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Unifi Announces Third Quarter 2014 Results; Board Authorizes Additional Repurchases of Common Stock

GREENSBORO, N.C., April 23, 2014 /PRNewswire/ -- Unifi, Inc. (NYSE: UFI) today released preliminary operating results for the third quarter ended March 30, 2014 of its 2014 fiscal year.  Net income for the March 2014 quarter was $4.7 million, or $0.25 per basic share, compared to net income of $1.4 million, or $0.07 per basic share, for the prior year quarter, reflecting improved operating results in the Company's domestic business and lower domestic depreciation expenses.  These gains were partially offset by lower earnings from the Company's equity affiliates and higher domestic income tax expense.    

Highlights for the March 2014 quarter included:

  • Adjusted EBITDA improved to $12.6 million for the current quarter from $8.4 million for the prior year quarter;
  • Income before income taxes increased to $8.9 million for the current quarter from $3.7 million for the prior year quarter, while equity in earnings of unconsolidated affiliates decreased $1.2 million;
  • The Company entered into a Fourth Amendment to its Credit Agreement for its existing revolving credit facility and term loan, which increased the term loan by $18 million to a total of $68 million and extended the maturity date of the facility from May 24, 2018 to March 28, 2019; and
  • The Company completed its previously authorized $50 million stock repurchase program that commenced in January 2013, through which it retired 2.3 million shares.

Net sales increased $8.6 million, or 5.1%, 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.  

"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." 

Cash-on-hand as of March 30, 2014 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, 2014, compared to $36.1 million as of June 30, 2013.    

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 $0.30 per basic share, for the prior year period, as gross profit margins increased during the current period as a result of the strength in the Company's domestic business.  Net sales decreased $7.0 million, or 1.4%, 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.

Bill Jasper, Chairman and CEO of Unifi, stated: "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.  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." Mr. Jasper continued: "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."

The Company will provide additional commentary regarding its third quarter results and other developments during its earnings conference call on April 24, 2014, at 8:30 a.m. Eastern Time.  The call will be webcast live at http://investor.unifi.com/, will be available for replay approximately two hours after the live event and will be archived for approximately twelve months.  Additional supporting materials and information related to the call, as well as the Company's financial results for the March 2014 quarter, will also be available at http://investor.unifi.com/.

Unifi, Inc. (NYSE: UFI) is a multi-national manufacturing company that produces and sells textured and other processed yarns designed to meet customer specifications, and premier value-added ("PVA") yarns with enhanced performance characteristics.  Unifi maintains one of the textile industry's most comprehensive polyester and nylon product offerings.  Unifi enhances demand for its products, and helps others in creating a more effective textile industry supply chain, through the development and introduction of branded yarns that provide unique performance, comfort and aesthetic advantages.  In addition to its flagship REPREVE® products – a family of eco-friendly yarns made from recycled materials – key Unifi brands include: SORBTEK®, REFLEXX®, AIO® - all-in-one performance yarns, SATURA®, AUGUSTA® A.M.Y.®, MYNX® UV and MICROVISTA®.  Unifi's yarns are readily found in the products of major brands in the apparel, hosiery, automotive, home furnishings, industrial and other end use markets.  For more information about Unifi, visit www.unifi.com; to learn more about REPREVE®, visit www.repreve.com.

 

Financial Statements to Follow

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(amounts in thousands, except share and per share amounts)














March 30, 2014


June 30, 2013

ASSETS





Cash and cash equivalents

$

13,159


$

8,755

Receivables, net


97,390



98,392

Inventories


110,916



110,667

Income taxes receivable


50



1,388

Deferred income taxes


1,898



1,715

Other current assets


5,254



5,913

Total current assets


228,667



226,830







Property, plant and equipment, net


118,708



115,164

Deferred income taxes


2,459



2,196

Intangible assets, net


7,867



7,772

Investments in unconsolidated affiliates


98,430



93,261

Other non-current assets


4,508



10,243

Total assets

$

460,639


$

455,466







LIABILITIES AND SHAREHOLDERS' EQUITY






Accounts payable

$

53,276


$

45,544

Accrued expenses


16,472



18,485

Income taxes payable


1,550



851

Current portion of long-term debt


4,905



65

Total current liabilities


76,203



64,945

Long-term debt


93,606



97,688

Other long-term liabilities


7,379



5,053

Deferred income taxes


2,231



1,300

Total liabilities


179,419



168,986

Commitments and contingencies












Common stock, $0.10 par (500,000,000 shares authorized,






18,555,370 and 19,205,209 shares outstanding)


1,855



1,921

Capital in excess of par value


42,280



36,375

Retained earnings


242,142



252,112

Accumulated other comprehensive loss


(6,679)



(5,500)

Total Unifi, Inc. shareholders' equity


279,598



284,908

Non-controlling interest


1,622



1,572

Total shareholders' equity


281,220



286,480

Total liabilities and shareholders' equity

$

460,639


$

455,466

 

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(amounts in thousands, except per share amounts)


























