Unifi, Inc. released operating results for its fourth quarter and fiscal year ending June 26, 2005.
Net income for the current quarter, including discontinued operations, was a net loss of $9.0 million or 17 cents per share compared to a net loss of $6.0 million or 12 cents per share for the prior year June quarter. The company also reported a net loss of $41.2 million or 79 cents per share for the 2005 fiscal year, which represents an improvement over a net loss of $69.8 million or $1.34 per share for the 2004 fiscal year. Net income for the current quarter was negatively impacted by a pre-tax charge of $8.2 million associated with the write-off of receivables associated with the recent Chapter 11 bankruptcy filing by Collins & Aikman.
Net sales for the June quarter, which include sales from the Kinston, North Carolina based INVISTA polyester manufacturing assets acquired in September 2004, were $203.2 million, an increase of $28.4 million or 16.2% compared to net sales of $174.8 million for the prior year June quarter. Net sales of $799.4 million for the 2005 fiscal year represent an increase of $131.6 million, or 19.7%, over the 2004 fiscal year.
Continuing its focus on strengthening the balance sheet, the company reported the following improvements made to its balance sheet during the current quarter:
- Increased cash-on-hand by $50.2 million, ending the current June
quarter with $105.6 million in cash-on-hand compared to the
$55.4 million cash-on-hand reported at the end of the March quarter.
The proceeds from the sale of the company's land and buildings
located in Ireland, which closed on June 30, 2005, are not included
in this figure.
- Reduced inventories by $32.0 million in the quarter.
- Reduced its receivables balance by $14.2 million during the quarter,
excluding the Collins & Aikman bad debt write-off.
Subsequent to the end of the current June quarter, the company utilized $24.4 million of cash to pay off the five-year note to INVISTA, derived from the purchase of the INVISTA polyester POY assets.
“We are entering our 2006 fiscal year with one of the strongest balance sheets and business models in years, which will allow us to stay focused on executing our domestic and global growth strategies,” said Bill Lowe, chief operating officer and CFO for Unifi. “Although the results posted on our income statement for our 2005 fiscal year were generally as expected, the significant progress on working capital reduction made during the fourth quarter leaves our balance sheet stronger than anticipated. In our POY or spinning business, the integration of Kinston is running ahead of schedule, and across all business units, we took the necessary step of drastically adjusting inventory levels, including selling off our aged inventory, which had a negative impact on our gross margin for the current quarter of approximately $3.9 million. We have lowered selling, general and administrative (SG&A) expenses from 6.9% of sales for our 2004 fiscal year to 5.4% for the current fiscal year, and we are confident that we can maintain SG&A at a level of 5.0% or lower in our 2006 fiscal year. All of this points to a healthier business for Unifi in the upcoming fiscal year.”
The company reported a net loss from continuing operations of $12.5 million or 24 cents per share for the June quarter compared to a net loss of $6.5 million or 13 cents per share for the prior year June quarter. The company also reported a net loss from continuing operations of $20.8 million or 40 cents per share for the 2005 fiscal year, which is an improvement over the net loss of $44.7 million or 86 cents per share for the 2004 fiscal year. Included in the results for the prior year June quarter and fiscal year is a pre-tax benefit, included in the cost of sales, of $11.4 million and $38.3 million, respectively, generated by the company's manufacturing alliance with Koch Industries (previously DuPont), which was terminated as a result of the Kinston purchase.
Brian Parke, chairman and CEO for Unifi, said, “Fiscal 2006 will be a year in which we leverage the success of our downstream selling and direct sourcing efforts to become a leading global supplier to U.S. and European brands and retailers. We will also focus on the new downstream selling and direct sourcing opportunities that are available through Yihua Unifi Fibre Industry Company Limited, our joint venture in China with Sinopec Yizheng Chemical Fibre Company. The knowledge, expertise, and relationships to develop programs that can drive our products to market through existing channels now reside within the company, and we have established a very successful business model. This success, coupled with the development of sourcing infrastructure in the Americas, has lessened the need for the company to maintain a separate sourcing business. As a result, Unifi will discontinue Unimatrix Americas and focus our resources internally to support our downstream initiatives around the globe. However, Unimatrix Asia, LLC, which is not a subsidiary or affiliate of Unifi, has been and will continue to operate independent of Unifi as a full-service, full-package global sourcing company.”
“Our joint venture in China with Sinopec Yizheng Chemical Fibre Company, Yihua UFI Ltd. is progressing according to plan and will begin operation in August. Our manufacturing and sales teams have been on the ground for approximately two months, and we are already seeing process improvements throughout the organization.”
UNIFI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In Thousands Except Per Share Data)
For the Quarters For the Year to Date
Ended Periods Ended
June 26, June 27, June 26, June 27,
2005 2004 2005 2004
Net sales $203,151 $174,774 $799,446 $667,837
Cost of sales 201,962 160,926 768,714 627,586
Selling, general &
administrative expense 11,905 10,023 43,157 46,333
Provision for bad debts 8,133 755 13,464 2,649
Interest expense 5,361 4,431 20,575 18,698
Interest income (876) (498) (2,302) (2,351)
Other (income) expense, net (1,050) 825 (2,253) (2,569)
Equity in (earnings) losses
of unconsolidated affiliates (578) 518 (6,788) 7,076
Minority interest (income)
expense (86) 401 (530) (6,430)
Restructuring charges
(recovery) (341) 5,624 (341) 8,229
Arbitration costs and
expenses - 179 - 182
Alliance plant closure costs
(recovery) - - - (206)
Write down of long-lived
assets 603 - 603 25,241
Goodwill impairment - - - 13,461
Loss from continuing
operations before income
taxes (21,882) (8,410) (34,853) (70,062)
Benefit for income taxes (9,392) (1,925) (14,103) (25,401)
Loss from continuing
operations (12,490) (6,485) (20,750) (44,661)
Income (loss) from
discontinued operations -
net of tax 3,681 466 (21,632) (25,132)
Loss before extraordinary
items (8,809) (6,019) (42,382) (69,793)
Extraordinary (loss) gain -
net of taxes of $0 (185) - 1,157 -
Net loss $(8,994) $(6,019) $(41,225) $(69,793)
Earnings (losses) per common
share:
Net loss - continuing
operations $(0.24) $(0.13) $(0.40) $(0.86)
Net loss - discontinued
operations $0.07 $0.01 $(0.41) $(0.48)
Net income - extraordinary
gain $- $- $0.02 $-
Net loss $(0.17) $(0.12) $(0.79) $(1.34)
