On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to (1) consolidate the company's North American mattress fabrics operations, including a gradual discontinuation of operations and sale of the company's manufacturing facility located in Quebec, Canada; (2) move a portion of the knitting and finishing capacity from the company's manufacturing facility located in Quebec, Canada to the company's manufacturing facility located in Stokesdale, North Carolina; (3) transition the mattress fabrics segment's weaving operation to a strategic sourcing model through the company's long standing supply partners; (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 expenses and shared service expenses.

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

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

our facility in Stokesdale, North Carolina, (ii) additional depreciation expense related to the shortening of useful lives of equipment associated with the gradual discontinuance of our operations located in Canada noted above totaling $1.3 million, (iii) employee termination benefits of $1.4 million, (iv) $1.5 million related to losses on disposal and valuation of inventory, and (v) lease termination costs of $849,000, partially offset by net gains on the disposal of equipment totaling $42,000. These restructuring and restructuring related charges exclude any expected gain from the sale of the Canadian facility, which would ultimately reduce the amount of the restructuring charges incurred. Based on changes in business and current unfavorable economic conditions related to the home furnishings and bedding industries, it is possible that the above estimates provided by management, to determine restructuring and restructuring related charges incurred during fiscal 2025 could be materially different from the actual results, and therefore could adversely affect the success of this restructuring plan.

The above-referenced conditional agreement for the sale of our Canadian facility includes a purchase price of $15.5 million CAD ($10.8 million USD as of January 26, 2025), contingent on the satisfaction of certain due diligence and closing conditions. Assuming the completion of the transaction, the company currently expects the proceeds from the sale (net of all taxes and commissions) to exceed the amount of cash restructuring charges incurred in connection with the Fiscal 2025 Restructuring Plan.

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


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

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


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

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

(2) Of the total $7.8 million restructuring and restructuring related charges, $6.3 million and $1.5 million were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the nine-month period ending January 26, 2025. The $7.8 million mostly relates to the mattress fabrics segment.

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

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

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


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

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

(2) Expenses incurred represent other associated costs and were recognized in our Consolidated Statement of Net Loss for the nine-month period ended January 26, 2025.

During the third quarter of fiscal 2023, Culp Upholstery Fabrics - Haiti, Ltd. ("CUF Haiti") entered into an agreement to terminate a lease associated with one facility and, in turn, moved the production of upholstery cut and sewn kits to an existing facility leased by Culp Home Fashions - Haiti, Ltd. ("CHF Haiti") during the fourth quarter of fiscal 2023. Both CUF Haiti and CHF Haiti are 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.

The following summarizes our restructuring (credit) expense and restructuring related (credit) charge for the three months and nine months ended January 28, 2024:


	Three Months Ended			Nine Months Ended
(dollars in thousands)	Janaury 28, 2024			Janaury 28, 2024
Employee termination benefits	$	—		$	103
Impairment loss - leasehold improvements and equipment		—			329
Gains on sale of equipment		(50	)		—
(Gain) loss on disposal and markdowns of inventory		(61	)		40
Restructuring expense and restructuring related (credits) charges (1) (2)	$	(111	)	$	472

(1) Of the total $(111,000), $(50,000) and $(61,000) were recorded within restructuring credit and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three-month period ended January 28, 2024.

(2) Of the total $472,000, $432,000 and $40,000 were recorded within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the nine-month period ended January 28, 2024.

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