Unifi Sees Slight Earnings Decline In Third Quarter

Unifi Inc., the maker of synthetic and recycled yarns, reported volume, measured by pounds sold, increased by more than 8 percent for the third quarter ended March 26 and by more than 10 percent for the first nine months of fiscal 2017 compared to the third quarter and first nine months of fiscal 2016.

The gains were driven by the strength of the global premium value-added (“PVA”) portfolio.

Gross margin was 13.1 percent for the third quarter of fiscal 2017, compared to 14.5 percent for the prior fiscal year third quarter, while gross margin was 14 percent compared to 13.8 percent for the year-to-date periods of fiscal 2017 and 2016, respectively.

Operating income was $9.1 million for the third quarter of fiscal 2017 compared to $10 million for the prior fiscal year third quarter, and operating income was $30.7 million compared to $28.3 million for the year-to-date periods of fiscal 2017 and 2016, respectively.

Net income for the third quarter of fiscal 2017 was $9.2 million compared to $9.7 million in the prior fiscal year third quarter. Fiscal 2017 third quarter net income includes a year-over-year decline in earnings from Parkdale America, LLC (“PAL”) of $1.5 million. Net income for the first nine months of fiscal 2017 was $23.2 million compared to $24.2 million in the prior year-to-date period. Net income for the fiscal 2017 year-to-date period includes a year-over-year decline in earnings from PAL of $2.8 million and a $1.7 million loss on a non-core divestiture.

Basic EPS was 50 cents for the third quarter of fiscal 2017, compared to 54 cents for the third quarter of fiscal 2016, while Basic EPS was $1.28 for the first nine months of fiscal 2017 compared to $1.35 for the first nine months of fiscal 2016.

Repreve Bottle Processing Center expanded potential revenue streams, receiving Letter of No Objection from the Food and Drug Administration to sell recycled bottle flake for food-grade packaging.

“Our international strategy has not only enhanced our ability to serve our customers but also provided us with valuable diversification throughout fiscal 2017. During this fiscal year, strength in the international PVA business has counterbalanced headwinds in the domestic market driven by weak retail sales, elevated inventory levels, and pressure from higher raw material costs. For fiscal 2017, we continue to expect results to be broadly in-line with fiscal 2016,” said Tom Caudle, president of Unifi.

Third Quarter Fiscal 2017 Operational Review
Net sales were $160.9 million for the third quarter of fiscal 2017, compared to net sales of $161.3 million for the third quarter of fiscal 2016. Operating income was $9.1 million in the third quarter of fiscal 2017, compared to $10 million in the third quarter of fiscal 2016. Continued strong PVA performance in Asia and Brazil was offset by challenging domestic market conditions and pressures from comparatively higher raw material costs.

Net income was $9.2 million for the third quarter of fiscal 2017, compared to net income of $9.7 million for the third quarter of fiscal 2016. Net income for the fiscal 2017 quarter benefitted from foreign exchange favorability associated with the strengthening of the Brazilian currency, lower bad debts, and a lower effective tax rate, but was unfavorably impacted by a $1.5 million decline in earnings from PAL. After-tax earnings from PAL declined from approximately $2.4 million in the third quarter of fiscal 2016 to approximately $0.9 million in the third quarter of fiscal 2017. Basic EPS was 50 cents for the third quarter of fiscal 2017, compared to 54 cents for the third quarter of fiscal 2016.

Adjusted EBITDA was $14.4 million for the third quarter of fiscal 2017, compared to $15.4 million for the third quarter of fiscal 2016.

Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are non-GAAP financial measures. The schedules included in this press release calculate Adjusted EPS and reconcile Adjusted EBITDA and Adjusted Net Income to Net income attributable to Unifi, Inc.

Foreign currency translation in the third quarter resulted in an increase to net sales of $4.6 million and gross profit of $0.9 million compared to the prior fiscal year third quarter.

Net debt was $104.2 million at March 26, 2017, compared to $106.4 million at June 26, 2016.

First Nine Months of Fiscal 2017 Operational Review
Net sales were $476 million for the nine months ended March 26, 2017, compared to net sales of $479.8 million for the nine months ended March 27, 2016. Operating income grew year-over-year to $30.7 million in the first nine months of fiscal 2017 compared to $28.3 million in the first nine months of fiscal 2016. Strong operating results in Asia and Brazil, driven by the global PVA portfolio, was partially offset by weaker performance in the domestic market.

Net income was $23.2 million for the first nine months of fiscal 2017, compared to $24.2 million for the first nine months of fiscal 2016. Net income for the first nine months of fiscal 2017 was favorably impacted by a benefit for bad debts and a lower effective tax rate, but adversely impacted by a loss of $1.7 million associated with a non-core divestiture and a $2.8 million decline in earnings from PAL. After-tax earnings from PAL declined from approximately $3.4 million in the first nine months of fiscal 2016 to approximately $0.6 million in the first nine months of fiscal 2017. Basic EPS was $1.28 for the first nine months of fiscal 2017 compared to $1.35 for the first nine months of fiscal 2016.

Adjusted Net Income and Adjusted EPS, both excluding the loss from a non-core divestiture, were $24.8 million and $1.37, respectively, for the first nine months of fiscal 2017 compared to $24.9 million and $1.39, respectively, for the first nine months of fiscal 2016. Of note, both Adjusted Net Income and Adjusted EPS were impacted by $2.8 million of weaker results from PAL. Adjusted EBITDA, which excludes changes in earnings from PAL, increased to $46.8 million for the first nine months of fiscal 2017, compared to $44.8 million for the first nine months of fiscal 2016.

Foreign currency translation resulted in an increase to net sales of $7.9 million and gross profit of $1.3 million compared to the prior fiscal year period.