Unifi Inc. reported fourth-quarter sales results in-line with expectations, with strong cash generation and significantly improved liquidity.
In a Nutshell: Unifi Inc., a maker of recycled and synthetic yarns, on Wednesday released operating results for the fourth fiscal quarter and fiscal year that reflected significant market disruptions as a result of the COVID-19 pandemic.
On April 29, the company sold its 34 percent interest in Parkdale America for $60 million in cash. Proceeds were used to reduce leverage and increase cash reserves on the balance sheet.
On June 28, debt principal was $98.9 million, and cash and cash equivalents were $75.3 million. Net debt was $23.6 million, which was a reduction of $82.2 million since June 30 and is the lowest level in more than 10 years.
Operating cash flows were $20.6 million, an increase of $11.8 million from the fourth quarter of fiscal 2019. Full year fiscal 2020 operating cash flows were $52.7 million, an increase of $45.4 million from fiscal 2019.
The company said it has reduced capital expenditure levels while prioritizing spending for safety and maintenance. Raw material pricing remains at low levels, which aids short-term working capital and liquidity. Manufacturing operations have been strategically reduced to support critical businesses and manage working capital.
For fiscal 2021, assuming no further significant disruptions to global markets, the company expects sales for each business segment to grow from fourth quarter fiscal 2020 levels at different rates through the fiscal year. It also expects sequential improvement in sales and underlying business performance through each quarter of fiscal 2021, sales of Repreve and specialty products to continue recent growth rates and increase as a percentage of consolidated sales, and $22 million of capital expenditures, including the previously announced eAFK Evo texturing machines to begin installation in early 2021, which should generate meaningful financial benefit to fiscal 2022.
Sales: Net sales for the fourth quarter ended June 28 fell 52 percent to $86.1 million compared to $179.5 million in fiscal 2019. Revenue from Repreve Fiber products represented 28 percent of net sales.
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Unifi said from April to June, core U.S. polyester products experienced sequential monthly sales increases.
For the year, which consisted of 52 weeks of domestic operations compared to 53 weeks in fiscal 2019, net sales were $606.5 million compared to $708.8 million in fiscal 2019, as the COVID-19 outbreak stifled global economic activity and sales growth momentum in the fourth quarter of fiscal 2020.
Earnings: Unifi reported a net loss of $20.2 million, or $1.10 loss per share, compared to net income of $1 million, or earnings per share of 5 cents for the year-ago quarter.
The operating loss for the quarter was $20.9 million, compared to operating income of $5.3 million in the fourth quarter of fiscal 2019, driven by lower sales and lower fixed cost absorption. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) decreased to negative $14 million compared to positive $12.7 million in the 2019 quarter.
For the year, the net loss was $57.2 million, including a $45.2 million impairment expense for the sale of the interest in Parkdale, compared to net income of $2.5 million for fiscal 2019. The operating loss was $8.8 million compared to income of $11 million for fiscal 2019.
CEO’s Take: Eddie Ingle, CEO of Unifi, said: “At the onset of the pandemic, our management team prioritized safety and took measures to improve our liquidity and cash position while maintaining our long-term focus on innovation and sustainability. During the just completed quarter, we generated significant cash from operations, while reducing inventory levels and operating costs. These actions, combined with a joint venture divestiture, allowed for significant debt reduction and an increase in cash. I am confident that our diverse global operations, strong management team, and solid financial position will enable us to overcome these current challenges and regain our momentum as we progress through fiscal 2021. I’m proud to return to Unifi and to have the opportunity to lead this great company through the next stage of its life cycle.”
“Significant progress was made during the first nine months of fiscal 2020 on several key priorities. At that time, our business in Asia experienced strong growth, our U.S polyester operations experienced underlying sales and market share growth, as favorable trade measures were enacted, cost reduction actions contributed to our performance and the sustainability focus of customers propelled further Repreve sales growth,” Ingle added. “Our sustainable solutions and innovative culture make us the partner of choice for leading global brands seeking to meet their sustainability goals. We have a truly great company with an energized team, and I’m looking forward to growing our business as we exit this pandemic.”