What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2025-02-06 · 201 added, 182 removed, 348 unchanged (52% of the section changed)

2 unchanged sentences

A reference to a “note” in this section refers to the accompanying notes to condensed consolidated financial statements.

A reference to the “current period” refers to the three-month period ended December 29, 2024, while a reference to the “prior period” refers to the three-month period ended December 31, 2023.

A reference to the “current six-month period” refers to the six-month period ended December 29, 2024, while a reference to the “prior six-month period” refers to the six-month period ended December 31, 2023.

A reference to the “current period” refers to the three-month period ended March 30, 2025, while a reference to the “prior period” refers to the three-month period ended March 31, 2024.

A reference to the “current nine-month period” refers to the nine-month period ended March 30, 2025, while a reference to the “prior nine-month period” refers to the nine-month period ended March 31, 2024.

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 ended December 29, 2024 and December 31, 2023, and, to the extent applicable, any material changes from the information discussed in the 2024 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 ended March 30, 2025 and March 31, 2024, and, to the extent applicable, any material changes from the information discussed in the 2024 Form 10-K or other important intervening developments or information.

These discussions should be read in conjunction with the 2024 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

December 29, 2024

December 31, 2023

December 29, 2024

December 31, 2023

For the Nine Months Ended

March 30, 2025

March 31, 2024

March 30, 2025

March 31, 2024

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

7 unchanged sentences

In addition, the following pressures have been present or recently introduced:

(i) the impact of inflation on consumer spending, (ii) elevated interest rates for consumers and customers, including the impact on the carrying costs of customer inventories, and (iii) the volatility of trade and regulatory matters in light of recent executive and legislative branch changes.

(i) the impact of inflation on consumer spending, (ii) elevated interest rates for consumers and customers, including the impact on the carrying costs of customer inventories, (iii) the volatility of trade and regulatory matters in light of recent executive and legislative branch changes and (iv) the uncertainty over global trade policies and the financial impact of related tariffs and retaliatory tariffs.

A tariff structure that disproportionately impacts one country or region over another may result in a shift in manufacturing or flow of goods particularly as it relates to textile production across Asia and Central America.

Such lower tariff countries or regions may be situated outside of UNIFI’s existing global supply chain.

If UNIFI is unable to move production based on these shifts in regional demand, we may lose sales and experience an adverse effect on our financial condition, results of operations, or cash flows.

UNIFI will continue to monitor these and other aspects of the current environment, leverage our global business model as necessary, and work closely with stakeholders to ensure business continuity and liquidity.

While we recognize the disruption to global markets and supply chains caused by the conflicts in Ukraine and the Middle East, we have not been directly impacted.

Fortunately, UNIFI has been expanding its supply chain and business model across multiple geographies over the last several years.

Particularly, (i) our feedstock supply spans multiple markets, (ii) our commercial position in the Central American market remains key to servicing compliant business for USMCA and CAFTA-DR programs, and (iii) we have expanded our asset light model beyond China.

Each of these concepts affords us diversity in this dynamic trade environment and greater flexibility in servicing our customer base.

Specific to other ongoing geopolitical tensions, we recognize the disruption to global markets and supply chains caused by the conflicts in Ukraine and the Middle East, and we have not been impacted.

Indirectly, we recognize that additional or prolonged impacts to the petroleum or other global markets could cause further inflationary pressures to our global raw material costs or additional unforeseen adverse impacts.

Input Costs and Global Production Volatility

Despite lowered input and freight costs and a marginally more stable labor pool recently, global demand volatility and uncertainty continued into fiscal 2025.

Despite lower input and freight costs and a marginally more stable labor pool recently, global demand volatility and uncertainty continued into fiscal 2025.

The threat of recession and global tensions continue to create uncertainty.

33 unchanged sentences

Review of Results of Operations

Three Months Ended December 29, 2024 Compared to Three Months Ended December 31, 2023

Three Months Ended March 30, 2025 Compared to Three Months Ended March 31, 2024

Consolidated Overview

4 unchanged sentences

For the Three Months Ended

December 29, 2024

December 31, 2023

March 30, 2025

March 31, 2024

Cost of sales

Gross (loss) profit

(Benefit) provision for bad debts

Gain on sale of assets

Restructuring costs

Other operating (income) expense, net

Other operating expense, net

Operating loss

Interest expense, net

Equity in loss (earnings) of unconsolidated affiliates

Equity in loss of unconsolidated affiliates

Loss before income taxes

4 unchanged sentences

For the Three Months Ended

December 29, 2024

December 31, 2023

March 30, 2025

March 31, 2024

Interest expense, net

1 unchanged sentence

Depreciation and amortization expense (1)

Gain on sale of assets (2)

Loss on joint venture dissolution (3)

Severance (4)

Transition costs (2)

Adjusted EBITDA

1 unchanged sentence

However, within the accompanying Condensed Consolidated Statements of Cash Flows, amortization of debt issuance costs is reflected in depreciation and amortization expense.

