,135

Inventory

1517,~~879~~222

1718,~~270~~952

17,172

Property, plant & equipment

1,~~188~~117

1,~~175~~155

1,125

Right of use assets

12,~~120~~647

12,~~992~~345

1,952

3032,~~165~~538

3234,~~170~~675

31,384

Refer to Note 14 of the consolidated financial statements for disclosures regarding determination of our segment assets.

Accounts Receivable

As of ~~October~~January 2726, ~~2024~~2025, accounts receivable ~~increased~~decreased ~~slightly~~by $671,000, or 5.5%, as compared with ~~October~~January 2928, ~~2023~~2024. This ~~trend~~decrease ~~reflects~~in ~~slower~~accounts ~~cash~~receivable ~~collections~~was due to ana ~~unfavorable~~decline ~~mix~~in net sales of ~~customers~~22.3% ~~with~~during ~~longer~~the ~~payment~~third ~~cycles~~quarter ~~during~~of fiscal 2025 compared with the ~~second~~third quarter of fiscal ~~2025~~2024, as ~~compared~~described toin the ~~prior~~section above titled "Segment Analysis-~~year~~Upholstery ~~period~~Fabrics-Net Sales." AsThe adecrease ~~result,~~in ~~days’sales~~accounts ~~outstanding~~receivable ~~for~~due ~~this~~to ~~segment~~the ~~increased~~decline toin 39net ~~days~~sales ~~for~~was mostly offset by longer payment trends during the ~~second~~third quarter of fiscal 2025, compared with ~~36 days for~~ the ~~second~~third quarter of fiscal 2024, due to a higher sales mix with customers with longer credit terms. ~~However~~Additionally, ~~the~~a ~~increase~~timing difference in ~~accounts~~cash ~~receivable~~receipts from ~~slower~~certain ~~cash~~significant ~~collections~~customers ~~was~~during ~~partially~~the ~~offset~~last byweek aof ~~decrease~~the inthird ~~net~~quarter ~~sales~~of fiscal 2024 relative to cash receipts during the third quarter of ~~$1.7~~fiscal ~~million,~~2025 oralso 6affected our accounts receivable.4% Accordingly, ~~during~~days’ sales outstanding for this segment increased to 42 days for the ~~second~~third quarter of fiscal 2025, as compared towith 31 days for the ~~second~~third quarter of fiscal 2024.

As of ~~October~~January 2726, ~~2024~~2025, accounts receivable increased by $~~843~~417,000, or 73.67%, compared with April 28, 2024. This ~~trend reflects an~~ increase in ~~net~~accounts ~~sales~~receivable ofis ~~$1.8~~mostly ~~million,~~due ~~or 7.7%, during the second quarter of fiscal 2025, as compared~~ to ~~the~~longer ~~fourth~~payment ~~quarter~~trends ofduring ~~fiscal 2024. Net sales for~~ the ~~second~~third quarter of fiscal 2025 ~~were $25.6 million, an increase of $1.8 million, or 7.7%,~~ compared with ~~net sales of $23.8 million for~~ the fourth quarter of fiscal 2024~~. Also~~, ~~the increase in accounts receivable was attributable to slower cash collections~~ as ~~noted~~we inexperienced ~~the~~a ~~preceding~~higher ~~paragraph~~sales ~~during~~mix ~~the~~with ~~second~~customers ~~quarter~~with oflonger ~~fiscal~~credit ~~2025, as compared to the fourth quarter of fiscal 2024~~terms. ~~As a result~~Accordingly, days’ sales outstanding for this segment increased to 3942 days for the ~~second~~third quarter of fiscal 2025, compared with 37 days for the fourth quarter of fiscal 2024.

Inventory

As of ~~October~~January 2726, ~~2024~~2025, inventory decreased by $1.47 million, or 89.1%, compared with ~~October~~January 2928, ~~2023~~2024. This decrease in inventory primarily represents the decrease in net sales during the ~~second~~third quarter of fiscal 2025, compared with the prior-year period, as described in the above section titled "Segment Analysis-Upholstery Fabrics-Net Sales."

As of ~~October~~January 2726, ~~2024~~2025, inventory ~~decreased~~remained byflat ~~$1.3 million, or 7.5%,~~ compared with April 28, 2024. ~~Although~~This trend reflects net sales for the ~~second~~third quarter of fiscal 2025 ~~increased~~of by $123.86 million, orwhich ~~7.7%,~~remained flat as compared with ~~the~~net ~~fourth~~sales ~~quarter~~ of ~~fiscal~~$23.8 ~~2024,~~million ~~this~~for ~~decrease~~the infourth ~~inventory~~quarter ~~reflects management's ability to maintain appropriate levels~~ of ~~inventory,~~fiscal ~~taking into account current and expected future demand trends and any changes in our global supply chain~~2024.

Inventory turns were 54.12 for the ~~second~~third quarter of fiscal 2025, compared with 45.61 for the ~~second~~third quarter of fiscal 2024 and 4.4 for the fourth quarter of fiscal 2024.

