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| New York | 11-2165495 | |
|
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
| Large accelerated filer [ ] | Accelerated filer [X] | Non-accelerated filer [ ] | Smaller Reporting Company [ ] | |||
|
(Do not check if a smaller reporting
company) |
2
| March 28, | June 28, | |||||||
| 2010 | 2009 | |||||||
| (Unaudited) | ||||||||
|
ASSETS
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||||||||
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Current assets:
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||||||||
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Cash and cash equivalents
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$ | 52,496 | $ | 42,659 | ||||
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Receivables, net
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84,788 | 77,810 | ||||||
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Inventories
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106,312 | 89,665 | ||||||
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Deferred income taxes
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1,683 | 1,223 | ||||||
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Assets held for sale
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— | 1,350 | ||||||
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Restricted cash
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1,818 | 6,477 | ||||||
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Other current assets
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4,576 | 5,464 | ||||||
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Total current assets
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251,673 | 224,648 | ||||||
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Property, plant and equipment
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745,405 | 744,253 | ||||||
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Less accumulated depreciation
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(593,170 | ) | (583,610 | ) | ||||
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152,235 | 160,643 | ||||||
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Restricted cash
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— | 453 | ||||||
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Intangible assets, net
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14,978 | 17,603 | ||||||
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Investments in unconsolidated affiliates
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65,237 | 60,051 | ||||||
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Other noncurrent assets
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12,908 | 13,534 | ||||||
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Total assets
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$ | 497,031 | $ | 476,932 | ||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable
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$ | 33,860 | $ | 26,050 | ||||
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Accrued expenses
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22,934 | 15,269 | ||||||
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Income taxes payable
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1,073 | 676 | ||||||
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Current maturities of long-term debt and other
current liabilities |
2,187 | 6,845 | ||||||
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||||||||
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Total current liabilities
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60,054 | 48,840 | ||||||
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Notes payable
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178,722 | 179,222 | ||||||
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Other long-term debt and liabilities
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2,721 | 3,485 | ||||||
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Deferred income taxes
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261 | 416 | ||||||
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Commitments and contingencies
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Shareholders’ equity:
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Common stock
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6,017 | 6,206 | ||||||
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Capital in excess of par value
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27,279 | 30,250 | ||||||
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Retained earnings
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210,712 | 205,498 | ||||||
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Accumulated other comprehensive income
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11,265 | 3,015 | ||||||
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||||||||
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255,273 | 244,969 | ||||||
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Total liabilities and shareholders’ equity
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$ | 497,031 | $ | 476,932 | ||||
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3
| For the Quarters Ended | For the Nine-Months Ended | |||||||||||||||
| March 28, | March 29, | March 28, | March 29, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
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Summary of Operations:
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Net sales
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$ | 154,687 | $ | 119,094 | $ | 439,793 | $ | 413,830 | ||||||||
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Cost of sales
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138,177 | 118,722 | 386,541 | 397,721 | ||||||||||||
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Restructuring charges
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254 | 293 | 254 | 293 | ||||||||||||
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Write down of long-lived assets
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— | — | 100 | — | ||||||||||||
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Goodwill impairment
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— | 18,580 | — | 18,580 | ||||||||||||
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Selling, general & administrative expenses
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11,252 | 9,507 | 34,568 | 29,356 | ||||||||||||
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Provision (benefit) for bad debts
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(105 | ) | 735 | (93 | ) | 1,794 | ||||||||||
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Other operating (income) expense, net
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(346 | ) | (89 | ) | (542 | ) | (5,862 | ) | ||||||||
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Non-operating (income) expense:
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Interest income
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(775 | ) | (656 | ) | (2,355 | ) | (2,249 | ) | ||||||||
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Interest expense
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5,697 | 5,879 | 16,412 | 17,592 | ||||||||||||
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Gain on extinguishment of debt
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— | — | (54 | ) | — | |||||||||||
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Equity in earnings of unconsolidated
affiliates
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(2,175 | ) | (825 | ) | (5,847 | ) | (4,469 | ) | ||||||||
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Write down of investment in unconsolidated
affiliate
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— | — | — | 1,483 | ||||||||||||
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Income (loss) from continuing operations
before income taxes
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2,708 | (33,052 | ) | 10,809 | (40,409 | ) | ||||||||||
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Provision (benefit) for income taxes
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1,937 | (101 | ) | 5,596 | 2,398 | |||||||||||
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Income (loss) from continuing operations
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771 | (32,951 | ) | 5,213 | (42,807 | ) | ||||||||||
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Income (loss) from discontinued operations –
net of tax |
— | (45 | ) | — | 67 | |||||||||||
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Net income (loss)
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$ | 771 | $ | (32,996 | ) | $ | 5,213 | $ | (42,740 | ) | ||||||
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Earnings (loss) per share from continuing
operations and net income:
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Income
(loss) per common share – basic
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$ | .01 | $ | (.53 | ) | $ | .09 | $ | (.69 | ) | ||||||
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Income (loss) per common share – diluted
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$ | .01 | $ | (.53 | ) | $ | .08 | $ | (.69 | ) | ||||||
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4
| For the Nine-Months Ended | ||||||||
| March 28, | March 29, | |||||||
| 2010 | 2009 | |||||||
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Cash and cash equivalents at beginning of year
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$ | 42,659 | $ | 20,248 | ||||
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Operating activities:
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Net income (loss)
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5,213 | (42,740 | ) | |||||
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Adjustments to reconcile net income (loss) to net cash provided by
continuing operating activities: |
||||||||
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Income from discontinued operations
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— | (67 | ) | |||||
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Earnings of unconsolidated affiliates, net of distributions
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(4,236 | ) | (1,585 | ) | ||||
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Depreciation
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17,204 | 21,954 | ||||||
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Amortization
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3,454 | 3,289 | ||||||
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Stock-based compensation expense
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1,836 | 1,033 | ||||||
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Deferred compensation expense (recovery), net
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463 | (50 | ) | |||||
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Net (gain) loss on asset sales
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953 | (5,865 | ) | |||||
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Gain on extinguishment of debt
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(54 | ) | — | |||||
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Goodwill impairment
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— | 18,580 | ||||||
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Write down of long-lived assets
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100 | — | ||||||
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Write down of investment in unconsolidated affiliate
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— | 1,483 | ||||||
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Restructuring charges
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254 | 293 | ||||||
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Deferred income tax
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(449 | ) | (77 | ) | ||||
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Provision (benefit) for bad debts
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(93 | ) | 1,794 | |||||
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Other
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268 | 306 | ||||||
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Change in assets and liabilities, excluding effects of
foreign currency adjustments |
(4,089 | ) | 6,258 | |||||
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Net cash provided by continuing operating activities
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20,824 | 4,606 | ||||||
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Investing activities:
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Capital expenditures
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(7,963 | ) | (10,918 | ) | ||||
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Investment in joint venture
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(550 | ) | — | |||||
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Acquisition of intangible asset
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— | (500 | ) | |||||
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Change in restricted cash
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5,776 | 14,035 | ||||||
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Proceeds from sale of capital assets
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1,393 | 6,959 | ||||||
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Other
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(246 | ) | (216 | ) | ||||
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Net cash (used in) provided by investing activities
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(1,590 | ) | 9,360 | |||||
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Financing activities:
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Payments of long-term debt
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(6,211 | ) | (22,199 | ) | ||||
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Borrowings of long-term debt
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— | 14,600 | ||||||
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Proceeds from stock option exercises
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— | 3,830 | ||||||
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Purchase and retirement of Company stock
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(4,995 | ) | — | |||||
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Other
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(381 | ) | (343 | ) | ||||
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Net cash used in financing activities
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(11,587 | ) | (4,112 | ) | ||||
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Cash flows of discontinued operations:
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||||||||
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Operating cash flows
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— | (308 | ) | |||||
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Effect of exchange rate changes on cash and cash equivalents
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2,190 | (6,250 | ) | |||||
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Net increase in cash and cash equivalents
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9,837 | 3,296 | ||||||
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Cash and cash equivalents at end of period
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$ | 52,496 | $ | 23,544 | ||||
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5
| 1. |
Basis of Presentation
|
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The Condensed Consolidated Balance Sheet of Unifi, Inc. together with its subsidiaries (the
“Company”) at June 28, 2009 has been derived from the audited financial statements at that date
but does not include all of the information and footnotes required by United States (“U.S.”)
generally accepted accounting principles (“GAAP”) for complete financial statements. Except as
noted with respect to the balance sheet at June 28, 2009, this information is unaudited and
reflects all adjustments which are, in the opinion of management, necessary to fairly present
the financial position of the Company at March 28, 2010, and the results of operations and cash
flows for the periods ended March 28, 2010 and March 29, 2009. Such adjustments consisted of
normal recurring items necessary for fair presentation in conformity with U.S. GAAP. Preparing
financial statements requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual results may differ
from these estimates. Interim results are not necessarily indicative of results for a full
year. The information included in this Quarterly Report on Form 10-Q should be read in
conjunction with Management’s Discussion and Analysis of Financial Condition and Results of
Operations and the financial statements and notes thereto included in the Company’s Annual
Report on Form 10-K for the fiscal year ended June 28, 2009. Certain prior period amounts have
been reclassified to conform to current year presentation.
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||
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The significant accounting policies followed by the Company are presented on pages 74 to 80 of
the Company’s Annual Report on Form 10-K for the fiscal year
ended June 28, 2009.
