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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 24, 1995
[] 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 October 29, 1995
Common Stock, par value $.10 per share 66,296,374 Shares
PART I. FINANCIAL INFORMATION
UNIFI, INC.
Condensed Consolidated Balance Sheets
September 24, June 25,
1995 1995
(Unaudited) (Audited)
(Amounts in Thousands)
ASSETS
Current Assets:
Cash and Cash Equivalents $50,231 $60,350
Short-Term Investments 109,304 85,844
Receivables 212,971 209,432
Inventories:
Raw Materials and Supplies 56,967 58,959
Work in Process 14,415 14,296
Finished Goods 67,072 66,123
Other Current Assets 4,175 8,017
Total Current Assets 515,135 503,021
Property, Plant and Equipment
(Notes e and f) 934,521 910,383
Less: Accumulated Depreciation 413,940 394,168
520,581 516,215
Investments in Affiliates 43 173
Other Assets 13,940 21,493
Total Assets $1,049,699 $1,040,902
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $112,690 $100,165
Accrued Expenses 63,543 54,338
Income Taxes 27,495 15,161
Total Current Liabilities 203,728 169,664
Long-Term Debt 230,000 230,000
Deferred Income Taxes 29,079 37,736
Shareholders' Equity:
Common Stock 6,660 6,714
Capital in Excess of Par Value 103,506 117,277
Retained Earnings 472,044 473,962
Cumulative Translation Adjustment 3,349 4,415
Unrealized Gains on Certain Investments 1,333 1,134
Total Shareholders' Equity 586,892 603,502
Total Liabilities and
Shareholders' Equity $1,049,699 $1,040,902
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Condensed Consolidated Statements of Income
(Unaudited)
For the Quarters Ended
September 24, September 25,
1995 1994
(Amounts in Thousands, Except
Per Share Data)
Net Sales $387,369 $359,194
Costs and Expenses:
Cost of Goods Sold 342,440 310,860
Selling, General and Administrative
Expense 10,072 9,674
Interest Expense 3,677 3,938
Interest Income (2,637) (2,652)
Other (Income) Expense (430) (579)
Non-Recurring Charge (Note e) 23,826 --
376,948 321,241
Income Before Income Taxes 10,421 37,953
Provision for Income Taxes 3,654 15,264
Net Income $6,767 $22,689
Earnings Per Share: Primary $.10 $.32
Fully Diluted $.10 $.32
Cash Dividends Per Share $.13 $.10
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Quarters Ended
September 24, September 25,
1995 1994
(Amounts in Thousands)
Cash and Cash Equivalents Provided by $50,059 $41,543
Operating Activities
Investing Activities:
Capital Expenditures $(25,687) $(23,736)
Purchase of Short-Term Investments (47,252) --
Sale of Capital Assets -- 308
Notes Receivable 257 (306)
Proceeds from Sale of Subsidiary
and Equity Investment 10,436 13,798
Sale of Short-Term Investments 24,579 1,580
Net Investing Activities $(37,667) $(8,356)
Financing Activities:
Issuance of Common Stock $-- $299
Purchase and Retirement of Common Stock (13,825) --
Cash Dividend (8,685) (7,045)
Net Financing Activities $(22,510) $(6,746)
Currency Translation Adjustment $(1) $71
Increase (Decrease) in Cash $(10,119) $26,512
Cash and Cash Equivalents - Beginning 60,350 80,653
Cash and Cash Equivalents - Ending $50,231 $107,165
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Notes to Condensed Consolidated Financial Statements
(a)Basis of Presentation
The information furnished is unaudited and reflects all adjustments which
are, in the opinion of Management, necessary to present fairly the
financial position at September 24, 1995 and the results of operations and
cash flows for the quarters ended September 24, 1995 and September 25,
1994. Such adjustments consisted of normal recurring items for both
periods presented and, for the current quarter, the non-recurring charge
described in Note (e). Interim results are not necessarily indicative of
results for a full year. It is suggested that the condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's latest annual report on Form 10-K.
(b)Income Taxes
Deferred income taxes have been provided for the temporary differences
between financial statement carrying amounts and tax basis of existing
assets and liabilities.
The difference between the statutory federal income tax rate and the
effective tax rate is primarily due to results of foreign subsidiaries
which are taxed at rates below those of U.S. operations. The current
quarter's pre-tax income from the Company's foreign operations represented
a higher percentage of the Company's consolidated results than the
corresponding period of the prior year which contributed to the decline in
the lower effective tax rate.
(c)Per Share Information
Earnings per common and common equivalent share are computed on the basis
of the weighted average number of common shares outstanding plus, to the
extent applicable, common stock equivalents.
The effect of the convertible subordinated notes was antidilutive for the
quarter ended September 24, 1995. Accordingly, fully diluted earnings per
share for the quarter has been reported consistent with the primary
earnings per share result.
Computation of average shares outstanding (in 000's):
Quarters Ended
September 24, September 25,
1995 1994
Weighted Average Shares
Outstanding 66,886 70,449
Add: Dilutive Options 487 503
Primary Shares 67,373 70,952
Incremental Shares Arising from
Full Dilution Assumption 7,753
Average Shares Assuming
Full Dilution 78,705
Computation of net income for per share data (in 000's):
Quarters Ended
September 24, September 25,
1995 1994
Net Income - Primary $6,767 $22,689
Add: Convertible Subordinated
Interest Net of Tax 2,169
Net Income Assuming Full
Dilution $24,858
(d)Common Stock
On October 19, 1995 the Company's Board of Directors declared a cash
dividend of 13 cents per share payable on November 10, 1995 to shareholders
of record on November 3, 1995.