I-4342

Property, Plant, & Equipment

As of ~~October~~January 2726, ~~2024~~2025, property, plant, and equipment remained relatively flat compared with ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively. This trend is mainly due to a reduced level of capital spending commensurate with current unfavorable macro-economic conditions within the home furnishings industry.

The $1.21 million as of ~~October~~January 2726, ~~2024~~2025, represents property, plant, and equipment of $1.10 million and $9583,000 located in the U.S. and China, respectively. The $1.2 million as of ~~October~~January 2928, ~~2023~~2024, represents property, plant, and equipment of $1.01 million and $~~140~~134,000 located in the U.S. and China, respectively. The $1.1 million as of April 28, 2024, represents property, plant, and equipment of $1.0 million and $120,000 located in the U.S. and China, respectively.

Right of Use Assets

As of ~~October~~January 2726, ~~2024~~2025, right of use assets ~~steadily~~increased ~~decreased~~ compared with ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively. This ~~decrease~~increase ~~mostly~~represents ~~resulted from rent expense incurred over~~ the ~~terms~~renewal of ~~the~~certain ~~existing respective~~ lease agreements ~~and~~associated ~~the~~with ~~termination~~our ofoperations ~~our~~located ~~agreement~~in toChina ~~lease~~totaling a$1.9 ~~building~~million, ~~associated~~partially ~~with~~offset ~~our~~by ~~upholstery~~rent ~~fabrics~~expense ~~finishing~~incurred ~~operation~~over ~~located~~the interms ~~Shanghai,~~of ~~China~~the existing respective lease agreements.

The $12.16 million as of ~~October~~January 2726, ~~2024~~2025, represents right of use assets of $~~925,000~~1.9 million and $~~195~~764,000 located in ~~the~~China and U.S. ~~and China~~, respectively. The $2.03 million as of ~~October~~January 2928, ~~2023~~2024, represents right of use assets of $~~1.2~~944,000 ~~million~~ and $~~818,000~~1.4 million located in China and ~~the~~ U.S., respectively. The $2.0 million as of April 28, 2024, represents right of use assets of $1.3 million and $709,000 located in ~~China and~~ the U.S. and China, respectively.

Consolidated Other Income Statement Categories

	Three Months Ended
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025			~~October~~January 2928, ~~2023~~2024			% Change
SG&A expenses	$	98,~~359~~579		$	109,~~045~~493			(69.86	)%
Interest expense		30(63	)		—			100.0	%
Interest income		~~244~~255			~~282~~284			(1310.52	)%
Other expense (income)		508			(49	)	N.M.
Other (income) expense		(15	)		705		N.M.

	Six Months Ended
	Nine Months Ended
(dollars in thousands)	~~October~~January 2726, ~~2024~~2025			~~October~~January 2928, ~~2023~~2024			% Change
SG&A expenses	$	1827,~~655~~235		$	1929,~~874~~366			(67.13	)%
Interest expense		58(121	)		—			100.0	%
Interest income		~~507~~761			~~627~~911			(1916.15	)%
Other expense (income)		913			(145	)	N.M.
Other expense		898			560			60.4	%

Selling, General, and Administrative Expenses ("SG&A")

The decrease in selling, general, and administrative expenses during the ~~second~~third quarter and the first ~~half~~nine months of fiscal 2025, as compared to the ~~second~~third quarter and first ~~half~~nine months of fiscal 2024, is primarily due to (i) lower incentive compensation that mostly relates to annual bonuses reflecting unfavorable financial results in relation to pre-established performance targets; (ii) lower employee compensation due to the company's restructuring activities described in the section titled "- Segment Analysis-Mattress Fabrics Segment-Restructuring Activities"; and (iii) lower professional and consulting fees.

Interest Expense

Interest expense mostly represents our borrowings totaling $45.14 million under aour ~~line~~lines of credit agreement associated with our operations located in China.

Interest Income

The decreases in interest income are due to lower average cash balances during the third quarter and first ~~two~~nine ~~quarters~~months of fiscal 2025, as compared towith the third quarter and first ~~two~~nine ~~quarters~~months of fiscal 2024.

~~Other (Expense) Income~~I-43

~~I-44~~Other (Income) Expense

Management is required to assess certain economic factors to determine the currency of the primary economic environment in which our foreign subsidiaries operate. Based on our assessments, the U.S. dollar was determined to be the functional currency of our operations located in China, Canada, and Vietnam.

The change in other income (expense) during the ~~second~~third quarter and first ~~half~~nine months of fiscal 2025, as compared towith ~~other~~prior-year ~~income during the second quarter and first half of fiscal 2024~~periods, iswere due mostly to ~~less~~changes ~~favorable~~in the foreign currency exchange rates applied against our balance sheet accounts denominated in Chinese Renminbi to determine the corresponding U.S. dollar financial reporting amounts ~~during the second quarter and first half of fiscal 2025, as compared to the prior-year periods~~. During the ~~second~~third quarter of fiscal 2025, we reported a foreign currency exchange ~~loss~~gain associated with our operations located in China totaling $~~186~~305,000, compared with a foreign currency exchange ~~gain~~loss of $~~228~~(290,000) during the ~~second~~third quarter of fiscal 2024. During the first ~~half~~nine months of fiscal 2025, we reported a foreign currency exchange ~~loss~~gain associated with our operations located in China totaling $~~231~~74,000, compared with a foreign currency exchange gain of $~~679~~389,000 during the first ~~half~~nine months of fiscal 2024.

