Company: CULP
Filing Date: 2025-03-07
Form Type: 10-Q
Source: 0000950170-25-035191
Chunk: 100

Company: CULP INC
Filing Date: 2025-03-07
Form: 10-Q
Item: Item 2
Chunk 100
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 restructuring activities described in the section titled "- Segment Analysis-Mattress Fabrics Segment-Restructuring Activities"; and (iii) lower professional and consulting fees.  

Interest Expense

Interest expense mostly represents our borrowings totaling $5.4 million under our lines of credit agreement associated with our operations located in China.

Interest Income

The decreases in interest income are due to lower average cash balances during the third quarter and first nine months of fiscal 2025, compared with the third quarter and first nine months of fiscal 2024.

I-43

Other (Income) Expense

Management is required to assess certain economic factors to determine the currency of the primary economic environment in which our foreign subsidiaries operate. Based on our assessments, the U.S. dollar was determined to be the functional currency of our operations located in China, Canada, and Vietnam.

The change in other income (expense) during the third quarter and first nine months of fiscal 2025, compared with prior-year periods, were due mostly to changes in the foreign currency exchange rates applied against our balance sheet accounts denominated in Chinese Renminbi to determine the corresponding U.S. dollar financial reporting amounts. During the third quarter of fiscal 2025, we reported a foreign currency exchange gain associated with our operations located in China totaling $305,000, compared with a foreign currency exchange loss of $(290,000) during the third quarter of fiscal 2024. During the first nine months of fiscal 2025, we reported a foreign currency exchange gain associated with our operations located in China totaling $74,000, compared with a foreign currency exchange gain of $389,000 during the first nine months of fiscal 2024.

The $74,000 foreign currency exchange gain related to our operations in China was mostly non-cash and was partially offset by $23,000 of income tax expense, which will increase our income tax payments and withholding tax payments associated with future earnings and profits repatriated from our operations located in China to the company's U.S. parent. The income tax expense of $23,000 was associated with taxable foreign currency exchange gains based on more favorable foreign currency exchange rates applied against balance sheet accounts denominated in U.S. dollars to determine the corresponding Chinese Renminbi local currency amounts. The foreign currency exchange rate gains (losses) related to our U.S. dollar denominated balance sheet accounts associated with our operations located in China are considered taxable income or tax deductible, as we incur income tax expense (benefit)  and pay income taxes in China