10-Q 1 ufi-10q_20220327.htm 10-Q ufi-10q_20220327.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

For the quarterly period ended March 27, 2022

OR

 

 

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

For the transition period from            to           

Commission File Number: 1-10542

 

UNIFI, INC.

(Exact name of registrant as specified in its charter)

 

 

New York

 

11-2165495

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

7201 West Friendly Avenue

 

 

Greensboro, North Carolina  

 

27410

(Address of principal executive offices)

 

(Zip Code)

(336) 294-4410

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.10 per share

UFI

New York Stock Exchange

 

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

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

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

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

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

 

As of April 29, 2022, there were 18,477,791 shares of the registrant’s common stock, par value $0.10 per share, outstanding.

 

 

 


 

FORWARD-LOOKING STATEMENTS

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

 

the financial condition of the Company’s customers;

 

the loss of a significant customer or brand partner;

 

natural disasters, industrial accidents, power or water shortages, extreme weather conditions and other disruptions at one of the Company’s facilities;

 

the disruption of operations, global demand, or financial performance as a result of catastrophic or extraordinary events, including epidemics or pandemics such as the recent strains of coronavirus (“COVID-19”);

 

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 the Company’s brands;

 

employee relations;

 

the ability to attract, retain and motivate key employees;

 

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

 

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

 

other factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended 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 AND NINE MONTHS ENDED MARCH 27, 2022

TABLE OF CONTENTS

 

PART I—FINANCIAL INFORMATION

 

 

 

 

Page

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 27, 2022 and June 27, 2021

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income for the Three Months and Nine Months Ended March 27, 2022 and March 28, 2021

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three Months and Nine Months Ended March 27, 2022 and March 28, 2021

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months and Nine Months Ended March 27, 2022 and March 28, 2021

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 27, 2022 and March 28, 2021

 

5

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

6

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

34

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

35

 

PART II—OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

36

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

36

 

 

 

 

 

Item 6.

 

Exhibits

 

37

 

 

 

 

 

 

 

Signatures

 

38

 

 

 

 

 

 

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

March 27, 2022

 

 

June 27, 2021

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

52,972

 

 

$

78,253

 

Receivables, net

 

 

109,531

 

 

 

94,837

 

Inventories

 

 

163,380

 

 

 

141,221

 

Income taxes receivable

 

 

11,664

 

 

 

2,392

 

Other current assets

 

 

20,978

 

 

 

12,364

 

Total current assets

 

 

358,525

 

 

 

329,067

 

Property, plant and equipment, net

 

 

215,078

 

 

 

201,696

 

Operating lease assets

 

 

9,520

 

 

 

8,772

 

Deferred income taxes

 

 

2,670

 

 

 

1,208

 

Other non-current assets

 

 

7,389

 

 

 

14,625

 

Total assets

 

$

593,182

 

 

$

555,368

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

67,134

 

 

$

54,259

 

Income taxes payable

 

 

11,609

 

 

 

1,625

 

Current operating lease liabilities

 

 

2,293

 

 

 

1,856

 

Current portion of long-term debt

 

 

14,509

 

 

 

16,045

 

Other current liabilities

 

 

18,806

 

 

 

31,638

 

Total current liabilities

 

 

114,351

 

 

 

105,423

 

Long-term debt

 

 

82,505

 

 

 

70,336

 

Non-current operating lease liabilities

 

 

7,331

 

 

 

7,032

 

Deferred income taxes

 

 

5,015

 

 

 

6,686

 

Other long-term liabilities

 

 

6,715

 

 

 

7,472

 

Total liabilities

 

 

215,917

 

 

 

196,949

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.10 par value (500,000,000 shares authorized; 18,451,039 and 18,490,338

   shares issued and outstanding as of March 27, 2022 and June 27, 2021, respectively)

 

 

1,845

 

 

 

1,849

 

Capital in excess of par value

 

 

67,523

 

 

 

65,205

 

Retained earnings

 

 

354,693

 

 

 

344,797

 

Accumulated other comprehensive loss

 

 

(46,796

)

 

 

(53,432

)

Total shareholders’ equity

 

 

377,265

 

 

 

358,419

 

Total liabilities and shareholders’ equity

 

$

593,182

 

 

$

555,368

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

1


 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

March 27, 2022

 

 

March 28, 2021

 

 

March 27, 2022

 

 

