Company: CULP
Filing Date: 2025-08-15
Form Type: DEF 14A
Source: 0000950170-25-109242
Chunk: 47

Company: CULP INC
Filing Date: 2025-08-15
Form: DEF 14A
Chunk 47
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5 as such reporting unit's cash from earnings (which includes and is calculated using the calculation of adjusted operating income (loss) under the annual incentive plan for such reporting unit), plus or minus cash flow from working capital for the division, plus proceeds from the sale of equipment for the division, as calculated and reported on the reporting unit's financial statements.

Net sales was defined as net sales for the applicable reporting unit as calculated and recorded on the Company's financial statements.

The Committee established three measurement levels—threshold, target, and maximum—for annual adjusted operating income (loss), adjusted operating cash flow, and net sales for each reporting unit under the fiscal 2025 annual cash incentive plan, as well as corresponding award funding opportunities. For fiscal 2025, award funding could range from 20% of target levels at threshold performance, and up to 200% of target levels for superior results, with payouts in between designated levels determined using straight-line interpolation, and no awards earned for below-threshold performance results. Consistent with the program in prior years, the annual incentive bonuses earned under the plan, if any, were to be paid in cash.

In developing the performance targets for the fiscal 2025 annual incentive program, the Committee carefully evaluated then-current and expected business conditions, as well as historical consolidated and divisional performance. Critical factors, such as then-current demand trends for furniture and bedding, as well as macroeconomic trends in the overall global economy, were also considered in setting

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the performance levels. The target goals for the applicable performance metrics for each reporting unit (adjusted operating income (loss), adjusted operating cash flow, and net sales) were set above the Company's internal annual operating plan budgets and required year-over-year improvement for each reporting unit to achieve a target payout. As such, the performance hurdles for each reporting unit were considered to be challenging in light of business conditions and expectations. Once approved by the Committee, these performance levels were not changed or adjusted during the year, despite greater-than-expected industry and macro headwinds faced by the Company during the year. Despite the significant cost structure and operating improvements achieved by the Company during fiscal 2025, the combination of stretch goals and challenging market conditions resulted in none of the minimum performance thresholds for the adjusted operating income (loss), adjusted operating cash flow or net sales measures being met by any of our reporting units for fiscal 2025. As a result of this below-threshold performance across all metrics and reporting units, there were no annual incentive