Unifi Announces First Quarter Fiscal 2020 Results
First Quarter Fiscal 2020 Overview
- Sales volumes increased 16% compared to the first quarter of fiscal 2019, led by REPREVE®-branded products.
- Achieved expected revenue performance, with net sales of
$179.9 million , despite one fewer sales week for domestic operations when compared to the prior year first fiscal quarter net sales of$181.6 million . - Revenues from premium value-added products represented a record 54% of consolidated net sales, up from 43% compared to the first quarter of fiscal 2019.
- Operating income increased 11% to
$6.3 million compared to the first quarter of fiscal 2019. - Operating cash flows improved significantly to
$23.8 million and included$10.4 million in distributions received fromParkdale America, LLC ("PAL"), which allowed for a 17% reduction of Net Debt to$88.3 million . - Selling, general and administrative expenses ("SG&A") decreased
$3.4 million compared to the first quarter of fiscal 2019, demonstrating results from previously communicated cost reduction efforts. - Net income of
$3.7 million and diluted earnings per share ("EPS") of$0.20 each exhibited substantial growth from the first quarter of fiscal 2019, despite a larger loss from PAL in the first quarter of fiscal 2020.
"Underlying sales growth was led by our REPREVE®-branded products, as our strategy and portfolio in
Mr. Caudle added, "Consistent with the timeline we have previously communicated, before the end of calendar 2019, we expect finalization of our
First Quarter Fiscal 2020 Compared to First Quarter Fiscal 2019
Net sales in the first quarter of fiscal 2020 were
Gross profit decreased to
Operating income increased to
Net income was
Net Debt was
Foreign currency fluctuations had no significant impact on comparable quarterly results.
Fiscal 2020 Outlook
For fiscal 2020, the Company reaffirmed its previously announced expectations. Assuming no significant volatility in raw material costs, the Company expects:
- High-single-digit percentage growth from fiscal 2019 for sales volumes;
- Mid-single-digit percentage growth from fiscal 2019 for net sales;
- Operating income between
$22.0 million and $27.0 million , over 100% growth from fiscal 2019; - Adjusted EBITDA between
$47.0 million and $52.0 million , over 25% growth from fiscal 2019; - Capital expenditures of approximately
$25.0 million ; and - An effective tax rate not to exceed 25%.
Mr. Caudle concluded, "With the assumption that raw material costs remain stable for the remainder of fiscal 2020, we are reaffirming our fiscal 2020 outlook. We continue to project growth from fiscal 2019 that includes continued top-line expansion, a doubling of operating income, substantial improvement in our effective tax rate and a significant increase in net income and Adjusted EBITDA."
First Quarter Fiscal 2020 Earnings Conference Call
The Company will provide additional commentary regarding its first quarter fiscal 2020 results and other developments during its earnings conference call on
About
Financial Statements, Business Segment Information and Reconciliations of Reported Results to Adjusted Results to Follow
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||
(Unaudited) |
||||||||
(In thousands, except per share amounts) |
||||||||
For the Three Months Ended |
||||||||
September 29, 2019 |
September 30, 2018 |
|||||||
Net sales |
$ |
179,949 |
$ |
181,611 |
||||
Cost of sales |
162,506 |
161,592 |
||||||
Gross profit |
17,443 |
20,019 |
||||||
Selling, general and administrative expenses |
10,980 |
14,411 |
||||||
Provision for bad debts |
9 |
131 |
||||||
Other operating expense (income), net |
108 |
(240) |
||||||
Operating income |
6,346 |
5,717 |
||||||
Interest income |
(210) |
(147) |
||||||
Interest expense |
1,257 |
1,467 |
||||||
Equity in loss (earnings) of unconsolidated affiliates |
866 |
(239) |
||||||
Income before income taxes |
4,433 |
4,636 |
||||||
Provision for income taxes |
721 |
2,824 |
||||||
Net income |
$ |
3,712 |
$ |
1,812 |
||||
Net income per common share: |
||||||||
Basic |
$ |
0.20 |
$ |
0.10 |
||||
Diluted |
$ |
0.20 |
$ |
0.10 |
||||
Weighted average common shares outstanding: |
||||||||
Basic |
18,481 |
18,368 |
||||||
Diluted |
18,726 |
18,703 |
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
(Unaudited) |
||||||||
(In thousands) |
||||||||
September 29, 2019 |