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| 2. |
Inventories
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Inventories are comprised of the
following (amounts in thousands):
|
| March 28, | June 28, | |||||||
| 2010 | 2009 | |||||||
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Raw materials and supplies
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$ | 45,159 | $ | 42,351 | ||||
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Work in process
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6,603 | 5,936 | ||||||
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Finished goods
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54,550 | 41,378 | ||||||
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$ | 106,312 | $ | 89,665 | ||||
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||||||||
| 3. | Accrued Expenses |
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Accrued expenses are comprised of the
following (amounts in thousands):
|
| March 28, | June 28, | |||||||
| 2010 | 2009 | |||||||
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Payroll and fringe benefits
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$ | 10,920 | $ | 6,957 | ||||
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Severance
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606 | 1,385 | ||||||
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Interest
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7,740 | 2,496 | ||||||
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Utilities
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1,965 | 2,085 | ||||||
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Retiree reserve
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172 | 190 | ||||||
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Property taxes
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451 | 1,094 | ||||||
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Other
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1,080 | 1,062 | ||||||
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$ | 22,934 | $ | 15,269 | ||||
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6
| 4. | Earnings Per Common Share |
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The following table sets forth the reconciliation of basic and diluted per share computations
(amounts in thousands, except per share data):
|
| For the Quarters Ended | For the Nine-Months Ended | |||||||||||||||
| March 28, | March 29, | March 28, | March 29, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
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Determination of shares:
|
||||||||||||||||
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Weighted average common shares
outstanding
|
60,172 | 62,057 | 61,243 | 61,740 | ||||||||||||
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Assumed conversion of dilutive stock
options
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652 | — | 312 | — | ||||||||||||
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Diluted weighted average common
shares outstanding
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60,824 | 62,057 | 61,555 | 61,740 | ||||||||||||
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Income (loss) per common share - basic
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$ | .01 | $ | (.53 | ) | $ | .09 | $ | (.69 | ) | ||||||
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Income (loss) per common share - diluted
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$ | .01 | $ | (.53 | ) | $ | .08 | $ | (.69 | ) | ||||||
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For the quarter and year-to-date periods ended March 29, 2009, no options were included in
the computation of diluted loss per share because the Company reported net losses from
continuing operations. The following table represents the number of options to purchase shares
of common stock which were not included in the calculation of diluted per share amounts because
they were anti-dilutive (amounts in thousands):
|
| For the Quarters Ended | For the Nine-Months Ended | |||||||||||||||
| March 28, | March 29, | March 28, | March 29, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
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Options
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742 | 2,238 | 742 | 2,238 | ||||||||||||
| 5. | Other Operating (Income) Expense, Net |
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The following table summarizes the Company’s other operating (income) expense, net (amounts in
thousands):
|
| For the Quarters Ended | For the Nine-Months Ended | |||||||||||||||
| March 28, | March 29, | March 28, | March 29, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
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(Gain) loss on sale or
disposal of fixed assets
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$ | 1,010 | $ | 44 | $ | 953 | $ | (5,865 | ) | |||||||
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Currency (gains) losses
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61 | (100 | ) | (59 | ) | (22 | ) | |||||||||
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Gain from sale of nitrogen credits
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(1,400 | ) | — | (1,400 | ) | — | ||||||||||
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Other, net
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(17 | ) | (33 | ) | (36 | ) | 25 | |||||||||
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Other operating (income) expense, net
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$ | (346 | ) | $ | (89 | ) | $ | (542 | ) | $ | (5,862 | ) | ||||
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||||||||||||||||
| 6. |
Intangible Assets, Net
|
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Other intangible assets subject to amortization consisted of a customer list of $22.0 million
and non-compete agreements of $4.0 million which were entered in connection with an asset
acquisition consummated in fiscal year 2007. The customer list is being amortized in a manner
which reflects the expected economic benefit that will be received over its thirteen year life.
The non-compete agreements are being amortized using the straight-line method. The non-compete
agreements had an original amortizable life of five years plus the term of the original Sales and Service Agreement (the “Agreement”)
with Dillon Yarn Company (“Dillon”) which was two years as discussed in “Footnote 16. Related Party Transactions”.
|
7
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The Agreement was extended for a one year period twice, effective as of
January 1, 2009 and January 1, 2010. There are no estimated residual values related to these
intangible assets. Accumulated amortization at March 28, 2010 and June 28, 2009 for these
intangible assets was $11.1 million and $8.7 million, respectively. These intangible assets
relate to the polyester segment.
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In addition, the Company allocated $0.5 million to customer relationships arising from a
transaction that closed in the second quarter of fiscal year 2009. This customer list is being
amortized using the straight-line method over a period of one and a half years. Accumulated
amortization at March 28, 2010 and June 28, 2009 was $0.4 million and $0.2 million,
respectively. This customer list relates to the polyester segment.
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The following table represents the expected intangible asset amortization for the next five
fiscal years (amounts in thousands):
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| Aggregate Amortization Expenses | ||||||||||||||||||||
| 2011 | 2012 | 2013 | 2014 | 2015 | ||||||||||||||||
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Customer lists
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$ | 2,173 | $ | 2,022 | $ | 1,837 | $ | 1,481 | $ | 1,215 | ||||||||||
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Non-compete contract
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381 | 381 | 381 | 381 | 381 | |||||||||||||||
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$ | 2,554 | $ | 2,403 | $ | 2,218 | $ | 1,862 | $ | 1,596 | ||||||||||
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||||||||||||||||||||
| 7. |
Recent Accounting Pronouncements
|
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In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards (“SFAS”) No. 168 “The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles”, a replacement of SFAS 162, “The
Hierarchy of Generally Accepted Accounting Principles”. The statement was effective for all
financial statements issued for interim and annual periods ending after September 15, 2009. On
June 30, 2009 the FASB issued its first Accounting Standard Update (“ASU”) No. 2009-01 “Topic
105 – Generally Accepted Accounting Principles amendments based on No. 168 the FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”.
Accounting Standards Codification (“ASC”) 105-10 establishes a single source of GAAP which is to
be applied by nongovernmental entities. All guidance contained in the ASC carries an equal
level of authority; however there are standards that will remain authoritative until such time
that each is integrated into the ASC. The Securities and Exchange Commission (“SEC”) also
issues rules and interpretive releases that are also sources of authoritative GAAP for publicly
traded registrants. The ASC superseded all existing non-SEC accounting and reporting standards.
All non-grandfathered accounting literature not included in the ASC will be considered
non-authoritative.
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Effective June 29, 2009, the Company adopted ASC 805-20, “Business Combinations –
Identifiable Assets, Liabilities and Any Non-Controlling Interest” (“ASC 805-20”). ASC 805-20
amends and clarifies ASC 805 which requires that the acquisition method of accounting, instead
of the purchase method, be applied to all business combinations and that an “acquirer” is
identified in the process. The guidance requires that fair market value be used to recognize
assets and assumed liabilities instead of the cost allocation method where the costs of an
acquisition are allocated to individual assets based on their estimated fair values. Goodwill
would be calculated as the excess purchase price over the fair value of the assets acquired;
however, negative goodwill will be recognized immediately as a gain instead of being allocated
to individual assets acquired. Costs of the acquisition will be recognized separately from the
business combination. The end result is that the statement improves the comparability,
relevance and completeness of assets acquired and liabilities assumed in a business combination.
The adoption of this guidance had no material effect on the Company’s financial statements.
|
8
|
In October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue Arrangements”,
(“ASU 2009-13”) and ASU No. 2009-14, “Certain Arrangements That Include Software Elements”,
(“ASU 2009-14”). ASU 2009-13 requires entities to allocate revenues in the absence of
vendor-specific objective evidence or third party evidence of selling price for deliverables
using a selling price hierarchy associated with the relative selling price method. ASU 2009-14
removes tangible products from the scope of software revenue guidance and provides guidance on
determining whether software deliverables in an arrangement that includes a tangible product are
covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be
applied on a prospective basis for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company
does not expect that the adoption of ASU 2009-13 or ASU 2009-14 will have a material impact on
the Company’s consolidated results of operations or financial condition.
|
||
|
In December 2009, the FASB issued ASU No. 2009-17, “Consolidations (Topic 810): Improvements to
Financial Reporting by Enterprises Involved with Variable Interest Entities” which amends the
ASC to include SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”. This amendment
requires that an analysis be performed to determine whether a company has a controlling
financial interest in a variable interest entity. This analysis identifies the primary
beneficiary of a variable interest entity as the enterprise that has the power to direct the
activities of a variable interest entity. The statement requires an ongoing assessment of
whether a company is the primary beneficiary of a variable interest entity when the holders of
the entity, as a group, lose power, through voting or similar rights, to direct the actions that
most significantly affect the entity’s economic performance. This statement also enhances
disclosures about a company’s involvement in variable interest entities. ASU No. 2009-17 is
effective as of the beginning of the first annual reporting period that begins after November
15, 2009. The Company does not expect that the adoption of this guidance will have a material
impact on its financial position or results of operations.
|
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In January 2010, the FASB issued ASU No. 2010-01, “Equity (Topic 505) Accounting for
Distributions to Shareholders with Components of Stock and Cash” which clarifies that the stock
portion of a distribution to shareholders that allow them to receive cash or stock with a
potential limitation on the total amount of cash that all shareholders can elect to receive in
the aggregate is considered a share issuance that is reflected in earnings per share
prospectively and is not a stock dividend. This update is effective for the Company’s interim
period ended December 27, 2009. The adoption of ASU No. 2010-01 did not have a material impact
on the Company’s consolidated financial position or results of operations.
|
||
|
In January 2010, the FASB issued ASU No. 2010-02, “Consolidation (Topic 810) Accounting and
Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification”. ASU 2010-02
clarifies Topic 810 implementation issues relating to a decrease in ownership of a subsidiary
that is a business or non-profit activity. This amendment affects entities that have previously
adopted Topic 810-10 (formally SFAS 160). This update is effective for the Company’s interim
period ended December 27, 2009. The adoption of ASU No. 2010-02 did not have a material impact
on the Company’s consolidated financial position or results of operations.
|
||
|
In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures
(Topic 820): Improving Disclosures about Fair Value Measurements”. This ASU provides amendments
to Topic 820 which requires new disclosures related to assets measured at fair value. In
addition, this ASU includes amendments to the guidance on employers’ disclosures related to the
classification of postretirement benefit plan assets and the related fair value measurement of
those classifications. This update was effective December 15, 2009. The adoption of ASU No.
2010-06 did not have a material impact on the Company’s consolidated financial position or
results of operations.
|
||
|
In February 2010, the FASB issued ASU No. 2010-09, “Subsequent Events (Topic 855): Amendments to
certain Recognition and Disclosure Requirements”. An entity that is an SEC filer is not
required to disclose the date through which subsequent events have been evaluated. This change
alleviates potential conflicts between the ASC and the SEC’s requirements. In addition the scope
of the “reissuance” disclosure requirements is refined to include revised financial statements
only. This update was effective February 24, 2010. The adoption of ASU
No. 2010-09 did not
have a material impact on the Company’s consolidated financial position or results of
operations.
|
9
| 8. |
Comprehensive Income (Loss)
|
|
The following table represents the Company’s comprehensive income (loss) components (amounts in
thousands):
|
| For the Quarters Ended | For the Nine-Months Ended | |||||||||||||||
| March 28, | March 29, | March 28, | March 29, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Net income (loss)
|
$ | 771 | $ | (32,996 | ) | $ | 5,213 | $ | (42,740 | ) | ||||||
|
Translation adjustments
|
(2,013 | ) | 294 | 8,250 | (29,689 | ) | ||||||||||
|
|
||||||||||||||||
|
Comprehensive income (loss)
|
$ | (1,242 | ) | $ | (32,702 | ) | $ | 13,463 | $ | (72,429 | ) | |||||
|
|
||||||||||||||||
|
The Company does not provide income taxes on the impact of currency translations as earnings
from foreign subsidiaries are deemed to be permanently invested.
|
| 9. |
Investments in Unconsolidated
Affiliates
|
|
The following table represents the
Company’s investments in unconsolidated affiliates:
|
| Date | Percent | |||||||||||
| Affiliate Name | Acquired | Location | Ownership | |||||||||
|
Parkdale America, LLC (“PAL”)
|
Jun-97 | North and South Carolina | 34% | |||||||||
|
|
||||||||||||
|
U.N.F. Industries, LLC (“UNF”)
|
Sep-00 | Migdal Ha – Emek, Israel | 50% | |||||||||
|
|
||||||||||||
|
UNF America, LLC (“UNF America”)
|
Oct-09 | Ridgeway, Virginia | 50% | |||||||||
|
|
||||||||||||
|
Yihua Unifi Fibre Company Limited (“YUFI”) (1)
|
Aug-05 | Yizheng, Jiangsu Province, | 50% | |||||||||
|
|
People’s Republic of China | |||||||||||
|
|
||||||||||||
|
(1) The Company completed the sale of YUFI during the fourth quarter of fiscal year 2009.