(e)Non-Recurring Charge
As disclosed in the Company's 10-K for the year ended June 25, 1995 the
Company announced on September 18, 1995 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 is focused on the
consolidation of production facilities acquired via mergers during the
preceding four years and reflects the Company's continued efforts to
streamline operations. As part of the restructuring action, the Company
will close its spun cotton manufacturing facilities in Edenton and Mount
Pleasant, North Carolina with the majority of the manufacturing production
being transferred to other facilities. Approximately 275 jobs, primarily
wage-level positions, will be affected.
The estimated cost of restructuring resulted in a first quarter fiscal 1996
non-recurring charge to earnings of $23.8 million or an after-tax charge to
earnings of $14.9 million ($.22 per share). The significant components of
the non-recurring charge include $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. The
balance sheet at September 24, 1995, reflects primarily in property, plant
and equipment the net book value of these assets amounting to $27.6 million
for which net recoveries of $6.2 million are expected. Costs associated
with the relocation of equipment or personnel will be expensed as incurred.
The Company anticipates that all significant aspects of the consolidation
of spun yarn facilities would be accomplished within a one year period.
However, the ultimate disposal of the equipment and facilities may take
longer due to current market conditions and the physical locations of the
properties.
(f)Accounting for Long-Lived Assets
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long -Lived Assets and for Long-Lived Assets to be Disposed
Of, (SFAS 121), which requires impairment losses to be recorded on long-
lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. SFAS 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company has adopted SFAS 121 in the first quarter of 1996. There was no
cumulative effect on the financial statements from the initial adoption of
SFAS 121; however, the accounting principles described in this statement
were utilized in estimating the non-recurring charge for the current
quarter discussed in Note (e).
(g)Pending Nylon Machinery Purchase
On October 2, 1995 the Company announced a definitive agreement with Glen
Raven Mills, Inc. to purchase its nylon texturing machinery and associated
equipment located in Norlina, North Carolina for a purchase price
anticipated to be less than $50 million. This transaction is currently
pending FTC approval. This productive capacity will be integrated into our
nylon/covered yarn operations.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is Management's discussion and analysis of certain significant
factors that have affected the Company's operations and material changes in
financial condition during the periods included in the accompanying Condensed
Consolidated Financial Statements.
Results of Operations
Net sales increased 7.8% in the quarter from $359.2 million to $387.4
million. Volume increased 1.4% for the quarter while average unit price,
based on overall product mix, increased 6.4% during this period.
Demand for our domestic yarn products for the quarter was hindered by
weakness in retail sales. Despite the unfavorable conditions in the retail
markets, our domestic sales increased 5.6%. This was accomplished by a 6.4%
increase in average unit prices, based on product mix, offsetting a modest
decline in unit volume of approximately 1%. Unit sales of our domestic
polyester yarns increased slightly over the corresponding quarter of the
prior year in combination with increases in our average sales price that
effectively offset increases in raw material costs during the period. Unit
volume for our nylon yarn operations has declined over the prior year
comparative period. However, a shift in product mix in the nylon yarn
operations to higher priced products has substantially offset raw material
price increases and the volume decrease experienced. Volume for our spun
yarn operations has declined during this quarter compared with the
corresponding quarter of the prior year due to softness in the market. The
spun yarn operations have experienced an increase in average unit sales
prices which have offset raw material price increases during this period
resulting in an overall increase in aggregate sales dollars.
Unit volume for our European polyester yarn operations has shown significant
improvement as demand levels have us operating at capacity after the
traditional summer holidays. Improvements have also been noted in our
average sales price compared to the corresponding quarter of the prior fiscal
year as these prices were raised to partially offset the effects of higher
raw material costs. The previously-announced capacity expansion is on
schedule to be completed by January 1996.
Cost of sales as a percentage of net sales for the quarter increased from
86.5% last year to 88.4% this year. Raw material and packing material costs,
manufacturing expense and depreciation have all increased in whole dollars
and on a per unit basis resulting in an overall 8.6% increase in cost of
sales per unit compared to the corresponding quarter of the prior year. The
Company has substantially offset the effects of these higher costs with
increased sales prices in generally all of its markets.
Selling, general and administrative expense as a percentage of net sales
decreased from 2.7% to 2.6% in the current quarter. During the quarter
actual selling, general and administrative expense increased 4.1% from $9.7
million to $10.1 million. The improvement in selling, general and
administrative expense as a percentage of sales is attributable to higher
sales dollars which absorbed the increased current period costs.
Interest expense decreased from $3.9 million in the prior fiscal year first
quarter to $3.7 million in the current quarter. Interest income has remained
relatively constant during the quarter compared to the corresponding period
of the prior year.
On September 18, 1995, 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 restructuring plan is focused on the consolidation
of production facilities acquired via mergers during the preceding four years
and reflects the Company's continued efforts to streamline operations. As
part of the restructuring plan, the Company has announced the closing of the
spun yarn manufacturing facilities in Edenton and Mount Pleasant, North
Carolina, with the majority of the manufacturing production being transferred
to other facilities. The Company anticipates that the benefits of these
actions on reduced manufacturing costs will begin to be realized during the
first calendar quarter of 1996.
The estimated cost of restructuring resulted in a first quarter fiscal 1996
non-recurring charge to earnings of $23.8 million or an after-tax charge to
earnings of $14.9 million ($.22 per share). The significant components of
the non-recurring charge include $2.4 million of severance and other
employee-related costs from the termination of approximately 275 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 will be
expensed as incurred.
The Company anticipates that all significant aspects of the consolidation of
spun yarn facilities would be accomplished within a one year period.
However, the ultimate disposal of the equipment and facilities may take
longer due to current market conditions and the physical locations of the
properties.
