What changed in this filing

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Item 1. Financial Statements

2023-05-10 compared with 2023-02-08 · 352 added, 311 removed, 796 unchanged (45% of the section changed)

2 unchanged sentences

(In thousands, except share and per share amounts)

January 1, 2023

April 2, 2023

Cash and cash equivalents

22 unchanged sentences

18,054,498 and 17,979,362

shares issued and outstanding as of January 1, 2023 and July 3, 2022, respectively)

shares issued and outstanding as of April 2, 2023 and July 3, 2022, respectively)

Capital in excess of par value

7 unchanged sentences

For the Three Months Ended

For the Six Months Ended

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

Cost of sales

Gross (loss) profit

Selling, general and administrative expenses

(Benefit) provision for bad debts

Benefit for bad debts

Other operating expense (income), net

3 unchanged sentences

Equity in earnings of unconsolidated affiliates

Recovery of non-income taxes, net

(Loss) income before income taxes

(Benefit) provision for income taxes

Provision for income taxes

Net (loss) income

4 unchanged sentences

For the Three Months Ended

For the Six Months Ended

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

Net (loss) income

Other comprehensive income (loss):

Other comprehensive income:

Foreign currency translation adjustments

1 unchanged sentence

nil, $ 105 , nil and $ 248 , respectively

Other comprehensive income (loss), net

Other comprehensive income, net

Comprehensive (loss) income

6 unchanged sentences

Total Shareholders’

Balance at October 2, 2022

Balance at January 1, 2023

Options exercised

3 unchanged sentences

Other comprehensive income, net of tax

Balance at January 1, 2023

Balance at April 2, 2023

Capital in Excess of Par Value

7 unchanged sentences

Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions

Other comprehensive loss, net of tax

Balance at January 1, 2023

Other comprehensive income, net of tax

Balance at April 2, 2023

Capital in Excess of Par Value

2 unchanged sentences

Total Shareholders’

Balance at September 26, 2021

Balance at December 26, 2021

Options exercised

3 unchanged sentences

Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions

Other comprehensive loss, net of tax

Balance at December 26, 2021

Other comprehensive income, net of tax

Balance at March 27, 2022

Capital in Excess of Par Value

8 unchanged sentences

Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions

Other comprehensive loss, net of tax

Balance at December 26, 2021

Other comprehensive income, net of tax

Balance at March 27, 2022

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

(In thousands)

For the Six Months Ended

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

Cash and cash equivalents at beginning of period

3 unchanged sentences

Equity in earnings of unconsolidated affiliates

Distribution received from unconsolidated affiliate

Depreciation and amortization expense

17 unchanged sentences

Common stock repurchased and retired under publicly announced program

Payments of debt financing fees

Net cash provided (used) by financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

12 unchanged sentences

Nylon products include virgin or recycled textured, solution dyed, and spandex covered yarns.

UNIFI maintains one of the textile industry’s most comprehensive product offerings that include a range of specialized, value-added and commodity solutions, with principal geographic markets in North America, Central America, South America, Asia, and Europe.

UNIFI maintains one of the textile industry’s most comprehensive product offerings that includes a range of specialized, value-added and commodity solutions, with principal geographic markets in North America, Central America, South America, Asia, and Europe.

UNIFI has direct manufacturing operations in four countries and participates in joint ventures with operations in Israel and the United States (“U.S.”).

11 unchanged sentences

All amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.

The fiscal quarter for each of Unifi, Inc., its primary domestic operating subsidiaries and its subsidiary in El Salvador ended on January 1, 2023.

The fiscal quarter for each of Unifi, Inc., its primary domestic operating subsidiaries and its subsidiary in El Salvador ended on April 2, 2023.

Unifi, Inc.’s remaining material operating subsidiaries’

fiscal quarter ended on December 31, 2022.

fiscal quarter ended on March 31, 2023.

There were no significant transactions or events that occurred between Unifi, Inc.’s fiscal quarter end and such wholly owned subsidiaries’

fiscal quarter end.

The three-month periods ended January 1, 2023 and December 26, 2021 both consisted of 13 weeks.

The six-month periods ended January 1, 2023 and December 26, 2021 both consisted of 26 weeks.

The three-month periods ended April 2, 2023 and March 27, 2022 both consisted of 13 weeks.

The nine-month periods ended April 2, 2023 and March 27, 2022 both consisted of 39 weeks.

Recent Accounting Pronouncements

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

Third-party manufacturer

For the Three Months Ended

For the Six Months Ended

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

REPREVE ® Fiber

21 unchanged sentences

Maturity Date

January 1, 2023

April 2, 2023

ABL Term Loan

6 unchanged sentences

(1) Scheduled maturity dates for finance lease obligations range from March 2025 to November 2027 .

(2) Refer to the discussion below under the subheading “

(2) Refer to the discussion below under “

Construction Financing ”

1 unchanged sentence

entered into the Sixth Amendment to Amended and Restated Credit Agreement (the “Sixth Amendment”) on September 2, 2022.

The Sixth Amendment modified the Trigger Level of the Prior Credit Agreement, which relates to, among other things, the requirement to maintain a Fixed Charge Coverage Ratio such that it occurs when Excess Availability falls below (a) for the period beginning on September 2, 2022 through and including the date that is 60 days after such date, $ 16,500 and (b) at all other times, the greatest of (i) $ 10,000 , (ii) 20 % of the Maximum Revolver Amount, and (iii) 12.5 % of the sum of the Maximum Revolver Amount plus the outstanding principal amount of the Term Loan.

The Sixth Amendment modified the Trigger Level of the Prior Credit Agreement, which relates to, among other things, the requirement to maintain a certain Fixed Charge Coverage Ratio, with such Trigger Level occurring when Excess Availability falls below (a) for the period beginning on September 2, 2022 through and including the date that is 60 days after such date, $ 16,500 and (b) at all other times, the greatest of (i) $ 10,000 , (ii) 20 % of the Maximum Revolver Amount, and (iii) 12.5 % of the sum of the Maximum Revolver Amount plus the outstanding principal amount of the Term Loan.

Notes to Condensed Consolidated Financial Statements (Continued)

3 unchanged sentences

The 2022 ABL Facility has a maturity date of October 28, 2027 .

The 2022 ABL Term Loan requires quarterly principal payments of $ 2,300 commencing on February 1, 2023.

Borrowings under the 2022 ABL Facility bear interest at SOFR plus 0.10% plus an applicable margin of 1.25 % to 1.75 %, or the Base Rate (as defined in the 2022 Credit Agreement) plus an applicable margin of 0.25 % to 0.75 %, with interest paid on a monthly basis.

The 2022 ABL Term Loan requires quarterly principal payments of $ 2,300 that began on February 1, 2023.

Prior to entering the 2022 Credit Agreement, Unifi, Inc.

8 unchanged sentences

Each borrowing under the agreement provides for 60 monthly payments, which will commence upon the completion of the construction period.

In connection with this construction financing arrangement, UNIFI has borrowed a total of $ 8,122 and transitioned $ 3,222 of completed asset costs to finance lease obligations as of January 1, 2023.

The (benefit) provision for income taxes and effective tax rate were as follows:

In connection with this construction financing arrangement, UNIFI has borrowed a total of $ 9,755 and transitioned $ 5,672 of completed asset costs to finance lease obligations as of April 2, 2023.

The provision for income taxes and effective tax rate were as follows:

For the Three Months Ended

For the Six Months Ended

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

(Benefit) provision for income taxes

For the Nine Months Ended

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

Provision for income taxes

Effective tax rate

Income Tax Expense

UNIFI’s (benefit) provision for income taxes for the six months ended January 1, 2023 and December 26, 2021 was calculated by applying the estimated annual effective tax rate to year-to-date pre-tax book income and adjusting for discrete items that occurred during the period.

