Unifi

InvestmentUFI
NYSE: Research
I Presentation
Month Day,
Sector: M 20XX
Industrials
April 24th, 2018
Senior Analysts: Niharika Pendharkar, Paul Menexas
Junior Analysts: Nolan Tiss, Subaru Honge, Radhey
Patel, Thanweer Ahmed, Dylan Melanson

1
Unifi Valuation Summary

Recommendation Summary

Unifi (NYSE: UFI)

Current Trading Price (04-24-18) $33.02

Recommendation BUY
Target Price $43.51
Upside Potential 32.0%

Recommendation BUY

2
Agenda
Industry Definition & Breakdown

Company Overview

Revenue Generation Model

Industry & Company Trends

Risk Analysis

Comparable & DCF Valuation

Summary/Recommendation

3
Industry Definition
• The Textile Manufacturing Industry includes the sale and production of petrochemical
and raw materials such as cotton and wool (natural fibers), and polyester and nylon
(synthetic fibers)
• Finished products that are created with the materials from this industry include
apparel, home textiles, industrial and consumer products, floor coverings, fiber fill and
tires.

Lydall, Inc. Unifi, Inc. Culp, Inc.

NYSE: LDL NYSE: UFI NYSE: CULP
Market Cap: 829.51M Market Cap: 694.76M Market Cap: 383.47M

Albany Intl, Corp. Interface, Inc. The Dixie Group, Inc

NYSE: AIN NYSE: TILE NYSE: DXYN
Market Cap: 2.05B Market Cap: 1.51B Market Cap: 47.62B

Source: Unifi, Inc. 10k, Google Finance, IBIS World

4
Industry Breakdown

Source: Unifi, Inc. 10k, Google Finance, IBIS World

5
Industry Trend 1: Shifts in Consumer Preferences
Favorable shifts in Consumer Preferences:
▪ With an increase in demand for textiles, the industry
faces environmental consequences.
▪ The textile industry’s CO2 emissions are projected to
increase by more than 60% to nearly 2.8 billion tons
per year by 2030.
▪ An estimated 92 million tons of textile waste is
created annually from the fashion industry.
▪ It is estimated to increase by about 60% between
2015 and 2030, with an additional new 57 million
tons of waste generated annually.

• With these environmental factors in consideration,

%
R : 6.4 millennials are preferring sustainable products.
CAG • 64% of Millennials all over the world reported
that they are willing to spend more on clothing
brands that provide sustainable and
eco-friendly products.
• This has put stress on textile manufacturers to
respond to these customer needs by supplying
eco-friendly fibers to their customers.

Source: CNBC, Business Of Fashion

6
Industry Trend 2: Shifts in Textile Material
Favorable shifts in Textile Material:
• The global polyester market is expected to
reach $39.3 billion by 2025, growing at a
compound annual growth rate of 6.3%.
• Polyester is used as a key element in various
markets, including apparel, home furnishing,
construction, and automotive.
• As demand for synthetic fibers grow, polyester
leads the charge as it’s cheaper to produce and
more widely preferred in comparison to other
fibers, such as nylon.
Polyester Nylon
• Pros • Pros
• More hydrophobic, fast-drying • Smooth, soft texture (alternative to silk)
• Permanent color from dyeing • More durable, abrasion resistant
• Can withstand higher temperature • Greater stretch ability
• Wrinkle-resistant • Cons
• Cons • Stays wet longer
• Odor retention • Colors fade over time
• Durability • Cannot withstand higher temperatures

Source: Lulu lemon, Sourcing Journal

7
Company Overview
Unifi is a global textile
manufacturing company focused
on yarns including polyester and
nylon.
• Its fastest growing product line is
Repreve, comprised of numerous
polyester-based fibers made from
recycled materials.
• The company has manufacturing
plants in North Carolina and Brazil
with sales offices spread throughout
Unifi Inc.
the Americas and Asia. Market Cap 694.76M
• Unifi has transformed more than 10
Current Trading Price ~38.00
billion plastic bottles into recycled
fiber for new clothing, shoes, home Enterprise Value 778.84M
goods and other consumer products.
• Brand names using Unifi Premium 2017 Revenue 647.27M
Value Added (PVA) products include Plastic Bottles Recycled 11.4 Billion
North Face, Ford, Nike, Patagonia,
Quicksilver, and New Balance.

