UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(Mark One) | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 24, 2017September 26, 2021
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-10542
UNIFI, INC.
(Exact name of registrant as specified in its charter)
New York |
| 11-2165495 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
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7201 West Friendly Avenue | ||
Greensboro, North Carolina | 27410 | |
(Address of principal executive offices) | (Zip Code) |
(336) 294-4410
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.10 per share | UFI | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☒ |
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Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
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| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of January 25, 2018,October 29, 2021, there were 18,297,60218,528,972 shares of the registrant’s common stock, par value $0.10 per share, outstanding.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that relate to our plans, objectives, estimates and goals. Statements expressing expectations regarding our future, or projections or estimates relating to products, sales, revenues, expenditures, costs, strategies, initiatives or earnings, are typical of such statements and are made under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s beliefs, assumptions and expectations about our future economic performance, considering the information currently available to management. 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,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;
• | the competitive nature of the textile industry and the impact of global competition; |
changes in the trade regulatory environment and governmental policies and legislation;
• | changes in the trade regulatory environment and governmental policies and legislation; |
the availability, sourcing and pricing of raw materials;
• | the availability, sourcing and pricing of raw materials; |
general domestic and international economic and industry conditions in markets where the Company competes, including economic and political factors over which the Company has no control;
• | general domestic and international economic and industry conditions in markets where the Company competes, including economic and political factors over which the Company has no control; |
changes in consumer spending, customer preferences, fashion trends and end-uses for products;
• | changes in consumer spending, customer preferences, fashion trends and end uses for the Company’s products; |
the financial condition of the Company’s customers;
• | the financial condition of the Company’s customers; |
the loss of a significant customer;
• | the loss of a significant customer or brand partner; |
the success of the Company’s strategic business initiatives;
• | natural disasters, industrial accidents, power or water shortages, extreme weather conditions and other disruptions at one of the Company’s facilities; |
volatility of financial and credit markets;
• | 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 (“COVID-19”); |
the ability to service indebtedness and fund capital expenditures and strategic business initiatives;
• | the success of the Company’s strategic business initiatives; |
availability of and access to credit on reasonable terms;
• | the volatility of financial and credit markets; |
changes in foreign currency exchange, interest and inflation rates;
• | the ability to service indebtedness and fund capital expenditures and strategic business initiatives; |
fluctuations in production costs;
• | the availability of and access to credit on reasonable terms; |
the ability to protect intellectual property;
• | changes in foreign currency exchange, interest and inflation rates; |
employee relations;
• | fluctuations in production costs; |
the impact of environmental, health and safety regulations;
• | the ability to protect intellectual property; |
the operating performance of joint ventures and other equity investments;
• | the strength and reputation of the Company’s brands; |
the accurate financial reporting of information from equity method investees; and
• | employee relations; |
• | the ability to attract, retain and motivate key employees; |
other factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 25, 2017 or elsewhere in this report.
• | the impact of climate change or environmental, health and safety regulations; |
• | the impact of tax laws, the judicial or administrative interpretations of tax laws and/or changes in such laws or interpretations; and |
• | other factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2021 or in the Company’s other periodic reports and information filed with the Securities and Exchange Commission (“SEC”). |
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 the Company. 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 law.laws.
In light of all the above considerations, we reiterate that forward-looking statements are not guarantees of future performance, and we caution you not to rely on them as such.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 24, 2017SEPTEMBER 26, 2021
TABLE OF CONTENTS
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Item 1. |
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Item 2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 6. |
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PART I—FINANCIALFINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
|
| December 24, 2017 |
|
| June 25, 2017 |
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| September 26, 2021 |
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| June 27, 2021 |
| ||||
ASSETS |
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Cash and cash equivalents |
| $ | 48,615 |
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| $ | 35,425 |
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| $ | 49,556 |
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| $ | 78,253 |
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Receivables, net |
|
| 80,847 |
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|
| 81,121 |
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| 103,031 |
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| 94,837 |
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Inventories |
|
| 116,239 |
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|
| 111,405 |
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|
| 150,511 |
|
|
| 141,221 |
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Income taxes receivable |
|
| 10,612 |
|
|
| 9,218 |
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|
| 3,368 |
|
|
| 2,392 |
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Other current assets |
|
| 6,854 |
|
|
| 6,468 |
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|
| 12,816 |
|
|
| 12,364 |
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Total current assets |
|
| 263,167 |
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|
| 243,637 |
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|
| 319,282 |
|
|
| 329,067 |
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Property, plant and equipment, net |
|
| 203,699 |
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|
| 203,388 |
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|
| 203,339 |
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|
| 201,696 |
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Operating lease assets |
|
| 9,561 |
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|
| 8,772 |
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Deferred income taxes |
|
| 4,161 |
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|
| 2,194 |
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|
| 2,462 |
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|
| 1,208 |
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Investments in unconsolidated affiliates |
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| 113,623 |
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| 119,513 |
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Other non-current assets |
|
| 2,815 |
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|
| 2,771 |
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|
| 14,061 |
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|
| 14,625 |
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Total assets |
| $ | 587,465 |
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| $ | 571,503 |
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| $ | 548,705 |
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| $ | 555,368 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Accounts payable |
| $ | 35,420 |
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| $ | 41,499 |
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| $ | 57,528 |
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| $ | 54,259 |
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Accrued expenses |
|
| 12,990 |
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| 16,144 |
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Income taxes payable |
|
| 1,833 |
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|
| 1,351 |
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| 5,177 |
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|
| 1,625 |
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Current operating lease liabilities |
|
| 2,150 |
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|
| 1,856 |
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Current portion of long-term debt |
|
| 17,112 |
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|
| 17,060 |
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|
| 15,428 |
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|
| 16,045 |
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Other current liabilities |
|
| 19,319 |
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|
| 31,638 |
| ||||||||
Total current liabilities |
|
| 67,355 |
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|
| 76,054 |
|
|
| 99,602 |
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|
| 105,423 |
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Long-term debt |
|
| 115,588 |
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|
| 111,382 |
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| 68,465 |
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|
| 70,336 |
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Non-current operating lease liabilities |
|
| 7,524 |
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|
| 7,032 |
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Deferred income taxes |
|
| 4,473 |
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|
| 6,686 |
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Other long-term liabilities |
|
| 11,093 |
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|
| 11,804 |
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|
| 7,644 |
|
|
| 7,472 |
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Deferred income taxes |
|
| 7,140 |
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|
| 11,457 |
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Total liabilities |
|
| 201,176 |
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|
| 210,697 |
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| 187,708 |
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| 196,949 |
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Commitments and contingencies |
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Common stock, $0.10 par value (500,000,000 shares authorized; 18,290,935 and 18,229,777 shares issued and outstanding as of December 24, 2017 and June 25, 2017, respectively) |
|
| 1,829 |
|
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| 1,823 |
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Common stock, $0.10 par value (500,000,000 shares authorized; 18,523,978 and 18,490,338 shares issued and outstanding as of September 26, 2021 and June 27, 2021, respectively) |
|
| 1,852 |
|
|
| 1,849 |
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Capital in excess of par value |
|
| 55,215 |
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|
| 51,923 |
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|
| 65,770 |
|
|
| 65,205 |
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Retained earnings |
|
| 360,702 |
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|
| 339,940 |
|
|
| 353,477 |
|
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| 344,797 |
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Accumulated other comprehensive loss |
|
| (31,457 | ) |
|
| (32,880 | ) |
|
| (60,102 | ) |
|
| (53,432 | ) |
Total Unifi, Inc. shareholders’ equity |
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| 386,289 |
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|
| 360,806 |
| ||||||||
Non-controlling interest |
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| — |
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| — |
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Total shareholders’ equity |
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| 386,289 |
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| 360,806 |
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| 360,997 |
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|
| 358,419 |
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Total liabilities and shareholders’ equity |
| $ | 587,465 |
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| $ | 571,503 |
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| $ | 548,705 |
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| $ | 555,368 |
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See accompanying notes to condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTSSTATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
|
| For the Three Months Ended |
|
| For the Six Months Ended |
|
| For the Three Months Ended |
| |||||||||||||||
|
| December 24, 2017 |
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| December 25, 2016 |
|
| December 24, 2017 |
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| December 25, 2016 |
|
| September 26, 2021 |
|
| September 27, 2020 |
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Net sales |
| $ | 167,478 |
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| $ | 155,155 |
|
| $ | 331,720 |
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| $ | 315,124 |
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| $ | 195,992 |
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| $ | 141,505 |
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Cost of sales |
|
| 144,802 |
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|
| 133,025 |
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|
| 285,752 |
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|
| 269,447 |
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|
| 169,895 |
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|
| 126,944 |
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Gross profit |
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| 22,676 |
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|
| 22,130 |
|
|
| 45,968 |
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|
| 45,677 |
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|
| 26,097 |
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|
| 14,561 |
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Selling, general and administrative expenses |
|
| 14,626 |
|
|
| 12,868 |
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|
| 27,489 |
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|
| 24,278 |
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|
| 12,670 |
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|
| 11,364 |
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Benefit for bad debts |
|
| (72 | ) |
|
| (95 | ) |
|
| (131 | ) |
|
| (462 | ) |
|
| (80 | ) |
|
| (887 | ) |
Other operating expense, net |
|
| 348 |
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|
| 319 |
|
|
| 663 |
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|
| 249 |
|
|
| 256 |
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|
| 1,178 |
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Operating income |
|
| 7,774 |
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|
| 9,038 |
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|
| 17,947 |
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|
| 21,612 |
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|
| 13,251 |
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|
| 2,906 |
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Interest income |
|
| (181 | ) |
|
| (183 | ) |
|
| (262 | ) |
|
| (329 | ) |
|
| (258 | ) |
|
| (125 | ) |
Interest expense |
|
| 1,190 |
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|
| 914 |
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|
| 2,375 |
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|
| 1,606 |
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|
| 696 |
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|
| 871 |
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Loss on sale of business |
|
| — |
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|
| 1,662 |
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|
| — |
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|
| 1,662 |
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Equity in (earnings) loss of unconsolidated affiliates |
|
| (211 | ) |
|
| 367 |
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|
| (3,298 | ) |
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| (473 | ) | ||||||||
Equity in earnings of unconsolidated affiliates |
|
| (280 | ) |
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| (93 | ) | ||||||||||||||||
Income before income taxes |
|
| 6,976 |
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|
| 6,278 |
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|
| 19,132 |
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|
| 19,146 |
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|
| 13,093 |
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|
| 2,253 |
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(Benefit) provision for income taxes |
|
| (4,826 | ) |
|
| 1,924 |
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|
| (1,630 | ) |
|
| 5,650 |
| ||||||||
Net income including non-controlling interest |
|
| 11,802 |
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|
| 4,354 |
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|
| 20,762 |
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|
| 13,496 |
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Less: net loss attributable to non-controlling interest |
|
| — |
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|
| (237 | ) |
|
| — |
|
|
| (498 | ) | ||||||||
Net income attributable to Unifi, Inc. |
| $ | 11,802 |
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| $ | 4,591 |
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| $ | 20,762 |
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| $ | 13,994 |
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Provision (benefit) for income taxes |
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| 4,413 |
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| (1,179 | ) | ||||||||||||||||
Net income |
| $ | 8,680 |
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| $ | 3,432 |
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Net income attributable to Unifi, Inc. per common share: |
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Net income per common share: | Net income per common share: |
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Basic |
| $ | 0.65 |
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| $ | 0.25 |
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| $ | 1.14 |
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| $ | 0.78 |
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| $ | 0.47 |
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| $ | 0.19 |
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Diluted |
| $ | 0.63 |
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| $ | 0.25 |
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| $ | 1.12 |
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| $ | 0.76 |
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| $ | 0.46 |
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| $ | 0.18 |
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See accompanying notes to condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVECOMPREHENSIVE INCOME
(Unaudited)
(In thousands)
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||||
Net income including non-controlling interest |
| $ | 11,802 |
|
| $ | 4,354 |
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| $ | 20,762 |
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| $ | 13,496 |
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Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Foreign currency translation adjustments |
|
| (2,341 | ) |
|
| (780 | ) |
|
| 524 |
|
|
| (1,359 | ) |
Foreign currency translation adjustments for an unconsolidated affiliate |
|
| (487 | ) |
|
| (280 | ) |
|
| (593 | ) |
|
| (523 | ) |
Changes in interest rate swaps |
|
| 1,077 |
|
|
| 19 |
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|
| 1,492 |
|
|
| 38 |
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Other comprehensive (loss) income, net |
|
| (1,751 | ) |
|
| (1,041 | ) |
|
| 1,423 |
|
|
| (1,844 | ) |
Comprehensive income including non-controlling interest |
|
| 10,051 |
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|
| 3,313 |
|
|
| 22,185 |
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|
| 11,652 |
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Less: comprehensive loss attributable to non-controlling interest |
|
| — |
|
|
| (237 | ) |
|
| — |
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|
| (498 | ) |
Comprehensive income attributable to Unifi, Inc. |
| $ | 10,051 |
|
| $ | 3,550 |
|
| $ | 22,185 |
|
| $ | 12,150 |
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|
| For the Three Months Ended |
| |||||
|
| September 26, 2021 |
|
| September 27, 2020 |
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Net income |
| $ | 8,680 |
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| $ | 3,432 |
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Other comprehensive (loss) income: |
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|
|
|
|
|
|
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Foreign currency translation adjustments |
|
| (6,926 | ) |
|
| (182 | ) |
Changes in interest rate swaps, net of tax of $77 and $78, respectively |
|
| 256 |
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|
| 254 |
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Other comprehensive (loss) income, net |
|
| (6,670 | ) |
|
| 72 |
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Comprehensive income |
| $ | 2,010 |
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| $ | 3,504 |
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See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTSSTATEMENTS OF CASH FLOWSSHAREHOLDERS’ EQUITY
(Unaudited)
(In thousands)
|
| For the Six Months Ended |
| |||||
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||
Cash and cash equivalents at beginning of year |
| $ | 35,425 |
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| $ | 16,646 |
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Operating activities: |
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Net income including non-controlling interest |
|
| 20,762 |
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|
| 13,496 |
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Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: |
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|
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Equity in earnings of unconsolidated affiliates |
|
| (3,298 | ) |
|
| (473 | ) |
Distributions received from unconsolidated affiliates |
|
| 8,678 |
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|
| 1,500 |
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Depreciation and amortization expense |
|
| 11,135 |
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|
| 9,731 |
|
Non-cash compensation expense |
|
| 3,569 |
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|
| 1,862 |
|
Loss on sale of business |
|
| — |
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|
| 1,662 |
|
Excess tax benefit on stock-based compensation plans |
|
| — |
|
|
| (1,111 | ) |
Deferred income taxes |
|
| (6,282 | ) |
|
| 5,335 |
|
Other, net |
|
| (206 | ) |
|
| 34 |
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Changes in assets and liabilities: |
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|
|
|
|
|
|
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Receivables, net |
|
| 267 |
|
|
| 6,043 |
|
Inventories |
|
| (4,556 | ) |
|
| (6,751 | ) |
Other current assets |
|
| (210 | ) |
|
| 837 |
|
Income taxes |
|
| (945 | ) |
|
| (6,841 | ) |
Accounts payable and accrued expenses |
|
| (8,796 | ) |
|
| (8,160 | ) |
Other, net |
|
| 271 |
|
|
| 132 |
|
Net cash provided by operating activities |
|
| 20,389 |
|
|
| 17,296 |
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (11,360 | ) |
|
| (19,343 | ) |
Other, net |
|
| 15 |
|
|
| (180 | ) |
Net cash used in investing activities |
|
| (11,345 | ) |
|
| (19,523 | ) |
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from ABL Revolver |
|
| 59,200 |
|
|
| 65,200 |
|
Payments on ABL Revolver |
|
| (46,600 | ) |
|
| (61,600 | ) |
Proceeds from ABL Term Loan |
|
| — |
|
|
| 14,500 |
|
Payments on ABL Term Loan |
|
| (5,000 | ) |
|
| (4,750 | ) |
Payments on capital lease obligations |
|
| (3,528 | ) |
|
| (2,154 | ) |
Proceeds from stock option exercises |
|
| 219 |
|
|
| 2,481 |
|
Excess tax benefit on stock-based compensation plans |
|
| — |
|
|
| 1,111 |
|
Other |
|
| (328 | ) |
|
| (368 | ) |
Net cash provided by financing activities |
|
| 3,963 |
|
|
| 14,420 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
| 183 |
|
|
| (349 | ) |
Net increase in cash and cash equivalents |
|
| 13,190 |
|
|
| 11,844 |
|
Cash and cash equivalents at end of period |
| $ | 48,615 |
|
| $ | 28,490 |
|
|
| Shares |
|
| Common Stock |
|
| Capital in Excess of Par Value |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Loss |
|
| Total Shareholders’ Equity |
| ||||||
Balance at June 27, 2021 |
|
| 18,490 |
|
| $ | 1,849 |
|
| $ | 65,205 |
|
| $ | 344,797 |
|
| $ | (53,432 | ) |
| $ | 358,419 |
|
Options exercised |
|
| 9 |
|
|
| 1 |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Conversion of restricted stock units |
|
| 38 |
|
|
| 4 |
|
|
| (4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 582 |
|
|
| — |
|
|
| — |
|
|
| 582 |
|
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions |
|
| (13 | ) |
|
| (2 | ) |
|
| (12 | ) |
|
| — |
|
|
| — |
|
|
| (14 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,670 | ) |
|
| (6,670 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,680 |
|
|
| — |
|
|
| 8,680 |
|
Balance at September 26, 2021 |
|
| 18,524 |
|
| $ | 1,852 |
|
| $ | 65,770 |
|
| $ | 353,477 |
|
| $ | (60,102 | ) |
| $ | 360,997 |
|
|
| Shares |
|
| Common Stock |
|
| Capital in Excess of Par Value |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Loss |
|
| Total Shareholders’ Equity |
| ||||||
Balance at June 28, 2020 |
|
| 18,446 |
|
| $ | 1,845 |
|
| $ | 62,392 |
|
| $ | 315,724 |
|
| $ | (63,806 | ) |
| $ | 316,155 |
|
Options exercised |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Conversion of restricted stock units |
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 425 |
|
|
| — |
|
|
| — |
|
|
| 425 |
|
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions |
|
| (1 | ) |
|
| — |
|
|
| (7 | ) |
|
| — |
|
|
| — |
|
|
| (7 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 72 |
|
|
| 72 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,432 |
|
|
| — |
|
|
| 3,432 |
|
Balance at September 27, 2020 |
|
| 18,447 |
|
| $ | 1,845 |
|
| $ | 62,810 |
|
| $ | 319,156 |
|
| $ | (63,734 | ) |
| $ | 320,077 |
|
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
| For the Three Months Ended |
| |||||
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||
Cash and cash equivalents at beginning of period |
| $ | 78,253 |
|
| $ | 75,267 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
| 8,680 |
|
|
| 3,432 |
|
Adjustments to reconcile net income to net cash (used) provided by operating activities: |
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
| (280 | ) |
|
| (93 | ) |
Depreciation and amortization expense |
|
| 6,365 |
|
|
| 6,112 |
|
Non-cash compensation expense |
|
| 660 |
|
|
| 509 |
|
Deferred income taxes |
|
| (3,463 | ) |
|
| (2,072 | ) |
Other, net |
|
| (100 | ) |
|
| (132 | ) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables, net |
|
| (9,462 | ) |
|
| (23,499 | ) |
Inventories |
|
| (12,190 | ) |
|
| 4,853 |
|
Other current assets |
|
| (1,056 | ) |
|
| 2,083 |
|
Income taxes |
|
| 2,606 |
|
|
| 191 |
|
Accounts payable and other current liabilities |
|
| (7,393 | ) |
|
| 15,314 |
|
Other, net |
|
| (175 | ) |
|
| 1,224 |
|
Net cash (used) provided by operating activities |
|
| (15,808 | ) |
|
| 7,922 |
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (9,300 | ) |
|
| (1,864 | ) |
Other, net |
|
| 31 |
|
|
| — |
|
Net cash used by investing activities |
|
| (9,269 | ) |
|
| (1,864 | ) |
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from ABL Revolver |
|
| — |
|
|
| — |
|
Payments on ABL Revolver |
|
| — |
|
|
| — |
|
Payments on ABL Term Loan |
|
| (2,500 | ) |
|
| (2,500 | ) |
Proceeds from construction financing |
|
| 882 |
|
|
| — |
|
Payments on finance lease obligations |
|
| (927 | ) |
|
| (945 | ) |
Other, net |
|
| (222 | ) |
|
| (7 | ) |
Net cash used by financing activities |
|
| (2,767 | ) |
|
| (3,452 | ) |
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
| (853 | ) |
|
| 222 |
|
Net (decrease) increase in cash and cash equivalents |
|
| (28,697 | ) |
|
| 2,828 |
|
Cash and cash equivalents at end of period |
| $ | 49,556 |
|
| $ | 78,095 |
|
See accompanying notes to condensed consolidated financial statements.
4
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Background
Unifi, Inc., a New York corporation formed in 1969 (together with its subsidiaries, “UNIFI,” the “Company,” “we,” “us” or “our”), is a multi-nationalmultinational company that manufactures and sells innovative syntheticrecycled and recycledsynthetic products, made from polyester and nylon, primarily to other yarn manufacturers and knitters and weavers (UNIFI’s direct customers) that produce yarn and/or fabric for the apparel, hosiery, home furnishings, automotive, industrial and other end-use markets.markets (UNIFI’s indirect customers). We refer to these indirect customers as “brand partners.” Polyester yarnsproducts include partially oriented yarn (“POY”), textured, solution and package dyed, twisted, beamed and draw wound yarns, and each is available in virgin or recycled varieties. Recycled solutions, made from both pre-consumer and post-consumer waste, include plastic bottle flake and(“Flake”), polyester polymer beads (“Chip”). and staple fiber. Nylon products include virgin or recycled textured, solution dyed and spandex covered yarns.
UNIFI maintains one of the textile industry’s most comprehensive yarn product offerings thatwhich include a range of specialized, yarns, premium value-added (“PVA”) yarns and commodity yarns,solutions, with principal geographic markets in the Americas, Asia and Asia.
Europe. UNIFI has direct manufacturing operations in four4 countries and participates in joint ventures with operations in Israel and the United States the most significant of which is a 34% non-controlling partnership interest in Parkdale America, LLC (“PAL”U.S.”), a producer of cotton and synthetic yarns for sale to the global textile industry and apparel market.
.
2. Basis of Presentation; Condensed Notes
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the United StatesU.S. (“GAAP”) for interim financial information. As contemplated by the instructions of the Securities and Exchange Commission (the “SEC”)SEC to Form 10-Q, the following notes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to UNIFI’s year-end audited consolidated financial statements and related notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended June 25, 201727, 2021 (the “2017“2021 Form 10-K”).
The financial information included in this report has been prepared by UNIFI, without audit. In the opinion of management, all adjustments, which consist of normal, recurring adjustments, considered necessary for a fair statement of the results for interim periods have been included. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the amounts reported and certain financial statement disclosures. Actual results may vary from these estimates.
All currency and share amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.
The fiscal quarter for each of Unifi, Inc., its primary domestic operating subsidiaries and its subsidiary in El Salvador ended on December 24, 2017, the second to last Sunday in December. TheSeptember 26, 2021. Unifi, Inc.’s remaining material operating subsidiaries’ fiscal quarter for Unifi, Inc.’s Brazilian, Chinese, Colombian and Sri Lankan subsidiaries ended on December 31, 2017.September 30, 2021. There were no significant transactions or events that occurred between Unifi, Inc.’s fiscal quarter end and such wholly owned subsidiaries’ subsequent fiscal quarter end. The three-month and six-month periods ended December 24, 2017September 26, 2021 and December 25, 2016 eachSeptember 27, 2020 both consisted of 13 and 26 fiscal weeks, respectively.
Reclassifications
Certain reclassifications of prior years’ data have been made to conform to the current year presentation.weeks.
3. Recent Accounting Pronouncements
Issued and Pending Adoption
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). Subsequent ASUs have been issued to provide clarity and defer the effective date of the new guidance. The new revenue recognition standard eliminates the transaction- and industry-specific revenue recognition guidance under current GAAP and replaces it with a principles-based approach. While UNIFI has not yet determined the effect of the new guidance on its ongoing financial reporting, UNIFI notes the following considerations: (i) UNIFI is primarily engaged in the business of manufacturing and delivering tangible products utilizing relatively straightforward contract terms without multiple performance obligations and (ii) transaction prices for UNIFI’s primary and material revenue activities are determinable and lack significant timing considerations. UNIFI is currently performing the following activities regarding implementation of the new guidance: (a) reviewing material contracts and (b) assessing accounting policy elections and disclosures under the new guidance. In
5
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
addition, implementation matters remaining include (x) evaluating the systems and processes to support revenue recognition and (y) selecting the method of adoption. The new revenue recognition guidance is effective for UNIFI’s fiscal 2019.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. While UNIFI has not yet determined the full effect of the new guidance on its ongoing financial reporting, as of June 25, 2017, UNIFI had approximately $6,400 of future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) and did not enter into any new material operating lease agreements during the six months ended December 24, 2017. The new lease guidance is effective for UNIFI’s fiscal 2020, and early adoption is permitted.
