What changed in UNIFI INC's 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of UNIFI INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+287 added−326 removedSource: 10-K (2024-08-23) vs 10-K (2023-08-25)
Top changes in UNIFI INC's 2024 10-K
287 paragraphs added · 326 removed · 230 edited across 7 sections
- Item 7. Management's Discussion & Analysis+135 / −140 · 106 edited
- Item 1. Business+85 / −124 · 71 edited
- Item 1A. Risk Factors+30 / −25 · 24 edited
- Item 4. Mine Safety Disclosures+13 / −11 · 6 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+14 / −17 · 14 edited
Item 1. Business
Business — how the company describes what it does
71 edited+14 added−53 removed65 unchanged
Item 1. Business
Business — how the company describes what it does
71 edited+14 added−53 removed65 unchanged
2023 filing
2024 filing
Biggest changeLooking ahead, we expect to expand into additional markets in India, Europe, Africa, and the Middle East utilizing the asset-light supply chain and service model that has been successful for us in Asia. 5 As we expand our operations outside of the Americas, we will continue to evaluate the level of capital investment required to support the needs of our customers and we intend to allocate our resources accordingly.
Biggest changeWe are encouraged by programs undertaken with key brands and retailers that benefit from the diversification and innovation of our global portfolio. Looking ahead, we expect to expand into additional markets in India, Europe, Africa, and the Middle East utilizing the asset-light supply chain and service model that has been successful for us in Asia.
Fiscal 2021 through 2023 capital investments increased in connection with our planned investment of approximately $100,000 into the Americas and Brazil Segments for new eAFK Evo texturing machinery that has significant efficiency, productivity, and flexibility benefits over our legacy equipment.
Capital Investments Fiscal 2021 through 2023 capital investments increased in connection with our planned investment of approximately $100,000 into the Americas and Brazil Segments for new eAFK Evo texturing machinery that has significant efficiency, productivity, and flexibility benefits over our legacy equipment.
Asia UNIFI’s Asia operations remain an important part of our strategy due to the significant capacity and production that exists in Asia, which enhances our ability to service customers with global supply chains. Competition in the Asia region remains high; however, interest and demand for UNIFI’s products in Asia have helped support strong underlying sales volumes in recent years.
Asia UNIFI’s Asia operations remain an important part of our strategy due to the significant production capacity that exists in Asia, which enhances our ability to service customers with global supply chains. Competition in the Asia region remains high; however, interest and demand for UNIFI’s products in Asia have helped support strong underlying sales volumes in recent years.
The U.S.'s adoption of the USMCA in calendar 2020 did not significantly impact textile and apparel trade in the region. The USMCA includes strong rules of origin and closed several loopholes in the NAFTA that allowed non-originating inputs, such as sewing thread, pocketing, and narrow elastic fabrics.
The U.S.'s adoption of the USMCA in calendar 2020 did not significantly impact textile and apparel trade in the region. The USMCA includes strong rules of origin and closed several loopholes in NAFTA that allowed non-originating inputs, such as sewing thread, pocketing, and narrow elastic fabrics.
UK continues to own property (the “Kentec site”) acquired in the 2004 transaction with INVISTA that has contamination from DuPont’s prior operations and is monitored by DEQ. The Kentec site has been remediated by DuPont, and DuPont has received authority from DEQ to discontinue further remediation, other than natural attenuation.
UK continues to own property (the “Kentec site”) acquired in the 2004 transaction with INVISTA that has contamination from DuPont’s prior operations and is monitored by the DEQ. The Kentec site has been remediated by DuPont, and DuPont has received authority from the DEQ to discontinue further remediation, other than natural attenuation.
Prior to transfer of responsibility to UK, DuPont and UK had a duty to monitor and report the environmental status of the Kentec site to DEQ. Effective April 10, 2019, UK assumed sole remediator responsibility of the Kentec site pursuant to its contractual obligations with INVISTA and received $180 of net monitoring and reporting costs due from DuPont.
Prior to transfer of responsibility to UK, DuPont and UK had a duty to monitor and report the environmental status of the Kentec site to the DEQ. Effective April 10, 2019, UK assumed sole remediator responsibility of the Kentec site pursuant to its contractual obligations with INVISTA and received $180 of net monitoring and reporting costs due from DuPont.
Application of these technologies allows for various, separate benefits, including: water repellency, flame retardation, soil release, enhanced color-fastness achieved with less water use, and protection from ultra-violet rays, among other attributes. 8 As we continue to diversify our portfolio beyond apparel and pursue new end markets, we expect to gain margin accretive sales and improve facility utilization.
Application of these technologies allows for various, separate benefits, including: water repellency, flame retardation, soil release, enhanced color-fastness achieved with less water use, and protection from ultra-violet rays, among other attributes. As we continue to diversify our portfolio beyond apparel and pursue new end markets, we expect to gain margin accretive sales and improve facility utilization.
UNIFI has three reportable segments based on the primary geographies in which UNIFI distributes its products: • The Americas Segment primarily sells recycled and synthetic products to yarn manufacturers, knitters and weavers that produce yarn and/or fabric for the apparel, hosiery, home furnishings, automotive, industrial, medical, and other end‑use markets principally in North and Central America.
UNIFI has three reportable segments based on the primary geographies in which UNIFI distributes its products: • The Americas Segment primarily manufactures and sells recycled and synthetic products to yarn manufacturers, knitters and weavers that produce yarn and/or fabric for the apparel, hosiery, home furnishings, automotive, industrial, medical, and other end‑use markets principally in North and Central America.
However, much of our portfolio in the Asia region is advantaged by specialty and recycled products and a global sourcing and support model that assists in differentiation. 7 UNIFI’s major competitors for nylon yarn sales in the U.S. are Sapona Manufacturing Company, Inc. and McMichael Mills, Inc.
However, much of our portfolio in the Asia region is advantaged by specialty and recycled products and a global sourcing and support model that assists in differentiation. UNIFI’s major competitors for nylon yarn sales in the U.S. are Sapona Manufacturing Company, Inc. and McMichael Mills, Inc.
The Americas Segment consists of sales and manufacturing operations in the U.S., El Salvador, and Colombia. • The Brazil Segment primarily sells recycled and synthetic products to knitters and weavers that produce fabric for the apparel, home furnishings, automotive, industrial, and other end-use markets principally in Brazil.
The Americas Segment consists of sales and manufacturing operations in the U.S., El Salvador, and Colombia. • The Brazil Segment primarily manufactures and sells recycled and synthetic products to knitters and weavers that produce fabric for the apparel, home furnishings, automotive, industrial, and other end-use markets principally in Brazil.
Copies of such materials, as well as any of our SEC reports and all amendments thereto, may also be obtained without charge by writing to Unifi, Inc., 7201 West Friendly Avenue, Greensboro, North Carolina 27410, Attention: Corporate Secretary.
Copies of such corporate governance materials, as well as any of our SEC reports and all amendments thereto, may also be obtained without charge by writing to Unifi, Inc., 7201 West Friendly Avenue, Greensboro, North Carolina 27410, Attention: Secretary.
In connection with monitoring, UK expects to sample and report to DEQ annually. At this time, UNIFI does not expect any active site remediation will be required but expects that any costs associated with active site remediation, if ever required, would likely be immaterial.
In connection with monitoring, UK expects to sample and report to the DEQ annually. At this time, UNIFI does not expect any active site remediation will be required but expects that any costs associated with active site remediation, if ever required, would likely be immaterial.
In the past, selling price adjustments were primarily associated with changes in the price of polyester and nylon raw materials, but the current environment requires that selling price adjustments accommodate significant increases in all categories of input costs, including packaging, supplies, additives, and labor.
In the past, selling price adjustments were primarily associated with changes in the price of polyester and nylon raw materials, but the current economic environment requires that selling price adjustments accommodate significant increases in all categories of input costs, including packaging, supplies, additives, and labor.
REPREVE is most commonly offered in the following fiber forms: polyester staple fiber, polyester filament, nylon staple fiber, and nylon filament, comprising our REPREVE Fiber platform. We also sell REPREVE Chip, which is a polyester resin product.
REPREVE is most commonly offered in the following fiber forms: polyester staple fiber, polyester filament, nylon staple fiber, and nylon filament, comprising our REPREVE Fiber platform. We also sell REPREVE Chip, which is a recycled polyester resin product.
UNIFI expects that the region covered by the Americas Segment will continue to maintain its share of apparel production as a percentage of U.S. retail.
As such, UNIFI expects that the region covered by the Americas Segment will continue to maintain its share of apparel production as a percentage of U.S. retail.
This has driven traction with global brands and retailers who obtain value and lasting consumer interest from the innovation and sustainability aspects that REPREVE provides. Expanding sales of REPREVE is an important component of our business strategy, and we expect to achieve improved margins and deeper relationships with customers accordingly. We remain committed to sustainability.
This has driven traction with global brands and retailers who obtain value and lasting consumer interest from the innovation and sustainability aspects that REPREVE provides. Expanding sales of REPREVE is an important component of our business strategy, and we expect to achieve improved margins and deeper relationships with customers accordingly.
The Asia Segment has no manufacturing assets and includes sales organizations in China, Turkey, and Hong Kong. Other information for UNIFI’s reportable segments is provided in Note 24, “Business Segment Information,” to the accompanying consolidated financial statements.
The Asia Segment has no manufacturing assets and includes sales offices in China, Turkey, and Hong Kong. Other information for UNIFI’s reportable segments is provided in Note 24, “Business Segment Information,” to the accompanying consolidated financial statements.
However, in calendar 2021 and 2022, UNIFI, along with many other textile manufacturers and a range of other industries, began to experience above-average inflationary pressures on a range of input costs, including, but not limited to, labor, freight, energy, and raw materials. Accordingly, we began implementing responsive selling price adjustments during both fiscal 2021 and 2022 to protect gross margins.
However, in fiscal 2022, UNIFI, along with many other textile manufacturers and a range of other industries, began to experience above-average inflationary pressures on a range of input costs, including, but not limited to, labor, freight, energy, and raw materials. Accordingly, we began implementing responsive selling price adjustments during fiscal 2022 to protect gross margins.
Developments in Principal Markets Americas Our operations in the U.S., El Salvador and Colombia utilize the Dominican Republic—Central America Free Trade Agreement (“CAFTA-DR”) and the United States-Mexico-Canada Agreement (“USMCA”). Prior to the establishment of the USMCA, we benefited from a similar, historical agreement known as the North American Free Trade Agreement (“NAFTA”).
Developments in Principal Markets Americas Our operations in the U.S., El Salvador, and Colombia operate under the Dominican Republic—Central America Free Trade Agreement (“CAFTA-DR”) and the United States-Mexico-Canada Agreement (“USMCA”). Prior to the establishment of the USMCA, we benefited from a similar, historical agreement known as the North American Free Trade Agreement (“NAFTA”).
For its operations in the U.S., UNIFI produces and buys certain of its raw material fibers for Compliant Yarns from a variety of sources in both the U.S. and Israel, and UNIFI produces a portion of its Chip requirements in its REPREVE Recycling Center and purchases the remainder of such requirements from external suppliers for use in its domestic spinning facility to produce POY.
For its operations in the U.S., UNIFI produces and buys certain of its raw material fibers for Compliant Yarns from a variety of sources in the U.S., UNIFI produces a portion of its Chip requirements in its REPREVE Recycling Center and purchases the remainder of such requirements primarily from external suppliers for use in its domestic spinning facility to produce POY.
Throughout fiscal 2022 and 2023, we experienced adverse pressure from rising input costs and weakening manufacturing productivity. In addition, in fiscal 2023, the Americas Segment experienced lower volumes as a result of lower global demand in connection with the inventory destocking efforts of major brands and retailers.
Throughout fiscal 2022 and 2023, we experienced adverse pressure from rising input costs, competitive headwinds, and weakening manufacturing productivity. In addition, in fiscal 2023 and 2024, the Americas Segment experienced lower volumes as a result of lower global demand in connection with the inventory destocking efforts of major brands and retailers.
For more detailed information, see “Liquidity and Capital Resources” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. 10 Inflation Prior to fiscal 2021, UNIFI’s input costs had experienced steady and predictable increases.
For more detailed information, see “Liquidity and Capital Resources” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. Inflation Prior to fiscal 2022, UNIFI’s input costs had experienced steady and predictable increases.
For example, UNIFI works with brands and retailers to educate and create demand for its products, including recent engagements involving REPREVE at multiple events and venues in the U.S. UNIFI then works with key fabric mill partners to develop specific fabrics for those brands and retailers utilizing UNIFI products.
For example, UNIFI works with brands and retailers to educate and create demand for its products, including recent engagements involving REPREVE, and other performance technology products at multiple events and venues in the U.S. and globally. UNIFI then works with key fabric mill partners to develop specific fabrics for those brands and retailers utilizing UNIFI products.
While we navigated the dynamic cost environment during fiscal 2021 through 2023 better than in earlier prior years, fixed cost absorption and manufacturing productivity have adversely impacted our gross margin and remain current headwinds to UNIFI’s profitability, most notably in the Americas Segment.
While we navigated the dynamic cost environment during fiscal 2022 through 2024 better than in earlier prior years, fixed cost absorption and manufacturing productivity have adversely impacted our gross margin and remain current headwinds to UNIFI’s profitability, most notably in the Americas Segment.
Global polyester consumption has accounted for an estimated 56% of global fiber consumption, and global demand was projected to increase by approximately 3.0% to 3.5% annually through calendar 2025. Global nylon consumption accounts for an estimated 5% of global fiber consumption. Additionally, due to the higher cost of nylon, the industry may transition certain products from nylon to polyester.
Polyester accounts for an estimated 56% of global fiber consumption, and global demand is projected to increase by approximately 3.0% to 3.5% annually through calendar 2025. Nylon accounts for an estimated 5% of global fiber consumption. Additionally, due to the higher cost of nylon, the industry may transition certain products from nylon to polyester.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under the subheading “ Investments in Unconsolidated Affiliates ” in Note 10, "Other Non-Current Assets," to the accompanying consolidated financial statements. 11 Available Information UNIFI’s website is www.unifi.com .
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and under the subheading “ Investments in Unconsolidated Affiliates ” in Note 10, "Other Non-Current Assets," to the accompanying consolidated financial statements. 9 Available Information UNIFI’s website is www.unifi.com .
Research and Development UNIFI employs approximately 130 persons, primarily in the U.S., who work closely with UNIFI’s customers, brand partners, and others to develop a variety of new yarns as well as improvements to the performance properties of existing yarns and fabrics.
Research and Development UNIFI employs research and development personnel, primarily in the U.S., who work closely with UNIFI’s customers, brand partners, and others to develop a variety of new yarns as well as improvements to the performance properties of existing yarns and fabrics.
The Brazil Segment includes a manufacturing location and sales offices in Brazil. • The Asia Segment primarily sells recycled and synthetic products to yarn manufacturers, knitters and weavers that produce fabric for the apparel, home furnishings, automotive, industrial, and other end-use markets principally in Asia and Europe.
The Brazil Segment includes a manufacturing location and sales offices in Brazil. • The Asia Segment primarily sources recycled and synthetic products from third party suppliers and sells to yarn manufacturers, knitters, and weavers that produce fabric for the apparel, home furnishings, automotive, industrial, and other end-use markets principally in Asia and Europe.
Competition and economic and political volatility remain challenging conditions in South America, despite our strong performance in fiscal 2021 and 2022, thus UNIFI continues to (i) aggressively pursue mix enrichment and market share by working with customers to develop programs using our differentiated products, including REPREVE, and (ii) implement process improvements and manufacturing efficiency plans to help lower per-unit costs.
Economic and political volatility remain challenging conditions in South America, despite our strong performance in recent years. UNIFI continues to (i) aggressively pursue mix enrichment and market share by working with customers to develop programs using our differentiated products, including REPREVE, and (ii) implement process improvements and manufacturing efficiency plans to help lower per-unit costs.
The primary suppliers of nylon raw materials for the Americas Segment are U.N.F. Industries Ltd. (“UNF”); UNF America, LLC (“UNFA”); The LYCRA Company; and Nilit Ltd. Each of UNF and UNFA is a joint venture owned 50% by UNIFI. Currently, there are multiple domestic and foreign suppliers available to fulfill UNIFI’s sourcing requirements for its recycled products.
The primary supplier of nylon raw materials for the Americas Segment are UNF America, LLC (“UNFA”); The LYCRA Company; and Nilit Ltd. ("Nilit"). UNFA is a joint venture owned 50% by UNIFI. Currently, there are multiple domestic and foreign suppliers available to fulfill UNIFI’s sourcing requirements for its recycled products.
UNIFI’s major competitors in the Americas region for polyester yarns are Aquafil O'Mara; United Textiles of America S.de R.L. de C.V.; NanYa Plastics Corp. of America (“NanYa”); AKRA, S.A. de C.V.; and C S Central America S.A. de C.V. UNIFI’s major competitors in Brazil are traders of imported yarns and fibers.
UNIFI’s major competitors in the Americas region for polyester yarns are Aquafil O'Mara; United Textiles of America S.de R.L. de C.V.; NanYa Plastics Corp. of America (“NanYa”); and C S Central America S.A. de C.V.
This segment is primarily impacted by (i) price pressures from imported fiber, fabric, and finished goods (similar to our U.S. operations), (ii) the inflation rate in Brazil, and (iii) changes in the value of the Brazilian Real (“BRL”).
Brazil UNIFI’s Brazilian operations play a key role in our strategy. This segment is primarily impacted by (i) price pressures from imported fiber, fabric, and finished goods (similar to our U.S. operations), (ii) the inflation rate in Brazil, and (iii) changes in the value of the Brazilian Real (“BRL”).
While the ultimate short-term and long-term impacts of these duties are not yet known, UNIFI expects these countervailing and antidumping duty rates to play a significant role in helping to normalize the competitive position of UNIFI’s yarns in the U.S. market against the respective imported yarns. Competition The industry in which UNIFI operates is global and highly competitive.