For the Three Months Ended


For the Nine Months Ended


March 30, 2014


March 24, 2013


March 30, 2014


March 24, 2013

Net sales

$

176,864


$

168,249


$

506,150


$

513,220

Cost of sales


157,105



155,568



447,909



465,828

Gross profit


19,759



12,681



58,241



47,392

Selling, general and administrative expenses


12,290



11,262



33,895



33,941

Provision for bad debts


137



74



186



257

Other operating expense, net


1,239



712



4,008



1,873

Operating income


6,093



633



20,152



11,321

Interest income


(214)



(240)



(1,570)



(508)

Interest expense


962



1,236



3,117



4,041

Loss on extinguishment of debt


-



746



-



1,102

Equity in earnings of unconsolidated affiliates


(3,585)



(4,783)



(14,830)



(6,712)

Income before income taxes


8,930



3,674



33,435



13,398

Provision for income taxes


4,476



2,510



14,151



7,959

Net income including non-controlling interest


4,454



1,164



19,284



5,439

Less: net (loss) attributable to non-controlling interest


(289)



(235)



(772)



(680)

Net income attributable to Unifi, Inc.

$

4,743


$

1,399


$

20,056


$

6,119













Net income attributable to Unifi, Inc. per common share:












Basic

$

0.25


$

0.07


$

1.05


$

0.30

Diluted

$

0.24


$

0.07


$

1.01


$

0.30

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(amounts in thousands)








For the Nine Months Ended


March 30, 2014


March 24, 2013

Cash and cash equivalents at beginning of year 

$

8,755


$

10,886

Operating activities: 






Net income including non-controlling interest 


19,284



5,439

Adjustments to reconcile net income including non-controlling 






    interest to net cash provided by operating activities: 






Equity in earnings of unconsolidated affiliates 


(14,830)



(6,712)

Dividends received from unconsolidated affiliates 


9,832



10,531

Depreciation and amortization expense 


13,290



19,263

Loss on extinguishment of debt 


-



1,102

Non-cash compensation expense 


2,091



1,896

Excess tax benefit on stock-based compensation plans 


(3,553)



-

Deferred income taxes 


417



4,703

Restructuring charges 


1,296



-

Other 


851



341

Changes in assets and liabilities, excluding effects of foreign currency adjustments: 






Receivables, net 


537



2,094

Inventories 


(1,075)



4,460

Other current assets and income taxes receivable 


2,344



607

Accounts payable and accrued expenses 


2,905



1,756

Income taxes payable 


4,268



(470)

Other non-current assets 


4,780



(84)

Net cash provided by operating activities 


42,437



44,926

Investing activities: 






Capital expenditures 


(13,390)



(4,522)

Proceeds from sale of assets 


2,186



56

Proceeds from other investments 


428



592

Other investments 


-



(1,835)

Other 


(188)



(272)

Net cash used in investing activities 


(10,964)



(5,981)

Financing activities: 






Proceeds from revolving credit facility 


99,500



64,100

Payments on revolving credit facility 


(126,600)



(63,800)

Proceeds from term loan 


25,200



-

Payments on term loans 


-



(26,530)

Payments of debt financing fees 


(3)



(113)

Proceeds from related party term loan 


-



1,250

Common stock repurchased and retired under publicly announced program 


(30,715)



(9,671)

Common stock tendered to the Company for withholding tax obligations and retired 


(1,654)



-

Proceeds from stock option exercises 


3,056



78

Contributions from non-controlling interest 


822



880

Excess tax benefit on stock-based compensation plans 


3,553



-

Other 


(152)



(41)

Net cash used in financing activities 


(26,993)



(33,847)







Effect of exchange rate changes on cash and cash equivalents 


(76)



(83)

Net increase in cash and cash equivalents 


4,404



5,015

Cash and cash equivalents at end of period 

$

13,159


$

15,901

 

 RECONCILIATIONS OF NET INCOME ATTRIBUTABLE TO UNIFI, INC. TO ADJUSTED EBITDA (Unaudited) 

(amounts in thousands)













The reconciliations of Net income attributable to Unifi, Inc. to EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA are as follows: 


For the Three Months Ended


For the Nine Months Ended


March 30, 2014


March 24, 2013


March 30, 2014


March 24, 2013

Net income attributable to Unifi, Inc. 

$

4,743


$

1,399


$

20,056


$

6,119

Provision for income taxes 


4,476



2,510



14,151



7,959

Interest expense, net 


748



996



1,547



3,533

Depreciation and amortization expense 


4,525



6,087



12,874



18,718

EBITDA 


14,492



10,992



48,628



36,329













Non-cash compensation expense 


480



570



2,091



1,896

Loss on extinguishment of debt 


-



746



-



1,102

Other 


1,203



845



3,749



1,736

Adjusted EBITDA including equity affiliates 


16,175



13,153



54,468



41,063













Equity in earnings of unconsolidated affiliates 


(3,585)



(4,783)



(14,830)



(6,712)

 Adjusted EBITDA 

$

12,590


$

8,370


$

39,638


$

34,351

NON-GAAP FINANCIAL MEASURES

Certain non-GAAP financial measures included herein are designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America ("GAAP") because management believes such measures are useful to investors.  These non-GAAP financial measures are Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Adjusted EBITDA including equity affiliates, and Adjusted EBITDA.

