Unifi, Inc. (UFI) Q4 2013 Earnings Report, Transcript and Summary

Good morning. My name is Charice, and I will be your conference operator today. At this time, I would like to welcome everyone to the Unifi Fourth Quarter and Year-end Earnings Conference Call. [Operator Instructions] . I would now turn the conference over to Ron Smith, Chief Financial Officer.

Thanks, Charice, 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'll be referencing a webcast presentation that can be found at unifi.com. The presentation could be accessed by clicking the Fourth Quarter Conference Call link found on our homepage. Before we begin, I need to first advice you that certain statements included herein 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. Therefore, 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. And I direct you to the disclosures filed with the SEC and our Form 10-Qs and 10-Ks regarding various factors that may impact these results. Also, please be advised that certain non-GAAP financial measures, such as adjusted EBITDA, will be discussed on this call and a non-GAAP reconciliation can be found in the schedules to the website presentation. Before we get to the financial details for the quarter, I'd like to turn the call over to Roger, who'll provide an overview of the markets and raw materials trends. Roger?

Thanks, Ron, and good morning, everyone. Overall, economic growth continued at a slow pace in the June quarter as consumers scaled back spending amid higher payroll taxes and weak growth in wages. Beyond replacing aging cars, which continued at a very strong pace, consumers remain cautious about buying anything other than the basics. But such basics include many apparel and hosiery items that our products go into. Economies remain hopeful that the overall economy will pick up in the second half of the year as improvements on the job front, rising home prices and this year's rally in the stock market all begin to bolster overall consumer confidence ahead of the back-to-school and holiday selling seasons. Looking at the largest market segment related to our products, retail sales in the apparel segment increased 5.3% in the June 2013 quarter compared to the June 2012 quarter, and improved 2% over the March 2013 quarter. After 2 consecutive years of declines in apparel consumption, on a square meter fabric basis, current projections indicate growth of up to 5% in 2013 calendar year compared to 2012, with increases in synthetic apparel outpacing increases in cotton apparel. Growth in square meters of fabric is an indication that more units of apparel are being sold, and this will help create future demand for our products. Regional sourcing of synthetic apparel, which includes NAFTA and CAFTA, has increased steadily since 2009, and we estimate that the region will maintain its share of total synthetic apparel consumption of approximately 18% for the fifth consecutive year. With the region holding share and a 5% growth in total apparel consumption, specifically on a square meter equivalent basis, this leads to future volume opportunities for the company. Looking at automotive segment. The current annualized rate of new car and truck sales is the best rate since December 2007, and auto industry executives believe that the conditions for continued growth in new vehicle sales will remain for the balance of the year. We are very pleased with the amount of development work that we have in place with REPREVE, which is our flagship premier value-added product among automakers, such as Ford, that are looking to make their vehicles more environmentally responsible. We continue to spot several of our traditional commodity products into the automotive fabric markets as well. Although year-over-year residential housing starts and completions have increased 10% and 20% respectively, retail sales dollars for home furnishings have not matched this pace. Retail sales of home furnishings for the June 2013 quarter increased 2.7% compared to the June 2012 quarter. And the level of year-over-year increases in this segment remain much lower than the improvements in either the apparel or the automotive segments. In terms of raw materials, prices in North America increased more sharply than expected in January and February, resulting in significant margin deterioration as we temporarily shared in the negative impact of higher prices with our customers. As the March quarter ended, we instituted across-the-board price increases based on the higher raw material prices in order to recover the margins lost in the March quarter. As we moved out of the March quarter, raw material prices moderated as the capacity for our primary ingredients came online and became more stable. The timing effect of the company's sales price adjustments that were made in response to raw material prices resulted in a 530 basis point improvement in our gross profit in the June 