Unifi Inc (UFI) 2013 Q4 法說會逐字稿

Good morning. My name is Therese, I will be your conference operator today. At this time, I would like to welcome everyone to the Unifi fourth quarter and year-end earnings conference call. All lines have been placed on mute to prevent any background noise.

After the speakers remarks, there will be a question and answer session. (Operator Instructions) Thank you. I would now turn the conference over to Ron Smith, Chief Financial Officer.

Thanks, Therese, and good morning, everyone. Joining me for the call today is Bill Jasper, our Chairman and Chief Executive Officer, and Roger Berrier, President and Chief Operating Officer.

During this call, we will be referencing a webcast presentation that can be found at Unifi.com. The presentation can be accessed by clicking the fourth quarter conference call link found on our homepage.

Before we begin, I need to first advise you that certain statements included herein will be forward-looking statements within the meaning of federal securities laws. Management cautions that these statements are based on current expectations, estimates, and/or projections about the markets in which the Company operates. Therefore, these statements are not guarantees of future performance and involve certain risks that are difficult to predict.

Actual outcomes and results may differ materially from what is expressed, forecasted, or implied by these statements, and I direct you to the disclosures filed with the SEC and our Form 10-Qs and 10-Ks regarding various factors that may impact these results.

Also, please be advised that certain non-GAAP financial measures such as adjusted EBITDA, will be discussed on this call and a non-GAAP reconciliation can be found in the schedules to the website presentation. Before we get to the financial details to for the quarter, I'd like to turn the call over to Roger, who will provide an overview of the markets and raw material trends. Roger?

Thanks, Ron, and good morning, everyone. Overall, economic growth continued at a slow pace in the June quarter as consumers scaled back spending amid higher payroll taxes and weak growth in wages.

Beyond replacing aging cars, which continued at a very strong pace, consumers remain cautious about buying anything other than the basics. But such basics include many apparel and hosiery items that our products go into.

Economists remain hopeful that the overall economy will pick up in the second half of the year, as improvements on the job front, rising home prices, and this year's rally in the stock market all began to bolster overall consumer confidence ahead of the back-to-school and holiday selling season.

Looking at the largest market segment related to our products, retail sales in the apparel segment increased 5.3% in the June 2013 quarter compared to the June 2012 quarter, and improved 2% over the March 2013 quarter. After two consecutive years of declines in apparel consumption on a square meter fabric basis, current projections indicate growth of up to 5% in 2013 calendar year, compared to 2012, with increases in synthetic apparel outpacing increases in cotton apparel.

Growth in square meters of fabric is an indication that more units of apparel are being sold, and this will help create future demand for our products.

Regional sourcing of synthetic apparel, which includes NAFTA and CAFTA, has increased steadily since 2009. And we estimate that the region will maintain its share of total synthetic apparel consumption of approximately 18% for the fifth consecutive year. With the region holding share and a 5% growth in total apparel consumption, specifically on a square meter equivalent basis, this leads to future volume opportunities for the Company.

Looking at the automotive segment, the current annualized rate of new car and truck sales is the best rate since December 2007. And auto industry executives believe that the conditions for continued growth in new vehicle sales will remain for the balance of the year.

We are very pleased with the amount of development work that we have in place with REPREVE, which is our flagship premier value-added product among automakers such as Ford, that are looking to make their vehicles more environmentally responsible. We continue to supply several of our traditional commodity products into the automotive fabric markets as well.

Although year-over-year residential housing starts and completions have increased 10% and 20%, respectively, retail sales dollars for home furnishings have not matched this pace. Retail sales of home furnishings for the June 2013 quarter increased 2.7% compared to the June 2012 quarter. And the level of year-over-year increases in this segment remain much lower than the improvements in either the apparel or the automotive segments.

In terms of raw materials, prices in North America increased more sharply than expected in January and February, resulting in significant margin deterioration, as we temporarily shared in the negative impact of higher prices with our customers. As the March quarter ended, we instituted across the board price increases based on the higher raw material prices in order to recover the margins lost in the March quarter.

As we moved out of the March quarter, raw material prices moderated as capacity for our primary ingredients came online and became more stable. The timing effect of the Company's sales price adjustments that were made in response to raw material prices resulted in a 530 basis point improvement in our gross profit in the June 2013 quarter, as we recovered the lost margins from the March quarter.

