Unifi Announces Fourth Quarter and Fiscal 2020 Results
Unifi, Inc. (NYSE: UFI) reported a fourth quarter fiscal 2020 net loss of $20.2 million, or $1.10 per share, down from a profit of $1.0 million in the same period last year. Net sales fell to $86.1 million, a 52.1% decline year-over-year. The company generated strong cash from operations amounting to $20.6 million, driven by inventory and cost reductions. Post-pandemic recovery is expected, with a focus on improved sales and operational performance for fiscal 2021, despite ongoing market challenges. Cash and cash equivalents rose to $75.3 million, significantly enhancing liquidity.
- Generated $20.6 million in operating cash flows, up $11.8 million from Q4 2019.
- Debt principal reduced to $98.9 million, the lowest since 2014.
- Cash and cash equivalents increased to $75.3 million from $22.2 million year-over-year.
- Expect improvement in sales for fiscal 2021 across business segments.
- Net sales decreased by 52.1% year-over-year to $86.1 million.
- Operating loss of $20.9 million, compared to a profit of $5.3 million last year.
- Net loss for fiscal 2020 totaled $57.2 million, including a $45.2 million impairment.
GREENSBORO, N.C., Aug. 5, 2020 /PRNewswire/ -- Unifi, Inc. (NYSE: UFI), 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 June 28, 2020, which reflect significant market disruptions as a result of the COVID-19 pandemic. The Company did not provide guidance for the quarter ended June 28, 2020.
Eddie Ingle, Chief Executive Officer of Unifi, said, "By the end of March 2020, the pandemic started to impact our apparel and automotive customers as they shut down or significantly curtailed operations. Since April 2020, monthly sales have improved sequentially, including July 2020, the best month since March 2020. At the onset of the pandemic, our management team prioritized safety and took measures to improve our liquidity and cash position while maintaining our long-term focus on innovation and sustainability. During the just completed quarter, we generated significant cash from operations while reducing inventory levels and operating costs. These actions, combined with a joint venture divestiture, allowed for significant debt reduction and an increase in cash. I am confident that our diverse global operations, strong management team, and solid financial position will enable us to overcome these current challenges and regain our momentum as we progress through fiscal 2021. I'm proud to return to Unifi and to have the opportunity to lead this great company through the next stage of its life cycle."
Fourth Quarter Fiscal 2020 Overview
- Net sales of
$86.1 million decreased year-over-year from$179.5 million in fiscal 2019. - Revenues from REPREVE® Fiber1 products represented
28% of consolidated net sales. - Operating loss was
$20.9 million , compared to operating income of$5.3 million in the fourth quarter of fiscal 2019, driven by lower sales and lower fixed cost absorption. - Net loss of
$20.2 million , or$1.10 loss per share, compared to net income of$1.0 million , or earnings per share ("EPS") of$0.05 for the fourth quarter of fiscal 2019. - Adjusted EBITDA2 decreased to negative
$14.0 million , compared to positive$12.7 million in the fourth quarter of fiscal 2019. - Operating cash flows were
$20.6 million , an increase of$11.8 million from the fourth quarter of fiscal 2019; full year fiscal 2020 operating cash flows were$52.7 million , an increase of$45.4 million from fiscal 2019. - On April 29, 2020, the Company sold its
34% interest in Parkdale America, LLC ("PAL") for$60.0 million in cash. Proceeds were used to reduce leverage and increase cash reserves on the balance sheet. - On June 28, 2020, debt principal was
$98.9 million , below$100.0 million for the first time since calendar 2014, and cash and cash equivalents were$75.3 million . - Net Debt2 was
$23.6 million on June 28, 2020, which is a reduction of$82.2 million since June 30, 2019 and is the lowest level in more than ten years. - On June 15, 2020, Eddie Ingle rejoined the Company as its new Chief Executive Officer.
Liquidity Update and Risk Mitigation Initiatives
- As of June 28, 2020, cash and cash equivalents were
$75.3 million , debt principal was$98.9 million (totaling Net Debt of$23.6 million ), and revolver availability was$56.4 million . - Capital expenditure levels have been reduced while prioritizing spending for safety and maintenance.
