Unifi Inc (UFI) 2015 Q4 法說會逐字稿

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

I would now like to introduce your host for today's conference, Mr. James Otterberg, CFO. Sir, you may begin.

Thank you 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 fourth-quarter conference call link found on our homepage.

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-Qs and Form 10-Ks regarding various factors that may impact these results.

Also, please be advised that certain non-GAAP financial measures, such as adjusted EBITDA and adjusted EPS, will be discussed on this call and non-GAAP reconciliations can be found in the schedules to the webcast presentation. Before we get to the financial details for the quarter I would like to turn the call over to Roger, who will provide you with an overview of the Company's markets, raw material trends, and other business updates.

Thanks, James, and good morning, everyone. Taking a look at retail indicators impacting our core business, year-over-year retail sales increases of 2.4% in apparel, 5% in furnishings, and 3.3% in automotive have helped drive demand from customers in each of these segments. Many economists expect continued payroll gains and improving wages will support consumer spending throughout the second half of the year, particularly during the upcoming back-to-school shopping period.

Looking at the Company's sales for the June quarter, we continue to see strong demand for our products in all of our market segments and across our entire product offering. We continue to see an increase in demand for our premier value-added yarns, which grew 15% in sales revenue in fiscal year 2015 driven by Repreve, our recycled yarn.

We continue to estimate annual growth in the NAFTA and CAFTA regions of approximately 5%. We anticipate that the growth in brands and retailers that are choosing to source their products in the Western Hemisphere will continue into the foreseeable future and we remain very confident and committed to the region and the importance that it has to our overall business. We will continue to focus on delivering these customers excellent value and service from our commodity and also our premier value-added yarn categories.

As expected, prices for our raw materials increased throughout the June quarter. As a reminder, raw material prices decreased in our third fiscal quarter and we benefited from this decrease at that time. However, raw material prices increased in our fourth fiscal quarter reversing some of this benefit as we continue to focus on offering our customers as much pricing stability as possible.

Looking ahead, we expect prices in the first quarter of fiscal 2016 to be approximately flat with our recently completed quarter.

The gap in polymer pricing between the US and Asia increased to approximately $0.17 per pound from approximately $0.13 per pound, putting it at the high end of the range over the past several years. Capacity utilization rates remain very low in China and Asian yarn producers are responding by being very aggressive with their low imported prices for DTY yarn.

Our domestic business will continue to benefit from the strategic capital expenditure projects that were completed in the 2015 fiscal year, which totaled $35 million for the year. Some of the projects completed include the additional capacity of eight draw texturing machines to the Company's locations in Yadkinville, Madison, and El Salvador that will help us better serve the growing demand for synthetic yarns in the CAFTA region. These machines also improve our manufacturing flexibility, including our small production run capabilities, which allows us to support the Company's mix enrichment strategies while also improving our ability to better service customers and handle an increasingly complex product mix.

We also expanded our airjet texturing capacity to take advantage of the opportunity to grow our market share in this product category and to service our growing domestic automotive business as well as technical fabrics for the military segment. We also completed the installation of our solar farm, which has a 1 megawatt capacity and sits on six acres of land at our Yadkinville facility. This solar farm could provide roughly 10% of the energy at the Repreve recycling center and is one more demonstration of our commitment to sustainability.

We are also purchasing a larger warehouse in Yadkinville and selling a smaller one to support the growth of Repreve. This new warehouse is needed to handle the current and anticipated increase in raw materials, waste used in processing, and finished goods that have come about with the growth of our Repreve brand.

Turning to our international businesses, we are once again pleased with the performance in Brazil and China, both in the current quarter and on a fiscal year basis. The devaluation of the Brazilian real versus the US dollar continued in the June quarter. The monthly average rate has remained above BRL3 per US dollar since March of this year, which allows our operations there to be more competitive versus imported yarn, but leads to challenges when we translate local sales and earnings into US dollars.

Even on the US dollar basis, Brazil met expectations for adjusted EBITDA for the 2015 fiscal year. We continue to focus on our mix enrichment strategy in Brazil and we remain encouraged by our progress against this strategy and by the operational improvements that we continue to make there.

We are also pleased with the adjusted EBITDA performance in China, we exceeded expectations for the 2015 fiscal year. With a growing number of development programs being commercialized, China has begun to bear the fruit that we had hoped for. To put the importance of China into better perspective, we developed a large Repreve program with a customer a few years back based on the commitment that we would be able to transition the volume to China within three years.

