Unifi Inc 10-Q for FY2022 Q1
Unifi Inc (UFI)
About this 10-Q
Unifi Inc filed this 10-Q on November 3, 2021, covering the quarter ended September 26, 2021 (FY2022 Q1).
Headline figures
Quarter ended September 26, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $195.99M
- up 38.5% from $141.51M a year earlier
- Net income
- $8.68M
- up 152.9% from net income of $3.43M a year earlier
- Diluted EPS
- $0.46
- up 155.6% from $0.18 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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incorporation or organization) |
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Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of October 29, 2021, there were
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; 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:
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the competitive nature of the textile industry and the impact of global competition; |
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changes in the trade regulatory environment and governmental policies and legislation; |
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the availability, sourcing and pricing of raw materials; |
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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; |
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changes in consumer spending, customer preferences, fashion trends and end uses for the Company’s products; |
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the financial condition of the Company’s customers; |
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the loss of a significant customer or brand partner; |
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natural disasters, industrial accidents, power or water shortages, extreme weather conditions and other disruptions at one of the Company’s facilities; |
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the disruption of operations, global demand, or financial performance as a result of catastrophic or extraordinary events, including epidemics or pandemics such as the recent strain of coronavirus (“COVID-19”); |
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the success of the Company’s strategic business initiatives; |
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the volatility of financial and credit markets; |
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the ability to service indebtedness and fund capital expenditures and strategic business initiatives; |
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the availability of and access to credit on reasonable terms; |
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changes in foreign currency exchange, interest and inflation rates; |
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fluctuations in production costs; |
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the ability to protect intellectual property; |
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the strength and reputation of the Company’s brands; |
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employee relations; |
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the ability to attract, retain and motivate key employees; |
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the impact of climate change or environmental, health and safety regulations; |
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the impact of tax laws, the judicial or administrative interpretations of tax laws and/or changes in such laws or interpretations; and |
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other factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2021 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 ENDED SEPTEMBER 26, 2021
TABLE OF CONTENTS
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Item 1. |
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Condensed Consolidated Balance Sheets as of September 26, 2021 and June 27, 2021 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 2. |
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Item 6. |
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PART I—FINANCIAL INFORMATION
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Item 1. |
Financial Statements |
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
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September 26, 2021 |
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June 27, 2021 |
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ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, net |
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Inventories |
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Income taxes receivable |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease assets |
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Deferred income taxes |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Accounts payable |
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$ |
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$ |
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Income taxes payable |
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Current operating lease liabilities |
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Current portion of long-term debt |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Non-current operating lease liabilities |
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Deferred income taxes |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies |
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Common stock, $ shares issued and outstanding as of September 26, 2021 and June 27, 2021, respectively) |
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Capital in excess of par value |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
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For the Three Months Ended |
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September 26, 2021 |
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September 27, 2020 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Benefit for bad debts |
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Other operating expense, net |
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Operating income |
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Interest income |
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Interest expense |
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Equity in earnings of unconsolidated affiliates |
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Income before income taxes |
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Provision (benefit) for income taxes |
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Net income |
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$ |
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$ |
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Net income per common share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
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For the Three Months Ended |
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September 26, 2021 |
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September 27, 2020 |
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Net income |
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$ |
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$ |
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Other comprehensive (loss) income: |
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Foreign currency translation adjustments |
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Changes in interest rate swaps, net of tax of $ |
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Other comprehensive (loss) income, net |
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Comprehensive income |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(In thousands)
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Shares |
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Common Stock |
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Capital in Excess of Par Value |
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Retained Earnings |
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Accumulated Other Comprehensive Loss |
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Total Shareholders’ Equity |
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Balance at June 27, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Options exercised |
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( |
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— |
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— |
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— |
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Conversion of restricted stock units |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions |
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( |
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( |
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— |
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— |
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Other comprehensive loss, net of tax |
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— |
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— |
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— |
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— |
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( |
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( |
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Net income |
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— |
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— |
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— |
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— |
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Balance at September 26, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Shares |
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Common Stock |
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Capital in Excess of Par Value |
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Retained Earnings |
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Accumulated Other Comprehensive Loss |
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Total Shareholders’ Equity |
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Balance at June 28, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Options exercised |
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— |
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— |
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— |
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— |
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— |
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— |
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Conversion of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions |
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( |
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— |
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( |
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— |
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— |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Balance at September 27, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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For the Three Months Ended |
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September 26, 2021 |
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September 27, 2020 |
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Cash and cash equivalents at beginning of period |
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$ |
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$ |
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Operating activities: |
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Net income |
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Adjustments to reconcile net income to net cash (used) provided by operating activities: |
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Equity in earnings of unconsolidated affiliates |
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Depreciation and amortization expense |
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Non-cash compensation expense |
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Deferred income taxes |
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( |
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Other, net |
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( |
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Changes in assets and liabilities: |
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Receivables, net |
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( |
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( |
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Inventories |
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Other current assets |
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Income taxes |
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Accounts payable and other current liabilities |
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Other, net |
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Net cash (used) provided by operating activities |
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Investing activities: |
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Capital expenditures |
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Other, net |
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— |
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Net cash used by investing activities |
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Financing activities: |
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Proceeds from ABL Revolver |
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— |
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— |
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Payments on ABL Revolver |
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— |
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— |
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Payments on ABL Term Loan |
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Proceeds from construction financing |
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— |
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Payments on finance lease obligations |
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( |
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Other, net |
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Net cash used by financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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Net (decrease) increase in cash and cash equivalents |
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( |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
5
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Background
Unifi, Inc., a New York corporation formed in 1969 (together with its subsidiaries, “UNIFI,” the “Company,” “we,” “us” or “our”), is a multinational company that manufactures and sells innovative recycled and synthetic products, made from polyester and nylon, primarily to other yarn manufacturers and knitters and weavers (UNIFI’s direct customers) that produce yarn and/or fabric for the apparel, hosiery, home furnishings, automotive, industrial and other end-use markets (UNIFI’s indirect customers). We refer to these indirect customers as “brand partners.” Polyester products include partially oriented yarn (“POY”), textured, solution and package dyed, twisted, beamed and draw wound yarns, and each is available in virgin or recycled varieties. Recycled solutions, made from both pre-consumer and post-consumer waste, include plastic bottle flake (“Flake”), polyester polymer beads (“Chip”) and staple fiber. Nylon products include virgin or recycled textured, solution dyed and spandex covered yarns.
UNIFI maintains one of the textile industry’s most comprehensive product offerings which include a range of specialized, value-added and commodity solutions, with principal geographic markets in the Americas, Asia and Europe. UNIFI has direct manufacturing operations in
2. Basis of Presentation; Condensed Notes
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) for interim financial information. As contemplated by the instructions of the SEC to Form 10-Q, the following notes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to UNIFI’s year-end audited consolidated financial statements and related notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended June 27, 2021 (the “2021 Form 10-K”).
The financial information included in this report has been prepared by UNIFI, without audit. In the opinion of management, all adjustments, which consist of normal, recurring adjustments, considered necessary for a fair statement of the results for interim periods have been included. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the amounts reported and certain financial statement disclosures. Actual results may vary from these estimates.
All amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.
3. Recent Accounting Pronouncements
Based on UNIFI’s review of Accounting Standards Updates issued since the filing of the 2021 Form 10-K, there have been no newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a material impact on UNIFI’s consolidated financial statements.
4. Revenue Recognition
The following tables present net sales grouped by (i) classification of sales type and (ii) REPREVE® Fiber sales:
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For the Three Months Ended |
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|||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
Third-party manufacturer |
|
$ |
|
|
|
$ |
|
|
|
Service |
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
|
|
|
$ |
|
|
|
|
|
For the Three Months Ended |
|
|||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
REPREVE® Fiber |
|
$ |
|
|
|
$ |
|
|
|
All other products and services |
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
|
|
|
$ |
|
|
Third-Party Manufacturer
Third-party manufacturer revenue is primarily generated through sales to direct customers. Such sales represent satisfaction of UNIFI’s performance obligations required by the associated revenue contracts. Each of UNIFI’s reportable segments derives revenue from sales to third-party manufacturers.
Service Revenue
Service revenue is primarily generated as services are rendered, through fulfillment of toll manufacturing of textile products or transportation services governed by written agreements. Such toll manufacturing and transportation services represent satisfaction of UNIFI’s performance obligations required
6
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
by the associated revenue contracts. The Polyester Segment derives service revenue for toll manufacturing and the All Other category derives service revenue for transportation services.
REPREVE® Fiber
REPREVE® Fiber represents our collection of fiber products on our recycled platform, with or without added technologies.
Beginning in the fourth quarter of fiscal 2021, as a result of its annual review of products meeting the REPREVE® Fiber definition, UNIFI began including certain product sales in the Asia Segment that were previously excluded from the REPREVE® Fiber sales metric. The prior period has been adjusted to reflect such sales and the amount reclassed was not material.
Variable Consideration
For all variable consideration, where appropriate, UNIFI estimates the amount using the expected value method, which takes into consideration historical experience, current contractual requirements, specific known market events and forecasted customer buying and payment patterns. Overall, these reserves reflect UNIFI’s best estimates of the amount of consideration to which the customer is entitled based on the terms of the contracts. Variable consideration has been immaterial to UNIFI’s financial statements for all periods presented.
5. Receivables, Net
Receivables, net consists of the following:
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|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Customer receivables |
|
$ |
|
|
|
$ |
|
|
|
Allowance for uncollectible accounts |
|
|
( |
) |
|
|
( |
) |
|
Reserves for quality claims |
|
|
( |
) |
|
|
( |
) |
|
Net customer receivables |
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|
|
|
|
|
|
|
|
Other receivables |
|
|
|
|
|
|
|
|
|
Total receivables, net |
|
$ |
|
|
|
$ |
|
|
Other receivables includes $
6. Inventories
Inventories consists of the following:
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
Supplies |
|
|
|
|
|
|
|
|
|
Work in process |
|
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|
|
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|
Finished goods |
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|
|
|
|
|
|
|
|
Gross inventories |
|
|
|
|
|
|
|
|
|
Net realizable value adjustment |
|
|
( |
) |
|
|
( |
) |
|
Total inventories |
|
$ |
|
|
|
$ |
|
|
7. Other Current Assets
Other current assets consist of the following:
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Vendor deposits |
|
$ |
|
|
|
$ |
|
|
|
Recovery of non-income taxes |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other |
|
|
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|
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|
Value-added taxes receivable |
|
|
|
|
|
|
|
|
|
Contract assets |
|
|
|
|
|
|
|
|
|
Total other current assets |
|
$ |
|
|
|
$ |
|
|
7
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Recovery of Non-Income Taxes
Brazilian companies are subject to various taxes on business operations, including turnover taxes used to fund social security and unemployment programs, commonly referred to as PIS/COFINS taxes. UNIFI, along with numerous other companies in Brazil, challenged the constitutionality of certain state taxes historically included in the PIS/COFINS tax base, alleging that such state taxes resulted in over-taxation.
