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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 24, 2001 -- COMMISSION FILE NUMBER 1-10542

---------------------

UNIFI, INC.
(Exact name of registrant as specified in its charter)

NEW YORK 11-2165495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

7201 WEST FRIENDLY AVENUE
GREENSBORO, NORTH CAROLINA 27410
(Address of principal executive offices) (Zip code)

(Registrant's telephone no., including area code): (336) 294-4410

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

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 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 [ ]

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 September 4, 2001 based on a closing price of $9.98 per share:
$495,884,783.

Number of shares outstanding as of September 4, 2001: 53,811,533

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 25, 2001, are incorporated by
reference into Part III.

Exhibits, Financial Statement Schedules and Reports on Form 8-K index is
located on pages 42 through 44.
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2

PART I

ITEM 1. BUSINESS

Unifi, Inc., a New York corporation formed in 1969, together with its
subsidiaries, 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, 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, sock and
other end use markets. See the Consolidated Financial Statements Footnote 2
("Acquisitions, Alliances and Divestures") on pages 26 and 27 and Consolidated
Financial Statements Footnote 11 ("Investment in Unconsolidated Affiliates") on
pages 35 and 36 of this Report for information concerning recent mergers,
acquisitions, alliances and consolidations of the Company's business, which is
incorporated herein by reference.

Texturing polyester and nylon filament fiber involves the processing of
partially 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, depending
on its ultimate end use.

SOURCES AND AVAILABILITY OF RAW MATERIALS

Effective June 1, 2000, Unifi and E. I. DuPont de Nemours and Company
("DuPont"), began operating their America's manufacturing alliance (the
"Alliance") to produce polyester filament yarn. The objective of the Alliance is
to reduce operating costs through collectively planning and operating both
companies' POY facilities as a single production unit, although Unifi and DuPont
continue to own their respective manufacturing facilities. Unifi's manufacturing
facility is located in Yadkinville, North Carolina and DuPont's remaining
facility is in Kinston, North Carolina. The resulting asset optimization, along
with the sharing of manufacturing technologies, are intended to result in
significant quality and yield improvements and product innovations. See the
Consolidated Financial Statements Footnote 2 ("Acquisitions, Alliances and
Divestures") on pages 26 and 27 for further information.

The primary third party suppliers of POY to the Company's polyester segment
are DuPont, Nanya Plastics Corp. of America ("Nanya"), Kosa (formerly Hoechst
Celanese Corporation), Wellman Industries, Reliance Industries, Ltd. and
Korteks. The majority of the Company POY for domestic use is produced by the
Alliance. In addition, the Company has a polyester POY manufacturing facility 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 POY manufactured in Yadkinville are
supplied by Nanya for domestic production and by DuPont and Bayer AG for our
Irish operation.

On September 27, 2000, Unifi and Nilit Ltd., located in Israel formed a
50/50 joint venture called U.N.F. Industries Ltd. (U.N.F.). The joint venture
will produce approximately 25.0 million pounds of nylon POY at Nilit's
manufacturing facility in Migdal Ha - Emek, Israel. Production and shipping of
POY from this facility began in March 2001. The nylon POY will be utilized in
the Company's nylon texturing and covering operations. The primary suppliers of
POY to the Company's nylon segment are DuPont, Universal Premier Fibers LLC
(formerly Cookson Fibers, Inc.), Nilit, Ltd., and U.N.F. Industries with the
majority of the Company's nylon POY being supplied by DuPont and U.N.F.
Industries.

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3

Although the Company is heavily dependent upon a limited number of
suppliers, the Company has not had and does not anticipate any significant
difficulty in obtaining its raw POY or raw materials used to manufacture
polyester or nylon POY.

Patents and Licenses: The Company currently has several patents and
registered trademarks, none of which it considers material to its business as a
whole.

Customers: The Company, in fiscal year ended June 24, 2001, sold its
polyester yarns to approximately 1,350 customers and its nylon yarns to
approximately 190 customers, one customer's purchases comprised approximately
11% of net sales for the polyester segment during said period, while another
customer comprised approximately 16% of net sales for the nylon segment for this
time period. The Company does not believe that the loss of any one 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, 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
seasonal ones.

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
competitors within the industry. Product innovation gives our customers
competitive advantages, while product quality insures manufacturing
efficiencies. The Company's polyester and nylon yarns compete in a worldwide
market with a number 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 nylon 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: The estimated amount spent during each of the
last three fiscal years on Company-sponsored and customer-sponsored research and
development activities is considered immaterial.

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: The number of full-time active employees of the Company is
approximately 5,400.

Financial Information About Segments: See the Consolidated Financial
Statements Footnote 9 ("Business Segments, Foreign Operations and Concentrations
of Credit Risk") on pages 31 through 34 of this Report for the Financial
Information About Segments required by Item 101 of Regulation S-K.

ITEM 2. PROPERTIES

The Company currently maintains a total of 18 manufacturing and warehousing
facilities, one central distribution center and one recycling center in North
Carolina; one manufacturing and related warehousing facility in Staunton,
Virginia; one central distribution center in Fort Payne, Alabama; four
manufacturing operations in Letterkenny, County of Donegal, Republic of Ireland;
two warehousing locations in Carrickfergus, Ireland; one manufacturing, one
warehousing and one office building in Brazil and one manufacturing and
administration building in Manchester, England. All of these facilities, which
contain approximately 8.1 million square feet of floor space are owned in fee
simple, with the exception of two United States plants, one of which is leased
from Bank of America Leasing and Capital LLC pursuant to a Sales-leaseback
Agreement entered on May 20, 1997, as amended, the second of which is leased
pursuant to a lease agreement entered into with Glen Raven, two warehouses in
Carrickfergus, Ireland, the office in Brazil and the plant and office location
in Manchester, England; and management believes they are in good condition, well
maintained, and are suitable and adequate for present utilization.

3
4

The polyester segment of the Company's business uses 17 manufacturing, six
warehousing and one dedicated office totaling 5.4 million square feet. The nylon
segment of the Company's business utilizes four manufacturing and four
warehousing facilities aggregating 2.7 million square feet.

Unifi Technology Group, LLC. ("UTG") leases 5 office locations in three
states from which it conducts business utilizing approximately 35,000 square
feet.

The Company leases sales offices and/or apartments in New York; Coleshill,
England; Oberkotzau, Germany; Lyon, France and Desenzano, Italy.

The Company also leases its corporate headquarters building at 7201 West
Friendly Avenue, Greensboro, North Carolina, which consists of a building
containing approximately 121,125 square feet located on a tract of land
containing approximately 8.99 acres. This property is leased from Merrill Lynch
Trust Company of North Carolina, Trustee under the Unifi, Inc. Profit Sharing
Plan and Trust, and Wachovia Bank & Trust Company, N.A., Independent. See the
related information included in the Consolidated Financial Statements Footnote 8
("Leases and Commitments") on page 31 of this Report. The Company also leases
two manufacturing facilities to others, one of which is affiliated with the
Company as a joint venture.

ITEM 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.

ITEM 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 24, 2001.

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5

PART II

ITEM 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. The following table sets forth the range of high and low closing
prices of Unifi's Common Stock as reported on the NYSE Composite Tape.

Effective July 16, 1998, the Board of Directors 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 September 4, 2001, there were 712 holders of record of the Company's
common stock.

<Table>
<Caption>
HIGH LOW
------ ------

Fiscal year 1999:
First quarter ended September 27, 1998.................... $34.25 $17.13
Second quarter ended December 27, 1998.................... $20.06 $11.94
Third quarter ended March 28, 1999........................ $19.56 $10.69
Fourth quarter ended June 27, 1999........................ $18.56 $11.56
Fiscal year 2000:
First quarter ended September 26, 1999.................... $21.25 $11.00
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
Fiscal year 2001:
First quarter ended September 24, 2000.................... $13.38 $10.31
Second quarter ended December 24, 2000.................... $10.38 $ 7.13
Third quarter ended March 25, 2001........................ $ 9.31 $ 6.25
Fourth quarter ended June 24, 2001........................ $ 8.33 $ 5.65
</Table>

5
6

ITEM 6. SELECTED FINANCIAL DATA

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999 JUNE 28, 1998 JUNE 29, 1997
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
------------- ------------- ------------- ------------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

Summary of Operations:
Net sales............................ $1,131,157 $1,291,435 $1,262,278 $1,390,497 $1,716,215
Cost of sales........................ 1,034,044 1,127,864 1,087,728 1,162,726 1,484,956
---------- ---------- ---------- ---------- ----------
Gross profit......................... 97,113 163,571 174,550 227,771 231,259
Selling, general and administrative
expense............................ 62,786 58,063 55,338 43,277 46,229
Provision for bad debts.............. 8,697 8,694 1,129 724 750
Interest expense..................... 30,123 30,294 27,459 16,598 11,749
Interest income...................... (2,549) (2,772) (2,399) (1,869) (2,219)
Other (income) expense............... 7,582 1,052 440 (335) 69
Equity in (earnings) losses of
unconsolidated affiliates.......... (2,930) 2,989 (4,214) (23,030) 399
Minority interest.................... 2,590 9,543 9,401 723 --
Alliance plant closure costs......... 15,000 -- -- -- --
Asset impairments and write downs.... 24,541 -- -- -- --
Employee severance and related
charges............................ 7,545 -- -- -- --
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations before income taxes and
cumulative effect of accounting
change............................. (56,272) 55,708 87,396 191,683 174,282
Provision (benefit) for income
taxes.............................. (11,598) 17,675 28,369 62,782 58,617
---------- ---------- ---------- ---------- ----------
Income (loss) before cumulative
effect of accounting change........ (44,674) 38,033 59,027 128,901 115,665
Cumulative effect of accounting
change, net of tax................. -- -- 2,768 4,636 --
---------- ---------- ---------- ---------- ----------
Net income (loss)............. $ (44,674) $ 38,033 $ 56,259 $ 124,265 $ 115,665
========== ========== ========== ========== ==========
Per Share of Common Stock:
Income (loss) before cumulative
effect of accounting change
(diluted).......................... $ (.83) $ .65 $ .97 $ 2.08 $ 1.81
Cumulative effect of accounting
change (diluted)................... -- -- (.04) (.07) --
---------- ---------- ---------- ---------- ----------
Net income (loss) (diluted)... $ (.83) $ .65 $ .93 $ 2.01 $ 1.81
========== ========== ========== ========== ==========
Cash Dividends......................... $ -- $ -- $ -- $ .56 $ .44
Financial Data:
Working capital...................... $ 63,708 $ 15,604 $ 216,897 $ 209,878 $ 216,145
Gross property, plant and
equipment.......................... 1,209,927 1,250,470 1,231,013 1,145,622 1,147,148
Total assets......................... 1,137,319 1,354,764 1,365,840 1,333,814 1,018,703
Long-term debt and other
obligations........................ 259,188 261,830 478,898 458,977 255,799
Shareholders' equity................. 540,543 622,438 646,138 636,197 548,531
</Table>

Fiscal year 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 (earnings) losses
of unconsolidated affiliates for fiscal years presented thereafter.

Fiscal years 1997 through 2000 net sales and cost of sales have been
restated to reflect the reclassification of freight expense from net sales to
cost of sales to conform with the current year presentation.

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 as this
facility was scheduled to mature in April 2001. This line of credit was
subsequently refinanced in December 2000.

The working capital and long-term debt and other liabilities line items at
June 24, 2001, reflect the classification of the outstanding balance under the
revolving line of credit of $6.5 million and the accounts receivables
securitization of $70.1 million as current liabilities, pending renegotiation or
refinancing of these obligations, which is expected to occur by October 31,
2001.

