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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM----------------
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 27, 199925, 2000 - Commission File Number 1-10542
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UNIFI, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
New York 11-2165495
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
7201 West Friendly Avenue
Greensboro, North Carolina 27410
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(336) 294-4410
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(REGISTRANT'S TELEPHONE NO., INCLUDING AREA CODE)----------------
Unifi, Inc.
(Exact name of registrant as specified in its charter)
New York 11-2165495
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(State or other jurisdiction of (I.R.S. Employer identification no.)
incorporation or organization)
7201 West Friendly Avenue
Greensboro, North Carolina 27410
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(Address of principal executive offices) (Zip code)
(336) 294-4410
-------------------------------------------
(Registrant's telephone no., including area
code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Title of each class Name of each exchange on which registered
Common Stock, par value $.10 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section13Section 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 X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ][_]
Aggregate market value of the voting stock held by non-affiliated of the
registrant as of August 13, 199924, 2000 based on a closing price of $14.8125$11.3125 per
share: $865,598,433$580,331,182
Number of shares outstanding as of August 13, 1999: 59,548,65224, 2000: 54,526,659
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the Annual Meeting of the
Shareholders of Unifi, Inc., to be held on October 21, 1999,26, 2000, are incorporated
by reference into Part III.
Exhibits, Financial Statement Schedules and Reports on Form 8-K index is
located on pages 32 through 34.and 33.
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PART I
ITEMItem 1. BUSINESS
Unifi, Inc., a New York corporation formed in 1969, together with its subsidiaries,sub-
sidiaries, hereinafter set forth, (the "Company" or "Unifi"), is one of the
largest and most diversified producers and processors of textile yarns in the
world. The Company is primarily engaged in the processing of synthetic yarns in
two primary business segments, polyester and nylon. The polyester segment is
comprised of textured, dyed, twisted and beamed yarns with sales to knitters
and weavers that produce fabrics for the apparel, automotive and furniture upholstery,up-
holstery, home furnishings, industrial and other end use markets. The nylon
segment is comprised of textured nylon and covered spandex products with sales
to knitters and weavers that produce fabrics for the apparel, hosiery, socks
and other end use markets. See footnote to the Consolidated Financial Statements ("Footnote")Footnote 2
("Acquisitions"Acquisitions and Alliances") on pagepages 20 and 21 and Consolidated Financial
Statements Footnote 11 ("Investment in Unconsolidated Affiliates") on pages 27 andpage 28
of this Report for information concerning recent mergers, acquisitions, alli-
ances and consolidations of the Company's business, which is incorporated
herein by reference.
Texturing polyester and nylon filament fiber involves the processing of partiallypar-
tially oriented yarn ("POY"), which is either raw polyester or nylon filament
fiber purchased from chemical manufacturers or produced internally, to give it
greater bulk, strength, stretch, consistent dyeability and a softer feel,
thereby making it suitable for use in knitting and weaving of fabrics. The
texturing process involves the use of high-speed machines to draw, heat and
twist the POY to produce yarn having various physical characteristics, dependingdepend-
ing on its ultimate end use.
During the fourth quarter of fiscal year 1999, the Company formed Unifi
Technology Group, LLC ("UTG"), to provide consulting services focused on integratedinte-
grated manufacturing, factory automation and electronic commerce solutions to
other domestic manufacturers. Effective June 1, 1999, UTG acquired the assets
of Cimtec, Inc. ("Cimtec"), a manufacturing automation solutions provider, for
$10.5 million. Subsequently, a five-percentownership interest in the new entity was sold to
certain former Cimtec shareholders.shareholders and former Unifi executives. See Consoli-
dated Financial Statements Footnote 2 ("Acquisitions"Acquisitions and Alliances") on pagepages
20 and 21 of this Report for additional information on UTG.
See the information included under "Year 2000 Compliance Status" under
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 11 and 12 of this Report.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The primary third party suppliers of POY to the Company's polyester segment
are E. I. DuPont de Nemours and Company ("Dupont"DuPont"), Nanya Plastics Corp. of
America ("Nanya"), Kosa (formerly Hoechst Celanese Corporation), Wellman Industries,Indus-
tries, Reliance Industries, LTD. Korteks and P.T. Indorama Synthetics TBK, with
the majority of the Company's polyester POY being supplied by DuPont. In addition,addi-
tion, the Company has polyester POY manufacturing facilities in Ireland and Yadkinville,
North Carolina (which provides approximately 35% of its total domestic polyesterpolyes-
ter POY supply needs). and in Ireland. The production of POY is comprised of two
primary processes, polymerisation (performed in Ireland only) and spinning
(performed in both Ireland and Yadkinville). The polymerisation process is the
production of polymer by a chemical reaction involving terephthalic acid and
ethylene glycol, which are combined to form chip. The spinning process involves
the extrusion and melting of chip to form molten polymer. The molten polymer is
then extruded through spinnerettes to form continuous multi-filament raw yarn
(POY). Substantially all of the raw materials for such manufactured POY isare
supplied by Nanya for domestic production and by DupontDuPont and Bayer AG for our
Irish operation. The primary suppliers of POY to the Company's nylon segment
are DuPont, andUniversal Premier Fibers LLC (formerly Cookson Fibers, Inc.), and
Nilit, Ltd. with the majority of the Company's nylon POY being supplied by
DuPont.
Effective June 1, 2000, Unifi and DuPont began operating their America's
manufacturing alliance to produce polyester filament yarn. The goal of the al-
liance is to reduce operating costs through collectively planning and operating
both companies' POY facilities as a single production unit. The resulting asset
optimization, along with the sharing of manufacturing technologies, should re-
sult in significant quality and yield improvements and product innovations. See
the Consolidated Financial Statements Footnote 2 ("Acquisitions and Alliances")
on pages 20 and 21 for further information.
2
Although the Company is heavily dependent upon a limited number of suppliers,suppli-
ers, the Company has not had and does not anticipate any material
difficultysignificant diffi-
culty in obtaining its raw POY or raw materials used to manufacture polyester
POY.
PATENTS AND LICENSES:Patents and Licenses: The Company currently has several patents and registeredregis-
tered trademarks, none of which it considers material to its business as a
whole.
CUSTOMERS:Customers: The Company, in fiscal year ended June 27, 1999,25, 2000, sold its polyesterpoly-
ester yarns to approximately 1,1501,512 customers and its nylon yarns to approximately 400approxi-
mately 249 customers, no one customer's purchases exceeded 10%comprised approximately 11% of
net sales for the polyester segment during said period, while oneanother customer
comprised 19.5%approximately 20% of net sales for the
2
nylon segment for this time
period. The Company does not believe that either its
polyester segment or its nylon segment is dependent onthe loss of any one customer.
BACKLOG:customer would
have a materially adverse effect on either the polyester or nylon segment.
Backlog: The Company, other than in connection with certain foreign sales
and for textured yarns that are package dyed according to customers' specifications,specifi-
cations, does not manufacture to order. The Company's products can be used in
many ways and can be thought of in terms of a commodity subject to the laws of
supply and demand and, therefore, does not have what is considered a backlog
of orders. In addition, the Company does not consider its products to be seasonalsea-
sonal ones.
COMPETITIVE CONDITIONS:Competitive Conditions: The textile industry in which the Company currently
operates is keenly competitive. The Company processes and sells high-volume
commodity products, pricing is highly competitive with innovation, product
quality and customer service being essential for differentiating the competitorscompeti-
tors within the industry. Product innovation gives our customers competitive
advantages, while product quality insures manufacturing efficiencies for the customer.efficiencies. The
Company's polyester and nylon yarns compete in a worldwide market with a numbernum-
ber of other foreign and domestic producers of such yarns. In the sale of
polyester filament yarns, major domestic competitors are Dillon Yarn Company,
Inc., Spectrum Dyed Yarns, Inc. and Milliken & Company and in the sale of nylonny-
lon yarns major domestic competitors are Jefferson Mills, Inc. and Worldtex,
Inc. Additionally, there are numerous foreign competitors that sell polyester
and nylon yarns in the United States.
RESEARCH AND DEVELOPMENT:Research and Development: The estimated amount spent during each of the
last three fiscal years on Company-sponsored and Customer-sponsoredcustomer-sponsored research
and development activities is considered immaterial.
COMPLIANCE WITH CERTAIN GOVERNMENT REGULATIONS:Compliance With Certain Government Regulations: Management of the Company
believes that the operation of the Company's production facilities and the
disposal of waste materials are substantially in compliance with applicable
laws and regulations.
EMPLOYEES:Employees: The number of full-time employees of the Company is approximately 6,250.
FINANCIAL INFORMATION ABOUT SEGMENTS:approxi-
mately 6,680.
Financial Information About Segments: See the information included inConsolidated Financial State-
ments Footnote 9 ("Business Segments, Foreign Operations and Concentrations of
Credit Risk") on Page 24page 25 through Page 26page 27 of this Report for the Financial InformationIn-
formation About Segments required by Item 101 of Regulation S-K.
ITEMItem 2. PROPERTIES
The Company currently maintains a total of 2018 manufacturing and warehousing
facilities, one central distribution center and one recycling center in North
Carolina; one manufacturing and related warehousing facility in Staunton, Virginia;Vir-
ginia; one central distribution center in Fort Payne, Alabama; four manufacturingmanufac-
turing operations in Letterkenny, County of Donegal, Republic of Ireland; two
warehousing locations in Carrickfergus, Ireland; twoone manufacturing and one officeof-
fice building in Brazil, one manufacturing and administration building in Man-
chester, England and one manufacturing and administration facility in Bogota,
Colombia. All of these facilities, which contain approximately 8,166,1538.1 million
square feet of floor space, with the exception of one plant facility leased
from NationsBankBank of America Leasing and R.E. Corp.Capital LLC pursuant to a Sales-leaseback
Agreement entered on May 20, 1997, as amended, two warehouses in
Carrickfergus, Ireland, and one plant and the office in Brazil and the plant and office location
in Manchester, England are owned in fee;fee simple; and management believes they
are in good condition, well maintained, and are suitable and adequate for
present production.utilization.
3
The polyester segment of the Company's business uses 1716 manufacturing, sixfive
warehousing and one dedicated office totaling 5.3 million square feet. The nylonny-
lon segment of the Company's business uses utilizes six manufacturing and four
warehousing facilities aggregating 2.72.8 million square feet.
UTGUnifi Technology Group, LLC. ("UTG") leases six9 office locations in severalfour
states from which it conducts business.business utilizing approximately 80,000 square
feet.
The Company leases sales offices and/or apartments in New York,York; Coleshill,
England,England; Oberkotzau, Germany, andGermany; Lyon, France and has a representative office
in Tokyo, Japan.Desenzano, Italy.
The Company also leases its corporate headquarters building at 7201 West
Friendly Avenue, Greensboro, North Carolina, which consists of a building containingcon-
taining approximately 121,125 square feet located on a tract of land containing
approximately 8.99 acres. This property is leased from Merrill Lynch Trust CompanyCom-
pany of North Carolina, Trustee under the Unifi, Inc. Profit Sharing Plan and
Trust, and Wachovia Bank & Trust Company, N.A., Independent Trustee. On
May 20, 1996, the Company exercised its option to extend the term of the lease
on this property for five years, through March 13, 2002. Reference is made to a
copy of the lease agreement
3
attached to the Registrant's Annual Report on Form 10-K as Exhibit (10d) for the
fiscal year ended June 27, 1987, which is by reference incorporated herein.Independent. See the related
information included in the Consolidated Financial Statements Footnote 8
("Leases and Commitments") on Page 24page 25 of this Report.
ITEMItem 3. LEGAL PROCEEDINGS
The Company is not currently involved in any litigation which is considered
material, as that term is used in Item 103 of Regulation S-K.
ITEMItem 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter for the fiscal year ended June 27, 1999.25, 2000.
PART II
ITEMItem 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed for trading on the New York Stock Exchange.Ex-
change. The following table sets forth the range of high and low sales prices
of the Unifi Common Stock as reported on the NYSE Composite Tape and the regularregu-
lar cash dividends per share declared by Unifi during the periods indicated.
On July 16, 1998, the Company announced its intention to discontinue the
payment of cash dividends and utilize the cash to purchase shares of the
Company's common stock. Accordingly, effective July 16, 1998, the Board of DirectorsDi-
rectors of the Company terminated the previously established policy of paying
cash dividends equal to approximately 30% of the Company's after tax earnings
of the previous fiscal year.
As of August 13, 1999,24, 2000, there were approximately 849745 holders of record of the
Company's common stock.
HIGH LOW DIVIDENDS
----------- ----------- ----------High Low Dividends
------ ------ ---------
Fiscal year 1997:
First quarter ended September 29, 1996 .. $ 28.88 $ 26.00 $ .11
Second quarter ended December 29, 1996 .. $ 33.13 $ 26.63 $ .11
Third quarter ended March 30, 1997 ...... $ 33.88 $ 30.13 $ .11
Fourth quarter ended June 29, 1997 ...... $ 36.88 $ 29.63 $ .11
Fiscal year 1998:
First quarter ended September 28, 1997 .. $ 43.63 $ 35.06 $ .141997.......... $43.63 $35.06 $.14
Second quarter ended December 28, 1997 .. $ 42.25 $ 36.38 $ .141997.......... $42.25 $36.38 $.14
Third quarter ended March 29, 1998 ...... $ 42.13 $ 33.00 $ .141998.............. $42.13 $33.00 $.14
Fourth quarter ended June 28, 1998 ...... $ 39.56 $ 34.19 $ .141998.............. $39.56 $34.19 $.14
Fiscal year 1999:
First quarter ended September 27, 1998 .. $ 34.25 $ 17.131998.......... $34.25 $17.13 $ --
Second quarter ended December 27, 1998 .. $ 20.06 $ 11.941998.......... $20.06 $11.94 $ --
Third quarter ended March 28, 1999 ...... $ 19.56 $ 10.691999.............. $19.56 $10.69 $ --
Fourth quarter ended June 27, 1999 ......1999.............. $18.56 $11.56 $ 18.56--
Fiscal year 2000:
First quarter ended September 26, 1999.......... $21.25 $11.00 $ 11.56--
Second quarter ended December 26, 1999.......... $13.50 $10.69 $ --
Third quarter ended March 26, 2000.............. $12.81 $ 7.88 $ --
Fourth quarter ended June 25, 2000.............. $14.94 $ 8.44 $ --
4
ITEMItem 6. SELECTED FINANCIAL DATA
JUNE(Amounts in thousands, except per June 25, 2000 June 27, 1999 JUNEJune 28, 1998 JUNEJune 29, 1997 JUNEJune 30, 1996
JUNE 25, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)share data) (52 WEEKS)Weeks) (52 WEEKS)Weeks) (52 WEEKS)Weeks) (52 Weeks) (53 WEEKS) (52 WEEKS)Weeks)
- ----------------------------------------------- --------------- --------------- --------------- --------------- ----------------------------------------------- ------------- ------------- ------------- ------------- -------------
Summary of Earnings:
Net sales .....................................sales............... $1,280,412 $1,251,160 $1,377,609 $1,704,926 $1,603,280
$1,554,557
Cost of sales .................................sales........... 1,116,841 1,076,610 1,149,838 1,473,667 1,407,608
1,330,410
Gross profit ..................................profit............ 163,571 174,550 227,771 231,259 195,672
224,147
Selling, general and
administrative
expense ......................................expense................ 58,063 55,338 43,277 46,229 45,084
43,116Provision for bad
debts.................. 8,694 1,129 724 750 --
Interest expense ..............................expense........ 30,294 27,459 16,598 11,749 14,593
15,452
Interest income ...............................income......... (2,772) (2,399) (1,869) (2,219) (6,757)
(10,372)
Other (income) expense ........................ 1,569 389 819expense.. 1,052 440 (335) 69 (4,390) (9,659)
Equity in (earnings)
losses of
unconsolidated
affiliates ....................affiliates............. 2,989 (4,214) (23,030) 399 --
--
Minority interest .............................interest....... 9,543 9,401 723 -- --
--
Non-recurring charge ..........................charge.... -- -- -- -- 23,826 --
---------- ---------- ---------- ---------- ----------
Income from continuing
operations before
income taxes and other
items listed below .................................below..... 55,708 87,396 191,683 174,282 123,316
185,610
Provision for income
taxes ....................taxes.................. 17,675 28,369 62,782 58,617 44,939 69,439
---------- ---------- ---------- ---------- ----------
Income before
extraordinary item and
cumulative effect of
accounting change .......................................change...... 38,033 59,027 128,901 115,665 78,377 116,171
---------- ---------- ---------- ---------- ----------
Extraordinary item, net
of tax ................tax................. -- -- -- -- 5,898 --
Cumulative effect of
accounting change, net
of tax ...........................tax................. -- 2,768 4,636 -- -- --
---------- ---------- ---------- ---------- ----------
Net income ....................................income.............. 38,033 56,259 124,265 115,665 72,479 116,171
========== ========== ========== ========== ==========
Per Share of Common
Stock:
Income before
extraordinary item and
cumulative effect of
accounting change
(diluted) ........................................... $ .65 $ .97 $ 2.08 $ 1.81 $ 1.18
$ 1.62
Extraordinary item
(diluted) ................................ -- -- -- ( .09) -- (.09)
Cumulative effect of
accounting change
(diluted) ............................. ( .04) ( .07).............. -- (.04) (.07) -- --
Net income (diluted) .............................. .65 .93 2.01 1.81 1.09
1.62
Cash dividends ................................dividends.......... -- -- .56 .44 .52
.40
Financial Data:
Working capital ...............................capital......... $ 15,604 $ 216,897 $ 209,878 $ 216,145 $ 196,222
$ 333,357
Gross property, plant
and equipment ....................................equipment.......... 1,250,470 1,231,013 1,145,622 1,147,148 1,027,128
910,383
Total assets ..................................assets............ 1,354,764 1,365,840 1,333,814 1,018,703 951,084
1,040,902
Long-term debt and other
obligations ..................................obligations............ 261,830 478,898 458,977 255,799 170,000
230,000
Shareholders' equity ..........................equity.... 622,438 646,138 636,197 548,531 583,206 603,502
Fiscal year 1995 through1996 and 1997 amounts include the spun cotton yarn operations
that were contributed to Parkdale America, LLC on June 30, 1997. The operating
results of our 34% ownership in Parkdale are accounted for as equity in (earn-
ings) losses of unconsolidated affiliates for fiscal 1998, 1999 and 2000.
The Working capital and Long-term debt and other liabilities line items at
June 25, 2000, reflect the classification of the outstanding balance under the
revolving line of credit of $211.5 million as a current liability. The revolv-
ing line of credit matures in April 2001. The Company intends to refinance this
debt on a long-term basis prior to maturity, however, no commitments or agree-
ments were in place to do so at June 25, 2000. When the Company does refinance
the debt, amounts owed beyond one year from that date will once again be clas-
sified as long-term debt.
