CULP 10-K & 10-Q changes, risk factors and insider trading

Overall demand for our products depends upon consumer demand for furniture and bedding products, which is subject to cyclical variations in the general economy, including current inflationary pressures affecting consumer spending, declines in overall consumer confidence, recession and fears of recession, and other geopolitical events, such as the ongoing Russia/Ukraine war, the war in Iran, and other armed conflicts in the Middle East and other areas of the world. Because purchases of furniture and bedding products may be considered discretionary purchases for most individuals and businesses, demand for these products is heavily influenced by economic trends. Economic downturns, increases in unemployment rates, persistent inflation, and uncertainty about future health and economic prospects can affect consumer spending habits and demand for discretionary items, including home furnishings, which reduces the demand for our products and, therefore, can cause a decline in our sales and earnings. In addition, the level of housing starts, sales of existing homes, declines in office occupancy rates, trends in disposable income, changes in interest rates (particularly home mortgage rates), and availability of consumer credit, can also affect our business.

Following an increase in demand for residential upholstery fabrics during the COVID-19 pandemic, increased consumer discretionary spending on travel, leisure, and entertainment, and away from home goods has persisted infor recentseveral years. Inflationary pressures also began to affectimpacted consumer spending during the second half of fiscal 2022 and continued through fiscal 2025.2026. SlowdownsFurther, inthe extended downturn of the U.S. housing and commercial real estate markets in fiscal 2024 and 2025 also negatively impactedaffected demand for furniture and bedding, reducing demand for our upholstery and mattress fabricbedding products. In addition, theas discussed in more detail below, recent global trade negotiations and related tariff and import control measures occurring beginning in the fourth quarter of fiscal 2025 have impactedaffected, and are expected to continue to impactimpact, industry pricing and supply chain dynamics, which may continue to pressure demand for our upholstery and mattress fabricbedding products. Global volatility, higher oil prices, and overall inflation have also challenged travel and leisure spending in fiscal 2026, which has negatively affected demand in our upholstery hospitality business. We are unable to predict how long these trends will last, or to what extent macroeconomic or other geopolitical events may affect the purchasing cycle for home furnishing products. Demand for our products, along with our results of operations, has been adversely affected by macroeconomic trends that are beyond our control, and those effects may continue or worsen.

Partly in response to certain of these trends, in fiscal 2025 we initiated and ultimately completed a restructuring of our business pursuant to which we, among other actions, consolidated our North American mattress fabricsbedding operations and our sewn cover operation in Haiti in an effort to align capacity and cost structure with demand. See “Item 1. Business—Fiscal 2025 Restructuring.” Additionally, at the end of fiscal 2025, we initiated a strategic transformation of our operating model through the combination of our two operating divisions into a single, unified business designed to optimize operational agility, further streamline costs and processes, and increase responsiveness to customer needs and market trends. We completed this business integration in fiscal 2026. See "Item 1. Business - Fiscal 2026 Business Integration." While some of the anticipated cost savings, efficiencyefficiencies, and other benefits from these restructuring effortefforts began to positively impact our financial results in fiscal 2025,2025 and fiscal 2026, we can offer no assurance that these efforts will achieve their full intended impacts or that such impacts will be realized on the expected timeframe or at all.

Our business is highly competitive and fragmented, and we face significant competition from many competitors, both foreign and domestic. We compete with many other manufacturers of fabric, as well as converters who source fabrics from various producers and market them to manufacturers of furniture and bedding. In many cases, these fabrics are sourced from foreign suppliers who have a lower cost structure than the company. The highly competitive nature of our business in each of our segments means we are constantly subject to the risk of losing market share, which would likely result in a decrease in our future sales and earnings. In particular, in recent years the U.S. bedding industry in which our mattress fabrics segment participates has seen significant increases in competition from low-cost foreign producers, which has adversely affected demand for products in our products.bedding segment.

Our domestic and foreign operations are subject to risks of unsettled political conditions, civil unrest or instability in countries in which we operate, natural or man-made disasters, armed conflicts or acts of war, and terrorism. As an example, we maintain an active production facility in Ouanaminthe, Haiti, on the Dominican Republic border. Severe political instability in Haiti, along with recent natural disasters, has created a crisis in the country, subjecting our operations there to heightened risk. WhileIn addition, recent government action regarding the minimum wage levels applicable to textile workers in Haiti led to labor strike activity in the industrial park in which our Haiti operations atare ourlocated, temporarily impacting production facilityschedules. have not been directly affected, ongoingOngoing political and civil unrest in Haiti could cause futher manufacturing disruptions at our Haiti facility.

Moreover, the effects of climate change and actions taken to combat climate change could exacerbate these risks, including by increasing the likelihood and severity of extreme weather events. Civil instability, public health concerns, pandemics, natural disasters, armed conflicts or acts of war, terrorism or other adverse events could cause disruption at our manufacturing or distribution facilities, or at the facilities of our suppliers and distribution channels. Moreover, the effects of climate change and actions taken to combat climate change could exacerbate these risks, including by increasing the likelihood and severity of extreme weather events. The materialization of any of these risks could result in additional expense to us, limit our supply of necessary goods and raw materials, and otherwise affect our ability to meet the needs of our customers, and our results of operations may be materially adversely affected as a result.

We continue to focus on strategic initiatives designed to improve our business and our results of operations. At the beginning ofIn fiscal 2025, we announcedcompleted a significant restructuring plan designed to reduce costs, improve asset utilization, and drive performance and profitable growth. This plan, which we completed during fiscal 2025,plan focused primarily on theour company’s mattress fabricsbedding segment and, to a lesser extent, itsour upholstery fabrics segment, and included consolidating operations, restructuring operations, and reducing expenses. See “Item 1. Business—Fiscal 2025 Restructuring.” In addition, onat Aprilthe 24,end of fiscal 2025, we announced the strategic transformation of our operating model through the combination of our two operating divisions, Culp Upholstery Fabrics and Culp Home Fashions, into a single, integratedunified business designed to optimize operational agility, further streamline costs and processes, and increase responsiveness to customer needs and market trends. This integration initiativeinitiative, includes,which amongwas othercompleted actions,during fiscal 2026, included increased centralization and collaboration among previously division-specific functions and departments, the transition of the duties and responsibilities of certain key division leadership roles to a company-wide scope, and the consolidation of certain upholstery fabric operations at our leased facility in Burlington, North Carolina, into a shared management model within our owned facility in Stokesdale, North Carolina facility.(which had historically been operated solely by our bedding segment), and the rationalization of our upholstery operations in China. See “Item 1. Business—Fiscal 2026 Business Integration.”