We don't expect to consistently hold these margins going forward and, based on the raw material decrease in April, some sales prices are being revised to maintain market competitiveness as we move through the first quarter of fiscal 2014.

The gap in polymer pricing between the US and Asia reduced to approximately $0.13 per pound in the June 2013 quarter compared to approximately $0.14 per pound in the March 2013 quarter. Although we don't expect much change in either raw material prices or the polymer pricing gap, in our September 2013 quarter, we are anticipating more stability in raw material pricing in fiscal 2014, based on the current visibility we have on global raw material supply/demand balance. This is assuming that there are no major plant disruptions that produce the key raw materials for our products.

Turning to our Brazil business, the overall results for the fiscal 2013 year, we are still below expectations despite sales volume improvements of 5.5% versus fiscal year 2012. Several challenges during the year were high inflation, changes in the local incentive programs, and continued pressure from cheap, imported textured yarn.

Our focus on mix enrichment helped contribute to the improving trends that we are seeing in Brazil, along with the reduction in the POY import duty that the Brazilian government implemented during the fourth quarter that reduces the raw material cost for our operation.

We anticipate the volume of improvements to continue into the next year and we have implemented price increases to recover margins, due to the negative impact of changes in the local incentive program. With these initiatives, we expect to continue the improving trend in Brazil.

In China, volume and margin improved by approximately 20% in fiscal year 2013 compared to fiscal year 2012. Given the general soft market conditions in China, our improved financial results speak to the success that we have been having with our premier value-added products.

Looking at the opportunities that are either in development or under consideration with our customers in China, we expect our mix to contribute to further improvements in our financial performance in fiscal year 2014.

We continue to have success with our premier value-added products in fiscal year 2013, driven primarily by REPREVE. Within the past 12 months, we have told you about many exciting adoptions with leading brands and retailers. In the action sports category, which we supported with our sponsorship of the X Games in January, we announced programs with brands such as Quicksilver, Volcom, Roxy, Vitamin A, and Eco Swim.

We have launched or expanded our PVA business in the menswear category with brands including Dockers, Lee, Haggar, Eddie Bauer, and Izod. We also made inroads into the womenswear market in the past year with [Bays La Fleur], which is a manufacturer of high-end denim. And we continued to expand our relationship with Ford.

Based on these programs and those that we have in development, we continue to be confident that we are on the path to double our global sales of premier value-added yarn by the end of fiscal year 2014 compared to the end of fiscal [2010 year]. We continued several new developments with brands and retailers and expect to continue our PVA growth of 20%-plus per year. However, we are rapidly moving toward reaching the capacity of our REPREVE recycling center in Yadkinville, so we are expanding our capacity to produce more REPREVE and other PVA products.

These plants include adding a third line in our REPREVE recycling center, as well as exploring manufacturing relationships that will assist us in expanding our REPREVE product portfolio. We are also enhancing our manufacturing flexibility by adding more chip storage silos and dryers, and expanding our machinery flexibility by retrofitting more PLI equipment for small lot, high flexibility to support our mix enrichment, PVA strategy and growth.

Over the next two years, we are allocating $14 million for these domestic initiatives, which is in addition to our standard $7 million to $8 million per year of routine maintenance CapEx. This will bring the annual CapEx to $14 million per year for the next two years versus our normal $7 million to $8 million per year.

We will also continue to evaluate opportunities in 2014 fiscal year that allow us to market REPREVE directly to consumers, as it not only continues to build awareness for REPREVE among target consumers, it also helps sustain momentum for REPREVE, brands and retailers by raising its visibility and credibility.

We are working with ESPN again on opportunities to promote REPREVE at the Winter X Games in Aspen in January 2014, and continuing to build the REPREVE brand recognition and brand awareness through these initiatives. With that as a backdrop, I will return the call back over to Ron.

Thanks, Roger. I'll begin the review of our preliminary financial results for the June 2013 quarter on page 3 of the presentation, with net sales and gross profits highlights by segment.

In the polyester segment, we had another strong June quarter with volume growing 16% compared to the March 2013 quarter. Compared to the prior year June quarter, volume increased primarily as a result of the 14th operating week in our fiscal quarter, as 2013 is the [physical] year containing 53 operating weeks. The increase in gross profit in the June quarter is primarily attributable to the additional volume and the significant increase in conversion margins during the quarter, related to the timing effect of the Company's sales price adjustments in North America and the growth of the -- of our PVA products Roger discussed earlier.

