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What changed in CULP INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of CULP INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+515 added−453 removedSource: 10-K (2025-07-11) vs 10-K (2024-07-12)

Top changes in CULP INC's 2025 10-K

515 paragraphs added · 453 removed · 348 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

131 edited+26 added−20 removed28 unchanged
Biggest changeOther examples of employee engagement initiatives include: • Interactive TeamTalk meetings, business strategy sessions, and video chat sessions with senior management • Policy Talk Tuesdays with managers and supervisors on company HR policies and benefits • CULPchat program soliciting employee feedback and communication • The CulpVets program, which provides special recognition to military veterans • Employee awards and recognition programs These engagement efforts and programs are continually refined and updated to meet the evolving needs of our workforce.
Biggest changeOther examples of employee engagement initiatives include: • Interactive TeamTalk meetings, business strategy sessions, and video chat sessions with senior management • Leadership Talk Tuesdays for managers and supervisors, with each session featuring either an external or internal guest speaker presenting various leadership development topics and also covering company human resources policies and benefits • CULP University, an online learning platform with courses coordinating with each month’s Leadership Talk Tuesday topic • Frontline Leadership Academy, with monthly sessions held in-person at our Stokesdale, North Carolina facility targeting associates new in leadership roles and those in need of extra leadership development 12 • Regularly scheduled, on-site informational and assistance visits by the company's human resources benefits team to our Stokesdale, North Carolina facility • CULPchat program soliciting employee feedback and communication • The CulpVets program, which provides special recognition to military veterans • Employee awards and recognition programs These engagement efforts and programs are continually refined and updated to meet the evolving needs of our workforce.
We will make this annual report and our other annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports available free of charge on our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).
We will make this annual report and our other Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to these reports available free of charge on our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).
In fiscal 2022, we expanded our leading-edge technology by investing in robust hot melt lamination finishing equipment. In fiscal 2024, we invested in knitting software to monitor machine efficiency and output, and we invested in a chemical dosing system designed to enhance our finishing capabilities and provide immediate cost saving benefits.
In fiscal 2022, we expanded our leading-edge technology by investing in robust hot melt lamination finishing equipment. In fiscal 2024, we invested in knitting software to monitor machine efficiency and output and a chemical dosing system designed to enhance our finishing capabilities and provide immediate cost saving benefits.
Under current law, environmental liability can arise from previously owned properties, leased properties, and properties owned by third parties, as well as from properties currently owned and leased by the company. Environmental liabilities can also be asserted by adjacent landowners or other third parties in toxic tort litigation.
Under current law, environmental liability can arise from previously owned properties, previously leased properties, and properties owned by third parties, as well as from properties currently owned and/or leased by the company. Environmental liabilities can also be asserted by adjacent landowners or other third parties in toxic tort litigation.
These are sometimes referred to as microdenier suedes. • Faux leathers – Sueded or knitted base cloths which are overprinted with polyurethane, and composite products consisting of a base fabric that is coated with a top layer of polyurethane, which simulates the look and feel of leather. • Cut and sewn kits – Covers made from various types of upholstery fabrics and cut and sewn to specifications of furniture manufacturing customers for use on specific furniture frames.
These fabrics are sometimes referred to as "microdenier suedes." • Faux leathers – Sueded or knitted base cloths that are overprinted with polyurethane, and composite products consisting of a base fabric that is coated with a top layer of polyurethane that simulates the look and feel of leather. • Cut and sewn kits – Covers made from various types of upholstery fabrics and cut and sewn to the specifications of furniture manufacturing customers for use on specific furniture frames.
Since 1997, our stock has been listed on the New York Stock Exchange and trades under ticker symbol “CULP.” Our fiscal year is the 52- or 53-week period ending on the Sunday closest to April 30. Our executive offices are located in High Point, North Carolina. Culp maintains a corporate website at www.culp.com.
Since 1997, our stock has been listed on the New York Stock Exchange (NYSE) and trades under ticker symbol “CULP.” Our fiscal year is the 52- or 53-week period ending on the Sunday closest to April 30. Our executive offices are located in High Point, North Carolina. Culp maintains a corporate website at www.culp.com.
Mattress Fabrics Segment The mattress fabrics business and the bedding industry in general are slightly seasonal, with sales being the highest in early spring and late summer, with another peak in mid-winter. In the U.S., customers often purchase mattresses during major U.S. holidays, in conjunction with retail store promotional events. However, these seasonality trends relate more to in-store retail sales.
Mattress Fabrics Segment The mattress fabrics business and the bedding industry in general are slightly seasonal, with sales traditionally being the highest in early spring and late summer and another peak in mid-winter. In the U.S., customers often purchase mattresses during major holidays in conjunction with retail store promotional events. However, these seasonality trends relate more to in-store retail sales.
We also provide development opportunities that support career growth and maintain a wide variety of programs to engage 11 with our employees and promote overall wellness. We believe these efforts support all of our personnel in the workplace and elsewhere in their lives, which in turn promotes employee satisfaction and retention.
We also provide development opportunities that support career growth and maintain a wide variety of programs to engage with our employees and promote overall wellness. We believe these efforts support all of our personnel in the workplace and elsewhere in their lives, which in turn promotes employee satisfaction and retention.
The upholstery fabrics business also markets window treatment products and installation services for customers in the hospitality and commercial industries. Culp markets a variety of fabrics and other products in different categories to a global customer base, including fabrics produced at our manufacturing facilities and fabrics produced by other suppliers.
The upholstery fabrics business also markets window treatment products and provides installation services for customers in the hospitality and commercial industries. Culp markets a variety of fabrics and other products in different categories to a global customer base, including fabrics produced at our manufacturing facilities and fabrics produced by other suppliers.
Our manufacturing facilities in China close during Chinese National Holiday (in October) and the Chinese New Year (which occurs in January or February each year), often causing sales to be higher in advance of these Chinese holiday periods and sometimes lower during or immediately following the same periods.
Our facilities in China close during Chinese National Holiday (in October) and the Chinese New Year (which occurs in January or February each year), often causing sales to be higher in advance of these holiday periods and sometimes lower during or immediately following the same periods.
Beginning in late fiscal 2019, we also developed strategic supplier relationships in Vietnam for additional sourcing of our cut and sewn kits, which has allowed us to begin 7 adjusting our supply chains to meet customer demands.
Beginning in late fiscal 2019, we also developed strategic supplier relationships in Vietnam for additional sourcing of our cut and sewn kits, which has allowed us to begin adjusting our supply chains to meet customer demands.
The sourcing of components and fully assembled furniture from overseas continues to play a major role in the furniture industry. The largest source for imported upholstery fabrics continues to be China, while China and Vietnam now serve as the largest sources for fully 5 assembled furniture.
The sourcing of components and fully assembled furniture from overseas continues to play a major role in the furniture industry. The largest source for imported upholstery fabrics continues to be China, while China and Vietnam now serve as the largest sources for fully assembled furniture.
Online sales, which have grown in recent years, are less affected by in-store seasonality trends. 9 Upholstery Fabrics Segment The upholstery fabrics business has some seasonality, which is tied to the timing of holidays in our manufacturing facilities.
Online sales, which have grown in recent years, are less affected by in-store seasonality trends. Upholstery Fabrics Segment The upholstery fabrics business has some seasonality, which is tied to the timing of holidays in our manufacturing facilities.
Culp’s success is largely dependent on its ability to market fabrics and products with appealing designs and patterns, as well as performance properties such as cleanability, stain-resistance, cooling, sustainability, and health-related benefits.
Culp’s success is largely dependent on its ability to market fabrics and products with appealing designs and patterns, as well as performance properties such as cleanability, stain-resistance, cooling, sustainability, and health- and hygiene-related benefits.
In order to enhance our design and innovation creativity and advance the synergies between our mattress fabrics and upholstery fabrics segments, we launched a new innovation campus in downtown High Point, North Carolina, during fiscal 2022.
To enhance our design and innovation creativity and advance the synergies between our mattress fabrics and upholstery fabrics segments, we launched a new innovation campus in downtown High Point, North Carolina, during fiscal 2022.
Consumers are often drawn to the mattress that is the most visually appealing when walking into a retail showroom or viewing mattress products online, so this design variation, together with price point delineation, helps our customers merchandise different looks at various price points. Fiber differentiation also plays an important part in design.
Consumers are often drawn to the mattress that is the most visually appealing when in a retail showroom or viewing mattress products online, so this design variation, together with price point delineation, helps our customers merchandise different looks at various price points. Fiber differentiation also plays an important part in design.
Over the past ten fiscal years, we have made capital expenditures to consolidate our production facilities and to modernize both knit and weaving equipment, enhance and provide knit and woven finishing capabilities, and expand capacity. The result has been an increase in manufacturing efficiency and reductions in operating costs, as well as expanded product offerings and capacity.
Over the past eleven fiscal years, we have made capital expenditures to consolidate our production facilities and to modernize both knit and weaving equipment, enhance and provide knit and woven finishing capabilities, and expand capacity. The result has been an increase in manufacturing efficiency and reductions in operating costs, as well as expanded product offerings.
During fiscal 2024, we sourced unfinished and finished fabrics, as well as cut and sewn kits, from a limited number of strategic suppliers in China who are willing to commit significant capacity to meet our needs and work with our product development team located in China to meet the demands of our customers.
During fiscal 2025, we sourced unfinished and finished fabrics, as well as cut and sewn kits, from a limited number of strategic suppliers in China who are willing to commit significant capacity to meet our needs and work with our product development team located in China to meet the demands of our customers.
We view such intellectual property, along with any unregistered copyrights, trademarks, service marks, trade names, domain names, trade dress, trade secrets, and proprietary technologies, as an important part of our business, and we seek to diligently protect, monitor, and defend, through appropriate action, against their unauthorized use. 13
We view such intellectual property, along with any unregistered copyrights, trademarks, service marks, trade names, domain names, trade dress, trade secrets, and proprietary technologies, as an important part of our business and seek to diligently protect, monitor, and defend, through appropriate action, against their unauthorized use. 14
This is due in part to the fact that a larger share of bedding industry sales are replacement purchases, which are generally less volatile than sales based on economic growth and new household formations.
This is due in part to the fact that a larger share of bedding industry sales are replacement purchases, which are generally less volatile than sales based on economic growth and new household formation.
Additional information about trends and developments in each of our business segments is provided in the “Segments” discussion below, as well as in our “Management’s Discussion and Analysis” in Part II, Section 7 of this report. General In formation Culp, Inc. was organized as a North Carolina corporation in 1972 and made its initial public offering in 1983.
Additional information about trends and developments in each of our business segments is provided in the “Segments” discussion below, as well as in our “Management’s Discussion and Analysis” in Part II, Item 7 of this report. 2 General In formation Culp, Inc. was organized as a North Carolina corporation in 1972 and made its initial public offering in 1983.
Upholstery Fabrics Segment Our major customers for upholstery fabrics are leading manufacturers of upholstered furniture, including Ashley Furniture, Flexsteel Home, Jonathan Louis, La-Z-Boy (La-Z-Boy Residential and England), Southern Furniture Industries (Fusion and Southern Motion), and Sudair Manufacturing. Major customers for the company’s fabrics for commercial furniture include Exemplis, HNI Corporation, Holiday Inn Club Vacations, and Marriott.
Upholstery Fabrics Segment Our major customers for upholstery fabrics are leading furniture manufacturers including Ashley Furniture, Flexsteel Home, Jonathan Louis, La-Z-Boy Incorporated (La-Z-Boy Residential and England), Southern Furniture Industries (Fusion and Southern Motion), and Sudair Manufacturing. Major customers for the company’s fabrics for commercial furniture include Exemplis, HNI Corporation, Holiday Inn Club Vacations, and Marriott.
In addition, our bedding customers continue to face increasing competition from imports of finished beds, which indirectly compete with our mattress fabrics as import producers generally do not purchase our fabrics.
In addition, our bedding customers continue to face increasing competition from imports of finished beds, which indirectly compete with our mattress fabrics because import producers generally do not purchase our fabrics.
Our design staff travels regularly to international trade and design shows to maintain familiarity with current design and fashion trends. The team searches continually for new ideas and for the best sources of raw materials, yarns, and fabrics, utilizing a supply network located mostly in China.
Our design staff regularly attends international trade and design shows to maintain familiarity with current design and fashion trends. The team 8 searches continually for new ideas and for the best sources of raw materials, yarns, and fabrics, utilizing a supply network located mostly in China.
Employee Recruitment, Development, Engagement, and Wellness We strive to attract, recruit, and retain employees through competitive compensation and benefit programs that are aligned with those of comparable industries and in the geographic areas where our facilities are located, and in compliance with local regulatory requirements.
Employee Recruitment, Development, Engagement, and Wellness We strive to attract, recruit, and retain employees through competitive compensation and benefit programs that are aligned with those of comparable industries and companies and in the geographic areas where our facilities are located, and that comply with local regulatory requirements.
Segm ents Our operations are classified into two business segments: mattress fabrics and upholstery fabrics. The following table sets forth certain information for each of our segments.
Segm ents Our operations are classified into two business segments for reporting purposes: mattress fabrics and upholstery fabrics. The following table sets forth certain information for each of our segments.
These fabrics are sold in roll form and as sewn mattress covers by the mattress fabrics segment, and in roll form and as cut and sewn kits by the upholstery fabrics segment. Our upholstery segment products also include window treatments and related products.
These fabrics are sold in roll form and as sewn mattress covers by the mattress fabrics segment, and in roll form and as cut and sewn kits by the upholstery fabrics segment. Our upholstery segment also provides window treatments and related products.
In general, the residential furniture industry has been consolidating for several years. The result of this trend is fewer, but larger, customers for marketers of upholstery fabrics. Intense price competition continues to be an important consideration for both residential and commercial furniture.
In general, the residential furniture industry has been consolidating for several years, with the result of this trend being fewer, but larger, customers for marketers of upholstery fabrics. Intense price competition continues to be an important consideration for both residential and commercial furniture.
We believe this industry softness was mostly driven by inflationary pressures affecting consumer spending, especially for mattress products in the low to mid-range price points, and a shift in demand from home goods to travel, leisure, and entertainment following a pulling forward of demand for home goods during the early years of the COVID-19 pandemic.
We believe this industry softness is mostly driven by inflationary pressures and related uncertainty affecting consumer spending, especially for mattress products in the low to mid-range price points, and a shift in demand from home goods to travel, leisure, and entertainment following a pulling forward of demand for home goods during the early years of the COVID-19 pandemic.
Our facilities in China provide a base from which to access a variety of products, including certain fabrics (such as micro denier suedes and polyurethane fabrics) that are not produced anywhere within the U.S.
Our facilities in China provide a base from which to access a variety of products, including certain fabrics (such as microdenier suedes and polyurethane fabrics) that are not produced anywhere within the U.S.
Compet ition Competition for our products is high and is based primarily on price, design, quality, product performance, timing of delivery, and service. Mattress Fabrics Segment The mattress fabrics market is concentrated in a few relatively large suppliers, as well as some niche producers focusing mainly on knitted products.
Compet ition Competition for our products is high and is based primarily on price, design, quality, product performance, timing of delivery, and service. Mattress Fabrics Segment The mattress fabrics market is concentrated within a few relatively large suppliers including Culp, as well as some niche producers focusing mainly on knitted products.
In fiscal 2021, we invested in additional knit machines and other equipment to expand fabric capacity in North America, and we also enhanced our digital project management platform, which allows us to work with customers from concept ideation and 3D mapping to product life cycle management and final merchandising.
In fiscal 2021, we invested in additional knit machines and other equipment to expand our mattress fabric capacity in North America, and we also enhanced the digital project management platform that allows us to work with customers from concept ideation and 3D mapping to product life cycle management and final merchandising.
Environmental and Other Regulations We are subject to various federal and state laws and regulations, including the Occupational Safety and Health Act (“OSHA”) and federal and state environmental laws, as well as similar laws governing our manufacturing facilities in China, Canada, and Haiti.
Environmental and Other Regulations We are subject to various federal and state laws and regulations, including the Occupational Safety and Health Act (“OSHA”) and federal and state environmental laws, as well as similar laws governing our facilities in China and Haiti and our former facility in Canada.
Our largest customer in the upholstery fabrics segment is La-Z-Boy Incorporated, which accounted for approximately 12% of the company’s consolidated sales in fiscal 2024. 12 The following table sets forth our net sales by geographic area by amount and percentage of total net sales for the three most recent fiscal years.
