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 ~~October~~December 131, 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 ~~November~~February 31, ~~2023~~2024, there were 18,~~116~~158,~~605~~306 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 2, 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 SIX MONTHS ENDED ~~OCTOBER~~DECEMBER 131, 2023

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of October 1, 2023 and July 2, 2023	1
	Condensed Consolidated Balance Sheets as of December 31, 2023 and July 2, 2023	1
	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 Operations and Comprehensive Loss for the Three Months and Six Months Ended December 31, 2023 and January 1, 2023	2
	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 Six Months Ended December 31, 2023 and January 1, 2023	3
	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 Six Months Ended December 31, 2023 and January 1, 2023	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2126
Item 4.	Controls and Procedures	2227
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	2328
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2328
Item 6.	Exhibits	2328
	Signatures	2429

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)

	October 1, 2023			July 2, 2023
	December 31, 2023			July 2, 2023
ASSETS
Cash and cash equivalents	$	5135,~~515~~979		$	46,960
Receivables, net		7869,~~706~~583			83,725
Inventories		~~136~~135,~~092~~676			150,810
Income taxes receivable		12,~~592~~421			238
Other current assets		912,~~419~~290			12,327
Total current assets		~~277~~255,~~324~~949			294,060
Property, plant and equipment, net		~~212~~209,~~634~~435			218,521
Operating lease assets		7,~~576~~094			7,791
Deferred income taxes		4,~~094~~812			3,939
Other non-current assets		14,~~633~~839			14,508
Total assets	$	~~516~~492,~~261~~129		$	538,819
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	3734,~~064~~709		$	44,455
Income taxes payable		~~996~~2,263			789
Current operating lease liabilities		1,~~885~~733			1,813
Current portion of long-term debt		12,~~323~~357			12,006
Other current liabilities		1617,~~443~~409			12,932
Total current liabilities		68,~~711~~471			71,995
Long-term debt		~~128~~120,~~890~~144			128,604
Non-current operating lease liabilities		5,~~842~~515			6,146
Deferred income taxes		2,~~999~~526			3,364
Other long-term liabilities		4,~~790~~133			5,100
Total liabilities		~~211~~200,~~232~~789			215,209
Commitments and contingencies
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
Common stock, $0.10 par value (500,000,000 shares authorized; 18,150,602 and 18,081,538 shares issued and outstanding as of December 31, 2023 and July 2, 2023, respectively)		1,815			1,808
Capital in excess of par value		6970,~~130~~254			68,901
Retained earnings		~~293~~273,~~522~~676			306,792
Accumulated other comprehensive loss		(5954,~~431~~405	)		(53,891	)
Total shareholders’ equity		~~305~~291,~~029~~340			323,610
Total liabilities and shareholders’ equity	$	~~516~~492,~~261~~129		$	538,819

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 Six Months Ended
	October 1, 2023			October 2, 2022
	December 31, 2023			January 1, 2023			December 31, 2023			January 1, 2023
Net sales	$	~~138~~136,~~844~~917		$	~~179~~136,~~519~~212		$	275,761		$	315,731
Cost of sales		~~139~~135,~~419~~281			~~172~~144,~~956~~212			274,700			317,168
Gross (loss) profit		(575	)		6,563
Gross profit (loss)		1,636			(8,000	)		1,061			(1,437	)
Selling, general and administrative expenses		1112,~~609~~408			11,~~773~~748			24,017			23,521
(Benefit) provision for bad debts		(209	)		174
Provision (benefit) for bad debts		1,289			(156	)		1,080			18
Other operating expense (income), net		54			(689	)
Restructuring costs		5,101			—			5,101			—
Operating loss		(12,029	)		(4,695	)
Other operating expense (income), net		481			226			535			(463	)
Interest income		(581	)		(547	)
Operating loss		(17,643	)		(19,818	)		(29,672	)		(24,513	)
Interest expense		2,485			1,247
Interest income		(697	)		(514	)		(1,278	)		(1,061	)
Equity in earnings of unconsolidated affiliates		(200	)		(295	)
Interest expense		2,613			1,889			5,098			3,136
Loss before income taxes		(13,733	)		(5,100	)
Equity in earnings of unconsolidated affiliates		(93	)		(86	)		(293	)		(381	)
(Benefit) provision for income taxes		(463	)		2,734
Loss before income taxes		(19,466	)		(21,107	)		(33,199	)		(26,207	)
Net loss	$	(13,270	)	$	(7,834	)
Provision (benefit) for income taxes		380			(3,070	)		(83	)		(336	)
Net loss per common share:
Net loss	$	(19,846	)	$	(18,037	)	$	(33,116	)	$	(25,871	)
Basic	$	(0.73	)	$	(0.44	)
Net loss per common share:
Diluted	$	(0.73	)	$	(0.44	)
Basic	$	(1.10	)	$	(1.00	)	$	(1.83	)	$	(1.44	)
Diluted	$	(1.10	)	$	(1.00	)	$	(1.83	)	$	(1.44	)

Comprehensive loss:

	For the Three Months Ended						For the Six Months Ended
	October 1, 2023			October 2, 2022
	December 31, 2023			January 1, 2023			December 31, 2023			January 1, 2023
Net loss	$	(1319,~~270~~846	)	$	(718,~~834~~037	)	$	(33,116	)	$	(25,871	)
Other comprehensive loss:
Other comprehensive income (loss):
Foreign currency translation adjustments		(5,~~540~~026	)		(53,~~908~~447	)		(514	)		(2,461	)
Other comprehensive loss, net		(5,540	)		(5,908	)
Other comprehensive income (loss), net		5,026			3,447			(514	)		(2,461	)
Comprehensive loss	$	(1814,~~810~~820	)	$	(1314,~~742~~590	)	$	(33,630	)	$	(28,332	)

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 July 2, 2023		18,081		$	1,808		$	68,901		$	306,792		$	(53,891	)	$	323,610
Options exercised		3			—			21			—			—			21
Conversion of equity units		1			—			—			—			—			—
Stock-based compensation		—			—			209			—			—			209
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		—			—			(1	)		—			—			(1	)
Other comprehensive loss, net of tax		—			—			—			—			(5,540	)		(5,540	)
Net loss		—			—			—			(13,270	)		—			(13,270	)
Balance at October 1, 2023		18,085		$	1,808		$	69,130		$	293,522		$	(59,431	)	$	305,029
Options exercised		2			—			18			—			—			18
Conversion of equity units		65			7			(7	)		—			—			—
Stock-based compensation		7			1			1,172			—			—			1,173
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(9	)		(1	)		(59	)		—			—			(60	)
Other comprehensive income, net of tax		—			—			—			—			5,026			5,026
Net loss		—			—			—			(19,846	)		—			(19,846	)
Balance at December 31, 2023		18,150		$	1,815		$	70,254		$	273,676		$	(54,405	)	$	291,340

	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
Balance at July 2, 2023		18,081		$	1,808		$	68,901		$	306,792		$	(53,891	)	$	323,610
Options exercised		35			—			1739			—			—			1739
Conversion of equity units		3166			37			(37	)		—			—			—
Stock-based compensation		—7			—1			~~591~~1,381			—			—			~~591~~1,382
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(19	)		—(1	)		(1660	)		—			—			(1661	)
Other comprehensive loss, net of tax		—			—			—			—			(~~5,908~~514	)		(~~5,908~~514	)
Net loss		—			—			—			(733,~~834~~116	)		—			(733,~~834~~116	)
Balance at October 2, 2022		18,012		$	1,801		$	66,709		$	345,302		$	(65,513	)	$	348,299
Balance at December 31, 2023		18,150		$	1,815		$	70,254		$	273,676		$	(54,405	)	$	291,340


	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at October 2, 2022		18,012		$	1,801		$	66,709		$	345,302		$	(65,513	)	$	348,299
Options exercised		—			—			2			—			—			2
Conversion of equity units		31			4			(4	)		—			—			—
Stock-based compensation		12			1			1,217			—			—			1,218
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(6	)		(1	)		(49	)		—			—			(50	)
Other comprehensive income, net of tax		—			—			—			—			3,447			3,447
Net loss		—			—			—			(18,037	)		—			(18,037	)
Balance at January 1, 2023		18,049		$	1,805		$	67,875		$	327,265		$	(62,066	)	$	334,879


	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		3			—			19			—			—			19
Conversion of equity units		62			7			(7	)		—			—			—
Stock-based compensation		12			1			1,808			—			—			1,809
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(7	)		(1	)		(65	)		—			—			(66	)
Other comprehensive loss, net of tax		—			—			—			—			(2,461	)		(2,461	)
Net loss		—			—			—			(25,871	)		—			(25,871	)
Balance at January 1, 2023		18,049		$	1,805		$	67,875		$	327,265		$	(62,066	)	$	334,879

