Item 1. Financial Statements
Item 1. Financial Statements
CONDENSED CONSOLIDATED BA LANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
September 29, 2024
June 30, 2024
ASSETS
Cash and cash equivalents
$
13,703
$
26,805
Receivables, net
77,885
79,165
Inventories
145,350
131,181
Income taxes receivable
1,355
164
Other current assets
12,923
11,618
Total current assets
251,216
248,933
Property, plant and equipment, net
189,744
193,723
Operating lease assets
8,411
8,245
Deferred income taxes
5,156
5,392
Other non-current assets
12,452
12,951
Total assets
$
466,979
$
469,244
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable
$
41,250
$
43,622
Income taxes payable
1,510
754
Current operating lease liabilities
2,434
2,251
Current portion of long-term debt
12,153
12,277
Other current liabilities
18,923
17,662
Total current liabilities
76,270
76,566
Long-term debt
119,324
117,793
Non-current operating lease liabilities
6,092
6,124
Deferred income taxes
1,869
1,869
Other long-term liabilities
3,715
3,507
Total liabilities
207,270
205,859
Commitments and contingencies
Common stock, $ 0.10 par value ( 500,000,000 shares authorized; 18,257,103 and 18,251,545
shares issued and outstanding as of September 29, 2024 and June 30, 2024, respectively)
1,826
1,825
Capital in excess of par value
71,419
70,952
Retained earnings
251,765
259,397
Accumulated other comprehensive loss
( 65,301
)
( 68,789
)
Total shareholders’ equity
259,709
263,385
Total liabilities and shareholders’ equity
$
466,979
$
469,244
See accompanying notes to condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATE MENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands, except per share amounts)
For the Three Months Ended
September 29, 2024
October 1, 2023
Net sales
$
147,372
$
138,844
Cost of sales
137,914
139,419
Gross profit (loss)
9,458
( 575
)
Selling, general and administrative expenses
11,842
11,609
Provision (benefit) for bad debts
312
( 209
)
Other operating expense, net
520
54
Operating loss
( 3,216
)
( 12,029
)
Interest income
( 257
)
( 581
)
Interest expense
2,507
2,485
Equity in earnings of unconsolidated affiliates
( 11
)
( 200
)
Loss before income taxes
( 5,455
)
( 13,733
)
Provision (benefit) for income taxes
2,177
( 463
)
Net loss
$
( 7,632
)
$
( 13,270
)
Net loss per common share:
Basic
$
( 0.42
)
$
( 0.73
)
Diluted
$
( 0.42
)
$
( 0.73
)
Comprehensive loss:
For the Three Months Ended
September 29, 2024
October 1, 2023
Net loss
$
( 7,632
)
$
( 13,270
)
Other comprehensive income (loss):
Foreign currency translation adjustments
3,488
( 5,540
)
Other comprehensive income (loss), net
3,488
( 5,540
)
Comprehensive loss
$
( 4,144
)
$
( 18,810
)
See accompanying notes to condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEM ENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(In thousands)
Shares
Common Stock
Capital in Excess of Par Value
Retained Earnings
Accumulated Other Comprehensive Loss
Total Shareholders’ Equity
Balance at June 30, 2024
18,252
$
1,825
$
70,952
$
259,397
$
( 68,789
)
$
263,385
Options exercised
5
1
32
—
—
33
Stock-based compensation
—
—
435
—
—
435
Other comprehensive gain, net of tax
—
—
—
—
3,488
3,488
Net loss
—
—
—
( 7,632
)
—
( 7,632
)
Balance at September 29, 2024
18,257
$
1,826
$
71,419
$
251,765
$
( 65,301
)
$
259,709
Shares
Common Stock
Capital in Excess of Par Value
Retained Earnings
Accumulated Other Comprehensive Loss
Total Shareholders’ Equity
Balance at July 2, 2023
18,081
$
1,808
$
68,901
$
306,792
$
( 53,891
)
$
323,610
Options exercised
3
—
21
—
—
21
Conversion of equity units
1
—
—
—
—
—
Stock-based compensation
—
—
209
—
—
209
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions
—
—
( 1
)
—
—
( 1
)
Other comprehensive loss, net of tax
—
—
—
—
( 5,540
)
( 5,540
)
Net loss
—
—
—
( 13,270
)
—
( 13,270
)
Balance at October 1, 2023
18,085
$
1,808
$
69,130
$
293,522
$
( 59,431
)
$
305,029
