FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 29, 2009
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-10542
UNIFI, INC.
(Exact name of registrant as specified in its charter)
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New York
(State or other jurisdiction of
incorporation or organization)
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11-2165495
(I.R.S. Employer
Identification No.) |
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P.O. Box 19109 7201 West Friendly Avenue Greensboro, NC
(Address of principal executive offices)
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27419
(Zip Code) |
Registrants telephone number, including area code: (336) 294-4410
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer o |
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Accelerated filer þ |
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Non-accelerated filer o
(Do not check if a smaller reporting company) |
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Smaller Reporting Company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The number of shares outstanding of the issuers common stock, par value $.10 per share, as of May
7, 2009 was
62,057,300.
UNIFI, INC.
Form 10-Q for the Quarterly Period Ended March 29, 2009
INDEX
2
Part.1 Financial Information
Item.1 Financial Statements
UNIFI, INC.
Condensed Consolidated Balance Sheets
(Amounts in thousands)
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March 29, |
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June 29, |
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2009 |
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2008 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
23,544 |
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$ |
20,248 |
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Receivables, net |
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71,498 |
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103,272 |
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Inventories |
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101,583 |
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122,890 |
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Deferred income taxes |
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1,474 |
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2,357 |
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Assets held for sale |
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1,700 |
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4,124 |
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Investment in unconsolidated affiliate |
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9,000 |
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Restricted cash |
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14,585 |
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9,314 |
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Other current assets |
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4,946 |
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3,693 |
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Total current assets |
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228,330 |
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265,898 |
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Property, plant and equipment |
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770,494 |
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855,324 |
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Less accumulated depreciation |
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(611,192 |
) |
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(678,025 |
) |
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159,302 |
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177,299 |
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Investments in unconsolidated affiliates |
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62,067 |
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70,562 |
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Restricted cash |
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1,394 |
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26,048 |
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Goodwill |
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18,579 |
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Intangible assets, net |
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18,465 |
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20,386 |
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Other noncurrent assets |
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13,737 |
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12,759 |
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Total assets |
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$ |
483,295 |
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$ |
591,531 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
24,904 |
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$ |
44,553 |
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Accrued expenses |
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20,361 |
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25,531 |
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Income taxes payable |
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7 |
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681 |
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Current maturities of long-term debt and other
current liabilities |
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6,119 |
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9,805 |
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Total current liabilities |
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51,391 |
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80,570 |
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Long-term debt and other liabilities |
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193,389 |
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204,366 |
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Deferred income taxes |
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413 |
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926 |
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Commitments and contingencies |
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Shareholders equity: |
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Common stock |
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6,206 |
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6,069 |
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Capital in excess of par value |
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29,858 |
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25,131 |
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Retained earnings |
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211,754 |
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254,494 |
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Accumulated other comprehensive income (loss) |
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(9,716 |
) |
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19,975 |
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238,102 |
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305,669 |
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Total liabilities and shareholders equity |
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$ |
483,295 |
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$ |
591,531 |
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See accompanying notes to condensed consolidated financial statements.
3
UNIFI, INC.
Condensed Consolidated Statements of Operations
(Unaudited) (Amounts in thousands, except per share data)
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For the Quarters Ended |
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For the Nine-Months Ended |
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March 29, |
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March 23, |
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March 29, |
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March 23, |
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2009 |
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2008 |
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2009 |
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2008 |
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Summary of Operations: |
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Net sales |
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$ |
119,094 |
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$ |
169,836 |
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$ |
413,830 |
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$ |
523,741 |
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Cost of sales |
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118,722 |
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156,404 |
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397,721 |
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490,996 |
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Restructuring charges (recoveries) |
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293 |
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(2,199 |
) |
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293 |
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4,638 |
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Write down of long-lived assets |
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2,780 |
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Goodwill impairment |
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18,580 |
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18,580 |
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Selling, general & administrative expenses |
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9,507 |
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10,080 |
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29,356 |
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36,542 |
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Provision for bad debts |
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735 |
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87 |
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1,794 |
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152 |
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Other operating (income) expense, net |
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(89 |
) |
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(897 |
) |
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(5,862 |
) |
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(4,087 |
) |
Non-operating (income) expense: |
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Interest income |
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(656 |
) |
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(651 |
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(2,249 |
) |
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(2,231 |
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Interest expense |
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5,879 |
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6,308 |
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17,592 |
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19,598 |
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Equity in earnings of unconsolidated
affiliates |
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(825 |
) |
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(757 |
) |
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(4,469 |
) |
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(914 |
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Write down
of investment in unconsolidated affiliates |
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1,483 |
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4,505 |
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Income (loss) from continuing operations
before income taxes |
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(33,052 |
) |
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1,461 |
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(40,409 |
) |
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(28,238 |
) |
Provision (benefit) from income taxes |
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(101 |
) |
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1,394 |
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2,398 |
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(11,294 |
) |
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Income (loss) from continuing operations |
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(32,951 |
) |
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67 |
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(42,807 |
) |
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(16,944 |
) |
Income (loss) from discontinued
operations
net of tax |
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(45 |
) |
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(55 |
) |
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67 |
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22 |
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Net income (loss) |
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$ |
(32,996 |
) |
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$ |
12 |
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$ |
(42,740 |
) |
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$ |
(16,922 |
) |
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Losses per common share (basic and
diluted): |
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Income (loss) continuing operations |
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$ |
(.53 |
) |
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$ |
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$ |
(.69 |
) |
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$ |
(.28 |
) |
Income (loss) discontinued operations |
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Net income (loss) basic and diluted |
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$ |
(.53 |
) |
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$ |
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$ |
(.69 |
) |
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$ |
(.28 |
) |
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Weighted average outstanding shares of
common stock (basic and diluted) |
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62,057 |
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60,589 |
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61,740 |
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60,560 |
|
See accompanying notes to condensed consolidated financial statements.
4
UNIFI, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited) (Amounts in thousands)
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For the Nine-Months Ended |
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March 29, |
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March 23, |
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2009 |
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2008 |
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Cash and cash equivalents at beginning of year |
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$ |
20,248 |
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$ |
40,031 |
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Operating activities: |
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Net loss |
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(42,740 |
) |
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(16,922 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
continuing operating activities: |
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Income from discontinued operations |
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(67 |
) |
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(22 |
) |
Earnings of unconsolidated equity affiliates, net of distributions |
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(1,585 |
) |
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262 |
|
Depreciation |
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21,954 |
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27,568 |
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Amortization |
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3,289 |
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|
3,486 |
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Stock-based compensation expense |
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1,033 |
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|
724 |
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Deferred compensation recovery, net |
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(50 |
) |
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(170 |
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Net gain on asset sales |
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(5,865 |
) |
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(1,872 |
) |
Non-cash effect of goodwill impairment |
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18,580 |
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Non-cash write down of long-lived assets |
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|
2,780 |
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Non-cash write down of investment in unconsolidated affiliate |
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1,483 |
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|
4,505 |
|
Non-cash portion of restructuring charges |
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293 |
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4,638 |
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Deferred income tax benefit |
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(77 |
) |
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(14,951 |
) |
Provision for bad debts |
|
|
1,794 |
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|
152 |
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Other |
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306 |
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|
(263 |
) |
Change in assets and liabilities, excluding effects of
acquisitions and foreign currency adjustments |
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|
6,258 |
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(11,338 |
) |
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Net cash
provided by (used in) continuing operating activities |
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4,606 |
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(1,423 |
) |
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Investing activities: |
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Capital expenditures |
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(10,918 |
) |
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(7,310 |
) |
Acquisition |
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(500 |
) |
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Change in restricted cash |
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14,035 |
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(12,338 |
) |
Proceeds from sale of capital assets |
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6,959 |
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|
15,797 |
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Proceeds from sale of equity affiliate |
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|
8,750 |
|
Collection of notes receivable |
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1 |
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|
269 |
|
Split dollar life insurance premiums |
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(217 |
) |
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(217 |
) |
Other |
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(793 |
) |
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Net cash provided by investing activities |
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9,360 |
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|
4,158 |
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Financing activities: |
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Borrowings of long-term debt |
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14,600 |
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Payments of
long-term debt |
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(22,199 |
) |
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(16,000 |
) |
Proceeds from stock option exercises |
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3,830 |
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Other |
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(343 |
) |
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(2,142 |
) |
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Net cash used in financing activities |
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(4,112 |
) |
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|
(18,142 |
) |
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Cash flows of discontinued operations operating cash flow |
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(308 |
) |
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|
(230 |
) |
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Effect of exchange rate changes on cash and cash equivalents |
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(6,250 |
) |
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|
1,793 |
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Net increase (decrease) in cash and cash equivalents |
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3,296 |
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(13,844 |
) |
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Cash and cash equivalents at end of period |
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$ |
23,544 |
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$ |
26,187 |
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|
See accompanying notes to condensed consolidated financial statements.
5
UNIFI, INC.
Notes to Condensed Consolidated Financial Statements
1. |
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Basis of Presentation |
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The Condensed Consolidated Balance Sheet of Unifi, Inc. (the Company) at June 29, 2008 has
been derived from the audited financial statements at that date but does not include all of the
information and footnotes required by United States generally accepted accounting principles
(U.S. GAAP) for complete financial statements. Except as noted with respect to the balance
sheet at June 29, 2008, this information is unaudited and reflects all adjustments which are, in
the opinion of management, necessary to present fairly the financial position at March 29, 2009,
and the results of operations and cash flows for the periods ended March 29, 2009 and March 23,
2008. Such adjustments consisted of normal recurring items necessary for fair presentation in
conformity with U.S. GAAP. Preparing financial statements requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying
notes. Actual results may differ from these estimates. Interim results are not necessarily
indicative of results for a full year. The information included in this Form 10-Q should be
read in conjunction with Managements Discussion and Analysis of Financial Condition and Results
of Operations and the financial statements and notes thereto included in the Companys Form 10-K
for the fiscal year ended June 29, 2008. Certain prior period amounts have been reclassified to
conform to current year presentation. |
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|
The significant accounting policies followed by the Company are presented on pages 65 to 71 of
the Companys Annual Report on
Form 10-K for the fiscal year ended June 29, 2008. |
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2. |
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Inventories |
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Inventories are comprised of the following (amounts in thousands): |
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|
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March 29, |
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June 29, |
|
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|
2009 |
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|
2008 |
|
Raw materials and supplies |
|
$ |
41,164 |
|
|
$ |
51,407 |
|
Work in process |
|
|
6,274 |
|
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|
7,021 |
|
Finished goods |
|
|
54,145 |
|
|
|
64,462 |
|
|
|
|
|
|
|
|
|
|
$ |
101,583 |
|
|
$ |
122,890 |
|
|
|
|
|
|
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|
3. |
|
Accrued Expenses |
|
|
|
Accrued expenses are comprised of the following (amounts in thousands): |
|
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|
|
|
|
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|
|
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|
March 29, |
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June 29, |
|
|
|
2009 |
|
|
2008 |
|
Payroll and fringe benefits |
|
$ |
5,221 |
|
|
$ |
11,101 |
|
Severance |
|
|
1,552 |
|
|
|
1,935 |
|
Interest |
|
|
8,188 |
|
|
|
2,813 |
|
Utilities |
|
|
1,626 |
|
|
|
3,114 |
|
Closure reserve |
|
|
619 |
|
|
|
1,414 |
|
Retiree benefits |
|
|
1,566 |
|
|
|
1,733 |
|
Property taxes |
|
|
547 |
|
|
|
1,132 |
|
Other |
|
|
1,042 |
|
|
|
2,289 |
|
|
|
|
|
|
|
|
|
|
$ |
20,361 |
|
|
$ |
25,531 |
|
|
|
|
|
|
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|
6
4. |
|
Other Operating (Income) Expense, Net |
|
|
|
The following table summarizes the Companys other operating (income) expense, net (amounts
in thousands): |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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For the Quarters Ended |
|
|
For the Nine-Months Ended |
|
|
|
March 29, |
|
|
March 23, |
|
|
March 29, |
|
|
March 23, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
(Gain) loss on sale of fixed assets |
|
$ |
44 |
|
|
$ |
(459 |
) |
|
$ |
(5,865 |
) |
|
$ |
(1,872 |
) |
Gain from sale of nitrogen credits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,614 |
) |
Technology
fee from China joint venture |
|
|
|
|
|
|
(187 |
) |
|
|
|
|
|
|
(875 |
) |
Currency (gains) losses |
|
|
(100 |
) |
|
|
(153 |
) |
|
|
(22 |
) |
|
|
305 |
|
Other, net |
|
|
(33 |
) |
|
|
(98 |
) |
|
|
25 |
|
|
|
(31 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating (income) expense, net |
|
$ |
(89 |
) |
|
$ |
(897 |
) |
|
$ |
(5,862 |
) |
|
$ |
(4,087 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
5. |
|
Intangible Assets, Net |
|
|
|
Other intangible assets subject to amortization consisted of customer relationships of $22.0
million and non-compete agreements of $4.0 million which were entered in connection with an
asset acquisition consummated in fiscal year 2007. The customer list is being amortized in a
manner which reflects the expected economic benefit that will be received over its twelve year
life and the non-compete agreement is being amortized using the straight-line method over six
years. There are no residual values related to these intangible assets. Accumulated
amortization at March 29, 2009 and June 29, 2008 for these intangible assets was $8.0 million
and $5.6 million, respectively. |
|
|
|
In addition, the Company allocated $0.5 million to customer relationships arising from a
transaction that closed in the second quarter of fiscal year 2009. This customer list is being
amortized using the straight-line method over a period of one and a half years. Accumulated
amortization at March 29, 2009 was $83 thousand. |
|
|
|
The intangible assets discussed above all relate to the polyester segment. |
|
|
|
The following table represents the expected intangible asset amortization for the next five
fiscal years (amounts in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Amortization Expenses |
|
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
Customer lists |
|
$ |
2,993 |
|
|
$ |
2,173 |
|
|
$ |
2,022 |
|
|
$ |
1,837 |
|
|
$ |
1,481 |
|
Non-compete contract |
|
|
571 |
|
|
|
571 |
|
|
|
571 |
|
|
|
571 |
|
|
|
286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,564 |
|
|
$ |
2,744 |
|
|
$ |
2,593 |
|
|
$ |
2,408 |
|
|
$ |
1,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. |
|
Recent Accounting Pronouncements |
|
|
|
On December 29, 2008, the Company adopted Statements of Financial Accounting Standard No.
161, Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB
Statement No. 133 (SFAS 161), requiring enhancements to the disclosure requirements for
derivative and hedging activities. The objective of the enhanced disclosure requirement is to
provide the user of financial statements with a clearer understanding of how the entity uses
derivative instruments; how derivatives are accounted for; and how derivatives affect an
entitys financial position, cash flows and performance. The statement applies to all derivative
and hedging instruments. SFAS 161 is effective for all fiscal years and interim periods
beginning after November 15, 2008. The adoption of SFAS 161 did not materially change the
Companys disclosures of derivative and hedging instruments. |
7
|
|
In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair
Value Measurements (SFAS 157). SFAS 157 addresses how companies should measure fair value
when companies are required to use a fair value measure for recognition or disclosure purposes
under generally accepted accounting principles. As a result of SFAS 157 there is now a common
definition of fair value to be used throughout GAAP. The FASB believes that the new standard
will make the measurement of fair value more consistent and comparable and improve disclosures
about those measures. The provisions of SFAS 157 were to be effective for fiscal years beginning
after November 15, 2007. On February 12, 2008, the FASB issued Staff Position (FSP) FAS 157-2
which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). This FSP partially deferred the effective
date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within
those fiscal years for items within the scope of this FSP. Effective for fiscal year 2009, the
Company adopted SFAS 157 except as it applies to those nonfinancial assets and nonfinancial
liabilities as noted in FSP FAS 157-2 and the adoption of this standard did not have a material
effect on its consolidated financial statements. |
|
7. |
|
Comprehensive Income (Loss) |
|
|
|
Comprehensive losses amounted to $32.7 million and $72.4 million for the third quarter and
year-to-date periods of fiscal year 2009, respectively, compared to comprehensive income of $1.3
million and comprehensive loss of $9.1 million for the third quarter and the year-to-date
periods of fiscal year 2008, respectively. Comprehensive losses were comprised of net losses of
$33.0 million and $42.7 million and cumulative translation adjustments of $0.3 million and
$(29.7) million for the third quarter and year-to-date periods of fiscal year 2009,
respectively. Comparatively, comprehensive losses for the corresponding periods in the prior
fiscal year were derived from net income of $12 thousand and net losses of $16.9 million, and
cumulative translation adjustments of $1.3 million and $7.8 million, respectively. The Company
does not provide income taxes on the impact of currency translations as earnings from foreign
subsidiaries are deemed to be permanently invested. |
|
8. |
|
Investments in Unconsolidated Affiliates |
|
|
|
The following table represents the Companys investments in unconsolidated affiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date |
|
|
|
|
|
Percent |
Affiliate Name |
|
Acquired |
|
Location |
|
Ownership |
Yihua Unifi Fibre Company Ltd (YUFI) (A) |
|
Aug-05 |
|
Yizheng, Jiangsu Province, Peoples Republic of China |
|
|
50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Parkdale America, LLC (PAL) |
|
Jun-97 |
|
North and South Carolina |
|
|
34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unifi-SANS
Technical Fibers, LLC (USTF) (B) |
|
Sep-00 |
|
Stoneville, North Carolina |
|
|
50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.N.F. Industries, LLC (UNF) |
|
Sep-00 |
|
Migdal Ha Emek, Israel |
|
|
50 |
% |
|
|
|
|
|
(A) |
|
The Company completed the sale of YUFI during the fourth quarter of fiscal year 2009. |
|
|
(B) |
|
The Company completed the sale of USTF during the second quarter of fiscal year 2008. |
8
|
|
Condensed income statement information for the quarters and nine-months ended March 29, 2009 and
March 23, 2008, of the combined unconsolidated equity affiliates are as follows (amounts in
thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 29, 2009 |
|
|
YUFI (1) |
|
PAL |
|
UNF |
|
Total |
Net sales |
|
|
|
|
|
$ |
89,998 |
|
|
$ |
3,638 |
|
|
$ |
93,636 |
|
Gross profit (loss) |
|
|
|
|
|
|
13,439 |
|
|
|
(581 |
) |
|
|
12,858 |
|
Depreciation and amortization |
|
|
|
|
|
|
4,573 |
|
|
|
474 |
|
|
|
5,047 |
|
Income (loss) from operations |
|
|
|
|
|
|
11,955 |
|
|
|
(682 |
) |
|
|
11,273 |
|
Net income (loss) |
|
|
|
|
|
|
3,949 |
|
|
|
(624 |
) |
|
|
3,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine-Months Ended March 29, 2009 |
|
|
YUFI |
|
PAL |
|
UNF |
|
Total |
Net sales |
|
|
|
|
|
$ |
309,276 |
|
|
$ |
16,073 |
|
|
$ |
325,349 |
|
Gross profit (loss) |
|
|
|
|
|
|
25,510 |
|
|
|
(2,247 |
) |
|
|
23,263 |
|
Depreciation and amortization |
|
|
|
|
|
|
14,477 |
|
|
|
1,422 |
|
|
|
15,899 |
|
Income (loss) from operations |
|
|
|
|
|
|
17,979 |
|
|
|
(3,306 |
) |
|
|
14,673 |
|
Net income (loss) |
|
|
|
|
|
|
15,889 |
|
|
|
(3,036 |
) |
|
|
12,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 23, 2008 |
|
|
YUFI |
|
PAL |
|
UNF |
|
Total |
Net sales |
|
$ |
30,618 |
|
|
$ |
116,258 |
|
|
$ |
6,747 |
|
|
$ |
153,623 |
|
Gross profit (loss) |
|
|
(1,800 |
) |
|
|
6,251 |
|
|
|
(473 |
) |
|
|
3,978 |
|
Depreciation and amortization |
|
|
1,085 |
|
|
|
3,850 |
|
|
|
474 |
|
|
|
5,409 |
|
Income (loss) from operations |
|
|
(3,275 |
) |
|
|
3,242 |
|
|
|
(643 |
) |
|
|
(676 |
) |
Net income (loss) |
|
|
(3,912 |
) |
|
|
7,578 |
|
|
|
(562 |
) |
|
|
3,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine-Months Ended March 23, 2008 |
|
|
USTF (2) |
|
YUFI |
|
PAL |
|
UNF |
|
Total |
Net sales |
|
$ |
6,455 |
|
|
$ |
103,738 |
|
|
$ |
331,797 |
|
|
$ |
18,577 |
|
|
$ |
460,567 |
|
Gross profit (loss) |
|
|
571 |
|
|
|
(2,334 |
) |
|
|
16,700 |
|
|
|
(318 |
) |
|
|
14,619 |
|
Depreciation and amortization |
|
|
578 |
|
|
|
3,703 |
|
|
|
13,520 |
|
|
|
1,264 |
|
|
|
19,065 |
|
Income (loss) from operations |
|
|
188 |
|
|
|
(6,903 |
) |
|
|
6,832 |
|
|
|
(785 |
) |
|
|
(668 |
) |
Net income (loss) |
|
|
148 |
|
|
|
(8,757 |
) |
|
|
12,144 |
|
|
|
(649 |
) |
|
|
2,886 |
|
|
|
|
|
|
(1) |
|
The Company completed the sale of its investment in YUFI during the fourth quarter of
fiscal year 2009 and as a result its financial statements were unavailable to the Company
for the quarter ended March 29, 2009. See below and Footnote 12-Impairment Charges and
Footnote 19- Subsequent Events for further discussion. |
|
|
(2) |
|
Sold in the second quarter of fiscal year 2008. |
|
|
On June 10, 2005, the Company and Sinopec Yizheng Chemical Fiber Co., Ltd, (YCFC) entered
into an Equity Joint Venture Contract (the JV Contract), to form YUFI to manufacture, process
and market polyester filament yarn in YCFCs facilities in China. Under the terms of the JV
Contract, each company owned a 50% equity interest in YUFI. The joint venture transaction
closed on August 3, 2005, and accordingly, the Company contributed to YUFI its initial capital
contribution of $15.0 million in cash on August 4, 2005. On October 12, 2005, the Company
transferred an additional $15.0 million to YUFI to complete the capitalization of the joint
venture. |
|
|
|
In July 2008, the Company reached an agreement in principal with YCFC to sell its 50% ownership
interest in YUFI to YCFC for $10.0 million, pending final negotiation and execution of
definitive agreements. The internal YCFC and external governmental approval process was
expected to take approximately two to three months. In the interim, the partners agreed that
YCFC would immediately take over operating control of YUFI. As a result, the Company lost its
ability to influence the operations of YUFI and therefore the Company
ceased recording its share of losses commencing in the first quarter of fiscal year 2009
in |
9
|
|
accordance with the authoritative guidance provided by Accounting Principles Board Opinion
18, The Equity Method of Accounting for Investments in Common Stock (APB 18). |
|
|
|
In December 2008, the Company renegotiated the proposed agreement to sell its interest in YUFI
to YCFC for $9.0 million, pending final approval by the appropriate authorities and execution of
definitive agreements and recorded an additional impairment charge of $1.5 million. See
Footnote 12-Impairment Charges. |
|
9. |
|
Income Taxes |
|
|
|
The Companys income tax provision for the quarter ended March 29, 2009 resulted in tax benefit
at an effective tax rate of 0.3% as compared to the quarter ended March 23, 2008, which resulted
in tax expense at an effective tax rate of 95.4%. The Companys income tax provision for the
year-to-date period ended March 29, 2009 resulted in tax expense at an effective tax rate of
5.9% compared to the year-to-date period ended March 23, 2008, which resulted in tax benefit at
an effective tax rate of 40.0%. The Companys effective tax rate for the quarter and
year-to-date period ended March 29, 2009 differed from the U.S. statutory rate primarily due to
an increase in valuation allowance related to losses in the U.S. and certain other foreign
countries and state income taxes. The Companys effective tax rate for the quarter ended March
23, 2008 differed from the U.S. statutory rate primarily due to foreign operations taxed at a
lower effective rate, stock based compensation, and an increase in the valuation allowance. The
Companys effective tax rate for the year-to-date period ended March 23, 2008 differed from the
U.S. statutory rate primarily due to foreign operations taxed at a lower effective rate, state
income taxes, and a decrease in the valuation allowance. |
|
|
|
Deferred income taxes have been provided for the temporary differences between financial
statement carrying amounts and the tax basis of existing assets and liabilities. The Company has
continued to record a valuation allowance against its net domestic deferred tax assets, and
certain foreign deferred tax assets related to net operating losses, as those net deferred tax
assets are more likely than not to be unrealizable for income tax purposes. The valuation
allowance increased by $13.1 million and $17.2 million in the quarter and year-to-date period
ended March 29, 2009, respectively, compared to an increase of $0.2 million and a decrease of
$6.7 million in the quarter and year-to-date period ended March 23, 2008, respectively. The net
increase in the valuation allowance for the quarter ended March 29, 2009 primarily consisted of
an increase of $7.0 million for net operating losses generated this quarter (federal and state),
and an increase of $6.1 million related to other temporary differences this quarter. The net
increase in the valuation allowance for the year-to-date period ended March 29, 2009 primarily
consisted of a $10.7 million increase for net operating losses generated year-to-date (federal
and state), and a $6.5 million increase related to other temporary differences. |
|
|
|
On June 25, 2007, the Company adopted Financial Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes
(FIN 48). During the third quarter ended March 29, 2009, the Company did not have an increase
or decrease in its FIN 48 liability. |
|
|
|
There was no change in the amount of interest and penalties during the quarter and year-to-date
period ended March 29, 2009 due to the Companys federal and state net operating loss carry
forwards. |
|
|
|
The Company is subject to income tax examinations for U.S. federal income taxes for fiscal years
2007 and 2008. The IRS recently concluded its exam for fiscal years 2003 through 2006. The
Company is also subject to income tax examinations for non-U.S. income taxes for tax years 2000
through 2008, and for state and local income taxes for fiscal years 2001 through 2008. |
10
10. |
|
Stock-Based Compensation |
|
|
|
During the second quarter of fiscal year 2008, the Compensation Committee (Committee) of the
Board of Directors (Board) authorized the issuance of 1,570,000 stock options from the 1999
Long-Term Incentive Plan of which 120,000 were issued to certain Board members and the remaining
options were issued to certain key employees. The stock options issued to key employees are
subject to a market condition which vests the options on the date that the closing price of the
Companys common stock shall have been at least $6.00 per share for thirty consecutive trading
days. The stock options issued to certain Board members are subject to a similar market
condition in that one half of each members options vest on the date that the closing price of
the Companys common stock shall have been at least $8.00 per share for thirty consecutive
trading days and the remaining one half vest on the date that the closing price of the Companys
common stock shall have been at least $10.00 per share for thirty consecutive trading days. The
Company used a Monte Carlo stock option model to estimate the fair value and the derived vesting
periods which range from 2.4 to 3.9 years. |
|
|
|
On October 29, 2008, the shareholders of the Company approved the 2008 Unifi, Inc. Long-Term
Incentive Plan (2008 Long-Term Incentive Plan). The 2008 Long-Term Incentive Plan authorized
the issuance of up to 6,000,000 shares of Common Stock pursuant to the grant or exercise of
stock options, including Incentive Stock Options (ISO), Non-Qualified Stock Options (NQSO)
and restricted stock, but not more than 3,000,000 shares may be issued as restricted stock.
