Unifi Returns to Profitability

Unifi Inc. earned $2.0 million, or 3 cents a share, in the second fiscal quarter ended Dec. 27, 2009, rebounding from a net loss of $9.1 million or 15 cents, for the prior year quarter. Net sales for the quarter increased $16.5 million or 13.1% to $142.3 million, and reflect the combined impact of improvements in retail sales across the company’s primary end-use segments and increases in market share.

The company is also reporting adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) of $13.3 million for the current quarter compared to $2.1 million of Adjusted EBITDA for the prior year quarter. Quarter over prior year quarter highlights include the following:

  • Gross profit increased $15 million and gross margin improved to 12.2%;
  • Adjusted EBITDA improved by $11.2 million;
  • The company’s share of earnings from its equity affiliates improved by $1.4 million; and
  • UTSC, the company’s wholly-owned subsidiary in China, reached profitability in the quarter.

For the first half of the 2010 fiscal year, Unifi is reporting net income of $4.4 million or 7 cents per share compared to a net loss of $9.7 million or 16 cents per share for the prior year period. Although net sales for the first half of the fiscal year decreased $9.6 million or 3.3% to $285.1 million, Adjusted EBITDA increased to $28.4 million compared to $16.0 million for the first six months of fiscal 2009. Results for the quarter and the first half of the fiscal year were positively impacted by a $1 million reduction in the company’s bad debt provision.

“I am very pleased with our overall results for the first half of the fiscal year, in which we maintained profitability and generated $12 million more Adjusted EBITDA compared to the prior year period, as we have adapted our business model to the post-recession reality,” said Bill Jasper, president and CEO of Unifi. “With the gradual improvement of the economy, we are encouraged by the demand levels we are seeing and the resurgence in the number of development programs using our premium value-added yarns, particularly our REPREVE(R) recycled product. In addition, progress continues on our Central American operation, and we expect to begin shipping locally-produced yarn in Central America during the June quarter.”

Cash-on-hand at the end of the December quarter was $54.4 million, which represents a decrease of $1.3 million from the end of the September quarter, but an increase of $42 million over the last twelve months. Total cash and cash equivalents at the end of the December quarter, including restricted cash, were $58.1 million and total long-term debt was $183.4 million.

Ron Smith, Chief Financial Officer for Unifi, said, “compared to a year ago, the Company’s substantial margin improvement was driven by significantly better volumes, resulting in higher utilization rates, as well as the Company’s continuous improvement efforts focused on quality, operating efficiencies and cost structures. We do see an upward trend in polyester raw material costs over the next two quarters, which may put some pressure on margins, but we are optimistic as a result of the improving demand and our ability to recover such cost increases over the long-run.”

UNIFI, INC.                                                              
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In Thousands Except Per Share Data)
For the
For the Year-To-Date
Quarters Periods
Ended Ended
--------- ------------
Dec. 27 Dec. 28 Dec. 27 Dec. 28
2009 2008 2009 2008
------ ------ ------ ------

Summary of Operations:
Net sales $142,255 $125,727 $285,106 $294,736
Cost of sales 124,919 123,415 248,364 278,999
Write down of
long-lived
assets - - 100 -
Selling, general &
administrative
expenses 12,152 9,304 23,316 19,849
Provision
(benefit) for
bad debts (564) 501 12 1,059
Other operating
(income) expense,
net (109) (5,212) (196) (5,773)

Non-operating
(income)
expense:
Interest income (834) (680) (1,580) (1,593)
Interest expense 5,223 5,748 10,715 11,713
Gain on
extinguishment
of debt - - (54) -
Equity in earnings of
unconsolidated
affiliates (1,609) (162) (3,672) (3,644)
Write down of investment
in unconsolidated
affiliate - 1,483 - 1,483
--- ----- --- -----
Income (loss) from
continuing operations
before
income taxes 3,077 (8,670) 8,101 (7,357)
Provision for
income taxes 1,124 614 3,659 2,499
----- --- ----- -----
Income (loss) from
continuing
operations 1,953 (9,284) 4,442 (9,856)
Income from discontinued
operations, net of tax - 216 - 112
--- --- --- ---
Net income (loss) $1,953 $(9,068) $4,442 $(9,744)
====== ======= ====== =======

Earnings (loss) per share
from continuing operations
and net income:
Income (loss) per
common share -
basic $0.03 $(0.15) $0.07 $(0.16)
===== ====== ===== ======

Income (loss) per
common share -
diluted $0.03 $(0.15) $0.07 $(0.16)
===== ====== ===== ======


Weighted average
shares outstanding -
basic 61,498 62,030 61,778 61,582

Weighted average
shares outstanding -
diluted 61,784 62,030 61,921 61,582

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

Unifi Returns to Profitability


Unifi Inc. reported net income for the current quarter, including discontinued operations, reached $771,000, or one cent a share, in the second quarter. That compares to a loss of $74.2 million, or $1.23 per share, for the prior June quarter. Net sales were up slightly to $189.6 million from $185.3 million a year  ago.
 

