UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~April~~October 21, 2023



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-10542

UNIFI, INC.

(Exact name of registrant as specified in its charter)


New York		11-2165495
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

7201 West Friendly Avenue
Greensboro, North Carolina		27410
(Address of principal executive offices)		(Zip Code)

(336) 294-4410

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 
Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.10 per share

UFI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~May~~November 83, 2023, there were 18,~~056~~116,~~208~~605 shares of the registrant’s common stock, par value $0.10 per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that relate to our plans, objectives, estimates, and goals. Statements expressing expectations regarding our future, or projections or estimates relating to products, sales, revenues, expenditures, costs, strategies, initiatives, or earnings, are typical of such statements and are made under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s beliefs, assumptions and expectations about our future performance, considering the information currently available to management. 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; 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 the Company competes, including economic and political factors over which the Company has no control;

•

changes in consumer spending, customer preferences, fashion trends, and end -uses for the Company’s products;

•

the financial condition of the Company’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 the Company’s facilities;

•

the disruption of operations, global demand, or financial performance as a result of catastrophic or extraordinary events, including, but not limited to, epidemics or pandemics such as strains of coronavirus (such as “COVID-19”);

•

the success of the Company’s strategic business initiatives;

•

the volatility of financial and credit markets, including the impacts of counterparty risk (e.g. deposit concentration and recent depositor sentiment and activity);

•

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 the Company’s brands;

•

employee relations;

•

the ability to attract, retain, and motivate key employees;

•

the impact of climate change or environmental, health, and safety regulations;

•

the impact of tax laws, the judicial or administrative interpretations of tax laws, and/or changes in such laws or interpretations; and

•

other factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended July 32, ~~2022~~2023 or in the Company’s other periodic reports and information filed with the Securities and Exchange Commission (the “SEC”).

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 the Company. 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.

In light of all the above considerations, we reiterate that forward-looking statements are not guarantees of future performance, and we caution you not to rely on them as such.

UNIFI, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ~~AND NINE MONTHS~~ ENDED ~~APRIL~~OCTOBER 21, 2023

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of April 2, 2023 and July 3, 2022	1
	Condensed Consolidated Balance Sheets as of October 1, 2023 and July 2, 2023	1
	Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended April 2, 2023 and March 27, 2022	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended October 1, 2023 and October 2, 2022	2
	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three Months and Nine Months Ended April 2, 2023 and March 27, 2022	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended October 1, 2023 and October 2, 2022	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months and Nine Months Ended April 2, 2023 and March 27, 2022	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended October 1, 2023 and October 2, 2022	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended April 2, 2023 and March 27, 2022	5
	Notes to Condensed Consolidated Financial Statements	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	22
Item 4.	Controls and Procedures	30
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	3123
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3123
Item 6.	Exhibits	3123
	Signatures	3224

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)

	April 2, 2023			July 3, 2022
	October 1, 2023			July 2, 2023
ASSETS
Cash and cash equivalents	$	4951,~~706~~515		$	5346,~~290~~960
Receivables, net		8778,~~968~~706			~~106~~83,~~565~~725
Inventories		~~143~~136,~~178~~092			~~173~~150,~~295~~810
Income taxes receivable		1,~~777~~592			~~160~~238
Other current assets		159,~~093~~419			1812,~~956~~327
Total current assets		~~297~~277,~~722~~324			~~352~~294,~~266~~060
Property, plant and equipment, net		~~229~~212,~~195~~634			~~216~~218,~~338~~521
Operating lease assets		87,~~327~~576			87,~~829~~791
Deferred income taxes		34,~~172~~094			23,~~497~~939
Other non-current assets		1214,~~986~~633			814,~~788~~508
Total assets	$	~~551~~516,~~402~~261		$	~~588~~538,~~718~~819
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	4737,~~702~~064		$	7344,~~544~~455
Income taxes payable		~~1,875~~996			~~1,526~~789
Current operating lease liabilities		1,~~874~~885			21,~~190~~813
Current portion of long-term debt		1112,~~544~~323			1112,~~726~~006
Other current liabilities		1316,~~494~~443			1912,~~806~~932
Total current liabilities		7668,~~489~~711			~~108~~71,~~792~~995
Long-term debt		~~124~~128,~~162~~890			~~102~~128,~~309~~604
Non-current operating lease liabilities		65,~~543~~842			6,~~736~~146
Deferred income taxes		42,~~389~~999			43,~~983~~364
Other long-term liabilities		4,~~911~~790			45,~~449~~100
Total liabilities		~~216~~211,~~494~~232			~~227~~215,~~269~~209
Commitments and contingencies
Common stock, $0.10 par value (500,000,000 shares authorized; 18,054,498 and 17,979,362 shares issued and outstanding as of April 2, 2023 and July 3, 2022, respectively)		1,805			1,798
Common stock, $0.10 par value (500,000,000 shares authorized; 18,084,522 and 18,081,538 shares issued and outstanding as of October 1, 2023 and July 2, 2023, respectively)		1,808			1,808
Capital in excess of par value		6869,~~562~~130			6668,~~120~~901
Retained earnings		~~322~~293,~~081~~522			~~353~~306,~~136~~792
Accumulated other comprehensive loss		(5759,~~540~~431	)		(5953,~~605~~891	)
Total shareholders’ equity		~~334~~305,~~908~~029			~~361~~323,~~449~~610
Total liabilities and shareholders’ equity	$	~~551~~516,~~402~~261		$	~~588~~538,~~718~~819

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

	For the Three Months Ended						~~For the Nine Months Ended~~
	April 2, 2023			March 27, 2022			April 2, 2023			March 27, 2022
	October 1, 2023			October 2, 2022
Net sales	$	~~156~~138,~~738~~844		$	~~200~~179,~~780~~519		$	~~472,469~~		$	~~598,182~~
Cost of sales		~~147~~139,~~085~~419			~~181~~172,~~636~~956			~~464,253~~			~~536,051~~
Gross profit		9,653			19,144			8,216			62,131
Gross (loss) profit		(575	)		6,563
Selling, general and administrative expenses		1211,~~063~~609			1411,~~389~~773			~~35,584~~			~~39,025~~
Benefit for bad debts		(56	)		(169	)		(38	)		(489	)
(Benefit) provision for bad debts		(209	)		174
Other operating expense (income), net		~~324~~54			(~~831~~689	)		~~(139~~	)		(2	)
Operating (loss) income		(2,678	)		5,755			(27,191	)		23,597
Operating loss		(12,029	)		(4,695	)
Interest income		(~~554~~581	)		(~~492~~547	)		~~(1,615~~	)		~~(944~~	)
Interest expense		2,~~073~~485			~~709~~1,247			~~5,209~~			~~2,140~~
Equity in earnings of unconsolidated affiliates		(~~158~~200	)		(41295	)		~~(539~~	)		~~(385~~	)
Recovery of non-income taxes, net		—			815			—			815
Loss before income taxes		(13,733	)		(5,100	)
(Loss) income before income taxes		(4,039	)		4,764			(30,246	)		21,971
(Benefit) provision for income taxes		(463	)		2,734
Provision for income taxes		1,145			2,698			809			10,296
Net loss	$	(13,270	)	$	(7,834	)
Net (loss) income	$	(5,184	)	$	2,066		$	(31,055	)	$	11,675
Net loss per common share:
Net (loss) income per common share:
Basic	$	(0.73	)	$	(0.44	)
Basic	$	(0.29	)	$	0.11		$	(1.72	)	$	0.63
Diluted	$	(0.73	)	$	(0.44	)
Diluted	$	(0.29	)	$	0.11		$	(1.72	)	$	0.62

Comprehensive loss:


	For the Three Months Ended
	October 1, 2023			October 2, 2022
Net loss	$	(13,270	)	$	(7,834	)
Other comprehensive loss:
Foreign currency translation adjustments		(5,540	)		(5,908	)
Other comprehensive loss, net		(5,540	)		(5,908	)
Comprehensive loss	$	(18,810	)	$	(13,742	)

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

(In thousands)

	For the Three Months Ended					For the Nine Months Ended
	April 2, 2023			March 27, 2022		April 2, 2023			March 27, 2022
Net (loss) income	$	(5,184	)	$	2,066	$	(31,055	)	$	11,675
Other comprehensive income:
Foreign currency translation adjustments		4,526			13,921		2,065			5,833
Changes in interest rate swaps, net of tax of nil, $105, nil and $248, respectively		—			340		—			803
Other comprehensive income, net		4,526			14,261		2,065			6,636
Comprehensive (loss) income	$	(658	)	$	16,327	$	(28,990	)	$	18,311

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(In thousands)

	Shares		Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at January 1, 2023		18,049	$	1,805		$	67,875		$	327,265		$	(62,066	)	$	334,879
Balance at July 2, 2023		18,081	$	1,808		$	68,901		$	306,792		$	(53,891	)	$	323,610
Options exercised		43		1—			3321			—			—			3421
Conversion of equity units		1		(1—	)		1—			—			—			—
Stock-based compensation		—		—			~~656~~209			—			—			~~656~~209
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		—		—			(31	)		—			—			(31	)
Other comprehensive income, net of tax		—		—			—			—			4,526			4,526
Other comprehensive loss, net of tax		—		—			—			—			(5,540	)		(5,540	)
Net loss		—		—			—			(513,~~184~~270	)		—			(513,~~184~~270	)
Balance at April 2, 2023		18,054	$	1,805		$	68,562		$	322,081		$	(57,540	)	$	334,908
Balance at October 1, 2023		18,085	$	1,808		$	69,130		$	293,522		$	(59,431	)	$	305,029

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at July 3, 2022		17,979		$	1,798		$	66,120		$	353,136		$	(59,605	)	$	361,449
Options exercised		73			1—			5217			—			—			5317
Conversion of equity units		6331			63			(63	)		—			—			—
Stock-based compensation		12—			1—			~~2,464~~591			—			—			~~2,465~~591
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(71	)		(1—	)		(6816	)		—			—			(6916	)
Other comprehensive income, net of tax		—			—			—			—			2,065			2,065
Other comprehensive loss, net of tax		—			—			—			—			(5,908	)		(5,908	)
Net loss		—			—			—			(317,~~055~~834	)		—			(317,~~055~~834	)
Balance at April 2, 2023		18,054		$	1,805		$	68,562		$	322,081		$	(57,540	)	$	334,908
Balance at October 2, 2022		18,012		$	1,801		$	66,709		$	345,302		$	(65,513	)	$	348,299

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at December 26, 2021		18,498		$	1,850		$	67,006		$	353,393		$	(61,057	)	$	361,192
Options exercised		—			—			—			—			—			—
Conversion of equity units		4			—			—			—			—			—
Stock-based compensation		—			—			721			—			—			721
Common stock repurchased and retired under publicly announced program		(50	)		(5	)		(181	)		(766	)		—			(952	)
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(1	)		—			(23	)		—			—			(23	)
Other comprehensive income, net of tax		—			—			—			—			14,261			14,261
Net income		—			—			—			2,066			—			2,066
Balance at March 27, 2022		18,451		$	1,845		$	67,523		$	354,693		$	(46,796	)	$	377,265

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at June 27, 2021		18,490		$	1,849		$	65,205		$	344,797		$	(53,432	)	$	358,419
Options exercised		9			1			(1	)		—			—			—
Conversion of equity units		68			6			(6	)		—			—			—
Stock-based compensation		5			1			2,827			—			—			2,828
Common stock repurchased and retired under publicly announced program		(102	)		(10	)		(367	)		(1,779	)		—			(2,156	)
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(19	)		(2	)		(135	)		—			—			(137	)
Other comprehensive income, net of tax		—			—			—			—			6,636			6,636
Net income		—			—			—			11,675			—			11,675
Balance at March 27, 2022		18,451		$	1,845		$	67,523		$	354,693		$	(46,796	)	$	377,265

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	For the Nine Months Ended
	For the Three Months Ended
	April 2, 2023			March 27, 2022
	October 1, 2023			October 2, 2022
Cash and cash equivalents at beginning of period	$	5346,~~290~~960		$	7853,~~253~~290
Operating activities:
Net (loss) income		(31,055	)		11,675
Net loss		(13,270	)		(7,834	)
Adjustments to reconcile net (loss) income to net cash provided (used) by operating activities:
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Equity in earnings of unconsolidated affiliates		(~~539~~200	)		(~~385~~295	)
Distribution received from unconsolidated affiliate		—			750
Depreciation and amortization expense		7,026			6,740
Depreciation and amortization expense		20,388			19,176
Non-cash compensation expense		212			633
Non-cash compensation expense		2,791			3,081
Deferred income taxes		(679	)		(373	)
Recovery of income taxes		(3,799	)		—
Other, net		(62	)		324
Deferred income taxes		(1,199	)		(3,019	)
Other, net		252			(22	)
Changes in assets and liabilities:
Receivables, net		184,~~585~~111			(13,~~537~~800	)
Inventories		3112,~~080~~608			~~(20~~6,~~170~~475	)
Other current assets		42,~~271~~126			(24,~~503~~026	)
Income taxes		(1,~~241~~148	)		~~670~~(789	)
Accounts payable and other current liabilities		(313,~~644~~432	)		1(28,~~084~~615	)
Other, net		~~459~~(173	)		~~1,137~~16
Net cash provided (used) by operating activities		87,~~349~~119			(25,~~063~~892	)
Investing activities:
Capital expenditures		(322,~~461~~937	)		(3011,~~094~~198	)
Other, net		~~(193~~457	)		(~~2,150~~222	)
Net cash used by investing activities		(322,~~654~~480	)		(3211,~~244~~420	)
Financing activities:
Proceeds from ABL Revolver		~~142~~31,~~400~~100			8065,~~300~~500
Payments on ABL Revolver		(~~121~~27,~~000~~500	)		(6152,~~800~~300	)
Payments on ABL Term Loan		(42,~~800~~300	)		(72,500	)
Proceeds from construction financing		~~6,533~~—			2,~~340~~449
Payments on finance lease obligations		(~~1,413~~713	)		(~~2,876~~436	)
Common stock repurchased and retired under publicly announced program		—			(2,156	)
Other, net		17			—
Other, net		(683	)		(345	)
Net cash provided by financing activities		604			12,713
Net cash provided by financing activities		21,037			7,963
Effect of exchange rate changes on cash and cash equivalents		(688	)		(1,491	)
Effect of exchange rate changes on cash and cash equivalents		(316	)		1,063
Net increase (decrease) in cash and cash equivalents		4,555			(6,090	)
Net decrease in cash and cash equivalents		(3,584	)		(25,281	)
Cash and cash equivalents at end of period	$	51,515		$	47,200
Cash and cash equivalents at end of period	$	49,706		$	52,972

See accompanying notes to condensed consolidated financial statements.

