Unifi Inc (UFI) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Unifi third-quarter earnings conference call. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to turn the conference over to James Otterberg, CFO. Sir, you may begin.

Thank you, Operator, and good morning, everyone. Joining me for the call today is Bill Jasper, our Chairman and Chief Executive Officer, and Roger Berrier, our 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 'Third Quarter Conference Call' link found on our home page.

Before we begin, I need to first advise you that certain statements included on today's call 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.

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. I direct you to the disclosures filed with the SEC and our Form 10-Q's and Form 10-K's 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 webcast presentation.

Before we get to the financial details for the quarter, I'd like to turn the call over to Roger, who will provide you with an overview of the Company's markets and raw material trends.

Roger...

Thanks, James, and good morning, everyone.

I will start this morning with a few brief comments regarding the retail market.

Freezing temperatures and heavy snow across much of the U.S. kept many shoppers indoors during the start of 2014, and forced some stores to close for a couple of days in January and February, causing retail sales to drop. Retail sales began to rebound in the month of March; however, the results for the three months of the March quarter, retail sales of apparel declined 1.2%, when compared to the December quarter, while retail sales of furnishings declined 2.4% and auto sales were down 1.8%.

However, when compared to the prior year March quarter, retail sales of apparel, furnishings and autos were flat to slightly up in each segment for the March 2014 quarter. As a result, we continued to see positive year-over-year growth in our key segments, despite the impacts of the unusually cold and snowy weather in the March quarter.

We remain very encouraged by the stability in synthetic apparel produced in the NAFTA/CAFTA region, which has held steady at approximately 18% of the total US apparel consumption for the last four years. During January and February, synthetic production from this region increased by more than 10% versus the same period last year, giving more indication that brands and retailers are looking to source more products from the region. Our production and sales volumes remain strong, particularly in our polyester segment, which includes both our value-added products and commodities, and our future orders look strong for our fiscal fourth quarter. We anticipate expanding our texturing capacity over the next six to nine months to take advantage of this incremental growth that Bill will touch on later.

In terms of polyester raw materials, prices have remained relatively stable over the past 12 months, which has led to pricing stability for our customers throughout the supply chain. Polyester raw material prices declined by 5% in the March 2014 quarter compared to the December quarter, and our overall margins have improved from the lower-cost raw materials; however, we do expect a corresponding increase in raw materials over the next several months. The gap in polymer pricing between the U.S. and Asia remained at approximately $0.14 per pound, which continues to put pressure on the lower end of our commodity business and makes it difficult to compete with imported yarn in market segments that do not require compliant yarn.

While the timing of the holiday shutdown period negatively impacted our year-over-year domestic volume comparison in the December quarter, that timing led to an improvement in the March 2014 quarter compared to the prior year quarter. Sales of our premier value-added yards and other value added products also contributed to overall improvements in sales and margins in our domestic polyester and nylon businesses, which James will explain in more detail in a few minutes.

Looking at Brazil, our volumes and sales revenue, based on local currency, are close to our targeted goals; however, our margins continue to be negatively impacted by price pressures from imported DTY, which we have discussed during the last two quarters. With the capacity utilization rates for polyester filament in Asia at about 65%, imported DTY from Asia continues to flood into the Brazilian market, and our gross margin has suffered as we are forced to match import pricing in order to hold onto market share. Changes in currency translation of the Real against the U.S. dollar have also impacted our results, which James will detail in the financial review. We remain focused on mix enrichment in Brazil, and are encouraged by the level of interest in value-added products, such as solution dyed and air covered yarns, as well as REPREVE. However, we expect that the shift to higher margin products will be a slow and gradual process, given the pricing pressures from imports and the challenging economic conditions in Brazil, which is facing slow growth as a result of high inflation and interest rates. We expect gradual improvement in Brazil as these initiatives are implemented.

Turning to China, our volume was slightly higher in the March 2014 quarter compared to the prior year; however, our gross margin declined based on pricing pressures in the market, due to the low operating rates and over-capacity. However, we continue to expect financial improvement in China in our 2015 fiscal year based on the pipeline of projects that we are working on that utilize REPREVE and other value added products.

