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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 3, 2025

Commission File No. 1-12597

CULP, INC.

(Exact name of registrant as specified in its charter)

     North Carolina

     56-1001967

     (State or other jurisdiction of
incorporation or other organization)

     (I.R.S. Employer
Identification No.)


410 W. English Road 5th Floor
High Point, North Carolina	27262
(Address of principal executive offices)	(zip code)

(336) 889-5161

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


		Name of Each Exchange
Title of Each Class	Trading Symbol(s)	On Which Registered
Common Stock, par value $.05/ Share	CULP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period after the registrant was required to submit such files). ☒ Yes No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common shares outstanding as of September 10, 2025: 12,605,306

Par Value: $0.05 per share

INDEX TO FORM 10-Q

For the period ended August 3, 2025


	Part I - Financial Statements	Page

Item 1.	Financial Statements: (Unaudited)	I-1

	Consolidated Statements of Net Loss — Three Months Ended August 3, 2025, and July 28, 2024	I-1

	Consolidated Statements of Comprehensive Loss – Three Months Ended August 3, 2025, and July 28, 2024	I-2

	Consolidated Balance Sheets — August 3, 2025, July 28 2024, and April 27, 2025	I-3

	Consolidated Statements of Cash Flows — Three Months Ended August 3, 2025, and July 28, 2024	I-4

	Consolidated Statements of Shareholders’ Equity – Three Months Ended August 3, 2025	I-5

	Consolidated Statements of Shareholders’ Equity – Three Months Ended July 28, 2024	I-6

	Notes to Consolidated Financial Statements	I-7

	Cautionary Statement Concerning Forward-Looking Information	I-32

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	I-33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	I-49

Item 4.	Controls and Procedures	I-49

	Part II - Other Information

Item 1.	Legal Proceedings	II-1

Item 1A.	Risk Factors	II-1

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	II-1

Item 5.	Other Information	II-1

Item 6.	Exhibits	II-2

Signatures		II-3

Item 1: Financial Statements

CULP, INC.

CONSOLIDATED STATEMENTS OF NET LOSS

FOR THE THREE MONTHS ENDED AUGUST 3, 2025, AND JULY 28, 2024

UNAUDITED

(Amounts in Thousands, Except for Per Share Data)


	THREE MONTHS ENDED
	August 3,			July 28,
	2025			2024
Net sales	$	50,691		$	56,537
Cost of sales		(43,463	)		(51,461	)
Gross profit		7,228			5,076
Selling, general and administrative expenses		(9,119	)		(9,296	)
Restructuring credit (expense)		3,508			(2,631	)
Income (loss) from operations		1,617			(6,851	)
Interest expense		(183	)		(28	)
Interest income		235			262
Other expense		(531	)		(404	)
Income (loss) before income taxes		1,138			(7,021	)
Income tax expense		(1,369	)		(240	)
Net loss	$	(231	)	$	(7,261	)

Net loss per share - basic	$	(0.02	)	$	(0.58	)
Net loss per share - diluted	$	(0.02	)	$	(0.58	)
Average shares outstanding, basic		12,570			12,470
Average shares outstanding, diluted		12,570			12,470

See accompanying notes to consolidated financial statements.

I-1

CULP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED AUGUST 3, 2025, AND JULY 28, 2024

UNAUDITED

(Amounts in Thousands)


	THREE MONTHS ENDED
	August 3,			July 28,
	2025			2024
Net loss	$	(231	)	$	(7,261	)
Unrealized holding gain on investments, net of tax		142			80
Comprehensive loss	$	(89	)	$	(7,181	)

See accompanying notes to consolidated financial statements.

I-2

CULP, INC.

CONSOLIDATED BALANCE SHEETS

AUGUST 3, 2025, JULY 28, 2024, AND APRIL 27, 2025

UNAUDITED

(Amounts in Thousands)


	August 3,		July 28,		April 27,
	2025		2024		2025*
Current assets:
Cash and cash equivalents	$	11,094	$	13,472	$	5,629
Short-term investments - rabbi trust		1,395		954		1,325
Accounts receivable, net		18,382		21,587		21,844
Inventories		50,109		41,668		49,309
Short-term notes receivable		5,104		268		280
Current income taxes receivable		—		532		—
Assets held for sale		40		607		2,177
Other current assets		2,767		3,590		2,970
Total current assets		88,891		82,678		83,534

Property, plant and equipment, net		23,552		30,476		24,836
Right of use assets		5,162		4,483		5,908
Intangible assets		865		1,782		960
Long-term investments - rabbi trust		5,715		7,089		5,722
Long-term notes receivable		1,078		1,394		1,182
Deferred income taxes		475		528		637
Other assets		676		709		591
Total assets	$	126,414	$	129,139	$	123,370

Current liabilities:
Lines of credit - current	$	11,120	$	4,017	$	8,114
Accounts payable - trade		24,319		26,540		27,323
Accounts payable - capital expenditures		8		56		23
Operating lease liability - current		2,209		1,565		2,394
Deferred compensation - current		1,395		954		1,325
Deferred revenue		485		1,600		422
Accrued expenses		5,850		6,097		5,333
Accrued restructuring		105		633		610
Income taxes payable - current		2,412		759		1,420
Total current liabilities		47,903		42,221		46,964

Lines of credit - long-term		7,025		—		4,600
Operating lease liability - long-term		1,995		2,219		2,535
Income taxes payable - long-term		841		2,180		790
Deferred income taxes		5,302		6,449		5,155
Deferred compensation - long-term		5,701		6,946		5,686
Total liabilities		68,767		60,015		65,730
Commitments and Contingencies (Notes 11, 17, and 18)
Shareholders' equity
Preferred stock, $0.05 par value, authorized 10,000,000		—		—		—
Common stock, $0.05 par value, authorized 40,000,000 shares, issued and outstanding 12,605,306 at August 3, 2025; 12,469,903 at July 28, 2024, and 12,559,129 at April 27, 2025		630		624		628
Capital contributed in excess of par value		45,683		45,187		45,589
Accumulated earnings		11,042		23,115		11,273
Accumulated other comprehensive income		292		198		150
Total shareholders' equity		57,647		69,124		57,640
Total liabilities and shareholders' equity	$	126,414	$	129,139	$	123,370

* Derived from audited consolidated financial statements.

See accompanying notes to consolidated financial statements.