Without the ability to make this commitment, we would not have received the program in the first place. This program has, in fact, started transition to China and, along with other PVA programs that are growing in size and scope, it has helped improve our overall results there.

Turning to our PVA products, Repreve and our other premier value-added yarns represented approximately 30% of our total revenue for fiscal year 2015, which is a demonstration of the success that we have had executing our mix enrichment strategy globally. We continue to expand the size and scope of our PVA programs, particularly those using Repreve, and I would like to highlight some of our more recent successes.

Repreve will be used in three new apparel programs at Target consisting of a T-shirt, khaki pants, and denim jeans. These products will feature a sewn-in label that will be branded with Repreve, which will provide us great exposure in Target's nearly 1,800 stores in the United States. These programs at Target are a great indication that the desire for apparel made with recycled materials has moved beyond specialty and performance brands and into the mainstream.

We are also excited by several other major programs that will feature the Repreve brand at retail. All Volcom styles that use Repreve will transition to a combination of customized hangtags, woven garment labels, and heat seal labels, all of which will include Repreve branding. Volcom stores will also be doing away with plastic shopping bags and will transition to reusable fabric bags that will be made from Repreve.

Kathmandu, a successful outdoor and travel brand with stores throughout Australia and New Zealand, will feature Repreve in up to 30 new styles. These styles will be part of a new line and will feature Repreve on garment hangtags as well as in stores, catalogs, and online.

In further demonstration of the growth and strength of the Repreve brand, we are seeing some of our partners take co-branding to the next level by incorporating Repreve into their product names. Two examples include Quiksilver, who now calls their very popular AG47 board short the AG47 Repreve board short, and Haggar, who is now calling their Stria dress pant, which is the number one selling dress pant in the US market, the Repreve Stria dress pant.

As we move into fiscal 2016, we will continue to allocate resources and funding to further brand partnerships and consumer activations, as these help provide growth opportunities for Repreve and our other PVA brands. We will continue our partnerships with the Detroit Lions, the University of North Carolina athletics department, Marvel Universe Live, and The North Face Endurance Challenge race event.

To support the growth of Repreve as a result of our new and expanding value-added programs with customers, we broke ground last week on our planned 85,000 square foot addition to the Repreve recycling center in Yadkinville. The $10 million project expands the building from approximately 60,000 square feet to 130,000 square feet and we will add another recycling machine, bringing the total to four lines and expanding our capacities from 72 million pounds to 100 million pounds.

We expect construction to be completed in the next six to eight months and the additional capacity to be available around mid to late calendar year 2016 just as we are reaching full utilization of our existing recycling assets. This would mean that, although the capital expenditure for the expansion will fall into our 2016 fiscal year, we would start to see the benefit as we enter into our 2017 fiscal year.

As mentioned on last quarter conference call, we are also moving forward with an investment of approximately $28 million in our backward integration strategy into plastic bottle processing, which will produce 75 million pounds per year of clear polyester bottle flake to supply our Repreve Recycling Center. Internal control over bottle processing will allow us to produce the quality and efficiencies that we need to operate cost effectively on a continuous basis.

We are investing in the latest recycling technology, which will provide many advantages to us compared to the supply chain that we are currently buying from. We would expect installation and initial startup to be mid-2016 calendar year; however, we would also expect to be in a startup phase for approximately nine months before we begin to realize the full benefit from these operations.

As discussed at our Annual Investor Conference in November of last year and on previous conference calls, the Company's total CapEx commitment to invest in strategic projects and growth, including some capital to maintain and extend the useful life of existing assets, was expected to be approximately $120 million for fiscal years 2015 through 2017. That remains our estimates for the three-year period.

As previously discussed, approximately $35 million of this total supported our fiscal 2015 efforts, and we expect to spend a total of approximately $55 million in our fiscal 2016 based on the timing of current projects. We will continue to explore additional strategic opportunities and will provide updates as they are available.

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

Thank you, Roger. I will begin the review of our preliminary financial results for the June quarter on page 3 of the presentation, with net sales and gross profit highlights by segment.

Net sales decreased $6.8 million, or 3.7%, to $175 million for the June 2015 quarter compared to net sales of $182 million for the prior-year quarter. The decrease in net sales was primarily attributable to the devaluation of the Brazilian real and lower average polyester pricing driven by a reduction in our raw material costs, partially offset by improved sales volume in the international segment.

