ufi-ex991_33.htm

Sales and profitability performance exhibit strength of regional business model and agile execution

Company introduces fiscal year 2023 outlook, including sales growth of 5% or more

GREENSBORO, N.C., August 10, 2022 – Unifi, Inc. (NYSE: UFI) (together with its consolidated subsidiaries, “UNIFI”), makers of REPREVE and one of the world’s leading innovators in recycled and synthetic yarns, today released operating results for the fourth fiscal quarter and fiscal year ended July 3, 2022.

Adjusted EPS, Adjusted EBITDA and Net Debt are non-GAAP financial measures. The schedules included in this press release reconcile each non-GAAP financial measure to its most directly comparable GAAP financial measure.

Eddie Ingle, Chief Executive Officer of UNIFI, said, “Our fourth quarter fiscal 2022 results were consistent with our expectations, as we generated double-digit top-line growth and continued to navigate a volatile macro environment. This marks our third consecutive quarter of over $200 million in sales, and we are proud of how our

teams around the globe continue to leverage the resilience and agility of our business model.”

Ingle continued, “As we look to fiscal 2023, we remain focused on executing our growth strategy, which includes accelerating innovation, expanding our REPREVE branding, growing our market share and penetrating new markets. Additionally, we will remain diligent in aligning pricing to stay ahead of inflation, and we expect to continue to make progress towards a stronger and more profitable U.S. business in the quarters and years ahead.”

In the fourth quarter of fiscal 2022, UNIFI realigned its reportable segments to correspond with changes to its operating model, management structure and organizational responsibilities. Accordingly, UNIFI is now reporting the Americas, Brazil and Asia Segments. The Americas Segment represents the combination of the previously reported Polyester Segment, Nylon Segment and All Other category. There are no changes to the composition of the historical Brazil Segment and Asia Segment. Comparative prior period disclosures have been updated to conform to the new presentation.

Net sales increased 18.0% to $217.6 million, from $184.4 million, primarily driven by pricing actions in the U.S. in response to inflation and higher input costs. The Americas Segment generated a double-digit percentage increase in revenue due to stable product demand amid higher selling prices. The Brazil Segment increased revenue by nearly 50%, as the comparative period included the unfavorable impact of pandemic-related lockdowns in Brazil. The Asia Segment generated strong underlying revenue performance considering the significant pressure from the current and ongoing pandemic-related lockdowns in China. Fourth quarter and fiscal year 2022 each contained an additional fiscal week.

Gross profit decreased 33.0% to $18.4 million from $27.4 million. Americas Segment gross profit decreased $3.1 million as a result of rising input costs and lower manufacturing productivity. Brazil Segment gross profit decreased $4.8 million, consistent with UNIFI’s prior expectations as (i) the local market dynamics have exhibited some normalization from the exceptionally strong environment in the prior year period, and (ii) raw material cost volatility adversely impacted the fourth quarter of fiscal 2022. Asia Segment gross profit was impacted by the current and ongoing pandemic-related lockdowns in China, while the gross margin rate remained robust with underlying REPREVE product demand.

Operating income decreased to $5.0 million, from $14.0 million, primarily due to the decrease in gross profit. Net income was $3.5 million, or $0.19 per share, compared to $13.4 million, or $0.70 per share, and was favorably

impacted by an estimated recovery of income taxes in Brazil. On an adjusted basis, EPS was $0.11, which excludes the benefit of the estimated recovery of income taxes in Brazil, compared to $0.37 which includes the 2021 estimated recovery of non-income taxes in the prior year period. Adjusted EBITDA was $12.2 million, compared to $20.4 million, consistent with the decrease in operating income.

Debt principal was $114.3 million on July 3, 2022 compared to $86.9 million on June 27, 2021. In connection with previously anticipated investments in new yarn texturing innovation and working capital to support future growth, cash and cash equivalents decreased to $53.3 million on July 3, 2022, from $78.3 million on June 27, 2021. Accordingly, Net Debt was $61.0 million on July 3, 2022 versus $8.6 million on June 27, 2021.

Net sales were $815.8 million for fiscal 2022, the highest annual sales level in more than 10 years, compared to $667.6 million in fiscal 2021. Revenues from REPREVE Fiber products represented 36% of consolidated net sales, compared to 37%. Gross margin was 9.9%, compared to 14.0%. Operating income was $28.6 million, compared to $38.6 million. Net income was $15.2 million, compared to $29.1 million.

The following reflects UNIFI’s expectations for fiscal 2023, in which the first quarter will exhibit the most profitability pressures, and quarterly performance is anticipated to improve sequentially throughout the year.

