FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 27, 1994
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-10542
UNIFI, INC.
(Exact name of registrant as specified its charter)
New York 11-2165495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 19109 - 7201 West Friendly Road
Greensboro, NC 27419
(Address of principal executive offices) (Zip Code)
(910) 294-4410
(Registrant's telephone number, including area code)
Same
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at March 27, 1994
Common Stock, par value $.10 per share 70,491,722 Shares
UNIFI, INC.
Consolidated Condensed Balance Sheets
Mar 27, 1994 Jun 27, 1993
(Unaudited) (Audited)
ASSETS (Amounts in Thousands)
Current Assets:
Cash and Cash Equivalents $54,013 $76,093
Short-Term Investments $77,833 $119,848
Accounts Receivable, Net $190,273 $200,678
Inventories:
Raw Material/Supplies $40,648 $41,498
Work in Process 12,954 13,181
Finished Goods 53,455 50,295
$107,057 $104,974
Prepaid Expenses/Deposits $5,003 $3,321
Total Current Assets $434,179 $504,914
Property, Plant and Equipment, Net 515,519 468,291
Investments in Affiliates 10,413 11,040
Other Assets 32,016 33,204
Total Assets 992,127 1,017,449
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable 3,797 4,664
Accounts Payable 78,266 121,492
Accrued Expenses 51,560 45,179
Income Taxes 9,844 13,364
Total Current Liabilities 143,467 184,699
Long-Term Debt 230,000 250,241
Deferred Income Taxes 30,913 36,956
Shareholders' Equity
Common Stock 7,049 7,034
Capital in Excess of Par 201,615 196,133
Retained Earnings 385,763 348,821
Cumulative Translation Adjustment (5,849) (5,515)
Reserve for Investments (831) (920)
Total Shareholders' Equity 587,747 545,553
Total Liabilities and Shareholders' Equity 992,127 1,017,449
See Accompanying Notes to Consolidated Condensed Financial Statements
Consolidated Condensed Statements of Income
(Unaudited)
For the Quarter Ended For the Nine Months Ended
Mar 27, Mar 28, Mar 27, Mar 28,
1994 1993 1994 1993
(13 Weeks) (13 Weeks) (39 Weeks) (39 Weeks)
(Amounts in Thousands Except Per Share Data)
Net Sales $346,059 $361,995 $1,022,930 $1,043,369
Cost and Expenses:
Cost of Goods Sold $295,470 $291,674 $874,052 $847,849
Selling, General &
Administrative Expense 10,661 9,103 30,419 28,130
Interest Expense 4,432 5,645 13,711 19,976
Interest (Income) (1,029) (2,373) (5,749) (9,848)
Other (Income) Expense (1,358) (3,737) (1,422) (4,275)
308,176 300,312 911,011 881,832
Income Before Income Taxes 37,883 61,683 111,919 161,537
Provision for Income Taxes 15,129 23,414 44,992 60,683
Net Income 22,754 38,269 66,927 100,854
Per Share Data:
Primary 0.32 0.54 0.94 1.43
Fully Diluted 0.32 0.51 0.93 1.37
Cash Dividends Per Share 0.14 0.11 0.42 0.31
Average Shares Outstanding:
Primary 71,027 70,922 71,048 70,684
Fully Diluted 78,780 78,707 78,810 78,471
See Accompanying Notes to Consolidated Condensed Financial Statements
UNIFI, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
Mar. 27, Mar. 28,
1994 1993
(Amounts in Thousands)
Cash Provided by Operating Activities $81,645 $128,052
Investing Activities:
Capital Expenditures $(98,994) $(108,491)
Sale of Capital Assets 3,061 122
Purchase of Investments (62) (69,372)
Sale of Investments 43,015 15,904
$(53,944) $(161,837)
Financing Activities:
Issuance of Common Stock $499 $(43)
Borrowing of Debt 7,453 22,997
Repayment of Debt (28,545) (1,507)
Cash Dividend (29,198) (18,475)
$(49,791) $2,972
Currency Translation Adjustment $10 $(1,545)
Increase (Decrease) in Cash $(22,080) $(32,358)
Cash and Cash Equivalents - Beginning 76,093 139,047
Cash and Cash Equivalents - Ending $54,013 $106,689
See Accompanying Notes to Consolidated Condensed Financial Statements
UNIFI, INC.
