UFI 10-K & 10-Q changes, risk factors and insider trading

Petroleum-based chemicals and recycled plastic bottles comprise a significant portion of UNIFI’s raw materials. The prices for these products and related energy costs are volatile and dependent on global supply and demand dynamics, including geo-political risks. While UNIFI enters into raw material supply agreements from time to time, these agreements typically provide index pricing based on quoted market prices. Therefore, supply agreements provide only limited protection against price volatility. UNIFI attempts to pass on to its customers increases in raw material costs, but at times it cannot. When it can, there is typically a time lag that adversely affects UNIFI's margins during one or more quarters. Certain customers are subject to an index-based pricing model in which UNIFI’s sales prices are adjusted based on the change in the cost of certain raw materials in the prior quarter. Pricing adjustments for other customers must be negotiated independently. In ordinary market conditions in which raw material price increases have stabilized and sales volumes are consistent with traditional levels, UNIFI has historically been successful in implementing price adjustments within one to two fiscal quarters of the raw material price increase for its index priced customers and within two fiscal quarters of the raw material price increase for its non-index priced customers. UNIFI has lost in the past (and expects that it may lose in the future) customers to its competitors as a result of price increases. In addition, competitors may be able to obtain raw materials at a lower cost due to market regulations that favor local producers in certain foreign locations where UNIFI operates, and certain other market regulations that favor UNIFI over other producers may be amended or repealed. Additionally, inflation can have a long-term impact by increasing the costs of materials, labor, and/or energy, any of which costs may adversely impact UNIFI’s ability to maintain satisfactory margins. If UNIFI is not able to pass on such cost increases to customers in a timely manner (or if it loses a large number of customers to competitors as a result of price increases), the result could be material and adverse to its business, financial condition, results of operations, or cash flows.

Through its foreign operations, UNIFI is also exposed to foreign currency exchange rate fluctuations. Fluctuations in foreign currency exchange rates will impact period-to-period comparisons of UNIFI’s reported results. Additionally, UNIFI operates in countries with foreign exchange controls. These controls may limit UNIFI’s ability to transfer funds from its international operations or otherwise to convert local currencies into USDs. These limitations could adversely affectrestrict UNIFI’s ability to access cash from its foreign operations.

UNIFI is subject to income tax and other taxes in the U.S. and in numerous foreign jurisdictions. UNIFI’s domestic and foreign income tax liabilities are dependent on the jurisdictions in which profits are determined to be earned and taxed. Additionally, the amount of taxes paid is subject to UNIFI’s interpretation of applicable tax laws in the jurisdictions in which we operate. Changes in tax laws including further regulatory developments arising from U.S. tax reform legislation, judicial interpretations in the jurisdictions in which we operate, and multi-jurisdictional changes enacted in response to the action items provided by the Organization for Economic Co-operation and Development could have an adverse effect on UNIFI’s business, financial condition, operating results, and cash flows. Significant judgment, knowledge, and experience are required in determining our worldwide provision for income taxes.

UNIFI’s principal sources of liquidity are cash flows generated from operations and borrowings under its credit facility. UNIFI’s ability to make payments on its indebtedness and to fund planned capital expenditures and strategic initiatives will depend on its ability to generate future cash flows from operations. This ability, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond UNIFI’s control. The business may not generate sufficient cash flows from operations, and future borrowings may not be available to UNIFI in amounts sufficient to enable UNIFI to pay its indebtedness and to fund its other liquidity needs. Any such development would have a material adverse effect on UNIFI. The Company is always engaged in efforts to reduce costs and rationalize assets (i.e. improve liquidity). In fiscal 2025, UNIFI identified under-utilized assets to sell at a premium price, which allowed for some deleveraging.

UNIFI depends on a limited number of third parties for certain raw material supplies,materials, such as POY, Chip, dyes, and chemicals. Although alternative sources of raw materials exist, UNIFI may not be able to obtain adequate supplies of such materials on acceptable terms, or at all, from other sources. UNIFI is dependent on USMCA/NAFTA, CAFTA-DR, and Berry Amendment qualified suppliers of raw materials for the production of Compliant Yarns. These suppliers are also at risk with their raw material supply chains. Any significant disruption or curtailment in the supply of any of its raw materials could cause UNIFI to reduce or cease production for an extended period, or require UNIFI to increase its pricing, any of which could have a material adverse effect on its business, financial condition, results of operations, or cash flows.