Looking at our global performance and growth of our Premier Value Added products, we set a goal four years ago to double the sales in this segment over four years. While the challenges in Brazil and China have made it difficult to meet this goal, we are extremely excited about the growth in our domestic business, especially with REPREVE-based products.

We continue to service our domestic customers with high quality commodity products, as well as differentiated products such as solution dye and cationic dye yarns that add value to their programs, in addition to our Premier Value Added Yarns. We are also very excited that the expanded capacity at our REPREVE Recycling Center will come online in May, which will increase our capacity for REPREVE from 42 million pounds annually to around 72 million pounds. We continue to explore opportunities to sell REPREVE polymer and chip to customers outside our traditional textile base and we are investigating additional expansions to support REPREVE in the future. We will provide additional updates and details on these opportunities as we evaluate them further.

We continue to be committed to driving demand for REPREVE by increasing consumer awareness for the brand. We were once again the official recycling sponsor of ESPN's X Games Aspen, which took place in January. Our sponsorship and the launch of our #TurnItGreen campaign resulted in over 50 million consumer impressions through on-site activations, social media, and advertising. The exposure that we generated for REPREVE through the X Games has also opened the door to other exciting and new opportunities, including a sponsorship of Marvel Universe LIVE, an exciting live entertainment experience that will take place in multiple cities across the country; and potential activation programs with the Detroit Lions of the NFL and the Portland Trailblazers of the NBA. We will provide additional details of these programs once they have been finalized.

We also continue to be a branding partner on several new programs that utilize our PVA products, particularly our flagship REPREVE product. One element that is catching on in our co-branding efforts is the inclusion of the number of bottles used in the production of each item. We think that communicating the bottle count information to the end consumer will help reinforce that many cool and desirable products are made with recycled polyester, and will aid in creating awareness for the need to recycle more plastic bottles in the future. A partial list of new programs and their associated bottle counts includes:

The Ford 2015 F truck series, which will incorporate approximately 28 bottles per truck.

Dockers Smart Shield pant, which uses approximately six bottles per pant and also includes our SORBTEK moisture management yarn.

Quiksilver youth and men's boardshorts, which use approximately 10 to 12 bottles each.

Brooks Brothers 50-50 Rethink t-shirts, which use about two bottles per shirt.

And Volcom T-shirts, which use about two bottles per shirt.

We were also featured in a national ad for the Haggar Performance Cotton Khaki program utilizing our SORBTEK moisture management technology, which ran in a recent addition of Men's Health magazine.

As we build consumer awareness for REPREVE and explore other non-textile related opportunities for REPREVE, we see ourselves evolving more and more into sustainable solutions generally across a broad spectrum, not just sustainable solutions in textiles. We are finding that more opportunities exist for our high quality REPREVE polymer product outside our normal textile customer base.

With that as a backdrop, I will turn the call back over to James.

Thanks, Roger. I will begin the review of our Preliminary Financial Results for the March quarter on page 3 of the Presentation, with Net Sales and Gross Profit Highlights by Segment.

Considering the timing of the holiday shutdown period, net sales of $176.9 million for the current quarter increased $8.6 million over the prior-year quarter. This increase was driven by higher sales volumes for the Company's Polyester and International segments; as well as improved pricing for the Company's Polyester and Nylon segments.

Currency translation drove the negative pricing impacts for the Company's international segment. The Brazilian real for the current quarter averaged 2.36 to one US Dollar versus 2.00 to one US Dollar for the comparable period in the prior year; this devaluation of the Brazilian Real accounted for $4.4 million of the decrease in net sales that will be shown within our International Segment.

For the current fiscal year-to-date period, the Company's sales volumes are down slightly versus the prior year-to-date period for each of our reportable segments while the pricing improvements for the Company's Polyester and Nylon segments have more than offset their respective volume declines.

From a Domestic perspective, net sales are up $4.7 million for the nine months ended March 2014 when compared to the prior year-to-date period, while the decline in net sales from our foreign subsidiaries can be primarily attributed to the effects of the devaluation of the Brazilian real against the US dollar.

When reviewing our gross profit results, the Company is reporting higher gross profits for both the three-month and nine-month periods when compared to the corresponding prior-year periods. These increases were driven primarily by improvements within the Company's domestic operating margins, which can be attributed to the Company's PVA and mix enrichment efforts, along with the benefits of lower depreciation expenses.

