8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 27, 2024

Culp, Inc.

(Exact name of Registrant as Specified in Its Charter)

North Carolina	1-12597	56-1001967
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
1823 Eastchester Drive
High Point, North Carolina		27265
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: 336 889-5161

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.05 per share	CULP	The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

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. ☐

This report and the exhibit attached hereto contain “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties that may cause actual events and results to differ materially from such statements. Further, forward looking statements are intended to speak only as of the date on which they are made, and we disclaim any duty to update such statements to reflect any changes in management’s expectations or any change in the assumptions or circumstances on which such statements are based, whether due to new information, future events, or otherwise. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often but not always characterized by qualifying words such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “plan,” “project,” and their derivatives, and include but are not limited to statements about expectations, projections, or trends for our future operations, strategic initiatives and plans, restructurings, production levels, new product launches, sales, profit margins, profitability, operating (loss) income, capital expenditures, working capital levels, cost savings (including, without limitation, anticipated cost savings from restructuring actions), income taxes, SG&A or other expenses, pre-tax (loss) income, earnings, cash flow, and other performance or liquidity measures, as well as any statements regarding dividends, share repurchases, liquidity, uses of cash and cash requirements, borrowing capacity, investments, potential acquisitions, restructuring and restructuring-related charges, expenses, and/or credits, future economic or industry trends, public health epidemics, or future developments. There can be no assurance that we will realize these expectations or meet our guidance, or that these beliefs will prove correct.

Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on our business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect us adversely. The future performance of our business depends in part on our success in conducting and finalizing acquisition negotiations and integrating acquired businesses into our existing operations. Changes in consumer tastes or preferences toward products not produced by us could erode demand for our products. Changes in tariffs or trade policy, including changes in U.S. trade enforcement priorities, or changes in the value of the U.S. dollar versus other currencies, could affect our financial results because a significant portion of our operations are located outside the United States. Strengthening of the U.S. dollar against other currencies could make our products less competitive on the basis of price in markets outside the United States, and strengthening of currencies in Canada and China can have a negative impact on our sales of products produced in those places. In addition, because our foreign operations use the U.S. dollar as their functional currency, changes in the exchange rate between the local currency of those operations and the U.S dollar can affect our reported profits from those foreign operations. Also, economic or political instability in international areas could affect our operations or sources of goods in those areas, as well as demand for our products in international markets. The impact of public health epidemics on employees, customers, suppliers, and the global economy, such as the recent coronavirus pandemic, could also adversely affect our operations and financial performance. In addition, the impact of potential asset impairments, including impairments of property, plant, and equipment, inventory, or intangible assets, as well as the impact of valuation allowances applied against our net deferred income tax assets, could affect our financial results. Increases in freight costs, labor costs, and raw material prices, including increases in market prices for petrochemical products, can also significantly affect the prices we pay for shipping, labor, and raw materials, respectively, and in turn, increase our operating costs and decrease our profitability. Also, our success in diversifying our supply chain with reliable partners to effectively service our global platform could affect our operations and adversely affect our financial results. Finally, the future performance of our business also depends on our ability to successfully restructure our mattress fabric operations and return the segment to profitability. Further information about these factors, as well as other factors that could affect our future operations or financial results and the matters discussed in forward-looking statements, is included in Item 1A “Risk Factors” in our most recent Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances

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may not occur. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results.

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Item 2.02 – Results of Operations and Financial Condition

On June 27, 2024, we issued a news release to announce our financial results for our fourth quarter and fiscal year ended April 28, 2024. A copy of the news release is attached hereto as Exhibit 99.1.

The information set forth in this Item 2.02 of this Current Report, and in Exhibit 99.1, is intended to be “furnished” under Item 2.02 of Form 8-K. Such information shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

The news release contains adjusted income statement information for the three and twelve-month periods ending April 28, 2024, and April 30, 2023, respectively, which disclose adjusted loss from operations, a non-U.S. GAAP performance measure that eliminates items which are not expected to occur on a recurring or regular basis. For the three and twelve-month periods ending April 28, 2024, these items include, as applicable for the period presented, restructuring expense associated with the rationalization of the upholstery fabrics finishing operation located in Shanghai, China, and the discontinued production of cut and sewn upholstery kits in Ouanaminthe, Haiti. For the three and twelve-month periods ending April 30, 2023, these items include, as applicable for the period presented, restructuring expense related to restructuring activities for the company's cut and sew upholstery fabric operation located in Shanghai, China, during the second quarter of fiscal 2023, and for the company's cut and sew upholstery fabric operation located in Ouanaminthe, Haiti, during the third and fourth quarters of fiscal 2023. The company has included this adjusted information in order to show operational performance excluding the effects of items not expected to occur on a recurring or regular basis. Details of these calculations and a reconciliation to information from our U.S. GAAP financial statements are set forth in the news release. Management believes this presentation aids in the comparison of financial results among comparable financial periods. Management uses adjusted income statement information in evaluating the financial performance of our overall operations and business segments. Also, adjusted income statement information is used as a performance measure in our incentive-based executive compensation program. We note, however, that this adjusted income statement information should not be viewed in isolation or as a substitute for loss from operations calculated in accordance with U.S. GAAP.

The news release contains disclosures about free cash flow, a non-U.S. GAAP liquidity measure that we define as net cash (used in) provided by operating activities, less cash capital expenditures and payments on vendor-financed capital expenditures, plus any proceeds from sale of property, plant, and equipment, plus proceeds from note receivable, plus proceeds from the sale of investments associated with our rabbi trust, less the purchase of investments associated with our rabbi trust, and plus or minus the effects of foreign currency exchange rate changes on cash and cash equivalents, in each case to the extent any such amount is incurred during the period presented. Details of these calculations and a reconciliation to information from our U.S. GAAP financial statements are set forth in the news release. Management believes the disclosure of free cash flow provides useful information to investors because it measures our available cash flow for potential debt repayment, stock repurchases, dividends, additions to cash and investments, or other corporate purposes. We note, however, that not all of the company’s free cash flow is available for discretionary spending, as we may have mandatory debt payments and other cash requirements that must be deducted from our cash available for future use. In operating our business, management uses free cash flow to make decisions about what commitments of cash to make for operations, such as capital expenditures (and possible financing arrangements for these expenditures), purchases of inventory or supplies, SG&A expenditure levels, compensation, and other commitments of cash, while still allowing for adequate cash to meet known future commitments for cash, such as debt repayment, and also for making decisions about dividend payments and share repurchases.

The news release contains disclosures about our Adjusted EBITDA, which is a non-U.S. GAAP performance measure that reflects net (loss) income excluding income tax expense (benefit), net interest income, and restructuring expense or credit and restructuring related charges or credits, as well as depreciation and amortization expense, and stock-based compensation expense. This measure also excludes other non-recurring charges and credits associated with our business, if and to the extent any such amount is incurred during the period presented. Details of these calculations and a reconciliation to information from our U.S. GAAP financial statements are set forth in the news release. We believe presentation of Adjusted EBITDA is useful to investors because earnings before interest income and expense, income taxes, depreciation and amortization, and similar performance measures that exclude certain charges from earnings, are often used by investors and financial analysts in evaluating and comparing companies in our industry. We note, however, that such measures are not defined uniformly by various companies, with differing expenses being excluded from net income to calculate these performance measures. For this reason, Adjusted EBITDA should not be viewed in isolation by investors and should not be used as a substitute for net income (loss) calculated in accordance with GAAP, nor should it be used for direct comparisons with similarly titled performance measures reported by other

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companies. Use of Adjusted EBITDA as an analytical tool has limitations in that this measure does not reflect all expenses that are necessary to fund and operate our business, including funds required to pay taxes, service our debt, and fund capital expenditures, among others. Management uses Adjusted EBITDA to help it analyze the company’s earnings and operating performance, by excluding the effects of expenses that depend upon capital structure and debt level, tax provisions, and non-cash items such as depreciation, amortization and stock-based compensation expense that do not require immediate uses of cash.

The news release contains disclosures about return on capital employed for both the entire company and for individual business segments. We define return on capital employed as adjusted operating income (loss) (measured on a trailing twelve-month basis) divided by average capital employed (excluding intangible assets related to acquisitions at the divisional level only). Adjusted operating income (loss) excludes certain charges or credits that are not expected to occur on a recurring or regular basis, if applicable for the period presented. Average capital employed is calculated over rolling five fiscal periods, depending on which quarter is being presented. Details of these calculations and a reconciliation to information from our U.S. GAAP financial statements are set forth in the news release. We believe return on capital employed is an accepted measure of earnings efficiency in relation to capital employed, but it is a non-U.S. GAAP performance measure that is not defined or calculated in the same manner by all companies. This measure should not be considered in isolation or as an alternative to net income (loss) or other performance measures, but we believe it provides useful information to investors by comparing the adjusted operating income (loss) we produce to the net asset base used to generate that income (loss). Also, adjusted operating income (loss) on a trailing twelve-months basis does not necessarily indicate results that would be expected for the full fiscal year or for the following twelve months. We note that, particularly for return on capital employed measured at the segment level, not all assets and expenses are allocated to our operating segments, and there are assets and expenses at the corporate (unallocated) level that may provide support to a segment’s operations and yet are not included in the assets and expenses used to calculate that segment’s return on capital. Thus, the average return on capital employed for the company’s segments will generally be different from the company’s overall return on capital employed. Management uses return on capital employed to evaluate the company’s earnings efficiency and the relative performance of its segments.

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Item 7.01 Regulation FD Disclosure

On June 27, 2024, we posted a restructuring presentation to our website at https://culpinc.gcs-web.com/ (the "Restructuring Presentation"). A copy of the Restructuring Presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated into this Item 7.01 by reference. We expect to use the Restructuring Presentation from time to time, in whole or in part, and possibly with modifications, in connection with presentations to investors, analysts, and others.

The information contained in the Restructuring Presentation is summary information that should be considered within the context of the company's filings with the Securities and Exchange Commission ("SEC") and other public announcements the company may make by press release or otherwise from time to time. The Restructuring Presentation speaks only as of the date of this Current Report on Form 8-K. We undertake no duty or obligation to publicly update or revise the information contained in the Restructuring Presentation, including, without limitation, any targets, estimates, goals, or other forward-looking statements, although we may do so from time to time. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases, or through other public disclosure.

