First Quarter Fiscal 2023 Compared to First Quarter Fiscal 2022

Net sales decreased 8.4% to $179.5 million, from $196.0 million, primarily driven by lower sales volumes for the Americas and Asia Segments in connection with a recent decline in demand for textile products from apparel brands. Such decline was partially offset by higher selling prices following months of inflationary cost increases. The demand for apparel production declined significantly in the first quarter of fiscal 2023 as brands and retailers took temporary actions to reduce their inventory levels. Accordingly, the Americas and Asia Segments experienced revenue declines following a reduction in ordering patterns from customers across U.S. and global markets. Conversely, the Brazil Segment generated strong sales performance within its domestic market where apparel demand had not suffered.

Gross profit decreased to $6.6 million from $26.1 million. Americas Segment gross profit decreased $14.1 million, primarily as a result of lower sales volumes driving weaker productivity and cost absorption. Brazil Segment gross profit decreased $3.2 million, which was consistent with the normalization of gross profit levels that occurred during calendar 2022 following the Brazil Segment’s strong performance during the pandemic recovery period. The Asia Segment maintained a strong gross margin rate but was impacted by weaker demand for apparel production.

Operating loss was $4.7 million compared to operating income of $13.3 million in the first quarter of fiscal 2022, primarily due to the decrease in gross profit. Net loss was $7.8 million, or $0.44 per share, compared to net income of $8.7 million, or $0.46 per share, impacted by the weaker profitability in the U.S. contributing to a higher effective tax rate. Adjusted EBITDA was $2.3 million, compared to $19.8 million, consistent with the change in operating income.

Debt principal was $127.0 million on October 2, 2022, compared to $114.3 million on July 3, 2022. In connection with previously anticipated investments in new yarn texturing innovation and working capital to support future growth, cash and cash equivalents decreased to $47.2 million on October 2, 2022 from $53.3 million on July 3, 2022. Accordingly, Net Debt was $79.8 million on October 2, 2022 compared to $61.0 million on July 3, 2022.

Credit Facility Update

On October 28, 2022, UNIFI renewed and amended its existing credit facility to expand the borrowing capacity and extend the maturity date. The amended credit agreement allows for an increase in borrowing capacity from $200.0 million to $230.0 million, extends the maturity date from December 2023 to October 2027, and contains pricing, terms, and conditions generally consistent with those in place prior to the amendment.

Outlook

The operating environment and textile demand trends for the apparel market are expected to remain suppressed for the remainder of calendar 2022. Future demand visibility has diminished due to changing forecasts from a number of customers. While UNIFI expects significant demand recovery and profitability acceleration to occur following the inventory destocking measures currently in progress at major apparel brands and retailers, the timing of an apparel production recovery is uncertain. Accordingly, UNIFI is withdrawing its previously issued full year fiscal 2023 outlook and anticipates the following for the second quarter of fiscal 2023:

• approximately 10% to 15% lower net sales than the first quarter of fiscal 2023;
  

• continued profitability pressures and performance resembling the first quarter of fiscal 2023, primarily attributable to weak cost absorption in the Americas Segment in connection with a seasonally-pressured period that includes annual customer shutdowns and holidays exacerbated by lower-than-normal sales and productivity levels driving consolidated Adjusted EBITDA between $(5.0) million and $0.0 million;
  

• continued volatility and unfavorability in the effective tax rate; and
  

• capital expenditures of approximately $10.0 million to $12.0 million, as UNIFI continues investing in new yarn texturing machinery within the U.S., El Salvador, and Brazil.
  

Ingle continued, “While the current operating environment is challenging, we are optimistic about the efforts we’re making to remain the global sustainable fiber leader. Our REPREVE products continue to see a high level of interest from our customers, and we are continuing to invest in marketing and building awareness of our flagship brand.”

Ingle concluded, “We are pleased to have the additional liquidity afforded by our amended credit facility. As retail apparel inventory levels decline and demand normalizes, we expect to see our revenue and profitability accelerate in the second half of fiscal 2023. We will continue to control costs, drive efficiencies, and invest prudently in growth areas of the business that will support strong long-term business expansion and value creation for all of our stakeholders.”

First Quarter Fiscal 2023 Earnings Conference Call

UNIFI will provide additional commentary regarding its first quarter fiscal 2023 results and other developments during its earnings conference call on November 4, 2022, at 8:30 a.m., Eastern Time. The call can be accessed via a live audio webcast on UNIFI’s website at http://investor.unifi.com. Additional supporting materials and information related to the call will also be available on UNIFI’s website.

http://investor.unifi.com/news-releases/news-release-details/unifi-inc-makers-reprever-announces-first-quarter-fiscal-2023