ufi20140121_8k.htm

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):

January 21, 2014

 

UNIFI, INC.

(Exact name of registrant as specified in its charter)

New York
(State or Other Jurisdiction of Incorporation)

1-10542
(Commission File Number)

11-2165495
(IRS Employer Identification No.)

     

7201 West Friendly Avenue

Greensboro, North Carolina

(Address of Principal Executive Offices)

 

27410

(Zip Code)

 

Registrant’s telephone number, including area code: (336) 294-4410


Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

-------------------------------------------------------------

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

[ ]

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

[ ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

[ ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

[ ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

==========================================================

 

 

 
 

 

 

ITEM 2.02.     RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On January 21, 2014, Unifi, Inc. (the “Registrant”) issued a press release announcing its preliminary operating results for the second quarter ended December 29, 2013 of its 2014 fiscal year, which press release is filed as Exhibit 99.1 and is incorporated herein by reference.

 

ITEM 7.01.     REGULATION FD DISCLOSURE.

 

On January 22, 2014, the Registrant will host a conference call to discuss its preliminary operating results for the second quarter ended December 29, 2013 of its 2014 fiscal year. The slide package prepared for use by executive management for this conference call is furnished herewith as Exhibit 99.2. All of the information in the conference call and in the slide package is being presented as of January 22, 2014, except for information for which an earlier date is indicated, and the Registrant does not assume any obligation to update such information in the future.

 

The information included in the preceding paragraph, as well as the exhibit referenced therein, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

 

ITEM 8.01.     OTHER EVENTS.

 

On January 21, 2014, the Registrant issued a press release announcing its preliminary operating results for the second quarter ended December 29, 2013 of its 2014 fiscal year, a copy of which press release is filed as Exhibit 99.1 and is incorporated herein by reference.

 

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

 

(d)     Exhibits.

 

The following exhibits are filed herewith:

 

EXHIBIT NO.

DESCRIPTION OF EXHIBIT

   

99.1

Press Release dated January 21, 2014 with respect to the Registrant’s preliminary operating results for the second quarter ended December 29, 2013 of its 2014 fiscal year.

99.2

Slide Package prepared for use in connection with the Registrant’s conference call to be held on January 22, 2014.

   

 

 

 
 

 

 

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 hereunto duly authorized.

 

 

 

 

UNIFI, INC.

 

 

 

 

 

 

 

  

 

 

By:

/S/ W. RANDY EADDY

 

 

 

W. Randy Eaddy

 

 

 

General Counsel

 

  

Dated: January 22, 2014

 

 
 

 

 

INDEX TO EXHIBITS

 

 

EXHIBIT NO.

DESCRIPTION OF EXHIBIT

   

99.1

Press Release dated January 21, 2014 with respect to the Registrant’s preliminary operating results for the second quarter ended December 29, 2013 of its 2014 fiscal year.

99.2

Slide Package prepared for use in connection with the Registrant’s conference call to be held on January 22, 2014.

 

 

ex99-1.htm

 

 Exhibit 99.1

For more information, contact:

James M. Otterberg

Chief Financial Officer

(336) 316-5424

 

 

Unifi Announces Second Quarter 2014 Results

  

GREENSBORO, N.C., – January 21, 2014 – Unifi, Inc. (NYSE: UFI) today released preliminary operating results for the second quarter ended December 29, 2013 of its 2014 fiscal year. Net income for the current year quarter was $6.4 million, or $0.34 per basic share, compared to net income of $2.4 million, or $0.12 per basic share, for the prior year quarter, reflecting gains from improved margins, lower net interest expense and higher earnings from the Company’s equity affiliates. These gains were partially offset by higher expenses for income taxes.

 

Highlights for the December 2013 quarter included:

 

Adjusted EBITDA improved to $12.6 million for the current year quarter from $12.2 million for the prior year quarter;

 

Domestic gross profit was higher due to improved margins and lower expenses for depreciation;

 

Higher earnings from the Company’s equity affiliates, primarily Parkdale America LLC, increased income before income taxes by $3.9 million versus the prior year quarter; and

 

The Company used $12.9 million of excess cash flows from operations to repurchase 522,220 shares of its common stock under its previously announced stock repurchase program.

