DEF 14A

DEF 14A 1 culp-2024-proxy_statemen.htm DEF 14A DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No.)

Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐

Check the appropriate box:


☐	Preliminary Proxy Statement
☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒	Definitive Proxy Statement
☐	Definitive Additional Materials
☐	Soliciting Material under §240.14a-12

Culp, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check all boxes that apply):


☒	No fee required.
☐	Fee paid previously with preliminary materials.
☐	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-(6)(i)(1) and 0-11

1823 Eastchester Drive

High Point, North Carolina 27265

Telephone: (336) 889-5161

NOTICE OF 2024 ANNUAL MEETING

OF SHAREHOLDERS

To Our Shareholders:

Culp, Inc. (the “Company”) will hold its 2024 Annual Meeting of Shareholders (the “Annual Meeting”) at the Company’s corporate offices, located at 1823 Eastchester Drive, High Point, North Carolina, on Wednesday, September 25, 2024, at 12:00 p.m. Eastern Time.

The purpose of the Annual Meeting is to:

(1)

Elect seven directors for a one-year term until the 2025 annual meeting;

(2)

Ratify the appointment of Grant Thornton LLP as our independent auditors for fiscal 2025;

(3)

Approve, through a non-binding advisory vote, the compensation of our named executive officers as disclosed in the accompanying Proxy Statement (“Say-on-Pay”); and

(4)

Consider any other business that properly comes before the meeting or any adjournment thereof.

Only shareholders of record at the close of business on July 29, 2024, are entitled to receive notice of, and to vote at, the Annual Meeting.

The Proxy Statement accompanying this notice contains detailed information about the matters we are asking you to vote on. It is first being mailed to and made available to shareholders on or about August 22, 2024. We hope you will read this information carefully and vote in accordance with the Board of Directors’ recommendations. Your vote is very important to us. Whether or not you expect to attend the Annual Meeting, please complete, date, and sign the enclosed form of proxy and return it promptly in the enclosed envelope. If you attend the Annual Meeting and prefer to vote in person, your proxy will be returned to you upon request. You may also vote by telephone or over the internet, as described in the Proxy Statement and on the proxy card.


	By Order of the Board of Directors,



	ASHLEY C. DURBIN
	Senior Vice President, General Counsel, and Corporate Secretary

August 22, 2024

Important Notice Regarding the Availability of Proxy Materials for the 2024 Annual Meeting to be held on September 25, 2024: The Proxy Statement and 2024 Annual Report to Shareholders for the fiscal year ended April 28, 2024 are available free of charge at www.culp.com.

2024 Proxy Statement

PROXY STATEMENT SUMMARY

This summary highlights certain information contained elsewhere in our Proxy Statement. Because the summary does not contain all of the information you should consider, we urge you to review the complete Proxy Statement carefully before voting.

Annual meeting of shareholders


Time, place, and voting matters		Meeting agenda
Date:	September 25, 2024		Election of seven directors
			Ratification of Grant Thornton as our independent auditors for fiscal 2025
Time:	12:00 p.m. Eastern Time		Advisory vote to approve executive compensation
			Transact other business that may properly come before the meeting
Place:	Culp, Inc. 1823 Eastchester Drive High Point, North Carolina 27265

Record Date:	July 29, 2024

Voting:	Shareholders of record as of the close of business on the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on.

Number of Shares Entitled to Vote:	The number of outstanding shares entitled to vote at the meeting is 12,469,903.

How to vote

See “General Information” (beginning on page 8) for more information.

In addition to attending the annual meeting, shareholders of record can vote by any of the following methods:

    By mailing your proxy card

    By Telephone at
1-800-652-VOTE (8683)
(within the USA, US territories, and Canada only)

    By internet at
www.investorvote.com/culp

   

If you hold your Culp shares in street name through an account with a bank, broker, or other nominee, your ability to vote by internet or telephone depends on the voting process of the bank, broker, or other nominees through which you hold the shares. Please follow their instructions carefully.

Voting recommendations


Proposal	Board Vote Recommendation
Election of seven directors (see page 11)	“FOR” each director nominee
Ratification of Grant Thornton as our independent auditors for fiscal 2025 (see page 56)	“FOR”
Advisory vote to approve executive compensation (see page 57)	“FOR”

Our director nominees

See “Proposal 1 – Election of Directors” (beginning on page 11) and “Corporate Governance” (beginning on page 16) for more information.

We are managed under the direction of our board of directors (the "Board of Directors" or "Board"), which is currently composed of nine members. As described below, effective as of the commencement of the Annual Meeting, the size of our board will be reduced to seven members. The Board of Directors recommends that you vote “FOR” each of the seven nominees listed in the table below, which provides summary information about each nominee. A full description of each nominee’s skills and qualifications begins on page 11. Each director is elected annually.


Name	Age	Director since	Occupation	Independent
Franklin N. Saxon	72	1987	Chairman, Culp, Inc.	No
Robert G. Culp, IV	53	2020	President and Chief Executive Officer, Culp, Inc.	No
John A. Baugh	63	2021	Vice President, Investor Relations, PROG Holdings, Inc.	Yes
Sharon A. Decker	67	2019	President, Tryon Equestrian Partners, Carolina Operations	Yes
Kimberly B. Gatling	49	2021	Partner and Chief Diversity and Inclusion Officer at Fox Rothschild, LLP	Yes
Fred A. Jackson	74	2016	Retired Chief Executive Officer, American & Efird LLC	Yes
Alexander B. Jones	38	2024	Vice President, Senior Research Analyst, 22NW, LP	Yes

Our nominees’ experience, qualifications, and diversity

The goal of our Corporate Governance and Nominating Committee is to create a Board that demonstrates competence, objectivity, and the highest degree of integrity on an individual and collective basis. Our Board and the Corporate Governance and Nominating Committee believe broad and diverse skills and backgrounds among directors are critical elements of a highly functioning board. The following chart reflects the experience and qualifications of the nominees for election as directors.

Director Nominee Experience and Qualifications


Experience/Qualifications	Culp	Baugh	Decker	Gatling	Jackson	Jones	Saxon
Financial Literacy
Strategic Planning
Industry Experience
Management Experience
International Experience
Finance/Accounting
Regulatory Compliance
Legal/Corporate Governance
Cybersecurity Experience

Our Board of Directors values the contribution of diversity in achieving Company objectives and maintaining sound governance practices as it brings together individuals with different skills and ideas, from varying backgrounds and experiences, to create balanced and thoughtful decision-making that best serves shareholder interests. The Board believes such diversity provides varied perspectives that promote active and constructive dialogue among Board members and between the Board and management, resulting in more effective oversight.

Diversity refers to a broad array of individual characteristics that collectively enable the Board to operate effectively and fulfill its responsibilities. These characteristics include, among others, professional qualifications, business experience, age, gender, race, ethnicity, and cultural background. Our nominees for election to the Board of Directors consist of seven directors with varying backgrounds and characteristics that blend to form a well-rounded group of individuals with deep knowledge of our business and industry, and both seasoned and fresh perspectives.

    Diversity

    Mix of Ages

    Independence

        29% of director nominees are women
    14% of director nominees are racially diverse

        2 director nominees between 38-49
    1 director nominee between 50-59
    2 director nominees between 60-69
    2 director nominee 70+
    Average Age: 59

        5 of 7 director nominees are independent

   

Governance Highlights

Our Board of Directors and management firmly embrace good and accountable corporate governance. We believe an attentive board, held to the highest standards of corporate governance, is a meaningful advantage for our shareholders and for our businesses. Our Board makes substantial efforts to meet such standards.


		Annually elected directors; no classified board
		Varying lengths of board tenure balance experience with fresh insights
		Lead independent director
		Five out of seven director nominees independent
		100% independent audit, compensation, and governance and nominating committees
		Regular executive sessions of non-management directors
		Comprehensive self-evaluations annually for the Board and each committee
		One class of shares with each share entitled to one vote
		No poison pill in place
		Meaningful stock ownership guidelines in place for directors and executive officers
		Policy against hedging or pledging shares

Auditors

See “Audit Committee Report” (beginning on page 54) and “Proposal 2 – Ratification of Independent Auditor” (page 56).

We ask our shareholders to ratify the selection of Grant Thornton, LLP as our independent auditors for the fiscal 2025 year. The information below summarizes Grant Thornton’s fees for services provided for fiscal years 2024 and 2023.


	Fiscal 2024		Fiscal 2023
Audit Fees	$	506,000	$	590,000
Audit-Related Fees	$	—	$	—
Tax Fees	$	—	$	—
All Other Fees (1)	$	15,000	$	—
Total Fees	$	521,000	$	590,000

(1)

All other fees for fiscal 2024 primarily consists of fees for review work associated with the filing of the S-8 registration statement associated with the Company's Amended and Restated Equity Incentive Plan.

Executive Compensation Highlights

For more information, see “Executive Compensation” (beginning on page 23) and “Proposal 3 – Advisory vote on executive compensation” (page 57).

Our Board of Director recommends that you vote “FOR” our advisory proposal on executive compensation. This non-binding vote gives our shareholders the opportunity to approve the compensation paid to the individuals identified as named executive officers in this Proxy Statement.

The primary purpose of our executive compensation program is to reinforce key business and strategic objectives in support of long-term value creation. To accomplish this purpose, our fiscal 2024 program focused on the following:


		Embracing a pay-for-results philosophy, with total pay aligned with Company performance
		Attracting and retaining management with the knowledge, skills, and ability to lead the Company successfully Fairly compensating management for their services
		Aligning long-term interests of senior management with those of shareholders by providing at least half of long-term incentive award opportunities in the form of performance-based restricted stock units tied to challenging performance goals for each of three discreet one-year performance periods, with any earned awards payable in stock following the three-year period and subject to adjustment based on (i) the cumulative three-year adjusted operating income of the applicable reporting unit, and (ii) the Company's three year total shareholder return relative to industry peers
		Setting very challenging performance goals for both long-term incentive program awards and short-term annual incentives
		Not making any changes to performance goals for outstanding short-term or long-term incentive awards, despite significant industry and macroeconomic headwinds
		Maintaining a focus on earnings growth, return on capital, cash generation, balance sheet management, and shareholder return
		Continuing the freeze in base salary for the chief executive officer (at his request in light of recent financial results for the Company that were below expectations), and providing only modest (4%) merit-based increases in base salary for other executive officers (consistent with percentage increases for other employees)
		Maintaining base salaries of executive officers well below the 50th percentile market level compared to the Company’s fiscal 2024 peer group, with the planned phase-in adjustment to compensation targets at the 50th percentile paused in response to ongoing macroeconomic headwinds affecting the Company’s business
		Maintaining a planned and disciplined approach to managing our business and capital utilization
		Supporting prudent/calculated risk taking
		Providing only very limited perquisites
		Being more team oriented than individual-accountability oriented
		Maintaining a balanced perspective between short-term and long-term incentives and goals

Summary of Executive Compensation Practices for Fiscal 2024 Executive Compensation Program


