Unifi Inc (UFI) Q2 2021 Earnings Call Transcript

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Unifi Inc (UFI 2.89%)
Q2 2021 Earnings Call
Aug 5, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Unifis Fourth Quarter Fiscal 2021 Conference Call. [Operator Instructions] After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that todays conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, A.J. Eaker. Please go ahead.

A.J. Eaker -- Vice President of Finance and Investor Relations

Thank you, Dunne, and good morning, everyone. On the call today is Al Carey, Executive Chairman; Eddie Ingle, Chief Executive Officer; and Craig Creaturo, Chief Financial Officer. During this call, management will be referencing a webcast presentation that can be found at unifi.com and by clicking the conference call link. Management advises you that certain statements included in todays 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, forecasted or implied by these statements. You are directed to the disclosures filed with the SEC on Unifis 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 EPS, adjusted working capital and net debt may be discussed on this call. I will now turn it over to Al Carey.

Albert P. Carey -- Executive Chairman

Thank you, A.J., and good morning, everyone, and thanks for joining our call this morning. Our performance for Q4 of 2021 was very good. It was a good finish to fiscal 2021 for our team at Unifi, and it gives us optimism about our fiscal 2022. Revenues continued the growth momentum that we had at the end of Q3 and when you take a look at Q3 and Q4 combined, were confident that we have the momentum to give us a strong revenue performance for 2022. And Eddie and Craig will take you through the details on that in a few minutes. EBITDA was strong again in Q4, and we ended the fiscal year of 2021 at almost $65 million, which is quite a bit better than we forecasted for Q4 and for the full year. Interestingly, our debt, cash, inventory levels and our overall balance sheet is probably as good a shape as any time in recent history. So overall, we feel like were entering this new fiscal year in a very good position. Id like to provide you with three important trends that are emerging for our business for 2022. The first one is environmental sustainability will be a driving force in our business. Our REPREVE sales were up 30% for the quarter.

Now thats a bit of a funny comparison with the pandemic, but its up 16% versus 2019 quarter. And product hang tags are up 60%, and we continue to see our customers taking aggressive actions that are going to allow them to achieve their 2025 sustainability goals for apparel, and this bodes very well for REPREVE. The second thing thats an emerging trend is that our regional focus is working. Our three regional businesses, North America, Asia and Brazil are quite different. And we have tactics and strategies that are different in each of those and are beginning to show promise. North America profitability is very definitely improving, and this is going to continue to be a big priority for us going forward. Asia had an all-time record revenue performance in Q4, and they show signs of full recovery from the pandemic and were forecasting a strong growth for Asia in 2022. And then finally, Brazil had an excellent year. They overdelivered Q4. And they also started selling REPREVE. And while the sales are minimal at this point, we believe that the consumer in Brazil has an appetite for sustainable apparel, and this could be a very big positive for the future of our Brazil business.

Now the final item I wanted to mention is that were increasing our capital investment over the next three years so that we can outfit our plants with the first new yarn texturing innovation since the mid-90s. Weve mentioned it before, but the equipment is called EvoCooler, and a texturing machine from our supplier, Oerlikon, which has really great potential. Were going to be able to see significant efficiencies in productivity and energy consumption and operator safety, and Eddie is going to tell you more about it in a few minutes. However, this investment will make us more profitable and give us more plant capacity, and its going to allow us to be more competitive against import prices in our business. So all in all, a very good quarter. Im proud of the organization as theyve managed through the pandemic. I believe theyve shown resiliency and also agility. And Id say that were a better organization than we were pre-pandemic. So that gives us some optimism as we enter 2022. So now let me turn the meeting over to Eddie Ingle, our CEO, and hell take you through the highlights of the quarter. Thank you.

