SECURITIES AND EXCHANGE COMMISSION  
                          Washington, D. C. 20549  
                                     FORM 10-K  
                                                     
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  
                   OF THE SECURITIES EXCHANGE ACT OF 1934  

For the fiscal year ended                              Commission File 
        June 28, 1998                                  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:  
                                                   Name of Each Exchange
     Title of Class                                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 August 14, 1998, based on a closing price of $23.875 per 
share:                                               $1,427,674,599.87

Number of shares outstanding as of August 14, 1998:      61,355,386

<PAGE>

                     Documents Incorporated By Reference

   
Portions of the Annual Report to Shareholders of Unifi, Inc. for the fiscal 
year ended June 28, 1998, are incorporated by reference into Parts I and II 
hereof.  

Portions of the definitive proxy statement for the Annual Meeting of the 
Shareholders of Unifi, Inc., to be held on October 22, 1998, are incorporated 
by reference into Part III.  

Exhibits, Financial Statement Schedules and Reports on Form 8-K index is 
located on pages IV-1 through IV-6.

<PAGE>



                                   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 processors of polyester and nylon yarns in the 
world.  The Company is engaged in the business of texturing polyester and 
nylon filament fiber to produce polyester and nylon yarns, dyed yarns and 
spandex yarns covered with nylon and polyester.  The Company sells its 
products to knitters and weavers that produce fabrics for the apparel, 
automotive upholstery, hosiery, home furnishings, industrial and other end use 
markets.
  
     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, 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.

     On June 30, 1997, the Company and Parkdale Mills, Inc. ("Parkdale") 
contributed cash, assets and certain liabilities associated with their 
respective open-end and air jet spun cotton yarn operations to a newly formed 
joint venture, Parkdale America, LLC ("Parkdale America").  As a result, the 
Company and Parkdale own a 34.0% and 66.0% equity interest in Parkdale 
America, respectively.  Parkdale America is one of the largest and most 
diversified processors of spun cotton yarns in the world.  The Company 
believes that its equity ownership in Parkdale America provides it with an 
opportunity to partner with the leading manufacturer in the cotton yarn 
industry and to increase the profitability of these operations through 
economies of scale and elimination of redundant overhead costs. 

     On November 14, 1997, the Company completed its $55.8 million acquisition 
of SI Holding Company ("SI Holding"), a manufacturer of covered nylon yarns 
operating under the "Spanco" name, generating approximately $85.0 million in 
annual sales. 

     On May 29, 1998, the Company and Burlington Industries, Inc. ("BI") 
contributed certain assets associated with their respective textured polyester 
yarn businesses to a newly formed limited liability company, Unifi Textured 
Polyester, LLC ("UTP").  Unifi contributed its textured polyester yarn 
facilities in Yarkinville, North Carolina and BI contributed its textured 
yarn operation in Mayodan, North Carolina.  Unifi is the majority owner of the 
new entity (approximately 85%) and manages the business, while BI holds a 
minority interest.  All yarn products are sold under the Unifi label.  The 
Company's polyester texturing facility in Reidsville, North Carolina, which 
processes textured products for yarn dyeing, was not contributed to UTP.

                                     I-1

<PAGE>

     The information included under "Year 2000 Compliance Status" on pages 35 
and 36 of the Annual Report of the company for fiscal year ended June 28, 
1998, is incorporated herein by reference.


SOURCES AND AVAILABILITY OF RAW MATERIALS:  
  
     The primary suppliers of POY to the Company are E. I. DuPont de Nemours 
and Company, Hoechst Celanese Corporation, Wellman Industries, Cookson Fibers, 
Inc., and Nan Ya Plastics Corp. of America with the majority of the Company's 
POY being supplied by DuPont.  In addition, the Company has POY manufacturing 
facilities in Ireland, and recently began full-scale operation in its newly 
constructed, state-of-the-art manufacturing facility in Yadkinville, North 
Carolina, designed to further vertically integrate the Company's domestic 
polyester operations. Management expects this facility to provide 
approximately 25% of its total domestic POY supply needs.  Management expects
that all polyester fiber manufactured by this facility will be used by the 
Company.  Although the Company is heavily dependent upon a limited number of 
suppliers, the Company has not had and does not anticipate any material 
difficulty in obtaining its raw 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 28, 1998, sold its 
polyester and nylon yarns to approximately 1,260 customers, no one 
customer's purchases exceeded 10% of net sales during said period, the ten 
largest customers accounted for approximately 32% of total net sales.  The 
Company does not believe that it is dependent on any one customer.  
  
     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 product 
quality and customer service being essential for differentiating the 
competitors within the industry.  Product quality insures manufacturing 
efficiencies for the customer.  The Company's polyester and nylon yarns, dyed 
yarns, and covered yarns compete with a number of other domestic producers of 
such yarns.  In the sale of polyester filament yarns, major competitors are 
Dillon Yarn Company, Inc., and Milliken & Company and in the sale of nylon 
yarns, dyed yarns, and covered yarns, major competitors are Jefferson Mills,
Inc., Worldtex, Inc., and Spectrum Dyed Yarns, Inc..

                                     I-2

<PAGE>  
     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 employees of the Company is 
Approximately 6,400.
  
     FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC INTERNATIONAL 
OPERATIONS AND EXPORT SALES:  The information included under the heading 
"Business Segments, Foreign Operations and Concentrations of Credit Risk" 
on Page 28 of the Annual Report of the Company to the Shareholders for the 
fiscal year ended June 28, 1998, is incorporated herein by reference.  
  


I
tem 2.  Description of Property:  
  
     The Company currently maintains a total of 24 manufacturing and 
warehousing facilities and one central distribution center in North Carolina, 
one manufacturing and related warehousing facility in Staunton, Virginia, one 
central distribution center in Fort Payne, Alabama, two manufacturing 
operations in Letterkenny, County of Donegal, 
Republic of Ireland and two warehousing locations in Carrickfergus, Northern 
Ireland.  All of these facilities, which contain approximately 7,992,513 
square feet of floor space, with the exception of one (1) plant facility 
leased from NationsBank Leasing and R.E. Corp. pursuant to a Sales-leaseback 
Agreement entered on May 20, 1997, as amended, and two warehouses in 
Carrickfergus, Northern Ireland, are owned in fee; and management believes they
are in good condition, well maintained, and are suitable and adequate for 
present production.    

     The Company leases sales offices and/or apartments in New York, 
Coleshill, England, Oberkotzau, Germany, and Lyon, France, and has a 
representative office in Tokyo, Japan.  
  
     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 Trustee.  On May 20, 1996, the Company exercised its option to 
extend the term of the lease on this property for five (5) years,  through 
March 13, 2002.  Reference is made to a copy of the lease agreement attached 
to the Registrant's Annual Report on Form 10-K as Exhibit (10d) for the fiscal 
year ended June 28, 1987, which is by reference incorporated herein.


                                      I-3

<PAGE>
     The information included under "Leases and Commitments" 
on Page 27 of the Annual Report of the Company to Shareholders for fiscal 
year ended June 28, 1998, is incorporated herein by reference.  
  


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 28, 1998.  

                                        I-4


<PAGE>

                                      PART II



Item 5.   Market for the Registrant's Common Equity and Related Stockholder 
Matters.
  
     (a)(c)  PRICE RANGE OF COMMON STOCK AND DIVIDENDS PAID.  
  
     The information included under the heading "Market and Dividend 
Information (Unaudited)" on Page 31 of the Annual Report of the Company to 
Shareholders for the fiscal year ended June 28, 1998, is incorporated herein 
by reference.  
  
     (b)  Approximate Number of Equity Security Holders:  
  

     Title of Class                         Number of Record Holders
                                              (as of August 14, 1998) 
     Common Stock, $.10 par value                            929
                                                             

       (c)  CASH DIVIDEND POLICY.  Effective July 16, 1998, the Board of 
Directors of the Company terminated its previously-established policy of 
April, 1990 of paying cash dividends equal to approximately 30% of the 
Company's after tax earnings for the previous year and authorized management 
of the Company to utilize cash equal to said 30% of previous year's earnings 
to purchase shares of the Company's stock, as, management deems advisable up 
to ten (10) million shares.  Under said April 1990 cash dividend policy, the 
Company paid a quarterly dividend of $.14 per share on its common stock for 
each quarter of the 1998 fiscal year.   


Item 6.  Selected Financial Data:

     The financial data for the five fiscal years included under the heading 
"Summary of Selected Financial Data" on Page 30 of the Annual Report of the 
Company to Shareholders for the fiscal year ended June 28, 1998, is 
incorporated herein by reference.   



Item 7.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations:  

     The information included under the heading "Management's Review and 
Analysis of Operations and Financial Position" beginning on Page 32 and ending 
on Page 36 of the Annual Report of the Company to Shareholders for the fiscal 
year ended June 28, 1998, is incorporated herein by reference.

                                         II-1

<PAGE>

Item 7A.  Quantitative and Qualitative Disclosure About Market Risk

     The information included under the heading "Derivative Financial 
Instruments and Fair Value of Financial Instruments" on Page 28 of 
the Annual Report of the Company to Shareholders for the fiscal year ended 
June 28, 1998, is incorporated herein by reference.



Item 8.  Financial Statements and Supplementary Data:  
  
     The report of independent auditors, consolidated financial statements and 
notes beginning on Page 17 and ending on Page 29 and the information included 
under the heading "Quarterly Results (Unaudited)" on Page 31 of the Annual 
Report of the Company to Shareholders for the fiscal year ended June 28, 1998, 
are incorporated herein by reference.
  
  

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. 


                                     II-2

<PAGE>

                                    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", "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 12 of the definitive proxy statement filed with 
the Commission since the close of the Registrant's fiscal year ended June 28, 
1998, and within 120 days after the close of said fiscal year, are 
incorporated herein by reference.  
    
(b)     Identification of Executive Officers:  
    
Chairman of The Board of Directors
  
     G. Allen Mebane, IV   Mr. Mebane is 68 and has been an Executive Officer 
and member of the Board of Directors of the Company since 1971, and served as 
President and Chief Executive Officer of the Company, relinquishing these 
positions in 1980 and 1985, respectively. He was the Chairman of the Board of 
Directors for many years, Chairman of the Executive Committee from 1974 to 
1995, and was elected as one of the three members of the Office of Chairman on 
August 8, 1991.  On October 22, 1992, Mr. Mebane was again elected as Chairman 
of the Board of Directors.  
    
President and Chief Executive Officer
  
     William T. Kretzer  Mr. Kretzer is 52 and served as a Vice President or 
Executive Vice President from 1971 until 1985.  He has been the President and 
Chief Executive Officer since 1985.  He has been a member of the Board of 
Directors since 1985 and has been Chairman of the Executive Committee since 
1995.  
  
Executive Vice Presidents  
  
     Jerry W. Eller  Mr. Eller is 57 and has been a Vice President or 
Executive Vice President since 1975.  He has been a member of the Board of 
Directors since 1985 and is a member of the Executive Committee.  
                                     
     G. Alfred Webster  Mr. Webster is 50 and has been a Vice President or 
Executive Vice President since 1979.  He has been a member of the Board of 
Directors since 1986 and is a member of the Executive Committee.  

                                       III-1

<PAGE>

Senior Vice Presidents
  
     Kenneth L. Huggins  Mr. Huggins is 55, had been an employee of Macfield, 
Inc. since 1970 and, at the time of the Macfield merger with Unifi, was 
serving as a Vice President of Macfield and President of Macfield's Dyed Yarn 
Division.  He was a Director of Macfield from 1989 until August 8, 1991, when 
Macfield, Inc. merged into and with Unifi.  He is Senior Vice President and 
also Assistant to the President.  
  
     Raymond W. Maynard  Mr. Maynard is 55 and has been a Vice President of 
the Company since June 27, 1971, and a Senior Vice President since October 22, 
1992.  

     Willis C. Moore, III    Mr. Moore is 45 and had been a Partner with Ernst 
& Young LLP, or its predecessors from 1985 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, and is 
currently serving as a Senior Vice President and Chief Financial Officer. 

Vice Presidents

     James W. Brown, Jr.    Mr. Brown is 46 and was an employee of Macfield 
from 1973 until the Macfield merger on August 8, 1991, when he became an 
employee of the Company.  He became a Vice President of the Company on October 
22, 1992, and he is currently serving as President of the Nylon/Covered Yarn 
Division of the Company.

     Stewart O. Little    Mr. Little is 45 and has been a Vice President of 
the Company since October 24, 1985.  He is currently serving as President of 
the Polyester Division of the Company.
  
     Ralph D. Mayes  Mr. Mayes is 49 and had been a Vice President and Chief 
Information Officer of the Leggett Group from 1992 until September, 1994 when
he became employed by the Company as its Chief Information Officer.  Mr. Mayes
was elected as a Vice President on October 20, 1994, and is currently serving
as Vice President and Chief Information Officer.

     These officers were elected by the Board of Directors of the Registrant 
at the Annual Meeting of the Board of Directors held on October 23, 1997.  
Each officer was elected to serve until the next Annual Meeting of the Board 
of Directors or until his successor was elected and qualified.  

(c)     Family Relationship:  Mr. Mebane, Chairman of the Board, and Mr. C. 
Clifford Frazier, Jr., the Secretary of the Registrant, are first cousins.  
Except for this relationship, there is no family relation between any of the 
Officers.  
  
                                        III-2

<PAGE>

Item 11.  Executive Compensation:  
  
     The information set forth under the headings "Compensation and Option 
Committees Interlocks and Insider Participation in Compensation Decisions", 
"Executive Officers and Their  Compensation", "Employment and Termination 
Agreements", "Options Granted", "Option  Exercises and Option/SAR Values", the 
"Report of the Compensation and Incentive Stock Option Committees on Executive 
Compensation", and the "Performance Graph-Shareholder Return on Common Stock"  
beginning on Page 6 and ending on Page 11 of the Company's definitive proxy 
statement filed with the Commission since the close of the Registrant's fiscal 
year ended June 28, 1998, 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 (101), (10m), (10n), (10q) and (10r) 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 4 
and Page 5 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 28, 1998, which are hereby incorporated by reference.
  