Our largest customer in the upholstery fabrics segment is La-Z-Boy Incorporated, which accounted for approximately 11% of the company’s consolidated sales in fiscal 2025. The following table sets forth our net sales by geographic area by amount and percentage of total net sales for the three most recent fiscal years.
We periodically review our compliance with these laws and regulations in an attempt to minimize the risk of violations. Our operations involve a variety of materials and processes that are subject to environmental regulation.
We monitor our compliance with these laws and regulations in an attempt to minimize the risk of violations. Our operations involve a variety of materials and processes that are subject to environmental regulation.
We continue to expand our marketing efforts to sell our upholstery fabrics products in countries other than the U.S., including the Chinese local market. During the fourth quarter of fiscal 2024, we also established an administrative office located in Ho Chi Minh City, Vietnam, for the purpose of enhancing our sourcing and to further diversify our supply chain in Asia.
We continue to expand our marketing efforts to sell our upholstery fabrics products in countries other than the U.S., including the Chinese local market. In fiscal 2024, we established an administrative office located in Ho Chi Minh City, Vietnam, for the purpose of enhancing our sourcing capabilities and to further diversify our supply chain in Asia.
This space combines our design, innovation, and sales teams for both businesses into a shared location to support collaboration across divisions and pull our top creative talent together to develop new products and technologies based on the latest consumer trends. Mattress Fabrics Segment Design innovation is a very important element of producing mattress fabrics.
This space combines our design, innovation, and sales teams for both businesses into a shared location to support collaboration and pull our top creative talent together to develop new products and technologies based on the latest consumer trends. Mattress Fabrics Segment Design innovation is a very important element of mattress fabric production.
Upholstery Fabrics Segment The upholstery fabrics segment generally does not purchase raw materials directly, but raw materials, particularly synthetic yarns (polyester, acrylic, rayon, and polypropylene) and dyes, are important to our suppliers of finished and unfinished fabrics. Raw materials account for approximately 60%-70% of upholstery fabric manufacturing costs for products the company manufactures.
Upholstery Fabrics Segment The upholstery fabrics segment generally does not purchase raw materials directly, but raw materials, particularly synthetic yarns (polyester, acrylic, rayon, and polypropylene) and dyes, are important to our suppliers of finished and unfinished fabrics. Raw materials account for approximately 60%-70% of the costs of the upholstery fabric products we manufacture.
Knitted mattress fabrics have inherent stretching properties and spongy softness, which conforms well to layered foam packages. • Woven jacquards – Various patterns and intricate designs, woven on complex looms using a variety of synthetic and natural yarns. • Converted fabric – Suedes, pile, and embroidered fabrics, as well as other specialty type products, are sourced to offer diversity for higher-end mattresses. • Sewn mattress covers – Covers for bedding (primarily specialty beds), sewn from mattress fabrics produced by our facilities or sourced from others.
Knitted mattress fabrics have inherent stretching properties and spongy softness, which conforms well to layered foam packages. • Woven jacquards – Various patterns and intricate designs, woven on complex looms using a variety of synthetic and natural yarns; sourced from third parties following the Fiscal 2025 restructuring. • Converted fabric – Suedes, pile, and embroidered fabrics, as well as other specialty type products, are sourced to offer diversity for higher-end mattresses. 6 • Sewn mattress covers – Covers for bedding (primarily specialty beds), sewn from mattress fabrics produced by our facilities or sourced from third parties.
Increased consumer spending on travel and experiences following the COVID-19 pandemic has driven increased demand for our products in the hospitality market, while significant challenges in the commercial real estate market following the pandemic have adversely affected our commercial sales to some extent.
Increased consumer spending on travel and experiences following the COVID-19 pandemic has driven increased demand for our products in the hospitality market, while significant challenges in the commercial real estate market following the pandemic and its impact on remote work trends have adversely affected our commercial sales to some extent.
During fiscal 2023, we completed a restructuring and rationalization of our U.S.-based cut and sewn cover platform, moving our research and development ("R&D") and prototyping capabilities from our location in High Point, North Carolina, to our owned facility in Stokesdale, North Carolina.
During fiscal 2023, we completed a restructuring and rationalization of our U.S.-based cut and sewn mattress cover platform, moving our research and development ("R&D") and prototyping capabilities to our owned facility in Stokesdale, North Carolina.
The process of developing new designs and innovative finishes involves maintaining an awareness of broad fashion and color trends, as well as wellness and other consumer trends, both in the United States and internationally.
The process of developing new designs and innovative finishes involves maintaining an awareness of broad fashion and color trends, as well as wellness and other consumer trends, both in the U.S. and internationally.
Mattress fabric designs are not routinely introduced on a scheduled season. Designs are typically introduced upon the request of the customer as they plan introductions of new products. Additionally, we work closely with our customers on new design offerings around the major furniture markets such as Las Vegas, Nevada, and High Point, North Carolina.
Mattress fabric designs are not routinely introduced on a scheduled seasonal cadence. Designs are typically introduced upon the request of the customer as they plan new product introductions. Additionally, we work closely with our customers on new design offerings around the major furniture markets such as those in Las Vegas, Nevada, and High Point, North Carolina.
Additionally, we market a variety of window treatments, using mostly customer-supplied fabrics and materials, fabricated at our Read Window Products facility in Knoxville, Tennessee, as well as by third-party suppliers.
Additionally, we market a variety of window treatments, using mostly customer-supplied fabrics and materials, which are fabricated at our Read Window Products facility in Knoxville, Tennessee, and our facility in Stokesdale, North Carolina, as well as by third-party suppliers.
We invest significant resources to stay ahead of current design trends, including maintaining a trained and active design and innovation staff; investing in research and development activities, such as participation in international design shows; and implementing systems for creating, cataloging, and simulating new designs.
We invest significant resources to stay ahead of current design trends, including maintaining a team of dedicated design and innovation professionals; investing in research and development activities, such as participation in international design shows; and implementing systems for creating, cataloging, and simulating new designs.
Additionally, the growth in non-traditional sources for retail mattress sales, such as online e-commerce channels and wholesale warehouse clubs, has the potential to increase overall consumption of bedding products due to convenience and high traffic volume, which may result in higher turnover of product. Among fabric types, knitted fabrics have continued to increase in popularity.
Additionally, the growth in non-traditional sources for retail mattress sales, such as online e-commerce channels and wholesale warehouse clubs, may potentially increase overall consumption of bedding products due to convenience and high traffic volume, which may result in more frequent product replacement. Among fabric types, knitted fabrics have continued to increase in popularity.
We believe the success of our upholstery fabrics segment over the longer term is due largely to a business strategy that has included: innovation in a low-cost environment, speed-to-market execution, consistent quality, reliable service and lead times, and increased recognition of and reliance on the Culp brand.
We believe the success of our upholstery fabrics business over the longer term is due largely to a strategy focusing on design and product innovation in a low-cost environment, speed-to-market execution, consistent quality, reliable service and lead times, and increased recognition of and reliance on the Culp brand.
Major importing countries in fiscal 2024 included Mexico, Vietnam, Indonesia, Taiwan, Spain, and Kosovo, among others. The result of the increase in imports has been a decline in sales for the major U.S. bedding manufacturers, which has affected major suppliers to those manufacturers, including Culp. While several rounds of actions by the U.S.
Major importing countries in fiscal 2025 included Indonesia, Mexico, Vietnam, Poland, and China, among others. The result of the increase in imports has been a decline in sales for the major U.S. bedding manufacturers, which has affected major suppliers to those manufacturers, including Culp. While several rounds of actions by the U.S.
Upholstery Fabrics Segment The company has developed an upholstery fabrics design and product development team (with staff located in the U.S. and in China) with a primary focus on value in designing body cloths, while promoting style leadership with pillow fabrics and color.
Upholstery Fabrics Segment The company has developed an upholstery fabrics design and product development team (with staff located in the U.S. and in China) primarily focused on value in designing furniture body cloths, while promoting style leadership with pillow fabrics and color.
Upholstery Fabrics Segment Although it is difficult to predict the amount of backlog that is “firm,” we have reported the portion of the upholstery fabric backlog from customers with confirmed shipping dates within five weeks of the end of the fiscal year.
Upholstery Fabrics Segment Although it is difficult to predict the amount of order backlog that is “firm” in our upholstery fabrics segment, we have reported the portion of the upholstery fabric backlog from customers with confirmed shipping dates within five weeks of the end of the fiscal year.
As part of the Fiscal 2025 restructuring, Culp is relocating some of its knitting and finishing operations from its Quebec, Canada facility to Stokesdale, North Carolina, and transitioning its woven jacquard fabric operations to a strategic sourcing model. See “—Manufacturing and Sourcing—Mattress Fabrics Segment,” below, for information on our mattress fabrics manufacturing.
As part of the Fiscal 2025 restructuring, Culp relocated some of its knitting and finishing operations from its Quebec, Canada, facility to Stokesdale, North Carolina, and transitioned its woven jacquard fabric operations to a strategic sourcing model utilizing outside suppliers. See “—Manufacturing and Sourcing—Mattress Fabrics Segment,” below, for information on our mattress fabrics manufacturing.
Additionally, we previously produced cut and sewn upholstery kits in Haiti, but we discontinued this production during the first quarter of fiscal 2024, based on reduced demand. A large portion of our upholstery fabric products, as well as certain elements of our production processes, are being sourced from outside suppliers.
Additionally, we previously produced cut and sewn upholstery kits in Haiti, but we discontinued this production during fiscal 2024 due to reduced demand. A large portion of our upholstery fabric products, as well as certain elements of our production processes, are sourced from outside suppliers.
We believe the success of our mattress fabrics business over the longer term is due largely to a business strategy that has included a focus on creative design and product innovation; a strong global manufacturing and sourcing platform; solid long-term customer and vendor relationships; and reliable service.
We believe the success of our mattress fabrics business over the longer term is due largely to a strategy focusing on creative design and product innovation, a strong, multi-faceted and flexible global manufacturing and sourcing platform, solid long-term customer and vendor relationships, and reliable service.
Purchases of furniture products are discretionary purchases for most individuals and businesses, and economic downturns or periods of depressed consumer confidence reduce demand for our upholstery fabrics. In addition, sales of residential furniture are influenced significantly by the housing industry and by trends in home sales and household formations. Reduced home sales in recent years have adversely affected our sales.
Purchases of furniture products are discretionary purchases for most individuals and businesses, and economic downturns or periods of depressed consumer confidence reduce demand for our upholstery fabrics. In addition, sales of residential furniture are influenced significantly by the housing industry and by trends in home sales and household formation.
Upholstery Fabrics Segment A majority of our upholstery fabrics are marketed on a “make to order” basis and are shipped directly from our distribution facilities in Burlington, North Carolina, and Shanghai, China. We also have distribution capabilities in Vietnam and Turkey.
Upholstery Fabrics Segment A majority of our upholstery fabrics are marketed on a “make to order” basis and are shipped directly from our distribution facilities in Burlington, North Carolina, and Shanghai, China.
Our business model has allowed us to provide bedding manufacturers with innovative products developed from consumer-based research and trend analysis, and we have been able to meet continually changing demand trends with the support of our flexible global platform. Upholstery Fabrics. The upholstery fabrics segment markets fabrics for residential, commercial, and hospitality furniture, described below.
Our business model has allowed us to provide bedding manufacturers with innovative products developed from consumer-based research and trend analysis, and we have been able to meet continually changing demand trends with the support of our flexible global platform. Upholstery Fabrics.
Consumer acceptance of boxed beds as a delivery mechanism continues to drive growth and increase market share for this product, increasing potential demand for knitted fabrics and sewn mattress covers. Mattress fabric design efforts are based on current trends in home decor and fashion.
Consumer acceptance of roll-packed/compressed, or “boxed,” mattresses as a delivery mechanism continues to drive growth and increase market share for this product, increasing potential demand for knitted fabrics and sewn mattress covers. Mattress fabric design efforts are based on current trends in home decor and fashion.
Also, as part of the Fiscal 2025 restructuring, we are consolidating our Haiti sewn mattress cover operation into one building and reducing operating expenses at that location.
Also, as part of the Fiscal 2025 restructuring, we consolidated our Haiti sewn mattress cover operation into one building and significantly reduced operating expenses at that location.
Overall demand for our residential and commercial upholstery fabrics depends upon consumer and business demand for furniture products, which is subject to variations in the general economy, including current inflationary pressures affecting consumer spending and declines in consumer confidence.
Overview of Residential, C ommercial, and Hospitality Furnishing Industries Overall demand for our residential and commercial upholstery fabrics depends upon consumer and business demand for furniture products, which is subject to variations in the general economy, including current inflationary pressures affecting consumer spending 5 and declines in consumer confidence.
Using these design elements, they develop product offerings using ideas and materials that take both fashion trends and cost considerations into account to offer products designed to meet the needs of furniture manufacturers and ultimately the desires of consumers. Upholstery fabric designs are introduced at major fabric trade conferences that occur twice a year in the United States.
Using these design elements, the team develops product offerings using ideas and materials that take both fashion trends and cost considerations into account to offer products designed to meet the needs of furniture manufacturers and, ultimately, consumer preferences. Upholstery fabric designs are introduced at major fabric trade conferences that occur twice annually in the United States.
Mattress Fabrics Segment Mattress fabrics segment sales constituted 52% of our total net sales for fiscal 2024, compared with 47% for fiscal 2023. The company has emphasized fabrics that have broad appeal at prices generally ranging from $1.60 to more than $10.00 per yard.
Mattress Fabrics Segment Mattress fabrics segment sales constituted 53% of our total net sales for fiscal 2025, compared with 52% for fiscal 2024. The company has emphasized fabrics that have broad appeal at prices generally ranging from $2.00 to more than $18.00 per yard.
The plan, which is being implemented primarily in the company’s mattress fabrics segment and, to a lesser extent, in its upholstery fabrics segment, includes the following strategic actions: • Consolidating the company’s North American mattress fabrics operations, including a phased wind-down and closure of the company’s manufacturing plant in Quebec, Canada, and moving knitting and finishing capacity from this plant to the company’s facility in Stokesdale, North Carolina; • Improving efficiency and through-put by optimizing volume and equipment in the company’s mattress fabrics operation in Stokesdale, North Carolina, to reduce costs and improve quality; • Transitioning the mattress fabrics segment’s weaving operation to a strategic sourcing model through the company’s long standing supply partners, enhancing competitiveness and value for customers; • Consolidating the company’s Haiti sewn mattress cover operation (which is located on the Dominican Republic/Haiti border) into one building and significantly reducing operating expenses at that location; • Restructuring the company’s upholstery fabrics finishing operation in China to align with current demand and continuing to leverage strategic supply relationships; and • Reducing unallocated corporate and shared services expenses with targeted annualized savings of $1.5 million.
The plan, which was primarily focused within the company’s mattress fabrics segment and, to a lesser extent, its upholstery fabrics segment, included the following strategic actions: • Consolidating the company’s North American mattress fabrics operations, including a phased wind-down and closure of the company’s manufacturing plant in Quebec, Canada, and the incorporation of the knitting and finishing capacity at this plant into the company’s facility in Stokesdale, North Carolina; • Cost efficiency, through-put and quality improvements via the optimization of volume and equipment in the company’s mattress fabrics operation in Stokesdale, North Carolina; • Transitioning the mattress fabrics segment’s internal weaving operation to a strategic sourcing model through the company’s long-standing supply partners, which enhanced competitiveness and value for customers; • Consolidating the company’s Haiti sewn mattress cover operation (which is located on the Dominican Republic border) into one building, which significantly reduced operating expenses at that location; • Restructuring the company’s upholstery fabrics finishing operation in China to better align with demand and continuing to leverage strategic supply relationships; and • Reducing unallocated corporate and shared services expenses with targeted annualized savings of $1.5 million.
This dynamic has mainly been due to short lead times demanded by mattress manufacturers and retailers, the customized nature of product lines, the relatively low direct labor content in mattresses, and strong brand recognition. Imports of bedding into the U.S. had been increasing gradually, but this trend accelerated significantly in recent years, especially for lower-priced and roll packed, boxed bedding.
This dynamic was mainly driven by the short lead times demanded by mattress manufacturers and retailers, the customized nature of product lines, the relatively low direct labor content in mattresses, and strong domestic brand recognition. In recent years, imports of bedding into the U.S. accelerated significantly, especially for lower-priced and roll-packed, boxed bedding.
We are not aware of any efforts to organize any more of our employees, and we believe our employee relations are very good with both our unionized and non-unionized workforce. Our company-wide annual employee turnover rate was approximately 43.5% during the past fiscal year, compared to approximately 42% in the prior year.