On May 13, 2021, Brazil’s supreme court ruled in favor of taxpayers, and on July 7, 2021, the Brazilian Internal Revenue Service withdrew its appeal. Following the supreme court decision, the federal government will not issue refunds for these taxes but instead will allow for the overpayments and associated interest to be applied as credits against future PIS/COFINS tax obligations.
There are no limitations or restrictions on UNIFI’s ability to recover the associated overpayment claims as future income is generated. We expect to recover the entirety of our claims over the
8. Property, Plant and Equipment, Net
Property, plant and equipment (“PP&E”), net consists of the following:
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Land |
|
$ |
|
|
|
$ |
|
|
|
Land improvements |
|
|
|
|
|
|
|
|
|
Buildings and improvements |
|
|
|
|
|
|
|
|
|
Assets under finance leases |
|
|
|
|
|
|
|
|
|
Machinery and equipment |
|
|
|
|
|
|
|
|
|
Computers, software and office equipment |
|
|
|
|
|
|
|
|
|
Transportation equipment |
|
|
|
|
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|
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|
|
Construction in progress |
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|
|
|
|
|
|
Gross PP&E |
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
Less: accumulated amortization – finance leases |
|
|
( |
) |
|
|
( |
) |
|
Total PP&E, net |
|
$ |
|
|
|
$ |
|
|
9. Other Non-Current Assets
Other non-current assets consist of the following:
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Recovery of non-income taxes |
|
$ |
|
|
|
$ |
|
|
|
Intangible assets, net |
|
|
|
|
|
|
|
|
|
Investments in unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
Vendor deposits and other |
|
|
|
|
|
|
|
|
|
Total other non-current assets |
|
$ |
|
|
|
$ |
|
|
Recovery of Non-Income Taxes
As previously described in Note 7, “Other Current Assets,” UNIFI recorded a recovery of non-income taxes and reflected current and non-current assets accordingly.
Investments in Unconsolidated Affiliates
As of September 26, 2021, UNIFI maintained investments in
U.N.F. Industries, Ltd.
Raw material and production services for UNF are provided by Nilit Ltd. under separate supply and services agreements. UNF’s fiscal year end is December 31, and it is a registered Israeli private company located in Migdal Ha-Emek, Israel.
UNF America LLC
Raw material and production services for UNFA are provided by Nilit America Inc. under separate supply and services agreements. UNFA’s fiscal year end is December 31, and it is a limited liability company treated as a partnership for income tax reporting purposes located in Ridgeway, Virginia.
In conjunction with the formation of UNFA, UNIFI entered into a supply agreement with UNF and UNFA whereby UNIFI agreed to purchase all of its first quality nylon POY requirements for texturing (subject to certain exceptions) from either UNF or UNFA. The supply agreement has no stated minimum purchase quantities and pricing is typically negotiated every six months, based on market rates. As of September 26, 2021, UNIFI’s open purchase orders related to this supply agreement were $
8
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
UNIFI’s raw material purchases under this supply agreement consisted of the following:
|
|
|
For the Three Months Ended |
|
|||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
UNFA |
|
$ |
|
|
|
$ |
|
|
|
UNF |
|
|
|
|
|
|
— |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
As of September 26, 2021 and June 27, 2021, UNIFI had combined accounts payable due to UNF and UNFA of $
UNIFI has determined that UNF and UNFA are variable interest entities and that UNIFI is the primary beneficiary of these entities, based on the terms of the supply agreement discussed above. As a result, these entities should be consolidated with UNIFI’s financial results. As (i) UNIFI purchases substantially all of the output from the two entities; (ii) the two entities’ balance sheets constitute
Condensed balance sheet and income statement information for UNIFI’s unconsolidated affiliates (including reciprocal balances) are presented in the tables below.
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Current assets |
|
$ |
|
|
|
$ |
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
— |
|
|
|
— |
|
|
Shareholders’ equity and capital accounts |
|
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|
UNIFI’s portion of undistributed earnings |
|
|
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|
|
|
|
|
|
For the Three Months Ended |
|
|||||
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
Net sales |
$ |
|
|
|
$ |
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
Income from operations |
|
|
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|
|
|
|
|
Net income |
|
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|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions received |
|
— |
|
|
|
— |
|
10. Other Current Liabilities
Other current liabilities consists of the following:
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Payroll and fringe benefits |
|
$ |
|
|
|
$ |
|
|
|
Deferred revenue |
|
|
|
|
|
|
|
|
|
Incentive compensation |
|
|
|
|
|
|
|
|
|
Current portion of supplemental post-employment plan |
|
|
|
|
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|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total other current liabilities |
|
$ |
|
|
|
$ |
|
|
9
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
11. Long-Term Debt
Debt Obligations
The following table presents the total balances outstanding for UNIFI’s debt obligations, their scheduled maturity dates and the weighted average interest rates for borrowings as well as the applicable current portion of long-term debt:
|
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|
|
Weighted Average |
|
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|
||||||||
|
|
|
Scheduled |
|
Interest Rate as of |
|
Principal Amounts as of |
|
||||||||
|
|
|
Maturity Date |
|
September 26, 2021 |
|
September 26, 2021 |
|
|
June 27, 2021 |
|
|||||
|
ABL Revolver |
|
|
|
|
|
% |
|
|
$ |
— |
|
|
$ |
— |
|
|
ABL Term Loan |
|
|
|
|
|
% |
(1) |
|
|
|
|
|
|
|
|
|
Finance lease obligations |
|
(2) |
|
|
|
% |
|
|
|
|
|
|
|
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|
|
Construction financing |
|
(3) |
|
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|
% |
|
|
|
|
|
|
|
|
|
|
Total debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current ABL Term Loan |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Current portion of finance lease obligations |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total long-term debt |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
Scheduled maturity dates for finance lease obligations range from |
|
(3) |
Refer to the discussion below under the subheading “─Construction Financing” for further information. |
ABL Facility
On December 18, 2018, Unifi, Inc. and certain of its subsidiaries entered into a Third Amendment to Amended and Restated Credit Agreement and Second Amendment to Amended and Restated Guaranty and Security Agreement (the “2018 Amendment”). The 2018 Amendment amended the Amended and Restated Credit Agreement, dated as of March 26, 2015, by and among Unifi, Inc. and a syndicate of lenders, as previously amended (together with all previous and subsequent amendments, the “Credit Agreement”). The Credit Agreement provides for a $
ABL Facility borrowings bear interest at LIBOR plus an applicable margin of
UNIFI currently maintains
Construction Financing
In May 2021, UNIFI entered into an agreement with a third party lender that provides for construction-period financing for certain texturing machinery anticipated in our capital allocation plans. UNIFI will record project costs to construction in progress and the corresponding liability to construction financing (within long-term debt). The agreement provides for monthly, interest-only payments during the construction period, at a rate of LIBOR plus
The agreement provides for
Scheduled Debt Maturities
The following table presents the scheduled maturities of UNIFI’s outstanding debt obligations for the remainder of fiscal 2022, the following four fiscal years and thereafter:
|
|
|
Fiscal 2022 |
|
|
Fiscal 2023 |
|
|
Fiscal 2024 |
|
|
Fiscal 2025 |
|
|
Fiscal 2026 |
|
|
Thereafter |
|
||||||
|
ABL Revolver |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
ABL Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Finance lease obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
10
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
|
|
(1) |
|
12. Other Long-Term Liabilities
Other long-term liabilities consists of the following:
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Uncertain tax positions |
|
$ |
|
|
|
$ |
|
|
|
Supplemental post-employment plan |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total other long-term liabilities |
|
$ |
|
|
|
$ |
|
|
13. Income Taxes
The provision (benefit) for income taxes and effective tax rate were as follows:
|
|
|
For the Three Months Ended |
|
|||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
Provision (benefit) for income taxes |
|
$ |
|
|
|
$ |
( |
) |
|
Effective tax rate |
|
|
|
% |
|
|
( |
)% |
U.S. Tax Law Change
On July 20, 2020, the U.S. Treasury issued and enacted final regulations related to global intangible low-tax income (“GILTI”) that allow certain U.S. taxpayers to elect to exclude foreign income that is subject to a high effective tax rate from their GILTI inclusions. The GILTI high-tax exclusion is an annual election and is retroactively available for tax years beginning after December 31, 2017. The three-month period ended September 27, 2020 includes a discrete tax benefit of $
Valuation Allowance
UNIFI regularly assesses whether it is more-likely-than-not that some portion or all of its deferred tax assets will not be realized. UNIFI considers the scheduled reversal of taxable temporary differences, taxable income in carryback years, projected future taxable income and tax planning strategies in making this assessment. Since UNIFI operates in multiple jurisdictions, the assessment is made on a jurisdiction-by-jurisdiction basis, taking into consideration the effects of local tax law. The three-month period ended September 27, 2020 includes discrete tax expense of $
Income Tax Expense
UNIFI’s provision (benefit) for income taxes for the three months ended September 26, 2021 and September 27, 2020 was calculated by applying the estimated annual effective tax rate to year-to-date pre-tax book income and adjusting for discrete items that occurred during the period.
The effective tax rate for the three months ended September 26, 2021 was higher than the U.S. federal statutory rate primarily due to earnings taxed at higher rates in foreign jurisdictions, deferred tax on unremitted earnings, and foreign withholding taxes.
The effective tax rate for the three months ended September 27, 2020 was lower than the U.S. federal statutory rate primarily due to the retroactive GILTI high-tax exclusion for prior periods. This benefit was partially offset by the change in valuation allowance for deferred tax assets and current U.S. tax on GILTI.
