Mattress Fabrics Segment, Upholstery Fabrics Segment, and Unallocated Corporate - Initiated During Fiscal 2025

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 that facility 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; (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; as well as (5) reduce unallocated corporate and shared service expenses.

All of the above restructuring activities related to this announcement have been completed, including the sale of the Property located in Quebec, Canada, effective April 30, 2025 (first quarter of fiscal 2026). Accordingly, we expect to record a gain from this sale totaling $4.0 million that will be recorded in restructuring expense (credit) in the consolidated statement of net income (loss) for the first quarter of fiscal 2026. See Note 8 located in the notes to the consolidated financial statements for further details regarding the sale of the Property.

During fiscal 2025, we incurred restructuring and restructuring related charges totaling $8.7 million related to the above mentioned initiatives, of which $8.5 million and $154,000 relate to the mattress fabrics and upholstery fabrics segments, respectively. As mentioned above, the restructuring activities related to this announcement were completed during the first quarter of fiscal 2026. Accordingly, we expect to record a restructuring credit of $3.8 million for the first quarter of fiscal 2026, which reflects the gain on the sale of Property located in Quebec, Canada, partially offset by other expected restructuring expenses. Overall, we expect cumulative restructuring and restructuring related charges of approximately $4.9 million related to this initiative, most of which relates to the mattress fabrics segment.

On April 24, 2025 (fourth quarter of fiscal 2025), the company announced a strategic transformation of its operating model that will combine certain activities within the mattress fabrics and upholstery fabrics business segments and create an integrated Culp-branded business. As part of this strategic transformation, we will close our leased facility operated by our upholstery fabrics segment located in Burlington, North Carolina, and transition its production and distribution activities utilizing a shared management model within our owned facility located in Stokesdale, North Carolina. Our Stokesdale, North Carolina facility has historically been solely operated by our mattress fabrics segment.

During fiscal 2025, we incurred restructuring expense of $676,000 related to this strategic transformation, of which $540,000 and $136,000 relate to unallocated corporate and the upholstery fabrics segment, respectively. The estimated cumulative restructuring and restructuring related charges for these initiatives is expected to be $1.5 million, of which $288,000 is expected to be cash expenditures. The $1.5 million of estimated cumulative restructuring and restructuring related charges associated with these activities represents: (i) a non-cash charge for impairment of Read's tradename totaling $540,000 (see Note 6 located in the notes to the consolidated financial statements for further details); (ii) a non-cash charge of $425,000 associated with markdowns and other inventory related adjustments; (iii) non-cash lease termination costs of $224,000; (iv) cash charges for employee termination benefits of $173,000, and (v) cash charges for facility consolidation and relocation expenses of $115,000. We expect the initiatives associated with this strategic transformation to be substantially completed by December 31, 2025.

The following summarizes restructuring and restructuring related charges associated with the above announcements for the year ended April 27, 2025:


	Year Ended
(dollars in thousands)	April 27, 2025
Additional depreciation expense for shortened useful lives of equipment	$	1,339
Employee termination benefits		1,552
Impairment of intangible asset		540
Facility consolidation and relocation expenses		2,437
Loss on disposal, valuation, and markdowns of inventory		1,621
Lease termination costs		849
Other associated costs		1,024
Net gain on sale of equipment		(16	)
Restructuring expense and restructuring related charges (1) (2) (3)	$	9,346

(1) Of the total $9.3 million, $7.7 million and $1.6 million were recorded within restructuring expense and cost of sales, respectively, in the fiscal 2025 Consolidated Statement of Net Loss.

(2) Of the total $9.3 million, $8.7 million and $676,000 relate to the restructuring activities announced on May 1, 2024, and the strategic transformation initiatives announced on April 24, 2025, respectively.

(3) Of the total $9.3 million, $8.5 million, $540,000, and $290,000 relate to the mattress fabrics segment, unallocated corporate, and the upholstery fabrics segment, respectively.