We are not aware of any ongoing efforts to organize our employees, and we believe our employee relations are very good with our workforce. Our company-wide annual employee turnover rate was approximately 46.3% during fiscal 2025, compared to approximately 43.5% in the prior year.
On April 28, 2024, the portion of the upholstery fabric backlog with confirmed shipping dates prior to June 3, 2024, was $11.7 million, compared with $10.6 million as of the end of fiscal 2023 (for confirmed shipping dates prior to June 5, 2023).
As of April 27, 2025, the portion of the upholstery fabric segment backlog with confirmed shipping dates prior to June 2, 2025, was $6.5 million, compared with $11.7 million as of the end of fiscal 2024 (for confirmed shipping dates prior to June 3, 2024).
All reports of inappropriate behavior are promptly investigated and appropriate action is taken to prevent their recurrence. We also prohibit retaliation against individuals who, in good faith, report any violation of company policies, including unlawful discrimination or harassment.
Employees have multiple avenues available to report inappropriate behavior, including a dedicated “HR Connection” phone line. All reports of inappropriate behavior are promptly investigated and appropriate action is taken to prevent their recurrence. We also prohibit retaliation against individuals who, in good faith, report any violation of company policies, including unlawful discrimination or harassment.
Additionally, demand for our upholstery fabrics and window treatment products for the commercial and hospitality industries generally reflects economic trends affecting businesses; consumer spending on travel and experiences; demand for new and refurbished hotel and resort properties; and demand for new and refurbished commercial office space.
Reduced home sales in recent years have adversely affected our residential sales. Additionally, demand for our upholstery fabrics and window treatment products for the commercial and hospitality industries generally reflects economic trends affecting businesses; consumer spending on travel and experiences; demand for new and refurbished hotel and resort properties; and demand for new and refurbished commercial office space.
Upholstery Fabrics Segment Upholstery fabrics segment sales totaled 48% of our sales for fiscal 2024, compared with 53% of for fiscal 2023. The company has emphasized fabrics that have broad appeal at “good” and “better” prices, generally ranging from $2.50 to $16.00 per yard.
Upholstery Fabrics Segment Upholstery fabrics segment sales totaled 47% of our total net sales for fiscal 2025, compared with 48% for fiscal 2024. The company has emphasized fabrics that have broad appeal at “good” and “better” prices, generally ranging from $5.00 to $15.00 per yard.
It is difficult to predict the extent to which any new rules or regulations would affect our business, but we would expect the effect on our operations to be similar to that for other manufacturers, particularly those in our industry. We are periodically involved in environmental claims or litigation and requests for information from environmental regulators.
It is difficult to predict the extent to which any new rules or regulations would affect our business, but we would expect the effect on our operations to be similar to that for other manufacturers, particularly those in our industry.
Net Sales by Ge ographic Area (dollars in thousands) Fiscal 2024 Fiscal 2023 Fiscal 2022 United States $ 153,631 68.2% $ 165,807 70.6% $ 204,454 69.3% North America (Excluding USA) (1) 29,357 13.0% 29,756 12.7% 39,256 13.3% Far East and Asia (2) 36,334 16.1% 31,339 13.3% 43,015 14.6% All other areas 6,011 2.7% 8,032 3.4% 8,114 2.8% Subtotal (International) $ 71,702 31.8% $ 69,127 29.4% $ 90,385 30.7% Total $ 225,333 100.0% $ 234,934 100.0% $ 294,839 100.0% (1) Of this amount, $25.1 million, $24.9 million, and $33.5 million are attributable to shipments to Mexico in fiscal 2024, 2023, and 2022, respectively.
Net Sales by Ge ographic Area (dollars in thousands) Fiscal 2025 Fiscal 2024 Fiscal 2023 United States $ 143,713 67.4% $ 153,631 68.2% $ 165,807 70.6% North America (Excluding USA) (1) 32,912 15.4% 29,357 13.0% 29,756 12.7% Far East and Asia (2) 30,586 14.3% 36,334 16.1% 31,339 13.3% All other areas 6,026 2.8% 6,011 2.7% 8,032 3.4% Subtotal (International) $ 69,524 32.6% $ 71,702 31.8% $ 69,127 29.4% Total $ 213,237 100.0% $ 225,333 100.0% $ 234,934 100.0% (1) Of this amount, $28.8 million, $25.1 million, and $24.9 million are attributable to shipments to Mexico in fiscal 2025, 2024, and 2023, respectively.
Following the Fiscal 2025 restructuring, distribution from Canada will be eliminated. Through arrangements with major customers and in accordance with industry practice, we maintain a significant inventory of mattress fabrics at our distribution facility in Stokesdale (“make to stock”), so that products may be shipped to customers with short lead times and on a “just in time” basis.
Through arrangements with major customers and in accordance with industry practice, we maintain a significant inventory of “make to stock” mattress fabrics at our distribution facility in Stokesdale, North Carolina, so that products may be shipped to customers with shorter lead times and/or on a “just in time” basis.
At these facilities, we inspect fabrics sourced from a limited number of suppliers, and during fiscal 2024, we also applied value-added finishing processes to sourced fabric. As part of the Fiscal 2025 restructuring, we are rationalizing internal upholstery fabrics finishing in China to align with current demand and further leverage strategic supply relationships.
At these facilities, we inspect fabrics sourced from a limited number of suppliers. As part of the 7 Fiscal 2025 restructuring, we rationalized our internal upholstery fabrics finishing in China to align with current demand and further leverage strategic supply relationships.
In addition to “make to order” distribution, an inventory of select fabric patterns is held at our distribution facilities in Burlington and Shanghai from which our customers can obtain quick delivery of sourced fabrics through a program known as “Culp Express.” We also currently have distribution capabilities for our “Culp Express” program to local customers in Canada through our mattress fabrics distribution facility in Quebec, Canada.
In addition to “make to order” distribution, an inventory of select fabric patterns is held at our distribution facilities in North Carolina and China from which our customers can obtain quick delivery of sourced fabrics through a program known as “Culp Express.” Our distribution capabilities for our “Culp Express” program to local customers in Canada through our mattress fabrics distribution facility in Quebec, Canada, were discontinued following the Fiscal 2025 restructuring.
Imports of upholstery fabric, both in roll and in “kit” form, have also had a significant impact on the market for upholstery fabrics in recent years. Fabrics entering the U.S. from China and other low labor cost countries have resulted in increased price competition in the upholstery fabric and upholstered furniture markets.
Imports of upholstery fabric, both in roll and in “kit” form, have significantly impacted the furniture market in recent years, with fabrics entering the U.S. from China and other low labor-cost countries resulting in increased price competition in the upholstery fabric and upholstered furniture markets.
The mattress fabrics segments employed 663 people at fiscal year-end, a decrease of 96 employees from the prior year, while the upholstery segment employed 305 people, a decrease of 238 employees from the prior year. The remaining employees comprise the company’s shared services functions.
The mattress fabrics segment employed 523 people at fiscal year-end, a decrease of 140 employees from the prior year, while the upholstery segment employed 277 people, a decrease of 28 employees from the prior year. The remaining employees comprise the company’s shared services functions.
Upholstery Fabrics Segment In the upholstery fabrics market, we compete against a large number of companies, ranging from a few large manufacturers comparable in size to Culp to small producers and converters (companies who buy and re-sell fabrics, but have no manufacturing). We believe our principal upholstery fabric competitors are Dorell Fabrics Co., Morgan Fabrics, Richloom Fabrics, Specialty Textile, Inc.
Upholstery Fabrics Segment In the upholstery fabrics market, we compete against a large number of companies ranging from a few manufacturers comparable in size to Culp to small producers and converters (companies who buy and re-sell fabrics, but have no manufacturing).
During the second half of fiscal 2022 and throughout fiscal 2023 and fiscal 2024, the bedding industry experienced weakness in domestic mattress sales, with industry reports reflecting significant unit contraction.
Since the second half of fiscal 2022, the bedding industry has experienced weakness in domestic mattress sales, with industry reports reflecting significant unit contraction and historically low volume.
The use of new fabrics, creative designs, and special production finishes and technologies remains an important consideration for manufacturers and marketers to distinguish their products at retail and to capitalize on changes in preferred colors, patterns, textures, and performance properties.
Product Design and Innovation Consumer tastes and preferences related to bedding, upholstered furniture, and window treatment products change over time. The use of new fabrics, creative designs, and special production finishes and technologies remains an important consideration for manufacturers and marketers to distinguish their products at retail and to capitalize on changes in preferred colors, patterns, textures, and performance properties.
Sales by Fiscal Year ($ in Millions) and Percentage of Total Company Sales Segment Fiscal 2024 Fiscal 2023 Fiscal 2022 Mattress Fabrics $ 116.4 52 % $ 111.0 47 % $ 152.2 52 % Upholstery Fabrics Non-U.S.-Produced 98.4 44 % 114.5 49 % 133.2 45 % U.S.-Produced 10.5 4 % 9.4 4 % 9.4 3 % Total Upholstery 108.9 48 % 123.9 53 % 142.6 48 % Total company $ 225.3 100 % $ 234.9 100 % $ 294.8 100 % Additional financial information about our operating segments can be found in Note 17 of the consolidated financial statements included in Item 8 of this report.
Sales by Fiscal Year ($ in Millions) and Percentage of Total Company Sales Segment Fiscal 2025 Fiscal 2024 Fiscal 2023 Mattress Fabrics $ 113.9 53 % $ 116.4 52 % $ 111.0 47 % Upholstery Fabrics 99.3 47 % 108.9 48 % 123.9 53 % Total $ 213.2 100 % $ 225.3 100 % $ 234.9 100 % Additional financial information about our operating segments can be found in Note 19 of the consolidated financial statements included in Item 8 of this report.
The mattress fabrics business markets primarily knitted and woven fabrics, as well as sewn covers made from those fabrics, which are used in the production of bedding products, including mattresses, foundations, and mattress sets.
However, for financial reporting purposes, our operations are classified into two operating segments— mattress fabrics and upholstery fabrics. The mattress fabrics business markets primarily knitted and woven fabrics, as well as sewn covers made from those fabrics, which are used in the production of bedding products, including mattresses, foundations, and mattress sets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny tariffs that result in increased costs of imported products and materials could require us to increase prices to our domestic customers. 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.
Biggest changeThe U.S. government has announced additional tariffs that have not yet gone into effect and may consider re-imposing certain tariffs, imposing additional tariffs or extending the timeline for continuation of existing tariffs. Any tariffs that result in increased costs of imported products and materials could require us to further increase prices to our domestic customers.
The risks described below should be carefully considered, together with other information provided in this report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements, including the related notes. The risks discussed below are not the only risks we face.
The risks described below should be carefully considered, together with other information provided in this report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and the related notes. The risks discussed below are not the only risks we face.
However, future detentions could result in unexpected (i) delays or rejections of products scheduled for delivery to us, which could in turn affect the timing or our ability to deliver products to our customers; (ii) supply chain disruptions and increased operating costs; (iii) damage to our customer relationships; and/or (iv) negative publicity that harms our reputation, any of which could have a material impact on our business and negatively affect our ultimate financial results.
However, future detentions could result in unexpected: (i) delays or rejections of products scheduled for delivery to us, which could, in turn, affect the timing or our ability to deliver products to our customers; (ii) supply chain disruptions and increased operating costs; (iii) damage to our customer relationships; and/or (iv) negative publicity that harms our reputation, any of which could have a material impact on our business and negatively affect our financial results.
Given the inherent uncertainty of litigation, there can be no assurance that claims against the company will not have a material adverse impact on our earnings or financial condition. We are also subject to various laws and regulations in our business, including those relating to environmental protection and the discharge of materials into the environment.
Given the inherent uncertainty of litigation, there can be no assurance that claims against the company will not have a material adverse impact on our earnings or financial condition. We are also subject to various laws and regulations in our business, including those relating to environmental protection and the 22 discharge of materials into the environment.
In addition, public health concerns and pandemics have in the past, and may again disrupt our business. For example, during the COVID-19 pandemic, we temporarily shut down certain of our facilities, as did certain of our sourcing partners and customers, which prevented us from shipping goods in both our residential upholstery fabrics business and our sewn mattress cover business.
In addition, public health concerns and pandemics have in the past disrupted and may again disrupt our business. For example, during the COVID-19 pandemic, we temporarily shut down certain of our facilities, as did certain of our sourcing partners and customers, which prevented us from shipping goods in both our residential upholstery fabrics business and our sewn mattress cover business.
These types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. 19 We may not be able to recruit and retain key employees and skilled workers in a competitive labor market.
These types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. We may not be able to recruit and retain key employees and skilled workers in a competitive labor market.
Any of such future actions could result in charges that could have an adverse effect on our financial condition and results of operations, and there is no assurance that future write-downs of fixed assets or other intangible assets will not occur if business conditions were to deteriorate.
Any such future actions or circumstances could result in charges that could have an adverse effect on our financial condition and results of operations, and there is no assurance that future write-downs of fixed assets or other intangible assets will not occur if business conditions were to deteriorate.
Attempts to gain unauthorized access to our information technology systems have become increasingly more sophisticated over time, and while we seek to detect and investigate all security incidents and to prevent their recurrence, in some cases we might be unaware of an incident or its magnitude and effect.
Attempts to gain unauthorized access to information technology systems have become increasingly more sophisticated over time, and while we seek to detect and investigate all security incidents and to prevent their recurrence, in some cases we might be unaware of an incident or its magnitude and effect.
If we are unable to 20 access additional credit at the levels we require, or the cost of credit is greater than expected, it could adversely affect our operating results or financial condition. Legal and Regulatory Risks We are subject to litigation and environmental regulations that could adversely affect our sales and earnings.
If we are unable to access additional credit at the levels we require, or the cost of credit is greater than expected, it could adversely affect our operating results or financial condition. Legal and Regulatory Risks We are subject to litigation and environmental regulations that could adversely affect our sales and earnings.
Any changes in policies governing tariffs, imports and exports, taxation, inflation, economic sanctions and export controls, environmental regulations, foreign currency exchange rates, the labor market, property, network security, intellectual property, and financial regulations could have an adverse effect on our business.
Any changes in policies governing tariffs, imports and exports, taxation, inflation, economic sanctions and export controls, environmental regulations, foreign currency exchange rates, the labor market, property, network security, intellectual property, or financial regulations could have an adverse effect on our business.
If we are unable to protect and enforce our intellectual property, we may be unable to prevent other companies from using our fabric designs or trademarks in connection with competitive products, which could adversely affect our sales, profitability, cash flows and financial condition.
If we are unable to protect and enforce our intellectual property rights, we may be unable to prevent other companies from using our fabric designs or trademarks in connection with competitive products, which could adversely affect our sales, profitability, cash flows and financial condition.
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 15 anti-dumping duties on mattress imports from countries other than China.
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.
We continue to balance the risk of an electronic security breach resulting in the unauthorized release of confidential information with the cost to protect us against such a breach, and we have taken steps to obtain insurance coverage for potential losses arising from a breach, although the costs, potential monetary damages, and operational consequences of responding to cyber incidents and implementing remediation measures may be in excess of our insurance coverage or not covered at all by our insurance.
We continue to balance the risk of an electronic security breach resulting in the unauthorized release of confidential information with the cost to protect us against such a breach, and we have 20 taken steps to obtain insurance coverage for certain potential losses arising from a breach, although the costs, potential monetary damages, and operational consequences of responding to cyber incidents and implementing remediation measures may be in excess of our insurance coverage or not covered at all by our insurance.
There is also the risk of our exposure to theft of confidential information, intentional vandalism, industrial espionage, and a variety of cyber-attacks, including phishing attempts, covertly introducing malware to our computers and networks (or the computers and networks of our third-party providers), and impersonating authorized users, among other types of cyber-attacks, that could compromise our internal technology system, infrastructure, or result in data leakage in-house or at our third-party providers and business partners.
There is also the risk of our exposure to theft of confidential information, intentional vandalism, industrial espionage, and a variety of cyber-attacks, including phishing attempts, covertly introducing malware to our computers and networks (or the computers and networks of our third-party providers), and impersonating authorized users, among other types of cyber-attacks, that could compromise our internal technology systems or infrastructure, or result in data leakage in-house or at our third-party providers and business partners.
In addition, the laws of some foreign countries may not protect our intellectual property rights and confidential information to the same extent as the laws of the United States.
In addition, the laws of some foreign countries may not 21 protect our intellectual property rights and confidential information to the same extent as the laws of the United States.
In addition, internal control over financial reporting of acquired companies may not be up to required standards. Our integration activities may place substantial demand on our management, operational resources, and financial and internal control systems. Customer dissatisfaction or performance problems with an acquired business, technology, service, or product could also have a material adverse effect on our reputation and business.
