Unifi(UFI) - 2024 Q4 - Annual Report

Part I Business Unifi manufactures and sells recycled and synthetic products globally, navigating a weak demand environment in fiscal 2024 with a focus on its REPREVE® brand - UNIFI is a multinational company manufacturing and selling recycled and synthetic products (polyester and nylon) for various end-use markets including apparel, home furnishings, and automotive[5] - The company operates through three reportable segments based on geography: Americas, Brazil, and Asia[6] - Strategic priorities include accelerating innovation, expanding the REPREVE® brand, growing market share in major textile regions, and penetrating new markets beyond apparel[8] - As of June 30, 2024, UNIFI had approximately 2,900 employees distributed across its segments: Americas (~1,900), Brazil (~800), Asia (~100), and corporate (~100)[44] REPREVE® Fiber Sales (Fiscal 2022-2024) | Fiscal Year | REPREVE® Fiber Sales (in thousands) | % of Consolidated Net Sales | | :--- | :--- | :--- | | 2024 | $188,517 | 32% | | 2023 | $186,161 | 30% | | 2022 | $293,080 | 36% | Fiscal 2024 Consolidated Net Sales by End Market | End Market | Percentage of Consolidated Net Sales | | :--- | :--- | | Apparel (including hosiery and footwear) | ~59% | | Industrial | ~13% | | Furnishings | ~12% | | Automotive | ~5% | | All other markets | ~11% | Research and Development Costs (Fiscal 2022-2024) | Fiscal Year | R&D Costs (in thousands) | | :--- | :--- | | 2024 | $9,599 | | 2023 | $10,871 | | 2022 | $12,103 | Risk Factors The company faces significant strategic, financial, and operational risks including intense competition, customer concentration, and raw material price volatility - The company faces intense competition from domestic and foreign yarn producers, with foreign competitors often having advantages like lower labor costs and government subsidies[60] - A significant portion of sales is dependent on demand from a limited number of large brand partners, and the loss of a major brand partner could materially harm the business[61] - The prices of petroleum-based raw materials and recycled plastic bottles are volatile, and time lags in passing on cost increases negatively affect margins[62] - Foreign operations expose the company to political, economic, and currency exchange rate risks, particularly with the Brazilian Real (BRL) and Chinese Renminbi (RMB)[65] - The business is susceptible to cybersecurity breaches, which could lead to theft of intellectual property and significant reputational harm[70] Unresolved Staff Comments The company reports that there are no unresolved staff comments - None[75] Cybersecurity UNIFI manages cybersecurity through a formal program with board oversight, and no material incidents have been identified to date - The company's cybersecurity program focuses on vulnerability management, access management, and user awareness training, including monthly social engineering tests[77] - Governance is handled by the Information Technology Security Team, with oversight from the CIO and the Audit Committee of the Board, which receives quarterly reports[79][81] - For the years presented, UNIFI did not identify any risks from cybersecurity threats that had, or were reasonably likely to have, a material effect on the company[78] Properties UNIFI owns and leases key properties globally, though its Americas manufacturing facilities operated below capacity in fiscal 2024 due to weak demand - The company's principal properties include owned and leased manufacturing facilities, warehouses, and offices in North Carolina, El Salvador, Colombia, Brazil, and China[82] - In fiscal 2024, UNIFI's manufacturing facilities in the Americas Segment operated below capacity, primarily due to a decline in demand throughout the apparel supply chains[82] Legal Proceedings The company is involved in ordinary course legal proceedings that are not expected to have a material adverse effect on its financial position - The company does not believe any current legal proceedings will have a material adverse effect on its results of operations, financial position, or cash flows[83] Mine Safety Disclosures This item is not applicable to the company - Not applicable[83] Information About our Executive Officers This section provides biographical information for the company's key executive officers, including the CEO, Executive Chairman, and CFO - Edmund M. Ingle, age 59, has served as Chief Executive Officer since June 2020[84] - Albert P. Carey, age 72, has served as Executive Chairman of the Board since April 2019[84] - Andrew J. (A.J.) Eaker, age 39, has served as Executive Vice President and Chief Financial Officer since January 2024[84] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities UNIFI's common stock (NYSE: UFI) has an active share repurchase program, but the company has not paid dividends and does not intend to in the near future - UNIFI's common stock is listed on the NYSE under the symbol 'UFI'[85] - No dividends were paid in the last two fiscal years, and the company does not intend to pay cash dividends in the foreseeable future[86] - As of June 30, 2024, $38,859 (in thousands) remained available for stock repurchases under the 2018 Share Repurchase Program, with no repurchases made in fiscal 2024[88] Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2024 performance was impacted by weak global demand, resulting in lower net sales and a net loss, though Brazil and Asia segments showed improvement Results of Operations Fiscal 2024 net sales decreased 6.6% to $582.2 million, resulting in a net loss of $47.4 million due to lower selling prices despite higher sales volumes - Consolidated net sales for fiscal 2024 decreased by 6.6% due to a 14.8% decrease in weighted average sales prices, despite an 8.2% increase in sales volumes[114] - Gross profit for fiscal 2024 increased by 16.7% to $16.6 million, primarily due to increased sales volumes and cost-saving initiatives[117] Consolidated Financial Performance (Fiscal 2022-2024) | Metric (in thousands, except EPS) | Fiscal 2024 | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | :--- | | Net