(2) In the second quarter of fiscal 2025, UNIFI recorded a gain of $4,296 related to the sale of a warehouse located in Yadkinville, North Carolina.

(3) In the second quarter of fiscal 2024, UNIFI recorded a loss of $2,750 related to the dissolution of a nylon joint venture.

(4) In the second quarter of fiscal 2024, UNIFI incurred severance costs in connection with the Profitability Improvement Plan in the U.S.

(2) In the third quarter of fiscal 2025, UNIFI incurred various transition costs totaling $2,900 in connection with the consolidation of its yarn manufacturing operations, including (i) facility closure and equipment relocation costs of $1,088, (ii) inventory write-downs of $1,000, (iii) excess manufacturing costs of $580, and (iv) employee separation or retention costs of $232.

The facility closure, equipment relocation, employee separation and retention costs were all recorded within Restructuring costs and the inventory write-downs and excess manufacturing costs were recorded within Cost of sales in the Condensed Consolidated Statements of Operations.

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

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

For the Three Months Ended December 29, 2024

For the Three Months Ended December 31, 2023

Gain on sale of assets (1)

Loss on joint venture dissolution (2)

Severance (3)

For the Three Months Ended March 30, 2025

For the Three Months Ended March 31, 2024

Transition costs (1)

Adjusted results

Weighted average common shares outstanding

(1) In the second quarter of fiscal 2025, UNIFI recorded a gain of $4,296 related to the sale of a warehouse located in Yadkinville, North Carolina.

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

(2) In the second quarter of fiscal 2024, UNIFI recorded a loss of $2,750 related to the dissolution of a nylon joint venture.

(3) In the second quarter of fiscal 2024, UNIFI incurred severance costs in connection with the Profitability Improvement Plan in the U.S.

Consolidated net sales for the current period increased by $1,963, or 1.4%, and consolidated sales volumes increased by 6.2%, compared to the prior period.

Net sales in the current period were higher primarily due to improved sales volumes in each of the reportable segments, along with favorable pricing and market share gains in Brazil, mainly offset by a weaker sales mix in Asia.

(1) In the third quarter of fiscal 2025, UNIFI incurred various transition costs totaling $2,900 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs of $1,088, (ii) inventory write-downs of $1,000, (iii) excess manufacturing costs of $580, and (iv) employee separation or retention costs of $232.

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

Consolidated net sales for the current period decreased by $2,439, or 1.6%, and consolidated sales volumes decreased by 0.9%, compared to the prior period.

Net sales in the current period were lower primarily due to lower sales volumes and a weaker sales mix in Asia, partially offset by improved sales volumes in the Americas Segment, along with favorable pricing and market share gains in Brazil.

Despite these sales volume improvements, volumes remain depressed, particularly in the Americas and Asia Segments as a result of continued weak global demand.

Consolidated weighted average sales prices decreased 4.8% which partially offset the volume increase.

Consolidated weighted average sales prices decreased 0.7%.

The decrease in sales prices was primarily attributable to a weaker sales mix in the Asia Segment, together with unfavorable foreign currency translation effects from the weakening of the BRL versus the USD within our Brazil Segment.

REPREVE ® Fiber products for the current period comprised 31%, or $44,699, of consolidated net sales, compared to 31%, or $46,754, for the prior period.

Gross profit for the current period decreased to $534 from $1,636 in the prior period.

Gross profit decreased primarily due to softer sales and profitability in the Asia Segment.

This was partially offset by (i) increased sales volumes, (ii) improved productivity, and (iii) higher conversion margins in the Brazil Segment.

However, gross profit continues to be unfavorably impacted by weak fixed cost absorption in the Americas Segment, where utilization and productivity remain below historical averages due to depressed demand.

• For the Americas Segment, gross profit was flat primarily due to higher sales volumes and conversion margins, which were mostly offset by inflationary pressures.

• For the Brazil Segment, gross profit increased primarily due to higher sales volumes from market share gains partially offset by an unfavorable foreign currency translation impact.

Gross (Loss) Profit

Gross profit for the current period decreased by $5,209 compared to the prior period.

Gross profit decreased primarily due to (i) lower conversion margins in the Americas Segment and (ii) softer sales and profitability in the Asia Segment.

These were partially offset by (a) increased sales volumes and (b) improved productivity.

However, gross profit continues to be unfavorably impacted by weak fixed cost absorption in the Americas Segment, where utilization and productivity remain below historical averages.

Ongoing cost savings measures led to UNIFI announcing the consolidation of yarn manufacturing operations in the Americas Segment with the planned closure of the Madison, North Carolina facility.

