The following positive developments and trends occurred or were occurring in fiscal 2022.
• Our REPREVE family of products continued to gain momentum with brands,
retailers, and mill partners who value sustainability and UNIFI's ability
to produce leading edge products with in-demand technologies.
• Although raw material costs rose throughout fiscal 2022, we have been able
to implement cost-responsive selling price adjustments intended to protect
• Our Brazil Segment was able to opportunistically capture market share from
• Our Asia Segment returned to sales growth, driven by demand for REPREVE,
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.
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
• sales volume and revenue for UNIFI and for each reportable segment;
• gross profit and gross margin for UNIFI and for each reportable segment;
• 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
loss of PAL and, from time to time, certain other adjustments necessary
• 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
• Net Debt, which represents debt principal less cash and cash equivalents.
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.
Management uses Adjusted Working Capital as an indicator of UNIFI's production efficiency and ability to manage inventories and receivables.
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
• 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
EBITDA and Adjusted EBITDA (Non-GAAP Measures)
The reconciliations of the amounts reported under GAAP for Net Income (Loss) to EBITDA and Adjusted EBITDA are as follows.
(1) Within this reconciliation, depreciation and amortization expense excludes
the amortization of debt issuance costs, which are reflected in interest
expense, net. Within the accompanying condensed consolidated statements of
cash flows, amortization of debt issuance costs is reflected in depreciation
(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
(3) In fiscal 2020, UNIFI recorded an impairment charge of $45,194 relating to
the April 29, 2020 sale of its 34% interest in PAL. UNIFI's 34% share of
PAL's loss subsequent to the date of the impairment charge (March 29, 2020)
and through the date of transaction closing (April 29, 2020) was $2,284 and
generated a gain on sale.
(4) In fiscal 2020, UNIFI incurred certain severance costs in connection with (i)
overall cost reduction efforts in the U.S. and (ii) a wind-down plan for its
Adjusted Net Income (Loss) and Adjusted EPS (Non-GAAP Measures)
(1) 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
(2) In fiscal 2022, UNIFI recorded a recovery of income taxes following a Brazil
Supreme Court decision regarding certain income taxes paid in prior fiscal
(3) In fiscal 2020, UNIFI recorded an impairment charge of $45,194 before tax,
related to the April 2020 sale of its 34% interest in PAL.
(4) In fiscal 2020, UNIFI incurred certain severance costs in connection with (i)
overall cost reduction efforts in the U.S. and (ii) a wind-down plan for its
Consolidated weighted average sales prices increased 19.5%, primarily attributable to higher selling prices in response to increasing raw material costs.
REPREVE Fiber products for fiscal 2022 comprised 36%, or $293,080, of consolidated net sales, down from 37%, or $245,832, for fiscal 2021. The decrease was primarily due to the pandemic lockdowns in China during the fourth quarter of fiscal 2022, reducing recycled product sales for the Asia Segment.
Consolidated average sales prices decreased 3.4%, primarily attributable to (i) a decline in higher-priced nylon product sales and (ii) unfavorable foreign currency translation.
• 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
• For the Asia Segment, gross profit increased primarily due to higher sales
Gross profit for fiscal 2021 increased by $54,454, or 139.5%, compared to fiscal 2020.
• For the Americas Segment, gross profit benefited from the restoration of
• For the Asia Segment, gross profit increased from fiscal 2020 primarily
• For the Brazil Segment, gross profit increased from fiscal 2020 primarily
The changes in SG&A were as follows:
Net increase in incentive and other compensation expenses 8,474 Other net decreases
Net decrease in incentive and other compensation expenses (4,171 ) SG&A expenses for fiscal 2022
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.
(Benefit) Provision for Bad Debts
The provision for bad debts decreased from a provision of $1,739 in fiscal 2020 to a benefit of $1,316 in fiscal 2021. 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
Interest expense, net decreased from fiscal 2020 to fiscal 2021 primarily as a result of a lower average debt principal during fiscal 2021.
(Earnings) Loss from Unconsolidated Affiliates
There was no material activity for fiscal 2021 or fiscal 2022.
On April 29, 2020, UNIFI sold its 34% non-controlling interest in PAL and, accordingly, no earnings from PAL were recorded in fiscal 2021. The earnings from the nylon joint ventures increased from fiscal 2020 to fiscal 2021, primarily due to higher sales and capacity utilization.