There can be no assurance that these or other future strategic initiatives will be successful to the extent we expect, or at all. Additionally, we are investing resources in these initiatives and the costs of thethese initiatives may outweigh their benefits. If we miscalculate the resources we need to complete these strategic initiatives or fail to implement them effectively, our business and operating results could be adversely affected.

Our business may be adversely affected by increased tariffs or other changes in U.S. trade policy related to imported products, as well as violations of existing trade policies.products.

Many of our products are manufactured or sourced outside of the U.S. The U.S. government has imposed certain tariffs on imports from various countries, including China, where a significant amount of our products is manufactured, and recently imposed significant additional tariffs on products imported from China that temporarily increased the tariff rate on certain of our products to well above 100%. Certain of those tariff rates have since been paused and/or reduced, but remain at elevated levels. These recent tariff actions compelled us to raise prices on our products and, as a result, our sales and gross margins on certain products arehave been, and will likely continue to bebe, impacted.affected. TheMoreover, U.S.the governmentcurrent has announced additional tariffs that have not yet gone into effecttariff and maytrade considerregulatory re-imposingenvironment certainis tariffs,unpredictable, imposingmaking additionalit tariffs or extending the timelinedifficult for continuationus, ofand existingfor tariffs.our customers and suppliers, to manage enterprise cost structure and supply chain planning. Any tariffs that result in increased costs of imported products and materials could require us to further increase prices to our domestic customers. If we are unable to pass along these additional costs, our sales and gross margins may be adversely affected. Further, while a significant portion of our products produced in China are not sold directly into the U.S., and therefore may not be directly impacted by certain U.S. imposed tariffs, most of our products are sold to manufacturers for end use in the U.S. If our customers’ sales are adversely affected by tariffs, our sales may also be adversely impacted.affected. As discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” tariffs have had an adverse impact on our business in fiscal 2025,business, and may have a material adverse effect on our results of operations in the future.

In addition to tariffs, the U.S. government has considered, and is expected to continue to consider,considering other proposals for substantial changes to its trade and tax policies, which could include import restrictions, changes to or withdrawal from existing trade agreements, and border-adjustment taxes, among other possible measures. Material changes in these policies could increase our tax obligations, require us to source materials from different regions, or increase prices to customers, which could adversely affect sales. Any significant change in U.S. trade or tax policy related to imported products could have a material adverse effect on our business and financial results.

There are also a number of trade regulations and duties currently in place to protect the U.S. textile industry against competition from low-priced foreign producers, such as those in China and Vietnam, but violations of these trade regulations and duties by foreign producers has had, and may in the future have, a material adverse effect on our operations. In May of 2019, the U.S. Department of Commerce imposed punitive anti-dumping measures against China mattress imports to address violations of trade regulations. Despite the imposition of these duties, we believe that some China producers have moved their production out of China and continue to engage in competitive activity inconsistent with trade regulations between the U.S. and other countries, including transshipments of mattress products into the United States that circumvent imposed duties by falsely claiming that mattresses are products of a particular country of origin. In response to low-priced mattress imports that moved out of China to other countries in an effort to circumvent U.S. duties, the U.S. Department of Commerce has imposed anti-dumping duties on mattress imports from countries other than China. While we believe the domestic mattress industry and, in turn, our business, began to realize some benefits from these duties starting in 2021, low-priced imports continue to adversely affect our sales. We can offer no assurance that such trends will abate, nor can we offer assurance that the U.S. Department of Commerce can effectively limit the dumping of low-priced imports into the U.S. market.

If supply chains are moved out of China to countries without anti-dumping duties and producers continue to supply low-priced imports in violation of U.S. trade laws, andor if illegal transshipments are not monitored and enforcement is not effective to limit them, these shipments could have a material adverse effect on the company’sour business, financial condition, results of operations or cash flows.flows may be adversely affected.

We rely significantly on operations in distant locations, especially China. In addition, we source a significant share of our products and raw materials from offshore suppliers, particularly suppliers in Asia and Turkey. At the same time, domestic manufacturing capacity for upholstery fabrics continues to decline for a variety of reasonsdecline, and we have limited optionality to source and/or produce upholstery fabrics domestically. These changes have caused us to rely on an extended supply chain and on a larger number of suppliers that we do not control, subjecting us to greater risks of delay or disruption. In addition, operations and sourcing in foreign areas are subject to the risk of changing local governmental rules, taxes, changes in import rules or customs, import restrictions, tariffs, shipping rates, potential political unrest and instability, coronavirus or other pandemic-related closure rules, or other threats that could disrupt or increase the costs of operating in foreign areas or sourcing products overseas. Any of the risks associated with foreign operations and sources could cause unanticipated increases in operating costs or disruptions in business, which could have a negative impact on our ultimate financial results.

In recent fiscal years, a confluence of factors has caused disruptions to international shipping, increasing costs and delaying shipments. AttacksThe onclosure shipsof the Strait of Hormuz in certainconnection waterwayswith the recent Iran war along with other armed conflicts in the Middle East have forcedcaused shipsincreases in oil prices and disruptions to take longershipping routes. InAs addition,a labor disputes at major ports and railways throughout the world, along with weather-related disruptions, such as droughts in Panama reducing capacity in the Panama Canal, impacted the global supply chain. These factors began to affect the availability of containers and space for shipments from our China operations beginning in the second half of fiscal 2024, impacting shipping costs. If anyresult of these situationsand orother similarfactors, dynamicsshipping werecosts have increased. Delays and increases costs with respect to worseninternational orshipping replicate, welogistics may beinterfere unablewith our ability to timely ship our products or receive the materials we need to produce our products,products orand adversely impact our shippingmargins. While we have been able to pass along some of the additional costs mayarising furtherfrom increase.increases Wein oil and other petrochemical prices to our customers, we may be unable to pass along such costs or any additional increases to our customers,customers going forward, or may have difficulty meeting our customers’ demands, each of which may materially and adversely affect our results of operations.

Our business faces several risks associated with doing business in ChinaChina.

