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 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.

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 December 28, 2025, while a reference to the “prior period” refers to the three-month period ended December 29, 2024. A reference to the “current six-month period” refers to the six-month period ended December 28, 2025, while a reference to the “prior six-month period” refers to the six-month period ended December 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. The current six-month period and the prior six-month period each consisted of 26 weeks.

Previous 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.

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 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, 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.

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. Additionally, we are closely monitoring developments in Latin America and the Caribbean following recent U.S. military action in Venezuela. It is too early to determine how this situation may evolve or what implications it could have for UNIFI, but no direct impacts have occurred in fiscal 2026. We will continue to assess developments and react as appropriate. 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

UNIFI has implemented additional cost savings initiatives that include reducing variable manufacturing costs across labor, spend, and support functions, while also eliminating a meaningful percentage of salaried positions in the U.S. ("Fiscal 2026 Profit Improvement Plan"). Accordingly, UNIFI expects to incur restructuring charges in the second quarter of fiscal 2026 of between $500 and $1,000, primarily relating to severance costs.

Current wording

During October 2025, UNIFI implemented additional cost-saving initiatives that include reducing variable manufacturing costs across labor, spend, and support functions, while also eliminating salaried positions in the U.S. ("Fiscal 2026 Profit Improvement Plan"). Accordingly, UNIFI recorded employee separation costs of $1,093 in connection with the Fiscal 2026 Profit Improvement Plan and a $308 gain from disposals of assets from the consolidation of Americas yarn manufacturing operations.

Previous wording

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

Current wording

a reconciliation from net loss to EBITDA and Adjusted EBITDA.

Previous 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.

Current wording

REPREVE® Fiber products for the current period comprised 28%, or $34,264, of consolidated net sales, compared to 31%, or $43,272, for the prior period.

Previous wording

For the Americas Segment, gross profit decreased primarily due to (i) demand and production volatility stemming from tariff uncertainty and (ii) lower conversion margins from a lower-priced sales mix, partially offset by variable cost saving initiatives.

Current wording

For the Americas Segment, gross profit increased primarily due to variable cost-saving initiatives, partially offset by (a) demand and production volatility stemming from tariff uncertainty and inventory management efforts from customers and (b) a weaker sales mix.

Previous 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.

Current wording

Other operating expense, net for the current period and the prior period included foreign currency transaction losses (gains) of $325 and $(221), 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 a large decrease in foreign earnings in the current period.

Current wording

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

Previous 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:

Current wording

The components of Segment Profit (Loss), 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

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.

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, net in the Condensed Consolidated Statements of Operations.

Previous 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.

Current wording

Consolidated net sales for the current six-month period decreased by $29,210, or 10.2%, and consolidated sales volumes decreased 7.5%, compared to the prior six-month period. Net sales in the current six-month period were lower primarily due to (i) lower sales volumes in the Asia Segment, (ii) lower-priced sales mix in the Americas Segment, and (iii) 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 2.7%. The decrease in sales prices was primarily attributable to sales mix and lower average selling prices in the Asia and Brazil Segments.

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 Americas and Brazil Segments.

Previous wording

Gross profit for the current period decreased to $3,387 from $9,458 in the prior period. Gross profit decreased primarily due to (i) lower sales volumes, (ii) lower overall conversion margins and (iii) production volatility from an inability to forecast demand due to the tariff uncertainty in the Americas Segment. The decrease was partially offset by (a) variable cost saving initiatives and (b) improved utilization in certain manufacturing areas. Gross profit continues to be unfavorably impacted by demand volatility in the Americas Segment and import pricing pressures in the Brazil Segment.

Current wording

Gross profit for the current six-month period decreased to $6,998 from $9,992 in the prior six-month period. Gross profit decreased primarily due to (i) lower sales volumes, (ii) lower overall conversion margins and (iii) production volatility from an inability to forecast demand due to the tariff uncertainty in the Americas Segment. The decrease was partially offset by (a) variable cost-saving initiatives and (b) improved utilization in certain manufacturing areas. Gross profit continues to be unfavorably impacted by demand volatility in the Americas Segment and import pricing pressures in the Brazil Segment.

Previous 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.

Current wording

For the Asia Segment, gross profit decreased primarily due to lower sales volumes.

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 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.

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 six-month 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 six-month period.

Previous 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.