|
||||||||||||
|
Condensed balance sheet information as of March 28, 2010 and June 28, 2009, and income statement
information for the quarter and year-to-date periods ended March 28, 2010 and March 29, 2009, of
the combined unconsolidated equity affiliates are as follows (amounts
in thousands):
|
| As of | As of | |||||||
| March 28, 2010 | June 28, 2009 | |||||||
|
Current assets
|
$ | 221,844 | $ | 152,871 | ||||
|
Noncurrent assets
|
110,846 | 101,893 | ||||||
|
Current liabilities
|
58,912 | 22,835 | ||||||
|
Noncurrent liabilities
|
32,424 | 8,405 | ||||||
|
Shareholders’ equity and capital accounts
|
241,354 | 223,524 | ||||||
10
| For the Quarters Ended | ||||||||
| March 28, 2010 | March 29, 2009 | |||||||
|
Net sales
|
$ | 194,546 | $ | 93,635 | ||||
|
Gross profit
|
9,324 | 2,947 | ||||||
|
Depreciation and amortization
|
5,557 | 5,047 | ||||||
|
Income (loss) from operations
|
6,033 | (1,017 | ) | |||||
|
Net income (loss)
|
6,258 | (1,486 | ) | |||||
| For the Nine-Months Ended | ||||||||
| March 28, 2010 | March 29, 2009 | |||||||
|
Net sales
|
$ | 411,758 | $ | 325,814 | ||||
|
Gross profit
|
28,353 | 6,695 | ||||||
|
Depreciation and amortization
|
17,204 | 15,899 | ||||||
|
Income (loss) from operations
|
17,801 | (2,427 | ) | |||||
|
Net income
|
18,883 | 3,388 | ||||||
|
PAL receives benefits under the Food, Conservation, and Energy Act of 2008 (“2008 U.S. Farm
Bill”) which extended the existing upland cotton and extra long staple cotton programs (the
“Program”), including economic adjustment assistance provisions for ten years. Beginning August
1, 2008, the Program provided textile mills a subsidy of four cents per pound on eligible upland
cotton consumed during the first four years and three cents per pound for the last six years.
The economic assistance received under this Program must be used to acquire, construct, install,
modernize, develop, convert or expand land, plant, buildings, equipment, or machinery. Capital
expenditures must be directly attributable to the purpose of manufacturing upland cotton into
eligible cotton products in the U.S. The recipients have the marketing year from August 1 to
July 31, plus eighteen months to make the capital expenditures. In the period when both
criteria have been met; i.e. eligible upland cotton has been consumed, and qualifying capital
expenditures under the Program have been made; the economic assistance is recognized by PAL as
operating income. PAL received $14.0 million of economic assistance under the Program during
the eleven months ended June 28, 2009 and, in accordance with the Program provisions, recognized
$9.7 million as operating income of which the Company’s share was $3.3 million.
|
|
On October 19, 2009 PAL notified the Company that approximately $8.0 million of the capital
expenditures recognized for fiscal year 2009 had been preliminarily disqualified by the U.S.
Department of Agriculture (“USDA”). PAL appealed the decision with the USDA. In November 2009,
PAL notified the Company that the USDA had denied the appeal. PAL filed a second appeal at a
higher level and a hearing took place during the Company’s third quarter of fiscal year 2010.
On March 17, 2010, PAL recorded a $4.1 million unfavorable adjustment to its 2009 earnings
related to economic assistance from the USDA that was disqualified. As a result, the Company
recorded a $1.6 million unfavorable adjustment for its share of the prior year economic
assistance and year-end adjustments in its current quarter.
|
|
PAL received $15.9 million of economic assistance under the Program during the nine-months
ended March 28, 2010 and, in accordance with the Program provisions, recognized $5.4 million as
operating income of which the Company’s share was $1.8 million.
|
11
|
The Company’s investment in PAL at March 28, 2010 was $61.6 million and the underlying equity in
the net assets of PAL at March 28, 2010 was $80.1 million. The difference between the carrying
value of the Company’s investment in PAL and the underlying equity in PAL is attributable to
initial excess capital contributions by the Company of $53.4 million, the Company’s share of the
settlement cost of an anti-trust lawsuit against PAL in which the Company did not participate of
$2.6 million offset by the Company’s share of other comprehensive income of $0.4 million and an
impairment charge taken by the Company on its investment in PAL of $74.1 million.
|
|
On October 8, 2009, a wholly-owned foreign subsidiary (“Foreign Subsidiary”) of the Company
formed a new joint venture, UNF America, with its partner, Nilit Ltd. (“Nilit”), for the purpose
of producing nylon partially oriented yarn (“POY”) in Nilit’s Ridgeway, Virginia plant. The
Foreign Subsidiary’s initial investment in UNF America was fifty thousand dollars. In addition,
the Foreign Subsidiary loaned UNF America $0.5 million for working capital. The loan carries
interest at LIBOR plus one and one-half percent and both principal and interest shall be paid
from the future profits of UNF America at such time as deemed appropriate by its members. The
loan is being treated as an additional investment by the Company for accounting purposes.
|
|
In conjunction with the formation of UNF America, the Company entered into a supply agreement
with UNF and UNF America whereby the Company is committed to purchase first quality nylon POY
for texturing (excluding specialty yarns) from UNF or UNF America. Pricing under the contract
is negotiated every six months and is based on market rates.
|
||
|
In August 2005, the Company formed YUFI, a 50/50 joint venture with Sinopec Yizheng
Chemical Fiber Co., Ltd, (“YCFC”), to manufacture, process and market polyester filament yarn in
YCFC’s facilities in Yizheng, Jiangsu Province, People’s Republic of China (“China”). During
fiscal year 2008, the Company’s management explored strategic options with its joint venture
partner in China with the ultimate goal of determining if there was a viable path to
profitability for YUFI. The Company’s management concluded that although YUFI had successfully
grown its position in high value and premier value-added (“PVA”) products, commodity sales would
continue to be a large and unprofitable portion of the joint venture’s business. In addition,
the Company believed YUFI had focused too much attention and energy on non-value added issues,
distracting management from its primary PVA objectives. Based on these conclusions, the Company
decided to exit the joint venture and on July 30, 2008, the Company announced that it had
reached a proposed agreement to sell its 50% interest in YUFI to its partner for $10.0 million.
|
|
As a result of the agreement with YCFC, the Company initiated a review of the carrying value of
its investment in YUFI and determined that the carrying value of its investment in YUFI exceeded
its fair value. Accordingly, the Company recorded a non-cash impairment charge of $6.4 million
in the fourth quarter of fiscal year 2008.
|
|
The Company expected to close the transaction in the second quarter of fiscal year 2009 pending
negotiation and execution of definitive agreements and Chinese regulatory approvals. The
agreement provided for YCFC to immediately take over operating control of YUFI, regardless of
the timing of the final approvals and closure of the equity sale transaction. During the first
quarter of fiscal year 2009, the Company gave up one of its senior staff appointees and YCFC
appointed its own designee as General Manager of YUFI, who assumed full responsibility for the
operating activities of YUFI at that time. As a result, the Company lost its ability to
influence the operations of YUFI and therefore the Company ceased recording its share of losses
commencing in the same quarter.
|
12
|
In December 2008, the Company renegotiated the proposed agreement to sell its interest in YUFI
to YCFC for $9.0 million and recorded an additional impairment charge of $1.5 million, which
included approximately $0.5 million related to certain disputed accounts receivable and $1.0
million related to the fair value of its investment, as determined by the renegotiated equity
interest sales price.
|
||
|
On March 30, 2009, the Company closed on the sale and received $9.0 million in proceeds related
to its investment in YUFI. The Company continues to service customers in Asia through Unifi
Textiles Suzhou Co., Ltd. (“UTSC”), a wholly-owned subsidiary based in Suzhou, China, that is
primarily focused on the development, sales and service of PVA and specialty yarns.
|
| 10. |
Income Taxes
|
|
The Company’s income tax provision for the quarter ended March 28, 2010 resulted in tax expense
at an effective rate of 71.5% compared to the quarter ended March 29, 2009 which resulted in tax
benefit at an effective rate of 0.3%. The Company’s income tax provision for the year-to-date
period ended March 28, 2010 resulted in tax expense at an effective rate of 51.8% compared to
the year-to-date period ended March 29, 2009 which resulted in tax expense at an effective rate
of 5.9%.
|
||
|
The differences between the Company’s income tax expense and the U.S. statutory rate for the
quarter and year-to-date period ended March 28, 2010 was primarily due to losses in the U.S. and
other jurisdictions for which no tax benefit could be recognized, while operating profit was
generated in other taxable jurisdictions. The difference between the Company’s income tax
expense and the U.S. statutory rate for the quarter and year-to-date periods ended March 29,
2009 were primarily attributable to state income tax benefits, foreign income taxed at rates
less than the U.S. statutory rate and an increase in the valuation allowance.
|
||
|
Deferred income taxes have been provided for the temporary differences between financial
statement carrying amounts and the tax basis of existing assets and liabilities. The valuation
allowance on the Company’s net domestic deferred tax assets is reviewed quarterly and will be
maintained until sufficient positive evidence exists to support the reversal of the valuation
allowance. In addition, until such time that the Company determines it is more likely than not
that it will generate sufficient taxable income to realize its deferred tax assets, income tax
benefits associated with future period losses will be fully reserved. The valuation allowance
increased $0.8 million and $1.5 million in the quarter and year-to-date period ended March 28,
2010, respectively, compared to increases of $13.1 million and $17.2 million in the quarter and
year-to-date periods ended March 29, 2009, respectively. The net increase in the valuation
allowance for the year-to-date period ended March 28, 2010 primarily consists of a $2.0 million
increase in the net operating loss generated in the period, and a decrease of $0.5 million
related to other temporary differences.
|
||
|
The Company believes it is reasonably possible that unrecognized tax benefits will decrease by
approximately $1.2 million by the end of fiscal year 2010 as a result of expiring tax credit
carry forwards.
|
||
|
The Company has elected to classify interest and penalties recognized as income tax expense.
The Company did not accrue interest or penalties related to uncertain tax positions during
fiscal year 2009 or during the quarter or year-to-date periods ended March 28, 2010.
|
||
|
The Company is subject to income tax examinations for U.S. federal income taxes for fiscal years
2004 through 2009, for non-U.S. income taxes for tax years 2001 through 2009, and for state and
local income taxes for fiscal years 2001 through 2009.
|
13
| 11. |
Stock-Based Compensation
|
|
On October 29, 2008, the shareholders of the Company approved the 2008 Unifi, Inc. Long-Term
Incentive Plan (“2008 Long-Term Incentive Plan”). The 2008 Long-Term Incentive Plan authorized
the issuance of up to 6,000,000 shares of Common Stock pursuant to the grant or exercise of
stock options, including Incentive Stock Options (“ISO”), Non-Qualified Stock Options (“NQSO”)
and restricted stock, but not more than 3,000,000 shares may be issued as restricted stock.
