Expansion of cost containment efforts and
renewed commercial initiatives provide optimism for calendar
2024
Business remains well positioned for apparel
demand recovery in calendar 2024
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 second fiscal quarter ended December 31,
2023.
Second Quarter Fiscal 2024
Overview
- Net sales were $136.9 million, an increase of 0.5% from the
second quarter of fiscal 2023, driven by higher sales volumes that
were muted by lower pricing in response to lower raw material
costs.
- Revenues from REPREVE Fiber products were $45.7 million and
represented 33% of net sales.
- Gross profit was $1.6 million and gross margin was 1.2%,
representing sequential-quarter and year-over-year improvements
through existing cost saving initiatives, successful execution of
renewed commercial efforts, and stabilized input costs.
- Net loss was $19.8 million, or ($1.10) per share, compared to
net loss of $18.0 million. Adjusted Net Loss was $14.7 million,
which excludes $5.1 million of restructuring costs, compared to
Adjusted Net Loss of $21.8 million for the second quarter of fiscal
2023, which excluded $3.8 million of income tax recoveries in
Brazil.
- Adjusted EBITDA, which also excludes $5.1 million of
restructuring costs, was ($5.5) million, compared to ($13.0)
million for the second quarter of fiscal 2023.
- Company continued and expanded cost efficiency measures to
streamline operations and reduce expenses across the business.
- Company recently announced the promotion of key executive
leaders to complement the Company’s Profitability Improvement Plan
implemented in December 2023, which is focused on streamlining
operations and reducing costs.
Adjusted Net Loss, 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., stated,
“Our second quarter fiscal 2024 results were in line with our
expectations and reflect sequential improvement in our underlying
gross profit performance, despite the negative impact from the
ongoing challenges in the apparel industry and its supply chains.
The recent strategic actions aimed at further reducing ongoing
costs, optimizing our operations, and enhancing profitability will
strengthen our position for the anticipated recovery in apparel
demand in calendar 2024.”
Ingle continued, “Our focus remains on maintaining a disciplined
approach to cost management and leveraging operational efficiencies
in the short-term environment, but we will continue to invest
prudently to support long-term growth and innovation for greater
revenues and accretive margins. We are excited about the
opportunities across the globe that expand our beyond apparel
initiatives and build on our REPREVE Fiber business.”
Second Quarter Fiscal 2024 Compared to
Second Quarter Fiscal 2023
Net sales of $136.9 million were relatively unchanged compared
to $136.2 million, primarily due to lower average selling prices
resulting from lower raw material costs. The Americas Segment
experienced modest volume improvement, although sales levels remain
below historical averages as a result of weakened demand for fiber
in the apparel sector. The Brazil Segment maintained its increased
market share with strong sales volumes while facing ongoing pricing
pressures from competitive imports. The Asia Segment continued to
experience weak apparel demand levels but attained a diverse sales
mix.
Gross profit of $1.6 million improved significantly compared to
($8.0) million. Americas Segment gross profit increased $6.3
million, primarily driven by variable cost management efforts and
more stable raw material costs. Brazil Segment gross profit
improved $1.8 million from higher sales volumes, which were
partially offset by unfavorable import pricing dynamics. The Asia
Segment continued to demonstrate portfolio strength with a rich mix
of REPREVE products, achieving a gross profit increase of $1.5
million and 250 basis points of incremental gross margin.
Operating loss was $17.6 million compared to $19.8 million,
aligning with the improvement in gross profit, partially offset by
$5.1 million of restructuring costs and $1.3 million of bad debt
expense. Net loss was $19.8 million compared to $18.0 million.
Adjusted EPS was ($0.81) and Adjusted EBITDA was ($5.5) million,
which exclude the $5.1 million of restructuring costs, comprised of
$2.7 million related to the dissolution of an unprofitable joint
venture and $2.4 million of severance costs.
Fiscal 2024 Outlook
UNIFI expects the following third quarter fiscal 2024
results:
- Net sales between $149.0 million and $154.0 million;
- Adjusted EBITDA between ($2.0) million and $1.0 million;
- Capital expenditures between $4.0 million and $5.0 million;
and
- Continued volatility in the effective tax rate.
Additionally, UNIFI expects sequential improvement from the
third quarter to the fourth quarter of fiscal 2024.
Ingle concluded, “While the apparel industry recession has
persisted longer than we anticipated, we believe we will see an
improved competitive environment moving forward. As one of the
strongest textile solutions providers in the world, we stand to
expand our global market share and accelerate our financial
performance as our industry returns to growth. Further, our
recently announced cost reset and commercial improvements should
amplify quarterly revenue and earnings on a sequential basis. Our
potential in Asia and Brazil continues to shine, demonstrating the
strength of our dynamic global business model. As the demand in the
Americas normalizes and the industry stabilizes, the results of our
recent efforts to strengthen the business will become even more
evident as we close our fiscal 2024.”
