Unifi Inc. reported earnings on an adjusted basis improved 17 percent on strong improvement in margins and a sales gain of 4.6 percent.
Highlights of the quarter include:
- Net sales were $178.9 million, an increase of 4.6 percent year-over-year, and an increase of 9.9 percent sequentially from the second quarter of fiscal 2021;
- Revenues from Repreve Fiber products represented 33 percent of consolidated net sales, compared to 29 percent for the third quarter of fiscal 2020;
- Gross profit was $25.6 million, a 66 percent increase year-over-year, while gross margin was 14.3 percent, an increase of 530 basis points year-over-year, primarily due to improvements in the Brazil and Asia Segments;
- Net income was $4.8 million, or $0.25 of diluted earnings per share (“EPS”), up from a net loss of $41.1 million, or $2.23 per share, year-over-year. The prior-year results included a $45.2 million impairment charge in connection with the company’s sale of its 34 percent interest in Parkdale America, LLC (“PAL”);
- Adjusted Net Income of $4.8 million and Adjusted EPS1 of $0.25, compared to $4.1 million and $0.22, respectively, for the third quarter of fiscal 2020, which excluded the impairment charge for PAL;
- Adjusted EBITDA was up 70.1 percent to $15.9 million, compared to $9.3 million in the third quarter of fiscal 2020; and
- On March 28, 2021, debt principal was $89.4 million while cash and cash equivalents were $75.6 million, resulting in Net Debt1 of $13.8 million, a reduction of 86.2 percent since March 29, 2020.
Eddie Ingle, CEO, Unifi, said, “Third quarter fiscal 2021 results reflected our team’s ability to leverage effectively the strength of our global business model during the continued economic recovery. We have remained focused on positioning the business to take advantage of building economic momentum around the world as we return to a more normalized demand environment. Our Brazil segment outperformed expectations again, achieving exceptional profitability with a record 41.2 percent gross margin driven by strong pricing levels. Our Asia segment also benefited from an improving business climate and recaptured pre-pandemic momentum, allowing the segment to return to top-line growth. We remain confident that the momentum we have generated throughout the recovery will allow us to further improve our long-term profitability. We expect that continued strong results from each of our high-performing businesses, coupled with continued interest in our Repreve-branded products, will fuel long-term growth.”
Third Quarter Fiscal 2021 Compared to Third Quarter Fiscal 2020
Net sales were $178.9 million, compared to $171.0 million, bolstered by an increase in sales volumes for the Asia Segment and higher selling prices for the Brazil Segment. Repreve product sales drove underlying momentum and growth for the Asia Segment. Higher selling prices, in response to local cost and supply dynamics, drove sales growth for the Brazil Segment.
Gross profit increased to $25.6 million, compared to $15.4 million. The increase in gross profit was primarily due to exceptional profitability in Brazil resulting from a strong market position and higher pricing. Additionally, sales mix and cost improvements drove gross profit benefits for the Asia Segment.
Operating income for the third quarter of fiscal 2021 increased to $8.6 million, compared to $3.1 million, primarily due to the $10.2 million, or 66 percent, increase in gross profit. Operating income for the third quarter of fiscal 2021 includes $4.1 million of higher incentive compensation expense, based on recognition of the maximum annual bonus for fiscal 2021, and a $2.6 million non-cash loss on asset disposals, primarily in preparation for installing new eAFK Evo texturing machinery in the Americas.
Net income was $4.8 million, or $0.25 per share compared to a net loss of $41.1 million, or $2.23 per share. In connection with the April 2020 sale of the company’s 34 percent interest in PAL, an impairment charge of $45.2 million was recorded in the third quarter of fiscal 2020. Adjusted Net Income and Adjusted EPS for the third quarter of fiscal 2020, which exclude the impairment charge, were $4.1 million and $0.22, respectively.
Debt principal was $89.4 million on March 28, 2021, compared to $133.7 million on March 29, 2020. Cash and cash equivalents increased to $75.6 million on March 28, 2021, up from $33.4 million on March 29, 2020, resulting in Net Debt of $13.8 million versus $100.3 million, respectively. The favorable cash and liquidity positions on March 28, 2021 benefited from the $60.0 million of proceeds from the April 2020 sale of the company’s minority interest in PAL, as well as the company’s strong generation of operating cash flows during the COVID-19 pandemic.
Year-To-Date Fiscal 2021 Compared to Year-To-Date Fiscal 2020
Net sales were $483.1 million for the first nine months of fiscal 2021, compared to $520.5 million. Revenues from REPREVE® Fiber products represented 35 percent of consolidated net sales, compared to 31 percent. Gross margin was 13.7 percent for the first nine months of fiscal 2021, compared to 9.3 percent. Operating income was $24.6 million for the first nine months of fiscal 2021, compared to $12.1 million. Net income was $15.7 million for the first nine months of fiscal 2021, compared to a net loss of $37.0 million.
The company expects demand levels and trends across the business to remain strong and anticipates current inflationary pressures from raw material fluctuations to be mostly offset by selling price adjustments. The company’s outlook for the June 2021 quarter includes the following expectations:
- Sales volumes to increase, with net sales improving sequentially from the March 2021 quarter by approximately 1.0 percent to 3.0 percent;
- Adjusted EBITDA to range from approximately $12.0 million to $14.0 million. This range includes consideration for continued underlying business momentum in spite of pandemic uncertainty in addition to an expected reduction from the recent exceptional performance of the Brazil Segment, recent global raw material cost increases that will adversely impact gross profit due to the inherent lag in responsive selling price adjustments, partially offset by a lack of incentive compensation expense due to full recognition during the first nine months of fiscal 2021;
- An effective tax rate between 45 percent and 55 percent; and
- Capital expenditures of approximately $10.0 million to $12.0 million.
Photo courtesy Unifi/Volcom