Edmund M. Ingle -- Chief Executive Officer & Director

Thanks, Al, and good morning, everyone. As Al pointed out, we are pleased with our performance during the fourth quarter of fiscal 2021. And as the numbers show, we built on the momentum from Q3 to deliver a better than previously forecasted fourth quarter. Strength across all segments resulted in fourth consecutive sequential increase in quarterly net sales. Right now, COVID-19 continues to be an obstacle that we have to pay attention to. However, our current momentum is setting us up to be able to deliver on our fiscal 2022 targets. Before I speak to the quarter, I want to take a moment to set about Unifi and the great people that represent our company. This year marks our companys 50th year anniversary, and I could not be prouder of what Unifi employees have accomplished throughout those 50 years. I want to thank our employees, past and present for their dedication to the business, and Im grateful to be surrounded and supported by such a talented team.

Now when I rejoined Unifi a year ago, I was clear that the cornerstone of Unifis future growth was sustainability. Today, I stand by that comment, and our innovative culture will enable us to expand into additional end markets and grow the exposure and leadership position of REPREVE. Unifi remains well positioned to be the partner of choice for global brands seeking to meet their sustainability targets in a transparent, trusted and traceable fashion. Now for the quarter. slide three shows an overview of our performance during the period. The business performed above expectations in the fourth quarter and further reflected the resilience of our global business model. Quarterly revenues were up over 100% year-over-year and up 3% when compared to both fiscal 2019s fourth quarter or fiscal 2021s third quarter. Performance in Q4 was underpinned by strength across all segments, particularly though, Asia and Brazil. Once again, Brazil outperformed with strong pricing, driving its gross margin above 30%, compensating somewhat for the lower volumes due to local lockdowns within their market. Asia also had another strong quarter and achieved its highest quarterly sales volume on record.

Lastly, the Polyester segment recovered further as demand in the U.S. continue to normalize. This strong segment performance was against the backdrop of upward pressure from raw material and other cost increases that we reacted to as we move through the quarter. On the subject of costs, nearly every business is seeing the impact of inflationary pressures, especially in North America, where volatility in labor, freight and other inputs is testing resolve on many companies, including ourselves at Unifi. In the U.S., automotive demand has been impacted by global semiconductor shortages, which trickled down to automotive fabric production and, of course, yarn demand. However, this phenomenon has been offset by strong recovery momentum in other end markets. Again, we are pleased with the results of the Polyester segment in light of all the difficult dynamics facing manufacturers today. Our conversations with customers remain positive and forward-looking as we all work together to mitigate the temporary impacts of inflation. Turning to the supply chain and U.S. raw material costs during the quarter, operating efficiencies and focused execution partially offset inflationary pressures, particularly for recycled raw material inputs. For example, from January to June 2021, our input costs to produce recycled plastic bottle flake increased significantly and well above the increases in virgin inputs.

While these recent increases are expected to pressure the September 2021 quarter, we are focused on pricing actions to mitigate the impacts on our margins. As we look forward, we remain committed to managing our price cost relationship. Weve been actively engaged with customers to ensure the appropriate selling price adjustments are in place to offset rising raw material costs for recycled and other inputs. While we anticipate some short-term margin pressure, we are confident in our underlying business momentum and responsiveness to addressing these cost headwinds. Turning back to review of the consolidated business. Our adjusted EBITDA performance was positive and above forecast in Q1, increasing significantly from the fourth quarter of fiscal 2019, which, as you know, was not impacted by the pandemic, like fiscal 2021. Our financial health remains a top priority, and that emphasis can be seen by the progress we have made to further strengthen what was already a very strong balance sheet. As demonstrated by the two bolt-on transactions we completed in fiscal 2021, our balance sheet serves as a catalyst for future growth opportunities that we see as profitable and value adds. During last quarters conference call, I chaired that our ongoing trade petitions involving textured polyester yarns were continuing to progress.

