##### 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 March 29, 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
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



INDEX
 PagePart I
    
    Item 1.
    
    Financial Statements:Financial 
Information
    
    
    
    Condensed Consolidated Balance Sheets as of
March 29, 2009 and June 29, 2008
    
    
    3Condensed Consolidated Statements of Operations
for the Quarters and Nine-Months Ended March 29, 2009
and March 23, 2008
    
    
    4Condensed Consolidated Statements of Cash Flows
for the Nine-Months Ended March 29, 2009 and
March 23, 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    27Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    51Item 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
    
    
    55Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    55Item 5.
    
    Other Information
    
    
    55Item 6.
    
    Exhibits
    
    
    55EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



March 29,
    
    
    June 29,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    23,544
    
    
    $
    20,248Receivables, net
    
    
    71,498
    
    
    
    103,272Inventories
    
    
    101,583
    
    
    
    122,890Deferred income taxes
    
    
    1,474
    
    
    
    2,357Assets held for sale
    
    
    1,700
    
    
    
    4,124Investment in unconsolidated affiliate
    
    
    9,000
    
    
    
    Restricted cash
    
    
    14,585
    
    
    
    9,314Other current assets
    
    
    4,946
    
    
    
    3,693Total current assets
    
    
    228,330
    
    
    
    265,898Property, plant and equipment
    
    
    770,494
    
    
    
    855,324Less accumulated depreciation
    
    
    (611,192
    )
    
    
    (678,025
    )159,302
    
    
    
    177,299Investments in unconsolidated affiliates
    
    
    62,067
    
    
    
    70,562Restricted cash
    
    
    1,394
    
    
    
    26,048Goodwill
    
    
    
    
    
    
    18,579Intangible assets, net
    
    
    18,465
    
    
    
    20,386Other noncurrent assets
    
    
    13,737
    
    
    
    12,759Total assets
    
    $
    483,295
    
    
    $
    591,531LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    24,904
    
    
    $
    44,553Accrued expenses
    
    
    20,361
    
    
    
    25,531Income taxes payable
    
    
    7
    
    
    
    681Current maturities of long-term debt and other
current liabilities
    
    
    6,119
    
    
    
    9,805Total current liabilities
    
    
    51,391
    
    
    
    80,570Long-term debt and other liabilities
    
    
    193,389
    
    
    
    204,366Deferred income taxes
    
    
    413
    
    
    
    926Commitments and contingenciesShareholders equity:Common stock
    
    
    6,206
    
    
    
    6,069Capital in excess of par value
    
    
    29,858
    
    
    
    25,131Retained earnings
    
    
    211,754
    
    
    
    254,494Accumulated other comprehensive income (loss)
    
    
    (9,716
    )
    
    
    19,975238,102
    
    
    
    305,669Total liabilities and shareholders equity
    
    $
    483,295
    
    
    $
    591,531
  3




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##### Table of Contents



For the Quarters Ended
    
    
    For the Nine-Months EndedMarch 29,
    
    
    March 23,
    
    
    March 29,
    
    
    March 23,2009
    
    
    2008
    
    
    2009
    
    
    2008Summary of Operations:Net sales
    
    $
    119,094
    
    
    $
    169,836
    
    
    $
    413,830
    
    
    $
    523,741Cost of sales
    
    
    118,722
    
    
    
    156,404
    
    
    
    397,721
    
    
    
    490,996Restructuring charges (recoveries)
    
    
    293
    
    
    
    (2,199
    )
    
    
    293
    
    
    
    4,638Write down of long-lived assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,780Goodwill impairment
    
    
    18,580
    
    
    
    
    
    
    
    18,580
    
    
    
    Selling, general & administrative expenses
    
    
    9,507
    
    
    
    10,080
    
    
    
    29,356
    
    
    
    36,542Provision for bad debts
    
    
    735
    
    
    
    87
    
    
    
    1,794
    
    
    
    152Other operating (income) expense, net
    
    
    (89
    )
    
    
    (897
    )
    
    
    (5,862
    )
    
    
    (4,087
    )Non-operating (income) expense:Interest income
    
    
    (656
    )
    
    
    (651
    )
    
