Published: October 27, 2010
Unifi Announces First Quarter Results
GREENSBORO, N.C., Oct. 27 /PRNewswire-FirstCall/ -- Unifi, Inc. (NYSE: UFI) today released preliminary operating results for its first quarter ended September 26, 2010. The Company reported net income for the current quarter of $10.2 million or $0.17 per share compared to net income of $2.5 million or $0.04 per share for the prior year first quarter ended September 27, 2009. The Company also reported net sales of $174 million for the current quarter, an increase of $31 million or 22% compared to net sales of $143 million for the prior year September quarter. Additional highlights for the current quarter include:
-- The Company continued to strengthen its balance sheet with the
redemption of $15 million of its 11.5% Senior Secured Notes due 2014
(the "2014 Notes");
-- The Company's 34% interest in Parkdale America LLC contributed $8.6
million of earnings in equity affiliates, a $6.3 million increase from
the prior year September quarter; and,
-- Adjusted earnings before income taxes, depreciation and amortization
(adjusted EBITDA) were $18.4 million, a $3.3 million improvement over
the prior year September quarter.
Ron Smith, Chief Financial Officer for Unifi, said, "Business conditions in the September quarter were generally favorable across our largest end use segments, and we saw continued strength in overall volume. Results were also positively impacted by operational efficiency gains and improved domestic conversion margins. It is important to note that while the underlying results of Parkdale America were strong, approximately $4.3 million of the Company's earnings in equity affiliates for the quarter is attributable to the timing of deferred revenue recognition by Parkdale America under the terms of the cotton rebate program."
Cash-on-hand as of September 26, 2010 was $26.3 million, a decrease of $16.4 million from June 27, 2010, as the Company used excess operating cash to call $15 million of the 2014 Notes. Since September 2009, total debt for the Company has been reduced by more than $21 million.
At the Company's annual meeting of its shareholders held earlier today, the Company's shareholders approved a proposal to amend the Company's Restated Certificate of Incorporation to effect a reverse stock split of the Company's common stock at a reverse stock split ratio of 1-for-3 (the "Reverse Stock Split"). The Board of Directors has authorized the Company to file a certificate of amendment to its Restated Certificate of Incorporation implementing the Reverse Stock Split, which is anticipated to be effective November 3, 2010. The financial statements included in this press release have not been adjusted to reflect this pending Reverse Stock Split.
"We are pleased to begin our 2011 fiscal year with a profitable quarter, driven by the strong results of our underlying business," said Bill Jasper, President and CEO of Unifi. "Although uncertainty remains around consumer demand amid rising raw material prices, we are prepared to react quickly and are confident in our ability to recoup raw material cost increases we are experiencing. Going forward, we will continue to focus on what got us here - driving rigorous continuous operational improvement across all areas of the organization, maintaining market share in all of our markets, and investing in the growth of our premier value-added products, especially Repreve®.
The Company will host a conference call and web cast at 10:00 a.m. (Eastern Time) tomorrow, October 28, 2010, to discuss the preliminary results for the current quarter. The conference call can be accessed by dialing (888) 713-4216 (Domestic) or (617) 213-4868 (International), and entering the passcode 71303558. Participants may pre-register for the conference call at https://cossprereg.btci.com/prereg/key.process?key=PEXM4UCPN. There will also be a live audio web cast of the call, which may be accessed on the Company's website at www.unifi.com or http://investor.unifi.com. Following management's comments, there will be an opportunity for questions from the financial community.
A replay of the conference call will be made available approximately two hours after the conclusion of the call. The replay can be accessed by dialing (888) 286-8010 (Domestic) or (617) 801-6888 (International) and entering the passcode 55125707. This replay line will be available through November 4, 2010. In addition, a replay of the web cast will also be available on the Company's website under the "Investor Relations" section and archived for up to twelve months following the call as will a transcript of the conference call.
Unifi, Inc. (NYSE: UFI) is a diversified producer and processor of multi-filament polyester and nylon textured yarns and related raw materials. The Company adds value to the supply chain and enhances consumer demand for its products through the development and introduction of branded yarns that provide unique performance, comfort and aesthetic advantages. Key Unifi brands include, but are not limited to: AIO® - all-in-one performance yarns, SORBTEK®, A.M.Y.®, MYNX® UV, REPREVE®, REFLEXX®, MICROVISTA® and SATURA®. Unifi's yarns and brands are readily found in home furnishings, apparel, legwear, and sewing thread, as well as industrial, automotive, military, and medical applications. For more information about Unifi, visit www.unifi.com, or to learn more about REPREVE®, visit www.repreve.com.
