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UNIFI®, Makers of REPREVE®, Announces Second Quarter Fiscal 2023 Results

Sales and profitability impacted by continued near-term demand disruption for apparel production

Cash generated from operations outpaced profitability headwinds

Unifi, Inc. (NYSE: UFI) (together with its consolidated subsidiaries, “UNIFI”), makers of REPREVE and one of the world’s leading innovators in recycled and synthetic yarns, today released operating results for the second fiscal quarter ended January 1, 2023.

Second Quarter Fiscal 2023 Overview

  • Net sales were $136.2 million, a decrease of 32.4% from the second quarter of fiscal 2022, primarily attributable to temporary demand disruption in the Americas and Asia Segments caused by near-term inventory destocking measures taken by apparel brands and retailers.
  • Revenues from REPREVE Fiber products represented 31% of net sales, or $42.9 million, compared to 40%, or $81.5 million, in the second quarter of fiscal 2022, primarily impacted by lower sales volumes in Asia.
  • Gross loss was $8.0 million compared to gross profit of $16.9 million for the second quarter of fiscal 2022, primarily impacted by lower facility utilization and lower sales. Gross margin was (5.9%) compared to 8.4% for the second quarter of fiscal 2022.
  • Operating loss was $19.8 million compared to operating income of $4.6 million for the second quarter of fiscal 2022.
  • Net loss was $18.0 million, or ($1.00) per share, compared to net income of $0.9 million, or $0.05 per share, for the second quarter of fiscal 2022. Adjusted Net Loss was $21.8 million compared to $0.9 million of Adjusted Net Income for the second quarter of fiscal 2022.
  • Adjusted EBITDA was ($13.0) million compared to $10.9 million for the second quarter of fiscal 2022.
  • Operating cash flows generated for the six months ended January 1, 2023 were $7.3 million, compared to ($4.0) million used in the comparative prior year period, exhibiting diligence around operating costs and working capital, which helped to offset a demand-suppressed operating environment.
  • Net Debt decreased from $79.8 million at October 2, 2022 to $79.6 million at January 1, 2023.
  • In October 2022, the existing credit facility was amended, expanded from $200.0 million to $230.0 million and maturity extended to October 2027, to support future growth and to provide additional liquidity.

Adjusted Net (Loss) Income, Adjusted EBITDA and Net Debt are non-GAAP financial measures. The schedules included in this press release reconcile each non-GAAP financial measure to its most directly comparable GAAP financial measure.

Eddie Ingle, Chief Executive Officer of Unifi, said, “Our second quarter fiscal 2023 performance was significantly impacted by a sequential decline in apparel production beyond our prior expectations. Our team remained proactive and executed numerous cost reduction initiatives and other savings measures during the period, but the headwinds caused by near-term inventory destocking efforts impacted demand from many of our apparel customers. The good news is that our customers’ supply chains are beginning to normalize and the drivers of our mid- and long-term growth engines remain fully intact. Further, our customers are forecasting a stronger second half of the calendar year as they work through their remaining excess inventory and short-term headwinds. In the interim, we will continue to invest prudently with an eye towards supporting long-term growth, while simultaneously controlling costs and building efficiencies. We remain confident in our position as a global leader for sustainable solutions and in the long-term demand profile for our REPREVE products and other innovative solutions.”

Second Quarter Fiscal 2023 Compared to Second Quarter Fiscal 2022

Net sales decreased 32.4% to $136.2 million, from $201.4 million, primarily driven by lower sales volumes. The demand for apparel production declined significantly in the first half of fiscal 2023 as brands and retailers took actions to reduce their inventory levels and normalize supply chains. This caused the Americas and Asia Segments to experience revenue declines from customers across both U.S. and foreign markets.

Gross loss was $8.0 million compared to gross profit of $16.9 million in the second quarter of fiscal 2022. Americas Segment gross profit decreased $13.9 million, primarily as a result of lower sales volumes driving weaker productivity and cost absorption. Brazil Segment gross profit decreased $6.2 million due to selling price pressures from foreign imports against high-cost inventory. The Asia Segment maintained a strong gross margin rate but was impacted by weaker sales volumes, driving a gross profit decrease of $4.8 million.