Option awards are granted with an exercise price not less than the market price of the Companys
stock at the date of grant. |
|
|
|
During the second quarter of fiscal year 2009, the Committee of the Board authorized the
issuance of 280,000 stock options from the 2008 Long-Term Incentive Plan to certain key
employees. The stock options are subject to a market condition which vests the options on the
date that the closing price of the Companys common stock shall have been at least $6.00 per
share for thirty consecutive trading days. The exercise price is $4.16 per share. The Company
used a Monte Carlo stock option model to estimate the fair value of $2.49 per share and the
derived vesting period of 1.2 years. |
|
|
|
The Company incurred $0.4 million and $0.3 million in the third quarter of fiscal years
2009 and 2008, and $1.0 million and $0.7 million for the year-to-date periods, respectively, in
stock-based compensation charges which were recorded as selling, general and administrative
(SG&A) expenses with the offset to capital in excess of par value. |
|
|
|
The Company issued 1,368,300 shares of common stock during the 2009 fiscal year-to-date period
as a result of the exercise of an equivalent number of stock options for which it received
proceeds of $3.8 million. There were no stock options exercised during the third quarter of
fiscal year 2009. The Company issued 147,500 shares of common stock during the fiscal year
ended June 29, 2008 due to the exercise of stock options for which it received proceeds of $0.4
million. |
|
11. |
|
Assets Held for Sale |
|
|
|
As of June 29, 2008, the Company had assets held for sale related to the consolidation of its
polyester manufacturing capacity which included the remaining assets and structures at the
Kinston site which have a carrying value of $1.7 million and certain real property and related
assets located in Yadkinville, North Carolina which had a carrying value of $2.4 million.
During the first quarter of fiscal year 2009, the Company reclassified $0.4 million of these
Yadkinville assets back to a held and used status. During the second quarter of fiscal year
2009, the Company transferred $0.6 million of the Yadkinville assets held for sale to its
Brazilian subsidiary. |
|
|
|
On September 29, 2008, the Company entered into an agreement to sell the remaining Yadkinville
assets held for sale for $7.0 million. On December 19, 2008, the Company completed the sale
which resulted in net proceeds of $6.6 million and a net pre-tax gain of $5.2 million in the
second quarter of fiscal year 2009. |
11
|
|
The following table summarizes by category assets held for sale (amounts in thousands): |
|
|
|
|
|
|
|
|
|
|
|
March 29, |
|
|
June 29, |
|
|
|
2009 |
|
|
2008 |
|
Land and building |
|
|
|
|
|
|
1,378 |
|
Machinery and equipment |
|
|
1,700 |
|
|
|
2,746 |
|
|
|
|
|
|
|
|
|
|
$ |
1,700 |
|
|
$ |
4,124 |
|
|
|
|
|
|
|
|
12. |
|
Impairment Charges |
|
|
|
Write down of long-lived assets |
|
|
|
During the first quarter of fiscal year 2008, the Companys Brazilian polyester operation
continued the modernization plan for its facilities by abandoning four of its older machines and
replacing them with newer machines transferred from the Companys domestic polyester division.
As a result, the Company recognized $0.5 million in non-cash impairment charges on the older
machines. |
|
|
|
During the second quarter of fiscal year 2008, the Company evaluated the carrying value of the
remaining machinery and equipment at its Dillon, South Carolina facility and determined that a
$1.6 million non-cash impairment charge was required. |
|
|
|
In addition, the Company negotiated with a third party to sell the manufacturing facility
located in Kinston, North Carolina. As a result of these negotiations, management concluded
that the carrying value of the real estate exceeded its fair value. Accordingly, the Company
recorded $0.7 million in non-cash impairment charges in the second quarter of fiscal year 2008. |
|
|
|
Write down of investment of unconsolidated affiliates |
|
|
|
During the first quarter of fiscal year 2008, the Company performed a review of the fair value
of USTF as part of the negotiations related to the sale. The Company determined that the
carrying value exceeded its fair value and recorded a non-cash impairment charge of $4.5
million. The investment was sold in the second quarter of fiscal year 2008. |
|
|
|
During the second quarter of fiscal year 2009, the Company and YCFC renegotiated the proposed
agreement to sell the Companys interest in YUFI to YCFC from $10.0 million to $9.0 million,
pending final negotiation and execution of definitive agreements and the receipt of Chinese
regulatory approvals. As a result, the Company recorded an additional impairment charge of $1.5
million due to the decline in the value of its investment and other related assets. During the
fourth quarter of fiscal year 2009, the Company completed the sale of YUFI to YCFC with no
further financial impact. See Footnote 19-Subsequent Events for further discussion. |
|
|
|
Goodwill Impairment |
|
|
|
The Company accounts for its goodwill and other intangibles under the provisions of SFAS
No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 142 requires that these
assets be reviewed for impairment annually, unless specific circumstances indicate that a more
timely review is warranted. This impairment test involves estimates and judgments that are
critical in determining whether any impairment charge should be recorded and the amount of such
charge if an impairment loss is deemed to be necessary. In accordance with the provisions of
SFAS 142, the Company determined that its reportable segments were comprised of three reporting
units; nylon, domestic polyester, and non-domestic polyester. |
|
|
|
The Companys balance sheet at December 28, 2008 reflected $18.6 million of goodwill, all of
which related to the acquisition of Dillon Yarn Corporation (Dillon) in January, 2007. The
Company previously determined that all of this goodwill should be allocated to the domestic
polyester reporting unit. Based on a decline in its market capitalization during the third quarter of fiscal year
2009 and difficult market conditions, the Company determined that it was appropriate to
re-evaluate the carrying |
12
|
|
value of its goodwill during the quarter ended March 29, 2009. In
connection with this third quarter interim impairment analysis, the Company updated its cash
flow forecasts based upon the latest market intelligence, its discount rate and its market
capitalization values. The fair value of the domestic polyester reporting unit was determined
based upon a combination of a discounted cash flow analysis and a market approach. As a result
of the findings, the Company determined that the goodwill was impaired and recorded an
impairment charge of $18.6 million in the third quarter of fiscal year 2009. |
|
13. |
|
Severance and Restructuring Charges |
|
|
|
Severance |
|
|
|
In the first quarter of fiscal year 2008, the Company announced the closure of its polyester
facility in Kinston, North Carolina. The Kinston facility produced partially oriented yarn
(POY) for internal consumption and third party sales. The Company now purchases its commodity
POY needs from external suppliers for conversion in its texturing operations. The Company
continues to produce POY in its Yadkinville, North Carolina facility for specialty and premier
valued-added (PVA) yarns and certain other commodity yarns. During the first quarter of fiscal
year 2008, the Company recorded $0.8 million for severance related to its Kinston consolidation.
Approximately 231 employees, which included 31 salaried positions and 200 wage positions, were
affected as a result of the reorganization. The severance expense is included in the cost of
sales line item in the Consolidated Statements of Operations. |
|
|
|
In the second quarter of fiscal year 2008, the Company recorded an additional $0.4 million in
severance costs related to Kinston employees who were associated with providing site services.
These severance expenses are included in the cost of sales line item in the Consolidated
Statements of Operations. |
|
|
|
The Company recorded severance of $2.4 million for its former President and Chief Executive
Officer during the first quarter of fiscal year 2008 and $1.7 million for severance related to
its former Chief Financial Officer during the second quarter of fiscal year 2008. These
severance expenses are included in the selling, general and administrative expense line item in
the Consolidated Statements of Operations. |
|
|
|
On May 14, 2008, the Company announced the closure of its polyester facility located in
Staunton, Virginia and the transfer of all its production to its facility in Yadkinville, North
Carolina which was completed in November 2008. During the first quarter of fiscal year 2009,
the Company recorded $0.1 million for severance related to its Staunton consolidation.
Approximately 40 salaried and wage employees were affected by this reorganization. The
severance expenses are included in the cost of sales line item in the Consolidated Statements of
Operations. |
|
|
|
In the third quarter of fiscal year 2009, the Company reorganized, reducing its workforce due to
the economic downturn. Approximately 200 salaried and wage employees were affected by this
reorganization related to the Companys efforts to reduce costs. As a result, the Company
recorded $0.3 million in severance charges related to certain salaried corporate and
manufacturing support staff. The severance expenses are included in the restructuring expense
line item in the Consolidated Statements of Operations. |
|
|
|
Restructuring |
|
|
|
In the first quarter of fiscal year 2008, the Company recorded $1.5 million for restructuring
charges related to unfavorable Kinston contracts for obligations which extended beyond the date
of the facilitys closing. These charges were reduced by $0.5 million in the fourth quarter of
fiscal year 2008 as a result of favorable contract negotiations and settlements. See the
Severance discussion above for further details related to Kinston. |
|
|
|
In fiscal year 2007, the Company recorded a $2.9 million unfavorable contract reserve
related to a portion of the sales and service contract which it entered into with Dillon for
continued support of the Dillon business through December 2008. A portion of the sales and
service contract was deemed to be
unfavorable, after the Company announced its plan to
consolidate the Dillon capacity into its other facilities. |
13
|
|
Restructuring charges are included in the restructuring expense line item in the
Consolidated Statement of operations for all periods presented. |
|
|
|
The table below summarizes changes to the accrued severance and accrued restructuring accounts
for the year-to-date period ended March 29, 2009 (amounts in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
June 29, 2008 |
|
Charges |
|
Adjustments |
|
Amounts Used |
|
March 29, 2009 |
Accrued severance |
|
$ |
3,668 |
|
|
|
371 |
|
|
|
5 |
|
|
|
(1,886 |
) |
|
$ |
2,158 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued restructuring |
|
$ |
1,414 |
|
|
|
|
|
|
|
245 |
|
|
|
(1,040 |
) |
|
$ |
619 |
|
|
|
|
|
|
(1) |
|
As of March 29, 2009, the Company classified $0.6 million of accrued executive severance as
long term. |
14. |
|
Discontinued Operations |
|
|
|
The manufacturing facilities in Ireland ceased operations on October 31, 2004. On March 31,
2009, the Company completed the final accounting for the closure of the subsidiary and filed the
appropriate dissolution papers with the Irish government. The Company recorded losses of $45
thousand and $0.1 million for the third quarter of fiscal years 2009 and 2008, respectively, and
income of $0.1 million and $22 thousand for the year-to-date periods, respectively. |
|
15. |
|
Derivative Financial Instruments |
|
|
|
The Company accounts for derivative contracts and hedging activities under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities which requires all derivatives to
be recorded on the balance sheet at fair value. If the derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of derivatives are either offset against the
change in fair value of the hedged assets, liabilities, or firm commitments through earnings or
are recorded in other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivatives change in fair value is immediately recognized in
earnings. The Company does not enter into derivative financial instruments for trading purposes
nor is it a party to any leveraged financial instruments. |
|
|
|
The Company conducts its business in various foreign currencies. As a result, it is subject to
the transaction exposure that arises from foreign exchange rate movements between the dates that
foreign currency transactions are recorded and the dates they are consummated. The Company
utilizes some natural hedging to mitigate these transaction exposures. The Company primarily
enters into foreign currency forward contracts for the purchase and sale of European, North
American and Brazilian currencies to hedge balance sheet and income statement currency
exposures. These contracts are principally entered into for the purchase of inventory and
equipment and the sale of Company products into export markets. Counter-parties for these
instruments are major financial institutions. |
|
|
|
Currency forward contracts are used to hedge exposure for sales in foreign currencies based on
specific sales orders with customers or for anticipated sales activity for a future time period.
Generally, 50% to 75% of the sales value of these orders is covered by forward contracts.
Maturity dates of the forward contracts are intended to match anticipated receivable
collections. The Company marks the outstanding accounts receivable and forward contracts to
market at month end and any realized and unrealized gains or losses are
recorded as other income and expense. The Company also enters currency forward contracts for
committed or anticipated equipment and inventory purchases. Generally, 50% of the asset cost is
covered by forward contracts although 100% of the asset cost may be covered by contracts in
certain instances. Forward contracts are matched with the anticipated date of delivery of the
assets and gains and losses are recorded |
14
|
|
as a component of the asset cost for purchase
transactions when the Company is firmly committed. The latest maturity for all outstanding
purchase and sales foreign currency forward contracts are August 2009 and July 2009,
respectively. |
The dollar equivalent of these forward currency contracts and their related fair values are
detailed below (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 29, |
|
|
June 29, |
|
|
|
2009 |
|
|
2008 |
|
Foreign currency purchase contracts: |
|
|
|
|
|
|
|
|
Notional amount |
|
$ |
883 |
|
|
$ |
492 |
|
Fair value |
|
|
885 |
|
|
|
499 |
|
|
|
|
|
|
|
|
Net (gain) loss |
|
$ |
(2 |
) |
|
$ |
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency sales contracts: |
|
|
|
|
|
|
|
|
Notional amount |
|
$ |
656 |
|
|
$ |
620 |
|
Fair value |
|
|
691 |
|
|
|
642 |
|
|
|
|
|
|
|
|
Net gain (loss) |
|
$ |
(35 |
) |
|
$ |
(22 |
) |
|
|
|
|
|
|
|
|
|
For the quarters ended March 29, 2009 and March 23, 2008, the total impact of foreign currency
related items on the Condensed Consolidated Statements of Operations, including transactions
that were hedged and those that were not hedged, resulted in a pre-tax profit of $0.1 million
and $0.2 million, respectively. For the year-to-date periods ended March 29, 2009 and March 23,
2008, the total impact of foreign currency related items resulted in a pre-tax profit of $23
thousand and a pre-tax loss of $0.3 million, respectively. These amounts are included in the
other operating (income) expense, net in the Consolidated Statements of Operations. |
|
16. |
|
Contingencies |
|
|
|
On September 30, 2004, the Company completed its acquisition of the polyester filament
manufacturing assets located at Kinston from INVISTA S.a.r.l. (INVISTA). The land for the
Kinston site was leased pursuant to a 99 year ground lease (Ground Lease) with E.I. DuPont de
Nemours (DuPont). Since 1993, DuPont has been investigating and cleaning up the Kinston site
under the supervision of the United States Environmental Protection Agency (EPA) and the North
Carolina Department of Environment and Natural Resources (DENR) pursuant to the Resource
Conservation and Recovery Act Corrective Action program. The Corrective Action program requires
DuPont to identify all potential areas of environmental concern (AOCs), assess the extent of
containment at the identified AOCs and clean it up to comply with applicable regulatory
standards. Under the terms of the Ground Lease, upon completion by DuPont of required remedial
action, ownership of the Kinston site was to pass to the Company and after seven years of
sliding scale shared responsibility with DuPont, the Company would have had sole responsibility
for future remediation requirements, if any. Effective March 20, 2008, the Company entered into
a Lease Termination Agreement associated with conveyance of certain assets at Kinston to DuPont.