In addition, internal control over financial reporting of acquired companies may not be up to required standards. Our integration activities may place substantial demand on our management, operational resources, and financial and internal control systems. Customer dissatisfaction or performance issues with an acquired business, technology, service, or product could also have a material adverse effect on our reputation and business.
For example, certain recently enacted laws and regulations impose a presumptive ban on the import of goods to the U.S. that are made, wholly or in part, in certain defined areas or by certain restricted persons or entities. These laws and regulations specifically target cotton and the apparel and textile industries as high-priority sectors for enforcement.
For example, certain laws and regulations impose a presumptive ban on the import of goods to the U.S. that are made, wholly or in part, in certain defined areas or by certain restricted persons or entities. These laws and regulations specifically target cotton and the apparel and textile industries as high-priority sectors for enforcement.
Changes in the value of the U.S. dollar versus other currencies can affect our financial results because a significant portion of our operations are located outside the United States. We manage various operating activities at the local level and net sales, costs, assets and liabilities are denominated in both the local currency and the U.S. dollar.
Changes in the value of the U.S. dollar versus other currencies can affect our financial results because a significant portion of our operations are located outside the U.S. We manage various operating activities at the local level, and net sales, costs, assets and liabilities are denominated in both the local currency and the U.S. dollar.
Our business faces several risks associated with doing business in China We source a variety of fabrics, as well as cut and sewn upholstery kits and sewn mattress covers, from a limited number of strategic suppliers in China. We also operate four facilities in Shanghai, China.
Our business faces several risks associated with doing business in China We source a variety of fabrics, as well as cut and sewn upholstery kits and sewn mattress covers, from a limited number of strategic suppliers in China. We also operate three facilities in Shanghai, China.
Greater reliance on offshore operations and foreign sources of products or raw materials increases the likelihood of disruptions to our supply chain or our ability to deliver products to our customers on a timely basis. We rely significantly on operations in distant locations, especially China.
Greater reliance on offshore operations and foreign sources of products or raw materials increases the likelihood of disruptions to our supply chain or our ability to timely deliver products to our customers. We rely significantly on operations in distant locations, especially China.
For example, during the COVID-19 pandemic, China from time to time enforced broad lock-downs which affected our ability to timely produce and ship products and affected the ability of our third-party suppliers and their supply chain to timely deliver products and materials.
For example, during the COVID-19 pandemic, China from time to time enforced broad lock-downs which affected our ability to timely produce and ship products and affected the ability of our third-party suppliers and their supply chains to timely deliver products and materials.
Data privacy breaches by employees and others with or without authorized access to our systems poses risks that sensitive data may be permanently lost or leaked to the public or other unauthorized persons.
Data privacy breaches by employees and others with or without authorized access to our systems pose risks that sensitive data may be permanently lost or leaked to the public or other unauthorized persons.
Risks Related to Financing Our Operations We may require funding from external sources, which may not be available at the levels we require or may cost more than we expect. As a result, our expenses and operating results could be negatively affected. We regularly review and evaluate our liquidity and capital needs.
Risks Related to Financing Our Operations We have required, and may continue to require, funding from external sources, which may not be available at the levels we require or may cost more than we expect. As a result, our expenses and operating results could be negatively affected. We regularly review and evaluate our liquidity and capital needs.
Civil instability, public health concerns, natural disasters, acts of war, terrorism or other adverse events could cause disruption at our manufacturing or distribution facilities, or at the facilities of our suppliers and distribution channels.
Civil instability, public health concerns, natural disasters, armed conflicts or acts of war, terrorism or other adverse events could cause disruption at our manufacturing or distribution facilities, or at the facilities of our suppliers and distribution channels.
We have been, and in the future may be, a party to legal proceedings and claims, including environmental matters, product liability, and employment disputes, some of which claim significant damages.
We have been, and in the future may be, a party to legal proceedings and claims, including environmental matters, product liability, and employment disputes, some of which seek significant damages.
None of our Chinese suppliers are located in the region targeted or are identified as restricted entities under these laws and regulations, and we prohibit our suppliers from doing business with or sourcing inputs from any company or entity that is in the region targeted or that restricted under U.S. or other applicable law.
To our knowledge, none of our Chinese suppliers are identified as restricted entities under these laws and regulations, and we prohibit our suppliers from doing business with or sourcing inputs from any company or entity that is in the region targeted or that is restricted under U.S. or other applicable law.
ASC Topic 350 establishes an impairment model for indefinite-lived intangible assets, such as our tradename, which must be tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered.
ASC Topic 350 establishes an impairment model for indefinite-lived intangible assets, such as our trade names, which must be tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered.
Actions of activist shareholders could be disruptive and potentially costly and the possibility that activist shareholders may seek changes that conflict with our strategic direction could cause uncertainty about the strategic direction of our business.
Actions of activist shareholders could be disruptive and potentially costly, and the possibility that activist shareholders may seek changes that conflict with our strategies could cause uncertainty about the direction of our business.
Overall demand for our products depends upon consumer demand for furniture and bedding products, which is subject to cyclical variations in the general economy, including current inflationary pressures affecting consumer spending, declines in overall consumer confidence, recession and fears of recession, and other geopolitical events, such as the ongoing Russia/Ukraine war and the armed conflict in the Middle East.
Overall demand for our products depends upon consumer demand for furniture and bedding products, which is subject to cyclical variations in the general economy, including current inflationary pressures affecting consumer spending, declines in overall consumer confidence, recession and fears of recession, and other geopolitical events, such as the ongoing Russia/Ukraine war and armed conflicts in the Middle East and other areas of the world.
Because purchases of furniture and bedding products may be considered discretionary purchases for most individuals and businesses, demand for these products are heavily influenced by economic trends.
Because purchases of furniture and bedding products may be considered discretionary purchases for most individuals and businesses, demand for these products is heavily influenced by economic trends.
We depend upon outside suppliers for most of our raw material needs, and we rely upon outside suppliers for component materials such as yarn, unfinished fabrics, and cut and sewn upholstery kits and mattress covers, as well as for certain services such as finishing and weaving.
We depend upon outside suppliers for most of our raw material needs and we rely upon outside suppliers for component materials such as yarn, unfinished fabrics, and cut and sewn upholstery kits and mattress covers and jacquard (damask) fabric, as well as for certain services such as finishing and weaving.
Any of the risks associated with foreign operations and sources could cause unanticipated increases in operating costs or disruptions in business, which could have a negative impact on our ultimate financial results. Recently, a confluence of factors has caused disruptions to international shipping, increasing costs and delaying shipments.
Any of the risks associated with foreign operations and sources could cause unanticipated increases in operating costs or disruptions in business, which could have a negative impact on our ultimate financial results. In recent fiscal years, a confluence of factors has caused disruptions to international shipping, increasing costs and delaying shipments.
In particular, in recent years the U.S. bedding industry—on which the mattress fabrics segment relies—has seen significant increases in competition from low-cost foreign producers, which has adversely affected demand for our products.
In particular, in recent years the U.S. bedding industry in which our mattress fabrics segment participates has seen significant increases in competition from low-cost foreign producers, which has adversely affected demand for our products.
In addition, we are and will continue to be dependent upon our senior management team and other key personnel. Losing the services of one or more key members of our management team or other key personnel could adversely affect our operations.
Moreover, we are and will continue to be dependent upon our senior management team and other key personnel. Losing the services of one or more key members of our management team or other key personnel could adversely affect our operations.
The Chinese economy is characterized by extensive state ownership, control, and regulation, and the political, legal, and economic climate in China is fluid and unpredictable. Therefore, our business is continually subject to the risk of changes in Chinese laws and regulations that could have an adverse effect on our suppliers and manufacturing operations.
The Chinese economy is characterized by extensive state ownership, control, and regulation, and the political, legal, and economic climates in China can be fluid and somewhat unpredictable. Therefore, our business is continually subject to the risk of changes in Chinese laws and regulations that could have an adverse effect on our suppliers and manufacturing operations.
The Chinese economy poses additional risks to our business, including fluctuating rates of inflation and currency exchange rates, a declining labor force 16 participation rate, and rising employee wages. In addition, changes in the political climate or trade policy of the United States, such as increased duties, tariffs, or U.S. restrictions on Chinese imports, may adversely affect our business.
The Chinese economy poses additional risks to our business, including fluctuating rates of inflation and currency exchange rates, a declining labor force participation rate, and rising employee wages. In addition, further changes in the political climate or trade policy of the U.S., such as re-imposed or increased duties, tariffs, or U.S. restrictions on Chinese imports, may adversely affect our business.
Our products and raw materials are and will continue to be subject to regulation in the United States by various federal, state, and local regulatory authorities. In addition, other governments and agencies in other jurisdictions regulate the manufacture, sale, and distribution of our products and raw materials.
Our products and raw materials are and will continue to be subject to regulation in the U.S. by various federal, state, and local regulatory authorities. In addition, governments and agencies in other jurisdictions regulate the manufacture, sale, and distribution of our products and raw materials.
As a result of increased competition, there have been deflationary pressures on the prices for many of our products, which make it more difficult to pass along increased operating costs such as raw materials, shipping, energy, foreign currency fluctuations, or labor in the form of price increases, which puts downward pressure on our profit margins.
As a result of increased competition, there have been deflationary pressures on the prices for many of our products, which make it more difficult to pass along increased operating costs such as raw materials, shipping, energy, foreign currency fluctuations, additional tariffs, 15 or labor in the form of price increases, which can put downward pressure on our profit margins.
In the upholstery fabrics segment, La-Z-Boy Incorporated accounted for approximately 12% of consolidated net sales during fiscal 2024, and several other large furniture manufacturers comprised a significant portion of sales.
In the upholstery fabrics segment, La-Z-Boy Incorporated accounted for approximately 11% of consolidated net sales during fiscal 2025, and several other large furniture manufacturers comprised a significant portion of sales.
Business—Fiscal 2025 Restructuring.” There can be no assurance that these or other future strategic initiatives will be successful to the extent we expect, or at all. Additionally, we are investing resources in these initiatives and the costs of the initiatives may outweigh their benefits.
There can be no assurance that these or other future strategic initiatives will be successful to the extent we expect, or at all. Additionally, we are investing resources in these initiatives and the costs of the initiatives may outweigh their benefits.
Actual write-downs and non-cash charges may exceed these amounts. Write-offs and write-downs of our assets, including inventory, result in an immediate charge to our earnings, and can have a material adverse effect on our operating results and financial condition.
Actual impairment and non-cash charges may exceed these amounts. Impairment of our assets, including inventory, results in an immediate charge to our earnings, and can have a material adverse effect on our operating results and financial condition.
Our domestic and foreign operations are subject to risks of unsettled political conditions, civil unrest or instability in countries in which we operate, natural or man-made disasters, acts of war, and terrorism. As an example, we maintain an active production facility in Ouanaminthe, Haiti.
Our domestic and foreign operations are subject to risks of unsettled political conditions, civil unrest or instability in countries in which we operate, natural or man-made disasters, armed conflicts or acts of war, and terrorism. As an example, we maintain an active production facility in Ouanaminthe, Haiti, on the Dominican Republic border.
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.
In addition to tariffs, the U.S. government has considered, and is expected to continue to consider, 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.
In July 2024, we entered into an agreement with an activist investor, 22NW, LP, and various of its affiliates (collectively, “22NW”) that had filed a Schedule 13D with the SEC with respect to us, where we agreed to appoint a representative of 22NW to our board of directors and nominate that representative for election at our 2024 annual meeting in return for certain customary confidentiality and standstill provisions. 22NW remains a greater than 5% owner of Culp stock.
In July 2024, we entered into an agreement with an activist investor, 22NW, LP, and various of its affiliates (collectively, “22NW”) that filed a Schedule 13D with the SEC with respect to the company, where we agreed to appoint a representative of 22NW to our board of directors and nominate that representative for election at our 2024 annual meeting in return for certain confidentiality and standstill provisions.
If any of these or other factors were to worsen, we may be unable to timely ship our products or receive the materials we need to produce our products, or our shipping costs may further increase.
If any of these situations or similar dynamics were to worsen or replicate, we may be unable to timely ship our products or receive the materials we need to produce our products, or our shipping costs may further increase.
We are unable to predict how long these trends will last, or to what extent macroeconomic or other geopolitical events may affect the purchasing cycle for home furnishing products. Demand for our products—and our results of operations—may be materially and adversely affected by macroeconomic trends that are beyond our control.
We are unable to predict how long these trends will last, or to what extent macroeconomic or other geopolitical events may affect the purchasing cycle for home furnishing products. Demand for our products, along with our results of operations, has been adversely affected by macroeconomic trends that are beyond our control, and those effects may continue or worsen.
Credit evaluations involve significant management diligence and judgment, especially in the current environment. If more customers than we anticipate experience liquidity issues, if payments are not received on a timely basis, or if a customer declares bankruptcy, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition, and liquidity.
If more customers than we anticipate experience liquidity issues, if payments are not received on a timely basis, or if a customer declares bankruptcy, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition, and liquidity.
Our ability to operate in China has also been adversely affected by the COVID-19 pandemic, and may in the future be negatively affected by additional surges in the coronavirus or other diseases.
Our ability to operate in China was adversely affected by the COVID-19 pandemic, and may in the future be negatively affected by additional instances of the coronavirus or other diseases.
Interruptions in our ability to obtain raw materials or other required products or services from our outside suppliers on a timely and cost-effective basis, especially if alternative suppliers cannot be immediately obtained, could disrupt our production and damage our financial results. Write-offs or write-downs of assets would result in a decrease in our earnings and shareholders’ equity.
Interruptions in our ability to obtain raw materials or other required products or services from our outside suppliers on a timely and cost-effective basis, especially if alternative suppliers cannot be immediately obtained, could disrupt our production and damage our financial results.
Our future success depends in part on our ability to successfully implement our strategic plan, including the Fiscal 2025 restructuring, and achieve our business strategies. We continue to focus on strategic initiatives designed improve our business and our results of operations.
Our future success depends in part on our ability to successfully implement our strategic initiatives and achieve our business plans. We continue to focus on strategic initiatives designed to improve our business and our results of operations.
Unforeseen events may adversely affect our customers, causing them to delay, or cease, payments to us. For example, during the onset of the COVID-19 pandemic, some customers experienced cash flow challenges and requested extended payment terms. While we perform credit evaluations of our customers, those evaluations may not prevent uncollectible trade accounts receivable.
Unforeseen events may adversely affect our customers, causing them to delay, or cease, payments to us. For example, during the onset of the COVID-19 pandemic, some customers experienced cash flow challenges and requested extended payment terms.
The $5.8 million charge incurred in fiscal 2023 represents a $2.9 million impairment charge associated with our mattress fabrics segment; a total of $2.8 million related to markdowns of inventory in both segments that were estimated based on our policy for aged inventory; and $98,000 for the loss on disposal and markdowns of inventory related to the exit of our cut and sewn upholstery fabrics operation located in Shanghai, China.
Moreover, as a result of inventory assessments, we incurred a non-cash inventory charge during fiscal year 2023 totaling $5.8 million, which included: (i) a $2.9 million impairment charge associated with our mattress fabrics segment; (ii) $2.8 million related to markdowns of inventory in both segments that were estimated based on our policy for aged inventory; and (iii) $98,000 for the loss on disposal and markdowns of inventory related to the exit of our cut and sewn upholstery fabrics operation located in Shanghai, China.
In the mattress fabrics segment, several large bedding manufacturers have large market shares and comprise a significant portion of our mattress fabric sales, with Serta Simmons Holdings, LLC and its subcontractors accounting for approximately 13% of consolidated net sales in fiscal 2024.
We currently have several customers that collectively account for a substantial portion of our sales. In the mattress fabrics segment, several bedding manufacturers have large market shares and comprise a significant portion of our mattress fabric sales, with Serta-Simmons Bedding (SSB) and its subcontractors and licensees accounting for approximately 13% of consolidated net sales in fiscal 2025.
In addition, we have been purchasing a significant share of our products and raw materials from offshore sources, particularly Asia and Turkey. At the same time, our domestic manufacturing capacity for the upholstery fabrics segment continues to decline.
In addition, we source a significant share of our products and raw materials from offshore suppliers, particularly suppliers in Asia and Turkey. At the same time, domestic manufacturing capacity for upholstery fabrics continues to decline for a variety of reasons and we have limited optionality to source and/or produce upholstery fabrics domestically.
