Unifi, Inc. (NYSE: UFI) (together with its consolidated subsidiaries, “UNIFI”), makers of REPREVE and one of the world’s leading innovators in recycled and synthetic yarns, today released operating results for the fourth fiscal quarter and fiscal year ended July 2, 2023.
Fourth Quarter Fiscal 2023 Overview
- Net sales were $151.1 million, pressured primarily by weak demand, due in part to volatile ordering patterns from brands and retailers.
- Revenues from REPREVE Fiber products represented 29% of net sales, or $44.5 million, and were primarily impacted by lower sales volumes in Asia.
- Gross profit was $6.0 million and gross margin was 4.0%, and each was impacted by lower demand.
- Operating loss was $13.7 million, which includes an $8.2 million impairment charge for abandonment of specialized machinery constructed in the Americas in fiscal 2017.
- Net loss was $15.3 million, or ($0.85) per share. Adjusted Net Loss was $7.0 million and Adjusted EBITDA was $1.7 million, and each exclude the $8.2 million impairment charge.
- Debt principal was $140.9 million and Net Debt was $93.9 million at July 2, 2023.
- Following strict cost control measures and reduced capital spending in the quarter, cash and cash equivalents were $47.0 million and immediate borrowing availability exceeded $30.0 million.
Adjusted Net (Loss) Income, 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.
Eddie Ingle, Chief Executive Officer of Unifi, said, “Our fourth quarter fiscal 2023 results reflect continued demand instability across apparel and textile supply chains, which were once again impacted by low levels of brand and retailer demand. In spite of the current headwinds, we are cultivating market share opportunities across the Americas and Brazil Segments through diligent price management and portfolio diversification. Additionally, our mix enrichment efforts in Asia continue to strengthen the asset-light margin profile. Our disciplined cost controls and reduced spending levels have bolstered our balance sheet and liquidity. These efforts allow us to remain focused on positioning our segments for demand recovery in fiscal 2024, restoring profitability, and executing our growth strategy, which includes accelerating innovation, expanding REPREVE brand awareness, increasing market share, and penetrating new markets.”
Fourth Quarter Fiscal 2023 Compared to Fourth Quarter Fiscal 2022
Net sales decreased to $151.1 million, from $217.6 million, primarily driven by lower sales volumes related to a weak global textile environment. The demand for apparel production declined in fiscal 2023 as brands and retailers took actions to reduce their inventory levels and normalize supply chains. Such actions caused the Americas and Asia Segments to experience revenue declines. The prior year quarter included a strong macro-economic environment amid supply chain and resource constraints.
Gross profit was $6.0 million compared to $18.4 million. Americas Segment gross profit decreased $8.5 million, primarily as a result of lower sales volumes driving weaker productivity and cost absorption. Brazil Segment gross profit decreased $2.0 million due to selling price pressures from foreign imports, most of which are sourced from China where lower utilization has led to lower pricing. The Asia Segment maintained strong gross margin, but it was impacted by weaker sales volumes and had a corresponding gross profit decrease of $1.8 million.
Operating loss was $13.7 million compared to operating income of $5.0 million, which was primarily due to the decrease in gross profit and an $8.2 million impairment charge for abandonment of specialized machinery constructed in the Americas in fiscal 2017. Adjusted EPS was ($0.39) and Adjusted EBITDA was $1.7 million, compared to $0.11 and $12.2 million, respectively, in the prior year quarter.
Debt principal was $140.9 million on July 2, 2023 compared to $114.3 million on July 3, 2022. Cash and cash equivalents decreased to $47.0 million on July 2, 2023, from $53.3 million on July 3, 2022, as operational losses were partially offset by diligent cost and working capital management. Accordingly, Net Debt was $93.9 million on July 2, 2023 compared to $61.0 million on July 3, 2022. On July 2, 2023, the revolving credit facility had outstanding borrowings of $18.1 million and total availability of $55.7 million.
First Quarter Fiscal 2024 Outlook
UNIFI expects first quarter fiscal 2024 net sales and Adjusted EBITDA to be generally consistent with fourth quarter fiscal 2023 results. The effective tax rate is expected to demonstrate continued volatility. Capital expenditures are expected to (i) trend downward for the first quarter and (ii) be between $14.0 million and $16.0 million for fiscal 2024.
Ingle concluded, "While the demand environment is expected to remain subdued during the balance of calendar 2023, we are encouraged by recent market share developments in both the Americas and Brazil Segments, which should provide momentum for a much stronger back half of fiscal 2024. Although there is continued uncertainty across our customer base, we believe the inventory destocking period is nearing its end."