For the fiscal year-to-date period, our Polyester Segment gross profits have improved primarily due to higher conversion margins and lower depreciation expenses. And, the year-to-date results for our Nylon Segment have increased approximately $2.7 million due to the benefits of new PVA programs and improved conversion margins. These gross profit improvements for the current year-to-date period have been partially offset by the $1.4 million decline for our international segment, which is attributable primarily to the combination of lower sales margins for our Brazilian operation, caused by pressures from imports, and the translation effects of the changes in currency, and in addition, lower year-over-year sales volumes for our Chinese subsidiary.

Turning to slide 4, I will now review our Income Statement Highlights for the third quarter.

For the three months ended March 30, 2014, the Company is reporting pretax income of $8.9 million on $176.9 million of net sales.

Pretax income is $5.2 million higher than the $3.7 million of pretax income generated during the prior-year quarter.

This improvement in our quarterly pre-tax income is attributable to the changes in gross profit discussed on the prior slide, as well as the benefits of lower interest expense and the absence of debt extinguishment losses that were partially offset by slightly higher SG&A expenses and lower earnings from the Company's equity affiliates.

For the current quarter, basic EPS was $0.25, against $0.07 for the prior-year quarter, with the increase primarily attributable to the Company's improved operating income and a lower amount of weighted average shares outstanding.

Now on slide number 5, we can see our year-to-date income statement highlights.

For the nine months ended March 30, 2014, the Company is reporting pretax income of $33.4 million on $506 million of net sales.

The $20 million improvement in pretax income versus the comparable prior-year period is due primarily to the increased gross profits from our Polyester and Nylon segments, lower net interest expense, and improvement in the earnings from equity affiliates, which is discussed on the next slide.

For the current year-to-date period, basic EPS was $1.05 per share, against $0.30 for the prior-year period.

Basic EPS of $1.05 is calculated using 19.1 million weighted average shares outstanding.

As of March 30, 2014, approximately 18.6 million shares were issued and outstanding.

The decline in the shares outstanding versus the prior-year period was driven by the Company's completion of its $50 million stock repurchase program through which we retired approximately 2.3 million shares at an average cost of $21.36 per share.

Beginning on slide number 6, we can review our Equity Affiliates' Highlights.

As of March 30, 2014, the Company has approximately $98 million recorded for investments in unconsolidated affiliates. These investments consist of our 34% ownership in Parkdale America, a domestic cotton spinner, and our 50% interest in two joint ventures that supply raw materials to our domestic nylon operations.

For the nine months ended March 30, 2014, these equity affiliates have contributed $14.8 million to the Company's pretax earnings, which is an improvement of $8.1 million over the prior year-to-date period.

The improvement in Parkdale America's earnings for the current year-to-date period can be attributed to higher amounts of income recognized under the EAP rebate program and improvements in operating income, while the decrease in the earnings for the UNF joint ventures can be attributed to lower gross margins.

In addition, the Company has received distributions of approximately $9.8 million during this current fiscal year.

Turning now to slide number 7, we can review the Company's Adjusted EBITDA results.

For the third quarter of the current fiscal year, the Company is reporting Adjusted EBITDA of $12.6 million with an EBITDA margin of 7.1%, in comparison to $8.4 million and an EBITDA margin of 5% for the prior-year quarter.

For the year-to-date period, the Company is reporting adjusted EBITDA of $39.6 million with an adjusted EBITDA margin of 7.8%, versus $34.4 million and 6.7% for the comparative prior-year period.

For both periods presented, the improvements in the Company's Adjusted EBITDA metric are primarily attributable to the improved domestic gross profits that we had previously discussed.

On slide number 8, the Company's working capital highlights are presented.

The Company's balance of $138.7 million in Adjusted Working Capital - (defined as AR, plus inventory, less AP and Accrued Expenses) -- was approximately 19.5% of annualized net sales.

The Adjusted Working Capital dollars and the dollars as a percent of annualized net sales compare favorably versus both the beginning of the quarter and versus the beginning of this fiscal year, as the Company continues to effectively manage these balances.

The changes shown for Receivables and Accounts Payable versus the beginning of the quarter are due to the timing of the holiday shutdown period that occurred in December quarter.