I-3

CULP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED AUGUST 3, 2025, AND JULY 28, 2024

UNAUDITED

(Amounts in Thousands)


	THREE MONTHS ENDED
	August 3,			July 28,
	2025			2024
Cash flows from operating activities:
Net loss	$	(231	)	$	(7,261	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,111			1,581
Non-cash inventory credit		(67	)		(268	)
Amortization		95			99
Stock-based compensation		156			176
Deferred income taxes		309			60
Gain on sale of equipment		(9	)		(4	)
Non-cash restructuring (credit) expense		(3,664	)		1,643
Foreign currency exchange loss		122			45
Changes in assets and liabilities:
Accounts receivable		3,482			(445	)
Inventories		(683	)		3,458
Other current assets		212			(221	)
Other assets		13			90
Accounts payable – trade		(3,126	)		884
Deferred revenue		63			105
Accrued restructuring		(506	)		640
Accrued expenses and deferred compensation		1,016			(478	)
Income taxes		1,012			(310	)
Net cash used in operating activities		(695	)		(206	)
Cash flows from investing activities:
Capital expenditures		(179	)		(501	)
Proceeds from the sale of property, plant, and equipment		966			37
Proceeds from notes receivable		120			90
Proceeds from the sale of investments (rabbi trust)		237			229
Purchase of investments (rabbi trust)		(158	)		(187	)
Net cash provided by (used in) investing activities		986			(332	)
Cash flows from financing activities:
Proceeds from lines credit		5,886			4,010
Payments on lines of credit		(552	)		—
Payment of debt issuance costs		(120	)		—
Common stock surrendered for withholding taxes payable		(60	)		—
Net cash provided by financing activities		5,154			4,010
Effect of foreign currency exchange rate changes on cash and cash equivalents		20			(12	)
Increase in cash and cash equivalents		5,465			3,460
Cash and cash equivalents at beginning of year		5,629			10,012
Cash and cash equivalents at end of period	$	11,094		$	13,472

See accompanying notes to consolidated financial statements.

I-4

CULP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED AUGUST 3, 2025

UNAUDITED

(Dollars in thousands, except share data)



							Capital						Accumulated
							Contributed						Other		Total
	Common Stock						in Excess			Accumulated			Comprehensive		Shareholders'
	Shares			Amount			of Par Value			Earnings			Income		Equity
Balance, April 27, 2025 *		12,559,129		$	628		$	45,589		$	11,273		$	150	$	57,640
Net loss		—			—			—			(231	)		—		(231	)
Stock-based compensation		—			—			156			—			—		156
Unrealized gain on investments		—			—			—			—			142		142
Common stock issued in connection with the vesting of time-based restricted stock units		59,352			3			(3	)		—			—		—
Common stock surrendered in connection with payroll withholding taxes		(13,175	)		(1	)		(59	)		—			—		(60	)
Balance, August 3, 2025		12,605,306		$	630		$	45,683		$	11,042		$	292	$	57,647

* Derived from audited consolidated financial statements.

See accompanying notes to consolidated financial statements.

I-5

CULP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 28, 2024

UNAUDITED

(Dollars in thousands, except share data)



					Capital					Accumulated
					Contributed					Other		Total
	Common Stock				in Excess		Accumulated			Comprehensive		Shareholders'
	Shares		Amount		of Par Value		Earnings			Income (Loss)		Equity
Balance, April 28, 2024 *		12,469,903	$	624	$	45,011	$	30,376		$	118	$	76,129
Net loss		—		—		—		(7,261	)		—		(7,261	)
Stock-based compensation		—		—		176		—			—		176
Unrealized gain on investments		—		—		—		—			80		80
Balance, July 28, 2024		12,469,903	$	624	$	45,187	$	23,115		$	198	$	69,124

* Derived from audited consolidated financial statements.

See accompanying notes to consolidated financial statements.

I-6

Culp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Culp, Inc. and its majority-owned subsidiaries (the “company”) include all adjustments that are, in the opinion of management, necessary for fair presentation of the results of operations and financial position. All these adjustments are of a normal recurring nature. Results of operations for interim periods may not be indicative of future results. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements that are included in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 11, 2025, for the fiscal year ended April 27, 2025.

The company's three months ended August 3, 2025, and July 28, 2024, represent 14-week and 13-week periods, respectively.

2. Significant Accounting Policies

As of August 3, 2025, there were no changes in the nature of our significant accounting policies or the application of those policies from those reported in our Annual Report on Form 10-K for the year then ended April 27, 2025. However, during the first quarter of fiscal 2026, we renamed our business segments to better reflect our product offerings: the mattress fabrics segment is now referred to as the bedding segment and the upholstery fabrics segment is now referred to as the upholstery segment. See Note 14 of the consolidated financial statements for further details regarding our business segments.

Recently Adopted Accounting Pronouncements

There were no recently adopted accounting pronouncements during the first quarter of fiscal 2026.

Recently Issued Accounting Pronouncements

Effective December 14 2023, the FASB issued ASU 2023-09 Improvements to Income Tax Disclosures ("ASU 2023-09"), which is an update to Topic 740, Income Taxes. The amendments in this update relate to improvements regarding the transparency of income tax disclosures by requiring consistent categories and greater disaggregation by jurisdiction of information included in the effective income tax rate reconciliation and for income taxes paid. Also, the amendments allow investors to better assess an entity's (i) capital allocation decisions, (ii) worldwide operations, and (iii) related tax risks, tax planning, and operational opportunities that affect the effective income tax rate and prospects for future cash flows. The other amendments in this update improve the effectiveness and comparability of disclosures relating to pretax income (or loss) and income tax expense (or benefit) and remove disclosures that are no longer considered cost beneficial or relevant. ASU 2023-09 is effective for public entities starting in annual periods beginning after December 15, 2024 (i.e., our fiscal 2026 annual report). Early adoption is permitted. The company expects that the adoption of ASU 2023-09 will not have an impact on our results of operations and financial condition, but will have a material impact on the disclosures required in the notes to the consolidated financial statements, which are disclosed in Note 15.