The effective tax rates for the three months and six months ended January 1, 2023 varied from the U.S.

federal statutory rate primarily due to losses for which UNIFI does not expect to realize a future benefit and a discrete tax benefit related to the recovery of certain Brazilian income taxes paid in prior years.

The effective tax rates for the three months and six months ended December 26, 2021 were higher than the U.S.

UNIFI’s provision for income taxes for the nine months ended April 2, 2023 and March 27, 2022 was calculated by applying the estimated annual effective tax rate to year-to-date pre-tax book income and adjusting for discrete items that occurred during the period.

The effective tax rates for the three months and nine months ended April 2, 2023 varied from the U.S.

federal statutory rate primarily due to losses for which UNIFI does not expect to realize a future tax benefit and a discrete tax benefit related to the recovery of certain Brazilian income taxes paid in prior years.

The effective tax rates for the three months and nine months ended March 27, 2022 were higher than the U.S.

federal statutory rate primarily due to an increase in the valuation allowance for deferred tax assets, earnings taxed at higher rates in foreign jurisdictions, and deferred tax on unremitted earnings.

21 unchanged sentences

Announced Plans

Fiscal 2023 (through January 1, 2023)

Fiscal 2023 (through April 2, 2023)

Repurchased shares are retired and have the status of authorized and unissued shares.

6 unchanged sentences

however, awards outstanding under a respective prior plan remain subject to that plan’s provisions.

The following table provides the number of awards remaining available for future issuance under the 2020 Plan as of January 1, 2023:

The following table provides the number of awards remaining available for future issuance under the 2020 Plan as of April 2, 2023:

Authorized under the 2020 Plan

9 unchanged sentences

Financial Instruments

For the nine months ended April 2, 2023 and March 27, 2022, there were no significant changes to UNIFI’s assets and liabilities measured at fair value, and there were no transfers into or out of the levels of the fair value hierarchy.

UNIFI believes that there have been no significant changes to its credit risk profile or the interest rates available to UNIFI for debt issuances with similar terms and average maturities, and UNIFI estimates that the fair values of its debt obligations approximate the carrying amounts.

Other financial instruments include cash and cash equivalents, receivables, accounts payable, and accrued expenses.

The financial statement carrying amounts of these items approximate the fair values due to their short-term nature.

Grantor Trust

1 unchanged sentence

Deferred Compensation Plan (the “DCP”), established in fiscal 2022, is an unfunded non-qualified deferred compensation plan in which certain key employees are eligible to participate.

The fair value of the investment assets held by the grantor trust established in connection with the DCP were approximately $ 2,897 and $ 2,196 as of January 1, 2023 and July 3, 2022, respectively, and are classified as trading securities within Other non-current assets.

The fair values of the investment assets held by the grantor trust established in connection with the DCP were approxima tely $ 2,586 and $ 2,196 as of April 2, 2023 and July 3, 2022, respectively, and are classified as trading securities within Other non-current assets.

The grantor trust assets have readily-available market values and are classified as Level 1 trading securities in the fair value hierarchy.

1 unchanged sentence

The associated DCP liability is recorded within Other long-term liabilities, and any increase or decrease in the liability is also recorded in Other operating (income) expense, net.

During fiscal 2023, we recorded net gains on investments held by the trust of $ 11 .

During the nine months ended April 2, 2023, we rec orded net gains on investments held by the trust of $ 78 .

Derivative Instruments

UNIFI uses derivative financial instruments such as foreign currency forward contracts or interest rate swaps to reduce its ongoing business exposures to fluctuations in foreign currency exchange rates or interest rates.

UNIFI uses derivative financial instruments such as interest rate swaps to reduce its ongoing business exposures to fluctuations in interest rates.

UNIFI does not enter into derivative contracts for speculative purposes.

Since June 2022, UNIFI has had no outstanding derivative instruments.

For the six months ended January 1, 2023 and December 26, 2021, there were no significant changes to UNIFI’s assets and liabilities measured at fair value, and there were no transfers into or out of the levels of the fair value hierarchy.

Other financial instruments include cash and cash equivalents, receivables, accounts payable and accrued expenses.

The financial statement carrying amounts of these items approximate the fair values due to their short-term nature.

Notes to Condensed Consolidated Financial Statements (Continued)

3 unchanged sentences

Balance at July 3, 2022

Other comprehensive loss

Balance at January 1, 2023

A summary of the after-tax effects of the components of other comprehensive loss, net for the three-month and six-month periods ended January 1, 2023 and December 26, 2021 is included in the accompanying condensed consolidated statements of comprehensive (loss) income.

Other comprehensive income

Balance at April 2, 2023

A summary of the after-tax effects of the components of other comprehensive loss, net for the three-month and nine-month periods ended April 2, 2023 and March 27, 2022 is included in the accompanying condensed consolidated statements of comprehensive (loss) income.

Earnings Per Share

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

Net (loss) income

30 unchanged sentences

Related Party Transactions

There were no related party receivables as of January 1, 2023 or July 3, 2022.

There were no related party receivables as of April 2, 2023 or July 3, 2022.

Related party payables for Salem Leasing Corporation consisted of the following:

January 1, 2023

April 2, 2023

Accounts payable

4 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Affiliated Entity

Transaction Type

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

Salem Leasing Corporation

17 unchanged sentences

The Asia Segment includes sales offices in China, Turkey, and Hong Kong.

UNIFI evaluates the operating performance of its segments based upon Segment Profit, which represents segment gross (loss) profit plus segment depreciation expense.

UNIFI evaluates the operating performance of its segments based upon Segment Profit, which represents segment gross profit (loss) plus segment depreciation expense.

This measurement of segment profit or loss best aligns segment reporting with the current assessments and evaluations performed by, and information provided to, the CODM.

1 unchanged sentence

Intersegment sales are omitted from segment disclosures, as they are (i) insignificant to UNIFI’s segments and eliminated from consolidated reporting and (ii) excluded from segment evaluations performed by the CODM.

Notes to Condensed Consolidated Financial Statements (Continued)

Selected financial information is presented below:

For the Three Months Ended January 1, 2023

For the Three Months Ended April 2, 2023

Cost of sales

Gross (loss) profit

Segment depreciation expense

Segment (Loss) Profit

For the Three Months Ended December 26, 2021

Segment Profit

Notes to Condensed Consolidated Financial Statements (Continued)

For the Three Months Ended March 27, 2022

Cost of sales

1 unchanged sentence

Segment Profit

For the Six Months Ended January 1, 2023

For the Nine Months Ended April 2, 2023

Cost of sales

1 unchanged sentence

Segment depreciation expense

Segment (Loss) Profit

For the Six Months Ended December 26, 2021

Segment Profit

For the Nine Months Ended March 27, 2022

Cost of sales

1 unchanged sentence

Segment Profit

The reconciliations of segment gross (loss) profit to consolidated (loss) income before income taxes are as follows:

The reconciliations of segment gross profit to consolidated (loss) income before income taxes are as follows:

For the Three Months Ended

For the Six Months Ended

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

Segment gross (loss) profit

For the Nine Months Ended

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

Segment gross profit

Selling, general and administrative expenses

(Benefit) provision for bad debts

Benefit for bad debts

Other operating expense (income), net

3 unchanged sentences

Equity in earnings of unconsolidated affiliates

Recovery of non-income taxes, net

(Loss) income before income taxes

13 unchanged sentences

UNFA is treated as a partnership for its income tax reporting.

