ufi-8k_20191229.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 29, 2020

 

UNIFI, INC.

(Exact name of registrant as specified in its charter)

 

 

New York

1-10542

11-2165495

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

 

 

 

7201 West Friendly Avenue

Greensboro, North Carolina

 

27410

(Address of principal executive offices)

 

 

(Zip Code)

 

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

 

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))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.10 per share

 

UFI

 

New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b‑2 of this chapter).  

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 

 

 

 


Item 2.02.Results of Operations and Financial Condition.

 

On January 29, 2020, Unifi, Inc. (the “Company”) issued a press release announcing its operating results for the second quarter of fiscal 2020 ended December 29, 2019, a copy of which is attached hereto as Exhibit 99.1.  

 

Item 7.01.Regulation FD Disclosure.

 

On January 29, 2020, the Company will host a conference call to discuss its operating results for the second quarter of fiscal 2020 ended December 29, 2019.  A copy of the materials prepared for use by management during this conference call is attached hereto as Exhibit 99.2.  

 

Item 9.01.Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit

No.

 

Description

 

 

 

99.1

 

Press Release of Unifi, Inc., dated January 29, 2020.

 

 

 

99.2

 

Earnings Call Presentation Materials.

 

The information in this Current Report on Form 8-K, including the exhibits attached hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.

 


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.

 

 

 

 

Date:  January 29, 2020

 

By:

/s/ CRAIG A. CREATURO

 

 

 

Craig A. Creaturo

 

 

 

Executive Vice President & Chief Financial Officer

 

 

 

ufi-ex991_7.htm

 

Exhibit 99.1

Unifi Announces Second Quarter Fiscal 2020 Results

 

Results reflect continued improvement in operating income and cash flows;

trade determinations finalized in December 2019, expected to be beneficial and effective moving forward;

updates full-year fiscal 2020 outlook.

 

GREENSBORO, N.C., January 29, 2020 – Unifi, Inc. (NYSE: UFI), one of the world’s leading innovators in recycled and synthetic yarns, today released operating results for the second quarter of fiscal 2020 ended December 29, 2019.

 

Second Quarter Fiscal 2020 Overview

 

 

Net sales of $169.5 million increased 1.1% from the second quarter of fiscal 2019 net sales of $167.7 million.

 

Revenues from premium value-added products represented 57% of consolidated net sales.

 

Selling, general and administrative expenses (“SG&A”) decreased $2.3 million compared to the second quarter of fiscal 2019, demonstrating results from previously communicated cost reduction efforts.

 

Operating income was $2.6 million, compared to an operating loss of $0.8 million in the second quarter of fiscal 2019.

 

Net income of $0.4 million and diluted earnings per share (“EPS”) of $0.02 were negatively impacted by $1.6 million of lower pre-tax earnings from Parkdale America, LLC (“PAL”); comparable amounts from the second quarter of fiscal 2019 were net income of $1.2 million and EPS of $0.06.

 

Operating cash flows for the six months ended December 29, 2019 improved to $28.6 million, continuing the positive momentum from the first quarter of fiscal 2020.

 

“We ended the second quarter with important news from the U.S. International Trade Commission, as antidumping and countervailing duty rates were recently finalized and published, setting the stage for a more balanced U.S. market for polyester textured yarn,” said Tom Caudle, President & Chief Operating Officer of Unifi. “We achieved significant improvement in operating results over the prior year period. Results were impacted by softer-than-expected U.S. demand in certain categories, along with global market pricing pressures. We are pleased with our ability to generate operating cash flows with a leaner cost structure. We now look forward to growing market share, driving innovation across our product portfolio, and leveraging our unmatched supply chain for further global growth.”

 

 


 

 

Second Quarter Fiscal 2020 Compared to Second Quarter Fiscal 2019

 

Net sales in the second quarter of fiscal 2020 were $169.5 million, compared to $167.7 million, driven by an 18% increase in sales volumes led by REPREVE®-branded products primarily in Asia, but partially offset by Nylon declines. The sales volume increase in Asia was largely offset by a decline in average selling prices and by Nylon volume declines resulting from customer plant closure announcements and soft demand across all Nylon end markets.

