Fourth quarter 2020 sales results in-line with expectations, with strong cash generation and significantly improved liquidity

Eddie Ingle, Chief Executive Officer of Unifi, said, "By the end of March 2020, the pandemic started to impact our apparel and automotive customers as they shut down or significantly curtailed operations. Since April 2020, monthly sales have improved sequentially, including July 2020, the best month since March 2020.  At the onset of the pandemic, our management team prioritized safety and took measures to improve our liquidity and cash position while maintaining our long-term focus on innovation and sustainability. During the just completed quarter, we generated significant cash from operations while reducing inventory levels and operating costs.  These actions, combined with a joint venture divestiture, allowed for significant debt reduction and an increase in cash. I am confident that our diverse global operations, strong management team, and solid financial position will enable us to overcome these current challenges and regain our momentum as we progress through fiscal 2021. I'm proud to return to Unifi and to have the opportunity to lead this great company through the next stage of its life cycle."

Fourth quarter fiscal 2020 overview

Net sales of $86.1 million decreased year-over-year from $179.5 million in fiscal 2019.

Revenues from REPREVE® Fiber1 products represented 28% of consolidated net sales.

Operating loss was $20.9 million, compared to operating income of $5.3 million in the fourth quarter of fiscal 2019, driven by lower sales and lower fixed cost absorption.

Net loss of $20.2 million, or $1.10 loss per share, compared to net income of $1.0 million, or earnings per share ("EPS") of $0.05 for the fourth quarter of fiscal 2019.

Adjusted EBITDA2 decreased to negative $14.0 million, compared to positive $12.7 million in the fourth quarter of fiscal 2019.

Operating cash flows were $20.6 million, an increase of $11.8 million from the fourth quarter of fiscal 2019; full year fiscal 2020 operating cash flows were $52.7 million, an increase of $45.4 million from fiscal 2019.

On April 29, 2020, the Company sold its 34% interest in Parkdale America, LLC ("PAL") for $60.0 million in cash. Proceeds were used to reduce leverage and increase cash reserves on the balance sheet.

On June 28, 2020, debt principal was $98.9 million, below $100.0 million for the first time since calendar 2014, and cash and cash equivalents were $75.3 million.

Net Debt2 was $23.6 million on June 28, 2020, which is a reduction of $82.2 million since June 30, 2019 and is the lowest level in more than ten years.

On June 15, 2020, Eddie Ingle rejoined the Company as its new Chief Executive Officer.

Liquidity update and risk mitigation initiatives

As of June 28, 2020, cash and cash equivalents were $75.3 million, debt principal was $98.9 million (totaling Net Debt of $23.6 million), and revolver availability was $56.4 million.

Capital expenditure levels have been reduced while prioritizing spending for safety and maintenance.

Raw material pricing remains at low levels, which aids short-term working capital and liquidity.

Manufacturing operations have been strategically reduced to support critical businesses and manage working capital.

Fourth quarter fiscal 2020 compared to fourth quarter fiscal 2019

Net sales in the fourth quarter of fiscal 2020 were $86.1 million, down compared to $179.5 million in the same period last year. The decline was driven by the adverse impacts of the COVID-19 outbreak, which impacted all business segments. However, from April 2020 to June 2020, core U.S. polyester products experienced sequential monthly sales increases.

Gross profit decreased to a loss of $9.5 million, from a profit of $18.3 million, due to significantly lower sales and production volumes. Stifled global demand drove lower-than-normal production levels in the U.S. and Brazil, which reduced the absorption of costs into inventory and increased the level of period costs recognized, thereby decreasing gross profit.

Operating loss for the fourth quarter of fiscal 2020 was $20.9 million, compared to operating income of $5.3 million for the fourth quarter of fiscal 2019, primarily due to the COVID-19 impact.

Net loss was $20.2 million, or $1.10 loss per share, compared to net income of $1.0 million, or EPS of $0.05. Adjusted EBITDA was negative $14.0 million, compared to positive $12.7 million. Adjusted EBITDA for the fourth quarters of fiscal 2019 and 2020 includes an adjustment for severance expenses relating to salaried workforce reductions.