Good day, ladies and gentlemen, and welcome to the Unifi fourth quarter earnings call. [Operator Instructions] I would now like to introduce your host for today's conference Mr. James Otterberg, CFO. Sir, you may begin.

Thank you, 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 will be referencing a webcast presentation that can be found at unifi.com. The presentation can be accessed by clicking the fourth quarter conference call link found on our homepage. Before we begin, I need to first advise you that certain statements included on today's call 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. 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. I direct you to the disclosures filed with the SEC in our Form 10-Qs and Form 10-Ks regarding various factors that may impact these results. Also, please be advised that certain non-GAAP financial measures such as adjusted EBITDA and adjusted EPS will be discussed on this call and non-GAAP reconciliations can be found in the schedules to the webcast presentation. Before we get to the financial details for the quarter, I'd like to turn the call over to Roger, who will provide you with an overview of the company's markets, raw material trends and other business updates.

Thanks, James, and good morning, everyone. Taking a look at retail indicators impacting our core business, year-over-year retail sales increase is of 2.4% in apparel, 5% in furnishings and 3.3% in automotive that help drive demand from customers in each of these segments. Many economists expect continued payroll gains and improving wages will support consumer spending throughout the second half of the year, particularly during the upcoming back-to-school shopping period. Looking at the company's sales for the June quarter, we continue to see strong demand for our products in all of our market segments and across our entire product offering. We continue to see an increase in demand for our premier value-added yarns, which grew 15% in sales revenue in fiscal year 2015, driven by REPREVE, our recycle yarn. We continue to estimate annual growth in the NAFTA and CAFTA region of approximately 5%. We anticipate that the growth in brands and retailers that are choosing to source their products in the western hemisphere will continue into the foreseeable future. And we remain very confident and committed to the region and the importance that it has to our overall business. We will continue to focus on delivering these customers, excellent value and service from our commodity and also our premier value-added yarn categories. As expected, prices for our raw materials increased throughout the June quarter. As a reminder, raw material prices decreased in our third fiscal quarter and we benefited from this decrease at that time. However, raw material prices increased in our fourth fiscal quarter, reversing some of these benefit, as we continue to focus on offering our customers as much pricing stability as possible. Looking ahead, we expect prices in the first quarter of fiscal 2016 to be approximately flat with our recently completed quarter. The gap in…

Thank you, Roger. I will begin the review of our preliminary financial results for the June quarter on Page 3 of the presentation with net sales, gross profit highlights by segment. Net sales decreased $6.8 million or 3.7% to $175 million for the June 2015 quarter compared to net sales of $182 million for the prior-year quarter. The decrease in net sales was primarily attributable to the devaluation of the Brazilian real and lower average polyester pricing, driven by a reduction in our raw material costs, partially offset by improved sales volume in the international segment. Consolidated sales volume is higher than the prior-year quarter, driven primarily by an increase in the international segment, while the polyester and nylon segments remained essentially flat. In addition, we continue to see higher sales volumes for our PVA products. International segment sales volume increased from the prior-year quarter due to higher volumes in China, as a result of our success with several new PVA programs and the company's transitioning of certain sales programs from its U.S. operations to China. The decrease in price quarter-over-quarter for the polyester segment is due to lower average pricing, driven by a reduction in raw material costs. The quarter-over-quarter price decrease in the nylon segment is mix driven and the quarter-over-quarter price decrease in the international segment is a result of unfavorable currency translation in Brazil, due to the devaluation of the real against the dollar. For our current quarter gross profit results against the prior-year quarter, despite a rise in the cost of our polyester raw material units during the current quarter, the company is reporting slightly higher consolidated gross profits, as higher profits for the nylon and international segments partially offset by lower gross profit in the polyester segment. For Q4 of this fiscal year, consolidated…

Thanks, James, and good morning, everyone. I'd like to start my comments by putting the results of our 2015 fiscal year in some historical context. As James reported, the company delivered $42.2 million of net income with $34.3 million of adjusted net income for the year, which makes this our most profitable year since fiscal year 2000. This accomplishment is a result of our continued success in driving our course strategies, which includes enriching our product mix, focusing on recycling and sustainability initiatives. Growing globally and driving operational excellence throughout the organization with the focus on lean manufacturing, statistical process control and a rigorous and disciplined approach to process improvement and price management. To quickly recap some of the key financial highlights for the year, net sales for the fiscal year were essentially flat to the prior year, with volume improvement across our consolidated businesses, being offset by the negative impact of currency translation in Brazil and lower average polyester pricing driven by a reduction in our raw material cost. However, our consolidated gross margin improved by 110 basis points year-over-year, driven by rigorous price versus value management, the continued growth of our PVA product sales and our ongoing focus on process improvement and flexibility initiatives. And compared to our 2014 fiscal year, we are very pleased with the $6 million improvement in adjusted EBITDA for the last fiscal year. I'd like to take a few minutes to recap some of what we consider to be our major achievements for the 2015 fiscal year. We restructured our debt, which increased our borrowing capacity by $22 million, which in conjunction with cash from operations allows us to pursue growth-related initiatives, including the expansion of our REPREVE Recycling Center and the backward integration into plastic bottle processing. We increased our year-over-year global…

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

Roger, a lot of good stuff just in terms of, I guess, depth of our new contracts and things working out in China, can you maybe walkthrough when you look at the first slide where you see the volume down in the polyester? Is that some of that moving out to China? Can you just walkthrough that if you're seeing that 15% growth in the PVA? Where does that translate into that first slide, that first deck that you presented?