Second Quarter Fiscal 2024 Earnings
Conference Call
UNIFI will provide additional commentary regarding its second
quarter 2024 results and other developments during its earnings
conference call on February 1, 2024, at 8:30 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 40
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
For the Six Months
Ended
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Net sales
$
136,917
$
136,212
$
275,761
$
315,731
Cost of sales
135,281
144,212
274,700
317,168
Gross profit (loss)
1,636
(8,000
)
1,061
(1,437
)
Selling, general and administrative
expenses
12,408
11,748
24,017
23,521
Provision (benefit) for bad debts
1,289
(156
)
1,080
18
Restructuring costs
5,101
—
5,101
—
Other operating expense (income), net
481
226
535
(463
)
Operating loss
(17,643
)
(19,818
)
(29,672
)
(24,513
)
Interest income
(697
)
(514
)
(1,278
)
(1,061
)
Interest expense
2,613
1,889
5,098
3,136
Equity in earnings of unconsolidated
affiliates
(93
)
(86
)
(293
)
(381
)
Loss before income taxes
(19,466
)
(21,107
)
(33,199
)
(26,207
)
Provision (benefit) for income taxes
380
(3,070
)
(83
)
(336
)
Net loss
$
(19,846
)
$
(18,037
)
$
(33,116
)
$
(25,871
)
Net loss per common share:
Basic
$
(1.10
)
$
(1.00
)
$
(1.83
)
$
(1.44
)
Diluted
$
(1.10
)
$
(1.00
)
$
(1.83
)
$
(1.44
)
Weighted average common shares
outstanding:
Basic
18,110
18,034
18,097
18,017
Diluted
18,110
18,034
18,097
18,017
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands)
December 31, 2023
July 2, 2023
ASSETS
Cash and cash equivalents
$
35,979
$
46,960
Receivables, net
69,583
83,725
Inventories
135,676
150,810
Income taxes receivable
2,421
238
Other current assets
12,290
12,327
Total current assets
255,949
294,060
Property, plant and equipment, net
209,435
218,521
Operating lease assets
7,094
7,791
Deferred income taxes
4,812
3,939
Other non-current assets
14,839
14,508
Total assets
$
492,129
$
538,819
LIABILITIES AND SHAREHOLDERS’
EQUITY
Accounts payable
$
34,709
$
44,455
Income taxes payable
2,263
789
Current operating lease liabilities
1,733
1,813
Current portion of long-term debt
12,357
12,006
Other current liabilities
17,409
12,932
Total current liabilities
68,471
71,995
Long-term debt
120,144
128,604
Non-current operating lease
liabilities
5,515
6,146
Deferred income taxes
2,526
3,364
Other long-term liabilities
4,133
5,100
Total liabilities
200,789
215,209
Commitments and contingencies
Common stock
1,815
1,808
Capital in excess of par value
70,254
68,901
Retained earnings
273,676
306,792
Accumulated other comprehensive loss
(54,405
)
(53,891
)
Total shareholders’ equity
291,340
323,610
Total liabilities and shareholders’
equity
$
492,129
$
538,819
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Six Months
Ended
December 31, 2023
January 1, 2023
Cash and cash equivalents at beginning of
period
$
46,960
$
53,290
Operating activities:
Net loss
(33,116
)
(25,871
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Equity in earnings of unconsolidated
affiliates
(293
)
(381
)
Depreciation and amortization expense
13,988
13,478
Non-cash compensation expense
1,387
1,976
Restructuring costs
5,101
—
Recovery of income taxes
—
(3,799
)
Deferred income taxes
(1,714
)
(304
)
Other, net
(120
)
289
Changes in assets and liabilities
17,284
21,884
Net cash provided by operating
activities
2,517
7,272
Investing activities:
Capital expenditures
(5,982
)
(23,950
)
Other, net
488
(576
)
Net cash used by investing activities
(5,494
)
(24,526
)
Financing activities:
Proceeds from long-term debt
80,600
101,700
Payments on long-term debt
(88,740
)
(85,599
)
Other, net
(27
)
(705
)
Net cash (used) provided by financing
activities
(8,167
)
15,396
Effect of exchange rate changes on cash
and cash equivalents
163
(651
)
Net decrease in cash and cash
equivalents
(10,981
)
(2,509
)
Cash and cash equivalents at end of
period
$
35,979
$
50,781
BUSINESS SEGMENT
INFORMATION
(Unaudited)
(In thousands)
Net sales and gross profit (loss) details
for each reportable segment of UNIFI are as follows:
For the Three Months
Ended
For the Six Months
Ended
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Americas
$
80,549
$
85,242
$
162,122
$
192,886
Brazil
26,061
25,687
55,970
64,566
Asia
30,307
25,283
57,669
58,279
Consolidated net sales
$
136,917
$
136,212
$
275,761
$
315,731
For the Three Months
Ended
For the Six Months
Ended
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Americas
$
(6,738
)
$
(13,084
)
$
(14,118
)
$
(17,953
)
Brazil
3,139
1,330
5,306
8,117
Asia
5,235
3,754
9,873
8,399
Consolidated gross profit (loss)
$
1,636
$
(8,000
)
$
1,061
$
(1,437
)
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
For the Six Months
Ended
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Net loss
$
(19,846
)
$
(18,037
)
$
(33,116
)
$
(25,871
)
Interest expense, net
1,916
1,375
3,820
2,075
Provision (benefit) for income taxes
380
(3,070
)
(83
)
(336
)
Depreciation and amortization expense
(1)
6,922
6,693
13,910
13,390
EBITDA
(10,628
)
(13,039
)
(15,469
)
(10,742
)
Loss on joint venture dissolution (2)
2,750
—
2,750
—
Severance (3)
2,351
—
2,351
—
Adjusted EBITDA
$
(5,527
)
$
(13,039
)
$
(10,368
)
$
(10,742
)
(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)
In the second quarter of fiscal 2024,
UNIFI recorded a loss of $2,750 related to the dissolution of a
joint venture.