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7

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FISCAL 2001

Following is a summary of operating income by segment for fiscal years 2001
and 2000, as reported regularly to the Company's management:

<Table>
<Caption>
ALL
POLYESTER NYLON OTHER TOTAL
--------- -------- ------- ----------
(AMOUNTS IN THOUSANDS)

Fiscal 2001
Net sales.................................. $791,232 $315,114 $33,270 $1,139,616
Cost of sales.............................. 725,351 293,090 21,767 1,040,208
Selling, general and administrative........ 37,451 14,632 13,362 65,445
-------- -------- ------- ----------
Segment operating income (loss)............ $ 28,430 $ 7,392 $(1,859) $ 33,963
======== ======== ======= ==========
Fiscal 2000
Net sales.................................. $861,865 $409,841 $31,917 $1,303,623
Cost of sales.............................. 757,580 353,739 21,024 1,132,343
Selling, general and administrative........ 37,713 15,103 9,952 62,768
-------- -------- ------- ----------
Segment operating income................... $ 66,572 $ 40,999 $ 941 $ 108,512
======== ======== ======= ==========
</Table>

As described in Consolidated Financial Statements Footnote 9 ("Business
Segments, Foreign Operations and Concentrations of Credit Risk"), the
adjustments 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. The fiscal year 2000 net sales and
cost of sales have been reclassified to conform with the current year
presentation. See Consolidated Financial Statements Footnote 1 ("Recent
Accounting Pronouncements") for further discussion.

Polyester Operations

In fiscal 2001, polyester net sales decreased $70.6 million, or 8.2%
compared to fiscal 2000. The decrease from fiscal year 2000 is primarily
attributable to reduced volumes both in the United States and internationally.
The importation of fabric and apparel has eroded our customers' business and the
slowing economy has prompted our customers to reduce inventories in response to
lower retail orders. Unit prices, based on product mix, were favorable to the
prior year. However, volumes were down approximately 10% from fiscal 2000 to
fiscal 2001. Sales volume for all of our international polyester operations was
down in fiscal 2001 compared to fiscal 2000, with the exception of our European
dyeing operation acquired in the fourth quarter of the prior year. The currency
exchange rate change from the prior year to the current year adversely effected
sales translated to U.S. dollars for our Irish and Brazilian operations.

Gross profit on sales for our polyester operations declined $38.4 million
over fiscal year 2000. Gross margin (gross profit as a percentage of net sales)
declined from 12.1% in fiscal year 2000 to 8.3% in fiscal year 2001. Gross
margin in fiscal 2001 declined primarily as a function of higher per unit raw
material prices and fixed manufacturing costs relative to a lower sales base.

Selling, general and administrative expenses for this segment declined $0.3
million from 2000 to 2001. This decrease was accomplished mainly due to the cost
cutting initiatives implemented at the end of the third quarter and were
achieved despite having only three months of selling, general and administrative
expenses for our European dye-house in the prior year.

Nylon Operations

Nylon net sales decreased $94.7 million, or 23.1% in fiscal 2001 compared
to fiscal 2000. Unit volumes for fiscal 2001 decreased by 15.2%, while average
sales prices, based on product mix, decreased 9.2%. The

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8

reductions in sales volume and price are primarily attributable to the
continuing softness of the ladies hosiery market, a slow down in seamless
apparel and the sluggishness of the economy in general.

Nylon gross profit decreased $34.1 million and gross margin decreased from
13.7% in 2000 to 7.0% in 2001. This was primarily attributable to the lower
sales volumes and prices and higher per unit fixed manufacturing costs, offset,
in part, by lower average fiber prices per pound.

Selling, general and administrative expense for the nylon segment decreased
$0.5 million in fiscal 2001. This reduction is due mainly to the cost cutting
initiatives implemented at the end of the third fiscal quarter.

All Other

The "All Other" segment primarily reflects the Company's majority owned
subsidiary, UTG established in May 1999. UTG is a domestic automation solutions
provider. This entity was in place for effectively the entire 2001 fiscal year,
however the consulting portion of this business was sold at the end of the
reporting period. The higher selling, general and administrative expenses in the
current year reflect additional costs incurred in early terminating certain
office leases in the second fiscal quarter. The remaining UTG operations are now
conducting business under the name Cimtec Automation, Inc. and involve the sale
and repair of certain computer hardware.

Consolidated Operations

For the year ended June 24, 2001, the Company recorded an $8.7 million
provision for bad debts in response to continued difficult industry conditions.
This amount is consistent with that recorded in the prior year.

Interest expense decreased slightly from $30.3 million in fiscal 2000 to
$30.1 million in fiscal 2001. The weighted average interest rate of our debt
outstanding at June 24, 2001 was 6.6%. Interest income remained consistent
between 2001 and 2000.

Other expense increased from $1.1 million in 2000 to $7.6 million in 2001.
This loss for 2001 includes $9.5 million in losses for foreign currency related
transactions including a loss of $4.7 million on foreign currency derivative
contracts denominated in Euro for which hedge accounting was terminated upon the
cancellation of the proposed project. These losses were offset, in part, by
amounts recovered for an insurance claim, a government grant program associated
with a start-up operation and a duty-drawback claim associated with prior
periods.

Earnings (losses) from our equity affiliates, Parkdale America, LLC. (the
"LLC"), Micell Technologies, Inc. ("Micell"), UNIFI-SANS Technical Fibers, LLC
("UNIFI-SANS") and U.N.F. Industries, Ltd. ("U.N.F.") totaled $2.9 million in
fiscal 2001 compared with $(3.0) million in fiscal 2000. The increase in
earnings is primarily attributable to improved earnings of the LLC and the
recognition of reduced losses for Micell.

Minority interest expense for fiscal 2001 was $2.6 million compared to $9.5
million in the prior year. This charge primarily relates to the minority
interest share of the earnings of Unifi Textured Polyester, LLC ("UTP") formed
with Burlington 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, Burlington is entitled to receive the first $9.4 million of
earnings and the first $12.0 million in excess cash flows generated by this
business. After the first five years, earnings and cash flows of UTP will be
allocated based on ownership percentages.

In the fourth quarter of the current fiscal year, the Company recorded its
share of the anticipated costs of closing DuPont's Cape Fear, North Carolina
facility, one of DuPont's facilities involved in the manufacturing alliance (the
"Alliance") between DuPont and Unifi. The Alliance was formed to integrate each
company's polyester partially oriented yarn (POY) manufacturing facilities into
a single production unit and is expected to enable each company to match
production with the best assets available, significantly improving product
quality and yields. On April 4, 2001, DuPont shut its Cape Fear POY facility
allowing for the acceleration of

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the benefits of the Alliance by shutting down older filament manufacturing
operations and transferring production to lower cost, more modern and flexible
assets. As a result of DuPont shutting down the Cape Fear facility, the Company
recognized a $15.0 million charge for its 50% share of the severance and costs
to dismantle the facility. Unifi's share of the cost to close this facility will
be paid over the eighteen-month period commencing July 2001 and ending December
2002. Subsequent to the shut down, the Company will receive from DuPont cash
distributions for its 50% share of the cash fixed costs eliminated as a result
of the Cape Fear shut down. Additionally, it is expected that the Company will
begin realizing other costs savings and synergies from the Alliance.

In the current year, the Company recorded charges of $7.6 million for
severance and employee related costs and $24.5 million for asset impairments and
write-downs. The majority of these charges relate to U.S. and European
operations and include plant closings and consolidations, the reorganization of
administrative functions and the write down of assets for certain operations
determined to be impaired as well as certain non-core businesses that are being
held for sale. The plant closing and consolidations of the manufacturing and
distribution systems are aimed at improving the overall efficiency and
effectiveness of our operations and reducing our fixed cost structure in
response to decreased sales volumes.

The severance and other employee related costs provide for the termination
of approximately 750 people who were terminated as a result of these worldwide
initiatives and included management, production workers and administrative
support located in Ireland, England and in the United States. Notice of the
termination was made to all employees prior to March 24, 2001 and substantially
all affected personnel were terminated by the end of April 2001. Severance will
be paid in accordance with various plan terms, which vary from lump sum to a
payout over a maximum of 21 months ending December 2002. Additionally, this
charge includes costs associated with medical and dental benefits for former
employees no longer providing services to the Company and provisions for certain
consultant agreements for which no future benefit is anticipated.

The charge for impairment and other write-down of assets includes $18.6
million for the write down of duplicate or less efficient property, plant and
equipment to their fair value less disposal cost and the write down of certain
non-core assets which are held for sale. It is anticipated that the remaining
non-core assets and business will be sold prior to the end of calendar 2001.
Additionally, an impairment charge of $5.9 million was recorded for the write
down to fair value of assets, primarily goodwill, associated with the European
polyester dyed yarn operation and Colombian nylon covering operation as the
undiscounted cash flows of the business were not sufficient to cover the
carrying value of these assets. These reviews were prompted by ongoing excess
manufacturing capacity issues and lack of competitiveness of these businesses.

The Company recognized a tax benefit in the current year at a 20.6%
effective tax rate compared to an effective tax rate on the consolidated
provision recorded in fiscal 2000 at 31.7%. The difference between the statutory
and effective tax rate in fiscal 2001 is primarily due to the fact that
substantially no tax benefit has been recognized on losses sustained by foreign
subsidiaries, as the recoverability of such tax benefits through loss
carryforward or carryback is not assured.

As a result of the above, the Company realized during the current year a
net loss of $44.7 million, or $(.83) per diluted share, compared to net income
in fiscal year 2000 of $38.0 million, or $.65 per diluted share.

Effective June 26, 2000, the Company began accounting for derivative
contracts and hedging activities under Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which requires all derivatives to be recorded on the balance sheet
at fair value. There was no cumulative effect adjustment of adopting this
accounting standard. 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 assets, liabilities, or firm
commitments 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.

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consummated (cash receipts and cash disbursements in foreign currencies). The
Company utilizes some natural hedging to mitigate these transaction exposures.
The Company also enters into foreign currency forward contracts for the purchase
and sale of European, 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
products into export markets. Counter-parties for these instruments are major
financial institutions. The Company does not enter into derivative financial
instruments for trading purposes.

The Company has a risk management policy that authorizes certain designated
individuals to enter into derivative contracts to mitigate economic and
accounting risk associated with currency and interest rate exposures in the
ordinary course of business. This policy permits the use of forward currency
purchase or sales contracts associated with the anticipated collection of
accounts receivable on foreign denominated sales and the purchase or sale of
assets in foreign currencies. This policy also allows the use of those
derivative instruments that hedge the Company's interest rate exposures
associated with fixed or floating rate debt. Any derivative contract authorized
by this risk management policy with notional amounts in excess of $1 million
requires the specific approval of the Chief Financial Officer. In no
circumstances does the policy permit entering into derivative contracts for
speculative purposes.

Currency forward contracts are entered to hedge exposure for sales in
foreign currencies based on specific sales orders with customers or for
anticipated sales activity for a future time period. Generally, 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
Company marks the outstanding accounts receivable and forward contracts to
market at month end and any realized and unrealized gains or losses are recorded
as other income and expense. The Company also enters currency forward contracts
for committed or anticipated equipment and inventory purchases. Generally 50-75%
of the asset cost is covered by forward contracts although 100% of the asset
cost may be covered by contracts in certain instances. Forward contracts are
matched with the anticipated date of delivery of the assets and gains and losses
are recorded as a component of the asset cost for purchase transactions the
Company is firmly committed. For anticipated purchase transactions, gains or
losses on hedge contracts are accumulated in Other Comprehensive Income (Loss)
and periodically evaluated to assess hedge effectiveness. In the current year,
the Company recorded and subsequently wrote off approximately $4.7 million of
accumulated losses on hedge contracts associated with the anticipated purchase
of machinery that was later canceled. The contracts outstanding for anticipated
purchase commitments that were subsequently canceled were unwound by entering
into sales contracts with identical remaining maturities and contract values.
These purchase and sales contracts continue to be marked to market with
offsetting gain and losses. The latest maturity for all outstanding purchase and
sales foreign currency forward contracts are October 15, 2001 and March 21,
2002, respectively.