5
ITEMItem 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FISCAL 2000
Following is a summary of operating income by segment for fiscal years 2000
and 1999, as reported regularly to the Company's management:
All
(Amounts in thousands) Polyester Nylon Other Total
- ---------------------- --------- -------- ------- ----------
Fiscal 2000
Net sales............................... $852,202 $408,481 $31,917 $1,292,600
Cost of sales........................... 747,917 352,379 21,024 1,121,320
Selling, general and administrative..... 37,713 15,103 9,952 62,768
-------- -------- ------- ----------
Segment operating income................ $ 66,572 $ 40,999 $ 941 $ 108,512
======== ======== ======= ==========
Fiscal 1999
Net sales............................... $822,763 $449,009 $ 1,561 $1,273,333
Cost of sales........................... 719,535 384,772 1,090 1,105,397
Selling, general and administrative..... 38,518 16,271 533 55,322
-------- -------- ------- ----------
Segment operating income (loss)......... $ 64,710 $ 47,966 $ (62) $ 112,614
======== ======== ======= ==========
As described in Consolidated Financial Statements Footnote 9, the adjust-
ments to revenues and expenses required to reconcile the operating segments to
consolidated results are comprised primarily of intersegment sales and cost of
sales eliminations, the provision for bad debts and various expenses reported
internally at a consolidated level.
Polyester operations
In fiscal 2000, polyester net sales increased $29.4 million, or 3.6% com-
pared to fiscal 1999. The increase over fiscal year 1999 is primarily attrib-
utable to the acquisition of our Brazilian operation in the fourth fiscal
quarter of 1999 and the acquisition of our dyed yarn operation in England at
the end of our fiscal third quarter. Net domestic sales increased slightly
over fiscal 1999 due to strength in our dyeing and twisting operations, offset
slightly by pricing pressures in our natural textured business. International-
ly, sales in local currency of our Irish Operation declined 5.4% for the year
due to lower average selling prices. Volume for our Irish operations increased
approximately 2.1% for the year. The currency exchange rate change from the
prior year to the current year adversely effected sales translated to U.S.
dollars for this operation by $13.0 million.
As described in the Consolidated Financial Statements Footnote 10 ("Deriva-
tive Financial Instruments and Fair Value of Financial Instruments"), the Com-
pany utilizes foreign currency forward contracts to hedge exposure for sales
in foreign currencies based on anticipated sales orders. Also, the purchases
and borrowings in those foreign currencies in which the Company has exchange
rate exposure provide a natural hedge and mitigate the effect of adverse fluc-
tuations in exchange rates.
Gross profit on sales for our polyester operations increased $1.0 million
over fiscal year 1999. Gross margin (gross profit as a percentage of net
sales) declined from 12.5% in fiscal year 1999 to 12.2% in fiscal year 2000.
In the prior year, gross margin for this segment was adversely impacted by a
$4.0 million charge for an early retirement package offered to employees.
Gross margin in fiscal 2000 declined primarily as a function of higher fiber
prices. Offsetting the effects of higher fiber prices were lower manufacturing
costs and increased sales for this segment.
Selling, general and administrative expenses for this segment declined $0.8
million from 1999 to 2000. In the prior year, this segment was allocated $5.7
million in selling, general and administrative expenses for the above men-
tioned early retirement package. Absent this charge, the current year selling,
general and adminis-
6
trative expenses for this segment would have increased $4.9 million. This in-
crease is primarily attributable to the start-up of our Brazilian operation,
which was only in operation two months of the prior year as well as the in-
crease in this segment's share of increased expenses incurred by our majority-
owned subsidiary, UTG. This subsidiary was formed in May 1999 and is a domestic
automation solutions provider.
Nylon operations
In fiscal 2000, nylon net sales decreased $40.5 million, or 9.0% compared to
fiscal 1999. Unit volumes for fiscal 2000 decreased by 5.3%, while average
sales prices, based on product mix, decreased 3.9%. The reductions in sales
volume and price are primarily attributable to the continuing softness of the
ladies hosiery market.
Nylon gross profit decreased $8.1 million and gross margin decreased from
14.3% in 1999 to 13.7% in 2000. This segment's share of the prior year early
retirement plan costs impacting gross profit was $2.6 million. Before the ef-
fect of the prior year early retirement expense, gross profit from 1999 to 2000
declined $10.7 million. This was primarily attributable to lower sales volume
and the shift in product mix caused by softness in the hosiery market.
Selling, general and administrative expense allocated to the nylon segment
decreased $1.2 million in fiscal 2000. The nylon segment selling, general and
administrative expenses in fiscal 1999 included a charge of $2.5 million for
the aforementioned early retirement plan. Before the effect of this charge,
selling general and administrative expenses for this segment would have in-
creased $1.3 million. This increase is primarily attributable to this segment's
share of increased selling, general and administrative expenses generated by
UTG.
The "All Other" segment primarily reflects the Company's majority owned sub-
sidiary, UTG established in May 1999. UTG is a domestic automation solutions
provider.
Consolidated operations
In the current year, the Company recorded an $8.0 million provision for bad
debts resulting from the general decline of industry conditions.
Interest expense increased $2.8 million, from $27.5 million in fiscal 1999
to $30.3 million in fiscal 2000. The increase in interest expense reflects
higher levels of interest-bearing debt outstanding at higher average interest
rates during fiscal 2000 and a $1.4 million reduction in capitalized interest
for major construction projects. The weighted average interest rate of our debt
outstanding at June 25, 2000 was 6.6%.
Interest income improved by $373 thousand from 1999 to 2000 primarily as a
result of higher levels of invested funds generated by our Irish operation.
Other expense increased from $440 thousand to $1.1 million from 1999 to 2000.
Other income and expense was negatively impacted in the current year by a $2.6
million write-off related to the abandonment of certain equipment associated
with domestic plant consolidations and $1.7 million in currency losses. These
amounts were offset, in part, by a $1.1 million gain recognized for insurance
proceeds recovered for a claim filed for property damage sustained by a tornado
and a $0.6 million gain recognized on the sale of an investment.
Earnings (losses) from our equity affiliates, Parkdale America, LLC. (the
"LLC") and Micell Technologies, Inc. ("Micell") totaled $(3.0) million in fis-
cal 2000 compared with $4.2 million in fiscal 1999. The decline in earnings is
primarily attributable to the reduced earnings of the LLC and higher start-up
expenses at Micell.
Minority interest expense for fiscal 2000 was $9.5 million compared to $9.4
million in the prior year. This charge primarily relates to the minority inter-
est share of the earnings of Unifi Textured Polyester LLP formed with Burling-
ton Industries on May 29, 1998. Unifi, Inc. has an 85.42% ownership interest in
this entity and Burlington has a 14.58% interest. However, for the first five
years of the Partnership, Burlington is entitled to receive the first $9.4 mil-
lion in earnings. After the first five years, earnings of the partnership will
be allocated based an ownership percentages.
7
The effective tax rate decreased from 32.5% in 1999 to 31.7% in 2000. The
difference between the statutory and effective tax rate in fiscal 2000 is pri-
marily due to a reduction of income taxes achieved through the resolution of
outstanding issues with taxing authorities.
In the first quarter of fiscal 1999, the Company recognized a cumulative
effect of an accounting change of $4.5 million ($2.8 million after tax) or
$.04 per diluted share as a result of changing its accounting policy regarding
start-up costs. Pursuant to the AICPA issued SOP 98-5, "Reporting on the Costs
of Start-Up Activities," any previously capitalized start-up costs were re-
quired to be written-off as a cumulative effect of an accounting change. Ac-
cordingly, the Company has written-off the unamortized balance of the previ-
ously capitalized start-up costs.
As a result of the above, the Company realized during the current year net
income of $38.0 million, or $0.65 per diluted share, compared to $56.3 mil-
lion, or $.93 per diluted share for the prior fiscal year period. Before the
previously described cumulative effect of an accounting change in the prior
year, earnings would have been $59.0 million or $0.97 per diluted share.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS
133) and in June 1999, the FASB issued Statement of Financial Accounting Stan-
dards No. 137 "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," which delayed the
effective date the Company is required to adopt SFAS 133 until its fiscal year
2001. In June 2000, the FASB issued Statement of Financial Accounting Stan-
dards No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities - an Amendment to FASB Statement No. 133." This statement
amended certain provisions of SFAS 133. SFAS 133 requires the Company to rec-
ognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the deriva-
tive is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair value of
the hedged assets, liabilities, or firm commitments through earnings or recog-
nized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will
be immediately recognized in earnings. The Company does not enter into deriva-
tive financial instruments for trading purposes. As discussed in Footnote 10
to the Consolidated Financial Statements, the Company enters into forward con-
tracts to hedge certain transactions and commitments in foreign currency. Upon
adoption of SFAS 133 in the first fiscal quarter of 2001, these activities
will be recognized on the Consolidated Balance Sheet. The Company anticipates
that adoption of SFAS 133 will not have a material effect on the Company's
earnings.
On March 8, 2000, the Company acquired Intex Yarns Limited (Intex) located
in Manchester, England for approximately $8.0 million plus assumed debt. This
acquisition adds high quality, package-dyeing capabilities in Europe and com-
pliments the Company's yarn production facility in Letterkenny, Ireland. The
acquisition, which is not considered significant to the Company's consolidated
net assets or results of operations, was accounted for by the purchase method
of accounting.
Effective June 1, 2000, the Company and E.I. DuPont De Nemours and Company
(DuPont) initiated a manufacturing alliance to produce polyester filament
yarn. The alliance is expected to optimize Unifi's and DuPont's partially ori-
ented yarn (POY) manufacturing facilities, increase manufacturing efficiency
and improve product quality. Under its terms, DuPont and Unifi will coopera-
tively run their polyester filament manufacturing facilities as a single oper-
ating unit. This consolidation will shift commodity yarns from our Yadkinville
facility to DuPont's Kinston plant, and bring high-end specialty production to
Yadkinville from Kinston and Cape Fear. The companies will split equally the
costs to complete the necessary plant consolidation and the benefits gained
through asset optimization. Additionally, the companies will collectively at-
tempt to increase profitability through the development of new products. Like-
wise, the costs incurred and benefits derived from the product innovations
will be split equally. DuPont and Unifi will continue to own and operate their
respective sites and employees will remain with their respective employers.
DuPont will continue to provide POY to the marketplace and will use DuPont
technology to expand the specialty product range at each company's sites.
Unifi will continue to provide textured yarn to the marketplace.
8
FISCAL 1999
Following is a summary of operating income by segment for fiscal years 1999
and 1998, as reported regularly to the Company's management:
ALL
(AMOUNTS IN THOUSANDS) POLYESTER NYLON OTHER CONSOLIDATEDAll
(Amounts in thousands) Polyester Nylon Other Total
- ------------------------------------- ----------- ----------- ------------- ----------------------------------- --------- -------- ------ ----------
Fiscal 1999
Net sales ..........................sales................................ $822,763 $449,009 $ (20,612) $1,251,160$1,561 $1,273,333
Cost of sales ......................sales............................ 719,535 384,772 (27,697) 1,076,6101,090 1,105,397
Selling, general and administrativeadministrative...... 38,518 16,271 549 55,338533 55,322
-------- -------- --------------- ----------
OperatingSegment operating income ...................(loss).......... $ 64,710 $ 47,966 $ 6,536(62) $ 119,212112,614
======== ======== =============== ==========
Fiscal 1998
Net sales ..........................sales................................ $939,780 $470,994 $ (33,165) $1,377,609-- $1,410,774
Cost of sales ......................sales............................ 797,613 387,428 (35,203) 1,149,838-- 1,185,041
Selling, general and administrativeadministrative...... 30,223 13,054 -- 43,277
-------- -------- --------------- ----------
Operating income ...................Segment operating income................. $111,944 $ 70,512 $ 2,038-- $ 184,494182,456
======== ======== =============== ==========
As described in NoteConsolidated Financial Statements Footnote 9, to the consolidated financial statements, all
"other"adjust-
ments to revenues and expenses required to reconcile the polyester and nylon operating segments to
consolidated results are comprised primarily of intersegment sales and cost of
sales eliminations, the provision for bad debts and various expenses reported
internally at a consolidated level.
In addition, fiscal 1999 "other" revenue and
expenses contains activity from the June 1, 1999 acquisition of Cimtec (see Note
2 to the consolidated financial statements).
POLYESTER OPERATIONSPolyester operations
In fiscal 1999, polyester net sales decreased $117.0 million, or 12.5% comparedcom-
pared to fiscal 1998. Year-over-year performance continues to be negatively impactedim-
pacted by the continuing effects of Asian imports of yarns, fabric and apparel,
which have kept sales volumes, sales pricing and gross margins under pressure
both domestically and internationally. The fiscal 1999 over 1998 volume increasein-
crease of 1.0% was aided by twelve months of sales volume generated by the
business venture with Burlington Industries consummated May 29, 1998 (see Note
13 to the consolidated financial statements)Con-
solidated Financial Statements Footnote 13). Average unit sales prices declined
13.5% during fiscal 1999. In addition to the decline in average unit sales
prices created by market pressures, the pricing decline was also influenced by
decreasing fiber costs and the strengthening of the U.S. dollar. As described
in NoteConsolidated Financial Statements Footnote 10, to the consolidated financial statements, the Company utilizes forward
contracts 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. Additionally, currency exchange rate risks are mitigated by purchases
and borrowings in local currencies. The Company also enters currency forward
contracts for committed equipment and inventory purchases. The Company does not
enter into derivative financial instruments for trading purposes.
Polyester gross profit decreased $38.9 million during fiscal 1999 and gross
margins declined from 15.1% in 1998 to 12.5% in 1999. Gross profit for fiscal
1999 was reduced by a $4.0 million charge resulting from employee acceptance of
an early retirement plan. The remainder of the decline in gross profit and
gross margin can be attributed to the aforementioned pressures on sales prices
caused by imports.
Selling, general and administrative expense allocated to the polyester segmentseg-
ment increased $8.3 million in fiscal 1999. Of this increase, $5.7 million relatedre-
lated to a charge resulting from employee acceptance of an early retirement
program offered in fiscal 1999. Selling, general and administrative expense, as
a percentage of polyester net sales, increased from 3.2% in fiscal 1998 to 4.7%
in fiscal 1999.
NYLON OPERATIONSNylon operations
In fiscal 1999, nylon net sales decreased $22.0 million, or 4.7% compared to
fiscal 1998. Unit volumes for fiscal 1999 decreased by 4.8%, while average
sales prices, based on product mix, increased 0.1%. The reduction in sales volumevol-
ume is primarily attributable to the continuing decline of the ladies hosiery
market. The sales
9
price increase was impacted by a minor shift in domestic product mix to lower
volume, higher priced products.
6
Nylon gross profit decreased $19.3 million and gross margin decreased from
17.7% in 1998 to 14.3% in 1999, due mainly to the previously noted decrease in
net sales and the corresponding lack of volume to cover existing fixed manufacturingmanu-
facturing costs and depreciation. In addition, depreciation increased $8.0
million in fiscal 1999 over 1998 resulting from the completion in fiscal 1999
of a nylon texturing and covering facility, constructed to replace older
equipment and consolidate several of the Company's older nylon facilities.
Gross profit was also reduced by a $2.6 million charge resulting from employee
acceptance of an early retirement plan offered in fiscal 1999.
Selling, general and administrative expense allocated to the nylon segment
increased $3.2 million in fiscal 1999. Of this increase, $2.5 million related
to a charge resulting from employee acceptance of an early retirement program
offered in fiscal 1999. Selling, general and administrative expense, as a percentageper-
centage of nylon net sales, increased from 2.8% in fiscal 1998 to 3.6% in fiscalfis-
cal 1999.
CONSOLIDATED OPERATIONSThe "All Other" segment primarily reflects the Company's majority owned
subsidiary, Unifi Technology Group established in May 1999. Unifi Technology
Group is a domestic automation solutions provider.
Consolidated operations
Interest expense increased $10.9 million, from $16.6 million in fiscal 1998
to $27.5 million in fiscal 1999. The increase in interest expense reflects
higher levels of debt outstanding at higher average interest rates during fiscalfis-
cal 1999 and a $4.8 million reduction in capitalized interest for major constructioncon-
struction projects, as certain significant projects in process during the
prior year period have been completed. The weighted average interest rate on
debt outstanding at June 27, 1999 was 5.94%.
Interest income improved by $530 thousand from 1998 to 1999 primarily as a
result of higher levels of invested funds. Other expense increaseddecreased from $389$335
thousand income to $1.6 million$440 thousand expense from 1998 to 1999.
Earnings from our equity affiliates, Parkdale America, LLC. (the "LLC") and
Micell Technologies, Inc. ("Micell"), net of related amortization, totaled $4.2 million in fiscal 1999 comparedcom-
pared with $23.0 million in fiscal 1998. The decline in earnings is primarily
attributable to the reduced earnings of the LLC and higher start-up expenses
at Micell. The LLC's operations were negatively impacted by excess capacity in
the markets and reduced sales volumes as imported apparel eroded their customer'scustom-
er's business.
Effective May 29, 1999,1998, the Company formed a limited liability company (the
"Partnership") with Burlington Industries, Inc. ("Burlington") to manufacture
and market natural textured polyester. The Company has an 85.42% ownership interestin-
terest in the Partnership and Burlington has 14.58%. However, for the first
five years of the Partnership, Burlington is entitled to receive the first
$9.4 million of earnings. Subsequent to this five yearfive-year period, earnings are to
be allocated based on ownership percentages. Burlington's share of the earningsearn-
ings of the Partnership are reflected as minority interest and amounted to
$9.4 million in fiscal 1999 and $0.7 million in fiscal 1998.
The effective tax rate decreased from 32.8% in 1998 to 32.5% in 1999. The
difference between the statutory and effective tax rate is primarily due to
the realization of state tax credits associated with significant capital expendituresex-
penditures and the operating results of our Irish operations that are taxed at
a 10.0% effective rate.
In the first quarter of fiscal 1999, the Company recognized a cumulative
effect of an accounting change of $4.5 million ($2.8 million after tax) or
$.04 per diluted share as a result of changing its accounting policy regarding
start-up costs. Pursuant to the AICPA issued SOP 98-5, "Reporting on the Costs
of Start-Up Activities," any previously capitalized start-up costs were requiredre-
quired to be written-off as a cumulative effect of an accounting change. Accordingly,Ac-
cordingly, the Company has written-off the unamortized balance of the previouslyprevi-
ously capitalized start-up costs.
10
As a result of the above, the Company realized during the current year net
income of $56.3 million, or $0.93 per diluted share, compared to $124.3 million,mil-
lion, or $2.01 per diluted share for the prior fiscal year period. Before the
previously described cumulative effect of an accounting change in the current
year, earnings would have been $59.0 million or $0.97 per diluted share.
In June 1997, the Financial Accounting Standard Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," ("SFAS 130"). SFAS 130 requires the reporting of comprehensive income
and its components in complete, general purpose financial statements as well as
requires certain interim comprehensive income information be disclosed.
