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 December 27, 1998
[] 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 Avenue
Greensboro, NC 27419
(Address of principal executive offices) (Zip Code)
(336) 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 January 31, 1999
Common Stock, par value $.10 per share 60,226,986 Shares
<PAGE>
Part I. Financial Information
UNIFI, INC.
Condensed Consolidated Balance Sheets
December 27, June 28,
1998 1998
(Unaudited) (Note)
(Amounts in Thousands)
ASSETS:
Current assets:
Cash and cash equivalents $37,361 $8,372
Receivables 173,869 222,310
Inventories:
Raw materials and supplies 46,645 45,044
Work in process 12,008 14,800
Finished goods 76,785 77,357
Other current assets 1,496 1,308
Total current assets 348,164 369,191
Property, plant and equipment 1,200,068 1,145,622
Less: accumulated depreciation 519,084 497,042
680,984 648,580
Equity investments in unconsolidated
affiliates 214,881 212,448
Other noncurrent assets 99,261 108,585
Total assets $1,343,290 $1,338,804
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $77,780 $93,922
Accrued expenses 34,014 43,939
Income taxes payable 14,777 5,218
Current maturities of long-term debt
and other current liabilities 16,231 16,234
Total current liabilities 142,802 159,313
Long-term debt and other liabilities 454,865 463,967
Deferred income taxes 69,025 62,970
Minority interests 18,293 16,357
Shareholders' equity:
Common stock 6,051 6,163
Capital in excess of par value - 22,454
Retained earnings 657,248 618,128
Accumulated other comprehensive loss (4,994) (10,548)
Total shareholders' equity 658,305 636,197
Total liabilities and shareholders'
equity $1,343,290 $1,338,804
Note: The balance sheet at June 28, 1998, has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See Accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
UNIFI, INC.
Condensed Consolidated Statement of Income
(Unaudited)
(Amounts in Thousands Except Per Share Data)
For the Quarters Ended For the Six Months Ended
Dec. 27, Dec. 28, Dec. 27, Dec. 28,
1998 1997 1998 1997
Net sales $319,854 $343,096 $648,669 $672,938
Cost of goods sold 269,394 284,091 550,732 564,415
Selling, general &
admin. expense 11,419 10,595 22,982 20,490
Operating income 39,041 48,410 74,955 88,033
Interest expense 6,553 3,285 13,139 6,556
Interest income 716 414 1,192 872
Other (income) expense 741 549 1,292 259
Equity in earnings of
unconsolidated affiliates 2,545 4,516 6,639 9,137
Minority interests 2,450 - 4,800 -
Income before income taxes 32,558 49,506 63,555 91,227
Provision for income taxes 10,060 16,487 20,027 30,683
Income before cumulative
effect of accounting change 22,498 33,019 43,528 60,544
Cumulative effect of
accounting change, net of
tax - 4,636 2,768 4,636
Net income $22,498 $28,383 $40,760 $55,908
Earnings per common share:
Income before cumulative
effect of accounting change $.37 $.54 $.71 $.99
Cumulative effect of
accounting change, net of
tax - .08 .04 .07
Net income per common share $.37 $.46 $.67 $.92
Earnings per common share -
assuming dilution:
Income before cumulative
effect of accounting
change $.37 $.54 $.71 $.98
Cumulative effect of
accounting change, net of
tax - .08 .04 .07
Net income per common share -
assuming dilution $.37 $.46 $.67 $.91
Cash dividends per share $ - $.14 $ - $.28
See Accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
UNIFI, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
December 27, December 28,
1998 1997
(Amounts in Thousands)
Cash and cash equivalents provided by
operating activities $130,204 $60,667
Investing activities:
Capital expenditures (74,431) (136,370)
Acquisitions - (25,644)
Investments in unconsolidated equity
affiliates (10,000) (35,152)
Sale of capital assets 456 731
Other 1,059 (2,605)
Net investing activities (82,916) (199,040)
Financing activities:
Borrowing of long-term debt 33,357 180,000
Repayment of long-term debt (25,119) (10,120)
Issuance of Company common stock 641 191
Stock option tax benefit _ 1,443
Purchase and retirement of Company
common stock (24,847) (24,187)
Cash dividends paid - (17,070)
Distributions to minority interest
shareholders (3,000) -
Other 393 (27)
Net financing activities (18,575) 134,230
Currency translation adjustment 276 (298)
Net increase (decrease) in cash and cash
equivalents 28,989 (4,441)
Cash and cash equivalents - beginning 8,372 9,514
Cash and cash equivalents - ending $37,361 $5,073
See Accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
UNIFI, INC.
