FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberDecember 25, 1994
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-10542
UNIFI, INC.
(Exact name of registrant as specified its charter)
New York 11-2165495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 19109 - 7201 West Friendly Road
Greensboro, NC 27419
(Address of principal executive offices) (Zip Code)
(910) 294-4410
(Registrant's telephone number, including area code)
Same
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at SeptemberDecember 25, 1994
Common Stock, par value $.10 per share 70,462,21768,212,035 Shares
Part I. Financial Information
UNIFI, INC.
Condensed Consolidated Balance Sheets
SeptemberDecember 25, June 26,
1994 1994
(Unaudited) (Audited)
(Amounts in Thousands)
ASSETS
Current Assets:
Cash and Cash Equivalents $107,165$58,233 $80,653
Short-Term Investments 69,62959,770 71,483
Accounts Receivable, Net 190,174188,802 200,537
Inventories
Raw Materials and Supplies $43,818$58,308 $29,797
Work in Process 13,32312,248 12,937
Finished Goods 56,37952,815 57,545
$113,520$123,371 $100,279
Other Current Assets 3,7541,588 3,605
Total Current Assets $484,242$431,764 $456,557
Property, Plant and Equipment $860,336$879,043 $848,637
Less: Accumulated Depreciation 349,461366,448 336,375
$510,875$512,595 $512,262
Investments in Affiliates $10,815$11,616 $10,626
Other Assets $26,559$24,751 $23,807
Total Assets $1,032,491$980,726 $1,003,252
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable $-- $137$25
Accounts Payable 95,18687,325 83,831
Accrued Expenses 43,541 56,18345,219 56,295
Income Taxes 20,73510,257 12,132
Total Current Liabilities $159,462$142,801 $152,283
Long-Term Debt $230,000 $230,000
Deferred Income Taxes $32,964$34,699 $32,447
Shareholders' Equity
Common Stock $7,046$6,821 $7,043
Capital in Excess of Par 201,833144,372 199,959
Retained Earnings 401,116422,225 385,472
Cumulative Translation Adjustment 911(365) (3,060)
Reserve for Investments (841)173 (892)
Total Shareholders' Equity $610,065$573,226 $588,522
Total Liabilities and
$1,032,491 $1,003,252
Shareholders' Equity $980,726 $1,003,252
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Condensed Consolidated Statements of Income
(Unaudited)
For the Quarters Ended SeptemberFor the Six Months Ended
Dec. 25, SeptemberDec. 26, Dec. 25, Dec. 26,
1994 1993 1994 1993
(Amounts in Thousands Except Per Share Data)
Net Sales $359,194 $325,355$387,297 $351,516 $746,491 $676,871
Costs and Expenses:
Cost of Goods Sold $310,860 $279,630$332,182 $298,952 $643,042 $578,582
Selling, General &
Administrative 9,674 9,573
ExpenseExp. 10,287 10,185 19,961 19,758
Interest Expense 3,938 5,0933,935 4,186 7,873 9,279
Interest Income (2,652) (2,713)(2,401) (2,007) (5,053) (4,720)
Other (Income)
Expense (579) 204
$321,241 $291,787(2,259) (268) (2,838) (64)
$341,744 $311,048 $662,985 $602,835
Income Before Income $45,553 $40,468 $83,506 $74,036
Taxes $37,953 $33,568
Income Taxes 15,264 13,75617,433 16,107 32,697 29,863
Net Income $22,689 $19,812$28,120 $24,361 $50,809 $44,173
Earnings Per Share:
Primary $.32 $.28$.40 $.34 $.72 $.62
Fully Diluted $.32 $.28$.39 $.34 $.70 $.61
Cash Dividends Per Share $.10 $.14 $.20 $.28
Share
Average Shares
Outstanding: Primary 70,952 71,09070,216 71,027 70,584 71,059
Fully Diluted 78,705 78,84377,970 78,806 78,337 78,824
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the QuartersSix Months
Ended
SeptemberDec. 25, SeptemberDec. 26,
1994 1993
(Amounts in Thousands)
Cash and Cash Equivalents Provided by
$41,568 $18,441
Operating Activities $64,338 $52,048
Investing Activities:
Capital Expenditures $(23,736) $(44,250)$(45,161) $(79,373)
