Core Insights - Culp, Inc. reported consolidated net sales of $50.7 million for the first fiscal quarter ended August 3, 2025, indicating a decline due to market softness and tariff impacts on residential upholstery shipments from China [1] Financial Performance - The financial results reflect continued market softness affecting the company's performance [1] - The tariff-driven pause in shipments from China has significantly impacted the residential upholstery segment [1]

Part I [Business](index=8&type=section&id=Item%201.%20Business) Culp, Inc. is a leading North American marketer of mattress and upholstery fabrics, undergoing a significant restructuring in fiscal 2025 to enhance efficiency - Culp is one of the largest marketers of mattress and upholstery fabrics in North America, serving leading bedding and furniture companies globally[15](index=15&type=chunk) Fiscal 2025 Restructuring Overview | Action | Description | | :--- | :--- | | **NA Mattress Ops Consolidation** | Phased wind-down and closure of the Quebec, Canada manufacturing plant, with knitting operations moved to Stokesdale, NC | | **Weaving Operation Transition** | Transitioned internal weaving to a strategic sourcing model, primarily with a partner in Turkey | | **Haiti Consolidation** | Consolidated the sewn mattress cover operation in Haiti into a single building to reduce expenses | | **China Finishing Rationalization** | Aligned the upholstery fabrics finishing operation in China with demand, leveraging supply relationships | | **Corporate Expense Reduction** | Targeted annualized savings of $1.5 million in unallocated corporate and shared services expenses | - The company incurred approximately **$9.4 million** in total restructuring and related costs in fiscal 2025[23](index=23&type=chunk) Net Sales by Segment (in Millions) | 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%)** | Net Sales by Geographic Area (FY2025) | Geographic Area | Sales (in thousands) | Percentage of Total | | :--- | :--- | :--- | | United States | $143,713 | 67.4% | | North America (Excl. USA) | $32,912 | 15.4% | | Far East and Asia | $30,586 | 14.3% | | All other areas | $6,026 | 2.8% | | **Total** | **$213,237** | **100.0%** | [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from economic uncertainty, intense competition, global supply chain issues, and activist shareholders - Economic uncertainty, inflationary pressures, and declines in consumer confidence negatively affect demand for furniture and bedding, which has adversely impacted sales and may continue to do so[120](index=120&type=chunk)[121](index=121&type=chunk) - The business is highly competitive and fragmented, with significant competition from low-cost foreign producers, increasing deflationary price pressures and market share loss risks[123](index=123&type=chunk)[124](index=124&type=chunk) - Increased U.S. tariffs on imports, especially from China, have compelled price increases and are likely to impact sales and gross margins, potentially affecting customer sales[131](index=131&type=chunk)[132](index=132&type=chunk) - Significant reliance on foreign operations and sourcing, particularly in China and Turkey, exposes the company to supply chain disruptions, political instability, and regulatory changes[136](index=136&type=chunk) - The company faces risks from activist shareholders, with an agreement made in June 2025 with 22NW, LP, including board appointments and a strategy committee formation[164](index=164&type=chunk) - The company's two largest customers, Serta-Simmons Bedding and La-Z-Boy Incorporated, accounted for approximately **13%** and **11%** of consolidated net sales in fiscal 2025, with loss of either significantly impacting sales and earnings[157](index=157&type=chunk) [Unresolved Staff Comments](index=44&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments from the SEC - None[182](index=182&type=chunk) [Cybersecurity](index=44&type=section&id=Item%201C.%20Cybersecurity) The Board's Audit Committee oversees the company's cybersecurity risk management program, with no material incidents identified - The Board's Audit Committee has primary oversight responsibility for cybersecurity risks and receives quarterly presentations on the program[190](index=190&type=chunk) - The company's cybersecurity strategy includes a security operations program, third-party risk management, an incident response plan, annual assessments by specialists, and security awareness training[192](index=192&type=chunk) - The company has not identified any cybersecurity incidents that have materially affected or are reasonably likely to materially affect its business, results of operations, or financial condition[189](index=189&type=chunk) [Properties](index=49&type=section&id=Item%202.%20Properties) Culp owned or leased thirteen facilities as of FY2025, with restructuring leading to plant closures and consolidations - The company owns its primary manufacturing and distribution facilities in Stokesdale, North Carolina[197](index=197&type=chunk) - As part of restructuring, the manufacturing facility in Quebec, Canada was closed and sold effective April 30, 2025[201](index=201&type=chunk) - The company plans to close its leased facility in Burlington, North Carolina, and transition its activities to the owned facility in Stokesdale, North Carolina, as part of its segment integration strategy[201](index=201&type=chunk) [Legal Proceedings](index=49&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no legal proceedings that are required to be disclosed under this item - There are no material legal proceedings to which the company or its subsidiaries are a party[200](index=200&type=chunk) [Mine Safety Disclosure](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This item is not applicable to the company - Not applicable[203](index=203&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Culp, Inc.'s common stock trades on NYSE; dividends are suspended, and no shares were repurchased in fiscal 2025 - The company's quarterly cash dividend has been suspended since June 29, 2022, and no dividends were paid in fiscal 2025[209](index=209&type=chunk) - No shares of common stock were repurchased during fiscal 2025, with approximately **$3.2 million** remaining available for future repurchases under the authorized program as of April 27, 2025[208](index=208&type=chunk)[326](index=326&type=chunk) [RESERVED]](index=54&type=section&id=Item%206.%20%5BRESERVED%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=55&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Consolidated net sales decreased to **$213.2 million** in fiscal 2025, resulting in a **$19.1 million** net loss due to restructuring and weak demand Consolidated Results of Operations (in thousands) | Metric | FY 2025 | FY 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $213,237 | $225,333 | (5.4)% | | Gross profit | $25,067 | $27,939 | (10.3)% | | Loss from operations | $(18,377) | $(11,308) | 62.5% | | Net loss | $(19,103) | $(13,819) | 38.2% | - The increase in operating loss was significantly impacted by restructuring expenses, which totaled approximately **$9.4 million** in fiscal 2025 compared to **$676,000** in fiscal 2024[236](index=236&type=chunk) - Cash and cash equivalents decreased by **$4.4 million** to **$5.6 million** as of April 27, 2025, primarily due to **$17.7 million** in cash used for operating activities and **$2.9 million** in capital expenditures[243](index=243&type=chunk) - As of April 27, 2025, the company had outstanding borrowings of **$12.7 million** under its line of credit agreements[245](index=245&type=chunk) [Segment Analysis - Mattress Fabrics Segment](index=61&type=section&id=Segment%20Analysis%20-%20Mattress%20Fabrics%20Segment) Mattress Fabrics net sales decreased 2.1% to **$113.9 million**, but operating loss improved due to restructuring cost reductions Mattress Fabrics Segment Performance (in thousands) | Metric | FY 2025 | FY 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $113,906 | $116,370 | (2.1)% | | Gross profit | $7,936 | $6,289 | 26.2% | | Loss from operations | $(5,235) | $(6,845) | (23.5)% | - Operating performance improved due to fixed cost reductions and efficiency gains from the Fiscal 2025 restructuring, despite being significantly affected by **$8.5 million** in restructuring and related expenses for the segment[253](index=253&type=chunk)[258](index=258&type=chunk) Mattress Fabrics Segment Assets (in thousands) | Asset | 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)% | | **Total segment assets** | **$69,430** | **$70,773** | **(1.9)%** | [Segment Analysis - Upholstery Fabrics Segment](index=67&type=section&id=Segment%20Analysis%20-%20Upholstery%20Fabrics%20Segment) Upholstery Fabrics net sales fell 8.8% to **$99.3 million** due to market downturn, with operating income decreasing 29.9% Upholstery Fabrics Segment Performance (in thousands) | Metric | FY 2025 | FY 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $99,331 | $108,963 | (8.8)% | | Gross profit | $18,752 | $21,690 | (13.5)% | | Income from operations | $4,057 | $5,787 | (29.9)% | - The decline in sales reflects a continued downturn in the home furnishings market and was exacerbated by tariff-related market uncertainty in the fourth quarter[271](index=271&type=chunk) - As part of a strategic transformation, the company will close its leased facility in Burlington, NC, and transition activities to its owned facility in Stokesdale, NC, to streamline costs[277](index=277&type=chunk) [Liquidity and Capital Resources](index=75&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity weakened in fiscal 2025, with cash decreasing to **$5.6 million** due to