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 September 24, 1995
[] 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 October 29, 1995
Common Stock, par value $.10 per share 66,296,374 Shares
PART I. FINANCIAL INFORMATION
UNIFI, INC.
Condensed Consolidated Balance Sheets
September 24, June 25,
1995 1995
(Unaudited) (Audited)
(Amounts in Thousands)
ASSETS
Current Assets:
Cash and Cash Equivalents $50,231 $60,350
Short-Term Investments 109,304 85,844
Receivables 212,971 209,432
Inventories:
Raw Materials and Supplies 56,967 58,959
Work in Process 14,415 14,296
Finished Goods 67,072 66,123
Other Current Assets 4,175 8,017
Total Current Assets 515,135 503,021
Property, Plant and Equipment
(Notes e and f) 934,521 910,383
Less: Accumulated Depreciation 413,940 394,168
520,581 516,215
Investments in Affiliates 43 173
Other Assets 13,940 21,493
Total Assets $1,049,699 $1,040,902
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $112,690 $100,165
Accrued Expenses 63,543 54,338
Income Taxes 27,495 15,161
Total Current Liabilities 203,728 169,664
Long-Term Debt 230,000 230,000
Deferred Income Taxes 29,079 37,736
Shareholders' Equity:
Common Stock 6,660 6,714
Capital in Excess of Par Value 103,506 117,277
Retained Earnings 472,044 473,962
Cumulative Translation Adjustment 3,349 4,415
Unrealized Gains on Certain Investments 1,333 1,134
Total Shareholders' Equity 586,892 603,502
Total Liabilities and
Shareholders' Equity $1,049,699 $1,040,902
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Condensed Consolidated Statements of Income
(Unaudited)
For the Quarters Ended
September 24, September 25,
1995 1994
(Amounts in Thousands, Except
Per Share Data)
Net Sales $387,369 $359,194
Costs and Expenses:
Cost of Goods Sold 342,440 310,860
Selling, General and Administrative
Expense 10,072 9,674
Interest Expense 3,677 3,938
Interest Income (2,637) (2,652)
Other (Income) Expense (430) (579)
Non-Recurring Charge (Note e) 23,826 --
376,948 321,241
Income Before Income Taxes 10,421 37,953
Provision for Income Taxes 3,654 15,264
Net Income $6,767 $22,689
Earnings Per Share: Primary $.10 $.32
Fully Diluted $.10 $.32
Cash Dividends Per Share $.13 $.10
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Quarters Ended
September 24, September 25,
1995 1994
(Amounts in Thousands)
Cash and Cash Equivalents Provided by $50,059 $41,543
Operating Activities
Investing Activities:
Capital Expenditures $(25,687) $(23,736)
Purchase of Short-Term Investments (47,252) --
Sale of Capital Assets -- 308
Notes Receivable 257 (306)
Proceeds from Sale of Subsidiary
and Equity Investment 10,436 13,798
Sale of Short-Term Investments 24,579 1,580
Net Investing Activities $(37,667) $(8,356)
Financing Activities:
Issuance of Common Stock $-- $299
Purchase and Retirement of Common Stock (13,825) --
Cash Dividend (8,685) (7,045)
Net Financing Activities $(22,510) $(6,746)
Currency Translation Adjustment $(1) $71
Increase (Decrease) in Cash $(10,119) $26,512
Cash and Cash Equivalents - Beginning 60,350 80,653
Cash and Cash Equivalents - Ending $50,231 $107,165
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 September 24, 1995 and the results of operations and
cash flows for the quarters ended September 24, 1995 and September 25,
1994. Such adjustments consisted of normal recurring items for both
periods presented and, for the current quarter, the non-recurring charge
described in Note (e). 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 have been provided for the temporary differences
between financial statement carrying amounts and tax basis of existing
assets and liabilities.
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. The current
quarter's pre-tax income from the Company's foreign operations represented
a higher percentage of the Company's consolidated results than the
corresponding period of the prior year which contributed to the decline in
the lower effective tax rate.
(c)Per Share Information
Earnings per common and common equivalent share are computed on the basis
of the weighted average number of common shares outstanding plus, to the
extent applicable, common stock equivalents.
The effect of the convertible subordinated notes was antidilutive for the
quarter ended September 24, 1995. Accordingly, fully diluted earnings per
share for the quarter has been reported consistent with the primary
earnings per share result.
Computation of average shares outstanding (in 000's):
Quarters Ended
September 24, September 25,
1995 1994
Weighted Average Shares
Outstanding 66,886 70,449
Add: Dilutive Options 487 503
Primary Shares 67,373 70,952
Incremental Shares Arising from
Full Dilution Assumption 7,753
Average Shares Assuming
Full Dilution 78,705
Computation of net income for per share data (in 000's):
Quarters Ended
September 24, September 25,
1995 1994
Net Income - Primary $6,767 $22,689
Add: Convertible Subordinated
Interest Net of Tax 2,169
Net Income Assuming Full
Dilution $24,858
(d)Common Stock
On October 19, 1995 the Company's Board of Directors declared a cash
dividend of 13 cents per share payable on November 10, 1995 to shareholders
of record on November 3, 1995.