Sale of Capital Assets 308623 --
Notes Receivable (306) 9154,702 (42)
Sale of Subsidiary - Note (e) 13,798 --
Sale of Investments 1,580 4,59849,661 34,168
Purchase of Investments (40,455) (4)
Net Investing Activities $(8,356) $(38,737)$(16,832) $(45,251)
Financing Activities:
Issuance of Common Stock $299 $17$410 $419
Borrowing of Debt -- 7,453
Repayment of Debt (25) (24,563)(27,194)
Cash Dividend (7,045) (9,463)(14,056) (19,331)
Purchase and Retirement of Common Stock (56,219) --
Net Financing Activities $(6,771) $(26,556)$(69,890) $(38,653)
Currency Translation Adjustment $71 $(75)$(36) $(16)
Increase (Decrease) in Cash $26,512 $(46,927)$(22,420) $(31,872)
Cash and Cash Equivalents - Beginning 80,653 76,093
Cash and Cash Equivalents - Ending $107,165 $29,166$58,233 $44,221
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Notes to Condensed Consolidated Financial Statements
(a)Basis of Presentation
The information furnished is unaudited and reflects all adjustments which
are, in the opinion of Management, necessary to present fairly the
financial position at SeptemberDecember 25, 1994 and the results of operations and
cash flows for the quartersperiods ended SeptemberDecember 25, 1994 and SeptemberDecember 26, 1993.
Such adjustments consisted of normal recurring items. Interim results are
not necessarily indicative of results for a full year. It is suggested
that the condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's latest
annual report on Form 10-K.
(b)Income Taxes
Deferred income taxes arise primarily from temporary differences between
financial and tax basis of assets and liabilities, principally property and
equipment.
The difference between the statutory federal income tax rate and the
effective tax rate is primarily due to results of foreign subsidiaries
which are taxed at rates below those of U.S. operations. Neither quarters'The current
periods' operating results were significantlymore favorably impacted by foreign
operations;
therefore,operations than the rate for both periods approximatesprior periods' which contributed to the statutory rate.
lower effective
tax rates.
(c)Per Share Information (c)
Earnings per common share are computed on the basis of the number of shares
outstanding, adjusted for the dilutive effect of stock options outstanding.
The Convertible Notes do not meet the test of a common stock equivalent,
accordingly, conversion of these notes is only assumed for the calculation
of fully diluted earnings per share.
Computation of average shares outstanding (in 000's):
Quarters Ended SeptemberSix Months Ended
Dec. 25, SeptemberDec. 26, Dec. 25, Dec. 26,
1994 1993 1994 1993
Average Shares
Outstanding 70,449 70,34069,706 70,434 70,077 70,387
Add: Dilutive Options 503 750510 593 507 672
Primary Average Shares 70,952 71,09070,216 71,027 70,584 71,059
Incremental Shares
Arising from Full
Dilution Assumption 7,754 7,779 7,753 7,753
Assumption7,765
Average Shares Assuming
Full Dilution 78,705 78,84377,970 78,806 78,337 78,824
Computation of net income for per share data (in 000's):
Quarters Ended SeptemberSix Months Ended
Dec. 25, SeptemberDec. 26, Dec. 25, Dec. 26,
1994 1993 1994 1993
Net Income - Primary $22,689 $19,812$28,120 $24,361 $50,809 $44,173
Add: Convertible
Subordinated Interest
Net of Tax 2,169 2,1032,168 2,113 4,337 4,216
Net Income Assuming
Full Dilution $24,858 $21,915$30,288 $26,474 $55,146 $48,389
(d)Common Stock
On October 20, 1994January 19, 1995 the Company's Board of Directors declared a cash
dividend of 10 cents per share payable on NovemberFebruary 10, 19941995 to shareholders
of record on NovemberFebruary 3, 1994.