In addition, labor disputes at major ports and railways throughout the world, along with weather-related disruptions, such as droughts in Panama reducing capacity in the Panama Canal, have further impacted the global supply chain.
Attacks on ships in certain waterways in the Middle East have forced ships to take longer routes. In addition, labor disputes at major ports and railways throughout the world, along with weather-related disruptions, such as droughts in Panama reducing capacity in the Panama Canal, impacted the global supply chain.
In many cases, these fabrics are sourced from foreign suppliers who have a lower cost structure than the company. The highly competitive nature of our business in each of our segments means we are constantly subject to the risk of losing market share, which would likely result in a decrease in our future sales and earnings.
The highly competitive nature of our business in each of our segments means we are constantly subject to the risk of losing market share, which would likely result in a decrease in our future sales and earnings.
Further, 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 in Canada and China could have a negative impact on our sales of products produced in those places.
Further, strengthening of the U.S. dollar against other currencies could make our products less competitive on the basis of price in markets outside the U.S., and strengthening of currency in China could have a negative impact on our sales of products produced there. We may have challenges managing the outsourcing arrangements used for products and services.
However, as a result of these laws and regulations, products we import into the U.S. could be held for inspection by U.S. customs and border patrol based on a suspicion of noncompliance.
However, as a result of these laws and regulations, products we import into the U.S. could be held for inspection by U.S. Customs and Border Protection based on suspicion of noncompliance. During fiscal 2023 and early in fiscal 2024, certain of our shipments were detained as a result of such inspections.
On May 1, 2024, we announced a significant restructuring plan designed to reduce costs, improve asset utilization, and drive performance and profitable growth. This plan, which is being implemented primarily in the company’s mattress fabrics segment and, to a lesser extent, in its upholstery fabrics segment, includes consolidating operations, restructuring operations, and reducing expenses. See “Item 1.
At the beginning of fiscal 2025, we announced a significant restructuring plan designed to reduce costs, improve asset utilization, and drive performance and profitable growth. This plan, which we completed during fiscal 2025, focused primarily on the company’s mattress fabrics segment and, to a lesser extent, its upholstery fabrics segment, and included consolidating operations, restructuring operations, and reducing expenses.
Partly in response to certain of these trends, in May 2024, we announced the implementation of a restructuring of our business pursuant to which we intend to consolidate our North American mattress fabrics operations and our sewn cover operation in Haiti in an effort to align capacity and cost structure with demand.
Partly in response to certain of these trends, in fiscal 2025 we initiated and ultimately completed a restructuring of our business pursuant to which we, among other actions, consolidated our North American mattress fabrics operations and our sewn cover operation in Haiti in an effort to align capacity and cost structure with demand. See “Item 1.
Also, the wide range of product offerings in our business can make it more difficult to differentiate our products through design, styling, finish, and other techniques. 14 Our operations are subject to risks of unsettled political conditions, civil unrest or instability, public health concerns or pandemics, natural or man-made disasters, acts of war, terrorism, and the effects of climate change, any one of which could adversely affect our business and results of operations.
Our operations are subject to risks of unsettled political conditions, civil unrest or instability, public health concerns or pandemics, natural or man-made disasters, armed conflicts or acts of war, terrorism, and the effects of climate change, any one of which could adversely affect our business and results of operations.
Our success in marketing our fabrics depends upon our ability to anticipate and respond in a timely manner to fashion trends in home furnishings.
Our success in marketing our fabrics depends upon our ability to anticipate and respond in a timely manner to fashion trends in home furnishings. If we fail to identify and respond to these changes, our sales of these products may decline.
Higher prices for electricity, natural gas, and fuel increase our production and shipping costs. A significant shortage, increased prices, or interruptions in the availability of these energy sources would increase the costs of producing and delivering products to our customers and would be likely to adversely affect our earnings.
A significant shortage, increased prices, or interruptions in the availability of these energy sources would increase the costs of producing and delivering products to our customers and would be likely to adversely affect our earnings. In many cases, we are not able to pass along the full extent of increases in our production costs to customers through price increases.
Greater dependence on technology systems heightens the risk of potential vulnerabilities from system failure and malfunction, breakdowns due to natural disasters, human error, unauthorized access, power loss, and other unforeseen events.
Our business increasingly relies on technology systems and infrastructure. Additionally, we rely on third-party service providers in connection with the maintenance thereof and the execution of certain business processes. Greater dependence on technology systems heightens the risk of potential vulnerabilities from system failure and malfunction, breakdowns due to natural disasters, human error, unauthorized access, power loss, and other unforeseen events.
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.
Despite the imposition of these duties, we believe that some China producers have moved their production out of China and continue to engage in competitive activity inconsistent with trade regulations between the U.S. and other countries, including transshipments of mattress products into the United States that circumvent imposed duties by falsely claiming that mattresses are products of a particular country of origin.
The company has assets, primarily consisting of property, plant and equipment, right of use assets, inventory, and intangible assets, that may be subject to write-offs or write-downs. ASC Topic 360 establishes an impairment accounting model for long-lived assets, including property, plant, and equipment, right of use assets, and finite-lived intangible assets such as customer relationships and our non-compete agreement.
ASC Topic 360 establishes an impairment accounting model for long-lived assets, including property, plant, and equipment, right of use assets, and finite-lived intangible assets such as customer relationships and non-compete agreements. It requires the company to assess these assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered.
Inflationary pressures also began to affect consumer spending during the second half of fiscal 2022 and continued throughout fiscal 2023 and 2024. In addition, declines in the U.S. housing and commercial real estate markets in fiscal 2024 negatively impacted demand for furniture and bedding, reducing demand for our upholstery and mattress fabric products.
Slowdowns in the U.S. housing and commercial real estate markets in fiscal 2024 and 2025 also negatively impacted demand for furniture and bedding, reducing demand for our upholstery and mattress fabric products.
We may have difficulty managing the outsourcing arrangements being used for products and services. We rely on outside sources for various products and services, including yarn and other raw materials, greige (unfinished) fabrics, finished fabrics, cut and sewn upholstery kits, sewn mattress covers, and services such as weaving and finishing.
We rely on outside sources for various products and services, including yarn and other raw materials, greige (unfinished) fabrics, finished fabrics, cut and sewn upholstery kits, sewn mattress covers, and services such as weaving and finishing. As part of the Fiscal 2025 restructuring, we transitioned all of our internal production of jacquard (damask) fabric to strategic outside suppliers.
Further, the Chinese legal system is continuing to develop and evolve, and the enforcement of rules and regulations is not always consistent or uniform. Moreover, any potential civil unrest, natural disasters, or other threats could disrupt or increase the costs of operating in China.
Further, the enforcement of applicable laws, rules and regulations in China may not always be consistent or uniform relative to other jurisdictions. Moreover, any natural disasters, or other threats or disruptions could inhibit our operations in China or increase our costs of operating there.
In many cases, we are not able to pass along the full extent of increases in our production costs to customers through price increases. Energy costs have varied significantly during recent fiscal years and remain a volatile element of our costs. Increases in energy costs could have a negative effect on our earnings.
Energy costs have varied significantly during recent fiscal years and remain a volatile element of our costs. Increases in energy costs could have a negative effect on our earnings. Business difficulties or failures of large customers could result in a decrease in our sales and earnings.
In January 2023, we entered into a Second Amended and Restated Credit Agreement with respect to our domestic credit facility, which provides for a revolving credit facility up to a maximum principal amount of $35.0 million, secured by a lien on the company's assets.
The amended Credit Agreement provides for a revolving credit facility of up to a maximum principal amount of $30.0 million, which may be increased upon mutual agreement by up to $10.0 million via an accordion feature, and is secured by a lien on the company's assets.
Also, market interest rates have increased significantly since the beginning of fiscal 2023. If we have a need to incur debt under our credit facilities, the cost of borrowing could increase substantially over debt costs that we have previously incurred.
Also, market interest rates increased significantly in fiscal 2023 and have impacted our cost of borrowing in subsequent periods. If interest rates increase further, our cost of borrowing could increase substantially over debt costs that we have previously incurred. As of April 27, 2025, we had approximately $21.4 million in total borrowing availability under our domestic credit facility.
These factors began to affect the availability of containers and space for shipments from our China operations beginning in the second half of fiscal 2024, and shipping costs have been rising since that time. Additionally, the change in global routes due to the Suez and Panama Canal disruptions has caused transit times to be extended by approximately two weeks.
These factors began to affect the availability of containers and space for shipments from our China operations beginning in the second half of fiscal 2024, impacting shipping costs.
These detentions did not resulted in any material impact on our business, supply chain, customer relationships, or reputation, and we did not have any further detentions in fiscal 2024.
We 17 were successful in submitting satisfactory supply chain evidence to result in the release of all such detained goods, and these detentions did not result in any material impact on our business, supply chain, customer relationships, or reputation.
Our business is highly competitive and fragmented, and we face significant competition from many competitors, both foreign and domestic. We compete with many other manufacturers of fabric, as well as converters who source fabrics from various producers and market them to manufacturers of furniture and bedding.
We compete with many other manufacturers of fabric, as well as converters who source fabrics from various producers and market them to manufacturers of furniture and bedding. In many cases, these fabrics are sourced from foreign suppliers who have a lower cost structure than the company.
If we fail to identify and respond to these changes, our sales of these products may decline. 18 In addition, incorrect projections about the demand for certain products could cause the accumulation of excess raw material or finished goods inventory, which could lead to inventory mark-downs and decreases in earnings.
In addition, inaccurate projections about the demand for certain products could cause the accumulation of excess raw material or finished goods inventory, which could lead to inventory mark-downs and decreases in earnings. Increasing dependence on information technology systems comes with specific risks, including cybersecurity breaches and data leaks, which could have an adverse effect on our business.
Experience has shown that the most significant of such indicators are the age of the inventory and planned discontinuances of certain patterns.
In accordance with ASC Topic 330, management continuously examines inventory to determine if there are indicators that the carrying value exceeds its net realizable value. Experience has shown that the most significant of such indicators are the age of the inventory, planned discontinuances of certain patterns, and restructuring initiatives.
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. In the future, the U.S. Government may consider imposing additional tariffs or extending the timeline for continuation of existing tariffs.
The U.S. government has imposed certain tariffs on imports from various countries, including China, where a significant amount of our products is manufactured, and recently imposed significant additional tariffs on products imported from China that temporarily increased the tariff rate on certain of our products to well above 100%.
Our available cash, cash equivalents, and cash flow from operations have been adequate to finance our operations and capital requirements in recent years. However, if we experience a sustained decline in revenue, there may be periods in which we may require additional external funding to support our operations.
Our available cash, cash equivalents, and cash flow from operations have generally been adequate to finance our operations and capital requirements in recent years, but in fiscal 2025 we required additional external funding to support our operations and utilized both U.S. and China credit facilities for that purpose.
However, we can offer no assurance that these efforts will achieve their intended effect or that the cost savings and other benefits we anticipate will be realized on the expected timeframe or at all. Loss of market share due to competition may result in declines in sales and could result in losses or decreases in earnings.
Business—Fiscal 2025 Restructuring.” While some of the anticipated cost savings, efficiency and other benefits from these restructuring effort began to positively impact our financial results in fiscal 2025, we can offer no assurance that these efforts will achieve their full intended impacts or that such impacts will be realized on the expected timeframe or at all.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur approach includes using select third-party resources, including external cybersecurity consultants, auditors, and technologies, along with our internal staff, to 21 benchmark, measure, and improve our cybersecurity risk management systems and processes, and ensure alignment with industry best practices. We have established a robust cybersecurity governance framework to manage and mitigate risk.
Biggest changeOur approach includes using select third-party resources, including external cybersecurity consultants, auditors, and technologies, along with our internal staff, to benchmark, measure, and improve our cybersecurity risk management systems and processes, and ensure alignment with industry best practices. We have established a robust cybersecurity governance framework to manage and mitigate risk.
ITEM 1C. CYBERSECURITY Our Board of Directors (the “Board”) recognizes the importance of cybersecurity and safeguarding our information systems and data assets. It is imperative that we maintain the trust and confidence of our customers, business partners and employees. Protecting our data and the data of our customers, business partners and employees is critical to maintaining that trust.
ITEM 1C. CYBERSECURITY Our Board of Directors (the “Board”) recognizes the importance of cybersecurity and safeguarding our information systems and data assets. It is imperative that we maintain the trust and confidence of our customers, business partners and employees. Protecting our data 23 and the data of our customers, business partners and employees is critical to maintaining that trust.
To facilitate the success of our cybersecurity risk management program, we have assigned our Director of Technical Infrastructure and his team to monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and provide reports to management.
To facilitate the success of our cybersecurity risk 24 management program, we have assigned our Director of Technical Infrastructure and his team to monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and provide reports to management.
Our Vice President of Information Technology and Director of Technical Infrastructure have a combined 65 years of experience designing, implementing, and supporting information technology systems with a security-first mindset. In particular, prior to joining Culp, our Director of Technical Infrastructure gained experience leading cybersecurity teams at a managed security service provider, where he provided cybersecurity support to outside organizations. 22
Our Vice President of Information Technology and Director of Technical Infrastructure have a combined 65 years of experience designing, implementing, and supporting information technology systems with a security-first mindset. In particular, prior to joining Culp, our Director of Technical Infrastructure gained experience leading cybersecurity teams at a managed security service provider, where he provided cybersecurity support to outside organizations. 25

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThis ability to source upholstery fabric is part of our long-term strategy to have a low-cost platform that is scalable, but not capital intensive. In the mattress fabrics segment, we believe we have sufficient capacity to meet current 23 and expected demand trends.
Biggest changeIn the upholstery fabrics segment, we have the ability to source upholstery fabric from outside suppliers to meet current and expected demand trends and further increase our output of finished goods. This ability to source upholstery fabric is part of our long-term strategy to have a low-cost platform that is scalable, but not capital intensive.
ITEM 2. P ROPERTIES As of the end of fiscal 2024 (April 28, 2024), we leased our corporate headquarters and a design and innovation campus located in High Point, North Carolina. In addition, we owned or leased thirteen facilities associated with our mattress and upholstery fabrics operations. The following is a list of our administrative and production facilities.
ITEM 2. P ROPERTIES As of the end of fiscal 2025 (April 27, 2025), we leased our corporate headquarters and a design and innovation campus located in High Point, North Carolina. In addition, we owned or leased thirteen facilities associated with our mattress and upholstery fabrics operations. The following is a list of our administrative and production facilities.
Jerome, Quebec, Canada Warehouse 46,113 (4) 2026 Ouanaminthe, Haiti Manufacturing 80,000 2025 (2) Ouanaminthe, Haiti Manufacturing 40,000 (5) 2028 (2) ● Upholstery Fabrics: Burlington, North Carolina Finished goods distribution 132,000 2028 Burlington, North Carolina Design center 13,750 2026 Knoxville, Tennessee Manufacturing and offices 37,770 2033 Shanghai, China Manufacturing, warehouse and offices 68,677 2024 Shanghai, China Warehouse and offices 89,857 2024 Shanghai, China Warehouse and offices 89,861 2024 Shanghai, China Warehouse 64,583 (6) 2024 (1) Includes all options to renew, except as noted in footnote 2 below.
Jerome, Quebec, Canada Warehouse 46,113 (3) 2026 Ouanaminthe, Haiti Manufacturing 80,000 2025 (2) ● Upholstery Fabrics: Burlington, North Carolina Finished goods distribution 132,000 (4) 2026 Burlington, North Carolina Design center 13,750 2026 Knoxville, Tennessee Manufacturing and offices 37,770 2033 Shanghai, China Warehouse and offices 68,677 2026 Shanghai, China Warehouse and offices 89,857 2026 Shanghai, China Warehouse and offices 89,861 2026 (1) Includes all options to renew, except as noted in footnote 2 below.
(4) As announced on May 1, 2024, the company's board of directors made the decision to consolidate the company's North American mattress fabrics operations including a gradual discontinuation of operations and the sale of the company's manufacturing facility located in Quebec, Canada, and to exit the leased warehouse facility also located in Quebec, Canada.
(3) As announced on May 1, 2024, the company's board of directors made the decision to consolidate the company's North American mattress fabrics operations including the closure and sale of the company's manufacturing facility located in Quebec, Canada, and to exit the leased warehouse facility also located in Quebec, Canada.
Jerome, Quebec, Canada Manufacturing 202,500 (4) Owned St.
Jerome, Quebec, Canada Manufacturing 202,500 (3) Owned St.
