Stock-Based Compensation

9 Months Ended

Jan. 26, 2025

Share-Based Payment Arrangement [Abstract]

16. Stock-Based Compensation

Equity Incentive Plan Description

On September 16, 2015, our shareholders approved an equity incentive plan titled the Culp, Inc. 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan authorizes the grant of stock options intended to qualify as incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based units, and other equity and cash related awards as determined by the Compensation Committee of our board of directors. An aggregate of 1,200,000 shares of common stock were authorized for issuance under the 2015 Plan, with certain sub-limits that would apply with respect to specific types of awards that may be issued as defined in the 2015 Plan. Effective September 27, 2023, our shareholders approved an amendment and restatement of the 2015 Plan (the "Amended and Restated Plan"). The Amended and Restated Plan authorizes the issuance of an additional 960,000 shares of common stock in addition to the shares of common stock still available for issuance under the 2015

Plan. The Amended and Restated Plan also removed certain sub-limits that previously applied with respect to specific types of awards that may be issued under the 2015 plan.

As of January 26, 2025, there were 451,537 shares available for future equity-based grants under the Amended and Restated Plan.

Performance-Based Restricted Stock Units

We grant performance-based restricted stock units to senior executives which could earn up to a certain number of shares of common stock if certain performance targets are met over a three-fiscal year performance period as defined in the related restricted stock unit award agreements. The number of shares of common stock that are earned based on performance targets that have been achieved may be adjusted based on a market-based total shareholder return component as defined in the related restricted stock unit award agreements.

Our performance-based restricted stock units granted to senior executives were measured based on their fair market value on the date of grant. The fair market value per share was determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock for the performance-based component.

The following table provides assumptions used to determine the fair market value of the market-based total shareholder return component using the Monte Carlo simulation model on our outstanding performance-based restricted stock units granted to senior executives on August 8, 2024, January 8, 2024, September 28, 2023, and August 10, 2022:


	August 8,			January 8,			September 28,			August 10,
		2024		2024			2023			2022
Closing price of our common stock	$	4.65		$	5.61		$	5.59		$	5.06
Expected volatility of our common stock		35.0	%		33.5	%		37.3	%		48.2	%
Expected volatility of peer companies	22.6- 104.0		%	33.7 - 102.6		%	35.7- 91.5		%	41.6 - 105.1		%
Risk-free interest rate		3.90	%		4.3	%		4.9	%		3.13	%
Dividend yield		-	%		-	%		-	%		-	%
Correlation coefficient of peer companies	(0.01) - 0.17			0.01 - 0.21			0.01 - 0.21			0.05 - 0.23

The following table summarizes information related to our grants of performance-based restricted stock units associated with senior executives that were unvested as of January 26, 2025:


	(2)		(3)
	Performance-Based		Restricted Stock
	Restricted Stock		Units Expected
Date of Grant	Units Awarded		to Vest		Price Per Share			Vesting Period
August 8, 2024 (1)		505,003		50,500	$	5.35	(4)	36 months
January 8, 2024 (1)		24,598		4,238	$	6.23	(5)	31 months
September 28, 2023 (1)		192,771		—	$	6.43	(6)	34 months
August 10, 2022 (1)		146,048		—	$	5.77	(7)	3 years

(1)

Performance-based restricted stock units awarded to senior executives.

(2)

Amounts represent the maximum number of common stock shares that could be earned if certain performance targets are met as defined in the related restricted stock unit agreements.

(3)

Compensation cost is based on an assessment each reporting period to determine the probability of whether or not certain performance goals will be met and how many shares are expected to be earned as of the end of the vesting period. These amounts represent the number of shares that were expected to vest as of January 26, 2025.

(4)

Price per share represents the fair market value per share ($1.15 per $1, or an increase of $0.70 to the closing price of our common stock on the date of grant) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($4.65) for the performance-based component of the performance-based restricted stock units granted to senior executives on August 8, 2024.

