SEC Filing | Unifi, Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 2, 2023



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

For the transition period from to

Commission File Number: 1-10542

UNIFI, INC.

(Exact name of registrant as specified in its charter)


New York		11-2165495
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

7201 West Friendly Avenue
Greensboro, North Carolina		27410
(Address of principal executive offices)		(Zip Code)

(336) 294-4410

(Registrant’s telephone number, including area code)

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

 
Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.10 per share

UFI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 8, 2023, there were 18,056,208 shares of the registrant’s common stock, par value $0.10 per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that relate to our plans, objectives, estimates, and goals. Statements expressing expectations regarding our future, or projections or estimates relating to products, sales, revenues, expenditures, costs, strategies, initiatives, or earnings, are typical of such statements and are made under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s beliefs, assumptions and expectations about our future performance, considering the information currently available to management. The words “believe,” “may,” “could,” “will,” “should,” “would,” “anticipate,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek,” “strive,” and words of similar import, or the negative of such words, identify or signal the presence of forward-looking statements. These statements are not statements of historical fact; 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 the Company’s 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 the Company’s facilities;

•

the disruption of operations, global demand, or financial performance as a result of catastrophic or extraordinary events, including, but not limited to, epidemics or pandemics such as strains of coronavirus (such as “COVID-19”);

•

the success of the Company’s strategic business initiatives;

•

the volatility of financial and credit markets, including the impacts of counterparty risk (e.g. deposit concentration and recent depositor sentiment and activity);

•

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 the Company’s brands;

•

employee relations;

•

the ability to attract, retain, and motivate key employees;

•

the impact of climate change or environmental, health, and safety regulations;

•

the impact of tax laws, the judicial or administrative interpretations of tax laws, and/or changes in such laws or interpretations; and

•

other factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended July 3, 2022 or in the Company’s other periodic reports and information filed with the Securities and Exchange Commission (“SEC”).

All such factors are difficult to predict, contain uncertainties that may materially affect actual results, and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, except as may be required by federal securities laws.

In light of all the above considerations, we reiterate that forward-looking statements are not guarantees of future performance, and we caution you not to rely on them as such.

UNIFI, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS AND NINE MONTHS ENDED APRIL 2, 2023

TABLE OF CONTENTS


PART I—FINANCIAL INFORMATION
		Page

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of April 2, 2023 and July 3, 2022	1

	Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended April 2, 2023 and March 27, 2022	2

	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three Months and Nine Months Ended April 2, 2023 and March 27, 2022	3

	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months and Nine Months Ended April 2, 2023 and March 27, 2022	4

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended April 2, 2023 and March 27, 2022	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	30

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6.	Exhibits	31

	Signatures	32

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)


	April 2, 2023			July 3, 2022
ASSETS
Cash and cash equivalents	$	49,706		$	53,290
Receivables, net		87,968			106,565
Inventories		143,178			173,295
Income taxes receivable		1,777			160
Other current assets		15,093			18,956
Total current assets		297,722			352,266
Property, plant and equipment, net		229,195			216,338
Operating lease assets		8,327			8,829
Deferred income taxes		3,172			2,497
Other non-current assets		12,986			8,788
Total assets	$	551,402		$	588,718

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	47,702		$	73,544
Income taxes payable		1,875			1,526
Current operating lease liabilities		1,874			2,190
Current portion of long-term debt		11,544			11,726
Other current liabilities		13,494			19,806
Total current liabilities		76,489			108,792
Long-term debt		124,162			102,309
Non-current operating lease liabilities		6,543			6,736
Deferred income taxes		4,389			4,983
Other long-term liabilities		4,911			4,449
Total liabilities		216,494			227,269

Commitments and contingencies

Common stock, $0.10 par value (500,000,000 shares authorized; 18,054,498 and 17,979,362 shares issued and outstanding as of April 2, 2023 and July 3, 2022, respectively)		1,805			1,798
Capital in excess of par value		68,562			66,120
Retained earnings		322,081			353,136
Accumulated other comprehensive loss		(57,540	)		(59,605	)
Total shareholders’ equity		334,908			361,449
Total liabilities and shareholders’ equity	$	551,402		$	588,718

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)


