##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended December 27, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
 Commission File Number: 1-10542
 UNIFI, INC.
  New York
(State or other jurisdiction of 
incorporation or organization)
    
    11-2165495
(I.R.S. Employer
Identification No.)
 P.O. Box 19109 - 7201 West Friendly Avenue Greensboro, NC
(Address of principal executive offices)
    
    27419
(Zip Code)
 (336) 294-4410
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller Reporting Company o(Do not check if a smaller reporting company)
 o þ




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##### 



INDEX
 PagePart I
    
    Item 1.
    
    Financial Statements:Financial Information
    
    
    
    Condensed
Consolidated Balance Sheets as of December 27, 2009 and June 28, 2009
    
    
    3Condensed
Consolidated Statements of Operations for the Quarters and Six-Months
EndedDecember 27, 2009 and December 28, 2008
    
    
    4Condensed
Consolidated Statements of Cash Flows for the Six-Months
EndedDecember 27, 2009 and December 28, 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    52Item 4.
    
    Controls and Procedures
    
    
    53Part IIOther Information
    
    Item 1.
    
    Legal Proceedings
    
    
    54Item 1A.
    
    Risk Factors
    
    
    54Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    54Item 3.
    
    Defaults Upon Senior Securities
    
    
    54Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    55Item 5.
    
    Other Information
    
    
    55Item 6.
    
    Exhibits
    
    
    55EX-10.1EX-31.1EX-31.2EX-32.1EX-32.2
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December 27,
    
    
    June 28,2009
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    54,442
    
    
    $
    42,659Receivables, net
    
    
    69,354
    
    
    
    77,810Inventories
    
    
    103,012
    
    
    
    89,665Deferred income taxes
    
    
    1,294
    
    
    
    1,223Assets held for sale
    
    
    
    
    
    
    1,350Restricted cash
    
    
    3,609
    
    
    
    6,477Other current assets
    
    
    5,887
    
    
    
    5,464Total current assets
    
    
    237,598
    
    
    
    224,648Property, plant and equipment
    
    
    746,341
    
    
    
    744,253Less accumulated depreciation
    
    
    (589,817
    )
    
    
    (583,610
    )156,524
    
    
    
    160,643Restricted cash
    
    
    
    
    
    
    453Intangible assets, net
    
    
    15,821
    
    
    
    17,603Investments in unconsolidated affiliates
    
    
    62,959
    
    
    
    60,051Other noncurrent assets
    
    
    13,035
    
    
    
    13,534Total assets
    
    $
    485,937
    
    
    $
    476,932LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    27,619
    
    
    $
    26,050Accrued expenses
    
    
    15,871
    
    
    
    15,269Income taxes payable
    
    
    445
    
    
    
    676Current maturities
of long-term debt
and other
current liabilities
    
    
    3,977
    
    
    
    6,845Total current
liabilities
    
    
    47,912
    
    
    
    48,840Notes payable
    
    
    178,722
    
    
    
    179,222Other long-term debt and liabilities
    
    
    2,981
    
    
    
    3,485Deferred income taxes
    
    
    371
    
    
    
    416Commitments and contingenciesShareholders equity:Common stock
    
    
    6,017
    
    
    
    6,206Capital in excess of par value
    
    
    26,716
    
    
    
    30,250Retained earnings
    
    
    209,940
    
    
    
    205,498Accumulated other comprehensive income
    
    
    13,278
    
    
    
    3,015255,951
    
    
    
    244,969Total liabilities
and shareholders
equity
    
    $
    485,937
    
    
    $
    476,932
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For the Quarters Ended
    
    
    For the Six-Months EndedDecember 27,
    
    
    December 28,
    
    
    December 27,
    
    
    December 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Summary of Operations:Net sales
    
    $
    142,255
    
    
    $
    125,727
    
    
    $
    285,106
    
    
    $
    294,736Cost of sales
    
    
    124,919
    
    
    
    123,415
    
    
    
    248,364
    
    
    
    278,999Write down of long-lived assets
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    Selling, general & administrative expenses
    
    
    12,152
    
    
    
    9,304
    
    
    
    23,316
    
    
    
    19,849Provision (benefit) for bad debts
    
    
    (564
    )
    
    
    501
    
    
    
    12
    
    
    
    1,059Other operating (income) expense, net
    
    
    (109
    )
    
    
    (5,212
    )
    
    
    (196
    )
    
    
    (5,773
    )Non-operating (income) expense:Interest income
    
    
    (834
    )
    
    
    (680
    )
    
    
    (1,580
    )
    
    
    (1,593
    )Interest expense
    
    
    5,223
    
    
    
    5,748
    
    
    
    10,715
    
    
    
    11,713Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    Equity in earnings of unconsolidated affiliates
    
    
    (1,609
    )
    
    
    (162
    )
    
    
    (3,672
    )
    
    
    (3,644
    )Write down of investment in unconsolidated
affiliate
    
    
    
    
    
    
    1,483
    
    
    
    
    
    
    
    1,483Income (loss) from continuing operations
before income taxes
    
    
    3,077
    
    
    
    (8,670
    )
    
    
    8,101
    
    
    
    (7,357
    )Provision for income taxes
    
    
    1,124
    
    
    
    614
    
    
    
    3,659
    
    
    
    2,499Income (loss) from continuing operations
    
    
    1,953
    
    
    
    (9,284
    )
    
    
    4,442
    
    
    
    (9,856
    )Income from discontinued operations  net of
tax
    
    
    
    
    
    
    216
    
    
    
    
    
    
    
    112Net income (loss)
    
    $
    1,953
    
    
    $
    (9,068
    )
    
    $
    4,442
    
    
    $
    (9,744
    )Earnings (loss) per share from continuing
operations and net income:Income (loss) per common share  basic
    
    $
    .03
    
    
    $
    (.15
    )
    
    $
    .07
    
    
    $
    (.16
    )Income (loss) per common share  diluted
    
    $
    .03
    
    
    $
    (.15
    )
    
    $
    .07
    
    
    $
    (.16
    )
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For the Six-Months EndedDecember 27,
    
    
    December 28,2009
    
    
    2008Cash and cash equivalents at beginning of year
    
    $
    42,659
    
    
    $
    20,248Operating activities:Net income (loss)
    
    
    4,442
    
    
    
    (9,744
    )Adjustments to reconcile net income (loss) to net cash provided by
(used in) continuing operating activities:Income from discontinued operations
    
    
    
    
    
    
    (112
    )Earnings of unconsolidated affiliates, net of distributions
    
    
    (2,062
    )
    
    
    (1,579
    )Depreciation
    
    
    11,563
    
    
    
    15,832Amortization
    
    
    2,334
    
    
    
    2,137Stock-based compensation expense
    
    
    1,273
    
    
    
    622Deferred compensation expense (recovery), net
    
    
    343
    
    
    
    (69
    )Net gain on asset sales
    
    
    (57
    )
    
    
    (5,910
    )Gain on extinguishment of debt
    
    
    (54
    )
    
    
    Write down of long-lived assets
    
    
    100
    
    
    
    Write down of investment in unconsolidated affiliate
    
    
    
    
    
    
    1,483Deferred income tax
    
    
    (19
    )
    
    
    35Provision for bad debts
    
    
    12
    
    
    
    1,059Other
    
    
    301
    
    
    
    256Change in assets and liabilities, excluding effects of foreign currency adjustments
    
    
    565
    
    
    
    (11,962
    )Net cash provided by (used in) continuing operating
activities
    
    
    18,741
    
    
    
    (7,952
    )Investing activities:Capital expenditures
    
    
    (4,965
    )
    
    
    (7,829
    )Investment in joint venture
    
    
    (550
    )
    
    
    Acquisition of intangible asset
    
    
    
    
    
    
    (500
    )Change in restricted cash
    
    
    4,158
    
    
    
    10,118Proceeds from sale of capital assets
    
    
    1,358
    
    
    
    6.950Other
    
    
    (79
    )
    
    
    Net cash (used in) provided by investing activities
    
    
    (78
    )
    
    
    8,739Financing activities:Payments of long-term debt
    
    
    (4,594
    )
    
    
    (20,578
    )Borrowings of long-term debt
    
    
    
    
    
    
    14,600Proceeds from stock option exercises
    
    
    
    
    
    
    3,830Purchase and retirement of Company stock
    
    
    (4,995
    )
    
    
    Other
    
    
    
    
    
    
    37Net cash used in financing activities
    
    
    (9,589
    )
    
    
    (2,111
    )Cash flows of discontinued operations:Operating cash flows
    
    
    
    
    
    
    (162
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    2,709
    
    
    
    (6,143
    )Net increase (decrease) in cash and cash equivalents
    
    
    11,783
    
    
    
    (7,629
    )Cash and cash equivalents at end of period
    
    $
    54,442
    
    
    $
    12,619
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1.
    
    Basis of Presentation
 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 present fairly
the financial position at December 27, 2009, and the results of operations and cash flows for
the periods ended December 27, 2009 and December 28, 2008. 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.
 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.
 2.
    