In May 2021, the U.S. Department of Commerce announced preliminary duty rates against four countries: Indonesia, Malaysia, Thailand and Vietnam. Investigations should conclude by January 2022 and are expected to provide benefits to sales volumes and resulting cost absorption for the Polyester segment for an extended time period thereafter. As seen on slide four, the demand for our REPREVE-branded Fiber continues to grow, comprising 38% of net sales in the fourth quarter this year. For fiscal 2021, we shipped nearly 97 million REPREVE hang tags, a year-over-year increase of 60%. So moving to brand updates. We have several exciting highlights, and this includes Ralph Lauren announced a sustainable offering as the official outfitter of Team USA at the ongoing Olympics. Athletes would wear jackets made with REPREVE during the closing ceremony Parade scheduled for this upcoming Sunday. Additionally, Girl Scouts of the U.S.A. are launching new uniforms made from 40% REPREVE Fiber. This new initiative is Girl Scout USAs first stride to becoming a brand that offers sustainable recycled polyester features in their uniforms. Next, TOMS has added a new line of shoes to their Earthwise collection that features REPREVE Our Ocean, prominently telling the REPREVE story on the interior of the footwear as well as through a variety of ad band medium.

Notable recent home goods placements include Brentwood Home and several mattresses made from Euro Colchones, a luxury mattress brand in Brazil. Im also excited to note that REPREVE made a virgin flight recently. With the use of our REPREVE flame-retardant fiber, Under Armour designed a 3D net structure for the Seating fabric in the Virgin Galactic Spaceship Unity, a company may accrue well above the air surface. Ill conclude our update on REPREVE with our latest achievement that weve announced in a press release last week. REPREVE received its Higg Materials Sustainability Index scores, demonstrating that our brands global warming potential is meaningfully better than conventional alternatives. And were proud that consumers and brands can rely on another level of assurance and transparency in knowing that their use of REPREVE continues to support their conscious and sustainable actions. The Higg Materials Sustainability Index score certainly shows as our vision states that we are working today for the good of tomorrow. We usually cover the outlook commentary from the earnings release a bit later in my prepared remarks.

However, today, Id like to take a moment on the fiscal year 2022 guidance we have given around our expected level of capital spending. We continue to be very encouraged by the initial results of investments we have made in New Yarn Textured Machinery at our Americas facilities. We are planning to continue these investments during fiscal year 2022, resulting in an elevated level of capital spending. These investments are necessary to meet what we expect will be a continued demand for our virgin and recycled products in future periods. As we progress through fiscal year 2022, we expect to be able to share more details on our progress during this important capital equipment upgrade period. With that, I will turn the call over to Craig. Craig? Thank you, Eddie, and good morning, everyone. Like the rest of the team, I am pleased with our fourth quarter and full year fiscal 2021 results and our ability to navigate the complexities of this recovery with the regional and responsive business model. Because of these strong results, were generating some exciting momentum for the future. As we look at the financial details today, I will be brief on year-over-year commentary due to the drastic difference in the respective economic circumstances, but I will spend a bit more time in the underlying drivers of the business and what factors are driving momentum for the future.

I will begin with a high-level overview of profitability before moving into the slide presentation. As expected, operating income and adjusted EBITDA increased significantly from the pandemic suppress Q4 of fiscal 2020. More impressive is the greater than 100% increase in operating income over the 2-year period from Q4 fiscal 2019 to Q4 fiscal 2021, along with the 60% increase in adjusted EBITDA for the same time frame. This strong Q4 fiscal 2021 performance helped us to produce significantly better earnings per share in fiscal 2021. Despite some volatility in the tax rate during the economic recovery. Specifically, Ill review the nonoperating item that was recorded in the just completed quarter, the recovery of non-income taxes in Brazil. We wanted to make sure investors understand the positive impact to our business, both historically as well as in the future, so Ill be providing some additional context. For more than 10 years, many companies in Brazil, including Unifi, challenged the constitutionality of certain items subject to taxes that fund social programs referred to as PIS/COFINS taxes, which have driven a double taxation situation when combined with other taxes paid in that country.

