-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E+ixEuSku59E1dquC8kVoHg9Umhf6XYSXw0JGT1pL7B7yZnCMjneaSkrZ+FV3c43 IJHmL5CWmrBOxNwIon1C0w== 0000100726-96-000013.txt : 19960508 0000100726-96-000013.hdr.sgml : 19960508 ACCESSION NUMBER: 0000100726-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960326 FILED AS OF DATE: 19960507 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIFI INC CENTRAL INDEX KEY: 0000100726 STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [2200] IRS NUMBER: 112165495 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10542 FILM NUMBER: 96557458 BUSINESS ADDRESS: STREET 1: 7201 WEST FRIENDLY RD STREET 2: P O BOX 19109 CITY: GREENSBORO STATE: NC ZIP: 27410-9109 BUSINESS PHONE: 9192944410 MAIL ADDRESS: STREET 1: P O BOX 19109 CITY: GREENSBORO STATE: NC ZIP: 24719-9109 FORMER COMPANY: FORMER CONFORMED NAME: AUTOMATED ENVIRONMENTAL SYSTEMS INC DATE OF NAME CHANGE: 19720906 10-Q 1 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 March 24, 1996 [] 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 April 28, 1996 Common Stock, par value $.10 per share 64,843,987 Shares Part I. Financial Information UNIFI, INC. Condensed Consolidated Balance Sheets March 24, June 25, 1996 1995 (Unaudited) (Audited) (Amounts in Thousands) ASSETS Current Assets: Cash and Cash Equivalents $20,025 $60,350 Short-Term Investments 57,656 85,844 Accounts Receivable, Net 201,849 209,432 Inventories: Raw Materials and Supplies 54,283 58,959 Work in Process 12,665 14,296 Finished Goods 61,914 66,123 Other Current Assets 3,106 8,017 Total Current Assets 411,498 503,021 Property, Plant and Equipment(Notes e and f) 1,001,361 910,383 Less: Accumulated Depreciation 446,841 394,168 554,520 516,215 Other Assets (Note g) 47,197 21,666 Total Assets $1,013,215 $1,040,902 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $107,881 $100,165 Accrued Expenses 55,759 54,338 Income Taxes 10,910 15,161 Total Current Liabilities 174,550 169,664 Long-Term Debt 230,000 230,000 Deferred Income Taxes 36,021 37,736 Shareholders' Equity: Common Stock 6,485 6,714 Capital in Excess of Par Value 63,138 117,277 Retained Earnings 499,835 473,962 Cumulative Translation Adjustment 1,428 4,415 Unrealized Gains on Certain Investments 1,758 1,134 Total Shareholders' Equity 572,644 603,502 Total Liabilities and Shareholders'Equity $1,013,215 $1,040,902 See Accompanying Notes to Condensed Consolidated Financial Statements. UNIFI, INC. Condensed Consolidated Statements of Income (Unaudited) For the Quarters For the Nine Months Ended Ended March 24, March 26, March 24, March 26, 1996 1995 1996 1995 (Amounts in Thousands Except Per Share Data) Net Sales $375,509 $403,001 $1,164,315 $1,149,492 Costs and Expenses: Cost of Goods Sold 329,965 344,699 1,024,587 987,741 Selling, General & Administrative Expense 10,403 11,055 31,908 31,016 Interest Expense 3,841 3,983 11,278 11,856 Interest Income (1,120) (2,507) (5,738) (7,560) Other (Income) Expense (544) (4,526) (2,282) (7,364) Non-Recurring Charge(Note e) -- -- 23,826 -- 342,545 352,704 1,083,579 1,015,689 Income Before Income Taxes 32,964 50,297 80,736 133,803 Provision for Income Taxes 12,217 19,247 29,104 51,944 Net Income $20,747 $31,050 $51,632 $81,859 Earnings Per Share:Primary $.32 $.45 $.78 $1.17 Fully Diluted $.32 $.43 $.78 $1.14 Cash Dividends Per Share $.13 $.10 $.39 $.30 See Accompanying Notes to Condensed Consolidated Financial Statements. UNIFI, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended March 24, March 26, 1996 1995 (Amounts in Thousands) Cash and Cash Equivalents Provided by Operating Activities, Net of Acquisitions $144,673 $92,716 Investing Activities: Capital Expenditures (100,114) (64,175) Acquisitions (48,444) -- Sale of Capital Assets 1,523 2,078 Proceeds from Notes Receivable 785 4,983 Proceeds from Sale of Subsidiary and Equity Investment 10,436 13,798 Sale of Short-Term Investments 91,072 80,460 Purchase of Short-Term Investments (59,808) (64,659) Net Investing Activities (104,550) (27,515) Financing Activities: Issuance of Common Stock 27 410 Cash Dividends Paid (25,758) (20,867) Purchase and Retirement of Common Stock (54,395) (58,748) Net Financing Activities (80,126) (79,205) Currency Translation Adjustment (322) 282 Increase (Decrease) in Cash (40,325) (13,722) Cash and Cash Equivalents - Beginning 60,350 80,653 Cash and Cash Equivalents - Ending $20,025 $66,931 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 March 24, 1996 and the results of operations and cash flows for the periods ended March 24, 1996 and March 26, 1995. Such adjustments consisted of normal recurring items for all periods presented and, for the current year-to-date, 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 periods' pre-tax income from the Company's foreign operations represented a higher percentage of the Company's consolidated results than the corresponding periods of the prior year and the current periods effective tax rates for foreign operations were lower than prior year periods. Additionally, the Company's effective tax rate for U.S. operations is lower in the current periods due to the realization of increased tax credits. These factors contributed to the decline in the effective tax rates for the consolidated