UNIFI incurred $1,580 of transition costs during the period, recorded in Cost of sales, related to (i) inventory write-downs of $1,000 and (ii) excess manufacturing costs of $580.

• For the Americas Segment, gross profit decreased primarily due to decreased productivity related to the consolidation of yarn manufacturing operations.

• For the Brazil Segment, gross profit decreased primarily due to (i) an unfavorable foreign currency translation impact and (ii) lower conversion margins.

• For the Asia Segment, gross profit decreased primarily due to unfavorable changes in customer-specific programs from a weak demand environment.

1 unchanged sentence

(Benefit) Provision for Bad Debts

The current period benefit reflects no material activity, while the prior period provision reflected an increase for a specifically identified customer balance originating in the U.S.

fiber market.

Gain on Sale of Assets

In the second quarter of fiscal 2025, UNIFI recorded a gain of $4,296 related to the sale of a warehouse located in Yadkinville, North Carolina.

The current period and the prior period reflect no material activity.

Restructuring Costs

Restructuring costs for the prior period consisted of (i) a loss of $2,750 for the dissolution of a nylon joint venture and (ii) severance charges of $2,351 in connection with the Profitability Improvement Plan in the U.S.

Other Operating (Income) Expense, Net

The current period and the prior period include foreign currency transaction (gains) losses of $(221) and $464, respectively, with no other meaningful activity.

On February 3, 2025, UNIFI announced the closing of its Madison, North Carolina facility and the transition of those manufacturing operations to other UNIFI production facilities in North and Central America.

As a result, UNIFI incurred restructuring costs of $1,320 in the current period which consisted of (i) equipment relocation and facility closure costs of $1,088 and (ii) employee separation or retention costs of $232.

Other Operating Expense, Net

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

Interest Expense, Net

Interest expense, net increased primarily due to lower interest income in the current period, associated with lower global cash balances.

Equity in Loss (Earnings) of Unconsolidated Affiliates

Equity in Loss of Unconsolidated Affiliates

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

1 unchanged sentence

For the Three Months Ended

December 29, 2024

December 31, 2023

March 30, 2025

March 31, 2024

Provision for income taxes

5 unchanged sentences

Additionally, the impacts of discrete and other rate impacting items are more pronounced when 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 fewer losses in the U.S.

and a discrete benefit from the release of interest and penalties accrued on uncertain tax positions after the close of the IRS audit in the prior period.

The improvement in net loss was primarily attributable to (i) a gain on sale of assets, (ii) no restructuring costs in the current period, (iii) lower bad debt expense and (iv) foreign currency translation gains, partially offset by (a) lower gross profit and (b) higher income tax expense.

The increase in the effective tax rate from the prior period to the current period is primarily attributable to lower foreign earnings and higher losses in the U.S.

The decrease in net loss was primarily attributable to (i) lower gross profit and (ii) restructuring costs in the current period, partially offset by (a) lower bad debt expense and (b) lower income tax expense.

Adjusted EBITDA and Adjusted EPS (Non-GAAP Financial Measures)

Adjusted EBITDA and Adjusted EPS were generally consistent with the prior period as the lower gross profit was mostly offset by (a) lower bad debt expense and (b) foreign currency translation gains.

Adjusted EBITDA and Adjusted EPS were lower compared to the prior period primarily due to lower gross profit, partially offset by lower bad debt expense.

Segment Overview

1 unchanged sentence

Americas Segment

The components of Segment Loss, 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 (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:

For the Three Months Ended

December 29, 2024

December 31, 2023

March 30, 2025

March 31, 2024

Cost of sales

Depreciation expense

Segment (Loss) Profit

Segment net sales as a percentage of

consolidated amounts

Segment Loss as a percentage of

Segment (Loss) Profit as a percentage of

consolidated amounts

4 unchanged sentences

Net sales for the current period

The increase in net sales for the Americas Segment from the prior period to the current period was primarily attributable to higher sales volumes.

The increase in net sales for the Americas Segment from the prior period to the current period was primarily attributable to higher sales volumes and ongoing growth in the Central America business.

Both periods were unfavorably impacted by the continued weak global textile demand environment.

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

Segment Loss for the prior period

Increase in underlying unit margins

Segment Profit for the prior period

Decrease in underlying unit margins

Segment Loss for the current period

Segment Loss for the Americas Segment was relatively unchanged from the prior period to the current period as higher conversion margins were offset by inflationary pressures.

The decrease in Segment (Loss) Profit for the Americas Segment from the prior period to the current period was primarily attributable to decreased productivity related to the consolidation of yarn manufacturing operations.