In May 2021, Brazils Supreme Court ruled in favor of the taxpayers and businesses like ours have effectively awarded future credits for the ongoing routine PIS/COFINS payments. Accordingly, we recorded a $9.7 million benefit to reflect the credits relating to prior years that are available to be taken against future non-income tax filings, and this benefit is reduced by $3.3 million in tax expense. The benefit has been renewed from our adjusted EBITDA and adjusted EPS calculations as they are not related to the current year underlying operations and stretched back a total of 10 years. This matter did not impact cash at our balance sheet date. However, this item will be positive to our cash position as we utilize the tax credits in the future, and this will be positive to both net sales and cash as this issue has effective -- has been effectively eliminated from future periods. Now lets turn to slide five for a quick net sales overview. Consolidated net sales increased to $184.4 million, achieving the sequential quarter increase from Q3 fiscal 2021 of 3%, which was the high end of our expectations for the quarter. Of course, sales eclipse Q4 2020 by more than 100%, which marked the most difficult quarter for Unifi during the COVID-19 pandemic.

Recovery in all our segments is easily seen on this slide five. slide six provides a quick overview of gross profit and follows the net sales recovery. For Polyester, this slide demonstrates the significant of volume throughput and our focused execution on price management in North and Central America. In addition, robust recovery in Asia and another exceptional quarter in Brazil helped to drive our consolidated gross margin to 14.9%. slide seven and eight include a net sales overview and gross profit overview respectively for fiscal 2020 versus fiscal 2021. These two slides exhibit the momentum that we have addressed elsewhere on this call as our dynamic global business model has been able to capture opportunities during the business recovery, especially in our Asia and Brazil segments. In addition to the year-over-year analysis, weve chosen to present some sales and gross profit comparisons for the 2-year period that excludes the COVID-19 pandemic on slides nine and 10. For the 2-year period comparisons, the following items are noteworthy for net sales on slide nine. Polyester segment sales are generally flat as a result of the short-term production constraints that are impacting the U.S. today. Asia segment sales increased 32%, consistent with our growth strategy and strong demand in that region for REPREVE product.

And Brazil sales decreased 12%, primarily due to devaluation of the Brazilian real and the impact of local current -- local country pandemic restrictions on product demand in April 2021. Moving on to the 2-year period comparison for gross profit on slide 10, the following items are noteworthy. The Polyester segment gross margin increased from 8.9% to 12.2%, demonstrating focused execution in terms of sales mix, pricing, cost management and efficient production. We are proud of this segment achieving double-digit margin in what is still a difficult environment. The Asia segment gross margin increased from 9.8% to 13.2%, demonstrates an improved sales mix and better cost management for a growing portfolio of innovative and sustainable products. The Brazil segment gross margin increased from 18.7% to 36.3% demonstrates the significant market position achieved in the just completed quarter, underpinned by exceptional performance and strong pricing. Moving on to the balance sheet on slide 11. Stability in our debt and liquidity positions is demonstrated by maintaining diligence around working capital components in the face of rising input costs, while generating strong cash flows globally. All of our teams great work in fiscal 2021 set another record low net debt level of $8.6 million shown on this slide. We continue to have 0 borrowings on our ABL Revolver, which had an availability of $66 million as of June 27, 2021.

Unifis commitment to financial health has allowed us to leverage our strong balance sheet during the more than 12 months challenged by the global pandemic. We will continue to allocate capital expenditures to new eAFK Evo Texturing technology in the Americas. Under our balanced approach to capital allocation, we expect to continue to invest in the business to drive innovation and organic growth, maintain a strong balance sheet and remain opportunistic with share repurchases and/or M&A opportunities. I will now turn the call back to Eddie to take us through the last slides of the presentation and make some final comments. Eddie? Thank you, Craig. I will conclude with slide 12 of the presentation and provide some context around our expectations for fiscal 2022. Our performance throughout fiscal 2021 and most recently, during the fourth quarter, reinforces our belief that there is a structural change in our markets, and sustainability is here to stay. We are encouraged by recent sales trends in our REPREVE and other value-added products, and we expect the recent strength to continue. While the exceptional gross margin performance of the Brazil segment is not expected to continue at the levels achieved in fiscal 2021, there is much to look forward to.

