Unifi Announces First Quarter Fiscal 2019 Results
First Quarter Fiscal 2019 Highlights
- Net sales increased
$17.4 million , or 10.6%, to$181.6 million , compared to$164.2 million for the first quarter of fiscal 2018, and increased$24.0 million , or 14.6%, when excluding the impact of foreign currency translation. - Revenues from premium value-added ("PVA") products grew 10.1% compared to the first quarter of fiscal 2018, or 14.4% when excluding the impact of foreign currency translation, and represented approximately 43% of consolidated net sales.
- Gross margin was 11.0%, compared to 14.2% for the first quarter of fiscal 2018, impacted by higher costs, including raw materials, and a less favorable sales mix.
- Operating income was
$5.7 million , compared to$10.2 million for the first quarter of fiscal 2018, impacted by lower gross profit and incremental selling, general and administrative ("SG&A") expenses. - Diluted EPS was
$0.10 , compared to$0.48 for the first quarter of fiscal 2018, impacted by a loss fromParkdale America, LLC ("PAL") and a significantly higher effective tax rate. - High end of the range of expectations for fiscal 2019 profitability has been reduced to reflect cost pressures, and fiscal 2019 effective tax rate outlook is updated accordingly.
"We continued to execute on our strategy of driving sales with our PVA portfolio as our team delivered its sixth consecutive quarter of sales growth," said
First Quarter Fiscal 2019 Operational Review
The first quarter of fiscal 2019 consisted of 14 weeks, compared to 13 weeks in the first quarter of fiscal 2018. Net sales in the first quarter of fiscal 2019 increased
Gross margin was 11.0% for the first quarter of fiscal 2019, compared to 14.2% for the first quarter of fiscal 2018. The decrease in gross margin was driven primarily by higher raw material costs, a less favorable sales mix in a highly competitive domestic environment, and integration costs associated with the recent dyed business acquisition. Raw material-related pricing adjustments continued to take hold in the first quarter of fiscal 2019, but these adjustments were not sufficient to overcome the additional raw material cost increases experienced in the quarter.
Operating income declined to
Net income was
Adjusted EBITDA was
Net debt (debt principal less cash and cash equivalents) was
Fiscal 2019 Outlook
Fiscal 2019 contains 53 fiscal weeks, with the additional week included in the first fiscal quarter. The Company's second quarter gross profit will be unfavorably impacted by a surge in polyester raw material costs in September, which was driven by higher global demand and tighter supply for polyester feedstocks, and a seasonal shut-down period in
- Mid-single-digit percentage growth for net sales;
- Mid-single-digit percentage growth for operating income and Adjusted EBITDA, assuming an improving price to raw material cost relationship;
- Capital expenditures of approximately
$25.0 million ; and - An effective tax rate in the mid-40% range, subject to further adjustment in light of pending interpretations of the
December 2017 federal tax reform legislation.
"Raw material costs have been rising over the last four quarters, and there was a dramatic jump in polyester costs in September that will place even more pressure on our second quarter profitability. While this rise is clearly a headwind, we anticipate a better relationship between pricing and cost in the second half of the year. This would benefit our third and fourth quarters, returning our profitability to the lower end of our original expectations," said
First Quarter Fiscal 2019 Earnings Conference Call
The Company will provide additional commentary regarding its first quarter fiscal 2019 results and other developments during its earnings conference call on
About
Financial Statements, Business Segment Information and Reconciliations of Reported Results to Adjusted Results to Follow
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
September 30, 2018 |
June 24, 2018 |
|||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ |
42,195 |
$ |
44,890 |
||||
Receivables, net |
87,082 |
86,273 |
||||||
Inventories |
131,961 |
126,311 |
||||||
Other current assets |
21,180 |
16,820 |
||||||
Total current assets |
282,418 |
274,294 |
||||||
Property, plant and equipment, net |
203,820 |
205,516 |
||||||
Investments in unconsolidated affiliates |
112,726 |
112,639 |
||||||
Other non-current assets |
9,154 |
9,358 |
||||||
Total assets |
$ |
608,118 |
$ |
601,807 |
||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