Source: Unifi, Inc. 10k, Google Finance, IBIS World

8
Revenue Generation Model
Polyester Segment Sold In:

Knitters and Weavers of

Polyester Yarn Apparel, Automotive and United States and
Furniture Upholstery, Home El Salvador
Furniture

Nylon Segment Sold In:

Textured Nylon and Covered Knitters and Weavers of United States and
Spandex Products Apparel and Hosiery Colombia
Markets

International Segment Manufactured In Sold in

Brazil with Sales Knitters and Weavers

of Apparel, Home South America
Offices in Brazil,
Polyester-Based Products China, and
Furnishings,
Automotive, and Asia
Sri Lanka. Industrial Markets

Sources: Unifi Press Release

9
Company Trend Summary

Trend 1: Shift in Product Mix Towards PVA

yarns

Trend 2: Diversification of Yarns in Product

Portfolio

Trend 3: Capacity Expansion Plans in Place to

Support Growth

10
Trend 1: Shift in Product Mix Towards PVA yarns
▪ Premium Value Added yarns have been rising in
popularity in North America and Europe due to the
high quality and sustainability offered.
▪ PVA yarns will continue to drive top line growth as
well as increase gross margins. .4%
9
▪ Unifi has lessened the impact of low quality yarn G R:
imports since it has started to move away from CA
competing with cheap foreign textile suppliers.

▪ Unifi’s most successful PVA yarn is a

product called Repreve, which is
manufactured using recycled plastic bottles
and industrial waste.
▪ Since all of Unifi’s PVA yarns are classified
as polyester-based fibers, they have started
to shift focus away from their nylon
product segment.
Source: Repreve.com, UFI 10k, Stonegate Capital Markets
11
Company Trend Summary

Trend 1: Shift in Product Mix Towards PVA

yarns

Trend 2: Diversification of Yarns in Product

Portfolio

Trend 3: Capacity Expansion Plans in Place to

Support Growth

12
Trend 2: Diversification of Yarns in Product Portfolio
• Unifi acquired National Spinning on April 12th, 2018 for an undisclosed value to
move into the market for wool and acrylic yarn. This will allow for growth in
key market segments such as sweaters, hosiery, and apparel.
• Unifi currently owns a 34% minority stake in Parkdale America LLC. in order to
hedge against a change in consumer preference for cotton.
• The acquisition will have a positive impact on both Unifi’s production facilities
as well as their product portfolio.

Dye Facility Transitioning
from Burlington, N.C.
(National Spinning) to
Reidsville, N.C (Unifi, Inc.)
• This will shorten product development and production lead
times, which increases customer responsiveness.
• Unifi expects to operate on a seven-day schedule.
• No net gain in the number of employees as a result of the
acquisition.

• The acquisition of National Spinning will increase sourcing

Addition of Wool and Acrylic
to Product Portfolio
flexibility and expertise.
• As a result, relationships with existing customers will be
strengthened.
• There will also be an increase in opportunities to attract new
customers.

Sources: Unifi Press Release

13
Company Trend Summary

Trend 1: Shift in Product Mix Towards PVA

yarns

Trend 2: Diversification of Yarns in Product

Portfolio

Trend 3: Capacity Expansion Plans in Place to

Support Growth

14
 Trend 3: Capacity Expansion Plan
• Unifi has laid out a plan to spend ~$138M from
F15 to F17 on expansion with maintenance
capex at around $10M per year.
• The expansion is primarily focused on
supporting its core production capacity to handle
growing PVA product sales.
• Unifi’s expansion plan is more about adding
additional capacity to its existing footprint
(current buildings and land) than expanding its
footprint.

• Unifi will spend an additional ~$75 million on

capital expenditures within the next two years
to fully complete their expansion plan.
• Most of this money will go towards finishing
the renovation of their Reidsville, North
Carolina manufacturing facility, which will
become completely state of the art by late 2019.

Source: Repreve.com, UFI 10k, Stonegate Capital Markets

15
Risks
• Unifi derived about 34% and 18% of its F15 and F16 pre-tax
Bottom line dependent on income from PAL, in which it holds a 34% interest. Thus, a
Parkdale America, LLC. less-than-impressive performance of PAL may substantially impact
Unifi’s earnings.

• Many of Unifi’s raw materials are derived from petro-based

chemicals.
Raw material volatility • While many of Unifi’s client contracts are indexed to raw material
costs, there may be delays in implementation. Increases in raw
material costs will adversely impact financial results.