We source a variety of fabrics, as well as cut and sewn upholstery kits and sewn mattress covers, from a limited number of strategic suppliers in China. We also operate threetwo facilities in Shanghai, China. The Chinese economy is characterized by extensive state ownership, control, and regulation, and the political, legal, and economic climates in China can be fluid and somewhat unpredictable. Therefore, our business is continually subject to the risk of changes in Chinese laws and regulations that could have an adverse effect on our suppliers and manufacturing operations. Any changes in policies governing tariffs, imports and exports, taxation, inflation, economic sanctions and export controls, environmental regulations, foreign currency exchange rates, the labor market, property, network security, intellectual property, or financial regulations could have an adverse effect on our business. Further, the enforcement of applicable laws, rules and regulations in China may not always be consistent or uniform relative to other jurisdictions. Moreover, any natural disasters, or other threats or disruptions could inhibit our operations in China or increase our costs of operating there.

The Chinese economy poses additional risks to our business, including fluctuating rates of inflation and currency exchange rates, a declining labor force participation rate, and rising employee wages. In addition, further changes in the political climate or trade policy of the U.S., such as re-imposed or increased duties, tariffs, or U.S. restrictions on Chinese imports, may adversely affect our business. The Chinese government recentlyhas imposed certain reciprocal tariffs on certain products imported from the U.S. in response to certain trade action by the U.S. Those tariff rates have since been paused and/or reduced, but those tariffsU.S., and any additional tariffs or related measures could have a material adverse impact on our third-party suppliers and their supply chains as well as our ability to operate in China. Any of these risks associated with our China operations and sources could cause unanticipated increases in operating costs or disruptions in business, which could negatively affect our ultimate financial results.

We rely on outside sources for various products and services, including yarn and other raw materials, greige (unfinished) fabrics, finished fabrics, cut and sewn upholstery kits, sewn mattress covers, and services such as weaving and finishing.finishing, as well as window treatment fabrication and installation. As part of the Fiscalfiscal 2025 restructuring, we transitioned all of our internal production of jacquard (damask) fabric to strategic outside suppliers. Increased reliance on outsourcing lowers our capital investment and fixed costs, but it decreases the amount of control that we have over certain elements of our production capacity. Interruptions in our ability to obtain raw materials or other required products or services from our outside suppliers on a timely and cost-effective basis, especially if alternative suppliers cannot be immediately obtained, could disrupt our production and damage our financial results.

The company has assets, primarily consisting of property, plant and equipment, right of use assets, inventory, and intangible assets, that may be subject to impairment. ASC Topic 360 establishes an impairment accounting model for long-lived assets, including property, plant, and equipment, right of use assets, and finite-lived intangible assets such as customer relationships and non-compete agreements. It requires the company to assess these assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered. In accordance with ASCaccounting Topic 330,standards, management continuously examines inventory to determine if there are indicators that the carrying value exceeds its net realizable value. Experience has shown that the most significant of such indicators are the age of the inventory, planned discontinuances of certain patterns, and restructuring initiatives. ASC Topic 350 establishes an impairment model for indefinite-lived intangible assets, such as our trade names, which must be tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered. Identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including market conditions, operating results, competition, and general economic conditions, requires significant judgment. Any such future actions or circumstances could result in charges that could have an adverse effect on our financial condition and results of operations, and there is no assurance that future write-downs of fixed assets or other intangible assets will not occur if business conditions were to deteriorate.

As part of the Fiscalfiscal 2025 restructuring, we incurred non-cash charges totaling $4.3 million of which: (i) $1.6 million related to the loss on disposal, valuation, and markdowns of inventory; (ii) $1.3 million associated with additional depreciation for shortened useful lives of equipment; (iii) $849,000 of accelerated lease termination costs for the reduction in periods of use for certain facilities, and (iv) an impairment charge of $540,000 related to the “Read Window” tradename. See Notes 6 and 10 of the consolidated financial statements for further details of the above-mentioned non-cash charges. Moreover, as a result of inventory assessments, we incurred a non-cash inventory charge during fiscal year 2023 totaling $5.8 million, which included: (i) a $2.9 million impairment charge associated with our mattress fabricsbedding segment; (ii) $2.8 million related to markdowns of inventory in both segments that were estimated based on our policy for aged inventory; and (iii) $98,000 for the loss on disposal and markdowns of inventory related to the exit of our cut and sewn upholstery fabrics operation located in Shanghai, China.

We depend upon outside suppliers for most of our raw material needs and we rely upon outside suppliers for component materials such as yarn, unfinished fabrics, and cut and sewn upholstery kits andkits, mattress coverscovers, and jacquard (damask) fabric, as well as for certain services such as finishing and weaving.weaving and window treatment fabrication and installation. Fluctuations in the price, availability, and quality of these goods and services have had, and could continue to have, a negative effect on our production costs and ability to meet the demands of our customers, which can affect our ability to generate sales and earnings. In many cases, we are not able to pass through increased costs of raw materials or increased production costs to our customers through price increases. In particular, many of our basic raw materials are petrochemical products or are produced from such products. For this reason, our material costs are especially sensitive to changes in prices for petrochemicals and the underlying price of oil. Increases in prices for oil, petrochemical products or other raw materials and services provided by outside suppliers can significantly increase our costs and negatively affect our profit margins and earnings.

Higher prices for electricity, natural gas, and fuel increase our production and shipping costs. A significant shortage, increased prices, or interruptions in the availability of these energy sources would increase the costs of producing and delivering products to our customers and would be likely to adversely affect our earnings. In many cases, we are not able to pass along the full extent of increases in our production costs to customers through price increases. Energy costs have varied significantly during recent fiscal yearsyears, with the price of oil increasing dramatically during the fourth quarter of fiscal 2026, and remain a volatile element of our costs. Increases in energy costs could have a negative effect on our earnings.

We currently have several customers that collectively account for a substantial portion of our sales. In the mattress fabricsbedding segment, several bedding manufacturers have large market shares and comprise a significant portion of our mattress fabricbedding sales, with Serta-Simmons Bedding (SSB) and its subcontractors and licensees accounting for approximately 13% of consolidated net sales in fiscal 2025.2026. In the upholstery fabrics segment, La-Z-Boy Incorporated accounted for approximately 11%12% of consolidated net sales during fiscal 2025,2026, and several other large furniture manufacturers comprised a significant portion of sales. A business failure or other significant financial difficulty by one or more of our major customers, or the loss of one or more of these customers, could cause a significant loss in sales, an adverse effect on our earnings, and difficulty in collection of our trade accounts receivable. For example, in June 2026, a major customer associated with our bedding segment announced that it had filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Based on the information available to us at this time, we have not recorded any credit losses and we expect to receive payment in full regarding all outstanding accounts receivable with respect to this customer. Additionally, based on information available to us at this time, we expect that this customer will continue to conduct normal business operations pending its reorganization, but a business failure or loss of this customer could cause a decrease in our sales and an adverse effect on our earnings. Additionally, in recent years, two of ourother major customers associated with our mattress fabricsbedding segment filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Although we did not record any credit losses and have received payment in full regarding all outstanding accounts receivable with respect to each of these two customers, a business failure or loss of either such customer and its affiliates, or a business failure or loss of one or more other major customers, could cause a decrease in our sales and an adverse effect on our earnings.

