10-Q 1 ufi-20240331.htm 10-Q 10-Q
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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 31, 2024

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 May 6, 2024, there were 18,251,545 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; 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, but not limited to, epidemics or pandemics;
the success of the Company’s strategic business initiatives;
the volatility of financial and credit markets, including the impacts of counterparty risk (e.g., deposit concentration and recent depositor sentiment and activity);
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 July 2, 2023 or in the Company’s other periodic reports and information filed with the Securities and Exchange Commission (the “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 of 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 31, 2024

TABLE OF CONTENTS

 

PART I—FINANCIAL INFORMATION

 

 

 

 

Page

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and July 2, 2023

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months and Nine Months Ended March 31, 2024 and April 2, 2023

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months and Nine Months Ended March 31, 2024 and April 2, 2023

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2024 and April 2, 2023

 

4

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

5

 

 

 

 

 

Item 2.

 

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

 

13

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

27

 

PART II—OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

28

 

 

 

 

 

Item 1A.

 

Risk Factors

 

28

 

 

 

 

 

Item 5.

 

Other Information

 

28

 

 

 

 

 

Item 6.

 

Exhibits

 

28

 

 

 

 

 

 

 

Signatures

 

29

 

 

 

 

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)

 

 

March 31, 2024

 

 

July 2, 2023

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

27,662

 

 

$

46,960

 

Receivables, net

 

 

78,931

 

 

 

83,725

 

Inventories

 

 

134,125

 

 

 

150,810

 

Income taxes receivable

 

 

2,002

 

 

 

238

 

Other current assets

 

 

9,460

 

 

 

12,327

 

Total current assets

 

 

252,180

 

 

 

294,060

 

Property, plant and equipment, net

 

 

204,795

 

 

 

218,521

 

Operating lease assets

 

 

7,500

 

 

 

7,791

 

Deferred income taxes

 

 

4,741

 

 

 

3,939

 

Other non-current assets

 

 

13,402

 

 

 

14,508

 

Total assets

 

$

482,618

 

 

$

538,819

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Accounts payable

 

$

42,343

 

 

$

44,455

 

Income taxes payable

 

 

1,883

 

 

 

789

 

Current operating lease liabilities

 

 

1,956

 

 

 

1,813

 

Current portion of long-term debt

 

 

12,368

 

 

 

12,006

 

Other current liabilities

 

 

19,173

 

 

 

12,932

 

Total current liabilities

 

 

77,723

 

 

 

71,995

 

Long-term debt

 

 

116,058

 

 

 

128,604

 

Non-current operating lease liabilities

 

 

5,683

 

 

 

6,146

 

Deferred income taxes

 

 

1,906

 

 

 

3,364

 

Other long-term liabilities

 

 

3,439

 

 

 

5,100

 

Total liabilities

 

 

204,809

 

 

 

215,209

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.10 par value (500,000,000 shares authorized; 18,249,837 and 18,081,538
   shares issued and outstanding as of March 31, 2024 and July 2, 2023, respectively)

 

 

1,825

 

 

 

1,808

 

Capital in excess of par value

 

 

70,675

 

 

 

68,901

 

Retained earnings

 

 

263,381

 

 

 

306,792

 

Accumulated other comprehensive loss

 

 

(58,072

)

 

 

(53,891

)

Total shareholders’ equity

 

 

277,809

 

 

 

323,610

 

Total liabilities and shareholders’ equity

 

$

482,618

 

 

$

538,819

 

 

See accompanying notes to condensed consolidated financial statements.

1


 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

March 31, 2024

 

 

April 2, 2023

 

 

March 31, 2024

 

 

April 2, 2023

 

Net sales

 

$

148,996

 

 

$

156,738

 

 

$

424,757

 

 

$

472,469

 

Cost of sales

 

 

144,232

 

 

 

147,085

 

 

 

418,932

 

 

 

464,253

 

Gross profit

 

 

4,764

 

 

 

9,653

 

 

 

5,825

 

 

 

8,216

 

Selling, general and administrative expenses

 

 

11,372

 

 

 

12,063

 

 

 

35,389

 

 

 

35,584

 

Provision (benefit) for bad debts

 

 

179

 

 

 

(56

)

 

 

1,259

 

 

 

(38

)

Restructuring costs

 

 

 

 

 

 

 

 

5,101

 

 

 

 

Other operating expense (income), net

 

 

139

 

 

 

324

 

 

 

674

 

 

 

(139

)

Operating loss

 

 

(6,926

)

 

 

(2,678

)

 

 

(36,598

)

 

 

(27,191

)