March 28, 2021

 

Net sales

 

$

200,780

 

 

$

178,866

 

 

$

598,182

 

 

$

483,147

 

Cost of sales

 

 

181,636

 

 

 

153,271

 

 

 

536,051

 

 

 

417,057

 

Gross profit

 

 

19,144

 

 

 

25,595

 

 

 

62,131

 

 

 

66,090

 

Selling, general and administrative expenses

 

 

14,389

 

 

 

14,581

 

 

 

39,025

 

 

 

38,570

 

Benefit for bad debts

 

 

(169

)

 

 

(184

)

 

 

(489

)

 

 

(1,330

)

Other operating (income) expense, net

 

 

(831

)

 

 

2,582

 

 

 

(2

)

 

 

4,236

 

Operating income

 

 

5,755

 

 

 

8,616

 

 

 

23,597

 

 

 

24,614

 

Interest income

 

 

(492

)

 

 

(159

)

 

 

(944

)

 

 

(471

)

Interest expense

 

 

709

 

 

 

885

 

 

 

2,140

 

 

 

2,589

 

Equity in earnings of unconsolidated affiliates

 

 

(41

)

 

 

(528

)

 

 

(385

)

 

 

(751

)

Recovery of non-income taxes, net

 

 

815

 

 

 

 

 

 

815

 

 

 

 

Income before income taxes

 

 

4,764

 

 

 

8,418

 

 

 

21,971

 

 

 

23,247

 

Provision for income taxes

 

 

2,698

 

 

 

3,660

 

 

 

10,296

 

 

 

7,593

 

Net income

 

$

2,066

 

 

$

4,758

 

 

$

11,675

 

 

$

15,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

Basic

 

$

0.11

 

 

$

0.26

 

 

$

0.63

 

 

$

0.85

 

Diluted

 

$

0.11

 

 

$

0.25

 

 

$

0.62

 

 

$

0.83

 

 

See accompanying notes to condensed consolidated financial statements.

 


2


 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

March 27, 2022

 

 

March 28, 2021

 

 

March 27, 2022

 

 

March 28, 2021

 

Net income

 

$

2,066

 

 

$

4,758

 

 

$

11,675

 

 

$

15,654

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

13,921

 

 

 

(4,996

)

 

 

5,833

 

 

 

734

 

Changes in interest rate swaps, net of tax of

   $105, $77, $248 and $233, respectively

 

 

340

 

 

 

247

 

 

 

803

 

 

 

756

 

Other comprehensive income (loss), net

 

 

14,261

 

 

 

(4,749

)

 

 

6,636

 

 

 

1,490

 

Comprehensive income

 

$

16,327

 

 

$

9

 

 

$

18,311

 

 

$

17,144

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


 

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(In thousands)

 

 

 

Shares

 

 

Common Stock

 

 

Capital in Excess of Par Value

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

Total Shareholders’ Equity

 

Balance at December 26, 2021

 

 

18,498

 

 

$

1,850

 

 

$

67,006

 

 

$

353,393

 

 

$

(61,057

)

 

$

361,192

 

Options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of restricted stock units

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

721

 

 

 

 

 

 

 

 

 

721

 

Common stock repurchased and retired under

  publicly announced program

 

 

(50

)

 

 

(5

)

 

 

(181

)

 

 

(766

)

 

 

 

 

 

(952

)

Common stock withheld in satisfaction of tax

  withholding obligations under net share settle

  transactions

 

 

(1

)

 

 

 

 

 

(23

)

 

 

 

 

 

 

 

 

(23

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,261

 

 

 

14,261

 

Net income

 

 

 

 

 

 

 

 

 

 

 

2,066

 

 

 

 

 

 

2,066

 

Balance at March 27, 2022

 

 

18,451

 

 

$

1,845

 

 

$

67,523

 

 

$

354,693

 

 

$

(46,796

)

 

$

377,265

 

 

 

 

Shares

 

 

Common Stock

 

 

Capital in Excess of Par Value

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

Total Shareholders’ Equity

 

Balance at June 27, 2021

 

 

18,490

 

 

$

1,849

 

 

$

65,205

 

 

$

344,797

 

 

$

(53,432

)

 

$

358,419

 

Options exercised

 

 

9

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Conversion of restricted stock units

 

 

68

 

 

 

6

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

5

 

 

 

1

 

 

 

2,827

 

 

 

