8-K
Unifi Inc (UFI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 2020
UNIFI, INC.
(Exact name of registrant as specified in its charter)
| New York | 1-10542 | 11-2165495 |
|---|---|---|
| (State or other jurisdiction<br><br><br>of incorporation) | (Commission<br><br><br>File Number) | (IRS Employer<br><br><br>Identification No.) |
| 7201 West Friendly Avenue<br><br><br>Greensboro, North Carolina | 27410 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (336) 294-4410
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br><br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.10 per share | UFI | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b‑2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02.Results of Operations and Financial Condition.
On October 26, 2020, the Company issued a press release announcing its operating results for the first quarter of fiscal 2021 ended September 27, 2020, a copy of which is attached hereto as Exhibit 99.1.
Item 7.01.Regulation FD Disclosure.
On October 27, 2020, the Company will host a conference call to discuss its operating results for the first quarter of fiscal 2021 ended September 27, 2020. A copy of the materials prepared for use by management during this conference call is attached hereto as Exhibit 99.2.
Item 9.01.Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit<br><br><br>No. | Description |
|---|---|
| 99.1 | Press Release of Unifi, Inc., dated October 26, 2020. |
| 99.2 | Earnings Call Presentation Materials. |
The information in this Current Report on Form 8-K, including the exhibits attached hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UNIFI, INC. | ||
|---|---|---|
| Date: October 26, 2020 | By: | /s/ CRAIG A. CREATURO |
| Craig A. Creaturo | ||
| Executive Vice President & Chief Financial Officer |
ufi-ex991_12.htm
Exhibit 99.1
Unifi Announces Strong Sequential Growth with First Quarter Fiscal 2021 Results
First quarter results reflect strong sequential growth as recovery takes hold faster than anticipated, driven by agile global business model and innovative culture
GREENSBORO, N.C., October 26, 2020 – Unifi, Inc. (NYSE: UFI), one of the world’s leading innovators in recycled and synthetic yarns, today released operating results for the first quarter of fiscal 2021 ended September 27, 2020.
First Quarter Fiscal 2021 Overview
| • | Net sales were $141.5 million, a decrease of 21% year-over-year, but an increase of 64% sequentially compared to the fourth quarter of fiscal 2020. |
|---|---|
| • | Revenues from REPREVE^®^ Fiber products represented a quarterly record of 35% of net sales compared to 31% in the first quarter of fiscal 2020. |
| --- | --- |
| • | Gross margin was 10.3%, an increase of 60 basis points year-over-year, despite the net sales decrease of 21% year-over-year. |
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| • | Net income was $3.4 million, or $0.18 of diluted earnings per share (“EPS”). |
| --- | --- |
| • | Adjusted EBITDA^1^ was $9.1 million. |
| --- | --- |
| • | Operating cash flows were $7.9 million, continuing the momentum from fiscal 2020. |
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| • | On September 27, 2020, debt principal was $95.4 million while cash and cash equivalents were $78.1 million, resulting in Net Debt^1^ of $17.3 million, a reduction from $23.6 million at June 28, 2020, and a record low level for the Company in more than 20 years. |
| --- | --- |
| • | During October 2020, the Company completed a strategic acquisition of the air-jet texturing assets of Texturing Service LLC (“TSI”) to enhance and expand the Company’s existing textured yarn capabilities; financial terms were not disclosed and did not impact first quarter fiscal 2021. |
| --- | --- |
Eddie Ingle, Chief Executive Officer of Unifi, said, “Our first quarter of fiscal 2021 results were better than anticipated and demonstrated the resilience of our business and the agility of our global model. We experienced sequential improvement in revenue during each month of the quarter and the pace of our recovery has been reassuring. We also achieved an expansion of gross margin by 60 basis points year-over-year, which was quite an achievement given ongoing pandemic-related volume pressures. Interest in our sustainable solutions remains high,
| ^1^ | Adjusted EBITDA and Net Debt are non-GAAP financial measures. The schedules included in this press release reconcile each non-GAAP financial measure to its most directly comparable GAAP financial measure. |
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as exemplified by REPREVE^®^ Fibers reaching 35% of our net sales. In the quarters ahead, our team will remain intently focused on the customer experience, driving new and innovative sustainable solutions, and returning to long-term growth. I am confident that our diverse global operations, strong management team, and solid financial position will enable us to regain our momentum throughout fiscal 2021.”