WeSpecific to other ongoing geopolitical tensions, we recognize the disruption to global markets and supply chains caused by the conflicts in Ukraine and the Middle East.East, Whileparticularly in Iran. Escalating geopolitical tensions involving Iran have contributed to volatility andin uncertaintypetroleum continue,markets. weIn haveearly noMarch significant2026, customersdisruptions orto certain supply chainroutes partnersassociated with this conflict resulted in a sharp increase in crude oil and related feedstock prices. As a result of higher raw material costs stemming from disruptions in the conflictedMiddle regions,East, the Company implemented responsive price increases and wesurcharges havethat notbegan beenin directlyApril impacted2026 byand theare conflicts.expected Indirectly,to wecontinue while petrochemical-related inflation remains elevated. We recognize that additional or prolonged impacts to the petroleum or other global markets could cause further inflationary pressures to our global raw material costs or additional unforeseen adverse impacts.

Widespread public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases, such as the COVID-19 pandemic, have had, and could in the future have, a material adverse effect on UNIFI’s business, financial condition, results of operations, or cash flows. The full extent to which a global health crisis may impact our business and operating results would depend on future developments that are highly uncertain and cannot be accurately predicted, including new medical and other information that may emerge as a result and the actions by governmental entities or others to contain it or treat its impact.

In March 2024, the SEC issued a final rule that required registrants to provide climate disclosures in their annual reports and registration statements. The disclosure requirements of the new rule would have become effective for UNIFI beginning in fiscal 2027 and continued through fiscal 2032. A legal challenge to the new rule was filed in the U.S. Court of Appeals shortly after the SEC’s adoption and the SEC issued a voluntarily stay of the climate rule pending judicial review.2027. In March 2025, the SEC announced that it had voted to end its defense of the final rule.rule and in May 2026, the SEC proposed the rescission of the rule altogether. As such, theit finalis not expected that UNIFI will have to make any climate-related disclosure requirements,under ifan any,SEC andrule. reportingHowever, timelinethe areCompany currentlymay unknown.need to make disclosure under state or international climate-related rules in the regions in which we do business.

Throughout fiscal 2025, inflationary pressures and uncertainty over global trade policies resulted in volatility and customer-demand headwinds, particularly in the Americas and Asia Segments. Looking ahead, we believe our operations remain well-positioned to capture long-term growth opportunities and we are working to mitigate any potential recessionary impacts.

Demand levels for the majority of our business lines in the Americas and Asia Segments were below expectations, as a result of lower global demand amid consumer and macroeconomic uncertainty including most recently the tariffsrecent geopolitical situation in Iran, trade disruptions, and retaliatorytariff-related tariffs.concerns.

The Brazil Segment incurred selling price pressures from low-cost imports for most of the fiscal year, but sales volumes and margins remained strong.strong due to diligent pricing actions associated with the Iran conflict.

Within this reconciliation, depreciation and amortization expense excludes the amortization of debt issuance costs, which are reflected in interest expense, net. Within the accompanying consolidatedConsolidated statementsStatements of cashCash flows,Flows, amortization of debt issuance costs is reflected in depreciation and amortization expense. In fiscal 2025, 2024 and 2023, interest expense, net includes $136, $0 and $273, respectively,$136 of loss on debt extinguishment.

In fiscal 2026, UNIFI incurred various transition costs totaling $1,068 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs (including asset impairments and disposals) of $1,021, and (ii) employee separation costs of $47. The facility closure, equipment relocation, and employee separation costs were all recorded within Restructuring costs in the Consolidated Statements of Operations. In fiscal 2025, UNIFI incurred various transition costs totaling $13,485 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs (including asset impairments and disposals) of $5,896, (ii) inventory write-downs of $2,923, (iii) excess fixed manufacturing costs of $1,638, (iv) employee separation or retention costs of $1,580, and (v) forfeitures of deposits for texturing machinery of $1,448. The facility closure, equipment relocation, employee separation and retention costs, and forfeitures of deposits were all recorded within Restructuring costs and the inventory write-downs and excess fixed manufacturing costs were recorded within Cost of sales in the Condensed Consolidated Statements of Operations.

In fiscal 2026, UNIFI incurred various transition costs totaling $1,068 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs (including asset impairments and disposals) of $1,021, and (ii) employee separation costs of $47. The facility closure, equipment relocation, and employee separation costs were all recorded within Restructuring costs in the Consolidated Statements of Operations. The associated tax impact was estimated to be $0 due to a valuation allowance against net operating losses in the U.S. In fiscal 2025, UNIFI incurred various transition costs totaling $13,485 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs (including asset impairments and disposals) of $5,896, (ii) inventory write-downs of $2,923, (iii) excess fixed manufacturing costs of $1,638, (iv) employee separation or retention costs of $1,580, and (v) forfeitures of deposits for texturing machinery of $1,448. The facility closure, equipment relocation, employee separation and retention costs, and forfeitures of deposits were all recorded within Restructuring costs and the inventory write-downs and excess fixed manufacturing costs were recorded within Cost of sales in the Condensed Consolidated Statements of Operations. The associated tax impact was estimated to be $0 due to a valuation allowance against net operating losses in the U.S.

