CULP INC

Restructuring Update

The restructuring plan announced on May 1, 2024, primarily focused on the company's mattress fabrics segment, continues to progress as planned. The consolidation of the company's sewn mattress cover operation in Haiti was completed during the first quarter, and the consolidation of the company's North American mattress fabrics operation is nearing completion, including the phased wind-down and closure of its manufacturing facility in Canada. The company discontinued knitting production at this facility during the second quarter (end of September), and completed damask weaving production in November. The optimization and relocation of certain knitting and finishing equipment from the Canadian facility to the mattress fabrics manufacturing facility in Stokesdale, North Carolina, is also well underway, with completion planned in the third quarter.

The company still expects to generate $10.0 - $11.0 million in annualized savings and operating improvements after the restructuring initiatives are fully implemented by the end of the third quarter, with most of the restructuring benefit realized during the fourth quarter of fiscal 2025.

In addition, based on restructuring activities that have been completed along with updated estimates on those that remain in process, the company now expects to incur total restructuring and restructuring-related costs and charges of $7.3 million in fiscal 2025, of which $4.4 million is now expected to be cash expenditures. The company expects to fund close to $2.0 million of the cash costs with proceeds from the sale of excess manufacturing equipment and proceeds from a building lease termination in Haiti.

These restructuring and restructuring-related costs and charges exclude any gain on the sale of real estate, the amount and timing of which is currently unknown, but which will ultimately reduce the amount of the restructuring charges incurred. The company is actively marketing and showing the real estate, and currently anticipates receiving approximately $6.0 to $8.0 million in cash proceeds (net of all taxes and commissions) from its eventual sale.