Disciplined cost control measures and reduced
capital expenditures aided cash generation
Business remains well positioned for apparel
demand recovery
Unifi, Inc. (NYSE: UFI) (together with its consolidated
subsidiaries, “UNIFI”), makers of REPREVE and one of the world’s
leading innovators in recycled and synthetic yarns, today released
operating results for the first fiscal quarter ended October 1,
2023.
First Quarter Fiscal 2024
Overview
- Operating activities provided cash of $7.1 million and,
primarily in combination with lower capital expenditure levels,
generated a $4.6 million increase in cash.
- Debt principal was $141.5 million and Net Debt was $90.0
million at October 1, 2023, compared to $140.9 million of debt
principal and Net Debt of $93.9 million at July 2, 2023.
- Net sales were $138.8 million, a decrease of 22.7% from the
first quarter of fiscal 2023, primarily due to weak apparel demand
from brands and retailers.
- Revenues from REPREVE Fiber products were $42.5 million and
represented 31% of net sales, a sequential-quarter and
year-over-year increase as a percentage of net sales.
- Gross loss was $0.6 million, gross margin was (0.4)%, and each
was adversely impacted by lower apparel demand.
- Net loss was $13.3 million, or ($0.73) per share. Adjusted
EBITDA was ($4.8) million.
Adjusted EBITDA and Net Debt are non-GAAP
financial measures. The schedules included in this press release
reconcile each non-GAAP financial measure to its most directly
comparable GAAP financial measure.
Eddie Ingle, Chief Executive Officer of Unifi, Inc. said, “Our
performance in the first quarter of fiscal 2024 reflects a
continuation of the weak demand and depressed ordering patterns
impacting the apparel industry and its supply chains. Given the
current challenges facing the industry, our customers have
continued to take a cautious approach to placing new orders as they
work through existing inventory levels and monitor consumer
activity. Such inventory appears to be approaching pre-pandemic
levels, giving us confidence that we may soon experience improved
order flow. Despite the difficult environment, our disciplined cost
control measures enabled us to generate solid cash flows during the
quarter and reduce net debt."
Ingle continued, "We are encouraged by several opportunities to
further diversify the business beyond apparel and leverage the
market share gains in North America that we expect to see in the
next few quarters. We will continue to manage our operations
diligently and proactively maintain a healthy balance sheet so that
our business is well-positioned to rebound quickly when the apparel
demand environment normalizes.”
First Quarter Fiscal 2024 Compared to
First Quarter Fiscal 2023
Net sales decreased to $138.8 million, from $179.5 million,
primarily due to weak fiber demand for apparel driving a less
favorable sales mix and lower average selling prices. The Company
continues to experience sales volume declines as a result of
inventory de-stocking and cautious ordering patterns by apparel
brands and retailers. Such volume declines are accompanied by lower
average selling prices, in part due to lower raw material
costs.
Gross loss was $0.6 million compared to gross profit of $6.6
million. Americas Segment gross loss increased $2.5 million,
primarily as a result of lower fiber sales volumes driving weaker
productivity and cost absorption. Brazil Segment gross profit
decreased $4.6 million due to selling price pressures from foreign
imports, most of which are sourced from China where lower demand
has led to lower pricing. The gross margin for the Asia Segment
improved by 290 basis points due to a rich mix of REPREVE products,
which led to comparatively flat gross profit for the Asia
Segment.
Operating loss was $12.0 million compared to $4.7 million,
following the decrease in gross profit. Net loss was $13.3 million
compared to $7.8 million. EPS was ($0.73) and Adjusted EBITDA was
($4.8) million, compared to ($0.44) and $2.3 million,
respectively.
Operating activities provided cash of $7.1 million compared to
using ($5.9) million. Accordingly, diligent cost, working capital,
and spend management allowed a reduction in Net Debt to $90.0
million on October 1, 2023 from $93.9 million on July 2, 2023.