Recovery of Non-Income Taxes, Net
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.
Impairment of Investment in Unconsolidated Affiliate and Gain on Divestiture
The change in consolidated income taxes is as follows:
The effective tax rate is subject to variation due to several factors, including: variability in pre-tax and taxable income; the mix of income by jurisdiction; changes in deferred tax valuation allowances; and changes in statutes, regulations, and case law. Additionally, the impacts of discrete and other rate impacting items are greater when income before income taxes is lower.
Adjusted EBITDA decreased from $64,643 for fiscal 2021 to $55,190 for fiscal 2022, consistent with the decrease in gross profit.
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 Net Income (Loss) increased from $(10,870) for fiscal 2020 to $22,660 for fiscal 2021, following the improvement in Adjusted EBITDA.
Following is a discussion and analysis of the revenue and profitability performance of UNIFI's reportable segments for fiscal 2022, 2021 and 2020.
The changes in net sales for the Americas Segment are as follows:
Increase due to an additional week of sales in fiscal 2022 8,703 Increase in sales volumes
The changes in Segment Profit for the Americas Segment are as follows:
Change in underlying margins and sales mix 26,757 Increase in sales volumes
Change in underlying margins and sales mix (12,918 ) Increase in sales volumes
The decrease in Segment Profit for the Americas Segment from fiscal 2021 to fiscal 2022 was primarily attributable to the adverse impacts of higher input costs outpacing selling price adjustments and weaker labor productivity.
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.
The changes in net sales for the Brazil Segment are as follows:
Increase in average selling price and change in sales mix 20,459 Increase in sales volumes
Increase in average selling price and change in sales mix 26,343 Favorable foreign currency translation effects
The changes in Segment Profit for the Brazil Segment are as follows:
Unfavorable foreign currency translation effects (2,796 ) Segment Profit for fiscal 2021
Favorable foreign currency translation effects 1,063 Increase in sales volumes
The changes in net sales for the Asia Segment are as follows:
Change in average selling price and sales mix (16,074 ) Net increase in sales volumes
Favorable foreign currency translation effects 8,559 Net sales for fiscal 2021
Change in average selling price and sales mix 9,686 Net increase in sales volumes
Favorable foreign currency translation effects 3,786 Net sales for fiscal 2022
The changes in Segment Profit for the Asia Segment are as follows:
Change in underlying margins and sales mix 4,584 Increase in sales volumes
Favorable foreign currency translation effects 970 Segment Profit for fiscal 2021
Change in underlying margins and sales mix 1,824 Increase in sales volumes
Favorable foreign currency translation effects 519 Segment Profit for fiscal 2022
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.
• have not accessed public or private capital markets for recent liquidity
• do not currently expect our cost of or access to existing capital and
funding sources to change materially; however, new capital and funding
sources (if any) may carry higher costs than our current structure;
• have not taken advantage of rent, lease or debt deferrals, forbearance
• have not relied on supply chain financing, structured trade payables, or
(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"
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.
In May 2021, UNIFI entered into an agreement with a third party lender that provides for construction-period financing for eAFK Evo texturing machines included in our capital allocation plans. UNIFI records project costs to construction in progress and the corresponding liability to construction financing (within long-term debt). 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.
The following table presents the scheduled maturities of UNIFI's outstanding debt obligations for the following five fiscal years and thereafter.
(1) Total reported excludes $729 for construction financing, described above.
Net Debt (Non-GAAP Financial Measure)
The reconciliations for Net Debt are as follows:
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:
Cash Provided by Operating Activities
The significant components of net cash provided by operating activities are summarized below. UNIFI analyzes net cash provided by operating activities utilizing the major components of the statements of cash flows prepared under the indirect method.
Net cash provided by operating activities $ 380 $ 36,681 $ 52,724
Cash (Used) Provided by Investing Activities and Financing Activities
2. Purchase obligations are agreements that are enforceable and legally
binding and that specify all significant terms, including fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions;
purchase orders are in the ordinary course of business for the procurement
of (i) raw materials used in the production of inventory, (ii) certain
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
UNIFI does not engage in off-balance sheet arrangements and only enters into material contracts in the ordinary course of business and/or to hedge the associated risks (e.g. interest rate swaps).
There have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on UNIFI's consolidated financial statements.
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.
Inventory Net Realizable Value Adjustment
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