(e)Sale of Subsidiary
During the current quarter the Company completed the sale of its wholly-
owned French subsidiary, Unifi Texturing, S.A. (UTSA). Net cash proceeds
from the sale totaled $13.8 million, excluding $4.1 million of cash
remitted to the Parent from UTSA in conjunction with the sale. The
transaction had no significant impact on current quarter earnings. The
results of operations of UTSA were not significant to the consolidated
Company for either period presented.1995.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is Management's discussion and analysis of certain significant
factors that have affected the Company's operations and material changes in
financial condition during the periods included in the accompanying Condensed
Consolidated Financial Statements.
Results of Operations
Net sales increased 10.4%from $351.5 million to $387.3 million in the quarter or
10.2% and for the six month period, sales increased 10.3% from $325.4$676.9 million
in 1993 to $359.2
million. Volume increased 17.5%$746.5 million in 1994. We experienced volume increases of 13.3%
for the quarter while averageand 15.3% for the year-to-date over the corresponding prior
year periods. Average unit price, based on overall product mix, decreased
6.0% during this period.2.8% for the quarter and 4.4% for the year-to-date compared to the
corresponding periods of the prior fiscal year.
Our domestic polyester operations performed wellyarn products experienced both gains in sales dollars and units
for both the first quarter.
Volumequarter and year-to-date. Continued excellent demand and price
increases were experienced in both theour dyed and undyed portionsnatural polyester yarns have been a key factor
in these increases for both the current quarter and the year-to-date. All
previously announced polyester price increases are now fully in place as we
enter our third fiscal quarter. Sales of our nylon and covered yarns have
remained solid with the exception of the business. Dyed yarn prices were increased at the beginning of the quarter
while prices for our natural yarns will be increasing in the second quarter.
Demand for our polyester yarn remains strong in the automotive, home
furnishings and export areas in additionladies' hosiery market where we
continue to solidexperience erratic demand, but going forward we feel that demand
for our warpedother products will enable us to better utilize our full capacity
potential. Our spun yarn products have also benefited from strong demand for
both the quarter and twisted yarns. Domestic nylon and covered yarn volume declined slightlythe year-to-date. Volume has increased as a result of
production from the corresponding period of the prior year together with a decreasenewest plant in Sanford, NC and subsequent capacity
increases to that facility. Our average unit price. We anticipate good business in the sock grouping and a
more steady demand in women's hosiery and legwear in the upcoming months.
Volumesales price for our spun
divisionoperations has declined for the year-to-date period. However, slight
improvement was noted in the current quarter as our older sales contracts
began to expire late in the quarter. We anticipate increased volume in our
spun operations as a result of the continuing expansion in our Sanford, NC
facility and the recent acquisition of a spinning mill.
Our Irish operations have experienced increased volume for the quarter while average per unit
price declined due to pressuresand a
slight decline for the year-to-date. Average selling prices, based on
selling prices. If demand remains good,
we would anticipate improved margins in our spun businessproduct mix, are up for both periods in the second half
of Fiscal 1995 as old sales contracts begincurrent year. We are striving to
expire at the end of our
second quarter. Volume for our European polyester business remains good
although we face rising raw material prices. In anticipation of further raw
material price increases we are pushingincrease our selling prices upwardcommensurate with raw material increases and
repositioningcontinue to reposition our product mix to help margin improvement.improve our margins. We anticipate
increased capacity in the third quarter with the addition of more texturizing
equipment.
Cost of sales increased from $279.6 million in last year's first quarter to
$310.9 million in this year's first quarter or 11.2%. Cost of salesgoods sold as a percentage of net sales for the quarter increased
slightly from 85.9%85.1% last year to 86.6%85.8% this year. This is mainlyFor the resultrespective year-to-date
periods, cost of the decline in average
unitgoods sold as a percentage of net sales price discussed above as sales volume has increased significantly
and components offrom
85.5% to 86.1%. The increase in cost of sales haveas a percentage of net sales
is attributable to lower average sales prices, based on product mix and, for
the current quarter, was also adversely impacted by higher per unit raw
material costs. Fixed manufacturing costs improved on a per unit basis. Average
raw material costs per unit, based on overall product mix, have declined
approximately 2.5%. Manufacturing costs have also experienced a decline
during this time period on a per unit basis as was the case for
depreciation.
