Unifi Announces First Quarter Results

• Press Release
• Source: Unifi, Inc.
• On 8:51 am EDT, Thursday October 29, 2009

GREENSBORO, N.C., Oct. 29 /PRNewswire-FirstCall/ -- Unifi, Inc. (NYSE: UFI - News) today released preliminary operating results for its first fiscal quarter ended September 27, 2009.

The Company is reporting net income of $2.5 million or $0.04 per share for the first quarter of the 2010 fiscal year compared to a net loss of $6.3 million or $0.10 per share and a net loss of $676 thousand or $0.01 per share for the June 2009 and September 2008 quarters, respectively. The Company is also reporting adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) of $15.1 million, which exceeds the Company's revised guidance of $13 to $14 million and is a marked improvement in Adjusted EBITDA from the June 2009 and September 2008 quarters of $9.6 million and $13.9 million, respectively. Results for the quarter were positively impacted by the following:

• A 570 basis point improvement in gross margin year-over-year, which reflects improvements made in both our conversion margins and our operating cost structure,
• Continued volume growth in the Company's polyester business from inventory levels coming back into alignment with retail demand in apparel and home furnishings, and
• Market share gains in certain product categories both in the U.S. and Brazil.

Revenues for the first quarter increased 2.2% over the June 2009 quarter to $143 million, although they still remain $26 million below the September 2008 quarterly level of $169 million.

"We are pleased the operating results for the quarter exceeded targets and the Company was able to achieve its highest quarterly net income in seven years despite the effects of a severe global recession," said Bill Jasper, President and CEO of Unifi. "Now that the negative impact of the inventory de-stocking across our supply chains seems to have abated, we are seeing the benefits of our unwavering focus on our core strategies. These include our continuous improvement efforts to enhance margins, quality, and operating efficiencies, resulting in significantly improved operating performance, in spite of a 15 percent decline in year-over-year revenue."

Cash-on-hand at the end of the September quarter was $55.7 million, which is an increase of $13.0 million from the end of the June quarter and an increase of $35 million over the last twelve months. Total cash and cash equivalents at the end of the September quarter, including restricted cash, were $61.5 million. Total long-term debt as of September 27, 2009 was $185.6 million, and net debt for the Company was $124 million, representing a reduction of more than $32 million from September 2008.

Ron Smith, Chief Financial Officer for Unifi, said, "Although there was modest month-over-month improvements in retail sales of apparel and home furnishings, volumes into all of our major segments remain down year-over-year. Accordingly, we expect continued recovery in our North American sales over the next several quarters, as consumer spending begins to return. We also expect our aggressive cost and working capital improvements, profitable share gains and disciplined, tasked based process improvement efforts will create further benefits to our operating results. As a result, we are reaffirming our Adjusted EBITDA estimate for the 2010 fiscal year to be near the higher end of the guidance provided in our June earnings call, which was $50 million."

Unifi, Inc. (NYSE: UFI - News) is a diversified producer and processor of multi-filament polyester and nylon textured yarns and related raw materials. The Company adds value to the supply chain and enhances consumer demand for its products through the development and introduction of branded yarns that provide unique performance, comfort and aesthetic advantages. Key Unifi brands include, but are not limited to: AIO(®) - all-in-one performance yarns, SORBTEK(®), A.M.Y.(®), MYNX(®) UV, REPREVE(®), REFLEXX(®), MICROVISTA(®) and SATURA(®). Unifi's yarns and brands are readily found in home furnishings, apparel, legwear, and sewing thread, as well as industrial, automotive, military, and medical applications. For more information about Unifi, visit www.unifi.com, or to learn more about REPREVE(®), visit www.repreve.com.

Financial Statements to Follow

        UNIFI, INC.
        CONSOLIDATED BALANCE SHEETS
        (Amounts in Thousands)



                                            September 27, 2009 June 28, 2009
                                            ------------------ -------------
                                                (Unaudited)
        Assets
        Cash and cash equivalents                      $55,700       $42,659
        Receivables, net                                79,358        77,810
        Inventories                                     99,414        89,665
        Deferred income taxes                            1,261         1,223
        Assets held for sale                             1,250         1,350
        Restricted cash                                  5,843         6,477
        Other current assets                             5,214         5,464
                                                         -----         -----
            Total current assets                       248,040       224,648