In connection with the SEC Staff Announcement on July 20, 2017 relating to the transition to ASU No. 2014-09 and ASU No. 2016-02, due to its status as a significant subsidiary of Unifi, Inc., PAL expects to adopt (i) the new revenue recognition guidance in its fiscal 2019 and (ii) the new lease guidance in its fiscal 2020.
Recently Adopted
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The ASU is intended to improve and simplify the rules around hedge accounting, reduce complexity for certain hedging concepts and better align financial reporting with an entity’s risk management activities. UNIFI early adopted ASU No. 2017-12 in the three months ended December 24, 2017. Early adoption will allow UNIFI to (i) eliminate consideration for hedge ineffectiveness, (ii) utilize a qualitative effectiveness assessment prospectively and (iii) contemplate hedge accounting for additional risk management activities allowed by the simplified guidance. Due to a lack of complexity in UNIFI’s recent risk management activities, there are no applicable cumulative adjustments to UNIFI’s financial statements in connection with adoption of the ASU.
In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including the accounting and classification of the respective income tax impacts, forfeitures and statutory withholding requirements. UNIFI adopted the ASU in the three months ended September 24, 2017, on a prospective basis. The adoption resulted in a $148 decrease to the provision for income taxes for excess tax benefits and an immaterial increase in potential dilutive weighted average shares for the six months ended December 24, 2017. In connection with the adoption of the ASU, UNIFI has elected to recognize forfeitures as they occur, and there is no corresponding retrospective adjustment to retained earnings. Additionally, UNIFI is presenting the change in classification of excess tax benefits in the condensed consolidated statements of cash flows on a prospective basis.
In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which modifies the subsequent measurement of inventories recorded under a first-in, first-out or average cost method. Under the new standard, such inventories are required to be measured at the lower of cost and net realizable value. UNIFI adopted the ASU in the three months ended September 24, 2017, with prospective application. UNIFI’s historical principles for inventory measurement had utilized net realizable value, and, therefore, adoption of the ASU had no material impact on UNIFI’s consolidated financial statements.
Based on UNIFI’s review of ASUsAccounting Standards Updates issued since the filing of the 20172021 Form 10-K, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significantmaterial impact on UNIFI’s consolidated financial statements.
4. Revenue Recognition
4. Receivables, Net
Receivables,The following tables present net consistssales grouped by (i) classification of the following:sales type and (ii) REPREVE® Fiber sales:
|
| December 24, 2017 |
|
| June 25, 2017 |
| ||
Customer receivables |
| $ | 82,637 |
|
| $ | 83,291 |
|
Allowance for uncollectible accounts |
|
| (2,089 | ) |
|
| (2,222 | ) |
Reserves for yarn quality claims |
|
| (731 | ) |
|
| (1,278 | ) |
Net customer receivables |
|
| 79,817 |
|
|
| 79,791 |
|
Other receivables |
|
| 1,030 |
|
|
| 1,330 |
|
Total receivables, net |
| $ | 80,847 |
|
| $ | 81,121 |
|
|
| For the Three Months Ended |
| |||||
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||
Third-party manufacturer |
| $ | 193,297 |
|
| $ | 138,841 |
|
Service |
|
| 2,695 |
|
|
| 2,664 |
|
Net sales |
| $ | 195,992 |
|
| $ | 141,505 |
|
|
| For the Three Months Ended |
| |||||
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||
REPREVE® Fiber |
| $ | 71,906 |
|
| $ | 51,612 |
|
All other products and services |
|
| 124,086 |
|
|
| 89,893 |
|
Net sales |
| $ | 195,992 |
|
| $ | 141,505 |
|
Third-Party Manufacturer
Third-party manufacturer revenue is primarily generated through sales to direct customers. Such sales represent satisfaction of UNIFI’s performance obligations required by the associated revenue contracts. Each of UNIFI’s reportable segments derives revenue from sales to third-party manufacturers.
Service Revenue
Service revenue is primarily generated as services are rendered, through fulfillment of toll manufacturing of textile products or transportation services governed by written agreements. Such toll manufacturing and transportation services represent satisfaction of UNIFI’s performance obligations required
6
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
There haveby the associated revenue contracts. The Polyester Segment derives service revenue for toll manufacturing and the All Other category derives service revenue for transportation services.
REPREVE® Fiber
REPREVE® Fiber represents our collection of fiber products on our recycled platform, with or without added technologies.
Beginning in the fourth quarter of fiscal 2021, as a result of its annual review of products meeting the REPREVE® Fiber definition, UNIFI began including certain product sales in the Asia Segment that were previously excluded from the REPREVE® Fiber sales metric. The prior period has been no material changes inadjusted to reflect such sales and the amount reclassed was not material.
Variable Consideration
For all variable consideration, where appropriate, UNIFI estimates the amount using the expected value method, which takes into consideration historical experience, current contractual requirements, specific known market events and forecasted customer buying and payment patterns. Overall, these reserves reflect UNIFI’s allowancebest estimates of the amount of consideration to which the customer is entitled based on the terms of the contracts. Variable consideration has been immaterial to UNIFI’s financial statements for uncollectible accounts since June 25, 2017.
The changes in UNIFI’s reserves for yarn quality claims were as follows:
|
| Reserves for Yarn Quality Claims |
| |
Balance at June 25, 2017 |
| $ | (1,278 | ) |
Charged to costs and expenses |
|
| (616 | ) |
Translation activity |
|
| (12 | ) |
Deductions |
|
| 1,175 |
|
Balance at December 24, 2017 |
| $ | (731 | ) |
all periods presented.
5. Receivables, Net
Receivables, net consists of the following:
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||
Customer receivables |
| $ | 86,997 |
|
| $ | 81,921 |
|
Allowance for uncollectible accounts |
|
| (2,396 | ) |
|
| (2,525 | ) |
Reserves for quality claims |
|
| (598 | ) |
|
| (703 | ) |
Net customer receivables |
|
| 84,003 |
|
|
| 78,693 |
|
Other receivables |
|
| 19,028 |
|
|
| 16,144 |
|
Total receivables, net |
| $ | 103,031 |
|
| $ | 94,837 |
|
Other receivables includes $15,416 and $13,391 of banker’s acceptance notes (“BANs”) as of September 26, 2021 and June 27, 2021, respectively, in connection with the settlement of certain customer receivables generated from trade activity in the Asia Segment. The BANs are redeemable upon maturity from the drawing financial institutions, or earlier at a discount.
6. Inventories
Inventories consists of the following:
|
| December 24, 2017 |
|
| June 25, 2017 |
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||||
Raw materials |
| $ | 38,342 |
|
| $ | 36,748 |
|
| $ | 61,826 |
|
| $ | 54,895 |
|
Supplies |
|
| 6,537 |
|
|
| 6,104 |
|
|
| 10,449 |
|
|
| 10,692 |
|
Work in process |
|
| 6,819 |
|
|
| 7,399 |
|
|
| 8,701 |
|
|
| 7,516 |
|
Finished goods |
|
| 66,872 |
|
|
| 63,121 |
|
|
| 72,090 |
|
|
| 70,525 |
|
Gross inventories |
|
| 118,570 |
|
|
| 113,372 |
|
|
| 153,066 |
|
|
| 143,628 |
|
Inventory reserves |
|
| (2,331 | ) |
|
| (1,967 | ) | ||||||||
Net realizable value adjustment |
|
| (2,555 | ) |
|
| (2,407 | ) | ||||||||
Total inventories |
| $ | 116,239 |
|
| $ | 111,405 |
|
| $ | 150,511 |
|
| $ | 141,221 |
|
7. Other Current Assets
6. Property, Plant and Equipment, Net
Property, plant and equipment, net (“PP&E”) consistsOther current assets consist of the following:
|
| December 24, 2017 |
|
| June 25, 2017 |
| ||
Land |
| $ | 2,931 |
|
| $ | 2,931 |
|
Land improvements |
|
| 15,099 |
|
|
| 15,066 |
|
Buildings and improvements |
|
| 157,984 |
|
|
| 157,115 |
|
Assets under capital leases |
|
| 34,568 |
|
|
| 34,568 |
|
Machinery and equipment |
|
| 586,798 |
|
|
| 579,211 |
|
Computers, software and office equipment |
|
| 19,850 |
|
|
| 19,360 |
|
Transportation equipment |
|
| 4,780 |
|
|
| 4,798 |
|
Construction in progress |
|
| 8,820 |
|
|
| 7,371 |
|
Gross property, plant and equipment |
|
| 830,830 |
|
|
| 820,420 |
|
Less: accumulated depreciation |
|
| (621,107 | ) |
|
| (612,355 | ) |
Less: accumulated amortization – capital leases |
|
| (6,024 | ) |
|
| (4,677 | ) |
Total PP&E |
| $ | 203,699 |
|
| $ | 203,388 |
|
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||
Vendor deposits |
| $ | 3,604 |
|
| $ | 3,341 |
|
Recovery of non-income taxes |
|
| 3,274 |
|
|
| 3,456 |
|
Prepaid expenses and other |
|
| 3,265 |
|
|
| 2,753 |
|
Value-added taxes receivable |
|
| 2,204 |
|
|
| 2,484 |
|
Contract assets |
|
| 469 |
|
|
| 330 |
|
Total other current assets |
| $ | 12,816 |
|
| $ | 12,364 |
|
Depreciation expense and repair and maintenance expenses were as follows:
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||||
Depreciation expense |
| $ | 5,237 |
|
| $ | 4,486 |
|
| $ | 10,360 |
|
| $ | 8,700 |
|
Repair and maintenance expenses |
|
| 4,779 |
|
|
| 4,514 |
|
|
| 9,504 |
|
|
| 8,754 |
|
7
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Accrued expenses
Recovery of Non-Income Taxes
Brazilian companies are subject to various taxes on business operations, including turnover taxes used to fund social security and unemployment programs, commonly referred to as PIS/COFINS taxes. UNIFI, along with numerous other companies in Brazil, challenged the constitutionality of certain state taxes historically included in the PIS/COFINS tax base, alleging that such state taxes resulted in over-taxation.
On May 13, 2021, Brazil’s supreme court ruled in favor of taxpayers, and on July 7, 2021, the Brazilian Internal Revenue Service withdrew its appeal. Following the supreme court decision, the federal government will not issue refunds for these taxes but instead will allow for the overpayments and associated interest to be applied as credits against future PIS/COFINS tax obligations.
There are no limitations or restrictions on UNIFI’s ability to recover the associated overpayment claims as future income is generated. We expect to recover the entirety of our claims over the 40-month period following June 2021. Thus, UNIFI has reflected current and non-current assets accordingly.
8. Property, Plant and Equipment, Net
Property, plant and equipment (“PP&E”), net consists of the following:
|
| December 24, 2017 |
|
| June 25, 2017 |
| ||
Payroll and fringe benefits |
| $ | 7,277 |
|
| $ | 10,469 |
|
Other |
|
| 5,713 |
|
|
| 5,675 |
|
Total accrued expenses |
| $ | 12,990 |
|
| $ | 16,144 |
|
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||
Land |
| $ | 3,154 |
|
| $ | 3,184 |
|
Land improvements |
|
| 16,372 |
|
|
| 16,372 |
|
Buildings and improvements |
|
| 159,143 |
|
|
| 160,122 |
|
Assets under finance leases |
|
| 22,000 |
|
|
| 22,000 |
|
Machinery and equipment |
|
| 610,768 |
|
|
| 609,414 |
|
Computers, software and office equipment |
|
| 24,792 |
|
|
| 24,848 |
|
Transportation equipment |
|
| 10,558 |
|
|
| 10,461 |
|
Construction in progress |
|
| 20,686 |
|
|
| 17,834 |
|
Gross PP&E |
|
| 867,473 |
|
|
| 864,235 |
|
Less: accumulated depreciation |
|
| (657,668 | ) |
|
| (656,576 | ) |
Less: accumulated amortization – finance leases |
|
| (6,466 | ) |
|
| (5,963 | ) |
Total PP&E, net |
| $ | 203,339 |
|
| $ | 201,696 |
|
Other consists primarily of accruals for utilities, property taxes, employee-related claims and payments, interest, marketing expenses, freight expenses, rent, other non-income related taxes and deferred revenue.
8. Long-Term Debt
Debt Obligations
The following table presents the total balances outstanding for UNIFI’s debt obligations, their scheduled maturity dates and the weighted average interest rates for borrowings as well as the applicable current portion of long-term debt:
|
|
|
| Weighted Average |
|
|
|
| ||||||
|
| Scheduled |
| Interest Rate as of |
|
| Principal Amounts as of |
| ||||||
|
| Maturity Date |
| December 24, 2017 |
|
| December 24, 2017 |
|
| June 25, 2017 |
| |||
ABL Revolver |
| March 2020 |
| 3.3% |
|
| $ | 21,900 |
|
| $ | 9,300 |
| |
ABL Term Loan (1) |
| March 2020 |
| 3.3% |
|
|
| 90,000 |
|
|
| 95,000 |
| |
Capital lease obligations |
| (2) |
| 3.7% |
|
|
| 21,640 |
|
|
| 25,168 |
| |
Total debt |
|
|
|
|
|
|
|
| 133,540 |
|
|
| 129,468 |
|
Current portion of capital lease obligations |
|
|
|
|
|
|
|
| (7,112 | ) |
|
| (7,060 | ) |
Current portion of other long-term debt |
|
|
|
|
|
|
|
| (10,000 | ) |
|
| (10,000 | ) |
Unamortized debt issuance costs |
|
|
|
|
|
|
|
| (840 | ) |
|
| (1,026 | ) |
Total long-term debt |
|
|
|
|
|
|
| $ | 115,588 |
|
| $ | 111,382 |
|
|
|
|
|
On March 26, 2015, Unifi, Inc. and its subsidiary, Unifi Manufacturing, Inc., entered into an Amended and Restated Credit Agreement for a $200,000 senior secured credit facility (the “ABL Facility”) with a syndicate of lenders. The ABL Facility consists of a $100,000 revolving credit facility (the “ABL Revolver”) and a term loan that can be reset up to a maximum amount of $100,000, once per fiscal year, if certain conditions are met (the “ABL Term Loan”). The ABL Facility has a maturity date of March 26, 2020.
Scheduled Debt Maturities
The following table presents the scheduled maturities of UNIFI’s outstanding debt obligations for the remainder of fiscal 2018 and the fiscal years thereafter:
|
| Fiscal 2018 |
|
| Fiscal 2019 |
|
| Fiscal 2020 |
|
| Fiscal 2021 |
|
| Fiscal 2022 |
|
| Thereafter |
| ||||||
ABL Revolver |
| $ | — |
|
| $ | — |
|
| $ | 21,900 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
ABL Term Loan |
|
| 5,000 |
|
|
| 10,000 |
|
|
| 75,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Capital lease obligations |
|
| 3,533 |
|
|
| 6,996 |
|
|
| 5,519 |
|
|
| 2,624 |
|
|
| 2,417 |
|
|
| 551 |
|
Total |
| $ | 8,533 |
|
| $ | 16,996 |
|
| $ | 102,419 |
|
| $ | 2,624 |
|
| $ | 2,417 |
|
| $ | 551 |
|
8
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
9. Other Long-Term LiabilitiesNon-Current Assets
Other long-term liabilities consists of the following:
|
| December 24, 2017 |
|
| June 25, 2017 |
| ||
Uncertain tax positions |
| $ | 5,293 |
|
| $ | 5,077 |
|
Other |
|
| 5,800 |
|
|
| 6,727 |
|
Total other long-term liabilities |
| $ | 11,093 |
|
| $ | 11,804 |
|
Other primarily includes UNIFI’s unfunded supplemental post-employment plan, certain retiree and post-employment medical and disability liabilities, deferred revenue and deferred energy incentive credits.
10. Income Taxes
The provision for income taxes was as follows:
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||||
(Benefit) provision for income taxes |
| $ | (4,826 | ) |
| $ | 1,924 |
|
| $ | (1,630 | ) |
| $ | 5,650 |
|
Effective tax rate |
|
| (69.2 | )% |
|
| 30.6 | % |
|
| (8.5 | )% |
|
| 29.5 | % |
H.R. 1, formerly known as the Tax Cuts and Jobs Act, was enacted on December 22, 2017. H.R. 1 includes significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, a one-time mandatory deemed repatriation of foreign earning and profits (the “toll charge”), deductions, credits and business-related exclusions.
The permanent reduction to the U.S. federal corporate income tax rate from 35% to 21% was effective January 1, 2018. When a U.S. federal tax rate change occurs during a fiscal year, taxpayers are required to compute a weighted daily average rate for the fiscal year of enactment. As a result of H.R. 1, UNIFI has calculated a U.S. federal corporate income tax rate of 28.25% for its fiscal 2018 tax year.
The effective tax rates for the periods presented above are lower than the U.S. statutory tax rate primarily due to the one-time tax benefit resulting from the revaluation of UNIFI’s domestic deferred tax balances for the lower U.S. statutory tax rate, the release of a valuation allowance on certain historical net operating losses (“NOLs”) and foreign income being taxed at lower rates. These benefits were partially offset by a provisional amount for the toll charge, net of foreign tax credits, and losses in tax jurisdictions for which no tax benefit can currently be recognized.
UNIFI revalued its measurable deferred tax balances based upon the new tax rate at which the temporary differences and carryforwards are expected to reverse. UNIFI recorded a tax benefit of approximately $4,500 as a result of the net change in deferred tax balances. UNIFI determined that the impact of the U.S. federal corporate income tax rate change on the U.S. deferred taxnon-current assets and liabilities is provisional because the number cannot be calculated until the underlying timing differences are known rather than estimated.
Specific to the toll charge, UNIFI has recorded a $1,700 provisional charge, net of foreign tax credits, based on the following estimates: (i) earnings and profits of foreign jurisdictions that will not be complete until the end of fiscal 2018, (ii) the aggregate cash position at June 24, 2018 and (iii) finalization of taxes paid in foreign jurisdictions. Additionally, the estimates have been made based on UNIFI’s interpretation of H.R. 1. The U.S. Treasury has indicated in Notice 2018-07 that it expects to issue further guidance to clarify certain technical aspects of H.R. 1, which could impact UNIFI’s computations and provisional amounts recorded.
Within the calculation of the annual effective tax rate, UNIFI has used assumptions and estimates that may change as a result of future guidance, interpretation, and rulemaking from the Internal Revenue Service, the SEC, the FASB and/or various other taxing authorities. For example, UNIFI anticipates that state taxing authorities will continue to determine and announce their conformity to H.R. 1 which could have an impact on UNIFI’s annual effective tax rate.
UNIFI continues to review the anticipated impacts of the global intangible low-taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”), which are not effective until fiscal 2019. UNIFI has not recorded any impact associated with either GILTI or BEAT.
9
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
UNIFI has recorded all known and estimable impacts of H.R. 1 that are effective for fiscal 2018. Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.
UNIFI regularly assesses the outcomes of both completed and ongoing examinations to ensure that UNIFI’s provision for income taxes is sufficient. Certain returns that remain open to examination have utilized carryforward tax attributes generated in prior tax years, including NOLs, which could potentially be revised upon examination.
UNIFI also regularly assesses whether it is more-likely-than-not that some portion or all of its deferred tax assets will not be realized. UNIFI considers the scheduled reversal of taxable temporary differences, taxable income in carryback years, projected future taxable income and tax planning strategies in making this assessment. Since UNIFI operates in multiple jurisdictions, the assessment is made on a jurisdiction-by-jurisdiction basis, taking into account the effects of local tax law. Due to new facts and circumstances in the second quarter of fiscal 2018, UNIFI has determined it can utilize certain NOLs to offset future taxable income and has reduced the corresponding valuation allowance by $3,807. There was also a reduction to valuation allowances on U.S. deferred tax assets in the current period as a result of the lower U.S. statutory tax rate under H.R. 1.
The components of UNIFI’s deferred tax valuation allowance are as follows:
|
| December 24, 2017 |
|
| June 25, 2017 |
| ||
Investment in a former domestic unconsolidated affiliate |
| $ | (3,958 | ) |
| $ | (6,269 | ) |
Equity-method investment in PAL |
|
| (1,217 | ) |
|
| (1,520 | ) |
Certain losses carried forward (1) |
|
| (1,548 | ) |
|
| (5,924 | ) |
State NOLs |
|
| (108 | ) |
|
| (108 | ) |
Other foreign NOLs (2) |
|
| (2,963 | ) |
|
| (3,347 | ) |
Foreign tax credits |
|
| (1,167 | ) |
|
| (789 | ) |
Total deferred tax valuation allowance |
| $ | (10,961 | ) |
| $ | (17,957 | ) |
|
|
|
|
11. Shareholders’ Equity
|
| Shares |
|
| Common Stock |
|
| Capital in Excess of Par Value |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Loss |
|
| Total Shareholders’ Equity |
| ||||||
Balance at June 25, 2017 |
|
| 18,230 |
|
| $ | 1,823 |
|
| $ | 51,923 |
|
| $ | 339,940 |
|
| $ | (32,880 | ) |
| $ | 360,806 |
|
Options exercised |
|
| 54 |
|
|
| 6 |
|
|
| 213 |
|
|
| — |
|
|
| — |
|
|
| 219 |
|
Conversion of restricted stock units |
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock-based compensation |
|
| 4 |
|
|
| — |
|
|
| 3,079 |
|
|
| — |
|
|
| — |
|
|
| 3,079 |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,423 |
|
|
| 1,423 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,762 |
|
|
| — |
|
|
| 20,762 |
|
Balance at December 24, 2017 |
|
| 18,291 |
|
| $ | 1,829 |
|
| $ | 55,215 |
|
| $ | 360,702 |
|
| $ | (31,457 | ) |
| $ | 386,289 |
|
No dividends were paid during the six months ended December 24, 2017 or in the two most recently completed fiscal years.
10
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
The following table provides information as of December 24, 2017 with respect to the number of securities remaining available for future issuance under the Unifi, Inc. 2013 Incentive Compensation Plan (the “2013 Plan”):
|
| |||
|
| |||
|
|
| ||
|
|
| ||
|
|
During the six months ended December 24, 2017 and December 25, 2016, UNIFI granted stock options to purchase 54 and 128 shares of common stock, respectively.
During the six months ended December 24, 2017 and December 25, 2016, UNIFI granted 90 and 31 restricted stock units (“RSUs”), respectively.
13. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities
UNIFI may use derivative financial instruments such as foreign currency forward contracts or interest rate swaps to reduce its ongoing business exposures to fluctuations in foreign currency exchange rates or interest rates. UNIFI does not enter into derivative contracts for speculative purposes. The following table presents details regarding UNIFI’s hedging activities:
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||||
Interest expense |
| $ | 1,190 |
|
| $ | 914 |
|
| $ | 2,375 |
|
| $ | 1,606 |
|
Increase in fair value of interest rate swaps |
|
| (1,077 | ) |
|
| (89 | ) |
|
| (1,492 | ) |
|
| (188 | ) |
Impact of interest rate swaps on interest expense |
|
| 123 |
|
|
| 65 |
|
|
| 254 |
|
|
| 137 |
|
For the six months ended December 24, 2017 and December 25, 2016, there were no significant changes to UNIFI’s assets and liabilities measured at fair value, and there were no transfers into or out of the levels of the fair value hierarchy.
UNIFI believes that there have been no significant changes to its credit risk profile or the interest rates available to UNIFI for debt issuances with similar terms and average maturities, and UNIFI estimates that the fair values of its debt obligations approximate the carrying amounts. Other financial instruments include cash and cash equivalents, receivables, accounts payable and accrued expenses. The financial statement carrying amounts of these items approximate the fair value due to their short-term nature.
14. Accumulated Other Comprehensive Loss
The components of and the changes in accumulated other comprehensive loss, net of tax, as applicable, consist of the following:
|
| Foreign Currency Translation Adjustments |
|
| Changes in Interest Rate Swaps |
|
| Accumulated Other Comprehensive Loss |
| |||
Balance at June 25, 2017 |
| $ | (32,372 | ) |
| $ | (508 | ) |
| $ | (32,880 | ) |
Other comprehensive (loss) income, net of tax |
|
| (69 | ) |
|
| 1,492 |
|
|
| 1,423 |
|
Balance at December 24, 2017 |
| $ | (32,441 | ) |
| $ | 984 |
|
| $ | (31,457 | ) |
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||
Recovery of non-income taxes |
| $ | 7,638 |
|
| $ | 8,063 |
|
Intangible assets, net |
|
| 3,604 |
|
|
| 3,978 |
|
Investments in unconsolidated affiliates |
|
| 2,377 |
|
|
| 2,159 |
|
Vendor deposits and other |
|
| 442 |
|
|
| 425 |
|
Total other non-current assets |
| $ | 14,061 |
|
| $ | 14,625 |
|
Recovery of Non-Income Taxes
11
Unifi, Inc.As previously described in Note 7, “Other Current Assets,” UNIFI recorded a recovery of non-income taxes and reflected current and non-current assets accordingly.