 

Gross profit increased to $15.7 million, from $14.2 million, primarily attributable to a more favorable raw material cost environment in the U.S. This increase was partially offset by competitive pricing pressures, especially in Brazil, and lower Nylon sales volumes.

 

Operating income (loss) for the second quarter of fiscal 2020 was $2.6 million, compared to ($0.8) million for the second quarter of fiscal 2019, and benefited from an expected decrease in SG&A, but was negatively impacted by $0.8 million from an unfavorable foreign currency environment and $0.4 million of shutdown costs for the Company’s subsidiary in Sri Lanka.

 

Net income was $0.4 million, compared to $1.2 million, and EPS was $0.02, compared to $0.06. Pre-tax PAL results were $1.6 million lower in the second quarter of fiscal 2020 and, for the second quarter of fiscal 2019, net income benefited by $2.0 million from tax credits related to prior fiscal years.

 

Adjusted EBITDA was $8.9 million, compared to $4.9 million.  Adjusted EBITDA is a non-GAAP financial measure. The schedules included in this press release reconcile Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.

 

Net Debt was $92.1 million at December 29, 2019, compared to $105.8 million at June 30, 2019, and benefited from $10.4 million in distributions received from PAL during the first quarter of fiscal 2020, which were used to reduce leverage.  Net Debt is a non-GAAP financial measure.  The schedules included in this press release reconcile Net Debt.  Cash and cash equivalents increased to $37.2 million at December 29, 2019, from $22.2 million at June 30, 2019, benefiting from international cash generation.

 

First Six Months of Fiscal 2020 Overview

 

The first six months of fiscal 2020 consisted of 26 weeks of domestic operations, compared to 27 weeks of domestic operations in the first six months of fiscal 2019. Net sales were $349.5 million for the first six months of fiscal 2020, compared to $349.3 million. Sales volumes grew 17%, led by Asia. Gross margin was 9.5% for the first

Unifi Announces Second Quarter Fiscal 2020 Results

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six months of fiscal 2020, compared to 9.8% for the first six months of fiscal 2019. Operating income was $8.9 million for the first six months of fiscal 2020, compared to $4.9 million for the first six months of fiscal 2019. Net income was $4.1 million for the first six months of fiscal 2020, compared to $3.0 million for the first six months of fiscal 2019.

 

Fiscal 2020 Outlook

 

For fiscal 2020, the Company has revised its guidance to reflect a softer-than-expected recovery. The Company now expects:

 

 

Sales volumes to grow between 10% and 13% from fiscal 2019 levels;

 

Net sales between $700.0 million and $715.0 million;

 

Operating income between $20.0 million and $23.0 million;

 

Adjusted EBITDA between $44.0 million and $47.0 million;

 

Capital expenditures of approximately $23.0 million; and

 

An effective tax rate not to exceed 23%.

 

Mr. Caudle concluded, “Our international operations have faced some significant pricing pressures in fiscal 2020, and global competition remains aggressive. While we are confident in our ability to generate significant improvement over fiscal 2019, including sequential gross profit improvement, recapture market share in the U.S., and drive strong cash flows, our full-year fiscal 2020 guidance has been updated to reflect global competitive pricing pressures and lower revenue expectations for Nylon. Nevertheless, our outlook continues to project substantial improvement from fiscal 2019 for operating income, net income, and Adjusted EBITDA.”

 

Second Quarter Fiscal 2020 Earnings Conference Call

 

The Company will provide additional commentary regarding its second quarter fiscal 2020 results and other developments during its earnings conference call on January 29, 2020, 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 18

Unifi Announces Second Quarter Fiscal 2020 Results

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billion plastic bottles into recycled fiber for new apparel, footwear, home goods and other consumer products. The Company's proprietary PROFIBER™ technologies offer increased performance, comfort and style advantages, enabling customers to develop products that perform, look and feel better. 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.