 

A net sales decrease of $11.5 million, or 6.7%, to $160.6 million for the second quarter of the current year compared to net sales of $172.1 million for the prior year quarter, was offset by improved operating margins and earnings from equity affiliates. The comparative decrease was primarily attributable to the timing of the holiday shutdown, which adversely affected domestic sales activity in the second quarter of the current year versus the third quarter of the prior year; in addition, declines in sales volumes for the Company’s foreign subsidiaries, reductions in lower margin business and the currency translation effects of the weakened Brazilian Real also contributed to lower net sales.

  

 
 

 

 

 

 

Unifi Announces Second Quarter 2014 Results – page 2

 

“We are encouraged with the continued performance of our domestic business, focusing on products that are profitable, defensible and compliant within the Central American Free Trade Agreement, and we have experienced growth in our domestic operations from our premier value-added products,” said Roger Berrier, President and Chief Operating Officer of Unifi. “Although operating conditions remain challenging in Brazil and China, we remain encouraged by the long-term sales opportunities that we anticipate from the development work that we are currently engaged in.”

 

Cash-on-hand as of December 29, 2013 was $15.5 million, an increase of $6.8 million from June 30, 2013. Net debt at the end of the December 2013 quarter was $87.3 million, compared to $89.0 million at June 30, 2013. As of December 29, 2013, the weighted average interest rate for the Company’s outstanding debt obligations was 3.1%.

 

Net income was $15.3 million, or $0.80 per basic share, for the six months ended December 29, 2013 compared to net income of $4.7 million, or $0.23 per share, for the prior year six-month period. A net sales decrease of $15.7 million, or 4.5%, to $329.3 million for the current year six-month period compared to net sales of $345.0 million for the prior year six-month period, was offset by improved operating margins and earnings from equity affiliates.

 

“We continue to have strong, improving earnings and cash flow. Our operating results over the past twelve months have enabled us to fund our operating and capital needs, while repurchasing $38 million of the Company’s common stock and reducing net debt by slightly over $4 million, significantly enhancing shareholder value,” said Bill Jasper, Chairman and CEO of Unifi. “We expect to continue our financial improvement by continuing to focus on lean manufacturing initiatives, enriching our product mix and deriving value from sustainability based initiatives.”

  

 

 

 

-continued-

 

 
 

 

 

 

 

Unifi Announces Second Quarter 2014 Results – page 3

 

The Company will provide additional commentary regarding its second quarter results during its earnings conference call on January 22, 2014, at 8:30 a.m. Eastern Time. The call will be webcast live at http://investor.unifi.com/ and will be available for replay approximately two hours after the live event and will be archived for approximately twelve months. Additional supporting materials and information related to the call, as well as the Company's financial results for the December 2013 quarter will also be available at http://investor.unifi.com/.

 

 

Unifi, Inc. (NYSE: UFI) is a multi-national manufacturing company that produces and sells textured and other processed yarns designed to meet customer specifications, and premier value-added (“PVA”) yarns with enhanced performance characteristics. Unifi maintains one of the textile industry’s most comprehensive polyester and nylon product offerings. Unifi enhances demand for its products, and helps others in creating a more effective textile industry supply chain, through the development and introduction of branded yarns that provide unique performance, comfort and aesthetic advantages. In addition to its flagship REPREVE® products – a family of eco-friendly yarns made from recycled materials – key Unifi brands include: SORBTEK®, REFLEXX®, AIO® - all-in-one performance yarns, SATURA®, AUGUSTA® A.M.Y.®, MYNX® UV and MICROVISTA®. Unifi's yarns are readily found in the products of major brands in the apparel, hosiery, automotive, home furnishings, industrial and other end use markets. For more information about Unifi, visit www.unifi.com; to learn more about REPREVE®, visit www.repreve.com.