This agreement terminated the Ground Lease and relieved the Company of any future
responsibility for environmental remediation, other than participation with DuPont, if so called
upon, with regard to the Companys period of operation of the Kinston site. However, the
Company continues to own a satellite service facility acquired in the INVISTA transaction that
has contamination from DuPonts operations and is monitored by DENR. This site has been
remediated by DuPont and DuPont has received authority from DENR to discontinue remediation,
other than natural attenuation. DuPonts duty to monitor and report to DENR will be transferred
to the Company in the future, at which time DuPont must pay the Company for seven years
of monitoring and reporting costs and the Company will assume responsibility for any future
remediation and monitoring of the site. At this time, the Company has no basis to determine if
and when it will have any responsibility or obligation with respect to the AOCs or the extent of
any potential liability for the same. |
15
17. |
|
Related Party Transaction |
|
|
|
In fiscal year 2007, the Company purchased the polyester and nylon texturing operations of
Dillon (the Transaction). In connection with the Transaction, the Company and Dillon entered
into a Sales and Services Agreement for a term of two years from January 1, 2007, pursuant to
which the Company agreed to pay Dillon an aggregate amount of $6.0 million in exchange for
certain polyester segment sales and Dillon transitional services to be provided by Dillons
sales staff and executive management. The Company announced on April 26, 2007 its plan to close
its Dillon polyester facility. As a result of this announcement, the Company evaluated all
contract obligations associated with the facility and determined that this contract obligation
partially included services to be rendered specifically to that facility and therefore the
Company would not receive any future economic benefit from that portion of the contract once the
facility was closed. As a result, the Company recorded a $2.9 million restructuring charge
related to that portion of the contract obligation. The contract termination date was December
2008. The Company recorded nil and $0.3 million for the third quarter of fiscal years 2009 and
2008 and $0.5 million and $0.8 million for the year-to-date periods, respectively, related to
this contract. |
|
|
|
On December 1, 2008, the Company entered into an agreement to extend the polyester services
portion of the Sales and Service agreement for a term of one year effective January 1, 2009
pursuant to which the Company will pay Dillon an aggregate amount of $1.7 million. The Company
recognized $0.4 million in expenses related to this contract in the March 2009 quarter. Mr.
Stephen Wener is the President and Chief Executive Officer of Dillon and is a director of the
Company. |
|
|
|
In fiscal year 2008, Unifi Manufacturing, Inc. (UMI), a wholly owned subsidiary of the
Company, sold certain real and personal property held by UMI located in Dillon, South Carolina,
to 1019 Realty LLC (the Buyer) for a sale price of $4.0 million. The real and personal
property being sold by UMI was acquired by the Company pursuant to the Transaction. Mr. Wener,
is a manager of the Buyer, and has a 13.5% ownership interest in and is the sole manager of an
entity which owns 50% of the Buyer. |
|
18. |
|
Segment Disclosures |
|
|
|
The following is the Companys selected segment information for the
quarters and nine-month periods ended March 29, 2009 and March 23,
2008 (amounts in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
Nylon |
|
Total |
Quarter ended March 29, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
85,480 |
|
|
$ |
33,614 |
|
|
$ |
119,094 |
|
Depreciation and amortization |
|
|
5,407 |
|
|
|
1,542 |
|
|
|
6,949 |
|
Segment operating loss |
|
|
(26,823 |
) |
|
|
(1,185 |
) |
|
|
(28,008 |
) |
Total assets |
|
|
310,036 |
|
|
|
80,141 |
|
|
|
390,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 23, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
126,247 |
|
|
$ |
43,589 |
|
|
$ |
169,836 |
|
Intersegment net sales |
|
|
1,735 |
|
|
|
491 |
|
|
|
2,226 |
|
Depreciation and amortization |
|
|
6,298 |
|
|
|
3,291 |
|
|
|
9,589 |
|
Segment operating income |
|
|
3,072 |
|
|
|
2,479 |
|
|
|
5,551 |
|
Total assets |
|
|
380,948 |
|
|
|
96,569 |
|
|
|
477,517 |
|
16
|
|
The following table provides reconciliations from segment data to consolidated reporting data
(amounts in thousands): |
|
|
|
|
|
|
|
|
|
|
|
For the Quarters Ended |
|
|
|
March 29, |
|
|
March 23, |
|
|
|
2009 |
|
|
2008 |
|
Depreciation and amortization: |
|
|
|
|
|
|
|
|
Depreciation
and amortization of specific reportable segment assets |
|
$ |
6,949 |
|
|
$ |
9,589 |
|
Depreciation included in other operating (income) expense, net |
|
|
35 |
|
|
|
|
|
Amortization included in interest expense, net |
|
|
290 |
|
|
|
291 |
|
|
|
|
|
|
|
|
Consolidated depreciation and amortization |
|
$ |
7,274 |
|
|
$ |
9,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of segment operating income (loss) to
income (loss) from continuing operations before income taxes: |
|
|
|
|
|
|
|
|
Reportable segments operating income (loss) |
|
$ |
(28,008 |
) |
|
$ |
5,551 |
|
Provision for bad debts |
|
|
735 |
|
|
|
87 |
|
Other operating (income) expense, net |
|
|
(89 |
) |
|
|
(897 |
) |
Interest expense, net |
|
|
5,223 |
|
|
|
5,657 |
|
Equity in earnings of unconsolidated affiliates |
|
|
(825 |
) |
|
|
(757 |
) |
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
$ |
(33,052 |
) |
|
$ |
1,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
Nylon |
|
Total |
Nine-Months ended March 29, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
302,443 |
|
|
$ |
111,387 |
|
|
$ |
413,830 |
|
Intersegment net sales |
|
|
|
|
|
|
71 |
|
|
|
71 |
|
Depreciation and amortization |
|
|
18,379 |
|
|
|
5,889 |
|
|
|
24,268 |
|
Segment operating income (loss) |
|
|
(33,750 |
) |
|
|
1,630 |
|
|
|
(32,120 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-Months ended March 23, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
390,743 |
|
|
$ |
132,998 |
|
|
$ |
523,741 |
|
Intersegment net sales |
|
|
4,955 |
|
|
|
2,011 |
|
|
|
6,966 |
|
Depreciation and amortization |
|
|
20,062 |
|
|
|
10,120 |
|
|
|
30,182 |
|
Segment operating income (loss) |
|
|
(15,147 |
) |
|
|
3,932 |
|
|
|
(11,215 |
) |
|
|
The following table represents reconciliations from segment data to consolidated reporting data
(amounts in thousands): |
|
|
|
|
|
|
|
|
|
|
|
For the Nine-Months Ended |
|
|
|
March 29, |
|
|
March 23, |
|
|
|
2009 |
|
|
2008 |
|
Depreciation and amortization: |
|
|
|
|
|
|
|
|
Depreciation
and amortization of specific reportable segment assets |
|
$ |
24,268 |
|
|
$ |
30,182 |
|
Depreciation included in other operating (income) expense, net |
|
|
107 |
|
|
|
|
|
Amortization included in interest expense, net |
|
|
868 |
|
|
|
872 |
|
|
|
|
|
|
|
|
Consolidated depreciation and amortization |
|
$ |
25,243 |
|
|
$ |
31,054 |
|
|
|
|
|
|
|
|
|
Reconciliation of segment operating loss to
loss from continuing operations before income taxes: |
|
|
|
|
|
|
|
|
Reportable segments operating loss |
|
$ |
(32,120 |
) |
|
$ |
(11,215 |
) |
Provision for bad debts |
|
|
1,794 |
|
|
|
152 |
|
Other operating (income) expense, net |
|
|
(5,862 |
) |
|
|
(4,087 |
) |
Interest expense, net |
|
|
15,343 |
|
|
|
17,367 |
|
Equity in earnings of unconsolidated affiliates |
|
|
(4,469 |
) |
|
|
(914 |
) |
Write down of investment in unconsolidated affiliate |
|
|
1,483 |
|
|
|
4,505 |
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes |
|
$ |
(40,409 |
) |
|
$ |
(28,238 |
) |
|
|
|
|
|
|
|
17
|
|
For purposes of internal management reporting, segment operating loss represents segment net
sales less cost of sales, segment restructuring charges, segment impairments of long-lived
assets, goodwill impairments, and allocated selling, general and administrative expenses.
Certain non-segment manufacturing and unallocated selling, general and administrative costs are
allocated to the operating segments based on activity drivers relevant to the respective costs.
In the prior year, consolidated intersegment sales were recorded at market. Beginning in fiscal
year 2009, the Company changed its domestic intersegment transfer pricing of inventory from a
market value approach to a cost approach. Using the new methodology, no intersegment sales are
recorded for domestic transfers of inventory. The amounts of domestic intersegment sales that
were included in the prior third quarter and year-to-date financial statements totaled $1.7
million and $5.0 million, respectively, for domestic polyester and $0.5 million and $2.0
million, respectively, for domestic nylon. The remaining intersegment sales relate to sales to
the Companys foreign subsidiaries which are still recorded at market. |
|
|
|
The primary differences between the segmented financial information of the operating segments,
as reported to management and the Companys consolidated reporting, relate to intersegment sales
of yarn and the associated fiber costs, the provision for bad debts, other operating (income)
expense, net and equity in earnings of unconsolidated affiliates and related impairments. |
|
|
|
Segment operating income (loss) excluded the provision (recovery) for bad debts of $0.7 million
and $0.1 million for the current and prior year third quarter periods, respectively, and $1.8
million and $0.2 million for the year-to-date periods, respectively. |
|
|
|
The total assets for the polyester segment decreased from $387.0 million at June 29, 2008 to
$310.0 million at March 29, 2009 primarily due to decreases in accounts receivable, goodwill,
inventory, property, plant, and equipment, long-term restricted cash, short-term restricted
cash, other non-current assets, and deferred taxes of $22.1 million, $18.6 million, $19.0
million, $13.2 million, $6.4 million, $3.5 million, $1.2 million, and $0.9 million,
respectively. These decreases were offset by increases in other current assets and cash of $7.1
million and $0.8 million, respectively. The changes included above in the polyester segment
assets include an overall $36.4 million reduction due to an increase in the Brazilian currency
exchange rate. The total assets for the nylon segment decreased from $92.5 million at June 29,
2008 to $80.1 million at March 29, 2009 due primarily to decreases in accounts receivable,
property, plant, and equipment, inventory and other current assets of $6.7 million, $5.0
million, $1.9 million, and $0.1 million, respectively. These decreases were offset by increases
in other non-current assets and cash of $0.9 million and $0.4 million, respectively. |
|
19. |
|
Subsequent Events |
|
|
|
During the fourth quarter of fiscal year 2009, the Company announced that it had closed on the
sale and received $9 million in proceeds related to its investment in YUFI. The Company will
continue to service customers in Asia through Unifi Textiles Suzhou Co., Ltd. (UTSC), a
wholly-owned subsidiary based in Suzhou, China, that is dedicated to the development, sales and
service of PVA yarns. UTSC is located in the Gold River Center (room 1101), No. 88 Shishan
Road, Suzhou New District, Suzhou, which is in Jiangsu Province. |
|
|
|
On March 2, 2009, the Company announced that it had commenced a cash tender offer for up to $8.8
million aggregate principal amount of its 11.5% senior secured notes due in 2014. On April 3,
2009, the Company successfully repurchased $8.8 million of the notes at par value. |
|
20. |
|
Condensed Consolidated Guarantor and Non-Guarantor Financial Statements |
|
|
|
The guarantor subsidiaries presented below represent the Companys subsidiaries that are subject
to the terms and conditions outlined in the indenture governing the Companys issuance of the
notes due in 2014 (the 2014 notes) and the guarantees, jointly and severally, on a senior
secured basis. The non-guarantor subsidiaries presented below represent the foreign subsidiaries
which do not guarantee the notes. Each subsidiary guarantor is 100% owned, directly or
indirectly, by Unifi, Inc. and all guarantees are full and unconditional.
Supplemental financial information for the Company and its guarantor subsidiaries and
non-guarantor subsidiaries of the 2014 notes is presented below. |
18
UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
Balance Sheet Information as of March 29, 2009 (amounts in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
11,110 |
|
|
$ |
(4,773 |
) |
|
$ |
17,207 |
|
|
$ |
¾ |
|
|
$ |
23,544 |
|
Receivables, net |
|
|
41 |
|
|
|
53,840 |
|
|
|
17,617 |
|
|
|
¾ |
|
|
|
71,498 |
|
Inventories |
|
|
¾ |
|
|
|
80,931 |
|
|
|
20,652 |
|
|
|
¾ |
|
|
|
101,583 |
|
Deferred income taxes |
|
|
¾ |
|
|
|
¾ |
|
|
|
1,474 |
|
|
|
¾ |
|
|
|
1,474 |
|
Assets held for sale |
|
|
¾ |
|
|
|
1,700 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
1,700 |
|
Investment in unconsolidated affiliate |
|
|
¾ |
|
|
|
¾ |
|
|
|
9,000 |
|
|
|
¾ |
|
|
|
9,000 |
|
Restricted cash |
|
|
¾ |
|
|
|
8,809 |
|
|
|
5,776 |
|
|
|
¾ |
|
|
|
14,585 |
|
Other current assets |
|
|
73 |
|
|
|
1,739 |
|
|
|
3,134 |
|
|
|
¾ |
|
|
|
4,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
11,224 |
|
|
|
142,246 |
|
|
|
74,860 |
|
|
|
¾ |
|
|
|
228,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
11,336 |
|
|
|
700,675 |
|
|
|
58,483 |
|
|
|
¾ |
|
|
|
770,494 |
|
Less accumulated depreciation |
|
|
(1,829 |
) |
|
|
(567,275 |
) |
|
|
(42,088 |
) |
|
|
¾ |
|
|
|
(611,192 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,507 |
|
|
|
133,400 |
|
|
|
16,395 |
|
|
|
¾ |
|
|
|
159,302 |
|
Investments in unconsolidated affiliates |
|
|
¾ |
|
|
|
58,589 |
|
|
|
3,478 |
|
|
|
¾ |
|
|
|
62,067 |
|
Restricted cash |
|
|
¾ |
|
|
|
¾ |
|
|
|
1,394 |
|
|
|
¾ |
|
|
|
1,394 |
|
Investments in consolidated subsidiaries |
|
|
375,606 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
(375,606 |
) |
|
|
¾ |
|
Intangible assets, net |
|
|
¾ |
|
|
|
18,465 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
18,465 |
|
Other noncurrent assets |
|
|
43,688 |
|
|
|
(27,676 |
) |
|
|
(2,275 |
) |
|
|
¾ |
|
|
|
13,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
440,025 |
|
|
$ |
325,024 |
|
|
$ |
93,852 |
|
|
$ |
(375,606 |
) |
|
$ |
483,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other |
|
$ |
180 |
|
|
$ |
19,501 |
|
|
$ |
5,223 |
|
|
$ |
¾ |
|
|
$ |
24,904 |
|
Accrued expenses |
|
|
8,604 |
|
|
|
9,648 |
|
|
|
2,109 |
|
|
|
¾ |
|
|
|
20,361 |
|
Income taxes payable |
|
|
3,139 |
|
|
|
(3,199 |
) |
|
|
67 |
|
|
|
¾ |
|
|
|
7 |
|
Current maturities of long-term debt and other current
liabilities |
|
|
¾ |
|
|
|
343 |
|
|
|
5,776 |
|
|
|
¾ |
|
|
|
6,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
11,923 |
|
|
|
26,293 |
|
|
|
13,175 |
|
|
|
¾ |
|
|
|
51,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and other liabilities |
|
|
190,000 |
|
|
|
1,995 |
|
|
|
1,394 |
|
|
|
¾ |
|
|
|
193,389 |
|
Deferred income taxes |
|
|
¾ |
|
|
|
¾ |
|
|
|
413 |
|
|
|
¾ |
|
|
|
413 |
|
Shareholders/ invested equity |
|
|
238,102 |
|
|
|
296,736 |
|
|
|
78,870 |
|
|
|
(375,606 |
) |
|
|
238,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
440,025 |
|
|
$ |
325,024 |
|
|
$ |
93,852 |
|
|
$ |
(375,606 |
) |
|
$ |
483,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Balance Sheet Information as of June 29, 2008 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
689 |
|
|
$ |
3,377 |
|
|
$ |
16,182 |
|
|
$ |
¾ |
|
|
$ |
20,248 |
|
Receivables, net |
|
|
66 |
|
|
|
82,040 |
|
|
|
21,166 |
|
|
|
¾ |
|
|
|
103,272 |
|
Inventories |
|
|
¾ |
|
|
|
92,581 |
|
|
|
30,309 |
|
|
|
¾ |
|
|
|
122,890 |
|
Deferred income taxes |
|
|
¾ |
|
|
|
¾ |
|
|
|
2,357 |
|
|
|
¾ |
|
|
|
2,357 |
|
Assets held for sale |
|
|
¾ |
|
|
|
4,124 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
4,124 |
|
Restricted cash |
|
|
¾ |
|
|
|
¾ |
|
|
|
9,314 |
|
|
|
¾ |
|
|
|
9,314 |
|
Other current assets |
|
|
26 |
|
|
|
733 |
|
|
|
2,934 |
|
|
|
¾ |
|
|
|
3,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
781 |
|
|
|
182,855 |
|
|
|
82,262 |
|
|
|
¾ |
|
|
|
265,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
11,273 |
|
|
|
765,710 |
|
|
|
78,341 |
|
|
|
¾ |
|
|
|
855,324 |
|
Less accumulated depreciation |
|
|
(1,616 |
) |
|
|
(623,262 |
) |
|
|
(53,147 |
) |
|
|
¾ |
|
|
|
(678,025 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,657 |
|
|
|
142,448 |
|
|
|
25,194 |
|
|
|
¾ |
|
|
|
177,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in unconsolidated affiliates |
|
|
¾ |
|
|
|
60,853 |
|
|
|
9,709 |
|
|
|
¾ |
|
|
|
70,562 |
|
Restricted cash |
|
|
¾ |
|
|
|
18,246 |
|
|
|
7,802 |
|
|
|
¾ |
|
|
|
26,048 |
|
Investments in consolidated subsidiaries |
|
|
417,503 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
(417,503 |
) |
|
|
¾ |
|
Intangible assets, net |
|
|
¾ |
|
|
|
38,965 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
38,965 |
|
Other noncurrent assets |
|
|
74,271 |
|
|
|
(60,879 |
) |
|
|
(633 |
) |
|
|
¾ |
|
|
|
12,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
502,212 |
|
|
$ |
382,488 |
|
|
$ |
124,334 |
|
|
$ |
(417,503 |
) |
|
$ |
591,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other |
|
$ |
172 |
|
|
$ |
39,328 |
|
|
$ |
5,053 |
|
|
$ |
¾ |
|
|
$ |
44,553 |
|
Accrued expenses |
|
|
3,371 |
|
|
|
18,011 |
|
|
|
4,149 |
|
|
|
¾ |
|
|
|
25,531 |
|
Income taxes payable |
|
|
¾ |
|
|
|
¾ |
|
|
|
681 |
|
|
|
¾ |
|
|
|
681 |
|
Current maturities of long-term debt and other current
liabilities |
|
|
¾ |
|
|
|
491 |
|
|
|
9,314 |
|
|
|
¾ |
|
|
|
9,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
3,543 |
|
|
|
57,830 |
|
|
|
19,197 |
|
|
|
¾ |
|
|
|
80,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and other liabilities |
|
|
193,000 |
|
|
|
3,563 |
|
|
|
7,803 |
|
|
|
¾ |
|
|
|
204,366 |
|
Deferred income taxes |
|
|
¾ |
|
|
|
¾ |
|
|
|
926 |
|
|
|
¾ |
|
|
|
926 |
|
Shareholders/ invested equity |
|
|
305,669 |
|
|
|
321,095 |
|
|
|
96,408 |
|
|
|
(417,503 |
) |
|
|
305,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
502,212 |
|
|
$ |
382,488 |
|
|
$ |
124,334 |
|
|
$ |
(417,503 |
) |
|
$ |
591,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
Statement of Operations Information for the Fiscal Quarter Ended March 29, 2009 (amounts in
thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Summary of Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
¾ |
|
|
$ |
96,238 |
|
|
$ |
22,885 |
|
|
$ |
(29 |
) |
|
$ |
119,094 |
|
Cost of sales |
|
|
¾ |
|
|
|
96,048 |
|
|
|
22,424 |
|
|
|
250 |
|
|
|
118,722 |
|
Restructuring charges |
|
|
¾ |
|
|
|
293 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
293 |
|
Equity in subsidiaries |
|
|
23,188 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
(23,188 |
) |
|
|
¾ |
|
Goodwill impairment |
|
|
¾ |
|
|
|
18,580 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
18,580 |
|
Selling, general and administrative expenses |
|
|
23 |
|
|
|
7,686 |
|
|
|
1,801 |
|
|
|
(3 |
) |
|
|
9,507 |
|
Provision for bad debts |
|
|
¾ |
|
|
|
577 |
|
|
|
158 |
|
|
|
¾ |
|
|
|
735 |
|
Other operating (income) expense, net |
|
|
(31 |
) |
|
|
147 |
|
|
|
(205 |
) |
|
|
¾ |
|
|
|
(89 |
) |
Non-operating (income) expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
(51 |
) |
|
|
¾ |
|
|
|
(605 |
) |
|
|
¾ |
|
|
|
(656 |
) |
Interest expense |
|
|
5,924 |
|
|
|
23 |
|
|
|
(68 |
) |
|
|
¾ |
|
|
|
