UNIFI INC

Previous wording

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 March 30, 2025, while a reference to the “prior period” refers to the three-month period ended March 31, 2024. A reference to the “current nine-month period” refers to the nine-month period ended March 30, 2025, while a reference to the “prior nine-month period” refers to the nine-month period ended March 31, 2024. Such references may be accompanied by certain phrases for added clarity. The current period and the prior period each consisted of 13 weeks. The current nine-month period and the prior nine-month period each consisted of 39 weeks.

Current wording

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 September 28, 2025, while a reference to the “prior period” refers to the three-month period ended September 29, 2024. Such references may be accompanied by certain phrases for added clarity. The current period and the prior period each consisted of 13 weeks.

Previous wording

A tariff structure that disproportionately impacts one country or region over another may result in a shift in manufacturing or flow of goods particularly as it relates to textile production across Asia and Central America. Such lower tariff countries or regions may be situated outside of UNIFI’s existing global supply chain. If UNIFI is unable to move production based on these shifts in regional demand, we may lose sales and experience an adverse effect on our financial condition, results of operations, or cash flows. UNIFI will continue to monitor these and other aspects of the current environment, leverage our global business model as necessary, and work closely with stakeholders to ensure business continuity and liquidity.

Current wording

Beyond the specific demand challenges within the textile industry, our business has been adversely impacted by: (i) the impact of inflation, including tariffs, on consumer spending, (ii) elevated interest rates for consumers and customers, including the impact on the carrying costs of customer inventories, and (iii) the volatility in customer order patterns resulting from trade and regulatory matters (including tariffs). This volatility in demand resulted from customers buying ahead of tariffs becoming effective for certain countries and difficulty in predicting final tariff assessments. A tariff structure that disproportionately impacts one country or region over another may result in a shift in manufacturing or flow of goods particularly as it relates to textile production across Asia and Central America. Such lower tariff countries or regions may be situated outside of UNIFI’s existing global supply chain. If UNIFI is unable to move production based on these shifts in regional demand, we may lose sales and experience an adverse effect on our financial condition, results of operations, or cash flows. UNIFI will continue to monitor these and other aspects of the current environment, leverage our global business model as necessary, and work closely with stakeholders to ensure business continuity and liquidity.

Previous wording

Fortunately, UNIFI has been expanding its supply chain and business model across multiple geographies over the last several years. Particularly, (i) our feedstock supply spans multiple markets, (ii) our commercial position in the Central American market remains key to servicing compliant business for USMCA and CAFTA-DR programs, and (iii) we have expanded our asset light model beyond China. Each of these concepts affords us diversity in this dynamic trade environment and greater flexibility in servicing our customer base.

Current wording

UNIFI has been expanding its supply chain and business model across multiple geographies over the last several years. Particularly, (i) our feedstock supply spans multiple domestic and foreign markets, (ii) our commercial position in the Central American market remains key to servicing compliant business for USMCA and CAFTA-DR programs, and (iii) we have expanded our asset light model beyond China, most recently with the addition of Unifi Textiles India in October 2024. Each of these initiatives affords us diversity in this dynamic trade environment and greater flexibility in servicing our customer base.

Previous wording

Specific to other ongoing geopolitical tensions, we recognize the disruption to global markets and supply chains caused by the conflicts in Ukraine and the Middle East, and we have not been impacted. 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 additional unforeseen adverse impacts.

Current wording

Specific to other ongoing geopolitical tensions, we recognize the disruption to global markets and supply chains caused by the conflicts in Ukraine and the Middle East, however we have not been directly impacted. 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 additional unforeseen adverse impacts.

Previous wording

Despite lower input and freight costs and a marginally more stable labor pool recently, global demand volatility and uncertainty continued into fiscal 2025. 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, gross profit, and operating cash flows. 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.

Current wording

Despite lower input and freight costs and a marginally more stable labor pool recently, global demand volatility and uncertainty continued into fiscal 2026. The threat of an economic slowdown 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, gross profit, and operating cash flows. 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.