2013 quarter, as we recovered the lost margins from the March quarter. We don't expect to consistently hold these margins going forward. And based on the raw material decrease in April, some sales prices are being revised to maintain market competitiveness as we move through the first quarter of fiscal 2014. The gap in polymer pricing between the U.S. and Asia reduced to approximately $0.13 per pound in the June 2013 quarter compared to approximately $0.14 per pound in the March 2013 quarter. Although we don't expect much change in either raw material prices or the polymer pricing gap, in our September 2013 quarter, we are anticipating more stability in raw material pricing in fiscal 2014 based on the current visibility we have on global raw material supply-demand balance. This is assuming that there are no major plant disruptions that produce the key raw materials for our products. Turning to our Brazil business. The overall results for the fiscal 2013 year, we're still below expectations despite sales volume improvements of 5.5% versus fiscal year 2012. Several challenges during the year were high inflation, changes in the local incentive programs and continued pressure from cheap imported textured yarn. Our focus on mix enrichment helped contribute to the improving trends that we are seeing in Brazil, along with the reduction in the POY import duty that the Brazilian government implemented during the fourth quarter that reduces the raw material cost for our operation. We anticipate the volume improvements to continue into the next year, and we have implemented price increases to recover margins due to the negative impact of changes in the local incentive program. With these initiatives, we expect to continue the improving trend in Brazil. In China, volume and margin improved by approximately 20% in fiscal year 2013 compared to fiscal year 2012. Given the general soft market conditions in China, our improved financial results speak to the success that we have been having with our premier value-added products. Looking at the opportunities that are either in development or under consideration with our customers in China, we expect our mix to contribute to further improvements in our financial performance in the fiscal year 2014. We continued to have success with our premier value-added products in fiscal year 2013, driven primarily by REPREVE. Within the past 12 months, we have told you about many exciting adoptions with leading brands and retailers. In the action sports category, which we supported with our sponsorship of the X Games in January, we announced programs with brands such as Quiksilver, Volcom, Roxy, Vitamin A and Eco Swim. We have launched or expanded our PVA business in the menswear category with brands including Dockers, Lee, Haggar, Eddie Bauer and Azad. We also made inroads into the women's wear market in the past year with Beija-Flor, which is a manufacturer of high-end denim. And we continue to expand our relationship with Ford. Based on these programs and those that we have in development, we continue to be confident that we are on the path to double our global sales of premier value-added yarn by the end of fiscal year 2014 compared to the end of fiscal 2010 year. We continued several new developments with brands and retailers and expect to continue our PVA growth of 20-plus percent per year. However, we are rapidly moving toward reaching the capacity of our REPREVE Recycling Center in Yadkinville, so we are expanding our capability to produce more REPREVE and other PVA products. These plans include adding a third line in our REPREVE Recycling Center, as well as exploring manufacturing relationships that will assist us in expanding our REPREVE product portfolio. We are also enhancing our manufacturing flexibility by adding more chips storage silos and dryers, and expanding our machinery flexibility by retrofitting more POY equipment for small-lot high flexibility to support our mix enrichment PVA strategy and growth. Over the next 2 years, we are allocating $14 million for these domestic initiatives, which is in addition to our standard $7 million to $8 million per year of routine maintenance CapEx. This will bring the annual CapEx to $14 million per year for the next 2 years versus our normal $7 million to $8 million per year. We will also continue to evaluate opportunities in 2014 fiscal year that will allow us to market REPREVE directly to consumers, as it not only continues to build awareness for REPREVE among target consumers, it also helps to sustain momentum for REPREVE among brands and retailers by raising its visibility and credibility. We are working with ESPN again on opportunities to promote REPREVE at the Winter X Games in Aspen in January 2014, and continuing to build the REPREVE brand recognition and brand awareness through these initiatives. With that as a backdrop, I will turn the call back over to Ron.