5,879 |
|
Equity in (earnings) losses of unconsolidated affiliates |
|
|
¾ |
|
|
|
(1,342 |
) |
|
|
312 |
|
|
|
205 |
|
|
|
(825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income
taxes |
|
|
(29,053 |
) |
|
|
(25,774 |
) |
|
|
(932 |
) |
|
|
22,707 |
|
|
|
(33,052 |
) |
Provision (benefit) for income taxes |
|
|
3,943 |
|
|
|
(3,964 |
) |
|
|
(80 |
) |
|
|
¾ |
|
|
|
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(32,996 |
) |
|
|
(21,810 |
) |
|
|
(852 |
) |
|
|
22,707 |
|
|
|
(32,951 |
) |
Loss from discontinued operations, net of tax |
|
|
¾ |
|
|
|
¾ |
|
|
|
(45 |
) |
|
|
¾ |
|
|
|
(45 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(32,996 |
) |
|
$ |
(21,810 |
) |
|
$ |
(897 |
) |
|
$ |
22,707 |
|
|
$ |
(32,996 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
Statement of Operations Information for the Fiscal Quarter Ended March 23, 2008 (amounts in
thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Summary of Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
¾ |
|
|
$ |
137,176 |
|
|
$ |
33,428 |
|
|
$ |
(768 |
) |
|
$ |
169,836 |
|
Cost of sales |
|
|
¾ |
|
|
|
127,829 |
|
|
|
29,391 |
|
|
|
(816 |
) |
|
|
156,404 |
|
Restructuring recoveries |
|
|
¾ |
|
|
|
(2,199 |
) |
|
|
¾ |
|
|
|
¾ |
|
|
|
(2,199 |
) |
Equity in subsidiaries |
|
|
(10,290 |
) |
|
|
¾ |
|
|
|
¾ |
|
|
|
10,290 |
|
|
|
¾ |
|
Selling, general and administrative expenses |
|
|
¾ |
|
|
|
8,509 |
|
|
|
1,863 |
|
|
|
(292 |
) |
|
|
10,080 |
|
Provision (recovery) for bad debts |
|
|
¾ |
|
|
|
98 |
|
|
|
(11 |
) |
|
|
¾ |
|
|
|
87 |
|
Other operating (income) expense, net |
|
|
6,055 |
|
|
|
(6,499 |
) |
|
|
(243 |
) |
|
|
(210 |
) |
|
|
(897 |
) |
Non-operating (income) expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
(229 |
) |
|
|
(1 |
) |
|
|
(421 |
) |
|
|
¾ |
|
|
|
(651 |
) |
Interest expense |
|
|
6,176 |
|
|
|
108 |
|
|
|
24 |
|
|
|
¾ |
|
|
|
6,308 |
|
Equity in (earnings) losses of unconsolidated affiliates |
|
|
¾ |
|
|
|
(2,933 |
) |
|
|
2,226 |
|
|
|
(50 |
) |
|
|
(757 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income
taxes |
|
|
(1,712 |
) |
|
|
12,264 |
|
|
|
599 |
|
|
|
(9,690 |
) |
|
|
1,461 |
|
Provision (benefit) for income taxes |
|
|
(1,724 |
) |
|
|
1,977 |
|
|
|
1,141 |
|
|
|
¾ |
|
|
|
1,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
12 |
|
|
|
10,287 |
|
|
|
(542 |
) |
|
|
(9,690 |
) |
|
|
67 |
|
Loss from discontinued operations, net of tax |
|
|
¾ |
|
|
|
¾ |
|
|
|
(55 |
) |
|
|
¾ |
|
|
|
(55 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
12 |
|
|
$ |
10,287 |
|
|
$ |
(597 |
) |
|
$ |
(9,690 |
) |
|
$ |
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
Statement of Operations Information for the Nine-Months Ended March 29, 2009 (amounts in
thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Summary of Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
¾ |
|
|
$ |
329,252 |
|
|
$ |
85,138 |
|
|
$ |
(560 |
) |
|
$ |
413,830 |
|
Cost of sales |
|
|
¾ |
|
|
|
322,283 |
|
|
|
75,609 |
|
|
|
(171 |
) |
|
|
397,721 |
|
Restructuring charges |
|
|
¾ |
|
|
|
293 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
293 |
|
Equity in subsidiaries |
|
|
21,938 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
(21,938 |
) |
|
|
¾ |
|
Goodwill impairment |
|
|
¾ |
|
|
|
18,580 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
18,580 |
|
Selling, general and administrative expenses |
|
|
213 |
|
|
|
23,925 |
|
|
|
5,374 |
|
|
|
(156 |
) |
|
|
29,356 |
|
Provision for bad debts |
|
|
¾ |
|
|
|
1,651 |
|
|
|
143 |
|
|
|
¾ |
|
|
|
1,794 |
|
Other operating (income) expense, net |
|
|
(46 |
) |
|
|
(5,075 |
) |
|
|
(566 |
) |
|
|
(175 |
) |
|
|
(5,862 |
) |
Non-operating (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
(97 |
) |
|
|
(48 |
) |
|
|
(2,104 |
) |
|
|
¾ |
|
|
|
(2,249 |
) |
Interest expense |
|
|
17,569 |
|
|
|
85 |
|
|
|
(62 |
) |
|
|
¾ |
|
|
|
17,592 |
|
Equity in (earnings) losses of unconsolidated affiliates |
|
|
¾ |
|
|
|
(5,403 |
) |
|
|
1,518 |
|
|
|
(584 |
) |
|
|
(4,469 |
) |
Write down of investment in unconsolidated affiliate |
|
|
¾ |
|
|
|
483 |
|
|
|
1,000 |
|
|
|
¾ |
|
|
|
1,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income
taxes |
|
|
(39,577 |
) |
|
|
(27,522 |
) |
|
|
4,226 |
|
|
|
22,464 |
|
|
|
(40,409 |
) |
Provision (benefit) for income taxes |
|
|
3,163 |
|
|
|
(3,162 |
) |
|
|
2,397 |
|
|
|
¾ |
|
|
|
2,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(42,740 |
) |
|
|
(24,360 |
) |
|
|
1,829 |
|
|
|
22,464 |
|
|
|
(42,807 |
) |
Income from discontinued operations, net of tax |
|
|
¾ |
|
|
|
¾ |
|
|
|
67 |
|
|
|
¾ |
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(42,740 |
) |
|
$ |
(24,360 |
) |
|
$ |
1,896 |
|
|
$ |
22,464 |
|
|
$ |
(42,740 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
Statement of Operations Information for the Nine-Months Ended March 23, 2008 (amounts in
thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Summary of Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
¾ |
|
|
$ |
427,406 |
|
|
$ |
98,004 |
|
|
$ |
(1,669 |
) |
|
$ |
523,741 |
|
Cost of sales |
|
|
¾ |
|
|
|
405,700 |
|
|
|
86,810 |
|
|
|
(1,514 |
) |
|
|
490,996 |
|
Restructuring charges, net |
|
|
¾ |
|
|
|
4,638 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
4,638 |
|
Write down of long-lived assets |
|
|
¾ |
|
|
|
2,247 |
|
|
|
533 |
|
|
|
¾ |
|
|
|
2,780 |
|
Equity in subsidiaries |
|
|
(6,241 |
) |
|
|
¾ |
|
|
|
¾ |
|
|
|
6,241 |
|
|
|
¾ |
|
Selling, general and administrative expenses |
|
|
¾ |
|
|
|
31,385 |
|
|
|
5,610 |
|
|
|
(453 |
) |
|
|
36,542 |
|
Provision for bad debts |
|
|
¾ |
|
|
|
145 |
|
|
|
7 |
|
|
|
¾ |
|
|
|
152 |
|
Other operating (income) expense, net |
|
|
(6,698 |
) |
|
|
2,404 |
|
|
|
173 |
|
|
|
34 |
|
|
|
(4,087 |
) |
Non-operating (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
(565 |
) |
|
|
(137 |
) |
|
|
(1,529 |
) |
|
|
¾ |
|
|
|
(2,231 |
) |
Interest expense |
|
|
19,054 |
|
|
|
423 |
|
|
|
121 |
|
|
|
¾ |
|
|
|
19,598 |
|
Equity in (earnings) losses of unconsolidated affiliates |
|
|
¾ |
|
|
|
(5,184 |
) |
|
|
4,692 |
|
|
|
(422 |
) |
|
|
(914 |
) |
Write down of investment in unconsolidated affiliate |
|
|
¾ |
|
|
|
4,505 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
4,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income
taxes |
|
|
(5,550 |
) |
|
|
(18,720 |
) |
|
|
1,587 |
|
|
|
(5,555 |
) |
|
|
(28,238 |
) |
Provision (benefit) for income taxes |
|
|
11,372 |
|
|
|
(24,928 |
) |
|
|
2,262 |
|
|
|
¾ |
|
|
|
(11,294 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(16,922 |
) |
|
|
6,208 |
|
|
|
(675 |
) |
|
|
(5,555 |
) |
|
|
(16,944 |
) |
Income from discontinued operations, net of tax |
|
|
¾ |
|
|
|
¾ |
|
|
|
22 |
|
|
|
¾ |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(16,922 |
) |
|
$ |
6,208 |
|
|
$ |
(653 |
) |
|
$ |
(5,555 |
) |
|
$ |
(16,922 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
Statements of Cash Flows Information for the Nine-Months Ended March 29, 2009 (amounts in
thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operating
activities |
|
$ |
14,824 |
|
|
$ |
(14,347 |
) |
|
$ |
4,292 |
|
|
$ |
(163 |
) |
|
$ |
4,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(68 |
) |
|
|
(9,311 |
) |
|
|
(1,539 |
) |
|
|
¾ |
|
|
|
(10,918 |
) |
Acquisition |
|
|
¾ |
|
|
|
(500 |
) |
|
|
¾ |
|
|
|
¾ |
|
|
|
(500 |
) |
Investment in subsidiary |
|
|
(4,950 |
) |
|
|
¾ |
|
|
|
4,950 |
|
|
|
¾ |
|
|
|
¾ |
|
Change in restricted cash |
|
|
¾ |
|
|
|
9,436 |
|
|
|
4,599 |
|
|
|
¾ |
|
|
|
14,035 |
|
Proceeds from sale of capital assets |
|
|
¾ |
|
|
|
6,916 |
|
|
|
43 |
|
|
|
¾ |
|
|
|
6,959 |
|
Collection of notes receivable |
|
|
1 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
1 |
|
Split dollar life insurance premiums |
|
|
(217 |
) |
|
|
¾ |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
(217 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
(5,234 |
) |
|
|
6,541 |
|
|
|
8,053 |
|
|
|
¾ |
|
|
|
9,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of long term debt |
|
|
14,600 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
14,600 |
|
Payments of long term debt |
|
|
(17,600 |
) |
|
|
¾ |
|
|
|
(4,599 |
) |
|
|
¾ |
|
|
|
(22,199 |
) |
Proceeds
from stock option exercises |
|
|
3,830 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
3,830 |
|
Other |
|
|
¾ |
|
|
|
(343 |
) |
|
|
¾ |
|
|
|
¾ |
|
|
|
(343 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
830 |
|
|
|
(343 |
) |
|
|
(4,599 |
) |
|
|
¾ |
|
|
|
(4,112 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows of discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flow |
|
|
¾ |
|
|
|
¾ |
|
|
|
(308 |
) |
|
|
¾ |
|
|
|
(308 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in discontinued operations |
|
|
¾ |
|
|
|
¾ |
|
|
|
(308 |
) |
|
|
¾ |
|
|
|
(308 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
¾ |
|
|
|
¾ |
|
|
|
(6,413 |
) |
|
|
163 |
|
|
|
(6,250 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
10,420 |
|
|
|
(8,149 |
) |
|
|
1,025 |
|
|
|
¾ |
|
|
|
3,296 |
|
Cash and cash equivalents at beginning of period |
|
|
689 |
|
|
|
3,377 |
|
|
|
16,182 |
|
|
|
¾ |
|
|
|
20,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
11,109 |
|
|
$ |
(4,772 |
) |
|
$ |
17,207 |
|
|
$ |
¾ |
|
|
$ |
23,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
Statements of Cash Flows Information for the Nine-Months Ended March 23, 2008 (amounts in
thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operating |
|
$ |
6,623 |
|
|
$ |
(9,437 |
) |
|
$ |
1,391 |
|
|
$ |
¾ |
|
|
$ |
(1,423 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
¾ |
|
|
|
(4,878 |
) |
|
|
(3,272 |
) |
|
|
840 |
|
|
|
(7,310 |
) |
Change in restricted cash |
|
|
¾ |
|
|
|
(12,338 |
) |
|
|
¾ |
|
|
|
¾ |
|
|
|
(12,338 |
) |
Proceeds from sale of capital assets |
|
|
¾ |
|
|
|
16,363 |
|
|
|
274 |
|
|
|
(840 |
) |
|
|
15,797 |
|
Proceeds from sale of equity affiliate |
|
|
¾ |
|
|
|
8,750 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
8,750 |
|
Collection of notes receivable |
|
|
9 |
|
|
|
260 |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
269 |
|
Split dollar life insurance premiums |
|
|
(217 |
) |
|
|
¾ |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
(217 |
) |
Other |
|
|
4,187 |
|
|
|
(793 |
) |
|
|
(4,187 |
) |
|
|
¾ |
|
|
|
(793 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities. |
|
|
3,979 |
|
|
|
7,364 |
|
|
|
(7,185 |
) |
|
|
¾ |
|
|
|
4,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of long term debt |
|
|
(16,000 |
) |
|
|
¾ |
|
|
|
¾ |
|
|
|
¾ |
|
|
|
(16,000 |
) |
Dividend payment |
|
|
5,307 |
|
|
|
¾ |
|
|
|
(5,307 |
) |
|
|
¾ |
|
|
|
¾ |
|
Other |
|
|
(1,146 |
) |
|
|
(247 |
) |
|
|
(749 |
) |
|
|
¾ |
|
|
|
(2,142 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(11,839 |
) |
|
|
(247 |
) |
|
|
(6,056 |
) |
|
|
¾ |
|
|
|
(18,142 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows of discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flow |
|
|
¾ |
|
|
|
¾ |
|
|
|
(230 |
) |
|
|
¾ |
|
|
|
(230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in discontinued operations |
|
|
¾ |
|
|
|
¾ |
|
|
|
(230 |
) |
|
|
¾ |
|
|
|
(230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents. |
|
|
¾ |
|
|
|
(43 |
) |
|
|
1,836 |
|
|
|
¾ |
|
|
|
1,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(1,237 |
) |
|
|
(2,363 |
) |
|
|
(10,244 |
) |
|
|
¾ |
|
|
|
(13,844 |
) |
Cash and cash equivalents at beginning of period |
|
|
17,808 |
|
|
|
1,645 |
|
|
|
20,578 |
|
|
|
¾ |
|
|
|
40,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
16,571 |
|
|
$ |
(718 |
) |
|
$ |
10,334 |
|
|
$ |
¾ |
|
|
$ |
26,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following is Managements discussion and analysis of certain significant factors that have
affected Unifi, Inc.s (the Companys) operations and material changes in financial condition
during the periods included in the accompanying Condensed Consolidated Financial Statements.
Business Overview
The Company is a diversified producer and processor of multi-filament polyester and nylon yarns,
including specialty yarns with enhanced performance characteristics. The Company adds value to the
supply chain and enhances consumer demand for its products through the development and introduction
of branded yarns that provide unique performance, comfort and aesthetic advantages. The Company
manufactures partially oriented, textured, dyed, twisted and beamed polyester yarns as well as
textured nylon and nylon covered spandex products. The Company sells its products to other yarn
manufacturers, knitters and weavers that produce fabric for the apparel, hosiery, furnishings,
automotive, industrial and other end-use markets. The Company maintains one of the industrys most
comprehensive product offerings and emphasizes quality, style and performance in all of its
products.
Polyester Segment. The polyester segment manufactures partially oriented, textured, dyed, twisted
and beamed yarns with sales to other yarn manufacturers, knitters and weavers that produce fabrics
for the apparel, automotive, hosiery, furnishings, industrial and other end-use markets. The
polyester segment primarily manufactures its products in Brazil and the United States (U.S.)
which has the largest operations.
Nylon Segment. The nylon segment manufactures textured nylon and covered spandex products with
sales to other yarn manufacturers, knitters and weavers that produce fabrics for the apparel,
hosiery, sock and other end-use markets. The nylon segment consists of operations in Colombia and
the U.S. which has the largest operations.
Recent Developments and Outlook
The global economic downturn has eroded U.S. consumer confidence and spending which have negatively
impacted all textile supply chains and markets in the last two quarters. On a year over year
basis, U.S. apparel retail sales are down 5% to 8% and home furnishing retail sales are down 12% to
14%. Prior North American production contractions were primarily due to import competition of
finished goods, however the current contraction which began in the second half of calendar year
2008 was primarily driven by decreased demand from all sectors of the Companys downstream markets.
These markets include apparel, automotive, and furnishings which have been significantly impacted
by the economic and retail downturn.
Regional manufacturers continue to demand North American manufactured yarn and fabrics due to the
duty-free advantage, quick response times, readily available production capacity, and specialized
products. In addition, North American retailers have expressed the need to have a balanced
procurement strategy with both global and regional producers. Industry experts originally
projected a decline in the textile markets for calendar year 2008 at a rate of 4% to 5%, however,
as a result of the U.S. economic downturn that began in the middle of calendar year 2008, the rate
of the polyester industry contraction in North America is now estimated to be approximately 18%.
Experts project contractions for the first quarter of calendar year 2009 compared to the prior year
first quarter to be approximately 40%. The impact of the decline in
retail sales was compounded further by
excessive inventories that were built across the supply chains as fabric mills, finished goods
producers, and retailers curtailed new orders in an effort to match investments in working capital
to levels consistent with lower sales volumes. As a result of this inventory de-stocking, the
Companys revenues have declined by 31% and 30% for the second and third fiscal quarters as
compared to the prior year quarters, respectively, despite retail sales for the Companys
collective markets being off by significantly less. However, as the third quarter progressed, the
Company saw sales volume improvements in some of its segments. The Company anticipates
continued improvement through the next few quarters as its sales volumes ultimately align with
retail market conditions once supply chain inventories return to normalized levels.
27
Like many other companies, the Company also aggressively reduced inventories by $25.5 million
during the third quarter of fiscal year 2009 which significantly improved its cash position. The
operating loss was negatively impacted by higher priced raw materials and under absorbed converting
costs from reduced production volumes included in the Companys costs of sales. Now that this
higher priced inventory has been depleted, the Company expects to see the benefit of lower priced
raw materials going forward.
The Company believes that its success going forward is primarily based on its ability to improve
the mix of its product offerings by shifting to more premier value-added (PVA) products. The
challenges in the economy have also impacted the Companys PVA volumes, which have declined,
although at a lower rate than its commodity business. Downstream development activities using the
Companys PVA products continue to be very strong; however, brands and retailers have
green-lighted more basic programs in this economy to hit value-oriented price points. The
adoption cycle for PVA programs is also being tempered by the economy, but the Company remains
encouraged by the ongoing development activities, particularly those using Repreve®
recycled products. The Company will continue to invest in and fund research and development
efforts, and customers can continue to expect the Company to bring new and innovative products to
the market. Customer response to the Companys recently introduced staple Repreve® has
been very positive, and the Company believes Repreve® FR, the first recycled fiber with
inherent flame retardant technology, will be a popular product offering in the market.
The Company is committed and dedicated to identifying strategic opportunities to participate in the
Asian textile market, specifically China. During the fourth quarter of fiscal year 2009, the
Company sold its interest in Yihua Unifi Fibre Company Limited (YUFI) to Sinopec Yizheng Chemical
Fiber Co., Ltd, (YCFC). In order to maintain a market presence in the Asian textile market, the
Company formed Unifi Textiles (Suzhou) Company, Ltd. (UTSC), a wholly owned Chinese subsidiary.
UTSC obtained its business license in the second quarter of fiscal year 2009 and was operational
during the third quarter of fiscal year 2009. UTSC was capitalized during the third quarter with
$3.3 million and the Company expects to invest up to an additional $1.6 million for working capital
requirements in the future. UTSC will continue to expand the sales and promotion of the Companys
specialty and PVA products, including the introduction of the next generation Sorbtek®
moisture management technology. Additionally, UTSC will continue to develop sustainable textiles
under the Repreve® brand and will begin localizing the Companys recycling efforts in
China. The Company is very encouraged by the number of development projects it has in progress,
including Repreve® filament and staple, Sorbtek® and Reflexx®.
Similar to the U.S., the adoption timetable for some of these programs may be linked to
improvements in the economy, but the Company projects that UTSC will operate at or near breakeven
which will be a substantial improvement over the results of YUFI.
In addition to China, the United StatesDominican RepublicCentral American Free Trade Agreement
(CAFTA) region continues to be a very important part of the Companys global sourcing strategy.