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	For the Three Months Ended
	For the Six Months Ended
	October 1, 2023			October 2, 2022
	December 31, 2023			January 1, 2023
Cash and cash equivalents at beginning of period	$	46,960		$	53,290
Operating activities:
Net loss		(1333,~~270~~116	)		(725,~~834~~871	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:
Equity in earnings of unconsolidated affiliates		(~~200~~293	)		(~~295~~381	)
Depreciation and amortization expense		713,~~026~~988			613,~~740~~478
Non-cash compensation expense		~~212~~1,387			~~633~~1,976
Deferred income taxes		(679	)		(373	)
Recovery of income taxes		—			(3,799	)
Other, net		(62	)		324
Deferred income taxes		(1,714	)		(304	)
Other, net		(120	)		289
Changes in assets and liabilities:
Receivables, net		414,~~111~~367			1340,~~800~~552
Inventories		1215,~~608~~081			625,~~475~~422
Other current assets		~~2,126~~(402	)		45,~~026~~525
Income taxes		(~~1,148~~727	)		(~~789~~2,655	)
Accounts payable and other current liabilities		(34,~~432~~763	)		(2847,~~615~~599	)
Other, net		(~~173~~1,171	)		16639
Net cash provided (used) by operating activities		7,119			(5,892	)
Net cash provided by operating activities		2,517			7,272
Investing activities:
Capital expenditures		(25,~~937~~982	)		(1123,~~198~~950	)
Other, net		~~457~~488			(~~222~~576	)
Net cash used by investing activities		(25,~~480~~494	)		(1124,~~420~~526	)
Financing activities:
Proceeds from ABL Revolver		3180,~~100~~600			6596,~~500~~800
Payments on ABL Revolver		(2782,~~500~~700	)		(5282,~~300~~200	)
Payments on ABL Term Loan		(24,~~300~~600	)		(2,500	)
Proceeds from construction financing		—			24,~~449~~900
Payments on finance lease obligations		(~~713~~1,440	)		(~~436~~899	)
Other, net		17			—
Payments of debt financing fees		—			(658	)
Net cash provided by financing activities		604			12,713
Other, net		(27	)		(47	)
Effect of exchange rate changes on cash and cash equivalents		(688	)		(1,491	)
Net cash (used) provided by financing activities		(8,167	)		15,396
Net increase (decrease) in cash and cash equivalents		4,555			(6,090	)
Effect of exchange rate changes on cash and cash equivalents		163			(651	)
Cash and cash equivalents at end of period	$	51,515		$	47,200
Net decrease in cash and cash equivalents		(10,981	)		(2,509	)
Cash and cash equivalents at end of period	$	35,979		$	50,781

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.”). During the quarter ended December 31, 2023, UNIFI terminated the joint venture with operations in Israel.

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 2, 2023 (the “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 ~~October~~December 131, 2023. Unifi, Inc.’s remaining material operating subsidiaries’ fiscal quarter ended on ~~September~~December 3031, 2023. ~~There~~The ~~were~~three-month noperiods ~~significant~~ended ~~transactions~~December ~~or events that occurred between Unifi~~31, ~~Inc.’s~~2023 ~~fiscal quarter end~~ and ~~such~~January ~~wholly~~1, ~~owned~~2023 ~~subsidiaries’~~both ~~fiscal~~consisted ~~quarter~~of ~~end~~13 weeks. The ~~three~~six-month periods ended ~~October~~December 131, 2023 and ~~October~~January 21, ~~2022~~2023 both consisted of 1326 weeks.

3. Recent Accounting Pronouncements

~~Based~~Issued onand ~~UNIFI’s~~Pending ~~review~~Adoption of Accounting Standards Updates issued since the filing of the 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.

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU No. 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The ASU is effective for UNIFI’s fiscal year 2025 for annual reporting and in the first quarter of fiscal 2026 for interim reporting, with early adoption permitted. UNIFI has not and does not expect to early adopt this standard. UNIFI does not expect this standard will have a material impact on its consolidated financial position, results of operations or cash flows.

Based on UNIFI’s review of ASUs issued since the filing of the 2023 Form 10-K, there have been no other 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:

Third-Party Manufacturer

	For the Three Months Ended				For the Six Months Ended
	October 1, 2023		October 2, 2022
	December 31, 2023		January 1, 2023		December 31, 2023		January 1, 2023
Third-party manufacturer	$	~~137~~135,~~620~~841	$	~~178~~135,~~212~~018	$	273,461	$	313,230
Service		1,~~224~~076		1,~~307~~194		2,300		2,501
Net sales	$	~~138~~136,~~844~~917	$	~~179~~136,~~519~~212	$	275,761	$	315,731

	For the Three Months Ended				For the Six Months Ended
	October 1, 2023		October 2, 2022
	December 31, 2023		January 1, 2023		December 31, 2023		January 1, 2023
REPREVE® Fiber	$	4245,~~461~~725	$	4942,~~179~~866	$	88,186	$	92,045
All other products and services		9691,~~383~~192		~~130~~93,~~340~~346		187,575		223,686
Net sales	$	~~138~~136,~~844~~917	$	~~179~~136,~~519~~212	$	275,761	$	315,731

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 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	~~October~~December 131, 2023			~~October~~December 131, 2023			July 2, 2023
ABL Revolver	October 2027		7.70	%	$	2116,~~700~~000		$	18,100
ABL Term Loan	October 2027		67.90	%		~~108~~105,~~100~~800			110,400
Finance lease obligations	(1)		5.01	%		1110,~~687~~960			10,767
Construction financing	(2)		0.0	%		—			1,632
Total debt						~~141~~132,~~487~~760			140,899
Current ABL Term Loan						(9,200	)		(9,200	)
Current portion of finance lease obligations						(3,~~123~~157	)		(2,806	)
Unamortized debt issuance costs						(~~274~~259	)		(289	)
Total long-term debt					$	~~128~~120,~~890~~144		$	128,604

(1)

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

(2)

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

ABL Facility and Amendments

There have been no changes to the 2022 Credit Agreement following the filing of the 2023 Form 10-K.

Construction 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~~December 131, 2023. There were no borrowings outstanding on this financing arrangement as of December 31, 2023.

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Income Taxes

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

	For the Three Months Ended						For the Six Months Ended
	October 1, 2023			October 2, 2022
	December 31, 2023			January 1, 2023			December 31, 2023			January 1, 2023
(Benefit) provision for income taxes	$	(463	)	$	2,734
Provision (benefit) for income taxes	$	380		$	(3,070	)	$	(83	)	$	(336	)
Effective tax rate		3(2.40	)%		~~(53~~14.65	)%		0.3	%		1.3	%

Income Tax Expense

UNIFI’s provision (benefit) ~~provision~~ for income taxes for the ~~three~~six months ended ~~October~~December 131, 2023 and ~~October~~January 21, ~~2022~~2023 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 rate for the three and six months ended ~~October~~December 131, 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.

During the ~~three~~six months ended ~~October~~December 131, 2023, the Internal Revenue Service (~~the~~ “IRS”) audit of fiscal years 2014 through 2019 was concluded with a ~~net~~ refund of $1,~~248~~275, which ishas ~~yet~~been toreceived bealong ~~received~~with $457 of interest on the overpayments. The impact from the IRS audit adjustments to the prior periods was insignificant.

The effective tax ~~rate~~rates for the three and six months ended ~~October~~January 21, ~~2022~~2023 ~~was~~varied ~~lower~~from ~~than~~ the U.S. federal statutory rate primarily due to anlosses ~~increase~~for inwhich ~~the~~UNIFI ~~valuation~~does ~~allowance~~not ~~for~~expect ~~deferred~~to ~~tax~~realize ~~assets~~a future benefit and ~~current~~a ~~U.S.~~discrete tax onbenefit ~~global~~related ~~intangible~~to ~~low-tax~~the recovery of certain Brazilian income ~~(“GILTI”)~~taxes paid in prior years.

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.

During the three months ended December 31, 2023, UNIFI released $853 accrued for interest and penalties after receiving the final assessment from the IRS.

7. Shareholders’ Equity

On October 31, 2018, UNIFI announced that 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. The share repurchase authorization is discretionary and has no expiration date. No shares have been repurchased in fiscal 2023 and 2024 and $38,859 remains available for repurchase.

8. Stock-Based Compensation

On October 31, 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 information as of December 31, 2023 with respect to the number of securities remaining available for future issuance under the 2020 Plan:


Authorized under the 2020 Plan	850
Plus: Share reserve increase from First Amendment	1,100
Plus: Awards expired, forfeited or otherwise terminated unexercised	48
Less: Awards granted to employees	(1,083	)
Less: Awards granted to non-employee directors	(197	)
Available for issuance under the 2020 Plan	718

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

Financial Instruments

For the ~~three~~six months ended ~~October~~December 131, 2023 and ~~October~~January 21, ~~2022~~2023, 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.

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

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

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,~~463~~618 and $2,496 as of ~~October~~December 131, 2023 and July 2, 2023, 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 expense (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 expense (income), net. During the ~~three~~six months ended ~~October~~December 131, 2023 and ~~October~~January 21, ~~2022~~2023, we recorded net ~~losses~~gains on investments held by the trust of $33122 and $4911, respectively.

10. Earnings Per Share

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

	For the Three Months Ended						For the Six Months Ended
	October 1, 2023			October 2, 2022
	December 31, 2023			January 1, 2023			December 31, 2023			January 1, 2023
Net loss	$	(1319,~~270~~846	)	$	(718,~~834~~037	)	$	(33,116	)	$	(25,871	)
Basic weighted average shares		18,~~084~~110			18,~~001~~034			18,097			18,017
Net potential common share equivalents		—			—			—			—
Diluted weighted average shares		18,~~084~~110			18,~~001~~034			18,097			18,017
Excluded from the calculation of common share equivalents:
Anti-dilutive common share equivalents		~~590~~577			~~618~~739			577			703
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.