• Unifi is the largest compliant yarn manufacturer in the NAFTA

Changes in trade and CAFTA region
regulation • Changes in trade regulation that weaken Unifi’s current position in
the region, could adversely impact financial results.

• The Company’s low-end products compete with low-cost yarn

imports from Asia where price is a primary competitive driver.
Intense Competition • Continued or increased pricing pressure from Asia could
materially impact Unifi’s financial operations.

16
 Comparable Companies Analysis
Comparable Company Analysis

LTM data (12-24-2017)

Company Ticker EV Market Cap Revenue EBITDA Net Income P/E EV/EBITDA EV/Revenue

Unifi, Inc. UFI 718.5 633.8 663.9 9.90% 5.30% 18.0x 10.9x 1.1x
Lydall, Inc. LDL 863.3 846.0 698.4 14.00% 7.10% 17.1x 8.8x 1.2x
Culp, Inc. CULP 342.0 384.1 322.9 11.30% 4.50% 26.4x 9.4x 1.1x
Albany International Corp. AIN 2,407.8 2,068.9 863.7 18.60% 3.80% 63.0x 15.0x 2.8x
Interface, Inc. TILE 1,669.1 1,522.0 996.4 14.80% 5.30% 28.8x 11.3x 1.7x
The Dixie Group, Inc. DXYN 181.0 45.6 412.5 4.30% (2.30%) N/A 10.2x 0.4x

High 63.0x 15.0x 2.8x

Mean 33.8x 10.9x 1.4x
Median 27.6x 10.2x 1.2x
Low 17.1x 8.8x 0.4x

P/E EV/EBITDA EV/Revenue

LTM EPS $1.92 LTM EBITDA $65.73 LTM Revenue $663.90

Implied Price Target $53.15 Implied Price Target $32.04 Implied Price Target $40.23

Upside (Downside) % 60.96% Upside (Downside) % -2.97% Upside (Downside) % 21.84%

17
 Discounted Cash Flow Valuation
Forecasted
Perpetuity Growth Method
2018 2019 2020 2021 2022
Growth Rate 2.00%
Undiscounted TEV $882,244
EBIT $30,995 $47,994 $55,051 $59,126 $61,641 Discounted TEV $585,510
DCF Value $728,160
- Taxes $(4,990) $(12,478) $(13,763) $(14,781) $(15,410)
Equity Value $643,417
$26,004 $35,515 $41,288 $44,344 $46,230 Add: Investment in Affiliates $153,368
Share Price $43.56
+ D&A $23,188 $24,309 $22,994 $24,590 $24,741 Implied Exit Multple 9.87

- CAPEX $(30,599) $(45,022) $(10,470) $(10,517) $(10,140)

- Δ in NWC $5,920 $(7,695) $(5,327) $(4,902) $(4,219) Exit Multiple Method

Unlevered FCF $24,513 $7,107 $48,485 $53,516 $56,613 EBITDA Multiple 10.20x
Undiscounted TEV $911,831
Net Present Value $142,649.76
Discounted TEV $605,146
DCF Value $747,796
Equity Value $663,053
Key Statistics: WACC Calculation:
Add: Investment in Affiliates $153,368
Share Price $44.64
Current Trading Price (04-24-2018) $34.65 Cost of Debt 2.50%
Implied Growth Rate 2.20%
Market Cap $633,780.90 % Weight 16%
Net Debt $84,743.00
Beta 0.63 Cost of Equity 9.69%
Shares Outstanding 18,290.94 % Weight 84%
Value of Investment in Affiliates $153,368
Marginal Tax Rate 21.00% WACC 8.55%

18
 Unifi Valuation Summary

Recommendation BUY Valuation Summary

Method Price Weight

Discounted Cash Flow

Recommendation Summary
Perpetuity Growth Method $43.56 10%
Exit Multiple Method $44.64 40%

Company (Ticker) UFI Comparable Company Analysis

Current Trading Price (04-24-2018) $33.02 P/E $53.15 25%

EV/EBITDA $32.04 25%
EV/Revenue $40.23 0%

Recommendation BUY
Target Price $43.51
Target Price $43.51

Upside Potential 32.0%

19
Thank You

20
 Appendix: Income Statement
Income Statement

Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Revenue 713,962.0 687,902.0 687,121.0 643,637.0 647,270.0 684,413.5 714,545.1 742,335.4 767,474.6 789,687.0
% growth -3.7% -0.1% -6.3% 0.6% 5.7% 4.4% 3.9% 3.4% 2.9%