In September 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 140 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS
140). SFAS 140 replaces Statement of Financial Accounting Standards No. 125
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities (SFAS 125). SFAS 140 revises the standards for accounting and for
securitizations and other transfers of financial assets and collateral and
requires certain disclosures, but carries over most of SFAS 125's provisions.
SFAS 140 provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities based on a
financial-components approach that focuses on control. This standard is applied
prospectively and was effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after March 31, 2001. The adoption
of this standard did not have any effect on the Company's results of operation
or financial position.

sales line item in the Consolidated Results of Operations. Costs to provide this
service were either historically included in net sales, for shipping costs, or
in cost of sales, for handling expenses. Upon the adoption of EITF 00-10 the
Company has reclassified the presentation of shipping costs from net sales to
cost of sales and has restated all prior periods to conform with the current
year format. Adopting EITF 00-10 had no impact on the Company's results of
operations or financial position.

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations," (SFAS 141) and
No. 142 "Goodwill and Other Intangible Assets (SFAS 142)." SFAS 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method is
prohibited after this date. SFAS 141 also includes guidance on the initial
recognition and measurement of goodwill and other intangible assets acquired in
a business combination completed after June 30, 2001.

SFAS 142 no longer permits the amortization of goodwill and
indefinite-lived intangible assets. Instead, these assets must be reviewed
annually, or more frequently under certain conditions, for impairment in
accordance with this standard. This impairment test uses a fair value approach
rather than the undiscounted cash flows approach previously required by SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of (SFAS 121)." The amortization of goodwill included in
investments in equity investees will also no longer be recorded upon adoption of
the new rules. Intangible assets that do not have indefinite lives will continue
to be amortized over their useful lives and reviewed for impairment in
accordance with SFAS 121. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the Company anticipates that it will apply the
new accounting rules beginning June 25, 2001. The Company is currently assessing
the financial impact SFAS 141 and 142 will have on the consolidated financial
statements. In fiscal 2001, the amortization expense associated with remaining
goodwill approximated $3.3 million.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143 "Accounting for Asset Retirement
Obligations" (SFAS 143). This standard applies to all entities and addresses
legal obligations associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development or normal operation
of a long-lived asset. SFAS 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. Additionally, any
associated asset retirement costs are to be capitalized as part of the carrying
amount of the long-lived asset and expensed over the life of the asset. SFAS 143
is effective for financial statements issued for fiscal years beginning after
June 15, 2002. The Company has not yet assessed the financial impact that
adopting SFAS 143 will have on the consolidated financial statements.

11
12

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. Note that polyester
and nylon segment net sales and cost of sales amounts and certain associated
dollar and percent changes between fiscal years have been restated to conform
with current year presentation.

<Table>
<Caption>
ALL
POLYESTER NYLON OTHER TOTAL
--------- -------- ------- ----------
(AMOUNTS IN THOUSANDS)

Fiscal 2000
Net sales.......................................... $861,865 $409,841 $31,917 $1,303,623
Cost of sales...................................... 757,580 353,739 21,024 1,132,343
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.......................................... $832,642 $450,248 $ 1,561 $1,284,451
Cost of sales...................................... 729,414 386,011 1,090 1,116,515
Selling, general and administrative................ 38,518 16,271 533 55,322
-------- -------- ------- ----------
Segment operating income (loss).................... $ 64,710 $ 47,966 $ (62) $ 112,614
======== ======== ======= ==========
</Table>

Polyester Operations

In fiscal 2000, polyester net sales increased $29.2 million, or 3.5%
compared to fiscal 1999. The increase over fiscal year 1999 is primarily
attributable 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. Internationally,
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
("Derivative Financial Instruments and Fair Value of Financial Instruments"),
the Company 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 fluctuations 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 12.4% in fiscal year 1999 to 12.1% 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 raw material
prices. Offsetting the effects of higher raw material 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 mentioned
early retirement package. Absent this charge, the current year selling, general
and administrative expenses for this segment would have increased $4.9 million.
This increase is primarily attributable to the start-up of our Brazilian
operation, which was only in operation two months of the prior

12
13

year as well as the increase 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 $40.4 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 effect
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 increased $1.3
million. This increase is primarily attributable to this segment's share of
increased selling, general and administrative expenses generated by UTG.

All Other

The "All Other" segment primarily reflects the Company's majority owned
subsidiary, UTG established in May 1999. UTG is a domestic automation solutions
provider.

Consolidated Operations

In fiscal year 2000, 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 fiscal year 2000 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"), net of related amortization,
totaled $(3.0) million in fiscal 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
interest share of the earnings of Unifi Textured Polyester LLC ("UTP) formed
with Burlington 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, Burlington is entitled to receive the first $9.4 million in
earnings and the first $12.0 in excess cash flows generated by the business.
After the first five years, earnings and cash flows of UTP will be allocated
based on ownership percentages.

13
14

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
primarily due to a reduction of income taxes achieved through the reversal of
previously established reserves due to 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 required
to be written-off as a cumulative effect of an accounting change. Accordingly,
the Company has written-off the unamortized balance of the previously
capitalized start-up costs.

As a result of the above, the Company realized during fiscal year 2000 net
income of $38.0 million, or $0.65 per diluted share, compared to $56.3 million,
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.

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
compliments 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 oriented
yarn (POY) manufacturing facilities, increase manufacturing efficiency and
improve product quality. Under its terms, DuPont and Unifi will cooperatively
run their polyester filament manufacturing 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. Additionally, the companies will collectively
attempt to increase profitability through the development of new products.
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
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.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations continues to be a primary source of funds to
finance operating needs and long-term investment requirements, including capital
expenditures. Cash generated from operations was $151.6 million for fiscal 2001,
compared to $126.5 million for fiscal 2000. The primary sources of cash from
operations were reduced receivables and inventories of $14.2 million and $17.2
million, respectively, increased payables and accruals of $3.3 million and
non-cash adjustments aggregating $148.6 million. Depreciation and amortization
of $90.1 million, the provision for doubtful accounts of $15.0 million, and the
non-cash portion of non-recurring charges of $43.5 million were the primary
components of the non-cash adjustments. The current year cash from operations
was positively impacted by distributions from unconsolidated equity affiliates
of current and prior year earnings of $26.1 million which exceeded the Company's
equity in earnings of unconsolidated subsidiaries by $23.2 million. Offsetting
these sources were the net loss for fiscal year 2001 of $44.7 million as well as
a decrease of income taxes payable of $10.0 million and a reduction of the
deferred tax liability by $1.6 million. Working capital changes have been
adjusted to exclude the effects of acquisitions and currency translation.
Working capital at June 24, 2001, of $63.7 million reflect the classification of
the outstanding balance under the revolving line of credit of $6.5 million and
the accounts receivable securitization of $70.1 million as current liabilities,
pending renegotiation or refinancing of these obligations, which is expected to
occur by October 31, 2001, as further discussed in the sixth and seventh
following paragraphs.

14
15

The Company utilized $222 thousand for net investing activities and $166.4
million for net financing activities during fiscal 2001. Significant
expenditures during this period included $42.3 million for capacity expansions
and upgrading of facilities, $15.5 million for investments in unconsolidated
equity affiliates (including U.N.F. and UNIFI-SANS) and $2.2 million for
acquisitions. A significant component of capital expenditures included the
remaining construction costs for the Company's Unifi Technical Fabrics nonwoven
operation, which was then sold in June 2001. Additionally, $16.6 million was
expended for the purchase and retirement of Company common stock, $12.0 million
for distributions and advances to minority interest shareholders and $137.4
million for net retirements of long-term debt. The Company obtained $41.7
million from the sale of capital assets, including $39.4 million for its
non-wovens business and the consulting portion of Unifi Technology Group.

At June 24, 2001, the Company has committed approximately $20.0 million for
capital expenditures during fiscal 2002.

During the March quarter of 2001 Parkdale America LLC (the"LLC"), an
unconsolidated equity affiliate of the Company, completed the recapitalization
of its balance sheet. Following the completion of this recapitalization, the LLC
distributed cash to the Company and Parkdale Mills, Inc. ("Mills") in the amount
of $49.2 million and $95.5 million, respectively. Of the $49.2 million remitted
to the Company, $23.5 million represents a distribution of current and prior
period earnings and $25.7 million represents a return of capital. Unifi retained
its 34% ownership position and Mills retained its 66% ownership in the LLC
following this distribution.

The Company periodically evaluates the carrying value of long-lived assets,
including property, plant and equipment and intangibles to determine if
impairment exists. If the sum of expected future undiscounted cash flows is less
than the carrying amount of the asset, additional analysis is performed to
determine the amount of loss to be recognized. The Company continues to evaluate
for impairment the carrying value of its polyester natural textured operations
and its nylon texturing and covering operations as the importation of fiber,
fabric and apparel continues to impair sales volumes and margins for these
operations and has negatively impacted the U.S. textile and apparel industry in
general.

Effective July 26, 2000, the Board of Directors increased the Company's
remaining authorization to repurchase up to 10.0 million shares of the Company's
common stock. The Company purchased 1.4 million shares in fiscal year 2001 for a
total of $16.6 million. The Company will continue to operate its stock buy-back
program from time to time as it deems appropriate and financially prudent.
However, it is anticipated that the Company will not repurchase significant
shares in fiscal year 2002 but instead will continue to focus its efforts on the
repayment of long-term debt.

Effective December 20, 2000, the Company refinanced their $400 million
credit facility with a new unsecured three year $250 million revolving bank
credit facility. Additionally, the Company entered into a $100 million trade
receivables financing agreement (the "Receivables Agreement") that is secured by
its domestic and certain foreign accounts receivable. The Receivables Agreement
does not have a stated maturity but is terminable at the option of the Company
with a five-day written notice. The Company has classified the $70.1 million
outstanding at June 24, 2001, as a current maturity of long-term debt, pending
renegotiation of the revolving credit facility discussed in the following
paragraph, despite the intent of the Company to continue the Receivables
Agreement on a long-term basis. Loans under the new credit facility initially
bear interest at LIBOR plus .825% and advances under the receivables financing
agreement bear interest at the applicable commercial paper rate plus .30%. The
weighted average interest rates for the borrowings made from the revolver and
the accounts receivable securitization from December 20, 2000 through June 24,
2001 were 6.60% and 5.92%, respectively. As of June 24, 2001, the Company had
unused capacity of approximately $243.5 million under the terms of the new
revolving credit facility.

Company is currently in discussions with the lending group and others to secure
a more flexible long-term borrowing arrangement. The outstanding balance of the
revolving credit facility of $6.5 million at June 24, 2001 has been classified
as a current maturity of long-term debt. The Company believes that its current
financial position as well as its cash flow from operations and available
collateral will allow it to refinance the revolving credit facility on
acceptable terms.

The current business climate for U.S. based textile manufactures in
extremely challenging due to disparate worldwide production capacity and demand.
This situation does not appear that it will reverse in the foreseeable future.
This highly competitive environment has resulted in a declining market for the
Company, domestically and abroad. Consequently, management took certain
consolidation and cost reduction actions during the year to align our capacity
with current market demands. Management feels confident that a long-term, stable
financing arrangement will be negotiated which will continue to enable the
Company, in combination with its current financial position, the ability to meet
working capital and long-term investment needs and pursue strategic business
opportunities.

