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What changed in UNIFI INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of UNIFI INC's 2022 and 2023 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 2023 report.

+322 added−309 removedSource: 10-K (2023-08-25) vs 10-K (2022-08-31)

Top changes in UNIFI INC's 2023 10-K

322 paragraphs added · 309 removed · 242 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

82 edited+23 added−19 removed84 unchanged
Biggest changeWe estimate consolidated net sales for fiscal 2022 were distributed across our primary end markets as listed below. • Apparel (including hosiery and footwear) represented approximately 70% of net sales. Apparel retail sales, supply chain inventory levels, and the strength of the regional supply base are vital to this market. • Industrial represented approximately 9% of net sales.
Biggest changeWe 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.
UNIFI has direct manufacturing operations in four countries and participates in joint ventures with operations in Israel and the United States (“U.S.”).
UNIFI has direct manufacturing operations in four countries and participates in joint ventures with operations in Israel and the United States (the “U.S.”).
The Brazil Segment includes a manufacturing location and sales offices in Brazil. • The Asia Segment primarily sells recycled and synthetic products to other 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 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.
These textile products are supported by quality assurance, product development, product and fabric certifications, hangtags, co-marketing along with technical and customer service teams across UNIFI’s operating subsidiaries. We have developed this successful operating platform by improving operational and business processes and deriving value from sustainability-based initiatives, including polyester and nylon recycling.
These textile products are supported by quality assurance, product development, product and fabric certifications, hangtags, and co-marketing along with technical and customer service teams across UNIFI’s operating subsidiaries. We have developed this successful operating platform by improving operational and business processes and deriving value from sustainability-based initiatives, including polyester and nylon recycling.
Under the 2018 SRP, purchases may be made from time to time in the open market at prevailing market prices, 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.
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. 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 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.
Environmental Protection Agency and the North Carolina Department of Environmental Quality (“DEQ”) pursuant to the Resource Conservation and Recovery Act Corrective Action program. The program requires DuPont to identify all potential areas of environmental concern (“AOCs”), assess the extent of containment at the identified AOCs and remediate the AOCs to comply with applicable regulatory standards.
Environmental Protection Agency and the North Carolina Department of Environmental Quality (the “DEQ”) pursuant to the Resource Conservation and Recovery Act Corrective Action program. The program requires DuPont to identify all potential areas of environmental concern (“AOCs”), assess the extent of containment at the identified AOCs and remediate the AOCs to comply with applicable regulatory standards.
Looking ahead, we expect to expand into additional markets in 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.
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. 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.
The restrictions caused an immediate disruption of our Brazil Segment’s revenue during the quarantine period, although demand levels recovered at the end of fiscal 2021. Beginning in March 2022, China implemented a strict COVID-19 zero-tolerance policy that included geographic markets near Suzhou, China, where our sales and administrative office is located.
The restrictions caused an immediate disruption of our Brazil Segment’s revenue during the quarantine period, although demand levels recovered at the end of fiscal 2021. 3 Beginning in March 2022, China implemented a strict COVID-19 zero-tolerance policy that included geographic markets near Suzhou, China, where our sales and administrative office is located.
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 better 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.
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.
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 sales volumes in recent years.
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.
A significant number of UNIFI’s customers in the apparel market produce finished goods that meet the eligibility requirements for duty-free treatment in the regions covered by the Americas Segment and the Colombia and Peru free trade agreements (collectively, the “Regional FTAs”). These Regional FTAs contain rules of origin requirements in order for covered products to be eligible for duty-free treatment.
A significant number of UNIFI’s customers in the apparel market produce finished goods that meet the eligibility requirements for duty-free treatment in the regions covered by the Americas Segment and the Colombia and Peru free trade agreements (collectively, the “Regional FTAs”). The Regional FTAs contain rules of origin requirements in order for covered products to be eligible for duty-free treatment.
In the case of textiles such as fabric, yarn (such as POY), fibers (filament and staple), and certain garments made from them, the products are generally required to be fully formed within the respective regions. UNIFI is the largest filament yarn manufacturer, and one of the few producers of qualifying synthetic yarns, in the regions covered by these Regional FTAs.
In the case of textiles such as fabric, yarn (such as POY), fibers (filament and staple), and certain garments made from them, the products are generally required to be fully formed within the respective regions. UNIFI is the largest filament yarn manufacturer, and one of the few producers of qualifying synthetic yarns, in the regions covered by the Regional FTAs.
In many of these regards, UNIFI draws upon and integrates the resources of its research and development personnel. In addition, UNIFI is enhancing co-branding activations with integrated point-of-sale and online marketing with popular brands and retailers to further enable consumers to find REPREVE and other performance technology products in multiple retail channels.
In many of these regards, UNIFI draws upon and integrates the resources of its research and development personnel. In addition, UNIFI is enhancing co-branding activations with integrated point-of-sale and online marketing with popular brands and retailers to enable consumers to find REPREVE and other performance technology products in multiple retail channels.
Subsequently, the Commerce Department and the ITC completed their investigations and began imposing associated final duties on imports. Pursuant to the conclusion of these investigations, subject imports from China and India are being assessed combined antidumping and countervailing duty rates of 97% and higher and 18% and higher, respectively, in addition to normal course duties in effect.
Subsequently, the Commerce Department and the ITC completed their investigations and began imposing associated final duties on imports. Pursuant to the conclusion of these investigations, subject imports from China and India are assessed combined antidumping and countervailing duty rates of 97% and higher and 18% and higher, respectively, in addition to normal course duties in effect.
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.
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.
The U.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 the NAFTA that allowed non-originating inputs, such as sewing thread, pocketing, and narrow elastic fabrics.
Globally, competitors for our REPREVE products include recycled brands from Far Eastern New Century, Tiejin, Radici, and Polygenta. 7 Raw Materials, Suppliers and Sourcing The primary raw material supplier for the Americas Segment of virgin Chip and POY is NanYa. For the Brazil Segment, Reliance Industries, Ltd. is the primary supplier of POY.
Globally, competitors for our REPREVE products include recycled brands from Far Eastern New Century, Tiejin, Radici, and Polygenta. Raw Materials, Suppliers and Sourcing The primary raw material supplier for the Americas Segment of virgin Chip and POY is NanYa. For the Brazil Segment, Reliance Industries, Ltd. is the primary supplier of POY.
UNIFI has been able to navigate the negative effects of the COVID-19 pandemic to minimize the overall impact to UNIFI for fiscal 2021 and 2022 as global demand and consumer spending were predominantly restored over fiscal 2021 and such economic levels did not decline within fiscal 2022.
UNIFI has been able to navigate the negative effects of the COVID-19 pandemic to minimize the overall impact to UNIFI for fiscal 2021, 2022, and 2023 as global demand and consumer spending levels were predominantly restored over fiscal 2021 and such economic levels did not decline within fiscal 2022.
Information regarding risks attendant to UNIFI’s foreign operations is included in “Item 1A. Risk Factors” in this Annual Report. Seasonality UNIFI is not significantly impacted by seasonality; however, UNIFI typically experiences its highest sales volumes in the fourth quarter of its fiscal years.
Information regarding risks attendant to UNIFI’s foreign operations is included in “Item 1A. Risk Factors” in this report. Seasonality UNIFI is not significantly impacted by seasonality; however, UNIFI typically experiences its highest sales volumes in the fourth quarter of its fiscal years.
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 Annual 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. 10 Inflation Prior to fiscal 2021, UNIFI’s input costs had experienced steady and predictable increases.
Beyond the current inflationary environment experienced in fiscal 2022, 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.
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.
Industry Overview UNIFI operates in the textile industry and, within that broad category, the respective markets for yarns, fabrics, fibers, and end-use products, such as apparel and hosiery, automotive, industrial products, and home furnishings, among others.
Industry Overview UNIFI operates in the textile industry and, within that broad category, the respective markets for yarns, fabrics, fibers, and end-use products, such as apparel and hosiery, automotive, industrial, medical, and home furnishings, among others.
This platform has provided 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.
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.
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 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.
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.
UNIFI’s bottle processing facility in Reidsville, North Carolina provides a high-quality source of Flake for the REPREVE Recycling Center as well as for sale to external parties. Combined with recent technology advancements in recycling, we believe the Flake produced at the bottle processing facility enhances our ability to grow REPREVE into other markets, such as nonwovens, carpet fiber, and packaging.
UNIFI’s bottle processing facility in Reidsville, North Carolina provides a high-quality source of Flake for the REPREVE Recycling Center as well as for sale to external parties. Combined with recent technological advancements in recycling, we believe the Flake produced at the bottle processing facility enhances our ability to grow REPREVE into other markets, such as nonwovens, carpet fiber, and packaging.
UNIFI believes the remaining synthetic apparel production within these NACA region markets is more specialized and defensible, and, in some cases, apparel producers are bringing programs back to the NACA region as part of a balanced sourcing strategy for certain brands and retailers.
UNIFI believes the remaining synthetic apparel production within these markets is more specialized and defensible, and, in some cases, apparel producers are bringing programs back to this region as part of a balanced sourcing strategy for certain brands and retailers.
For the majority of our portfolio, we were able to implement selling price adjustments to protect gross margins. However, some selling price adjustments in the U.S. and Central America were not realized rapidly enough to avoid temporary gross margin declines in certain portions of our portfolio.
For the majority of our portfolio, we were able to implement selling price adjustments to protect gross margins in fiscal 2022. However, some selling price adjustments in the U.S. and Central America were not realized rapidly enough in fiscal 2022 to avoid temporary gross margin declines in certain portions of our portfolio.
Research and Development UNIFI employs approximately 140 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 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.