Comprehensive income represents the change in net assets of a business during a
period from non-owner sources, which are not included in net income. Foreign
currency translation adjustments presently represent the only component of
comprehensive income for the Company. As of June 28, 1998, the Company adopted
SFAS 130, Reporting Comprehensive Income. SFAS 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
7
adoption of this Statement had no impact on the Company's net income or
shareholders' equity. Statement 130 requires unrealized gains or losses on the
Company's available-for-sale securities and the foreign currency translation
adjustments, which prior to adoption were reported separately in shareholders'
equity, to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of SFAS 130.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
("SFAS 131") which the Company adopted in the fourth quarter of fiscal 1999.
SFAS 131 establishes standards of reporting financial information from operating
segments in annual and interim financial statements of public companies, as well
as establishes standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined in SFAS 131
as components of an enterprise about which separate financial information is
available to the chief operating decision-maker for purposes of assessing
performance and allocating resources. The required segment reporting is detailed
in Note 9 to the consolidated financial statements. The adoption of SFAS 131 had
no effect on the consolidated results of operations or financial position.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Cost of
Computer Software Developed for or Obtained for Internal-Use," ("SOP 98-1").
This SOP is effective for the Company in the first quarter of fiscal year 2000.
SOP 98-1 will require the capitalization of certain costs incurred after the
date of adoption in connection with developing or obtaining software for
internal use. The Company currently expenses certain of these internal costs
when incurred. As discussed in "Year 2000 Compliance Status" located in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the Company is actively implementing an enterprise-wide software
solution that is substantially complete at June 27, 1999. Consequently,
remaining costs associated with obtaining and modifying this system are not
anticipated to be material to the Company's results of operations or financial
position after the adoption of this SOP.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS
133") and in August 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, "An Amendment to SFAS 133," which delayed the effective date
of SFAS 133 until the Company's fiscal year 2001. SFAS 133 will require the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
For derivatives that are hedges, changes in the fair value of derivatives will
either be offset against the change in fair value of the hedged asset,
liability, or firm commitment through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. Although the Company does not enter into derivative
financial instruments for trading purposes, it has not yet determined what the
effect of SFAS 133, for derivatives that are considered hedges, will be on its
results of operations or financial position.
FISCAL 1998
Following is a summary of operating income by segment for fiscal years 1998
and 1997, as reported regularly to the Company's management:
ALL
(AMOUNTS IN THOUSANDS) POLYESTER NYLON OTHER CONSOLIDATED
- ------------------------------------- ----------- ----------- ------------- -------------
Fiscal 1998
Net sales .......................... $939,780 $470,994 $ (33,165) $1,377,609
Cost of sales ...................... 797,613 387,428 (35,203) 1,149,838
Selling, general and administrative. 30,223 13,054 -- 43,277
-------- -------- --------- ----------
Operating income ................... $111,944 $ 70,512 $ 2,038 $ 184,494
======== ======== ========= ==========
Fiscal 1997
Net sales .......................... $967,201 $469,954 $ 267,771 $1,704,926
Cost of sales ...................... 835,027 386,467 252,173 1,473,667
Selling, general and administrative. 25,464 11,845 8,920 46,229
-------- -------- --------- ----------
Operating income ................... $106,710 $ 71,642 $ 6,678 $ 185,030
======== ======== ========= ==========
8
As illustrated in Note 9 to the consolidated financial statements, all
"other" revenues and expenses, required to reconcile the polyester and nylon
operating segments to consolidated results, are comprised primarily of
intersegment sales and cost of sales eliminations and various expenses reported
internally at a consolidated level. In addition, fiscal 1997 contains activity
related to the spinning of cotton and cotton blend fibers, which were
contributed to Parkdale America on June 30, 1997 (see Note 11 to the
consolidated financial statements).
POLYESTER OPERATIONS
Polyester net sales decreased $27.4 million from fiscal year 1997 to 1998.
Overall unit volume increased 1.5% during fiscal 1998. Average unit sales prices
declined 4.3% during fiscal 1998 primarily due to export sales comprising a
larger percentage of total fiscal 1998 sales as compared with fiscal 1997.
Export unit prices were adversely affected in fiscal 1998 due to various factors
including the strengthening of the U.S. dollar and increased competition. The
stronger U.S. dollar also negatively impacted the translation of our Irish
operation's sales in fiscal 1998 from the functional Irish punt currency to the
U.S. dollar. Domestically, unit volumes declined in fiscal 1998 as a result of
increased fiber, fabric and apparel imports. Unit volumes increased in the
fourth quarter due, in part, to the sales generated by the formation of a
limited liability company with Burlington Industries on May 29, 1998.
Sales from foreign operations are denominated in local currencies and are
hedged in part by the purchase of raw materials and services in those same
currencies. As described in Note 10 to the consolidated financial statements,
currency exchange rate risks are mitigated by the utilization of foreign
currency forward contracts and purchases in local currencies. The Company does
not enter into derivative financial instruments for trading purposes.
Polyester gross margins improved from 13.7% in fiscal 1997 to 15.1% in the
fiscal 1998. The increase in gross margin primarily reflects raw material cost
reductions based on product mix, which were partially offset by higher direct
and allocated indirect manufacturing costs as a percentage of net sales. The
increase in allocated indirect manufacturing costs results from the lower
consolidated sales base in fiscal 1998, in which to allocate indirect costs, as
a result of the contribution of our spun cotton yarn operations at the beginning
of the 1998 fiscal year.
Selling, general and administrative expense allocated to the polyester
segment increased $4.8 million from fiscal 1997 to 1998. As a percentage of net
sales these costs increased from 2.6% in the prior fiscal year to 3.2% in the
current year. The increase mainly reflects the lower consolidated sales base, in
which to absorb allocated costs, as a result of the contribution of our spun
cotton yarn operations at the beginning of the 1998 fiscal year.
NYLON OPERATIONS
Nylon net sales remained stable from the fiscal year 1997 to 1998 despite a
4.4% decline in unit volume. The volume decrease was minimized by the
acquisition on November 14, 1997, of SI Holding Company (Spanco). The effect of
the volume decrease was offset by a 4.4% increase in average unit sales prices.
Nylon gross margins were 17.7% in both fiscal 1998 and 1997. During fiscal
1998 nylon realized average unit raw material cost reductions based on product
mix, which were offset by higher direct and allocated indirect manufacturing
costs as a percentage of net sales. The increase in allocated indirect
manufacturing costs results from the lower consolidated sales base in fiscal
1998, in which to allocate indirect costs, as a result of the contribution of
our spun cotton yarn operations at the beginning of the 1998 fiscal year.
Selling, general and administrative expense allocated to the nylon segment
increased $1.2 million from fiscal 1997 to 1998. As a percentage of net sales
these costs increased from 2.5% in fiscal 1997 to 2.8% in fiscal 1998. The
increase mainly reflects the lower consolidated sales base, in which to absorb
allocated costs, as a result of the contribution of our spun cotton yarn
operations at the beginning of the 1998 fiscal year.
CONSOLIDATED OPERATIONS
Interest expense increased $4.9 million, from $11.7 million in 1997 to
$16.6 million in 1998. The increase is associated with both higher levels of
debt outstanding during the current year and higher average interest rates
during this period. In February 1998, the Company issued $250.0 million of debt
securities, the proceeds of which were used to repay a portion of the revolving
credit facility. The coupon rate of the new securities is 6.50%. Debt
9
levels increased during the year as a result of capital expenditures,
investments in equity affiliates, stock repurchases and an acquisition.
Interest income declined $350 thousand from 1997 to 1998 primarily as a
result of lower levels of invested funds. Other expense decreased from $819
thousand to $389 thousand from 1997 to 1998.
Earnings from our equity affiliates, net of related amortization, totaled
$23.0 million in the current year. The effective tax rate decreased from 33.6%
in 1997 to 32.8% in 1998. The improvement in the effective tax rate is primarily
due to the realization of state tax credits in the current year associated with
significant capital expenditures and improved operating results of our Irish
operations that are taxed at a 10.0% effective rate.
In the second quarter of fiscal 1998, the Company recognized a write-off of
$7.5 million ($4.6 million after tax) or $.07 per diluted share as a result of
changing its accounting policy regarding business reengineering costs.
Previously, substantially all direct external costs associated with installing a
new computer software system were capitalized, including those costs related to
business process reengineering. Pursuant to Emerging Issues Task Force 97-13
issued in November 1997, these costs were written off as a cumulative catch-up
adjustment.
As a result of the above, the Company realized during fiscal 1998 net
income of $124.3 million, or $2.01 per diluted share, compared to $115.7 million
or $1.81 per diluted share for fiscal 1997. Before the cumulative effect of an
accounting change in fiscal 1998, earnings would have been $128.9 million or
$2.08 per diluted share.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations continues to be a primary source of funds to financefi-
nance operating needs and capital expenditures. Cash generated from operations
was $126.5 million for fiscal 2000, compared to $209.8 million for fiscal 1999, compared to $181.7 million for fiscal 1998.1999.
The primary sources of cash from operations, other than net income, were a
decreasean in-
crease in accounts receivablepayable and accruals of $34.5 million, a decrease in inventory of
$16.3$27.1 million, and non-cash adjustmentsadjust-
ments aggregating $103.0$124.4 million. Depreciation and amortization of $89.9 million, the after-tax cumulative effect of an
accounting change of $2.8 million,$90.5 mil-
lion, the deferred income tax provision of $4.6$10.7 million, the provision for
doubtful accounts of $14.9 million and the distributionslosses from unconsolidated equity
affiliates, in excessnet of earningsdistributions of $5.3$6.2 million were the primary components of
the non-cash adjustments. Offsetting these sources waswere increases in accounts
receivable and inventories of $39.3 million and $18.1 million, respectively and
a decrease in accountsof income taxes payable and
accruals of $14.0$4.4 million. All working capital changes
have been adjusted to exclude the effects of acquisitions and currency translation.transla-
tion. Working capital levels are more than adequate to meetat June 25, 2000, of $15.6 million reflect the
operating requirementsclassification of the Company.outstanding balance under the revolving line of credit of
$211.5 million as a current liability. The revolving line of credit matures in
April 2001. The Company ended fiscal 1999 with working capital of $216.9 million, which
included cash and cash equivalents of $44.4 million.intends to refinance this debt on a long-term basis
prior to maturity, however, no commitment or agreements were in place to do so
at June 25, 2000. When the Company does refinance the debt, amounts owed beyond
one year from that date will once again be classified as long-term debt.
The Company utilized $159.6$78.1 million for net investing activities and $12.0$69.9
million for net financing activities during fiscal 1999.2000. Significant expendituresexpendi-
tures during this period included $118.8$58.6 million for capacity expansions and upgradingup-
grading of facilities $27.1and $8.0 million for acquisitions, $10.0acquisitions. A significant compo-
nent of capital expenditures includes the initial construction costs for the
Company's Unifi Technical Fabrics nonwoven facility and installment payments
for related equipment. Additionally, $16.1 million was expended for investments
in equity affiliates, $39.3$48.9 million for the purchase and retirement of Company
common stock, and $9.0$12.0 million for distributions to minority interest shareholders. The Company also utilized theshareholders
and $9.2 million for net proceeds of $35.4 million from
itspayments under long-term debt agreements to finance these expenditures.agreements. The Company
purchased, effective April 1, 1999,March 8, 2000, the polyester texturing and dyed yarn
property, plant and equipment
of Fairway Polyester, LTDA located in BrazilIntex for $16.6$8.0 million. The Company also acquired the assets of Cimtec Inc, a
manufacturing solutions provider, effective June 1, 1999 for $10.5 million.
These acquisitions, which are not deemed significant to the Company's
consolidated net assets or result of operations, were accounted for by the
purchase method of accounting.
At June 27, 1999,25, 2000, the Company has committed approximately $20.2$55.1 million for
the purchase and upgrade of equipment and facilities during fiscal 2000.
In the third quarter of fiscal 1999, the Company recognized a $14.8 million
charge associated with the early retirement and termination of 114 salaried
employees. The charge was recorded as a component of selling, general and
administrative expenses in the amount of $8.2 million and cost of goods sold in
the amount of $6.6 million. Substantially all employees were terminated
effective March 31, 1999, with cash payments expected to be spread over a period
not to exceed three years.2001.
The Company periodically evaluates the carrying value of long-lived assets,
including property, plant and equipment and intangibles to determine if impairmentimpair-
ment exists. If the sum of expected future undiscounted cash flows is less than
the carrying amount of the asset, an impairmentadditional analysis is performed to determine
the amount of loss is required to be recognizedrecognized. The Company continues to evaluate for the difference between the fair value or the discounted future
cash flows andim-
pairment the carrying amountvalue of the asset. As discussedits polyester natural textured operations and
its investment in the current and
prior periods, the performanceits spun-yarn partnership. The importation of our polyester operations continued to be
negatively
10
impacted by the ongoing effects of Asian fiber, fabric
and apparel imports which
have reduced polyestercontinues to impair sales volumes and gross margins. Additionally, in
response tomargins for these operations
and has negatively impacted the pressures caused by the importation of fabric and apparel, many U.S. textile and apparel manufacturers are downsizing their domestic operations
and moving production capacity offshore. During the fourth quarter of fiscal
1999, the Company reviewed its projected future cash flowsindustry in general.
The effect of the polyester
division's long-lived assetsimportation of these products has resulted in downsizing in
the U.S. and determined norelocation of production offshore. These operations have operated
in the most recent 18-month period at close to break-even, which heighten the
focus on impairment exists at this time.issues.
Effective July 16, 1998,26, 2000, the Board of Directors terminated the
previously-established policy of paying cash dividends equal to approximately
30% ofincreased the Company's after-tax earnings for the previous year. In lieu of this
cash dividend, the Board of Directors authorized managementre-
maining authorization to utilize in fiscal
1999 cash equalrepurchase up to the same 30% of previous year's earnings to purchase10.0 million shares of the Company's
stock, as management deems advisable.common stock. The Board of Directors
also increased the remaining authorization pursuant to a resolution originally
adopted on October 21, 1993, to purchase 10Company purchased 4.5 million shares in fiscal year 2000 for
a total of Unifi's common
stock. During the current year, the Company has purchased 2.1 million shares for
$39.3$48.9 million. Accordingly, there remains an authorization to repurchase
approximately 7.9 million shares. The Company will continue its commitment to operate itsrepur-
chase shares of the Company's common stock buy-back program,throughout fiscal year 2001, as
it deemsdeemed appropriate based on prevailing financial and market conditions.financially prudent.
Management believes the current financial position of the Company in connectionconnec-
tion with its operations and its access to debt and equity markets are sufficient
to meet anticipated capital expenditure, strategic acquisition, working capital,capi-
tal, Company common stock repurchases and other financial needs.
YEAR 2000 COMPLIANCE STATUS
The Company continues to actively address the business issues associated
with the year 2000 that impact information technology systems and
non-information technology systems (i.e., embedded technology) both internally
and in relation to our external customers, suppliers and other business
associates. Factors involved in addressing such business issues include the
evaluation, testing and implementation of the Company's enterprise-wide systems;
evaluation, upgrading and certifying of non-information technology systems;
assessing and testing significant customers' and vendors' compliance strategies
and monitoring the status thereof (including electronic commerce with these
companies); and, evaluating and monitoring the compliance plans of businesses in
which the Company maintains investments in their operations. The Company has
created a team of professionals with the responsibility of addressing business
issues associated with the year 2000. The Company does not believe any material
exposures or contingencies exist with respect to its internal information
systems as the installation of the remaining enterprises-wide software is
anticipated to be completed in the necessary time frame. At present, the Company
estimates it is approximately 95% complete with its enterprise-wide software
implementation efforts and approximately 95% complete with respect to
manufacturing plant floor applications implementations. Additionally, upgrades
are ongoing and are on schedule for certain applications where the Company has
elected to postpone enterprise software conversion. Testing of the respective
applications is an on-going process, which will go on throughout the next
quarter. Embedded technology devices are also being reviewed in conjunction with
the manufacturing plant floor compliance procedures.
The Company is also dependent upon its customers' and vendors' compliance
with the year 2000 problem and could face disruption of business in the event
these efforts are unsuccessful. The Company has requested information on the
year 2000 compliance plans and status from its significant vendors and equity
affiliates and is presently not aware of any material exposures or
contingencies. Face-to-face meetings have been conducted and will continue in
order to plan and execute appropriate follow-up activities with its more
critical suppliers. The Company has sent surveys to its major customers and is
presently evaluating responses as they are submitted to plan and perform
necessary follow-up activities. Conversion plans have been established for the
Company's EDI customers and vendors and procedures have begun. Efforts are
underway to convert the remaining customers in the next fiscal quarter. The
Company will continue its efforts to gather information from businesses with
which it conducts business. However, such information is subject to accurate and
voluntary communication. Consequently, the Company cannot predict the likelihood
or impact on its business resulting from noncompliance by such parties. Although
the Company believes its business critical systems will be compliant, there can
be no assurances that all non-compliant systems will be identified or that all
significant suppliers or customers will be year 2000 capable. A worst-case
scenario could include interruption in the procurement of necessary materials or
the disruption in manufacturing or information systems. Such events would
adversely impact the distribution of product, timelines and accuracy of
record-keeping and collection of revenue among other consequences which could
cause a material impact on the Company's results of operation and financial
position.
11
The Company has substantially completed contingency plans and recovery
procedures to deal with potential problems associated with failures in its own
computer systems as well as disruptions caused by system failures (or further
dependencies) of its critical suppliers. These plans include, among others, the
modification and upgrading of necessary business systems for which the
enterprise-wide system implementation efforts are not certain. Costs incurred in
the Company's year 2000 compliance efforts are being expensed as incurred.
Anticipated expenditures related to year 2000 compliance readiness, in addition
to those associated with the enterprise- wide software implementation, was $765
thousand for the fiscal year ending June 27, 1999.
EURO CONVERSION
The Company conducts business in multiple currencies, including the currenciescurren-
cies of various European countries in the European Union which began participatingpartici-
pating in the single European currency by adopting the Euro as their common
currency as of January 1, 1999. Additionally, the functional currency of our
Irish operation and several sales office locations will change before January
1, 2002, from their historical currencies to the Euro. During the period JanuaryJanu-
ary 1, 1999, to January 1, 2002, the existing currencies of the member countriescoun-
tries will remain legal tender and customers and vendors of the Company may
continue to use these currencies when conducting business. Currency rates duringdur-
ing this period, however, will no longer be computed from one legacy currency
to another but instead will first be converted into the Euro. The Company continuescon-
tinues to evaluate the Euro conversion and the impact on its business, both
strategically and operationally. At this time, the conversion to the Euro has
not had, nor is expected to have, a material adverse effect on the financial
condition or results of operations of the Company.
