UNIFI, Inc. — Form 10-K Summary
Period clarification: Although the request metadata says “2020 Q4,” the filing is UNIFI’s annual report for fiscal 2021, ended June 27, 2021. Fiscal 2021 and fiscal 2020 each comprised 52 weeks. Unless otherwise stated, dollar amounts below are in thousands.
Business context and reporting period
UNIFI manufactures and sells polyester and nylon products, including recycled fibers under its REPREVE brand, to yarn and fabric producers. Its four reportable segments are Polyester, Asia, Brazil and Nylon. Apparel represented approximately 70% of fiscal 2021 net sales. REPREVE Fiber accounted for 37% of sales, up from 31% in fiscal 2020.
Financial performance
| Metric | Fiscal 2021 | Fiscal 2020 |
|---|---|---|
| Net sales | $667,592 | $606,509 |
| Gross profit / margin | $93,494 / 14.0% | $39,040 / 6.4% |
| Operating income (loss) | $38,611 | $(8,821) |
| Net income (loss) | $29,073 | $(57,237) |
| Diluted EPS | $1.54 | $(3.10) |
| Adjusted EBITDA (non-GAAP) | $64,643 | $16,553 |
| Cash from operating activities | $36,681 | $52,724 |
| Capital expenditures | $21,178 | $18,509 |
Sales rose 10.1% and sales volume increased 13.5% year over year as demand recovered from pandemic-related declines. Average selling prices fell 3.4%, mainly due to lower sales of higher-priced nylon products and unfavorable currency translation. Operating results also benefited from improved gross profit and a $9,717 Brazilian non-income-tax recovery. Fiscal 2020 results included a $45,194 impairment charge related to the sale of UNIFI’s PAL investment.
By segment, fiscal 2021 sales and Segment Profit were: Polyester $316,235 and $52,081; Asia $184,837 and $25,393; Brazil $95,976 and $33,010; and Nylon $65,869 and $4,136. Brazil’s strong profitability reflected temporary market-share gains and favorable conversion margins; management cautioned that pricing and margins may normalize. Nylon remained pressured by declining category demand and customer programs shifting to overseas production.
Fourth-quarter fiscal 2021 sales were $184,445, gross profit $27,404, and net income $13,419. For fourth-quarter fiscal 2020, sales were $86,055, gross loss $9,451, and net loss $20,247. The fiscal 2021 fourth-quarter net income included the Brazilian tax recovery.
Liquidity, debt and financial position
At June 27, 2021, cash and cash equivalents were $78,253, total debt principal was $86,857, and net debt (non-GAAP) was $8,604, compared with $23,614 a year earlier. Working capital was $223,644. A further $65,891 was available under the ABL Revolver. Cash from operations declined despite improved earnings, primarily because of working-capital investment during the recovery and the absence of $10,437 in PAL distributions received in fiscal 2020.
Debt included a $77,500 ABL Term Loan, finance lease obligations of $8,475 and construction financing of $882. The ABL Facility matures in December 2023; $55,000 of term-loan principal was scheduled for fiscal 2024. UNIFI reported compliance with financial covenants and stated it was not at material risk of failing them. However, 52% of cash was held by foreign subsidiaries and may not be immediately available for domestic obligations.
Material changes, outlook and risks
- Recovery and demand: Management reported a robust textile-supply-chain recovery and fiscal 2021 results above its expectations, but noted uncertainty about the durability of demand, including possible effects of COVID-19 variants and renewed restrictions.
- Capital spending: Fiscal 2022 capital expenditures were forecast at $40,000–$45,000, including approximately $10,000–$12,000 for maintenance and additional texturing equipment. Management expects the projects to support future profitability; spending could change with economic conditions and liquidity priorities.
- Cash use: Management expected to use cash in fiscal 2022 because of incentive-compensation payments, higher working-capital needs, capital spending, debt service and taxes, while describing available liquidity as adequate.
- Trade actions: Final duties on polyester textured-yarn imports from China and India were in effect. Preliminary antidumping duties concerning imports from Indonesia, Malaysia, Thailand and Vietnam had been announced; final determinations were expected around the end of calendar 2021. The impact remained uncertain.
- Costs and margins: Higher raw-material, labor, freight and energy costs were emerging. UNIFI had raised selling prices, but pricing can lag cost increases and may not fully offset them. The company does not hedge polyester or nylon raw-material costs.
- Concentration and competition: No direct customer accounted for 10% or more of consolidated sales, but sales depend on a relatively small number of brand partners. One domestic customer represented approximately 20% of Nylon Segment sales. Global competition, imports and customer shifts remain risks.
- Tax recovery: The $9,717 Brazilian recovery arose from prior-period PIS/COFINS overpayments and associated interest; management expected to realize the credits against future tax obligations over approximately 40 months.
- Contingencies: UNIFI disclosed potential, unquantified responsibility relating to environmental areas at the former Kinston site, while stating the extent of any liability could not be determined. It did not expect active remediation at the monitored Kentec site and considered potential costs likely immaterial. Ordinary-course legal proceedings were not expected to have a material adverse effect.
KPMG issued unqualified opinions on the consolidated financial statements and internal control over financial reporting. The filing identified finished-goods inventory net realizable value as a critical audit matter. UNIFI reported no material off-balance-sheet arrangements and no material impact from adopting the expected-credit-loss accounting standard.
Important facts for investors to verify
- Confirm the period: this filing covers fiscal 2021, not fiscal 2020 Q4; fiscal 2021 Q4 figures are separately disclosed above.
- Assess how much of the earnings recovery reflects underlying operations versus the $9,717 tax recovery, and review the company’s non-GAAP reconciliations.
- Monitor whether demand, Brazil’s exceptional margins and US market share gains persist, including outcomes of the pending trade investigations.
- Evaluate whether the planned $40,000–$45,000 fiscal 2022 capital program and working-capital needs can be funded while maintaining debt reduction and liquidity.
- Review debt maturities, borrowing-base availability, covenant trigger terms, and the accessibility of foreign-held cash.
- Track raw-material and freight inflation, pricing pass-through timing, nylon demand, brand-partner concentration and the realization of Brazilian tax credits.