UNIFI, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
September 26, June 27,
2010 2010
-------------- ---------
(Unaudited)
Assets
Cash and cash equivalents $26,274 $42,691
Receivables, net 95,404 91,243
Inventories 120,410 111,007
Deferred income taxes 1,647 1,623
Other current assets 9,465 6,119
----- -----
Total current assets 253,200 252,683
Property, plant and equipment, net 152,337 151,499
Intangible assets, net 13,496 14,135
Investments in unconsolidated
affiliates 80,494 73,543
Other noncurrent assets 9,795 12,605
$509,322 $504,465
======== ========
Liabilities and Shareholders'
Equity
Accounts payable $45,093 $40,662
Accrued expenses 18,827 21,725
Income taxes payable 1,368 505
Current portion of notes payable - 15,000
Current maturities of long-term
debt
and other liabilities 327 327
--- ---
Total current liabilities 65,615 78,219
Notes payable, less current portion 163,722 163,722
Long-term debt and other
liabilities 2,700 2,531
Deferred income taxes 255 97
Shareholders' equity 277,030 259,896
$509,322 $504,465
======== ========
UNIFI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In Thousands Except Per Share Data)
For the Quarters Ended
----------------------
September 26, September 27,
2010 2009
-------------- --------------
Summary of Operations:
Net sales $174,020 $142,851
Cost of sales 152,857 123,445
Restructuring charges 363 -
Write down of long-
lived assets - 100
Selling, general &
administrative
expenses 11,127 11,164
(Benefit) provision
for bad debts (41) 576
Other operating
expense (income), net 243 (87)
Non-operating
(income) expense:
Interest income (743) (746)
Interest expense 5,269 5,492
Loss (gain) on
extinguishment of
debt 1,144 (54)
Equity in earnings of
unconsolidated
affiliates (8,951) (2,063)
------ ------
Income from operations
before income taxes 12,752 5,024
Provision for income
taxes 2,517 2,535
----- -----
Net income $10,235 $2,489
======= ======
Earnings per share:
Income per common
share -basic $0.17 $0.04
===== =====
Income per common
share -diluted $0.17 $0.04
===== =====
Weighted average
shares outstanding -
basic 60,172 62,057
Weighted average
shares outstanding -
diluted 61,136 62,057
UNIFI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (Amounts in Thousands)
For the Quarters Ended
----------------------
September 26, September 27,
2010 2009
-------------- --------------
Cash and cash equivalents
at beginning of year $42,691 $42,659
Operating activities:
Net income 10,235 2,489
Adjustments to reconcile
net income to net cash
provided by
operating activities:
Earnings of unconsolidated
affiliates, net of
distributions (6,419) (452)
Depreciation 5,850 5,805
Amortization 893 1,168
Stock-based compensation
expense 192 593
Deferred compensation
expense 155 177
Net gain on asset sales (65) (94)
Loss (gain) on
extinguishment of debt 1,144 (54)
Write down of long-lived
assets - 100
Deferred income tax 225 63
(Benefit) provision for
bad debts (41) 576
Other 7 40
Change in assets and
liabilities, excluding
effects of
foreign currency
adjustments (8,165) 2,811
------ -----
Net cash provided by
operating activities 4,011 13,222
----- ------
Investing activities:
Capital expenditures (5,495) (2,106)
Investment in
unconsolidated affiliate (225) -
Change in restricted cash - 1,763
Proceeds from sale of
capital assets 180 107
---
Net cash used in investing
activities (5,540) (236)
------ ----
Financing activities:
Payments of notes payable (15,863) -
Payments of other long-
term debt (40,525) (2,198)
Borrowings of other long-
term debt 40,525 -
Debt refinancing fees (821) -
---- ---
Net cash used in financing
activities (16,684) (2,198)
------- ------
Effect of exchange rate
changes on cash and cash
equivalents 1,796 2,253
----- -----
Net (decrease) increase in
cash and cash equivalents (16,417) 13,041
------- ------
Cash and cash equivalents
at end of period $26,274 $55,700
======= =======
Adjusted EBITDA Reconciliation
to Net Income
(Amounts in thousands)
(Unaudited)
For the Quarters Ended
----------------------
September September
26, 27,
2010 2009
---- ----
Net income $10,235 $2,489
Provision for income taxes 2,517 2,535
Interest expense, net 4,526 4,746
Depreciation and amortization expense 6,489 6,696
Equity in earnings of unconsolidated
affiliates (8,951) (2,063)
Non-cash compensation expense, net of
distributions 347 770
Gain on sales or disposals of PP&E (65) (94)
Currency and derivative losses 364 13
Write down of long-lived assets - 100
Loss (gain) on extinguishment of debt 1,144 (54)
Restructuring charges 363 -
Foreign subsidiary startup costs 1,463 -
Adjusted EBITDA $18,432 $15,138
======= =======
NON-GAAP FINANCIAL MEASURES
Non-GAAP Financial Measures
Included in this presentation are certain non-GAAP financial measures designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America ("GAAP") because management believes such measures are useful to investors.