Operating loss was $19.8 million compared to operating income of $4.6 million in the second quarter of fiscal 2022, primarily due to the decrease in gross profit. Net loss was $18.0 million, or ($1.00) per share, compared to net income of $0.9 million, or $0.05 per share, impacted by the weaker profitability in the U.S. On an adjusted basis, EPS was ($1.21), which includes a $3.8 million recovery of prior years' income taxes in Brazil, compared to of $0.05 in the prior year period. Adjusted EBITDA was ($13.0) million, compared to $10.9 million, consistent with the change in operating income.

Year-To-Date Fiscal 2023 Compared to Year-To-Date Fiscal 2022

Net sales were $315.7 million compared to $397.4 million. Revenues from REPREVE Fiber products represented 29% of net sales, or $92.0 million, compared to 39%, or $153.4 million. Gross margin was (0.5%) compared to 10.8%. Operating loss was $24.5 million compared to operating income of $17.8 million. Net loss was $25.9 compared to net income of $9.6 million.

Liquidity and Credit Facility

On October 28, 2022, UNIFI renewed and amended its existing credit facility to expand the borrowing capacity and extend the maturity date. The amended credit agreement increases the borrowing capacity from $200.0 million to $230.0 million; extends the maturity date from December 2023 to October 2027; and contains pricing, terms, and conditions generally consistent with those in place prior to the amendment. In connection with the refinancing, a loss on debt extinguishment of $0.3 million was recorded to interest expense in the second quarter of fiscal 2023.

Debt principal was $130.4 million on January 1, 2023 compared to $114.3 million on July 3, 2022. Cash and cash equivalents decreased to $50.8 million on January 1, 2023, from $53.3 million on July 3, 2022, as operational losses were partially offset by cost and working capital diligence. Accordingly, Net Debt was $79.6 million on January 1, 2023 compared to $61.0 million on July 3, 2022. On January 1, 2023, the revolving credit facility had outstanding borrowings of $3.4 million and availability of $64.7 million.

Outlook

The operating environment and textile demand trends for the apparel market are expected to recover at a modest pace during calendar 2023. UNIFI expects the following for the third quarter of fiscal 2023:

  • revenue to increase sequentially, but adversely impacted by the Lunar New Year holiday in Asia;
  • sequential operating performance improvement;
  • continued volatility and unfavorability in the effective tax rate; and
  • slightly lower sequential capital expenditures, with further reductions anticipated during the fourth quarter of fiscal 2023.

Ingle continued, “Although current economic conditions have impacted our financial results in the first half of the fiscal year, our team has taken the proper actions to mitigate these headwinds. We believe we have positioned the business to return to strength in the second half of the fiscal year. We have also made positive changes to our capital structure by amending and expanding our credit facility, and we maintain a strong and flexible balance sheet. Most importantly, our position as the premier supplier of sustainable fibers continues to be recognized across the globe, and the REPREVE brand remains highly aligned with our customers’ long-term priorities. As the apparel markets recover, we expect to see our business bounce back fairly quickly and are confident we have the right strategic plan to drive long-term growth and value for all of our stakeholders.”

Second Quarter Fiscal 2023 Earnings Conference Call

UNIFI will provide additional commentary regarding its second quarter fiscal 2023 results and other developments during its earnings conference call on February 2, 2023, at 8:30 a.m., Eastern Time. The call can be accessed via a live audio webcast on UNIFI’s website at http://investor.unifi.com. Additional supporting materials and information related to the call will also be available on UNIFI’s website.

About UNIFI

Unifi, Inc. (NYSE: UFI) is a global textile solutions provider and one of the world's leading innovators in manufacturing synthetic and recycled performance fibers. Through REPREVE, one of UNIFI's proprietary technologies and the global leader in branded recycled performance fibers, UNIFI has transformed more than 35 billion plastic bottles into recycled fiber for new apparel, footwear, home goods, and other consumer products. UNIFI continually innovates technologies to meet consumer needs in moisture management, thermal regulation, antimicrobial protection, UV protection, stretch, water resistance, and enhanced softness. UNIFI collaborates with many of the world's most influential brands in the sports apparel, fashion, home, automotive and other industries. For more information about UNIFI, visit www.unifi.com.