        Property, plant and equipment, net             159,086       160,643
        Investments in unconsolidated
         affiliates                                     60,641        60,051
        Restricted cash                                      -           453
        Intangible assets, net                          16,712        17,603
        Other noncurrent assets                         13,439        13,534
                                                        ------        ------
                                                      $497,918      $476,932
                                                      ========      ========
        Liabilities and Shareholders' Equity
        Accounts payable                               $33,528       $26,050
        Accrued expenses                                18,876        15,269
        Income taxes payable                               727           676
        Current maturities of long-term debt
           and other current liabilities                 6,212         6,845
                                                         -----         -----
             Total current liabilities                  59,343        48,840

        Long-term debt and other
         liabilities                                   181,629       182,707
        Deferred income taxes                              438           416
        Shareholders' equity                           256,508       244,969
                                                       -------       -------
                                                      $497,918      $476,932
                                                      ========      ========



    UNIFI, INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (Unaudited) (In Thousands Except Per Share Data)

                                                        For the Quarters Ended
                                                        ----------------------
                                                         September September
                                                          27, 2009  28, 2008
                                                        ---------- -----------
    Summary of Operations:
      Net sales                                           $142,851  $169,009
      Cost of sales                                        123,445   155,584
      Write down of long-lived assets                          100         -
      Selling, general & administrative expenses            11,164    10,545
      Provision for bad debts                                  576       558
      Other operating (income) expense, net                    (87)     (561)

    Non-operating (income) expense:
      Interest income                                         (746)     (913)
      Interest expense                                       5,492     5,965
      Gain on extinguishment of debt                           (54)        -
      Equity in earnings of unconsolidated affiliates       (2,063)   (3,482)
                                                            ------    ------

      Income from continuing operations before  income
       taxes                                                 5,024     1,313
      Provision for income taxes                             2,535     1,885
                                                             -----     -----
      Income (loss) from continuing operations               2,489      (572)
      Loss from discontinued operations, net of tax              -      (104)
                                                                 -      ----
                    Net income (loss)                       $2,489     $(676)
                                                            ======     =====

      Income (loss) per common share (basic and diluted):
                    Income (loss) - continuing operations    $0.04    $(0.01)
                    Loss - discontinued operations               -         -
                                                                 -         -
                    Net income (loss) - basic and diluted    $0.04    $(0.01)
                                                             =====    ======

      Weighted average basic and diluted shares
       outstanding                                          62,057    61,134



    UNIFI, INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited) (Amounts in Thousands)
                                                        For the Quarters Ended
                                                        ----------------------
                                                         September September
                                                          27, 2009  28, 2008
                                                        ---------- -----------

    Cash and cash equivalents at beginning of year         $42,659   $20,248
    Operating activities:
      Net income (loss)                                      2,489      (676)
      Adjustments to reconcile net income (loss)
           to net cash provided by continuing
           operating activities:
           Loss from discontinued operations                     -       104
           Earnings of unconsolidated equity
           affiliates, net of distributions                   (452)   (1,417)
           Depreciation                                      5,805     8,980
           Amortization                                      1,168     1,069
           Stock-based compensation expense                    593       282
           Deferred compensation expense (recovery), net       177       (81)
           Net gain on asset sales                             (94)     (316)
           Gain on extinguishment of debt                      (54)        -
           Write down of long-lived assets                     100         -
           Deferred income tax                                  63      (115)
           Provision for bad debts                             576       558
           Other                                                40       296
           Change in assets and liabilities,
              excluding effects of acquisitions and
              foreign currency adjustments                   2,811    (6,082)
                                                             -----    ------
                   Net cash provided by continuing
                    operating activities                    13,222     2,602
                                                            ------     -----

    Investing activities:
      Capital expenditures                                  (2,106)   (3,569)
      Change in restricted cash                              1,763     5,183
      Proceeds from sale of capital assets                     107       101
      Other                                                      -       (94)
                                                                 -       ---
                   Net cash (used in) provided by
                    investing activities                      (236)    1,621
                                                              ----     -----

    Financing activities:
      Payments of long-term debt                            (2,198)   (9,080)
      Borrowings of long-term debt                               -     4,600
      Proceeds from stock option exercises                       -     3,551
      Other                                                      -        37
                                                                 -        --
                   Net cash used in financing activities    (2,198)     (892)
                                                            ------      ----

    Cash flows of discontinued operations:
       Operating cash flow                                       -      (114)

                                                                 -      ----
                   Net cash used in discontinued operations      -      (114)
                                                                 -      ----


    Effect of exchange rate changes on cash and cash
     equivalents                                             2,253    (3,069)
                                                             -----    ------

