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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 December 28, 1997
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-10542
UNIFI, INC.
(Exact name of registrant as specified its charter)
New York 11-2165495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 19109 - 7201 West Friendly Avenue
Greensboro, NC 27419
(Address of principal executive offices) (Zip Code)
(336) 294-4410
(Registrant's telephone number, including area code)
Same
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at February 1, 1998
Common Stock, par value $.10 per share 61,587,997 Shares
Part I. Financial Information
UNIFI, INC.
Condensed Consolidated Balance Sheet
(Amounts in Thousands)
December 28, June, 29,
1997 1997
(Unaudited) (Note)
ASSETS:
Current assets:
Cash and cash equivalents $5,073 $9,514
Receivables 185,353 224,233
Inventories:
Raw materials and supplies 45,629 54,979
Work in process 12,409 11,791
Finished goods 86,359 75,493
Other current assets 2,606 3,688
Total current assets 337,429 379,698
Property, plant and equipment 1,026,813 1,147,148
Less: accumulated depreciation 460,764 548,775
566,049 598,373
Equity investment in
unconsolidated affiliates 199,274 1,851
Other noncurrent assets 79,777 38,781
Total assets $1,182,529 $1,018,703
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable $10,088 $1,189
Accounts payable 69,302 119,623
Accrued expenses 34,788 35,854
Income taxes payable 4,039 6,887
Total current liabilities 118,217 163,553
Long-term debt 413,326 255,799
Other noncurrent liabilities 8,102 --
Deferred income taxes 57,130 50,820
Shareholders' equity:
Common stock 6,139 6,121
Capital in excess of par value 20,501 --
Retained earnings 565,456 545,099
Cumulative translation adjustment (6,342) (2,689)
Total shareholders' equity 585,754 548,531
Total liabilities and
shareholders' equity $1,182,529 $1,018,703
Note: The balance sheet at June 29, 1997, has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in Thousands Except Per Share Data)
For the Quarters Ended For the Six Months Ended
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
1997 1996 1997 1996
Net sales $343,096 $419,345 $672,938 $834,060
Cost of goods sold 284,091 360,487 564,415 725,257
Selling, general &
admin. expense 10,595 11,247 20,490 22,077
Operating income 48,410 47,611 88,033 86,726
Interest expense 3,285 2,958 6,556 5,880
Interest income (414) (562) (872) (1,094)
Other (income) expense 549 1,039 259 841
Equity in (earnings) losses of
unconsolidated losses of
affiliates (4,516) 94 (9,137) 94
Income before income taxes 49,506 44,082 91,227 81,005
Provision for income taxes 16,487 15,292 30,683 28,260
Income before cumulative
effect of accounting change 33,019 28,790 60,544 52,745
Cumulative effect of
accounting change, net of
tax 4,636 -- 4,636 --
Net income $28,383 $28,790 $55,908 $52,745
Earnings per common share:
Income before cumulative
effect of accounting
change $.54 $.45 $.99 $.82
Cumulative effect of
accounting change, net of
tax .08 -- .07 --
Net income per common share $.46 $.45 $.92 $.82
Earnings per common share -
assuming dilution:
Income before cumulative
effect of accounting
change $.54 $.44 $.98 $.81
Cumulative effect of
accounting change, net of
tax .08 -- .07 --
Net income per common share
- assuming dilution $.46 $.44 $.91 $.81
Cash dividends per share $.14 $.11 $.28 $.22
See Accompanying Notes to Condensed Consolidated Financial Statements.
UNIFI, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
For the Six Months Ended
December 28, December 29,
1997 1996
Cash and cash equivalents provided by
operating activities, net of
acquisition $60,667 $83,018
Investing activities:
Capital expenditures (136,370) (66,983)
Acquisitions (25,644) --
Investments in unconsolidated equity
affiliates (35,152) (1,125)
Sale of capital assets 731 1,410
Proceeds from notes receivable 273 525
Other (2,878) --
Net investing activities (199,040) (66,173)
Financing activities:
Issuance of Company common stock 191 790
Stock option tax benefit 1,443 --
Purchase and retirement of Company
common stock (20,187) (63,783)
Borrowing of long-term debt 180,000 95,000
Payments of long-term debt (10,120) (40,000)
Cash dividends paid (17,070) (14,191)
Other (27) --
Net financing activities 134,230 (22,184)
Currency translation adjustment (298) 273
Net increase (decrease) in cash and cash
equivalents (4,441) (5,066)
Cash and cash equivalents - beginning 9,514 24,473
Cash and cash equivalents - ending $5,073 $19,407
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 December 28, 1997, and the results of operations and
cash flows for the periods ended December 28, 1997, and December 29, 1996.