First Quarter Fiscal 2021 Compared to First Quarter Fiscal 2020
Net sales were $141.5 million, compared to $179.9 million in the first quarter of fiscal 2020. The decline was primarily the result of overall lower global demand, lower selling prices in connection with lower raw material costs, and unfavorable foreign currency translation. The decline was partially offset by volume growth in Brazil due to the operation’s strength and ability to quickly respond to pandemic-related demand fluctuations. Net sales exhibited sequential monthly increases, driving a 64% increase over the fourth quarter of fiscal 2020.
Gross profit decreased to $14.6 million from $17.4 million in the first quarter of fiscal 2020, primarily due to the expected lower sales and production volumes in the U.S. However, gross margin increased to 10.3%, compared to 9.7%, driven by improvements in both Asia and Brazil.
Operating income for the first quarter of fiscal 2021 was $2.9 million, compared to $6.3 million for the first quarter of fiscal 2020, primarily due to the pandemic impact on U.S. gross profit.
Net income was $3.4 million, or $0.18 per share, and included a $1.2 million income tax benefit resulting from a $2.7 million net benefit in connection with recently passed high-tax exception rules. Net income for the first quarter of fiscal 2020 was $3.7 million, or $0.20 per share, and was adversely impacted by a $1.2 million loss from a minority interest investment the Company sold in April 2020.
Net Debt was $17.3 million on September 27, 2020, compared to $88.3 million on September 29, 2019. Cash and cash equivalents increased to $78.1 million on September 27, 2020, up from $34.1 million on September 29, 2019. The favorable cash and liquidity positions benefited from the $60.0 million sale proceeds of a minority interest investment the Company sold in April 2020 and continued diligence around lowering working capital and capital expenditures.
Acquisition of TSI Assets
During October 2020, the Company completed the acquisition of TSI’s air-jet texturing assets located in Virginia.
| Unifi Announces Strong Sequential Growth with First Quarter Fiscal 2021 Results | 2 |
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Financial terms were not disclosed. Customers and production activity will transition to the Company’s Polyester segment operations in North Carolina during the second quarter of fiscal 2021.
Fiscal 2021 Outlook
For fiscal 2021, assuming no further significant disruptions to global markets or further adverse impacts from COVID-19, the Company notes and expects the following:
| • | The initial recovery in net sales and profitability in the first quarter of fiscal 2021 appears consistent with the improvements in the apparel industry, in spite of the lingering challenges of COVID-19; |
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| • | Entering the second quarter of fiscal 2021, net sales trends are encouraging and are expected to continue to improve; should these trends remain, growth in profitability is expected to follow at commensurate rates, considering any routine seasonal net sales and expense items; |
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| • | Sales of REPREVE^®^ and value-added products are expected to continue recent growth rates and increase as a percentage of net sales; and |
| --- | --- |
| • | $22.0 to $25.0 million of capital expenditures are expected for fiscal 2021. |
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First Quarter Fiscal 2021 Earnings Conference Call
The Company will provide additional commentary regarding its first quarter fiscal 2021 results and other developments during its earnings conference call on October 27, 2020, at 8:30 a.m., Eastern Time. The call can be accessed via a live audio webcast on the Company’s website at http://investor.unifi.com. Additional supporting materials and information related to the call will also be available on the Company’s website.
About Unifi
Unifi, Inc. (NYSE: UFI) is a global textile solutions provider and one of the world's leading innovators in manufacturing synthetic and recycled performance fibers. Through REPREVE^®^, one of Unifi's proprietary technologies and the global leader in branded recycled performance fibers, Unifi has transformed more than 23 billion plastic bottles into recycled fiber for new apparel, footwear, home goods and other consumer products. The Company's proprietary PROFIBER™ technologies offer increased performance, comfort and style advantages, enabling customers to develop products that perform, look and feel better. Unifi continually innovates technologies to meet consumer needs in moisture management, thermal regulation, antimicrobial protection, UV protection, stretch, water resistance and enhanced softness. Unifi collaborates with many of the world's most influential brands
| Unifi Announces Strong Sequential Growth with First Quarter Fiscal 2021 Results | 3 |
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in the sports apparel, fashion, home, automotive and other industries. For more information about Unifi, visit www.Unifi.com.