Brazil Segment

1 unchanged sentence

For the Three Months Ended

December 29, 2024

December 31, 2023

March 30, 2025

March 31, 2024

Cost of sales

7 unchanged sentences

Net sales for the prior period

Increase in average selling price and change in sales mix

Increase in sales volumes

Unfavorable foreign currency translation effects

Increase in average selling price and change in sales mix

Net sales for the current period

The increase in net sales for the Brazil Segment from the prior period to the current period was primarily attributable to (i) higher average selling prices due to increasing raw material costs and (ii) an improvement in sales volumes from market share gains, partially offset by unfavorable foreign currency translation effects from the weakening of the BRL versus the USD.

The decrease in net sales for the Brazil Segment from the prior period to the current period was primarily attributable to unfavorable foreign currency translation effects from the weakening of the BRL versus the USD, partially offset by higher average selling prices due to increasing raw material costs.

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

Segment Profit for the prior period

Increase in underlying unit margins

Increase in sales volumes

Unfavorable foreign currency translation effects

Decrease in underlying unit margins

Segment Profit for the current period

The increase in Segment Profit for the Brazil Segment from the prior period to the current period was primarily attributable to (i) improved underlying margins from higher selling prices and (ii) an increase in sales volumes as discussed above, partially offset by unfavorable foreign currency translation effects.

The decrease in Segment Profit for the Brazil Segment from the prior period to the current period was primarily attributable to (i) unfavorable foreign currency translation effects and (ii) lower conversion margins.

We continue to prioritize innovation and differentiation to improve our portfolio and competitive position in Brazil.

1 unchanged sentence

For the Three Months Ended

December 29, 2024

December 31, 2023

March 30, 2025

March 31, 2024

Cost of sales

7 unchanged sentences

Net sales for the prior period

Decrease in sales volumes

Change in average selling price and sales mix

Increase in sales volumes

Unfavorable foreign currency translation effects

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 the changes in sales volumes related to customer-specific programs, which were partially offset by an overall improvement in sales volumes compared to the prior period despite continued weak global demand, particularly for apparel.

The decrease in net sales for the Asia Segment from the prior period to the current period was primarily attributable to the changes in sales volumes related to customer-specific programs due to continued weak global demand, particularly for apparel.

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

1 unchanged sentence

Change in underlying unit margins and sales mix

Increase in sales volumes

Favorable foreign currency translation effects

Decrease in sales volumes

Unfavorable foreign currency translation effects

Segment Profit for the current period

The decrease in Segment Profit for the Asia Segment from the prior period to the current period was attributable to a decline in gross margin rate associated with a change in sales mix of REPREVE products, partially offset by the overall increase in sales volumes.

Six Months Ended December 29, 2024 Compared to Six Months Ended December 31, 2023

The decrease in Segment Profit for the Asia Segment from the prior period to the current period was primarily attributable to (i) a lower gross margin rate associated with a change in sales mix of REPREVE products and (ii) a decline in sales volumes.

Nine Months Ended March 30, 2025 Compared to Nine Months Ended March 31, 2024

Consolidated Overview

The below tables provide:

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

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

• a reconciliation from net loss to EBITDA and Adjusted EBITDA, and

following the tables is a discussion and analysis of the significant components of net loss.

For the Six Months Ended

December 29, 2024

December 31, 2023

For the Nine Months Ended

March 30, 2025

March 31, 2024

Cost of sales

Provision for bad debts

(Benefit) provision for bad debts

Gain on sale of assets

3 unchanged sentences

Interest expense, net

Equity in loss (earnings) of unconsolidated affiliates

Equity in loss of unconsolidated affiliates

Loss before income taxes

Provision (benefit) for income taxes

Provision for income taxes

nm = not meaningful

1 unchanged sentence

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

For the Six Months Ended

December 29, 2024

December 31, 2023

For the Nine Months Ended

March 30, 2025

March 31, 2024

Interest expense, net

Provision (benefit) for income taxes

Provision for income taxes

Depreciation and amortization expense (1)

Transition costs (2)

Gain on sale of assets (3)

Loss on joint venture dissolution (3)

Severance (4)

Restructuring costs (4)

Adjusted EBITDA

1 unchanged sentence

However, within the accompanying Condensed Consolidated Statements of Cash Flows, amortization of debt issuance costs is reflected in depreciation and amortization expense.

(2) In the third quarter of fiscal 2025, UNIFI incurred various transition costs totaling $2,900 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs of $1,088, (ii) inventory write-downs of $1,000, (iii) excess manufacturing costs of $580, and (iv) employee separation or retention costs of $232.

(3) In the second quarter of fiscal 2025, UNIFI recorded a gain of $4,296 related to the sale of a warehouse located in Yadkinville, North Carolina.

(3) In the second quarter of fiscal 2024, UNIFI recorded a loss of $2,750 related to the dissolution of a nylon joint venture.

(4) In the second quarter of fiscal 2024, UNIFI incurred severance costs in connection with the Profitability Improvement Plan in the U.S.