What We Do		What We Don’t Do
Pay-for-performance – Total pay is directly aligned with Company performance through the use of performance-based incentives, with below target performance resulting in little or no payout and superior performance leading to above-target payouts.	x	Do not provide excessive perquisites

Challenging performance targets – Fiscal 2024 annual incentive award opportunities were tied to measures of adjusted operating performance, adjusted operating cash flow, and revenue (net sales), key short-term financial metrics that were critical to the Company’s strategic priorities during a period of continued uncertainty and headwinds relating to macroeconomic and industry conditions. In addition, a negative moderator of 40% was applied against any bonus earned for the adjusted operating cash flow and revenue components if the adjusted operating income for the applicable reporting unit was below the threshold level for the program, and no bonus could be earned if the adjusted operating income for the applicable reporting unit was significantly below the threshold level set for the program.	x	Do not have single-trigger vesting of equity-based awards upon a change in control

Align pay with longer-term Company performance success and enhance retention – Fiscal 2024 LTIP target award opportunities included an equally weighted blend of performance-based and time-based restricted stock unit awards (except the CEO’s target value mix was 75% performance-based and 25% time-based) to align pay with longer-term Company performance success, while also enhancing the Company’s ability to retain key employees and aligning the long-term interests of management with those of shareholders.	x	Do not provide employment agreements

Executive stock ownership guidelines – We align the interests of our executive officers with the interests of our shareholders. We require our executive officers to own and retain meaningful amounts of Culp stock.	x	Do not gross up excise taxes upon a change of control

Mitigate undue risk – We have a clawback policy on performance-based compensation and caps on potential incentive payments.	x	Do not pay dividends on unearned performance shares or units

Policy against hedging and pledging of Culp stock by executive officers and directors.

Provide double-trigger severance and change-in-control arrangements.

Include only independent directors on the Compensation Committee.

The Compensation Committee engages and relies on an independent compensation consultant to evaluate our executive compensation programs. The consultant reports directly to the Compensation Committee and provides no other services to the Company.

Summary of Company Performance Highlights and Effects on Compensation

The Company continued to face a difficult business environment during fiscal 2024. The ongoing slowdown in demand for home furnishings, softer home sales, reduced discretionary spending on consumer durables, inflation concerns, and general economic uncertainty all played a role in creating demand weakness in the domestic mattress and residential home furnishings industries. Our results for fiscal 2024 reflect these challenging conditions, with lower sales for the Company overall and for the upholstery fabrics operating segment compared to the prior fiscal year, and only a modest increase in sales for the mattress fabrics segment. However, despite these challenges, the Company achieved a significant year-over-year operating loss improvement, driven primarily by a more profitable mix of sales and better inventory management from both the mattress and upholstery fabrics segments, along with an improved exchange rate and lower fixed costs for the upholstery fabrics segment. This resulted in a consolidated loss from operations of $(11.3) million and an adjusted loss from operations of $(10.6) million for fiscal 2024, an improvement of $17.2 million and $16.3 million, respectively, compared to the prior fiscal year (Adjusted operating income (loss) is a non-GAAP measure. See Appendix A for a reconciliation of adjusted operating income (loss) to the most directly comparable GAAP measure). Additionally, the upholstery fabrics segment delivered consistent and significantly improved operating profits under tough industry conditions during fiscal 2024, and also performed well with respect to cash generation for the year.

The Company’s fiscal 2024 annual incentive program tied award opportunities to measures of operating performance, cash flow, and revenue in order to focus participants on profitability, top line sales growth, cash generation and balance sheet management during a time of continued uncertainty due to industry and macroeconomic challenges. For fiscal 2024, award opportunities were tied to measures of annual adjusted operating income (loss), adjusted operating cash flow, and net sales, with a weighting of 60% for adjusted annual operating income (loss), 20% for adjusted operating cash flow, and 20% for net sales, in each case, of the applicable reporting unit. For executive officers in the executive shared services reporting unit (which includes corporate senior officers and managers), these measures are of the entire Company on a consolidated basis. For executives in our two divisional reporting units (upholstery fabrics and mattress fabrics), these measures are of such executive officer's respective unit. Any earned award for the adjusted operating cash flow and net sales components was subject to a downward adjustment of 40% if the adjusted operating income (loss) was below the threshold level for the applicable reporting unit, and no bonus could be earned if the adjusted operating income (loss) was significantly below the threshold level set for the applicable reporting unit. The target goals for adjusted operating income (loss) for each reporting unit were set above the Company's internal annual operating plan budgets and required significant year-over-year improvement for each reporting unit to achieve target payout. The target goals for net sales for each reporting unit were set well above the prior year's actual performance to achieve target payout, and the target goals for adjusted operating cash flow levels for each reporting unit were set well above the Company's internal annual operating plan budgets. As such, the performance hurdles for each reporting unit were considered to be very challenging in light of business conditions and expectations.

As a result of the significantly improved operating performance for the Company overall and for the upholstery fabrics segment in fiscal 2024 compared to fiscal 2023, executive officers in our executive shared services reporting unit and in our upholstery fabrics reporting unit earned bonus payments between threshold and target levels under our fiscal 2024 annual incentive program with respect to the adjusted operating income (loss) measure (weighted at 60% of target award opportunity). In addition, as a result of the solid level of cash generation from the upholstery fabrics segment, executive officers in our upholstery fabrics reporting unit also earned bonus payments at target level under our fiscal 2024 annual incentive program with respect to the adjusted operating cash flow measure (weighted at 20% of target award opportunity). In each case, these bonus payments were earned based on the attainment of challenging performance-based targets that required significant year-over-year improvement in operating performance, and in the case of the upholstery fabrics reporting unit, a diligent focus on cash generation in the face of tough industry conditions. As a result of below-threshold performance results for the applicable measures of adjusted operating income (loss), adjusted operating cash flow, and net sales, no annual incentive compensation awards under our fiscal 2024 annual incentive plan were earned for executive officers in our mattress fabrics reporting unit, including one of our named executive officers, Thomas M. Bruno. Additionally, no annual incentive compensation awards were earned by executive officers in our executive shared services reporting unit or our upholstery fabrics reporting unit with respect to net sales, or, with respect to adjusted operating cash flow for our executive shared services reporting unit, based on below-threshold performance results for these reporting units. Total fiscal 2024 awards for participants in our executive shared services reporting unit, which includes two named executive officers (Robert G. Culp and Kenneth R. Bowling), were earned at 21% of target levels, well below payouts earned during fiscal 2023.

Long-term equity incentive awards that were granted under the long-term incentive compensation plan in fiscal 2022 for the three-year period ending in fiscal 2024 consisted solely of performance-based stock awards for our then-chief executive officer and a mix of one-half performance-based stock awards and one-half time-based stock awards for all other executive officers. For each reporting unit, cumulative adjusted operating income (loss) over the three-year performance period for the applicable reporting unit was the metric for the performance-based stock awards. Operating results for each reporting unit during this period were below the threshold performance level for these awards due primarily to a slowdown in demand for home furnishings, softer home sales, reduced discretionary spending on consumer durables, inflation concerns, general economic uncertainty, and other macroeconomic conditions.

As a result, no performance-based stock awards granted in fiscal 2022 were earned by executive officer participants in any of our three reporting units.

Notably, in evaluating these results, the compensation committee did not alter or adjust the performance targets originally set under the fiscal 2024 annual incentive plan or under the fiscal 2022 long-term incentive compensation plan to favorably benefit any participants, despite greater-than-expected macro headwinds faced by the Company during the applicable performance periods.

The compensation committee determined that fiscal 2024 pay levels for executive officers were appropriate, aligned with our strategic objectives, and consistent with our pay-for-performance philosophy. This determination was based on the compensation committee’s primary focus on profitability, top line sales growth, cash generation, and balance sheet management during fiscal 2024; the significant year-over-year improvement in operating performance for both the upholstery fabrics reporting unit and the executive shared services reporting unit; the generation of solid operating cash flow by the upholstery fabrics reporting unit; and also taking into account that:

•

no executive officers received salary increases during fiscal 2023, and executive officers (other than the Company's chief executive officer) only received modest merit-based salary increases in fiscal 2024;

•

the Company's chief executive officer did not receive a salary increase in fiscal 2023 or fiscal 2024;

•

executive officer base salaries in fiscal 2024 were generally believed to be well below the 50th percentile market level compared to the Company’s peer group;

•

adjusted operating income (loss), adjusted operating cash flow, and net sales targets for each reporting unit for the fiscal 2024 annual incentive program were set at levels considered to be very challenging, generally requiring significant year-over-year improvement or performance above the Company's internal annual operating plan budgets for each reporting unit to achieve a target payout;

•

no executive officers earned any performance-based shares under the fiscal 2022 LTIP program;

•

no named executive officers are currently expected to earn any performance-based shares under the fiscal 2023 or fiscal 2024 LTIP programs; and

•

no increases in base salary are currently anticipated for executive officers in fiscal 2025.

Compensation Committee Responsiveness to Our Most Recent Say-on-Pay Vote

In response to the relatively low level of support for our Say-on-Pay Vote at the 2023 annual meeting of shareholders (a 67.6% approval rate in 2023, as compared to historical levels of support which have averaged over 90%), we invited 13 of our largest shareholders, collectively representing over 56% ownership of our outstanding common stock (based on management estimates derived from third-party reports on the Company's share ownership), to directly engage with the Compensation Committee, and held discussions with shareholders representing more than 39% of the Company's outstanding common stock. All discussions were led by the Chair of our Compensation Committee, with certain members of management also participating. After considering feedback from these discussions, the Compensation Committee approved certain changes to the Company's industry peer group composition used for market benchmarking, as well as certain changes to the executive compensation program design for fiscal 2025. Additional details are included in the Compensation Discussion and Analysis section of this Proxy Statement under the heading "Shareholder Engagement and Executive Compensation Program Changes for Fiscal 2025."

GENERAL INFORMATION

This Proxy Statement is furnished to the shareholders of Culp, Inc. (the “Company”) by the Company’s Board of Directors in connection with the solicitation of proxies for use at the 2024 Annual Meeting of Shareholders of the Company (the “Annual Meeting”) or any adjournment thereof. The Company will hold the 2024 Annual Meeting on Wednesday, September 25, 2024, at 12:00 p.m. local time at the Company’s corporate offices, 1823 Eastchester Drive, High Point, North Carolina. The purpose of the Annual Meeting is to take action on the items described in this Proxy Statement, and on any other business that properly comes before the meeting.

This Proxy Statement, accompanying form of proxy, and the Company’s 2024 Annual Report to Shareholders for the fiscal year ended April 28, 2024 (the “Annual Report”) are first being mailed to shareholders on or about August 22, 2024. The Annual Report does not constitute “soliciting material” and is not to be deemed “filed” with the Securities and Exchange Commission (the "SEC").