Contact information:
Alpha IR Group
312-445-2870
Financial Statements, Business Segment Information and Reconciliations of Reported Results to Adjusted Results to Follow
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
| For the Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| September 27, 2020 | September 29, 2019 | |||||
| Net sales | $ | 141,505 | $ | 179,949 | ||
| Cost of sales | 126,944 | 162,506 | ||||
| Gross profit | 14,561 | 17,443 | ||||
| Selling, general and administrative expenses | 11,364 | 10,980 | ||||
| (Benefit) provision for bad debts | (887 | ) | 9 | |||
| Other operating expense, net | 1,178 | 108 | ||||
| Operating income | 2,906 | 6,346 | ||||
| Interest income | (125 | ) | (210 | ) | ||
| Interest expense | 871 | 1,257 | ||||
| Equity in (earnings) loss of unconsolidated affiliates | (93 | ) | 866 | |||
| Income before income taxes | 2,253 | 4,433 | ||||
| (Benefit) provision for income taxes | (1,179 | ) | 721 | |||
| Net income | $ | 3,432 | $ | 3,712 | ||
| Net income per common share: | ||||||
| Basic | $ | 0.19 | $ | 0.20 | ||
| Diluted | $ | 0.18 | $ | 0.20 | ||
| Weighted average common shares outstanding: | ||||||
| Basic | 18,447 | 18,481 | ||||
| Diluted | 18,698 | 18,726 | ||||
| Unifi Announces Strong Sequential Growth with First Quarter Fiscal 2021 Results | 5 | |||||
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
| September 27, 2020 | June 28, 2020 | |||||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash and cash equivalents | $ | 78,095 | $ | 75,267 | ||
| Receivables, net | 77,228 | 53,726 | ||||
| Inventories | 104,780 | 109,704 | ||||
| Income taxes receivable | 7,387 | 4,033 | ||||
| Other current assets | 9,760 | 11,763 | ||||
| Total current assets | 277,250 | 254,493 | ||||
| Property, plant and equipment, net | 200,222 | 204,246 | ||||
| Operating lease assets | 8,482 | 8,940 | ||||
| Deferred income taxes | 2,333 | 2,352 | ||||
| Other non-current assets | 3,950 | 4,131 | ||||
| Total assets | $ | 492,237 | $ | 474,162 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Accounts payable | $ | 38,468 | $ | 25,610 | ||
| Accrued expenses | 16,618 | 13,689 | ||||
| Income taxes payable | 3,936 | 349 | ||||
| Current operating lease liabilities | 1,773 | 1,783 | ||||
| Current portion of long-term debt | 13,506 | 13,563 | ||||
| Total current liabilities | 74,301 | 54,994 | ||||
| Long-term debt | 81,279 | 84,607 | ||||
| Non-current operating lease liabilities | 6,811 | 7,251 | ||||
| Other long-term liabilities | 9,214 | 8,606 | ||||
| Deferred income taxes | 555 | 2,549 | ||||
| Total liabilities | 172,160 | 158,007 | ||||
| Commitments and contingencies | ||||||
| Common stock | 1,845 | 1,845 | ||||
| Capital in excess of par value | 62,810 | 62,392 | ||||
| Retained earnings | 319,156 | 315,724 | ||||
| Accumulated other comprehensive loss | (63,734 | ) | (63,806 | ) | ||
| Total shareholders’ equity | 320,077 | 316,155 | ||||
| Total liabilities and shareholders’ equity | $ | 492,237 | $ | 474,162 | ||
| Unifi Announces Strong Sequential Growth with First Quarter Fiscal 2021 Results | 6 | |||||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| For the Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| September 27, 2020 | September 29, 2019 | |||||
| Cash and cash equivalents at beginning of period | $ | 75,267 | $ | 22,228 | ||
| Operating activities: | ||||||
| Net income | 3,432 | 3,712 | ||||
| Adjustments to reconcile net income to net cash<br><br><br>provided by operating activities: | ||||||
| Equity in (earnings) loss of unconsolidated affiliates | (93 | ) | 866 | |||
| Distributions received from unconsolidated affiliates | — | 10,437 | ||||
| Depreciation and amortization expense | 6,112 | 5,685 | ||||