The $~~231~~74,000 foreign currency exchange ~~loss~~gain related to our operations in China was mostly non-cash and was partially offset by $~~221~~23,000 of income tax ~~benefit~~expense, which will ~~decrease~~increase our income tax payments and withholding tax payments associated with future earnings and profits repatriated from our operations located in China to the company's U.S. parent. The income tax ~~benefit~~expense of $~~221~~23,000 was associated with ~~deductible~~taxable foreign currency exchange ~~losses~~gains based on ~~less~~more favorable foreign currency exchange rates applied against balance sheet accounts denominated in U.S. dollars to determine the corresponding Chinese Renminbi local currency amounts. The foreign currency exchange rate gains (losses) related to our U.S. dollar denominated balance sheet accounts associated with our operations located in China are considered taxable income or tax deductible, as we incur income tax expense (benefit) and pay income taxes in China's local currency.

Income Taxes

Effective Income Tax Rate

The following schedule summarizes the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements for the ~~six~~nine-month periods ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, and ~~October~~January 2928, ~~2023~~2024:

	October 27,			October 29,
	January 26,			January 28,
	2024			2023
	2025			2024
U.S. federal income tax rate		21.0	%		21.0	%
U.S. valuation allowance		(1826.82	)		(3242.80	)
Tax effects of local currency foreign exchange (losses) gains		(4.5	)		5.1
Tax effects of local currency foreign exchange gain		0.7			3.8
Uncertain income tax positions		24.63			(0.1	)
Withholding taxes associated with foreign jurisdictions		(01.75	)		(98.91	)
Foreign income tax rate differential		—			(5.7	)
Captial expenditure deduction - Quebec Canada		(1.1	)		—
Stock-based compensation		(0.4	)		(4.2	)
Foreign income tax rate differential		(0.8	)		(5.2	)
Other		(0.7	)		(0.2	)
Stock-based compensation		(0.4	)		(2.9	)
	(1.5)%			(26.8)%
Other		0.1			0.1
	(3.9)%			(33.4)%

I-4544

first nine months of 2024, we incurred pre-tax losses associated with our U.S. operations, for which an income tax benefit was not recorded due to a full valuation allowance applied against our U.S. net deferred income tax assets. The income tax charge associated with the full valuation allowance applied against our U.S. net deferred income tax assets was higher during the first ~~half~~nine months of fiscal 2025 compared with the first ~~half~~nine months of fiscal 2024, as our $(1216.48) million U.S. pre-tax loss incurred during the first ~~half~~nine months of fiscal 2025 was ~~significantly~~ greater than the $(511.83) million U.S. pre-tax loss incurred during the first ~~half~~nine months of fiscal 2024.

U.S. Valuation Allowance

As of ~~October~~January 2726, ~~2024~~2025, we evaluated the realizability of our U.S. net deferred income tax assets to determine if a full valuation allowance was 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 from 2022 through 2024, and we ~~are~~ currently ~~expecting~~expect significant U.S. pre-tax losses to continue during fiscal 2025. 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 ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, valuation allowances against our net deferred income tax assets pertain to the following:

(dollars in thousands)	~~October~~January 2726, ~~2024~~2025		~~October~~January 2928, ~~2023~~2024		April 28, 2024
U.S. federal and state net deferred income tax assets	$	2223,~~060~~962	$	1719,~~839~~162	$	19,674
U.S. capital loss carryforward		2,330		2,330		2,330
	$	2426,~~390~~292	$	2021,~~169~~492	$	22,004

Undistributed Earnings

Uncertain Income Tax Positions

I-4645

As of ~~October~~January 2726, ~~2024~~2025, ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, we had a total of $1.4 million, $1.2 million, and $1.3 million, ~~total~~respectively, of gross unrecognized income tax benefits, of which the entire amount was classified as income taxes payable – long-term in the accompanying Consolidated Balance Sheets. As of ~~October~~January 2726, ~~2024~~2025, the unrecognized tax benefit would favorably affect income tax expense in future periods by $1.4 million.