 

 

 

 

###

 

Financial Statements to Follow

 

 
 

 

  

 

Unifi Announces Second Quarter 2014 Results – page 4

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(amounts in thousands, except share and per share amounts)

 

   

December 29, 2013

   

June 30, 2013

 

ASSETS

               

Cash and cash equivalents

  $ 15,522     $ 8,755  

Receivables, net

    77,536       98,392  

Inventories

    110,765       110,667  

Income taxes receivable

    1,374       1,388  

Deferred income taxes

    1,831       1,715  

Other current assets

    5,371       5,913  

Total current assets

    212,399       226,830  
                 

Property, plant and equipment, net

    116,562       115,164  

Deferred income taxes

    2,590       2,196  

Intangible assets, net

    8,549       7,772  

Investments in unconsolidated affiliates

    101,562       93,261  

Other non-current assets

    4,510       10,243  

Total assets

  $ 446,172     $ 455,466  
                 

LIABILITIES AND SHAREHOLDERS’ EQUITY

               

Accounts payable

  $ 35,740     $ 45,544  

Accrued expenses

    12,517       18,485  

Income taxes payable

    417       851  

Current portion of long-term debt

    1,316       65  

Total current liabilities

    49,990       64,945  

Long-term debt

    101,508       97,688  

Other long-term liabilities

    6,950       5,053  

Deferred income taxes

    1,991       1,300  

Total liabilities

    160,439       168,986  

Commitments and contingencies

               
                 

Common stock, $0.10 par (500,000,000 shares authorized, 19,035,918 and 19,205,209 shares outstanding)

    1,904       1,921  

Capital in excess of par value

    42,814       36,375  

Retained earnings

    248,242       252,112  

Accumulated other comprehensive loss

    (8,662 )     (5,500 )

Total Unifi, Inc. shareholders’ equity

    284,298       284,908  

Non-controlling interest

    1,435       1,572  

Total shareholders’ equity

    285,733       286,480  

Total liabilities and shareholders’ equity

  $ 446,172     $ 455,466  

 

 

 

-continued-

 

 
 

 

 

 

Unifi Announces Second Quarter 2014 Results – page 5

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(amounts in thousands, except per share amounts)

 

 

 

   

For the Three Months Ended

   

For the Six Months Ended

 
   

December 29, 2013

   

December 23, 2012

   

December 29, 2013

   

December 23, 2012

 

Net sales

  $ 160,617     $ 172,071     $ 329,286     $ 344,971  

Cost of sales

    142,120       155,380       290,804       310,260  

Gross profit

    18,497       16,691       38,482       34,711  

Selling, general and administrative expenses

    11,491       11,532       21,605       22,679  

Provision for bad debts

    87       73       49       183  

Other operating expense, net

    1,145       580       2,769       1,161  

Operating income

    5,774       4,506       14,059       10,688  

Interest income

    (142 )     (144 )     (1,356 )     (268 )

Interest expense

    903       1,361       2,155       2,805  

Loss on extinguishment of debt

          114             356  

Equity in earnings of unconsolidated affiliates

    (5,122 )     (1,258 )     (11,245 )     (1,929 )

Income before income taxes

    10,135       4,433       24,505       9,724  

Provision for income taxes

    3,924       2,216       9,675       5,449  

Net income including non-controlling interest

    6,211       2,217       14,830       4,275  

Less: net (loss) attributable to non-controlling interest

    (232 )     (209 )     (483 )     (445 )

Net income attributable to Unifi, Inc.

  $ 6,443     $ 2,426     $ 15,313     $ 4,720  
                                 

Net income attributable to Unifi, Inc. per common share:

                               

Basic

  $ 0.34     $ 0.12     $ 0.80     $ 0.23  

Diluted

  $ 0.32     $ 0.12     $ 0.76     $ 0.23  

 

 

-continued-

 

 
 

 

 

 

Unifi Announces Second Quarter 2014 Results – page 6

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(amounts in thousands)

 

   

For The Six Months Ended

 
   

December 29, 2013

   

December 23, 2012

 

Cash and cash equivalents at beginning of year

  $ 8,755     $ 10,886  

Operating activities:

               

Net income including non-controlling interest

    14,830       4,275  

Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:

               

Equity in earnings of unconsolidated affiliates

    (11,245 )     (1,929 )

Dividends received from unconsolidated affiliates

    3,059       2,724  

Depreciation and amortization expense

    8,625       12,997  

Loss on extinguishment of debt

          356  

Non-cash compensation expense

    1,611       1,326  

Excess tax benefit on stock-based compensation plans

    (3,536 )      

Deferred income taxes

    25       3,159  

Other

    3,465       97  

Changes in assets and liabilities, excluding effects of foreign currency adjustments:

               

Receivables, net

    19,829       10,447  

Inventories

    (1,609 )     5,467  

Other current assets and income taxes receivable

    3,684       (784 )