Unrecognized Tax Benefits
UNIFI regularly assesses the outcomes of both completed and ongoing examinations to ensure that its provision for income taxes is sufficient. Certain returns that remain open to examination have utilized carryforward tax attributes generated in prior tax years, including net operating losses, which could potentially be revised upon examination.
14. Shareholders’ Equity
On October 31, 2018, UNIFI announced that its Board of Directors (the “Board”) approved a share repurchase program (the “2018 SRP”) under which UNIFI is authorized to acquire up to $
11
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The following table summarizes UNIFI’s repurchases and retirements of its common stock under the 2018 SRP for the fiscal periods noted:
|
|
|
Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs |
|
|
Average Price Paid per Share |
|
|
Approximate Dollar Value that May Yet Be Repurchased Under Publicly Announced Plans or Programs |
|
|||
|
Fiscal 2019 |
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Fiscal 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Fiscal 2021 |
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Fiscal 2022 (through September 26, 2021) |
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Repurchased shares are retired and have the status of authorized and unissued shares. The cost of the repurchased shares is recorded as a reduction to common stock to the extent of the par value of the shares acquired and the remainder is allocated between capital in excess of par value and retained earnings, on a pro rata basis.
15. Stock-Based Compensation
On
The following table provides the number of awards remaining available for future issuance under the 2020 Plan as of September 26, 2021:
|
Authorized under the 2020 Plan |
|
|
|
|
|
Plus: Awards expired, forfeited or otherwise terminated unexercised |
|
|
— |
|
|
Less: Awards granted to employees |
|
|
( |
) |
|
Less: Awards granted to non-employee directors |
|
|
( |
) |
|
Available for issuance under the 2020 Plan |
|
|
|
|
There were
On October 27, 2021, UNIFI’s shareholders approved the Unifi, Inc. Employee Stock Purchase Plan (the “ESPP”) as described in the Company’s definitive proxy statement on Schedule 14A filed with the SEC on September 2, 2021. The ESPP reserved
16. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities
UNIFI uses derivative financial instruments such as foreign currency forward contracts or interest rate swaps to reduce its ongoing business exposures to fluctuations in foreign currency exchange rates or interest rates. UNIFI currently maintains
|
|
|
For the Three Months Ended |
|
|||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
Interest expense |
|
$ |
|
|
|
$ |
|
|
|
Increase in fair value of interest rate swaps |
|
|
( |
) |
|
|
( |
) |
|
Impact of interest rate swaps to increase interest expense |
|
|
|
|
|
|
|
|
For the three months ended September 26, 2021 and September 27, 2020, there were no significant changes to UNIFI’s assets and liabilities measured at fair value, and there were
UNIFI believes that there have been no significant changes to its credit risk profile or the interest rates available to UNIFI for debt issuances with similar terms and average maturities, and UNIFI estimates that the fair values of its debt obligations approximate the carrying amounts. Other financial instruments include cash and cash equivalents, receivables, accounts payable and accrued expenses. The financial statement carrying amounts of these items approximate the fair values due to their short-term nature.
12
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
17. Accumulated Other Comprehensive Loss
The components of and the changes in accumulated other comprehensive loss, net of tax, as applicable, consist of the following:
|
|
|
Foreign Currency Translation Adjustments |
|
|
Changes in Interest Rate Swaps |
|
|
Accumulated Other Comprehensive Loss |
|
|||
|
Balance at June 27, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Balance at September 26, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
A summary of the after-tax effects of the components of other comprehensive (loss) income, net for the three-month periods ended September 26, 2021 and September 27, 2020 is included in the accompanying condensed consolidated statements of comprehensive income.
18. Earnings Per Share
The components of the calculation of earnings per share (“EPS”) are as follows:
|
|
|
For the Three Months Ended |
|
|||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
Basic weighted average shares |
|
|
|
|
|
|
|
|
|
Net potential common share equivalents |
|
|
|
|
|
|
|
|
|
Diluted weighted average shares |
|
|
|
|
|
|
|
|
|
Excluded from the calculation of common share equivalents: |
|
|
|
|
|
|
|
|
|
Anti-dilutive common share equivalents |
|
|
|
|
|
|
|
|
|
Excluded from the calculation of diluted shares: |
|
|
|
|
|
|
|
|
|
Unvested stock options that vest upon achievement of certain market conditions |
|
|
|
|
|
|
|
|
The calculation of EPS is based on the weighted average number of Unifi, Inc.’s common shares outstanding for the applicable period. The calculation of diluted EPS presents the effect of all potential dilutive common shares that were outstanding during the respective period, unless the effect of doing so is anti-dilutive.
19. Commitments and Contingencies
Collective Bargaining Agreements
While employees of UNIFI’s Brazilian operations are unionized, none of the labor force employed by UNIFI’s domestic or other foreign subsidiaries is currently covered by a collective bargaining agreement.
Environmental
On September 30, 2004, Unifi Kinston, LLC (“UK”), a subsidiary of Unifi, Inc., completed its acquisition of polyester filament manufacturing assets located in Kinston, North Carolina (“Kinston”) from Invista S.a.r.l. (“INVISTA”). The land for the Kinston site was leased pursuant to a
13
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
20. Related Party Transactions
There were
Related party payables for Salem Leasing Corporation consisted of the following:
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Accounts payable |
|
$ |
|
|
|
$ |
|
|
|
Operating lease obligations |
|
|
|
|
|
|
|
|
|
Finance lease obligations |
|
|
|
|
|
|
|
|
|
Total related party payables |
|
$ |
|
|
|
$ |
|
|
The following are the Company’s significant related party transactions:
|
|
|
|
|
For the Three Months Ended |
|
|||||
|
Affiliated Entity |
|
Transaction Type |
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
Salem Leasing Corporation |
|
Payments for transportation equipment costs and finance lease debt service |
|
$ |
|
|
|
$ |
|
|
21. Business Segment Information
UNIFI defines operating segments as components of the organization for which discrete financial information is available and operating results are evaluated on a regular basis by UNIFI’s principal executive officer, who is the chief operating decision maker (the “CODM”), in order to assess performance and allocate resources. Characteristics of UNIFI which were relied upon in making the determination of reportable segments include the nature of the products sold, the internal organizational structure, the trade policies in the geographic regions in which UNIFI operates and the information that is regularly reviewed by the CODM for the purpose of assessing performance and allocating resources.
UNIFI has four reportable segments.
|
|
• |
The operations within the Polyester Segment exhibit similar long-term economic characteristics and primarily sell into an economic trading zone covered by the USMCA, NAFTA and CAFTA (collectively, the regions comprising these economic trading zones are referred to as “NACA”) to similar customers utilizing similar methods of distribution. These operations derive revenues primarily from manufacturing polyester-based products with sales primarily to other yarn manufacturers and knitters and weavers that produce yarn and/or fabric for the apparel, hosiery, automotive, home furnishings, industrial and other end-use markets. The Polyester Segment consists of sales and manufacturing operations in the U.S. and El Salvador. |
|
|
• |
The operations within the Asia Segment exhibit similar long-term economic characteristics and sell to similar customers utilizing similar methods of distribution primarily in Asia and Europe, which are outside of the NACA region. The Asia Segment primarily sources polyester-based products from third-party suppliers and sells to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial and other end-use markets principally in Asia. The Asia Segment includes sales offices in China. |
|
|
• |
The Brazil Segment primarily manufactures and sells polyester-based products to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial and other end-use markets principally in South America. The Brazil Segment includes a manufacturing location and sales offices in Brazil. |
|
|
• |
The operations within the Nylon Segment exhibit similar long-term economic characteristics and primarily sell into the NACA region to similar customers utilizing similar methods of distribution. These operations derive revenues primarily from manufacturing nylon-based products with sales to knitters and weavers that produce fabric primarily for the apparel, hosiery and medical markets. The Nylon Segment includes an immaterial operating segment in Colombia that sells similar nylon-based textile products to similar customers in Colombia and Mexico utilizing similar methods of distribution. The Nylon Segment consists of sales and manufacturing operations in the U.S. and Colombia. |
In addition to UNIFI’s reportable segments, an All Other category is included in the tables below. All Other consists primarily of for-hire transportation services. For-hire transportation services revenue is derived from performing common carrier services utilizing UNIFI’s fleet of transportation equipment.
The operations within All Other (i) are not subject to review by the CODM at a level consistent with UNIFI’s other operations, (ii) are not regularly evaluated using the same metrics applied to UNIFI’s other operations, and (iii) do not qualify for aggregation with an existing reportable segment. Therefore, such operations are excluded from reportable segments.
UNIFI evaluates the operating performance of its segments based upon Segment Profit, which represents segment gross profit (loss) plus segment depreciation expense. This measurement of segment profit or loss best aligns segment reporting with the current assessments and evaluations performed by, and information provided to, the CODM.
The accounting policies for the segments are consistent with UNIFI’s accounting policies. Intersegment sales are omitted from segment disclosures, as they are (i) insignificant to UNIFI’s segments and eliminated from consolidated reporting and (ii) excluded from segment evaluations performed by the CODM.