EBITDA represents net income or loss attributable to Unifi, Inc. before net interest expense, income tax expense, and depreciation and amortization expense.  Adjusted EBITDA including equity affiliates represents EBITDA adjusted to exclude non-cash compensation expense, gains or losses on extinguishment of debt, loss on previously held equity interest, and certain other adjustments.  Such other adjustments include operating expenses for Repreve Renewables, restructuring charges and start-up costs, gains or losses on sales or disposals of property, plant and equipment, currency and derivative gains or losses, certain employee healthcare expenses, and other operating or non-operating income or expense items necessary to understand and compare the underlying results of the Company.  Adjusted EBITDA represents Adjusted EBITDA including equity affiliates adjusted to exclude equity in earnings and losses of unconsolidated affiliates.  The Company may, from time to time, change the items included within Adjusted EBITDA. 

EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA are alternative views of performance used by management, and we believe that investors' understanding of our performance is enhanced by disclosing these performance measures.  Management uses Adjusted EBITDA: (i) as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis, as it removes the impact of (a) items directly related to our asset base (primarily depreciation and amortization) and (b) items that we would not expect to occur as a part of our normal business on a regular basis; (ii) for planning purposes, including the preparation of our annual operating budget; (iii) as a valuation measure for evaluating our operating performance and our capacity to incur and service debt, fund capital expenditures and expand our business; and (iv) as one measure in determining the value of other acquisitions and dispositions.  Adjusted EBITDA is also a key performance metric utilized in the determination of variable compensation.

We believe that the use of EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA as operating performance measures provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets, among otherwise comparable companies.  We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense decreases as deductible interest expense increases; and depreciation and amortization are non-cash charges.  Equity in earnings and losses of unconsolidated affiliates is excluded because such earnings or losses do not reflect our operating performance.  The other items excluded from Adjusted EBITDA are excluded in order to better reflect the performance of our continuing operations.

In evaluating EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA, you should be aware that in the future, we may incur expenses similar to the adjustments included herein. Our presentation of EBITDA, Adjusted EBITDA including equity affiliates and Adjusted EBITDA should not be construed as indicating that our future results will be unaffected by unusual or non-recurring items.  EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA are not determined in accordance with GAAP and should not be considered as substitutes for net income, operating income or any other performance measures determined in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.

Each of our EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA measures has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

  • it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
  • it does not reflect the impact of earnings or charges resulting from matters we consider not indicative of our ongoing operations;
  • it does not reflect changes in, or cash requirements for, our working capital needs;
  • it does not reflect the cash requirements necessary to make payments on our debt;
  • it does not reflect our future requirements for capital expenditures or contractual commitments;
  • it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and
  • other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA, Adjusted EBITDA including equity affiliates, and Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations, including those under our outstanding debt obligations. You should compensate for these limitations by relying primarily on our GAAP results and using these measures only as supplemental information.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Certain statements included herein contain forward-looking statements within the meaning of federal securities laws about the financial condition and results of operations of Unifi, Inc. (the "Company") that are based on management's beliefs, assumptions and expectations about our future economic performance, considering the information currently available to management.  The words "believe," "may," "could," "will," "should," "would," "anticipate," "estimate," "project," "expect," "intend," "seek," "strive," and words of similar import, or the negative of such words, identify or signal the presence of forward-looking statements.  These statements are not statements of historical fact; they involve risk and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition that we express or imply in any forward-looking statement.

Factors that could contribute to such differences include, but are not limited to:  the competitive nature of the textile industry and the impact of worldwide competition; changes in the trade regulatory environment and governmental policies and legislation; the availability, sourcing and pricing of raw materials; general domestic and international economic and industry conditions in markets where the Company competes, such as recession and other economic and political factors over which the Company has no control; changes in consumer spending, customer preferences, fashion trends and end-uses; the financial condition of the Company's customers; the loss of a significant customer; the success of the Company's strategic business initiatives; the continuity of the Company's leadership; volatility of financial and credit markets; the ability to service indebtedness and fund capital expenditures and strategic initiatives; availability of and access to credit on reasonable terms; changes in currency exchange, interest and inflation rates; the ability to reduce production costs; the ability to protect intellectual property; employee relations; the impact of environmental, health and safety regulations; the operating performance of joint ventures and other equity investments; and the accurate financial reporting of information from equity method investees.

All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control.  New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on the Company.  Any forward-looking statement speaks only as of the date on which such statement is made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, except as may be required by federal securities law. The above and other risks and uncertainties are described in the Company's most recent annual report on Form 10-K, and additional risks or uncertainties may be described from time to time in other reports filed by the Company with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

SOURCE Unifi, Inc.

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