Consolidated sales volume was higher than the prior-year quarter, driven primarily by an increase in the international segment, while the polyester and nylon segments remained essentially flat. In addition, we continued to see higher sales volumes for our PVA products.

International segment sales volume increased from the prior-year quarter due to higher volumes in China as a result of our success with several new PVA programs and the Company's transitioning of certain sales programs from its US operations to China. The decrease in price quarter- over-quarter for the polyester segment is due to lower average pricing, driven by a reduction in raw material costs. The quarter-over-quarter price decrease in the nylon segment is mix-driven and the quarter-over-quarter price decrease in the international segment is a result of unfavorable currency translation in Brazil due to the devaluation of the real against the dollar.

For our current quarter gross profit results against the prior-year quarter, despite a rise in the cost of our polyester raw material units during the current quarter, the Company is reporting slightly higher consolidated gross profit as higher profits for the nylon and international segment partially offset by lower gross profit in the polyester segment. For Q4 of this fiscal year, consolidated gross profit improved to $25.3 million from $25 million for the prior-year quarter and constituted 14.5% of net sales versus 13.8% for the prior-year quarter.

The decline in polyester segment gross profit versus the prior-year quarter is primarily due to lower margins caused by the timing impact of rising raw material costs during this fiscal quarter, while the prior-year quarter experienced a declining raw material environment. The slight increase in nylon segment gross profit is driven by higher volumes and improved margins for all of our textured and air-covered products. The increase in international segment gross profit versus the prior-year quarter is due to higher sales volumes and margins in China, higher unit conversion margins in Brazil on a local currency basis, and lower unit converting costs in Brazil, partially offset by unfavorable currency translation in Brazil.

For fiscal year 2015, net sales decreased $0.8 million to $687.1 million. The sales decrease is due to unfavorable currency translation in Brazil and pricing declines in the polyester and nylon segments with the same themes driving these changes as those discussed in the quarterly comparison. These items were partially offset by higher volumes in the nylon and international segments and the continued growth of our PVA portfolio of products, as these sales have now reached 30% of our total consolidated sales.

And our year-over-year sales volume and gross profit continues to increase for our polyester textured yarns here in the NAFTA/CAFTA regions, which we are now supporting with recently added capacity.

Fiscal year 2015 consolidated gross profit improved to $91 million and 13.2% of sales from $83 million and 12.1% of sales for the prior-year period. The improvement was primarily driven by higher sales volume and conversion margins for the textured product line within our polyester segment and for our subsidiary located in El Salvador, as well as higher sales volumes and margins for the nylon and international segments. These favorable results were partially offset by the unfavorable effects of the currency translation for our Brazilian subsidiary.

Turning to slide number 4, I will now review our income statement highlights for the fourth quarter. For the three months ended June 28, 2015, the Company is reporting preliminary pretax income of $18.2 million on $175 million of net sales. Pretax income is $3.7 million higher than the $14.4 million of pretax income generated during the prior-year fourth quarter. This increase in our quarterly pretax income is primarily attributable to improved gross profit driven by the factors previously discussed and higher earnings from our equity affiliates, which we will discuss on slide number 6.

For the current quarter, we are reporting preliminary basic EPS of $0.86 per share against $0.48 per share for the prior-year quarter. Preliminary EPS is higher due to improved operating income, higher earnings from our equity affiliates, and a decline in our effective tax rate caused by certain events or transactions that are outlined in our adjusted results reconciliation on slide number 8. The decline in average basic shares outstanding to 18.2 million shares from the prior-year quarter's 18.5 million shares is due to purchases made under the Company's previously announced stock repurchase program.

Turning to slide number 5, I will now review our income statement highlights for the 12 months ended June 28, 2015.

For the year-to-date period, the Company is reporting preliminary pretax income of $53.8 million on $687 million of net sales. Pretax income is $5.9 million higher than the $47.9 million of pretax income generated during fiscal year 2014. This increase in pretax income is primarily attributable to $7.4 million of improved gross profit, driven by the factors previously discussed, and slightly higher earnings from our equity affiliates, which will discuss on the next slide.

These items were partially offset by slightly higher SG&A expenses, primarily due to stock-based compensation, marketing and professional fees, a write-off of debt financing fees, and higher net interest expense due to a one-time interest income benefit received by our Brazilian subsidiary in the prior-year period.