REPREVE Fiber products for fiscal 2025 comprised 31%, or $174,855, of consolidated net sales, compared to 32%, or $188,517, for fiscal 2024. REPREVE Fiber sales decreased primarily due to lower customer demand, cautious purchasing patterns, and ongoing competitive pressures in the recycled fiber market.

Gross profit for fiscal 2025 decreased to $8,418 from $16,616 in fiscal 2024. Gross profit decreased primarily due to (i) lower overall conversion margins and (ii) low utilization and decreased productivity related to the consolidation of yarn manufacturing operations in the Americas Segment. This was partially offset by (a) increased sales volumes, (b) variable cost savingcost-saving initiatives, and (c) improved productivity in certain manufacturing areas. Gross profit continues to be unfavorably impacted by weak manufacturing utilization in the Americas Segment, where utilization and productivity remain below expected levels.

Restructuring CostsCosts, Net

GainLoss (LossGain) on Sales and Disposals of Assets

Other Operating (Income) Expense, Net

Loss (Earnings) from Unconsolidated Affiliates

The following is management’s discussion and analysis of certain significant factors that have affected UNIFI’s operations, along with material changes in financial condition, during the periods included in the accompanying condensed consolidated financial statements. A reference to a “note” in this section refers to the accompanying notes to condensed consolidated financial statements. A reference to the “current period” refers to the three-month period ended DecemberMarch 28,29, 2025,2026, while a reference to the “prior period” refers to the three-month period ended DecemberMarch 29,30, 2024.2025. A reference to the “current six-monthnine-month period” refers to the six-monthnine-month period ended DecemberMarch 28,29, 2025,2026, while a reference to the “prior six-monthnine-month period” refers to the six-monthnine-month period ended DecemberMarch 29,30, 2024.2025. Such references may be accompanied by certain phrases for added clarity. The current period and the prior period each consisted of 13 weeks. The current six-monthnine-month period and the prior six-monthnine-month period each consisted of 2639 weeks.

Our discussions in this Item 2 focus on our results during, or as of, the three months ended DecemberMarch 28,29, 20252026 and DecemberMarch 29,30, 2024,2025, and, to the extent applicable, any material changes from the information discussed in the 2025 Form 10-K or other important intervening developments or information. These discussions should be read in conjunction with the 2025 Form 10-K for more detailed and background information about our business, operations, and financial condition.

Beyond the specific demand challenges within the textile industry,industry as described in the Form 10-K, our business has been adversely impacted by: (i) the impact of inflation, including tariffs, on consumer spending, (ii) elevated interest rates for consumers and customers, including the impact on the carrying costs of customer inventories, and (iii) the volatility in customer order patterns resulting from trade and regulatory matters (including tariffs). This volatility in demand resulted from customers buying ahead of tariffs becoming effective for certain countries and difficulty in predicting final tariff assessments. A tariff structure that disproportionately impacts one country or region over another may result in a shift in manufacturing or flow of goods particularly as it relates to textile production across Asia and Central America. Such lower tariff countries or regions may be situated outside of UNIFI’s existing global supply chain. If UNIFI is unable to move production based on these shifts in regional demand, we may lose sales and experience an adverse effect on our financial condition, results of operations, or cash flows. UNIFI will continue to monitor these and other aspects of the current environment, leverage our global business model as necessary, and work closely with stakeholders to ensure business continuity and liquidity.

Specific to other ongoing geopolitical tensions, we recognize the disruption to global markets and supply chains caused by the conflicts in Ukraine and the Middle East, howeverparticularly wein Iran. Escalating geopolitical tensions involving Iran have notcontributed beento directlyvolatility impacted.in Additionally,petroleum wemarkets. In early March 2026, disruptions to certain supply routes associated with this conflict resulted in a sharp increase in crude oil and related feedstock prices. As a result of higher raw material costs stemming from disruptions in the Middle East, the Company implemented responsive price increases and surcharges that began in April 2026 and are closely monitoring developments in Latin America and the Caribbean following recent U.S. military action in Venezuela. It is too earlyexpected to determinecontinue howwhile thispetrochemical-related situationinflation mayremains evolve or what implications it could have for UNIFI, but no direct impacts have occurred in fiscal 2026.elevated. We will continue to assess developments and react as appropriate. Indirectly, we recognize that additional or prolonged impacts to the petroleum or other global markets could cause further inflationary pressures to our global raw material costs or additional unforeseen adverse impacts.