In November 2024, the FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (“ASU 2024-03”) which is an update to Topic 220, Income Statement - Reporting Comprehensive Income. ASU 2024-03 enhances transparency and decision-usefulness of expense disclosures in response to investors' requests for more detailed, disaggregated expense information, enabling a clearer understanding of a public business entity's performance and cost structure. The amendments improve disclosure requirements in financial statement notes for specific expense categories including: (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, (e) certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as other disaggregation requirements, (f) qualitative description of amounts remaining in relevant expense captions that are not necessarily disaggregated quantitatively, as well as (g) the total amount of selling expenses, and in annual reporting periods, the entity's definition of selling expense. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, (i.e., our fiscal 2028 annual report) and interim reporting periods beginning after December 15, 2027 (i.e., first quarter of fiscal 2029 interim report). Early adoption is permitted. The company is currently evaluating ASU 2024-03 to determine the impact it will have on its consolidated financial statements and related disclosures.

I-7

Except as disclosed above, there are currently no new accounting pronouncements that are expected to have a material effect on our consolidated financial statements.

3. Allowance for Doubtful Accounts

A summary of the activity in the allowance for doubtful accounts follows:


	Three months ended
(dollars in thousands)	August 3, 2025		July 28, 2024
Beginning balance	$	651	$	356
Provision for bad debts		65		57
Write-offs, net of recoveries		7		—
Ending balance	$	723	$	413

As of August 3, 2025, and July 28, 2024, we assessed the credit risk of our customers within our accounts receivable portfolio. Our risk assessment includes the respective customers’: (i) financial position; (ii) past payment history; (iii) management’s general ability; and (iv) historical loss experience; as well as (v) any other ongoing economic conditions. After our risk assessment was completed, we assigned credit grades to our customers, which, in turn, were used to determine our allowance for doubtful accounts totaling $723,000 and $413,000 as of August 3, 2025, and July 28, 2024, respectively.

4. Revenue from Contracts with Customers

Nature of Performance Obligations

Our operations are classified into two business segments: bedding (formerly known as mattress fabrics) and upholstery (formerly known as upholstery fabrics). The bedding segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. The upholstery segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers.

In addition, the upholstery segment includes Read Window Products LLC (“Read”), a wholly owned subsidiary with operations located in Knoxville, Tennessee, that provides window treatments and sourcing of upholstery fabrics and other products, as well as related measuring and installation services to customers in the hospitality and commercial markets. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows. 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 bedding and upholstery business segments and create one integrated Culp-branded business. As part of this strategic transformation, we will close our leased facilities operated by our upholstery segment located in Burlington, North Carolina and Knoxville, Tennessee and will transition their production and distribution activities utilizing a shared management model within our owned facility located in Stokesdale, North Carolina. See note 10 of the consolidated financial statements for further details regarding this strategic transformation initiative.

Our primary performance obligations include the sale of bedding and upholstery products, as well as the performance of customized fabrication and installation services associated with window treatments.

Contract Assets & Liabilities

Certain contracts relating to customized fabrication and installation services associated with Read require upfront customer deposits that result in a contract liability which is recorded in the Consolidated Balance Sheets as deferred revenue. Revenue on contract liabilities associated with customized fabrication and installation services is generally recognized within one year, as the satisfaction of performance obligations are generally one year or less. If upfront deposits or prepayments are not required, customers may be granted terms that generally range from 15 to 60 days. Our terms are customary within the industries in which we operate and are not considered financing arrangements.

I-8

There were no contract assets recognized as of August 3, 2025, July 28, 2024, or April 27, 2025.

A summary of the activity associated with deferred revenue follows:


	Three months ended
(dollars in thousands)	August 3, 2025			July 28, 2024
Beginning balance	$	422		$	1,495
Revenue recognized on contract liabilities		(564	)		(781	)
Payments received for services not yet rendered		627			886
Ending balance	$	485		$	1,600

As of August 3, 2025, deferred revenue of $485,000 pertained to (i) upfront customer deposits associated with customized fabrication and installation services related to Read totaling $422,000, and (ii) an upfront license fee paid to us for the licensing of a certain trademark to be used by an upholstery customer totaling $63,000. As of July 28, 2024, deferred revenue of $1.6 million pertained to (i) upfront customer deposits associated with customized fabrication and installation services relating to Read totaling $1.5 million, and (ii) an upfront license fee paid to us for the licensing of a certain trademark to be used by an upholstery customer totaling $146,000.

Revenue recognized during the three-month periods ended August 3, 2025, and July 28, 2024, that was included in the deferred revenue balance at the beginning of each period was $437,000 and $595,000, respectively.

Disaggregation of Revenue

The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the three-month period ended August 3, 2025:



(dollars in thousands)	Bedding		Upholstery		Total
Products transferred at a point in time	$	28,046	$	20,774	$	48,820
Services transferred over time		—		1,871		1,871
Total net sales	$	28,046	$	22,645	$	50,691

The following table presents our disaggregated revenue by segment, timing of revenue recognition, and product sales versus services rendered for the three-month period ended July 28, 2024:



(dollars in thousands)	Bedding		Upholstery		Total
Products transferred at a point in time	$	28,076	$	25,465	$	53,541
Services transferred over time		—		2,996		2,996
Total net sales	$	28,076	$	28,461	$	56,537

5. Inventories

Inventories are carried at the lower of cost or net realizable value. Cost is determined using the FIFO (first-in, first-out) method.

A summary of inventories follows:


(dollars in thousands)	August 3, 2025		July 28, 2024		April 27, 2025
Raw materials	$	5,698	$	7,076	$	5,733
Work-in-process		3,374		1,876		2,747
Finished goods		41,037		32,716		40,829
	$	50,109	$	41,668	$	49,309

I-9

6. Intangible Assets

A summary of intangible assets follows:


(dollars in thousands)	August 3, 2025		July 28, 2024		April 27, 2025
Tradename	$	—	$	540	$	—
Customer relationships, net		659		960		734
Non-compete agreement, net		206		282		226
	$	865	$	1,782	$	960

Tradename

Our tradename pertains to Read, a separate reporting unit within the upholstery segment. This tradename was determined to have an indefinite useful life at the time of its acquisition, and therefore was not amortized.