| Non-cash compensation expense | 509 | 187 | ||||
| Deferred income taxes | (2,072 | ) | (760 | ) | ||
| Other, net | (132 | ) | (127 | ) | ||
| Changes in assets and liabilities | 166 | 3,822 | ||||
| Net cash provided by operating activities | 7,922 | 23,822 | ||||
| Investing activities: | ||||||
| Capital expenditures | (1,864 | ) | (4,585 | ) | ||
| Other, net | — | (21 | ) | |||
| Net cash used by investing activities | (1,864 | ) | (4,606 | ) | ||
| Financing activities: | ||||||
| Proceeds from long-term debt | — | 23,000 | ||||
| Payments on long-term debt | (3,445 | ) | (29,508 | ) | ||
| Other, net | (7 | ) | (15 | ) | ||
| Net cash used by financing activities | (3,452 | ) | (6,523 | ) | ||
| Effect of exchange rate changes on cash and cash equivalents | 222 | (803 | ) | |||
| Net increase in cash and cash equivalents | 2,828 | 11,890 | ||||
| Cash and cash equivalents at end of period | $ | 78,095 | $ | 34,118 | ||
| Unifi Announces Strong Sequential Growth with First Quarter Fiscal 2021 Results | 7 | |||||
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BUSINESS SEGMENT INFORMATION
(Unaudited)
(In thousands)
Net sales details for each reportable segment of the Company are as follows:
| For the Three Months Ended | ||||
|---|---|---|---|---|
| September 27, 2020 | September 29, 2019 | |||
| Polyester | $ | 69,076 | $ | 88,695 |
| Asia | 37,723 | 45,957 | ||
| Brazil | 22,606 | 24,172 | ||
| Nylon | 11,029 | 20,202 | ||
| All Other | 1,071 | 923 | ||
| Consolidated net sales | $ | 141,505 | $ | 179,949 |
Gross profit details for each reportable segment of the Company are as follows:
| For the Three Months Ended | ||||
|---|---|---|---|---|
| September 27, 2020 | September 29, 2019 | |||
| Polyester | $ | 4,632 | $ | 7,795 |
| Asia | 4,578 | 4,282 | ||
| Brazil | 4,613 | 4,159 | ||
| Nylon | 665 | 1,178 | ||
| All Other | 73 | 29 | ||
| Consolidated gross profit | $ | 14,561 | $ | 17,443 |
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RECONCILIATIONS OF REPORTED RESULTS TO ADJUSTED RESULTS
(Unaudited)
(In thousands)
EBITDA and Adjusted EBITDA
The reconciliations of the amounts reported under U.S. generally accepted accounting principles (“GAAP”) for Net income to EBITDA and Adjusted EBITDA are as follows:
| For the Three Months Ended | |||||
|---|---|---|---|---|---|
| September 27, 2020 | September 29, 2019 | ||||
| Net income | $ | 3,432 | $ | 3,712 | |
| Interest expense, net | 746 | 1,047 | |||
| (Benefit) provision for income taxes | (1,179 | ) | 721 | ||
| Depreciation and amortization expense ^(1)^ | 6,052 | 5,622 | |||
| EBITDA | 9,051 | 11,102 | |||
| Equity in loss of PAL | — | 1,175 | |||
| EBITDA excluding PAL | 9,051 | 12,277 | |||
| Other adjustments ^(2)^ | — | — | |||
| Adjusted EBITDA | $ | 9,051 | $ | 12,277 | |
| (1) | Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net. Within the condensed consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense. | ||||
| --- | --- | ||||
| (2) | For the periods presented, there were no other adjustments necessary to reconcile Net income to Adjusted EBITDA. However, such adjustments may be presented in future periods when applicable. | ||||
| --- | --- |
Net Debt
Reconciliations of Net Debt are as follows:
| September 27, 2020 | June 28, 2020 | |||
|---|---|---|---|---|
| Long-term debt | $ | 81,279 | $ | 84,607 |
| Current portion of long-term debt | 13,506 | 13,563 | ||
| Unamortized debt issuance costs | 651 | 711 | ||
| Debt principal | 95,436 | 98,881 | ||
| Less: cash and cash equivalents | 78,095 | 75,267 | ||
| Net Debt | $ | 17,341 | $ | 23,614 |
Cash and cash equivalents
At September 27, 2020 and June 28, 2020, the Company’s domestic operations held approximately 62% and 54% of consolidated cash and cash equivalents, respectively.