We expect to maintain much of the underlying business momentum that was captured and restored during fiscal 2021, while navigating the existing inflationary pressures. We anticipate that the Asia segment and Polyester segment will generate modest profitability growth over fiscal 2021. Sales volume growth and continued momentum for REPREVE in fiscal 2022 is expected to drive a net sales increase of 10% or more. Operating income and adjusted EBITDA are expected to be broadly consistent with fiscal 2021 levels. The effective tax rate is expected to fall between 35% and 40%. And we will continue to invest in organic growth in the Americas, driving our capital expenditures estimate between 40 and $45 million for fiscal 2022, primarily comprised of new yarn texture machinery, along with approximately $10 million to $12 million of routine annual maintenance. To conclude, Im proud of our teams performance during the year, challenged by the pandemic and global uncertainty.

Our strong results during the fourth quarter and fiscal year demonstrate the strength of our resilient global business model and our potential under normal economic conditions. We have the right team and workforce in place to drive long-term growth and shareholder value. Going forward, we will continue to focus on partnering with global brand leaders that want to position themselves using sustainable products, innovating and positioning the business to drive long-term organic growth. Diligent cost and price management initiatives to protect and improve gross margin and maintaining the strength of our balance sheet to act opportunistically on further organic growth and strategic M&A. We will now open the line for questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] We have a question from the line of Dan Moore with CJS Securities.

Pete Lucas -- CJS Securities -- Analyst

Hi. Good morning. Its Pete Lucas for Dan. You touched on it in your prepared remarks, but if you could just kind of expand on your outlook for growth and margins for 22 -- fiscal 22 by segment, starting with Polyester, International. I know you said in Brazil, you dont expect those margins to continue. But finally, kind of touch on the outlook also for nylon?

Edmund M. Ingle -- Chief Executive Officer & Director

Thank you, Pete. This is Eddie. The growth that we do expect -- we expect growth in volume across all of our business units, and it will be growth in revenue and in volume. The revenue growth will be partly as a result of the growing cost of raw materials that were passing on. But as we said on the call, we do expect the overall global growth rate to be 10% plus over fiscal 2021. From a margin perspective, we do expect to see some pressure. If we take all of the business units together, the global margin will drop primarily because the Brazil margins that were currently experiencing are not expected to continue. But we are focused on ensuring that the margins in Brazil are as good as they can be, but specifically in Asia and the U.S., we are under pressure, but we do expect to maintain decent margins in those two areas.

Pete Lucas -- CJS Securities -- Analyst

Helpful. Thanks. Next one on the tariffs. You touched on that coming to be a benefit starting in January. Do you expect to achieve the full $20 million revenue benefit in fiscal 22? Or is that more of a run rate benefit you expect to reach sometime during the fiscal year?

Edmund M. Ingle -- Chief Executive Officer & Director

Yes. Thats more of a run rate benefit. And as we said, were installing new equipment. So well be ready from a machine capacity perspective, but we do expect that to ramp up as we move through the second half of our fiscal year.

Pete Lucas -- CJS Securities -- Analyst

Great. And the last one for me. With a lot of new entrants and emerging companies focused on recycling plastics, do you see the potential for increased demand and competition for Bayer bottles as an input? And what are you doing to ensure that you have enough supply?

Edmund M. Ingle -- Chief Executive Officer & Director

Yes. Thats a question Id like to retarget specifically to the U.S. In Asia, we do not have any issues at all. But in the U.S., there is certainly, especially increased competition, especially from the beverage companies who are trying to put more recycled content into their containers. And in some states that they get legal requirements to do that, such as California. So we are seeing increased pressure. We havent had a shortage of bottles, but we are having to pay a lot more for the bottles than we had just six months ago. And we are -- as we go through the next quarter or so, we are passing on those cost increases. So the supply is not an issue, but certainly, the cost of those Bayer bottles has been problematic for us. And of course, its very easy to pass on price adjustments to customers, but I think they see whats going on right now.

Pete Lucas -- CJS Securities -- Analyst

Very helpful. Thanks and congrats again on the quarter.

Edmund M. Ingle -- Chief Executive Officer & Director

Thank you.