We consider the raw material price decreases during most of fiscal 2020 and fiscal 2021 to be the result of a decline in global demand, while increasing raw material prices during the second half of fiscal 2021 and most of fiscal 2022 appeared to reflect global demand rebounds and inflationary pressures.
We consider the raw material price decreases during most of fiscal 2020 and fiscal 2021 to be the result of a decline in COVID-related global demand, while increasing raw material prices during the second half of fiscal 2021 and most of fiscal 2022 appeared to reflect global demand rebounds and inflationary pressures.
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.
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.
During the last five 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 the last six fiscal years, several key drivers affected our financial results in the Americas. 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.
Most notably, we made significant investments in the production and supply chain for REPREVE, including backward integration by building a bottle processing plant and additional production lines in the REPREVE Recycling Center.
Most notably, we made significant investments in the production and supply chain for REPREVE, including backward integration by building a bottle processing facility and additional production lines in the REPREVE Recycling Center.
These laws include the Federal Water Pollution Control Act, the Clean Air Act, the Resource Conservation and Recovery Act (including provisions relating to underground storage tanks), the Comprehensive Environmental Response, Compensation, and Liability Act, commonly referred to as “Superfund” or “CERCLA” and various state counterparts to such laws.
These laws include the Federal Water Pollution Control Act, the Clean Air Act, the Resource Conservation and Recovery Act (including provisions relating to underground storage tanks), the Comprehensive Environmental Response, Compensation, and Liability Act, commonly referred to as “Superfund” or “CERCLA,” and various state counterparts to such laws.
UNIFI believes that its flexibility and know-how in producing specialty recycled and synthetic products provide important development and commercialization advantages, in addition to the recent ability to vertically integrate with post-industrial and post-consumer materials. UNIFI produces Flake, Chip, and POY using recycled materials.
UNIFI believes that its flexibility and expertise in producing specialty recycled and synthetic products provide important development and commercialization advantages, in addition to the recent ability to integrate vertically with post-industrial and post-consumer materials. UNIFI produces Flake, Chip, and POY using recycled materials.
UNIFI refers to fibers sold with specific rules of origin requirements under the Regional FTAs and the Berry Amendment, as “Compliant Yarns.” Approximately two-thirds of UNIFI’s sales within the Americas Segment are sold as Compliant Yarns under the terms of the Regional FTAs or the Berry Amendment.
UNIFI refers to fibers sold with specific rules of origin requirements under the Regional FTAs and the Berry Amendment, as “Compliant Yarns.” Approximately half of UNIFI’s sales within the Americas Segment are sold as Compliant Yarns under the terms of the Regional FTAs or the Berry Amendment.
COVID-19 Pandemic Beginning in March 2020 with the World Health Organization’s declaration of the current COVID-19 outbreak as a global pandemic, the global economy has seen the negative effects of local, state and federal containment efforts. These measures significantly reduced economic activity and demand for UNIFI’s products from March 2020 to December 2020.
COVID-19 Pandemic Beginning in March 2020 with the World Health Organization’s declaration of the COVID-19 outbreak as a global pandemic, the global economy experienced the negative effects of local, state and federal containment efforts. These measures significantly reduced economic activity and demand for UNIFI’s products from March 2020 to December 2020.
Capital Investments In fiscal 2015, we began a significant, three-year capital investment plan to increase our manufacturing capabilities and capacity, expand our technological foundation and customize our asset base to improve our ability to deliver small-lot and high-value solutions. These investments were made primarily for the Americas Segment.
Capital Investments In fiscal 2018, we completed a significant, three-year capital investment plan to increase our manufacturing capabilities and capacity, expand our technological foundation, and customize our asset base to improve our ability to deliver small-lot and high-value solutions. These investments were made primarily for the Americas Segment.
The Asia Segment is better able to navigate volatility in product demand due to its asset light model and the lack of cost absorption that can be unfavorable in times of weaker demand for more asset intensive operations like our Americas and Brazil Segments.
The Asia Segment is better able to withstand volatility in product demand due to its asset-light model and the lack of fixed cost absorption that can be unfavorable in times of weaker demand for asset intensive operations like our Americas and Brazil Segments.
Business Unifi, Inc., a New York corporation formed in 1969 (together with its subsidiaries, “UNIFI,” the “Company,” “we,” “us,” or “our”), is a multinational company that manufactures and sells innovative recycled and synthetic products, made from polyester and nylon, primarily to other yarn manufacturers and knitters and weavers (UNIFI’s direct customers) that produce yarn and/or fabric for the apparel, hosiery, home furnishings, automotive, industrial, and other end-use markets (UNIFI’s indirect customers).
Business Unifi, Inc., a New York corporation formed in 1969 (together with its subsidiaries, “UNIFI,” the “Company,” “we,” “us,” or “our”), is a multinational company that manufactures and sells innovative recycled and synthetic products, made from polyester and nylon, primarily to other yarn manufacturers and knitters and weavers (UNIFI’s “direct customers”) that produce yarn and/or fabric for the apparel, hosiery, home furnishings, automotive, industrial, medical, and other end-use markets (UNIFI’s “indirect customers”).
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 3, 2022, UNIFI had $2,072 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 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.
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 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.
For fiscal 2022, 2021, and 2020, UNIFI incurred $12,103, $11,483, and $11,257, 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 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.
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 sales in fiscal 2020, 2021, and 2022, REPREVE Fiber comprised 31%, 37%, and 36%, or $186,141, $245,832, and $293,080, 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 2021, 2022, and 2023, REPREVE Fiber sales comprised 37%, 36% and 30%, or $245,832, $293,080, and $186,161, respectively.
Trade Regulation and Rules of Origin The duty rate on imports into the U.S. of finished apparel categories that utilize polyester and nylon yarns generally range from 16% to 32%.
The U.S. textile industry remains a large manufacturing employer. Trade Regulation and Rules of Origin The duty rate on imports into the U.S. of finished apparel categories that utilize polyester and nylon yarns generally range from 16% to 32%.
The existing challenges and future uncertainty, particularly for rising input costs, labor productivity, and global demand, could worsen and/or continue for prolonged periods, materially impacting our Americas and Asia Segments. The need for future selling price adjustments could impact our ability to retain current customer programs and compete successfully for new programs in certain regions.
The existing challenges and future uncertainty, particularly for global demand, labor productivity, and potential further inflation, could worsen and/or continue for prolonged periods, materially impacting our financial performance. The need for future selling price adjustments could impact our ability to retain current customer programs and compete successfully for new programs in certain regions.
We also sell REPREVE Chip, which is a polyester resin product. Beyond the high quality, versatility, and breadth of application that REPREVE offers, UNIFI combines transparency, traceability, and certification for REPREVE products to support our customers’ own sustainability narratives. REPREVE is our flagship and fastest growing brand.
Beyond the high quality, versatility, and breadth of application that REPREVE offers, UNIFI combines transparency, traceability, and certification for REPREVE products to support our customers’ own sustainability narratives. REPREVE is our flagship and fastest growing brand.
Department of Commerce (the “Commerce Department”) and the U.S. International Trade Commission (the “ITC”) alleging that dumped and subsidized imports of polyester textured yarn from China and India were causing material injury to the domestic polyester textured yarn industry.
Accordingly, in October 2018, UNIFI filed antidumping and countervailing duty cases with the U.S. Department of Commerce (the “Commerce Department”) and the U.S. International Trade Commission (the “ITC”) alleging that dumped and subsidized imports of polyester textured yarn from China and India were causing material injury to the domestic polyester textured yarn industry.
Developments in Principal Markets Americas Since 2017, apparel production experienced multi-year growth in the North and Central America regions, which comprise the principal markets for UNIFI’s Americas Segment. The share of synthetic apparel production for these regions as a percentage of U.S. retail stabilized at approximately 18%, while retail consumption grew.
Over the last several years, apparel production experienced growth in the North and Central America regions, which comprise the principal markets for UNIFI’s Americas Segment. The share of synthetic apparel production for these regions as a percentage of U.S. retail stabilized at approximately 18%.
These measures were relaxed in fiscal 2022 and are evaluated regularly against local, state, and federal recommendations. 3 Throughout calendar 2020, the Asia Segment’s overall performance and profitability was moderately impacted by the COVID-19 pandemic, while our Americas and Brazil Segments’ operations were more adversely impacted, most notably in the June 2020 and September 2020 quarters during the most intense declines in global demand.
Throughout calendar 2020, the Asia Segment’s overall performance and profitability was moderately impacted by the COVID-19 pandemic, while our Americas and Brazil Segments’ operations were more adversely impacted, most notably in the June 2020 and September 2020 quarters during the most intense declines in global demand.
Human Capital (not presented in thousands) As of July 3, 2022, UNIFI had approximately 3,100 employees, which includes approximately 300 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 2,270, 630, 90, and 110, respectively, at July 3, 2022.
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.
We make these documents available as soon as reasonably practicable after we electronically transmit them to the SEC. Except as otherwise stated in these documents, the information on our website is not a part of this Annual Report and is not incorporated by reference in this Annual Report or any of our other filings with the SEC.
Except as otherwise stated in these documents, the information on our website or linked to or from our website is not a part of this report and is not incorporated by reference in this report or any of our other filings with the SEC.
However, UNIFI’s consolidated net sales are dependent on demand from a relatively small number of brand partners. Sales and Marketing UNIFI employs an internal sales force of approximately 50 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 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.
As of July 3, 2022, UNIFI had repurchased 701 shares at an average price of $15.90, leaving $38,859 available for repurchase under the 2018 SRP.
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.
Share Repurchases In addition to capital investments and debt retirement, UNIFI may utilize excess cash for strategic share repurchases. On October 31, 2018, UNIFI announced that the Board of Directors (“Board”) approved a share repurchase program (the “2018 SRP”) under which UNIFI is authorized to acquire up to $50,000 of its common stock.