Unforeseen events may adversely affect our customers, causing them to delay, or cease, payments to us. For example, during the onset of the COVID-19 pandemic, some customers experienced cash flow challenges and requested extended payment terms. While we perform credit evaluations of our customers, those evaluations involve significant management diligence and judgment and may not prevent uncollectible trade accounts receivable, especially in the current environment. If more customers than we anticipate experience liquidity issues, if payments are not received on a timely basis, or if a customer declares bankruptcy, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition, and liquidity.

Our business increasingly relies on technology systems and infrastructure.infrastructure, Additionally,including we rely onfrom third-party service providers in connection with the maintenance thereof and the execution of certain business processes.providers. Greater dependence on technology systems heightens the risk of potential vulnerabilities from system failure and malfunction, breakdowns due to natural disasters, human error, unauthorized access, power loss, and other unforeseen events. Data privacy breaches by employees and others with or without authorized access to our systems pose risks that sensitive data may be permanently lost or leaked to the public or other unauthorized persons. With the growing use and rapid evolution of technology, including artificial intelligence and machine learning, cloud-based computing and mobile devices, there are additional risks of unintentional data leaks. There is also the risk of our exposure to theft of confidential information, intentional vandalism, ransomware attacks, industrial espionage, and a variety of cyber-attacks, including phishing attempts, covertly introducing malware to our computers and networks (or the computers and networks of our third-party providers), and impersonating authorized users, among other types of cyber-attacks, that could compromise our internal technology systems or infrastructure, or result in data leakage in-house or at our third-party providers and business partners. These risks have intensified with the rapid advancement of artificial intelligence. Moreover, we may face increased exposure to these threats as a result of allowing certain of our employees to work remotely from time-to-time.remotely. Attempts to gain unauthorized access to information technology systems have become increasingly more sophisticated over time, and while we seek to detect and investigate all security incidents and to prevent their recurrence, in some cases we might be unaware of an incident or its magnitude and effect. Failures of technology or related systems, cybersecurity incidents, or improper release of confidential information could damage our business or subject us to unexpected liabilities, expenditures, and recovery time.

Additionally, the devotion ofspending additional resources toon the security ofsecuring our information technology systems in the future could significantly increase our operating costs or otherwise adversely affect our financial results. We continue to balance the risk of an electronic security breach resulting in the unauthorized release of confidential information with the cost to protect us against such a breach, and we have taken steps to obtain insurance coverage for certain potential losses arising from a breach, although the costs, potential monetary damages, and operational consequences of responding to cyber incidents and implementing remediation measures may be in excess of our insurance coverage or not covered at all by our insurance. Losses in excess of our insurance coverage or outside the scope of our coverage could have a material adverse effect on our operations and financial results. In addition to direct financial losses, cybersecurity incidents may adversely impact our relationships with our customers or our business reputation, which may cause long-term damage to our business. We have been a target of cybersecurity attacks in the past, and while such attacks have not resulted in a material impact on our operations, business, customer relationships, or reputation, we can provide no assurance that cybersecurity attacks or other cybersecurity-related incidents will not have a material adverse impact on our business in the future.

In July 2024, we entered into an agreement with an activist investor, 22NW, LP, and various of its affiliates (collectively, “22NW”) that filed a Schedule 13D with the SEC with respect to the company,, where we agreed to appoint a representative of 22NW to our board of directors and nominate that representative for election at our 2024 annual meeting in return for certain confidentiality and standstill provisions. In June 2025, we entered into a new multi-year agreement with 22NW pursuant to which, in return for certain confidentiality and standstill provisions, we agreed to: (i) renominate the 22NW representative for election to our board of directors at our 2025 and 2026 annual meetings; (ii) nominate two identified independent candidates for election to our board of directors at our 2025 and 2026 annual meetings; (iii) establish a strategy committee of our board of directors, and (iv) limit the size of our board of directors to no more than eight as of our 2025 annual meeting and no more seven as of our 2026 annual meeting and until the agreement with 22NW terminates. 22NW remains a greater thangreater-than 5% owner of Culp stock.

Activist investors may attempt to effect changes in our strategic direction and how we are governed, or to acquire control over us. Some investors seek to increase short-term shareholder value by advocating for corporate actions, such as financial restructuring, increased borrowing, special dividends, stock repurchases, or even sales of assets or the entire company. While we welcome varying opinions from all shareholders, activist campaigns that contest or conflict with our strategic direction could have an adverse effect on our results of operations and financial condition, as responding to proxy contests and other actions by activist shareholders can disrupt our operations, be costly and time-consuming, and divert the attention of our board of directors and senior management from the pursuit of business strategies. In addition, perceived uncertainties as to our future direction as a result of changes to the composition of our board may lead to the perception of a change in the direction of the business, instability or lack of continuity, which may be exploited by our competitors, may cause concern to our current or potential customers, may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners. These types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

Our business is dependent on attracting and retaining quality employees. Competition for personnel is highly competitive, and there is no assurance we willmay not be able to attract and retain a sufficient number of qualified personnel in future periods.personnel. Our ability to meet our labor needs is subject to many factors such as prevailing wage rates, minimum wage legislation, unemployment levels, and actions by our competitors with respect to compensation levels. Wage rates have increased significantly in the U.S. and wage rate increases have also occurred in foreign countries in which we operate. Any further significant increases in wage rates in the countries in which we operate could have a materialan adverse impact on our operating results. In addition, changes in federal, state, or local laws and regulations relating to employee benefits, including, but not limited to, sick time, paid time off, leave of absence, wage-and-hour, overtime, and meal-and-break time could cause us to incur additional costs. Competitive and regulatory pressures have already significantly increased our labor costscosts, and we may be unable to fully pass these costs to our customers through increased selling prices,customers, which could deteriorate our profitability. In addition, further changes that hurt our ability to attract and retain personnel could adversely affect our results of operations in the future. Moreover, we are and will continue to be dependent upon our senior management team and other key personnel. Losing the services of one or more key members of our management team or other key personnel could adversely affect our operations.