    Inventories
 Inventories are comprised of the following (amounts in thousands):
 December 27,
    
    
    June 28,2009
    
    
    2009Raw materials and supplies
    
    $
    45,052
    
    
    $
    42,351Work in process
    
    
    4,755
    
    
    
    5,936Finished goods
    
    
    53,205
    
    
    
    41,378$
    103,012
    
    
    $
    89,665
 3.
    
    Accrued Expenses
 Accrued expenses are comprised of the following (amounts in thousands):
 December 27,
    
    
    June 28,2009
    
    
    2009Payroll and fringe benefits
    
    $
    9,403
    
    
    $
    6,957Severance
    
    
    977
    
    
    
    1,385Interest
    
    
    2,471
    
    
    
    2,496Utilities
    
    
    1,762
    
    
    
    2,085Retiree reserve
    
    
    196
    
    
    
    190Property taxes
    
    
    6
    
    
    
    1,094Other
    
    
    1,056
    
    
    
    1,062$
    15,871
    
    
    $
    15,269
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4.
    
    Earnings Per Common Share
 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 Six-Months EndedDecember 27,
    
    
    December 28,
    
    
    December 27,
    
    
    December 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Determination of shares:Weighted average common shares
outstanding
    
    
    61,498
    
    
    
    62,030
    
    
    
    61,778
    
    
    
    61,582Assumed conversion of dilutive stock
options
    
    
    286
    
    
    
    
    
    
    
    143
    
    
    
    Diluted weighted average common shares
outstanding
    
    
    61,784
    
    
    
    62,030
    
    
    
    61,921
    
    
    
    61,582Income (loss) per common share  basic
    
    $
    .03
    
    
    $
    (.15
    )
    
    $
    .07
    
    
    $
    (.16
    )Income
(loss) per common share 
diluted
    
    $
    .03
    
    
    $
    (.15
    )
    
    $
    .07
    
    
    $
    (.16
    )
 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 was 892,388 at December
27, 2009. For the quarter and year-to-date periods ended December 28, 2008, no options were
included in the computation of diluted loss per share because the Company reported net losses
from continuing operations.
 5.
    
    Other Operating (Income) Expense, Net
 The following table summarizes the Companys other operating (income) expense, net (amounts in
thousands):
 For the Quarters Ended
    
    
    For the Six-Months EndedDecember 27,
    
    
    December 28,
    
    
    December 27,
    
    
    December 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(Gain) loss on sale of fixed assets
    
    $
    37
    
    
    $
    (5,594
    )
    
    $
    (57
    )
    
    $
    (5,910
    )Currency (gains) losses
    
    
    (133
    )
    
    
    380
    
    
    
    (120
    )
    
    
    77Other, net
    
    
    (13
    )
    
    
    2
    
    
    
    (19
    )
    
    
    60Other operating (income) expense, net
    
    $
    (109
    )
    
    $
    (5,212
    )
    
    $
    (196
    )
    
    $
    (5,773
    )
 6.
    
    Intangible Assets, Net
 Other intangible assets subject to amortization consisted of customer relationships 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 agreement is being amortized using the straight-line method. The
non-compete agreement 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. The Agreement was
extended for a one year period two times, effective as of January 1, 2009 and January 1, 2010.
There are no estimated residual values related to these intangible assets. Accumulated
amortization at December 27, 2009 and June 28, 2009 for these intangible assets was $10.3
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 December 27, 2009 and
June 28, 2009 was $0.3 million and $0.2 million, respectively. These intangible assets relate
to the polyester segment.
 The following table represents the expected intangible asset amortization for the next five
fiscal years (amounts in thousands):
 Aggregate Amortization Expenses2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015Customer lists
    
    $
    2,173
    
    
    $
    2,022
    
    
    $
    1,837
    
    
    $
    1,481
    
    
    $
    1,215Non-compete contract
    
    
    381
    
    
    
    381
    
    
    
    381
    
    
    
    381
    
    
    
    381$
    2,554
    
    
    $
    2,403
    
    
    $
    2,218
    
    
    $
    1,862
    
    
    $
    1,596
 7.
    
    Recent Accounting Pronouncements
 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.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.
 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
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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. 2009-16, Transfers and Servicing (Topic 860):
Accounting for the Transfers of Financial Assets which amends the ASC to include SFAS No.166,
Accounting for Transfers of Financial Assets  an Amendment of FASB Statement No. 140. SFAS
No. 166 revised SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities  a Replacement of FASB Statement No. 125 requiring additional
disclosures about transfers of financial assets, including securitization transactions, and
any continuing exposure to the risks related to transferred financial assets. It also
eliminates the concept of a qualifying special-purpose entity, changes the requirements for
derecognizing financial assets, and enhances disclosure requirements. ASU No. 2009-16 is
effective prospectively, for annual periods beginning after November 15, 2009, and interim and
annual periods thereafter. The Company does not expect the adoption of this guidance will have
a material impact on its financial position or results of operations.
 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). The amendment
requires 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 the adoption of this guidance will have a material impact
on its financial position or results of operations.
 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.
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8.
    
    Comprehensive Income (Loss)
 Comprehensive income amounted to $3.8 million and $14.7 million for the second quarter and
year-to-date periods of fiscal year 2010, respectively, compared to comprehensive losses of
$23.2 million and $39.7 million for the second quarter and the year-to-date periods of fiscal
year 2009. Comprehensive income is comprised of net income of $2.0 million and $4.4 million for
the second quarter and year-to-date periods of fiscal year 2010, respectively, and positive
translation adjustments of $1.8 million and $10.3 million, respectively. Comparatively,
comprehensive losses were comprised of net losses of $9.1 million and $9.7 million for the
second quarter and year-to-date periods of fiscal year 2009, respectively, and negative
translation adjustments of $14.1 million and $30.0 million, respectively. 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:
 Affiliate Name
    
    Date Acquired
    
    Location
    
    Percent OwnershipParkdale 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, Peoples Republic of China
    
    
    50
    %
 
 (1)
    
    The Company completed the sale of YUFI during the fourth quarter of fiscal year 2009. Condensed balance sheet information as of December 27, 2009 and June 28, 2009, and income
statement information for the quarter and year-to-date periods ended December 27, 2009 and
December 28, 2008, of the combined unconsolidated equity affiliates are as follows (amounts in
thousands):
 As of
    
    As ofDecember 27, 2009
    
    June 28, 2009Current assets
    
    $
    167,531
    
    
    $
    152,288Noncurrent assets
    
    
    112,910
    
    
    
    101,893Current liabilities
    
    
    32,160
    
    
    
    22,834Noncurrent liabilities
    
    
    15,245
    
    
    
    4,294Shareholders equity and
capital accounts
    
    
    233,036
    
    
    
    227,053
 For the Quarters EndedDecember 27, 2009
    
    December 28, 2008Net sales
    
    $
    117,766
    
    
    $
    134,687Gross profit
    
    
    16,294
    
    
    
    3,420Depreciation and amortization
    
    
    6,621
    
    
    
    7,246Income (loss) from operations
    
    
    12,277
    
    
    
    (1,611
    )Net income (loss)
    
    
    11,027
    
    
    
    (2,423
    )
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For the Six-Months EndedDecember 27, 2009
    
    December 28, 2008Net sales
    
    $
    217,212
    
    
    $
    302,543Gross profit
    
    
    24,703
    
    
    
    6,830Depreciation and amortization
    
    
    11,647
    
    
    
    13,572Income (loss) from operations
    
    
    17,442
    
    
    
    (3,540
    )Net income
    
    
    18,299
    
    
    
    1,963
 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,
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; eligible upland cotton has been consumed, and qualifying capital
expenditures under the program have been made; the economic assistance is recognized by PAL as
reductions to cost of sales. PAL received economic assistance under the program of $14.0
million during the eleven months ended June 28, 2009 and, in accordance with the program
provisions, recognized $9.7 million as reductions to costs of sales 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 has filed a second appeal at a
higher level and a hearing is scheduled during the Companys third quarter of fiscal year 2010.
In the event that PALs appeal is unsuccessful, PAL may be required to adjust its prior period
earnings which the Company believes would not materially impact its results of operations. From
a cash perspective, PAL has informed the Company that it expects there will be sufficient future
qualifying capital expenditures to recapture any lost benefit after the appeal process has been
completed.The Companys investment in PAL at December 27, 2009 was $59.6 million and the underlying equity
in the net assets of PAL at December 27, 2009 was $77.4 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, settlement
cost of an anti-trust lawsuit against PAL in which the Company did not participate of $2.6
million, net income adjustments of $0.3 million related to the expected disallowed expenditures
for the cotton rebate program and other comprehensive income of $0.1 million offset by $74.1
million of investment impairment charges.On October 8, 2009, a wholly-owned foreign subsidiary of the Company formed a new joint venture,
UNF America, with its partner, Nilit Ltd. (Nilit), for the purpose of producing nylon POY in
Nilits Ridgeway, Virginia plant. This new joint venture will allow UNF America to produce
Berry Amendment and North American Free Trade Agreement (NAFTA) compliant yarns which UNF was
not able to produce under the product origination requirements of these trade agreements. The
new joint venture will also shorten the Companys supply chain resulting in expected
improvements in the Companys working capital, flexibility of the Companys product offerings
and the financial performance of the Companys investments in equity affiliates.
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The Companys initial investment in UNF America was fifty thousand dollars. In addition, 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. The loan is being
treated as an additional investment by the Company for accounting purposes.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.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 re-negotiated equity
interest sales price, which was lower than carrying value.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
focused on the development, sales and service of PVA yarns.
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10.
    