(4) In the second quarter of fiscal 2024, UNIFI incurred severance costs of $2,351 in connection with the Profitability Improvement Plan in the U.S.

and a loss of $2,750 related to the dissolution of a nylon joint venture.

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

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

For the Six Months Ended December 29, 2024

For the Six Months Ended December 31, 2023

For the Nine Months Ended March 30, 2025

For the Nine Months Ended March 31, 2024

Transition costs (1)

Gain on sale of assets (2)

Loss on joint venture dissolution (2)

Severance (3)

Restructuring costs (3)

Adjusted results

Weighted average common shares outstanding

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

(2) In the second quarter of fiscal 2025, UNIFI recorded a gain of $4,296 related to the sale of a warehouse located in Yadkinville, North Carolina.

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

(2) In the second quarter of fiscal 2024, UNIFI recorded a loss of $2,750 related to the dissolution of a nylon joint venture.

(3) In the second quarter of fiscal 2024, UNIFI incurred severance costs in connection with the Profitability Improvement Plan in the U.S.

Consolidated net sales for the current six-month period increased by $10,491, or 3.8%, and consolidated sales volumes increased 6.9%, compared to the prior six-month period.

Net sales in the current six-month period were higher primarily due to improved sales volumes in each of the reportable segments, along with favorable pricing in Brazil.

Despite these sales volume improvements, volumes remain depressed, particularly in the Americas and Asia Segments as a result of continued weak global demand.

(3) In the second quarter of fiscal 2024, UNIFI incurred severance costs of $2,351 in connection with the Profitability Improvement Plan in the U.S.

and a loss of $2,750 related to the dissolution of a nylon joint venture.

Consolidated net sales for the current nine-month period increased by $8,052, or 1.9%, and consolidated sales volumes increased 4.2%, compared to the prior nine-month period.

Net sales in the current nine-month period were higher primarily due to improved sales volumes in each of the reportable segments, along with favorable pricing in Brazil.

Despite some volume improvements, overall sales remain depressed, particularly in the Americas and Asia Segments as a result of continued weak global demand.

Consolidated weighted average sales prices decreased 2.3% which partially offset the volume increase.

The decrease in sales prices was primarily attributable to sales mix and lower average selling prices in Asia and the Americas Segment, together with unfavorable foreign currency translation effects from the weakening of the BRL versus the USD within our Brazil Segment.

REPREVE ® Fiber products for the current six-month period comprised 31%, or $88,014, of consolidated net sales, compared to 32%, or $88,186, for the prior six-month period.

Gross profit for the current six-month period increased to $9,992 from $1,061 in the prior six-month period.

Gross profit increased primarily due to (i) increased sales volumes, (ii) variable cost saving initiatives, (iii) improved productivity, and (iv) higher conversion margins.

The decrease in sales prices was primarily attributable to sales mix and lower average selling prices in the Asia and Americas Segments, together with unfavorable foreign currency translation effects from the weakening of the BRL versus the USD within our Brazil Segment.

REPREVE ® Fiber products for the current nine-month period comprised 31%, or $132,713, of consolidated net sales, compared to 32%, or $134,940, for the prior nine-month period.

Gross profit for the current nine-month period increased to $9,547 from $5,825 in the prior nine-month period.

Gross profit increased primarily due to (i) increased sales volumes, (ii) variable cost saving initiatives, (iii) improved productivity in certain manufacturing areas, and (iv) higher conversion margins.

However, gross profit continues to be unfavorably impacted by weak manufacturing fixed cost absorption in the Americas Segment, where utilization and productivity remain below historical averages.

Ongoing cost savings measures led to UNIFI announcing the consolidation of yarn manufacturing operations in the Americas Segment with the planned closure of the Madison, North Carolina facility.

UNIFI incurred $1,580 of transition costs during the period, recorded in Cost of sales, related to (i) inventory write-downs of $1,000, and (ii) excess manufacturing costs of $580.

• For the Americas Segment, gross profit increased primarily due to (i) higher sales volumes, (ii) higher conversion margins, and (iii) variable cost management efforts.

1 unchanged sentence

• For the Asia Segment, gross profit decreased primarily due to lower conversion margins from an unfavorable change in sales mix in a weak demand environment.

SG&A did not change meaningfully from the prior six-month period to the current six-month period, nor did the change include any significant offsetting impacts.

Provision for Bad Debts

The current six-month period provision reflects no material activity, while the prior six-month period provision reflected an increase for a specifically identified customer balance originating in the U.S.

SG&A did not change meaningfully from the prior nine-month period to the current nine-month period, nor did the change include any significant offsetting impacts.

(Benefit) Provision for Bad Debts

The current nine-month period benefit reflects no material activity, while the prior nine-month period provision reflected an increase for a specifically identified customer balance originating in the U.S.

fiber market.