Notes to Condensed Consolidated Financial Statements (Continued)

In conjunction with the formation of UNFA, UNIFI entered into a supply agreement with UNF and UNFA whereby UNIFI agreed to purchase all of its first quality nylon POY requirements for texturing (subject to certain exceptions) from either UNF or UNFA.

The supply agreement has no stated minimum purchase quantities and pricing is typically negotiated every six months, based on market rates.

As of January 1, 2023, UNIFI’s open purchase orders related to this supply agreement were $ 1,722 .

As of April 2, 2023, UNIFI’s open purchase orders related to this supply agreement were $ 5,044 .

Notes to Condensed Consolidated Financial Statements (Continued)

UNIFI’s raw material purchases under this supply agreement consisted of the following:

For the Three Months Ended

For the Six Months Ended

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

As of January 1, 2023 and July 3, 2022, UNIFI had combined accounts payable due to UNF and UNFA of $ 2,223 and $ 5,565 , respectively.

For the Nine Months Ended

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

As of April 2, 2023 and July 3, 2022, UNIFI had combined accounts payable due to UNF and UNFA of $ 4,621 and $ 5,565 , respectively.

UNIFI has determined that UNF and UNFA are variable interest entities and that UNIFI is the primary beneficiary of these entities, based on the terms of the supply agreement discussed above.

2 unchanged sentences

balance sheets constitute 3 % or less of UNIFI’s current assets and total assets, and (iii) such balances are not expected to comprise a larger portion in the future, UNIFI has not included the accounts of UNF and UNFA in its consolidated financial statements and instead is accounting for these entities as equity investments.

As of January 1, 2023, UNIFI’s combined investments in UNF and UNFA were $ 2,430 .

As of April 2, 2023, UNIFI’s combined investments in UNF and UNFA were $ 2,504 .

The financial results of UNF and UNFA are included in UNIFI’s consolidated financial statements with a one-month lag, using the equity method of accounting and with intercompany profits eliminated in accordance with UNIFI’s accounting policy.

1 unchanged sentence

Condensed balance sheet and income statement information for UNIFI’s unconsolidated affiliates (including reciprocal balances) are presented in the tables below.

January 1, 2023

April 2, 2023

Current assets

6 unchanged sentences

For the Three Months Ended

For the Six Months Ended

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

Income (loss) from operations

Net income (loss)

For the Nine Months Ended

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

(Loss) income from operations

Net (loss) income

Depreciation and amortization

2 unchanged sentences

Cash payments for interest and taxes consist of the following:

For the Six Months Ended

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

Interest, net of capitalized interest of $ 403 and $ 322 , respectively

2 unchanged sentences

and foreign jurisdictions, net of refunds.

The six months ended December 26, 2021 includes an income tax payment of $ 3,749 related to the recovery of non-income taxes in Brazil.

The nine months ended March 27, 2022 includes an income tax payment of $ 3,749 related to the recovery of non-income taxes in Brazil.

Non-Cash Investing and Financing Activities

As of January 1, 2023 and July 3, 2022, $ 1,594 and $ 2,456 , respectively, were included in accounts payable for unpaid capital expenditures.

As of December 26, 2021 and June 27, 2021, $ 1,992 and $ 2,080 , respectively, were included in accounts payable for unpaid capital expenditures.

During the six months ended January 1, 2023 and December 26, 2021, UNIFI recorded non-cash activity relating to finance leases of $ 729 and $ 882 , respectively.

As of April 2, 2023 and July 3, 2022, $ 1,332 and $ 2,456 , respectively, were included in accounts payable for unpaid capital expenditures.

As of March 27, 2022 and June 27, 2021, $ 1,981 and $ 2,080 , respectively, were included in accounts payable for unpaid capital expenditures.

During the nine months ended April 2, 2023 and March 27, 2022, UNIFI recorded non-cash activity relating to finance leases of $ 3,179 and $ 1,764 respectively.

In connection with the commencement of the 2022 Credit Agreement in October 2022, $ 52,500 of borrowings outstanding on the revolving credit facility were transferred to the term loan, such that revolver borrowings were reduced by $ 52,500 and term loan borrowings were increased by $ 52,500 with no flow of cash.

2 unchanged sentences

Select balance sheet information is presented in the following table.

January 1, 2023

April 2, 2023

Receivables, net:

13 unchanged sentences

Other current assets:

Prepaid expenses and other

Value-added taxes receivable

Vendor deposits

Value-added taxes receivable

Prepaid expenses and other

Recovery of non-income taxes, net

35 unchanged sentences

A reference to the “current period”

refers to the three-month period ended January 1, 2023, while a reference to the “prior period”

refers to the three-month period ended December 26, 2021.

A reference to the “current six-month period”

refers to the six-month period ended January 1, 2023, while a reference to the “prior six-month period”

refers to the six-month period ended December 26, 2021.

refers to the three-month period ended April 2, 2023, while a reference to the “prior period”

refers to the three-month period ended March 27, 2022.

A reference to the “current nine-month period”

refers to the nine-month period ended April 2, 2023, while a reference to the “prior nine-month period”

refers to the nine-month period ended March 27, 2022.

Such references may be accompanied by certain phrases for added clarity.

The current period and the prior period each consisted of 13 weeks.

The current six-month period and the prior six-month period each consisted of 26 weeks.

Our discussions in this Item 2 focus on our results during, or as of, the three months and six months ended January 1, 2023 and December 26, 2021, and, to the extent applicable, any material changes from the information discussed in the 2022 Form 10-K or other important intervening developments or information.

The current nine-month period and the prior nine-month period each consisted of 39 weeks.

Our discussions in this Item 2 focus on our results during, or as of, the three months and nine months ended April 2, 2023 and March 27, 2022, and, to the extent applicable, any material changes from the information discussed in the 2022 Form 10-K or other important intervening developments or information.

These discussions should be read in conjunction with the 2022 Form 10-K for more detailed and background information about our business, operations, and financial condition.

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

January 1, 2023

December 26, 2021

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

All amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.

6 unchanged sentences

In addition to the current unfavorable economic environment and the inventory destocking measures taken by brands and retailers, the following pressures have continued from fiscal 2022 into fiscal 2023:

(i) the impact of inflation on consumer spending, (ii) rising interest rates, (iii) the Russia-Ukraine conflict, (iv) global input cost volatility, and (v) supply chain disruption.

(i) the impact of inflation on consumer spending, (ii) rising interest rates, (iii) the Russia-Ukraine conflict, and (iv) supply chain volatility.

UNIFI will continue to monitor these and other aspects of the current economic environment and work closely with stakeholders to ensure business continuity and liquidity.

3 unchanged sentences

and (iii) suppressed productivity from our business partners resulting from pandemic-related lockdowns in certain regions, particularly Asia.

Despite significant improvement in input and freight costs and a more stable labor pool during the current period, the global demand volatility and uncertainty that began in late fiscal 2022 has continued through the second quarter of fiscal 2023, as the threat of recession continues to create uncertainty for calendar 2023.

Despite lowered input and freight costs and a marginally more stable labor pool during fiscal 2023, the global demand volatility and uncertainty that began in late fiscal 2022 has continued throughout fiscal 2023, as the threat of recession and global tensions continue to create uncertainty.

The existing challenges and future uncertainty, particularly for rising input costs, labor productivity, and global demand, could worsen and/or continue for prolonged periods, materially impacting our consolidated sales and gross profit.

Also, the need for future selling price adjustments in connection with inflationary costs could impact our ability to retain current customer programs and compete successfully for new programs in certain regions.

Cash Deposits and Financial Institution Risk

During the current period, certain regional bank crises and failures generated additional uncertainty and volatility in the financial and credit markets.

UNIFI currently holds the vast majority of its cash deposits with large foreign banks in our associated operating regions, and management maintains the ability to repatriate cash to the U.S.

relatively quickly.