Previous wording

In the third quarter of fiscal 2025, UNIFI incurred various transition costs totaling $2,900 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs of $1,088, (ii) inventory write-downs of $1,000, (iii) excess manufacturing costs of $580, and (iv) employee separation or retention costs of $232. The facility closure, equipment relocation, employee separation and retention costs were all recorded within Restructuring costs and the inventory write-downs and excess manufacturing costs were recorded within Cost of sales in the Condensed Consolidated Statements of Operations. The associated tax impact was estimated to be $0 due to a valuation allowance against net operating losses in the U.S.

Current wording

In the first quarter of fiscal 2026, UNIFI incurred various transition costs totaling $1,068 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs (including asset impairments and disposals) of $1,021, and (ii) employee separation costs of $47. The facility closure, equipment relocation, and employee separation costs were all recorded within Restructuring costs in the Condensed Consolidated Statements of Operations. The associated tax impact was estimated to be $0 due to a valuation allowance against net operating losses in the U.S.

Previous wording

Consolidated net sales for the current period decreased by $2,439, or 1.6%, and consolidated sales volumes decreased by 0.9%, compared to the prior period. Net sales in the current period were lower primarily due to lower sales volumes and a weaker sales mix in Asia, partially offset by improved sales volumes in the Americas Segment, along with favorable pricing and market share gains in Brazil. Despite these sales volume improvements, volumes remain depressed, particularly in the Americas and Asia Segments as a result of continued weak global demand.

Current wording

Consolidated net sales for the current period decreased by $11,698, or 7.9%, and consolidated sales volumes decreased 5.2%, compared to the prior period. Net sales in the current period were lower primarily due to (i) lower sales volumes and lower-priced sales mix in the Asia Segment and (ii) lower sales volumes and prices in the Brazil Segment. Overall sales remain depressed, particularly in the Americas and Asia Segments as a result of continued volatility from uncertainty over global trade policies and competition from lower-priced products.

Previous wording

Consolidated weighted average sales prices decreased 2.3% which partially offset the volume increase. The decrease in sales prices was primarily attributable to sales mix and lower average selling prices in the Asia and Americas Segments, together with unfavorable foreign currency translation effects from the weakening of the BRL versus the USD within our Brazil Segment.

Current wording

Consolidated weighted average sales prices decreased 2.7%. The decrease in sales prices was primarily attributable to sales mix and lower average selling prices in the Asia and Brazil Segments.

Previous wording

REPREVE® Fiber products for the current period comprised 31%, or $44,699, of consolidated net sales, compared to 31%, or $46,754, for the prior period.

Current wording

REPREVE® Fiber products for the current period comprised 29%, or $39,272, of consolidated net sales, compared to 30%, or $44,742, for the prior period.

Previous wording

For the Asia Segment, gross profit decreased primarily due to lower conversion margins from an unfavorable change in sales mix in a weak demand environment.

Current wording

For the Asia Segment, gross profit decreased primarily due to (i) lower sales volumes and (ii) lower conversion margins from an unfavorable change in sales mix.

Previous wording

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

Current wording

SG&A did not change meaningfully from the prior period to the current period, nor did the change include any significant offsetting impacts. Actions from the Fiscal 2026 Profit Improvement Plan are expected to reduce SG&A in future fiscal quarters.

Previous wording

On February 3, 2025, UNIFI announced the closing of its Madison, North Carolina facility and the transition of those manufacturing operations to other UNIFI production facilities in North and Central America. As a result, UNIFI incurred restructuring costs of $1,320 in the current period which consisted of (i) equipment relocation and facility closure costs of $1,088 and (ii) employee separation or retention costs of $232.

Current wording

On February 3, 2025, UNIFI announced the closing of its Madison, North Carolina facility and the transition of those manufacturing operations to other UNIFI production facilities in North and Central America. As a result, UNIFI incurred transition costs of $1,068 in the current period which consisted of (i) equipment relocation and facility closure costs (including asset impairments and disposals) of $1,021 and (ii) employee separation costs of $47. There were no Restructuring costs for the prior period.