Income Taxes Paid

The following table sets forth taxes paid by jurisdiction:

	Six Months			Six Months
	Nine Months			Nine Months
	Ended			Ended
	October 27,			October 29,
	January 26,			January 28,
(dollars in thousands)	~~2024~~2025			~~2023~~2024
United States Transition Tax Payment		665			499
China Income Taxes, Net of Refunds		~~578~~1,566			1,~~278~~803
Canada - Income Taxes, Net of Refunds		—(219	)		~~336~~468
	$	12,~~243~~012		$	2,~~113~~770

Future Liquidity

Based on the restructuring plan approved by our board of directors on April 29, 2024, the timing and success of the closure of our Canadian operation, along with the sale of associated real estate ~~(the timing and amount of which sales price is currently undetermined)~~, could have a significant effect on (i) the amount and timing of when and if fiscal 2025 income tax payments will be required; (ii) the amount and timing of withholding tax payments to the Canadian government associated with the repatriation of earnings and profits to the U.S. parent; and (iii) the respective tax rates that will be applied on the sale of equipment. Accordingly, we believe we cannot provide a reasonable estimate of our fiscal 2025 income tax payments associated with our Canadian operation at this time.

Currently, we are projecting annual cash income tax payments of approximately $1.78 million associated with our operations located in China. This estimate is management's current projection only and can be affected by actual earnings versus annual projections, changes in the foreign exchange rates in relation to the U.S. dollar, and the timing of when we will repatriate earnings and profits from China to our U.S. parent.

Currently, we do not expect to incur any income taxes in the U.S. on a cash basis during fiscal 2025 due to (i) the accelerated expensing of U.S. capital expenditures and our existing U.S. federal net operating loss carryforwards totaling $69.60 million as of April 28, 2024. As of ~~October~~January 2726, ~~2024~~2025, we will be required to pay a U.S. federal transition tax payment, in accordance with the 2017 Tax Cuts and Jobs Act, of $831,000 by August 15, 2025.

Liquidity and Capital Resources

Liquidity

Overall

Currently, our sources of liquidity include cash and cash equivalents (collectively, "cash"), cash flow from operations, and amounts available under our revolving credit lines. As of ~~October~~January 2726, ~~2024~~2025, we believe our cash of $~~10.~~5.3 million and the current availability under our revolving credit lines totaling $2223.62 million will be sufficient to fund our foreseeable business needs, restructuring activities, capital expenditures, commitments, and contractual obligations. Refer to Note 11 of the consolidated financial statements for further information regarding our revolving credit lines.

As of ~~October~~January 2726, ~~2024~~2025, our cash totaled $~~10.~~5.3 million, which represents a ~~slight~~decrease ~~increase~~of $4.7 million compared with cash of $10.0 million as of April 28, 2024. This ~~increase~~decrease was mostly due to ~~$4.0~~(i) ~~million~~net in cash ~~proceeds~~used ~~from~~in ~~borrowings~~operating onactivities atotaling ~~line~~$9.4 ofmillion, ~~credit~~and ~~associated~~(ii) ~~with~~capital ~~our~~expenditures ~~operations~~totaling ~~located~~$2.4 inmillion, ~~China~~partially ~~and~~offset ~~$527,000~~by in(iii) ~~cash~~net ~~proceeds~~borrowings from ~~the~~our ~~sale~~lines of ~~equipment~~credit ~~associated~~totaling ~~with our restructuring activities, mostly offset by~~ $15.64 million inand ~~capital~~(iv) ~~expenditures~~proceeds ~~and~~from ~~$2.6~~the ~~million~~sale of ~~net~~equipment ~~cash~~of ~~used in operating activities~~$1.5 million.

~~I-47~~Our net cash used in operating activities was $9.4 million during the first nine months of fiscal 2025, an increase of $3.4 million compared with net cash used in operating activities of $6.0 million during the first nine months of fiscal 2024. This trend mostly reflects (i) a significant decrease in cash earnings, (ii) an increase in inventory purchases to maintain an appropriate level during

Our net cash used in operating activities was $2.6 million during the first half of fiscal 2025, a decrease of $1.9 million compared with net cash used in operating activities of $4.5 million during the first half of fiscal 2024. This trend mostly reflects (i) an increase in accounts payable due to an increase in inventory purchases from significant vendors who extended their terms during the first half of fiscal 2025 compared with fiscal 2024, partially offset by (ii) an increase in inventory purchases to maintain an appropriate level of inventory during the company's recent restructuring activities, as described above in the section titled “—Segment Analysis—Mattress Fabrics Segment—Restructuring Activities,” and (iii) an increase in accounts receivable primarily due to an increase in net sales during the second quarter of fiscal 2025, as compared to the fourth quarter of fiscal 2024.I-46

Asthe ofcompany's ~~October~~restructuring 27activities, ~~2024~~as described above in the section titled “—Segment Analysis—Mattress Fabrics Segment—Restructuring Activities,” weand ~~had~~(iii) ~~outstanding~~an ~~borrowings~~increase ~~totaling~~in ~~$4.1~~accounts ~~million~~receivable ~~under~~primarily due to longer payment trends related to a ~~line~~higher ofsales ~~credit~~mix ~~agreement~~with ~~associated~~customers with ~~our~~longer ~~operations~~credit ~~located~~terms, partially offset by an increase in ~~China~~accounts payable due to an increase in inventory purchases with significant vendors who extended their terms during the first nine months of fiscal 2025 compared with the first nine months fiscal 2024.

