Unifi(US:UFI)2025-05-07 12:30PART I—FINANCIAL INFORMATION Financial Statements Unifi reported a net loss of $35.8 million on $432.8 million net sales for the nine months ended March 30, 2025, reflecting asset decrease and liability increase Condensed Consolidated Balance Sheets As of March 30, 2025, total assets decreased to $446.5 million, total liabilities increased to $218.2 million, and shareholders' equity declined to $228.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total current assets | $245,530 | $248,933 | | Total assets | $446,540 | $469,244 | | Total current liabilities | $78,605 | $76,566 | | Long-term debt | $127,894 | $117,793 | | Total liabilities | $218,154 | $205,859 | | Total shareholders' equity | $228,386 | $263,385 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q3 FY25 net sales decreased to $146.6 million with a $0.4 million gross loss and $16.8 million net loss, while nine-month net sales increased to $432.8 million with a narrowed $35.8 million net loss Key Operational Results (in thousands, except per share amounts) | Metric | Q3 FY2025 | Q3 FY2024 | Nine Months FY2025 | Nine Months FY2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $146,557 | $148,996 | $432,809 | $424,757 | | Gross (loss) profit | $(445) | $4,764 | $9,547 | $5,825 | | Operating loss | $(13,860) | $(6,926) | $(24,640) | $(36,598) | | Net loss | $(16,794) | $(10,295) | $(35,818) | $(43,411) | | Diluted net loss per share | $(0.92) | $(0.57) | $(1.96) | $(2.40) | Condensed Consolidated Statements of Cash Flows Net cash used in operations was $20.0 million for the nine months ended March 30, 2025, with investing activities providing $0.2 million and financing activities providing $9.3 million, leading to a $10.6 million cash decrease Cash Flow Summary (in thousands) | Activity | Nine Months Ended March 30, 2025 | Nine Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used) provided by operating activities | $(19,994) | $1,160 | | Net cash provided (used) by investing activities | $179 | $(8,076) | | Net cash provided (used) by financing activities | $9,275 | $(12,236) | | Net decrease in cash and cash equivalents | $(10,550) | $(19,298) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, REPREVE® Fiber sales, increased debt, segment performance, and the Madison facility closure with associated costs and a $53.2 million sale agreement REPREVE® Fiber Net Sales (in thousands) | Period | REPREVE® Fiber Sales | % of Total Net Sales | | :--- | :--- | :--- | | Three Months Ended March 30, 2025 | $44,699 | 30.5% | | Three Months Ended March 31, 2024 | $46,754 | 31.4% | | Nine Months Ended March 30, 2025 | $132,713 | 30.7% | | Nine Months Ended March 31, 2024 | $134,940 | 31.8% | - On October 25, 2024, UNIFI entered into a new $25,000 revolving credit facility, collateralized by personal assets of board member Kenneth G. Langone. In January 2025, UNIFI borrowed $22,000 against this facility4647 - On February 3, 2025, UNIFI announced the pending closure of its Madison, North Carolina facility. This resulted in $1.32 million of restructuring costs in Q3 FY25. The company estimates an additional $6 to $8 million in related costs7778 - Subsequent to the quarter-end, on April 10, 2025, UNIFI entered an agreement to sell the Madison, NC facility and related equipment for a cash price of $53,200, with proceeds intended to repay debt79 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses performance in a challenging textile market, noting Q3 FY25 sales decrease and Adjusted EBITDA loss, while nine-month sales rose with improved Adjusted EBITDA, supported by strategic initiatives and liquidity management - The company faces adverse impacts from a challenging environment for textile production and demand, including inflation, elevated interest rates, and volatility in trade and regulatory matters87 - Strategic initiatives include growing market share, expanding REPREVE® products into non-apparel markets, commercializing innovative solutions, and increasing brand awareness86 Results of Operations - Three Months Ended March 30, 2025 Q3 FY25 consolidated net sales decreased 1.6% to $146.6 million, resulting in a $0.4 million gross loss and a widened $16.8 million net loss, with Adjusted EBITDA at a $4.9 million loss Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Description | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | Net loss | $(16,794) | $(10,295) | | Interest expense, net | $2,219 | $1,975 | | Provision for income taxes | $499 | $790 | | Depreciation and amortization expense | $6,259 | $6,753 | | EBITDA | $(7,817) | $(777) | | Transition costs | $2,900 | — | | Adjusted EBITDA | $(4,917) | $(777) | - Gross profit decreased by $5.2 million, primarily due to lower conversion margins in the Americas, softer sales in Asia, and $1.58 million in transition costs related to the consolidation