The Restructuring Presentation contains statements intended as "forward-looking statements" that are subject to the cautionary statements about forward-looking statements set forth on page 2 of the Restructuring Presentation. By furnishing the information contained in this Current Report on Form 8-K, including Exhibit 99.2, we make no admission as to the materiality of any such information.

The information in this Current Report on Form 8-K, including Exhibit 99.2, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference to such filing.

Item 9.01 (d) – Exhibits

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EXHIBIT INDEX

Exhibit Number	Exhibit
99.1	News Release dated June 27, 2024
99.2	Restructuring Presentation
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

CULP, INC. (Registrant)
By:	/s/ Kenneth R. Bowling
	Chief Financial Officer
	(principal financial officer and principal accounting officer)

Dated June 27, 2024

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EX-99.1

Exhibit 99.1

 

CULP ANNOUNCES RESULTS FOR FOURTH QUARTER AND FISCAL 2024,

PROVIDES UPDATE ON RESTRUCTURING INITIATIVES

HIGH POINT, N.C. (June 27, 2024) ─ Culp, Inc. (NYSE: CULP) (together with its consolidated subsidiaries, “CULP”) today reported financial and operating results for the fourth quarter and fiscal year ended April 28, 2024.

Fiscal 2024 Fourth Quarter Financial Summary

▪Net sales for the fourth quarter of fiscal 2024 were $49.5 million, down 19.4 percent compared with the prior-year period, with mattress fabrics sales down 16.1 percent, and upholstery fabrics sales down 22.6 percent.

▪Loss from operations was $(4.2) million (which included $204,000 in restructuring expense during the period), compared with a loss from operations of $(4.0) million for the prior-year period (which included $70,000 in restructuring expense during the period).

▪Net loss was $(4.9) million, or $(0.39) per diluted share, compared with a net loss of $(4.7) million, or $(0.38) per diluted share, for the prior-year period. The effective tax rate for the fourth quarter was negative (19.8) percent, reflecting the company’s mix of taxable income between its U.S. and foreign jurisdictions during the period.

▪The company maintained a solid financial position, with its balance sheet reflecting $10.0 million of total cash and no outstanding borrowings as of April 28, 2024. Total liquidity as of April 28, 2024, was $32.5 million (consisting of $10.0 million in cash and $22.5 million in borrowing availability under the company's domestic and foreign credit facilities).

Fiscal 2024 Full Year Financial Summary

▪Net sales for fiscal 2024 were $225.3 million, down 4.1 percent from the prior year, with mattress fabrics sales up 4.8 percent and upholstery fabrics sales down 12.1 percent.

▪Loss from operations was $(11.3) million (which included $676,000 in restructuring and related expenses during the period), compared with a loss from operations of $(28.5) million for the prior year (which included approximately $9.9 million relating to certain inventory impairment and other charges and restructuring and related expenses during the period).

▪Net loss was $(13.8) million, or $(1.11) per diluted share, compared with a net loss of $(31.5) million, or $(2.57) per diluted share, for the prior year. The effective tax rate for fiscal 2024 was negative (28.3) percent, reflecting the company's mix of taxable income between its U.S. and foreign jurisdictions during the period.

Restructuring Plan Update

The restructuring plan announced on May 1, 2024, primarily focused on the company's mattress fabrics segment, is progressing as planned.

▪Expect to achieve $10.0 - $11.0 million in annualized savings and operating improvements after restructuring initiatives are fully implemented by the end of the calendar year, with most of the restructuring benefit realized during the second half of fiscal 2025.

▪Expect a return to break-even operating results at currently depressed industry demand levels post restructuring.

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

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▪Expect to incur cash restructuring and restructuring-related costs and charges of approximately $2.5 million, the majority of which are anticipated to be incurred in the first half of fiscal 2025. The company expects to fund these cash costs primarily with the sale of excess manufacturing equipment.

▪Expect to receive at least $10.0 - $12.0 million in cash proceeds (net of all taxes and commissions) from the sale of real estate associated with the restructuring plan.

▪Also expect to incur non-cash restructuring and restructuring-related costs and charges of approximately $5.4 million (excluding any gain from the sale of real estate).

▪Assuming the completion of all restructuring actions and the sale of associated real estate by the end of fiscal 2025, the company currently projects its cash as of the end of fiscal 2025 to be higher than its $10.0 million in cash as of the end of fiscal 2024.

CEO Commentary

Commenting on the results, Iv Culp, president and chief executive officer of Culp, Inc., said, “Our sales and operating results for the fourth quarter were in line with our expectations announced on May 1, 2024. These results reflected weakness in industry demand in both of our businesses, driven primarily by ongoing macro-economic headwinds. Our sales performance for the fourth quarter was also affected to some degree by the timing of orders, as many of our larger customers experienced extremely slow conditions beginning in January. We posted solid year-over-year sales gains in both businesses during our fiscal third quarter, and we were making progress towards our stated improvement goals. However, we faced a significant decline in order levels during our fourth quarter, related to demand pressures our customers faced early in the calendar year.

"This impact on fourth quarter revenue, along with ongoing macro-challenges, led us to take aggressive action to bring our manufacturing costs and capacity in line with current and expected demand. We announced a major restructuring plan in early May, with a primary focus on our mattress fabrics segment, and we are making steady progress on the execution of this restructuring initiative. The announced adjustments, once fully implemented, will enable us to grow more efficiently and profitably with a lower level of fixed costs. Importantly, these strategic steps do not limit our ability to grow the business, but instead allow us to better optimize our global mix of manufacturing capabilities and long-term sourcing partners. Also, we are extremely grateful for the support we have received from our valued customers, suppliers, and employees, and we are confident that the strength of these relationships will help drive our recovery.

“Despite the headwinds, there were some positive indicators within CULP’s business during fiscal 2024, including (1) significant year-over-year operating improvement (though still a loss and below intended targets); (2) consistent operating profits in our upholstery fabrics business; (3) year-over-year sales growth in our mattress fabrics segment; and (4) strong product innovation and placements in both segments, positioning us for a return to higher sales growth as macro conditions improve. We are encouraged by our solid market position in both businesses, and with our restructuring actions well underway, we believe we are on track to return to profitability post-restructuring even if market conditions remain at their currently depressed levels.

“We also maintained a solid balance sheet during the fourth quarter, with a focus on prudent financial management, and we are taking proactive steps to ensure the long-term success of our business. We are diligently focused on executing our restructuring initiatives, and therefore strengthening our balance sheet, optimizing our operations and cost structure, and supporting our customers, while also continuing to win new placements with our innovative product portfolio.

"As we look ahead to fiscal 2025, we expect industry conditions will remain pressured for some time, but we believe our fiscal 2024 fourth quarter revenue levels represented a bottom point for CULP. We believe the strategic actions we are taking will position us for profitable growth opportunities, and we remain committed to delivering sustainable results and enhancing value for our shareholders over the long term," added Culp.

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Business Segment Highlights

Mattress Fabrics Segment (“CHF”) Summary

▪Sales for this segment were $25.8 million for the fourth quarter, down 16.1 percent compared with sales of $30.7 million in the fourth quarter of fiscal 2023.

▪Sales were pressured during the quarter by further weakness in the domestic mattress industry, driven by a challenging macro-economic environment that is affecting consumer discretionary spending and housing markets.

▪Operating loss was $(2.9) million for the fourth quarter, compared to an operating loss of $(2.5) million operating loss in the prior-year period. Operating performance for the quarter was primarily pressured by lower sales and operating inefficiencies.

▪For fiscal 2024, sales were $116.4 million, up 4.8 percent compared with sales of $111.0 million for fiscal 2023. This year-over-year increase was driven by higher sales for the first nine months of fiscal 2024 (primarily due to new fabric and sewn cover placements priced in line with current costs), partially offset by lower sales during the fourth quarter of fiscal 2024.

▪For the full year, operating loss was $(6.8) million for fiscal 2024, compared with an operating loss of ($18.7) million for fiscal 2023. The decrease in CHF's operating loss for fiscal 2024, as compared to the prior-year period (which was negatively affected by certain inventory impairment charges and losses from inventory close out sales), was primarily due to higher sales through the first nine months of fiscal 2024 as described above, along with better inventory management. These factors were partially offset by higher SG&A expense during fiscal 2024, as well as production inefficiencies relating to certain new product launches.

Upholstery Fabrics Segment (“CUF”) Summary

▪Sales for this segment were $23.8 million for the fourth quarter, down 22.6 percent compared with sales of $30.7 million in the fourth quarter of fiscal 2023.

▪Sales for CUF's residential fabric business were lower than the prior-year period, driven primarily by further deterioration in residential home furnishing sales, as well as the timing of the Chinese New Year holiday (which this year fell primarily in the fourth quarter, rather than the third quarter). Additionally, approximately 3.0 percent of the 22.6 percent decline in sales was related to a one-time customer payment (based on newly negotiated terms) received during the fourth quarter of fiscal 2023 that did not recur during the fourth quarter of fiscal 2024.

▪Demand remained solid for CUF’s hospitality/contract business during the fourth quarter, with sales for this business accounting for approximately 38.0 percent of CUF's total sales.

▪Operating income was $975,000 for the fourth quarter, compared with operating income of $1.6 million in the fourth quarter of fiscal 2023. Operating margin for the fourth quarter of fiscal 2024 was 4.1 percent, compared with 5.2 percent for the fourth quarter of fiscal 2023. Operating performance for the fourth quarter was primarily pressured by lower sales and non-recurrence of the one-time customer payment noted earlier. Excluding the one-time non-recurring payment from the fourth quarter of fiscal 2023, operating margin for the fourth quarter of fiscal 2024 would have improved compared to the prior-year period.

▪For fiscal 2024, sales were $109.0 million, down 12.1 percent compared with sales of $123.9 million for fiscal 2023. This decrease primarily reflects ongoing softness in the residential home furnishings industry, where demand was pressured by a challenging macro-economic environment. Sales during the prior year were also positively affected by receipt of the one-time customer payment noted earlier.

▪For the full year, operating income was $5.8 million for fiscal 2024, a significant improvement compared with operating income of 2.0 million for fiscal 2023. Operating margin for fiscal 2024 was 5.3 percent, again a significant improvement compared to the prior year.

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▪Operating performance for fiscal 2024, as compared to the prior year (which was negatively affected by higher-than-normal inventory markdowns and restructuring and related charges), was positively affected by a more profitable mix of sales; better inventory management; a more favorable foreign exchange rate in China; and lower fixed costs. These factors were partially offset by lower sales during the year.