Whether or not you expect to attend the Annual Meeting, please complete, date, and sign the accompanying form of proxy and return it promptly to ensure that your shares are voted at the meeting. Most shareholders have the choice of voting by completing the enclosed proxy card and mailing it in the postage-paid envelope provided, voting over the internet, or using a toll-free telephone number. You should refer to the proxy card or the information forwarded by your bank, broker, or other holder of record, if applicable, to see which voting options are available to you. The internet and telephone voting facilities for eligible shareholders of record will remain available for voting up until commencement of the Annual Meeting at 12:00 p.m. Eastern Time on September 25, 2024. Specific instructions to be followed by any shareholder of record interested in voting via the internet or telephone are shown on the enclosed proxy card. The internet and telephone voting procedures are designed to authenticate the shareholder’s identity and to allow shareholders to vote their shares and confirm that their instructions have been properly recorded.

A shareholder of record or registered shareholder is a shareholder whose ownership of common stock is reflected directly on the books and records of the Company’s transfer agent, Computershare Trust Company, N.A. If you hold common stock through an account with a bank, broker, or similar organization, you are considered the beneficial owner of shares held in “street name” and are not a shareholder of record. For shares held in street name, the shareholder of record is your bank, broker, or similar organization. The Company only has access to ownership records for the registered shares.

If you hold your shares in street name, your ability to vote by internet or telephone depends on the voting process of the bank, broker, or other nominee through which you hold the shares. Please follow their directions carefully. If you want to vote at the meeting, you must obtain a legal proxy appointment from your bank, broker, or other nominee and present that legal proxy appointment, together with proof of your identity, to Company officials as you attend the meeting.

If you hold your shares in street name, it is critical that you cast your vote if you want it to count in the election of our directors (Proposal 1 of this Proxy Statement) and in the advisory vote on the compensation of our named executive officers (a Say-on-Pay vote) (Proposal 3 of this Proxy Statement). As a result of current regulations, your bank or broker is not allowed to vote your uninstructed shares on a discretionary basis on matters related to the election of directors or executive compensation. Thus, if you hold your shares in street name and you do not instruct your bank or broker how to vote in the election of directors and the Say-on-Pay advisory vote, no votes will be cast on your behalf with respect to the proposals for which you did not provide voting instructions. Your bank or broker will still have voting discretion on your uninstructed shares with respect to ratification of our independent auditors (Proposal 2 of this Proxy Statement) or routine matters that may properly come before the meeting.

Any shareholder giving a proxy may revoke it at any time before a vote is taken by:

•

duly executing a proxy bearing a later date;

•

executing a notice of revocation in a written instrument filed with the secretary of the Company; or

•

appearing at the meeting and notifying the secretary of the intention to vote in person.

Unless a contrary choice is specified, all shares represented by valid proxies that are received pursuant to this solicitation, and not revoked before they are exercised, will be voted FOR the election of the Board’s seven director nominees named in this Proxy Statement, FOR ratification of the appointment of Grant Thornton LLP as the independent auditors of the Company for the current fiscal year, and FOR the Say-on-Pay shareholder resolution approving the Company’s compensation of our named executive officers. The proxy also confers discretionary authority upon the persons named therein, or their substitutes, with respect to any other business that may properly come before the meeting.

The presence, in person or by proxy, of the holders of a majority of the outstanding shares of common stock of the Company is necessary to constitute a quorum at the Annual Meeting and any adjournment thereof. If a quorum is not present or represented at the Annual Meeting, the shareholders present and entitled to vote have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At any such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally notified. A shareholder abstaining from the vote on a proposal and any votes not made or not permitted to be made by banks or brokers (broker non-votes) will be counted as present for purposes of determining whether a quorum is present, but will be counted as not having voted on the proposal in question.

With regard to the election of directors, shareholders may cast votes in favor of a nominee or withhold votes from a nominee, and directors will be elected by a plurality of the votes cast. Votes that are withheld will be excluded entirely from the vote and will have no effect on the outcome of the election of directors. Cumulative voting is not permitted. With regard to ratification of Grant Thornton LLP as the Company’s independent auditors, and approval of the Say-on-Pay shareholder resolution approving the Company’s compensation of our named executive officers, shareholders may vote for or against each proposal or abstain from voting, and each proposal will be approved if more votes are cast in favor of such proposal than are cast against it. Abstentions and broker non-votes will have no effect on the outcome of the vote on either of these proposals.

Although the advisory vote on the Company’s executive compensation is non-binding, the Board will consider the outcome when considering future executive compensation decisions.

The Company will bear the entire cost of preparing this Proxy Statement and of soliciting proxies. Proxies may be solicited by employees of the Company, either personally, by special letter, or by telephone. However, Company employees will not be specifically compensated for these services. The Company also will request brokers and others to send solicitation material to beneficial owners of the Company’s stock and will, upon request, reimburse their out-of-pocket costs.

BENEFICIAL OWNERS OF 5% OR MORE OF OUR COMMON STOCK

The following table lists the beneficial ownership of the Company’s common stock with respect to each individual or entity known by the Company to be the beneficial owner of more than five percent of such common stock as of July 29, 2024. This information is based solely on SEC filings made by the individuals or entities by that date.


Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Outstanding Shares (1)
Common stock, par value $.05 per share	Gate City Capital Management, LLC 8725 W. Higgins Road Suite 530 Chicago, IL 60631	1,577,693 (2)	12.7%

	22NW Fund, LP 590 1st Ave South Unit C1 Seattle, WA 98104	1,342,488 (3)	10.8%

	Renaissance Technologies LLC 800 Third Avenue New York, NY 10022	701,416 (4)	5.6%

(1)

Applicable percentage ownership is based on 12,469,903 shares of our common stock outstanding as of July 29, 2024.

(2)

Based upon information obtained from Gate City Capital Management, LLC, Gate City Capital Management, LLC has the power to vote 972,053 shares and dispositive power over 1,577,693 shares as of June 30, 2024. Based upon information obtained from a Schedule 13G/A filed by Gate City Capital Management, LLC with the SEC on May 10, 2024, reporting 1,301,545 shares owned as of April 30, 2024, Michael Melby is the managing member of Gate City Capital Management, LLC and is deemed to beneficially own the shares held by Gate City Capital Management, LLC.

(3)

Based on information obtained from a Form 4 filed with the SEC on July 19, 2024 (the "Form 4"), 22NW Fund, LP, 22NW LP, 22NW Fund GP, LLC, 22NW GP, Inc., and Aron R. English have the power to vote and dispositive power over 1,342,488 shares. Shares reported are directly owned by 22NW Fund, LP. 22NW LP serves as the investment manager of 22NW Fund, LP; 22NW GP, Inc. serves as the general partner of 22NW, LP. Aron R. English is the Portfolio Manager of 22 NW, LP, Manager of 22 NW Fund GP, LLC, and President and sole shareholder of 22NW GP, Inc. By virtue of these relationships, 22NW LP, 22NW Fund GP, LLC, 22NW GP, Inc., and Mr. English may be deemed to beneficially own the shares held by 22NW Fund, LP. According to the Form 4, Mr. English also directly owns an additional 1,450 shares. Further, based on information obtained from a Schedule 13D/A filed by 22NW Fund, LP, 22NW, LP, 22NW Fund GP, LLC, 22NW GP, Inc., Mr. English, Bryson O. Hirai-Hadley, and Alexander B. Jones (collectively the "22NW Investors"), on June 18, 2024, reporting ownership by the 22NW Investors as of June 17, 2024, each of the 22NW Investors may be deemed to be a "group" for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and such group may be deemed to beneficially own the 1,239,563 shares owned as of June 17, 2024, in the aggregate by all of the 22NW Investors. According to the Schedule 13D/A, by virtue of their respective positions with 22NW Fund, LP, each of 22NW, LP, 22NW Fund GP, 22NW GP, Inc., and Mr. English may be deemed to have sole power to vote and dispose of the shares directly beneficially owned by 22NW Fund, LP as reported in the Schedule 13D/A. The Schedule 13D/A further reports that Mr. Hirai-Hadley directly beneficially owned 799 shares and Mr. Jones directly beneficially owned 525 shares, and that each of Mr. Hirai-Hadley and Mr. Jones has the power to vote and dispose of the shares directly owned by Mr. Hirai-Hadley and Mr. Jones, respectively.

On July 17, 2024, the Company entered into the Cooperation Agreement (defined below) with each of the 22NW Investors, pursuant to which the 22NW Investors agreed to take certain actions with respect to shares beneficially owned by them. See "Corporate Governance - Agreement with 22NW Fund, LP et. al" on page for a description of that agreement.

(4)

Based upon information obtained from a Schedule 13F-HR filed with the SEC on May 13, 2024, Renaissance Technologies LLC has the power to vote 701,416 shares and dispositive power over 701,406 shares. Shares reported are directly owned by Renaissance Technologies LLC. Based on information obtained from a Schedule 13G/A filed with the SEC on February 13, 2024, Renaissance Technologies Holdings Corporation is the majority owner of Renaissance Technologies LLC and is deemed to beneficially own the shares held by Renaissance Technologies LLC.

PROPOSAL 1: ELECTION OF DIRECTORS

We are managed under the direction of our board of directors, which is currently composed of nine members. The authorized number of directors comprising our board of directors may not be less than five or not more than nine, with the actual number to be fixed from time to time by resolution of our board of directors, subject to the terms of our certificate of incorporation and bylaws. Effective as of the commencement of the Annual Meeting, the size of our board of directors will be reduced to seven members.

Under the Company’s bylaws, directors are elected at each annual meeting and hold office for a one-year term or until their respective successors are elected and have qualified. The terms of all nine of our current directors expire at the 2024 Annual Meeting, and two of our directors, Perry E. Davis and Jonathan L. Kelly, are not being nominated for re-election upon expiration of their current term. Accordingly, seven directors will be elected for a one-year term at the 2024 Annual Meeting. Each nominee has consented to being named in the Proxy Statement and has agreed to serve as a member of the Board of Directors, if elected.

In the absence of specifications to the contrary, proxies will be voted for the election of each of the seven nominees named in this Proxy Statement. In no case will proxies be voted for more than seven nominees. The persons who receive the highest number of votes for election at the Annual Meeting will be elected as directors. If, at or before the time of the meeting, any of the nominees becomes unable to serve for any reason, the proxy holders have the discretion to vote for a substitute nominee or nominees. The Board currently knows of no reason why any of the nominees listed below is likely to become unable to serve as a director.

NOMINEES, DIRECTORS, AND EXECUTIVE OFFICERS

Directors and Nominees:

FRANKLIN N. SAXON, age 72, is the non-executive Chairman of the Board, was employed by the Company from 1983 to 2022, and currently provides advice, strategic planning, and consulting services to the Company. From January 2020 to September 2022, Mr. Saxon served as executive chairman of the Company. From 2007 to 2020, Mr. Saxon served as the chief executive officer of the Company, and prior to that served in various roles at the Company, including executive vice president, chief financial officer, and president, Culp Velvets/Prints division, in addition to his service on the Board, including serving as chairman of the Board beginning in April of 2019.