    
    (2,249
    )
    
    
    (2,231
    )Interest expense
    
    
    5,879
    
    
    
    6,308
    
    
    
    17,592
    
    
    
    19,598Equity in earnings of unconsolidated
affiliates
    
    
    (825
    )
    
    
    (757
    )
    
    
    (4,469
    )
    
    
    (914
    )Write down
of investment in unconsolidated affiliates
    
    
    
    
    
    
    
    
    
    
    1,483
    
    
    
    4,505Income (loss) from continuing operations
before income taxes
    
    
    (33,052
    )
    
    
    1,461
    
    
    
    (40,409
    )
    
    
    (28,238
    )Provision (benefit) from income taxes
    
    
    (101
    )
    
    
    1,394
    
    
    
    2,398
    
    
    
    (11,294
    )Income (loss) from continuing operations
    
    
    (32,951
    )
    
    
    67
    
    
    
    (42,807
    )
    
    
    (16,944
    )Income (loss) from discontinued
operations 
net of tax
    
    
    (45
    )
    
    
    (55
    )
    
    
    67
    
    
    
    22Net income (loss)
    
    $
    (32,996
    )
    
    $
    12
    
    
    $
    (42,740
    )
    
    $
    (16,922
    )Losses per common share (basic and
diluted):Income (loss)  continuing operations
    
    $
    (.53
    )
    
    $
    
    
    
    $
    (.69
    )
    
    $
    (.28
    )Income (loss)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)  basic and diluted
    
    $
    (.53
    )
    
    $
    
    
    
    $
    (.69
    )
    
    $
    (.28
    )Weighted average outstanding shares of
common stock (basic and diluted)
    
    
    62,057
    
    
    
    60,589
    
    
    
    61,740
    
    
    
    60,560
  4




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##### Table of Contents



For the Nine-Months EndedMarch 29,
    
    
    March 23,2009
    
    
    2008Cash and cash equivalents at beginning of year
    
    $
    20,248
    
    
    $
    40,031Operating activities:Net loss
    
    
    (42,740
    )
    
    
    (16,922
    )Adjustments to reconcile net loss to net cash provided by (used in)
continuing operating activities:Income from discontinued operations
    
    
    (67
    )
    
    
    (22
    )Earnings of unconsolidated equity affiliates, net of distributions
    
    
    (1,585
    )
    
    
    262Depreciation
    
    
    21,954
    
    
    
    27,568Amortization
    
    
    3,289
    
    
    
    3,486Stock-based compensation expense
    
    
    1,033
    
    
    
    724Deferred compensation recovery, net
    
    
    (50
    )
    
    
    (170
    )Net gain on asset sales
    
    
    (5,865
    )
    
    
    (1,872
    )Non-cash effect of goodwill impairment
    
    
    18,580
    
    
    
    Non-cash write down of long-lived assets
    
    
    
    
    
    
    2,780Non-cash write down of investment in unconsolidated affiliate
    
    
    1,483
    
    
    
    4,505Non-cash portion of restructuring charges
    
    
    293
    
    
    
    4,638Deferred income tax benefit
    
    
    (77
    )
    
    
    (14,951
    )Provision for bad debts
    
    
    1,794
    
    
    
    152Other
    
    
    306
    
    
    
    (263
    )Change in assets and liabilities, excluding effects of
acquisitions and foreign currency adjustments
    
    
    6,258
    
    
    
    (11,338
    )Net cash
provided by (used in) continuing operating activities
    
    
    4,606
    
    
    
    (1,423
    )Investing activities:Capital expenditures
    
    
    (10,918
    )
    
    
    (7,310
    )Acquisition
    
    
    (500
    )
    
    
    Change in restricted cash
    
    
    14,035
    
    
    
    (12,338
    )Proceeds from sale of capital assets
    
    
    6,959
    
    
    
    15,797Proceeds from sale of equity affiliate
    
    
    
    
    
    
    8,750Collection of notes receivable
    
    
    1
    
    
    
    269Split dollar life insurance premiums
    
    
    (217
    )
    
    
    (217
    )Other
    
    
    
    
    
    
    (793
    )Net cash provided by investing activities
    
    
    9,360
    
    
    