Such adjustments consisted of normal recurring items except for the
cumulative effect of accounting change recorded in the current period as
described further in Note (i). Interim results are not necessarily
indicative of results for a full year. It is suggested that the condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's latest annual report
on Form 10-K. The Company has reclassified the presentation of certain
prior year information to conform with the current presentation format.
(b)Income Taxes
Deferred income taxes have been provided for the temporary differences
between financial statement carrying amounts and tax bases of existing
assets and liabilities.
The difference between the statutory federal income tax rate and the
effective tax rate is primarily due to the realization of state and federal
tax credits and the results of foreign subsidiaries which are taxed at
rates below those of U.S. operations.
(c)Earnings per share
The following table sets forth the computation of basic and diluted
earnings per share:
For the Quarters Ended For the Six Months Ended
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
1997 1996 1997 1996
Numerator:
Income before cumulative
effect of accounting
change $33,019 $28,790 $60,544 $52,745
Cumulative effect of
accounting change, net
of tax 4,636 -- 4,636 --
Net income $28,383 $28,790 $55,908 $52,745
For the Quarters Ended For the Six Months Ended
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
1997 1996 1997 1996
Denominator:
Denominator for basic
earnings per share -
weighted average
shares 61,106 64,377 61,058 64,457
Effect of dilutive
securities:
Stock options 589 772 639 704
Dilutive potential common
shares Denominator for
diluted earnings per
share-adjusted weighted
average shares and
assumed conversions 61,695 65,149 61,697 65,161
(d)Common Stock
On January 8, 1998, the Company's Board of Directors declared a cash
dividend of 14 cents per share payable on February 6, 1998, to shareholders
of record on January 31, 1998.
(e)Investments in unconsolidated affiliates
Investments in affiliates consist of a 34% interest in Parkdale America,
LLC (the LLC) and a 48.5% interest in MiCELL Technologies, Inc. (MiCELL).
These investments are reported using the equity method.
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 $58 million and is being amortized on a
straight-line basis over 30 years as a component of the equity in earnings
of unconsolidated affiliates. Net sales and operating income for the
prior year second quarter and for the prior year to date
attributable to the Company's spun cotton yarn operations contributed to
the LLC amounted to $72.8 million and $1.0 million and
$148.2 million and $0.2 million, respectively. Condensed balance
sheet and income statement information as of December 28, 1997, and for
the quarter and year-to-date periods ended December 28,1997, of the
unconsolidated affiliates is as follows (in $000):
December 28,
1997
Current assets $405,548
Noncurrent assets 210,782
Current liabilities 261,826
Shareholders' equity 354,504
Quarter Ended For the Six Months Ended
Dec. 28, 1997 Dec. 28, 1997
Net sales $151,348 $317,627
Gross profit 20,394 43,935
Income from operations 15,117 30,386
Net Income 15,117 30,386
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.
(f)Recent Accounting Pronouncements
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 in the current quarter 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,
without significant changes in the method of computation.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130," Reporting Comprehensive Income," (SFAS 130) which is required
to be adopted for fiscal years beginning after December 15, 1997, if not
previously adopted. SFAS 130 requires the reporting of comprehensive
income and its components in complete general purpose financial statements
as well as requires certain interim comprehensive income information be
disclosed. Comprehensive income represents the change in net assets of a
business during a period from non-owner sources. Such non-owner changes in
net assets that are not included in net income include, among others,
foreign currency translation adjustments, unrealized gains and losses on
available-for-sale securities and certain minimum pension liabilities. The
Company has not as yet determined the impact that the adoption of this
standard will have on its consolidated financial statements.
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 is required to be adopted for
fiscal years beginning after December 15, 1997, if not previously adopted.
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
results of operations or financial position.
(g)Year 2000 Compliance Status
The Company is in process of identifying the business issues associated
with the year 2000 that impact information systems both internally and in
relation to our external customers, suppliers and other business
associates. Factors considered in the assessment of the business issues
involved with the year 2000 include the evaluation of compliance
capabilities and the current status of the Company's enterprise-wide system
conversion project, significant customers' and vendors' compliance plans
and status thereof (including the impact on electronic commerce systems
with these companies) and the compliance plans and status for businesses in
which the Company has investments in their operations.