The CAFTA regions share of synthetic apparel imports ranges from 12% to 13% and is expected to
grow over the next few years, making the region a critical component in the apparel supply chain.
To better service customers in the CAFTA region, the Company is exploring options for placing
manufacturing capabilities in Central America. At this point, all options are being explored,
including joint venture opportunities as well as green-field scenarios and the total investment in
the initial stages is expected to be $10 million or less.
The Companys Brazilian operation had especially strong results in the first quarter of fiscal year
2009, but those results deteriorated through the second and third quarters due to softness in the
Brazilian economy and the volatility related to raw material costs. However, through efficiency
improvements, mix enrichment, and gains in market share, the Company anticipates improved results
in the fourth quarter of fiscal year 2009 and subsequent quarters.
28
On March 13, 2009, the Company amended the Unifi, Inc. Retirement Savings Plan (the 401(k) plan)
to eliminate the safe harbor matching contribution by the Company with respect to employee
compensation deferrals. The Company expects to save approximately $1.7 million per year related to
this amendment.
Key Performance Indicators
The Company continuously reviews performance indicators to measure its success. The following are
the indicators management uses to assess performance of the Companys business:
|
|
|
sales volume, which is an indicator of demand; |
|
|
|
|
margins, which are indicators of product mix and profitability; |
|
|
|
|
adjusted EBITDA, which the Company defines as pre-tax income before interest expense,
depreciation and amortization expense and loss or income from discontinued operations,
adjusted to exclude equity in earnings and losses of unconsolidated affiliates, write
down of long-lived assets and unconsolidated affiliate, non-cash compensation expense,
gains and losses on sales of property, plant and equipment, hedging gains and losses,
asset consolidation and optimization expense, goodwill impairment, restructuring charges
and Kinston shutdown costs, as revised from time to time, which the Company believes is
a supplemental measure of its performance and ability to service debt; and |
|
|
|
|
working capital of each business unit as a percentage of sales, which is an indicator
of the Companys production efficiency and ability to manage its inventory and
receivables. |
Corporate Restructuring
Severance
In the first quarter of fiscal year 2008, the Company announced the closure of its polyester
facility in Kinston, North Carolina. The Kinston facility produced partially oriented yarn (POY)
for internal consumption and third party sales. The Company now purchases its commodity POY needs
from external suppliers for conversion in its texturing operations. The Company continues to
produce POY in its Yadkinville, North Carolina facility for specialty and premier valued-added
(PVA) yarns and certain other commodity yarns. During the first quarter of fiscal year 2008, the
Company recorded $0.8 million for severance related to its Kinston consolidation. Approximately
231 employees, which included 31 salaried positions and 200 wage positions, were affected as a
result of the reorganization.
In the second quarter of fiscal year 2008, the Company recorded an additional $0.4 million in
severance costs related to Kinston employees who were associated with providing site services.
The Company recorded severance of $2.4 million for its former President and Chief Executive Officer
during the first quarter of fiscal year 2008 and $1.7 million for severance related to its former
Chief Financial Officer during the second quarter of fiscal year 2008.
On May 14, 2008, the Company announced the closure of its polyester facility located in Staunton,
Virginia and the transfer of all its production to its facility in Yadkinville, North Carolina
which was completed in November 2008. During the first quarter of fiscal year 2009, the Company
recorded $0.1 million for severance related to its Staunton consolidation. Approximately 40
salaried and wage employees were affected by this reorganization.
29
In the third quarter of fiscal year 2009, the Company reorganized, reducing its workforce due to
the economic downturn. Approximately 200 salaried and wage employees were affected by this
reorganization related to the Companys efforts to reduce costs. As a result, the Company recorded
$0.3 million in severance charges related to certain salaried corporate and manufacturing support
staff.
Restructuring
In the first quarter of fiscal year 2008, the Company recorded $1.5 million for restructuring
charges related to unfavorable Kinston contracts for obligations which extended beyond the date of
the facilitys closing. These charges were reduced by $0.5 million in the fourth quarter of fiscal
year 2008 as a result of favorable contract negotiations and settlements. See the Severance
discussion above for further details related to Kinston.
In fiscal year 2007, the Company recorded a $2.9 million unfavorable contract reserve related
to a portion of the sales and service contract which it entered into with Dillon Yarn Corporation
(Dillon) for continued support of the Dillon business through December 2008. A portion of the
sales and service contract was deemed to be unfavorable after the Company announced its plan to
consolidate the Dillon capacity into its other facilities.
The table below summarizes changes to the accrued severance and accrued restructuring accounts for
the year-to-date period ended March 29, 2009 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
June 29, 2008 |
|
Charges |
|
Adjustments |
|
Amounts Used |
|
March 29, 2009 |
Accrued severance |
|
$ |
3,668 |
|
|
|
371 |
|
|
|
5 |
|
|
|
(1,886 |
) |
|
$ |
2,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued restructuring |
|
$ |
1,414 |
|
|
|
|
|
|
|
245 |
|
|
|
(1,040 |
) |
|
$ |
619 |
|
As of March 29, 2009, the Company classified $0.6 million of accrued executive severance as long
term.
Joint Ventures and Other Equity Investments
The following table represents the Companys investments in unconsolidated affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date |
|
|
|
|
|
Percent |
Affiliate Name |
|
Acquired |
|
Location |
|
Ownership |
Yihua Unifi Fibre Company Ltd (YUFI) (A) |
|
Aug-05 |
|
Yizheng, Jiangsu Province, Peoples Republic of China |
|
|
50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Parkdale America, LLC (PAL) |
|
Jun-97 |
|
North and South Carolina |
|
|
34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unifi-SANS Technical Fibers, LLC (USTF) (B) |
|
Sep-00 |
|
Stoneville, North Carolina |
|
|
50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.N.F. Industries, LLC (UNF) |
|
Sep-00 |
|
Migdal Ha Emek, Israel |
|
|
50 |
% |
|
|
|
(A) |
|
The Company completed the sale of YUFI during the fourth quarter of fiscal year 2009. |
|
(B) |
|
The Company completed the sale of USTF during the second quarter of fiscal year 2008. |
30
Condensed income statement information for the quarters and nine-months ended March 29, 2009 and
March 23, 2008, of the combined unconsolidated equity affiliates are as follows (amounts in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 29, 2009 |
|
|
YUFI (1) |
|
PAL |
|
UNF |
|
Total |
Net sales |
|
|
|
|
|
$ |
89,998 |
|
|
$ |
3,638 |
|
|
$ |
93,636 |
|
Gross profit (loss) |
|
|
|
|
|
|
13,439 |
|
|
|
(581 |
) |
|
|
12,858 |
|
Depreciation and amortization |
|
|
|
|
|
|
4,573 |
|
|
|
474 |
|
|
|
5,047 |
|
Income (loss) from operations |
|
|
|
|
|
|
11,955 |
|
|
|
(682 |
) |
|
|
11,273 |
|
Net income (loss) |
|
|
|
|
|
|
3,949 |
|
|
|
(624 |
) |
|
|
3,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine-Months Ended March 29, 2009 |
|
|
YUFI |
|
PAL |
|
UNF |
|
Total |
Net sales |
|
|
|
|
|
$ |
309,276 |
|
|
$ |
16,073 |
|
|
$ |
325,349 |
|
Gross profit (loss) |
|
|
|
|
|
|
25,510 |
|
|
|
(2,247 |
) |
|
|
23,263 |
|
Depreciation and amortization |
|
|
|
|
|
|
14,477 |
|
|
|
1,422 |
|
|
|
15,899 |
|
Income (loss) from operations |
|
|
|
|
|
|
17,979 |
|
|
|
(3,306 |
) |
|
|
14,673 |
|
Net income (loss) |
|
|
|
|
|
|
15,889 |
|
|
|
(3,036 |
) |
|
|
12,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 23, 2008 |
|
|
YUFI |
|
PAL |
|
UNF |
|
Total |
Net sales |
|
$ |
30,618 |
|
|
$ |
116,258 |
|
|
$ |
6,747 |
|
|
$ |
153,623 |
|
Gross profit (loss) |
|
|
(1,800 |
) |
|
|
6,251 |
|
|
|
(473 |
) |
|
|
3,978 |
|
Depreciation and amortization |
|
|
1,085 |
|
|
|
3,850 |
|
|
|
474 |
|
|
|
5,409 |
|
Income (loss) from operations |
|
|
(3,275 |
) |
|
|
3,242 |
|
|
|
(643 |
) |
|
|
(676 |
) |
Net income (loss) |
|
|
(3,912 |
) |
|
|
7,578 |
|
|
|
(562 |
) |
|
|
3,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine-Months Ended March 23, 2008 |
|
|
USTF (2) |
|
YUFI |
|
PAL |
|
UNF |
|
Total |
Net sales |
|
$ |
6,455 |
|
|
$ |
103,738 |
|
|
$ |
331,797 |
|
|
$ |
18,577 |
|
|
$ |
460,567 |
|
Gross profit (loss) |
|
|
571 |
|
|
|
(2,334 |
) |
|
|
16,700 |
|
|
|
(318 |
) |
|
|
14,619 |
|
Depreciation and amortization |
|
|
578 |
|
|
|
3,703 |
|
|
|
13,520 |
|
|
|
1,264 |
|
|
|
19,065 |
|
Income (loss) from operations |
|
|
188 |
|
|
|
(6,903 |
) |
|
|
6,832 |
|
|
|
(785 |
) |
|
|
(668 |
) |
Net income (loss) |
|
|
148 |
|
|
|
(8,757 |
) |
|
|
12,144 |
|
|
|
(649 |
) |
|
|
2,886 |
|
(1) |
|
The Company completed the sale of its investment in YUFI during the fourth quarter of
fiscal year 2009 and as a result its financial statements were unavailable to the Company
for the quarter ended March 29, 2009. See below and Footnote 12-Impairment Charges and
Footnote 19- Subsequent Events for further discussion. |
|
(2) |
|
Sold in the second quarter of fiscal year 2008 . |
On June 10, 2005, the Company and Sinopec Yizheng Chemical Fiber Co., Ltd, (YCFC) entered
into an Equity Joint Venture Contract (the JV Contract), to form YUFI to manufacture, process and
market polyester filament yarn in YCFCs facilities in China. Under the terms of the JV Contract,
each company owned a 50% equity interest in YUFI. The joint venture transaction closed on
August 3, 2005, and accordingly, the Company contributed to YUFI its initial capital contribution
of $15.0 million in cash on August 4, 2005. On October 12, 2005, the Company transferred an
additional $15.0 million to YUFI to complete the capitalization of the joint venture.
In July 2008, the Company reached an agreement in principal with YCFC to sell its 50% ownership
interest in YUFI to YCFC for $10.0 million, pending final negotiation and execution of definitive
agreements. The internal YCFC and external governmental approval process was expected to take
approximately two to three months. In the interim, the partners agreed that YCFC would immediately
take over operating control of YUFI. As a result, the Company lost its ability to influence the
operations of YUFI and therefore the Company ceased recording its share of losses commencing in the
first quarter of fiscal year 2009 in accordance with the
authoritative guidance provided by Accounting Principles Board Opinion 18, The Equity Method of
Accounting for Investments in Common Stock (APB 18).
31
In December 2008, the Company renegotiated the proposed agreement to sell its interest in YUFI to
YCFC for $9.0 million, pending final approval by the appropriate authorities and execution of
definitive agreements and recorded an additional impairment charge of $1.5 million. See Footnote
12-Impairment Charges.
For the quarter and year-to-date period ended March 23, 2008, the Company recognized equity losses
net of technology and license fee income of $2.0 million and $3.7 million, respectively. In
addition, the Company recognized $0.3 million and $1.6 million in operating expenses for the
quarter and year-to-date periods ended March 23, 2008, respectively, which was directly related to
providing technological support in accordance with the Companys joint venture contract.
In June 1997, the Company and Parkdale Mills, Inc. entered into a contribution agreement whereby
both companies contributed all of the assets of their spun cotton yarn operations utilizing
open-end and air jet spinning technologies to create PAL. In exchange for its contributions, the
Company received a 34% ownership interest in the joint venture. PAL is a producer of cotton and
synthetic yarns for sale to the textile and apparel industries primarily within North America. PAL
has 12 manufacturing facilities primarily located in central and western North Carolina and in
South Carolina. For the quarter and year-to-date periods ended March 29, 2009, the Company
recognized net equity earnings of $1.3 million and $5.4 million, respectively, compared to equity
earnings of $3.0 million and $4.5 million for the respective corresponding periods in the prior
year. The Company received accumulated distributions from PAL of $2.9 million and $1.2 million for
the year-to-date periods of fiscal years 2009 and 2008, respectively. As of April 4, 2009, PAL had
$33.0 million cash-on-hand and no outstanding debt.
In September 2000, the Company and SANS Fibres of South Africa (SANS Fibres) formed USTF, a 50/50
joint venture created to produce low-shrinkage high tenacity nylon 6.6 light denier industrial
yarns in North Carolina. The business was operated in a plant in Stoneville, North Carolina. In the
second quarter of fiscal year 2008, the Company completed the sale of its interest in USTF.
In September 2000, the Company and Nilit Ltd (Nilit) formed UNF; a 50/50 joint venture to produce
nylon POY at Nilits manufacturing facility in Migdal Ha-Emek, Israel which is the Companys
primary source of nylon POY for its texturing operations. For the quarter and year-to-date periods
ended March 29, 2009, the Company recognized net equity losses of $0.5 million and $0.9 million,
respectively, compared to net equity losses of $0.2 million and net equity earnings of $0.1 million
for the respective corresponding periods in the prior year.
32
Review of Third Quarter Fiscal Year 2009 compared to Third Quarter Fiscal Year 2008
The following table sets forth the income (loss) from continuing operations components for each of
the Companys business segments for the fiscal quarters ended March 29, 2009 and March 23, 2008,
respectively. The table also sets forth each of the segments net sales as a percent to total net
sales, the net income (loss) components as a percent to total net sales and the percentage increase
or decrease of such components over the comparable prior year period (amounts in thousands, except
percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarters Ended |
|
|
|
|
|
|
March 29, 2009 |
|
|
March 23, 2008 |
|
|
|
|
|
|
|
|
|
|
% to Total |
|
|
|
|
|
|
% to Total |
|
|
% Change |
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
$ |
85,480 |
|
|
|
71.8 |
|
|
$ |
126,247 |
|
|
|
74.3 |
|
|
|
(32.3 |
) |
Nylon |
|
|
33,614 |
|
|
|
28.2 |
|
|
|
43,589 |
|
|
|
25.7 |
|
|
|
(22.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
119,094 |
|
|
|
100.0 |
|
|
$ |
169,836 |
|
|
|
100.0 |
|
|
|
(29.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% to Sales |
|
|
|
|
|
|
% to Sales |
|
|
|
|
|
Gross profit (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
$ |
(430 |
) |
|
|
(0.4 |
) |
|
$ |
9,508 |
|
|
|
5.6 |
|
|
|
(104.5 |
) |
Nylon |
|
|
802 |
|
|
|
0.7 |
|
|
|
3,924 |
|
|
|
2.3 |
|
|
|
(79.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
372 |
|
|
|
0.3 |
|
|
|
13,432 |
|
|
|
7.9 |
|
|
|
(97.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges (recoveries) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
|
220 |
|
|
|
0.2 |
|
|
|
(2,199 |
) |
|
|
(1.3 |
) |
|
|
(110.0 |
) |
Nylon |
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
293 |
|
|
|
0.2 |
|
|
|
(2,199 |
) |
|
|
(1.3 |
) |
|
|
(113.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
|
18,580 |
|
|
|
15.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nylon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
18,580 |
|
|
|
15.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
|
7,593 |
|
|
|
6.4 |
|
|
|
8,635 |
|
|
|
5.1 |
|
|
|
(12.1 |
) |
Nylon |
|
|
1,914 |
|
|
|
1.6 |
|
|
|
1,445 |
|
|
|
0.8 |
|
|
|
32.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
9,507 |
|
|
|
8.0 |
|
|
|
10,080 |
|
|
|
5.9 |
|
|
|
(5.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for bad debts |
|
|
735 |
|
|
|
0.6 |
|
|
|
87 |
|
|
|
|
|
|
|
744.8 |
|
Other operating (income) expense, net |
|
|
(89 |
) |
|
|
|
|
|
|
(897 |
) |
|
|
(0.5 |
) |
|
|
(90.1 |
) |
Non-operating (income) expense, net |
|
|
4,398 |
|
|
|
3.7 |
|
|
|
4,900 |
|
|
|
2.9 |
|
|
|
(10.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes |
|
|
(33,052 |
) |
|
|
(27.8 |
) |
|
|
1,461 |
|
|
|
0.9 |
|
|
|
|
|
Provision (benefit) for income taxes |
|
|
(101 |
) |
|
|
(0.1 |
) |
|
|
1,394 |
|
|
|
0.9 |
|
|
|
(107.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations |
|
|
(32,951 |
) |
|
|
(27.7 |
) |
|
|
67 |
|
|
|
|
|
|
|
|
|
Loss from discontinued
operations, net of tax |
|
|
(45 |
) |
|
|
|
|
|
|
(55 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(32,996 |
) |
|
|
(27.7 |
) |
|
$ |
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
As reflected in the tables above, consolidated net sales from continuing operations decreased from
$169.8 million to $119.1 million which was primarily attributable to decreased sales in the
apparel, automotive and furnishing market segments. Consolidated unit volumes decreased by 27.1%
for the third quarter of fiscal year 2009, while average net selling prices decreased by 2.8% for
the same period.
Consolidated gross profit from continuing operations decreased by $13.1 million to $0.4 million for
the third quarter of fiscal year 2009 as compared to the prior year third quarter. The decrease in
gross profit was primarily attributable to lower sales volumes and decreased conversion margins in
both the polyester and nylon segments. As discussed earlier in the Recent Development and
Outlook section, the decrease in sales volumes for both segments was attributable to the global
economic slowdown which began in the second quarter of fiscal year 2009 and continued into the
third quarter. In addition, conversion margins decreased as overall sales prices declined while
fiber costs increased on a per pound basis compared to the prior year quarter. Fiber as a percent
of sales increased to 68.0% in the third quarter of fiscal year 2009 from 59.7% in the prior year
quarter. Consolidated converting costs decreased on a dollar basis due to lower sales volumes.
Fixed and variable manufacturing expenses as a percent of sales decreased slightly to 30.7% from
30.9% in the prior year quarter. Refer to the segment operations under the captions Polyester
Operations and Nylon Operations for a further discussion of each segments operating results.
Severance and Restructuring Charges
In the third quarter of fiscal year 2009, the Company reorganized, reducing its workforce due to
the economic downturn. Approximately 200 salaried and wage employees were affected by this
reorganization related to the Companys efforts to reduce costs. As a result, the Company recorded
$0.3 million in severance charges related to certain salaried corporate and manufacturing support
staff.
During the second quarter of fiscal year 2008, the Company evaluated the contract termination costs
associated with the closure of its Kinston, North Carolina facility and accrued for unfavorable
contract costs of $4.6 million related to site services that the Company was obligated to provide
through June 2008. During the third quarter of fiscal year 2008, the Company negotiated with the
Kinston tenant for higher site services reimbursements and as a result reduced the reserve by a net
$2.2 million with an offset to restructuring recoveries.
Goodwill Impairment
The Company accounts for its goodwill and other intangibles under the provisions of SFAS No. 142,
Goodwill and Other Intangible Assets (SFAS 142). SFAS 142 requires that these assets be
reviewed for impairment annually, unless specific circumstances indicate that a more timely review
is warranted. This impairment test involves estimates and judgments that are critical in
determining whether any impairment charge should be recorded and the amount of such charge if an
impairment loss is deemed to be necessary. In accordance with the provisions of SFAS 142, the
Company determined that its reportable segments were comprised of three reporting units; nylon,
domestic polyester, and non-domestic polyester.
The Companys balance sheet at December 28, 2008 reflected $18.6 million of goodwill, all of which
related to the acquisition of Dillon in January 2007. The Company previously determined that all
of this goodwill should be allocated to the domestic polyester reporting unit. Based on a decline
in its market capitalization during the third quarter of fiscal year 2009 and difficult market
conditions, the Company determined that it was appropriate to re-evaluate the carrying value of its
goodwill during the quarter ended March 29, 2009. In connection with this third quarter interim
impairment analysis, the Company updated its cash flow forecasts based upon the latest market
intelligence, its discount rate and its market capitalization values. The fair value of the
domestic polyester reporting unit was determined based upon a combination of a discounted cash flow
analysis and a market approach. As a result of the findings, the Company determined that the
goodwill was impaired and recorded an impairment charge of $18.6 million in the third quarter of
fiscal year 2009.