operating activities and capital expenditures - Cash and cash equivalents decreased by **$4.4 million**, from **$10.0 million** at FYE 2024 to **$5.6 million** at FYE 2025[318](index=318&type=chunk) - Net cash used in operating activities was **$17.7 million**, an increase of **$9.5 million** from the prior year, reflecting lower cash earnings and an increase in inventory purchases during restructuring[319](index=319&type=chunk) - The company had outstanding borrowings of **$12.7 million** as of April 27, 2025, and available borrowings of **$21.4 million** under its domestic credit facility[320](index=320&type=chunk)[508](index=508&type=chunk) - The dividend program remains suspended, and no shares were repurchased in fiscal 2025[323](index=323&type=chunk)[326](index=326&type=chunk) [Critical Accounting Estimates](index=81&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates include Inventory Valuation, Income Taxes Valuation Allowance, and Stock-Based Compensation, requiring significant judgment - For Inventory Valuation, management continually examines inventory for obsolescence, with a **$1.7 million** non-cash credit to cost of sales in Q4 FY2025 due to a change in accounting estimate for the finished goods markdown reserve[350](index=350&type=chunk)[351](index=351&type=chunk) - For Income Taxes, the company recorded a full valuation allowance of **$26.3 million** against its U.S. net deferred tax assets as of April 27, 2025, concluding they are more-likely-than-not not fully realizable[355](index=355&type=chunk)[305](index=305&type=chunk) - Stock-Based Compensation expense recognition requires significant judgment, including forecasting future financial results and using complex assumptions in valuation models for performance-based awards[358](index=358&type=chunk)[359](index=359&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=84&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to interest rate and foreign currency risks, with **$12.7 million** in variable-rate borrowings outstanding - The company is exposed to interest rate risk on its variable-rate credit agreements in the U.S. and China, with outstanding borrowings totaling **$4.6 million** under the U.S. facility and approximately **$8.1 million** under China facilities as of April 27, 2025[366](index=366&type=chunk)[367](index=367&type=chunk)[368](index=368&type=chunk) - The company is exposed to foreign currency risk from its operations in Canada, China, and Vietnam, attempting to manage this risk through a natural hedge, and a **10%** change in exchange rates is not expected to have a material impact[371](index=371&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=85&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal 2025, with an unqualified auditor's opinion - The independent auditor, Grant Thornton LLP, issued an unqualified opinion on the consolidated financial statements[373](index=373&type=chunk) Consolidated Balance Sheet Summary (in thousands) | | April 27, 2025 | April 28, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $83,534 | $80,881 | | **Total Assets** | **$123,370** | **$132,054** | | **Total Current Liabilities** | $46,964 | $38,107 | | **Total Liabilities** | $65,730 | $55,925 | | **Total Shareholders' Equity** | $57,640 | $76,129 | | **Total Liabilities and Equity** | **$123,370** | **$132,054** | Consolidated Statement of Net Loss Summary (in thousands) | | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | Net Sales | $213,237 | $225,333 | $234,934 | | Gross Profit | $25,067 | $27,939 | $10,896 | | Loss from Operations | $(18,377) | $(11,308) | $(28,478) | | **Net Loss** | **$(19,103)** | **$(13,819)** | **$(31,520)** | | **Net Loss Per Share** | **$(1.53)** | **$(1.11)** | **$(2.57)** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=91&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no disagreements with its accountants on accounting or financial disclosure matters - There were no disagreements with accountants on accounting principles or financial disclosure[594](index=594&type=chunk) [Controls and Procedures](index=91&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of April 27, 2025 - Management concluded that disclosure controls and procedures were effective as of April 27, 2025[596](index=596&type=chunk) - Management concluded that internal control over financial reporting was effective as of April 27, 2025, based on the COSO 2013 framework[598](index=598&type=chunk) [Other Information](index=91&type=section&id=Item%209B.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements in the fourth quarter of fiscal 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement in the fourth quarter[602](index=602&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=91&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not Applicable[603](index=603&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=92&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement - This information is incorporated by reference from the company's definitive Proxy Statement[605](index=605&type=chunk) [Executive Compensation](index=92&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive Proxy Statement - This information is incorporated by reference from the company's definitive Proxy Statement[607](index=607&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=92&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the Proxy Statement, including equity compensation plan details - This information is incorporated by reference from the company's definitive Proxy Statement[608](index=608&type=chunk) Equity Compensation Plan Information (as of April 27, 2025) | Plan Category | Securities to be issued upon exercise (a) | Weighted-average exercise price (b) | Securities remaining available for future issuance (c) | | :--- | :--- | :--- | :--- | | Approved by security holders | 846,119 | $ — | 668,353 | | Not approved by security holders | — | — | — | | **Total** | **846,119** | **$ —** | **668,353** | [Certain Relationships and Related Transactions, and Director Independence](index=93&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the Proxy Statement - This information is incorporated by reference from the company's definitive Proxy Statement[613](index=613&type=chunk) [Principal Accountant Fees and Services](index=93&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's definitive Proxy Statement - This information is incorporated by reference from the company's definitive Proxy Statement[615](index=615&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=94&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and all exhibits filed with the Form 10-K report - This section lists the consolidated financial statements and all exhibits filed with the Form 10-K[618](index=618&type=chunk)[621](index=621&type=chunk) [Form 10-K Summary](index=96&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that no Form 10-K summary is provided - None[623](index=623&type=chunk)

Financial Data and Key Metrics Changes - Net sales for the fourth quarter were $48.8 million, generally flat compared to $49.5 million in the prior year period [25] - The company reported a loss from operations of $2.2 million, which included $1.5 million in restructuring-related expenses, compared to a loss of $4.2 million in the prior year [25] - Net loss for the fourth quarter was $2.1 million or $0.17 per diluted share, compared to a net loss of $4.9 million or $0.39 per diluted share for the prior year [26] - Adjusted EBITDA for the fourth quarter was $559,000 compared to negative $2.2 million in the prior year [26] - For the full fiscal year, net sales were $213.2 million, down 5.4% compared to the previous year [27] Business Line Data and Key Metrics Changes - Mattress fabrics segment sales for the fourth quarter were $27.1 million, up 5.3% compared to the prior year [31] - Upholstery fabrics segment sales for the fourth quarter were $21.7 million, down 8.9% compared to the prior year [32] - Operating loss in the mattress fabrics segment for the quarter was $217,000, compared to an operating loss of $2.9 million in the prior year [32] - Operating income for the upholstery fabrics segment for the quarter was $1.1 million, compared to $975,000 in the prior year [34] Market Data and Key Metrics Changes - The mattress industry is experiencing a projected decline in overall sales, with a report indicating a decline in units of around 11% or more [11] - Demand trends in the furniture market segment continue to be historically low, particularly affecting residential upholstery sales [12] - Hospitality and commercial markets have shown relatively solid demand, with sales in that area growing to constitute approximately 42% of total upholstery sales during the quarter [15] Company Strategy and Development Direction - The company has completed a restructuring plan aimed at reducing fixed costs and enhancing operational efficiency [9] - An integration initiative called Project Blaze is underway to unify the mattress and upholstery fabric divisions, expected to generate approximately $3 million in annualized savings [18][21] - The company is focusing on price increases in response to the tariff landscape, with an expected annualized benefit of $2.5 million [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the mattress fabrics business, noting a solid pipeline and backlog despite overall industry challenges [43] - The company is not providing specific financial guidance for fiscal 2026 due to macroeconomic uncertainty and ongoing tariff impacts [39] - Management anticipates continued sales pressure on the residential side of the upholstery business but expects operational improvements