Balance Sheet, Cash Flow, and Liquidity

▪As of April 28, 2024, the company reported $10.0 million in total cash and no outstanding debt.

▪Cash flow from operations and free cash flow were negative $(8.2) million and negative $(10.8) million, respectively, for fiscal 2024. (See reconciliation table at the back of this press release.) As expected, the company’s cash flow from operations and free cash flow during the fiscal year were affected by operating losses and planned strategic investments in capital expenditures mostly related to the CHF transformation plan.

▪Capital expenditures for fiscal 2024 were $3.7 million. The company continues to manage capital investments, focusing on projects that will increase efficiencies and improve quality, especially for the CHF segment.

▪As of April 28, 2024, the company had approximately $32.5 million in liquidity, consisting of $10.0 million in total cash and $22.5 million in borrowing availability under the company's domestic and foreign credit facilities.

▪The company intends to utilize some borrowings under its domestic and/or foreign credit facilities during fiscal 2025 in connection with its restructuring activities and to fund working capital to grow the business. Importantly, the company still expects to maintain a positive net cash position and to fund most of the cash costs associated with the restructuring from the eventual sale of excess equipment.

▪Assuming the completion of all restructuring actions and the sale of associated real estate by the end of fiscal 2025, the company currently projects its cash as of the end of fiscal 2025 to be higher than its $10.0 million in cash as of the end of fiscal 2024.

Financial Outlook

▪Due to the uncertainty in the macro-environment, as well as the significant activity underway in connection with the company's restructuring initiatives, the company is only providing limited financial guidance at this time. While macro demand is expected to remain challenged in the first quarter of fiscal 2025, pressuring year-over-year sales results, the company does expect its consolidated net sales for the first quarter to be moderately higher as compared sequentially to the fourth quarter of fiscal 2024. The company will update progress on its restructuring initiatives every quarter, and post restructuring, the company expects to return to positive operating income (on a monthly basis) sometime in the second half of fiscal 2025.

▪The company’s expectations are based on information available at the time of this press release and reflect certain assumptions by management regarding the company’s business and trends and the projected impact of the ongoing headwinds.

Conference Call

Culp, Inc. will hold a conference call to discuss financial results for the fourth quarter and fiscal 2024 year on Friday, June 28, 2024, at 11:00 a.m. Eastern Time. A live webcast of this call can be accessed on the “Upcoming Events” section on the investor relations page of the company’s website, www.culp.com. A replay of the webcast will be available for 30 days under the “Past Events” section on the investor relations page of the company’s website, beginning at 2:00 p.m. Eastern Time on June 28, 2024.

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Investor Relations Contact

Ken Bowling, Executive Vice President, Chief Financial Officer, and Treasurer:

(336) 881-5630

krbowling@culp.com

About the Company

Culp, Inc. is one of the largest marketers of mattress fabrics for bedding and upholstery fabrics for residential and commercial furniture in North America. The company markets a variety of fabrics to its global customer base of leading bedding and furniture companies, including fabrics produced at Culp’s manufacturing facilities and fabrics sourced through other suppliers. Culp has manufacturing and sourcing capabilities located in the United States, Canada, China, Haiti, Turkey, and Vietnam.

Forward Looking Statements

This release contains “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties that may cause actual events and results to differ materially from such statements. Further, forward looking statements are intended to speak only as of the date on which they are made, and we disclaim any duty to update such statements to reflect any changes in management’s expectations or any change in the assumptions or circumstances on which such statements are based, whether due to new information, future events, or otherwise. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often but not always characterized by qualifying words such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “plan,” “project,” and their derivatives, and include but are not limited to statements about expectations, projections, or trends for our future operations, strategic initiatives and plans, restructurings, production levels, new product launches, sales, profit margins, profitability, operating (loss) income, capital expenditures, working capital levels, cost savings (including, without limitation, anticipated cost savings from restructuring actions), income taxes, SG&A or other expenses, pre-tax (loss) income, earnings, cash flow, and other performance or liquidity measures, as well as any statements regarding dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, potential acquisitions, restructuring and restructuring-related charges, expenses, and/or credits, future economic or industry trends, public health epidemics, or future developments. There can be no assurance that we will realize these expectations or meet our guidance, or that these beliefs will prove correct.

Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on our business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect us adversely. The future performance of our business depends in part on our success in conducting and finalizing acquisition negotiations and integrating acquired businesses into our existing operations. Changes in consumer tastes or preferences toward products not produced by us could erode demand for our products. Changes in tariffs or trade policy, including changes in U.S. trade enforcement priorities, or changes in the value of the U.S. dollar versus other currencies, could affect our financial results because a significant portion of our operations are located outside the United States. Strengthening of the U.S. dollar against other currencies could make our products less competitive on the basis of price in markets outside the United States, and strengthening of currencies in Canada and China can have a negative impact on our sales of products produced in those places. In addition, because our foreign operations use the U.S. dollar as their functional currency, changes in the exchange rate between the local currency of those operations and the U.S dollar can affect our reported profits from those foreign operations. Also, economic or political instability in international areas could affect our operations or sources of goods in those areas, as well as demand for our products in international markets. The impact of public health epidemics on employees, customers, suppliers, and the global economy, such as the recent coronavirus pandemic, could also adversely affect our operations and financial performance. In addition, the impact of potential asset impairments, including impairments of property,

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 6

June 27, 2024

plant, and equipment, inventory, or intangible assets, as well as the impact of valuation allowances applied against our net deferred income tax assets, could affect our financial results. Increases in freight costs, labor costs, and raw material prices, including increases in market prices for petrochemical products, can also significantly affect the prices we pay for shipping, labor, and raw materials, respectively, and in turn, increase our operating costs and decrease our profitability. Also, our success in diversifying our supply chain with reliable partners to effectively service our global platform could affect our operations and adversely affect our financial results. Finally, the future performance of our business also depends on our ability to successfully restructure our mattress fabrics operation and return the segment to profitability. Further information about these factors, as well as other factors that could affect our future operations or financial results and the matters discussed in forward-looking statements, is included in Item 1A “Risk Factors” in our most recent Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results.

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 7

June 27, 2024

CULP, INC.

CONSOLIDATED STATEMENTS OF NET LOSS

FOR THE THREE MONTHS ENDED APRIL 28, 2024, AND APRIL 30, 2023

Unaudited

(Amounts in Thousands, Except for Per Share Data)

	THREE MONTHS ENDED
	Amount									Percent of Sales
	(1)			(1)
	April 28,			April 30,			% Over			April 28,			April 30,
	2024			2023			(Under)			2024			2023
Net sales	$	49,528		$	61,426			(19.4	)%		100.0	%		100.0	%
Cost of sales		(44,327	)		(54,538	)		(18.7	)%		89.5	%		88.8	%
Gross profit		5,201			6,888			(24.5	)%		10.5	%		11.2	%
Selling, general and administrative    expenses		(9,245	)		(10,845	)		(14.8	)%		18.7	%		17.7	%
Restructuring expense (2) (3)		(204	)		(70	)		191.4	%		0.4	%		0.1	%
Loss from operations		(4,248	)		(4,027	)		5.5	%		(8.6	)%		(6.6	)%
Interest expense		(11	)		—			100.0	%		(0.0	)%		—
Interest income		263			239			10.0	%		0.5	%		0.4	%
Other expense		(64	)		(95	)		(32.6	)%		(0.1	)%		(0.2	)%
Loss before income taxes		(4,060	)		(3,883	)		4.6	%		(8.2	)%		(6.3	)%
Income tax expense (4)		(805	)		(798	)		0.9	%		(19.8	)%		(20.6	)%
Net loss	$	(4,865	)	$	(4,681	)		3.9	%		(9.8	)%		(7.6	)%
Net loss per share - basic	$	(0.39	)	$	(0.38	)		2.6	%
Net loss per share - diluted	$	(0.39	)	$	(0.38	)		2.6	%
Average shares outstanding-basic		12,470			12,316			1.3	%
Average shares outstanding-diluted		12,470			12,316			1.3	%

Notes

(1) See page 14 for a Reconciliation of Selected Income Statement Information to Adjusted Results for the three months ending April 28, 2024, and April 30, 2023.

(2) Restructuring expense of $204,000 for the three months ending April 28, 2024, represents employee termination benefits related to the rationalization of the upholstery fabrics finishing operation located in Shanghai, China.

(3) Restructuring expense of $70,000 for the three months ending April 30, 2023, represents employee termination benefits of $39,000 and other associated costs $31,000 related to the consolidation of certain leased facilities located in Ouanaminthe, Haiti.

(4) Percent of sales column for income tax expense is calculated as a percent of loss before income taxes.

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June 27, 2024

CULP, INC.

CONSOLIDATED STATEMENTS OF NET LOSS

FOR THE TWELVE MONTHS ENDED APRIL 28, 2024, AND APRIL 30, 2023

Unaudited

(Amounts in Thousands, Except for Per Share Data)

	TWELVE MONTHS ENDED
	Amount									Percent of Sales
	(1)			(1)
	April 28,			April 30,			% Over			April 28,			April 30,
	2024			2023			(Under)			2024			2023
Net sales	$	225,333		$	234,934			(4.1	)%		100.0	%		100.0	%
Cost of sales (2) (3)		(197,394	)		(224,038	)		(11.9	)%		87.6	%		95.4	%
Gross profit		27,939			10,896			156.4	%		12.4	%		4.6	%
Selling, general and administrative    expenses		(38,611	)		(37,978	)		1.7	%		17.1	%		16.2	%
Restructuring expense (4) (5)		(636	)		(1,396	)		(54.4	)%		0.3	%		0.6	%
Loss from operations		(11,308	)		(28,478	)		(60.3	)%		(5.0	)%		(12.1	)%
Interest expense		(11	)		—			100.0	%		—	%		—
Interest income		1,174			531			121.1	%		0.5	%		0.2	%
Other expense		(625	)		(443	)		41.1	%		0.3	%		0.2	%
Loss before income taxes		(10,770	)		(28,390	)		(62.1	)%		(4.8	)%		(12.1	)%
Income tax expense (6)		(3,049	)		(3,130	)		(2.6	)%		(28.3	)%		(11.0	)%
Net loss	$	(13,819	)	$	(31,520	)		(56.2	)%		(6.1	)%		(13.4	)%
Net loss per share - basic	$	(1.11	)	$	(2.57	)		(56.8	)%
Net loss per share - diluted	$	(1.11	)	$	(2.57	)		(56.8	)%
Average shares outstanding-basic		12,432			12,283			1.2	%
Average shares outstanding-diluted		12,432			12,283			1.2	%

Notes

(1) See page 15 for the Reconciliation of Selected Income Statement Information to Adjusted Results for the twelve months ending April 28, 2024, and April 30, 2023.