34
Related Party Transactions
In fiscal year 2007, the Company purchased the polyester and nylon texturing operations of Dillon
(the Transaction). In connection with the Transaction, the Company and Dillon entered into a
Sales and Services Agreement for a term of two years from January 1, 2007, pursuant to which the
Company agreed to pay Dillon an aggregate amount of $6.0 million in exchange for certain polyester
segment sales and Dillon transitional services to be provided by Dillons sales staff and executive
management. The Company announced on April 26, 2007 its plan to close its Dillon polyester
facility. As a result of this announcement, the Company evaluated all contract obligations
associated with the facility and determined that this contract obligation partially included
services to be rendered specifically to that facility and therefore the Company would not receive
any future economic benefit from that portion of the contract once the facility was closed. As a
result, the Company recorded a $2.9 million restructuring charge related to that portion of the
contract obligation. The contract termination date was December 2008. The Company recorded nil
and $0.3 million for the third quarter of fiscal years 2009 and 2008 and $0.5 million and $0.8
million for the year-to-date periods, respectively, related to this contract.
On December 1, 2008, the Company entered into an agreement to extend the polyester services portion
of the Sales and Service Agreement for a term of one year effective January 1, 2009 pursuant to
which the Company will pay Dillon an aggregate amount of $1.7 million. The Company recognized $0.4
million in expenses related to this contract in the March 2009 quarter. Mr. Stephen Wener is the
President and Chief Executive Officer of Dillon and is a director of the Company.
Selling, General, and Administrative Expenses
Consolidated selling, general and administrative (SG&A) expenses decreased by $0.6 million or
5.7% during the third quarter of fiscal year 2009 as compared to the prior year third quarter. The
decrease in SG&A for the third quarter was primarily a result of decreases of $0.3 million in the
Companys Brazilian operation, $0.2 million in depreciation expenses, $0.2 million in insurance
expenses, and $0.2 million in net costs related to the Companys China operations offset by
increases of $0.2 million in deferred compensation costs, and $0.1 million in sales and service
fees. SG&A expenses related to the Companys Brazilian operation decreased by $0.3 million
compared to the prior year third quarter due to a decrease of $0.4 million related to the
strengthening of the U.S. dollar against the Brazilian real and a increase of $0.1 million in
overall expenses.
Other Operating (Income) Expense, Net
Other operating (income) expense, net decreased from $0.9 million in the third quarter of fiscal
year 2008 to $0.1 million in the third quarter of fiscal year 2009. The following table shows the
components of other operating (income) expense, net (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Quarters Ended |
|
|
|
March 29, |
|
|
March 23, |
|
|
|
2009 |
|
|
2008 |
|
(Gain) loss on sale of fixed assets |
|
$ |
44 |
|
|
$ |
(459 |
) |
Technology fee from China joint venture |
|
|
|
|
|
|
(187 |
) |
Currency (gains) losses |
|
|
(100 |
) |
|
|
(153 |
) |
Other, net |
|
|
(33 |
) |
|
|
(98 |
) |
|
|
|
|
|
|
|
Other operating (income) expense, net |
|
$ |
(89 |
) |
|
$ |
(897 |
) |
|
|
|
|
|
|
|
35
Income Taxes
The Companys income tax provision for the quarter ended March 29, 2009 resulted in tax benefit at
an effective tax rate of 0.3% as compared to the quarter ended March 23, 2008, which resulted in
tax expense at an effective tax rate of 95.4%. The Companys effective tax rate for the quarter
ended March 29, 2009 differed from the U.S. statutory rate primarily due to an increase in
valuation allowance related to losses in the U.S. and certain other foreign countries and state
income taxes. The Companys effective tax rate for the quarter ended March 23, 2008 differed from
the U.S. statutory rate primarily due to foreign operations taxed at a lower effective rate, stock
based compensation, and an increase in the valuation allowance.
Deferred income taxes have been provided for the temporary differences between financial statement
carrying amounts and the tax basis of existing assets and liabilities. The Company has continued to
record a valuation allowance against its net domestic deferred tax assets, and certain foreign
deferred tax assets related to net operating losses, as those net deferred tax assets are more
likely than not to be unrealizable for income tax purposes. The valuation allowance increased
$13.1 million in the quarter ended March 29, 2009 compared to an increase of $0.2 million in the
quarter ended March 23, 2008. The net increase in the valuation allowance for the quarter ended
March 29, 2009 primarily consisted of an increase of $7.0 million for net operating losses
generated this quarter (federal and state), and an increase of $6.1 million related to other
temporary differences this quarter.
As a result of the discussions above, loss from continuing operations before income taxes was $33.1
million in the third quarter of fiscal year 2009 as compared to income of $1.5 million recorded in
the same period of the prior year.
Polyester Operations
Polyester unit volumes decreased 27.8% for the quarter ended March 29, 2009, while average net
selling prices decreased 4.5% compared to the quarter ended March 23, 2008. Net sales for the
polyester segment for the third quarter of fiscal year 2009 decreased by $40.8 million or 32.3% as
compared to the same quarter in the prior year. Net sales of domestic polyester decreased by 33.1%
primarily due to a decline in volume attributed to a reduction in demand in the retail apparel,
automotive and home upholstery markets.
Sales in local currency for the Brazilian operation decreased by 9.7% for the quarter ended March
29, 2009 compared to the same quarter in the prior year primarily due to a decrease in unit volumes
of 11.2% offset by an increase in average selling prices of 1.7%. The decrease in U.S. dollar net
sales for the third quarter as compared to the prior year period includes a reduction of $7.9
million due to an increase in the Brazilian currency exchange rate.
During the second quarter of fiscal year 2009, the Company experienced a decline in its polyester
business beginning in November 2008 which was attributable to market conditions previously
discussed. This trend continued into the third quarter of fiscal year 2009. Consolidated
polyester fiber costs increased as a percent of net sales to 70.0% in the third quarter of fiscal
year 2009 from 58.9% in the prior year third quarter. On a dollar basis, fiber costs for the
polyester segment, excluding the Brazilian currency impact, decreased by approximately 12.4%
compared to the prior year third quarter primarily due to lower sales volumes. This decrease was
partially offset by an increase on a cost per pound basis due to enriched product mix.
Converting costs, excluding the Brazilian currency impact, decreased by 34.4% primarily as a result
of lower sales volumes and decreased domestic polyester fixed manufacturing costs. Fixed and
variable manufacturing costs decreased as a percentage of consolidated polyester net sales to 29.5%
in the third quarter from 32.1% in the prior year quarter. Domestically, fixed and variable
manufacturing expenses decreased by 1.4% as a percentage of sales. Domestic variable manufacturing
expenses decreased in the third quarter of fiscal year 2009 as a result of lower wage and fringe
costs, packaging costs, utility expenses, and other various expenses partly due to lower volumes.
Fixed manufacturing expenses for the domestic
36
polyester operations decreased primarily as a result
of lower depreciation expense due to plant closures and
consolidation efforts in the manufacturing operations. Therefore, gross profit for the polyester
operations decreased $10.0 million over prior year third quarter, and gross margin (gross profit
(loss) as a percentage of net sales) decreased to (0.5)% in the third quarter of fiscal year 2009
from 7.5% in the prior year third quarter.
SG&A expenses for the third quarter of fiscal year 2009 were $7.6 million compared to $8.6 million
in the same quarter in the prior year. Refer to the discussion of SG&A in the quarter overview
discussed above.
Nylon Operations
Nylon unit volumes decreased by 21.9% in the third quarter of fiscal year 2009 compared to the
prior year quarter while average selling prices decreased by 1.0%. Net sales for the nylon segment
for the third quarter of fiscal year 2009 decreased by $10.0 million or 22.9% as compared to the
same quarter in the prior year. This decrease in net sales was primarily due to the slowdown in
the retail apparel markets which began in the second quarter of fiscal year 2009.
Consolidated nylon fiber costs increased as a percent of net sales to 62.8% in the third quarter of
fiscal year 2009 from 62.0% in the prior year third quarter. Although fiber increased as a
percentage of sales, fiber costs on a per pound basis were flat. On a dollar basis, fiber costs
decreased by 21.8% in the third quarter of fiscal year 2009 as compared to the prior year quarter
as a result of decreased volumes from the global economic slowdown.
Total converting costs for the nylon segment decreased by 7.5% in the third quarter as compared to
the same quarter in the prior year as a result of lower sales volumes. Fixed and variable
manufacturing costs increased as a percentage of consolidated nylon net sales to 33.8% in the third
quarter from 27.6% in the prior quarter. Overall, variable expenses were higher on a per pound
basis in third quarter of fiscal year 2009 compared to prior year quarter due to under absorbed
costs from reduced production volumes. Fixed manufacturing expenses decreased mainly in
depreciation expense quarter over quarter. As a result, gross profit for the nylon operations
decreased by $3.1 million, or 79.6%, over prior year third quarter, and gross margin (gross profit
as a percentage of net sales) decreased to 2.4% in the third quarter of fiscal year 2009 from 9.0%
in the prior year third quarter.
SG&A expenses for the third quarter of fiscal year 2009 were $1.9 million compared to $1.4 million
in the same quarter in the prior year. Refer to the discussion of SG&A in the quarter overview
discussed above.
Corporate
On July 26, 2006, the Compensation Committee (Committee) of the Board of Directors (Board)
authorized the issuance of an additional 1,065,000 stock options to certain key employees from the
1999 Long-Term Incentive Plan. In addition, on October 24, 2007, the Committee authorized the
issuance of approximately 1,570,000 stock options from the 1999 Long-Term Incentive Plan, of which
120,000 were issued to certain Board members and the remaining options were issued to certain key
employees. On October 29, 2008, the shareholders of the Company approved the 2008 Unifi, Inc.
Long-Term Incentive Plan (2008 Long-Term Incentive Plan). The 2008 Long-Term Incentive Plan
authorized the issuance of up to 6,000,000 shares of Common Stock pursuant to the grant or exercise
of stock options, including Incentive Stock Options (ISO), Non-Qualified Stock Options (NQSO)
and restricted stock, but not more than 3,000,000 shares may be issued as restricted stock. Option
awards are granted with an exercise price not less than the market price of the Companys stock at
the date of grant. During the second quarter of fiscal year 2009, the Committee of the Board
authorized the issuance of 280,000 stock options from the 2008 Long-Term Incentive Plan to certain
key employees. As a result of these grants, the Company incurred $0.4 million of stock-based
compensation charges in the third quarter for fiscal years 2009 and $0.3 million in the third
quarter of fiscal year 2008, which were recorded as SG&A expenses with the offset to additional
paid-in-capital.
37
Review of Year-To-Date Fiscal Year 2009 compared to Year-To-Date Fiscal Year 2008
The following table sets forth the loss from continuing operations components for each of the
Companys business segments for the year-to-date periods ended March 29, 2009 and March 23, 2008,
respectively. The table also sets forth each of the segments net sales as a percent to total net
sales, the net income (loss) components as a percent to total net sales and the percentage increase
or decrease of such components over the comparable prior year period (amounts in thousands, except
percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine-Months Ended |
|
|
|
|
|
|
March 29, 2009 |
|
|
March 23, 2008 |
|
|
|
|
|
|
|
|
|
|
% to Total |
|
|
|
|
|
|
% to Total |
|
|
% Change |
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
$ |
302,443 |
|
|
|
73.1 |
|
|
$ |
390,743 |
|
|
|
74.6 |
|
|
|
(22.6 |
) |
Nylon |
|
|
111,387 |
|
|
|
26.9 |
|
|
|
132,998 |
|
|
|
25.4 |
|
|
|
(16.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
413,830 |
|
|
|
100.0 |
|
|
$ |
523,741 |
|
|
|
100.0 |
|
|
|
(21.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% to Sales |
|
|
|
|
|
|
% to Sales |
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
$ |
8,298 |
|
|
|
2.0 |
|
|
$ |
23,263 |
|
|
|
4.4 |
|
|
|
(64.3 |
) |
Nylon |
|
|
7,811 |
|
|
|
1.9 |
|
|
|
9,482 |
|
|
|
1.8 |
|
|
|
(17.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
16,109 |
|
|
|
3.9 |
|
|
|
32,745 |
|
|
|
6.2 |
|
|
|
(50.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
|
220 |
|
|
|
0.1 |
|
|
|
4,420 |
|
|
|
0.9 |
|
|
|
(95.0 |
) |
Nylon |
|
|
73 |
|
|
|
|
|
|
|
218 |
|
|
|
|
|
|
|
(66.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
293 |
|
|
|
0.1 |
|
|
|
4,638 |
|
|
|
0.9 |
|
|
|
(93.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write downs of long-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
|
|
|
|
|
|
|
|
|
2,780 |
|
|
|
0.5 |
|
|
|
|
|
Nylon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
2,780 |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
|
18,580 |
|
|
|
4.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nylon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
18,580 |
|
|
|
4.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyester |
|
|
23,248 |
|
|
|
5.6 |
|
|
|
31,210 |
|
|
|
6.0 |
|
|
|
(25.5 |
) |
Nylon |
|
|
6,108 |
|
|
|
1.5 |
|
|
|
5,332 |
|
|
|
1.0 |
|
|
|
14.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
29,356 |
|
|
|
7.1 |
|
|
|
36,542 |
|
|
|
7.0 |
|
|
|
(19.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for bad debt |
|
|
1,794 |
|
|
|
0.4 |
|
|
|
152 |
|
|
|
|
|
|
|
|
|
Other operating (income) expense, net |
|
|
(5,862 |
) |
|
|
(1.4 |
) |
|
|
(4,087 |
) |
|
|
(0.8 |
) |
|
|
43.4 |
|
Non-operating (income) expense, net |
|
|
12,357 |
|
|
|
3.0 |
|
|
|
20,958 |
|
|
|
4.0 |
|
|
|
(41.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations before income taxes |
|
|
(40,409 |
) |
|
|
(9.8 |
) |
|
|
(28,238 |
) |
|
|
(5.4 |
) |
|
|
43.1 |
|
Provision (benefit) for income taxes |
|
|
2,398 |
|
|
|
0.5 |
|
|
|
(11,294 |
) |
|
|
(2.2 |
) |
|
|
(121.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
operations |
|
|
(42,807 |
) |
|
|
(10.3 |
) |
|
|
(16,944 |
) |
|
|
(3.2 |
) |
|
|
152.6 |
|
Income from discontinued
operations, net of tax |
|
|
67 |
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(42,740 |
) |
|
|
(10.3 |
) |
|
$ |
(16,922 |
) |
|
|
(3.2 |
) |
|
|
152.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
As reflected in the tables above, consolidated net sales from continuing operations decreased from
$523.7 million for the year-to-date ended March 23, 2008 to $413.8 million for the year-to-date
period ended March 29, 2009 which was primarily attributable to decreased sales volumes in the
polyester and nylon segments as a result of the previously described market conditions.
Consolidated unit volumes decreased by 24.1% for the current year-to-date period, while average net
selling prices increased 3.2% for the same period.
Consolidated gross profit from continuing operations decreased by $16.6 million to $16.1 million
for the year-to-date period ended March 29, 2009 as compared to the prior year-to-date period.
This decrease was attributable to lower sales volumes and lower conversion margins in both the
polyester and nylon segments. The decrease in sales volumes was attributable to the global
economic slowdown which impacted all textile supply chains and markets. Consolidated conversion
margins decreased year-over-year as a result of higher fiber costs partially offset by improved
sales prices. Fiber as a percent of sales increased to 67.8% in the year-to-date period of fiscal
year 2009 from 57.4% in the prior year. Converting costs decreased on a dollar basis due to lower
volumes and plant consolidation efforts. Fixed and variable manufacturing expenses as a percent of
sales decreased to 27.5% from 34.8% in the prior year. Refer to the segment operations under the
captions Polyester Operations and Nylon Operations for a further discussion of each segments
operating results.
Severance and Restructuring Charges
In the third quarter of fiscal year 2009, the Company reorganized, reducing its workforce due to
the economic downturn. Approximately 200 salaried and wage employees were affected by this
reorganization related to the Companys efforts to reduce costs. As a result, the Company recorded
$0.3 million in severance charges related to certain salaried corporate and manufacturing support
staff.
During the year-to-date period ended March 28, 2008, the Company recorded a net $3.9 million in
restructuring charges related to unfavorable contract costs and $1.1 million in severance costs all
related to the closure of its Kinston, North Carolina facility offset by $0.4 million in favorable
adjustments related to a lease obligation associated with the closure of its Altamahaw, North
Carolina facility.
Write downs of Long-Lived Assets
During the first quarter of fiscal year 2008, the Companys Brazilian polyester operation continued
the modernization plan for its facilities by abandoning four of its older machines with newer
machines purchased from the Companys domestic polyester division. As a result, the Company
recognized a $0.5 million non-cash impairment charge on the older machines.
During the second quarter of fiscal year 2008, the Company evaluated the carrying value of the
remaining machinery and equipment at its Dillon, South Carolina facility. The Company sold several
machines to a foreign subsidiary and also transferred several other machines to its Yadkinville,
North Carolina facility. Five machines were scrapped for spare parts inventory. Six of the
remaining machines were leased under an operating lease to a manufacturer in Mexico at a fair
market value substantially less than their carrying value. These remaining machines were written
down to the fair market value determined by the lease; and as a result, the Company recorded a
non-cash impairment charge of $1.6 million in the second quarter of fiscal year 2008. The adjusted
net book value will be depreciated over a two year period which is consistent with the life of the
lease.
In addition, the Company negotiated with a third party to sell its manufacturing facility located
in Kinston, North Carolina. As a result of these negotiations, management concluded that the
carrying value of the real estate exceeded its fair value. Accordingly, a $0.7 million non-cash
impairment charge was recorded in the quarter ended December 23, 2007.
39
Goodwill Impairment
The Company accounts for its goodwill and other intangibles under the provisions of SFAS 142. SFAS
142 requires that these assets be reviewed for impairment annually, unless specific circumstances
indicate that a more timely review is warranted. This impairment test involves estimates and
judgments that are critical in determining whether any impairment charge should be recorded and the
amount of such charge if an impairment loss is deemed to be necessary. In accordance with the
provisions of SFAS 142, the Company determined that its reportable segments were comprised of three
reporting units; nylon, domestic polyester, and non-domestic polyester.
The Companys balance sheet at December 28, 2008 reflected $18.6 million of goodwill, all of which
related to the acquisition of Dillon in January 2007. The Company previously determined that all
of this goodwill should be allocated to the domestic polyester reporting unit. Based on a decline
in its market capitalization during the third quarter of fiscal year 2009 and difficult market
conditions, the Company determined that it was appropriate to re-evaluate the carrying value of its
goodwill during the quarter ended March 29, 2009. In connection with this third quarter interim
impairment analysis, the Company updated its cash flow forecasts based upon the latest market
intelligence, its discount rate and its market capitalization values. The fair value of the
domestic polyester reporting unit was determined based upon a combination of a discounted cash flow
analysis and a market approach. As a result of the findings, the Company determined that the
goodwill was impaired and recorded an impairment charge of $18.6 million in the third quarter of
fiscal year 2009.
Related Party Transactions
In fiscal year 2007, the Company purchased the polyester and nylon texturing operations of Dillon.
In connection with the Transaction, the Company and Dillon entered into a Sales and Services
Agreement for a term of two years from January 1, 2007, pursuant to which the Company agreed to pay
Dillon an aggregate amount of $6.0 million in exchange for certain polyester segment sales and
Dillon transitional services to be provided by Dillons sales staff and executive management. The
Company announced on April 26, 2007 its plan to close its Dillon polyester facility. As a result
of this announcement, the Company evaluated all contract obligations associated with the facility
and determined that this contract obligation partially included services to be rendered
specifically to that facility and therefore the Company would not receive any future economic
benefit from that portion of the contract once the facility was closed. As a result, the Company
recorded a $2.9 million restructuring charge related to that portion of the contract obligation.
The contract termination date was December 2008. The Company recorded nil and $0.3 million for the
third quarter of fiscal years 2009 and 2008 and $0.5 million and $0.8 million for the year-to-date
periods, respectively, related to this contract.
On December 1, 2008, the Company entered into an agreement to extend the polyester services portion
of the Sales and Service Agreement for a term of one year effective January 1, 2009 pursuant to
which the Company will pay Dillon an aggregate amount of $1.7 million. The Company recognized $0.4
million in expenses related to this contract in the March 2009 quarter. Mr. Stephen Wener is the
President and Chief Executive Officer of Dillon and is a director of the Company.
Selling, General, and Administrative Expenses
Consolidated SG&A expenses decreased by $7.2 million or 19.7% for the year-to-date period ended
March 29, 2009 as compared to the same period of the prior year. The decrease in SG&A was primarily
a result of decreases of $4.1 million in executive severance costs, $1.2 million in deposit
write-offs, $0.6 million related to the Companys Brazilian operation, $0.5 million in depreciation
expenses, $0.5 million in insurance expense, $0.4 million in salaries and fringe expenses, and $0.1
million in costs related to the Companys China operations. These decreases in SG&A were offset by
increases in SG&A of $0.2 million in deferred compensation costs.