  

Item 13.  Certain Relationships and Related Transactions:
  
       The information included under the heading "Compensation and Option 
Committees  Interlocks and Insider Participation In Compensation Decisions", 
on Page 6 of the definitive proxy statement filed with the Commission since 
the close of the Registrant's fiscal year ended June 28, 1998, and within 120 
days after the close of said fiscal year, is incorporated herein by 
reference.  
                                      III-3

<PAGE>


                                  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 28, 1998                 BY:  WILLIAM T. KRETZER
                                        ______________________________
                                        William T. Kretzer, President
                                        (Chief Executive Officer)  
  
September 28, 1998                 BY:  WILLIS C. MOORE, III
                                        ______________________________
                                        Willis C. Moore,III, Sr Vice President
                                        (Chief Financial 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:  

                                         G. ALLEN MEBANE, IV
September 28, 1998            Chairman   __________________________
                           and Director  G. Allen Mebane, IV
  
                                         WILLIAM T. KRETZER
September 28, 1998      President, Chief __________________________
                       Executive Officer William T. Kretzer   
                         and Director  
                                         ROBERT A. WARD  
September 28, 1998      Senior Advisor   ___________________________
                      to President and   Robert A. Ward  
                         Director  

                                         JERRY W. ELLER 
September 28, 1998     Executive Vice    ___________________________
                       President and     Jerry W. Eller  
                       Director  

                                         G. ALFRED WEBSTER
September 28, 1998     Executive Vice    ___________________________ 
                       President and     G. Alfred Webster          
                       Director  

                                         CHARLES R. CARTER
September 28, 1998    Director          ___________________________
                                         Charles R. Carter  


<PAGE>

                                         KENNETH G. LANGONE
September 28, 1998    Director          ___________________________
                                         Kenneth G. Langone  
  
                                         DONALD F. ORR
September 28, 1998     Director          ___________________________
                                         Donald F. Orr   

                                         J.B. DAVIS
September 28, 1998     Director          ___________________________
                                         J. B. Davis   

                                         R. WILEY BOURNE, JR.
September 28, 1998     Director          ___________________________
                                         R. Wiley Bourne, Jr.



<PAGE>

                                    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 included 
in the Annual Report of Unifi, Inc. to its Shareholders for the fiscal year 
ended June 28, 1998, are incorporated herein by reference.  With the exception 
of the aforementioned information and the information incorporated by 
reference in Items 1, 2, 5, 6, 7 7A and 8 herein, the 1998 Annual Report to 
shareholders is not deemed to be filed as part of this report.

                                                                    Annual
                                                                    Report
                                                                    Pages
                                                                    ------
     Consolidated Balance Sheets at June 28, 1998  
       and June 29, 1997                                             18
     Consolidated Statements of Income for the     
       Years Ended June 28, 1998, June 29, 1997,  
       and June 30, 1996                                             19
     Consolidated Statements of Changes in         
       Shareholders' Equity for the Years Ended    
       June 28, 1998, June 29, 1997 and June 30,   
       1996                                                          20
  
     Consolidated Statements of Cash Flows for     
       the Years Ended June 28, 1998, June 29,     
       1997 and June 30, 1996                                        21
  
     Notes to Consolidated Financial Statements                 22 - 29

     Management's Review and Analysis of Operations and
       Financial Position                                       32 - 36

     Report of Independent Auditors                                  17
  
(a)  2.  Financial Statement Schedules                 
                                                              Form 10-K
                                                                  Pages
     Schedules for the three years ended June 28, 1998:  
      II - Valuation and Qualifying Accounts                       IV-6

                                  IV-1

<PAGE>

     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.  
  
(a)  3.  Exhibits  

(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 (3a) with the Company's Form 10-K for the fiscal year 
ended June 26, 1994), which is incorporated herein by reference.  
  
(3b)     Restated By-Laws of Unifi, Inc., (filed as Exhibit (3b) with the 
Company's Form 10-K for the fiscal year ended June 29, 1997), which is 
incorporated herein by reference.    
  
(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.
  
(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 (10c) 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.  
                                       IV-2

<PAGE>
  
(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 (10d) 
with the Company's Form 10-K for the fiscal year ended June 28, 1987), which 
is incorporated herein by reference. 
 
 (10i)     Factoring Contract and Security Agreement and a Letter Amendment 
thereto, all dated as of May 25, 1994, by and between Unifi, Inc. and the CIT 
Group/DCC, Inc., (filed as Exhibit (10g) with the Company's Form 10-K for the 
fiscal year ended June 26, 1994), which are incorporated herein by 
reference.  
  
(10j)     Factoring Contract and Security Agreement, dated as of May 2, 1988, 
between Macfield, Inc., and First Factors Corp., and First Amendment thereto, 
dated September 28, 1990, (both filed as Exhibit (10g) with the Company's Form 
10-K for the fiscal year ended June 30, 1991), and Second Amendment to the 
Factoring Contract and Security Agreement, dated March 1, 1992, (filed as 
Exhibit (10g) with the Company's Form 10-K for the fiscal year ended June 28, 
1992), and Letter Agreement dated August 31, 1993 and Amendment to Factoring 
Contract and Security Agreement dated January 5, 1994, (filed as Exhibit (10h) 
with the Company's Form 10-K for the fiscal year ended June 26, 1994), which 
are incorporated herein by reference. 
  
(10k)     Factoring Agreement dated August 23, 1995, and a Letter Amendment 
thereto dated October 16, 1995, by and between Unifi, Inc. and Republic 
Factors Corp., (filed as Exhibit 10(k) with the Company's Form 10-K for the 
fiscal year ended June 30, 1996), which is incorporated herein by reference.  

                                      IV-3

<PAGE>  
(10l)     *Employment Agreement between Unifi, Inc. and G. Allen Mebane, dated 
July 19, 1990, (filed as Exhibit (10h) with the Company's Form 10-K for the 
fiscal year ended June 30, 1991), which is incorporated herein by reference.  
  
(10m)     *Employment Agreement between Unifi, Inc. and William T. Kretzer, 
dated July 19, 1990, (filed as Exhibit (10i) with the Company's Form 10-K for 
the fiscal year ended June 30, 1991), and Amendment to Employment Agreement 
between Unifi, Inc. and William T. Kretzer, dated October 22, 1992 (filed as 
Exhibit (10j) with the Company's Form 10-K for fiscal year ended June 27, 
1993), which are incorporated herein by reference.  
  
(10n)     *Severance Compensation Agreement between Unifi, Inc. and William T. 
Kretzer, dated July 20, 1996, expiring on July 19, 1999 (similar agreements 
were signed with G. Allen Mebane, Robert A. Ward, Jerry W. Eller and G. Alfred 
Webster)(filed as Exhibit (10n) with the Company's Form 10-K for fiscal year 
ended June 30, 1996), which is incorporated herein by reference.  
  
(10o)     Credit Agreement, dated April 15, 1996, by and between Unifi, Inc. 
and The Several Lenders from Time to Time Party thereto and NationsBank, N.A. 
as agent, (filed as Exhibit (10o) with the Company's Form 10-K for the fiscal 
year ended June 30, 1996), which is incorporated herein by reference.  
  

(10p)     *Deferral Agreement, dated November 21, 1997, by and between Unifi, 
Inc. and William T. Kretzer, filed herewith.
 .  
(10q)     *Severance Compensation Agreement between Unifi, Inc. and Willis C. 
Moore, III, dated July 16, 1998, expiring on July 20, 2001 (similar agreements 
were signed with James W. Brown, Jr., Kenneth L. Huggins, Stewart Q. Little, 
Ralph D. Mayes, and Raymond W. Maynard), filed herewith.

(13a)     Portions of Unifi, Inc.'s 1998 Annual Report to Shareholders which 
are incorporated herein by reference, as a part of this Form 10-K for fiscal 
year ended June 28, 1998, filed herewith.  

(13b-1)Report of Independent Auditors/Ernst & Young LLP - on the Consolidated 
Financial  Statements of Unifi, Inc. as of June 28, 1998, and each of the three 
years in the period ended June 28, 1998.    
  
(21)      Subsidiaries of Unifi, Inc.  
  
(23)      Consent of Ernst & Young LLP  
  
(27)      Financial Data Schedule  

                                        IV-4

<PAGE>  
(b)          Reports on Form 8-K  
           None.
  
  
  
*  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.  

                                         IV-5

<PAGE>

                   SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                        UNIFI, INC. AND SUBSIDIARIES
                              JUNE 28, 1998
                              (in thousands)


 COLUMN A      COLUMN B        COLUMN C       COLUMN D          COLUMN E
- ----------    ---------      -----------      ----------        ---------
                               Additions
                            -------------------
                 Balance    Charged   Charged to                   Balance
                   at          to      Other                         at
               Beginning of Costs and  Accounts-  Deductions-      End of       
Description     Period      Expenses  Describe    Describe         Period
- -----------    -----------  -------- ---------  -----------      ---------

Allowance for doubtful accounts:

 Year ended 
  June 28, 1998  $5,462    $3,917   $3,665(a)   $(4,819) (b)     $ 8,225 
 Year ended
  June 29, 1997   6,595     4,390     -          (5,523) (b)       5,462
 Year ended
  June 30, 1996   6,452     3,660     -          (3,517) (b)       6,595

(a) Primarily represents acquisition related adjustment to write-down acquired
accounts receivable to fair market value.

(b) Includes uncollectible accounts written off and customer claims paid, net 
of certain recoveries.





Unrealized (gains)/losses on certain investments:

 Year ended
  June 28, 1998 $  -      $  -      $  -        $  -            $   -
 Year ended 
  June 29, 1997    -         -         -           -                -
 Year ended 
  June 30, 1996   (1,835)    -        1,835 (c)    -                -



(c) Represents the change in fair market value of the related investment 
securities and the entry to reflect the disposition of the underlying 
investments.









                             EXHIBIT (10p)

                        DEFERRAL AGREEMENT



     THIS DEFERRAL AGREEMENT ("Agreement"), effective the 21st day of November,
1997, between Unifi, Inc., a New York Corporation, ("Unifi"), and William T.
Kretzer (hereinafter referred to a the "Executive"); 

                      W I T N E S S E T H :

     WHEREAS, the Executive is the President and Chief Executive Officer as well
as Chairman of the Executive Committee of Unifi; and,
     WHEREAS, the Executive was granted stock options to purchase 163,668 shares
of Unifi Common stock at an option price of $4.80 per share (as adjusted for
stock splits and stock dividends) on January 21, 1988 (the "Stock Option") under
the Unifi, Inc. 1982 Incentive Stock Option Plan ("ISOP"); and,
     WHEREAS, the exercise of the Stock Option would result in the Executive
recognizing taxable compensation; and,
     WHEREAS, the Executive and Unifi desire to enter into this Deferral
Agreement to defer such taxable compensation as provided herein.
     NOW THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, it is agreed as follows:
          1.   DEFERRAL.  Pursuant to the second paragraph of Section 3 of
               his Incentive Stock Option Agreement dated January 21, 1988
               with Unifi as amended effective November 21, 1997 ("ISOP"
               Agreement), the Executive will tender
 on or before January 20,
               1998, to Unifi such number of his previously acquired
               outstanding shares of Unifi common stock that has been held
               for at least six (6) months and that has a fair market value
               equal to the exercise price of the Stock Option in exchange
               for an equivalent number of shares of Unifi common stock (the
               "Exchange Shares") and the right to receive 163,668 shares less
               the amount of Exchange Shares of Unifi common stock in the
               future ("Deferral Shares") under the terms of this Agreement. 
               Unifi shall issue the Deferral Shares to the Trustee of the
               Unifi, Inc. Trust for Deferred Compensation Arrangements
               ("Trust").
          2.   INCOME ON SHARES.  Any and all dividends paid on the Deferral
               Shares shall be held as additional deferral compensation for
               the Executive's account and distributed as provided in
               paragraph 3 hereof.  Additionally, as of each January 1st and
               July 1st until all accumulated dividends are fully and finally
               paid out, Unifi shall pay to the Trust as additional deferral
               compensation for  the Executive, interest on any accumulated
               dividends as heretofore provided in such amounts after
               considering the income generated by the Trusts on said
               accumulated dividends as is necessary to provide a rate of
               return equal to the Prime Rate as hereinafter described for
               the last business day preceding the applicable January 1st and
               July 1st plus three (3) percentage points (such sum being
               referred to as the "Interest Factor"), multiplied by the
               balance of said accumulated dividends, including the amount of
               Interest previously credited on such accumulated dividends as
               of the previous day (i.e., December 31st or June 30th).  Said
               accumulated dividends and the interest thereon are hereafter
               referred to herein as "Accumulated Dividends".
                    The term "Prime Rate" used in this Agreement shall be the
               base rate on the Corporate loans posted by at least seventy-
               five (75%) percent of the nation's thirty (30) largest banks
               as reported in the Wall Street Journal or, if no longer
               published, a similar publication for the last business day
               preceding the applicable January 1st and July 1st.
          3.   DEFERRAL PERIOD.  Ten (10) years from the date hereof the
               Executive or his designated beneficiary, if the Executive
               should die before the expiration of said ten (10) year period,
               will be entitled to receive the Deferral Shares and
               Accumulated Income in the form of equal annual distributions
               over a period of five (5) years.
          4.   DEATH OF EXECUTIVE.  If the Executive should die prior to the
               time that all of his Deferral Shares and Accumulated Dividends
               (cumulatively referred to as "Deferral Compensation") have been
               completely distributed to him, the Executive's designated
               beneficiary will be entitled to receive the amount he was
               entitled to receive under paragraph 3 in the manner specified
               therein.
          5.   BENEFICIARIES.   The Executive shall have the right at any
               time to name any person or persons (including his estate or
               any trust) as his beneficiary hereunder by filing written
               notice with the Compensation Committee.  The Executive's last
               written designation to the Compensation Committee shall be
               deemed his last designated beneficiary.  The Executive may
               name a contingent beneficiary or beneficiaries to receive
               payment in the event of the death of his primary beneficiary. 
               If the Executive has not designated a beneficiary or his
               designated beneficiary is not alive when payments are due
               hereunder, the Executive's designated beneficiary shall be
               deemed his estate.  All designations of the Executive's
               beneficiary shall not be effective unless countersigned by a
               member of the Compensation Committee.
          6.   ASSIGNMENT.  Except as specifically provided in paragraph 5
               herein, relating to the designation of a beneficiary, neither
               the Executive nor his designated beneficiary may assign,
               transfer, pledge, encumber, or hypothecate this Agreement, or
               any rights hereunder, or any part hereof (whether by operation
               of law or otherwise), and this Agreement shall not be subject
               to the execution, attachment, or similar proceeding.  Any
               attempted assignment, transfer, pledge, encumbrance,
               hypothecation, or other disposition of this agreement,
               contrary to the provisions hereof, and the levy of any
               attachment or similar proceedings upon this Agreement, shall
               be null and void and without effect.
          7.   NO VESTED BENEFIT.  Nothing contained herein shall be deemed
               to give the Executive any vested interest in any specific
               assets of Unifi and no benefits to which the Executive or his
               beneficiary is entitled hereunder shall give the Executive any
               greater right to receive payment from Unifi than the right of
               an unsecured general creditor of Unifi.
          8.   TERMINATION BY BOARD.  The Board of Directors ("Board") of
               Unifi, excluding the Executive if he is a member of the Board,
               may at any time, in its sole discretion, terminate this
               agreement and distribute to the Executive the balance of his
               Deferral Compensation at one time.
          9.   ENTIRE AGREEMENT.  This Agreement constitutes the entire
               agreement between the Executive and Unifi, and may not be
               altered, modified, amended, or rescinded except in writing,
               signed by the parties hereto.  It is further understood that
               this Agreement shall inure to the benefit of the parties,
               their successors or assigns.
          10.  GOVERNING LAW.  This Agreement, and the interpretation
               thereof, shall be governed by the laws of the State of North
               Carolina and shall be deemed to have been made in the State of
               North Carolina.
     IN WITNESS WHEREOF, the parties have executed this Agreement, on the day
and year first above written.