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Non-GAAP Financial Measures
Certain non-GAAP financial measures included herein are designed to complement the financial information presented in accordance with GAAP. These non-GAAP financial measures include Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA, and Net Debt (together, the “non-GAAP financial measures”).
| • | EBITDA represents Net income before net interest expense, income tax expense, and depreciation and amortization expense. |
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| • | Adjusted EBITDA represents EBITDA adjusted to exclude equity in loss of PAL and, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI. |
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| • | Net Debt represents debt principal less cash and cash equivalents. |
| --- | --- |
The non-GAAP financial measures are not determined in accordance with GAAP and should not be considered a substitute for performance measures determined in accordance with GAAP. The calculations of the non-GAAP financial measures are subjective, based on management’s belief as to which items should be included or excluded in order to provide the most reasonable and comparable view of the underlying operating performance of the business. We may, from time to time, modify the amounts used to determine our non-GAAP financial measures.
We believe that these non-GAAP financial measures better reflect Unifi’s underlying operations and performance and that their use, as operating performance measures, provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets, among otherwise comparable companies.
Management uses Adjusted EBITDA (i) as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis, as it removes the impact of (a) items directly related to our asset base (primarily depreciation and amortization) and (b) items that we would not expect to occur as a part of our normal business on a regular basis; (ii) for planning purposes, including the preparation of our annual operating budget; (iii) as a valuation measure for evaluating our operating performance and our capacity to incur and service debt, fund capital expenditures, and expand our business; and (iv) as one measure in determining the value of other acquisitions and dispositions. Adjusted EBITDA is a key performance metric utilized in the determination of variable compensation. We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because it serves as a high-level proxy for cash generated from operations. Equity in loss of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance.
Management uses Net Debt as a liquidity and leverage metric to determine how much debt would remain if all cash and cash equivalents were used to pay down debt principal.
In evaluating non-GAAP financial measures, investors should be aware that, in the future, we may incur expenses similar to the adjustments included herein. Our presentation of non-GAAP financial measures should not be construed as indicating that our future results will be unaffected by unusual or non-recurring items. Each of our non-GAAP financial measures has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of our results or liquidity measures as reported under GAAP. Some of these limitations are (i) it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; (ii) it does not reflect the impact of earnings or charges resulting from matters we consider not indicative of our ongoing operations; (iii) it does not reflect changes in, or cash requirements for, our working capital needs; (iv) it does not reflect the cash requirements necessary to make payments on our debt; (v) it does not reflect our future requirements for capital expenditures or contractual commitments; (vi) it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and (vii) other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, these non-GAAP financial measures should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations, including those under our outstanding debt obligations. Investors should compensate for these limitations by relying primarily on our GAAP results and using these measures only as supplemental information.
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Cautionary Statement on Forward-Looking Statements
Certain statements included herein contain “forward-looking statements” within the meaning of federal securities laws about the financial condition and results of operations of Unifi that are based on management’s beliefs, assumptions and expectations about our future economic performance, considering the information currently available to management. An example of such forward-looking statements include, among others, guidance pertaining to our financial outlook. The words “believe,” “may,” “could,” “will,” “should,” “would,” “anticipate,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek,” “strive” and words of similar import, or the negative of such words, identify or signal the presence of forward-looking statements. These statements are not statements of historical fact, and they involve risks and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition that we express or imply in any forward-looking statement.
Factors that could contribute to such differences include, but are not limited to: the competitive nature of the textile industry and the impact of global competition; changes in the trade regulatory environment and governmental policies and legislation; the availability, sourcing and pricing of raw materials; general domestic and international economic and industry conditions in markets where Unifi competes, including economic and political factors over which Unifi has no control; changes in consumer spending, customer preferences, fashion trends and end uses for products; the financial condition of Unifi’s customers; the loss of a significant customer or brand partner; natural disasters, industrial accidents, power or water shortages, extreme weather conditions and other disruptions at one of our facilities; the 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; the success of Unifi’s strategic business initiatives; the volatility of financial and credit markets; the ability to service indebtedness and fund capital expenditures and strategic business initiatives; the availability of and access to credit on reasonable terms; changes in foreign currency exchange, interest and inflation rates; fluctuations in production costs; the ability to protect intellectual property; the strength and reputation of our brands; employee relations; the ability to attract, retain and motivate key employees; the impact of environmental, health and safety regulations; the impact of tax laws, the judicial or administrative interpretations of tax laws and/or changes in such laws or interpretations; the operating performance of joint ventures and other equity method investments; and the accurate financial reporting of information from equity method investees.