Accounts payable and accrued expenses

    (19,299 )     (12,235 )

Income taxes payable

    3,137       (1,161 )

Net cash provided by operating activities

    22,576       24,739  

Investing activities:

               

Capital expenditures

    (9,431 )     (2,872 )

Other investments

          (1,620 )

Proceeds from sale of assets

    268       56  

Proceeds from other investments

    392        

Other

    (60 )     (55 )

Net cash used in investing activities

    (8,831 )     (4,491 )

Financing activities:

               

Proceeds from revolving credit facility

    72,700       28,700  

Payments on revolving credit facility

    (74,800 )     (35,700 )

Proceeds from term loan

    7,200        

Payments on term loans

          (10,516 )

Payments of debt financing fees

    (3 )     (63 )

Proceeds from related party term loan

          1,250  

Repurchase and retirement of common stock

    (18,686 )      

Proceeds from stock option exercises

    2,833       29  

Contributions from non-controlling interest

    346       480  

Excess tax benefit on stock-based compensation plans

    3,536        

Other

    (29 )     (39 )

Net cash used in financing activities

    (6,903 )     (15,859 )
                 

Effect of exchange rate changes on cash and cash equivalents

    (75 )     (29 )

Net increase in cash and cash equivalents

    6,767       4,360  

Cash and cash equivalents at end of period

  $ 15,522     $ 15,246  

 

-continued-

 

 
 

 

 

 

Unifi Announces Second Quarter 2014 Results – page 7

 

RECONCILIATIONS OF NET INCOME ATTRIBUTABLE TO UNIFI, INC. TO ADJUSTED EBITDA (Unaudited)

(amounts in thousands)

 

 

The reconciliations of Net income attributable to Unifi, Inc. to EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA are as follows:

 

   

For the Three Months Ended

   

For the Six Months Ended

 
   

December 29, 2013

   

December 23, 2012

   

December 29, 2013

   

December 23, 2012

 

Net income attributable to Unifi, Inc.

  $ 6,443     $ 2,426     $ 15,313     $ 4,720  

Provision for income taxes

    3,924       2,216       9,675       5,449  

Interest expense, net

    761       1,217       799       2,537  

Depreciation and amortization expense

    4,080       6,298       8,349       12,631  

EBITDA

    15,208       12,157       34,136       25,337  
                                 

Non-cash compensation expense

    1,197       705       1,611       1,326  

Loss on extinguishment of debt

          114             356  

Other

    1,284       438       2,546       891  

Adjusted EBITDA including equity affiliates

    17,689       13,414       38,293       27,910  
                                 

Equity in earnings of unconsolidated affiliates

    (5,122 )     (1,258 )     (11,245 )     (1,929 )

Adjusted EBITDA

  $ 12,567     $ 12,156     $ 27,048     $ 25,981  

 

 

-continued-

 

 
 

 

 

 

Unifi Announces Second Quarter 2014 Results – page 8

 

NON-GAAP FINANCIAL MEASURES

 

Certain non-GAAP financial measures included herein are designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America ("GAAP") because management believes such measures are useful to investors. These non-GAAP financial measures are Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA including equity affiliates, and Adjusted EBITDA.

 

EBITDA represents net income or loss attributable to Unifi, Inc. before net interest expense, income tax expense, and depreciation and amortization expense. Adjusted EBITDA including equity affiliates represents EBITDA adjusted to exclude non-cash compensation expense, gains or losses on extinguishment of debt, loss on previously held equity interest, and certain other adjustments. Such other adjustments include operating expenses for Repreve Renewables, restructuring charges and start-up costs, gains or losses on sales or disposals of property, plant and equipment, currency and derivative gains or losses, certain employee healthcare expenses, and other operating or non-operating income or expense items necessary to understand and compare the underlying results of the Company. Adjusted EBITDA represents Adjusted EBITDA including equity affiliates adjusted to exclude equity in earnings and losses of unconsolidated affiliates. The Company may, from time to time, change the items included within Adjusted EBITDA.

 

EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA are alternative views of performance used by management, and we believe that investors’ understanding of our performance is enhanced by disclosing these performance measures. 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 also a key performance metric utilized in the determination of variable compensation.