Financial Statements, Business Segment Information and Reconciliations of Reported Results to Adjusted Results to Follow

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

January 1, 2023

 

December 26, 2021

 

January 1, 2023

 

December 26, 2021

Net sales

 

$

136,212

 

 

$

201,410

 

 

$

315,731

 

 

$

397,402

 

Cost of sales

 

 

144,212

 

 

 

184,520

 

 

 

317,168

 

 

 

354,415

 

Gross (loss) profit

 

 

(8,000

)

 

 

16,890

 

 

 

(1,437

)

 

 

42,987

 

Selling, general and administrative expenses

 

 

11,748

 

 

 

11,966

 

 

 

23,521

 

 

 

24,636

 

(Benefit) provision for bad debts

 

 

(156

)

 

 

(240

)

 

 

18

 

 

 

(320

)

Other operating expense (income), net

 

 

226

 

 

 

573

 

 

 

(463

)

 

 

829

 

Operating (loss) income

 

 

(19,818

)

 

 

4,591

 

 

 

(24,513

)

 

 

17,842

 

Interest income

 

 

(514

)

 

 

(194

)

 

 

(1,061

)

 

 

(452

)

Interest expense

 

 

1,889

 

 

 

735

 

 

 

3,136

 

 

 

1,431

 

Equity in earnings of unconsolidated affiliates

 

 

(86

)

 

 

(64

)

 

 

(381

)

 

 

(344

)

(Loss) income before income taxes

 

 

(21,107

)

 

 

4,114

 

 

 

(26,207

)

 

 

17,207

 

(Benefit) provision for income taxes

 

 

(3,070

)

 

 

3,185

 

 

 

(336

)

 

 

7,598

 

Net (loss) income

 

$

(18,037

)

 

$

929

 

 

$

(25,871

)

 

$

9,609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per common share:

 

Basic

 

$

(1.00

)

 

$

0.05

 

 

$

(1.44

)

 

$

0.52

 

Diluted

 

$

(1.00

)

 

$

0.05

 

 

$

(1.44

)

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

Basic

 

 

18,034

 

 

 

18,511

 

 

 

18,017

 

 

 

18,513

 

Diluted

 

 

18,034

 

 

 

19,004

 

 

 

18,017

 

 

 

18,999

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

 

 

January 1, 2023

 

July 3, 2022

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

50,781

 

 

$

53,290

 

Receivables, net

 

 

64,980

 

 

 

106,565

 

Inventories

 

 

147,253

 

 

 

173,295

 

Income taxes receivable

 

 

1,938

 

 

 

160

 

Other current assets

 

 

13,203

 

 

 

18,956

 

Total current assets

 

 

278,155

 

 

 

352,266

 

Property, plant and equipment, net

 

 

226,279

 

 

 

216,338

 

Operating lease assets

 

 

7,736

 

 

 

8,829

 

Deferred income taxes

 

 

2,841

 

 

 

2,497

 

Other non-current assets

 

 

13,222

 

 

 

8,788

 

Total assets

 

$

528,233

 

 

$

588,718

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Accounts payable

 

$

33,784

 

 

$

73,544

 

Income taxes payable

 

 

587

 

 

 

1,526

 

Current operating lease liabilities

 

 

2,002

 

 

 

2,190

 

Current portion of long-term debt

 

 

11,092

 

 

 

11,726

 

Other current liabilities

 

 

11,345

 

 

 

19,806

 

Total current liabilities

 

 

58,810

 

 

 

108,792

 

Long-term debt

 

 

118,980

 

 

 

102,309

 

Non-current operating lease liabilities

 

 

5,818

 

 

 

6,736

 

Deferred income taxes

 

 

4,986

 

 

 

4,983

 

Other long-term liabilities

 

 

4,760

 

 

 

4,449

 

Total liabilities

 

 

193,354

 

 

 

227,269

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

1,805

 

 

 

1,798

 

Capital in excess of par value

 

 

67,875

 

 

 

66,120

 

Retained earnings

 

 

327,265

 

 

 

353,136

 

Accumulated other comprehensive loss

 

 

(62,066

)

 

 

(59,605

)

Total shareholders’ equity

 

 

334,879

 

 

 

361,449

 

Total liabilities and shareholders’ equity

 

$

528,233

 

 

$

588,718

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

For the Six Months Ended

 

 