FORWARD-LOOKING STATEMENTS
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations and other sections of this quarterlyannual report
contain forward-looking statements within the meaning of federal security laws
about the Company's financial condition and results of operations that are
based on management's current expectations, estimates and projections about the
markets in which the Company operates, management's beliefs and assumptions
made by management. Words such as "expects," "anticipates," "believes," "estimates,"esti-
mates," variations of such words and other similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties and assumptions
which are difficult to predict. Therefore, actual outcomes and results may differdif-
fer materially from what is expressed or forecasted in, or implied by, such
forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which reflect management's judgment only
as of the date hereof. The Company undertakes no obligation to update publicly
any of these forward-looking statements to reflect new information, future
events or otherwise. Factors that may cause actual outcome and results to differdif-
fer materially from those expressed in, or implied by, these forward-looking
statements include, but are not necessarily limited to, availability, sourcing
and pricing of raw materials, pressures on sales prices and volumes due to competitioncom-
petition and economic conditions, reliance on and financial viability of significantsig-
nificant customers, technological advancements, employee relations, changes in
construction spending and capital equipment expenditures (including those relatedre-
lated to unforeseen acquisition opportunities), the timely completion of constructioncon-
struction and expansion projects planned or in process, continued availability
of financial resources through financing arrangements and operations, negotiationsnegotia-
tions of new or modifications of existing contracts for asset management and
for property and equipment construction and acquisition, regulations governing
tax laws, other governmental and authoritative bodies' policies and legislation,legisla-
tion, the continuation and magnitude of the Company's common stock repurchase
program and proceeds received from the sale of assets held for disposal. In additionad-
dition to these representative factors, forward-looking statements could be impactedim-
pacted by general domestic and international economic and industry conditions
in the markets where the Company competes, such as changes in currency exchange
rates, interest and inflation rates, recession and other economic and political
factors over which the Company has no control.
ITEMItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
See the information included in Footnotethe Consolidated Financial Statements Foot-
note 10 ("Derivative Financial Instruments and Fair Value of Financial Instruments"Instru-
ments") on Pages 26pages 27 and 2728 of this Report.
ITEMItem 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's report of independent auditors and consolidated financial
statementsConsolidated Financial
Statements and related notes follow on subsequent pages of this Report.
12
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF UNIFI, INC.Report of Independent Auditors
The Board of Directors and Shareholders of Unifi, Inc.
We have audited the accompanying consolidated balance sheets of Unifi, Inc.
as of June 27, 1999,25, 2000, and June 28, 1998,27, 1999, and the related consolidated statements
of income, changes in shareholders' equity and comprehensive income, and cash
flows for each of the three years in the period ended June 27, 1999.25, 2000. Our audits
also include the financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financialfi-
nancial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards.stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of materialmate-
rial misstatement. An audit includes examining, on a test basis, evidence supportingsup-
porting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation.pre-
sentation. We believe that our audits provide a reasonable basis for our opinion.opin-
ion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Unifi, Inc. at
June 27, 1999,25, 2000, and June 28, 1998,27, 1999, and the consolidated results of its operationsopera-
tions and its cash flows for each of the three years in the period ended June
27,
1999,25, 2000, in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in relationrela-
tion to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ ERNSTErnst & YOUNGYoung LLP
[Signature of Ernst & Young LLP]
Greensboro, North Carolina
July 20, 199918, 2000
13
CONSOLIDATED BALANCE SHEETSConsolidated Balance Sheets
(AMOUNTS IN THOUSANDS) JUNE(Amounts in thousands) June 25, 2000 June 27, 1999
JUNE 28, 1998
- ------------------------------------------------- --------------- ------------------------------------ ------------- -------------
ASSETS:
Current assets:
Cash and cash equivalents .......................equivalents......................... $ 18,778 $ 44,433
$ 8,372
Receivables ....................................Receivables....................................... 214,001 185,784
222,310
Inventories ....................................Inventories....................................... 147,640 129,917 137,201
Other current assets ...........................assets.............................. 2,958 2,015
1,308
----------- --------------------- ----------
Total current assets .........................assets........................... 383,377 362,149
369,191
----------- --------------------- ----------
Property, plant and equipment:
Land ...........................................Land.............................................. 5,560 6,973 6,525
Buildings and air conditioning .................conditioning.................... 239,245 241,852 206,559
Machinery and equipment ........................equipment........................... 853,553 848,701
772,504
Other ..........................................Other............................................. 152,112 133,487
160,034
----------- --------------------- ----------
1,250,470 1,231,013 1,145,622
Less accumulated depreciation ...................depreciation...................... 592,083 541,275
497,042
----------- --------------------- ----------
658,387 689,738 648,580
Investment in unconsolidated affiliates .........affiliates............ 208,918 207,142 212,448
Other noncurrent assets .........................assets............................ 104,082 106,811
103,595
----------- -----------
$ 1,365,840 $ 1,333,814
=========== ===========---------- ----------
$1,354,764 $1,365,840
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable ...............................payable.................................. $ 97,875 $ 68,716
$ 93,922
Accrued expenses ...............................expenses.................................. 50,160 52,889 43,939
Income taxes payable ...........................payable.............................. 2,430 7,392 5,218
Current maturities of long-term debt and other
current liabilities ....................liabilities.............................. 217,308 16,255
16,234
----------- --------------------- ----------
Total current liabilities ....................liabilities...................... 367,773 145,252
159,313
----------- --------------------- ----------
Long-term debt and other liabilities ............liabilities............... 261,830 478,898
458,977
----------- --------------------- ----------
Deferred income taxes ...........................taxes.............................. 86,046 78,369
62,970
----------- --------------------- ----------
Minority interests ..............................interests................................. 16,677 17,183
16,357
----------- --------------------- ----------
Shareholders' equity:
Common stock ...................................stock...................................... 5,516 5,955 6,163
Capital in excess of par value .................value.................... -- 13
22,454
Retained earnings ..............................earnings................................. 649,444 658,353
618,128Unearned compensation............................. (1,260) --
Accumulated other comprehensive loss ...........loss.............. (31,262) (18,183)
(10,548)
----------- --------------------- ----------
622,438 646,138
636,197
----------- -----------
$ 1,365,840 $ 1,333,814
=========== ===========---------- ----------
$1,354,764 $1,365,840
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.The accompanying notes are an integral part of the financial statements.
14
CONSOLIDATED STATEMENTS OF INCOMEConsolidated Statements of Income
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) JUNE(Amounts in thousands, except per
share data) June 25, 2000 June 27, 1999 JUNEJune 28, 1998
JUNE 29, 1997
- ------------------------------------------------------ --------------- --------------- ----------------------------------------------- ------------- ------------- -------------
Net sales ............................................ $ 1,251,160 $ 1,377,609 $ 1,704,926
----------- ----------- -----------sales............................ $1,280,412 $1,251,160 $1,377,609
---------- ---------- ----------
Costs and expenses:
Cost of sales .......................................sales....................... 1,116,841 1,076,610 1,149,838 1,473,667
Selling, general and administrative
expense .........expense............................ 58,063 55,338 43,277
46,229Provision for bad debts............. 8,694 1,129 724
Interest expense ....................................expense.................... 30,294 27,459 16,598
11,749
Interest income .....................................income..................... (2,772) (2,399) (1,869)
(2,219)
Other expense ....................................... 1,569 389 819(income) expense.............. 1,052 440 (335)
Equity in (earnings) losses of
unconsolidated affiliates ........................................affiliates.......... 2,989 (4,214) (23,030)
399
Minority interest ...................................interest................... 9,543 9,401 723
--
----------- ----------- --------------------- ---------- ----------
1,224,704 1,163,764 1,185,926
1,530,644
----------- ----------- --------------------- ---------- ----------
Income before income taxes and
cumulative effect of accounting
change ................................change.............................. 55,708 87,396 191,683 174,282
Provision for income taxes ...........................taxes........... 17,675 28,369 62,782
58,617
----------- ----------- --------------------- ---------- ----------
Income before cumulative effect of
accounting change ..............................................change................... 38,033 59,027 128,901 115,665
Cumulative effect of accounting
change (net of applicable income
taxes of $1,696 for June 27, 1999
and $2,902 for June 28, 1998) ................ -- 2,768 4,636
--
----------- ----------- --------------------- ---------- ----------
Net income ...........................................income........................... $ 38,033 $ 56,259 $ 124,265
$ 115,665
=========== =========== ===================== ========== ==========
Earnings per common share -- basic:share:
Income before cumulative effect of
accounting change .................................change.................. $ .65 $ .97 $ 2.10
$ 1.83
Cumulative effect of accounting
change .............. ( .04) ( .07)change............................. -- ----------- ----------- -----------(.04) (.07)
---------- ---------- ----------
Net income per common share .........................share......... $ .65 $ .93 $ 2.03
$ 1.83
=========== =========== ===================== ========== ==========
Earnings per common share -- assuming
dilution:
Income before cumulative effect of
accounting change ............................................change.................. $ .65 $ .97 $ 2.08
$ 1.81
Cumulative effect of accounting
change .............. ( .04) ( .07)change............................. -- ----------- ----------- -----------(.04) (.07)
---------- ---------- ----------
Net income per common share .........................share......... $ .65 $ .93 $ 2.01
$ 1.81
=========== =========== ===================== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.The accompanying notes are an integral part of the financial statements.
15
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOMEConsolidated Statements of Changes
in Shareholders' Equity and Comprehensive Income
CAPITAL IN ACCUMULATED TOTAL COMPREHENSIVE
(AMOUNTS IN THOUSANDS, SHARES COMMON EXCESS OF RETAINED COMPREHENSIVE SHAREHOLDERS' INCOME
EXCEPT PER SHARE DATA) OUTSTANDING STOCK PAR VALUE EARNINGS INCOME/(LOSS) EQUITY NOTECapital in Other Total Comprehensive
(Amounts in thousands, Shares Common Excess of Retained Unearned Comprehensive Shareholders' Income
except per share data) Outstanding Stock Par Value Earnings Compensation Income Equity Note 1
- --------------------------------------------------- ----------- ------ ---------- -------- ------------ ------------- ---------- ------------ ------------ --------------- --------------- --------------------------- -------------
Balance June 30, 1996 ....... 64,831 $ 6,483 $ 62,255 $ 512,253 $ 2,215 $ 583,20629, 1997... 61,210 $6,121 $ -- $545,099 $ -- $ (2,689) $548,531 $110,761
====== ====== ======= ========= ========= ========== ========== ============== ======= ======== ======== ========
Purchase of stock ........... (3,901) (390) (64,786) (55,824) -- (121,000) --
Options exercised ........... 280 28 2,531 (1,404) -- 1,155 --
Stock option tax benefit -- -- -- 2,307 -- 2,307 --
Cash dividends -- $.44
per share .................. -- -- -- (27,898) -- (27,898) --
Currency translation
adjustments ................ -- -- -- -- (4,904) (4,904) (4,904)
Net income .................. -- -- -- 115,665 -- 115,665 115,665
------ ------- --------- --------- ---------- ---------- -------
Balance June 29, 1997 ....... 61,210 6,121 -- 545,099 (2,689) 548,531 110,761
====== ======= ========= ========= ========== ========== =========
Purchase of stock ...........stock....... (539) (54) (618) (19,515) -- -- (20,187) --
Options exercised ...........exercised....... 402 40 2,154 -- -- -- 2,194 --
Stock option tax
benefitbenefit................ -- -- -- 2,599 -- -- 2,599 --
Stock issued for
acquisition ................acquisition............ 561 56 20,918 -- -- -- 20,974 --
Cash dividends -- $.56
per share ..................share.............. -- -- -- (34,320) -- -- (34,320) --
Currency translation
adjustments ................adjustments............ -- -- -- -- -- (7,859) (7,859) (7,859)
Net income ..................income.............. -- -- -- 124,265 -- -- 124,265 124,265
------ ------ ------- --------- --------- ---------- ---------- ----------------- ------- -------- -------- --------
Balance June 28, 1998 .......1998... 61,634 6,163 22,454 618,128 -- (10,548) 636,197 116,406
====== ====== ======= ========= ========= ========== ========== ================= ======= ======== ======== ========
Purchase of stock ...........stock....... (2,112) (211) (23,092) (16,034) -- -- (39,337) --
Options exercised ...........exercised....... 26 3 651 -- -- -- 654 --
Currency translation
adjustments ................adjustments............ -- -- -- -- -- (7,635) (7,635) (7,635)
Net income ..................income.............. -- -- -- 56,259 -- -- 56,259 56,259
------ ------ ------- --------- --------- ---------- ---------- ----------------- ------- -------- -------- --------
Balance June 27, 1999 .......1999... 59,548 $ 5,955 $ 13 $ 658,353 $-- (18,183) $ 646,138 $ 48,624
====== ====== ======= ========= ========= ========== ========== ================= ======= ======== ======== ========
Purchase of stock....... (4,462) (446) (840) (47,623) -- -- (48,909) --
Options exercised....... 1 -- 14 -- -- -- 14 --
Grantor's trust tax
benefit................ -- -- -- 681 -- -- 681 --
Stock forfeited to
satisfy income tax
withholding............ (53) (5) (630) -- -- -- (635) --
Issuance of restricted
stock.................. 129 12 1,443 -- (1,455) -- -- --
Amortization of
restricted stock....... -- -- -- -- 195 -- 195 --
Currency translation
adjustments............ -- -- -- -- -- (13,079) (13,079) (13,079)
Net income.............. -- -- -- 38,033 -- -- 38,033 38,033
------ ------ ------- -------- ------- -------- -------- --------
Balance June 25, 2000... 55,163 $5,516 $ -- $649,444 $(1,260) $(31,262) $622,438 $ 24,954
====== ====== ======= ======== ======= ======== ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.The accompanying notes are an integral part of the financial statements.
16
CONSOLIDATED STATEMENTS OF CASH FLOWSConsolidated Statements of Cash Flows
(AMOUNTS IN THOUSANDS) JUNE(Amounts in thousands) June 25, 2000 June 27, 1999 JUNEJune 28, 1998
JUNE 29, 1997
- --------------------------------------------------------- --------------- --------------- ------------------------------------ ------------- ------------- -------------
Cash and cash equivalents at
beginning of year ..........year................... $ 44,433 $ 8,372 $ 9,514
$ 24,473
Operating activities:
Net income ............................................income.......................... 38,033 56,259 124,265 115,665
Adjustments to reconcile net income
to net cash provided by operating
activities:
Cumulative effect of accounting
change (net of applicable income
taxes) ..................................................... -- 2,768 4,636 --
(Earnings) losses of unconsolidated
equity affiliates, net of
distributions ....................distributions..................... 6,200 5,287 (15,282)
399
Depreciation .........................................Depreciation....................... 83,037 82,993 65,033
85,533
Amortization .........................................Amortization....................... 7,491 6,883 4,677
2,366
Deferred income taxes ................................taxes.............. 10,692 4,641 12,201
17,157
Other ................................................Provision for bad debts and quality
claims............................ 14,866 6,241 3,917
Other.............................. 2,135 415 (350) (85)
Changes in assets and liabilities,
excluding effects of acquisitions
and foreign currency adjustments:
Receivables ......................................... 34,475 9,628 (26,441)
Inventories .........................................Receivables....................... (39,257) 28,234 5,711
Inventories....................... (18,088) 16,320 (793)
(10,032)
Other current assets ................................assets.............. (1,330) (948) 1,556
(462)
Payables and accruals ...............................accruals............. 27,118 (13,959) (25,213)
9,260
Income taxes ........................................taxes...................... (4,430) 14,697 1,329
(9,524)
---------- ---------- ------------------ --------- ---------
Net -- operating activities ...........................activities......... 126,467 209,831 181,687
183,836
---------- ---------- ------------------ --------- ---------
Investing activities:
Capital expenditures ..................................expenditures................ (58,609) (118,846) (250,064)
(143,176)
Acquisitions ..........................................Acquisitions........................ (7,953) (27,112) (25,776) --
Investments in unconsolidated equity
affiliates ...........................................affiliates......................... (16,069) (10,000) (39,492) (2,250)
Sale of capital assets ................................assets.............. 5,637 847 2,428
3,046
Other .................................................Other............................... (1,138) (4,508) (2,755)
768
---------- ---------- ------------------ --------- ---------
Net -- investing activities ...........................activities......... (78,132) (159,619) (315,659)
(141,612)
---------- ---------- ------------------ --------- ---------
Financing activities:
Borrowing of long-term debt ...........................debt......... 72,342 97,000 440,273 187,500
Repayment of long-term debt ...........................debt......... (81,589) (61,596) (252,844) (100,513)
Issuance of Company stock .............................stock........... 14 654 2,194 3,462
Stock option tax benefit ..............................benefit............ -- -- 2,599 2,307
Purchase and retirement of Company
stock ..............stock.............................. (48,909) (39,337) (20,187)
(121,000)
Cash dividends paid ...................................paid................. -- -- (34,320) (27,898)
Distributions to minority
shareholders ................shareholders....................... (12,000) (9,000) --
--
Other .................................................Other............................... 287 249 (4,006)
--
---------- ---------- ------------------ --------- ---------
Net -- financing activities ...........................activities......... (69,855) (12,030) 133,709
(56,142)
---------- ---------- ------------------ --------- ---------
Currency translation adjustment .........................adjustment...... (4,135) (2,121) (879)
(1,041)
---------- ---------- ------------------ --------- ---------
Net increase (decrease) in cash and
cash equivalents ...........................................equivalents.................... (25,655) 36,061 (1,142)
(14,959)
---------- ---------- ------------------ --------- ---------
Cash and cash equivalents at end of
year ................year................................ $ 18,778 $ 44,433 $ 8,372
$ 9,514
========== ========== ================== ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.The accompanying notes are an integral part of the financial statements.
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
1. ACCOUNTING POLICIES AND FINANCIAL STATEMENT INFORMATION
PRINCIPLES OF CONSOLIDATION:Accounting Policies and Financial Statement Information
Principles of Consolidation: The consolidated financial statementsConsolidated Financial Statements include
the accounts of the Company and all majority-owned subsidiaries. The portion
of the income applicable to noncontrolling interests in the majority-owned op-
erations is reflected as minority interests in the Consolidated Statements of
Income. The accounts of all foreign subsidiaries have been included on the basisba-
sis of fiscal periods ended three months or less prior to the dates of the
consolidated balance sheets.Consolidated Balance Sheets. All significant intercompany accounts and transactionstrans-
actions have been eliminated. Investments in 20 to 50% owned companies and
partnerships where the Company is able to exercise significant influence, but
not control, are reported usingaccounted for by the equity method.
RECLASSIFICATION:method and, accordingly, consoli-
dated income includes the Company's share of the affiliates' income.
Fiscal Year: The Company's fiscal year is the fifty-two or fifty-three
weeks ending the last Sunday in June. All three fiscal years presented consist
of fifty-two weeks.
Reclassification: The Company has reclassified the presentation of certain
prior year information to conform with the current presentation format.
REVENUE RECOGNITION:Revenue Recognition: Revenues from sales are recognized at the time shipmentsship-
ments are made.
FOREIGN CURRENCY TRANSLATION:Foreign Currency Translation: Assets and liabilities of foreign subsidiariessubsidiar-
ies are translated at year-end rates of exchange and revenues and expenses are
translated at the average rates of exchange for the year. Gains and losses resultingre-
sulting from translation are accumulated in a separate component of shareholders'sharehold-
ers' equity and included in comprehensive income. Gains and losses resulting
from foreign currency transactions (transactions denominated in a currency
other than the subsidiary's functional currency) are included in net income.