A.J. Eaker -- Vice President of Finance and Investor Relations

Thanks Pete.

Operator

Your next question comes from the line of Gus Richard with Northland.

Gus Richard -- Northland -- Analyst

Yes. Thanks for taking my question. I just wanted to focus on Asia for a second. Vietnam is shut down, and they are a big producer of apparel and footwear. And I was wondering if that was causing any perturbations in your business there?

Edmund M. Ingle -- Chief Executive Officer & Director

Thanks for the question. Most of our business in Asia is in China, but we do have some business, as weve talked about in the past, in Vietnam. This is certainly something were paying attention to as in our script. We know that COVID is not over. Were not sure exactly how its going to impact Q1 of this new fiscal year. And its really sort of only -- sort of liquidates head just a few weeks ago. But were paying attention to it. I dont think its something that overall is going to impact our Q1 results, however.

Gus Richard -- Northland -- Analyst

Okay and then on the new texturing equipment that youre putting in your facility, is that a productivity or is it enhancing the product or both? Could you give a little color there?

Edmund M. Ingle -- Chief Executive Officer & Director

Yes. I guess theres three reasons for doing this one, its going to give us more capacity, which we will need as we capture some import replacement business due to the anti-dumping initiatives that are going on. But its also, as Al pointed out in his comments, we know that its going to be more productive from a speed point of view, but also it reduces the resources from an energy and labor perspective, and it is safer than existing equipment, which were very pleased about. And then lastly, we are very confident that well be able to make some products on this new equipment, new innovative products that we havent been able to make on the existing equipment that weve had. Our existing equipment is 25-plus years old, and this is a great opportunity for us to develop new products -- new innovative products on this equipment. Thank you.

Gus Richard -- Northland -- Analyst

Got it. And then the last one for me is -- it seems like globalization is moving a bit in reverse. And I was just wondering, are you seeing any brands or new customers starting up businesses in North America that would shift revenue more to North America.

Edmund M. Ingle -- Chief Executive Officer & Director

Yes. I mean, I think where were really seeing growth and a shift in supply chain is in Central America, this has been a -- this pandemic has been a shock to all of us and the logistics coming from Asia, not just a very costly, but its also very timely -- time-consuming. So what might have taken four weeks is now taking eight weeks to get across. And so that builds the working capital constraint for these brands. And we are hearing from many brands that they want to put more business through the Central America supply chain, particularly in the -- specifically in the U.S., were not seeing a huge amount, but I do think well see some impact going forward, but I cant be as specific as I can to Central America.

Gus Richard -- Northland -- Analyst

Okay. And would you service that from Brazil or from your North America plan?

Edmund M. Ingle -- Chief Executive Officer & Director

North Americas because there -- whats called a yarn forward rule and somebody makes it garments in Central America. If its made from U.S. components or local components, it comes back into the U.S. Duty free. So theres a real advantage to -- from a tax perspective, duty perspective to make garments in Central America, which offset some of the higher costs that might be otherwise associated. Were making it here versus in Asia.

Gus Richard -- Northland -- Analyst

Perfect. Thank you so much. Congratulations on the quarter.

Edmund M. Ingle -- Chief Executive Officer & Director

Thanks.

A.J. Eaker -- Vice President of Finance and Investor Relations

Thanks Gus.

Operator

Your next question comes from the line of Ryan Dennis Savage with Sidoti.

Ryan Danisavage -- Sidoti -- Analyst

Hi guys. Congrats on the quarter, first off. Just a couple of questions from me. But in the sales guidance range for the full year, how much pricing considered into that given the raw material environment? And is that embedded? And is there more to come in that?

Edmund M. Ingle -- Chief Executive Officer & Director

Ryan, we did anticipate in that initial guidance for 22, yes, we took into consideration the current level of pricing that were seeing. As weve noted, it has been on the upper rise here, especially as of late. I think we took into consideration what was happening now. We didnt try to project past what were seeing in the current day, but the current level of pricing and what were seeing here is reflected in that guidance.