Ft.) Expiration of Lease (1) ● Administrative: High Point, North Carolina Upholstery fabric division offices and corporate headquarters 36,643 (3) 2034 High Point, North Carolina Design and innovation campus, showrooms, and office space 21,261 2043 ● Mattress Fabrics: Stokesdale, North Carolina Manufacturing and headquarters office 299,163 Owned Stokesdale, North Carolina Distribution center 220,222 Owned St.
Ft.) Expiration of Lease (1) ● Administrative: High Point, North Carolina Upholstery fabric division and shared service offices 18,960 2030 High Point, North Carolina Design and innovation campus, showrooms, and executive offices 21,261 2043 ● Mattress Fabrics: Stokesdale, North Carolina Manufacturing and headquarters office 299,163 Owned Stokesdale, North Carolina Distribution center 220,222 Owned St.
(2) These lease agreements have an unspecified number of renewal options available, and the year listed above is the expiration of the current lease term.
(2) This lease agreement has an unspecified number of renewal options available, and the year listed above is the expiration of the current lease term.
We also have the ability to source additional mattress fabrics from outside suppliers to further increase our ultimate output of finished goods.
In the mattress fabrics segment, we believe we have sufficient capacity to meet current and expected demand trends, but we also source certain fabrics from outside suppliers and have the ability to source additional mattress fabrics from outside suppliers to further increase our ultimate output of finished goods.
We believe that our facilities are in good condition, well-maintained, suitable, and adequate for present utilization. In the upholstery fabrics segment, we have the ability to source upholstery fabric from outside suppliers to meet current and expected demand trends and further increase our output of finished goods.
The Stokesdale, North Carolina facility has historically been solely operated by the mattress fabrics segment. We believe that our facilities are in good condition, well-maintained, suitable, and adequate for present utilization.
Removed
(3) As a result of the Fiscal 2025 restructuring, the company expects to reduce the square footage at this facility from 36,643 to approximately 19,000 by consolidating its corporate headquarters and executive offices into existing space within the design and innovation campus also located in High Point, North Carolina.
Added
See Note 8 to the consolidated statements for additional details regarding the sale of the owned Canadian manufacturing facility effective April 30, 2025 (first quarter fiscal 2026). The leased warehouse in Quebec, Canada is no longer used in operations.
Removed
See Note 8 to the consolidated statements for additional details regarding our restructuring activities. (5) As a result of the Fiscal 2025 restructuring, the company made the decision to consolidate this 40,000 square foot facility into the already existing 80,000 square foot facility also located in Ouanaminthe, Haiti.
Added
(4) As announced on April 24, 2025, the company will close its leased facility operated by the upholstery fabrics segment located in Burlington, North Carolina, and transition its production and distribution activities utilizing a shared management model within its owned facility located in Stokesdale, North Carolina.
Removed
See Note 8 to the consolidated statements for additional details regarding our restructuring activities. (6) As a part of the company's plan to restructure its upholstery fabrics finishing operation in Shanghai, China, it does not expect to renew the lease for this facility beyond the expiration of the current lease term ending December 31, 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGA L PROCEEDINGS There are no legal proceedings to which the company, or its subsidiaries, is a party to or of which any of their property is the subject that are required to be disclosed under this item.
Biggest changeITEM 3. LEGA L PROCEEDINGS There are no legal proceedings to which the company, or its subsidiaries, is a party to or of which any of their property is the subject that are required to be disclosed under this item. 26

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAccordingly, we did not make any dividend payments during fiscal 2024 or fiscal 2023. During fiscal 2022, dividend payments totaled $5.5 million, which represented quarterly dividend payments ranging from $0.11 per share to $0.115 per share. Our board of directors has sole authority to determine if and when we will declare future dividends, and on what terms.
Biggest changeAccordingly, we did not make any dividend payments during fiscal 2025, 2024, or 2023, respectively. Our board of directors has sole authority to determine if and when we will declare future dividends, and on what terms. We will continue to reassess our dividend policy each quarter.
Canton, MA 02021 (800) 254-5196 (781) 575-2879 (Foreign shareholders) www.computershare.com/investor Stock Listing Culp, Inc. common stock is traded on the New York Stock Exchange (NYSE) under the symbol CULP. As of April 28, 2024, Culp, Inc. had approximately 2,682 shareholders based on the number of holders of record and an estimate of individual participants represented by security position listings.
Canton, MA 02021 (800) 254-5196 (781) 575-2879 (Foreign shareholders) www.computershare.com/investor Stock Listing Culp, Inc. common stock is traded on the New York Stock Exchange (NYSE) under the symbol CULP. As of April 27, 2025, Culp, Inc. had approximately 2,176 shareholders based on the number of holders of record and an estimate of individual participants represented by security position listings.
Sales of Unregistered Securities There were no sales of unregistered securities during fiscal 2024, 2023, or 2022. 26 Performance Comparison The following graph shows changes over the five fiscal years ending April 28, 2024, in the value of $100 invested in (1) the common stock of the company, (2) the Hemscott Textile Manufacturing Group Index reported by Standard and Poor’s, consisting of three companies in the textile industry, and (3) the Standard & Poor’s 500 Index.
Sales of Unregistered Securities There were no sales of unregistered securities during fiscal 2025, 2024, or 2023. 29 Performance Comparison The following graph shows changes over the five fiscal years ended April 27, 2025, in the value of $100 invested in (1) the common stock of the company, (2) the Hemscott Textile Manufacturing Group Index reported by Standard and Poor’s, consisting of three companies in the textile industry, and (3) the Standard & Poor’s 500 Index.
The graph assumes an initial investment of $100 at the end of fiscal 2019 and the reinvestment of all dividends during the periods identified. ITE M 6. [RESERVED] 27
The graph assumes an initial investment of $100 at the end of fiscal 2020 and the reinvestment of all dividends during the periods identified. ITE M 6. [RESERVED] 30
Analyst Coverage The following analyst covers Culp, Inc.: Water Tower Research – Budd Bugatch, CFA 25 Dividends and Share Repurchases; Sales of Unregistered Securities Share Repurchases ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) January 29, 2024 to March 3, 2024 — $ — — $ 3,248,094 March 4, 2024 to March 31, 2024 — $ — — $ 3,248,094 April 1, 2024 to April 28, 2024 — $ — — $ 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.
Analyst Coverage The following analyst covers Culp, Inc.: Water Tower Research, LLC – Brian Gordon 28 Dividends and Share Repurchases; Sales of Unregistered Securities Share Repurchases ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) January 27, 2025 to March 2, 2025 — $ — — $ 3,248,094 March 3, 2025 to March 30, 2025 — $ — — $ 3,248,094 March 31, 2025 to April 27, 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.
We will continue to reassess our dividend policy each quarter. Future dividend payments will depend on earnings, capital requirements, financial condition, excess availability under our lines of credit, market and economic conditions, and other factors, including alternative investment opportunities.
Future dividend payments will depend on earnings, capital requirements, financial condition, excess availability under our lines of credit, market and economic conditions, and other factors, including alternative investment opportunities.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

108 edited+94 added−69 removed15 unchanged
Biggest changeUnallocated corporate expenses primarily represent compensation and benefits for certain executives and their support staff, all costs associated with being a public company, amortization of intangible assets, and other miscellaneous expenses. 28 Results of Operations Twelve Months Ended (dollars in thousands) April 28, 2024 April 30, 2023 Change Net sales $ 225,333 $ 234,934 (4.1 )% Gross profit 27,939 10,896 156.4 % Gross profit margin 12.4 % 4.6 % 780 bp Selling, general, and administrative expenses 38,611 37,978 1.7 % Restructuring expense 636 1,396 (54.4 )% Loss from operations (11,308 ) (28,478 ) (60.3 )% Operating margin (5.0 )% (12.1 )% (710 ) bp Loss before income taxes (10,770 ) (28,390 ) (62.1 )% Income tax expense 3,049 3,130 (2.6 )% Net loss (13,819 ) (31,520 ) (56.2 )% Net Sales Our consolidated net sales decreased 4.1% in fiscal 2024 compared with a year ago, with mattress fabric net sales increasing 4.8% and upholstery fabric net sales decreasing 12.1%.
Biggest changeLoss from operations (18,377 ) (11,308 ) 62.5 % Operating margin (8.6 )% (5.0 )% 360 bp Loss before income taxes (18,711 ) (10,770 ) 73.7 % Income tax expense 392 3,049 (87.1 )% Net loss (19,103 ) (13,819 ) 38.2 % Net Sales Our consolidated net sales decreased by 5.4% in fiscal 2025 compared with a year ago, with mattress fabric net sales decreasing 2.1% and upholstery fabric net sales decreasing 8.8%.
Uncertainty in Income Taxes An unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period if the more-likely-than-not recognition threshold is met by the end of the reporting period, or if the position is effectively settled through examination, negotiation, or litigation, or if the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired.
Uncertainty in Income Taxes An unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period if the more-likely-than-not recognition threshold is met by the end of the reporting period, or is effectively settled through examination, negotiation, or litigation, or if the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired.
For a discussion of all our significant accounting policies, including our critical accounting policies, refer to Note 1 of the consolidated financial statements. Inventory Valuation We operate as a “make-to-order” and “make-to-stock” business.
Refer to Note 1 of the consolidated financial statements for discussion of all of our significant accounting policies, including our critical accounting policies. Inventory Valuation We operate as a “make-to-order” and “make-to-stock” business.
While our forecasts of future financial results represent management’s best estimates, these involve inherent uncertainties. As a result, if we revised our assumptions and estimates during the vesting period, our stock-based compensation expense could be materially different than previously expected.
While our forecasts of future financial results represent management’s best estimates, these forecasts involve inherent uncertainties. As a result, if we revised our assumptions and estimates during the vesting period, our stock-based compensation expense could be materially different than previously expected.
Common Stock Repurchases 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 repurchased from time to time in open market transactions, block trades, through plans established under the Securities Exchange Act Rule 10b5-1, or otherwise.
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 repurchased from time to time in open market transactions, block trades, through plans established under the Securities Exchange Act Rule 10b5-1, or otherwise.
Deferred Income Taxes – Undistributed Earnings from Foreign Subsidiaries We assess whether the undistributed earnings from our foreign subsidiaries will be reinvested indefinitely or eventually distributed to our U.S. parent company, and whether we are required to a record a deferred income tax liability for those undistributed earnings from foreign subsidiaries that will not be reinvested indefinitely.
Deferred Income Taxes – Undistributed Earnings from Foreign Subsidiaries We assess whether the undistributed earnings from our foreign subsidiaries will be reinvested indefinitely or eventually distributed to our U.S. parent company, and whether we are required to a record a deferred income tax liability for those undistributed earnings from 42 foreign subsidiaries that will not be reinvested indefinitely.
We believed that preserving capital and managing our liquidity was in the company’s best interest to support future growth and the long-term interests of our shareholders. Accordingly, we did not make any dividend payments during fiscal 2024 or fiscal 2023.
We believed that preserving capital and managing our liquidity was in the company’s best interest to support future growth and the long-term interests of our shareholders. Accordingly, we did not make any dividend payments during fiscal 2025, 2024 or fiscal 2023.
Liquidity and Capital Resources Overall Currently, our sources of liquidity include cash and cash equivalents ("cash"), cash flow from operations, and amounts available under our revolving credit lines.
Liquidity and Capital Resources Overall Currently, our sources of liquidity include cash and cash equivalents ("cash"), cash flow from operations, and amounts available under our lines of credit.
During the last half of fiscal 2023, we rationalized our domestic cut and sewn cover platform, which included the termination of agreements to lease two facilities located in High Point, North Carolina, and moving our R&D and prototyping capabilities from these facilities to our facility located in Stokesdale, North Carolina.
During the last half of fiscal 2023, we rationalized our domestic cut and sewn cover platform, which included the termination of agreements to lease two facilities located in High Point, North Carolina, and moved our R&D and prototyping capabilities from these facilities to our facility located in Stokesdale, North Carolina.
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.
Other Expense Management is required to assess certain economic factors to determine the currency of the primary economic environment in which our foreign subsidiaries operate. Based on our assessments, the U.S. dollar was determined to be the functional currency of our operations located in China, Canada, and Vietnam.
As a result, the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during fiscal 2024 compared with fiscal 2023.
As a result, the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during fiscal 2024 compared with fiscal 2025.
As a result, the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during fiscal 2024 compared with fiscal 2023.
As a result, the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during fiscal 2024 compared with fiscal 2025.
During the fourth quarter of fiscal 2024, we also established a wholly owned subsidiary, Culp Fabrics Vietnam Limited, with an administrative office located in Ho Chi Minh City, Vietnam, for the purpose of enhancing our strategic sourcing opportunities and to further diversify our supply chain in Asia.
During the fourth quarter of fiscal 2024, we established a wholly owned subsidiary, Culp Fabrics Vietnam Limited, with an administrative office located in Ho Chi Minh City, Vietnam, for the purpose of enhancing our strategic sourcing capabilities and to further diversify our supply chain in Asia.
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 sewn mattress cover operation located in Ouanaminthe, Haiti, from two leased facilities into one building and reduce other operating expenses at this location.
Restructuring Activities Restructuring Activities Announced May 1, 2024 On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to: (1) consolidate the company's North American mattress fabrics operations, including the closure and sale of the Property located in Quebec, Canada; (2) move a portion of the knitting and finishing capacity from 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.
Refer to Note 11 of the consolidated financial statements for additional disclosures regarding the valuation allowance against our U.S. net deferred income taxes.
Refer to Note 12 of the consolidated financial statements for additional disclosures regarding the valuation allowance against our U.S. net deferred income taxes.
Our board of directors has sole authority to determine if and when we will declare future dividends, and on what terms. We will continue to reassess our dividend policy each quarter. Future dividend payments will depend on earnings, capital requirements, financial condition, excess availability under our lines of credit, market and economic conditions, and other factors, including alternative investment opportunities.
Our board of directors has sole authority to determine if and when we will declare future dividends, and on what terms. We will continue to reassess our dividend policy each quarter. Future dividend payments will depend on earnings, capital requirements, financial condition, excess availability under our lines of credit, market and economic conditions, and other factors.
Due to the uncertain and unpredictable nature of our estimates, actual results could differ from the estimates that were previously reported in our consolidated financial statements. As of April 28, 2024, we believe the following list represents our critical accounting estimates that have or are reasonably likely to have a material effect on our financial condition or results of operations.
Due to the uncertain and unpredictable nature of our estimates, actual results could differ from the estimates that were previously reported in our consolidated financial statements. As of April 27, 2025, we believe the following list represents our critical accounting estimates that have or are reasonably likely to have a material effect on our financial condition or results of operations.
Since the company operates in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law. As of April 28, 2024, we evaluated the realizability of our U.S. net deferred income tax assets to determine if a full valuation allowance was still required.
Since the company operates in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law. As of April 27, 2025, we evaluated the realizability of our U.S. net deferred income tax assets to determine if a full valuation allowance was still required.
Refer to Note 11 of the consolidated financial statements for disclosures and additional information regarding our uncertain income tax positions.
Refer to Note 12 of the consolidated financial statements for disclosures and additional information regarding our uncertain income tax positions.
This income tax expense of $541,000 was associated with taxable foreign exchange rate gains based on less favorable foreign currency exchange rates applied against balance sheet accounts denominated in U.S. dollars to determine the corresponding Chinese Renminbi local currency amounts.
This income tax expense of $125,000 was associated with taxable foreign exchange rate gains based on 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.
Canadian provincial (Quebec) income tax returns filed by us remain subject to examination for income tax years 2020 and subsequent. Income tax returns associated with our operations located in China are subject to examination for income tax year 2019 and subsequent.
Canadian federal income tax returns filed by us remain subject to examination for income tax years 2021 and subsequent. Canadian provincial (Quebec) income tax returns filed by us remain subject to examination for income tax years 2021 and subsequent. Income tax returns associated with our operations located in China are subject to examination for income tax year 2020 and subsequent.
In addition, we applied a full valuation allowance against our U.S. deferred income tax assets during both fiscal 2024 and fiscal 2023. Consequently, an income tax benefit was not recognized for the pre-tax losses associated with our U.S. operations totaling $(18.6) million and $(33.5) million that were incurred during fiscal 2024 and fiscal 2023, respectively.
In addition, we applied a full valuation allowance against our U.S. deferred income tax assets during both fiscal 2025 and fiscal 2024. Consequently, an income tax benefit was not recognized for the pre-tax losses associated with our U.S. operations totaling $(18.4) million and $(18.6) million that were incurred during fiscal 2025 and fiscal 2024, respectively.