14
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Selected financial information is presented below:
|
|
|
For the Three Months Ended September 26, 2021 |
|
|||||||||||||||||||||
|
|
|
Polyester |
|
|
Asia |
|
|
Brazil |
|
|
Nylon |
|
|
All Other |
|
|
Total |
|
||||||
|
Net sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment depreciation expense |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
For the Three Months Ended September 27, 2020 |
|
|||||||||||||||||||||
|
|
|
Polyester |
|
|
Asia |
|
|
Brazil |
|
|
Nylon |
|
|
All Other |
|
|
Total |
|
||||||
|
Net sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment depreciation expense |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The reconciliations of segment gross profit to consolidated income before income taxes are as follows:
|
|
|
For the Three Months Ended |
|
|||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
Polyester |
|
$ |
|
|
|
$ |
|
|
|
Asia |
|
|
|
|
|
|
|
|
|
Brazil |
|
|
|
|
|
|
|
|
|
Nylon |
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
Segment gross profit |
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
Provision (benefit) for bad debts |
|
|
( |
) |
|
|
( |
) |
|
Other operating expense, net |
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
( |
) |
|
|
( |
) |
|
Interest expense |
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
( |
) |
|
|
( |
) |
|
Income before income taxes |
|
$ |
|
|
|
$ |
|
|
The reconciliations of segment total assets to consolidated total assets are as follows:
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Polyester |
|
$ |
|
|
|
$ |
|
|
|
Asia |
|
|
|
|
|
|
|
|
|
Brazil |
|
|
|
|
|
|
|
|
|
Nylon |
|
|
|
|
|
|
|
|
|
Segment total assets |
|
|
|
|
|
|
|
|
|
Other current assets |
|
|
|
|
|
|
|
|
|
Other PP&E |
|
|
|
|
|
|
|
|
|
Other operating lease assets |
|
|
|
|
|
|
|
|
|
Other non-current assets |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
22. Supplemental Cash Flow Information
Cash payments for interest and taxes consist of the following:
|
|
|
For the Three Months Ended |
|
||||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
|||
|
Interest, net of capitalized interest of $ |
|
$ |
|
|
|
$ |
|
|
|
|
Income tax payments, net |
|
|
|
|
|
|
|
|
|
15
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Cash payments for taxes shown above consist primarily of income and withholding tax payments made by UNIFI in both U.S. and foreign jurisdictions, net of refunds. The three months ended September 26, 2021 includes an income tax payment of $
Non-Cash Investing and Financing Activities
As of September 26, 2021 and June 27, 2021, $
During the three months ended September 26, 2021 and September 27, 2020, UNIFI recorded non-cash activity relating to finance leases of $
16
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following is management’s discussion and analysis of certain significant factors that have affected UNIFI’s operations, along with material changes in financial condition, during the periods included in the accompanying condensed consolidated financial statements. A reference to a “note” in this section refers to the accompanying notes to condensed consolidated financial statements. A reference to the “current period” refers to the three-month period ended September 26, 2021, while a reference to the “prior period” refers to the three-month period ended September 27, 2020. Such references may be accompanied by certain phrases for added clarity. The current period and the prior period each consisted of 13 weeks.
Our discussions in this Item 2 focus on our results during, or as of, the three months ended September 26, 2021 and September 27, 2020, and, to the extent applicable, any material changes from the information discussed in the 2021 Form 10-K or other important intervening developments or information. These discussions should be read in conjunction with the 2021 Form 10-K for more detailed and background information about our business, operations and financial condition. Discussion of foreign currency translation is primarily associated with the weakening of the Brazilian Real (“BRL”) and changes in the Chinese Renminbi (“RMB”) versus the U.S. Dollar (“USD”). In discussion of operating results in this report, we refer to our operations in the “NACA” region, which is the region comprised of the trade zones covered by USMCA, NAFTA and CAFTA-DR.
All amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.
Overview and Significant General Matters
UNIFI focuses on delivering products and solutions to direct customers and brand partners throughout the world, leveraging our internal manufacturing capabilities and an enhanced global supply chain that delivers a diverse range of synthetic and recycled fibers and polymers. This strategic and synergistic focus includes three supporting pillars: (1) engaging in strategic relationships with like-minded entities, (2) growing our existing portfolio of technologies and capabilities, and (3) expanding our supply chain to best serve our direct and indirect customers. UNIFI remains committed to this strategy, which we believe will increase profitability and generate improved cash flows from operations.
UNIFI has four reportable segments for its operations – the Polyester Segment, the Asia Segment, the Brazil Segment and the Nylon Segment – as well as certain ancillary operations that include for-hire transportation services, which comprise an All Other category. The ancillary operations classified within All Other are insignificant for all periods presented; therefore, UNIFI’s discussion and analysis of those activities is generally limited to their impact on consolidated results, where appropriate.
COVID-19 Pandemic
The COVID-19 pandemic adversely impacted our operating results for the prior period as a result of global demand declines that pressured our sales and profitability performance. Despite the lingering effects and uncertainty of the COVID-19 pandemic, our operating results have improved significantly from the prior period to the current period, primarily due to the restoration of global demand levels and consumer spending.
Recent Trade Initiatives
UNIFI remains committed to pursuing relief from the elevated levels of low-cost and subsidized polyester textured yarn (“Subject Imports”) entering the U.S. market from foreign countries. Trade petition efforts to slow Subject Imports from China and India were successful during calendar 2019.
Due to the continued pressure from Subject Imports on our Polyester Segment revenues and gross margins in the U.S. market, UNIFI is again a petitioner to the United States Department of Commerce (“Commerce Department”) and the United States International Trade Commission (“ITC”) relating to Subject Imports from Indonesia, Malaysia, Thailand, and Vietnam (the “Subject Countries”). For such countries, preliminary antidumping duty rates are currently in effect. On October 19, 2021, the Commerce Department announced final antidumping duty deposit rates on imports of polyester textured yarn from the Subject Countries. The ITC is expected to announce its final determination on November 30, 2021.
We believe both trade petitions on Subject Imports are necessary to normalize the U.S. polyester market for fair pricing and competition, and a positive outcome in the ongoing petition will aid in generating incremental revenue for the Polyester Segment.
Adverse Impacts of Elevated Input Costs and Global Production Volatility
The prior period benefited from stable, low raw material costs, although suppressed global demand levels prevented UNIFI from generating meaningful operating results. As fiscal 2021 concluded, global economic recovery, domestic weather events, supply constraints and general inflationary pressures have led to higher input costs in fiscal 2022. For the majority of our portfolio, we have been able to implement selling price adjustments to protect gross margins in the current period, and we have navigated the higher cost environment better than in recent prior years. However, the acceleration of input costs and the current elevated levels remain headwinds to our underlying performance.
In addition to the recent pressures from input costs, UNIFI is experiencing inefficiencies in the global supply chain in connection with (i) freight and logistics slowdowns in foreign markets; (ii) a tighter labor pool in the U.S.; and (iii) suppressed productivity resulting from (a) pandemic-related lockdowns in certain regions of Asia and (b) energy management measures taken in China during September and October 2021. While our businesses are not currently materially impacted by these adverse events and circumstances, the existing challenges could worsen and/or occur for prolonged periods and eventually become material impacts to our Asia and Polyester segments.
Key Performance Indicators and Non-GAAP Financial Measures
UNIFI continuously reviews performance indicators to measure its success. These performance indicators form the basis of management’s discussion and analysis included below:
|
|
• |
sales volume and revenue for UNIFI and for each reportable segment; |
|
|
• |
gross profit and gross margin for UNIFI and for each reportable segment; |
17
|
|
• |
net income and diluted EPS; |
|
|
• |
Segment Profit, which equals segment gross profit plus segment depreciation expense; |
|
|
• |
unit conversion margin, which represents unit net sales price less unit raw material costs, for UNIFI and for each reportable segment; |
|
|
• |
working capital, which represents current assets less current liabilities; |
|
|
• |
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), which represents Net income before net interest expense, income tax expense and depreciation and amortization expense; |
|
|
• |
Adjusted EBITDA, which represents EBITDA adjusted to exclude, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI; |
|
|
• |
Adjusted Net Income, which represents net income calculated under GAAP, adjusted to exclude certain amounts which management believes do not reflect the ongoing operations and performance of UNIFI and/or for which exclusion may be necessary to understand and compare the underlying results of UNIFI; |
|
|
• |
Adjusted EPS, which represents Adjusted Net Income divided by UNIFI’s diluted weighted average common shares outstanding; |
|
|
• |
Adjusted Working Capital, which equals receivables plus inventories and other current assets, less accounts payable and other current liabilities; and |
|
|
• |
Net Debt, which represents debt principal less cash and cash equivalents. |
EBITDA, Adjusted EBITDA, Adjusted Working Capital and Net Debt (collectively, 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 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 and is relevant to our fixed charge coverage ratio.
Management uses Adjusted Net Income and Adjusted EPS (i) as measurements of net operating performance because they assist us in comparing such performance on a consistent basis, as they remove the impact of (a) items that we would not expect to occur as a part of our normal business on a regular basis and (b) components of the provision for income taxes that we would not expect to occur as a part of our underlying taxable operations; (ii) for planning purposes, including the preparation of our annual operating budget; and (iii) as measures in determining the value of other acquisitions and dispositions.
Management uses Adjusted Working Capital as an indicator of UNIFI’s production efficiency and ability to manage inventories and receivables. Adjusted Working Capital is a metric used in the determination of variable compensation.
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.
Review of Results of Operations
Three Months Ended September 26, 2021 Compared to Three Months Ended September 27, 2020
Consolidated Overview
The below tables provide:
|
|
• |
the components of net income and the percentage increase or decrease over the prior fiscal year amounts, and |
|
|
• |
a reconciliation from net income to EBITDA and Adjusted EBITDA. |
Following the tables is a discussion and analysis of the significant components of net income.
