Unifi benefits from retail sales nearing pre-recession levels
Unifi Inc released preliminary operating results for its third quarter ended March 27, 2011. Net sales increased $23 million, or 15 percent, to $178 million for the March 2011 quarter compared to net sales of $155 million for the prior year quarter. The Company reported a net loss for the third quarter of its 2011 fiscal year of $4.0 million, or $0.20 per share, compared to net income of $0.8 million, or $0.04 per share, for the prior year quarter.
Earnings for the March 2011 quarter included approximately $2.2 million of charges related to the early extinguishment of debt and a loss of $2.5 million from our investment in Parkdale America LLC, which compares to $2.0 million of income from Parkdale America in the prior year March quarter.
For the first nine months of the fiscal year 2011, the Company reported net income of $11.6 million, or $0.58 per share, compared to net income of $5.2 million, or $0.26 per share, for the prior year period. Net sales increased $73 million, or 17 percent, to $513 million for the fiscal year-to-date compared to net sales of $440 million for the prior year period.
Adjusted earnings before interest, taxes, depreciation and amortization for the March 2011 quarter were $12.3 million compared to adjusted EBITDA of $12.7 million for the prior year quarter. Adjusted EBITDA for the first nine months of fiscal year 2011 was $46.4 million compared to $41.1 million for the prior year period.
"During the March quarter, polyester raw material prices rose significantly," said Bill Jasper, Chairman and CEO of Unifi. "Certain quarterly pricing commitments and our strategic decision to absorb a portion of the raw material cost increases during the March quarter resulted in temporary margin pressure. Since the end of the quarter, we have recovered most of the lost margin and our business fundamentals remain strong."
Mr. Jasper also noted, "Year-over-year volume continued to improve in our polyester business based upon retail sales improvements that are nearing pre-recession levels; continued growth of our business in China; and startup of our operations in Central America, a region which continues to develop and increase its share of the U.S. apparel market. In addition, sales of the Company's Premier Value Added products are on track to meet our stated goal of doubling over the next three years."
Working capital usage during the quarter combined with elevated strategic capital expenditures to complete the Company's new REPREVE Recycling Center resulted in a $14 million decrease in cash-on-hand from the end of December 2010, to $19.1 million as of the end of March 2011. During the quarter, the Company also redeemed $30 million of its senior secured notes, due May 2014, reducing the amount of outstanding notes to $133.7 million. Outstanding borrowings on the Company's revolving credit facility at the end of the March quarter were $37.8 million.
"Raw material cost increases also had a significant effect on our investment in working capital during the quarter," said Ron Smith, Chief Financial Officer of Unifi. "The volume increase over the last several quarters, coupled with the higher raw material costs and related selling prices increases, resulted in the Company investing an additional $24 million in working capital during the quarter."