The Company adopted FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived assets to be Disposed Of, (SFAS 121), in
the first quarter of 1996. There was no cumulative effect on the financial
statements from the initial adoption of SFAS 121; however, the accounting
principles described in this statement were utilized in estimating the above
described non-recurring charge for the current quarter.
Our effective tax rate was 35.1% in the current quarter as compared with
40.2% in the prior quarter. The lower rate in the current period is primarily
due to the pretax earnings of foreign subsidiaries, which are taxed at rates
lower than U.S. rates, representing a larger contribution of total
consolidated pre-tax income. Additionally, the Company will realize the
benefit of certain increased tax credits during fiscal 1996.
Earnings per share for the current quarter were $.10 compared to $.32 for the
corresponding quarter of the prior year. Earnings per share for the current
quarter were adversely affected by the non-recurring charge to earnings of
$.22 per share.
Liquidity and Capital Resources
We ended the current quarter with working capital of $311.4 million of which
$159.5 million represents cash and short-term investments. This compares
with working capital of $333.4 million and cash and short-term investments of
$146.2 million at year end. In addition, the Company has access to debt and
equity markets.
Our primary source of cash funds is from operating activities which generated
$50.1 million in cash and cash equivalents for the current quarter. The
Company utilized $37.7 million and $22.5 million for net investing and
financing activities, respectively, for the quarter ended September 24, 1995.
These net investing and financing activities were primarily comprised of
$12.0 million of funds used for net investment activity, $25.7 for capacity
expansions and upgrades, $8.7 million for the payment of the Company's cash
dividends and $13.8 million for the purchase and retirement of Company common
stock.
On October 21, 1993, the Board of Directors authorized Management to
repurchase up to 15 million shares of Unifi's common stock from time to time
at such prices as Management feels advisable and in the best interest of the
Company. Approximately 4.0 million shares have been repurchased as of
September 24, 1995, pursuant to this Board authorization.
On October 2, 1995, the Company announced a definitive agreement with Glen
Raven Mills, Inc. to purchase its nylon texturing machinery and associated
equipment located in Norlina, North Carolina. Annual sales from this
operation approximate $75 million. The transaction is currently pending FTC
approval. The purchase price is anticipated to be less than $50 million and
will be satisfied with current cash reserves.
At September 24, 1995, the Company has committed approximately $119.4 million
for the purchase of equipment and facilities, excluding the Glen Raven
acquisition, which is scheduled to be expended in fiscal years 1996 through
1998.
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 and other financial needs.
PART II. OTHER INFORMATION
UNIFI, INC.
Item 6. Exhibits and Reports on Form 8-K
(a) (10.1)Factoring Agreement dated August 23, 1995, by and between
Republic Factors Corp. and Unifi, Inc., filed herewith.
(10.2)Consent to Action Without Meeting By The Stock Option
Committee Of The Unifi Spun Yarns, Inc.'s 1992 Employee Stock
Option Plan effective September 1, 1995, filed herewith.
(27) Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter ended
September 24, 1995.
UNIFI, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIFI, INC.
Date: 11/07/95 WILLIS C. MOPORE, III
Willis C. Moore, III
Vice President and Chief
Financial Officer (Mr. Moore is
the Principal Financial and
Accounting Officer and has been
duly authorized to sign on behalf
of the Registrant.)
EXHIBIT (10.1)
FACTORING AGREEMENT
Republic Factors Corp.
452 Fifth Avenue
New York, New York 10018
Re: Unifi, Inc.
Ladies and Gentlemen:
We hereby request that you act as our factor effective as of
the date of your acceptance hereof, upon the terms and conditions
set forth below. All capitalized terms shall have the meaning
given such terms in Section 15 of this Agreement ("Definitions")
unless defined elsewhere in this Agreement.
1. PURCHASE OF RECEIVABLES:
A. We agree that we will do certain of our business
through you as our factor and hereby assign and sell to you as
absolute owner of all Receivables. We represent and warrant that
each and every Receivable now or hereafter assigned to you will
be a bona fide and existing obligation of a customer of ours,
owned by and owing to us, arising out of the sale and delivery of
goods by us, free and clear of any and all deductions, Disputes,
liens, security interests and encumbrances.
B. You agree to and do hereby purchase without
recourse to us, except as set forth hereinafter, all Receivables
approved by you in accordance with Section 1.E below. You agree
to and do hereby assume the risk of non-payment on such
Receivables, if non-payment is due solely to the financial
inability of our customer to make payment at the due date of the
Receivable, provided the customer has, at such due date, and
thereafter, received and finally accepted the merchandise giving
rise to such Receivables without any Dispute.
C. Receivables not approved by you in accordance with
Section 1.E below also are assigned to and purchased by you, but
with full recourse to us in the event on non-payment thereof or
in the event of a Dispute.
D. In addition, we hereby sell, assign and transfer
to you all of our right, title and interest in and to the
merchandise, the sale of which resulted in creation of
Receivables, and in all such merchandise that may be returned by
customers and all causes of action and rights in connection
therewith, which we now have or may hereafter acquire, including
our rights of reclamation, replevin and stoppage in transit and
as an unpaid vendor of merchandise or services as a lienor. We
hereby agree upon your instruction to promptly take any and all
action necessary for you to enforce your rights of reclamation,
replevin and stoppage in transit and in the event of our failure
to do so, you shall be authorized to exercise any such right in
our name or in any manner you deem appropriate. Any merchandise
so recovered shall be treated as returned merchandise, and shall
be set aside, marked with your name and held for your account as
owner. We shall notify you promptly of all such returned
merchandise.
