Unifi, Inc. reported net income rose sharply in the third quarter ended March 30 as brands sourced more of their apparel from factories in the Central American Free Trade Agreement production area.



The Greensboro, NC company said steady CAFTA demand boosted U.S. sales of its specialty yarns, which include Repreve, a line polyester yarns made with material recycled from PET bottles and other waste. Repreve yarns have become a popular ingredient in fleece and other garments made by  eco-minded brands in the outdoor and athletic apparel industry.

 

Unfit said lower domestic depreciation expenses also boosted domestic results, but that those gains were partially offset by lower earnings from the company's equity affiliates and higher domestic income tax expense.

 

Net sales increased $8.6 million, or 5.1 percent, to $176.9 million for the March 2014 quarter compared to net sales of $168.3 million for the prior year quarter. Net sales for the current quarter were positively impacted by the timing of the holiday shutdown period compared to the prior quarter and greater contributions from the company's domestic premier and other value-added yarns, and were partially offset by currency translation rate changes for Brazil.

 

Gross margin reached 11.2 percent, up 370 basis points from the year earlier quarter.

“The operating performance in our domestic business remained strong in the March quarter, both in our value-added product segments and commodity business,” said Roger Berrier, president and chief operating officer of Unifi. “We also remain encouraged by the stability of synthetic apparel produced in the CAFTA region and by the growth during the March quarter. As brands and retailers continue to focus on this region for additional sourcing opportunities, we will continue to add incremental capacity.”

 

Net income was $20.1 million, or $1.05 per basic share, for the nine months ended March 30, 2014, compared to net income of $6.1 million, or 30 cents per basic share, for the prior year period.

 

Cash-on-hand as of March 30 was $13.2 million, an increase of $4.4 million from June 30, 2013. Net debt at the end of the March 2014 quarter was $85.4 million, compared to $89.0 million at June 30, 2013. The company had $62.7 million available under its revolving credit facility as of March 30, compared to $36.1 million as of June 30, 2013.

 

Year-to-date sales down
Net sales decreased $7.0 million, or 1.4 percent, to $506.2 million for the current year-to-date period compared to net sales of $513.2 million for the prior year period, as increases to the company's domestic business were offset by declines in its international operations.

 

Subsequent to the quarter's closing, the board of directors authorized a new program for the company to repurchase up to an additional $50 million of common stock.

 

 

“I am pleased with the operating results from our domestic operations in the March quarter and with our ability to improve the overall liquidity of the company,” said Bill Jasper, Unifi’s chairman and CEO. “The recent amendment to our Credit Agreement increases our borrowing capacity by $18 million, which we can use to fund our strategic initiatives, including possible growth oriented capital expenditures. Our strong balance sheet, coupled with the board's decision to authorize the repurchase of up to an additional $50 million of stock, positions us to continue to maximize shareholder value as we conclude the 2014 fiscal year and enter into the next.”