We were required to assess our tradename for impairment annually or between annual tests if we believed indicators of impairment existed. Accordingly, we performed our annual impairment assessment of Read's tradename as of April 27, 2025. Initially, we performed a qualitative assessment in which we concluded it was more-likely-than-not the fair value of Read's tradename was less than its carrying amount. This conclusion was based on management's decision, announced on April 24, 2025, to strategically transform the company's operating model by combining certain activities within the bedding and upholstery business segments and creating one integrated and Culp-branded business. Since the company is transforming to a single Culp-branded business, Read's tradename will be phased out during fiscal 2026, and will no longer be used to market upholstery fabric products to customers associated with the hospitality industry. Consequently, we recorded an asset impairment charge totaling $540,000 during the fourth quarter of fiscal 2025, which represents the entire carrying value of our Read tradename. This charge was classified as restructuring expense within our Consolidated Statement of Net Loss for the twelve-month period ended April 27, 2025.

Customer Relationships

A summary of the change in the carrying amount of our customer relationships follows:


	Three months ended
(dollars in thousands)	August 3, 2025			July 28, 2024
Beginning balance	$	734		$	1,035
Amortization expense		(75	)		(75	)
Ending balance	$	659		$	960

Our customer relationships are amortized on a straight-line basis over useful lives ranging from nine to seventeen years.

The gross carrying amount of our customer relationships was $3.1 million as of August 3, 2025, July 28, 2024, and April 27, 2025, respectively. Accumulated amortization for these customer relationships was $2.5 million, $2.1 million, and $2.4 million as of August 3, 2025, July 28, 2024, and April 27, 2025, respectively.

The remaining amortization expense for each of the next five fiscal years and thereafter is as follows: FY 2026 - $226,000; FY 2027 - $280,000; FY 2028 - $51,000; FY 2029 - $51,000; and FY 2030 - $51,000.

The weighted average amortization period for our customer relationships was 2.8 years as of August 3, 2025.

Non-Compete Agreement

A summary of the change in the carrying amount of our non-compete agreement follows:


	Three months ended
(dollars in thousands)	August 3, 2025			July 28, 2024
Beginning balance	$	226		$	301
Amortization expense		(20	)		(19	)
Ending balance	$	206		$	282

I-10

Our non-compete agreement is associated with a prior acquisition by our bedding segment and is amortized on a straight-line basis over the fifteen-year life of the agreement.

The gross carrying amount of our non-compete agreement was $2.0 million as of August 3, 2025, July 28, 2024, and April 27, 2025, respectively. Accumulated amortization for our non-compete agreement was $1.9 million, $1.8 million, and $1.8 million as of August 3, 2025, July 28, 2024, and April 27, 2025, respectively.

The remaining amortization expense for each of the next three fiscal years is as follows: FY 2026 - $56,000; FY 2027 - $76,000; and FY 2028 - $74,000.

The weighted average amortization period for the non-compete agreement was 2.8 years as of August 3, 2025.

Impairment of Definite Lived Assets - Bedding Segment

As of August 3, 2025, management reviewed the long-lived assets associated with our bedding segment, which consisted of property, plant, and equipment, right of use assets, and definite-lived intangible assets (collectively known as the "Bedding Asset Group"), for impairment, as events and changes in circumstances occurred that indicated the carrying amount of the Bedding Asset Group may not be recoverable. The bedding segment has experienced significant cumulative operating losses totaling $33.2 million commencing in the second quarter of fiscal 2023, and continuing through the first quarter of fiscal 2026. We believe the significant cumulative operating losses started from a decline in consumer discretionary spending on bedding products, which we believe stemmed from the following factors: (i) inflationary effects of commodities such as gas, food, and other necessities; (ii) a significant increase in interest rates; (iii) the pulling forward of demand for home goods products during the early years of the COVID-19 pandemic, which such demand subsequently shifting to travel, leisure, and other services; and (iv) excess inventory held by customers due to the decline in consumer demand.

Based on the above evidence, we were required to determine the recoverability of the Bedding Asset Group, which is classified as held and used, by comparing the carrying amount of the Bedding Asset Group to the sum of the future undiscounted cash flows expected to result from its use and eventual disposition. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized for the excess of the carrying amount over the fair value of the asset group. The carrying amount of the Bedding Asset Group totaled $22.6 million, which represents property, plant, and equipment of $22.1 million, right of use assets of $50,000, customer relationships of $243,000, and a non-compete agreement of $206,000. The total carrying amount of the Bedding Asset Group did not exceed the sum of its future undiscounted cash flows from its use and disposition. As a result, we determined there was no impairment associated with the Bedding Asset Group as of August 3, 2025.

7. Notes Receivable

Rayonese Textile, Inc.

In connection with the sale of the company's manufacturing facility and related land (collectively referred to as the "Property") located in Quebec, Canada, we entered into an amended agreement, effective April 2, 2025, which incorporated an original agreement and prior amendment (collectively referred to as the "Sales Agreement"), to sell our Property to a third party (the "Seller") with a closing date of April 30, 2025. Pursuant to the Sales Agreement, the total sales price for the Property was $8.6 million CAD ($6.2 million USD as of April 30, 2025), with $2.0 million CAD ($1.4 million USD as of April 30, 2025) paid prior to and at closing, and the remaining balance of $6.6 million CAD ($4.8 million USD as of April 30, 2025) due by April 30, 2026. Interest is earned on the note receivable at rates ranging from 6% to 10% and collected monthly as specified in the Sales Agreement. Refer to Notes 8 and 10 of the consolidated financial statements for further details of the sale of the Property and a description of our restructuring activities.

As of August 3, 2025, the outstanding balance of this note receivable was $6.6 million CAD ($4.8 million USD) which represents its fair value because of the relative short maturity of this note receivable as specified in the Sales Agreement. As of August 3, 2025, we believe there is no expected credit loss related to the collectibility of this note receivable, as the Seller has made all the required interest payments as specified in the Sales Agreement. We will continue to evaluate the facts and circumstances at the end of each reporting period to determine if an expected credit loss is deemed necessary.

I-11

Culp Upholstery Fabrics - Haiti, Ltd. ("CUF Haiti")

Effective January 24, 2023, CUF Haiti entered into an agreement to terminate a lease ("CUF Termination Agreement") of a facility located in Ouanaminthe, Haiti. Pursuant to the terms of the CUF Termination Agreement, the original lease agreement (the "Original Lease") was formally terminated when CUF Haiti vacated and returned possession of the leased facility to the lessor. Subsequently, a third party (the "Lessee") took possession of this facility and agreed to pay CUF Haiti $2.4 million in the form of a note receivable over a period commencing on April 1, 2023 and ending on December 31, 2029, based on the terms stated in the CUF Termination Agreement. In addition , as described in the CUF Termination Agreement, an affiliate of the Lessee guaranteed payment in full of all amounts due and payable to CUF Haiti by the Lessee, and CUF Haiti was fully and unconditionally discharged from all of its remaining obligations under the Original Lease.