- Raw material pricing remains at low levels, which aids short-term working capital and liquidity.
- Manufacturing operations have been strategically reduced to support critical businesses and manage working capital.
Fourth Quarter Fiscal 2020 Compared to Fourth Quarter Fiscal 2019
Net sales in the fourth quarter of fiscal 2020 were
Gross profit decreased to a loss of
Operating loss for the fourth quarter of fiscal 2020 was
Net loss was
Fiscal 2020 Compared to Fiscal 2019
Fiscal 2020 consisted of 52 weeks of domestic operations, compared to 53 weeks of domestic operations in fiscal 2019. Net sales were
Net Debt was
Fiscal 2021 Outlook
For fiscal 2021, assuming no further significant disruptions to global markets, the Company expects:
- sales for each business segment to grow from fourth quarter fiscal 2020 levels at different rates through the fiscal year;
- sequential improvement in sales and underlying business performance through each quarter of fiscal 2021;
- sales of REPREVE® and specialty products to continue recent growth rates and increase as a percentage of consolidated sales; and
$22.0 million of capital expenditures, including the previously-announced eAFK Evo texturing machines to begin installation in early calendar 2021 which should generate meaningful financial benefit to fiscal 2022.
Ingle continued, "Significant progress was made during the first nine months of fiscal 2020 on several key priorities. At that time, our business in Asia experienced strong growth, our U.S polyester operations experienced underlying sales and market share growth as favorable trade measures were enacted, cost reduction actions contributed to our performance, and the sustainability focus of customers propelled further REPREVE® sales growth."
Ingle concluded, "Our sustainable solutions and innovative culture make us the partner of choice for leading global brands seeking to meet their sustainability goals. We have a truly great company with an energized team, and I'm looking forward to growing our business as we exit this pandemic. We have a long history of navigating significant change and market environments across our almost 50 year history. We have a resilient and adaptive business model and culture, and are using this to our advantage. Looking forward, our innovative and sustainable solutions will be the growth engines that help us meet the evolving needs of our forward-thinking consumers. We expect REPREVE® to grow in non-traditional markets, as more brands seek out ways to reduce the carbon footprint of their raw materials. We appreciate our employees' continued dedication to delivering the best customer experience. We will continue to take the necessary steps to protect our people, communities, and strong balance sheet. We believe we are well positioned to deliver long-term value for our shareholders."
Fourth Quarter Fiscal 2020 Earnings Conference Call
The Company will provide additional commentary regarding its fourth quarter and fiscal 2020 results and other developments during its earnings conference call on August 6, 2020, at 8:30 a.m., Eastern Time. The call can be accessed via a live audio webcast on the Company's website at http://investor.unifi.com. Additional supporting materials and information related to the call will also be available on the Company's website.
About Unifi
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 20 billion plastic bottles into recycled fiber for new apparel, footwear, home goods and other consumer products. The Company's proprietary PROFIBER™ technologies offer increased performance, comfort and style advantages, enabling customers to develop products that perform, look and feel better. 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.