COGS (excl. D&A) (616,274.0) (586,744.0) (578,373.0) (532,477.0) (532,738.0) (578,230.3) (588,083.4) (608,140.6) (625,808.5) (643,763.8)
% of Revenue 86.32% 85.29% 84.17% 82.73% 82.31% 84.49% 82.30% 81.92% 81.54% 81.52%
Gross Profit 97,688.0 101,158.0 108,748.0 111,160.0 114,532.0 106,183.2 126,461.7 134,194.8 141,666.0 145,923.2
% Margin 13.7% 14.7% 15.8% 17.3% 17.7% 15.5% 17.7% 18.1% 18.5% 18.5%

SG&A (47,386.0) (46,203.0) (49,672.0) (47,502.0) (50,829.0) (49,025.4) (51,183.8) (53,174.4) (54,975.2) (56,566.3)
% of Revenue 6.64% 6.72% 7.23% 7.38% 7.85% 7.16% 7.16% 7.16% 7.16% 7.16%
EBITDA 50,302.0 54,955.0 59,076.0 63,658.0 63,703.0 57,157.8 75,277.9 81,020.4 86,690.8 89,356.9
% Margin 7.0% 8.0% 8.6% 9.9% 9.8% 8.4% 10.5% 10.9% 11.3% 11.3%

Depreciation (24,584.0) (17,896.0) (18,043.0) (17,528.0) (20,368.0) (23,187.9) (24,308.8) (22,993.8) (24,589.9) (24,740.9)
Amort. of Intangibles 1.0 1.0 1.0 1.0 1.0 - - - - -
Total D&A (24,584.0) (17,896.0) (18,043.0) (17,528.0) (20,368.0) (23,187.9) (24,308.8) (22,993.8) (24,589.9) (24,740.9)
Provision for Bad Debts 154.0 (287.0) (947.0) (1,684.0) 123.0 (528.2) (528.2) (528.2) (528.2) (528.2)
Other Operating Expenses (3,409.0) (5,289.0) (1,600.0) (2,248.0) 310.0 (2,447.2) (2,447.2) (2,447.2) (2,447.2) (2,447.2)
Total Operating Expenses (75,225.0) (69,675.0) (70,262.0) (68,962.0) (70,764.0) (75,188.7) (78,468.0) (79,143.7) (82,540.5) (84,282.6)
Operating Income (EBIT) 22,463.0 31,483.0 38,486.0 42,198.0 43,768.0 30,994.5 47,993.7 55,051.1 59,125.6 61,640.6
% Margin 3.1% 4.6% 5.6% 6.6% 6.8% 4.5% 6.7% 7.4% 7.7% 7.8%

Interest Expense (4,489.0) (4,329.0) (4,025.0) (3,528.0) (3,578.0) (3,806.4) (3,806.4) (3,806.4) (3,806.4) (3,806.4)
Interest Income 698.0 1,790.0 916.0 610.0 517.0 911.5 951.7 988.7 1,022.2 1,051.8
Net Interest Inc. (Exp) (3,791.0) (2,539.0) (3,109.0) (2,918.0) (3,061.0) (2,894.8) (2,854.7) (2,817.7) (2,784.2) (2,754.6)

Other Non-Operating Income 11,444.0 19,063.0 19,475.0 8,963.0 4,230.0 10,889.3 8,027.4 7,715.6 8,877.5 8,206.8
EBT Excl. Unusual Items 30,116.0 48,007.0 54,852.0 48,243.0 44,937.0 38,989.0 53,166.4 59,949.0 65,218.8 67,092.8
% Margin 4.2% 7.0% 8.0% 7.5% 6.9% 5.7% 7.4% 8.1% 8.5% 8.5%

Unusual Items (1,102.0) (126.0) (1,040.0) - (1,662.0) - - - - -

EBT Incl. Unusual Items 29,014.0 47,881.0 53,812.0 48,243.0 43,275.0 38,989.0 53,166.4 59,949.0 65,218.8 67,092.8