Thanks, Roger. I'll begin the review of our preliminary financial results for the June 2013 quarter on Page 3 of the presentation, with net sales and gross profit highlights by segment. In the polyester segment, we had another strong June quarter with volume growing 16% compared to the March 2013 quarter. Compared to the prior year June quarter, volume increased primarily as a result of the 14th operating week in our fiscal quarter as 2013 is the fiscal year containing 53 operating weeks. The increase in gross profit in the June quarter is primarily attributable to the additional volume and the significant increase in conversion margins during the quarter related to the timing effect of the company's sales price adjustments in North America and the growth of the PVA -- of our PVA products Roger discussed earlier. In the nylon segment, volumes increased and price decreased as a result of a stable -- as a result of stable pricing with the shift in mix towards products that carry a lower average selling price. Volumes were also impacted by the additional operating weeks in the June 2013 quarter. In the international segment, volume increased 6.4% in the June quarter compared to the June 2012 quarter, as a result of improved operating conditions in both Brazil and China. Our gross profit in Brazil improved on a local currency basis, despite the loss of certain incentives for local producers. Gross profit for the quarter, on a U.S. dollar basis, remained unchanged as the average exchange rate weakened from BRL 1.96 to the dollar in the June 2012 quarter to BRL 2.07 in the June 2013 quarter. Gross profit improved in China as we increased our product offerings and widened our customer base. Turning to the income statement highlights for the June 2013 quarter on Page 4. The company is reporting net income of $10.5 million or $0.54 per share on net sales of $200.7 million for the June 2013 quarter. On a consolidated basis, gross profit increased 320 basis points based on the 7% increase in consolidated sales volumes, higher conversion margins related to the company's price adjustments and PVA sales growth mentioned earlier, and the company's ongoing improvement efforts to reduce the per unit manufacturing cost. Interest expense declined $2.8 million for the quarter as a result of the company's deleveraging strategy, which has dramatically lowered our debt levels and significantly reduced our interest-carrying costs. Net income for the current quarter was negatively impacted by a $2.5 million increase in SG&A expenses related to variable compensation and marketing investments to support REPREVE and other PVA products. Net income in the June 2013 quarter was also negatively impacted by a net increase in income tax expense of $10.3 million compared to the June 2012 quarter, which included an unusual item related to the company's adjustment of its valuation allowance for certain deferred taxes. Turning to the income statement highlights for the full fiscal year on Page 5. The company is reporting net income of $16.6 million or $0.84 per share on net sales of $714 million for the 2013 fiscal year, an improvement over net income of $11.5 million or $0.57 per share on net sales of $705 million for the prior fiscal year. Gross profit for the fiscal 2013 year improved 250 basis points compared to the 2012 fiscal year. As our international segment continued to recover from a slow 2012 fiscal year, average raw material prices in North America were down slightly for the full year and we continue to realize the benefits of our mix enrichment and cost improvement programs. For the 2013 fiscal year, interest expense decreased $11.6 million as we saw a full year benefit from our previously completed deleveraging strategy, but income taxes increased $15.3 million. Net income in the 2013 fiscal year was also negatively impacted by an $8.3 million decrease in earnings from the company's equity affiliates. Turning to our equity affiliates highlighted on Page 6. The company's earnings from Parkdale America decreased slightly in the June 2013 quarter, but decreased $9.9 million for the fiscal year. For the year, Parkdale America's results were negatively impacted by inventory destocking of several large customers early in the year, the timing of deferred revenue recognition related to the EAP cotton rebate program and a $0.01 per pound reduction in the rebate program. However, we believe that Parkdale America has returned to more normal operating conditions and run rates, as shown by their improving performance over the past 6 months. Going forward, their performance should benefit from an expected increase in cotton apparel imports of approximately 4% in the calendar year 2013 compared to 2012, which will reverse 2 consecutive years of declines, and raw material prices that have moderated since their run-up in the March 2013 quarter. Distributions in Parkdale America totaled $3.4 million during the quarter and $13.4 million for the fiscal year. For the 2013 fiscal year, earnings from the company's nylon POY joint ventures increased $1.6 million while distributions for the year increased $0.5 million. Turning to Page 7. Adjusted EBITDA for the June 2013 quarter was $18.3 million, which exceeds the $15 million to $7 million -- $15 million to $17 million estimate provided on our earnings call in April, thanks to the better-than-expected operating margins discussed earlier. Included in the add-backs to adjusted EBITDA for the June 2013 quarter was a $1.1 million -- was $1.1 million of restructuring costs, primarily related to the departure of the company's former General Counsel during the quarter. Adjusted EBITDA for the 2013 fiscal year was $52.7 million, an improvement of $12.9 million over the prior fiscal year and within the low-50s range provided at the beginning of the year and reconfirmed on our quarterly earnings calls throughout the year. Turning to the working capital highlights slide on Page 8. Adjusted working capital increased $4.4 million during the June 2013 quarter as sales volumes increased, and the increase in inventory unit outpaced the raw material price declines. The build in the inventory was primarily in Brazil to support the improving business there. However, the impact of the increase was minimized in Brazil due to the net effect on working capital of the weakened real in Brazil. The increase in payables and accrued expenses were primarily timing-related. Turning to the capital structure highlights on Page 9. For the 2013 fiscal year, the company utilized $50.5 million of cash generated from operating activities and distributions from equity affiliates to repurchase 1.1 million shares of the company's common stock for $19.3 million or an average price of just over $18 per share and it reduced its outstanding debt by $23.8 million. As of June 30, 2013, cash on hand was $8.8 million, total debt was $97.8 million and we have 19.2 million shares currently outstanding. During the June quarter, the company also amended its bank credit facility, which consists of $100 million revolving credit facility and a $50 million term loan. The amendment extends the maturity of the entire facility to May 2018, eliminates scheduled quarterly principal payments, reduces the borrowing rate of the term loan and removes share repurchases and certain optional debt prepayments from our fixed charge coverage ratio calculation. The amendment also provides for the reload of the term loan from its balance at June 30, 2013 of $42.8 million back to its original balance of $50 million, subject to the completion of certain appraisals that have since been obtained. As a result, the reload of the term loan back to $50 million is now effective. More generally, we believe the amendment provides additional stability to our long-term capital structure and significantly improves our financial flexibility and related capacity to execute on our strategic plans for the future. Before I turn the call back over to Bill, I'd like to provide an update on some key upcoming dates, which can be found on Page 10. We expect to file the results for the 2013 fiscal year in our Form 10-K before the filing deadline, which is Friday, September 13. And our quiet period will begin on Friday, September 27, and extend through our earnings release conference call, which is currently scheduled for October 24. We also plan to have an Investor Day on Monday, September 16. And we have the contact information there for Rebecca for you guys to contact for anyone who's interested. With that, I'd like to turn the call back over to Bill. Bill?