Second Quarter Fiscal 2024
Outlook
UNIFI expects second quarter fiscal 2024 net sales, Adjusted
EBITDA, and capital expenditures to be generally consistent with
first quarter fiscal 2024 results, and the effective tax rate is
expected to demonstrate continued volatility.
Ingle concluded, "While the pace of recovery across our business
and the apparel industry has been slower than we anticipated, we
are encouraged by the progress made with our beyond apparel
strategic initiatives. The conversations we are having with
customers are promising and we anticipate that calendar 2024 will
bring an improved demand environment. As the leading global
supplier of sustainable fibers, we remain optimistic about our
long-term growth prospects, underscored by our team’s ability to
drive innovation, grow the REPREVE brand, and increase market
share."
First Quarter Fiscal 2024 Earnings
Conference Call
UNIFI will provide additional commentary regarding its first
quarter 2024 results and other developments during its earnings
conference call on November 2, 2023, at 9:00 a.m., Eastern Time.
The call can be accessed via a live audio webcast on UNIFI’s
website at http://investor.unifi.com. Additional supporting
materials and information related to the call will also be
available on UNIFI’s website.
###
About UNIFI
Unifi, Inc. (NYSE: UFI) is a global textile solutions provider
and one of the world's leading innovators in manufacturing
synthetic and recycled performance fibers. Through REPREVE, one of
UNIFI's proprietary technologies and the global leader in branded
recycled performance fibers, UNIFI has transformed more than 35
billion plastic bottles into recycled fiber for new apparel,
footwear, home goods, and other consumer products. UNIFI
continually innovates technologies to meet consumer needs in
moisture management, thermal regulation, antimicrobial protection,
UV protection, stretch, water resistance, and enhanced softness.
UNIFI collaborates with many of the world's most influential brands
in the sports apparel, fashion, home, automotive, and other
industries. For more information about UNIFI, visit
www.unifi.com.
Financial Statements, Business Segment
Information and Reconciliations of Reported Results to Adjusted
Results to Follow
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per
share amounts)
For the Three Months
Ended
October 1, 2023
October 2, 2022
Net sales
$
138,844
$
179,519
Cost of sales
139,419
172,956
Gross (loss) profit
(575
)
6,563
Selling, general and administrative
expenses
11,609
11,773
(Benefit) provision for bad debts
(209
)
174
Other operating expense (income), net
54
(689
)
Operating loss
(12,029
)
(4,695
)
Interest income
(581
)
(547
)
Interest expense
2,485
1,247
Equity in earnings of unconsolidated
affiliates
(200
)
(295
)
Loss before income taxes
(13,733
)
(5,100
)
(Benefit) provision for income taxes
(463
)
2,734
Net loss
$
(13,270
)
$
(7,834
)
Net loss per common share:
Basic
$
(0.73
)
$
(0.44
)
Diluted
$
(0.73
)
$
(0.44
)
Weighted average common shares
outstanding:
Basic
18,084
18,001
Diluted
18,084
18,001
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands)
October 1, 2023
July 2, 2023
ASSETS
Cash and cash equivalents
$
51,515
$
46,960
Receivables, net
78,706
83,725
Inventories
136,092
150,810
Income taxes receivable
1,592
238
Other current assets
9,419
12,327
Total current assets
277,324
294,060
Property, plant and equipment, net
212,634
218,521
Operating lease assets
7,576
7,791
Deferred income taxes
4,094
3,939
Other non-current assets
14,633
14,508
Total assets
$
516,261
$
538,819
LIABILITIES AND SHAREHOLDERS’
EQUITY
Accounts payable
$
37,064
$
44,455
Income taxes payable
996
789
Current operating lease liabilities
1,885
1,813
Current portion of long-term debt