Sales | $582,209 | $623,527 | $815,758 | | Gross Profit | $16,616 | $14,241 | $80,485 | | Operating (Loss) Income | $(37,421) | $(40,871) | $28,599 | | Net (Loss) Income | $(47,395) | $(46,344) | $15,171 | Adjusted EBITDA Reconciliation (Fiscal 2022-2024) | Metric (in thousands) | Fiscal 2024 | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | :--- | | Net (loss) income | $(47,395) | $(46,344) | $15,171 | | EBITDA | $(10,298) | $(12,955) | $54,375 | | Adjusted EBITDA | $(5,197) | $(4,085) | $55,190 | Segment Overview The Americas segment posted a loss, while the Brazil and Asia segments demonstrated profit growth driven by market share gains and a strong sales mix Americas Segment Performance (Fiscal 2022-2024) | Metric (in thousands) | Fiscal 2024 | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | :--- | | Net Sales | $344,256 | $389,662 | $483,085 | | Gross (Loss) Profit | $(17,630) | $(14,659) | $24,468 | | Segment Profit | $4,524 | $7,385 | $45,621 | Brazil Segment Performance (Fiscal 2022-2024) | Metric (in thousands) | Fiscal 2024 | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | :--- | | Net Sales | $117,783 | $119,062 | $126,066 | | Gross Profit | $14,755 | $12,162 | $27,141 | | Segment Profit | $18,012 | $14,197 | $28,641 | Asia Segment Performance (Fiscal 2022-2024) | Metric (in thousands) | Fiscal 2024 | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | :--- | | Net Sales | $120,170 | $114,803 | $206,607 | | Gross Profit | $19,491 | $16,738 | $28,876 | | Segment Profit | $19,501 | $16,738 | $28,876 | Liquidity and Capital Resources The company maintains sufficient liquidity through cash from operations and its ABL credit facility, with total liquidity of $67.6 million as of June 30, 2024 - In fiscal 2024, the company repatriated approximately $32 million from its operations in Asia and Brazil to the U.S. to reduce outstanding revolver borrowings[154] Liquidity Position as of June 30, 2024 (in thousands) | Metric | Domestic | Foreign | Total | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $17 | $26,788 | $26,805 | | Borrowings available | $40,832 | $— | $40,832 | | Liquidity | $40,849 | $26,788 | $67,637 | | Total debt obligations | $130,299 | $— | $130,299 | Capital Expenditures (Fiscal 2022-2025E) | Fiscal Year | Capital Expenditures (in thousands) | | :--- | :--- | | 2025 (Expected) | $10,000 - $12,000 | | 2024 | $11,198 | | 2023 | $36,434 | | 2022 | $39,631 | Net Debt Reconciliation (in thousands) | Metric | June 30, 2024 | July 2, 2023 | | :--- | :--- | :--- | | Debt principal | $130,299 | $140,899 | | Less: cash and cash equivalents | $26,805 | $46,960 | | Net Debt | $103,494 | $93,939 | Quantitative and Qualitative Disclosures About Market Risk UNIFI is exposed to market risks from interest rates, foreign currency exchange rates, and volatile raw material costs - The company is exposed to interest rate risk; a 50-basis point increase would result in an approximate $700 thousand increase in annual interest expense[192] - UNIFI is exposed to foreign currency exchange rate risk, particularly from fluctuations in the Brazilian Real (BRL) and the Chinese Renminbi (RMB)[194] - Raw material and energy costs are volatile and dependent on global petroleum prices, and time lags in adjusting customer pricing can adversely affect margins[196] Financial Statements and Supplementary Data This section directs to the company's consolidated financial statements and related notes, which begin on page F-i of the report - The consolidated financial statements and related notes begin on page F-i of the Form 10-K[200] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[200] Controls and Procedures Management concluded that the company's disclosure controls, procedures, and internal control over financial reporting were effective as of June 30, 2024 - Management, including the principal executive and financial officers, concluded that UNIFI's disclosure controls and procedures were effective as of June 30, 2024[201] - Management concluded that UNIFI's internal control over financial reporting was effective as of June 30, 2024[203] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, internal controls[205] Other Information No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the fourth quarter of fiscal 2024 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the fourth quarter of fiscal 2024[205] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[205] Part III Directors, Executive Officers and Corporate Governance Information on directors and corporate governance is incorporated by reference from the company's 2024 proxy statement - Information required by this item is incorporated by reference from the company's 2024 Proxy Statement[206] Executive Compensation Executive compensation details are incorporated by reference from the company's 2024 proxy statement - Information required by this item is incorporated by reference from the company's 2024 Proxy Statement[210] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership is incorporated by reference from the company's 2024 proxy statement - Information required by this item is incorporated by reference from the company's 2024 Proxy Statement[211] Certain Relationships and Related Transactions, and Director Independence Information on related transactions and director independence is incorporated by reference from the company's 2024 proxy statement - Information required by this item is incorporated by reference from the company's 2024 Proxy Statement[212] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's 2024 proxy statement - Information required by this item is incorporated by reference from the company's 2024 Proxy Statement[213] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report - The financial statements are listed in the Index to Consolidated Financial Statements on page F-i[214] - A list of exhibits filed with the report is provided, including the company's credit agreement, incentive compensation plans, and executive employment agreements[215][216][217] Form 10-K Summary The company reports that there is no Form 10-K summary - None[219]