January 1, 2023

 

December 26, 2021

Cash and cash equivalents at beginning of period

 

$

53,290

 

 

$

78,253

 

Operating activities:

 

 

 

 

 

 

Net (loss) income

 

 

(25,871

)

 

 

9,609

 

Adjustments to reconcile net (loss) income to net cash provided (used) by operating activities:

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

 

(381

)

 

 

(344

)

Depreciation and amortization expense

 

 

13,478

 

 

 

12,687

 

Non-cash compensation expense

 

 

1,976

 

 

 

2,261

 

Recovery of income taxes

 

 

(3,799

)

 

 

 

Deferred income taxes

 

 

(304

)

 

 

(3,197

)

Other, net

 

 

289

 

 

 

(149

)

Changes in assets and liabilities

 

 

21,884

 

 

 

(24,817

)

Net cash provided (used) by operating activities

 

 

7,272

 

 

 

(3,950

)

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(23,950

)

 

 

(19,172

)

Other, net

 

 

(576

)

 

 

87

 

Net cash used by investing activities

 

 

(24,526

)

 

 

(19,085

)

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

Proceeds from long-term debt

 

 

101,700

 

 

 

20,111

 

Payments on long-term debt

 

 

(85,599

)

 

 

(25,377

)

Common stock repurchased

 

 

 

 

 

(1,204

)

Other, net

 

 

(705

)

 

 

(324

)

Net cash provided (used) by financing activities

 

 

15,396

 

 

 

(6,794

)

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(651

)

 

 

(804

)

Net decrease in cash and cash equivalents

 

 

(2,509

)

 

 

(30,633

)

Cash and cash equivalents at end of period

 

$

50,781

 

 

$

47,620

 

BUSINESS SEGMENT INFORMATION

(Unaudited)

(In thousands)

Net sales details for each reportable segment of UNIFI 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

Americas

 

$

85,242

 

 

$

114,697

 

 

$

192,886

 

 

$

225,523

 

Brazil

 

 

25,687

 

 

 

27,601

 

 

 

64,566

 

 

 

61,339

 

Asia

 

 

25,283

 

 

 

59,112

 

 

 

58,279

 

 

 

110,540

 

Consolidated net sales

 

$

136,212

 

 

$

201,410

 

 

$

315,731

 

 

$

397,402

 

Gross (loss) profit details for each reportable segment of UNIFI 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

Americas

 

$

(13,084

)

 

$

853

 

 

$

(17,953

)

 

$

10,039

 

Brazil

 

 

1,330

 

 

 

7,526

 

 

 

8,117

 

 

 

17,466

 

Asia

 

 

3,754

 

 

 

8,511

 

 

 

8,399

 

 

 

15,482

 

Consolidated gross (loss) profit

 

$

(8,000

)

 

$

16,890

 

 

$

(1,437

)

 

$

42,987

 

RECONCILIATIONS OF REPORTED RESULTS TO ADJUSTED RESULTS

(Unaudited)

(In thousands)

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)
The reconciliations of the amounts reported under U.S. generally accepted accounting principles (“GAAP”) for Net (loss) income to EBITDA and Adjusted EBITDA are set forth below.
 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

January 1, 2023

 

December 26, 2021

 

January 1, 2023

 

December 26, 2021

Net (loss) income

 

$

(18,037

)

 

$

929

 

$

(25,871

)

 

$

9,609

Interest expense, net

 

 

1,375

 

 

 

541

 

 

2,075

 

 

 

979

(Benefit) provision for income taxes

 

 

(3,070

)

 

 

3,185

 

 

(336

)

 

 

7,598

Depreciation and amortization expense (1)

 

 

6,693

 

 

 

6,266

 

 

13,390

 

 

 

12,574

EBITDA

 

 

(13,039

)

 

 

10,921

 

 

(10,742

)

 

 

30,760

 

 

 

 

 

 

 

 

 

Other adjustments (2)

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

(13,039

)

 

$

10,921

 

$

(10,742

)

 

$

30,760

(1)

Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net. Within the 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.

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 (“Net (Loss) Income”) to Adjusted Net (Loss) Income and (ii) Diluted Earnings Per Share (“Diluted EPS”) to Adjusted EPS. Rounding may impact certain of the below calculations.
 