Interest income

 

 

(432

)

 

 

(554

)

 

 

(1,710

)

 

 

(1,615

)

Interest expense

 

 

2,407

 

 

 

2,073

 

 

 

7,505

 

 

 

5,209

 

Equity in loss (earnings) of unconsolidated affiliates

 

 

604

 

 

 

(158

)

 

 

311

 

 

 

(539

)

Loss before income taxes

 

 

(9,505

)

 

 

(4,039

)

 

 

(42,704

)

 

 

(30,246

)

Provision for income taxes

 

 

790

 

 

 

1,145

 

 

 

707

 

 

 

809

 

Net loss

 

$

(10,295

)

 

$

(5,184

)

 

$

(43,411

)

 

$

(31,055

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

Basic

 

$

(0.57

)

 

$

(0.29

)

 

$

(2.40

)

 

$

(1.72

)

Diluted

 

$

(0.57

)

 

$

(0.29

)

 

$

(2.40

)

 

$

(1.72

)

 

 

Comprehensive loss:

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

March 31, 2024

 

 

April 2, 2023

 

 

March 31, 2024

 

 

April 2, 2023

 

Net loss

 

$

(10,295

)

 

$

(5,184

)

 

$

(43,411

)

 

$

(31,055

)

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(3,667

)

 

 

4,526

 

 

 

(4,181

)

 

 

2,065

 

Other comprehensive (loss) income, net

 

 

(3,667

)

 

 

4,526

 

 

 

(4,181

)

 

 

2,065

 

Comprehensive loss

 

$

(13,962

)

 

$

(658

)

 

$

(47,592

)

 

$

(28,990

)

 

See accompanying notes to condensed consolidated financial statements.

2


 

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 31, 2023

 

 

18,150

 

 

$

1,815

 

 

$

70,254

 

 

$

273,676

 

 

$

(54,405

)

 

$

291,340

 

Options exercised

 

 

7

 

 

 

1

 

 

 

38

 

 

 

 

 

 

 

 

 

39

 

Conversion of equity units

 

 

95

 

 

 

9

 

 

 

(9

)

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

407

 

 

 

 

 

 

 

 

 

407

 

Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions

 

 

(2

)

 

 

 

 

 

(15

)

 

 

 

 

 

 

 

 

(15

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,667

)

 

 

(3,667

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(10,295

)

 

 

 

 

 

(10,295

)

Balance at March 31, 2024

 

 

18,250

 

 

$

1,825

 

 

$

70,675

 

 

$

263,381

 

 

$

(58,072

)

 

$

277,809

 

 

 

 

 

Shares

 

 

Common Stock

 

 

Capital in Excess of Par Value

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

Total Shareholders’ Equity

 

Balance at July 2, 2023

 

 

18,081

 

 

$

1,808

 

 

$

68,901

 

 

$

306,792

 

 

$

(53,891

)

 

$

323,610

 

Options exercised

 

 

12

 

 

 

1

 

 

 

77

 

 

 

 

 

 

 

 

 

78

 

Conversion of equity units

 

 

161

 

 

 

16

 

 

 

(16

)

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

7

 

 

 

1

 

 

 

1,788

 

 

 

 

 

 

 

 

 

1,789

 

Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions

 

 

(11

)

 

 

(1

)

 

 

(75

)

 

 

 

 

 

 

 

 

(76

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,181

)

 

 

(4,181

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(43,411

)

 

 

 

 

 

(43,411

)

Balance at March 31, 2024

 

 

18,250

 

 

$

1,825

 

 

$

70,675

 

 

$

263,381

 

 

$

(58,072

)

 

$

277,809

 

 

 

 

 

Shares

 

 

Common Stock

 

 

Capital in Excess of Par Value

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

Total Shareholders’ Equity

 

Balance at January 1, 2023

 

 

18,049

 

 

$

1,805

 

 

$

67,875

 

 

$

327,265

 

 

$

(62,066

)

 

$

334,879

 

Options exercised

 

 

4

 

 

 

1

 

 

 

33

 

 

 

 

 

 

 

 

 

34

 

Conversion of equity units

 

 

1

 

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

656

 

 

 

 

 

 

 

 

 

656

 

Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

(3

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,526

 

 

 

4,526

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(5,184

)

 

 

 

 

 

(5,184

)

Balance at April 2, 2023

 

 

18,054

 

 

$

1,805

 

 

$

68,562

 

 

$

322,081

 

 

$

(57,540

)

 

$

334,908

 

 

 

 

 

Shares

 

 

Common Stock

 

 

