Visit Unifi.com

Unifi, Inc., Makers of REPREVE®, Announces Second Quarter Fiscal 2022 Results, Achieving Strong Sales

01/26/22

Second quarter sales exceed expectations and set multi-year record, while foreign operations maintain overall portfolio strength by counterbalancing domestic headwinds

GREENSBORO, N.C.--(BUSINESS WIRE)--Jan. 26, 2022-- Unifi, Inc. (NYSE: UFI), makers of REPREVE® and one of the world’s leading innovators in recycled and synthetic yarns, today released operating results for the second fiscal quarter ended December 26, 2021.

Second Quarter Fiscal 2022 Overview

  • Net sales were $201.4 million, representing an increase of 23.7% from the second quarter of fiscal 2021.
  • Revenues from REPREVE® Fiber products represented 40% of net sales, which was an increase from 38% in the second quarter of fiscal 2021.
  • Gross profit was $16.9 million compared to $25.9 million for the second quarter of fiscal 2021. Gross margin was 8.4% compared to 15.9% for the second quarter of fiscal 2021, impacted by domestic labor and input cost challenges.
  • Operating income was $4.6 million compared to $13.1 million for the second quarter of fiscal 2021.
  • Net income was $0.9 million, or $0.05 diluted earnings per share (“EPS”), compared to net income of $7.5 million, or $0.40 diluted EPS for the second quarter of fiscal 2021.
  • Adjusted EBITDA1 was $10.9 million compared to $19.2 million in the second quarter of fiscal 2021.
  • Adjusted EBITDA1 for the 12 fiscal months ended December 26, 2021 was $67.1 million compared to $23.7 million for the 12 fiscal months ended December 27, 2020.
  • The Company repurchased 51,500 shares of its common stock for $1.2 million during the second quarter of fiscal 2022 under a previously announced program.

Eddie Ingle, Chief Executive Officer of Unifi, said, “Second quarter fiscal 2022 sales exceeded our expectations, driven by continued strong international performance, but labor and input cost headwinds for our domestic operations pressured overall profitability results. Our teams in Asia and Brazil have performed very well against a dynamic business environment, while the Polyester and Nylon operations have experienced significant cost and efficiency pressures that weighed on gross profit. However, with continued global momentum allowing REPREVE® Fiber products to achieve 40% of consolidated sales, recent responsive selling price adjustments in the U.S. and Central America, and anticipated productivity improvements across our manufacturing base, expectations for mid- and long-term performance remain strong.”

1 Adjusted EBITDA and Net Debt are non-GAAP financial measures. The schedules included in this press release reconcile each non-GAAP financial measure to its most directly comparable GAAP financial measure.

Second Quarter Fiscal 2022 Compared to Second Quarter Fiscal 2021

Net sales increased 23.7% to $201.4 million, from $162.8 million. The Asia Segment achieved record quarterly sales volume, driving a 32% increase in revenue. Additionally, the Brazil Segment captured a 14% year-over-year revenue increase from favorable pricing and sales mix. Polyester Segment revenue increased 21%, due to pricing adjustments associated with a portion of raw material cost increases that occurred in calendar 2021. Lastly, REPREVE® Fiber product sales reached 40% of consolidated sales and continue to meet the ever-growing demand for sustainable textiles, driving underlying portfolio momentum.

Gross profit decreased 35% to $16.9 million from $25.9 million. Polyester Segment gross profit decreased $10.5 million as a result of rising input costs and production inefficiencies. Brazil Segment gross profit was consistent with expectations as the local market dynamics exhibit some normalization from the favorable environment in the prior year quarter. Gross profit decreases were partially offset by the Asia Segment contributing an additional $2.0 million in gross profit from sales growth.

Operating income decreased to $4.6 million, from $13.1 million, primarily due to the decrease in gross profit associated with the aforementioned input cost and efficiency pressures. The decrease in domestic profits adversely impacted the effective tax rate as low earnings from U.S. operations in the second quarter and full year fiscal 2022 generate a net operating loss for which the full benefit is currently unrealizable. Accordingly, net income was $0.9 million, or $0.05 per share, compared to $7.5 million, or $0.40 per share. Adjusted EBITDA was $10.9 million, compared to $19.2 million, following the cost pressure on gross profit in North and Central America.