                                   UNIFI, INC.

____________11/21/97____________        By:_________Willis C. Moore, III___
Date                                    Willis C. Moore, III
                                         Senior Vice-President and 
                                         Chief Financial Officer


____________11/21/97_____________       _________William T. Kretzer________
Date                                    William T. Kretzer




                                  EXHIBITY (10q)

                         SEVERANCE COMPENSATION AGREEMENT

    THIS AGREEMENT ("Agreement") between UNIFI, INC., a New York corporation 
(the "Company"), and WILLIS C. MOORE, III ("Executive") effective the 16th 
day of July, 1998.
                               WITNESSETH:
     WHEREAS, WILLIS C. MOORE, III is presently a Senior Vice President and 
Chief Financial Officer for the Company, has been an Officer of the Company 
since 1995, and is and has been an integral part of the Company's Management; 
and
      WHEREAS, the Company's Board of Directors considers the establishment and 
maintenance of a sound and vital Management to be essential in protecting and 
enhancing the best interests of the Company and its Shareholders, recognizes 
that the possibility of a change in control exists and that such possibility, 
and the uncertainty and questions which it may raise among Management, may 
result in the departure or distraction of Management personnel to the 
detriment of the Company and its Shareholders; and
     WHEREAS, the Executive desires that in the event of any change in control
he will continue to have the responsibility and status he has earned; and
     WHEREAS, the Company's Board of Directors has determined that it is 
appropriate to reinforce and encourage the continued attention
 and dedication 
of the Executive, as a member of the Company's Management, to his assigned 
duties without distraction in potentially disturbing circumstances arising 
from the possibility of a change in control of the Company.
     NOW, THEREFORE, in order to induce the Executive to remain in the 
employment of the Company and in consideration of the Executive agreeing to 
remain in the employment of the Company, subject to the terms and conditions 
set out below, the Company agrees it will pay such amount, as provided in 
Section 4 of this Agreement, to the Executive, if the Executive's employment
with the Company terminates under one of the circumstances described herein
following a change in control of the Company, as herein defined.
    Section 1.  Term:  This Agreement shall terminate, except to the extent 
that any obligation of the Company hereunder remains unpaid as of such time, 
upon the earliest of (i) July 20, 2001 if a Change in Control of the Company
has not occurred within such period; (ii) the termination of the Executive's 
employment with the Company based on Death, Disability (as defined in Section 
3(b), Retirement (as defined in Section 3(c)), Cause (as defined in Section 
3(d)) or by the Executive other than for Good Reason (as defined in Section 
3(e)); and (iii) two years from the date of a Change in Control of the Company 
if the Executive has not voluntarily terminated his employment for Good Reason 
as of such time.
     Section 2.  Change in Control:  No compensation shall be payable under 
this Agreement unless and until (a) there shall have been a Change in Control
of the Company, while the Executive is still an employee of the Company and (b) 
the Executive's employment by the Company thereafter shall have been terminated
in accordance with Section 3.  For purposes of this Agreement, a Change in 
Control of the Company shall be deemed to have occurred if (i) there shall 
be consummated (x) any consolidation or merger of the Company in which the 
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's Common Stock would be converted into cash, securities
or other property, other than a merger of the Company in which the holders of
the Company's Common Stock immediately prior to the merger have the same 
proportionate ownership of common stock of the surviving corporation 
immediately after the merger, or (y) any sale, lease, exchange or other 
transfer (in one transaction or a series of related transactions) of all, or 
substantially all, of the assets of the Company, or (ii) the Shareholders of 
the Company approved any plan or proposal for the liquidation or dissolution 
of the Company, or (iii) any person (as such term is used in Sections 13(d) 
and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange 
Act")), shall become the beneficial owner (within the meaning of Rule 13d-3 
under the Exchange Act) of twenty percent (20%) or more of the Company's 
outstanding Common Stock, or (iv) during any period of two consecutive years, 
individuals who at the beginning of such period constitute the entire Board of 
Directors shall cease for any reason to constitute a majority thereof unless 
the election, or the nomination for election by the Company's Shareholders, of 
each new Director was approved by a vote of at least two-thirds of the 
Directors then still in office who were Directors at the beginning of the 
period.
     Section 3.  Termination Following Change in Control:  (a) If a Change in 
Control of the Company shall have occurred while the Executive is still an 
employee of the Company, the Executive shall be entitled to the compensation 
provided in Section 4 upon the subsequent termination of the Executive's 
employment with the Company by the Executive voluntarily for Good Reason or by 
the Company unless such termination by the Company is as a result of (i) the 
Executive's Death, (ii) the Executive's Disability (as defined in Section 
(3)(b) below); (iii) the Executive's Retirement (as defined in Section 3(c) 
below); (iv) the Executive's termination by the Company for Cause(as defined 
in Section 3(d) below); or (v) the Executive's decision to terminate 
employment other than for Good Reason (as defined in Section 3(e) below).
(b)  Disability:  If, as a result of the Executive's incapacity due to 
physical or mental illness, the Executive shall have been absent from his 
duties with the Company on a full-time basis for six months (including months 
before and after the change of control) and within 30 days after written 
notice of termination is thereafter given by the Company the Executive shall 
not have returned to the full- time performance of the Executive's duties, the 
Company may terminate this Agreement for "Disability."
(c)  Retirement:  The term "Retirement" as used in this Agreement shall mean 
termination in accordance with the Company's retirement policy or any 
arrangement established with the consent of the Executive.
(d)  Cause:  The Company may terminate the Executive's employment for Cause.  
For purposes of this Agreement only, the Company shall have "Cause" to 
terminate the Executive's employment hereunder only on the basis of fraud, 
misappropriation or embezzlement on the part of the Executive or malfeasance 
or misfeasance by said Executive in performing the duties of his office, as 
determined by the Board of Directors.  Notwithstanding the foregoing, the 
Executive shall not be deemed to have been terminated for Cause unless and 
until there shall have been a meeting of the Company's Board of Directors 
(after reasonable notice to the Executive and an opportunity for the 
Executive, together with the Executive's counsel, to be heard before the 
Board), and the delivery to the Executive of a resolution duly adopted by the 
affirmative vote of not less than three-quarters of the entire membership of 
said Board of Directors stating that in the good faith opinion of the Board 
the Executive was guilty of conduct set forth in the second sentence of this 
Section 3(d) and specifying the particulars thereof in detail.
(e)  Good Reason:  The Executive may terminate the Executive's employment for 
Good Reason at any time during the term of this Agreement.  For purposes of 
this Agreement "Good Reason" shall mean any of the following (without the 
Executive's express written consent):
(i)  the assignment to the Executive by the Company of duties inconsistent 
with the Executive's position, duties, responsibilities and status with the 
Company immediately prior to a Change in Control of the Company; or a change 
in the Executive's titles or offices as in effect immediately prior to a 
Change in Control of the Company; or any removal of the Executive from or 
any failure to reelect the Executive to any of the positions held prior to the 
change of control, except in connection with the termination of his employment 
for Disability, Retirement, or Cause, or as a result of the Executive's Death; 
or by the Executive other than for Good Reason;

(ii)  a reduction by the Company in the Executive's base salary as in effect 
on the date hereof or as the same may be increased from time to time during 
the term of this Agreement or the Company's failure to increase (within 12 
months of the Executive's last increase in base salary) the Executive's base 
salary after a Change in Control of the Company in an amount which at least 
equals, on a percentage basis, the average percentage increase in base salary 
for all executive officers of the Company effected in the preceding 12 months;

(iii)  any failure by the Company to continue in effect any benefit plan or 
arrangement (including, without limitation, the Company's Profit Sharing Plan, 
group life insurance plan and medical, dental, accident and disability plans) 
in which the Executive is participating at the time of a Change in Control of 
the Company (or any other plans providing the Executive with substantially 
similar benefits) (hereinafter referred to as "Benefit Plans"), or the taking 
of any action by the Company which would adversely affect the Executive's 
participation in or materially reduce the Executive's benefits under any such 
Benefit Plan or deprive the Executive of any material fringe benefit enjoyed 
by the Executive at the time of a Change in Control of the Company;

(iv)  any failure by the Company to continue in effect any plan or arrangement 
to receive securities of the Company (including, without limitation, Stock 
Option Plans or any other plan or arrangement to receive and exercise stock 
options, restricted stock or grants thereof) in which the Executive is 
participating at the time of a Change in Control of the Company (or plans or 
arrangements providing him with substantially similar benefits) (hereinafter 
referred to as "Securities Plans") and the taking of any action by the Company 
which would adversely affect the Executive's participation in or materially 
reduce the Executive's benefits under any such Securities Plan;

(v)  any failure by the Company to continue in effect any bonus plan, 
automobile allowance plan, or other incentive payment plan in which the 
Executive is participating at the time of a Change in Control of the Company, 
or said Executive had participated in during the previous calendar year;

(vi)  a relocation of the Company's principal executive offices to a location 
outside of North Carolina, or the Executive's relocation to any place other 
than the location at which the Executive performed the Executive's duties 
prior to a Change in Control of the Company, except for required travel by the 
Executive on the Company's business to an extent substantially consistent with 
the Executive's business travel obligations at the time of a Change in Control 
of the Company;

(vii)  any failure by the Company to provide the Executive with the number of 
paid vacation days to which the Executive is entitled at the time of a Change 
in Control of the Company;

(viii)  any breach by the Company of any provision of this Agreement;

(ix)  any failure by the Company to obtain the assumption of this Agreement by 
any successor or assign of the Company; or

(x)  any purported termination of the Executive's employment which is not made 
pursuant to a Notice of Termination satisfying the requirements of Section 
3(f).

(f)  Notice of Termination:  Any termination by the Company pursuant to 
Section 3(b), 3(c) or 3(d) shall be communicated by a Notice of Termination.  
For purposes of this Agreement, a "Notice of Termination" shall mean a written 
notice which shall indicate those specific termination provisions in this 
Agreement relied upon and which sets forth in reasonable detail the facts and 
circumstances claimed to provide a basis for termination of the Executive's 
employment under the provision so indicated.  For purposes of this Agreement, 
no such purported termination by the Company shall be effective without such 
Notice of Termination.

(g)  Date of Termination:  "Date of Termination" shall mean (a) if Executive's 
employment is terminated by the Company for Disability, 30 days after Notice 
of Termination is given to the Executive (provided that the Executive shall 
not have returned to the performance of the Executive's duties on a full-time 
basis during such 30 day period) or (b) if the Executive's employment is 
terminated by the Company for any other reason, the date on which a Notice of 
Termination is given; provided that if within 30 days after any Notice of 
Termination is given to the Executive by the Company the Executive notifies 
the Company that a dispute exists concerning the termination, the Date of 
Termination shall be the date the dispute is finally determined, whether by 
mutual agreement by the parties or upon final judgment, order or decree of a 
court of competent jurisdiction (the time for appeal therefrom having expired 
and no appeal having been perfected) or (c) the date the Executive notifies 
the Company in writing that he is terminating his employment and setting forth 
the Good Reason (as defined in Section 3(e)).

Section 4.  Severance Compensation upon Termination of Employment.  If the 
Company shall terminate the Executive's employment other than pursuant to 
Section 3(b), 3(c) or 3(d) or if the Executive shall voluntarily terminate his 
employment for Good Reason, then the Company shall pay to the Executive as 
severance pay in a lump sum, in cash, on the fifth day following the Date of 
Termination, an amount equal to 2.99 times the annualized aggregate 
annual compensation paid to the Executive by the Company or any of its 
subsidiaries during the five calendar years preceding the Change in Control of 
the Company; provided, however, that if the lump sum severance payment under 
this Section 4, either alone or together with other payments which the 
Executive has the right to receive from the Company, would constitute a 
"parachute payment" (as defined in Section 280G of the Internal Revenue Code 
of 1986, as amended (the "Code")), such lump sum severance payment shall be 
reduced to the largest amount as will result in no portion of the lump sum 
severance payment under this Section 4 being subject to the excise tax imposed 
by Section 4999 of the Code.  The determination of any reduction in the lump 
sum severance payment under this Section 4 pursuant to the foregoing proviso 
shall be made by the Company's Independent Certified Public Accountants, and 
their decision shall be conclusive and binding on the Company and the 
Executive.