EURO CONVERSION

The Company conducts business in multiple currencies, including the
currencies of various European countries in the European Union which began
participating 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
January 1, 1999, to January 1, 2002, the existing currencies of the member
countries will remain legal tender and customers and vendors of the Company may
continue to use these currencies when conducting business. Currency rates during
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 continues
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 annual
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,"
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 differ
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 differ
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
competition and economic conditions, reliance on and financial viability of
significant customers, technological advancements, employee relations, changes
in capital expenditures and long-term investments (including those related to
unforeseen acquisition opportunities), continued availability of financial
resources through financing arrangements and operations, negotiations of new or
modifications of existing contracts for asset management regulations governing
tax laws, other governmental and authoritative bodies' policies and legislation,
the continuation and magnitude of the Company's common stock repurchase program
and proceeds received from the sale of assets held for disposal. In addition to
these representative factors, forward-looking statements could be impacted by
general domestic and international economic and industry conditions in the
markets where the Company competes, such as

16
17

changes in currency exchange rates, interest and inflation rates, recession and
other economic and political factors over which the Company has no control.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

See the information included in the Consolidated Financial Statements
Footnote 10 ("Derivative Financial Instruments and Fair Value of Financial
Instruments") on pages 34 and 35 of this Report.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's report of independent auditors and consolidated financial
statements and related notes follow on subsequent pages of this Report.

17
18

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 24, 2001, and June 25, 2000, and the related consolidated statements
of operations, changes in shareholders' equity and comprehensive income, and
cash flows for each of the three years in the period ended June 24, 2001. 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
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting 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. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Unifi, Inc. at
June 24, 2001 and June 25, 2000, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended June 24,
2001, in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Greensboro, North Carolina
July 19, 2001

18
19

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000
------------- -------------
(AMOUNTS IN THOUSANDS)

ASSETS
Current assets:
Cash and cash equivalents................................. $ 6,634 $ 18,778
Receivables............................................... 171,744 214,001
Inventories............................................... 124,434 147,640
Other current assets...................................... 6,882 2,958
---------- ----------
Total current assets.............................. 309,694 383,377
---------- ----------
Property, plant and equipment:
Land...................................................... 5,712 5,560
Buildings and air conditioning............................ 237,767 239,245
Machinery and equipment................................... 821,100 853,553
Other..................................................... 145,348 152,112
---------- ----------
1,209,927 1,250,470
Less accumulated depreciation............................... 647,614 592,083
---------- ----------
562,313 658,387
Investment in unconsolidated affiliates..................... 173,502 208,918
Other noncurrent assets..................................... 91,810 104,082
---------- ----------
$1,137,319 $1,354,764
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 100,086 $ 97,875
Accrued expenses.......................................... 59,866 50,160
Income taxes payable...................................... 72 2,430
Current maturities of long-term debt and other current
liabilities............................................ 85,962 217,308
---------- ----------
Total current liabilities......................... 245,986 367,773
---------- ----------
Long-term debt and other liabilities........................ 259,188 261,830
---------- ----------
Deferred income taxes....................................... 80,307 86,046
---------- ----------
Minority interests.......................................... 11,295 16,677
---------- ----------
Shareholders' equity:
Common stock.............................................. 5,382 5,516
Capital in excess of par value............................ -- --
Retained earnings......................................... 589,360 649,444
Unearned compensation..................................... (1,203) (1,260)
Accumulated other comprehensive loss...................... (52,996) (31,262)
---------- ----------
540,543 622,438
---------- ----------
$1,137,319 $1,354,764
========== ==========
</Table>

The accompanying notes are an integral part of the financial statements.

19
20

CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

Net sales.............................................. $1,131,157 $1,291,435 $1,262,278
---------- ---------- ----------
Cost of sales.......................................... 1,034,044 1,127,864 1,087,728
Selling, general and administrative expense............ 62,786 58,063 55,338
Provision for bad debts................................ 8,697 8,694 1,129
Interest expense....................................... 30,123 30,294 27,459
Interest income........................................ (2,549) (2,772) (2,399)
Other (income) expense................................. 7,582 1,052 440
Equity in (earnings) losses of unconsolidated
affiliates........................................... (2,930) 2,989 (4,214)
Minority interest...................................... 2,590 9,543 9,401
Alliance plant closure costs........................... 15,000 -- --
Asset impairments and write downs...................... 24,541 -- --
Employee severance and related charges................. 7,545 -- --
---------- ---------- ----------
Income (loss) before income taxes and cumulative effect
of accounting change................................. (56,272) 55,708 87,396
Provision (benefit) for income taxes................... (11,598) 17,675 28,369
---------- ---------- ----------
Income (loss) before cumulative effect of accounting
change............................................... (44,674) 38,033 59,027
Cumulative effect of accounting change (net of
applicable income taxes of $1,696 for June 27,
1999)................................................ -- -- 2,768
---------- ---------- ----------
Net income (loss)............................ $ (44,674) $ 38,033 $ 56,259
========== ========== ==========
Earnings (losses) per common share:
Income (loss) before cumulative effect of accounting
change............................................ $ (.83) $ .65 $ .97
Cumulative effect of accounting change............... -- -- (.04)
---------- ---------- ----------
Net income (loss) per common share........... $ (.83) $ .65 $ .93
========== ========== ==========
Earnings (losses) per common share -- assuming
dilution:
Income (loss) before cumulative effect of accounting
change............................................ $ (.83) $ .65 $ .97
Cumulative effect of accounting change............... -- -- (.04)
---------- ---------- ----------
Net income (loss) per common share........... $ (.83) $ .65 $ .93
========== ========== ==========
</Table>

The accompanying notes are an integral part of the financial statements.

20
21

CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
<Table>
<Caption>
CAPITAL IN OTHER
SHARES COMMON EXCESS OF RETAINED UNEARNED COMPREHENSIVE
OUTSTANDING STOCK PAR VALUE EARNINGS COMPENSATION INCOME (LOSS)
----------- -------- ---------- --------- ------------ -------------
(AMOUNTS IN THOUSANDS,

Balance June 28,
1998................. 61,634 $6,163 $ 22,454 $618,128 $ -- $(10,548)
====== ====== ======== ======== ======= ========
Purchase of stock.... (2,112) (211) (23,092) (16,034) -- --
Options exercised.... 26 3 651 -- -- --
Currency translation
adjustments........ -- -- -- -- -- (7,635)
Net income........... -- -- -- 56,259 -- --
------ ------ -------- -------- ------- --------
Balance June 27,
1999................. 59,548 5,955 13 658,353 -- (18,183)
====== ====== ======== ======== ======= ========
Purchase of stock.... (4,462) (446) (840) (47,623) -- --
Options exercised.... 1 -- 14 -- -- --
Grantor's trust tax
benefit............ -- -- -- 681 -- --
Stock forfeited to
satisfy income tax
withholding........ (53) (5) (630) -- -- --
Issuance of
restricted stock... 129 12 1,443 -- (1,455) --
Amortization of
restricted stock... -- -- -- -- 195 --
Currency translation
adjustments........ -- -- -- -- -- (13,079)
Net income........... -- -- -- 38,033 -- --
------ ------ -------- -------- ------- --------
Balance June 25,
2000................. 55,163 5,516 -- 649,444 (1,260) (31,262)
====== ====== ======== ======== ======= ========
Purchase of stock.... (1,436) (144) (1,020) (15,410) -- --
Issuance of
restricted stock... 104 10 1,020 -- (1,030) --
Amortization of
restricted stock... -- -- -- -- 1,087 --
Currency translation
adjustments........ -- -- -- -- -- (21,734)
Net income (loss).... -- -- -- (44,674) -- --
------ ------ -------- -------- ------- --------
Balance June 24,
2001................. 53,831 $5,382 $ -- $589,360 $(1,203) $(52,996)
====== ====== ======== ======== ======= ========

<Caption>
TOTAL COMPREHENSIVE
SHAREHOLDERS' INCOME(LOSS)
EQUITY NOTE 1
------------- -------------
(AMOUNTS IN THOUSANDS,

Balance June 28,
1998................. $636,197 $116,406
======== ========
Purchase of stock.... (39,337) --
Options exercised.... 654 --
Currency translation
adjustments........ (7,635) (7,635)
Net income........... 56,259 56,259
-------- --------
Balance June 27,
1999................. 646,138 48,624
======== ========
Purchase of stock.... (48,909) --
Options exercised.... 14 --
Grantor's trust tax
benefit............ 681 --
Stock forfeited to
satisfy income tax
withholding........ (635) --
Issuance of
restricted stock... -- --
Amortization of
restricted stock... 195 --
Currency translation
adjustments........ (13,079) (13,079)
Net income........... 38,033 38,033
-------- --------
Balance June 25,
2000................. 622,438 24,954
======== ========
Purchase of stock.... (16,574) --
Issuance of
restricted stock... -- --
Amortization of
restricted stock... 1,087 --
Currency translation
adjustments........ (21,734) (21,734)
Net income (loss).... (44,674) (44,674)
-------- --------
Balance June 24,
2001................. $540,543 $(66,408)
======== ========
</Table>

The accompanying notes are an integral part of the financial statements.

21
22

CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)

Cash and cash equivalents at beginning of year........... $ 18,778 $44,433 $ 8,372
Operating activities:
Net income (loss)...................................... (44,674) 38,033 56,259
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting change (net of
applicable income taxes).......................... -- -- 2,768
(Earnings) losses of unconsolidated equity
affiliates, net of distributions.................. 23,204 6,200 5,287
Depreciation........................................ 81,114 82,750 82,945
Amortization........................................ 9,035 7,778 6,931
Non-cash portion of non-recurring charges........... 43,478 -- --
Deferred income taxes............................... (1,554) 10,692 4,641
Provision for bad debts and quality claims.......... 14,985 14,866 6,241
Other............................................... 72 2,135 415
Changes in assets and liabilities, excluding effects
of acquisitions and foreign currency adjustments:
Receivables....................................... 14,223 (39,257) 28,234
Inventories....................................... 17,221 (18,088) 16,320
Other current assets.............................. 1,214 (1,330) (948)
Payables and accruals............................. 3,285 27,118 (13,959)
Income taxes...................................... (9,971) (4,430) 14,697
--------- ------- ---------
Net -- operating activities.................... 151,632 126,467 209,831
--------- ------- ---------
Investing activities:
Capital expenditures................................... (42,337) (58,609) (118,846)
Acquisitions........................................... (2,159) (7,953) (27,112)
Investments in unconsolidated equity affiliates........ (15,537) (16,069) (10,000)
Return of capital from equity affiliates............... 25,743 -- --
Investment of foreign restricted assets................ (6,770) -- --
Sale of capital assets................................. 41,725 5,637 847
Other.................................................. (887) (1,138) (4,508)
--------- ------- ---------
Net -- investing activities.................... (222) (78,132) (159,619)
--------- ------- ---------
Financing activities:
Borrowing of long-term debt............................ 355,009 72,342 97,000
Repayment of long-term debt............................ (492,450) (81,589) (61,596)
Issuance of Company stock.............................. -- 14 654
Purchase and retirement of Company stock............... (16,574) (48,909) (39,337)
Distributions and advances to minority shareholders.... (12,000) (12,000) (9,000)
Other.................................................. (375) 287 249
--------- ------- ---------
Net -- financing activities.................... (166,390) (69,855) (12,030)
--------- ------- ---------
Currency translation adjustment.......................... 2,836 (4,135) (2,121)
--------- ------- ---------
Net increase (decrease) in cash and cash equivalents..... (12,144) (25,655) 36,061
--------- ------- ---------
Cash and cash equivalents at end of year................. $ 6,634 $18,778 $ 44,433
========= ======= =========
</Table>

The accompanying notes are an integral part of the financial statements.