(e)Non-Recurring Charge
As disclosed in the Company's 10-K for the year ended June 25, 1995 the
Company announced on September 18, 1995 restructuring plans to further
reduce the Company's cost structure and improve productivity through the
consolidation of certain manufacturing operations and the disposition of
underutilized assets. The restructuring plan is focused on the
consolidation of production facilities acquired via mergers during the
preceding four years and reflects the Company's continued efforts to
streamline operations. As part of the restructuring action, the Company
will close its spun cotton manufacturing facilities in Edenton and Mount
Pleasant, North Carolina with the majority of the manufacturing production
being transferred to other facilities. Approximately 275 jobs, primarily
wage-level positions, will be affected.
The estimated cost of restructuring resulted in a first quarter fiscal 1996
non-recurring charge to earnings of $23.8 million or an after-tax charge to
earnings of $14.9 million ($.22 per share). The significant components of
the non-recurring charge include $2.4 million of severance and other
employee-related costs from the termination of employees and a $21.4
million write-down to estimated fair value less the cost of disposal of
underutilized assets and consolidated facilities to be disposed. The
balance sheet at September 24, 1995, reflects primarily in property, plant
and equipment the net book value of these assets amounting to $27.6 million
for which net recoveries of $6.2 million are expected. Costs associated
with the relocation of equipment or personnel will be expensed as incurred.
The Company anticipates that all significant aspects of the consolidation
of spun yarn facilities would be accomplished within a one year period.
However, the ultimate disposal of the equipment and facilities may take
longer due to current market conditions and the physical locations of the
properties.
(f)Accounting for Long-Lived Assets
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long -Lived Assets and for Long-Lived Assets to be Disposed
Of, (SFAS 121), which requires impairment losses to be recorded on long-
lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. SFAS 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company has adopted SFAS 121 in the first quarter of 1996. There was no
cumulative effect on the financial statements from the initial adoption of
SFAS 121; however, the accounting principles described in this statement
were utilized in estimating the non-recurring charge for the current
quarter discussed in Note (e).
(g)Pending Nylon Machinery Purchase
On October 2, 1995 the Company announced a definitive agreement with Glen
Raven Mills, Inc. to purchase its nylon texturing machinery and associated
equipment located in Norlina, North Carolina for a purchase price
anticipated to be less than $50 million. This transaction is currently
pending FTC approval. This productive capacity will be integrated into our
nylon/covered yarn operations.
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 7.8% in the quarter from $359.2 million to $387.4
million. Volume increased 1.4% for the quarter while average unit price,
based on overall product mix, increased 6.4% during this period.
Demand for our domestic yarn products for the quarter was hindered by
weakness in retail sales. Despite the unfavorable conditions in the retail
markets, our domestic sales increased 5.6%. This was accomplished by a 6.4%
increase in average unit prices, based on product mix, offsetting a modest
decline in unit volume of approximately 1%. Unit sales of our domestic
polyester yarns increased slightly over the corresponding quarter of the
prior year in combination with increases in our average sales price that
effectively offset increases in raw material costs during the period. Unit
volume for our nylon yarn operations has declined over the prior year
comparative period. However, a shift in product mix in the nylon yarn
operations to higher priced products has substantially offset raw material
price increases and the volume decrease experienced. Volume for our spun
yarn operations has declined during this quarter compared with the
corresponding quarter of the prior year due to softness in the market. The
spun yarn operations have experienced an increase in average unit sales
prices which have offset raw material price increases during this period
resulting in an overall increase in aggregate sales dollars.
Unit volume for our European polyester yarn operations has shown significant
improvement as demand levels have us operating at capacity after the
traditional summer holidays. Improvements have also been noted in our
average sales price compared to the corresponding quarter of the prior fiscal
year as these prices were raised to partially offset the effects of higher
raw material costs. The previously-announced capacity expansion is on
schedule to be completed by January 1996.
Cost of sales as a percentage of net sales for the quarter increased from
86.5% last year to 88.4% this year. Raw material and packing material costs,
manufacturing expense and depreciation have all increased in whole dollars
and on a per unit basis resulting in an overall 8.6% increase in cost of
sales per unit compared to the corresponding quarter of the prior year. The
Company has substantially offset the effects of these higher costs with
increased sales prices in generally all of its markets.
Selling, general and administrative expense as a percentage of net sales
decreased from 2.7% to 2.6% in the current quarter. During the quarter
actual selling, general and administrative expense increased 4.1% from $9.7
million to $10.1 million. The improvement in selling, general and
administrative expense as a percentage of sales is attributable to higher
sales dollars which absorbed the increased current period costs.