    Income Taxes
 The Companys income tax provision for the quarter ended December 27, 2009 resulted in tax
expense at an effective rate of 36.5% compared to the quarter ended December 28, 2008 which
resulted in tax expense at an effective rate of 7.1%. The Companys income tax provision for
the year-to-date period ended December 27, 2009 resulted in tax expense at an effective rate of
45.2% compared to the year-to-date period ended December 28, 2008 which resulted in tax expense
at an effective rate of 33.5%.The differences between the Companys income tax expense and the U.S. statutory rate for the
quarter and year-to-date period ended December 27, 2009 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 period ended December 28,
2008 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 decreased
$1.5 million and increased $0.7 million in the quarter and year-to-date period ended December
27, 2009, respectively, compared to increases of $3.5 million and $4.1 million in the quarter
and year-to-date period ended December 28, 2008, respectively. The net increase in the
valuation allowance for the year-to-date period ended December 27, 2009 primarily consists of a
$0.3 million decrease in the net operating loss generated in the period, and an increase of $1.0
million related to other temporary differences.The Company believes it is reasonably possible 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 period ended December 27, 2009.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.
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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 key 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 key 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 term
    
    Exercise
    
    Interest
    
    
    
    
    
    DividendOptions granted
    
    (years)
    
    price
    
    rate
    
    Volatility
    
    yield
    
    Fair value1,660,000
    
    
    5.5
    
    
    $
    1.91
    
    
    
    2.8
    %
    
    
    63.6
    %
    
    
    
    
    
    $
    1.1040,000
    
    
    5.5
    
    
    $
    2.86
    
    
    
    2.5
    %
    
    
    63.9
    %
    
    
    
    
    
    $
    1.65
 The Company incurred $0.7 million and $0.3 million in the second quarter of fiscal years
2010 and 2009 respectively, and $1.3 million and $0.6 million for the year-to-date periods,
respectively, in stock-based compensation charges which were recorded as selling, general and
administrative (SG&A) expenses with the offset to capital in excess of par value.The Company issued 100,000 shares of common stock and 1,368,300 shares of common stock during
the second quarter and year-to-date periods of fiscal year 2009, respectively, as a result of
the exercise of stock options. There were no options exercised during the second quarter or the
year-to-date period of fiscal year 2010.
 12.
    
    Assets Held for Sale
 The Company had assets held for sale related to the consolidation of its polyester manufacturing
capacity that are comprised of the remaining assets and structures in Kinston, North Carolina
(Kinston). 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 in the first quarter of fiscal year 2010. The sale closed
during the second quarter of fiscal year 2010. The remaining assets and structures at the
Kinston facility have no net book value and will be conveyed back to E.I. DuPont de Nemours
(DuPont) if the Company is unable to sell the assets by March 20, 2010.
 14




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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.The table below summarizes changes to the accrued severance account for the six-month period
ended December 27, 2009 (amounts in thousands):
 Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atJune 28, 2009
    
    Charges
    
    Adjustments
    
    Amounts Used
    
    December 27, 2009Accrued severance
    
    $
    1,687
    (1)
    
    
    
    
    
    
    20
    
    
    
    (730
    )
    
    $
    977
 
 (1)
    
    As of June 28, 2009, the Company classified $0.3 million of executive severance as
long-term. 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.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. As of December 27, 2009, the Brazilian subsidiarys currency risk was minimal and
therefore no forward contracts were deemed necessary. The latest maturity for all outstanding
foreign currency sales contracts is March 2010.
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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):
 December 27,
    
    
    June 28,2009
    
    
    2009Foreign currency purchase contracts:
    
    Level 2
    
    Level 2Notional amount
    
    $
    
    
    
    $
    110Fair value
    
    
    
    
    
    
    130Net gain
    
    $
    
    
    
    $
    (20
    )Foreign currency sales contracts:Notional amount
    
    $
    1,783
    
    
    $
    1,121Fair value
    
    
    1,828
    
    
    
    1,167Net loss
    
    $
    (45
    )
    
    $
    (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 gain of $0.1 million for the quarter ended December 27, 2009
and a pre-tax loss of $0.4 million for the quarter ended December 28, 2008. For the year-to-date
periods ended December 27, 2009 and December 28, 2008, the total impact of foreign currency
related items resulted in a pre-tax gain of $0.1 million and a pre-tax loss of $0.1 million,
respectively.
 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 notes on the latest trade date prior to
its period end. These are considered Level 1 inputs in the fair value hierarchy. The following
table shows the fair values at December 27, 2009 and June 28, 2009 which were calculated based on
the latest trade price on December 17, 2009 and June 19, 2009, respectively (amounts in
thousands):
 December 27, 2009
    
    
    June 28, 2009Carrying Value
    
    
    Fair Value
    
    
    Carrying Value
    
    
    Fair Value2014 Notes Payable
    
    $
    178,722
    
    
    $
    170,680
    
    
    $
    179,222
    
    
    $
    112,910
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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.
 16.
    
    Related Party Transactions
 In fiscal 2007, the Company purchased the polyester and nylon texturing operations of Dillon
(the Transaction). In connection with the Transaction the Company and Dillon entered into the
Agreement for a term of two years from January 1, 2007, pursuant to which the Company agreed to
pay Dillon for certain sales and transitional services to be provided by Dillons sales staff
and executive management. On December 1, 2008, the Company entered into an agreement to extend
the polyester services portion of the Agreement for a term of one year effective January 1, 2009
pursuant to which the Company agreed to pay Dillon an aggregate amount of $1.7 million. The
Company recorded $0.4 million and $0.3 million of SG&A expense for the second quarter of fiscal
years 2010 and 2009, respectively, and $0.9 million and $0.5 million for the year-to-date
periods of fiscal year 2010 and 2009, respectively, related to this contract and the related
amendment.On December 11, 2009, the Company and Dillon entered into a Second Amendment (the Amendment)
to the Agreement. The Amendment provides that effective January 1, 2010, the term of the
Agreement will be extended for a one year term which will expire on December 31, 2010 pursuant
to which the Company will pay Dillon an aggregate amount of $1.3 million. Mr. Stephen Wener is
the President and CEO of Dillon. Mr. Wener is Chairman of the Companys Board of Directors
(Board) and has been a member of the Board since May 24, 2007. The terms of the Companys
Agreement with Dillon are, in managements opinion, no less favorable than the Company would
have been able to negotiate with an independent third party for similar services.On November 25, 2009, the Company entered into a stock purchase agreement with Invemed Catalyst
Fund. L.P. (the Fund). Pursuant to the stock purchase agreement, the Company agreed to
purchase 1,885,000 shares of its common stock from the Fund for an aggregate purchase price of
$5.0 million. The Company and the Fund negotiated the per share purchase price of $2.65 per
share based on an approximately 10% discount to the closing price of the Companys common stock
on November 24, 2009.
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##### Table of Contents



Mr. Kenneth G. Langone, a member of the Companys board of directors, is the principal
stockholder and CEO of Invemed Securities, Inc., which is a managing member of Invemed Catalyst
Gen Par, LLC, the general partner of the Fund. Mr. William M. Sams, another member of the
Companys board of directors, is a limited partner of the Fund. Neither Mr. Langone nor Mr.
Sams was involved in any decisions by the board of directors of the Company or any committee
thereof with respect to this stock purchase transaction. Following the purchase, Mr. Langone
continued to beneficially own 1,757,900 shares of the Companys common stock, or 2.9% of the
total outstanding shares, and Mr. Sams continued to beneficially own 5,420,000 shares of the
Companys common stock, or 9.0% of the total outstanding shares of the Companys common stock.
 17.
    