1 See discussion of the Company's transition to reporting REPREVE® Fiber sales later in this document. | ||
2 Adjusted EBITDA, Adjusted Net (Loss) Income, Adjusted EPS 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. | ||
Financial Statements, Business Segment Information and Reconciliations of Reported Results to Adjusted Results to Follow
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||
For the Three Months Ended | For the Fiscal Year Ended | |||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||
Net sales | $ | 86,055 | $ | 179,493 | $ | 606,509 | $ | 708,804 | ||||||||
Cost of sales | 95,506 | 161,151 | 567,469 | 642,496 | ||||||||||||
Gross (loss) profit | (9,451) | 18,342 | 39,040 | 66,308 | ||||||||||||
Selling, general and administrative expenses | 8,606 | 12,018 | 43,814 | 52,690 | ||||||||||||
Provision (benefit) for bad debts | 1,408 | (73) | 1,739 | 308 | ||||||||||||
Other operating expense, net | 1,408 | 1,132 | 2,308 | 2,350 | ||||||||||||
Operating (loss) income | (20,873) | 5,265 | (8,821) | 10,960 | ||||||||||||
Interest income | (127) | (180) | (722) | (628) | ||||||||||||
Interest expense | 1,190 | 1,336 | 4,779 | 5,414 | ||||||||||||
Equity in loss (earnings) of unconsolidated affiliates | 2,381 | (842) | 477 | (3,968) | ||||||||||||
Gain on sale of investment in unconsolidated affiliate | (2,284) | — | (2,284) | — | ||||||||||||
Impairment of investment in unconsolidated affiliate | — | — | 45,194 | — | ||||||||||||
Loss on extinguishment of debt | — | — | — | 131 | ||||||||||||
(Loss) income before income taxes | (22,033) | 4,951 | (56,265) | 10,011 | ||||||||||||
(Benefit) provision for income taxes | (1,786) | 3,949 | 972 | 7,555 | ||||||||||||
Net (loss) income | $ | (20,247) | $ | 1,002 | $ | (57,237) | $ | 2,456 | ||||||||
Net (loss) income per common share: | ||||||||||||||||
Basic | $ | (1.10) | $ | 0.05 | $ | (3.10) | $ | 0.13 | ||||||||
Diluted | $ | (1.10) | $ | 0.05 | $ | (3.10) | $ | 0.13 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 18,446 | 18,439 | 18,475 | 18,395 | ||||||||||||
Diluted | 18,446 | 18,705 | 18,475 | 18,695 | ||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
June 28, 2020 | June 30, 2019 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 75,267 | $ | 22,228 | ||||
Receivables, net | 53,726 | 88,884 | ||||||
Inventories | 109,704 | 133,781 | ||||||
Income taxes receivable | 4,033 | 4,373 | ||||||
Other current assets | 11,763 | 16,356 | ||||||
Total current assets | 254,493 | 265,622 | ||||||
Property, plant and equipment, net | 204,246 | 206,787 | ||||||
Operating lease assets | 8,940 | — | ||||||
Deferred income taxes | 2,352 | 2,581 | ||||||
Intangible assets, net | 1,412 | 2,170 | ||||||
Investments in unconsolidated affiliates | 2,171 | 114,320 | ||||||
Other non-current assets | 548 | 671 | ||||||
Total assets | $ | 474,162 | $ | 592,151 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Accounts payable | $ | 25,610 | $ | 41,796 | ||||
Accrued expenses | 13,689 | 16,849 | ||||||
Income taxes payable | 349 | 569 | ||||||
Current operating lease liabilities | 1,783 | — | ||||||
Current portion of long-term debt | 13,563 | 15,519 | ||||||
Total current liabilities | 54,994 | 74,733 | ||||||
Long-term debt | 84,607 | 111,541 | ||||||
Non-current operating lease liabilities | 7,251 | — | ||||||
Other long-term liabilities | 8,606 | 6,185 | ||||||
Deferred income taxes | 2,549 | 6,847 | ||||||
Total liabilities | 158,007 | 199,306 | ||||||
Commitments and contingencies | ||||||||
Common stock | 1,845 | 1,846 | ||||||
Capital in excess of par value | 62,392 | 59,560 | ||||||
Retained earnings | 315,724 | 374,668 | ||||||
Accumulated other comprehensive loss | (63,806) | (43,229) | ||||||
Total shareholders' equity | 316,155 | 392,845 | ||||||
Total liabilities and shareholders' equity | $ | 474,162 | $ | 592,151 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