E. No purchase of any Receivable by you shall be
deemed to be made pursuant to Section 1.B. above unless the sale
of merchandise by us resulting in such Receivable shall have been
made with your prior written approval of the amount and terms of
such sale and the credit standing of our customer, and you shall
have the right to withdraw such approval at any time before
actual delivery of such merchandise. Each credit approval shall
be automatically withdrawn in the event the terms of sale are
changed without your written approval or in the event the
shipment of goods or rendition of services shall not be made or
performed within thirty (30) days from the completion date
specified in the credit approval or within thirty (30) days from
the date of the credit approval, if no completion date is
specified. When a credit approval specifies special terms and
conditions, the credit approval shall be deemed automatically
withdrawn when such special terms and conditions are not complied
with. You shall not be liable in any manner or respect for
refusing to accept or approve any Receivable or the credit
standing of any customer of ours or for withdrawing any approval
as provided in this Section 1.E.
F. Net Sales relating to each Receivable shall be
credited to our account net of any deductions as of the last day
of the month in which such Receivables are specifically
assigned and shall be available for payment on the Settlement
Date of the month in which such Receivables are specifically
assigned and such credit shall constitute payment in full of such
receivable. At your election, you may deduct from Net Sales
available for payment on the Settlement Date or charge our
account with your factoring commission and interest, fees and
chargebacks as provided in this Agreement.
G. On the face of all bills and invoices for all
Receivables assigned to and purchased by you hereunder shall be
placed the following legend: "This Receivable is assigned to,
owned by and payable only to: REPUBLIC FACTORS CORP. AT P.O. BOX
7777, W8720, PHILADELPHIA, PA 19175-8720 OR DEPT. 49941, LOS
ANGELES, CA 90088, whichever is nearer. Any objection to this
invoice must be reported to Republic Factors Corp. at 452 Fifth
Avenue, New York, NY 10018-2706."
2. ADVANCES: You may, in your sole discretion, make
advances to us from time to time at our request. In your sole
discretion you may hold a reserve against Receivables in such
amount as you determine to hold, and you may revise such reserve
from time to time.
3. SECURITY INTEREST: As security for any and all
Obligations, you shall be entitled to hold and we hereby grant to
you a continuing general lien upon, security interest in and to,
and right of set off on or against any or all of the following,
whether now or hereafter existing or acquired (collectively, the
"Collateral"): our reserves, all balances, sums and other
property at any time to our credit or in your possession or in
the possession of any of your Affiliates, together with all
merchandise the sale of which resulted in the creation of
Receivables and in all such merchandise that may be returned by
customers and Receivables, if and to the extent we are deemed to
have any rights therein, and all books and records relating to
any of the foregoing, including the cash and non-cash proceeds of
all of the foregoing. We represent, warrant and covenant to you
that we now have, and shall at all times continue to have, good
and marketable title to all of the Collateral, free and clear of
any and all liens, security interest and encumbrances. We shall
execute and deliver to you all financing statements and other
documents and instruments that you may request to perfect,
protect or establish your security interest hereunder. We shall
reimburse you for, and you shall be entitled to charge our
account with, all reasonable costs and expenses incurred by you
in connection with the enforcement of this Agreement, or to
enforce any of the Obligations, or in the prosecution or defense
of any action, between you or us, concerning any matter growing
out of or in any manner relating to this Agreement or other
Collateral or any Obligation whatsoever including, without
limitation, all reasonable fees and expenses of your attorneys
(including in-house counsel), incurred in connection with the
foregoing, including, without limitation, those incurred in
connection with any state court insolvency case or proceeding or
federal bankruptcy case or proceeding, and all fees and costs in
connection with public record searches and filings,
investigation, accounting and periodic field examination fees and
expenses (whether from your own or outside investigators,
auditors or examiners) and all other costs and expenses with
respect thereto, whether or not a legal action is commenced by or
against us, and if such action is commenced, whether or not
judgment is obtained. Recourse to security or any Collateral
shall not at any time be required and we shall at all times
remain liable for the repayment on demand to you of all loans and
advances to or for our account and of all other Obligations at
any time or from time to time owing to you or any of your
Affiliates.
4. DISBURSEMENT OF FUNDS: We may from time to time give
you oral, telephonic, telefax and/or written instructions to
disburse monies out of our factoring account. Such disbursement
requests may be made by any of our officers, employees or agents
and you shall have no obligation to verify that any request is
authorized or proper.
5. INTEREST:
A. Interest charges to our account shall be at
one-half of one percent (1/2%) in excess of the Republic
Reference Rate, computed on the basis of a 360-day year for the
actual number of days in the interest period. We recognize that
the actual yield to you under this Agreement may exceed the rate
of interest specified in this Section 5.A. The interest rate in
effect during each calendar month shall be determined using the
Republic Reference Rate in effect on the last Business Day of the
preceding calendar month.
B. Interest on all sums charged to us or to or for
our account or payable to us by you during any month shall be
calculated from the date any such charge was incurred to
and including the Settlement Date of such month. Interest on all
sums advanced to us or to or for our account shall be calculated
from the date of such advance up to and including the date
on which such advance is repaid.
C. You shall charge our account with interest at the
applicable rate determined in accordance with Section 5.A above
for chargebacks, and changes to the due date of any Receivable.
Interest on chargebacks of full invoices shall be calculated from
the due date of the Receivable involved to the Settlement Date of
the month in which such chargeback was made. Interest on
chargebacks relating to customer partial deductions of invoices
shall be calculated from the Deposit Date of the remittance
taking such deduction until the end of the month in which such
chargeback was made and from the end of such month until the
Settlement Date of such month. Interest on changes to the due
dates of Receivables shall be calculated from the original due
date of such Receivable to the revised due date of such
Receivable. Early payments made by our customers shall not
reduce the interest to be charged to our account.