We regularly review and evaluate our liquidity and capital needs. Our available cash, cash equivalents, and cash flow from operations have generally been adequate to finance our operations and capital requirements in recent years, but in fiscal 2025 and fiscal 2026 we required additional external funding to support our operations and utilized both U.S. and China credit facilities for that purpose. Also,In marketaddition, increased interest rates increased significantly in fiscalrecent 2023 andyears have impactedincreased our cost of borrowing in subsequent periods.borrowing. If interest rates increase further, our cost of borrowing could increase substantially over debt costs that we have previously incurred.

As of AprilMay 27,3, 2025,2026, we had approximately $21.4$14.5 million in total borrowing availability under our domestic credit facility. In January 2023, we entered into a Second Amended and Restated Credit Agreement (as amended, the "Credit Agreement") with respect to our domestic credit facility, and we entered into an amendment to that agreement on June 12, 2025, which extended the termmaturity ofdate ourto domesticJune credit12, facility by three years and amended it in certain other respects.2028. The amended Credit Agreement provides for a revolving credit facility of up to a maximum principal amount of $30.0 million, which may be increased upon mutual agreement by up to $10.0 million via an accordion feature, and is secured by a lien on the company's assets. The amount available under this facility is limited by a borrowing base consisting of certain eligible accounts receivable and inventory of the company. In the event we require additional liquidity from our lenders that exceeds the availability under our credit facilities at such time, such funds may not be available to us. In addition, in the event we draw on any of our credit facilities, outstanding amounts may become immediately due and payable upon certain events of default, including a failure to comply with the financial covenants or certain other affirmative and negative covenants in the credit agreements. If we are unable to access additional credit at the levels we require, or the cost of credit is greater than expected, it could adversely affect our operating results or financial condition.

Our products and raw materials are and will continue to be subject to regulation in the U.S. by various federal, state, and local regulatory authorities. In addition, governments and agencies in other jurisdictions regulate the manufacture, sale, and distribution of our products and raw materials. Also, rules and restrictions regarding the importation of fabrics and other materials, including custom duties, tariffs, import restrictions (including, without limitation, the recent enactment of the UFLPA),restrictions, quotas, banned substances, and other regulations, are continually changing. Environmental laws, labor laws, tax laws and regulations (including, without limitation,including the Global Intangible Low Taxed Income (“GILTI”) tax provisions), data privacy laws, and other regulations continually affect our business. These rules and regulations can and do change from time to time, which can increase our costs and our taxes, or can require us to make changes in our manufacturing processes, product mix, sources of products and raw materials, or distribution. Changes in the rules and regulations applicable to our business may negatively affect our sales and earnings.

As of JuneJuly 16,15, 2025,2026, we had 12,559,12912,662,784 shares of common stock outstanding and, as of that date,and we estimate that: (i) approximately 41%34% of oursuch stockshares waswere beneficially owned by entities and individuals who each owned more than 5% of the outstanding shares of our common stock; and (ii) institutional investors that each beneficially owned more than 5% of our outstanding shares collectively owned approximately 34% of the outstanding shares of our common stock. Sales of substantial amounts of our stock in the public market by any of these large holders could adversely affect the market price of our stock, especially in light of the limited trading volumes.

Fluctuations in our stock price may be influenced by, among other things, general economic and market conditions, conditions or trends in our industry, changes in the market valuations of other companies in our industry, announcements by us or our competitors of significant acquisitions, strategic partnerships or other strategic initiatives, and trading volumes. In addition, our stock is listed on the Nasdaq Capital Market and must meet certain standards to continue to be listed, including a minimum bid price of $1 per share. If we were to lose our listing on Nasdaq, we may face material adverse consequences, such as reduced liquidity. Many of these factors are beyond our control but may cause the market price of our stock to decline, regardless of our operating performance.

We have prepared this Management’s Discussion and Analysis of Financial Condition and Results of Operations as an aid to understanding our financial results. It should be read in conjunction with the consolidated financial statements and notes and other exhibits included elsewhere in this report. It also includes management’s analysis of past financial results and certain potential risk factors that may affect future results, as well as approaches that may be used to manage those risks. See “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report, together with the section of this report titled “Item 1A. RISK FACTORS,” for a discussion of factors that may cause results to differ materially.

Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30. Fiscal 2026, 2025, 2024, and 20232024 eachcomprised included53-week, 52-52-week, weeksand periods.52-week periods, respectively. We refer to the year ended May 3, 2026 as “fiscal 2026,” the year ended April 27, 2025 as “fiscal 2025,2025” and the year ended April 28, 2024 as “fiscal 20242024.” and the year ended April 30, 2023 as “fiscal 2023.”

Our operations are classified into two reportable segments: mattress fabricsbedding and upholstery fabrics.upholstery.

On April 24, 2025, the company announced a strategic transformation of its operating model that willto combine certain activities within the mattress fabricsbedding and upholstery fabrics business segments and becomecreate a moreone integrated Culp-branded business. This strategic transformation was completed by the end of fiscal 2026.

The mattress fabricsbedding segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. Currently, we have a mattress fabricbedding manufacturing operation located in Stokesdale, North Carolina, and a sewn mattress cover operation located in Ouanaminthe, Haiti.

OnIn Aprilthe 29, 2024 (first quarter of fiscal 2025),2025, our board of directors made a decision to: (1) consolidate the company's North American mattress fabricsbedding operations, including the closure and sale of the company's manufacturing facility and related land (collectively referred to as the "Property") located in Quebec, Canada; (2) move a portion of the knitting and finishing capacity from the facilitycompany's Property located in Quebec, Canada to the company's manufacturing facility located in Stokesdale, North Carolina; (3) transition the mattress fabricsbedding segment's weaving operation to a strategic sourcing model through the company's long standinglong-standing supply partners; and (4) consolidate the company's sewn mattress cover operation located in Ouanaminthe, Haiti, from two leased facilities into one building and reduce other operating expenses at this location. See Note 10 to the consolidated financial statements for further details regarding thethese restructuring activities announced on May 1, 2024.activities.