18
Net income
|
|
|
For the Three Months Ended |
|
|
|
|
|
|||||||||||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
% of Net Sales |
|
|
|
|
|
|
% of Net Sales |
|
|
% Change |
|
|||
|
Net sales |
|
$ |
195,992 |
|
|
|
100.0 |
|
|
$ |
141,505 |
|
|
|
100.0 |
|
|
|
38.5 |
|
|
Cost of sales |
|
|
169,895 |
|
|
|
86.7 |
|
|
|
126,944 |
|
|
|
89.7 |
|
|
|
33.8 |
|
|
Gross profit |
|
|
26,097 |
|
|
|
13.3 |
|
|
|
14,561 |
|
|
|
10.3 |
|
|
|
79.2 |
|
|
SG&A |
|
|
12,670 |
|
|
|
6.4 |
|
|
|
11,364 |
|
|
|
8.0 |
|
|
|
11.5 |
|
|
Benefit for bad debts |
|
|
(80 |
) |
|
|
— |
|
|
|
(887 |
) |
|
|
(0.6 |
) |
|
|
(91.0 |
) |
|
Other operating expense, net |
|
|
256 |
|
|
|
0.1 |
|
|
|
1,178 |
|
|
|
0.8 |
|
|
|
(78.3 |
) |
|
Operating income |
|
|
13,251 |
|
|
|
6.8 |
|
|
|
2,906 |
|
|
|
2.1 |
|
|
nm |
|
|
|
Interest expense, net |
|
|
438 |
|
|
|
0.2 |
|
|
|
746 |
|
|
|
0.5 |
|
|
|
(41.3 |
) |
|
Equity in earnings of unconsolidated affiliates |
|
|
(280 |
) |
|
|
(0.1 |
) |
|
|
(93 |
) |
|
|
— |
|
|
|
201.1 |
|
|
Income before income taxes |
|
|
13,093 |
|
|
|
6.7 |
|
|
|
2,253 |
|
|
|
1.6 |
|
|
nm |
|
|
|
Provision (benefit) for income taxes |
|
|
4,413 |
|
|
|
2.3 |
|
|
|
(1,179 |
) |
|
|
(0.8 |
) |
|
nm |
|
|
|
Net income |
|
$ |
8,680 |
|
|
|
4.4 |
|
|
$ |
3,432 |
|
|
|
2.4 |
|
|
|
152.9 |
|
nm – Not meaningful
EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)
The reconciliations of the amounts reported under GAAP for Net income to EBITDA and Adjusted EBITDA were as follows:
|
|
|
For the Three Months Ended |
|
|||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
Net income |
|
$ |
8,680 |
|
|
$ |
3,432 |
|
|
Interest expense, net |
|
|
438 |
|
|
|
746 |
|
|
Provision (benefit) for income taxes |
|
|
4,413 |
|
|
|
(1,179 |
) |
|
Depreciation and amortization expense (1) |
|
|
6,308 |
|
|
|
6,052 |
|
|
EBITDA |
|
|
19,839 |
|
|
|
9,051 |
|
|
|
|
|
|
|
|
|
|
|
|
Other adjustments (2) |
|
|
— |
|
|
|
— |
|
|
Adjusted EBITDA |
|
$ |
19,839 |
|
|
$ |
9,051 |
|
|
(1) |
Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net. Within the accompanying condensed consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense. |
|
(2) |
For the periods presented, there were no other adjustments necessary to reconcile Net income to Adjusted EBITDA. |
Adjusted Net Income and Adjusted EPS (Non-GAAP Measures)
For the current and the prior period, there were no adjustments necessary to reconcile Net income to Adjusted Net Income or Adjusted EPS.
Net Sales
Consolidated net sales for the current period increased by $54,487, or 38.5%, and consolidated sales volumes increased 12.8%, compared to the prior period. The increases occurred primarily due to (i) a rebound in product demand following the adverse impact of the COVID-19 pandemic on sales volumes in the prior period, (ii) incremental sales growth for the Asia Segment led by REPREVE® branded products, and (iii) opportunistically improved market share and pricing levels in Brazil.
Consolidated average sales prices increased 25.7%, primarily attributable to higher selling prices associated with higher raw material costs.
REPREVE® Fiber products for the current period comprised 37% of consolidated net sales, up from 36% for the prior period.
Gross Profit
Gross profit for the current period increased by $11,536, or 79.2%, compared to the prior period. Despite input cost and supply chain pressures for each of our segments, gross profit performance was better than anticipated.
|
|
• |
For the Polyester Segment, gross profit benefited from the restoration of U.S. demand following the worst months of the COVID-19 pandemic and a better sales mix. |
|
|
• |
For the Asia Segment, gross profit increased from the prior period primarily due to higher sales volumes and a stronger sales mix. |
|
|
• |
For the Brazil Segment, gross profit increased significantly from the prior period primarily due to opportunistically improved market share and pricing levels. |
|
|
• |
For the Nylon Segment, gross profit exhibited no relevant change. |
19
SG&A
SG&A increased from the prior period, primarily due to higher amortization from customer list assets acquired in fiscal 2021 and higher discretionary expenses in the current period, following COVID-19 pandemic related restrictions and cost control in the prior period.
Benefit for Bad Debts
The current period benefit for bad debts reflects no material activity. The prior period reflects a benefit for general improvement in customer payment frequency following the adverse effects of the COVID-19 pandemic on customer health.
Other Operating Expense, Net
The current period and prior period primarily reflect foreign currency transaction losses of $233 and $281, respectively, in addition to $881 of severance costs recorded in the prior period.
Interest Expense, Net
Interest expense, net decreased from the prior period to the current period, primarily attributable to a lower average debt principal and interest rate.
Equity in Earnings of Unconsolidated Affiliates
There was no material activity for the current period or the prior period.
Income Taxes
Provision (benefit) for income taxes and the effective tax rate were as follows:
|
|
|
For the Three Months Ended |
|
|||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
Provision (benefit) for income taxes |
|
$ |
4,413 |
|
|
$ |
(1,179 |
) |
|
Effective tax rate |
|
|
33.7 |
% |
|
|
(52.3 |
)% |
The effective tax rate is subject to variation due to a number of factors, including variability in pre-tax book income, the mix of income by jurisdiction, changes in deferred tax valuation allowances and changes in statutes, regulations and case law. Additionally, the impacts of discrete and other rate impacting items are greater when income before income taxes is lower.
The increase in the effective tax rate from the prior period to the current period is primarily attributable to a discrete benefit in the prior period for the retroactive GILTI high-tax exclusion. This increase is partially offset by an expense recorded in the prior period to increase the valuation allowance for deferred tax assets.
Net Income
Net income for the current period was $8,680, or $0.46 per diluted share, compared to net income of $3,432 or $0.18 per diluted share, for the prior period. The improvement in net income was primarily attributable to higher gross profit in the current period.
20
Adjusted EBITDA (Non-GAAP Financial Measure)
Adjusted EBITDA increased from the prior period to the current period, primarily due to higher gross profit.
Segment Overview
Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for the current period.
Polyester Segment
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Polyester Segment, were as follows:
|
|
|
For the Three Months Ended |
|
|
|
|
|
|||||||||||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
% of Net Sales |
|
|
|
|
|
|
% of Net Sales |
|
|
% Change |
|
|||
|
Net sales |
|
$ |
89,467 |
|
|
|
100.0 |
|
|
$ |
69,076 |
|
|
|
100.0 |
|
|
|
29.5 |
|
|
Cost of sales |
|
|
81,173 |
|
|
|
90.7 |
|
|
|
64,444 |
|
|
|
93.3 |
|
|
|
26.0 |
|
|
Gross profit |
|
|
8,294 |
|
|
|
9.3 |
|
|
|
4,632 |
|
|
|
6.7 |
|
|
|
79.1 |
|
|
Depreciation expense |
|
|
4,482 |
|
|
|
5.0 |
|
|
|
4,403 |
|
|
|
6.4 |
|
|
|
1.8 |
|
|
Segment Profit |
|
$ |
12,776 |
|
|
|
14.3 |
|
|
$ |
9,035 |
|
|
|
13.1 |
|
|
|
41.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment net sales as a percentage of consolidated amounts |
|
|
45.6 |
% |
|
|
|
|
|
|
48.8 |
% |
|
|
|
|
|
|
|
|
|
Segment Profit as a percentage of consolidated amounts |
|
|
40.5 |
% |
|
|
|
|
|
|
45.2 |
% |
|
|
|
|
|
|
|
|
The change in net sales for the Polyester Segment was as follows:
|
Net sales for the prior period |
|
$ |
69,076 |
|
|
Net change in average selling price and sales mix |
|
|
15,914 |
|
|
Increase in sales volumes |
|
|
4,477 |
|
|
Net sales for the current period |
|
$ |
89,467 |
|
The increase in net sales for the Polyester Segment from the prior period to the current period was primarily attributable to (i) higher average selling prices associated with higher polyester raw material costs, (ii) a better sales mix, and (iii) higher sales volumes in connection with demand restoration following the adverse impacts of the COVID-19 pandemic on the prior period.
The change in Segment Profit for the Polyester Segment was as follows:
|
Segment Profit for the prior period |
|
$ |
9,035 |
|
|
Change in underlying margins and sales mix |
|
|
3,155 |
|
|
Increase in sales volumes |
|
|
586 |
|
|
Segment Profit for the current period |
|
$ |
12,776 |
|
The increase in Segment Profit for the Polyester Segment from the prior period to the current period was primarily attributable to (i) the adverse impact of the COVID-19 pandemic on cost absorption and facility utilization following lower sales volumes during the prior period and (ii) a better sales and production mix in the current period.
21
Asia Segment
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Asia Segment, were as follows:
|
|
|
For the Three Months Ended |
|
|
|
|
|
|||||||||||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
% of Net Sales |
|
|
|
|
|
|
% of Net Sales |
|
|
% Change |
|
|||
|
Net sales |
|
$ |
51,428 |
|
|
|
100.0 |
|
|
$ |
37,723 |
|
|
|
100.0 |
|
|
|
36.3 |
|
|
Cost of sales |
|
|
44,457 |
|
|
|
86.4 |
|
|
|
33,145 |
|
|
|
87.9 |
|
|
|
34.1 |
|
|
Gross profit |
|
|
6,971 |
|
|
|
13.6 |
|
|
|
4,578 |
|
|
|
12.1 |
|
|
|
52.3 |
|
|
Depreciation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Segment Profit |
|
$ |
6,971 |
|
|
|
13.6 |
|
|
$ |
4,578 |
|
|
|
12.1 |
|
|
|
52.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment net sales as a percentage of consolidated amounts |
|
|
26.2 |
% |
|
|
|
|
|
|
26.7 |
% |
|
|
|
|
|
|
|
|
|
Segment Profit as a percentage of consolidated amounts |
|
|
22.1 |
% |
|
|
|
|
|
|
22.9 |
% |
|
|
|
|
|
|
|
|
The change in net sales for the Asia Segment was as follows:
|
Net sales for the prior period |
|
$ |
37,723 |
|
|
Net increase in sales volumes |
|
|
11,191 |
|
|
Favorable foreign currency translation effects |
|
|
2,420 |
|
|
Change in average selling price and sales mix |
|
|
94 |
|
|
Net sales for the current period |
|
$ |
51,428 |
|
The increase in net sales for the Asia Segment from the prior period to the current period was primarily attributable to the continued momentum of REPREVE®-branded products contributing to underlying sales growth, in addition to the adverse impacts of the COVID-19 pandemic on global demand in the prior period.
The RMB weighted average exchange rate was 6.47 RMB/USD and 6.91 RMB/USD for the current period and the prior period, respectively.