Income Tax Expense (13,344.0) (20,161.0) (13,346.0) (15,073.0) (10,898.0) (6,277.2) (13,823.3) (14,987.3) (16,304.7) (16,773.2)
Earnings from Cont. Ops 15,670.0 27,720.0 40,466.0 33,170.0 32,377.0 32,711.8 39,343.2 44,961.8 48,914.1 50,319.6

Earnings from Discounted Ops. - - - - - - - - - -

Extraord Item & Acct. Change - - - - - - - - - -
Net Income to Company 15,670.0 27,720.0 40,466.0 33,170.0 32,377.0 32,711.8 39,343.2 44,961.8 48,914.1 50,319.6

Minority Int. in Earnings 965.0 1,103.0 1,685.0 1,245.0 498.0 503.1 605.1 691.6 752.4 774.0
Net Income 16,635.0 28,823.0 42,151.0 34,415.0 32,875.0 33,214.9 39,948.3 45,653.3 49,666.5 51,093.6
% Margin 2.3% 4.2% 6.1% 5.3% 5.1% 4.9% 5.6% 6.1% 6.5% 6.5%

EPS $0.84 $1.52 $2.32 $1.93 $1.81 $1.82 $2.18 $2.50 $2.72 $2.79

All numbers excluding EPS and margins are in thousands

21
 Appendix: Balance Sheet
Balance Sheet

Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Cash And Equivalents 8,755.0 15,907.0 10,013.0 16,646.0 35,425.0 66,644.9 77,579.7 129,738.5 187,824.1 248,526.0
Accounts Receivable 97,459.0 93,617.0 83,554.0 82,727.0 79,791.0 88,426.1 92,319.1 95,909.6 99,157.5 102,027.4
Other Recievables 933.0 308.0 309.0 695.0 1,330.0 (617.4) (627.9) (649.4) (668.2) (687.4)
Total Receivables 98,392.0 93,925.0 83,863.0 83,422.0 81,121.0 87,808.7 91,691.1 95,260.2 98,489.3 101,340.0
Inventory 110,667.0 113,370.0 111,615.0 103,532.0 111,405.0 112,098.8 114,009.0 117,897.4 121,322.6 124,803.5
Income taxes receivable 1,388.0 179.0 1,451.0 3,502.0 9,218.0 1,631.8 3,593.5 3,896.1 4,238.6 4,360.4
Deffered income taxes 3,911.0 4,123.0 3,922.0 2,387.0 2,194.0 1,445.2 3,182.5 3,450.5 3,753.8 3,861.7
Other Current Assets 5,913.0 6,052.0 6,022.0 4,790.0 6,468.0 5,950.9 6,052.3 6,258.7 6,440.6 6,625.4
Total Current Assets 229,026.0 233,556.0 216,886.0 214,279.0 245,831.0 275,580.3 296,108.2 356,501.4 422,069.0 489,516.9

Gross Property, Plant & Equipment 714,806.0 726,529.0 732,205.0 790,646.0 820,420.0 851,019.3 896,041.4 906,511.5 917,028.2 927,167.9
Accumulated Depreciation (599,642.0) (602,727.0) (595,983.0) (605,545.0) (617,032.0) (640,219.9) (664,528.8) (687,522.6) (712,112.5) (736,853.4)
Net Property, Plant & Equipment 115,164.0 123,802.0 136,222.0 185,101.0 203,388.0 210,799.4 231,512.6 218,989.0 204,915.7 190,314.6

Intangibles assets, net 7,772.0 7,394.0 5,388.0 3,741.0 2,158.0 2,158.0 2,158.0 2,158.0 2,158.0 2,158.0
Investments in unconsolidated affiliates 93,261.0 99,229.0 113,901.0 117,412.0 119,513.0 119,513.0 119,513.0 119,513.0 119,513.0 119,513.0
Other non-current assets 10,243.0 5,086.0 3,975.0 4,909.0 613.0 613.0 613.0 613.0 613.0 613.0
Total Assets 455,466.0 469,067.0 476,372.0 525,442.0 571,503.0 608,663.7 649,904.8 697,774.4 749,268.7 802,115.4