The initial gross carrying amount of this note receivable was $2.4 million and was recorded at its fair value of $2.0 million, which represented the present value of future discounted cash flows based on the payment amounts and timing of such payments due from the Lessee as stated in the CUF Termination Agreement. We used an interest rate of 6% to determine the present value of the future discounted cash flows, based on significant unobservable inputs and assumptions determined by management such as: (i) the credit characteristics of the Lessee and guarantor of the CUF Termination Agreement; (ii) the length of the payment terms as defined in the CUF Termination Agreement; (iii) the payment terms as defined in the CUF Termination Agreement being denominated in USD; and (iv) the fact that the facility is located in, and the Lessee and guarantor conduct business in, Haiti, a foreign country. Since management used significant unobservable inputs and assumptions to determine the fair value of this note receivable, this note receivable was classified as Level 3 within the fair value hierarchy (see Note 12 of the consolidated financial statements for further explanation of the fair value hierarchy).

Effective May 1, 2023, CUF Haiti formally assigned this note receivable to Culp, Inc. (its U.S. parent).

As of August 3, 2025, July 28, 2024, and April 27, 2025, the outstanding balance under this agreement was $1.4 million, $1.7 million, and $1.5 million, respectively. As of August 3, 2025, we believe there is no expected credit loss related to the collectability of this note receivable, as the Lessee has made all of the required principal payments stated in the CUF Termination Agreement. We will continue to evaluate the facts and circumstances at the end of each reporting period to determine if an expected credit loss is deemed necessary.

Other

The following table represents the remaining future principal payments for the notes receivable referenced above as of August 3, 2025:


(dollars in thousands)
2026	$	5,088
2027		330
2028		360
2029		360
2030		240
Undiscounted value of note receivable	$	6,378
Less: unearned interest income		(196	)
Present value of note receivable	$	6,182

As of August 3, 2025, notes receivable totaled $6.2 million, of which $5.1 million and $1.1 million were classified as short-term notes receivable and long-term notes receivable, respectively. As of July 28, 2024, notes receivable totaled $1.7 million, of which $268,000 and $1.4 million were classified as short-term notes receivable and long-term notes receivable, respectively. As of April 27, 2025, notes receivable totaled $1.5 million, of which $280,000 and $1.2 million were classified as short-term notes receivable and long-term notes receivable, respectively.

We classified amortization of unearned interest income totaling $22,000 and $26,000 within interest income in our consolidated statements of net loss during the three-month periods ended August 3, 2025, and July 28, 2024, respectively.

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8. Assets Held for Sale

A summary of assets held for sale follows:


(dollars in thousands)	August 3, 2025		July 28, 2024		April 27, 2025
Bedding - U.S. (1) (2)	$	40	$	357	$	—
Bedding - Haiti (3)		—		250		—
Bedding - Canada (4)		—		—		2,177
	$	40	$	607	$	2,177

(1) In connection with our restructuring activities announced on April 24, 2025 (see Note 10 of the consolidated financial statements for further details), equipment with a fair value totaling $40,000 was classified as held for sale as of August 3, 2025. We determined that the carrying value of $296,000 was higher than its fair value of $40,000, and accordingly, we recorded an impairment charge of $256,000 during the first quarter of fiscal 2026. This impairment charge was classified within restructuring credit in the Consolidated Statement of Net Loss for the three-month period ended August 3, 2025. The fair value of this equipment was based on quoted market prices from dealers of this type of equipment, which such prices are either directly or indirectly observable, and therefore we believe this information is classified as level 2 within the fair value hierarchy (see note 12 of the consolidated financial statements for further explanation of the fair value hierarchy).

(2) In connection with our restructuring activities announced on May 1, 2024 (see Note 10 of the consolidated financial statements for further details), equipment with a carrying value totaling $357,000 was classified as held for sale as of July 28, 2024. We determined that the fair value of this equipment exceeded its carrying value, and therefore, no impairment charge was recorded during the first quarter of fiscal 2025. The fair value of this equipment was based on quoted market prices from dealers of this type of equipment, which such prices are either directly or indirectly observable, and therefore we believe this information is classified as level 2 within the fair value hierarchy (see note 12 of the consolidated financial statements for further explanation of the fair value hierarchy).

(3) In connection with our restructuring activities announced on May 1, 2024 (see Note 10 of the consolidated financial statements for further details), we entered into an agreement ("Termination Agreement") on August 2, 2024, to terminate a lease of a manufacturing facility ("Right of Use Asset") located in Ouanaminthe, Haiti. Accordingly, as of July 28, 2024, we classified this Right of Use Asset as held for sale at its fair value totaling $250,000, which was lower than its carrying value of $656,000. Consequently, we recorded an impairment charge of $406,000 that was classified as restructuring expense in the Consolidated Statement of Net Loss for the three-month period ended July 28, 2024. The fair value of this Right of Use Asset represents the amount due from the Lessor totaling $250,000, which is the amount stated in the Termination Agreement, and was paid on February 28, 2025. We believe the fair value amount of $250,000 as stated in the Termination Agreement, represents a significant observable input, and therefore we believe this information was classified as Level 2 within the fair value hierarchy (see note 12 of the consolidated financial statements for further explanation of the fair value hierarchy).

(4) In connection with the closure of our manufacturing facility located in Quebec, Canada, we classified Property of $2.1 million and certain equipment totaling $75,000 as held for sale as of April 27, 2025. We determined that the fair value of these assets held for sale exceeded its carrying value, and therefore no impairment change was recorded during the fourth quarter of fiscal 2025. The fair value of the Property and equipment was based on quoted market prices from third party sales offers, which we believe are significant observable inputs, and therefore we believe this information was classified as Level 2 within the fair value hierarchy (see note 12 of the consolidated financial statements for further explanation of the fair value hierarchy). During the first quarter of fiscal 2026, we sold the Property and equipment, and recognized a gain from this sale totaling $4.0 million that was classified within restructuring credit in the Consolidated Statement of Net Loss for the period ended August 3, 2025. See notes 7 and 10 of the consolidated financial statements for further details regarding the Sales Agreement associated with the sale of the Property and description of the restructuring announced on May 1, 2024.