    4,158Financing activities:Borrowings of long-term debt
    
    
    14,600
    
    
    
    Payments of
long-term debt
    
    
    (22,199
    )
    
    
    (16,000
    )Proceeds from stock option exercises
    
    
    3,830
    
    
    
    Other
    
    
    (343
    )
    
    
    (2,142
    )Net cash used in financing activities
    
    
    (4,112
    )
    
    
    (18,142
    )Cash flows of discontinued operations  operating cash flow
    
    
    (308
    )
    
    
    (230
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (6,250
    )
    
    
    1,793Net increase (decrease) in cash and cash equivalents
    
    
    3,296
    
    
    
    (13,844
    )Cash and cash equivalents at end of period
    
    $
    23,544
    
    
    $
    26,187
  5




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##### Table of Contents



1.
    
    Basis of PresentationThe Condensed Consolidated Balance Sheet of Unifi, Inc. (the Company) at June 29, 2008 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 generally accepted accounting principles
(U.S. GAAP) for complete financial statements. Except as noted with respect to the balance
sheet at June 29, 2008, this information is unaudited and reflects all adjustments which are, in
the opinion of management, necessary to present fairly the financial position at March 29, 2009,
and the results of operations and cash flows for the periods ended March 29, 2009 and March 23,
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 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 Form 10-K
for the fiscal year ended June 29, 2008. 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 65 to 71 of
the Companys Annual Report on 
Form 10-K for the fiscal year ended June 29, 2008.2.
    
    InventoriesInventories are comprised of the following (amounts in thousands):
 March 29,
    
    
    June 29,2009
    
    
    2008Raw materials and supplies
    
    $
    41,164
    
    
    $
    51,407Work in process
    
    
    6,274
    
    
    
    7,021Finished goods
    
    
    54,145
    
    
    
    64,462$
    101,583
    
    
    $
    122,890
 3.
    
    Accrued ExpensesAccrued expenses are comprised of the following (amounts in thousands):
 March 29,
    
    
    June 29,2009
    
    
    2008Payroll and fringe benefits
    
    $
    5,221
    
    
    $
    11,101Severance
    
    
    1,552
    
    
    
    1,935Interest
    
    
    8,188
    
    
    
    2,813Utilities
    
    
    1,626
    
    
    
    3,114Closure reserve
    
    
    619
    
    
    
    1,414Retiree benefits
    
    
    1,566
    
    
    
    1,733Property taxes
    
    
    547
    
    
    
    1,132Other
    
    
    1,042
    
    
    
    2,289$
    20,361
    
    
    $
    25,531
 6




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##### Table of Contents



4.
    
    Other Operating (Income) Expense, NetThe following table summarizes the Companys other operating (income) expense, net (amounts
in thousands):
 For the Quarters Ended
    
    
    For the Nine-Months EndedMarch 29,
    
    
    March 23,
    
    
    March 29,
    
    
    March 23,2009
    
    
    2008
    
    
    2009
    
    
    2008(Gain) loss on sale of fixed assets
    
    $
    44
    
    
    $
    (459
    )
    
    $
    (5,865
    )
    
    $
    (1,872
    )Gain from sale of nitrogen credits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,614
    )Technology
fee from China joint venture
    
    
    
    
    
    
    (187
    )
    
    
    
    
    
    
    (875
    )Currency (gains) losses
    
    
    (100
    )
    
    
    (153
    )
    
    
    (22
    )
    
    
    305Other, net
    
    
    (33
    )
    
    
    (98
    )
    
    
    25
    
    
    
    (31
    )Other operating (income) expense, net
    
    $
    (89
    )
    
    $
    (897
    )
    
    $
    (5,862
    )
    
    $
    (4,087
    )
 5.
    