Accounts Payable 45,544.0 51,364.0 45,023.0 41,593.0 41,499.0 45,714.5 46,493.5 48,079.2 49,476.1 50,895.6
Accrued Exp. 18,485.0 18,589.0 16,640.0 18,474.0 16,144.0 17,982.0 18,773.7 19,503.8 20,164.3 20,747.9
Curr. Income Taxes Payable 851.0 3,134.0 676.0 1,455.0 1,351.0 1,516.6 1,583.4 1,644.9 1,700.6 1,749.9
ST Debt 65.0 7,215.0 12,385.0 13,786.0 17,060.0 15,289.8 15,550.3 16,080.7 16,547.9 17,022.6
Other Current Liabilities - - - - - - - - - -
Total Current Liabilities 64,945.0 80,302.0 74,724.0 75,308.0 76,054.0 80,502.9 82,400.9 85,308.7 87,888.9 90,416.0

Long Term Debt 97,688.0 92,273.0 91,725.0 107,805.0 111,382.0 111,382.0 111,382.0 111,382.0 111,382.0 111,382.0
Other Non-Current Liabilities 5,053.0 7,549.0 10,740.0 10,393.0 11,804.0 11,804.0 11,804.0 11,804.0 11,804.0 11,804.0
Deferred income taxes 1,300.0 2,205.0 90.0 4,991.0 11,457.0 11,457.0 11,457.0 11,457.0 11,457.0 11,457.0
Total Liabilities 168,986.0 182,329.0 177,279.0 198,497.0 210,697.0 215,145.9 217,043.9 219,951.7 222,531.9 225,059.0

Common Stock 1,921.0 1,831.0 1,801.0 1,785.0 1,823.0 1,823.0 1,823.0 1,823.0 1,823.0 1,823.0
Additional Paid In Capital 36,375.0 42,130.0 44,261.0 45,932.0 51,923.0 51,923.0 51,923.0 51,923.0 51,923.0 51,923.0
Retained Earnings 252,112.0 245,673.0 278,331.0 307,065.0 339,940.0 372,651.8 411,994.9 456,956.7 505,870.8 556,190.4
Treasury Stock - - - - - - - - - -
Comprehensive Inc. and Other (5,500.0) (4,619.0) (26,899.0) (29,751.0) (32,880.0) (32,880.0) (32,880.0) (32,880.0) (32,880.0) (32,880.0)
Total Common Equity 284,908.0 285,015.0 297,494.0 325,031.0 360,806.0 393,517.8 432,860.9 477,822.7 526,736.8 577,056.4

Minority Interest 1,572.0 1,723.0 1,599.0 1,914.0 - - - - - -

Total Equity 286,480.0 286,738.0 299,093.0 326,945.0 360,806.0 393,517.8 432,860.9 477,822.7 526,736.8 577,056.4

Total Liabilities and Equity 455,466.0 469,067.0 476,372.0 525,442.0 571,503.0 608,663.7 649,904.8 697,774.4 749,268.7 802,115.4

All numbers are in thousands

22
 Appendix: Cash Flow Statement and Key Assumptions
Statement of Cash Flows

Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Net Income 15,670 27,720 40,466 33,170 32,377 32,712 39,343 44,962 48,914 50,320
Add: Depreciation & Amortization 24,584 17,896 18,043 17,528 20,368 23,188 24,309 22,994 24,590 24,741
Less: Change in Net Working Capital (2,642) 17,979 5,198 9,824 (12,027) 5,920 (7,695) (5,327) (4,902) (4,219)
Less: Capital Expenditures (8,809) (19,091) (25,966) (52,337) (33,190) (30,599) (45,022) (10,470) (10,517) (10,140)
Operating Cash Flow 28,803 44,504 37,741 8,185 7,528 31,220 10,935 52,159 58,086 60,702

Initial Cash Balance 10,886 (10,560) (20,644) (347) 10,435 35,425 66,645 77,580 129,738 187,824
Cash Available for Investors 39,689 33,944 17,097 7,838 17,963 66,645 77,580 129,738 187,824 248,526

Debt Additions (Repayments) (26,830) (1,300) (6,975) 8,775 3,150

Dividend Payments - - - - - - - - - -
Equity Additions (Share Repurchase) (19,315) (36,551) (10,360) (6,211) -
Historical Cash Adjustment (4,104) (16,737) (109) 33 14,312 - - - - -
Ending Cash Balance (10,560) (20,644) (347) 10,435 35,425 66,645 77,580 129,738 187,824 248,526

Revenue_COGS 2018 2019 2020 2021 2022 Income_Statement 2018 2019 2020 2021 2022
Polyester Segment % Growth 8.0% 6.0% 5.5% 5.0% 4.5% Revenue Growth
5.7% 4.4% 3.9% 3.4% 2.9%
Nylon Segment % Growth 0.0% -1.0% -2.0% -3.0% -4.0% Assumptions