Accounts payable and other current liabilities |
$ |
63,489 |
$ |
68,007 |
||||
Current portion of long-term debt |
16,814 |
16,996 |
||||||
Total current liabilities |
80,303 |
85,003 |
||||||
Long-term debt |
123,633 |
113,553 |
||||||
Other long-term liabilities |
14,069 |
13,470 |
||||||
Total liabilities |
218,005 |
212,026 |
||||||
Total shareholders' equity |
390,113 |
389,781 |
||||||
Total liabilities and shareholders' equity |
$ |
608,118 |
$ |
601,807 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||
For the Three Months Ended |
||||||||
September 30, 2018 |
September 24, 2017 |
|||||||
Net sales |
$ |
181,611 |
$ |
164,242 |
||||
Cost of sales |
161,592 |
140,950 |
||||||
Gross profit |
20,019 |
23,292 |
||||||
Selling, general and administrative expenses |
14,411 |
12,863 |
||||||
Provision (benefit) for bad debts |
131 |
(59) |
||||||
Other operating (income) expense, net |
(240) |
315 |
||||||
Operating income |
5,717 |
10,173 |
||||||
Interest income |
(147) |
(81) |
||||||
Interest expense |
1,467 |
1,185 |
||||||
Equity in earnings of unconsolidated affiliates |
(239) |
(3,087) |
||||||
Income before income taxes |
4,636 |
12,156 |
||||||
Provision for income taxes |
2,824 |
3,196 |
||||||
Net income |
$ |
1,812 |
$ |
8,960 |
||||
Net income per common share: |
||||||||
Basic |
$ |
0.10 |
$ |
0.49 |
||||
Diluted |
$ |
0.10 |
$ |
0.48 |
||||
Weighted average common shares outstanding: |
||||||||
Basic |
18,368 |
18,243 |
||||||
Diluted |
18,703 |
18,571 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
For the Three Months Ended |
||||||||
September 30, 2018 |
September 24, 2017 |
|||||||
Cash and cash equivalents at beginning of year |
$ |
44,890 |
$ |
35,425 |
||||
Operating activities: |
||||||||
Net income |
1,812 |
8,960 |
||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
||||||||
Equity in earnings of unconsolidated affiliates |
(239) |
(3,087) |
||||||
Distributions received from unconsolidated affiliates |
504 |
7,178 |
||||||
Depreciation and amortization expense |
6,036 |
5,510 |
||||||
Non-cash compensation expense |
998 |
1,151 |
||||||
Deferred income taxes |
909 |
918 |
||||||
Other, net |
(201) |
(23) |
||||||
Inventories |
(15,079) |
(6,021) |
||||||
Income taxes |
6,591 |
(351) |
||||||
Other changes in assets and liabilities |
(6,289) |
1,525 |
||||||
Net cash (used in) provided by operating activities |
(4,958) |
15,760 |
||||||
Investing activities: |
||||||||
Capital expenditures |
(6,384) |
(5,148) |
||||||
Other, net |
15 |
57 |
||||||
Net cash used in investing activities |
(6,369) |
(5,091) |
||||||
Financing activities: |
||||||||
Proceeds from long-term debt |
34,000 |
22,200 |
||||||
Payments on long-term debt |
(24,190) |
(26,185) |
||||||
Other, net |
(402) |
(44) |
||||||
Net cash provided by (used in) financing activities |
9,408 |
(4,029) |
||||||
Effect of exchange rate changes on cash and cash equivalents |
(776) |
326 |
||||||
Net (decrease) increase in cash and cash equivalents |
(2,695) |
6,966 |
||||||
Cash and cash equivalents at end of period |
$ |
42,195 |
$ |
42,391 |
BUSINESS SEGMENT INFORMATION |
||||||||||||||||
Net sales details for each reportable segment of the Company are as follows: |
||||||||||||||||
For the Three Months Ended |
||||||||||||||||
September 30, 2018 |
September 24, 2017 |
Change ($) |
Change (%) |
|||||||||||||
Polyester |
$ |
100,131 |
$ |
87,738 |
$ |
12,393 |
14.1 |
% |
||||||||
Nylon |
27,949 |
26,827 |
1,122 |
4.2 |
% |
|||||||||||
International |
52,353 |
48,659 |
3,694 |
7.6 |
% |
|||||||||||
All Other |
1,178 |
1,018 |
160 |
15.7 |
% |
|||||||||||
Consolidated |
$ |
181,611 |
$ |
164,242 |
17,369 |
10.6 |
% |
|||||||||
Gross profit details for each reportable segment of the Company are as follows: |
||||||||||||||||
For the Three Months Ended |
||||||||||||||||
September 30, 2018 |
September 24, 2017 |
Change ($) |
Change (%) |
|||||||||||||
Polyester |
$ |
6,728 |
$ |
8,913 |
$ |
(2,185) |
-24.5 |
% |
||||||||
Nylon |
2,144 |
3,314 |
(1,170) |
-35.3 |
% |
|||||||||||
International |
11,023 |
10,998 |
25 |
0.2 |
% |
|||||||||||
All Other |
124 |
67 |
57 |
85.1 |
% |
|||||||||||
Consolidated |
$ |
20,019 |
$ |
23,292 |
(3,273) |
-14.1 |
% |
|||||||||
RECONCILIATIONS OF REPORTED RESULTS TO ADJUSTED RESULTS |
|||||||||
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 |
|||||||||
September 30, 2018 |
September 24, 2017 |
||||||||
Net income |
$ |
1,812 |
$ |
8,960 |
|||||
Interest expense, net |
1,320 |
1,104 |
|||||||
Provision for income taxes |
2,824 |
3,196 |