Notes to Condensed Consolidated Financial Statements
(a)Basis of Presentation
The information furnished is unaudited and reflects all adjustments which
are,in the opinion of management, necessary to present fairly the financial
position at December 27, 1998, and the results of operations and cash flows
for the periods ended December 27, 1998, and December 28, 1997. Such
adjustments consisted of normal recurring items in the current year except
for the cumulative effect of accounting change recorded in the first fiscal
quarter as described further in Note (e). Interim results are not
necessarily indicative of results for a full year. It is suggested that the
condensed consolidated 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. The Company has reclassified the presentation
of certain prior year information to conform with the current presentation
format.
(b)Income Taxes
Deferred income taxes have been provided for the temporary differences
between financial statement carrying amounts and tax basis of existing
assets and liabilities.
The difference between the statutory federal income tax rate and the
effective tax rate is primarily due to the realization of state and federal
tax credits and the results of foreign subsidiaries which are taxed at rates
below those of U.S. operations.
(c)Earnings per share
The following table sets forth the reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations
(amounts in thousands):
For the Quarters Ended For the Six Months Ended
Dec. 27, Dec. 28, Dec. 27, Dec. 28,
1998 1997 1998 1997
Numerator:
Income before
cumulative effect
of accounting
change $22,498 $33,019 $43,528 $60,544
Cumulative effect of
accounting change, net
net of tax - 4,636 2,768 4,636
Net income $22,498 $28,383 $40,760 $55,908
<PAGE>
For the Quarters Ended For the Six Months Ended
Dec. 27, Dec. 28, Dec. 27, Dec. 28,
1998 1997 1998 1997
Denominator:
Denominator for basic
earnings per share -
weighted average
shares 60,935 61,106 61,168 61,058
Effect of dilutive
securities:
Stock options - 589 3 639
Dilutive potential common
shares Denominator for
diluted earnings per
share-adjusted weighted
average shares and
assumed conversions 60,935 61,695 61,171 61,697
(d)Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," (SFAS 130) which the Company adopted
in the first quarter of fiscal 1999. This Statement has no impact on the
Company's net income or shareholders' equity. SFAS 130 requires the reporting
of comprehensive income and its components in complete general purpose
financial statements as well as requires certain interim comprehensive income
information be disclosed. Comprehensive income represents the change in net
assets of a business during a period from non-owner sources. Such non-owner
changes in net assets that are not included in net income include, among
others, foreign currency translation adjustments, unrealized gains and losses
on available-for-sale securities and certain minimum pension liabilities.
Prior year statements have been reclassified to conform to SFAS 130.
Comprehensive loss amounted to $(0.7) million for both the second quarter of
fiscal 1999 and 1998, and was comprised of foreign currency translation
adjustments. For the respective year-to-date periods, comprehensive income
(loss) totaled $5.5 million and $(3.6) million and was comprised of foreign
currency translation adjustments. The Company does not provide income taxes
on the impact of currency translations as earnings from foreign subsidiaries
are deemed to be permanently invested.
(e)Cumulative Effect of Accounting Change
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities," (SOP 98-5) which requires start-up costs, as defined, to be
expensed as incurred. In accordance with this SOP, any previously
capitalized start-up costs are required to be written-off as a cumulative
effect of a change in accounting principle. The Company, upon adoption of
this SOP in the first quarter of fiscal 1999, has written 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.
<PAGE>
(f)Recent Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
(SFAS 131) which is required to be adopted in the fourth quarter of fiscal
1999. SFAS 131 establishes standards for public companies for the reporting
of financial information from operating segments in annual and interim
financial statements as well as establishes standards for related disclosures
about products and services, geographic areas and major customers. Operating
segments are defined in SFAS 131 as components of an enterprise about which
separate financial information is available to the chief operating decision
maker for purposes of assessing performance and allocating resources. The
Company has not completed its analysis of the effect that the adoption of
this standard will have on its financial statement disclosure; however, the
adoption of SFAS 131 will not affect consolidated results of operations or
financial position. The Company, however, is currently considering
presenting required SFAS 131 disclosures by its two primary product
offerings, polyester and nylon yarns. This presentation is consistent with
the operating and reporting structure that existed through the current
quarter and this format is expected to continue to provide the necessary
information the Company's chief operating decision maker will utilize to
assess performance and allocate resources under the recent Company
organizational restructuring.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Cost of
Computer Software Developed for or Obtained for Internal-Use," (SOP 98-1).