In the nylon segment, volumes increased and price decreased as a result of stable pricing with a shift in mix toward products that carry a lower average selling price. Volumes were also impacted by the additional operating weeks in the June 2013 quarter.

In the international segment, volume increased 6.4% in the June quarter compared to the June 2012 quarter as a result of improved operating conditions in both Brazil and China. While gross profit in Brazil improved on a local currency basis, despite the loss of certain incentives for local producers, gross profit for the quarter on a US dollar basis remained unchanged as the average exchange rate weakened from BRL1.96 to the dollar in the June 2012 quarter to BRL2.07 in the June 2013 quarter.

Gross profit improved in China as we increased our product offerings and widened our customer base.

Turning to our income statement highlights for the June 2013 quarter on page 4, the Company is reporting net income of $10.5 million or $0.54 per share on net sales of $200.7 million for the June 2013 quarter. On a consolidated basis, gross profit increased 320 basis points based on the 7% increase in consolidated sales volumes, higher conversion margins related to the Company's price adjustments and PVA sales growth mentioned earlier, and the Company's ongoing improvement efforts to reduce per unit manufacturing costs.

Interest expense declined $2.8 million for the quarter as a result of the Company's deleveraging strategy, which has dramatically lowered our debt levels and significantly reduced our interest carrying costs. Net income for the current quarter was negatively impacted by a $2.5 million increase in SG&A expenses related to variable compensation and marketing investments to support REPREVE and other PVA products.

Net income in the June 2013 quarter was also negatively impacted by a net increase in income tax expense of $10.3 million compared to the June 2012 quarter, which included an unusual item related to the Company's adjustment of its valuation allowance for certain deferred taxes.

Turning to the income statement, highlights for the full fiscal year on page 5, the Company is reporting net income of $16.6 million, or $0.84 per share, on net sales of $714 million for the 2013 fiscal year and improvement over net income of $11.5 million, or $0.57 per share on net sales of $705 million for the prior fiscal year.

Gross profit for the fiscal 2013 year improved 250 basis points compared to the 2012 fiscal year. As our international segment continued to recover from a slow 2012 fiscal year, average raw material prices in North America were down slightly for the full year and we continued to realize the benefits of our mix enrichment and cost improvement programs.

For the 2013 fiscal year, interest expense decreased $11.6 million as we saw a full year benefit from our previously completed deleveraging strategy, but income taxes increased $15.3 million. Net income in the 2013 fiscal] year was also negatively impacted by an $8.3 million decrease in earnings from the company's equity affiliates.

Turning to our equity affiliates highlight on page 6, the Company's earnings from Parkdale America decreased slightly in the June 2013 quarter, but decreased $9.9 million for the fiscal year. For the year, Parkdale Americas results were negatively impacted by inventory destocking of several large customers earlier in the year, the timing of deferred revenue recognition related to the EAP cotton rebate program, and a $0.01 per pound reduction in the rebate program.

However, we believe that Parkdale America has returned to more normal operating conditions and run rates as shown by their improving performance over the past six months. Going forward, their performance should benefit from an expected increase in cotton apparel imports of approximately 4% in calendar year 2013 compared to 2012, which will reverse two consecutive years of declines and raw material prices that have moderated since their run-up in the March 2013 quarter.

Distributions from Parkdale America totaled $3.4 million during the quarter and $13.4 million for the fiscal year. For the 2013 fiscal year earnings from the Company's nylon POY joint ventures increased $1.6 million while distributions for the year increased $0.5 million.

Turning to page 7, adjusted EBITDA for the June 2013 quarter was $18.3 million, which exceeds the $15 million to $17 million estimate provided on our earnings call in April, thanks to the better than expected operating margins discussed earlier.

Included in the add-backs to adjusted EBITDA for the June 2013 quarter, was $1.1 million of restructuring costs, primarily related to the departure of the Company's former general counsel during the quarter. Adjusted EBITDA for the 2013 fiscal year was $52.7 million, an improvement of $12.9 million over the prior fiscal year and within the [low 50s] range provided at the beginning of the year and reconfirmed on our quarterly earnings calls throughout the year.

Turning to the working capital highlights slide on page 8, adjusted working capital increased $4.4 million during the June 2013 quarter as sales volumes increased and the increase in inventory units outpaced the raw material price declines. The build in inventory was primarily in Brazil to support the improving business there. However, the impact of the increase was minimized in Brazil, due to the net effect on working capital of the weakened real in Brazil. The increase in payables and accrued expenses were primarily timing related.