June 30, 2019 |
|||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ |
34,118 |
$ |
22,228 |
||||
Receivables, net |
85,598 |
88,884 |
||||||
Inventories |
129,447 |
133,781 |
||||||
Other current assets |
20,045 |
20,729 |
||||||
Total current assets |
269,208 |
265,622 |
||||||
Property, plant and equipment, net |
205,374 |
206,787 |
||||||
Investments in unconsolidated affiliates |
102,601 |
114,320 |
||||||
Other non-current assets |
13,857 |
5,422 |
||||||
Total assets |
$ |
591,040 |
$ |
592,151 |
||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
Accounts payable and other current liabilities |
$ |
60,741 |
$ |
59,214 |
||||
Current portion of long-term debt |
14,738 |
15,519 |
||||||
Total current liabilities |
75,479 |
74,733 |
||||||
Long-term debt |
106,754 |
111,541 |
||||||
Other long-term liabilities |
18,800 |
13,032 |
||||||
Total liabilities |
201,033 |
199,306 |
||||||
Total shareholders' equity |
390,007 |
392,845 |
||||||
Total liabilities and shareholders' equity |
$ |
591,040 |
$ |
592,151 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(Unaudited) |
||||||||
(In thousands) |
||||||||
For the Three Months Ended |
||||||||
September 29, 2019 |
September 30, 2018 |
|||||||
Cash and cash equivalents at beginning of period |
$ |
22,228 |
$ |
44,890 |
||||
Operating activities: |
||||||||
Net income |
3,712 |
1,812 |
||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
Equity in loss (earnings) of unconsolidated affiliates |
866 |
(239) |
||||||
Distributions received from unconsolidated affiliates |
10,437 |
504 |
||||||
Depreciation and amortization expense |
5,685 |
6,036 |
||||||
Non-cash compensation expense |
187 |
998 |
||||||
Deferred income taxes |
(760) |
909 |
||||||
Other, net |
(127) |
(201) |
||||||
Inventories |
1,981 |
(15,079) |
||||||
Other changes in assets and liabilities |
1,841 |
302 |
||||||
Net cash provided by (used in) operating activities |
23,822 |
(4,958) |
||||||
Investing activities: |
||||||||
Capital expenditures |
(4,585) |
(6,384) |
||||||
Other, net |
(21) |
15 |
||||||
Net cash used in investing activities |
(4,606) |
(6,369) |
||||||
Financing activities: |
||||||||
Proceeds from long-term debt |
23,000 |
34,000 |
||||||
Payments on long-term debt |
(29,508) |
(24,190) |
||||||
Other, net |
(15) |
(402) |
||||||
Net cash (used in) provided by financing activities |
(6,523) |
9,408 |
||||||
Effect of exchange rate changes on cash and cash equivalents |
(803) |
(776) |
||||||
Net increase (decrease) in cash and cash equivalents |
11,890 |
(2,695) |
||||||
Cash and cash equivalents at end of period |
$ |
34,118 |
$ |
42,195 |
BUSINESS SEGMENT INFORMATION |
||||||||
(Unaudited) |
||||||||
(In thousands) |
||||||||
Net sales details for each reportable segment of the Company are as follows: |
||||||||
For the Three Months Ended |
||||||||
September 29, 2019 |
September 30, 2018 |
|||||||
Polyester |
$ |
88,695 |
$ |
100,131 |
||||
Nylon |
20,202 |
27,949 |
||||||
Brazil |
24,172 |
26,913 |
||||||
Asia |
45,957 |
25,440 |
||||||
All Other |
923 |
1,178 |
||||||
Consolidated |
$ |
179,949 |
$ |
181,611 |
||||
Gross profit details for each reportable segment of the Company are as follows: |
||||||||
For the Three Months Ended |
||||||||
September 29, 2019 |
September 30, 2018 |
|||||||
Polyester |
$ |
7,795 |
$ |
7,801 |
||||
Nylon |
1,178 |
2,144 |
||||||
Brazil |
4,159 |
6,418 |
||||||
Asia |
4,282 |
3,532 |
||||||
All Other |
29 |
124 |
||||||
Consolidated |
$ |
17,443 |
$ |
20,019 |
||||
RECONCILIATIONS OF REPORTED RESULTS TO ADJUSTED RESULTS |
|||||||||
(Unaudited) |
|||||||||
(In thousands) |
|||||||||
EBITDA and Adjusted EBITDA |
|||||||||
The reconciliations of the amounts reported under U.S. generally accepted accounting principles ("GAAP") for Net income to EBITDA and |
|||||||||
For the Three Months Ended |
|||||||||
September 29, 2019 |
September 30, 2018 |
||||||||
Net income |
$ |
3,712 |
$ |
1,812 |
|||||
Interest expense, net |
1,047 |
1,320 |
|||||||
Provision for income taxes |
721 |
2,824 |
|||||||
Depreciation and amortization expense (1) |
5,622 |
5,948 |
|||||||
EBITDA |
11,102 |
11,904 |
|||||||
Equity in loss of PAL |
1,175 |
17 |
|||||||
EBITDA excluding PAL |
12,277 |
11,921 |
|||||||
Other adjustments (2) |
— |
— |
|||||||
Adjusted EBITDA |
$ |
12,277 |
$ |
11,921 |
(1) |
Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in |