Contact information:

Alpha IR Group

312-445-2870

UFI@alpha-ir.com

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

Unifi Announces Second Quarter Fiscal 2020 Results

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

 

 

  

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

December 29, 2019

 

 

December 30, 2018

 

 

December 29, 2019

 

 

December 30, 2018

 

Net sales

 

$

169,511

 

 

$

167,711

 

 

$

349,460

 

 

$

349,322

 

Cost of sales

 

 

153,846

 

 

 

153,555

 

 

 

316,352

 

 

 

315,147

 

Gross profit

 

 

15,665

 

 

 

14,156

 

 

 

33,108

 

 

 

34,175

 

Selling, general and administrative

  expenses

 

 

12,508

 

 

 

14,822

 

 

 

23,488

 

 

 

29,233

 

(Benefit) provision for bad debts

 

 

(258

)

 

 

32

 

 

 

(249

)

 

 

163

 

Other operating expense (income), net

 

 

854

 

 

 

99

 

 

 

962

 

 

 

(141

)

Operating income (loss)

 

 

2,561

 

 

 

(797

)

 

 

8,907

 

 

 

4,920

 

Interest income

 

 

(212

)

 

 

(152

)

 

 

(422

)

 

 

(299

)

Interest expense

 

 

1,101

 

 

 

1,355

 

 

 

2,358

 

 

 

2,822

 

Loss on extinguishment of debt

 

 

 

 

 

131

 

 

 

 

 

 

131

 

Equity in loss (earnings) of unconsolidated

  affiliates

 

 

756

 

 

 

(1,014

)

 

 

1,622

 

 

 

(1,253

)

Income (loss) before income taxes

 

 

916

 

 

 

(1,117

)

 

 

5,349

 

 

 

3,519

 

Provision (benefit) for income taxes

 

 

507

 

 

 

(2,288

)

 

 

1,228

 

 

 

536

 

Net income

 

$

409

 

 

$

1,171

 

 

$

4,121

 

 

$

2,983

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

Basic

 

$

0.02

 

 

$

0.06

 

 

$

0.22

 

 

$

0.16

 

Diluted

 

$

0.02

 

 

$

0.06

 

 

$

0.22

 

 

$

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

Basic

 

 

18,499

 

 

 

18,382

 

 

 

18,490

 

 

 

18,374

 

Diluted

 

 

18,772

 

 

 

18,705

 

 

 

18,745

 

 

 

18,701

 

Unifi Announces Second Quarter Fiscal 2020 Results

5

 

 


 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

  

 

December 29, 2019

 

 

June 30, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

37,210

 

 

$

22,228

 

Receivables, net

 

 

78,132

 

 

 

88,884

 

Inventories

 

 

133,893

 

 

 

133,781

 

Income taxes receivable

 

 

4,595

 

 

 

4,373

 

Other current assets

 

 

18,311

 

 

 

16,356

 

Total current assets

 

 

272,141

 

 

 

265,622

 

Property, plant and equipment, net

 

 

209,250

 

 

 

206,787

 

Operating lease assets

 

 

6,606

 

 

 

 

Deferred income taxes

 

 

2,529

 

 

 

2,581

 

Investments in unconsolidated affiliates

 

 

102,261

 

 

 

114,320

 

Other non-current assets

 

 

2,420

 

 

 

2,841

 

Total assets

 

$

595,207

 

 

$

592,151

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

36,055

 

 

$

41,796

 

Accrued expenses

 

 

15,801

 

 

 

16,849

 

Income taxes payable

 

 

571

 

 

 

569

 

Current operating lease liabilities

 

 

1,734

 

 

 

 

Current portion of long-term debt

 

 

14,760

 

 

 

15,519

 

Total current liabilities

 

 

68,921

 

 

 

74,733

 

Long-term debt

 

 

113,738

 

 

 

111,541

 

Non-current operating lease liabilities

 

 

4,980

 

 

 

 

Other long-term liabilities

 

 

6,122

 

 

 

6,185

 

Deferred income taxes

 

 

5,967

 

 

 

6,847

 

Total liabilities

 

 

199,728

 

 

 

199,306

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

1,851

 

 

 

1,846

 

Capital in excess of par value

 

 

61,187

 

 

 

59,560

 

Retained earnings

 

 

378,789

 

 

 

374,668

 

Accumulated other comprehensive loss

 

 

(46,348

)

 

 

(43,229

)

Total shareholders’ equity

 

 

395,479

 

 

 

392,845

 

Total liabilities and shareholders’ equity

 