    Net increase in cash and cash equivalents               13,041       148
                                                            ------       ---

    Cash and cash equivalents at end of period             $55,700   $20,396
                                                           =======   =======



                         Adjusted EBITDA Reconciliation
                            to Pre-Tax Income (Loss)
                            (Amounts in thousands)
                                  (Unaudited)

                                                For the Quarters Ended
                                                ----------------------
                                              September   June    September
                                                 2009     2009       2008
                                                 ----     ----       ----

    Pre-tax income (loss) from continuing
     operations                                $5,024  $(4,351)    $1,313

    Interest expense, net                       4,746    4,876      5,052

    Depreciation and amortization expense       6,696    6,951      9,758

    Equity in (earnings) losses of
     unconsolidated affiliates                 (2,063)   1,218     (3,482)

    Non-cash compensation, net of
     distributions                                770      607        201

    Gain (loss) on sales of PP&E                  (94)       9       (315)

    Currency and hedging losses                    13      370         86

    Write down of long-lived assets               100      350          -

    Restructuring recoveries                        -     (240)         -

    Gain on extinguishment of debt                (54)    (251)         -

    Asset consolidation and optimization
     expense                                        -       47      1,240

    Kinston shutdown expenses                       -        -         30


                                              -------   ------    -------
    Adjusted EBITDA                           $15,138   $9,586    $13,883
                                              =======   ======    =======

NON-GAAP FINANCIAL MEASURES

Non-GAAP Financial Measures

Included in this presentation are certain non-GAAP financial measures designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America because management believes such measures are useful to investors.

Adjusted EBITDA

Adjusted EBITDA represents pre-tax income before interest expense, depreciation and amortization expense and loss or income from discontinued operations, adjusted to exclude equity in earnings and losses of unconsolidated affiliates, write down of long-lived assets, non-cash compensation expense net of distributions, gains or losses on sales of property, plant and equipment, currency and hedging losses, asset consolidation and optimization expense, restructuring recoveries, gain on extinguishment of debt, and Kinston shutdown costs. We present Adjusted EBITDA as a supplemental measure of our performance and ability to service debt. We also present Adjusted EBITDA because we believe such measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry and in measuring the ability of "high-yield" issuers to meet debt service obligations.

We believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense goes down as deductible interest expense goes up; depreciation and amortization are non-cash charges. Equity in earnings and losses of unconsolidated affiliates is excluded because such earnings or losses do not have an impact on our ability to service our debt. The other items excluded from Adjusted EBITDA are excluded in order to better reflect our continuing operations.

In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.

Our Adjusted EBITDA measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• it does not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;
• it does not reflect changes in, or cash requirements for, our working capital needs;
• it does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and our Adjusted EBITDA measure does not reflect any cash requirements for such replacements;
• it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
• it does not reflect the impact of earnings or charges resulting from matters we consider not be indicative of our ongoing operations;
• it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and
• other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA 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 the notes. You should compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Certain statements included herein contain forward-looking statements within the meaning of federal securities laws about Unifi, Inc.'s (the "Company") financial condition and results of operations that are based on management's current expectations, estimates and projections about the markets in which the Company operates, as well as management's beliefs and assumptions. Words such as "expects," "anticipates," "believes," "estimates," variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of the date hereof. The Company undertakes no obligation to update publicly any of these forward-looking statements to reflect new information, future events or otherwise.

Factors that may cause actual outcome and results to differ materially from those expressed in, or implied by, these forward-looking statements include, but are not necessarily limited to, availability, sourcing and pricing of raw materials, the success of our subsidiaries, pressures on sales prices and volumes due to competition and economic conditions, reliance on and financial viability of significant customers, operating performance of joint ventures, alliances and other equity investments, technological advancements, employee relations, changes in construction spending, capital expenditures and long-term investments (including those related to unforeseen acquisition opportunities), continued availability of financial resources through financing arrangements and operations, outcomes of pending or threatened legal proceedings, changes in currency exchange rates, interest and inflation rates, changes in consumer spending, customer preferences, fashion trends and end-uses, regulations governing tax laws, other governmental and authoritative bodies' policies and legislation, and the ability to sell excess assets. In addition to these representative factors, forward-looking statements could be impacted by general domestic and international economic and industry conditions in the markets where the Company competes, such as changes in currency exchange rates, interest and inflation rates, recession and other economic and political factors over which the Company has no control. Other risks and uncertainties may be described from time to time in the Company's other reports and filings with the Securities and Exchange Commission.

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