Section 5.  No Obligation to Mitigate Damages; No Effect on Other Contractual 
Rights:  (a) The Executive shall not be required to mitigate damages or the 
amount of any payment provided for under this Agreement by seeking other 
employment or otherwise, nor shall the amount of any payment provided for 
under this Agreement be reduced by any compensation earned by the Executive as 
the result of employment by another employer after the Date of Termination, or 
otherwise.
(b)  The provisions of this Agreement, and any payment provided for hereunder, 
shall not reduce any amounts otherwise payable, or in any way diminish the 
Executive's rights under any employment agreement or 
other contract, plan or employment arrangement with the Company.
(c)  The Company shall, upon the termination of the Executive's employment 
other than by Death, Disability (as defined in Section 3(b)), Retirement (as 
defined in Section 3(c)) or Cause (as defined in Section 3(d)), or the 
termination of the Executive's employment by the Executive without Good 
Reason, maintain in full force and effect, for the Executive's continued 
benefit until the earlier of (a) two years after the Date of Termination or 
(b) Executive's commencement of full time employment with a new employer, all 
life insurance, medical, health and accident, and disability plans, programs 
or arrangements in which he was entitled to participate immediately prior to 
the Date of Termination, provided that his continued participation is possible 
under the general terms and provisions of such plans and programs.  In the 
event the Executive is ineligible under the terms of such plans or programs to 
continue to be so covered, the Company shall provide substantially equivalent 
coverage through other sources.
(d)  The Executive's account and rights in and under Unifi, Inc.'s Profit 
Sharing Plan and Trust, Unifi, Inc.'s Retirement Savings Plan and any other 
retirement benefit or incentive plans, shall remain subject to the terms and 
conditions of the respective plans as they existed at the time of the 
termination of the Executive's employment.

Section 6.  Successor to the Company:  (a) The Company will require any 
successor or assign (whether direct or indirect, by purchase, merger, 
consolidation or otherwise) to all or substantially all of the business and/or 
assets of the Company, by agreement expressly, absolutely and unconditionally 
to assume and agree to perform this Agreement in the same manner and to the 
same extent that the Company would be required to perform it if no such 
succession or assignment had taken place.  Any failure of the Company to 
obtain such agreement prior to the effectiveness of any such succession or 
assignment shall be a material breach of this Agreement and shall entitle the 
Executive to terminate the Executive's employment for Good Reason.  As used in 
this Agreement, "Company" shall mean the Company as hereinbefore defined and 
any successor or assign to its business and/or assets as aforesaid which 
executes and delivers the agreement provided for in this Section 6 or which 
otherwise becomes bound by all the terms and provisions of this Agreement by 
operation of law.  If at any time during the term of this Agreement the 
Executive is employed by any corporation a majority of the voting securities 
of which is then owned by the Company, "Company" as used in Sections 3, 4 and 
11 hereof shall in addition include such employer.  In such event, the Company 
agrees that it shall pay or shall cause such employer to pay any amounts owed 
to the Executive pursuant to Section 4 hereof.
(b)  If the Executive should die while any amounts are still payable to him 
hereunder, all such amounts, unless otherwise provided herein, shall be paid 
in accordance with the terms of this Agreement to the Executive's legatee, or
other designee or, if there be no such designee, to the Executive's estate. 
 This Agreement shall inure to the benefit of and be enforceable by the 
Executive's legal representatives or attorney-in-fact, executors or 
administrators, heirs, distributees and legatees.

Section 7.  Notice:  For purposes of this Agreement, notices and all other 
communications provided for in the Agreement shall be in writing and shall be 
deemed to have been duly given when delivered or mailed by United States 
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:

Unifi, Inc.
P. O. Box 19109
Greensboro, NC 27419-9109

ATTENTION:  Mr. William T. Kretzer
            President and Chief Executive Officer


If to the Executive:

Mr. Willis C. Moore, III
3801 Roundhill Road
Greensboro, NC 27408

or such other address as either party may have furnished to the other in 
writing in accordance herewith, except that notices of change of address shall 
be effective only upon receipt.
Section 8.  Miscellaneous:  (a) The invalidity or unenforceability of any 
provisions of this Agreement shall not affect the validity or enforceability 
of any other provision of 
this Agreement, which shall remain in full force and effect.
(b)  Any payment or delivery required under this Agreement 
shall be subject to all requirements of the law with regard to withholding 
(including FICA tax), filing, making of reports and the like, and Company 
shall use its best efforts to satisfy promptly all such requirements.
(c)  Prior to the Change in Control of the Company, as herein defined, this 
Agreement shall terminate if Executive shall resign, retire, become 
permanently and totally disabled, or die.  This Agreement shall also terminate 
if Executive's employment as an executive officer of the Company shall have 
been terminated for any reason by the Board of Directors of the Company as 
constituted more than three (3) months prior to any Change in Control of the 
Company, as defined in Section 2 of this Agreement.
Section 9.  Legal Fees and Expenses:  The Company shall pay all legal fees and 
expenses which the Executive may incur as a result of the Company's contesting 
the validity, enforceability or the executive's interpretation of, or 
determinations under, this Agreement.
Section 10.  Confidentiality:  The Executive shall retain in confidence any 
and all confidential information known to the Executive concerning the Company 
and its business so long as such information is not otherwise publicly 
disclosed.






IN WITNESS WHEREOF, Unifi, Inc. has caused this Agreement to be signed by a 
member of the Company's Compensation Committee who is an outside director 
pursuant to resolutions duly adopted by the Board of Directors and its seal 
affixed hereto and the Executive has hereunto affixed his hand and seal 
effective as of the date first above written.

                                              UNIFI, INC. 


                                       BY: ROBERT A. WARD  (SEAL)
                                         Compensation Committee



                                            WILLIS C. MOORE, III    (SEAL)
                                            WILLIS C. MOORE, III
                                 Vice President and Chief Financial Officer





                                        EXHIBIT (13a)

Consolidated balance sheets
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
(Amounts in thousands)                          June 28, 1998    June 29, 1997
- -------------------------------------------   ---------------   --------------
<S>                                           <C>               <C>
ASSETS:
Current assets:
  Cash and cash equivalents                     $     8,372      $     9,514
  Receivables                                       222,310          224,233
  Inventories                                       137,201          142,263
  Other current assets                                1,308            3,688
- -------------------------------------------     -----------      -----------
   Total current assets                             369,191          379,698
- -------------------------------------------     -----------      -----------

Property, plant and equipment:
  Land                                                6,525            6,836
  Buildings and air conditioning                    206,559          216,441
  Machinery and equipment                           772,504          739,599
  Other                                             160,034          184,272
- -------------------------------------------     -----------      -----------
                                                  1,145,622        1,147,148
  Less: accumulated depreciation                    497,042          548,775
- -------------------------------------------     -----------      -----------
                                                    648,580          598,373
Investment in unconsolidated affiliates             212,448            1,851
Other noncurrent assets                             108,585           38,781
- -------------------------------------------     -----------      -----------
                                                $ 1,338,804      $ 1,018,703
                                                -----------      -----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
  Accounts payable                              $    93,922      $   119,623
  Accrued expenses                                   43,939           35,854
  Income taxes payable                                5,218            6,887
  Current maturities of long-term debt and
   other current liabilities                         16,234            1,189
- -------------------------------------------     -----------      -----------
   Total current liabilities                        159,313          163,553
- -------------------------------------------     -----------      -----------
Long-term debt and other liabilities                463,967          255,799
- -------------------------------------------     -----------      -----------
Deferred income taxes                                62,970           50,820
- -------------------------------------------     -----------      -----------
Minority interests                                   16,357               --
- -------------------------------------------     -----------      -----------
Shareholders' equity:
  Common stock                                        6,163            6,121
  Capital in excess of par value                     22,454               --
  Retained earnings                                 618,128          545,099
  Cumulative translation adjustment                 (10,548)          (2,689)
- -------------------------------------------     -----------      -----------
                                                    636,197          548,531
- -------------------------------------------     -----------      -----------
                                                $ 1,338,804      $ 1,018,703

- -------------------------------------------     -----------      -----------
</TABLE>


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

18

<PAGE>
Consolidated Statements of income
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
(Amounts in thousands, except per share data)                June 28, 1998     June 29, 1997    June 30, 1996
- --------------------------------------------------------   ---------------   ---------------   --------------
<S>                                                        <C>               <C>               <C>

Net sales                                                    $ 1,377,609       $ 1,704,926      $ 1,603,280
- --------------------------------------------------------     -----------       -----------      -----------
Costs and expenses:
 Cost of sales                                                 1,149,838         1,473,667        1,407,608
 Selling, general and administrative expense                      43,277            46,229           45,084
 Interest expense                                                 16,598            11,749           14,593
 Interest income                                                  (1,869)           (2,219)          (6,757)
 Other (income) expense                                              389               819           (4,390)
 Equity in (earnings) losses of unconsolidated
   affiliates                                                    (22,307)              399               --
 Non-recurring charge                                                 --                --           23,826
- --------------------------------------------------------     -----------       -----------      -----------
                                                               1,185,926         1,530,644        1,479,964
- -------                                                      -----------       -----------      -----------
Income before income taxes and other items listed
 below                                                           191,683           174,282          123,316
Provision for income taxes                                        62,782            58,617           44,939
- --------------------------------------------------------     -----------       -----------      -----------
Income before extraordinary item and cumulative
 effect of accounting change                                     128,901           115,665           78,377
Extraordinary item (net of applicable income taxes of
$ 3,692)                                                              --                --            5,898
Cumulative effect of accounting change (net of
 applicable income taxes of $2,902)                                4,636                --               --
- --------------------------------------------------------     -----------       -----------      -----------
Net income                                                   $   124,265       $   115,665      $    72,479
- --------------------------------------------------------     -----------       -----------      -----------
Earnings per common share:
 Income before extraordinary item and cumulative
   effect of accounting change                               $      2.10       $      1.83      $      1.19
 Extraordinary item                                                   --                --              .09
 Cumulative effect of accounting change                              .07                --               --
- --------------------------------------------------------     -----------       -----------      -----------
 Net income per common share                                 $      2.03       $      1.83      $      1.10
- --------------------------------------------------------     -----------       -----------      -----------

Earnings per common share -- assuming dilution:
 Income before extraordinary item and cumulative
   effect of accounting change                               $      2.08       $      1.81      $      1.18
 Extraordinary item                                                   --                --              .09
 Cumulative effect of accounting change                              .07                --               --
- --------------------------------------------------------     -----------       -----------      -----------
 Net income per common share                                 $      2.01       $      1.81      $      1.09
- --------------------------------------------------------     -----------       -----------      -----------
</TABLE>


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

                                                                              19

<PAGE>
Consolidated Statements of Changes in shareholders' equity
- --------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                           Capital in                     Cumulative       Unrealized Gains
(Amounts in thousands,             Shares       Common      Excess of       Retained     Translation    (Losses) on Certain
except per share data)        Outstanding        Stock      Par Value       Earnings      Adjustment            Investments
- -------------------------   -------------   ----------   ------------   ------------   -------------   --------------------
<S>                         <C>             <C>          <C>            <C>            <C>             <C>
Balance June 25, 1995           67,140       $ 6,714      $ 117,277      $  473,962      $   4,415           $  1,134
- -------------------------       ------       -------      ---------      ----------      ---------           --------
 Purchase of stock              (2,347)         (235)       (55,315)             --             --                 --
 Options exercised                  36             4            242              --             --                 --
 Conversion of 6%
   subordinated notes                2            --             51              --             --                 --
 Cash dividends --
   $.52 per share                   --            --             --         (34,188)            --                 --
 Currency translation
   adjustments                      --            --             --              --         (2,200)                --
 Change in unrealized
   gains (losses) on
   certain investments              --            --             --              --             --             (1,134)
 Net income                         --            --             --          72,479             --                 --
- -------------------------       ------       -------      ---------      ----------      ---------           --------
Balance June 30, 1996           64,831         6,483         62,255         512,253          2,215                 --
- -------------------------       ------       -------      ---------      ----------      ---------           --------
 Purchase of stock              (3,901)         (390)       (64,786)        (55,824)            --                 --
 Options exercised                 280            28          2,531          (1,404)            --                 --
 Stock option tax
   benefit                          --            --             --           2,307             --                 --
 Cash dividends --
   $.44 per share                   --            --             --         (27,898)            --                 --
 Currency translation
   adjustments                      --            --             --              --         (4,904)                --
 Net income                         --            --             --         115,665             --                 --
- -------------------------       ------       -------      ---------      ----------      ---------           --------
Balance June 29, 1997           61,210         6,121             --         545,099         (2,689)                --
- -------------------------       ------       -------      ---------      ----------      ---------           --------
 Purchase of stock                (539)          (54)          (618)        (19,515)            --                 --
 Options exercised                 402            40          2,154              --             --                 --
 Stock option tax
   benefit                          --            --             --           2,599             --                 --
 Stock issued for
   acquisition                     561            56         20,918              --             --                 --
 Cash dividends --
   $.56 per share                   --            --             --         (34,320)            --                 --
 Currency translation
   adjustments                      --            --             --              --         (7,859)                --
 Net income                         --            --             --         124,265             --                 --
- -------------------------       ------       -------      ---------      ----------      ---------           --------
Balance June 28, 1998           61,634       $ 6,163      $  22,454      $  618,128      $ (10,548)          $     --
- -------------------------       ------       -------      ---------      ----------      ---------           --------
</TABLE>


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

20

<PAGE>
Consolidated Statements of cash flows
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
(Amounts in thousands)                                       June 28, 1998     June 29, 1997    June 30, 1996
- --------------------------------------------------------   ---------------   ---------------   --------------
<S>                                                        <C>               <C>               <C>