Notes to Consolidated Condensed Financial Statements
The information furnished is unaudited and reflects all adjustments which
are, in the opinion of Management, necessary to present fairly the financial
position at March 27, 1994 and the results of operations and cash flows for
the periods ended March 27, 1994 and March 28, 1993. Such adjustments
consisted of normal recurring items. The Company has reclassified certain
prior year information to conform with the current year presentation.
Interim results are not necessarily indicative of results for a full year.
It is suggested that the condensed financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's latest annual report on Form 10-K.
Income Taxes
Deferred income taxes arise primarily from timing differences between
financial and tax reporting associated with depreciable assets.
The difference between the statutory federal income tax rate and the
effective tax rate is primarily due to the results of foreign subsidiaries
that are taxed at rates below those of U.S. operations. The current periods
were not significantly impacted by foreign operations; therefore, the current
periods' rates approach the statutory rate. Foreign earnings were more
significant last year and helped to lower the effective rate.
The increase in the statutory rate from 34% to 35%, such change being
retroactive to January 1, 1993, has been provided for in the current periods
and was not material to the results of the periods.
Per Share Information
Earnings per common share are computed on the basis of the number of shares
outstanding, adjusted for the dilutive effect of stock options outstanding.
The Convertible Notes do not meet the test of a common stock equivalent,
accordingly, conversion of these notes is only assumed for the calculation of
the fully diluted earnings per share.
Computation of the average shares outstanding (in 000's):
Quarters Ended Nine Months Ended
Mar. 27, Mar. 28, Mar. 27, Mar. 28,
1994 1993 1994 1993
Average Shares Outstanding 70,482 69,953 70,419 69,694
Add: Dilutive Options 545 969 629 990
Primary Average Shares 71,027 70,922 71,048 70,684
Incremental Shares Arising from
Full Dilution Assumption 7,753 7,785 7,762 7,787
Average Shares Assuming
Full Dilution 78,780 78,707 78,810 78,471
Computation of net income for per share data (in 000's):
Quarters Ended Nine Months Ended
Mar. 27, Mar. 28, Mar. 27, Mar. 28,
1994 1993 1994 1993
Net Income - Primary $22,754 $38,269 $66,927 $100,854
Add: Convertible Subordinated
Interest Net of Tax 2,111 2,205 6,332 6,518
Net Income Assuming Full
Dilution $24,865 $40,474 $73,259 $107,372
Common Stock
On April 28, 1994, the Company's Board of Directors declared a cash dividend
of 14 cents per share payable to shareholders of record on May 12, 1994,
payable on May 19, 1994.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is Management's discussion and analysis of certain significant
factors which have affected the Company's operations and material changes in
financial condition during the periods included in the accompanying
consolidated condensed financial statements.
Results of Operations
Net sales decreased from $362.0 million to $346.1 million in the quarter or
4.4 percent and decreased in the nine month period from $1.043 billion in
1993 to $1.023 billion in 1994 or 2.0 percent. We experienced volume
increases of 2.8 percent for the quarter and 3.6 percent for the year-to-date
period over the prior year periods. Our average net sales price, based on
the overall product mix, decreased 7.0 percent in the current quarter and
decreased 5.3 percent for the current nine month period.
In the quarter, unit volume was strong in our domestic polyester business and
improved in our spun yarn business. Demand from the automotive, home
upholstery and export markets led the way for our polyester business, while a
recovery in the fleece, tee shirt and women's apparel markets firmed up
orders for our spun yarn products. However, margins in the spun yarn area
remain down from year-ago levels due to escalating raw material prices and
erratic retail demand.
Sales of our nylon and covered yarn products to the ladies' hosiery market
were not as strong as in the previous quarter. Sales at the retail level
have been down and adjustments in running schedules were made accordingly.
Sales of nylon and covered yarns into the sock and apparel areas remained
steady and we look for improvement in the next quarter.
The business environment in Europe is improving slowly and we continue to
make progress in the areas of quality, product differentiation, and market
position. Polyester operations ran at capacity in the quarter.
Cost of sales increased from $291.7 million in last year's third quarter to
$295.5 million in this year's quarter or 1.3 percent. The nine month period
increased from $847.8 million to $874.1 million or 3.1 percent. Cost of
sales, as a percentage of net sales, increased from 80.6 percent last year to
85.4 percent during the quarter. For the nine months, cost of sales climbed
from 81.3 percent to 85.4 percent of net sales.