40
Other Operating (Income) Expense, Net
Other operating (income) expense, net increased from $4.1 million for the year-to-date period of
fiscal year 2008 to $5.9 million for the same period of fiscal year 2009. The following table
shows the components of other operating (income) expense, net (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Nine-Months Ended |
|
|
|
March 29, |
|
|
March 23, |
|
|
|
2009 |
|
|
2008 |
|
Gain on sale of fixed assets |
|
$ |
(5,865 |
) |
|
$ |
(1,872 |
) |
Gain from sale of nitrogen credits |
|
|
|
|
|
|
(1,614 |
) |
Technology fee from China joint venture |
|
|
|
|
|
|
(875 |
) |
Currency (gains) losses |
|
|
(22 |
) |
|
|
305 |
|
Other, net |
|
|
25 |
|
|
|
(31 |
) |
|
|
|
|
|
|
|
Other operating (income) expense, net |
|
$ |
(5,862 |
) |
|
$ |
(4,087 |
) |
|
|
|
|
|
|
|
Write downs of Investment in Unconsolidated Affiliates
During the first quarter of fiscal year 2008 in connection with negotiations related to the sale of
its investment in USTF, the Company determined that a review of the carrying value of its
investment was necessary. As a result of this review, the Company determined that the carrying
value exceeded its fair value. Accordingly, a non-cash impairment charge of $4.5 million was
recorded in the first quarter of fiscal year 2008.
During the second quarter of fiscal year 2009, the Company and YCFC renegotiated the proposed
agreement to sell the Companys interest in YUFI to YCFC from $10.0 million to $9.0 million,
pending final negotiation and execution of definitive agreements and the receipt of Chinese
regulatory approvals. As a result, the Company recorded an additional impairment charge of $1.5
million due to the decline in the value of its investment and other related assets.
Income Taxes
The Companys income tax provision for the year-to-date period ended March 29, 2009 resulted in tax
expense at an effective tax rate of 5.9% compared to the year-to-date period ended March 23, 2008,
which resulted in tax benefit at an effective tax rate of 40.0%. The Companys effective tax rate
for the year-to-date period ended March 29, 2009 differed from the U.S. statutory rate primarily
due to an increase in valuation allowance related to losses in the U.S. and certain other foreign
countries and state income taxes. The Companys effective tax rate for the year-to-date period
ended March 23, 2008 differed from the U.S. statutory rate primarily due to foreign operations
taxed at a lower effective rate, state income taxes, and a decrease in the valuation allowance.
Deferred income taxes have been provided for the temporary differences between financial statement
carrying amounts and the tax basis of existing assets and liabilities. The Company has continued to
record a valuation allowance against its net domestic deferred tax assets, and certain foreign
deferred tax assets related to net operating losses, as those net deferred tax assets are more
likely than not to be unrealizable for income tax purposes. The valuation allowance increased $17.2
million in the year-to-date period ended March 29, 2009, compared to a decrease of $6.7 million in
the year-to-date period ended March 23, 2008. The net increase in the valuation allowance for the
year-to-date period ended March 29, 2009 primarily consisted of a $10.7 million increase for net
operating losses generated year-to-date (federal and state), and a $6.5 million increase related to
other temporary differences.
As a result of the discussions above, loss from continuing operations before income taxes was $40.4
million in the year-to-date period of fiscal year 2009 as compared to a loss of $28.2 million for
the same period of fiscal year 2008.
41
Polyester Operations
Polyester unit volumes decreased 25.4% for the year-to-date period ended March 29, 2009, while
average net selling prices increased 2.8% compared to the prior year-to-date period. Net sales for
the polyester segment
for the year-to-date period of fiscal year 2009 decreased by $88.3 million or 22.6% as compared to
the same period in the prior year. Domestic sales of polyester decreased overall by 25.9%
primarily due to a decline in volume related to the market slowdown and decreased sales of
commodity POY from shutting down the Kinston facility in October 2007.
Sales in local currency for the Brazilian operation decreased by 3.9% for the year-to-date period
ended March 29, 2009 compared to the same period in the prior year primarily due to a decrease in
unit volumes of 4.4%, partially offset an increase in average selling prices of 0.5%. The decrease
in U.S. dollar net sales for the period as compared to the prior year period includes a reduction
of $10.5 million due to an increase in the Brazilian currency exchange rate.
During the second quarter of fiscal year 2009, the Company experienced a decline in its polyester
business beginning in November 2008 which was attributable to market conditions previously
discussed. This trend continued into the third quarter of fiscal year 2009. Consolidated
polyester fiber costs increased as a percent of net sales to 69.8% in the year-to-date period of
fiscal year 2009 from 55.8% in the prior year period, reflecting a spike in raw material prices
during the first quarter of the current fiscal year.
Converting costs, excluding the Brazilian currency impact, decreased 42.8% compared to the same
period in the prior year as a result of lower sales volumes, the closure of the Kinston facility,
and other consolidation efforts. Fixed and variable manufacturing costs decreased as a percentage
of consolidated polyester net sales to 26.7% from 36.8% in the prior period. Domestically, fixed
and variable manufacturing expenses decreased 8.9% as a percentage of sales. Domestic variable
manufacturing expenses decreased for the year-to-date period of fiscal year 2009 as a result of
lower variable expenses including wage and fringe costs, packaging costs, utility expenses, and
other various expenses due to lower volumes. Fixed manufacturing expenses for the domestic
polyester operations decreased primarily as a result of lower fixed costs including depreciation
expense and salaries and fringes as a result of plant closure and consolidation efforts. As a
result, gross profit for the polyester operations decreased $15.0 million, or 64.3%, over the prior
year-to-date period, and gross margin (gross profit as a percentage of net sales) decreased to 2.7%
for the year-to-date period of fiscal year 2009 from 5.9% in the prior year period.
SG&A expenses for the year-to-date period of fiscal year 2009 were $23.2 million compared to $31.2
million in the same period in the prior year. Refer to the discussion of SG&A in the year-to-date
overview discussed above.
Nylon Operations
Nylon unit volumes decreased by 13.7% for the year-to-date period of fiscal year 2009 compared to
the same period in the prior year while average selling prices decreased by 2.6%. Net sales for
the nylon segment for the year-to-date period of fiscal year 2009 decreased by $21.6 million or
16.2% as compared to the same period in the prior year. This decrease in net sales was primarily
due to weak demand for both its nylon textured and covered products.
Consolidated nylon fiber costs increased as a percent of net sales to 62.5% in the year-to-date
period of fiscal year 2009 from 62.2% in the prior year year-to-date period. On a dollar basis,
fiber costs decreased by 15.9% for the year-to-date period in fiscal year 2009 as compared to the
same period last year as a result of decreased volumes previously discussed above.
42
Total converting costs for the nylon segment decreased by 16.6% in the same period as compared to
the same period in the prior year reflecting lower volumes and lower depreciation expense partially
offset by higher other converting costs resulting in overall lower cost per unit. Fixed and
variable manufacturing costs increased as a percentage of consolidated nylon net sales to 29.7% in
the year-to-date period from 29.2% in the prior year-to-date period. Wage and fringe costs and
utility expenses were lower due to lower nylon sales volumes. Fixed manufacturing costs decreased
primarily in depreciation expense from the year-to-date period of fiscal year 2009 compared to
prior year-to-date period. As a result, gross profit for the nylon operations decreased $1.7
million, or 17.6%, over the prior year-to-date period, and gross margin (gross profit as a
percentage of net sales) decreased to 7.0% for the year-to-date period of fiscal year 2009 from
7.1% in the prior year period.
SG&A expenses for the year-to-date period of fiscal year 2009 were $6.1 million compared to $5.3
million for the year-to-date period of fiscal year 2008. Refer to the discussion of SG&A in the
year-to-date overview discussed above.
Corporate
On July 26, 2006, the Committee authorized the issuance of an additional 1,065,000 stock options to
certain key employees from the 1999 Long-Term Incentive Plan. In addition, on October 24, 2007,
the Committee authorized the issuance of approximately 1,570,000 stock options from the 1999
Long-Term Incentive Plan, of which 120,000 were issued to certain Board members and the remaining
options were issued to certain key employees. On October 29, 2008, the shareholders of the Company
approved the 2008 Unifi, Inc. Long-Term Incentive Plan (2008 Long-Term Incentive Plan). The 2008
Long-Term Incentive Plan authorized the issuance of up to 6,000,000 shares of Common Stock pursuant
to the grant or exercise of stock options, including Incentive Stock Options (ISO), Non-Qualified
Stock Options (NQSO) and restricted stock, but not more than 3,000,000 shares may be issued as
restricted stock. Option awards are granted with an exercise price not less than the market price
of the Companys stock at the date of grant. During the second quarter of fiscal year 2009, the
Committee of the Board authorized the issuance of 280,000 stock options from the 2008 Long-Term
Incentive Plan to certain key employees. As a result of these grants, the Company incurred $1.0
million and $0.7 million of stock-based compensation charges in the year-to-date periods for fiscal
years 2009 and 2008, respectively, which were recorded as SG&A expenses with the offset to
additional paid-in-capital.
Liquidity and Capital Resources
Liquidity Assessment
The Companys primary capital requirements are for working capital, capital expenditures and
service of indebtedness. Historically, the Company has met its working capital and capital
maintenance requirements from its operations. Asset acquisitions and joint venture investments
have been financed by asset sales proceeds, cash reserves and borrowing under its financing
agreements discussed below.
In addition to its normal operating cash and working capital requirements and service of its
indebtedness, the Company will also require cash to fund capital expenditures and enable cost
reductions through restructuring projects as follows:
Capital Expenditures. The Company estimates its fiscal year 2009 capital expenditures will be
within a range of $14.0 million to $15.0 million. The Companys capital expenditures primarily
relate to maintenance of existing assets and equipment and technology upgrades to support PVA
initiatives. Management continuously evaluates opportunities to further reduce production costs,
and the Company may incur additional capital expenditures from time to time as it pursues new
opportunities for further cost reductions.
43
Joint Venture Investments. During the first nine months of fiscal year 2009, the Company received
$2.9 million in dividend distributions from its joint ventures. Although historically over the
past five years the
Company has received distributions from certain of its joint ventures, there is no guarantee that
it will continue to receive distributions in the future. The Company may from time to time increase
its interest in its joint ventures, sell its interest in its joint ventures, invest in new joint
ventures or transfer idle equipment to its joint ventures.
On July 31, 2008, the Company announced a proposed agreement to sell its 50% ownership
interest in YUFI to its partner, YCFC, for $10.0 million. During the second quarter of fiscal year
2009, the Company and YCFC renegotiated the proposed agreement to sell the Companys interest in
YUFI to YCFC for $9.0 million, pending final negotiation and execution of definitive agreements and
the receipt of Chinese regulatory approvals. As a result, the Company recorded an additional
impairment charge of $1.5 million due to the decline in the value of its investment and other
related assets. During the fourth quarter of fiscal year 2009, the Company announced that it had
closed on the sale of its investment in YUFI to YCFC and had received $9.0 million in proceeds.
Cash Provided by (Used In) Continuing Operations
The Company provided $4.6 million of cash from continuing operations in the first nine months of
fiscal year 2009 compared to cash used in continuing operations of $1.4 million for the first nine
months of fiscal year 2008. The net loss of $42.7 million in the first nine months of fiscal year
2009 was adjusted positively for items such as decreases in accounts receivable of $23.0 million,
depreciation and amortization of $25.2 million, goodwill impairment of $18.6 million, decrease in
inventory of $12.3 million, impairment charge of $1.5 million, provision for bad debt of $1.8
million, increase in additional paid in capital related to stock-based compensation expense of $1.0
million, restructuring charges of $0.3 million, and decreases in other miscellaneous assets of $0.3
million offset by decreases in accounts payable and accrued expenses of $23.3 million, gains from
the sale of capital assets of $5.9 million, increases in prepaid expenses of $5.0 million, income
from unconsolidated equity affiliates net of distributions of $1.6 million, net decrease in income
tax payable and deferred taxes of $0.8 million, and income from discontinued operations of $0.1
million.
The following discussion regarding the receipt and or use of cash from operations is a comparison
of the first nine months of fiscal year 2008 compared to the first nine months of fiscal year 2009.
Cash received from customers decreased from $520.1 million to $437.1 million due to a decrease in
sales volume of 24.1% offset by an increase in weighted average net selling prices of 3.15%.
Payments for cost of sales and SG&A expenses excluding salaries, wages and related benefits
decreased from $434.6 million to $351.6 million primarily due to lower volumes and cost
consolidation efforts. Salary and wage payments decreased as well from $76.4 million to $68.9
million. Interest payments decreased from $13.5 million to $11.4 million as a result of the
reduction in principal borrowing on LIBOR rate loans. Restructuring and severance payments
increased in the current year period by $2.1 million due to the timing differences between the
recognition of the expense and the actual cash outlay. Taxes paid by the Company increased from
$2.4 million to $2.9 million primarily due to the timing of tax payments made by its Brazilian
subsidiary. The Company received cash dividends of $1.2 million in the first nine months of fiscal
year 2008 compared to $2.9 million in the first nine months in fiscal year 2009 as a result of
increased net income recognized by PAL. Other net cash provided by or used in operating activities
was derived from miscellaneous items, other operating income (expense) items, and interest income.
On a U.S. dollar basis, working capital decreased from $185.3 million at June 29, 2008 to $176.9
million at March 29, 2009 due to decreases in accounts receivable of $31.8 million, decreases in
inventories of $21.3 million, decreases in restricted cash of $3.5 million, decreases in assets
held for sale of $2.4 million, decreases in deferred income tax assets of $0.9 million offset by
increases in cash of $3.3 million, decreases in accounts payable of $19.6 million, decreases in
accrued expenses of $5.2 million, decreases in current maturities of long-term debt and other
current liabilities of $3.7 million, increases in other current assets of $1.2 million, and
decrease in income taxes payable of $0.7 million. The remaining increase in working capital
relates to the reclassification of investment in unconsolidated affiliate of $9.0 million and the
reclassification of restricted cash of $8.8 million from long-term assets to current assets.
Working capital was negatively affected by $18.6 million in currency translations related to the
Companys Brazilian subsidiary. The working capital current ratio was 3.3 at June 29, 2008 and 4.4
at March 29, 2009.
44
Cash Provided By (Used In) Investing Activities and Financing Activities
The Company provided $9.4 million from net investing activities and used $4.1 million in net
financing activities during the year-to-date period ended March 29, 2009. The primary cash
expenditures for investing and financing activities during the current period included $22.2
million for payments of long-term debt, $10.9 million in capital expenditures, $0.5 million of
acquisition costs, $0.3 million of other financing activities and $0.2 million increases in
officers life insurance offset by $14.6 million in borrowings of long-term debt, a $14.0 million
decrease in restricted cash, $7.0 million in proceeds from the sale of capital assets, and $3.8
million from stock option exercises.
The Companys ability to fund operations, meet its debt service obligations and reduce its total
debt will depend upon its ability to generate cash in the future which, in turn, will be subject to
general economic, financial, business, competitive, legislative, regulatory and other conditions,
many of which are beyond its control. The Company may not be able to generate sufficient cash flow
from operations and future borrowings may not be available to the Company under its amended
revolving credit facility in an amount sufficient to enable it to repay its debt or to fund its
other liquidity needs. If its future cash flow from operations and other capital resources are
insufficient to pay its obligations as they mature or to fund its liquidity needs, the Company may
be forced to reduce or delay its business activities and capital expenditures, sell assets, obtain
additional debt or equity capital or restructure or refinance all or a portion of its debt on or
before maturity. The Company may not be able to accomplish any of these alternatives on a timely
basis or on satisfactory terms, if at all. In addition, the terms of its existing and future
indebtedness, including its 11.5% senior secured notes which mature on May 15, 2014 (the 2014
notes) and its amended revolving credit facility, may limit its ability to pursue any of these
alternatives. See Item 1ARisk FactorsThe Company will require a significant amount of cash to
service its indebtedness, and its ability to generate cash depends on many factors beyond its
control included in the Companys Form 10-K for the fiscal year ended June 29, 2008. Some risks
that could adversely affect its ability to meet its debt service obligations include, but are not
limited to, intense domestic and foreign competition in its industry, general domestic and
international economic conditions, changes in currency exchange rates, interest and inflation
rates, the financial condition of its customers and the operating performance of joint ventures,
alliances and other equity investments.
Other Factors Affecting Liquidity
Asset Sales. Under the terms of the Companys debt agreements, the sale or other disposition of
any assets or rights as well as the issuance or sale of equity interests in the Companys
subsidiaries is considered an asset sale (Asset Sale) subject to various exceptions. The Company
has granted liens to its lenders on substantially all of its assets (Collateral). Further, the
debt agreements place restrictions on the Companys ability to dispose of certain assets which do
not qualify as Collateral (Non-Collateral). Pursuant to the debt agreements the Company is
restricted from selling or otherwise disposing of either its Collateral or its Non-Collateral,
subject to certain exceptions, such as ordinary course of business inventory sales and sales of
assets having a fair market value of less than $2.0 million.
45
The Indenture with respect to the 2014 notes dated May 26, 2006 between the Company and its
subsidiary guarantors and U.S. Bank, National Association, as the trustee (the Indenture) governs
the sale of both Collateral and Non-Collateral and the use of sales proceeds. The Company may not
sell Collateral unless it satisfies four requirements. They are:
|
1. |
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The Company must receive fair market value for the Collateral sold or disposed of; |
|
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2. |
|
Fair market value must be certified by the Companys Chief Executive Officer or Chief
Financial Officer and for sales of Collateral in excess of $5.0 million, by the Companys
Board of Directors; |
|
|
3. |
|
At least 75% of the consideration for the sale of the Collateral must be in the form of
cash or cash equivalents and 100% of the proceeds must be deposited by the Company into a
specified account designated under the Indenture (the Collateral Account); and |
|
|
4. |
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Any remaining consideration from an asset sale that is not cash or cash equivalents
must be pledged as Collateral. |
Within 360 days after the deposit of proceeds from the sale of Collateral into the Collateral
Account, the Company may invest the proceeds in certain other assets, such as capital expenditures
or certain permitted capital investments (Other Assets). Any proceeds from the sale of
Collateral that are not applied or invested within the 360 day period, shall constitute excess
collateral proceeds (Excess Collateral Proceeds).
Once Excess Collateral Proceeds from sales of Collateral exceed $10.0 million, the Company must
make an offer, no later than 365 days after such sale of Collateral, to all holders of the 2014
notes to repurchase such 2014 notes at par (Collateral Sale Offer). The Collateral Sale Offer
must be made to all holders to purchase 2014 notes to the extent of the Excess Collateral Proceeds.
Any Excess Collateral Proceeds remaining after the completion of a Collateral Sale Offer may be
used by the Company for any purpose not prohibited by the Indenture.
The Indenture also governs sales of Non-Collateral. The Company may not sell Non-Collateral unless
it satisfies three specific requirements. They are:
|
1. |
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The Company must receive fair market value for the Non-Collateral sold or disposed of; |
|
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2. |
|
Fair market value must be certified by the Companys Chief Executive Officer or Chief
Financial Officer and for asset sales in excess of $5.0 million, by the Companys Board of
Directors; and, |
|
|
3. |
|
At least 75% of the consideration for the sale of Non-Collateral must be in the form of
cash or cash equivalents. |
The Indenture does not require the proceeds to be deposited by the Company into the applicable
Collateral Account, since the assets sold were not Collateral under the terms of the Indenture.
Within 360 days after receipt of the proceeds from a sale of Non-Collateral, the Company may
utilize the proceeds in one of the following ways: 1) repay, repurchase or otherwise retire the
2014 notes; 2) repay, repurchase or otherwise retire other indebtedness of the Company that is pari
passu with the 2014 notes, on a pro rata basis; 3) repay indebtedness of certain subsidiaries
identified in the Indenture, none of which are a Guarantor; or 4) acquire or invest in Other
Assets. Any net proceeds from a sale of Non-Collateral that are not applied or invested within the
360 day period, shall constitute excess proceeds (Excess Proceeds).
Once Excess Proceeds from sales of Non-Collateral exceed $10.0 million the Company must make an
offer, no later than 365 days after such sale of Non-Collateral to all holders of the 2014 notes
and holders of other indebtedness that is pari passu with the 2014 notes to purchase or redeem the
maximum amount of 2014 notes and/or other pari passu indebtedness that may be purchased out of the
Excess Proceeds (Asset Sale
46
Offer). The purchase price of such an Asset Sale Offer must be equal
to 100% of the principal amount of
the 2014 notes and such other indebtedness. Any Excess Proceeds remaining after completion of the
Asset Sale Offer may be used by the Company for any purpose not prohibited by the Indenture. As of
March 29, 2009, the Company had $2.3 million of Excess Proceeds.
On March 20, 2008, the Company completed the sale of assets located at Kinston. The Company
retains certain rights to sell idle assets for a period of two years. If after the two year period
the assets have not sold, the Company will convey them to the buyer for no value. As of March 29,
2009, the value of these assets held for sale was $1.7 million and would be considered a sale of
Collateral.
In the first quarter of fiscal year 2009, the Company entered into an agreement to sell a 380,000
square foot facility in Yadkinville for $7.0 million and such sale was a sale of Non-Collateral
assets. On December 19, 2008, the Company completed the sale which resulted in net proceeds of
$6.6 million and a net pre-tax gain of $5.2 million in the second quarter of fiscal year 2009.
In the fourth quarter of fiscal year 2009, the Company completed its sale of its equity interest in
YUFI and received proceeds of $9.0 million. In accordance with the Indenture, the sale of the YUFI
equity interest was an exception to the definition of an Asset Sale and therefore the use
restrictions applicable to the proceeds of Asset Sales do not apply.