The Company has identified a team of professionals with the responsibility
of addressing business issues associated with the year 2000 and has
completed a preliminary assessment of the issues and actions needed to be
performed. The Company does not believe any material exposures or
contingencies exist with respect to its internal information systems. The
Company has not completed its evaluation of year 2000 compliance plans for
its external business affiliates but is not aware of any material exposure
or contingency to date.
(h)Acquisition
On November 14, 1997, the Company completed its previously announced
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.
(i)Cumulative Effect of Accounting Change
Pursuant to Emerging Issues Tasks 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 that it began in fiscal 1995. Previously, substantially all direct
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
$.08 per share was written off as a cumulative catch-up adjustment in the
second quarter of fiscal 1998.
(j)Subsequent Event
The Company announced on January 8, 1998, its intent to offer and sell up
to $300 million of senior, unsecured debt securities (the "Notes") to
qualified institutional buyers in the U.S. and to non-U.S. investors
outside the United States. On February 2, 1998, $250 million of these
securities were sold. The net proceeds of the offering 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's Discussion and Analysis of
Financial Condition and Results of Operations
The following is Management's discussion and analysis of certain significant
factors that have affected the Company's operations and material changes in
financial condition during the periods included in the accompanying Condensed
Consolidated Financial Statements.
Results of Operations
Consolidated net sales decreased 1.0% in the quarter from $346.6 million to
$343.1 million and declined 1.9% for the year to date from $685.9 million for
the prior year six month period to $672.9 million in the corresponding
current year period, after eliminating the net sales of the Company's spun
cotton yarn operations that were contributed to Parkdale America LLC at the
beginning of the current fiscal year. Net sales of the spun cotton yarn
operations were $72.8 million and $148.2 million for the prior year second
quarter and year to date, respectively. Unit volume for the quarter and year
to date periods, after eliminating spun yarn cotton operations from the prior
year periods, increased 1.3% and 0.3%, respectively. Average unit sales
prices, based on product mix, declined 2.5% for the quarter and 2.0% for the
year to date after giving effect to the elimination of spun cotton yarn sales
for the prior year periods.
Domestically, polyester and nylon yarn sales declined slightly for the
quarter due primarily to a decline in average sales price, based on product
mix. For the year-to-date period, sales of our polyester and nylon yarns
decreased approximately 1.6% due to slight declines in both unit sales and
average sales prices. Internationally, sales declined 1.4% for the quarter
and 4.1% for the year to date as decreases in unit prices for both periods
offset increases in unit sales over prior year corresponding periods. Also
impacting the current quarter sales relative to the prior year was the
strengthening of the U.S. dollar to the Irish punt during this period which
had the currency translation effect of reducing net sales by $4.1 million.
Gross profit increased 6.4% to $59.0 million for the quarter and 4.4% to
$108.5 million for the year to date, after eliminating spun cotton yarn
operating results from the prior year periods. Gross margin (gross profit as
a percentage of net sales) improved 1.2% for the quarter and 0.9% for the
year to date compared to the prior year periods, after removing the spun
cotton yarn operating results for these periods. Decreases in fiber and
manufacturing components of cost of sales more than offset increases in
depreciation and other fixed charges as a percentage of net sales for both
current year periods compared to the corresponding prior year periods
resulting in the improved gross margin percentages.
Selling, general and administrative expenses as a percentage of net sales
increased from 2.7% in last year's quarter to 3.1% this quarter. On a year-
to-date basis, selling, general and administration expense as a percentage of
net sales increased from 2.6% last year to 3.0% this year. On a dollar
basis, selling, general and administrative expense declined $0.7 million to
$10.6 million for the quarter and decreased $1.6 million to $20.5 million for
the year to date. Lower selling, general and administrative expenses for
both current year periods reflect cost reductions associated with the
contribution of our spun cotton yarn operations at the beginning of the
fiscal year. The increase in selling, general and administrative expense as
a percentage of net sales for both current year periods is attributable to
the lower sales base discussed above.
Interest expense increased $0.3 million to $3.3 million in the current
quarter and $0.7 million to $6.6 million for the year-to-date period. The
increase in interest expense for both current year periods reflects higher
levels of outstanding debt at higher average interest rates. Interest income
has decreased from $0.6 million in last year's second quarter to $0.4 million
in the current quarter. For the six month period, interest income has
decreased from $1.1 million last year to $0.9 million in the current period.