    Segment Disclosures
 The following is the Companys segment information for the quarters
and six-month period ended December 27, 2009 and December 28, 2008
(amounts in thousands):
 Polyester
    
    
    Nylon
    
    
    TotalQuarter ended December 27, 2009:Net sales to external customers
    
    $
    104,303
    
    
    $
    37,952
    
    
    $
    142,255Inter-segment net sales
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    5,750
    
    
    
    862
    
    
    
    6,612Segment operating profit
    
    
    2,924
    
    
    
    2,260
    
    
    
    5,184Total segment assets
    
    
    322,232
    
    
    
    75,462
    
    
    
    397,694Quarter ended December 28, 2008:Net sales to external customers
    
    $
    93,984
    
    
    $
    31,743
    
    
    $
    125,727Inter-segment net sales
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    5,684
    
    
    
    1,912
    
    
    
    7,596Segment operating loss
    
    
    (6,735
    )
    
    
    (257
    )
    
    
    (6,992
    )Total segment assets
    
    
    332,994
    
    
    
    84,505
    
    
    
    417,499
 The following table provides reconciliations from segment data to consolidated reporting data
(amounts in thousands):
 For the Quarters EndedDecember 27,
    
    
    December 28,2009
    
    
    2008Depreciation and amortization:Depreciation and amortization of specific reportable segment
assets
    
    $
    6,612
    
    
    $
    7,596Depreciation included in other operating (income) expense, net
    
    
    36
    
    
    
    36Amortization included in interest expense, net
    
    
    276
    
    
    
    289Consolidated depreciation and amortization
    
    $
    6,924
    
    
    $
    7,921Reconciliation of segment operating income (loss) to
income (loss) from continuing operations before income taxes:Reportable segments operating income (loss)
    
    $
    5,184
    
    
    $
    (6,992
    )Provision (benefit) for bad debts
    
    
    (564
    )
    
    
    501Other operating (income) expense, net
    
    
    (109
    )
    
    
    (5,212
    )Interest expense, net
    
    
    4,389
    
    
    
    5,068Equity in earnings of unconsolidated affiliates
    
    
    (1,609
    )
    
    
    (162
    )Write down of investment in unconsolidated affiliate
    
    
    
    
    
    
    1,483Income (loss) from continuing operations before income taxes
    
    $
    3,077
    
    
    $
    (8,670
    )
 18




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##### Table of Contents



Polyester
    
    
    Nylon
    
    
    TotalSix-Months ended December 27, 2009:Net sales to external customers
    
    $
    208,763
    
    
    $
    76,343
    
    
    $
    285,106Intersegment net sales
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    11,518
    
    
    
    1,755
    
    
    
    13,273Segment operating profit
    
    
    7,795
    
    
    
    5,531
    
    
    
    13,326Six-Months ended December 28, 2008:Net sales to external customers
    
    $
    216,963
    
    
    $
    77,773
    
    
    $
    294,736Intersegment net sales
    
    
    
    
    
    
    71
    
    
    
    71Depreciation and amortization
    
    
    12,973
    
    
    
    4,346
    
    
    
    17,319Segment operating profit (loss)
    
    
    (6,925
    )
    
    
    2,813
    
    
    
    (4,112
    )
 The following table provides reconciliations from segment data to consolidated reporting data
(amounts in thousands):
 For the Six-Months EndedDecember 27,
    
    
    December 28,2009
    
    
    2008Depreciation and amortization:Depreciation and amortization of specific reportable segment
assets
    
    $
    13,273
    
    
    $
    17,319Depreciation included in other operating (income) expense, net
    
    
    71
    
    
    
    71Amortization included in interest expense, net
    
    
    553
    
    
    
    579Consolidated depreciation and amortization
    
    $
    13,897
    
    
    $
    17,969Reconciliation of segment operating income (loss) to
income (loss) from continuing operations before income taxes:Reportable segments operating income (loss)
    
    $
    13,326
    
    
    $
    (4,112
    )Provision for bad debts
    
    
    12
    
    
    
    1,059Other operating (income) expense, net
    
    
    (196
    )
    
    
    (5,773
    )Interest expense, net
    
    
    9,135
    
    
    
    10,120Gain on extinguishment of debt
    
    
    (54
    )
    
    
    Equity in earnings of unconsolidated affiliates
    
    
    (3,672
    )
    
    
    (3,644
    )Write down of investment in unconsolidated affiliate
    
    
    
    
    
    
    1,483Income (loss) from continuing operations before income taxes
    
    $
    8,101
    
    
    $
    (7,357
    )
 For purposes of internal management reporting, segment operating profit (loss) represents
segment net sales less cost of sales, segment restructuring charges, segment impairments of
long-lived assets, and allocated SG&A expenses. Certain non-segment manufacturing and
unallocated SG&A costs are allocated to the operating segments based on activity drivers
relevant to the respective costs. This allocation methodology is updated as part of the annual
budgeting process.
 The primary differences between the segmented financial information of the operating segments,
as reported to management and the Companys consolidated reporting relate to the provision for
bad debts, other operating (income) expense, net and equity in earnings of unconsolidated
affiliates and related impairments.
 Segment operating profit (loss) excludes the benefit for bad debts of $0.6 million and a
provision of $0.5 million for the current and prior year second quarter periods, respectively,
and a provision of twelve thousand dollars and $1.1 million for the current and prior
year-to-date periods, respectively.
 19




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##### Table of Contents



The total assets for the polyester segment increased from $314.6 million at June 28, 2009 to
$322.2 million at December 27, 2009 primarily due to increases in cash, inventory, and deferred
taxes of $13.5 million, $10.3 million, and $0.1 million, respectively. These increases were
offset by decreases in accounts receivable, short-term restricted cash, property, plant, and
equipment, other long-term assets, other current
assets and long-term restricted cash of $7.7 million, $2.9 million, $2.6 million, $1.7 million,
$0.9 million, and $0.5 million, respectively. The total assets for the nylon segment increased
from $75.0 million at June 28, 2009 to $75.5 million at December 27, 2009 primarily due to
increases in inventory and cash of $3.4 million and $0.3 million, respectively. These increases
were offset by decreases in accounts receivable and property, plant, and equipment of $2.1
million and $1.1 million, respectively.
 18.
    
    Subsequent Events
 The Company evaluated all events and material transactions for potential recognition or
disclosure through such time as these statements were filed with the SEC on February 5, 2010 and
has determined there were no items deemed reportable.
 19.
    
    Condensed Consolidated Guarantor and Non-Guarantor Financial Statements
 The guarantor subsidiaries presented below represent the Companys subsidiaries that are subject
to the terms and conditions outlined in the indenture governing the Companys issuance of the
2014 notes and the guarantees, jointly and severally, on a senior secured basis. The
non-guarantor subsidiaries presented below represent the foreign subsidiaries which do not
guarantee the notes. Each subsidiary guarantor is 100% owned, directly or indirectly, by Unifi,
Inc. and all guarantees are full and unconditional.Supplemental financial information for the Company and its guarantor subsidiaries and
non-guarantor subsidiaries of the 2014 notes is presented below.
 20




---



##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,940
    
    
    $
    (3,266
    )
    
    $
    45,768
    
    
    $
    
    
    
    $
    54,442Receivables, net
    
    
    
    
    
    
    50,830
    
    
    
    18,524
    
    
    
    
    
    
    
    69,354Inventories
    
    
    
    
    
    
    72,077
    
    
    
    32,609
    
    
    
    (1,674
    )
    
    
    103,012Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,294
    
    
    
    
    
    
    
    1,294Restricted cash
    
    
    
    
    
    
    
    
    
    
    3,609
    
    
    
    
    
    
    
    3,609Other current assets
    
    
    75
    
    
    
    1,701
    
    
    
    4,111
    
    
    
    
    
    
    
    5,887Total current assets
    
    
    12,015
    
    
    
    121,342
    
    
    
    105,915
    
    
    
    (1,674
    )
    
    
    237,598Property, plant and equipment
    
    
    11,348
    
    
    
    660,266
    
    
    
    74,727
    
    
    
    
    
    
    
    746,341Less accumulated depreciation
    
    
    (2,042
    )
    
    
    (534,582
    )
    
    
    (53,193
    )
    
    
    
    
    
    
    (589,817
    )9,306
    
    
    
    125,684
    
    
    
    21,534
    
    
    
    
    
    
    
    156,524Intangible assets, net
    
    
    
    
    
    
    15,821
    
    
    
    
    
    
    
    
    
    
    
    15,821Investments in unconsolidated affiliates
    
    
    
    
    
    
    59,572
    
    
    
    3,387
    
    
    
    
    
    
    
    62,959Investments in consolidated subsidiaries
    
    
    412,505
    
    
    
    
    
    
    
    
    
    
    
    (412,505
    )
    
    
    Other noncurrent assets
    
    
    3,984
    
    
    
    12,857
    
    
    
    (3,806
    )
    
    
    
    
    
    
    13,035$
    437,810
    
    
    $
    335,276
    
    
    $
    127,030
    
    
    $
    (414,179
    )
    
    $
    485,937LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    49
    
    
    $
    22,611
    
    
    $
    4,959
    
    
    $
    
    
    
    $
    27,619Accrued expenses
    
    
    2,708
    
    
    
    10,708
    
    
    
    2,455
    
    
    
    
    
    
    
    15,871Income taxes payable
    
    
    380
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    445Current
maturities of long-term debt and other current liabilities
    
    
    
    
    
    
    368
    
    
    
    3,609
    
    
    
    
    
    
    
    3,977Total current liabilities
    
    
    3,137
    
    
    
    33,687
    
    
    
    11,088
    
    
    
    
    
    
    
    47,912Long-term debt and other liabilities
    
    
    178,722
    
    
    
    2,981
    
    
    
    
    
    
    
    
    
    
    
    181,703Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    371
    
    
    
    
    
    
    