Capital in Excess of Par Value

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

Total Shareholders’ Equity

 

Balance at July 3, 2022

 

 

17,979

 

 

$

1,798

 

 

$

66,120

 

 

$

353,136

 

 

$

(59,605

)

 

$

361,449

 

Options exercised

 

 

7

 

 

 

1

 

 

 

52

 

 

 

 

 

 

 

 

 

53

 

Conversion of equity units

 

 

63

 

 

 

6

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

12

 

 

 

1

 

 

 

2,464

 

 

 

 

 

 

 

 

 

2,465

 

Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions

 

 

(7

)

 

 

(1

)

 

 

(68

)

 

 

 

 

 

 

 

 

(69

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,065

 

 

 

2,065

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(31,055

)

 

 

 

 

 

(31,055

)

Balance at April 2, 2023

 

 

18,054

 

 

$

1,805

 

 

$

68,562

 

 

$

322,081

 

 

$

(57,540

)

 

$

334,908

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

For the Nine Months Ended

 

 

 

March 31, 2024

 

 

April 2, 2023

 

Cash and cash equivalents at beginning of period

 

$

46,960

 

 

$

53,290

 

Operating activities:

 

 

 

 

 

 

Net loss

 

 

(43,411

)

 

 

(31,055

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Equity in loss (earnings) of unconsolidated affiliates

 

 

311

 

 

 

(539

)

Distribution received from unconsolidated affiliate

 

 

1,000

 

 

 

 

Depreciation and amortization expense

 

 

20,780

 

 

 

20,388

 

Non-cash compensation expense

 

 

1,798

 

 

 

2,791

 

Recovery of income taxes

 

 

 

 

 

(3,799

)

Deferred income taxes

 

 

(2,403

)

 

 

(1,199

)

Other, net

 

 

(93

)

 

 

252

 

Changes in assets and liabilities:

 

 

 

 

 

 

Receivables, net

 

 

4,225

 

 

 

18,585

 

Inventories

 

 

15,174

 

 

 

31,080

 

Other current assets

 

 

2,217

 

 

 

4,271

 

Income taxes

 

 

(685

)

 

 

(1,241

)

Accounts payable and other current liabilities

 

 

3,577

 

 

 

(31,644

)

Other, net

 

 

(1,330

)

 

 

459

 

Net cash provided by operating activities

 

 

1,160

 

 

 

8,349

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(8,566

)

 

 

(32,461

)

Other, net

 

 

490

 

 

 

(193

)

Net cash used by investing activities

 

 

(8,076

)

 

 

(32,654

)

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

Proceeds from ABL Revolver

 

 

109,700

 

 

 

142,400

 

Payments on ABL Revolver

 

 

(112,800

)

 

 

(121,000

)

Payments on ABL Term Loan

 

 

(6,900

)

 

 

(4,800

)

Proceeds from construction financing

 

 

 

 

 

6,533

 

Payments on finance lease obligations

 

 

(2,230

)

 

 

(1,413

)

Other, net

 

 

(6

)

 

 

(683

)

Net cash (used) provided by financing activities

 

 

(12,236

)

 

 

21,037

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(146

)

 

 

(316

)

Net decrease in cash and cash equivalents

 

 

(19,298

)

 

 

(3,584

)

Cash and cash equivalents at end of period

 

$

27,662

 

 

$

49,706

 

 

See accompanying notes to condensed consolidated financial statements.

4


 

 

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, medical, and other end-use markets (UNIFI’s “indirect customers”). We sometimes refer to these indirect customers as “brand partners.” Polyester products include partially oriented yarn (“POY”) and 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 that includes a range of specialized, value-added, and commodity solutions, with principal geographic markets in North America, Central America, South America, Asia, and Europe. UNIFI has direct manufacturing operations in four countries and participates in joint ventures with operations in Israel and the United States (the “U.S.”). During the second quarter of fiscal 2024, UNIFI terminated the joint venture with operations in Israel.

 

2. Basis of Presentation; Condensed Notes

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“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 July 2, 2023 (the “2023 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.

The fiscal quarter for Unifi, Inc. and its material operating subsidiaries ended on March 31, 2024. The three-month periods ended March 31, 2024 and April 2, 2023 both consisted of 13 weeks. The nine-month periods ended March 31, 2024 and April 2, 2023 both consisted of 39 weeks.