This SOP is effective for the Company in the first quarter of fiscal year
2000 if not previously adopted. SOP 98-1 will require the capitalization of
certain costs incurred after the date of adoption in connection with
developing or obtaining software for internal use. The Company currently
expenses certain of these internal costs when incurred. The Company has not
yet assessed what the impact of the SOP will be on the Company's future
earnings or financial position. However, as discussed in "Year 2000
Compliance" located in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the Company is actively implementing an
enterprise-wide software solution that is scheduled to be substantially
completed by its current fiscal year ending June 27, 1999. Consequently,
remaining costs associated with obtaining and modifying this system are not
anticipated to be material to the Company's results of operations or
financial position after the date of adoption of this SOP.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS
133) which the Company is required to adopt in fiscal year 2000. SFAS 133
permits early adoption as of the beginning of any fiscal quarter after its
issuance. SFAS 133 will require the Company to recognize all derivatives on
the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. 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. The Company has not yet
determined what the effect of Statement 133 will be on the earnings and
financial position of the Company.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is Management's discussion and analysis of certain significant
factors that have affected the Company's operations and material changes in
financial condition during the periods included in the accompanying Condensed
Consolidated Financial Statements.
Results of Operations
Consolidated net sales decreased 6.8% in the quarter from $343.1 million to
$319.9 million and decreased 3.6% for the year-to-date period from $672.9
million to $648.7 million. Unit volume for the quarter increased 0.6% while
average unit sales prices, based on product mix, declined 7.4%. For the year to
date, unit volumes increased 3.3% while average unit sales prices declined 6.9%.
The increase in unit volumes during the quarter and for the year to date is
primarily due to the formation of a limited liability company with Burlington
Industries, Inc. (Burlington) on May 29, 1998.
Domestically, polyester and nylon yarn net sales declined 8.6% for the quarter
and 4.9% for the year to date due primarily to reductions in unit price, based
on product mix. Our performance year over year was negatively impacted by the
continuing pressures on polyester yarn pricing caused by the importation of
Asian yarns. Additionally, the importation of Asian fabrics and garments have
weakened both the domestic and export demand for our yarns and has negatively
impacted unit sales and gross margins. Internationally, sales in local currency
increased 7.3% for the quarter and 10.0% for the year to date due to both
increased unit volume and sales prices.
Gross profit decreased 14.5% to $50.5 million for the quarter while gross margin
(gross profit as a percentage of net sales) declined 1.4% to 15.8%. The decline
in gross margin reflects lower average selling prices and increased
manufacturing and packaging costs, which were partially offset by lower average
raw material costs. Fixed charges, such as depreciation, were also higher in
both dollars and as a percentage of sales. For the year to date, gross profit
decreased $10.6 million or 9.8% while gross margin declined 1.0% to 15.1%. The
declines experienced for the year-to-date period are attributable to the same
factors described in our quarterly comparison.
Selling, general and administrative expenses as a percentage of net sales
increased from 3.1% in last year's quarter to 3.6% this quarter and from 3.0% in
the prior year-to-date period to 3.5% in the current year. On a dollar basis,
selling, general and administrative expense increased $0.8 million to $11.4
million for the quarter and $2.5 million to $23.0 million for the year to date.
Higher selling, general and administrative expenses for the current year periods
reflect cost increases associated with the prior year acquisition of Spanco, the
formation of the limited liability company with Burlington discussed above,
increased costs associated with the enterprise-wide software system solution and
higher sales costs for our international operations as we pursue new markets.
Interest expense increased $3.3 million to $6.6 million in the current quarter
and $6.6 million to $13.1 million for the year to date. The increase in
interest expense reflects higher levels of outstanding debt at higher average
interest rates and the reduction of interest capitalized for major construction
projects as certain significant projects in process in the prior year periods
have been substantially completed. The average interest rate on outstanding
debt at December 27, 1998 was 6.1%.
Equity in the earnings of our unconsolidated affiliates, Parkdale America, LLC
("the LLC") and Micell Technologies, Inc., (Micell) amounted to $2.5 million in
the second quarter of fiscal 1999 and $6.6 million for the year to date compared
with $4.5 million and $9.1 million for the corresponding quarter and year-to-
date periods in fiscal 1998. The declines are primarily attributable to the
reduced earnings from the LLC and higher start-up costs associated with Micell.