D. If for any reason there remains with you past any
Settlement Date any balance owing to us ("Matured Funds"), you
shall pay us interest on such Matured Funds from the day after
Settlement Date up to and including the date such funds are
remitted to us, at a rate per annum equal to 2% below the
Republic Reference Rate in effect during each day in which
such Matured Funds are retained by you. The applicable Republic
Reference Rate to be determined in accordance with Section 5.A
above. You reserve the right to remit such Matured Funds to us
at any time.
6. MONTHLY STATEMENTS: You will send us a monthly
statement of our account current after the end of each month.
UNLESS YOU RECEIVE OUR WRITTEN EXCEPTIONS TO ANY ACCOUNT CURRENT
RENDERED BY YOU WITHIN SIXTY (60) DAYS AFTER SUCH ACCOUNT CURRENT
IS RENDERED, SUCH ACCOUNT CURRENT SHALL CONSTITUTE AN ACCOUNT
STATED AND BE DEEMED ACCEPTED BY US AND SHALL BE CONCLUSIVE AND
BINDING UPON US.
7. COMMISSIONS:
A. We agree to pay to you a factoring commission
equal to five tenths of a percent (.5%) of the gross face amount
of each Receivable, less, with respect to each Receivable,
applicable credits issued by us. Your factoring commission as so
calculated shall be charged to our account effective as of the
fifteenth (15th) day of the month in which the Receivable was
assigned.
B. Commissions payable to you hereunder are based
upon our usual and regular terms which do not exceed sixty (60)
days.
C. We may from time to time request that you credit
approve sales made by us to Debtors-in-Possession operating under
Chapter 11 of the Bankruptcy Code ("DIP Sales"). We agree that
any such credit approval by you of DIP Sales shall be subject to
a supplemental factoring commission to be agreed upon by you and
us in addition to the regular factoring commission charged by
you, as an additional condition to your factoring of DIP Sales.
D. Each month you shall charge our account with the
amount of the factoring commission provided for herein.
8. ASSIGNMENT SCHEDULES, INVOICING AND CREDITS: We will
provide you with an assignment and schedule of Receivables sold
and assigned to you in form satisfactory to you. All bills or
invoices shall be mailed by us to our customers at our sole
expense. We will give you copies of all bills or invoices,
together with such proof of shipment or delivery as you may from
time to time require. The issuance of or any billing by us of
such bills or invoices, shall constitute an assignment thereof to
you for the Receivables represented thereby, whether or not we
execute any other specific instrument of assignment.
Notwithstanding the foregoing, you shall be deemed not to have
assumed the credit risk as provided in Section 1.B above if we do
not supply you with a schedule and assignment of Receivables
within ten (10) days of the creation of the Receivables involved
and the risk of loss with respect to such Receivables shall be
deemed to have reverted to and been assumed by us without any act
upon your part to effect the same. Credits may be claimed only
by the customer. All credits for full invoice amounts shall be
assigned by us to you.
9. DISPUTES AND CHARGEBACKS: We hereby further warrant
to you that the customer in each instance has received and will
accept the merchandise sold and the bill or invoice therefor, and
will pay the same as and when due without any Dispute. We will
notify you promptly of, and, at our own cost and expense,
including attorneys' fees and expenses, shall settle all Disputes
and will pay you promptly the amount of the Receivables affected
thereby. Any Dispute not settled by us by the sixtieth (60th) day
next following the maturity of the bill or invoice affected
thereby may, if you so elect, be settled, compromised, adjusted
or litigated by you directly with the customer or other
complainant for our account and risk and upon such terms and
conditions as you in your sole discretion deem advisable. In
addition to all other rights to which you are entitled hereunder,
whenever there is any Dispute, if any unapproved Receivable or
approved Receivable of a customer having other approved
Receivables then in Dispute is unpaid at its maturity, you may
charge the amount of the Receivable so affected or unpaid to us
at any time. In addition, you shall also be entitled to charge
our account the amounts you receive in payment of any unapproved
Receivable and which thereafter you are required to turn over or
return to the customer or any legal representative thereof. The
provisions of the foregoing sentence shall survive the
termination of this Agreement, and we hereby indemnify you and
hold you harmless from any loss or expense arising out of the
assertion of such a claim with respect to any such unapproved
Receivable, including attorneys' fees and expenses. You may
charge back to our account any deduction taken by customer with
respect to a Receivable sixty days after receipt of payment with
respect to such Receivable. In addition, as further
consideration for your entering into this Agreement, we waive any
right to any payments received by you from or on behalf of our
customers which neither you nor we can identify to any
Receivable. Any chargeback of a Receivable shall not be deemed
nor shall it constitute a reassignment to us of the Receivable
affected thereby, and title thereto and to the merchandise
represented thereby shall remain in you until you are fully
reimbursed. Regardless of the date or dates upon which you
charge back the amount of any Receivable with respect to
which there is any Dispute, or the amount owing from a customer
which has raised any Dispute, we agree that immediately upon the
occurrence of any such Dispute, any obligation you may
otherwise have had hereunder to bear the risk of loss with
respect to such Receivable shall cease and such obligation shall
be deemed to have reverted to, and to have been assumed by, us
without any act upon your part to effect the same.
10. REMITTANCES OF FUNDS: If any remittances are made
directly to us, we shall hold the same in trust for you as your
property and immediately deliver to you the identical checks,
monies or other forms of payment received, and you shall have the
right to endorse our name on any and all checks or other forms of
remittances received if such endorsement is necessary to effect
collection.