International Segment % Growth 5.0% 4.5% 4.0% 3.5% 3.0% COGS % Revenue
84.5% 82.3% 81.9% 81.5% 81.5%
Assumptions
Polyester Segment % COGS 86.0% 84.8% 84.3% 83.8% 83.8%
SG&A % Revenue
Nylon Segment % COGS 89.0% 87.4% 86.9% 86.4% 86.4% 7.2% 7.2% 7.2% 7.2% 7.2%
Assumptions
International Segment % COGS 79.5% 74.8% 74.8% 74.8% 74.8%

23
 Appendix: Supplemental Data and Balance Sheet Assumptions
Supplemental Data

Tax Rate 44.31% 42.00% 24.33% 31.24% 24.25% 16.10% 26.00% 25.00% 25.00% 25.00%
Shares Outstanding 19,909.0 18,919.0 18,207.0 17,857.0 18,136.0 18,290.9 18,290.9 18,290.9 18,290.9 18,290.9
Depreciation as % of Net
21.3% 14.5% 13.2% 9.5% 10.0% 11.0% 10.5% 10.5% 12.0% 13.0%
PP&E
Interest Income as % Sales 0.10% 0.26% 0.13% 0.09% 0.08% 0.13% 0.13% 0.13% 0.13% 0.13%

(Regular Dividends) - - - - - - - - - -
Dividends % of NI 0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
(Preferred Dividends Paid) - - - - - - - - - -
Minority Interest -6.2% -4.0% -4.2% -3.8% -1.5% -1.5% -1.5% -1.5% -1.5% -1.5%
Balance Sheet Assumptions

Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Net Working Capital (FCF-style) 155,326.0 137,347.0 132,149.0 122,325.0 134,352.0 128,432.5 136,127.6 141,454.3 146,356.0 150,574.9

Accounts Receivable % Revenue 13.7% 13.6% 12.2% 12.9% 12.3% 12.9% 12.9% 12.9% 12.9% 12.9%
Other Receivables % Revenue 0.1% 0.0% 0.0% 0.1% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1%
Inventory % COGS 18.0% 19.3% 19.3% 19.4% 20.9% 19.4% 19.4% 19.4% 19.4% 19.4%
Income Tax Receivables % Tax
10.4% 0.9% 10.9% 23.2% 84.6% 26.0% 26.0% 26.0% 26.0% 26.0%
Expense
Other Current Assets % COGS 1.0% 1.0% 1.0% 0.9% 1.2% 1.0% 1.0% 1.0% 1.0% 1.0%
Net PP&E as a % of Sales 16.1% 18.0% 19.8% 28.8% 31.4% 30.8% 32.4% 29.5% 26.7% 24.1%
Deferred Income Taxes % Tax
29.3% 20.5% 29.4% 15.8% 20.1% 23.0% 23.0% 23.0% 23.0% 23.0%
Expense

Accounts Payable % COGS 7.4% 8.8% 7.8% 7.8% 7.8% 7.9% 7.9% 7.9% 7.9% 7.9%
Accrued Exp. % SG&A 39.0% 40.2% 33.5% 38.9% 31.8% 36.7% 36.7% 36.7% 36.7% 36.7%
Curr. Inc. Taxes Pay. % Sales -0.12% -0.46% -0.10% -0.23% -0.21% -0.22% -0.22% -0.22% -0.22% -0.22%
ST Debt % of COGS 0.0% 1.2% 2.1% 2.6% 3.2% 2.6% 2.6% 2.6% 2.6% 2.6%
Other Crt. Liabilities % COGS 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

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Appendix: Valuation Range
Valuation Range

52-week range Perpetuity Growth Exit Multiple Price/Earnings EV/EBITDA EV/Revenue Reference Range

Low 26.91 34.50 36.72 32.82089468 27.09 11.29

Range 7.74 9.06 7.92 20.33 4.94 28.94
Base 34.65 43.56 44.64 53.1474651 32.04 40.23
Range 4.56 16.99 8.61 68.12 17.19 56.32
High 39.21 60.56 53.25 121.2650402 49.22 96.55

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 Appendix: Sensitivity Tables
Risks - Sensitivity Analysis