Accordingly, UNIFI has not modified its mix of financial institutions holding cash deposits, but UNIFI will continue to monitor the environment and current events to ensure any increase in concentration or credit risk is appropriately and timely addressed.

If any of the financial institutions within our 2022 Credit Agreement or construction financing arrangement (“lending counterparties”) are unable to perform on their commitments, our liquidity could be impacted.

We actively monitor all lending counterparties, and none have indicated that they may be unable to perform on their commitments.

In addition, we periodically review our lending counterparties, considering the stability of the institutions and other aspects of the relationships.

Based on our monitoring activities, we currently believe our lending counterparties will be able to perform their commitments.

Key Performance Indicators and Non-GAAP Financial Measures

2 unchanged sentences

sales volume and revenue for UNIFI and for each reportable segment;

gross (loss) profit and gross margin for UNIFI and for each reportable segment;

gross profit and gross margin for UNIFI and for each reportable segment;

net (loss) income and diluted EPS;

3 unchanged sentences

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), which represents net (loss) income before net interest expense, income tax expense and depreciation and amortization expense;

Adjusted EBITDA, which represents EBITDA adjusted to exclude, from time to time, certain other adjustments necessary to understand and

compare the underlying results of UNIFI;

Adjusted EBITDA, which represents EBITDA adjusted to exclude, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI;

Adjusted Net (Loss) Income, which represents net (loss) income calculated under GAAP, adjusted to exclude certain amounts which management believes do not reflect the ongoing operations and performance of UNIFI and/or for which exclusion may be necessary to understand and compare the underlying results of UNIFI;

19 unchanged sentences

Review of Results of Operations

Three Months Ended January 1, 2023 Compared to Three Months Ended December 26, 2021

Three Months Ended April 2, 2023 Compared to Three Months Ended March 27, 2022

Consolidated Overview

6 unchanged sentences

For the Three Months Ended

January 1, 2023

December 26, 2021

April 2, 2023

March 27, 2022

Cost of sales

Gross (loss) profit

Benefit for bad debts

Other operating expense, net

Other operating expense (income), net

Operating (loss) income

1 unchanged sentence

Equity in earnings of unconsolidated affiliates

Recovery of non-income taxes, net

(Loss) income before income taxes

(Benefit) provision for income taxes

Provision for income taxes

Net (loss) income

3 unchanged sentences

For the Three Months Ended

January 1, 2023

December 26, 2021

April 2, 2023

March 27, 2022

Net (loss) income

Interest expense, net

(Benefit) provision for income taxes

Provision for income taxes

Depreciation and amortization expense (1)

Other adjustments (2)

Contract modification costs (2)

Recovery of non-income taxes, net (3)

Adjusted EBITDA

1 unchanged sentence

Within the accompanying condensed consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense.

In the second quarter of fiscal 2023, interest expense, net reflects $273 of loss on debt extinguishment.

(2) For the periods presented, there were no other adjustments necessary to reconcile Net (loss) income to Adjusted EBITDA.

(2) In the third quarter of fiscal 2023, UNIFI amended certain existing contracts related to future purchases of texturing machinery by delaying the scheduled receipt and installation of such equipment in the U.S.

and El Salvador for 18 months.

UNIFI paid the associated vendor $623 to facilitate the 18-month delay.

(3) In fiscal 2021, UNIFI recognized an estimated benefit for the recovery of non-income taxes in Brazil.

During the quarter ended March 27, 2022, UNIFI reduced the estimated benefit based on additional clarity and review of the recovery process.

Adjusted Net (Loss) Income and Adjusted EPS (Non-GAAP Financial Measures)

The tables below set forth reconciliations of (i) (Loss) income before income taxes (“Pre-tax (Loss) Income”), (Benefit) provision for income taxes (“Tax Impact”), and Net (Loss) Income to Adjusted Net (Loss) Income and (ii) Diluted EPS to Adjusted EPS.

For the Three Months Ended January 1, 2023

For the Three Months Ended December 26, 2021

Recovery of income taxes (1)

The tables below set forth reconciliations of (i) (Loss) income before income taxes (“Pre-tax (Loss) Income”), Provision for income taxes (“Tax Impact”), and Net (Loss) Income to Adjusted Net (Loss) Income and (ii) Diluted EPS to Adjusted EPS.

For the Three Months Ended April 2, 2023

For the Three Months Ended March 27, 2022

Pre-tax Income

Contract modification costs (1)

Recovery of non-income taxes, net (2)

Adjusted results

Weighted average common shares outstanding

(1) In the second quarter of fiscal 2023, UNIFI recorded a recovery of income taxes in connection with filing amended tax returns in Brazil relating to certain income taxes paid in prior fiscal years.

(1) In the third quarter of fiscal 2023, UNIFI amended certain existing contracts related to future purchases of texturing machinery by delaying the scheduled receipt and installation of such equipment in the U.S.

and El Salvador for 18 months.

UNIFI paid the associated vendor $623 to facilitate the 18-month delay.

The associated tax impact was estimated to be $0 due to (i) a valuation allowance against net operating losses in the U.S.

and (ii) UNIFI's effective tax rate in El Salvador.

(2) In fiscal 2021, UNIFI recognized an estimated benefit for the recovery of non-income taxes in Brazil.

During the quarter ended March 27, 2022, UNIFI reduced the estimated benefit based on additional clarity and review of the recovery process.

Consolidated net sales for the current period decreased by $44,042, or 21.9%, and consolidated sales volumes decreased 22.3%, compared to the prior period.

The decreases occurred primarily due to lower volumes in the Americas and Asia Segments as a result of lower global demand in connection with the inventory de-stocking efforts of major brands and retailers, in addition to pandemic-related lockdowns in Asia, partially offset by higher selling prices in response to increasing raw material and input costs.

Consolidated weighted average sales prices increased 3.2%, primarily attributable to higher selling prices in response to higher raw material costs.

Consolidated weighted average sales prices increased 0.4%, an insignificant change.

REPREVE ® Fiber products for the current period comprised 32%, or $49,619, of consolidated net sales, down from 36%, or $71,930, for the prior period.

The lower volumes and net sales in the Asia Segment, which has the highest portion of REPREVE ® Fiber sales as a percentage of segment net sales, was the main driver for the lower REPREVE ® Fiber sales.

Gross (Loss) Profit

The lower volumes and net sales in the Asia Segment, which has the highest proportion of REPREVE ® Fiber sales as a percentage of segment net sales, was the main driver for the lower REPREVE ® Fiber sales.

Gross profit for the current period decreased by $9,491, or 49.6%, compared to the prior period.

Gross profit decreased as a result of the decline in net sales, combined with weak fixed cost absorption for the Americas Segment, where utilization and productivity are materially impactful to gross profit.

Although raw material costs for the Americas Segment have decreased meaningfully in fiscal 2023, the associated benefit was muted by low production levels, weak demand, and higher priced raw material inventory purchased in the fourth fiscal quarter of 2022.

For the Americas Segment, gross profit decreased due to weaker global demand and weak fixed cost absorption in connection with lower production, along with the impact of higher priced raw material inventory purchased in the fourth fiscal quarter of 2022.

For the Brazil Segment, gross profit decreased primarily due to the combination of high priced raw material inventory purchased in the fourth fiscal quarter of 2022 and decreasing market prices in Brazil due to lower cost import competition.

For the Asia Segment, gross profit decreased primarily due to lower sales volumes in connection with weaker global demand and pandemic-related lockdowns in Asia.

SG&A was generally flat as the prior period included a reduction in incentive compensation expense while the current period included lower discretionary spending.