I-13

9. Accrued Expenses

A summary of accrued expenses follows:


(dollars in thousands)	August 3, 2025		July 28, 2024		April 27, 2025
Compensation, commissions and related benefits	$	3,360	$	3,310	$	2,534
Other accrued expenses		2,490		2,787		2,799
	$	5,850	$	6,097	$	5,333

10. Restructuring Activities

Restructuring Activities Announced May 1, 2024

On April 29, 2024 (first quarter of fiscal 2025), our board of directors made a decision to: (i) consolidate the company's North American mattress fabrics operations, including the closure and sale of the Property located in Quebec, Canada; (ii) 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; (iii) transition the bedding segment's weaving operation to a strategic sourcing model through the company's long-standing supply partners; (iv) 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 (v) reduce unallocated corporate and shared service expenses.

As of the end of the first quarter of fiscal 2026, all of the above restructuring activities related to this announcement have been completed, including the sale of the Property and certain equipment located in Quebec, Canada. Accordingly, we recorded a gain from the sale of this Property and equipment totaling $4.0 million that was classified within restructuring credit in the Consolidated Statement of Net Loss for the period ended August 3, 2025. See notes 7 and 8 of the consolidated financial statements for further details regarding the Sales Agreement associated with the sale of the Property and determination of fair value regarding the Property and equipment.

During three months ended August 3, 2025, we recorded a restructuring credit of $3.9 million that was mostly related to the gain on sale of the Property noted above and was solely related to the bedding segment. Since inception of this restructuring initiative, we incurred cumulative restructuring and restructuring related charges totaling $4.8 million, most of which related to the bedding segment.

Restructuring Activities Announced April 24, 2025

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 bedding and upholstery segments and create one integrated Culp-branded business. As part of this strategic transformation, we will close our leased facilities operated by our upholstery segment located in Burlington, North Carolina, and Knoxville, Tennessee, and will transition their production and distribution activities to a shared management model within our owned facility located in Stokesdale, North Carolina, which has historically been solely operated by our bedding segment.

During the three months ended August 3, 2025, we incurred restructuring expense of $349,000 related to this strategic transformation, of which $256,000 and $93,000 relate to the bedding and upholstery segments, respectively. The estimated cumulative restructuring and restructuring related charges for this initiative are expected to be $2.2 million, of which $674,000 is expected to be cash expenditures. The $2.2 million of estimated cumulative restructuring and restructuring related charges associated with this initiative 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 $450,000 associated with the disposal and markdowns of inventory; (iii) non-cash lease termination costs of $125,000; (iv) non-cash accelerated depreciation expense, along with impairments and losses on disposal of fixed assets totaling $424,000; (v) cash charges for employee termination benefits of $207,000; (vi) cash charges for facility consolidation and relocation expenses of $432,000; (vii) and cash charges for other associated costs of $35,000. We expect the initiatives associated with this strategic transformation to be substantially completed by December 31, 2025.

I-14

The following summarizes restructuring and restructuring related charges associated with the above announcements for the three month periods ended August 3, 2025 and July 28, 2024:


	Three Months Ended			Three Months Ended
(dollars in thousands)	August 3, 2025			July 28, 2024
Additional depreciation expense for shortened useful lives	$	22		$	875
Employee termination benefits		(4	)		689
Lease Termination Costs		62			670
Facility consolidation and relocation expenses		52			251
Net (gain) loss on sale and impairment of property, plant, and equipment		(3,747	)		95
Other Associated Costs		107			51
Loss on disposal and markdowns of inventory		—			116
Restructuring (credit) expense and restructuring related charge (1) (2)	$	(3,508	)	$	2,747

(1) The total $3.5 million credit was classified within restructuring credit in the Consolidated Statement of Net Loss for the three-month period ended August 3, 2025. The $3.5 million restructuring credit mostly related to the bedding segment.

(2) Of the total $2.7 million restructuring and restructuring related charges, $2.6 million and $116,000 were classified within restructuring expense and cost of sales, respectively, in the Consolidated Statement of Net Loss for the three month period ended July 28, 2024. The $2.7 million expense mostly related to the bedding fabrics segment.

The following summarizes accrued restructuring costs for the three-month period ended August 3, 2025:


	Employee			Other			Facility Consolidation
	Termination			Associated			and Relocation
(dollars in thousands)	Benefits			Costs			Costs			Total
Beginning balance	$	522		$	88		$	—		$	610
Expenses incurred		—			84			52			136
Change in estimate adjustments		(4	)		23			—			19
Payments		(446	)		(163	)		(52	)		(661	)
Foreign currency exchange remeasurement		—			1			—			1
Ending Balance	$	72		$	33		$	—		$	105

The following summarizes accrued restructuring costs for the three-month period ended July 28, 2024:


	Employee			Other			Facility Consolidation
	Termination			Associated			and Relocation
(dollars in thousands)	Benefits			Costs			Costs		Total
Beginning balance (1)	$	—		$	3		$	—	$	3
Expenses incurred		689			302			—		991
Payments		(72	)		(282	)		—		(354	)
Foreign currency exchange remeasurement		(7	)		—			—		(7	)
Ending Balance	$	610		$	23		$	—	$	633

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

I-15

11. Lines of Credit

The summary of outstanding borrowings under our lines of credit follows:


(dollars in thousands)	August 3, 2025		July 28, 2024		April 27, 2025
Wells Fargo - U.S. revolving line of credit	$	7,025	$	—	$	4,600
Agricultural Bank of China - revolving line of credit		4,031		4,017		3,988
Agricultural Bank of China - supplier financing arrangements		2,780		—		2,751
Agricultural Bank of China - working capital loan		2,919		—		—
Bank of China - working capital loan		1,390		—		1,375
Lines of credit (1)	$	18,145	$	4,017	$	12,714

(1) Of the total $18.1 million, $11.1 million and $7.0 million were recorded within lines of credit - current and lines of credit - long-term, respectively, within the Consolidated Balance Sheet as of August 3, 2025. The total $4.0 million was recorded within lines of credit - current within the Consolidated Balance Sheet as of July 28, 2024. Of the total $12.7 million, $8.1 million and $4.6 million were recorded within lines of credit - current and lines of credit - long-term, respectively, within the Consolidated Balance Sheet as of April 27, 2025.

