Company: CULP
Filing Date: 2025-03-07
Form Type: 10-Q
Source: 0000950170-25-035191
Chunk: 101

Company: CULP INC
Filing Date: 2025-03-07
Form: 10-Q
Item: Item 2
Chunk 101
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's local currency.

Income Taxes

Effective Income Tax Rate

We recorded income tax expense of $635,000, or (3.9%) of loss before income taxes, for the nine-month period ended January 26, 2025, compared with income tax expense of $2.2 million, or (33.4%) of loss before income taxes, for the nine-month period ended January 28, 2024. 

Our effective income tax rates for the nine-month periods ended January 26, 2025, and January 28, 2024, were based upon the estimated effective income tax rate applicable for the full year after giving effect to any significant items related specifically to interim periods. When calculating the annual estimated effective income tax rates for the nine-month periods ended January 26, 2025, and January 28, 2024, we were subject to loss limitation rules. These loss limitation rules require any taxable loss associated with our U.S. or foreign operations to be excluded from the annual estimated effective income tax rate calculation if it was determined that no income tax benefit could be recognized during the current fiscal year. The effective income tax rate can be affected over the fiscal year by the mix 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.

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.