These improvements in cost per unit primarily resulted from increased volume
in our polyester and spun yarn businesses. Our gross margins have declined
approximately 0.6% from last year's first quarter toboth the current quarter and the year-to-date due to lower average net sales prices based on our overall product mix.the volume increases
noted above.
Selling, general and administrative expenses as a percentage of net sales
decreaseddeclined from 2.9% in the prior year quarter to 2.7% in the current quarter.
During the quarter
actual expense increasedOur year-to-date results are consistent reflecting a decline from $9.6 million2.9% in
1993 to $9.7 million. The improvement2.7% in 1994. In dollar terms selling, general and administrative
expenses as a percentage of sales is
attributablewere stable for the quarters increasing from $10.2 million in the
prior year quarter to $10.3 million in the current quarter. For the six
month period selling, general and administrative expenses increased sales volume.slightly
from $19.8 million in 1993 to $20.0 million in 1994.
Interest expense decreased from $5.1$4.2 million in the prior fiscal year first1993 quarter to $3.9
million in the current quarter. DuringFor the first quarteryear-to-date we have experienced a
decline of $1.4 million from $9.3 million to $7.9 million. This reduction of
interest expense is attributed to the prior year, the Company paid off approximately $24.6 millionretirement of debt acquired through merged companies and borrowed $7.5assumed in mergers
consummated in prior periods. Interest income has increased from $2.0
million of additional
debt. The combination of the interest expense on the newly acquired debt and
the interest charged on the debt extinguished through the pay-off date
resulted in higher interest expense in the September 1993last year's second quarter thanto $2.4 million in the current quarter.
InterestFor the six month period, interest income has remained relatively constant duringincreased from $4.7 million to
$5.1 million in the current period. The increase in interest income is
attributed to higher returns on invested funds.
Other income, net increased from $268 thousand in the prior year quarter compared to
$2.3 million in the corresponding periodcurrent year quarter and from $64 thousand to $2.8
million for the year-to-date. The majority of the prior year.
Other (income) expense reflects an improvement of $783 thousand over the
first quarter of the prior fiscal year. Inincrease in both the
current quarter and the Company
recognized gainsyear-to-date period resulted from the recognition of
a gain on the sale of investments and property, plant and
equipment. Currency exchange gains and incomean investment that had previously been deferred pending
collection of a note receivable balance.
The effective tax rate has decreased from an equity investment39.8% to 38.3% in the current
quarter also contributedand has decreased from 40.3% to 39.2% for the year-to-date. The
decrease in effective tax rates is attributed to the increase.
Our effective tax rate was 40.2%current period increase
in foreign subsidiaries earnings that are taxed at rates lower than U.S.
rates.
Earnings per share increased from $.34 per share to $.40 per share in the
current quarter as compared with
41.0% in the prior quarter. The lower rate in the current period is due to
taxable earnings of foreign subsidiaries representing a larger contribution
of total consolidated pretax income. Taxes on foreign earnings are normally
at rates lower than US rates.
Quarterly earningsand from $.62 per share increased from $.28 to $.32.$.72 for the year-to-date.
Liquidity and Capital Resources
The primary source of cash funds for the Company during the current quarter
was from operating activities that contributed $41.6 million in cash and cash
equivalents. Net income and noncash expenses comprised $40.9 million of this
amount. The Company substantially completed the sale of its European nylon
operations in the current quarter. This generated approximately $13.8
million in net cash proceeds, excluding $4.1 million of cash remitted to the
Parent from UTSA in conjunction with the sale. The primary uses of funds
during this period were capital expenditures of $23.7 million and the payment
of cash dividends of $7.0 million.
The CompanyWe ended the current quarter with working capital of $324.8$289.0 million of which
$176.8$118.0 million represents cash and cash equivalents and short-term
investments. This compares with working capital of $304.3 million and cash
reserves of $152.1 million at year-end.year end. Cash and cash equivalents generated
from operations amounted to $64.3 million for the six month period ended
December 25, 1994. Inventories increased $23.1 million from $100.3 million
at June 26, 1994 to $123.4 million at December 25, 1994. This is attributed
to several factors including overall per unit raw material price increases,
maintaining higher levels of raw yarn inventories in anticipation of
continued strong demand and capacity increases currently in progress. Our
net accounts receivable balance has declined from $200.5 million at June 26,
1994 to $188.8 million at December 25, 1994. This decline is due, in part,
to decreased days outstanding as enhanced collection efforts and portfolio
management have yielded improved results.