12,323
12,006
Other current liabilities
16,443
12,932
Total current liabilities
68,711
71,995
Long-term debt
128,890
128,604
Non-current operating lease
liabilities
5,842
6,146
Deferred income taxes
2,999
3,364
Other long-term liabilities
4,790
5,100
Total liabilities
211,232
215,209
Commitments and contingencies
Common stock
1,808
1,808
Capital in excess of par value
69,130
68,901
Retained earnings
293,522
306,792
Accumulated other comprehensive loss
(59,431
)
(53,891
)
Total shareholders’ equity
305,029
323,610
Total liabilities and shareholders’
equity
$
516,261
$
538,819
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Three Months
Ended
October 1, 2023
October 2, 2022
Cash and cash equivalents at beginning of
period
$
46,960
$
53,290
Operating activities:
Net loss
(13,270
)
(7,834
)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Equity in earnings of unconsolidated
affiliates
(200
)
(295
)
Depreciation and amortization expense
7,026
6,740
Non-cash compensation expense
212
633
Deferred income taxes
(679
)
(373
)
Other, net
(62
)
324
Changes in assets and liabilities
14,092
(5,087
)
Net cash provided (used) by operating
activities
7,119
(5,892
)
Investing activities:
Capital expenditures
(2,937
)
(11,198
)
Other, net
457
(222
)
Net cash used by investing activities
(2,480
)
(11,420
)
Financing activities:
Proceeds from long-term debt
31,100
67,949
Payments on long-term debt
(30,513
)
(55,236
)
Other, net
17
—
Net cash provided by financing
activities
604
12,713
Effect of exchange rate changes on cash
and cash equivalents
(688
)
(1,491
)
Net increase (decrease) in cash and cash
equivalents
4,555
(6,090
)
Cash and cash equivalents at end of
period
$
51,515
$
47,200
BUSINESS SEGMENT
INFORMATION
(Unaudited)
(In thousands)
Net sales and gross (loss) profit details
for each reportable segment of UNIFI are as follows:
For the Three Months
Ended
October 1, 2023
October 2, 2022
Americas
$
81,573
$
107,644
Brazil
29,909
38,879
Asia
27,362
32,996
Consolidated net sales
$
138,844
$
179,519
For the Three Months
Ended
October 1, 2023
October 2, 2022
Americas
$
(7,380
)
$
(4,869
)
Brazil
2,167
6,787
Asia
4,638
4,645
Consolidated gross (loss) profit
$
(575
)
$
6,563
RECONCILIATIONS OF REPORTED
RESULTS TO ADJUSTED RESULTS
(Unaudited)
(In thousands)
EBITDA and Adjusted
EBITDA (Non-GAAP Financial Measures)
The reconciliations of the amounts
reported under U.S. generally accepted accounting principles
(“GAAP”) for Net loss to EBITDA and Adjusted EBITDA are set forth
below.
For the Three Months
Ended
October 1, 2023
October 2, 2022
Net loss
$
(13,270
)
$
(7,834
)
Interest expense, net
1,904
700
(Benefit) provision for income taxes
(463
)
2,734
Depreciation and amortization expense
(1)
6,988
6,697
EBITDA
(4,841
)
2,297
Other adjustments (2)
—
—
Adjusted EBITDA
$
(4,841
)
$
2,297
(1)
Within this reconciliation,
depreciation and amortization expense excludes the amortization of
debt issuance costs, which are reflected in interest expense, net.
Within the condensed consolidated statements of cash flows,
amortization of debt issuance costs is reflected in depreciation
and amortization expense.
(2)
For the periods presented, there
were no other adjustments necessary to reconcile Net loss to
Adjusted EBITDA.
Net Debt (Non-GAAP
Financial Measure)
Reconciliations of Net Debt are as
follows:
October 1, 2023
July 2, 2023
Long-term debt
$
128,890
$
128,604
Current portion of long-term debt
12,323
12,006
Unamortized debt issuance costs
274
289
Debt principal
141,487
140,899
Less: cash and cash equivalents
51,515
46,960
Net Debt
$
89,972
$
93,939
Cash and cash equivalents
At October 1, 2023 and July 2, 2023,
UNIFI’s foreign operations held nearly all consolidated cash and
cash equivalents.