22
23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES AND FINANCIAL STATEMENT INFORMATION

Principles of Consolidation: The Consolidated 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
operations is reflected as minority interests in the Consolidated Statements of
Operations. The accounts of all foreign subsidiaries have been included on the
basis of fiscal periods ended three months or less prior to the dates of the
Consolidated Balance Sheets. All significant intercompany accounts and
transactions 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 accounted for by the equity method and, accordingly,
consolidated income includes the Company's share of the affiliates' income or
losses.

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: Revenues from sales are recognized at the time
shipments are made and include amounts billed to customers for shipping and
handling. Costs associated with shipping and handling are included in cost of
sales in the Consolidated Statements of Operations.

Foreign Currency Translation: Assets and liabilities of foreign
subsidiaries 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 resulting from translation are accumulated in a separate component of
shareholders' equity and included in comprehensive income (loss). Gains and
losses resulting from foreign currency transactions (transactions denominated in
a currency other than the subsidiary's functional currency) are included in
other income or expense in the Consolidated Statements of Operations.

Cash and Cash Equivalents: Cash equivalents are defined as short-term
investments having an original maturity of three months or less.

Receivables: Certain customer accounts receivable are factored without
recourse with respect to credit risk. Factored accounts receivable at June 24,
2001, and June 25, 2000, were $34.7 million and $42.9 million, respectively. An
allowance for losses is provided for known and potential losses arising from
yarn quality claims and receivables from customers not factored based on a
periodic review of these accounts. Reserves for such losses were $9.9 million at
June 24, 2001 and $17.2 million at June 25, 2000.

Inventories: The Company utilizes the last-in, first-out ("LIFO") method
for valuing certain inventories representing 47.0% of all inventories at June
24, 2001, and the first-in, first-out ("FIFO") method for all other inventories.
Inventory values computed by the LIFO method are lower than current market
values. Inventories valued at current or replacement cost would have been
approximately $5.0 million and $5.9 million in excess of the LIFO valuation at
June 24, 2001, and June 25, 2000, respectively. The Company experienced a LIFO
liquidation in the current fiscal year resulting in the recognition of
approximately $0.4 million in pre-tax income. Finished goods, work in process,
and raw materials and supplies at June 24, 2001, and June 25, 2000, amounted to
$64.5 million and $81.2 million; $12.5 million and $17.0 million; and $47.4
million and $49.4 million, respectively.

Property, Plant and 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 at June 24, 2001, and
June 25, 2000, consist primarily of the cash surrender value of key executive
life insurance policies ($9.3 million and $7.7 million); unamortized bond issue
costs and debt origination fees ($6.1 million and $5.9 million); and acquisition
related assets consisting of the excess cost over fair value of net assets
acquired and other intangibles ($64.6 million
23
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and $82.6 million), respectively. Debt related origination costs have been
amortized on the straight-line method over the life of the corresponding debt,
which approximates the effective interest method. The acquisition related assets
have been amortized on the straight-line method over periods ranging between
five and thirty years. See Recent Accounting Pronouncements in this footnote for
anticipated changes in amortizing and impairment testing of acquisition related
assets for periods beginning after fiscal year 2001. Accumulated amortization at
June 24, 2001, and June 25, 2000, for debt origination costs and acquisition
related assets was $29.9 million and $26.6 million, respectively. See Footnote
15 "Consolidation and Cost Reduction Efforts" for further discussion on current
year activity impacting noncurrent assets.

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. If undiscounted cashflows are not adequate to cover the asset
carrying value, additional analysis is conducted to determine the amount of loss
to be recognized. The impairment loss is determined by the difference between
the carrying amount of the asset and the fair value measured by future
discounted cashflows. See Recent Accounting Pronouncements in this footnote for
anticipated changes in amortizing and impairment testing of acquisition related
assets for periods beginning after fiscal year 2001.

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 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. Income taxes have not been provided for the undistributed earnings
of certain foreign subsidiaries as such earnings are deemed to be permanently
invested.

Earnings (Losses) Per Share: The following table details the computation
of basic and diluted earnings (losses) per share:

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)

Numerator:
Income (loss) before cumulative effect of
accounting change........................... $(44,674) $38,033 $59,027
Cumulative effect of accounting change......... -- -- 2,768
-------- ------- -------
Net income (loss).............................. $(44,674) $38,033 $56,259
======== ======= =======
Denominator:
Denominator for basic earnings (losses) per
share -- weighted average shares............ 53,868 58,488 60,568
Effect of dilutive securities:
Stock options............................... -- 19 2
Restricted stock awards..................... -- 4 --
-------- ------- -------
Diluted potential common shares denominator for
diluted earnings (losses) per
share -- adjusted weighted average shares
and assumed conversions..................... 53,868 58,511 60,570
======== ======= =======
</Table>

Stock-Based Compensation: With the adoption of SFAS 123, the Company
elected to continue to measure compensation expense for its stock-based employee
compensation 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
recorded on the 230,805 options granted in fiscal 2001, the 1,975,570 options
granted in fiscal 2000 and the 414,000 options granted in fiscal 1999 based on
their respective vesting schedules. The fiscal 2001 and 2000 options vest in
annual increments over five years and the fiscal 1999 options vest primarily
over two years. Net income (loss) in fiscal 2001, 2000 and 1999 restated for the
effect would have been $(49.4) million or $(0.92) per diluted

24
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

share, $32.7 million or $0.56 per diluted share and $53.3 million or $0.88 per
diluted, respectively. The fair value and related compensation expense of the
2001, 2000 and 1999 options were calculated as of the issuance date using the
Black-Scholes model with the following assumptions:

<Table>
<Caption>
OPTIONS GRANTED 2001 2000 1999
--------------- ---- ---- ----

Expected life (years)...................................... 10.0 10.0 10.0
Interest rate.............................................. 6.00% 6.00% 6.14%
Volatility................................................. 47.7% 49.5% 49.3%
Dividend yield............................................. -- -- --
</Table>

Comprehensive Income: Comprehensive income includes net income and other
changes in net assets of a business during a period from non-owner sources,
which are not included in net income. Such non-owner changes may include, for
example, available-for-sale securities and foreign currency translation
adjustments. Other than net income, foreign currency translation adjustments
presently represent the only component of comprehensive income for the Company.
The Company does not provide income taxes on the impact of currency translations
as earnings from foreign subsidiaries are deemed to be permanently invested.

Recent Accounting Pronouncements: In September 2000, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 140 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" (SFAS 140). SFAS 140 replaces Statement of
Financial Accounting Standards No. 125 "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities (SFAS 125). SFAS 140
revises the standards for accounting and for securitizations and other transfers
of financial assets and collateral and requires certain disclosures, but carries
over most of SFAS 125's provisions. SFAS 140 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities based on a financial-components approach that focuses on control.
This standard is applied prospectively and was effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001. The adoption of this standard did not have any effect on the
Company's results of operation or financial position.

In September 2000, the Emerging Issues Task Force (EITF) issued EITF
Abstract 00-10 "Accounting for Shipping and Handling Fees and Costs." EITF 00-10
requires that any amounts billed to a customer for a sales transaction related
to shipping or handling should be classified as revenues. Costs associated with
providing this service is an accounting policy disclosure and a company may
adopt a policy of including such costs in their cost of sales line item. The
Company was required to adopt EITF 00-10 in the fourth quarter of fiscal year
2001. The Company historically has included revenues earned for shipping and
handling in the net sales line item in the Consolidated Results of Operations.
Costs to provide this service were either historically included in net sales,
for shipping costs, or in cost of sales, for handling expenses. Upon the
adoption of EITF 00-10 the Company has reclassified the presentation of shipping
costs from net sales to cost of sales and has restated all prior periods to
conform with the current year format. Adopting EITF 00-10 had no impact on the
Company's results of operations or financial position.

25
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

investments in equity investees will also no longer be recorded upon adoption of
the new rules. Intangible assets that do not have indefinite lives will continue
to be amortized over their useful lives and reviewed for impairment in
accordance with SFAS 121. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the Company anticipates that it will apply the
new accounting rules beginning June 25, 2001. The Company is currently assessing
the financial impact SFAS 141 and 142 will have on the consolidated financial
statements. In fiscal 2001, the amortization expense associated with remaining
goodwill approximated $3.3 million.

Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

2. ACQUISITIONS, ALLIANCES AND DIVESTURES

On May 22, 2001, the Company assumed operating control of Glen Raven's
(Glen Raven) air jet texturing assets located in Altamahaw, North Carolina. This
location is capable of producing an estimated 13.0 million pounds of air jet
texturing volume making Unifi the United States market leader in the production
of air jet textured yarn. The agreement between Glen Raven and the Company is
structured as an operating lease whereby the air texturing equipment and
manufacturing location will be leased from Glen Raven over a seven-year term.
The Glen Raven employees at the Altamahaw plant became Unifi employees.

On June 22, 2001, the Company completed the previously announced sale of
the assets of its wholly owned subsidiary, Unifi Technical Fabrics, LLC, to
Avgol Nonwovens Industries of Holon, Israel. There were substantially no sales
or other operating activities associated with these assets prior to the date of
sale.

In June 2001, the consulting operations of the Company's majority-owned
subsidiary, Unifi Technology Group (UTG) were sold to Camstar Technology Group,
Inc. UTG was formed in the fourth quarter of fiscal year 1999 to provide
consulting services focused on integrated 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 and a minority-ownership
interest in the newly combined entity was subsequently sold to certain former
Cimtec shareholders and former Unifi executives. The remaining UTG operations,
now conducting business under the name Cimtec Automation, Inc., involves the
sale and repair of certain computer hardware which was part of the Cimtec
business acquired on June 1, 1999.

The combined sales proceeds from the divestures described in the preceding
two paragraphs totaled approximately $39.4 million.

Effective June 1, 2000, the Company and E.I. DuPont De Nemours and Company
(DuPont) initiated a manufacturing alliance. The alliance is expected to
optimize Unifi's and DuPont's partially oriented yarn (POY) manufacturing
facilities, increase manufacturing efficiency and improve product quality. Under
its terms, DuPont and Unifi will cooperatively run their polyester filament
manufacturing facilities as a single operating unit. This consolidation involves
the closing of the DuPont Cape Fear, North Carolina plant and will

26
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

shift commodity yarns from our Yadkinville, North Carolina facility to DuPont's
Kinston, North Carolina 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
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 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. At termination of the alliance 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 filament business for a price within a
predetermined fair market value range involving this manufacturing alliance. See
Footnote 16 "Alliance Plant Closure Costs" on pages 37 and 38 for additional
information involving this alliance.

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 added high quality, package-dyeing capabilities in Europe and
compliments 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
effective April 1, 1999.

The Glen Raven, Intex, Brazilian and Cimtec 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 Statements
beginning on the date the acquisition was consummated. The transactions are not
considered significant to the Company's consolidated net assets or results of
operations.

3. CUMULATIVE EFFECT OF ACCOUNTING CHANGE

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-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 were 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, wrote 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.

4. LONG-TERM DEBT AND OTHER LIABILITIES

A summary of long-term debt follows:

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000
------------- -------------
(AMOUNTS IN THOUSANDS)

Bonds payable............................................... $248,651 $248,447
Revolving credit facility dated April 15, 1996.............. -- 211,500
Revolving credit facility dated December 20, 2000........... 6,500 --
Accounts receivable securitization.......................... 70,085 --
Sale-leaseback obligation................................... 3,020 3,154
Other obligations........................................... 16,894 16,037
-------- --------
Total debt........................................ 345,150 479,138
Current maturities.......................................... 85,962 217,308
-------- --------
Total long-term debt and other liabilities........ $259,188 $261,830
======== ========
</Table>

On February 5, 1998, the Company issued $250 million of senior, unsecured
debt securities (the "Notes") which bear a coupon rate of 6.50% and mature in
2008. The estimated fair value of the Notes, based

27
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

on quoted market prices, at June 24, 2001, and June 25, 2000, was approximately
$195.0 million and $216.9 million, respectively.