As of January 26, 2025, we had outstanding borrowings totaling $5.4 million under lines of credit associated with our operations located in China.

The income taxes we pay also affect our liquidity. See the above section titled “Income Taxes Paid” for further detail.

Our cash balance may be adversely affected by factors beyond our control, such as (i) recent customer demand trends affecting net sales, (ii) supply chain disruptions, (iii) higher interest rates and inflation, (iv) ~~world~~the ~~events~~imposition ~~(including~~of ~~wars~~tariffs ~~in Ukraine~~ and ~~the~~other ~~Middle~~trade ~~East)~~restrictions, and (v) ~~the~~geopolitical ~~continuing~~events ~~uncertainty~~(including ~~associated~~conflicts ~~with~~in ~~COVID-19~~Ukraine and the Middle East). These factors could cause delays in receipt of payment on accounts receivable and could increase cash disbursements due to rising prices.

By Geographic Area

A summary of our cash by geographic area follows:

	October 27,		October 29,		April 28,
	January 26,		January 28,		April 28,
(dollars in thousands)	~~2024~~2025		~~2023~~2024		2024
United States	$	1,~~189~~037	$	52,~~047~~816	$	2,912
China		94,~~102~~032		9,~~301~~138		6,554
Canada		4964		~~482~~259		371
Haiti		~~142~~125		~~375~~363		86
Vietnam		4113		—		81
Cayman Islands		8		9		8
	$	105,~~531~~279	$	1512,~~214~~585	$	10,012

Common Stock Repurchase Program

We did not repurchase any shares of common stock during the ~~six~~ nine-month periods ~~ending~~ended ~~October~~January 2726, ~~2024~~2025, or ~~October~~January 2928, ~~2023~~2024, respectively.

As of ~~October~~January 2726, ~~2024~~2025, $3.2 million is available for additional repurchases of our common stock.

Dividends

On June 29, 2022, our board of directors announced the decision to suspend the company’s quarterly cash dividend., Webelieving ~~believed~~ that preserving capital and managing our liquidity were in the company’s best interest to support future growth and the long-term interests of our shareholders. Accordingly, we did not make any dividend payments during the ~~second~~first ~~quarter~~nine months of fiscal 2025, fiscal 2024, and fiscal 2023.

Working Capital

Operating Working Capital

Operating working capital (the total of accounts receivable and inventories, less accounts payable-trade, less accounts payable-capital expenditures, and less deferred revenue) was $3337.49 million as of ~~October~~January 2726, ~~2024~~2025, compared with $3839.40 million as of ~~October~~January 2928, ~~2023~~2024, and $38.5 million as of April 28, 2024. Operating working capital turnover was 65.08 during the ~~second~~third quarter of fiscal 2025, compared with 5.59 during the ~~second~~third quarter of fiscal 2024 and 5.8 during the fourth quarter of fiscal 2024.

I-4847

Accounts Receivable

Accounts receivable was $2223.32 million as of ~~October~~January 2726, ~~2024~~2025, a decrease of $~~706~~527,000, or 32.12%, compared with $23.07 million as of ~~October~~January 2928, ~~2023~~2024. This ~~trend~~decrease ~~was~~in ~~mostly~~accounts ~~due~~receivable torepresents a 5decline in net sales of 13.25% during the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, as described in the section titled "Executive Summary-Net Sales". The decrease in ~~consolidated~~accounts ~~nets~~receivable due to the decline net sales was mostly offset by longer payment trends during the ~~second~~third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, as ~~compared~~we toexperienced a higher sales mix with customers with longer credit terms as well as a timing difference in cash receipts from certain significant customers associated with upholstery fabrics segment during the ~~second~~last week of the third quarter of fiscal 2024 relative to cash receipts during the third quarter of fiscal 2025. ~~Days~~Accordingly, days’ sales outstanding ~~were~~increased 35to 39 days for the ~~second~~third quarter of fiscal 2025, ~~and were slightly higher~~ compared with 3433 days for the ~~second~~third quarter of fiscal 2024.

Accounts receivable was $23.1 million as of ~~October~~January 2726, ~~2024~~2025, ~~increased~~an increase of $1.2.0 million, or 59.6%, compared with $21.1 million as of April 28, 2024. This trend was due to aan ~~12.4%~~ increase in net sales during the ~~second~~third quarter of fiscal 2025, as compared to the fourth quarter of fiscal 2024. ~~However~~Net sales for the third quarter of fiscal 2025 were $52.3 million, ~~this~~an increase inof ~~accounts~~$2.7 ~~receivable~~million, ~~was~~or ~~partially~~5.5%, ~~offset~~compared bywith ~~faster~~$49.5 ~~cash~~million ~~collections~~for ~~stemming~~the ~~from~~fourth ~~improved~~quarter ~~payment~~of ~~trends~~fiscal ~~with~~2024. ~~larger~~In ~~customers~~addition, ~~associated~~the ~~with~~increase ~~our~~in ~~mattress~~accounts ~~fabrics~~receivable ~~segment~~was due to longer payment trends during the ~~second~~third quarter of fiscal 2025, compared with the fourth quarter of fiscal 2024., Asas we experienced a ~~result~~higher sales mix with customers with longer credit terms in both the mattress and upholstery fabrics segments. Accordingly, days’ sales outstanding ~~decreased~~increased to 3539 days for the ~~second~~third quarter of fiscal 2025, compared with 36 days for the fourth quarter of fiscal 2024.