Company. (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 and nine months ended March 24, 1996. Accordingly, fully diluted earnings per share for these periods has been reported consistent with the primary earnings per share results. Computation of average shares outstanding (in 000's): Quarters Ended Nine Months Ended March 24, March 26, March 24, March 26, 1996 1995 1996 1995 Average Shares Outstanding 65,068 68,127 66,020 69,427 Add: Dilutive Options 436 572 454 528 Primary Average Shares 65,504 68,699 66,474 69,955 Incremental Shares Arising from Full Dilution Assumption 7,771 7,760 Average Shares Assuming Full Dilution 76,470 77,715 Computation of net income for per share data (in 000's): Quarters Ended Nine Months Ended March 24, March 26, March 24, March 26, 1996 1995 1996 1995 Net Income - Primary $20,747 $31,050 $51,632 $81,859 Add: Convertible Subordinated Interest Net of Tax 2,147 6,442 Net Income Assuming Full Dilution $33,197 $88,301 (d)Common Stock On April 18, 1996 the Company's Board of Directors declared a cash dividend of 13 cents per share payable on May 10, 1996 to shareholders of record on May 3, 1996. (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 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 closed its spun cotton manufacturing facilities in Edenton and Mount Pleasant, North Carolina on November 17, 1995 with the majority of the manufacturing production being transferred to other facilities. Approximately 275 jobs, primarily wage-level positions, were 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 included $2.4 million of severance and other employee-related costs from the termination of employees and a $21.4 million write-down to estimated fair value less the cost of disposal of underutilized assets and consolidated facilities to be disposed. Costs associated with the relocation of equipment or personnel are being expensed as incurred. In connection with the plan of restructuring and corporate consolidation, the Company has incurred as of March 24, 1996 severance and other employee- related costs of $1.7 million. Additionally, the Company has charged against the reserve costs associated with the plant closures of $0.5 million and losses incurred from the disposal of assets of $5.0 million. The Company anticipates that all significant aspects of the consolidation plan will be accomplished by September 1996. However, the ultimate disposal of equipment and facilities may take longer due to current market conditions and the physical locations of the properties. The balance sheet at March 24, 1996, reflects primarily in property, plant and equipment, the net book value of the remaining assets to be disposed amounting to approximately $20.5 million for which net recoveries of $4.6 million are expected. (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 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 discussed in Note (e). (g)Nylon Machinery Purchase The acquisition of the Norlina Division of Glen Raven Mills, Inc., announced on October 2, 1995, was consummated on November 17, 1995. The acquisition, which is not deemed significant to the Company's consolidated net assets or the results of operations, has been accounted for as a purchase and accordingly, the net assets and operations have been included in the Company's consolidated financial statements beginning on the date the acquisition was consummated. The purchase price was allocated to the net assets acquired with the excess of cost over fair value of the net assets acquired being approximately $37.2 million. The excess of cost over fair value of net assets acquired is being amortized on a straight-line basis over 15 years. (h)Subsequent Event As disclosed in the Company's Form 8-K filed April 26, 1996, the Company announced on March 20, 1996 its intention of redeeming the $230 million of 6% convertible Subordinated Notes due 2002 unless otherwise converted in accordance with the debt agreement prior to the close of business on April 12, 1996. On April 22, 1996 the unconverted balance of the notes was redeemed at 103.33% of the principal amount with accrued interest through the date of the redemption. The remaining notes, totaling $51,000, were converted into shares of Unifi Common Stock on the basis of 33.7 shares of common stock for each $1,000 principal amount of notes (with cash paid in lieu of any fractional shares). The redemption was funded by a $400 million five-year revolving credit facility led by NationsBank, N.A. dated April 15, 1996. $239.0 million of the credit facility has been used to fund the above-referenced redemption with the balance of the credit facility to be used for future capital expenditures, stock repurchases, acquisitions and general corporate purposes. The redemption resulted in an extraordinary after tax charge that will be recognized in the Company's fiscal fourth quarter of approximately $6.0 million, or $.09 per share. 