All the above restructuring activities relatedwere tocompleted the May 1, 2024, announcement have been completed, including the saleas of the Property located in Quebec, Canada, effective April 30, 2025. See NoteNotes 7 and 8 located in the notes to the consolidated financial statements for further details regarding the sale of the Property.Property and determination of fair value.

The upholstery fabrics segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers. As of AprilMay 27,3, 2025,2026, we had upholstery fabric operations located in Stokesdale, North Carolina, and Shanghai, China, andas Burlington,well North Carolina. During the fourth quarter of fiscal 2024, we establishedas a wholly ownedwholly-owned subsidiary, Culp Fabrics Vietnam Limited, withwhich has an administrative office and showroom located in Ho Chi Minh City, Vietnam,Vietnam. forOur theVietnam purposeoffice of enhancingenhances our strategic sourcing capabilities and to further diversifydiversifies our supply chain in Asia.Asia, while our recently added showroom facilitates better product exposure with our growing customer base there.

OnDuring Aprilfiscal 24, 2025, we announced2026, as part of ourthe strategic transformation noted above, that we willclosed close oura leased upholstery facility located in Burlington, North Carolina, and transitiontransitioned its production and distribution activities utilizingto a shared management model within our owned facility located in Stokesdale, North Carolina. Our Stokesdale, North Carolina facility hashad historically been operated solely operated by our mattress fabricsbedding segment. WeSee expectNote 10 of the consolidated financial statements for further details regarding this transitionrestructuring to be substantially completed by December 31, 2025.activity.

Additionally, the upholstery segment includes Read Window Products, LLC (“"Read”"), a wholly owned subsidiary withthat operations located in Knoxville, Tennessee, and our upholstery fabrics facility located in Burlington, North Carolina, provideprovides window treatments and sourcing of upholstery fabrics and other products, as well as related measuring and installation servicesservices, to customers in the hospitality and commercial markets. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows. TheRead's activitiesoperations locatedwere previously conducted at oura leased facility in Knoxville, Tennessee, and also within a leased upholstery facility in Burlington, North Carolina, facilitybut willthese transitionoperations were moved to our facility located in Stokesdale, North Carolina, facility in fiscal 2026 as part of ourthe integrationstrategic and shared management initiativetransformation noted above.

Our consolidated net sales decreased by 5.4%4.6% in fiscal 20252026 compared with a year ago, with mattressbedding fabricnet sales increasing 2.4% and upholstery net sales decreasing 2.1% and upholstery fabric net sales decreasing 8.8%.12.5%.

Overall, our consolidated loss before income taxes was $(18.7)$8.3 million for fiscal 2025,2026, compared with a loss before income taxes of $(10.8)$18.7 million for the priorsame year.period a year ago.

See the "Segment Analysis" located in the Results of Operations section below for further details.

Our negative consolidated effective income tax rates during fiscal 20252026 and fiscal 20242025 were causedadversely affected by the mix of earnings between our U.S. operations and foreign subsidiaries,subsidiaries. asDuring fiscal 2026, our taxable income stemmed from our operations located in China during fiscal 2025 and botha ourgain operationson sale of Property located in China and Canada during fiscal 2024,2026 (see Notes 8 and 10 of the consolidated financial statements for further details), which jurisdictions have higher income tax rates than the U.S. During fiscal 2025, our taxable income stemmed from our operations located in China, partially offset by a pre-tax loss incurred in Canada due to our restructuring activities during fiscal 2025. In addition, we applied a full valuation allowance against our U.S. deferred income tax assets during both fiscal 20252026 and fiscal 2024.2025, respectively. Consequently, an income tax benefit was not recognized for the pre-tax losses associated with our U.S. operations totaling $(18.415.1) million and $(18.618.4) million that were incurred during fiscal 20252026 and fiscal 2024,2025, respectively. Lastly, our negative consolidated effective income tax rates in fiscal 2026 and 2025 were also causedadversely affected by pre-tax losses associated with our Haitian operations, which are not currently subject to income tax. As a result, an income benefit was not recognized for the pre-tax losses associated with our Haitian operations totaling $(1.6804,000) million and $(2.11.6) million that were incurred during fiscal 20252026 and fiscal 2024,2025, respectively.

During fiscal 2025,2026, we incurred a consolidated pre-tax loss of $(8.3) million, compared with a significantly higher consolidated pre-tax loss of $(18.7) million, compared with a significantly lower pre-tax loss of $(10.8) million incurred during fiscal 2024.2025. As a result, the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during fiscal 20242026, as compared with fiscal 2025.

During fiscal 20252026 and fiscal 2024,2025, we had income tax payments totaling $2.3$3.6 million and $3.3$2.3 million, respectively, which primarilyconsist representedof income tax payments associated with the U.S. federal transition tax associated with the 2017 Tax Cuts and Jobs Act ("TCJA") and our operations located in China.China and Canada.

As of AprilMay 27,3, 2025,2026, our cash and cash equivalents (“cash") totaled $5.6$8.3 million, aan decreaseincrease of $4.4$2.7 million compared with cash of $10.0$5.6 million as of April 28,27, 2024.2025. This decreaseincrease was primarilymostly due to: (i) net cash used in operating activities totaling $17.7 million and (ii) capital expenditures of $2.9 million, that were partially offset by net borrowings from ouron lines of credit totaling $12.7$5.7 million,million; and (ii) proceeds from notes receivable and the sale of property, plant, and equipment totaling $1.9$6.2 millionmillion, relatedwhich mostly relates to ourthe restructuringsale activities.of Property located in Quebec, Canada, partially offset by net cash used in operating activities of $(9.4) million.

WeAs of May 3, 2026, we had outstanding borrowings totaling $12.7$19.1 million under our line of credit agreements, of which $8.1$12.1 million and $4.6$7.0 million were reported in linelines of credit-current and linelines of credit-long term, respectively, onwithin the AprilMay 27,3, 2025,2026, Consolidated Balance Sheet.

Mattress fabricsBedding sales decreasedincreased by 2.1%2.4% in fiscal 20252026 compared to the prior year. TheThis decreaseincrease in net sales was chieflydriven attributableby tohigher ademand year-over-yearfor our products in the fourth quarter, particularly for sewn mattress covers, partially offset by lower sales decline for the first nine months of fiscal 20252026 drivendue byto subduedmuted demand across the bedding industry demandand thatrelated wechallenges believe was brought on byfrom weaker consumer spending and housingbroader macroeconomic pressures. Despite the continued market headwinds.headwinds, Inwe thesecured fourthnew quarterprograms with major customers across all product categories and expanded our share of fiscal 2025, sales for the segment improved compared to the prior-year fourth quarter, driven by newavailable business within largertargeted customerschannels andin afiscal strategic focus on key segments including mattress fabrics and cut-and-sewn covers.2026.