Cash and cash equivalents at beginning of year               $    9,514        $   24,473        $   60,350
Operating activities:
 Net income                                                     124,265           115,665            72,479
 Adjustments to reconcile net income to net cash
   provided by operating activities:
   Extraordinary item (net of applicable income
    taxes)                                                           --                --             5,898
   Cumulative effect of accounting change (net of
    applicable income taxes)                                      4,636                --                --
   (Earnings) losses of unconsolidated equity
    affiliates, net of distributions                            (15,282)              399                --
   Depreciation                                                  65,033            85,533            79,628
   Amortization                                                   4,677             2,366             2,261
   Non-cash portion of non-recurring charge                          --                --            23,826
   Gain on sale of investments                                       --                --            (4,476)
   Deferred income taxes                                         12,201            17,157            (4,795)
   Other                                                           (350)              (85)            4,263
   Changes in assets and liabilities, excluding effects of 
    acquisitions and foreign currency adjustments:
    Receivables                                                   9,628           (26,441)            9,428
    Inventories                                                    (793)          (10,032)           13,640
    Other current assets                                          1,556              (462)              987
    Payables and accruals                                       (25,213)            9,260            (5,865)
    Income taxes                                                  1,329            (9,524)            4,182
- --------------------------------------------------------     ----------        ----------        ----------
 Net -- operating activities                                    181,687           183,836           201,456
- --------------------------------------------------------     ----------        ----------        ----------
Investing activities:
 Capital expenditures                                          (250,064)         (143,176)         (133,967)
 Acquisitions                                                   (25,776)               --           (48,444)
 Investments in unconsolidated equity affiliates                (39,492)           (2,250)               --
 Sale of capital assets                                           2,428             3,046             2,290
 Purchase of investments                                             --                --           (60,474)
 Sale of investments                                                 --                --           149,015
 Other                                                           (2,755)              768            11,444
- --------------------------------------------------------     ----------        ----------        ----------
 Net -- investing activities                                   (315,659)         (141,612)          (80,136)
- --------------------------------------------------------     ----------        ----------        ----------
Financing activities:
 Borrowing of long-term debt                                    440,273           187,500           225,000
 Repayment of long-term debt                                   (252,844)         (100,513)         (284,949)
 Premium paid on early retirement of debt                            --                --            (7,657)
 Issuance of Company stock                                        2,194             3,462               246
 Stock option tax benefit                                         2,599             2,307                --
 Purchase and retirement of Company stock                       (20,187)         (121,000)          (55,550)
 Cash dividends paid                                            (34,320)          (27,898)          (34,188)
 Other                                                           (4,006)               --                --
- --------------------------------------------------------     ----------        ----------        ----------
 Net -- financing activities                                    133,709           (56,142)         (157,098)
- --------------------------------------------------------     ----------        ----------        ----------
Currency translation adjustment                                    (879)           (1,041)              (99)
- --------------------------------------------------------     ----------        ----------        ----------
Net increase (decrease) in cash and cash equivalents             (1,142)          (14,959)          (35,877)
- --------------------------------------------------------     ----------        ----------        ----------
Cash and cash equivalents at end of year                     $    8,372        $    9,514        $   24,473
- --------------------------------------------------------     ----------        ----------        ----------
</TABLE>


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

                                                                              21

<PAGE>

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 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 are reported using the
equity method.
      FISCAL YEAR: The Company's fiscal year is the fifty-two or fifty-three
weeks ending the last Sunday in June. The current year ended June 28, 1998, and
the prior year ended June 29, 1997, consisted of fifty-two weeks. The year ended
June 30, 1996, consisted of fifty-three weeks.
      RECLASSIFICATION: The Company has reclassified the presentation of certain
prior year information to conform with the current presentation format.
      REVENUE RECOGNITION: Substantially all revenue from sales is recognized
at the time shipments are made.
      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. Gains and losses resulting from foreign currency
transactions (transactions denominated in a currency other than the subsidiary's
functional currency) are included in net income.
      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 28,
1998, and June 29, 1997, were $49.2 million and $55.9 million, respectively. An
allowance for losses is provided for known and potential losses rising from yarn
quality claims and for customers not factored based on a periodic review of
these accounts. Reserve for such losses was $8.2 million at June 28, 1998, and
$5.5 million at June 29, 1997. 
      INVENTORIES: The Company utilizes the last-in, first-out (LIFO) method for
valuing certain inventories representing 62.9% of all inventories at June 28,
1998, 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 $8.9 million and $13.9 million in excess of the LIFO valuation at
June 28, 1998, and June 29, 1997, respectively. Finished goods, work in process,
and raw materials and supplies at June 28, 1998, and June 29, 1997, amounted to
$77.4 million and $72.0 million; $14.8 million and $11.8 million; and $45.0
million and $58.5 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 28, 1998, and
June 29, 1997, consist primarily of the cash surrender value of key executive
life insurance policies ($7.1 million and $6.5 million, respectively);
unamortized bond issue costs ($7.5 million at June 28, 1998); and acquisition
related assets consisting of the excess cost over fair value of net assets
acquired and other intangibles ($83.9 million and $32.1 million, respectively).
Bond issue costs are being amortized on the straight-line method over the life
of the bonds which approximates the effective interest method. The acquisition
related assets are being amortized on the straight-line method over periods
ranging between five and thirty years. Accumulated amortization at June 28, 1998
and June 29, 1997, for bond issue costs and acquisition related assets was $11.2
million and $3.7 million, respectively.
      LONG-LIVED ASSETS: Long-lived assets, including goodwill, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the sum of expected future
undiscounted cash flows is less than the carrying amount of the asset, a loss is
recognized for the difference between fair value and the carrying amount of the
asset.
      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 bases 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 PER SHARE: In February 1997, the FASB issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," (SFAS 128) which
was required to be adopted in the December 1997 fiscal quarter. The Company
adopted SFAS 128 at such time and restated all prior periods. Under the new
requirements for calculating basic earnings per share, the dilutive effect of
stock options is excluded. Diluted earnings per share continues to reflect the
assumed conversion of all potentially diluted securities. The effect of the
convertible subordinated notes, which were redeemed in April 1996, was
anti-dilutive for fiscal 1996. Accordingly, diluted weighted average shares for
1996 exclude the convertible effect of these notes.


22

<PAGE>
The following table details the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                June 28,     June 29,    June 30,
(Amounts in thousands)              1998         1997        1996
- ---------------------------   ----------   ----------   ---------
<S>                           <C>          <C>          <C>
Numerator:
   Income before
     extraordinary item
     and cumulative effect
     of accounting change     $128,901     $115,665     $78,377
   Extraordinary item               --           --       5,898
   Cumulative effect of
     accounting change           4,636           --          --
- ---------------------------   --------     --------     -------
   Net income                 $124,265     $115,665     $72,479
- ---------------------------   --------     --------     -------
Denominator:
   Denominator for basic
     earnings per
     share -- weighted
     average shares             61,331       63,294      65,727
   Effect of dilutive
     securities:
     Stock options                 525          641         484
- ---------------------------   --------     --------     -------
   Diluted potential 
     common shares 
     denominator for 
     diluted earnings per
     share -- adjusted 
     weighted average 
     shares and assumed
     conversions                61,856       63,935      66,211
- ---------------------------   --------     --------     -------
</TABLE>


      STOCK-BASED COMPENSATION: FASB Statement No. 123, "Stock-Based
Compensation," (SFAS 123) became effective beginning with the Company's first
quarter of fiscal 1997. With 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 270,500 options granted in fiscal 1997 (which vest over a two year
period) and 283,000 options granted in fiscal 1996. No options were granted in
fiscal 1998. Net income in fiscal 1998, 1997 and 1996 restated for the effect
would have been $122.8 million or $1.98 per diluted share, $115.1 million or
$1.80 per diluted share and $70.1 million or $1.06 per diluted share,
respectively. The fair value and related compensation expense of the 1997 and
1996 options were calculated as of the issuance date using the Black-Scholes
model with the following assumptions:




<TABLE>
<CAPTION>
Options Granted                 1997        1996
- ------------------------   ---------   ---------
<S>                        <C>         <C>
 Expected life (years)      10.0        10.0
 Interest rate              6.18%       6.87%
 Volatility                 31.1%       34.0%
 Dividend yield             1.72%       1.93%
</TABLE>



      RECENT ACCOUNTING PRONOUNCEMENTS: In June 1997, the FASB issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"
(SFAS 130) which the Company is required to adopt in the first quarter of fiscal
1999. 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 foreign currency translation adjustments, unrealized gains and
losses on available-for-sale securities and certain minimum pension liabilities.
Foreign currency translation adjustments presently represent the primary
component of comprehensive income for the Company. The Company expects to
reflect comprehensive income in its consolidated statement of changes in
shareholders' equity when this standard is adopted. Results of operations and
financial position, however, will be unaffected by the implementation of this
standard.
      Also 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 the Company is required to adopt 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.
      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.
      In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," (SOP 98-5) which is effective for the Company in fiscal
year 2000, if not previously adopted. SOP 98-5 requires


                                                                              23

<PAGE>
start-up costs, as defined, to be expensed as incurred. Upon adoption of SOP
98-5, any previously capitalized start-up costs net of accumulated depreciation
will be required to be written-off as a cumulative effect of a change in
accounting principle. The Company has not yet determined what the impact of SOP
98-5 will be on its financial statements upon 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 years beginning after June 15,
1999. 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
SFAS 133 will be on the earnings and financial position of the Company.
      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


On November 14, 1997, the Company completed its Agreement and Plan of Triangular
Merger with SI Holding Company and thereby acquired their covered yarn business
for approximately $46.6 million. Additionally, covenants-not-to-compete were
entered into with the principal operating officers of the acquired company in
exchange for $9.2 million, to be paid generally over the terms of the covenants.
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 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. After allocation of the purchase
price to the net assets acquired, the excess of cost over fair value has been
preliminarily valued at $31.2 million.
      The acquisition of the Norlina Division of Glen Raven Mills, Inc. was
consummated on November 17, 1995. The acquisition, which was not deemed
significant to the Company's consolidated net assets or the results of
operations, has been accounted for as a purchase. The purchase price of $48.4
million was allocated to the net assets acquired with the excess of cost over
fair value of the net assets acquired approximating $35.7 million after giving
effect to all purchase adjustments.


3     Non-Recurring Charge

During the fiscal 1996 first quarter, the Company recognized a non-recurring
charge to earnings of $23.8 million ($14.9 million after-tax or $0.23 per
diluted share) related to restructuring plans to further reduce the Company's
cost structure and improve productivity through the consolidation of certain
manufacturing operations and the disposition of underutilized assets. The
restructuring plan focused on the consolidation of production facilities
acquired via mergers during the preceding four years. As part of the
restructuring action, the Company closed its spun cotton manufacturing
facilities in Edenton and Mount Pleasant, North Carolina, with the majority of
the manufacturing production being transferred to other facilities. The
significant components of the non-recurring charge included $2.4 million of
severance and other employee-related costs from the termination of employees and
a $21.4 million write-down to estimated fair value less the cost of disposal of
underutilized assets and consolidated facilities to be disposed. Costs
associated with the relocation of equipment or personnel were expensed as
incurred. The Company has completed substantially all of these restructuring
efforts and anticipates no material differences in actual charges compared to
its original estimates.

4     Cumulative Effect of Accounting Change and Extraordinary Charge

Pursuant to Emerging Issues Task Force No. 97-13 issued in November 1997, the
Company changed its accounting policy in the second quarter of fiscal 1998
regarding a project to install an entirely new computer software system which it
began in fiscal 1995. Previously, substantially all direct external costs
relating to the project were capitalized, including the portion related to
business process reengineering. In accordance with this accounting
pronouncement, the unamortized balance of these reengineering costs as of
September 28, 1997, of $7.5 million ($4.6 million after tax) or $.07 per diluted
share were written off as a cumulative catch-up adjustment in the second quarter
of fiscal 1998.
      During the fiscal 1996 fourth quarter, the Company recognized an
extraordinary after-tax charge of $5.9 million or $0.09 per diluted share as a
result of the redemption of the $230 million in 6% convertible subordinated
notes due 2002. In accordance with the debt agreement, the note holders had an
option to convert their notes at a conversion rate of 33.7 shares of common
stock for each $1,000 principal amount of notes. Notes aggregating $51,000 were
converted into


24

<PAGE>
1,718 shares of common stock in accordance with this provision. The remaining
notes, totaling $229.9 million, were redeemed at 103.33% of principal amount,
with accrued interest to the date of redemption.


5     Long-Term Debt and Other Liabilities


A summary of long-term debt follows:

<TABLE>
<CAPTION>
(Amounts in thousands)           June 28, 1998    June 29, 1997
- ----------------------------   ---------------   --------------
<S>                            <C>               <C>
Bonds payable                  $    248,038      $     --
Revolving credit facility           180,000       230,000
Sale-leaseback obligation             3,444        26,988
Other bank debt and other
   obligations                       48,719            --
- ----------------------------   ------------      --------
  Total debt                        480,201       256,988
Current maturities                   16,234         1,189
- ----------------------------   ------------      --------
  Total long-term debt
     and other liabilities     $    463,967      $255,799
- ----------------------------   ------------      --------
</TABLE>


      In February 5, 1998, the Company issued $250 million of senior, unsecured
debt securities (the "Notes") to qualified institutional buyers. The net
proceeds from the sale were used to repay a portion of the Company's bank credit
facility. The Notes, which were registered with the Securities and Exchange
Commission on April 2, 1998, bear a coupon rate of 6.50% and mature in 2008. The
estimated fair value of the Notes, based on quoted market prices, at June 28,
1998, was approximately $247.4 million.
      The Company entered a $400 million revolving credit facility dated April
15, 1996, with a group of financial institutions that extends through April 15,
2001. The rate of interest charged is adjusted quarterly based on a pricing grid
which is a function of the ratio of the Company's debt to earnings before income
taxes, depreciation, amortization and other non-cash charges. The credit
facility provides 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 pays 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 fiscal years 1998 and 1997, were 5.89% and 5.75%,
respectively. At June 28, 1998, and June 29, 1997, the interest rates on the
outstanding balances were 5.92% and 5.87%, respectively. As a result of the
variable nature of the credit facility's interest rate, the fair value of the
Company's revolving credit debt approximates its carrying value.
      The revolving credit facility also provides the Company the option to
borrow funds competitively from the individual lenders, at their discretion,
provided that the sum of the competitive bid loans and the aggregate funds
committed under the revolving credit facility do not exceed the total committed
amount. The revolving credit facility allows the Company to reduce the
outstanding commitment in whole or in part upon satisfactory notice up to an
amount no less than the sum of the aggregate competitive bid loans and the total
committed loans. Any such partial termination is permanent. The Company may also
elect to prepay loans in whole or in part. Amounts paid in accordance with this
provision may be re-borrowed.
      The terms of the revolving credit facility contain, among other
provisions, requirements for maintaining certain net worth and other financial
ratios and specific limits or restrictions on additional indebtedness, liens and
merger activity. Provisions under this agreement are not considered restrictive
to normal operations.
      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. Sales proceeds aggregated $27.5 million. The terms of the agreement
provide for an early purchase option at the end of year nine. If the agreement
has not been terminated before the end of the lease term, by exercising the
early purchase option or otherwise, the Company is required to purchase the
leased properties at the end of the lease term for an amount equal to the fair
market value as defined in the agreement. 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. 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. Principal payments required over the next five
years are approximately $100 thousand per year. The interest rate implicit in
the agreement is 7.84%, and the fair value of the long-term obligation at June
28, 1998, approximates its carrying value.
      Other bank debt and other obligations consist of non-domestic borrowings
of approximately $1.8 million, acquisition related liabilities due within the
next five years of $41.9 million and a liability for a deferred compensation
plan of approximately $5.0 million. Maturities of the acquisition obligations
for the next five years are $16.1 million, $16.0 million, $4.0 million, $3.0
million, and $2.8 million, respectively.
      Interest capitalized during fiscal 1998 and 1997 was $6.8 million and $0.9
million, respectively.