As of April 28, 2024, we assessed the liquidity requirements of our U.S. parent company and determined that our undistributed earnings from our foreign subsidiaries would not be reinvested indefinitely and 37 therefore, would be eventually distributed to our U.S. parent company. The conclusion reached from our assessment is consistent with prior years.
As of April 27, 2025, we assessed the liquidity requirements of our U.S. parent company and determined that our undistributed earnings from our foreign subsidiaries would not be reinvested indefinitely and therefore, would be eventually distributed to our U.S. parent company. The conclusion reached from our assessment is consistent with prior years.
Adoption of New Accounting Pronouncements Refer to Note 1 of the consolidated financial statements for recently adopted accounting pronouncements for fiscal 2024. Recently Issued Accounting Standards Refer to Note 1 of the consolidated financial statements for recently issued accounting pronouncements for fiscal 2025 and beyond.
Adoption of New Accounting Pronouncements Refer to Note 1 of the consolidated financial statements for recently adopted accounting pronouncements for fiscal 2025. Recently Issued Accounting Standards Refer to Note 1 of the consolidated financial statements for recently issued accounting pronouncements for fiscal 2026 and beyond. 48
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 operation expenses at this location.
On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to: (1) consolidate the company's North American mattress fabrics operations, including the closure and sale of the company's manufacturing facility and related land (collectively referred to as the "Property") located in Quebec, Canada; (2) move a portion of the knitting and finishing capacity from the 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.
In addition, we applied a full valuation allowance against our U.S. deferred income tax assets 29 during both fiscal 2024 and fiscal 2023. Consequently, an income tax benefit was not recognized for the pre-tax losses associated with our U.S. operations totaling $(18.6) million and $(33.5) million that were incurred during fiscal 2024 and fiscal 2023, respectively.
In addition, we applied a full valuation allowance against our U.S. deferred income tax assets during both fiscal 2025 and fiscal 2024, respectively. Consequently, an income tax benefit was not recognized for the pre-tax losses associated with our U.S. operations totaling $(18.4) million and $(18.6) million that were incurred during fiscal 2025 and fiscal 2024, respectively.
The determination of the inputs and complex assumptions used, and the application of the Monte Carlo valuation model, requires significant judgment by management and advice from an external advisor. We recorded $915,000, $1.1 million, and $1.1 million of compensation expense within selling, general, and administrative expense for our equity-based awards in fiscal 2024, 2023, and 2022, respectively.
The determination of the inputs and complex assumptions used, and the application of the Monte Carlo valuation model, requires significant judgment by management and advice from an external advisor. We recorded $650,000, and $915,000 of compensation expense within selling, general, and administrative expense for our equity-based awards in fiscal 2025 and 2024, respectively.
(2) Our negative consolidated effective income tax rates during fiscal 2024 and fiscal 2023 were caused by the mix of earnings between our U.S. operations and foreign subsidiaries, as our taxable income stems from our operations located in China and Canada, which have higher income tax rates than the U.S.
(2) Our negative consolidated effective income tax rates during fiscal 2025 and fiscal 2024 were caused by the mix of earnings between our U.S. operations and foreign subsidiaries, as our taxable income stemmed from our operations located in China during fiscal 2025 and both our operations located in China and Canada during fiscal 2024, which jurisdictions have higher income tax rates than the U.S.
Our negative consolidated effective income tax rates during fiscal 2024 and fiscal 2023 were caused by the mix of earnings between our U.S. operations and foreign subsidiaries, as our taxable income stems from our operations located in China and Canada, which have higher income tax rates than the U.S.
Our negative consolidated effective income tax rates during fiscal 2025 and fiscal 2024 were caused by the mix of earnings between our U.S. operations and foreign subsidiaries, as our taxable income stemmed from our operations located in China during fiscal 2025 and both our operations located in China and Canada during fiscal 2024, which jurisdictions have higher income tax rates than the U.S.
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. In addition, we are currently expecting U.S. pre-tax losses to continue into fiscal 2025.
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. In addition, we are currently expecting a U.S. pre-tax loss during fiscal 2026.
As a result of the significant weight of this negative evidence, we believe it is more-likely-than-not that our U.S. net deferred income tax assets will not be fully realizable, and therefore we provided for a full valuation allowance against our U.S. net deferred income tax assets totaling $22.0 million as of April 28, 2024.
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 totaling $26.3 million as of April 27, 2025.
Leases Refer to Note 12 of the consolidated financial statements for disclosure of our lease obligations, which includes a five-year maturity schedule. Capital Expenditures As of April 28, 2024, and April 30, 2023, we had total amounts due regarding capital expenditures totaling $343,000 and $56,000, respectively, which pertained to outstanding vendor invoices, none of which were financed.
Leases Refer to Note 13 of the consolidated financial statements for disclosure of our lease obligations, which includes a five-year maturity schedule. 45 Capital Expenditures As of April 27, 2025, and April 28, 2024, we had total amounts due regarding capital expenditures totaling $23,000 and $343,000, respectively, which pertained to outstanding vendor invoices, none of which were financed.
Segment Assets Segment assets consist of accounts receivable, inventory, property, plant, and equipment, and right of use assets.
Segment Assets Segment assets consist of accounts receivable, inventory, property, plant, and equipment, right of use assets, and assets held for sale.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended April 30, 2023, filed with the SEC on July 14, 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended April 28, 2024, filed with the SEC on July 12, 2024.
During fiscal 2024, we incurred a significantly lower consolidated pre-tax loss of $(10.8) million, compared with a significantly higher pre-tax loss of $(28.4) million incurred during fiscal 2023.
(4) During fiscal 2025, we incurred a significantly higher consolidated pre-tax loss of $(18.7) million, compared with a significantly lower pre-tax loss of $(10.8) million incurred during fiscal 2024.
The following schedule summarizes the principal differences between income tax expense at the federal income tax rate and the effective income tax rate reflected in the consolidated financial statements: 2024 2023 U.S. federal income tax rate 21.0 % 21.0 % valuation allowance (30.9 ) (24.0 ) foreign tax rate differential (4.7 ) (4.0 ) income tax effects of Chinese foreign exchange gains and losses (3.6 ) (0.9 ) withholding taxes associated with foreign tax jurisdictions (6.5 ) (2.4 ) uncertain income tax positions (0.7 ) (0.3 ) U.S. state income taxes 0.8 0.6 stock-based compensation (1.8 ) (0.3 ) other (1) (1.9 ) (0.7 ) consolidated effective income tax rate (2) (3) (28.3 )% (11.0 )% (1) “Other” for all periods presented represents miscellaneous adjustments that pertain to U.S. permanent differences such as meals and entertainment expense and income tax provision to return adjustments.
Income Taxes Effective Income Tax Rate & Income Tax Expense We recorded income tax expense of $392,000, or (2.1)% of loss before income taxes, during fiscal 2025, compared with income tax expense of $3.0 million, or (28.3)% of loss before income taxes, during fiscal 2024. 41 The following schedule summarizes the principal differences between income tax expense at the federal income tax rate and the effective income tax rate reflected in the consolidated financial statements: 2025 2024 U.S. federal income tax rate 21.0 % 21.0 % valuation allowance (23.0 ) (30.9 ) foreign tax rate differential (1.4 ) (4.7 ) income tax effects of Chinese foreign exchange gains (0.5 ) (3.6 ) withholding taxes associated with foreign tax jurisdictions (1.7 ) (6.5 ) uncertain income tax positions 2.5 (0.7 ) U.S. state income taxes 1.1 0.8 stock-based compensation (0.3 ) (1.8 ) other (1) 0.2 (1.9 ) consolidated effective income tax rate (2) (3) (4) (2.1 )% (28.3 )% (1) “Other” for all periods presented represents miscellaneous adjustments that pertain to U.S. permanent differences such as meals and entertainment, income tax provision to return adjustments, and other miscellaneous items.
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. The $33.7 million as of April 30, 2023, represents property, plant, and equipment of $22.7 million, $10.4 million, and $608,000 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.
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 $2.6 million as of April 30, 2023, represents right of use assets of $1.5 million and $1.1 million located in China and the U.S., respectively.
The $2.7 million as of April 27, 2025, represents right of use assets of $1.7 million and $1.0 million located in China and the U.S., respectively. 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.
RISK FACTORS,” for a discussion of factors that may cause results to differ materially. General Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30. Fiscal 2024, 2023, and 2022 each included 52- weeks periods. Our operations are classified into two business segments: mattress fabrics and upholstery fabrics.
RISK FACTORS,” for a discussion of factors that may cause results to differ materially. General Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30. Fiscal 2025, 2024, and 2023 each included 52- weeks periods.
Accordingly, as of April 28, 2024, we recorded a deferred income tax liability associated with our undistributed earnings from foreign subsidiaries of $4.8 million. Refer to Note 11 of the consolidated financial statements for additional disclosures regarding our deferred income tax liability associated with the undistributed earnings from our foreign subsidiaries.
Accordingly, as of April 27, 2025, we recorded a deferred income tax liability associated with our undistributed earnings from foreign subsidiaries of $5.2 million. Refer to Note 12 of the consolidated financial statements for additional disclosures regarding our deferred income tax liability associated with the undistributed earnings from our foreign subsidiaries.
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.
Both CUF Haiti and CHF Haiti are indirect wholly-owned subsidiaries of the company. During the first quarter of fiscal 2024, demand for upholstery cut and sewn kits declined more than previously anticipated, resulting in the strategic action to discontinue the production of upholstery cut and sewn kits in Haiti.
Had these costs been included in cost of sales, gross profit would have been $23.3 million, or 10.3% of net sales, during fiscal 2024, and $6.7 million, or 2.8% of net sales, during fiscal 2023.
Had these costs been included in cost of sales, gross profit would have been $20.4 million, or 9.6% of net sales, during fiscal 2025, and $23.3 million, or 10.3% of net sales, during fiscal 2024.
Warehousing costs include the operating expenses of our various finished goods distribution centers, such as personnel costs, utilities, building rent and material handling equipment, and lease expense.
Handling costs were $4.6 million during each of fiscal 2025 and fiscal 2024. Warehousing costs include the operating expenses of our various finished goods distribution centers, such as personnel costs, utilities, building rent, material handling equipment, and lease expense.
(3) During fiscal 2024, we incurred a significantly lower consolidated pre-tax loss of $(10.8) million, compared with a significantly higher pre-tax loss of $(28.4) million incurred during fiscal 2023.
During fiscal 2025, we incurred a significantly higher consolidated pre-tax loss of $(18.7) million, compared with a significantly lower pre-tax loss of $(10.8) million incurred during fiscal 2024.
This restructuring activity was completed during the third quarter of fiscal 2024, and we incurred a cumulative restructuring and restructuring related charge of $1.3 million from the commencement of this restructuring activity during the third quarter of fiscal 2023 through the third quarter of fiscal 2024.
This restructuring activity commenced during the third quarter of fiscal 2023, and was completed during the third quarter of fiscal 2024 and resulted in a cumulative restructuring and restructuring related charge of $1.3 million.
Net sales during the fourth quarter of fiscal 2024 were $23.8 million, a decrease of 22.6% compared with net sales of $30.7 million during the fourth quarter of fiscal 2023.
Net sales during the fourth quarter of fiscal 2025 were $21.7 million, a decrease of 8.9%, compared with $23.8 million during the fourth quarter of fiscal 2024.
Additionally, Read Window Products, LLC (“Read”), a wholly owned subsidiary with operations located in Knoxville, Tennessee, provides window treatments and sourcing of upholstery fabrics and other products, as well as measuring and installation for Read’s products, to customers in the hospitality and commercial industries.
Additionally, Read Window Products, LLC (“Read”), a wholly owned subsidiary with operations located in Knoxville, Tennessee, and our upholstery fabrics facility located in Burlington, North Carolina, provide window treatments and sourcing of upholstery fabrics and other products, as well as related measuring and installation services to customers in the hospitality and commercial markets.
By Geographic Area A summary of our cash by geographic area follows: April 28, April 30, (dollars in thousands) 2024 2023 United States $ 2,912 $ 9,769 China 6,554 10,669 Canada 371 281 Haiti 86 236 Vietnam 81 — Cayman Islands 8 9 $ 10,012 $ 20,964 39 Dividend Program On June 29, 2022 (fiscal 2023), our board of directors announced the decision to suspend the company’s quarterly cash dividend.
By Geographic Area A summary of our cash by geographic area follows: April 27, April 28, (dollars in thousands) 2025 2024 United States $ 151 $ 2,912 China 4,723 6,554 Canada 701 371 Vietnam 38 81 Haiti 8 86 Cayman Islands 8 8 $ 5,629 $ 10,012 Dividend Program On June 29, 2022, our board of directors announced the decision to suspend the company’s quarterly cash dividend.
Our cash balance may be adversely affected by factors beyond our control, such as (i) recent customer demand trends affecting sales, (ii) supply chain disruptions, (iii) rising interest rates and inflation, (iv) world events (including wars in Ukraine and the Middle East), and (v) the continuing uncertainty associated with COVID-19.
Our cash balance may be adversely affected by factors beyond our control, such as: (i) recent customer demand trends affecting sales, (ii) increased tariffs or other changes in U.S. trade policy related to imported products, (iii) supply chain disruptions, (iv) rising interest rates and inflation, and (v) geopolitical events (including wars in Ukraine and the Middle East).
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. During fiscal 2024 and fiscal 2023, we did not repurchase any shares of our common stock.
The number of shares purchased and the timing of such purchases are based on working capital requirements, market and general business conditions, and other factors. During fiscal 2025 and fiscal 2024, we did not repurchase any shares of our common stock. As of April 27, 2025, $3.2 million was available for additional repurchases of our common stock.
Fiscal Fiscal 2024 2023 Net sales 100.0 % 100.0 % Cost of sales (87.6 ) (95.4 ) Gross profit 12.4 4.6 Selling, general and administrative expenses (17.1 ) (16.2 ) Restructuring expense (0.3 ) (0.6 ) Loss from operations (5.0 ) (12.1 ) Interest expense — — Interest income 0.5 0.2 Other expense (0.3 ) (0.2 ) Loss before income taxes (4.8 ) (12.1 ) Income tax expense * (28.3 ) (11.0 ) Net loss (6.1 ) (13.4 ) * Calculated as a percentage of loss before income taxes. 30 2024 compared with 2023 Segment Analysis Mattress Fabrics Segment Twelve Months Ended (dollars in thousands) April 28, 2024 April 30, 2023 Change Net sales $ 116,370 $ 110,995 4.8 % Gross profit (loss) 6,289 (6,739 ) N.M.
Fiscal Fiscal 2025 2024 Net sales 100.0 % 100.0 % Cost of sales (88.2 ) (87.6 ) Gross profit 11.8 12.4 Selling, general and administrative expenses (16.7 ) (17.1 ) Restructuring expense (3.6 ) (0.3 ) Loss from operations (8.6 ) (5.0 ) Interest expense (0.1 ) — Interest income 0.4 0.5 Other expense (0.5 ) (0.3 ) Loss before income taxes (8.8 ) (4.8 ) Income tax expense * (2.1 ) (28.3 ) Net loss (9.0 ) (6.1 ) * Calculated as a percentage of loss before income taxes. 2025 compared with 2024 Segment Analysis Mattress Fabrics Segment Twelve Months Ended (dollars in thousands) April 27, 2025 April 28, 2024 Change Net sales $ 113,906 $ 116,370 (2.1 )% Gross profit 7,936 6,289 26.2 % Gross margin 7.0 % 5.4 % 160 bp Selling, general and administrative expenses 13,171 13,134 0.3 % Restructuring expense 6,895 — 100.0 % Loss from operations (5,235 ) (6,845 ) (23.5 )% Operating margin (4.6 )% (5.9 )% 130 bp Net Sales Mattress fabrics sales decreased by 2.1% in fiscal 2025 compared to the prior year.
The $2.3 million as of April 30, 2023, represents right of use assets of $1.5 million and $776,000 located in Haiti and Canada, respectively. Upholstery Fabrics Segment Net Sales Twelve Months Ended (dollars in thousands) April 28, 2024 April 30, 2023 % Change Non-U.S. Produced $ 98,429 90 % $ 114,589 92 % (14.1 )% U.S.
The $125,000 as of April 27, 2025, represents right of use assets located in Haiti. 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. Upholstery Fabrics Segment Net Sales Twelve Months Ended (dollars in thousands) April 27, 2025 April 28, 2024 % Change Non-U.S.
During fiscal 2024, we recorded a foreign exchange rate gain of $604,000 related to our operations located in China, which was mostly non-cash and was offset by $541,000 of income tax expense.