Mr. Saxon brings extensive business, managerial, and leadership experience to the Board. With over 40 years of experience with the Company, Mr. Saxon provides the Board with a vital understanding and appreciation of the Company’s business. His strong leadership skills have been demonstrated through his services as chief executive officer from 2007 through 2019 and his service as a director since 1987, including as chairman beginning in 2019. Mr. Saxon also has extensive financial management expertise, having worked in public accounting before joining the Company, and serving as the Company’s chief financial officer for many years.

ROBERT G. CULP, IV, age 53, has been employed by the Company since 1998 and has served in various capacities, including president of the Culp Home Fashions Division from 2004 to 2019. The Board elected Mr. Culp as chief operating officer of the Company in October 2018 and as president of the Company in March 2019. He was elected by the Board as president and chief executive officer of the Company effective January 1, 2020.

Mr. Culp has very strong knowledge about the Company and its business, having been employed with the Company for more than 25 years. He developed management and executive skills in a number of leadership roles in the Company before his role as president and CEO, as well as significant knowledge of the bedding and furniture industries.

JOHN A. BAUGH, CFA, age 63, is the Vice President of Investor Relations for PROG Holdings, Inc., a publicly traded fintech holding company that provides transparent and competitive payment options to consumers. Prior to joining PROG Holdings in September 2020, Mr. Baugh was a sell-side analyst with Stifel Financial, serving as Managing Director, Senior Equity Research from 2005 to 2020. He also served as a sell-side analyst for Legg Mason Securities from 2004 to 2005 and Wheat First Union/Wachovia Securities from 1983 to 2004. During his 37 years as an analyst on Wall Street, Mr. Baugh covered industry spaces including home furnishings, retail, building products, and lease-to-own, including coverage of the Company and many of its largest customers during much of this time.

Mr. Baugh brings to the Company a deep understanding of capital markets and institutional investing, as well as substantial knowledge about the furniture and bedding industries, both domestic and international. He has a strong knowledge about the Company and its business, as well as the business of several of the Company’s largest customers, based on his long tenure as a sell-side analyst covering the home furnishings industry.

SHARON A. DECKER, age 67 is president of Tryon Equestrian Partners, Carolina Operations, an investment group responsible for the development and operation of a premiere sports complex and resort in western North Carolina. Prior to holding this position, she served as chief operating officer of Tryon Equestrian Partners, Carolina Operations, from September 2015 to April 2020. Prior to that, she served as president of NURAY Media, a media preservation company, from January 2015 until August 2015, and served as Secretary of Commerce for the State of North Carolina from January 2013 until December 2014. Ms. Decker served as chief executive officer of The Tapestry Group, a non-profit organization, from September 2004 to January 2013, and has served as the chief executive officer of North Washington Street Properties, a community redevelopment company, since October 2004. Ms. Decker served as president of The Tanner Companies, a direct marketer of women’s apparel, from August 2002 to September 2004, and president of Doncaster, a division of The Tanner Companies, from August 1999 to July 2002. Ms. Decker also served as president and chief executive officer of the Lynnwood Foundation, which created and managed a conference facility and leadership institute, from 1997 until 1999. From 1980 until 1997, she served Duke Energy Corporation, an electric power holding company, in various capacities, including as corporate vice president and in various strategic areas from marketing and community relations to customer service. Ms. Decker currently serves on the board of directors of Coca-Cola Consolidated, Inc., a nonalcoholic beverage maker and distributor; on the Board of Trustees of the University of North Carolina at Charlotte; and on the board of directors of CTE, the largest provider of construction, industrial, and other related equipment in the Southeast. She previously served as a director of SCANA Corporation, a diversified utility company, from 2006 to 2013 and from 2015 to 2018, and on the board of directors of Family Dollar Stores, Inc., a discount retailer, from 1999 to 2015.

Ms. Decker brings to the Company extensive business, leadership, and financial management experience from the numerous positions she has held across a broad range of fields, including large public companies and non-profit organizations. Her diverse executive, marketing, and economic development experience, as well as her extensive experience serving on multiple corporate boards, provides a valuable perspective on operational and governance matters.

KIMBERLY B. GATLING, age 49, is a partner and the Chief Diversity and Inclusion Officer at the law firm of Fox Rothschild LLP (formerly Smith Moore Leatherwood LLP). She has been a partner at the firm since 2008 and has served as the Chief Diversity and Inclusion Officer for all of the firm’s 27 offices since 2020. Ms. Gatling is a United States Registered Patent Attorney and a North Carolina State Certified Trademark Specialist. Her legal practice is focused on intellectual property and information technology, including protection and enforcement of patents, trademarks, and copyrights; counseling clients on data protection and privacy, computer and internet related issues, and regulatory matters pertaining to product packaging, labeling, and advertising; and drafting and negotiating intellectual property license agreements, sponsored research agreements, joint development agreements, and software development and license agreements. Over the course of her legal career, she has counseled a variety of clients in the textile industry, and in her role as Chief Diversity and Inclusion Officer, she serves as part of the firm’s leadership team and develops strategies that increase and promote a diverse workforce and inclusive environment at all levels of the firm. Throughout Ms. Gatling’s professional career, she has also invested in her community through service and leadership with various entities. Ms. Gatling is the Chair of the Board of Directors for the Cone Health Foundation, having served on the Board of Directors since 2015 (currently serving as Vice-Chair). She also serves as a Director for Truliant Federal Credit Union, wherein she serves on the Governance Committee, and as a Trustee for North Carolina A&T State University, wherein she serves on the Governance Committee and the Advancement and External Affairs Committee. In prior roles, Ms. Gatling served on the Board of Directors of the United Way of Greater Greensboro from 2008 – 2021, including as Chair from 2019 – 2021. In this role, Ms. Gatling oversaw the development of a comprehensive strategic plan and led a national search for a new CEO. She additionally served in various other leadership roles during her tenure, including as a member of the Governance Committee, Finance Committee, and Community Impact Committee. Ms. Gatling also previously served on the Board of Directors for Habitat for Humanity, in which she chaired the Audit Committee, and the Gateway Research center, in which she served as Vice Chair and chaired the Governance Committee.

Ms. Gatling’s legal and business experiences bring to the Company a robust skillset including extensive corporate governance and legal knowledge, regulatory compliance experience, board leadership and collaboration, strategic planning and management, data protection, technological innovation, product development, intellectual property protection and enforcement strategy, and marketing and advertising expertise. She has also developed experience in the textile industry through her legal work with various industry clients over the course of her career.

FRED A. JACKSON, age 74, is the retired chief executive officer of American & Efird LLC, a global manufacturer of sewing, thread, embroidery thread, and technical textiles. He served American & Efird for 38 years in various positions before his retirement from the CEO position in September 2015, and his retirement as non-executive chairman for the Advisory Board of American & Efird Global, L.P. in May 2018.

Mr. Jackson brings to the Company extensive experience and knowledge in textiles and related industries, both domestic and international, and has significant financial management and executive leadership experience gained through his long tenure with American & Efird LLC, including its international subsidiaries and joint ventures, and leadership positions in textile industry trade associations.

ALEXANDER B. JONES, age 38, is Vice President and Senior Research Analyst for 22NW, LP (‘‘22NW LP”), a Seattle-based long/short small cap value hedge fund, which, together with its affiliates, is the one of the Company's largest shareholders. Mr. Jones joined 22NW LP in 2021 and currently oversees the firm’s investments in industrials, materials, and consumer sectors. Prior to 22NW LP, Mr. Jones was founder and principal of Porter Street Research, LLC, a Washington, DC based investment research and advisory firm, from 2017 to 2021; an investment analyst at Legacy Research/Bonner and Partners in Washington, DC, from 2017 to 2019; an Investment Analyst at The Brookings Institution in Washington, DC, from 2015 to 2017; and a Senior Investment Associate at Cambridge Associates in Arlington, Virginia from 2008 to 2015. Mr. Jones currently serves on the board of directors of L.B. Foster Company (NASDAQ: FSTR), a global technology solutions provider of engineered, manufactured products and services that builds and supports infrastructure.

Mr. Jones brings to the Company a valuable understanding of investor communications, capital allocation and public markets, and a shareholder perspective, including relating to enhancing shareholder value. See “Agreement with 22NW Fund, LP et al,” below, which describes an agreement between the Company and certain shareholders pursuant to which the Company agreed to appoint Mr. Jones as a director and nominate him as a director for the 2024 Annual Meeting.

Non-Director Executive Officers:

Information concerning our executive officers as of April 28, 2024, is set forth below:

KENNETH R. BOWLING, age 62, joined the Company in 1997 as controller for the Culp Velvets/Prints division. He was promoted to corporate controller in 2001 and was named corporate controller and assistant treasurer in 2002. In 2004, he was promoted to vice president, finance and treasurer. Mr. Bowling became the Company’s chief financial officer in 2007 and corporate secretary in 2008, and he was named senior vice president in 2016. In 2019, Mr. Bowling was named executive vice president.

THOMAS M. BRUNO, age 43, joined the Company in September of 2022 as executive vice president of the Culp Home Fashions division, and he was named by the Board as president of the Culp Home Fashions division in January of 2023. Mr. Bruno previously served as vice president of business development, alternative channels at Tempur Sealy International from 2018 to 2022. Prior to that, he was one of the founding members of Comfort Revolution, a sleep accessories company, where he served in various leadership roles from its inception in 2009 until its full acquisition by Tempur Sealy in 2018. Following this acquisition, Mr. Bruno was tasked with integrating Comfort Revolution into Tempur Sealy as Comfort Revolution’s senior vice president & managing director. During his tenure, Comfort Revolution sales grew 300% and the company was a profitable operation supporting some of Tempur Sealy’s most extensive alternative channel initiatives. Prior to Comfort Revolution, Mr. Bruno began his career in New Jersey with a top public accounting firm.

BOYD B. CHUMBLEY, age 67, has been employed by the Company since 1984 and has served in various capacities. Mr. Chumbley was named senior vice president – operations in 2007, and he was promoted to executive vice president of the Culp Upholstery Fabrics division in July of 2014. The Board elected Mr. Chumbley as president of the Culp Upholstery Fabrics division in 2016. Mr. Chumbley retired as an executive officer of the Company effective July 26, 2024. He remains employed by the Company in a part-time advisory role to strategically support the Culp Upholstery Fabrics division.

ASHLEY C. DURBIN, age 44, joined the Company in 2019 as vice president, general counsel and corporate secretary, and she was named senior vice president in 2023. Previously, Ms. Durbin was a partner at the law firm of Robinson, Bradshaw & Hinson, P.A. in Charlotte North Carolina, a firm with which she was associated since 2008.

TERESA A. HUFFMAN, age 63, has been employed by the Company since 1986 and has served in various capacities. Ms. Huffman was named as vice president, human resources for the Company in February 2008, and was promoted to senior vice president, human resources in 2019. In July of 2021, she became an executive officer of the Company, and in July of 2022, she was named senior vice president, chief human resources officer.