Notes to Condensed Consolidated Financial Statements (Continued)
A summary of the after-tax effects of the components of other comprehensive (loss) income, net for the three-month and six-month periods ended December 24, 2017 and December 25, 2016 is included in the accompanying condensed consolidated statements of comprehensive income.
15. Earnings Per Share
The components of the calculation of earnings per share (“EPS”) are as follows:
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||||
Net income attributable to Unifi, Inc. |
| $ | 11,802 |
|
| $ | 4,591 |
|
| $ | 20,762 |
|
| $ | 13,994 |
|
Basic weighted average shares |
|
| 18,273 |
|
|
| 18,128 |
|
|
| 18,260 |
|
|
| 18,045 |
|
Net potential common share equivalents – stock options and RSUs |
|
| 378 |
|
|
| 314 |
|
|
| 338 |
|
|
| 346 |
|
Diluted weighted average shares |
|
| 18,651 |
|
|
| 18,442 |
|
|
| 18,598 |
|
|
| 18,391 |
|
Excluded from diluted weighted average shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive common share equivalents |
|
| 60 |
|
|
| 185 |
|
|
| 290 |
|
|
| 271 |
|
The calculation of EPS is based on the weighted average number of Unifi, Inc.’s common shares outstanding for the applicable period. The calculation of diluted EPS presents the effect of all potential dilutive common shares that were outstanding during the respective period, unless the effect of doing so is anti-dilutive.
16. Investments in Unconsolidated Affiliates and Variable Interest Entities
As of September 26, 2021, UNIFI currently maintainsmaintained investments in three2 entities classified as unconsolidated affiliates: PAL; U.N.F. Industries, Ltd. (“UNF”); and UNF America LLC (“UNFA”) (collectively “UNFs”). As of December 24, 2017, UNIFI’s investment in PAL was $110,321 and UNIFI’s combined investments in UNF and UNFA were $3,302, each of which is reflected within investments in unconsolidated affiliates in the accompanying condensed consolidated balance sheets.
Parkdale America, LLC
PAL is a limited liability company treated as a partnership for income tax reporting purposes. UNIFI accounts for its investment in PAL using the equity method of accounting. PAL is subject to price risk related to anticipated fixed-price yarn sales. To protect the gross margin of these sales, PAL may enter into cotton futures to manage changes in raw material prices. The derivative instruments used are listed and traded on an exchange and are valued using quoted prices classified within Level 1 of the fair value hierarchy. As of December 2017, PAL had no futures contracts designated as cash flow hedges.
The reconciliation between UNIFI’s share of the underlying equity of PAL and its investment is as follows:
Underlying equity as of December 24, 2017 |
| $ | 128,412 |
|
Initial excess capital contributions |
|
| 53,363 |
|
Impairment charge recorded by UNIFI in fiscal 2007 |
|
| (74,106 | ) |
Anti-trust lawsuit against PAL in which UNIFI did not participate |
|
| 2,652 |
|
Investment as of December 24, 2017 |
| $ | 110,321 |
|
U.N.F. Industries, Ltd.
Raw material and production services for UNF are provided by Nilit Ltd. under separate supply and services agreements. UNF’s fiscal year end is December 31, and it is a registered Israeli private company located in Migdal Ha-Emek, Israel.
UNF America LLC
Raw material and production services for UNFA are provided by Nilit America Inc. under separate supply and services agreements. UNFA’s fiscal year end is December 31, and it is a limited liability company treated as a partnership for income tax reporting purposes located in Ridgeway, Virginia.
12
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
In conjunction with the formation of UNFA, UNIFI entered into a supply agreement with UNF and UNFA whereby UNIFI agreed to purchase all of its first quality nylon POY requirements for texturing (subject to certain exceptions) from either UNF or UNFA. The supply agreement has no stated minimum purchase quantities and pricing is typically negotiated every six months, based on market rates. As of December 24, 2017,September 26, 2021, UNIFI’s open purchase orders related to this supply agreement were $3,158.$1,914.
8
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
UNIFI’s raw material purchases under this supply agreement consistconsisted of the following:
|
| For the Six Months Ended |
|
| For the Three Months Ended |
| ||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||||
UNFA |
| $ | 5,830 |
|
| $ | 3,527 |
| ||||||||
UNF |
| $ | 1,141 |
|
| $ | 1,250 |
|
|
| 71 |
|
|
| — |
|
UNFA |
|
| 10,406 |
|
|
| 9,579 |
| ||||||||
Total |
| $ | 11,547 |
|
| $ | 10,829 |
|
| $ | 5,901 |
|
| $ | 3,527 |
|
As of December 24, 2017September 26, 2021 and June 25, 2017,27, 2021, UNIFI had combined accounts payable due to UNF and UNFA of $1,483$3,077 and $2,301,$2,955, respectively.
UNIFI has determined that UNF and UNFA are variable interest entities (“VIEs”) and that UNIFI is the primary beneficiary of these entities, based on the terms of the supply agreement discussed above. As a result, these entities should be consolidated with UNIFI’s financial results. As (i) UNIFI purchases substantially all of the output from the two entities,entities; (ii) the two entities’ balance sheets constitute 3% or less of UNIFI’s current assets, total assets and total liabilitiesliabilities; and because(iii) such balances are not expected to comprise a larger portion in the future, UNIFI has not included the accounts of UNF and UNFA in its consolidated financial statements. The financial results of UNF and UNFA are included in UNIFI’s consolidated financial statements with a one-month lag, using the equity method of accounting and with intercompany profits eliminated in accordance with UNIFI’s accounting policy. Other than the supply agreement discussed above, UNIFI does not provide any other commitments or guarantees related to either UNF or UNFA.
Condensed balance sheet and income statement information for UNIFI’s unconsolidated affiliates (including reciprocal balances) isare presented in the tables below. PAL is defined as significant and its information is separately disclosed. PAL does not meet the criteria for segment reporting.
|
| As of December 24, 2017 |
| |||||||||||||||||
|
| PAL |
|
| Other |
|
| Total |
|
| September 26, 2021 |
|
| June 27, 2021 |
| |||||
Current assets |
| $ | 265,491 |
|
| $ | 8,797 |
|
| $ | 274,288 |
|
| $ | 8,406 |
|
| $ | 7,931 |
|
Noncurrent assets |
|
| 171,256 |
|
|
| 971 |
|
|
| 172,227 |
| ||||||||
Non-current assets |
|
| 625 |
|
|
| 659 |
| ||||||||||||
Current liabilities |
|
| 56,134 |
|
|
| 3,262 |
|
|
| 59,396 |
|
|
| 4,281 |
|
|
| 3,967 |
|
Noncurrent liabilities |
|
| 2,933 |
|
|
| — |
|
|
| 2,933 |
| ||||||||
Non-current liabilities |
|
| — |
|
|
| — |
| ||||||||||||
Shareholders’ equity and capital accounts |
|
| 377,680 |
|
|
| 6,506 |
|
|
| 384,186 |
|
|
| 4,750 |
|
|
| 4,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNIFI’s portion of undistributed earnings |
|
| 41,432 |
|
|
| 1,411 |
|
|
| 42,843 |
|
|
| 2,318 |
|
|
| 2,100 |
|
|
| As of June 25, 2017 |
| |||||||||
|
| PAL |
|
| Other |
|
| Total |
| |||
Current assets |
| $ | 247,820 |
|
| $ | 10,340 |
|
| $ | 258,160 |
|
Noncurrent assets |
|
| 183,418 |
|
|
| 1,039 |
|
|
| 184,457 |
|
Current liabilities |
|
| 54,389 |
|
|
| 3,588 |
|
|
| 57,977 |
|
Noncurrent liabilities |
|
| 3,263 |
|
|
| — |
|
|
| 3,263 |
|
Shareholders’ equity and capital accounts |
|
| 373,586 |
|
|
| 7,791 |
|
|
| 381,377 |
|
| For the Three Months Ended |
| |||||
| September 26, 2021 |
|
| September 27, 2020 |
| ||
Net sales | $ | 6,150 |
|
| $ | 3,213 |
|
Gross profit |
| 544 |
|
|
| 441 |
|
Income from operations |
| 127 |
|
|
| 46 |
|
Net income |
| 127 |
|
|
| 49 |
|
Depreciation and amortization |
| 33 |
|
|
| 36 |
|
|
|
|
|
|
|
|
|
Distributions received |
| — |
|
|
| — |
|
13
10. Other Current Liabilities
Other current liabilities consists of the following:
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||
Payroll and fringe benefits |
| $ | 8,706 |
|
| $ | 10,204 |
|
Deferred revenue |
|
| 2,654 |
|
|
| 2,691 |
|
Incentive compensation |
|
| 2,377 |
|
|
| 12,356 |
|
Current portion of supplemental post-employment plan |
|
| 1,097 |
|
|
| 1,087 |
|
Interest rate swaps |
|
| 901 |
|
|
| 1,234 |
|
Other |
|
| 3,584 |
|
|
| 4,066 |
|
Total other current liabilities |
| $ | 19,319 |
|
| $ | 31,638 |
|
9
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
|
| For the Three Months Ended December 24, 2017 |
| |||||||||
|
| PAL |
|
| Other |
|
| Total |
| |||
Net sales |
| $ | 176,577 |
|
| $ | 6,756 |
|
| $ | 183,333 |
|
Gross profit |
|
| 2,379 |
|
|
| 1,628 |
|
|
| 4,007 |
|
(Loss) income from operations |
|
| (1,922 | ) |
|
| 1,185 |
|
|
| (737 | ) |
Net (loss) income |
|
| (1,398 | ) |
|
| 1,198 |
|
|
| (200 | ) |
Depreciation and amortization |
|
| 10,885 |
|
|
| 47 |
|
|
| 10,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received by PAL under cotton rebate program |
|
| 4,701 |
|
|
| — |
|
|
| 4,701 |
|
Earnings recognized by PAL for cotton rebate program |
|
| 3,191 |
|
|
| — |
|
|
| 3,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions received |
|
| — |
|
|
| 1,500 |
|
|
| 1,500 |
|
|
| For the Three Months Ended December 25, 2016 |
| |||||||||
|
| PAL |
|
| Other |
|
| Total |
| |||
Net sales |
| $ | 153,074 |
|
| $ | 5,056 |
|
| $ | 158,130 |
|
Gross profit |
|
| 1,765 |
|
|
| 983 |
|
|
| 2,748 |
|
(Loss) income from operations |
|
| (2,849 | ) |
|
| 509 |
|
|
| (2,340 | ) |
Net (loss) income |
|
| (2,238 | ) |
|
| 513 |
|
|
| (1,725 | ) |
Depreciation and amortization |
|
| 11,708 |
|
|
| 45 |
|
|
| 11,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received by PAL under cotton rebate program |
|
| 3,635 |
|
|
| — |
|
|
| 3,635 |
|
Earnings recognized by PAL for cotton rebate program |
|
| 2,907 |
|
|
| — |
|
|
| 2,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions received |
|
| — |
|
|
| 750 |
|
|
| 750 |
|
|
| For the Six Months Ended December 24, 2017 |
| |||||||||
|
| PAL |
|
| Other |
|
| Total |
| |||
Net sales |
| $ | 379,368 |
|
| $ | 12,449 |
|
| $ | 391,817 |
|
Gross profit |
|
| 16,089 |
|
|
| 2,582 |
|
|
| 18,671 |
|
Income from operations |
|
| 8,034 |
|
|
| 1,694 |
|
|
| 9,728 |
|
Net income |
|
| 6,948 |
|
|
| 1,716 |
|
|
| 8,664 |
|
Depreciation and amortization |
|
| 20,485 |
|
|
| 94 |
|
|
| 20,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received by PAL under cotton rebate program |
|
| 6,942 |
|
|
| — |
|
|
| 6,942 |
|
Earnings recognized by PAL for cotton rebate program |
|
| 6,446 |
|
|
| — |
|
|
| 6,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions received |
|
| 7,178 |
|
|
| 1,500 |
|
|
| 8,678 |
|
|
| For the Six Months Ended December 25, 2016 |
| |||||||||
|
| PAL |
|
| Other |
|
| Total |
| |||
Net sales |
| $ | 358,974 |
|
| $ | 11,058 |
|
| $ | 370,032 |
|
Gross profit |
|
| 7,261 |
|
|
| 2,528 |
|
|
| 9,789 |
|
(Loss) income from operations |
|
| (1,988 | ) |
|
| 1,594 |
|
|
| (394 | ) |
Net (loss) income |
|
| (1,364 | ) |
|
| 1,610 |
|
|
| 246 |
|
Depreciation and amortization |
|
| 23,184 |
|
|
| 84 |
|
|
| 23,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received by PAL under cotton rebate program |
|
| 7,762 |
|
|
| — |
|
|
| 7,762 |
|
Earnings recognized by PAL for cotton rebate program |
|
| 6,796 |
|
|
| — |
|
|
| 6,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions received |
|
| — |
|
|
| 1,500 |
|
|
| 1,500 |
|
1411. Long-Term Debt
Debt Obligations
The following table presents the total balances outstanding for UNIFI’s debt obligations, their scheduled maturity dates and the weighted average interest rates for borrowings as well as the applicable current portion of long-term debt:
|
|
|
| Weighted Average |
|
|
| ||||||||
|
| Scheduled |
| Interest Rate as of |
| Principal Amounts as of |
| ||||||||
|
| Maturity Date |
| September 26, 2021 |
| September 26, 2021 |
|
| June 27, 2021 |
| |||||
ABL Revolver |
| December 2023 |
|
| 0.0 | % |
|
| $ | — |
|
| $ | — |
|
ABL Term Loan |
| December 2023 |
|
| 3.2 | % | (1) |
|
| 75,000 |
|
|
| 77,500 |
|
Finance lease obligations |
| (2) |
|
| 3.6 | % |
|
|
| 7,548 |
|
|
| 8,475 |
|
Construction financing |
| (3) |
|
| 2.3 | % |
|
|
| 1,764 |
|
|
| 882 |
|
Total debt |
|
|
|
|
|
|
|
|
| 84,312 |
|
|
| 86,857 |
|
Current ABL Term Loan |
|
|
|
|
|
|
|
|
| (12,500 | ) |
|
| (12,500 | ) |
Current portion of finance lease obligations |
|
|
|
|
|
|
|
|
| (2,928 | ) |
|
| (3,545 | ) |
Unamortized debt issuance costs |
|
|
|
|
|
|
|
|
| (419 | ) |
|
| (476 | ) |
Total long-term debt |
|
|
|
|
|
|
|
| $ | 68,465 |
|
| $ | 70,336 |
|
(1) | Includes the effects of interest rate swaps. |
(2) | Scheduled maturity dates for finance lease obligations range from May 2022 to November 2027. |
(3) | Refer to the discussion below under the subheading “─Construction Financing” for further information. |
ABL Facility
On December 18, 2018, Unifi, Inc. and certain of its subsidiaries entered into a Third Amendment to Amended and Restated Credit Agreement and Second Amendment to Amended and Restated Guaranty and Security Agreement (the “2018 Amendment”). The 2018 Amendment amended the Amended and Restated Credit Agreement, dated as of March 26, 2015, by and among Unifi, Inc. and a syndicate of lenders, as previously amended (together with all previous and subsequent amendments, the “Credit Agreement”). The Credit Agreement provides for a $200,000 senior secured credit facility (the “ABL Facility”), including a $100,000 revolving credit facility (the “ABL Revolver”) and a term loan that can be reset up to a maximum amount of $100,000, once per fiscal year, if certain conditions are met (the “ABL Term Loan”). The ABL Facility has a maturity date of December 18, 2023.
ABL Facility borrowings bear interest at LIBOR plus an applicable margin of 1.25% to 1.75%, or the Base Rate (as defined in the Credit Agreement) plus an applicable margin of 0.25% to 0.75%, with interest currently being paid on a monthly basis. As of September 26, 2021 and June 27, 2021, ABL Facility borrowings carried interest at LIBOR plus 1.25%.
UNIFI currently maintains 3 interest rate swaps that fix LIBOR at approximately 1.9% on $75,000 of variable-rate debt. Such swaps are scheduled to terminate in May 2022.
Construction Financing
In May 2021, UNIFI entered into an agreement with a third party lender that provides for construction-period financing for certain texturing machinery anticipated in our capital allocation plans. UNIFI will record project costs to construction in progress and the corresponding liability to construction financing (within long-term debt). The agreement provides for monthly, interest-only payments during the construction period, at a rate of LIBOR plus 2.2%, and contains terms customary for a financing of this type.
The agreement provides for 60 monthly payments, which will commence upon the completion of the construction period with an interest rate of approximately 2.8%. In connection with this construction financing arrangement, UNIFI recorded long-term debt of $1,764 as of September 26, 2021.
Scheduled Debt Maturities
The following table presents the scheduled maturities of UNIFI’s outstanding debt obligations for the remainder of fiscal 2022, the following four fiscal years and thereafter:
|
| Fiscal 2022 |
|
| Fiscal 2023 |
|
| Fiscal 2024 |
|
| Fiscal 2025 |
|
| Fiscal 2026 |
|
| Thereafter |
| ||||||
ABL Revolver |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
ABL Term Loan |
|
| 10,000 |
|
|
| 10,000 |
|
|
| 55,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Finance lease obligations |
|
| 2,618 |
|
|
| 1,257 |
|
|
| 1,301 |
|
|
| 1,195 |
|
|
| 733 |
|
|
| 444 |
|
Total (1) |
| $ | 12,618 |
|
| $ | 11,257 |
|
| $ | 56,301 |
|
| $ | 1,195 |
|
| $ | 733 |
|
| $ | 444 |
|
10
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(1) | Total reported excludes $1,764 for construction financing, described above. |
12. Other Long-Term Liabilities
Other long-term liabilities consists of the following:
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||
Uncertain tax positions |
| $ | 3,168 |
|
| $ | 3,045 |
|
Supplemental post-employment plan |
|
| 2,168 |
|
|
| 2,090 |
|
Other |
|
| 2,308 |
|
|
| 2,337 |
|
Total other long-term liabilities |
| $ | 7,644 |
|
| $ | 7,472 |
|
13. Income Taxes
The provision (benefit) for income taxes and effective tax rate were as follows:
|
| For the Three Months Ended |
| |||||
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||
Provision (benefit) for income taxes |
| $ | 4,413 |
|
| $ | (1,179 | ) |
Effective tax rate |
|
| 33.7 | % |
|
| (52.3 | )% |
U.S. Tax Law Change
On July 20, 2020, the U.S. Treasury issued and enacted final regulations related to global intangible low-tax income (“GILTI”) that allow certain U.S. taxpayers to elect to exclude foreign income that is subject to a high effective tax rate from their GILTI inclusions. The GILTI high-tax exclusion is an annual election and is retroactively available for tax years beginning after December 31, 2017. The three-month period ended September 27, 2020 includes a discrete tax benefit of $4,789 related to the retroactive election.
Valuation Allowance
UNIFI regularly assesses whether it is more-likely-than-not that some portion or all of its deferred tax assets will not be realized. UNIFI considers the scheduled reversal of taxable temporary differences, taxable income in carryback years, projected future taxable income and tax planning strategies in making this assessment. Since UNIFI operates in multiple jurisdictions, the assessment is made on a jurisdiction-by-jurisdiction basis, taking into consideration the effects of local tax law. The three-month period ended September 27, 2020 includes discrete tax expense of $2,127 for a change in valuation allowance related to the GILTI regulations enacted during that period.
Income Tax Expense
UNIFI’s provision (benefit) for income taxes for the three months ended September 26, 2021 and September 27, 2020 was calculated by applying the estimated annual effective tax rate to year-to-date pre-tax book income and adjusting for discrete items that occurred during the period.
The effective tax rate for the three months ended September 26, 2021 was higher than the U.S. federal statutory rate primarily due to earnings taxed at higher rates in foreign jurisdictions, deferred tax on unremitted earnings, and foreign withholding taxes.
The effective tax rate for the three months ended September 27, 2020 was lower than the U.S. federal statutory rate primarily due to the retroactive GILTI high-tax exclusion for prior periods. This benefit was partially offset by the change in valuation allowance for deferred tax assets and current U.S. tax on GILTI.
Unrecognized Tax Benefits
UNIFI regularly assesses the outcomes of both completed and ongoing examinations to ensure that its provision for income taxes is sufficient. Certain returns that remain open to examination have utilized carryforward tax attributes generated in prior tax years, including net operating losses, which could potentially be revised upon examination.
14. Shareholders’ Equity
On October 31, 2018, UNIFI announced that its Board of Directors (the “Board”) approved a share repurchase program (the “2018 SRP”) under which UNIFI is authorized to acquire up to $50,000 of its common stock. Under the 2018 SRP, purchases may be made from time to time in the open market at prevailing market prices, through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements and other factors. The share repurchase authorization is discretionary and has no expiration date. Repurchases, if any, are expected to be financed through cash generated from operations and borrowings under the ABL Revolver, and are subject to applicable limitations and restrictions as set forth in the ABL Facility. UNIFI may discontinue repurchases at any time that management determines additional purchases are not beneficial or advisable.
11
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The following table summarizes UNIFI’s repurchases and retirements of its common stock under the 2018 SRP for the fiscal periods noted:
|
| Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs |
|
| Average Price Paid per Share |
|
| Approximate Dollar Value that May Yet Be Repurchased Under Publicly Announced Plans or Programs |
| |||
Fiscal 2019 |
|
| — |
|
| $ | — |
|
| $ | 50,000 |
|
Fiscal 2020 |
|
| 84 |
|
| $ | 23.72 |
|
| $ | 48,008 |
|
Fiscal 2021 |
|
| — |
|
| $ | — |
|
| $ | 48,008 |
|
Fiscal 2022 (through September 26, 2021) |
|
| — |
|
| $ | — |
|
| $ | 48,008 |
|
Total |
|
| 84 |
|
| $ | 23.72 |
|
| $ | 48,008 |
|
Repurchased shares are retired and have the status of authorized and unissued shares. The cost of the repurchased shares is recorded as a reduction to common stock to the extent of the par value of the shares acquired and the remainder is allocated between capital in excess of par value and retained earnings, on a pro rata basis.
15. Stock-Based Compensation
On October 29, 2020, UNIFI’s shareholders approved the Unifi, Inc. Second Amended and Restated 2013 Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan set the number of shares available for future issuance pursuant to awards granted under the 2020 Plan to 850. No additional awards can be granted under prior plans; however, awards outstanding under a respective prior plan remain subject to that plan’s provisions.
The following table provides the number of awards remaining available for future issuance under the 2020 Plan as of September 26, 2021:
Authorized under the 2020 Plan | 850 | |||
Plus: Awards expired, forfeited or otherwise terminated unexercised | — | |||
Less: Awards granted to employees | (75 | ) | ||
Less: Awards granted to non-employee directors | (4 | ) | ||
Available for issuance under the 2020 Plan | 771 |
There were 0 awards granted or issued from an equity compensation plan for the three month periods ending September 26, 2021 or September 27, 2020.
On October 27, 2021, UNIFI’s shareholders approved the Unifi, Inc. Employee Stock Purchase Plan (the “ESPP”) as described in the Company’s definitive proxy statement on Schedule 14A filed with the SEC on September 2, 2021. The ESPP reserved 100 Company shares, is intended to be a qualified plan under applicable tax law, and allows eligible employees to purchase Company shares at a 15% discount from market value.
16. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities
UNIFI uses derivative financial instruments such as foreign currency forward contracts or interest rate swaps to reduce its ongoing business exposures to fluctuations in foreign currency exchange rates or interest rates. UNIFI currently maintains 3 interest rate swaps that fix LIBOR at approximately 1.9% on $75,000 of variable-rate debt. UNIFI does not enter into derivative contracts for speculative purposes.
The following table presents details regarding UNIFI’s hedging activities:
|
| For the Three Months Ended |
| |||||
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||
Interest expense |
| $ | 696 |
|
| $ | 871 |
|
Increase in fair value of interest rate swaps |
|
| (333 | ) |
|
| (332 | ) |
Impact of interest rate swaps to increase interest expense |
|
| 347 |
|
|
| 329 |
|
For the three months ended September 26, 2021 and September 27, 2020, there were no significant changes to UNIFI’s assets and liabilities measured at fair value, and there were 0 transfers into or out of the levels of the fair value hierarchy.
UNIFI believes that there have been no significant changes to its credit risk profile or the interest rates available to UNIFI for debt issuances with similar terms and average maturities, and UNIFI estimates that the fair values of its debt obligations approximate the carrying amounts. Other financial instruments include cash and cash equivalents, receivables, accounts payable and accrued expenses. The financial statement carrying amounts of these items approximate the fair values due to their short-term nature.