REPREVE Fiber
REPREVE Fiber represents UNIFI’s
collection of fiber products on its recycled platform, with or
without added technologies.
Non-GAAP Financial
Measures
Certain non-GAAP financial measures included herein are designed
to complement the financial information presented in accordance
with GAAP. These non-GAAP financial measures include Earnings
Before Interest, Taxes, Depreciation and Amortization (“EBITDA”),
Adjusted EBITDA, Adjusted Net (Loss) Income, Adjusted EPS, and Net
Debt (together, the “non-GAAP financial measures”).
- EBITDA represents Net (loss) income before net interest
expense, income tax expense, and depreciation and amortization
expense.
- Adjusted EBITDA represents EBITDA adjusted to exclude, from
time to time, certain adjustments necessary to understand and
compare the underlying results of UNIFI.
- Adjusted Net (Loss) Income represents Net (loss) income
calculated under GAAP adjusted to exclude certain amounts.
Management believes the excluded amounts do not reflect the ongoing
operations and performance of UNIFI and/or exclusion may be
necessary to understand and compare the underlying results of
UNIFI.
- Adjusted EPS represents Adjusted Net (Loss) Income divided by
UNIFI’s weighted average common shares outstanding.
- Net Debt represents debt principal less cash and cash
equivalents.
The non-GAAP financial measures are not determined in accordance
with GAAP and should not be considered a substitute for performance
measures determined in accordance with GAAP. The calculations of
the non-GAAP financial measures are subjective, based on
management’s belief as to which items should be included or
excluded in order to provide the most reasonable and comparable
view of the underlying operating performance of the business. We
may, from time to time, modify the amounts used to determine our
non-GAAP financial measures.
We believe that these non-GAAP financial measures better reflect
UNIFI’s underlying operations and performance and that their use,
as operating performance measures, provides investors and analysts
with a measure of operating results unaffected by differences in
capital structures, capital investment cycles, and ages of related
assets, among otherwise comparable companies.
Management uses Adjusted EBITDA (i) as a measurement of
operating performance because it assists us in comparing our
operating performance on a consistent basis, as it removes the
impact of (a) items directly related to our asset base (primarily
depreciation and amortization) and (b) items that we would not
expect to occur as a part of our normal business on a regular
basis; (ii) for planning purposes, including the preparation of our
annual operating budget; (iii) as a valuation measure for
evaluating our operating performance and our capacity to incur and
service debt, fund capital expenditures, and expand our business;
and (iv) as one measure in determining the value of other
acquisitions and dispositions. Adjusted EBITDA is a key performance
metric utilized in the determination of variable compensation. We
also believe Adjusted EBITDA is an appropriate supplemental measure
of debt service capacity, because it serves as a high-level proxy
for cash generated from operations.
Management uses Adjusted Net (Loss) Income and Adjusted EPS (i)
as measurements of net operating performance because they assist us
in comparing such performance on a consistent basis, as they remove
the impact of (a) items that we would not expect to occur as a part
of our normal business on a regular basis and (b) components of the
provision for income taxes that we would not expect to occur as a
part of our underlying taxable operations; (ii) for planning
purposes, including the preparation of our annual operating budget;
and (iii) as measures in determining the value of other
acquisitions and dispositions.
Management uses Net Debt as a liquidity and leverage metric to
determine how much debt would remain if all cash and cash
equivalents were used to pay down debt principal.
