Unifi, Inc. reported a surge in income on lower sales in its fiscal second quarter as higher sales of premium fibers to its North American customers helped offset difficult conditions in China and Brazil.
Based in North Carolina, Unifi sells textured and other processed yarns with enhanced performance characteristics, such as Repreve, a yarn made from recycled PET bottles used to make fleece by many outdoor apparel brands.
Preliminary figures released by the company show it earned net income was $6.4 million, or $0.34 per basic share for the second quarter ended Dec. 29, 2013, up 166.7 percent from the prior year quarter, reflecting gains from improved margins, lower net interest expense and higher earnings from the company's equity affiliates. These gains were partially offset by higher expenses for income taxes.
Unifit reported net sales decreased by $11.5 million, or 6.7 percent, to $160.6 million for the second quarter of the current year compared to net sales of $172.1 million for the prior year quarter, was offset by improved operating margins and earnings from equity affiliates. The comparative decrease was primarily attributable to the timing of the holiday shutdown, which adversely affected domestic sales activity in the second quarter of the current year versus the third quarter of the prior year; in addition, declines in sales volumes for the company's foreign subsidiaries, reductions in lower margin business and the currency translation effects of the weakened Brazilian Real also contributed to lower net sales.
“We are encouraged with the continued performance of our domestic business, focusing on products that are profitable, defensible and compliant within the Central American Free Trade Agreement, and we have experienced growth in our domestic operations from our premier value-added products,” said Roger Berrier, President and Chief Operating Officer of Unifi. “Although operating conditions remain challenging in Brazil and China, we remain encouraged by the long-term sales opportunities that we anticipate from the development work that we are currently engaged in.”
Cash-on-hand as of December 29, 2013 was $15.5 million, an increase of $6.8 million from June 30, 2013. Net debt at the end of the December 2013 quarter was $87.3 million, compared to $89.0 million at June 30, 2013. As of December 29, 2013, the weighted average interest rate for the company's outstanding debt obligations was 3.1 percent.
Net income was $15.3 million, or $0.80 per basic share, for the six months ended December 29, 2013 compared to net income of $4.7 million, or $0.23 per share, for the prior year six-month period. A net sales decrease of $15.7 million, or 4.5 percent, to $329.3 million for the current year six-month period compared to net sales of $345.0 million for the prior year six-month period, was offset by improved operating margins and earnings from equity affiliates.
“We continue to have strong, improving earnings and cash flow,” said Bill Jasper, Chairman and CEO of Unifi. “Our operating results over the past twelve months have enabled us to fund our operating and capital needs, while repurchasing $38 million of the company's common stock and reducing net debt by slightly over $4 million, significantly enhancing shareholder value. We expect to continue our financial improvement by continuing to focus on lean manufacturing initiatives, enriching our product mix and deriving value from sustainability based initiatives.”
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
(amounts in thousands, except per share amounts) |
|
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
|
December 29, 2013 |
|
December 23, 2012 |
|
December 29, 2013 |
|
December 23, 2012 |
Net sales |
|
$ |
160,617 |
|
$ |
172,071 |
|
$ |
329,286 |
|
$ |
344,971 |
Cost of sales |
|
|
142,120 |
|
|
155,380 |
|
|
290,804 |
|
|
310,260 |
Gross profit |
|
|
18,497 |
|
|
16,691 |
|
|
38,482 |
|
|
34,711 |
Selling, general and administrative expenses |
|
|
11,491 |
|
|
11,532 |
|
|
21,605 |
|
|
22,679 |
Provision for bad debts |
|
|
87 |
|
|
73 |
|
|
49 |
|
|
183 |
Other operating expense, net |
|
|
1,145 |
|
|
580 |
|
|
2,769 |
|
|
1,161 |
Operating income |
|
|
5,774 |
|
|
4,506 |
|
|
14,059 |
|
|
10,688 |
Interest income |
|
|
(142) |
|
|
(144) |
|
|
(1,356) |
|
|
(268) |
Interest expense |
|
|
903 |
|
|
1,361 |
|
|
2,155 |
|
|
2,805 |
Loss on extinguishment of debt |
|
|
– |
|
|
114 |
|
|
– |
|
|
356 |
Equity in earnings of unconsolidated affiliates |
|
|
(5,122) |
|
|
(1,258) |
|
|
(11,245) |
|
|
(1,929) |
Income before income taxes |
|
|
10,135 |
|
|
4,433 |
|
|
24,505 |
|
|
9,724 |
Provision for income taxes |
|
|
3,924 |
|
|
2,216 |
|
|
9,675 |
|
|
5,449 |
Net income including non-controlling interest |
|
|
6,211 |
|
|
2,217 |
|
|
14,830 |
|
|
4,275 |
Less: net (loss) attributable to non-controlling interest |
|
|
(232) |
|
|
(209) |
|
|
(483) |
|
|
(445) |
Net income attributable to Unifi, Inc. |
|
$ |
6,443 |
|
$ |
2,426 |
|
$ |
15,313 |
|
$ |
4,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Unifi, Inc. per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.34 |
|
$ |
0.12 |
|
$ |
0.80 |
|
$ |
0.23 |
Diluted |
|
$ |
0.32 |
|
$ |
0.12 |
|
$ |
0.76 |
|
$ |
0.23 |