12
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
17. Accumulated Other Comprehensive Loss
The components of and the changes in accumulated other comprehensive loss, net of tax, as applicable, consist of the following:
|
| Foreign Currency Translation Adjustments |
|
| Changes in Interest Rate Swaps |
|
| Accumulated Other Comprehensive Loss |
| |||
Balance at June 27, 2021 |
| $ | (52,480 | ) |
| $ | (952 | ) |
| $ | (53,432 | ) |
Other comprehensive (loss) income |
|
| (6,926 | ) | �� |
| 256 |
|
|
| (6,670 | ) |
Balance at September 26, 2021 |
| $ | (59,406 | ) |
| $ | (696 | ) |
| $ | (60,102 | ) |
A summary of the after-tax effects of the components of other comprehensive (loss) income, net for the three-month periods ended September 26, 2021 and September 27, 2020 is included in the accompanying condensed consolidated statements of comprehensive income.
18. Earnings Per Share
The components of the calculation of earnings per share (“EPS”) are as follows:
|
| For the Three Months Ended |
| |||||
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||
Net income |
| $ | 8,680 |
|
| $ | 3,432 |
|
Basic weighted average shares |
|
| 18,515 |
|
|
| 18,447 |
|
Net potential common share equivalents |
|
| 482 |
|
|
| 251 |
|
Diluted weighted average shares |
|
| 18,997 |
|
|
| 18,698 |
|
Excluded from the calculation of common share equivalents: |
|
|
|
|
|
|
|
|
Anti-dilutive common share equivalents |
|
| 287 |
|
|
| 546 |
|
Excluded from the calculation of diluted shares: |
|
|
|
|
|
|
|
|
Unvested stock options that vest upon achievement of certain market conditions |
|
| 333 |
|
|
| 333 |
|
The calculation of EPS is based on the weighted average number of Unifi, Inc.’s common shares outstanding for the applicable period. The calculation of diluted EPS presents the effect of all potential dilutive common shares that were outstanding during the respective period, unless the effect of doing so is anti-dilutive.
19. Commitments and Contingencies
Collective Bargaining Agreements
While employees of UNIFI’s Brazilian operations are unionized, none of the labor force employed by UNIFI’s domestic or other foreign subsidiaries is currently covered by a collective bargaining agreement.
Environmental
On September 30, 2004, UNIFIUnifi Kinston, LLC (“UK”), a subsidiary of Unifi, Inc., completed its acquisition of polyester filament manufacturing assets located in Kinston, North Carolina (“Kinston”) from Invista S.a.r.l. (“INVISTA”). The land for the Kinston site was leased pursuant to a 99-year ground lease (the “Ground Lease”) with E.I. DuPont de Nemours (“DuPont”). Since 1993, DuPont has been investigating and cleaning up the Kinston site under the supervision of the U.S. Environmental Protection Agency and the North Carolina Department of Environmental Quality (“DEQ”) pursuant to the Resource Conservation and Recovery Act Corrective Action program. The program requires DuPont to identify all potential areas of environmental concern (“AOCs”), assess the extent of containment at the identified AOCs and remediate the AOCs to comply with applicable regulatory standards. Effective March 20, 2008, UNIFIUK entered into a lease termination agreement associated with conveyance of certain assets at the Kinston site to DuPont. This agreement terminated the Ground Lease and relieved UNIFIUK of any future responsibility for environmental remediation, other than participation with DuPont, if so called upon, with regard to UNIFI’sUK’s period of operation of the Kinston site, which was from 2004 to 2008. At this time, UNIFI has no basis to determine if or when it will have any responsibility or obligation with respect to the AOCs or the extent of any potential liability for the same.
UNIFI UK continues to own property (the “Kentec site”) acquired in the 2004 transaction with INVISTA that has contamination from DuPont’s prior operations and is monitored by DEQ. ThisThe Kentec site has been remediated by DuPont, and DuPont has received authority from DEQ to discontinue further remediation, other than natural attenuation. Prior to transfer of responsibility to UNIFI,UK, DuPont hasand UK had a duty to monitor and report the environmental status of the Kentec site to DEQ. UNIFI expectsEffective April 10, 2019, UK assumed sole remediator responsibility of the Kentec site pursuant to assume that responsibility in fiscal 2018its contractual obligations with INVISTA and will be entitled to receive from DuPont seven yearsreceived $180 of net monitoring and reporting costs less certain adjustments. At that time, UNIFI will assume responsibility for any future remediation of the site.due from DuPont. In connection with monitoring, UK expects to sample and report to DEQ annually. At this time, UNIFI has no basis to determinedoes not expect any active site remediation will be required but expects that any costs associated with active site remediation, if or when it will have any obligation to perform further remediation or the potential cost thereof.ever required, would likely be immaterial.
Leases
UNIFI routinely leases sales and administrative office space, warehousing and distribution centers, manufacturing space, transportation equipment, manufacturing equipment, and other information technology and office equipment from third parties.
UNIFI has assumed various financial obligations and commitments in the normal course of its operating and financing activities. Financial obligations are considered to represent known future cash payments that UNIFI is required to make under existing contractual arrangements, such as debt and lease agreements.
18. Related Party Transactions
For details regarding the nature of certain related party relationships, see Note 24, “Related Party Transactions,” to the consolidated financial statements in the 2017 Form 10-K.
Related party receivables consists of the following:
|
| December 24, 2017 |
|
| June 25, 2017 |
| ||
Salem Global Logistics, Inc. |
| $ | 7 |
|
| $ | 6 |
|
Total related party receivables (included within receivables, net) |
| $ | 7 |
|
| $ | 6 |
|
Related party payables consists of the following:
|
| December 24, 2017 |
|
| June 25, 2017 |
| ||
Salem Leasing Corporation (included within accounts payable) |
| $ | 294 |
|
| $ | 298 |
|
Salem Leasing Corporation (capital lease obligation) |
|
| 911 |
|
|
| 947 |
|
Total related party payables |
| $ | 1,205 |
|
| $ | 1,245 |
|
1513
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Related party transactions in excess of $120 for the current or prior two fiscal years consist of the following amounts for the periods presented:
|
|
|
| For the Three Months Ended |
| |||||
Affiliated Entity |
| Transaction Type |
| December 24, 2017 |
|
| December 25, 2016 |
| ||
Salem Leasing Corporation |
| Transportation equipment costs and capital lease debt service |
| $ | 969 |
|
| $ | 1,291 |
|
Salem Global Logistics, Inc. |
| Freight service income |
|
| 50 |
|
|
| 31 |
|
|
|
|
| For the Six Months Ended |
| |||||
Affiliated Entity |
| Transaction Type |
| December 24, 2017 |
|
| December 25, 2016 |
| ||
Salem Leasing Corporation |
| Transportation equipment costs and capital lease debt service |
| $ | 1,950 |
|
| $ | 2,269 |
|
Salem Global Logistics, Inc. |
| Freight service income |
|
| 92 |
|
|
| 52 |
|
19.20. Related Party Transactions
There were 0 related party receivables as of September 26, 2021 or June 27, 2021.
Related party payables for Salem Leasing Corporation consisted of the following:
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||
Accounts payable |
| $ | 457 |
|
| $ | 469 |
|
Operating lease obligations |
|
| 1,049 |
|
|
| 1,133 |
|
Finance lease obligations |
|
| 5,850 |
|
|
| 6,149 |
|
Total related party payables |
| $ | 7,356 |
|
| $ | 7,751 |
|
The following are the Company’s significant related party transactions:
|
|
|
| For the Three Months Ended |
| |||||
Affiliated Entity |
| Transaction Type |
| September 26, 2021 |
|
| September 27, 2020 |
| ||
Salem Leasing Corporation |
| Payments for transportation equipment costs and finance lease debt service |
| $ | 1,028 |
|
| $ | 939 |
|
21. Business Segment Information
UNIFI defines operating segments as components of the organization for which discrete financial information is available and operating results are evaluated on a regular basis by UNIFI’s Chief Executive Officer,principal executive officer, who is the chief operating decision maker (the “CODM”), in order to assess performance and allocate resources. Characteristics of the organizationUNIFI which were relied upon in making the determination of reportable segments include the nature of the products sold, the organization’s internal organizational structure, the trade policies in the geographic regions in which UNIFI operates and the information that is regularly reviewed by the CODM for the purpose of assessing performance and allocating resources.
UNIFI’s operating segments are aggregated into three has four reportable segments based on similarities between the operating segments’ economic characteristics, nature of products sold, type of customer, methods of distribution and regulatory environment.segments.
The operations within the Polyester Segment exhibit similar long-term economic characteristics and sell into an economic trading zone covered by the North American Free Trade Agreement (“NAFTA”) and the Dominican Republic—Central America Free Trade Agreement (“CAFTA-DR”) to similar customers utilizing similar methods of distribution. These operations derive revenues from polyester-based products with sales primarily to other yarn manufacturers and knitters and weavers that produce yarn and/or fabric for the apparel, hosiery, automotive, home furnishings, industrial and other end-use markets. The Polyester Segment consists of sales and manufacturing operations in the United States and El Salvador.
• | The operations within the Polyester Segment exhibit similar long-term economic characteristics and primarily sell into an economic trading zone covered by the USMCA, NAFTA and CAFTA (collectively, the regions comprising these economic trading zones are referred to as “NACA”) to similar customers utilizing similar methods of distribution. These operations derive revenues primarily from manufacturing polyester-based products with sales primarily to other yarn manufacturers and knitters and weavers that produce yarn and/or fabric for the apparel, hosiery, automotive, home furnishings, industrial and other end-use markets. The Polyester Segment consists of sales and manufacturing operations in the U.S. and El Salvador. |
The operations within the Nylon Segment exhibit similar long-term economic characteristics and sell into an economic trading zone covered by NAFTA and CAFTA-DR to similar customers utilizing similar methods of distribution. The Nylon Segment includes an immaterial operating segment in Colombia that sells similar nylon-based textile products to similar customers in Colombia and Mexico utilizing similar methods of distribution. These operations derive revenues from nylon-based products with sales to knitters and weavers that produce fabric primarily for the apparel and hosiery markets. The Nylon Segment consists of sales and manufacturing operations in the United States and Colombia.
• | The operations within the Asia Segment exhibit similar long-term economic characteristics and sell to similar customers utilizing similar methods of distribution primarily in Asia and Europe, which are outside of the NACA region. The Asia Segment primarily sources polyester-based products from third-party suppliers and sells to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial and other end-use markets principally in Asia. The Asia Segment includes sales offices in China. |
• | The Brazil Segment primarily manufactures and sells polyester-based products to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial and other end-use markets principally in South America. The Brazil Segment includes a manufacturing location and sales offices in Brazil. |
The operations within the International Segment exhibit similar long-term economic characteristics and sell to similar customers utilizing similar methods of distribution in geographic regions that are outside of the economic trading zone covered by NAFTA and CAFTA-DR. The International Segment primarily sells polyester-based products to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial and other end-use markets primarily in the South American and Asian regions. The International Segment includes a manufacturing location in Brazil and sales offices in Brazil, China and Sri Lanka.
• | The operations within the Nylon Segment exhibit similar long-term economic characteristics and primarily sell into the NACA region to similar customers utilizing similar methods of distribution. These operations derive revenues primarily from manufacturing nylon-based products with sales to knitters and weavers that produce fabric primarily for the apparel, hosiery and medical markets. The Nylon Segment includes an immaterial operating segment in Colombia that sells similar nylon-based textile products to similar customers in Colombia and Mexico utilizing similar methods of distribution. The Nylon Segment consists of sales and manufacturing operations in the U.S. and Colombia. |
In addition to UNIFI’s reportable segments, the selected financial information presented below includes an All Other category.category is included in the tables below. All Other consists primarily of for-hire transportation services and Repreve Renewables, LLC (“Renewables”) (up through December 23, 2016, the date of the sale by UNIFI of its 60% equity ownership interest in Renewables).services. For-hire transportation services revenue is derived from performing common carrier services utilizing UNIFI’s fleet of transportation equipment. Revenue for Renewables was primarily derived from (i) facilitating the use of miscanthus grass as bio-fuel through service agreements and (ii) delivering harvested miscanthus grass to poultry producers for animal bedding.
16
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
The operations within All Other (i) are not subject to review by the CODM at a level consistent with UNIFI’s other operations, (ii) are not regularly evaluated using the same metrics applied to UNIFI’s other operations, and (iii) do not qualify for aggregation with an existing reportable segment. Therefore, such operations are excluded from reportable segments.
UNIFI evaluates the operating performance of its segments based upon Segment Profit, (Loss), which represents segment gross profit (loss) plus segment depreciation expense. This measurement of segment profit or loss best aligns segment reporting with the current assessments and evaluations performed by, and information provided to, the CODM.
The accounting policies for the segments are consistent with UNIFI’s accounting policies. Intersegment sales are omitted from the below financial information,segment disclosures, as they are (i) insignificant to UNIFI’s segments and eliminated from consolidated reporting and (ii) excluded from segment evaluations performed by the CODM.
14
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Selected financial information is presented below:
|
| For the Three Months Ended December 24, 2017 |
|
| For the Three Months Ended September 26, 2021 |
| ||||||||||||||||||||||||||||||||||||||
|
| Polyester |
|
| Nylon |
|
| International |
|
| All Other |
|
| Total |
|
| Polyester |
|
| Asia |
|
| Brazil |
|
| Nylon |
|
| All Other |
|
| Total |
| |||||||||||
Net sales |
| $ | 90,316 |
|
| $ | 25,103 |
|
| $ | 51,046 |
|
| $ | 1,013 |
|
| $ | 167,478 |
|
| $ | 89,467 |
|
| $ | 51,428 |
|
| $ | 33,738 |
|
| $ | 20,159 |
|
| $ | 1,200 |
|
| $ | 195,992 |
|
Cost of sales |
|
| 81,740 |
|
|
| 22,027 |
|
|
| 40,072 |
|
|
| 963 |
|
|
| 144,802 |
|
|
| 81,173 |
|
|
| 44,457 |
|
|
| 23,798 |
|
|
| 19,433 |
|
|
| 1,034 |
|
|
| 169,895 |
|
Gross profit |
|
| 8,576 |
|
|
| 3,076 |
|
|
| 10,974 |
|
|
| 50 |
|
|
| 22,676 |
|
|
| 8,294 |
|
|
| 6,971 |
|
|
| 9,940 |
|
|
| 726 |
|
|
| 166 |
|
|
| 26,097 |
|
Segment depreciation expense |
|
| 3,973 |
|
|
| 552 |
|
|
| 397 |
|
|
| 64 |
|
|
| 4,986 |
|
|
| 4,482 |
|
|
| — |
|
|
| 383 |
|
|
| 435 |
|
|
| 158 |
|
|
| 5,458 |
|
Segment Profit |
| $ | 12,549 |
|
| $ | 3,628 |
|
| $ | 11,371 |
|
| $ | 114 |
|
| $ | 27,662 |
|
| $ | 12,776 |
|
| $ | 6,971 |
|
| $ | 10,323 |
|
| $ | 1,161 |
|
| $ | 324 |
|
| $ | 31,555 |
|
|
| For the Three Months Ended December 25, 2016 |
|
| For the Three Months Ended September 27, 2020 |
| ||||||||||||||||||||||||||||||||||||||
|
| Polyester |
|
| Nylon |
|
| International |
|
| All Other |
|
| Total |
|
| Polyester |
|
| Asia |
|
| Brazil |
|
| Nylon |
|
| All Other |
|
| Total |
| |||||||||||
Net sales |
| $ | 86,671 |
|
| $ | 28,302 |
|
| $ | 38,868 |
|
| $ | 1,314 |
|
| $ | 155,155 |
|
| $ | 69,076 |
|
| $ | 37,723 |
|
| $ | 22,606 |
|
| $ | 11,029 |
|
| $ | 1,071 |
|
| $ | 141,505 |
|
Cost of sales |
|
| 76,200 |
|
|
| 25,679 |
|
|
| 29,419 |
|
|
| 1,727 |
|
|
| 133,025 |
|
|
| 64,444 |
|
|
| 33,145 |
|
|
| 17,993 |
|
|
| 10,364 |
|
|
| 998 |
|
|
| 126,944 |
|
Gross profit (loss) |
|
| 10,471 |
|
|
| 2,623 |
|
|
| 9,449 |
|
|
| (413 | ) |
|
| 22,130 |
| ||||||||||||||||||||||||
Gross profit |
|
| 4,632 |
|
|
| 4,578 |
|
|
| 4,613 |
|
|
| 665 |
|
|
| 73 |
|
|
| 14,561 |
| ||||||||||||||||||||
Segment depreciation expense |
|
| 3,384 |
|
|
| 530 |
|
|
| 228 |
|
|
| 244 |
|
|
| 4,386 |
|
|
| 4,403 |
|
|
| — |
|
|
| 430 |
|
|
| 442 |
|
|
| 164 |
|
|
| 5,439 |
|
Segment Profit (Loss) |
| $ | 13,855 |
|
| $ | 3,153 |
|
| $ | 9,677 |
|
| $ | (169 | ) |
| $ | 26,516 |
| ||||||||||||||||||||||||
Segment Profit |
| $ | 9,035 |
|
| $ | 4,578 |
|
| $ | 5,043 |
|
| $ | 1,107 |
|
| $ | 237 |
|
| $ | 20,000 |
|
The reconciliations of segment gross profit (loss) to consolidated income before income taxes are as follows:
|
| For the Three Months Ended |
| |||||
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||
Polyester |
| $ | 8,576 |
|
| $ | 10,471 |
|
Nylon |
|
| 3,076 |
|
|
| 2,623 |
|
International |
|
| 10,974 |
|
|
| 9,449 |
|
All Other |
|
| 50 |
|
|
| (413 | ) |
Segment gross profit |
|
| 22,676 |
|
|
| 22,130 |
|
Selling, general and administrative expenses |
|
| 14,626 |
|
|
| 12,868 |
|
Benefit for bad debts |
|
| (72 | ) |
|
| (95 | ) |
Other operating expense, net |
|
| 348 |
|
|
| 319 |
|
Operating income |
|
| 7,774 |
|
|
| 9,038 |
|
Interest income |
|
| (181 | ) |
|
| (183 | ) |
Interest expense |
|
| 1,190 |
|
|
| 914 |
|
Loss on sale of business |
|
| — |
|
|
| 1,662 |
|
Equity in (earnings) loss of unconsolidated affiliates |
|
| (211 | ) |
|
| 367 |
|
Income before income taxes |
| $ | 6,976 |
|
| $ | 6,278 |
|
17
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
Selected financial information is presented below:
|
| For the Six Months Ended December 24, 2017 |
| |||||||||||||||||
|
| Polyester |
|
| Nylon |
|
| International |
|
| All Other |
|
| Total |
| |||||
Net sales |
| $ | 178,054 |
|
| $ | 51,930 |
|
| $ | 99,705 |
|
| $ | 2,031 |
|
| $ | 331,720 |
|
Cost of sales |
|
| 160,565 |
|
|
| 45,540 |
|
|
| 77,733 |
|
|
| 1,914 |
|
|
| 285,752 |
|
Gross profit |
|
| 17,489 |
|
|
| 6,390 |
|
|
| 21,972 |
|
|
| 117 |
|
|
| 45,968 |
|
Segment depreciation expense |
|
| 7,840 |
|
|
| 1,089 |
|
|
| 813 |
|
|
| 129 |
|
|
| 9,871 |
|
Segment Profit |
| $ | 25,329 |
|
| $ | 7,479 |
|
| $ | 22,785 |
|
| $ | 246 |
|
| $ | 55,839 |
|
|
| For the Six Months Ended December 25, 2016 |
| |||||||||||||||||
|
| Polyester |
|
| Nylon |
|
| International |
|
| All Other |
|
| Total |
| |||||
Net sales |
| $ | 171,356 |
|
| $ | 56,797 |
|
| $ | 84,212 |
|
| $ | 2,759 |
|
| $ | 315,124 |
|
Cost of sales |
|
| 152,435 |
|
|
| 51,037 |
|
|
| 62,493 |
|
|
| 3,482 |
|
|
| 269,447 |
|
Gross profit (loss) |
|
| 18,921 |
|
|
| 5,760 |
|
|
| 21,719 |
|
|
| (723 | ) |
|
| 45,677 |
|
Segment depreciation expense |
|
| 6,492 |
|
|
| 1,040 |
|
|
| 474 |
|
|
| 496 |
|
|
| 8,502 |
|
Segment Profit (Loss) |
| $ | 25,413 |
|
| $ | 6,800 |
|
| $ | 22,193 |
|
| $ | (227 | ) |
| $ | 54,179 |
|
The reconciliations of segment gross profit (loss) to consolidated income before income taxes are as follows:
|
| For the Six Months Ended |
|
| For the Three Months Ended |
| ||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||||
Polyester |
| $ | 17,489 |
|
| $ | 18,921 |
|
| $ | 8,294 |
|
| $ | 4,632 |
|
Asia |
|
| 6,971 |
|
|
| 4,578 |
| ||||||||
Brazil |
|
| 9,940 |
|
|
| 4,613 |
| ||||||||
Nylon |
|
| 6,390 |
|
|
| 5,760 |
|
|
| 726 |
|
|
| 665 |
|
International |
|
| 21,972 |
|
|
| 21,719 |
| ||||||||
All Other |
|
| 117 |
|
|
| (723 | ) |
|
| 166 |
|
|
| 73 |
|
Segment gross profit |
|
| 45,968 |
|
|
| 45,677 |
|
|
| 26,097 |
|
|
| 14,561 |
|
Selling, general and administrative expenses |
|
| 27,489 |
|
|
| 24,278 |
|
|
| 12,670 |
|
|
| 11,364 |
|
Benefit for bad debts |
|
| (131 | ) |
|
| (462 | ) | ||||||||
Provision (benefit) for bad debts |
|
| (80 | ) |
|
| (887 | ) | ||||||||
Other operating expense, net |
|
| 663 |
|
|
| 249 |
|
|
| 256 |
|
|
| 1,178 |
|
Operating income |
|
| 17,947 |
|
|
| 21,612 |
|
|
| 13,251 |
|
|
| 2,906 |
|
Interest income |
|
| (262 | ) |
|
| (329 | ) |
|
| (258 | ) |
|
| (125 | ) |
Interest expense |
|
| 2,375 |
|
|
| 1,606 |
|
|
| 696 |
|
|
| 871 |
|
Loss on sale of business |
|
| — |
|
|
| 1,662 |
| ||||||||
Equity in earnings of unconsolidated affiliates |
|
| (3,298 | ) |
|
| (473 | ) |
|
| (280 | ) |
|
| (93 | ) |
Income before income taxes |
| $ | 19,132 |
|
| $ | 19,146 |
|
| $ | 13,093 |
|
| $ | 2,253 |
|
The reconciliations of segment total assets to consolidated total assets are as follows:
|
| December 24, 2017 |
|
| June 25, 2017 |
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||||
Polyester |
| $ | 266,522 |
|
| $ | 270,819 |
|
| $ | 299,708 |
|
| $ | 285,939 |
|
Asia |
|
| 72,417 |
|
|
| 41,121 |
| ||||||||
Brazil |
|
| 84,881 |
|
|
| 85,950 |
| ||||||||
Nylon |
|
| 60,210 |
|
|
| 57,789 |
|
|
| 43,355 |
|
|
| 68,034 |
|
International |
|
| 95,198 |
|
|
| 80,824 |
| ||||||||
Segment total assets |
|
| 421,930 |
|
|
| 409,432 |
|
|
| 500,361 |
|
|
| 481,044 |
|
Other current assets |
|
| 33,033 |
|
|
| 27,375 |
|
|
| 23,692 |
|
|
| 48,972 |
|
Other PP&E |
|
| 15,988 |
|
|
| 14,904 |
|
|
| 20,253 |
|
|
| 21,175 |
|
Other operating lease assets |
|
| 1,023 |
|
|
| 1,116 |
| ||||||||
Other non-current assets |
|
| 2,891 |
|
|
| 279 |
|
|
| 3,376 |
|
|
| 3,061 |
|
Investments in unconsolidated affiliates |
|
| 113,623 |
|
|
| 119,513 |
| ||||||||
Total assets |
| $ | 587,465 |
|
| $ | 571,503 |
|
| $ | 548,705 |
|
| $ | 555,368 |
|
18
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
20.22. Supplemental Cash Flow Information
Cash payments for interest and taxes consist of the following:
|
| For the Six Months Ended |
| |||||
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||
Interest, net of capitalized interest of $85 and $395, respectively |
| $ | 2,130 |
|
| $ | 1,527 |
|
Income taxes, net of refunds |
|
| 5,340 |
|
|
| 5,695 |
|
|
| For the Three Months Ended |
| ||||||
|
| September 26, 2021 |
|
| September 27, 2020 |
| |||
Interest, net of capitalized interest of $106 and $45, respectively |
| $ | 644 |
|
| $ | 836 |
| |
Income tax payments, net |
|
| 5,091 |
|
|
| 602 |
|
15
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Cash payments for taxes shown above consist primarily of income and withholding tax payments made by UNIFI in both U.S. and foreign jurisdictions.jurisdictions, net of refunds. The three months ended September 26, 2021 includes an income tax payment of $2,125 related to the recovery of non-income taxes described in Note 7, “Other Current Assets.”
