Company: CULP
Filing Date: 2025-03-07
Form Type: 10-Q
Source: 0000950170-25-035191
Chunk: 73

Company: CULP INC
Filing Date: 2025-03-07
Form: 10-Q
Item: Item 1
Chunk 73
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 raw material costs, utility/energy costs, and general economic inflation could have a material adverse impact on the company because competitive conditions may limit our ability to pass significant operating cost increases on to customers. 

During fiscal 2024 and continuing through the third quarter of fiscal 2025, raw material costs started to decline due to slowing global demand; however, the cost of labor remained challenging during fiscal 2024 and continuing through the third quarter of fiscal 2025.    

Inflationary pressures also affected consumer spending during fiscal 2024 and continuing through the third quarter of fiscal 2025, causing a slowdown in business in both the mattress industry and the residential home furnishings industry. This slowdown has caused reduced demand from producers of home furnishings for our mattress fabrics and residential upholstery fabrics products during fiscal 2024 and continuing through the third quarter of fiscal 2025. 

We are unable to predict how long these trends will last, or to what extent inflationary pressures may affect the economic and purchasing cycle for home furnishing products (and therefore affect demand for our products) over the short and long term.  

I-49

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rates

We are exposed to market risk from changes in interest rates on our revolving credit agreements.

Effective January 19, 2023, we entered into a second amended and restated U.S. revolving credit agreement (the "Amended Agreement") to establish an asset-based revolving credit facility that required interest to be charged at a rate calculated using an applicable margin over the Federal Reserve Bank of New York's secured overnight fund rate (SOFR), as defined in the Amended Agreement. The interest rate under the Amended Agreement as of January 26, 2025, was 5.8%. As of January 26, 2025, there were no outstanding borrowings under the Amended Agreement.

Effective March 20, 2024, we entered into an unsecured credit agreement with a financial institution in China denominated in RMB that requires interest to be charged at a rate based on the Loan Prime Rate ("LPR") in China minus 50 basis points at the time of borrowing, which represents 2.95%. There were outstanding borrowings under this agreement totaling $4.0 million as of January 26, 2025.

On November 5, 2024, we entered into an unsecured credit agreement with another financial institution in China denominated in R