UNIFI INC [UFI] Filings

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

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



☐	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.

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.

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.

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.

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