The following summarizes accrued restructuring costs for the two plans described above for the year ended April 27, 2025:


	Employee			Other			Facility Consolidation
	Termination			Associated			and Relocation
(dollars in thousands)	Benefits			Costs			Costs			Total
Beginning balance	$	—		$	—		$	—		$	—
Expenses incurred		1,667			1,032			2,437			5,136
Change in estimate adjustments		(115	)		(8	)		—			(123	)
Payments		(1,019	)		(926	)		(2,435	)		(4,380	)
Foreign currency exchange remeasurement		(11	)		(10	)		(2	)		(23	)
Ending Balance	$	522		$	88		$	—		$	610

Upholstery Fabrics Segment - Restructuring Activities Initiated During Fiscal 2024 and 2023

During the third quarter of fiscal 2023, CUF Haiti entered into an agreement to terminate a lease associated with one of its facilities and moved the production of upholstery cut and sewn kits to an existing facility leased by CHF Haiti during the fourth quarter of fiscal 2023. Both CUF Haiti and CHF Haiti are indirect wholly-owned subsidiaries of the company. During the first quarter of fiscal 2024, demand for upholstery cut and sewn kits declined more than previously anticipated, resulting in the strategic action to discontinue the production of upholstery cut and sewn kits in Haiti.

This restructuring activity commenced during the third quarter of fiscal 2023 and was completed during the third quarter of fiscal 2024 and resulted in a cumulative restructuring and restructuring related charge of $1.3 million.

See Note 7 of the consolidated financial statements for further details regarding the agreement to terminate the above mentioned lease and the establishment of a note receivable.

During the fourth quarter of fiscal 2024, we closed our upholstery fabrics finishing operation in China to align with current demand trends. This restructuring activity was completed during the first quarter of fiscal 2025 and resulted in a cumulative restructuring and restructuring related charge totaling $218,000.

During the second quarter of fiscal 2023, we closed our cut and sewn upholstery fabrics operation, which included a termination of an agreement to lease a building. This strategic action was our response to declining consumer demand for cut and sew products, by adjusting our operating costs to better align with lower demand. This restructuring activity was completed during the third quarter of fiscal 2023, and resulted in a cumulative restructuring and restructuring related charge of $713,000 during the second and third quarters of fiscal 2023.

The following summarizes restructuring expense and restructuring related charges associated with our upholstery fabrics segment's restructuring activities initiated during fiscal 2024 and 2023, for fiscal years 2025, 2024, and 2023:


(dollars in thousands)		2025		2024		2023
Employee termination benefits	$	—	$	307	$	507
Lease termination costs		—		—		481
Impairment loss - property, plant, and equipment		—		329		357
Loss on disposal and markdowns of inventory		—		40		98
Other associated costs		14		—		51
Restructuring expense and restructuring related charges (1) (2) (3)	$	14	$	676	$	1,494

(1) The total $14,000 was recorded within restructuring expense in the fiscal 2025 Consolidated Statement of Net Loss.

(2) Of the total $676,000, $636,000 and $40,000 were recorded within restructuring expense and cost of sales, respectively, in the fiscal 2024 Consolidated Statement of Net Loss.

(3) Of the total $1.5 million, $1.4 million and $98,000 were recorded within restructuring expense and cost of sales, respectively, in the fiscal 2023 Consolidated Statement of Net Loss.

The following summarizes the activity in accrued restructuring associated with our upholstery fabrics segment's restructuring activities initiated during fiscal 2024 and 2023, for fiscal years ended 2025, 2024, and 2023:


	Employee			Lease			Other
	Termination			Termination			Associated
(dollars in thousands)	Benefits			Costs			Costs			Total
Balance, May 1, 2022	$	—		$	—		$	—		$	—
Accrual established in fiscal 2023		507			47			—			554
Expenses incurred		—			—			51			51
Payments		(507	)		(47	)		(51	)		(605	)
Balance, April 30, 2023		—			—			—			—
Accrual established in fiscal 2024		307			—			—			307
Expenses incurred		—			—			—			—
Payments		(304	)		—			—			(304	)
Balance, April 28, 2024 (1)		3			—			—			3
Expense incurred		—			—			14			14
Payments		(3	)		—			(14	)		(17	)
Balance, April 27, 2025	$	—		$	—		$	—		$	—

(1) Accrued restructuring was reported within accrued expenses within the Consolidated Balance Sheet as of April 28, 2024.