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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 25, 1994
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-10542
UNIFI, INC.
(Exact name of registrant as specified its charter)
New York 11-2165495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 19109 - 7201 West Friendly Road
Greensboro, NC 27419
(Address of principal executive offices) (Zip Code)
(910) 294-4410
(Registrant's telephone number, including area code)
Same
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at September 25, 1994
Common Stock, par value $.10 per share 70,462,217 Shares
UNIFI, INC.
Condensed Consolidated Balance Sheets
September 25, June 26,
1994 1994
(Unaudited) (Audited)
(Amounts in Thousands)
ASSETS
Current Assets:
Cash and Cash Equivalents $107,165 $80,653
Short-Term Investments 69,629 71,483
Accounts Receivable, Net 190,174 200,537
Inventories
Raw Materials and Supplies $43,818 $29,797
Work in Process 13,323 12,937
Finished Goods 56,379 57,545
$113,520 $100,279
Other Current Assets 3,754 3,605
Total Current Assets $484,242 $456,557
Property, Plant and Equipment $860,336 $848,637
Less: Accumulated Depreciation 349,461 336,375
$510,875 $512,262
Investments in Affiliates $10,815 $10,626
Other Assets $26,559 $23,807
Total Assets $1,032,491 $1,003,252
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable $-- $137
Accounts Payable 95,186 83,831
Accrued Expenses 43,541 56,183
Income Taxes 20,735 12,132
Total Current Liabilities $159,462 $152,283
Long-Term Debt $230,000 $230,000
Deferred Income Taxes $32,964 $32,447
Shareholders' Equity
Common Stock $7,046 $7,043
Capital in Excess of Par 201,833 199,959
Retained Earnings 401,116 385,472
Cumulative Translation Adjustment 911 (3,060)
Reserve for Investments (841) (892)
Total Shareholders' Equity $610,065 $588,522
Total Liabilities and $1,032,491 $1,003,252
Shareholders' Equity
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Condensed Consolidated Statements of Income
(Unaudited)
For the Quarters Ended
September 25, September 26,
1994 1993
(Amounts in Thousands Except
Per Share Data)
Net Sales $359,194 $325,355
Costs and Expenses:
Cost of Goods Sold $310,860 $279,630
Selling, General & Administrative 9,674 9,573
Expense
Interest Expense 3,938 5,093
Interest Income (2,652) (2,713)
Other (Income) Expense (579) 204
$321,241 $291,787
Income Before Income Taxes $37,953 $33,568
Income Taxes 15,264 13,756
Net Income $22,689 $19,812
Earnings Per Share: Primary $.32 $.28
Fully Diluted $.32 $.28
Cash Dividends Per Share $.10 $.14
Average Shares Outstanding: Primary 70,952 71,090
Fully Diluted 78,705 78,843
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Quarters Ended
September 25, September 26,
1994 1993
(Amounts in Thousands)
Cash and Cash Equivalents Provided by $41,568 $18,441
Operating Activities
Investing Activities:
Capital Expenditures $(23,736) $(44,250)
Sale of Capital Assets 308 --
Notes Receivable (306) 915
Sale of Subsidiary - Note (e) 13,798 --
Sale of Investments 1,580 4,598
Net Investing Activities $(8,356) $(38,737)
Financing Activities:
Issuance of Common Stock $299 $17
Borrowing of Debt -- 7,453
Repayment of Debt (25) (24,563)
Cash Dividend (7,045) (9,463)
Net Financing Activities $(6,771) $(26,556)
Currency Translation Adjustment $71 $(75)
Increase (Decrease) in Cash $26,512 $(46,927)
Cash and Cash Equivalents - Beginning 80,653 76,093
Cash and Cash Equivalents - Ending $107,165 $29,166
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Notes to Condensed Consolidated Financial Statements
(a)Basis of Presentation
The information furnished is unaudited and reflects all adjustments which
are, in the opinion of Management, necessary to present fairly the
financial position at September 25, 1994 and the results of operations and
cash flows for the quarters ended September 25, 1994 and September 26,
1993. Such adjustments consisted of normal recurring items. Interim
results are not necessarily indicative of results for a full year. It is
suggested that the condensed financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
latest annual report on Form 10-K.
(b)Income Taxes
Deferred income taxes arise primarily from temporary differences between
financial and tax basis of assets and liabilities, principally property and
equipment.
The difference between the statutory federal income tax rate and the
effective tax rate is primarily due to results of foreign subsidiaries
which are taxed at rates below those of U.S. operations. Neither quarters'
operating results were significantly impacted by foreign operations;
therefore, the rate for both periods approximates the statutory rate.
Per Share Information (c)
Earnings per common share are computed on the basis of the number of shares
outstanding, adjusted for the dilutive effect of stock options outstanding.
The Convertible Notes do not meet the test of a common stock equivalent,
accordingly, conversion of these notes is only assumed for the calculation
of fully diluted earnings per share.
Computation of average shares outstanding (in 000's):
Quarters Ended
September 25, September 26,
1994 1993
Average Shares Outstanding 70,449 70,340
Add: Dilutive Options 503 750
Primary Average Shares 70,952 71,090
Incremental Shares Arising
from
Full Dilution 7,753 7,753
Assumption
Average Shares Assuming
Full Dilution 78,705 78,843
Computation of net income for per share data (in 000's):
Quarters Ended
September 25, September 26,
1994 1993
Net Income - Primary $22,689 $19,812
Add: Convertible
Subordinated
Interest Net of Tax 2,169 2,103
Net Income Assuming Full
Dilution $24,858 $21,915
(d)Common Stock
On October 20, 1994 the Company's Board of Directors declared a cash
dividend of 10 cents per share payable on November 10, 1994 to shareholders
of record on November 3, 1994.