On October 31, 2018, UNIFI announced that the Company's Board of Directors (the “Board”) approved a share repurchase program (the “2018 SRP”) under which UNIFI is authorized to acquire up to $50,000 of its common stock.
In an effort to protect the health and safety of our employees, customers and communities, UNIFI took proactive, aggressive actions that included social distancing and travel restriction policies for all locations along with reducing costs in both manufacturing and selling, general, and administrative expenses (“SG&A”) without impacting our ability to service customers.
In an effort to protect the health and safety of our employees, customers and communities, UNIFI took proactive, aggressive actions that included implementing safety measures and cost reductions in both manufacturing and selling, general, and administrative (“SG&A”) expenses without impacting our ability to service customers.
UNIFI endeavors to offer competitive compensation and benefits packages to our employees, as well as professional development opportunities to cultivate talent throughout the organization. We are focused on employee health and safety initiatives and have implemented protocols during the COVID-19 pandemic to enhance workplace safety.
UNIFI endeavors to offer competitive compensation and benefits packages to our employees, as well as professional development opportunities to cultivate talent throughout the organization. We focus on employee health and safety initiatives, with thorough training and monitoring practices to enhance workplace safety.
We sometimes refer to these indirect customers as “brand partners.” Polyester products include partially oriented yarn (“POY”), textured, solution and package dyed, twisted, beamed, and draw wound yarns, and each is available in virgin or recycled varieties. Nylon products include virgin or recycled textured, solution dyed and spandex covered yarns.
We sometimes refer to these indirect customers as “brand partners.” Polyester products include partially oriented yarn (“POY”) and textured, solution and package dyed, twisted, beamed, and draw wound yarns, and each is available in virgin or recycled varieties. Recycled solutions, made from both pre-consumer and post-consumer waste, include plastic bottle flake (“Flake”), polyester polymer beads (“Chip”), and staple fiber.
In calendar 2018, global polyester consumption 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. In calendar 2018, global nylon consumption accounted for an estimated 5% of global fiber consumption.
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.
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.
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.
Throughout fiscal 2022, we experienced adverse pressure from rising input costs and weakening labor productivity primarily in our domestic operations. Looking ahead, our operations remain well positioned to capture long-term growth opportunities, and we are working to mitigate any potential recession impacts. Brazil UNIFI’s Brazilian operations play a key role in our strategy.
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.
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.
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.
In addition, in fiscal 2021, we received comparably favorable Higg Materials Sustainability Index scores for REPREVE produced in the U.S., demonstrating that the brand’s global warming potential is meaningfully better than conventional alternatives such as generic recycled yarn and virgin yarn.
During fiscal 2023, we achieved a significant milestone by surpassing more than 35 billion recycled plastic bottles transformed since the inception of REPREVE. In addition, in fiscal 2021 and 2023, we received comparably favorable Higg Materials Sustainability Index scores for REPREVE produced in the U.S., demonstrating that the brand’s global warming potential is meaningfully better than conventional alternatives.
Because UNIFI is the largest of only a few significant producers of Compliant Yarns under these Regional FTAs, one of UNIFI’s business strategies is to continue to leverage its eligibility status for duty-free processing to increase its share of business with regional and domestic fabric producers who ship their products into this region. 6 Over the longer term, the textile industry in the NACA region is expected to continue to be impacted by Asian supply chains where costs are much lower and regulation is limited.
Because UNIFI is the largest of only a few significant producers of Compliant Yarns under the Regional FTAs, UNIFI continues to leverage its eligibility status for duty-free processing to increase its share of business with regional and domestic fabric producers who ship their products into this region.
Due to these severe lockdowns in China, the Asia Segment’s results were adversely impacted, primarily during the fourth quarter of fiscal 2022. We also believe that if these lockdowns remain in place, this could adversely impact the results of our Asia Segment in the first half of fiscal 2023, along with the current global demand uncertainty.
Due to these severe lockdowns in China, the Asia Segment’s results were adversely impacted, primarily during the fourth quarter of fiscal 2022 and the first half of fiscal 2023. While pandemic restrictions eased during fiscal 2023, reversion could adversely impact our operating results.
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 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.
UNIFI’s major competitor in Brazil is Petroquimica Suape (Companhia Petroquimica de Pernambuco or PQS), among other traders of imported yarns and fibers. UNIFI’s operations in Asia face competition from multiple yarn manufacturers in that region and identification of them is not feasible.
UNIFI’s operations in Asia face competition from multiple yarn manufacturers in that region and identification of them is not feasible.
While we have navigated the dynamic cost environment better than in recent prior years, elevated levels of input costs and lower levels of labor productivity in our manufacturing operations adversely impacted our gross margin and remain headwinds to UNIFI’s profitability.
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.
We are encouraged by programs undertaken with key brands and retailers that benefit from the diversification and innovation of our global portfolio. UNIFI’s operations in Asia and Brazil have been critical to global growth and expansion.
We are encouraged by programs undertaken with key brands and retailers that benefit from the diversification and innovation of our global portfolio and expect a rebound in the Asian market in the second half of fiscal 2024.
According to the National Council of Textile Organizations, the U.S. textile and apparel industry’s total shipments were approximately $65.2 billion for calendar 2021 as the U.S. textile and apparel industry exported nearly $28.4 billion of textile and apparel products. The U.S. textile industry remains a large manufacturing employer.
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.
Imports of polyester textured yarn from China and India, which increased approximately 79% from calendar 2013 to 2017 and which continued to grow during calendar 2018, remained elevated during fiscal 2019 and created considerable pressure on our margins and competitiveness in the U.S. Accordingly, in October 2018, UNIFI filed antidumping and countervailing duty cases with the U.S.
Over the longer term, the textile industry in this region is expected to continue to be impacted by Asian supply chains where costs are much lower and regulation is limited. 6 Imports of polyester textured yarn from China and India, which increased approximately 79% from calendar 2013 to 2017 and which continued to grow during calendar 2018, remained elevated during fiscal 2019 and created considerable pressure on our margins and competitiveness in the U.S.
The Americas Segment consists of sales and manufacturing operations in the U.S., El Salvador and Colombia that utilize the Dominican Republic—Central America Free Trade Agreement (“CAFTA-DR”) and the United States-Mexico-Canada Agreement (“USMCA”).
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”).
Recycled solutions, made from both pre-consumer and post-consumer waste, include plastic bottle flake (“Flake”) made from polyester, and polymer beads (“Chip”) and staple fiber made from polyester or nylon. UNIFI maintains one of the textile industry’s most comprehensive product offerings that includes a range of specialized, value-added and commodity solutions, with principal geographic markets in the Americas, Asia, and Europe.
Nylon products include virgin or recycled textured, solution dyed, and spandex covered yarns. UNIFI maintains one of the textile industry’s most comprehensive product offerings that includes a range of specialized, value-added and commodity solutions, with principal geographic markets in North America, Central America, South America, Asia, and Europe.
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. UNIFI’s top 10 direct customers accounted for approximately 24% of consolidated net sales for fiscal 2022 and approximately 34% of receivables as of July 3, 2022.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 10, “Other Non-Current Assets” under the subheading “ Investments in Unconsolidated Affiliates and Variable Interest Entities ,” to the accompanying consolidated financial statements. During fiscal 2020, UNIFI and Parkdale finalized negotiations to sell UNIFI’s PAL Investment to Parkdale for $60,000.
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 .
Prior to the establishment of the USMCA, we benefited from a similar, historical agreement known as the North American Free Trade Agreement (“NAFTA”). • 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 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.
Subsequent to the multi-year capital investment plan, our capital investments have ranged from approximately $15,000 to $25,000 each fiscal year, and most recently include (i) making further improvements in production capabilities and technology enhancements in the Americas and (ii) annual maintenance capital expenditures. 4 Fiscal 2022 capital investments increased to approximately $40,000 in connection with our plans to invest 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.
Subsequent to the multi-year capital investment plan, our capital investments ranged from approximately $15,000 to $25,000 each fiscal year, and most recently included making (i) further improvements in production capabilities and technological enhancements in the Americas and (ii) annual maintenance capital expenditures.
We are encouraged by the initial 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. Nonetheless, 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.
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.
UNIFI will continue to monitor the Russia-Ukraine conflict, the COVID-19 pandemic, and the potential recessionary pressures that have become pervasive in calendar 2022. REPREVE ® In the early 2000s, by recycling our own production waste into useful polyester fibers, we took the first steps toward building an important supply chain with a focus on sustainability and environmental responsibility.
REPREVE ® In the early 2000s, by recycling our own production waste into useful polyester fibers, we took the first steps toward building an important supply chain with a focus on sustainability and environmental responsibility. After nearly two decades, our REPREVE brand has become the quintessential recycled fiber of choice for brand, retail, and textile partners around the globe.
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 Customers UNIFI’s Americas Segment, Brazil Segment and Asia Segment serve approximately 550, 400, and 800 customers, respectively, all in a variety of geographic markets.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA decline or change in general economic conditions, political conditions, and/or levels of consumer spending could cause a decline in demand for textile products, including UNIFI’s products. UNIFI’s products are used in the production of fabric primarily for the apparel, hosiery, home furnishings, automotive, industrial, and other end-use markets.
Biggest changeUNIFI’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.
In order to compete effectively, we must attract, retain, and motivate 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, 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.
UNIFI’s business is susceptible to risks associated with climate change, including, but not limited to, disruptions to our supply chain, which could potentially impact the production and distribution of our products and availability and pricing of raw materials.
UNIFI’s business is susceptible to risks associated with climate change, including, but not limited to, disruptions to our supply chain, which could potentially impact the production and distribution of our products and the availability and pricing of raw materials.