Despite lower input and freight costs and a marginally more stable labor pool recently, global demand volatility and uncertainty continued into fiscal 2026.continues. The threat of an economic slowdown and global tensions continue to create uncertainty.uncertainty, more specifically the conflict in Iran contributed to rising freight and raw material costs beginning in March 2026. Such existing challenges and future uncertainty, particularly for rising input costs, labor productivity, and global demand, could worsen and/or continue for prolonged periods, materially impacting our consolidated sales, gross profit, and operating cash flows. Also, the need for future selling price adjustments in connection with inflationary costs could impact our ability to retain current customer programs and compete successfully for new programs in certain regions.

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

Three Months Ended DecemberMarch 28,29, 20252026 Compared to Three Months Ended DecemberMarch 29,30, 20242025

Consolidated net sales for the current period decreased by $17,512,$16,520, or 12.6%,11.3%, and consolidated sales volumes decreased 9.8%7.7% as customer inventories beingcustomers reduced inventories, which led to lower demand for UNIFI,UNIFI products, compared to the prior period. Net sales in the current period were lower primarily due to (i) lower sales volumes in the Asia Segment, (ii)and lower-priced sales mix in the Asia Segment and (ii) lower sales volumes in the Americas Segment. These were partially offset by higher sales volumes in the Brazil Segment, partially offset by improvedimport salespricing volumes, and (iii) lower sales volumes and prices in the Brazil Segment.pressures. Overall sales remain depressed, particularly in the Americas and Asia Segments as a result of continued volatility from uncertainty over ongoing geopolitical events, global trade policiespolicies, and competition from lower-priced products.

Gross Profit (Loss)

Gross profit for the current period increased to $3,611$9,117 from $534$(445) in the prior period. Gross profit increased primarily due to (i) variable cost-saving initiatives and (ii) improved utilization in certain manufacturing areas, partially offset by (a) lower sales volumes and (b) production volatility and limited demand visibility due to thevolatility tariffprimarily uncertainty infrom the Americasongoing Segment.geopolitical events. Gross profit continues to bewas unfavorably impacted by demand volatility in the Americas Segment and import pricing pressures in the Brazil Segment.

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

ForBrazil the Asia Segment,Segment gross profit decreased primarily due to lowercompetitive salesimport volumes,pricing pressures, partially offset by higher-pricedhigher sales mix.volumes.

Provision (Benefit) for Bad Debts

Other Operating Expense (Income), Expense, Net

The improvement in net loss was primarily attributable to (i) increased gross profit, (ii) lower SG&A expenses, (iii) lower interest expense, net andnet, (iv) lower income tax expense,expense partially offset byand (av) lower restructuring costs, net incurred in the current period and (b) a gain on sale of assets in the prior period.net.

The decrease in net sales for the Americas Segment from the prior period to the current period was primarily attributable to (i) lower fiber sales volumes and higher(ii) Flakea lower-priced sales volumes, driving a decrease in average selling price.mix.

The decreaseincrease in net sales for the Brazil Segment from the prior period to the current period was primarily attributable to (i) lower selling prices associated with competitive pricing pressures and (ii) lower sales volumes due to market conditions, partially offset by favorable foreign currency translation effects from the strengthening of the BRL versus the USD.USD and (ii) higher sales volumes, partially offset by lower selling prices associated with competitive import pricing pressures.

The decrease in Segment Profit for the Brazil Segment was flat from the prior period to the current period was primarily attributable to (i)as lower conversion margins primarily due to sales mix and pricing pressures andwere (ii) a decrease in sales volumes discussed above, partiallymostly offset by favorable foreign currency translation effects from the strengthening of the BRL versus the USD.USD and an increase in sales volumes. We continue to prioritize innovation and differentiation to improve our portfolio and competitive position in Brazil.

The decrease in net sales for the Asia Segment from the prior period to current period was primarily attributable to (i) a change in sales mix of REPREVE products and (ii) an overall decrease in sales volumes due to geopolitical events, competitive pricing pressures and the continued volatility introduced by recent tariffs, partially offset by afavorable changeforeign incurrency salestranslation mixeffects from the strengthening of REPREVEthe products.RMB versus the USD.

The decrease in Segment Profit for the Asia Segment from the prior period to the current period was primarily attributable to (i) a change in sales mix of REPREVE products and (ii) lower sales volumes discussed above, partially offset by afavorable changeforeign incurrency salestranslation mixeffects from the strengthening of REPREVEthe products.RMB versus the USD.