All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on Unifi. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, except as may be required by federal securities laws. The above and other risks and uncertainties are described in Unifi’s most recent Annual Report on Form 10-K, and additional risks or uncertainties may be described from time to time in other reports filed by Unifi with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
-end-
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ufi-ex992_11.pptx.htm
First Quarter Ended September 27, 2020 (Unaudited Results) October 27, 2020 Conference Call Presentation Exhibit 99.2
Cautionary Statement on Forward-Looking Statements Certain statements included herein contain “forward-looking statements” within the meaning of federal securities laws about the financial condition and results of operations of the Company that are based on management’s beliefs, assumptions and expectations about our future economic performance, considering the information currently available to management. An example of such forward-looking statements include, among others, guidance pertaining to our financial outlook. The words “believe,” “may,” “could,” “will,” “should,” “would,” “anticipate,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek,” “strive” and words of similar import, or the negative of such words, identify or signal the presence of forward-looking statements. These statements are not statements of historical fact, and they involve risks and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition that we express or imply in any forward-looking statement. Factors that could contribute to such differences include, but are not limited to: the competitive nature of the textile industry and the impact of global competition; changes in the trade regulatory environment and governmental policies and legislation; the availability, sourcing and pricing of raw materials; general domestic and international economic and industry conditions in markets where the Company competes, including economic and political factors over which the Company has no control; changes in consumer spending, customer preferences, fashion trends and end uses for products; the financial condition of the Company’s customers; the loss of a significant customer or brand partner; natural disasters, industrial accidents, power or water shortages, extreme weather conditions and other disruptions at one of our facilities; the 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; the success of the Company’s strategic business initiatives; the volatility of financial and credit markets; the ability to service indebtedness and fund capital expenditures and strategic business initiatives; the availability of and access to credit on reasonable terms; changes in foreign currency exchange, interest and inflation rates; fluctuations in production costs; the ability to protect intellectual property; the strength and reputation of our brands; employee relations; the ability to attract, retain and motivate key employees; the impact of environmental, health and safety regulations; the impact of tax laws, the judicial or administrative interpretations of tax laws and/or changes in such laws or interpretations; the operating performance of joint ventures and other equity method investments; and the accurate financial reporting of information from equity method investees. All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, except as may be required by federal securities laws. The above and other risks and uncertainties are described in the Company’s most recent Annual Report on Form 10-K, and additional risks or uncertainties may be described from time to time in other reports filed by the Company with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Non-GAAP Financial Measures Certain non-GAAP financial measures are designed to complement the financial information presented in accordance with GAAP. These non-GAAP financial measures include Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA, Adjusted Net (Loss) Income, Adjusted EPS, Adjusted Working Capital and Net Debt (collectively, the “non-GAAP financial measures”). • EBITDA represents Net income before net interest expense, income tax expense, and depreciation and amortization expense. • Adjusted EBITDA represents EBITDA adjusted to exclude equity in loss of Parkdale America, LLC (“PAL”) and, from time to time, certain other adjustments necessary to understand and compare the underlying results of the Company. • Adjusted Working Capital represents receivables plus inventory and other current assets, less accounts payable and accrued expenses, which is an indicator of the Company’s production efficiency and ability to manage its inventory and receivables. • Net Debt represents debt principal less cash and cash equivalents. The non-GAAP financial measures are not determined in accordance with GAAP and should not be considered a substitute for performance measures determined in accordance with GAAP. The calculations of the non-GAAP financial measures are subjective, based on management’s belief as to which items should be included or excluded in order to provide the most reasonable and comparable view of the underlying operating performance of the business. The Company may, from time to time, modify the amounts used to determine its non-GAAP financial measures. We believe that these non-GAAP financial measures better reflect the Company’s underlying operations and performance and that their use, as operating performance measures, provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets, among otherwise comparable companies. Management uses Adjusted EBITDA (i) as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis, as it removes the impact of (a) items directly