Turning to the capital structure highlights on page 9, for the 2013 fiscal year the Company utilized $50.5 million of cash generated from operating activities and distributions from equity affiliates to repurchase 1.1 million shares of the Company's common stock for $19.3 million or an average price of just over $18 per share. And it reduced its outstanding debt by $23.8 million.

As of June 30, 2013, cash on hand was $8.8 million, total debt was $97.8 million, and we have 19.2 million shares currently outstanding.

During the June quarter, the Company also amended its bank credit facility, which consists of a $100 million revolving credit facility and a $50 million term loan. The amendment extends the maturity of the entire facility to May 2018, eliminates scheduled quarterly principal payments, reduces the borrowing rate of the term loan, and removes share repurchases and certain optional debt prepayments from our fixed charge coverage ratio calculation.

The amendment also provides for the reload of the term loan from its balance at June 30, 2013 of $42.8 million, back to its original balance of $50 million, subject to the completion of certain appraisals that have since been obtained. As a result, the reload of the term loan back to $50 million is now effective. More generally, we believe the amendment provides additional stability to our long-term capital structure and significantly improves our financial flexibility and related capacity to execute on our strategic plans for the future.

Before I turn the call back over to Bill, I would like to provide an update on some key upcoming dates, which can be found on page 10. We expect to file the results for the 2013 fiscal year and our Form 10-K before the filing deadline, which is Friday, September 13.

And our quiet period will begin on Friday, September 27 and extend through our earnings release conference call, which is currently scheduled for October 24. We also plan to have an investor day on Monday, September 16, and we have the contact information there for Rebecca for any of you guys to contact, for anyone who is interested.

With that, I'd like to turn the call back over to Bill. Bill?

Thanks, Ron, and good morning, everyone. I'd like to start my comments today with a brief look at the global economy, including those areas of the world that impact our business most.

World Bank estimates that global GDP is set to grow at 2.2% in 2013, a pace that is slightly lower than a 2.3% registered last year. In their most recent report, the World Bank said the global economy appears to be transitioning toward a period of more stable, but slower growth with projected global growth of 3% in 2014 and 3.3% in 2015.

In Brazil, the Central Bank recently cut its growth forecast down to 2.7% from 3.1% for 2013 and estimates that inflation could reach 6% as the real has posted significant decline against the dollar. However, GDP growth projections for Brazil will improve -- or, sorry -- expected to improve with an estimate from the World Bank of 4% for 2014 and 3.8% in 2015.

The weakening of the real has helped make us, as a domestic producer in Brazil, more competitive at the commodity end of our business while our focus on process improvement, mix enrichment, and sales price management contributed to improvements in our operating results as the 2013 fiscal year progressed. The continuation of these strategies, along with the reduction in the POY import duty that Roger mentioned earlier, should help us maintain positive momentum in Brazil as we enter the 2014 fiscal year.

China's economy is expected to grow 7.6% in the second half of calendar year 2013. Though slower than previous years, it is an indication that China's economic growth at least remains fundamentally stable. According to the World Bank, GDP growth for China is projected to be 8% in 2014 and 7.9% in 2015.

A positive indicator for our business in China is that, after GDP declines in the European Union in 2012 and 2013, the World Bank estimates GDP growth slowly strengthening to 0.9% in 2014 and to about 1.5% in 2015. We believe that an economic recovery in Europe, although slow and tenuous, should result in improving demand for our PVA products, primarily those supplied from UTSC, our Chinese trading company.

Although commodity textile activity in China will remain soft in the next fiscal year, we feel confident that our PVA business will continue to strengthen based on the number of current and planned development projects. We are very pleased with the volume and margin improvements in China in fiscal year 2013 and we expect the overall financial performance of UTSC will improve in fiscal 2014 and 2015.

Here in the US, the GDP growth estimates for 2013 is about 2%, then strengthening to 2.8% in 2014 and 3% in 2015. As Roger mentioned earlier, consumers have limited their spending to the basics, such as apparel and hosiery, and retail sales have benefited from this, increasing 4.1% in the first six months of the calendar year compared to last year.

