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

Thank you, operator, and good morning, everyone. On the call today is Kevin Hall, Chief Executive Officer; Tom Caudle, President and Chief Operating Officer; and Jeff Ackerman, Executive Vice President and Chief Financial Officer. During this call, management will be referencing a webcast presentation that can be found at unifi.com and by clicking the second quarter conference call link. Management advises you that certain statements included in today's call will be forward-looking statements within the meaning of the federal securities laws. Management cautions that these statements are based on current expectations, estimates and/or projections about the markets in which Unifi operates. These statements are not guarantees of future performance and involve certain risks that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecast or implied by these statements. You are directed to the disclosures filed with the SEC on Unifi's Forms 10-Q and 10-K regarding various factors that may impact these results. Also, please be advised that certain non-GAAP financial measures, such as adjusted EBITDA, adjusted working capital, adjusted net income and adjusted EPS, may be discussed on this call, and non-GAAP reconciliations can be found in the schedules to the webcast presentation. I will now turn the call over to Kevin Hall.

Thanks, A.J. And good morning, everyone. And thank you for joining us today. Our second quarter results reflect building sales momentum across our premium value-added portfolio which is really driving excellent global sales growth. In particular, Asia has been very strong over the last couple of quarters and we began this period with record revenue performance. As a result, total PVA now exceeds 45% of our consolidated sales. We are proud of this milestone and we expect this PVA story to continue to build. What makes our topline performance even more exciting is that we were able to deliver total net sales growth of 8% despite industry wide pressure going into the holidays. As we continue to grow our number of PVA relationships, our position is becoming even stronger and our technologies are resonating with customers that need innovative solutions, centered around quality, performance and sustainability. I would like to showcase a few examples of how Unifi’s broad portfolio of innovative solutions is helping us win, retain and expand our customer relationships. First, New Balance recently introduced the NB 1300 sneaker which is part of its customizable footwear line and made with REPREVE. Online personalization of the classic style allows customers to design custom shoes starting from 20 assorted colors for the REPREVE mesh panels. So, our REPREVE offering supplements New Balance’s effort to provide unique style, to sustainably focus customers, both with customization and performance characteristics. Unifi supported the sneakers’ launch by producing a co-branded 30 second video that aired at a TD Garden remake during Boston Bruins home games. Another great example of how we’re expanding our opportunities involves our recent partnership with Williams-Sonoma, Inc and its subsidiary brands Pottery Barn and West Elm. Here, they incorporated use of REPREVE polyester staple fiber for filling and padding in…

Thank you, Kevin, and good morning everyone. I’ll share Kevin’s excitement about our sales and volume growth and I’ll get into more specifics on our financial performance during the fiscal second quarter. Throughout my discussion, I will be referencing the presentation that is available as part of the webcast and published on our website. For the second quarter, we are reporting net income of $11.8 million and diluted earnings per share of $0.63 compared to net income of $4.6 million and diluted earnings per share of $0.25 Q2 of fiscal 2017. In the second quarter of this year, we saw a tax benefit of $3.8 million due to tax optimization actions and correspondingly the company’s ability to reverse a valuation allowance on certain historical net operating losses. This was not part of H.R. 1 Tax Reform. The last year, it’s also worth noting that Q2 ‘17 included a $1.7 million divestiture loss related to REPREVE renewables. Excluding those two items, adjusted EPS was $0.43 compared to $0.34 in the comparable period last year. On slide 3 of our presentation, we show a high-level overview of these results. Here you can see that net income for the second quarter of fiscal 2018 primarily benefited from increased sales volumes and the valuation allowance reversal. Slightly offsetting these positive impacts were, lower gross margins driven by the mix shift and higher raw material costs that Kevin mentioned earlier; expected higher SG&A expenses stemming from our planned strategic investments in marketing; and our commercial capabilities to generate and expand customer relationships; and higher interest rates now that we have fixed $75 million of our floating rate debt. Slide 4 provides a similar walk for diluted earnings per share where you can see the corresponding impact of each driver. Separately, year-to-date, we are reporting net…

[Operator Instructions]. And our first question comes from the line of Chris McGinnis with Sidoti & Company. Your line is open.

Good morning and congrats on a strong quarter. Can you may be just dig a little bit about the international growth, was that expected, is that sustainable growth rate -- can you just dig and dive into that for us a little bit more details? Thank you.