Other expense declined $0.5 million for the quarter and $0.6 million for the
year to date compared to the corresponding periods in the prior year.
Income from our equity affiliates, Parkdale America, LLC and MiCELL
Technologies, Inc., contributed $4.5 million to pre-tax income for the
quarter and $9.1 million for the year to date. During the second quarter of
fiscal 1997, and for the corresponding year to date, net sales and operating
income from our spun cotton yarn assets contributed to Parkdale America, LLC
amounted to $72.8 million and $1.0 million, and $148.2 million and $0.2
million, respectively. See Note (e) to the financial statements for
additional information regarding unconsolidated affiliates.
The effective tax rate has decreased from 34.7% to 33.3% in the current
quarter and from 34.9% to 33.6% for the year-to-date period. The difference
between the statutory federal income tax rate and the effective tax rate is
primarily due to the realization of state and federal tax credits and the
results of foreign subsidiaries which are taxed at rates below those of U.S.
operations.
Pursuant to Emerging Issues Tasks 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
that it began in fiscal 1995. Previously, substantially all direct 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 $.08 per share
was written off as a one-time, non-cash, cumulative catch-up adjustment in
the second quarter of fiscal 1998.
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 in the
current quarter 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, without significant
changes in the method of computation.
As a result of the above, the Company realized during the current quarter
income before the cumulative effect of the accounting change of $33.0
million, or diluted earnings per share of $.54, compared to $28.8 million, or
$.44 per share, for the corresponding quarter of the prior year. Net income
for the current quarter amounted to $28.4 million, or $.46 per diluted share,
after the charge for the cumulative effect of the change in accounting of
$4.6 million, or $.08 per diluted share. Net income for the current six
month year-to-date period amounted to $55.9 million, or $.91 per share,
compared to corresponding amounts in the prior year-to-date period of $52.7
million, or $.81 per share. For the current year to date, income before the
cumulative effect of the accounting change was $60.5 million, or $.98 per
share, respectively.
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 $60.7 million for the six month period ended December 28,
1997, compared to $83.0 million for the prior year corresponding period. The
primary sources of cash from operations, other than net income, were
decreases in accounts receivable of $51.2 million and non-cash adjustments
aggregating $35.9 million. Depreciation and amortization of $34.1 million,
the after-tax cumulative accounting change of $4.6 million and the deferred
income tax provision of $6.3 million, offset by earnings of unconsolidated
affiliates of $9.1 million, were the primary components of the non-cash
adjustments to cash provided by operations. Offsetting these sources were an
increase in inventory of $13.9 million and a decrease in accounts payable and
accruals of $68.4 million. All working capital changes have been adjusted to
exclude the effect of the current quarter acquisition. The decreases in
account receivable and account payable and accruals were impacted by the
contribution of the spun cotton yarn operations at the beginning of the
fiscal year as well as the timing of the holiday shut down at the end of the
current quarter relative to the shutdown that normally occurs near the
beginning of our fiscal year. In addition, the timing of the Company's
disbursements at the end of the current quarter compared to those of the
prior fiscal year end contributed to the significant decline in accounts
payable for the current period.
Working capital levels are more than adequate to meet the operating
requirements of the Company. We ended the current quarter with working
capital of $219.2 million which included cash and cash equivalents of $5.1
million.
The Company utilized $199.0 million for net investing activities and obtained
$134.2 million from net financing activities, during the six month period
ended December 28, 1997. Significant expenditures during this period
included $136.4 million for capacity expansions and upgrading of facilities,
$25.6 for acquisitions, $35.2 for investments in equity affiliates, $17.1
million for the payment of the Company's cash dividends, $20.2 million for
the purchase and retirement of Company common stock and $0.2 million, net for
other activity. The Company obtained proceeds from net borrowings under its
long-term debt agreement of $169.9 million to substantially offset these
cash expenditures.
As discussed in Note (e) 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 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. It is
anticipated that the LLC will distribute dividends to the Company and
Parkdale sufficient to satisfy any income tax liability attributable to the
taxable earnings of the LLC. Additionally, the Company is not obligated to
provide the LLC with any further cash contributions beyond those described
herein.