For the Fiscal Year Ended | ||||||||
June 28, 2020 | June 30, 2019 | |||||||
Cash and cash equivalents at beginning of year | $ | 22,228 | $ | 44,890 | ||||
Operating activities: | ||||||||
Net (loss) income | (57,237) | 2,456 | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Equity in loss (earnings) of unconsolidated affiliates | 477 | (3,968) | ||||||
Distributions received from unconsolidated affiliates | 10,437 | 2,647 | ||||||
Depreciation and amortization expense | 23,653 | 23,003 | ||||||
Impairment of investment in unconsolidated affiliate | 45,194 | — | ||||||
Gain on sale of investment in unconsolidated affiliate | (2,284) | — | ||||||
Non-cash compensation expense | 3,999 | 3,258 | ||||||
Deferred income taxes | (4,011) | 423 | ||||||
Other, net | (284) | (560) | ||||||
Changes in assets and liabilities | 32,780 | (19,975) | ||||||
Net cash provided by operating activities | 52,724 | 7,284 | ||||||
Investing activities: | ||||||||
Capital expenditures | (18,509) | (24,871) | ||||||
Proceeds from sale of investment in unconsolidated affiliate | 60,000 | — | ||||||
Other, net | 83 | (65) | ||||||
Net cash provided by (used in) investing activities | 41,574 | (24,936) | ||||||
Financing activities: | ||||||||
Proceeds from long-term debt | 122,200 | 128,100 | ||||||
Payments on long-term debt | (157,635) | (131,319) | ||||||
Common stock repurchased | (1,994) | — | ||||||
Payments of debt financing fees | — | (720) | ||||||
Other, net | (493) | (687) | ||||||
Net cash used in financing activities | (37,922) | (4,626) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (3,337) | (384) | ||||||
Net increase (decrease) in cash and cash equivalents | 53,039 | (22,662) | ||||||
Cash and cash equivalents at end of year | $ | 75,267 | $ | 22,228 | ||||
BUSINESS SEGMENT INFORMATION | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Net sales details for each reportable segment of the Company are as follows: | ||||||||||||||||
For the Three Months Ended | ||||||||||||||||
June 28, 2020 | June 30, 2019 | Change ($) | Change (%) | |||||||||||||
Polyester | $ | 47,972 | $ | 89,105 | $ | (41,133) | -46.2 | % | ||||||||
Asia | 20,536 | 40,852 | (20,316) | -49.7 | % | |||||||||||
Brazil | 7,245 | 26,620 | (19,375) | -72.8 | % | |||||||||||
Nylon | 9,528 | 21,968 | (12,440) | -56.6 | % | |||||||||||
All Other | 774 | 948 | (174) | -18.4 | % | |||||||||||
Consolidated net sales | $ | 86,055 | $ | 179,493 | (93,438) | -52.1 | % | |||||||||
For the Fiscal Year Ended | ||||||||||||||||
June 28, 2020 | June 30, 2019 | Change ($) | Change (%) | |||||||||||||
Polyester | $ | 309,184 | $ | 370,770 | $ | (61,586) | -16.6 | % | ||||||||
Asia | 153,032 | 132,866 | 20,166 | 15.2 | % | |||||||||||
Brazil | 73,339 | 102,877 | (29,538) | -28.7 | % | |||||||||||
Nylon | 67,381 | 98,127 | (30,746) | -31.3 | % | |||||||||||
All Other | 3,573 | 4,164 | (591) | -14.2 | % | |||||||||||
Consolidated net sales | $ | 606,509 | $ | 708,804 | (102,295) | -14.4 | % | |||||||||
Gross (loss) profit details for each reportable segment of the Company are as follows: | ||||||||||||||||
For the Three Months Ended | ||||||||||||||||
June 28, 2020 | June 30, 2019 | Change ($) | Change (%) | |||||||||||||
Polyester | $ | (9,399) | $ | 7,902 | $ | (17,301) | -218.9 | % | ||||||||
Asia | 2,301 | 4,003 | (1,702) | -42.5 | % | |||||||||||
Brazil | 190 | 4,976 | (4,786) | -96.2 | % | |||||||||||
Nylon | (2,535) | 1,408 | (3,943) | -280.0 | % | |||||||||||
All Other | (8) | 53 | (61) | -115.1 | % | |||||||||||
Consolidated gross (loss) profit | $ | (9,451) | $ | 18,342 | (27,793) | -151.5 | % | |||||||||
For the Fiscal Year Ended | ||||||||||||||||
June 28, 2020 | June 30, 2019 | Change ($) | Change (%) | |||||||||||||
Polyester | $ | 12,088 | $ | 23,819 | $ | (11,731) | -49.3 | % | ||||||||
Asia | 16,683 | 15,700 | 983 | 6.3 | % | |||||||||||