Although raw material costs for the Americas Segment have decreased meaningfully in fiscal 2023, the associated benefit was muted by low production levels and weak demand.

For the Americas Segment, gross profit decreased due to weaker global demand in connection with the inventory destocking efforts of major brands and retailers and weak fixed cost absorption in connection with lower production.

For the Brazil Segment, gross profit decreased primarily due to decreasing market prices in Brazil due to low-cost import competition.

For the Asia Segment, gross profit decreased primarily due to lower sales volumes in connection with weaker global demand in connection with the inventory destocking efforts of major brands and retailers.

SG&A for the current period decreased compared to the prior period, primarily due to (i) lower incentive compensation for the current period and (ii) lower discretionary expenses, including marketing and advertising.

Benefit for Bad Debts

The current period and prior period bad debt changes reflect no material activity.

Other Operating Expense, Net

The current period and prior period include foreign currency transaction (gains) losses of $(78) and $297, respectively in addition to $298 of severance costs recorded in the prior period.

Other Operating Expense (Income), Net

The current period and prior period include foreign currency transaction losses (gains) of $174 and $(895), respectively.

The current period also includes $623 paid to a vendor to facilitate an 18-month delay for contracted equipment purchases.

Interest Expense, Net

Interest expense, net increased in connection with higher debt principal following continued capital investments and higher interest rates.

Interest expense, net for the current period includes $273 of loss on debt extinguishment.

Equity in Earnings of Unconsolidated Affiliates

There was no material activity for the current period or the prior period.

(Benefit) provision for income taxes and the effective tax rate were as follows:

Recovery of Non-income Taxes, Net

In fiscal 2021, UNIFI recognized an estimated benefit from the expected recovery of non-income taxes in Brazil.

During the prior period, UNIFI reduced the estimate by $815 based on additional clarity and precedent surrounding the recovery process.

Provision for income taxes and the effective tax rate were as follows:

For the Three Months Ended

January 1, 2023

December 26, 2021

(Benefit) provision for income taxes

April 2, 2023

March 27, 2022

Provision for income taxes

Effective tax rate

5 unchanged sentences

Additionally, the impacts of discrete and other rate impacting items are more pronounced when income (loss) before income taxes is lower.

The decrease in the effective tax rate from the prior period to the current period is primarily attributable to a discrete tax benefit related to the recovery of certain Brazilian income taxes paid in prior years, partially offset by an increase in the valuation allowance for deferred tax assets in the current period.

The decrease in the effective tax rate from the prior period to the current period is primarily attributable to lower income for foreign subsidiaries, in combination with the impact of further losses in the U.S.

and the associated valuation allowance for deferred tax assets.

Net (Loss) Income

The decrease in net (loss) income was primarily attributable to the decrease in gross profit and the associated adverse impact of lower U.S.

earnings on the effective tax rate.

earnings on the effective tax rate, partially offset by lower SG&A in the current period.

Adjusted EBITDA (Non-GAAP Financial Measure)

Adjusted EBITDA decreased primarily in connection with lower gross profit.

Adjusted EBITDA decreased primarily in connection with lower gross profit, partially offset by lower SG&A in the current period.

Adjusted Net (Loss) Income and Adjusted EPS (Non-GAAP Financial Measures)

3 unchanged sentences

Americas Segment

The components of Segment (Loss) Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Americas Segment, were as follows:

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Americas Segment, were as follows:

For the Three Months Ended

January 1, 2023

December 26, 2021

April 2, 2023

March 27, 2022

Cost of sales

Gross (loss) profit

Depreciation expense

Segment (Loss) Profit

Segment Profit

Segment net sales as a percentage of

consolidated amounts

Segment (Loss) Profit as a percentage of

Segment Profit as a percentage of

consolidated amounts

4 unchanged sentences

Net sales for the current period

The change in net sales for the Americas Segment from the prior period to the current period was primarily attributable to lower sales volumes following weaker global textile demand, partially offset by higher average selling prices in response to higher input costs.

The change in Segment (Loss) Profit for the Americas Segment was as follows:

The change in net sales for the Americas Segment from the prior period to the current period was primarily attributable to lower sales volumes following weaker global textile demand.

Net change in average selling price and sales mix reflects a larger proportion of lower-priced Flake and Chip sales in the current period.

The change in Segment Profit for the Americas Segment was as follows:

Segment Profit for the prior period

Net decrease in underlying margins from excess capacity

Net decrease in underlying margins

Decrease in sales volumes

Segment Loss for the current period

The decrease in Segment (Loss) Profit for the Americas Segment from the prior period to the current period was primarily attributable to lower production volumes driving weaker fixed cost absorption in connection with lower sales volumes.

Segment Profit for the current period

The decrease in Segment Profit for the Americas Segment from the prior period to the current period was primarily attributable to lower production volumes driving weaker fixed cost absorption in connection with lower sales volumes.

Brazil Segment

1 unchanged sentence

For the Three Months Ended

January 1, 2023

December 26, 2021

April 2, 2023

March 27, 2022

Cost of sales

11 unchanged sentences

Net sales for the current period

The decrease in net sales for the Brazil Segment from the prior period to the current period was primarily attributable to pricing pressure due to import competition, partially offset by higher sales volumes.

The decrease in net sales for the Brazil Segment from the prior period to the current period was primarily attributable to pricing pressure from import competition, partially offset by higher sales volumes in connection with market share gains.

The change in Segment Profit for the Brazil Segment was as follows:

4 unchanged sentences

Segment Profit for the current period

The decrease in Segment Profit for the Brazil Segment from the prior period to the current period was primarily attributable to an overall decrease in gross margin mainly due to pressure on selling prices from low-priced import competition and higher raw material costs.

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Asia Segment, were as follows:

For the Three Months Ended

January 1, 2023

December 26, 2021

April 2, 2023

March 27, 2022

Cost of sales

11 unchanged sentences

Net sales for the current period

The decrease in net sales for the Asia Segment from the prior period to the current period was primarily attributable to weaker global demand and pandemic-related lockdowns driving lower sales volumes, partially offset by a strong sales mix.

The decrease in net sales for the Asia Segment from the prior period to the current period was primarily attributable to weaker global demand in connection with the inventory destocking efforts of major brands and retailers driving lower sales volumes, partially offset by a strong sales mix.

The change in Segment Profit for the Asia Segment was as follows:

5 unchanged sentences

The decrease in Segment Profit for the Asia Segment from the prior period to the current period follows the decline in net sales and sales volumes discussed above, as the comparable gross margin rate for the Asia Segment improved with a strong sales mix.

Six Months Ended January 1, 2023 Compared to Six Months Ended December 26, 2021

Nine Months Ended April 2, 2023 Compared to Nine Months Ended March 27, 2022

Consolidated Overview

The below tables provide:

the components of net (loss) income and the percentage increase or decrease over the prior six-month period amounts,

the components of net (loss) income and the percentage increase or decrease over the prior nine-month period amounts,

a reconciliation from net (loss) income to EBITDA and Adjusted EBITDA, and

2 unchanged sentences

Net (loss) income

For the Six Months Ended

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

Cost of sales

Gross (loss) profit

Provision (benefit) for bad debts

Other operating (income) expense, net

Benefit for bad debts

Other operating income, net

Operating (loss) income

1 unchanged sentence

Equity in earnings of unconsolidated affiliates

Recovery of non-income taxes, net

(Loss) income before income taxes

(Benefit) provision for income taxes

Provision for income taxes

Net (loss) income

2 unchanged sentences

The reconciliations of the amounts reported under GAAP for Net (loss) income to EBITDA and Adjusted EBITDA were as follows:

For the Six Months Ended

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

Net (loss) income

Interest expense, net

(Benefit) provision for income taxes

Provision for income taxes

Depreciation and amortization expense (1)

Other adjustments (2)

Contract modification costs (2)

Recovery of non-income taxes, net (3)

Adjusted EBITDA

1 unchanged sentence

Within the accompanying condensed consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense.