See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEME NTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Three Months Ended
September 29, 2024
October 1, 2023
Cash and cash equivalents at beginning of period
$
26,805
$
46,960
Operating activities:
Net loss
( 7,632
)
( 13,270
)
Adjustments to reconcile net loss to net cash (used) provided by operating activities:
Equity in earnings of unconsolidated affiliates
( 11
)
( 200
)
Depreciation and amortization expense
6,547
7,026
Non-cash compensation expense
435
212
Deferred income taxes
344
( 679
)
Other, net
80
( 62
)
Changes in assets and liabilities:
Receivables, net
2,221
4,111
Inventories
( 12,851
)
12,608
Other current assets
( 1,091
)
2,126
Income taxes
( 462
)
( 1,148
)
Accounts payable and other current liabilities
( 460
)
( 3,432
)
Other, net
46
( 173
)
Net cash (used) provided by operating activities
( 12,834
)
7,119
Investing activities:
Capital expenditures
( 2,018
)
( 2,937
)
Other, net
—
457
Net cash used by investing activities
( 2,018
)
( 2,480
)
Financing activities:
Proceeds from ABL Revolver
47,500
31,100
Payments on ABL Revolver
( 43,000
)
( 27,500
)
Payments on ABL Term Loan
( 2,300
)
( 2,300
)
Payments on finance lease obligations
( 808
)
( 713
)
Other, net
( 162
)
17
Net cash provided by financing activities
1,230
604
Effect of exchange rate changes on cash and cash equivalents
520
( 688
)
Net (decrease) increase in cash and cash equivalents
( 13,102
)
4,555
Cash and cash equivalents at end of period
$
13,703
$
51,515
See accompanying notes to condensed consolidated financial statements.
4
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Background
Unifi, Inc., a New York corporation formed in 1969 (together with its subsidiaries, “UNIFI,” the “Company,” “we,” “us,” or “our”), is a multinational company that manufactures and sells innovative recycled and synthetic products, made from polyester and nylon, primarily to other yarn manufacturers and knitters and weavers (UNIFI’s “direct customers”) that produce yarn and/or fabric for the apparel, hosiery, home furnishings, automotive, industrial, medical, and other end-use markets (UNIFI’s “indirect customers”). We sometimes refer to these indirect customers as “brand partners.” Polyester products include partially oriented yarn (“POY”) and textured, solution and package dyed, twisted, beamed, and draw wound yarns, and each is available in virgin or recycled varieties. Recycled solutions, made from both pre-consumer and post-consumer waste, include plastic bottle flake (“Flake”), polyester polymer beads (“Chip”), and staple fiber. 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 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 a joint venture with operations in the United States (the “U.S.”).
2. Basis of Presentation; Condensed Notes
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. As contemplated by the instructions of the SEC to Form 10-Q, the following notes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to UNIFI’s year-end audited consolidated financial statements and related notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (the “2024 Form 10-K”).
The financial information included in this report has been prepared by UNIFI, without audit. In the opinion of management, all adjustments, which consist of normal, recurring adjustments, considered necessary for a fair statement of the results for interim periods have been included. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the amounts reported and certain financial statement disclosures. Actual results may vary from these estimates.
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 September 29, 2024. Unifi, Inc.’s remaining material operating subsidiaries’ fiscal quarter ended on September 30, 2024. 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 September 29, 2024 and October 1, 2023 both consisted of 13 weeks.