We have been -- as we’ve been talking over the last couple of calls, we’ve been investing in our organization and our people in Asia as we really look to partner with some of these larger customers, a lot of them do source through Asia. And so, as the partnership began and as we start to look at how we can really partner with them and bring products like REPREVE and PVA to the marketplace, we do see that there’s considerable volume that’s still -- that does come to Asia and we do expect to continue the growth there.

So, I guess in relation to that, so was this strength that you saw -- I mean that’s obviously a considerable rate, was that expected or was this is a surprise to you in terms of expansion? If you may be just think about it that way.

I think when you start these conversations and you start the development, I do expect that we’re going to partner with more large brands and large customers as we go forward. I think some of the adoption coming into the first half happen a little bit more quickly. So that was good. But I do expect to -- you’re going to be hearing us talk more about new brand partnerships, new programs that we’re developing. And as I say I always like to share different ones, those I find particularly exciting on these calls and you will be hearing more of those as we start to ship into our spring and summer of next year.

And then just one more and then I’ll jump back in queue, just in a relation to the revised guidance with the bottom line, being impacted by the raw materials, you expect a lot of that to be offset by stronger sales because that wasn’t really revised upward, you know its considerably strong in the quarter. Can you just may be talk a little bit about how you think about the rest of year and I guess the bottom line playing out versus your top line.

Hey Chris this is Jeff, I think maybe it's fair with the gross profit margin, so if you look at where we work in the quarter, the greatest impact on the gross margin was really the shift in sales mix and Kevin talked about that and I mention that as well. So, the polyester sales being driven by chip and flake sales and those are those are, as you are well aware our margin, lower margin items they just don’t benefit from that added PDA technologies and then as you guys we're just talking about to Kevin, the mix shift in Asia. And then beyond that it was impact related to the increase raw material cost and that probably impact that’s about 70 to 80 basis points. So, as we look forward, you may have already seeing those oil price is at $66 a barrel this is well above what the company had originally build its guidance. So, as we see that increase coming in our fiscal third quarter, we could see a similar impact on our gross margin. So, with the softness and volume that we saw domestically and the increase cost that impacted our profitability we expect as Kevin said, we expect revenue momentum to continue to be strong especially in Asia but we’re going to continue to face headwinds on the margin front.

Thank you. And our next question comes from the line of Daniel Moore with CJS Securities. Your line is open.

Wanted to see how granular we can get just in terms of -- it sounds like different pieces of the business, that impacted gross margin, mix was a little greater on one side and rising raw materials on the other, can you maybe break out overall of that 80 basis points how much was rising input costs and then secondarily can you give us a sense for what total sales were of cheap and flake kind of this year versus last year to get a little better sense of what's going on.

Sure, let me just kind of break down the gross margin for you, so as you mentioned we saw a declining gross margin of about 80 basis points going from 14.3% to 13.5%. And if you think about that there were two primary factors, the largest one is sales mix and there were two pieces to that, I'll break that down a little bit for you the polyester business in U.S. we mentioned that chip and flake sales was really what drove the sales volume there and that does not have the margin benefit, the added PDA technology. So, Kevin mentioned that in that U.S. business there was some conservatives and so we saw little bit lighter demand on some of the text. In the international business we had great success and again that was getting people to adopt the REPREVE platform and we have expectations that that will develop further into them adopting some of the PVA technology which carry higher margins. So those drivers impacted margin the greatest. The second impact was a rising raw material cost and that alone was about 70 to 80 basis points of impact. And we were expecting, probably in the third quarter we’re expecting raw materials to rise a similar amount. Does that help?

It does. I don’t want to get too granular, but the rising raw material 70 to 80 basis points overall, so that -- I mean that sounds like that in of itself was essentially the entirety of the decline in gross margin or is that in one piece of your business?

So, the rising raw material cost primarily impacted the US polyester business.

Got it. So, 70, 80 bps in US poly.

Right. And you can look at our webcast, right, and you can look at what happened with the international margins and that was completely driven by a mix shift.

Got it. Okay. That does help very much. And then just a magnitude, I don’t know if you would want to break that out kind of what chip and flake sales look like on a year-over-year basis?

No, we’re not going to disclose that.

