Professor Mike Lord Comments on the Financial Performance of Unifi Inc.

2.4.2011 Article, Faculty News, General

Unifi quarterly profit more than doubles
Reposted from Winston-Salem Journal | by Richard Craver

Strong global sales enabled Unifi Inc. to more than double its profit in the company's second quarter of fiscal 2011, the company reported late Wednesday. The quarter ended Dec. 26.

Net income was $5.4 million, compared with $2 million a year ago. Sales were up 19 percent to $161 million.

Unifi, based in Greensboro, has its largest U.S. manufacturing presence in Yadkinville.

The performance is the latest evidence that Unifi is putting the financial difficulties of the previous decade farther in its rear-view mirror.

The company said it is benefiting from increased demand in most of its global operations, including its plant in Central America, where it reached full capacity.

Michael Lord, an associate professor of management at Wake Forest University, said Unifi's results show it is "benefiting both from a better overall economy, as well as from their own improved operations."

Bill Jasper, the president and chief executive of Unifi, said it expects to hold a grand opening in May for its 50,000-square-foot recycling center in Yadkinville.

The company plans to handle the cleansing of used plastic bottles there to increase product development and production. It expects to hire up to 20 employees for that operation.

The Repreve line, introduced in 2006, has been a major sales and branding factor in Unifi's turnaround. The company makes polyester chips — about the size of a Tic Tac mint — from fiber waste, a byproduct of yarn production. A percentage of used plastics, such as soda, water and 100 percent PET bottles, have been used, along with recycled filament nylon, staple polyester and performance fibers.

Chief Financial Officer Ron Smith said that over the next two years, Unifi plans to use excess operating cash and a limited amount of borrowing to pay down its 11.5 percent senior secured notes due May 2014.

With the outlook promising for more quarterly profits, it's time for Unifi to focus more on reducing its debt, said Peter Tourtellot, the managing director of Anderson Bauman Tourtellot Vos & Co., a turnaround-management company.

"The reverse stock split (in October) should help the company's stock price," Tourtellot said. "It would appear to me that the missing ingredient to its turnaround effort is a plan clearly addressed to reducing their debt."