Option awards are granted with an exercise price not less than the market price of the Company’s
stock at the date of grant.
|
||
|
During the second quarter of fiscal year 2009, the Compensation Committee (“Committee”) of the
Board of Directors (“Board”) authorized the issuance of 280,000 stock options from the 2008
Long-Term Incentive Plan to certain employees. The stock options are subject to a market
condition which vests the options on the date that the closing price of the Company’s common
stock shall have been at least $6.00 per share for thirty consecutive trading days. The
exercise price is $4.16 per share which is equal to the market price of the Company’s stock on
the grant date. The Company used a Monte Carlo stock option model to estimate the fair value of
$2.49 per share and the derived vesting period of 1.2 years.
|
||
|
During the first quarter of fiscal year 2010, the Committee authorized the issuance of 1,700,000
stock options from the 2008 Long-Term Incentive Plan to certain employees and certain members of
the Board. The stock options vest ratably over a three year period and have 10-year contractual
terms. The Company used the Black-Scholes model to estimate the fair values of the options
granted. The following table provides detail of the number of options granted during the first
quarter of fiscal year 2010 and the related assumptions used in the
valuation of these awards:
|
| Expected | ||||||||||||||||||||||
| Options | term | Exercise | Interest | Dividend | Fair | |||||||||||||||||
| granted | (years) | price | rate | Volatility | yield | value | ||||||||||||||||
|
1,660,000
|
5.5 | $ | 1.91 | 2.8% | 63.6% | - | $ 1.10 | |||||||||||||||
|
40,000
|
5.5 | $ | 2.86 | 2.5% | 63.9% | - | $ 1.65 | |||||||||||||||
|
The Company incurred $0.6 million and $0.4 million in the third quarter of fiscal years
2010 and 2009 respectively, and $1.8 million and $1.0 million for the year-to-date periods,
respectively, in stock-based compensation expense which was recorded as selling, general and
administrative (“SG&A”) expense with the offset to capital in excess of par value.
|
||
|
The Company issued 1,368,300 shares of common stock during the year-to-date period of fiscal
year 2009 as a result of the exercise of stock options. There were no options exercised during
the third quarter or the year-to-date periods of fiscal year 2010.
|
| 12. |
Assets Held for Sale
|
|
During the second quarter of fiscal year 2008, the Company negotiated an agreement with E.I.
DuPont de Nemours (“DuPont”) to sell its Kinston, North Carolina polyester facility. On March
20, 2008, the Company completed the sale of assets located in Kinston. Per the agreement, the
Company retained the right to sell certain idle polyester assets for a period of two years
ending March 20, 2010. On that date, the remaining assets were conveyed back to DuPont with no
consideration paid to the Company.
|
||
|
The Company had assets held for sale related to the idle polyester assets and as of June 28,
2009, the value of the machinery and equipment held for sale was $1.4 million.
|
||
|
During the first quarter of fiscal year 2010, the Company entered into a contract to sell
certain of the assets held for sale and based on the contract price, the Company recorded a $0.1
million non-cash impairment charge. The sale closed during the second quarter of fiscal year
2010.
|
14
| 13. |
Severance and Restructuring
Charges
|
|
Severance
|
||
|
The Company recorded severance expense of $2.4 million for its former President and Chief
Executive Officer (“CEO”) during the first quarter of fiscal year 2008 and $1.7 million of
severance expense related to its former Chief Financial Officer during the second quarter of
fiscal year 2008.
|
||
|
In the third quarter of fiscal year 2009, the Company reorganized, reducing its workforce due to
the economic downturn. Approximately 200 salaried and wage employees were affected by this
reorganization related to the Company’s efforts to reduce costs. As a result, the Company
recorded $0.3 million in severance charges related to certain allocated salaried corporate and
manufacturing support staff.
|
||
|
On January 11, 2010, the Company announced that it created Unifi Central America,
Ltda. DE C.V. (“UCA”). With a base of operations established in El Salvador, UCA will serve
customers in the Central American region. The Company started relocating polyester equipment to
the region during the current quarter and expects to complete the relocation by second quarter
of fiscal year 2011. The Company expects to incur approximately $1.7 million in polyester
equipment relocation costs of which $0.3 million was incurred during the current quarter. In
addition, the Company plans to incur $0.7 million related to reinstallation of idle texturing
equipment in its Yadkinville facility. The polyester equipment relocation costs are recorded in
the restructuring charges line item as incurred.
|
||
|
The table below summarizes changes to the accrued severance account for the nine-month period
ended March 28, 2010 (amounts in thousands):
|
| Balance at | Balance at | |||||||||||||||||||
| June 28, 2009 | Charges | Adjustments | Amounts Used | March 28, 2010 | ||||||||||||||||
|
Accrued severance
|
$ 1,687 (1) | — | 20 | (1,101) | $ | 606 | ||||||||||||||
| (1) |
As of June 28, 2009, the Company classified $0.3 million of executive severance as
long-term. There was no executive severance classified as long-term as of March 28, 2010.
|
| 14. |
Derivatives and Fair Value
Measurements
|
|
The Company accounts for derivative contracts and hedging activities at fair value. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives are either offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or are recorded in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of a derivative’s
change in fair value is immediately recognized in earnings. The Company does not enter into
derivative financial instruments for trading purposes nor is it a party to any leveraged
financial instruments.
|
||
|
The Company conducts its business in various foreign currencies. As a result, it is
subject to the transaction exposure that arises from foreign exchange rate movements between the
dates that foreign currency transactions are recorded and the dates they are consummated. The
Company utilizes some natural hedging to mitigate these transaction exposures. The Company
primarily enters into foreign currency forward contracts for the purchase and sale of European,
North American and Brazilian currencies to use as economic hedges against balance sheet and
income statement currency exposures. These contracts are principally entered into for the
purchase of inventory and equipment and the sale of Company products into export markets.
Counter-parties for these instruments are major financial institutions.
|
15
|
Currency forward contracts are used to hedge exposure for sales in foreign currencies based on
specific sales made to customers. Generally, 60-75% of the sales value of these orders is
covered by forward contracts. Maturity dates of the forward contracts are intended to match
anticipated receivable collections. The Company marks the forward contracts to market at month
end and any realized and unrealized gains or losses are recorded as other operating (income)
expense. The Company also enters currency forward contracts for committed inventory purchases
made by its Brazilian subsidiary. Generally up to 5% of these inventory purchases are covered
by forward contracts although 100% of the cost may be covered by individual contracts in certain
instances. The latest maturities for all outstanding sales and purchase foreign currency
forward contracts are July 2010 and April 2010, respectively.
|
|
There is now a common definition of fair value used and a hierarchy for fair value measurements
based on the type of inputs that are used to value the assets or liabilities at fair value.
|
|
The levels of the fair value hierarchy
are:
|
| • |
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities that the reporting entity has the ability to access at the measurement
date,
|
||
| • |
Level 2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly,
or
|
||
| • |
Level 3 inputs are unobservable inputs for the asset or liability. Unobservable
inputs shall be used to measure fair value to the extent that observable inputs are not
available, thereby allowing for situations in which there is little, if any, market
activity for the asset or liability at the measurement date.
|
|
The dollar equivalent of these forward currency contracts and their related fair values are
detailed below (amounts in thousands):
|
| March 28, | June 28, | |||||||
| 2010 | 2009 | |||||||
|
Foreign currency purchase contracts:
|
Level 2 | Level 2 | ||||||
|
|
||||||||
|
Notional amount
|
$ | 177 | $ | 110 | ||||
|
Fair value
|
179 | 130 | ||||||
|
|
||||||||
|
Net gain
|
$ | (2 | ) | $ | (20 | ) | ||
|
|
||||||||
|
|
||||||||
|
Foreign currency sales contracts:
|
||||||||
|
Notional amount
|
$ | 1,547 | $ | 1,121 | ||||
|
Fair value
|
1,587 | 1,167 | ||||||
|
|
||||||||
|
Net loss
|
$ | (40 | ) | $ | (46 | ) | ||
|
|
||||||||
|
The fair values of the foreign exchange forward contracts at the respective quarter-end dates are
based on discounted quarter-end forward currency rates. The total impact of foreign currency
related items that are reported on the line item other operating (income) expense, net in the
Consolidated Statements of Operations, including transactions that were hedged and those
unrelated to hedging, was a pre-tax loss of $61 thousand for the quarter ended March 28, 2010 and
a pre-tax gain of $0.1 million for the quarter ended March 29, 2009. For the year-to-date
periods ended March 28, 2010 and March 29, 2009, the total impact of foreign currency related
items resulted in a pre-tax gain of $59 thousand and $22 thousand, respectively.
|
|
The Company’s financial assets include cash and cash equivalents, receivables, net, restricted
cash, accounts payable, and notes payable. The cash and cash equivalents, receivables, net,
restricted cash, and accounts payable approximate fair value due to their short maturities. The
Company calculates the fair value of its 11.5% senior secured notes, which mature on May 15, 2014
(the “2014 notes”) based on the traded price of the 2014 notes on the latest trade date prior to
its period end. These are considered Level 1 inputs in the fair value hierarchy.
|
16
|
The carrying values and approximate fair values of the Company’s financial instruments as of
March 28, 2010 and June 28, 2009 were as follows (amounts
in thousands):
|
| March 28, 2010 | June 28, 2009 | |||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
|
Assets:
|
||||||||||||||||
|
Cash and cash equivalents
|
$ | 52,496 | $ | 52,496 | $ | 42,659 | $ | 42,659 | ||||||||
|
Receivables, net
|
84,788 | 84,788 | 77,810 | 77,810 | ||||||||||||
|
Restricted cash
|
1,818 | 1,818 | 6,930 | 6,930 | ||||||||||||
|
Liabilities:
|
||||||||||||||||
|
Accounts payable
|
33,860 | 33,860 | 26,050 | 26,050 | ||||||||||||
|
Notes payable
|
178,722 | 183,190 | 179,222 | 112,910 | ||||||||||||
| 15. |
Contingencies
|
|
On September 30, 2004, the Company completed its acquisition of the polyester filament
manufacturing assets located at Kinston from INVISTA S.a.r.l. (“INVISTA”). The land for the
Kinston site was leased pursuant to a 99 year ground lease (“Ground Lease”) with DuPont. Since
1993, DuPont has been investigating and cleaning up the Kinston site under the supervision of
the U.S. Environmental Protection Agency (“EPA”) and the North Carolina Department of
Environment and Natural Resources (“DENR”) pursuant to the Resource Conservation and Recovery
Act Corrective Action program. The Corrective Action program requires DuPont to identify all
potential areas of environmental concern (“AOCs”), assess the extent of containment at the
identified AOCs and clean it up to comply with applicable regulatory standards. Effective March
20, 2008, the Company entered into a Lease Termination Agreement associated with conveyance of
certain assets at Kinston to DuPont. This agreement terminated the Ground Lease and relieved
the Company of any future responsibility for environmental remediation, other than participation
with DuPont, if so called upon, with regard to the Company’s period of operation of the Kinston
site. However, the Company continues to own a satellite service facility acquired in the
INVISTA transaction that has contamination from DuPont’s operations and is monitored by DENR.