3. Recent Accounting Pronouncements
Issued and Pending Adoption
In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . ASU No. 2023-09 modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (iii) income tax expense or benefit from continuing operations (separated by federal, state, and foreign). The ASU also requires entities to disclose their income tax payments to international, federal, state, and local jurisdictions, among other changes. The ASU is effective for UNIFI's fiscal 2026, with early adoption permitted, and should be applied on a prospective basis, but retrospective application is permitted. UNIFI is currently evaluating the impact on the Company’s disclosures but does not expect this standard will have a material impact on its consolidated financial position, results of operations, or cash flows.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . ASU No. 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The ASU is effective this fiscal year for annual reporting and in the first quarter of fiscal 2026 for interim reporting, with early adoption permitted. UNIFI has not adopted this standard. UNIFI is currently evaluating the impact on the Company’s disclosures but does not expect this standard will have a material impact on its consolidated financial position, results of operations, or cash flows.
Based on UNIFI’s review of ASUs issued since the filing of the 2024 Form 10-K, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a material impact on UNIFI’s consolidated financial statements.
5
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
4. Revenue
The following tables present net sales disaggregated by (i) classification of customer type and (ii) REPREVE ® Fiber sales:
Third-Party Manufacturer
For the Three Months Ended
September 29, 2024
October 1, 2023
Third-party manufacturer
$
146,219
$
137,620
Service
1,153
1,224
Net sales
$
147,372
$
138,844
For the Three Months Ended
September 29, 2024
October 1, 2023
REPREVE ® Fiber
$
44,742
$
42,461
All other products and services
102,630
96,383
Net sales
$
147,372
$
138,844
Third-party manufacturer revenue is primarily generated through sales to direct customers. Such sales represent satisfaction of UNIFI’s performance obligations required by the associated revenue contracts. Each of UNIFI’s reportable segments derives revenue from sales to third-party manufacturers.
Service Revenue
Service revenue is primarily generated, as services are rendered, through fulfillment of toll manufacturing of textile products or transportation services governed by written agreements. Such toll manufacturing and transportation services represent satisfaction of UNIFI’s performance obligations required by the associated revenue contracts.
REPREVE ® Fiber
REPREVE ® Fiber represents UNIFI's collection of fiber products on our recycled platform, with or without added technologies.
Variable Consideration
For all variable consideration, where appropriate, UNIFI estimates the amount using the expected value method, which takes into consideration historical experience, current contractual requirements, specific known market events, and forecasted customer buying and payment patterns. Overall, these reserves reflect UNIFI’s best estimates of the amount of consideration to which the customer is entitled based on the terms of the contracts. Variable consideration has been immaterial to UNIFI’s financial statements for all periods presented.
5. Long-Term Debt
Debt Obligations
The following table and narrative presents the detail of UNIFI’s debt obl igations. Capitalized terms not otherwise defined within this Note shall have the meanings attributed to them in the Second Amended and Restated Credit Agreement, dated as of October 28, 2022 (the "2022 Credit Agreement") as amended.
Weighted Average
Scheduled
Interest Rate as of
Principal Amounts as of
Maturity Date
September 29, 2024
September 29, 2024
June 30, 2024
ABL Revolver
October 2027
7.4
%
$
24,200
$
19,700
ABL Term Loan
October 2027
8.1
%
98,900
101,200
Finance lease obligations
(1)
5.2
%
8,591
9,399
Total debt
131,691
130,299
Current ABL Term Loan
( 9,200
)
( 9,200
)
Current portion of finance lease obligations
( 2,953
)
( 3,077
)
Unamortized debt issuance costs
( 214
)
( 229
)
Total long-term debt
$
119,324
$
117,793
(1) Scheduled maturity dates for finance lease obligations range from Marc h 2025 to September 2028 .
ABL Facility and Amendments
On September 5, 2024, UNIFI, Inc. and certain of its subsidiaries entered into a First Amendment to the Second Amended and Restated Credit Agreement (the “First Amendment”) with a syndicate of lenders. The First Amendment primarily (i) permits the sale of a Company-owned real estate asset (consisting of an industrial warehouse building and land acreage) located in Yadkinville, North Carolina with application of the net proceeds to reduce the outstanding ABL Revolver balance, in lieu of the prescribed mandatory prepayment to the ABL Term Loan; (ii) reduces the Maximum Revolver Amount from $ 115,000 to $ 80,000 ; (iii) modifies the definition of the Trigger Level as of any date of determination to the greater of (a) $ 16,500 and (b) 10 % of the sum of (i) the Maximum Revolver Amount plus (ii) the outstanding principal amount of the ABL Term Loan on such date of determination; (iv) increases the range of the
6
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Applicable Margin on (a) SOFR-based loans to a new range of 1.50 % to 2.00 % and (b) Base Rate-based loans to a new range of 0.50 % to 1.00 %, with such new ranges of Applicable Margin rates becoming immediately effective and continuing until the Company achieves a Fixed Charge Coverage Ratio of 1.05 to 1.00 or better; (v) for a Term Loan Reset, establishes an additional requirement to obtain lender approval; and (vi) modifies certain terms and conditions of the Credit Agreement including, but not limited to, Swing Loans, Letter of Credit sublimits, and costs related to normal course collateral valuations for the ABL Facility.