The change in Segment Profit for the Asia Segment was as follows:
|
Segment Profit for the prior period |
|
$ |
4,578 |
|
|
Increase in sales volumes |
|
|
1,358 |
|
|
Change in underlying margins and sales mix |
|
|
742 |
|
|
Favorable foreign currency translation effects |
|
|
293 |
|
|
Segment Profit for the current period |
|
$ |
6,971 |
|
The increase in Segment Profit for the Asia Segment from the prior period to the current period was primarily attributable to higher sales volumes and a stronger sales mix in the current period.
Brazil Segment
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Brazil Segment, were as follows:
|
|
|
For the Three Months Ended |
|
|
|
|
|
|||||||||||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
% of Net Sales |
|
|
|
|
|
|
% of Net Sales |
|
|
% Change |
|
|||
|
Net sales |
|
$ |
33,738 |
|
|
|
100.0 |
|
|
$ |
22,606 |
|
|
|
100.0 |
|
|
|
49.2 |
|
|
Cost of sales |
|
|
23,798 |
|
|
|
70.5 |
|
|
|
17,993 |
|
|
|
79.6 |
|
|
|
32.3 |
|
|
Gross profit |
|
|
9,940 |
|
|
|
29.5 |
|
|
|
4,613 |
|
|
|
20.4 |
|
|
|
115.5 |
|
|
Depreciation expense |
|
|
383 |
|
|
|
1.1 |
|
|
|
430 |
|
|
|
1.9 |
|
|
|
(10.9 |
) |
|
Segment Profit |
|
$ |
10,323 |
|
|
|
30.6 |
|
|
$ |
5,043 |
|
|
|
22.3 |
|
|
|
104.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment net sales as a percentage of consolidated amounts |
|
|
17.2 |
% |
|
|
|
|
|
|
16.0 |
% |
|
|
|
|
|
|
|
|
|
Segment Profit as a percentage of consolidated amounts |
|
|
32.7 |
% |
|
|
|
|
|
|
25.2 |
% |
|
|
|
|
|
|
|
|
22
The change in net sales for the Brazil Segment was as follows:
|
Net sales for the prior period |
|
$ |
22,606 |
|
|
Increase in average selling price and change in sales mix |
|
|
11,397 |
|
|
Favorable foreign currency translation effects |
|
|
620 |
|
|
Decrease in sales volumes |
|
|
(885 |
) |
|
Net sales for the current period |
|
$ |
33,738 |
|
The increase in net sales for the Brazil Segment from the prior period to the current period was primarily attributable to higher selling prices in connection with (i) higher input costs and (ii) a better competitive position.
The BRL weighted average exchange rate was 5.24 BRL/USD and 5.39 BRL/USD for the current period and the prior period, respectively.
The change in Segment Profit for the Brazil Segment was as follows:
|
Segment Profit for the prior period |
|
$ |
5,043 |
|
|
Increase in underlying margins |
|
|
5,343 |
|
|
Favorable foreign currency translation effects |
|
|
135 |
|
|
Decrease in sales volumes |
|
|
(198 |
) |
|
Segment Profit for the current period |
|
$ |
10,323 |
|
The increase in Segment Profit for the Brazil Segment from the prior period to the current period was primarily attributable to an improved sales mix and conversion margin stemming from an improved competitive position in Brazil.
Nylon Segment
The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Nylon Segment, were as follows:
|
|
|
For the Three Months Ended |
|
|
|
|
|
|||||||||||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
% of Net Sales |
|
|
|
|
|
|
% of Net Sales |
|
|
% Change |
|
|||
|
Net sales |
|
$ |
20,159 |
|
|
|
100.0 |
|
|
$ |
11,029 |
|
|
|
100.0 |
|
|
|
82.8 |
|
|
Cost of sales |
|
|
19,433 |
|
|
|
96.4 |
|
|
|
10,364 |
|
|
|
94.0 |
|
|
|
87.5 |
|
|
Gross profit |
|
|
726 |
|
|
|
3.6 |
|
|
|
665 |
|
|
|
6.0 |
|
|
|
9.2 |
|
|
Depreciation expense |
|
|
435 |
|
|
|
2.2 |
|
|
|
442 |
|
|
|
4.0 |
|
|
|
(1.6 |
) |
|
Segment Profit |
|
$ |
1,161 |
|
|
|
5.8 |
|
|
$ |
1,107 |
|
|
|
10.0 |
|
|
|
4.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment net sales as a percentage of consolidated amounts |
|
|
10.3 |
% |
|
|
|
|
|
|
7.8 |
% |
|
|
|
|
|
|
|
|
|
Segment Profit as a percentage of consolidated amounts |
|
|
3.7 |
% |
|
|
|
|
|
|
5.5 |
% |
|
|
|
|
|
|
|
|
The change in net sales for the Nylon Segment was as follows:
|
Net sales for the prior period |
|
$ |
11,029 |
|
|
Increase in sales volumes |
|
|
8,100 |
|
|
Net change in average selling price and sales mix |
|
|
1,030 |
|
|
Net sales for the current period |
|
$ |
20,159 |
|
The increase in net sales for the Nylon Segment from the prior period to the current period was primarily attributable to an increase in sales volumes in the current period following the adverse impacts of the COVID-19 pandemic on sales volumes in the prior period, in addition to higher selling prices in connection with higher raw material costs.
The change in Segment Profit for the Nylon Segment was as follows:
|
Segment Profit for the prior period |
|
$ |
1,107 |
|
|
Increase in sales volumes |
|
|
814 |
|
|
Net decrease in underlying margins |
|
|
(760 |
) |
|
Segment Profit for the current period |
|
$ |
1,161 |
|
Nylon Segment Profit was essentially unchanged due to the offsetting impacts of higher volumes of a less favorable sales and production mix.
23
Liquidity and Capital Resources
UNIFI’s primary capital requirements are for working capital, capital expenditures, debt service and share repurchases. UNIFI’s primary sources of capital are cash generated from operations and borrowings available under the ABL Revolver of its credit facility. For the current period, cash used by operations was $15,808, and, at September 26, 2021, excess availability under the ABL Revolver was $73,693.
As of September 26, 2021, all of UNIFI’s $84,312 of debt obligations were guaranteed by certain of its domestic operating subsidiaries, while 76% of UNIFI’s cash and cash equivalents were held by its foreign subsidiaries. Cash and cash equivalents held by foreign subsidiaries may not be presently available to fund UNIFI’s domestic capital requirements, including its domestic debt obligations. UNIFI employs a variety of strategies to ensure that its worldwide cash is available in the locations where it is needed.
The following table presents a summary of cash and cash equivalents, borrowings available under financing arrangements, liquidity, working capital and total debt obligations as of September 26, 2021 for domestic operations compared to foreign operations:
|
|
|
Domestic |
|
|
Foreign |
|
|
Total |
|
|||
|
Cash and cash equivalents |
|
$ |
12,051 |
|
|
$ |
37,505 |
|
|
$ |
49,556 |
|
|
Borrowings available under financing arrangements |
|
|
73,693 |
|
|
|
— |
|
|
|
73,693 |
|
|
Liquidity |
|
$ |
85,744 |
|
|
$ |
37,505 |
|
|
$ |
123,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital |
|
$ |
85,254 |
|
|
$ |
134,426 |
|
|
$ |
219,680 |
|
|
Total debt obligations |
|
$ |
84,312 |
|
|
$ |
— |
|
|
$ |
84,312 |
|
UNIFI’s primary cash requirements, in addition to normal course operating activities (e.g. working capital and payroll), primarily include (i) capital expenditures that generally have commitments of up to 12 months, (ii) contractual obligations that support normal course ongoing operations and production, (iii) operating leases and finance leases, and (iv) debt service.
COVID-19 Pandemic Liquidity Considerations
Throughout the COVID-19 pandemic, UNIFI has not experienced any (i) substantial, prolonged headwinds relating to liquidity, (ii) significant outbreaks of COVID-19 among employees, nor (iii) other extensive disruptions to ongoing operations. The following reflect on UNIFI’s strong liquidity position and access to capital resources during the COVID-19 pandemic:
|
|
• |
We have not accessed public or private capital markets for recent liquidity needs. |
|
|
• |
We do not currently expect our cost of or access to existing capital and funding sources to materially change as a result of the COVID-19 pandemic; however, new capital and funding sources (if any) may carry higher costs than our current structure. |
|
|
• |
We have not taken advantage of rent, lease or debt deferrals, forbearance periods or other concessions, nor have we modified any material agreements to provide concessions. |
|
|
• |
We have not relied on supply chain financing, structured trade payables or vendor financing. |
|
|
• |
We are not at material risk of not meeting our financial covenants. |
|
|
• |
We continue to maintain significant borrowing availability on our existing credit facility. |
Now that global demand pressures are less severe and the textile supply chain appears to be recovering, we expect our significant cash balances and available borrowings to continue to provide adequate liquidity during the lingering pressures of the COVID-19 pandemic. Accordingly, and because of the global demand recovery that has occurred thus far, we do not currently anticipate any adverse events or circumstances will place critical pressure on our liquidity position and/or ability to fund our operations, capital expenditures, and expected business growth during fiscal 2022. Should global demand and economic activity decline beyond the short-term, UNIFI maintains the ability to (i) seek additional credit or financing arrangements or extensions of existing arrangements and/or (ii) re-implement cost reduction initiatives to preserve cash and secure the longevity of the business and operations.
As we anticipate further business recovery to occur throughout fiscal 2022, we expect the majority of our capital will be deployed to upgrade the machinery in our Americas manufacturing facilities via capital expenditures.