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 6.8% to $375.5 million in the third quarter of fiscal 1996 and for the nine month period, net sales reflect a slight increase of 1.3% to $1,164.3 million. The decrease in net sales for the quarter is the result of an 11.8% decline in unit volume offset partially by a 5.7% increase in per unit sales price. For the year-to-date, a 7.2% increase in per unit sales price offset a 5.5% decline in unit volume to yield a slight increase in net sales. The decreases in unit volume continue to reflect an overall weakness in retail sales. To counteract the volume declines and higher per unit raw material and manufacturing costs, the sales prices, based on overall product mix, were increased as indicated above. Net sales for our domestic operations declined 9.6% for the quarter as the overall weakness in retail sales translated into reduced unit demand across all our yarn products. Increased per unit sales prices, based on overall product mix, partially offset the effect of the reduced unit demand for the domestic operations. Net sales for our domestic operations for the year to date reflect a 1.4% decline as high average per unit sales prices were not sufficient to completely offset the decline in unit demand. Our Irish operations have experienced volume increases of 27.0% and 33.3% for the quarter and year-to-date periods, respectively, when compared to the corresponding periods of the prior year. Average selling prices, based on overall product mix have increased for both periods in the current year to partially offset the effects of higher raw material costs. The increased volume results from the addition of 20 new polyester texturing machines. Cost of goods sold as a percentage of net sales for the quarter increased from 85.5% last year to 87.9% this year. For the respective year-to-date periods, cost of goods sold as a percentage of net sales has increased from 85.9% to 88.0%. The increase in cost of sales as a percentage of net sales is attributable to the increase in average selling prices only partially offsetting the effects of reduced unit volume and increases in per unit raw material, packaging, and manufacturing costs. Selling, general and administrative expenses as a percentage of net sales increased from 2.7% in the prior year quarter to 2.8% in the current quarter. Our year-to-date results as a percentage of net sales have remained stable at 2.7%. Selling, general and administrative expenses decreased $0.7 million in the current quarter to $10.4 million and increased $0.9 million to $31.9 million for the nine months year-to-date. These increases primarily reflect our ongoing efforts to enhance our information systems to improve the operating performance throughout the Company and the level of service to our customers. Interest expense decreased $.1 million to $3.8 million in the current quarter and $.6 million to $11.3 million for the year-to-date period. Interest income has decreased from $2.5 million in last year's third quarter to $1.1 million in the current quarter. For the nine month period, interest income has decreased from $7.6 million to $5.7 million in the current period. The decline in interest income for the quarter and year-to-date periods reflect lower levels of invested funds. Other income, net decreased $4.0 million to $0.5 million in the current quarter and $5.1 million to $2.3 million for the year-to-date period. The decline in the current quarter and year-to-date is primarily due to the recognition of gains on the sale of equity investments in the prior year quarter and year-to-date periods of $2.7 million and $5.8 million, respectively. As disclosed in Note (e) in this Form 10-Q, the Company recorded in its quarter ended September 24, 1995 a non-recurring charge 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 and a $21.4 million write-down to estimated fair value less the cost of disposal for underutilized assets. This charge resulted from the plan to restructure and further reduce the Company's cost structure and improve productivity through the consolidation of certain manufacturing facilities and the disposition of underutilized assets. As part of the restructuring plan the Company has closed effective November 17, 1995 the spun yarn manufacturing facilities in Edenton and Mount Pleasant, North Carolina. The effective tax rate has decreased from 38.3% to 37.1% in the current quarter and has decreased from 38.8% to 36.0% for the year-to-date period. The lower rates in the current periods are 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. As a result of the above, the Company realized during the current quarter net income of $20.7 million, or $.32 per primary share compared to $31.1 million, or $.45 per primary share during the corresponding quarter of the prior year. Net income and primary earnings per share for the current nine month year-to-date period amounted to $51.6 million, or $.78 per share compared to corresponding totals in the prior year-to-date period of $81.9 million, or $1.17 per share. Before the effects of the non-recurring charge to earnings during the current nine month year-to-date, the Company had income of $66.5 million or $1.02 per share. Liquidity and Capital Resources We ended the current quarter with working capital of $236.9 million which included cash and short-term investments of $77.7 million. Cash and short- term investments have decreased $68.5 million since June 25, 1995 resulting primarily from the utilization of existing cash to fund the costs of acquisitions, capital expansions and the purchase and retirement of Company common stock. Our primary