Subsequent Event
On October 25, 2024, UNIFI entered into a new credit agreement with Wells Fargo Bank, National Association for a $ 25,000 revolving credit facility (the "2024 Facility"). The maturity date of the 2024 Facility is the earlier of (i) October 28, 2027 and (ii) the termination or refinancing of the 2022 Credit Agreement. The 2024 Facility is deemed unsecured financing for UNIFI, but is collateralized by certain assets pledged by related party Kenneth G. Langone, one of the members of UNIFI's Board of Directors. Borrowings under the 2024 Facility bear interest at a rate of SOFR plus 0.90 %. The 2024 Facility contains no additional financial covenants beyond those already in effect for the 2022 Credit Agreement and is subject to a monthly unused line fee of 0.25 % on available borrowing capacity. As of the report date, no amounts had been borrowed against the 2024 Facility.
6. Income Taxes
The provision (benefit) for income taxes and effective tax rate were as follows:
For the Three Months Ended
September 29, 2024
October 1, 2023
Provision (benefit) for income taxes
$
2,177
$
( 463
)
Effective tax rate
( 39.9
)%
3.4
%
Income Tax Expense
UNIFI’s provision (benefit) for income taxes for the three months ended September 29, 2024 and October 1, 2023 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 rate for the three months ended September 29, 2024 and October 1, 2023 varied from the U.S. federal statutory rate primarily due to the U.S. generated losses for which UNIFI does not expect to realize a future tax benefit.
During the three months ended October 1, 2023, the Internal Revenue Service (the “IRS”) audit of fiscal years 2014 through 2019 was concluded with a net refund of $ 1,248 . The impact from the audit adjustments to the prior periods was insignificant.
Unrecognized Tax Benefits
UNIFI regularly assesses the outcomes of both completed and ongoing examinations to ensure that its provision for income taxes is sufficient. Certain returns that remain open to examination have utilized carryforward tax attributes generated in prior tax years, including net operating losses, which could potentially be revised upon examination.
Following the conclusion of the IRS audit during the period ended October 1, 2023, UNIFI adjusted the uncertain tax positions for fiscal years 2014 through 2019 that were effectively settled. The impact from releasing the netted uncertain tax position liabilities was insignificant.
7. Shareholders’ Equity
On October 31, 2018, UNIFI announced that the Company's Board of Directors approved a share repurchase program (the “2018 SRP”) under which UNIFI is authorized to acquire up to $ 50,000 of its common stock. The share repurchase authorization is discretionary and has no expiration date. No shares have been repurchased in fiscal 2023 and 2024 and $ 38,859 remains available for repurchase.
8. Stock-Based Compensation
On October 31, 2023 , UNIFI’s shareholders approved a First Amendment (the "First Amendment") to the Unifi, Inc. Second Amended and Restated 2013 Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan set the initial number of shares available for future issuance (“share reserve”) pursuant to awards granted under the 2020 Plan to 850 . The First Amendment increased the remaining share reserve by 1,100 . No additional awards can be granted under prior plans; however, awards outstanding under a respective prior plan remain subject to that plan’s provisions.