 

 

 

 

 

 

2,828

 

Common stock repurchased and retired under

  publicly announced program

 

 

(102

)

 

 

(10

)

 

 

(367

)

 

 

(1,779

)

 

 

 

 

 

(2,156

)

Common stock withheld in satisfaction of tax

  withholding obligations under net share settle

  transactions

 

 

(19

)

 

 

(2

)

 

 

(135

)

 

 

 

 

 

 

 

 

(137

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,636

 

 

 

6,636

 

Net income

 

 

 

 

 

 

 

 

 

 

 

11,675

 

 

 

 

 

 

11,675

 

Balance at March 27, 2022

 

 

18,451

 

 

$

1,845

 

 

$

67,523

 

 

$

354,693

 

 

$

(46,796

)

 

$

377,265

 

 

 

 

Shares

 

 

Common Stock

 

 

Capital in Excess of Par Value

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

Total Shareholders’ Equity

 

Balance at December 27, 2020

 

 

18,481

 

 

$

1,848

 

 

$

63,972

 

 

$

326,620

 

 

$

(57,567

)

 

$

334,873

 

Options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of restricted stock units

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

4

 

 

 

1

 

 

 

761

 

 

 

 

 

 

 

 

 

762

 

Common stock withheld in satisfaction of tax

  withholding obligations under net share settle

  transactions

 

 

(2

)

 

 

 

 

 

(47

)

 

 

 

 

 

 

 

 

(47

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,749

)

 

 

(4,749

)

Net income

 

 

 

 

 

 

 

 

 

 

 

4,758

 

 

 

 

 

 

4,758

 

Balance at March 28, 2021

 

 

18,490

 

 

$

1,849

 

 

$

64,686

 

 

$

331,378

 

 

$

(62,316

)

 

$

335,597

 

 

 

 

Shares

 

 

Common Stock

 

 

Capital in Excess of Par Value

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

Total Shareholders’ Equity

 

Balance at June 28, 2020

 

 

18,446

 

 

$

1,845

 

 

$

62,392

 

 

$

315,724

 

 

$

(63,806

)

 

$

316,155

 

Options exercised

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of restricted stock units

 

 

45

 

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

4

 

 

 

1

 

 

 

2,409

 

 

 

 

 

 

 

 

 

2,410

 

Common stock withheld in satisfaction of tax

  withholding obligations under net share settle

  transactions

 

 

(6

)

 

 

(1

)

 

 

(111

)

 

 

 

 

 

 

 

 

(112

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,490

 

 

 

1,490

 

Net income

 

 

 

 

 

 

 

 

 

 

 

15,654

 

 

 

 

 

 

15,654

 

Balance at March 28, 2021

 

 

18,490

 

 

$

1,849

 

 

$

64,686

 

 

$

331,378

 

 

$

(62,316

)

 

$

335,597

 

 

See accompanying notes to condensed consolidated financial statements.

 

4


 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

For the Nine Months Ended

 

 

 

March 27, 2022

 

 

March 28, 2021

 

Cash and cash equivalents at beginning of period

 

$

78,253

 

 

$

75,267

 

Operating activities:

 

 

 

 

 

 

 

 

Net income

 

 

11,675

 

 

 

15,654

 

Adjustments to reconcile net income to net cash

   (used) provided by operating activities:

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

 

(385

)

 

 

(751

)

Distribution received from unconsolidated affiliate

 

 

750

 

 

 

 

Depreciation and amortization expense

 

 

19,176

 

 

 

19,007

 

Non-cash compensation expense

 

 

3,081

 

 

 

2,656

 

Deferred income taxes

 

 

(3,019

)

 

 

(1,826

)

Loss on disposal of assets

 

 

21

 

 

 

2,773

 

Other, net

 

 

(43

)

 

 

(356

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Receivables, net

 

 

(13,537

)

 

 

(43,034

)

Inventories

 

 

(20,170

)

 

 

(11,825

)

Other current assets

 

 

(2,503

)

 

 

3,482

 

Income taxes

 

 

670

 

 

 

4,277

 

Accounts payable and other current liabilities

 

 

1,084

 

 

 

33,033

 

Other, net

 

 

1,137

 

 

 

2,620

 

Net cash (used) provided by operating activities

 

 

(2,063

)

 

 

25,710

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(30,094

)

 

 

(12,071

)

Purchases of intangible assets