Brazil | 11,195 | 18,579 | (7,384) | -39.7 | % | |||||||||||
Nylon | (978) | 7,896 | (8,874) | -112.4 | % | |||||||||||
All Other | 52 | 314 | (262) | -83.4 | % | |||||||||||
Consolidated gross profit | $ | 39,040 | $ | 66,308 | (27,268) | -41.1 | % | |||||||||
RECONCILIATIONS OF REPORTED RESULTS TO ADJUSTED RESULTS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
EBITDA and Adjusted EBITDA | ||||||||||||||||
The reconciliations of the amounts reported under U.S. generally accepted accounting principles ("GAAP") for Net (loss) income to EBITDA and Adjusted EBITDA are as follows: | ||||||||||||||||
For the Three Months Ended | For the Fiscal Year Ended | |||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||
Net (loss) income | $ | (20,247) | $ | 1,002 | $ | (57,237) | $ | 2,456 | ||||||||
Interest expense, net | 1,063 | 1,156 | 4,057 | 4,786 | ||||||||||||
(Benefit) provision for income taxes | (1,786) | 3,949 | 972 | 7,555 | ||||||||||||
Depreciation and amortization expense (1) | 5,907 | 5,698 | 23,406 | 22,713 | ||||||||||||
EBITDA | (15,063) | 11,805 | (28,802) | 37,510 | ||||||||||||
Equity in loss (earnings) of PAL | 2,284 | (407) | 960 | (2,561) | ||||||||||||
EBITDA excluding PAL | (12,779) | 11,398 | (27,842) | 34,949 | ||||||||||||
Gain on sale of investment in unconsolidated affiliate (2) | (2,284) | — | (2,284) | — | ||||||||||||
Severance (3) | 1,102 | 1,351 | 1,485 | 1,351 | ||||||||||||
Impairment of investment in unconsolidated affiliate (4) | — | — | 45,194 | — | ||||||||||||
Adjusted EBITDA | $ | (13,961) | $ | 12,749 | $ | 16,553 | $ | 36,300 | ||||||||
(1) | Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net. Within the condensed consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense. |
(2) | For the fiscal year ended June 28, 2020, the Company recorded an impairment charge of |
(3) | For the fiscal year ended June 28, 2020, the Company incurred certain severance costs in connection with (i) overall cost reduction efforts in the U.S. and (ii) a wind-down plan for its operations in Sri Lanka. For the three months ended June 30, 2019, the Company incurred certain severance costs in connection with overall cost reduction efforts in the U.S. |
(4) | For the fiscal year ended June 28, 2020, the Company recorded an impairment charge of |
RECONCILIATIONS OF REPORTED RESULTS TO ADJUSTED RESULTS (CONTINUED) | ||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
Adjusted Net (Loss) Income and Adjusted EPS | ||||||||||||||||||||||||||||||||
The tables below set forth reconciliations of (i) (loss) income before income taxes ("Pre-tax (Loss) Income"), (benefit) provision for income taxes ("Tax Impact") and net (loss) income ("Net (Loss) Income") to Adjusted Net (Loss) Income and (ii) Basic Earnings Per Share ("Basic EPS") to Adjusted EPS. Rounding may impact certain of the below calculations. | ||||||||||||||||||||||||||||||||
For the Three Months Ended June 28, 2020 | For the Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||
Pre-tax | Tax | Net Loss | Basic | Pre-tax | Tax | Net | Basic | |||||||||||||||||||||||||
GAAP results | $ | (22,033) | $ | 1,786 | $ | (20,247) | $ | (1.10) | $ | 4,951 | $ | (3,949) | $ | 1,002 | $ | 0.05 | ||||||||||||||||
Severance (1) | 1,102 | (231) | 871 | 0.05 | 1,351 | (284) | 1,067 | 0.06 | ||||||||||||||||||||||||
Adjusted results | $ | (20,931) | $ | 1,555 | $ | (19,376) | $ | (1.05) | $ | 6,302 | $ | (4,233) | $ | 2,069 | $ | 0.11 | ||||||||||||||||
Weighted average common shares outstanding | 18,446 | 18,439 | ||||||||||||||||||||||||||||||
For the Fiscal Year Ended June 28, 2020 | For the Fiscal Year Ended June 30, 2019 | |||||||||||||||||||||||||||||||
Pre-tax | Tax | Net Loss | Basic | Pre-tax | Tax | Net | Basic | |||||||||||||||||||||||||
GAAP results | $ | (56,265) | $ | (972) | $ | (57,237) | $ | (3.10) | $ | 10,011 | $ | (7,555) | $ | 2,456 | $ | 0.13 | ||||||||||||||||