For fiscal year 2015 we are reporting preliminary basic EPS of $2.32 per share against $1.52 per share for the prior year. Preliminary EPS was higher due to improved operating income and a decline in our effective tax rate. The decline in average basic shares outstanding to 18.2 million shares from the prior year's 18.9 million shares was due to purchases made under our stock repurchase program.

Beginning on slide number 6, we can now review our equity affiliates highlights.

As of June 28, 2015, the Company has approximately $114 million reported 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 current fiscal quarter, these equity affiliates accounted for $7 million of the Company's pretax earnings, which is an improvement of $2.8 million versus the prior year's fourth fiscal quarter. For the fiscal year 2015, equity affiliate earnings of $19.5 million increased $400,000 from the prior year.

Higher current quarter earnings for Parkdale relate primarily to a bargain purchase gain from a recent business acquisition. Lower earnings from Parkdale America for the fiscal year can be attributed to lower operating income and lower amounts of earnings recognized under the EAP rebate program, which were partially offset by bargain purchase gains from recent business acquisitions. For fiscal year 2015, we received distributions of $2.5 million from Parkdale America and $1.2 million from our UNF America joint venture.

Turning to slide number 7, the Company's adjusted EBITDA results are presented. For the fourth quarter of the current fiscal year the Company is reporting preliminary adjusted EBITDA of $18.5 million with an EBITDA margin of 10.6%, in comparison to $18 million at a margin of 9.9% for the prior-year quarter. Improved gross profits discussed earlier are the primary reasons for the higher adjusted EBITDA versus the year-ago quarter.

For the current fiscal year, the Company is reporting adjusted EBITDA of $63.7 million with an EBITDA margin of 9.3% in comparison to $57.6 million at a margin of 8.4% for the prior year. Improved gross profits were partially offset by higher SG&A expenses and a slight increase in our provision for bad debts.

On slide number 8 we can review the Company's reconciliations of GAAP results to adjusted results.

Adjustments presented here are intended to exclude certain items which management believes are not indicative of the Company's underlying and ongoing operations. Such amounts are excluded from adjusted net income and adjusted EPS in order to better reflect the Company's underlying basic earnings per share. Adjusted EPS excludes certain amounts which management believes do not reflect the ongoing operations and performance of the Company.

The columns presented here provide the before and after-tax impact of certain GAAP transactions or amounts, as well as the approximate impact on basic earnings per share. For all periods presented, each of the individual items that were identified is separately listed within the reconciliation and may consist primarily of items impacting the Company's provision for income taxes, the earnings from our Parkdale joint venture, and net interest expense. The Company is reporting adjusted EPS of $1.88 for fiscal year 2015, up $0.23 from the prior year, driven by increases in adjusted net income and the benefit of a lower average share count.

On slide number 9 we can review the Company's working capital highlights. The balance of $134 million in adjusted working capital, defined as accounts receivable plus inventory less AP and accrued expenses, at June 28, 2015, is approximately 19% of annualized net sales. The decrease in the Company's adjusted working capital dollars versus the beginning of the fiscal year is primarily due to the devaluation of the Brazilian real and lower polyester raw material costs.

These changes were mostly offset by lower amounts for accounts payable and accrued expenses due to reductions in amounts due to vendors related to capital expenditures and amounts due under variable compensation programs.

Total working capital at June 28, 2015, was $141 million and the decrease since the beginning of the year is primarily driven by the previously-discussed decrease in adjusted working capital, a decrease in cash at our foreign subsidiaries, and an increase in other current liabilities due to the timing of scheduled debt payments.

Turning to slide number 10, details for the Company's capital structure are presented.

The Company ended fiscal year 2015 with $104.1 million of total debt and net debt of $94.1 million; and net debt has increased approximately $10.5 million from the beginning of the fiscal year. As of June 28, 2015, the Company's weighted average interest rate for its outstanding indebtedness was approximately 2.4% and our total revolver availability and liquidity was $75.9 million and $85.9 million, respectively.

In addition, during the [2015] fiscal year, the Company repurchased 349,000 shares of its common stock at a total cost of $10.4 million. (Company corrected after the call) As of year-end there were approximately 18 million shares outstanding. The various capital spending opportunities mentioned earlier by Roger are primarily related to our core regional polyester and recycling businesses. The Company's total commitment for these capital projects, over the three-year period for fiscal year 2017, is expected to be approximately $120 million, with the expectation that a portion of these projects will be funded with borrowings available under our ABL facility.