Any disruption from a cyber attack could require substantial expenditures and recovery time in order to fully resume operations and could also have a material adverse effect on our operations and financial results to the extent losses are uninsured or exceed insurance recoveries and to the extent that such disruptions adversely impact our relationships with our customers.
However, any disruption from a cyber attack could require substantial expenditures and recovery time in order to fully resume operations and could also have a material adverse effect on our operations and financial results to the extent losses are uninsured or exceed insurance recoveries and to the extent that such disruptions adversely impact our relationships with our customers.
UNIFI has foreign operations in Brazil, China, Colombia, El Salvador, and Turkey and participates in joint ventures located in Israel. 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 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.
According to industry experts and trade associations, there has been a significant amount of illegal transshipments of POY and apparel products into the U.S. and into certain other countries in the NACA region in which UNIFI competes.
According to industry experts and trade associations, there has been a significant amount of illegal transshipments of POY and apparel products into the U.S. and into certain other countries in the Americas region in which UNIFI competes.
Such changes in U.S. import duties might also result in increased indirect costs on items imported to support UNIFI’s domestic operations and/or countervailing or responsive changes applicable to exports of our products outside the U.S.
Such changes in import duties in the U.S. and other countries in which we operate might also result in increased direct and indirect costs on items imported to support UNIFI’s operations and/or countervailing or responsive changes applicable to exports of our products outside the U.S.
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. 14 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.
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.
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.
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.
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 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.
Any such development would have a material adverse effect on UNIFI. 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.
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.
In particular, devaluation of the Chinese currency against the USD could result in UNIFI’s products becoming less competitive from a pricing standpoint and/or could result in the NACA region losing market share to Chinese imports, thereby adversely impacting UNIFI’s sales and profits. While these foreign competitors have traditionally focused on commodity production, they are now increasingly focused on value-added products.
In particular, devaluation of the Chinese currency against the USD could result in UNIFI’s products becoming less competitive from a pricing standpoint and/or could result in the Americas region losing market share to Chinese imports, thereby adversely impacting UNIFI’s sales and profits.
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.
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.
Increased frequency and intensity of weather events due to climate change could lead to supply chain disruption, energy and resource rationing, or an adverse event at one of our manufacturing facilities or the facilities of our manufacturing partners. Further, the recent energy management initiatives in China temporarily constrained global supply chains and reduced supplier and customer activity.
Increased frequency and intensity of weather events could lead to supply chain disruption, energy and resource rationing, or an adverse event at one of our manufacturing facilities or the facilities of our manufacturing partners. Further, regulatory responses to climate change could adversely affect our operations.
However, the COVID-19 pandemic could resurge or another epidemic or pandemic could arise, and, accordingly, we will remain diligent and responsive to ensure the vitality of the organization. The risks associated with climate change, localized energy management initiatives, and other environmental impacts could negatively affect UNIFI’s business and operations.
UNIFI 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.
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. We carry commercial property damage and business interruption insurance against various risks, with limits we deem adequate, for reimbursement for damage to our fixed assets and resulting disruption of our operations.
We carry commercial property damage and business interruption insurance against various risks, with limits we deem adequate, for reimbursement for damage to our fixed assets and resulting disruption of our operations.
We seek to detect and investigate all security incidents and to prevent their recurrence, but in some cases we might be unaware of an incident or its magnitude and effects.
We seek to detect and investigate all security incidents and to prevent their recurrence, but in some cases we might be unaware of an incident or its magnitude and effects. We carry cyber liability insurance against cyber attacks, with limits we deem adequate for the reimbursement for damage to our computers, equipment, and networks and resulting disruption of our operations.
To the extent that any cybersecurity breach results in inappropriate disclosure of our customers’ or brand partners’ confidential information, we may incur a liability as a result. In addition, devoting additional resources to the security of our information technology systems in the future could significantly increase the cost of doing business or otherwise adversely impact our financial results.
To the extent that any cybersecurity breach results in inappropriate disclosure of our customers’ or brand partners’ confidential information, we may incur significant liability and reputational harm as a result.
The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending, and affecting global supply chains. The duration of the COVID-19 pandemic and its long-term impact on our businesses is currently unknown. Ongoing containment efforts such as travel bans and restrictions, quarantines, and business shutdowns continue to negatively impact the global economy.
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.
If further declines are significant in any one year or the cumulative decline over a number of years is significant, the impact could have a material adverse effect on UNIFI’s business, financial condition, results of operations, or cash flows. 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. 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.
Removed
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
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.
Removed
We carry data protection liability insurance against cyber attacks, with limits we deem adequate for the reimbursement for damage to our computers, equipment, and networks and resulting disruption of our operations.
Added
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.
Removed
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 also tends to be tied to economic cycles and customer preferences that affect the textile industry in general.
Added
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.
Removed
Additionally, the end-consumer retail and apparel markets may continue to experience difficult conditions characterized by reduced retail traffic and growth in online sales channels, which may cause bankruptcies, store closures, and other transformations for traditional retail enterprises, which could have an adverse effect on UNIFI’s business and financial condition.
Added
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.
Removed
Historic trends indicate weakening performance in the nylon sector on a global basis.
Added
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.
Removed
Specifically, containment efforts in China have impacted our supply chain, negatively impacting the results of our Asia Segment. The duration of these containment efforts and future impact on our business is difficult to predict. UNIFI will continue to monitor the COVID-19 pandemic by prioritizing health and safety while delivering on customer demand.
Added
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.
Removed
UNIFI remains focused on diversifying our product portfolio and manufacturing footprint while utilizing fewer resources to help address the risks associated with climate change. Nonetheless, the associated risks could adversely impact our results of operations and cash flows. 16 Item 1B. Unresolved Staff Comments None.
Added
In addition, devoting additional resources to the security of our information technology systems in the future could significantly increase the cost of doing business or otherwise adversely impact our financial results. A decline or change in general economic conditions, political conditions, and/or levels of consumer spending could cause a decline in demand for textile products, including UNIFI’s products.
Added
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.
Added
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.

Item 2. Properties

Properties — owned and leased real estate

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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 Reidsville, North Carolina Warehouse 80,000 Leased Madison, North Carolina Manufacturing facility 947,000 Owned Madison, North Carolina Warehouse 31,000 Owned Ridgeway, Virginia Warehouse 12,000 Leased Foreign Ciudad Arce, El Salvador Manufacturing facility 132,000 Leased Ciudad Arce, El Salvador Warehouse 49,000 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 307,000 Owned Sao Paulo, Brazil Corporate office 12,000 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 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.
Item 2. Properties The following table contains information about the principal properties owned or leased by UNIFI as of July 3, 2022: 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 July 2, 2023 (not in thousands): Location Principal Use Approx. Total Area (Sq.
In fiscal 2022, UNIFI’s manufacturing facilities in the Americas Segment operated below capacity for most of the year, in part due to the availability and productivity of labor. Management does not perceive any capacity constraints in the foreseeable future.
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.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeSigmon served as an officer in the legal department of BB&T Corporation in Winston-Salem, North Carolina (“BB&T”), where he was a Vice President from April 2018 to August 2019, an Assistant Vice President from September 2015 to March 2018, and a graduate of BB&T’s Leadership Development Program. Mr.
Biggest changeBefore 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.
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: 32 – 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.
Craig A. Creaturo – Age: 52 – 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.
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.
Item 4. Mine Safety 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. 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.
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: 57 – Mr. Ingle has served as Chief Executive Officer of UNIFI and a member of UNIFI’s 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: 58 – Mr. Ingle has served as Chief Executive Officer of UNIFI and a member of the Board since June 2020.
Sigmon, 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 July 2020 to July 2022 and as Assistant General Counsel of the Company from September 2019 to June 2020. Before joining UNIFI, Mr.
Sigmon, 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.
Albert P. Carey – Age: 70 – Mr. Carey has served as Executive Chairman of the Board of UNIFI since April 2019. Mr. Carey previously served as Non-Executive Chairman of the Board of the Company from January 2019 to March 2019. In March 2019, Mr.
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.
Creaturo is a Certified Public Accountant in the Commonwealth of Pennsylvania. Hongjun Ning – Age: 55 – 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.
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.
Added
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−0 removed3 unchanged
Biggest changeUNIFI 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. 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 23, 2017.
Biggest changeIn 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.
Under the 2018 SRP, purchases may be made from time to time in the open market at prevailing market prices, through private transactions, or via 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.
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 5,900 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 4,350 beneficial owners of its common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder 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 26, 2022, there were 125 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 24, 2023, there were 117 record holders of UNIFI’s common stock.
As of July 3, 2022, UNIFI has repurchased 701 shares at an average price of $15.90, leaving $38,859 available for repurchase under the 2018 SRP.
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.