 

We believe that the use of EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA 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. We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense decreases as deductible interest expense increases; and depreciation and amortization are non-cash charges. Equity in earnings and losses of unconsolidated affiliates is excluded because such earnings or losses do not reflect our operating performance. The other items excluded from Adjusted EBITDA are excluded in order to better reflect the performance of our continuing operations.

 

  

 

-continued-

 

 
 

 

 

 

Unifi Announces Second Quarter 2014 Results – page 9

 

In evaluating EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA, you should be aware that in the future, we may incur expenses similar to the adjustments included herein. Our presentation of EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA should not be construed as indicating that our future results will be unaffected by unusual or non-recurring items. EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA are not determined in accordance with GAAP and should not be considered as substitutes for net income, operating income or any other performance measures determined in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.

 

Each of our EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA measures has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

  

 

it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;

 

 

it does not reflect the impact of earnings or charges resulting from matters we consider not indicative of our ongoing operations;

 

 

It does not reflect changes in, or cash requirements for, our working capital needs;

 

 

it does not reflect the cash requirements necessary to make payments on our debt;

 

 

it does not reflect our future requirements for capital expenditures or contractual commitments;

 

 

it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and

 

 

other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

  

Because of these limitations, EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA 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.

 

 

 

-continued-

 

 
 

 

 

 

Unifi Announces Second Quarter 2014 Results – page 8

 

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, Inc. (the “Company”) that 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,” “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; they involve risk 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 worldwide 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 the Company competes, such as recession and other economic and political factors over which the Company has no control; changes in consumer spending, customer preferences, fashion trends and end-uses; the financial condition of the Company’s customers; the loss of a significant customer; the success of the Company’s strategic business initiatives; the continuity of the Company’s leadership; volatility of financial and credit markets; the ability to service indebtedness and fund capital expenditures and strategic initiatives; availability of and access to credit on reasonable terms; changes in currency exchange, interest and inflation rates; the ability to reduce production costs; the ability to protect intellectual property; employee relations; the impact of environmental, health and safety regulations; the operating performance of joint ventures and other equity investments; and the accurate financial reporting of information from equity method investees.

 

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. The above and other risks and uncertainties are described in the Company’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 the Company with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

 

 

 

-end-

 

 

 Unifi, Inc.

For the Second Quarter Ended
December 29, 2013

Conference Call
Slide Presentation
 Exhibit 99.2

 

 
 

 

 

 

 2
 Cautionary Statement
 
 
 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, Inc. (the “Company”) that 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,” “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; they involve risk 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 worldwide 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 the Company competes, such as recession and other economic and political factors over which the Company has no control; changes in consumer spending, customer preferences, fashion trends and end-uses; the financial condition of the Company’s customers; the loss of a significant customer; the success of the Company’s strategic business initiatives; the continuity of the Company’s leadership; volatility of financial and credit markets; the ability to service indebtedness and fund capital expenditures and strategic initiatives; availability of and access to credit on reasonable terms; changes in currency exchange, interest and inflation rates; the ability to reduce production costs; the ability to protect intellectual property; employee relations; the impact of environmental, health and safety regulations; the operating performance of joint ventures and other equity investments; and the accurate financial reporting of information from equity method investees.

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. The above and other risks and uncertainties are described in the Company’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 the Company with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
 Unifi, Inc.
Second Qtr. Conf. Call
January 22, 2014
(Unaudited)

 
 

 

 

 

 

3
 Net Sales and Gross Profit Highlights
(Amounts in Thousands, Except Percentages)
 Unifi, Inc.
Second Qtr. Conf. Call
January 22, 2014
(Unaudited)

 3

Quarter over Quarter                         Year over Year               

 

      For the Three Months Ended           For the Six Months Ended      

 

               December 29, 2013 vs. December 23, 2012                         December 29, 2013 vs. December 23, 2012               

 

               Volume          Price               Volume          Price     

 

     Net Sales:                                                  

 

     Polyester          (11.5%)          3.4%                (5.2%)          1.3%      

 

     Nylon          (2.4%)          3.0%                0.4%           (0.5%)     

 

     International          (8.6%)          (2.3%)               (7.1%)          (3.9%)     

 

     Consolidated          (9.8%)          3.2%                (5.2%)          0.6%      

 

 

 

               For the Three Months Ended                         For the Six Months Ended               

 

               December 29, 2013          December 23, 2012               December 29, 2013          December 23, 2012     

 