|||||||
Depreciation and amortization expense |
5,948 |
5,417 |
|||||||
EBITDA |
11,904 |
18,677 |
|||||||
Equity in loss (earnings) of PAL |
17 |
(2,854) |
|||||||
EBITDA excluding PAL |
11,921 |
15,823 |
|||||||
Other adjustments (1) |
— |
— |
|||||||
Adjusted EBITDA |
$ |
11,921 |
$ |
15,823 |
|||||
(1) For the periods presented, there were no other adjustments necessary to reconcile Net income to Adjusted EBITDA. However, such adjustments may be presented in future periods when applicable. |
|||||||||
Note: Amounts presented in the reconciliations above may not be consistent with amounts included in the Company's condensed consolidated financial statements. Any such inconsistencies are insignificant and are integral to the reconciliations. |
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") and Adjusted EBITDA (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 .
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. When applicable, management's discussion and analysis includes specific consideration for items that comprise the reconciliations of its non-GAAP financial measures.
We believe that these non-GAAP financial measures better reflect
Management uses Adjusted EBITDA (i) as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis, as it removes the impact of (a) items directly related to our asset base (primarily depreciation and amortization) and (b) items that we would not expect to occur as a part of our normal business on a regular basis; (ii) for planning purposes, including the preparation of our annual operating budget; (iii) as a valuation measure for evaluating our operating performance and our capacity to incur and service debt, fund capital expenditures and expand our business; and (iv) as one measure in determining the value of other acquisitions and dispositions. Adjusted EBITDA is a key performance metric utilized in the determination of variable compensation. We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because it serves as a high-level proxy for cash generated from operations and is relevant to our fixed charge coverage ratio. Equity in loss (earnings) of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance.
In evaluating non-GAAP financial measures, investors should be aware that, in the future, we may incur expenses similar to the adjustments included herein. Our presentation of non-GAAP financial measures should not be construed as indicating that our future results will be unaffected by unusual or non-recurring items. Each of our non-GAAP financial measures has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results or liquidity measures as reported under GAAP. Some of these limitations are (i) it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; (ii) it does not reflect the impact of earnings or charges resulting from matters we consider not indicative of our ongoing operations; (iii) it does not reflect changes in, or cash requirements for, our working capital needs; (iv) it does not reflect the cash requirements necessary to make payments on our debt; (v) it does not reflect our future requirements for capital expenditures or contractual commitments; (vi) it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and (vii) other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, these non-GAAP financial measures should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations, including those under our outstanding debt obligations. You should compensate for these limitations by relying primarily on our GAAP results and using these measures only as supplemental information.
Cautionary Statement on Forward-Looking Statements
Certain statements included herein contain forward-looking statements within the meaning of federal securities laws about the financial condition and results of operations of
Factors that could contribute to such differences include, but are not limited to: the competitive nature of the textile industry and the impact of global competition; changes in the trade regulatory environment and governmental policies and legislation; the availability, sourcing and pricing of raw materials; general domestic and international economic and industry conditions in markets where
All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on Unifi. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, except as may be required by federal securities laws. The above and other risks and uncertainties are described in
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SOURCE
Alpha IR Group, 312-445-2870, UFI@alpha-ir.com