While the ultimate short-term and long-term impacts of these duties are not yet known, UNIFI expects these countervailing and antidumping duty rates to play a significant role in helping to normalize the competitive position of UNIFI’s yarns in the U.S. market against the respective imported yarns.
The primary metric for tracking growth of the REPREVE brand is REPREVE Fiber sales. REPREVE Fiber represents UNIFI's collection of fiber products on its recycled platform, with or without added technologies. Of our consolidated net sales in fiscal 2021, 2022, and 2023, REPREVE Fiber sales comprised 37%, 36% and 30%, or $245,832, $293,080, and $186,161, respectively.
The primary metric for tracking growth of the REPREVE brand is REPREVE Fiber sales. REPREVE Fiber represents UNIFI's collection of fiber products on its recycled platform, with or without added technologies. Of our consolidated net sales in fiscal 2022, 2023, and 2024, REPREVE Fiber sales comprised 36%, 30%, and 32%, or $293,080, $186,161, and $188,517, respectively.
The polyester and nylon fiber sectors together account for approximately 62% of North American textile consumption. According to the National Council of Textile Organizations, the U.S. textile and apparel industry’s total shipments were approximately $65.8 billion for calendar 2022 as the U.S. textile and apparel industry exported nearly $34.0 billion of textile and apparel products.
The polyester and nylon fiber sectors together account for approximately 62% of North American textile consumption. 4 According to the National Council of Textile Organizations, the U.S. textile and apparel industry’s total shipments were approximately $64.8 billion for calendar 2023 as the U.S. textile and apparel industry exported nearly $29.7 billion of textile and apparel products.
UNIFI’s consolidated net sales are not materially dependent on a single direct customer and no single direct customer accounts for 10% or more of UNIFI’s consolidated net sales. One direct customer, OIA Global, comprised 15% of the Asia Segment's sales in fiscal 2023.
UNIFI’s consolidated net sales are not materially dependent on a single direct customer and no single direct customer accounts for 10% or more of UNIFI’s consolidated net sales. In fiscal 2024, OIA Global comprised 13% of the Asia Segment's sales and Milliken & Company comprised 10% of the Americas Segment's sales.
Human Capital As of July 2, 2023, UNIFI had approximately 2,800 employees, which includes approximately 200 individuals working under temporary labor contracts. The number of employees in each of the Americas, Brazil, and Asia Segments and the corporate office were approximately 2,000, 610, 90, and 100, respectively, at July 2, 2023.
Human Capital As of June 30, 2024, UNIFI had approximately 2,900 employees, which includes approximately 200 individuals working under temporary labor contracts. The number of employees in each of the Americas, Brazil, and Asia Segments and the corporate office were approximately 1,900, 800, 100, and 100, respectively, at June 30, 2024.
In addition, many of our corporate governance documents are available on our website, including our: Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, Corporate Governance Guidelines, Code of Business Conduct and Ethics, Ethical Business Conduct Policy Statement, and Code of Ethics for Senior Financial and Executive Officers.
In addition, many of our corporate governance materials are available on our website, including the charters for the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee, the Corporate Governance Guidelines, the Code of Business Conduct and Ethics, the Ethical Business Conduct Policy Statement, the Code of Ethics for Senior Financial and Executive Officers, the Insider Trading Policy, and the Incentive-Based Compensation Recovery Policy.
UNIFI has direct manufacturing operations in four countries and participates in joint ventures with operations in Israel and the United States (the “U.S.”).
UNIFI has direct manufacturing operations in four countries and participates in a joint venture operating in the United States (the “U.S.”).
In order to achieve further growth, UNIFI is committed to investing strategically and synergistically in: • accelerating innovation and high-quality manufacturing processes; • expanding the REPREVE ® brand; • growing market share in our major textile regions; and • penetrating new markets and end-uses.
Strategic Overview and Operating Results UNIFI is committed to investing strategically and synergistically in: • accelerating innovation and high-quality manufacturing processes; • expanding the REPREVE ® brand; • growing market share in our major textile regions; and • penetrating new markets and end-uses, particularly beyond apparel.
UNIFI’s top 10 direct customers accounted for approximately 26% of consolidated net sales for fiscal 2023 and approximately 28% of receivables as of July 2, 2023. However, UNIFI’s consolidated net sales are dependent on demand from a relatively small number of brand partners.
UNIFI’s top 10 direct customers accounted for approximately 24% of consolidated net sales for fiscal 2024 and approximately 34% of receivables as of June 30, 2024. However, UNIFI’s consolidated net sales are dependent on demand from a relatively small number of brand partners.
As of July 2, 2023, UNIFI had repurchased 701 shares at an average price of $15.90 per share, none of which occurred in fiscal 2023, leaving $38,859 available for repurchase under the 2018 SRP.
As of June 30, 2024, UNIFI had repurchased 701 shares of its common stock at an average price of $15.90 per share, none of which occurred in fiscal 2024, leaving $38,859 available for repurchases under the 2018 SRP.
Most of UNIFI’s branded yarns, including its flagship REPREVE brand, were derived from its research and development initiatives. 9 UNIFI also includes, as part of its research and development initiatives, the use of continuous improvement methodologies to increase its manufacturing and other operational efficiencies, both to enhance product quality and to derive cost savings.
UNIFI also includes, as part of its research and development initiatives, the use of continuous improvement methodologies to increase its manufacturing and other operational efficiencies, both to enhance product quality and to derive cost savings.
Sales and Marketing UNIFI employs an internal sales force of approximately 60 persons operating out of sales offices primarily in the U.S., Brazil, China, El Salvador, Colombia, Turkey, and Europe. UNIFI also relies on independent sales agents for sales in several other countries.
Sales and Marketing UNIFI employs an internal sales force operating out of sales offices primarily in the U.S., Brazil, China, El Salvador, Colombia, Turkey, and Europe. UNIFI also relies on independent sales agents for sales in several other countries. UNIFI seeks to create strong customer relationships and to build and strengthen those relationships throughout the supply chain.
For fiscal 2023, 2022, and 2021, UNIFI incurred $10,871, $12,103, and $11,483, respectively, in costs for research and development (including salaries and benefits of the personnel involved in those efforts). Intellectual Property UNIFI has numerous trademarks registered in the U.S. and in other countries and jurisdictions around the world.
For fiscal 2024, 2023, and 2022, UNIFI incurred $9,599, $10,871, and $12,103, respectively, in costs for research and development (including employee costs). 7 Intellectual Property UNIFI has numerous trademarks registered in the U.S. and in other countries and jurisdictions around the world.
UNIFI’s subsidiaries in Asia offer the same high-quality and innovative products and technologies through contract manufacturing arrangements with local manufacturers. This asset-light model allows for seamless integration of our products into the global supply chain of our customers.
Lastly, covering operations utilize a spandex core to produce yarns with more stretch, compression, or comfort. UNIFI’s subsidiaries in Asia offer the same high-quality and innovative products and technologies through contract manufacturing arrangements with local manufacturers. This asset-light model allows for seamless integration of our products into the global supply chains of our customers.
UNIFI seeks to create strong customer relationships and to build and strengthen those relationships throughout the supply chain. Through frequent communications with customers, partnering in product development, and engaging key downstream brands and retailers, UNIFI has created significant pull-through sales and brand recognition for its products.
Through having frequent communications with customers, partnering in product development, and engaging key downstream brands and retailers, UNIFI has created significant pull-through sales and brand recognition for its products.
We are encouraged by the performance metrics surrounding the eAFK Evo texturing machines currently operating in our facilities, and we expect these upgrades to generate meaningful investment returns in the future when product demand recovers.
We are encouraged by the performance metrics surrounding the eAFK Evo texturing machines currently operating in our facilities, and we expect these upgrades to generate meaningful investment returns in the future when product demand recovers. Due to the weak demand environment in fiscal 2023 and continued weakness expected in fiscal 2024, UNIFI negotiated two contract modifications with the equipment vendor.
While competitors have traditionally focused on high-volume commodity products, they are now increasingly focused on specialty products that UNIFI historically has been able to leverage to generate higher margins.
Dollar (“USD”), any of which could make UNIFI’s products, or the related supply chains, less competitive. While competitors have traditionally focused on high-volume commodity products, they are now increasingly focused on specialty products that UNIFI historically has been able to leverage to generate higher margins.
We estimate consolidated net sales for fiscal 2023 were distributed across our primary end markets as listed below. • Apparel (including hosiery and footwear) represented approximately 65% of our consolidated net sales. • Industrial represented approximately 11% of our consolidated net sales, and includes medical, belting, tapes, filtration, ropes, protective fabrics, and awnings. • Furnishings (including both contract and home furnishings) represented approximately 9% of our consolidated net sales, and are largely dependent upon the housing market, which, in turn, is influenced by consumer confidence and credit availability. • Automotive represented approximately 4% of our consolidated net sales. • All other markets represented approximately 11% of our consolidated net sales.
We estimate our consolidated net sales for fiscal 2024 were distributed across our primary end markets as follows: • Apparel (including hosiery and footwear) represented approximately 59% of our consolidated net sales. • Industrial represented approximately 13% of our consolidated net sales, and includes medical, belting, tapes, filtration, ropes, protective fabrics, and awnings. • Furnishings (including both contract and home furnishings) represented approximately 12% of our consolidated net sales, and is largely dependent upon the housing market, which, in turn, is influenced by consumer confidence and credit availability. • Automotive represented approximately 5% of our consolidated net sales. • All other markets represented approximately 11% of our consolidated net sales. 6 In addition to the above, UNIFI combines its research and development efforts with the demands of customers and markets to develop innovative technologies that enhance yarn characteristics.
Customers UNIFI’s Americas Segment, Brazil Segment, and Asia Segment serve approximately 500, 400, and 600 customers, respectively, all in a variety of geographic markets. UNIFI’s products are manufactured according to customer specifications and are shipped based upon customer order requirements. Customer payment terms are generally consistent with prevailing industry practices for the geographies in which we participate.
UNIFI’s products are manufactured according to customer specifications and are shipped based upon customer order requirements. Customer payment terms are generally consistent with prevailing industry practices for the geographies in which we participate.
Joint Ventures and Unconsolidated Affiliates UNIFI participates in two joint ventures that supply raw materials to the Americas Segment, one located in the U.S. and one in Israel. As of July 2, 2023, UNIFI had $2,997 recorded for these investments in unconsolidated affiliates. Other information regarding UNIFI’s unconsolidated affiliates is provided in “Item 7.
Joint Ventures and Unconsolidated Affiliates UNIFI participates in one joint venture located in the U.S. that supplies raw materials to the Americas Segment. As of June 30, 2024, UNIFI had $1,603 recorded for this unconsolidated affiliate investment. Other information regarding UNIFI’s unconsolidated affiliates is provided in “Item 7.
In any event, UNIFI monitors these dynamic factors closely and does not currently engage in hedges of polyester or nylon raw materials. Products, Technologies and Related Markets Our virgin and recycled products sold across all geographies range from specialty, value-added to commodity. We provide products to a variety of end-use markets, principally apparel, industrial, furnishings, and automotive.
Products, Technologies, and Related Markets Our virgin and recycled products sold across all geographies range from specialty, value-added, to commodity. We provide products to a variety of end-use markets, principally apparel, industrial, furnishings, and automotive.
Among other things, UNIFI evaluates trends and uses the latest technology to create innovative yarns that meet the needs of evolving consumer preferences.
Among other things, UNIFI evaluates trends and uses the latest technology to create innovative yarns that meet the needs of evolving consumer preferences. Most of UNIFI’s branded yarns, including its flagship REPREVE brand, were derived from its research and development initiatives.
Beyond the current inflationary environment experienced in fiscal 2022 and 2023, UNIFI expects that costs could continue to rise long term for certain consumables used to produce and ship its products, as well as for its utilities and labor.
However, we monitor our input costs closely, and we expect to maintain our ability to respond quickly to cost fluctuations to minimize any potential adverse impacts to earnings. 8 Beyond the current inflationary environment experienced in fiscal 2022, 2023, and 2024, UNIFI expects that costs could continue to rise long term for certain consumables used to produce and ship its products, as well as for its utilities and labor.
For sales of non-Compliant Yarns, UNIFI competes with a larger number of foreign and domestic producers of polyester and nylon yarns that can meet the required customer specifications of quality, reliability, and timeliness. UNIFI is affected by imported textile, apparel, and hosiery products, which adversely impact demand for UNIFI’s polyester and nylon products in certain of its markets.
For sales of Compliant Yarns, UNIFI competes with a limited number of foreign and domestic producers of polyester and nylon yarns. For sales of non-Compliant Yarns, UNIFI competes with a larger number of foreign and domestic producers of polyester and nylon yarns that can meet the required customer specifications of quality, reliability, and timeliness.
In addition, our installation of eAFK Evo machinery in Brazil has been highly successful in generating manufacturing efficiencies and the associated finished goods have been highly regarded by customers.
The growth of the REPREVE brand in Brazil continues to be a focus of ours as the segment's sales do not include a significant amount of REPREVE. In addition, our installation of eAFK Evo machinery in Brazil has been highly successful in generating manufacturing efficiencies and the associated finished goods have been highly regarded by customers.
This action allows for improved short- and mid-term liquidity in light of the current subdued levels of sales and facility utilization and allows for a better matching of future capital expenditures with expected higher levels of future business activity. 4 In fiscal 2024, we expect to invest between $14,000 and $16,000 in capital projects, including making further improvements in production capabilities and technological enhancements in the Americas and annual maintenance capital expenditures.
This action allows for improved short- and mid-term liquidity in light of the current subdued levels of sales and facility utilization and allows for a better matching of future capital expenditures with expected higher levels of future business activity.
The decline in such REPREVE Fiber sales for fiscal 2023 was driven primarily by weak global demand and lower sales volume for our Asia Segment.
The lower REPREVE Fiber sales for fiscal 2023 and 2024 were driven primarily by weak global demand for both years.
While volatility and uncertainty continue, we have no significant customers or supply chain partners in the conflicted region, and we have not been directly impacted by the conflict. Indirectly, we recognize that additional or prolonged impacts to the petroleum or other global markets could cause further inflationary pressures to our raw material costs or unforeseen adverse impacts.
Indirectly, we recognize that additional or prolonged impacts to the petroleum or other global markets could cause further inflationary pressures to our global raw material costs or unforeseen adverse impacts.
Beaming places both textured and covered yarns onto beams to be used by customers in warp knitting and weaving applications. The draw winding process utilizes heat and draws POY to produce mid-tenacity, flat yarns. Lastly, covering operations utilize a spandex core to produce yarns with more stretch, compression, or comfort.
Twisting incorporates real twist into filament yarns, which can be sold for a variety of uses, such as sewing thread, home furnishings, and apparel. Beaming places both textured and covered yarns onto beams to be used by customers in warp knitting and weaving applications. The draw winding process utilizes heat and draws POY to produce mid-tenacity, flat yarns.
The prices of the principal raw materials used by UNIFI continuously fluctuate, and it is difficult or impossible to predict trends or upcoming developments. During fiscal 2020 and 2021, UNIFI operated in a predominantly decreasing polyester raw material cost environment. During fiscal 2022, UNIFI operated in a predominantly increasing polyester raw material cost environment.
The prices of the principal raw materials used by UNIFI continuously fluctuate, and it is difficult or impossible to predict trends or upcoming developments. In any event, UNIFI monitors these dynamic factors closely and does not currently engage in hedges of polyester or nylon raw materials.
The texturing process involves the use of high-speed machines to draw, heat, and false-twist POY to produce yarn with different physical characteristics, depending on its ultimate end-use. Texturing gives the yarn greater bulk, strength, stretch, consistent dye-ability, and a softer feel, thereby making it suitable for use in the knitting and weaving of fabric.
Additional processing of UNIFI’s polyester POY includes texturing, dyeing, twisting, beaming, draw winding, and covering. The texturing process involves the use of high-speed machines to draw, heat, and false-twist POY to produce yarn with different physical characteristics, depending on its ultimate end-use.
Several foreign competitors have significant advantages, including lower wages, raw material costs, and capital costs and favorable foreign currency exchange rates against the U.S. Dollar (“USD”), any of which could make UNIFI’s products, or the related supply chains, less competitive.
UNIFI is affected by imported textile, apparel, and hosiery products, which adversely impact demand for UNIFI’s polyester and nylon products in certain of its markets. Several foreign competitors have significant advantages, including lower wages, raw material costs, and capital costs and favorable foreign currency exchange rates against the U.S.
UNIFI’s operations in Asia face competition from multiple yarn manufacturers in that region and identification of them is not feasible.
In fiscal 2024, our largest domestic competitor, Petroquimica Suape (Companhia Petroquimica de Pernambuco), halted textured yarn production providing us an opportunity to gain additional market share in the region. UNIFI’s operations in Asia face competition from multiple yarn manufacturers in that region and identification of them is not feasible.
In fiscal 2023, the Asia Segment's results decreased primarily due to lower sales volumes in connection with weaker global demand.
In fiscal 2024, the Asia Segment's results increased primarily due to (i) a strong sales mix and (ii) higher sales volumes compared to fiscal 2023 despite continued weak global demand.
We believe that further commercial expansion will require a continued stream of new technology and innovation that generates products with meaningful consumer benefits. Along with our recycled platform, UNIFI has significant yarn technologies that provide optimal performance characteristics for today’s marketplace, including moisture management, temperature moderation, stretch, ultra-violet protection, and fire retardation, among others.
We believe that further commercial expansion will require a continued stream of new technology and innovation that generates products with meaningful consumer benefits.
Looking ahead, we believe our operations remain well-positioned to capture long-term growth opportunities, and we are working to mitigate any potential recessionary impacts. Brazil UNIFI’s Brazilian operations play a key role in our strategy.
However, beginning in the second half of fiscal 2024, we experienced a slow, but steady improvement in overall sales, primarily due to our increased commercial efforts and portfolio diversification. Looking ahead, we believe our Americas business remains well-positioned to capture long-term growth opportunities, and we are working to mitigate any potential recessionary impacts.