And to conclude, 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-K for the 2015 fiscal year on or before the filing deadline, which is Friday, September 11. With that, I would like to now turn the call over to Bill.

Thanks, James, and good morning, everyone. I would like to start my comments by putting the results of our 2015 fiscal year into some historical context.

As James reported, the Company delivered $42.2 million of net income with [$31.2] million of adjusted net income for the year, which makes this our most profitable year since fiscal year 2000.(Company corrected after the call) This accomplishment is the result of our continued success in driving our core strategies, which includes enriching our product mix, focusing on recycling and sustainability initiatives, growing globally, and driving operational excellence throughout the organization, with a focus on lean manufacturing, statistical process control, and a rigorous and disciplined approach to process improvement and price management.

To quickly recap some of the key financial highlights for the year, net sales for the fiscal year were essentially flat to the prior year with volume improvement across our consolidated businesses being offset by the negative impact of currency translation in Brazil and lower average polyester pricing, driven by a reduction in our raw material costs. However, our consolidated gross margin improved by 110 basis points year over year, driven by rigorous price versus value management, the continued growth of our PVA product sales, and our ongoing focus on process improvement and flexibility initiatives. And compared to our 2014 fiscal year, we are very pleased with the $6 million improvement in adjusted EBITDA for the last fiscal year.

I would like to take a few minutes to recap some of what we consider to be our major achievements for the 2015 fiscal year. We restructured our debt, which increased our borrowing capacity by $22 million, which, in conjunction with cash from operations, allows us to pursue growth-related initiatives including the expansion of our Repreve Recycling Center in the backward integration into plastic bottle processing.

We increased our year-over-year global PVA volume and revenue by about 15%, which is due in part to the investments in R&D and marketing that we are making to support the new products and technologies that contribute to our mix enrichment strategy. We completed the commercialization of a third production line in our Repreve Recycling Center. This flexible line, which is capable of recycling a wide variety of polyester waste inputs, increased our recycling capacity to approximately 70 million pounds per year, as Roger mention earlier.

We also broke ground last week in a major building addition to the Repreve Recycling Center in Yadkinville, which will allow us to have a fourth production line operational in mid-to-late calendar year 2016. Once fully operational, this fourth line will allow us to produce a total of approximately 100 million pounds of Repreve chip, and the building expansion will also have sufficient space to allow us to grow further with the potential addition of a fifth production line in the future.

We increased our air-jet texturing capacity, adding four state-of-the-art texturing machines to take advantage of the opportunity to grow our market share in this product category with the objective of becoming the largest domestic supplier in this profitable business. We completed the installation of additional polymer storage silos and feed systems through our POY production facility. This project increases by 20% the number of polymer types we can produce and greatly improves process flexibility and our ability to develop and produce unique, high-value products in support of our PVA growth initiatives.

And as mention earlier we also added polyester DTY texturing capacity with the addition of eight texturing machines to our operations in the US and El Salvador. This demonstrates our commitment to the NAFTA/CAFTA region and our willingness to make the necessary investments to service customers who choose to source their programs in the Western Hemisphere. Our objective is to continue to grow with regional apparel production and assure a sufficient supply of all types of yarns from Unifi to this region.

And, finally, we completed several Lean Manufacturing projects across all of our operations, which were successful at improving asset flexibility and efficiency, as well as supply chain responsiveness and velocity. We continue to focus on adjusting the capability and flexibility of our manufacturing process to match shifts in customer needs, including what they want and where they want it. And these accomplishments will help increase the flexibility of our assets to more effectively and efficiently react to the requirements of our broader, more specialized product offering.

We have also made considerable progress in developing commercial opportunities for our Repreve Renewables biomass business. As we have discussed in the past, one of our core objectives is to become less dependent on commodity yarn sales through the growth of PVA products, expanding business globally, and diversifying our company with sustainability at the core of what we do. Repreve Renewables, which is 60% owned by Unifi, produces and sells dedicated biomass feedstock and is an example of how the Company can diversify while remaining committed to sustainability.

Giant miscanthus, our biomass feedstock, can be used in biopower, bioliquid fuels, and the broad-based biomaterial markets. However, we view these as long-term opportunities, as there are many competing technologies being developed, evaluated, and tested. We have had success in one of these markets that we can build from in the future.

Repreve Renewables has been chosen to provide the agricultural and business development services to the University of Iowa's Biomass Fuel Project, which aims to reduce the use of fossil fuels by growing renewable biomass to be used to generate electricity for the university from its power plant with the goal of achieving 40% renewable energy production by 2020. We currently have planted 350 acres near the University and ultimately may grow as much as 2,500 acres to supply their power plant in the next few years.