Okay. Shifting gears, and just wanted to touch -- talk a little bit about the adoption curve Kevin and may be elaborate a little bit more, you gave us some nice examples in terms of customers. But what you are seeing in the marketplace, what -- a little bit more color about the level of dialogue with new customers? And then lastly for Jeff, may be just SG&A, do we think about Q2 as being a good run rate or we have some more incremental stems to go? Thanks, and I’ll get back in queue.

Yes, I will take the first part and Jeff will have after it. So, we continue to have great discussion, I will tell you that, one of the things I am encouraged by is that there continues to be more and more people stepping up to want to make a difference on new cycle in sustainability and really even part of a circulation on them, right. So even in this last quarter you’ve seen some of our major partners state sustainability goals. When you have that then you get a real good conversation about how can we help delivering that, where can we go, and as I said, the early part of the adoption is really around what is currently in the line, how do we move from virgin over to REPREVE and recycled and then as you start to think of longer term, you get into where can Unifi then step in and help with a more technology, more added benefits to really help differentiate. So, I feel great about the increased desire to be part of the circular economy and recycle globally. I hope more and more continue to move in that because that’s just a good thing. And then I want to make -- and I think that as we continue those dialogues we are just -- we are building some terrific partnerships. The only one other thing I would like to highlight, it wasn’t part of the question though, I think the opportunity kind of jump into here is that we also announced yesterday that Al Carey was going to be joining our Board. Al Carey, he comes here with great experience on the commercial side of the business, starting at P&G and then Frito and then Pepsi. He is going to really help us from a standpoint of really how to think about commercializing this business globally. So, I think he added a guidance, when we’ll get there is fantastic. He also comes from a space of CPG experience. So, I think as we look at how we extend this business into CPG that helps quite a bit as well. And then finally, he has a shared value in the company that’s too that he comes from around recycling and where we can go. So, I think he is going to be a great addition and those things are going to really help us well, I know that was little added on to the question near but I want to make sure that, I was able to highlight them, I'm excited about Al joining the board.

Then just follow up on your question about SG&A and the run rate that was on Q2, so as we talked about I think on the last call, we were still in the process of building the senior team during the first quarter, so the full team was on board in the second quarter, we're starting to make some progress on some marketing initiatives that we talked about or improving our really our commercial capabilities. And so, I think at this point probably that the second quarter is fairly represented, we're getting pretty close to our run rate on SG&A.

[Operator Instructions] And our next question comes from the line of Marco Rodriguez with Stonegate Capital. Your line is open.

I was wondering if you could follow up on prior question, just kind talking little bit about the mix shift that you guys saw on poly and perhaps you can talk a little bit about the, what's kind driving the higher chip and flakes sales versus PDA.

Let me start and Jeff and fill in this well. You know as I look at the mix impact and just think it's helpful to take it little bit different geographically. In Asia as our new partnerships are building as we’re really bringing on the program. A lot of the early adoption is REPREVE as a platform, later on will be more added technologies into that REPREVE platform. So that’s all I would think a natural progression and so we just had, a larger part of the overall, I mean the overall pilot figure and the larger part of that probably was just people in the early phase of adoption which is actually I feel good about. Domestically I would characterize this a little bit differently which is on a domestic front, it's hard to think back to what Q2 is -- Q2 in the calendar year was like or Q4 in the calendar year, but what it was like going into holiday. People were very cautious here going into the holiday season, it was a tough environment and we continue to have downward pressures on the overall market. I think as you really think through the mix impact in the domestic business there were a lot of people who also were being very cautious on how much, what they were buying and what they were putting out there. I will tell you coming out of that as we gone into a post-holiday, much more positive conversations happening, there is more confidence, we're still waiting for that kind of positive feedback translate into orders and orders on the premium part of our mix. But there is a different feel in the market place and I think, it's almost hard for us to remember that was just weeks ago when we were kind of going through that environment where it was just so tough. So hopefully that’s encouraging for the future.

Got it, then kind shifting here to Asia, obviously your prior call, called out the that’s a pretty good growth you guys followed in the sales volumes and I know you guys mentioned Asia doing pretty well and Brazil is pretty strong, just wondering at least on the Asia side, was these new client wins or just kind of existing clients of ramping up more of your business and then also can you talk a little bit about Brazil, I know in the prior calls you guys said mentioned some increasing competition levels there. Could you talk about those two factors?