Another trend that bodes well for our business going forward is the growth in share of synthetic apparel compared to cotton apparel. In 2008, synthetic apparel had a 38% share of total apparel consumption in the US. That share is expected to be 49% in 2013. Coupled with growth of apparel sold at retail and a stable regional share of US synthetic apparel at about 18%, we believe the conditions are favorable for continued improvements in our North American operations.

We are also encouraged by the cost and supply projections for raw materials over the next few years. Although we expect limited relief in raw material prices in the near term, we do expect to see less volatility in raw material pricing in fiscal 2014 compared to the last two years and continued moderation over time. A more stable raw material environment, coupled with our sales price management strategies, should provide more consistency in our gross margins throughout the 2014 fiscal year.

Of course, the outlook for raw materials assumes there are no major unplanned disruptions at refineries or natural disasters that impact the plants producing key raw materials for our products.

Turning to our financial strength, as Ron mentioned we are very pleased by the results of our deleveraging strategy, which we accomplished with a focused, disciplined approach over the last several years. The strength and liquidity of our domestic business now provides the foundation needed to support our operational needs, fund future growth initiatives, and enable us to execute our stock repurchase plan.

During the 2013 fiscal year, the Company utilized cash generated from operations and distributions from equity affiliates to repay $24 million of outstanding debt and, as Ron mentioned, repurchase 1.1 million shares of the Company's common stock. In addition, we further improved our operating flexibility in 2013 quarter by amending our bank credit facility, as Ron mentioned earlier.

With that strong foundation, the Company will continue its rigorous improvement programs and evaluation of every feasible opportunity to increase our capacity and flexibility in order to support the growth of our PVA global product portfolio.

Last quarter we announced a $14 million investment over the next two years to expand our recycling capacity, increase flexibility of our existing asset base, and improve our small lot production run capability. And the development and planning for those projects are underway.

Turning now to REPREVE Renewables, our bioenergy feedstock JV, which is commercialized in a proprietary and patented bioenergy crop, Freedom Giant Miscanthus. The Company has -- the JV has developed rhizome harvesting and planting technology which have been proven to be highly efficient and effective, significantly reducing establishment costs while providing high germination rates.

We believe this technology provides highly competitive, commercial scale planting capability and economics, which was the first step in developing this business. We are in a process of filing patents for this novel technology and will further refine it in the 2014 planting season.

We also recently hired an experienced agribusiness executive as the JV's CEO, and are in the process of developing a comprehensive business plan to identify the resources needed to support this business, based on the defined performance of goals in a full year pro forma budget. Based on its geopotential, elemental composition and environmental properties, Freedom Giant Miscanthus has the potential to be the market leader in the growing biomass feedstock market.

The bioenergy industry, which utilizes biomass as its feedstock, is estimated to have over $80 billion of annual revenues in the US currently, and is projected to grow to $250 billion by 2022. And that's in the US. Based on these projections, biomass feedstock revenue from perennial grass like Freedom Giant Miscanthus are expected to be approximately $30 billion in 2022 in the US alone.

In fact, according to industry reports, Freedom Giant Miscanthus has an achievable ethanol gallon per acre yield that is nearly 2.5 times greater than competing crops such as switchgrass, and four times greater than corn, which is the primary feedstock for ethanol today. Key industry customers rank Giant Miscanthus as at the top of their list of feedstocks and they are looking for the type of turnkey solutions that REPREVE Renewables expects to bring to the market in future years.

We are excited about the potential of this opportunity and intend to develop, implement, validate, and measure the progress against this plan during the first six months of 2014 fiscal year and determine appropriate steps for REPREVE Renewables at that time.

In addition to the conditions and factors I have just discussed, the Company's outlook for fiscal 2014 is also based on the continued focus on our core strategies, which includes driving continuous improvement across all operational business processes, enriching our product mix by expanding our trade compliant yarn sales, and growing our higher margin PVA product portfolio globally.

And while we are optimistic about the markets in which we are operating, we do anticipate some of the expected volume and cost improvements will be offset by inflationary pressures this year, specifically in utilities and healthcare costs.

With this in mind, the Company expects adjusted EBITDA for the 2014 fiscal year to be in the mid to high [50s] and we expect adjusted EBITDA of $14 million to $15 million for the [September 2014] quarter.

And with that, I will turn the call back over to the operator for any questions that you may have.

(Operator Instructions) Chris McGinnis, Sidoti and Company.