Our primary focus, however, has been on supplying the poultry bedding market, which today consists of approximately 71,000 chicken houses that raise 8.5 billion chickens and 14,300 turkey houses that raise over 250 million turkeys each year. Poultry houses consume 2.9 million tons of bedding annually, spending in excess of $300 million in the US.

Our product is purpose-grown, harvested, and chopped for the poultry bedding market and offers many competitive advantages including supply reliability, price stability, and a consistently dry and absorbent product. We have been testing our product in poultry houses for 11 of the largest poultry integrators that represent more than 60% of the US poultry market. Our product has been validated by more than 3 million birds raised on our bedding and four University studies.

Currently we have 1,800 acres planted across Georgia, Oklahoma, North Carolina, Mississippi, Iowa, and Wisconsin, and 100% of our 2015 harvested volume has been sold out. We have supply commitments from several of the integrators, including three of the top five US poultry brands, with whom we are working on contracts and believe we will once again sellout next year. We are planning to greatly increase planted acreage this fall and spring near our target customers, and we will provide more complete details of our plans likely at our next conference call.

As previously discussed, we are planning to invest approximately $120 million of capital project spending over the course of our three fiscal years, 2015 through 2017, to support our growth initiatives. We invested $35 million of that amount in fiscal year 2015. We anticipate that the investment in these capital growth projects, when completed, will result in improvements to our annual adjusted EBITDA in the range of $18 million to $22 million fully realized in our 2018 fiscal year.

We expect that sales of our PVA products will continue to grow at levels consistent with the last few years and that our focus on differentiated products will drive further improvements in our domestic and international business over the next several quarters. Our adjusted EBITDA of $63.7 million for the 2015 fiscal year was consistent with the guidance we provided throughout the past year. We believe fiscal 2016 will provide another year of adjusted EBITDA and profit growth to the Company, but we will not begin to realize the full benefits of our capital spending on the expansion of the Repreve recycling center or the backward integration to bottle processing until fiscal years 2017 and 2018.

However, with that said, we would expect adjusted EBITDA to improve in 2016 and be in the high $60 millions for the 2016 fiscal year with adjusted EPS of between $2.15 and $2.20 per basic share, an improvement of $0.25 to $0.30 versus 2015 fiscal year. Adjusted EBITDA for the first quarter is expected to be at or slightly above $15 million.

With that, I will turn the call over to the operator for any questions.

(Operator Instructions) Chris McGinnis, Sidoti & Company.

Roger, a lot of good stuff just in terms of I guess depth of new contracts and things working out in China. Can you maybe walk through, when you look at the first slide and talk -- or you see volume down in the polyester, is that some of that moving out to China? Can you just walk through that if you're seeing that 15% growth in the PVA? Where does that translate into that first slide, that first deck that you present?

When we look at polyester texturing -- so we have polyester texturing in our polyester reporting segment. We also have a little bit of polyester texturing in our nylon segment and, of course, in our international segment.

So in our core polyester texturing we refer to as regional polyester texturing, from a year-over-year standpoint we've seen growth as we talk about CAFTA and NAFTA growing, but when we break out into the reporting segments we see some of the decline in the reporting segments. But in regional texturing, the polyester texturing we see growth year-over-year.

Got you, all right.

For you to think about; remember as the PVA gets bigger it's typically a lighter denier, higher margin but lower pounds. And in the recycle center, as we produce more but consume more of that internally, that can also affect the volume numbers. But Roger hit the highlights for you there.

Sure, that makes sense. I guess just a couple things, then I'll go to the queue and ask more if nobody else is around. But in the 2016 guidance, how much are you -- on the part -- the JVs is contributing to that? Whether on an EPS I guess maybe impact?

That's fair. I think from an EPS impact Parkdale would not be part of the Company's adjusted EBITDA metric. When you look at Parkdale for the current year, please remember to also look at the reconciliation from the GAAP to the adjusted results and pull out those one-time items to get to a baseline or an underlying number for fiscal year 2015.

From that point, given the recent capital spending at Parkdale that we've discussed on previous calls and as that capital spending begins to near its end, our expectation is for Parkdale or our, Unifi's, share of Parkdale's earnings to increase in fiscal 2016 against that adjusted fiscal 2015 number that you can see.