Based on our average product mix, raw material prices decreased in both the
current periods; however, the declines were not sufficient to offset the
decreases mentioned above involving net sales prices. Manufacturing costs
were unchanged in the current quarter. Fixed manufacturing costs increased
slightly in the current nine month period as a result of capacity additions
and upgrades in many of our divisions. These capacity improvements
contributed to the sales volume increases previously mentioned.
Selling, general and administrative expenses as a percentage of net sales
increased from 2.5 percent to 3.1 percent in the current quarter. For the
nine month periods we experienced an increase from 2.7 percent in 1993 to 3.0
percent in 1994. During the quarter actual expense increased from $9.1
million to $10.7 million. For the nine month period expense increased from
$28.1 million in 1993 to $30.4 million in 1994. The growth in expenditures
was due to the volume increases previously mentioned and the current period's
consolidation of administrative functions resulting from earlier mergers.
S,G&A expenses, when expressed as a percentage of net sales, also increased
due to the current periods having fewer net sales dollars even though we
experienced increases in sales volume.
Interest expense decreased from $5.6 million in the 1993 quarter to $4.4
million in the current quarter. The same holds true for the nine month
periods as interest expense decreased from $20.0 million to $13.7 million in
the current period. The Company has used cash reserves generated from
operations and the issuance of the subordinated debentures in prior periods
to eliminate the debt of merged companies and thereby lower the overall
interest costs of the consolidated group. As these reserves have decreased
for the payment of debt, our investment base has also declined. As a result,
interest income has decreased from $2.4 million in last year's third quarter
to $1.0 million in the current quarter. For the nine month period, interest
income has declined from $9.8 million to $5.7 million in the current period
Other (income) expense represents income in all periods presented. Other
income decreased from $3.7 million to $1.4 million or $2.3 million during the
current quarter and decreased from $4.3 million to $1.4 million or $2.9
million during the current nine month period. Last year's periods included a
pretax gain of approximately $4.0 million on the sale of an affiliate. The
current periods amounts include gains on sale of property and equipment and a
gain reported by a 45 percent owned affiliate from the disposal of an
investment.
Our effective tax rate was 39.94% in the current quarter as compared with
37.96% in the prior quarter. For the year-to-date periods, the rate was
40.20% and 37.57% in 1994 and 1993, respectively. The higher rates of the
current periods are due to taxable earnings of foreign subsidiaries
comprising a smaller percentage of total consolidated pretax income in the
current periods. Foreign earnings are normally taxed at rates lower than US
rates. The current periods also reflect the higher US statutory rate that
became effective in the current year.
Earnings per share decreased from $.54 per share to $.32 per share in the
current quarter and decreased from $1.43 per share to $.94 for the current
nine month period.
Financial Condition
We ended the current quarter with working capital of $290.7 million of which
$131.8 million represents cash and short-term investments. This compares
with working capital of $320.2 million and cash reserves of $195.9 million at
year end. Net receivables and net payables decreased due to seasonal and
timing differences between the Company's June year end and the March quarter
end.
The primary sources of cash funds continue to be operations and the Company's
access to debt and equity markets. The primary uses of funds during the
current nine months were capital expenditures for the previously mentioned
capacity expansions and upgrades totaling $99.0 million, the reduction of net
long-term debt by $21.1 million and the payment of the Company's cash
dividends of $29.2 million. During this time period the Company generated
$43.0 million from the sale of short-term investments to supplement cash
generated from operations to cover the aforementioned cash outlays.
Management believes the current financial position of the Company in
connection with its operations and its access to debt and equity markets are
sufficient to meet its anticipated capital expenditure, strategic acquisition
and working capital needs.
Total shareholders' equity increased from $545.6 million at year end to
$587.7 million at quarterend. Net book value per share was $8.34 at March
27, 1994.
UNIFI, INC.
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K have been filed during the quarter ended
March 27, 1994.
UNIFI, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIFI, INC.
Date: ROBERT A. WARD
Robert A. Ward
Executive Vice President-
Financial and Administration (Mr.
Ward is the Principal Financial
and Accounting Officer and has
been duly authorized to sign on
behalf of the Registrant.)
Date: GREGG H. LOWE
Gregg H. Lowe
Vice President and
Corporate Controller