(2) Cost of sales for the twelve months ending April 28, 2024, includes a restructuring related charge totaling $40,000 representing markdowns of inventory related to the discontinuation of production of cut and sewn upholstery kits at the company's facility in Ouanaminthe, Haiti.

(3) Cost of sales for the twelve months ending April 30, 2023, includes a restructuring related charge totaling $98,000, which pertained to a loss on disposal and markdowns of inventory related to the exit of the company's cut and sew upholstery fabrics operation located in Shanghai, China.

(4) Restructuring expense of $636,000 for the twelve months ending April 28, 2024, represents impairment charges related to equipment of $329,000 and employee termination benefits of $103,000 related to the discontinuation of production of cut and sewn upholstery kits at the company's facility in Ouanaminthe, Haiti. In addition, during the fourth quarter of fiscal 2024, restructuring expense of $204,000 was incurred for employee termination benefits related to the rationalization of the upholstery fabrics finishing operation located in Shanghai, China.

(5) Restructuring expense of $1.4 million for the twelve months ending April 30, 2023, relates to restructuring activities for both the company's cut and sew upholstery fabrics operations located in Shanghai, China, which occurred during the second quarter of fiscal 2023, and located in Ouananminthe, Haiti, which occurred during the third and fourth quarters of fiscal 2023. Restructuring expense represents employee termination benefits of $507,000, lease termination costs of $481,000, impairment losses totaling $357,000 that relate to leasehold improvements and equipment, and $51,000 for other associated costs.

(6) Percent of sales column for income tax expense is calculated as a percent of loss before income taxes.

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Page 9

June 27, 2024

CONSOLIDATED BALANCE SHEETS

APRIL 28, 2024, AND APRIL 30, 2023

Unaudited

(Amounts in Thousands)

	Amounts
	(Condensed)		(Condensed)
	April 28,		*April 30,		Increase (Decrease)
	2024		2023		Dollars			Percent
Current assets
Cash and cash equivalents	$	10,012		20,964		(10,952	)		(52.2	)%
Short-term investments - rabbi trust		903		1,404		(501	)		(35.7	)%
Accounts receivable, net		21,138		24,778		(3,640	)		(14.7	)%
Inventories		44,843		45,080		(237	)		(0.5	)%
Short-term note receivable		264		219		45			20.5	%
Current income taxes receivable		350		—		350			100.0	%
Other current assets		3,371		3,071		300			9.8	%
Total current assets		80,881		95,516		(14,635	)		(15.3	)%
Property, plant & equipment, net		33,182		36,111		(2,929	)		(8.1	)%
Right of use assets		6,203		8,191		(1,988	)		(24.3	)%
Intangible assets		1,876		2,252		(376	)		(16.7	)%
Long-term investments - rabbi trust		7,102		7,067		35			0.5	%
Long-term note receivable		1,462		1,726		(264	)		(15.3	)%
Deferred income taxes		518		480		38			7.9	%
Other assets		830		840		(10	)		(1.2	)%
Total assets	$	132,054		152,183		(20,129	)		(13.2	)%
Current liabilities
Accounts payable - trade		25,607		29,442		(3,835	)		(13.0	)%
Accounts payable - capital expenditures		343		56		287			512.5	%
Operating lease liability - current		2,061		2,640		(579	)		(21.9	)%
Deferred compensation - current		903		1,404		(501	)		(35.7	)%
Deferred revenue		1,495		1,192		303			25.4	%
Accrued expenses		6,726		8,533		(1,807	)		(21.2	)%
Income taxes payable - current		972		753		219			29.1	%
Total current liabilities		38,107		44,020		(5,913	)		(13.4	)%
Operating lease liability - long-term		2,422		3,612		(1,190	)		(32.9	)%
Income taxes payable - long-term		2,088		2,675		(587	)		(21.9	)%
Deferred income taxes		6,379		5,954		425			7.1	%
Deferred compensation - long-term		6,929		6,842		87			1.3	%
Total liabilities		55,925		63,103		(7,178	)		(11.4	)%
Shareholders' equity		76,129		89,080		(12,951	)		(14.5	)%
Total liabilities and shareholders'    equity	$	132,054		152,183		(20,129	)		(13.2	)%
Shares outstanding		12,470		12,327		143			1.2	%

* Derived from audited financial statements.

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 10

June 27, 2024

CULP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE TWELVE MONTHS ENDED APRIL 28, 2024, AND APRIL 30, 2023

Unaudited

(Amounts in Thousands)

	TWELVE MONTHS ENDED
	Amounts
	April 28,			April 30,
	2024			2023
Cash flows from operating activities:
Net loss	$	(13,819	)	$	(31,520	)
Adjustments to reconcile net loss to net cash (used in)    provided by operating activities:
Depreciation		6,521			6,845
Non-cash inventory (credit) charge (1) (2)		(1,628	)		5,819
Amortization		390			438
Stock-based compensation		915			1,145
Deferred income taxes		387			(2	)
Gain on sale of equipment		(299	)		(314	)
Non-cash restructuring expense		330			791
Foreign currency exchange gain		(593	)		(537	)
Changes in assets and liabilities:
Accounts receivable		3,559			(2,642	)
Inventories		1,593			15,370
Other current assets		(329	)		(297	)
Other assets		(115	)		86
Accounts payable		(2,926	)		10,274
Deferred revenue		303			672
Accrued expenses and deferred compensation		(1,870	)		853
Income taxes		(643	)		823
Net cash (used in) provided by operating activities		(8,224	)		7,804
Cash flows from investing activities:
Capital expenditures		(3,711	)		(2,108	)
Proceeds from the sale of equipment		385			468
Proceeds from note receivable		330			15
Proceeds from the sale of investments (rabbi trust)		1,449			2,058
Purchase of investments (rabbi trust)		(884	)		(1,185	)
Net cash used in investing activities		(2,431	)		(752	)
Cash flows from financing activities:
Proceeds from line of credit - China		4,166			—
Payments associated with line of credit - China		(4,146	)		—
Common stock surrendered for withholding taxes payable		(146	)		(33	)
Payments of debt issuance costs		—			(403	)
Net cash used in financing activities		(126	)		(436	)
Effect of exchange rate changes on cash and cash equivalents		(171	)		(202	)
(Decrease) increase in cash and cash equivalents		(10,952	)		6,414
Cash and cash equivalents at beginning of year		20,964			14,550
Cash and cash equivalents at end of year	$	10,012		$	20,964
Free Cash Flow (3)	$	(10,826	)	$	6,850

(1) The non-cash inventory credit of $1.6 million for the twelve months ending April 28, 2024, mostly represents adjustments for inventory markdowns based on the company's policy for aged inventory. The $1.6 million is based on inventory on hand as of April 28, 2024, and relates to both the mattress fabrics and upholstery fabrics segments. In addition, the $1.6 million includes a $40,000 charge associated with the upholstery fabrics segment related to markdowns of inventory associated with the discontinuation of production of cut and sewn upholstery kits at the company's facility in Ouanaminthe, Haiti.

(2) The non-cash inventory charge of $5.8 million for the twelve months ending April 28, 2023, represents a $2.9 million charge for the write down of inventory to its net realizable value associated with the mattress fabrics segment, $2.8 million related to markdowns of inventory estimated based on the company's policy for aged inventory for both the mattress and upholstery fabrics segments, and $98,000 for the loss on disposal and markdowns of inventory related to the exit of the company's cut and sew upholstery fabrics operation located in Shanghai, China.

(3) See next page for Reconciliation of Free Cash Flow for the twelve-month periods ending April 28, 2024, and April 29, 2023.

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 11

June 27, 2024

CULP, INC.

RECONCILIATION OF FREE CASH FLOW

FOR THE TWELVE MONTHS ENDED APRIL 28, 2024, AND APRIL 30, 2023

Unaudited

(Amounts in Thousands)

	TWELVE MONTHS ENDED
	Amounts
	April 28,			April 30,
	2024			2023
A) Net cash (used in) provided by operating activities	$	(8,224	)	$	7,804
B) Minus: Capital expenditures		(3,711	)		(2,108	)
C) Plus: Proceeds from the sale of equipment		385			468
D) Plus: Proceeds from note receivable		330			15
E) Plus: Proceeds from the sale of investments (rabbi trust)		1,449			2,058
F) Minus: Purchase of investments (rabbi trust)		(884	)		(1,185	)
G) Effects of exchange rate changes on cash and cash equivalents		(171	)		(202	)
Free Cash Flow	$	(10,826	)	$	6,850

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 12

June 27, 2024

CULP, INC.

STATEMENTS OF OPERATIONS BY SEGMENT

FOR THE THREE MONTHS ENDED APRIL 28, 2024, AND APRIL 30, 2023

Unaudited

(Amounts in Thousands)

	THREE MONTHS ENDED
	Amounts									Percent of Total Sales
	April 28,			April 30,			% Over			April 28,			April 30,
Net Sales by Segment	2024			2023			(Under)			2024			2023
Mattress Fabrics	$	25,750		$	30,696			(16.1	)%		52.0	%		50.0	%
Upholstery Fabrics		23,778			30,730			(22.6	)%		48.0	%		50.0	%
Net Sales	$	49,528		$	61,426			(19.4	)%		100.0	%		100.0	%
Gross Profit										Gross Margin
Mattress Fabrics	$	292		$	591			(50.6	)%		1.1	%		1.9	%
Upholstery Fabrics		4,909			6,297			(22.0	)%		20.6	%		20.5	%
Total Gross Profit		5,201			6,888			(24.5	)%		10.5	%		11.2	%
Selling, General and Administrative    Expenses by Segment										Percent of Sales
Mattress Fabrics	$	3,221		$	3,121			3.2	%		12.5	%		10.2	%
Upholstery Fabrics		3,934			4,686			(16.0	)%		16.5	%		15.2	%
Unallocated Corporate Expenses		2,090			3,038			(31.2	)%		4.2	%		4.9	%
Selling, General and Administrative    Expenses	$	9,245		$	10,845			(14.8	)%		18.7	%		17.7	%
(Loss) Income from Operations    by Segment										Operating Margin
Mattress Fabrics	$	(2,929	)	$	(2,530	)		15.8	%		(11.4	)%		(8.2	)%
Upholstery Fabrics		975			1,611			(39.5	)%		4.1	%		5.2	%
Unallocated Corporate Expenses		(2,090	)		(3,038	)		(31.2	)%		(4.2	)%		(4.9	)%
Total Segment Loss from          Operations		(4,044	)		(3,957	)		2.2	%		(8.2	)%		(6.4	)%
Restructuring Expense (1)		(204	)		(70	)		191.4	%		(0.4	)%		(0.1	)%
Loss from Operations	$	(4,248	)	$	(4,027	)		5.5	%		(8.6	)%		(6.6	)%
Depreciation Expense by Segment
Mattress Fabrics	$	1,461		$	1,426			2.5	%
Upholstery Fabrics		162			193			(16.1	)%
Depreciation Expense	$	1,623		$	1,619			0.2	%

Notes

(1) See page 14 for a Reconciliation of Selected Income Statement Information to Adjusted Results for the three months ending April 28, 2024, and April 30, 2023.