Non-Cash Investing and Financing Activities
As of December 24, 2017September 26, 2021 and June 25, 2017, $2,61027, 2021, $1,524 and $3,234,$2,080, respectively, were included in accounts payable for unpaid capital expenditures. As of December 25, 2016September 27, 2020 and June 26, 2016, $3,70028, 2020, $800 and $4,197,$630, respectively, were included in accounts payable for unpaid capital expenditures.
During the sixthree months ended December 25, 2016,September 26, 2021 and September 27, 2020, UNIFI recorded $5,139non-cash activity relating to construction in progressfinance leases of $0 and long-term debt, in connection with a historical construction financing arrangement.
$878, respectively.
The following is management’s discussion and analysis of certain significant factors that have affected UNIFI’s operations, along with material changes in financial condition, during the periods included in the accompanying condensed consolidated financial statements. A reference to a “note” in this section refers to the accompanying notes to condensed consolidated financial statements. A reference to the “current period” refers to the three-month period ended December 24, 2017,September 26, 2021, while a reference to the “prior period” refers to the three-month period ended December 25, 2016. A reference to the “current six-month period” refers to the six-month period ended December 24, 2017, while a reference to the “prior six-month period” refers to the six-month period ended December 25, 2016.September 27, 2020. Such references may be accompanied by certain phrases for added clarity. The current period and the prior period each consisted of 13 weeks.
Our discussions in this Item 2 are based upon the more detailed discussions about our business, operations and financial condition included in the 2017 Form 10-K. These discussions focus on our results during, or as of, the three months ended September 26, 2021 and six months ended December 24, 2017 and December 25, 2016,September 27, 2020, and, to the extent applicable, any material changes from the information discussed in the 20172021 Form 10-K or other important intervening developments or information. These discussions should be read in conjunction with the 20172021 Form 10-K for more detailed and background information.information about our business, operations and financial condition. Discussion of foreign currency translation is primarily associated with the weakening of the Brazilian Real (“BRL”) and changes in the Chinese Renminbi (“RMB”) versus the U.S. Dollar (“USD”). In discussion of operating results in this report, we refer to our operations in the “NACA” region, which is the region comprised of the trade zones covered by USMCA, NAFTA and CAFTA-DR.
All currency and share amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.
Overview and Significant General Matters
UNIFI remains focusedfocuses on delivering PVA products and solutions to direct customers and brand partners throughout the world, leveraging our internal manufacturing capabilities and an enhanced global supply chain that delivers a diverse range of synthetic and recycled fibers and polymers. This strategic and synergistic focus includes a number ofthree supporting pillars, such as investingpillars: (1) engaging in commercial expansion;strategic relationships with like-minded entities, (2) growing our existing portfolio of technologies and capabilities; engaging in strategic partnerships;capabilities, and investing in UNIFI’s people(3) expanding our supply chain to best serve our direct and teams.indirect customers. UNIFI remains committed to these strategic initiatives,this strategy, which it believeswe believe will increase profitability and generate improved cash flows from operations.
UNIFI has threefour reportable segments for its operations – the Polyester Segment, the NylonAsia Segment, the Brazil Segment and the InternationalNylon Segment – as well as certain ancillary operations that include for-hire transportation services, which comprise an All Other category. The ancillary operations classified within All Other are insignificant for all periods presented; therefore, UNIFI’s discussion and analysis of those activities is generally limited to their impact on consolidated results, where appropriate.
Significant highlightsCOVID-19 Pandemic
The COVID-19 pandemic adversely impacted our operating results for the prior period as a result of global demand declines that pressured our sales and profitability performance. Despite the lingering effects and uncertainty of the COVID-19 pandemic, our operating results have improved significantly from the prior period to the current period, primarily due to the restoration of global demand levels and consumer spending.
Recent Trade Initiatives
UNIFI remains committed to pursuing relief from the elevated levels of low-cost and subsidized polyester textured yarn (“Subject Imports”) entering the U.S. market from foreign countries. Trade petition efforts to slow Subject Imports from China and India were successful during calendar 2019.
Due to the continued pressure from Subject Imports on our Polyester Segment revenues and gross margins in the U.S. market, UNIFI is again a petitioner to the United States Department of Commerce (“Commerce Department”) and the United States International Trade Commission (“ITC”) relating to Subject Imports from Indonesia, Malaysia, Thailand, and Vietnam (the “Subject Countries”). For such countries, preliminary antidumping duty rates are currently in effect. On October 19, 2021, the Commerce Department announced final antidumping duty deposit rates on imports of polyester textured yarn from the Subject Countries. The ITC is expected to announce its final determination on November 30, 2021.
We believe both trade petitions on Subject Imports are necessary to normalize the U.S. polyester market for fair pricing and competition, and a positive outcome in the ongoing petition will aid in generating incremental revenue for the Polyester Segment.
Adverse Impacts of Elevated Input Costs and Global Production Volatility
The prior period benefited from stable, low raw material costs, although suppressed global demand levels prevented UNIFI from generating meaningful operating results. As fiscal 2021 concluded, global economic recovery, domestic weather events, supply constraints and general inflationary pressures have led to higher input costs in fiscal 2022. For the majority of our portfolio, we have been able to implement selling price adjustments to protect gross margins in the current period, and we have navigated the higher cost environment better than in recent prior years. However, the acceleration of input costs and the current six-month period include the following, each of which is outlined in more detail below:
Net sales for the current period increased $12,323, or 7.9%,elevated levels remain headwinds to $167,478, compared to $155,155 for the prior period, and increased $11,433, or 7.4%, when excluding the impact of foreign currency translation; our underlying performance.
Net sales for the current six-month period increased $16,596, or 5.3%, to $331,720, compared to $315,124 for the prior six-month period, and increased $14,985, or 4.8%, when excluding the impact of foreign currency translation;
Revenues from PVA products for the current period grew more than 20% comparedIn addition to the prior period,recent pressures from input costs, UNIFI is experiencing inefficiencies in the global supply chain in connection with (i) freight and represented more than 45%logistics slowdowns in foreign markets; (ii) a tighter labor pool in the U.S.; and (iii) suppressed productivity resulting from (a) pandemic-related lockdowns in certain regions of consolidated net sales;
Gross margin was 13.5%Asia and (b) energy management measures taken in China during September and October 2021. While our businesses are not currently materially impacted by these adverse events and circumstances, the existing challenges could worsen and/or occur for the current period, comparedprolonged periods and eventually become material impacts to 14.3% for the prior period,our Asia and was 13.9% for the current six-month period, compared to 14.5% for the prior six-month period;Polyester segments.
Operating income was $7,774 for the current period, compared to $9,038 for the prior period, and was $17,947 for the current six-month period, compared to $21,612 for the prior six-month period; and
Diluted EPS was $0.63 for the current period, compared to $0.25 for the prior period, and was $1.12 for the current six-month period, compared to $0.76 for the prior six-month period.
Key Performance Indicators and Non-GAAP Financial Measures
UNIFI continuously reviews performance indicators to measure its success. These performance indicators form the basis of management’s discussion and analysis included below:
sales volume and revenue for UNIFI and for each reportable segment;
gross profit and gross margin for UNIFI and for each reportable segment;
Net income attributable to Unifi, Inc. (“Net Income”) and diluted EPS;
• | sales volume and revenue for UNIFI and for each reportable segment; |
• | net income and diluted EPS; |
• | Segment Profit, |
unit conversion margin, which represents unit net sales price less unit raw material costs, for UNIFI and for each reportable segment;
• | unit conversion margin, which represents unit net sales price less unit raw material costs, for UNIFI and for each reportable segment; |
working capital, which represents current assets less current liabilities;
• | working capital, which represents current assets less current liabilities; |
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), which represents Net Income before net interest expense, income tax expense and depreciation and amortization expense;
• | Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), which represents Net income before net interest expense, income tax expense and depreciation and amortization expense; |
Adjusted EBITDA, which represents EBITDA adjusted to exclude equity in loss (earnings) of PAL, and, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI;
• | Adjusted EBITDA, which represents EBITDA adjusted to exclude, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI; |
Adjusted Net Income, which represents Net Income calculated under GAAP, adjusted to exclude the approximate after-tax impact of certain income or expense items (as well as specific impacts to the provision for income taxes) necessary to understand and compare the underlying results of UNIFI. Adjusted Net Income excludes certain amounts which management believes do not reflect the ongoing operations and performance of UNIFI;
• | Adjusted Net Income, which represents net income calculated under GAAP, adjusted to exclude certain amounts which management believes do not reflect the ongoing operations and performance of UNIFI and/or for which exclusion may be necessary to understand and compare the underlying results of UNIFI; |
Adjusted EPS, which represents Adjusted Net Income divided by UNIFI’s diluted weighted average common shares outstanding; and
• | Adjusted EPS, which represents Adjusted Net Income divided by UNIFI’s diluted weighted average common shares outstanding; |
• | Adjusted Working Capital, which equals receivables plus inventories and other current assets, less accounts payable and other current liabilities; and |
Adjusted Working Capital, which represents receivables plus inventory, less accounts payable and accrued expenses.
• | Net Debt, which represents debt principal less cash and cash equivalents. |
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Adjusted Working Capital and Net Debt (collectively, 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. When applicable, management’s discussion and analysis includes specific consideration for items that comprise the reconciliations of its 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 and is relevant to our fixed charge coverage ratio. Equity in loss (earnings) of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance.
Management uses Adjusted Net 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.
Historically, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS aimed to exclude the impact of the non-controlling interest in Renewables, while the consolidated amounts for such entity were required to be included in UNIFI’s financial amounts reported under GAAP.
Management uses Adjusted Working Capital as an indicator of UNIFI’s production efficiency and ability to manage inventoryinventories and receivables. Adjusted Working Capital is a metric used in the determination of variable compensation.
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.
Review of Results of Operations
Three Months Ended September 26, 2021 Compared to Three Months Ended September 27, 2020
Consolidated Overview
The below tables provide:
• | the components of net income and the percentage increase or decrease over the prior fiscal year amounts, and |
• | a reconciliation from net income to EBITDA and Adjusted EBITDA. |
Following the tables is a discussion and analysis of the significant components of net income.
Non-GAAP ReconciliationsNet income
|
| For the Three Months Ended |
|
|
|
|
| |||||||||||||
|
| September 26, 2021 |
|
| September 27, 2020 |
|
|
|
|
| ||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| |||
Net sales |
| $ | 195,992 |
|
|
| 100.0 |
|
| $ | 141,505 |
|
|
| 100.0 |
|
|
| 38.5 |
|
Cost of sales |
|
| 169,895 |
|
|
| 86.7 |
|
|
| 126,944 |
|
|
| 89.7 |
|
|
| 33.8 |
|
Gross profit |
|
| 26,097 |
|
|
| 13.3 |
|
|
| 14,561 |
|
|
| 10.3 |
|
|
| 79.2 |
|
SG&A |
|
| 12,670 |
|
|
| 6.4 |
|
|
| 11,364 |
|
|
| 8.0 |
|
|
| 11.5 |
|
Benefit for bad debts |
|
| (80 | ) |
|
| — |
|
|
| (887 | ) |
|
| (0.6 | ) |
|
| (91.0 | ) |
Other operating expense, net |
|
| 256 |
|
|
| 0.1 |
|
|
| 1,178 |
|
|
| 0.8 |
|
|
| (78.3 | ) |
Operating income |
|
| 13,251 |
|
|
| 6.8 |
|
|
| 2,906 |
|
|
| 2.1 |
|
| nm |
| |
Interest expense, net |
|
| 438 |
|
|
| 0.2 |
|
|
| 746 |
|
|
| 0.5 |
|
|
| (41.3 | ) |
Equity in earnings of unconsolidated affiliates |
|
| (280 | ) |
|
| (0.1 | ) |
|
| (93 | ) |
|
| — |
|
|
| 201.1 |
|
Income before income taxes |
|
| 13,093 |
|
|
| 6.7 |
|
|
| 2,253 |
|
|
| 1.6 |
|
| nm |
| |
Provision (benefit) for income taxes |
|
| 4,413 |
|
|
| 2.3 |
|
|
| (1,179 | ) |
|
| (0.8 | ) |
| nm |
| |
Net income |
| $ | 8,680 |
|
|
| 4.4 |
|
| $ | 3,432 |
|
|
| 2.4 |
|
|
| 152.9 |
|
nm – Not meaningful
EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)
The reconciliations of the amounts reported under GAAP for Net Incomeincome to EBITDA and Adjusted EBITDA arewere as follows:
|
| For the Three Months Ended |
| |||||
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||
Net income |
| $ | 8,680 |
|
| $ | 3,432 |
|
Interest expense, net |
|
| 438 |
|
|
| 746 |
|
Provision (benefit) for income taxes |
|
| 4,413 |
|
|
| (1,179 | ) |
Depreciation and amortization expense (1) |
|
| 6,308 |
|
|
| 6,052 |
|
EBITDA |
|
| 19,839 |
|
|
| 9,051 |
|
|
|
| �� |
|
|
|
|
|
Other adjustments (2) |
|
| — |
|
|
| — |
|
Adjusted EBITDA |
| $ | 19,839 |
|
| $ | 9,051 |
|
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||
| December 24, 2017 |
|
| December 25, 2016 |
|
| December 24, 2017 |
|
| December 25, 2016 |
| |||||
Net income attributable to Unifi, Inc. |
| $ | 11,802 |
|
| $ | 4,591 |
|
| $ | 20,762 |
|
| $ | 13,994 |
|
Interest expense, net |
|
| 1,009 |
|
|
| 716 |
|
|
| 2,113 |
|
|
| 1,246 |
|
(Benefit) provision for income taxes |
|
| (4,826 | ) |
|
| 1,924 |
|
|
| (1,630 | ) |
|
| 5,650 |
|
Depreciation and amortization expense |
|
| 5,532 |
|
|
| 4,830 |
|
|
| 10,949 |
|
|
| 9,396 |
|
EBITDA |
|
| 13,517 |
|
|
| 12,061 |
|
|
| 32,194 |
|
|
| 30,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in loss (earnings) of PAL |
|
| 376 |
|
|
| 745 |
|
|
| (2,478 | ) |
|
| 431 |
|
EBITDA excluding PAL |
|
| 13,893 |
|
|
| 12,806 |
|
|
| 29,716 |
|
|
| 30,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of business (1) |
|
| — |
|
|
| 1,662 |
|
|
| — |
|
|
| 1,662 |
|
Adjusted EBITDA |
| $ | 13,893 |
|
| $ | 14,468 |
|
| $ | 29,716 |
|
| $ | 32,379 |
|
(1) | Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net. Within the accompanying condensed consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense. |
| For the |
Amounts presented in the reconciliations above may not be consistent with amounts included in the accompanying condensed consolidated financial statements. Any such inconsistencies are insignificant and are integral to the reconciliations.
Adjusted Net Income and Adjusted EPS (Non-GAAP Measures)
The tables below set forth reconciliations of (i) Income beforeFor the current and the prior period, there were no adjustments necessary to reconcile Net income taxes (“Pre-tax Income”), Provision for income taxes (“Tax Impact”) and Net Income to Adjusted Net Income and (ii) Diluted EPS toor Adjusted EPS:EPS.
|
| For the Three Months Ended December 24, 2017 |
|
| For the Three Months Ended December 25, 2016 |
| ||||||||||||||||||||||||||
|
| Pre-tax Income |
|
| Tax Impact |
|
| Net Income |
|
| Diluted EPS |
|
| Pre-tax Income |
|
| Tax Impact |
|
| Net Income |
|
| Diluted EPS |
| ||||||||
GAAP results |
| $ | 6,976 |
|
| $ | 4,826 |
|
| $ | 11,802 |
|
| $ | 0.63 |
|
| $ | 6,278 |
|
| $ | (1,924 | ) |
| $ | 4,591 |
|
| $ | 0.25 |
|
Certain tax valuation allowance reversal (1) |
|
| — |
|
|
| (3,807 | ) |
|
| (3,807 | ) |
|
| (0.20 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Loss on sale of business (2) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,662 |
|
|
| — |
|
|
| 1,662 |
|
|
| 0.09 |
|
Adjusted results |
| $ | 6,976 |
|
| $ | 1,019 |
|
| $ | 7,995 |
|
| $ | 0.43 |
|
| $ | 7,940 |
|
| $ | (1,924 | ) |
| $ | 6,253 |
|
| $ | 0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding |
|
|
|
|
|
|
| 18,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18,442 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| For the Six Months Ended December 24, 2017 |
|
| For the Six Months Ended December 25, 2016 |
| ||||||||||||||||||||||||||
|
| Pre-tax Income |
|
| Tax Impact |
|
| Net Income |
|
| Diluted EPS |
|
| Pre-tax Income |
|
| Tax Impact |
|
| Net Income |
|
| Diluted EPS |
| ||||||||
GAAP results |
| $ | 19,132 |
|
| $ | 1,630 |
|
| $ | 20,762 |
|
| $ | 1.12 |
|
| $ | 19,146 |
|
| $ | (5,650 | ) |
| $ | 13,994 |
|
| $ | 0.76 |
|
Certain tax valuation allowance reversal (1) |
|
| — |
|
|
| (3,807 | ) |
|
| (3,807 | ) |
|
| (0.21 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Loss on sale of business (2) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,662 |
|
|
| — |
|
|
| 1,662 |
|
|
| 0.09 |
|
Adjusted results |
| $ | 19,132 |
|
| $ | (2,177 | ) |
| $ | 16,955 |
|
| $ | 0.91 |
|
| $ | 20,808 |
|
| $ | (5,650 | ) |
| $ | 15,656 |
|
| $ | 0.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding |
|
|
|
|
|
|
| 18,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18,391 |
|
|
|
Working Capital and Adjusted Working Capital
See the discussion under the heading “Working Capital” within “Liquidity and Capital Resources” below.
Results of Operations
Three Months Ended December 24, 2017 Compared to Three Months Ended December 25, 2016
Consolidated Overview
The components of Net Income, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts are as follows:
|
| For the Three Months Ended |
|
|
|
|
| |||||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
|
|
|
| ||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| |||
Net sales |
| $ | 167,478 |
|
|
| 100.0 |
|
| $ | 155,155 |
|
|
| 100.0 |
|
|
| 7.9 |
|
Cost of sales |
|
| 144,802 |
|
|
| 86.5 |
|
|
| 133,025 |
|
|
| 85.7 |
|
|
| 8.9 |
|
Gross profit |
|
| 22,676 |
|
|
| 13.5 |
|
|
| 22,130 |
|
|
| 14.3 |
|
|
| 2.5 |
|
Selling, general and administrative expenses |
|
| 14,626 |
|
|
| 8.7 |
|
|
| 12,868 |
|
|
| 8.3 |
|
|
| 13.7 |
|
Benefit for bad debts |
|
| (72 | ) |
|
| — |
|
|
| (95 | ) |
|
| (0.1 | ) |
|
| (24.2 | ) |
Other operating expense, net |
|
| 348 |
|
|
| 0.2 |
|
|
| 319 |
|
|
| 0.2 |
|
|
| 9.1 |
|
Operating income |
|
| 7,774 |
|
|
| 4.6 |
|
|
| 9,038 |
|
|
| 5.9 |
|
|
| (14.0 | ) |
Interest expense, net |
|
| 1,009 |
|
|
| 0.6 |
|
|
| 731 |
|
|
| 0.5 |
|
|
| 38.0 |
|
Loss on sale of business |
|
| — |
|
|
| — |
|
|
| 1,662 |
|
|
| 1.1 |
|
| nm |
| |
Equity in (earnings) loss of unconsolidated affiliates |
|
| (211 | ) |
|
| (0.1 | ) |
|
| 367 |
|
|
| 0.2 |
|
|
| (157.5 | ) |
Income before income taxes |
|
| 6,976 |
|
|
| 4.1 |
|
|
| 6,278 |
|
|
| 4.1 |
|
|
| 11.1 |
|
(Benefit) provision for income taxes |
|
| (4,826 | ) |
|
| (2.9 | ) |
|
| 1,924 |
|
|
| 1.2 |
|
|
| (350.8 | ) |
Net income including non-controlling interest |
|
| 11,802 |
|
|
| 7.0 |
|
|
| 4,354 |
|
|
| 2.9 |
|
|
| 171.1 |
|
Less: net loss attributable to non-controlling interest |
|
| — |
|
|
| — |
|
|
| (237 | ) |
|
| (0.1 | ) |
|
| (100.0 | ) |
Net income attributable to Unifi, Inc. |
| $ | 11,802 |
|
|
| 7.0 |
|
| $ | 4,591 |
|
|
| 3.0 |
|
|
| 157.1 |
|
nm – Not meaningful
Consolidated Net Sales
Consolidated net sales for the current period increased by $12,323,$54,487, or 7.9%38.5%, asand consolidated sales volumes increased 12.8%, compared to the prior period.
Consolidated sales volumes increased 14.5%, attributable The increases occurred primarily due to continued growth(i) a rebound in salesproduct demand following the adverse impact of recycled polyester Chip and plastic bottle flake in the Polyester Segment and sales of staple fiber and other PVA products in the International Segment. Sales continue to expand in the International Segment as our PVA portfolio resonates with numerous customers. The increase inCOVID-19 pandemic on sales volumes in our Polyester and International Segments was partially offset by soft yarnthe prior period, (ii) incremental sales in the Nylon Segment. We believe the softness in the domestic environment continues to be a challengegrowth for the textile supply chain, while our nylon business results also reflect the current global trend of declinesAsia Segment led by REPREVE® branded products, and (iii) opportunistically improved market share and pricing levels in demand for nylon socks, ladies’ hosiery and intimate apparel.Brazil.
Consolidated average sales prices decreased 6.3%increased 25.7%, primarily attributable to disproportionate growth of lower-priced recycled polyester Chip, plastic bottle flake and staple fiber among the Polyester and International Segments, as well as a lower proportion of nylon products that carry higher selling prices. The decrease in consolidated average sales prices was partially offset by a net favorable foreign currency translation compared to the prior period of approximately $900, primarily associated with the strengthening of the Chinese Renminbi (“RMB”) and the Brazilian Real (“BRL”). PVAhigher raw material costs.
REPREVE® Fiber products comprised more than 45% of net sales for the current period while representing approximately 40%comprised 37% of consolidated net sales, up from 36% for fiscal 2017.the prior period.
Gross profit for the current period increased by $546,$11,536, or 2.5%79.2%, as compared to the prior period. Despite input cost and supply chain pressures for each of our segments, gross profit performance was better than anticipated.
• | For the Polyester Segment, gross profit benefited from the restoration of U.S. demand following the worst months of the COVID-19 pandemic and a better sales mix. |
• | For the Asia Segment, gross profit increased from the prior period primarily due to higher sales volumes and a stronger sales mix. |
• | For the Brazil Segment, gross profit increased significantly from the prior period primarily due to opportunistically improved market share and pricing levels. |
• | For the Nylon Segment, gross profit exhibited no relevant change. |
SG&A
SG&A increased from the International Segment,prior period, primarily due to higher amortization from customer list assets acquired in fiscal 2021 and higher discretionary expenses in the current period, gross margin rate was impacted by disproportionate growthfollowing COVID-19 pandemic related restrictions and cost control in lower-margin sales mixthe prior period.
Benefit for Bad Debts
The current period benefit for bad debts reflects no material activity. The prior period reflects a benefit for general improvement in customer payment frequency following the adverse effects of the COVID-19 pandemic on customer health.
Other Operating Expense, Net
The current period and pressure brought by higherprior period primarily reflect foreign currency transaction losses of $233 and $281, respectively, in addition to $881 of severance costs comparedrecorded in the prior period.
Interest Expense, Net
Interest expense, net decreased from the prior period to the current period, primarily attributable to a lower average debt principal and interest rate.
Equity in Earnings of Unconsolidated Affiliates
There was no material activity for the current period or the prior period. For
Income Taxes
Provision (benefit) for income taxes and the Polyester Segment, the decline in gross margineffective tax rate was primarilywere as follows:
|
| For the Three Months Ended |
| |||||
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||
Provision (benefit) for income taxes |
| $ | 4,413 |
|
| $ | (1,179 | ) |
Effective tax rate |
|
| 33.7 | % |
|
| (52.3 | )% |
The effective tax rate is subject to variation due to a risenumber of factors, including variability in raw material costs, a greaterpre-tax book income, the mix of lower margin product salesincome by jurisdiction, changes in deferred tax valuation allowances and incremental depreciation,changes in statutes, regulations and case law. Additionally, the impacts of discrete and other rate impacting items are greater when income before income taxes is lower.