In the second quarter of fiscal 2023, interest expense, net reflects $273 of loss on debt extinguishment.

(2) For the periods presented, there were no other adjustments necessary to reconcile Net (loss) income to Adjusted EBITDA.

In fiscal 2023, interest expense, net includes $273 of loss on debt extinguishment.

(2) In the third quarter of fiscal 2023, UNIFI amended certain existing contracts related to future texturing machinery purchases by delaying the scheduled receipt and installation of such equipment in the U.S.

and El Salvador for 18 months.

UNIFI paid the associated vendor $623 to facilitate the 18-month delay.

(3) In fiscal 2021, UNIFI recognized an estimated benefit for the recovery of non-income taxes in Brazil.

During the quarter ended March 27, 2022, UNIFI reduced the estimated benefit based on additional clarity and review of the recovery process.

Adjusted Net (Loss) Income and Adjusted EPS (Non-GAAP Financial Measures)

For the Six Months Ended January 1, 2023

For the Six Months Ended December 26, 2021

For the Nine Months Ended April 2, 2023

For the Nine Months Ended March 27, 2022

Pre-tax Income

Contract modification costs (1)

Recovery of income taxes (3)

Recovery of non-income taxes, net (2)

Adjusted results

Weighted average common shares outstanding

and El Salvador for 18 months.

UNIFI paid the associated vendor $623 to facilitate the 18-month delay.

The associated tax impact was estimated to be $0 due to (i) a valuation allowance against net operating losses in the U.S.

and (ii) UNIFI's effective tax rate in El Salvador.

(2) In fiscal 2021, UNIFI recognized an estimated benefit for the recovery of non-income taxes in Brazil.

During the quarter ended March 27, 2022, UNIFI reduced the estimated benefit based on additional clarity and review of the recovery process.

(3) In the second quarter of fiscal 2023, UNIFI recorded a recovery of income taxes in connection with filing amended tax returns in Brazil relating to certain income taxes paid in prior fiscal years.

Consolidated net sales for the current six-month period decreased by $81,671, or 20.6%, and consolidated sales volumes decreased 28.6%, compared to the prior six-month period.

Consolidated weighted average sales prices increased 8.0%, primarily attributable to higher selling prices in response to higher raw material costs.

REPREVE ® Fiber products for the current six-month period comprised 29%, or $92,045, of consolidated net sales, down from 39%, or $153,430, for the prior six-month period.

Gross (Loss) Profit

Gross (loss) profit for the current six-month period decreased by $44,424, or 103.3%, compared to the prior six-month period.

Consolidated net sales for the current nine-month period decreased by $125,713, or 21.0%, and consolidated sales volumes decreased 26.6%, compared to the prior nine-month period.

The decreases occurred primarily due to lower volumes in the Americas and Asia Segments as a result of lower global demand in connection with the inventory destocking efforts of major brands and retailers in addition to pandemic-related lockdowns in Asia, partially offset by higher selling prices in response to higher raw material and input costs.

Consolidated weighted average sales prices increased 5.6%, primarily attributable to higher selling prices in response to higher input costs.

REPREVE ® Fiber products for the current nine-month period comprised 30%, or $141,664, of consolidated net sales, down from 38%, or $225,360, for the prior nine-month period.

Gross profit for the current nine-month period decreased by $53,915, or 86.8%, compared to the prior nine-month period.

Gross profit decreased as a result of the decline in net sales combined with weak fixed cost absorption for the Americas Segment, where utilization and productivity are materially impactful to gross profit.

Although raw material costs for the Americas Segment decreased meaningfully in the current six-month period, the associated benefit was muted by low production levels, weak demand, and higher priced raw material inventory purchased in the fourth fiscal quarter of 2022.

For the Americas Segment, gross profit decreased due to weaker global demand and weak fixed cost absorption in connection with lower production.

Although raw material costs for the Americas Segment decreased meaningfully in the current nine-month period, the associated benefit was muted by low production levels, weak demand, and higher priced raw material inventory purchased in the fourth fiscal quarter of 2022.

For the Americas Segment, gross profit decreased due to weaker global demand, weak fixed cost absorption in connection with lower production, and overall higher raw material cost levels in beginning inventory, despite a decrease in raw material costs during fiscal 2023.

For the Asia Segment, gross profit decreased primarily due to lower sales volumes in connection with weaker global demand and pandemic-related lockdowns in Asia.

SG&A for the current six-month period decreased compared to the prior six-month period, primarily due to (i) lower incentive compensation for the current six-month period and (ii) lower discretionary expenses, including marketing and advertising.

Provision (Benefit) for Bad Debts

The current six-month period and prior six-month period bad debt changes reflect no material activity.

Other Operating (Income) Expense, Net

The current six-month period and prior six-month period include foreign currency transaction (gains) losses of $(803) and $530, respectively, in addition to $314 of severance costs in the prior six-month period.

SG&A for the current nine-month period decreased compared to the prior nine-month period, primarily due to (i) lower incentive compensation for the current nine-month period and (ii) lower discretionary expenses, including marketing and advertising.

Benefit for Bad Debts

The current nine-month period and prior nine-month period bad debt changes reflect no material activity.

Other Operating Income, Net

The current nine-month period and prior nine-month period include foreign currency transaction gains of $629 and $365, respectively, in addition to $346 of severance costs in the prior nine-month period.

The current nine-month period also includes $623 paid to a vendor to facilitate an 18-month delay for equipment purchases.

Interest Expense, Net

Interest expense, net increased in connection with higher debt principal following continued capital investments and higher interest rates.

Interest expense, net for the current six-month period includes $273 of loss on debt extinguishment.

Interest expense, net increased in connection with higher debt principal following continued capital investments and higher interest rates during the current nine-month period.

Interest expense, net for the current nine-month period also includes $273 of loss on debt extinguishment.

Equity in Earnings of Unconsolidated Affiliates

There was no material activity for the current six-month period or the prior six-month period.

(Benefit) provision for income taxes and the effective tax rate were as follows:

For the Six Months Ended

January 1, 2023

December 26, 2021

(Benefit) provision for income taxes

There was no material activity for the current nine-month period or the prior nine-month period.

Recovery of Non-income Taxes, Net

In fiscal 2021, UNIFI recognized an estimated benefit from the expected recovery of non-income taxes in Brazil.

During the prior nine-month period, UNIFI reduced the estimate by $815 based on additional clarity and precedent surrounding the recovery process.

Provision for income taxes and the effective tax rate were as follows:

For the Nine Months Ended

April 2, 2023

March 27, 2022

Provision for income taxes

Effective tax rate

5 unchanged sentences

Additionally, the impacts of discrete and other rate impacting items are more pronounced when income (loss) before income taxes is lower.

The decrease in the effective tax rate from the prior six-month period to the current six-month period is primarily attributable to a discrete tax benefit related to the recovery of certain Brazilian income taxes paid in prior years, partially offset by an increase in the valuation allowance for deferred tax assets in the current six-month period.

The decrease in the effective tax rate from the prior nine-month period to the current nine-month period is primarily attributable to lower income for foreign subsidiaries, in combination with the impact of further losses in the U.S.

and the associated valuation allowance for deferred tax assets in the current period.

Additionally, a discrete tax benefit was recognized in the second quarter of fiscal 2023 related to the recovery of certain Brazilian income taxes paid in prior years.

Net (Loss) Income

The decrease in net (loss) income was primarily attributable to the decrease in Americas gross profit and the associated adverse impact of lower U.S.