11. MAINTENANCE OF RECORDS:
A. We agree that we will hold at our offices and be
fully responsible to you for any and all shipping receipts
evidencing delivery of goods or rendition of services regarding
Receivables factored by you. Such shipping evidences held by us
shall be available for your inspection and for delivery to you at
your request at any time.
B. We further agree to make our records, files and
books of account, including, but not limited to, any and all
bills, invoices, shipping or transport documents, ledgers,
journals, checkbooks, correspondence, memoranda, microfilm,
microfiche, computer programs and records, source materials,
tapes and discs (collectively "Documents"), available to you on
request and that you may visit our premises during normal
business hours to examine such Documents and to make copies or
extracts thereof and to conduct such examinations as you
deem necessary.
12. CERTAIN COSTS AND EXPENSES:
A. If you, in your sole discretion, agree to at our
request and on our behalf file a claim (a "DR Claim"), with
respect to a Receivable which is not at your credit risk or
forward such a DR Claim to a collection agency or attorney for
collection, you shall do so only if you and we have agreed as to
the terms regarding payment to you for such service or those
of any collection agency or attorney to whom you may forward the
DR Claim and reimbursement for expenses incurred in respect
thereof and you may then charge our account in an amount equal to
such agreed fees and expenses.
B. We shall be entitled to receive at no cost to us
one (1) Client Detail Aged Trial Balance for each month.
C. You may modify the charges set forth in Sections
4, 7.B, 7.C and 12.A above, from time to time, on not less than
sixty (60) days prior written notice.
13. TAXES: Any state, city, local or federal sales or
excise taxes on sales of Receivables hereunder shall be timely
paid by us, but if you should make any payment of any thereof, we
will repay the same to you upon demand, and all such payments
shall constitute Obligations.
14. WARRANTIES AND AGREEMENTS:
A. We hereby warrant our solvency (which warranty
shall be continuing throughout the term of this Agreement) and
hereby agree that we are not entitled to and shall not pledge
your credit for any purpose whatsoever. We further agree that we
shall not encumber or grant a lien on or security interest in
Receivables or our other Collateral, other than to you without
your prior written consent.
B. We agree to furnish you with balance sheets,
statements of profit and loss, financial statements and such
other information regarding our business affairs and financial
condition as you may from time to time require, and in any event,
a statement of our financial position for each fiscal year
prepared and certified by our regularly engaged Certified Public
Accountant. All such statements shall fairly present our
financial condition as of the dates, and the results of our
operations for the periods, for which the same are furnished.
C. This Agreement is the complete agreement between
the parties hereto as to the subject matter hereof, all prior
commitments, proposals, negotiations concerning the subject
matter hereof being merged herein. This Agreement is entered
into for the benefit of said parties, their successors and
assigns, except that we shall not assign or hypothecate our
rights under this Agreement to any other person, firm,
corporation or entity without your prior written consent. This
Agreement cannot be amended, changed, modified or terminated
orally. We hereby consent to the assignment by you of this
Agreement and your rights hereunder, including the Collateral, to
any Affiliate or any other third-party. No delay or failure on
your part in exercising any right, privilege or option, and no
waiver whatever shall be valid unless in writing signed by you
and then only to the extent a waiver is therein set forth.
15. DEFINITIONS: For purposes of this Agreement the
following terms shall have the respective meanings given to them
below:
(a) "Affiliates" shall mean any person, firm or
corporation directly or indirectly controlling, controlled by or
in common control with you and any corporation the stock of which
is owned or controlled directly or indirectly by, or is under
common control with, Republic New York Corporation.
(b) "Agreement" shall mean this Factoring Agreement,
as amended, modified or supplemented.
(c) "Average Weighted Due Date of Receivables" shall
mean with respect to Receivables assigned hereunder in any month,
the quotient obtained by dividing the Dollar Days for such month
by the Net Sales for such month, adjusted to the next calendar
day, if such calculated date results in fractional days.
(d) "Business Day" shall mean any week day on which
banking institutions in New York, New York, are open for the
transaction of ordinary banking business. If any payment or
credit by you to us under this Agreement is due on a day other
than a Business Day, then such payment or credit shall be made on
the next Business Day.
(e) "Deposit Date" shall mean with respect to a
payment on a Receivable from or on behalf of our customer made to
the banking institution receiving on your behalf such payment,
the date such banking institution notes on the item evidencing
such payment or otherwise on its records as the date it deems
such payment as having been received by it.
(f) "Dispute" shall mean any dispute, claim, offset,
defense, counterclaim or any other reason for nonpayment other
than a customer's financial inability to pay, whether bona
fide or not, and regardless of whether the same, in part or in
whole, relates to an unpaid Receivable or any other Receivable.
(g) "Dollar Days" shall mean with respect to
Receivables assigned hereunder in any month, the number of days
from the end of the month in which each invoice or credit is
assigned to its due date (based upon longest or shortest payment
terms as you may elect) multiplied by the dollar amount of each
such invoice or credit, net of discounts.
(h) "Net Sales" shall mean the gross face amount of
Receivables less discounts offered to, and any credits received
by or allowed to our customers. In computing "Net Sales"
you may in your discretion treat (1) discounts offered to our
customers as having been taken by such customers on the largest
discount offered to them, and (2) all discounts used in such
computation also as being applicable to postage, freight, and
incidental charges.
(i) "Obligations" shall mean all loans, advances,
indebtedness, liabilities, debit balances, covenants and duties
and all other obligations of whatever kind or nature at any time
or from time to time owed by us to you or any of your Affiliates,
whether fixed or contingent, due or to become due, no matter how
or when arising and whether under this or any other Agreement or
otherwise and including all obligations for purchases made by us
from any other concern factored by you.