June 23, 2017 June 22, 2018 June 28, 2019 June 26, 2020 June 25, 2021 July 1, 2022 Unifi, Inc. $ 100.00 $ 108.99 $ 62.83 $ 40.35 $ 85.58 $ 48.48 S&P SmallCap 600 100.00 122.18 111.94 92.57 162.40 133.82 NYSE Composite 100.00 110.37 117.00 106.70 156.55 140.74
June 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
Added
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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

114 edited+40 added−37 removed30 unchanged
Biggest changeNet income (loss) Fiscal 2022 % Change Fiscal 2021 % Change Fiscal 2020 Net sales $ 815,758 22.2 $ 667,592 10.1 $ 606,509 Cost of sales 735,273 28.1 574,098 1.2 567,469 Gross profit 80,485 (13.9 ) 93,494 139.5 39,040 SG&A expenses 52,489 2.2 51,334 17.2 43,814 (Benefit) provision for bad debts (445 ) (66.2 ) (1,316 ) (175.7 ) 1,739 Other operating (income) expense, net (158 ) (103.2 ) 4,865 110.8 2,308 Operating income (loss) 28,599 (25.9 ) 38,611 nm (8,821 ) Interest expense, net 1,561 (42.6 ) 2,720 (33.0 ) 4,057 (Earnings) loss from unconsolidated affiliates (605 ) (18.1 ) (739 ) nm 477 Recovery of non-income taxes, net 815 (108.4 ) (9,717 ) nm — Gain on sale of investment in unconsolidated affiliate — — — nm (2,284 ) Impairment of investment in unconsolidated affiliate — — — nm 45,194 Income (loss) before income taxes 26,828 (42.1 ) 46,347 (182.4 ) (56,265 ) Provision for income taxes 11,657 (32.5 ) 17,274 nm 972 Net income (loss) $ 15,171 (47.8 ) $ 29,073 (150.8 ) $ (57,237 ) nm – not meaningful 23 EBITDA and Adjusted EBITDA (Non-GAAP Measures) Fiscal 2022 Fiscal 2021 Fiscal 2020 Net income (loss) $ 15,171 $ 29,073 $ (57,237 ) Interest expense, net 1,561 2,720 4,057 Provision for income taxes 11,657 17,274 972 Depreciation and amortization expense (1) 25,986 25,293 23,406 EBITDA 54,375 74,360 (28,802 ) Equity in loss of PAL — — 960 EBITDA excluding PAL 54,375 74,360 (27,842 ) Recovery of non-income taxes, net (2) 815 (9,717 ) — Gain on sale of investment in unconsolidated affiliate (3) — — (2,284 ) Impairment of investment in unconsolidated affiliate (3) — — 45,194 Severance (4) — — 1,485 Adjusted EBITDA $ 55,190 $ 64,643 $ 16,553 The reconciliations of the amounts reported under GAAP for Net Income (Loss) to EBITDA and Adjusted EBITDA are as follows.
Biggest changeNet (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.
EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted EPS, Adjusted Working Capital, and Net Debt (collectively, the “non-GAAP financial measures”) are not determined in accordance with GAAP and should not be considered a substitute for performance measures determined in accordance with GAAP.
EBITDA, Adjusted EBITDA, Adjusted Net (Loss) Income, Adjusted EPS, Adjusted Working Capital, and Net Debt (collectively, the “non-GAAP financial measures”) are not determined in accordance with GAAP and should not be considered a substitute for performance measures determined in accordance with GAAP.
Management uses Adjusted Net Income (Loss) and Adjusted EPS (i) as measurements of net operating performance because they assist us in comparing such performance on a consistent basis, as they remove the impact of (a) items that we would not expect to occur as a part of our normal business on a regular basis and (b) components of the provision for income taxes that we would not expect to occur as a part of our underlying taxable operations; (ii) for planning purposes, including the preparation of our annual operating budget; and (iii) as measures in determining the value of other acquisitions and dispositions.
Management uses Adjusted Net (Loss) Income and Adjusted EPS (i) as measurements of net operating performance because they assist us in comparing such performance on a consistent basis, as they remove the impact of (a) items that we would not expect to occur as a part of our normal business on a regular basis and (b) components of the provision for income taxes that we would not expect to occur as a part of our underlying taxable operations; (ii) for planning purposes, including the preparation of our annual operating budget; and (iii) as measures in determining the value of other acquisitions and dispositions.
Consolidated Overview The below tables provide: • the components of net income (loss) and the percentage increase or decrease over the prior fiscal year amounts, • a reconciliation from net income (loss) to EBITDA and Adjusted EBITDA, and • a reconciliation from net income (loss) to Adjusted Net Income (Loss) and Adjusted EPS.
Consolidated Overview The below tables provide: • the components of net (loss) income and the percentage increase or decrease over the prior fiscal year amounts, • a reconciliation from net (loss) income to EBITDA and Adjusted EBITDA, and • a reconciliation from net (loss) income to Adjusted Net (Loss) Income and Adjusted EPS.
Following the tables is a discussion and analysis of the significant components of net income (loss).
Following the tables is a discussion and analysis of the significant components of net (loss) income.
Under the 2018 SRP, purchases will be made from time to time in the open market at prevailing market prices, through private transactions, or via 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 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.
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 income (loss) and earnings per share; • Segment Profit, which equals segment gross 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 income (loss) before net interest expense, income tax expense and depreciation and amortization expense; • Adjusted EBITDA, which represents EBITDA adjusted to exclude equity in loss of PAL and, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI; • Adjusted Net Income (Loss), which represents net income (loss) 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 Income (Loss) 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 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.
UNIFI’s foreign operations in Asia and Brazil are in a position to obtain local country financing arrangements due to the strong operating results of each subsidiary. Cash Provided by Operating Activities The significant components of net cash provided by operating activities are summarized below.
UNIFI’s foreign operations in Asia and Brazil are in a position to obtain local country financing arrangements due to the operating results of each subsidiary. Cash Provided by Operating Activities The significant components of net cash provided by operating activities are summarized below.
Management’s discussion and analysis should be read in conjunction with the remainder of this Annual Report, with the understanding that forward-looking statements may be present. A reference to a “note” refers to the accompanying notes to consolidated financial statements.
Management’s discussion and analysis should be read in conjunction with the remainder of this report, with the understanding that forward-looking statements may be present. A reference to a “note” refers to the accompanying notes to consolidated financial statements.
However, 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 quickly respond to demand recovery.
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.
Domestically, UNIFI’s cash balances, cash provided by operating activities and borrowings available under the ABL Revolver continue to be sufficient to fund UNIFI’s domestic operating activities as well as cash commitments for its investing and financing activities.
Domestically, UNIFI’s cash balances, cash provided by operating activities, and borrowings available under the 2022 ABL Revolver continue to be sufficient to fund UNIFI’s domestic operating activities as well as cash commitments for its investing and financing activities.
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 or extensions of existing 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 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.
Looking ahead, our operations remain well positioned to capture long-term growth opportunities and we are working to mitigate any potential recession impacts. Once global economic pressures subside, we believe incremental revenue for the Americas Segment will be generated from both the polyester textured yarn trade petitions, along with continued demand for innovative and sustainable products.
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. Once global economic pressures subside, we believe incremental revenue for the Americas Segment will be generated from both the polyester textured yarn trade petitions, along with continued demand for innovative and sustainable products.
Such obligations, predominantly related to ongoing operations and service contracts in support of normal course business, range from approximately $5,000 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. 3.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is management’s discussion and analysis of certain significant factors that have affected UNIFI’s operations, along with material changes in financial condition, during the periods included in the accompanying consolidated financial statements.
Item 7. Management’s Discussion and Analysis o f Financial Condition and Results of Operations The following is management’s discussion and analysis of certain significant factors that have affected UNIFI’s operations, along with material changes in financial condition, during the periods included in the accompanying consolidated financial statements.
Significant investing activities included (i) approximately $21,000 for capital expenditures that primarily relate to ongoing maintenance capital expenditures along with production capabilities and technology enhancements in the Americas and (ii) approximately $3,600 for intangible asset purchases in connection with two bolt-on asset acquisitions in an effort to expand our customer portfolios in the U.S.
Fiscal 2021 Significant investing activities included (i) approximately $21,000 for capital expenditures that primarily relate to ongoing maintenance capital expenditures along with production capabilities and technological enhancements in the Americas and (ii) approximately $3,600 for intangible asset purchases in connection with two bolt-on asset acquisitions in an effort to expand our customer portfolios in the U.S.
Additionally, the impacts of discrete and other rate impacting items are greater when income before income taxes is lower. Fiscal 2022 vs.
Additionally, the impacts of discrete and other rate impacting items are greater when income before income taxes is lower. Fiscal 2023 vs.
UNIFI considers $26,253 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 $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.
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 3, 2022, 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 July 2, 2023, UNIFI’s contractual obligations consisted of the following additional concepts and considerations. 1.
Although we experienced a significant increase in net sales, input cost and labor challenges muted our Americas gross profit, primarily in the last nine months of fiscal 2022. • For the Americas Segment, gross profit decreased due to higher-than-expected input costs primarily for raw material, labor, packaging, and supplies, along with weaker labor productivity, offsetting the benefit from the restoration of U.S. demand following the negative impact the COVID-19 pandemic had on fiscal 2021. • For the Brazil Segment, gross profit decreased primarily due to lower volumes and a more normalized market environment in fiscal 2022 following the exceptional performance of the Brazil Segment in fiscal 2021. • For the Asia Segment, gross profit increased primarily due to higher sales volumes.
Although we experienced a significant increase in net sales, input cost and labor challenges negatively impacted our Americas gross profit, primarily in the last nine months of fiscal 2022. • For the Americas Segment, gross profit decreased due to higher-than-expected input costs primarily for raw material, labor, packaging, and supplies, along with weaker labor productivity, offsetting the benefit from the restoration of U.S. demand following the worst months of the COVID-19 pandemic. • For the Brazil Segment, gross profit decreased primarily due to lower volumes and a more normalized market environment in fiscal 2022 following the exceptional performance of the Brazil Segment in fiscal 2021. • For the Asia Segment, gross profit increased primarily due to higher sales volumes.
The 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”).
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”).
UNIFI’s ability to borrow under the ABL Revolver is limited to a borrowing base equal to specified percentages of eligible accounts receivable and inven tories and is subject to certain conditions and limitations. There is also a monthly unused line fee under the ABL Revolver of 0.25%.
UNIFI’s ability to borrow under the 2022 ABL Revolver is limited to a borrowing base equal to specified percentages of eligible accounts receivable and inventories and is subject to certain conditions and limitations. There is also a monthly unused line fee under the 2022 ABL Revolver of 0.25%.