Adjusted EBITDA
Adjusted EBITDA represents net income or loss before income tax expense, net interest expense, and depreciation and amortization expense, adjusted to exclude equity in earnings and losses of unconsolidated affiliates, write down of long-lived assets, non-cash compensation expense net of distributions, gains or losses on sales or disposals of property, plant and equipment, currency and derivative gains or losses, gains or losses on extinguishment of debt, restructuring charges and foreign subsidiary startup costs. We present Adjusted EBITDA as a supplemental measure of our operating performance and ability to service debt. We also present Adjusted EBITDA because we believe such measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry and in measuring the ability of "high-yield" issuers to meet debt service obligations.
Adjusted EBITDA is an alternative view of performance used by management and we believe that investors' understanding of our performance is enhanced by disclosing this performance measure. Our management uses Adjusted EBITDA: (i) as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of (a) items directly related to our asset base (primarily depreciation and amortization) and (b) unusual items that we would not expect to occur as a part of our normal business on a regular basis; (ii) for planning purposes, including the preparation of our annual operating budget; (iii) as a valuation measure for evaluating our operating performance and our capacity to incur and service debt, fund capital expenditures and expand our business; and (iv) as one measure in determining the value of other acquisitions and dispositions. Adjusted EBITDA is also a key performance metric utilized in the determination of variable compensation.
We believe that the use of Adjusted EBITDA as an operating performance measure provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets, among otherwise comparable companies. We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense decreases as deductible interest expense increases; depreciation and amortization are non-cash charges. Equity in earnings and losses of unconsolidated affiliates is excluded because such earnings or losses do not reflect our operating performance. The other items excluded from Adjusted EBITDA are excluded in order to better reflect the performance of our continuing operations.
In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.
NON-GAAP FINANCIAL MEASURES
-continued-
Our Adjusted EBITDA measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
-- it does not reflect our cash expenditures, future requirements for
capital expenditures or contractual commitments;
-- it does not reflect changes in, or cash requirements for, our working
capital needs;
-- it does not reflect the significant interest expense or the cash
requirements necessary to service interest or principal payments on our
debt;
-- although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized will often have to be replaced in the
future, and our Adjusted EBITDA measure does not reflect any cash
requirements for such replacements;
-- it is not adjusted for all non-cash income or expense items that are
reflected in our statements of cash flows;
-- it does not reflect the impact of earnings or charges resulting from
matters we consider not indicative of our ongoing operations;
-- it does not reflect limitations on or costs related to transferring
earnings from our subsidiaries to us; and
-- other companies in our industry may calculate this measure differently
than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations, including those under our outstanding debt obligations. You should compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements included herein contain forward-looking statements within the meaning of federal securities laws about Unifi, Inc.'s (the "Company") financial condition and results of operations that are based on management's current expectations, estimates and projections about the markets in which the Company operates, as well as management's beliefs and assumptions. Words such as "expects," "anticipates," "believes," "estimates," variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of the date hereof. The Company undertakes no obligation to update publicly any of these forward-looking statements to reflect new information, future events or otherwise.
Factors that may cause actual outcome and results to differ materially from those expressed in, or implied by, these forward-looking statements include, but are not necessarily limited to, availability, sourcing and pricing of raw materials, the success of our subsidiaries, pressures on sales prices and volumes due to competition and economic conditions, reliance on and financial viability of significant customers, operating performance of joint ventures, alliances and other equity investments, technological advancements, employee relations, changes in construction spending, capital expenditures and long-term investments (including those related to unforeseen acquisition opportunities), continued availability of financial resources through financing arrangements and operations, outcomes of pending or threatened legal proceedings, negotiation of new or modifications of existing contracts for asset management and for property and equipment construction and acquisition, regulations governing tax laws, other governmental and authoritative bodies' policies and legislation, and proceeds received from the sale of assets held for disposal. In addition to these representative factors, forward-looking statements could be impacted by general domestic and international economic and industry conditions in the markets where the Company competes, such as changes in currency exchange rates, interest and inflation rates, recession and other economic and political factors over which the Company has no control. Other risks and uncertainties may be described from time to time in the Company's other reports and filings with the Securities and Exchange Commission.
SOURCE Unifi, Inc.
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