    371Shareholders/ invested equity
    
    
    255,951
    
    
    
    298,608
    
    
    
    115,571
    
    
    
    
    
    
    
    255,951$
    437,810
    
    
    $
    335,276
    
    
    $
    127,030
    
    
    $
    (414,179
    )
    
    $
    485,937
 21




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,509
    
    
    $
    (813
    )
    
    $
    31,963
    
    
    $
    
    
    
    $
    42,659Receivables, net
    
    
    100
    
    
    
    56,031
    
    
    
    21,679
    
    
    
    
    
    
    
    77,810Inventories
    
    
    
    
    
    
    63,919
    
    
    
    25,746
    
    
    
    
    
    
    
    89,665Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,223
    
    
    
    
    
    
    
    1,223Assets held for sale
    
    
    
    
    
    
    1,350
    
    
    
    
    
    
    
    
    
    
    
    1,350Restricted cash
    
    
    
    
    
    
    
    
    
    
    6,477
    
    
    
    
    
    
    
    6,477Other current assets
    
    
    46
    
    
    
    2,199
    
    
    
    3,219
    
    
    
    
    
    
    
    5,464Total current assets
    
    
    11,655
    
    
    
    122,686
    
    
    
    90,307
    
    
    
    
    
    
    
    224,648Property, plant and equipment
    
    
    11,336
    
    
    
    665,724
    
    
    
    67,193
    
    
    
    
    
    
    
    744,253Less accumulated depreciation
    
    
    (1,899
    )
    
    
    (534,297
    )
    
    
    (47,414
    )
    
    
    
    
    
    
    (583,610
    )9,437
    
    
    
    131,427
    
    
    
    19,779
    
    
    
    
    
    
    
    160,643Restricted cash
    
    
    
    
    
    
    
    
    
    
    453
    
    
    
    
    
    
    
    453Intangible assets, net
    
    
    
    
    
    
    17,603
    
    
    
    
    
    
    
    
    
    
    
    17,603Investments in unconsolidated affiliates
    
    
    
    
    
    
    57,107
    
    
    
    2,944
    
    
    
    
    
    
    
    60,051Investments 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
    )
    
    $
    476,932LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    37
    
    
    $
    19,888
    
    
    $
    6,125
    
    
    $
    
    
    
    $
    26,050Accrued expenses
    
    
    1,690
    
    
    
    11,033
    
    
    
    2,546
    
    
    
    
    
    
    
    15,269Income taxes payable
    
    
    
    
    
    
    
    
    
    
    676
    
    
    
    
    
    
    
    676Current maturities of long-term debt and other current
Liabilities
    
    
    
    
    
    
    368
    
    
    
    6,477
    
    
    
    
    
    
    
    6,845Total current liabilities
    
    
    1,727
    
    
    
    31,289
    
    
    
    15,824
    
    
    
    
    
    
    
    48,840Long-term debt and other liabilities
    
    
    180,334
    
    
    
    1,920
    
    
    
    453
    
    
    
    
    
    
    
    182,707Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    416
    
    
    
    
    
    
    
    416Shareholders/ invested equity
    
    
    244,969
    
    
    
    266,400
    
    
    
    94,497
    
    
    
    (360,897
    )
    
    
    244,969$
    427,030
    
    
    $
    299,609
    
    
    $
    111,190
    
    
    $
    (360,897
    )
    
    $
    476,932
 22




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedSummary of Operations:Net sales
    
    $
    
    
    
    $
    105,687
    
    
    $
    36,573
    
    
    $
    (5
    )
    
    $
    142,255Cost of sales
    
    
    
    
    
    
    95,724
    
    
    
    29,262
    
    
    
    (67
    )
    
    
    124,919Equity in subsidiaries
    
    
    (2,218
    )
    
    
    
    
    
    
    
    
    
    
    2,218
    
    
    
    Selling, general and administrative expenses
    
    
    (6
    )
    
    
    9,678
    
    
    
    2,485
    
    
    
    (5
    )
    
    
    12,152Benefit for bad debts
    
    
    
    
    
    
    (544
    )
    
    
    (20
    )
    
    
    
    
    
    
    (564
    )Other operating (income) expense, net
    
    
    (5,663
    )
    
    
    5,643
    
    
    
    (89
    )
    
    
    
    
    
    
    (109
    )Non-operating (income) expenses:Interest income
    
    
    45
    
    
    
    (139
    )
    
    
    (740
    )
    
    
    
    
    
    
    (834
    )Interest expense
    
    
    5,509
    
    
    
    (295
    )
    
    
    9
    
    
    
    
    
    
    
    5,223Equity in (earnings) losses of unconsolidated affiliates
    
    
    
    
    
    
    (1,724
    )
    
    
    (141
    )
    
    
    256
    
    
    
    (1,609
    )Income (loss) from operations before income taxes
    
    
    2,333
    
    
    
    (2,656
    )
    
    
    5,807
    
    
    
    (2,407
    )
    
    
    3,077Provision for income taxes
    
    
    380
    
    
    
    8
    
    
    
    736
    
    
    
    
    
    
    
    1,124Net income (loss)
    
    $
    1,953
    
    
    $
    (2,664
    )
    
    $
    5,071
    
    
    $
    (2,407
    )
    
    $
    1,953
 23




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedSummary of Operations:Net sales
    
    $
    
    
    
    $
    103,324
    
    
    $
    22,586
    
    
    $
    (183
    )
    
    $
    125,727Cost of sales
    
    
    
    
    
    
    103,756
    
    
    
    19,750
    
    
    
    (91
    )
    
    
    123,415Equity in subsidiaries
    
    
    2,640
    
    
    
    
    
    
    
    
    
    
    
    (2,640
    )
    
    
    Selling, general and administrative expenses
    
    
    190
    
    
    
    7,669
    
    
    
    1,537
    
    
    
    (92
    )
    
    
    9,304Provision (benefit) for bad debts
    
    
    
    
    
    
    620
    
    
    
    (119
    )
    
    
    
    
    
    
    501Other operating (income) expense, net
    
    
    (13
    )
    
    
    (5,242
    )
    
    
    (1
    )
    
    
    44
    
    
    
    (5,212
    )Non-operating (income) expenses:Interest income
    
    
    (27
    )
    
    
    (2
    )
    
    
    (651
    )
    
    
    
    
    
    
    (680
    )Interest expense
    
    
    5,717
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    5,748Equity in (earnings) losses of unconsolidated affiliates
    
    
    
    
    
    
    (610
    )
    
    
    634
    
    
    
    (186
    )
    
    
    (162
    )Write down of investment in unconsolidated affiliate
    
    
    
    
    
    
    483
    
    
    
    1,000
    
    
    
    
    
    
    
    1,483Income (loss) from continuing operations before income
taxes
    
    
    (8,507
    )
    
    
    (3,381
    )
    
    
    436
    
    
    
    2,782
    
    
    
    (8,670
    )Provision (benefit) for income taxes
    
    
    561
    
    
    
    (573
    )
    
    
    626
    
    
    
    
    
    
    
    614Income (loss) from continuing operations
    
    
    (9,068
    )
    
    
    (2,808
    )
    
    
    (190
    )
    
    
    2,782
    
    
    
    (9,284
    )Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    216
    
    
    
    
    
    
    
    216Net income (loss)
    
    $
    (9,068
    )
    
    $
    (2,808
    )
    
    $
    26
    
    
    $
    2,782
    
    
    $
    (9,068
    )
 24




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedSummary of Operations:Net sales
    
    $
    
    
    
    $
    210,234
    
    
    $
    74,931
    
    
    $
    (59
    )
    
    $
    285,106Cost of sales
    
    
    
    
    
    
    189,507
    
    
    
    58,892
    
    
    
    (35
    )
    
    
    248,364Write down of long-lived assets
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100Equity in subsidiaries
    
    
    (4,574
    )
    
    
    
    
    
    
    
    
    
    
    4,574
    
    
    
    Selling, general and administrative expenses
    
    
    (16
    )
    
    
    18,569
    
    
    
    4,822
    
    
    
    (59
    )
    
    
    23,316Provision (benefit) for bad debts
    
    
    
    
    
    
    (63
    )
    
    
    75
    
    
    
    
    
    
    
    12Other operating (income) expense, net
    
    
    (11,137
    )
    
    
    11,160
    
    
    
    (219
    )
    
    
    
    
    
    
    (196
    )Non-operating (income) expenses:Interest income
    
    
    (17
    )
    
    
    (139
    )
    
    
    (1,424
    )
    
    
    
    
    
    
    (1,580
    )Interest expense
    
    
    10,976
    
    
    
    (270
    )
    
    
    9
    
    
    
    
    
    
    
    10,715Gain on extinguishment of debt
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )Equity in (earnings) losses of unconsolidated affiliates
    
    
    
    
    
    
    (4,076
    )
    
    
    (318
    )
    
    
    722
    
    
    
    (3,672
    )Income (loss) from operations before income
taxes
    
    
    4,822
    
    
    
    (4,554
    )
    
    
    13,094
    
    
    
    (5,261
    )
    