(3)
In the second quarter of fiscal 2024,
UNIFI incurred certain severance costs in connection with overall
cost reduction efforts in the U.S.
Adjusted Net Loss and Adjusted EPS
(Non-GAAP Financial Measures)
The tables below set forth reconciliations of (i) loss before
income taxes (“Pre-tax Loss”), provision (benefit) for income taxes
(“Tax Impact”), and net loss (“Net Loss”) to Adjusted Net Loss and
(ii) Diluted Earnings Per Share (“Diluted EPS”) to Adjusted EPS.
Rounding may impact certain of the below calculations.
For the Three Months Ended
December 31, 2023
For the Three Months Ended
January 1, 2023
Pre-tax Loss
Tax Impact
Net Loss
Diluted EPS
Pre-tax Loss
Tax Impact
Net Loss
Diluted EPS
GAAP results
$
(19,466
)
$
(380
)
$
(19,846
)
$
(1.10
)
$
(21,107
)
$
3,070
$
(18,037
)
$
(1.00
)
Loss on joint venture dissolution (1)
2,750
—
2,750
0.15
—
—
—
—
Severance (2)
2,351
—
2,351
0.14
—
—
—
—
Recovery of income taxes (3)
—
—
—
—
—
(3,799
)
(3,799
)
(0.21
)
Adjusted results
$
(14,365
)
$
(380
)
$
(14,745
)
$
(0.81
)
$
(21,107
)
$
(729
)
$
(21,836
)
$
(1.21
)
Weighted average common shares
outstanding
18,110
18,034
For the Six Months Ended
December 31, 2023
For the Six Months Ended
January 1, 2023
Pre-tax Loss
Tax Impact
Net Loss
Diluted EPS
Pre-tax Loss
Tax Impact
Net Loss
Diluted EPS
GAAP results
$
(33,199
)
$
83
$
(33,116
)
$
(1.83
)
$
(26,207
)
$
336
$
(25,871
)
$
(1.44
)
Loss on joint venture dissolution (1)
2,750
—
2,750
0.15
—
—
—
—
Severance (2)
2,351
—
2,351
0.13
—
—
—
—
Recovery of income taxes (3)
—
—
—
—
—
(3,799
)
(3,799
)
(0.21
)
Adjusted results
$
(28,098
)
$
83
$
(28,015
)
$
(1.55
)
$
(26,207
)
$
(3,463
)
$
(29,670
)
$
(1.65
)
Weighted average common shares
outstanding
18,097
18,017
(1)
In the second quarter of fiscal 2024, UNIFI recorded a loss of
$2,750 related to the dissolution of a joint venture.
(2)
In the second quarter of fiscal 2024, UNIFI incurred certain
severance costs in connection with overall cost reduction efforts
in the U.S.
(3)
In the second quarter of fiscal 2023, UNIFI recorded a recovery
of income taxes in connection with filing amended tax returns in
Brazil relating to certain income taxes paid in prior fiscal
years.
Net Debt (Non-GAAP Financial
Measure)
Reconciliations of Net Debt are as follows:
December 31, 2023
July 2, 2023
Long-term debt
$
120,144
$
128,604
Current portion of long-term debt
12,357
12,006
Unamortized debt issuance costs
259
289
Debt principal
132,760
140,899
Less: cash and cash equivalents
35,979
46,960
Net Debt
$
96,781
$
93,939
Cash and cash equivalents
At December 31, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240131540372/en/
Davis Snyder or Darren Yeun Alpha IR Group 312-445-2870
UFI@alpha-ir.com
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