CASH AND CASH EQUIVALENTS:Cash and Cash Equivalents: Cash equivalents are defined as short-term investmentsin-
vestments having an original maturity of three months or less.
RECEIVABLES:Receivables: Certain customer accounts receivable are factored without recoursere-
course with respect to credit risk. Factored accounts receivable at June 25,
2000, and June 27, 1999, and June 28, 1998, were $41.6$42.9 million and $49.2$41.6 million, respectively.
An allowance for losses is provided for known and potential losses risingarising
from yarn quality claims and forreceivables from customers not factored based on
a periodic review of these accounts. Reserves for such losses were $17.2 mil-
lion at June 25, 2000 and $8.7 million at June 27, 1999 and
$8.2 million at June 28, 1998.
INVENTORIES:1999.
Inventories: The Company utilizes the last-in, first-out ("LIFO") method
for valuing certain inventories representing 52.4%51.3% of all inventories at June
27, 1999,25, 2000, and the first-in, first-out ("FIFO") method for all other inventories.invento-
ries. Inventory values computed by the LIFO method are lower than current marketmar-
ket values. Inventories valued at current or replacement cost would have been
approximately $0.7$5.9 million and $8.9$0.7 million in excess of the LIFO valuation at
June 27, 199925, 2000, and June 28, 1998,27, 1999, respectively. Finished goods, work in process,proc-
ess, and raw materials and supplies at June 25, 2000, and June 27, 1999,
and June 28, 1998, amounted to $69.7$81.2 million and $77.4$69.7 million; $14.6$17.0 million and $14.8$14.6 million;
and $49.4 million and $45.6 million, respectively.
Property, Plant and $45.0 million, respectively.
PROPERTY, PLANT AND EQUIPMENT:Equipment: Property, plant and equipment are stated at
cost. Depreciation is computed for asset groups primarily utilizing the
straight-line method for financial reporting and accelerated methods for tax
reporting. For financial reporting purposes, asset lives have been assigned to
asset categories over periods ranging between three and forty years.
OTHER NONCURRENT ASSETS:Other Noncurrent Assets: Other noncurrent assets at June 27, 1999,25, 2000, and June
28, 1998,27, 1999, consist primarily of the cash surrender value of key executive life
insurance policies ($8.17.7 million and $7.1$8.1 million); unamortized bond issue
costs ($6.75.9 million and $7.5$6.7 million); and acquisition related assets consistingconsist-
ing of the excess cost over fair value of net assets acquired and other intangiblesintan-
gibles ($86.383.2 million and $83.9$86.3 million), respectively. Bond issue costs are
being amortized on the straight-line method over the life of the bonds, which
approximates the effective interest method. The acquisition related assets are
being amortized on the straight-line method over periods ranging between five
and thirty years. Accumulated amortization at June 27, 199925, 2000, and June 28, 1998,27,
1999, for bond issue costs and acquisition related assets was $29.3 million
and $19.2 million, and $10.2
million, respectively.
LONG-LIVED ASSETS:18
Long-Lived Assets: Long-lived assets, including the excess cost over fair
value of net assets acquired, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.recover-
able. If undiscounted cashflows are not adequate to cover the sumasset carrying
value, additional analysis is conducted to determine the amount of expected future undiscounted cash flowsloss to be
recognized. The impairment loss is less thandetermined by the difference between the
carrying amount of the asset a loss is recognized forand the difference
between fair value and the carrying amount of the asset.
INCOME TAXES:measured by future discounted
cashflows. To date, no impairment losses have been recorded.
Income Taxes: The Company and its domestic subsidiaries file a consolidated
federal income tax return. Income tax expense is computed on the basis of
transactions entering into pretax operating results. Deferred 18
income taxes have
been provided for the tax effect of temporary differences between financial
statement carrying amounts and the tax basis of existing assets and liabilities.liabili-
ties. Income taxes have not been provided for the undistributed earnings of
certain foreign subsidiaries as such earnings are deemed to be permanently invested.
EARNINGS PER SHARE:in-
vested.
Earnings Per Share: The following table details the computation of basic and
diluted earnings per share:
(AMOUNTS IN THOUSANDS) JUNE(Amounts in thousands) June 25, 2000 June 27, 1999 JUNEJune 28, 1998
JUNE 29, 1997
- ------------------------------------------------------------------ --------------- --------------- ------------------------------------ ------------- ------------- -------------
Numerator:
Income before cumulative effect of
accounting change ...........change.................. $38,033 $59,027 $128,901 $115,665
Cumulative effect of accounting
change .........................change............................. -- 2,768 4,636
--------- ------- --------
--------
Net income .....................................................income.......................... $38,033 $56,259 $124,265
$115,665
======= =============== ========
Denominator:
Denominator for basic earnings per
share -- weighted average
shares ........................................................share--weighted averages shares.... 58,488 60,568 61,331 63,294
Effect of dilutive securities:
stock options ...................Stock options...................... 19 2 525
641Restricted stock awards............ 4 -- --
------- --------------- --------
Diluted potential common shares
denominator for diluted
earnings per share -- adjusted
weighted average shares and
assumed conversions ...........................................conversions................. 58,511 60,570 61,856
63,935
======= =============== ========
STOCK-BASED COMPENSATION:Stock-Based Compensation: With the adoption of SFAS 123, the Company elected
to continue to measure compensation expense for its stock-based employee compensationcom-
pensation plans using the intrinsic value method prescribed by APB Opinion No.
25, "Accounting for Stock Issued to Employees." Had the fair value-based method
encouraged by SFAS 123 been applied, compensation expense would have been recordedre-
corded on the 1,975,570 options granted in fiscal 2000 and the 414,000 options
granted in fiscal 1999 (which mostlybased on their respective vesting schedules. The fiscal
2000 options vest in annual increments over afive years and the fiscal 1999 op-
tions vest primarily over two year period), and 270,500 options granted in fiscal 1997 (which vest over a two
year period).years. No options were granted in fiscal 1998.
Net income in fiscal 2000, 1999 1998 and 19971998 restated for the effect would have
been $53.0$32.7 million or $0.56 per diluted share, $53.3 million or $0.88 per diluteddi-
luted share and $122.8 million or $1.98 per diluted, share and $115.1 million or
$1.80 per diluted share, respectively. The fair
value and related compensation expense of the 19992000 and 19971999 options were calculatedcalcu-
lated as of the issuance date using the Black-Scholes model with the following
assumptions:
OPTIONS GRANTEDOptions Granted 2000 1999
1997
- --------------------------------- --------- ------------------------ ---- ----
Expected life (years) ......................... 10.0 10.0
Interest rate .................rate........................ 6.00% 6.14%
6.18%
Volatility .................... 47.6% 31.1%
Dividend yield ................ -- 1.72%Volatility........................... 49.5% 49.3%
RECENT ACCOUNTING PRONOUNCEMENTS: In June 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," ("SFAS 130"). SFAS 130 requires the
reporting of comprehensiveIncome: Comprehensive income includes net income and its components in complete, general
purpose financial statements as well as requires certain interim comprehensive
income information be disclosed. Comprehensive income represents the changeother
changes in net assets of a business during a period from non-owner sources,
which are not included in net income. SFAS 130 requires unrealized gains or losses on the
Company'sSuch non-owner changes may include, for
example, available-for-sale securities and theforeign currency translation adjust-
ments. Other than net income, foreign currency translation adjustments which prior to adoption were reported separately in shareholders'
equity, to be included in other comprehensive income. Foreign currency
translation adjustments presentlypres-
ently represent the only component of comprehensive income for the Company. As of June 29, 1998, theThe
Company adopted SFAS 130,
however, the adoption of this Statement had no impactdoes not provide income taxes on the Company's net
income or shareholders' equity. Prior year financial statements have been
reclassifiedimpact of currency translations as
earnings from foreign subsidiaries are deemed to conform to the requirements of SFAS 130.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
("SFAS 131") which the Company adopted in the fourth quarter of fiscal 1999.
SFAS 131 establishes standards of reporting financial information from operating
segments in annual and interim financial statements of public companies, as well
as establishes standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined in SFAS 131
as components of an enterprise about which separate financial information is
available to the chief operating decision-maker for purposes of assessing
performance and allocating resources. The required segmentbe permanently invested.
19
reporting is detailed in Note 9. The adoption of SFAS 131 had no effect on the
consolidated results of operations or financial position.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Cost of
Computer Software Developed for or Obtained for Internal-Use," ("SOP 98-1").
This SOP is effective for the Company in the first quarter of fiscal year 2000.
SOP 98-1 requires the capitalization of certain costs incurred after the date of
adoption in connection with developing or obtaining software for internal use.
The Company currently expenses certain of these internal costs when incurred. As
discussed in "Year 2000 Compliance Status" located in Management's Discussion
and Analysis of Financial Condition and Results of Operations, the Company is
actively implementing an enterprise-wide software solution that is substantially
complete at June 27, 1999. Consequently, remaining costs associated with
obtaining and modifying this system are not anticipated to be material to the
Company's results of operations or financial position after the adoption of this
SOP.Recent Accounting Pronouncements: In June 1998, the FASB issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative InstrumentsInstru-
ments and Hedging Activities," ("SFAS
133")(SFAS 133) and in AugustJune 1999, the FASB issued
Statement of Financial Accounting Standards No. 137 "Accounting for Derivative
Instruments and Hedging Activities - -- Deferral of the Effective Date of FASB
Statement No. 133," which delayed the effective date ofthe Company is required
to adopt SFAS 133 until the Company'sits fiscal year 2001. In June 2000, the FASB issued
Statement of Financial Accounting Standards No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an Amendment to FASB
Statement No. 133." This statement amended certain provisions of SFAS 133.
SFAS 133 will
requirerequires the Company to recognize all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through income. For derivatives that are hedges,If the derivative is a hedge, depending on the nature of
the hedge, changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged asset, liability,assets, liabilities, or firm
commitmentcommitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a derivative'sderiv-
ative's change in fair value will be immediately recognized in earnings. The
Company does not enter into derivative financial instruments for trading purposespur-
poses. As discussed in Footnote 10 to the Consolidated Financial Statements,
the Company enters into forward contracts to hedge certain transactions and
it has not yet determined what the effectcommitments in foreign currency. Upon adoption of SFAS 133 for derivatives that are considered hedges,in the first fiscal
quarter of 2001, these activities will be recognized on its earnings
and financial position.
USE OF ESTIMATES:the Consolidated Bal-
ance Sheet. The Company anticipates that adoption of SFAS 133 will not have a
material effect on the Company's earnings.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make estimateses-
timates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those estimates.es-
timates.
2. ACQUISITIONSAcquisitions and Alliances
Effective June 1, 2000, the Company and E.I. DuPont De Nemours and Company
(DuPont) initiated a manufacturing alliance. The alliance is expected to opti-
mize Unifi's and DuPont's partially oriented yarn (POY) manufacturing facili-
ties, increase manufacturing efficiency and improve product quality. Under its
terms, DuPont and Unifi will cooperatively run their polyester filament manu-
facturing facilities as a single operating unit. This consolidation will shift
commodity yarns from our Yadkinville facility to DuPont's Kinston plant, and
bring high-end specialty production to Yadkinville from Kinston and Cape Fear.
The companies will split equally the costs to complete the necessary plant
consolidation and the benefits gained through asset optimization. Addition-
ally, the companies will collectively attempt to increase profitability
through the development of new products and related technologies. Likewise,
the costs incurred and benefits derived from the product innovations will be
split equally. DuPont and Unifi will continue to own and operate their respec-
tive sites and employees will remain with their respective employers. DuPont
will continue to provide POY to the marketplace and will use DuPont technology
to expand the specialty product range at each company's sites. Unifi will con-
tinue to provide textured yarn to the marketplace. At termination of the alli-
ance or at any time after June 1, 2005, Unifi has the option to purchase from
DuPont and DuPont has the right to sell to Unifi, DuPont's U.S. polyester fil-
ament business for a price within a predetermined fair market value range.
On March 8, 2000, the Company acquired Intex Yarns Limited (Intex) located
in Manchester, England for approximately $8.0 million plus assumed debt. This
acquisition adds high quality, package-dyeing capabilities in Europe and com-
pliments the Company's yarn production facility in Letterkenny, Ireland.
During fiscal 1999, the Company formed Unifi do Brasil, LTDA to acquire the
assets of Fairway Polyester, LTDA., a Brazilian company, for $16.6 million effectiveef-
fective April 1, 1999. Also, effective June 1, 1999, UNIFI Technology Group
LLC the(UTG), a newly formed subsidiary of the Company, acquired the assets of
Cimtec Inc. ("Cimtec"), a manufacturing automation solutions provider, for
$10.5 million. Subsequently, a five-percent interest in the new entity was
sold to certain former Cimtec shareholders.shareholders and an additional 2.875% was sold
to certain former Unifi executives. The acquisitions,Company also granted an additional
2.875% of its ownership interest in UTG to certain Unifi executives which
are not considered significant to the
Company's consolidated net assets or results of operations, were accounted for
by the purchase method of accounting and both have been includedvests in the
consolidated results of the Company since the respective acquisition dates.
On November 14, 1997,annual increments over a five-year period.
During fiscal 1998, the Company completed its Agreement and Plan of TriangularTrian-
gular Merger with SI Holding Company and thereby acquired their covered yarn
business for approximately $46.6 million. Additionally,million effective November 17, 1997. Addi-
tionally, covenants-not-to-compete were entered into with the principal operatingoper-
ating officers of the acquired company in exchange for $9.2 million, to be
paid generally over the terms of the covenants. The acquisition, which is not considered significantAfter allocation of the pur-
chase price to the Company's consolidated net assets or resultsacquired, the excess of operations, wascost over fair value has
been valued at $25.5 million.
20
The Intex, Brazilian, Cimtec and SI Holding Company acquisitions were all
accounted for by the purchase method of accounting and accordingly, the net
assets and operations have been included in the Company's consolidated financial statementsConsolidated Finan-
cial Statements beginning on the date the acquisition was consummated. After allocation of the
purchase priceThe
transactions are not considered significant to the Company's consolidated net
assets acquired, the excessor results of cost over fair value
has been valued at $31.2 million.operations.
3. CUMULATIVE EFFECT OF ACCOUNTING CHANGECumulative Effect of Accounting Change
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-UpStart-
Up Activities," which requires start-up costs, as defined, to be expensed as
incurred. In accordance with this SOP, any previously capitalized start-up
costs arewere required to be written-off as a cumulative effect of a change in
accounting principle. The Company, upon adoption of this SOP in the first
quarter of fiscal 1999, has writtenwrote off the unamortized balance of such previously
capitalized start-up costs as of June 29, 1998, of $4.5 million ($2.8 million
after tax) or $.04 per diluted share as a cumulative catch-up adjustment.
20
Pursuant to Emerging Issues Task Force No. 97-13 issued in November 1997,
the Company changed its accounting policy in the second quarter of fiscal 1998
regarding a project to install an entirely new computer software system which
it began in fiscal 1995. Previously, substantially all direct external costs
relating to the project were capitalized, including the portion related to
business process reengineering. In accordance with this accounting pronouncement,pronounce-
ment, the unamortized balance of these reengineering costs as of September 28,
1997, of $7.5 million ($4.6 million after tax) or $.07 per diluted share was
written off as a cumulative catch-up adjustment in the second quarter of fiscalfis-
cal 1998.
4. LONG-TERM DEBT AND OTHER LIABILITIESLong-Term Debt and Other Liabilities
A summary of long-term debt follows:
(AMOUNTS IN THOUSANDS) JUNE(Amounts in thousands) June 25, 2000 June 27, 1999
JUNE 28, 1998
- ----------------------------------------------------- --------------- ------------------------------------ ------------- -------------
Bonds payable .......................................payable...................................... $248,447 $248,242 $248,038
Revolving credit facility ...........................facility.......................... 211,500 217,000
180,000
Sale-leaseback obligation ...........................obligation.......................... 3,154 3,355 3,444
Other bank debt and other obligations ...............obligations.............. 16,037 26,556 43,729
-------- --------
Total debt .........................................debt........................................ 479,138 495,153
475,211
Current maturities .................................maturities................................ 217,308 16,255 16,234
-------- --------
Total long-term debt and other liabilities .........liabilities........ $261,830 $478,898 $458,977
======== ========
On February 5, 1998, the Company issued $250 million of senior, unsecured
debt securities (the "Notes") to qualified institutional buyers. The net
proceeds from the sale were used to repay a portion of the Company's bank credit
facility. The Notes, which were registered with the Securities and Exchange
Commission on April 2, 1998, bear a coupon rate of 6.50% and mature in
2008. The estimated fair value of the Notes, based on quoted market prices, at
June 25, 2000, and June 27, 1999, and June 28, 1998, was approximately $229.7$216.9 million and $247.4$229.7
million, respectively.
The Company entered a $400 million revolving credit facility dated April
15, 1996, with a group of financial institutions that extends through April
15, 2001. The outstanding amounts due on the revolving credit facility at June
25, 2000 have been classified as current maturities. Although the Company in-
tends to refinance or negotiate additional borrowings to replace some or all
of the outstanding obligations under the revolving credit facility, no formal
commitments were entered into by fiscal year end. The rate of interest charged
is adjusted quarterly based on a pricing grid, which is a function of the ratiora-
tio of the Company's debt to earnings before income taxes, depreciation, amortizationamor-
tization and other non-cash charges. The credit facility provides the Company
the option of borrowing at a spread over the base rate (as defined) for base
rate loans or the Adjusted London Interbank Offered Rate (LIBOR) for EurodollarEurodol-
lar loans. In accordance with the pricing grid, the Company pays a quarterly
facility fee ranging from 0.090%-0.150% of the total amount available under
the revolving credit facility. The weighted average interest rates for fiscal
years 2000 and 1999 were 6.12% and 1998 were 5.57% and 5.89%, respectively. At June 27, 199925, 2000, and
June 28, 1998,27, 1999, the interest rates on the outstanding balances were 5.29%6.68% and
5.92%5.29%, respectively. As a result of the variable nature of the credit
facility's interest rate, the fair value of the Company's revolving credit
debt approximates its carrying value.
21
The revolving credit facility also provides the Company the option to borrow
funds competitively from the individual lenders, at their discretion, provided
that the sum of the competitive bid loans and the aggregate funds committed underun-
der the revolving credit facility do not exceed the total committed amount. The
revolving credit facility allows the Company to reduce the outstanding commitmentcommit-
ment in whole or in part upon satisfactory notice up to an amount no less than
the sum of the aggregate competitive bid loans and the total committed loans.
Any such partial termination is permanent. The Company may also elect to prepay
loans in whole or in part. Amounts paid in accordance with this provision may
be re-borrowed.
The terms of the revolving credit facility contain, among other provisions,
requirements for maintaining certain net worth and other financial ratios and
specific limits or restrictions on additional indebtedness, liens and merger
activity. Provisions under this agreement are not considered restrictive to
normal operations.
