Unifi, Inc. engages in the manufacture and sale of synthetic and recycled products made from polyester and nylon. It operates through the following segments: Polyester, Nylon, Brazil, Asia, and All Other. The Polyester segment sells polyester-based products to other yarn manufacturers, knitters, and weavers that produces yarn and fabric for the apparel, hosiery, home furnishings, automotive, industrial, and other end-use markets in U.S. and El Salvador. The Nylon segment offers nylon-based products to knitters and weavers that produce fabric for the apparel and hosiery markets in U.S. and Colombia. The Brazil and Asia segments comprises polyester-based products to knitters and weavers that produce fabric for the apparel, home furnishings, automotive, industrial, and other end-use markets principally in South America and Asia. The All Other segment conducts certain ancillary operations that include for-hire transportation services. The company was founded by George Allen Mebane IV in 1969 and is headquartered in Greensboro, NC.
UNIFI faces intense competition from a number of domestic and foreign yarn producers and importers of foreign-sourced fabric, apparel and other textile products. Because UNIFI and the supply chains in which UNIFI conducts its business do not typically operate on the basis of long-term contracts with textile customers or brand partners, these competitive factors could cause UNIFI’s customers or brand partners to shift rapidly to other producers.
A significant portion of our sales is dependent upon demand from a few large brand partners.
Significant price volatility of UNIFI’s raw materials and rising energy costs may result in increased production costs. UNIFI attempts to pass such increases in production costs on to its customers through responsive price increases. However, any such price increases are effective only after a time lag that may span one or more quarters, during which UNIFI and its margins are negatively affected.
UNIFI depends on limited sources for certain of its raw materials, and interruptions in supply could increase its costs of production, cause production inefficiencies or lead to a halt in production.
A disruption at one of our facilities could harm our business and result in significant losses, lead to a decline in sales and increase our costs and expenses.
UNIFI has significant foreign operations, and its consolidated results of operations and business may be adversely affected by the risks associated with doing business in foreign locations, including the risk of fluctuations in foreign currency exchange rates.
UNIFI’s future success will depend in part on its ability to protect and preserve its intellectual property rights, and UNIFI’s inability to enforce these rights could cause it to lose sales, reduce any competitive advantage it has developed or otherwise harm its business.
UNIFI has investments in less-than-100%-owned affiliates that it does not control, which subjects UNIFI to uncertainties about the operating performance and quality of financial reporting of these affiliates.
UNIFI requires cash to service its indebtedness and to fund capital expenditures and strategic initiatives, and its ability to generate sufficient cash for those purposes depends on many factors beyond its control.
A decline in general economic or political conditions, and changes in consumer spending, could cause a decline in demand for textile products, including UNIFI’s products.
Unfavorable changes in trade policies and/or violations of existing trade policies could weaken UNIFI’s competitive position significantly and have a material adverse effect on its business.
In order to compete effectively, we must attract, retain and motivate key employees, and our failure to do so could harm our business and our results of operations.
Our business and operations could suffer in the event of cybersecurity breaches.
Gross profit for fiscal 2019 decreased by $20,120, or 23.3%, as compared to fiscal 2018. For the Asia Segment, gross profit decreased as sales growth was more than offset by (i) margin pressure from higher raw material costs, (ii) a greater mix of lower-priced product sales and (iii) unfavorable foreign currency translation effects as the RMB weakened against the USD during fiscal 2019. For the Brazil Segment, gross profit decreased primarily due to (a) unfavorable foreign currency translation effects as the BRL weakened against the USD during fiscal 2019, (b) margin pressure from higher raw material costs and competition and (c) lower sales volumes as described above. For the Polyester Segment, gross profit decreased primarily due to lower conversion margin, in which the first half of fiscal 2019 was unfavorably impacted by higher raw material costs, unfavorable sales mix towards lower-margin business and weaker fixed cost absorption resulting from lower textured yarn volumes in connection with significant competitive pressure from imported textured polyester. For the Nylon Segment, gross profit decreased primarily due to a less favorable sales mix and weaker fixed cost absorption, due in part to the loss of a customer program to overseas production during the fourth quarter of fiscal 2019.