Inventory

Inventory was $4548.16 million as of ~~October~~January 2726, ~~2024~~2025, ~~and~~compared ~~was~~with ~~comparable to~~ $4446.59 million and $44.8 million as of ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively. This ~~trend~~increase primarily represents ~~management's~~purchases ~~ability~~of toinventory needed maintain an appropriate level of inventory during the company's ~~recent~~Fiscal ~~restructuring~~2025 ~~plan~~Restructuring Plan as described above in the section titled “—Segment Analysis — Mattress Fabrics Segment — Restructuring Activities~~,” and taking into account current and expected future demand trends and any changes in our global supply chain~~".

Inventory turns were 43.58 for the ~~second~~third quarter of fiscal 2025, as compared with 4.65 for the ~~second~~third quarter of fiscal 2024 and 3.9 for the fourth quarter of fiscal 2024.

Accounts Payable - Trade

As of ~~October~~January 2726, ~~2024~~2025, accounts payable - trade was $32.47 million, which represents aan ~~significant~~ increase compared with $2729.97 million and $25.6 million as of ~~October~~January 2928, ~~2023~~2024, and April 28, 2024, respectively. This trend mostly represents an increase in inventory purchases from significant vendors who extended credit terms during ~~the second quarter of~~ fiscal 2025, as compared with ~~the second quarter of~~ fiscal 2024 ~~and the fourth quarter of fiscal 2024~~.

Financing Arrangements

Currently, we have revolving credit agreements with banks for our U.S parent company and our operations located in China. As of ~~October~~January 2726, ~~2024~~2025, we had outstanding borrowings totaling $45.14 million under aour ~~line~~lines of credit ~~agreement~~related ~~associated~~to ~~with~~ our operations located in China. Our loan agreements require, among other things, that we maintain compliance with certain financial covenants. As of ~~October~~January 2726, ~~2024~~2025, we were in compliance with these financial covenants.

Refer to Note 11 of the consolidated financial statements for further disclosure regarding our revolving credit agreements.

Capital Expenditures and Depreciation

Overall

Capital expenditures on a cash basis during the first ~~half~~nine months of fiscal 2025 totaled $12.64 million, compared with $23.02 million during the first ~~half~~ nine months of fiscal 2024. ~~This~~These ~~level~~levels of capital spending ~~reflects~~reflect reduced capital spending during the current unfavorable macro-economic conditions within the home furnishings and bedding industries.

Depreciation expense was $45.46 million for the first ~~half~~nine months of fiscal 2025, compared with $34.39 million for the same period a year ago, and was mostly related to our mattress fabrics segment for both periods. In addition, for the first ~~half~~nine months of fiscal 2025, depreciation expense for the mattress fabrics segment included $1.3 million of additional depreciation expense related to the shortening of useful lives of equipment associated with the closure of our manufacturing facility located in Quebec, Canada. This ~~$1.3 million of additional~~

I-4948

$1.3 million of additional depreciation expense was classified as restructuring expense in the Consolidated Statement of Net Loss for the ~~six~~nine-month period ~~ending~~ended ~~October~~January 2726, ~~2024~~2025.

For the remainder of fiscal 2025, our capital spending will be centered on ~~our mattress fabrics segment, with a strategic focus on~~ capital projects that will increase efficiencies and improve the quality of our products. Funding for capital expenditures is expected to be from cash provided by operating activities.

Accounts Payable – Capital Expenditures

As of ~~October~~January 2726, ~~2024~~2025, we had amounts due regarding capital expenditures totaling $~~602~~439,000 that pertained to outstanding vendor invoices, none of which were financed. The total amount outstanding of $~~602~~439,000 is required to be paid based on normal credit terms.

Purchase Commitments – Capital Expenditures

As of ~~October~~January 2726, ~~2024~~2025, we had open purchase commitments to acquire equipment for our mattress fabrics segment totaling $~~571~~600,000.

Critical Accounting Policies and Recent Accounting Developments

As of ~~October~~January 2726, ~~2024~~2025, there were no changes in our significant accounting policies or the application of those policies from those reported in our ~~annual~~Annual ~~report~~Report on Form 10-K for the year ended April 28, 2024.

Refer to Note 2 of the consolidated financial statements for recently adopted and issued accounting pronouncements, if any, since the filing of our Form 10-K for the year ended April 28, 2024.

Contractual Obligations

There were no significant or new contractual obligations since those reported in our ~~annual~~Annual ~~report~~Report on Form 10-K for the year ended April 28, 2024.

Inflation

Any significant increase in our raw material costs, utility/energy costs, and general economic inflation could have a material adverse impact on the company, because competitive conditions ~~have~~may ~~limited~~limit our ability to pass significant operating cost increases on to customers.