(e)Sale of Subsidiary
During the current quarter the Company completed the sale of its wholly-
owned French subsidiary, Unifi Texturing, S.A. (UTSA). Net cash proceeds
from the sale totaled $13.8 million, excluding $4.1 million of cash
remitted to the Parent from UTSA in conjunction with the sale. The
transaction had no significant impact on current quarter earnings. The
results of operations of UTSA were not significant to the consolidated
Company for either period presented.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is Management's discussion and analysis of certain significant
factors that have affected the Company's operations and material changes in
financial condition during the periods included in the accompanying Condensed
Consolidated Financial Statements.
Results of Operations
Net sales increased 10.4% in the quarter from $325.4 million to $359.2
million. Volume increased 17.5% for the quarter while average unit price,
based on overall product mix, decreased 6.0% during this period.
Our domestic polyester operations performed well in the first quarter.
Volume increases were experienced in both the dyed and undyed portions of the
business. Dyed yarn prices were increased at the beginning of the quarter
while prices for our natural yarns will be increasing in the second quarter.
Demand for our polyester yarn remains strong in the automotive, home
furnishings and export areas in addition to solid demand for our warped and
twisted yarns. Domestic nylon and covered yarn volume declined slightly from
the corresponding period of the prior year together with a decrease in
average unit price. We anticipate good business in the sock grouping and a
more steady demand in women's hosiery and legwear in the upcoming months.
Volume for our spun division increased for the quarter while average per unit
price declined due to pressures on selling prices. If demand remains good,
we would anticipate improved margins in our spun business in the second half
of Fiscal 1995 as old sales contracts begin to expire at the end of our
second quarter. Volume for our European polyester business remains good
although we face rising raw material prices. In anticipation of further raw
material price increases we are pushing our selling prices upward and
repositioning our product mix to help margin improvement.
Cost of sales increased from $279.6 million in last year's first quarter to
$310.9 million in this year's first quarter or 11.2%. Cost of sales as a
percentage of net sales for the quarter increased slightly from 85.9% last
year to 86.6% this year. This is mainly the result of the decline in average
unit sales price discussed above as sales volume has increased significantly
and components of cost of sales have improved on a per unit basis. Average
raw material costs per unit, based on overall product mix, have declined
approximately 2.5%. Manufacturing costs have also experienced a decline
during this time period on a per unit basis as was the case for depreciation.
These improvements in cost per unit primarily resulted from increased volume
in our polyester and spun yarn businesses. Our gross margins have declined
approximately 0.6% from last year's first quarter to the current quarter due
to lower average net sales prices based on our overall product mix.
Selling, general and administrative expenses as a percentage of net sales
decreased from 2.9% to 2.7% in the current quarter. During the quarter
actual expense increased from $9.6 million to $9.7 million. The improvement
in selling, general and administrative expenses as a percentage of sales is
attributable to increased sales volume.
Interest expense decreased from $5.1 million in the prior fiscal year first
quarter to $3.9 million in the current quarter. During the first quarter of
the prior year, the Company paid off approximately $24.6 million of debt
acquired through merged companies and borrowed $7.5 million of additional
debt. The combination of the interest expense on the newly acquired debt and
the interest charged on the debt extinguished through the pay-off date
resulted in higher interest expense in the September 1993 quarter than in the
current quarter. Interest income has remained relatively constant during the
quarter compared to the corresponding period of the prior year.
Other (income) expense reflects an improvement of $783 thousand over the
first quarter of the prior fiscal year. In the current quarter, the Company
recognized gains on the sale of investments and property, plant and
equipment. Currency exchange gains and income from an equity investment in
the current quarter also contributed to the increase.
Our effective tax rate was 40.2% in the current quarter as compared with
41.0% in the prior quarter. The lower rate in the current period is due to
taxable earnings of foreign subsidiaries representing a larger contribution
of total consolidated pretax income. Taxes on foreign earnings are normally
at rates lower than US rates.
Quarterly earnings per share increased from $.28 to $.32.
Liquidity and Capital Resources
The primary source of cash funds for the Company during the current quarter
was from operating activities that contributed $41.6 million in cash and cash
equivalents. Net income and noncash expenses comprised $40.9 million of this
amount. The Company substantially completed the sale of its European nylon
operations in the current quarter. This generated approximately $13.8
million in net cash proceeds, excluding $4.1 million of cash remitted to the
Parent from UTSA in conjunction with the sale. The primary uses of funds
during this period were capital expenditures of $23.7 million and the payment
of cash dividends of $7.0 million.
The Company ended the current quarter with working capital of $324.8 million
of which $176.8 million represents cash and short-term investments. This
compares with working capital of $304.3 million and cash reserves of $152.1
million at year-end. Management believes that the current financial position
of the Company in addition to its operations and access to debt and equity
markets is sufficient to meet anticipated capital expenditure, strategic
acquisition, working capital and other financial needs.
UNIFI, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Part I Exhibit
(27) Financial Data Schedule
(b)No reports on Form 8-K have been filed during the quarter ended
September 25, 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: 11/09/94 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: 11/09/94 NORMA R. NIXON
Norma R. Nixon
Corporate Controller