 

3. Recent Accounting Pronouncements

Issued and Pending Adoption

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU No. 2023-09 modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (iii) income tax expense or benefit from continuing operations (separated by federal, state, and foreign). The ASU also requires entities to disclose their income tax payments to international, federal, state, and local jurisdictions, among other changes. The ASU is effective for UNIFI's fiscal 2026, with early adoption permitted, and should be applied on a prospective basis, but retrospective application is permitted. UNIFI is currently evaluating the impact on the Company’s disclosures but does not expect this standard will have a material impact on its consolidated financial position, results of operations, or cash flows.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU No. 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The ASU is effective for UNIFI’s fiscal 2025 for annual reporting and in the first quarter of fiscal 2026 for interim reporting, with early adoption permitted. UNIFI has not adopted, and does not expect to early adopt, this standard. UNIFI is currently evaluating the impact on the Company’s disclosures but does not expect this standard will have a material impact on its consolidated financial position, results of operations, or cash flows.

Based on UNIFI’s review of ASUs issued since the filing of the 2023 Form 10-K, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a material impact on UNIFI’s consolidated financial statements.

5


Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

4. Revenue

The following tables present net sales disaggregated by (i) classification of customer type and (ii) REPREVE® Fiber sales:

Third-Party Manufacturer

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

March 31, 2024

 

 

April 2, 2023

 

 

March 31, 2024

 

 

April 2, 2023

 

Third-party manufacturer

 

$

147,857

 

 

$

155,423

 

 

$

421,318

 

 

$

468,653

 

Service

 

 

1,139

 

 

 

1,315

 

 

 

3,439

 

 

 

3,816

 

Net sales

 

$

148,996

 

 

$

156,738

 

 

$

424,757

 

 

$

472,469

 

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

March 31, 2024

 

 

April 2, 2023

 

 

March 31, 2024

 

 

April 2, 2023

 

REPREVE® Fiber

 

$

46,754

 

 

$

49,619

 

 

$

134,940

 

 

$

141,664

 

All other products and services

 

 

102,242

 

 

 

107,119

 

 

 

289,817

 

 

 

330,805

 

Net sales

 

$

148,996

 

 

$

156,738

 

 

$

424,757

 

 

$

472,469

 

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 by the associated revenue contracts.

REPREVE® Fiber

REPREVE® Fiber represents UNIFI's collection of fiber products on our recycled platform, with or without added technologies.

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. Long-Term Debt

Debt Obligations

The following table and narrative presents the detail of UNIFI’s debt obligations. Capitalized terms not otherwise defined within this Note shall have the meanings attributed to them in the Second Amended and Restated Credit Agreement, dated as of October 28, 2022 (the "2022 Credit Agreement").

 

 

 

 

Weighted Average

 

 

 

 

 

Scheduled

 

Interest Rate as of

 

Principal Amounts as of

 

 

 

Maturity Date

 

March 31, 2024

 

March 31, 2024

 

 

July 2, 2023

 

ABL Revolver

 

October 2027

 

 

6.9

%

 

 

$

15,000

 

 

$

18,100

 

ABL Term Loan

 

October 2027

 

 

6.9

%

 

 

 

103,500

 

 

 

110,400

 

Finance lease obligations

 

(1)

 

 

5.1

%

 

 

 

10,170

 

 

 

10,767

 

Construction financing

 

(2)

 

 

0.0

%

 

 

 

 

 

 

1,632

 

Total debt

 

 

 

 

 

 

 

 

128,670

 

 

 

140,899

 

Current ABL Term Loan

 

 

 

 

 

 

 

 

(9,200

)

 

 

(9,200

)

Current portion of finance lease obligations

 

 

 

 

 

 

 

 

(3,168

)

 

 

(2,806

)

Unamortized debt issuance costs

 

 

 

 

 

 

 

 

(244

)

 

 

(289

)

Total long-term debt

 

 

 

 

 

 

 

$

116,058

 

 

$

128,604

 

(1)
Scheduled maturity dates for finance lease obligations range from March 2025 to September 2028.
(2)
Refer to the discussion below under “Construction Financing” for further information.

ABL Facility and Amendments

There have been no changes to the 2022 Credit Agreement following the filing of the 2023 Form 10-K.

Construction Financing

In connection with the construction financing arrangement, UNIFI has borrowed a total of $9,755 and transitioned $9,755 of completed asset costs to finance lease obligations as of March 31, 2024. There were no borrowings outstanding on this financing arrangement as of March 31, 2024.