of yarn manufacturing operations106 - The company incurred $1.32 million in restructuring costs related to the closure of its Madison, North Carolina facility109 Results of Operations - Nine Months Ended March 30, 2025 Nine-month net sales increased 1.9% to $432.8 million, gross profit grew to $9.5 million, and net loss narrowed to $35.8 million, with Adjusted EBITDA improving to a $7.5 million loss Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Description | Nine Months FY2025 | Nine Months FY2024 | | :--- | :--- | :--- | | Net loss | $(35,818) | $(43,411) | | Interest expense, net | $6,690 | $5,795 | | Provision for income taxes | $4,021 | $707 | | Depreciation and amortization expense | $19,046 | $20,663 | | EBITDA | $(6,061) | $(16,246) | | Transition costs | $2,900 | — | | Gain on sale of assets | $(4,296) | — | | Restructuring costs | — | $5,101 | | Adjusted EBITDA | $(7,457) | $(11,145) | - Gross profit increased due to higher sales volumes, cost-saving initiatives, and improved productivity, though it was unfavorably impacted by weak fixed cost absorption in the Americas segment138 - A gain of $4.3 million was recorded from the sale of a warehouse in Yadkinville, North Carolina143 Segment Overview For the nine-month period, Americas segment returned to profitability with $1.1 million profit, Brazil segment profit increased 44.6% to $16.8 million, and Asia segment profit declined 31.8% to $9.8 million Segment (Loss) Profit (in thousands) | Segment | Nine Months FY2025 | Nine Months FY2024 | % Change | | :--- | :--- | :--- | :--- | | Americas | $1,120 | $(1,154) | 197.1% | | Brazil | $16,755 | $11,590 | 44.6% | | Asia | $9,755 | $14,314 | (31.8)% | - The Americas segment's profit improvement was driven by higher margins from better variable cost management, despite weak fixed cost absorption and transition costs from facility consolidation154 - The Brazil segment's profit growth was attributable to higher conversion margins and increased sales volumes from market share gains, partially offset by unfavorable foreign currency effects157 - The Asia segment's profit decline was caused by a lower gross margin rate associated with a change in the sales mix of REPREVE products159 Liquidity and Capital Resources The company's liquidity is supported by credit facilities, with available liquidity of $44.5 million as of March 30, 2025, and net debt increasing to $123.7 million, partially offset by a new credit facility and a subsequent asset sale agreement Net Debt Reconciliation (in thousands) | Description | March 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Debt principal | $140,002 | $130,299 | | Less: cash and cash equivalents | $16,255 | $26,805 | | Net Debt | $123,747 | $103,494 | - As of March 30, 2025, the company had $45.1 million in availability under its ABL Revolver and $0.6 million under its 2024 Facility162 - Subsequent to quarter-end, UNIFI agreed to sell its Madison, NC facility for $53.2 million, with net proceeds to be used for debt repayment165 Quantitative and Qualitative Disclosures About Market Risk Unifi faces market risks from interest rate fluctuations, foreign currency exchange rates, and raw material costs, with a 50-basis point rate increase potentially raising annual interest expense by $0.7 million - A 50-basis point increase in interest rates would result in an approximate $700,000 increase in annual interest expense on the company's $133.0 million of ABL Facility borrowings187 - As of March 30, 2025, 29.6% of total consolidated assets were held by subsidiaries outside the U.S. with a functional currency other than the USD, indicating significant foreign currency exposure188 Controls and Procedures As of March 30, 2025, Unifi's disclosure controls and procedures were deemed effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 30, 2025191 - No changes occurred during the quarter ended March 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting192 PART II—OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings, none of which are expected to have a material adverse effect on its financial position, results, or cash flows - The company does not believe that any ongoing legal proceedings would be expected to have a material adverse effect on its results of operations, financial position, or cash flows194 Risk Factors No material changes to the company's risk factors have occurred since the Annual Report on Form 10-K for the fiscal year ended June 30, 2024 - No material changes in UNIFI's risk factors have occurred since the filing of the 2024 Form 10-K195 Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended March 30, 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the third fiscal quarter196 Exhibits This section lists exhibits filed with the Form 10-Q, including credit agreement amendments, CEO and CFO certifications, and XBRL data files