	For the Three Months Ended						For the Nine Months Ended
	April 2, 2023			March 27, 2022			April 2, 2023			March 27, 2022
Net sales	$	156,738		$	200,780		$	472,469		$	598,182
Cost of sales		147,085			181,636			464,253			536,051
Gross profit		9,653			19,144			8,216			62,131
Selling, general and administrative expenses		12,063			14,389			35,584			39,025
Benefit for bad debts		(56	)		(169	)		(38	)		(489	)
Other operating expense (income), net		324			(831	)		(139	)		(2	)
Operating (loss) income		(2,678	)		5,755			(27,191	)		23,597
Interest income		(554	)		(492	)		(1,615	)		(944	)
Interest expense		2,073			709			5,209			2,140
Equity in earnings of unconsolidated affiliates		(158	)		(41	)		(539	)		(385	)
Recovery of non-income taxes, net		—			815			—			815
(Loss) income before income taxes		(4,039	)		4,764			(30,246	)		21,971
Provision for income taxes		1,145			2,698			809			10,296
Net (loss) income	$	(5,184	)	$	2,066		$	(31,055	)	$	11,675

Net (loss) income per common share:
Basic	$	(0.29	)	$	0.11		$	(1.72	)	$	0.63
Diluted	$	(0.29	)	$	0.11		$	(1.72	)	$	0.62

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

(In thousands)


	For the Three Months Ended					For the Nine Months Ended
	April 2, 2023			March 27, 2022		April 2, 2023			March 27, 2022
Net (loss) income	$	(5,184	)	$	2,066	$	(31,055	)	$	11,675
Other comprehensive income:
Foreign currency translation adjustments		4,526			13,921		2,065			5,833
Changes in interest rate swaps, net of tax of nil, $105, nil and $248, respectively		—			340		—			803
Other comprehensive income, net		4,526			14,261		2,065			6,636
Comprehensive (loss) income	$	(658	)	$	16,327	$	(28,990	)	$	18,311

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(In thousands)


	Shares		Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at January 1, 2023		18,049	$	1,805		$	67,875		$	327,265		$	(62,066	)	$	334,879
Options exercised		4		1			33			—			—			34
Conversion of equity units		1		(1	)		1			—			—			—
Stock-based compensation		—		—			656			—			—			656
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		—		—			(3	)		—			—			(3	)
Other comprehensive income, net of tax		—		—			—			—			4,526			4,526
Net loss		—		—			—			(5,184	)		—			(5,184	)
Balance at April 2, 2023		18,054	$	1,805		$	68,562		$	322,081		$	(57,540	)	$	334,908


	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at July 3, 2022		17,979		$	1,798		$	66,120		$	353,136		$	(59,605	)	$	361,449
Options exercised		7			1			52			—			—			53
Conversion of equity units		63			6			(6	)		—			—			—
Stock-based compensation		12			1			2,464			—			—			2,465
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(7	)		(1	)		(68	)		—			—			(69	)
Other comprehensive income, net of tax		—			—			—			—			2,065			2,065
Net loss		—			—			—			(31,055	)		—			(31,055	)
Balance at April 2, 2023		18,054		$	1,805		$	68,562		$	322,081		$	(57,540	)	$	334,908


	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at December 26, 2021		18,498		$	1,850		$	67,006		$	353,393		$	(61,057	)	$	361,192
Options exercised		—			—			—			—			—			—
Conversion of equity units		4			—			—			—			—			—
Stock-based compensation		—			—			721			—			—			721
Common stock repurchased and retired under publicly announced program		(50	)		(5	)		(181	)		(766	)		—			(952	)
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(1	)		—			(23	)		—			—			(23	)
Other comprehensive income, net of tax		—			—			—			—			14,261			14,261
Net income		—			—			—			2,066			—			2,066
Balance at March 27, 2022		18,451		$	1,845		$	67,523		$	354,693		$	(46,796	)	$	377,265


	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at June 27, 2021		18,490		$	1,849		$	65,205		$	344,797		$	(53,432	)	$	358,419
Options exercised		9			1			(1	)		—			—			—
Conversion of equity units		68			6			(6	)		—			—			—
Stock-based compensation		5			1			2,827			—			—			2,828
Common stock repurchased and retired under publicly announced program		(102	)		(10	)		(367	)		(1,779	)		—			(2,156	)
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(19	)		(2	)		(135	)		—			—			(137	)
Other comprehensive income, net of tax		—			—			—			—			6,636	</