SixNine Months Ended DecemberMarch 28,29, 20252026 Compared to SixNine Months Ended DecemberMarch 29,30, 20242025

the components of net loss and the percentage increase or decrease over the prior six-monthnine-month period amounts, and a reconciliation from net loss to EBITDA and Adjusted EBITDA.

In the first quarter of fiscal 2026, UNIFI incurred various transition costs totaling $1,068 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs (including asset impairments and disposals) of $1,021, and (ii) employee separation costs of $47. The facility closure, equipment relocation, and employee separation costs were all recorded within Restructuring costs, net in the Condensed Consolidated Statements of Operations. In the third quarter of fiscal 2025, UNIFI incurred various transition costs totaling $2,900 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs of $1,088, (ii) inventory write-downs of $1,000, (iii) excess manufacturing costs of $580, and (iv) employee separation or retention costs of $232. The facility closure, equipment relocation, employee separation and retention costs were all recorded within Restructuring costs and the inventory write-downs and excess manufacturing costs were recorded within Cost of sales in the Condensed Consolidated Statements of Operations.

In the first quarter of fiscal 2026, UNIFI incurred various transition costs totaling $1,068 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs (including asset impairments and disposals) of $1,021, and (ii) employee separation costs of $47. The facility closure, equipment relocation, and employee separation costs were all recorded within Restructuring costs in the Condensed Consolidated Statements of Operations. The associated tax impact was estimated to be $0 due to a valuation allowance against net operating losses in the U.S. In the third quarter of fiscal 2025, UNIFI incurred various transition costs totaling $2,900 in connection with the consolidation of its yarn manufacturing operations including (i) facility closure and equipment relocation costs of $1,088, (ii) inventory write-downs of $1,000, (iii) excess manufacturing costs of $580, and (iv) employee separation or retention costs of $232. The facility closure, equipment relocation, employee separation and retention costs were all recorded within Restructuring costs and the inventory write-downs and excess manufacturing costs were recorded within Cost of sales in the Condensed Consolidated Statements of Operations. The associated tax impact was estimated to be $0 due to a valuation allowance against net operating losses in the U.S.

Consolidated net sales for the current six-monthnine-month period decreased by $29,210,$45,730, or 10.2%,10.6%, and consolidated sales volumes decreased 7.5%, compared to the prior six-monthnine-month period. Net sales in the current six-monthnine-month period were lower primarily due to (i) lower sales volumes in the Asia Segment, (ii) lower sales volumes and lower-priced sales mix in the Americas Segment, and (iii) lower sales volumes and prices in the Brazil Segment. Overall sales remain depressed, particularly in the Americas and Asia Segments as a result of continued volatility from uncertainty over ongoing geopolitical events, global trade policiespolicies, and competition from lower-priced products.

REPREVE® Fiber products for the current six-monthnine-month period comprised 29%, or $73,536,$111,784, of consolidated net sales, compared to 31%, or $88,014,$132,713, for the prior six-monthnine-month period.

Gross profit for the current six-monthnine-month period decreasedincreased to $6,998$16,115 from $9,992$9,547 in the prior six-monthnine-month period. Gross profit decreasedincreased primarily due to (i) variable cost-saving initiatives and (ii) improved utilization in certain manufacturing areas. This increase was partially offset by (a) lower sales volumes, (iib) lower overall conversion margins and (iiic) production volatility from an inability to forecast demand due to the tariff uncertainty incaused by geopolitical events and tariffs impacting the Americas Segment. The decrease was partially offset by (a) variable cost-saving initiatives and (b) improved utilization in certain manufacturing areas. Gross profit continues to be unfavorably impacted by demand volatility in the Americas Segment and import pricing pressures in the Brazil Segment.

For the Americas Segment,Segment gross profit increased primarily due to overall cost-saving initiatives, including reductions in manufacturing costs from the consolidation of Americas yarn manufacturing consolidationoperations and the Fiscal 2026 Profit Improvement Plan, partially offset by (a) demand and production volatility stemming from tariffgeopolitical uncertaintyevents and (b)tariff lower conversion margins from a lower-priced sales mix.uncertainty.

For the Brazil Segment,Segment gross profit decreased primarily due to (i) lower sales volumes and (ii) competitive import pricing pressures.

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

SG&A decreased from the prior six-monthnine-month period to the current six-monthnine-month period, primarily due to the actions from the Fiscal 2026 Profit Improvement Plan.

ProvisionBenefit for Bad Debts

The current six-monthnine-month period and prior six-monthnine-month period provision reflect no material activity.