Current wording

The increase in net loss was primarily attributable to (i) decreased gross profit and (ii) restructuring costs, net incurred in the current six-month period and (iii) a gain on sale of assets in the prior six-month period, partially offset by (a) lower SG&A expenses, (b) lower interest expense, net, and (c) lower income tax expense.

Previous wording

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

Current wording

Adjusted EBITDA decreased primarily due to lower gross profit, partially offset by lower SG&A. Adjusted EPS improved primarily due to (i) lower interest expense and (ii) income tax expense.

Previous wording

The decrease in Segment Profit for the Americas Segment from the prior period to the current period was primarily attributable to lower productivity, partially offset by higher sales volumes.

Current wording

The decrease in net sales for the Americas Segment from the prior six-month period to the current six-month period was primarily attributable to a lower-priced sales mix which was partially offset by higher sales volumes.

Previous wording

The decrease in net sales for the Asia Segment from the prior period to current period was primarily attributable to (i) an overall decrease in sales volumes due to competitive pricing pressures and the continued volatility introduced by recent tariffs and (ii) a change in sales mix of REPREVE products.

Current wording

The decrease in net sales for the Asia Segment from the prior six-month period to current six-month period was primarily attributable to (i) an overall decrease in sales volumes due to competitive pricing pressures and the continued volatility introduced by recent tariffs and (ii) a change in sales mix of REPREVE products.

Previous 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.

Current wording

The decrease in Segment Profit for the Asia Segment from the prior six-month period to the current six-month period was primarily attributable to a decline in sales volumes as discussed above.

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 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.

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 and borrowings available under the 2022 Credit Agreement and the 2024 Facility. For the current six-month period, cash provided by operations was $16,362 and, at December 28, 2025, availability under the ABL Revolver and 2024 Facility was $34,329 and $583, respectively.

Previous 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.

Current wording

As of December 28, 2025, all of UNIFI’s $105,405 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

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

Current wording

availability under the 2024 Facility was $583 as of December 28, 2025;

Previous wording

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

Current wording

availability exceeding the Trigger Level (as defined in the 2022 Credit Agreement) under the ABL Revolver was $17,829;

Previous wording

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

Current wording

The decrease in Net Debt primarily reflects the generation of operating cash flows during fiscal 2026, aided by reduced levels of capital expenditures.

Previous wording

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

Current wording

Adjusted Working Capital decreased $17,830 from June 29, 2025 to December 28, 2025.

Previous wording

The increase in Adjusted Working Capital was primarily attributable to the reductions in (i) accounts payable primarily due to lower production activity and variable cost savings initiatives and (ii) other current liabilities due primarily to the payment of incentive compensation earned in fiscal 2025 together with increases in (a) inventories due to higher units on hand and (b) receivables, net due to the timing of cash receipts. These were partially offset by a decrease in other current assets primarily prepaid expenses and vendor deposits.

Current wording

The decrease in Adjusted Working Capital was primarily attributable to the decreases in (i) inventories due to lower units on hand, (ii) receivables, net due to lower sales and the timing of cash receipts, and (iii) other current assets primarily due to lower vendor deposits and value-added taxes receivable. These were partially offset by reductions in (a) accounts payable primarily due to lower production activity and variable cost-saving initiatives and (b) other current liabilities due primarily to the payment of incentive compensation earned in fiscal 2025.

Previous wording

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

Current wording

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

Previous 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.

Current wording

For the current six-month period, the decreases in accounts receivable was largely driven by a decrease in sales and the timing of cash receipts. The decrease in inventories was driven by concerted efforts to reduce inventory levels in response to the lower demand environment. The decrease in accounts payable and other current liabilities was largely due to lower production activity, variable cost-saving initiatives, and the payment of incentive compensation liabilities. Other changes comprise mostly decreases in income tax receivables and other current assets due to the utilization of tax credits, an income tax refund, and lower vendor deposits in Brazil.

Previous 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.

Current wording

For the prior six-month period, the decreases in accounts payable and other current liabilities was primarily due to seasonally lower production activity which included scheduled holiday shutdown periods. Inventories increased primarily due to higher average unit costs. Other changes comprised mostly of higher vendor deposits and recoverable value added taxes (following the increased value of inventories). The decrease in accounts receivable was largely driven by the decrease in sales and timing of cash receipts.

Previous 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.

Current wording

Investing activities primarily include $3,084 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

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

Current wording

Financing activities primarily include principal payments on the ABL Term Loan and finance leases.

Previous 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.

Current wording

Except for the $3,705 of new finance leases that commenced during the six months ended December 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.