This site has been remediated by DuPont and DuPont has received authority from DENR to
discontinue remediation, other than natural attenuation. DuPont’s duty to monitor and report to
DENR will be transferred to the Company in the future, at which time DuPont must pay the Company
for seven years of monitoring and reporting costs and the Company will assume responsibility for
any future remediation and monitoring of the site. At this time, the Company has no basis to
determine if and when it will have any responsibility or obligation with respect to the AOCs or
the extent of any potential liability for the same.
|
||
|
The Company is aware of certain claims and potential claims against it for the alleged use of
non-compliant “Berry Amendment” nylon POY in yarns that the Company sold which may have
ultimately been used to manufacture certain U.S. military garments (the “Military Claims”). At
this time, the Company does not believe it has adequate information to estimate the amount of
any potential liabilities for any Military Claims.
|
17
| 16. | Related Party Transactions |
| 17. | Segment Disclosures |
| Polyester | Nylon | Total | ||||||||||
|
Quarter ended March 28, 2010:
|
||||||||||||
|
Net sales to external customers
|
$ | 112,604 | $ | 42,083 | $ | 154,687 | ||||||
|
Depreciation and amortization
|
5,591 | 860 | 6,451 | |||||||||
|
Segment operating income
|
2,721 | 2,283 | 5,004 | |||||||||
|
Total segment assets
|
330,017 | 77,708 | 407,725 | |||||||||
|
|
||||||||||||
|
Quarter ended March 29, 2009:
|
||||||||||||
|
Net sales to external customers
|
$ | 85,480 | $ | 33,614 | $ | 119,094 | ||||||
|
Depreciation and amortization
|
5,407 | 1,542 | 6,949 | |||||||||
|
Segment operating loss
|
(26,823 | ) | (1,185 | ) | (28,008 | ) | ||||||
|
Total segment assets
|
310,036 | 80,141 | 390,177 | |||||||||
18
| For the Quarters Ended | ||||||||
| March 28, | March 29, | |||||||
| 2010 | 2009 | |||||||
|
Depreciation and amortization:
|
||||||||
|
Depreciation and amortization of specific reportable segment
assets
|
$ | 6,451 | $ | 6,949 | ||||
|
Depreciation included in other operating (income) expense, net
|
34 | 35 | ||||||
|
Amortization included in interest expense, net
|
276 | 290 | ||||||
|
|
||||||||
|
Consolidated depreciation and amortization
|
$ | 6,761 | $ | 7,274 | ||||
|
|
||||||||
|
|
||||||||
|
Reconciliation of segment operating income (loss) to
income (loss) from continuing operations before income taxes:
|
||||||||
|
Reportable segments operating income (loss)
|
$ | 5,004 | $ | (28,008 | ) | |||
|
Provision (benefit) for bad debts
|
(105 | ) | 735 | |||||
|
Other operating (income) expense, net
|
(346 | ) | (89 | ) | ||||
|
Interest expense, net
|
4,922 | 5,223 | ||||||
|
Equity in earnings of unconsolidated affiliates
|
(2,175 | ) | (825 | ) | ||||
|
|
||||||||
|
Income (loss) from continuing operations before income taxes
|
$ | 2,708 | $ | (33,052 | ) | |||
|
|
||||||||
| Polyester | Nylon | Total | ||||||||||
|
Nine-Months ended March 28, 2010:
|
||||||||||||
|
Net sales to external customers
|
$ | 321,340 | $ | 118,453 | $ | 439,793 | ||||||
|
Depreciation and amortization
|
17,109 | 2,615 | 19,724 | |||||||||
|
Segment operating income
|
10,509 | 7,821 | 18,330 | |||||||||
|
|
||||||||||||
|
Nine-Months ended March 29, 2009:
|
||||||||||||
|
Net sales to external customers
|
$ | 302,443 | $ | 111,387 | $ | 413,830 | ||||||
|
Intersegment net sales
|
— | 71 | 71 | |||||||||
|
Depreciation and amortization
|
18,379 | 5,889 | 24,268 | |||||||||
|
Segment operating income (loss)
|
(33,750 | ) | 1,630 | (32,120 | ) | |||||||
| For the Nine-Months Ended | |||||||||
| March 28, | March 29, | ||||||||
| 2010 | 2009 | ||||||||
|
Depreciation and amortization:
|
|||||||||
|
Depreciation and amortization of specific reportable segment
assets
|
$ | 19,724 | $ | 24,268 | |||||
|
Depreciation included in other operating (income) expense, net
|
105 | 107 | |||||||
|
Amortization included in interest expense, net
|
829 | 868 | |||||||
|
|
|||||||||
|
Consolidated depreciation and amortization
|
$ | 20,658 | $ | 25,243 | |||||
|
|
|||||||||
|
|
|||||||||
|
Reconciliation of segment operating income (loss) to
income (loss) from continuing operations before income taxes:
|
|||||||||
|
Reportable segments operating income (loss)
|
$ | 18,330 | $ | (32,120 | ) | ||||
|
Provision (benefit) for bad debts
|
(93 | ) | 1,794 | ||||||
|
Other operating (income) expense, net
|
(542 | ) | (5,862 | ) | |||||
|
Interest expense, net
|
14,057 | 15,343 | |||||||
|
Gain on extinguishment of debt
|
(54 | ) | — | ||||||
|
Equity in earnings of unconsolidated affiliates
|
(5,847 | ) | (4,469 | ) | |||||
|
Write down of investment in unconsolidated affiliate
|
— | 1,483 | |||||||
|
|
|||||||||
|
Income (loss) from continuing operations before income taxes
|
$ | 10,809 | $ | (40,409 | ) | ||||
|
|
|||||||||
19
| 18. | Subsequent Events |
| 19. | Condensed Consolidated Guarantor and Non-Guarantor Financial Statements |
20
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
Current assets:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 8,579 | $ | 172 | $ | 43,745 | $ | — | $ | 52,496 | ||||||||||
|
Receivables, net
|
— | 61,629 | 23,159 | — | 84,788 | |||||||||||||||
|
Inventories
|
— | 72,353 | 33,959 | — | 106,312 | |||||||||||||||
|
Deferred income taxes
|
— | — | 1,683 | — | 1,683 | |||||||||||||||
|
Restricted cash
|
— | — | 1,818 | — | 1,818 | |||||||||||||||
|
Other current assets
|
107 | 1,296 | 3,173 | — | 4,576 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total current assets
|
8,686 | 135,450 | 107,537 | — | 251,673 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Property, plant and equipment
|
11,348 | 659,874 | 74,183 | — | 745,405 | |||||||||||||||
|
Less accumulated depreciation
|
(2,114 | ) | (538,241 | ) | (52,815 | ) | — | (593,170 | ) | |||||||||||
|
|
||||||||||||||||||||
|
|
9,234 | 121,633 | 21,368 | — | 152,235 | |||||||||||||||
|
Intangible assets, net
|
— | 14,978 | — | — | 14,978 | |||||||||||||||
|
Investments in unconsolidated affiliates
|
— | 61,565 | 3,672 | — | 65,237 | |||||||||||||||
|
Investments in consolidated subsidiaries
|
411,397 | — | — | (411,397 | ) | — | ||||||||||||||
|
Other noncurrent assets
|
12,603 | 4,960 | 1,864 | (6,519 | ) | 12,908 | ||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
|
$ | 441,920 | $ | 338,586 | $ | 134,441 | $ | (417,916 | ) | $ | 497,031 | |||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||
|
Accounts payable
|
$ | 75 | $ | 27,891 | $ | 5,894 | $ | — | $ | 33,860 | ||||||||||
|
Accrued expenses
|
8,024 | 11,997 | 2,913 | — | 22,934 | |||||||||||||||
|
Income taxes payable
|
(174 | ) | — | 1,247 | — | 1,073 | ||||||||||||||
|
Current maturities of long-term debt and other current
liabilities
|
— | 369 | 1,818 | — | 2,187 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total current liabilities
|
7,925 | 40,257 | 11,872 | — | 60,054 | |||||||||||||||
|
|
||||||||||||||||||||
|
Long-term debt and other liabilities
|
178,722 | 2,721 | — | — | 181,443 | |||||||||||||||
|
Deferred income taxes
|
— | — | 261 | — | 261 | |||||||||||||||
|
Shareholders’/ invested equity
|
255,273 | 295,608 | 122,308 | (417,916 | ) | 255,273 | ||||||||||||||
|
|
||||||||||||||||||||
|
|
$ | 441,920 | $ | 338,586 | $ | 134,441 | $ | (417,916 | ) | $ | 497,031 | |||||||||
|
|
||||||||||||||||||||
21
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
Current assets:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 11,509 | $ | (813 | ) | $ | 31,963 | $ | — | $ | 42,659 | |||||||||
|
Receivables, net
|
100 | 56,031 | 21,679 | — | 77,810 | |||||||||||||||
|
Inventories
|
— | 63,919 | 25,746 | — | 89,665 | |||||||||||||||
|
Deferred income taxes
|
— | — | 1,223 | — | 1,223 | |||||||||||||||
|
Assets held for sale
|
— | 1,350 | — | — | 1,350 | |||||||||||||||
|
Restricted cash
|
— | — | 6,477 | — | 6,477 | |||||||||||||||
|
Other current assets
|
46 | 2,199 | 3,219 | — | 5,464 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total current assets
|
11,655 | 122,686 | 90,307 | — | 224,648 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Property, plant and equipment
|
11,336 | 665,724 | 67,193 | — | 744,253 | |||||||||||||||
|
Less accumulated depreciation
|
(1,899 | ) | (534,297 | ) | (47,414 | ) | — | (583,610 | ) | |||||||||||
|
|
||||||||||||||||||||
|
|
9,437 | 131,427 | 19,779 | — | 160,643 | |||||||||||||||
|
Restricted cash
|
— | — | 453 | — | 453 | |||||||||||||||
|
Intangible assets, net
|
— | 17,603 | — | — | 17,603 | |||||||||||||||
|
Investments in unconsolidated affiliates
|
— | 57,107 | 2,944 | — | 60,051 | |||||||||||||||
|
Investments in consolidated subsidiaries
|
360,897 | — | — | (360,897 | ) | — | ||||||||||||||
|
Other noncurrent assets
|
45,041 | (29,214 | ) | (2,293 | ) | — | 13,534 | |||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
|
$ | 427,030 | $ | 299,609 | $ | 111,190 | $ | (360,897 | ) | $ | 476,932 | |||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||
|
Accounts payable
|
$ | 37 | $ | 19,888 | $ | 6,125 | $ | — | $ | 26,050 | ||||||||||
|
Accrued expenses
|
1,690 | 11,033 | 2,546 | — | 15,269 | |||||||||||||||
|
Income taxes payable
|
— | — | 676 | — | 676 | |||||||||||||||
|
Current maturities of long-term debt and other current
liabilities
|
— | 368 | 6,477 | — | 6,845 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total current liabilities
|
1,727 | 31,289 | 15,824 | — | 48,840 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Long-term debt and other liabilities
|
180,334 | 1,920 | 453 | — | 182,707 | |||||||||||||||
|
Deferred income taxes
|
— | — | 416 | — | 416 | |||||||||||||||
|
Shareholders’/ invested equity
|
244,969 | 266,400 | 94,497 | (360,897 | ) | 244,969 | ||||||||||||||
|
|
||||||||||||||||||||
|
|
$ | 427,030 | $ | 299,609 | $ | 111,190 | $ | (360,897 | ) | $ | 476,932 | |||||||||
|
|
||||||||||||||||||||
22
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
|
||||||||||||||||||||
|
Summary of Operations:
|
||||||||||||||||||||
|
Net sales
|
$ | — | $ | 117,116 | $ | 38,063 | $ | (492 | ) | $ | 154,687 | |||||||||
|
Cost of sales
|
— | 107,416 | 31,294 | (533 | ) | 138,177 | ||||||||||||||
|
Restructuring charges
|
254 | — | — | 254 | ||||||||||||||||
|
Equity in subsidiaries
|
(905 | ) | — | — | 905 | — | ||||||||||||||
|
Selling, general and administrative expenses
|
— | 9,050 | 2,197 | 5 | 11,252 | |||||||||||||||
|
Benefit for bad debts
|
— | (11 | ) | (94 | ) | — | (105 | ) | ||||||||||||
|
Other operating (income) expense, net
|
(5,782 | ) | 5,380 | 56 | — | (346 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Non-operating (income) expense:
|
||||||||||||||||||||
|
Interest income
|
(11 | ) | 1 | (765 | ) | — | (775 | ) | ||||||||||||
|
Interest expense
|
5,681 | 16 | — | — | 5,697 | |||||||||||||||
|
Equity in (earnings) losses of unconsolidated affiliates
|
— | (1,994 | ) | (197 | ) | 16 | (2,175 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from operations before income taxes