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Background

Unifi, Inc., a New York corporation formed in 1969 (together with its subsidiaries, “UNIFI,” the “Company,” “we,” “us,” or “our”), is a multinational company that manufactures and sells innovative recycled and synthetic products, made from polyester and nylon, primarily to other yarn manufacturers and knitters and weavers (UNIFI’s “direct customers”) that produce yarn and/or fabric for the apparel, hosiery, home furnishings, automotive, industrial, medical, and other end-use markets (UNIFI’s “indirect customers”). We sometimes refer to these indirect customers as “brand partners.” Polyester products include partially oriented yarn (“POY”), and textured, solution and package dyed, twisted, beamed, and draw wound yarns, and each is available in virgin or recycled varieties. Recycled solutions, made from both pre-consumer and post-consumer waste, include plastic bottle flake (“Flake”), polyester polymer beads (“Chip”), and staple fiber. Nylon products include virgin or recycled textured, solution dyed, and spandex covered yarns.

UNIFI maintains one of the textile industry’s most comprehensive product offerings that includes a range of specialized, value-added, and commodity solutions, with principal geographic markets in North America, Central America, South America, Asia, and Europe. UNIFI has direct manufacturing operations in four countries and participates in joint ventures with operations in Israel and the United States (the “U.S.”).

2. Basis of Presentation; Condensed Notes

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. As contemplated by the instructions of the SEC to Form 10-Q, the following notes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to UNIFI’s year-end audited consolidated financial statements and related notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended July 32, ~~2022~~2023 (the “~~2022~~2023 Form 10-K”).

The financial information included in this report has been prepared by UNIFI, without audit. In the opinion of management, all adjustments, which consist of normal, recurring adjustments, considered necessary for a fair statement of the results for interim periods have been included. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the amounts reported and certain financial statement disclosures. Actual results may vary from these estimates.

All amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.

The fiscal quarter for each of Unifi, Inc., its primary domestic operating subsidiaries and its subsidiary in El Salvador ended on ~~April~~October 21, 2023. Unifi, Inc.’s remaining material operating subsidiaries’ fiscal quarter ended on ~~March~~September 3130, 2023. There were no significant transactions or events that occurred between Unifi, Inc.’s fiscal quarter end and such wholly owned subsidiaries’ fiscal quarter end. The three-month periods ended ~~April~~October 21, 2023 and ~~March~~October 272, 2022 both consisted of 13 weeks. ~~The nine-month periods ended April 2, 2023 and March 27, 2022 both consisted of 39 weeks.~~

3. Recent Accounting Pronouncements

Based on UNIFI’s review of Accounting Standards Updates issued since the filing of the ~~2022~~2023 Form 10-K, there have been no newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a material impact on UNIFI’s consolidated financial statements.

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

4. Revenue

The following tables present net sales disaggregated by (i) classification of customer type and (ii) REPREVE® Fiber sales:

	For the Three Months Ended				For the Nine Months Ended
	April 2, 2023		March 27, 2022		April 2, 2023		March 27, 2022
Third-party manufacturer	$	155,423	$	199,623	$	468,653	$	592,505
Service		1,315		1,157		3,816		5,677
Net sales	$	156,738	$	200,780	$	472,469	$	598,182

	For the Three Months Ended				For the Nine Months Ended
	April 2, 2023		March 27, 2022		April 2, 2023		March 27, 2022
REPREVE® Fiber	$	49,619	$	71,930	$	141,664	$	225,360
All other products and services		107,119		128,850		330,805		372,822
Net sales	$	156,738	$	200,780	$	472,469	$	598,182

Third-Party Manufacturer


	For the Three Months Ended
	October 1, 2023		October 2, 2022
Third-party manufacturer	$	137,620	$	178,212
Service		1,224		1,307
Net sales	$	138,844	$	179,519


	For the Three Months Ended
	October 1, 2023		October 2, 2022
REPREVE® Fiber	$	42,461	$	49,179
All other products and services		96,383		130,340
Net sales	$	138,844	$	179,519

Third-party manufacturer revenue is primarily generated through sales to direct customers. Such sales represent satisfaction of UNIFI’s performance obligations required by the associated revenue contracts. Each of UNIFI’s reportable segments derives revenue from sales to third-party manufacturers.

Service Revenue

Service revenue is primarily generated, as services are rendered, through fulfillment of toll manufacturing of textile products or transportation services governed by written agreements. Such toll manufacturing and transportation services represent satisfaction of UNIFI’s performance obligations required by the associated revenue contracts.

REPREVE® Fiber

REPREVE® Fiber represents UNIFI's collection of fiber products on our recycled platform, with or without added technologies.

Variable Consideration

For all variable consideration, where appropriate, UNIFI estimates the amount using the expected value method, which takes into consideration historical experience, current contractual requirements, specific known market events, and forecasted customer buying and payment patterns. Overall, these reserves reflect UNIFI’s best estimates of the amount of consideration to which the customer is entitled based on the terms of the contracts. Variable consideration has been immaterial to UNIFI’s financial statements for all periods presented.

5. Long-Term Debt

Debt Obligations

The following table and narrative presents the detail of UNIFI’s debt obligations. Capitalized terms not otherwise defined within this Note shall have the meanings attributed to them in the ~~Amended and Restated Credit Agreement, dated as of March 26, 2015 (together with amendments, the "Prior Credit Agreement"), or the~~ Second Amended and Restated Credit Agreement, dated as of October 28, 2022 (the "2022 Credit Agreement").

Weighted Average

Scheduled

Interest Rate as of

Principal Amounts as of

Maturity Date

~~April~~October 21, 2023

July 32, ~~2022~~2023

ABL Revolver

October 2027

67.47

1021,~~200~~700

4118,~~300~~100

ABL Term Loan

October 2027

6.39

~~112~~108,~~700~~100

65110,~~000~~400

Finance lease obligations

(1)

45.30

911,~~027~~687

710,~~261~~767

Construction financing

(2)

60.10

~~4,083~~—

~~729~~1,632

Total debt

~~136~~141,~~010~~487

~~114~~140,~~290~~899

Current ABL Term Loan

(9,200

)

(109,~~000~~200

)

Current portion of finance lease obligations

(23,~~344~~123

)

(12,~~726~~806

)

Unamortized debt issuance costs

(~~304~~274

)

(~~255~~289

)

Total long-term debt

~~124~~128,~~162~~890

~~102~~128,~~309~~604

(1)

Scheduled maturity dates for finance lease obligations range from March 2025 to ~~November~~September ~~2027~~2028.

(2)

Refer to the discussion below under “Construction Financing” for further information.

ABL Facility and Amendments

~~Unifi,~~There ~~Inc.~~have ~~entered~~been ~~into~~no ~~the~~changes ~~Sixth Amendment~~ to ~~Amended and Restated Credit Agreement (~~the ~~“Sixth Amendment”) on September 2,~~ 2022. ~~The Sixth Amendment modified the Trigger Level of the Prior~~ Credit Agreement, ~~which~~following ~~relates to, among other things,~~ the ~~requirement~~filing to maintain a certain Fixed Charge Coverage Ratio, with such Trigger Level occurring when Excess Availability falls below (a) for the period beginning on September 2, 2022 through and including the date that is 60 days after such date, $16,500 and (b) at all other times, the greatest of ~~(i) $10,000, (ii) 20% of~~ the ~~Maximum~~2023 ~~Revolver~~Form ~~Amount, and (iii) 12~~10-K.5% ~~of the sum of the Maximum Revolver Amount plus the outstanding principal amount of the Term Loan.~~

7Construction Financing

In connection with the construction financing arrangement, UNIFI has borrowed a total of $9,755 and transitioned $9,755 of completed asset costs to finance lease obligations as of October 1, 2023.

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

On October 28, 2022, Unifi, Inc. and certain of its subsidiaries entered into the 2022 Credit Agreement with a syndicate of lenders. The 2022 Credit Agreement provides for a $230,000 senior secured credit facility (the “2022 ABL Facility”), including a $115,000 revolving credit facility and a term loan ("2022 ABL Term Loan") that can be reset up to a maximum amount of $115,000, once per fiscal year, if certain conditions are met. The 2022 ABL Facility has a maturity date of October 28, 2027. The 2022 ABL Term Loan requires quarterly principal payments of $2,300 that began on February 1, 2023. Borrowings under the 2022 ABL Facility bear interest at SOFR plus 0.10% plus an applicable margin of 1.25% to 1.75%, or the Base Rate (as defined in the 2022 Credit Agreement) plus an applicable margin of 0.25% to 0.75%, with interest paid most commonly on a monthly basis.

Prior to entering the 2022 Credit Agreement, Unifi, Inc. and certain of its subsidiaries maintained the Prior Credit Agreement that established a $200,000 senior secured credit facility (the “Prior ABL Facility”), including a $100,000 revolving credit facility and a term loan that could be reset up to a maximum amount of $100,000, once per fiscal year, if certain conditions were met. The Prior ABL Facility had a maturity date of December 18, 2023. Prior ABL Facility borrowings bore interest at LIBOR plus an applicable margin of 1.25% to 1.75%, or the Base Rate plus an applicable margin of 0.25% to 0.75%, with interest paid on a monthly basis.

In connection with the 2022 Credit Agreement, UNIFI recorded a $273 loss on debt extinguishment to interest expense in the second quarter of fiscal 2023.

Construction Financing

In May 2021, UNIFI entered into an agreement with a third party lender that provides for construction-period financing for certain texturing machinery included in our capital allocation plans. UNIFI records project costs to construction in progress and the corresponding liability to construction financing (within long-term debt). The agreement provides for monthly, interest-only payments during the construction period at a rate of SOFR plus 1.25%, and contains terms customary for a financing of this type.

Each borrowing under the agreement provides for 60 monthly payments, which will commence upon the completion of the construction period. In connection with this construction financing arrangement, UNIFI has borrowed a total of $9,755 and transitioned $5,672 of completed asset costs to finance lease obligations as of April 2, 2023.

6. Income Taxes

The (benefit) provision for income taxes and effective tax rate were as follows:

	For the Three Months Ended						~~For the Nine Months Ended~~
	April 2, 2023			March 27, 2022			April 2, 2023			March 27, 2022
	October 1, 2023			October 2, 2022
Provision for income taxes	$	1,145		$	2,698		$	809		$	10,296
(Benefit) provision for income taxes	$	(463	)	$	2,734
Effective tax rate		~~(28.~~3.4	)%		56(53.6	)%		~~(2.7~~	)%		~~46.9~~	%

Income Tax Expense

UNIFI’s (benefit) provision for income taxes for the ~~nine~~three months ended ~~April~~October 21, 2023 and ~~March~~October 272, 2022 was calculated by applying the estimated annual effective tax rate to year-to-date pre-tax book income and adjusting for discrete items that occurred during the period.

The effective tax ~~rates~~rate for the three months ~~and nine months~~ ended ~~April~~October 21, 2023 varied from the U.S. federal statutory rate primarily due to the U.S.-generated losses for which UNIFI does not expect to realize a future tax benefit ~~and a discrete tax benefit related to the recovery of certain Brazilian income taxes paid in prior years~~.

~~The~~During ~~effective tax rates for~~ the three months ~~and nine months~~ ended ~~March~~October 271, ~~2022~~2023, ~~were~~the ~~higher~~Internal ~~than~~Revenue Service (the ~~U.S.~~“IRS”) ~~federal~~audit ~~statutory~~of ~~rate~~fiscal ~~primarily~~years ~~due~~2014 tothrough an2019 ~~increase~~was inconcluded ~~the~~with ~~valuation~~a ~~allowance~~net ~~for~~refund ~~deferred~~of ~~tax assets~~$1,248 ~~earnings~~which ~~taxed~~is atyet ~~higher~~to ~~rates~~be inreceived. ~~foreign~~The ~~jurisdictions,~~impact ~~and~~from ~~deferred~~the ~~tax~~audit onadjustments ~~unremitted~~to ~~earnings~~the prior periods was insignificant.

The effective tax rate for the three months ended October 2, 2022 was lower than the U.S. federal statutory rate primarily due to an increase in the valuation allowance for deferred tax assets and current U.S. tax on global intangible low-tax income (“GILTI”).

Unrecognized Tax Benefits

UNIFI regularly assesses the outcomes of both completed and ongoing examinations to ensure that its provision for income taxes is sufficient. Certain returns that remain open to examination have utilized carryforward tax attributes generated in prior tax years, including net operating losses, which could potentially be revised upon examination.

Following the conclusion of the IRS audit, UNIFI adjusted the uncertain tax positions for fiscal years 2014 through 2019 that were effectively settled. The impact from releasing the netted uncertain tax position liabilities was insignificant.

7. Shareholders’ Equity

On October 31, 2018, UNIFI announced that ~~its~~the Company's Board of Directors (the “Board”) approved a share repurchase program (the “2018 SRP”) under which UNIFI is authorized to acquire up to $50,000 of its common stock. ~~Under the 2018 SRP, purchases may be made from time to time in the open market at prevailing market prices, through private transactions or block trades.~~ The ~~timing and amount of repurchases will depend on market conditions,~~ share ~~price, applicable legal requirements, and other factors. The share~~ repurchase authorization is discretionary and has no expiration date. ~~Repurchases,~~No ifshares ~~any,~~have ~~are~~been ~~expected~~repurchased toin befiscal ~~financed~~2023 ~~through cash generated from operations~~ and ~~borrowings~~2024 ~~under the ABL Revolver~~ and ~~are~~$38,859 ~~subject~~remains toavailable ~~applicable~~for ~~limitations and restrictions as set forth in the ABL Facility~~repurchase. ~~UNIFI may discontinue repurchases at any time that management determines additional purchases are not beneficial or advisable.~~

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

The following table summarizes UNIFI’s repurchases and retirements of its common stock under the 2018 SRP for the fiscal periods noted:

	Total Numberof SharesRepurchased asPart of PubliclyAnnounced Plansor Programs		Average PricePaid per Share		Approximate DollarValue that MayYet Be RepurchasedUnder PubliclyAnnounced Plansor Programs
Fiscal 2019		—	$	—	$	50,000
Fiscal 2020		84	$	23.72	$	48,008
Fiscal 2021		—	$	—	$	48,008
Fiscal 2022		617	$	14.84	$	38,859
Fiscal 2023 (through April 2, 2023)		—	$	—	$	38,859
Total		701	$	15.90	$	38,859

Repurchased shares are retired and have the status of authorized and unissued shares. The cost of the repurchased shares is recorded as a reduction to common stock to the extent of the par value of the shares acquired and the remainder is allocated between capital in excess of par value and retained earnings, on a pro rata basis.

8. Stock-Based Compensation

On October 2931, ~~2020~~2023, UNIFI’s shareholders approved a First Amendment (the "First Amendment") to the Unifi, Inc. Second Amended and Restated 2013 Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan set the initial number of shares available for future issuance ("share reserve") pursuant to awards granted under the 2020 Plan to 850. The First Amendment increased the remaining share reserve by 1,100. No additional awards can be granted under prior plans; however, awards outstanding under a respective prior plan remain subject to that plan’s provisions.