Total working capital at March 30, 2014, was $152 million, and this balance was also down versus both periods presented on this slide.

The increase in other current liabilities is primarily driven by an increase in the current portion of debt due under our ABL facility.

And on slide number 9, details for the Company's capital structure are presented.

The Company ended the quarter with $98.5 million of total debt and net debt of $85.4 million. And net debt has declined approximately $3.6 million from the beginning of this fiscal year.

Cash flows from operations provided the Company with the ability to reduce its net debt position and utilize $30.7 million to repurchase 1.3 million shares of stock during the current fiscal year.

As of March 30, 2014, the Company's weighted average interest rate for its outstanding indebtedness was approximately 3.2%.

During this quarter, we completed the fourth amendment to our Credit Agreement, which increased our PP&E term loan by $18 million to a total of $68 million and extended the maturity date of our ABL facility to March 28, 2019, from May 24, 2018.

And our total revolver availability and liquidity at the end of Q3 were $62.7 million and $75.9 million, respectively.

The fourth amendment, along with the additional liquidity that it provides and our ongoing cash flows from operations, continues to give the Company the flexibility to fund our strategic growth initiatives, capital expenditures, and our newly authorized stock repurchase program.

Before I turn the call over to Bill, I would like to provide an update on an approaching deadline:

We expect to file our Form 10-Q for the March quarter on or before the filing deadline, which is Friday, May 9.

With that, I would like to now turn the call over to Bill.

Thanks, James, and good morning, everyone.

I am pleased with the revenue recovery in the March quarter, which has come from the overall strength of our domestic business, coupled with the positive impact in the current quarter associated with the timing of our holiday shutdown. Our domestic gross margin continues to benefit from the stability of the price of raw materials and our ongoing focus on lean manufacturing, rigorous process improvement, increased flexibility in all operations, and our cost-reduction initiatives. Although revenue for the first nine months of fiscal 2014 remains approximately $7 million below last year, in fact, year-to-date revenue in the North and Central America region is actually up, while foreign revenue is $10 million lower, primarily attributable to a weakened Brazilian Real.

I would like to echo the comments that Roger and James have made regarding the results from our operations in Brazil and China. There is a confluence of factors impacting our results from Brazil, including lower gross profit in US dollars due to currency translation and margins that have been squeezed by price pressures from imported DTY, both of which are more than offsetting higher sales volumes in Brazil. We have also experienced gross margin and volume declines in China due to pricing pressures, stemming from low operating rates and overcapacity in the market. We remain encouraged by the level of interest in our higher-margin and PVA products in both Brazil and China; however, the pace at which these programs are coming online is being hindered by the challenging economic conditions in both markets. We remain committed to our mix enrichment strategy and aggressively managing price and costs to overcome inflationary cost increases, and we do expect to see gradual improvements throughout our 2015 fiscal year in both countries.

Turning now to North and Central American region, we are very encouraged by the level of synthetic apparel produced, which increased by more than 10% in January and February compared to year-ago levels. This is an acceleration of the growth we have seen over the last several years and increases our confidence in the near- and midterm future prospects in this region. Wal-Mart's pledge to purchase more American-made goods has helped raise the awareness of the Made in USA label, and this may result in improved demand, which could translate to added growth. We plan to be very aggressive in capturing any growth opportunities in polyester DTY in this region, including the expansion of our texturing capacity in fiscal 2015.

In terms of trade legislation, little progress has been made since our last call on the Trans-Pacific Partnership negotiations as several difficult issues remain unresolved, especially with respect to Japan. While these trade negotiations may conclude this year, it is possible they will continue into next year. Considering that, and the fact that a completed deal will have to pass through 12 countries' legislatures, I would not expect any appreciable impact on our business from TPP over the next few years.

Talks have started in July of 2013 around the Transatlantic Trade and Investment Partnership, or TTIP, which is a comprehensive trade and investment agreement that is being negotiated between the US and the European Union. TTIP aims at removing trade barriers in a wide range of economic sectors, including textiles, to make it easier to buy and sell goods and services between the US and the EU. We are encouraged by the premise behind TTIP, as it may be one of the few pieces of trade legislation that offers market opportunities both ways, by further opening EU markets, which is already a large export market for many US manufacturers.