Ingle concluded, “While there is short-term uncertainty with regard to global demand and inflation concerns that will pressure our first half of fiscal 2023, our team remains focused on executing our strategic plans including the long-term financial goals that were presented during our February 2022 Investor Day. We continue to make investments in and are realizing initial benefits from our new yarn texturing machinery within our U.S., El Salvador

and Brazil manufacturing operations. Adoption of our REPREVE Fiber products continues to grow as we support numerous customers with their sustainability endeavors. We continue to make progress with innovative approaches to the labor challenges that have impacted many businesses in the U.S. In addition, we remain diligent with pricing actions to offset inflationary pressures. We are well positioned as a global sustainability leader and will drive long-term value for all of our stakeholders.”

UNIFI will provide additional commentary regarding its fourth quarter and fiscal 2022 results and other developments during its earnings conference call on August 11, 2022, at 8:30 a.m., Eastern Time. The call can be accessed via a live audio webcast on UNIFI’s website at http://investor.unifi.com. Additional supporting materials and information related to the call will also be available on UNIFI’s website.

Unifi, Inc. (NYSE: UFI) is a global textile solutions provider and one of the world's leading innovators in manufacturing synthetic and recycled performance fibers. Through REPREVE, one of UNIFI's proprietary technologies and the global leader in branded recycled performance fibers, UNIFI has transformed more than 30 billion plastic bottles into recycled fiber for new apparel, footwear, home goods and other consumer products. UNIFI continually innovates technologies to meet consumer needs in moisture management, thermal regulation, antimicrobial protection, UV protection, stretch, water resistance and enhanced softness. UNIFI collaborates with many of the world's most influential brands in the sports apparel, fashion, home, automotive and other industries. For more information about UNIFI, visit www.unifi.com.

Financial Statements, Business Segment Information and Reconciliations of Reported Results to Adjusted Results to Follow

	For the Three Months Ended						For the Fiscal Year Ended
	July 3, 2022			June 27, 2021			July 3, 2022			June 27, 2021
Net sales	$	217,576		$	184,445		$	815,758		$	667,592
Cost of sales		199,222			157,041			735,273			574,098
Gross profit		18,354			27,404			80,485			93,494
Selling, general and administrative expenses		13,464			12,764			52,489			51,334
Provision (benefit) for bad debts		44			14			(445	)		(1,316	)
Other operating (income) expense, net		(156	)		629			(158	)		4,865
Operating income		5,002			13,997			28,599			38,611
Interest income		(580	)		(132	)		(1,524	)		(603	)
Interest expense		945			734			3,085			3,323
Equity in (earnings) loss of unconsolidated affiliates		(220	)		12			(605	)		(739	)
Recovery of non-income taxes, net		—			(9,717	)		815			(9,717	)
Income before income taxes		4,857			23,100			26,828			46,347
Provision for income taxes		1,361			9,681			11,657			17,274
Net income	$	3,496		$	13,419		$	15,171		$	29,073

Net income per common share:
Basic	$	0.19		$	0.73		$	0.82		$	1.57
Diluted	$	0.19		$	0.70		$	0.80		$	1.54

Weighted average common shares outstanding:
Basic		18,233			18,490			18,429			18,472
Diluted		18,605			19,055			18,868			18,856

	July 3, 2022			June 27, 2021
ASSETS
Cash and cash equivalents	$	53,290		$	78,253
Receivables, net		106,565			94,837
Inventories		173,295			141,221
Income taxes receivable		160			2,392
Other current assets		18,956			12,364
Total current assets		352,266			329,067
Property, plant and equipment, net		216,338			201,696
Operating lease assets		8,829			8,772
Deferred income taxes		2,497			1,208
Other non-current assets		8,788			14,625
Total assets	$	588,718		$	555,368

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	73,544		$	54,259
Income taxes payable		1,526			1,625
Current operating lease liabilities		2,190			1,856
Current portion of long-term debt		11,726			16,045
Other current liabilities		19,806			31,638
Total current liabilities		108,792			105,423
Long-term debt		102,309			70,336
Non-current operating lease liabilities		6,736			7,032
Deferred income taxes		4,983			6,686
Other long-term liabilities		4,449			7,472
Total liabilities		227,269			196,949

Commitments and contingencies

Common stock		1,798			1,849
Capital in excess of par value		66,120			65,205
Retained earnings		353,136			344,797
Accumulated other comprehensive loss		(59,605	)		(53,432	)
Total shareholders’ equity		361,449			358,419
Total liabilities and shareholders’ equity	$	588,718		$	555,368