Effective as of July 27, 2024, the Board named MARY BETH HUNSBERGER, age 49, as president of the Culp Upholstery Fabrics division and as an executive officer of the Company. Ms. Hunsberger joined the Company as executive vice president of the Culp Upholstery Fabrics division in January 2024. Previously, she served as president of North and South America for Decon, Inc., from 2016 through 2023, and she concurrently served as chief operating officer of North and South America for Gloster Furniture during 2023.

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of July 29, 2024, for the nominees for election to the Board of Directors, the directors and named executive officers of the Company, and all executive officers, directors, and nominees of the Company as a group, a total of 14 persons:


Name	Position with Company (1)	Year Became Director	Year Term Expires	Shares and Percent of Common Stock Beneficially Owned As of July 29, 2024 (2)	Notes
Directors, Nominees, and Named Executive Officers

Franklin N. Saxon	Director, Chairman	1987	2024	113,750*	(3)

Robert G. Culp, IV	President and Chief Executive Officer, Director	2020	2024	338,547 2.7%	(4)

John A. Baugh	Director	2021	2024	42,078*	(5)

Perry E. Davis	Director	2019	2024	39,816*	(6)

Sharon A. Decker	Director	2019	2024	40,383*	(7)

Kimberly B. Gatling	Director	2021	2024	33,956*	(8)

Fred A. Jackson	Director	2016	2024	81,040*	(9)

Alexander B. Jones	Director	2024	2024	525*	(10)

Jonathan L. Kelly	Director	2021	2024	86,656*	(11)

Kenneth R. Bowling	Executive Vice President, Chief Financial Officer and Treasurer			50,766*	(12)

Thomas M. Bruno	President, Culp Home Fashions Division			60,114*	(13)

All executive officers, current directors and nominees as a group (14 persons)				921,953 7.3%

* Less than one percent.

(1)

As of July 29, 2024.

(2)

Includes shares currently owned and shares that may be acquired within 60 days after July 29, 2024, upon the vesting of time-based restricted stock units. Percentage ownership is based on 12,469,903 shares of our common stock outstanding as of July 29, 2024.

(3)

Includes approximately 275 shares owned by Mr. Saxon through the Company’s 401(k) plan (estimated number of shares based on calculation from information reported by 401(k) plan administrator). Also includes 3,000 shares owned by Lori Saxon, Mr. Saxon’s spouse, in her own name. Mr. Saxon disclaims beneficial ownership of the shares owned by his spouse.

(4)

Includes approximately 53,392 shares owned by Mr. Culp through the Company’s 401(k) plan (estimated number of shares based on calculation from information reported by 401(k) plan administrator). Also includes 1,740 shares held in trust for Mr. Culp’s daughter and 1,740 shares held in trust for Mr. Culp’s son, where Mr. Culp is the sole trustee for these trusts, and has sole voting, dispositive, and investment power with respect to these shares.

(5)

Includes 9,839 shares that Mr. Baugh may acquire within 60 days after July 29, 2024, upon the vesting of time-based restricted stock units, subject to his continued service as a director through the vesting date.

(6)

Includes 9,839 shares that Mr. Davis may acquire within 60 days after July 29, 2024, upon the vesting of time-based restricted stock units, subject to his continued service as a director through the vesting date.

(7)

Includes 9,839 shares that Ms. Decker may acquire within 60 days after July 29, 2024, upon the vesting of time-based restricted stock units, subject to her continued service as a director through the vesting date.

(8)

Includes 9,839 shares that Ms. Gatling may acquire within 60 days after July 29, 2024, upon the vesting of time-based restricted stock units, subject to her continued service as a director through the vesting date.

(9)

Includes 10,733 shares that Mr. Jackson may acquire within 60 days after July 29, 2024, upon the vesting of time-based restricted stock units, subject to his continued service as a director through the vesting date.

(10)

Does not include shares beneficially owned by the Investor Group other than those directly beneficially owned by Mr. Jones. Mr. Jones is Vice President, Senior Research Analyst at 22NW, LP.

(11)

Includes 1,110 shares owned by Mr. Kelly through a Roth IRA and 48,571 shares owned by Mr. Kelly through a SEP-IRA. Also includes 9,839 shares that Mr. Kelly may acquire within 60 days after July 29, 2024, upon the vesting of time-based restricted stock units, subject to his continued service as a director through the vesting date.

(12)

Includes approximately 18,170 shares owned by Mr. Bowling through the Company’s 401(k) plan (estimated number of shares based on calculation from information reported by 401(k) plan administrator). Also includes 4,357 shares that Mr. Bowling will acquire within 60 days after July 29, 2024, in connection with time-based restricted units that have vested, but for which corresponding shares have not yet been issued by the Company.

(13)

Includes 12,557 shares that Mr. Bruno may acquire within 60 days after July 29, 2024, upon the vesting of time-based restricted stock units, subject to Mr. Bruno's continued service with the Company through the vesting date.

The Board of Directors recommends a vote “FOR” the seven nominees listed above as directors.

CORPORATE GOVERNANCE

Corporate Governance Guidelines and Committee Charters

The Board of Directors has approved Corporate Governance Guidelines, with the goal of providing effective governance of the Company’s business and affairs for the benefit of shareholders. The Corporate Governance Guidelines are available on the Company’s website at www.culp.com in the “Investor Relations/Governance” section and are available in print to any shareholder upon request. In addition, the charters for the Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee are also included in the “Investor Relations/Governance” section of the Company’s website and are available in print to any shareholder upon request.

Director Independence

The Board believes that independent directors should comprise a majority of the Board, and the Company’s Corporate Governance Guidelines (as well as New York Stock Exchange ("NYSE") rules) require that a majority of the Company’s Board be independent. To be considered independent, a director must be determined, by resolution of the Board as a whole, to have no material relationship with the Company other than as a director. These determinations are made annually. In each case, the Board considers all relevant facts and circumstances and applies the independence standards of the NYSE. In addition, the Board has adopted the following categorical standards, which are included in the Company’s Corporate Governance Guidelines, to assist in the determination of director independence. These categorical standards conform to, or are more exacting than, the independence requirements in the NYSE listing standards:

(i)

Disqualifying Relationships – A director will not be considered independent if any of the following has occurred within the preceding three years:

•

the director was employed by the Company

•

any of the director’s immediate family members was employed by the Company as an executive officer

•

the director or any of the director’s immediate family members received more than $25,000 per year in direct compensation from the Company (other than director’s fees and pension or other forms of deferred compensation for prior service with the Company)

•

the director was affiliated with or employed by the Company’s independent auditor

•

an immediate family member of a director (1) was affiliated with or employed by the Company’s independent auditor as a partner, principal, manager, or in any other professional capacity, or (2) is currently an employee of the company’s independent auditor and personally works on the Company’s audit

•

an executive officer of the Company was on the compensation committee of the board of directors of a company that employed either the director or the director’s immediate family member as an executive officer

•

the director is a current employee, or an immediate family member of the director is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceed the greater of $1 million, or two percent, of such other company’s consolidated gross revenues

(ii)

Commercial Relationships – The following commercial relationships will not be considered to be material relationships that would impair a director’s status as being independent:

•

the director is an executive officer or employee or director of one of the Company’s suppliers or customers whose annual sales to, or purchases from, the Company are less than one percent of the annual revenues of the customer or supplier

•

the director’s immediate family member is an executive officer or director of one of the Company’s suppliers or customers whose annual sales to, or purchases from, the Company are less than one percent of the annual revenues of the customer or supplier

•

the director or the director’s immediate family member is an executive officer of another company that is indebted to the Company, or to which the Company is indebted, and the total amount of either company’s indebtedness to the other is less than one percent of the total consolidated assets of the company he or she serves as an executive officer

(iii)

Charitable Relationships – The following charitable relationship will not be considered to be a material relationship that would impair a director’s independence: if a director of the Company, or a member of a director’s immediate family, serves as an executive officer of a charitable or other not-for-profit organization, and the Company’s charitable contributions to the organization, in the aggregate, are less than two percent of that organization’s total revenues during its most recent fiscal year.

(iv)

Stock Ownership – Ownership of a significant amount of the Company’s stock does not necessarily preclude a determination of independence.

Applying the independence standards described above, the Board has determined that the following current directors and/or nominees are independent within the meaning of the listing standards of the NYSE and the Company’s categorical standards of independence: John Baugh, Perry Davis, Sharon Decker, Kimberly Gatling, Fred Jackson, Alexander Jones, and Jonathan Kelly. These determinations are based primarily on a review of the responses of our directors to questions regarding employment and compensation history, affiliations and family and other relationships, and on discussions with directors. In considering the independence of Mr. Davis, the Board took into consideration his role as a recently retired executive officer of a customer of the Company and the Company’s annual sales to such customer, and determined this relationship did not impair Mr. Davis’ status as being independent. In considering the independence of Ms. Gatling, the Board took into consideration her role as a partner at a law firm that Company has previously used for legal services, including the annual fees previously paid to such law firm and the fact that the relationship with such law firm has been discontinued, and no fees have been paid, since August 2020, and determined that this relationship did not impair Ms. Gatling’s status as being independent.

Board Leadership Structure and Lead Independent Director; Executive Sessions of Non-Management Directors and Independent Directors

The roles of Board Chair and Chief Executive Officer are filled separately by two individuals. Mr. Saxon, who serves as Board Chair, is a non-employee director who also provided consulting services to the Company as a strategic advisor in fiscal 2024. The Board believes, and our Corporate Governance Guidelines provide, that the Board should have flexibility to decide whether it is best for the Company at a given point in time for the roles of the Chief Executive Officer and Chair of the Board to be separate or combined and, if separate, whether the Chair should be selected from the independent directors or be an employee. The Board believes that the complementary leadership skills of Mr. Saxon as Chair and Mr. Culp as Chief Executive Officer are currently serving the Board and the Company well.

Non-management Board members (which consists of Mr. Saxon and the independent directors) meet separately from the other directors at regularly scheduled executive sessions, without the presence of management directors or executive officers of the Company (except to the extent that the non-management directors request the attendance of any management directors or executive officers). These meetings normally occur quarterly. Independent Board members meet separately from other directors in an executive session at least once per fiscal year (and more frequently upon request from the independent Board members), without the presence of other directors or executive officers of the Company. The non-management directors and independent directors have designated a lead independent director to preside at these meetings, to advise management and to otherwise act as a liaison between the non-management or independent directors, as applicable, and the Company’s management and/or other directors. Mr. Jackson has served as lead independent director since September 29, 2021.

Director Attendance at Annual Meetings

Directors are expected to attend the Company’s Annual Meeting of Shareholders absent exceptional cause. All directors then on the Board attended the 2023 Annual Meeting of Shareholders.