Nonetheless, as demonstrated in fiscal 2023, economic disruptions and other factors could adversely impact the speed at which we invest in capital projects, as we continue to prioritize liquidity, safety, and maintenance. Share Repurchases In addition to capital investments and debt retirement, UNIFI may utilize excess cash for strategic share repurchases.
In fiscal 2025, we expect to invest between $10,000 and $12,000 in capital projects, including making further improvements in production capabilities and technological enhancements in the Americas and annual maintenance capital expenditures. 3 Share Repurchases In addition to capital investments and debt retirement, UNIFI may utilize excess cash for strategic share repurchases.
Ultimately, combining leading-edge innovation with our prominent, high-quality brand and agile regional business model will allow for underlying sales and profitability growth. 2 Our recent efforts to alleviate competitive pressures from imported yarn into the U.S. are intended to complement our strategic initiatives and to stabilize the market share decline we have experienced in the U.S., while improving facility utilization and cost absorption.
Ultimately, combining leading-edge innovation with our prominent, high-quality brand and agile regional business model will allow for underlying sales and profitability growth. 2 Fiscal 2024 Financial Performance In fiscal 2024, while sales volumes increased, lower sales prices in response to lower raw material input costs for the Americas Segment adversely impacted our ability to generate profits and cash flows.
UNIFI competes not only as a global yarn producer, but also as part of a regional supply chain for certain textile products. For sales of Compliant Yarns, UNIFI competes with a limited number of foreign and domestic producers of polyester and nylon yarns.
Furthermore, we expect continued governmental support on these efforts as both presidential candidates have concerns regarding the impacts of Chinese imports. 5 Competition The industry in which UNIFI operates is global and highly competitive. UNIFI competes not only as a global yarn producer, but also as part of a regional supply chain for certain textile products.
Removed
Strategic Overview and Operating Results We believe UNIFI’s underlying performance during recent fiscal years reflects the strength of our global initiative to deliver differentiated solutions to customers and brand partners throughout the world.
Added
Along with our recycled platform, UNIFI has significant yarn technologies that provide optimal performance characteristics for today’s marketplace, including water repellency, flame retardation, soil release, enhanced color-fastness achieved with less water use, and protection from ultra-violet rays, among other attributes.
Removed
This platform has provided underlying growth in our core operations during recent fiscal years and has been augmented by significant capital investments that support the production and delivery of sustainable and innovative solutions.
Added
We continued to experience a weak global demand environment which resulted in sales levels that were well below historical trends and continued pricing pressures and inflationary impacts that weighed on gross margins.
Removed
These efforts are further discussed below under the heading “Trade Regulation and Rules of Origin.” Execution on both our strategic and trade initiatives is expected to increase revenue and profitability. Fiscal 2023 Financial Performance The current economic environment and a significant decrease in textile product demand adversely impacted our consolidated sales and profitability in fiscal 2023.
Added
In response to weak operating results, we implemented a Profitability Improvement Plan in fiscal 2024, which consisted primarily of workforce reductions and sales transformation efforts intended to lower operating expenses and increase gross margin opportunities.
Removed
In addition to the current unfavorable economic environment and the inventory destocking measures taken by brands and retailers, the following pressures continued from fiscal 2022 into fiscal 2023: (i) the impact of inflation on consumer spending and our own manufacturing costs, (ii) rising interest rates, (iii) the Russia-Ukraine conflict, and (iv) supply chain volatility.
Added
Despite the difficult operating environment, we have continued to focus on commercializing value-added products and creating differentiation through innovation and sustainability, while also expanding our sales channels beyond traditional apparel end-uses.
Removed
As it pertains to the global business and the Americas Segment in particular, UNIFI will continue to monitor these and other aspects of the current economic environment and work closely with stakeholders to ensure business continuity and liquidity.
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Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
24 edited+6 added−1 removed65 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
24 edited+6 added−1 removed65 unchanged
2023 filing
2024 filing
Biggest changeUNIFI will continue to monitor the COVID-19 pandemic by prioritizing health and safety while delivering on customer demand. However, the COVID-19 pandemic could resurge or another epidemic or pandemic could arise, and, accordingly, could adversely affect our organization. The risks associated with climate change, localized energy management initiatives, and other environmental impacts could negatively affect UNIFI’s business and operations.
Biggest changeThe risks associated with climate change, localized energy management initiatives, other environmental impacts and compliance with new reporting regulations could negatively affect UNIFI’s business and operations.
A disruption at one of our facilities could harm our business and result in significant losses, lead to a decline in sales, and increase our costs and expenses. Our operations and business could be disrupted by natural disasters, industrial accidents, power or water shortages, extreme weather conditions, pandemics, and other man-made disasters or catastrophic events.
A disruption at one of our facilities could harm our business and result in significant losses, lead to a decline in sales, and increase our costs and expenses. Our operations and business could be disrupted by natural disasters, industrial accidents, power or water shortages, extreme weather conditions, epidemics or pandemics, and other man-made disasters or catastrophic events.
UNIFI currently holds the vast majority of its cash deposits with large foreign banks in our associated operating regions, and management believes that it has the ability to repatriate cash to the U.S. relatively quickly, although management recognizes that various inherent risks do exist in executing the repatriation of cash from foreign subsidiaries.
UNIFI currently holds the majority of its cash deposits with large foreign banks in our associated operating regions, and management believes that it has the ability to repatriate cash to the U.S. relatively quickly, although management recognizes that various inherent risks do exist in executing the repatriation of cash from foreign subsidiaries.
Any significant disruption or curtailment in the supply of any of its raw materials could cause UNIFI to reduce or cease its production for an extended 14 period, or require UNIFI to increase its pricing, any of which could have a material adverse effect on its business, financial condition, results of operations, or cash flows.
Any significant disruption or curtailment in the supply of any of its raw materials could cause UNIFI to reduce or cease its production for an extended period, or require UNIFI to increase its pricing, any of which could have a material adverse effect on its business, financial condition, results of operations, or cash flows.
UNIFI’s strategy involves the sale of products and solutions to other yarn manufacturers and knitters and weavers (UNIFI’s direct customers) that produce yarn and/or fabric for brands and retailers in the apparel, hosiery, home furnishings, automotive, industrial and other end-use markets (UNIFI’s indirect customers).
UNIFI’s strategy involves the sale of products and solutions to other yarn manufacturers and knitters and weavers (UNIFI’s direct customers) that produce yarn and/or fabric for brands and retailers in the apparel, hosiery, home furnishings, automotive, industrial, medical, and other end-use markets (UNIFI’s indirect customers).
We refer to these indirect customers as “brand partners.” Although we generally do not derive revenue directly from our brand partners, sales volumes to our direct customers are linked with demand from our brand partners because our direct sales generally form a part of our brand partners’ supply chains.
We sometimes refer to these indirect customers as “brand partners.” Although we generally do not derive revenue directly from our brand partners, sales volumes to our direct customers are linked with demand from our brand partners because our direct sales generally form a part of our brand partners’ supply chains.
While foreign competitors have traditionally focused on commodity production, entities are now increasingly focused on value-added products and unbranded recycled products. Competition from unbranded recycled yarns has recently increased, and could drive market share losses for our flagship REPREVE brand.
While foreign competitors have traditionally focused on commodity production, entities are now increasingly focused on value-added products and unbranded recycled products. Competition from unbranded recycled yarns has increased, and could drive market share losses for our flagship REPREVE brand.
The use of UNIFI’s intellectual property by others without authorization may cause it to lose sales, reduce any competitive advantage UNIFI has developed, or otherwise harm its business. 13 Financial Risks UNIFI has significant foreign operations, and its consolidated results of operations and business may be adversely affected by the risks associated with doing business in foreign locations, including the risk of fluctuations in foreign currency exchange rates.
The use of UNIFI’s intellectual property by others without authorization may cause it to lose sales, reduce any competitive advantage UNIFI has developed, or otherwise harm its business. 11 Financial Risks UNIFI has significant foreign operations, and its consolidated results of operations and business may be adversely affected by the risks associated with doing business in foreign locations, including the risk of fluctuations in foreign currency exchange rates.
The loss of a large brand partner, and the failure to add new customers to replace the corresponding lost sales, would have a material adverse effect on our business, financial condition, results of operations, and cash flows. 12 Significant price volatility of UNIFI’s raw materials and rising energy costs may result in increased production costs.
The loss of a large brand partner, and the failure to add new customers to replace the corresponding lost sales, would have a material adverse effect on our business, financial condition, results of operations, and cash flows. 10 Significant price volatility of UNIFI’s raw materials and rising energy costs may result in increased production costs.
Additionally, the end-consumer retail and apparel markets may continue to experience difficult conditions and other transformations, which could have an adverse effect on UNIFI’s business and financial condition. 15 General Risks Unfavorable changes in trade policies and/or violations of existing trade policies could weaken UNIFI’s competitive position significantly and have a material adverse effect on its business.
Additionally, the end-consumer retail and apparel markets may continue to experience difficult conditions and other transformations, which could have an adverse effect on UNIFI’s business and financial condition. 13 General Risks Unfavorable changes in trade policies and/or violations of existing trade policies could weaken UNIFI’s competitive position significantly and have a material adverse effect on its business.
If any of the financial institutions within our 2022 Credit Agreement or construction financing arrangement our lending counterparties are unable to perform on their commitments, our liquidity could be adversely impacted, and we may not be able to adequately fund our operations and pay our debts as they become due.
If any of the financial institutions within the 2022 Credit Agreement (as defined below) or the construction financing arrangement ("lending counterparties") are unable to perform on their commitments, our liquidity could be adversely impacted, and we may not be able to adequately fund our operations and pay our debts as they become due.
Additionally, UNIFI operates in countries with foreign exchange controls. These controls may limit UNIFI’s ability to transfer funds from its international operations and joint ventures or otherwise to convert local currencies into USDs. These limitations could adversely affect UNIFI’s ability to access cash from its foreign operations.
Additionally, UNIFI operates in countries with foreign exchange controls. These controls may limit UNIFI’s ability to transfer funds from its international operations and joint venture or otherwise to convert local currencies into USDs. These limitations could adversely affect UNIFI’s ability to access cash from its foreign operations.
UNIFI attempts to pass on to its customers increases in raw material costs, but at times it cannot. When it can, there is typically a time lag that adversely affects UNIFI and its margins during one or more quarters.
UNIFI attempts to pass on to its customers increases in raw material costs, but at times it cannot. When it can, there is typically a time lag that adversely affects UNIFI's margins during one or more quarters.
UNIFI has foreign operations in Brazil, China, Colombia, El Salvador, and Turkey and participates in joint ventures located in Israel and the U.S. In addition, to help service its customers, UNIFI from time to time engages with third-party independent contractors to provide sales and distribution, manufacturing, and other operational and administrative support services in locations around the world.
UNIFI has foreign operations in Brazil, China, Colombia, El Salvador, and Turkey and participates in a joint venture located in the U.S. In addition, to help service its customers, UNIFI from time to time engages with third-party independent contractors to provide sales and distribution, manufacturing, and other operational and administrative support services in locations around the world.
While volatility and uncertainty continue, we have no significant customers or supply chain partners in the conflicted region, and we have not been directly impacted by the conflict. Indirectly, we recognize that additional or prolonged impacts to the petroleum or other global markets could cause further inflationary pressures to our raw material costs or unforeseen adverse impacts.
While volatility and uncertainty continue, we have no significant customers or supply chain partners in the conflicted regions, and we have not been directly impacted by the conflicts. Indirectly, we recognize that additional or prolonged impacts to the petroleum or other global markets could cause further inflationary pressures to our global raw material costs or unforeseen adverse impacts.
In order to compete effectively, we must attract, retain, and motivate qualified key employees, and our failure to do so could harm our business and our results of operations. In order to compete effectively, we must attract and retain qualified employees.
In order to compete effectively, we must attract and retain qualified employees, and our failure to do so could harm our business and our results of operations. In order to compete effectively, we must attract and retain qualified employees.
Additionally, prolonged economic downturns that negatively impact UNIFI’s results of operations and cash flows could result in future material impairment charges to write-down the carrying value of certain assets, including facilities and equipment, amortizable intangible assets, and equity affiliates. We recognize the disruption to global markets and supply chains caused by Russia’s invasion of Ukraine.
Additionally, prolonged economic downturns that negatively impact UNIFI’s results of operations and cash flows could result in future material impairment charges to write-down the carrying value of certain assets, including facilities and equipment, amortizable intangible assets, and equity affiliates. We recognize the disruption to global markets and supply chains caused by the conflicts in Ukraine and the Middle East.
UNIFI’s products are used in the production of fabric primarily for the apparel, hosiery, home furnishings, automotive, industrial, and other end-use markets. Demand for furniture and other durable goods is often affected significantly by economic conditions that have global or regional industry-wide consequences.
UNIFI’s products are used in the production of fabric primarily for the apparel, hosiery, home furnishings, automotive, industrial, medical, and other end-use markets. Demand for furniture and other durable goods is often affected significantly by economic conditions that have global or regional industry-wide consequences. Demand for a number of categories of apparel is impacted by discretionary spending by consumers.
We actively monitor all lending counterparties, and none have indicated that they may be unable to perform on their commitments. In addition, we periodically review our lending counterparties, considering the stability of the institutions and other aspects of the relationships. Based on our monitoring activities, we currently believe our lending counterparties will be able to perform their commitments.
We actively monitor all lending counterparties, and none have indicated that they may be unable to perform on their commitments. In addition, we periodically review our lending counterparties, considering the stability of the institutions and other aspects of the relationships.
Demand for a number of categories of apparel also tends to be tied to economic cycles and customer preferences that affect the textile industry in general. Demand for textile products, therefore, tends to vary with the business cycles of the U.S. and other economies, as well as changes in global trade flows, and economic and political conditions.
Demand for textile products, therefore, tends to vary with the business cycles of the U.S. and other economies, as well as changes in global trade flows, and economic and political conditions.
Although alternative sources of raw materials exist, UNIFI may not be able to obtain adequate supplies of such materials on acceptable terms, or at all, from other sources. UNIFI is dependent on USMCA/NAFTA, CAFTA-DR, and Berry Amendment qualified suppliers of raw materials for the production of Compliant Yarns. These suppliers are also at risk with their raw material supply chains.
UNIFI is dependent on USMCA/NAFTA, CAFTA-DR, and Berry Amendment qualified suppliers of raw materials for the production of Compliant Yarns. These suppliers are also at risk with their raw material supply chains.
Operational Risks UNIFI depends on limited sources for certain of its raw materials, and interruptions in supply could increase its costs of production, cause production inefficiencies, or lead to a halt in production. UNIFI depends on a limited number of third parties for certain raw material supplies, such as POY, Chip, dyes, and chemicals.
Based on our monitoring activities, we currently believe our lending counterparties will be able to perform their commitments. 12 Operational Risks UNIFI depends on limited sources for certain of its raw materials, and interruptions in supply could increase its costs of production, cause production inefficiencies, or lead to a halt in production.
Any such development would have a material adverse effect on UNIFI. During fiscal 2023, certain regional bank crises and failures generated additional uncertainty and volatility in the financial and credit markets.
Any such development would have a material adverse effect on UNIFI.
For instance, the recent energy management initiatives in China temporarily constrained global supply chains and reduced supplier and customer activity. Additionally, weaknesses in energy infrastructure could result in supply disruptions that could indirectly affect our operations and could adversely impact our results of operations and cash flows. 16 Item 1B. Unresolv ed Staff Comments None.
Additionally, weaknesses in energy infrastructure could result in supply disruptions that could indirectly affect our operations and could adversely impact our results of operations and cash flows. In March 2024, the SEC issued a final rule that requires registrants to provide climate disclosures in their annual reports and registration statements.
Removed
The COVID-19 pandemic negatively impacted the global economy, disrupted consumer spending, and affected global supply chains. Specifically, containment efforts in China have impacted our supply chain, negatively impacting the results of our Asia Segment. The long-term impact on our businesses is currently unknown.
Added
UNIFI depends on a limited number of third parties for certain raw material supplies, such as POY, Chip, dyes, and chemicals. Although alternative sources of raw materials exist, UNIFI may not be able to obtain adequate supplies of such materials on acceptable terms, or at all, from other sources.
Added
Discretionary spending is affected by many factors that are outside of our control, including general business conditions, interest rates, inflation, consumer debt levels, the availability of consumer credit, currency exchange rates, taxation, energy prices, unemployment trends, and other matters that influence consumer confidence and spending.
Added
Widespread public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases, such as the COVID-19 pandemic, have had, and could in the future have, a material adverse effect on UNIFI’s business, financial condition, results of operations, or cash flows.
Added
The full extent to which a global health crisis may impact our business and operating results would depend on future developments that are highly uncertain and cannot be accurately predicted, including new medical and other information that may emerge as a result and the actions by governmental entities or others to contain it or treat its impact.
Added
The disclosure requirements of the new rule, as they stand currently, become effective for UNIFI beginning in fiscal 2027 and continue through fiscal 2032. A legal challenge to the new rule has been filed in the U.S. Court of Appeals and the SEC has announced that it would voluntarily stay its final climate disclosure rule pending judicial review.
Added
As such, the final disclosure requirements and reporting timeline are currently unknown, as is the cost of compliance with the new disclosure requirements in their final form. 14 Item 1B. Unresolv ed Staff Comments None.
