Unifi Inc. reported a slight decline in earnings in the first quarter ended September 24 as a 2.7 percent revenue gain wasn’t offset by lower margins and investments in its strategic growth initiatives.

“We are pleased with the first quarter results, as we grew domestic and international sales despite continued market pressures,” said Kevin Hall, CEO of Unifi. “Our PVA brands, like REPREVE, continue to take hold within the marketplace and exhibit our strong and growing partnerships with global brands and retailers. Overall, PVA products now account for more than 40 percent of our consolidated sales, driving another strong quarter, with contributions from our REPREVE platform of products. We remain focused on recycling and innovation to fuel our growth, and are proud to maintain the portfolio diversity we believe is necessary to succeed over the long term.”

Hall continued, “I am also excited about our newly expanded executive team. With this significant new talent and a strong competitive position, we expect to become the global textile industry leader in recycling and an innovation partner of choice, collaborating with world-class operations and prominent brands.”

First Quarter Fiscal 2018 Operational Review
Net sales were $164.2 million for the first quarter of fiscal 2018, compared to net sales of $160 million for the first quarter of fiscal 2017. Revenue growth was driven by an overall increase in sales volume, as the company continued to benefit from strength in Brazil and Asia and the ongoing ramp-up of its recycling operations, which contributed to sales of REPREVE products, partially offset by challenging domestic market conditions for the traditional fiber portfolio. Gross profit as a percentage of sales was 14.2 percent for the first quarter of fiscal 2018, compared to 14.7 percent for the first quarter of fiscal 2017, reflecting higher costs and increased sales of lower-margin products in our international businesses in the first quarter of fiscal 2018.

Operating income was $10.2 million for the first quarter of fiscal 2018, compared to $12.6 million for the first quarter of fiscal 2017, as first quarter fiscal 2018 operating income reflected the company’s investment in its strategic growth initiatives.

Net income was $9 million for the first quarter of fiscal 2018, compared to net income of $9.4 million for the first quarter of fiscal 2017. Net income for the first quarter of fiscal 2018 benefited from higher earnings from Parkdale America LLC and a lower effective tax rate, but was unfavorably impacted by higher administrative expenses and higher interest rates. Diluted EPS was 48 cents for the first quarter of fiscal 2018, compared to 51 cents for the first quarter of fiscal 2017.

Adjusted EBITDA was $15.8 million for the first quarter of fiscal 2018, compared to $17.9 million for the first quarter of fiscal 2017. The decrease in Adjusted EBITDA primarily resulted from higher operating expenses in the first quarter of fiscal 2018. Adjusted EBITDA is a non-GAAP financial measure.

Net debt (debt principal less cash and cash equivalents) was $83.1 million at September 24, 2017, compared to $94 million at June 25, 2017, as cash and cash equivalents grew from $35.4 million at June 25, 2017 to $42.4 million at September 24, 2017.

Fiscal 2018 Outlook
For fiscal 2018, the company continues to anticipate:

  • Volume growth, assuming a stable raw material pricing environment;
  • Revenue growth in the low-single digit percentage range;
  • Operating income and earnings growth in the mid-single digit percentage range, excluding PAL;
  • Capital expenditures of approximately $35 million; and
  • An effective tax rate in the mid-20 percent range.

Hall concluded, “We continue to expect growth in both revenue and earnings during fiscal 2018. As we remain focused on combining recycling, innovation and technology with our superior supply chain capabilities, we are excited about our growth opportunities in fiscal 2018 and beyond.”