As we have mentioned in the past, the North and Central American market has stabilized and textile production has continued to grow, primarily in synthetics. We are improving margins through mix enrichment, process improvement, and cost reduction. Over the past 15 months, we have generated significant excess cash and used it to expand our REPREVE recycling capacity, improve polyester texturing flexibility, and reduce our outstanding stock by 2.3 million shares. We expect continued strong cash generation. We plan to utilize much of that cash to expand sales in defensible, high-value products and to grow our sales and capabilities for REPREVE, as we continue to focus on the reduction of our reliance on more commodity import sensitive markets. We also remain encouraged by the potential of our REPREVE renewables business, based on initial feedback from poultry bedding trials. These trials will continue for six to nine months, and we will be evaluating all potential opportunities to grow this business.

I'm also very pleased with the flexibility the fourth amendment to our credit agreement brings to the Company, as well as the authorization from the Board of Directors to repurchase an additional $50 million in common stock. We will, of course, weigh stock repurchases with growth opportunities and will invest our cash for maximum shareholder return. Increasing our borrowing capacity by $18 million will allow us greater flexibility as we look to fund our strategic growth initiatives, including possible capital expenditures to expand existing businesses and grow new ones. The Board has also increased our capital spending authorization for fiscal-year 2015 from $14 million to $27 million to support additional PVA growth opportunities we have identified, especially for REPREVE. We also expect to have sufficient cash to allow us to begin buying back stock as we exit our current stock purchase blackout period. Our increased liquidity provides us with a very strong capital structure to support and grow our business in the future and increase shareholder value.

Looking to the June 2014 quarter, we expect the relative stability of raw material prices to continue, and that the strength of our domestic business will continue to more than offset softness in our international operations. With that, we expect adjusted EBITDA in the fourth quarter to be between $17 million and $18 million, which would result in $57 million to $58 million adjusted EBITDA for the 2014 fiscal year. I would also expect good momentum as we head into the 2015 fiscal year.

And with that, I will turn the call over to the operator for questions.

(Operator Instructions). Chris McGinnis, Sidoti & Company.

I guess just in terms of on the international business, you have done a great job positioning yourself in the domestic regions, and I was just wondering. Is there more you can do in terms of changing the business? I know you're going to change the mix of the PVA. Is there anything you can do maybe quicker to stem the issues in international regions, especially in Brazil?

Chris, this is Roger. Good morning. Yes, in Brazil, we are -- in addition to what we talked about, the mix enrichment, which we feel like has a big opportunity for us, and if you look at our domestic business, the commodity business being necessary for the compliant yarns certainly provides a strong foothold for us to grow our PVA business.

In Brazil, that compliant need doesn't exist and we compete with imports. And with the, I guess, capacity utilization being so low in China, the imports really coming into Brazil heavy and at low prices, and we fend off that market share by reducing our margins.

One of the things that we are looking at is always reducing our cost basis, being more competitive in Brazil, continuing the process improvement things that Bill mentioned is a core competency for us as a Company. So, as we look to reduce our cost to produce commodity yarns, at the same time we are looking to grow that value-added mix in PVA.

The only thing I would add -- this is Bill. Chris, the only thing I would add to that is I do want to reiterate that both Brazil and China are both very profitable and they are both generating cash. They are just not performing as well as our domestic business is, so certainly we're not building on a bad base there. So as we make improvements, I would expect them to stay profitable and start increasing.

Sure. Thanks. Just looking at the guidance for 4Q, a little stronger than I was expecting. I thought maybe the strength last year was due to some, I guess, buildup or pent-up demand in terms of holiday shutdowns.

So is the strength coming up next quarter -- or this quarter, I guess, is that more just the domestic business is really taking off? Could you maybe just explain that strength a little bit? I was thinking it was a little bit weaker on a year-over-year, when it sounds like it's going to be comparable.

Hi, Chris, this is James. Your memory is good. Thank you.

The fourth quarter last year was very strong and it was very strong domestically. Fourth quarter also included 14 weeks in the prior-year period, but as Roger mentioned in his script, the Company is very optimistic about its PVA growth, mix enrichment efforts, and other developments that had happened in the domestic business over the last 12 to 15 months, so that's the reason for our excitement of Q4.