Good morning, guys. First off, I just want to say congratulations on obviously a great quarter, but just a phenomenal year. I just want to get into REPREVE a little bit more, the expansion in capacity and I guess just a little bit ahead of schedule. Can you just maybe talk a little bit about deeper about that and how you expect that to play out over the next two years in terms of reaching the 25% for, I believe, the end of this year?

Yes. Hey, Chris. Good morning. It is Roger. I would say, I mean, we are on schedule. I mean, when we installed the REPREVE recycling center a few years ago, we installed the capacity of 42 million pounds. We were looking to fill that up over the course of a couple of years.

We built it with expansion in mind. So when we put the building in place, we had extra square footage reserved for expanding and adding some equipment without having to expand the building itself. So I would say that we are pretty much on schedule with our vision of expanding REPREVE and growing REPREVE.

And as we add this third line, which we hope to be installed and up and running by March 2014, we are looking to add roughly another 30 million pounds of capacity. So, as that pushes up our total capacity opportunities at the recycling center, it may take us another couple years to grow into that capacity before we will consider expanding again to service the REPREVE growth.

And the reason for the growth, or I guess the extension, is that because you are seeing the volume -- I mean, obviously, you're having strong success with the REPREVE, but if you add that much in terms of additional capacity, what is the -- can you just maybe talk a little bit about what you are seeing that makes you competent in adding the capacity behind that?

Yes. And I think as we mentioned in our opening comments, the new programs that we have that are being adopted, we mentioned some new programs with Volcom, with Roxy, with Quicksilver. We also mentioned our growing relationship with Ford. And we just continue to get more and more adoptions with REPREVE.

And so, with that, we are certainly producing more REPREVE pounds. So therefore, we need the capacity to produce the recycle -- the polymer that feeds our POY and DTY operations. And, with that expansion, we continue just add more flexibility and we are also growing REPREVE into new markets.

One of the things that has opened up to us, as we have promoted REPREVE and we talked about promoting REPREVE at -- with ESPN at the X Games, we are starting to get interest outside of our core apparel markets for people that are interested in REPREVE, whether that could be injection molding opportunities, carpeting, outside of our traditional end uses. We are starting to get some interest in REPREVE. So we are feeding that development effort and expanding and getting ready for more opportunities.

Great. I appreciate that. Potentially ask a question on where is, as a percent of sales, noncompliant yarn versus compliant yarn?

That number is still -- we don't have an updated number. When we come out September 16 there with that earnings call -- or our investor presentation there in New York, we will have our slides and sort of break that down. At this point, we don't have that updated number for the fiscal year, but it's generally in that same area.

Our last number, I think, was 62%, 38%, and I would expect that to be slightly higher this year. But it still remains in that same area.

38% noncompliant.

Noncompliant, 38%, yes.

Great. Can you maybe just touch on -- obviously, you started to return capital to shareholders. Can you maybe just, outside of the expansion capacity, maybe thoughts of capital going forward, and maybe the acquisition market. I know you have talked about that in the past. Obviously, you are starting to return capital to shareholders. Can you touch on your thoughts about allocation for 2014?

I guess starting with the CapEx that we talked about, our normal maintenance CapEx, which, you know, we have got world-class equipment and it is because of the fact that we do a good job spending money and making sure we keep our equipment in order. Our maintenance CapEx is in that $7 million to $8 million a year.

What we have talked about over the next few years is sort of an additional $14 million -- $7 million per year -- of additional CapEx to support the growth opportunities we have talked about here around REPREVE and some of the other stuff. So, first and foremost on our capital allocation strategy is the maintenance CapEx and making sure we are able to continue our capacity and keep running it at the efficient levels that we run.

Second on the list is certainly CapEx to support our strategy. And our strategy -- the biggest leg of our strategy is that mix enrichment strategy where we make more PVA products, not just REPREVE, but also some of the other -- SORBTEK and some of the other PVA products that have been growing lately. So that's the first two things on the list.

Then when you drop down from that, the third piece of it would be strategic acquisitions. So we talked about it before. We are constantly evaluating opportunities to either grow our business, expand our business, expand into related markets.

So we'll continue to look at those opportunities. And as they develop we'll come to you guys with -- and let you know sort of how we are going and what we are doing.

To the extent we don't -- we have excess liquidity after that, that's when we are looking to do sort of share repurchases. I know we purchased, I think it was, $19.3 million worth of stock and 1.1 million shares over the last six months. So that program is still the program that we have in place.