The increase in the effective tax rate from the prior period to the current period is primarily dueattributable to expanded recycling operations,a discrete benefit in the prior period for the retroactive GILTI high-tax exclusion. This increase is partially offset by an expense recorded in the conversion services performedprior period to increase the valuation allowance for Eastman Chemical Company (“Eastman”) on bi-component machinery, a revenue stream that did not exist indeferred tax assets.
Net Income
Net income for the current period was $8,680, or $0.46 per diluted share, compared to net income of $3,432 or $0.18 per diluted share, for the prior period. The Nylon Segment achieved an increaseimprovement in gross margin rate due in partnet income was primarily attributable to a more favorable sales mix and cost management. Consolidatedhigher gross profit in the current period.
Adjusted EBITDA (Non-GAAP Financial Measure)
Adjusted EBITDA increased from the prior period to the current period, primarily due to higher gross profit.
Segment Overview
Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for the current period also included approximately $200 of favorable foreign currency translation reflected in the International Segment.
Further details regarding the changes in net sales and gross profit, by reportable segment, follow.period.
Polyester Segment
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Polyester Segment, arewere as follows:
|
| For the Three Months Ended |
|
|
|
|
|
| For the Three Months Ended |
|
|
|
|
| ||||||||||||||||||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
|
|
|
|
| September 26, 2021 |
|
| September 27, 2020 |
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| ||||||
Net sales |
| $ | 90,316 |
|
|
| 100.0 |
|
| $ | 86,671 |
|
|
| 100.0 |
|
|
| 4.2 |
|
| $ | 89,467 |
|
|
| 100.0 |
|
| $ | 69,076 |
|
|
| 100.0 |
|
|
| 29.5 |
|
Cost of sales |
|
| 81,740 |
|
|
| 90.5 |
|
|
| 76,200 |
|
|
| 87.9 |
|
|
| 7.3 |
|
|
| 81,173 |
|
|
| 90.7 |
|
|
| 64,444 |
|
|
| 93.3 |
|
|
| 26.0 |
|
Gross profit |
|
| 8,576 |
|
|
| 9.5 |
|
|
| 10,471 |
|
|
| 12.1 |
|
|
| (18.1 | ) |
|
| 8,294 |
|
|
| 9.3 |
|
|
| 4,632 |
|
|
| 6.7 |
|
|
| 79.1 |
|
Depreciation expense |
|
| 3,973 |
|
|
| 4.4 |
|
|
| 3,384 |
|
|
| 3.9 |
|
|
| 17.4 |
|
|
| 4,482 |
|
|
| 5.0 |
|
|
| 4,403 |
|
|
| 6.4 |
|
|
| 1.8 |
|
Segment Profit |
| $ | 12,549 |
|
|
| 13.9 |
|
| $ | 13,855 |
|
|
| 16.0 |
|
|
| (9.4 | ) |
| $ | 12,776 |
|
|
| 14.3 |
|
| $ | 9,035 |
|
|
| 13.1 |
|
|
| 41.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Segment net sales as a percentage of consolidated amounts |
|
| 45.6 | % |
|
|
|
|
|
| 48.8 | % |
|
|
|
|
|
|
|
| ||||||||||||||||||||
Segment Profit as a percentage of consolidated amounts |
|
| 40.5 | % |
|
|
|
|
|
| 45.2 | % |
|
|
|
|
|
|
|
|
The change in net sales for the Polyester Segment iswas as follows:
Net sales for the prior period |
| $ | 86,671 |
|
| $ | 69,076 |
|
Net change in average selling price and sales mix |
|
| 15,914 |
| ||||
Increase in sales volumes |
|
| 6,192 |
|
|
| 4,477 |
|
Net change in average selling price and sales mix |
|
| (2,547 | ) | ||||
Net sales for the current period |
| $ | 90,316 |
|
| $ | 89,467 |
|
The increase in net sales for the Polyester Segment from the prior period to the current period was primarily attributable to (i) higher average selling prices associated with higher polyester raw material costs, (ii) a better sales of plastic bottle flake, recycled polyester Chipmix, and POY and (ii) the conversion services performed for Eastman on bi-component machinery. The unfavorable change in sales price and mix was due to (a) lower sales volumes of higher-priced textured and dyed yarns and (b)(iii) higher sales volumes in connection with demand restoration following the adverse impacts of lower-priced plastic bottle flake, recycled polyester Chip and POY.the COVID-19 pandemic on the prior period.
The change in Segment Profit for the Polyester Segment iswas as follows:
Segment Profit for the prior period |
| $ | 13,855 |
|
| $ | 9,035 |
|
Net decrease in underlying margins |
|
| (2,296 | ) | ||||
Change in underlying margins and sales mix |
|
| 3,155 |
| ||||
Increase in sales volumes |
|
| 990 |
|
|
| 586 |
|
Segment Profit for the current period |
| $ | 12,549 |
|
| $ | 12,776 |
|
The decreaseincrease in Segment Profit for the Polyester Segment from the prior period to the current period was primarily attributable to (i) the adverse impact of the COVID-19 pandemic on cost absorption and facility utilization following lower sales volumes during the prior period and (ii) a better sales and production mix in the current period.
Asia Segment
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Asia Segment, were as follows:
|
| For the Three Months Ended |
|
|
|
|
| |||||||||||||
|
| September 26, 2021 |
|
| September 27, 2020 |
|
|
|
|
| ||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| |||
Net sales |
| $ | 51,428 |
|
|
| 100.0 |
|
| $ | 37,723 |
|
|
| 100.0 |
|
|
| 36.3 |
|
Cost of sales |
|
| 44,457 |
|
|
| 86.4 |
|
|
| 33,145 |
|
|
| 87.9 |
|
|
| 34.1 |
|
Gross profit |
|
| 6,971 |
|
|
| 13.6 |
|
|
| 4,578 |
|
|
| 12.1 |
|
|
| 52.3 |
|
Depreciation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Segment Profit |
| $ | 6,971 |
|
|
| 13.6 |
|
| $ | 4,578 |
|
|
| 12.1 |
|
|
| 52.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment net sales as a percentage of consolidated amounts |
|
| 26.2 | % |
|
|
|
|
|
| 26.7 | % |
|
|
|
|
|
|
|
|
Segment Profit as a percentage of consolidated amounts |
|
| 22.1 | % |
|
|
|
|
|
| 22.9 | % |
|
|
|
|
|
|
|
|
The change in net sales for the Asia Segment was as follows:
Net sales for the prior period |
| $ | 37,723 |
|
Net increase in sales volumes |
|
| 11,191 |
|
Favorable foreign currency translation effects |
|
| 2,420 |
|
Change in average selling price and sales mix |
|
| 94 |
|
Net sales for the current period |
| $ | 51,428 |
|
The increase in net sales for the Asia Segment from the prior period to the current period was primarily attributable to the unfavorablecontinued momentum of REPREVE®-branded products contributing to underlying sales growth, in addition to the adverse impacts of the COVID-19 pandemic on global demand in the prior period.
The RMB weighted average exchange rate was 6.47 RMB/USD and 6.91 RMB/USD for the current period and the prior period, respectively.
The change in Segment Profit for the Asia Segment was as follows:
Segment Profit for the prior period |
| $ | 4,578 |
|
Increase in sales volumes |
|
| 1,358 |
|
Change in underlying margins and sales mix |
|
| 742 |
|
Favorable foreign currency translation effects |
|
| 293 |
|
Segment Profit for the current period |
| $ | 6,971 |
|
The increase in Segment Profit for the Asia Segment from the prior period to the current period was primarily attributable to higher sales volumes and a stronger sales mix shift towards lower-margin products discussed above in the net sales analysis, along with raw material cost pressures, partially offset by the benefitcurrent period.
Brazil Segment
The components of the conversion services performed for Eastman on bi-component machinery and an increase in sales volumes.
Polyester Segment net sales and Segment Profit, each component as a percentage of total consolidatednet sales and the percentage increase or decrease over the prior period amounts for the Brazil Segment, were 53.9%as follows:
|
| For the Three Months Ended |
|
|
|
|
| |||||||||||||
|
| September 26, 2021 |
|
| September 27, 2020 |
|
|
|
|
| ||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| |||
Net sales |
| $ | 33,738 |
|
|
| 100.0 |
|
| $ | 22,606 |
|
|
| 100.0 |
|
|
| 49.2 |
|
Cost of sales |
|
| 23,798 |
|
|
| 70.5 |
|
|
| 17,993 |
|
|
| 79.6 |
|
|
| 32.3 |
|
Gross profit |
|
| 9,940 |
|
|
| 29.5 |
|
|
| 4,613 |
|
|
| 20.4 |
|
|
| 115.5 |
|
Depreciation expense |
|
| 383 |
|
|
| 1.1 |
|
|
| 430 |
|
|
| 1.9 |
|
|
| (10.9 | ) |
Segment Profit |
| $ | 10,323 |
|
|
| 30.6 |
|
| $ | 5,043 |
|
|
| 22.3 |
|
|
| 104.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment net sales as a percentage of consolidated amounts |
|
| 17.2 | % |
|
|
|
|
|
| 16.0 | % |
|
|
|
|
|
|
|
|
Segment Profit as a percentage of consolidated amounts |
|
| 32.7 | % |
|
|
|
|
|
| 25.2 | % |
|
|
|
|
|
|
|
|
The change in net sales for the Brazil Segment was as follows:
Net sales for the prior period |
| $ | 22,606 |
|
Increase in average selling price and change in sales mix |
|
| 11,397 |
|
Favorable foreign currency translation effects |
|
| 620 |
|
Decrease in sales volumes |
|
| (885 | ) |
Net sales for the current period |
| $ | 33,738 |
|
The increase in net sales for the Brazil Segment from the prior period to the current period was primarily attributable to higher selling prices in connection with (i) higher input costs and 45.4%, respectively,(ii) a better competitive position.
The BRL weighted average exchange rate was 5.24 BRL/USD and 5.39 BRL/USD for the current period compared to 55.9% and 52.3%, respectively,the prior period, respectively.
The change in Segment Profit for the Brazil Segment was as follows:
Segment Profit for the prior period |
| $ | 5,043 |
|
Increase in underlying margins |
|
| 5,343 |
|
Favorable foreign currency translation effects |
|
| 135 |
|
Decrease in sales volumes |
|
| (198 | ) |
Segment Profit for the current period |
| $ | 10,323 |
|
The increase in Segment Profit for the Brazil Segment from the prior period.period to the current period was primarily attributable to an improved sales mix and conversion margin stemming from an improved competitive position in Brazil.
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Nylon Segment, arewere as follows:
|
| For the Three Months Ended |
|
|
|
|
|
| For the Three Months Ended |
|
|
|
|
| ||||||||||||||||||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
|
|
|
|
| September 26, 2021 |
|
| September 27, 2020 |
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| ||||||
Net sales |
| $ | 25,103 |
|
|
| 100.0 |
|
| $ | 28,302 |
|
|
| 100.0 |
|
|
| (11.3 | ) |
| $ | 20,159 |
|
|
| 100.0 |
|
| $ | 11,029 |
|
|
| 100.0 |
|
|
| 82.8 |
|
Cost of sales |
|
| 22,027 |
|
|
| 87.7 |
|
|
| 25,679 |
|
|
| 90.7 |
|
|
| (14.2 | ) |
|
| 19,433 |
|
|
| 96.4 |
|
|
| 10,364 |
|
|
| 94.0 |
|
|
| 87.5 |
|
Gross profit |
|
| 3,076 |
|
|
| 12.3 |
|
|
| 2,623 |
|
|
| 9.3 |
|
|
| 17.3 |
|
|
| 726 |
|
|
| 3.6 |
|
|
| 665 |
|
|
| 6.0 |
|
|
| 9.2 |
|
Depreciation expense |
|
| 552 |
|
|
| 2.2 |
|
|
| 530 |
|
|
| 1.8 |
|
|
| 4.2 |
|
|
| 435 |
|
|
| 2.2 |
|
|
| 442 |
|
|
| 4.0 |
|
|
| (1.6 | ) |
Segment Profit |
| $ | 3,628 |
|
|
| 14.5 |
|
| $ | 3,153 |
|
|
| 11.1 |
|
|
| 15.1 |
|
| $ | 1,161 |
|
|
| 5.8 |
|
| $ | 1,107 |
|
|
| 10.0 |
|
|
| 4.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Segment net sales as a percentage of consolidated amounts |
|
| 10.3 | % |
|
|
|
|
|
| 7.8 | % |
|
|
|
|
|
|
|
| ||||||||||||||||||||
Segment Profit as a percentage of consolidated amounts |
|
| 3.7 | % |
|
|
|
|
|
| 5.5 | % |
|
|
|
|
|
|
|
|
The change in net sales for the Nylon Segment iswas as follows:
Net sales for the prior period |
| $ | 28,302 |
|
| $ | 11,029 |
|
Decrease in sales volumes |
|
| (1,993 | ) | ||||
Increase in sales volumes |
|
| 8,100 |
| ||||
Net change in average selling price and sales mix |
|
| (1,206 | ) |
|
| 1,030 |
|
Net sales for the current period |
| $ | 25,103 |
|
| $ | 20,159 |
|
The decreaseincrease in net sales for the Nylon Segment from the prior period to the current period was primarily attributable to (i) loweran increase in sales volumes as a resultin the current period following the adverse impacts of soft domestic market conditionsthe COVID-19 pandemic on sales volumes in which nylon socks, ladies’ hosiery and intimates have experienced demand declines and (ii) a lower-priced sales mix.the prior period, in addition to higher selling prices in connection with higher raw material costs.
The change in Segment Profit for the Nylon Segment iswas as follows:
Segment Profit for the prior period |
| $ | 3,153 |
|
| $ | 1,107 |
|
Net improvement in underlying margins |
|
| 697 |
| ||||
Decrease in sales volumes |
|
| (222 | ) | ||||
Increase in sales volumes |
|
| 814 |
| ||||
Net decrease in underlying margins |
|
| (760 | ) | ||||
Segment Profit for the current period |
| $ | 3,628 |
|
| $ | 1,161 |
|
The increase in Segment Profit for the Nylon Segment was attributable to a more profitable sales mix and cost management.
Nylon Segment net sales and Segment Profit as a percentage of total consolidated amounts, were 15.0% and 13.1%, respectively, for the current period, compared to 18.2% and 11.9%, respectively, for the prior period.
International Segment
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the International Segment are as follows:
|
| For the Three Months Ended |
|
|
|
|
| |||||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
|
|
|
| ||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| |||
Net sales |
| $ | 51,046 |
|
|
| 100.0 |
|
| $ | 38,868 |
|
|
| 100.0 |
|
|
| 31.3 |
|
Cost of sales |
|
| 40,072 |
|
|
| 78.5 |
|
|
| 29,419 |
|
|
| 75.7 |
|
|
| 36.2 |
|
Gross profit |
|
| 10,974 |
|
|
| 21.5 |
|
|
| 9,449 |
|
|
| 24.3 |
|
|
| 16.1 |
|
Depreciation expense |
|
| 397 |
|
|
| 0.8 |
|
|
| 228 |
|
|
| 0.6 |
|
|
| 74.1 |
|
Segment Profit |
| $ | 11,371 |
|
|
| 22.3 |
|
| $ | 9,677 |
|
|
| 24.9 |
|
|
| 17.5 |
|
The change in net sales for the International Segment is as follows:
Net sales for the prior period |
| $ | 38,868 |
|
Increase in sales volumes |
|
| 11,985 |
|
Favorable foreign currency translation effects (RMB and BRL) |
|
| 882 |
|
Net change in average selling price and sales mix |
|
| (689 | ) |
Net sales for the current period |
| $ | 51,046 |
|
The increase in net sales for the International Segment was attributable to (i) higher sales volumes from our Asian subsidiaries, primarily relating to our recycled polyester Chip and staple fiber products, with strong demand for REPREVE®, (ii) higher sales volumes at our Brazilian subsidiary due to increased demand for synthetic yarns, including air-covered PVA products for use in applications such as stretch denim, and (iii) favorable foreign currency translationessentially unchanged due to the strengtheningoffsetting impacts of the RMB and the BRL. These benefits were partially offset by a decrease in the average selling price in Asia due to a greater mix of lower-priced product sales.
The RMB weighted average exchange rate was 6.61 RMB/U.S. Dollar (“USD”) and 6.84 RMB/USD for the current period and the prior period, respectively. The BRL weighted average exchange rate was 3.24 BRL/USD and 3.29 BRL/USD for the current period and the prior period, respectively.
The change in Segment Profit for the International Segment is as follows:
Segment Profit for the prior period |
| $ | 9,677 |
|
Increase in sales volumes |
|
| 2,985 |
|
Favorable foreign currency translation effects (RMB and BRL) |
|
| 221 |
|
Decrease in underlying margins |
|
| (1,512 | ) |
Segment Profit for the current period |
| $ | 11,371 |
|
The increase in Segment Profit for the International Segment was attributable to (i) improved sales volumes and (ii) favorable foreign currency translation effects due to the strengthening of the RMB and the BRL versus the USD, partially offset by a greater mix of lower-priced product sales in Asia.
International Segment net sales and Segment Profit, as a percentage of total consolidated amounts, were 30.5% and 41.1%, respectively, for the current period, compared to 25.1% and 36.5%, respectively, for the prior period.
Consolidated Selling, General and Administrative Expenses
The change in selling, general and administrative (“SG&A”) expenses is as follows:
SG&A expenses for the prior period |
| $ | 12,868 |
|
Increase in compensation expenses |
|
| 1,895 |
|
Increase in supplemental retirement plan expenses |
|
| 141 |
|
Other net decreases |
|
| (278 | ) |
SG&A expenses for the current period |
| $ | 14,626 |
|
Total SG&A expenses were higher for the current period compared to the prior period, primarily as a result of (i) an increase in compensation expenses due to recent talent acquisition and higher incentive compensation expenses and (ii) an increase in supplemental retirement plan expenses due to comparatively higher performance of the stock market index benchmark, partially offset by other net decreases that include fees paid to external service providers and other administrative expenses.
Consolidated Benefit for Bad Debts
There is no significant activity reflected in the current or prior periods.
Consolidated Other Operating Expense, Net
The change in other operating expense, net is primarily attributable to foreign currency losses in the current period, mostly resulting from changes in the value of USDs held by our subsidiary in China, while the prior period includes executive relocation expenses.
Consolidated Interest Expense, Net
Interest expense, net increased from the prior period, as reflected below, primarily due to (i) a higher weighted average interest rate resulting from fixing the variable portion of the interest rate on $75,000 of debt principal, beginning in May 2017, (ii) less interest capitalized to project costs and (iii) a prior period favorable mark-to-market adjustment on the historical interest rate swap that terminated in May 2017.
|
| For the Three Months Ended |
| |||||
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||
Interest and fees on the ABL Facility |
| $ | 932 |
|
| $ | 806 |
|
Other interest |
|
| 211 |
|
|
| 259 |
|
Subtotal of interest on debt obligations |
|
| 1,143 |
|
|
| 1,065 |
|
Other components of interest expense |
|
| 47 |
|
|
| (151 | ) |
Total interest expense |
|
| 1,190 |
|
|
| 914 |
|
Interest income |
|
| (181 | ) |
|
| (183 | ) |
Interest expense, net |
| $ | 1,009 |
|
| $ | 731 |
|
Loss on Sale of Business
On December 23, 2016, UNIFI, through a wholly owned foreign subsidiary, entered into an agreement to sell its historical 60% equity ownership interest in Renewables to the existing third-party joint venture partner for $500 in cash and release of certain debt obligations. In connection with the transaction, UNIFI recognized a loss on sale of business of $1,662.
Consolidated (Earnings) Loss from Unconsolidated Affiliates
The components of (earnings) loss from unconsolidated affiliates are as follows:
|
| For the Three Months Ended |
| |||||
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||
Loss from PAL |
| $ | 376 |
|
| $ | 745 |
|
Earnings from nylon joint ventures |
|
| (587 | ) |
|
| (378 | ) |
Total equity in (earnings) loss of unconsolidated affiliates |
| $ | (211 | ) |
| $ | 367 |
|
|
|
|
|
|
|
|
|
|
As a percentage of consolidated income before income taxes |
|
| 3.0 | % |
|
| (5.8 | )% |
UNIFI’s 34% share of PAL’s loss decreased in the current period versus the prior period, which was primarily attributable to lower depreciation expense. The earnings from the nylon joint ventures experienced an increase primarily due to higher volumes and improved margins for the current period despite overall softness in the nylon market.
Consolidated Income Taxes
The change in consolidated income taxes is as follows:
|
| For the Three Months Ended |
| |||||
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||
(Benefit) provision for income taxes |
| $ | (4,826 | ) |
| $ | 1,924 |
|
Effective tax rate |
|
| (69.2 | )% |
|
| 30.6 | % |
The effective tax rate for the current period is lower than the U.S. statutory tax rate primarily due to the $4,500 tax benefit resulting from the revaluation of UNIFI’s domestic deferred tax balances for the lower U.S. statutory tax rate, the release of a $3,807 valuation allowance and foreign income being taxed at lower rates. These benefits were partially offset by a $1,700 provisional charge for the deemed mandatory repatriation of foreign earnings and profits, net of foreign tax credits, and by losses in tax jurisdictions for which no tax benefit can currently be recognized.
The effective tax rate for the prior period is lower than the U.S. statutory tax rate primarily due to foreign income being taxed at lower rates and a decrease in the valuation allowance for UNIFI’s investment in PAL. These benefits were partially offset by losses in tax jurisdictions for which no tax benefit can currently be recognized and state and local income taxes net of federal benefits.
Consolidated Net Income
Net Income for the current period was $11,802, or $0.63 per diluted share, compared to $4,591, or $0.25 per diluted share, for the prior period. The increase was primarily attributable to (i) a significantly lower effective tax rate and (ii) a prior period loss on sale of business, partially offset by higher operating expenses.
Consolidated Adjusted EBITDA
Adjusted EBITDA for the current period was $13,893, compared to $14,468 for the prior period. The decrease was primarily attributable to higher operating expenses, as described in the discussions above.
Results of Operations
Six Months Ended December 24, 2017 Compared to Six Months Ended December 25, 2016
Consolidated Overview
The components of Net Income, each component as a percentage of net sales and the percentage increase or decrease over the prior six-month period amounts are as follows:
|
| For the Six Months Ended |
|
|
|
|
| |||||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
|
|
|
| ||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| |||
Net sales |
| $ | 331,720 |
|
|
| 100.0 |
|
| $ | 315,124 |
|
|
| 100.0 |
|
|
| 5.3 |
|
Cost of sales |
|
| 285,752 |
|
|
| 86.1 |
|
|
| 269,447 |
|
|
| 85.5 |
|
|
| 6.1 |
|
Gross profit |
|
| 45,968 |
|
|
| 13.9 |
|
|
| 45,677 |
|
|
| 14.5 |
|
|
| 0.6 |
|
Selling, general and administrative expenses |
|
| 27,489 |
|
|
| 8.3 |
|
|
| 24,278 |
|
|
| 7.7 |
|
|
| 13.2 |
|
Benefit for bad debts |
|
| (131 | ) |
|
| — |
|
|
| (462 | ) |
|
| (0.1 | ) |
|
| (71.6 | ) |
Other operating expense, net |
|
| 663 |
|
|
| 0.2 |
|
|
| 249 |
|
|
| 0.1 |
|
|
| 166.3 |
|
Operating income |
|
| 17,947 |
|
|
| 5.4 |
|
|
| 21,612 |
|
|
| 6.8 |
|
|
| (17.0 | ) |
Interest expense, net |
|
| 2,113 |
|
|
| 0.6 |
|
|
| 1,277 |
|
|
| 0.4 |
|
|
| 65.5 |
|
Loss on sale of business |
|
| — |
|
|
| — |
|
|
| 1,662 |
|
|
| 0.5 |
|
| nm |
| |
Equity in earnings of unconsolidated affiliates |
|
| (3,298 | ) |
|
| (1.0 | ) |
|
| (473 | ) |
|
| (0.2 | ) |
|
| 597.3 |
|
Income before income taxes |
|
| 19,132 |
|
|
| 5.8 |
|
|
| 19,146 |
|
|
| 6.1 |
|
|
| (0.1 | ) |
(Benefit) provision for income taxes |
|
| (1,630 | ) |
|
| (0.5 | ) |
|
| 5,650 |
|
|
| 1.8 |
|
|
| (128.8 | ) |
Net income including non-controlling interest |
|
| 20,762 |
|
|
| 6.3 |
|
|
| 13,496 |
|
|
| 4.3 |
|
|
| 53.8 |
|
Less: net loss attributable to non-controlling interest |
|
| — |
|
|
| — |
|
|
| (498 | ) |
|
| (0.1 | ) |
|
| (100.0 | ) |
Net income attributable to Unifi, Inc. |
| $ | 20,762 |
|
|
| 6.3 |
|
| $ | 13,994 |
|
|
| 4.4 |
|
|
| 48.4 |
|
nm – Not meaningful
Consolidated Net Sales
Consolidated net sales for the current six-month period increased by $16,596, or 5.3%, as compared to the prior six-month period.