And Chris, if you look at the seasonality of our business, we do have a little bit of seasonality. Typically, the fourth quarter is one of our stronger quarters, and that's where we typically shift a lot of or more into that apparel sector.

And we do ship a lot of product into apparel. And the fourth quarter is when a lot of that apparel is being produced for back to school and for fall and winter.

And with the placement of our compliant yarn business, we mentioned some growth in CAFTA, and in our success placing PVA and REPREVE, we are anticipating a strong fourth quarter.

Great. Great news. And then, I guess, two pieces. Just on the animal bedding, how confident are you that -- I know you made some comments, but just maybe over the 12 months, maybe, that contributes to the top and bottom line?

Chris, I guess the best way to answer that is it is still an embryonic startup business, and even if we are wildly successful, I wouldn't expect to see any appreciable return to the Company over the next year or two. I mean, (multiple speakers) it's going to be something that will grow.

Initial trials look very good. There is still a long way to go before we decide we actually have a business that we're going to invest in there, but I think six to nine months from now, we will have a much clearer view as to what that the potential is and how much we will be investing in that business and what the potential returns might be. But certainly nothing that has happened since the last call has been a stopper.

Cool. Great. And then, maybe just on the capital allocation, you talked about 2015, a pretty high number for CapEx. Can you maybe just talk about is that guidance for next year in terms of CapEx and maybe what's the opportunity that you're talking about with that increase in CapEx for 2015, if that's where the number ends -- shakes out?

Chris, this is Bill again. First of all, the higher authorization for our capital spending next year was based on specific projects that we have identified. We're not really ready to talk about those projects right now. We will certainly be talking about them as we approve each of these projects and move on.

It's just -- have to suffice to say that we have identified additional fairly quick payback opportunities, especially around our PVA products, which we believe are going to be very positive, and we have gotten authorization of the Board to move forward on them.

Certainly with any capital plan, things could change as we move forward, could go up, could go down, depending on what we find out as we get into it. But suffice it to say, we have identified opportunities. The Board is optimistic about what we have been proposing, and we have gotten authorization to significantly increase our capital spending next year with a fairly high payback.

Great. And just one last piece. I think, Bill, you talked about this. But you talked about some REPREVE -- maybe some higher growth rate in that -- from that product. You didn't jump into any specifics in terms of what those programs were or those initiatives. Maybe could you just dig a little bit more of just maybe your confidence behind it?

I know, obviously, it's done well. It just sounds like there is more behind the -- I guess there is more growth than -- it could pick up a little bit quicker if you invested maybe a little bit more, from the way you were talking about the REPREVE brand itself.

Yes, Chris, this is Roger. When we look at REPREVE, I think one of the things that has been exciting for us is we have been marketing REPREVE, and we talk about our consumer marketing campaigns and some of our involvement with the X Games and some of the things that we may be doing in the future with Marvel and Detroit Lions football. Certainly, that is out of our historical element.

But what we are finding with REPREVE is it is growing outside of our normal textile core customers. There is other customers that need polyester or recycled polyester type product. They need a high-quality product that we have developed with REPREVE, and so, we are finding opportunities to sell REPREVE polymer outside of our traditional customers. And this has opened up some growth opportunities for us, and as Bill mentioned, we are looking at some new capital type plans to support this type of activity.

Anything that we are looking at, certainly, we will run it through our process to make sure that the payback and the growth and all the risk factors are considered.

Great. Thank you very much.

Chris?

Yes.

Just one more point on the capital I want to clarify. Like any good analyst, I am sure you're going to run back and start thinking about what those returns might be.

On that $27 million, about $8 million to $10 million is regular maintenance capital that we typically spend every year to keep our equipment in top condition and top efficiency. So, consider that when you think about our capital spending.

Great, I appreciate that. Thank you very much for the time today.

(Operator Instructions). [Stephen Calvin], Private Investor.

I have a question about the stock buyback. Is there any correlation between when you ended the stock buyback in the last session versus the price now is down about 20%?

Yes, the Company completed its additional $50 million stock repurchase program during the quarter, and a new one was authorized yesterday.