11. 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.

12. Related Party Transactions

Related party balances and transactions are not material to the condensed consolidated financial statements and, accordingly, are not presented separately from other financial statement captions.

There were no related party receivables as of ~~October~~December 131, 2023 orand July 2, 2023.

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

	October 1, 2023		July 2, 2023
	December 31, 2023		July 2, 2023
Accounts payable	$	~~516~~350	$	457
Operating lease obligations		~~453~~403		502
Finance lease obligations		3,~~356~~031		3,677
Total related party payables	$	43,~~325~~784	$	4,636

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

For the Three Months Ended

For the Six Months Ended

Affiliated Entity

Transaction Type

~~October~~December 131, 2023

~~October~~January 21, ~~2022~~2023

December 31, 2023

January 1, 2023

Salem Leasing Corporation

Payments for transportation equipment costs and finance lease debt service

1,~~209~~228

1,~~199~~184

2,437

2,383

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

13. 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.

UNIFI's three reportable segments are organized as follows:

•

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 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 October 1, 2023

For the Three Months Ended December 31, 2023

Americas

Brazil

Asia

Total

Net sales

8180,~~573~~549

2926,~~909~~061

2730,~~362~~307

~~138~~136,~~844~~917

Cost of sales

8887,~~953~~287

2722,~~742~~922

2225,~~724~~072

~~139~~135,~~419~~281

Gross (loss) profit

(76,~~380~~738

)

23,~~167~~139

45,~~638~~235

~~(575~~1,636

)

Segment depreciation expense

5,~~497~~508

~~840~~766

—

6,~~337~~274

Segment (Loss) Profit

(1,~~883~~230

)

3,~~007~~905

45,~~638~~235

57,~~762~~910

	For the Three Months Ended October 2, 2022
	For the Three Months Ended January 1, 2023
	Americas			Brazil		Asia		Total
Net sales	$	~~107~~85,~~644~~242		$	3825,~~879~~687	$	3225,~~996~~283	$	~~179~~136,~~519~~212
Cost of sales		~~112~~98,~~513~~326			3224,~~092~~357		2821,~~351~~529		~~172~~144,~~956~~212
Gross (loss) profit		(413,~~869~~084	)		61,~~787~~330		43,~~645~~754		6(8,~~563~~000	)
Segment depreciation expense		5,~~480~~542			~~470~~391		—		5,~~950~~933
Segment Profit	$	611		$	7,257	$	4,645	$	12,513
Segment (Loss) Profit	$	(7,542	)	$	1,721	$	3,754	$	(2,067	)

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


	For the Six Months Ended December 31, 2023
	Americas			Brazil		Asia		Total
Net sales	$	162,122		$	55,970	$	57,669	$	275,761
Cost of sales		176,240			50,664		47,796		274,700
Gross (loss) profit		(14,118	)		5,306		9,873		1,061
Segment depreciation expense		11,005			1,606		—		12,611
Segment (Loss) Profit	$	(3,113	)	$	6,912	$	9,873	$	13,672

	For the Three Months Ended
	For the Six Months Ended January 1, 2023
	October 1, 2023			October 2, 2022
	Americas			Brazil			Asia		Total
Americas	$	(7,380	)	$	(4,869	)
Net sales	$	192,886		$	64,566		$	58,279	$	315,731
Brazil		2,167			6,787
Cost of sales		210,839			56,449			49,880		317,168
Asia		4,638			4,645
Gross (loss) profit		(17,953	)		8,117			8,399		(1,437	)
Segment gross (loss) profit		(575	)		6,563
Segment depreciation expense		11,022			861			—		11,883
Selling, general and administrative expenses		11,609			11,773
Segment (Loss) Profit	$	(6,931	)	$	8,978		$	8,399	$	10,446
(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)

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


	For the Three Months Ended						For the Six Months Ended
	December 31, 2023			January 1, 2023			December 31, 2023			January 1, 2023
Americas	$	(6,738	)	$	(13,084	)	$	(14,118	)	$	(17,953	)
Brazil		3,139			1,330			5,306			8,117
Asia		5,235			3,754			9,873			8,399
Segment gross profit (loss)		1,636			(8,000	)		1,061			(1,437	)
Selling, general and administrative expenses		12,408			11,748			24,017			23,521
Provision (benefit) for bad debts		1,289			(156	)		1,080			18
Restructuring costs		5,101			—			5,101			—
Other operating expense (income), net		481			226			535			(463	)
Operating loss		(17,643	)		(19,818	)		(29,672	)		(24,513	)
Interest income		(697	)		(514	)		(1,278	)		(1,061	)
Interest expense		2,613			1,889			5,098			3,136
Equity in earnings of unconsolidated affiliates		(93	)		(86	)		(293	)		(381	)
Loss before income taxes	$	(19,466	)	$	(21,107	)	$	(33,199	)	$	(26,207	)

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

14. 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~~In ~~material~~December ~~and~~2023, ~~production~~UNIFI ~~services~~dissolved ~~for~~its interest in UNF ~~are~~under ~~provided~~an byagreement ~~Nilit~~whereby ~~Ltd.~~UNIFI ~~under~~agreed ~~separate~~to ~~supply~~pay the former joint venture partner $2,750 and ~~services~~recorded ~~agreements~~it as an associated contract termination cost within Restructuring costs on the Condensed Consolidated Statements of Operations and Comprehensive Loss. UNIFI ~~UNF’s~~made ~~fiscal~~a ~~year~~payment ~~end~~to isthe ~~December~~former 31joint venture partner of $1,200 in the second quarter of fiscal 2024 and itthe remaining $1,550 is aincluded ~~registered~~in ~~Israeli~~Other ~~private~~current ~~company~~liabilities, ~~located~~expected to be paid in ~~Migdal~~the ~~Ha-Emek~~third quarter of fiscal 2024. Accordingly, ~~Israel~~the balance sheet information presented below as of December 31, 2023 does not include any amounts related to UNF.

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 ~~October~~December 131, 2023, UNIFI’s open purchase orders related to this supply agreement, all with UNFA, were $~~2,265~~571.

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

	For the Three Months Ended				For the Six Months Ended
	October 1, 2023		October 2, 2022
	December 31, 2023		January 1, 2023		December 31, 2023		January 1, 2023
UNFA	$	3,~~126~~787	$	75,~~401~~390	$	6,913	$	12,791
UNF		—		37—		—		37
Total	$	3,~~126~~787	$	75,~~438~~390	$	6,913	$	12,828

As of ~~October~~December 131, 2023, UNIFI had accounts payable due to UNFA of $2,020, and as of July 2, 2023, UNIFI had combined accounts payable due to UNF and UNFA of $~~2,238 and $~~3,440~~, respectively~~.

UNIFI ~~has~~previously determined that UNF and UNFA ~~are~~were variable interest entities and ~~has~~ also determined that UNIFI is the primary beneficiary of these entities, based on the terms of the supply agreement. As a result, these entities should be consolidated with UNIFI’s financial results. As (i) UNIFI purchases substantially all of the output from ~~the~~these ~~two~~ entities and all intercompany sales would be eliminated in consolidation, (ii) the ~~two~~ entities’ balance sheets constitute 5% 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 October 1, 2023, UNIFI’s combined investments in UNF and UNFA were $3,213.~~ 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~~UNFA. As ~~UNF~~of orDecember 31, 2023, UNIFI’s investment in UNFA was $3,101.

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

	October 1, 2023		July 2, 2023
Current assets	$	9,288	$	10,608
Non-current assets		480		494
Current liabilities		5,823		7,304
Non-current liabilities		—		—
Shareholders’ equity and capital accounts		3,945		3,798
UNIFI’s portion of undistributed earnings		3,154		2,938

	For the Three Months Ended
	October 1, 2023		October 2, 2022
Net sales	$	4,741	$	8,811
Gross profit		638		489
Income from operations		196		25
Net income		165		15
Depreciation and amortization		14		28
Distributions received		—		—

15. Supplemental Cash Flow Information

Cash payments for interest and taxes consist of the following:

	For the Three Months Ended
	October 1, 2023		October 2, 2022
Interest, net of capitalized interest of $62 and $87, respectively	$	2,443	$	767
Income tax payments, net		1,633		2,928

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

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


	December 31, 2023		July 2, 2023
Current assets	$	9,363	$	10,608
Non-current assets		473		494
Current liabilities		3,634		7,304
Non-current liabilities		—		—
Shareholders’ equity and capital accounts		6,202		3,798

UNIFI’s portion of undistributed earnings		3,042		2,938


	For the Three Months Ended					For the Six Months Ended
	December 31, 2023			January 1, 2023		December 31, 2023			January 1, 2023
Net sales	$	4,368		$	7,224	$	9,109		$	16,035
Gross profit		9			444		647			933
(Loss) income from operations		(467	)		26		(271	)		51
Net (loss) income		(483	)		14		(318	)		29
Depreciation and amortization		7			28		21			56

Distributions received		—			—		—			—

15. Supplemental Cash Flow Information

Cash payments for interest and taxes consist of the following:


	For the Six Months Ended
	December 31, 2023		January 1, 2023
Interest, net of capitalized interest of $104 and $239, respectively	$	4,740	$	2,739
Income tax payments, net		2,606		4,064

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 ~~October~~December 131, 2023 and July 2, 2023, $~~1,084~~621 and $1,137, respectively, were included in accounts payable for unpaid capital expenditures. As of ~~October~~January 21, ~~2022~~2023 and July 3, 2022, $1,~~449~~594 and $2,456, respectively, were included in accounts payable for unpaid capital expenditures.

