Unifi’s Q4 Revenues Climb 4.5 Percent

Unifi Inc. reported earnings dipped 4.9 percent in its fourth quarter ended June 25 due to higher administrative expenses while revenues grew 4.5 percent.

Financial Highlights

• Net sales increased to $171.3 million for the fourth quarter of fiscal 2017, compared to $163.9 million for the fourth quarter of fiscal 2016
• Basic EPS of $0.53 for the fourth quarter of fiscal 2017, compared to $0.57 for the fourth quarter of fiscal 2016
• Operating income of $13.0 million for the fourth quarter of fiscal 2017, compared to $13.9 million for the fourth quarter of fiscal 2016
• Net sales increased to $647.3 million for fiscal 2017, compared to $643.6 million for fiscal 2016
• Basic EPS of $1.81 and Adjusted EPS of $1.90 for fiscal 2017, compared to $1.93 and $2.01, respectively, for fiscal 2016
• Fiscal 2018 outlook of low-single digit revenue growth and mid-single digit earnings growth (exclusive of Parkdale America, LLC)

Other Highlights

• Kevin Hall named as CEO and elected as a member of the Board of Directors, effective May 19, 2017
• Cash position increased to $35.4 million, while net debt decreased to $94.0 million
• Premium value-added (“PVA”) product sales reached 40 percent of the consolidated portfolio for fiscal 2017
• Recycling operations contribute to portfolio growth and diversification

“The fourth quarter of fiscal 2017 continued to demonstrate the global opportunity of our growing portfolio of PVA products. We are pleased that the strength of our international operations allowed us to overcome ongoing headwinds in the domestic retail and apparel markets,” said Kevin Hall, CEO of Unifi.  “In my first two months at Unifi, I’ve had the opportunity to better understand the breadth and talent of our organization.  As a result, I’ve grown even more confident in Unifi’s long-term potential and the growth opportunities for Repreve and our other PVA products, which will be driven by our strong technological and operational expertise, as well as by our exciting partnerships with many of the world’s leading brands and retailers.”

Hall continued, “As we look to the future, I believe that we will become an even stronger partner for our customers and that we will build new and more expansive relationships with like-minded global brands.  In doing so, we will remain committed to innovation by building around our recent successes in the use of earth-friendly materials in combination with the technologies that improve the performance and aesthetic characteristics of high-demand products.  We must also remain disciplined, leveraging our premier supply chain capabilities with our state-of-the-art recycling equipment and vast network of textile assets to remain a leading solutions provider.  As our core competencies continue to provide the platform necessary for future growth, we expect to invest for growth in PVA revenue and earnings for fiscal 2018.”

Fourth Quarter Fiscal 2017 Operational Review

Net sales were $171.3 million for the fourth quarter of fiscal 2017, compared to net sales of $163.9 million for the fourth quarter of fiscal 2016.  Sales growth was led by operations in Asia and Brazil, partially offset by challenging domestic market conditions. Operating income was $13.0 million in the fourth quarter of fiscal 2017, compared to $13.9 million in the fourth quarter of fiscal 2016.

Net income was $9.7 million for the fourth quarter of fiscal 2017, compared to net income of $10.2 million for the fourth quarter of fiscal 2016.  Net income for the fiscal 2017 quarter benefitted from a lower effective tax rate, but was unfavorably impacted by higher administrative expenses. Basic EPS was $0.53 for the fourth quarter of fiscal 2017, compared to $0.57 for the fourth quarter of fiscal 2016, while Adjusted EPS was $0.53 for the fourth quarter of fiscal 2017, compared to $0.62 for the fourth quarter of fiscal 2016.

Adjusted EBITDA was $18.8 million for the fourth quarter of fiscal 2017, compared to $20.6 million for the fourth quarter of fiscal 2016.  Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are non-GAAP financial measures. The schedules included in this press release calculate Adjusted EPS and reconcile Adjusted EBITDA and Adjusted Net Income to Net income attributable to Unifi, Inc.

Foreign currency translation in the fourth quarter of fiscal 2017 resulted in an increase to net sales of $1.9 million and gross profit of $0.5 million compared to the prior fiscal year fourth quarter.
Net debt (debt principal less cash and cash equivalents) was $94.0 million at June 25, 2017, compared to $106.4 million at June 26, 2016.

Fiscal 2017 Operational Review

Net sales were $647.3 million for the fiscal year ended June 25, 2017, compared to net sales of $643.6 million for the fiscal year ended June 26, 2016.  PVA portfolio performance in Asia and Brazil provided growth against difficult domestic market conditions.  Operating income increased to $43.8 million in fiscal 2017 compared to $42.2 million in fiscal 2016. Lower bad debt and other operating expenses were partially offset by higher administrative expenses, which reflect investments aimed at increasing top-line growth, specifically through strategic planning, talent acquisition and commercial expansion.

Net income was $32.9 million for fiscal 2017, compared to $34.4 million for fiscal 2016.  Net income for fiscal 2017 was favorably impacted by a lower effective tax rate, but adversely impacted by a loss of approximately $1.7 million associated with a non-core divestiture and an approximately $2.2 million* decline in earnings from Parkdale America, LLC (“PAL”).  After-tax earnings from PAL declined from approximately $4.0 million* in fiscal 2016 to approximately $1.8 million* in fiscal 2017. Basic EPS was $1.81 for fiscal 2017, compared to $1.93 for fiscal 2016.

Adjusted Net Income and Adjusted EPS, both excluding the loss from a non-core divestiture, were $34.5 million and $1.90, respectively, for fiscal 2017, compared to $35.9 million and $2.01, respectively, for fiscal 2016.  Adjusted Net Income and Adjusted EPS in fiscal 2017 and fiscal 2016 were impacted by weaker results from PAL.  Adjusted EBITDA, which excludes changes in earnings from PAL, was $65.6 million for fiscal 2017, compared to $65.4 million for fiscal 2016.

Foreign currency translation in fiscal 2017 resulted in an increase to net sales of $9.8 million and gross profit of $1.8 million compared to the prior fiscal year.

* The estimate of after-tax earnings for PAL utilizes the 35 percent U.S. federal tax rate.

Fiscal 2018 Outlook

For fiscal 2018, the company anticipates:
• Volume growth, assuming a stable raw material pricing environment
• Revenue growth in the low-single digit percentage range
• Operating income and earnings growth in the mid-single digit percentage range, excluding PAL
• Capital expenditures of approximately $35 million
• Effective tax rate in the mid 20 percent range

At the start of fiscal 2018, the company received a $6.8 million distribution from PAL.

Hall concluded, “While we enter fiscal 2018 with a somewhat soft domestic environment in the retail and apparel markets, our global performance remains quite strong.  Further, we expect PVA sales to exceed 40 percent of our consolidated portfolio in fiscal 2018 as Repreve and our branded products continue to gain acceptance and broader awareness.  As a result, we believe we will see improved contributions from our strategic investments, such as our Repreve Bottle Processing Center and the Repreve Recycling Center.  Therefore, we expect to see growth in both revenue and earnings during fiscal 2018.”