Thanks, Ron, and good morning, everyone. I'd like to start my comments today with a brief look at the global economy, including those areas of the world that impact our business the most. World Bank estimates that global GDP is set to grow at 2.2% in 2013, a pace that is slightly lower than a 2.3% registered last year. In their most recent report, the World Bank said the global economy appears to be transitioning toward a period of more stable but slower growth with projected global growth of 3% in 2014 and 3.3% in 2015. In Brazil, the Central Bank recently cut its growth forecast down to 2.7% from 3.1% for 2013, and estimates that -- excuse me, that inflation could reach 6% as the real has posted significant decline against the dollar. However, GDP growth projections for Brazil will improve -- or I think it is expected to improve with an estimate from the World Bank of 4% for 2014 and 3.8% in 2015. The weakening of the real has helped make us, as a domestic producer in Brazil, more competitive at the commodity-end of our business, while our focus on process improvement, mix enrichment and sales price management contributed to improvements in our operating results as the 2013 fiscal year progressed. The continuation of these strategies, along with the reduction in the POY import duty that Roger mentioned earlier, should help us maintain positive momentum in Brazil as we enter the 2014 fiscal year. China's economy is expected to grow 7.6% in the second half of calendar year 2013. Though slower than previous years, it is an indication that China's economic growth at least remains fundamentally stable. According to the World Bank, GDP growth for China is projected to be 8% in 2014 and 7.9% in 2015. A positive indicator for our business in China is that after GDP declines in the European union in 2012 and 2013, the World Bank estimates GDP growth slowly strengthening to 0.9% in 2014 and to about 1.5% in 2015. We believe that an economic recovery in Europe, although slow and tenuous, should result in improving demand for our PVA products, primarily those supplied from UTSC, our Chinese trading company. Although commodity textile activity in China will remain soft in the next fiscal year, we feel confident that our PVA business will continue to strengthen based on the number of current and planned development projects. We are very pleased with the volume and margin improvements in China in fiscal year 2013, and we expect the overall financial performance of UTSC will improve in fiscal '14 and '15. Here in the U.S., the GDP growth estimates for 2013 is about 2%, then strengthening to 2.8% in '14 and 3% in 2015. As Roger mentioned earlier, consumers had limited their spending to the basics such as apparel and hosiery. And retail sales had benefit from this, increasing 4.1% in the first 6 months of the calendar year compared to last year. And another trend that bodes well for our business going forward is the growth in share of synthetic apparel compared to cotton apparel. In 2008, synthetic apparel had a 38% share of total apparel consumption in the U.S. That share is expected to be 49% in 2013. Coupled with growth of apparels sold at retail and a stable regional share of U.S. synthetic apparel at about 18%, we believe the conditions are favorable for continued improvements in our North American operations. We are also encouraged by the cost and supply projections for raw materials over the next few years. Although we expect limited relief in raw material prices in the near term, we do expect to see less volatility in raw material pricing in fiscal 2014 compared to the last 2 years and continued moderation over time. A more stable raw material environment, coupled with our sales price management strategies, should provide more consistency in our gross margins throughout the 2014 fiscal year. Of course, the outlook for raw material assumes there were no major unplanned disruptions at refineries or natural disasters that impact the plants producing key raw materials for our products. Turning to our financial strength that Ron mentioned, we are very pleased by the results of our deleveraging strategy, which we accomplished with the focused disciplined approach over the last several years. The strength and liquidity of our domestic business now provides the foundation needed to support our operational needs, fund future growth initiatives and enable us to execute our stock repurchase plan. During the 2013 fiscal year, the company utilized cash generated from operations and distributions from equity affiliates to repay $24 million of outstanding debt, and as Ron mentioned, repurchase 1.1 million shares of the company's common stock. In addition, we further improved our operating flexibility in 2013 quarter by amending our bank credit facility, as Ron mentioned earlier. With that strong foundation, the company will continue its rigorous improvement programs and evaluation of every feasible opportunity to increase our capacity and flexibility in order to support the growth of our PVA global product portfolio. Last quarter, we announced the $14 million investment over the next 2 years to expand our recycling capacity, increase flexibility of our existing asset base and improve our small-lot production run capability and the development and planning for those projects are underway. Turning now to REPREVE Renewables, our bioenergy feedstock JV, which is commercialized in the proprietary and patented bioenergy crop, FREEDOM Giant Miscanthus. The company has -- the JV has developed rhizome harvesting and planting technology, which have been proven to be highly efficient and effective, significantly reducing establishment costs while providing high germination rates. We believe this technology provides highly competitive commercial scale planting capability and economics, which was the first step in developing this business. We are in the process of filing patents with this noble technology and will further refine it in the 2014 planting season. We also recently hired an experienced agro business executive as the JV CEO, and are in the process of developing a comprehensive business plan to identify the resources needed to support this business based on the defined performance goals in a full year pro forma budget. Based on the geo-potential, elemental composition and environmental properties, FREEDOM Giant Miscanthus has the potential to be the market leader in the growing biomass feedstock market. The bioenergy industry, which utilizes biomass as its feedstock, is estimated to have over $80 billion of annual revenues in the U.S. currently and is projected to grow to $250 billion by 2022. And that's in the U.S. Based on these projections, biomass feedstock revenue from perennial grasses like FREEDOM Giant Miscanthus, are expected to be approximately $30 billion in 2022 in the U.S. alone. In fact, according to industry reports, FREEDOM Giant Miscanthus has an achievable ethanol gallon per acre yield that is nearly 2.5x greater than competing the crops such as switch grass, and 4x greater than corn, which is the primary feedstock for ethanol today. Key industry customers ranked Giant Miscanthus at the top of their list of feedstocks, and they are looking for the type of turnkey solutions that REPREVE Renewables expects to bring to market in future years. We're excited about the potential of this opportunity and intend to develop, implement, validate and measure the progress against this plan during the first 6 months of 2014 fiscal year, and determine appropriate steps for REPREVE Renewables at that time. In addition to the conditions and factors I've just discussed, the company's outlook for fiscal 2014 is also based on the continued focus on our core strategies, which includes driving continuous improvement across all operational and business processes, enriching our product mix by expanding our trade compliant yarn sales and growing a higher margin PVA product portfolio globally. And while we're optimistic about the markets in which we are operating, we do anticipate some of the expected volume and cost improvements will be offset by inflationary pressures this year, specifically in utilities and healthcare costs. With this in mind, the company expects adjusted EBITDA for the 2014 fiscal year to be in a mid- to high-50s and we expect adjusted EBITDA of $14 million to $15 million for the September '14 quarter. And with that, I'll turn the call back over to the operator for any questions that you may have.