The following table provides the number of awards remaining available for future issuance under the 2020 Plan as of April 2, 2023:

Authorized under the 2020 Plan	850
Plus: Awards expired, forfeited or otherwise terminated unexercised	4
Less: Awards granted to employees	(544	)
Less: Awards granted to non-employee directors	(114	)
Available for issuance under the 2020 Plan	196

On October 27, 2021, UNIFI’s shareholders approved the Unifi, Inc. Employee Stock Purchase Plan (the “ESPP”) as described in Unifi, Inc.’s Definitive Proxy Statement on Schedule 14A filed with the SEC on September 2, 2021. The ESPP reserved 100 Company shares, is intended to be a qualified plan under applicable tax law, and allows eligible employees to purchase Company shares at a 15% discount from market value. ESPP activity is reflected as options exercised in the condensed consolidated statements of shareholders’ equity.

9. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

Financial Instruments

For the ~~nine~~three months ended ~~April~~October 21, 2023 and ~~March~~October 272, 2022, there were no significant changes to UNIFI’s assets and liabilities measured at fair value, and there were no transfers into or out of the levels of the fair value hierarchy.

UNIFI believes that there have been no significant changes to its credit risk profile or the interest rates available to UNIFI for debt issuances with similar terms and average maturities, and UNIFI estimates that the fair values of its debt obligations approximate the carrying amounts. Other financial instruments include cash and cash equivalents, receivables, accounts payable, and accrued expenses. The financial statement carrying amounts of these items approximate the fair values due to their short-term nature.

~~Grantor Trust~~7

The UNIFI, Inc. Deferred Compensation Plan (the “DCP”), established in fiscal 2022, is an unfunded non-qualified deferred compensation plan in which certain key employees are eligible to participate. The fair values of the investment assets held by the grantor trust established in connection with the DCP were approximately $2,586 and $2,196 as of April 2, 2023 and July 3, 2022, respectively, and are classified as trading securities within Other non-current assets. The grantor trust assets have readily-available market values and are classified as Level 1 trading securities in the fair value hierarchy. Trading gains and losses associated with these investments are recorded to Other operating (income) expense, net. The associated DCP liability is recorded within Other long-term liabilities, and any increase or decrease in the liability is also recorded in Other operating (income) expense, net. During the nine months ended April 2, 2023, we recorded net gains on investments held by the trust of $78.

Derivative Instruments

UNIFI uses derivative financial instruments such as interest rate swaps to reduce its ongoing business exposures to fluctuations in interest rates. UNIFI does not enter into derivative contracts for speculative purposes. Since June 2022, UNIFI has had no outstanding derivative instruments.

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

~~10. Accumulated~~Grantor ~~Other Comprehensive Loss~~Trust

The ~~components~~UNIFI, Inc. Deferred Compensation Plan (the “DCP”), established in fiscal 2022, is an unfunded non-qualified deferred compensation plan in which certain key employees are eligible to participate. The fair values of ~~and~~the investment assets held by the ~~changes~~grantor trust established in ~~accumulated~~connection ~~other~~with ~~comprehensive~~the ~~loss~~DCP were approximately $2,463 ~~net~~and $2,496 as of ~~tax~~October 1, 2023 and July 2, 2023, respectively, and are classified as ~~applicable~~trading securities within Other non-current assets. The grantor trust assets have readily-available market values and are classified as Level 1 trading securities in the fair value hierarchy. Trading gains and losses associated with these investments are recorded to Other operating (income) expense, ~~consist~~net. ofThe associated DCP liability is recorded within Other long-term liabilities, and any increase or decrease in the ~~following:~~liability is also recorded in Other operating expense (income), net. During the three months ended October 1, 2023 and October 2, 2022, we recorded net losses on investments held by the trust of $33 and $49, respectively.

	ForeignCurrencyTranslationAdjustments			Accumulated OtherComprehensive Loss
Balance at July 3, 2022	$	(59,605	)	$	(59,605	)
Other comprehensive income		2,065			2,065
Balance at April 2, 2023	$	(57,540	)	$	(57,540	)

10. Earnings Per Share

A summary of the after-tax effects of the components of other comprehensive loss, net for the three-month and nine-month periods ended April 2, 2023 and March 27, 2022 is included in the accompanying condensed consolidated statements of comprehensive (loss) income.

11. Earnings Per Share

The components of the calculation of earnings per share (“EPS”) are as follows:

	For the Three Months Ended						~~For the Nine Months Ended~~
	April 2, 2023			March 27, 2022			April 2, 2023			March 27, 2022
	October 1, 2023			October 2, 2022
Net (loss) income	$	(5,184	)	$	2,066		$	(31,055	)	$	11,675
Net loss	$	(13,270	)	$	(7,834	)
Basic weighted average shares		18,~~052~~084			18,~~473~~001			~~18,029~~			~~18,500~~
Net potential common share equivalents		—			~~469~~—			—			~~474~~
Diluted weighted average shares		18,~~052~~084			18,~~942~~001			~~18,029~~			~~18,974~~
Excluded from the calculation of common share equivalents:
Anti-dilutive common share equivalents		—590			~~443~~618			—			~~330~~
Excluded from the calculation of diluted shares:
Unvested stock options that vest upon achievement of certain market conditions		333			333			~~333~~			~~333~~

The calculation of EPS is based on the weighted average number of Unifi, Inc.’s common shares outstanding for the applicable period. The calculation of diluted EPS presents the effect of all potential dilutive common shares that were outstanding during the respective period, unless the effect of doing so is anti-dilutive.

1211. Commitments and Contingencies

Collective Bargaining Agreements

While employees of UNIFI’s Brazilian operations are unionized, none of the labor force employed by UNIFI’s domestic or other foreign subsidiaries is currently covered by a collective bargaining agreement.

~~Environmental~~12. Related Party Transactions

OnRelated ~~September~~party ~~30,~~balances 2004, Unifi Kinston, LLC (“UK”), a subsidiary of Unifi, Inc., completed its acquisition of polyester filament manufacturing assets located in Kinston, North Carolina (“Kinston”) from Invista S.a.r.l. (“INVISTA”). The land for the Kinston site was leased pursuant to a 99-year ground lease (the “Ground Lease”) with E.I. DuPont de Nemours (“DuPont”). Since 1993, DuPont has been investigating and ~~cleaning~~transactions upare ~~the~~not ~~Kinston~~material ~~site under the supervision of the U.S. Environmental Protection Agency and the North Carolina Department of Environmental Quality (“DEQ”) pursuant~~ to the ~~Resource~~condensed ~~Conservation~~consolidated ~~and~~financial ~~Recovery~~statements ~~Act Corrective Action program. The program requires DuPont to identify all potential areas of environmental concern (“AOCs”), assess the extent of containment at the identified AOCs~~ and ~~remediate the AOCs to comply with applicable regulatory standards. Effective March 20~~, ~~2008~~accordingly, UKare ~~entered~~not ~~into~~presented aseparately lease termination agreement associated with conveyance of certain assets at the Kinston site to DuPont. This agreement terminated the Ground Lease and relieved UK of any future responsibility for environmental remediation, other than participation with DuPont, if so called upon, with regard to UK’s period of operation of the Kinston site, which was from 2004 to 2008. At this time, UNIFI has no basis to determine if or when it will have any responsibility or obligation with respect to the AOCs or the extent of any potential liability for the same. UK continues to own property (the “Kentec site”) acquired in the 2004 transaction with INVISTA that has contamination from DuPont’s prior operations and is monitored by DEQ. The Kentec site has been remediated by DuPont, and DuPont has received authority from DEQ to discontinue further remediation, other ~~than~~financial ~~natural~~statement ~~attenuation~~captions. Prior to transfer of responsibility to UK, DuPont and UK had a duty to monitor and report the environmental status of the Kentec site to DEQ. Effective April 10, 2019, UK assumed sole remediator responsibility of the Kentec site pursuant to its contractual obligations with INVISTA and received $180 of net monitoring and reporting costs due from DuPont. In connection with monitoring, UK expects to sample and report to DEQ annually. At this time, UNIFI does not expect any active site remediation will be required but expects that any costs associated with active site remediation, if ever required, would likely be immaterial.

10There were no related party receivables as of October 1, 2023 or July 2, 2023.

Related party payables for Salem Leasing Corporation consisted of the following:


	October 1, 2023		July 2, 2023
Accounts payable	$	516	$	457
Operating lease obligations		453		502
Finance lease obligations		3,356		3,677
Total related party payables	$	4,325	$	4,636

The following were the Company’s significant related party transactions:


		For the Three Months Ended
Affiliated Entity	Transaction Type	October 1, 2023		October 2, 2022
Salem Leasing Corporation	Payments for transportation equipment costs and finance lease debt service	$	1,209	$	1,199

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

13. ~~Related~~Business ~~Party~~Segment ~~Transactions~~Information

There were no related party receivables as of April 2, 2023 or July 3, 2022.

Related party payables for Salem Leasing Corporation consisted of the following:

	April 2, 2023		July 3, 2022
Accounts payable	$	405	$	432
Operating lease obligations		575		811
Finance lease obligations		3,995		4,933
Total related party payables	$	4,975	$	6,176

The following were the Company’s significant related party transactions:

		For the Three Months Ended				For the Nine Months Ended
Affiliated Entity	Transaction Type	April 2, 2023		March 27, 2022		April 2, 2023		March 27, 2022
Salem Leasing Corporation	Payments for transportation equipment costs and finance lease debt service	$	1,048	$	1,030	$	3,431	$	3,117

14. Business Segment Information

UNIFI defines operating segments as components of the organization for which discrete financial information is available and operating results are evaluated on a regular basis by UNIFI’s principal executive officer, who is the chief operating decision maker (the “CODM”), in order to assess performance and allocate resources. Characteristics of UNIFI which were relied upon in making the determination of reportable segments include the nature of the products sold, the internal organizational structure, the trade policies in the geographic regions in which UNIFI operates, and the information that is regularly reviewed by the CODM for the purpose of assessing performance and allocating resources.

~~In the fourth fiscal quarter of fiscal 2022,~~ UNIFI's ~~realigned~~three ~~its operating and~~ reportable segments ~~to correspond with changes to its operating model, management structure, and organizational responsibilities, reflecting the manner in which business performance is evaluated, resources~~ are ~~allocated,~~organized ~~and~~as financial statement users can best understand the results of operations. Accordingly, UNIFI is now reporting the Americas Segment, Brazil Segment, and Asia Segment. The Americas Segment represents the combination of the previously reported Polyester Segment, Nylon Segment, and All Other category. There are no changes to the composition of the historical Brazil Segment and Asia Segment. Comparative prior period disclosures have been updated to conform to the new presentation.follows:

•

UNIFI has three reportable segments.

The operations within the Americas Segment exhibit similar long-term economic characteristics and primarily sell into an economic trading zone covered by the USMCA and CAFTA-DR to similar customers utilizing similar methods of distribution. These operations derive revenues primarily from manufacturing synthetic and recycled textile products with sales primarily to yarn manufacturers, knitters, and weavers that produce yarn and/or fabric for the apparel, hosiery, automotive, home furnishings, industrial, medical, and other end-use markets principally in North and Central America. The Americas Segment consists of sales and manufacturing operations in the U.S., El Salvador, and Colombia.

•

The Brazil Segment primarily manufactures and sells polyester-based products to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial, and other end-use markets principally in Brazil. The Brazil Segment includes a manufacturing location and sales offices in Brazil.

•

The operations within the Asia Segment exhibit similar long-term economic characteristics and sell to similar customers utilizing similar methods of distribution primarily in Asia and Europe. The Asia Segment primarily sources synthetic and recycled textile products from third-party suppliers and sells to ~~other~~ yarn manufacturers, knitters, and weavers that produce fabric for the apparel, automotive, home furnishings, industrial, and other end-use markets principally in Asia. The Asia Segment includes sales offices in China, Turkey, and Hong Kong.

UNIFI evaluates the operating performance of its segments based upon Segment Profit, which represents segment gross profit (loss) plus segment depreciation expense. This measurement of segment profit or loss best aligns segment reporting with the current assessments and evaluations performed by, and information provided to, the CODM.

The accounting policies for the segments are consistent with UNIFI’s accounting policies. Intersegment sales are omitted from segment disclosures, as they are (i) insignificant to UNIFI’s segments and eliminated from consolidated reporting and (ii) excluded from segment evaluations performed by the CODM.

Selected financial information is presented below:

	For the Three Months Ended April 2, 2023
	For the Three Months Ended October 1, 2023
	Americas			Brazil		Asia		Total
Net sales	$	~~101~~81,~~946~~573		$	2729,~~380~~909	$	27,~~412~~362	$	~~156~~138,~~738~~844
Cost of sales		9888,~~788~~953			2427,~~998~~742		2322,~~299~~724		~~147~~139,~~085~~419
Gross profit		3,158			2,382		4,113		9,653
Gross (loss) profit		(7,380	)		2,167		4,638		(575	)
Segment depreciation expense		5,~~574~~497			~~549~~840		—		6,~~123~~337
Segment Profit	$	8,732		$	2,931	$	4,113	$	15,776
Segment (Loss) Profit	$	(1,883	)	$	3,007	$	4,638	$	5,762


	For the Three Months Ended October 2, 2022
	Americas			Brazil		Asia		Total
Net sales	$	107,644		$	38,879	$	32,996	$	179,519
Cost of sales		112,513			32,092		28,351		172,956
Gross (loss) profit		(4,869	)		6,787		4,645		6,563
Segment depreciation expense		5,480			470		—		5,950
Segment Profit	$	611		$	7,257	$	4,645	$	12,513

The reconciliations of segment gross (loss) profit to consolidated loss before income taxes are as follows:


	For the Three Months Ended
	October 1, 2023			October 2, 2022
Americas	$	(7,380	)	$	(4,869	)
Brazil		2,167			6,787
Asia		4,638			4,645
Segment gross (loss) profit		(575	)		6,563
Selling, general and administrative expenses		11,609			11,773
(Benefit) provision for bad debts		(209	)		174
Other operating expense (income), net		54			(689	)
Operating loss		(12,029	)		(4,695	)
Interest income		(581	)		(547	)
Interest expense		2,485			1,247
Equity in earnings of unconsolidated affiliates		(200	)		(295	)
Loss before income taxes	$	(13,733	)	$	(5,100	)

There have been no material changes in segment assets during fiscal 2024.