Ryan Danisavage -- Sidoti -- Analyst

Thanks for that and just one more on REPREVE. Can you talk about the conversations you guys are having with clients and the ability to expand the raw material environment? Does that change the conversation at all? And also, does that -- with the recent Higg MSI scores, how do you guys compete in the marketplace?

Edmund M. Ingle -- Chief Executive Officer & Director

Ill answer the second question first. I mean the Higg Sustainability Index is something weve worked on for a long time. One of the big attractiveness about Unifi is that were transparent, were traceable and were -- because of our fiber print technology. What this does is add another level of comfort to the brand that when they buy from Unifi that we are helping them become more sustainable. So its easy for us to say were good, were better than virgin or were better than some of the other recycled polyester yarn out there. But when a third-party says that, it just gives them more comfort. And again, as we said before, our job is to help brands become more sustainable, but we also want to help them do it in a very -- in a way thats very trusted, and that gives them a lot of trust. Im not sure about your first question, but I think it was about the expansion of the raw materials.

Are there ways to get other raw materials in the U.S. beyond Bayer bottles. We are working, as weve mentioned some of the other calls before, on increasing our textile takeback program. So as we get more and more interest from the brands and they develop some collection systems, we do believe well be able to take textiles and put it back into, say, black yarns, which will help them increase their sustainability story too. The recycling rate in the U.S., we do expect to increase when Bayer bottle pricing goes up significantly as it has done, its going to attract more people to increase collections. We have a great partnership with Waste Management, and they are very focused in different communities and increasing recycling rates. Nonprofit like the recycling partnership, they are also very focused on increasing the amount of curve side collection available to American communities.

Today, were still around 50% election rates, 50% access to curbside recycling in America and theres a big initiative to increase that. And then you have states like Maine that just passed an EPR ruling that is going to require companies who are putting plastic onto the market to help create the recycling infrastructure to make that happen. So we see a lot of upside in the collection rates over the next few years because as the price point has become more attractive. And as legislation gets put in place, it will put more product onto the marketplace. Thank you.

Ryan Danisavage -- Sidoti -- Analyst

Thanks Ed. And then just one more for me, a quick one. Can you just provide some color on the texturing machines? And when will we see benefits from this project? If you could give some color on that? So well see benefit in 2022. My apologies.

Edmund M. Ingle -- Chief Executive Officer & Director

No, thats good question. Yes, as weve mentioned, were really in the initial stages of getting those first machines into our operations. Really, well continue on that during the first half of FY 22. And it wont be really until the back end of FY 22 that well start to see some benefit, even though we will continue that machine installation even into that period as well. So really, for the first quarter and second quarter of FY 22 will continue to be an installation ramp-up mode. Well start to see some additional benefit for that really in the back half of FY 22.

Ryan Danisavage -- Sidoti -- Analyst

Thanks for that and congrats on the quarter guys.

Edmund M. Ingle -- Chief Executive Officer & Director

Thank you

A.J. Eaker -- Vice President of Finance and Investor Relations

Thanks.

Operator

Our next question comes from the line of David Silver with CL King.

David Silver -- CL King -- Analyst

Yes. Hi. Good morning. I had maybe a question about the broader kind of marketing opportunity you have and maybe the current pricing environment. So you mentioned rising costs, I mean, I guess all along the supply chain, Im thinking more along the lines of petrochemical input prices or the oil price. I mean, I personally think $70 crude is just rest stop on the way to something a little bit higher. But across the cycle, recycled plastics, at some point, have to compete with virgin plastics. And in your experience, I mean, in an elevated plastics price environment, does it -- is it easier for your company to hit those double-digit growth targets you have? Or is it harder? Or is it kind of depends -- it depends kind of answer? So how do you think of your marketing and the demand for your recycled products in a world of elevated prices for the virgin alternatives? Thank you.