                                                                              25

<PAGE>
6     Income Taxes


The provision for income taxes before the extra-ordinary item in fiscal 1996 and
cumulative effect of accounting change in fiscal 1998 consisted of the
following:

<TABLE>
<CAPTION>
                               June 28,     June 29,      June 30,
(Amounts in thousands)             1998         1997          1996
- ------------------------   ------------   ----------   -----------
<S>                           <C>            <C>          <C>       
Currently payable:           
   Federal                    $43,245        $34,235      $42,289
   State                        5,704          6,074        6,953
   Foreign                      1,474          1,151          492
- ------------------------      -------        -------      -------
   Total current               50,423         41,460       49,734
- ------------------------      -------        -------      -------
Deferred:                    
   Federal                     23,799         18,929       (4,080)
   State                      (11,715)        (1,994)        (604)
   Foreign                        275            222         (111)
- ------------------------      -------        -------      -------
   Total deferred              12,359         17,157       (4,795)
- ------------------------      -------        -------      -------
Income taxes before       
   extraordinary
   item and
   cumulative effect
   of accounting
   change                     $62,782        $58,617      $44,939
- ------------------------      -------        -------      -------
</TABLE>


      Income taxes were 32.8%, 33.6% and 36.4% of pretax earnings in fiscal
1998, 1997 and 1996, respectively. A reconciliation of the provision for income
taxes (before extraordinary item and cumulative effect of accounting change,
where applicable) with the amounts obtained by applying the federal statutory
tax rate is as follows:



<TABLE>
<CAPTION>
                                    June 28,     June 29,    June 30,
                                        1998         1997        1996
                              --------------   ----------   ---------
<S>                           <C>              <C>          <C>
Federal statutory tax
   rate                               35.0%        35.0%    35.0%
State income taxes net
   of federal tax benefit              2.9          3.2      3.3
State tax credits net of
   federal tax benefit                (4.9)        (1.7)      --
Foreign taxes less than              
   domestic rate                      (1.9)        (1.8)    (0.8)
Foreign Sales                        
   Corporation tax                   
   benefit                            (0.4)        (0.5)    (0.9)
Research and                     
   experimentation
   credit                               --           --     (0.6)
Nondeductible
   expenses and other                  2.1         (0.6)     0.4
- ---------------------------       --------         ----     -----
Effective tax rate                    32.8%        33.6%    36.4%
- ---------------------------       --------         ----     -----
</TABLE>



      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 28, 1998, and June 29,
1997, were as follows:

<TABLE>
<CAPTION>
                                     June 28,    June 29,
(Amounts in thousands)                   1998        1997
- --------------------------------   ----------   ---------
<S>                                <C>          <C>
Deferred tax liabilities:
   Property, plant and
      equipment                    $75,184      $62,899
   Investments in equity
      affiliates                     7,257           --
- --------------------------------   -------      -------
Total deferred tax liabilities      82,441       62,899
- --------------------------------   -------      -------
Deferred tax assets:
   Accrued liabilities and
      valuation reserves             2,684        4,421
   State tax credits                12,379        2,963
   Other items                       4,408        4,695
- --------------------------------   -------      -------
Total deferred tax assets           19,471       12,079
- --------------------------------   -------      -------
Net deferred tax liabilities       $62,970      $50,820
- --------------------------------   -------      -------
</TABLE>


7     Common Stock and Stock Option Plans


Shares authorized were 500 million in 1998 and 1997. Common shares outstanding
at June 28, 1998, and June 29, 1997, were 61,634,386 and 61,209,588,
respectively.
      The Company has Incentive Stock Option Plans with 1,942,133 shares
reserved at June 28, 1998. There remain 1,000,000 options available for grant at
year end. The Company also has a Non-Qualified Stock Option Plan with 1,645,667
shares reserved at June 28, 1998. There remain 534,500 options available for
grant at year end. The transactions for 1998, 1997 and 1996 were as follows:


26

<PAGE>

<TABLE>
<CAPTION>
                                                          ISO                             NQSO
                                             ------------------------------   -----------------------------
                                                   Options         Weighted         Options        Weighted
                                               outstanding     avg. $/share     outstanding    avg. $/share
                                             -------------   --------------   -------------   -------------
<S>                                          <C>             <C>              <C>             <C>
Fiscal 1996:
Shares under option -- beginning of year      1,739,968      $  18.13            738,519      $ 25.49
Granted                                         165,500        24.67                  --          --
Exercised                                       (55,500)       13.66                  --          --
Canceled                                        (56,590)       21.66             (45,000)       25.83
- ------------------------------------------    ---------      --------            -------      -------
Shares under option -- end of year            1,793,378      $  18.76            693,519      $ 25.47
- ------------------------------------------    ---------      --------            -------      -------
Fiscal 1997:
Granted                                              --      $    --             465,500      $ 28.64
Exercised                                      (346,787)        9.79                  --          --
Canceled                                             --           --                  --          --
- ------------------------------------------    ---------      --------            -------      -------
Shares under option -- end of year            1,446,591      $  20.91          1,159,019      $ 26.75
- ------------------------------------------    ---------      --------          ---------      -------

Fiscal 1998:
Granted                                              --      $    --                  --      $   --
Exercised                                      (504,458)       14.31             (47,852)       25.76
Canceled                                             --           --                  --          --
- ------------------------------------------    ---------      --------          ---------      -------
Shares under option -- end of year              942,133      $  24.45          1,111,167      $ 26.79
- ------------------------------------------    ---------      --------          ---------      -------
</TABLE>


<TABLE>
<CAPTION>
                                                                      Fiscal 1998         Fiscal 1997         Fiscal 1996
                                                               ------------------   -----------------   -----------------
<S>                                                            <C>                  <C>                 <C>
ISO:
 Exercisable shares under option -- end of year                       942,133            1,446,591           1,687,018
 Option price range                                            $ 10.19-$25.38       $  4.80-$25.38      $  3.80-$25.38
 Weighted average exercise price for options excerciseable     $        24.45       $        20.91      $        18.51
 Weighted average remaining life of shares under option                   6.2                  6.0                 6.3
 Fair value of options granted                                 $          --        $          --       $        11.43
NQSO:
 Exercisable shares under option -- end of year                     1,021,001              888,519             693,519
 Option price range                                            $ 25.38-$31.00       $ 23.88-$31.00      $ 23.88-$25.83
 Weighted average exercise price for options excercisable      $        26.42       $        25.45      $        25.47
 Weighted average remaining life of shares under option                   6.8                  7.8                 7.8
 Fair value of options granted                                 $          --        $        13.32      $          --
</TABLE>


     All options granted vest on the date of issuance except 270,500 of the
non-qualified options awarded in fiscal 1997 which have a two-year vesting
schedule. The first one-third were exercisable as of October 17, 1997, the
second one-third were exercisable on April 17, 1998, and the remaining one-third
are exercisable on April 17, 1999.


8     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 $13.0 million
in 1998 and $17.0 million in each of 1997 and 1996. The Company leases its
corporate office building from its profit-sharing plan through an independent
trustee.

9     Leases and Commitments


In addition to the direct financing sales-leaseback obligation described in note
5 above, 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 28, 1998, are $5.8 million in 1999, $5.0
million in 2000, $4.8 million in 2001, $1.9 million in 2002 and $1.2 million in
2003. Rental expense was $6.8 million, $5.0 million and $4.4 million for the
fiscal years 1998, 1997 and 1996, respectively. The Company had committed
approximately $127.2 million for the purchase of equipment and facilities at
June 28, 1998.


                                                                              27

<PAGE>
10    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. In fiscal years 1997 and 1996, the Company was also directly
involved with the spinning of cotton and cotton blend fibers. These operations
were contributed to a limited liability company on June 30, 1997, of which the
Company has a 34% ownership interest (see note 12).
      The Company's domestic operations serve customers principally located the
southeastern United States as well as international customers located primarily
in Canada, eastern Europe, and South America. During fiscal 1998 and 1997 the
Company did not have sales to any one customer in excess of 10% of consolidated
revenues; however, the Company had sales to one customer of approximately 12% in
1996. Export sales, excluding those to the Company's international operations in
Ireland, aggregated $185.5 million in 1998, $203.8 million in 1997 and $173.1
million in 1996. 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.
      The Company's foreign operations primarily consist of a manufacturing
operation in Ireland. Net sales, pre-tax operating income and total assets of
the Company's foreign and domestic operations are as follows:

<TABLE>
<CAPTION>
(Amounts in                  June 28,        June 29,        June 30,
thousands)                       1998            1997            1996
- ---------------------   -------------   -------------   -------------
<S>                     <C>             <C>             <C>
Foreign operations:
   Net sales            $  136,573      $  140,102      $  129,246
   Pre-tax income           15,107          12,683           4,015
   Total assets            127,586         112,203         117,578
Domestic operations:
   Net sales            $1,241,036      $1,564,824      $1,474,034
   Pre-tax income          176,576         161,599         119,301
   Total assets          1,211,218         906,500         833,506
</TABLE>


11    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) 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.
      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 equipment and inventory purchases. Generally 50-75% of the asset
cost is covered by forward contracts. 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. The outstanding hedge agreements as of June 28,
1998, mature through April 1999.
      The dollar equivalent of these forward currency contracts and their
related fair values are detailed below:

<TABLE>
<CAPTION>
                                             June 28,
(Amounts in thousands)                           1998
- --------------------------------------   ------------
<S>                                      <C>
Foreign currency purchase contracts:
   Notational amount                     $29,184
   Fair value                             31,418
- --------------------------------------   -------
      Net unrecognized (gain) loss       $(2,234)
- --------------------------------------   -------
Foreign currency sales contracts:
   Notational amount                     $28,446
   Fair value                             28,646
- --------------------------------------   -------
      Net unrecognized (gain) loss       $   200
- --------------------------------------   -------
</TABLE>


      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 note 5).
      Foreign currency contracts -- The fair value is based on quotes obtained
from brokers or reference to publicly available market information.


28

<PAGE>

12    Investment in Unconsolidated Affiliates

Investments in affiliates consist of a 34% interest in Parkdale America, LLC
(the LLC) and a 48.4% interest in Micell Technologies, Inc. (Micell(R)).
      The LLC was created on June 30, 1997, when the Company and Parkdale Mills,
Inc. (Parkdale) of Gastonia, North Carolina entered into a Contribution
Agreement (the Agreement) that set forth the terms and conditions whereby each
entity's open-end and air jet spun cotton yarn assets and certain long-term debt
obligations were contributed to the LLC. In accordance with the Agreement, each
entity's inventory, owned real and tangible personal property and improvements
thereon and the Company's leased real property associated with the operations
were contributed to the LLC. Additionally, the Company contributed $32.9 million
in cash to the LLC on June 30, 1997, and is required to contribute $10.0 million
in cash on June 30, 1998, and $10.0 million on June 30, 1999, whereas Parkdale
contributed cash of $51.6 million on June 30, 1997. The LLC assumed certain
long-term debt obligations of the Company and Parkdale in the amounts of $23.5
million and $46.0 million, respectively. In exchange for the assets contributed
to the LLC and the liabilities assumed by the LLC, the Company received a 34%
interest in the LLC and Parkdale received a 66% interest in the LLC. The excess
of the Company's investment over its equity in the underlying net assets of the
LLC approximates $67.9 million and is being amortized on a straight-line basis
over 30 years as a component of the equity in earnings of unconsolidated
affiliates. The pro forma consolidated statement of income of the Company for
fiscal 1997, assuming that the spun cotton yarn assets were contributed to the
LLC as of first day of fiscal 1997, results in net sales, pre-tax income, net
income and net income per diluted share of $1.4 billion, $186.3 million, $123.1
million and $1.93, respectively.
      Condensed balance sheet and income statement information as of June 28,
1998, and for the fiscal year ended June 28, 1998, of the combined LLC and
Micell is as follows:

<TABLE>
<CAPTION>
                                                   June 28,
(Amounts in thousands)                                 1998
- -------------------------------------------   -------------
<S>                                           <C>
Current assets                                $  260,358
Noncurrent assets                                264,194
Current liabilities                              134,110
Shareholders' equity and capital accounts        390,442
Net sales                                     $  652,097
Gross profit                                     108,649
Income from operations                            80,546
Net income                                        75,788
</TABLE>

      The LLC is organized as a partnership for tax purposes. Taxable income is
passed through the LLC to the shareholders in accordance with the Operating
Agreement of the LLC. For the fiscal year ended June 28, 1998, distributions
received by the Company from the LLC aggregated $7.7 million.