	For the Fiscal Year Ended
	July 3, 2022			June 27, 2021
Cash and cash equivalents at beginning of year	$	78,253		$	75,267
Operating activities:
Net income		15,171			29,073
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of unconsolidated affiliates		(605	)		(739	)
Distributions received from unconsolidated affiliates		750			750
Depreciation and amortization expense		26,207			25,528
Non-cash compensation expense		3,555			3,462
Deferred income taxes		(3,119	)		5,087
Loss on disposal of assets		48			2,809
Recovery of non-income taxes, net		815			(9,717	)
Other, net		(99	)		(495	)
Changes in assets and liabilities		(42,343	)		(19,077	)
Net cash provided by operating activities		380			36,681

Investing activities:
Capital expenditures		(39,631	)		(21,178	)
Purchases of intangible assets		—			(3,605	)
Other, net		(2,103	)		162
Net cash used by investing activities		(41,734	)		(24,621	)

Financing activities:
Proceeds from long-term debt		158,000			—
Payments on long-term debt		(132,907	)		(13,646	)
Proceeds from construction financing		2,340			882
Common stock repurchased		(9,151	)		—
Other, net		(317	)		(111	)
Net cash provided (used) by financing activities		17,965			(12,875	)

Effect of exchange rate changes on cash and cash equivalents		(1,574	)		3,801
Net (decrease) increase in cash and cash equivalents		(24,963	)		2,986
Cash and cash equivalents at end of year	$	53,290		$	78,253

	For the Three Months Ended
	July 3, 2022		June 27, 2021
Americas	$	137,826	$	107,093
Brazil		34,960		23,413
Asia		44,790		53,939
Consolidated net sales	$	217,576	$	184,445

	For the Fiscal Year Ended
	July 3, 2022		June 27, 2021
Americas	$	483,085	$	386,779
Brazil		126,066		95,976
Asia		206,607		184,837
Consolidated net sales	$	815,758	$	667,592

	For the Three Months Ended
	July 3, 2022		June 27, 2021
Americas	$	8,645	$	11,763
Brazil		3,692		8,507
Asia		6,017		7,134
Consolidated gross profit	$	18,354	$	27,404

	For the Fiscal Year Ended
	July 3, 2022		June 27, 2021
Americas	$	24,468	$	36,406
Brazil		27,141		31,695
Asia		28,876		25,393
Consolidated gross profit	$	80,485	$	93,494

The reconciliations of the amounts reported under U.S. generally accepted accounting principles (“GAAP”) for Net income to EBITDA and Adjusted EBITDA are set forth below.

	For the Three Months Ended					For the Fiscal Year Ended
	July 3, 2022		June 27, 2021			July 3, 2022		June 27, 2021
Net income	$	3,496	$	13,419		$	15,171	$	29,073
Interest expense, net		365		602			1,561		2,720
Provision for income taxes		1,361		9,681			11,657		17,274
Depreciation and amortization expense ⁽¹⁾		6,979		6,464			25,986		25,293
EBITDA		12,201		30,166			54,375		74,360

Recovery of non-income taxes, net⁽²⁾		—		(9,717	)		815		(9,717	)
Adjusted EBITDA	$	12,201	$	20,449		$	55,190	$	64,643

The tables below set forth reconciliations of (i) income before income taxes (“Pre-tax Income”), provision for income taxes (“Tax Impact”), and net income (“Net Income”) to Adjusted Net Income and (ii) Diluted Earnings Per Share (“Diluted EPS”) to Adjusted EPS. Rounding may impact certain of the below calculations.

	For the Three Months Ended July 3, 2022											For the Three Months Ended June 27, 2021
	Pre-tax Income		Tax Impact			Net Income			Diluted EPS			Pre-tax Income			Tax Impact			Net Income			Diluted EPS
GAAP results	$	4,857	$	(1,361	)	$	3,496		$	0.19		$	23,100		$	(9,681	)	$	13,419		$	0.70
Recovery of non-income taxes, net ⁽¹⁾		—		—			—			—			(9,717	)		3,304			(6,413	)		(0.33	)
Recovery of income taxes, net ⁽²⁾		—		(1,446	)		(1,446	)		(0.08	)		—			—			—			—
Adjusted results	$	4,857	$	(2,807	)	$	2,050		$	0.11		$	13,383		$	(6,377	)	$	7,006		$	0.37

Weighted average common shares outstanding										18,605												19,055


	For the Fiscal Year Ended July 3, 2022											For the Fiscal Year Ended June 27, 2021
	Pre-tax Income		Tax Impact			Net Income			Diluted EPS			Pre-tax Income			Tax Impact			Net Income			Diluted EPS
GAAP results	$	26,828	$	(11,657	)	$	15,171		$	0.80		$	46,347		$	(17,274	)	$	29,073		$	1.54
Recovery of non-income taxes, net ⁽¹⁾		815		(257	)		558			0.03			(9,717	)		3,304			(6,413	)		(0.34	)
Recovery of income taxes, net ⁽²⁾		—		(1,446	)		(1,446	)		(0.07	)		—			—			—			—
Adjusted results	$	27,643	$	(13,360	)	$	14,283		$	0.76		$	36,630		$	(13,970	)	$	22,660		$	1.20

Weighted average common shares outstanding										18,868												18,856

At July 3, 2022 and June 27, 2021, UNIFI’s domestic operations held approximately 1% and 48% of consolidated cash and cash equivalents, respectively.