Edmund M. Ingle -- Chief Executive Officer & Director

Weve got a lot of things in there, David, but I just as on the general broad theme around petrochemicals, recycling traditionally has followed the recycling inputs that followed the virgin inputs. And theres generally a lag sometimes forward leading or not. But what I can say is that there has been a disconnect between those companies who want to use virgin material, and those who want to become more sustainable and using recycled products. So right now, we are in this moment in time where the recycled inputs have gone beyond the increases in virgin materials. So we saw crude go from $45, which was there for quite a while up to $70 or $75, which is a big increase, but the recycling inputs in the U.S. specifically have increased further. So you have to sort of ask the question about the regions. Is there a disconnect in China? No. Is there a disconnect here in the U.S.? Yes. Are the brands that were working with staying on their sustainability path. I think I can confidently say, yes, they are.

And they know this is a temporary situation where the disconnect is so big. But as -- if you go back to just several years ago, crude was at $100, and we were selling a lot of yarn. And when the higher that crude goes, its easier, it is generally speaking for the recyclers because the delta between the two narrows. So were -- while it is challenging right now because of the delta between the Bayer bottle pricing and resulting flight costs is greater than normal. At some point, there will be an equalization and either virgin will continue to go up or the recycled costs will go down as more collections occur. So from a margin perspective, were marking to people that want to be sustainable. Were not trying to convince people who are committed to virgin products to move over. We know theres a bunch of big brands out there, big retailers out there, who are really consciously trying to meet the consumer demand, and theyre trying to meet those needs of sustainability that their customers are asking for.

And the regional focus that we have really helps us because our supply chain, like we talked about earlier, we can make products in Central America, in the U.S. for quick turns, but we can also make products in Asia and recycle content and theres less pressure over there from a recycled inputs point of view. So I think the motivation to buy in apparel, in home goods and shoes is more and more becoming sustainably focused. So these brands are looking forward to that, and were going to market toward those brands and actually focus on marketing on their customers so that they can get value from the REPREVE marketing that were putting out there. I hope that helps.

David Silver -- CL King -- Analyst

Yes. A lot to unpack there. Thank you. I had a follow-up question maybe on your tax rate. So an effective tax rate of between 35% and 40% is what youre guiding to. And I mean, to me, thats one of the higher rates for the companies in my universe. However, I did notice in the cash flow statement here that there was a deferred income tax kind of benefit for this year. So if I was modeling your company going forward, is there kind of a structural difference, lets say, between your GAAP income tax accrual and a cash tax rate? And do you -- is that something that we should be factoring in, I guess, for the longer term? So maybe just some thoughts on your GAAP tax rate versus your cash tax rate. Thank you.

Edmund M. Ingle -- Chief Executive Officer & Director

Sure. David, thats a good question. Yes. For cash taxes, we do -- we will get the benefit. We will get some continued benefit, specifically, as we mentioned in the call today, some of the changes with the indirect taxes and getting credits that we will utilize over several years. That will continue to push the cash taxes below the overall tax rate. There are some other factors that are in play there as well. But yes, I would say that we feel like if I gave you a specific number, could you be five percentage points lower when youre ranging your cash taxes, thats probably realistic. So yes, to broadly answer your question, yes, we do feel like we will continue to have some things that have the effective tax rate actually be a bit higher than the actual cash tax rate.

David Silver -- CL King -- Analyst

Okay. Great. Thank you very much.

Operator

And I will now turn the call back over to management for closing remarks.

Edmund M. Ingle -- Chief Executive Officer & Director

Thank you, Don, and thank you to everyone for listening and participating today. Our next earnings release for the first fiscal quarter ending September 26, 2021, is tentatively scheduled for Monday, October 25, 2021, after the close of the market. With the conference call to follow the next morning, Tuesday, October 26, 2021, at 8:30 a.m. Eastern Time. Thanks again.

Duration: 43 minutes

Call participants:

A.J. Eaker -- Vice President of Finance and Investor Relations

Albert P. Carey -- Executive Chairman

Edmund M. Ingle -- Chief Executive Officer & Director

Pete Lucas -- CJS Securities -- Analyst

Gus Richard -- Northland -- Analyst

Ryan Danisavage -- Sidoti -- Analyst

David Silver -- CL King -- Analyst

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