2 unchanged sentences

Restructuring Costs

Restructuring costs for the prior six-month period consisted of (i) a loss of $2,750 for the dissolution of a nylon joint venture and (ii) severance charges of $2,351 in connection with the Profitability Improvement Plan in the U.S.

Restructuring costs for the prior nine-month period consisted of (i) a loss of $2,750 for the dissolution of a nylon joint venture and (ii) severance charges of $2,351 in connection with the Profitability Improvement Plan in the U.S.

Other Operating Expense, Net

Other operating expense, net for the current six-month period and the prior six-month period include foreign currency transaction losses of $268 and $430, respectively, with no other meaningful activity.

Other operating expense, net for the current nine-month period and the prior nine-month period include foreign currency transaction losses of $218 and $395, respectively, with no other meaningful activity.

Interest Expense, Net

Interest expense, net increased primarily due to lower interest income in the current six-month period, associated with lower global cash balances.

Equity in Loss (Earnings) of Unconsolidated Affiliates

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

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

For the Six Months Ended

December 29, 2024

December 31, 2023

Provision (benefit) for income taxes

Interest expense, net increased primarily due to lower interest income in the current nine-month period, associated with lower global cash balances.

Equity in Loss of Unconsolidated Affiliates

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

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

For the Nine Months Ended

March 30, 2025

March 31, 2024

Provision for income taxes

Effective tax rate

4 unchanged sentences

Additionally, the impacts of discrete and other rate impacting items are more pronounced when 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 less losses in the U.S.

in the current six-month period, as well as a decrease in valuation allowances on deferred tax asset balances adjusted in response to the IRS audit of tax years 2014 through 2019, which was concluded during the prior six-month period.

The improvement in net loss was primarily attributable to (i) increased gross profit, (ii) lower bad debt expense, (iii) a gain on sale of assets, and (iv) no restructuring costs in the current period, partially offset by (a) higher interest expense, net, (b) higher income tax expense, (c) higher SG&A costs, and (d) lower earnings from unconsolidated affiliates.

The decrease in the effective tax rate from the prior nine-month period to the current nine-month period is primarily attributable to (i) lower losses in the U.S.

and lower foreign earnings in the current nine-month period, as well as (ii) a decrease in valuation allowances and release of interest and penalty reserves for uncertain tax benefits as a result of concluding an IRS audit during the prior nine-month period.

The improvement in net loss was primarily attributable to (i) increased gross profit, (ii) lower bad debt expense, (iii) a gain on sale of assets, and (iv) lower restructuring costs in the current nine-month period compared to the prior nine-month period, partially offset by (a) higher interest expense, net, and (b) higher income tax expense.

Adjusted EBITDA and Adjusted EPS (Non-GAAP Financial Measures)

Adjusted EBITDA and Adjusted EPS increased primarily due to (i) higher gross profit and (ii) lower bad debt expense, partially offset by (a) higher SG&A costs and (b) lower earnings from unconsolidated affiliates.

Adjusted EBITDA and Adjusted EPS increased primarily due to (i) higher gross profit and (ii) lower bad debt expense.

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 Profit (Loss), 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

December 29, 2024

December 31, 2023

The components of Segment Profit (Loss), 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

March 30, 2025

March 31, 2024

Cost of sales

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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

Increase in sales volumes

Change in average selling price and sales mix

Net sales for the current six-month period

The increase in net sales for the Americas Segment from the prior six-month period to the current six-month period was primarily attributable to higher sales volumes, partially offset by a lower-priced sales mix.

Net sales for the current nine-month period

The increase in net sales for the Americas Segment from the prior nine-month period to the current nine-month period was primarily attributable to higher sales volumes, partially offset by a lower-priced sales mix.

Both periods were unfavorably impacted by the continued weak global textile demand environment.

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

Segment Loss for the prior six-month period

Segment Loss for the prior nine-month period

Change in underlying unit margins and sales mix

Change in sales volumes

Segment Profit for the current six-month period

The increase in Segment Profit for the Americas Segment from the prior six-month period to the current six-month period was primarily attributable to higher margins due to improved variable cost management efforts.

Segment Profit for the Americas Segment continues to be negatively impacted by a lower proportion of fiber sales volumes.

Segment Profit for the current nine-month period

The increase in Segment Profit for the Americas Segment from the prior nine-month period to the current nine-month period was primarily attributable to higher margins due to improved variable cost management efforts, partially offset by weak manufacturing fixed cost absorption and decreased productivity related to the consolidation of yarn manufacturing operations.

Ongoing cost savings measures led to UNIFI announcing the consolidation of yarn manufacturing operations in the Americas Segment with the planned closure of the Madison, North Carolina facility.