Risk Oversight

The Board oversees risk-assessment in a number of ways, both as a full Board and through its committees. The Board assesses enterprise risk as it reviews and directs the Company’s strategic plans and decisions, both for operational and financial matters. The Board as a whole, in executive sessions and in meetings with management and reports from its committees, assesses risks faced by the Company and evaluates ways to mitigate those risks. For instance, the Board exercises oversight of information technology infrastructure and cybersecurity risks, in part through quarterly meetings between the Audit Committee and the head of the Company’s information technology department to review the Company’s readiness and ability to thwart a cybersecurity threat or recover from a technology failure. The Audit Committee has the responsibility to review and discuss with management, and with the internal auditor and the independent auditor, as appropriate, issues regarding the Company’s risk assessment and risk management policies, including the Company’s major financial risk exposure and the steps management has taken to monitor and mitigate such exposure. The Audit Committee also has the responsibility to review and discuss with management the Company’s policies, procedures, and practices with

respect to overall enterprise risk management, including those risks related to information security, cybersecurity, data protection, sustainability and environmental issues. In addition, the Compensation Committee assesses the Company’s compensation policies and practices to ensure that compensation arrangements do not provide incentives that create risks that are reasonably likely to have a material adverse effect on the Company.

Code of Business Conduct and Ethics

The Company has adopted a written Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer, and controller. The Code is available on the Company’s website at www.culp.com under the “Investor Relations/Governance” section and is available in print to any shareholder who requests it. The Company will disclose on its website or by the filing of a Form 8-K any substantive amendments to or waivers granted under the Code with regard to executive officers.

Anti-Hedging and Anti-Pledging Policies

As discussed in detail in the section named “Executive Compensation – Compensation Discussion & Analysis – Compensation Elements” on page 23, the Company maintains a policy that prohibits all directors, executive officers, and other designated individuals from hedging with respect to any of the Company’s securities. In addition, the Company’s policy strongly discourages directors, executive officers, and other designated individuals from pledging Company securities to secure a loan unless such person has the clear financial capability to repay any associated loan without resort to the pledged securities. Company policy requires advance notice and pre-clearance of any such pledge or margin transaction. None of the Company’s executive officers or directors have currently pledged any Company securities.

Stock Ownership and Retention Requirements

In June 2018, the Compensation Committee recommended and the Board approved stock ownership and retention requirements applicable to our executive officers and members of our Board. Under these guidelines, each elected officer (including the named executive officers) is required to hold shares of our common stock with a market value at least equal to a specific multiple of the officer’s base salary. Non-employee directors are required to hold common stock with a market value equal to two times the annual cash retainer paid to such directors. Our CEO is required to hold common stock valued at three times base salary, and other executive officers are required to hold common stock valued at two times base salary. In calculating ownership for purposes of this policy, only shares of common stock are considered - unvested restricted stock units (performance- or time-based) and unexercised stock options are not counted toward an executive's compliance with the stock ownership guidelines.

Officers and directors have five years from the date of adoption of the requirements or the date they become subject to the requirements, whichever is later, to meet the minimum ownership requirements. If an individual does not own enough shares to meet the ownership requirements, that individual is required to retain at least 50% of all shares of our common stock granted to such individual pursuant to equity awards or stock grants from the Company under any compensation arrangements, until compliance with the ownership policy is achieved.

As of April 28, 2024, all of our directors held sufficient equity of our Company to satisfy the stock ownership guidelines, and all of our current named executive officers who have been subject to the policy for at least five years held at least the required minimum number of shares, other than Mr. Bowling. Mr. Bowling has historically met the stock ownership guidelines, but his calculated ownership value was below the designated level based on our stock price as of the most recent measurement period. However, Mr. Bowling remains in compliance with the policy's requirement to retain at least 50% of all shares of our common stock granted to him until the targeted ownership level is achieved.

Communications with Directors

The Company and the Company’s Board of Directors believe it is important that a direct and open line of communication exist between the Company’s Board of Directors and its shareholders and other interested parties. Any shareholder or other interested party who desires to contact the Company’s directors may send a letter to the following address:

Culp, Inc. Board of Directors

c/o Corporate Secretary

1823 Eastchester Drive

High Point, North Carolina 27265

Communications to directors will be handled by the office of the Corporate Secretary and forwarded as soon as practicable to the Lead Director designated by the independent directors.

The Company also has a separate policy that allows shareholders, employees, or other interested parties to communicate with the Chair of the Audit Committee of the Board of Directors to report complaints or concerns regarding accounting, internal accounting controls, or audit matters. More details about this policy are available on the Company’s corporate website at www.culp.com, in the “Investor Relations/Governance” section under the heading “Complaint Procedures for Accounting, Internal Accounting Controls, or Auditing Matters.”

Director Nomination Process

The Corporate Governance and Nominating Committee is responsible for selecting persons to be recommended to the Board to fill vacancies on the Board, as well as persons to be recommended to the Board to be submitted to the shareholders as nominees for election as directors of the Company. The charter of the Corporate Governance and Nominating Committee sets forth the specific responsibilities and duties of that committee, and a copy of the charter may be found on the Company’s website at www.culp.com, in the “Investor Relations/Governance” section. Among other things, the charter requires that the Corporate Governance and Nominating Committee consist of not less than three directors, each of whom must be independent as determined by the Board of Directors and as defined by NYSE rules. All of the current members of the Corporate Governance and Nominating Committee are independent directors.

The goal of the Corporate Governance and Nominating Committee is to create a Board that will demonstrate competence, objectivity, and the highest degree of integrity on an individual and collective basis. In evaluating current members and new candidates, the Corporate Governance and Nominating Committee considers the needs of the Board of Directors in light of the current mix of director skills and attributes. In accordance with the Corporate Governance Guidelines adopted by the Board, the Corporate Governance and Nominating Committee will seek a diversity of skills and backgrounds among directors in assessing candidates for membership on the Board. The Corporate Governance and Nominating Committee will seek candidates who possess honesty and integrity, sound business judgment, financial literacy, strategic and analytical insight, and the ability to commit an adequate amount of time to make a productive contribution to the Board and the Company. In addition, the Corporate Governance and Nominating Committee will seek to assure that one or more Board members possess each of the following characteristics: knowledge and experience in the Company’s industry, management experience, international business knowledge, expertise in accounting or financial analysis, and regulatory compliance expertise. When the Corporate Governance and Nominating Committee is considering current Board members for nomination for reelection, the committee also considers prior Board contributions and performance, as well as attendance records for Board and committee meetings.

Although the Company has no formal diversity policy, our Board of Directors values the contribution of diversity in achieving Company objectives and maintaining sound governance practices, as it brings together individuals with different skills and ideas from varying backgrounds and experiences to create balanced and thoughtful decision-making that best serves shareholder interests. Diversity refers to a broad array of individual characteristics that collectively enable the Board to operate effectively and fulfill its responsibilities. These characteristics include, among others, professional skills and qualifications, business experience, age, gender, race, ethnicity, and cultural background. The Board believes that such diversity provides varied perspectives that promote active and constructive dialogue among Board members and between the Board and management, resulting in more effective oversight, and should be taken into consideration by the Corporate Governance and Nominating Committee when considering director nominees.

The Corporate Governance and Nominating Committee may seek input from other members of the Board and management in identifying and attracting director candidates who meet the criteria outlined above. In addition, the committee may use the services of consultants or a search firm, although it has not done so in the past. Mr. Jones was identified by one of the Company's largest shareholders, 22NW, LP. Recommendations from shareholders for nominees to the Board of Directors will be considered by the Corporate Governance and Nominating Committee if made in writing addressed to the Company’s Secretary at the Company’s main office. In order to be considered, such recommendations must be received at least 60 days prior to the date of the meeting at which directors are to be elected. Submissions should include information regarding a candidate’s background, qualifications, experience, and willingness to serve as a director. Based on a preliminary assessment of a candidate’s qualifications, the Corporate Governance and Nominating Committee may conduct interviews with the candidate and request additional information from the candidate. The committee uses the same process for evaluating all nominees, including those recommended by shareholders.

Agreement with 22NW Fund, LP et. al

On June 17, 2024, (the “Effective Date”), the Company entered into a Cooperation Agreement (the “Cooperation Agreement”) with 22NW Fund, LP, 22NW LP, 22NW Fund GP, LLC, 22NW GP, Inc., Aron R. English, Bryson O. Hirai-Hadley, and Alexander B. Jones (each, an “Investor” and collectively the “Investors” or the “Investor Group”). Pursuant to the Cooperation Agreement, the Board, as of the Effective Date, increased the size of the Board from eight to nine directors and appointed, at the request and recommendation

of the Investor Group, Mr. Alexander B. Jones to fill the vacancy resulting from the increase in the size of the Board. In addition, Mr. Jones was appointed to each of the Audit Committee and the Compensation Committee of the Board, and the Board agreed to nominate Mr. Jones to stand for election to the Board at the 2024 Annual Meeting for a term expiring at the Company’s 2025 annual meeting of shareholders and until his successor is duly elected and qualified.

Under the Cooperation Agreement, the Investor Group agreed to certain standstill provisions with respect to its actions with regard to the Company for the duration of the Standstill Period, which commenced on the Effective Date and will end on the date that is the earlier of (i) thirty (30) calendar days prior to the expiration of the advance notice period for the submission by shareholders of director nominations (as set forth in the advance notice provisions of the Company’s bylaws, as amended) for consideration at the 2025 annual meeting of shareholders and (ii) ninety (90) calendar days prior to the first anniversary of the 2024 Annual Meeting (the “Standstill Period”). During the Standstill Period, the Investors and their affiliates and associates may not have beneficial ownership of more than 15% of the Company’s common stock outstanding or have a net long position in more than 15% of the Company’s common stock outstanding. The standstill provisions also include, among other things, restrictions with respect to nominating or recommending for nomination any persons for election to the Board, making any shareholder proposal to the Company or the Board or any committee thereof, soliciting any proxy or consents to vote securities of the Company in opposition to any recommendation or proposal of the Board and conducting any other referendum (including any “withhold” or similar campaign), except as expressly permitted by the Cooperation Agreement.

The Cooperation Agreement also requires the Investor Group, at the 2024 Annual Meeting and during the pendency of the Standstill Period, to take certain actions, including to vote, or cause to be voted, all shares of common stock beneficially owned by each member of the Investor Group and their respective affiliates and associates in favor of (i) each of the directors nominated by the Board and recommended by the Board in the election of directors (and not in favor of any other nominees to serve on the Board), and (ii) each of the shareholder proposals listed on the Company’s proxy card or voting instruction form as identified in the Company’s proxy statement in accordance with the Board’s recommendations, including in favor of all other matters recommended for shareholder approval by the Board; provided, however, that in the event that Institutional Shareholder Services Inc. (“ISS”) recommends otherwise with respect to any proposals (other than the election or removal of directors), each of the Investors shall be permitted to vote in accordance with the ISS recommendation; provided, further, that each of the Investors shall be permitted to vote in their sole discretion with respect to any publicly announced proposals relating to a merger, acquisition, disposition of all or substantially all of the assets of the Company, or other business combination involving the Company requiring a vote of shareholders of the Company.