The operating results of the LLC were impacted by pricing pressures on spun
cotton products associated with weaker demand and excess capacity issues.
In the current fiscal quarter and for the year to date, the minority interest
amounted to $2.4 million and $4.8 million, respectively.
The effective income tax rate has decreased from 33.3% to 30.9% in the current
quarter and from 33.6% to 31.5% for the year to date primarily due to earnings
of our Irish operations, which are taxed at a 10.0% effective rate, increasing
as a percentage of pre-tax earnings of the Company. The difference between the
statutory federal income tax rate and the effective tax rate is primarily due to
the realization of state and federal tax credits and the results of foreign
subsidiaries which are taxed at rates below those of U.S. operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities," (SOP 98-5) which requires start-up costs, as defined, to be
expensed as incurred. In accordance with this SOP, any previously capitalized
start-up costs are required to be written-off as a cumulative effect of a change
in accounting principle. The Company, upon adoption of this SOP in the first
quarter of fiscal 1999, has written 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.
As a result of the above, the Company realized during the current quarter net
income of $22.5 million, or diluted earnings per share of $.37, compared to
$28.4 million, or $.46 per share, for the corresponding quarter of the prior
year. For the respective year-to-date periods, net income was $40.8 million, or
$.67 per diluted share, compared to $55.9 million, or $.91 per diluted share.
For the current year-to-date period, income before the cumulative effect of the
accounting change was $43.5 million, or $.71 per diluted share, respectively.
For the prior year quarter and year-to-date periods, income and diluted earnings
per share before the cumulative effect of the accounting change were $33.0
million or $.54 per diluted share and $60.5 million, or $.98 per diluted share,
respectively.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
(SFAS 131) which is required to be adopted in the fourth quarter of fiscal 1999.
SFAS 131 establishes standards for public companies for the reporting of
financial information from operating segments in annual and interim financial
statements as well as establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company has
not completed its analysis of the effect that the adoption of this standard will
have on its financial statement disclosure; however, the adoption of SFAS 131
will not affect consolidated results of operations or financial position. The
Company, however, is currently considering presenting required SFAS 131
disclosures by its two primary product offerings, polyester and nylon yarns.
This presentation is consistent with the operating and reporting structure that
existed through the current quarter and this format is expected to continue to
provide the necessary information the Company's chief operating decision maker
will utilize to assess performance and allocate resources under the recent
Company organizational restructuring.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Cost of Computer
Software Developed for or Obtained for Internal-Use," (SOP 98-1). This SOP is
effective for the Company in the first quarter of fiscal year 2000 if not
previously adopted. SOP 98-1 will require the capitalization of certain costs
incurred after the date of adoption in connection with developing or obtaining
software for internal use. The Company currently expenses certain of these
internal costs when incurred. The Company has not yet assessed what the impact
of the SOP will be on the Company's future earnings or financial position.
However, as discussed in "Year 2000 Compliance" located on page 14 of
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the Company is actively implementing an enterprise-wide software
solution that is scheduled to be substantially completed by its current fiscal
year ending June 27, 1999. Consequently, remaining costs associated with
obtaining and modifying this system are not anticipated to be material to the
Company's results of operations or financial position after the date of adoption
of this SOP.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS 133)
which the Company is required to adopt in fiscal year 2000. SFAS 133 permits
early adoption as of the beginning of any fiscal quarter after its issuance.
SFAS 133 will require the Company to recognize all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through income. 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.
The Company has not yet determined what the effect of Statement 133 will be on
the earnings and financial position of the Company.
Liquidity and Capital Resources
Cash provided by operations continues to be a primary source of funds to finance
operating needs and capital expenditures. Cash generated from operations was
$130.2 million for the year-to-date period ended December 27, 1998, compared to
$60.7 million for the prior year corresponding period. The primary sources of
cash from operations, other than net income, were a decrease in accounts
receivable of $47.8 million, a decrease in inventory of $2.9 million an increase
in net income taxes payable of $11.1 million and non-cash adjustments
aggregating $49.4 million. Depreciation and amortization of $43.1 million, the
after-tax cumulative accounting change of $2.8 million, and the deferred income
tax provision of $6.0 million, offset by undistributed earnings of
unconsolidated affiliates of $2.5 million, were the primary components of the
non-cash adjustments to cash provided by operations. Offsetting these sources
was a decrease in accounts payable and accruals of $21.8 million. All working
capital changes have been adjusted to exclude the effects of currency
translation.