Debt principal was $81.6 million on December 26, 2021 compared to $86.9 million on June 27, 2021. In connection with previously anticipated investments in new yarn texturing innovation and working capital to support future growth, cash and cash equivalents decreased to $47.6 million on December 26, 2021, from $78.3 million on June 27, 2021. Accordingly, Net Debt1 was $34.0 million on December 26, 2021 versus $8.6 million on June 27, 2021.

Year-To-Date Fiscal 2022 Compared to Year-To-Date Fiscal 2021

Net sales were $397.4 million, compared to $304.3 million. Revenues from REPREVE® Fiber products represented 39% of consolidated net sales, compared to 38%. Gross margin was 10.8%, compared to 13.3%. Operating income was $17.8 million, compared to $16.0 million. Net income was $9.6 million, compared to $10.9 million.

Outlook

The following reflect the Company’s updated expectations for fiscal 2022, assuming there are no further significant disruptions to global markets, supply chains, or the labor market and no further adverse impacts from COVID-19.

  • Sales volume and REPREVE® Fiber sales growth driving net sales to $800 million or more, which would represent an increase of 20% or more from the level achieved in fiscal 2021.
  • Adjusted EBITDA to range between $60.0 million and $62.0 million, with a larger portion of second half fiscal 2022 profitability being generated in the fourth quarter ending July 3, 2022 rather than the third quarter ending March 27, 2022.
  • An effective tax rate between 40% and 50%, assuming no significant changes in existing tax legislation.
  • Capital expenditures of approximately $40.0 million to $44.0 million, as the Company continues its plan to invest in new yarn texturing machinery within its Americas facilities. Such capital expenditure levels will be funded by cash on-hand and available financing arrangements and are inclusive of approximately $10.0 million to $12.0 million of routine annual maintenance.

Ingle concluded, “Although we face some short-term headwinds domestically that have impacted our performance, I am proud of the way all of our employees globally continue to deliver value and contribute to making Unifi a better company each and every day. We feel that we are better positioned to navigate our domestic headwinds going forward and remain confident in our ability to execute and drive future value for shareholders. Our momentum in Asia and Brazil helped contribute to overall revenue performance exceeding expectations, demonstrating the strength of our dynamic global business model. As the demand for sustainable solutions grows, we will remain focused on capturing momentum towards long-term growth and are excited for the opportunities that lie ahead of us.”

Investor Day 2022

The Company plans to host an Investor Day on Wednesday, February 16, 2022 at its manufacturing facilities in North Carolina. Parties interested in attending this event in-person should contact the Company for further details.

Update on Recent Trade Actions

On October 19, 2021, the U.S. Department of Commerce (the “Commerce Department”) announced final antidumping duty deposit rates on imports of polyester textured yarn (the “Subject Imports”) from Indonesia, Malaysia, Thailand, and Vietnam (the “Subject Countries”). On November 16, 2021, the U.S. International Trade Commission determined that the U.S. textile industry was materially injured by Subject Imports from Subject Countries, and in December 2021, the Commerce Department issued unanimous final antidumping duty orders on Subject Imports. Following these concluded petitions, the Company continues to expect an increase in annual revenue of $20.0 million or greater as a result of a more normalized pricing environment.

Second Quarter Fiscal 2022 Earnings Conference Call

The Company will provide additional commentary regarding its second quarter results and other developments during its earnings conference call on January 27, 2022, at 8:30 a.m., Eastern Time. The call can be accessed via a live audio webcast on the Company’s website at http://investor.unifi.com. Additional supporting materials and information related to the call will also be available on the Company’s website.

About Unifi

Unifi, Inc. (NYSE: UFI) is a global textile solutions provider and one of the world's leading innovators in manufacturing synthetic and recycled performance fibers. Through REPREVE®, one of Unifi's proprietary technologies and the global leader in branded recycled performance fibers, Unifi has transformed more than 30 billion plastic bottles into recycled fiber for new apparel, footwear, home goods and other consumer products. Unifi continually innovates technologies to meet consumer needs in moisture management, thermal regulation, antimicrobial protection, UV protection, stretch, water resistance and enhanced softness. Unifi collaborates with many of the world's most influential brands in the sports apparel, fashion, home, automotive and other industries. For more information about Unifi, visit www.Unifi.com.