REPREVE Fiber represents UNIFI's collection of fiber products on its recycled platform, with or without added technologies.

Fiscal 2022 contained 53 weeks and the fourth quarter of fiscal 2022 contained 14 weeks. The additional week in the three months ended and twelve months ended July 3, 2022 included approximately $8.7 million of net sales, an insignificant impact to gross profit, and approximately $0.4 million of selling, general and administrative expenses.

Certain non-GAAP financial measures included herein are designed to complement the financial information presented in accordance with GAAP. These non-GAAP financial measures include Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Net Debt (together, the “non-GAAP financial measures”).

The non-GAAP financial measures are not determined in accordance with GAAP and should not be considered a substitute for performance measures determined in accordance with GAAP. The calculations of the non-GAAP financial measures are subjective, based on management’s belief as to which items should be included or excluded in order to provide the most reasonable and comparable view of the underlying operating performance of the business. We may, from time to time, modify the amounts used to determine our non-GAAP financial measures.

We believe that these non-GAAP financial measures better reflect UNIFI’s underlying operations and performance and that their use, 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.

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 a key performance metric utilized in the determination of variable compensation. We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because it serves as a high-level proxy for cash generated from operations.

Management uses Adjusted Net Income and Adjusted EPS (i) as measurements of net operating performance because they assist us in comparing such performance on a consistent basis, as they remove the impact of (a) items that we would not expect to occur as a part of our normal business on a regular basis and (b) components of the provision for income taxes that we would not expect to occur as a part of our underlying taxable operations; (ii) for planning purposes, including the preparation of our annual operating budget; and (iii) as measures in determining the value of other acquisitions and dispositions.

Management uses Net Debt as a liquidity and leverage metric to determine how much debt would remain if all cash and cash equivalents were used to pay down debt principal.

In evaluating non-GAAP financial measures, investors should be aware that, in the future, we may incur expenses similar to the adjustments included herein. Our presentation of non-GAAP financial measures should not be construed as indicating that our future results will be unaffected by unusual or non-recurring items. Each of our non-GAAP financial measures has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of our results or liquidity measures as reported under GAAP. Some of these limitations are (i) it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; (ii) it does not reflect the impact of earnings or charges resulting from matters we consider not indicative of our ongoing operations; (iii) it does not reflect changes in, or cash requirements for, our working capital needs; (iv) it does not reflect the cash requirements necessary to make payments on our debt; (v) it does not reflect our future requirements for capital expenditures or contractual commitments; (vi) it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and (vii) other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, these non-GAAP financial measures 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. Investors should compensate for these limitations by relying primarily on our GAAP results and using these measures only as supplemental information.

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 that are based on management’s beliefs, assumptions and expectations about our future economic performance, considering the information currently available to management. An example of such forward-looking statements include, among others, guidance pertaining to our financial outlook. The words “believe,” “may,” “could,” “will,” “should,” “would,” “anticipate,” “plan,” “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, and they involve risks 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 global 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 UNIFI competes, including economic and political factors over which UNIFI has no control; changes in consumer spending, customer preferences, fashion trends and end uses for products; the financial condition of UNIFI’s customers; the loss of a significant customer or brand partner; natural disasters, industrial accidents, power or water shortages, extreme weather conditions and other disruptions at one of our facilities; the disruption of operations, global demand, or financial performance as a result of catastrophic or extraordinary events, including epidemics or pandemics such as the recent strain of coronavirus; the success of UNIFI’s strategic business initiatives; the volatility of financial and credit markets; the ability to service indebtedness and fund capital expenditures and strategic business initiatives; the availability of and access to credit on reasonable terms; changes in foreign currency exchange, interest and inflation rates; fluctuations in production costs; the ability to protect intellectual property; the strength and reputation of our brands; employee relations; the ability to attract, retain and motivate key employees; the impact of climate change or environmental, health and safety regulations; and the impact of tax laws, the judicial or administrative interpretations of tax laws and/or changes in such laws or interpretations.

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 UNIFI. 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 laws. The above and other risks and uncertainties are described in UNIFI’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 UNIFI with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.