(j) "Receivables" (or "Receivable" in the singular)
shall mean and include all accounts, and all other obligations of
customers of ours arising out of the sale and delivery of
goods by us (whether now existing or hereafter created) which are
designated by us as being factored by you.
(k) "Republic Reference Rate" shall mean the lending
rate established by Republic National Bank of New York from time
to time at its principal domestic office as its reference lending
rate for domestic commercial loans.
(l) "Settlement Date" shall mean the Average Weighted
Due Date of all Receivables assigned during such month plus five
Business Days.
16. TERM AND EVENTS OF DEFAULT:
A. This Agreement shall continue in full force and
effect from the effective date hereof unless terminated by you or
unless we notify you of our desire to terminate this Agreement by
giving you at least thirty (30) days' prior written notice. You
shall have the right to terminate this Agreement at any time upon
thirty (30) days' prior written notice. Termination shall be
effective by the mailing by certified mail, return receipt
requested of a letter of notice addressed by either of us to the
other specifying the date of termination. Notwithstanding the
foregoing, you may terminate this Agreement without notice upon
the occurrence of any Event of Default. On termination for any
reason, all Obligations shall, unless and to the extent that
you otherwise elect, become immediately due and payable without
notice or demand. Any of the following events with respect to us
or any guarantor of any Obligations shall constitute an "Event of
Default" hereunder: default in the payment or performance of any
Obligation owing to you or any of your Affiliates when due,
including without limitation the failure to pay to you the amount
of any net debit balance in our account and any unpaid interest
thereof after demand therefor has been made; or we or any of them
commit any breach of or default in the performance of any other
covenant or agreement contained in this Agreement or in any other
instrument or agreement with or in favor of you or your
Affiliates; any representation or warranty made by us or any of
them in this Agreement or in any other instrument or agreement
with or in favor of you or your Affiliates shall prove to be
inaccurate or untrue; any partner (if we or any of them is a
partnership) shall die or otherwise withdraw from the
partnership; death (if we or any of them is a natural person) or
dissolution (if we or any of them is a corporation); we or any of
them shall commence any case, proceeding or other action under
any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered
with respect to us or any of them, or seeking to adjudicate us or
any of them a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to us or any of them or
any of their debts, or seeking appointment of a receiver,
trustee, custodian or other similar official for us or any
of them or for all or any substantial part of the assets of us or
any of them, or we or any of them shall make a general assignment
for the benefit of its creditors, or there shall be commenced
against us or any of them any case, proceeding or other action of
a nature referred to in this clause; there shall be commenced
against us or any of them any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of the
assets of us or any of them which results in the entry of an
order for any such relief, or we or any of them shall take any
action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in this clause;
we or any of them shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they
become due; entry of a judgment against us or any of them;
failure to pay or remit any tax when assessed or due; making a
bulk transfer or sending notice of intent to do so; granting any
security interest (other than to you) in the Collateral without
your prior written consent; suspension or liquidation of the
usual business of us or any of them; failing to furnish you with
any requested financial information or failing to permit
inspection of books or records by you or any of your agents,
attorneys or accountants; the occurrence of a default or
event of default under any guarantee or security agreement
guaranteeing or securing any Obligations; we or any of them (if a
corporation) shall become a party to any merger or consolidation
without your prior written consent unless the surviving entity
shall specifically assume our obligations hereunder and have a
net worth upon the effectiveness of such merger or consolidation
at least equal to ours immediately prior thereto; or control of
us or any of them (if a corporation or partnership) shall change.
B. Notwithstanding any termination hereof, this
Agreement shall nevertheless continue in full force and effect as
to, and be binding upon us, after any termination, until we
have fully paid, performed and satisfied all of the Obligations,
no matter how or when arising and whether under this or any other
agreement.
17. REMEDIES: Upon the occurrence of any Event of Default,
you shall have all the rights and remedies of a secured party
under the Uniform Commercial Code and other applicable laws with
respect to all Collateral, such rights and remedies being in
addition to all of your other rights and remedies provided for
herein or in any other agreement between us, and further, you
may, at any time or times, after the occurrence of any such Event
of Default, sell and deliver any and all other Collateral held by
you or for you at public or private sale, in one or more sales or
parcels, at such prices and upon such terms as you may deem best,
and for cash or on credit or for future delivery, without your
assumption of any credit risk, and at public or private sales, as
you may deem appropriate. If reasonable notice of the time and
place of such sale is required under applicable law, such
requirement shall be met if any such notice is mailed, postage
prepaid, to our address shown on the cover page hereof, or the
last shown address in your records, at least five (5) days before
the time of the sale or disposition thereof. You may be the
purchaser at any sale, if it is public, free from any right of
redemption, which, to the extent permitted by law, we also hereby
expressly waive. The proceeds of sale shall be applied first to
all costs and expenses of sale, including attorneys' fees and
disbursements, and then to the payment (in such order as you may
elect) of all Obligations. You will return any excess to us and
we shall remain liable to you for any deficiency. Your rights
and remedies under this Agreement will be cumulative and not
exclusive of any other rights or remedies which you may
otherwise have. The provisions of this Section 17 shall survive
any termination of this Agreement.
18. APPLICABLE LAW, ARBITRATION, WAIVER OF JURY TRIAL,
JURISDICTION, STATUTE OF LIMITATIONS:
A. This Agreement is made in the State of New York
and shall be governed by and construed in accordance with the
laws of said State, without regard to conflict of laws
principles.