The following table provides information as of September 29, 2024 with respect to the number of securities remaining available for future issuance under the 2020 Plan, as amended:
Authorized under the 2020 Plan
850
Plus: Share reserve increase from the First Amendment
1,100
Plus: Awards expired, forfeited, or otherwise terminated unexercised
220
Less: Awards granted to employees
( 1,106
)
Less: Awards granted to non-employee directors
( 204
)
Available for issuance under the 2020 Plan
860
7
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
9. Earnings Per Share
The components of the calculation of earnings per share (“EPS”) are as follows:
For the Three Months Ended
September 29, 2024
October 1, 2023
Net loss
$
( 7,632
)
$
( 13,270
)
Basic weighted average shares
18,255
18,084
Net potential common share equivalents
—
—
Diluted weighted average shares
18,255
18,084
Excluded from the calculation of common share equivalents:
Anti-dilutive common share equivalents
478
590
Excluded from the calculation of diluted shares:
Unvested stock options that vest upon achievement of certain market conditions
333
333
The calculation of EPS is based on the weighted average number of Unifi, Inc.’s common shares outstanding for the applicable period. The calculation of diluted EPS presents the effect of all potential dilutive common shares that were outstanding during the respective period, unless the effect of doing so is anti-dilutive.
10. Commitments and Contingencies
Collective Bargaining Agreements
While employees of UNIFI’s Brazilian operations are unionized, none of the labor force employed by UNIFI’s domestic or other foreign subsidiaries is currently covered by a collective bargaining agreement.
11. Related Party Transactions
Related party balances and transactions are not material to the condensed consolidated financial statements and, accordingly, are not presented separately from other financial statement captions.
There were no related party receivables as of September 29, 2024 and June 30, 2024.
Related party payables for Salem Leasing Corporation consisted of the following:
September 29, 2024
June 30, 2024
Accounts payable
$
403
$
464
Operating lease obligations
251
301
Finance lease obligations
2,043
2,374
Total related party payables
$
2,697
$
3,139
The following were the Company’s significant related party transactions:
For the Three Months Ended
Affiliated Entity
Transaction Type
September 29, 2024
October 1, 2023
Salem Leasing Corporation
Payments for transportation equipment costs and finance lease debt service
$
1,161
$
1,209
8
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
12. Business Segment Information
UNIFI defines operating segments as components of the organization for which discrete financial information is available and operating results are evaluated on a regular basis by UNIFI’s chief executive officer, who is the chief operating decision maker (the “CODM”), in order to assess performance and allocate resources. Characteristics of UNIFI which were relied upon in making the determination of reportable segments include the nature of the products sold, the internal organizational structure, the trade policies in the geographic regions in which UNIFI operates, and the information that is regularly reviewed by the CODM for the purpose of assessing performance and allocating resources.
UNIFI's three reportable segments are organized as follows:
• The operations within the Americas Segment exhibit similar long-term economic characteristics and primarily sell into an economic trading zone covered by the United States-Mexico-Canada Agreement and the Dominican Republic-Central America Free Trade Agreement to similar customers utilizing similar methods of distribution. These operations derive revenues primarily from manufacturing synthetic and recycled textile products with sales primarily to yarn manufacturers, knitters, and weavers that produce yarn and/or fabric for the apparel, hosiery, automotive, home furnishings, industrial, medical, and other end-use markets principally in North and Central America. The Americas Segment consists of sales and manufacturing operations in the U.S., El Salvador, and Colombia.
• The Brazil Segment primarily manufactures and sells polyester-based products to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial, and other end-use markets principally in Brazil. The Brazil Segment includes a manufacturing location and sales offices in Brazil.
• The operations within the Asia Segment exhibit similar long-term economic characteristics and sell to similar customers utilizing similar methods of distribution primarily in Asia and Europe. The Asia Segment primarily sources synthetic and recycled textile products from third-party suppliers and sells to yarn manufacturers, knitters, and weavers that produce fabric for the apparel, automotive, home furnishings, industrial, and other end-use markets principally in Asia and Europe. The Asia Segment includes sales offices in China, Turkey, and Hong Kong.
UNIFI evaluates the operating performance of its segments based upon Segment (Loss) Profit, which represents segment gross (loss) profit 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.
The accounting policies for the segments are consistent with UNIFI’s accounting policies. 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.