The $400 million revolving credit facility dated April 15, 1996 that was
scheduled to mature April 15, 2001 was refinanced in December 2000. The June 25,
2000 outstanding balance was classified as short term due to the scheduled
maturity falling within 12 months of the prior fiscal year end. The rate of
interest that was charged under this facility was adjusted quarterly based on a
pricing grid which considered the ratio of the Company's debt to earnings before
income taxes, depreciation, amortization and other non-cash charges. The credit
facility provided 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 Eurodollar loans. In accordance with the pricing grid, the
Company paid 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 the period this debt was outstanding in the current fiscal
year was 6.91% and was 6.12% for the prior fiscal year.

Effective December 20, 2000, the Company refinanced the above described
$400 million credit facility with a new unsecured three year $250 million
revolving bank credit facility. Additionally, the Company entered into a $100
million trade receivables financing agreement (the "Receivables Agreement") that
is secured by its domestic and certain foreign accounts receivable. The
Receivables Agreement does not have a stated maturity but is terminable at the
option of the Company with a five-day written notice. The Company has classified
the $70.1 million outstanding at June 24, 2001, as a current maturity of
long-term debt, pending renegotiation of the revolving credit facility discussed
in the following paragraph, despite the intent of the Company to continue the
Receivables Agreement on a long-term basis. Loans under the new credit facility
initially bear interest at LIBOR plus .825% and advances under the receivables
financing agreement bear interest at the applicable commercial paper rate plus
.30%. The weighted average interest rates for the borrowings made from the
revolver and the accounts receivable securitization from December 20, 2000
through June 24, 2001 were 6.60% and 5.92%, respectively. As of June 24, 2001,
the Company had unused capacity of approximately $243.5 million under the terms
of the new revolving credit facility.

The loans under the new revolving credit facility include financial
covenants that required, at June 24, 2001, tangible net worth of $396.1 million,
a maximum leverage ratio of 3.25 and a minimum interest coverage ratio of 2.50.
The Company was in default of the interest coverage covenant of the new
revolving credit facility at June 24, 2001. As a result, the Company has
obtained a waiver through October 31, 2001, which reduced the facility from $250
million to $150 million and raised the effective interest rate approximately
2.0%. The Company is currently in discussions with the lending group and others
to secure a more flexible long-term borrowing arrangement. The outstanding
balance of the revolving credit facility of $6.5 million at June 24, 2001 has
been classified as a current maturity of long-term debt. The Company believes
that its current financial position as well as its cash flow from operations and
available collateral will allow it to refinance the revolving credit facility on
acceptable terms.

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
financial institution and will be leased by the Company over a sixteen-year
period. 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 Consolidated Financial Statement
Footnote 11). As a part of the Contribution Agreement, ownership of a
significant 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
remaining balance of the sales-leaseback agreement are due semi-annually and are
in varying amounts, in accordance with the agreement. Average annual principal
payments over the next five years are approximately $179 thousand. The interest
rate implicit in the agreement is 7.84%.

Other obligations consist primarily of acquisition-related liabilities and
advances from the Brazilian government. Maturities over the next three years are
$9.3 million, $7.1 million, $0.5 million, respectively.

Interest capitalized during fiscal 2001 and 2000 was $2.4 million and $0.6
million, respectively.
28
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. INCOME TAXES

The provision for income taxes for fiscal 2001, 2000 and 1999 consists of
the following:

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)

Currently payable (recoverable):
Federal........................................ $ (6,005) $ 6,629 $20,124
State.......................................... 666 1,682 2,951
Foreign........................................ 108 (225) 653
-------- ------- -------
Total current.......................... (5,231) 8,086 23,728
-------- ------- -------
Deferred:
Federal........................................ (4,239) 9,772 10,219
State.......................................... (1,325) (261) (5,718)
Foreign........................................ (803) 78 140
-------- ------- -------
Total deferred......................... (6,367) 9,589 4,641
-------- ------- -------
Income taxes (benefit) before cumulative effect
of accounting change (1999).................... $(11,598) $17,675 $28,369
======== ======= =======
</Table>

Income taxes/(benefit) were (20.6%), 31.7% and 32.5% of pretax
earnings/(losses) in fiscal 2001, 2000 and 1999, respectively. A reconciliation
of the provision for income taxes/(benefits) (before cumulative effect of
accounting changes in 1999) with the amounts obtained by applying the federal
statutory tax rate is as follows:

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------

Federal statutory tax rate....................... (35.0%) 35.0% 35.0%
State income taxes net of federal tax benefit.... (0.5) 3.7 3.1
State tax credits net of federal tax benefit..... (0.4) (2.1) (5.1)
Foreign taxes less than domestic rate............ -- -- (1.8)
Foreign tax benefit of losses less than domestic
rate........................................... 16.8 2.5 --
Foreign Sales Corporation tax benefit............ (0.8) (1.1) (0.7)
Research and experimentation credit.............. (0.1) (0.1) (0.1)
Reversal of tax reserves......................... -- (7.4) --
Nondeductible expenses and other................. (0.6) 1.2 2.1
------ ---- ----
Effective tax rate............................... (20.6%) 31.7% 32.5%
====== ==== ====
</Table>

29
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The deferred income taxes reflect the net tax effects of temporary
differences between the bases of assets and liabilities for financial reporting
purposes and their bases for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets as of June 24, 2001, and June 25,
2000, were as follows:

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000
------------- -------------
(AMOUNTS IN THOUSANDS)

Deferred tax liabilities:
Property, plant and equipment............................. $100,676 $ 97,051
Investments in equity affiliates.......................... 19,297 19,974
Other..................................................... 1,021 394
-------- --------
Total deferred tax liabilities.................... $120,994 $117,419
======== ========
Deferred tax assets:
Accrued liabilities and valuation reserves................ 15,397 9,795
State tax credits......................................... 16,608 16,511
Other items............................................... 8,682 5,067
-------- --------
Total deferred tax assets......................... 40,687 31,373
-------- --------
Net deferred tax liabilities...................... $ 80,307 $ 86,046
======== ========
</Table>

6. COMMON STOCK, STOCK OPTION PLANS AND RESTRICTED STOCK

Common shares authorized were 500 million in 2001 and 2000. Common shares
outstanding at June 24, 2001, and June 25, 2000, were 53,825,533 and 55,163,193,
respectively.

On October 21, 1999, the shareholders of the Company approved the 1999
Unifi, Inc. Long-Term Incentive Plan. The plan authorized the issuance of up to
6,000,000 shares of Common Stock pursuant to the grant or exercise of stock
options, including Incentive Stock Options ("ISO"), Non-Qualified Stock Options
("NQSO") and restricted stock, but not more than 3,000,000 shares may be issued
as restricted stock. The 230,805 and 1,975,570 options granted in fiscal 2001
and 2000, respectively were all from the 1999 Long-Term Incentive Plan. In
addition, the Company has previous ISO plans with 846,357 shares reserved and
previous NQSO plans with 1,576,007 shares reserved at year end. No additional
options will be issued under any previous ISO or NQSO plan. The transactions for
2001, 2000 and 1999 of all three plans were as follows:

<Table>
<Caption>
ISO NQSO
-------------------------- --------------------------
OPTIONS WEIGHTED OPTIONS WEIGHTED
OUTSTANDING AVG. $/SHARE OUTSTANDING AVG. $/SHARE
----------- ------------ ----------- ------------

Fiscal 1999:
Granted........................................ 309,000 $16.31 105,000 $17.47
Exercised...................................... (833) 16.31 (25,000) 25.65
Canceled....................................... (12,435) 17.48 (6,668) 31.00
Converted from ISO to NQSO..................... (391,508) 23.24 391,508 23.24
--------- ------ --------- ------
Shares under option -- end of year............... 846,357 $22.15 1,576,007 $25.29
========= ====== ========= ======
Fiscal 2000:
Granted........................................ 1,975,570 $11.90 -- $ --
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
========= ====== ========= ======
Fiscal 2001:
Granted........................................ 230,805 $ 9.11 -- $ --
Canceled....................................... (177,477) 17.32 (40,000) 29.24
--------- ------ --------- ------
Shares under option -- end of year............... 2,857,922 $14.31 1,189,175 $25.31
========= ====== ========= ======
</Table>

30
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
FISCAL 2001 FISCAL 2000 FISCAL 1999
------------- ------------- -------------

ISO:
Exercisable shares under option -- end of
year......................................... 1,609,931 829,024 685,918
Option price range.............................. $11.19-$25.38 $10.19-$25.38 $10.19-$25.38
Weighted average exercise price for options
exercisable.................................. $ 16.46 $ 22.14 $ 23.52
Weighted average remaining life of shares under
option....................................... 7.4 4.7 6.4
Fair value of options granted................... $ 5.59 $ 7.58 $ 11.21
NQSO:
Exercisable shares under option -- end of
year......................................... 1,189,175 1,229,175 1,542,077
Option price range.............................. $16.31-$31.00 $16.31-$31.00 $16.31-$31.00
Weighted average exercise price for options
exercisable.................................. $ 25.31 $ 25.44 $ 25.48
Weighted average remaining life of shares under
option....................................... 4.1 5.1 6.0
Fair value of options granted................... $ -- $ -- $ 11.21
</Table>

All options granted in fiscal 2001 and 2000 vest in annual increments over
five years from the grant date.

During fiscal 2001 and 2000, the Company issued a combined total of 104,366
shares and 129,500 shares, respectively of restricted stock to certain employees
under the 1999 Unifi, Inc. Long-Term Incentive Plan. The stock issued vests in
equal annual increments ranging from two to 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.

7. RETIREMENT 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 $5.0 million
in 2001 and $11.0 million in both 2000 and 1999. The Company leases its
corporate office building from its profit-sharing plan through an independent
trustee.

8. LEASES AND COMMITMENTS

In addition to the direct financing sales-leaseback obligation described in
Consolidated Financial Statements Footnote 4, the Company is obligated under
operating leases consisting primarily of real estate and equipment. Future
obligations for minimum rentals under the leases during fiscal years after June
24, 2001, are $6.4 million in 2002, $5.4 million in 2003, $5.8 million in 2004,
$4.6 million in 2005, $3.5 million in 2006 and $5.7 million in aggregate
thereafter. Rental expense was $7.9 million, $8.5 million and $7.6 million for
the fiscal years 2001, 2000 and 1999, respectively. The Company had committed
approximately $20.0 million for the purchase and upgrade of equipment and
facilities at June 24, 2001.

9. BUSINESS 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. The
consulting operations of this business was sold at the end of the current fiscal
year. This operation comprises the majority of the amounts included in the "All
Other" column for all three years presented. The Company also maintains
investments in several minority-owned and jointly owned affiliates. See Footnote
11 in these Consolidated Financial Statements for further information on
unconsolidated affiliates.

31
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In accordance with Statement 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.