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

	For the Three Months Ended March 27, 2022
	Americas		Brazil		Asia		Total
Net sales	$	119,736	$	29,767	$	51,277	$	200,780
Cost of sales		113,952		23,784		43,900		181,636
Gross profit		5,784		5,983		7,377		19,144
Segment depreciation expense		5,226		382		—		5,608
Segment Profit	$	11,010	$	6,365	$	7,377	$	24,752

14. Investments in Unconsolidated Affiliates

	For the Nine Months Ended April 2, 2023
	Americas			Brazil		Asia		Total
Net sales	$	294,832		$	91,946	$	85,691	$	472,469
Cost of sales		309,627			81,447		73,179		464,253
Gross (loss) profit		(14,795	)		10,499		12,512		8,216
Segment depreciation expense		16,596			1,410		—		18,006
Segment Profit	$	1,801		$	11,909	$	12,512	$	26,222

	For the Nine Months Ended March 27, 2022
	Americas		Brazil		Asia		Total
Net sales	$	345,259	$	91,106	$	161,817	$	598,182
Cost of sales		329,436		67,657		138,958		536,051
Gross profit		15,823		23,449		22,859		62,131
Segment depreciation expense		15,446		1,042		—		16,488
Segment Profit	$	31,269	$	24,491	$	22,859	$	78,619

The reconciliations of segment gross profit to consolidated (loss) income before income taxes are as follows:

	For the Three Months Ended						For the Nine Months Ended
	April 2, 2023			March 27, 2022			April 2, 2023			March 27, 2022
Americas	$	3,158		$	5,784		$	(14,795	)	$	15,823
Brazil		2,382			5,983			10,499			23,449
Asia		4,113			7,377			12,512			22,859
Segment gross profit		9,653			19,144			8,216			62,131
Selling, general and administrative expenses		12,063			14,389			35,584			39,025
Benefit for bad debts		(56	)		(169	)		(38	)		(489	)
Other operating expense (income), net		324			(831	)		(139	)		(2	)
Operating (loss) income		(2,678	)		5,755			(27,191	)		23,597
Interest income		(554	)		(492	)		(1,615	)		(944	)
Interest expense		2,073			709			5,209			2,140
Equity in earnings of unconsolidated affiliates		(158	)		(41	)		(539	)		(385	)
Recovery of non-income taxes, net		—			815			—			815
(Loss) income before income taxes	$	(4,039	)	$	4,764		$	(30,246	)	$	21,971

There have been no material changes in segment assets during fiscal 2023.

15. Investments in Unconsolidated Affiliates

Included within Other non-current assets are UNIFI’s investments in unconsolidated affiliates: U.N.F. Industries, Ltd. (“UNF”) and UNF America LLC (“UNFA”) (collectively “UNFs”).

U.N.F. Industries, Ltd.

Raw material and production services for UNF are provided by Nilit Ltd. under separate supply and services agreements. UNF’s fiscal year end is December 31, and it is a registered Israeli private company located in Migdal Ha-Emek, Israel.

UNF America LLC

Raw material and production services for UNFA are provided by Nilit America Inc. under separate supply and services agreements. UNFA’s fiscal year end is December 31, and it is a limited liability company located in Ridgeway, Virginia. UNFA is treated as a partnership for its income tax reporting.

In conjunction with the formation of UNFA, UNIFI entered into a supply agreement with UNF and UNFA whereby UNIFI agreed to purchase all of its first quality nylon POY requirements for texturing (subject to certain exceptions) from either UNF or UNFA. The supply agreement has no stated minimum purchase quantities and pricing is typically negotiated every six months, based on market rates. As of ~~April~~October 21, 2023, UNIFI’s open purchase orders related to this supply agreement were $52,~~044~~265.

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

UNIFI’s raw material purchases under this supply agreement consisted of the following:

For the Three Months Ended

~~For the Nine Months Ended~~

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

October 1, 2023

October 2, 2022

UNFA

63,~~604~~126

87,~~267~~401

~~19,395~~

~~20,849~~

UNF

—

9337

~~239~~

Total

63,~~604~~126

87,~~360~~438

~~19,432~~

~~21,088~~

As of ~~April~~October 21, 2023 and July 32, ~~2022~~2023, UNIFI had combined accounts payable due to UNF and UNFA of $42,~~621~~238 and $53,~~565~~440, respectively.

UNIFI has determined that UNF and UNFA are variable interest entities and has also determined that UNIFI is the primary beneficiary of these entities, based on the terms of the supply agreement ~~discussed above~~. As a result, these entities should be consolidated with UNIFI’s financial results. As (i) UNIFI purchases substantially all of the output from the two entities and all intercompany sales would be eliminated in consolidation, (ii) the two entities’ balance sheets constitute 35% or less of UNIFI’s current assets and total assets, and (iii) such balances are not expected to comprise a larger portion in the future, UNIFI has not included the accounts of UNF and UNFA in its consolidated financial statements and instead is accounting for these entities as equity investments. As of ~~April~~October 21, 2023, UNIFI’s combined investments in UNF and UNFA were $23,~~504~~213. The financial results of UNF and UNFA are included in UNIFI’s consolidated financial statements with a one-month lag, using the equity method of accounting and with intercompany profits eliminated in accordance with UNIFI’s accounting policy. Other than the supply agreement discussed above, UNIFI does not provide any other commitments or guarantees related to either UNF or UNFA.

Condensed balance sheet and income statement information for UNIFI’s unconsolidated affiliates (including reciprocal balances) are presented in the tables below.

	April 2, 2023		July 3, 2022
	October 1, 2023		July 2, 2023
Current assets	$	9,~~150~~288	$	10,~~705~~608
Non-current assets		~~521~~480		~~605~~494
Current liabilities		65,~~542~~823		87,~~056~~304
Non-current liabilities		—		—
Shareholders’ equity and capital accounts		3,~~129~~945		3,~~254~~798
UNIFI’s portion of undistributed earnings		23,~~445~~154		2,~~013~~938

	For the Three Months Ended					~~For the Nine Months Ended~~
	April 2, 2023			March 27, 2022		April 2, 2023			March 27, 2022
	October 1, 2023			October 2, 2022
Net sales	$	54,~~041~~741		$	8,~~816~~811	$	~~21,076~~		$	~~22,301~~
Gross profit		~~282~~638			~~487~~489		~~1,215~~			~~1,059~~
(Loss) income from operations		(138	)		60		(87	)		(194	)
Income from operations		196			25
Net (loss) income		(154	)		54		(125	)		(199	)
Net income		165			15
Depreciation and amortization		2714			2928		83			93
Distributions received		—			~~750~~—		—			~~750~~

1615. Supplemental Cash Flow Information

Cash payments for interest and taxes consist of the following:

	For the Nine Months Ended
	For the Three Months Ended
	April 2, 2023		March 27, 2022
	October 1, 2023		October 2, 2022
Interest, net of capitalized interest of $403 and $322, respectively	$	4,143	$	1,980
Interest, net of capitalized interest of $62 and $87, respectively	$	2,443	$	767
Income tax payments, net		41,~~760~~633		112,~~626~~928

Cash payments for taxes shown above consist primarily of income and withholding tax payments made by UNIFI in both U.S. and foreign jurisdictions, net of refunds. The nine months ended March 27, 2022 includes an income tax payment of $3,749 related to the recovery of non-income taxes in Brazil.10

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

Cash payments for taxes shown above consist primarily of income and withholding tax payments made by UNIFI in both U.S. and foreign jurisdictions, net of refunds.

Non-Cash Investing and Financing Activities

As of ~~April~~October 21, 2023 and July 32, ~~2022~~2023, $1,~~332~~084 and $21,~~456~~137, respectively, were included in accounts payable for unpaid capital expenditures. As of ~~March~~October 272, 2022 and ~~June~~July 273, ~~2021~~2022, $1,~~981~~449 and $2,~~080~~456, respectively, were included in accounts payable for unpaid capital expenditures.

During the ~~nine~~three months ended ~~April~~October 21, 2023 and ~~March~~October 272, 2022, UNIFI recorded non-cash activity relating to finance leases of $31,~~179~~633 and $~~1,764~~729 respectively.

In connection with the commencement of the 2022 Credit Agreement in October 2022, $52,500 of borrowings outstanding on the revolving credit facility were transferred to the term loan, such that revolver borrowings were reduced by $52,500 and term loan borrowings were increased by $52,500 with no flow of cash.11

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1716. Other Financial Data

Select balance sheet information is presented in the following table.

	April 2, 2023			July 3, 2022
	October 1, 2023			July 2, 2023
Receivables, net:
Customer receivables	$	8473,~~599~~147		$	9979,~~963~~174
Allowance for uncollectible accounts		(1,~~356~~132	)		(1,~~498~~362	)
Reserves for quality claims		(~~834~~663	)		(~~860~~682	)
Net customer receivables		8271,~~409~~352			9777,~~605~~130
Banker's acceptance notes		46,~~579~~608			75,~~849~~870
Other receivables		~~980~~746			~~1,111~~725
Total receivables, net	$	8778,~~968~~706		$	~~106~~83,~~565~~725
Inventories:
Raw materials	$	5054,~~681~~538		$	6959,~~994~~983
Supplies		11,~~984~~705			11,~~953~~787
Work in process		87,~~860~~945			106,~~358~~633
Finished goods		7568,~~637~~672			8478,~~477~~032
Gross inventories		~~147~~142,~~162~~860			~~176~~156,~~782~~435
Net realizable value adjustment		(36,~~984~~768	)		(35,~~487~~625	)
Total inventories	$	~~143~~136,~~178~~092		$	~~173~~150,~~295~~810
Other current assets:
Vendor deposits	$	5,623		$	6,910
Prepaid expenses and other	$	2,592		$	2,584
Value-added taxes receivable		3,881			1,987
Vendor deposits		2,585			3,863
Prepaid expenses and other		2,827			3,004
Value-added taxes receivable		2,574			3,398
Recovery of non-income taxes, net		21,~~359~~467			61,~~770~~933
Contract assets		~~403~~201			~~285~~549
Total other current assets	$	159,~~093~~419		$	1812,~~956~~327
Property, plant and equipment, net:
Land	$	32,~~166~~496		$	32,~~160~~512
Land improvements		16,~~443~~445			16,443
Buildings and improvements		~~166~~167,~~675~~643			~~164~~167,~~252~~589
Assets under finance leases		1318,~~947~~030			1016,~~921~~397
Machinery and equipment		~~643~~659,~~347~~027			~~635~~656,~~699~~431
Computers, software and office equipment		2625,~~213~~255			2526,~~348~~654
Transportation equipment		10,~~643~~646			10,~~591~~710
Construction in progress		222,~~316~~266			2010,~~397~~003
Gross property, plant and equipment		~~902~~901,~~750~~808			~~886~~906,~~811~~739
Less: accumulated depreciation		(~~668~~683,~~540~~263	)		(~~666~~682,~~569~~768	)
Less: accumulated amortization – finance leases		(5,~~015~~911	)		(35,~~904~~450	)
Total property, plant and equipment, net	$	~~229~~212,~~195~~634		$	~~216~~218,~~338~~521
Other non-current assets:
Recovery of taxes	$	5,~~492~~808		$	15,~~463~~957
Grantor trust		2,586			2,196
Investments in unconsolidated affiliates		3,213			2,997
Investments in unconsolidated affiliates		2,504			2,072
Grantor trust		2,463			2,496
Intangible assets, net		~~1,479~~973			21,~~500~~210
Other		~~925~~2,176			~~557~~1,848
Total other non-current assets	$	1214,~~986~~633		$	814,~~788~~508
Other current liabilities:
Payroll and fringe benefits	$	8,~~415~~541		$	96,~~414~~981
Utilities		12,~~578~~065			21,~~287~~634
Deferred revenue		1,~~471~~346			1,~~694~~441
Incentive compensation		~~443~~1,183			~~3,916~~298
Property taxes and other		13,~~587~~308			2,~~495~~578
Total other current liabilities	$	1316,~~494~~443		$	1912,~~806~~932
Other long-term liabilities:
Nonqualified deferred compensation plan obligation	$	2,~~501~~469		$	12,~~982~~659
Uncertain tax positions		1,~~894~~871			1,~~575~~973
Other		~~516~~450			~~892~~468
Total other long-term liabilities	$	4,~~911~~790		$	45,~~449~~100

1412

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of certain significant factors that have affected UNIFI’s operations, along with material changes in financial condition, during the periods included in the accompanying condensed consolidated financial statements. A reference to a “note” in this section refers to the accompanying notes to condensed consolidated financial statements. A reference to the “current period” refers to the three-month period ended ~~April~~October 21, 2023, while a reference to the “prior period” refers to the three-month period ended ~~March~~October ~~27, 2022. A reference to the “current nine-month period” refers to the nine-month period ended April~~ 2, ~~2023, while a reference to the “prior nine-month period” refers to the nine-month period ended March 27,~~ 2022. Such references may be accompanied by certain phrases for added clarity. The current period and the prior period each consisted of 13 weeks. ~~The current nine-month period and the prior nine-month period each consisted of 39 weeks.~~

Our discussions in this Item 2 focus on our results during, or as of, the three months ~~and nine months~~ ended ~~April~~October 21, 2023 and ~~March~~October 272, 2022, and, to the extent applicable, any material changes from the information discussed in the ~~2022~~2023 Form 10-K or other important intervening developments or information. These discussions should be read in conjunction with the ~~2022~~2023 Form 10-K for more detailed and background information about our business, operations, and financial condition.

Discussion of foreign currency translation is primarily associated with changes in the Brazilian Real (“BRL”) and changes in the Chinese Renminbi (“RMB”) versus the U.S. Dollar (“USD”). Weighted average exchange rates were as follows:

For the Three Months Ended

~~For the Nine Months Ended~~

April 2, 2023

March 27, 2022

April 2, 2023

March 27, 2022

October 1, 2023

October 2, 2022

BRL to USD

54.1989

5.2025

~~5.23~~

~~5.32~~

RMB to USD

67.8525

6.3585

~~6.92~~

~~6.40~~

All amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.

Overview and Significant General Matters

UNIFI focuses on delivering products and solutions to direct customers and brand partners throughout the world, leveraging our internal manufacturing capabilities and an enhanced global supply chain that delivers a diverse range of synthetic and recycled fibers and polymers. Our strategic initiatives include (i) leveraging our competitive advantages to grow market share in each of the major geographies we serve, (ii) expanding our presence in non-apparel markets with additional REPREVE® products, (iii) advancing the development and commercialization of innovative and sustainable solutions, and (iv) increasing brand awareness for REPREVE®. Due to the recent volatility of the apparel market, we have increased our focus on sales opportunities beyond traditional apparel customers, and we continue to drive innovation throughout our portfolio to further diversify the business and enhance gross profit. We believe our strategic initiatives will increase revenue and profitability and generate improved cash flows from operations.

Current Economic Environment

The current economic environment and significant decrease in textile product demand ~~has~~ adversely impacted our consolidated sales and profitability in fiscal 2023 and the first quarter of fiscal 2024. In addition to the current unfavorable economic environment and the inventory destocking measures taken by brands and retailers, the following pressures have ~~continued~~been ~~from fiscal 2022 into fiscal 2023~~present: (i) the impact of inflation on consumer spending, (ii) rising interest rates for consumers and customers, including the impact on the carrying costs of customer inventories, (iii) the Russia-Ukraine conflict, (iv) the recent conflict in the Middle East and the potential impacts to petroleum pricing and geopolitics, and (ivv) supply chain volatility. UNIFI will continue to monitor these and other aspects of the current economic environment and work closely with stakeholders to ensure business continuity and liquidity.