During the ~~three~~six months ended ~~October~~December 131, 2023 and ~~October~~January 21, ~~2022~~2023, UNIFI recorded non-cash activity relating to finance leases of $1,633 and $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.

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

16. Other Financial Data

Select balance sheet information is presented in the following table.

	October 1, 2023			July 2, 2023
	December 31, 2023			July 2, 2023
Receivables, net:
Customer receivables	$	7366,~~147~~537		$	79,174
Allowance for uncollectible accounts		(12,~~132~~452	)		(1,362	)
Reserves for quality claims		(~~663~~709	)		(682	)
Net customer receivables		7163,~~352~~376			77,130
Banker's acceptance notes		65,~~608~~446			5,870
Other receivables		~~746~~761			725
Total receivables, net	$	7869,~~706~~583		$	83,725
Inventories:
Raw materials	$	5458,~~538~~448		$	59,983
Supplies		11,~~705~~871			11,787
Work in process		7,~~945~~077			6,633
Finished goods		6865,~~672~~646			78,032
Gross inventories		~~142~~143,~~860~~042			156,435
Net realizable value adjustment		(67,~~768~~366	)		(5,625	)
Total inventories	$	~~136~~135,~~092~~676		$	150,810
Other current assets:
Prepaid expenses and other	$	2,592		$	2,584
Vendor deposits	$	4,608		$	3,863
Vendor deposits		2,585			3,863
Prepaid expenses and other		3,826			2,584
Value-added taxes receivable		2,~~574~~893			3,398
Recovery of non-income taxes, net		1,467			1,933
Contract assets		769			549
Contract assets		201			549
Recovery of non-income taxes, net		194			1,933
Total other current assets	$	912,~~419~~290		$	12,327
Property, plant and equipment, net:
Land	$	2,~~496~~512		$	2,512
Land improvements		16,445			16,443
Buildings and improvements		~~167~~168,~~643~~231			167,589
Assets under finance leases		18,030			16,397
Machinery and equipment		659,~~027~~553			656,431
Computers, software and office equipment		25,~~255~~370			26,654
Transportation equipment		10,~~646~~731			10,710
Construction in progress		23,~~266~~635			10,003
Gross property, plant and equipment		~~901~~904,~~808~~507			906,739
Less: accumulated depreciation		(~~683~~688,~~263~~687	)		(682,768	)
Less: accumulated amortization – finance leases		(56,~~911~~385	)		(5,450	)
Total property, plant and equipment, net	$	~~212~~209,~~634~~435		$	218,521
Other non-current assets:
Recovery of taxes	$	56,~~808~~156		$	5,957
Investments in unconsolidated affiliates		3,~~213~~101			2,997
Grantor trust		2,~~463~~618			2,496
Intangible assets, net		~~973~~736			1,210
Other		2,~~176~~228			1,848
Total other non-current assets	$	14,~~633~~839		$	14,508
Other current liabilities:
Payroll and fringe benefits	$	84,~~541~~827		$	6,981
Utilities		2,065			1,634
Severance (1)		2,351			—
Deferred revenue		1,346			1,441
Incentive compensation		1,856			298
Incentive compensation		1,183			298
Dissolution of joint venture		1,550			—
Property taxes and other		3,308			2,578
Utilities		1,476			1,634
Total other current liabilities	$	16,443		$	12,932
Deferred revenue		1,293			1,441
Property taxes, interest and other		4,056			2,578
Total other current liabilities	$	17,409		$	12,932
Other long-term liabilities:
Nonqualified deferred compensation plan obligation	$	2,~~469~~675		$	2,659
Uncertain tax positions		1,~~871~~032			1,973
Other		~~450~~426			468
Total other long-term liabilities	$	4,~~790~~133		$	5,100

(1)

During the second quarter of fiscal 2024, UNIFI recorded $2,351 of severance expenses related to a cost reduction plan intended to lower operating expenses for both production and administrative activities, included in Restructuring costs on the Condensed Consolidated Statements of Operations and Comprehensive Loss. Most of the restructuring expenses incurred impact the Americas Segment and UNIFI does not anticipate any additional, material restructuring costs at this time.

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 ~~October~~December 131, 2023, while a reference to the “prior period” refers to the three-month period ended ~~October~~January 21, ~~2022~~2023. A reference to the “current six-month period” refers to the six-month period ended December 31, 2023, while a reference to the “prior six-month period” refers to the six-month period ended January 1, 2023. 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 six-month period and the prior six-month period each consisted of 26 weeks.

Our discussions in this Item 2 focus on our results during, or as of, the three months ended ~~October~~December 131, 2023 and ~~October~~January 21, ~~2022~~2023, and, to the extent applicable, any material changes from the information discussed in the 2023 Form 10-K or other important intervening developments or information. These discussions should be read in conjunction with the 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 Six Months Ended
	October 1, 2023		October 2, 2022
	December 31, 2023		January 1, 2023		December 31, 2023		January 1, 2023
BRL to USD		4.8996		5.2526		4.92		5.25
RMB to USD		7.2522		67.8509		7.23		6.95

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~~We ~~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 adversely impacted our consolidated sales and profitability in fiscal 2023 and the first ~~quarter~~half 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 been 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, and (iv) the ~~recent~~ conflict in the Middle East and the potential impacts to petroleum pricing and geopolitics~~, and (v) 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~~had ~~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 global raw material costs or unforeseen adverse impacts.

Input Costs and Global Production Volatility

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 existed in fiscal 2023 continued into fiscal 2024. The threat of recession and global tensions continue to create uncertainty. 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 fiscal 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 when presently available. 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 our 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;

•

net loss 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 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, which represents net loss 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 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, 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 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.

Review of Results of Operations

Three Months Ended ~~October~~December 131, 2023 Compared to Three Months Ended ~~October~~January 21, ~~2022~~2023

Consolidated Overview

The below tables provide:

•

the components of net loss and the percentage increase or decrease over the prior period amounts,

•

a reconciliation from net loss to EBITDA and Adjusted EBITDA, and

following the tables is a discussion and analysis of the significant components of net loss.

Net loss

	For the Three Months Ended
	October 1, 2023						October 2, 2022
	December 31, 2023						January 1, 2023
				% ofNet Sales						% ofNet Sales			%Change
Net sales	$	~~138~~136,~~844~~917			100.0		$	~~179~~136,~~519~~212			100.0			~~(22~~0.75	)
Cost of sales		~~139~~135,~~419~~281			~~100~~98.48			~~172~~144,~~956~~212			96105.39			(196.42	)
Gross (loss) profit		(575	)		(0.4	)		6,563			3.7			(108.8	)
Gross profit (loss)		1,636			1.2			(8,000	)		(5.9	)		(120.5	)
SG&A		1112,~~609~~408			89.41			11,~~773~~748			68.6			(15.46	)
(Benefit) provision for bad debts		(209	)		(0.2	)		174			0.1		nm
Provision (benefit) for bad debts		1,289			0.9			(156	)		(0.1	)	nm
Other operating expense (income), net		54			—			(689	)		(0.4	)		(107.8	)
Restructuring costs		5,101			3.7			—			—		nm
Operating loss		(12,029	)		(8.6	)		(4,695	)		(2.6	)		156.2
Other operating expense, net		481			0.4			226			0.2			112.8
Interest expense, net		1,904			1.4			700			0.4			172.0
Operating loss		(17,643	)		(12.9	)		(19,818	)		(14.6	)		(11.0	)
Equity in earnings of unconsolidated affiliates		(200	)		(0.1	)		(295	)		(0.2	)		(32.2	)
Interest expense, net		1,916			1.4			1,375			1.0			39.3
Loss before income taxes		(13,733	)		(9.9	)		(5,100	)		(2.8	)		169.3
Equity in earnings of unconsolidated affiliates		(93	)		(0.1	)		(86	)		(0.1	)		8.1
(Benefit) provision for income taxes		(463	)		(0.3	)		2,734			1.6			(116.9	)
Loss before income taxes		(19,466	)		(14.2	)		(21,107	)		(15.5	)		(7.8	)
Net loss	$	(13,270	)		(9.6	)	$	(7,834	)		(4.4	)		69.4
Provision (benefit) for income taxes		380			0.3			(3,070	)		(2.3	)		(112.4	)
Net loss	$	(19,846	)		(14.5	)	$	(18,037	)		(13.2	)		10.0

nm = not meaningful

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)

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

	For the Three Months Ended
	October 1, 2023			October 2, 2022
	December 31, 2023			January 1, 2023
Net loss	$	(1319,~~270~~846	)	$	(718,~~834~~037	)
Interest expense, net		1,~~904~~916			~~700~~1,375
(Benefit) provision for income taxes		(463	)		2,734
Provision (benefit) for income taxes		380			(3,070	)
Depreciation and amortization expense (1)		6,~~988~~922			6,~~697~~693
EBITDA		(410,~~841~~628	)		2(13,~~297~~039	)
Other adjustments (2)		—			—
Loss on joint venture dissolution (2)		2,750			—
Adjusted EBITDA	$	(4,841	)	$	2,297
Severance (3)		2,351			—
Adjusted EBITDA	$	(5,527	)	$	(13,039	)

(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)

~~For~~In the ~~periods~~second ~~presented,~~quarter ~~there~~of ~~were~~fiscal no2024, ~~other~~UNIFI ~~adjustments~~recorded ~~necessary~~a toloss ~~reconcile~~of ~~Net~~$2,750 ~~loss~~related to ~~Adjusted~~the ~~EBITDA~~dissolution of UNF.