Revolving Credit Agreement – United States

On June 12, 2025, Culp, Inc., as borrower (the “Company”), and Read and Culp Fabrics Global, LLC, each a wholly owned domestic subsidiary of the Company, as guarantors (collectively, the “Guarantors”), entered into a Third Amendment to the Second Amended and Restated Credit Agreement (the “Third Amendment”), by and among the Company, the Guarantors and Wells Fargo Bank, National Association, as lender (the “Lender”). The Third Amendment amends the Second Amended and Restated Credit Agreement dated as of January 19, 2023, (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”), an asset-based revolving credit facility (the “ABL Facility”). Proceeds from the ABL Facility may be used to pay fees and expenses related to the ABL Facility and to provide funding for ongoing working capital and general corporate purposes. The Credit Agreement amended, restated and superseded, and served as a replacement for, the Amended and Restated Credit Agreement, dated as of June 24, 2022, as amended, by and between the Company and the Lender.

Pursuant to the Third Amendment, the term of the ABL Facility was extended for three years and now matures on June 12, 2028.

Pursuant to the Credit Agreement, the ABL Facility contains the following terms:

The ABL Facility may be used for revolving credit loans and letters of credit from time to time up to a maximum principal amount of $30.0 million, which may be increased upon mutual agreement by up to $10.0 million via an accordion feature, subject to the limitations described below.

The Company may issue letters of credit under a sub-facility within the ABL Facility in an aggregate amount not to exceed $2 million.

The amount available under the ABL Facility is limited by a borrowing base consisting of certain eligible accounts receivable and inventory, reduced by specified reserves, as follows:

•

85% of eligible accounts receivable, plus

•

the least of:

i) the sum of:

▪

lesser of (i) 65% of eligible inventory valued at cost based on a first-in first-out basis (net of intercompany profits) and (ii) 85% of the net-orderly-liquidation value percentage of eligible inventory, plus

▪

the least of (i) 65% of eligible in-transit inventory valued at cost based on a first-in first-out basis (net of intercompany profits), (ii) 85% of the net-orderly-liquidation value percentage of eligible in-transit inventory, and (iii) $4.0 million, plus

I-16

▪

the lesser of (i) 65% of eligible raw material inventory valued at cost based on a first-in first-out basis (net of intercompany profits) and (ii) 85% of the net-orderly-liquidation value percentage of eligible raw material inventory

In each case, the net-orderly-liquidation value is calculated based on the lower of (i) a first-in first-out basis and (ii) market value, and is (A) net of intercompany profits, (B) net of write-ups and write-downs in value with respect to foreign currency exchange rates and (C) consistent with most recent appraisals received and acceptable to Lender.

ii) $20.0 million; and

iii) An amount equal to 200% of eligible accounts receivable,

•

minus applicable reserves.

The ABL Facility permits both base rate borrowings and borrowings that bear interest at annual rate equal to daily simple SOFR (the secured overnight financing rate administered by the Federal Reserve Bank of New York (or its successor)), in each case, plus an Applicable Margin equal to: (i) 75 basis points for base rate borrowings and 175 basis points for SOFR-based borrowings (if the average monthly excess availability under the ABL Facility is greater than 66 2/3%), (ii) 100 basis points for base rate borrowings and 200 basis points for SOFR-based borrowings (if the average monthly excess availability under the ABL Facility is less than or equal to 66 2/3% and greater than 33 1/3%), or (iii) 125 basis points for base rate borrowings and 225 basis points for SOFR-based borrowings (if the average monthly excess availability under the ABL Facility is less than or equal to 33 1/3%), as applicable, with a fee on unutilized commitments at an annual rate of 37.5 basis points (if usage is equal to or greater than 50% of the maximum credit available under the ABL Facility) or 50 basis points (if usage is less than 50% of the maximum credit available under the ABL Facility).

Outstanding balances associated with the ABL Facility may be prepaid from time to time, in whole or in part, without a prepayment penalty or premium. In addition, customary mandatory prepayments of the loans under the ABL Facility are required upon the occurrence of certain events including, without limitation, outstanding borrowing exposures exceeding the borrowing base and certain dispositions of assets outside of the ordinary course of business. Accrued interest is payable monthly in arrears.

The Company’s obligations under the ABL Facility (and certain related obligations) are: (a) guaranteed by the Guarantors and each of the company’s future domestic subsidiaries is required to guarantee the ABL Facility on a senior secured basis (such guarantors and the company, the “Loan Parties”) and (b) secured by all assets of the Loan Parties on a first priority basis, subject to certain exceptions.

Cash Dominion. Under the terms of the ABL Facility, if: (i) an event of default has occurred or (ii) excess borrowing availability under the ABL Facility (based on the lesser of $30.0 million and the borrowing base) (the "Excess Availability") falls below 6.0 million at such time, the Loan Parties will become subject to cash dominion, which will require prepayment of loans under the ABL Facility with the cash deposited in certain deposit accounts of the Loan Parties, including a concentration account, and will restrict the Loan Parties' ability to transfer cash from their concentration account. Such cash dominion period (a "Dominion Period") shall end when Excess Availability shall be equal to or greater than $6.0 million for a period of 60 consecutive days and no event of default is continuing.

Financial Covenants. The ABL Facility contains a springing covenant requiring that the Company's fixed charge coverage ratio be no less than 1.10 to 1.00 during any period that: (i) an event of default has occurred or (ii) Excess Availability under the ABL

I-17

Facility falls below $4.5 million at such time. Such compliance period shall end when Excess Availability shall be equal to or greater than $4.5 million for a period of 60 consecutive days and no event of default is continuing.

Affirmative and Restrictive Covenants. The Credit Agreement governing the ABL Facility contains customary representations and warranties, affirmative and negative covenants (subject, in each case, to exceptions and qualifications) and events of default, including covenants that limit the company's ability to, among other things:

•

incur additional indebtedness;

•

make investments;

•

pay dividends and make other restricted payments;

•

sell certain assets;

•

create liens;

•

consolidate, merge, sell or otherwise dispose of all or substantially all of the company's assets; and

•

enter into transactions with affiliates

The applicable interest rate under the ABL Facility was 6.11%, 6.84%, and 5.78% as of August 3, 2025, July 28, 2024, and April 27, 2025, respectively.

