Company: CULP
Filing Date: 2025-03-07
Form Type: 10-Q
Source: 0000950170-25-035191
Chunk: 84

Company: CULP INC
Filing Date: 2025-03-07
Form: 10-Q
Item: Item 2
Chunk 84
---
 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 $(16.8) million U.S. pre-tax loss incurred during the first nine months of fiscal 2025 was greater than the $(11.3) million U.S. pre-tax loss incurred during the first nine months of fiscal 2024.

During the first nine months of fiscal 2025, we incurred a greater consolidated pre-tax loss totaling $(16.4) million compared with $(6.7) million during the first nine months of fiscal 2024. As a result, 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 were more pronounced during the first nine months of fiscal 2024, as compared with the first nine months of fiscal 2025.

Refer to Note 15 of the consolidated financial statements for further details regarding our provision for income taxes.

Liquidity

As of January 26, 2025, our cash and cash equivalents (collectively, “cash”) totaled $5.3 million, which represents a decrease of $4.7 million compared with cash of $10.0 million as of April 28, 2024. This decrease was primarily attributable to (i) net cash used in operating activities totaling $9.4 million, and (ii) capital expenditures totaling $2.4 million, partially offset by (iii) net borrowings from our lines of credit totaling $5.4 million and (iv) proceeds from the sale of equipment of $1.5 million.

Our net cash used in operating activities was $9.4 million during the first nine months of fiscal 2025, an increase of $3.4 million compared with net cash used in operating activities of $6.0 million during the first nine months of fiscal 2024. This trend mostly reflects (i) a significant decrease in cash earnings, (ii) an increase in inventory purchases to maintain an appropriate level during the company's restructuring activities,