The markets in total have been down some this year, so that correlation is probably your own personal opinion. But the Company's quarterly results are in line with our expectations since the last time we talked and our annual guidance is slightly higher than the last time that we talked.

All right. Because I am a shareholder, and I -- if you took that $50 million and gave it out partly as a dividend, wouldn't that -- that would drum up more interest in the stock, because I think that the more stock you keep buying and taking off the market makes the stock more illiquid, so there's a lot of trading there -- there is a lot of swings in the price. And you -- instead of giving back the money to the shareholders, it seems that you're just creating more of a volatile stock price.

Yes, sir. Thank you for your opinion.

There is no -- don't I have a voice in some of the -- there is no plans to increase shareholder value?

No, I think the Company considers all its options as it relates to how to best grow the business today and in the future and maximize the value for all shareholders.

Yes, let me just add to that. This is Bill. Look, as we move forward with excess cash, we evaluate every opportunity to increase shareholder value. That may include investment in high payback capital. It could be investment in consumer advertising. It certainly includes stock buyback, as well as dividends, which has been under consideration with the Board all through this time period.

So I guess the best way to answer your question is we are focused certainly on shareholder value and we will do what we believe is the best thing to do at any given time. And if we felt giving dividends was the best way to increase shareholder value, that's something we would have done. It's certainly -- it's not something we'd considered to be the best route today.

And I think as we move forward, just continue to pay attention to how we are spending our cash and what we are doing with our cash, and certainly we value the opinion of all shareholders as to what we are doing it, but obviously, we got to make judgments and decisions based on what we believe is the best use of that cash.

And certainly, I will reiterate to you one of our key focuses is to increase shareholder value. That is something we are very sensitive to, and not everybody may agree with the way we do that, but rest assured, we have got the shareholders' best interests at heart. And I -- that will really be the way I would answer your question.

Okay, I am not a militant shareholder, but I own probably 1.5% of the stock, and I have been following you since 2010 when I became a shareholder and you are doing a great job. It just seems that the value and the brand is so strong right now that I would think that other companies would be trying to acquire you, or someone like Hanes, who has a big vested interest in the well being of Unifi, that they would try to make overtures to purchase the Company or something to drum up more interest.

Understood. Thank you very much.

And we appreciate your confidence in the Company.

Eric Pisauro, Regency Group.

You mentioned being excited for the fourth quarter. What is the guidance for the full year, or next quarter in particular?

Our guidance for the fourth quarter is $17 million to $18 million adjusted EBITDA, and since we're at about $39.5 million now, we are looking at $57 million to $58 million for the full year.

Terrific, thank you.

(Operator Instructions). [Malcolm Solid], Private Investor.

Just wanted to know whether there is any competitive products to REPREVE in the market?

Yes, Malcolm, this is Roger. There are competitive products to REPREVE in the market, particularly more as we compete in the Asian supply chain.

Typically, we go to brands and retailers and we talk to them about Unifi and our product offerings, specifically REPREVE in this case. We sell them on the concept that we can produce REPREVE and service REPREVE here in the US, Central America, Brazil, and also Asia.

So wherever that retailer or brand decides to source their product, Unifi is able and around the world to supply REPREVE. If they decide to put that program here in the NAFTA/CAFTA region, we are one of the few people that produce recycled polyester in this region. If they decide to put that product in Asia and source the product there, then we do have two or three competitors of recycled polyester in Asia.

Okay, thank you.

There are no further questions in queue at this time. I will turn the call back over for closing remarks.

Okay, this is Bill again. I will just close with a few thoughts. As we have said over this last several calls, the NAFTA/CAFTA region continues to be stable and continues to grow. We are seeing opportunities to grow polyester DTY, and our intention would be to add capacity as needed since we have the cash and certainly we're more cost -- we can add that capacity more cost competitively than anybody else, because of our size.

The economy is stable and is growing a bit slowly, but we are seeing significant PVA and REPREVE opportunities, especially as we grow consumer awareness around the REPREVE brand.

And finally, I will leave you with one more thought. Our focus continues to be to invest in and drive growth in defensible, high-value businesses like REPREVE and to really focus on reducing our reliance on commodity import sensitive businesses.

And with that, I will thank you all for your interest and have a good day.

Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.