As of March 29, 2009, the balance in the Collateral Account was $8.8 million consisting entirely of
Excess Collateral Proceeds. On April 3, 2009, the Company used the entire $8.8 million of Excess
Collateral Proceeds to repurchase $8.8 million of 2014 notes at par.
Other Potential Resources. While there is no requirement in the Indenture to use Excess Proceeds
or Excess Collateral Proceeds to offer to repurchase the 2014 notes (at par) prior to the time
either category respectively reaches $10.0 million, the Company may elect, from time to time, to
make such offers earlier, at its discretion. Additionally, the Company may also from time to time
seek to retire or purchase a portion of the 2014 notes in open market purchases, in privately
negotiated transactions or otherwise. Such retirement or purchases of the 2014 notes may come from
the operating cash flows of the business or other sources and will depend upon prevailing market
conditions, liquidity requirements, contractual restrictions and other factors, and the amounts
involved may be material.
Stock Repurchase Program. Effective July 26, 2000, the Board authorized the Company to
repurchase up to 10.0 million shares of its common stock. As of March 29, 2009, the Company had
remaining authority to repurchase approximately 6.8 million shares of its common stock under the
repurchase plan. The repurchase program was suspended in November 2003, and the Company has no
immediate plans to reinstitute the program.
Environmental Liabilities. On September 30, 2004, the Company completed its acquisition of the
polyester filament manufacturing assets located at Kinston from INVISTA S.a.r.l. (INVISTA). The
land for the Kinston site was leased pursuant to a 99 year ground lease (Ground Lease) with E.I.
DuPont de Nemours (DuPont). Since 1993, DuPont has been investigating and cleaning up the
Kinston site under the supervision of the United States Environmental Protection Agency (EPA) and
the North Carolina Department of Environment and Natural Resources (DENR) pursuant to the
Resource Conservation and Recovery Act Corrective Action program. The Corrective Action program
requires DuPont to identify all potential areas of environmental concern (AOCs), assess the
extent of containment at the identified AOCs and clean it up to comply with applicable regulatory
standards. Under the terms of the Ground Lease, upon completion by DuPont of required remedial
action, ownership of the Kinston site was to pass to the Company and after seven years of sliding
scale shared responsibility with DuPont, the Company would have had sole responsibility for future
remediation requirements, if any. Effective March 20, 2008, the Company entered into a Lease
Termination Agreement associated with conveyance of certain assets at Kinston to DuPont. This
agreement terminated the Ground Lease and relieved the Company of any future responsibility for
environmental
47
remediation, other than participation with DuPont, if so called upon, with regard to
the Companys period of operation of the Kinston site. However, the Company continues to own a
satellite service facility acquired in
the INVISTA transaction that has contamination from DuPonts operations and is monitored by DENR.
This site has been remediated by DuPont and DuPont has received authority from DENR to discontinue
remediation, other than natural attenuation. DuPonts duty to monitor and report to DENR will be
transferred to the Company in the future, at which time DuPont must pay the Company for seven years
of monitoring and reporting costs and the Company will assume responsibility for any future
remediation and monitoring of the site. At this time, the Company has no basis to determine if and
when it will have any responsibility or obligation with respect to the AOCs or the extent of any
potential liability for the same.
Market Conditions. Further deterioration of the current global economic conditions could reduce
demand for the Companys product faster than managements ability to react through further
consolidation of its manufacturing capacity, since the Company is a high volume, high fixed cost
business. These conditions could also materially affect the Companys customers causing reductions
or cancellations of existing sales orders and inhibit the collectibility of receivables. In
addition, the Companys suppliers may be unable to fulfill the Companys outstanding orders or
could change credit terms that would negatively affect the Companys liquidity. All of these
factors could adversely impact the Companys results of operations, financial condition and cash
flows.
Long-Term Debt
In May 2006, the Company amended its asset-based revolving credit facility with the Amended Credit
Agreement to provide a $100 million revolving borrowing base (with an option to increase borrowing
capacity up to $150 million), to extend its maturity from 2006 to 2011, and to revise some of its
other terms and covenants. The Amended Credit Agreement is secured by first-priority liens on the
Companys and its subsidiary guarantors inventory, accounts receivable, general intangibles (other
than uncertificated capital stock of subsidiaries and other persons), investment property (other
than capital stock of subsidiaries and other persons), chattel paper, documents, instruments,
supporting obligations, letter of credit rights, deposit accounts and other related personal
property and all proceeds relating to any of the above, and by second-priority liens, subject to
permitted liens, on the Companys and its subsidiary guarantors assets securing the notes and
guarantees on a first-priority basis, in each case other than certain excluded assets. The
Companys ability to borrow under the Amended Credit Agreement is limited to a borrowing base equal
to specified percentages of eligible accounts receivable and inventory and is subject to other
conditions and limitations.
Borrowings under the Amended Credit Agreement bear interest at rates selected periodically by the
Company of LIBOR plus 1.50% to 2.25% for LIBOR rate revolving loans and prime plus 0.00% to 0.50%
for the prime rate revolving loan. The Company can decrease the LIBOR revolving loan interest rate
by 0.25% if it maintains a fixed charge coverage ratio in excess of 1.5 to 1.0 for the four
previous fiscal quarters. The interest rate matrix is based on the Companys excess availability
under the Amended Credit Agreement. The interest rate in effect at March 29, 2009 was 3.25% for
the prime rate revolving loan. Under the Amended Credit Agreement, the Company pays an unused line
fee ranging from 0.25% to 0.35% per annum of the borrowing base. The Company primarily borrows
using the LIBOR fixed rate loans discussed below.
48
As of March 29, 2009, the Company had no LIBOR rate revolving loans outstanding under the credit
facility. As of March 29, 2009, under the terms of the Amended Credit Agreement, the Company had
remaining availability of $70.2 million, however given the current economic conditions in the U.S.
and the tightening of the credit markets, the Companys ability to borrow under the agreement may
be negatively impacted.
The Amended Credit Agreement contains affirmative and negative customary covenants for asset based
loans that restrict future borrowings and capital spending. Such covenants include, without
limitation, restrictions and limitations on (i) sales of assets, consolidation, merger, dissolution
and the issuance of the Companys capital stock, each subsidiary guarantor and any domestic
subsidiary thereof, (ii) permitted encumbrances on the Companys property, each subsidiary
guarantor and any domestic subsidiary thereof, (iii) the incurrence of indebtedness by the Company,
any subsidiary guarantor or any domestic subsidiary thereof, (iv) the making of loans or
investments by the Company, any subsidiary guarantor or any domestic subsidiary thereof, (v) the
declaration of dividends and redemptions by the Company or any subsidiary guarantor and
(vi) transactions with affiliates by the Company or any subsidiary guarantor.
The
Amended Credit Agreement contains customary covenants for asset based
loans which restrict future borrowings and capital spending. It
includes a trailing twelve month fixed charge coverage ratio that
restricts the Companys ability to invest in certain assets if
the ratio becomes less than 1.0 to 1.0, after giving effect to such
investment on a pro forma basis. The Company was not subject to this
restriction for the quarter ended March 29, 2009, but this
restriction will likely apply in future quarters beginning with the
quarter ended June 28, 2009 until such time as the
Companys financial performance improves.
The Amended Credit Agreement also provides that if
availability becomes less than $25.0 million at any time during the quarter, the Company is
required to maintain a fixed charge coverage ratio of at least 1.1 to 1.0. The Company was not
subject to this restriction as of March 29, 2009, as its availability under the Amended Credit
Agreement was approximately $70.2 million. The Company also had available cash and cash
equivalents on hand of $23.5 million which could have been utilized to pay down any outstanding
debt under the Amended Credit Agreement (had it existed) to create additional availability.
However, if availability had fallen below $25.0 million, the Company would not have been in
compliance with the ratio based on its financial performance through March 29, 2009. Such failure,
if not waived or cured, allows the Amended Credit Agreement lenders to elect to discontinue lending
and to accelerate the payment of any outstanding debt under the Amended Credit Agreement.
It could also allow the lenders under the 2014 notes to declare all borrowings outstanding thereunder to be due and payable.
On May 26, 2006, the Company issued the 2014 notes. The estimated fair value of the 2014 notes,
based on quoted market prices, at March 29, 2009 and at June 29, 2008, was approximately $98.8
million and $157.7 million, respectively. The Company makes semi-annual interest payments of $10.4
million on the fifteenth of November and May each year.
As of March 29, 2009, the Company was in compliance with the Amended Credit Agreement and 2014 note
covenants.
As discussed under Other Factors Affecting Liquidity, in accordance with the 2014 notes
collateral documents and the Indenture, the net proceeds of sales of the First Priority Collateral
are required to be deposited into a separate account whereby the Company may use the restricted
funds to purchase additional qualifying assets. As of March 29, 2009, the balance in the
Collateral Account was $8.8 million consisting entirely of Excess Collateral Proceeds. On April 3,
2009 the Company used the entire $8.8 million of Excess Collateral Proceeds to repurchase $8.8
million of 2014 notes at par.
The Companys Brazilian subsidiary (the Subsidiary) receives loans from the government of the
State of Minas Gerais to finance 70% of the value added taxes due by the Subsidiary to the State of
Minas Gerais. These twenty-four month loans were granted as part of a tax incentive program for
producers in the State of Minas Gerais. The loans have a 2.5% origination fee and bear an effective
interest rate equal to 50% of the Brazilian inflation rate, which was 6.3% on March 29, 2009. The
loans are collateralized by a performance
49
bond letter issued by a Brazilian bank, which secures the
performance by the Subsidiary of its obligations
under the loans. In return for this performance bond letter, the Subsidiary makes certain
restricted cash deposits with the Brazilian bank in amounts equal to 100% of the loan amounts. The
deposits made by the Subsidiary earn interest at a rate equal to approximately 100% of the
Brazilian prime interest rate which was 11.3% as of March 29, 2009. The ability to make new
borrowings under the tax incentive program ended in May 2008 and was replaced by other favorable
tax incentives.
Recent Accounting Pronouncements
On December 29, 2008, the Company adopted SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities an amendment of FASB Statement No. 133 (SFAS 161)
requiring enhancements to the disclosure requirements for derivative and hedging activities. The
objective of the enhanced disclosure requirement is to provide the user of financial statements
with a clearer understanding of how the entity uses derivative instruments; how derivatives are
accounted for; and how derivatives affect an entitys financial position, cash flows and
performance. The statement applies to all derivative and hedging instruments. SFAS 161 is effective
for all fiscal years and interim periods beginning after November 15, 2008. The adoption of SFAS
161 did not materially change the Companys disclosures of derivative and hedging instruments.
In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair
Value Measurements (SFAS 157). SFAS 157 addresses how companies should measure fair value when
companies are required to use a fair value measure for recognition or disclosure purposes under
generally accepted accounting principles. As a result of SFAS 157 there is now a common definition
of fair value to be used throughout GAAP. The FASB believes that the new standard will make the
measurement of fair value more consistent and comparable and improve disclosures about those
measures. The provisions of SFAS 157 were to be effective for fiscal years beginning after
November 15, 2007. On February 12, 2008, the FASB issued Staff Position (FSP) FAS 157-2 which
delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). This FSP partially deferred the effective date of SFAS 157 to
fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for
items within the scope of this FSP. Effective for fiscal year 2009, the Company adopted SFAS 157
except as it applies to those nonfinancial assets and nonfinancial liabilities as noted in FSP
FAS 157-2 and the adoption of this standard did not have a material effect on its consolidated
financial statements.
Off Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements that have, or are reasonably
likely to have, a current or future material effect on the Companys financial condition, revenues,
expenses, results of operations, liquidity, capital expenditures or capital resources.
50
Forward-Looking Statements
Forward-looking statements are those that do not relate solely to historical fact. They include,
but are not limited to, any statement that may predict, forecast, indicate or imply future results,
performance, achievements or events. They may contain words such as believe, anticipate,
expect, estimate, intend, project, plan, will, or words or phrases of similar meaning.
They may relate to:
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the competitive nature of the textile industry and the impact of worldwide
competition; |
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changes in the trade regulatory environment and governmental policies and
legislation; |
|
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|
the availability, sourcing and pricing of raw materials; |
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|
general domestic and international economic and industry conditions in markets
where the Company competes, such as recession and other economic and political
factors over which the Company has no control; |
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|
changes in consumer spending, customer preferences, fashion trends and end-uses; |
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|
its ability to reduce production costs; |
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changes in currency exchange rates, interest and inflation rates; |
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the financial condition of its customers; |
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its ability to sell excess assets; |
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technological advancements and the continued availability of financial resources
to fund capital expenditures; |
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the operating performance of joint ventures, alliances and other equity
investments; |
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the impact of environmental, health and safety regulations; |
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the loss of a material customer; |
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employee relations; |
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volatility of financial and credit markets; |
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the continuity of the Companys leadership; |
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availability of and access to credit on reasonable terms; and |
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the success of the Companys consolidation initiatives. |
These forward-looking statements reflect the Companys current views with respect to future events
and are based on assumptions and subject to risks and uncertainties that may cause actual results
to differ materially from trends, plans or expectations set forth in the forward-looking
statements. New risks can emerge from time to time. It is not possible for the Company to predict
all of these risks, nor can it assess the extent to which any factor, or combination of factors,
may cause actual results to differ from those contained in forward-looking statements. The Company
will not update these forward-looking statements, even if its situation changes in the future,
except as required by federal securities laws.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risks associated with changes in interest rates and currency
fluctuation rates, which may adversely affect its financial position, results of operations and
Condensed Consolidated Statements of Cash Flows. In addition, the Company is also exposed to other
risks in the operation of its business.
51
Interest Rate Risk: The Company is exposed to interest rate risk through its various borrowing
activities. The majority of the Companys borrowings are in long-term fixed rate bonds.
Therefore, the market rate risk associated with a 100 basis point change in interest rates would
not be material to the Company at the present time.
Currency Exchange Rate Risk: The Company conducts its business in various foreign currencies. As
a result, it is subject to the transaction exposure that arises from foreign exchange rate
movements between the dates that foreign currency transactions are recorded (export sales and
purchase commitments) and the dates they are consummated (cash receipts and cash disbursements in
foreign currencies). The Company utilizes some natural hedging to mitigate these transaction
exposures. The Company also enters into foreign currency forward contracts for the purchase and
sale of European, North American, and Brazilian currencies to hedge balance sheet and income
statement currency exposures. These contracts are principally entered into for the purchase of
inventory and equipment and the sale of Company products into export markets. Counterparties for
these instruments are major financial institutions. The Company is specifically exposed to
currency exchange rate risk in its Brazilian operation.
Currency forward contracts are used to hedge exposure for sales in foreign currencies based on
specific sales orders with customers or for anticipated sales activity for a future time period.
Generally, 50% to 75% of the sales value of these orders is covered by forward contracts. Maturity
dates of the forward contracts are intended to match anticipated receivable collections. The
Company marks the outstanding accounts receivable and forward contracts to market at month end and
any realized and unrealized gains or losses are recorded as other income and expense. The Company
also enters currency forward contracts for committed or anticipated equipment and inventory
purchases. Generally, 50% of the asset cost is covered by forward contracts although 100% of the
asset cost may be covered by contracts in certain instances. Forward contracts are matched with
the anticipated date of delivery of the assets and gains and losses are recorded as a component of
the asset cost for purchase transactions when the Company is firmly committed. The latest maturity
for all outstanding purchase and sales foreign currency forward contracts are August 2009 and July
2009, respectively.
The dollar equivalent of these forward currency contracts and their related fair values are
detailed below (amounts in thousands):
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March 29, |
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June 29, |
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2009 |
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|
2008 |
|
Foreign currency purchase contracts: |
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|
Notional amount |
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$ |
883 |
|
|
$ |
492 |
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Fair value |
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|
885 |
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|
499 |
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|
|
|
|
Net (gain) loss |
|
$ |
(2 |
) |
|
$ |
(7 |
) |
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|
Foreign currency sales contracts: |
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|
|
|
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|
Notional amount |
|
$ |
656 |
|
|
$ |
620 |
|
Fair value |
|
|
691 |
|
|
|
642 |
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|
|
|
|
|
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|
Net gain (loss) |
|
$ |
(35 |
) |
|
$ |
(22 |
) |
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|
|
|
|
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|
For the quarters ended March 29, 2009 and March 23, 2008, the total impact of foreign currency
related items on the Condensed Consolidated Statements of Operations, including transactions that
were hedged and those that were not hedged, resulted in a pre-tax profit of $0.1 million and $0.2
million, respectively. For the year-to-date periods ended March 29, 2009 and March 23, 2008, the
total impact of foreign currency related items resulted in a pre-tax profit of $23 thousand and a
pre-tax loss of $0.3 million, respectively.
Inflation and Other Risks: The inflation rate in most countries the Company conducts business has
been low in recent years and the impact on the Companys cost structure has not been significant.
The Company is also exposed to political risk, including changing laws and regulations governing
international trade such as quotas and tariffs and tax laws. The degree of impact and the
frequency of these events cannot be predicted.
52
Item 4. Controls and Procedures
As of March 29, 2009, an evaluation of the effectiveness of the Companys disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange
Act of 1934, as amended (the Exchange Act)) was performed under the supervision and with the
participation of the Companys management, including the Chief Executive Officer and Chief
Financial Officer. Based on that evaluation, the Companys Chief Executive Officer and Chief
Financial Officer have concluded that the Companys disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company in its reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission rules and forms, and that
information required to be disclosed by the Company in the reports the Company files or submits
under the Exchange Act is accumulated and communicated to the Companys management, including its
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
There has been no change in the Companys internal control over financial reporting (as defined in
Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the Companys most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the Companys internal
controls over financial reporting.
53
Part II. Other Information
Item 1. Legal Proceedings
There are no pending legal proceedings, other than ordinary routine litigation incidental to the
Companys business, to which the Company is a party or of which any of its property is the
subject.
Item 1A. Risk Factors
There have been no material changes in the Companys risk factors set forth under Part 1A. Risk
Factors in its Annual Report on
Form 10-K for the fiscal year ended June 29, 2008, other than
the modification of the following risk factor:
The Company is dependent on a relatively small number of customers for a significant portion of
its net sales.
A significant portion of the Companys net sales is derived from a relatively small number of
customers and in particular the sales to one customer, Hanesbrands, Inc. (HBI). The Companys
supply agreement with HBI expired in April 2009. The Company and HBI have established a framework
for a new long-term supply contract that is anticipated to be finalized in the June quarter of
fiscal year 2009. However, there can be no assurances that the Company and HBI will finalize a
new supply agreement on this timetable or at all. If the HBI supply agreement is not renewed,
and the sales to HBI are reduced, the result could have a material adverse effect on the
Companys business and operating results. The Company expects to continue to depend upon its
principal customers for a significant portion of its sales, although there can be no assurance
that the Companys principal customers will continue to purchase products and services from it at
current levels, if at all. The loss of one or more major customers or a change in their buying
patterns could have a material adverse effect on the Companys business, financial condition and
results of operations.
These risk factors could materially affect the Companys business, financial condition and
future results and should be carefully considered. Additional risks and uncertainties not
currently known to management or that it currently deems to be immaterial also may materially
adversely affect the Companys business, financial condition and operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Items 2(a) and (b) are not applicable.
(c) The following table summarizes the Companys repurchases of its common stock during the
quarter ended March 29, 2009:
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Total Number of |
|
Maximum Number |
|
|
Total Number |
|
Average Price |
|
Shares Purchased as |
|
of Shares that May |
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|
of |
|
Paid |
|
Part of Publicly |
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Yet Be Purchased |
|
|
Shares |
|
per |
|
Announced Plans |
|
Under the Plans or |
Period |
|
Purchased |
|
Share |
|
or Programs |
|
Programs |
12/29/08 - 01/28/09 |
|
|
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|
|
|
|
|
|
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|
6,807,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/29/09 - 02/28/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,807,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/09 - 03/29/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,807,241 |
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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Total |
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54
On April 25, 2003, the Company announced that its Board had reinstituted the Companys
previously
authorized stock repurchase plan at its meeting on April 24, 2003. The plan was originally
announced by the Company on July 26, 2000 and authorized the Company to repurchase of up to
10.0 million shares of its common stock. During fiscal years 2004 and 2003, the Company
repurchased approximately 1.3 million and 0.5 million shares, respectively. The repurchase
program was suspended in November 2003 and the Company has no immediate plans to reinstitute
the program. As of March 29, 2009, there is remaining authority for the Company to
repurchase approximately 6.8 million shares of its common stock under the repurchase plan.
The repurchase plan has no stated expiration or termination date.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
10.1 |
|
Amendment to the Unifi, Inc. Supplemental Key Employee Retirement Plan (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K (Reg. No. 001-10542)
filed on December 31, 2008). |
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31.1 |
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Chief Executive Officers certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
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31.2 |
|
Chief Financial Officers certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
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32.1 |
|
Chief Executive Officers certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
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32.2 |
|
Chief Financial Officers certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
55
UNIFI, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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UNIFI, INC.
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Date: May 8, 2009 |
/s/ RONALD L. SMITH
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Ronald L. Smith |
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Vice President and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) |
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56