We recognize the disruption to global markets and supply chains caused by (i) Russia’s invasion of Ukraine and (ii) the recent conflict in the Middle East. While we currently have a raw material supplier based in Israel for which the recent supply levels have been insignificant, we have not been directly impacted by either conflict. Indirectly, we recognize that additional or prolonged impacts to the petroleum or other global markets could cause further inflationary pressures to our raw material costs or unforeseen adverse impacts.

Input Costs and Global Production Volatility

In addition to the escalation of input costs in fiscal 2022, UNIFI experienced inefficiencies in the global supply chain in connection with (i) freight costs and logistics slowdowns in foreign markets; (ii) a tighter labor pool in the U.S.; and (iii) suppressed productivity from our business partners resulting from pandemic-related lockdowns in certain regions, particularly Asia. Despite lowered input and freight costs and a marginally more stable labor pool during fiscal 2023 and 2024, the global demand volatility and uncertainty that ~~began~~existed in ~~late~~ fiscal ~~2022~~2023 ~~has~~ continued ~~throughout~~into fiscal ~~2023,~~2024. asThe ~~the~~ threat of recession and global tensions continue to create uncertainty. ~~The~~Such existing challenges and future uncertainty, particularly for rising input costs, labor productivity, and global demand, could worsen and/or continue for prolonged periods, materially impacting our consolidated sales and gross profit. Also, the need for future selling price adjustments in connection with inflationary costs could impact our ability to retain current customer programs and compete successfully for new programs in certain regions.

Cash Deposits and Financial Institution Risk

During ~~the~~fiscal ~~current period~~2023, certain regional bank crises and failures generated additional uncertainty and volatility in the financial and credit markets. UNIFI currently holds the vast majority of its cash deposits with large foreign banks in our associated operating regions, and management maintains the ability to repatriate cash to the U.S. relatively quickly. Accordingly, UNIFI has not modified its mix of financial institutions holding cash deposits, but UNIFI will continue to monitor the environment and current events to ensure any increase in concentration or credit risk is appropriately and timely addressed. If any of ~~the financial institutions within~~ our ~~2022 Credit Agreement or construction financing arrangement (“~~lending counterparties”) are unable to perform on their commitments, our liquidity could be impacted. We actively monitor all lending counterparties, and none have indicated that they may be unable to perform on their commitments. In addition, we periodically review our lending counterparties, considering the stability of the institutions and other aspects of the relationships. Based on our monitoring activities, we currently believe our lending counterparties will be able to perform their commitments.

Key Performance Indicators and Non-GAAP Financial Measures

UNIFI continuously reviews performance indicators to measure its success. These performance indicators form the basis of management’s discussion and analysis included below:

•

sales volume and revenue for UNIFI and for each reportable segment;

•

gross (loss) profit and gross margin for UNIFI and for each reportable segment;

•

15net loss and diluted EPS;

•

net (loss) income and diluted EPS;

Segment (Loss) Profit, which equals segment gross (loss) profit plus segment depreciation expense;

•

unit conversion margin, which represents unit net sales price less unit raw material costs, for UNIFI and for each reportable segment;

•

working capital, which represents current assets less current liabilities;

•

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), which represents net (loss) ~~income~~ before net interest expense, income tax expense, and depreciation and amortization expense;

•

Adjusted EBITDA, which represents EBITDA adjusted to exclude, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI;

•

Adjusted Net (Loss~~) Income~~, which represents net (loss) ~~income~~ calculated under GAAP, adjusted to exclude certain amounts which management believes do not reflect the ongoing operations and performance of UNIFI and/or for which exclusion may be necessary to understand and compare the underlying results of UNIFI;

•

Adjusted EPS, which represents Adjusted Net (Loss) ~~Income~~ divided by UNIFI’s diluted weighted average common shares outstanding;

•

Adjusted Working Capital, which equals receivables plus inventories and other current assets, less accounts payable and other current liabilities; and

•

Net Debt, which represents debt principal less cash and cash equivalents.

EBITDA, Adjusted EBITDA, Adjusted Net (Loss~~) Income~~, Adjusted EPS, Adjusted Working Capital, and Net Debt (collectively, 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. When applicable, management’s discussion and analysis includes specific consideration for items that comprise the reconciliations of its 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 items (a) directly related to our asset base (primarily depreciation and amortization) and/or (b) 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 and is relevant to our fixed charge coverage ratio.

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 Adjusted Working Capital as an indicator of UNIFI’s production efficiency and ability to manage inventories and receivables.

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.

1614

Review of Results of Operations

Three Months Ended ~~April~~October 21, 2023 Compared to Three Months Ended ~~March~~October 272, 2022

Consolidated Overview

The below tables provide:

•

the components of net (loss) ~~income~~ and the percentage increase or decrease over the prior period amounts,

•

a reconciliation from net (loss) ~~income~~ to EBITDA and Adjusted EBITDA, and

afollowing ~~reconciliation~~the ~~from~~tables ~~net~~is ~~(loss)~~a ~~income~~discussion toand ~~Adjusted~~analysis ~~Net~~of ~~(Loss)~~the ~~Income~~significant ~~and~~components ~~Adjusted~~of ~~EPS~~net loss.

~~Following~~Net ~~the tables is a discussion and analysis of the significant components of net (~~loss~~) income.~~

Net (loss) income


	For the Three Months Ended
	October 1, 2023						October 2, 2022
				% of Net Sales						% of Net Sales			% Change
Net sales	$	138,844			100.0		$	179,519			100.0			(22.7	)
Cost of sales		139,419			100.4			172,956			96.3			(19.4	)
Gross (loss) profit		(575	)		(0.4	)		6,563			3.7			(108.8	)
SG&A		11,609			8.4			11,773			6.6			(1.4	)
(Benefit) provision for bad debts		(209	)		(0.2	)		174			0.1		nm
Other operating expense (income), net		54			—			(689	)		(0.4	)		(107.8	)
Operating loss		(12,029	)		(8.6	)		(4,695	)		(2.6	)		156.2
Interest expense, net		1,904			1.4			700			0.4			172.0
Equity in earnings of unconsolidated affiliates		(200	)		(0.1	)		(295	)		(0.2	)		(32.2	)
Loss before income taxes		(13,733	)		(9.9	)		(5,100	)		(2.8	)		169.3
(Benefit) provision for income taxes		(463	)		(0.3	)		2,734			1.6			(116.9	)
Net loss	$	(13,270	)		(9.6	)	$	(7,834	)		(4.4	)		69.4

	For the Three Months Ended
	April 2, 2023						March 27, 2022
				% ofNet Sales						% ofNet Sales			%Change
Net sales	$	156,738			100.0		$	200,780			100.0			(21.9	)
Cost of sales		147,085			93.8			181,636			90.5			(19.0	)
Gross profit		9,653			6.2			19,144			9.5			(49.6	)
SG&A		12,063			7.7			14,389			7.2			(16.2	)
Benefit for bad debts		(56	)		—			(169	)		(0.1	)		(66.9	)
Other operating expense (income), net		324			0.2			(831	)		(0.4	)	nm
Operating (loss) income		(2,678	)		(1.7	)		5,755			2.8		nm
Interest expense, net		1,519			1.0			217			0.1		nm
Equity in earnings of unconsolidated affiliates		(158	)		(0.1	)		(41	)		—		nm
Recovery of non-income taxes, net		—			—			815			0.4			(100.0	)
(Loss) income before income taxes		(4,039	)		(2.6	)		4,764			2.3		nm
Provision for income taxes		1,145			0.7			2,698			1.3			(57.6	)
Net (loss) income	$	(5,184	)		(3.3	)	$	2,066			1.0		nm

nm = not meaningful

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)

The reconciliations of the amounts reported under GAAP for Net (loss) ~~income~~ to EBITDA and Adjusted EBITDA were as follows:

	For the Three Months Ended
	April 2, 2023			March 27, 2022
	October 1, 2023			October 2, 2022
Net (loss) income	$	(5,184	)	$	2,066
Net loss	$	(13,270	)	$	(7,834	)
Interest expense, net		1,~~519~~904			~~217~~700
Provision for income taxes		1,145			2,698
(Benefit) provision for income taxes		(463	)		2,734
Depreciation and amortization expense (1)		6,~~871~~988			6,~~433~~697
EBITDA		(4,~~351~~841	)		112,~~414~~297
Contract modification costs (2)		623			—
Other adjustments (2)		—			—
Recovery of non-income taxes, net (3)		—			815
Adjusted EBITDA	$	(4,841	)	$	2,297
Adjusted EBITDA	$	4,974		$	12,229

(1)

Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net. Within the accompanying condensed consolidated statements of cash flows, amortization of debt issuance costs is reflected in depreciation and amortization expense.

(2)

InFor the ~~third~~periods ~~quarter of fiscal 2023~~presented, ~~UNIFI~~there ~~amended~~were ~~certain~~no ~~existing~~other ~~contracts~~adjustments ~~related~~necessary to ~~future~~reconcile ~~purchases~~Net ofloss ~~texturing machinery by delaying the scheduled receipt and installation of such equipment in the U.S. and El Salvador for 18 months. UNIFI paid the associated vendor $623~~ to ~~facilitate~~Adjusted ~~the 18-month delay~~EBITDA.

InAdjusted ~~fiscal~~Net ~~2021,~~Loss ~~UNIFI~~and ~~recognized~~Adjusted anEPS ~~estimated benefit for the recovery of non~~(Non-~~income~~GAAP ~~taxes~~Financial ~~in Brazil. During the quarter ended March 27, 2022, UNIFI reduced the estimated benefit based on additional clarity and review of the recovery process.~~Measures)

17For the current and the prior period, there were no adjustments necessary to reconcile Net loss to Adjusted Net Loss or Adjusted EPS.

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”), Provision for income taxes (“Tax Impact”), and Net (Loss) Income to Adjusted Net (Loss) Income and (ii) Diluted EPS to Adjusted EPS.

	For the Three Months Ended April 2, 2023												For the Three Months Ended March 27, 2022
	Pre-tax Loss			Tax Impact			Net Loss			Diluted EPS			Pre-tax Income		Tax Impact			Net Income		Diluted EPS
GAAP results	$	(4,039	)	$	(1,145	)	$	(5,184	)	$	(0.29	)	$	4,764	$	(2,698	)	$	2,066	$	0.11
Contract modification costs (1)		623			—			623			0.04			—		—			—		—
Recovery of non-income taxes, net (2)		—			—			—			—			815		(257	)		558		0.03
Adjusted results	$	(3,416	)	$	(1,145	)	$	(4,561	)	$	(0.25	)	$	5,579	$	(2,955	)	$	2,624	$	0.14
Weighted average common shares outstanding											18,052										18,942

In the third quarter of fiscal 2023, UNIFI amended certain existing contracts related to future purchases of texturing machinery by delaying the scheduled receipt and installation of such equipment in the U.S. and El Salvador for 18 months. UNIFI paid the associated vendor $623 to facilitate the 18-month delay. The associated tax impact was estimated to be $0 due to (i) a valuation allowance against net operating losses in the U.S. and (ii) UNIFI's effective tax rate in El Salvador.

In fiscal 2021, UNIFI recognized an estimated benefit for the recovery of non-income taxes in Brazil. During the quarter ended March 27, 2022, UNIFI reduced the estimated benefit based on additional clarity and review of the recovery process.

Net Sales

Consolidated net sales for the current period decreased by $4440,~~042~~675, or 2122.97%, and consolidated sales volumes decreased 225.32%, compared to the prior period. The decreases occurred primarily due to lower volumes in the Americas and Asia Segments as a result of lower global demand in connection with the apparel demand weakness and inventory destocking efforts of major brands and retailers.

Consolidated weighted average sales prices ~~increased~~decreased 017.45%, anprimarily ~~insignificant~~attributable ~~change~~to lower selling prices in response to lower input costs, along with (a) competitive pricing pressures in Brazil and (b) a greater mix of Chip and Flake product sales in the Americas Segment.

REPREVE® Fiber products for the current period comprised 3231%, or $4942,~~619~~461, of consolidated net sales, ~~down~~compared ~~from~~to 3627%, or $7149,~~930~~179, for the prior period. The lower volumes and net sales in the Asia Segment, which has the highest proportion of REPREVE® Fiber sales as a percentage of segment net sales, was the main driver for the lower REPREVE® Fiber sales.

~~Gross Profit~~15

Gross ~~profit~~(Loss) for the current period decreased by $9,491, or 49.6%, compared to the prior period. Gross profit decreased as a result of the decline in net sales, combined with weak fixed cost absorption for the Americas Segment, where utilization and productivity are materially impactful to gross profit. Although raw material costs for the Americas Segment have decreased meaningfully in fiscal 2023, the associated benefit was muted by low production levels and weak demand.Profit

~~For~~Gross (loss) profit for the ~~Americas~~current ~~Segment,~~period ~~gross~~worsened ~~profit~~by ~~decreased~~$7,138, ~~due~~or 108.8%, compared to ~~weaker~~the ~~global~~prior ~~demand~~period. inGross ~~connection~~(loss) ~~with~~profit ~~the~~decreased ~~inventory~~as ~~destocking~~a ~~efforts~~result of ~~major~~the ~~brands~~decline ~~and~~in ~~retailers~~net ~~and~~sales, combined with weak fixed cost absorption for the Americas Segment, where utilization and productivity are materially impactful to gross profit. Although raw material costs for the Americas Segment were stable in ~~connection~~fiscal ~~with~~2024, ~~lower~~low production levels and weak demand were significantly adverse.

•

For the Americas Segment, gross loss increased due to weaker global demand and weak fixed cost absorption in connection with lower production.

•

For the Brazil Segment, gross profit decreased primarily due to decreasing market prices in Brazil due to low-cost import competition.

•

For the Asia Segment, gross profit decreased primarily due to lower sales volumes in connection with weaker global demand ~~in connection with the inventory destocking efforts of major brands and retailers~~.

SG&A

SG&A ~~for~~did ~~the~~not ~~current~~change ~~period~~meaningfully ~~decreased~~from ~~compared to~~ the prior period, ~~primarily due~~ to ~~(i) lower incentive compensation for~~ the current period, ~~and~~nor ~~(ii)~~did ~~lower~~the ~~discretionary~~change ~~expenses,~~include ~~including~~any ~~marketing~~significant ~~and~~offsetting ~~advertising~~impacts.

(Benefit) Provision for Bad Debts

The current period and prior period bad debt changes reflect no material activity.

Other Operating Expense (Income), Net

The current period and prior period include foreign currency transaction ~~losses (~~gains) of $~~174~~33 and $~~(895)~~725, respectively~~. The~~, ~~current~~with ~~period~~no ~~also~~other ~~includes~~meaningful ~~$623 paid to a vendor to facilitate an 18-month delay for contracted equipment purchases~~activity.

Interest Expense, Net

Interest expense, net increased in connection with higher debt principal ~~following continued capital investments~~ and higher interest rates.

Equity in Earnings of Unconsolidated Affiliates

There was no material activity for the current period or the prior period.