Gross Profit and Operating Income

During fiscal 2024 and continuing through fiscal 2025, property,Property, plant, and equipment,equipment has steadily decreased due to reduced capital spending that stemmedstemming from current unfavorable macroeconomic conditions within the home furnishings and bedding industry,industries, as well as actionsrestructuring takeninitiatives ascommencing describedat abovethe inbeginning "Restructuringof Activities."fiscal 2025 and continuing through the end of fiscal 2026. See Note 10 to the consolidated financial statements for further details and description of our restructuring activities.

Except as set forth below, thereThere have not been any material changes to our risk factors during the three months ended FebruaryAugust 1,2, 2026, from the risk factors disclosed in Item 1A “Risk Factors” of the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 11,17, 2025,2026, for the fiscal year ended AprilMay 27,3, 2025.2026.

Our fiscal year is the 52 or 53-week period ending on the Sunday closest to April 30. The company's ninethree months ended FebruaryAugust 1,2, 2026, and JanuaryAugust 26,3, 2025, represent 40-week13-week and 39-week14-week periods, respectively. We refer to the three months ended FebruaryAugust 1,2, 2026, as the "thirdfirst quarter" and the three months ended JanuaryAugust 26,3, 2025, as the "comparable quarter".

Our operations are classified into two business segments: bedding (formerly known as mattress fabrics) and upholstery (formerly known as upholstery fabrics).upholstery.

The bedding segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. Currently, we have a mattress fabricsbedding manufacturing operation located in Stokesdale, North Carolina, and a sewn mattress cover operation located in Ouanaminthe, Haiti.

The upholstery segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers. Currently, we have upholstery fabric operations located in Shanghai, China; Burlington,Stokesdale, North Carolina;Carolina, and Shanghai, China, as well as a wholly-owned subsidiary, Culp Fabrics Vietnam Company Ltd., which has an administrative office and showroom located in Ho Chi Minh City, Vietnam. Our Vietnam office enhances our strategic sourcing capabilities and further diversifies our supply chain in Asia, while our recently added showroom facilitates better product exposure with our growing customer base there.

Also,During Readfiscal Window2026, Products,as LLC (“Read”), is a wholly owned subsidiary that provides window treatments and sourcingpart of upholstery fabrics and other products, as well as related measuring and installation services, to customers in the hospitality and commercial markets. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows. On April 24, 2025 (the fourth quarter of fiscal 2025), the company announced a strategic transformation ofnoted its operating model that combined certain activities within the bedding and upholstery segments and created one integrated Culp-branded business. As part of this strategic transformation,above, we closed oura leased facilities operated by our upholstery segmentfacility located in Burlington, North Carolina, and Knoxville, Tennessee, and transitioned their production andits distribution activities to a shared management model within our owned facility located in Stokesdale, North Carolina,Carolina. whichOur hasStokesdale, North Carolina facility had historically been operated solely operated by our bedding segment. Refer toSee Note 10 of the consolidated financial statements for further details regarding this restructuring activity.

Overall, our consolidated net sales for the thirdfirst quarter of fiscal 20262027 decreasedincreased by $(4.3) million, or (8.2)%6.5% compared with the same period a year ago, with bedding sales decreasingincreasing by $(1.4) million, or (4.7)%,13.2%, and upholstery sales decreasing by $(2.9) million, or (12.41.9)%. Our consolidated net sales for the first nine months of fiscal 2026 decreased by $(12.6) million, or (7.7)%, compared with the same period a year ago, with bedding sales decreasing by $(699,000), or (0.8)%, and upholstery sales decreasing by $(11.9) million, or (15.3)%.

Overall, our lossconsolidated income before income taxes for the thirdfirst quarter of fiscal 20262027 was $(3.1)$6.8 million, an improvementincrease of $540,000,$5.7 million or 14.7%,501.8%, compared with lossincome before income taxes of $(3.7)$1.1 million for the same period a year ago. Our loss before income taxes for the first nine months of fiscal 2026 was $(6.1) million, an improvement of $10.3 million, or 62.8%, compared with loss before income taxes of $(16.4) million for the same period a year ago.

AlthoughOperating lowerperformance comparablefor salesthe quarter benefited from a one-time recovery of expenses previously incurred in connection with IEEPA tariffs and other factors adversely affected our operating performance during the quarter, we continuecontinued to benefit from the lower costs and operational efficiencies emanatingresulting from ourthe recentlyCompany's restructured bedding manufacturing platform. Our operatingOperating performance also continuescontinued to benefit from our additional actionsinitiatives to reduce selling, general and administrative expenses andexpenses, implement price increases to mitigate tariff impacts. Further,offset the integrationimpact of ourtariffs domesticand higher petrochemical costs, and further integrate the upholstery distribution and Read window treatment operations into our owned North Carolina facility, along with the reduction of our facility footprint in China, all of which we completed during the quarter, should further strengthen our operating profile going forward.business.

We recorded income tax expense of $1.9 million,$868,000, or (30.6)%12.7% of lossincome before income taxes, for the nine-monththree-month period ended FebruaryAugust 1,2, 2026, compared with income tax expense of $635,000,$1.4 million, or (3.9)%120.3% of lossincome before income taxes, for the nine-monththree-month period ended JanuaryAugust 26,3, 2025. The primary factors that decreased the company's effective income tax rate for the three months ended August 2, 2026, compared with August 3, 2025, follows:

During the first nine monthsquarter of fiscal 2026,2027, we incurredreported a higher consolidated pre-tax lossincome oftotaling $(6.1)$6.8 million, compared with a significantly higher consolidated pre-tax loss of $(16.4)$1.1 million during the first nine monthsquarter of fiscal 2025.2026. As a result,Accordingly, the principal differences between our income tax expense at the U.S. federalFederal income tax rate and the effective income tax rate reflected in the consolidated financial statements were more pronounced during the first nine monthsquarter of fiscal 2026, as compared with the first nine monthsquarter of fiscal 2025.2027.