Item 2. Properties
Properties — owned and leased real estate
3 edited+0 added−0 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
3 edited+0 added−0 removed0 unchanged
2023 filing
2024 filing
Biggest changeFt.) Owned or Leased Administrative Greensboro, North Carolina Corporate headquarters 121,000 Owned Americas Segment Domestic Yadkinville, North Carolina Manufacturing facility 261,000 Owned Yadkinville, North Carolina Manufacturing facility 212,000 Owned Yadkinville, North Carolina Manufacturing facility 812,000 Owned Yadkinville, North Carolina Manufacturing facility 413,000 Owned Yadkinville, North Carolina Manufacturing facility 147,000 Owned Yadkinville, North Carolina Warehouse 400,000 Owned Yadkinville, North Carolina Warehouse 120,000 Owned Yadkinville, North Carolina Warehouse 217,000 Owned Yadkinville, North Carolina Warehouse 61,000 Leased Yadkinville, North Carolina Warehouse 82,000 Leased Reidsville, North Carolina Manufacturing facility 384,000 Owned Reidsville, North Carolina Manufacturing facility 160,000 Owned Madison, North Carolina Manufacturing facility 947,000 Owned Madison, North Carolina Warehouse 31,000 Owned Foreign Ciudad Arce, El Salvador Manufacturing facility 132,000 Leased Ciudad Arce, El Salvador Warehouse 59,000 Leased Bogota, Colombia Manufacturing facility 31,000 Owned Bogota, Colombia Sales office 1,000 Leased Brazil Segment Foreign Alfenas, Brazil Manufacturing facility 355,000 Owned Alfenas, Brazil Warehouse 356,000 Owned Sao Paulo, Brazil Corporate office 13,000 Leased Asia Segment Foreign Suzhou, China Sales office 16,000 Leased Suzhou, China Warehouse 75,000 Leased Suzhou, China Warehouse 59,000 Leased Management believes all of UNIFI’s operating properties are well maintained and in good condition.
Biggest changeFt.) Owned or Leased Administrative Greensboro, North Carolina Corporate headquarters 121,000 Owned Americas Segment Domestic Yadkinville, North Carolina Manufacturing facility 812,000 Owned Yadkinville, North Carolina Manufacturing facility 413,000 Owned Yadkinville, North Carolina Manufacturing facility 261,000 Owned Yadkinville, North Carolina Manufacturing facility 212,000 Owned Yadkinville, North Carolina Manufacturing facility 147,000 Owned Yadkinville, North Carolina Warehouse 400,000 Owned Yadkinville, North Carolina Warehouse 217,000 Owned Yadkinville, North Carolina Warehouse 120,000 Owned Yadkinville, North Carolina Warehouse 82,000 Leased Yadkinville, North Carolina Warehouse 61,000 Leased Reidsville, North Carolina Manufacturing facility 384,000 Owned Reidsville, North Carolina Manufacturing facility 160,000 Owned Reidsville, North Carolina Warehouse 91,000 Leased Madison, North Carolina Manufacturing facility 947,000 Owned Madison, North Carolina Warehouse 31,000 Owned Madison, North Carolina Warehouse 102,000 Leased Foreign Ciudad Arce, El Salvador Manufacturing facility 132,000 Leased Ciudad Arce, El Salvador Warehouse 59,000 Leased Bogota, Colombia Manufacturing facility 31,000 Owned Bogota, Colombia Sales office 1,000 Leased Brazil Segment Foreign Alfenas, Brazil Manufacturing facility 360,000 Owned Alfenas, Brazil Warehouse 354,000 Owned Sao Paulo, Brazil Corporate office 13,000 Leased Asia Segment Foreign Suzhou, China Sales office 17,000 Leased Suzhou, China Warehouse 75,000 Leased Suzhou, China Warehouse 59,000 Leased Management believes all of UNIFI’s operating properties are well maintained and in good condition.
In fiscal 2023, UNIFI’s manufacturing facilities in the Americas Segment operated below capacity for most of the year, primarily due to a decline in demand throughout the apparel supply chains. Management does not perceive any capacity constraints in the foreseeable future.
In fiscal 2024, UNIFI’s manufacturing facilities in the Americas Segment operated below capacity for most of the year, primarily due to a decline in demand throughout the apparel supply chains. Management does not perceive any capacity constraints in the foreseeable future.
Item 2. P roperties The following table contains information about the principal properties owned or leased by UNIFI as of July 2, 2023 (not in thousands): Location Principal Use Approx. Total Area (Sq.
Item 2. P roperties The following table contains information about the principal properties owned or leased by UNIFI as of June 30, 2024 (not in thousands): Location Principal Use Approx. Total Area (Sq.
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
6 edited+7 added−5 removed3 unchanged
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
6 edited+7 added−5 removed3 unchanged
2023 filing
2024 filing
Biggest changeSigmon, age 33, has served as an Executive Officer of UNIFI since July 2022 and as General Counsel and Corporate Secretary of the Company since June 2020. Previously, Mr. Sigmon served as a Vice President of UNIFI from June 2020 to July 2022 and as Assistant General Counsel of the Company from September 2019 to June 2020.
Biggest changeBoyd has served as Executive Vice President and Chief Product Officer of UNIFI since January 2024. Ms. Boyd previously served as Senior Vice President of Sustainability, Technology & Innovation of UNIFI from September 2020 to January 2024 and Senior Vice President of Global Innovation from April 2019 to September 2020. Ms.
Item 4. Mine Sa fety Disclosures Not applicable. 17 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following is a description of the names and ages of the executive officers of the Company, indicating all positions and offices with the Company held by each such person and each person’s principal occupation or employment during the past five years.
Item 4. Mine Sa fety Disclosures Not applicable. 16 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following is a description of the names and ages of the executive officers of the Company, indicating all positions and offices with the Company held by each such person and each person’s principal occupation or employment during the past five years.
Each executive officer of UNIFI is elected by the Board and holds office from the date of election until thereafter removed by the Board. Edmund M. Ingle – Age: 58 – Mr. Ingle has served as Chief Executive Officer of UNIFI and a member of the Board since June 2020.
Each executive officer of UNIFI is elected by the Board and holds office from the date of election until thereafter removed by the Board. Edmund M. Ingle – Age: 59 – Mr. Ingle has served as Chief Executive Officer of UNIFI and a member of the Board since June 2020.
Albert P. Carey – Age: 71 – Mr. Carey has served as Executive Chairman of the Board since April 2019. Mr. Carey previously served as Non-Executive Chairman of the Board from January 2019 to March 2019. In March 2019, Mr.
Albert P. Carey – Age: 72 – Mr. Carey has served as Executive Chairman of the Board since April 2019. Mr. Carey previously served as Non-Executive Chairman of the Board from January 2019 to March 2019. In March 2019, Mr.
Previously, he served as Vice President of UTSC from September 2013 to June 2017, Director of Sales & Marketing of UTSC from August 2008 to September 2013, and General Manager, Sales & Marketing of a former UNIFI joint venture in China from January 2006 to August 2008. Gregory K. Sigmon – Age: 33 – Mr.
Previously, he served as Vice President of UTSC from September 2013 to June 2017, Director of Sales & Marketing of UTSC from August 2008 to September 2013, and General Manager, Sales & Marketing of a former UNIFI joint venture in China from January 2006 to August 2008. Brian D. Moore – Age: 54 – Mr.
Ning has served as an Executive Vice President of UNIFI since July 2020, President of Unifi Textiles (Suzhou) Co. Ltd. (“UTSC”) (UNIFI’s subsidiary in China) since March 2020, and President of Unifi Asia Pacific since June 2017.
(“UTSC”) (UNIFI’s subsidiary in China) since March 2020, and President of Unifi Asia Pacific since June 2017.
Removed
Craig A. Creaturo – Age: 53 – Mr. Creaturo has served as Executive Vice President & Chief Financial Officer of UNIFI since September 2019. Mr. Creaturo served as Chief Financial Officer & Vice President-Administration of Chromalox, Inc., an advanced thermal technologies manufacturing company, from February 2015 to March 2019.
Added
Andrew J. (A.J.) Eaker – Age: 39 – Mr. Eaker has served as Executive Vice President and Chief Financial Officer of UNIFI since January 2024, as Treasurer of UNIFI since December 2022, and as Vice President of UNIFI's primary domestic operating subsidiary since June 2017. Mr.
Removed
Prior to that, he served as Chief Financial Officer of II-VI Incorporated (“II-VI”), a publicly traded global leader in engineered materials and optoelectronic components, from 2004 to 2014, Treasurer of II-VI from 2000 to 2014, and Corporate Controller of II-VI from 1998 to 2000. From 1992 to 1998, he held a variety of audit roles at Arthur Andersen LLP. Mr.
Added
Eaker previously served as Interim Chief Financial Officer of UNIFI from August 2023 to January 2024. Mr. Eaker has held various other positions with increasing leadership and functional responsibilities since joining UNIFI in March 2014, including Vice President of Finance, Corporate Finance Manager, and Assistant Controller. Mr.
Removed
Creaturo is a Certified Public Accountant in the Commonwealth of Pennsylvania. Mr. Creaturo has notified the Company that he will resign from all of his positions with the Company and its subsidiaries and affiliates, effective as of the end of the day on August 25, 2023. Hongjun Ning – Age: 56 – Mr.
Added
Eaker is a Certified Public Accountant in North Carolina and began his career in the audit practice of KPMG LLP from 2009 to 2014. Hongjun Ning – Age: 57 – Mr. Ning has served as an Executive Vice President of UNIFI since July 2020, President of Unifi Textiles (Suzhou) Co. Ltd.
Removed
Before joining UNIFI, Mr. Sigmon served as an officer in the legal department of BB&T Corporation (“BB&T”) in Winston-Salem, North Carolina, where he was a graduate of BB&T’s Leadership Development Program and held progressively senior roles from 2015 to 2019, including Vice President from April 2018 to August 2019 when he joined UNIFI. Mr.
Added
Moore has served as an Executive Vice President of UNIFI and as President of Unifi Manufacturing, Inc., the Company's primary operating subsidiary in the U.S., since January 2024. Mr.
Removed
Sigmon is a member of the North Carolina State Bar. 18 PART II
Added
Moore previously served as Senior Vice President of Direct Sales & Operations of UNIFI from March 2023 to January 2024 and as Vice President of Global Brand Sales from September 2020 to March 2023. Mr. Moore first joined UNIFI in 1993 and has held a number of other key roles with the Company, including leading UNIFI’s Asian market.
Added
From 2005 to 2018, Mr. Moore served as Managing Director, Asia Pacific, and as Vice President of Global Sales, Marketing, and Asian Operations for Scovill Fasteners Ltd. From 2018 to 2020, he served as Chief Executive Officer for Prym Fashion, a global manufacturer of fastening systems and accessories. Meredith S. Boyd – Age: 38 – Ms.
Added
Boyd joined UNIFI in 2007 and has held several other key positions, including Vice President of Brand Sales and head of the Global Business Development group. Ms. Boyd also serves on the Board of Directors for the Synthetic Yarn and Fabric Association (SYFA) and the Textile Technology Center (TTC) Advisory Council. 17 PART II
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
6 edited+1 added−0 removed4 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
6 edited+1 added−0 removed4 unchanged
2023 filing
2024 filing
Biggest changeJune 22, 2018 June 28, 2019 June 26, 2020 June 25, 2021 July 1, 2022 June 30, 2023 Unifi, Inc. $ 100.00 $ 57.65 $ 37.02 $ 78.52 $ 44.48 $ 25.60 S&P 600 100.00 91.61 75.77 132.92 109.53 117.23 NYSE Composite 100.00 106.00 96.67 141.83 127.50 141.81 Item 6. [Re served] 20
Biggest changeJune 28, 2019 June 26, 2020 June 25, 2021 July 1, 2022 June 30, 2023 June 28, 2024 Unifi, Inc. $ 100.00 $ 64.23 $ 136.21 $ 77.16 $ 44.41 $ 32.42 S&P SmallCap 600 100.00 82.70 145.09 119.55 127.96 136.48 NYSE Composite 100.00 91.20 133.80 120.28 133.78 155.51
A significant number of the outstanding shares of common stock that are beneficially owned by individuals and entities are registered in the name of Cede & Co. Cede & Co. is a nominee of The Depository Trust Company, a securities depository for banks and brokerage firms. UNIFI estimates that there are approximately 4,350 beneficial owners of its common stock.
A significant number of the outstanding shares of common stock that are beneficially owned by individuals and entities are registered in the name of Cede & Co. Cede & Co. is a nominee of The Depository Trust Company, a securities depository for banks and brokerage firms. UNIFI estimates that there are approximately 4,400 beneficial owners of its common stock.
UNIFI will continue to evaluate opportunities to use excess cash flows from operations or existing borrowings to repurchase additional stock, while maintaining sufficient liquidity to support its operational needs and to fund future strategic growth opportunities. In fiscal 2023, UNIFI withheld 7 shares in satisfaction of tax withholding obligations under net share settle transactions of stock-based compensation awards.
UNIFI will continue to evaluate opportunities to use excess cash flows from operations or existing borrowings to repurchase additional stock, while maintaining sufficient liquidity to support its operational needs and to fund future strategic growth opportunities. In fiscal 2024, UNIFI withheld 12 shares in satisfaction of tax withholding obligations under net share settle transactions of stock-based compensation awards.
In fiscal 2022, UNIFI repurchased 617 shares of its common stock at an average price of $14.84 per share. 19 PERFORMANCE GRAPH - SHAREHOLDER RETURN ON COMMON STOCK The below graphic comparison assumes the investment of $100 in each of UNIFI common stock, the S&P SmallCap 600 Index (a benchmark index containing inclusion characteristics closely associated with UNIFI) and the NYSE Composite Index (a broad equity market index), all at June 22, 2018.
In fiscal 2022, UNIFI repurchased 617 shares of its common stock at an average price of $14.84 per share. 18 PERFORMANCE GRAPH - SHAREHOLDER RETURN ON COMMON STOCK The below graphic comparison assumes the investment of $100 in each of UNIFI common stock, the S&P SmallCap 600 Index (a benchmark index containing inclusion characteristics closely associated with UNIFI), and the NYSE Composite Index (a broad equity market index), all at June 28, 2019.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities UNIFI’s common stock is listed for trading on the New York Stock Exchange (the “NYSE”) under the symbol “UFI.” As of August 24, 2023, there were 117 record holders of UNIFI’s common stock.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities UNIFI’s common stock is listed for trading on the New York Stock Exchange (the “NYSE”) under the symbol “UFI.” As of August 21, 2024, there were 115 record holders of UNIFI’s common stock.
As of July 2, 2023, UNIFI had repurchased 701 shares of its common stock at an average price of $15.90 per share, leaving $38,859 available for repurchase under the 2018 SRP.
As of June 30, 2024, UNIFI had repurchased 701 shares of its common stock at an average price of $15.90 per share, none of which occurred in fiscal 2024, leaving $38,859 available for repurchase under the 2018 SRP.
Added
In fiscal 2023, UNIFI withheld 7 shares in satisfaction of tax withholding obligations under net share settle transactions of stock-based compensation awards.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
106 edited+29 added−34 removed44 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
106 edited+29 added−34 removed44 unchanged
2023 filing
2024 filing
Biggest changeAmericas Segment The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Americas Segment are as follows: Fiscal 2023 % Change Fiscal 2022 % Change Fiscal 2021 Net sales $ 389,662 (19.3 ) $ 483,085 24.9 $ 386,779 Cost of sales 404,321 (11.8 ) 458,617 30.9 350,373 Gross (loss) profit (14,659 ) (159.9 ) 24,468 (32.8 ) 36,406 Depreciation expense 22,044 4.2 21,153 0.5 21,054 Segment Profit $ 7,385 (83.8 ) $ 45,621 (20.6 ) $ 57,460 Gross margin (3.8 )% 5.1 % 9.4 % Segment margin 1.9 % 9.4 % 14.9 % Segment net sales as a percentage of consolidated amount 62.5 % 59.2 % 57.9 % Segment Profit as a percentage of consolidated amount 19.3 % 44.2 % 49.6 % The changes in net sales for the Americas Segment are as follows: Net sales for fiscal 2021 $ 386,779 Net change in average selling price and sales mix 80,337 Increase due to an additional week of sales in fiscal 2022 8,703 Increase in sales volumes 7,266 Net sales for fiscal 2022 $ 483,085 Net sales for fiscal 2022 $ 483,085 Decrease in sales volumes (92,593 ) Decrease due to an additional week of sales in fiscal 2022 (8,703 ) Net change in average selling price and sales mix 7,873 Net sales for fiscal 2023 $ 389,662 The decrease in net sales for the Americas Segment from fiscal 2022 to fiscal 2023 was primarily attributable to lower sales volumes following weaker global textile demand.
Biggest changeAmericas Segment The components of Segment Profit and the percentage increase or decrease over the prior period amounts for the Americas Segment are as follows: Fiscal 2024 % Change Fiscal 2023 % Change Fiscal 2022 Net sales $ 344,256 (11.7 ) $ 389,662 (19.3 ) $ 483,085 Cost of sales 361,886 (10.5 ) 404,321 (11.8 ) 458,617 Gross (loss) profit (17,630 ) 20.3 (14,659 ) (159.9 ) 24,468 Depreciation expense 22,154 0.5 22,044 4.2 21,153 Segment Profit $ 4,524 (38.7 ) $ 7,385 (83.8 ) $ 45,621 Gross margin (5.1 )% (3.8 )% 5.1 % Segment margin 1.3 % 1.9 % 9.4 % Segment net sales as a percentage of consolidated amount 59.1 % 62.5 % 59.2 % Segment Profit as a percentage of consolidated amount 10.8 % 19.3 % 44.2 % The changes in net sales for the Americas Segment are as follows: Net sales for fiscal 2022 $ 483,085 Decrease in sales volumes (92,593 ) Decrease due to an additional week of sales in fiscal 2022 (8,703 ) Net change in average selling price and sales mix 7,873 Net sales for fiscal 2023 $ 389,662 Net sales for fiscal 2023 $ 389,662 Net change in average selling price and sales mix (58,661 ) Increase in sales volumes 13,255 Net sales for fiscal 2024 $ 344,256 The decrease in net sales for the Americas Segment from fiscal 2023 to fiscal 2024 was primarily attributable to the net change in average selling price and sales mix that included lower raw material input costs, partially offset by an increase in sales volumes.