(2) In fiscal 2021, UNIFI recorded a recovery of non-income taxes of $9,717 related to favorable litigation results for its Brazilian operations, generating overpayments that resulted from excess social program taxes paid in prior fiscal years. For fiscal 2022, UNIFI reduced the estimated benefit based on additional clarity and review of the recovery process during the months following the decision.
(4) In fiscal 2021, UNIFI recorded a recovery of non-income taxes of $9,717 related to favorable litigation results for its Brazilian operations, generating overpayments that resulted from excess social program taxes paid in prior fiscal years. For fiscal 2022, UNIFI reduced the estimated benefit based on additional clarity and review of the recovery process.
Capital Projects In fiscal 2022, UNIFI invested $39,631 in capital projects, primarily relating to (i) eAFK Evo texturing machinery, (ii) further improvements in production capabilities and technology enhancements in the Americas, and (iii) routine annual maintenance capital expenditures.
In fiscal 2022, UNIFI invested $39,631 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 2021, UNIFI invested $21,178 in capital projects, primarily relating to (i) further improvements in production capabilities and technology enhancements in the Americas, (ii) eAFK Evo texturing machines, and (iii) routine annual maintenance capital expenditures.
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.
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 $6,046.
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.
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.
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.
Raw Material and Foreign Currency Raw material costs represent a significant portion of UNIFI’s manufactured product costs. The prices for the principal raw materials used by UNIFI continually fluctuate, and it is difficult or impossible to predict trends or upcoming developments.
Fluctuations in Raw Material Costs and Foreign Currency Exchange Rates Raw material costs represent a significant portion of UNIFI’s product costs. The prices for the principal raw materials used by UNIFI continually fluctuate, and it is difficult or impossible to predict trends or upcoming developments.
UNIFI’s primary sources of capital are cash generated from operations and borrowings available under the ABL Revolver (as defined below) of its credit facility. As of July 3, 2022, all of UNIFI’s $114,290 of debt obligations were guaranteed by certain of its domestic operating subsidiaries, and 99% of UNIFI’s cash and cash equivalents were held by its foreign subsidiaries.
UNIFI’s primary sources of capital are cash generated from operations and borrowings available under the 2022 ABL Revolver (as defined below) of its credit facility. As of July 2, 2023, all of UNIFI’s $140,899 of debt obligations were guaranteed by certain of its domestic operating subsidiaries, and 99% of UNIFI’s cash and cash equivalents were held by its foreign subsidiaries.
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. 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. 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 decrease primarily reflected lower-than-expected credit losses on outstanding receivables following the adverse effects of the COVID-19 pandemic on customer financial health. Other Operating (Income) Expense, Net Fiscal 2022 vs.
Fiscal 2021 reflected lower-than-expected credit losses on outstanding receivables following the adverse effects of the COVID-19 pandemic on customer financial health. Other Operating Expense (Income), Net Fiscal 2023 vs.
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. Such obligations are approximately $32,000 and $12,000 for fiscal years 2023 and 2024, respectively. 2.
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. Such obligations are approximately $6,000 and $19,000 for fiscal years 2024 and 2025, respectively. 2.
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 3, 2022 June 27, 2021 June 28, 2020 Net realizable value adjustment $ (3,487 ) $ (2,407 ) $ (4,224 )
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 )
If excess availability under the ABL Revolver falls below the Trigger Level (as defined in the 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 July 3, 2022 was $20,625.
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.
Non-capital purchase orders totaled approximately $75,000 at the end of fiscal 2022 and are expected to be settled in fiscal 2023.
Non-capital purchase orders totaled approximately $74,000 at the end of fiscal 2023 and are expected to be settled in fiscal 2024.
The applicable margin is based on (i) the excess availability under the ABL Revolver and (ii) the consolidated leverage ratio, calculated as of the end of each fiscal quarter.
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.
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 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.
Additionally, UNIFI considers opportunities to deploy existing cash to preserve or enhance liquidity. In August 2022, we repatriated approximately $14,000 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, 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.
However, further degradation in the macro-economic environment could introduce additional liquidity risk and require UNIFI to limit cash outflows for capital expenditures and discretionary activities, while also 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 for discretionary activities while further utilizing available and additional forms of credit.
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; (ii) our ability to fund our operations, capital expenditures, and expected business growth; or (iii) the financial targets we have set for fiscal 2025.
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.
In connection with this construction financing arrangement, UNIFI has borrowed a total of $3,222 and transitioned $2,493 of completed asset costs to finance lease obligations as of July 3, 2022. 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 $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.
Other balance sheet items are detailed within the notes to the consolidated financial statements, including but not limited to annual incentive compensation, severance agreements, post-employment plan liabilities, unpaid invoice and contract amounts, interest rate swaps, and other balances and charges that primarily relate to normal course operations.
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.
The BRL to USD weighted average exchange rate was 5.21, 5.38, and 4.29 for fiscal 2022, 2021 and 2020, respectively. The RMB to USD weighted average exchange rate was 6.45, 6.60, and 7.03 for fiscal 2022, 2021 and 2020, respectively. Key Performance Indicators and Non-GAAP Financial Measures UNIFI continuously reviews performance indicators to measure its success.
The BRL to USD weighted average exchange rate was 5.17, 5.21, and 5.38 for fiscal 2023, 2022, and 2021, respectively. The RMB to USD weighted average exchange rate was 6.94, 6.45, and 6.60 for fiscal 2023, 2022, and 2021, respectively. 22 Key Performance Indicators and Non-GAAP Financial Measures UNIFI continuously reviews performance indicators to measure its success.
These increases are partially offset by (i) lower U.S. tax on GILTI in in fiscal 2022 and (ii) a discrete benefit in fiscal 2022 related to a favorable Supreme Court ruling in Brazil. Fiscal 2021 vs.
These increases are partially offset by (i) lower U.S. tax on GILTI in in fiscal 2022 and (ii) a discrete benefit in fiscal 2022 related to a favorable SFC ruling in Brazil. Net (Loss) Income Fiscal 2023 vs.
The Credit Agreement provides for a $200,000 senior secured credit facility (the “ABL Facility”), including a $100,000 revolving credit facility (the “ABL Revolver”) and a term loan that can be reset up to a maximum amount of $100,000, once per fiscal year, if certain conditions are met (the “ABL Term Loan”).
The 2022 Credit Agreement provides for a $230,000 senior secured credit facility (the “2022 ABL Facility”), including a $115,000 revolving credit facility (the "2022 ABL Revolver") and a term loan (the "2022 ABL Term Loan") that can be reset up to a maximum amount of $115,000, once per fiscal year, if certain conditions are met.
When applicable, management’s discussion and analysis includes specific consideration for items that comprise the reconciliations of its non-GAAP financial measures. 22 We believe that these non-GAAP financial measures better reflect UNIFI’s underlying operations and performance and that their use, as operating performance measures, provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets, among otherwise comparable companies.
We believe that these non-GAAP financial measures better reflect UNIFI’s underlying operations and performance and that their use, as operating performance measures, provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets, among otherwise comparable companies.
See “Non-GAAP Reconciliations” below for reconciliations of non-GAAP metrics to the most directly comparable GAAP metric. Review of Results of Operations for Fiscal 2022, 2021 and 2020 Fiscal 2022 contained 53 weeks and fiscal 2021 and 2020 were each comprised of 52 weeks.
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.
Significant investing activities included $39,631 for capital expenditures, which primarily relate to ongoing maintenance capital expenditures along with production capabilities and technology enhancements in the Americas. 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.
Significant financing activities included $22,200 of net borrowings against the ABL Facility, along with $2,123 of payments on finance lease obligations during fiscal 2023. Fiscal 2022 Significant investing activities included $39,631 for capital expenditures, which primarily relate to ongoing maintenance capital expenditures along with production capabilities and technological enhancements in the Americas.
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. The maturity date of these obligations is June 2025 with an interest rate of 3.8%.
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.
The decrease in net income was primarily attributable to (i) lower gross profit, (ii) a higher effective tax rate in fiscal 2022, and (iii) the favorable impact of the recovery of non-income taxes in fiscal 2021. Fiscal 2021 vs.
The decrease in net income was primarily attributable to (i) lower gross profit, (ii) a higher effective tax rate in fiscal 2022, and (iii) the favorable impact of the recovery of non-income taxes in fiscal 2021. Adjusted EBITDA Adjusted EBITDA decreased from $55,190 for fiscal 2022 to ($4,085) for fiscal 2023, primarily in connection with the decrease in gross profit.
Americas 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 2022 % Change Fiscal 2021 % Change Fiscal 2020 Net sales $ 483,085 24.9 $ 386,779 1.7 $ 380,138 Cost of sales 458,617 30.9 350,373 (5.0 ) 368,976 Gross profit 24,468 (32.8 ) 36,406 226.2 11,162 Depreciation expense 21,153 0.5 21,054 9.2 19,274 Segment Profit $ 45,621 (20.6 ) $ 57,460 88.8 $ 30,436 Gross margin 5.1 % 9.4 % 2.9 % Segment margin 9.4 % 14.9 % 8.0 % Segment net sales as a percentage of consolidated amount 59.2 % 57.9 % 62.7 % Segment Profit as a percentage of consolidated amount 44.2 % 49.6 % 51.0 % The changes in net sales for the Americas Segment are as follows: Net sales for fiscal 2020 $ 380,138 Increase in sales volumes 3,333 Net change in average selling price and sales mix 3,308 Net sales for fiscal 2021 $ 386,779 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 The increase in net sales for the Americas Segment from fiscal 2021 to fiscal 2022 was primarily attributable to (i) higher average selling prices in response to increasing input costs and (ii) an additional week of sales in fiscal 2022.
Americas 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.
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. 37 Recently Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses , with an effective date consistent with UNIFI’s fiscal 2021.
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.