    Intangible Assets, NetOther 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 twelve year
life and the non-compete agreement is being amortized using the straight-line method over six
years. There are no residual values related to these intangible assets. Accumulated
amortization at March 29, 2009 and June 29, 2008 for these intangible assets was $8.0 million
and $5.6 million, respectively.In addition, the Company allocated $0.5 million to customer relationships arising from a
transaction that closed in the second quarter of fiscal year 2009. This customer list is being
amortized using the straight-line method over a period of one and a half years. Accumulated
amortization at March 29, 2009 was $83 thousand.The intangible assets discussed above all 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 Expenses2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014Customer lists
    
    $
    2,993
    
    
    $
    2,173
    
    
    $
    2,022
    
    
    $
    1,837
    
    
    $
    1,481Non-compete contract
    
    
    571
    
    
    
    571
    
    
    
    571
    
    
    
    571
    
    
    
    286$
    3,564
    
    
    $
    2,744
    
    
    $
    2,593
    
    
    $
    2,408
    
    
    $
    1,767
 6.
    
    Recent Accounting PronouncementsOn December 29, 2008, the Company adopted Statements of Financial Accounting Standard No.
161, Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB
Statement No. 133 (SFAS 161), requiring enhancements to the disclosure requirements for
derivative and hedging activities. The objective of the enhanced disclosure requirement is to
provide the user of financial statements with a clearer understanding of how the entity uses
derivative instruments; how derivatives are accounted for; and how derivatives affect an
entitys financial position, cash flows and performance. The statement applies to all derivative
and hedging instruments. SFAS 161 is effective for all fiscal years and interim periods
beginning after November 15, 2008. The adoption of SFAS 161 did not materially change the
Companys disclosures of derivative and hedging instruments.
 7




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##### Table of Contents



In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair
Value Measurements (SFAS 157). SFAS 157 addresses how companies should measure fair value
when companies are required to use a fair value measure for recognition or disclosure purposes
under generally accepted accounting principles. As a result of SFAS 157 there is now a common
definition of fair value to be used throughout GAAP. The FASB believes that the new standard
will make the measurement of fair value more consistent and comparable and improve disclosures
about those measures. The provisions of SFAS 157 were to be effective for fiscal years beginning
after November 15, 2007. On February 12, 2008, the FASB issued Staff Position (FSP) FAS 157-2
which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). This FSP partially deferred the effective
date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within
those fiscal years for items within the scope of this FSP. Effective for fiscal year 2009, the
Company adopted SFAS 157 except as it applies to those nonfinancial assets and nonfinancial
liabilities as noted in FSP FAS 157-2 and the adoption of this standard did not have a material
effect on its consolidated financial statements.7.
    
    Comprehensive Income (Loss)Comprehensive losses amounted to $32.7 million and $72.4 million for the third quarter and
year-to-date periods of fiscal year 2009, respectively, compared to comprehensive income of $1.3
million and comprehensive loss of $9.1 million for the third quarter and the year-to-date
periods of fiscal year 2008, respectively. Comprehensive losses were comprised of net losses of
$33.0 million and $42.7 million and cumulative translation adjustments of $0.3 million and
$(29.7) million for the third quarter and year-to-date periods of fiscal year 2009,
respectively. Comparatively, comprehensive losses for the corresponding periods in the prior
fiscal year were derived from net income of $12 thousand and net losses of $16.9 million, and
cumulative translation adjustments of $1.3 million and $7.8 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.8.
    
    Investments in Unconsolidated AffiliatesThe following table represents the Companys investments in unconsolidated affiliates:
 Date
    
    
    
    
    
    PercentAffiliate Name
    
    Acquired
    
    Location
    
    OwnershipYihua Unifi Fibre Company Ltd (YUFI) (A)
    
    Aug-05
    
    Yizheng, Jiangsu Province, Peoples Republic of China
    
    
    50
    %Parkdale America, LLC (PAL)
    
    Jun-97
    
    North and South Carolina
    
    
    34
    %Unifi-SANS
Technical Fibers, LLC (USTF) (B)
    
    Sep-00
    
    Stoneville, North Carolina
    
    
    50
    %U.N.F. Industries, LLC (UNF)
    
    Sep-00
    
    Migdal Ha  Emek, Israel
    
    
    50
    %
 
 (A)
    
    The Company completed the sale of YUFI during the fourth quarter of fiscal year 2009.(B)
    
    The Company completed the sale of USTF during the second quarter of fiscal year 2008. 8