    
    8,101Provision for income taxes
    
    
    380
    
    
    
    8
    
    
    
    3,271
    
    
    
    
    
    
    
    3,659Net income (loss)
    
    $
    4,442
    
    
    $
    (4,562
    )
    
    $
    9,823
    
    
    $
    (5,261
    )
    
    $
    4,442
 25




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedSummary of Operations:Net sales
    
    $
    
    
    
    $
    233,015
    
    
    $
    62,253
    
    
    $
    (532
    )
    
    $
    294,736Cost of sales
    
    
    
    
    
    
    226,235
    
    
    
    53,185
    
    
    
    (421
    )
    
    
    278,999Equity in subsidiaries
    
    
    (1,251
    )
    
    
    
    
    
    
    
    
    
    
    1,251
    
    
    
    Selling, general and administrative expenses
    
    
    190
    
    
    
    16,239
    
    
    
    3,573
    
    
    
    (153
    )
    
    
    19,849Provision (benefit) for bad debts
    
    
    
    
    
    
    1,074
    
    
    
    (15
    )
    
    
    
    
    
    
    1,059Other operating (income) expense, net
    
    
    (15
    )
    
    
    (5,222
    )
    
    
    (361
    )
    
    
    (175
    )
    
    
    (5,773
    )Non-operating (income) expenses:Interest income
    
    
    (46
    )
    
    
    (48
    )
    
    
    (1,499
    )
    
    
    
    
    
    
    (1,593
    )Interest expense
    
    
    11,646
    
    
    
    62
    
    
    
    5
    
    
    
    
    
    
    
    11,713Equity in (earnings) losses of unconsolidated affiliates
    
    
    
    
    
    
    (4,060
    )
    
    
    1,205
    
    
    
    (789
    )
    
    
    (3,644
    )Write down of investment in unconsolidated affiliate
    
    
    
    
    
    
    483
    
    
    
    1,000
    
    
    
    
    
    
    
    1,483Income (loss) from continuing operations before income
taxes
    
    
    (10,524
    )
    
    
    (1,748
    )
    
    
    5,160
    
    
    
    (245
    )
    
    
    (7,357
    )Provision (benefit) for income taxes
    
    
    (780
    )
    
    
    802
    
    
    
    2,477
    
    
    
    
    
    
    
    2,499Income (loss) from continuing operations
    
    
    (9,744
    )
    
    
    (2,550
    )
    
    
    2,683
    
    
    
    (245
    )
    
    
    (9,856
    )Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    112Net income (loss)
    
    $
    (9,744
    )
    
    $
    (2,550
    )
    
    $
    2,795
    
    
    $
    (245
    )
    
    $
    (9,744
    )
 26




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net cash provided by (used in) continuing operating
activities
    
    $
    5,873
    
    
    $
    331
    
    
    $
    12,579
    
    
    $
    (42
    )
    
    $
    18,741Investing activities:Capital expenditures
    
    
    (12
    )
    
    
    (4,036
    )
    
    
    (917
    )
    
    
    
    
    
    
    (4,965
    )Acquisition
    
    
    
    
    
    
    
    
    
    
    (550
    )
    
    
    
    
    
    
    (550
    )Change in restricted cash
    
    
    
    
    
    
    
    
    
    
    4,158
    
    
    
    
    
    
    
    4,158Proceeds from sale of capital assets
    
    
    
    
    
    
    1,251
    
    
    
    107
    
    
    
    
    
    
    
    1,358Other
    
    
    
    
    
    
    
    
    
    
    (79
    )
    
    
    
    
    
    
    (79
    )Net cash provided by (used in) investing activities
    
    
    (12
    )
    
    
    (2,785
    )
    
    
    2,719
    
    
    
    
    
    
    
    (78
    )Financing activities:Payments of long-term debt
    
    
    (435
    )
    
    
    
    
    
    
    (4,159
    )
    
    
    
    
    
    
    (4,594
    )Purchase and retirement of Company stock
    
    
    (4,995
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,995
    )Net cash provided by (used in) financing activities
    
    
    (5,430
    )
    
    
    
    
    
    
    (4,159
    )
    
    
    
    
    
    
    (9,589
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    2,667
    
    
    
    42
    
    
    
    2,709Net increase in cash and cash equivalents
    
    
    431
    
    
    
    (2,454
    )
    
    
    13,806
    
    
    
    
    
    
    
    11,783Cash and cash equivalents at beginning of period
    
    
    11,509
    
    
    
    (812
    )
    
    
    31,962
    
    
    
    
    
    
    
    42,659Cash and cash equivalents at end of period
    
    $
    11,940
    
    
    $
    (3,266
    )
    
    $
    45,768
    
    
    $
    
    
    
    $
    54,442
 27




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net cash provided by (used in) continuing operating
activities
    
    $
    4,642
    
    
    $
    (11,129
    )
    
    $
    (1,316
    )
    
    $
    (149
    )
    
    $
    (7,952
    )Investing activities:Capital expenditures
    
    
    (68
    )
    
    
    (6,742
    )
    
    
    (1,769
    )
    
    
    750
    
    
    
    (7,829
    )Acquisition
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    (500
    )Change in restricted cash
    
    
    
    
    
    
    7,140
    
    
    
    2,978
    
    
    
    
    
    
    
    10,118Proceeds from sale of capital assets
    
    
    
    
    
    
    7,658
    
    
    
    42
    
    
    
    (750
    )
    
    
    6,950Reclassification of investment to foreign guarantor
    
    
    (4,781
    )
    
    
    
    
    
    
    4,781
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    (4,849
    )
    
    
    7,556
    
    
    
    6,032
    
    
    
    
    
    
    
    8,739Financing activities:Borrowings of long-term debt
    
    
    14,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,600Payments of long-term debt
    
    
    (17,600
    )
    
    
    
    
    
    
    (2,978
    )
    
    
    
    
    
    
    (20,578
    )Proceeds from stock exercises
    
    
    3,830
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,830Other
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    37Net cash provided by (used in) financing activities
    
    
    830
    
    
    
    37
    
    
    
    (2,978
    )
    
    
    
    
    
    
    (2,111
    )Cash flows of discontinued operations:Operating cash flow
    
    
    
    
    
    
    
    
    
    
    (162
    )
    
    
    
    
    
    
    (162
    )Net cash used in discontinued operations
    
    
    
    
    
    
    
    
    
    
    (162
    )
    
    
    
    
    
    
    (162
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (6,292
    )
    
    
    149
    
    
    
    (6,143
    )Net increase (decrease) in cash and cash equivalents
    
    
    623
    
    
    
    (3,536
    )
    
    
    (4,716
    )
    
    
    
    
    
    
    (7,629
    )Cash and cash equivalents at beginning of period
    
    
    689
    
    
    
    3,377
    
    
    
    16,182
    
    
    
    
    
    
    
    20,248Cash and cash equivalents at end of period
    
    $
    1,312
    
    
    $
    (159
    )
    
    $
    11,466
    
    
    $
    
    
    
    $
    12,619
 28




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Business Overview
  Polyester Segment.
 Nylon Segment.
 Recent Developments and Outlook
    29




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##### Table of Contents



®
   Key Performance Indicators
  
    
    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, non-cash compensation
expense net of distributions, gains and losses on sales of property, plant and
equipment, currency and hedging gains and losses, and gain and loss on extinguishment of
debt, as revised from time to time, which the Company believes is a supplemental measure
of its 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.
 30




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##### Table of Contents



Corporate Restructuring
 Severance
  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.
  Balance at
    

    


    
    
    
    
    
    
    
    
    
    

    Balance atJune 28, 2009
    

    Charges

    
    
    Adjustments

    
    
    Amounts Used
    
    December 27, 2009Accrued severance
    
    $
    1,687
    (1)

    
    
    
    
    20
    
    
    
    (730
    )
    
    $
    977
 
 (1)
    
    As of June 28, 2009, the Company classified $0.3 million of executive severance as long-term. Joint Ventures and Other Equity Investments
  Affiliate Name
    
    Date Acquired
    
    Location
    
    Percent OwnershipParkdale 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, Peoples Republic of China
    
    
    50
    %
 
 (1)
    
    The Company completed the sale of YUFI during the fourth quarter of fiscal year 2009. 31




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##### Table of Contents



As of December 27, 2009UNFPAL
    
    UNF
    
    America
    
    TotalCurrent assets
    
    
    
    
    
    $
    161,559
    
    
    $
    4,935
    
    
    $
    1,037
    
    
    $
    167,531Noncurrent assets
    
    
    
    
    
    
    110,300
    
    
    
    1,866
    
    
    
    744
    
    
    
    112,910Current liabilities
    
    
    
    
    
    
    30,544
    
    
    
    1,565
    
    
    
    51
    
    
    
    32,160Noncurrent liabilities
    
    
    
    
    
    
    13,697
    
    
    
    
    
    
    
    1,548
    
    
    
    15,245Shareholders equity and capital accounts
    
    
    
    
    
    
    227,618
    
    
    
    5,236
    
    
    