from restructuring efforts [39] Other Important Information - The effective income tax rate for the fourth quarter was 10.5%, compared to negative 19.8% for the same period a year ago [28] - Cash flow from operations and free cash flow were negative $17.7 million and negative $17.1 million, respectively, for the full fiscal year [35] - The company extended its credit facility with Wells Fargo for an additional three years, providing liquidity and financing flexibility [23][37] Q&A Session Summary Question: Can you discuss the cadence of business across mattress, residential upholstery, and commercial upholstery? - Management expressed encouragement about the mattress fabrics business and noted optimism in the backlog, while residential upholstery remains challenging due to low demand [43][44] Question: How have tariffs specifically impacted end customer demand across segments? - Management indicated that while prices are being pushed through to consumers, tariffs are just one factor among many affecting demand, with broader economic uncertainty playing a significant role [46] Question: What are the revenue assumptions baked into the pricing actions? - Management clarified that the price increases are based on steady state revenue and are primarily focused on the mattress side [48] Question: Can you explain the change in approach to inventory markdowns? - Management noted that they adjusted their markdown strategy to better align with actual prices received, resulting in a $1.7 million benefit in the quarter [55] Question: How aggressive will the company be on debt pay down? - Management stated that they will pay down debt as quickly as possible while ensuring working capital needs are met [57] Question: What growth investments in new products and markets will be prioritized? - Management highlighted the potential for growth in the mattress fabric and hospitality markets, while also continuing to support the residential upholstery business despite current demand challenges [66]

Financial Data and Key Metrics Changes - For the fourth quarter, net sales were $48.8 million, generally flat compared to $49.5 million in the prior year period [25] - The company reported a loss from operations of $2.2 million, which included $1.5 million in restructuring-related expenses, compared to a loss of $4.2 million in the prior year [25] - Net loss for the fourth quarter was $2.1 million or $0.17 per diluted share, compared to a net loss of $4.9 million or $0.39 per diluted share for the prior year [26] - Adjusted EBITDA for the fourth quarter was $559,000 compared to a negative $2.2 million in the prior year [26] - For the full fiscal year, net sales were $213.2 million, down 5.4% compared to the previous year [27] Business Line Data and Key Metrics Changes - Mattress fabrics segment sales for the fourth quarter were $27.1 million, up 5.3% compared to the prior year [30] - Upholstery fabrics segment sales for the fourth quarter were $21.7 million, down 8.9% compared to the prior year [32] - Operating loss in the mattress fabrics segment for the quarter was $217,000, compared to an operating loss of $2.9 million in the prior year [31] - Operating income for the upholstery fabrics segment for the quarter was $1.1 million, compared to $975,000 in the prior year [33] Market Data and Key Metrics Changes - The mattress industry is experiencing a projected decline in overall sales, with a report indicating a decline in units of around 11% [11] - Demand trends in the furniture market segment for upholstery fabrics continue to be historically low, particularly on the residential side [12] - The hospitality and commercial markets for upholstery fabrics have remained relatively solid, constituting approximately 42% of total upholstery sales during the quarter [14] Company Strategy and Development Direction - The company has completed a restructuring plan aimed at reducing fixed costs and enhancing operational efficiency [9] - An integration initiative called Project Blaze is underway to unify the mattress and upholstery fabric divisions, expected to generate approximately $3 million in annualized savings [20] - The company is focusing on price increases in response to tariff impacts, with an expected annualized benefit of $2.5 million [21] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic uncertainty and global trade environment have pressured demand, leading to suspended shipments from China [38] - The company anticipates year-over-year sales growth in the mattress fabrics business, while expecting continued sales pressure on the residential side of the upholstery business [38] - Management emphasized the importance of maintaining liquidity and capital expenditures while prioritizing free cash flow [39] Other Important Information - The effective income tax rate for the fourth quarter was 10.5%, compared to a negative 19.8% for the same period a year ago [28] - Cash flow from operations and free cash flow were negative $17.7 million and negative $17.1 million, respectively, for the full fiscal year [34] - The company extended its credit facility with Wells Fargo for an additional three years, providing liquidity and financing flexibility [23] Q&A Session Summary Question: Could you talk about the cadence of business across mattress, residential upholstery, and commercial upholstery? - Management expressed optimism about the mattress fabrics business and noted challenges in residential upholstery due to demand cycles [42][44] Question: How have tariffs specifically impacted end customer demand across segments? - Management indicated that while prices are being passed to consumers, tariffs are just one factor among many affecting consumer demand [46] Question: What are the revenue assumptions baked into the pricing gains? - Management clarified that the price increases are based on steady state revenue and are primarily on the mattress side [48] Question: Can you explain the change in approach to inventory markdowns? - Management noted that they adjusted their markdown strategy to better align with actual prices received, generating a $1.7 million benefit in the quarter [54] Question: How aggressive will the company be on debt pay down? - Management stated they will pay down debt as quickly as possible while ensuring working capital needs are met [56] Question: What growth investments will the company prioritize in 2026? - Management highlighted opportunities in the mattress fabric and hospitality markets, while also continuing to focus on residential upholstery [60][66]

[Executive Summary & Business Overview](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Overview) [President and CEO's Comments](index=1&type=section&id=President%20and%20CEO's%20Comments) Culp's CEO highlighted fiscal 2025 restructuring to improve cost structure and market positioning amidst revenue and tariff uncertainty - **Fiscal 2025** focused on cost structure transformation and market positioning due to challenging revenue and tariff uncertainty[2](index=2&type=chunk) - Completed restructuring plan, including Canada facility sale and mattress fabrics consolidations, is yielding benefits like **lower fixed costs** and **increased efficiencies**[3](index=3&type=chunk) - Integration of Culp Upholstery Fabrics and Culp Home Fashions is expected to improve **scale efficiencies** and generate **additional savings in fiscal 2026**[4](index=4&type=chunk) - Credit facility with Wells Fargo extended for **three years**, providing additional flexibility and liquidity[4](index=4&type=chunk) [Company Overview](index=5&type=section&id=About%20the%20Company) Culp, Inc. is a leading North American marketer of mattress and upholstery fabrics, with global manufacturing and sourcing capabilities - Culp, Inc. is a **major marketer** of mattress and upholstery fabrics in North America[20](index=20&type=chunk) - Global manufacturing and sourcing operations are located in the United States, China, Haiti, Turkey, and Vietnam[20](index=20&type=chunk) [Fiscal Year 2025 Financial Highlights](index=2&type=section&id=Fiscal%202025%20Financial%20Highlights) [Fourth Quarter Financial Highlights](index=2&type=section&id=Fiscal%202025%20Fourth%20Quarter%20Financial%20Highlights) Culp reported flat Q4 FY2025 net sales, reduced GAAP operating loss, improved net loss, and achieved positive Adjusted EBITDA Fourth Quarter Financial Performance | Metric | Q4 FY2025 (Millions) | Q4 FY2024 (Millions) | Change (%) | | :-------------------------------- | :------------------- | :------------------- | :--------- | | Consolidated Net Sales | $48.8 | $49.5 | (1.5)% | | Mattress Fabric Sales | $27.1 | $25.8 | 5.3% | | Upholstery Fabric Sales | $21.7 | $23.8 | (8.9)% | | GAAP Consolidated Loss from Operations | $(2.2) | $(4.2) | (47.3)% | | Non-GAAP Operating Loss | $(0.704) | $(4.0) | (82.5)% | | Net Loss | $(2.1) | $(4.9) | (57.4)% | | Diluted EPS | $(0.17) | $(0.39) | (56.4)% | | Adjusted EBITDA | $0.559 | $(2.2) | N.M. | - Improvement in operating loss and Adjusted EBITDA driven by **cost and efficiency benefits** from restructuring and **lower inventory markdowns**[8](index=8&type=chunk) - Mattress fabrics segment showed **continued momentum** and **significant improvement in operating loss**[8](index=8&type=chunk) - Upholstery fabrics segment maintained **profitability** despite low-revenue industry and tariff challenges[8](index=8&type=chunk) [Full Year Financial Highlights](index=2&type=section&id=Fiscal%202025%20Full%20Year%20Financial%20Highlights) Full year FY2025 saw consolidated net sales decrease, GAAP operating loss widen, but non-GAAP operating loss improved Full Year Financial Performance | Metric | FY2025 (Millions) | FY2024 (Millions) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Consolidated Net Sales | $213.2 | $225.3 | (5.4)% | | Mattress Fabric Sales | $113.9 | $116.4 | (2.1)% | | Upholstery Fabric Sales | $99.3 | $109.0 | (8.8)% | | GAAP Consolidated Loss from Operations | $(18.4) | $(11.3) | 62.5% | | Non-GAAP Operating Loss | $(9.0) | $(10.6) | (15.1)% | | Net Loss | $(19.1) | $(13.8) | 38.2% | | Diluted EPS | $(1.53) | $(1.11) | 37.8% | - Non-GAAP operating loss improvement driven by **cost and efficiency benefits** from restructuring and **lower inventory markdowns**[8](index=8&type=chunk) [Restructuring Plan Update](index=3&type=section&id=Restructuring%20Plan%20Update) [Restructuring Plan Update](index=3&type=section&id=Restructuring%20Plan%20Update) The restructuring plan, completed with the Quebec facility sale, is expected to yield **$10.0-$11.0 million** in annualized savings - Restructuring plan completed with the sale of the Quebec, Canada manufacturing facility on **April 30, 2025**[10](index=10&type=chunk) - Expected annualized savings and operating improvements from the restructuring plan are **$10.0-$11.0 million**[10](index=10&type=chunk) Restructuring Plan Financials | Metric | FY2025 (Millions) | | :-------------------------------- | :------------------ | | Total Restructuring Expenses | $9.4 | | Cash Expenditures for Restructuring | $5.6 | | Funding from Asset Sales (FY2025) | $2.3 | | Expected Net Cash Proceeds from Canada Facility Sale (FY2026) | $3.0 - $3.5 | [Business Segment Highlights](index=3&type=section&id=Business%20Segment%20Highlights) [Mattress Fabrics Segment](index=3&type=section&id=Mattress%20Fabrics%20Segment) Mattress Fabrics segment reported Q4 sales increase and significant operating loss improvement from restructuring and higher gross margins Mattress Fabrics Segment Performance | Metric | Q4 FY2025 (Millions) | Q4 FY2024 (Millions) | Change (%) | FY2025 (Millions) | FY2024 (Millions) | Change (%) | | :------------------- | :------------------- | :------------------- | :--------- | :------------------ | :------------------ | :--------- | | Sales | $27.1 | $25.8 | 5.3% | $113.9 | $116.4 | (2.1)% | | Operating (Loss) | $(0.217) | $(2.9) | (92.6)% | $(5.2) | $(6.8) | (23.5)% | - Q4 operating loss improvement driven by **higher gross margins** from lower fixed costs, **operating efficiency** from restructuring, and **lower inventory markdowns**[13](index=13&type=chunk) - Full-year operating performance improved consistently despite lower sales, driven by the same factors as Q4[13](index=13&type=chunk) [Upholstery Fabrics Segment](index=3&type=section&id=Upholstery%20Fabrics%20Segment) Upholstery Fabrics segment experienced Q4 sales decline due to market softness, but operating income increased from favorable mix and lower SG&A Upholstery Fabrics Segment Performance | Metric | Q4 FY2025 (Millions) | Q4 FY2024 (Millions) | Change (%) | FY2025 (Millions) | FY2024 (Millions) | Change (%) | | :------------------- | :------------------- | :------------------- | :--------- | :------------------ | :------------------ | :--------- | | Sales | $21.7 | $23.8 | (8.9)% | $99.3 | $109.0 | (8.8)% | | Operating Income | $1.1 | $0.975 | 8.0% | $4.1 | $5.8 | (29.9)% | - Q4 sales decline attributed to **soft home furnishings market**, lower residential customer sales, tariff uncertainty, and Chinese New Year timing[14](index=14&type=chunk) - Q4 operating income improvement partially offset by lower inventory markdowns, favorable mix of **higher-margin hospitality/contract sales (42% of segment sales)**, and lower SG&A[16](index=16&type=chunk) [Financial Position and Liquidity](index=4&type=section&id=Balance%20Sheet%2C%20Cash%20Flow%2C%20and%20Liquidity) [Balance Sheet, Cash Flow, and Liquidity](index=4&type=section&id=Balance%20Sheet%2C%20Cash%20Flow%2C%20and%20Liquidity) Culp maintained **$5.6 million** cash and **$12.7 million** debt, with **$27.0 million** total liquidity, and extended its credit facility Balance Sheet Summary | Metric | April 27, 2025 (Millions) | April 28, 2024 (Millions) | Change (%) | | :-------------------------------- | :------------------------ | :------------------------ | :--------- | | Total Cash | $5.6 | $10.0 | (43.8)% | | Outstanding Debt | $12.7 | $0 | N.M. | | Total Assets | $123.37 | $132.05 | (6.6)% | | Total Liabilities | $65.73 | $55.93 | 17.5% | | Shareholders' Equity | $57.64 | $76.13 | (24.3)% | - Total liquidity as of April 27, 2025, was approximately **$27.0 million**, including **$5.6 million** cash and **$21.4 million** borrowing availability[16](index=16&type=chunk) - Domestic credit facility with Wells Fargo Bank extended for **three years** on June 12, 2025, with borrowing capacity up to **$30 million** (plus **$10 million** accordion)[16](index=16&type=chunk) Cash Flow Summary | Metric | FY2025 (Millions) | FY2024 (Millions) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Cash Flow from Operations | $(17.7) | $(8.2) | 115.3% | | Free Cash Flow | $(17.1) | $(10.8) | 58.3% | | Capital Expenditures | $2.9 | $3.7 | (21.6)% | - Negative cash flow from operations and free cash flow primarily due to operating losses, **$5.6 million** in non-recurring cash restructuring charges, and strategic capital investments[16](index=16&type=chunk) [Financial Outlook](index=5&type=section&id=Financial%20Outlook) [Financial Outlook](index=5&type=section&id=Financial%20Outlook) Culp provides limited annual guidance due to macro-economic uncertainty, expecting mattress fabric sales growth and continued residential upholstery pressure - No specific financial guidance provided due to macro-economic uncertainty and tariff fluidity; only limited annual guidance[21](index=21&type=chunk) - Anticipates year-over-year **sales growth in mattress fabrics** and continued sales pressure in residential upholstery[21](index=21&type=chunk) - Expects **meaningful operating improvement** from restructuring benefits and fiscal 2026 division integration, especially after Q1[21](index=21&type=chunk) - Will continue to use credit facilities for working capital and growth but will aggressively manage liquidity and capital expenditures, prioritizing **free cash flow**[21](index=21&type=chunk) [Additional Information](index=5&type=section&id=Additional%20Information) [Conference Call](index=5&type=section&id=Conference%20Call) Culp, Inc. will host a conference call on **June 26, 2025**, at **9:00 a.m. ET** to discuss Q4 and full fiscal year 2025 results - Conference call for Q4 and FY2025 results scheduled for **June 26, 2025**, at **9:00 a.m. ET**[19](index=19&type=chunk) - Webcast and replay available on the company's investor relations website[19](index=19&type=chunk) [Investor Relations Contact](index=5&type=section&id=Investor%20Relations%20Contact) Ken Bowling, EVP, CFO, and Treasurer, serves as the investor relations contact for Culp, Inc - Investor Relations Contact: **Ken Bowling, EVP, CFO, and Treasurer**[21](index=21&type=chunk) [Forward-Looking Statements & Risk Factors](index=6&type=section&id=Forward%20Looking%20Statements) [Forward-Looking Statements & Risk Factors](index=6&type=section&id=Forward%20Looking%20Statements) Forward-looking statements are subject to risks and uncertainties, including market conditions, economic trends, tariffs, and restructuring success - Forward-looking statements are subject to **risks and uncertainties** that may cause actual events and results to differ materially[22](index=22&type=chunk) - Key risk factors include housing market, consumer confidence, economic conditions, interest rates, inflation, consumer tastes, tariffs/trade policy, currency fluctuations, international instability, public health epidemics, asset impairments, and rising costs[23](index=23&type=chunk)[24](index=24&type=chunk) - Success of mattress fabric operations restructuring and integration of mattress and upholstery fabric segments are **critical for future performance**[24](index=24&type=chunk) - The company does not assume any obligation to update forward-looking statements after the release date, unless required by federal securities laws[25](index=25&type=chunk) [Consolidated Financial Statements](index=8&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Net Loss - Three Months Ended April 27, 2025](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20NET%20LOSS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Unaudited consolidated statements of net loss for Q4 FY2025 and Q4 FY2024, detailing sales, costs, and operating results Consolidated Net Loss - Three Months | Metric (Thousands) | April 27, 2025 | April 28, 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Net sales | $48,773 | $49,528 | (1.5)% | | Cost of sales | $(41,120) | $(44,327) | (7.2)% | | Gross profit | $7,653 | $5,201 | 47.1% | | Selling, general and administrative expenses | $(8,470) | $(9,245) | (8.4)% | | Restructuring expense | $(1,422) | $(204) | N.M. | | Loss from operations | $(2,239) | $(4,248) | (47.3)% | | Net loss | $(2,073) | $(4,865) | (57.4)% | | Net loss per share - diluted | $(0.17) | $(0.39) | (56.4)% | [Consolidated Statements of Net Loss - Twelve Months Ended April 27, 2025](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20NET%20LOSS%20FOR%20THE%20TWELVE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Unaudited consolidated statements of net loss for full fiscal years 2025 and 2024, detailing full-year performance metrics Consolidated Net Loss - Twelve Months | Metric (Thousands) | April 27, 2025 | April 28, 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Net sales | $213,237 | $225,333 | (5.4)% | | Cost of sales | $(188,170) | $(197,394) | (4.7)% | | Gross profit | $25,067 | $27,939 | (10.3)% | | Selling, general and administrative expenses | $(35,705) | $(38,611) | (7.5)% | | Restructuring expense | $(7,739) | $(636) | N.M. | | Loss from operations | $(18,377) | $(11,308) | 62.5% | | Net loss | $(19,103) | $(13,819) | 38.2% | | Net loss per share - diluted | $(1.53) | $(1.11) | 37.8% | [Consolidated Balance Sheets](index=10&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Unaudited condensed consolidated balance sheets as of April 27, 2025, and April 28, 2024, detailing assets, liabilities, and equity Consolidated Balance Sheet Summary | Metric (Thousands) | April 27, 2025 | April 28, 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Cash and cash equivalents | $5,629 | $10,012 | (43.8)% | | Total current assets | $83,534 | $80,881 | 3.3% | | Property, plant & equipment, net | $24,836 | $33,182 | (25.2)% | | Total assets | $123,370 | $132,054 | (6.6)% | | Total current liabilities | $46,964 | $38,107 | 23.2% | | Total liabilities | $65,730 | $55,925 | 17.5% | | Shareholders' equity | $57,640 | $76,129 | (24.3)% | [Summary of Cash and Debt](index=11&type=section&id=SUMMARY%20OF%20CASH%20AND%20DEBT%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Summary of the company's cash and debt position as of April 27, 2025, and April 28, 2024, highlighting net debt Cash and Debt Position | Metric (Thousands) | April 27, 2025 | April 28, 2024 | | :-------------------------------- | :------------- | :------------- | | Cash and cash equivalents | $5,629 | $10,012 | | Lines of credit - current | $8,114 | $0 | | Lines of credit - long-term | $4,600 | $0 | | Net (debt) cash position | $(7,085) | $10,012 | [Consolidated Statements of Cash Flows](index=12&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20FOR%20THE%20TWELVE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Unaudited consolidated statements of cash flows for FY2025 and FY2024, detailing operating, investing, and financing activities Consolidated Cash Flows | Metric (Thousands) | April 27, 2025 | April 28, 2024 | | :-------------------------------- | :------------- | :------------- | | Net cash used in operating activities | $(17,650) | $(8,224) | | Net cash provided by (used in) investing activities | $598 | $(2,431) | | Net cash provided by (used in) financing activities | $12,673 | $(126) | | Decrease in cash and cash equivalents | $(4,383) | $(10,952) | | Cash and cash equivalents at end of year | $5,629 | $10,012 | [Reconciliation of Free Cash Flow](index=13&type=section&id=RECONCILIATION%20OF%20FREE%20CASH%20FLOW%20FOR%20THE%20TWELVE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Reconciliation of free cash flow for the twelve months ended April 27, 2025, and April 28, 2024 Free Cash Flow Reconciliation | Metric (Thousands) | April 27, 2025 | April 28, 2024 | | :-------------------------------- | :------------- | :------------- | | Net cash used in operating activities | $(17,650) | $(8,224) | | Capital expenditures | $(2,947) | $(3,711) | | Proceeds from asset sales | $1,945 | $385 | | Free Cash Flow | $(17,056) | $(10,826) | [Statements of Operations by Segment - Three Months Ended April 27, 2025](index=14&type=section&id=STATEMENTS%20OF%20OPERATIONS%20BY%20SEGMENT%20FOR%20THE%20THREE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Unaudited statements of operations by segment for Q4 FY2025 and Q4 FY2024, detailing sales, gross profit, and operating results Segment Operations - Three Months | Metric (Thousands) | Mattress Fabrics (Q4 FY25) | Upholstery Fabrics (Q4 FY25) | Total (Q4 FY25) | Mattress Fabrics (Q4 FY24) | Upholstery Fabrics (Q4 FY24) | Total (Q4 FY24) | | :-------------------------------- | :------------------------- | :-------------------------- | :-------------- | :------------------------- | :-------------------------- | :-------------- | | Net Sales | $27,114 | $21,659 | $48,773 | $25,750 | $23,778 | $49,528 | | Gross Profit | $3,075 | $4,691 | $7,653 | $292 | $4,909 | $5,201 | | (Loss) Income from Operations | $(217) | $1,053 | $(2,239) | $(2,929) | $975 | $(4,248) | [Statements of Operations by Segment - Twelve Months Ended April 27, 2025](index=15&type=section&id=STATEMENTS%20OF%20OPERATIONS%20BY%20SEGMENT%20FOR%20THE%20TWELVE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Unaudited statements of operations by segment for full fiscal years 2025 and 2024, showing full-year segment performance Segment Operations - Twelve Months | Metric (Thousands) | Mattress Fabrics (FY25) | Upholstery Fabrics (FY25) | Total (FY25) | Mattress Fabrics (FY24) | Upholstery Fabrics (FY24) | Total (FY24) | | :-------------------------------- | :------------------------ | :------------------------ | :------------- | :------------------------ | :------------------------ | :------------- | | Net Sales | $113,906 | $99,331 | $213,237 | $116,370 | $108,963 | $225,333 | | Gross Profit | $7,936 | $18,752 | $25,067 | $6,289 | $21,690 | $27,939 | | (Loss) Income from Operations | $(5,235) | $4,057 | $(18,377) | $(6,845) | $5,787 | $(11,308) | [Reconciliation of Selected Income Statement Information to Adjusted Results - Three Months](index=16&type=section&id=RECONCILIATION%20OF%20SELECTED%20INCOME%20STATEMENT%20INFORMATION%20TO%20ADJUSTED%20RESULTS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Reconciliation of selected income statement information to adjusted results for Q4 FY2025 and Q4 FY2024, showing non-GAAP operating performance Adjusted Income Statement - Three Months | Metric (Thousands) | As Reported (Q4 FY25) | Adjustments (Q4 FY25) | Adjusted Results (Q4 FY25) | As Reported (Q4 FY24) | Adjustments (Q4 FY24) | Adjusted Results (Q4 FY24) | | :-------------------------------- | :-------------------- | :-------------------- | :------------------------- | :-------------------- | :-------------------- | :------------------------- | | Net sales | $48,773 | — | $48,773 | $49,528 | — | $49,528 | | Cost of sales | $(41,120) | $113 | $(41,007) | $(44,327) | — | $(44,327) | | Gross profit | $7,653 | $113 | $7,766 | $5,201 | — | $5,201 | | Restructuring expense | $(1,422) | $1,422 | — | $(204) | $204 | — | | Loss from operations | $(2,239) | $1,535 | $(704) | $(4,248) | $204 | $(4,044) | - Q4 FY2025 adjustments include **$113,000** for inventory disposal losses in cost of sales and **$1.422 million** for restructuring expense[53](index=53&type=chunk)[54](index=54&type=chunk) [Reconciliation of Selected Income Statement Information to Adjusted Results - Twelve Months](index=17&type=section&id=RECONCILIATION%20OF%20SELECTED%20INCOME%20STATEMENT%20INFORMATION%20TO%20ADJUSTED%20RESULTS%20FOR%20THE%20TWELVE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Reconciliation of selected income statement information to adjusted results for FY2025 and FY2024, providing a non-GAAP view of full-year performance Adjusted Income Statement - Twelve Months | Metric (Thousands) | As Reported (FY25) | Adjustments (FY25) | Adjusted Results (FY25) | As Reported (FY24) | Adjustments (FY24) | Adjusted Results (FY24) | | :-------------------------------- | :----------------- | :----------------- | :---------------------- | :----------------- | :----------------- | :---------------------- | | Net sales | $213,237 | — | $213,237 | $225,333 | — | $225,333 | | Cost of sales | $(188,170) | $1,621 | $(186,549) | $(197,394) | $40 | $(197,354) | | Gross profit | $25,067 | $1,621 | $26,688 | $27,939 | $40 | $27,979 | | Restructuring expense | $(7,739) | $7,739 | — | $(636) | $636 | — | | Loss from operations | $(18,377) | $9,360 | $(9,017) | $(11,308) | $676 | $(10,632) | - FY2025 adjustments include **$1.6 million** for inventory disposal/valuation losses in cost of sales and **$7.739 million** for restructuring expense[59](index=59&type=chunk)[60](index=60&type=chunk) [Summary of Restructuring Expense - Three Months](index=18&type=section&id=SUMMARY%20OF%20RESTRUCTURING%20EXPENSE%20FOR%20THE%20THREE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Summary of restructuring expenses for Q4 FY2025 and Q4 FY2024, broken down by segment and type of expense Restructuring Expense - Three Months | Description (Thousands) | Upholstery Fabrics (Q4 FY25) | Mattress Fabrics (Q4 FY25) | Unallocated Corporate (Q4 FY25) | Total (Q4 FY25) | | :-------------------------------- | :--------------------------- | :--------------------------- | :------------------------------ | :-------------- | | Employee termination benefits | $112 | $12 | — | $124 | | Impairment charge related to intangible asset | — | — | $540 | $540 | | Facility consolidation and relocation expenses | — | $322 | — | $322 | | Cost incurred to ready a closed facility for sale | — | $360 | — | $360 | | Total restructuring expense | $136 | $746 | $540 | $1,422 | - Q4 FY2025 restructuring expenses primarily related to the closure of the Quebec, Canada mattress fabrics facility, initial costs for consolidating upholstery fabrics distribution, and other strategic plan expenses[65](index=65&type=chunk) - Q4 FY2024 restructuring expense of **$204,000** was for employee termination benefits from rationalizing Shanghai upholstery fabrics finishing[66](index=66&type=chunk) [Summary of Restructuring Expense - Twelve Months](index=19&type=section&id=SUMMARY%20OF%20RESTRUCTURING%20EXPENSE%20FOR%20THE%20TWELVE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Summary of restructuring expenses for FY2025 and FY2024, providing a detailed breakdown by segment and expense type Restructuring Expense - Twelve Months | Description (Thousands) | Upholstery Fabrics (FY25) | Mattress Fabrics (FY25) | Unallocated Corporate (FY25) | Total (FY25) | | :-------------------------------- | :------------------------ | :----------------------- | :--------------------------- | :------------- | | Employee