Impairment of investment in unconsolidated affiliate (2) | 45,194 | — | 45,194 | 2.45 | — | — | — | — | ||||||||||||||||||||||||
Severance (1) | 1,485 | (312) | 1,173 | 0.06 | 1,351 | (284) | 1,067 | 0.06 | ||||||||||||||||||||||||
Adjusted results | $ | (9,586) | $ | (1,284) | $ | (10,870) | $ | (0.59) | $ | 11,362 | $ | (7,839) | $ | 3,523 | $ | 0.19 | ||||||||||||||||
Weighted average common shares outstanding | 18,475 | 18,395 | ||||||||||||||||||||||||||||||
(1) | For the fiscal year ended June 28, 2020, the Company incurred certain severance costs in connection with (i) overall cost reduction efforts in the U.S. and (ii) a wind-down plan for its operations in Sri Lanka. For the three months ended June 30, 2019, the Company incurred certain severance costs in connection with overall cost reduction efforts in the U.S. |
(2) | For the fiscal year ended June 28, 2020, the Company recorded an impairment charge of |
Net Debt | ||||||||
Reconciliations of Net Debt are as follows: | ||||||||
June 28, 2020 | June 30, 2019 | |||||||
Long-term debt | $ | 84,607 | $ | 111,541 | ||||
Current portion of long-term debt | 13,563 | 15,519 | ||||||
Unamortized debt issuance costs | 711 | 958 | ||||||
Debt principal | 98,881 | 128,018 | ||||||
Less: cash and cash equivalents | 75,267 | 22,228 | ||||||
Net Debt | $ | 23,614 | $ | 105,790 | ||||
Cash and cash equivalents
At June 28, 2020 and June 30, 2019, the Company's domestic operations held approximately
Transition from reporting premium value-added sales to reporting REPREVE® Fiber sales
The Company has transitioned from reporting premium value-added sales to reporting REPREVE® Fiber sales. This change increases the transparency of core recycled fiber product sales growth and better aligns the Company's and customers' goals around sustainability. The REPREVE® Fiber metric includes the recycled filament fiber and recycled staple fiber platforms, which are key inputs for apparel production, but it excludes REPREVE® Chip (recycled polyester resin with multiple applications and end-markets).
Non-GAAP Financial Measures
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 (Loss) Income, Adjusted EPS and Net Debt (together, the "non-GAAP financial measures").
- EBITDA represents Net (loss) income before net interest expense, income tax expense, and depreciation and amortization expense.
- Adjusted EBITDA represents EBITDA adjusted to exclude equity in loss (earnings) of PAL and, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI.
- Adjusted Net (Loss) Income represents Net (loss) income calculated under GAAP adjusted to exclude certain amounts. Management believes the excluded amounts do not reflect the ongoing operations and performance of UNIFI and/or exclusion may be necessary to understand and compare the underlying results of UNIFI.
- Adjusted EPS represents Adjusted Net (Loss) Income divided by UNIFI's weighted average common shares outstanding.
- Net Debt represents debt principal less cash and cash equivalents.
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. Equity in loss (earnings) of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance.
Management uses Adjusted Net (Loss) 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.
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 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 environmental, health and safety regulations; the impact of tax laws, the judicial or administrative interpretations of tax laws and/or changes in such laws or interpretations; the operating performance of joint ventures and other equity method 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 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.
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SOURCE Unifi, Inc.
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