The decrease in net (loss) income was primarily attributable to the decrease in gross profit and the associated adverse impact of lower U.S.

earnings on the effective tax rate.

2 unchanged sentences

Adjusted Net (Loss) Income and Adjusted EPS (Non-GAAP Financial Measures)

Adjusted Net (Loss) Income and Adjusted EPS decreased from the prior six-month period to the current period, commensurate with the decrease in net (loss) income.

Adjusted Net (Loss) Income and Adjusted EPS decreased from the prior nine-month period to the current nine-month period, commensurate with the decrease in net (loss) income.

Segment Overview

Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for the current six-month period.

Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for the current nine-month period.

Americas Segment

The components of Segment (Loss) Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior six-month period amounts for the Americas Segment, were as follows:

For the Six Months Ended

January 1, 2023

December 26, 2021

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior nine-month period amounts for the Americas Segment, were as follows:

For the Nine Months Ended

April 2, 2023

March 27, 2022

Cost of sales

1 unchanged sentence

Depreciation expense

Segment (Loss) Profit

Segment Profit

Segment net sales as a percentage of

consolidated amounts

Segment (Loss) Profit as a percentage of

Segment Profit as a percentage of

consolidated amounts

The change in net sales for the Americas Segment was as follows:

Net sales for the prior six-month period

Net sales for the prior nine-month period

Decrease in sales volumes

Net change in average selling price and sales mix

Net sales for the current six-month period

The change in net sales for the Americas Segment from the prior six-month period to the current six-month period was primarily attributable to lower sales volumes following weaker global textile demand, partially offset by higher average selling prices in response to higher input costs.

The change in Segment (Loss) Profit for the Americas Segment was as follows:

Segment Profit for the prior six-month period

Net sales for the current nine-month period

The change in net sales for the Americas Segment from the prior nine-month period to the current nine-month period was primarily attributable to lower sales volumes following weaker global textile demand, partially offset by higher average selling prices in response to higher input costs.

The change in Segment Profit for the Americas Segment was as follows:

Segment Profit for the prior nine-month period

Change in underlying margins and sales mix from excess capacity

Decrease in sales volumes

Segment Loss for the current six-month period

The decrease in Segment (Loss) Profit for the Americas Segment from the prior six-month period to the current six-month period was primarily attributable to lower production volumes driving weaker fixed cost absorption along with lower sales volumes.

Segment Profit for the current nine-month period

The decrease in Segment Profit for the Americas Segment from the prior nine-month period to the current nine-month period was primarily attributable to lower production volumes driving weaker fixed cost absorption in connection with lower sales volumes.

Brazil Segment

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior six-month period amounts for the Brazil Segment, were as follows:

For the Six Months Ended

January 1, 2023

December 26, 2021

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior nine-month period amounts for the Brazil Segment, were as follows:

For the Nine Months Ended

April 2, 2023

March 27, 2022

Cost of sales

6 unchanged sentences

The change in net sales for the Brazil Segment was as follows:

Net sales for the prior six-month period

Net sales for the prior nine-month period

Increase in sales volumes

1 unchanged sentence

Decrease in average selling price and change in sales mix

Net sales for the current six-month period

The increase in net sales for the Brazil Segment from the prior six-month period to the current six-month period was primarily attributable to higher sales volumes during strong market conditions in Brazil.

Net sales for the current nine-month period

The increase in net sales for the Brazil Segment from the prior nine-month period to the current nine-month period was primarily attributable to higher sales volumes and favorable foreign currency translation effects, partially offset by the expected decrease in average selling price following the exceptional pricing levels experienced during the pandemic recovery in fiscal 2022.

The Brazil Segment has undertaken aggressive pricing (i) against low-priced competitive imports and (ii) in the pursuit of greater market share.

The change in Segment Profit for the Brazil Segment was as follows:

Segment Profit for the prior six-month period

Segment Profit for the prior nine-month period

Decrease in underlying margins

1 unchanged sentence

Favorable foreign currency translation effects

Segment Profit for the current six-month period

The decrease in Segment Profit for the Brazil Segment from the prior six-month period to the current six-month period was primarily attributable to an overall decrease in gross margin mainly due to pressure on selling prices from low-priced import competition and higher raw material costs.

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior six-month period amounts for the Asia Segment, were as follows:

For the Six Months Ended

January 1, 2023

December 26, 2021

Segment Profit for the current nine-month period

The decrease in Segment Profit for the Brazil Segment from the prior nine-month period to the current nine-month period was primarily attributable to an overall decrease in gross margin mainly due to the decrease in selling prices discussed above and the impact of higher raw material costs in beginning inventory.

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior nine-month period amounts for the Asia Segment, were as follows:

For the Nine Months Ended

April 2, 2023

March 27, 2022

Cost of sales

6 unchanged sentences

The change in net sales for the Asia Segment was as follows:

Net sales for the prior six-month period

Net sales for the prior nine-month period

Net decrease in sales volumes

1 unchanged sentence

Change in average selling price and sales mix

Net sales for the current six-month period

The decrease in net sales for the Asia Segment from the prior six-month period to the current six-month period was primarily attributable to weaker global demand and pandemic-related lockdowns driving lower sales volumes, partially offset by a strong sales mix.

Net sales for the current nine-month period

The decrease in net sales for the Asia Segment from the prior nine-month period to the current nine-month period was primarily attributable to weaker global demand and pandemic-related lockdowns driving lower sales volumes, partially offset by a strong sales mix.

The change in Segment Profit for the Asia Segment was as follows:

Segment Profit for the prior six-month period

Segment Profit for the prior nine-month period

Decrease in sales volumes

1 unchanged sentence

Change in underlying margins and sales mix

Segment Profit for the current six-month period

The decrease in Segment Profit for the Asia Segment from the prior six-month period to the current six-month period follows the decline in net sales and sales volumes discussed above, as the comparable gross margin rate for the Asia Segment improved with a stronger sales mix.

Segment Profit for the current nine-month period

The decrease in Segment Profit for the Asia Segment from the prior nine-month period to the current nine-month period follows the decline in net sales and sales volumes discussed above, as the comparable gross margin rate for the Asia Segment improved due to a stronger sales mix.

Liquidity and Capital Resources

3 unchanged sentences

UNIFI’s primary capital requirements are for working capital, capital expenditures, debt service, and share repurchases.

UNIFI’s primary sources of capital are cash generated from operations and borrowings available under the ABL Revolver of its credit facility.

For the current six-month period, cash provided by operations was $7,272, and, at January 1, 2023, excess availability under the ABL Revolver was $64,694.

As of January 1, 2023, all of UNIFI’s $130,391 of debt obligations were guaranteed by certain of its domestic operating subsidiaries, while approximately 99% of UNIFI’s cash and cash equivalents were held by its foreign subsidiaries.

UNIFI’s primary sources of capital are cash generated from operations, borrowings available under the 2022 Credit Agreement, and asset financing arrangements.

For the current nine-month period, cash provided by operations was $8,349, and, at April 2, 2023, availability under the ABL Revolver was $69,114.

As of April 2, 2023, all of UNIFI’s $136,010 of debt obligations were guaranteed by certain of its domestic operating subsidiaries, while nearly all of UNIFI’s cash and cash equivalents were held by its foreign subsidiaries.

Cash and cash equivalents held by foreign subsidiaries may not be presently available to fund UNIFI’s domestic capital requirements, including its domestic debt obligations.

UNIFI employs a variety of strategies to ensure that its worldwide cash is available in the locations where it is needed.