termination benefits | $214 | $1,338 | — | $1,552 | | Impairment charge related to intangible asset | — | — | $540 | $540 | | Accelerated depreciation | — | $1,339 | — | $1,339 | | Lease termination costs | — | $849 | — | $849 | | Facility consolidation and relocation expenses | $53 | $2,384 | — | $2,437 | | Total restructuring expense | $305 | $6,894 | $540 | $7,739 | - FY2025 restructuring expenses primarily associated with consolidating North American mattress fabrics operations, Haiti sewn mattress cover facilities, and upholstery fabrics distribution[69](index=69&type=chunk) - FY2024 restructuring expense of **$636,000** included impairment charges for equipment and employee termination benefits related to Haiti and Shanghai operations[70](index=70&type=chunk) [Consolidated Statements of Adjusted EBITDA](index=20&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20ADJUSTED%20EBITDA%20FOR%20THE%20TWELVE%20MONTHS%20ENDED%20APRIL%2027%2C%202025%2C%20AND%20APRIL%2028%2C%202024) Unaudited consolidated statements of Adjusted EBITDA for trailing twelve months and quarterly breakdowns, reconciling net loss to Adjusted EBITDA Consolidated Adjusted EBITDA | Metric (Thousands) | Q4 FY25 | Trailing 12 Months FY25 | Q4 FY24 | Trailing 12 Months FY24 | | :-------------------------------- | :------ | :-------------------- | :------ | :-------------------- | | Net loss | $(2,073) | $(19,103) | $(4,865) | $(13,819) | | Income tax expense (benefit) | $(243) | $392 | $805 | $3,049 | | Depreciation expense | $1,152 | $5,440 | $1,623 | $6,521 | | Restructuring expense | $1,422 | $7,739 | $204 | $636 | | Restructuring related charge | $113 | $1,621 | — | $40 | | Amortization expense | $104 | $405 | $99 | $390 | | Stock based compensation | $128 | $650 | $168 | $915 | | Adjusted EBITDA | $559 | $(3,540) | $(2,218) | $(3,431) | - Adjusted EBITDA for Q4 FY2025 turned positive at **$559 thousand**, a significant improvement from **$(2,218) thousand** in Q4 FY2024[72](index=72&type=chunk) - Trailing 12-month Adjusted EBITDA for FY2025 was **$(3,540) thousand**, compared to **$(3,431) thousand** for FY2024[72](index=72&type=chunk) [Return on Capital Employed by Segment - Twelve Months Ended April 27, 2025](index=21&type=section&id=RETURN%20ON%20CAPITAL%20EMPLOYED%20BY%20SEGMENT%20FOR%20THE%20TWELVE%20MONTHS%20ENDED%20APRIL%2027%2C%202025) Return on Capital Employed (ROCE) by segment for FY2025, including average capital employed calculation for each segment and consolidated Return on Capital Employed by Segment - FY2025 | Segment | Adjusted Operating (Loss) Income (FY25, Thousands) | Average Capital Employed (FY25, Thousands) | Return on Avg. Capital Employed (FY25) | | :-------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------------------- | | Mattress Fabrics | $(5,235) | $55,170 | (9.5)% | | Upholstery Fabrics | $4,057 | $10,027 | 40.5% | | Unallocated Corporate | $(7,839) | $4,427 | N.M. | | Consolidated | $(9,017) | $69,624 | (13.0)% | - Upholstery Fabrics segment shows a strong positive **ROCE of 40.5%**, while Mattress Fabrics and Consolidated remain negative[75](index=75&type=chunk) - Average capital employed is calculated using five quarterly periods and excludes certain non-operating assets/liabilities[78](index=78&type=chunk)[79](index=79&type=chunk) [Return on Capital Employed by Segment - Twelve Months Ended April 28, 2024](index=23&type=section&id=RETURN%20ON%20CAPITAL%20EMPLOYED%20BY%20SEGMENT%20FOR%20THE%20TWELVE%20MONTHS%20ENDED%20April%2028%2C%202024) Return on Capital Employed (ROCE) by segment for FY2024, including the calculation of average capital employed Return on Capital Employed by Segment - FY2024 | Segment | Adjusted Operating (Loss) Income (FY24, Thousands) | Average Capital Employed (FY24, Thousands) | Return on Avg. Capital Employed (FY24) | | :-------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------------------- | | Mattress Fabrics | $(6,845) | $63,189 | (10.8)% | | Upholstery Fabrics | $5,787 | $9,263 | 62.5% | | Unallocated Corporate | $(9,574) | $3,784 | N.M. | | Consolidated | $(10,632) | $76,235 | (13.9)% | - Upholstery Fabrics segment had a higher **ROCE of 62.5% in FY2024** compared to **40.5% in FY2025**, indicating a decline in profitability relative to capital employed[75](index=75&type=chunk)[81](index=81&type=chunk) - Consolidated ROCE improved slightly from **(13.9)% in FY2024** to **(13.0)% in FY2025**[75](index=75&type=chunk)[81](index=81&type=chunk)

Financial Performance - Consolidated net sales for the third quarter of fiscal 2025 decreased by 13.5% to $52.3 million compared to $60.4 million in the prior year[194]. - Gross profit for the third quarter of fiscal 2025 was $6.3 million, down 17.6% from $7.7 million in the prior year, resulting in a gross margin of 12.1%[194]. - Loss from operations for the third quarter of fiscal 2025 was $3.9 million, a 123.4% increase compared to a loss of $1.7 million in the prior year[194]. - The company recorded a net loss of $4.1 million for the third quarter of fiscal 2025, compared to a net loss of $3.2 million in the prior year, reflecting a 29.4% increase[194]. - Income from operations for Q3 fiscal 2025 was $679,000, down 67.5% from $2.1 million in Q3 fiscal 2024[239]. - Gross profit for Q3 fiscal 2025 was $4.228 million, a decrease of 30.9% from $6.122 million in Q3 fiscal 2024[239]. Sales and Revenue Trends - Mattress fabrics sales decreased by 4.6% in the third quarter and 4.2% in the first nine months of fiscal 2025, while upholstery fabrics sales decreased by 22.3% in the third quarter and 8.8% in the first nine months[195]. - Net sales for Q3 fiscal 2025 were $28.6 million, an increase of $2.9 million or 11.2% compared to Q4 fiscal 2024[227]. - Upholstery fabrics sales decreased by 22.3% in Q3 fiscal 2025 compared to the prior-year period[236]. - Accounts receivable decreased by $671,000, or 5.5%, due to a 22.3% decline in net sales during Q3 fiscal 2025 compared to Q3 fiscal 2024[248]. - Net sales for Q3 fiscal 2025 were $52.3 million, an increase of $2.7 million, or 5.5%, compared to $49.5 million in Q4 fiscal 2024[299]. Expenses and Costs - The company incurred restructuring expenses of $1.7 million in the third quarter of fiscal 2025, compared to a credit of $50,000 in the prior year[194]. - SG&A expenses decreased by 11.9% to $3.549 million in Q3 fiscal 2025 from $4.030 million in Q3 fiscal 2024[239]. - Restructuring expenses totaled $169,000 for the nine months ended January 26, 2025, compared to $472,000 for the same period in 2024[252]. - The company expects proceeds from the sale of its Canadian facility to exceed the cash restructuring charges incurred[221]. Cash Flow and Liquidity - Cash and cash equivalents decreased to $5.3 million as of January 26, 2025, down from $10.0 million as of April 28, 2024, primarily due to net cash used in operating activities of $9.4 million[206]. - Net cash used in operating activities was $9.4 million during the first nine months of fiscal 2025, an increase of $3.4 million from $6.0 million in the same period of fiscal 2024[287]. - As of January 26, 2025, the company had cash totaling $5.3 million, a decrease of $4.7 million from $10.0 million as of April 28, 2024[286]. - The company’s cash balance may be adversely affected by factors such as customer demand trends, supply chain disruptions, and geopolitical events[291]. Tax and Deferred Tax - The effective income tax rate for the nine-month period ended January 26, 2025, was adversely affected by a higher pre-tax loss of $16.8 million compared to $11.3 million in the prior year[203]. - The effective income tax rate for the nine-month period ended January 26, 2025, was (3.9%), significantly improved from (33.4%) for the nine-month period ended January 28, 2024[266]. - The company recorded a deferred income tax liability of $5.1 million for unremitted withholding taxes from foreign subsidiaries[276]. - The company had gross unrecognized income tax benefits of $1.4 million as of January 26, 2025, which could favorably affect future income tax expense[279]. Inventory and Accounts Receivable - Inventory increased by $3.5 million, or 12.4%, compared to January 28, 2024, due to restructuring activities[228]. - Inventory increased to $48.6 million as of January 26, 2025, compared to $46.9 million as of January 28, 2024, due to purchases for the Fiscal 2025 Restructuring Plan[300]. - Accounts receivable increased by $1.6 million, or 16.0%, compared to April 28, 2024, reflecting longer payment trends[227]. - Days' sales outstanding increased to 37 days for Q3 fiscal 2025, compared to 35 days for Q3 fiscal 2024[226]. Strategic Initiatives - The company established a wholly owned subsidiary in Vietnam to enhance strategic sourcing capabilities and diversify its supply chain in Asia[191]. - The company is exploring additional strategic actions to enhance profitability amid current soft market conditions[217]. - The company expects continued challenges in residential sales due to muted conditions in the home furnishings industry[241]. Capital Expenditures and Assets - Capital expenditures totaled $2.4 million during the first nine months of fiscal 2025, down from $3.2 million in the same period of fiscal 2024[305]. - Property, plant, and equipment decreased to $24.2 million as of January 26, 2025, due to reduced capital spending[232]. - Outstanding borrowings under an unsecured credit agreement in China totaled $4.0 million at an interest rate of 2.95% as of January 26, 2025[319]. Dividends - The company suspended its quarterly cash dividend on June 29, 2022, and did not make any dividend payments during the first nine months of fiscal 2025[295].

Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $52.3 million, down 13.5% compared to the prior year period [40] - The company reported a loss from operations of $3.9 million, which included $2.3 million in restructuring expenses [40] - Adjusted loss from operations was $1.6 million, an improvement from $1.9 million in the prior year period [40] - Consolidated adjusted EBITDA for the quarter was close to breakeven at a negative $123,000, a sequential improvement from negative $1.3 million in Q2 [42] Business Line Data and Key Metrics Changes - Mattress fabrics segment sales were $28.6 million, down 4.6% year-over-year and 4.8% sequentially [43] - Operating loss for the mattress fabrics segment was $433,000, improved from a loss of $1.6 million a year ago [44] - Upholstery fabrics segment sales were $23.6 million, down 22.3% year-over-year and 7.8% sequentially [45] - Hospitality contract business sales increased significantly year-over-year and slightly sequentially, contributing to 40% of upholstery fabrics total sales for the quarter [21] Market Data and Key Metrics Changes - Consolidated sales for Q3 were down due to ongoing weakness in the home furnishings and bedding industries [16] - Specific pressure on residential upholstery fabric sales was noted, exacerbated by inventory adjustments from a large customer [17] - The hospitality contract portion of the upholstery fabrics segment is expected to drive solid long-term growth [22] Company Strategy and Development Direction - The company is focused on returning to profitability despite a challenging demand environment, with operational adjustments aimed at cost and efficiency improvements [24] - A restructuring plan has been largely completed, with expected annualized savings of $10 million to $11 million [25] - The company is targeting further strategic actions to create more cost and operating efficiencies across its businesses [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sustained profitability and growth in fiscal 2026, assuming no significant worsening in industry sales levels [24] - The company anticipates continued industry sales pressure due to macroeconomic factors and tariff uncertainties [55] - Management expects consolidated net sales for Q4 to show some year-over-year growth, driven by the mattress fabrics segment [55] Other Important Information - The company has entered into a conditional agreement for the sale of its Canadian facility, expecting to receive between $6 million and $8 million in cash proceeds [14] - The company reported a net debt position of $105,000 as of the end of Q3 [49] - Capital expenditures for the first nine months of the fiscal year were $2.4 million, projected to be approximately $3 million to $3.5 million for the entire fiscal year [51] Q&A Session Summary Question: Change in guidance regarding profitability - Management confirmed expectations for a return to profitability in early fiscal 2026, despite current demand levels [60][62] Question: Market share growth in mattress and hospitality segments - Management indicated continued market share growth in both mattress and hospitality segments, with new customer projects underway [63][67] Question: Additional restructuring savings - Management discussed an additional $1 million in annualized savings expected to start in Q4, related to personnel and professional fees [84][86] Question: Impact of tariffs on production - Management noted that only about 30% of upholstery fabrics are tariff impacted, with strategies in place to mitigate these effects [99][100] Question: Consolidation in the mattress industry - Management views industry consolidation as a net positive, providing opportunities for growth and service to larger customers [106][109]

Financial Data and Key Metrics Changes - Net sales for the third quarter were $52.3 million, down 13.5% compared to the prior year period [40] - The company reported a loss from operations of $3.9 million, which included $2.3 million in restructuring expenses [40] - Adjusted loss from operations was $1.6 million, an improvement from $1.9 million in the prior year period [40] - Net loss for the third quarter was $4.1 million or $0.33 per diluted share, compared to a net loss of $3.2 million or $0.26 per diluted share for the prior year [41] - Adjusted EBITDA for the third quarter was close to breakeven at a negative $123,000, a sequential improvement from negative $1.3 million in the second quarter [42] Business Line Data and Key Metrics Changes - Mattress fabrics segment sales were $28.6 million, down 4.6% year-over-year and down 4.8% sequentially [43] - Operating loss for the mattress fabrics segment was $433,000, improved from a loss of $1.6 million a year ago [44] - Upholstery fabrics segment sales were $23.6 million, down 22.3% year-over-year and down 7.8% sequentially [45] - Hospitality contract business sales increased significantly year-over-year and slightly sequentially, contributing to 40% of upholstery fabrics total sales for the quarter [21] Market Data and Key Metrics Changes - The company faced ongoing weakness in the home furnishings and bedding industries, impacting sales [16] - Specific pressure on residential upholstery fabric sales was noted due to inventory adjustments from a large customer [17] - The hospitality contract portion of the upholstery fabrics segment is expected to drive solid long-term growth [22] Company Strategy and Development Direction - The company is focused on returning to profitability despite a challenging demand environment [24] - A restructuring plan aimed at transforming the business model and improving efficiency is largely complete [15] - The company is targeting further strategic actions to create cost and operating efficiencies across its businesses [26] - Emphasis on product development and innovation is seen as a key driver for success [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sustained profitability and growth in fiscal 2026 [16] - The company anticipates continued industry sales pressure due to macroeconomic factors and tariff uncertainties [55] - Management expects consolidated net sales for the fourth quarter to show some year-over-year growth, driven by the mattress fabrics segment [55] Other Important Information - The company is under contract for the sale of its Canadian facility, expecting to receive between $6 million and $8 million in cash proceeds [14] - The company has a net debt position of $105,000 as of the end of the third quarter [49] - Capital expenditures for the first nine months of the fiscal year were $2.4 million, projected to be approximately $3 million to $3.5 million for the fiscal year [51] Q&A Session Summary Question: Clarification on guidance and return to profitability - Management confirmed expectations for a return to profitability in early fiscal 2026, despite current demand levels [60][62] Question: Market share growth in mattress and hospitality segments - Management indicated continued market share growth in both mattress fabrics and hospitality segments, with new customer projects underway [63][67] Question: Details on additional restructuring savings - Management discussed an additional $1 million in annualized savings related to personnel and professional fees, expected to start in Q4 [84][86] Question: Impact of tariffs on production and strategy - Management noted that only about 30% of upholstery fabrics are tariff-impacted, with strategies in place to mitigate these effects [99][100] Question: Consolidation in the mattress industry - Management views industry consolidation as a net positive, providing opportunities for growth and leveraging their capabilities [106][109]

Financial Performance - Consolidated net sales for Q3 fiscal 2025 were $52.3 million, down 6.1% sequentially and down 13.5% year-over-year[3][12]. - Net loss for the quarter was $(4.1) million, an improvement from a net loss of $(5.6) million in the prior quarter[3][12]. - Adjusted EBITDA was close to break-even at negative $(123,000), a sequential improvement of approximately $1.1 million despite $3.4 million less in sales compared to the previous quarter[3][4]. - Net sales for the three months ended January 26, 2025, were $52,253,000, a decrease of 13.5% compared to $60,418,000 for the same period in 2024[26]. - Gross profit for the three months ended January 26, 2025, was $6,347,000, down 17.6% from $7,703,000 in the prior year, resulting in a gross margin of 12.1%[26]. - The net loss for the three months ended January 26, 2025, was $4,126,000, representing a 29.4% increase from a net loss of $3,188,000 in the same period last year[26]. - For the nine months ended January 26, 2025, net sales were $164,464,000, a decline of 6.5% from $175,804,000 in the prior year[30]. - The net loss for the nine months ended January 26, 2025, was $17,031,000, a 90.2% increase compared to a net loss of $8,954,000 for the same period in 2024[30]. Segment Performance - Mattress fabrics segment achieved a 58.3% sequential reduction in operating loss, following a 70.7% reduction in the previous quarter[3][4]. - Sales for the