    182
    
    
    
    233,036As of June 28, 2009UNFPAL
    
    UNF
    
    America
    
    TotalCurrent assets
    
    
    
    
    
    $
    149,959
    
    
    $
    2,329
    
    
    
    
    
    
    $
    152,288Noncurrent assets
    
    
    
    
    
    
    98,460
    
    
    
    3,433
    
    
    
    
    
    
    
    101,893Current liabilities
    
    
    
    
    
    
    21,754
    
    
    
    1,080
    
    
    
    
    
    
    
    22,834Noncurrent liabilities
    
    
    
    
    
    
    4,294
    
    
    
    
    
    
    
    
    
    
    
    4,294Shareholders equity and capital accounts
    
    
    
    
    
    
    222,371
    
    
    
    4,682
    
    
    
    
    
    
    
    227,053For the Quarter Ended December 27, 2009UNFYUFI (1)
    
    PAL
    
    UNF
    

America
    
    TotalNet sales
    
    
    
    
    
    $
    112,827
    
    
    $
    4,132
    
    
    $
    807
    
    
    $
    117,766Gross profit
    
    
    
    
    
    
    15,648
    
    
    
    472
    
    
    
    174
    
    
    
    16,294Depreciation and amortization
    
    
    
    
    
    
    6,180
    
    
    
    435
    
    
    
    6
    
    
    
    6,621Income from operations
    
    
    
    
    
    
    12,015
    
    
    
    129
    
    
    
    133
    
    
    
    12,277Net income
    
    
    
    
    
    
    10,745
    
    
    
    199
    
    
    
    83
    
    
    
    11,027For the Six-Months Ended December 27, 2009UNFYUFI
    
    PAL
    
    UNF
    

America
    
    TotalNet sales
    
    
    
    
    
    $
    207,697
    
    
    $
    8,708
    
    
    $
    807
    
    
    $
    217,212Gross profit
    
    
    
    
    
    
    23,331
    
    
    
    1,198
    
    
    
    174
    
    
    
    24,703Depreciation and amortization
    
    
    
    
    
    
    10,732
    
    
    
    909
    
    
    
    6
    
    
    
    11,647Income from operations
    
    
    
    
    
    
    16,785
    
    
    
    524
    
    
    
    133
    
    
    
    17,442Net income
    
    
    
    
    
    
    17,662
    
    
    
    554
    
    
    
    83
    
    
    
    18,299For the Quarter Ended December 28, 2008UNFYUFI
    
    PAL
    
    UNF
    
    America
    
    TotalNet sales
    
    $
    30,950
    
    
    $
    97,194
    
    
    $
    6,543
    
    
    
    
    
    
    $
    134,687Gross profit (loss)
    
    
    (1,528
    )
    
    
    5,825
    
    
    
    (877
    )
    
    
    
    
    
    
    3,420Depreciation and amortization
    
    
    1,325
    
    
    
    5,447
    
    
    
    474
    
    
    
    
    
    
    
    7,246Income (loss) from operations
    
    
    (2,783
    )
    
    
    2,546
    
    
    
    (1,374
    )
    
    
    
    
    
    
    (1,611
    )Net income (loss)
    
    
    (2,949
    )
    
    
    1,794
    
    
    
    (1,268
    )
    
    
    
    
    
    
    (2,423
    )
 32




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##### Table of Contents



For the Six-Months Ended December 28, 2008UNFYUFI
    
    
    PAL
    
    
    UNF
    
    
    America
    
    
    TotalNet sales
    
    $
    70,830
    
    
    $
    219,278
    
    
    $
    12,435
    
    
    
    
    
    
    $
    302,543Gross profit (loss)
    
    
    (3,575
    )
    
    
    12,072
    
    
    
    (1,667
    )
    
    
    
    
    
    
    6,830Depreciation and amortization
    
    
    2,720
    
    
    
    9,904
    
    
    
    948
    
    
    
    
    
    
    
    13,572Income (loss) from operations
    
    
    (6,939
    )
    
    
    6,024
    
    
    
    (2,625
    )
    
    
    
    
    
    
    (3,540
    )Net income (loss)
    
    
    (7,566
    )
    
    
    11,940
    
    
    
    (2,411
    )
    
    
    
    
    
    
    1,963
     33




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##### Table of Contents



34




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##### Table of Contents



Review of Second Quarter Fiscal Year 2010 compared to Second Quarter Fiscal Year 2009
  For the Quarters EndedDecember 27, 2009
    
    
    December 28, 2008% to Total
    
    
    
    
    
    
    % to Total
    
    
    % ChangeNet salesPolyester
    
    $
    104,303
    
    
    
    73.3
    
    
    $
    93,984
    
    
    
    74.8
    
    
    
    11.0Nylon
    
    
    37,952
    
    
    
    26.7
    
    
    
    31,743
    
    
    
    25.2
    
    
    
    19.6Total
    
    $
    142,255
    
    
    
    100.0
    
    
    $
    125,727
    
    
    
    100.0
    
    
    
    13.1
 % to Sales
    
    
    
    
    
    
    % to SalesGross profitPolyester
    
    $
    12,498
    
    
    
    8.8
    
    
    $
    559
    
    
    
    0.4
    
    
    
    2,135.8Nylon
    
    
    4,838
    
    
    
    3.4
    
    
    
    1,753
    
    
    
    1.4
    
    
    
    176.0Total
    
    
    17,336
    
    
    
    12.2
    
    
    
    2,312
    
    
    
    1.8
    
    
    
    649.8Write down of long-lived assets and
investment in unconsolidated
affiliatePolyester
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nylon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    
    
    
    
    
    
    
    
    1,483
    
    
    
    1.1
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    1,483
    
    
    
    1.1
    
    
    
    Selling, general and administrative
expensesPolyester
    
    
    9,574
    
    
    
    6.7
    
    
    
    7,294
    
    
    
    5.8
    
    
    
    31.3Nylon
    
    
    2,578
    
    
    
    1.8
    
    
    
    2,010
    
    
    
    1.6
    
    
    
    28.3Total
    
    
    12,152
    
    
    
    8.5
    
    
    
    9,304
    
    
    
    7.4
    
    
    
    30.6Provision (benefit) for bad debts
    
    
    (564
    )
    
    
    (0.4
    )
    
    
    501
    
    
    
    0.4
    
    
    
    (212.6
    )Other operating (income) expense, net
    
    
    (109
    )
    
    
    
    
    
    
    (5,212
    )
    
    
    (4.1
    )
    
    
    (97.9
    )Non-operating (income) expense, net
    
    
    2,780
    
    
    
    1.9
    
    
    
    4,906
    
    
    
    3.9
    
    
    
    (43.3
    )Income (loss) from continuing
operations before income taxes
    
    
    3,077
    
    
    
    2.2
    
    
    
    (8,670
    )
    
    
    (6.9
    )
    
    
    (135.5
    )Provision for income taxes
    
    
    1,124
    
    
    
    0.8
    
    
    
    614
    
    
    
    0.5
    
    
    
    83.1Income (loss) from continuing
operations
    
    
    1,953
    
    
    
    1.4
    
    
    
    (9,284
    )
    
    
    (7.4
    )
    
    
    (121.0
    )Income from discontinued
operations, net of tax
    
    
    
    
    
    
    
    
    
    
    216
    
    
    
    0.2
    
    
    
    Net income (loss)
    
    $
    1,953
    
    
    
    1.4
    
    
    $
    (9,068
    )
    
    
    (7.2
    )
    
    
    (121.5
    )
  35




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##### Table of Contents



Selling, General, and Administrative Expenses
  Other Operating (Income) Expense, Net
  For the Quarters EndedDecember 27,
    
    
    December 28,2009
    
    
    2008(Gain) loss on sale of fixed assets
    
    $
    37
    
    
    $
    (5,594
    )Currency (gains) losses
    
    
    (133
    )
    
    
    380Other, net
    
    
    (13
    )
    
    
    2Other operating (income) expense, net
    
    $
    (109
    )
    
    $
    (5,212
    )
 Income Taxes
  36




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Polyester Operations
      37




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Nylon Operations
    Corporate
  38




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39




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Review of Year-To-Date Fiscal Year 2010 compared to Year-To-Date Fiscal Year 2009
  For the Six-Months EndedDecember 27, 2009
    
    
    December 28, 2008% to Total
    
    
    
    
    
    % to Total
    
    % ChangeNet salesPolyester
    
    $
    208,763
    
    
    
    73.2
    
    
    $
    216,963
    
    
    
    73.6
    
    
    
    (3.8
    )Nylon
    
    
    76,343
    
    
    
    26.8
    
    
    
    77,773
    
    
    
    26.4
    
    
    
    (1.8
    )Total
    
    $
    285,106
    
    
    
    100.0
    
    
    $
    294,736
    
    
    
    100.0
    
    
    
    (3.3
    )% to Sales
    
    
    
    
    
    % to SalesGross profitPolyester
    
    $
    26,301
    
    
    
    9.2
    
    
    $
    8,729
    
    
    
    2.9
    
    
    