Understood. I guess, just doing some quick math -- and this is rough for sure -- but are you ahead of plan on the percentage of PVA that you targeted? I think it's 34% going into 2018. Are you ahead of that plan right now?

Chris, that's a good point. I'm picturing in my mind the investor day presentation in November 2014 and one of the slides that Roger would've presented the previous year was about 27% and we predicted 30% for the current year. So I think that in that regard, even despite slightly lower raw material costs and the effect that might or might not have on pricing, we are right on target for that metric and see no reason for the future slopes in 2017 or 2018 -- 2016/2017 to change.

All right. But if I'm thinking that you are at 30% now and you grow another 15, should you be at 34% by the end of this year or --? Or maybe I'm off a little bit with my number; maybe it's a little bit lower. But with more help coming in because of the expansion in 2016, will that number be outsized growth in 2017?

Yes, I believe that 33%, 34% would be what we would expect for 2016. And then the timing of the CapEx project and other -- with the completion of startups and installation will impact 2017 and beyond, but there's no reason to believe that we would be behind what was presented for 2017.

Sure. No, it looks like you're at it (inaudible) I guess just roughly. Let me see; just is Parkdale finished with the completion of the acquisition and the ramp up and now you should benefit again? I guess also on a cash basis; are you going to start to get that higher distribution then in prior periods?

You're exactly right. On previous calls, we had communicated that Parkdale was spending a significant amount of money reinvesting in its business both here and in Mexico. They embarked on a recent acquisition. Those capital spending opportunities led Unifi to receive and expect to receive only the tax distributions.

Those capital spending plans are nearing their end and, yes, we would -- after those capital spending opportunities stop that we would begin to receive both the tax and the special distributions fairly consistent with what we've seen in years prior.

Sure, all right. And then just one last question, or maybe two, sorry. Just on the China, you talked about the price gap. Has it become more competitive in any region with the change in the price gap and seemingly how hungry they are to kind of build up that utilization?

Yes, I would -- competitive, it's probably less competitive for us. As that price gap widens certainly China is being more aggressive in their pricing, and then when you factor in the price gap that really hurts the low end of our commodity business here in the US as we track those imports very carefully and see how those imports sort of hurt the bottom end of our business, if you will. Certainly volume is also important to us so we are very sensitive to that low end of the business and tracking the raw material gap and how many imports are coming in.

But that's all the more reason that we are investing in growth opportunities, looking at mix enrichment strategies, growing Repreve, because certainly that gives us a great defensibility against that level of product mix. But certainly we are sensitive to it; we track it very carefully and we share that each quarter and update.

Great. And I apologize if I missed this, but was there any comments about the TPP and how you are feeling it right now? It seems like it's obviously getting pretty close to maybe passing.

This is Bill. There's a negotiating meeting in Hawaii starting sometime late this week, probably going through next week. Expectation is that at least the textile chapter will likely be very close to being completed. Obviously, the industry is and will continue to be very much involved in that.

As far as the TPP negotiations being completed, there are still several very contentious issues around automotive and agriculture, and I think it's very hard to say whether it will actually get completed. But I think from a textile standpoint, the industry has been very much engaged and I think we are still reasonably comfortable with where we think the negotiations are going, but obviously won't be able to say that till we see the final deal.

Great, thanks very much for the time.

(Operator Instructions) Marco Rodriguez, Stonegate Capital.

Good morning, guys. Thank you for taking my questions. I wanted to start off on just I guess some housekeeping items here.

Just kind of wanted to talk about the tax rate and all the movement you guys saw in the tax situation as the year went along. Can you talk a little bit about that? And then how should we be thinking about taxes going into fiscal 2016?

Marco, this is James. That's a great question, thank you. I think the best way to answer that is to talk from the reconciliation on slide 8. You see us begin with the GAAP number and then, in the spirit of your question, adjust out the things that we would think of as unique to the period or not underlying -- or not part of our underlying effective tax rate.

And I think if you look at the adjusted totals at the bottom and see the $50.9 million for the year of income before income taxes and then you see the net income adjusted of $34 million. After considering the minority or non-controlling interests, you can calculate an effective tax rate from that. That, to me, would be a reasonable rate for you to use in future periods.

Although the success in China that Roger mentioned and the growth that we would expect there, as well as the success in Central America at our subsidiary, UCA, that Roger referenced and how well they have performed and we expect to continue to perform in future years, will provide further reductions to our underlying effective tax rate as those are jurisdictions in which the statutory rate is lower than what we experienced here in the US.