|
1,017 | (2,996 | ) | 5,572 | (885 | ) | 2,708 | |||||||||||||
|
Provision for income taxes
|
246 | 4 | 1,687 | — | 1,937 | |||||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss)
|
$ | 771 | $ | (3,000 | ) | $ | 3,885 | $ | (885 | ) | $ | 771 | ||||||||
|
|
||||||||||||||||||||
23
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Summary of Operations:
|
||||||||||||||||||||
|
Net sales
|
$ | — | $ | 96,238 | $ | 22,885 | $ | (29 | ) | $ | 119,094 | |||||||||
|
Cost of sales
|
— | 96,048 | 22,424 | 250 | 118,722 | |||||||||||||||
|
Restructuring charges
|
— | 293 | — | — | 293 | |||||||||||||||
|
Equity in subsidiaries
|
23,188 | — | — | (23,188 | ) | — | ||||||||||||||
|
Goodwill impairment
|
— | 18,580 | — | — | 18,580 | |||||||||||||||
|
Selling, general and administrative expenses
|
23 | 7,686 | 1,801 | (3 | ) | 9,507 | ||||||||||||||
|
Provision for bad debts
|
— | 577 | 158 | — | 735 | |||||||||||||||
|
Other operating (income) expense, net
|
(31 | ) | 147 | (205 | ) | — | (89 | ) | ||||||||||||
|
Non-operating (income) expense:
|
||||||||||||||||||||
|
Interest income
|
(51 | ) | — | (605 | ) | — | (656 | ) | ||||||||||||
|
Interest expense
|
5,924 | 23 | (68 | ) | — | 5,879 | ||||||||||||||
|
Equity in (earnings) losses of unconsolidated affiliates
|
— | (1,342 | ) | 312 | 205 | (825 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing operations before income
taxes
|
(29,053 | ) | (25,774 | ) | (932 | ) | 22,707 | (33,052 | ) | |||||||||||
|
Provision (benefit) for income taxes
|
3,943 | (3,964 | ) | (80 | ) | — | (101 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing operations
|
(32,996 | ) | (21,810 | ) | (852 | ) | 22,707 | (32,951 | ) | |||||||||||
|
Loss from discontinued operations, net of tax
|
— | — | (45 | ) | — | (45 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss)
|
$ | (32,996 | ) | $ | (21,810 | ) | $ | (897 | ) | $ | 22,707 | $ | (32,996 | ) | ||||||
|
|
||||||||||||||||||||
24
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
|
||||||||||||||||||||
|
Summary of Operations:
|
||||||||||||||||||||
|
Net sales
|
$ | — | $ | 327,350 | $ | 112,994 | $ | (551 | ) | $ | 439,793 | |||||||||
|
Cost of sales
|
— | 296,923 | 90,186 | (568 | ) | 386,541 | ||||||||||||||
|
Restructuring charges
|
— | 254 | — | — | 254 | |||||||||||||||
|
Write down of long-lived assets
|
— | 100 | — | — | 100 | |||||||||||||||
|
Equity in subsidiaries
|
(5,479 | ) | — | — | 5,479 | — | ||||||||||||||
|
Selling, general and administrative expenses
|
(16 | ) | 27,619 | 7,019 | (54 | ) | 34,568 | |||||||||||||
|
Benefit for bad debts
|
— | (74 | ) | (19 | ) | — | (93 | ) | ||||||||||||
|
Other operating (income) expense, net
|
(16,919 | ) | 16,540 | (163 | ) | — | (542 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Non-operating (income) expense:
|
||||||||||||||||||||
|
Interest income
|
(28 | ) | (138 | ) | (2,189 | ) | — | (2,355 | ) | |||||||||||
|
Interest expense
|
16,657 | (254 | ) | 9 | — | 16,412 | ||||||||||||||
|
Gain on extinguishment of debt
|
(54 | ) | — | — | — | (54 | ) | |||||||||||||
|
Equity in (earnings) losses of unconsolidated affiliates
|
— | (6,070 | ) | (515 | ) | 738 | (5,847 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from operations before income
taxes
|
5,839 | (7,550 | ) | 18,666 | (6,146 | ) | 10,809 | |||||||||||||
|
Provision for income taxes
|
626 | 12 | 4,958 | — | 5,596 | |||||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss)
|
$ | 5,213 | $ | (7,562 | ) | $ | 13,708 | $ | (6,146 | ) | $ | 5,213 | ||||||||
|
|
||||||||||||||||||||
25
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Summary of Operations:
|
||||||||||||||||||||
|
Net sales
|
$ | — | $ | 329,252 | $ | 85,138 | $ | (560 | ) | $ | 413,830 | |||||||||
|
Cost of sales
|
— | 322,283 | 75,609 | (171 | ) | 397,721 | ||||||||||||||
|
Restructuring charges
|
— | 293 | — | — | 293 | |||||||||||||||
|
Equity in subsidiaries
|
21,938 | — | — | (21,938 | ) | — | ||||||||||||||
|
Goodwill impairment
|
— | 18,580 | — | — | 18,580 | |||||||||||||||
|
Selling, general and administrative expenses
|
213 | 23,925 | 5,374 | (156 | ) | 29,356 | ||||||||||||||
|
Provision for bad debts
|
— | 1,651 | 143 | — | 1,794 | |||||||||||||||
|
Other operating (income) expense, net
|
(46 | ) | (5,075 | ) | (566 | ) | (175 | ) | (5,862 | ) | ||||||||||
|
Non-operating (income) expense:
|
||||||||||||||||||||
|
Interest income
|
(97 | ) | (48 | ) | (2,104 | ) | — | (2,249 | ) | |||||||||||
|
Interest expense
|
17,569 | 85 | (62 | ) | — | 17,592 | ||||||||||||||
|
Equity in (earnings) losses of unconsolidated affiliates
|
— | (5,403 | ) | 1,518 | (584 | ) | (4,469 | ) | ||||||||||||
|
Write down of investment in unconsolidated affiliate
|
— | 483 | 1,000 | — | 1,483 | |||||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing operations before income
taxes
|
(39,577 | ) | (27,522 | ) | 4,226 | 22,464 | (40,409 | ) | ||||||||||||
|
Provision (benefit) for income taxes
|
3,163 | (3,162 | ) | 2,397 | — | 2,398 | ||||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing operations
|
(42,740 | ) | (24,360 | ) | 1,829 | 22,464 | (42,807 | ) | ||||||||||||
|
Income from discontinued operations, net of tax
|
— | — | 67 | — | 67 | |||||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss)
|
$ | (42,740 | ) | $ | (24,360 | ) | $ | 1,896 | $ | 22,464 | $ | (42,740 | ) | |||||||
|
|
||||||||||||||||||||
26
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
|
||||||||||||||||||||
|
Operating activities:
|
||||||||||||||||||||
|
Net cash provided by (used in) continuing operating
activities
|
$ | 2,680 | $ | 6,101 | $ | 12,150 | $ | (107 | ) | $ | 20,824 | |||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Investing activities:
|
||||||||||||||||||||
|
Capital expenditures
|
(12 | ) | (6,003 | ) | (1,948 | ) | — | (7,963 | ) | |||||||||||
|
Investment in joint venture
|
— | — | (550 | ) | — | (550 | ) | |||||||||||||
|
Change in restricted cash
|
— | — | 5,776 | — | 5,776 | |||||||||||||||
|
Proceeds from sale of capital assets
|
— | 1,267 | 126 | — | 1,393 | |||||||||||||||
|
Other
|
(168 | ) | — | (78 | ) | — | (246 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Net cash provided by (used in) investing activities
|
(180 | ) | (4,736 | ) | 3,326 | — | (1,590 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Financing activities:
|
||||||||||||||||||||
|
Payments of long-term debt
|
(435 | ) | — | (5,776 | ) | — | (6,211 | ) | ||||||||||||
|
Purchase and retirement of Company stock
|
(4,995 | ) | — | — | — | (4,995 | ) | |||||||||||||
|
Other
|
— | (381 | ) | — | — | (381 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Net cash provided by (used in) financing activities
|
(5,430 | ) | (381 | ) | (5,776 | ) | — | (11,587 | ) | |||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
— | — | 2,083 | 107 | 2,190 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Net increase in cash and cash equivalents
|
(2,930 | ) | 984 | 11,783 | — | 9,837 | ||||||||||||||
|
Cash and cash equivalents at beginning of period
|
11,509 | (812 | ) | 31,962 | — | 42,659 | ||||||||||||||
|
|
||||||||||||||||||||
|
Cash and cash equivalents at end of period
|
$ | 8,579 | $ | 172 | $ | 43,745 | $ | — | $ | 52,496 | ||||||||||
|
|
||||||||||||||||||||
27
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
|
||||||||||||||||||||
|
Operating activities:
|
||||||||||||||||||||
|
Net cash provided by (used in) continuing operating
activities
|
$ | 14,824 | $ | (14,347 | ) | $ | 4,292 | $ | (163 | ) | $ | 4,606 | ||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Investing activities:
|
||||||||||||||||||||
|
Capital expenditures
|
(68 | ) | (9,311 | ) | (1,539 | ) | — | (10,918 | ) | |||||||||||
|
Acquisition of intangible asset
|
— | (500 | ) | — | — | (500 | ) | |||||||||||||
|
Investment in subsidiary
|
(4,950 | ) | — | 4,950 | — | — | ||||||||||||||
|
Change in restricted cash
|
— | 9,436 | 4,599 | — | 14,035 | |||||||||||||||
|
Proceeds from sale of capital assets
|
— | 6,916 | 43 | — | 6,959 | |||||||||||||||
|
Other
|
(216 | ) | — | — | — | (216 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Net cash provided by (used in) investing activities
|
(5,234 | ) | 6,541 | 8,053 | — | 9,360 | ||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Financing activities:
|
||||||||||||||||||||
|
Payments of
long-term debt
|
(17,600 | ) | — | (4,599 | ) | — | (22,199 | ) | ||||||||||||
|
Borrowings
of long-term debt
|
14,600 | — | — | — | 14,600 | |||||||||||||||
|
Proceeds from stock option exercises
|
3,830 | — | — | — | 3,830 | |||||||||||||||
|
Other
|
— | (343 | ) | — | — | (343 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Net cash provided by (used in) financing activities
|
830 | (343 | ) | (4,599 | ) | — | (4,112 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Cash flows of discontinued operations:
|
||||||||||||||||||||
|
Operating cash flow
|
— | — | (308 | ) | — | (308 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Net cash used in discontinued operations
|
— | — | (308 | ) | — | (308 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
— | — | (6,413 | ) | 163 | (6,250 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Net increase (decrease) in cash and cash equivalents
|
10,420 | (8,149 | ) | 1,025 | — | 3,296 | ||||||||||||||
|
Cash and cash equivalents at beginning of period
|
689 | 3,377 | 16,182 | — | 20,248 | |||||||||||||||
|
|
||||||||||||||||||||
|
Cash and cash equivalents at end of period
|
$ | 11,109 | $ | (4,772 | ) | $ | 17,207 | $ | — | $ | 23,544 | |||||||||
|
|
||||||||||||||||||||
28
29
30
| • |
sales volume, which is an indicator of demand;
|
||
| • |
margins, which are indicators of product mix and profitability;
|
||
| • |
adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“adjusted
EBITDA”), which the Company defines as net income or loss before income tax expense,
interest expense, depreciation and amortization expense and loss or income from
discontinued operations, adjusted to exclude equity in earnings and losses of
unconsolidated affiliates, write down of long-lived assets and unconsolidated affiliate,
non-cash compensation expense net of distributions, gains or losses on sales or
disposals of property, plant and equipment, currency and hedging gains and losses, gain
on extinguishment of debt, goodwill impairment, restructuring charges, asset
consolidation and optimization expense, gain from the sale of nitrogen credits, UCA
startup costs, and Kinston shutdown expenses, as revised from time to time, which the
Company believes is a supplemental measure of its operating performance and ability to
service debt; and
|
||
| • |
adjusted working capital (accounts receivable plus inventory less accounts payable
and accruals) as a percentage of sales, which is an indicator of the Company’s
production efficiency and ability to manage its inventory and receivables.