Debt Obligations
The following table presents the total balances outstanding for UNIFI’s debt obligations, their scheduled maturity dates and the weighted average interest rates for borrowings as well as the applicable current portion of long-term debt:
|
|
|
|
|
Weighted Average |
|
|
|
||||||||
|
|
|
Scheduled |
|
Interest Rate as of |
|
Principal Amounts as of |
|
||||||||
|
|
|
Maturity Date |
|
September 26, 2021 |
|
September 26, 2021 |
|
|
June 27, 2021 |
|
|||||
|
ABL Revolver |
|
December 2023 |
|
|
0.0 |
% |
|
|
$ |
— |
|
|
$ |
— |
|
|
ABL Term Loan |
|
December 2023 |
|
|
3.2 |
% |
(1) |
|
|
75,000 |
|
|
|
77,500 |
|
|
Finance lease obligations |
|
(2) |
|
|
3.6 |
% |
|
|
|
7,548 |
|
|
|
8,475 |
|
|
Construction financing |
|
(3) |
|
|
2.3 |
% |
|
|
|
1,764 |
|
|
|
882 |
|
|
Total debt |
|
|
|
|
|
|
|
|
|
84,312 |
|
|
|
86,857 |
|
|
Current ABL Term Loan |
|
|
|
|
|
|
|
|
|
(12,500 |
) |
|
|
(12,500 |
) |
|
Current portion of finance lease obligations |
|
|
|
|
|
|
|
|
|
(2,928 |
) |
|
|
(3,545 |
) |
|
Unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
(419 |
) |
|
|
(476 |
) |
|
Total long-term debt |
|
|
|
|
|
|
|
|
$ |
68,465 |
|
|
$ |
70,336 |
|
24
|
(1) |
Includes the effects of interest rate swaps. |
|
(2) |
Scheduled maturity dates for finance lease obligations range from May 2022 to November 2027. |
|
(3) |
Refer to the discussion below under the subheading “─Construction Financing” for further information. |
As of September 26, 2021:
|
|
• |
UNIFI was in compliance with all financial covenants in the Credit Agreement, |
|
|
• |
excess availability under the ABL Revolver was $73,693, |
|
|
• |
the Trigger Level (as defined in the Credit Agreement) was $21,875, and |
|
|
• |
$0 of standby letters of credit were outstanding. |
UNIFI currently maintains three interest rate swaps that fix LIBOR at approximately 1.9% on $75,000 of variable-rate debt. Such swaps are scheduled to terminate in May 2022. Management will continue to monitor the expected termination of LIBOR and the impact on UNIFI’s operations. However, management does not expect (i) significant efforts are necessary to accommodate a termination of LIBOR or (ii) a significant impact to UNIFI’s operations upon a termination of LIBOR.
In addition to making payments in accordance with the scheduled maturities of debt required under its existing debt obligations, UNIFI may, from time to time, elect to repay additional amounts borrowed under the ABL Facility. Funds to make such repayments may come from the operating cash flows of the business or other sources and will depend upon UNIFI’s strategy, prevailing market conditions, liquidity requirements, contractual restrictions and other factors.
Construction Financing
In May 2021, UNIFI entered into an agreement with a third party lender that provides for construction-period financing for certain texturing machinery anticipated in our capital allocation plans. UNIFI will record project costs to construction in progress and the corresponding liability to construction financing (within long-term debt). The agreement provides for monthly, interest-only payments during the construction period, at a rate of LIBOR plus 2.2%, and contains terms customary for a financing of this type. The agreement provides for 60 monthly payments, which will commence upon the completion of the construction period with an interest rate of approximately 2.8%.
Scheduled Debt Maturities
The following table presents the scheduled maturities of UNIFI’s outstanding debt obligations for the remainder of fiscal 2022, the following four fiscal years and thereafter:
|
|
|
Fiscal 2022 |
|
|
Fiscal 2023 |
|
|
Fiscal 2024 |
|
|
Fiscal 2025 |
|
|
Fiscal 2026 |
|
|
Thereafter |
|
||||||
|
ABL Revolver |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
ABL Term Loan |
|
|
10,000 |
|
|
|
10,000 |
|
|
|
55,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Finance lease obligations |
|
|
2,618 |
|
|
|
1,257 |
|
|
|
1,301 |
|
|
|
1,195 |
|
|
|
733 |
|
|
|
444 |
|
|
Total (1) |
|
$ |
12,618 |
|
|
$ |
11,257 |
|
|
$ |
56,301 |
|
|
$ |
1,195 |
|
|
$ |
733 |
|
|
$ |
444 |
|
|
|
(1) |
Total reported excludes $1,764 for construction financing, described above. |
Net Debt (Non-GAAP Financial Measure)
The reconciliations for Net Debt are as follows:
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Long-term debt |
|
$ |
68,465 |
|
|
$ |
70,336 |
|
|
Current portion of long-term debt |
|
|
15,428 |
|
|
|
16,045 |
|
|
Unamortized debt issuance costs |
|
|
419 |
|
|
|
476 |
|
|
Debt principal |
|
|
84,312 |
|
|
|
86,857 |
|
|
Less: cash and cash equivalents |
|
|
49,556 |
|
|
|
78,253 |
|
|
Net Debt |
|
$ |
34,756 |
|
|
$ |
8,604 |
|
25
Working Capital and Adjusted Working Capital (Non-GAAP Financial Measures)
The following table presents the components of working capital and the reconciliation of working capital to Adjusted Working Capital:
|
|
|
September 26, 2021 |
|
|
June 27, 2021 |
|
||
|
Cash and cash equivalents |
|
$ |
49,556 |
|
|
$ |
78,253 |
|
|
Receivables, net |
|
|
103,031 |
|
|
|
94,837 |
|
|
Inventories |
|
|
150,511 |
|
|
|
141,221 |
|
|
Income taxes receivable |
|
|
3,368 |
|
|
|
2,392 |
|
|
Other current assets |
|
|
12,816 |
|
|
|
12,364 |
|
|
Accounts payable |
|
|
(57,528 |
) |
|
|
(54,259 |
) |
|
Other current liabilities |
|
|
(19,319 |
) |
|
|
(31,638 |
) |
|
Income taxes payable |
|
|
(5,177 |
) |
|
|
(1,625 |
) |
|
Current operating lease liabilities |
|
|
(2,150 |
) |
|
|
(1,856 |
) |
|
Current portion of long-term debt |
|
|
(15,428 |
) |
|
|
(16,045 |
) |
|
Working capital |
|
$ |
219,680 |
|
|
$ |
223,644 |
|
|
|
|
|
|
|
|
|
|
|
|
Less: Cash and cash equivalents |
|
|
(49,556 |
) |
|
|
(78,253 |
) |
|
Less: Income taxes receivable |
|
|
(3,368 |
) |
|
|
(2,392 |
) |
|
Less: Income taxes payable |
|
|
5,177 |
|
|
|
1,625 |
|
|
Less: Current operating lease liabilities |
|
|
2,150 |
|
|
|
1,856 |
|
|
Less: Current portion of long-term debt |
|
|
15,428 |
|
|
|
16,045 |
|
|
Adjusted Working Capital |
|
$ |
189,511 |
|
|
$ |
162,525 |
|
Working capital decreased from $223,644 as of June 27, 2021 to $219,680 as of September 26, 2021, while Adjusted Working Capital increased from $162,525 to $189,511.
The decrease in cash and cash equivalents was primarily driven by the increase in receivables and inventories, the routine payment of incentive compensation earned in fiscal 2021, capital expenditures and scheduled debt service. The increase in receivables, net and inventories was primarily attributable to increased sales in the current period along with the impact of increased sales pricing and higher raw material costs. The changes in income taxes receivable and other current assets were insignificant. The increase in accounts payable was consistent with the increase in sales and production activity. The decrease in other current liabilities was primarily attributable to the payment of incentive compensation earned in fiscal 2021. The increase in income taxes payable primarily reflects the impact of the interim tax provision. The changes in current operating lease liabilities and current portion of long-term debt were insignificant.
Capital Projects
During the current period, UNIFI invested $9,300 in capital projects, primarily relating to (i) eAFK Evo texturing machinery, (ii) further improvements in production capabilities and technology enhancements in the Americas, and (iii) routine annual maintenance capital expenditures. Maintenance capital expenditures are necessary to support UNIFI’s current operations, capacities and capabilities and exclude expenses relating to repairs and costs that do not extend an asset’s useful life.
For the remainder of fiscal 2022, we expect to invest up to $34,700 in capital projects for an aggregate annual estimate of $40,000 to $44,000, to include (i) continuing the purchase and installation of new eAFK Evo texturing machines, (ii) making further improvements in production capabilities and technology enhancements in the Americas, and (iii) annual maintenance capital expenditures.
The total amount ultimately invested for fiscal 2022 could be more or less than the currently estimated amount depending on the timing and scale of contemplated initiatives and is expected to be funded primarily by existing cash and cash equivalents. UNIFI expects recent and future capital projects to provide benefits to future profitability. The additional assets from these capital projects consist primarily of machinery and equipment.
Share Repurchase Program
On October 31, 2018, the Board approved the 2018 SRP under which UNIFI is authorized to acquire up to $50,000 of its common stock. Under the 2018 SRP, purchases will be made from time to time in the open market at prevailing market prices or through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements and other factors. The share repurchase authorization is discretionary and has no expiration date.
As of September 26, 2021, UNIFI repurchased a total of 84 shares during fiscal 2020, at an average price of $23.72 (for a total of $1,994 inclusive of commission costs) pursuant to the 2018 SRP, leaving $48,008 available for repurchase under the 2018 SRP.
Liquidity Summary
UNIFI has met its historical liquidity requirements for working capital, capital expenditures, debt service requirements and other operating needs from its cash flows from operations and available borrowings. UNIFI believes that its existing cash balances, cash provided by operating activities and borrowings available under the ABL Revolver will enable UNIFI to comply with the terms of its indebtedness and meet its foreseeable liquidity requirements. Domestically, UNIFI’s cash balances, cash provided by operating activities and borrowings available under the ABL Revolver continue to be sufficient to fund UNIFI’s domestic operating activities as well as cash commitments for its investing and financing activities. For its foreign operations, UNIFI expects its existing cash balances and cash provided by operating activities will provide the needed liquidity to fund its foreign operating activities and any foreign
26
investing activities, such as future capital expenditures. However, expansion of our foreign operations may require cash sourced from our domestic subsidiaries.