Previous wording

Other operating expense, net for the current nine-month period and the prior nine-month period include foreign currency transaction losses of $218 and $395, respectively, with no other meaningful activity.

Current wording

Other operating expense, net for the current period and the prior period include foreign currency transaction losses of $50 and $489, respectively, with no other meaningful activity.

Previous wording

The increase in the effective tax rate from the prior period to the current period is primarily attributable to lower foreign earnings and higher losses in the U.S.

Current wording

The increase in the effective tax rate from the prior period to the current period is primarily attributable to a large decrease in foreign earnings in the current period.

Previous wording

The decrease in net loss was primarily attributable to (i) lower gross profit and (ii) restructuring costs in the current period, partially offset by (a) lower bad debt expense and (b) lower income tax expense.

Current wording

The increase in net loss was primarily attributable to (i) decreased gross profit and (ii) restructuring costs incurred in the current period, partially offset by (a) lower interest expense, net, and (b) lower income tax expense.

Previous wording

Adjusted EBITDA and Adjusted EPS were lower compared to the prior period primarily due to lower gross profit, partially offset by lower bad debt expense.

Current wording

Adjusted EBITDA and Adjusted EPS decreased primarily due to lower gross profit.

Previous wording

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:

Current wording

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 Americas Segment, were as follows:

Previous wording

The increase in net sales for the Americas Segment from the prior nine-month period to the current nine-month period was primarily attributable to higher sales volumes, partially offset by a lower-priced sales mix. Both periods were unfavorably impacted by the continued weak global textile demand environment.

Current wording

The slight decrease in net sales for the Americas Segment from the prior period to the current period was primarily attributable to a lower-priced sales mix which was partially offset by higher sales volumes. Both periods were unfavorably impacted by the continued volatile global textile demand environment resulting from tariff uncertainty.

Previous wording

The increase in Segment Profit for the Brazil Segment from the prior nine-month period to the current nine-month period was primarily attributable to (i) higher conversion margins and (ii) an increase in sales volumes discussed above, partially offset by unfavorable foreign currency translation effects. We continue to prioritize innovation and differentiation to improve our portfolio and competitive position in Brazil.

Current wording

The decrease in Segment Profit for the Brazil Segment from the prior period to the current period was primarily attributable to (i) lower conversion margins primarily due to sales mix and pricing pressures, and (ii) a decrease in sales volumes discussed above, partially offset by favorable foreign currency translation effects from the strengthening of the BRL versus the USD. We continue to prioritize innovation and differentiation to improve our portfolio and competitive position in Brazil.

Previous wording

The decrease in Segment Profit for the Asia Segment from the prior nine-month period to the current nine-month period was attributable to a decline in gross margin rate associated with a change in sales mix of REPREVE products.

Current wording

The decrease in Segment Profit for the Asia Segment from the prior period to the current period was primarily attributable to a decline in gross margin associated with (i) lower sales volumes discussed above and (ii) a change in sales mix of REPREVE products.

Previous wording

UNIFI’s primary capital requirements are for working capital, capital expenditures, and debt service. UNIFI’s primary sources of capital are cash generated from operations, borrowings available under the 2022 Credit Agreement and the 2024 Facility. For the current nine-month period, cash used by operations was $19,994 and, at March 30, 2025, availability under the ABL Revolver and 2024 Facility was $45,114 and $597, respectively.

Current wording

UNIFI’s primary capital requirements are for working capital, capital expenditures, and debt service. UNIFI’s primary sources of capital are cash generated from operations, borrowings available under the 2022 Credit Agreement and the 2024 Facility. For the current period, cash used by operations was $8,920 and, at September 28, 2025, availability under the ABL Revolver and 2024 Facility was $36,233 and $586, respectively.