But it's very much of a view from our perspective of where do we forecast our needs for our business and our needs for growth. And then to the extent there is cash left over at that point in time, that is what we are doing the share repurchases.

And, Ron, this is Bill. I guess the only thing I would add to that is, I mean, certainly we will continue to look for investment opportunities that have very quick payback and high returns.

And I think one other comment I do need to make is, as you've noticed on this call and probably the previous call, there is growth in this region right now in synthetics. We have been able to keep up with that growth through our efficiency improvement in our yield improvement programs, but ultimately you've reached a point of diminishing returns with that.

Our intention is to continue to grow with the market. We intend to be the premier supplier in this region and we will continue to be able to supply the needs of this region. So that may include, at some point in time, adding texturing machines. So that's another possible capital expenditure we could see at some point in time.

And, obviously, I think this is the first time you mentioned it on a real conference call, which is REPREVE Renewables. Do you see that kind of -- how do you see that playing out in 2014 and 2015 in terms of -- does that -- is that a use of capital for you guys over the next couple of years as you try to help fund that? Can you maybe just talk a little bit about the financial dynamics behind your thoughts over the next two years?

Yes. I will start and then Bill can jump in over the top. I think that we spend -- we own 60% of REPREVE Renewables. That joint venture spends $2 million to $2.5 million a year on the commercialization and development of the market like we've talked about, both the operational commercialization, but also the development of the market.

And that level has been fairly consistent over the last couple of years. So that is our sort of cash outlay on that.

I think when you take it to the next level and start talking about capital of investing in specific projects, we would consider that as -- what we talk about, as we go down our list, our sort of capital prioritization after supporting the core business, after supporting the growth of REPREVE in our existing products, we would consider a new project opportunity within that -- sort of that third level of project that we would evaluate. So there is the potential for that in 2014 or 2015 for us to invest in those, but it's not something that we are really at this point quantifying.

I mean, I think Bill referenced in his script, our new guy that came over from Monsanto is a developing a business plan that is going to have those exact things -- that exact type layout in it for, this is what we are planning on; this is the resources we need, both capital and human resources we need in order to develop this business. And so we are not at the point we are ready to talk about that.

I think we are at the point where we are feeling really optimistic about what we have. But we are not at the point to sort of layout what that looks like and I think we are probably, maybe two or three quarters away from doing that. But next year, next planting season, the 2014 planning season, we expect to be a big year for us.

Okay. Thank you very much.

Eric Pisauro, Regency Group.

Good morning, gentlemen. I was wondering if you could speak to what you think the impact of the Trans-Pacific Rim Free Trade Agreement, one that would include China, what the impact of such an agreement would be on Unifi.

This is Bill. I'll answer that. The Trans-Pacific partnership, first, does not include China. I guess probably the most prominent textile producing country would be Vietnam.

There is still a lot of -- a long way to go in negotiations of the textile chapter there, but I think realistically, I don't think it will be in place and I certainly can't project when the negotiations will be done and when the pact actually be in place. But we are probably looking at a two- to three-year framework.

And depending on how quickly duties drop, there could be some marginal impact to this region, maybe in the three- to four-year time frame. Certainly, when you look seven to eight years out, when you consider inflation rates in Vietnam and other developing countries, it's really hard to predict.

I think there is going to be some opportunity for exports from this region to that part of the world. I think there is certainly going to be opportunities for the countries in that part of the world, primarily Vietnam, who were in the TPP to take share from other countries like China, who would be still shipping to the US with full duty rates. But it's very difficult to predict what kind of impact it could have in this industry.

Now, what I will say is this industry is still a large manufacturing industry in this country. We still have a lot of influence and we have developed a very strong advocacy campaign in Congress for this industry, and I'm feeling very, very good about that. I don't know if that answered your question or not, but if you have more specific questions, I'll be happy to try to answer them.

No. That was fine. Thanks.

(Operator Instructions) Eric Pisauro, Regency Group.

With respect to the license on the REPREVE Renewables, is that a perpetual license or is there a term on that? And can you also tell us who is the other partner in the joint venture?

Yes. This is Ron. The license is a global exclusive license on the variety -- what Bill said is, we believe we have a great variety. But we also believe we have great technology that is around the propagation and planning of Giant Miscanthus that is leverageable across other varieties as well. So there's two big components of what we see the value of in REPREVE Renewables.