Working capital levels are more than adequate to meet the operating requirements
of the Company. The Company ended the current quarter with working capital of
$205.4 million, which included cash and cash equivalents of $37.4 million.
The Company utilized $82.9 million for net investing activities and $18.6
million for net financing activities during the year-to-date period ended
December 27, 1998. Significant expenditures during this period included $74.4
million for capacity expansions and upgrading of facilities, $10.0 for
investments in equity affiliates, $24.8 million for the purchase and retirement
of Company common stock and $3.0 million for distributions to minority interest
shareholders. The Company obtained proceeds from net borrowings under its long-
term debt agreements of $8.2 million which partially offset these cash
expenditures.
At December 27, 1998, the Company has committed approximately $58.4 million for
the purchase and upgrade of equipment and facilities, which is scheduled to be
expended during the remainder of fiscal year 1999 and in fiscal year 2000. A
significant component of these committed funds as well as a major component of
the year-to-date capital expenditures is the continuing construction of a new
nylon texturing and covering facility in Madison, North Carolina. This plant
will consolidate the existing capacity at several locations, replacing older
equipment with state-of-the-art technology, and will provide for additional
capacity and expansion capabilities. Certain construction and machinery
components of this project are still under negotiation.
Effective July 16, 1998, the Board of Directors terminated the previously-
established policy of paying cash dividends equal to approximately 30% of the
Company's after-tax earnings for the previous year. In lieu of this cash
dividend, the Board of Directors authorized management to utilize cash equal to
the same 30% of previous year's earnings to purchase shares of the Company's
stock as management deems advisable. The Board of Directors also increased the
remaining authorization pursuant to a resolution originally adopted on October
21, 1993, to purchase 10 million shares of Unifi's common stock. During the
current year, the Company purchased 1.1 million shares. Accordingly, there
remains an authorization to repurchase approximately 8.9 million shares. The
Company will continue to operate its stock buy-back program from time to time as
it deems appropriate, based on prevailing financial and market conditions.
Management believes the current financial position of the Company in connection
with its operations and its access to debt and equity markets are sufficient to
meet anticipated capital expenditure, strategic acquisition, working capital,
Company common stock repurchases and other financial needs.
Year 2000 Compliance Status
The Company continues to actively address the business issues associated with
the year 2000 that impact information technology systems and non-information
technology systems (i.e., embedded technology) both internally and in relation
to our external customers, suppliers and other business associates. Factors
involved in addressing such business issues include the evaluation, testing and
implementation of the Company's enterprise-wide systems; evaluation, upgrading
and certifying of non-information technology systems; assessing and testing
significant customers' and vendors' compliance strategies and monitoring the
status thereof (including electronic commerce with these companies); and,
evaluating and monitoring the compliance plans of businesses in which the
Company maintains investments in their operations.
The Company has created a team of professionals with the responsibility of
addressing business issues associated with the year 2000. The Company does not
believe any material exposures or contingencies exist with respect to its
internal information systems as the installation of the remaining enterprises-
wide software is anticipated to be completed in the necessary time frame. At
present, the Company estimates it is approximately two-thirds complete with its
enterprise-wide software implementation efforts and approximately 75% complete
with respect to manufacturing plant floor applications. Additionally, upgrades
are in process of being performed for certain applications where the Company has
elected to postpone enterprise software conversion. Embedded technology devices
are also being reviewed in conjunction with the manufacturing plant floor
compliance procedures.
The Company has requested information on the year 2000 compliance plans and
status from its significant vendors and equity affiliates and is presently not
aware of any material exposures or contingencies. Face-to-face meetings have
been conducted and will continue in order to plan appropriate follow-up
activities with its more critical suppliers. The Company has sent surveys to
its major customers and is presently evaluating responses submitted to plan
necessary follow-up activities. Conversion plans have been established for the
Company's EDI customers and vendors and conversion procedures will begin in the
next fiscal quarter.
The Company is requesting assurances from its major suppliers that they are
addressing the year 2000 issue to avoid disruption of products and services.
Certain suppliers, although not indicating any problems or concerns at the
present time, are unwilling to provide any guarantees or assurances.
Consequently, the Company cannot predict the likelihood or impact on its
business resulting from noncompliance by such parties.