B. We agree that any Claim or cause of action by us
against you, or any of your directors, officers, employees,
agents, accountants or attorneys, based on, arising from or
relating in any way to this Agreement, or any supplement or
amendment hereto, or any other present or future agreement
between us, or any other transaction contemplated hereby or
thereby or relating hereto or thereto, or any other matter
whatsoever shall be barred unless asserted by us by the
commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within three years
after the first act, occurrence or omission upon which such Claim
or cause of action, or any part thereof, is based, and the
service of a summons and complaint upon one of your officers,
within thirty (30) days thereafter. We agree that said three
year period is a reasonable and sufficient time for us to
investigate and act upon such Claim or cause of action. Said
three year period shall not be waived, tolled or extended except
by specific written consent by you.
C. In performing your obligations under this
Agreement, you shall be liable to us for only your negligence or
willful misconduct. No person or entity shall be a third party
beneficiary of any of our rights or claims under this Agreement
and in particular, but not by way of limitation, you shall not be
liable to any third party to effect a transfer in accordance with
our instructions due to mechanical, computer or electrical
failures or for any other reason beyond your control. You shall
have no obligation to pursue, or assist us in pursuing, any claim
we may have against any third party. In no event, shall you be
liable for special, punitive, indirect or consequential damages,
nor shall any action or inaction on your part, constitute a
waiver by you of any cause of action or defense.
D. YOU AND WE EACH HEREBY WAIVE THE RIGHT TO TRIAL BY
JURY IN ANY ACTION BASED UPON, ARISING FROM, OR IN ANY WAY
RELATING TO: (I) THIS AGREEMENT, OR ANY SUPPLEMENT OR AMENDMENT
HERETO; OR (II) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR
AGREEMENT BETWEEN YOU AND US; OR (III) ANY CONDUCT, ACTS OR
OMISSIONS BY YOU OR US OR ANY OF YOUR OR OUR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER
PERSONS AFFILIATED WITH YOU OR US; IN EACH OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. As a
material part of the consideration to you to enter into this
Agreement, we (1) agree that, at your option, all actions and
proceedings based upon, arising out of or relating in any way
directly or indirectly to this Agreement shall be litigated
exclusively in the Supreme Court of the State of New York, County
of New York, (2) consent to the jurisdiction of such court and
consent to the service of process in any such action or
proceeding by personal delivery, first-class mail, or any other
method permitted by law, and (3) waive any and all rights to
transfer or change the venue of any such action or proceeding to
any other court.
E. The headings of various Sections of this Agreement
are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions of this
Agreement.
F. This Agreement and the other written documents
previously or now executed in connection herewith are the entire
and only agreements between us with respect to the subject matter
hereof, and all oral representations, agreements and
undertakings, previously or contemporaneously made, which are not
set forth herein or therein, are superseded hereby and thereby.
The provisions of this Section 18, shall survive any termination
of this Agreement.
Very truly yours,
ATTEST:
GEORGE ALFRED WEBSTER ROBERT A. WARD
[SEAL] By: Executive Vice President
Title:
ACCEPTED AT NEW YORK, NEW YORK
ON August 23, 1995
REPUBLIC FACTORS CORP.
By: MARC HELLER
Title: Senior Vice President
EXHIBIT (10.2)
CONSENT TO ACTION WITHOUT MEETING
BY THE STOCK OPTION COMMITTEE OF THE UNIFI SPUN YARNS, INC.'S
1992 EMPLOYEE STOCK OPTION PLAN
WHEREAS, Vintage Yarns, Inc. ("Vintage") instituted its 1992 Employee
Stock Option Plan ("Vintage Plan") on April 1, 1992, that provided,
among other things, that the option exercise price of stock options
issued under the Vintage Plan shall be paid in cash at the time an
optionee gives notice of exercise of an option; and
WHEREAS, Vintage, whose name was changed to Unifi Spun Yarns, Inc.
("USY"), became a wholly-owned subsidiary of Unifi, Inc. ("Unifi") on
April 23, 1993, pursuant to the terms of a Reverse Triangular Merger and
options under the Vintage Plan were converted to options to purchase
Unifi stock; and
WHEREAS, effective May 12, 1993, the Board of Directors of USY changed
the name of the Vintage Plan to the Unifi Spun Yarns, Inc.'s 1992
Employee Stock Option Plan ("USY Plan") and appointed a Stock Option
Committee for the USY Plan made up of G. Allen Mebane, William T.
Kretzer and Robert A. Ward; and
WHEREAS, USY merged with and into Unifi on December 26, 1994 and the
USY Plan contained in existence after the merger, although no further
options can be granted under the same; and
WHEREAS, the Stock Option Committee deems it in the Optionees of the
USY Plan and Unifi's best interest for it, pursuant to Paragraph 14 of
the USY Plan, to amend the USY Plan to provide for payment of the option
exercise price in cash or for exchange of shares of Unifi's Common Stock
previously owned by the optionee.
NOW, THEREFORE, BE IT RESOLVED, that the Second Sentence of Paragraph
7(b) of the USY Plan is deleted in its entirety and substituted with the
following:
Such notice shall specify the number of shares to be purchased
pursuant to an option and the aggregate purchase price to be
paid therefore, and shall be accompanied by the payment of
such purchase price in cash or by the exchange of shares of the
Corporation's Common Stock, previously owned by the
optionee, at the fair market value of said shares on the date of
exercise or such other form of payment and upon such other
terms and conditions as are acceptable to the Committee.
This Consent is effective as of the 1st day of September, 1995 and may
be signed in counterparts.
STOCK OPTION COMMITTEE
G. ALLEN MEBANE
G. Allen Mebane
WILLIAM T.KRETZER
William T.Kretzer
ROBERT A. WARD
Robert A. Ward