$

595,207

 

 

$

592,151

 


Unifi Announces Second Quarter Fiscal 2020 Results

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

For the Six Months Ended

 

 

 

December 29, 2019

 

 

December 30, 2018

 

Cash and cash equivalents at beginning of period

 

$

22,228

 

 

$

44,890

 

Operating activities:

 

 

 

 

 

 

 

 

Net income

 

 

4,121

 

 

 

2,983

 

Adjustments to reconcile net income to net cash

   provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Equity in loss (earnings) of unconsolidated affiliates

 

 

1,622

 

 

 

(1,253

)

Distributions received from unconsolidated affiliates

 

 

10,437

 

 

 

630

 

Depreciation and amortization expense

 

 

11,610

 

 

 

11,652

 

Non-cash compensation expense

 

 

1,837

 

 

 

3,039

 

Deferred income taxes

 

 

(878

)

 

 

(332

)

Other, net

 

 

(64

)

 

 

(269

)

Inventories

 

 

(1,330

)

 

 

(17,139

)

Other changes in assets and liabilities

 

 

1,280

 

 

 

(3,286

)

Net cash provided by (used in) operating activities

 

 

28,635

 

 

 

(3,975

)

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(8,335

)

 

 

(12,342

)

Other, net

 

 

60

 

 

 

(20

)

Net cash used in investing activities

 

 

(8,275

)

 

 

(12,362

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

41,100

 

 

 

73,500

 

Payments on long-term debt

 

 

(46,085

)

 

 

(73,683

)

Payments of debt financing fees

 

 

 

 

 

(665

)

Other, net

 

 

(70

)

 

 

(446

)

Net cash used in financing activities

 

 

(5,055

)

 

 

(1,294

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(323

)

 

 

(606

)

Net increase (decrease) in cash and cash equivalents

 

 

14,982

 

 

 

(18,237

)

Cash and cash equivalents at end of period

 

$

37,210

 

 

$

26,653

 

 

Unifi Announces Second Quarter Fiscal 2020 Results

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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 29, 2019

 

 

December 30, 2018

 

 

December 29, 2019

 

 

December 30, 2018

 

Polyester

 

$

82,750

 

 

$

85,789

 

 

$

171,445

 

 

$

185,920

 

Nylon

 

 

17,084

 

 

 

22,647

 

 

 

37,286

 

 

 

50,596

 

Brazil

 

 

20,862

 

 

 

24,234

 

 

 

45,034

 

 

 

51,147

 

Asia

 

 

47,918

 

 

 

34,003

 

 

 

93,875

 

 

 

59,443

 

All Other

 

 

897

 

 

 

1,038

 

 

 

1,820

 

 

 

2,216

 

Consolidated

 

$

169,511

 

 

$

167,711

 

 

$

349,460

 

 

$

349,322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

December 29, 2019

 

 

December 30, 2018

 

 

December 29, 2019

 

 

December 30, 2018

 

Polyester

 

$

6,660

 

 

$

3,312

 

 

$

14,455

 

 

$

11,113

 

Nylon

 

 

46

 

 

 

2,032

 

 

 

1,224

 

 

 

4,176

 

Brazil

 

 

3,430

 

 

 

4,409

 

 

 

7,589

 

 

 

10,827

 

Asia

 

 

5,517

 

 

 

4,324

 

 

 

9,799

 

 

 

7,856

 

All Other

 

 

12

 

 

 

79

 

 

 

41

 

 

 

203

 

Consolidated

 

$

15,665

 

 

$

14,156

 

 

$

33,108

 

 

$

34,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Unifi Announces Second Quarter Fiscal 2020 Results

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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 Adjusted EBITDA are as follows:

 

  

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

December 29, 2019

 

 

December 30, 2018

 

 

December 29, 2019

 

 

December 30, 2018

 

Net income

 

$

409

 

 

$

1,171

 

 

$

4,121

 

 

$

2,983

 

Interest expense, net

 

 

889

 

 

 

1,203

 

 

 

1,936

 

 

 

2,523

 

Provision (benefit) for income taxes

 

 

507

 

 

 

(2,288

)

 

 

1,228

 

 

 

536

 

Depreciation and amortization expense (1)