On May 20, 1997, the Company entered into a sales-leaseback agreement with a
financial institution whereby land, buildings and associated real and personal
property improvements of certain manufacturing facilities were sold to the financialfi-
nancial institution and will be leased by the Company over a sixteen year
period. Sales proceeds aggregated $27.5 million. The terms of the agreement
provide for an early purchase option at the end of year nine. If the agreement
has not been terminated before the end of the lease term, by exercising the
early purchase option or otherwise, the Company is required to purchase the
leased properties at the end of the lease term for
21
an amount equal to the fair market value as defined in the agreement.sixteen-year peri-
od. This transaction has been recorded as a direct financing arrangement. On
June 30, 1997, the Company entered into a Contribution Agreement associated
with the formation of Parkdale America, LLC (see NoteConsolidated Financial State-
ment Footnote 11). As a part of the Contribution Agreement, ownership of a significantsig-
nificant portion of the assets financed under the sales-leaseback agreement and
the related debt ($23.5 million) were assumed by the LLC. Payments for the remainingre-
maining balance of the sales-leaseback agreement are due semi-annually and are
in varying amounts, in accordance with the agreement. Principal payments requiredre-
quired over the next five years are approximately $100 thousand per year. The
interest rate implicit in the agreement is 7.84%, and the
fair value of the long-term obligation at June 27, 1999 and June 28, 1998,
approximates its carrying value..
Other obligations consist of acquisition related liabilities due within the
next four years. Maturities of the obligations over the next four years are
$16.3$5.8 million, $4.0$6.4 million, $3.1$3.3 million and $3.6$.5 million, respectively.
Interest capitalized during fiscal 2000 and 1999 and 1998 was $2.0$0.6 million and $6.8$2.0
million, respectively.
5. INCOME TAXESIncome Taxes
The provision for income taxes before the cumulative effect of accounting
change infor fiscal 2000, 1999 and 1998 consists of
the following:
(AMOUNTS IN THOUSANDS) JUNE(Amounts in thousands) June 25, 2000 June 27, 1999 JUNEJune 28, 1998
JUNE 29, 1997
- ------------------------------------------ --------------- --------------- ------------------------------------ ------------- ------------- -------------
Currently payable:
Federal ................................Federal............................ $ 20,1246,629 $20,124 $ 43,245
$ 34,235
State ..................................State.............................. 1,682 2,951 5,704
6,074
Foreign ................................Foreign............................ (225) 653 1,474
1,151
-------- ---------------- ------- --------
Total current ..........................current...................... 8,086 23,728 50,423
41,460
-------- ---------------- ------- --------
Deferred:
Federal ................................Federal............................ 9,772 10,219 23,799
18,929
State ..................................State.............................. (261) (5,718) (11,715)
(1,994)
Foreign ................................Foreign............................ 78 140 275
222
-------- ---------------- ------- --------
Total deferred .........................deferred..................... 9,589 4,641 12,359
17,157
-------- ---------------- ------- --------
Income taxes before extraordinary item and cumulative
effect of accounting change . $ 28,369(1999
and 1998).......................... $17,675 $28,369 $ 62,782
$ 58,617
======== ================ ======= ========
22
Income taxes were 32.5%31.7%, 32.8%32.5% and 33.6%32.8% of pretax earnings in fiscal 2000,
1999 1998 and 1997,1998, respectively. A reconciliation of the provision for income
taxes (before cumulative effect of accounting change, where applicable)changes, in 1999 and 1998) with
the amounts obtained by applying the federal statutory tax rate is as follows:
JUNEJune 25, 2000 June 27, 1999 JUNEJune 28, 1998
JUNE 29, 1997
--------------- --------------- --------------------------- ------------- -------------
Federal statutory tax rate ........................rate.......... 35.0% 35.0% 35.0%
State income taxes net of federal
tax benefit .....benefit........................ 3.7 3.1 2.9 3.2
State tax credits net of federal tax
benefit ......benefit............................ (2.1) (5.1) (4.9) (1.7)
Foreign taxes less than domestic
rate .............rate............................... -- (1.8) (1.9)
(1.8)Foreign tax benefit of losses less
than domestic rate................. 2.5 -- --
Foreign Sales Corporation tax
benefit .............benefit............................ (1.1) (0.7) (0.4) (0.5)
Research and experimentation
credit ...............credit............................. (0.1) (0.1) --
Resolution of tax issues............ (7.4) -- --
Nondeductible expenses and other ..................other.... 1.2 2.1 2.1 (0.6)
---- ---- ----
Effective tax rate ................................rate.................. 31.7% 32.5% 32.8% 33.6%
==== ==== ====
The deferred income taxes reflect the net tax effects of temporary differencesdiffer-
ences between the bases of assets and liabilities for financial reporting purposespur-
poses and their bases for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets as of June 27, 1999,25, 2000, and June
28,
1998,27, 1999, were as follows:
22
(AMOUNTS IN THOUSANDS) JUNE(Amounts in thousands) June 25, 2000 June 27, 1999
JUNE 28, 1998
- ----------------------------------------------------- --------------- ------------------------------------ ------------- -------------
Deferred tax liabilities:
Property, plant and equipment ......................equipment...................... $ 97,051 $78,241 $48,935
Investments in equity affiliates ...................affiliates................... 19,974 20,883
33,506
-------Other.............................................. 394 --
-------- -------
Total deferred tax liabilities ......................liabilities...................... 117,419 99,124
82,441
--------------- -------
Deferred tax assets:
Accrued liabilities and valuation reserves .........reserves......... 9,795 1,568 2,684
State tax credits ..................................credits.................................. 16,511 17,043
12,379
Other items ........................................items........................................ 5,067 2,144
4,408
--------------- -------
Total deferred tax assets ...........................assets........................... 31,373 20,755
19,471
--------------- -------
Net deferred tax liabilities ........................liabilities........................ $ 86,046 $78,369
$62,970
=============== =======
6. COMMON STOCK AND STOCK OPTION PLANSCommon Stock, Stock Option Plans and Restricted Stock
Common shares authorized were 500 million in 19992000 and 1998.1999. Common shares
outstanding at June 25, 2000, and June 27, 1999, were 55,163,193 and
June 28, 1998, were 59,547,819, and 61,634,386,
respectively.
On October 21, 1999, the shareholders of the Company approved the 1999
Unifi, Inc. Long-Term Incentive Plan. The Company hasplan 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 Option Plans ("ISO"), Non-Qualified Stock Option
("NQSO") and restricted stock, but not more than 3,000,000 shares may be is-
sued as restricted stock. The 1,975,570 options granted in fiscal 2000 were
all from the 1999 Long-Term Incentive Plan.
23
In addition, the Company has previous ISO plans with 1,537,357846,357 shares reserved
and previous NQSO plans with 1,576,007 shares reserved at June 27, 1999. There remain 691,000 options available for grant at
year end. No addi-
tional options will be issued under any previous ISO or NQSO plan. The Company also has a Non-Qualified Stock Option Plan ("NQSO") with
1,613,999 shares reserved at June 27, 1999. There remain 37,992 options
availabletransac-
tions for grant at year end. The transactions for2000, 1999 and 1998 and 1997of all three plans were as follows:
ISO NQSO
---------------------------- ---------------------------
OPTIONS WEIGHTED OPTIONS WEIGHTED
OUTSTANDING AVG.------------------------ ------------------------
Options Weighted Options Weighted
Outstanding avg. $/SHARE OUTSTANDING AVG.share outstanding avg. $/SHARE
------------- -------------- ------------- -------------share
----------- ------------ ----------- ------------
Fiscal 1997:1998:
Shares under option --
beginning of year ..... 1,793,378 $ 18.76 693,519 $ 25.47
Granted ...................................... -- -- 465,500 28.64
Exercised .................................... (346,787) 9.79 -- --
Canceled ..................................... -- -- -- --year.......... 1,446,591 $20.91 1,159,019 $26.75
Exercised................... (504,458) 14.31 (47,852) 25.76
--------- -------- ------- -------------- --------- ------
Shares under option -- end
of year ........... 1,446,591 $ 20.91 1,159,019 $ 26.75
--------- -------- --------- --------
Fiscal 1998:
Granted ...................................... -- $ -- -- $ --
Exercised .................................... (504,458) 14.31 (47,852) 25.76
Canceled ..................................... -- -- -- --
--------- -------- --------- --------
Shares under option -- end of year ...........year.................... 942,133 $ 24.45$24.45 1,111,167 $ 26.79
--------- -------- --------- --------$26.79
========= ====== ========= ======
Fiscal 1999:
Granted ......................................Granted..................... 309,000 $ 16.31$16.31 105,000 $ 17.47
Exercised ....................................$17.47
Exercised................... (833) 16.31 (25,000) 25.65
Canceled .....................................Canceled.................... (12,435) 17.48 (6,668) 31.00
Converted from ISO to NQSO ...................NQSO.. (391,508) 23.24 391,508 23.24
--------- -------------- --------- --------------
Shares under option -- end
of year ...........year.................... 846,357 $22.15 1,576,007 $25.29
========= ====== ========= ======
Fiscal 2000:
Granted..................... 1,975,570 $11.90 -- $ 22.15 1,576,007 $ 25.29--
Exercised................... (833) 16.31 -- --
Canceled.................... (16,500) 22.73 (346,832) 24.74
--------- ------ --------- ------
Shares under option -- end
of year.................... 2,804,594 $14.93 1,229,175 $25.44
========= ============== ========= ==============
23
FISCALFiscal 2000 Fiscal 1999 FISCALFiscal 1998
FISCAL 1997
------------------ ------------------ ------------------------------ ------------- -------------
ISO:
Exercisable shares under option --
end of year ....year........................ 829,024 685,918 942,133
1,446,591
Option price range ................................ $ 10.19-range.................. $10.19-$25.38 $ 10.19-$10.19-$25.38 $ 4.80-$10.19-$25.38
Weighted average exercise price for
options exercisable .....................................exercisable................ $ 22.14 $ 23.52 $ 24.45 $ 20.91
Weighted average remaining life of
shares under options ...................................option................ 4.7 6.4 6.2 6.0
Fair value of options granted .....................granted....... $ 11.047.58 $ --11.21 $ --
NQSO:
Exercisable shares under option --
end of year ....year........................ 1,229,175 1,542,077 1,021,001
888,519
Option price range ................................ $ 16.31-range.................. $16.31-$31.00 $ 25.38-$16.31-$31.00 $ 23.88-$25.38-$31.00
Weighted average exercise price for
options exercisable .....................................exercisable................ $ 25.44 $ 25.48 $ 26.42 $ 25.45
Weighted average remaining life of
shares under options ...................................option................ 5.1 6.0 6.8 7.8
Fair value of options granted ..................... $ 11.21granted....... $ -- $ 13.3211.21 $ --
All options granted in fiscal 2000 vest in annual increments over five years
from the grant date. Substantially all options granted in fiscal years 1997, 1998 and 1999 vest over
a two year period from the date of grant.
During fiscal 2000 the Company issued a combined total of 129,500 shares of
restricted stock to certain employees under the 1999 Unifi, Inc. Long-Term In-
centive Plan. The stock issued vests in equal annual increments over five years
from the grant dates. Compensation expense will be recognized over the vesting
terms of the shares based on the fair market value at the date of grant.
24
7. RETIREMENT PLANSRetirement Plans
The Company has a qualified profit-sharing plan, which provides benefits for
eligible salaried and hourly employees. The annual contribution to the plan,
which is at the discretion of the Board of Directors, amounted to $11.0 million
in both 2000 and 1999 and $13.0 million in 1998 and $17.0 million 1997.1998. The Company leases its corporatecorpo-
rate office building from its profit-sharing plan through an independent trustee.trust-
ee.
8. LEASES AND COMMITMENTSLeases and Commitments
In addition to the direct financing sales-leaseback obligation described in
NoteConsolidated Financial Statements Footnote 4, the Company is obligated under
operating leases consisting primarily of real estate and equipment. Future obligationsob-
ligations for minimum rentals under the leases during fiscal years after June
27, 1999,25, 2000, are $5.6 million in 2000, $4.8$7.3 million in 2001, $4.0$6.3 million in 2002, $3.1$4.5 million in 2003,
and $1.9$2.7 million in 2004.2004, $2.2 million in 2005 and $0.9 million in aggregate there-
after. Rental expense was $8.5 million, $7.6 million $6.8 million and $5.0$6.8 million for the
fiscal years 2000, 1999 1998 and 1997,1998, respectively. The Company had committed approximately $20.2ap-
proximately $55.1 million for the purchase and up gradeupgrade of equipment and facilitiesfacili-
ties at June 27, 1999.25, 2000.
9. BUSINESS SEGMENTS, FOREIGN OPERATIONS AND CONCENTRATIONS OF CREDIT RISKBusiness Segments, Foreign Operations and Concentrations of Credit Risk
The Company and its subsidiaries are engaged predominantly in the processing
of yarns by texturing of synthetic filament polyester and nylon fiber with
sales domestically and internationally, mostly to knitters and weavers for the
apparel, industrial, hosiery, home furnishing, automotive upholstery and other
end-use markets. Additionally, during fiscal 1999, the Company formed a limited
liability company to provide integrated manufacturing, factory automation and
electronic commerce solutions to other domestic manufactures. In
fiscal year 1997, theThe Company was also
directly involved with the spinning of
cotton and cotton blend fibers. These operations were contributed to a limited
liability companymaintains investments in several minority-owned affiliates. See Footnote 11 in
these Consolidated Financial Statements for further information on June 30, 1997, of which the Company has a 34% ownership
interest (see Note 11).unconsoli-
dated affiliates.
In accordance with SFASStatement of Financial Accounting Standards No. 131,
segmented financial information of the polyester and nylon operating segments,
as regularly reported to management for the purpose of assessing performance
and allocating resources, is detailed below. "All other" primarily represents
the results of the limited liability consulting company in fiscal 19992000 and
the spun cotton operations in fiscal 1997.
24
1999.
ALL
(AMOUNTS IN THOUSANDS) POLYESTER NYLON OTHER TOTALAll
(Amounts in thousands) Polyester Nylon Other Total
- -------------------------------------- ----------- ----------- ------------- ----------------------------------- --------- -------- ------- ----------
Fiscal 2000
Net sales to external customers......... $852,179 $408,073 $20,160 $1,280,412
Intersegment net sales.................. 23 408 11,757 12,188
Depreciation and amortization........... 59,435 22,001 767 82,203
Segment operating income................ 66,572 40,999 941 108,512
Total assets............................ 695,363 358,205 17,721 1,071,289
-------- -------- ------- ----------
Fiscal 1999
Net sales to external customers ..... $ 805,749 $ 443,850customers......... $805,749 $443,850 $ 1,561 $ 1,251,160$1,251,160
Intersegment net sales ..............sales.................. 17,014 5,159 -- 22,173
Depreciation and amortization ....... 36,791 24,038amortization........... 58,294 24,142 48 60,877
Operating82,484
Segment operating income ....................(loss)......... 64,710 47,966 (62) 112,614
Total assets ........................ 709,553assets............................ 710,277 206,661 13,392 929,606
--------- --------- --------- -----------930,330
-------- -------- ------- ----------
Fiscal 1998
Net sales to external customers ..... $ 911,704 $ 465,905customers......... $911,704 $465,905 $ -- $ 1,377,609$1,377,609
Intersegment net sales ..............sales.................. 28,076 5,089 -- 33,165
Depreciation and amortization .......amortization........... 46,003 15,030 -- 61,033
Operating income ....................Segment operating income................ 111,944 70,512 -- 182,456
Total assets ........................assets............................ 650,335 249,754 60 900,149
--------- --------- --------- -----------
Fiscal 1997
Net sales to external customers ..... $ 935,972 $ 464,608 $ 304,346 $ 1,704,926
Intersegment net sales .............. 31,229 5,346 8 36,583
Depreciation and amortization ....... 49,460 11,929 19,277 80,666
Operating income .................... 106,710 71,642 4,681 183,033
Total assets ........................ 548,533 180,323 182,539 911,395
--------- --------- --------- ------------------- -------- ------- ----------
25
Segment operating income for fiscal 1999 was reduced $9.7 million and $5.1
million for polyester and nylon, respectively, as a result of the early retirementretire-
ment and termination charge in the third quarter (see NoteConsolidated Financial
Statements Footnote 14).
Certain indirect manufacturing and selling, general and administrative costs
are allocated to the operating segments based on activity drivers relevant to
the respective costs. The primary differences between the segmented financial
information of the operating segments, as reported to management, and the
Company's consolidated reporting relates to fiberintersegment transfer of yarn, fi-
ber costing and capitalization of property, plant and equipment costs. The domestic portionPrior to
the current fiscal year, substantially all intersegment transfers of yarn were
treated as internal sales at a selling price, which approximated cost plus a
normalized profit margin. In the current year, the majority of intersegment
yarn transfers were treated as inventory transfers, and profit margins recorded
only on intersegment transfers from our dyed operations. Domestic operating division'sdi-
visions' fiber costs are valued on a standard cost basis, which approximates
first-in, first-out accounting to better match current fluctuations in fiber
costing. Subsequently, foraccounting. For those components of inventory valued utilizingutil-
izing the last-in, first-out method (see NoteConsolidated Financial Statements
Footnote 1), an adjustment is made at the corporate level.level to record the differ-
ence between standard cost and LIFO. For significant capital projects, capitalizationcapital-
ization is delayed for management segment reporting until the facility is substantially complete, however,sub-
stantially complete. However, for consolidated financial reporting, expendituresassets are
capitalized into construction in progress as costs are incurred.
25
incurred or carried as
unallocated corporate fixed assets if they have been placed in service but not
as yet been moved for management segment reporting.
The increase in nylon total assets is attributable to the reclassification
of property, plant and equipment from unallocated corporate fixed assets. This
reclassification primarily relates to a new facility that was substantially
completed. The change in total assets for the "All Other" segment primarily re-
flects the establishment of the Company's majority owned subsidiary, Unifi
Technology Group in May 1999. Unifi Technology Group is a domestic automation
solutions provider.