mattress fabrics segment were $28.6 million, down 4.6% year-over-year, while upholstery fabrics segment sales were $23.6 million, down 22.3% year-over-year[15]. - Mattress Fabrics segment sales decreased by 4.6% to $28,642,000, while Upholstery Fabrics segment sales fell by 22.3% to $23,611,000[44]. - Mattress Fabrics segment gross profit decreased by 18.9% to $4,862,000, while Upholstery Fabrics segment gross profit fell by 16.2% to $14,061,000[47]. - Upholstery fabrics segment achieved an operating income of $3,981,000, with an average capital employed of $7,853,000, yielding a return of 50.7%[69]. Restructuring and Operational Changes - The company expects to generate $10.0 million to $11.0 million in annualized savings and operating improvements following the restructuring[9]. - The company is focusing on restructuring its mattress fabric operations to return the segment to profitability[23]. - Restructuring expenses for the three months ended January 26, 2025, amounted to $1,655,000, compared to a credit of $50,000 in the same period last year[26]. - The company incurred a restructuring expense of $6.317 million during the nine months ending January 26, 2025, primarily due to consolidating operations and facility closures[63]. - Restructuring-related charges for the third quarter amounted to $624,000, impacting the cost of sales due to the discontinuation of operations at the Quebec manufacturing facility[51]. Cash Flow and Liquidity - Cash flow from operations for the first nine months of fiscal 2025 was negative $(9.4) million, primarily affected by operating losses and non-recurring cash restructuring charges[19]. - The company anticipates receiving approximately $6.0 million to $8.0 million in cash proceeds from the sale of Canadian real estate, contingent on due diligence and closing conditions[11][19]. - The company plans to use cash proceeds from the real estate sale to pay off outstanding borrowings and bolster liquidity[5][19]. - Free cash flow for the nine months ended January 26, 2025, was negative at $(10,063,000), worsening from $(8,233,000) in the prior year[43]. - Cash and cash equivalents dropped significantly by 58.1% to $5,279,000 from $12,585,000 year-over-year[36]. Balance Sheet and Assets - Total current assets decreased by 4.2% to $85,286,000 compared to $89,058,000 in the previous year[36]. - Total liabilities increased by 11.0% to $67,905,000 from $61,202,000 year-over-year[36]. - Shareholders' equity decreased by 26.2% to $59,650,000 compared to $80,796,000 in the previous year[36]. - The company had a net (debt) cash position of $(105,000) as of January 26, 2025, compared to a net cash position of $12,585,000 in the previous year[39]. - Total assets as of January 26, 2025, amounted to $127,555,000, compared to $132,054,000 as of April 28, 2024[71]. Future Outlook - The company expects continued sequential improvement in adjusted EBITDA and a foundation for a return to consolidated operating income in fiscal 2026[19]. - The company is focusing on improving operational efficiency and exploring market expansion opportunities in the upcoming quarters[70]. - The company is focusing on improving operational efficiency and exploring new market opportunities to enhance future performance[76].

Financial Performance - Net sales for the three months ended October 27, 2024, were $55,674,000, a decrease of 3.6% compared to $58,725,000 for the same period in 2023[7]. - Gross profit for the three months ended October 27, 2024, was $5,990,000, down 24.6% from $7,950,000 in the prior year[7]. - Net loss for the three months ended October 27, 2024, was $5,644,000, compared to a net loss of $2,424,000 for the same period in 2023, representing an increase of 133.3%[7]. - For the six months ended October 27, 2024, net sales were $112,211,000, a decrease of 2.0% from $115,387,000 in the same period in 2023[9]. - The net loss for the six months ended October 27, 2024, was $12,905,000, compared to a net loss of $5,766,000 for the same period in 2023, indicating a 124.5% increase in losses[9]. - The company reported a comprehensive loss of $5,621,000 for the three months ended October 27, 2024, compared to a comprehensive loss of $2,506,000 for the same period in 2023[11]. Assets and Liabilities - Total current assets as of October 27, 2024, were $86,901,000, a decrease from $88,594,000 as of October 29, 2023[15]. - Total liabilities as of October 27, 2024, were $65,364,000, an increase from $58,532,000 as of October 29, 2023[15]. - Cash and cash equivalents as of October 27, 2024, were $10,531,000, down from $15,214,000 as of October 29, 2023[15]. - The total shareholders' equity as of October 27, 2024, was $63,623 thousand, down from $76,129 thousand as of April 28, 2024, reflecting a decline of 16%[21]. - Total assets decreased from $142.2 million on October 29, 2023, to $129.0 million on October 27, 2024, representing a decline of approximately 9.3%[132]. Cash Flow and Capital Expenditures - Cash flows used in operating activities were $2,633 thousand for the six months ended October 27, 2024, a decrease of 41% compared to $4,476 thousand for the same period in 2023[19]. - Capital expenditures for the six months ended October 27, 2024, were $1,578 thousand, down 20% from $1,972 thousand for the same period in 2023[19]. - Capital expenditures for the six months ending October 27, 2024, amounted to $1.8 million, down from $2.2 million in the same period of the previous year, representing a decrease of about 18.9%[140]. Restructuring and Operational Changes - The company reported a significant increase in non-cash restructuring expenses, which rose to $2,178 thousand for the six months ended October 27, 2024, compared to $379 thousand in the same period of 2023[19]. - The company expects restructuring charges of approximately $7.3 million for fiscal 2025, with $4.4 million expected to be cash expenditures[74]. - Restructuring charges related to the mattress fabrics segment are estimated at $7.2 million, including $2.7 million for relocating equipment and $1.3 million for employee termination benefits[75]. - The company recorded restructuring expenses of $2.8 million for the three-month period ending October 27, 2024, and $5.5 million for the six-month period[78]. - Culp Upholstery Fabrics Haiti, Ltd. discontinued the production of upholstery cut and sewn kits due to a decline in demand, which was more than previously anticipated[82]. Segment Performance - Net sales for the mattress fabrics segment decreased to $30.1 million for the three months ended October 27, 2024, compared to $31.4 million for the same period in 2023, representing a decline of 4.1%[120]. - Net sales for the upholstery fabrics segment decreased to $25.6 million for the three months ended October 27, 2024, down from $27.3 million in the prior year, a decrease of 6.3%[120]. - Total segment gross profit decreased to $6.8 million for the three months ended October 27, 2024, compared to $7.9 million for the same period in 2023, a decline of 14.1%[120]. - The company reported a total segment loss from operations of $2.6 million for the three months ended October 27, 2024, compared to a loss of $2.2 million for the same period in 2023[120]. Financing and Credit Facilities - The company has an asset-based revolving credit facility (ABL Facility) with a maximum principal amount of $35.0 million, which can be used for working capital and general corporate purposes[87]. - As of October 27, 2024, the available borrowings under the ABL Facility totaled $22.6 million, with no outstanding borrowings reported[97]. - The company entered into an unsecured credit agreement in RMB for a line of credit up to 29.0 million RMB ($4.1 million USD) effective March 20, 2024[99]. - A new credit agreement was established on November 5, 2024, providing borrowing capacity up to 35.0 million RMB ($4.9 million USD), with a working capital loan of 10.0 million RMB ($1.4 million USD) already utilized[99]. Tax and Deferred Income - The effective income tax rate for the six months ending October 27, 2024, was (1.5%), a significant decrease from (26.8%) for the same period in 2023[142]. - The company recorded a full valuation allowance against its U.S. net deferred income tax assets due to ongoing significant pre-tax losses[148]. - As of October 27, 2024, the total gross unrecognized income tax benefits amounted to $1.4 million, an increase from $1.2 million as of October 29, 2023[153]. Stock and Compensation - The fair value of performance-based restricted stock units expected to vest as of October 27, 2024, was $333,000[172]. - The company recorded compensation expense of $33,000 for performance-based restricted stock units for the six months ended October 27, 2024, compared to $23,000 for the same period in 2023[171]. - Time-based restricted stock units totaling 103,320 vested during the six-month period ending October 27, 2024, with a fair value of $581,000[175]. Legal and Compliance - The company is involved in legal proceedings but does not expect these actions to have a material adverse effect on its financial position[186].