 

 

For the Three Months Ended January 1, 2023

 

For the Three Months Ended December 26, 2021

 

 

Pre-tax Loss

 

Tax Impact

 

Net Loss

 

Diluted EPS

 

Pre-tax Income

 

Tax Impact

 

Net Income

 

Diluted EPS

GAAP results

 

$

(21,107

)

 

$

3,070

 

 

$

(18,037

)

 

$

(1.00

)

 

$

4,114

 

$

(3,185

)

 

$

929

 

$

0.05

Recovery of income taxes (1)

 

 

 

 

 

(3,799

)

 

 

(3,799

)

 

 

(0.21

)

 

 

 

 

 

 

 

 

 

Adjusted results

 

$

(21,107

)

 

$

(729

)

 

$

(21,836

)

 

$

(1.21

)

 

$

4,114

 

$

(3,185

)

 

$

929

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

18,034

 

 

 

 

 

 

 

 

 

19,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended January 1, 2023

 

For the Six Months Ended December 26, 2021

 

 

Pre-tax Loss

 

Tax Impact

 

Net Loss

 

Diluted EPS

 

Pre-tax Income

 

Tax Impact

 

Net Income

 

Diluted EPS

GAAP results

 

$

(26,207

)

 

$

336

 

 

$

(25,871

)

 

$

(1.44

)

 

$

17,207

 

$

(7,598

)

 

$

9,609

 

$

0.51

Recovery of income taxes (1)

 

 

 

 

 

(3,799

)

 

 

(3,799

)

 

 

(0.21

)

 

 

 

 

 

 

 

 

 

Adjusted results

 

$

(26,207

)

 

$

(3,463

)

 

$

(29,670

)

 

$

(1.65

)

 

$

17,207

 

$

(7,598

)

 

$

9,609

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

18,017

 

 

 

 

 

 

 

 

 

18,999

(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.

Net Debt (Non-GAAP Financial Measure)

Reconciliations of Net Debt are as follows:

 

 

January 1, 2023

 

July 3, 2022

Long-term debt

 

$

118,980

 

$

102,309

Current portion of long-term debt

 

 

11,092

 

 

11,726

Unamortized debt issuance costs

 

 

319

 

 

255

Debt principal

 

 

130,391

 

 

114,290

Less: cash and cash equivalents

 

 

50,781

 

 

53,290

Net Debt

 

$

79,610

 

$

61,000

Cash and cash equivalents

At both January 1, 2023 and July 3, 2022, UNIFI’s foreign operations held approximately 99% of consolidated cash and cash equivalents.

REPREVE Fiber

REPREVE Fiber represents UNIFI’s collection of fiber products on its recycled platform, with or without added technologies.

Non-GAAP Financial Measures

Certain non-GAAP financial measures included herein are designed to complement the financial information presented in accordance with GAAP. These non-GAAP financial measures include Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA, Adjusted Net (Loss) Income, Adjusted EPS, and Net Debt (together, the “non-GAAP financial measures”).

  • EBITDA represents Net (loss) income before net interest expense, income tax expense, and depreciation and amortization expense.
  • Adjusted EBITDA represents EBITDA adjusted to exclude, from time to time, certain adjustments necessary to understand and compare the underlying results of UNIFI.
  • Adjusted Net (Loss) Income represents Net (loss) income calculated under GAAP adjusted to exclude certain amounts. Management believes the excluded amounts do not reflect the ongoing operations and performance of UNIFI and/or exclusion may be necessary to understand and compare the underlying results of UNIFI.
  • Adjusted EPS represents Adjusted Net (Loss) Income divided by UNIFI’s weighted average common shares outstanding.
  • Net Debt represents debt principal less cash and cash equivalents.

The non-GAAP financial measures are not determined in accordance with GAAP and should not be considered a substitute for performance measures determined in accordance with GAAP. The calculations of the non-GAAP financial measures are subjective, based on management’s belief as to which items should be included or excluded in order to provide the most reasonable and comparable view of the underlying operating performance of the business. We may, from time to time, modify the amounts used to determine our non-GAAP financial measures.

We believe that these non-GAAP financial measures better reflect UNIFI’s underlying operations and performance and that their use, as operating performance measures, provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets, among otherwise comparable companies.