Costs incurred in the Company's year 2000 compliance efforts are being expensed
as incurred. Anticipated expenditures related to year 2000 compliance
readiness, in addition to those associated with the enterprise-wide software
implementation, are expected to be approximately $0.5 million for the fiscal
year ending June 27, 1999.
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 quarterly 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 construction spending
and capital equipment expenditures (including those related to unforeseen
acquisition opportunities), the timely completion of construction and expansion
projects planned or in process, continued availability of financial resources
through financing arrangements and operations, negotiations of new or
modifications of existing contracts for asset management and for property and
equipment construction and acquisition, regulations governing tax laws, other
governmental and authoritative bodies' policies and legislation, 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 changes in currency exchange rates,
interest and inflation rates, recession and other economic and political factors
over which the Company has no control.
<PAGE>
Part II. Other Information
UNIFI, INC.
Item 4. Submission of Matters to a Vote of Security Holders
The Shareholders of the Company at their Annual Meeting held on the 22nd
day of October 1998, considered and voted upon the election of three (3)
Class 1 Directors of the Company.
The Shareholders elected management nominees for the three (3) Class 1
Directors of the Company to serve until the Annual Meeting of the
Shareholders in 2001 or until their successors are elected and qualified,
as follows:
Name of Director Votes in Votes Votes
Favor Against Abstaining
Donald F. Orr 47,569,003 0 786,677
Robert A. Ward 47,696,412 0 659,268
G. Alfred Webster 47,696,623 0 659,057
The following persons will continue to serve on the Company's Board of
Directors until the Annual Meeting of Shareholders in 1999 for Class 2
and 2000 for Class 3:
Class 2 Class 3
Charles R. Carter G. Allen Mebane, IV
Jerry W. Eller William T. Kretzer
Kenneth G. Langone J.B. Davis
R. Wiley Bourne, Jr.
The information set forth under the headings "Election of Directors,"
"Nominees for Election as Directors," and "Security Holding of Directors,
Nominees, and Executive Officers" on Pages 2-5 of the Definitive Proxy
Statement filed with the Commission since the close of the registrant's
fiscal year ending June 28, 1998, is incorporated herein by reference.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(27) Financial Data Schedule
(b)No reports on Form 8-K have been filed during the quarter ended
December 27, 1998
<PAGE>
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: February 09, 1999 WILLIS C. MOORE, III
Willis C. Moore, III
Senior-Vice President and
Chief Financial Officer (Mr. Moore
is the Principal Financial and
Accounting Officer and has been
duly authorized to sign on behalf
of the Registrant.)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Company's
Quarterly Reports for the six month period ended December 27, 1998, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-27-1999
<PERIOD-END> DEC-27-1998
<CASH> $37,361
<SECURITIES> $0
<RECEIVABLES> $182,623
<ALLOWANCES> $8,754
<INVENTORY> $135,438
<CURRENT-ASSETS> $348,164
<PP&E> $1,200,068
<DEPRECIATION> $519,084
<TOTAL-ASSETS> $1,343,290
<CURRENT-LIABILITIES> $142,802
<BONDS> $454,865
$0
$0
<COMMON> $6,051
<OTHER-SE> $652,254<F1>
<TOTAL-LIABILITY-AND-EQUITY> $1,343,290
<SALES> $648,669
<TOTAL-REVENUES> $648,669
<CGS> $550,732
<TOTAL-COSTS> $550,732
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $3,384
<INTEREST-EXPENSE> $13,139
<INCOME-PRETAX> $63,555
<INCOME-TAX> $20,027
<INCOME-CONTINUING> $43,528
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $2,768
<NET-INCOME> $40,760
<EPS-PRIMARY> $.67<F2>
<EPS-DILUTED> $.67<F2>
<FN>
<F1>Note 1: Other Stockholders Equity of $652,254 is comprised of Retained
Earnings of $657,248 and Accumulated Other Comprehensive Loss of $(4,994).
<PAGE>
<F2>Note 2: Pursuant to FASB 128, "Earning per share" which the Company adopted
in the second quarter of the prior fiscal year, the Company changed its method
of calculating earnings per share and restated all prior periods. Under the new
requirements for calculating basic earnings per share, the dilutive effect of
stock options are excluded. Basic earnings per share for the cyrrent period is
reflected above under the "Primary" line item. Diluted earnings per share as
reflected in the above schedule, has been calculated to conform with the new
pronouncement.
</FN>