    201.3Nylon
    
    
    10,441
    
    
    
    3.7
    
    
    
    7,008
    
    
    
    2.4
    
    
    
    49.0Total
    
    
    36,742
    
    
    
    12.9
    
    
    
    15,737
    
    
    
    5.3
    
    
    
    133.5Write down of long-lived assets and
investment in unconsolidated
affiliatePolyester
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nylon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    
    
    
    
    
    
    
    
    1,483
    
    
    
    0.5
    
    
    
    Total
    
    
    100
    
    
    
    
    
    
    
    1,483
    
    
    
    0.5
    
    
    
    (93.5
    )Selling, general and administrative
expensesPolyester
    
    
    18,406
    
    
    
    6.5
    
    
    
    15,654
    
    
    
    5.3
    
    
    
    17.6Nylon
    
    
    4,910
    
    
    
    1.7
    
    
    
    4,195
    
    
    
    1.4
    
    
    
    17.0Total
    
    
    23,316
    
    
    
    8.2
    
    
    
    19,849
    
    
    
    6.7
    
    
    
    17.5Provision for bad debts
    
    
    12
    
    
    
    
    
    
    
    1,059
    
    
    
    0.4
    
    
    
    (98.9
    )Other operating (income) expense, net
    
    
    (196
    )
    
    
    (0.1
    )
    
    
    (5,773
    )
    
    
    (2.0
    )
    
    
    (96.6
    )Non-operating (income) expense, net
    
    
    5,409
    
    
    
    1.9
    
    
    
    6,476
    
    
    
    2.2
    
    
    
    (16.5
    )Income (loss) from continuing
operations before income taxes
    
    
    8,101
    
    
    
    2.9
    
    
    
    (7,357
    )
    
    
    (2.5
    )
    
    
    (210.1
    )Provision for income taxes
    
    
    3,659
    
    
    
    1.3
    
    
    
    2,499
    
    
    
    0.8
    
    
    
    46.4Income (loss) from continuing
operations
    
    
    4,442
    
    
    
    1.6
    
    
    
    (9,856
    )
    
    
    (3.3
    )
    
    
    (145.1
    )Income from discontinued
operations, net of tax
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    4,442
    
    
    
    1.6
    
    
    $
    (9,744
    )
    
    
    (3.3
    )
    
    
    (145.6
    )
  40




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Selling, General, and Administrative Expenses
  Other Operating (Income) Expense, Net
  For the Six-Months EndedDecember 27,
    
    
    December 28,2009
    
    
    2008Gain on sale of fixed assets
    
    $
    (57
    )
    
    $
    (5,910
    )Currency (gains) losses
    
    
    (120
    )
    
    
    77Other, net
    
    
    (19
    )
    
    
    60Other operating (income) expense, net
    
    $
    (196
    )
    
    $
    (5,773
    )
 Income Taxes
  41




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Polyester Operations
      42




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Nylon Operations
    Corporate
  43




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Liquidity and Capital Resources
 Liquidity Assessment
   
    
    Capital Expenditures. During the first six months of fiscal year 2010, the Company
spent $5.0 million on capital expenditures compared to $7.8 million during the same
period in fiscal year 2009. The Company estimates its fiscal year 2010 capital
expenditures will be within a range of $9.0 million to $11.0 million excluding 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 December 27, 2009, 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, and the Company may incur additional capital
expenditures from time to time as it pursues new opportunities for further cost
reductions.
    
    Joint Venture Investments. During the first six 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.
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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.
 
    
    Investments.The Companys management decided that a fundamental change in its
approach was required to maximize its earnings and growth opportunities in the Chinese
market. Accordingly, the Company formed UTSC, a wholly-owned subsidiary based in Suzhou,
China, that is dedicated to the development, sales and service of PVA yarns. UTSC
obtained its business license in the second quarter of fiscal year 2009, was capitalized
during the third quarter of fiscal year 2009 with $3.3 million of registered capital and
became operational at the end of the third quarter of fiscal year 2009.The Company is executing its plans to establish a wholly-owned base of operations in
Central America. The total investment in the initial stages is expected to be $10.0
million or less. The Company expects to commence operations during the third quarter of
fiscal year 2010 and be fully operational by September 2010.During the second quarter of fiscal year 2010, PAL purchased most of the spun cotton yarn
manufacturing operations of HBI. In addition, PAL entered into a supply agreement with HBI
whereby PAL will supply a substantial amount of HBIs yarn demand in the western
hemisphere. The funding of the initial purchase and the required working capital to
operate these additional facilities will likely reduce future dividends paid from PAL to
the Company. The Company expects this agreement will substantially improve the financial
performance of the joint venture and ultimately the fair value of its investment.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 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 December 27, 2009,
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.
 Cash Provided by Continuing Operations
  For the Six-Months EndedDecember 27, 2009
    
    
    December 28, 2008(Amounts in millions)Cash provided by continuing operationsCash Receipts:Receipts from customers
    
    $
    296.0
    
    
    $
    323.1Dividends from unconsolidated affiliates
    
    
    1.6
    
    
    
    2.1Cash Payments:Payments to suppliers and other operating cost
    
    
    214.6
    
    
    
    260.3Payments for salaries, wages, and benefits
    
    
    50.9
    
    
    
    56.8Payments for interest, net
    
    
    8.6
    
    
    
    9.6Payments for restructuring and severance
    
    
    0.7
    
    
    
    2.3Payments for taxes
    
    
    4.0
    
    
    
    2.9Effects of foreign currency on net income
    
    
    0.1
    
    
    
    1.3Cash
provided by (used in) continuing
operations
    
    $
    18.7
    
    
    $
    (8.0
    )
 45




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Cash Used In Investing Activities and Financing Activities
   46




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Other Factors Affecting Liquidity
 Asset Sales.
 Note Repurchases from Sources Other than Sales of Collateral and Non-Collateral.
  Stock
Repurchases
 Environmental Liabilities
 47




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Market Conditions.
 Long-Term Debt
    48




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49




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Recent Accounting Pronouncements
   Off Balance Sheet Arrangements
  50




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Forward-Looking Statements
  
    
    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.
  51




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Interest Rate Risk:
 Currency Exchange Rate Risk:
     
    
    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.
 52




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##### Table of Contents



December 27,
    
    
    June 28,2009
    
    
    2009Foreign currency purchase contracts:
    
    Level 2
    
    Level 2Notional amount
    
    $
    
    
    
    $
    110Fair value
    
    
    
    
    
    
    130Net gain
    
    $
    
    
    
    $
    (20
    )Foreign currency sales contracts:Notional amount
    
    $
    1,783
    
    
    $
    1,121Fair value
    
    
    1,828
    
    
    
    1,167Net loss
    
    $
    (45
    )
    
    $
    (46
    )
  Inflation and Other Risks:
 
    53




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Total Number of
    
    
    Maximum NumberTotal Number
    
    
    Average Price
    
    
    Shares Purchased as
    
    
    of Shares that Mayof
    
    
    Paid
    
    
    Part of Publicly
    
    
    Yet Be PurchasedShares
    
    
    per
    
    
    Announced Plans
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    Programs9/28/09  10/27/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,807,24110/28/09  11/27/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,807,24111/28/09  12/27/09
    
    
    1,885,000
    
    
    $
    2.65
    
    
    
    
    
    
    
    6,807,241Total
    
    
    1,885,000
    
    
    $
    2.65
    
    
    
    
  Stock Repurchases
 
   54




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Votes
    
    VotesName of Director
    
    in Favor
    
    WithheldWilliam J. Armfield, IV
    
    
    51,766,272
    
    
    
    1,363,662R. Roger Berrier, Jr.
    
    
    52,163,220
    
    
    
    966,714Archibald Cox, Jr.
    
    
    52,245,238
    
    
    
    884,696William L. Jasper
    
    
    52,166,091
    
    
    
    963,843Kenneth G. Langone
    
    
    52,211,652
    
    
    
    918,282Chiu Cheng Anthony Loo
    
    
    52,227,165
    
    
    
    902,769George R. Perkins, Jr.
    
    
    52,249,886
    
    
    
    880,048William M. Sams
    
    
    52,204,050
    
    
    
    925,884Michael Sileck
    
    
    52,231,424
    
    
    
    898,510G. Alfred Webster
    
    
    51,646,333
    
    
    
    1,483,601Stephen Wener
    
    
    52,227,650
    
    
    
    902,284
 
   
  10.1
    
    Yarn Purchase Agreement between
Unifi Manufacturing, Inc. and Hanesbrands, Inc effective November 6, 2009
filed herewith in redacted form as confidential treatment has been requested pursuant to Rule
24b-2 for certain portions thereof.10.2
    
    Second Amendment to Sales and Service Agreement between Unifi, Inc. and Dillon Yarn
Corporation, effective January 1, 2010 (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K (Reg. No. 001-10542) dated December 11, 2009).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.
 55




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UNIFI, INC.Date: February 5, 2010
    /s/    RONALD L. SMITHRonald L. SmithVice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer and Duly Authorized 
Officer) 56