|
31
| Balance at | Balance at | |||||||||||||||||||
| June 28, 2009 | Charges | Adjustments | Amounts Used | March 28, 2010 | ||||||||||||||||
|
Accrued severance
|
$ | 1,687 | (1) | — | 20 | (1,101 | ) | $ | 606 | |||||||||||
| (1) | As of June 28, 2009, the Company classified $0.3 million of executive severance as long-term. There was no executive severance classified as long-term as of March 28, 2010. |
| Date | Percent | |||||||
| Affiliate Name | Acquired | Location | Ownership | |||||
|
Parkdale America, LLC
|
Jun-97 | North and South Carolina | 34% | |||||
|
U.N.F. Industries, LLC (“UNF”)
|
Sep-00 | Migdal Ha – Emek, Israel | 50% | |||||
|
UNF America, LLC (“UNF America”)
|
Oct-09 | Ridgeway, Virginia | 50% | |||||
|
Yihua Unifi Fibre Company
Limited (“YUFI”) (1)
|
Aug-05 |
Yizheng, Jiangsu
Province,
People’s Republic of China |
50% | |||||
| (1) | The Company completed the sale of YUFI during the fourth quarter of fiscal year 2009. |
| As of March 28, 2010 | ||||||||||||
| PAL | Other | Total | ||||||||||
|
Current assets
|
$ | 212,572 | $ | 9,272 | $ | 221,844 | ||||||
|
Noncurrent assets
|
108,534 | 2,312 | 110,846 | |||||||||
|
Current liabilities
|
55,139 | 3,773 | 58,912 | |||||||||
|
Noncurrent liabilities
|
30,424 | 2,000 | 32,424 | |||||||||
|
Shareholders’ equity
and capital accounts
|
235,543 | 5,811 | 241,354 | |||||||||
32
| As of June 28, 2009 | ||||||||||||
| PAL | Other | Total | ||||||||||
|
Current assets
|
$ | 150,542 | $ | 2,329 | $ | 152,871 | ||||||
|
Noncurrent assets
|
98,460 | 3,433 | 101,893 | |||||||||
|
Current liabilities
|
21,755 | 1,080 | 22,835 | |||||||||
|
Noncurrent liabilities
|
8,405 | — | 8,405 | |||||||||
|
Shareholders’ equity and
capital accounts
|
218,842 | 4,682 | 223,524 | |||||||||
| For the Quarter Ended March 28, 2010 | ||||||||||||
| PAL | Other | Total | ||||||||||
|
Net sales
|
$ | 189,021 | $ | 5,525 | $ | 194,546 | ||||||
|
Gross profit
|
8,501 | 823 | 9,324 | |||||||||
|
Depreciation and amortization
|
5,215 | 342 | 5,557 | |||||||||
|
Income from operations
|
5,770 | 263 | 6,033 | |||||||||
|
Net income
|
5,865 | 393 | 6,258 | |||||||||
| For the Nine-Months Ended March 28, 2010 | ||||||||||||
| PAL | Other | Total | ||||||||||
|
Net sales
|
$ | 396,718 | $ | 15,040 | $ | 411,758 | ||||||
|
Gross profit
|
26,158 | 2,195 | 28,353 | |||||||||
|
Depreciation and amortization
|
15,947 | 1,257 | 17,204 | |||||||||
|
Income from operations
|
16,882 | 919 | 17,801 | |||||||||
|
Net income
|
17,854 | 1,029 | 18,883 | |||||||||
| For the Quarter Ended March 29, 2009 | ||||||||||||
| PAL | Other | Total | ||||||||||
|
Net sales
|
$ | 89,997 | $ | 3,638 | $ | 93,635 | ||||||
|
Gross profit (loss)
|
3,528 | (581 | ) | 2,947 | ||||||||
|
Depreciation and amortization
|
4,573 | 474 | 5,047 | |||||||||
|
Loss from operations
|
(336 | ) | (681 | ) | (1,017 | ) | ||||||
|
Net loss
|
(861 | ) | (625 | ) | (1,486 | ) | ||||||
| For the Nine-Months Ended March 29, 2009 | ||||||||||||
| PAL | Other | Total | ||||||||||
|
Net sales
|
$ | 309,741 | $ | 16,073 | $ | 325,814 | ||||||
|
Gross profit (loss)
|
8,942 | (2,247 | ) | 6,695 | ||||||||
|
Depreciation and amortization
|
14,477 | 1,422 | 15,899 | |||||||||
|
Income (loss) from operations
|
880 | (3,307 | ) | (2,427 | ) | |||||||
|
Net income (loss)
|
6,423 | (3,035 | ) | 3,388 | ||||||||
33
34
35
| For the Quarters Ended | ||||||||||||||||||||
| March 28, 2010 | March 29, 2009 | |||||||||||||||||||
| % to Total | % to Total | % Change | ||||||||||||||||||
|
Net sales
|
||||||||||||||||||||
|
Polyester
|
$ | 112,604 | 72.8 | $ | 85,480 | 71.8 | 31.7 | |||||||||||||
|
Nylon
|
42,083 | 27.2 | 33,614 | 28.2 | 25.2 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 154,687 | 100.0 | $ | 119,094 | 100.0 | 29.9 | |||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
|
% to Sales | % to Sales | ||||||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Gross profit
|
||||||||||||||||||||
|
Polyester
|
$ | 11,860 | 7.7 | $ | (430 | ) | (0.4 | ) | — | |||||||||||
|
Nylon
|
4,650 | 3.0 | 802 | 0.7 | 479.8 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
16,510 | 10.7 | 372 | 0.3 | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Restructuring charges
|
||||||||||||||||||||
|
Polyester
|
254 | 0.1 | 220 | 0.2 | 15.5 | |||||||||||||||
|
Nylon
|
— | — | 73 | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
254 | 0.1 | 293 | 0.2 | 13.3 | |||||||||||||||
|
|
||||||||||||||||||||
|
Goodwill impairment
|
||||||||||||||||||||
|
Polyester
|
— | — | 18,580 | 15.6 | — | |||||||||||||||
|
Nylon
|
— | — | — | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
— | — | 18,580 | 15.6 | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Selling, general and administrative
expenses
|
||||||||||||||||||||
|
Polyester
|
8,885 | 5.8 | 7,593 | 6.4 | 17.0 | |||||||||||||||
|
Nylon
|
2,367 | 1.5 | 1,914 | 1.6 | 23.7 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
11,252 | 7.3 | 9,507 | 8.0 | 18.4 | |||||||||||||||
|
|
||||||||||||||||||||
|
Provision (benefit) for bad debts
|
(105 | ) | (0.1 | ) | 735 | 0.6 | (114.3 | ) | ||||||||||||
|
Other operating (income) expense, net
|
(346 | ) | (0.2 | ) | (89 | ) | — | 288.8 | ||||||||||||
|
Non-operating (income) expense, net
|
2,747 | 1.8 | 4,398 | 3.7 | (37.5 | ) | ||||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing
operations before income taxes |
2,708 | 1.8 | (33,052 | ) | (27.8 | ) | (108.2 | ) | ||||||||||||
|
Provision (benefit) for income taxes
|
1,937 | 1.3 | (101 | ) | (0.1 | ) | — | |||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing
operations |
771 | 0.5 | (32,951 | ) | (27.7 | ) | (102.3 | ) | ||||||||||||
|
Loss from discontinued
operations, net of tax |
— | — | (45 | ) | — | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss)
|
$ | 771 | 0.5 | $ | (32,996 | ) | (27.7 | ) | (102.3 | ) | ||||||||||
|
|
||||||||||||||||||||
36
37
| For the Quarters Ended | ||||||||
| March 28, | March 29, | |||||||
| 2010 | 2009 | |||||||
|
Loss on disposal of fixed assets
|
$ | 1,010 | $ | 44 | ||||
|
Currency (gains) losses
|
61 | (100 | ) | |||||
|
Gain from sale of nitrogen credits
|
(1,400 | ) | — | |||||
|
Other, net
|
(17 | ) | (33 | ) | ||||
|
|
||||||||
|
Other operating (income) expense, net
|
$ | (346 | ) | $ | (89 | ) | ||
|
|
||||||||
38
39
40
| For the Nine-Months Ended | ||||||||||||||||||||
| March 28, 2010 | March 29, 2009 | |||||||||||||||||||
| % to Total | % to Total | % Change | ||||||||||||||||||
|
Net sales
|
||||||||||||||||||||
|
Polyester
|
$ | 321,340 | 73.1 | $ | 302,443 | 73.1 | 6.2 | |||||||||||||
|
Nylon
|
118,453 | 26.9 | 111,387 | 26.9 | 6.3 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 439,793 | 100.0 | $ | 413,830 | 100.0 | 6.3 | |||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
|
% to Sales | % to Sales | ||||||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Gross profit
|
||||||||||||||||||||
|
Polyester
|
$ | 38,154 | 8.7 | $ | 8,298 | 2.0 | 359.8 | |||||||||||||
|
Nylon
|
15,098 | 3.4 | 7,811 | 1.9 | 93.3 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
53,252 | 12.1 | 16,109 | 3.9 | 230.6 | |||||||||||||||
|
|
||||||||||||||||||||
|
Restructuring charges
|
||||||||||||||||||||
|
Polyester
|
254 | — | 220 | 0.1 | 15.5 | |||||||||||||||
|
Nylon
|
— | — | 73 | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
254 | — | 293 | 0.1 | 13.3 | |||||||||||||||
|
|
||||||||||||||||||||
|
Goodwill impairment
|
||||||||||||||||||||
|
Polyester
|
— | — | 18,580 | 4.5 | — | |||||||||||||||
|
Nylon
|
— | — | — | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
— | — | 18,580 | 4.5 | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Write down of long-lived assets
|
||||||||||||||||||||
|
Polyester
|
100 | — | — | — | — | |||||||||||||||
|
Nylon
|
— | — | — | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
100 | — | — | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Selling, general and administrative
expenses
|
||||||||||||||||||||
|
Polyester
|
27,291 | 6.2 | 23,248 | 5.6 | 17.4 | |||||||||||||||
|
Nylon
|
7,277 | 1.7 | 6,108 | 1.5 | 19.1 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
34,568 | 7.9 | 29,356 | 7.1 | 17.8 | |||||||||||||||
|
|
||||||||||||||||||||
|
Provision
(benefit) for bad debts
|
(93 | ) | — | 1,794 | 0.4 | (105.2 | ) | |||||||||||||
|
Other operating (income) expense, net
|
(542 | ) | (0.1 | ) | (5,862 | ) | (1.4 | ) | (90.8 | ) | ||||||||||
|
Write down of investment in
unconsolidated affiliate |
— | — | 1,483 | 0.4 | — | |||||||||||||||
|
Non-operating (income) expense, net
|
8,156 | 1.8 | 10,874 | 2.6 | (25.0 | ) | ||||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing
operations before income taxes |
10,809 | 2.5 | (40,409 | ) | (9.8 | ) | (126.7 | ) | ||||||||||||
|
Provision for income taxes
|
5,596 | 1.3 | 2,398 | 0.5 | 133.4 | |||||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing
operations |
5,213 | 1.2 | (42,807 | ) | (10.3 | ) | (112.2 | ) | ||||||||||||
|
Income from discontinued
operations, net of tax |
— | — | 67 | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss)
|
$ | 5,213 | 1.2 | $ | (42,740 | ) | (10.3 | ) | (112.2 | ) | ||||||||||
|
|
||||||||||||||||||||
41
42
| For the Nine-Months Ended | ||||||||