Got you. That's helpful, thank you. And then moving along to your guidance for fiscal 2016, your adjusted EBITDA guidance in the high $60 millions, you exited fiscal 2015 at $63 million, $64 million. Can you kind of help us bridge the gap, the additional EBITDA? Are you expecting more of that to come from gross margin improvement, revenue improvement, OpEx reductions? Just kind of help me think through that.

I will go ahead and start it and let Roger and Bill fill in any commentary after I give you the bridge.

We would see -- our expectations are based on flat raw materials from where we ended the year. Our expectations are to follow the CapEx plan that Roger outlined and then from there the improvement is really probably driven in half between a combination of payback of those capital spending projects, predominantly here, the United States, within the polyester segment, as well as the improvements in El Salvador and China for the reasons that Roger outlined. Probably an equal split between those two sort of CapEx and operating margin categories that you mentioned.

Roger, I would just echo that from James. Certainly as we have deployed the CapEx to further increase our mix enrichment, but also give us the capacity. We've added some texturing machines that I referenced. Certainly that's going to help us to continue to grow incrementally our volume as we communicated.

We continue to see CAFTA growing at roughly 5%, so with the flat raw material situation, which is something that we are anticipating but is always unpredictable, we would see some incremental volume growth. So also some incremental revenue growth.

Got you, (multiple speakers) I'm sorry, go ahead.

If I could just add to that, I think the other change that we will see is some reduction in our SG&A expenses as we had some unusual expenses in this past fiscal year. So we would expect SG&A to be back to more normal levels that you have seen in previous fiscal years, which I think is a [$1.2] million improvement also.

Got you, that's helpful. Just to clarify here on the raw material aspects, I know in your prepared remarks you talked about you are anticipating raw materials to kind of be flat on a sequential basis. But you are also anticipating that for the fiscal year?

Yes.

Got you, got you. And I didn't quite catch the number, the CapEx spend for fiscal 2016. Did I hear $25 million?

No, we just finished -- the fiscal year 2015 was $35 million and we anticipate -- based on the timing of the projects of the recycle expansion and the backward integration of bottle processing, we communicated $55 million for fiscal year 2016.

For fiscal 2016, got you. Sorry about that.

The three-year total is still in the range of $120 million.

Perfect. Last quick question; on the revenue segments, you have this all other revenues. Is that the poultry bedding?

That is a great question, Marco. Thank you. Your instincts are correct; that all other segment consists of the revenues from the Repreve Renewables entity that Bill outlined. Also includes certain third-party, for-hire transportation service revenues that we earned during the year.

And as both of those categories are expected to grow, predominantly in the renewables portion of that, we have begun to show those revenues separate. They don't belong in either of the poly, the nylon, or the international segments, so they are displayed for the reader in that new all other category.

Got you. And so, from what I gather from your prepared remarks, it sounds like the poultry bedding business is doing pretty well. You are anticipating adding some additional acreage. You did about $6.3 million in fiscal 2015, so I'm assuming the anticipation is that that goes up into fiscal 2016?

I think about all I can say right now is that we do anticipate it will go up. I think at our next conference call we will have a much better view of how much more planting we plan to do and how many contracts we have and what the likely increase would be.

But just one comment, the $120 million of capital spending that we have been discussing, any investment in Repreve Renewables is not included in that $120 million, though we don't anticipate there will be much investment or at least appreciable investment in this fiscal year.

Got you. And the additional acreage that you are going to be adding, do you have the space in your existing footprint or do you have to go out and find something, some additional footprint for that acreage?

Certainly anytime we increase acreage, because our business plan has been primarily to lease acreage in the general area of where our customers are, we will have to be acquiring that land as we go through. And by acquiring I mean leasing, not necessarily --.

Right, right. Perfect. Well, that's all I got. Thanks alot, guys.

Thank you. I'm showing no further questions at this time. I would like to turn the call back over to Bill Jasper for closing remarks.

Okay. Thank you, operator. We had a great year and we feel very, very good about where we have been and where we are going.

I think, more importantly, we're excited about the opportunities we have as we strategically spend capital aimed at both revenue and earnings growth. As we have demonstrated in the past, we're going to work very diligently to execute these plans effectively and efficiently, and we will continue to deploy our financial and human resources to most effectively increase shareholder value.

Thanks to all for participating on our call.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a wonderful day.