Unifi also announced a proposed agreement to sell its 50% ownership interest in Yihua Unifi Fibre Industry Co. Ltd (“YUFI”) to its partner, Sinopec Yizheng Chemical Fiber Co., Ltd. (“YCFC”), pending final negotiation and execution of definitive agreements and Chinese regulatory approvals. While there can be no assurances of completion, the company expects to close the transaction in the second quarter of fiscal 2009. Net income for the June quarter was negatively impacted by $8.8 million in impairment charges and operating losses of YUFI. The Company intends to continue servicing customers in Asia, through the formation of Unifi Textiles Suzhou Co., Ltd. (“UTSC”), a wholly-owned, China-based subsidiary that will develop, source, sell and service premium value-added yarns. The company expects UTSC to begin operations during the second quarter of fiscal 2009.

 


Net income in the quarter was also impacted by a $3.2 million discontinued operation benefit from the pending liquidation of the company’s former operations in the United Kingdom and $2.1 million of gains related to the sale of non-productive assets.


Net income for the 2008 fiscal year was a net loss of $16.2 million or $0.27 per share compared to a net loss of $115.8 million or $2.06 per share for the prior fiscal year. Net sales for the 2008 fiscal year were $713.3 million compared to net sales of $690.3 million for the prior fiscal year.


 


“The supply-chain management and operational improvements made throughout the fiscal year, as well as continued growth in our premium value-added products, have driven our improved performance over the last two quarters,” said Ron Smith, chief financial officer for Unifi. “Our sourcing strategy for raw materials enabled the Company to partially contend with escalating raw materials costs, which saw double digit increases during the quarter. While domestic consumption contracted as a result of the prolonged economic slowdown in many of our market segments, certain portions of our business remained stable due to the increased volume of synthetic apparel sourced through the CAFTA region.”


 


Cash-on-hand at the end of the June quarter was $20.2 million, which is a decrease from the $26.2 million cash-on-hand at the end of the March quarter. Total cash and cash equivalents at the end of June, including restricted cash, were $38.5 million compared to $44.1 million as of June 2007. Total long-term debt at the end of the June quarter was $201.8 million compared to $218.4 million as of the March 2008 quarter and $234.6 million as of the June 2007 year-end.


 


Bill Jasper, president and CEO of Unifi, said, “Although the economic slowdown and rapidly rising raw material prices have dampened the positive impacts, we continue to be pleased with the fundamental improvements in our core business. As we move into our new fiscal year, we will continue to address our supply chain management and operational discipline, and focus our efforts on driving growth of premium value-added products. Integral to our strategy will be continued investment in the development and commercialization of innovative products, such as Repreve, and the establishment of UTSC to service the profitable opportunities in the value-added segments of the Asian yarn markets. The positive improvements in our underlying operations over the last few quarters, and the new business model being launched in China are specific examples of how the leadership team is successfully responding to challenges in the market place while also seeking to maximize profitable growth opportunities, both domestically and abroad.”



UNIFI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In Thousands Except Per Share Data)

For the Quarters Ended For the Years Ended
June 29, June 24, June 29, June 24,
2008 2007 2008 2007

Net sales $189,605 $185,267 $713,346 $690,308
Cost of sales 171,768 170,704 662,764 651,911
Selling, general &
administrative expenses 11,030 12,032 47,572 44,886
Provision for bad debts 62 4,302 214 7,174
Interest expense 6,458 6,732 26,056 25,518
Interest income (679) (970) (2,910) (3,187)
Other (income) expense,
net (2,340) 129 (6,427) (2,576)
Equity in (earnings)
losses of unconsolidated
affiliates 4,179 (181) 3,265 4,292
Restructuring charges
(recoveries) (611) (157) 4,027 (157)
Write down of long-lived
assets – 659 2,780 16,731
Write down of investment
in unconsolidated
affiliates 1,826 84,742 6,331 84,742
Loss from continuing
operations before
income taxes (2,088) (92,725) (30,326) (139,026)
Provision (benefit) for
income taxes 345 (17,531) (10,949) (21,769)
Loss from continuing
operations (2,433) (75,194) (19,377) (117,257)
Income from discontinued
operations, net of tax 3,204 1,002 3,226 1,465
Net income (loss) $771 $(74,192) $(16,151) $(115,792)

Income (loss) per common
share (basic and diluted):
Net loss –
continuing operations $(0.04) $(1.24) $(0.32) $(2.09)
Net income –
discontinued operations 0.05 0.01 0.05 0.03
Net income (loss) –
basic and diluted $0.01 $(1.23) $(0.27) $(2.06)

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

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