Financial Statements, Business Segment Information and Reconciliations of Reported Results to Adjusted Results to Follow

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

December 26, 2021

 

 

December 27, 2020

 

 

December 26, 2021

 

 

December 27, 2020

 

Net sales

 

$

201,410

 

 

$

162,776

 

 

$

397,402

 

 

$

304,281

 

Cost of sales

 

 

184,520

 

 

 

136,842

 

 

 

354,415

 

 

 

263,786

 

Gross profit

 

 

16,890

 

 

 

25,934

 

 

 

42,987

 

 

 

40,495

 

Selling, general and administrative expenses

 

 

11,966

 

 

 

12,625

 

 

 

24,636

 

 

 

23,989

 

Benefit for bad debts

 

 

(240

)

 

 

(259

)

 

 

(320

)

 

 

(1,146

)

Other operating expense, net

 

 

573

 

 

 

476

 

 

 

829

 

 

 

1,654

 

Operating income

 

 

4,591

 

 

 

13,092

 

 

 

17,842

 

 

 

15,998

 

Interest income

 

 

(194

)

 

 

(187

)

 

 

(452

)

 

 

(312

)

Interest expense

 

 

735

 

 

 

833

 

 

 

1,431

 

 

 

1,704

 

Equity in earnings of unconsolidated affiliates

 

 

(64

)

 

 

(130

)

 

 

(344

)

 

 

(223

)

Income before income taxes

 

 

4,114

 

 

 

12,576

 

 

 

17,207

 

 

 

14,829

 

Provision for income taxes

 

 

3,185

 

 

 

5,112

 

 

 

7,598

 

 

 

3,933

 

Net income

 

$

929

 

 

$

7,464

 

 

$

9,609

 

 

$

10,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

Basic

 

$

0.05

 

 

$

0.40

 

 

$

0.52

 

 

$

0.59

 

Diluted

 

$

0.05

 

 

$

0.40

 

 

$

0.51

 

 

$

0.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

Basic

 

 

18,511

 

 

 

18,465

 

 

 

18,513

 

 

 

18,456

 

Diluted

 

 

19,004

 

 

 

18,732

 

 

 

18,999

 

 

 

18,729

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

 

 

December 26, 2021

 

 

June 27, 2021

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

47,620

 

 

$

78,253

 

Receivables, net

 

 

92,175

 

 

 

94,837

 

Inventories

 

 

148,893

 

 

 

141,221

 

Income taxes receivable

 

 

8,162

 

 

 

2,392

 

Other current assets

 

 

15,331

 

 

 

12,364

 

Total current assets

 

 

312,181

 

 

 

329,067

 

Property, plant and equipment, net

 

 

207,461

 

 

 

201,696

 

Operating lease assets

 

 

8,788

 

 

 

8,772

 

Deferred income taxes

 

 

2,448

 

 

 

1,208

 

Other non-current assets

 

 

12,547

 

 

 

14,625

 

Total assets

 

$

543,425

 

 

$

555,368

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

54,761

 

 

$

54,259

 

Income taxes payable

 

 

7,993

 

 

 

1,625

 

Current operating lease liabilities

 

 

2,150

 

 

 

1,856

 

Current portion of long-term debt

 

 

14,971

 

 

 

16,045

 

Other current liabilities

 

 

18,260

 

 

 

31,638

 

Total current liabilities

 

 

98,135

 

 

 

105,423

 

Long-term debt

 

 

66,257

 

 

 

70,336

 

Non-current operating lease liabilities

 

 

6,736

 

 

 

7,032

 

Deferred income taxes

 

 

4,723

 

 

 

6,686

 

Other long-term liabilities

 

 

6,382

 

 

 

7,472

 

Total liabilities

 

 

182,233

 

 

 

196,949

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

1,850

 

 

 

1,849

 

Capital in excess of par value

 

 

67,006

 

 

 

65,205

 

Retained earnings

 

 

353,393

 

 

 

344,797

 

Accumulated other comprehensive loss

 

 

(61,057

)

 

 

(53,432

)

Total shareholders’ equity

 

 

361,192

 

 

 

358,419

 

Total liabilities and shareholders’ equity

 

$

543,425

 

 

$

555,368

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

     

 

 

For the Six Months Ended

 

 

 

December 26, 2021

 

 

December 27, 2020

 

Cash and cash equivalents at beginning of period

 

$

78,253

 

 

$

75,267

 

Operating activities:

 

 

 

 

 

 

 

 

Net income

 

 

9,609

 

 

 

10,896

 

Adjustments to reconcile net income to net cash (used) provided by operating activities:

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

 

(344

)

 

 

(223

)

Depreciation and amortization expense

 

 