(AMOUNTS IN THOUSANDS) JUNE(Amounts in Thousands) June 25, 2000 June 27, 1999 JUNEJune 28, 1998
JUNE 29, 1997
- -------------------------------------------------------- --------------- --------------- ------------------------------------ ------------- ------------- -------------
Depreciation and amortizationamortization:
Depreciation and amortization onof
specific assets of
reportable segments .................................segment
assets............................. $ 60,87782,203 $ 82,484 $ 61,033
$ 80,666
Depreciation onof unallocated assets .................... 25,626assets.. 7,146 6,362 6,138 7,233
Amortization of unallocated goodwill .................. 2,343 2,096 --
Amortization of financing costs ....................... 1,030 443 --
----------- ----------- -----------assets.. 3,841 3,373 2,539
---------- ---------- ----------
Consolidated depreciation and
amortization ............amortization....................... $ 89,87693,190 $ 92,219 $ 69,710
$ 87,899
=========== =========== ===========
Operating income========== ========== ==========
Profit:
Reportable segments operating
income ..................income............................. $ 108,512 $ 112,614 $ 182,456
$ 183,033
Net LIFOstandard cost (income) expense
adjustment to standard adjustment ....................... 8,040 2,038 1,997LIFO................. 4,444 (8,040) (2,038)
Unallocated operating (income)
expense projects ................ (1,442)project adjustment......... (1,440) 1,442 --
--
----------- ----------- -----------
Consolidated operatingProvision for bad debts............. 8,694 1,129 724
Interest expense.................... 30,294 27,459 16,598
Interest income..................... (2,772) (2,399) (1,869)
Other (income) expense.............. 1,052 440 (335)
Equity in (earnings) losses of
unconsolidated affiliates.......... 2,989 (4,214) (23,030)
Minority interests.................. 9,543 9,401 723
---------- ---------- ----------
Income before income .........................taxes and
cumulative effect of accounting
change............................. $ 119,21255,708 $ 184,49487,396 $ 185,030
=========== =========== ===========191,683
========== ========== ==========
Total assetsassets:
Reportable segments total assets ......................assets.... $1,071,289 $ 929,606930,330 $ 900,149 $ 911,395
Cash, receivables and other current
assets ............ 18,269assets............................. 16,254 17,661 2,604 9,027
Unallocated corporate fixed assets ....................assets.. 44,159 176,161 188,311 90,852
Other non-current corporate assets .................... 41,201assets.. 38,834 41,085 34,112 8,529
Investments in equity affiliates ......................affiliates.... 208,918 207,142 212,488 --
Intersegment notes and receivables ....................receivables.. (24,690) (6,539) (3,850)
(1,100)
----------- ----------- --------------------- ---------- ----------
Consolidated Assets ................................... $ 1,365,840 $ 1,333,814 $ 1,018,703
=========== =========== ===========assets................. $1,354,764 $1,365,840 $1,333,814
========== ========== ==========
26
The Company's domestic operations serve customers principally located in the
southeastern United States as well as international customers located primarily
in Canada, Mexico, Europe and South America. During fiscal 2000, 1999 1998
and 19971998
the Company did not have sales to any one customer in excess of 10% of consolidatedconsoli-
dated revenues. Export sales, excluding those to the Company's international
operations, aggregated $182.8 million in 2000, $153.9 million in 1999 and,
$185.5 million in 1998 and $203.8 million in 1997.1998. The concentration of credit risk for the Company with
respect to trade receivables is mitigated due to the large number of customers,
dispersion across different industries and geographic regions and its factoring
arrangements.
The Company's foreign operations primarily consist of manufacturing operationsopera-
tions in Ireland, England, Brazil and Columbia. Net sales, pre-tax operating
income and total assets of the Company's foreign and domestic operations are as
follows:
(AMOUNTS IN THOUSANDS) JUNE(Amounts in Thousands) June 25, 2000 June 27, 1999 JUNEJune 28, 1998
JUNE 29, 1997
- ------------------------------ --------------- --------------- ------------------------------------ ------------- ------------- -------------
Foreign operations:
Net sales ..............sales....................... $ 158,174 $ 130,766 $ 136,573
$ 140,102
Pre-tax income .........(loss)........... (4,456) 6,804 15,107
12,683
Total assets ...........assets.................... 193,860 173,298 127,586 112,203
Domestic operations:
Net sales .............. $ 1,120,394 $ 1,241,036 $ 1,564,824sales....................... $1,122,238 $1,120,394 $1,241,036
Pre-tax income .........income.................. 60,164 80,592 176,576
161,599
Total assets ...........assets.................... 1,160,904 1,192,542 1,206,228 906,500
10. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTSDerivative Financial Instruments and Fair Value of Financial Instruments
The Company conducts its business in various foreign currencies. As a result,re-
sult, it is subject to the transaction exposure that arises from foreign exchangeex-
change rate movements between the dates that foreign currency transactions are
recorded (export sales and purchases commitments) and the dates they are consummatedcon-
summated (cash receipts and cash disbursements in foreign currencies). The CompanyCom-
pany 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, Canadian and other 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 productsprod-
ucts into export markets. Counter-parties for these instruments are major financialfi-
nancial institutions.
26
Currency forward contracts are entered to hedge exposure for sales in foreignfor-
eign currencies based on specific sales orders with customers or for anticipatedantici-
pated sales activity for a future time period. Generally, 60-80% of the sales
value of these orders are covered by forward contracts. Maturity dates of the
forward contracts attempt to match anticipated receivable collections. The CompanyCom-
pany 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 equipment and inventory purchases. Generally 50-75% of the asset
cost is covered by forward contracts.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 recordedre-
corded as a component of the asset cost. The outstanding hedge agreements as of
June 27,
199925, 2000 mature through June 2000.October 2001.
The dollar equivalent of these forward currency contracts and their related
fair values are detailed below:
(AMOUNTS IN THOUSANDS) JUNE(Amounts in thousands) June 25, 2000 June 27, 1999 JUNEJune 28, 1998
- ------------------------------------------ --------------- ------------------------------------ ------------- ------------- -------------
Foreign currency purchase
contracts:
Notational amount ......................amount......... $49,343 $ 2,842 $ 29,184$29,184
Fair value .............................value................ 46,760 3,250 31,418
-------- ---------------- ------- -------
Net unrecognized (gain)
loss ...........loss.................... $ 2,583 $ (408) $ (2,234)
======== =========$(2,234)
======= ======= =======
Foreign currency sales
contracts:
Notational amount ...................... $ 28,024 $ 28,446amount......... $26,303 $28,024 $28,446
Fair value .............................value................ 26,474 27,826 28,646
-------- ---------------- ------- -------
Net unrecognized (gain)
loss ...........loss.................... $ 171 $ (198) $ 200
======== ================ ======= =======
27
The following methods were used by the Company in estimating its fair value
disclosures for financial instruments:
CASH AND CASH EQUIVALENTS, TRADE RECEIVABLES AND TRADE PAYABLESCash and cash equivalents, trade receivables and trade payables -- The carryingcar-
rying amounts approximate fair value because of the short maturity of these
instruments.
LONG-TERM DEBTLong-term debt -- The fair value of the Company's borrowings is estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities
(see NoteConsolidated Financial Statements Footnote 4).
FOREIGN CURRENCY CONTRACTSForeign currency contracts -- The fair value is based on quotes obtained
from brokers or reference to publicly available market information.
11. INVESTMENT IN UNCONSOLIDATED AFFILIATESInvestment in Unconsolidated Affiliates
Investments in affiliates consist of a 34% interest in Parkdale America,
LLC (the "LLC") and a 41.61%45.27% interest in Micell Technologies, Inc. ("Micell").
The LLC was created on June 30, 1997, when the Company and Parkdale Mills,
Inc. ("Parkdale") of Gastonia, North Carolina entered into a Contribution
Agreement (the "Agreement") that set forth the terms and conditions whereby
each entity's open-end and air jet spun cotton yarn assets and certain long-termlong-
term debt obligations were contributed to the LLC. In accordance with the
Agreement, each entity's inventory, owned real and tangible personal property
and improvements thereon and the Company's leased real property associated
with the operations were contributed to the LLC. Additionally, the Company
contributed $32.9 million in cash to the LLC on June 30, 1997, and is required to contribute $10.0 million
in cash on June 30, 1998, and $10.0 million on June 30, 1999, whereas Parkdale
contributed cash of $51.6 million on June 30, 1997. The LLC assumed certain
long-term debt obligations of the Company and Parkdale in the amounts of
$23.5 million and $46.0 million, respectively. In exchange for the assets contributedcon-
tributed to the LLC and the liabilities assumed by the LLC, the Company receivedre-
ceived a 34% interest in the LLC and Parkdale received a 66% interest in the
LLC.
The excess
of the Company's investment over its equity in the underlying net assets of the
LLC approximated $67.9 million at June 30, 1997 and is being amortized on a
straight-line basis over 30 years as a component of the equity in earnings of
unconsolidated affiliates.
27
Condensed balance sheet and income statement information as of June 25,
2000, June 27, 1999 and June 28, 1998 and for the fiscal yearyears ended June 25,
2000, June 27, 1999 and June 28, 1998, of the combined LLC and Micell is as
follows:
(AMOUNTS IN THOUSANDS) JUNE(Amounts in thousands) June 25, 2000 June 27, 1999 JUNEJune 28, 1998
- -------------------------------------------- --------------- ------------------------------------ ------------- ------------- -------------
Current assets ..................... $ 282,004 $ 260,358assets.............. $223,068 $282,004 $260,358
Noncurrent assets ..................assets........... 234,093 256,513 264,194
Current liabilities ................liabilities......... 37,632 125,730 134,110
Shareholders' equity and
capital accountsaccounts........... 398,113 390,935 390,442
Net sales .......................... $ 594,445 $ 652,097sales................... $507,950 $594,445 $652,097
Gross profit .......................profit................ 33,524 57,915 108,649
Income from operations .............operations...... 988 27,653 80,546
Net income .........................income.................. 2,453 21,262 75,788
The LLC is organized as a partnership for tax purposes. Taxable income is
passed through the LLC to the shareholders in accordance with the Operating
Agreement of the LLC. For the fiscal yearyears ended June 25, 2000, June 27, 1999
and June 28, 1998, distributions received by the Company from the LLC aggregatedamounted
to $3.2 million, $9.5 million.million and $7.7 million, respectively.
12. SUPPLEMENTAL CASH FLOW INFORMATIONSupplemental Cash Flow Information
Supplemental cash flow information is summarized below:
(AMOUNTS IN THOUSANDS) JUNE(Amounts in thousands) June 25, 2000 June 27, 1999 JUNEJune 28, 1998
JUNE 29, 1997
- -------------------------------------------------------- --------------- --------------- ------------------------------------ ------------- ------------- -------------
Cash payments for:
Interest, net of amounts
capitalized ............. $ 16,922 $ 16,521 $ 12,064capitalized................. $28,978 $25,396 $16,521
Income taxes, net of
refunds .....................refunds..................... 9,315 8,225 47,488 45,726
Stock issued for SI HoldingsHolding
Company acquisition ..acquisition.......... -- -- 21,000 --
28
13. MINORITY INTERESTMinority Interest
Effective May 29, 1998, the Company formed a limited liability company (the
"Partnership") with Burlington Industries, Inc. ("Burlington") to manufacture
and market natural textured polyester yarns. The Company has an 85.42% interest
in the Partnership and Burlington has 14.58%. However, forFor the first five years of the
Partnership, Burlington is entitled to the first $9.4 million of earnings. SubsequentSub-
sequent to this five yearfive-year period, earnings are to be allocated based on ownershipowner-
ship percentages. The Partnership's assets, liabilities and earnings are consolidatedcon-
solidated with those of the Company and Burlington's interest in the PartnershipPartner-
ship is included in the Company's financial statements as minority interest.
Burlington's share of the partnershipPartnership earnings in fiscal 2000, 1999 and 1998
amounted to $9.4 million, $9.4 million and $0.7 million, respectively.
14. EARLY RETIREMENT AND TERMINATION CHARGEEarly Retirement and Termination Charge
During the third quarter of fiscal 1999, the Company recognized a $14.8 millionmil-
lion charge associated with the early retirement and termination of 114 salariedsala-
ried employees. The charge was recorded as a component of selling, general and
administrative expenses in the amount of $8.2 million and cost of goods sold in
the amount of $6.6 million. Substantially all employees were terminated effectiveeffec-
tive March 31, 1999, with cash payments expected to be spread over a period not
to exceed three years. At June 27, 199925, 2000, there remained a reserve of $11.0
million$7.4 mil-
lion that is expected to equal the future cash expenditures to such terminated
employees.
28
15. QUARTERLY RESULTS (UNAUDITED)Quarterly Results (Unaudited)
Quarterly financial data for the years ended June 28, 1998,27, 1999, and June 27,
1999,25,
2000, is presented below:
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
(AMOUNT IN THOUSANDS, EXCEPT PER SHARE DATA)(Amounts in thousands, First Quarter Second Quarter Third Quarter Fourth Quarter
except per share data) (13 WEEKS)Weeks) (13 WEEKS)Weeks) (13 WEEKS)Weeks) (13 WEEKS)Weeks)
- -------------------------------------------------- --------------- ---------------- --------------- ------------------------------------- ------------- -------------- ------------- --------------
1998:
Net sales ....................................... $ 329,842 $ 343,096 $ 345,986 $ 358,685
Gross profit .................................... 49,518 59,005 58,134 61,114
Income before cumulative effect of accounting
change ......................................... 27,525 33,019 33,286 35,071
Cumulative effect of accounting change .......... 4,636
Net income ...................................... 27,525 28,383 33,286 35,071
Income before cumulative effect of accounting
change (basic) ................................. .45 .54 .54 .57
Income before cumulative effect of accounting
change (diluted) ............................... .45 .54 .54 .57
Earnings per share (basic) ...................... .45 .46 .54 .57
Earnings per share (diluted) .................... .45 .46 .54 .57
1999:
Net sales ....................................... $ 328,815 $ 319,854 $ 294,805 $ 307,686sales............... $328,815 $319,854 $294,805 $307,686
Gross profit ....................................profit............ 47,477 50,460 29,970 46,643
Income before cumulative
effect of accounting
change .........................................change................. 21,030 22,498 1,093 14,406
Cumulative effect of
accounting change ..........change...... 2,768
Net income ......................................income.............. 18,262 22,498 1,093 14,406
Income before cumulative
effect of accounting
change (basic) .......................................... .34 .37 .02 .24
Income before cumulative
effect of accounting
change (diluted) ...................................... .30 .37 .02 .24
Earnings per share
(basic) ...................................... .34 .37 .02 .24
Earnings per share
(diluted) .................................. .30 .37 .02 .24
2000:
Net sales............... $304,714 $317,589 $319,302 $338,807
Gross profit............ 34,259 41,742 42,870 44,700
Net income.............. 3,332 10,173 13,236 11,292
Earnings per share
(basic)................ .06 .17 .23 .20
Earnings per share
(diluted).............. .06 .17 .23 .20
ITEMItem 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has not changed accountants nor are there any disagreements with
its accountants, Ernst & Young LLP, on accounting and financial disclosure that
should be reported pursuant to Item 304 of Regulation S-K.
29
PART III
ITEMItem 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT AND COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT
(a) Directors of Registrant: The information included under the headings
"Election of Directors", "Nominees for Election as Directors", "Directors
Remaining in Office", "Security Holding of Directors, Nominees, and Executive
Officers", "Directors' Compensation", "Committees of the Board of Directors",
and compliance with Section 16(a) of The Securities and Exchange Act, beginning
on Page 3page 2 and ending on Page 6page 7 and on page 1714 of the definitive proxy statement
filed with the Commission since the close of the Registrant's fiscal year ended
June 27, 1999,25, 2000, and within 120 days after the close of said fiscal year, are
incorporated herein by reference.
29
(b) Identification of Executive Officers:
CHAIRMAN OF THE BOARD OF DIRECTORSChairman of The Board of Directors
G. ALLEN MEBANE,Allen Mebane, IV Mr. Mebane is 6970 and has been an Executive Officer and
member of the Board of directors of the Company since 1971, serving as PresidentPresi-
dent and Chief Executive Officer of the Company relinquishing these positions inuntil 1980 and 1985, respectively.respec-
tively. He was the Chairman of the Board of Directors for many years, Chairman
of the Executive Committee from 1974 to 1995, and was elected as one of the
three members of the Office of Chairman on August 8, 1991. On October 22,
1992, Mr. Mebane was again elected as Chairman of the Board of Directors and
on January 20, 1999 resumed the positions of Chief Executive Officer (which he
held until January 26, 2000). Mr. Mebane has announced that he will retire as
an Executive Officer and Chairman of the Board of Directors effective after
the Company's annual meeting of shareholders on October 26, 2000.
President and Chief Executive Committee.
PRESIDENT AND CHIEF OPERATING OFFICER
BRIANOfficer
Brian R. PARKEParke Mr. Parke is 5152 and hashad been the Manager or President of the
Company's Irish subsidiary (Unifi Textured Yarns Europe) from its acquisition
by the Company in 1984 to January 20, 1999, when he was elected President and
Chief Operating Officer of the Company. On January 26, 2000, Mr. Parke was
elected Chief Executive Officer of the Company. Additionally, Mr. Parke has
been a Vice President of the Company since October 21, 1993 and on July 22,
1999 was elected to the Company's Board of Directors.
EXECUTIVE VICE PRESIDENTS
JERRY W. ELLER Mr. Eller is 58 and has been a Vice President or Executive Vice President since 1975. He has been a member of the Board of Directors since
1985 and is a member of the Executive Committee.
G. ALFRED WEBSTER Mr. Webster is 51 and has been a Vice President or
Executive Vice President since 1979. He has been a member of the Board of
Directors since 1986 and is a member of the Executive Committee.
SENIOR VICE PRESIDENTS
WILLISPresidents
Willis C. MOORE,Moore, III Mr. Moore is 4647 and had been a Partner with Ernst &
Young LLP, or its predecessors from 1975 until December 1994, when he became
employed by the Company as its Chief Financial Officer. Mr. Moore was elected
as a Vice President of the Company on October 19, 1995, Senior Vice President
on October 23, 1997 and Executive Vice President on July 26, 2000. Addition-
ally, Mr. Moore continues to serve as the Company's Chief Financial Officer.
G. Alfred Webster Mr. Webster is currently
serving52 and has been a Vice President or Execu-
tive Vice President since 1979. He has been a member of the Board of Directors
since 1986.
Senior Vice Presidents
Thomas H. Caudle Mr. Caudle is 48 and has been an employee of the Company
since 1982. On January 20, 1999, Mr. Caudle was elected as a Vice President of
Manufacturing Services of the Company and on July 26, 2000 he was elected as a
Senior Vice President in charge of Manufacturing for the Company.
Michael E. Delaney Mr. Delaney is 44 and Chief Financial Officer.
JAMES W. BROWN, JR. Mr. Brown is 47 and was an employee of Macfield, Inc.
from 1973 until the Macfield merger on August 8, 1991, when he becamehas been an employee of the Company. He became aCom-
pany since January 2000, when he joined the Company as Senior Vice President
of Marketing. Prior to coming to the Company, on October
22, 1992 and a SeniorMr. Delaney was Vice President
on January 20, 1999. He is currently
serving asof Marketing with Volvo Truck N.A. from July 1997 through December 1999, Vice
President of the Nylon/Covered Yarn DivisionMarketing with GE Capital Transport International Pool from De-
cember 1995 through July 1997 and Vice President of the Company.
STEWART O. LITTLETIP Intermodel Services
from December 1993 through December 1995.
Stewart Q. Little Mr. Little is 46 and has been a Vice President of the
Company since October 24, 1985 and a Senior Vice President since January 20,
1999. He is currently serving as Senior Vice President of the Polyester DivisionNorth American Yarn
Sales.