[Operator Instructions] Your first question comes from Chris McGinnis with Sidoti & Company. Christopher McGinnis - Sidoti & Company, LLC: I just want to get in maybe to the REPREVE a little bit more, the expansion and capacity and I guess just a little bit ahead of schedule. Can you just maybe talk a little bit deeper about that, and how do you expect that to play out over the next 2 years in terms of reaching the 25% for, I believe, towards the end of this year?

Yes. Chris, it's Roger. I would say we are on schedule. I mean, when we installed the prerecycling center a few years ago, we installed the capacity of 42 million pounds. We were looking to fill that up over the course of a couple years. We built it with expansion in mind. So when we put the building in place, we had extra square footage reserved for expanding and adding some equipment without having to expand the building itself. So I would say that we're pretty much on schedule with our vision of expanding REPREVE and growing REPREVE. And as we add this third line, which we hope to be installed and up and running by March of 2014, we're looking to add roughly another 30 million pounds of capacity. So as that pushes up our total capacity opportunities at the recycling center, it may take us another couple of years to grow into that capacity before we'll consider expanding again to service the REPREVE growth. Christopher McGinnis - Sidoti & Company, LLC: And the reason for the growth -- or I guess, the extension was -- is that because you're seeing the volume -- I mean, obviously you're having strong success with the REPREVE, but if you add that much in terms of additional capacity, what's the -- can you just maybe talk a little bit about what you're seeing that makes you confident in adding the capacity behind that?