UNIFI incurred $1,580 of transition costs during the period, recorded in Cost of sales, related to (i) inventory write-downs of $1,000 and (ii) excess manufacturing costs of $580.

Additionally, Segment Profit for the Americas Segment continues to be negatively impacted by a lower proportion of fiber sales volumes which are below historical averages due to depressed demand.

As fiber products carry a higher selling price and allocation of production costs versus Chip and Flake, lower fiber production drives weaker fixed cost absorption and adversely impacts gross profit and gross margin.

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

December 29, 2024

December 31, 2023

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

March 30, 2025

March 31, 2024

Cost of sales

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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 average selling price and change in sales mix

1 unchanged sentence

Unfavorable foreign currency translation effects

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 (i) higher average selling prices due to increasing raw material costs and (ii) an improvement in sales volumes from market share gains, partially offset by unfavorable foreign currency translation effects from the weakening of the BRL versus the USD.

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 (i) higher average selling prices due to increasing raw material costs and (ii) an improvement in sales volumes from market share gains, partially offset by unfavorable foreign currency translation effects from the weakening of the BRL versus the USD.

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

Increase in underlying unit margins

1 unchanged sentence

Unfavorable foreign currency translation effects

Segment Profit for the current six-month period

The increase in Segment Profit for the Brazil Segment from the prior six-month period to the current six-month period was primarily attributable to (i) higher conversion margins and (ii) an increase in sales volumes discussed above, partially offset by unfavorable foreign currency translation effects.

Segment Profit for the current nine-month period

The increase in Segment Profit for the Brazil Segment from the prior nine-month period to the current nine-month period was primarily attributable to (i) higher conversion margins and (ii) an increase in sales volumes discussed above, partially offset by unfavorable foreign currency translation effects.

We continue to prioritize innovation and differentiation to improve our portfolio and competitive position in Brazil.

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

December 29, 2024

December 31, 2023

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

March 30, 2025

March 31, 2024

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

Change in average selling price and sales mix

1 unchanged sentence

Favorable foreign currency translation effects

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 the changes in sales volumes related to customer-specific programs, partially offset by (a) an overall increase in sales volumes compared to the prior six-month period despite continued weak global demand, particularly for apparel and (b) favorable foreign currency translation effects due to the strengthening of the RMB versus the USD.

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 a change in sales mix of REPREVE products, partially offset by (i) an overall increase in sales volumes despite continued weak global demand, particularly for apparel and (ii) favorable foreign currency translation effects due to the strengthening of the RMB versus the USD.

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

Change in underlying unit margins and sales mix

1 unchanged sentence

Favorable foreign currency translation effects

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 was attributable to a decline in gross margin rate associated with a change in sales mix of REPREVE products, partially offset by (a) the overall increase in sales volumes and (b) favorable foreign currency translation effects.

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 was attributable to a decline in gross margin rate associated with a change in sales mix of REPREVE products.

Liquidity and Capital Resources

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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.

In the third quarter of fiscal 2025, UNIFI borrowed $22,000 against the 2024 Facility and used the proceeds to reduce the outstanding ABL Revolver balance.

There was no impact to debt principal from these transactions.

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

UNIFI’s primary sources of capital are cash generated from operations, borrowings available under the 2022 Credit Agreement and the 2024 Facility.

For the current six-month period, cash used by operations was $15,004 and, at December 29, 2024, availability under the ABL Revolver and 2024 Facility was $26,387 and $22,546, respectively.

As of December 29, 2024, all of UNIFI’s $135,203 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.

For the current nine-month period, cash used by operations was $19,994 and, at March 30, 2025, availability under the ABL Revolver and 2024 Facility was $45,114 and $597, respectively.

As of March 30, 2025, all of UNIFI’s $140,002 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 December 29, 2024 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 March 30, 2025 for domestic operations compared to foreign operations:

Cash and cash equivalents

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Total debt obligations

Borrowings available under financing arrangements are generally collateralized by receivables and inventory owned in the U.S., plus cash equivalents pledged by one of the members of UNIFI’s Board of Directors, and generally constrained by the fixed charge coverage ratio and trigger level prescribed in the 2022 Credit Agreement.

Borrowings available under financing arrangements are generally collateralized by receivables and inventory owned in the U.S., plus cash equivalents pledged by Mr.

Langone, and generally constrained by the fixed charge coverage ratio and trigger level prescribed in the 2022 Credit Agreement.

Accordingly, “Available Liquidity” includes consideration for the trigger level that currently constrains our borrowing ability until a fixed charge coverage ratio of 1.05 to 1.00 is achieved.

UNIFI’s primary cash requirements, in addition to normal course operating activities (e.g., working capital and payroll), primarily include (i) capital expenditures that generally have commitments of up to 12 months, (ii) contractual obligations that support normal course ongoing operations and production, (iii) operating leases and finance leases, (iv) debt service, and (v) share repurchases.