The license on Freedom, which is the variety we have, is a global exclusive license. It is basically a 10-year license, but we have the ability to renew that license with Mississippi State where the variety was developed, with a guy named Dr. Brian Baldwin.

Oh, and the other question was about the financial partner. They are just a financial partner. It's not someone that we disclose around that. They were there we got there. The original JV was between Phillip Jennings in Georgia. He had a financial partner at that was there with him.

When we came in, it was a 40%/40%/20% joint venture, with us having 40% and Jennings having 40% and the financial partner having 20%. We ultimately -- the two -- the financial partner and us bought out Phillip Jennings, and that's how we got to the 60%/40%. But they are just a financial partner that is in it with us, funding the growth of the business.

Excellent. And is REPREVE Renewables something you will be talking about, you expect, at the investor day as well?

Yes. I think there will definitely be a part of the presentation around REPREVE and what our thoughts are around that.

Terrific. Thank you.

[Zorab Durian], an investor.

You had mentioned that the Giant Miscanthus product -- the end product was ethanol. I had read some research papers where they claimed that the end product is really tank-ready gasoline. Can you comment on that?

I will. This is Bill. There are several bioenergy markets that we would target. Certainly, bioethanol, biogasoline are two. And there are technologies being developed for tank-ready biogasoline and biodiesel.

Other potential markets for this product are certainly power plants where, in Europe today, one of the main feedstocks for power plants is Miscanthus. And there are other potential markets like biochemicals, which ultimately could be the largest market for this crop. And by biochemicals, I mean potentially the precursors to polyester yarns.

There are a lot of potential markets. Certainly, the volubility of a crop in any one of these markets is going to be dependent on the biology of that crop. And one of the big benefits of Miscanthus is its biology for the ethanol and tank-ready gasoline markets.

When do you expect this to become reasonably feasible?

Well, I think the technology today is feasible for most of these products. Today, much of this market is being fed, for ethanol, by corn. For the other markets, primarily by wood, but ultimately wood becomes scarce. And certainly when you look at the economics of growing Miscanthus versus growing wood that has to be basically regrown for 10 years, the economics look very, very good for Miscanthus.

One of the issues that we have always had with Miscanthus, or this industry has had with Miscanthus, especially the rhizome base, is that has been quite expensive to harvest the rhizomes and replant. We have developed technology, which we think is really proprietary, that allows us to harvest and plant it at near the same cost as a seeded system. So we are feeling very, very good about that and think we've had a breakthrough there which could potentially grow this business.

Now, if you ask me when is it going to happen, I mean, this is an embryonic business. It could be a year from now; it could be five years from now before we see appreciable revenues from it.

But we certainly are developing a plan right now and understanding these markets better and we will aggressively pursue the markets that appear to be the most attractive to us. And I would expect to see some revenue, maybe substantial revenue, next annual year.

Bill, I will add just one thing to that. I think the next -- if you look at sort of at these markets hit, like the biopower or the bioembedding, some of that is there today. Some of the real big growth of these markets, the next one will be -- it seems like you did a little bit of research -- will be that cellulosic ethanol, not corn ethanol, but cellulosic ethanol. And there is advanced biofuels that you are talking about.

But there has been, if you look at Chemtex, if you look at KiOR, KiOR is a publicly traded company. Chemtex is a large company owned by M&G. They have announced first-generation commercial scale cellulosic ethanol and advanced biofuel facilities that have come online and that have been operational within the last 12 months. So I think the ultimate market demand is coming and that first scale commercial scale production facility is something that certainly has us excited about the market.

Yes, and I guess, Ron, this is Bill again. One more comment I would make is, if you look at some of the existing processes that are out there today, say, corn ethanol, many of these processes are commercially viable without heavy government subsidies. And one of our key goals is to develop a business plan that does not require government subsidies to be profitable. And we think we have achieved that.

And, to me, that's very, very important because I don't know that these government subsidies are going to be there 5 or 10 years from now.

It sounds terrific. Thank you very much for the input.

At this time, I am not showing any further questions. Are there any closing remarks?

Yes. This is Bill. Just to close it out, we felt good about last year. We think we had a very, very good year, especially the fourth quarter. Certainly, we are anticipating a better year in 2014.

And, frankly, we are very, very proud about our deleveraging strategy and where we have gotten ourselves to, especially around our debt and look forward to some very good progress going forward into the next couple of fiscal years. And with that, I will thank everybody for being on the call. Thanks.