Consolidated sales volumes increased 11.0%, attributable to continued growth in sales of recycled polyester Chip and plastic bottle flake in the Polyester Segment and staple fiber and other PVA products in the International Segment. Sales continue to expand in the International Segment as our PVA portfolio resonates with numerous customers. The increase in sales volumes was partially offset by soft yarn sales in the Polyester and Nylon Segments. We believe the softness in the domestic environment continues to be a challenge for the textile supply chain. Our nylon business results also reflect the current global trend of declines in demand for nylon socks, ladies’ hosiery and intimate apparel.
Consolidated average sales prices decreased 5.5%, attributable to disproportionate growth of lower-priced recycled polyester Chip, plastic bottle flake and staple fiber among the Polyester and International Segments, as well as a lower proportion of nylon products
that carry higher selling prices. The decrease in consolidated sales pricing was partially offset by a benefit from net favorable foreign currency translation compared to the prior period of approximately $1,600, primarily associated with the strengthening of the BRL and the RMB.
Consolidated Gross Profit
Gross profit for the current six-month period increased by $291, or 0.6%, as compared to the prior six-month period. The Nylon Segment achieved an increase in gross margin rate due in part to a more favorable sales mix and cost management. For the International Segment, gross profit increased due to sales growth; however, margins were lower due to a less favorable sales mix and pressure from higher costs. For the Polyester Segment, the decline in gross margin rate was primarily due to a greater mix of lower margin product sales and incremental depreciation, primarily due to expanded recycling operations, partially offset by the conversion services performed for Eastman on bi-component machinery, a revenue stream that did not exist in the prior six-month period. Consolidated gross profit for the current six-month period also included approximately $400 of favorable foreign currency translation.
Further details regarding the changes in net sales and gross profit, by reportable segment, follow.
Polyester Segment
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior six-month period amounts for the Polyester Segment are as follows:
|
| For the Six Months Ended |
|
|
|
|
| |||||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
|
|
|
| ||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| |||
Net sales |
| $ | 178,054 |
|
|
| 100.0 |
|
| $ | 171,356 |
|
|
| 100.0 |
|
|
| 3.9 |
|
Cost of sales |
|
| 160,565 |
|
|
| 90.2 |
|
|
| 152,435 |
|
|
| 89.0 |
|
|
| 5.3 |
|
Gross profit |
|
| 17,489 |
|
|
| 9.8 |
|
|
| 18,921 |
|
|
| 11.0 |
|
|
| (7.6 | ) |
Depreciation expense |
|
| 7,840 |
|
|
| 4.4 |
|
|
| 6,492 |
|
|
| 3.8 |
|
|
| 20.8 |
|
Segment Profit |
| $ | 25,329 |
|
|
| 14.2 |
|
| $ | 25,413 |
|
|
| 14.8 |
|
|
| (0.3 | ) |
The change in net sales for the Polyester Segment is as follows:
Net sales for the prior six-month period |
| $ | 171,356 |
|
Increase in sales volumes |
|
| 12,200 |
|
Decrease in average selling price and change in sales mix |
|
| (5,502 | ) |
Net sales for the current six-month period |
| $ | 178,054 |
|
The increase in net sales for the Polyester Segment was primarily attributable to (i) higher sales of plastic bottle flake, recycled polyester Chip and POY and (ii) the conversion services performed for Eastman on bi-component machinery. The unfavorable change in sales mix was due to (a) lower sales volumes of higher-priced textured, dyed and beamed yarns and (b) higher sales volumes of lower-priced plastic bottle flake, recycled polyester Chip and POY.
The change in Segment Profit for the Polyester Segment is as follows:
|
|
| ||
|
|
| ||
|
| |||
|
|
|
The decrease in Segment Profit for the Polyester Segment was primarily attributable to the unfavorable sales mix shift towards lower-margin products discussed above in the net sales analysis, along with raw material cost pressures, partially offset by the benefit of the conversion services performed for Eastman on bi-component machinery and an increase in sales volumes.
Polyester Segment net sales and Segment Profit, as a percentage of total consolidated amounts, were 53.7% and 45.4%, respectively, for the current six-month period, compared to 54.4% and 46.9%, respectively, for the prior six-month period.production mix.
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior six-month period amounts for the Nylon Segment are as follows:
|
| For the Six Months Ended |
|
|
|
|
| |||||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
|
|
|
| ||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| |||
Net sales |
| $ | 51,930 |
|
|
| 100.0 |
|
| $ | 56,797 |
|
|
| 100.0 |
|
|
| (8.6 | ) |
Cost of sales |
|
| 45,540 |
|
|
| 87.7 |
|
|
| 51,037 |
|
|
| 89.9 |
|
|
| (10.8 | ) |
Gross profit |
|
| 6,390 |
|
|
| 12.3 |
|
|
| 5,760 |
|
|
| 10.1 |
|
|
| 10.9 |
|
Depreciation expense |
|
| 1,089 |
|
|
| 2.1 |
|
|
| 1,040 |
|
|
| 1.9 |
|
|
| 4.7 |
|
Segment Profit |
| $ | 7,479 |
|
|
| 14.4 |
|
| $ | 6,800 |
|
|
| 12.0 |
|
|
| 10.0 |
|
The change in net sales for the Nylon Segment is as follows:
Net sales for the prior six-month period |
| $ | 56,797 |
|
Decrease in sales volumes |
|
| (3,284 | ) |
Decrease in average selling price and change in sales mix |
|
| (1,583 | ) |
Net sales for the current six-month period |
| $ | 51,930 |
|
The decrease in net sales for the Nylon Segment was primarily attributable to (i) lower sales volumes as a result of soft domestic market conditions in which nylon socks, ladies’ hosiery and intimates have experienced demand declines and (ii) a lower-priced sales mix.
The change in Segment Profit for the Nylon Segment is as follows:
Segment Profit for the prior six-month period |
| $ | 6,800 |
|
Increase in underlying margins |
|
| 1,072 |
|
Decrease in sales volumes |
|
| (393 | ) |
Segment Profit for the current six-month period |
| $ | 7,479 |
|
The increase in Segment Profit for the Nylon Segment was attributable to a more profitable sales mix and cost management.
Nylon Segment net sales and Segment Profit, as a percentage of total consolidated amounts, were 15.7% and 13.4%, respectively, for the current six-month period, compared to 18.0% and 12.6%, respectively, for the prior six-month period.
International Segment
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior six-month period amounts for the International Segment are as follows:
|
| For the Six Months Ended |
|
|
|
|
| |||||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
|
|
|
| ||||||||||
|
|
|
|
|
| % of Net Sales |
|
|
|
|
|
| % of Net Sales |
|
| % Change |
| |||
Net sales |
| $ | 99,705 |
|
|
| 100.0 |
|
| $ | 84,212 |
|
|
| 100.0 |
|
|
| 18.4 |
|
Cost of sales |
|
| 77,733 |
|
|
| 78.0 |
|
|
| 62,493 |
|
|
| 74.2 |
|
|
| 24.4 |
|
Gross profit |
|
| 21,972 |
|
|
| 22.0 |
|
|
| 21,719 |
|
|
| 25.8 |
|
|
| 1.2 |
|
Depreciation expense |
|
| 813 |
|
|
| 0.9 |
|
|
| 474 |
|
|
| 0.6 |
|
|
| 71.5 |
|
Segment Profit |
| $ | 22,785 |
|
|
| 22.9 |
|
| $ | 22,193 |
|
|
| 26.4 |
|
|
| 2.7 |
|
The change in net sales for the International Segment is as follows:
Net sales for the prior six-month period |
| $ | 84,212 |
|
Increase in sales volumes |
|
| 16,807 |
|
Net favorable foreign currency translation effects (BRL and RMB) |
|
| 1,611 |
|
Decrease in average selling price and change in sales mix |
|
| (2,925 | ) |
Net sales for the current six-month period |
| $ | 99,705 |
|
The increase in net sales for the International Segment was attributable to (i) higher sales volumes from our Asian subsidiaries due to growth in our REPREVE® portfolios, particularly staple fiber and recycled polyester Chip, (ii) higher sales volumes at our Brazilian subsidiary due to increased demand for synthetic yarns, including air-covered PVA products for use in applications such as stretch denim, and (iii) favorable foreign currency translation due to the strengthening of the BRL and the RMB. These benefits were partially offset by a decrease in the average selling price in Asia due to a greater mix of lower-priced product sales.
The BRL weighted average exchange rate was 3.20 BRL/USD and 3.27 BRL/USD for the current six-month period and the prior six-month period, respectively. The RMB weighted average exchange rate was 6.64 RMB/USD and 6.75 RMB/USD for the current six-month period and the prior six-month period, respectively.
The change in Segment Profit for the International Segment is as follows:
Segment Profit for the prior six-month period |
| $ | 22,193 |
|
Increase in sales volumes |
|
| 4,432 |
|
Net favorable foreign currency translation effects (BRL and RMB) |
|
| 427 |
|
Decrease in underlying margins |
|
| (4,267 | ) |
Segment Profit for the current six-month period |
| $ | 22,785 |
|
The increase in Segment Profit for the International Segment was attributable to (i) improved sales volumes and (ii) favorable foreign currency translation effects due to the strengthening of both the BRL and the RMB versus the USD, partially offset by a greater mix of lower-margin product sales in Asia.
International Segment net sales and Segment Profit, as a percentage of total consolidated amounts, were 30.1% and 40.8%, respectively, for the current six-month period, compared to 26.7% and 41.0%, respectively, for the prior six-month period.
Consolidated Selling, General and Administrative Expenses
The change in SG&A expenses is as follows:
SG&A expenses for the prior six-month period | $ | 24,278 |
|
Increase in compensation expenses |
| 3,115 |
|
Other net increases |
| 96 |
|
SG&A expenses for the current six-month period | $ | 27,489 |
|
Total SG&A expenses were higher for the current six-month period compared to the prior six-month period, primarily as a result of an increase in compensation expenses due to recent talent acquisition and other net increases.
Consolidated Benefit for Bad Debts
The benefit in the prior six-month period reflects a decrease in the reserve against specifically identified customer balances in the Polyester and International Segments.
Consolidated Other Operating Expense, Net
The change in other operating expense, net is primarily attributable to foreign currency losses in the current six-month period, mostly resulting from changes in the value of USDs held by our subsidiary in China.
Consolidated Interest Expense, Net
Interest expense, net increased from the prior six-month period, as reflected below, primarily due to (i) a higher weighted average interest rate resulting from fixing the variable portion of the interest rate on $75,000 of debt principal, beginning in May 2017, (ii) less interest capitalized to project costs and (iii) a prior period favorable mark-to-market adjustment on the historical interest rate swap that terminated in May 2017.
|
| For the Six Months Ended |
| |||||
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||
Interest and fees on the ABL Facility |
| $ | 1,837 |
|
| $ | 1,454 |
|
Other interest |
|
| 437 |
|
|
| 514 |
|
Subtotal of interest on debt obligations |
|
| 2,274 |
|
|
| 1,968 |
|
Other components of interest expense |
|
| 101 |
|
|
| (362 | ) |
Total interest expense |
|
| 2,375 |
|
|
| 1,606 |
|
Interest income |
|
| (262 | ) |
|
| (329 | ) |
Interest expense, net |
| $ | 2,113 |
|
| $ | 1,277 |
|
Loss on Sale of Business
On December 23, 2016, UNIFI, through a wholly owned foreign subsidiary, entered into an agreement to sell its historical 60% equity ownership interest in Renewables to the existing third-party joint venture partner for $500 in cash and release of certain debt obligations. In connection with the transaction, UNIFI recognized a loss on sale of business of $1,662.
Consolidated Earnings from Unconsolidated Affiliates
The components of earnings from unconsolidated affiliates are as follows:
|
| For the Six Months Ended |
| |||||
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||
(Earnings) loss from PAL |
| $ | (2,478 | ) |
| $ | 431 |
|
Earnings from nylon joint ventures |
|
| (820 | ) |
|
| (904 | ) |
Total equity in earnings of unconsolidated affiliates |
| $ | (3,298 | ) |
| $ | (473 | ) |
|
|
|
|
|
|
|
|
|
As a percentage of consolidated income before income taxes |
|
| 17.2 | % |
|
| 2.5 | % |
UNIFI’s 34% share of PAL’s earnings increased in the current six-month period versus the prior six-month period, which was primarily attributable to improved operating margins and lower depreciation expense. The earnings from the nylon joint ventures experienced a decrease primarily due to softness in the nylon market, consistent with the results of the Nylon Segment, as well as higher raw material costs.
Consolidated Income Taxes
The change in consolidated income taxes is as follows:
|
| For the Six Months Ended |
| |||||
|
| December 24, 2017 |
|
| December 25, 2016 |
| ||
(Benefit) provision for income taxes |
| $ | (1,630 | ) |
| $ | 5,650 |
|
Effective tax rate |
|
| (8.5 | )% |
|
| 29.5 | % |
The effective tax rate for the current six-month period is lower than the U.S. statutory tax rate primarily due to the $4,500 tax benefit resulting from the revaluation of UNIFI’s domestic deferred tax balances for the lower U.S. statutory tax rate, the release of a $3,807 valuation allowance and foreign income being taxed at lower rates. These benefits were partially offset by a $1,700 provisional charge for the deemed mandatory repatriation of foreign earnings and profits, net of foreign tax credits, and by losses in tax jurisdictions for which no tax benefit can currently be recognized.
The effective tax rate for the prior six-month period is lower than the U.S. statutory tax rate primarily due to foreign income being taxed at lower rates and a decrease in the valuation allowance for UNIFI’s investment in PAL. These benefits were partially offset by losses in tax jurisdictions for which no tax benefit can currently be recognized and state and local income taxes net of federal benefits.
Consolidated Net Income
Net Income for the current six-month period was $20,762, or $1.12 per diluted share, compared to $13,994, or $0.76 per diluted share, for the prior six-month period. The increase was primarily attributable to a significantly lower effective tax rate, higher earnings from PAL and a loss on sale of business in the prior six-month period, partially offset by higher operating expenses and interest expense.
Consolidated Adjusted EBITDA
Adjusted EBITDA for the current six-month period was $29,716, compared to $32,379 for the prior six-month period. The decrease was primarily attributable to higher operating expenses, as described in the discussions above.
Liquidity and Capital Resources
UNIFI’s primary capital requirements are for working capital, capital expenditures, debt service and stockshare repurchases. UNIFI’s primary sources of capital are cash generated from operations and borrowings available under the ABL Revolver.Revolver of its credit facility. For the current six-month period, cash generated fromused by operations was $20,389,$15,808, and, at December 24, 2017,September 26, 2021, excess availability under the ABL Revolver was $54,379.$73,693.
As of December 24, 2017,September 26, 2021, all of UNIFI’s $133,540$84,312 of debt obligations were guaranteed by certain of its domestic operating subsidiaries, while nearly all76% of UNIFI’s cash and cash equivalents were held by its foreign subsidiaries. Cash and cash equivalents held by such foreign subsidiaries may not be presently available to fund UNIFI’s domestic capital requirements, including its domestic debt obligations. UNIFI employs a variety of tax planning and financing strategies to ensure that its worldwide cash is available in the locations where it is needed.
The following table presents a summary of cash and cash equivalents, borrowings available under financing arrangements, liquidity, working capital and total debt obligations as of December 24, 2017September 26, 2021 for domestic andoperations compared to foreign operations:
|
| Domestic |
|
| Foreign |
|
| Total |
|
| Domestic |
|
| Foreign |
|
| Total |
| ||||||
Cash and cash equivalents |
| $ | 14 |
|
| $ | 48,601 |
|
| $ | 48,615 |
|
| $ | 12,051 |
|
| $ | 37,505 |
|
| $ | 49,556 |
|
Borrowings available under financing arrangements |
|
| 54,379 |
|
|
| — |
|
|
| 54,379 |
|
|
| 73,693 |
|
|
| — |
|
|
| 73,693 |
|
Liquidity |
| $ | 54,393 |
|
| $ | 48,601 |
|
| $ | 102,994 |
|
| $ | 85,744 |
|
| $ | 37,505 |
|
| $ | 123,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital |
| $ | 90,441 |
|
| $ | 105,371 |
|
| $ | 195,812 |
|
| $ | 85,254 |
|
| $ | 134,426 |
|
| $ | 219,680 |
|
Total debt obligations |
| $ | 133,540 |
|
| $ | — |
|
| $ | 133,540 |
|
| $ | 84,312 |
|
| $ | — |
|
| $ | 84,312 |
|
Debt Obligations
ABL Facility
On March 26, 2015, Unifi, Inc.UNIFI’s primary cash requirements, in addition to normal course operating activities (e.g. working capital and its subsidiary, Unifi Manufacturing, Inc.payroll), entered into an Amended and Restated Credit Agreement (as subsequently amended, the “Amended Credit Agreement”) for a $200,000 senior secured credit facility (the ABL Facility) with a syndicateprimarily include (i) capital expenditures that generally have commitments of lenders. The ABL Facility consists of a $100,000 revolving credit facility (the ABL Revolver) and a term loan that can be reset up to a maximum amount12 months, (ii) contractual obligations that support normal course ongoing operations and production, (iii) operating leases and finance leases, and (iv) debt service.
COVID-19 Pandemic Liquidity Considerations
Throughout the COVID-19 pandemic, UNIFI has not experienced any (i) substantial, prolonged headwinds relating to liquidity, (ii) significant outbreaks of $100,000, once per fiscal year, if certain conditionsCOVID-19 among employees, nor (iii) other extensive disruptions to ongoing operations. The following reflect on UNIFI’s strong liquidity position and access to capital resources during the COVID-19 pandemic:
• | We have not accessed public or private capital markets for recent liquidity needs. |
• | We do not currently expect our cost of or access to existing capital and funding sources to materially change as a result of the COVID-19 pandemic; however, new capital and funding sources (if any) may carry higher costs than our current structure. |
• | We have not taken advantage of rent, lease or debt deferrals, forbearance periods or other concessions, nor have we modified any material agreements to provide concessions. |
• | We have not relied on supply chain financing, structured trade payables or vendor financing. |
• | We are not at material risk of not meeting our financial covenants. |
• | We continue to maintain significant borrowing availability on our existing credit facility. |
Now that global demand pressures are met (the ABL Term Loan). The ABL Facility has a maturity date of March 26, 2020.
The ABL Facility is secured by a first-priority perfected security interest in substantially all owned propertyless severe and assets (together with all proceedsthe textile supply chain appears to be recovering, we expect our significant cash balances and products) of Unifi, Inc., Unifi Manufacturing, Inc. and certain subsidiary guarantors (the “Loan Parties”). It is also secured by a first-priority security interest in all (or 65% inavailable borrowings to continue to provide adequate liquidity during the case of certain first-tier controlled foreign corporations, as required by the lenders)lingering pressures of the stock of (or other ownership interests in) eachCOVID-19 pandemic. Accordingly, and because of the Loan Parties (other than Unifi, Inc.)global demand recovery that has occurred thus far, we do not currently anticipate any adverse events or circumstances will place critical pressure on our liquidity position and/or ability to fund our operations, capital expenditures, and certain subsidiariesexpected business growth during fiscal 2022. Should global demand and economic activity decline beyond the short-term, UNIFI maintains the ability to (i) seek additional credit or financing arrangements or extensions of existing arrangements and/or (ii) re-implement cost reduction initiatives to preserve cash and secure the longevity of the Loan Parties, together with all proceedsbusiness and products thereof.operations.
If excess availability underAs we anticipate further business recovery to occur throughout fiscal 2022, we expect the ABL Revolver falls belowmajority of our capital will be deployed to upgrade the defined Trigger Level, a financial covenant requiring the Loan Parties to maintain a fixed charge coverage ratio on a monthly basis of at least 1.05 to 1.00 becomes effective. The Trigger Level as of December 24, 2017 was $23,750. In addition, the ABL Facility contains restrictions on particular payments and investments, including
certain restrictions on the payment of dividends and share repurchases. Subject to specific provisions, the ABL Term Loan may be prepaid at par,machinery in whole or in part, at any time before the maturity date, at UNIFI’s discretion.our Americas manufacturing facilities via capital expenditures.
ABL Facility borrowings bear interest at the London Interbank Offer Rate (“LIBOR”) plus an applicable margin of 1.50% to 2.00%, or the Base Rate (as defined below) plus an applicable margin of 0.50% to 1.00%, with interest currently being paid on a monthly basis. The applicable margin is based on (i) the excess availability under the ABL Revolver and (ii) the consolidated leverage ratio, calculated as of the end of each fiscal quarter. The Base Rate means the greater of (a) the prime lending rate as publicly announced from time to time by Wells Fargo Bank, National Association, (b) the Federal Funds Rate plus 0.50% or (c) LIBOR plus 1.00%. UNIFI’s ability to borrow under the ABL Revolver is limited to a borrowing base equal to specified percentages of eligible accounts receivable and inventory and is subject to certain conditions and limitations. There is also a monthly unused line fee under the ABL Revolver of 0.25%. As of December 24, 2017, UNIFI was in compliance with all financial covenants in the Amended Credit Agreement, and the excess availability under the ABL Revolver was $54,379. At December 24, 2017, the fixed charge coverage ratio was 1.11 to 1.00 and UNIFI had $400 of standby letters of credit, none of which had been drawn upon.
UNIFI currently maintains three interest rate swaps that fix LIBOR at approximately 1.9% on $75,000 of variable-rate debt under the ABL Facility. Such swaps are scheduled to terminate in May 2022.
Summary of Debt Obligations
The following table presents the total balances outstanding for UNIFI’s debt obligations, their scheduled maturity dates and the weighted average interest rates for borrowings as well as the applicable current portion of long-term debt:
|
|
|
| Weighted Average |
|
|
|
|
|
|
| Weighted Average |
|
|
| ||||||||||||||
|
| Scheduled |
| Interest Rate as of |
|
| Principal Amounts as of |
|
| Scheduled |
| Interest Rate as of |
| Principal Amounts as of |
| ||||||||||||||
|
| Maturity Date |
| December 24, 2017 |
|
| December 24, 2017 |
|
| June 25, 2017 |
|
| Maturity Date |
| September 26, 2021 |
| September 26, 2021 |
|
| June 27, 2021 |
| ||||||||
ABL Revolver |
| March 2020 |
| 3.3% |
|
| $ | 21,900 |
|
| $ | 9,300 |
|
| December 2023 |
|
| 0.0 | % |
|
| $ | — |
|
| $ | — |
| |
ABL Term Loan |
| March 2020 |
| 3.3% |
|
|
| 90,000 |
|
|
| 95,000 |
|
| December 2023 |
|
| 3.2 | % | (1) |
|
| 75,000 |
|
|
| 77,500 |
| |
Capital lease obligations |
| (2) |
| 3.7% |
|
|
| 21,640 |
|
|
| 25,168 |
| ||||||||||||||||
Finance lease obligations |
| (2) |
|
| 3.6 | % |
|
|
| 7,548 |
|
|
| 8,475 |
| ||||||||||||||
Construction financing |
| (3) |
|
| 2.3 | % |
|
|
| 1,764 |
|
|
| 882 |
| ||||||||||||||
Total debt |
|
|
|
|
|
|
|
| 133,540 |
|
|
| 129,468 |
|
|
|
|
|
|
|
|
|
| 84,312 |
|
|
| 86,857 |
|
Current portion of capital lease obligations |
|
|
|
|
|
|
|
| (7,112 | ) |
|
| (7,060 | ) | |||||||||||||||
Current portion of other long-term debt |
|
|
|
|
|
|
|
| (10,000 | ) |
|
| (10,000 | ) | |||||||||||||||
Current ABL Term Loan |
|
|
|
|
|
|
|
|
| (12,500 | ) |
|
| (12,500 | ) | ||||||||||||||
Current portion of finance lease obligations |
|
|
|
|
|
|
|
|
| (2,928 | ) |
|
| (3,545 | ) | ||||||||||||||
Unamortized debt issuance costs |
|
|
|
|
|
|
|
| (840 | ) |
|
| (1,026 | ) |
|
|
|
|
|
|
|
|
| (419 | ) |
|
| (476 | ) |
Total long-term debt |
|
|
|
|
|
|
| $ | 115,588 |
|
| $ | 111,382 |
|
|
|
|
|
|
|
|
| $ | 68,465 |
|
| $ | 70,336 |
|
(1)
(1) | Includes the effects of interest rate swaps. |
(2) | Scheduled maturity dates for finance lease obligations range from May 2022 to November 2027. |
(3) | Refer to the discussion below under the subheading “─Construction Financing” for further information. |
As of September 26, 2021:
• | UNIFI was in compliance with all financial covenants in the Credit Agreement, |
• | excess availability under the ABL Revolver was $73,693, |
• | the Trigger Level (as defined in the Credit Agreement) was $21,875, and |
• | $0 of standby letters of credit were outstanding. |
UNIFI currently maintains three interest rate swaps.
