During the third quarter of fiscal 2023, CUF Haiti entered into an agreement to terminate a lease associated with a facility located in Ouanaminthe, Haiti and, in turn, moved the production of upholstery cut and sewn kits to an existing facility leased by Culp Home Fashions Haiti, Ltd. (“CHF Haiti”) during the fourth quarter of fiscal 2023. Both CUF Haiti and CHF Haiti are indirect wholly-owned subsidiaries of the company. During the first quarter of fiscal 2024, demand for upholstery cut and sewn kits

declined more than previously anticipated, resulting in the strategic action to discontinue the production of upholstery cut and sew kits in Haiti.

The following summarizes our restructuring expense and restructuring related (credits) charges from the restructuring activities associated with our upholstery fabrics operations located in Haiti for the three months and six months ending October 29, 2023:


	Three Months Ended			Six Months Ended
(dollars in thousands)	October 29, 2023			October 29, 2023
Employee termination benefits	$	2		$	103
Impairment loss - equipment		142			379
(Gain) loss on disposal and markdowns of inventory		(78	)		101
Restructuring expense and restructuring related (credits) charges (1) (2)	$	66		$	583

(1) Of the total $66,000, $144,000 and ($78,000) were recorded within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three-month period ending October 29, 2023.

(2) Of the total $583,000, $482,000 and $101,000 were recorded within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the six-month period ending October 29, 2023.

The restructuring activity related to the discontinuation of production of upholstery cut and sew kits in Haiti was completed as of October 29, 2023. As a result of our strategic decision to discontinue this production, we incurred a cumulative amount of $1.4 million in restructuring expense and restructuring related charges.

The following summarizes the activity in accrued restructuring costs for the six-month period ending October 29, 2023:


	Employee
	Termination
(dollars in thousands)	Benefits			Total
Beginning balance	$	—		$	—
Expenses incurred		103			103
Payments		(103	)		(103	)
Ending balance	$	—		$	—

During the second quarter of fiscal 2023, we closed our cut and sew upholstery fabrics operation located in Shanghai, China, which included the termination of an agreement to lease a building. This strategic action, along with the further use of our Asian supply chain, was taken in order to adjust our operating costs to better align with the declining customer demand for cut and sewn products.

The following summarizes our restructuring expense and restructuring related charges from the restructuring activities associated with our upholstery fabrics operations located in China for the three months and six months ending October 29, 2022:


	Three and Six Months Ended
(dollars in thousands)	October 30, 2022
Employee termination benefits	$	468
Loss on disposal and markdowns of inventory		98
Loss on disposal of equipment		80
Lease termination costs		47
Other associated costs		20
Restructuring expense and restructuring related charges (3)	$	713

(3) Of the total $713,000, $615,000 and $98,000 were recorded to restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three-month and six-month periods ending October 30, 2022.

The following summarizes the activity in accrued restructuring costs for the three-month and six-month periods ending October 30, 2022:


	Employee			Lease			Other
	Termination			Termination			Associated
(dollars in thousands)	Benefits			Costs			Costs			Total
Beginning balance	$	—		$	—		$	—		$	—
Accrual established in fiscal 2023		468			47			—			515
Expenses incurred		—			—			20			20
Payments		(468	)		(16	)		(18	)		(502	)
Ending balance	$	—		$	31		$	2		$	33

The restructuring activity related to the discontinuation of operations of the upholstery cut and sew kits in China was completed in the third quarter of fiscal 2023.