6


Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

 

6. Income Taxes

The provision for income taxes and effective tax rate were as follows:

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

March 31, 2024

 

 

April 2, 2023

 

 

March 31, 2024

 

 

April 2, 2023

 

Provision for income taxes

 

$

790

 

 

$

1,145

 

 

$

707

 

 

$

809

 

Effective tax rate

 

 

(8.3

)%

 

 

(28.3

)%

 

 

(1.7

)%

 

 

(2.7

)%

Income Tax Expense

UNIFI’s provision for income taxes for the nine months ended March 31, 2024 and April 2, 2023 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 and nine months ended March 31, 2024 varied from the U.S. federal statutory rate primarily due to the U.S. generated losses for which UNIFI does not expect to realize a future tax benefit.

During the nine months ended March 31, 2024, the Internal Revenue Service (the “IRS”) audit of fiscal 2014 through 2019 was concluded with a refund of $1,275, which has been received along with $457 of interest on the overpayments. The impact from the IRS audit adjustments to the prior periods was insignificant.

The effective tax rates for the three and nine months ended April 2, 2023 varied from the U.S. federal statutory rate primarily due to the U.S. generated losses for which UNIFI does not expect to realize a future tax benefit and a discrete tax benefit related to the recovery of certain Brazilian income taxes paid in prior years.

Unrecognized Tax Benefits

UNIFI regularly assesses the outcomes of both completed and ongoing examinations to ensure that its provision for income taxes is sufficient.

Following the conclusion of the IRS audit, UNIFI adjusted the uncertain tax positions for fiscal 2014 through 2019 that were effectively settled. The impact from releasing the netted uncertain tax position liabilities was insignificant.

 

7. Shareholders’ Equity

On October 31, 2018, UNIFI announced that the Company's Board of Directors approved a share repurchase program (the “2018 SRP”) under which UNIFI is authorized to acquire up to $50,000 of its common stock. The share repurchase authorization is discretionary and has no expiration date. No shares have been repurchased in fiscal 2023 and 2024 and $38,859 remains available for repurchase.

 

8. Stock-Based Compensation

On October 31, 2023, UNIFI’s shareholders approved a First Amendment (the "First Amendment") to the Unifi, Inc. Second Amended and Restated 2013 Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan set the initial number of shares available for future issuance ("share reserve") pursuant to awards granted under the 2020 Plan to 850. The First Amendment increased the remaining share reserve by 1,100. No additional awards can be granted under prior plans; however, awards outstanding under a respective prior plan remain subject to that plan’s provisions.

The following table provides information as of March 31, 2024 with respect to the number of securities remaining available for future issuance under the 2020 Plan:

 

Authorized under the 2020 Plan

 

 

850

 

Plus: Share reserve increase from the First Amendment

 

 

1,100

 

Plus: Awards expired, forfeited, or otherwise terminated unexercised

 

 

179

 

Less: Awards granted to employees

 

 

(1,106

)

Less: Awards granted to non-employee directors

 

 

(197

)

Available for issuance under the 2020 Plan

 

 

826

 

 

9. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

Financial Instruments

For the nine months ended March 31, 2024 and April 2, 2023, there were no significant changes to UNIFI’s assets and liabilities measured at fair value, and there were no transfers into or out of the levels of the fair value hierarchy.

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.

7


Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

Grantor Trust

The UNIFI, Inc. Deferred Compensation Plan (the “DCP”), established in fiscal 2022, is an unfunded non-qualified deferred compensation plan in which certain key employees are eligible to participate. The fair values of the investment assets held by the grantor trust established in connection with the DCP were approximately $2,891 and $2,496 as of March 31, 2024 and July 2, 2023, respectively, and are classified as trading securities within Other non-current assets on the Condensed Consolidated Balance Sheets. The grantor trust assets have readily available market values and are classified as Level 1 trading securities in the fair value hierarchy. Trading gains and losses associated with these investments are recorded within Other operating expense (income), net on the Condensed Consolidated Statements of Operations and Comprehensive Loss. The associated DCP liability is recorded within Other long-term liabilities on the Condensed Consolidated Balance Sheets, and any increase or decrease in the liability is also recorded in Other operating expense (income), net on the Condensed Consolidated Statements of Operations and Comprehensive Loss. During the nine months ended March 31, 2024 and April 2, 2023, we recorded net gains on investments held by the trust of $255 and $78, respectively.

 

10. Earnings Per Share

The components of the calculation of earnings per share (“EPS”) are as follows:

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

March 31, 2024

 

 

April 2, 2023

 

 

March 31, 2024

 

 

April 2, 2023

 

Net loss

 

$

(10,295

)

 

$

(5,184

)

 

$

(43,411

)

 

$

(31,055

)

Basic weighted average shares

 

 

18,169

 

 

 

18,052

 

 

 

18,121

 

 

 

18,029

 

Net potential common share equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares

 

 

18,169