Management uses Adjusted EBITDA (i) as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis, as it removes the impact of (a) items directly related to our asset base (primarily depreciation and amortization) and (b) items that we would not expect to occur as a part of our normal business on a regular basis; (ii) for planning purposes, including the preparation of our annual operating budget; (iii) as a valuation measure for evaluating our operating performance and our capacity to incur and service debt, fund capital expenditures, and expand our business; and (iv) as one measure in determining the value of other acquisitions and dispositions. Adjusted EBITDA is a key performance metric utilized in the determination of variable compensation. We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because it serves as a high-level proxy for cash generated from operations.

Management uses Adjusted Net (Loss) Income and Adjusted EPS (i) as measurements of net operating performance because they assist us in comparing such performance on a consistent basis, as they remove the impact of (a) items that we would not expect to occur as a part of our normal business on a regular basis and (b) components of the provision for income taxes that we would not expect to occur as a part of our underlying taxable operations; (ii) for planning purposes, including the preparation of our annual operating budget; and (iii) as measures in determining the value of other acquisitions and dispositions.

Management uses Net Debt as a liquidity and leverage metric to determine how much debt would remain if all cash and cash equivalents were used to pay down debt principal.

In evaluating non-GAAP financial measures, investors should be aware that, in the future, we may incur expenses similar to the adjustments included herein. Our presentation of non-GAAP financial measures should not be construed as indicating that our future results will be unaffected by unusual or non-recurring items. Each of our non-GAAP financial measures has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of our results or liquidity measures as reported under GAAP. Some of these limitations are (i) it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; (ii) it does not reflect the impact of earnings or charges resulting from matters we consider not indicative of our ongoing operations; (iii) it does not reflect changes in, or cash requirements for, our working capital needs; (iv) it does not reflect the cash requirements necessary to make payments on our debt; (v) it does not reflect our future requirements for capital expenditures or contractual commitments; (vi) it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and (vii) other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, these non-GAAP financial measures should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations, including those under our outstanding debt obligations. Investors should compensate for these limitations by relying primarily on our GAAP results and using these measures only as supplemental information.

Cautionary Statement on Forward-Looking Statements

Certain statements included herein contain “forward-looking statements” within the meaning of federal securities laws about the financial condition and results of operations of UNIFI that are based on management’s beliefs, assumptions and expectations about our future economic performance, considering the information currently available to management. An example of such forward-looking statements include, among others, guidance pertaining to our financial outlook. The words “believe,” “may,” “could,” “will,” “should,” “would,” “anticipate,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek,” “strive” and words of similar import, or the negative of such words, identify or signal the presence of forward-looking statements. These statements are not statements of historical fact, and they involve risks and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition that we express or imply in any forward-looking statement.

Factors that could contribute to such differences include, but are not limited to: the competitive nature of the textile industry and the impact of global competition; changes in the trade regulatory environment and governmental policies and legislation; the availability, sourcing and pricing of raw materials; general domestic and international economic and industry conditions in markets where UNIFI competes, including economic and political factors over which UNIFI has no control; changes in consumer spending, customer preferences, fashion trends and end uses for products; the financial condition of UNIFI’s customers; the loss of a significant customer or brand partner; natural disasters, industrial accidents, power or water shortages, extreme weather conditions and other disruptions at one of our facilities; the disruption of operations, global demand, or financial performance as a result of catastrophic or extraordinary events, including epidemics or pandemics such as the recent strain of coronavirus; the success of UNIFI’s strategic business initiatives; the volatility of financial and credit markets; the ability to service indebtedness and fund capital expenditures and strategic business initiatives; the availability of and access to credit on reasonable terms; changes in foreign currency exchange, interest and inflation rates; fluctuations in production costs; the ability to protect intellectual property; the strength and reputation of our brands; employee relations; the ability to attract, retain and motivate key employees; the impact of climate change or environmental, health and safety regulations; and the impact of tax laws, the judicial or administrative interpretations of tax laws and/or changes in such laws or interpretations.

All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on UNIFI. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, except as may be required by federal securities laws. The above and other risks and uncertainties are described in UNIFI’s most recent Annual Report on Form 10-K, and additional risks or uncertainties may be described from time to time in other reports filed by UNIFI with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

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