Operating Cash Flows
The significant components of net cash (used) provided by operating activities are summarized below.
|
|
|
For the Three Months Ended |
|
|||||
|
|
|
September 26, 2021 |
|
|
September 27, 2020 |
|
||
|
Net income |
|
$ |
8,680 |
|
|
$ |
3,432 |
|
|
Equity in earnings of unconsolidated affiliates |
|
|
(280 |
) |
|
|
(93 |
) |
|
Depreciation and amortization expense |
|
|
6,365 |
|
|
|
6,112 |
|
|
Non-cash compensation expense |
|
|
660 |
|
|
|
509 |
|
|
Deferred income taxes |
|
|
(3,463 |
) |
|
|
(2,072 |
) |
|
Subtotal |
|
|
11,962 |
|
|
|
7,888 |
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, net |
|
|
(9,462 |
) |
|
|
(23,499 |
) |
|
Inventories |
|
|
(12,190 |
) |
|
|
4,853 |
|
|
Accounts payable and other current liabilities |
|
|
(7,393 |
) |
|
|
15,314 |
|
|
Other changes |
|
|
1,275 |
|
|
|
3,366 |
|
|
Net cash (used) provided by operating activities |
|
$ |
(15,808 |
) |
|
$ |
7,922 |
|
The decrease in net cash (used) provided by operating activities from the prior period to the current period was primarily due to an increase in working capital associated with (i) higher raw material costs and consolidated sales activity driving higher inventory and accounts receivable balances and (ii) lower other current liabilities resulting from the payment of incentive compensation earned in fiscal 2021, partially offset by an increase in net income.
Investing Cash Flows
Investing activities include $9,300 for capital expenditures, as previously described in Capital Projects above.
Financing Cash Flows
Financing activities include scheduled payments against the ABL Term Loan and finance leases during the current period.
Contractual Obligations
UNIFI has incurred various financial obligations and commitments in its normal course of business. Financial obligations are considered to represent known future cash payments that UNIFI is required to make under existing contractual arrangements, such as debt and lease agreements.
There have been no material changes in the scheduled maturities of UNIFI’s contractual obligations as disclosed under the heading “Contractual Obligations” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2021 Form 10-K.
Off-Balance Sheet Arrangements
UNIFI is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on UNIFI’s financial condition, results of operations, liquidity or capital expenditures.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The SEC has defined a company’s most critical accounting policies as those involving accounting estimates that require management to make assumptions about matters that are highly uncertain at the time and where different reasonable estimates or changes in the accounting estimate from quarter to quarter could materially impact the presentation of the financial statements. UNIFI’s critical accounting policies are discussed in the 2021 Form 10-K. There were no material changes to these policies during the current period.
|
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
UNIFI is exposed to market risks associated with changes in interest rates, fluctuations in foreign currency exchange rates, and raw material and commodity costs, which may adversely affect its financial position, results of operations or cash flows. UNIFI does not enter into derivative financial instruments for trading purposes, nor is it a party to any leveraged financial instruments.
Interest Rate Risk
UNIFI is exposed to interest rate risk through its borrowing activities. As of September 26, 2021, UNIFI had borrowings under its ABL Term Loan that totaled $75,000, for which all of the interest is currently hedged via interest rate swaps. After considering the variable rate debt obligations that have been hedged and UNIFI’s outstanding debt obligations with fixed rates of interest, UNIFI’s sensitivity analysis indicates that a 50-basis point increase in LIBOR as of September 26, 2021 would result in an increase in annual interest expense of less than $100.
27
Foreign Currency Exchange Rate Risk
UNIFI conducts its business in various foreign countries and in various foreign currencies. Each of UNIFI’s subsidiaries may enter into transactions (sales, purchases, fixed purchase commitments, etc.) that are denominated in currencies other than the subsidiary’s functional currency and thereby expose UNIFI to foreign currency exchange rate risk. UNIFI may enter into foreign currency forward contracts to hedge this exposure. UNIFI may also enter into foreign currency forward contracts to hedge its exposure for certain equipment or inventory purchase commitments. As of September 26, 2021, UNIFI had no outstanding foreign currency forward contracts.
A significant portion of raw materials purchased by the Brazil Segment are denominated in USDs, requiring UNIFI to regularly exchange BRL. A significant portion of sales and asset balances for the Asia Segment are denominated in USDs. During recent fiscal years, UNIFI has been negatively impacted by fluctuations of the BRL and the RMB. Discussion and analysis surrounding the impact of fluctuations of the BRL and the RMB on UNIFI’s results of operations are included above in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” UNIFI does not enter into foreign currency derivatives to hedge its net investment in its foreign operations.
As of September 26, 2021, foreign currency exchange rate risk concepts included the following:
|
|
|
Approximate Amount or Percentage |
|
|
|
Percentage of total consolidated assets held by UNIFI's subsidiaries outside the U.S. whose functional currency is not the USD |
|
|
28.4 |
% |
|
|
|
|
|
|
|
Cash and cash equivalents held outside the U.S.: |
|
|
|
|
|
Denominated in USD |
|
$ |
10,772 |
|
|
Denominated in RMB |
|
|
17,391 |
|
|
Denominated in BRL |
|
|
3,758 |
|
|
Denominated in other foreign currencies |
|
|
226 |
|
|
Total cash and cash equivalents held outside the U.S. |
|
$ |
32,147 |
|
|
Percentage of total cash and cash equivalents held outside the U.S. |
|
|
64.9 |
% |
|
|
|
|
|
|
|
Cash and cash equivalents held inside the U.S. in USD by foreign subsidiaries |
|
$ |
5,358 |
|
Raw Material and Commodity Risks
A significant portion of UNIFI’s raw material and energy costs are derived from petroleum-based chemicals. The prices for petroleum and petroleum-related products and related energy costs are volatile and dependent on global supply and demand dynamics, including certain geo-political risks. A sudden rise in the price of petroleum and petroleum-based products could have a material impact on UNIFI’s profitability. UNIFI does not use financial instruments to hedge its exposure to changes in these costs as management has concluded that the overall cost of hedging petroleum exceeds the potential risk mitigation. The costs of the primary raw materials that UNIFI uses throughout all of its operations are generally based on USD pricing, and such materials are purchased at market or at fixed prices that are established with individual vendors as part of the purchasing process for quantities expected to be consumed in the ordinary course of business. UNIFI manages fluctuations in the cost of raw materials primarily by making corresponding adjustments to the prices charged to its customers. Certain customers are subject to an index-based pricing model in which UNIFI’s prices are adjusted based on the change in the cost of raw materials in the prior quarter. Pricing adjustments for other customers must be negotiated independently. UNIFI attempts to quickly pass on to its customers increases in raw material costs, but due to market pressures, this is not always possible. When price increases can be implemented, there is typically a time lag that adversely affects UNIFI’s margins during one or more quarters. In ordinary market conditions in which raw material price increases have stabilized and sales volumes are consistent with traditional levels, UNIFI has historically been successful in implementing price adjustments within one to two fiscal quarters of the raw material price increase for its index-priced customers and within two fiscal quarters of the raw material price increase for its non-index-priced customers.
As fiscal 2021 concluded, UNIFI experienced cost increases for raw materials, primarily related to (i) increases in petroleum prices and (ii) supply chain disruptions that occurred in Texas during February 2021 due to abnormally cold weather. Our raw material costs remain elevated in fiscal 2022. However, we have been able to implement responsive selling price adjustments for the majority of our portfolio, and our underlying gross margin has not been significantly pressured by the elevated raw material costs. Nonetheless, such costs remain subject to the volatility described above and, should raw material costs increase unexpectedly, UNIFI’s results of operations and cash flows are likely to be adversely impacted.
Other Risks
UNIFI is also exposed to political risk, including changing laws and regulations governing international trade, such as quotas, tariffs and tax laws. The degree of impact and the frequency of these events cannot be predicted.
28
The risks associated with climate change, localized energy management initiatives, and other environmental impacts could negatively affect UNIFI’s business and operations.
UNIFI’s business is susceptible to risks associated with climate change, including, but not limited to, disruptions to our supply chain, which could potentially impact the production and distribution of our products and availability and pricing of raw materials. Increased frequency and intensity of weather events due to climate change could lead to supply chain disruption, energy and resource rationing, or an adverse event at one of our manufacturing facilities. For example, the February 2021 winter storm in Texas impacted our U.S. supply chain and led to non-routine fees and surcharges applied to routine business activities and products. Further, the recent energy management initiatives in China are currently pressuring global supply chains and reducing supplier and customer activity. UNIFI remains focused on diversifying our product portfolio and manufacturing footprint while utilizing fewer resources to help address the risks associated with climate change. Nonetheless, the associated risks could adversely impact our results of operations and cash flows.
|
Item 4. |
Controls and Procedures |
As of September 26, 2021, an evaluation of the effectiveness of UNIFI’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was performed under the supervision and with the participation of UNIFI’s management, including the principal executive officer and principal financial officer. Based on that evaluation, UNIFI’s principal executive officer and principal financial officer concluded that UNIFI’s disclosure controls and procedures are effective to ensure that information required to be disclosed by UNIFI in its reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that information required to be disclosed by UNIFI in the reports UNIFI files or submits under the Exchange Act is accumulated and communicated to UNIFI’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in UNIFI’s internal control over financial reporting during the three months ended September 26, 2021 that have materially affected, or are reasonably likely to materially affect, UNIFI’s internal control over financial reporting.
29
PART II—OTHER INFORMATION
|
Item 1. |
Legal Proceedings |
We are from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to all such lawsuits, claims and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our results of operations, financial position or cash flows. We maintain liability insurance for certain risks that is subject to certain self-insurance limits.
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
Not applicable.
|
Item 6. |
Exhibits |
|
Exhibit No. |
|
Description |
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
3.2 |
|
|
|
|
|
|
|
3.3 |
|
|
|
|
|
|
|
10.1* |
|
|
|
|
|
|
|
10.2*+ |
|
|
|
|
|
|
|
31.1+ |
|
|
|
31.2+ |
|
|
|
|
|
|
|
32.1++ |
|
|
|
|
|
|
|
32.2++ |
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
|
+ |
Filed herewith. |
|
++ |
Furnished herewith. |
|
* |
Indicates a management contract or compensatory plan or arrangement. |
30
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 thereunto duly authorized.
|
|
|
UNIFI, INC. |
|
|
|
|
(Registrant) |
|
|
|
|
|
|
|
Date: November 3, 2021 |
|
By: |
/s/ CRAIG A. CREATURO |
|
|
|
|
Craig A. Creaturo |
|
|
|
|
Executive Vice President & Chief Financial Officer |
|
|
|
|
(Principal Financial Officer and Principal Accounting Officer) |
31