<Table>
<Caption>
ALL
POLYESTER NYLON OTHER TOTAL
--------- -------- ------- ----------
(AMOUNTS IN THOUSANDS)

Fiscal 2001:
Net sales to external customers............ $791,169 $315,114 $24,106 $1,130,389
Intersegment net sales..................... 63 -- 9,164 9,227
Depreciation and amortization.............. 57,159 22,616 1,048 80,823
Segment operating income (loss)............ 28,430 7,392 (1,859) 33,963
Total assets....................... 608,594 292,369 5,076 906,039
-------- -------- ------- ----------
Fiscal 2000:
Net sales to external customers............ $861,842 $409,433 $20,160 $1,291,435
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....................... 695,675 358,205 17,721 1,071,601
-------- -------- ------- ----------
Fiscal 1999:
Net sales to external customers............ $815,628 $445,089 $ 1,561 $1,262,278
Intersegment net sales..................... 17,014 5,159 -- 22,173
Depreciation and amortization.............. 58,294 24,142 48 82,484
Segment operating income (loss)............ 64,710 47,966 (62) 112,614
Total assets....................... 710,277 206,661 13,392 930,330
-------- -------- ------- ----------
</Table>

Net sales to external customers for fiscal year 2001 does not include $768
thousand of net sales associated with the Company's non-woven start-up
operation. This operation was substantially selling off-quality product during
its ramp-up phase and had not yet been classified internally as a separate
operational segment for purposes of management evaluation.

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 intersegment transfer of yarn, fiber
costing and capitalization of property, plant and equipment costs. In fiscal
year 1999, 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 and for fiscal year 2000, 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 divisions' fiber costs are valued on a standard cost basis,
which approximates first-in, first-out accounting. For those components of
inventory valued utilizing the last-in, first-out method (see Footnote 1
"Accounting Polices and Financial Statement Information"), an adjustment is made
at the corporate level to record the difference between standard cost and LIFO.
For significant capital projects, capitalization is delayed for management
segment reporting until the facility is substantially complete. However, for
consolidated financial reporting, assets are capitalized into construction in
progress as costs are 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.

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
retirement and termination charge in the third quarter. See Footnote 14 "Early
Retirement and Termination Charge" for additional information.

The change in the polyester segment total assets between fiscal year end
2000 and 2001 reflects reduced working capital of $38.1 million and lower fixed
assets of $51.2 million. The fixed asset reduction is primarily

32
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

associated with current year depreciation. The change in the nylon segment total
assets for this period is a result of lower working capital of $44.6 million,
decreased property and equipment of $16.5 million and lower noncurrent assets of
approximately $3.3 million. The reduction in long-term assets is primarily
associated with depreciation and amortization recorded during the current year.
The change in total assets for the "All Other" segment primarily reflects the
sale of the consulting operations of the Company's majority owned subsidiary,
Unifi Technology Group at the end of the current fiscal year.

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)

Depreciation and amortization:
Depreciation and amortization of specific
reportable segment assets................... $ 80,823 $ 82,203 $ 82,484
Depreciation of unallocated assets............. 7,271 7,146 6,362
Amortization of unallocated assets............. 2,108 3,841 3,373
---------- ---------- ----------
Consolidated depreciation and amortization..... $ 90,202 $ 93,190 $ 92,219
========== ========== ==========
Operating income (loss):
Reportable segments operating income........... $ 33,963 $ 108,512 $ 112,614
Unallocated start-up operating losses.......... 2,078 -- --
Net standard cost (income) expense adjustment
to LIFO..................................... (2,781) 4,444 (8,040)
Unallocated operating (income) expense project
adjustment.................................. 339 (1,440) 1,442
Provision for bad debts........................ 8,697 8,694 1,129
Interest expense............................... 30,123 30,294 27,459
Interest income................................ (2,549) (2,772) (2,399)
Other (income) expense......................... 7,582 1,052 440
Equity in (earnings) losses of unconsolidated
affiliates.................................. (2,930) 2,989 (4,214)
Minority interests............................. 2,590 9,543 9,401
Alliance plant closure costs................... 15,000 -- --
Asset impairments and write downs.............. 24,541 -- --
Employee severance and related charges......... 7,545 -- --
---------- ---------- ----------
Income (loss) before income taxes and
cumulative effect of accounting change...... $ (56,272) $ 55,708 $ 87,396
========== ========== ==========
Total assets:
Reportable segments total assets............... $ 906,039 $1,071,601 $ 930,330
Cash, receivables and other current assets..... 24,720 16,254 17,661
Unallocated corporate fixed assets............. 16,603 44,159 176,161
Other non-current corporate assets............. 36,010 38,522 41,085
Investments in equity affiliates............... 173,502 208,918 207,142
Intersegment notes and receivables............. (19,555) (24,690) (6,539)
---------- ---------- ----------
Consolidated assets.............................. $1,137,319 $1,354,764 $1,365,840
========== ========== ==========
</Table>

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 2001, 2000
and 1999 the Company did not have sales to any one customer in excess of 10% of
consolidated revenues. Export sales, excluding those to the Company's
international operations, aggregated $143.4 million in 2001, $182.8 million in
2000 and, $153.9 million in 1999. 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.

33
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's foreign operations primarily consist of manufacturing
operations in Ireland, England, Brazil and Colombia. Net sales, pre-tax
operating income and total assets of the Company's foreign and domestic
operations are as follows:

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)

Foreign operations:
Net sales...................................... $190,763 $ 182,326 $ 141,310
Pre-tax income (loss).......................... (28,430) (4,456) 6,804
Total assets........................... 160,190 193,746 174,146
Domestic operations:
Net sales...................................... $940,394 $1,109,109 $1,120,968
Pre-tax income (loss).......................... (27,842) 60,164 80,592
Total assets........................... 977,129 1,161,018 1,191,694
</Table>

10. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company conducts its business in various foreign currencies. As a
result, it is subject to the transaction exposure that arises from foreign
exchange rate movements between the dates that foreign currency transactions are
recorded (export sales and purchases commitments) and the dates they are
consummated (cash receipts and cash disbursements in foreign currencies). The
Company utilizes some natural hedging to mitigate these transaction exposures.
The Company also enters into foreign currency forward contracts for the purchase
and sale of European, 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
products into export markets. Counter-parties for these instruments are major
financial institutions.

34
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to market with offsetting gain and losses. The latest maturity for all
outstanding purchase and sales foreign currency forward contracts are October
15, 2001 and March 21, 2002, respectively.

The dollar equivalent of these forward currency contracts and their related
fair values are detailed below:

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)

Foreign currency purchase contracts:
Notional amount................................ $14,400 $49,343 $ 2,842
Fair value..................................... 12,439 46,760 3,250
------- ------- -------
Net (gain) loss........................ $ 1,961 $ 2,583 $ (408)
======= ======= =======
Foreign currency sales contracts:
Notional amount................................ $28,820 $26,303 $28,024
Fair value..................................... 29,369 26,474 27,826
------- ------- -------
Net (gain) loss........................ $ 549 $ 171 $ (198)
======= ======= =======
</Table>

For the fiscal year ended June 24, 2001, the total impact of foreign
currency related items on the Consolidated Statements of Operations, including
transaction that were hedged and those that were not hedged, was a pre-tax loss
of $9.5 million.

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 payables. The
carrying amounts approximate fair value because of the short maturity of these
instruments.

Long-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 Footnote 4 "Long-Term Debt and Other Liabilities").

Foreign currency contracts. The fair value is based on quotes obtained
from brokers or reference to publicly available market information.

11. INVESTMENT IN UNCONSOLIDATED AFFILIATES

On September 13, 2000, the Company and SANS Fibres of South Africa formed a
50/50 joint venture (UNIFI-SANS Technical Fibers, LLC or UNIFI-SANS) to produce
low-shrinkage high tenacity nylon 6.6 light denier industrial (LDI) yarns in
North Carolina. Sales from this entity are expected to be primarily to customers
in the NAFTA and CBI markets. UNIFI-SANS will also incorporate the two-stage
light denier industrial nylon yarn business of Solutia, Inc. which was purchased
by SANS Fibres. Solutia will exit the two-stage light denier industrial yarn
business transitioning production from its Greenwood, SC site to the UNIFI-SANS
Stoneville, North Carolina facility, a former Unifi manufacturing location. The
Unifi-Sans facility is scheduled to begin production in November 2001. Until
such time, UNIFI-SANS will continue to purchase yarn from Solutia to meet market
demand. Unifi will manage the day-to-day production and shipping of the LDI
produced in North Carolina and SANS Fibres will handle technical support and
sales. Annual LDI production capacity from the joint venture is estimated to be
approximately 9.6 million pounds.

On September 27, 2000, Unifi and Nilit Ltd., located in Israel, formed a
50/50 joint venture to be called U.N.F. Industries Ltd. (U.N.F.). The joint
venture will produce approximately 25.0 million pounds of nylon POY at Nilit's
manufacturing facility in Migdal Ha - Emek, Israel. Production and shipping of
POY from this facility began in March 2001. The nylon POY will be utilized in
the Company's nylon texturing and covering operations.

35
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In addition, the Company continues to maintain a 34% interest in Parkdale
America, LLC (the "LLC") and has reduced its equity interest in Micell
Technologies Inc. ("Micell") from 45.27% to 32.71% during the current year.

Condensed balance sheet and income statement information of the combined
unconsolidated equity affiliates as of and for the twelve-month periods ended
June 24, 2001, June 25, 2000 and June 27, 1999 are as follows:

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)

Current assets................................... $258,679 $223,068 $282,004
Noncurrent assets................................ 216,760 234,093 256,513
Current liabilities.............................. 145,963 37,632 125,730
Shareholders' equity and capital accounts........ 294,411 398,113 390,935
Net sales........................................ $493,012 $507,950 $594,445
Gross profit..................................... 27,229 33,524 57,915
Income from operations........................... 4,224 988 27,653
Net income....................................... 6,642 2,453 21,262
</Table>

UNIFI-SANS and the LLC are organized as partnerships for U.S. tax purposes.
Taxable income is passed through UNIFI-SANS and the LLC to the members in
accordance with the Operating Agreements of UNIFI-SANS and the LLC. For the
fiscal years ended June 24, 2001, June 25, 2000 and June 27, 1999, distributions
received by the Company from the LLC amounted to $51.9 million, $3.2 million and
$9.5 million, respectively. Included in the above net sales amount for the June
24, 2001 period are sales to Unifi of approximately $12.5 million. This amount
represents sales of nylon POY from U.N.F. for use in the production of nylon
textured yarn in the ordinary course of business.

12. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is summarized below:

<Table>
<Caption>
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)

Cash payments for:
Interest, net of amounts capitalized........... $28,362 $28,978 $25,396
Income taxes, net of refunds................... 1,392 9,315 8,225
</Table>

13. MINORITY INTEREST

Effective May 29, 1998, the Company formed Unifi Textured Polyester, LLC
(UTP)with Burlington Industries, Inc. ("Burlington") to manufacture and market
natural textured polyester yarns. The Company has an 85.42% interest in UTP and
Burlington has 14.58%. For the first five years, Burlington is entitled to the
first $9.4 million of earnings and the first $12.0 million of excess cash flow
of the business. Subsequent to this five-year period, earnings and cash flows
are to be allocated based on ownership percentages. UTP's assets, liabilities
and earnings are consolidated with those of the Company and Burlington's
interest in the UTP is included in the Company's financial statements as
minority interest. Minority interest for Burlington's share of UTP in fiscal
2001, 2000 and 1999 amounted to $3.0 million, $9.4 million and $9.4 million,
respectively.

14. EARLY RETIREMENT AND TERMINATION CHARGE

During 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 for

36
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

severance expected to be spread over a period not to exceed three years. At June
24, 2001, a reserve of $5.6 million remained on the Consolidated Balance Sheets
that is expected to equal the future cash expenditures to such terminated
employees.

15. CONSOLIDATION AND COST REDUCTION EFFORTS

The charge for impairment and other write down of assets includes $18.6
million for the write down of duplicate or less efficient property, plant and
equipment to their fair value less disposal cost and the write down of certain
non-core assets which are held for sale. It is anticipated that the remaining
non-core assets and business will be sold prior to the end of calendar 2001.
Additionally, an impairment charge of $5.9 million was recorded for the write
down to fair value of assets, primarily goodwill, associated with the European
polyester dyed yarn operation and Colombian nylon covering operation as the
undiscounted cash flows of the business were not sufficient to cover the
carrying value of these assets. These reviews were prompted by ongoing excess
manufacturing capacity issues. Run-out expenses related to the consolidation and
closing of the affected operations, including equipment relocation and other
costs associated with necessary ongoing plant maintenance expenses, were charged
to operations as incurred and were substantially completed by the end of the
current fiscal year.