12,687

 

 

 

12,187

 

Non-cash compensation expense

 

 

2,261

 

 

 

1,816

 

Deferred income taxes

 

 

(3,197

)

 

 

(1,700

)

Other, net

 

 

(149

)

 

 

(25

)

Changes in assets and liabilities

 

 

(24,817

)

 

 

(3,225

)

Net cash (used) provided by operating activities

 

 

(3,950

)

 

 

19,726

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(19,172

)

 

 

(6,035

)

Other, net

 

 

87

 

 

 

(925

)

Net cash used by investing activities

 

 

(19,085

)

 

 

(6,960

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

20,111

 

 

 

 

Payments on long-term debt

 

 

(25,377

)

 

 

(6,725

)

Common stock repurchased

 

 

(1,204

)

 

 

 

Other, net

 

 

(324

)

 

 

(64

)

Net cash used by financing activities

 

 

(6,794

)

 

 

(6,789

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(804

)

 

 

2,077

 

Net (decrease) increase in cash and cash equivalents

 

 

(30,633

)

 

 

8,054

 

Cash and cash equivalents at end of period

 

$

47,620

 

 

$

83,321

BUSINESS SEGMENT INFORMATION

(Unaudited)

(In thousands)

 

Net sales details for each reportable segment of the Company are as follows:

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

December 26, 2021

 

 

December 27, 2020

 

 

December 26, 2021

 

 

December 27, 2020

 

Polyester

 

$

92,418

 

 

$

76,696

 

 

$

181,885

 

 

$

145,772

 

Asia

 

 

59,112

 

 

 

44,692

 

 

 

110,540

 

 

 

82,415

 

Brazil

 

 

27,601

 

 

 

24,253

 

 

 

61,339

 

 

 

46,859

 

Nylon

 

 

21,015

 

 

 

16,008

 

 

 

41,174

 

 

 

27,037

 

All Other

 

 

1,264

 

 

 

1,127

 

 

 

2,464

 

 

 

2,198

 

Consolidated

 

$

201,410

 

 

$

162,776

 

 

$

397,402

 

 

$

304,281

 

Gross profit details for each reportable segment of the Company are as follows:

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

December 26, 2021

 

 

December 27, 2020

 

 

December 26, 2021

 

 

December 27, 2020

 

Polyester

 

$

440

 

 

$

10,895

 

 

$

8,734

 

 

$

15,527

 

Asia

 

 

8,511

 

 

 

6,528

 

 

 

15,482

 

 

 

11,106

 

Brazil

 

 

7,526

 

 

 

7,977

 

 

 

17,466

 

 

 

12,590

 

Nylon

 

 

186

 

 

 

395

 

 

 

912

 

 

 

1,060

 

All Other

 

 

227

 

 

 

139

 

 

 

393

 

 

 

212

 

Consolidated

 

$

16,890

 

 

$

25,934

 

 

$

42,987

 

 

$

40,495

 

RECONCILIATIONS OF REPORTED RESULTS TO ADJUSTED RESULTS

(Unaudited)

(In thousands)

 

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)

 

The reconciliations of the amounts reported under U.S. generally accepted accounting principles (“GAAP”) for Net income to EBITDA and Adjusted EBITDA are set forth below.

     

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

December 26, 2021

 

 

December 27, 2020

 

 

December 26, 2021

 

 

December 27, 2020

 

Net income

 

$

929

 

 

$

7,464

 

 

$

9,609

 

 

$

10,896

 

Interest expense, net

 

 

541

 

 

 

646

 

 

 

979

 

 

 

1,392

 

Provision for income taxes

 

 

3,185

 

 

 

5,112

 

 

 

7,598

 

 

 

3,933

 

Depreciation and amortization expense (1)

 

 

6,266

 

 

 

6,016

 

 

 

12,574

 

 

 

12,068

 

EBITDA

 

 

10,921

 

 

 

19,238

 

 

 

30,760

 

 

 

28,289

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other adjustments (2)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

10,921

 

 

$

19,238

 

 

$

30,760

 

 

$

28,289

 

(1)

Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net. Within the condensed consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense.

 
(2)

For the periods presented, there were no other adjustments necessary to reconcile Net income to Adjusted EBITDA.