Recovery of Non-income Taxes, Net

In fiscal 2021, UNIFI recognized an estimated benefit from the expected recovery of non-income taxes in Brazil. During the prior period, UNIFI reduced the estimate by $815 based on additional clarity and precedent surrounding the recovery process.

Income Taxes

~~Provision~~(Benefit) provision for income taxes and the effective tax rate were as follows:

	For the Three Months Ended
	April 2, 2023			March 27, 2022
	October 1, 2023			October 2, 2022
Provision for income taxes	$	1,145		$	2,698
(Benefit) provision for income taxes	$	(463	)	$	2,734
Effective tax rate		~~(28.~~3.4	)%		56(53.6	)%

The effective tax rate is subject to variation due to a number of factors, including: variability in pre-tax book income; the mix of income by jurisdiction; changes in deferred tax valuation allowances; and changes in statutes, regulations, and case law. Additionally, the impacts of discrete and other rate impacting items are more pronounced when income (loss) before income taxes is lower.

The ~~decrease~~increase in the effective tax rate from the prior period to the current period is primarily attributable to ~~lower~~an ~~income~~increase in valuation allowance for ~~foreign~~deferred ~~subsidiaries,~~tax inassets ~~combination~~generated ~~with~~in the ~~impact~~current ofperiod. ~~further~~The ~~losses~~increase in the ~~U.S.~~effective ~~and~~tax ~~the~~rate ~~associated~~is then offset by a decrease in valuation allowance ~~for~~on deferred tax ~~assets~~asset balances adjusted by the IRS audit of tax years 2014 through 2019, which was concluded during the current period.

Net (Loss~~) Income~~

The ~~decrease~~increase in net (loss) ~~income~~ was primarily attributable to ~~the~~lower ~~decrease in~~ gross profit ~~and the associated adverse impact of lower U~~.~~S. earnings on the effective tax rate, partially offset by lower SG&A in the current period.~~

Adjusted EBITDA (Non-GAAP Financial Measure)

Adjusted EBITDA decreased primarily in connection with lower gross profit~~, partially offset by lower SG&A in the current period~~.

~~Adjusted Net (Loss) Income and Adjusted EPS (Non-GAAP Financial Measures)~~16

Adjusted Net (Loss) Income and Adjusted EPS decreased from the prior period to the current period, commensurate with the decrease in net (loss) income.

Segment Overview

Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for the current period.

Americas Segment

The components of Segment (Loss) Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Americas Segment, were as follows:

	For the Three Months Ended
	April 2, 2023						March 27, 2022
	October 1, 2023						October 2, 2022
				% ofNet Sales						% ofNet Sales			%Change
Net sales	$	~~101~~81,~~946~~573			100.0		$	~~119~~107,~~736~~644			100.0			(1424.92	)
Cost of sales		9888,~~788~~953			96109.90			~~113~~112,~~952~~513			95104.25			(1320.39	)
Gross profit		3,158			3.1			5,784			4.8			(45.4	)
Gross loss		(7,380	)		(9.0	)		(4,869	)		(4.5	)		51.6
Depreciation expense		5,~~574~~497		56.57				5,~~226~~480			45.41			60.73
Segment Profit	$	8,732			8.6		$	11,010			9.2			(20.7	)
Segment (Loss) Profit	$	(1,883	)		(2.3	)	$	611			0.6		nm
Segment net sales as a percentage of consolidated amounts		6558.08	%					5960.60	%
Segment Profit as a percentage of consolidated amounts		55.3	%					44.5	%
Segment (Loss) Profit as a percentage of consolidated amounts		(32.7	)%					4.9	%

The change in net sales for the Americas Segment was as follows:

Net sales for the prior period	$	~~119~~107,~~736~~644
Decrease in sales volumes		(11,513	)
Net change in average selling price and sales mix		(22,984	)
Net change in average selling price and sales mix		(6,277	)
Decrease in sales volumes		(3,087	)
Net sales for the current period	$	~~101~~81,~~946~~573

19The change in net sales for the Americas Segment from the prior period to the current period was primarily attributable to (i) the net change in average selling price and sales mix that reflects both (a) lower input costs and (b) a larger proportion of lower-priced Flake and Chip sales in the current period and (ii) lower fiber sales volumes following weaker global textile demand.

The change in ~~net~~Segment ~~sales~~(Loss) Profit for the Americas Segment ~~from the prior period to the current period~~ was ~~primarily~~as attributable to lower sales volumes following weaker global textile demand. Net change in average selling price and sales mix reflects a larger proportion of lower-priced Flake and Chip sales in the current period.follows:

The change in Segment Profit for the Americas Segment was as follows:


Segment Profit for the prior period	$	611
Net decrease in underlying margins		(2,476	)
Decrease in sales volumes		(18	)
Segment Loss for the current period	$	(1,883	)

Segment Profit for the prior period	$	11,010
Net decrease in underlying margins		(1,220	)
Decrease in sales volumes		(1,058	)
Segment Profit for the current period	$	8,732

The decrease in Segment (Loss) Profit for the Americas Segment from the prior period to the current period was primarily attributable to lower production volumes of fiber products in connection with the lower fiber sales volumes described above. As fiber products carry a higher selling price and allocation of production costs versus Flake and Chip, lower fiber production drives weaker fixed cost absorption and adversely impacts gross profit and gross margin.

The decrease in Segment Profit for the Americas Segment from the prior period to the current period was primarily attributable to lower production volumes driving weaker fixed cost absorption in connection with lower sales volumes.

Brazil Segment

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Brazil Segment, were as follows:

	For the Three Months Ended
	April 2, 2023					March 27, 2022
	October 1, 2023					October 2, 2022
				% ofNet Sales					% ofNet Sales		%Change
Net sales	$	2729,~~380~~909			100.0	$	2938,~~767~~879			100.0		(823.01	)
Cost of sales		2427,~~998~~742			9192.37		2332,~~784~~092			7982.95		5(13.16	)
Gross profit		2,~~382~~167			8.7.3		56,~~983~~787			2017.15		(6068.21	)
Depreciation expense		~~549~~840			2.08		~~382~~470			1.32		4378.7
Segment Profit	$	23,~~931~~007			10.71	$	67,~~365~~257			2118.47		(5458.06	)
Segment net sales as a percentage of consolidated amounts		1721.5	%				1421.87	%
Segment Profit as a percentage of consolidated amounts		1852.62	%				2558.70	%

The change in net sales for the Brazil Segment was as follows:

Net sales for the prior period	$	2938,~~767~~879
Decrease in average selling price		(610,~~900~~311	)
Increase in sales volumes		4,439
Decrease in sales volumes		(1,546	)
Favorable foreign currency translation effects		742,887
Net sales for the current period	$	2729,~~380~~909

The decrease in net sales for the Brazil Segment from the prior period to the current period was primarily attributable to ~~pricing~~selling ~~pressure~~price pressures from ~~import~~low-priced ~~competition~~imports, partially offset by ~~higher~~favorable ~~sales~~foreign ~~volumes~~currency translation effects. The Brazil Segment has undertaken aggressive pricing (i) against low-priced competitive imports and (ii) in ~~connection~~the ~~with~~pursuit of greater market share ~~gains~~.

The change in Segment Profit for the Brazil Segment was as follows:

Segment Profit for the prior period	$	67,~~365~~257
Decrease in underlying unit margins		(4,~~440~~489	)
Increase in sales volumes		954
Decrease in sales volumes		(288	)
Favorable foreign currency translation effects		52527
Segment Profit for the current period	$	23,~~931~~007

The decrease in Segment Profit for the Brazil Segment from the prior period to the current period was primarily attributable to an overall decrease in gross margin mainly due to pressure on selling prices from low-priced import competition. We continue to prioritize innovation and differentiation to improve our portfolio and competitive position in Brazil.

Asia Segment

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Asia Segment, were as follows:

	For the Three Months Ended
	April 2, 2023					March 27, 2022
	October 1, 2023					October 2, 2022
				% ofNet Sales					% ofNet Sales		%Change
Net sales	$	27,~~412~~362			100.0	$	5132,~~277~~996			100.0		(4617.51	)
Cost of sales		2322,~~299~~724			8583.0		4328,~~900~~351			85.69		(4619.98	)
Gross profit		4,~~113~~638			1517.0		74,~~377~~645			14.41		(440.2	)
Depreciation expense		—			—		—			—		—
Segment Profit	$	4,~~113~~638			1517.0	$	74,~~377~~645			14.41		(440.2	)
Segment net sales as a percentage of consolidated amounts		1719.57	%				2518.54	%
Segment Profit as a percentage of consolidated amounts		2680.15	%				2937.81	%

The change in net sales for the Asia Segment was as follows:

Net sales for the prior period	$	5132,~~277~~996
Net decrease in sales volumes		(243,~~720~~143	)
Unfavorable foreign currency translation effects		(31,~~161~~661	)
Change in average selling price and sales mix		~~4,016~~(830	)
Net sales for the current period	$	27,~~412~~362

The decrease in net sales for the Asia Segment from the prior period to the current period was primarily attributable to ~~weaker~~(i) weak global demand inand ~~connection~~inventory ~~with~~destocking ~~the~~by ~~inventory~~brands ~~destocking~~and ~~efforts~~retailers, ofparticularly ~~major~~for ~~brands~~apparel, and ~~retailers~~(ii) ~~driving~~unfavorable ~~lower~~foreign ~~sales~~currency ~~volumes,~~translation ~~partially~~effects ~~offset~~due byto athe ~~strong~~weakening ~~sales~~of ~~mix~~the RMB versus the USD.

The change in Segment Profit for the Asia Segment was as follows:

Segment Profit for the prior period	$	74,~~377~~645
Decrease in sales volumes		(~~3,548~~440	)
Unfavorable foreign currency translation effects		(~~471~~254	)
Change in underlying margins and sales mix		~~755~~687
Segment Profit for the current period	$	4,~~113~~638

The ~~decrease~~nominal change in Segment Profit for the Asia Segment from the prior period to the current period ~~follows~~is attributable to the decline in net sales and sales volumes discussed above, asalong ~~the~~with ~~comparable~~unfavorable ~~gross~~foreign ~~margin~~currency ~~rate~~translation ~~for~~effects, ~~the~~offset ~~Asia~~by ~~Segment~~an improved gross margin rate associated with a strong sales mix of REPREVE products.

~~Nine Months Ended April 2, 2023 Compared to Nine Months Ended March 27, 2022~~18

Consolidated Overview

The below tables provide:

the components of net (loss) income and the percentage increase or decrease over the prior nine-month period amounts,

a reconciliation from net (loss) income to EBITDA and Adjusted EBITDA, and

a reconciliation from net (loss) income to Adjusted Net (Loss) Income and Adjusted EPS.

Following the tables is a discussion and analysis of the significant components of net (loss) income.

Net (loss) income

	For the Nine Months Ended
	April 2, 2023						March 27, 2022
				% ofNet Sales						% ofNet Sales			%Change
Net sales	$	472,469			100.0		$	598,182			100.0			(21.0	)
Cost of sales		464,253			98.3			536,051			89.6			(13.4	)
Gross profit		8,216			1.7			62,131			10.4			(86.8	)
SG&A		35,584			7.5			39,025			6.6			(8.8	)
Benefit for bad debts		(38	)		—			(489	)		(0.1	)		(92.2	)
Other operating income, net		(139	)		—			(2	)		—		nm
Operating (loss) income		(27,191	)		(5.8	)		23,597			3.9		nm
Interest expense, net		3,594			0.7			1,196			0.2		nm
Equity in earnings of unconsolidated affiliates		(539	)		(0.1	)		(385	)		(0.1	)		40.0
Recovery of non-income taxes, net		—			—			815			0.1			(100.0	)
(Loss) income before income taxes		(30,246	)		(6.4	)		21,971			3.7		nm
Provision for income taxes		809			0.2			10,296			1.7			(92.1	)
Net (loss) income	$	(31,055	)		(6.6	)	$	11,675			2.0		nm

nm = not meaningful

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)

The reconciliations of the amounts reported under GAAP for Net (loss) income to EBITDA and Adjusted EBITDA were as follows:

	For the Nine Months Ended
	April 2, 2023			March 27, 2022
Net (loss) income	$	(31,055	)	$	11,675
Interest expense, net		3,594			1,196
Provision for income taxes		809			10,296
Depreciation and amortization expense (1)		20,261			19,007
EBITDA		(6,391	)		42,174
Contract modification costs (2)		623			—
Recovery of non-income taxes, net (3)		—			815
Adjusted EBITDA	$	(5,768	)	$	42,989

In the third quarter of fiscal 2023, UNIFI amended certain existing contracts related to future texturing machinery purchases by delaying the scheduled receipt and installation of such equipment in the U.S. and El Salvador for 18 months. UNIFI paid the associated vendor $623 to facilitate the 18-month delay.

Adjusted Net (Loss) Income and Adjusted EPS (Non-GAAP Financial Measures)

	For the Nine Months Ended April 2, 2023												For the Nine Months Ended March 27, 2022
	Pre-tax Loss			Tax Impact			Net Loss			Diluted EPS			Pre-tax Income		Tax Impact			Net Income		Diluted EPS
GAAP results	$	(30,246	)	$	(809	)	$	(31,055	)	$	(1.72	)	$	21,971	$	(10,296	)	$	11,675	$	0.62
Contract modification costs (1)		623			—			623			0.03			—		—			—		—
Recovery of income taxes (3)		—			(3,799	)		(3,799	)		(0.21	)		—		—			—		—
Recovery of non-income taxes, net (2)		—			—			—			—			815		(257	)		558		0.02
Adjusted results	$	(29,623	)	$	(4,608	)	$	(34,231	)	$	(1.90	)	$	22,786	$	(10,553	)	$	12,233	$	0.64
Weighted average common shares outstanding											18,029										18,974

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 Sales

Consolidated net sales for the current nine-month period decreased by $125,713, or 21.0%, and consolidated sales volumes decreased 26.6%, compared to the prior nine-month period. The decreases occurred primarily due to lower volumes in the Americas and Asia Segments as a result of lower global demand in connection with the inventory destocking efforts of major brands and retailers in addition to pandemic-related lockdowns in Asia, partially offset by higher selling prices in response to higher raw material and input costs.

Consolidated weighted average sales prices increased 5.6%, primarily attributable to higher selling prices in response to higher input costs.

REPREVE® Fiber products for the current nine-month period comprised 30%, or $141,664, of consolidated net sales, down from 38%, or $225,360, for the prior nine-month period. The lower volumes and net sales in the Asia Segment, which has the highest proportion of REPREVE® Fiber sales as a percentage of segment net sales, was the main driver for the lower REPREVE® Fiber sales.

Gross Profit

Gross profit for the current nine-month period decreased by $53,915, or 86.8%, compared to the prior nine-month period. Gross profit decreased as a result of the decline in net sales combined with weak fixed cost absorption for the Americas Segment, where utilization and productivity are materially impactful to gross profit. Although raw material costs for the Americas Segment decreased meaningfully in the current nine-month period, the associated benefit was muted by low production levels, weak demand, and higher priced raw material inventory purchased in the fourth fiscal quarter of 2022.