When we look at polyester texturing, right, so we have polyester texturing in our polyester reporting segment, we also have a little bit of polyester texturing in our nylon segment, and of course, in our international segment. So in our core polyester texturing, we refer to as regional polyester texturing from a year-over-year standpoint, we've seen growth as we talk about CAFTA and NAFTA growing. But when we breakout into the reporting segments, we see some of the decline in the reporting segment, but in regional texturing, the polyester texturing we see growth year-over-year.

For you to think about, remember as the PVA gets bigger, it's typically a lighter, denier, higher margin, but lower pounds, and in the recycle center as we produce more, but consume more of that internally, that can also affect these volume numbers, but Roger hit the highlights for you there.

I guess, just a couple of things, and I'll go to the Q and ask more if nobody else around, but in the 2016 guidance, how much on the part the JVs has contributed to that, whether on EPS, I guess, maybe have impact.

Now, that's fair. I think from an EPS impact, right, because Parkdale would not be part of the company's adjusted EBITDA metric. I mean, when you look at Parkdale for the current year, please remember to also look at the reconciliation from the GAAP to the adjusted results to pull out those one-time items to get to a baseline or an underlying number for fiscal year '15. From that point, given the recent capital spending at Parkdale that we've discussed on previous calls, and their capital spending begins to near its end, our expectation is for Parkdale's or ours unified share of Parkdale's earnings to increase in fiscal '16 against that adjusted fiscal '15 number as you can see.

And I guess, just doing some quick math and this is rough for sure, but are you ahead of plan on the percentage of PVA, that you targeted, I think its 34% going into 2018, are you ahead of that plan right now?

I'm picturing in my mind the Investor Day presentation in November of 2014 and one of the slides that Roger would have presented that previous year was about 27%, and we had predicted a 30% for the current year. So I think that in that regard even despite slightly lower raw material cost and the effect that might or might not have on pricing, we're right on target for that metric and see no reason for the future slopes in '17 '18 -- '16, '17 to change.

But if I'm thinking that you're 30% and you grow another 15%, should you be at 34% at the end of this year, or maybe I'm off a little bit with my number, maybe that's a little bit lower, but with more help coming in, because of the expansion in 2016 that number be outsized gross in 2017?

Yes. I believe that 33%, 34% would be what we would expect for '16 and then the timing of the CapEx project and other, as the completion of startup and installation will impact '17 and beyond, but there is no reason to believe that we would be behind what was presented for '17.

Sure. No, it looks like you're at, I guess, just roughly. Is Parkdale finished with the completion of the acquisition of ramp up and now you should benefit again like, I guess, also on the cash basis, are you going to start to get that higher distribution than in prior periods?

No, you're exactly right, on previous calls we had communicated that Parkdale was spending a significant amount of money reinvesting in its business, both here and in Mexico. They embarked on a recent acquisition. There was capital spending opportunities, led Unifi to receive and expect to receive only the tax distributions. Those capital spending plans are nearing their end, and yes, we would believe that after those capital spending opportunities stop that we would begin to receive both the tax and the special distributions fairly consistent with what you've seen in years prior.

And then just one last question or maybe two. Just on the China, you talked about the price gap. Has it become more competitive than any region with the change in the price gap and assumingly how hungry they are to kind of build up that utilization?

Yes. I mean, competitively it is probably less competitive for us as that price gap widened. Certainly China is being more aggressive in their pricing and then when you factor in the price gap that really hurts the low end of our commodity business here in the U.S. as we track those imports very carefully and see how those imports sort of hurt the bottom-end of our business, if you will. I mean, certainly volume is also important to us. So we're sensitive to that low-end of business and tracking the raw material gap and how many imports are coming in, but that's all the more reason that we're investing in growth opportunities, looking at mixed enrichment strategies, growing REPREVE of certainly that gives us a great defensibility against that level of product mix. But certainly we are sensitive to it. We track it very carefully and we share that each quarter and update.

And I apologize if I missed this, but was there any comments about the TPP and just kind of your feel on it right now, since it seems like its obviously getting pretty close to passing?

There is a negotiating meeting in Hawaii starting some time late this week probably going through next week, our expectation is that at least the textile chapter will likely be very close to be completed. Obviously, the industry is easing. We'll continue to be very much involved in that. As far as the TPP negotiations being completed, there are still several very contentious issues around automotive and agriculture. And I think it's very hard to say whether it will actually get completed, but I think from a textile standpoint, that the industry has been very much engaged and I think we're still reasonably comfortable with where we think that the negotiations are going, but obviously we won't be able to say that till we see the final deal.

Our next question comes from the line of Marco Rodriguez with Stonegate Capital.