(3)

In the second quarter of fiscal 2024, UNIFI incurred severance costs in connection with overall cost reduction efforts in the U.S.

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

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


	For the Three Months Ended December 31, 2023												For the Three Months Ended January 1, 2023
	Pre-tax Loss			Tax Impact			Net Loss			Diluted EPS			Pre-tax Loss			Tax Impact			Net Loss			Diluted EPS
GAAP results	$	(19,466	)	$	(380	)	$	(19,846	)	$	(1.10	)	$	(21,107	)	$	3,070		$	(18,037	)	$	(1.00	)
Loss on joint venture dissolution (1)		2,750			—			2,750			0.15			—			—			—			—
Severance (2)		2,351			—			2,351			0.14			—			—			—			—
Recovery of income taxes (3)		—			—			—			—			—			(3,799	)		(3,799	)		(0.21	)
Adjusted results	$	(14,365	)	$	(380	)	$	(14,745	)	$	(0.81	)	$	(21,107	)	$	(729	)	$	(21,836	)	$	(1.21	)

Weighted average common shares outstanding											18,110												18,034

Net Sales

Consolidated net sales for the current period decreased by $40,675, or 22.7%, and consolidated sales volumes decreased 5.2%, 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 decreased 17.5%, primarily attributable 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 31%, or $42,461, of consolidated net sales, compared to 27%, or $49,179, for the prior period.

(1)

~~Gross~~In ~~(Loss)~~the ~~Profit~~second quarter of fiscal 2024, UNIFI recorded a loss of $2,750 related to the dissolution of UNF.

(2)

~~Gross~~In ~~(loss) profit for~~ the ~~current~~second ~~period~~quarter ~~worsened~~of byfiscal $72024,~~138,~~ orUNIFI ~~108.8%,~~incurred ~~compared~~severance tocosts ~~the prior period. Gross (loss) profit decreased as a result of the decline~~ in ~~net~~connection ~~sales, combined~~ with ~~weak~~overall ~~fixed~~ cost ~~absorption~~reduction ~~for~~efforts ~~the~~in ~~Americas Segment, where utilization and productivity are materially impactful to gross profit. Although raw material costs for~~ the ~~Americas Segment were stable in fiscal 2024, low production levels and weak demand were significantly adverse~~U.S.

(3)

~~For~~In the ~~Americas~~second ~~Segment~~quarter of fiscal 2023, ~~gross~~UNIFI ~~loss~~recorded ~~increased~~a ~~due~~recovery toof ~~weaker~~income ~~global~~taxes ~~demand~~in ~~and~~connection ~~weak~~with ~~fixed~~filing ~~cost~~amended ~~absorption~~tax returns in ~~connection~~Brazil ~~with~~relating ~~lower~~to ~~production~~certain income taxes paid in prior fiscal years.

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

~~For~~Consolidated net sales for the ~~Asia~~current ~~Segment~~period increased by $705, ~~gross~~or ~~profit~~0.5%, ~~decreased~~and consolidated sales volumes increased 13.0%, compared to the prior period. The increase was primarily due to ~~lower~~improvements ~~sales~~in volumes in ~~connection~~all ~~with~~segments, ~~weaker~~however sales levels remain below historical averages, primarily due to lower global demand in connection with the weakness in apparel sector and inventory destocking efforts of major brands and retailers, especially those impacting the Americas and Asia Segments.

Consolidated weighted average sales prices decreased 13.5%, primarily attributable 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 product sales in the Americas Segment.

REPREVE® Fiber products for the current period comprised 33%, or $45,725, of consolidated net sales, compared to 31%, or $42,866, for the prior period.

Gross Profit (Loss)

Gross profit for the current period improved by $9,636, or 120.5%, compared to the prior period. Gross profit improved as a result of (i) increased sales volumes, (ii) cost saving initiatives, and (iii) more stable raw material costs. However, gross profit continues to be negatively impacted by weak fixed cost absorption in the Americas Segment, where utilization and productivity remain below historical averages due to depressed demand.

•

For the Americas Segment, gross loss improved due to (i) higher sales volumes, (ii) variable cost management efforts, and (iii) a more stable raw material cost environment, but remains adversely impacted by overall weak global demand and weak fixed cost absorption in connection with low production.

•

For the Brazil Segment, gross profit increased primarily due to (i) improved underlying unit margins and (ii) higher sales volumes.

•

For the Asia Segment, gross profit increased primarily due to (i) improved underlying margins and sales mix and (ii) higher sales volumes compared to the prior period despite continued weak global demand.

SG&A

SG&A ~~did~~for ~~not~~the ~~change~~current ~~meaningfully~~period ~~from~~increased compared to the prior period, primarily due to ~~the~~(i) ~~current~~higher ~~period,~~compensation ~~nor~~expenses ~~did~~prior to the ~~change~~cost ~~include~~reduction ~~any~~actions ~~significant~~executed ~~offsetting~~in ~~impacts~~the current period.

Provision (Benefit) ~~Provision~~ for Bad Debts

The current period's ~~and~~provision ~~prior~~reflects ~~period~~an ~~bad~~increase ~~debt~~for ~~changes~~a ~~reflect~~specifically noidentified ~~material~~customer ~~activity~~balance originating in the U.S. fiber market.

~~Other~~Restructuring ~~Operating Expense (Income), Net~~Costs

~~The~~Restructuring ~~current~~costs ~~period~~consisted ~~and~~of ~~prior~~(i) ~~period~~a ~~include~~loss ~~foreign~~of ~~currency~~$2,750 ~~transaction~~for ~~gains~~the dissolution of ~~$33~~UNF and (ii) severance charges of $~~725~~2,351 ~~respectively,~~in connection with nooverall ~~other~~cost ~~meaningful~~reduction ~~activity~~efforts in the U.S.

Other Operating Expense, Net

The current period and prior period include foreign currency transaction losses (gains) of $464 and ($78), respectively, with no other meaningful activity.

Interest Expense, Net

Interest expense, net increased in connection with higher debt principal and higher interest rates.

Equity in Earnings of Unconsolidated Affiliates

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

Income Taxes

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

	For the Three Months Ended
	October 1, 2023			October 2, 2022
	December 31, 2023			January 1, 2023
(Benefit) provision for income taxes	$	(463	)	$	2,734
Provision (benefit) for income taxes	$	380		$	(3,070	)
Effective tax rate		3(2.40	)%		~~(53~~14.65	)%

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 ~~increase~~decrease in the effective tax rate from the prior period to the current period is primarily attributable to ~~an increase in valuation allowance for deferred tax assets generated in the current period. The increase in the effective tax rate is then offset by~~ a ~~decrease~~discrete ~~in valuation allowance on deferred~~ tax ~~asset~~benefit ~~balances~~related ~~adjusted~~to by the ~~IRS~~recovery ~~audit~~ of ~~tax~~certain ~~years~~Brazilian ~~2014~~income ~~through~~taxes ~~2019,~~in ~~which was concluded during~~ the ~~current~~prior period.

Net Loss

The increase in net loss was primarily attributable to ~~lower~~restructuring costs, higher bad debt expense, higher interest expense, net, and higher income tax expense, partially offset by improved gross profit.

Adjusted EBITDA and Adjusted EPS (Non-GAAP Financial ~~Measure~~Measures)

Adjusted EBITDA ~~decreased~~and ~~primarily~~Adjusted inEPS ~~connection~~increased ~~with~~primarily ~~lower~~due to improved gross profit, partially offset by higher bad debt and SG&A expenses.

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
	October 1, 2023						October 2, 2022
	December 31, 2023						January 1, 2023
				% ofNet Sales						% ofNet Sales			%Change
Net sales	$	8180,~~573~~549			100.0		$	~~107~~85,~~644~~242			100.0			(245.25	)
Cost of sales		8887,~~953~~287			~~109~~108.04			~~112~~98,~~513~~326			~~104~~115.53			(2011.92	)
Gross loss		(76,~~380~~738	)		(98.04	)		(413,~~869~~084	)		(415.53	)		51(48.65	)
Depreciation expense		5,~~497~~508		~~6.7~~	6.9			5,~~480~~542			56.15			(0.36	)
Segment (Loss) Profit	$	(1,883	)		(2.3	)	$	611			0.6		nm
Segment Loss	$	(1,230	)		(1.5	)	$	(7,542	)		(8.8	)		(83.7	)
Segment net sales as a percentage of consolidated amounts		58.8	%					6062.06	%
Segment (Loss) Profit as a percentage of consolidated amounts		(32.7	)%					4.9	%
Segment Loss as a percentage of consolidated amounts		(15.5	)%				nm

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

Net sales for the prior period	$	~~107~~85,~~644~~242
Net change in average selling price and sales mix		(2212,~~984~~152	)
Decrease in sales volumes		(3,087	)
Increase in sales volumes		7,459
Net sales for the current period	$	8180,~~573~~549

The 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 proportion of fiber sales volumes following ~~weaker~~continued weak global textile demand.