In evaluating non-GAAP financial measures, investors should be
aware that, in the future, we may incur expenses similar to the
adjustments included herein. Our presentation of non-GAAP financial
measures should not be construed as indicating that our future
results will be unaffected by unusual or non-recurring items. Each
of our non-GAAP financial measures has limitations as an analytical
tool, and investors should not consider it in isolation or as a
substitute for analysis of our results or liquidity measures as
reported under GAAP. Some of these limitations are (i) it is not
adjusted for all non-cash income or expense items that are
reflected in our statements of cash flows; (ii) it does not reflect
the impact of earnings or charges resulting from matters we
consider not indicative of our ongoing operations; (iii) it does
not reflect changes in, or cash requirements for, our working
capital needs; (iv) it does not reflect the cash requirements
necessary to make payments on our debt; (v) it does not reflect our
future requirements for capital expenditures or contractual
commitments; (vi) it does not reflect limitations on or costs
related to transferring earnings from our subsidiaries to us; and
(vii) other companies in our industry may calculate this measure
differently than we do, limiting its usefulness as a comparative
measure.
Because of these limitations, these non-GAAP financial measures
should not be considered as a measure of discretionary cash
available to us to invest in the growth of our business or as a
measure of cash that will be available to us to meet our
obligations, including those under our outstanding debt
obligations. Investors should compensate for these limitations by
relying primarily on our GAAP results and using these measures only
as supplemental information.
Cautionary Statement on Forward-Looking
Statements
Certain statements included herein contain “forward-looking
statements” within the meaning of federal securities laws about the
financial condition and results of operations of UNIFI that are
based on management’s beliefs, assumptions and expectations about
our future economic performance, considering the information
currently available to management. An example of such
forward-looking statements include, among others, guidance
pertaining to our financial outlook. The words “believe,” “may,”
“could,” “will,” “should,” “would,” “anticipate,” “plan,”
“estimate,” “project,” “expect,” “intend,” “seek,” “strive” and
words of similar import, or the negative of such words, identify or
signal the presence of forward-looking statements. These statements
are not statements of historical fact, and they involve risks and
uncertainties that may cause our actual results, performance or
financial condition to differ materially from the expectations of
future results, performance or financial condition that we express
or imply in any forward-looking statement.
Factors that could contribute to such differences include, but
are not limited to: the competitive nature of the textile industry
and the impact of global competition; changes in the trade
regulatory environment and governmental policies and legislation;
the availability, sourcing and pricing of raw materials; general
domestic and international economic and industry conditions in
markets where UNIFI competes, including economic and political
factors over which UNIFI has no control; changes in consumer
spending, customer preferences, fashion trends and end uses for
products; the financial condition of UNIFI’s customers; the loss of
a significant customer or brand partner; natural disasters,
industrial accidents, power or water shortages, extreme weather
conditions and other disruptions at one of our facilities; the
disruption of operations, global demand, or financial performance
as a result of catastrophic or extraordinary events, including
epidemics or pandemics such as the recent strain of coronavirus;
the success of UNIFI’s strategic business initiatives; the
volatility of financial and credit markets; the ability to service
indebtedness and fund capital expenditures and strategic business
initiatives; the availability of and access to credit on reasonable
terms; changes in foreign currency exchange, interest and inflation
rates; fluctuations in production costs; the ability to protect
intellectual property; the strength and reputation of our brands;
employee relations; the ability to attract, retain and motivate key
employees; the impact of climate change or environmental, health
and safety regulations; and the impact of tax laws, the judicial or
administrative interpretations of tax laws and/or changes in such
laws or interpretations.
All such factors are difficult to predict, contain uncertainties
that may materially affect actual results and may be beyond our
control. New factors emerge from time to time, and it is not
possible for management to predict all such factors or to assess
the impact of each such factor on UNIFI. Any forward-looking
statement speaks only as of the date on which such statement is
made, and we do not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which such statement is made, except as may be required
by federal securities laws. The above and other risks and
uncertainties are described in UNIFI’s most recent Annual Report on
Form 10-K, and additional risks or uncertainties may be described
from time to time in other reports filed by UNIFI with the
Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as amended.
-end-
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Davis Snyder Alpha IR Group 312-445-2870 UFI@alpha-ir.com
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