The table below summarizes the employee severance portion of the
consolidation and cost reduction charge, the amounts paid and the accrual
balance as of June 24, 2001:

<Table>

Total charges............................................... $ 7,753
Cash payments............................................... (3,547)
Change in estimate.......................................... (209)
-------
Balance at June 24, 2001.................................... $ 3,997
=======
</Table>

Substantially all costs other than severance associated with the
consolidation and cost reduction charges are non cash.

16. ALLIANCE PLANT CLOSURE COSTS

In the fourth quarter of the current fiscal year, the Company recorded its
share of the anticipated costs of closing DuPont's Cape Fear, North Carolina
facility. The charge totaled $15.0 million and represents 50% of the severance
and dismantlement cost of closing this plant. The Cape Fear plant produced
polyester POY and was one of two DuPont facilities involved in the Alliance
further discussed in Footnote 2 "Acquisitions, Alliances and Divestures."
Payments for this obligation are to be made over the eighteen-month period

37
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

commencing July 2001 and ending December 2002. This obligation is included in
accrued liabilities on the Consolidated Balance Sheets.

17. QUARTERLY RESULTS (UNAUDITED)

Quarterly financial data for the years ended June 25, 2000, and June 24,
2001, is presented below:

<Table>
<Caption>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
(13 WEEKS) (13 WEEKS) (13 WEEKS) (13 WEEKS)
------------- -------------- ------------- --------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

2000:
Net sales................................. $306,974 $320,207 $322,096 $342,158
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
2001:
Net sales................................. $319,163 $299,143 $255,223 $257,628
Gross profit.............................. 37,660 28,040 15,975 15,438
Net income (loss)......................... 2,883 (3,428) (28,548) (15,581)
Earnings (loss) per share (basic)......... .05 (.06) (.53) (.29)
Earnings (loss) per share (diluted)....... .05 (.06) (.53) (.29)
</Table>

Net sales for the first quarter of fiscal year 2001 have been reclassified
to conform with the presentation for the second, third and fourth quarters. Net
sales for all quarters presented reflect the reclassification of freight expense
from net sales into cost of sales.

38
39

ITEM 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.

39
40

PART III

ITEM 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 2 and ending on Page 6 and on page 15 of the definitive proxy
statement filed with the Commission since the close of the Registrant's fiscal
year ended June 24, 2001, and within 120 days after the close of said fiscal
year, are incorporated herein by reference.

(b) Identification of Executive Officers:

PRESIDENT AND CHIEF EXECUTIVE OFFICER

Brian R. Parke. Mr. Parke is 53 and had 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

Willis C. Moore, III. Mr. Moore is 48 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. Additionally,
Mr. Moore continues to serve as the Company's Chief Financial Officer.

G. Alfred Webster. Mr. Webster is 53 and has been a Vice President or
Executive Vice President of the Company since 1979. He has been a member of the
Board of Directors since 1986.

SENIOR VICE PRESIDENTS

Thomas H. Caudle. Mr. Caudle is 50 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 45 and has been an employee of the
Company since January 2000, when he joined the Company as Senior Vice President
of Marketing. Prior to coming to the Company, Mr. Delaney was Vice President of
Marketing with Volvo Truck N.A. from July 1997 through December 1999, Vice
President of Marketing with GE Capital Transport International Pool from
December 1995 through July 1997 and Vice President of TIP Intermodel Services
from December 1993 through December 1995.

Stewart Q. Little. Mr. Little is 48 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 Customer Development.

Ottis "Lee" Gordon. Mr. Gordon is 55 and has been an employee of the
Company since the merger with Macfield, Inc. 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 Senior Vice President of Product Development.

40
41

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 26, 2001. 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.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth under the headings "Compensation Committees
Interlocks and Insider Participation in Compensation Decisions", "Report of the
Compensation Committee on Executive Compensation", "Executive Officers and their
Compensation", "Option Grants in Fiscal Year 2001", "Option Exercises and
Option/SAR Values", "Employment and Termination Agreements", and the
"Performance Graph-Shareholder Return on Common Stock" beginning on Page 7 and
ending on Page 14 of the Company's definitive proxy statement filed with the
Commission since the close of the Registrant's fiscal year ended June 24, 2001,
and within 120 days after the close of said fiscal year, are incorporated herein
by reference.

For additional information regarding executive compensation reference is
made to Exhibits (10i), (10m) and (10n) of this Form 10-K.

ITEM 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 Page 2 of the definitive proxy statement and under the heading
"Security Holding of Directors, Nominees and Executive Officers" on Page 5 and
Page 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
24, 2001, which are hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information included under the heading "Compensation Committee
Interlocks and Insider Participation In Compensation Decisions", on Page 7 of
the definitive proxy statement filed with the Commission since the close of the
Registrant's fiscal year ended June 24, 2001, and within 120 days after the
close of said fiscal year, is incorporated herein by reference.

41
42

PART IV

ITEM 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.

<Table>
<Caption>
PAGES
-----

Report of Independent Auditors.............................. 18
Consolidated Balance Sheets at June 24, 2001 and June 25,
2000...................................................... 19
Consolidated Statements of Operations for the Years Ended
June 24, 2001, June 25, 2000, and June 27, 1999........... 20
Consolidated Statements of Changes in Shareholders' Equity
and Comprehensive Income (Loss) for the Years Ended June
24, 2001, June 25, 2000 and June 27, 1999................. 21
Consolidated Statements of Cash Flows for the Years Ended
June 24, 2001, June 25, 2000 and June 27, 1999............ 22
Notes to Consolidated Financial Statements.................. 23
2. Financial Statement Schedules
Schedules for the three years ended June 24, 2001:
II -- Valuation and Qualifying Accounts................ 46
</Table>

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 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 statements being filed, in the aggregate, do not have
minority equity interest and/or indebtedness to any person other than the
Registrant 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.

With the exception of the information herein expressly incorporated by
reference, the 2001 Proxy Statement is not deemed filed as a part of this Annual
Report on Form 10-K.

42
43

3. Exhibits

<Table>
<Caption>
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 as Exhibit 3(a) with the Company's
Form 10-K for the fiscal year ended June 25, 2000), which is
incorporated herein by reference.
(3b) -- Restated by-laws of Unifi, Inc., effective August 31, 2001,
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.
(10c) -- *Unifi, Inc. 1992 Incentive Stock Option Plan, effective
July 16, 1992, (filed as Exhibit 10(c) 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), 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 10(h) with the Company's
Form 10-K for the fiscal year ended June 25, 2000) which is
incorporated herein by reference.
(10i) -- *Employment Agreement between Unifi, Inc. and G. Allen
Mebane, dated July 19, 1990 (filed as Exhibit 10(i) with the
Company's Form 10-K for the fiscal year ended June 25, 2000)
which is incorporated herein by reference.
</Table>

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44

<Table>
<Caption>
EXHIBIT
NO. DESCRIPTION
------- -----------

(10j) -- Credit Agreement, dated December 20, 2000, by and between
Unifi, Inc. and The Several Lenders from Time to Time Party
thereto and Bank of America, N.A. as Administrative Agent,
Wachovia Bank, N.A. as Syndication Agent, Credit Suisse
First Boston as Documentation Agent and Banc America
Securities LLC as Lead Arranger and Book Manager (the
"Credit Agreement"), filed herewith.
(10k) -- First Amendment To Credit Agreement and Waiver dated August
14, 2001, filed herewith.
(10l) -- Receivables Purchase Agreement, dated December 19, 2000,
among Unifi Receivables, LLC, as Seller, Unifi, Inc., as
Initial Servicer, Blue Ridge Asset Funding Corporation and
Wachovia Bank, N.A., as Agent, filed herewith.
(10m) -- *Change of Control Agreement between Unifi, Inc. and G.
Alfred Webster, dated October 26, 2000, expiring November 1,
2005, filed herewith.
(10n) -- *Agreement, effective February 1, 1999, by and between
Unifi, Inc. and Jerry W. Eller, (filed as Exhibit 10(s) with
the Company's Form 10-K for the fiscal year ended June 27,
1999) which is incorporated herein by reference.
(10o) -- *1999 Unifi, Inc. Long-Term Incentive Plan, (filed as
Exhibit 99.1 to the Registration Statement on Form S-8,
(Registration No. 333-48158), which is incorporated herein
by reference.
(10p) -- Master Agreement POY Manufacturing Alliance between Unifi,
Inc. and E.I. du Pont de Nemours and Company, dated June 1,
2000 (filed as Exhibit 10(o) with the Company's Form 10-K
for the fiscal year ended June 25, 2000) which is
incorporated herein by reference.
(21) -- Subsidiaries of Unifi, Inc.
(23) -- Consent of Ernst & Young LLP.
(b) -- Reports on Form 8-K. None
</Table>

---------------

* NOTE: These Exhibits are management contracts or compensatory plans or
arrangements required to be filed as an exhibit to this Form 10-K pursuant to
Item 14(c) of this report.

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45

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.

September 21, 2001 By: /s/ BRIAN R. PARKE
------------------------------------
Brian R. Parke
Chief Executive Officer

September 21, 2001 By: /s/ WILLIS C. MOORE, III
------------------------------------
Willis C. Moore, III
Executive Vice President
(Chief Financial Officer)

September 21, 2001 By: /s/ EDWARD A. IMBROGNO
------------------------------------
Edward A. Imbrogno
Chief Accounting Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----

/s/ BRIAN R. PARKE President, Chief Executive September 21, 2001
--------------------------------------------------- Officer
Brian R. Parke and Director

/s/ G. ALFRED WEBSTER Executive Vice President and September 21, 2001
--------------------------------------------------- Director
G. Alfred Webster

/s/ WILLIAM J. ARMFIELD, IV Director September 21, 2001
---------------------------------------------------
William J. Armfield, IV

Director September 21, 2001
---------------------------------------------------
R. Wiley Bourne, Jr.

/s/ CHARLES R. CARTER Director September 21, 2001
---------------------------------------------------
Charles R. Carter

/s/ SUE W. COLE Director September 21, 2001
---------------------------------------------------
Sue W. Cole

/s/ J.B. DAVIS Director September 21, 2001
---------------------------------------------------
J.B. Davis

/s/ RICHARD GREENBURY Director September 21, 2001
---------------------------------------------------
Sir Richard Greenbury

Director September 21, 2001
---------------------------------------------------
Kenneth G. Langone

/s/ DONALD F. ORR Director September 21, 2001
---------------------------------------------------
Donald F. Orr

/s/ ROBERT A. WARD Director September 21, 2001
---------------------------------------------------
Robert A. Ward
</Table>

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46

(27)

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

<Table>
<Caption>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
------------------------------------------ ---------- ------------------------------ ------------- ---------
ADDITIONS
------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER ACCOUNTS -- DEDUCTIONS -- AT END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ---------- ---------- ----------------- ------------- ---------
(AMOUNTS IN THOUSANDS)

Allowance for doubtful accounts(a):
Year ended June 24, 2001................ $17,209 14,985 47(b) (22,352)(c) $ 9,889
Year ended June 25, 2000................ 8,749 14,866 225(b) (6,631)(c) 17,209
Year ended June 27, 1999................ 8,225 6,241 240(b) (5,957)(c) 8,749
</Table>

---------------

(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 conditions.
(b) May include acquisition related adjustments and/or 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.