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 13

June 27, 2024

CULP, INC.

STATEMENTS OF OPERATIONS BY SEGMENT

FOR THE TWELVE MONTHS ENDED APRIL 28, 2024, AND APRIL 30, 2023

Unaudited

(Amounts in Thousands)

	TWELVE MONTHS ENDED
	Amounts									Percent of Total Sales
	April 28,			April 30,			% Over			April 28,			April 30,
Net Sales by Segment	2024			2023			(Under)			2024			2023
Mattress Fabrics	$	116,370		$	110,995			4.8	%		51.6	%		47.2	%
Upholstery Fabrics		108,963			123,939			(12.1	)%		48.4	%		52.8	%
Net Sales	$	225,333		$	234,934			(4.1	)%		100.0	%		100.0	%
Gross Profit (Loss):										Gross Margin
Mattress Fabrics	$	6,289		$	(6,739	)		(193.3	)%		5.4	%		(6.1	)%
Upholstery Fabrics		21,690			17,733			22.3	%		19.9	%		14.3	%
Total Segment Gross Profit		27,979			10,994			154.5	%		12.4	%		4.7	%
Restructuring Related Charge (1)		(40	)		(98	)		(59.2	)%		(0.0	)%		(0.0	)%
Gross Profit	$	27,939		$	10,896			156.4	%		12.4	%		4.6	%
Selling, General and Administrative    Expenses by Segment										Percent of Sales
Mattress Fabrics	$	13,134		$	11,942			10.0	%		11.3	%		10.8	%
Upholstery Fabrics		15,903			15,739			1.0	%		14.6	%		12.7	%
Unallocated Corporate Expenses		9,574			10,297			(7.0	)%		4.2	%		4.4	%
Selling, General and Administrative    Expenses	$	38,611		$	37,978			1.7	%		17.1	%		16.2	%
(Loss) Income from Operations    by Segment										Operating Margin
Mattress Fabrics	$	(6,845	)	$	(18,681	)		(63.4	)%		(5.9	)%		(16.8	)%
Upholstery Fabrics		5,787			1,994			190.2	%		5.3	%		1.6	%
Unallocated Corporate Expenses		(9,574	)		(10,297	)		(7.0	)%		(4.2	)%		(4.4	)%
Total Segment Loss from          Operations		(10,632	)		(26,984	)		(60.6	)%		(4.7	)%		(11.5	)%
Restructuring Related Charge (1)		(40	)		(98	)		(59.2	)%		(0.0	)%		(0.0	)%
Restructuring Expense (1)		(636	)		(1,396	)		(54.4	)%		(0.3	)%		(0.6	)%
Loss from Operations	$	(11,308	)	$	(28,478	)		(60.3	)%		(5.0	)%		(12.1	)%
Return on Capital Employed (2)
Mattress Fabrics		(10.8	)%		(25.8	)%		(58.1	)%
Upholstery Fabrics		62.5	%		11.2	%		458.0	%
Unallocated Corporate	N.M.			N.M.			N.M.
Consolidated		(13.9	)%		(28.7	)%		(51.6	)%
Capital Employed (2) (3)
Mattress Fabrics	$	62,257		$	64,107			(2.9	)%
Upholstery Fabrics		7,259			9,489			(23.5	)%
Unallocated Corporate		4,999			3,197			56.4	%
Consolidated	$	74,515		$	76,793			(3.0	)%
Depreciation Expense by Segment
Mattress Fabrics	$	5,883		$	6,050			(2.8	)%
Upholstery Fabrics		638			795			(19.7	)%
Depreciation Expense	$	6,521		$	6,845			(4.7	)%

Notes

(1) See page 15 for a Reconciliation of Selected Income Statement Information to Adjusted Results for the twelve months ending April 28, 2024, and April 30, 2023.

(2) See pages 17 through 20 for calculation of Return on Capital Employed by Segment for the twelve months ending April 28, 2024, and April 30, 2023, and a reconciliation to information from our U.S. GAAP financial statements.

(3) The capital employed balances are as of April 28, 2024, and April 30, 2023.

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 14

June 27, 2024

CULP, INC.

RECONCILIATION OF SELECTED INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS

FOR THREE MONTHS ENDED APRIL 28, 2024, AND APRIL 30, 2023

Unaudited

(Amounts in Thousands)

	As Reported					Adjusted Results
	April 28,					April 28,
	2024			Adjustments		2024
Net sales	$	49,528			—	$	49,528
Cost of sales		(44,327	)		—		(44,327	)
Gross profit		5,201			—		5,201
Selling, general and administrative    expenses		(9,245	)		—		(9,245	)
Restructuring expense (1)		(204	)		204		—
Loss from operations	$	(4,248	)		204	$	(4,044	)

Notes

(1) Restructuring expense of $204,000 for the three months ending April 28, 2024, represents employee termination benefits related to the rationalization of the upholstery fabrics finishing operation located in Shanghai, China.

	As Reported					Adjusted Results
	April 30,					April 30,
	2023			Adjustments		2023
Net sales	$	61,426			—	$	61,426
Cost of sales		(54,538	)		—		(54,538	)
Gross profit		6,888			—		6,888
Selling, general and administrative    expenses		(10,845	)		—		(10,845	)
Restructuring expense (1)		(70	)		70		—
Loss from operations	$	(4,027	)		70	$	(3,957	)

Notes

(1) Restructuring expense of $70,000 for the three-months ending April 30, 2023, represents employee termination benefits of $39,000 and other associated costs of $31,000 that related to the consolidation of certain leased facilities located in Ouanaminthe, Haiti.

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 15

June 27, 2024

CULP, INC.

RECONCILIATION OF SELECTED INCOME STATEMENT INFORMATION TO ADJUSTED RESULTS

FOR TWELVE MONTHS ENDED APRIL 28, 2024, AND APRIL 30, 2023

Unaudited

(Amounts in Thousands)

	As Reported					Adjusted Results
	April 28,					April 28,
	2024			Adjustments		2024
Net sales	$	225,333			—	$	225,333
Cost of sales (1)		(197,394	)	40			(197,354	)
Gross profit		27,939			40		27,979
Selling, general and administrative    expenses		(38,611	)		—		(38,611	)
Restructuring expense (2)		(636	)		636		—
Loss from operations	$	(11,308	)		676	$	(10,632	)

Notes

(1) Cost of sales for the twelve months ending April 28, 2024, includes a restructuring related charge totaling $40,000 representing markdowns of inventory related to the discontinuation of production of cut and sewn upholstery kits at the company's facility in Ouanaminthe, Haiti.

(2) Restructuring expense of $636,000 for the twelve months ending April 28, 2024, represents impairment charges related to equipment of $329,000 and employee termination benefits of $103,000 related to the discontinuation of production of cut and sewn upholstery kits at the company's facility in Ouanaminthe, Haiti. In addition, during the fourth quarter of fiscal 2024, restructuring expense of $204,000 was incurred for employee termination benefits related to the rationalization of the upholstery fabrics finishing operation located in Shanghai, China.

	As Reported					Adjusted Results
	April 30,					April 30,
	2023			Adjustments		2023
Net sales	$	234,934			—	$	234,934
Cost of sales (1)		(224,038	)	98			(223,940	)
Gross profit		10,896			98		10,994
Selling, general and administrative    expenses		(37,978	)		—		(37,978	)
Restructuring expense (2)		(1,396	)		1,396		—
Loss from operations	$	(28,478	)		1,494	$	(26,984	)

Notes

(1) Cost of sales for the twelve months ending April 28, 2024, includes a restructuring related charge totaling $98,000, which pertained to a loss on disposal and markdowns of inventory related to the exit of the company's cut and sew upholstery fabrics operation located in Shanghai, China.

(2) Restructuring expense of $1.4 million for the twelve months ending April 30, 2023, relates to restructuring activities for both the company's cut and sew upholstery fabrics operations located in Shanghai, China, which occurred during the second quarter of fiscal 2023, and located in Ouananminthe, Haiti, which occurred during the third and fourth quarters of fiscal 2023. Restructuring expense represents employee termination benefits of $507,000, lease termination costs of $481,000, impairment losses totaling $357,000 that relate to leasehold improvements and equipment, and $51,000 for other associated costs.

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 16

June 27, 2024

CULP, INC.