13    Supplemental Cash Flow Information


Supplemental cash flow information is summarized below:

<TABLE>
<CAPTION>
                             June 28,     June 29,    June 30,
(Amounts in thousands)           1998         1997        1996
- ------------------------   ----------   ----------   ---------
<S>                        <C>          <C>          <C>
 Cash payments for:
   Interest, net of
  amounts
  capitalized              $16,521      $12,064      $18,520
   Income taxes, net
  of refunds                47,488       45,726       38,427
 Stock issued for SI
   Holding
   Company
   acquisition             $21,000      $    --      $    --
 Redemption of 6%
   convertible
   subordinated
   notes                        --           --        1,983
</TABLE>


14    Polyester Business Venture


On April 23, 1998, the Company announced that it agreed to form a limited
liability company with Burlington Industries, Inc. (Burlington) of Greensboro,
North Carolina, to manufacture and market natural textured polyester yarns. The
limited liability company commenced operations on May 29, 1998. The Company has
the majority ownership (approximately 85%) and is managing the business, while
Burlington owns a minority interest.


                                                                              29

<PAGE>
Summary of selected financial data
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                  June 28, 1998   June 29, 1997   June 30, 1996   June 25, 1995  June 26, 1994
  (Amounts in thousands, except per share data)      (52 Weeks)      (52 Weeks)      (53 Weeks)      (52 Weeks)     (52 Weeks)
- ----------------------------------------------- --------------- --------------- --------------- --------------- --------------
<S>                                             <C>             <C>             <C>             <C>             <C>
Summary of Earnings:
Net sales                                         $1,377,609      $1,704,926      $1,603,280      $1,554,557      $1,384,797
Cost of sales                                      1,149,838       1,473,667       1,407,608       1,330,410       1,185,386
Gross profit                                         227,771         231,259         195,672         224,147         199,411
Selling, general and administrative
  expense                                             43,277          46,229          45,084          43,116          40,429
Interest expense                                      16,598          11,749          14,593          15,452          18,241
Interest income                                       (1,869)         (2,219)         (6,757)        (10,372)         (8,290)
Other (income) expense                                   389             819          (4,390)         (9,659)         (1,238)
Equity in (earnings) losses of
  unconsolidated affiliates                          (22,307)            399              --              --              --
Non-recurring charge                                      --              --          23,826              --          13,433
Income from continuing operations
  before income taxes and other
  items listed below                                 191,683         174,282         123,316         185,610         136,836
Provision for income taxes                            62,782          58,617          44,939          69,439          60,344
Income before extraordinary item
  and cumulative effect of
  accounting change                                  128,901         115,665          78,377         116,171          76,492
Extraordinary item, net of tax                            --              --           5,898              --              --
Cumulative effect of accounting
  change, net of tax                                   4,636              --              --              --              --
Net income                                           124,265         115,665          72,479         116,171          76,492
Per Share of Common Stock:
Income before extraordinary item
  and cumulative effect of
  accounting change (diluted)                     $     2.08      $     1.81      $     1.18      $     1.62      $     1.07
Extraordinary item (diluted)                              --              --             .09              --              --
Cumulative effect of accounting
  change (diluted)                                       .07              --              --              --              --
Net income (diluted)                                    2.01            1.81            1.09            1.62            1.07
Cash dividends                                           .56             .44             .52             .40             .56
Financial Data:
Working capital                                   $  209,878      $  216,145      $  196,222      $  333,357      $  304,274
Gross property, plant and
  equipment                                        1,145,622       1,147,148       1,027,128         910,383         848,637
Total assets                                       1,338,804       1,018,703         951,084       1,040,902       1,003,252
Long-term debt and other
  obligations                                        463,967         255,799         170,000         230,000         230,000
Shareholders' equity                                 636,197         548,531         583,206         603,502         588,522
</TABLE>


     Fiscal year 1994 through 1997 amounts include the spun cotton yarn
operations that were contributed to Parkdale America, LLC on June 30, 1997.


30

<PAGE>
quarterly Results (Unaudited)
- --------------------------------------------------------------------------------

     Quarterly financial data for the years ended June 28, 1998, and June 27,
1997, is presented below:

<TABLE>
<CAPTION>
                                                    First Quarter     Second Quarter     Third Quarter    Fourth Quarter
(Amounts in thousands, except per share data)        (13 Weeks)        (13 Weeks)         (13 Weeks)        (13 Weeks)
- -----------------------------------------------   ---------------   ----------------   ---------------   ---------------
<S>                                               <C>               <C>                <C>               <C>
1997:
Net sales                                            $ 414,715         $  419,345         $  438,252        $  432,614
Gross profit                                            49,945             58,858             61,808            60,648
Net income                                              23,955             28,790             31,467            31,453
Earnings per share (basic)                                 .37                .45                .50               .51
Earnings per share (diluted)                               .37                .44                .50               .51
1998:
Net sales                                            $ 329,842         $  343,096         $  345,986        $  358,685
Gross profit                                            49,518             59,005             58,134            61,114
Income before cumulative effect of accounting
  change                                                27,525             33,019             33,286            35,071
Cumulative effect of accounting change                      --              4,636                 --                --
Net income                                              27,525             28,383             33,286            35,071
Income before cumulative effect of accounting
  change (basic)                                           .45                .54                .54               .57
Income before cumulative effect of accounting
  change (diluted)                                         .45                .54                .54               .57
Earnings per share (basic)                                 .45                .46                .54               .57
Earnings per share (diluted)                               .45                .46                .54               .57
</TABLE>


market and dividend Information (Unaudited)

- --------------------------------------------------------------------------------
     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 sales prices
of the Unifi Common Stock as reported on the NYSE Composite Tape and the regular
cash dividends per share declared by Unifi during the periods indicated.
     On July 16, 1998, the Company announced its intention to discontinue the
payment of cash dividends and utilize the cash to purchase shares of the
Company's common stock. Accordingly, 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 August 14, 1998, there were approximately 929 holders of record of
the Company's common stock.

<TABLE>
<CAPTION>
                                                          High           Low    Dividends
<S>                                                <C>           <C>           <C>
       Fiscal year 1996:
        First quarter ended September 24, 1995      $  26.63      $  23.50      $   .13
        Second quarter ended December 24, 1995      $  25.00      $  21.88      $   .13
        Third quarter ended March 24, 1996          $  25.75      $  21.25      $   .13
        Fourth quarter ended June 30, 1996          $  28.50      $  23.00      $   .13
       Fiscal year 1997:
        First quarter ended September 29, 1996      $  28.88      $  26.00      $   .11
        Second quarter ended December 29, 1996      $  33.13      $  26.63      $   .11
        Third quarter ended March 30, 1997          $  33.88      $  30.13      $   .11
        Fourth quarter ended June 29, 1997          $  36.88      $  29.63      $   .11
       Fiscal year 1998:
        First quarter ended September 28, 1997      $  43.63      $  35.06      $   .14
        Second quarter ended December 28, 1997      $  42.25      $  36.38      $   .14
        Third quarter ended March 29, 1998          $  42.13      $  33.00      $   .14
        Fourth quarter ended June 28, 1998          $  39.56      $  34.19      $   .14
</TABLE>


                                                                              31

<PAGE>
MANAGEMENT'S REVIEW

and Analysis of Operations and Financial Position
- --------------------------------------------------------------------------------
FISCAL 1998

     Following is a Summary of operating income for fiscal years 1998 and 1997
and related percentages of net sales for each period:




<TABLE>
<CAPTION>
(Dollar amounts in thousands)                     June 28, 1998                    June 29, 1997
- -------------------------------------   ---------------------------------   ---------------------------
<S>                                     <C>                <C>              <C>             <C>
Net sales                               $   1,377,609         100.0%        $1,704,926      100.0%
Cost of sales                               1,149,838          83.5          1,473,667       86.4
- -------------------------------------   -------------      ---------        ----------      ------
Gross margin                                  227,771          16.5            231,259       13.6
Selling, general and administrative            43,277           3.1             46,229        2.7
- -------------------------------------   -------------      ---------        ----------      ------
Operating income                        $     184,494          13.4%        $  185,030       10.9%
- -------------------------------------   -------------      ---------        ----------      ------
</TABLE>

      Consolidated net sales decreased $327.3 million from fiscal year 1997 to
1998, or 19.2%, before giving effect to the contribution of our spun cotton yarn
operations to Parkdale America, LLC on June 30, 1997. Net sales for our spun
cotton yarn operations were $304.4 million in fiscal year 1997. After giving
effect to the removal of the net sales for the 1997 fiscal year attributable to
the spun cotton operations, consolidated net sales decreased $22.9 million, or
1.6%. The comparison of sales was positively impacted by the acquisition on
November 14, 1997, of SI Holding Company (Spanco) and the formation of a limited
liability company with Burlington Industries, Inc. on May 29, 1998. The benefit
of these ventures on sales was offset by various factors including: the
strengthening of the U.S. dollar in 1998 that adversely impacted export sales
and the translation of our Irish operation sales from the functional Irish punt
currency to the U.S. dollar, the decline in unit prices and the increase of
imported fiber, fabric and apparel.
      Domestically, unit prices, based on product mix, declined 1.4% while unit
volumes remained relatively stable after giving effect to the removal of our
spun cotton yarn operations in the prior fiscal year. Unit volumes increased in
the fourth quarter due, in part, to the sales generated by the business venture
with Burlington Industries.
      Internationally, unit prices declined 7.4% while unit volumes increased
6.2%. Sales from foreign operations are denominated in local currencies and are
hedged in part by the purchase of raw materials and services in those same
currencies. As described in note 11 to the consolidated financial statements,
currency exchange rate risk is mitigated by the utilization of foreign currency
forward contracts. Additionally, the net asset exposure is hedged by borrowings
in local currencies which minimizes the risk of currency fluctuations. The
Company does not enter into derivative financial instruments for trading
purposes.
      Gross Margins improved from 15.5% in the prior year to 16.5% in the
current year after eliminating the net operating results of our spun cotton yarn
operations described above. The increase in gross margin primarily reflects raw
material cost reductions based on product mix, which were partially offset by
higher manufacturing costs as a percentage of net sales.
      Selling, general and administrative expense decreased $3.0 million from
1997 to 1998; however, as a percentage of net sales these costs increased from
2.7% in the prior fiscal year to 3.1% in the current year. The increase reflects
the lower sales base in the current year associated with the contribution of our
spun cotton yarn operations at the beginning of the fiscal year.
      Interest expense increased $4.8 million, or 41.3%, from $11.7 million in
1997 to $16.6 million in 1998. The increase is associated with both higher
levels of debt outstanding during the current year and higher average interest
rates during this period. In February 1998, the Company issued $250.0 million of
debt securities, the proceeds of which were used to repay a portion of the
revolving credit facility. The coupon rate of the new securities is 6.50%. Debt
levels increased during the year as a result of capital expenditures,
investments in equity affiliates, stock repurchases and an acquisition.
      Interest income declined $350 thousand from 1997 to 1998 primarily as a
result of lower levels of invested funds. Other expense decreased from $819
thousand to $389 thousand from 1997 to 1998.
      Earnings from our equity affiliates, net of related amortization, totaled
$22.7 million in the current year. The effective tax rate decreased from 33.6%
in 1997 to 32.8% in 1998. The improvement in the effective tax rate is primarily
due to the realization of state tax credits in the current year associated with
significant capital expenditures and improved operating results of our Irish
operations that are taxed at a 10.0% effective rate.
      In the second quarter of fiscal 1998, the Company recognized a write-off
of $7.5 million ($4.5 million after tax) or $.07 per diluted share as a result
of changing its accounting policy regarding business reengineering costs.
Previously, substantially all direct external costs associated with installing a
new computer software system were capitalized, including those costs related to
business process reengineering. Pursuant to Emerging Issues Task Force 97-13
issued in November 1997, these costs were written off as a cumulative catch-up
adjustment.
      As a result of the above, the Company realized during the current year net
income of $124.3 million, or $2.01 per diluted share, compared to $115.7 million


32

<PAGE>

or $1.81 per diluted share for the prior fiscal year period. Before the effect
of the accounting change in the current year, earnings would have been $128.9
million or $2.08 per diluted share.
      In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income," (SFAS 130) which the Company is
required to adopt in the first quarter of fiscal 1999. 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 foreign
currency translation adjustments, unrealized gains and losses on
available-for-sale securities and certain minimum pension liabilities. Foreign
currency translation adjustments presently represent the primary component of
comprehensive income for the Company. The Company expects to reflect
comprehensive income in its consolidated statement of changes in shareholders'
equity when this standard is adopted. Results of operations and financial
position, however, will be unaffected by the implementation of this standard.
      Also 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 the Company is required to adopt 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.
      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.
      In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," (SOP 98-5) which is effective for the Company in fiscal
year 2000, if not previously adopted. SOP 98-5 requires start-up costs, as
defined, to be expensed as incurred. Upon adoption of SOP 98-5, any previously
capitalized start-up costs net of accumulated depreciation will be required to
be written-off as a cumulative effect of a change in accounting principle. The
Company has not yet determined what the impact of SOP 98-5 will be on its
financial statements upon 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 years beginning after June 15,
1999. 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.


FISCAL 1997

      Consolidated net sales increased 6.3% from $1.603 billion in 1996 to
$1.705 billion in 1997. The current fiscal year included fifty-two weeks
compared to the previous year's fifty-three weeks. Growth in net sales was
achieved by a 7.2% increase in unit volume offset slightly by a modest decline
in per unit average sales prices.
      Domestically, unit volumes increased 6.3% while average per unit sales
prices remained stable. Increased unit volumes were experienced across all of
our sales-yarn operations. Fiscal 1997 unit sales growth benefited from
phased-in production of our new polyester texturing facility in Yadkinville,
North Carolina, which was substantially completed at year end, and from
realizing a full year's sales activity after purchasing the texturing operations
of Glen Raven Mills, Inc.'s Norlina Division in November 1995. In addition,
growth in export sales was experienced year-over-year contributing to the
increase in unit volume.
      Internationally, increased unit growth was offset by lower per unit
average sales prices resulting in a net 8.3% increase in sales. Sales from
foreign operations are denominated in local currencies and are hedged in part by
the purchases of raw materials and services in


                                                                              33

<PAGE>

those same currencies. As described in note 11 to the consolidated financial
statements, currency exchange rate risk is mitigated by the utilization of
foreign currency forward contracts. Additionally, the net asset exposure is
hedged by borrowings in local currencies which minimize the risk of currency
fluctuations.
      Gross margin increased from 12.2% last year to 13.6% this year. The
increased gross margin of 1.4% reflects lower operating costs due to improved
efficiency and volume increases and raw material cost reductions based on
product mix, as a percentage of net sales.
      Selling, general and administrative expense as a percentage of net sales
decreased from 2.8% last year to 2.7% this year. On a dollar-basis, selling,
general and administrative expense increased $1.1 million to $46.2 million, or
2.5%. Increased selling, general and administrative expenses are primarily
attributable to higher information systems' costs and professional fees
associated with various technology and corporate reengineering improvement
efforts.
      Interest expense declined $2.8 million or 19.5%, from $14.6 million in
1996 to $11.7 million in 1997. In the fourth quarter of the prior year, $230
million of 6% convertible subordinated notes were redeemed utilizing the
proceeds from a $400 million, five year, revolving credit facility. The
effective interest rate of the revolving credit facility has remained below the
convertible debt interest rate and the average debt level outstanding throughout
fiscal 1997 has also been lower than the prior year resulting in reduced
interest expense. Interest income declined $4.5 million from $6.8 million in
1996 to $2.2 million in 1997. This change reflects lower levels of invested
funds which were primarily used for capital expenditures and the purchase and
retirement of Company common stock.
      Net other income and expense changed unfavorably by $5.6 million from $4.4
million of income in 1996 to $1.2 million of expense in 1997. In the prior year,
gains were recorded from the sale of capital assets and investments in excess of
current year amounts.
      In the first quarter of fiscal 1996, the Company announced restructuring
plans to further reduce the Company's cost structure and improve productivity
through the consolidation of certain manufacturing operations and the
disposition of underutilized assets. The estimated cost of restructuring
resulted in a non-recurring charge to earnings of $23.8 million or an after-tax
charge to earnings of $14.9 million ($.23 per share). The Company has completed
the majority of these restructuring efforts and anticipates no material
differences in actual charges compared to its original estimates.
      The effective tax rate decreased from 36.4% in 1996 to 33.6% in 1997. The
improvement in the effective tax rate is primarily due to the realization of
state tax credits during the current year and the improved operating results of
foreign subsidiaries which are taxed at rates below those of U.S. operations.
      As a result of the above, the Company realized during the current year net
income of $115.7 million, or $1.81 per share, compared to $72.5 million, or
$1.18 per share, for the corresponding prior fiscal year. Before the effects of
the non-recurring and the extraordinary charges recognized in the prior year,
earnings would have been $93.3 million or $1.41 per share.

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 $181.7 million for fiscal 1998 compared to $183.8 million for fiscal 1997.
The primary sources of cash from operations, other than net income, were
decreases in accounts receivable and other current assets of $9.6 million and
$1.6 million, respectively and non-cash adjustments aggregating $70.9 million.
Depreciation and amortization of $69.7 million, the after-tax cumulative effect
of accounting change of $4.7 million and the deferred income tax provision of
$12.2 million, offset by undistributed net earnings of unconsolidated affiliates
of $15.3 million, were the primary components of the non-cash adjustments to
cash provided by operations. Offsetting these sources were an increase in
inventory of $0.8 million and a net decrease in income taxes, accounts payable
and accruals of $23.9 million. All working capital changes have been adjusted to
exclude the effect of the current year acquisition and currency translation. The
significant decreases in accounts receivable and accounts payable and accruals
were impacted by the contribution of the spun cotton yarn operations at the
beginning of the fiscal year.
      Working capital levels are more than adequate to meet the operating
requirements of the Company. The Company ended the current year with working
capital of $209.9 million, which included cash and cash equivalents of $8.4
million.
      The Company utilized $315.7 million for net investing activities and
obtained $133.7 million from net financing activities during fiscal 1998.
Significant expenditures during this period included $250.1 million for capacity
expansions and upgrading of facilities, $25.8 million for acquisitions, $39.5
for investments in equity affiliates, $34.3 million for the payment of the
Company's cash dividends and $20.2 million for the purchase and retirement of
Company common stock. The Company obtained proceeds from net borrowings under
its long-term debt agreements of $187.4 million, which partially offset these
cash expenditures.
      As discussed in note 12 to the financial statements, on June 30, 1997, the
Company and Parkdale Mills, Inc. (Parkdale) contributed the inventory and the
owned and leased tangible real and personal property associated with their
open-end and air jet spun cotton yarn operations to Parkdale America, LLC (the
LLC). Additionally, the Company contributed $32.9 million in cash to the LLC on
June 30, 1997, and is required to


34

<PAGE>

contribute $10.0 million on June 30, 1998, and $10.0 million on June 30, 1999,
whereas Parkdale contributed cash of $51.6 million on June 30, 1997. The LLC
assumed certain long-term debt obligations of the Company and Parkdale in the
amounts of $23.5 million and $46.0 million, respectively. In exchange for the
assets contributed to the LLC and the liabilities assumed by the LLC, the
Company received a 34% interest in the LLC and Parkdale received a 66% interest
in the LLC. The LLC distributed dividends of $7.7 million to the Company in
fiscal 1998. It is expected that such distributions will continue. Additionally,
the Company is not obligated to provide the LLC with any further cash
contributions beyond those described herein.
      On November 14, 1997, the Company completed its Agreement and Plan of
Triangular Merger with SI Holding Company and thereby acquired their covered
yarn business for approximately $46.6 million. Additionally,
covenants-not-to-compete were entered into with the principal operating officers
of the acquired company in exchange for $9.2 million, to generally be paid over
the terms of the covenants. The acquisition, which is not deemed significant to
the Company's consolidated net assets or results of operations, is being
accounted for by the purchase method of accounting.
      On April 23, 1998, the Company announced that it agreed to form a limited
liability company with Burlington Industries, Inc. (Burlington) of Greensboro,
North Carolina, to manufacture and market natural textured polyester yarns. The
Company has the majority ownership (approximately 85.0%) and will manage the
business, while Burlington will own a minority interest (approximately 15.0%).
The Company's natural textured polyester yarn facilities located in Yadkinville,
North Carolina, became part of the limited liability company, along with
Burlington's natural textured yarn manufacturing business located in Mayodan,
North Carolina. The Company's polyester texturing facility in Reidsville, North
Carolina, was not contributed. This facility will continue to be dedicated to
providing textured polyester products for yarn dyeing. The limited liability
company commenced operations on May 29, 1998. Under terms of the agreement, the
Company is not required to contribute any operating funds to the newly created
entity at inception nor will any existing Company debt be assumed by the new
entity. Additionally, there are no future contributions required to be made to
the new entity. However, the Company may, from time to time, loan funds to this
entity under prevailing market conditions as deemed necessary or appropriate
under the circumstances.
      At June 28, 1998, the Company has committed approximately $127.2 million
for the purchase and upgrade of equipment and facilities, which is scheduled to
be expended during fiscal year 1999. A significant component of these committed
funds is the 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 has authorized management to utilize cash
equal to the same 30% of the previous year's earnings to repurchase shares of
the Company's stock as management deems advisable. The Board of Directors also
increased the remaining authorization pursuant to a resolution originally
established on October 21, 1993, to purchase 10 million shares of Unifi's common
stock. 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.
      On February 5, 1998, the Company sold $250 million of senior, unsecured
debt securities to qualified institutional buyers. The net proceeds from the
sale of the Notes were used to repay a portion of the Company's bank credit
facility. The Notes bear a coupon rate of interest of 6.50% and mature in 2008.
      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
enterprise-wide software is anticipated to be completed in the necessary time


                                                                              35

<PAGE>

frame. At present the Company estimates it is approximately one-half to
two-thirds complete with its enterprise-wide software implementation efforts.
Additionally, as a precautionary measure, back-up plans are in process of being
formulated in the event certain enterprise-wide applications are not fully
implemented by the end of the 1999 fiscal year. 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.
      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 ended June 27, 1999.

EURO CONVERSION

      As discussed above and in notes 10 and 11 to the consolidated financial
statements, the Company conducts business in multiple currencies, including the
currencies of various European countries in the European Union which will be
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 or the Euro when conducting business (the rules
relating to the conversion to the Euro are outlined in the European Commission
Directorate General XV Exposure Draft "Preparing Information Systems for the
Euro" issued in Brussels September 25, 1997). 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 is currently
evaluating the Euro conversion and the impact on its business, both
strategically and operationally. At this time, management has not completed its
assessment of the impact of the conversion; however, the conversion to the Euro
is not 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 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.


36






                      EXHIBIT (13b-1)

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 28, 1998, and June 29, 1997, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for each
of the three years in the period ended June 28, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
      We conducted our audits in accordance with generally accepted auditing
standards. 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 28, 1998, and June 29, 1997, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended June 28,
1998, in conformity with generally accepted accounting principles.


/s/ Ernst & Young LLP
- ---------------------
    Ernst & Young LLP




Greensboro, North Carolina
July 14, 1998

                                                                          17 


                                 (Exhibit 21)

                                  UNIFI, INC.

                                  SUBSIDIARIES

Name                 Address              Incorporation      Unifi Percentage of
                                                         Voting Securities Owned

Unifi, FSC Ltd.     Agana, Guam              Guam                    100%

Unifi Textured 
  Yarns             Letterkenny, Ireland     United Kingdom          100%
Europe, Ltd. 

Unifi International  Greensboro, NC          North Carolina          100%
Services, Inc.

Unifi Manufacturing, Greensboro, NC          North Carolina          100%
Inc. ("UMI")

Unifi Sales &        Greensboro, NC          North Carolina          100%
Distribution, Inc.

Unifi Manufacturing  Greensboro, NC          North Carolina            95%
Virginia, LLC                                                    (5% - UMI)

Unifi Export Sales,  Greensboro, NC          North Carolina            95%
LLC                                                              (5% - UMI)

Unifi Equipment      Greensboro, NC          North Carolina           100%
Leasing, LLC

Unifi Textured       Greensboro, NC          North Carolina       85.42% - UMI
Polyester, LLC                                            (14.58% - Burlington
                                                              Industries, Inc.)

Spanco Industries,   Greensboro, NC          North Carolina          100% - UMI
Inc.  ("SI")

[ SI owns:     100% Spanco International, Inc., ("SII"), a North 
Carolina corporation]
[SII owns:       67% Spanco - Latin America, S.A., a Columbian sociedad 
anonime; the remainder of Spanco Latin America is presently owned  by:
 1%  Unifi designees
32% Spanco - Panama, S.A. ]





                            Consent of Independent Auditors

We consent to the incorporation by reference in this Annual Report (Form 10-K) 
of Unifi, Inc. of our report dated July 14, 1998, included in the 1998 Annual 
Report to Shareholders of Unifi, Inc.

Our audit also included the financial statement schedule of Unifi, Inc. listed 
in Item 14(a).  This schedule is the responsibility of the Company's 
management.  Our responsibility is to express an opinion based on our audits.  
In our opinion, the financial statement schedule referred to above, when 
considered in relation to the basic financial statements taken as a whole, 
present fairly in all material respects the information set forth therein. 

In addition, we consent to the incorporation by reference in the Registration 
Statement (Form S-8 No. 33-23201) pertaining to the Unifi, Inc. 1982 Incentive 
Stock Option Plan and the 1987 Non-Qualified Stock Option Plan, and the 
Registration Statement (Form S-8 No. 33-53799) pertaining to the Unifi, Inc. 
1992 Incentive Stock Option Plan and Unifi Spun Yarns, Inc. 1992 Employee 
Stock Option Plan, and Registration Statement (Form S-8 No. 333-35001) 
pertaining to the Unifi, Inc. 1996 Incentive Stock Option Plan and the Unifi, 
Inc. 1996 Non-Qualified Stock Option Plan of
 our report dated July 14, 1998, 
with respect to the consolidated financial statements and schedule of Unifi, 
Inc. incorporated herein by reference in this Annual Report (Form 10-K) for 
the year ended June 28, 1998.

                                                        
                                              Ernst & Young LLP



Greensboro, North Carolina
September 25, 1998





<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S ANNUAL REPORT FOR THE TWELVE MONTH PERIOD ENDED JUNE 28, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          JUN-30-1998
<PERIOD-END>                               JUN-30-1998
<CASH>                                           8,372
<SECURITIES>                                         0
<RECEIVABLES>                                  230,510
<ALLOWANCES>                                     8,200
<INVENTORY>                                    137,201
<CURRENT-ASSETS>                               369,191
<PP&E>                                       1,145,622
<DEPRECIATION>                                 497,042
<TOTAL-ASSETS>                               1,338,804
<CURRENT-LIABILITIES>                          159,313
<BONDS>                                        463,967
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         6,163
<OTHER-SE>                                     630,034<F1>
<TOTAL-LIABILITY-AND-EQUITY>                 1,338,804
<SALES>                                      1,377,609
<TOTAL-REVENUES>                             1,377,609
<CGS>                                        1,149,838
<TOTAL-COSTS>                                1,149,838
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                 3,917
<INTEREST-EXPENSE>                              16,598
<INCOME-PRETAX>                                191,683
<INCOME-TAX>                                    62,782
<INCOME-CONTINUING>                            128,901
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                        4,636
<NET-INCOME>                                   124,265
<EPS-PRIMARY>                                     2.03<F2>
<EPS-DILUTED>                                     2.01<F2>
<FN>
<F1>OTHER STOCKHOLDERS EQUITY OF $630,034 IS COMPRISED OF CAPITAL IN EXCESS OF
PAR VALUE OF $22,454, RETAINED EARNINGS OF $618,128 AND CUMULATIVE
TRANSLATION ADJUSTMENT OF $(10,548).

<F2> PURSUANT TO FASB 128, "EARNINGS PER SHARE" WHICH THE COMPANY ADOPTED IN 
THE SECOND FISCAL QUARTER, 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 FISCAL YEAR 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>
        

</TABLE>