These performance indicators form the basis of management’s discussion and analysis included below: • sales volume and revenue for UNIFI and for each reportable segment; • gross profit and gross margin for UNIFI and for each reportable segment; • net (loss) income and (loss) earnings per share ("EPS"); • Segment Profit, which equals segment gross (loss) profit plus segment depreciation expense; • unit conversion margin, which represents unit net sales price less unit raw material costs, for UNIFI and for each reportable segment; • working capital, which represents current assets less current liabilities; • Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), which represents net (loss) income before net interest expense, income tax expense and depreciation and amortization expense; • Adjusted EBITDA, which represents EBITDA adjusted to exclude, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI; • Adjusted Net (Loss) Income, which represents net (loss) income calculated under GAAP, adjusted to exclude certain amounts which management believes do not reflect the ongoing operations and performance of UNIFI and/or for which exclusion may be necessary to understand and compare the underlying results of UNIFI; • Adjusted EPS, which represents Adjusted Net (Loss) Income divided by UNIFI’s weighted average common shares outstanding; • Adjusted Working Capital, which equals receivables plus inventories and other current assets, less accounts payable and other current liabilities; and • Net Debt, which represents debt principal less cash and cash equivalents.
These performance indicators form the basis of management’s discussion and analysis included below: • sales volume and revenue for UNIFI and for each reportable segment; • gross profit and gross margin for UNIFI and for each reportable segment; • net (loss) income and (loss) earnings per share ("EPS"); • Segment (Loss) Profit, which equals segment gross (loss) profit plus segment depreciation expense; • unit conversion margin, which represents unit net sales price less unit raw material costs, for UNIFI and for each reportable segment; • working capital, which represents current assets less current liabilities; • Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), which represents net (loss) income before net interest expense, income tax expense and depreciation and amortization expense; • Adjusted EBITDA, which represents EBITDA adjusted to exclude, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI; • Adjusted Net (Loss) Income, which represents net (loss) income calculated under GAAP, adjusted to exclude certain amounts which management believes do not reflect the ongoing operations and performance of UNIFI and/or for which exclusion may be necessary to understand and compare the underlying results of UNIFI; • Adjusted EPS, which represents Adjusted Net (Loss) Income divided by UNIFI’s weighted average common shares outstanding; • Adjusted Working Capital, which equals receivables plus inventories and other current assets, less accounts payable and other current liabilities; and • Net Debt, which represents debt principal less cash and cash equivalents.
Capital Projects In fiscal 2023, UNIFI invested $36,434 in capital projects, primarily relating to (i) texturing machinery, (ii) further improvements in production capabilities and technological enhancements in the Americas, and (iii) routine annual maintenance capital expenditures.
In fiscal 2023, UNIFI invested $36,434 in capital projects, primarily relating to (i) texturing machinery, (ii) further improvements in production capabilities and technological enhancements in the Americas, and (iii) routine annual maintenance capital expenditures.
Under the 2018 SRP, purchases will be made from time to time in the open market at prevailing market prices or through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements and other factors. The share repurchase authorization is discretionary and has no expiration date.
Under the 2018 SRP, purchases may be made from time to time in the open market at prevailing market prices or through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements, and other factors. The share repurchase authorization is discretionary and has no expiration date.
Fiscal 2022 Gross profit for fiscal 2023 decreased by $66,244, or 82.3%, compared to fiscal 2022. Gross profit decreased as a result of the decline in net sales combined with weak fixed cost absorption for the Americas Segment, where utilization and productivity are materially impactful to gross profit.
Fiscal 2023 vs. Fiscal 2022 Gross profit for fiscal 2023 decreased by $66,244, or 82.3%, compared to fiscal 2022. Gross profit decreased as a result of the decline in net sales combined with weak fixed cost absorption for the Americas Segment, where utilization and productivity are materially impactful to gross profit.
The impairment charge was recorded to reflect the lack of future positive cash flows associated with the machinery, following multiple years of investment recovery since its fiscal 2017 installation. (3) In fiscal 2023, UNIFI amended certain existing contracts related to future purchases of texturing machinery by delaying the scheduled receipt and installation of such equipment for approximately 18 months.
The impairment charge was recorded to reflect the lack of future positive cash flows associated with the machinery, following multiple years of investment recovery since its fiscal 2017 installation. (5) In fiscal 2023, UNIFI amended certain existing contracts related to future purchases of texturing machinery by delaying the scheduled receipt and installation of such equipment for approximately 18 months.
Prior to entering into the 2022 Credit Agreement, Unifi, Inc. and certain of its subsidiaries maintained a similar credit agreement that established a $200,000 senior secured credit facility (the “Prior ABL Facility”), including a $100,000 revolving credit facility (the “Prior ABL Revolver”) and a term loan that could be reset up to a maximum amount of $100,000, once per fiscal year, if certain conditions were met (the “Prior ABL Term Loan”).
Prior to entering into the 2022 Credit Agreement, Unifi, Inc. and certain of its subsidiaries maintained a similar credit agreement that established a $200,000 senior secured credit facility (the “Prior ABL Facility”), including a $100,000 revolving credit facility and a term loan that could be reset up to a maximum amount of $100,000, once per fiscal year, if certain conditions were met.
The total amount ultimately invested for fiscal 2024 could be more or less than the currently estimated amount depending on the timing and scale of contemplated initiatives and is expected to be funded primarily with cash provided by operating activities and other borrowings. UNIFI expects recent and future capital projects to provide benefits to future profitability.
The total amount ultimately invested for fiscal 2025 could be more or less than the currently estimated amount depending on the timing and scale of contemplated initiatives and is expected to be funded primarily with cash provided by operating activities and other borrowings. UNIFI expects recent and future capital projects to provide benefits to future profitability.
The additional assets from these capital projects consist primarily of machinery and equipment. 35 Share Repurchase Program On October 31, 2018, UNIFI announced that the Board approved the 2018 SRP under which UNIFI is authorized to acquire up to $50,000 of its common stock.
The additional assets from these capital projects consist primarily of machinery and equipment. 34 Share Repurchase Program On October 31, 2018, UNIFI announced that the Board approved the 2018 SRP under which UNIFI is authorized to acquire up to $50,000 of its common stock.
Although raw material costs for the Americas Segment decreased meaningfully in the current fiscal year, the associated benefit was muted by low production levels, weak demand, and higher priced raw material inventory impacting gross margins in the first half of the fiscal year. • For the Americas Segment, gross profit decreased due to weaker global demand, weak fixed cost absorption in connection with lower production, and overall higher raw material cost levels in beginning inventory, despite a decrease in raw material costs during fiscal 2023. • For the Brazil Segment, gross profit decreased primarily due to the combination of high priced raw material inventory impacting gross margins in the first half of the fiscal year and decreasing market prices in Brazil due to low-cost import competition. • For the Asia Segment, gross profit decreased primarily due to lower sales volumes in connection with weaker global demand and pandemic-related lockdowns in Asia.
Although raw material costs for the Americas Segment decreased meaningfully in the fiscal year 2023, the associated benefit was muted by low production levels, weak demand, and higher priced raw material inventory impacting gross margins in the first half of the fiscal year. • For the Americas Segment, gross profit decreased due to (i) weaker global demand, (ii) weak fixed cost absorption in connection with lower production, and (iii) overall higher raw material cost levels in beginning inventory, despite a decrease in raw material costs during fiscal 2023. • For the Brazil Segment, gross profit decreased primarily due to the combination of high priced raw material inventory impacting gross margins in the first half of the fiscal year and decreasing market prices in Brazil due to low-cost import competition. • For the Asia Segment, gross profit decreased primarily due to lower sales volumes in connection with weaker global demand and pandemic-related lockdowns in Asia.
Our liquidity position (calculated in the table above) remains elevated and is expected to be adequate to allow UNIFI to manage through the current macro-economic environment and to respond quickly to demand recovery.
Our liquidity position (calculated in the table above) and asset base remains elevated and is expected to be adequate to allow UNIFI to manage through the current macro-economic environment and to respond quickly to demand recovery.
Should global demand, economic activity, or input availability decline considerably for a prolonged period of time (for example, in connection with the Russia-Ukraine conflict or the macro-economic factors leading to inflation and a potential recession), UNIFI maintains the ability to (i) seek additional credit or financing arrangements and/or (ii) re-implement cost reduction initiatives to preserve cash and secure the longevity of the business and operations.
Should global demand, economic activity, or input availability decline considerably for a prolonged period of time (for example, in connection with the Russia-Ukraine or Middle East conflicts or the macro-economic factors leading to inflation and a potential recession), UNIFI maintains the ability to (i) seek additional credit or financing arrangements and/or (ii) re-implement cost reduction initiatives to preserve cash and secure the longevity of the business and operations.
The additional week in fiscal 2022 included approximately $8,700 of net sales, an insignificant impact to gross profit, and approximately $400 of selling, general and administrative expenses.
The additional week in fiscal 2022 included approximately $8,700 of net sales, an insignificant impact to gross profit, and approximately $400 of selling, general, and administrative ("SG&A") expenses.
Borrowings under the 2022 ABL Facility bear interest at SOFR plus 0.10% plus an applicable margin of 1.25% to 1.75%, or the Base Rate (as defined in the 2022 Credit Agreement) plus an applicable margin of 0.25% to 0.75%, with interest paid most commonly on a monthly basis.
Borrowings under the 2022 ABL Facility bear interest at the Secured Overnight Financing Rate ("SOFR") plus 0.10% plus an applicable margin of 1.25% to 1.75%, or the Base Rate (as defined in the 2022 Credit Agreement) plus an applicable margin of 0.25% to 0.75%, with interest paid most commonly on a monthly basis.
The decrease was primarily attributable to (i) the decrease in gross profit, (ii) the associated adverse impact of lower U.S. earnings on the effective tax rate in fiscal 2023, and (iii) the charge for asset abandonment of certain machinery in fiscal 2023, partially offset by a discrete tax benefit was recognized in the second quarter of fiscal 2023 related to the recovery of certain Brazilian income taxes paid in prior years.
The change was primarily attributable to (i) the decrease in gross profit, (ii) the associated adverse impact of lower U.S. earnings on the effective tax rate in fiscal 2023, and (iii) the charge for asset abandonment of certain machinery in fiscal 2023, partially offset by a discrete tax benefit that was recognized in fiscal 2023 related to the recovery of certain Brazilian income taxes paid in prior years.
Consolidated weighted average sales prices increased 1.7%, primarily attributable to higher selling prices in response to higher input costs, partially offset by (a) competitive pricing pressures in Brazil and (b) a greater mix of Chip and Flake product sales in the Americas Segment.
Consolidated weighted average sales prices increased 1.7%, primarily attributable to higher selling prices in response to higher input costs, partially offset by (i) competitive pricing pressures in Brazil and (ii) a greater mix of Chip and Flake product sales in the Americas Segment.
Similar to the Prior ABL Facility, the 2022 ABL Facility is secured by a first-priority perfected security interest in substantially all owned property and assets (together with all proceeds and products) of Unifi, Inc., Unifi Manufacturing, Inc., and a certain subsidiary guarantor (collectively, the “Loan Parties”).
The 2022 ABL Facility is secured by a first-priority perfected security interest in substantially all owned property and assets (together with all proceeds and products) of Unifi, Inc., Unifi Manufacturing, Inc., and a certain subsidiary guarantor (collectively, the “Loan Parties”).
UNIFI considers $43,664 of its unremitted foreign earnings to be permanently reinvested to fund working capital requirements and operations abroad, and has therefore not recognized a deferred tax liability for the estimated future taxes that would be incurred upon repatriation.
UNIFI considers $41,644 of its unremitted foreign earnings to be permanently reinvested to fund working capital requirements and operations abroad, and has therefore not recognized a deferred tax liability for the estimated future taxes that would be incurred upon repatriation.
Fiscal 2022 The decrease in the effective tax rate from fiscal 2022 to fiscal 2023 is primarily attributable to lower income for foreign subsidiaries, in combination with the impact of further losses in the U.S. and the associated valuation allowance for deferred tax assets in the current period.
Fiscal 2022 The decrease in the effective tax rate from fiscal 2022 to fiscal 2023 was primarily attributable to lower income for foreign subsidiaries, in combination with the impact of further losses in the U.S. and the associated valuation allowance for deferred tax assets in fiscal 2023.
See “Non-GAAP Reconciliations” below for reconciliations of non-GAAP metrics to the most directly comparable GAAP metric. 23 Review of Results of Operations for Fiscal 2023, 2022 and 2021 UNIFI’s fiscal 2023 and 2021 each consisted of 52 weeks, while its fiscal 2022 consisted of 53 weeks.
See “Non-GAAP Reconciliations” below for reconciliations of each non-GAAP metrics to the most directly comparable GAAP metric. 22 Review of Results of Operations for Fiscal 2024, 2023, and 2022 UNIFI’s fiscal 2024 and 2023 each consisted of 52 weeks, while its fiscal 2022 consisted of 53 weeks.
For fiscal 2022, UNIFI reduced the estimated benefit based on additional clarity and review of the recovery process. 24 Adjusted Net (Loss) Income and Adjusted EPS (Non-GAAP Financial Measures) The tables below set forth reconciliations of (i) (Loss) Income before income taxes (“Pre-tax (Loss) Income”), Provision for income taxes (“Tax Impact”) and Net (Loss) Income to Adjusted Net (Loss) Income and (ii) Diluted EPS to Adjusted EPS.
(6) In fiscal 2022, UNIFI reduced an estimated benefit based on additional clarity and the review of the recovery process in Brazil. 23 Adjusted Net (Loss) Income and Adjusted EPS (Non-GAAP Financial Measures) The tables below set forth reconciliations of (i) (Loss) Income Before Income Taxes (“Pre-tax (Loss) Income”), Provision for Income Taxes (“Tax Impact”) and Net (Loss) Income to Adjusted Net (Loss) Income and (ii) Diluted EPS to Adjusted EPS.
In ordinary market conditions in which raw material cost increases have stabilized and sales volumes are consistent with traditional levels, UNIFI has historically been successful in implementing price adjustments within one or two fiscal quarters of the raw material price increase for all of its customers.
Pricing adjustments for other customers must be negotiated independently. In ordinary market conditions in which raw material cost increases have stabilized and sales volumes are consistent with traditional levels, UNIFI has historically been successful in implementing price adjustments within one or two fiscal quarters of the raw material price increase for all of its customers.
Near the end of fiscal 2020, we divested a minority interest investment and significantly improved our liquidity position, supporting business preservation and the ability to capture long-term growth opportunities. • Throughout fiscal 2021, our businesses experienced sequential improvement alongside global demand and economic recovery, and we capitalized on profitable opportunities that fueled strong consolidated results. • Throughout fiscal 2022, we experienced adverse pressure from rising input costs and a weakening of labor productivity primarily in our domestic operations. • Throughout fiscal 2023, we experienced a downturn in global textile demand as brands and retailers began to destock their inventory levels.
Near the end of fiscal 2020, we divested a minority interest investment and significantly improved our liquidity position, supporting business preservation and the ability to capture long-term growth opportunities. • Throughout fiscal 2021, our businesses experienced sequential improvement alongside global demand and economic recovery, and we capitalized on profitable opportunities that fueled strong consolidated results. • Throughout fiscal 2022, we experienced adverse pressure from rising input costs and a weakening of labor productivity, primarily in our domestic operations. • Throughout fiscal 2023, we experienced a downturn in global textile demand as brands and retailers began to destock their inventory levels. • Throughout fiscal 2024, global textile demand remained weak, particularly in the Americas and Asia Segments with reduced overall order levels.
Significant Developments and Trends During the last six fiscal years, several key drivers affected our financial results. • During fiscal 2018 and 2019, our operations in the U.S. were unfavorably impacted by (i) rising raw material costs and (ii) a surge of imported polyester textured yarn that depressed our pricing, market share, and fixed cost absorption. • During fiscal 2020, our financial results began to improve following more stable import and raw material cost environments.
Significant Developments and Trends Key drivers of our recent financial results include: • During fiscal 2019, our operations in the U.S. were unfavorably impacted by (i) rising raw material costs and (ii) a surge of imported polyester textured yarn that depressed our pricing, market share, and fixed cost absorption. • During fiscal 2020, our financial results began to improve following more stable import and raw material cost environments.
Similar to the Prior ABL Facility, the applicable margin is based on (i) the excess availability under the 2022 ABL Revolver and (ii) the consolidated leverage ratio, calculated as of the end of each fiscal quarter.
The applicable margin is based on (i) the excess availability under the 2022 ABL Revolver and (ii) the consolidated leverage ratio, calculated as of the end of each fiscal quarter.
A plus or minus 10% change in the inventory net realizable value adjustment would not have been material to UNIFI’s consolidated financial statements for the past three fiscal years. July 2, 2023 July 3, 2022 June 27, 2021 Net realizable value adjustment $ (5,625 ) $ (3,487 ) $ (2,407 )
A plus or minus 10% change in the inventory net realizable value adjustment would not have been material to UNIFI’s consolidated financial statements for the past three fiscal years. June 30, 2024 July 2, 2023 July 3, 2022 Net realizable value adjustment $ (3,813 ) $ (5,625 ) $ (3,487 )
Additionally, UNIFI considers opportunities to repatriate existing cash to reduce debt and preserve or enhance liquidity. In fiscal 2023, we repatriated approximately $19,000 from our operations in Asia to the U.S. via an existing intercompany note and, after remitting the appropriate withholding taxes, utilized the cash to reduce our outstanding revolver borrowings, thereby increasing the availability.
Additionally, UNIFI considers opportunities to repatriate existing cash to reduce debt and preserve or enhance liquidity. In fiscal 2023 and 2024, we repatriated approximately $19,000 and $32,000, respectively, from our operations in Asia and Brazil to the U.S. and, after remitting the appropriate withholding taxes, utilized the cash to reduce our outstanding revolver borrowings, thereby increasing the availability.
UNIFI had maintained three interest rate swaps to fix LIBOR at approximately 1.9% on $75,000 of variable-rate debt. Such swaps terminated in May 2022 and no interest rate swaps were in effect during fiscal 2023.