Previous wording

As of March 30, 2025, all of UNIFI’s $140,002 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.

Current wording

As of September 28, 2025, all of UNIFI’s $120,345 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.

Previous wording

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.

Current wording

We feel that our current liquidity position is sufficient 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.

Previous wording

availability under the 2024 Facility was $597 as of March 30, 2025;

Current wording

availability under the 2024 Facility was $586 as of September 28, 2025;

Previous wording

availability exceeding the Trigger Level (as defined in the 2022 Credit Agreement) under the ABL Revolver was $27,684;

Current wording

availability exceeding the Trigger Level (as defined in the 2022 Credit Agreement) under the ABL Revolver was $19,733;

Previous wording

the Trigger Level under the ABL Revolver was $17,430; and

Current wording

the Trigger Level under the ABL Revolver was $16,500; and

Previous wording

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 facilities will enable UNIFI to meet its foreseeable liquidity requirements. 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 believes its operations in Asia and Brazil are in a position to obtain local country financing arrangements due to the operating results of each subsidiary.

Current wording

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, expected cash provided by operating activities, and credit facilities will enable UNIFI to meet its foreseeable liquidity requirements. 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 believes its operations in Asia and Brazil are in a position to obtain local country financing arrangements due to the operating results of each subsidiary.

Previous wording

The increase in Net Debt primarily reflects the use of operating cash during fiscal 2025 and capital expenditures during the current nine-month period. The increase was partially offset by the application of proceeds to the ABL Revolver for the warehouse sale in October 2024.

Current wording

The increase in Net Debt primarily reflects the use of operating cash and capital expenditures during the current period.

Previous wording

Adjusted Working Capital decreased $2,222 from June 30, 2024 to March 30, 2025.

Current wording

Adjusted Working Capital increased $8,106 from June 29, 2025 to September 28, 2025.

Previous wording

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

Current wording

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

Previous wording

The decrease in operating cash flows was due to the relative changes in working capital including receivables, net, inventories, and accounts payable and other current liabilities, partially offset by an improvement in earnings in the current nine-month period compared to the prior nine-month period.

Current wording

The change in operating cash flows was due to the diligent reduction of inventory balances, partially offset by reductions in accounts payable and other current liabilities together with lower earnings from gross profit in current period compared to the prior period.

Previous wording

For the current nine-month period, the increases in accounts receivable and inventories were largely driven by the improvement in sales and timing of cash receipts. The increase in accounts payable and other current liabilities was largely due to increased accruals for employee compensation.

Current wording

For the current period, the increases in accounts receivable was largely driven by the timing of cash receipts. The decrease in accounts payable and other current liabilities was largely due to lower production activity, variable cost savings initiatives, and satisfaction of incentive compensation liabilities. The increase in inventories was not meaningful. Other changes comprise mostly jurisdictional tax liabilities.

Previous wording

For the prior nine-month period, the decrease in inventories was primarily due to lower weighted average costs. The decrease in accounts receivable was largely driven by the decrease in sales and timing of cash receipts. The increase in accounts payable and other current liabilities was largely due to the liabilities recorded for severance and employee compensation.

Current wording

For the prior period, the increase in inventories was primarily due to higher on hand units. The decrease in accounts receivable was largely driven by the decrease in sales and timing of cash receipts. The increase in accounts payable and other current liabilities was not meaningful.

Previous wording

Investing activities primarily include $7,915 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. In March 2023, UNIFI amended certain existing contracts related to future purchases of texturing machinery by delaying the scheduled receipt and installation of such equipment in the U.S. and El Salvador by 18 months. In December 2023, UNIFI extended this delay by an additional 12 months at no cost to the Company.

Current wording

Investing activities primarily include $2,029 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.

Previous wording

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 2024 Form 10-K except for the $22,000 of borrowings on the 2024 Facility, which matures October 28, 2027.

Current wording

Except for the $3,705 of new finance leases commencing during the three months ended September 28, 2025, 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 2025 Form 10-K.