Yes. And I think as we mentioned in our opening comments, the new programs that we have that are being adopted, we mentioned some new programs with Volcom, with Roxy, with Quiksilver, we also mentioned our growing relationship with Ford. And we just continued to get more and more adoptions with REPREVE. And so with that, we're certainly producing more REPREVE pounds so, therefore, we need the capacity to produce the recycled polymer that feeds our POY and DTY operations. And with that expansion, we continue just to add more flexibility and we're also growing REPREVE into new markets. One of the things that's opened up to us as we've promoted REPREVE and we talked about promoting REPREVE at the -- with ESPN at the X Games, we're starting to get interest outside of our core apparel markets for people that are interested in REPREVE, whether that could be injection molding opportunities, carpeting. Outside of our traditional end-users, we're starting to get some interest in REPREVE. So we're feeding that development effort and expanding, getting ready for more opportunities. Christopher McGinnis - Sidoti & Company, LLC: Great. I appreciate that. Can I just ask the question on where is, as a percentage of sales, noncompliant yarn versus compliant yarn?

That number's still -- we don't have an updated number. When we come out September 16 there with that earnings call -- or our Investor Presentation there in New York, we'll have our slides and sort of break that down. At this point, we don't have that updated number for the fiscal year, but it's generally in that same area. Our last number, I think, was 62%, 38%, and I would expect that to be slightly higher this year, but it still remains in that same area. Christopher McGinnis - Sidoti & Company, LLC: 38% noncompliant?

Noncompliant, 38%. Yes.

Correct. Christopher McGinnis - Sidoti & Company, LLC: Great. Can you maybe just touch on, obviously, you started to return the capital to shareholders. Can you maybe just, outside of the expansion capacity, maybe thoughts of capital going forward. Is it -- and maybe the acquisition market, I know you've talked about that in the past. Obviously, you're starting to return capital to shareholders. Can you just touch on your thoughts about allocation for 2014?

Yes, I think the -- we talked about -- I guess, starting with the CapEx that we talked about, our normal maintenance CapEx, which we've got world-class equipment and it is because of the fact that we do a good job spending money and making sure we keep our equipment in order. Our maintenance CapEx is in that $7 million to $8 million a year. What we've talked about over the next few years is sort of an additional $14 million, $7 million per year of additional CapEx to support the growth opportunities we've talked about here around REPREVE and some of the other stuff. So first and foremost, on our sort of capital allocation strategy of the maintenance CapEx, so we're making sure we are able to continue our capacity and to keep running at the efficient levels that we're on. Second on the list is certainly CapEx to support our strategy. And our strategy -- the biggest leg of our strategy is that mix enrichment strategy, where we make more PVA products, not just REPREVE, but also some of the other Sorbtek and some of the other PVA products that have been growing lately. So that's the first 2 things on the list. Then when you drop down from that, the third piece of it would be strategic acquisitions. So we talked about before, we are constantly evaluating opportunities to either grow our business, expand our business, expand into related markets, so we'll continue to look at those opportunities. And as they develop, we'll come to you guys with -- and let you know sort of how we are going and what we're doing. To the extent we don't -- we have excess liquidity after that, that's when we're looking to do sort of share repurchases. I know we purchased something as $19.3 million worth of stock and 1.1 million shares over the last 6 months. And so that program is still the program that we have in place, but it's very much of a view from our perspective of where do we forecast our needs for our business and our needs for growth. And then to the extent, there's cash leftover at that point in time, that's when we're doing the share repurchases.