DCF - Perpetuity Growth Sensitivity

WACC
– 7% 8% 8% 9% 9% 10% 10% 11%
3.0% $68.00 $60.56 $54.59 $49.70 $45.63 $42.19 $39.23 $36.67
2.5% $61.59 $55.51 $50.53 $46.38 $42.87 $39.85 $37.25 $34.97
2.0% $56.45 $51.38 $47.14 $43.56 $40.49 $37.83 $35.51 $33.46
Terminal Growth Rate
1.5% $52.24 $47.93 $44.27 $41.14 $38.43 $36.06 $33.97 $32.12
1.0% $48.73 $45.00 $41.81 $39.05 $36.63 $34.50 $32.61 $30.92
0.5% $45.75 $42.49 $39.67 $37.21 $35.04 $33.11 $31.39 $29.84

DCF - EV/EBITDA Exit Multiple Sensitivity

WACC
– 7% 8% 8% 9% 9% 10% 10% 11%
12.2 x $54.35 $53.25 $52.17 $51.12 $50.10 $49.10 $48.14 $47.20
11.2 x $50.88 $49.85 $48.85 $47.88 $46.93 $46.01 $45.11 $44.24
10.2 x $47.40 $46.46 $45.53 $44.64 $43.76 $42.91 $42.08 $41.28
Terminal EBITDA Multiple
9.2 x $43.93 $43.06 $42.21 $41.39 $40.59 $39.81 $39.06 $38.32
8.2 x $40.45 $39.66 $38.90 $38.15 $37.42 $36.72 $36.03 $35.36
7.2 x $36.98 $36.27 $35.58 $34.91 $34.26 $33.62 $33.00 $32.40

CompCo - Price/Earnings Sensitivity CompCo - EV/EBITDA Sensitivity CompCo - EV/Revenue Sensitivity

Implied Share Price Implied Share Price Implied Share Price
$1.92 #REF! $32.04 $65.73 $663.90 #REF!
29.63x $56.99 12.20x $39.22 2.2x $76.53
28.63x $55.07 11.20x $35.63 1.7x $58.38
Price/Earnings 27.63x $53.15 10.20x $32.04 1.2x $40.23
EV/EBITDA Multiple EV/Revenue Multiple
Multiple 26.63x $51.22 09.20x $28.44 0.7x $22.09
25.63x $49.30 08.20x $24.85 0.2x $3.94
24.63x $47.38 07.20x $21.25 -0.3x $(14.21)

26
Porter’s Five Forces

Threat of Entry: High

• The industry is machine intensive,
therefore requiring a lot of capital upfront.
• Especially with producing ecofriendly
fibers, state of the art facilities are necessary
and expensive.

Supplier Power: Low
• Many different suppliers offer the
same quality of raw materials.
• However, because raw materials
have such a large impact on the
manufacturers, they are extremely
sensitive to price changes.
Industry Rivalry:
Moderate
• Extremely competitive for
commoditized yarns.
• On the other hand, the
market for PVA yarns is not
as saturated leading to lower
competition.
Buyer Power: Moderate
• Buyershave the power to chose from
many different suppliers of cheap,
commoditized yarn.
•Limited number of suppliers for PVA
yarns make buyer power low for this
quality level of yarn.

Threat of Substitutes: High

• Many alternatives, specifically recycled
material, have emerged as substitutes.
• Synthetic fibers, such as polyester and
nylon, serve as substitutes for natural fibers,
such as cotton, silk and wool.

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SWOT Analysis
Strengths
• Differentiated product in its PVA
product lines, offering both quality and
sustainability
• Strong customer base with high profile
brands using their product
• State of the art facilities give Unifi a
competitive advantage
Opportunities
• Potential for even more brand signing
with more high profile companies
• Unifi has the potential to further
expand its PVA sales into Europe, Asia,
and South America
• There is room for Unifi to further
diversify their product portfolio with
more fibers
Weaknesses
• A large amount of Unifi’s profit comes
from minority interest in Parkdale
America LLC., therefore, it is dependent
on its success
• Unifi has no PVA nylon-based yarns
which will likely result in a decline in
sales for that specific segment
Threats
• Potential for more competitors to enter
the market for PVA yarns
• If oil prices continue to rise, the cost of
producing these synthetic yarns will rise
as well therefore lowering profits
• Potential changes in trade regulation or
a potential trade war involving textiles
will have an adverse effect on financials
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