Unifi Inc. reported sales of $162.8 million in the second quarter ended December 27, a decrease of 4.0 percent year-over-year, but an increase of 15.0 percent sequentially from the first quarter of fiscal 2021. Revenues from its Repreve Fiber products represented 37 percent of consolidated net sales, a new quarterly record.

Gross profit was $25.9 million, a 66 percent increase year-over-year, while gross margin was 15.9 percent of net sales, an increase of 670 basis points year-over-year, despite the year-over-year decline in sales, influenced by the strong performance from its Brazil Segment.

Net income was $7.5 million, or $0.40 of diluted earnings per share (EPS), reflected the best quarterly earnings performance since June 2018, up from a net income of $0.4 million and EPS of $0.02 year-over-year.

Adjusted EBITDA1 was $19.2 million, the highest quarterly achievement since June 2016 and the best fiscal second quarter in more than ten years.

Operating cash flow was $11.8 million, improved sequentially from $7.9 million generated in the first quarter of fiscal 2021.

On December 27, 2020, debt principal was $92.9 million while cash and cash equivalents were $83.3 million, resulting in Net Debt1 of $9.6 million, the lowest level for the company in more than 20 years.

After the close of its fiscal second quarter, the company completed a strategic acquisition of the nylon assets of Fiber and Yarn Products, Inc. (FNY). Financial terms were not disclosed and did not impact second-quarter fiscal 2021.

Eddie Ingle, CEO, Unifi, said, “Second quarter fiscal 2021 results reflected stronger than expected performance across each of our key geographies and reinforced the resilience of our global business model. We delivered significant sequential net sales improvement in each of our segments. Most impressive is the year-over-year improvement in our gross margin, especially with the record set by the Brazil Segment. The team has been diligently positioning our business to capitalize on industry recovery as we near normal demand levels. Additionally, we have been able to sustain many of the efficiencies implemented during the beginning of the pandemic, which has begun to positively impact our long-term profitability and inventory levels as sales volumes returned. The demand for sustainable solutions continues to grow, and we remain intently focused on leveraging our strong global operations and solid financial position to drive momentum for sustainable, long-term growth.”

Second Quarter Fiscal 2021 Compared To Second Quarter Fiscal 2020
Net sales were $162.8 million, compared to $169.5 million, while consolidated sales volumes increased by 1.0 percent due to agility and responsiveness during demand recovery in Brazil. The net sales decline resulted from lower selling prices in connection with lower raw material costs and unfavorable foreign currency translation.

Gross profit increased to $25.9 million from $15.7 million in the second quarter of fiscal 2020, primarily due to an improvement in sales mix, raw material, pricing stability, and recent manufacturing efficiency gains. Each segment achieved higher-than-anticipated performance, led by a 32.9 percent gross margin for the Brazil Segment.

Operating income for the second quarter of fiscal 2021 was $13.1 million, compared to $2.6 million, primarily due to the $10.2 million, or 65.6 percent, increase in gross profit. Operating income for the second quarter of fiscal 2021 includes certain benefits: the record profitability performance for the Brazil Segment; raw material and pricing stability; and lack of discretionary spending due to continued travel restrictions and limitations.

Net income was $7.5 million, or $0.40 per share compared to $0.4 million, or $0.02 per share.

Debt principal was $92.9 million on December 27, 2020, compared to $129.3 million on December 29, 2019. Cash and cash equivalents increased to $83.3 million on December 27, 2020, up from $37.2 million on December 29, 2019, resulting in Net Debt of $9.6 million compared to $92.1 million, respectively. The favorable cash and liquidity positions on December 27, 2020 benefited from the $60.0 million of proceeds from the April 2020 sale of the company’s minority interest in Parkdale America, LLC (“PAL”), while generating operating cash flows during the pandemic.

Year-To-Date Fiscal 2021 Compared To Year-To-Date Fiscal 2020
Net sales were $304.3 million for the first six months of fiscal 2021, compared to $349.5 million. Gross margin was 13.3 percent for the first six months of fiscal 2021 compared to 9.5 percent. Operating income was $16.0 million for the first six months of fiscal 2021 compared to $8.9 million. Net income was $10.9 million for the first six months of fiscal 2021 compared to $4.1 million.

After the close of the fiscal second quarter, the company acquired certain nylon assets of FNY to enhance and expand the company’s existing nylon yarn portfolio. Financial terms were not disclosed and did not impact second-quarter fiscal 2021.

Outlook
Because of the continued global economic impact and uncertainty associated with the COVID-19 pandemic, the company’s outlook for the third quarter of fiscal 2021 is limited to the following expectations:

  • Net sales trends continue to improve sequentially, including sales of Repreve fiber, with net sales returning to the pre-pandemic level of the March 2020 quarter;
  • Adjusted EBITDA improves by a low double-digit percentage from the pre-pandemic level of the March 2020 quarter by maintaining the underlying business momentum that has occurred in fiscal 2021 with consideration for the following factors that are expected to differ from the December 2020 quarter; and
  • For full-year fiscal 2021, the company expects $22.0 to $24.0 million of capital expenditures, excluding acquisition-related amounts.

Update on Recent Trade Developments
Following antidumping and countervailing duties applied to imports of polyester textured yarn from Greater China and India in January 2020, similar imports from Indonesia, Malaysia, Thailand, and Vietnam surged in the calendar year 2020, replacing the subject imports from Mainland China and India.

In December 2020, the United States International Trade Commission (“USITC”) determined that there is a reasonable indication of material injury from imports of polyester textured yarn from Indonesia, Malaysia, Thailand, and Vietnam, which are allegedly sold in the U.S. at less than fair value.

As a result of the USITC’s affirmative determinations, the U.S. Department of Commerce will continue its investigations of imports of polyester textured yarn from Indonesia, Malaysia, Thailand, and Vietnam, with its preliminary antidumping duty determinations expected in the second quarter of calendar 2021.

Photo courtesy Unifi/Repreve