related to our asset base (primarily depreciation and amortization) and (b) items that we would not expect to occur as a part of our normal business on a regular basis; (ii) for planning purposes, including the preparation of our annual operating budget; (iii) as a valuation measure for evaluating our operating performance and our capacity to incur and service debt, fund capital expenditures and expand our business; and (iv) as one measure in determining the value of other acquisitions and dispositions. Adjusted EBITDA is a key performance metric utilized in the determination of variable compensation. We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because it serves as a high-level proxy for cash generated from operations. Equity in loss of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance. Management uses Adjusted Working Capital as an indicator of the Company’s production efficiency and ability to manage inventory and receivables. In the first quarter of fiscal 2019, in connection with changes to balance sheet presentation required by the adoption of new revenue recognition guidance, the Company updated the definition of Adjusted Working Capital to include Other current assets for current and historical calculations of the non-GAAP financial measure. Other current assets includes amounts capitalized for future conversion into inventory or receivables (e.g., vendor deposits and contract assets), and management believes that its inclusion in the definition of Adjusted Working Capital improves the understanding of the Company’s capital that is supporting production and sales activity. Management uses Net Debt as a liquidity and leverage metric to determine how much debt would remain if all cash and cash equivalents were used to pay down debt principal. In evaluating non-GAAP financial measures, investors should be aware that, in the future, we may incur expenses similar to the adjustments included herein. Our presentation of non-GAAP financial measures should not be construed as indicating that our future results will be unaffected by unusual or non-recurring items. Each of our non-GAAP financial measures has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results or liquidity measures as reported under GAAP. Some of these limitations are (i) it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; (ii) it does not reflect the impact of earnings or charges resulting from matters we consider not indicative of our ongoing operations; (iii) it does not reflect changes in, or cash requirements for, our working capital needs; (iv) it does not reflect the cash requirements necessary to make payments on our debt; (v) it does not reflect our future requirements for capital expenditures or contractual commitments; (vi) it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and (vii) other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, these non-GAAP financial measures should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations, including those under our outstanding debt obligations. You should compensate for these limitations by relying primarily on our GAAP results and using these measures only as supplemental information.
Revenue rebounded 64% from Q4 fiscal 2020 levels Recovery speed by geography (strongest first) Brazil – highest quarterly sales volume on record Asia – effective cost management North / Central America – sustainability interest grows Recovery speed by market (strongest first) Automotive Apparel Furnishings All other Q1 FISCAL 2021 CEO COMMENTARY Consolidated net sales (millions) Momentum from new products, customer adoptions, and co-branding Strategic acquisition of Texturing Service LLC’s air-jet texturing business; easy to integrate into the Polyester Segment Current balance sheet is even stronger than at June 2020
NET SALES OVERVIEW (SEQUENTIAL QUARTER) (dollars in thousands) Three-Month Comparison (Q4 FY20 vs. Q1 FY21) 1 Approximates the impact of foreign currency translation. nm – Not meaningful
NET SALES OVERVIEW (YEAR-OVER-YEAR) Three-Month Comparison (Q1 FY20 vs. Q1 FY21) 1 Approximates the impact of foreign currency translation. nm – Not meaningful Note: The “Prior Period” ended on September 29, 2019. The “Current Period” ended on September 27, 2020. The Prior Period and the Current Period each contained 13 fiscal weeks. (dollars in thousands)
nm – Not meaningful Three-Month Comparison (Q4 FY20 vs. Q1 FY21) GROSS PROFIT OVERVIEW (SEQUENTIAL QUARTER) (dollars in thousands)
nm – Not meaningful Note: The “Prior Period” ended on September 29, 2019. The “Current Period” ended on September 27, 2020. The Prior Period and the Current Period each contained 13 fiscal weeks. Three-Month Comparison (Q1 FY20 vs. Q1 FY21) (dollars in thousands) GROSS PROFIT OVERVIEW (YEAR-OVER-YEAR)
BALANCE SHEET HIGHLIGHTS (dollars in millions) Net Debt Continued diligence around balance sheet during initial recovery stages Capital allocation strategy remains balanced and focused on: Capital expenditures Acquisitions Debt reduction Share repurchases
The initial recovery in net sales and profitability in the first quarter of fiscal 2021 appears consistent with the improvements in the apparel industry, in spite of the lingering challenges of COVID-19; Entering the second quarter of fiscal 2021, net sales trends are encouraging and are expected to continue to improve; should these trends remain, growth in profitability is expected to follow at commensurate rates, considering any routine seasonal net sales and expense items; Sales of REPREVE® and value-added products are expected to continue recent growth rates and increase as a percentage of net sales; and $22.0 to $25.0 million of capital expenditures are expected for fiscal 2021. Building on Q1 2021 Momentum to Navigate the Recovery FOR THE GOOD OF TOMORROW
Thank You!