 

 

5,863

 

 

 

5,532

 

 

 

11,485

 

 

 

11,480

 

EBITDA

 

 

7,668

 

 

 

5,618

 

 

 

18,770

 

 

 

17,522

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in loss (earnings) of PAL

 

 

837

 

 

 

(762

)

 

 

2,012

 

 

 

(745

)

EBITDA excluding PAL

 

 

8,505

 

 

 

4,856

 

 

 

20,782

 

 

 

16,777

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Facility shutdown costs (2)

 

 

383

 

 

 

 

 

 

383

 

 

 

 

Adjusted EBITDA

 

$

8,888

 

 

$

4,856

 

 

$

21,165

 

 

$

16,777

 

 

 

(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)

In the second quarter of fiscal 2020, UNIFI commenced a shutdown plan for its operations in Sri Lanka. The adjustment primarily reflects accrued severance and exit costs.

 

 

Net Debt

 

Reconciliations of Net Debt are as follows:

 

 

 

December 29, 2019

 

 

June 30, 2019

 

Long-term debt

 

$

113,738

 

 

$

111,541

 

Current portion of long-term debt

 

 

14,760

 

 

 

15,519

 

Unamortized debt issuance costs

 

 

834

 

 

 

958

 

Debt principal

 

 

129,332

 

 

 

128,018

 

Less: cash and cash equivalents

 

 

37,210

 

 

 

22,228

 

Net Debt

 

$

92,122

 

 

$

105,790

 

 

 


Unifi Announces Second Quarter Fiscal 2020 Results

9

 

 


 

 

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 (earnings) 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 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. Equity in loss (earnings) of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance.

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 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.


Unifi Announces Second Quarter Fiscal 2020 Results

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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 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 environmental, health and safety regulations; the impact of tax laws, the judicial or administrative interpretations of tax laws and/or changes in such laws or interpretations; the operating performance of joint ventures and other equity method 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 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.

-end-

 

Unifi Announces Second Quarter Fiscal 2020 Results

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ufi-ex992_30.pptx.htm

Slide 1

Second Quarter Ended December 29, 2019 (Unaudited Results) January 29, 2020 Conference Call Presentation Exhibit 99.2

Slide 2

  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 the Company 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 the Company competes, including economic and political factors over which the Company has no control; changes in consumer spending, customer preferences, fashion trends and end uses for products; the financial condition of the Company’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 success of the Company’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 environmental, health and safety regulations; the impact of tax laws, the judicial or administrative interpretations of tax laws and/or changes in such laws or interpretations; the operating performance of joint ventures and other equity method 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 laws. 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. Non-GAAP Financial Measures Certain non-GAAP financial measures 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 Working Capital and Net Debt (collectively, 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 Parkdale America, LLC (“PAL”) and, from time to time, certain other adjustments necessary to understand and compare the underlying results of the Company. • Adjusted Working Capital represents receivables plus inventory and other current assets, less accounts payable and accrued expenses, which is an indicator of the Company’s production efficiency and ability to manage its inventory and receivables. • 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. The Company may, from time to time, modify the amounts used to determine its non-GAAP financial measures. We believe that these non-GAAP financial measures better reflect the Company’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. Equity in loss of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance. Management uses Adjusted Working Capital as an indicator of the Company’s production efficiency and ability to manage inventory and receivables. In the first quarter of fiscal 2019, in connection with changes to balance sheet presentation required by the adoption of new revenue recognition guidance, the Company updated the definition of Adjusted Working Capital to include Other current assets for current and historical calculations of the non-GAAP financial measure. Other current assets includes amounts capitalized for future conversion into inventory or receivables (e.g., vendor deposits and contract assets), and management believes that its inclusion in the definition of Adjusted Working Capital improves the understanding of the Company’s capital that is supporting production and sales activity. 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 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.