On January 2, 2025, UNIFI borrowed $22,000 against the 2024 Facility and used the proceeds to reduce the outstanding ABL Revolver balance.

There was no impact to debt principal from these transactions.

Subsequent to quarter-end, on April 10, 2025, UNIFI entered into a Real Estate Purchase and Sale Agreement ("the Purchase Agreement") related to the sale of its Madison, North Carolina facility, as well as certain machinery and equipment located thereon, for a cash purchase price of $53,200.

The closing of the transaction is expected to occur on May 15, 2025, unless accelerated by Buyer pursuant to the terms of the Purchase Agreement.

The net proceeds of the transaction will be used to repay a portion of the principal balance of term loans and revolving loans outstanding under the 2022 Credit Agreement.

Liquidity Considerations

6 unchanged sentences

When business levels increase, we expect to use cash in support of working capital needs.

The following outlines the attributes relating to our credit facilities as of December 29, 2024:

The following outlines the attributes relating to our credit facilities as of March 30, 2025:

• UNIFI was in compliance with all applicable financial covenants in the 2022 Credit Agreement and 2024 Facility;

• no amounts had been borrowed against the 2024 Facility as of December 29, 2024;

• availability under the 2024 Facility was $22,546 as of December 29, 2024;

• excess availability before the Trigger Level (as defined in the 2022 Credit Agreement) under the ABL Revolver was $8,727;

• availability under the 2024 Facility was $597 as of March 30, 2025;

• availability exceeding the Trigger Level (as defined in the 2022 Credit Agreement) under the ABL Revolver was $27,684;

• the Trigger Level under the ABL Revolver was $17,430;

9 unchanged sentences

The reconciliations for Net Debt are as follows:

December 29, 2024

March 30, 2025

June 30, 2024

4 unchanged sentences

cash and cash equivalents

The increase in Net Debt primarily reflects the use of operating cash during fiscal 2025 and capital expenditures during the current six-month period.

The increase in Net Debt primarily reflects the use of operating cash during fiscal 2025 and capital expenditures during the current nine-month period.

The increase was partially offset by the application of proceeds to the ABL Revolver for the warehouse sale in October 2024.

1 unchanged sentence

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

December 29, 2024

March 30, 2025

June 30, 2024

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Adjusted Working Capital

Adjusted Working Capital decreased $1,228 from June 30, 2024 to December 29, 2024.

The decrease in Adjusted Working Capital was primarily attributable to a decrease in receivables, net primarily due to a decrease in sales and the timing of cash receipts, which was mostly offset by a decrease in accounts payable primarily due to the normal scheduled operational shutdowns and the decline in sales due to seasonality.

Adjusted Working Capital decreased $2,222 from June 30, 2024 to March 30, 2025.

The decrease in Adjusted Working Capital was primarily attributable to (i) a decrease in other current assets following an asset sale and (ii) an increase in employee compensation accruals within other current liabilities, which was partially offset by an increase in receivables, net primarily due to an increase in sales and the timing of cash receipts.

Operating Cash Flows

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

For the Six Months Ended

December 29, 2024

December 31, 2023

Equity in earnings of unconsolidated affiliates

For the Nine Months Ended

March 30, 2025

March 31, 2024

Equity in loss of unconsolidated affiliates

Distribution received from unconsolidated affiliate

Depreciation and amortization expense

6 unchanged sentences

Net cash (used) provided by operating activities

The decrease in operating cash flows was due to the relative changes in working capital including receivables, net, inventories, and accounts payable and other current liabilities, partially offset by an improvement in earnings in the current six-month period compared to the prior six-month period.

The decrease in operating cash flows was due to the relative changes in working capital including receivables, net, inventories, and accounts payable and other current liabilities, partially offset by an improvement in earnings in the current nine-month period compared to the prior nine-month period.

For the current nine-month period, the increases in accounts receivable and inventories were largely driven by the improvement in sales and timing of cash receipts.

The increase in accounts payable and other current liabilities was largely due to increased accruals for employee compensation.

For the prior nine-month period, the decrease in inventories was primarily due to lower weighted average costs.

The decrease in accounts receivable was largely driven by the decrease in sales and timing of cash receipts.

The increase in accounts payable and other current liabilities was largely due to the liabilities recorded for severance and employee compensation.

Investing Cash Flows

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There have been no material changes in the scheduled maturities of UNIFI’s contractual obligations as disclosed under the heading “Contractual Obligations” in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2024 Form 10-K.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2024 Form 10-K except for the $22,000 of borrowings on the 2024 Facility, which matures October 28, 2027.

Off-Balance Sheet Arrangements

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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 2. Management’s Discussion and Analysis