4. Revenue from Contracts with Customers

Nature of Performance Obligations

Our operations are classified into two business segments: bedding (formerly known as mattress fabrics) and upholstery (formerly known as upholstery fabrics). The bedding segment manufactures, sources, and sells fabrics and mattress covers primarily to bedding manufacturers. The upholstery segment develops, sources, manufactures, and sells fabrics primarily to residential, commercial, and hospitality furniture manufacturers.

In addition, the upholstery segment includes Read Window Products LLC (“Read”), a wholly owned subsidiary with operations located in Knoxville, Tennessee, that provides window treatments and sourcing of upholstery fabrics and other products, as well as related measuring and installation services to customers in the hospitality and commercial markets. Read also supplies soft goods such as decorative top sheets, coverlets, duvet covers, bed skirts, bolsters, and pillows. On April 24, 2025 (fourth quarter of fiscal 2025), the company announced a strategic transformation of its operating model that will combine certain activities within the bedding and upholstery business segments and create one integrated Culp-branded business. As part of this strategic transformation, we will close our leased facilities operated by our upholstery segment located in Burlington, North Carolina and Knoxville, Tennessee and will transition their production and distribution activities utilizing a shared management model within our owned facility located in Stokesdale, North Carolina. See note 10 of the consolidated financial statements for further details regarding this strategic transformation initiative.

Our primary performance obligations include the sale of bedding and upholstery products, as well as the performance of customized fabrication and installation services associated with window treatments.

Contract Assets & Liabilities

Certain contracts relating to customized fabrication and installation services associated with Read require upfront customer deposits that result in a contract liability which is recorded in the Consolidated Balance Sheets as deferred revenue. Revenue on contract liabilities associated with customized fabrication and installation services is generally recognized within one year, as the satisfaction of performance obligations are generally one year or less. If upfront deposits or prepayments are not required, customers may be granted terms that generally range from 15 to 60 days. Our terms are customary within the industries in which we operate and are not considered financing arrangements.

There were no contract assets recognized as of August 3, 2025, July 28, 2024, or April 27, 2025.

As of August 3, 2025, deferred revenue of $485,000 pertained to (i) upfront customer deposits associated with customized fabrication and installation services related to Read totaling $422,000, and (ii) an upfront license fee paid to us for the licensing of a certain trademark to be used by an upholstery customer totaling $63,000. As of July 28, 2024, deferred revenue of $1.6 million pertained to (i) upfront customer deposits associated with customized fabrication and installation services relating to Read totaling $1.5 million, and (ii) an upfront license fee paid to us for the licensing of a certain trademark to be used by an upholstery customer totaling $146,000.

Revenue recognized during the three-month periods ended August 3, 2025, and July 28, 2024, that was included in the deferred revenue balance at the beginning of each period was $437,000 and $595,000, respectively.

Disaggregation of Revenue