Company: CULP
Filing Date: 2025-03-07
Form Type: 10-Q
Source: 0000950170-25-035191
Chunk: 31

Company: CULP INC
Filing Date: 2025-03-07
Form: 10-Q
Item: Item 1
Chunk 31
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 and timing of actual earnings from our U.S. operations and foreign subsidiaries located in China, Canada, Haiti, and Vietnam versus annual projections, as well as changes in foreign currency exchange rates in relation to the U.S. dollar.

I-25

The following schedule summarizes the principal differences between income tax expense at the U.S. federal income tax rate and the effective income tax rate reflected in the consolidated financial statements for the nine-month periods ended January 26, 2025, and January 28, 2024: 

        January 26,

        January 28,

        2025

        2024

        U.S. federal income tax rate

        21.0
        %

        21.0
        %

        U.S. valuation allowance

        (26.2
        )

        (42.0
        )

        Tax effects of local currency foreign exchange gain

        0.7

        3.8

        Uncertain income tax positions

        4.3

        (0.1
        )

        Withholding taxes associated with foreign jurisdictions

        (1.5
        )

        (8.1
        )

        Captial expenditure deduction - Quebec Canada

        (1.1
        )

        —

        Foreign income tax rate differential

        (0.8
        )

        (5.2
        )

        Stock-based compensation

        (0.4
        )

        (2.9
        )

        Other

        0.1

        0.1

        (3.9)%

        (33.4)%

        Our consolidated effective income tax rates for the first nine months of fiscal 2025 and 2024 were both adversely affected by the mix of earnings between our U.S. operations and foreign subsidiaries, as our taxable income stems mostly from our operations located in China, which has a higher income tax rate than the U.S. In addition, during the first nine months of fiscal 2025 and the first nine months of 2024, we incurred pre-tax losses associated with our U.S. operations for which an income tax benefit was not recorded due to a full valuation allowance applied against our U.S. net deferred income tax assets. The income tax charge associated with the full valuation allowance applied against our U.S. net deferred income tax assets was higher during the first nine months of fiscal 2025 compared with the first nine months of fiscal 2024, as our $(