(5)

Price per share represents the fair market value per share ($1.11 per $1, or an increase of $0.62 to the closing price of our common stock on the date of grant) determined using the Monte Carlo simulation model for the market-based total shareholder

return component and the closing price of our common stock ($5.61) for the performance-based component of the performance-based restricted stock units granted to a senior executive on January 8, 2024.

(6)

Price per share represents the fair market value per share ($1.15 per $1, or an increase of $0.84 to the closing price of our common stock on the date of grant) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($5.59) for the performance-based component of the performance-based restricted stock units granted to senior executives on September 28, 2023.

(7)

Price per share represents the fair market value per share ($1.14 per $1, or an increase of $0.71 to the closing price of our common stock on the date of grant) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($5.06) for the performance-based component of the performance-based restricted stock units granted to senior executives on August 10, 2022.

There were no performance-based restricted stock units that vested during the nine-month periods ended January 26, 2025 and January 28, 2024, respectively.

We recorded compensation expense of $49,000 and $67,000 within selling, general, and administrative expenses associated with our performance-based restricted stock unit awards for the nine-month periods ended January 26, 2025, and January 28, 2024, respectively. Compensation expense is recorded based on an assessment each reporting period to determine the probability of whether or not certain performance targets will be met and how many shares are expected to be earned as of the end of the vesting period. If certain performance goals are not expected to be achieved, compensation expense would not be recorded, and any previously recognized compensation expense would be reversed.

As of January 26, 2025, the remaining unrecognized compensation expense related to our performance-based restricted stock units was $240,000, which is expected to be recognized over a weighted average vesting period of 2.4 years. As of January 26, 2025, performance-based restricted stock units that are expected to vest had a fair value of $291,000.

Time-Based Restricted Stock Units

The following table summarizes information related to our grants of time-based restricted stock unit awards associated with senior executives, key employees, and outside directors that were unvested as of January 26, 2025:


	Time-Based
	Restricted Stock		(1)
Date of Grant	Units Awarded		Price Per Share		Vesting Period
January 6, 2025 (3)		21,506	$	5.69	3 years
September 26, 2024 (2)		46,823	$	5.98	1 year
August 8, 2024 (3)		17,900	$	4.65	36 months
January 8, 2024 (3)		14,758	$	5.61	31 months
September 28, 2023 (3)		86,551	$	5.59	34 months
September 6, 2022 (3)		12,557	$	4.58	3 years
August 10, 2022 (3)		62,053	$	5.06	35 months

(1)

Price per share represents closing price of our common stock on the date the respective award was granted.

(2)

Time-based restricted stock units awarded to outside directors.

(3)

Time-based restricted stock units awarded to senior executives and key employees.

During the nine-month period ended January 26, 2025, time-based restricted stock units totaling 103,320 vested at a fair value of $581,000, or $5.63 per share. During the nine-month period ended January 28, 2024, time-based restricted stock units totaling 151,653, vested at a fair value of $857,000, or $5.65 per share.

We recorded compensation expense of $473,000 and $597,000 within selling, general, and administrative expenses associated with our time-based restricted stock unit awards for the nine-month periods ended January 26, 2025, and January 28, 2024, respectively.

As of January 26, 2025, the remaining unrecognized compensation expense related to our time-based restricted stock units was $731,000, which is expected to be recognized over a weighted average vesting period of 1.5 years. As of January 26, 2025, the time-based restricted stock units that are expected to vest had a fair value totaling $1.4 million.

Immediately Vested Common Stock Awards

We granted a total of 16,616 shares of common stock to our outside directors on July 3, 2023. These shares of common stock vested immediately and were measured at their fair value on the date of the grant. The fair value of these awards was $5.04 per share on July 3, 2023, which represents the closing price of our common stock on the date of grant.

We recorded $84,000 of compensation expense within selling, general, and administrative expenses for common stock awards that immediately vested to our outside directors during the nine-month period ended January 28, 2024.