 

 

For the Twelve Months Ended

 

 

 

December 26, 2021

 

 

December 27, 2020

 

Net income (loss)

 

$

27,786

 

 

$

(50,462

)

Interest expense, net

 

 

2,307

 

 

 

3,513

 

Provision for income taxes

 

 

20,939

 

 

 

3,677

 

Depreciation and amortization expense (1)

 

 

25,799

 

 

 

23,989

 

EBITDA

 

 

76,831

 

 

 

(19,283

)

 

 

 

 

 

 

 

 

 

Equity in earnings of former minority investment

 

 

 

 

 

(1,052

)

EBITDA excluding former minority investment

 

 

76,831

 

 

 

(20,335

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recovery of non-income taxes (2)

 

 

(9,717

)

 

 

 

Gain on sale of investment in unconsolidated affiliate (3)

 

 

 

 

 

(2,284

)

Impairment of investment in unconsolidated affiliate (3)

 

 

 

 

 

45,194

 

Severance (4)

 

 

 

 

 

1,102

 

Adjusted EBITDA

 

$

67,114

 

 

$

23,677

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

760,713

 

 

$

561,330

 

Adjusted EBITDA as a % of Net sales

 

 

8.8

%

 

 

4.2

%

(1)

Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net. Within the condensed consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense.
 

(2)

During fiscal 2021 and the twelve fiscal months ended December 26, 2021, the Company recorded a recovery of non-income taxes of $9,717 related to favorable litigation results for its Brazilian operations, generating overpayments that resulted from excess social program taxes paid in prior fiscal years.
 

(3)

During fiscal 2020 and the twelve fiscal months ended December 27, 2020, the Company recorded an impairment charge of $45,194 relating to the April 29, 2020 sale of its minority interest in a domestic cotton producer. The Company’s 34% share of the associated losses subsequent to the date of the impairment charge (March 29, 2020) and through the date of the transaction closing (April 29, 2020) was $2,284 and generated a gain on sale.

(4)

During fiscal 2020 and the twelve fiscal months ended December 27, 2020, the Company recorded severance costs related to overall cost reduction efforts in the U.S.

Adjusted Net Income and Adjusted EPS (Non-GAAP Financial Measures)

For the three and six months ended December 26, 2021 and December 27, 2020, there were no adjustments necessary to reconcile Net income to Adjusted Net Income or Adjusted EPS.

Net Debt (Non-GAAP Financial Measure)

Reconciliations of Net Debt are as follows:

 

 

December 26, 2021

 

 

June 27, 2021

 

Long-term debt

 

$

66,257

 

 

$

70,336

 

Current portion of long-term debt

 

 

14,971

 

 

 

16,045

 

Unamortized debt issuance costs

 

 

363

 

 

 

476

 

Debt principal

 

 

81,591

 

 

 

86,857

 

Less: cash and cash equivalents

 

 

47,620

 

 

 

78,253

 

Net Debt

 

$

33,971

 

 

$

8,604

 

Cash and cash equivalents

At December 26, 2021 and June 27, 2021, the Company’s domestic operations held approximately 1% and 48% of consolidated cash and cash equivalents, respectively.

REPREVE® Fiber

REPREVE® Fiber represents the Company's collection of fiber products on its 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, the Company began including certain product sales in the Asia Segment that were previously excluded from the REPREVE® Fiber sales metric. Quarters 1, 2, and 3 of fiscal 2021 have been adjusted to reflect such sales, which resulted in a change of not more than 1% for any quarter.

Non-GAAP Financial Measures

Certain non-GAAP financial measures included herein are designed to complement the financial information presented in accordance with GAAP. These non-GAAP financial measures include Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA, Adjusted Net Income, Adjusted EPS 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, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI.
  • Adjusted Net Income represents Net income calculated under GAAP adjusted to exclude certain amounts. Management believes the excluded amounts do not reflect the ongoing operations and performance of UNIFI and/or exclusion may be necessary to understand and compare the underlying results of UNIFI.
  • Adjusted EPS represents Adjusted Net Income divided by UNIFI’s weighted average common shares outstanding.
  • Net Debt represents debt principal less cash and cash equivalents.

The non-GAAP financial measures are not determined in accordance with GAAP and should not be considered a substitute for performance measures determined in accordance with GAAP. The calculations of the non-GAAP financial measures are subjective, based on management’s belief as to which items should be included or excluded in order to provide the most reasonable and comparable view of the underlying operating performance of the business. We may, from time to time, modify the amounts used to determine our non-GAAP financial measures.