 

     Gross Profit:                                                  

 

     Polyester           $9,797            $8,437                 $20,157            $16,644      

 

     Nylon           4,758            4,016                 9,452            8,086      

 

     International           3,942            4,238                 8,873            9,981      

 


 
 

 

 

 

 

4
Income Statement Highlights (Amounts in Thousands, Except Percentages and Per Share Amounts)
 Unifi, Inc.
Second Qtr. Conf. Call
January 22, 2014
(Unaudited)

  For the Three Months Ended      

  December 29, 2013   December 23, 2012  

Net sales $ 160,617 100.0% $ 172,091 100.0%

Gross profit           18,497 11.5%           16,691 9.7%

Selling, general and administrative expenses           11,491 7.2%           11,532 6.7%

Operating income             5,774 3.6%             4,506 2.6%

Interest expense                903               1,361  

Income before income taxes           10,135               4,433  

Equity in earnings of unconsolidated affiliates           (5,122)              (1,258)  

Earnings per share (basic) $ 0.34   $ 0.12  

Weighted average shares outstanding           19,136             20,099  

 
 

 

 

 

 5
Income Statement Highlights (Amounts in Thousands, Except Percentages and Per Share Amounts)
 Unifi, Inc.
Second Qtr. Conf. Call
January 22, 2014
(Unaudited)

  For the Six Months Ended      

  December 29, 2013   December 23, 2012  

Net sales $ 329,286 100.0% $ 344,971 100.0%

Gross profit           38,482 11.7%           34,711 10.1%

Selling, general and administrative expenses           21,605 6.6%           22,679 6.6%

Operating income           14,059 4.3%           10,688 3.1%

Interest expense             2,155               2,805  

Income before income taxes           24,505               9,724  

Equity in earnings of unconsolidated affiliates          (11,245)              (1,929)  

Earnings per share (basic) $ 0.80   $ 0.23  

Weighted average shares outstanding           19,200             20,095  

 
 

 

 

 

6
 Equity Affiliates Highlights
 (Amounts in thousands, Except Percentages)
 Unifi, Inc.
Second Qtr. Conf. Call
January 22, 2014
(Unaudited) 

  For the Three Months Ended   For the Six Months Ended  

  December 29, 2013 December 23, 2012 December 29, 2013 December 23, 2012

Earnings:        

Parkdale America (34%) $ 4,803 $ 655 $ 10,718 $ 697

Other                         319                         603                        527                      1,232

Total $ 5,122 $ 1,258 $ 11,245 $ 1,929

         

Distributions:        

Parkdale America (34%) $ - $ - $ 2,559 $ 2,224

Other                         500                         500                        500                        500

Total $ 500 $ 500 $ 3,059 $ 2,724

 
 

 

 

 

 7
 Reconciliations of Net Income to Adjusted EBITDA (Amounts in Thousands)
 Unifi, Inc.
Second Qtr. Conf. Call
January 22, 2014
(Unaudited)

  For the Three Months Ended   For the Six Months Ended  

  December 29, 2013 December 23, 2012 December 29, 2013 December 23, 2012

         

Net income attributable to Unifi, Inc. $ 6,443 $ 2,426 $ 15,313 $ 4,720

Provision for income taxes                          3,924                          2,216                          9,675                          5,449

Interest expense, net                             761                          1,217                             799                          2,537

Depreciation and amortization expense                          4,080                          6,298                          8,349                        12,631

EBITDA                        15,208                        12,157                        34,136                        25,337

         

Non-cash compensation expense                          1,197                             705                          1,611                          1,326

Loss on extinguishment of debt                                  -                             114                                  -                             356

Other                          1,284                             438                          2,546                             891

Adjusted EBITDA including equity affiliates                        17,689                        13,414                        38,293                        27,910

         

Equity in earnings of unconsolidated affiliates                         (5,122)                         (1,258)                       (11,245)                         (1,929)

Adjusted EBITDA $ 12,567 $ 12,156 $ 27,048 $ 25,981

         

         

         

Adjusted EBITDA 12567 12156 27048 25981

 
 

 

 

 

 8
Working Capital Highlights (Amounts in Thousands)
 Unifi, Inc.
Second Qtr. Conf. Call
January 22, 2014
(Unaudited)

  December 29, 2013 September 29, 2013 June 30, 2013

       

