Unifi posts $4.6 million quarterly loss

Don Hogsett, October 27, 2003

With sales tumbling more than 18 percent, and spending more that it's taking in once it's covered its basic costs, polyester yarn producer Unifi Inc. recorded a first quarter loss of $4.6 million, compared with a year-before profit of $4.3 million.

Putting the bottom line under crushing pressure, total sales dropped off by 18.5 percent, to $180.5 million from $221.5 million last year, a shortfall of $41.0 million.

Taking the blame for the weakening sales, the company said, is a punishing combination of "continued increase in imported fabric and apparel, and the overall softness in the domestic textile and apparel industries."

Average gross margin was slashed by 460 basis points, or 4.6 percent, to 5.8 percent from 10.4 percent a year ago. Caught between falling sales and thinning margins, gross margin dollars were more than cut in half, falling by 54.3 percent, to $10.6 million from $23.1 million.

Operating costs climbed higher, when measured as a percentage of sales, by 130 basis points. But measured in absolute dollars, costs were actually whittled down by 1.8 percent, to $13.3 million from $13.6 million, generating a cash savings of $241,000.

With costs outpacing gross profit, the yarn producer recorded an operating loss of $2.8 million, compared with an operating profit the year before of $9.6 million.

In a modest lift to the bottom line, Unifi pared its interest expense by 7.0 percent, to $4.7 million from $5.1 million last year, yielding a cash savings of $357,000.

Freeing up the balance sheet, Unifi said its "ongoing strategic focus on maximizing free cash" left the company "with no funded bank debt" by the end of the quarter. The company also ended the period with cash on hand of $72.3 million.

Even with so much business moving off-shore, ceo Brian Parke said Unifi will "continue to develop the opportunities that exit in the Americas."

However, he said, "We will also participate in the growth in Asia. Our sales office in Hong Kong and operations in Thailand are now supplying the region with Unifi-quality product, including several of our added-value yarns."

Unifi Inc.

Qtr. 9/28 (x000) 2003 2002 % change
a-First-fiscal quarter results include interest income of $828,000, compared with $493,000 during the prior-year period; $817,000 in miscellaneous expenses, compared with miscellaneous income of $719,000 last year; a $257,000 profit from the company's equity in an unconsolidated affiliate, down from $3.6 million last year; and $955,000 in minority interest income, compared with $2.8 million in minority interest expenses a year ago; and an income-tax benefit of $1.7 million, compared with income-tax expense of $2.1 million last year.
Sales $180,486 $221,530 -18.5
Oper. income (EBIT) (2,758) 9,562
Net income (4,562)a 4,327a
Per share (diluted) (0.09) 0.08)
Average gross margin 5.8% 10.4%
SG&A expenses 7.4% 6.1%

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