There were $925,000, $535,000, and $925,000 of outstanding letters of credit provided by the ABL Facility as of August 3, 2025, July 28, 2024, and April 27, 2025, respectively. As of August 3, 2025, we had $1.1 million remaining for the issuance of additional letters of credit based on an aggregate letters of credit amount not to exceed $2.0 million as stated in the Credit Agreement.

As of August 3, 2025, our available borrowings calculated under the provisions of the Credit Agreement totaled $17.6 million.

Credit Agreements - China Operations

Agricultural Bank of China - Unsecured Credit Agreement

Effective March 5, 2025, we entered into an unsecured credit agreement that provides for a line of credit up to 29.0 million RMB ($4.0 million USD as of August 3, 2025) that expires on March 4, 2026. Interest charged under this agreement is based on the Chinese Loan Prime Rate ("LPR") minus 50 basis points (applicable interest rates of 2.6%, 2.85%, and 2.6% as of August 3, 2025, July 28, 2024, and April 27, 2025, respectively). As of August 3, 2025, July 28, 2024, and April 27, 2025, the outstanding balance under this agreement was $4.0 million USD.

Agricultural Bank of China - Supplier Financing Arrangements

Based on the company's request, certain suppliers entered into supply chain financing arrangements, which such arrangements totaled 20.0 million RMB ($2.8 million USD as of August 3, 2025), and are set to expire on dates ranging from April 2, 2026, through April 23, 2026. As a result of these expiration dates, we were able to extend our payment terms beyond those that are normal and customary. The suppliers that entered into these supply chain financing arrangements assigned their receivables due from the company to the Agricultural Bank of China, under a reverse factoring agreement with no recourse, and, in turn, received payments from the Agricultural Bank of China under terms that are normal and customary. Interest was charged under these agreements at a fixed rate of 2.72% and was paid in full at the time these agreements were effective. The outstanding balance associated with this agreement was $2.8 million USD and was classified as lines of credit-current in the Consolidated Balance Sheets as of August 3, 2025, and April 27, 2025, respectively. There were no supplier financing arrangements as of July 28, 2024.

I-18

The following summarizes the activity associated with our supply chain financing arrangements for the three-month periods ended August 3, 2025 and July 28, 2024:


	Three Months		Three Months
(dollars in thousands)	August 3, 2025		July 28, 2024
Outstanding at the beginning of the year	$	2,751	$	—
Vendor invoices financed during the year		—		—
Vendor invoices paid during the year		—		—
Foreign currency exchange rate remeasurement		29		—
Ending balance	$	2,780	$	—

Agricultural Bank of China - Working Capital Loans

During the first quarter of fiscal 2026, we entered into unsecured loan agreements totaling 21.0 million RMB ($2.9 million USD as of August 3, 2025), which such agreements are set to expire on dates ranging from May 7, 2026, through May 28, 2026. Interest charged under these agreements is based on the Chinese LPR 50 basis points (applicable interest rate of 2.6% as of August 3, 2025). As of August 3, 2025, the outstanding balance under this agreement was $2.9 million USD.

Bank of China - Credit Agreement

Effective November 5, 2024, we entered into a credit agreement (“Agreement”) that provides for a 10.0 million RMB ($1.4 million USD as of August 3, 2025) unsecured working capital loan and 25.0 million RMB ($3.5 million USD as of August 3, 2025) for letters of credit, guarantees, and other financing arrangements secured by trade accounts receivable associated with the company’s operations located in China. The working capital loan and letters of credit expire on November 6, 2025, and July 31, 2025, respectively. Currently, we are negotiating the terms for renewal of the working capital loan agreement that expires November 6, 2025, along with the letters of credit, guarantees, and other financing arrangements that expired on July 31, 2025. Interest charged under the Agreement is based on the Chinese LPR in China minus 50 basis points (applicable interest rates of 2.6% as of August 3, 2025 and April 27, 2025, respectively). As of August 3, 2025 and April 27, 2025, the outstanding balance under this Agreement were $1.4 million USD. In addition, as of August 3, 2025 and April 27, 2025, there were no outstanding letters of credit under this Agreement.

Other

Our loan agreements require, among other things, that we maintain compliance with certain financial covenants. As of August 3, 2025, we were in compliance with our financial covenants.

Interest payments totaled $185,000 during the three-month period ended August 3, 2025. There were no interest payments during the three-month period ended July 28, 2024.

12. Fair Value

ASC Topic 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the company’s assumptions (unobservable inputs). Determining where an asset or liability falls within that hierarchy depends on the lowest level input that is significant to the fair value measurement as a whole. An adjustment to the pricing method used within either Level 1 or Level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy.

The hierarchy consists of three broad levels as follows:

Level 1 – Quoted market prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than Level 1 inputs that are either directly or indirectly observable; and

Level 3 – Unobservable inputs developed using the company’s estimates and assumptions, which reflect those that market participants would use.

I-19

The determination of where an asset or liability falls in the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter based on various factors, and it is possible that an asset or liability may be classified differently from quarter to quarter. However, we expect that changes in classifications between different levels will be rare.

Recurring Basis

The following tables present information about assets measured at fair value on a recurring basis:

          
         Fair value measurements as of August 3, 2025, using:

          
         Quoted prices

         Significant

          
         in active

         other

         Significant

          
         markets for

         observable

         unobservable

          
         identical assets

         inputs

         inputs

         (amounts in thousands)

         Level 1

         Level 2

         Level 3

         Total

         Assets:

U.S. Government Money Market Fund

5,568

N/A

N/A

5,568

Growth Allocation Mutual Funds

894

N/A

N/A

894

S&P 500 Index Fund

340

N/A

N/A

340

Other

308

N/A

N/A

308

          
         Fair value measurements as of July 28, 2024, using:

          
         Quoted prices

         Significant

          
         in active

         other

         Significant

          
         markets for

         observable

         unobservable

          
         identical assets

         inputs

         inputs

         (amounts in thousands)

         Level 1

         Level 2

         Level 3

         Total

         Assets:

U.S. Government Money Market Fund

6,823

N/A

N/A

6,823

Growth Allocation Mutual Funds

756

N/A

N/A

756

S&P 500 Index Fund

212

N/A

N/A

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

Emerging Growth Company

CULP INC 10-Q