CONSOLIDATED STATEMENTS OF ADJUSTED EBITDA

FOR THE TWELVE MONTHS ENDED APRIL 28, 2024, AND APRIL 30, 2023

Unaudited

(Amounts in Thousands)

	Quarter Ended			Quarter Ended			Quarter Ended			Quarter Ended			Trailing 12 Months
	July 30,			October 29,			January 28,			April 28,			April 28,
	2023			2023			2024			2024			2024
Net loss	$	(3,342	)	$	(2,424	)	$	(3,188	)	$	(4,865	)	$	(13,819	)
Income tax expense		701			516			1,027			805			3,049
Interest income, net		(345	)		(282	)		(284	)		(252	)		(1,163	)
Depreciation expense		1,635			1,617			1,646			1,623			6,521
Restructuring expense (credit)		338			144			(50	)		204			636
Restructuring related charge (credit)		179			(78	)		(61	)		—			40
Amortization expense		96			97			98			99			390
Stock based compensation		322			163			262			168			915
Adjusted EBITDA	$	(416	)	$	(247	)	$	(550	)	$	(2,218	)	$	(3,431	)
% Net Sales		(0.7	)%		(0.4	)%		(0.9	)%		(4.5	)%		(1.5	)%
	Quarter Ended			Quarter Ended			Quarter Ended			Quarter Ended			Trailing 12 Months
	July 31,			October 30,			January 29,			April 30,			April 30,
	2022			2022			2023			2023			2023
Net loss (1)	$	(5,698	)	$	(12,173	)	$	(8,968	)	$	(4,681	)	$	(31,520	)
Income tax expense		896			1,150			286			798			3,130
Interest income, net		(17	)		(79	)		(196	)		(239	)		(531	)
Depreciation expense		1,768			1,719			1,739			1,619			6,845
Restructuring expense		—			615			711			70			1,396
Restructuring related charge		—			98			—			—			98
Amortization expense		105			109			109			115			438
Stock based compensation		252			313			322			258			1,145
Adjusted EBITDA (1)	$	(2,694	)	$	(8,248	)	$	(5,997	)	$	(2,060	)	$	(18,999	)
% Net Sales		(4.3	)%		(14.1	)%		(11.4	)%		(3.4	)%		(8.1	)%
% Over (Under)		(84.6	)%		(97.0	)%		(90.8	)%		7.7	%		(81.9	)%

(1) Net loss and adjusted EBITDA for the quarter ended October 30, 2022, and the twelve-month period ending April 30, 2023, includes a non-cash charge totaling $5.2 million, which represents a $2.9 million charge for the write down of inventory to its net realizable value associated with the mattress fabrics segment and $2.3 million related to markdowns of inventory estimated based on the company's policy for aged inventory for both the mattress and upholstery fabrics segments.

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 17

June 27, 2024

CULP, INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT

FOR THE TWELVE MONTHS ENDED APRIL 28, 2024

Unaudited

(Amounts in Thousands)

	Adjusted Operating     (Loss) Income
	Twelve Months Ended			Average Capital			Return on Avg. Capital
	April 28, 2024			Employed (2)			Employed (1)
Mattress Fabrics	$	(6,845	)	$	63,189			(10.8	)%
Upholstery Fabrics		5,787			9,263			62.5	%
Unallocated Corporate		(9,574	)		3,784		N.M.
Total	$	(10,632	)	$	76,235			(13.9	)%
Average Capital Employed	As of the three Months April 28, 2024												As of the three Months January 28, 2024												As of the three Months October 29, 2023
	Mattress			Upholstery			Unallocated						Mattress			Upholstery			Unallocated						Mattress			Upholstery			Unallocated
	Fabrics			Fabrics			Corporate			Total			Fabrics			Fabrics			Corporate			Total			Fabrics			Fabrics			Corporate			Total
Total assets (3)	$	72,060			32,629			27,365			132,054		$	75,572			38,085			28,341			141,998		$	75,924			35,082			31,154			142,160
Total liabilities		(9,803	)		(25,370	)		(20,752	)		(55,925	)		(8,234	)		(32,201	)		(20,767	)		(61,202	)		(14,739	)		(23,758	)		(20,035	)		(58,532	)
Subtotal	$	62,257		$	7,259			6,613		$	76,129		$	67,338		$	5,884		$	7,574		$	80,796		$	61,185		$	11,324		$	11,119		$	83,628
Cash and cash equivalents		—			—			(10,012	)		(10,012	)		—			—			(12,585	)		(12,585	)		—			—			(15,214	)		(15,214	)
Short-term investments - Rabbi Trust		—			—			(903	)		(903	)		—			—			(937	)		(937	)		—			—			(937	)		(937	)
Current income taxes receivable		—			—			(350	)		(350	)		—			—			(476	)		(476	)		—			—			(340	)		(340	)
Long-term investments - Rabbi Trust		—			—			(7,102	)		(7,102	)		—			—			(7,083	)		(7,083	)		—			—			(6,995	)		(6,995	)
Deferred income taxes - non-current		—			—			(518	)		(518	)		—			—			(531	)		(531	)		—			—			(472	)		(472	)
Deferred compensation - current		—			—			903			903			—			—			937			937			—			—			937			937
Income taxes payable - current		—			—			972			972			—			—			1,070			1,070			—			—			998			998
Income taxes payable - long-term		—			—			2,088			2,088			—			—			2,072			2,072			—			—			2,055			2,055
Deferred income taxes - non-current		—			—			6,379			6,379			—			—			6,177			6,177			—			—			5,663			5,663
Deferred compensation non-current		—			—			6,929			6,929			—			—			6,856			6,856			—			—			6,748			6,748
Total Capital Employed	$	62,257		$	7,259		$	4,999		$	74,515		$	67,338		$	5,884		$	3,074		$	76,296		$	61,185		$	11,324		$	3,562		$	76,071

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 18

June 27, 2024

CULP, INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED

FOR THE TWELVE MONTHS ENDED APRIL 28, 2024

Unaudited

(Amounts in Thousands)

	As of the three Months Ended July 30, 2023												As of the three Months Ended April 30, 2023
	Mattress			Upholstery			Unallocated						Mattress			Upholstery			Unallocated
	Fabrics			Fabrics			Corporate			Total			Fabrics			Fabrics			Corporate			Total
Total assets (3)	$	72,286			37,592			33,024			142,902		$	75,494			39,127			37,562			152,183
Total liabilities		(11,230	)		(25,235	)		(20,320	)		(56,785	)		(11,387	)		(29,638	)		(22,078	)		(63,103	)
Subtotal	$	61,056		$	12,357		$	12,704		$	86,117		$	64,107		$	9,489		$	15,484		$	89,080
Cash and cash equivalents		—			—			(16,812	)		(16,812	)		—			—			(20,964	)		(20,964	)
Short-term investments - Rabbi Trust		—			—			(791	)		(791	)		—			—			(1,404	)		(1,404	)
Current income taxes receivable		—			—			(202	)		(202	)		—			—			-			-
Long-term investments - Rabbi Trust		—			—			(7,204	)		(7,204	)		—			—			(7,067	)		(7,067	)
Deferred income taxes - non-current		—			—			(476	)		(476	)		—			—			(480	)		(480	)
Deferred compensation - current		—			—			791			791			—			—			1,404			1,404
Accrued restructuring		—			—			10			10			—			—			—			—
Income taxes payable - current		—			—			526			526			—			—			753			753
Income taxes payable - long-term		—			—			2,710			2,710			—			—			2,675			2,675
Deferred income taxes - non-current		—			—			5,864			5,864			—			—			5,954			5,954
Deferred compensation non-current		—			—			6,966			6,966			—			—			6,842			6,842
Total Capital Employed	$	61,056		$	12,357		$	4,086		$	77,499		$	64,107		$	9,489		$	3,197		$	76,793
	Mattress			Upholstery			Unallocated
	Fabrics			Fabrics			Corporate			Total
Average Capital Employed (3)	$	63,189		$	9,263		$	3,784		$	76,235

Notes

(1) Return on average capital employed represents the twelve months operating (loss) income as of April 28, 2024, divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term and long-term investments – Rabbi Trust, income taxes receivable and payable, accrued restructuring, noncurrent deferred income tax assets and liabilities, and current and non-current deferred compensation.

(2) Average capital employed was computed using the five quarterly periods ending April 28, 2024, January 28, 2024, October 29, 2023, July 30, 2023, and April 30, 2023.

(3) Intangible assets are included in unallocated corporate for all periods presented and therefore, have no effect on capital employed and return on capital employed for our mattress fabrics and upholstery fabrics segments.

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CULP Announces Results for Third Quarter Fiscal 2024, With Continued Sequential and Year-Over-Year Improvement

Page 19

March 6, 2024

CULP INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT

FOR THE TWELVE MONTHS ENDED APRIL 30, 2023

Unaudited

(Amounts in Thousands)

	Adjusted Operating  (Loss) Income
	Twelve Months Ended			Average  Capital			Return on Avg. Capital
	April 30, 2023			Employed (2)			Employed (1)
Mattress Fabrics	$	(18,681	)	$	72,282			(25.8	)%
Upholstery Fabrics		1,994			17,853			11.2	%
Unallocated Corporate		(10,297	)		3,808		N.M.
Total	$	(26,984	)	$	93,943			(28.7	)%
Average Capital Employed	As of the three Months Ended April 30, 2023												As of the three Months Ended January 29, 2023												As of the three Months Ended October 30, 2022
	Mattress			Upholstery			Unallocated						Mattress			Upholstery			Unallocated						Mattress			Upholstery			Unallocated
	Fabrics			Fabrics			Corporate			Total			Fabrics			Fabrics			Corporate			Total			Fabrics			Fabrics			Corporate			Total
Total assets (3)	$	75,494			39,127			37,562			152,183		$	75,393			39,817			35,388			150,598		$	78,366			44,934			38,330			161,630
Total liabilities		(11,387	)		(29,638	)		(22,078	)		(63,103	)		(9,511	)		(24,367	)		(23,216	)		(57,094	)		(9,895	)		(26,108	)		(23,519	)		(59,522	)
Subtotal	$	64,107		$	9,489		$	15,484		$	89,080		$	65,882		$	15,450		$	12,172		$	93,504		$	68,471		$	18,826		$	14,811		$	102,108
Cash and cash equivalents		—			—			(20,964	)		(20,964	)		—			—			(16,725	)		(16,725	)		—			—			(19,137	)		(19,137	)
Short-term investments - Rabbi Trust		—			—			(1,404	)		(1,404	)		—			—			(2,420	)		(2,420	)		—			—			(2,237	)		(2,237	)
Current income taxes receivable		—			—			—			—			—			—			(238	)		(238	)		—			—			(510	)		(510	)
Long-term investments - Rabbi Trust		—			—			(7,067	)		(7,067	)		—			—			(7,725	)		(7,725	)		—			—			(7,526	)		(7,526	)
Deferred income taxes - non-current		—			—			(480	)		(480	)		—			—			(463	)		(463	)		—			—			(493	)		(493	)
Deferred compensation - current		—			—			1,404			1,404			—			—			2,420			2,420			—			—			2,237			2,237
Accrued restructuring		—			—			—			—			—			—			—			—			—			—			33			33
Income taxes payable - current		—			—			753			753			—			—			467			467			—			—			969			969
Income taxes payable - long-term		—			—			2,675			2,675			—			—			2,648			2,648			—			—			2,629			2,629
Deferred income taxes - non-current		—			—			5,954			5,954			—			—			6,089			6,089			—			—			5,700			5,700
Deferred compensation - long-term		—			—			6,842			6,842			—			—			7,590			7,590			—			—			7,486			7,486
Total Capital Employed	$	64,107		$	9,489		$	3,197		$	76,793		$	65,882		$	15,450		$	3,815		$	85,147		$	68,471		$	18,826		$	3,962		$	91,259

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CULP Announces Results for Fourth Quarter and Fiscal 2024, Provides Update on Restructuring Initiatives

Page 20

June 27, 2024

CULP INC.