       

Receivables, net $ 77,536 $ 90,097 $ 98,392

Inventories                110,765                 114,432           110,667

Accounts payable                 (35,740)                 (40,275)           (45,544)

Accrued expenses                 (12,399)                 (13,498)           (18,383)

Adjusted working capital $ 140,162 $ 150,756 $ 145,132

Adjusted working capital $ 140,162 $ 150,756 $ 145,132

Cash                  15,522                   10,310              8,755

Other current assets                    8,576                   11,060              9,016

Accrued interest                     (118)                        (78)                (102)

Other current liabilities                   (1,733)                   (3,195)                (916)

Working capital $ 162,409 $ 168,853 $ 161,885

 
 

 

 

 

  9
Capital Structure (Amounts in Thousands)
 Unifi, Inc.
Second Qtr. Conf. Call
January 22, 2014
(Unaudited)

        June 24,

  December 29, 2013 September 29, 2013 June 30, 2013 2012

         

ABL Revolver $ 50,400 $ 44,900 $ 52,500 $ 51,000

ABL Term Loan                   50,000                    50,000                 42,800                 50,000

Other                     2,424                      2,439                   2,453                       37

Total Debt $ 102,824 $ 97,339 $ 97,753 $ 101,037

         

Cash                   15,522                    10,310                   8,755                 10,886

Net Debt $ 87,302 $ 87,029 $ 88,998 $ 90,151

Cash $ 15,522 $ 10,310 $ 8,755 $ 10,886

Revolver Availability, Net                   28,083                    38,968                 36,105                 37,122

Total Liquidity $ 43,605 $ 49,278 $ 44,860 $ 48,008

 
 

 

 

 

 10
 Non-GAAP Financial Measures
 
 
 Certain non-GAAP financial measures included herein are designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America ("GAAP") because management believes such measures are useful to investors.  These non-GAAP financial measures are Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA including equity affiliates, and Adjusted EBITDA.

EBITDA represents net income or loss attributable to Unifi, Inc. before net interest expense, income tax expense, and depreciation and amortization expense.  Adjusted EBITDA including equity affiliates represents EBITDA adjusted to exclude non-cash compensation expense, gains or losses on extinguishment of debt, loss on previously held equity interest, and certain other adjustments.  Such other adjustments include operating expenses for Repreve Renewables, restructuring charges and start-up costs, gains or losses on sales or disposals of property, plant and equipment, currency and derivative gains or losses, certain employee healthcare expenses, and other operating or non-operating income or expense items necessary to understand and compare the underlying results of the Company.  Adjusted EBITDA represents Adjusted EBITDA including equity affiliates adjusted to exclude equity in earnings and losses of unconsolidated affiliates.  The Company may, from time to time, change the items included within Adjusted EBITDA. 

EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA are alternative views of performance used by management, and we believe that investors’ understanding of our performance is enhanced by disclosing these performance measures.  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 also a key performance metric utilized in the determination of variable compensation.

We believe that the use of EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA 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.  We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense decreases as deductible interest expense increases; and depreciation and amortization are non-cash charges.  Equity in earnings and losses of unconsolidated affiliates is excluded because such earnings or losses do not reflect our operating performance.  The other items excluded from Adjusted EBITDA are excluded in order to better reflect the performance of our continuing operations.
 Unifi, Inc.
Second Qtr. Conf. Call
January 22, 2014
(Unaudited) 

 
 

 

 

 

 11
 Non-GAAP Financial Measures - continued
 
 
 In evaluating EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA, you should be aware that in the future, we may incur expenses similar to the adjustments included herein. Our presentation of EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA should not be construed as indicating that our future results will be unaffected by unusual or non-recurring items.  EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA are not determined in accordance with GAAP and should not be considered as substitutes for net income, operating income or any other performance measures determined in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.

Each of our EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA measures has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
 
it does not reflect the impact of earnings or charges resulting from matters we consider not indicative of our ongoing operations;
 
it does not reflect changes in, or cash requirements for, our working capital needs;
 
it does not reflect the cash requirements necessary to make payments on our debt;
 
it does not reflect our future requirements for capital expenditures or contractual commitments;
 
it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and
 
other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA 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.

 Unifi, Inc.
Second Qtr. Conf. Call
January 22, 2014
(Unaudited)