During fiscal 2024 and continuing through the ~~second~~third quarter of fiscal 2025, raw material costs started to decline due to slowing global demand; however, the cost of labor remained challenging during fiscal 2024 and continuing through the ~~second~~third quarter of fiscal 2025.

Inflationary pressures also affected consumer spending during fiscal 2024 and continuing through the ~~second~~third quarter of fiscal 2025, causing a slowdown in business in both the mattress industry and the residential home furnishings industry. This slowdown has caused reduced demand from producers of home furnishings for our mattress fabrics and residential upholstery fabrics products during fiscal 2024 and incontinuing through the ~~second~~third quarter of fiscal 2025.

We are unable to predict how long these trends will last, or to what extent inflationary pressures may affect the economic and purchasing cycle for home furnishing products (and therefore affect demand for our products) over the short and long term.

I-5049

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rates

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

Effective January 19, 2023, we entered into a second amended and restated U.S. revolving credit agreement (the "Amended Agreement") to establish an asset-based revolving credit facility that required interest to be charged at a rate calculated using an applicable margin over the Federal Reserve Bank of New York's secured overnight fund rate (SOFR), as defined in the Amended Agreement. The interest rate under the Amended Agreement as of ~~October~~January 2726, ~~2024~~2025, was 65.338%. As of ~~October~~January 2726, ~~2024~~2025, there were no outstanding borrowings under the Amended Agreement.

Effective March 20, 2024, we entered into an unsecured credit agreement with a financial institution in China denominated in RMB that requires interest to be charged at a rate based on the Loan Prime Rate ("LPR") in China minus 50 basis points ~~(2.60%~~at asthe time of ~~October 27~~borrowing, ~~2024)~~which represents 2.95%. There were outstanding borrowings under this agreement totaling $4.10 million as of ~~October~~January 2726, ~~2024~~2025.

On November 5, 2024, we entered into an unsecured credit agreement with another financial institution in China denominated in RMB that requires interest to be charged at a rate based on the Loan Prime Rate ("LPR") in China minus 50 basis points ~~(2.60%~~at asthe time of ~~October 27~~borrowing, ~~2024)~~which represents 2.60%. There were no outstanding borrowings under this agreement totaling $1.4 million as of ~~October~~January 2726, ~~2024~~2025.

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 ~~October~~January 2726, ~~2024~~2025, would not have materially affected our results of operations or financial position.

ITEM 4. CONTROLS AND PROCEDURES

As of ~~October~~January 2726, ~~2024~~2025, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of such date, in all material respects, to ensure that information required to be disclosed in the reports filed by us and submitted under the Exchange Act, is recorded, processed, summarized, and reported as and when required, and that these disclosure controls and procedures were effective as of such date 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.

During the quarter ended ~~October~~January 2726, ~~2024~~2025, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

I-5150

Part II – Other Information

Item 1. Legal Proceedings

There have not been any material changes to our legal proceedings during the three months ended ~~October~~January 2726, ~~2024~~2025. Our legal proceedings are disclosed in the company’s ~~annual~~Annual ~~report~~Report on Form 10-K filed with the Securities and Exchange Commission on July 12, 2024, for the fiscal year ended April 28, 2024.

Item 1A. Risk Factors

~~There~~Except as set forth below, there have not been any material changes to our risk factors during the three months ended ~~October~~January 2726, ~~2024.~~2025, ~~Our~~from the risk factors ~~are~~ disclosed in Item 1A “Risk Factors” of the company’s ~~annual~~Annual ~~report~~Report on Form 10-K filed with the Securities and Exchange Commission on July 12, 2024, for the fiscal year ended April 28, 2024.

Our business may be adversely affected by increased tariffs or other changes in U.S. trade policy related to imported products, as well as violations of existing trade policies.

Many of our products are manufactured or sourced outside of the United States. The U.S. government has imposed certain tariffs on imports from various countries, including China, where a significant amount of our products is produced. Recently, the U.S. government significantly increased tariffs on imports from China, and has indicated a willingness to impose additional tariffs on imports from China and other countries. Any tariffs that result in increased costs of imported products and materials could require us to increase prices to our domestic customers. Moreover, if other countries enact retaliatory tariffs in response to U.S. trade policy, our sales, and the economy in general, may be adversely affected. If we are unable to pass along these additional costs, our gross margins on products sold may be adversely affected. As a result, the tariffs could have a material adverse effect on our results of operations.

In addition to tariffs, the U.S. government considers other proposals for substantial changes to its trade and tax policies, which could include import restrictions, changes to or withdrawal from existing trade agreements, and border-adjustment taxes, among other possible measures. Material changes in these policies could increase our tax obligations, require us to source materials from different regions, or increase prices to customers, which could adversely affect sales. Any significant change in U.S. trade or tax policy related to imported products could have a material adverse effect on our business and financial results.