And Ron, this is Bill, I guess, the only thing I'd to that is I mean, certainly we will continue to look for investment opportunities that have very quick payback and higher returns. And I think one of the comment I do need to make is as you've noticed on this call and probably the previous call, there is growth in this region right now in synthetics. We've been able to keep up with that growth through our efficiency improvement in our yield improvement programs but ultimately, you've reached the point of diminishing returns with that. Our intention is to continue to grow with the market. We intend to be the premier supplier in this region and we will continue to be able to supply the needs of these regions so that may include, at some point in time, adding texturing machines. So that's another possible capital expenditure we could see at some point in time. Christopher McGinnis - Sidoti & Company, LLC: And obviously, I think that it's the first time you've mentioned on a real conference call, which is REPREVE Renewables. Do you see that kind of -- how do you see that playing out in '14 and '15 terms of does that -- is that a use of capital for you guys over the next couple of years as you try to help fund that? Can you maybe just talk a little bit about the financial dynamics behind your thoughts over the next 2 years?

Yes. I'll start and then Bill can jump in over the top. I think that we spend -- we own 60% of REPREVE Renewables. That joint venture spends $2 million to $2.5 million a year on the commercialization and development of the market like we've talked about, both the operational commercialization but also the development of the markets. And that level's been fairly consistent over the last couple of years. So that's our sort of cash outlay on that. I think when you take it to the next level and start talking about capital of investing in the specific projects, I think we would consider that as -- when we talk about, as we go down our list, our sort of capital prioritization, after supporting the core business, after supporting the growth of REPREVE in our existing products, we would consider a new project opportunity within that, sort of that third level of project that we would evaluate. And so there is the potential for that in '14 or '15 for us to invest in those, but it's not something that we're really, at this point, quantifying. I mean, I think, Bill referenced in his script, our new guy that came over from Monsanto is developing a business plan that's going to have those exact things, that exact pipe layout in it for this is what we're planning on, this is what the resources we need both capital and human resources we need in order to develop this business. And so we're not at the point when we're ready to talk about that. I think we are at the point where we're feeling really optimistic about what we have, but we're not at the point to sort of layout what that looks like. And I think we're probably maybe 2 or 3 quarters away from doing that. But next year, next planning season, the 2014 planning season, we expect to be a big year for us.

Your next question comes from Eric Pisauro with Regency Group.

I was wondering if you could speak to what you think the impact of the Trans-Pacific Rim Free Trade Agreement, one that would include China. What's the impact of such an agreement would be on Unifi?

This is Bill. I'll answer that. The Trans-Pacific Partnership, first, does not include China. I guess, probably the most prominent textile-producing country would be Vietnam. There's still a lot of -- there's still a long way to go in negotiations of the textile chapter there. But yes, I think -- realistically, I don't think it'll be in place and I certainly can't project when the negotiations would be done and when the pack will actually be in place. But we're probably looking at it at a 2- to 3-year framework. And depending on how quickly duties drop, there could be some marginal impact to this region maybe in a 3- to 4-year timeframe. Certainly, when you look 7 to 8 years out, when you consider inflation rates in Vietnam and other developing country, it's really hard to predict. I think there's going to be some opportunity for exports from this region to that part of the world. I think there's, certainly, going to be opportunities for the countries in that part of the world, primarily Vietnam, who were in the TPP to take share from other countries like China, who would be still shipping to the U.S. with full duty rates. But it's very difficult to predict what kind of impact it could have for this industry. Now what I will say is that this industry is still a large manufacturing industry in this country. We still have a lot of influence, and we've developed a very strong advocacy campaign in congress for this industry. And I'm feeling very, very good about that. I don't know if that answered your question now, but if you have more specific questions, I'll be happy to try to answer them.

[Operator Instructions] And we have a follow-up question or comment again from Eric Pisauro with Regency Group.

With respect to the license on the REPREVE Renewables, is that a perpetual license or is there a term on that? And can you also tell us who is the other partner in the joint venture?