Interest expense decreased from $3.9 million in the prior fiscal year first
quarter to $3.7 million in the current quarter. Interest income has remained
relatively constant during the quarter compared to the corresponding period
of the prior year.
On September 18, 1995, the Company announced restructuring plans to further
reduce the Company's cost structure and improve productivity through the
consolidation of certain manufacturing operations and the disposition of
underutilized assets. The restructuring plan is focused on the consolidation
of production facilities acquired via mergers during the preceding four years
and reflects the Company's continued efforts to streamline operations. As
part of the restructuring plan, the Company has announced the closing of the
spun yarn manufacturing facilities in Edenton and Mount Pleasant, North
Carolina, with the majority of the manufacturing production being transferred
to other facilities. The Company anticipates that the benefits of these
actions on reduced manufacturing costs will begin to be realized during the
first calendar quarter of 1996.
The estimated cost of restructuring resulted in a first quarter fiscal 1996
non-recurring charge to earnings of $23.8 million or an after-tax charge to
earnings of $14.9 million ($.22 per share). The significant components of
the non-recurring charge include $2.4 million of severance and other
employee-related costs from the termination of approximately 275 employees
and a $21.4 million write-down to estimated fair value less the cost of
disposal of underutilized assets and consolidated facilities to be disposed.
Costs associated with the relocation of equipment or personnel will be
expensed as incurred.
The Company anticipates that all significant aspects of the consolidation of
spun yarn facilities would be accomplished within a one year period.
However, the ultimate disposal of the equipment and facilities may take
longer due to current market conditions and the physical locations of the
properties.
The Company adopted FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived assets to be Disposed Of, (SFAS 121), in
the first quarter of 1996. There was no cumulative effect on the financial
statements from the initial adoption of SFAS 121; however, the accounting
principles described in this statement were utilized in estimating the above
described non-recurring charge for the current quarter.
Our effective tax rate was 35.1% in the current quarter as compared with
40.2% in the prior quarter. The lower rate in the current period is primarily
due to the pretax earnings of foreign subsidiaries, which are taxed at rates
lower than U.S. rates, representing a larger contribution of total
consolidated pre-tax income. Additionally, the Company will realize the
benefit of certain increased tax credits during fiscal 1996.
Earnings per share for the current quarter were $.10 compared to $.32 for the
corresponding quarter of the prior year. Earnings per share for the current
quarter were adversely affected by the non-recurring charge to earnings of
$.22 per share.
Liquidity and Capital Resources
We ended the current quarter with working capital of $311.4 million of which
$159.5 million represents cash and short-term investments. This compares
with working capital of $333.4 million and cash and short-term investments of
$146.2 million at year end. In addition, the Company has access to debt and
equity markets.
Our primary source of cash funds is from operating activities which generated
$50.1 million in cash and cash equivalents for the current quarter. The
Company utilized $37.7 million and $22.5 million for net investing and
financing activities, respectively, for the quarter ended September 24, 1995.
These net investing and financing activities were primarily comprised of
$12.0 million of funds used for net investment activity, $25.7 for capacity
expansions and upgrades, $8.7 million for the payment of the Company's cash
dividends and $13.8 million for the purchase and retirement of Company common
stock.
On October 21, 1993, the Board of Directors authorized Management to
repurchase up to 15 million shares of Unifi's common stock from time to time
at such prices as Management feels advisable and in the best interest of the
Company. Approximately 4.0 million shares have been repurchased as of
September 24, 1995, pursuant to this Board authorization.
On October 2, 1995, the Company announced a definitive agreement with Glen
Raven Mills, Inc. to purchase its nylon texturing machinery and associated
equipment located in Norlina, North Carolina. Annual sales from this
operation approximate $75 million. The transaction is currently pending FTC
approval. The purchase price is anticipated to be less than $50 million and
will be satisfied with current cash reserves.
At September 24, 1995, the Company has committed approximately $119.4 million
for the purchase of equipment and facilities, excluding the Glen Raven
acquisition, which is scheduled to be expended in fiscal years 1996 through
1998.
Management believes the current financial position of the Company in
connection with its operations and its access to debt and equity markets are
sufficient to meet anticipated capital expenditure, strategic acquisition,
working capital and other financial needs.
PART II. OTHER INFORMATION
UNIFI, INC.
Item 6. Exhibits and Reports on Form 8-K
(a) (10.1)Factoring Agreement dated August 23, 1995, by and between
Republic Factors Corp. and Unifi, Inc., filed herewith.
(10.2)Consent to Action Without Meeting By The Stock Option
Committee Of The Unifi Spun Yarns, Inc.'s 1992 Employee Stock
Option Plan effective September 1, 1995, filed herewith.
(27) Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter ended
September 24, 1995.
UNIFI, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIFI, INC.
Date: 11/07/95 WILLIS C. MOPORE, III
Willis C. Moore, III
Vice President and Chief
Financial Officer (Mr. Moore is
the Principal Financial and
Accounting Officer and has been
duly authorized to sign on behalf
of the Registrant.)