There are also a number of trade regulations and duties currently in place to protect the U.S. textile industry against competition from low-priced foreign producers, such as those in China and Vietnam, but violations of these trade regulations and duties by foreign producers has had, and may in the future have, a material adverse effect on our operations. In May of 2019, the U.S. Department of Commerce imposed punitive anti-dumping measures against China mattress imports to address violations of trade regulations. Despite the imposition of these duties, if China producers move their production out of China, which we believe has already occurred, they may continue to engage in unfair competition in violation of trade regulations between the U.S. and other countries, or there may be a potential risk of illegal transshipments of mattress products into the United States, which involves circumventing the imposed duties by falsely claiming that mattresses are products of a particular country of origin to avoid paying higher duties. In response to low-priced mattress imports that moved out of China to other countries in an effort to circumvent U.S. duties, the U.S. Department of Commerce has imposed anti-dumping duties on mattress imports from countries other than China. While we believe the domestic mattress industry and, in turn, our business, began to realize some benefits from these duties starting in 2021, low-priced imports continue to adversely affect our sales. We can offer no assurance that such trends will abate, nor can we offer assurance that the U.S. Department of Commerce can effectively limit the dumping of low-priced imports into the U.S. market.

If supply chains are moved out of China to countries without anti-dumping duties and producers continue to supply low-priced imports in violation of U.S. trade laws, and if illegal transshipments are not monitored and enforcement is not effective to limit them, these shipments could have a material adverse effect on the company’s business, financial condition, results of operations or cash flows.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER PURCHASES OF EQUITY SECURITIES

					(c)		(d)
					Total Number of		Approximate
	(a)				Shares Purchased		Dollar Value of
	Total		(b)		as Part of		Shares that May
	Number		Average		Publicly		Yet Be Purchased
	of Shares		Price Paid		Announced Plans		Under the Plans or
Period	Purchased		per Share		or Programs		Programs (1)
July 29, 2024 to September 1, 2024		—		—		—	$	3,248,094
October 28, 2024 to December 1, 2024		—		—		—	$	3,248,094
September 2, 2024 to September 29, 2024		—		—		—	$	3,248,094
December 2, 2024 to December 29, 2024		—		—		—	$	3,248,094
September 30, 2024 to October 27, 2024		—		—		—	$	3,248,094
December 30, 2024 to January 26, 2025		—		—		—	$	3,248,094
Total		—		—		—	$	3,248,094

(1)

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

Item 5. Other Information

During the three months ended ~~October~~January 2726, ~~2024~~2025, none of the company's directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (as such terms are defined in Item 408 of Regulation S-K).

~~II-1~~Appointment of Principal Accounting Officer

Effective March 5, 2025, the Board of Directors of the company appointed Ronald S. Chandler as the company’s Vice President and Corporate Controller and to serve as the company’s principal accounting officer. Mr. Chandler will report to Kenneth R. Bowling, the company’s Executive Vice President, Chief Financial Officer, and Treasurer, and, in connection with Mr. Chandler’s appointment, Mr. Bowling will no longer serve as the Company’s principal accounting officer.

Mr. Chandler, age 46, previously served as the company’s Corporate Controller since July 2021, and began his tenure with the company as Assistant Corporate Controller in January 2014. Prior to joining the company, Mr. Chandler served as Accounting Manager for Inmar, Inc. from 2010 to 2014 and in audit associate roles with Grant Thornton LLP from 2006 to 2010. Mr. Chandler earned a bachelor’s degree in Business Administration, with a concentration in Finance, from Western Carolina University and a master’s degree in Accounting from the University of North Carolina at Greensboro. Mr. Chandler is a certified public accountant.

In connection with his appointment, Mr. Chandler’s annual salary was increased from $149,900 to $175,000.

There is no arrangement or understanding pursuant to which Mr. Chandler was appointed as principal accounting officer of the company. There are no family relationships between Mr. Chandler and any of the company’s directors or executive officers, and there are no related party transactions involving Mr. Chandler that are reportable under Item 404(a) of Regulation S-K.

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Item 6. Exhibits

The following exhibits are submitted as part of this report.

3.1 Amended and Restated Bylaws effective as of September 26, 2024, were filed as Exhibit 3.1 to the Current Report on

Form 8-K filed September 27, 2024 (Commission File No. 001-12597), and incorporated herein by reference.

10.1 Form of Annual Incentive Award Agreement.

10.2 Form of Restricted Stock Unit Award Agreement for restricted stock units granted to executive officers pursuant to the

Amended and Restated Equity Incentive Plan.

31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).

31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).

32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.

32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

104 Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension

information contained in Exhibits 101).

II-23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CULP, INC.(Registrant)
Date: December 6, 2024	By:	/s/ Kenneth R. Bowling
Date: March 7, 2025	By:	/s/ Kenneth R. Bowling
		Kenneth R. Bowling
		Executive Vice President and Chief Financial Officer
		(Authorized to sign on behalf of the registrant and also signing as principal financial officer and principal accounting officer)
		(Authorized to sign on behalf of the registrant and also signing as principal financial officer)

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