The following table presents a summary of cash and cash equivalents, borrowings available under financing arrangements, liquidity, working capital, and total debt obligations as of January 1, 2023 for domestic operations compared to foreign operations:

The following table presents a summary of cash and cash equivalents, borrowings available under financing arrangements, liquidity, working capital, and total debt obligations as of April 2, 2023 for domestic operations compared to foreign operations:

Cash and cash equivalents

5 unchanged sentences

Liquidity Considerations

UNIFI navigated the impact on liquidity of the COVID-19 pandemic by diligently managing the balance sheet and operational spending, in addition to utilizing cash received from a minority interest divestiture in April 2020.

Following the COVID-19 pandemic, global demand recovery allowed for strong results and cash generation in fiscal 2021.

However, inflation and demand uncertainty in fiscal 2022 and during the current six-month period have introduced new pressures to liquidity.

However, in fiscal 2022 and through the current nine-month period, inflation and demand uncertainty have introduced new pressures to liquidity.

Following the establishment of the 2022 Credit Agreement, UNIFI’s cash and liquidity positions are sufficient to sustain its operations and meet its growth needs.

However, further degradation in the macroeconomic environment could introduce additional liquidity risk and require UNIFI to limit cash outflows for capital expenditures and discretionary activities while further utilizing available and additional forms of credit.

Since the onset of the COVID-19 pandemic and the date of this report, we have not:

taken advantage of rent, lease or debt deferrals, forbearance periods, or other concessions or

relied on supply chain financing, structured trade payables, or vendor financing.

Although global demand for the remainder of calendar 2023 is uncertain, we do not currently anticipate that any adverse events or circumstances will place critical pressure on our liquidity position or our ability to fund our operations, capital expenditures, and expected business growth.

However, further degradation in the macroeconomic environment could introduce additional liquidity risk and require UNIFI to limit cash outflows for discretionary activities while further utilizing available and additional forms of credit.

Should global demand, economic activity, or input availability decline considerably for a prolonged period of time, UNIFI maintains the ability to (i) seek additional credit or financing arrangements and/or (ii) re-implement cost reduction initiatives to preserve cash and secure the longevity of the business and operations.

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Management regularly evaluates such repatriations and maintains the ability to take additional, similar actions from time to time, as circumstances warrant.

For the remainder of fiscal 2023, we expect the majority of our capital will be deployed to (i) upgrade the machinery in our U.S., El Salvador, and Brazil manufacturing facilities via capital expenditures and (ii) support working capital needs associated with recovering demand and product sales.

Nonetheless, we understand the current global economic risks and we are prepared to act swiftly and diligently to ensure the vitality of the business.

The following outlines the attributes relating to our credit facility as of January 1, 2023:

Recognizing the continuing weak demand environment, in the third quarter of fiscal 2023, UNIFI negotiated a contract modification with an equipment vendor from which significant capital expenditures had occurred and were planned to continue.

The contract modification was executed at a cost to UNIFI of $623 and allows UNIFI to delay the associated equipment purchases and installation activities for 18 months, such that approximately $25,000 of capital expenditures originally expected over the March 2023 to September 2024 period are now expected to occur over the September 2024 to March 2026 period.

This action allows for improved short- and mid-term liquidity in light of the current subdued levels of sales and facility utilization and allows for a better matching of future capital expenditures with expected higher levels of future business activity.

As textile product demand recovers in the next several quarters, we expect to use cash in support of increasing working capital needs.

The following outlines the attributes relating to our credit facility as of April 2, 2023:

UNIFI was in compliance with all applicable financial covenants in the 2022 Credit Agreement;

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The reconciliations for Net Debt are as follows:

January 1, 2023

April 2, 2023

Long-term debt

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cash and cash equivalents

There was no significant change in Net Debt in connection with the establishment of the 2022 Credit Agreement in the second quarter of fiscal 2023.

Further, Net Debt remained relatively unchanged from October 2, 2022 to January 1, 2023.

The increase in Net Debt reflects the impact of the constrained demand environment and the anticipated capital expenditures deployed in fiscal 2023.

Working Capital and Adjusted Working Capital (Non-GAAP Financial Measures)

The following table presents the components of working capital and the reconciliation of working capital to Adjusted Working Capital:

January 1, 2023

April 2, 2023

Cash and cash equivalents

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Adjusted Working Capital

When comparing from July 3, 2022 to January 1, 2023, working capital and Adjusted Working Capital decreased.

When comparing from July 3, 2022 to April 2, 2023, working capital and Adjusted Working Capital decreased.

The decrease in receivables, net was primarily due to (i) a decrease in sales following lower global demand and (ii) a decrease in banker’s acceptance notes held by our Asia Segment.

The decrease in inventories was primarily attributable to a decline in raw material purchases and costs in the current six-month period.

The decrease in inventories was primarily attributable to a decline in raw material purchases and costs in the current nine-month period.

The decrease in other current assets was primarily due to utilization of the fiscal 2021 recovery of non-income taxes in Brazil and lower vendor deposits.

The decrease in accounts payable followed the decrease in inventories and production activity in the current six-month period.

The decrease in other current liabilities primarily reflects the routine timing differences for payroll and other operating expenses.

The decrease in accounts payable followed the decrease in inventories and production activity in the current nine-month period.

The decrease in other current liabilities primarily reflects lower business activities and the routine timing differences for payroll and other operating expenses.

The changes in current operating lease liabilities, current portion of long-term debt, income taxes receivable, and income taxes payable were insignificant.

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The significant components of net cash provided (used) by operating activities are summarized below.

For the Six Months Ended

January 1, 2023

December 26, 2021

For the Nine Months Ended

April 2, 2023

March 27, 2022

Net (loss) income

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Deferred income taxes

Distribution received from unconsolidated affiliate

Receivables, net

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Net cash provided (used) by operating activities

The increase in operating cash flows was primarily due to reducing working capital associated with a decline in overall business activity in the current six-month period, which was primarily offset by significantly weaker earnings.

The increase in operating cash flows was primarily due to reducing working capital associated with a decline in overall business activity in the current nine-month period, which was primarily offset by significantly weaker earnings.

Investing Cash Flows

Investing activities primarily includes $32,461 for capital expenditures.

During the current six-month period, UNIFI invested $23,950 in capital projects, primarily relating to (i) eAFK Evo texturing machinery, (ii) further improvements in production capabilities and technology enhancements in the Americas, and (iii) routine annual maintenance capital expenditures.

During the current nine-month period, UNIFI invested $32,461 in capital projects, primarily relating to (i) texturing machinery, (ii) further improvements in production capabilities and technology enhancements in the Americas, and (iii) routine annual maintenance capital expenditures.

Maintenance capital expenditures are necessary to support UNIFI’s current operations, capacities, and capabilities and exclude expenses relating to repairs and costs that do not extend an asset’s useful life.

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Financing Cash Flows

Financing activities primarily include (i) scheduled payments against the ABL Term Loan and finance leases, (ii) proceeds and payments on the ABL Revolver, and (iii) proceeds from construction financing during the current six-month period.

Financing activities primarily include (i) scheduled payments against outstanding indebtedness and (ii) proceeds from construction financing during the current nine-month period.

Share Repurchase Program

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Financial obligations are considered to represent known future cash payments that UNIFI is required to make under existing contractual arrangements, such as debt and lease agreements.

After considering the changes generated by the 2022 Credit Agreement, there have been no further material changes in the scheduled maturities of UNIFI’s contractual obligations as disclosed under the heading “Contractual Obligations”

After considering the changes generated by the 2022 Credit Agreement and the above discussion of delaying certain equipment purchases by 18 months, there have been no further material changes in the scheduled maturities of UNIFI’s contractual obligations as disclosed under the heading “Contractual Obligations”

in “Item 7.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements