FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1993
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-10542
UNIFI, INC.
(Exact name of registrant as specified its charter)
New York 11-2165495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 19109 - 7201 West Friendly Road
Greensboro, NC 27419
(Address of principal executive offices) (Zip Code)
(910) 294-4410
(Registrant's telephone number, including area code)
Same
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at December 26, 1993
Common Stock, par value $.10 per share 70,481,937 Shares
UNIFI, INC.
Consolidated Condensed Balance Sheets
Dec 26, Jun 27,
1993 1993
(Unaudited) (Audited)
(Amounts in Thousands)
ASSETS
Current Assets:
Cash and Cash Equivalents $44,221 $76,093
Short-Term Investments $85,680 $119,848
Accounts Receivable, Net $163,475 $200,678
Inventories:
Raw Material/Supplies $32,749 $41,498
Work in Process 11,619 13,181
Finished Goods 50,680 50,295
$95,048 $104,974
Prepaid Expenses/Deposits $3,269 $3,321
Total Current Assets $391,693 $504,914
Property, Plant and Equipment, Net 513,941 468,291
Investments in Affiliates 10,053 11,040
Other Assets 33,937 33,204
Total Assets $949,624 $1,017,449
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable $5,165 $4,664
Accounts Payable 58,017 121,492
Accrued Expenses 41,657 45,179
Income Taxes 10,832 13,364
Total Current Liabilities $115,671 $184,699
Long-Term Debt $230,000 $250,241
Deferred Income Taxes $28,691 $36,956
Shareholders' Equity
Common Stock $7,048 $7,034
Capital in Excess of Par 201,536 196,133
Retained Earnings 372,877 348,821
Cumulative Translation Adjustment (6,108) (5,515)
Reserve for Investments (91) (920)
Total Shareholders' Equity $575,262 $545,553
Total Liabilities and Shareholder's Equity $949,624 $1,017,449
See Accompanying Notes to Consolidated Condensed Financial Statements
UNIFI, INC.
Consolidated Condensed Statements of Income
(Unaudited)
For the Quarter Ended For the 6 Months Ended
Dec 26, Dec 27, Dec 26, Dec 27,
1993 1992 1993 1992
(Amounts in Thousands Except Per Share Data)
Net Sales $351,516 $347,591 $676,871 $681,097
Cost and Expenses:
Cost of Goods Sold $298,952 $281,536 $578,582 $556,175
Selling, General & 10,185 10,144 19,758 18,750
Administrative Expense
Interest Expense 4,186 8,176 9,279 14,331
Interest Income (2,007) (4,677) (4,720) (7,475)
Other (Income) Expense (268) 133 (64) (538)
$311,048 $295,312 $602,835 $581,243
Income Before Income Taxes $40,468 $52,279 $74,036 $99,854
Provision for Income Taxes 16,107 19,405 29,863 37,269
Net Income $24,361 $32,874 $44,173 $62,585
Per Share Data:
Primary $0.34 $0.47 $0.62 $0.89
Fully Diluted $0.34 $0.45 $0.61 $0.86
Cash Dividends Per Share $0.14 $0.10 $0.28 $0.20
Average Shares Outstanding:
Primary 71,027 70,625 71,059 70,564
Fully Diluted 78,806 78,447 78,824 78,353
See Accompanying Notes to Consolidated Condensed Financial Statements
UNIFI, INC.
Consolidated Condensed Statements of Cash Flow
(Unaudited)
For the Six Months Ended
Dec 26, Dec 27,
1993 1992
(Amounts in Thousands)
Cash Provided by Operating Activities $52,048 $87,574
Investing Activities:
Capital Expenditures $(79,373) $(66,930)
Notes Receivable (42) 24
Purchase of Investments (4) (61,868)
Sale of Investments 34,168 (3,813)
$(45,251) $(132,587)
Financing Activities:
Issuance of Common Stock $419 $35
Borrowing of Debt 7,453 6,160
Repayment of Debt (27,194) (1,698)
Cash Dividend (19,331) (11,908)
$(38,653) $(7,411)
Currency Translation Adjustment $(15) $(59)
Increase (Decrease) in Cash $(31,871) $(52,483)
Cash and Cash Equivalents - Beginning 76,092 139,047
Cash and Cash Equivalents - Ending $44,221 $86,564
See Accompanying Notes to Consolidated Condensed Financial Statements
UNIFI, INC.
Notes to Consolidated Condensed Financial Statements
The information furnished is unaudited and reflects all adjustments which
are, in the opinion of Management, necessary to present fairly the financial
position at December 26, 1993 and the results of operations and cash flows
for the periods ended December 26, 1993 and December 27, 1992. Such
adjustments consisted of normal recurring items. The Company has
reclassified certain prior year information to conform with the current year
presentation. Interim results are not necessarily indicative of results for
a full year. It is suggested that the condensed financial statements be read
in conjunction with the financial statements and notes thereto included in
the Company's latest annual report on Form 10-K.
Income Taxes
Deferred income taxes arise primarily from timing differences between
financial and tax reporting associated with depreciable assets.
The difference between the statutory federal income tax rate and the
effective tax rate is primarily due to the results of foreign subsidiaries
that are taxed at rates below those of U.S. operations. The current periods
were not significantly impacted by foreign operations; therefore, the current
periods' rates approach the statutory rate. Foreign earnings were more
significant last year and helped to lower the effective rate.
The increase in the statutory rate from 34% to 35%, such change being
retroactive to January 1, 1993, has been provided for in the current periods
and was not material to the results of the periods.
Per Share Information
Earnings per common share are computed on the basis of the number of shares
outstanding, adjusted for the dilutive effect of stock options outstanding.
The Convertible Notes do not meet the test of a common stock equivalent,
accordingly, conversion of these notes is only assumed for the calculation of
the fully diluted earnings per share.
Computation of the average shares outstanding (in 000's):
Quarters Ended Six Months Ended
Dec. 26, Dec. 27, Dec. 26, Dec. 27,
1993 1992 1993 1992
Average Shares Outstanding 70,340 69,627 70,387 69,564
Add: Dilutive Options 593 998 672 1,000
Primary Average Shares 71,027 70,625 71,059 70,564
Incremental Shares Arising from
Full Dilution Assumption 7,779 7,822 7,765 7,789
Average Shares Assuming
Full Dilution 78,806 78,447 78,824 78,353
Computation of net income for per share data (in 000's):
Quarters Ended Six Months Ended
Dec. 26, Dec. 27, Dec. 26, Dec. 27,
1993 1992 1993 1992
Net Income - Primary $24,361 $32,874 $44,173 $62,585
Add: Convertible Subordinated
Interest Net of Tax 2,113 2,194 4,216 4,313
Net Income Assuming Full
Dilution $26,474 $35,068 $48,389 $66,898
Common Stock
On January 20, 1994, the Company's Board of Directors declared a cash
dividend of 14 cents per share payable to shareholders of record on February
3, 1994, payable on February 10, 1994.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is Management's discussion and analysis of certain significant
factors which have affected the Company's operations and material changes in
financial condition during the periods included in the accompanying
consolidated condensed financial statements.
Results of Operations
Net sales increased from $347.6 million to $351.5 million in the quarter or
1.1 percent and decreased in the six month period from $681.1 million in 1992
to $676.9 million in 1993 or 0.6 percent. We experienced volume increases of
6.6 percent for the quarter and 4.0 percent for the year-to-date period over
the prior year periods. Second quarter capacity utilization rates improved
in all domestic operations. The major plant expansions in our undyed
polyester and spun yarn facilities were nearly complete as the quarter ended.
Despite some volume recovery in the quarter, the primary markets served by
our spun yarn operations remained sluggish at best. Lower overall demand,
coupled with the additional yarn sales capacity, has caused margins to erode.
Sales of our nylon and covered yarn products to the ladies' hosiery market
showed increasing strength as the quarter progressed, while demand in our
polyester operations, fueled by demand in our automotive, home furnishings
and export categories.
We also experienced better demand in our European businesses in the quarter
and operations continue to run at capacity; however, we continue to be
impacted by changes in currency relationships and an overall market still
suffering from overcapacity.
Our average net sales price, based on the average product mix, decreased 5.1
percent in the current quarter and decreased 4.4 percent for the current six
month period. We continue to experience price pressure in our spun yarn and
export markets serviced from the U.S. and in the markets serviced by our
foreign operations.
Cost of goods sold increased from $281.5 million in last year's second
quarter to $299.0 million in this year's quarter or 6.2 percent. The six
month period increased from $556.2 million to $578.6 million or 4.0 percent.
Cost of goods sold, as a percentage of net sales, increased from 81.0 percent
last year to 85.1 percent during the quarter. For the six months, cost of
goods sold climbed from 81.7 percent to 85.5 percent of net sales.
Based on our average product mix, raw material prices decreased in both the
current periods; however, the declines were not sufficient to offset the
decreases mentioned above involving net sales prices. Fixed manufacturing
costs increased slightly in both the current periods as a result of capacity
additions and upgrades in many of our divisions. We will shortly have start-
up expenses behind us and these plants can push costs to expected levels.
These capacity improvements contributed to the sales volume increases
previously mentioned.
Selling, general and administrative expenses as a percentage of net sales
remained unchanged between the quarters at 2.9 percent. For the six month
periods we experienced a slight increase from 2.8 percent in 1992 to 2.9
percent in 1993. Actual expense was also unchanged in Dollar terms between
the quarters. For the six month period expense increased from $18.8 million
in 1992 to $19.9 million in 1993. The increase derives from volume gains in
sales and from the process of consolidating administrative functions
resulting from recent mergers.
Interest expense decreased from $8.2 million in the 1992 quarter to $4.2
million in the current quarter. The same holds true for the six month
periods as interest expense decreased from $14.3 million to $9.3 million in
the current period. The Company has used cash reserves generated from
operations and the issuance of the subordinated debentures in prior periods
to eliminate the debt of merged companies and thereby lower the overall
interest costs of the consolidated group. As these reserves have decreased
for the payment of debt, our investment base has also declined. As a result,
interest income has decreased from $4.7 million in last year's second quarter
to $2.0 million in the current quarter. For the six month period, interest
income has declined from $7.5 million to $4.7 million in the current period.
When interest expense and income are combined, net interest costs decreased
from $3.5 million to $2.2 million in the quarter and from $6.9 million to
$4.6 million in the current six month period.
Other income and expense were insignificant in all periods presented.
The effective tax rate has increased from 37.1 percent to 39.8 percent in the
current quarter and has increased from 37.3 percent to 40.3 percent for the
current six month period. The increase is attributable to the increase in
the U.S. Federal tax rate in the current year and the reduction in earnings
of foreign subsidiaries that are taxed at rates lower than U.S. rates.
Earnings per share decreased from $.47 per share to $.34 per share in the
current quarter and decreased from $.89 per share to $.62 for the current six
month period.
Financial Condition
We ended the current quarter with working capital of $276.0 million of which
$129.9 million represents cash and short-term investments. This compares
with working capital of $324.9 million and cash reserves of $195.9 million at
year end. Net income and noncash expenses generated cash equivalents of
$82.9 million in the six month period. Net receivables and net payables
decreased due to seasonal and timing differences between the Company's June
year end and the December quarter end. We also experienced a decrease in
inventories from $105.0 million at year end to $95.0 million at quarter end.
The Company's inventories can fluctuate substantially from month to month.
Due to the commodity nature of our raw materials, the Company can make
adjustments to inventory levels as deemed necessary in a relatively short
time period.
The primary sources of cash funds continue to be operations and the Company's
access to debt and equity markets. The primary uses of funds during the
current six months were capital expenditures for the previously mentioned
capacity expansions and upgrades totaling $79.4 million, repayment of debt
less short-term borrowings reducing debt by $19.7 million and the payment of
the Company's cash dividends of $19.3 million. During this time period the
Company generated $34.2 million from the sale of short-term investments to
supplement cash generated from operations to cover the aforementioned cash
outlays. Management believes the current financial position of the Company
in connection with its operations and it access to debt and equity markets
are sufficient to meet its anticipated capital expenditure, strategic
acquisition and working capital needs.
Total shareholders' equity increased from $545.6 at yearend to $575.3 million
at quarterend. Net book value per share was $8.16 at December 26, 1993.
UNIFI, INC.
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Shareholders of the Company at their Annual Meeting held on the
21st day of October, 1993 considered and voted upon an amendment to
the Certificate of Incorporation increasing the number of authorized
shares of capital stock of the Company to 500 million shares and the
election of four (4) Class 2 Directors and one(1) Class 3 Director of
the Company.
The proposed amendment to the Company's Certificate of Incorporation
increasing the number of authorized shares of Capital Stock to 500
million shares was adopted by the shareholders of the Company with
54,161,197 shares of the 70,340,687 issued and outstanding shares of
the company being more than fifty percent (50%) of the shares entitled
to vote at the meeting, voting in favor, 514,469 shares voting against
the amendment and 103,654 shares abstaining from voting.
The Shareholders elected management's nominees for the four (4) Class
2 Directors to serve until the Annual Meeting of the Shareholders in
1996, or until their successors are elected and qualified, and the one
(1) Class 3 Director to serve until the Annual Meeting of the
Shareholders in 1994, or until his successor is elected and qualified
as follows:
Votes in Votes
Names of Director Favor Against Abstaining
Class 2: Charles R. Carter 59,622,574 156,846
Jerry W. Eller 59,483,652 195,768
Kenneth G. Langone 59,624,911 154,509
Lord Eric Sharp 59,623,099 156,321
Class 1: George R. Perkins 59,625,127 154,293
The information set forth under the heading "Election of Directors"
on pages 2-5 of the Definitive Proxy Statement filed with the
Commission since the close of the registrant's fiscal year ending June
27, 1993 is incorporated herein by reference.
The shareholders at their Annual Meetings in 1991 elected Class 3
Directors and in 1992 elected Class 1 Directors to serve until the
Annual Meeting of the Shareholders in 1994 and 1995 respectively, or
until their successors are elected and qualified, the following
persons were elected and still serving as Class 3 and Class 1
Directors of the Company:
Class 3 Class 1
William J. Armfield IV Donald F. Orr
William T. Kretzer Timotheus R. Phol
G. Allen Mebane Robert A. Ward
G. Alfred Webster
Item 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K have been filed during the quarter ended
December 26, 1993.
UNIFI, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIFI, INC.
Date: 2/2/94 ROBERT A. WARD
Robert A. Ward
Executive Vice President-
Financial and Administration (Mr.
Ward is the Principal Financial
and Accounting Officer and has
been duly authorized to sign on
behalf of the Registrant.)
Date: 2/2/94 GREGG H. LOWE
Gregg H. Lowe
Vice President and
Corporate Controller