(2) Scheduled maturity dates for capital lease obligations range from July 2018swaps that fix LIBOR at approximately 1.9% on $75,000 of variable-rate debt. Such swaps are scheduled to November 2027.terminate in May 2022. Management will continue to monitor the expected termination of LIBOR and the impact on UNIFI’s operations. However, management does not expect (i) significant efforts are necessary to accommodate a termination of LIBOR or (ii) a significant impact to UNIFI’s operations upon a termination of LIBOR.
In addition to making payments in accordance with the scheduled maturities of debt required under its existing debt obligations, UNIFI may, from time to time, elect to repay additional amounts borrowed under the ABL Facility. Funds to make such repayments may come from the operating cash flows of the business or other sources and will depend upon UNIFI’s strategy, prevailing market conditions, liquidity requirements, contractual restrictions and other factors.
Construction Financing
In May 2021, UNIFI entered into an agreement with a third party lender that provides for construction-period financing for certain texturing machinery anticipated in our capital allocation plans. UNIFI will record project costs to construction in progress and the corresponding liability to construction financing (within long-term debt). The agreement provides for monthly, interest-only payments during the construction period, at a rate of LIBOR plus 2.2%, and contains terms customary for a financing of this type. The agreement provides for 60 monthly payments, which will commence upon the completion of the construction period with an interest rate of approximately 2.8%.
Scheduled Debt Maturities
The following table presents the scheduled maturities of UNIFI’s outstanding debt obligations for the remainder of fiscal 2018 and2022, the following four fiscal years and thereafter:
|
| Fiscal 2022 |
|
| Fiscal 2023 |
|
| Fiscal 2024 |
|
| Fiscal 2025 |
|
| Fiscal 2026 |
|
| Thereafter |
| ||||||
ABL Revolver |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
ABL Term Loan |
|
| 10,000 |
|
|
| 10,000 |
|
|
| 55,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Finance lease obligations |
|
| 2,618 |
|
|
| 1,257 |
|
|
| 1,301 |
|
|
| 1,195 |
|
|
| 733 |
|
|
| 444 |
|
Total (1) |
| $ | 12,618 |
|
| $ | 11,257 |
|
| $ | 56,301 |
|
| $ | 1,195 |
|
| $ | 733 |
|
| $ | 444 |
|
| (1) | Total reported excludes $1,764 for construction financing, described above. |
Net Debt (Non-GAAP Financial Measure)
The reconciliations for Net Debt are as follows:
|
| Fiscal 2018 |
|
| Fiscal 2019 |
|
| Fiscal 2020 |
|
| Fiscal 2021 |
|
| Fiscal 2022 |
|
| Thereafter |
| ||||||
ABL Revolver |
| $ | — |
|
| $ | — |
|
| $ | 21,900 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
ABL Term Loan |
|
| 5,000 |
|
|
| 10,000 |
|
|
| 75,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Capital lease obligations |
|
| 3,533 |
|
|
| 6,996 |
|
|
| 5,519 |
|
|
| 2,624 |
|
|
| 2,417 |
|
|
| 551 |
|
Total |
| $ | 8,533 |
|
| $ | 16,996 |
|
| $ | 102,419 |
|
| $ | 2,624 |
|
| $ | 2,417 |
|
| $ | 551 |
|
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||
Long-term debt |
| $ | 68,465 |
|
| $ | 70,336 |
|
Current portion of long-term debt |
|
| 15,428 |
|
|
| 16,045 |
|
Unamortized debt issuance costs |
|
| 419 |
|
|
| 476 |
|
Debt principal |
|
| 84,312 |
|
|
| 86,857 |
|
Less: cash and cash equivalents |
|
| 49,556 |
|
|
| 78,253 |
|
Net Debt |
| $ | 34,756 |
|
| $ | 8,604 |
|
Working Capital and Adjusted Working Capital (Non-GAAP Financial Measures)
The following table presents the components of working capital and the reconciliation of working capital to Adjusted Working Capital:
|
| December 24, 2017 |
|
| June 25, 2017 |
|
| September 26, 2021 |
|
| June 27, 2021 |
| ||||
Cash and cash equivalents |
| $ | 48,615 |
|
| $ | 35,425 |
|
| $ | 49,556 |
|
| $ | 78,253 |
|
Receivables, net |
|
| 80,847 |
|
|
| 81,121 |
|
|
| 103,031 |
|
|
| 94,837 |
|
Inventories |
|
| 116,239 |
|
|
| 111,405 |
|
|
| 150,511 |
|
|
| 141,221 |
|
Income taxes receivable |
|
| 3,368 |
|
|
| 2,392 |
| ||||||||
Other current assets |
|
| 17,466 |
|
|
| 15,686 |
|
|
| 12,816 |
|
|
| 12,364 |
|
Accounts payable |
|
| (35,420 | ) |
|
| (41,499 | ) |
|
| (57,528 | ) |
|
| (54,259 | ) |
Accrued expenses |
|
| (12,990 | ) |
|
| (16,144 | ) | ||||||||
Other current liabilities |
|
| (18,945 | ) |
|
| (18,411 | ) |
|
| (19,319 | ) |
|
| (31,638 | ) |
Income taxes payable |
|
| (5,177 | ) |
|
| (1,625 | ) | ||||||||
Current operating lease liabilities |
|
| (2,150 | ) |
|
| (1,856 | ) | ||||||||
Current portion of long-term debt |
|
| (15,428 | ) |
|
| (16,045 | ) | ||||||||
Working capital |
| $ | 195,812 |
|
| $ | 167,583 |
|
| $ | 219,680 |
|
| $ | 223,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Cash and cash equivalents |
|
| (48,615 | ) |
|
| (35,425 | ) |
|
| (49,556 | ) |
|
| (78,253 | ) |
Less: Other current assets |
|
| (17,466 | ) |
|
| (15,686 | ) | ||||||||
Less: Other current liabilities |
|
| 18,945 |
|
|
| 18,411 |
| ||||||||
Less: Income taxes receivable |
|
| (3,368 | ) |
|
| (2,392 | ) | ||||||||
Less: Income taxes payable |
|
| 5,177 |
|
|
| 1,625 |
| ||||||||
Less: Current operating lease liabilities |
|
| 2,150 |
|
|
| 1,856 |
| ||||||||
Less: Current portion of long-term debt |
|
| 15,428 |
|
|
| 16,045 |
| ||||||||
Adjusted Working Capital |
| $ | 148,676 |
|
| $ | 134,883 |
|
| $ | 189,511 |
|
| $ | 162,525 |
|
Working capital increaseddecreased from $167,583$223,644 as of June 25, 201727, 2021 to $195,812$219,680 as of December 24, 2017,September 26, 2021, while Adjusted Working Capital increased from $134,883$162,525 to $148,676. Working capital and Adjusted Working Capital are within our range of expectations based on the composition of the underlying business and global structure.$189,511.
The increasedecrease in cash and cash equivalents reflectswas primarily driven by the strong performanceincrease in receivables and inventories, the routine payment of our international subsidiariesincentive compensation earned in fiscal 2021, capital expenditures and the intent to leave cash available in foreign jurisdictions for future expansion.scheduled debt service. The decreaseincrease in receivables, net is attributable to lower sales associated with the routine December shutdown period. The increase inand inventories iswas primarily attributable to increased international sales activityin the current period along with the impact of increased sales pricing and higher raw material costs. The changes in income taxes receivable and other current assets were insignificant. The increase in accounts payable was consistent with the increase in sales and production activity. The decrease in other current liabilities was primarily attributable to the payment of incentive compensation earned in fiscal 2021. The increase in income taxes payable primarily reflects the impact of the routine December shutdown period.interim tax provision. The increasechanges in other current assets is attributable to an increase in income taxes receivable. The decrease in accounts payable is mainly due to the routine December shutdown period. The decrease in accrued expenses is primarily attributable to a net decrease in amounts due to employees, resulting from the timingoperating lease liabilities and current portion of accrual and payment of (i) variable compensation earned in fiscal 2017 and (ii) routine payrolls. The change in other current liabilities islong-term debt were insignificant.
Capital Projects
During the current six-month period, UNIFI invested approximately $11,400$9,300 in capital projects, primarily relating to routine maintenance expenditures as well as the completion(i) eAFK Evo texturing machinery, (ii) further improvements in production capabilities and start-up of the fourth production linetechnology enhancements in the REPREVE® Recycling Center, which is intendedAmericas, and (iii) routine annual maintenance capital expenditures. Maintenance capital expenditures are necessary to increasesupport UNIFI’s capacitycurrent operations, capacities and capabilities and exclude expenses relating to produce recycled polyester Chip for internal consumptionrepairs and external sales.costs that do not extend an asset’s useful life.
ThroughFor the remainder of fiscal 2018, UNIFI expects2022, we expect to invest an additional $18,600up to $34,700 in capital projects (forfor an aggregate fiscal 2018annual estimate of $30,000), which$40,000 to $44,000, to include (i) continuing the purchase and installation of new eAFK Evo texturing machines, (ii) making further improvements in production capabilities and technology enhancements in the Americas, and (ii) routine(iii) annual maintenance capital expenditures to allow continued efficient production.expenditures.
The total amount ultimately invested infor fiscal 20182022 could be more or less than the anticipatedcurrently estimated amount depending on the timing and scale of contemplated initiatives and other factors, and is expected to be funded primarily by a combination ofexisting cash from operations and borrowings under the ABL Revolver.cash equivalents. UNIFI expects the recent and future capital projects to provide benefits to future profitability. The additional assets from these capital projects consist primarily of machinery and equipment.
As a result of our continued focus on REPREVE® and other PVA yarns as part of our mix enrichment strategy, we may incur additional expenditures for capital projects beyondShare Repurchase Program
On October 31, 2018, the currently estimated amount, as we pursue new, currently unanticipated opportunities in order to expand our manufacturing capabilities for these products, for other strategic growth initiatives or to further streamline our manufacturing process, inBoard approved the 2018 SRP under which case we may be required to increase the amount of our working capital and long-term borrowings. If our strategyUNIFI is successful, we would expect higher gross profit as a result of the combination of potentially higher sales volumes and an improved mix from higher-margin products.
On April 23, 2014, UNIFI announced a stock repurchase program (the “2014 SRP”) to authorize UNIFIauthorized to acquire up to $50,000 of its common stock. Under the 20142018 SRP, UNIFI is authorizedpurchases will be made from time to repurchase sharestime in the open market at prevailing market prices or through open market purchasesprivate transactions or privately negotiated transactions at such timesblock trades. The timing and prices and in such manner as determined by management, subject toamount of repurchases will depend on market conditions, share price, applicable legal requirements contractual obligations and other factors. Repurchases, if any, are expected to be financed through cash generated from operationsThe share repurchase authorization is discretionary and borrowings under the ABL Revolver, and are subject to applicable limitations and restrictions as set forth in the ABL Facility. The 2014 SRP has no stated expiration or termination date, and there is no time limit or specific time frame otherwise for repurchases. UNIFI may discontinue repurchases at any time that management determines additional purchases are not beneficial or advisable.date.
UNIFI made no repurchases of its shares of common stock during the current six-month period.
As of December 24, 2017,September 26, 2021, UNIFI had repurchased a total of 80684 shares during fiscal 2020, at an average price of $27.79$23.72 (for a total of $22,409,$1,994 inclusive of commission costs) pursuant to the 2014 SRP. As of December 24, 2017, $27,603 remained2018 SRP, leaving $48,008 available for share repurchasesrepurchase under the 20142018 SRP.
Liquidity Summary
UNIFI has met its historical liquidity requirements for working capital, capital expenditures, debt service requirements and other operating needs from its cash flows from operations and available borrowings. UNIFI believes that its existing cash balances, cash provided by operating activities and borrowings available under the ABL Revolver will enable UNIFI to comply with the terms of its indebtedness and meet its foreseeable liquidity requirements. Domestically, UNIFI’s cash balances, cash provided by operating activities and borrowings available under the ABL Revolver continue to be sufficient to fund UNIFI’s domestic operating activities as well as cash commitments for its investing and financing activities. For its existing foreign operations, UNIFI expects its existing cash balances and cash provided by operating activities will provide the needed liquidity to fund its foreign operating activities and any foreign
investing activities, such as future capital expenditures. However, expansion of our foreign operations may require cash sourced from our domestic subsidiaries.
Operating Cash Provided by Operating ActivitiesFlows
The significant components of net cash (used) provided by operating activities are summarized below. UNIFI analyzes net cash provided by operating activities utilizing the major components of the statements of cash flows prepared under the indirect method.
|
| For the Six Months Ended |
|
| For the Three Months Ended |
| ||||||||||
|
| December 24, 2017 |
|
| December 25, 2016 |
|
| September 26, 2021 |
|
| September 27, 2020 |
| ||||
Net income including non-controlling interest |
| $ | 20,762 |
|
| $ | 13,496 |
| ||||||||
Loss on sale of business |
|
| — |
|
|
| 1,662 |
| ||||||||
Net income |
| $ | 8,680 |
|
| $ | 3,432 |
| ||||||||
Equity in earnings of unconsolidated affiliates |
|
| (3,298 | ) |
|
| (473 | ) |
|
| (280 | ) |
|
| (93 | ) |
Depreciation and amortization expense |
|
| 11,135 |
|
|
| 9,731 |
|
|
| 6,365 |
|
|
| 6,112 |
|
Non-cash compensation expense |
|
| 3,569 |
|
|
| 1,862 |
|
|
| 660 |
|
|
| 509 |
|
Deferred income taxes |
|
| (6,282 | ) |
|
| 5,335 |
|
|
| (3,463 | ) |
|
| (2,072 | ) |
Subtotal |
|
| 25,886 |
|
|
| 31,613 |
|
|
| 11,962 |
|
|
| 7,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions received from unconsolidated affiliates |
|
| 8,678 |
|
|
| 1,500 |
| ||||||||
Receivables, net |
|
| (9,462 | ) |
|
| (23,499 | ) | ||||||||
Inventories |
|
| (12,190 | ) |
|
| 4,853 |
| ||||||||
Accounts payable and other current liabilities |
|
| (7,393 | ) |
|
| 15,314 |
| ||||||||
Other changes |
|
| (14,175 | ) |
|
| (15,817 | ) |
|
| 1,275 |
|
|
| 3,366 |
|
Net cash provided by operating activities |
| $ | 20,389 |
|
| $ | 17,296 |
| ||||||||
Net cash (used) provided by operating activities |
| $ | (15,808 | ) |
| $ | 7,922 |
|
The increasedecrease in net cash (used) provided by operating activities from the prior six-month period to the current six-month period was primarily due to distributions receivedan increase in working capital associated with (i) higher raw material costs and consolidated sales activity driving higher inventory and accounts receivable balances and (ii) lower other current liabilities resulting from PALthe payment of $7,178 and a comparably lower build of working capital. The increase wasincentive compensation earned in fiscal 2021, partially offset by lower consolidated earnings, consistent withan increase in net income.
Investing Cash Flows
Investing activities include $9,300 for capital expenditures, as previously described in Capital Projects above.
Financing Cash Flows
Financing activities include scheduled payments against the comparable decrease in Adjusted EBITDA discussed above.
Cash Used in Investing ActivitiesABL Term Loan and Cash Provided by Financing Activities
UNIFI utilized $11,345 (net) for investing activities and was provided $3,963 (net) from financing activitiesfinance leases during the current six-month period.
Significant investing activities include $11,360 for capital expenditures, primarily relating to ongoing maintenance capital expenditures and the completion and start-up of the fourth production line in the REPREVE® Recycling Center, which is intended to increase UNIFI’s capacity to produce recycled polyester Chip for internal consumption and external sales.
Significant financing activities include $7,600 for net borrowings against long-term debt. The borrowings helped fund the investing activities described above.
Contractual Obligations
UNIFI has incurred various financial obligations and commitments in its normal course of business. Financial obligations are considered to represent known future cash payments that UNIFI is required to make under existing contractual arrangements, such as debt and lease agreements.
There have been no material changes in the scheduled maturities of UNIFI’s contractual obligations as disclosed in the table under the heading “Contractual Obligations” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 20172021 Form 10-K.
Off-Balance Sheet Arrangements
UNIFI is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on UNIFI’s financial condition, results of operations, liquidity or capital expenditures.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The SEC has defined a company’s most critical accounting policies as those involving accounting estimates that require management to make assumptions about matters that are highly uncertain at the time and where different reasonable estimates or changes in the accounting estimatesestimate from quarter to quarter could materially impact the presentation of the financial statements. UNIFI’s critical accounting policies are discussed in the 20172021 Form 10-K. There were no material changes to these policies during the current period.
UNIFI is exposed to market risks associated with changes in interest rates, fluctuations in foreign currency exchange rates, and raw material and commodity costs, which may adversely affect its financial position, results of operations or cash flows. UNIFI does not enter into derivative financial instruments for trading purposes, nor is it a party to any leveraged financial instruments.
Interest Rate Risk
UNIFI is exposed to interest rate risk through its borrowing activities. As of December 24, 2017,September 26, 2021, UNIFI had borrowings under its ABL Revolver and ABL Term Loan that totaled $111,900 and contain variable rates$75,000, for which all of interest; however, UNIFI hedges a significant portion of suchthe interest rate variability usingis currently hedged via interest rate swaps. As of December 24, 2017, afterAfter considering the variable rate debt obligations that have been hedged and UNIFI’s outstanding debt obligations with fixed rates of interest, UNIFI’s sensitivity analysis indicates that a 50-basis point increase in LIBOR as of December 24, 2017September 26, 2021 would result in an increase in annual interest expense of less than $200.$100.
Foreign Currency Exchange Rate Risk
UNIFI conducts its business in various foreign countries and in various foreign currencies. Each of UNIFI’s subsidiaries may enter into transactions (sales, purchases, fixed purchase commitments, etc.) that are denominated in currencies other than the subsidiary’s functional currency and thereby expose UNIFI to foreign currency exchange rate risk. UNIFI may enter into foreign currency forward contracts to hedge this exposure. UNIFI may also enter into foreign currency forward contracts to hedge its exposure for certain equipment or inventory purchase commitments. As of December 24, 2017,September 26, 2021, UNIFI had no outstanding foreign currency forward contracts.
A significant portion of raw materials purchased by UNIFI’s Brazilian subsidiarythe Brazil Segment are denominated in USD,USDs, requiring UNIFI to regularly exchange BRL. A significant portion of sales and asset balances for the Asia Segment are denominated in USDs. During recent fiscal years, UNIFI washas been negatively impacted by a devaluationfluctuations of the BRL. Predicting fluctuations inBRL and the BRL is impracticable.RMB. Discussion and analysis surrounding the impact of fluctuations of the BRL as well asand the RMB on UNIFI’s results of operations are included above in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
As of December 24, 2017, UNIFI’s subsidiaries outside the United States, whose functional currency is other than the USD, held approximately 16.7% of UNIFI’s consolidated total assets. UNIFI does not enter into foreign currency derivatives to hedge its net investment in its foreign operations.
As of December 24, 2017, $44,996, or 92.6%, of UNIFI’s cash and cash equivalents was held outsideSeptember 26, 2021, foreign currency exchange rate risk concepts included the United States, of which $31,061 was held in USD and $12,439 was held in BRL.following:
|
| Approximate Amount or Percentage |
| |
Percentage of total consolidated assets held by UNIFI's subsidiaries outside the U.S. whose functional currency is not the USD |
|
| 28.4 | % |
|
|
|
|
|
Cash and cash equivalents held outside the U.S.: |
|
|
|
|
Denominated in USD |
| $ | 10,772 |
|
Denominated in RMB |
|
| 17,391 |
|
Denominated in BRL |
|
| 3,758 |
|
Denominated in other foreign currencies |
|
| 226 |
|
Total cash and cash equivalents held outside the U.S. |
| $ | 32,147 |
|
Percentage of total cash and cash equivalents held outside the U.S. |
|
| 64.9 | % |
|
|
|
|
|
Cash and cash equivalents held inside the U.S. in USD by foreign subsidiaries |
| $ | 5,358 |
|
Raw Material and Commodity Risks
A significant portion of UNIFI’s raw materialsmaterial and energy costs are derived from petroleum-based chemicals. The prices for petroleum and petroleum-related products and related energy costs are volatile and dependent on global supply and demand dynamics, including certain geo-political risks. A sudden rise in the price of petroleum and petroleum-based products could have a material impact on UNIFI’s profitability. UNIFI does not use financial instruments to hedge its exposure to changes in these costs.costs as management has concluded that the overall cost of hedging petroleum exceeds the potential risk mitigation. The costs of the primary raw materials that UNIFI uses throughout all of its operations are generally based on USD pricing, and such materials are purchased at market or at fixed prices that are established with individual vendors as part of the purchasing process for quantities expected to be consumed in the ordinary course of business. UNIFI manages fluctuations in the cost of raw materials primarily by making corresponding adjustments to the prices charged to its customers. Certain customers are subject to an index-based pricing model in which UNIFI’s prices are adjusted based on the change in the cost of raw materials in the prior quarter. Pricing adjustments for other customers must be negotiated independently. UNIFI attempts to quickly pass on to its customers increases in raw material costs, but due to market pressures, this is not always possible. When price increases can be implemented, there is typically a time lag that adversely affects UNIFI’s margins during one or more quarters. In ordinary market conditions in which raw material price increases have stabilized and sales volumes are consistent with traditional levels, UNIFI has historically been successful in implementing price adjustments within one to two fiscal quarters of the raw material price increase for its index-priced customers and within two fiscal quarters of the raw material price increase for its non-index-priced customers.
As fiscal 2021 concluded, UNIFI experienced cost increases for raw materials, primarily related to (i) increases in petroleum prices and (ii) supply chain disruptions that occurred in Texas during February 2021 due to abnormally cold weather. Our raw material costs remain elevated in fiscal 2022. However, we have been able to implement responsive selling price adjustments for the majority of our portfolio, and our underlying gross margin has not been significantly pressured by the elevated raw material costs. Nonetheless, such costs remain subject to the volatility described above and, should raw material costs increase unexpectedly, UNIFI’s results of operations and cash flows are likely to be adversely impacted.
Other Risks
UNIFI is also exposed to political risk, including changing laws and regulations governing international trade, such as quotas, tariffs and tax laws. The degree of impact and the frequency of these events cannot be predicted.
The risks associated with climate change, localized energy management initiatives, and other environmental impacts could negatively affect UNIFI’s business and operations.
UNIFI’s business is susceptible to risks associated with climate change, including, but not limited to, disruptions to our supply chain, which could potentially impact the production and distribution of our products and availability and pricing of raw materials. Increased frequency and intensity of weather events due to climate change could lead to supply chain disruption, energy and resource rationing, or an adverse event at one of our manufacturing facilities. For example, the February 2021 winter storm in Texas impacted our U.S. supply chain and led to non-routine fees and surcharges applied to routine business activities and products. Further, the recent energy management initiatives in China are currently pressuring global supply chains and reducing supplier and customer activity. UNIFI remains focused on diversifying our product portfolio and manufacturing footprint while utilizing fewer resources to help address the risks associated with climate change. Nonetheless, the associated risks could adversely impact our results of operations and cash flows.
As of December 24, 2017,September 26, 2021, an evaluation of the effectiveness of UNIFI’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was performed under the supervision and with the participation of UNIFI’s management, including the principal executive officer and principal financial officer. Based on that evaluation, UNIFI’s principal executive officer and principal financial officer concluded that UNIFI’s disclosure controls and procedures are effective to ensure that information required to be disclosed by UNIFI in theits reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that information required to be disclosed by UNIFI in the reports itUNIFI files or submits under the Exchange Act is accumulated and communicated to UNIFI’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in UNIFI’s internal control over financial reporting during the three months ended December 24, 2017September 26, 2021 that have materially affected, or are reasonably likely to materially affect, UNIFI’s internal control over financial reporting.
PART II—OTHEROTHER INFORMATION
We are from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to all such lawsuits, claims and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our results of operations, financial position or cash flows. We maintain liability insurance for certain risks that is subject to certain self-insurance limits.
There have been no material changes in UNIFI’s risk factors from those disclosed in “Item 1A. Risk Factors” in the 2017 Form 10-K.
Not applicable.
Exhibit No. |
| Description |
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|
3.1 |
| |
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3.2 |
| |
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| |
10.1* | ||
10.2*+ | ||
| ||
31.1+ |
| |
| ||
31.2+ |
| |
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|
32.1++ |
| |
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|
32.2++ |
| |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the | |
+ | Filed herewith. |
++ | Furnished herewith. |
* | Indicates a management contract or compensatory plan or arrangement. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| UNIFI, INC. | |
|
| (Registrant) | |
|
|
|
|
Date: |
| By: | /s/ |
|
|
|
|
|
|
| Executive Vice President & Chief Financial Officer |
|
|
| (Principal Financial Officer and Principal Accounting Officer) |
4131