The Company is in process of identifying the business issues associated with
the year 2000 that impact information systems both internally and in relation
to our external customers, suppliers and other business associates. Factors
considered in the assessment of the business issues involved with the year
2000 include the evaluation of compliance capabilities and the current status
of the Company's enterprise-wide system conversion project, significant
customers' and vendors' compliance plans and status thereof (including the
impact on electronic commerce systems with these companies) and the
compliance plans and status for businesses in which the Company has
investments in their operations.
The Company has identified a team of professionals with the responsibility of
addressing business issues associated with the year 2000 and has completed a
preliminary assessment of the issues and actions needed to be performed. The
Company does not believe any material exposures or contingencies exist with
respect to its internal information systems. The Company has not completed
its evaluation of year 2000 compliance plans for its external business
affiliates but is not aware of any material exposure or contingency to date.
On November 14, 1997, the Company completed its previously announced
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.
At December 28, 1997, the Company has committed approximately $192.4 million
for the purchase and upgrade of equipment and facilities, which is scheduled
to be expended during fiscal years 1998 and 1999. A significant component of
these committed funds as well as a major component of the year-to-date
capital expenditures is the continuing construction of a polyester fiber
production facility in Yadkinville, North Carolina. In addition to this
project, the Company is in process of constructing 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.
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. Through December 28, 1997, 10.2 million shares have been
repurchased at a total cost of $282.5 million pursuant to this Board
authorization.
The Company announced on January 8, 1998, its intent to offer and sell up to
$300 million of senior, unsecured debt securities (the "Notes") to qualified
institutional buyers in the U.S. and to non-U.S. investors outside the United
States. On February 2, 1998, $250 million of these securities were sold.
The net proceeds of the offering 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.
Cautionary Statement on Forward-Looking Statements
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations and other sections of this Quarterly
Report contain forward-looking statements within the meaning of federal
security laws about the Company's financial condition and results of
operations that are based on management's current expectations, estimates and
projections about the markets in which the Company operates, management's
beliefs and assumptions made by management. Words such as "expects,"
"anticipates," "believes," "estimates," variations of such words and other
similar expressions are intended to identify such forward-looking statements.
These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions which are difficult to predict.
Therefore, actual outcomes and results may differ materially from what is
expressed or forecasted in, or implied by, such forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's judgment only as of the date hereof.
The Company undertakes no obligation to update publicly any of these forward-
looking statements to reflect new information, future events or otherwise.
Factors that may cause actual outcome and results to differ materially from
those expressed in, or implied by, these forward-looking statements include,
but are not necessarily limited to, availability, sourcing and pricing of raw
materials, pressures on sales prices 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), continued availability of financial
resources through financing arrangements and operations, negotiation 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.
Part II. Other Information
UNIFI, INC.
Item 4. Submission of Matters to a Vote of Security Holders
The Shareholders of the Company at their Annual Meeting held on the
23rd day of October 1997, considered and voted upon the election of
four (4) Class 3 Directors of the Company.
The Shareholders elected management nominees for the four (4) Class 3
Directors of the Company to serve until the Annual Meeting of the
Shareholders in 2000 or until their successors are elected and
qualified, as follows:
Name of Votes in Votes Votes
Director Favor Against Abstaining
G. Allen Mebane 53,007,402 0 556,218
William T. Kretzer 53,007,402 0 556,147
J. B. Davis 53,007,402 0 556,147
R. Wiley Bourne, Jr. 53,007,402 0 556,147
The following persons continued to serve on the Company's Board of
Directors until the Annual Meeting of Shareholders in 1998 for Class 1
and 1999 for Class 2:
Class 1 Class 2
Donald F. Orr Charles R. Carter
Robert A. Ward Jerry W. Eller
G. Alfred Webster Kenneth G. Langone
The information set forth under the headings "Election of Directors,"
"Nominees for Election as Directors," and "Security Holdings of
Directors, Nominees, and Executive Officers" on Pages 2-5 of the
Definitive Proxy Statement filed with the Commission since the close
of the registrant's fiscal year ending June 29, 1997, is incorporated
herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(27) Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter ended
December 28, 1997.
UNIFI, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIFI, INC.
Date: February 11, 1998 WILLIS C. MOORE, III
Willis C. Moore, III
Senior-Vice President and Chief
Financial Officer (Mr. Moore is
the Principal Financial and
Accounting Officer and has been
duly authorized to sign on behalf
of the Registrant.)