30
Ottis "Lee" Gordon Mr. Gordon is 54 and has been an employee of the Company.Company
since the Unifi merger with Macfield in 1991. Prior to the merger, Mr. Gordon
had been an employee of Macfield since 1973. On January 20, 1999, Mr. Gordon
was elected as a Vice President of Product Development of the Company and on
July 26, 2000 he was elected as a Senior Vice President of Product Develop-
ment.
These executive officers, unless otherwise noted, were elected by the Board
of Directors of the Registrant at the Annual Meeting of the Board of Directors
held on October 22, 1998.21, 1999. Each executive officer was elected to serve until
the next Annual Meeting of the Board of Directors or until his successor was
elected and qualified.
(c) Family Relationship: Mr. Mebane, Chairman of the Board, and Mr. C. CliffordClif-
ford Frazier, Jr., the Secretary of the Registrant, are first cousins. Except
for this relationship, there is no family relation between any of the Officers.
ITEMOffi-
cers.
Item 11. EXECUTIVE COMPENSATION
The information set forth under the headings "Compensation and Option
Committees InterlocksCommittee Inter-
locks and Insider Participation in Compensation Decisions",
"Executive Officers and Their Compensation", "Employment and Termination
Agreements", "Options Granted", "Option Exercises and Option/SAR Values", the "Report of the
Compensation Committee on Executive Compensation", "Executive Officers and
Their Compensation", "Options Grants in Fiscal Year 2000", "Option Exercises
and Option/SAR Values", "Employment and Termination Agreements", and the "Performance"Per-
formance Graph-Shareholder Return on Common Stock" beginning on Page 6page 7 and
ending on Page 13page 14 of the Company's definitive proxy statement filed with the
Commission since the close of the Registrant's fiscal year ended June 27, 1999,25,
2000, and within 120 days after the close of said fiscal year, are incorporatedincorpo-
rated herein by reference.
For additional information regarding executive compensation reference is
made to Exhibits (101)(10i), (10k), (10l), and (10m), (10n), (10p), (10q), (10r) and (10s) of this Form 10-K.
30
ITEMItem 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security ownership of certain beneficial owners and management is the same
as reported under the heading "Information Relating to Principal Security
Holders" on Pagepage 2 of the definitive proxy statement and under the heading
"Security Holding of Directors, Nominees and Executive Officers" on Pagepage 5 and
Pagepage 6 of the definitive proxy statement filed with the Commission pursuant to
Regulation 14 (a) within 120 days after the close of the fiscal year ended
June 27, 1999,25, 2000, which are hereby incorporated by reference.
ITEMItem 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information included under the heading "Compensation and Option
Committees InterlocksCommittee Inter-
locks and Insider Participation In Compensation Decisions", on Page 6 and Pagepage 7 of the
definitive proxy statement filed with the Commission since the close of the
Registrant's fiscal year ended June 27, 1999,25, 2000, and within 120 days after the
close of said fiscal year, is incorporated herein by reference.
31
PART IV
ITEMItem 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
The following financial statements and report of independent auditors are
filed as a part of this Report.
PAGES
------Pages
-----
Report of Independent Auditors ....................................................Auditors...................................... 13
Consolidated Balance Sheets at June 27, 199925, 2000 and June 28, 1998 ....................27, 1999...... 14
Consolidated Statements of Income for the Years Ended June 25, 2000,
June 27, 1999, and June 28, 1998,
and June 29, 1997 .................................................................1998................................... 15
Consolidated Statements of Changes in Shareholders' Equity and
Comprehensive Income for the Years Ended June 25, 2000, June 27,
1999 and June 28, 1998 and June 29, 1997 .........1998............................................. 16
Consolidated Statements of Cash Flows for the Years Ended June 25,
2000, June 27, 1999 and June 28, 1998 and June 29, 1997 ............................................................1998.............................. 17
Notes to Consolidated Financial Statements ........................................Statements.......................... 18
2. Financial Statement Schedules
Schedules for the three years ended June 27, 1999:25, 2000:
II -- Valuation and Qualifying Accounts .......... 36Accounts............................ 35
Schedules other than those above are omitted because they are not required,
are not applicable, or the required information is given in the consolidated
financial statementsConsolidated
Financial Statements or notes thereto.
Individual financial statements of the Registrant have been omitted because
it is primarily an operating company and all subsidiaries included in the consolidated financial statementsCon-
solidated Financial Statements being filed, in the aggregate, do not have minoritymi-
nority equity interest and/or indebtedness to any person other than the RegistrantRegis-
trant or its consolidated subsidiaries in amounts which together exceed 5% of
the total assets as shown by the most recent year end consolidated balance
sheet.Consolidated Balance
Sheet.
With the exception of the information herein expressly incorporated by reference,ref-
erence, the 19992000 Proxy Statement is not deemed filed as a part of this Annual
Report on Form 10-K.
3. Exhibits
EXHIBIT NO. DESCRIPTION
- ------------- ----------------------------------------------------------------Exhibit No. Description
----------- -----------
(2a-1) Contribution Agreement, dated June 30, 1997, by and between
Parkdale Mills, Inc., Unifi, Inc., UNIFI Manufacturing, Inc., and
Parkdale America, LLC, filed as Exhibit (2) to Unifi's Form 8-K
filed with the Commission on July 15, 1997, which is incorporated
herein by reference.
(3a) Restated Certificate of Incorporation of Unifi, Inc., dated July
21, 1994, filed herewith.
(3b) Restated by-laws of Unifi, Inc., effective July 22, 1999, (filed
as Exhibit (3a)(3b) with the Company's Form 10-K for the fiscal year
ended June 26, 1994)27, 1999), which is incorporated herein by reference.
(3b) Restated by-laws of Unifi, Inc., (effective July 22, 1999),
filed herewith.
(4a) Specimen Certificate of Unifi, Inc.'s common stock, filed as
Exhibit 4(a) to the Registration Statement on Form S-1,
(Registration No. 2-45405), which is incorporated herein by
reference.
(4b) Unifi, Inc.'s Registration Statement for the 6 1/2% Notes due
2008, Series B, filed on Form S-4 (Registration No. 333-49243),
which is incorporated herein by reference.
(4c) Description of Unifi, Inc.'s common stock, filed on November 5,
1998, as Item 5. (Other Events) on Form 8-K, which is incorporated
herein by reference.
(10a) *Unifi, Inc. 1982 Incentive Stock Option Plan, as amended, filed
as Exhibit 28.2 to the Registration Statement on Form S-8,
(Registration No. 33-23201), which is incorporated herein by
reference.
(10b) *Unifi, Inc. 1987 Non-Qualified Stock Option Plan, as amended,
filed as Exhibit 28.3 to the Registration Statement on Form S-8,
(Registration No. 33-23201), which is incorporated herein by
reference.
32
EXHIBIT NO. DESCRIPTION
- ------------- ----------------------------------------------------------------Exhibit No. Description
----------- -----------
(10c) *Unifi, Inc. 1992 Incentive Stock Option Plan, effective July 16,
1992, (filed as Exhibit (10c) with the Company's Form 10-K for the
fiscal year ended June 27, 1993), and included as Exhibit 99.2 to
the Registration Statement on Form S-8 (Registration No. 33-53799)33-
53799), which are incorporated herein by reference.
(10d) *Unifi, Inc.'s Registration Statement for selling Shareholders,
who are Directors and Officers of the Company, who acquired the
shares as stock bonuses from the Company, filed on Form S-3
(Registration No. 33-23201), which is incorporated herein by
reference.
(10e) Unifi Spun Yarns, Inc.'s 1992 Employee Stock Option Plan filed as
Exhibit 99.3 to the Registration Statement on Form S-8
(Registration No. 33-53799), which is incorporated herein by
reference.
(10f) *Unifi, Inc.'s 1996 Incentive Stock Option Plan (filed as Exhibit
10(f) with the Company's Form 10-K for the fiscal year ended June
30, 1996) which is incorporated herein by reference.
(10g) *Unifi, Inc.'s 1996 Non-Qualified Stock Option Plan (filed as
Exhibit 10(g) with the Company's Form 10-K for the fiscal year
ended June 30, 1996) which is incorporated herein by reference.
(10h) Lease Agreement, dated March 2, 1987, between NationsBank, Trustee
under the Unifi, Inc. Profit Sharing Plan and Trust, Wachovia Bank
and Trust Co., N.A., Independent Fiduciary, and Unifi, Inc., (filed as Exhibit (10d) with the Company's Form
10-K for the fiscal year ended June 27, 1987), which is
incorporated herein by reference.filed
herewith.
(10i) Factoring Contract and Security Agreement and a Letter Amendment
thereto, all dated as of May 25, 1994, by and between Unifi,
Inc. and the CIT Group/DCC, Inc., (filed as Exhibit (10g) with
the Company's Form 10-K for the fiscal year ended June 26,
1994), which are incorporated herein by reference.
(10j) Factoring Contract and Security Agreement, dated as of May 2,
1988, between Macfield, Inc., and First Factors Corp., and First
Amendment thereto, dated September 28, 1990, (both filed as
Exhibit (10g) with the Company's Form 10-K for the fiscal year
ended June 30, 1991), and Second Amendment to the Factoring
Contract and Security Agreement, dated March 1, 1992, (filed as
Exhibit (10g) with the Company's Form 10-K for the fiscal year
ended June 27, 1992), and Letter Agreement dated August 31, 1993
and Amendment to Factoring Contract and Security Agreement dated
January 5, 1994, (filed as Exhibit (10h) with the Company's Form
10-K for the fiscal year ended June 26, 1994), which are
incorporated herein by reference.
(10k) Factoring Agreement dated August 23, 1995, and a Letter
Amendment thereto dated October 16, 1995, by and between Unifi,
Inc. and Republic Factors Corp., (filed as Exhibit 10(k) with
the Company's Form 10-K for the fiscal year ended June 30, 1996)
which is incorporated herein by reference.
(10l) *Employment Agreement between Unifi, Inc. and G. Allen Mebane,
dated July 19, 1990, (filed as Exhibit (10h) with the Company's
Form 10-K for the fiscal year ended June 30, 1991), which is
incorporated herein by reference.
(10m) *Employment Agreement between Unifi, Inc. and William T.
Kretzer, dated July 19, 1990, (filed as Exhibit (10i) with the
Company's Form 10-K for the fiscal year ended June 30, 1991),
and Amendment to Employment Agreement between Unifi, Inc. and
William T. Kretzer, dated October 22, 1992 (filed as Exhibit
(10j) with the Company's Form 10-K for fiscal year ended June
27, 1993), which are incorporated herein by reference, and
Termination Agreement effective the 1st day of February, 1999,
which is filed herewith.
(10n) *Severance Compensation Agreement between Unifi, Inc. and
William T. Kretzer, dated July 20, 1996, expiring on July 19,
1999 (similar agreements were signed with G. Allen Mebane,
Robert A. Ward, Jerry W. Eller and G. Alfred Webster)(filed as
Exhibit (10n) with the Company's Form 10-K for fiscal year ended
June 30, 1996), which is incorporated herein by reference.
(10o)(10j) Credit Agreement, dated April 15, 1996, by and between Unifi, Inc.
and The Several Lenders from Time to Time Party thereto and
NationsBank, N.A. as agent, (filed as Exhibit (10o) with the
Company's Form 10-K for the fiscal year ended June 30, 1996) which
is incorporated herein by reference.
(10p) *Deferral Agreement, dated November 21, 1997, by and between
Unifi, Inc. and William T. Kretzer (filed as Exhibit (10p) with
the Company's Form 10-K for the fiscal year ended June 28,
1998), which incorporated herein by reference. Note: Said
Deferral Agreement was amended by the Termination Agreement
filed as Exhibit (10m) to this Form 10-K.
33
EXHIBIT NO. DESCRIPTION
- ------------- ----------------------------------------------------------------
(10q)(10k) *Severance Compensation Agreement between Unifi, Inc. and Willis
C. Moore, III, dated July 16, 1998, expiring on July 20, 2001 (similar agreements were(a
similar agreement was signed with James W. Brown, Jr.,
Kenneth L. Huggins, Stewart Q. Little, Ralph D. Mayes and
Raymond W. Maynard)Little)(filed as
Exhibit (10q) with the Company's Form 10-K for the fiscal year
ended June 28, 1998).
(10r)(10l) *Severance Compensation Agreement between Unifi, Inc. and Brian R.
Parke, dated October 1, 1998, expiring on July 20, 2001, filed herewith.
(10s)(filed as
exhibit (10r) with the Company's Form 10-K for the fiscal year
ended June 27, 1999) which is incorporated herein by reference.
(10m) *Agreement, effective February 1, 1999, by and between Unifi, Inc.
and Jerry W. Eller, filed herewith.
(21) Subsidiaries of(filed as Exhibit (10s) with the Company's
Form 10-K for the fiscal year ended June 27, 1999).
(10n) *1999 Unifi, Inc. (23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule.
(b) ReportsLong-Term Incentive Plan, (filed as Exhibit 99.1
to the Registration Statement on Form 8-K.
NoneS-8, (Registration No. 333-
43158), which is incorporated herein by reference.
(10o) Master Agreement POY Manufacturing Alliance between Unifi, Inc.
and E.I. du Pont de Nemours and Company, dated June 1, 2000, filed
herewith.
(21) Subsidiaries of Unifi, Inc.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule.
- ----------------
* NOTE: These Exhibits are management contracts or compensatory plans or arrangementsar-
rangements required to be filed as an exhibit to this Form 10-K pursuant to
Item 14(c) of this report.
34(b) Reports on Form 8-K.
None
33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
UNIFI, INC.Unifi, Inc.
September 21, 19992000 By: /s/ G. ALLEN MEBANE, IV
-- ---------------------------------------
G. ALLEN MEBANE, IV
CHAIRMAN OF THE BOARD
(CHIEF EXECUTIVE OFFICER)Brian R. Parke
_______________________________________
Brian R. Parke
Chief Executive Officer
September 21, 19992000 By: /s/ WILLISWillis C. MOORE,Moore, III
-- ---------------------------------------
WILLIS_______________________________________
Willis C. MOORE,Moore, III
SENIOR VICE PRESIDENT
(CHIEF FINANCIAL OFFICER)
Pursuant to the requirements of the SecuritiesExecutive Vice President
(Chief Financial Officer)
/s/ G. Allen Mebane, IV Chairman and Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
RegistrantSeptember 21, 2000
- ---------------------------------- Director
G. Allen Mebane, IV
/s/ Brian R. Parke President, Chief September 21, 2000
- ---------------------------------- Executive Officer and
in the capacitiesBrian R. Parke Director
/s/ G. Alfred Webster Executive Vice President September 21, 2000
- ---------------------------------- and on the dates indicated:
/s/ G. ALLEN MEBANE, IV Chairman, Chief Executive Officer September 21, 1999
- ---------------------------------- and Director --
G. ALLEN MEBANE, IV
/s/ BRIAN R. PARKE President, Chief Operating Officer September 21, 1999
- ---------------------------------- and Director --
BRIAN R. PARKE
/s/ ROBERT A. WARD Senior Advisor to President and September 21, 1999
- ---------------------------------- Director --
ROBERT A. WARD
/s/ JERRY W. ELLER Executive Vice President and September 21, 1999
- ---------------------------------- Director --
JERRY W. ELLER
/s/ G. ALFRED WEBSTER Executive Vice President and September 21, 1999
- ---------------------------------- Director --
G. ALFRED WEBSTER
/s/ CHARLES R. CARTER Director September 21, 1999
- ---------------------------------- --
CHARLES R. CARTER
/s/ KENNETH G. LANGONE Director September 21, 1999
- ---------------------------------- --
KENNETH G. LANGONE
/s/ DONALD F. ORR Director September 21, 1999
- ---------------------------------- --
DONALD F. ORR
/s/ J.B. DAVIS Director September 21, 1999
- ---------------------------------- --
J.B. DAVIS
/s/ R. WILEY BOURNE, JR. Director September 21, 1999
- ---------------------------------- --
R. WILEY BOURNE, JR.
Director September 21, 1999
- ---------------------------------- --
SIR RICHARD GREENBURY
35Director
G. Alfred Webster
/s/ Robert A. Ward Director September 21, 2000
- ----------------------------------
Robert A. Ward
/s/ Jerry W. Eller Director September 21, 2000
- ----------------------------------
Jerry W. Eller
/s/ Charles R. Carter Director September 21, 2000
- ----------------------------------
Charles R. Carter
/s/ Kenneth G. Langone Director September 21, 2000
- ----------------------------------
Kenneth G. Langone
/s/ Donald F. Orr Director September 21, 2000
- ----------------------------------
Donald F. Orr
/s/ J.B. Davis Director September 21, 2000
- ----------------------------------
J.B. Davis
/s/ R. Wiley Bourne, Jr. Director September 21, 2000
- ----------------------------------
R. Wiley Bourne, Jr.
/s/ Richard Greenbury Director September 21, 2000
- ----------------------------------
Sir Richard Greenbury
34
(d)(27) Schedule II --- Valuation and Qualifying Accounts
UNIFI, INC. AND SUBSIDIARIES
JUNE 27, 1999
(IN THOUSANDS)(Amounts in thousands)
COLUMNColumn A COLUMNColumn B COLUMNColumn C COLUMNColumn D COLUMNColumn E
- ----------------------------- -------------- --------------------------- ------------------ --------------
ADDITIONS
---------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS------------------------ ------------ ---------------------- ------------- -------------
Additions
----------------------
Charged to
Balance at Charged to Other
Beginning of Costs and Accounts -- DEDUCTIONSDeductions -- BALANCE AT
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIODBalance at
Description Period Expenses Describe Describe End of Period
- ----------------------------- -------------------------------------- ------------ -------------- ------------------ ------------------------ ----------- ------------- -------------
Allowance for doubtful
accounts:accounts (a):
Year ended June 25,
2000................... $8,749 $14,866 $ 225(b) $(6,631)(c) $17,209
Year ended June 27,
1999 .. $8,225 $6,241 $ 451(a) $ (6,168)(b) $8,7491999................... 8,225 6,241 240(b) (5,957)(c) 8,749
Year ended June 28,
1998 ..1998................... 5,462 3,917 3,665(a)3,665(b) (4,819)(b)(c) 8,225
Year ended June 29, 1997 .. 6,595 4,390 -- (5,523)(b) 5,462
(A) INCLUDES ACQUISITION RELATED ADJUSTMENTS TO WRITE-DOWN ACQUIRED ACCOUNTS
RECEIVABLE TO FAIR MARKET VALUE.
(B) INCLUDES UNCOLLECTIBLE ACCOUNTS WRITTEN OFF AND CUSTOMER CLAIMS PAID, NET OF
CERTAIN RECOVERIES.
36(a) The allowance for doubtful accounts includes amounts estimated not to be
collectible for product quality claims, specific customer credit issues
and a general provision for bad debts due to the decline in industry con-
ditions.
(b) Includes acquisition related adjustments to write-down acquired accounts
receivable to fair market value and effects of currency translation from
restating activity of our foreign affiliates from their respective local
currencies to the U.S. dollar.
(c) Includes accounts written off which were deemed not to be collectible and
customer claims paid, net of certain recoveries.
35