(2) |
For the periods presented, there were no other adjustments necessary to reconcile Net income to Adjusted EBITDA. However, such |
Net Debt |
||||||||
Reconciliations of Net Debt are as follows: |
||||||||
September 29, 2019 |
June 30, 2019 |
|||||||
Long-term debt |
$ |
106,754 |
$ |
111,541 |
||||
Current portion of long-term debt |
14,738 |
15,519 |
||||||
Unamortized debt issuance costs |
895 |
958 |
||||||
Debt principal |
122,387 |
128,018 |
||||||
Cash and cash equivalents |
(34,118) |
(22,228) |
||||||
Net debt |
$ |
88,269 |
$ |
105,790 |
Non-GAAP Financial Measures
Certain non-GAAP financial measures included herein are designed to complement the financial information presented in accordance with GAAP. These non-GAAP financial measures include Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Adjusted EBITDA and Net Debt (together, the "non-GAAP financial measures").
- EBITDA represents Net income before net interest expense, income tax expense, and depreciation and amortization expense.
- Adjusted EBITDA represents EBITDA adjusted to exclude equity in loss of PAL and, from time to time, certain other adjustments necessary to understand and compare the underlying results of
Unifi . - Net Debt represents debt principal less cash and cash equivalents.
The non-GAAP financial measures are not determined in accordance with GAAP and should not be considered a substitute for performance measures determined in accordance with GAAP. The calculations of the non-GAAP financial measures are subjective, based on management's belief as to which items should be included or excluded in order to provide the most reasonable and comparable view of the underlying operating performance of the business. We may, from time to time, modify the amounts used to determine our non-GAAP financial measures.
We believe that these non-GAAP financial measures better reflect
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 of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance.
In evaluating non-GAAP financial measures, investors should be aware that, in the future, we may incur expenses similar to the adjustments included herein. Our presentation of non-GAAP financial measures should not be construed as indicating that our future results will be unaffected by unusual or non-recurring items. Each of our non-GAAP financial measures has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results or liquidity measures as reported under GAAP. Some of these limitations are (i) it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; (ii) it does not reflect the impact of earnings or charges resulting from matters we consider not indicative of our ongoing operations; (iii) it does not reflect changes in, or cash requirements for, our working capital needs; (iv) it does not reflect the cash requirements necessary to make payments on our debt; (v) it does not reflect our future requirements for capital expenditures or contractual commitments; (vi) it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and (vii) other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, these non-GAAP financial measures should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations, including those under our outstanding debt obligations. You should compensate for these limitations by relying primarily on our GAAP results and using these measures only as supplemental information.
Cautionary Statement on Forward-Looking Statements
Certain statements included herein contain "forward-looking statements" within the meaning of federal securities laws about the financial condition and results of operations of
Factors that could contribute to such differences include, but are not limited to: the competitive nature of the textile industry and the impact of global competition; changes in the trade regulatory environment and governmental policies and legislation; the availability, sourcing and pricing of raw materials; general domestic and international economic and industry conditions in markets where
All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on Unifi. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, except as may be required by federal securities laws. The above and other risks and uncertainties are described in
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SOURCE
Alpha IR Group, 312-445-2870, UFI@alpha-ir.com