Selected financial information is presented below:
For the Three Months Ended September 29, 2024
Americas
Brazil
Asia
Total
Net sales
$
86,283
$
34,310
$
26,779
$
147,372
Cost of sales
87,661
26,373
23,880
137,914
Gross (loss) profit
( 1,378
)
7,937
2,899
9,458
Segment depreciation expense
5,410
741
17
6,168
Segment Profit
$
4,032
$
8,678
$
2,916
$
15,626
For the Three Months Ended October 1, 2023
Americas
Brazil
Asia
Total
Net sales
$
81,573
$
29,909
$
27,362
$
138,844
Cost of sales
88,953
27,742
22,724
139,419
Gross (loss) profit
( 7,380
)
2,167
4,638
( 575
)
Segment depreciation expense
5,497
840
—
6,337
Segment (Loss) Profit
$
( 1,883
)
$
3,007
$
4,638
$
5,762
The reconciliations of segment gross profit (loss) to consolidated loss before income taxes are as follows:
For the Three Months Ended
September 29, 2024
October 1, 2023
Americas
$
( 1,378
)
$
( 7,380
)
Brazil
7,937
2,167
Asia
2,899
4,638
Segment gross profit (loss)
9,458
( 575
)
Selling, general and administrative expenses
11,842
11,609
Provision (benefit) for bad debts
312
( 209
)
Other operating expense, net
520
54
Operating loss
( 3,216
)
( 12,029
)
Interest income
( 257
)
( 581
)
Interest expense
2,507
2,485
Equity in earnings of unconsolidated affiliates
( 11
)
( 200
)
Loss before income taxes
$
( 5,455
)
$
( 13,733
)
There have been no material changes in segment assets during fiscal 2025.
9
Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
13. Investments in Unconsolidated Affiliates
Included within Other non-current assets are UNIFI’s investments in unconsolidated affiliates: U.N.F. Industries, Ltd. (“UNF”) and UNF America LLC (“UNFA”).
U.N.F. Industries, Ltd.
In December 2023, UNIFI dissolved its interest in UNF under an agreement whereby UNIFI agreed to pay the former joint venture partner $ 2,750 and recorded it as an associated contract termination cost within Restructuring costs on the Condensed Consolidated Statements of Operations and Comprehensive Loss. UNIFI made a payment to the former joint venture partner of $ 1,200 in the second quarter of fiscal 2024 and the remaining $ 1,550 was paid in the third quarter of fiscal 2024. Accordingly, the balance sheet information presented below as of September 29, 2024 does not include any amounts related to UNF.
UNF America LLC
Raw material and production services for UNFA are provided by Nilit America Inc. under separate supply and services agreements. UNFA’s fiscal year end is December 31, and it is a limited liability company located in Ridgeway, Virginia. UNFA is treated as a partnership for its income tax reporting.
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 September 29, 2024, UNIFI’s open purchase orders related to this supply agreement, all with UNFA, w ere $ 1,465 .
UNIFI’s raw material purchases under this supply agreement consisted of the following:
For the Three Months Ended
September 29, 2024
October 1, 2023
UNFA
$
3,689
$
3,126
UNF
—
—
Total
$
3,689
$
3,126
As of September 29, 2024 and June 30, 2024, UNIFI had accounts payable due to UNF A of $ 1,403 and $ 2,197 .
UNIFI has determined that UNF was, and UNFA is, a variable interest entity and has also determined that UNIFI has been the primary beneficiary of these entities, based on the terms of the supply agreement. As a result, these entities should be consolidated with UNIFI’s financial results. As (i) UNIFI purchases substantially all of the output and all intercompany sales would be eliminated in consolidation, (ii) the entity balance sheets constitute 5 % 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. 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. Other than the supply agreement discussed above, UNIFI does not provide any other commitments or guarantees related to UNFA. As of September 29, 2024 and June 30, 2024, UNIFI’s investment in UNFA w as $ 1,599 and $ 1,603 , respectively.
Condensed balance sheet and income statement information for UNIFI’s unconsolidated affiliates (including reciprocal balances) are presented in the tables below.