For the Americas Segment, gross profit decreased due to weaker global demand, weak fixed cost absorption in connection with lower production, and overall higher raw material cost levels in beginning inventory, despite a decrease in raw material costs during fiscal 2023.

For the Brazil Segment, gross profit decreased primarily due to the combination of high priced raw material inventory purchased in the fourth fiscal quarter of 2022 and decreasing market prices in Brazil due to low-cost import competition.

For the Asia Segment, gross profit decreased primarily due to lower sales volumes in connection with weaker global demand and pandemic-related lockdowns in Asia.

SG&A

SG&A for the current nine-month period decreased compared to the prior nine-month period, primarily due to (i) lower incentive compensation for the current nine-month period and (ii) lower discretionary expenses, including marketing and advertising.

Benefit for Bad Debts

The current nine-month period and prior nine-month period bad debt changes reflect no material activity.

Other Operating Income, Net

The current nine-month period and prior nine-month period include foreign currency transaction gains of $629 and $365, respectively, in addition to $346 of severance costs in the prior nine-month period. The current nine-month period also includes $623 paid to a vendor to facilitate an 18-month delay for equipment purchases.

Interest Expense, Net

Interest expense, net increased in connection with higher debt principal following continued capital investments and higher interest rates during the current nine-month period. Interest expense, net for the current nine-month period also includes $273 of loss on debt extinguishment.

Equity in Earnings of Unconsolidated Affiliates

There was no material activity for the current nine-month period or the prior nine-month period.

Recovery of Non-income Taxes, Net

In fiscal 2021, UNIFI recognized an estimated benefit from the expected recovery of non-income taxes in Brazil. During the prior nine-month period, UNIFI reduced the estimate by $815 based on additional clarity and precedent surrounding the recovery process.

Income Taxes

Provision for income taxes and the effective tax rate were as follows:

	For the Nine Months Ended
	April 2, 2023			March 27, 2022
Provision for income taxes	$	809		$	10,296
Effective tax rate		(2.7	)%		46.9	%

The decrease in the effective tax rate from the prior nine-month period to the current nine-month period is primarily attributable to lower income for foreign subsidiaries, in combination with the impact of further losses in the U.S. and the associated valuation allowance for deferred tax assets in the current period. Additionally, a discrete tax benefit was recognized in the second quarter of fiscal 2023 related to the recovery of certain Brazilian income taxes paid in prior years.

Net (Loss) Income

The decrease in net (loss) income was primarily attributable to the decrease in gross profit and the associated adverse impact of lower U.S. earnings on the effective tax rate.

Adjusted EBITDA (Non-GAAP Financial Measure)

Adjusted EBITDA decreased primarily in connection with lower gross profit.

Adjusted Net (Loss) Income and Adjusted EPS (Non-GAAP Financial Measures)

Adjusted Net (Loss) Income and Adjusted EPS decreased from the prior nine-month period to the current nine-month period, commensurate with the decrease in net (loss) income.

Segment Overview

Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for the current nine-month period.

Americas Segment

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior nine-month period amounts for the Americas Segment, were as follows:

	For the Nine Months Ended
	April 2, 2023						March 27, 2022
				% ofNet Sales						% ofNet Sales		%Change
Net sales	$	294,832			100.0		$	345,259			100.0		(14.6	)
Cost of sales		309,627			105.0			329,436			95.4		(6.0	)
Gross (loss) profit		(14,795	)		(5.0	)		15,823			4.6		(193.5	)
Depreciation expense		16,596		5.6				15,446			4.5		7.4
Segment Profit	$	1,801			0.6		$	31,269			9.1		(94.2	)
Segment net sales as a percentage of consolidated amounts		62.4	%					57.7	%
Segment Profit as a percentage of consolidated amounts		6.9	%					39.8	%

The change in net sales for the Americas Segment was as follows:

Net sales for the prior nine-month period	$	345,259
Decrease in sales volumes		(67,171	)
Net change in average selling price and sales mix		16,744
Net sales for the current nine-month period	$	294,832

The change in net sales for the Americas Segment from the prior nine-month period to the current nine-month period was primarily attributable to lower sales volumes following weaker global textile demand, partially offset by higher average selling prices in response to higher input costs.

The change in Segment Profit for the Americas Segment was as follows:

Segment Profit for the prior nine-month period	$	31,269
Change in underlying margins and sales mix from excess capacity		(23,385	)
Decrease in sales volumes		(6,083	)
Segment Profit for the current nine-month period	$	1,801

The decrease in Segment Profit for the Americas Segment from the prior nine-month period to the current nine-month period was primarily attributable to lower production volumes driving weaker fixed cost absorption in connection with lower sales volumes.

Brazil Segment

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior nine-month period amounts for the Brazil Segment, were as follows:

	For the Nine Months Ended
	April 2, 2023					March 27, 2022
				% ofNet Sales					% ofNet Sales		%Change
Net sales	$	91,946			100.0	$	91,106			100.0		0.9
Cost of sales		81,447			88.6		67,657			74.3		20.4
Gross profit		10,499			11.4		23,449			25.7		(55.2	)
Depreciation expense		1,410			1.6		1,042			1.2		35.3
Segment Profit	$	11,909			13.0	$	24,491			26.9		(51.4	)
Segment net sales as a percentage of consolidated amounts		19.5	%				15.2	%
Segment Profit as a percentage of consolidated amounts		45.4	%				31.2	%

The change in net sales for the Brazil Segment was as follows:

Net sales for the prior nine-month period	$	91,106
Increase in sales volumes		12,367
Favorable foreign currency translation effects		1,646
Decrease in average selling price and change in sales mix		(13,173	)
Net sales for the current nine-month period	$	91,946

The increase in net sales for the Brazil Segment from the prior nine-month period to the current nine-month period was primarily attributable to higher sales volumes and favorable foreign currency translation effects, partially offset by the expected decrease in average selling price following the exceptional pricing levels experienced during the pandemic recovery in fiscal 2022. The Brazil Segment has undertaken aggressive pricing (i) against low-priced competitive imports and (ii) in the pursuit of greater market share.

The change in Segment Profit for the Brazil Segment was as follows:

Segment Profit for the prior nine-month period	$	24,491
Decrease in underlying margins		(16,400	)
Increase in sales volumes		3,330
Favorable foreign currency translation effects		488
Segment Profit for the current nine-month period	$	11,909

The decrease in Segment Profit for the Brazil Segment from the prior nine-month period to the current nine-month period was primarily attributable to an overall decrease in gross margin mainly due to the decrease in selling prices discussed above and the impact of higher raw material costs in beginning inventory.

Asia Segment

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior nine-month period amounts for the Asia Segment, were as follows:

	For the Nine Months Ended
	April 2, 2023					March 27, 2022
				% ofNet Sales					% ofNet Sales		%Change
Net sales	$	85,691			100.0	$	161,817			100.0		(47.0	)
Cost of sales		73,179			85.4		138,958			85.9		(47.3	)
Gross profit		12,512			14.6		22,859			14.1		(45.3	)
Depreciation expense		—			—		—			—		—
Segment Profit	$	12,512			14.6	$	22,859			14.1		(45.3	)
Segment net sales as a percentage of consolidated amounts		18.1	%				27.1	%
Segment Profit as a percentage of consolidated amounts		47.7	%				29.1	%

The change in net sales for the Asia Segment was as follows:

Net sales for the prior nine-month period	$	161,817
Net decrease in sales volumes		(76,783	)
Unfavorable foreign currency translation effects		(11,107	)
Change in average selling price and sales mix		11,764
Net sales for the current nine-month period	$	85,691

The decrease in net sales for the Asia Segment from the prior nine-month period to the current nine-month period was primarily attributable to weaker global demand and pandemic-related lockdowns driving lower sales volumes, partially offset by a strong sales mix.

The change in Segment Profit for the Asia Segment was as follows:

Segment Profit for the prior nine-month period	$	22,859
Decrease in sales volumes		(10,807	)
Unfavorable foreign currency translation effects		(1,648	)
Change in underlying margins and sales mix		2,108
Segment Profit for the current nine-month period	$	12,512

The decrease in Segment Profit for the Asia Segment from the prior nine-month period to the current nine-month period follows the decline in net sales and sales volumes discussed above, as the comparable gross margin rate for the Asia Segment improved due to a stronger sales mix.

Liquidity and Capital Resources

Note 5, “Long-Term Debt” to the condensed consolidated financial statements includes the detail of UNIFI’s debt obligations and terms and conditions thereof. Further discussion and analysis of liquidity and capital resources follow.

UNIFI’s primary capital requirements are for working capital, capital expenditures, debt service, and share repurchases. UNIFI’s primary sources of capital are cash generated from operations, borrowings available under the 2022 Credit Agreement, and asset financing arrangements. For the current ~~nine-month~~ period, cash provided by operations was $87,~~349~~119, and, at ~~April~~October 21, 2023, availability under the ABL Revolver was $6944,~~114~~164.

As of ~~April~~October 21, 2023, all of UNIFI’s $~~136~~141,~~010~~487 of debt obligations were guaranteed by certain of its domestic operating subsidiaries, while nearly all of UNIFI’s cash and cash equivalents were held by its foreign subsidiaries. Cash and cash equivalents held by foreign subsidiaries may not be presently available to fund UNIFI’s domestic capital requirements, including its domestic debt obligations. UNIFI employs a variety of strategies to ensure that its worldwide cash is available in the locations where it is needed.

The following table presents a summary of cash and cash equivalents, borrowings available under financing arrangements, liquidity, working capital, and total debt obligations as of ~~April~~October 21, 2023 for domestic operations compared to foreign operations:

	Domestic		Foreign		Total
Cash and cash equivalents	$	1728	$	4951,~~689~~487	$	4951,~~706~~515
Borrowings available under financing arrangements		6944,~~114~~164		—		6944,~~114~~164
Liquidity	$	6944,~~131~~192	$	4951,~~689~~487	$	~~118~~95,~~820~~679
Working capital	$	8877,~~215~~315	$	~~133~~131,~~018~~298	$	~~221~~208,~~233~~613
Total debt obligations	$	~~136~~141,~~010~~487	$	—	$	~~136~~141,~~010~~487

UNIFI’s primary cash requirements, in addition to normal course operating activities (e.g. working capital and payroll), primarily include (i) capital expenditures that generally have commitments of up to 12 months, (ii) contractual obligations that support normal course ongoing operations and production, (iii) operating leases and finance leases, (iv) debt service, and (v) share repurchases.

Liquidity Considerations

Following the ~~COVID-19~~establishment ~~pandemic~~of the 2022 Credit Agreement, UNIFI’s global ~~demand~~cash ~~recovery~~and ~~allowed~~liquidity ~~for~~positions ~~strong~~are ~~results~~sufficient ~~and~~to ~~cash~~sustain ~~generation~~its inoperations ~~fiscal~~and ~~2021~~meet its growth needs. However, further degradation in ~~fiscal~~the ~~2022~~macroeconomic environment could introduce additional liquidity risk and ~~through~~require ~~the~~UNIFI ~~current~~to ~~nine-month~~limit ~~period,~~cash ~~inflation~~outflows ~~and~~for ~~demand~~discretionary ~~uncertainty~~activities ~~have~~while ~~introduced~~further ~~new~~utilizing ~~pressures~~available toand ~~liquidity~~additional forms of credit.

~~Following~~We ~~the~~do ~~establishment~~not ofcurrently ~~the~~anticipate ~~2022~~that ~~Credit~~any ~~Agreement,~~adverse ~~UNIFI’s~~events ~~cash~~or ~~and~~circumstances will place critical pressure on our liquidity ~~positions~~position ~~are~~or ~~sufficient~~our ability to ~~sustain~~fund ~~its~~our operations and ~~meet~~expected ~~its~~business growth ~~needs~~. ~~However~~Should global demand, ~~further~~economic ~~degradation~~activity, inor input availability decline considerably for an even longer period of time, UNIFI maintains the ~~macroeconomic~~ability ~~environment~~to ~~could~~(i) ~~introduce~~seek additional ~~liquidity~~credit ~~risk~~or financing arrangements and/or ~~require~~(ii) ~~UNIFI~~re-implement cost reduction initiatives to ~~limit~~preserve cash ~~outflows~~and ~~for~~secure ~~discretionary~~the ~~activities~~longevity ~~while~~of ~~further~~the ~~utilizing~~business ~~available~~and operations. Management continues to (i) explore cost savings opportunities and ~~additional~~(ii) ~~forms~~prioritize repayment of ~~credit.~~debt in the current operating environment.

~~Although~~When ~~global~~business ~~demand~~levels ~~for the remainder of calendar 2023 is uncertain~~increase, we doexpect ~~not currently anticipate that any adverse events or circumstances will place critical pressure on our liquidity position or our ability~~ to ~~fund~~use our operations and expected business growth. Should global demand, economic activity, or input availability decline considerably for a prolonged period of time, UNIFI maintains the ability to (i) seek additional credit or financing arrangements and/or (ii) re-implement cost reduction initiatives to preserve cash ~~and~~in ~~secure~~support ~~the longevity~~ of ~~the~~working ~~business~~capital ~~and operations~~needs.

~~Additionally,~~The ~~UNIFI~~following ~~considers~~outlines ~~opportunities to deploy existing cash to preserve or enhance liquidity. In August 2022, we repatriated approximately $14,000 from our operations in Asia to~~ the ~~U.S.~~attributes ~~via~~relating ~~an existing intercompany note and, after remitting the appropriate withholding taxes, utilized the cash~~ to ~~reduce~~ our ~~outstanding~~credit ~~revolver~~facility ~~borrowings,~~as ~~thereby~~of ~~increasing~~October ~~the availability. Management regularly evaluates such repatriations and maintains the ability to take additional~~1, ~~similar actions from time to time, as circumstances warrant.~~2023:

•

Recognizing the continuing weak demand environment, in the third quarter of fiscal 2023, UNIFI negotiated a contract modification with an equipment vendor from which significant capital expenditures had occurred and were planned to continue. The contract modification was executed at a cost to UNIFI of $623 and allows UNIFI to delay the associated equipment purchases and installation activities for 18 months, such that approximately $25,000 of capital expenditures originally expected over the March 2023 to September 2024 period are now expected to occur over the September 2024 to March 2026 period. This action allows for improved short- and mid-term liquidity in light of the current subdued levels of sales and facility utilization and allows for a better matching of future capital expenditures with expected higher levels of future business activity.

As textile product demand recovers in the next several quarters, we expect to use cash in support of increasing working capital needs.

The following outlines the attributes relating to our credit facility as of April 2, 2023:

UNIFI was in compliance with all applicable financial covenants in the 2022 Credit Agreement;

•

excess availability under the ABL Revolver was $6921,~~114~~854;

•

the Trigger Level (as defined in the 2022 Credit Agreement) was $22,~~770~~310; and

•

$0 of standby letters of credit were outstanding.