As noted above, our primary source of cash funds is from operating activities
which generated $64.3 million in cash and cash equivalents for the year-to-
date period ended December 25, 1994. In addition to operating activities,
the Company generated $27.7 million from net investment activity during this
six month period, including $13.8 million from the sale of its French
subsidiary. The primary uses of funds during the current six months were
capital expenditures for capacity expansions and upgrades totaling $45.2
million, the payment of the Company's cash dividends of $14.1 million and the
purchase and retirement of Company common stock of $56.2 million.
Management believes that the current financial position of the Company in
addition toconnection with its operations and its access to debt and equity markets isare
sufficient to meet its anticipated capital expenditure, strategic
acquisition, working capital and other financial needs.
Part II. Other Information
UNIFI, INC.
PART II - OTHER INFORMATIONItem 4. Submission of Matters to a Vote of Security Holders
The Shareholders of the Company at their Annual Meeting held on the
20th day of October, 1994, considered and voted upon the elections of
four (4) Class 3 Directors of the Company.
The Shareholders elected management's nominees for the four (4) Class 3
Directors to serve until the Annual Meeting of the Shareholders in
1997, or until their successors are elected and qualified, as follows:
Votes in Votes
Names of Directors Favor Against Abstaining
William J. Armfield, IV 57,966,448 476,240 3,883,991
William T. Kretzer 57,925,298 517,390 3,883,991
G. Allen Mebane, IV 57,713,793 543,640 4,069,246
George R. Perkins, Jr. 57,966,448 472,240 3,887,991
The information set forth under the heading Election of Directors on
pages 2-5 of the Definitive Proxy Statement filed with the Commission
since the close of the registrant's fiscal year ending June 26, 1994,
and is incorporated herein by reference.
The Shareholders at their Annual Meetings in 1992 elected Class 1
Directors and in 1993 elected Class 2 Directors to serve until the
Annual Meeting of the Shareholders in 1995 and 1996 respectively, or
until their successors are elected and qualified, the following persons
were elected and are still serving as Class 1 and Class 2 Directors of
the Company:
Class 1 Class 2
Donald F. Orr Charles R. Carter
Timotheus R. Pohl Jerry W. Eller
Robert A. Ward Kenneth G. Langone
G. Alfred Webster
Lord Eric Sharp who was elected as a Class 2 Director in 1993 died in
May 1994. No one was elected to replace Lord Sharp and the number of
directors of the Corporation was reduced by one after his death.
Item 6. Exhibits and Reports on Form 8-K
(a) Part I ExhibitExhibits
(10.1)Lease Agreement, dated March 2, 1987, between NationsBank,
Trustee under Unifi, Inc. Profit Sharing Plan and Trust,
Wachovia Bank and Trust Co., N.A., Independent Fiduciary, and
Unifi, Inc., filed herewith.
(10.2)Severance Compensation Agreement between Unifi, Inc. and
William T. Kretzer dated July 20, 1993, expiring on July 19,
1996 (similar agreements were signed with G. Allen Mebane,
William J. Armfield, IV, Robert A. Ward, Jerry W. Eller and
G. Alfred Webster), filed herewith.
(27) Financial Data Schedule
(b)No reports on Form 8-K have been filed during the quarter ended
SeptemberDecember 25, 1994.
UNIFI, INC.
SIGNATURESSignatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIFI, INC.
Date: 11/09/94 ROBERT A. WARD
Robert A. Ward
ExecutiveWILLIS C. MOORE III
Willis C. Moore III
Vice President-President and Chief
Financial and AdministrationOfficer (Mr. WardMoore is
the Principal Financial and
Accounting Officer and has been
duly authorized to sign on behalf
of the Registrant.)
Date: 11/09/94 NORMA R. NIXON
Norma R. Nixon
Corporate Controller