UNIFI maintained three interest rate swaps to fix the London Interbank Offered Rate ("LIBOR") at approximately 1.9% on $75,000 of variable-rate debt. Such swaps terminated in May 2022 and no interest rate swaps were in effect during fiscal 2023 and 2024.
In connection with this construction financing arrangement, UNIFI has borrowed a total of $9,755 and transitioned $8,123 of completed asset costs to finance lease obligations as of July 2, 2023. Scheduled Debt Maturities The following table presents the scheduled maturities of UNIFI’s outstanding debt obligations for the following five fiscal years and thereafter.
In connection with this construction financing arrangement, UNIFI has borrowed a total of $9,755 and transitioned $9,755 of completed asset costs to finance lease obligations as of June 30, 2024. Scheduled Debt Maturities The following table presents the scheduled maturities of UNIFI’s outstanding debt obligations for the following five fiscal years and thereafter.
During fiscal 2022, UNIFI reduced the estimated recovery by $815 based on additional clarity and the review of the recovery process during the months following the associated SFC decision. 27 Provision for Income Taxes The change in consolidated income taxes is as follows: Fiscal 2023 Fiscal 2022 Fiscal 2021 (Loss) income before income taxes $ (45,443 ) $ 26,828 $ 46,347 Provision for income taxes 901 11,657 17,274 Effective tax rate (2.0 )% 43.5 % 37.3 % The effective tax rate is subject to variation due to a number of factors, including: variability in pre-tax and taxable income; the mix of income by jurisdiction; changes in deferred tax valuation allowances; and changes in statutes, regulations, and case law.
During fiscal 2022, UNIFI reduced the estimated recovery by $815 based on additional clarity and the review of the recovery process during the months following the associated SFC decision. 26 Provision for Income Taxes The change in consolidated income taxes is as follows: Fiscal 2024 Fiscal 2023 Fiscal 2022 (Loss) income before income taxes $ (45,537 ) $ (45,443 ) $ 26,828 Provision for income taxes 1,858 901 11,657 Effective tax rate (4.1 )% (2.0 )% 43.5 % The effective tax rate is subject to variation due to a number of factors, including: variability in pre-tax and taxable income; the mix of income by jurisdiction; changes in deferred tax valuation allowances; and changes in audit adjustments, statutes, regulations, and case law.
Similar to the Prior ABL Facility, if excess availability under the 2022 ABL Revolver falls below the Trigger Level (as defined in the 2022 Credit Agreement), a financial covenant requiring the Loan Parties to maintain a fixed charge coverage ratio on a quarterly basis of at least 1.05 to 1.00 becomes effective.
If excess availability under the 2022 ABL Revolver falls below the Trigger Level (as defined in the 2022 Credit Agreement), a financial covenant requiring the Loan Parties to maintain a fixed charge coverage ratio on a quarterly basis of at least 1.05 to 1.00 becomes effective. The Trigger Level as of June 30, 2024 was $21,620.
Adjusted Net Income decreased from $22,660 for fiscal 2021 to $14,283 for fiscal 2022, commensurate with lower gross profit and an unfavorable effective tax rate. 28 Segment Overview Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for fiscal 2023, 2022, and 2021.
Adjusted Net (Loss) Income decreased from $14,283 for fiscal 2022 to $(41,273) for fiscal 2023, commensurate with lower gross profit and an unfavorable effective tax rate. 27 Segment Overview Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for fiscal 2024, 2023, and 2022.
In connection with the 2022 Credit Agreement, UNIFI recorded a $273 loss on debt extinguishment to interest expense in the second quarter of fiscal 2023.
In connection with entering into the 2022 Credit Agreement, UNIFI recorded a $273 loss on debt extinguishment to interest expense in the second quarter of fiscal 2023 related to its prior debt instrument.
As of July 2, 2023: UNIFI was in compliance with all financial covenants in the Credit Agreement; excess availability under the 2022 ABL Revolver was $55,735 and UNIFI had $0 of standby letters of credit. Management maintains the capability to improve the fixed charge coverage ratio utilizing existing foreign cash and cash equivalents.
As of June 30, 2024, UNIFI was in compliance with all financial covenants in the 2022 Credit Agreement; excess availability under the 2022 ABL Revolver was $40,832 and UNIFI had $0 of standby letters of credit. Management maintains the capability to improve the fixed charge coverage ratio utilizing existing foreign cash and cash equivalents.
UNIFI paid the associated vendor $623 to establish the 18-month delay. The associated tax impact was estimated to be $0 due to (i) a valuation allowance against net operating losses in the U.S. and (ii) UNIFI's effective tax rate in El Salvador.
The associated tax impact was estimated to be $0 due to (i) a valuation allowance against net operating losses in the U.S. and (ii) UNIFI's effective tax rate in El Salvador.
Although short-term global demand appears somewhat uncertain, we do not currently anticipate that any adverse events or circumstances will place critical pressure on (i) our liquidity position; or (ii) our ability to fund our operations, capital expenditures, and expected business growth.
Short-term global demand appears somewhat uncertain and any adverse events or circumstances could place critical pressure on (i) our liquidity position; and/or (ii) our ability to fund our operations, capital expenditures, and expected business growth.
Significant financing activities included $28,800 of net borrowings against the ABL Facility, along with $3,707 of payments on finance lease obligations and $9,151 for share repurchases during fiscal 2022.
Fiscal 2022 Significant investing activities included $39,631 for capital expenditures (as described above). Significant financing activities included $28,800 of net borrowings against the 2022 ABL Facility, along with $3,707 of payments on finance lease obligations and $9,151 for share repurchases.
UNIFI did not incur additional costs or administrative burdens during the transition from LIBOR to SOFR with the establishment of the 2022 Credit Agreement. 33 Finance Lease Obligations During fiscal 2023, UNIFI entered into finance lease obligations totaling $5,629 for texturing machines. The maturity dates of these obligations occur during fiscal 2028 with interest rates between 4.4% and 6.2%.
UNIFI did not incur additional costs or administrative burdens during the transition from LIBOR to SOFR with the establishment of the 2022 Credit Agreement. 32 Finance Lease Obligations During fiscal 2024, UNIFI entered into finance lease obligations totaling $1,633 for texturing machines. The maturity dates of these obligations occur during fiscal 2029 with interest rates between 6.6% and 6.9%.
Fiscal 2023 also includes (i) $8,247 of impairment related to the abandonment of certain machinery constructed in fiscal 2017 and (ii) $623 paid to a vendor to facilitate an 18-month delay for equipment purchases. Fiscal 2022 vs.
Fiscal 2023 also includes (i) $8,247 of impairment related to the abandonment of certain machinery constructed in fiscal 2017 and (ii) $623 paid to a vendor to facilitate an 18-month delay for equipment purchases. There was no meaningful activity in fiscal 2022. Interest Expense, Net Fiscal 2024 vs. Fiscal 2023 Interest expense, net increased from fiscal 2023 to fiscal 2024.
In fiscal 2024, UNIFI expects to invest between $14,000 and $16,000 in capital projects, including making (i) further improvements in production capabilities and technological enhancements in the Americas and (ii) annual maintenance capital expenditures. UNIFI will seek to ensure maintenance capital expenditures are sufficient to allow continued production at high efficiencies.
In fiscal 2025, UNIFI expects to invest between $10,000 and $12,000 in capital projects, primarily relating to (i) further improvements in production capabilities and technological enhancements in the Americas, and (ii) routine annual maintenance capital expenditures. UNIFI will seek to ensure maintenance capital expenditures are sufficient to allow continued production at high efficiencies.
Fiscal 2022 Other operating expense (income), net was income of $158 in fiscal 2022 and expense of $7,856 in fiscal 2023, which includes foreign currency transaction gains in fiscal 2022 and 2023.
Fiscal 2022 Other operating expense, net was $7,856 in fiscal 2023 and $733 in fiscal 2024, which includes foreign currency transaction gains in fiscal 2023 and foreign currency transaction losses in fiscal 2024.
As the Asia market improves, the volume of low-cost Asian imports into Brazil is expected to decrease. 21 The following developments and trends occurred or were occurring in fiscal 2023. • Demand levels for the majority of our business lines in the Americas and Asia Segments experienced declines during fiscal 2023 as a result of lower global demand in connection with the inventory destocking efforts of major brands and retailers in addition to pandemic-related lockdowns in Asia, partially offset by higher selling prices in response to higher raw material and input costs. • Our REPREVE family of products continued to gain momentum with brands, retailers, and mill partners who value sustainability and UNIFI’s ability to produce leading-edge products with in-demand technologies. • The Americas Segment experienced weaker global demand, weak fixed cost absorption in connection with lower production, and overall higher raw material cost levels in beginning inventory, despite a decrease in raw material costs during fiscal 2023. • The Brazil Segment was able to capture market share from competitors, but incurred selling price pressures from lower cost imports. • The Asia Segment's sales growth slowed in fiscal 2023 due to a slowdown in global demand; however, there remains healthy demand for REPREVE, generating continued portfolio expansion.
As the Asia market improves, the volume of low-cost Asian imports into Brazil is expected to decrease. 20 The following developments and trends occurred or were occurring in fiscal 2024: • Demand levels for the majority of our business lines in the Americas and Asia Segments were below historical trends, as a result of lower global demand amid consumer and macroeconomic uncertainty. • Our REPREVE family of products continued to gain momentum with brands, retailers, and mill partners who value sustainability and UNIFI’s ability to produce leading-edge products with in-demand technologies. • The Americas Segment experienced continued weak demand and weak fixed cost absorption in connection with lower production, despite stable raw material costs during fiscal 2024. • The Brazil Segment was able to capture market share, but incurred selling price pressures from low-cost imports in the first half of the fiscal year. • The Asia Segment's sales growth slowed in fiscal 2024, due to a slowdown in global demand; however, there remains healthy demand for REPREVE, generating continued portfolio expansion.
Each borrowing under the agreement provides for 60 monthly payments, which will commence upon the completion of the construction period with a fixed interest rate of approximately SOFR plus 1.0% to 1.2%.
The agreement provides for monthly, interest-only payments during the construction period, at a rate of SOFR plus 1.25%, and contains terms customary for a financing of this type. Each borrowing under the agreement provides for 60 monthly payments, which will commence upon the completion of the construction period with a fixed interest rate of approximately SOFR plus 1.0% to 1.2%.
In fiscal 2021, UNIFI invested $21,178 in capital projects, primarily relating to (i) further improvements in production capabilities and technological enhancements in the Americas, (ii) texturing machines, and (iii) routine annual maintenance capital expenditures.
In fiscal 2024, UNIFI invested $11,198 in capital projects, primarily relating to (i) further improvements in production capabilities and technological enhancements in the Americas, and (ii) routine annual maintenance capital expenditures.
During fiscal 2024, we expect the majority of our capital will be deployed to support further working capital needs associated with recovering demand and product sales.
During fiscal 2025, we expect the majority of our capital will be deployed to support further working capital needs in response to the demand environment and product sales.
Additionally, the impacts of discrete and other rate impacting items are greater when income before income taxes is lower. Fiscal 2023 vs.
Additionally, the effects of discrete and other rate impacting items are more pronounced when income before income taxes is lower. Fiscal 2024 vs.
Purchase obligations are agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
Such obligations are approximately $3,878 and $15,545 for fiscal years 2025 and 2026, respectively. • Purchase obligations are agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
However, further degradation in the macroeconomic environment could introduce additional liquidity risk and require UNIFI to limit cash outflows for discretionary activities while further utilizing available and additional forms of credit.
However, further degradation in the macroeconomic environment could introduce additional liquidity risk and require UNIFI to limit cash outflows while further utilizing available and additional forms of credit. Cash Provided by Operating Activities The significant components of net cash provided by operating activities are summarized below.
(5) In fiscal 2022, UNIFI recorded a recovery of income taxes in Brazil regarding certain income taxes paid in prior fiscal years. Net Sales Fiscal 2023 vs. Fiscal 2022 Consolidated net sales for fiscal 2023 decreased by $192,231, or 23.6%, and consolidated sales volumes decreased 25.3%, compared to fiscal 2022.
(7) In fiscal 2022, UNIFI recorded a recovery of income taxes in Brazil regarding certain income taxes paid in prior fiscal years. Net Sales Fiscal 2024 vs. Fiscal 2023 Consolidated net sales for fiscal 2024 decreased by $41,318, or 6.6%, and consolidated sales volumes increased 8.2%, compared to fiscal 2023.
Recent Accounting Pronouncements Issued and Pending Adoption Upon review of each Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (the “FASB”) through the date of this report, UNIFI identified no newly applicable accounting pronouncements that are expected to have a significant impact on UNIFI’s consolidated financial statements.
Upon review of each ASU issued by the FASB through the date of this report, UNIFI identified no other newly issued accounting pronouncements that are expected to have a significant impact on UNIFI’s consolidated financial statements.
ABL Facility and Amendments On October 28, 2022, Unifi, Inc. and certain of its subsidiaries entered into a Second Amended and Restated Credit Agreement (the “2022 Credit Agreement”) with a syndicate of lenders.
(2) Refer to the discussion below under the subheading “ Construction Financing ” for further information. 2022 ABL Facility and Amendments On October 28, 2022, Unifi, Inc. and certain of its subsidiaries entered into a Second Amended and Restated Credit Agreement (the “2022 Credit Agreement”) with a syndicate of lenders.
As of July 2, 2023, UNIFI had repurchased 701 shares of its common stock at an average price of $15.90 per share, leaving $38,859 available for repurchase under the 2018 SRP.
As of June 30, 2024, UNIFI had repurchased 701 shares of its common stock at an average price of $15.90 per share, none of which occurred in fiscal 2024, leaving $38,859 available for repurchases under the 2018 SRP.
Fiscal 2023 Fiscal 2022 Fiscal 2021 Net (loss) income $ (46,344 ) $ 15,171 $ 29,073 Interest expense, net 5,468 1,561 2,720 Provision for income taxes 901 11,657 17,274 Depreciation and amortization expense (1) 27,020 25,986 25,293 EBITDA (12,955 ) 54,375 74,360 Asset abandonment (2) 8,247 — — Contract modification costs (3) 623 — — Recovery of non-income taxes, net (4) — 815 (9,717 ) Adjusted EBITDA $ (4,085 ) $ 55,190 $ 64,643 (1) Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net.
Fiscal 2024 Fiscal 2023 Fiscal 2022 Net (loss) income $ (47,395 ) $ (46,344 ) $ 15,171 Interest expense, net 7,726 5,468 1,561 Provision for income taxes 1,858 901 11,657 Depreciation and amortization expense (1) 27,513 27,020 25,986 EBITDA (10,298 ) (12,955 ) 54,375 Loss on joint venture dissolution (2) 2,750 — — Severance (3) 2,351 — — Asset abandonment (4) — 8,247 — Contract modification costs (5) — 623 — Recovery of non-income taxes, net (6) — — 815 Adjusted EBITDA $ (5,197 ) $ (4,085 ) $ 55,190 (1) Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net.
Nonetheless, given the current global economic risks, we are prepared to act swiftly and diligently to ensure the vitality of the business. 32 Debt Obligations The following table presents details for UNIFI’s debt obligations: Weighted Average Scheduled Interest Rate as of Principal Amounts as of Maturity Date July 2, 2023 July 2, 2023 July 3, 2022 ABL Revolver October 2027 7.1% $ 18,100 $ 41,300 ABL Term Loan October 2027 6.6% 110,400 65,000 Finance lease obligations (1) 4.8% 10,767 7,261 Construction financing (2) 6.9% 1,632 729 Total debt 140,899 114,290 Current ABL Term Loan (9,200 ) (10,000 ) Current portion of finance lease obligations (2,806 ) (1,726 ) Unamortized debt issuance costs (289 ) (255 ) Total long-term debt $ 128,604 $ 102,309 (1) Scheduled maturity dates for finance lease obligations range from March 2025 to May 2028, as further outlined in Note 4, “Leases.” (2) Refer to the discussion below under the subheading “ Construction Financing ” for further information.
Nonetheless, given the current global economic risks, we are prepared to act swiftly and diligently to ensure the vitality of the business. 31 Debt Obligations The following table presents details for UNIFI’s debt obligations: Weighted Average Scheduled Interest Rate as of Principal Amounts as of Maturity Date June 30, 2024 June 30, 2024 July 2, 2023 ABL Revolver October 2027 7.3% $ 19,700 $ 18,100 ABL Term Loan October 2027 6.9% 101,200 110,400 Finance lease obligations (1) 5.1% 9,399 10,767 Construction financing (2) 0.0% — 1,632 Total debt 130,299 140,899 Current ABL Term Loan (9,200 ) (9,200 ) Current portion of finance lease obligations (3,077 ) (2,806 ) Unamortized debt issuance costs (229 ) (289 ) Total long-term debt $ 117,793 $ 128,604 (1) Scheduled maturity dates for finance lease obligations range from March 2025 to September 2028, as further outlined in Note 4, “Leases,” to the accompanying consolidated financial statements.
Additionally, a discrete tax benefit was recognized in the second quarter of fiscal 2023 related to the recovery of certain Brazilian income taxes paid in prior years. Fiscal 2022 vs.
Fiscal 2023 The decrease in the effective tax rate from fiscal 2023 to fiscal 2024 was primarily attributable to a discrete tax benefit recognized in fiscal 2023 related to the recovery of certain Brazilian income taxes paid in prior years. Fiscal 2023 vs.
Such obligations, predominantly related to ongoing operations and service contracts in support of normal course business, range from approximately $1,000 to $10,000 per annum and vary based on the renewal timing of specific commitments and the range of services received. 3.
Such obligations, predominantly related to ongoing operations and service contracts in support of normal course business, range from approximately $1,000 to $10,000 per annum and vary based on the renewal timing of specific commitments and the range of services received. • Non-capital purchase orders totaled approximately $78,163 at the end of fiscal 2024 and are expected to be settled in fiscal 2025.