The change in Segment (Loss) ~~Profit~~ for the Americas Segment was as follows:

Segment Profit for the prior period	$	611
Segment Loss for the prior period	$	(7,542	)
Net decrease in underlying margins		(2,476	)
Net increase in underlying margins		6,972
Decrease in sales volumes		(18	)
Change in sales volumes		(660	)
Segment Loss for the current period	$	(1,~~883~~230	)

The ~~decrease~~improvement in Segment (Loss) ~~Profit~~ for the Americas Segment from the prior period to the current period was primarily attributable to ~~lower~~variable ~~production~~cost ~~volumes~~management ofefforts ~~fiber~~and ~~products~~more stable raw material costs in ~~connection~~the current period, along with volume improvements. Segment Loss for the ~~lower~~Americas Segment continued to be negatively impacted by weak fixed cost absorption as fiber ~~sales~~production ~~volumes~~remains ~~described~~below ~~above~~historical averages. 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.

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
	October 1, 2023					October 2, 2022
	December 31, 2023					January 1, 2023
				% ofNet Sales					% ofNet Sales		%Change
Net sales	$	2926,~~909~~061			100.0	$	3825,~~879~~687			100.0		~~(23.~~1.5	)
Cost of sales		2722,~~742~~922			9287.79		3224,~~092~~357			8294.58		(135.69	)
Gross profit		23,~~167~~139			712.31		61,~~787~~330			~~17.~~5.2		~~(68~~136.10	)
Depreciation expense		~~840~~766			2.89		~~470~~391			1.25		7895.79
Segment Profit	$	3,~~007~~905			1015.10	$	71,~~257~~721			186.7		~~(58~~126.69	)
Segment net sales as a percentage of consolidated amounts		2119.50	%				2118.79	%
Segment Profit as a percentage of consolidated amounts		5249.24	%				58(83.03	)%

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

Net sales for the prior period	$	3825,~~879~~687
Decrease in average selling price		(10,311	)
Increase in sales volumes		3,782
Decrease in sales volumes		(1,546	)
Favorable foreign currency translation effects		1,522
Favorable foreign currency translation effects		2,887
Decrease in average selling price		(4,930	)
Net sales for the current period	$	2926,~~909~~061

The ~~decrease~~increase in net sales for the Brazil Segment from the prior period to the current period was primarily attributable to ~~selling~~(i) ~~price~~higher ~~pressures~~sales ~~from~~volumes ~~low-priced~~and ~~imports,~~(ii) ~~partially offset by~~ favorable foreign currency translation effects., ~~The~~partially ~~Brazil~~offset ~~Segment~~by ~~has~~selling ~~undertaken~~price ~~aggressive~~pressures ~~pricing~~from ~~(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 period	$	71,~~257~~721
Decrease in underlying unit margins		(4,489	)
Increase in underlying unit margins		1,848
Decrease in sales volumes		(288	)
Increase in sales volumes		251
Favorable foreign currency translation effects		~~527~~85
Segment Profit for the current period	$	3,~~007~~905

The ~~decrease~~increase in Segment Profit for the Brazil Segment from the prior period to the current period was primarily attributable to an overall ~~decrease~~increase in ~~gross~~underlying ~~margin~~unit ~~mainly~~margins ~~due~~and toimproved sales volumes, partially offset by 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
	October 1, 2023					October 2, 2022
	December 31, 2023					January 1, 2023
				% ofNet Sales					% ofNet Sales		%Change
Net sales	$	2730,~~362~~307			100.0	$	3225,~~996~~283			100.0		~~(17~~19.19	)
Cost of sales		2225,~~724~~072			8382.07		2821,~~351~~529			85.92		~~(19~~16.85	)
Gross profit		45,~~638~~235			17.03		43,~~645~~754			14.18		(039.25	)
Depreciation expense		—			—		—			—		—
Segment Profit	$	45,~~638~~235			17.03	$	43,~~645~~754			14.18		(039.25	)
Segment net sales as a percentage of consolidated amounts		1922.71	%				18.46	%
Segment Profit as a percentage of consolidated amounts		8066.52	%				37(181.16	)%

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

Net sales for the prior period	$	3225,~~996~~283
Net decrease in sales volumes		(3,143	)
Net increase in sales volumes		4,811
Unfavorable foreign currency translation effects		(1,661	)
Change in average selling price and sales mix		592
Change in average selling price and sales mix		(830	)
Unfavorable foreign currency translation effects		(379	)
Net sales for the current period	$	2730,~~362~~307

The decrease in net sales for the Asia Segment from the prior period to the current period was primarily attributable to (i) weak global demand and inventory destocking by brands and retailers, particularly for apparel, and (ii) unfavorable foreign currency translation effects due to the weakening of the RMB versus the USD.

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

Segment Profit for the prior period	$	4,645
Decrease in sales volumes		(440	)
Unfavorable foreign currency translation effects		(254	)
Change in underlying margins and sales mix		687
Segment Profit for the current period	$	4,638

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

The increase in net sales for the Asia Segment from the prior period to the current period was primarily attributable to (i) increase in sales volume compared to the prior period despite continued weak global demand during the current period and (ii) improved sales mix compared to the prior period, partially offset by unfavorable foreign currency translation effects due to the weakening of the RMB versus the USD.

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


Segment Profit for the prior period	$	3,754
Change in underlying margins and sales mix		836
Increase in sales volumes		712
Unfavorable foreign currency translation effects		(67	)
Segment Profit for the current period	$	5,235

The increase in Segment Profit for the Asia Segment from the prior period to the current period is attributable to (i) an improved gross margin rate associated with a strong sales mix of REPREVE products and (ii) the increase in sales volumes discussed above.

Six Months Ended December 31, 2023 Compared to Six Months Ended January 1, 2023

Consolidated Overview

The below tables provide:

•

the components of net loss and the percentage increase or decrease over the prior period amounts,

•

a reconciliation from net loss to EBITDA and Adjusted EBITDA, and

following the tables is a discussion and analysis of the significant components of net loss.

Net loss


	For the Six Months Ended
	December 31, 2023						January 1, 2023
				% of Net Sales						% of Net Sales			% Change
Net sales	$	275,761			100.0		$	315,731			100.0			(12.7	)
Cost of sales		274,700			99.6			317,168			100.5			(13.4	)
Gross profit (loss)		1,061			0.4			(1,437	)		(0.5	)		(173.8	)
SG&A		24,017			8.7			23,521			7.4			2.1
Provision for bad debts		1,080			0.4			18			—		nm
Restructuring costs		5,101			1.8			—			—		nm
Other operating expense (income), net		535			0.2			(463	)		(0.1	)	nm
Operating loss		(29,672	)		(10.7	)		(24,513	)		(7.8	)		21.0
Interest expense, net		3,820			1.4			2,075			0.6			84.1
Equity in earnings of unconsolidated affiliates		(293	)		(0.1	)		(381	)		(0.1	)		(23.1	)
Loss before income taxes		(33,199	)		(12.0	)		(26,207	)		(8.3	)		26.7
Benefit for income taxes		(83	)		—			(336	)		(0.1	)		(75.3	)
Net loss	$	(33,116	)		(12.0	)	$	(25,871	)		(8.2	)		28.0

nm = not meaningful

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)

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


	For the Six Months Ended
	December 31, 2023			January 1, 2023
Net loss	$	(33,116	)	$	(25,871	)
Interest expense, net		3,820			2,075
Benefit for income taxes		(83	)		(336	)
Depreciation and amortization expense (1)		13,910			13,390
EBITDA		(15,469	)		(10,742	)

Loss on joint venture dissolution (2)		2,750			—
Severance (3)		2,351			—
Adjusted EBITDA	$	(10,368	)	$	(10,742	)

(1)

(2)

In the second quarter of fiscal 2024, UNIFI recorded a loss of $2,750 related to the dissolution of UNF.

(3)

In the second quarter of fiscal 2024, UNIFI incurred severance costs in connection with overall cost reduction efforts in the U.S.

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


	For the Six Months Ended December 31, 2023											For the Six Months Ended January 1, 2023
	Pre-tax Loss			Tax Impact		Net Loss			Diluted EPS			Pre-tax Loss			Tax Impact			Net Loss			Diluted EPS
GAAP results	$	(33,199	)	$	83	$	(33,116	)	$	(1.83	)	$	(26,207	)	$	336		$	(25,871	)	$	(1.44	)
Loss on joint venture dissolution (1)		2,750			—		2,750			0.15			—			—			—			—
Severance (2)		2,351			—		2,351			0.13			—			—			—			—
Recovery of income taxes (3)		—			—		—			—			—			(3,799	)		(3,799	)		(0.21	)
Adjusted results	$	(28,098	)	$	83	$	(28,015	)	$	(1.55	)	$	(26,207	)	$	(3,463	)	$	(29,670	)	$	(1.65	)

Weighted average common shares outstanding										18,097												18,017

(1)

In the second quarter of fiscal 2024, UNIFI recorded a loss of $2,750 related to the dissolution of UNF.