I wanted to start off on just I guess some housekeeping items here, just kind of wanted to talk about the tax rate and all the movement you guys saw in the tax situation as the year went along. Can you talk a little bit about that? And then how should we be thinking about taxes going into fiscal '16?

I think the best way to answer that is to talk some of the reconciliation on Slide 8, and you see us speaking with the GAAP number, and then in the spirit of your questions adjust out the things that we would think of is as unique to the period, or not underlying, or not part of our underlying effective tax rate. And I think if you look at the adjusted totals at the bottom and see the $50.9 million for the year of income before income taxes, and then you see the net income adjusted of $34 million after considering the minority for non-controlling interests, you can calculate an effective tax rate from that. That to me would be a reasonable rate for use in future periods. Although, the success in China that Roger mentioned and the growth that we would expect there as well as the success in Central America at our subsidiary UCA that Roger referenced and how well they've performed and we expect to continue to perform in future years will provide further reductions to our underlying effective tax rate, as those are jurisdictions in which the statutory rate is lower than what we experienced here in the U.S.

And then moving along to your guidance for fiscal '16 your adjusted EBITDA guidance was in the high-60s, and you ended the fiscal '15 with 63, 64. Can you kind of help us bridge the gap, the additional EBITDA? Are you expecting more that to come from gross margin improvement, revenue improvement, OpEx reductions, just kind of help me think through that?

I will go ahead and start and let Roger and Bill fill in any commentary after I give you the bridge. We would see -- our expectations are based on flat raw materials from where we ended the year. Our expectations are to follow the CapEx plan that Roger outlined. And then from there, the improvement is really probably driven in half between a combination of payback of those capital spending projects, predominantly here, in the United States within the polyester segment as well as the improvements in El Salvador and China for the reasons that Roger outlined; probably an equal split between those two sort of CapEx and operating margin categories that you mentioned.

I would just echo that from James. Certainly, as we have deployed the CapEx to further increase our mixed enrichment would also give us the capacity. We've added some texture machines that I referenced, certainly that's going to help us continue to grow incrementally our volume. As we communicated, we continue to see CAFTA growing at roughly 5%. So with the flat raw material situation, which is something that we're anticipating, but it's always unpredictable, we would see some incremental volume growth, also some incremental revenue growth.

If I could just add to that, I think the other change we'll see is some reduction in our SG&A expenses, as we had some unusual expenses in this past fiscal year. So we would expect SG&A to be back to more normal levels that you've seen in previous fiscal years, which I think is $1 million or $2 million improvement also.

And just to clarify here on the raw material aspects, I know, in your prepared remarks you talked about you're anticipating raw materials to kind of be flat on a sequential basis, but you're also anticipating that for the fiscal year?

Yes.

Yes.

And I didn't quite catch the number, the CapEx spend for fiscal 2016, did I hear $25 million?

We just finished the fiscal year '15, it was $35 million. And we anticipate, based on the timing of the projects, of the recycle expansion and the backward integration of bottle processing, we communicated $55 million for the fiscal year '16. The three year total is still in the range of $120 million.

And last quick question, on the revenue segments, you have this all other revenues. Is that the poultry bedding?

Your instincts are correct, that all other segments consists of the revenues from the REPREVE RENEWABLE that Bill outlined. It also includes certain third-party for higher transportation service revenues that we are in during the year, and as both of those categories are expected to grow, predominantly the renewables portion of that, we've begun to show those revenues separate. They don't belong in either of the poly, the nylon, or the international segment, so they are displayed for the reader in that new wall, other category.

And so from what I gather from your prepared remarks, it sounds like that the poultry bedding business is doing pretty well. You're anticipating, adding some additional acreage, so you did about $6.3 million in fiscal year '15, so I'm assuming the anticipation is, is that goes up into fiscal year '16.

Yes I think, overall I can say right now is that we do anticipate it will go up. I think at our next conference call we'll have a much better view of how much more planting we plan to do and how many contracts we have and what the likely increase would be. Just one comment, the $120 million of capital spending that we've been discussing, any investment in REPREVE Renewable is not included in that $120 million. Though, we don't anticipate there will be much investment or at least appreciable investment in this fiscal year.

And then additional acreage that you're going to be adding, do you have the space in your existing footprint or do you have to go out and find some additional footprint for that acreage?

Well, certainly anytime we increase acreage, because our business plan has been primarily to lease acreage in the general area of where our customers are, we will have to be acquiring that land as we go through. And by acquiring, I mean leasing, not necessarily acquiring.

Thank you. And I am showing no further questions at this time. I would like to turn the call back over to Bill Jasper for closing remarks. End of Q&A

Thank you, operator. We had a great year and we feel very, very good about where we've been and where we're going. I think more importantly we're excited about the opportunities we have as we strategically spend capital aimed at both revenue and earnings growth. As we have demonstrated in the past, we're going to work very diligently to execute these plans effectively and efficiently and we'll continue to deploy our financial and human resources to most effectively increase shareholder value. And thanks to all for participating on our call.

Ladies and gentleman, thank you participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a wonderful day.