During fiscal 2025, we reported a foreign exchange rate gain associated with our operations located in China totaling $141,000, compared with a foreign exchange rate gain of $604,000 during fiscal 2024. The foreign exchange rate gain of $141,000 described above was mostly non-cash and offset by income tax expense of $125,000.
Accounts Receivable The decrease in accounts receivable reflects the decrease in net sales during the fourth quarter of fiscal 2024, as compared with the fourth quarter of fiscal 2023. Net sales during the fourth quarter of fiscal 2024 were $25.8 million, a decrease of (16.1)% compared with net sales of $30.7 million during the fourth quarter of fiscal 2023.
Net sales during the fourth quarter of fiscal 2025 were $21.7 million, a decrease of 8.9%, compared with $23.8 million during the fourth quarter of fiscal 2024. Inventory The decrease in inventory reflects the decrease in net sales during the fourth quarter of fiscal 2025, as compared with the fourth quarter of fiscal 2024.
The $1.7 million as of April 30, 2023, represents property, plant, and equipment of $974,000, $592,000, and $105,000 located in the U.S., Haiti, and China, respectively.
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.
See Note 8 to the consolidated statements 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.
Upholstery Fabrics The upholstery fabrics segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers. As of April 27, 2025, we had upholstery fabric operations located in Shanghai, China, and Burlington, North Carolina.
Our judgments are often based on estimates that are derived from (i) forecasted financial information, (ii) assumptions on when certain taxable or deductible events will occur, and (iii) interpretation of complex income tax laws and regulations. As of April 28, 2024, we recorded a full valuation allowance against all our U.S. net deferred income tax assets totaling $22.0 million.
Our judgments are often based on estimates that are derived from (i) forecasted financial information, (ii) assumptions on when certain taxable or deductible events will occur, and (iii) interpretation of complex income tax laws and regulations.
(dollars in thousands) April 28, 2024 April 30, 2023 % Change Accounts receivable $ 10,003 $ 12,396 (19.3 )% Inventory 27,671 25,674 7.8 % Property, plant & equipment 31,472 33,749 (6.7 )% Right of use assets 1,627 2,308 (29.5 )% Total mattress fabrics segment assets $ 70,773 $ 74,127 (4.5 )% Refer to Note 17 of the consolidated financial statements for disclosures regarding determination of our segment assets.
(dollars in thousands) April 27, 2025 April 28, 2024 % Change Accounts receivable $ 10,576 $ 10,003 5.7 % Inventory 33,293 27,671 20.3 % Property, plant & equipment 23,259 31,472 (26.1 )% Assets held for sale 2,177 — 100.0 % Right of use assets 125 1,627 (92.3 )% Total mattress fabrics segment assets $ 69,430 $ 70,773 (1.9 )% Refer to Note 19 of the consolidated financial statements for disclosures regarding determination of our segment assets.
Right of Use Assets The decrease in right of use assets reflects rent expense incurred over the terms of our existing lease agreements, partially offset by the renewal of our agreement to lease a facility with Read and certain facilities associated with our operations located in China.
Right of Use Assets The increase in right of use assets represents the renewal of certain lease agreements associated with our operations located in China and Burlington, North Carolina, totaling $2.4 million, partially offset by rent expense incurred over the terms of the existing lease agreements.
Also, we provide inventory valuation write-downs based on the planned discontinuation of certain products based on current market values at the time of assessment compared with their current carrying values.
Also, we provide inventory valuation markdowns associated with restructuring activities and on the planned discontinuance of certain patterns based on the current market values at that time of assessment as compared to their current carrying values.
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.
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 April 27, 2025, we had gross unrecognized income tax benefit totaling $790,000 that primarily relates to taxation under applicable income tax treaties with foreign tax jurisdictions.
Our net cash used in operating activities was $8.2 million during fiscal 2024, a decrease of $16.0 million compared with net cash provided by operating activities of $7.8 million during fiscal 2023.
Our net cash used in operating activities was $17.7 million during fiscal 2025, an increase of $9.5 million compared with net cash used in operating activities of $8.2 million during fiscal 2024.
Our net cash used in operating activities was $8.2 million during fiscal 2024, a decrease of $16.0 million compared with net cash provided by operating activities of $7.8 million during fiscal 2023.
Our net cash used in operating activities was $17.7 million during fiscal 2025, an increase of $9.5 million compared with net cash used in operating activities of $8.2 million during fiscal 2024.
Mattress fabrics net sales during the fourth quarter of fiscal 2024 were $25.8 million, a decrease of 16.1%, compared with net sales of $30.7 million during the fourth quarter of fiscal 2023. Inventory turns were 3.9 for the fourth quarter of fiscal 2024, compared with 4.7 for the fourth quarter of fiscal 2023.
Net sales in our mattress fabrics segment during the fourth quarter of fiscal 2025 were $27.1 million, an increase of 5.3% compared with net sales of $25.8 million during the fourth quarter of fiscal 2024. Inventory turns were 2.9 for the fourth quarter of fiscal 2025, compared with 3.6 for the fourth quarter of fiscal 2024.
Although management closely monitors demand for each product category to decide which patterns and styles to hold in inventory, the availability of low-cost imported products and shifts in consumer preferences and styles subject the company to markdowns of inventory. Management continually examines inventory to determine if there are indicators that the carrying value exceeds its net realizable value.
Although management closely monitors demand for each product category to decide which patterns and styles to hold in inventory, the availability of low-cost imported products, shifts in consumer preferences and styles, and increased tariffs or other changes in U.S. trade policy related to imported products subject the company to markdowns of inventory.
Refer to Note 11 of the consolidated financial statements for additional disclosures regarding our assessments and conclusions reached regarding our valuation allowance as of April 28, 2024. 42 Stock-Based Compensation We are required to recognize compensation expense for all stock-based compensation awards in the financial statements, with the cost measured at the grant date fair value.
Stock-Based Compensation We are required to recognize compensation expense for all stock-based compensation awards in the financial statements, with the cost measured at the grant date fair value.
This restructuring 34 activity was completed during the third quarter of fiscal 2023, and we incurred a cumulative restructuring and restructuring related charge of $713,000 during the second and third quarters of fiscal 2023.
This restructuring activity was completed during the first quarter of fiscal 2025 and resulted in a cumulative restructuring and restructuring related charge totaling $218,000.
Income Taxes We recorded income tax expense of $3.0 million, or (28.3)% of loss before income taxes, for fiscal 2024, compared with income tax expense of $3.1 million, or (11.0)% of loss before income taxes, for fiscal 2023.
See the Segment Analysis located in the Results of Operations section below for further details. Income Taxes We recorded income tax expense of $392,000, or (2.1)% of loss before income taxes, for fiscal 2025, compared with income tax expense of $3.0 million, or (28.3)% of loss before income taxes, for fiscal 2024.
See Notes 8 and 9 of the consolidated financial statements for further details regarding this restructuring plan.
See Note 8 located in the notes to the consolidated financial statements for further details regarding the sale of the Property.
Uncertain Income Tax Positions As of April 28, 2024, we had $1.3 million of total gross unrecognized tax benefits, which primarily relate to double taxation under applicable income tax treaties with foreign tax jurisdictions.
As of April 27, 2025, we had open purchase commitments to acquire equipment for our mattress fabrics operations totaling $117,000. Uncertain Income Tax Positions As of April 27, 2025, we had $790,000 of total gross unrecognized tax benefits, which primarily relate to taxation under applicable income tax treaties with foreign tax jurisdictions.
The $545,000 and $500,000 foreign exchange rate gains reported in fiscal 2024 and fiscal 2023 mostly relate to foreign currency exchange rates applied against our balance sheet accounts denominated in Chinese Renminbi to determine the corresponding U.S. dollar financial reporting amounts.
The increase in other expense during fiscal 2025, compared with fiscal 2024, was primarily due to less favorable foreign exchange rates applied against our balance sheet accounts denominated in Chinese Renminbi to determine the corresponding U.S. dollar financial reporting amounts.
Mattress Fabrics The mattress fabrics segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. Currently, we have mattress fabric manufacturing operations located in Stokesdale, North Carolina, and Quebec, Canada. We also have a mattress cover operation located in Ouanaminthe, Haiti.
Currently, we have a mattress fabric manufacturing operation located in Stokesdale, North Carolina, and a sewn mattress cover operation located in Ouanaminthe, Haiti.
Loss Before Income Taxes Overall, our consolidated loss before income taxes was $(10.8) million for fiscal 2024, compared with loss before income taxes of $(28.4) for the prior year.
See the Segment Analysis located in the Results of Operations section below for further details. 32 Loss Before Income Taxes Overall, our consolidated loss before income taxes was $(18.7) million for fiscal 2025, compared with loss before income taxes of $(10.8) million for the prior year.
While management believes that adequate markdowns for inventory have been made in the consolidated financial statements, significant unanticipated changes in demand or changes in consumer tastes and preferences could result in additional inventory markdowns in the future. As of April 28, 2024, and April 30, 2023, the reserve for inventory markdowns was $9.6 million and $11.8 million, respectively.
While management believes that adequate markdowns for inventory have been made in the consolidated financial statements, significant unanticipated changes in demand or changes in consumer tastes and preferences could result in additional inventory markdowns in the future. During the fourth quarter of fiscal 2025, we assessed the percentages associated with the age of our inventory and the related aging categories.
This decrease was mostly due to (i) net cash used in operating activities totaling $8.2 million; and (ii) capital expenditures of $3.7 million mostly related to our mattress fabrics segment; partially offset by (iii) proceeds from the sale of equipment and a note receivable totaling $715,000 (see Note 9 to the consolidated financial statements for further details).
This decrease was primarily due to: (i) net cash used in operating activities totaling $17.7 million and (ii) capital expenditures of $2.9 million, that were partially offset by net borrowings from our lines of credit totaling $12.7 million, and proceeds from the sale of property, plant, and equipment totaling $1.9 million related to our restructuring activities.
This decrease was mostly due to (i) net cash used in operating activities totaling $8.2 million; (ii) capital expenditures of $3.7 million mostly related to our mattress fabrics segment; partially offset by (iii) proceeds from the sale of equipment and a note receivable totaling $715,000 (see Note 9 to the consolidated financial statements for further details).
This decrease was primarily due to: (i) net cash used in operating activities totaling $17.7 million and (ii) capital expenditures of $2.9 million that were partially offset by net borrowings from our lines of credit totaling $12.7 million and proceeds from the sale of property, plant, and equipment totaling $1.9 million, related to our restructuring activities.
The following summarizes our restructuring expense and restructuring related charges from the restructuring activities noted above for the twelve months ending April 28, 2024, and April 30, 2023: (dollars in thousands) 2024 2023 Employee termination benefits $ 307 $ 507 Lease termination costs — 481 Impairment loss - leasehold improvements and equipment 329 357 Loss on disposal and markdowns of inventory 40 98 Other associated costs — 51 Restructuring expense and restructuring related charges (1)(2) $ 676 $ 1,494 (1) Of the total $676,000 for fiscal 2024, $636,000 and $40,000 were recorded within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the twelve-month period ending April 28, 2024.
Financial Information The following summarizes the restructuring and restructuring related charges associated with our upholstery fabrics segment for the twelve-month periods ended April 27, 2025, and April 28, 2024: (dollars in thousands) 2025 2024 Employee termination benefits $ 214 $ 307 Facility consolidation and relocation expenses 53 — Impairment and loss on sale of equipment 23 329 Loss on disposal and markdowns of inventory — 40 Other associated costs 14 — Restructuring expense and restructuring related charges (1) (2) (3) (4) $ 304 $ 676 (1) The total $304,000 was recorded within restructuring expense in the fiscal 2025 Consolidated Statement of Net Loss.
United States federal and state income tax returns filed by us remain subject to examination for income tax years 2019 and subsequent. Canadian federal income tax returns filed by us remain subject to examination for income tax years 2020 and subsequent.
At this time, a significant change associated with this income tax benefit is not expected within the next fiscal year. United States federal and state income tax returns filed by us remain subject to examination for income tax years 2019 and subsequent.
Accounts Receivable Accounts receivable as of April 28, 2024, were $21.1 million, a decrease of $3.6 million, or 14.7%, compared with $24.8 million as of April 30, 2023. This trend reflects a decrease in net sales during the fourth quarter of fiscal 2024 compared with the fourth quarter of fiscal 2023.
Accounts Receivable The increase in accounts receivable mostly reflects an increase in net sales during the fourth quarter of fiscal 2025, as compared with the fourth quarter of fiscal 2024. Net sales during the fourth quarter of fiscal 2025 were $27.1 million, an increase of 5.3% compared with net sales of $25.8 million during the fourth quarter of fiscal 2024.
Produced 10,534 10 % 9,350 8 % 12.7 % Total $ 108,963 100 % $ 123,939 100 % (12.1 )% Upholstery fabrics sales decreased 12.1% in fiscal 2024 compared to the prior year.
Produced $ 86,998 88 % $ 98,429 90 % (11.6 )% U.S. Produced 12,333 12 % 10,534 10 % 17.1 % Total $ 99,331 100 % $ 108,963 100 % (8.8 )% Upholstery fabrics sales decreased by 8.8% in fiscal 2025 compared to the prior year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+6 added−1 removed0 unchanged
Biggest changeEffective on March 20, 2024, we entered into an unsecured credit agreement with a financial institution in China denominated in RMB that requires interest to be charged at a rate based on the Loan Prime Rate ("LPR") in China minus 50 basis points (2.95% as of April 28, 2024).
Biggest changeInterest is charged at a variable rate under the agreement based on the China Loan Prime Rate ("China LPR") minus 50 basis points, which represents 2.60% as of April 27, 2025. As of April 27, 2025, the outstanding balance under the working capital loan was 10.0 million RMB ($1.4 million USD).
ITEM 7A. 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rates We are exposed to market risk from changes in interest rates regarding our credit agreements.
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.
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 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 April 28, 2024, would not have materially affected our results of operations or financial position. 43
A 10% change in the above exchange rates as of April 27, 2025, would not have materially affected our results of operations or financial position. 49
There were no borrowings outstanding under this agreement as of April 28, 2024. 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.
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.
Effective January 19, 2023, we entered into a second amended and restated U.S. revolving credit agreement (the "Amended Agreement") to establish an asset-based revolving credit facility that required interest to be charged at a rate calculated using an applicable margin over Federal Reserve Bank of New York's secured overnight fund rate (SOFR), as defined in the Amended Agreement.
Revolving Credit Agreement – United States Our U.S. revolving credit agreement ("Credit Agreement") with Wells Fargo Bank N.A., permits both base rate borrowings and borrowings that require interest to be charged at a variable rate calculated using an applicable margin over SOFR (the secured overnight financing rate administered by the Federal Reserve Bank of New York (or its successor)), as defined in the Credit Agreement.
The interest rate under the Amended Agreement as of April 28, 2204, was 6.81%. As of April 28, 2024, there were no outstanding borrowings under the Amended Agreement.
The interest rate under the Credit Agreement as of April 27, 2025, was 5.78%. As of April 27, 2025, outstanding borrowings under the Credit Agreement totaled $4.6 million.
Removed
There were no borrowings outstanding under this agreement as of April 28, 2024. Our previously existing revolving credit agreement with another financial institution in China bears interest at a rate determined by the Chinese government at the time of borrowing, and is not directly determined by a published interest rate benchmark.
Added
Credit Agreements - China Operations Effective November 5, 2024, we entered into an unsecured credit agreement with the Bank of China that provides for a 10.0 million RMB ($1.4 million USD as of April 27, 2025) working capital loan.
Added
Effective March 5, 2025, we entered into a separate unsecured credit agreement with the Agriculture Bank of China ("ABC") that provides for a line of credit of up to 29.0 million RMB ($4.0 million USD as of April 27, 2025).
Added
Interest is charged under this agreement at a variable rate based on the China LPR minus 50 basis points (applicable interest rate of 2.60% as of April 27, 2025). As of April 27, 2025, the outstanding balance under this agreement was 29.0 million RMB ($4.0 million USD).
Added
During the first quarter of fiscal 2026 we entered into unsecured working loan agreements with ABC that provide for 21 million RMB ($2.9 million USD as of borrowing dates ranging from May 12, 2025 through May 28, 2025).
Added
Interest is charged under these agreements at variable rates based on the China LPR at the time of the borrowing minus 50 basis points (2.60% as of borrowing dates ranging from May 12, 2025 through May 28, 2025).
Added
Currently, we have supplier financing arrangements that bear interest at a fixed rate, which is paid in full at the time of borrowing and therefore borrowings under these agreements are not subject to future changes in the market rate of interest.

Other CULP 10-K year-over-year comparisons