As of FebruaryAugust 1,2, 2026, our cash and cash equivalents (collectively, “cash”) totaled $9.7$10.2 million, which represents an increase of $4.1$1.9 million compared with cash of $5.6$8.3 million as of AprilMay 27,3, 2025.2026. This increase was due mostly to: (i) net borrowingscash provided by operating activities of $8.1 million, partially offset by net payments on our lines of credit of $5.3 million; and (ii) proceeds from the sale of property, plant, and equipment totaling $1.1 million, partially offset by net cash used in operating activities of $(2.3)$6.0 million.

We had outstanding borrowings totaling $18.5$13.3 million under our line of credit agreements, of which $11.5the millionentire andamount $7.0 million werewas reported in lines of credit-current and line of credit-long term, respectively, onwithin the FebruaryAugust 1,2, 2026, Consolidated Balance Sheet.

Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer ("CEO"), who regularly reviews the financial results of the company on a consolidated and business segment basis for the purpose of evaluating financial and operating performance and allocation of resources to the individual segments noted above. Beginning in the first quarter of fiscal 2026, the CODM decided to use net sales and gross profit, excluding items that are not expected to occur on a regular basis (e.g.,e.g. restructuring activities and tariff refunds), as the primary measure of segment profit or loss. Previously, segment performance was primarily evaluated based on net sales and income (loss) from operations before unallocated corporate expenses and other items that are not expected to occur on a regular basis (e.g., restructuring activities and tariff refunds). This change was made to align with internal management reporting and the decision-making processes affected by the strategic transformation of the company's operating model announced on April 24, 2025, which combined certain activities within the bedding and upholstery business segments and created one integrated Culp-branded business. The CODM evaluates segment performance based on: (i) net sales, (ii) cost of sales, (iii) gross profit excluding items that are not expected to occur on a regular basis (i.e.,e.g., restructuring related charges and credits and tariff refunds), (iv) assets used in operations, which generally include accounts receivable, inventory, property, plant, and equipment, right of use assets, and assets held for sale; and (v) capital spending.

Bedding net sales decreasedincreased (4.7)%13.2% during the thirdfirst quarter of fiscal 2026,2027, compared with the same period a year ago. Bedding net sales for the first nine months of fiscal 2026 decreased by (0.8)%, compared with the same period a year ago.

Segment assets consist of accounts receivable;receivable, inventory;inventory, property, plant, and equipment;equipment, right of use assets;assets, and assets held for sale:

As of FebruaryAugust 1,2, 2026, accounts receivable of $8.6$10.0 million decreased by $(3.0181,000) million,, or (25.91.8)%, compared with accounts receivable totaling $11.6$10.2 million as of JanuaryAugust 26,3, 2025. This decreasetrend wasstems drivenfrom byan a decreaseincrease in net sales of (4.7)%13.2% during the thirdfirst quarter of fiscal 2027, compared with the first quarter of fiscal 2026, comparedthat withwas themore samethan periodoffset a year ago. In addition, this decrease reflectsby faster payment trends with key bedding customers that had shorter credit terms during the thirdfirst quarter of fiscal 2026,2027, as compared with the thirdfirst quarter of fiscal 2025.2026. Accordingly, days’days sales outstanding decreased to 29 days for the thirdfirst quarter of fiscal 2026,2027, from 3736 days for the thirdfirst quarter of fiscal 2025.2026.

As of FebruaryAugust 1,2, 2026, accounts receivable totaling $8.6$10.0 million decreased by $(2.0622,000) million,, or (18.75.8)%, compared with accounts receivable totaling $10.6$10.7 million as of AprilMay 27,3, 2025.2026. This decrease mostly represents continued faster payment trends with key customers during the thirdfirst quarter of fiscal 2026,2027, compared with the fourth quarter of fiscal 2025.2026. Accordingly, days’days sales outstanding decreased to 29 days for the thirdfirst quarter of fiscal 2026,2027, from 3532 days for the fourth quarter of fiscal 2025.2026.

As of FebruaryAugust 1,2, 2026, inventory of $34.3$26.7 increasedmillion byhas $1.0steadily million, or 3.1%,decreased compared with inventory totalingof $33.3$35.1 million and $31.8 million as of AprilAugust 27,3, 2025.2025, and May 3, 2026, respectively. This increasedecrease in inventory is due to theimproved samealignment reasonsof notedinventory above for the third quarter ended February 1, 2026, comparedpurchases with thecurrent thirdcustomer quarterdemand endedtrends Januaryand 26,a 2025.strategic focus on reducing aged inventory.

Inventory turns were 3.03.3 for the thirdfirst quarter of fiscal 2027, as compared with 2.9 for the first quarter of fiscal 2026, as compared with 3.4 for the third quarter of fiscal 2025, and 2.93.3 for the fourth quarter of fiscal 2025.2026.

Property, plant, and equipment has steadily decreased due to reduced capital spending stemming from current unfavorable macroeconomic conditions within the home furnishings and bedding industries, as well as the restructuring initiativesinitiative commencingannounced aton April 24, 2025, that related to the beginningstrategic transformation of fiscalthe 2025company's operating model that combined certain activities within the bedding and continuingupholstery throughsegments theand thirdcreated quarterone ofintegrated fiscalCulp-branded 2026.business. See note 10 of the consolidated financial statements for further details and description of our restructuring activities.

The $20.4$19.0 million as of FebruaryAugust 1,2, 2026, represents property, plant, and equipment of $19.6$18.1 million and $803,000$855,000 located in the U.S. and Haiti, respectively. The $24.2$22.1 million as of JanuaryAugust 26,3, 2025, represents property, plant, and equipment of $23.0 million, $973,000 and $221,000 located in the U.S., Haiti, and Canada, respectively. The $23.3 million as of April 27, 2025, represents property, plant, and equipment of $22.3$21.2 million and $955,000$888,000 located in the U.S. and Haiti, respectively. The $19.8 million as of May 3, 2026, represents property, plant, and equipment of $18.9 million, and $825,000 located in the U.S. and Haiti, respectively.

As of FebruaryAugust 1,2, 2026, theand beddingMay segment3, did2026, notthere havewere anyno right of use assets dueas toa the closureresult of the abovecompletion mentionedof facilities.our restructuring activities during fiscal 2026. The $200,000 and $125,000$50,000 as of JanuaryAugust 26,3, 2025, and April 27, 2025, respectively, represents a right of use asset located in Haiti.Haiti that was subsequently terminated during the second quarter of fiscal 2026.