Fourth Quarter Fiscal 2023 Earnings Conference Call
UNIFI will provide additional commentary regarding its fourth quarter and fiscal 2023 results and other developments during its earnings conference call on August 24, 2023, at 8:30 a.m., Eastern Time. The call can be accessed via a live audio webcast on UNIFI’s website at http://investor.unifi.com. Additional supporting materials and information related to the call will also be available on UNIFI’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 35 billion plastic bottles into recycled fiber for new apparel, footwear, home goods, and other consumer products. UNIFI continually innovates technologies to meet consumer needs in moisture management, thermal regulation, antimicrobial protection, UV protection, stretch, water resistance, and enhanced softness. UNIFI collaborates with many of the world's most influential brands in the sports apparel, fashion, home, automotive, and other industries. For more information about UNIFI, visit www.unifi.com.
Financial Statements, Business Segment Information and Reconciliations of Reported Results to Adjusted Results to Follow
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts) | ||||||||||||||||
For the Three Months Ended | For the Fiscal Year Ended | |||||||||||||||
July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | |||||||||||||
Net sales | $ | 151,058 | $ | 217,576 | $ | 623,527 | $ | 815,758 | ||||||||
Cost of sales | 145,033 | 199,222 | 609,286 | 735,273 | ||||||||||||
Gross profit | 6,025 | 18,354 | 14,241 | 80,485 | ||||||||||||
Selling, general and administrative expenses | 11,761 | 13,464 | 47,345 | 52,489 | ||||||||||||
(Benefit) provision for bad debts | (51 | ) | 44 | (89 | ) | (445 | ) | |||||||||
Other operating expense (income), net | 7,995 | (156 | ) | 7,856 | (158 | ) | ||||||||||
Operating (loss) income | (13,680 | ) | 5,002 | (40,871 | ) | 28,599 | ||||||||||
Interest income | (494 | ) | (580 | ) | (2,109 | ) | (1,524 | ) | ||||||||
Interest expense | 2,368 | 945 | 7,577 | 3,085 | ||||||||||||
Equity in earnings of unconsolidated affiliates | (357 | ) | (220 | ) | (896 | ) | (605 | ) | ||||||||
Recovery of non-income taxes, net | — | — | — | 815 | ||||||||||||
(Loss) income before income taxes | (15,197 | ) | 4,857 | (45,443 | ) | 26,828 | ||||||||||
Provision for income taxes | 92 | 1,361 | 901 | 11,657 | ||||||||||||
Net (loss) income | $ | (15,289 | ) | $ | 3,496 | $ | (46,344 | ) | $ | 15,171 | ||||||
Net (loss) income per common share: | ||||||||||||||||
Basic | $ | (0.85 | ) | $ | 0.19 | $ | (2.57 | ) | $ | 0.82 | ||||||
Diluted | $ | (0.85 | ) | $ | 0.19 | $ | (2.57 | ) | $ | 0.80 | ||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 18,061 | 18,233 | 18,037 | 18,429 | ||||||||||||
Diluted | 18,061 | 18,605 | 18,037 | 18,868 | ||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) | ||||||||
July 2, 2023 | July 3, 2022 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 46,960 | $ | 53,290 | ||||
Receivables, net | 83,725 | 106,565 | ||||||
Inventories | 150,810 | 173,295 | ||||||
Income taxes receivable | 238 | 160 | ||||||
Other current assets | 12,327 | 18,956 | ||||||
Total current assets | 294,060 | 352,266 | ||||||
Property, plant and equipment, net | 218,521 | 216,338 | ||||||
Operating lease assets | 7,791 | 8,829 | ||||||
Deferred income taxes | 3,939 | 2,497 | ||||||
Other non-current assets | 14,508 | 8,788 | ||||||
Total assets | $ | 538,819 | $ | 588,718 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Accounts payable | $ | 44,455 | $ | 73,544 | ||||
Income taxes payable | 789 | 1,526 | ||||||
Current operating lease liabilities | 1,813 | 2,190 | ||||||
Current portion of long-term debt | 12,006 | 11,726 | ||||||
Other current liabilities | 12,932 | 19,806 | ||||||
Total current liabilities | 71,995 | 108,792 | ||||||
Long-term debt | 128,604 | 102,309 | ||||||
Non-current operating lease liabilities | 6,146 | 6,736 | ||||||
Deferred income taxes | 3,364 | 4,983 | ||||||
Other long-term liabilities | 5,100 | 4,449 | ||||||
Total liabilities | 215,209 | 227,269 | ||||||
Commitments and contingencies | ||||||||
Common stock | 1,808 | 1,798 | ||||||
Capital in excess of par value | 68,901 | 66,120 | ||||||
Retained earnings | ||||||||