In addition to making payments in accordance with the scheduled maturities of debt required under its existing debt obligations, UNIFI may, from time to time, elect to repay additional amounts borrowed under the ABL Facility. Funds to make such repayments may come from the operating cash flows of the business or other sources and will depend upon UNIFI’s strategy, prevailing market conditions, liquidity requirements, contractual restrictions, and other factors.

Liquidity Summary

UNIFI has met its historical liquidity requirements for working capital, capital expenditures, debt service requirements, and other operating needs from its cash flows from operations and available borrowings. UNIFI believes that its existing cash balances, cash provided by operating activities, and credit facility will enable UNIFI to meet its foreseeable liquidity requirements. Domestically, UNIFI’s cash balances, cash provided by operating activities, and borrowings available under the ABL Revolver continue to be sufficient to fund UNIFI’s domestic operating activities as well as cash commitments for its investing and financing activities. For its foreign operations, UNIFI expects its existing cash balances, cash provided by operating activities, and available ~~foreign~~ financing arrangements will provide the needed liquidity to fund the associated operating activities and investing activities, such as future capital expenditures. UNIFI’s ~~foreign~~ operations in Asia and Brazil are in a position to obtain local country financing arrangements due to the operating results of each subsidiary.

Net Debt (Non-GAAP Financial Measure)

The reconciliations for Net Debt are as follows:

	April 2, 2023		July 3, 2022
	October 1, 2023		July 2, 2023
Long-term debt	$	~~124~~128,~~162~~890	$	~~102~~128,~~309~~604
Current portion of long-term debt		1112,~~544~~323		1112,~~726~~006
Unamortized debt issuance costs		~~304~~274		~~255~~289
Debt principal		~~136~~141,~~010~~487		~~114~~140,~~290~~899
Less: cash and cash equivalents		4951,~~706~~515		5346,~~290~~960
Net Debt	$	8689,~~304~~972	$	6193,~~000~~939

The ~~increase~~decrease in Net Debt primarily reflects the ~~impact~~generation of ~~the~~operating ~~constrained~~cash ~~demand~~flows ~~environment~~during ~~and~~fiscal ~~the~~2024, ~~anticipated~~aided ~~capital~~by ~~expenditures~~reduced ~~deployed~~levels inof ~~fiscal~~capital ~~2023~~expenditures.

Working Capital and Adjusted Working Capital (Non-GAAP Financial Measures)

The following table presents the components of working capital and the reconciliation of working capital to Adjusted Working Capital:

	April 2, 2023			July 3, 2022
	October 1, 2023			July 2, 2023
Cash and cash equivalents	$	4951,~~706~~515		$	5346,~~290~~960
Receivables, net		8778,~~968~~706			~~106~~83,~~565~~725
Inventories		~~143~~136,~~178~~092			~~173~~150,~~295~~810
Income taxes receivable		1,~~777~~592			~~160~~238
Other current assets		159,~~093~~419			1812,~~956~~327
Accounts payable		(4737,~~702~~064	)		(7344,~~544~~455	)
Other current liabilities		(1316,~~494~~443	)		(1912,~~806~~932	)
Income taxes payable		(~~1,875~~996	)		(~~1,526~~789	)
Current operating lease liabilities		(1,~~874~~885	)		(21,~~190~~813	)
Current portion of long-term debt		(1112,~~544~~323	)		(1112,~~726~~006	)
Working capital	$	~~221~~208,~~233~~613		$	~~243~~222,~~474~~065
Less: Cash and cash equivalents		(4951,~~706~~515	)		(5346,~~290~~960	)
Less: Income taxes receivable		(1,~~777~~592	)		(~~160~~238	)
Less: Income taxes payable		~~1,875~~996			~~1,526~~789
Less: Current operating lease liabilities		1,~~874~~885			21,~~190~~813
Less: Current portion of long-term debt		1112,~~544~~323			1112,~~726~~006
Adjusted Working Capital	$	~~185~~170,~~043~~710		$	~~205~~189,~~466~~475

~~When~~Adjusted ~~comparing~~Working ~~from~~Capital ~~July~~decreased 3$18,765 ~~2022~~from toJuly ~~April~~ 2, 2023, ~~working~~to ~~capital~~October ~~and~~1, ~~Adjusted Working Capital decreased~~2023.

The decrease in receivables, net was primarily due to ~~(i)~~ a decrease in sales ~~following lower global demand~~ and ~~(ii)~~the atiming ~~decrease~~of incash ~~banker’s acceptance notes held by our Asia Segment~~receipts. The decrease in inventories was primarily attributable to alower ~~decline~~weighted inaverage ~~raw material purchases and~~ costs in the current ~~nine-month~~ period and lower units on hand. The decrease in other current assets was primarily due to lower vendor deposits, lower value-added taxes receivable, and the utilization of the fiscal 2021 recovery of non-income taxes in Brazil ~~and lower vendor deposits~~. The decrease in accounts payable followed the decrease in inventories and production activity in the current ~~nine-month~~ period. The ~~decrease~~increase in other current liabilities primarily reflects ~~lower business activities and~~ the routine timing differences for payroll and other operating expenses. The change in income taxes receivable reflects the conclusion of an IRS audit. The changes in current operating lease liabilities, current portion of long-term debt, ~~income taxes receivable,~~ and income taxes payable were insignificant.

Operating Cash Flows

The significant components of net cash provided (used) by operating activities are summarized below.

	For the Nine Months Ended
	For the Three Months Ended
	April 2, 2023			March 27, 2022
	October 1, 2023			October 2, 2022
Net (loss) income	$	(31,055	)	$	11,675
Net loss	$	(13,270	)	$	(7,834	)
Equity in earnings of unconsolidated affiliates		(~~539~~200	)		(~~385~~295	)
Depreciation and amortization expense		207,~~388~~026			196,~~176~~740
Recovery of income taxes		(3,799	)		—
Non-cash compensation expense		212			633
Non-cash compensation expense		2,791			3,081
Deferred income taxes		(679	)		(373	)
Deferred income taxes		(1,199	)		(3,019	)
Subtotal		(6,911	)		(1,129	)
Subtotal		(13,413	)		30,528
Receivables, net		4,111			13,800
Distribution received from unconsolidated affiliate		—			750
Inventories		12,608			6,475
Receivables, net		18,585			(13,537	)
Accounts payable and other current liabilities		(3,432	)		(28,615	)
Inventories		31,080			(20,170	)
Other changes		743			3,577
Accounts payable and other current liabilities		(31,644	)		1,084
Net cash provided (used) by operating activities	$	7,119		$	(5,892	)
Other changes		3,741			(718	)
Net cash provided (used) by operating activities	$	8,349		$	(2,063	)

The increase in operating cash flows was primarily due to ~~reducing~~reduced working capital associated with a decline in overall business activity in the current ~~nine-month~~ period, ~~which was~~ primarily offset by ~~significantly~~ weaker earnings.

Investing Cash Flows

Investing activities primarily includes $322,~~461~~937 for capital expenditures. UNIFI expects recent and future capital projects to provide benefits to future profitability. The additional assets from these capital projects consist primarily of machinery and equipment.

During the current nine-month period, UNIFI invested $32,461 in capital projects, primarily relating to (i) texturing machinery, (ii) further improvements in production capabilities and technology enhancements in the Americas, and (iii) routine annual maintenance capital expenditures. Maintenance capital expenditures are necessary to support UNIFI’s current operations, capacities, and capabilities and exclude expenses relating to repairs and costs that do not extend an asset’s useful life.

UNIFI expects recent and future capital projects to provide benefits to future profitability. The additional assets from these capital projects consist primarily of machinery and equipment.

Financing Cash Flows

Financing activities primarily include ~~(i)~~net ~~scheduled payments against outstanding indebtedness and (ii)~~ proceeds from ~~construction financing during~~ the ~~current~~ABL ~~nine-month period~~Revolver.

Share Repurchase Program

As described in Note 7, “Shareholders’ Equity,” no share repurchases have been completed in fiscal ~~2023~~2024.

Contractual Obligations

UNIFI incurs various financial obligations and commitments in the ordinary course of business. Financial obligations are considered to represent known future cash payments that UNIFI is required to make under existing contractual arrangements, such as debt and lease agreements.

~~After~~There ~~considering the changes generated by the 2022 Credit Agreement and the above discussion of delaying certain equipment purchases by 18 months, there~~ have been no ~~further~~ material changes in the scheduled maturities of UNIFI’s contractual obligations as disclosed under the heading “Contractual Obligations” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the ~~2022~~2023 Form 10-K.

Off-Balance Sheet Arrangements

UNIFI is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on UNIFI’s financial condition, results of operations, liquidity, or capital expenditures.

Critical Accounting Policies

UNIFI’s critical accounting policies are discussed in the ~~2022~~2023 Form 10-K. There have been no changes to UNIFI’s critical accounting policies in fiscal ~~2023~~2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

UNIFI is exposed to market risks associated with changes in interest rates, fluctuations in foreign currency exchange rates, and raw material and commodity costs, which may adversely affect its financial position, results of operations, or cash flows. UNIFI does not enter into derivative financial instruments for trading purposes, nor is it a party to any leveraged financial instruments.

Interest Rate Risk

UNIFI is exposed to interest rate risk through its borrowing activities. As of ~~April~~October 21, 2023, UNIFI had borrowings under its ABL Facility that totaled $~~122~~129,~~900~~800. UNIFI’s sensitivity analysis indicates that a 50-basis point interest rate increase as of ~~April~~October 21, 2023 would result in an increase in annual interest expense of approximately $~~640~~700.

Foreign Currency Exchange Rate Risk

A complete discussion of foreign currency exchange rate risk is included in the ~~2022~~2023 Form 10-K and is supplemented by the following disclosures.

As of ~~April~~October 21, 2023, UNIFI had no outstanding foreign currency forward contracts. As of October 1, 2023, foreign currency exchange rate risk concepts included the following:

As of April 2, 2023, foreign currency exchange rate risk concepts included the following:


	Approximate Amount or Percentage
Percentage of total consolidated assets held by UNIFI's subsidiaries outside the U.S. whose functional currency is not the USD		31.0	%

Cash and cash equivalents held outside the U.S.:
Denominated in USD	$	18,332
Denominated in RMB		16,740
Denominated in BRL		15,812
Denominated in other foreign currencies		156
Total cash and cash equivalents held outside the U.S.	$	51,040
Percentage of total cash and cash equivalents held outside the U.S.		99.1	%

Cash and cash equivalents held inside the U.S. in USD by foreign subsidiaries	$	447

	ApproximateAmount orPercentage
Percentage of total consolidated assets held by UNIFI's subsidiaries outside the U.S. whose functional currency is not the USD		30.6	%
Cash and cash equivalents held outside the U.S.:
Denominated in USD	$	13,193
Denominated in RMB		28,320
Denominated in BRL		7,104
Denominated in other foreign currencies		363
Total cash and cash equivalents held outside the U.S.	$	48,980
Percentage of total cash and cash equivalents held outside the U.S.		98.5	%
Cash and cash equivalents held inside the U.S. in USD by foreign subsidiaries	$	709

Raw Material and Commodity Cost Risks

A complete discussion of raw material and commodity cost risks is included in the ~~2022~~2023 Form 10-K ~~and is supplemented by the following disclosures~~.

As fiscal 2022 concluded, UNIFI experienced cost increases for raw materials related to inflationary pressures and competing alternatives to U.S. polyester production. Following the recent global demand deterioration, raw material costs have declined in fiscal 2023. We have been able to implement responsive selling price adjustments for the majority of our portfolio throughout fiscal 2022 and 2023. While our underlying gross margin is predominantly pressured by lower textile demand, we expect the impact of recent selling price adjustments to aid margin improvement throughout the remainder of fiscal 2023. Nonetheless, input costs remain subject to volatility, and, should input costs increase unexpectedly or should textile demand worsen, UNIFI’s results of operations and cash flows are likely to be adversely impacted.

Cash Deposits and Financial Institution Risk

During the current period, certain regional bank crises and failures generated additional uncertainty and volatility in the financial and credit markets. UNIFI currently holds the vast majority of its cash deposits with large foreign banks in our associated operating regions, and management maintains the ability to repatriate cash to the U.S. relatively quickly. Accordingly, UNIFI has not modified its mix of financial institutions holding cash deposits, but UNIFI will continue to monitor the environment and current events to ensure any increase in concentration or credit risk is appropriately and timely addressed. If any of the financial institutions within our 2022 Credit Agreement or construction financing arrangement (“lending counterparties”) are unable to perform on their commitments, our liquidity could be impacted. We actively monitor all lending counterparties, and none have indicated that they may be unable to perform on their commitments. In addition, we periodically review our lending counterparties, considering the stability of the institutions and other aspects of the relationships. Based on our monitoring activities, we currently believe our lending counterparties will be able to perform their commitments.

Other Risks

UNIFI is also exposed to ~~political~~geopolitical risk, including changing laws and regulations governing international trade, such as quotas, tariffs, and tax laws. The degree of impact and the frequency of these events cannot be predicted.

Item 4. Controls and Procedures

As of ~~April~~October 21, 2023, an evaluation of the effectiveness of UNIFI’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was performed under the supervision and with the participation of UNIFI’s management, including the principal executive officer and interim principal financial officer. Based on that evaluation, UNIFI’s principal executive officer and interim principal financial officer concluded that UNIFI’s disclosure controls and procedures are effective to ensure that information required to be disclosed by UNIFI in its reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that information required to be disclosed by UNIFI in the reports UNIFI files or submits under the Exchange Act is accumulated and communicated to UNIFI’s management, including its principal executive officer and interim principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in UNIFI’s internal control over financial reporting during the three months ended ~~April~~October 21, 2023 that have materially affected, or are reasonably likely to materially affect, UNIFI’s internal control over financial reporting.

3022

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time a party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business. With respect to all such lawsuits, claims, and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our results of operations, financial position, or cash flows. We maintain liability insurance for certain risks that is subject to certain self-insurance limits.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 6. Exhibits

Exhibit No.		Description
3.1		Restated Certificate of Incorporation of Unifi, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed October 31, 2016 (File No. 001-10542)).
3.2		Amended and Restated By-laws of Unifi, Inc., as of October 26, 2016 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed October 31, 2016 (File No. 001-10542)).
3.3		Declaration of Amendment to the Amended and Restated By-laws of Unifi, Inc. effective April 30, 2019 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed May 1, 2019 (File No. 001-10542)).
10.1*+		Unifi, Inc. Director Compensation Policy, effective September 1, 2023.
31.1+		Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+		Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32++		Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

+ Filed herewith.

++ Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	UNIFI, INC.
	(Registrant)
Date: May 10, 2023	By:	/s/ CRAIG A. CREATURO
Date: November 8, 2023	By:	/s/ ANDREW J. EAKER
		Craig A. Creaturo
		Andrew J. Eaker
		Executive Vice President & Chief Financial Officer
		Interim Chief Financial OfficerTreasurer
		(Principal Financial Officer and Principal Accounting Officer)
		(Interim Principal Financial Officer and Interim Principal Accounting Officer)

3224

Filing Compare · UNIFI INC