Nonetheless, we understand the current global economic risks and we are prepared to act swiftly and diligently to ensure the vitality of the business. 32 Debt Obligations The following table presents the total balances outstanding for UNIFI’s debt obligations, their scheduled maturity dates and the weighted average interest rates for borrowings as well as the applicable current portion of long-term debt: Weighted Average Scheduled Interest Rate as of Principal Amounts as of Maturity Date July 3, 2022 July 3, 2022 June 27, 2021 ABL Revolver December 2023 3.2% $ 41,300 $ — ABL Term Loan December 2023 3.2% 65,000 77,500 Finance lease obligations (1) 3.6% 7,261 8,475 Construction financing (2) 1.9% 729 882 Total debt 114,290 86,857 Current ABL Term Loan (10,000 ) (12,500 ) Current portion of finance lease obligations (1,726 ) (3,545 ) Unamortized debt issuance costs (255 ) (476 ) Total long-term debt $ 102,309 $ 70,336 ( 1 ) Scheduled maturity dates for finance lease obligations range from March 2025 to November 2027, 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. 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.
The increase in Segment Profit for the Asia Segment from fiscal 2020 to fiscal 2021 was primarily attributable to raw material cost benefits achieved on certain product lines, an improved sales mix, and higher sales volumes. 31 Liquidity and Capital Resources UNIFI’s primary capital requirements are for working capital, capital expenditures, debt service and share repurchases.
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.
Fiscal 2021 Other operating (income) expense, net was expense of $4,865 in fiscal 2021 and income of $158 in fiscal 2022, which primarily reflects (i) foreign currency transaction gains in fiscal 2022 and such transaction losses in fiscal 2021 and (ii) a predominantly non-cash loss on disposal of assets of $2,809 was recorded in fiscal 2021, primarily relating to the removal of existing texturing machinery to allow for the future installation of new eAFK Evo texturing machinery.
Fiscal 2021 Other operating (income) expense, net was expense of $4,865 in fiscal 2021 and income of $158 in fiscal 2022, which primarily reflects (i) foreign currency transaction gains in fiscal 2022 and transaction losses in fiscal 2021 and (ii) a predominantly non-cash loss on disposal of assets of $2,809 recorded in fiscal 2021. Interest Expense, Net Fiscal 2023 vs.
In addition, the ABL Facility contains restrictions on particular payments and investments, including certain restrictions on the payment of dividends and share repurchases.
The Trigger Level as of July 2, 2023 was $22,540. In addition, the 2022 ABL Facility contains restrictions on particular payments and investments, including certain restrictions on the payment of dividends and share repurchases.
Thus, during fiscal 2021, UNIFI recorded a $9,717 recovery of non-income taxes comprised of an estimate of prior fiscal year PIS/COFINS overpayments of $6,167 and associated interest of $3,550. 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.
Thus, during fiscal 2021, UNIFI recorded a $9,717 recovery of non-income taxes comprised of an estimate of prior fiscal year PIS/COFINS overpayments of $6,167 and associated interest of $3,550.
The increase in Segment Profit for the Americas Segment from fiscal 2020 to fiscal 2021 was primarily attributable to the pandemic recovery that led to improved manufacturing productivity and conversion margin. 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 2022 % Change Fiscal 2021 % Change Fiscal 2020 Net sales $ 126,066 31.4 $ 95,976 30.9 $ 73,339 Cost of sales 98,925 53.9 64,281 3.4 62,144 Gross profit 27,141 (14.4 ) 31,695 183.1 11,195 Depreciation expense 1,500 14.1 1,315 (5.1 ) 1,385 Segment Profit $ 28,641 (13.2 ) $ 33,010 162.4 $ 12,580 Gross margin 21.5 % 33.0 % 15.3 % Segment margin 22.7 % 34.4 % 17.2 % Segment net sales as a percentage of consolidated amount 15.5 % 14.4 % 12.1 % Segment Profit as a percentage of consolidated amount 27.8 % 28.5 % 21.1 % The changes in net sales for the Brazil Segment are as follows: Net sales for fiscal 2020 $ 73,339 Increase in average selling price and change in sales mix 20,459 Increase in sales volumes 17,297 Unfavorable foreign currency translation effects (15,119 ) Net sales for fiscal 2021 $ 95,976 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 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 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.
Fiscal 2021 SG&A increased from fiscal 2021, primarily due to higher discretionary expenses, including marketing, advertising, and travel, partially offset by lower incentive compensation for fiscal 2022. Fiscal 2021 vs. Fiscal 2020 SG&A increased from fiscal 2020, primarily due to higher incentive compensation in fiscal 2021 in connection with consolidated out-performance.
Fiscal 2021 SG&A expenses increased from fiscal 2021, primarily due to higher discretionary expenses, including marketing, advertising, and travel, partially offset by lower incentive compensation for fiscal 2022. 26 Benefit for Bad Debts Fiscal 2023 vs. Fiscal 2022 The benefit for bad debts decreased from a benefit of $445 in fiscal 2022 to a benefit of $89 in fiscal 2023.
Adjusted Net Income (Loss) and Adjusted EPS (Non-GAAP Measures) The tables below set forth reconciliations of (i) Income (Loss) before income taxes (“Pre-tax Income (Loss)”), Provision for income taxes (“Tax Impact”) and Net Income (Loss) to Adjusted Net Income (Loss) and (ii) Diluted EPS to Adjusted EPS.
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.
UNIFI will seek to ensure maintenance capital expenditures are sufficient to allow continued production at high efficiencies. The total amount ultimately invested for fiscal 2023 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 by cash provided by operating activities and other borrowings.
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.
As of July 3, 2022: UNIFI was in compliance with all financial covenants in the Credit Agreement; excess availability under the ABL Revolver was $51,409; UNIFI had $0 of standby letters of credit; and the fixed charge coverage ratio was (0.24) to 1.00.
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.
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.
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.
Significant financing activities included $10,000 of net payments against the ABL Facility, along with $3,646 of payments on finance lease obligations. Fiscal 2020 UNIFI generated $41,574 from net investing activities and utilized $37,922 for net financing activities during fiscal 2020.
Significant financing activities included $10,000 of net payments against the ABL Facility, along with $3,646 of payments on finance lease obligations.
Off-Balance Sheet Arrangements UNIFI is not a party to any off-balance sheet arrangements that have had, or are reasonably likely to have, a current or future material effect on UNIFI’s financial condition, results of operations, liquidity or capital expenditures.
Off-Balance Sheet Arrangements UNIFI is not a party to any off-balance sheet arrangements that have had, or are reasonably likely to have, a current or future material effect on UNIFI’s financial condition, results of operations, liquidity or capital expenditures. 37 Critical Accounting Policies The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Net Sales Fiscal 2022 vs. Fiscal 2021 Consolidated net sales for fiscal 2022 increased by $148,166, or 22.2%, and consolidated sales volumes increased 2.7%, compared to fiscal 2021. The increases occurred primarily due to (i) higher selling prices in response to increasing raw material costs and (ii) underlying sales growth led by the Asia Segment and REPREVE products.
The increases occurred primarily due to (i) higher selling prices in response to increasing raw material costs and (ii) underlying sales growth led by the Asia Segment and REPREVE products. 25 Consolidated weighted average sales prices increased 19.5%, primarily attributable to higher selling prices in response to increasing raw material costs.
UNIFI, along with numerous other companies in Brazil, challenged the constitutionality of certain state taxes historically included in the PIS/COFINS tax base. On May 13, 2021, Brazil’s Supreme Federal Court (“SFC”) ruled in favor of taxpayers, and on July 7, 2021, the Brazilian Internal Revenue Service withdrew its existing appeal.
On May 13, 2021, Brazil’s Supreme Federal Court (the “SFC”) ruled in favor of taxpayers, and on July 7, 2021, the Brazilian Internal Revenue Service withdrew its existing appeal.
The increase in Segment Profit for the Brazil Segment from fiscal 2020 to fiscal 2021 was primarily attributable to an improved sales mix and conversion margin combined with higher sales volumes stemming from a temporarily improved competitive position in Brazil, partially offset by unfavorable foreign currency translation effects. 30 Asia 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 Asia Segment are as follows: Fiscal 2022 % Change Fiscal 2021 % Change Fiscal 2020 Net sales $ 206,607 11.8 $ 184,837 20.8 $ 153,032 Cost of sales 177,731 11.5 159,444 16.9 136,349 Gross profit 28,876 13.7 25,393 52.2 16,683 Depreciation expense — — — — — Segment Profit $ 28,876 13.7 $ 25,393 52.2 $ 16,683 Gross margin 14.0 % 13.7 % 10.9 % Segment margin 14.0 % 13.7 % 10.9 % Segment net sales as a percentage of consolidated amount 25.3 % 27.7 % 25.2 % Segment Profit as a percentage of consolidated amount 28.0 % 21.9 % 27.9 % The changes in net sales for the Asia Segment are as follows: Net sales for fiscal 2020 $ 153,032 Change in average selling price and sales mix (16,074 ) Net increase in sales volumes 39,320 Favorable foreign currency translation effects 8,559 Net sales for fiscal 2021 $ 184,837 Net sales for fiscal 2021 $ 184,837 Change in average selling price and sales mix 9,686 Net increase in sales volumes 8,298 Favorable foreign currency translation effects 3,786 Net sales for fiscal 2022 $ 206,607 The increase in net sales for the Asia Segment from fiscal 2021 to fiscal 2022 was primarily attributable to the continued momentum of REPREVE-branded products contributing to underlying sales growth, partially offset by supply chain and shipping challenges in Asia in connection with pandemic-related lockdowns during the fourth quarter of fiscal 2022.
