Unifi has second quarter to forget

With the woes of the U.S. textiles industry backing up along the supply chain, yarn-producer Unifi Inc. recorded a steep drop in second-quarter sales and a sharply widening loss of $9.2 million, more than four times the size of a year-ago deficit of $2.2 million.

Sales at the big producer of textured polyester and nylon yarns tumbled by 9 percent, to $183.7 million from $201.9 million, a shortfall of more than $18 million.

As sales headed south, margins came under pressure, contracting to 2 percent from 7.4 percent a year ago, a drop of 540 basis points, or 5.4 percentage points. Gross margin dollars dropped off by 75.5 percent, to $3.7 million from $14.9 million.

Supplying some of the margin pressure, a pre-tax benefit from fiber producer DuPont — included in the margin — was reduced by 10.3 percent, to $7 million from $7.8 million during the year-before quarter.

When measured as a percentage of sharply falling sales, operating costs climbed by 50 basis points, or one-half of a percentage point, to 7 percent from 6.5 percent a year ago. But the company has continued to cut away at costs, and measured in absolute dollars, expenses were whittled down by 2.7 percent, to $12.8 million from $13.1 million last year, generating a cash savings of $340,000.

Pressured downward by the falling sales and the severe margin contraction, Unifi swung to an operating loss, recording an operating deficit of $9.1 million, compared with a year-ago operating profit of $1.8 million.

On the plus side, Unifi pared down inventories and interest expense.

Unifi Inc.

Qtr. 12/28 (x000) 2003 2002 % chg
a-Second-quarter results include $1.1 million in miscellaneous expenses, compared with $649,000 last year; a $146,000 loss from unconsolidated affiliates vs. a $2.6 million in earnings a year ago; $1.1 million in minority interest income vs. $758,000 in expenses a year ago; and a $4.2 million income-tax benefit, compared with $1.6 million in the same period last year. Results in the year-before quarter include $1.6 million in arbitration costs.
b-Six-month results include $1.9 million in miscellaneous expenses, compared with $70,000 in miscellaneous income last year; $111,000 in earnings from unconsolidated affiliates, compared with $6.2 million last year; $2.1 million in minority interest income, compared with $3.6 million in minority interest expense during the same period in 2002; and an income-tax benefit of $6.0 million, compared with a $456,000 tax payment last year. Results in the year-ago six month-period include $2.8 million in arbitration costs.
Sales $183,667 $201,859 -9.0
Oper. income (EBIT) (9,126) 1,919 --
Net income (9,221)a (2,170)a
Per share (diluted) (0.18) (0.04)
Average gross margin 2.0% 7.4%
SG&A expenses 7.0% 6.5%
Six months 2003 2002 % chg
Sales 363,871 423,389 -14.1
Oper. income (EBIT) (11,909) 12,590
Net income (13,782)b 2,157
Per share (diluted) (0.26) 0.04
Average gross margin 3.9% 9.0%
SG&A expenses 7.2% 6.0%

Home & Textiles Today Staff | News & Commentary

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