We believe that these non-GAAP financial measures better reflect Unifi’s underlying operations and performance and that their use, as operating performance measures, provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets, among otherwise comparable companies.

Management uses Adjusted EBITDA (i) as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis, as it removes the impact of (a) items directly related to our asset base (primarily depreciation and amortization) and (b) items that we would not expect to occur as a part of our normal business on a regular basis; (ii) for planning purposes, including the preparation of our annual operating budget; (iii) as a valuation measure for evaluating our operating performance and our capacity to incur and service debt, fund capital expenditures, and expand our business; and (iv) as one measure in determining the value of other acquisitions and dispositions. Adjusted EBITDA is a key performance metric utilized in the determination of variable compensation. We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because it serves as a high-level proxy for cash generated from operations.

Management uses Adjusted Net Income and Adjusted EPS (i) as measurements of net operating performance because they assist us in comparing such performance on a consistent basis, as they remove the impact of (a) items that we would not expect to occur as a part of our normal business on a regular basis and (b) components of the provision for income taxes that we would not expect to occur as a part of our underlying taxable operations; (ii) for planning purposes, including the preparation of our annual operating budget; and (iii) as measures in determining the value of other acquisitions and dispositions.

Management uses Net Debt as a liquidity and leverage metric to determine how much debt would remain if all cash and cash equivalents were used to pay down debt principal.

In evaluating non-GAAP financial measures, investors should be aware that, in the future, we may incur expenses similar to the adjustments included herein. Our presentation of non-GAAP financial measures should not be construed as indicating that our future results will be unaffected by unusual or non-recurring items. Each of our non-GAAP financial measures has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of our results or liquidity measures as reported under GAAP. Some of these limitations are (i) it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; (ii) it does not reflect the impact of earnings or charges resulting from matters we consider not indicative of our ongoing operations; (iii) it does not reflect changes in, or cash requirements for, our working capital needs; (iv) it does not reflect the cash requirements necessary to make payments on our debt; (v) it does not reflect our future requirements for capital expenditures or contractual commitments; (vi) it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and (vii) other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, these non-GAAP financial measures should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations, including those under our outstanding debt obligations. Investors should compensate for these limitations by relying primarily on our GAAP results and using these measures only as supplemental information.

Cautionary Statement on Forward-Looking Statements

Certain statements included herein contain “forward-looking statements” within the meaning of federal securities laws about the financial condition and results of operations of Unifi that are based on management’s beliefs, assumptions and expectations about our future economic performance, considering the information currently available to management. An example of such forward-looking statements include, among others, guidance pertaining to our financial outlook. The words “believe,” “may,” “could,” “will,” “should,” “would,” “anticipate,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek,” “strive” and words of similar import, or the negative of such words, identify or signal the presence of forward-looking statements. These statements are not statements of historical fact, and they involve risks and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition that we express or imply in any forward-looking statement.

Factors that could contribute to such differences include, but are not limited to: the competitive nature of the textile industry and the impact of global competition; changes in the trade regulatory environment and governmental policies and legislation; the availability, sourcing and pricing of raw materials; general domestic and international economic and industry conditions in markets where Unifi competes, including economic and political factors over which Unifi has no control; changes in consumer spending, customer preferences, fashion trends and end uses for products; the financial condition of Unifi’s customers; the loss of a significant customer or brand partner; natural disasters, industrial accidents, power or water shortages, extreme weather conditions and other disruptions at one of our facilities; the disruption of operations, global demand, or financial performance as a result of catastrophic or extraordinary events, including epidemics or pandemics such as the recent strain of coronavirus; the success of Unifi’s strategic business initiatives; the volatility of financial and credit markets; the ability to service indebtedness and fund capital expenditures and strategic business initiatives; the availability of and access to credit on reasonable terms; changes in foreign currency exchange, interest and inflation rates; fluctuations in production costs; the ability to protect intellectual property; the strength and reputation of our brands; employee relations; the ability to attract, retain and motivate key employees; the impact of climate change or environmental, health and safety regulations; and the impact of tax laws, the judicial or administrative interpretations of tax laws and/or changes in such laws or interpretations.

All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on Unifi. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, except as may be required by federal securities laws. The above and other risks and uncertainties are described in Unifi’s most recent Annual Report on Form 10-K, and additional risks or uncertainties may be described from time to time in other reports filed by Unifi with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

Davis Snyder
Alpha IR Group
312-445-2870
UFI@alpha-ir.com

Source: Unifi, Inc.