source of cash and cash equivalents continues to be generated from operating activities. Cash generated from operations increased to $144.7 million for the nine month period ended March 24, 1996 compared to $92.7 million for the corresponding period of the prior year. This improvement was achieved despite a decrease in net income through the improved management of working capital and adjustments for non-cash items including depreciation and amortization, which increased $4.7 million during the current nine month year-to-date period, and the non-recurring charge of $23.8 million of which $21.8 million represents non-cash items through March 1996. The Company utilized $104.6 million and $80.1 million for net investing and financing activities, respectively, during the nine months ended March 24, 1996. These net investing and financing activities were primarily comprised of $42.5 million generated from the net purchase and collection of investments offset by $148.6 million used for capacity expansions, upgrades and acquisitions, $25.8 million for the payment of the Company's cash dividends and $54.4 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 5.8 million shares have been repurchased as of March 24, 1996, pursuant to this Board authorization. At March 24, 1996, the Company has committed approximately $61.7 million for the purchase and upgrade of equipment and facilities, which is scheduled to be expended during the remainder of fiscal year 1996 and fiscal years 1997 and 1998. A significant component of these committed funds as well as a major component of year-to-date capital expenditures is the continuing construction of a highly automated, state-of-the-art texturing facility in Yadkinville, North Carolina. We have reached the initial phases of production in this texturing facility which is scheduled for completion in December 1996. On April 18, 1996 the Board of Directors approved Unifi's entrance into polyester fiber production in the United States. The facility, to be located in Yadkinville, North Carolina will be capable of producing approximately 150 million pounds of polyester fiber or one-third of the Company's annual domestic need. Expected start-up is in 1998. This new production capacity will support continued growth opportunities in textured polyester and will increase the Company's long-term competitiveness. The cost of the equipment and the facilities is currently being negotiated and is not included in the $61.7 million commitment identified in the preceding paragraph. As disclosed in the Company's Form 8-K filed April 26, 1996, the Company announced on March 20, 1996 its intention of redeeming the $230 million of 6% convertible Subordinated Notes due 2002 unless otherwise converted in accordance with the debt agreement prior to the close of business on April 12, 1996. On April 22, 1996 the unconverted balance of the notes was redeemed at 103.33% of the principal amount with accrued interest through the date of the redemption. The remaining notes, totaling $51,000, were converted into shares of Unifi Common Stock on the basis of 33.7 shares of common stock for each $1,000 principal amount of notes (with cash paid in lieu of any fractional shares). The redemption was funded by a $400 million five-year revolving credit facility led by NationsBank, N.A. dated April 15, 1996. $239.0 million of the credit facility has been used to fund the above- referenced redemption with the balance of the credit facility to be used for future capital expenditures, stock repurchases, acquisitions and general corporate purposes. The redemption resulted in an extraordinary after tax charge that will be recognized in the Company's fiscal fourth quarter of approximately $6.0 million, or $.09 per share. 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 5. Other Information Effective midnight, December 31, 1995, Mr. William J. Armfield, IV resigned as a member of the Company's Board of Directors and effective January 18, 1996, Mr. Timotheus R. Pohl resigned as a member of the Company's Board of Directors. Neither Mr. Armfield nor Mr. Pohl resigned as a Director of the Company because of disagreements with the Company on any matters relating to the Company's operations, policies or practices. Successor directors have not been elected. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27)Financial Data Schedule (b) No reports on Form 8-K have been filed during the quarter ended March 24, 1996. 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: May 7, 1996 WILLIS C. MOORE, 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.) EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S QUARTERLY REPORT FOR THE NINE MONH PERIOD ENDED MARCH 24, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 9-MOS JUN-30-1996 MAR-24-1996 20,025 57,656 208,461 6,612 128,862 411,498 1,001,361 446,841 1,013,215 174,550 230,000 0 0 6,485 566,159 1,013,215 1,164,315 1,164,315 1,024,587 1,024,587 23,826 0 11,278 80,736 29,104 51,632 0 0 0 51,632 .78 .78 OTHER STOCKHOLDERS'EQITY OF $566,159 IS COMPRISED OF CAPITAL IN EXCESS OF PAR VALUE OF $63,138, RETAINED EARNINGS OF $499,835, CUMULATIVE TRANSLATION ADJUSTMENT OF $1,428 AND UNREALIZED GAINS ON CERTAIN INVESTMENTS OF $1,758.
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