Under the Cooperation Agreement, the Company agreed that Mr. Jones will receive (i) the same benefits of director and officer insurance, and any indemnity and exculpation arrangements available generally to the directors on the Board, (ii) the same compensation for his service as a director as the compensation received by other non-management directors on the Board with similar Board assignments, and (iii) such other benefits on the same basis as all other non-management directors on the Board. In the Cooperation Agreement, the Company and the Investors also agreed to customary confidentiality, non-disparagement, and other provisions and have made customary representations and warranties. The Company also agreed to reimburse the Investor Group for its reasonable and documented out of pocket fees and expenses in connection with its involvement at the Company in an amount not to exceed $15,000 in the aggregate.

BOARD COMMITTEES AND ATTENDANCE

There are four standing committees of the Board of Directors: Executive Committee, Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee. Each of the members of the Company’s Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee (and any director who served on such committees at any time during the fiscal year) has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) and is independent within the meaning of the director independence standards set forth in the regulations of the NYSE and the Company’s categorical standards of independence. Also, each of the members of our Audit Committee is “independent” for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934, and each of the members of our Compensation Committee is “independent” for purposes of Section 10C(a)(2) of the Securities Exchange Act of 1934. The written charters of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are available on our website at www.culp.com in the “Investor Relations/Governance” section.

Executive Committee

The Executive Committee may exercise the full authority of the Board of Directors when the Board is not in session, except for certain powers related to borrowing and electing certain officers, and other powers that may not lawfully be delegated to Board committees. Under current management practices, the Executive Committee exists mainly to act in place of the Board in cases where time constraints or other considerations make it impractical to convene a meeting of the entire Board or to obtain written consents from all Board members. The Executive Committee currently consists of Messrs. Saxon (Chair), Culp, and Jackson. The Executive Committee did not hold any formal meetings during fiscal 2024, and all significant management decisions requiring action by the Board of Directors were considered and acted upon by the full Board.

Audit Committee

The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the independent auditors of the Company, and must pre-approve all services provided to the Company by the independent auditors. The committee discusses and reviews in advance the scope and the fees of the annual audit and reviews the results thereof with the independent auditors. The auditors meet with the committee to discuss audit and financial reporting issues. The committee reviews the Company’s significant accounting policies, internal accounting controls, reports from the Company’s internal auditor, quarterly financial information releases, Quarterly Reports on Form 10-Q filed with the SEC, and the Annual Report on Form 10-K filed with the SEC. In addition, the committee reviews and approves all significant transactions between the Company and any related party, and it reviews the Company’s risk assessment and risk management policies.

The current members of the Audit Committee are Mr. Baugh (Chair), Mr. Davis, Ms. Decker, Ms. Gatling, Mr. Jackson, Mr. Jones, and Mr. Kelly. The Board of Directors has determined that all members of the Audit Committee are financially literate as defined by the rules of the NYSE. In addition, the Board has determined that Mr. Baugh, Ms. Decker, and Mr. Jackson each qualify as an “audit committee financial expert” for purposes of the rules and regulations of the SEC adopted pursuant to the Sarbanes-Oxley Act of 2002.

Compensation Committee

The Compensation Committee reviews the performance of the chief executive officer and determines the chief executive officer’s compensation after consulting with the Board of Directors. The Compensation Committee performs the same functions with regard to other executive officers after consulting with the chief executive officer. The committee also makes recommendations to the Board regarding incentive compensation plans and equity-based plans, and it administers the incentive compensation and equity-based plans after they are adopted. In performing its obligations, the Compensation Committee regularly meets with and consults with the chief executive officer, and occasionally other executive officers, to receive their recommendations regarding executive compensation (except as it relates to their own individual executive compensation levels).

In fiscal 2024, the Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) as a third-party advisor to provide advice, research, evaluation, and design services related to executive and non-employee director compensation. Pearl Meyer provided advice to the Compensation Committee on market trends and best practices in executive compensation, the structure and design of the Company’s compensation program, and the relationship between executive compensation and Company performance. Pearl Meyer has also assisted the Compensation Committee in defining the list of peer companies used to compare the Company’s pay practices and levels to those of other companies within our industry or related industries. During fiscal 2024, Pearl Meyer did not provide any services to the Company other than the assistance it provided to the Compensation Committee.

The committee’s charter does not address its ability to delegate its authority to others, and although it may have such power, in practice the Compensation Committee approves all final decisions regarding changes in the compensation of executive officers. The current members of this committee are Mr. Davis (Chair), Mr. Baugh, Ms. Decker, Ms. Gatling, Mr. Jackson, Mr. Jones, and Mr. Kelly.

Corporate Governance and Nominating Committee

The current members of the Corporate Governance and Nominating Committee are Ms. Decker (Chair), Mr. Baugh, Mr. Davis, Ms. Gatling, Mr. Jackson, and Mr. Kelly. The committee reviews and recommends to the Board candidates for appointment to fill vacancies on the Board as well as candidates for selection as director nominees for election by shareholders. The Corporate Governance and Nominating Committee also considers and makes recommendations to the Board on other matters relating to the size and function of the Board and its committees, to the Board’s policies and procedures, and to corporate governance policies applicable to the Company.

Attendance

During the fiscal year ended April 28, 2024, the Board of Directors had nine meetings; the Audit Committee had thirteen meetings; the Compensation Committee had six meetings; and the Corporate Governance and Nominating Committee had five meetings. Each Board member then on the Board attended at least 75% of the aggregate number of the meetings of the Board of Directors and of the committees on which he or she then served.

EXECUTIVE COMPENSATION

For fiscal 2024, the Company qualifies as a smaller reporting company under the SEC's definition of “smaller reporting company.” The Company has, nonetheless, opted to provide many of the compensation-related disclosures that are required for larger public companies and that the Company has historically provided. However, among other smaller reporting company accommodations, the Company is disclosing compensation for only three named executive officers (comprising (i) the Company’s principal executive officer, and (ii) the two most highly compensated executive officers other than the principal executive officer who were serving as executive officers as of April 28, 2024), consistent with the disclosure requirements applicable for smaller reporting companies.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis section is intended to give an overview of our compensation program and policies, the material compensation decisions we have made under our program and policies with respect to our named executive officers (our “NEOs”), and the material factors that we considered in making those decisions. The NEOs of the Company during fiscal 2024 were as follows:


Name		Title
Robert G. Culp, IV		President and Chief Executive Officer
Kenneth R. Bowling		Executive Vice President, Chief Financial Officer, and Treasurer
Thomas M. Bruno		President, Culp Home Fashions Division

The Compensation Committee of our Board of Directors (the “Committee”), which is made up solely of independent directors, leads and directs our executive compensation program. Additional details about the individual compensation of each NEO and the annual review of compensation for our NEOs is contained in the sections that follow, and this Compensation Discussion and Analysis should be read in connection with that information.

Executive Summary

The Committee adopted an executive compensation strategy statement for fiscal 2024, which provides that the primary purpose of the Company’s executive compensation program is to support growth in earnings, return on capital, free cash flow, balance sheet management, and shareholder value. The compensation structure adopted by the Committee for NEOs during the fiscal 2024 year sought to accomplish these goals by relying heavily on incentive-based compensation linked to the Company’s financial results, as opposed to fixed compensation, while also seeking to enhance the Company’s ability to retain key employees and align the long-term interests of senior management with those of our shareholders.

The Committee approved a new executive compensation philosophy in fiscal 2021 to begin positioning base salaries and target short-term and long-term incentive award opportunities for NEOs at or near market 50th percentile (or median) levels, as compared to the Company’s peer group, while continuing to place significant emphasis on variable pay to help align executive pay with performance and long-term shareholder value creation. Any changes in compensation opportunities to improve pay competitiveness were intended to be made through a series of adjustments over time, as warranted based on Company and individual performance. The first adjustment to base salaries was implemented in fiscal 2022, with base salaries for NEOs set at levels that were generally believed, based on a peer group benchmarking study undertaken in assessing fiscal 2022 compensation, to remain well below the 50th percentile market level compared to the Company’s fiscal 2022 peer group. The next step of this phased-in adjustment to pay positioning targets was intended to be implemented for fiscal 2023. However, near the end of fiscal 2022, in response to ongoing macroeconomic headwinds affecting the Company’s business, including continued disruption from the COVID-19 pandemic, weakness in the domestic mattress industry, ongoing inflationary pressures, and other macroeconomic pressures that were materially affecting the Company’s operations, the Company temporarily implemented a freeze on base salaries for most employees with base salaries over $150,000, including all of our NEOs, which freeze was maintained for NEOs throughout fiscal 2023. For fiscal 2024, based on ongoing macroeconomic uncertainty and market volatility, and in light of recent financial results, the Company again delayed any further implementation of adjusting executive pay to move towards these peer-median targets. Instead, executives other than the chief executive officer received modest (4%) base salary merit increases, based on individual performance. The chief executive officer requested to continue the salary-freeze already in place for him in fiscal 2024, in light of recent financial results for the Company that were below expectations.

Beyond base salaries, NEOs also had the opportunity to earn additional compensation under the fiscal 2024 executive compensation program through short-term and long-term incentive plans that could result in compensation at, above, or below targeted levels based on actual versus targeted performance results as well as continued service through the applicable award vesting periods for time-based awards.

Short-term (annual) incentive compensation for fiscal 2024 tied award opportunities to measures of operating performance, cash flow, and revenue in order to focus participants on profitability, top line sales growth, cash generation and balance sheet management during a time of continued uncertainty due to industry and macroeconomic challenges. For fiscal 2024, award opportunities were tied to measures of annual adjusted operating income (loss), adjusted operating cash flow, and net sales, with a weighting of 60% for adjusted annual operating income (loss), 20% for adjusted operating cash flow, and 20% for net sales, in each case, of the applicable reporting unit. For executive officers in the executive shared services reporting unit (which includes corporate senior officers and managers), these measures are of the entire Company on a consolidated basis. For executives in our two divisional reporting units (upholstery fabrics and mattress fabrics), these measures are of such executive officer's respective unit. Any earned award for the adjusted operating cash flow and net sales components was subject to a downward adjustment of 40% if the adjusted operating income (loss) was below the threshold level for the applicable reporting unit, and no bonus could be earned for any component if the adjusted operating income (loss) was significantly below the threshold level set for the applicable reporting unit. The target goals for each metric were generally set above the Company's internal annual operating plan budgets for each applicable reporting unit and, in the case of the adjusted operating income and net sales components, required significant year-over-year improvement in order to receive a target payout. As such, the performance hurdles for each reporting unit were considered to be very challenging in light of business conditions and expectations.

The practice of granting long-term incentive equity awards was continued for fiscal 2024. The Committee again granted a combination of performance-based and time-based restricted stock units in fiscal 2024, which vest three years after the date of grant if the participant meets the applicable performance and continued service requirements. Grants to all NEO participants under the plan consisted of one-half performance-based units and one-half time-based units, except that the grant for the chief executive officer was 75% performance-based and 25% time-based. The Committee implemented this structure to align pay with longer-term Company performance success, and also to continue our focus of aligning the long-term interest of senior management with those of our shareholders and retaining key executive talent during a very challenging business and macroeconomic environment. The vesting conditions for the performance-based units are based on the applicable reporting unit's adjusted operating income goals identified for three discreet one-year periods, with all goals set at the time of grant and each measurement period equally weighted, and with any earned awards subject to adjustment by up to +/- 25% based on the Company’s three-year relative total shareholder return performance as compared to the Company’s peer group, as described in detail below. Additionally, no performance-based units will vest unless the cumulative three-year adjusted operating income is positive for the applicable reporting unit. As was the case with the fiscal 2024 annual cash incentive program, performance hurdles for performance-based restricted stock awards were stretch goals set at levels considered to be very challenging for each of the three discreet one-year periods.