Net (loss) income Fiscal 2023 % Change Fiscal 2022 % Change Fiscal 2021 Net sales $ 623,527 (23.6 ) $ 815,758 22.2 $ 667,592 Cost of sales 609,286 (17.1 ) 735,273 28.1 574,098 Gross profit 14,241 (82.3 ) 80,485 (13.9 ) 93,494 SG&A 47,345 (9.8 ) 52,489 2.2 51,334 Benefit for bad debts (89 ) (80.0 ) (445 ) (66.2 ) (1,316 ) Other operating expense (income), net 7,856 nm (158 ) (103.2 ) 4,865 Operating (loss) income (40,871 ) nm 28,599 (25.9 ) 38,611 Interest expense, net 5,468 nm 1,561 (42.6 ) 2,720 Earnings from unconsolidated affiliates (896 ) 48.1 (605 ) (18.1 ) (739 ) Recovery of non-income taxes, net — nm 815 (108.4 ) (9,717 ) (Loss) income before income taxes (45,443 ) nm 26,828 (42.1 ) 46,347 Provision for income taxes 901 (92.3 ) 11,657 (32.5 ) 17,274 Net (loss) income $ (46,344 ) nm $ 15,171 (47.8 ) $ 29,073 nm – not meaningful EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures) The reconciliations of the amounts reported under GAAP for Net (Loss) Income to EBITDA and Adjusted EBITDA are as follows.
Net (Loss) Income Fiscal 2024 % Change Fiscal 2023 % Change Fiscal 2022 Net sales $ 582,209 (6.6 ) $ 623,527 (23.6 ) $ 815,758 Cost of sales 565,593 (7.2 ) 609,286 (17.1 ) 735,273 Gross profit 16,616 16.7 14,241 (82.3 ) 80,485 SG&A 46,632 (1.5 ) 47,345 (9.8 ) 52,489 Provision (benefit) for bad debts 1,571 nm (89 ) (80.0 ) (445 ) Restructuring costs 5,101 nm — nm — Other operating expense (income), net 733 (90.7 ) 7,856 nm (158 ) Operating (loss) income (37,421 ) (8.4 ) (40,871 ) nm 28,599 Interest expense, net 7,726 41.3 5,468 nm 1,561 Loss (earnings) from unconsolidated affiliates 390 (143.5 ) (896 ) 48.1 (605 ) Recovery of non-income taxes, net — nm — nm 815 (Loss) income before income taxes (45,537 ) 0.2 (45,443 ) nm 26,828 Provision for income taxes 1,858 106.2 901 (92.3 ) 11,657 Net (loss) income $ (47,395 ) 2.3 $ (46,344 ) nm $ 15,171 nm – not meaningful Non-GAAP Reconciliations EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures) The reconciliations of the amounts reported under GAAP for Net (Loss) Income to EBITDA and Adjusted EBITDA are as follows.
However, recycled inputs in the U.S. experienced continued cost increases during fiscal 2022. Despite the responsive selling price increases, we still experienced meaningful gross profit pressure during fiscal 2022 and 2023, primarily from the U.S. labor shortage and speed at which input costs increased.
For the majority of our portfolio, we were able to implement selling price adjustments throughout fiscal 2022 in response to rising inputs costs. Despite the responsive selling price increases, we still experienced meaningful gross profit pressure during fiscal 2022 and 2023, primarily from the U.S. labor shortage and speed at which input costs increased.
The Brazil Segment has undertaken aggressive pricing (i) against low-priced competitive imports and (ii) in the pursuit of greater market share. The increase in net sales for the Brazil Segment from fiscal 2021 to fiscal 2022 was primarily attributable to higher selling prices associated with higher input costs and favorable foreign currency translation effects.
The decrease in net sales for the Brazil Segment from fiscal 2022 to fiscal 2023 was primarily attributable to selling price pressures from low-priced imports. The Brazil Segment has undertaken aggressive pricing (i) against low-priced competitive imports and (ii) in the pursuit of greater market share.
Fiscal 2023 Fiscal 2022 Fiscal 2021 Net (loss) income $ (46,344 ) $ 15,171 $ 29,073 Depreciation and amortization expense 27,186 26,207 25,528 Equity in earnings of unconsolidated affiliates (896 ) (605 ) (739 ) Impairment for asset abandonment 8,247 — — Recovery of taxes, net (3,799 ) 815 (9,717 ) Non-cash compensation expense 2,805 3,555 3,462 Deferred income taxes (2,788 ) (3,119 ) 5,087 Subtotal (15,589 ) 42,024 52,694 Distributions received from unconsolidated affiliates — 750 750 Change in inventories 24,431 (34,749 ) (28,069 ) Other changes in assets and liabilities (4,102 ) (7,645 ) 11,306 Net cash provided by operating activities $ 4,740 $ 380 $ 36,681 Fiscal 2023 Compared to Fiscal 2022 The increase in operating cash flows was primarily due to reducing working capital associated with a decline in overall business activity in fiscal 2023, which was primarily offset by significantly weaker earnings.
Fiscal 2024 Fiscal 2023 Fiscal 2022 Net (loss) income $ (47,395 ) $ (46,344 ) $ 15,171 Depreciation and amortization expense 27,669 27,186 26,207 Equity in loss (earnings) of unconsolidated affiliates 390 (896 ) (605 ) Impairment for asset abandonment — 8,247 — Recovery of taxes, net — (3,799 ) 815 Non-cash compensation expense 2,074 2,805 3,555 Deferred income taxes (3,543 ) (2,788 ) (3,119 ) Subtotal (20,805 ) (15,589 ) 42,024 Distributions received from unconsolidated affiliates 1,000 — 750 Change in inventories 13,879 24,431 (34,749 ) Other changes in assets and liabilities 8,018 (4,102 ) (7,645 ) Net cash provided by operating activities $ 2,092 $ 4,740 $ 380 Fiscal 2024 Compared to Fiscal 2023 The decrease in operating cash flows was primarily due to weaker earnings in fiscal 2024 compared to fiscal 2023, partially offset by working capital improvements.
SG&A Expenses The changes in SG&A expenses were as follows: SG&A for fiscal 2021 $ 51,334 Net increase in marketing expenses 2,007 Other net increases 3,319 Net decrease in incentive and other compensation expenses (4,171 ) SG&A for fiscal 2022 $ 52,489 SG&A for fiscal 2022 $ 52,489 Net decrease in incentive expenses (2,768 ) Net decrease in professional fees (1,104 ) Net decrease in marketing expenses (497 ) Other net decreases (775 ) SG&A for fiscal 2023 $ 47,345 Fiscal 2023 vs.
SG&A Expenses The changes in SG&A expenses were as follows: SG&A for fiscal 2022 $ 52,489 Net decrease in incentive expenses (2,768 ) Net decrease in professional fees (1,104 ) Net decrease in marketing expenses (497 ) Other net decreases (775 ) SG&A for fiscal 2023 $ 47,345 SG&A for fiscal 2023 $ 47,345 Net decrease in marketing expenses (848 ) Net decrease in amortization expenses (763 ) Net increase in professional fees 587 Other net increases 311 SG&A for fiscal 2024 $ 46,632 25 Fiscal 2024 vs.
Fiscal 2022 Interest expense, net increased from fiscal 2022 to fiscal 2023. The increase was attributable to higher debt principal following continued capital investments and higher interest rates in fiscal 2023. Interest expense, net for fiscal 2023 included a $273 loss on debt extinguishment. Fiscal 2022 vs. Fiscal 2021 Interest expense, net decreased from fiscal 2021 to fiscal 2022.
The increase was attributable to higher debt principal following continued capital investments and higher average interest rates in fiscal 2023. Interest expense, net for fiscal 2023 includes a $273 loss on debt extinguishment. (Loss) Earnings from Unconsolidated Affiliates There was no material activity for fiscal 2024, 2023, or 2022.
Fiscal 2022 SG&A expenses decreased from fiscal 2022, primarily due to (i) lower equity compensation in fiscal 2023 and (ii) lower discretionary expenses, including marketing and advertising. Fiscal 2022 vs.
Fiscal 2023 SG&A expenses decreased from fiscal 2023, primarily due to lower marketing, compensation, and amortization expenses. Fiscal 2023 vs. Fiscal 2022 SG&A expenses decreased from fiscal 2022, primarily due to lower compensation and discretionary expenses, including marketing and advertising. Provision (Benefit) for Bad Debts Fiscal 2024 vs.
(3) In fiscal 2023, UNIFI recorded a recovery of income taxes in connection with filing amended tax returns in Brazil relating to certain income taxes paid in prior fiscal years following favorable legal rulings in fiscal 2023.
(5) In fiscal 2023, UNIFI recorded a recovery of income taxes in connection with filing amended tax returns in Brazil relating to certain income taxes paid in prior fiscal years following favorable legal rulings in fiscal 2023. (6) In fiscal 2022, UNIFI reduced an estimated benefit based on additional clarity and the review of the recovery process in Brazil.
The difference in fiscal weeks was not meaningful to Segment Profit. 29 Brazil Segment The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Brazil Segment are as follows: Fiscal 2023 % Change Fiscal 2022 % Change Fiscal 2021 Net sales $ 119,062 (5.6 ) $ 126,066 31.4 $ 95,976 Cost of sales 106,900 8.1 98,925 53.9 64,281 Gross profit 12,162 (55.2 ) 27,141 (14.4 ) 31,695 Depreciation expense 2,035 35.7 1,500 14.1 1,315 Segment Profit $ 14,197 (50.4 ) $ 28,641 (13.2 ) $ 33,010 Gross margin 10.2 % 21.5 % 33.0 % Segment margin 11.9 % 22.7 % 34.4 % Segment net sales as a percentage of consolidated amount 19.1 % 15.5 % 14.4 % Segment Profit as a percentage of consolidated amount 37.0 % 27.8 % 28.5 % The changes in net sales for the Brazil Segment are as follows: Net sales for fiscal 2021 $ 95,976 Increase in average selling price and change in sales mix 26,343 Favorable foreign currency translation effects 2,757 Increase in sales volumes 990 Net sales for fiscal 2022 $ 126,066 Net sales for fiscal 2022 $ 126,066 Decrease in average selling price and change in sales mix (19,862 ) Increase in sales volumes 11,373 Favorable foreign currency translation effects 1,485 Net sales for fiscal 2023 $ 119,062 The decrease in net sales for the Brazil Segment from fiscal 2022 to fiscal 2023 was primarily attributable to selling price pressures from low-priced imports.
The difference in fiscal weeks was not meaningful to Segment Profit. 28 Brazil Segment The components of Segment Profit and the percentage increase or decrease over the prior period amounts for the Brazil Segment are as follows: Fiscal 2024 % Change Fiscal 2023 % Change Fiscal 2022 Net sales $ 117,783 (1.1 ) $ 119,062 (5.6 ) $ 126,066 Cost of sales 103,028 (3.6 ) 106,900 8.1 98,925 Gross profit 14,755 21.3 12,162 (55.2 ) 27,141 Depreciation expense 3,257 60.0 2,035 35.7 1,500 Segment Profit $ 18,012 26.9 $ 14,197 (50.4 ) $ 28,641 Gross margin 12.5 % 10.2 % 21.5 % Segment margin 15.3 % 11.9 % 22.7 % Segment net sales as a percentage of consolidated amount 20.2 % 19.1 % 15.5 % Segment Profit as a percentage of consolidated amount 42.8 % 37.0 % 27.8 % The changes in net sales for the Brazil Segment are as follows: Net sales for fiscal 2022 $ 126,066 Decrease in average selling price and change in sales mix (19,862 ) Increase in sales volumes 11,373 Favorable foreign currency translation effects 1,485 Net sales for fiscal 2023 $ 119,062 Net sales for fiscal 2023 $ 119,062 Decrease in average selling price and change in sales mix (21,723 ) Increase in sales volumes 16,137 Favorable foreign currency translation effects 4,307 Net sales for fiscal 2024 $ 117,783 The decrease in net sales for the Brazil Segment from fiscal 2023 to fiscal 2024 was primarily attributable to lower average selling prices due to pressure from low-priced import competition, partially offset by (i) an improvement in sales volumes from market share gains and (ii) favorable foreign currency translation effects from the strengthening of the BRL versus the USD.
This action allows for (i) improved short- and mid-term liquidity in light of the current subdued levels of sales and facility utilization and (ii) a better matching of future capital expenditures with expected higher levels of future business activity.
Under the modified agreement, the capital expenditures are expected to occur over the October 2025 to September 2026 period. These actions allow for (i) improved short- and mid-term liquidity in light of the current subdued levels of sales and facility utilization and (ii) a better matching of future capital expenditures with expected higher levels of future business activity.
During fiscal 2022, UNIFI entered into finance lease obligations totaling $2,493 for texturing machines. The maturity dates of these obligations occur during fiscal 2027 with interest rates between 3.0% and 4.4%. During fiscal 2021, UNIFI entered into finance lease obligations totaling $740 for certain transportation equipment.
During fiscal 2023, UNIFI entered into finance lease obligations totaling $5,629 for texturing machines. The maturity dates of these obligations occur during fiscal 2028 with interest rates between 4.4% and 6.2%.
Net Debt (Non-GAAP Financial Measure) The reconciliations for Net Debt are as follows: July 2, 2023 July 3, 2022 Long-term debt $ 128,604 $ 102,309 Current portion of long-term debt 12,006 11,726 Unamortized debt issuance costs 289 255 Debt principal 140,899 114,290 Less: cash and cash equivalents 46,960 53,290 Net Debt $ 93,939 $ 61,000 34 Working Capital and Adjusted Working Capital (Non-GAAP Financial Measures) The following table presents the components of working capital and the reconciliation from working capital to Adjusted Working Capital: July 2, 2023 July 3, 2022 Cash and cash equivalents $ 46,960 $ 53,290 Receivables, net 83,725 106,565 Inventories 150,810 173,295 Income taxes receivable 238 160 Other current assets 12,327 18,956 Accounts payable (44,455 ) (73,544 ) Other current liabilities (12,932 ) (19,806 ) Income taxes payable (789 ) (1,526 ) Current operating lease liabilities (1,813 ) (2,190 ) Current portion of long-term debt (12,006 ) (11,726 ) Working capital $ 222,065 $ 243,474 Less: Cash and cash equivalents (46,960 ) (53,290 ) Less: Income taxes receivable (238 ) (160 ) Less: Income taxes payable 789 1,526 Less: Current operating lease liabilities 1,813 2,190 Less: Current portion of long-term debt 12,006 11,726 Adjusted Working Capital $ 189,475 $ 205,466 Working capital decreased from $243,474 as of July 3, 2022 to $222,065 as of July 2, 2023, while Adjusted Working Capital decreased from $205,466 to $189,475, both primarily in connection with slower overall economic conditions and higher input costs.
Net Debt (Non-GAAP Financial Measure) The reconciliations for Net Debt are as follows: June 30, 2024 July 2, 2023 Long-term debt $ 117,793 $ 128,604 Current portion of long-term debt 12,277 12,006 Unamortized debt issuance costs 229 289 Debt principal 130,299 140,899 Less: cash and cash equivalents 26,805 46,960 Net Debt $ 103,494 $ 93,939 33 Working Capital and Adjusted Working Capital (Non-GAAP Financial Measure) The following table presents the components of working capital and the reconciliation from working capital to Adjusted Working Capital: June 30, 2024 July 2, 2023 Cash and cash equivalents $ 26,805 $ 46,960 Receivables, net 79,165 83,725 Inventories 131,181 150,810 Income taxes receivable 164 238 Other current assets 11,618 12,327 Accounts payable (43,622 ) (44,455 ) Other current liabilities (17,662 ) (12,932 ) Income taxes payable (754 ) (789 ) Current operating lease liabilities (2,251 ) (1,813 ) Current portion of long-term debt (12,277 ) (12,006 ) Working capital $ 172,367 $ 222,065 Less: Cash and cash equivalents (26,805 ) (46,960 ) Less: Income taxes receivable (164 ) (238 ) Less: Income taxes payable 754 789 Less: Current operating lease liabilities 2,251 1,813 Less: Current portion of long-term debt 12,277 12,006 Adjusted Working Capital $ 160,680 $ 189,475 Working capital decreased from $222,065 as of July 2, 2023 to $172,367 as of June 30, 2024, while Adjusted Working Capital decreased from $189,475 to $160,680, both primarily in connection with slower overall economic conditions and higher input costs.
Within the accompanying consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense. In fiscal 2023, interest expense, net includes $273 of loss on debt extinguishment. (2) In fiscal 2023, UNIFI abandoned certain specialized machinery in the Americas and recorded an impairment charge.
Within the accompanying consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense. In fiscal 2023, interest expense, net includes $273 of loss on debt extinguishment. (2) In the second quarter of fiscal 2024, UNIFI recorded a loss of $2,750 related to the dissolution of a nylon joint venture.
The continuing volatility in global crude oil prices is likely to impact UNIFI’s polyester and nylon raw material costs. While it is not possible to predict the timing or amount of the impact or whether the recent fluctuations in crude oil prices will stabilize, increase, or decrease, UNIFI monitors these dynamic factors closely.
While it is not possible to predict the timing or amount of the impact or whether the recent fluctuations in crude oil prices will stabilize, increase, or decrease, UNIFI monitors these dynamic factors closely. In addition, UNIFI attempts to pass on to its customers increases in raw material costs but due to market pressures, this is not always possible.
Subject to specific provisions, the 2022 ABL Term Loan may be prepaid at par, in whole or in part, at any time before the maturity date, at UNIFI’s discretion.
In addition, the 2022 ABL Facility contains restrictions on particular payments and investments, including certain restrictions on the payment of dividends and share repurchases. Subject to specific provisions, the 2022 ABL Term Loan may be prepaid at par, in whole or in part, at any time before the maturity date, at UNIFI’s discretion.
Contractual Obligations In addition to management’s discussion and analysis surrounding our liquidity and capital resources, long-term debt, finance leases, operating leases, and the associated principal and interest components thereof, as of July 2, 2023, UNIFI’s contractual obligations consisted of the following additional concepts and considerations. 1.