September 29, 2024
June 30, 2024
Current assets
$
5,954
$
5,758
Non-current assets
453
458
Current liabilities
3,208
3,009
Non-current liabilities
—
—
Shareholders’ equity and capital accounts
3,199
3,207
UNIFI’s portion of undistributed earnings
1,540
1,544
For the Three Months Ended
September 29, 2024
October 1, 2023
Net sales
$
4,210
$
4,741
Gross profit
515
638
(Loss) income from operations
( 8
)
196
Net (loss) income
( 8
)
165
Depreciation and amortization
7
14
Distribution received
—
—
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Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
14. Supplemental Cash Flow Information
Cash payments for interest and taxes consist of the following:
For the Three Months Ended
September 29, 2024
October 1, 2023
Interest, net of capitalized interest of $ 38 and $ 62 , respectively
$
2,368
$
2,443
Income tax payments, net
2,558
1,633
Cash payments for taxes shown above consist primarily of income and withholding tax payments made by UNIFI in both U.S. and foreign jurisdictions, net of refunds.
Non-Cash Investing and Financing Activities
As of September 29, 2024 and June 30, 2024, $ 772 and $ 879 , respectively, were included in accounts payable for unpaid capital expenditures. As of October 1, 2023 and July 2, 2023, $ 1,084 and $ 1,137 , respectively, were included in accounts payable for unpaid capital expenditures.
During the three months ended September 29, 2024 and October 1, 2023, UNIFI recorded non-cash activity relating to finance lease s of $ 0 a nd $ 1,633 , respectively.
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Unifi, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
15. Other Financial Data
Select balance sheet information is presented in the following table.
September 29, 2024
June 30, 2024
Receivables, net:
Customer receivables
$
79,089
$
80,050
Allowance for uncollectible accounts
( 3,036
)
( 2,713
)
Reserves for quality claims
( 835
)
( 745
)
Net customer receivables
75,218
76,592
Banker's acceptance notes
1,632
1,326
Other receivables
1,035
1,247
Total receivables, net
$
77,885
$
79,165
Inventories:
Raw materials
$
57,696
$
49,391
Supplies
12,206
12,160
Work in process
8,696
8,994
Finished goods
70,122
64,449
Gross inventories
148,720
134,994
Net realizable value adjustment
( 3,370
)
( 3,813
)
Total inventories
$
145,350
$
131,181
Other current assets:
Assets held for sale (1)
$
3,798
$
3,781
Vendor deposits
3,579
2,633
Prepaid expenses and other
2,554
2,133
Value-added taxes receivable
2,454
2,510
Contract assets
538
561
Total other current assets
$
12,923
$
11,618
Property, plant and equipment, net:
Land
$
1,904
$
1,897
Land improvements
16,409
16,409
Buildings and improvements
162,840
162,414
Assets under finance leases
18,030
18,030
Machinery and equipment
653,378
650,901
Computers, software and office equipment
25,744
25,464
Transportation equipment
10,755
10,710
Construction in progress
3,350
3,319
Gross property, plant and equipment
892,410
889,144
Less: accumulated depreciation
( 694,857
)
( 688,086
)
Less: accumulated amortization – finance leases
( 7,809
)
( 7,335
)
Total property, plant and equipment, net
$
189,744
$
193,723
Other non-current assets:
Recovery of taxes
$
5,794
$
5,543
Grantor trust
2,147
2,942
Investments in unconsolidated affiliates
1,599
1,603
Intangible assets, net
655
682
Other
2,257
2,181
Total other non-current assets
$
12,452
$
12,951
Other current liabilities:
Payroll and fringe benefits
$
8,978
$
7,140
Utilities
2,612
2,861
Incentive compensation
1,798
1,450
Deferred revenue
1,500
1,504
Property taxes, interest and other
4,035
4,707
Total other current liabilities
$
18,923
$
17,662
Other long-term liabilities:
Nonqualified deferred compensation plan obligation
$
2,175
$
2,008
Uncertain tax positions
1,161
1,109
Other
379
390
Total other long-term liabilities
$
3,715
$
3,507
(1) Assets held for sale as of September 29, 2024 relates to a warehouse located in Yadkinville, North Carolina. On October 30, 2024, this property was sold for $ 8,100 resulting in a net gain of approximately $ 4,300 .
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