The decrease in Segment Profit for the Brazil Segment from fiscal 2021 to fiscal 2022 was primarily attributable to an overall decrease in gross margin following the normalization of the competitive environment in Brazil, which was exceptionally favorable for the Brazil Segment during the fiscal 2021 economic recovery. 30 Asia 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 Asia Segment are as follows: Fiscal 2023 % Change Fiscal 2022 % Change Fiscal 2021 Net sales $ 114,803 (44.4 ) $ 206,607 11.8 $ 184,837 Cost of sales 98,065 (44.8 ) 177,731 11.5 159,444 Gross profit 16,738 (42.0 ) 28,876 13.7 25,393 Depreciation expense — — — — — Segment Profit $ 16,738 (42.0 ) $ 28,876 13.7 $ 25,393 Gross margin 14.6 % 14.0 % 13.7 % Segment margin 14.6 % 14.0 % 13.7 % Segment net sales as a percentage of consolidated amount 18.4 % 25.3 % 27.7 % Segment Profit as a percentage of consolidated amount 43.7 % 28.0 % 21.9 % The changes in net sales for the Asia Segment are as follows: Net sales for fiscal 2021 $ 184,837 Change in average selling price and sales mix 9,686 Net increase in sales volumes 8,298 Favorable foreign currency translation effects 3,786 Net sales for fiscal 2022 $ 206,607 Net sales for fiscal 2022 $ 206,607 Net decrease in sales volumes (92,535 ) Unfavorable foreign currency translation effects (13,455 ) Change in average selling price and sales mix 14,186 Net sales for fiscal 2023 $ 114,803 The decrease in net sales for the Asia Segment from fiscal 2022 to fiscal 2023 was primarily attributable to weaker global demand and pandemic-related lockdowns driving lower sales volumes, partially offset by a strong sales mix.
As of July 3, 2022, UNIFI repurchased 701 shares at an average price of $15.90, leaving $38,859 available for repurchase under the 2018 SRP. 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.
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.
UNIFI is also impacted by significant fluctuations in the value of the Brazilian Real (“BRL”) and the Chinese Renminbi (“RMB”), the local currencies for our operations in Brazil and China, respectively. Appreciation of the BRL and the RMB improves our net sales and gross profit metrics when the results of our subsidiaries are translated into USDs at comparatively favorable rates.
UNIFI is also impacted by significant fluctuations in the value of the Brazilian Real (the “BRL”) and the Chinese Renminbi (the “RMB”), the local currencies for our operations in Brazil and China, respectively.
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 an interest rate at fiscal year-end of approximately 4.4%.
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%.
Ultimately, combining leading edge innovation with our prominent, high-quality brand and agile regional business model will allow for underlying sales and profitability growth. Significant Developments and Trends During the last five fiscal years, several key drivers affected our financial results.
Ultimately, we believe that combining leading-edge innovation with our prominent, high-quality brand and agile regional business model will allow for underlying sales and profitability growth.
This increase is partially offset by a benefit in fiscal 2021 for the retroactive GILTI high-tax exclusion for prior periods. Net Income (Loss) Fiscal 2022 vs. Fiscal 2021 Net income for fiscal 2022 was $15,171, or $0.80 per diluted share, compared to net income of $29,073, or $1.54 per diluted share, for fiscal 2021.
Fiscal 2022 vs. Fiscal 2021 Net income for fiscal 2022 was $15,171, or $0.80 per diluted share, compared to net income of $29,073, or $1.54 per diluted share, for fiscal 2021.
However, inflationary pressures and demand uncertainty throughout fiscal 2022 and entering into fiscal 2023 have created new risks to liquidity. Currently, UNIFI’s cash and liquidity positions are sufficient to sustain its operations and meet its long-term financial targets.
However, inflationary pressures and demand uncertainty throughout fiscal 2022 and 2023 created risks to liquidity. Following the establishment of the 2022 Credit Agreement, UNIFI’s cash and liquidity positions are considered sufficient to sustain its operations and meet its growth needs.
Adjusted Net Income (Loss) increased from $(10,870) for fiscal 2020 to $22,660 for fiscal 2021, following the improvement in Adjusted EBITDA. 28 Segment Overview Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for fiscal 2022, 2021 and 2020.
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.
The changes in Segment Profit for the Asia Segment are as follows: Segment Profit for fiscal 2020 $ 16,683 Change in underlying margins and sales mix 4,584 Increase in sales volumes 3,156 Favorable foreign currency translation effects 970 Segment Profit for fiscal 2021 $ 25,393 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 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.
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.
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.
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.
Management maintains the capability to improve the fixed charge coverage ratio utilizing existing foreign cash and cash equivalents. UNIFI had maintained three interest rate swaps that fix LIBOR at approximately 1.9% on $75,000 of variable-rate debt. Such swaps terminated in May 2022.
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.
Adjusted Net Income (Loss) Adjusted Net Income decreased from $22,660 for fiscal 2021 to $14,283 for fiscal 2022, commensurate with lower gross profit and a higher effective tax rate.
Adjusted EBITDA decreased from $64,643 for fiscal 2021 to $55,190 for fiscal 2022, consistent with the decrease in gross profit. Adjusted Net (Loss) Income 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.
Further discussion of the terms and conditions of the Credit Agreement and the Company’s existing indebtedness is outlined in Note 12, “Long-Term Debt,” to the accompanying consolidated financial statements. 34 Net Debt (Non-GAAP Financial Measure) The reconciliations for Net Debt are as follows: July 3, 2022 June 27, 2021 Long-term debt $ 102,309 $ 70,336 Current portion of long-term debt 11,726 16,045 Unamortized debt issuance costs 255 476 Debt principal 114,290 86,857 Less: cash and cash equivalents 53,290 78,253 Net Debt $ 61,000 $ 8,604 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: Fiscal 2022 Fiscal 2021 Cash and cash equivalents $ 53,290 $ 78,253 Receivables, net 106,565 94,837 Inventories 173,295 141,221 Income taxes receivable 160 2,392 Other current assets 18,956 12,364 Accounts payable (73,544 ) (54,259 ) Other current liabilities (19,806 ) (31,638 ) Income taxes payable (1,526 ) (1,625 ) Current operating lease liabilities (2,190 ) (1,856 ) Current portion of long-term debt (11,726 ) (16,045 ) Working capital $ 243,474 $ 223,644 Less: Cash and cash equivalents (53,290 ) (78,253 ) Less: Income taxes receivable (160 ) (2,392 ) Less: Income taxes payable 1,526 1,625 Less: Current operating lease liabilities 2,190 1,856 Less: Current portion of long-term debt 11,726 16,045 Adjusted Working Capital $ 205,466 $ 162,525 Working capital increased from $223,644 as of June 27, 2021 to $243,474 as of July 3, 2022, while Adjusted Working Capital increased from $162,525 to $205,466, both primarily in connection with business recovery and higher input costs.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+6 added−4 removed9 unchanged
Biggest changeOur raw material 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.
Biggest changeNonetheless, 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.
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.
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.
Item 7A. Quantitative and Qualitative 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, 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.
A significant portion of sales and asset balances for the Asia Segment are denominated in USD s . During recent fiscal years, UNIFI has been negatively impacted by fluctuations of the BRL and the RMB. Discussion and analysis surrounding the impact of fluctuations of the BRL and the RMB on UNIFI’s results of operations are included above in “Item 7.
A significant portion of sales and asset balances for the Asia Segment are denominated in USDs. During recent fiscal years, UNIFI has been negatively impacted by fluctuations of the BRL and the RMB. Discussion and analysis surrounding the impact of fluctuations of the BRL and the RMB on UNIFI’s results of operations are included above in “Item 7.
We have been able to implement responsive selling price adjustments for the majority of our portfolio, however our underlying gross margin has been pressured somewhat during fiscal 2022. We expect the impact of recent selling price adjustments to improve margins in future periods.
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.
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 3, 2022, UNIFI had borrowings under its ABL Term Facility totaling $106,300.
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 may also enter into foreign currency forward contracts to hedge its exposure for certain equipment or inventory purchase commitments. As of July 3, 2022, UNIFI had no outstanding foreign currency forward contracts. 38 A significant portion of raw materials purchased by the Brazil Segment are denominated in USD s , requiring UNIFI to regularly exchange BRL.
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.
After considering UNIFI’s outstanding debt obligations with fixed rates of interest, UNIFI’s sensitivity analysis indicates that a 50-basis point increase in LIBOR as of July 3, 2022 would result in an increase in annual interest expense of less than $600. 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 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.
As of July 3, 2022, 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 30.2 % Cash and cash equivalents held outside the U.S.: Denominated in USD $ 10,372 Denominated in RMB 28,836 Denominated in BRL 12,115 Denominated in other foreign currencies 125 Total cash and cash equivalents held outside the U.S. $ 51,448 Percentage of total cash and cash equivalents held outside the U.S. 96.5 % Cash and cash equivalents held inside the U.S. in USD by foreign subsidiaries $ 1,315 More information regarding UNIFI’s derivative financial instruments as of July 3, 2022 is provided in Note 18, “Fair Value of Financial Instruments and Non-Financial Assets and Liabilities,” to the accompanying consolidated financial statements.
As 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.
Removed
During fiscal 2019 and 2018, UNIFI operated in a predominantly increasing raw material cost environment. UNIFI believes those higher costs were primarily a result of volatility in the crude oil markets, along with periods of supply and demand constraints for certain polyester feedstock.
Added
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.
Removed
During the second half of fiscal 2021, 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.
Added
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.
Removed
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. 39 Other Risks UNIFI is also exposed to political risk, including changing laws and regulations governing international trade, such as quotas, tariffs and tax laws.
Added
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.
Removed
The degree of impact and the frequency of these events cannot be predicted.
Added
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.
Added
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.
Added
Changes in and Disagreements With Acco untants on Accounting and Financial Disclosure None. 39

Other UFI 10-K year-over-year comparisons