Let me start with Asia and then actually Tom you talk little bit about Brazil. In Asia, so what we had is we've had, this is why I feel decent about these adoption curve. We had some customers who had been in the pipeline, had been already moving on to the REPREVE platform and we saw them grow, and then we had many new customers come on board. And what you are seeing in our Q2 shipments is a reflection of both the growth in that but plus new programs that will ship in spring and summer. We are already beginning to make some of that and to ship it. So, I can’t talk about it yet though because it’s not on the open marketplace, and -- but as soon as I can, I am looking forward to sharing that. So again, in Asia you were seeing a blend of both. Tom?

Brazil is -- we continue to be pleased with the performance. The major competition down there are the imports coming into the country. There has been some discussion about the petro sloppy assets that were some major petrochemical complex and had a lot of textiles associated with it up in northern part of Brazil. That asset has been bought by another entity. We don’t see that as being a major competitor in the near term but we’re monitoring the situation to see how it evolves.

Got you. And then just kind of a housekeeping item here. On the valuation allowance that you reversed in the quarter, is that a function of the new Tax Law? And then if maybe you could talk about where you guys are? I am assuming you are analyzing the impact and how that might look in terms of your tax rate going forward?

Yes, so first part of your question. You know how that was reversed, valuation allowance that was reversed related to NOL, was not part of H.R. 1 Tax Reform. And you are absolutely right, we’re working hard, the tax department is putting in a lot of long hours trying to catch up with all the Tax Reform and working through what all the impacts of that are going to be. So, we will be able to communicate that to you as we move through the quarter. But again, just on our work and being able to recognize the valuation allowance, that was really just more of a tax strategy move that our Group did internally. So, it’s completely independent of the H.R. 1 Tax Reform.

Got you. And is there a possible -- as soon as -- as far as what you think your tax rate may lie and then also in that same kind of lot of questioning, is there any other NOLs that might need to be -- or rather the valuation allowances might need to be reversed because of the Tax Law changes?

So, two parts to that, let me just say that as we look forward on our ongoing effective tax rate, excluding any kind of adjustments like we experienced in the second quarter plus others associated with the adoption of Tax Reform, we really expect our tax rate to remain in the mid 20% range. Now, separate from that and completely unrelated to Tax Reform is just the work that our tax team is doing to optimize our tax structure. So, we will definitely be scoring the books working really hard to take advantage of any NOLs that we can. So, I would expect that that may happen and probably will happen periodically as the team works on optimizing our tax structure.

Thank you. And we have a follow-up from the line of Chris McGinnis with Sidoti & Company. Your line is open.

Thanks again, this might be not a great question but I apologize if this has been [indiscernible] but, can you just talk about the joint venture in Guatemala and is there any update to that off hand?

Chris this is Tom, our efforts are continuing on the due diligence on our potential JV and Guatemala. We look at it as progressing normally but our focus is, truly focused on doing it right as well. I mean as it evolves, we will be happy to report back to you but at this time we really don’t have anything further to say about it.

Thanks, I don’t know is that progressive on in there, so I made. And then so can you just may be talk a little bit about Park down and kind their outlook, how they are being impacted its they should see better volumes because of the higher price of the oil here and the impact on raw materials for synthetic market. And then may be just how you guys are working together and if you may mention some partnership or trying to work with them. May be just can you explain on the relationship.

Sure, this is Kevin, actually we just had a great discussion with them earlier in week. I would characterize the business overall as very much like ours, I think it was a good but tough into the year same kind of things around just an overall healing in the market place. I think they are seeing the same positive feedback. I think like us they are waiting for that positive feedback to transfer the firm orders but there is different feel and I think they are experiencing their own kind of cost increases as you know cotton's right up now and so they are working through some of that as well. Yes, there are more interested parties in blended products cotton and polyester blend in this environment and so we continue to dialog and I continue to believe there will be opportunity for partnership in the future.

Thank you. I'm showing no further question at this time. I would now like to turn the call back to Mr. Kevin Hal for any closing remarks.

All right. Well thank you everyone and I guess just to conclude PDA is growing nicely, we're now at 45% of sales, we feel good about that. REPREVE is been well received and we're focusing our efforts on further expansion on REPREVE. So, we look forward to sharing more of that in second half of our fiscal. Thank you very much.

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