| March 28, | March 29, | |||||||
| 2010 | 2009 | |||||||
|
(Gain) loss on sale or disposal of fixed assets
|
$ | 953 | $ | (5,865 | ) | |||
|
Currency gains
|
(59 | ) | (22 | ) | ||||
|
Gain from sale of nitrogen credits
|
(1,400 | ) | — | |||||
|
Other, net
|
(36 | ) | 25 | |||||
|
|
||||||||
|
Other operating (income) expense, net
|
$ | (542 | ) | $ | (5,862 | ) | ||
|
|
||||||||
43
44
45
| • |
Capital Expenditures
. During the first nine months of fiscal year 2010, the Company
spent $8.0 million on capital expenditures compared to $10.9 million during the same
period in fiscal year 2009. The Company estimates its fiscal year 2010 capital
expenditures will be within a range of $12.0 million to $14.0 million, excluding the
Company’s new facility in Central America. From time to time, the Company may have
restricted cash from the sale of certain nonproductive assets reserved for domestic
capital expenditures in accordance with its long-term borrowing agreements. As of March
28, 2010, the Company had no restricted cash funds that were required to be used for
domestic capital expenditures. The Company’s capital expenditures primarily relate to
maintenance of existing assets and equipment and technology upgrades. Management
continuously evaluates opportunities to further reduce production costs or increase
product flexibility or capability, and the Company may incur additional capital
expenditures from time to time as it pursues new opportunities, such as a capital project
to vertically integrate one-step backwards into the production of 100% recycled chip from
post industrial waste and post consumer flake.
|
||
| • |
Joint Venture Investments
. During the first nine months of fiscal year 2010, the
Company received $1.6 million in dividend distributions from its joint ventures.
Although historically over the past five years the Company has received distributions
from certain of its joint ventures, there is no guarantee that it will continue to
receive distributions in the future. The Company may from time to time increase its
interest, sell, or transfer idle equipment to its joint ventures. The Company may also
from time-to-time evaluate investments in new related or unrelated joint ventures.
|
||
|
The Company’s initial investment in UNF America was fifty thousand dollars paid in the
second quarter of fiscal year 2010. In addition, during the second quarter fiscal year
2010, the Company loaned UNF America $0.5 million for working capital. The loan carries
interest at LIBOR plus one and one-half percent and both principal and interest shall be
paid from the future profits of UNF America at such time as deemed appropriate by its
members.
|
|||
|
In April 2010, one of the Company’s wholly-owed foreign subsidiaries entered into an
agreement to form a new joint venture. The joint venture was established for the purpose
of acquiring the assets and the expertise related to the business of cultivating, growing,
and selling biomass crops, including feedstock for establishing biomass crops that are
intended to be used as a fuel or in the production of fuels or energy in the U.S. and the
European Union. The Company received a 40% ownership interest in the joint venture for its
contribution of $4.0 million.
|
|||
| • |
Investments.
The Company has established a wholly-owned base of operations in Central
America. The total investment is expected to be less than $10.0 million. The Company
began selling U.S. products during the third quarter of fiscal year 2010 and expects to
be manufacturing to its capacity by the end of December 2010.
|
||
|
As discussed below in “Long-Term Debt”, the Company’s Amended Credit Agreement contains
customary covenants for asset based loans which restrict future borrowings and capital
spending. It includes a trailing twelve month fixed charge coverage ratio that restricts
the Company’s ability to
|
46
|
invest in certain assets if the ratio becomes less than 1.0 to
1.0, after giving effect to such investment on a pro forma basis. As of March 28, 2010,
the Company had a fixed charge coverage ratio of less
than 1.0 to 1.0 and was therefore subjected to these restrictions. These restrictions will
likely apply in future quarters until such time as the Company’s financial performance
improves.
|
| For the Nine-Months Ended | ||||||||
| March 28, 2010 | March 29, 2009 | |||||||
| (Amounts in millions) | ||||||||
|
Cash provided by continuing operations
|
||||||||
|
Cash Receipts:
|
||||||||
|
Receipts from customers
|
$ | 435.0 | $ | 437.2 | ||||
|
Receipt from
the sale of nitrogen credits
|
1.4 | — | ||||||
|
Dividends from unconsolidated affiliates
|
1.6 | 2.9 | ||||||
|
Cash Payments:
|
||||||||
|
Payments to suppliers and other operating cost
|
325.6 | 344.4 | ||||||
|
Payments for salaries, wages, and benefits
|
76.4 | 76.1 | ||||||
|
Payments for interest, net
|
8.4 | 9.1 | ||||||
|
Payments for restructuring and severance
|
1.1 | 2.6 | ||||||
|
Payments for taxes
|
5.4 | 2.9 | ||||||
|
Other
|
0.3 | 0.4 | ||||||
|
|
||||||||
|
Cash provided by continuing operations
|
$ | 20.8 | $ | 4.6 | ||||
|
|
||||||||
47
48
49
50
51
52
| • |
the competitive nature of the textile industry and the impact of worldwide
competition;
|
||
| • |
changes in the trade regulatory environment and governmental policies and
legislation;
|
||
| • |
the availability, sourcing and pricing of raw materials;
|
||
| • |
general domestic and international economic and industry conditions in markets
where the Company competes, such as recession and other economic and political
factors over which the Company has no control;
|
||
| • |
changes in consumer spending, customer preferences, fashion trends and end-uses;
|
||
| • |
its ability to reduce production costs;
|
||
| • |
changes in currency exchange rates, interest and inflation rates;
|
||
| • |
the financial condition of its customers;
|
||
| • |
its ability to sell excess assets;
|
||
| • |
technological advancements and the continued availability of financial resources
to fund capital expenditures;
|
||
| • |
the operating performance of joint ventures, alliances and other equity
investments;
|
||
| • |
the impact of environmental, health and safety regulations;
|
||
| • |
the loss of a material customer;
|
||
| • |
employee relations;
|
||
| • |
volatility of financial and credit markets;
|
||
| • |
the continuity of the Company’s leadership;
|
||
| • |
availability of and access to credit on reasonable terms; and
|
||
| • |
the success of the Company’s consolidation initiatives.
|
53
| • |
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities that the reporting entity has the ability to access at the measurement
date,
|
||
| • |
Level 2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly, or
|
||
| • |
Level 3 inputs are unobservable inputs for the asset or liability. Unobservable
inputs shall be used to measure fair value to the extent that observable inputs are not
available, thereby allowing for situations in which there is little, if any, market
activity for the asset or liability at the measurement date.
|
54
| March 28, | June 28, | |||||||
|
2010
|
2009
|
|||||||
|
Foreign currency purchase contracts:
|
Level 2 | Level 2 | ||||||
|
Notional amount
|
$ | 177 | $ | 110 | ||||
|
Fair value
|
179 | 130 | ||||||
|
|
||||||||
|
Net gain
|
$ | (2 | ) | $ | (20 | ) | ||
|
|
|
|
||||||
|
|
||||||||
|
Foreign currency sales contracts:
|
||||||||
|
Notional amount
|
$ | 1,547 | $ | 1,121 | ||||
|
Fair value
|
1,587 | 1,167 | ||||||
|
|
||||||||
|
Net loss
|
$ | (40 | ) | $ | (46 | ) | ||
|
|
|
|
||||||
| March 28, 2010 | June 28, 2009 | |||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
|
Assets:
|
||||||||||||||||
|
Cash and cash equivalents
|
$ 52,496
|
$ 52,496
|
$ 42,659
|
$ 42,659
|
||||||||||||
|
Receivables, net
|
84,788
|
84,788
|
77,810
|
77,810
|
||||||||||||
|
Restricted cash
|
1,818
|
1,818
|
6,930
|
6,930
|
||||||||||||
|
Liabilities:
|
||||||||||||||||
|
Accounts payable
|
33,860
|
33,860
|
26,050
|
26,050
|
||||||||||||
|
Notes payable
|
178,722
|
183,190
|
179,222
|
112,910
|
||||||||||||
55
| Total Number of | Maximum Number | |||||||||||||||
| Total Number | Average Price | Shares Purchased as | of Shares that May | |||||||||||||
| of | Paid | Part of Publicly | Yet Be Purchased | |||||||||||||
| Shares | per | Announced Plans | Under the Plans or | |||||||||||||
| Period | Purchased | Share | or Programs | Programs | ||||||||||||
|
12/28/09 – 1/27/10
|
— | — | — | 6,807,241 | ||||||||||||
|
1/28/10 – 2/27/10
|
— | — | — | 6,807,241 | ||||||||||||
|
2/28/10 – 3/28/10
|
— | — | — | 6,807,241 | ||||||||||||
|
|
||||||||||||||||
| Total | — | — | — | |||||||||||||
|
|
||||||||||||||||
56
| 31.1 | Chief Executive Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Chief Financial Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Chief Executive Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Chief Financial Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
57
|
|
UNIFI, INC.
|
|||
|
Date:
May 6, 2010
|
/s/ RONALD L. SMITH
|
|||
|
|
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer and Duly Authorized Officer) |
58
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|