(2)

In the second quarter of fiscal 2024, UNIFI incurred severance costs in connection with overall cost reduction efforts in the U.S.

(3)

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 six-month period decreased by $39,970, or 12.7%, while consolidated sales volumes increased 3.1%, compared to the prior six-month period. Despite modest sales volume improvements in each of the reportable segments, volumes remain depressed, particularly in the Americas and Asia Segments as a result of low global demand in connection with the apparel market.

Consolidated weighted average sales prices decreased 15.8% which drove the decrease in net sales. The decrease in sales price was primarily attributable 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 six-month period comprised 32%, or $88,186, of consolidated net sales, compared to 29%, or $92,045, for the prior six-month period.

Gross Profit (Loss)

Gross profit for the current six-month period improved by $2,498, or 173.8%, compared to the prior six-month period. Gross profit improved as a result of variable cost management efforts and more stable raw material costs, along with increased sales volume. Gross profit was negatively impacted by weak fixed cost absorption in the Americas Segment, where utilization and productivity are materially impactful to gross profit. Although raw material costs for the Americas Segment were stable in fiscal 2024, low production levels and weak demand were significantly adverse.

•

For the Americas Segment, gross loss improved due to variable cost management efforts and more stable raw material costs in the current six-month period, partially offset by weak global demand and weak fixed cost absorption in connection with low production levels.

•

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 increased primarily due to (i) a strong sales mix and (ii) higher sales volumes compared to the period six-month period despite weak global demand.

SG&A

SG&A did not change meaningfully from the prior six-month period to the current period, nor did the change include any significant offsetting impacts.

Provision for Bad Debts

The current six-month period's provision reflects an increase for a specifically identified customer balance originating in the U.S. fiber market.

Restructuring Costs

Restructuring costs consisted of (i) a loss of $2,750 when UNIFI dissolved its interest in UNF under an agreement with its former joint venture partner and (ii) severance charges of $2,351 in connection with overall cost reduction efforts in the U.S.

Other Operating Expense (Income), Net

The current six-month period and prior six-month period include foreign currency transaction losses (gains) of $430 and ($803), respectively, with no other meaningful activity.

Interest Expense, Net

Interest expense, net increased in connection with higher debt principal and higher interest rates.

Equity in Earnings of Unconsolidated Affiliates

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

Income Taxes

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


	For the Six Months Ended
	December 31, 2023			January 1, 2023
Benefit for income taxes	$	(83	)	$	(336	)
Effective tax rate		0.3	%		1.3	%

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 in the effective tax rate from the prior six-month period to the current six-month period is primarily attributable to a discrete tax benefit related to the recovery of certain Brazilian income taxes in the prior six-month period.

Net Loss

The increase in net loss was primarily attributable to restructuring costs, higher bad debt expense, and higher interest expense, net, partially offset by improved gross profit.

Adjusted EBITDA and Adjusted EPS (Non-GAAP Financial Measures)

Adjusted EBITDA and Adjusted EPS increased primarily due to improved gross profit, partially offset by higher bad debt expense and other operating expenses.

Segment Overview

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

Americas Segment

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


	For the Six Months Ended
	December 31, 2023						January 1, 2023
				% of Net Sales						% of Net Sales			% Change
Net sales	$	162,122			100.0		$	192,886			100.0			(15.9	)
Cost of sales		176,240			108.7			210,839			109.3			(16.4	)
Gross loss		(14,118	)		(8.7	)		(17,953	)		(9.3	)		(21.4	)
Depreciation expense		11,005		6.8				11,022			5.7			(0.2	)
Segment Loss	$	(3,113	)		(1.9	)	$	(6,931	)		(3.6	)		(55.1	)

Segment net sales as a percentage of consolidated amounts		58.8	%					61.1	%
Segment Loss as a percentage of consolidated amounts		(22.8	)%					(66.4	)%

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


Net sales for the prior six-month period	$	192,886
Net change in average selling price and sales mix		(35,980	)
Increase in sales volumes		5,216
Net sales for the current six-month period	$	162,122

The change in net sales for the Americas Segment from the prior six-month period to the current six-month 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 Chip and Flake sales in the current six-month period and (ii) lower fiber sales volumes following weaker global textile demand.

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


Segment Loss for the prior six-month period	$	(6,931	)
Change in underlying margins and sales mix		4,005
Change in sales volumes		(187	)
Segment Loss for the current six-month period	$	(3,113	)

The improvement in Segment Loss for the Americas Segment from the prior six-month period to the current six-month period was primarily attributable to variable cost management efforts and more stable raw material costs in the current six-month period. Segment Loss for the Americas Segment continued to be negatively impacted by low fiber sales volumes. As fiber products carry a higher selling price and allocation of production costs versus Chip and Flake, lower fiber production drives weaker fixed cost absorption and adversely impacts gross profit and gross margin.

Brazil Segment

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


	For the Six Months Ended
	December 31, 2023					January 1, 2023
				% of Net Sales					% of Net Sales		% Change
Net sales	$	55,970			100.0	$	64,566			100.0		(13.3	)
Cost of sales		50,664			90.5		56,449			87.4		(10.2	)
Gross profit		5,306			9.5		8,117			12.6		(34.6	)
Depreciation expense		1,606			2.8		861			1.3		86.5
Segment Profit	$	6,912			12.3	$	8,978			13.9		(23.0	)

Segment net sales as a percentage of consolidated amounts		20.3	%				20.4	%
Segment Profit as a percentage of consolidated amounts		50.6	%				85.9	%

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


Net sales for the prior six-month period	$	64,566
Decrease in average selling price and change in sales mix		(15,632	)
Favorable foreign currency translation effects		4,409
Increase in sales volumes		2,627
Net sales for the current six-month period	$	55,970

The decrease in net sales for the Brazil Segment from the prior six-month period to the current six-month period was primarily attributable to selling price pressures from low-priced imports, partially offset by favorable foreign currency translation effects and an improvement in sales volumes.

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


Segment Profit for the prior six-month period	$	8,978
Decrease in underlying margins		(3,044	)
Favorable foreign currency translation effects		613
Increase in sales volumes		365
Segment Profit for the current six-month period	$	6,912

The decrease in Segment Profit for the Brazil Segment from the prior six-month period to the current six-month 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 six-month period amounts for the Asia Segment, were as follows:


	For the Six Months Ended
	December 31, 2023					January 1, 2023
				% of Net Sales					% of Net Sales		% Change
Net sales	$	57,669			100.0	$	58,279			100.0		(1.0	)
Cost of sales		47,796			82.9		49,880			85.6		(4.2	)
Gross profit		9,873			17.1		8,399			14.4		17.5
Depreciation expense		—			—		—			—		—
Segment Profit	$	9,873			17.1	$	8,399			14.4		17.5

Segment net sales as a percentage of consolidated amounts		20.9	%				18.5	%
Segment Profit as a percentage of consolidated amounts		72.2	%				80.4	%

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


Net sales for the prior six-month period	$	58,279
Unfavorable foreign currency translation effects		(2,040	)
Change in average selling price and sales mix		(277	)
Net increase in sales volumes		1,707
Net sales for the current six-month period	$	57,669

The nominal change in net sales for the Asia Segment from the prior six-month period to the current six-month period was primarily attributable to (i) unfavorable foreign currency translation effects due to the weakening of the RMB versus the USD, offset by an improvement in sales volume compared to the prior six-month period despite continued weak global demand and inventory destocking by brands and retailers, particularly for apparel.

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


Segment Profit for the prior six-month period	$	8,399
Change in underlying margins and sales mix		1,550
Increase in sales volumes		245
Unfavorable foreign currency translation effects		(321	)
Segment Profit for the current six-month period	$	9,873

The increase in Segment Profit for the Asia Segment from the prior six-month period to the current six-month period is attributable to (i) an improved gross margin rate associated with a strong sales mix of REPREVE products and (ii) the increase in sales volumes discussed above, offset by unfavorable foreign currency translation effects.

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 six-month period, cash provided by operations was $72,~~119~~517, and, at ~~October~~December 131, 2023, availability under the ABL Revolver was $4443,~~164~~082.

As of ~~October~~December 131, 2023, all of UNIFI’s $~~141~~132,~~487~~760 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 ~~October~~December 131, 2023 for domestic operations compared to foreign operations:

	Domestic		Foreign		Total
Cash and cash equivalents	$	2825	$	5135,~~487~~954	$	5135,~~515~~979
Borrowings available under financing arrangements		4443,~~164~~082		—		4443,~~164~~082
Liquidity	$	4443,~~192~~107	$	5135,~~487~~954	$	9579,~~679~~061
Working capital	$	7773,~~315~~768	$	~~131~~113,~~298~~710	$	~~208~~187,~~613~~478
Total debt obligations	$	~~141~~132,~~487~~760	$	—	$	~~141~~132,~~487~~760

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 establishment of the 2022 Credit Agreement, UNIFI’s global cash and liquidity positions are sufficient to sustain its operations and meet its growth needs. Additionally, UNIFI considers opportunities to repatriate existing cash to reduce debt and preserve or enhance liquidity. However, further degradation in the macroeconomic environment could introduce additional liquidity risk and require UNIFI to limit cash outflows for discretionary activities while further utilizing available and additional forms of credit.