RETURN ON CAPITAL EMPLOYED BY SEGMENT - CONTINUED

FOR THE TWELVE MONTHS ENDED APRIL 30, 2023

Unaudited

(Amounts in Thousands)

	As of the three Months Ended July 31, 2022												As of the three Months Ended May 1, 2022
	Mattress			Upholstery			Unallocated						Mattress			Upholstery			Unallocated
	Fabrics			Fabrics			Corporate			Total			Fabrics			Fabrics			Corporate			Total
Total assets (3)	$	90,842			51,053			38,595			180,490		$	92,609			51,124			33,830			177,563
Total liabilities		(11,934	)		(30,762	)		(23,799	)		(66,495	)		(8,569	)		(25,915	)		(23,578	)		(58,062	)
Subtotal	$	78,908		$	20,291		$	14,796		$	113,995		$	84,040		$	25,209		$	10,252		$	119,501
Cash and cash equivalents		—			—			(18,874	)		(18,874	)		—			—			(14,550	)		(14,550	)
Current income taxes receivable		—			—			(798	)		(798	)		—			—			(857	)		(857	)
Long-term investments - Rabbi Trust		—			—			(9,567	)		(9,567	)		—			—			(9,357	)		(9,357	)
Deferred income taxes - non-current		—			—			(546	)		(546	)		—			—			(528	)		(528	)
Income taxes payable - current		—			—			587			587			—			—			413			413
Income taxes payable - long-term		—			—			3,118			3,118			—			—			3,097			3,097
Deferred income taxes - non-current		—			—			6,007			6,007			—			—			6,004			6,004
Deferred compensation - long-term		—			—			9,528			9,528			—			—			9,343			9,343
Total Capital Employed	$	78,908		$	20,291		$	4,251		$	103,450		$	84,040		$	25,209		$	3,817		$	113,066
	Mattress			Upholstery			Unallocated
	Fabrics			Fabrics			Corporate			Total
Average Capital Employed (3)	$	72,282		$	17,853		$	3,808		$	93,943

Notes

(1) Return on average capital employed represents the last twelve months operating (loss) income as of April 30, 2023, divided by average capital employed. Average capital employed does not include cash and cash equivalents, short-term and long-term investments – Rabbi Trust, accrued restructuring, income taxes receivable and payable, noncurrent deferred income tax assets and liabilities, and current and non-current deferred compensation.

(2) Average capital employed was computed using the five quarterly periods ending April 30, 2023, January 29, 2023, October 30, 2022, July 31, 2022, and May 1, 2022.

(3) Intangible assets are included in unallocated corporate for all periods presented and therefore, have no effect on capital employed and return on capital employed for our mattress fabrics and upholstery fabrics segments.

EX-99.2

Exhibit 99.2

 

CULP Positioning for the Future Culp Restructuring Plan - June 2024

 

Forward Looking Statements This presentation contains "forward-looking statements" within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties that may cause actual events and results to differ materially from such statements. Further, forward looking statements are intended to speak only as of the date on which they are made, and we disclaim any duty to update such statements to reflect any changes in management's expectations or any change in the assumptions or circumstances on which such statements are based, whether due to new information, future events, or otherwise. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often but not always characterized by qualifying words such as "expect," "believe," "anticipate," "estimate," "intend," "plan," "project," and their derivatives, and include but are not limited to statements about expectations, projections, targets, or trends for our future operations, strategic initiatives, restructurings, production levels, new product launches, sales, profit margins, profitability, operating (loss) income, capital expenditures, working capital levels, cost savings (including, without limitation, anticipated cost savings from restructuring initiatives), income taxes, SG&A or other expenses, pre-tax (loss) income, earnings, cash flow, and other performance or liquidity measures, as well as any statements regarding dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, potential acquisitions, restructuring and restructuring-related charges, expenses, and/or credits future economic or industry trends, public health epidemics, or future developments. There can be no assurance that we will realize these expectations or meet our guidance, or that these beliefs will prove correct. Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on our business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect us adversely. The future performance of our business depends in part on our success in conducting and finalizing acquisition negotiations and integrating acquired businesses into our existing operations. Changes in consumer tastes or preferences toward products not produced by us could erode demand for our products. Changes in tariffs or trade policy, including changes in U.S. trade enforcement priorities, or changes in the value of the U.S. dollar versus other currencies, could affect our financial results because a significant portion of our operations are located outside the United States. Strengthening of the U.S. dollar against other currencies could make our products less competitive on the basis of price in markets outside the United States, and strengthening of currencies in Canada and China can have a negative impact on our sales of products produced in those places. In addition, because our foreign operations use the U.S. dollar as their functional currency, changes in the exchange rate between the local currency of those operations and the U.S dollar can affect our reported profits from those foreign operations. Also, economic or political instability in international areas could affect our operations or sources of goods in those areas, as well as demand for our products in international markets. The impact of public health epidemics on employees, customers, suppliers, and the global economy, such as the recent global coronavirus pandemic, could also adversely affect our operations and financial performance. In addition, the impact of potential asset impairments, including impairments of property, plant, and equipment, inventory, or intangible assets, as well as the impact of valuation allowances applied against our net deferred income tax assets, could affect our financial results. Increases in freight costs, labor costs, and raw material prices, including increases in market prices for petrochemical products, can also significantly affect the prices we pay for shipping, labor, and raw materials, respectively, and in turn, increase our operating costs and decrease our profitability. Also, our success in diversifying our supply chain with reliable partners to effectively service our global platform could affect our operations and adversely affect our financial results. Finally, the future performance of our business also depends on our ability to successfully restructure our mattress fabrics operation and return the segment to profitability. Further information about these factors, as well as other factors that could affect our future operations or financial results and the matters discussed in forward-looking statements, is included in Item 1A "Risk Factors" in our recent Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results. CULP

 

Restructuring Overview - Why Now? FY24 Q4/PRE-RESTRUCTURING STATE • Building foundation for profitable growth in FY24, Mattress Fabrics (CHF) business transformation plan was underway ■ Industry conditions significantly declined in FY24 Q4, warranting action o Both businesses had solid sales gains in FY24 Q3 o Macroeconomic conditions worsened in early calendar 2024, affecting customers Demand pressure and impact on financial results necessitated change o Action needed to implement sustainable cost structure 。 CHF needed to return to profitability at current demand levels without sacrificing future growth potential • Need to recalibrate capacity and portfolio of owned real estate to align with demand • Solid balance sheet remains intact with additional available liquidity FUTURE STATE/POST-RESTRUCTURING Operate profitably in currently depressed demand environment o Generate positive Adjusted EBITDA with path to positive operating income post-restructuring by second half of FY25 Generate positive free cash flow o Return to profitability o Continued focus on working capital o Cost reductions/sale of assets o Benefit of significant U.S. NOLS ■ Transition CHF product mix of manufactured vs sourced, especially related to damask/woven products o Expand ways to service customers and grow in cost- efficient manner • Leverage consolidated global footprint, design capabilities, and customer focus to accelerate market position ■ Capitalize on new product development opportunities to outperform industry trends 3 CULP

 

Financial and Business Implications 4 RESTRUCTURING ACTIONS RESTRUCTURING OUTCOMES 1. Consolidate CHF North American Operations Wind Down and Close Operations in Quebec, Canada Move Knitting and Finish Capacity to Stokesdale, NC Optimize Capacity and Overhead in North America in One Facility (NC) 2. Transition Mattress Fabric Damask Weaving Operation to Sourcing Model 3. Consolidate Haiti Operations into One Facility 4. Reduce CHF workforce by approximately 240 people (35% of segment total workforce) 5. Restructure Upholstery Fabrics (CUF) Finishing Operation in China 6. Reduce Unallocated Corporate and Shared Service Expenses Projected Cost Savings 1. $10-11 million in annualized cost and productivity savings, primarily via mattress segment COGS $8.0 million total restructuring & related charges with $2.5 million cash charges from: • Severance Restructuring • Relocation of Equipment • Wind-Down of Canadian Operation $1.0-1.5 million reduction in annualized unallocated corporate/shared services savings Projected Proceeds from Asset Sales 1. Anticipate $10-12 million of after-tax proceeds from sale of owned Canadian Faciality 2. Anticipate $2.0-2.5 million from sale of excess equipment ■ Offset against cash restructuring expense CULP

 

Steps and Timing of Restructuring: Measuring Success 5 FISCAL Q1 25 ΙΣΣ (MAY - JULY 2024) Major restructuring actions announced in early May Communicated phased closure of Canadian mattress fabrics facility to affected employees, customers, vendors, and Canadian regulatory authorities Initiated and completed negotiation of severance and stay bonus agreements Engaged broker to sell Canadian real estate Working with supply partners on transition of damask SKUs Moving and optimizing Stokesdale facility floor space for relocation of Canadian knitting and finishing equipment Completed consolidation of Haiti operations into one building Completed restructuring of upholstery fabric (CUF) finishing operation in China FISCAL Q2 25 (AUGUST - OCTOBER 2024) >> Discontinue production at Canadian mattress fabrics facility by end of Q2 Complete transition of Damask SKUs with supply partners by end of Q2 Make continued progress with relocation of knitting and finishing equipment to Stokesdale Early stages of operational improvements for plant and equipment consolidation SECOND HALF FISCAL 25 (NOVEMBER 2024 - APRIL 2025) Complete relocation of equipment to Stokesdale Complete sale of excess equipment Estimated completion for sale of Canadian real estate (timing dependent upon buyer interest / market conditions) Further progress on operational improvements from plant and equipment consolidation CULP

 