Slide 3

NET INCOME OVERVIEW (dollars in millions) 1 2 3 4 5 6 7 When comparing Net income from Q2 FY19 to Q2 FY20, items (1) through (5) detail pre-tax changes and items (6) and (7) relate to changes in provision (benefit) for income taxes: 1 Approximates the increase in gross profit. 2 Approximates the decrease in selling, general and administrative expenses. 3 Approximates the change in other operating expense and foreign currency translation, excluding impacts from (benefit) provision for bad debts, interest income and interest expense. 4 Approximates the change in (benefit) provision for bad debts, interest income and interest expense. 5 Approximates the change in the Company’s share of earnings from unconsolidated affiliates, for which approximately $1.6 million is attributable to Parkdale America, LLC. 6 Approximates the prior period favorable impact of tax credits recorded in Q2 FY19 related to prior fiscal years. 7 Approximates the impact on the provision (benefit) for income taxes of a comparable increase in income before income taxes of approximately $2.0 million. Note: This representation is not intended to depict amounts calculated under GAAP.

Slide 4

NET SALES OVERVIEW (dollars in thousands) Three-Month Comparison (Q2 FY19 vs. Q2 FY20) 1 Approximates the impact of foreign currency translation. Note: The “Prior Period” ended on December 30, 2018. The “Current Period” ended on December 29, 2019. The Prior Period and the Current Period each contained 13 fiscal weeks. The Polyester Segment includes operations in the U.S. and El Salvador. The Nylon Segment includes operations in the U.S. and Colombia. The Brazil Segment includes operations in Brazil. The Asia Segment includes operations in Asia. nm – Not meaningful * * * *

Slide 5

GROSS PROFIT OVERVIEW (dollars in thousands) Three-Month Comparison (Q2 FY19 vs. Q2 FY20) 1 Gross profit for the Polyester and Asia Segments reflect the Company’s update to segment profitability completed in the fourth quarter of fiscal 2019. Prior period amounts have been revised accordingly. Note: The “Prior Period” ended on December 30, 2018. The “Current Period” ended on December 29, 2019. The Prior Period and the Current Period each had 13 fiscal weeks. The Polyester Segment includes operations in the U.S. and El Salvador. The Nylon Segment includes operations in the U.S. and Colombia. The Brazil Segment includes operations in Brazil. The Asia Segment includes operations in Asia. nm – Not meaningful * * * *

Slide 6

EQUITY AFFILIATES OVERVIEW (dollars in thousands)

Slide 7

DEBT & CASH OVERVIEW (dollars in thousands) Net Debt 1 Represents a non-GAAP financial measure.

Slide 8

The Company has revised fiscal 2020 guidance as follows: Metric Revised Guidance Sales volumes Between 10% and 13% growth from fiscal 2019 levels Net sales Between $700.0 million and $715.0 million Operating income Between $20.0 million and $23.0 million Adjusted EBITDA 1 Between $44.0 million and $47.0 million Capital expenditures Approximately $23.0 million Effective tax rate Not to exceed 23% 1 Represents a non-GAAP financial measure. FISCAL 2020 OUTLOOK

Slide 9

APPENDIX

Slide 10

NET SALES OVERVIEW (dollars in thousands) Six-Month Comparison (YTD FY19 vs. YTD FY20) 1 Approximates the impact of foreign currency translation. Note: The “Prior Period” ended on December 30, 2018. The “Current Period” ended on December 29, 2019. The Prior Period had 27 fiscal weeks and the Current Period had 26 fiscal weeks. The Polyester Segment includes operations in the U.S. and El Salvador. The Nylon Segment includes operations in the U.S. and Colombia. The Brazil Segment includes operations in Brazil. The Asia Segment includes operations in Asia. nm – Not meaningful * * * *

Slide 11

GROSS PROFIT OVERVIEW (dollars in thousands) Six-Month Comparison (YTD FY19 vs. YTD FY20) 1 Gross profit for the Polyester and Asia Segments reflect the Company’s update to segment profitability completed in the fourth quarter of fiscal 2019. Prior period amounts have been revised accordingly. Note: The “Prior Period” ended on December 30, 2018. The “Current Period” ended on December 29, 2019. The Prior Period had 27 fiscal weeks and the Current Period had 26 fiscal weeks. The Polyester Segment includes operations in the U.S. and El Salvador. The Nylon Segment includes operations in the U.S. and Colombia. The Brazil Segment includes operations in Brazil. The Asia Segment includes operations in Asia. nm – Not meaningful * * * *

Slide 12

Thank You!