Contractual Obligations In addition to management’s discussion and analysis surrounding our liquidity and capital resources, long-term debt, finance leases, operating leases, and the associated principal and interest components thereof, as of June 30, 2024, UNIFI’s contractual obligations consisted of the following additional concepts and considerations: • Capital purchase obligations relate to contracts with vendors for the construction or purchase of assets, primarily for the normal course operations in our manufacturing facilities.
Fiscal 2023 Pre-tax Loss Tax Impact Net Loss Diluted EPS GAAP results $ (45,443 ) $ (901 ) $ (46,344 ) $ (2.57 ) Asset abandonment (1) 8,247 — 8,247 0.46 Contract modification costs (2) 623 — 623 0.03 Recovery of income taxes (3) — (3,799 ) (3,799 ) (0.21 ) Adjusted results $ (36,573 ) $ (4,700 ) $ (41,273 ) $ (2.29 ) Weighted average common shares outstanding 18,037 Fiscal 2022 Pre-tax Income Tax Impact Net Income Diluted EPS GAAP results $ 26,828 $ (11,657 ) $ 15,171 $ 0.80 Recovery of non-income taxes, net (4) 815 (257 ) 558 0.03 Recovery of income taxes, net (5) — (1,446 ) (1,446 ) (0.07 ) Adjusted results $ 27,643 $ (13,360 ) $ 14,283 $ 0.76 Weighted average common shares outstanding 18,868 Fiscal 2021 Pre-tax Income Tax Impact Net Income Diluted EPS GAAP results $ 46,347 $ (17,274 ) $ 29,073 $ 1.54 Recovery of non-income taxes, net (4) (9,717 ) 3,304 (6,413 ) (0.34 ) Adjusted results $ 36,630 $ (13,970 ) $ 22,660 $ 1.20 Weighted average common shares outstanding 18,856 (1) In fiscal 2023, UNIFI abandoned certain specialized machinery in the Americas and recorded an impairment charge.
Fiscal 2024 Pre-tax Loss Tax Impact Net Loss Diluted EPS GAAP results $ (45,537 ) $ (1,858 ) $ (47,395 ) $ (2.61 ) Loss on joint venture dissolution (1) 2,750 — 2,750 0.15 Severance (2) 2,351 — 2,351 0.13 Adjusted results $ (40,436 ) $ (1,858 ) $ (42,294 ) $ (2.33 ) Weighted average common shares outstanding 18,154 Fiscal 2023 Pre-tax Loss Tax Impact Net Loss Diluted EPS GAAP results $ (45,443 ) $ (901 ) $ (46,344 ) $ (2.57 ) Asset abandonment (3) 8,247 — 8,247 0.46 Contract modification costs (4) 623 — 623 0.03 Recovery of income taxes (5) — (3,799 ) (3,799 ) (0.21 ) Adjusted results $ (36,573 ) $ (4,700 ) $ (41,273 ) $ (2.29 ) Weighted average common shares outstanding 18,037 Fiscal 2022 Pre-tax Income Tax Impact Net Income Diluted EPS GAAP results $ 26,828 $ (11,657 ) $ 15,171 $ 0.80 Recovery of non-income taxes, net (6) 815 (257 ) 558 0.03 Recovery of income taxes, net (7) — (1,446 ) (1,446 ) (0.07 ) Adjusted results $ 27,643 $ (13,360 ) $ 14,283 $ 0.76 Weighted average common shares outstanding 18,868 (1) In the second quarter of fiscal 2024, UNIFI recorded a loss of $2,750 related to the dissolution of a nylon joint venture.
The associated tax impact was estimated to be $0 due to a valuation allowance against net operating losses in the U.S. (2) In fiscal 2023, UNIFI amended certain existing contracts related to future purchases of texturing machinery by delaying the scheduled receipt and installation of such equipment in the U.S. and El Salvador for 18 months.
(4) In fiscal 2023, UNIFI amended certain existing contracts related to future purchases of texturing machinery by delaying the scheduled receipt and installation of such equipment in the U.S. and El Salvador for 18 months. UNIFI paid the associated vendor $623 to establish the 18-month delay.
Maintenance capital expenditures are necessary to support UNIFI’s current operations, capacities, and capabilities and exclude expenses relating to repairs and costs that do not extend an asset’s useful life.
The changes in income taxes receivable, income taxes payable, current operating lease liabilities, and current portion of long-term debt were insignificant. Capital Projects Maintenance capital expenditures are necessary to support UNIFI’s current operations, capacities, and capabilities and exclude expenses relating to repairs and costs that do not extend an asset’s useful life.
The changes in Segment Profit for the Asia Segment are as follows: Segment Profit for fiscal 2021 $ 25,393 Change in underlying margins and sales mix 1,824 Increase in sales volumes 1,140 Favorable foreign currency translation effects 519 Segment Profit for fiscal 2022 $ 28,876 Segment Profit for fiscal 2022 $ 28,876 Decrease in sales volumes (12,885 ) Unfavorable foreign currency translation effects (1,981 ) Change in underlying margins and sales mix 2,728 Segment Profit for fiscal 2023 $ 16,738 The decrease in Segment Profit for the Asia Segment from fiscal 2022 to fiscal 2023 follows the decline in net sales and sales volumes discussed above, as the comparable gross margin rate for the Asia Segment improved due to a stronger sales mix.
The changes in Segment Profit for the Asia Segment are as follows: Segment Profit for fiscal 2022 $ 28,876 Decrease in sales volumes (12,885 ) Unfavorable foreign currency translation effects (1,981 ) Change in underlying margins and sales mix 2,728 Segment Profit for fiscal 2023 $ 16,738 Segment Profit for fiscal 2023 $ 16,738 Increase in sales volumes 1,880 Change in underlying margins and sales mix 1,514 Unfavorable foreign currency translation effects (631 ) Segment Profit for fiscal 2024 $ 19,501 The increase in Segment Profit for the Asia Segment from fiscal 2023 to fiscal 2024 was attributable to (i) the increase in sales volumes discussed above and (ii) an improved gross margin rate associated with a strong sales mix of REPREVE products, partially offset by unfavorable foreign currency translation effects.
If these earnings were distributed in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, UNIFI could be subject to additional tax liabilities of approximately $11,592.
If these earnings were distributed in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, UNIFI could be subject to additional tax liabilities of approximately $10,906. Liquidity Considerations Inflationary pressures and demand uncertainty throughout fiscal 2022, 2023, and 2024 created risks to UNIFI's liquidity.
The changes in Segment Profit for the Americas Segment are as follows: Segment Profit for fiscal 2021 $ 57,460 Change in underlying margins and sales mix (12,918 ) Increase in sales volumes 1,079 Segment Profit for fiscal 2022 $ 45,621 Segment Profit for fiscal 2022 $ 45,621 Change in underlying margins and sales mix (29,492 ) Decrease in sales volumes (8,744 ) Segment Profit for fiscal 2023 $ 7,385 The decrease in Segment Profit for the Americas Segment from fiscal 2022 to fiscal 2023 was primarily attributable to lower production volumes driving weaker fixed cost absorption in connection with lower sales volumes.
The changes in Segment Profit for the Americas Segment are as follows: Segment Profit for fiscal 2022 $ 45,621 Change in underlying margins and sales mix (29,492 ) Decrease in sales volumes (8,744 ) Segment Profit for fiscal 2023 $ 7,385 Segment Profit for fiscal 2023 $ 7,385 Change in underlying margins and sales mix (3,112 ) Increase in sales volumes 251 Segment Profit for fiscal 2024 $ 4,524 The decrease in Segment Profit for the Americas Segment from fiscal 2023 to fiscal 2024 was primarily attributable to (i) higher manufacturing costs and (ii) lower conversion margins.
The increase in Segment Profit for the Asia Segment from fiscal 2021 to fiscal 2022 was primarily attributable to higher sales volumes with a stronger sales mix in fiscal 2022. 31 Liquidity and Capital Resources UNIFI’s primary capital requirements are for working capital, capital expenditures, debt service and share repurchases.
The decrease in Segment Profit for the Asia Segment from fiscal 2022 to fiscal 2023 follows the decline in net sales and sales volumes discussed above, as the comparable gross margin rate for the Asia Segment improved due to a stronger sales mix. 30 Liquidity and Capital Resources UNIFI’s primary capital requirements are for working capital, capital expenditures, debt service, and share repurchases.
Such open purchase orders are in the ordinary course of business for the procurement of (i) raw materials used in the production of inventory, (ii) certain consumables and outsourced services used in UNIFI’s manufacturing processes, and (iii) selected finished goods for resale sourced from third-party suppliers. 4.
Such open purchase orders are in the ordinary course of business for the procurement of (i) raw materials used in the production of inventory, (ii) certain consumables and outsourced services used in UNIFI’s manufacturing processes, and (iii) selected finished goods for resale sourced from third-party suppliers. • Other balance sheet items are detailed within the notes to the consolidated financial statements, including, but not limited to, post-employment plan liabilities, unpaid invoice and contract amounts, and other balances and charges that primarily relate to normal course operations.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
14 edited+0 added−3 removed7 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
14 edited+0 added−3 removed7 unchanged
2023 filing
2024 filing
Biggest changeAs of July 2, 2023, foreign currency exchange rate risk concepts included the following: Approximate Amount or Percentage Percentage of total consolidated assets held by UNIFI's subsidiaries outside the U.S. whose functional currency is not the USD 32 % Cash and cash equivalents held outside the U.S.: Denominated in USD $ 18,137 Denominated in RMB 18,275 Denominated in BRL 9,441 Denominated in other foreign currencies 224 Total cash and cash equivalents held outside the U.S. $ 46,077 Percentage of total cash and cash equivalents held outside the U.S. 98 % Cash and cash equivalents held inside the U.S. in USD by foreign subsidiaries $ 591 38 More information regarding UNIFI’s derivative financial instruments as of July 2, 2023 is provided in Note 18, “Fair Value of Financial Instruments and Non-Financial Assets and Liabilities,” to the accompanying consolidated financial statements.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations.” UNIFI does not enter into foreign currency derivatives to hedge its net investment in its foreign operations. 37 As of June 30, 2024, foreign currency exchange rate risk concepts included the following: Approximate Amount or Percentage Percentage of total consolidated assets held by UNIFI's subsidiaries outside the U.S. whose functional currency is not the USD 30 % Cash and cash equivalents held outside the U.S.: Denominated in USD $ 16,062 Denominated in RMB 502 Denominated in BRL 8,775 Denominated in other foreign currencies 162 Total cash and cash equivalents held outside the U.S. $ 25,501 Percentage of total cash and cash equivalents held outside the U.S. 95 % Cash and cash equivalents held inside the U.S. in USD by foreign subsidiaries $ 1,287 More information regarding UNIFI’s derivative financial instruments as of June 30, 2024 is provided in Note 18, “Fair Value of Financial Instruments and Non-Financial Assets and Liabilities,” to the accompanying consolidated financial statements.
Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk UNIFI is exposed to market risks associated with changes in interest rates, fluctuations in foreign currency exchange rates and raw material and commodity costs, which may adversely affect its financial position, results of operations or cash flows.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk UNIFI is exposed to market risks associated with changes in interest rates, and fluctuations in foreign currency exchange rates and raw material and commodity costs, which may adversely affect its financial position, results of operations or cash flows.
UNIFI manages fluctuations in the cost of raw materials primarily by making corresponding adjustments to the prices charged to its customers. Certain customers are subject to an index-based pricing model in which UNIFI’s prices are adjusted based on the change in the cost of raw materials in the prior quarter. Pricing adjustments for other customers must be negotiated independently.
UNIFI manages fluctuations in the cost of raw materials primarily by making corresponding adjustments to the prices charged to its customers. Certain customers are subject to an index-based pricing model in which UNIFI’s prices are adjusted based on the change in the cost of certain raw materials in the prior quarter. Pricing adjustments for other customers must be negotiated independently.
UNIFI attempts to quickly pass on to its customers increases in raw material costs, but due to market conditions, this is not always possible. When price increases can be implemented, there is typically a time lag that adversely affects UNIFI’s margins during one or more quarters.
UNIFI attempts to pass on to its customers increases in raw material costs, but due to market conditions, this is not always possible. When price increases can be implemented, there is typically a time lag that adversely affects UNIFI’s margins during one or more quarters.
Other Risks UNIFI is also exposed to political risk, including changing laws and regulations governing international trade, such as quotas, tariffs and tax laws. The degree of impact and the frequency of these events cannot be predicted. Item 8. Financial Statemen ts and Supplementary Data Our consolidated financial statements and the related notes begin on page F-i herein. Item 9.
Other Risks UNIFI is also exposed to political risk, including changing laws and regulations governing international trade, such as quotas, tariffs, and tax laws. The degree of impact and the frequency of these events cannot be predicted. 38 Item 8. Financial Statemen ts and Supplementary Data Our consolidated financial statements and the related notes begin on page F-i herein.
Accordingly, UNIFI has not modified its mix of financial institutions holding cash deposits, but UNIFI will continue to monitor the environment and current events to ensure any increase in concentration or credit risk is appropriately and timely addressed.
Accordingly, UNIFI has not modified its mix of financial institutions holding cash deposits, but UNIFI continues to monitor the environment and current events to ensure any increase in concentration or credit risk is appropriately and timely addressed.
UNIFI may also enter into foreign currency forward contracts to hedge its exposure for certain equipment or inventory purchase commitments. As of July 2, 2023, UNIFI had no outstanding foreign currency forward contracts. A significant portion of raw materials purchased by the Brazil Segment are denominated in USDs, requiring UNIFI to exchange BRL for USD.
UNIFI may also enter into foreign currency forward contracts to hedge its exposure for certain equipment or inventory purchase commitments. As of June 30, 2024, UNIFI had no outstanding foreign currency forward contracts. A significant portion of raw materials purchased by the Brazil Segment are denominated in USDs, requiring UNIFI to exchange BRL for USD.
After considering UNIFI’s outstanding debt obligations with fixed rates of interest, UNIFI’s sensitivity analysis indicates that a 50-basis point increase in SOFR as of July 2, 2023 would result in an increase in annual interest expense of approximately $700. Foreign Currency Exchange Rate Risk UNIFI conducts its business in various foreign countries and in various foreign currencies.
After considering UNIFI’s outstanding debt obligations with fixed rates of interest, UNIFI’s sensitivity analysis indicates that a 50-basis point interest rate increase as of June 30, 2024 would result in an increase in annual interest expense of approximately $700. Foreign Currency Exchange Rate Risk UNIFI conducts its business in various foreign countries and in various foreign currencies.
Changes in and Disagreements With Acco untants on Accounting and Financial Disclosure None. 39
Item 9. Changes in and Disagreements With Acco untants on Accounting and Financial Disclosure None.
UNIFI does not enter into derivative financial instruments for trading purposes, nor is it a party to any leveraged financial instruments. Interest Rate Risk UNIFI is exposed to interest rate risk through its borrowing activities. As of July 2, 2023, UNIFI had borrowings under its 2022 ABL Term Facility totaling $128,500.
UNIFI does not enter into derivative financial instruments for trading purposes, nor is it a party to any leveraged financial instruments. Interest Rate Risk UNIFI is exposed to interest rate risk through its borrowing activities. As of June 30, 2024, UNIFI had borrowings under the 2022 ABL Term Facility totaling $120,900.
UNIFI currently holds the vast majority of its cash deposits with large foreign banks in our associated operating regions, and management believes that it has the ability to repatriate cash to the U.S. relatively quickly.
Cash Deposits and Financial Institution Risk During calendar 2023, certain regional bank crises and failures generated additional uncertainty and volatility in the financial and credit markets. UNIFI currently holds the vast majority of its cash deposits with large foreign banks in our associated operating regions, and management believes that it has the ability to repatriate cash to the U.S.
Likewise, if any of the financial institutions within our 2022 Credit Agreement or construction financing arrangement (“lending counterparties”) are unable to perform on their commitments, our liquidity could be impacted. We actively monitor all lending counterparties, and none have indicated that they may be unable to perform on their commitments.
Likewise, if any of our lending counterparties are unable to perform on their commitments, our liquidity could be adversely impacted and we may not be able to adequately fund our operations and pay our debts as they become due. We actively monitor all lending counterparties, and none have indicated that they may be unable to perform on their commitments.
Nonetheless, such costs remain subject to the volatility described above and, should raw material costs increase unexpectedly, UNIFI’s results of operations and cash flows are likely to be adversely impacted. Cash Deposits and Financial Institution Risk During calendar 2023, certain regional bank crises and failures generated additional uncertainty and volatility in the financial and credit markets.
Nonetheless, such costs remain subject to the volatility described above and, should raw material costs increase unexpectedly, UNIFI’s results of operations and cash flows are likely to be adversely impacted. In any event, UNIFI monitors these dynamic factors closely.
We have been able to implement responsive selling price adjustments for the majority of our portfolio, however our underlying gross margin has been pressured during fiscal 2022 and 2023. We expect the impact of recent selling price adjustments to improve margins in future periods.
During fiscal 2022 and 2023, our raw material costs were elevated. We were able to implement responsive selling price adjustments for the majority of our portfolio; however our underlying gross margin was pressured. In fiscal 2024, while gross margins were still pressured, UNIFI experienced a more stable raw material pricing environment for most of the fiscal year.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” UNIFI does not enter into foreign currency derivatives to hedge its net investment in its foreign operations.
Removed
During fiscal 2020 and the first six months of fiscal 2021, UNIFI experienced a predominantly favorable, declining raw material cost environment, especially during calendar 2020 as the COVID-19 pandemic suppressed petroleum prices for several months.
Removed
As fiscal 2021 concluded, UNIFI experienced cost increases for raw materials, primarily related to (i) increases in petroleum prices and (ii) supply chain disruptions that occurred in Texas during February 2021 due to abnormally cold weather. Our raw material costs remained elevated in fiscal 2022 and 2023.