We do not currently anticipate that any adverse events or circumstances will place critical pressure on our liquidity position or our ability to fund our operations and expected business growth. Should global demand, economic activity, or input availability decline considerably for an even longer 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 secure the longevity of the business and operations. Management continues to (i) explore cost savings opportunities and (ii) prioritize repayment of debt in the current operating environment.

When business levels increase, we expect to use cash in support of working capital needs.

The following outlines the attributes relating to our credit facility as of ~~October~~December 131, 2023:

•

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

•

excess availability before the Trigger Level (as defined in the 2022 Credit Agreement) under the ABL Revolver was $21,~~854~~002;

•

the Trigger Level ~~(as defined in the 2022 Credit Agreement)~~ was $22,~~310~~080; 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 financing arrangements will provide the needed liquidity to fund the associated operating activities and investing activities, such as future capital expenditures. UNIFI’s 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:

	October 1, 2023		July 2, 2023
	December 31, 2023		July 2, 2023
Long-term debt	$	~~128~~120,~~890~~144	$	128,604
Current portion of long-term debt		12,~~323~~357		12,006
Unamortized debt issuance costs		~~274~~259		289
Debt principal		~~141~~132,~~487~~760		140,899
Less: cash and cash equivalents		5135,~~515~~979		46,960
Net Debt	$	8996,~~972~~781	$	93,939

The ~~decrease~~increase in Net Debt primarily reflects capital expenditures during the fiscal year, partially offset by the generation of operating cash flows during fiscal 2024~~, aided by reduced levels of capital expenditures~~.

~~Working Capital and Adjusted Working Capital (Non-GAAP Financial Measures)~~24

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

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

	October 1, 2023			July 2, 2023
	December 31, 2023			July 2, 2023
Cash and cash equivalents	$	5135,~~515~~979		$	46,960
Receivables, net		7869,~~706~~583			83,725
Inventories		~~136~~135,~~092~~676			150,810
Income taxes receivable		12,~~592~~421			238
Other current assets		912,~~419~~290			12,327
Accounts payable		(3734,~~064~~709	)		(44,455	)
Other current liabilities		(1617,~~443~~409	)		(12,932	)
Income taxes payable		(~~996~~2,263	)		(789	)
Current operating lease liabilities		(1,~~885~~733	)		(1,813	)
Current portion of long-term debt		(12,~~323~~357	)		(12,006	)
Working capital	$	~~208~~187,~~613~~478		$	222,065
Less: Cash and cash equivalents		(5135,~~515~~979	)		(46,960	)
Less: Income taxes receivable		(12,~~592~~421	)		(238	)
Less: Income taxes payable		~~996~~2,263			789
Less: Current operating lease liabilities		1,~~885~~733			1,813
Less: Current portion of long-term debt		12,~~323~~357			12,006
Adjusted Working Capital	$	~~170~~165,~~710~~431		$	189,475

Adjusted Working Capital decreased $1824,~~765~~044 from July 2, 2023 to ~~October~~December 131, 2023.

The decrease in receivables, net was primarily due to a decrease in sales and the timing of cash receipts. The decrease in inventories was primarily attributable to lower weighted average costs in the current six-month period and lower units on hand. The decrease in ~~other~~accounts ~~current~~payable ~~assets~~followed ~~was~~the ~~primarily~~decrease ~~due~~in toinventories ~~lower vendor deposits, lower value-added taxes receivable,~~ and ~~the~~production ~~utilization~~activity ofin the ~~fiscal~~current ~~2021 recovery of non~~six-~~income~~month ~~taxes in Brazil~~period. The ~~decrease~~increase in ~~accounts~~other ~~payable~~current ~~followed~~liabilities primarily reflects the ~~decrease~~liabilities recorded in ~~inventories~~the ~~and~~current ~~production~~period ~~activity~~for inseverance and the ~~current~~dissolution ~~period~~of UNF. The ~~increase~~change in ~~other~~income ~~current~~taxes ~~liabilities~~receivable ~~primarily~~ reflects the ~~routine~~foreign ~~timing~~tax ~~differences~~payments ~~for~~made ~~payroll~~in ~~and~~the ~~other~~current ~~operating~~six-month ~~expenses~~period. The change in income taxes ~~receivable~~payable reflects the ~~conclusion~~impact of anthe ~~IRS~~interim ~~audit~~tax provision. The changes in other current assets, current operating lease liabilities, and current portion of long-term debt, ~~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 Three Months Ended
	For the Six Months Ended
	October 1, 2023			October 2, 2022
	December 31, 2023			January 1, 2023
Net loss	$	(1333,~~270~~116	)	$	(725,~~834~~871	)
Equity in earnings of unconsolidated affiliates		(~~200~~293	)		(~~295~~381	)
Depreciation and amortization expense		713,~~026~~988			613,~~740~~478
Non-cash compensation expense		212			633
Recovery of income taxes		—			(3,799	)
Deferred income taxes		(679	)		(373	)
Non-cash compensation expense		1,387			1,976
Subtotal		(6,911	)		(1,129	)
Deferred income taxes		(1,714	)		(304	)
Receivables, net		4,111			13,800
Subtotal		(19,748	)		(14,901	)
Inventories		12,608			6,475
Receivables, net		14,367			40,552
Accounts payable and other current liabilities		(3,432	)		(28,615	)
Inventories		15,081			25,422
Other changes		743			3,577
Accounts payable and other current liabilities		(4,763	)		(47,599	)
Net cash provided (used) by operating activities	$	7,119		$	(5,892	)
Other changes		(2,420	)		3,798
Net cash provided by operating activities	$	2,517		$	7,272

The ~~increase~~decrease in operating cash flows was primarily due to ~~reduced~~weaker ~~working~~earnings ~~capital associated with a decline~~ in ~~overall business activity in~~ the current six-month period, ~~primarily~~compared ~~offset~~to bythe ~~weaker~~prior ~~earnings~~six-month period.

Investing Cash Flows

Investing activities primarily includes $25,~~937~~982 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.

Financing Cash Flows

Financing activities primarily include net ~~proceeds~~payments ~~from~~on the ABL Revolver and payments on the ABL Term Loan.

Share Repurchase Program

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

There have been no 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 2023 Form 10-K, except for the capital purchase obligations are approximately $6,000, $0 and $19,000 for fiscal years 2024, 2025 and 2026, respectively.

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 2023 Form 10-K. There have been no changes to UNIFI’s critical accounting policies in fiscal 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 ~~October~~December 131, 2023, UNIFI had borrowings under its ABL Facility that totaled $~~129~~121,800. UNIFI’s sensitivity analysis indicates that a 50-basis point interest rate increase as of ~~October~~December 131, 2023 would result in an increase in annual interest expense of approximately $~~700~~600.

Foreign Currency Exchange Rate Risk

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

As of ~~October~~December 131, 2023, UNIFI had no outstanding foreign currency forward contracts. As of ~~October~~December 131, 2023, foreign currency exchange rate risk ~~concepts~~positions included the following:

	ApproximateAmount orPercentage
Percentage of total consolidated assets held by UNIFI's subsidiaries outside the U.S. whose functional currency is not the USD		3129.09	%
Cash and cash equivalents held outside the U.S.:
Denominated in USD	$	1813,~~332~~259
Denominated in RMB		166,~~740~~707
Denominated in BRL		1514,~~812~~789
Denominated in other foreign currencies		~~156~~256
Total cash and cash equivalents held outside the U.S.	$	5135,~~040~~011
Percentage of total cash and cash equivalents held outside the U.S.		9997.13	%
Cash and cash equivalents held inside the U.S. in USD by foreign subsidiaries	$	~~447~~943

Raw Material and Commodity Cost Risks

A complete discussion of raw material and commodity cost risks is included in the 2023 Form 10-K.

Other Risks

UNIFI is also exposed to 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 ~~October~~December 131, 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 ~~October~~December 131, 2023 that have materially affected, or are reasonably likely to materially affect, UNIFI’s internal control over financial reporting.

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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.
10.1		Employment Agreement by and between Unifi, Inc. and Brian D. Moore, effective as of January 22, 2024.
10.2		Employment Agreement by and between Unifi, Inc. and Meredith S. Boyd, effective as of January 22, 2024.
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 With Embedded Linkbases 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.

2328

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: November 8, 2023	By:	/s/ ANDREW J. EAKER
Date: February 7, 2024	By:	/s/ ANDREW J. EAKER
		Andrew J. Eaker
		Interim Chief Financial OfficerTreasurer
		Executive Vice President & Chief Financial OfficerTreasurer
		(Interim Principal Financial Officer and Interim Principal Accounting Officer)
		(Principal Financial Officer and Principal Accounting Officer)

2429

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