Yes, this is Ron. The license is a -- it's a global exclusive license on the variety -- what Bill said is we believe we have a great variety, but we also believe we have great technology that's around the propagation and planning of Giant Miscanthus that's leverageable across other varieties as well. So there's 2 big components of what we see the value of REPREVE Renewables. The license on freedom, which is the variety we have is a perpetual -- is a global exclusive license. It's basically a 10-year license, but we have the ability to renew that license with Mississippi State, where the variety was developed with a guy named Dr. Brian Baldwin. And the other question was about the financial partner. They're just a financial partner. It's not someone that we disclose around. They were there when we got there. The original JV was between Phillip Jennings in Georgia. He had a financial partner that was there with him. When we came in, it was a 40-40-20 joint venture, with us having 40 and Jennings having 40 and the financial partner having 20. We ultimately, the 2, the financial partner and us, bought out Phillip Jennings and that's how we got to the 60-40. But it's not -- they're just a financial partner that's in it with us funding the growth of the business.

Excellent. And is REPREVE Renewables something you will be talking about you expect at the Investor Day as well?

Yes. I think there'll definitely be a part of the presentation around REPREVE and what our thoughts are around that.

Your next question comes from Sarab Durian [ph], an investor.

You had mentioned that the Giant Miscanthus product -- the end product was ethanol. I have read some research papers where they claim that the end product is really tank-ready gasoline. Can you comment on that?

This is Bill. There is several bioenergy markets that we would target. Certainly, bioethanol, biogasoline are 2 and there are technologies being developed for tank-ready biogasoline and biodiesel. Other potential markets for this product are, certainly, powerplants where in Europe, today, one of the main feedstocks for power plants is Miscanthus. And there are other potential markets like biochemicals, which ultimately could be the largest market for this crop. And by biochemicals, I mean, potentially the precursor is the polyester yarns. There's a lot of potential markets. Certainly, the viability of a crop in any one of these markets is going to be dependent on the biology of that crop. And one of the big benefits of Miscanthus is its biology for the ethanol and tank-ready gasoline markets.

When do you expect this to become reasonably feasible, timing?

Well, I think the technology today is feasible for most of these products. Today, much of this markets being -- for ethanol by corn. For the other markets, primarily by wood but ultimately, wood becomes scarce. And certainly, when you look at the economics of growing Miscanthus versus growing wood, that has to be basically regrown for 10 years. The economics look very, very good for Miscanthus. One of the issues that we've always had with Miscanthus or this industry's had with Miscanthus, especially the rhizome base, is that it's been quite expensive to harvest the rhizomes and replant. We've developed technology, which we think is really proprietary, that allows us to harvest and plant it at near the same course as the seed existence. So we're feeling very, very good about that's and think we've had a breakthrough there, which could potentially grow this business. Now if you ask me when it's going to happen, I mean, this is an embryonic business. It could be a year from now, it could be 5 years from now before we see appreciable revenues from it, but we certainly are developing a plan right now in understanding these markets better and we'll aggressively pursue the markets that appear to be the most attractive to us, I mean. And I'd expect to see some revenue,- maybe substantial revenue next, next annual year.

Okay. Bill, I'll add just one thing to that. I think the next -- if you look at sort of as these markets hit like the BioPower or the biobetting, some of that's there today, some of the real, real growth in these market. The next one will be -- it seems like you did a little research will be that cellulosic ethanol, not corn ethanol, but cellulosic ethanol. And sort of -- and there's advanced BioFuels that you're talking about. But there's been, if you look at Kimtex, if you look at KIOR. KIOR is a publicly traded company. Kimtex is a large company owned by M & G. They've announced sort of first-generation commercial scale cellulosic ethanol and advanced BioFuel facilities that have come online and have been operational within the last 12 months. So I think the ultimate market demand is coming and that first-scale commercial-scale production facility is something that certainly has us excited about the market.

Yes. And, I guess -- Ron, this is Bill again. One more comment I would make is if you look at some of the existing processes that are out there today, say corn ethanol. Many of these processes are not commercially viable without heavy government subsidies. And one of our key goals is to develop a business plan that does not require government subsidies to be profitable. And we think we've achieved that. And to me, that's very, very important because I don't know that these governments subsidies are going to be there 5 or 10 years from now.

And at this time, I'm not showing any further questions. Are there any closing remarks?

Yes, this is Bill. I guess, just to close it out, we felt good about last year. We think we had a very, very good year, especially the fourth quarter. Certainly, we're anticipating a better year in 2014. And frankly, we're very, very proud about our deleveraging strategy and where we've gotten ourselves to, especially around our debt. And look forward to some very good progress going forward into the next couple of fiscal years. And with that, I'll thank everyone for being on the call. Thanks.

Thank you. That does conclude today's conference. You may now disconnect. Thank you for your participation.