Unifi Inc. (NYSE:UFI) Q3 2018 Earnings Conference Call - Preliminary Transcript

Apr 25, 2018 • 08:30 am ET

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Unifi Inc. (NYSE:UFI) Q3 2018 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

Good morning, everyone. Welcome to Unifi's Third Quarter Conference Call. Leading today's call is A.J. Eaker, Vice President Finance and Investor Relations. A.J?

Executive
A.J. Eaker

Thank you, Operator, and good morning, everyone. On the call today is Kevin Hall, Chairman and Chief Executive Officer; Tom Caudle, President and Chief Operating Officer; and Jeff Ackerman, Executive Vice President and Chief Financial Officer.

During this call, management will be referencing a webcast presentation that can be found at unifi.com and by clicking the third quarter conference call link. Management advises you that certain statements included in today's call will be forward-looking statements within the meaning of the federal securities laws. Management cautions that these statements are based on current expectations, estimates, and/or projections about the markets in which Unifi 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, forecast, or implied by these statements. You are directed to the disclosures filed with the SEC on Unifi's Forms 10-Q and 10-K regarding various factors that may impact these results.

Also, please be advised that certain non-GAAP financial measures, such as adjusted EBITDA, adjusted working capital, adjusted net income, and adjusted EPS, may be discussed on this call, and non-GAAP reconciliations can be found in the schedules to the webcast presentation.

I will now turn the call over to Kevin Hall and advise you to follow along, beginning on Slide three of the webcast presentation.

Executive
Kevin Hall

Thanks A.J. and good morning everyone and thank you for joining us today.

During the third quarter, our revenue grew 3% year-over-year making it our fourth consecutive quarter of sales growth. Our sales momentum continues to be driven by the success of our premium value-added product portfolio. Total PVA sales for the quarter grew 17%.

The top-line performance do not translate into increased profitability due primarily to the acceleration of raw material costs which moved higher at a much faster rate than our ability to take responsive pricing actions.

We continue to believe that the investments we're making to drive long-term growth across the globe are important and are working. That said, we have some work to do to navigate this complex and challenging cost environment.

Jeff will share in a few minutes more detail on several unanticipated headwinds in the quarter. A quarter where many things went against us, an unexpected and a dramatic increase in raw material costs, sales mix and domestic demand challenges, unfavorable foreign currency impacts, and a higher effective tax rate.

The largest of these however, and the one that is our top priority, is the pace of raw material cost increases. As we talked about in our second quarter earnings call in January, the price of our input costs are directionally correlated with trends in the price of oil. At that time, we said that we have seen a move in raw material costs and then an increase in raw materials had a meaningful short-term impact