In addition to these major elements of executive compensation, the Company provided a limited selection of additional benefits and perquisites to NEOs during fiscal 2024.

The Company also conducted extensive shareholder outreach during fiscal 2024 in response to the relatively low level of support we received for our Say-on-Pay Vote at the 2023 annual meeting of shareholders (a 67.6% approval rate, which was well below our historical support levels). All discussions were led by the Chair of our Compensation Committee, along with certain members of management also participating. After considering feedback from these discussions, the Compensation Committee approved certain changes to the Company's industry peer group composition used for market benchmarking, as well as certain changes to the executive compensation program design for fiscal 2025. For example, NEOs and other executive officers will only receive performance-based equity grants in fiscal 2025, with vesting tied to three-year cumulative adjusted operating income (loss) goals. The executive compensation program will continue to place primary emphasis on variable incentives tied to challenging goals to align NEO pay with performance outcomes and shareholder interests, with no base salary increases currently anticipated in fiscal 2025 for NEOs. Additional details are included in the Compensation Discussion and Analysis section of this Proxy Statement under the heading "Shareholder Engagement and Executive Compensation Program Changes for Fiscal 2025."

Company Performance Highlights and Effects on Compensation

segment delivered consistent and significantly improved operating profits under tough industry conditions during fiscal 2024, and also performed well with respect to cash generation for the year.

The combination of stretch goals, challenging market conditions, and significantly improved operating performance for the Company overall and for the upholstery fabrics segment in fiscal 2024, as compared to fiscal 2023, led to partial, below-target annual incentive bonus awards for NEOs and other participants within our executive shared services and upholstery fabric reporting units. Participants in our executive shared services reporting unit earned bonus payments between threshold and target levels for the adjusted operating income (loss) measure and no awards for the adjusted operating cash flow and net sales measures due to below-threshold results, with payouts equal to 21% of total target award opportunities for Mr. Culp and Mr. Bowling, well below awards earned for fiscal 2023. Participants in our upholstery fabrics segment earned bonus payments between threshold and target levels for the adjusted operating income (loss) measure; target payouts for the adjusted cash flow measure; and no award for the net sales measure. No annual incentive compensation award was earned for Mr. Bruno or other participants within our mattress fabrics reporting unit due to below threshold performance results across all three metrics for that unit.

Notably, in evaluating these results, the Compensation Committee did not alter or adjust the performance targets originally set under the fiscal 2024 annual incentive plan to favorably benefit any participants, despite greater-than-expected macro headwinds faced by the Company during the year.

Additional details about the fiscal 2024 annual incentive plan and performance thereunder are discussed later in this Compensation Discussion and Analysis section under the heading “Annual Incentive Plan.

Long term equity incentive awards that were granted under the fiscal 2022 long term incentive compensation plan (“LTIP”) for the three-year period ending following completion of the fiscal 2024 year consisted solely of performance-based restricted stock unit ("RSU") awards for our chief executive officer and a mix of one-half performance-based RSU awards and one-half time-based stock awards for all other executive officers. For each reporting unit, cumulative adjusted operating income over the three-year performance period for the applicable reporting unit was the metric for the performance-based RSUs, with award opportunities ranging from 0% to 200% of target grants. Any earned performance-based RSUs from the fiscal 2022 grants to executive officers were subject to an upward or downward adjustment of up to 25%, based on the Company’s total shareholder return (“TSR”) for the three-year period ending in fiscal 2024, as compared to companies in the Company’s fiscal 2022 peer group. Operating results during this three-year performance period were below the threshold performance level for these awards primarily due to a slowdown in demand for home furnishings, softer home sales, reduced discretionary spending on consumer durables, inflation concerns, general economic uncertainty, and other macroeconomic conditions. Despite the significant and greater than expected headwinds during each of fiscal 2022, fiscal 2023, and fiscal 2024, the Committee did not alter or adjust the previously set levels of operating income (loss) over the three-year performance period. As such, three-year cumulative operating income (loss) was below the applicable threshold performance level for all three of the Company's reporting units, with no performance-based RSUs from the fiscal 2022 grant being earned by any participants.

Additional details about the Company’s long-term incentive plan, including information with respect to long-term incentive awards granted in fiscal 2024, and information relating to long-term incentive awards granted in fiscal 2022 that would have vested during fiscal 2024 if performance metrics for those awards were achieved, are discussed later in this Compensation Discussion and Analysis section under the heading “Long-Term Incentive Awards.”

The Committee determined that fiscal 2024 pay levels for executive officers were appropriate, aligned with our strategic objectives, and consistent with our pay-for-performance philosophy. This determination was based on the Committee’s primary focus on profitability, top line sales growth, cash generation, and balance sheet management during fiscal 2024; the significant year-over-year improvement in operating performance for both the upholstery fabrics reporting unit and the executive shared services reporting unit; the generation of solid operating cash flow by the upholstery fabrics reporting unit; and also taking into account that:

•

no executive officers received salary increases during fiscal 2023, and executive officers (other than the Company's chief executive officer) only received modest (4%) merit-based salary increases in fiscal 2024;

•

the Company's chief executive officer did not receive a salary increase in fiscal 2023 or fiscal 2024;

•

executive officer base salaries in fiscal 2024 were generally believed to be well below the 50th percentile market level compared to the Company’s peer group;

•

adjusted operating income, adjusted operating cash flow, and net sales targets for each reporting unit for the fiscal 2024 annual incentive program were set at levels considered to be very challenging, generally requiring significant year-over-year improvement and/or performance above the Company's internal annual operating plan budgets for each reporting unit to achieve a target payout;

•

no executive officers earned any performance-based shares under the fiscal 2022 LTIP program;

•

no NEOs are currently expected to earn any performance-based shares under the fiscal 2023 or fiscal 2024 LTIP programs; and

•

no increases in base salary are currently anticipated for executive officers in fiscal 2025.

Overview and Objective –Compensation Strategy

The primary purpose of our executive compensation program is to reinforce key business and strategic objectives in support of long-term value creation. We believe the best way to accomplish this purpose was to focus the fiscal 2024 program on these objectives:

•

Embracing a pay-for-results philosophy. Total pay is aligned with Company performance success through the use of management incentives;

•

Attracting and retaining management with the knowledge, skills, and ability to lead the Company successfully;

•

Fairly compensating management for their service to our Company, which in turn helps to retain and motivate them; and

•

Aligning the long-term interests of senior management with those of our shareholders by providing at least half of long-term incentive award opportunities in the form of performance-based restricted stock units tied to challenging goals for each of three discreet one-year performance periods, with any earned awards paid in stock and subject to adjustment based on (i) the cumulative three-year adjusted operating income of the applicable reporting unit, and (ii) the Company’s three-year total shareholder return relative to industry peers.

As described below under “—Compensation Elements—Position Relative to Market and Peer Comparison Group,” and “—Compensation Elements—Base Salary,” in response to ongoing macroeconomic headwinds and financial results, in fiscal 2024 the Committee again delayed its prior plan to position base salaries and target short-and long-term award opportunities at or near market median levels, as a result of ongoing macroeconomic uncertainty and market volatility, and in light of the Company’s financial results. Instead, executives other than the chief executive officer received modest (4%) merit increases in fiscal 2024, based on individual performance. The chief executive officer requested to continue the salary-freeze already in place for him in fiscal 2024, in light of recent financial results for the Company that were below expectations. Based on these considerations, our executive compensation program for fiscal 2024 generally comprised:

•

Setting base salaries at levels generally believed to be well below the 50th percentile market level compared to the Company’s fiscal 2024 peer group;

•

Setting challenging financial targets for annual incentives, generally requiring significant year-over-year improvement or performance above the Company's internal annual operating plan budgets for each reporting unit to achieve a target payout, despite ongoing economic headwinds;

•

Setting challenging performance goals for the fiscal 2024 long term incentive program, which require significant improvements in profitability versus actual results for both fiscal 2023 and for each discreet one-year period within the three-year award period (i.e., significant improvement in profitability is required for fiscal 2024 as compared to fiscal 2023, for fiscal 2025 as compared to fiscal 2024, and for fiscal 2026 as compared to fiscal 2025, in order to accrue a target payout for the applicable year); and

•

Using a combination of performance-based and time-based awards for long-term incentives in order to align executive pay with the Company’s longer-term success and shareholder interests, while incentivizing our key employees to remain with the Company.

Our corporate culture and compensation philosophy call for rewarding successful results, rather than effort, through performance-leveraged and variable incentives. Our compensation program for fiscal 2024 was intended to support the following:

•

continuing to be a market leader in product innovation in our industry;

•

not making any changes to performance goals for outstanding short-term and long-term incentive awards, despite significant industry and macroeconomic headwinds;

•

a planned and disciplined approach to managing our business and the utilization of capital;

•

maintaining a strong focus on increasing earnings, return on capital, cash generation, balance sheet management, and shareholder returns;

•

prudent/calculated risk taking;

•

providing only very limited perquisites;

•

being more team-oriented than individual accountability oriented;

•

decision making that is decentralized as pertains to sales, marketing, and operations, and centralized as pertains to strategic matters; and

•

a balanced perspective between short-term and long-term incentives and goals.

Compensation Elements

The overall compensation program for fiscal 2024 consisted of base salary, annual incentives, long-term incentives, and benefits. These benefits included a 401(k) plan, health and other welfare benefits, supplemental non-qualified deferred compensation, and limited perquisites such as an auto allowance and voluntary participation for certain executive officers, including NEOs, in an executive health program. Certain executive officers also participated in a severance protection plan. Further details about the elements of our compensation program for fiscal 2024 are set forth on the following pages.


Element	Form of compensation	Purpose	Performance criteria
Base salary	Cash	Providing a competitive level of fixed compensation that appropriately balances the need to be market competitive and the need to control fixed costs	Not performance-based, but individual performance is considered for merit increases

Annual incentive bonus	Cash	Creating an incentive for executive officers to direct their efforts toward achieving specified Company financial goals	Tied to measures of adjusted operating income (loss) (60% weighting), adjusted operating cash flow (20% weighting), and net sales 20% weighting) for each reporting unit, subject to a negative moderator of 40% in the event adjusted operating income (loss) for the applicable reporting unit falls below threshold level. No bonus earned in the event adjusted operating income (loss) for the applicable reporting unit falls significantly below threshold level.

Long-term incentive awards	Performance-based restricted stock units and time-based restricted stock units

SEC Form DEF 14A filed by Culp Inc.