Liquidity, Access to Capital are Strengthened Total Liquidity As of 4/28/2024 (in millions) Cash ABL Availability China Credit Line Availability $10.0 18.5 4.0 $32.5 Total Liquidity Estimated Proceeds from Canadian Real Estate Sale $10.0 Total Liquidity Including Future Real Estate Sale Proceeds* $42.5 TTM Cash Burn -$11.0 $10.0 Cash Restructuring Benefit Net of Cash Expense FY 2025 Year-End Expected Cash >$10.0 *Hypothetical pro forma assuming sale of Canadian real estate based on estimated net proceeds. Timing and amount of actual proceeds currently unknown. BALANCE SHEET IMPACT Cash and access to liquidity remains solid • Expect to utilize some borrowing during fiscal 2025 to fund restructuring activity and working capital to grow business • Expect to maintain positive net cash position and fund most of restructuring costs from eventual sale of excess equipment Eventual proceeds from sale of Canadian facility enhances balance sheet ■ Cost actions to dramatically lower expected operating and cash burn at current low sales levels to ride out industry softness • Restructuring and balance sheet actions allow for continued investment in the business to benefit consolidated company in market recovery Cash: $10 million SOURCES OF LIQUIDITY (AS OF APRIL 28, 2024) • Domestic ABL - working capital-based ABL - $18.5 million available based on inventory and working capital levels ■ China unsecured credit line - $4.0 million available ■ Canadian Real Estate Proceeds OTHER SOURCES - Anticipate $10-12 million of proceeds post tax by end of fiscal 2025 - Sale process underway U.S. Real Estate Ability to advance credit on owned property if needed CULP

 

Restructuring Puts CHF on Path to Segment Breakeven Hypothetical pro forma model of projected annualized savings on CHF profitability post-restructuring, assuming the same level of sales from fiscal 2024 (model is before any corporate allocation at segment level) Projected annualized cost and productivity savings of approximately $9.5 million (CHF only) Post restructuring, mattress fabrics segment expected to return to positive operating income (on a monthly basis) sometime in the second half of fiscal 2025 CHF 2017 Revenue Gross Profit $ Gross Profit % $ 190.8 $ 43.1 23% 2021 2022 2023 2024 $157.7 $152.2 $111.0 $ 116.4 $23.9 $ 16.5 $ (6.7) $ 6.3 15% 11% -6% Pro Forma Revenue $ 116.4 Gross Profit $ $ 6.3 5% Restructuring Savings** $ 9.5 New Gross Profit $ $ 15.8 New Gross Profit % 13.6% Operating Income % Seg 15.4% 7.5% Operating Income/Loss $ Segment SG&A -5.9% $ 29.38 $11.80 $ 4.21 $ (18.68) $ (6.85) $13.69 $12.07 $ 12.25 $ 11.94 $ 13.13 2.8% -16.8% Operating Income Segment SG&A $ 2.67 $ 13.13 D&A EBITDA $ 5.88 $(0.97) $ 5.88 $ 8.55 * Reflects FY 2024 CHF results restated as a hypothetical pro forma with estimated cost and productivity savings from CHF restructuring actions included. This is a hypothetical model only - it is not intended as guidance/projections. Also, this model does not include any allocation of corporate costs at segment level. ** Estimated restructuring savings for CHF segment only. CULP

 

Mattress Fabrics: Current Industry Demand Near Previous Recession (2009) Bottom Levels Current level of domestic unit production of 18 million units near 2009 recession levels Unique factors affecting current cycle ■ Post Covid stimulus, at home demand pull forward ■ Supply chain challenges and cost pressures in addition to labor shortage ■ Pressures on lower end consumer discretionary spending due to inflation Figure 6 Annual U.S.-Produced Mattress Unit Volume Trends - Below Pre-Pandemic Levels in millions 14 26 222 2 24 24 22 23 22 21 21 22 20 18 16 25 24 24 23 24 23 22 21 20 20 20 19 19 18 2013 20 19 8 Note: Annual unit volume data is composed of reported and projected U.S.-produced mattress shipments and does not include imported mattress shipments or U.S.- produced or imported stationary foundations. 2022 annual unit volume data, for U.S.-produced mattresses, may not equal the summed total of quarterly unit volume data, for 2022, due to ISPA's quarterly data restatements. 2021 annual unit volume data, for U.S.-produced mattresses, may not equal the summed total of quarterly unit volume data, for 2021, due to ISPA's annual data restatements. Source: International Sleep Products Association, KeyBanc Capital Markets Inc. CULP

 

Restructuring of Mattress Fabrics Segment ✓Strengthened leadership team focused on profitable growth Leverage long history of success within the bedding industry Drive operating efficiencies: 9 - Optimize manufacturing and sourcing capabilities for customer reactivity and improved cost advantage Phased wind down and closure of fabric formation facility in Canada and consolidation of manufacturing and sourcing capabilities to USA, Turkey and Asia Consolidate cut and sew operations on Haiti / Dominican Republic border to one facility Diligent focus on production scheduling and quality management Invest in high ROI, quick payback capital projects to drive cost savings New commercial approach including: Strong focus on winning new market position as customer innovation cycle increases New product introductions priced in line with current costs to improve profit Restructured and energized sales team Customer, product, and design segmentation including a focused selling strategy and significant SKU rationalization, especially in damask weaving Establishment of an open line to balance custom design work with curated fabric offerings where volumes warrant Continued focus on new product placements and growing market position CHF Manufacturing & Sourcing Locations Post-Restructuring USA TURKEY CHINA VIETNAM HAITI CULP

 

Solidly Profitable Upholstery Fabrics Segment With Key Initiatives Underway to Accelerate Performance Leading position in a fragmented market Asset light model to maintain flexibility and product profit performance Growing innovative performance products LiveSmart® performance brand LiveSmart EvolveR, performance plus recycled fibers Nanobionic® wellness-focused technology Growing Hospitality segment Targeting >25% of normalized sales with higher margin Expanding capacity of roller shades within Read Window Products Drive operating efficiencies Cut & Sew platform restructuring completed in both Haiti and Asia Improved Read Window operations Lower inventory markdown expense Accelerating Segment Performance 10 LIVESmart ENJOY LIFE. STAY SPOTLESS by CULP LiveSmart EVOLVE POWERED BY REPREVE CULPO Powered by nanobionic CULP

 

What Gives CULP Confidence in Restructuring Plan / Recovery? Key Success Factors Experienced leadership team focused on profitable growth Successfully navigated significant restructuring of CUF beginning in early 2000's Solid balance sheet and available liquidity Strong relationships with key customers and long-term suppliers Emphasis on design creativity and product innovation Strategic and optimized manufacturing and global sourcing platform Market position improving with solid placements priced in line with current costs Year-over-year sales growth (FY24) in CHF in very difficult demand 11 environment CULP

 

CULP

 

About Non-GAAP Financial Information This presentation contains adjusted income statement information, which discloses adjusted loss from operations, a non-U.S. GAAP performance measure that eliminates items which are not expected to occur on a recurring or regular basis (including, without limitation, restructuring and restructuring-related expenses, charges, and/or credits, as applicable for the periods presented or projected). The company has included this adjusted information in order to show operational performance excluding the effects of items not expected to occur on a recurring or regular basis. Management believes this presentation aids in the comparison of financial results among comparable financial periods. Management uses adjusted income statement information in evaluating the financial performance of our overall operations and business segments. Also, adjusted income statement information is used as a performance measure in our incentive-based executive compensation program. We note, however, that this adjusted income statement information should not be viewed in isolation or as a substitute for loss from operations calculated in accordance with U.S. GAAP. This presentation contains disclosures about free cash flow, a non-U.S. GAAP liquidity measure that we define as net cash (used in) provided by operating activities, less cash capital expenditures and payments on vendor-financed capital expenditures, plus any proceeds from sale of property, plant, and equipment, plus proceeds from note receivable, plus proceeds from the sale of investments associated with our rabbi trust, less the purchase of investments associated with our rabbi trust, and plus or minus the effects of foreign currency exchange rate changes on cash and cash equivalents, in each case to the extent any such amount is incurred during the period presented or projected. Management believes the disclosure of free cash flow provides useful information to investors because it measures our available cash flow for potential debt repayment, stock repurchases, dividends, additions to cash and investments, or other corporate purposes. We note, however, that not all of the company's free cash flow is available for discretionary spending, as we may have mandatory debt payments and other cash requirements that must be deducted from our cash available for future use. In operating our business, management uses free cash flow to make decisions about what commitments of cash to make for operations, such as capital expenditures (and possible financing arrangements for these expenditures), purchases of inventory or supplies, SG&A expenditure levels, compensation, and other commitments of cash, while still allowing for adequate cash to meet known future commitments for cash, such as debt repayment, and also for making decisions about dividend payments and share repurchases. This presentation contains disclosures about our Adjusted EBITDA, which is a non-U.S. GAAP performance measure that reflects net (loss) income excluding income tax expense (benefit), net interest income, and restructuring expense or credit and restructuring related charges or credits, as well as depreciation and amortization expense, and stock-based compensation expense. This measure also excludes other non-recurring charges and credits associated with our business, if and to the extent any such amount is incurred during the period presented or projected. We believe presentation of Adjusted EBITDA is useful to investors because earnings before interest income and expense, income taxes, depreciation and amortization, and similar performance measures that exclude certain charges from earnings, are often used by investors and financial analysts in evaluating and comparing companies in our industry. We note, however, that such measures are not defined uniformly by various companies, with differing expenses being excluded from net income to calculate these performance measures. For this reason, Adjusted EBITDA should not be viewed in isolation by investors and should not be used as a substitute for net income (loss) calculated in accordance with GAAP, nor should it be used for direct comparisons with similarly titled performance measures reported by other companies. Use of Adjusted EBITDA as an analytical tool has limitations in that this measure does not reflect all expenses that are necessary to fund and operate our business, including funds required to pay taxes, service our debt, and fund capital expenditures, among others. Management uses Adjusted EBITDA to help it analyze the company's earnings and operating performance, by excluding the effects of expenses that depend upon capital structure and debt level, tax provisions, and non-cash items such as depreciation, amortization and stock-based compensation expense that do not require immediate uses of cash. 13 CULP

XML

Document And Entity Information	Jun. 27, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jun. 27, 2024
Entity Registrant Name	Culp, Inc.
Entity Central Index Key	0000723603
Entity Emerging Growth Company	false
Entity File Number	1-12597
Entity Incorporation, State or Country Code	NC
Entity Tax Identification Number	56-1001967
Entity Address, Address Line One	1823 Eastchester Drive
Entity Address, City or Town	High Point
Entity Address, State or Province	NC
Entity Address, Postal Zip Code	27265
City Area Code	336
Local Phone Number	889-5161
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock, par value $0.05 per share
Trading Symbol	CULP
Security Exchange Name	NYSE