Unifi(UFI) - 2024 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarterly period ended October 1, 2023, including balance sheets, statements of operations, and cash flows Condensed Consolidated Balance Sheets Total assets decreased to $516,261 thousand as of October 1, 2023, primarily due to reduced inventories and receivables, while total shareholders' equity declined Balance Sheet Highlights (in thousands) | Account | October 1, 2023 | July 2, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $51,515 | $46,960 | | Inventories | $136,092 | $150,810 | | Total current assets | $277,324 | $294,060 | | Total assets | $516,261 | $538,819 | | Total current liabilities | $68,711 | $71,995 | | Long-term debt | $128,890 | $128,604 | | Total liabilities | $211,232 | $215,209 | | Total shareholders' equity | $305,029 | $323,610 | Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported a net loss of $13,270 thousand for the three months ended October 1, 2023, driven by a 22.7% decrease in net sales and a shift to a gross loss Quarterly Statement of Operations (in thousands, except per share amounts) | Metric | For the Three Months Ended Oct 1, 2023 | For the Three Months Ended Oct 2, 2022 | | :--- | :--- | :--- | | Net sales | $138,844 | $179,519 | | Gross (loss) profit | $(575) | $6,563 | | Operating loss | $(12,029) | $(4,695) | | Net loss | $(13,270) | $(7,834) | | Diluted net loss per share | $(0.73) | $(0.44) | - Comprehensive loss for the quarter was $18,800 thousand, compared to $13,700 thousand in the prior-year period, exacerbated by foreign currency translation adjustments[17] Condensed Consolidated Statements of Cash Flows Operating activities generated $7,119 thousand in cash, a significant improvement from the prior-year period, primarily due to favorable working capital changes despite a higher net loss Cash Flow Summary (in thousands) | Activity | For the Three Months Ended Oct 1, 2023 | For the Three Months Ended Oct 2, 2022 | | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $7,119 | $(5,892) | | Net cash used by investing activities | $(2,480) | $(11,420) | | Net cash provided by financing activities | $604 | $12,713 | | Net increase (decrease) in cash | $4,555 | $(6,090) | Notes to Condensed Consolidated Financial Statements The notes provide detailed disclosures on accounting policies and financial data, including revenue disaggregation, long-term debt, and segment performance Net Sales by Product Type (in thousands) | Product/Service | For the Three Months Ended Oct 1, 2023 | For the Three Months Ended Oct 2, 2022 | | :--- | :--- | :--- | | REPREVE® Fiber | $42,461 | $49,179 | | All other products and services | $96,383 | $130,340 | | Total Net Sales | $138,844 | $179,519 | Segment Financials for Q1 FY2024 (in thousands) | Segment | Net Sales | Gross (Loss) Profit | | :--- | :--- | :--- | | Americas | $81,573 | $(7,380) | | Brazil | $29,909 | $2,167 | | Asia | $27,362 | $4,638 | - Total debt principal stood at $141,487 thousand as of October 1, 2023, primarily composed of an ABL Term Loan and ABL Revolver[40] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the adverse impact of the current economic environment and decreased textile demand on financial results, covering sales decline, gross loss, segment challenges, and liquidity management Overview and Significant General Matters The company's Q1 FY2024 performance was adversely impacted by decreased textile demand and inventory destocking, leading to strategic focus on non-apparel markets and innovation - The current economic environment, including inflation and inventory destocking, significantly decreased textile product demand, adversely impacting sales and profitability[88] - Strategic initiatives include expanding into non-apparel markets, advancing innovative solutions, and increasing REPREVE® brand awareness to drive revenue and profitability[87] Review of Results of Operations Consolidated net sales fell 22.7% to $138,844 thousand, resulting in a gross loss due to lower volumes and average selling prices, with the Americas segment most impacted Consolidated Operations Overview (in thousands) | Metric | Q1 FY2024 | Q1 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $138,844 | $179,519 | (22.7)% | | Gross (loss) profit | $(575) | $6,563 | (108.8)% | | Operating loss | $(12,029) | $(4,695) | 156.2% | | Net loss | $(13,270) | $(7,834) | 69.4% | - The decrease in net sales was attributed to lower volumes in the Americas and Asia segments due to weak global apparel demand and inventory destocking, along with a 17.5% decrease in consolidated weighted average sales prices[102][103] - Adjusted EBITDA turned negative to $(4,800) thousand from $2,300 thousand in the prior-year quarter, primarily due to the significant decline in gross profit[99][113] Liquidity and Capital Resources The company maintains sufficient liquidity with $95,679 thousand in total liquidity as of October 1, 2023, while net debt decreased and operating cash flow improved significantly Liquidity Summary (in thousands) | Component | October 1, 2023 | | :--- | :--- | | Cash and cash equivalents | $51,515 | | Borrowings available under financing arrangements | $44,164 | | Total Liquidity | $95,679 | Net Debt Reconciliation (in thousands) | Component | October 1, 2023 | July 2, 2023 | | :--- | :--- | :--- | | Debt principal | $141,487 | $140,899 | | Less: cash and cash equivalents | $(51,515) | $(46,960) | | Net Debt | $89,972 | $93,939 | - Net cash provided by operating activities increased to $7,119 thousand from a use of $5,892 thousand in the prior year, primarily due to reduced working capital needs associated with declining business activity[136] Quantitative and Qualitative Disclosures About Market Risk UNIFI is exposed to market risks from interest rates, foreign currency exchange rates, and raw material costs, with significant foreign currency exposure from its international operations - The company is exposed to interest rate risk on its $129,800 thousand ABL Facility borrowings, where a 50-basis point increase would raise annual interest expense by approximately $700 thousand[145] - Significant foreign currency exchange rate risk exists, as 31.0% of consolidated assets and 99.1% of cash are held by non-U.S. subsidiaries[146] - The company is also exposed to geopolitical risks, including changes in international trade laws and raw material cost fluctuations[147][148] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of October 1, 2023, with no material changes in internal control over financial reporting during the quarter - The principal executive officer and interim principal financial officer concluded that the company's disclosure controls and procedures are effective as of October 1, 2023[149] - No material changes in internal control over financial reporting occurred during the quarter[150] PART II—OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business, none of which are expected to have a material adverse effect on its financial position or results - The company is party to various lawsuits and claims arising in the ordinary course of business, none of which are expected to have a material adverse effect[152] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable[153] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents - Exhibits filed include the Director Compensation Policy, CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and Inline XBRL data files[154]