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##### Table of Contents



Condensed income statement information for the quarters and nine-months ended March 29, 2009 and
March 23, 2008, of the combined unconsolidated equity affiliates are as follows (amounts in
thousands):
 For the Quarter Ended March 29, 2009YUFI (1)
    
    PAL
    
    UNF
    
    TotalNet sales
    
    
    
    
    
    $
    89,998
    
    
    $
    3,638
    
    
    $
    93,636Gross profit (loss)
    
    
    
    
    
    
    13,439
    
    
    
    (581
    )
    
    
    12,858Depreciation and amortization
    
    
    
    
    
    
    4,573
    
    
    
    474
    
    
    
    5,047Income (loss) from operations
    
    
    
    
    
    
    11,955
    
    
    
    (682
    )
    
    
    11,273Net income (loss)
    
    
    
    
    
    
    3,949
    
    
    
    (624
    )
    
    
    3,325
 For the Nine-Months Ended March 29, 2009YUFI
    
    PAL
    
    UNF
    
    TotalNet sales
    
    
    
    
    
    $
    309,276
    
    
    $
    16,073
    
    
    $
    325,349Gross profit (loss)
    
    
    
    
    
    
    25,510
    
    
    
    (2,247
    )
    
    
    23,263Depreciation and amortization
    
    
    
    
    
    
    14,477
    
    
    
    1,422
    
    
    
    15,899Income (loss) from operations
    
    
    
    
    
    
    17,979
    
    
    
    (3,306
    )
    
    
    14,673Net income (loss)
    
    
    
    
    
    
    15,889
    
    
    
    (3,036
    )
    
    
    12,853
 For the Quarter Ended March 23, 2008YUFI
    
    PAL
    
    UNF
    
    TotalNet sales
    
    $
    30,618
    
    
    $
    116,258
    
    
    $
    6,747
    
    
    $
    153,623Gross profit (loss)
    
    
    (1,800
    )
    
    
    6,251
    
    
    
    (473
    )
    
    
    3,978Depreciation and amortization
    
    
    1,085
    
    
    
    3,850
    
    
    
    474
    
    
    
    5,409Income (loss) from operations
    
    
    (3,275
    )
    
    
    3,242
    
    
    
    (643
    )
    
    
    (676
    )Net income (loss)
    
    
    (3,912
    )
    
    
    7,578
    
    
    
    (562
    )
    
    
    3,104
 For the Nine-Months Ended March 23, 2008USTF (2)
    
    YUFI
    
    PAL
    
    UNF
    
    TotalNet sales
    
    $
    6,455
    
    
    $
    103,738
    
    
    $
    331,797
    
    
    $
    18,577
    
    
    $
    460,567Gross profit (loss)
    
    
    571
    
    
    
    (2,334
    )
    
    
    16,700
    
    
    
    (318
    )
    
    
    14,619Depreciation and amortization
    
    
    578
    
    
    
    3,703
    
    
    
    13,520
    
    
    
    1,264
    
    
    
    19,065Income (loss) from operations
    
    
    188
    
    
    
    (6,903
    )
    
    
    6,832
    
    
    
    (785
    )
    
    
    (668
    )Net income (loss)
    
    
    148
    
    
    
    (8,757
    )
    
    
    12,144
    
    
    
    (649
    )
    
    
    2,886
 
 (1)
    
    The Company completed the sale of its investment in YUFI during the fourth quarter of
fiscal year 2009 and as a result its financial statements were unavailable to the Company
for the quarter ended March 29, 2009. See below and Footnote 12-Impairment Charges and
Footnote 19- Subsequent Events for further discussion.(2)
    
    Sold in the second quarter of fiscal year 2008. On June 10, 2005, the Company and Sinopec Yizheng Chemical Fiber Co., Ltd, (YCFC) entered
into an Equity Joint Venture Contract (the JV Contract), to form YUFI to manufacture, process
and market polyester filament yarn in YCFCs facilities in China. Under the terms of the JV
Contract, each company owned a 50% equity interest in YUFI. The joint venture transaction
closed on August 3, 2005, and accordingly, the Company contributed to YUFI its initial capital
contribution of $15.0 million in cash on August 4, 2005. On October 12, 2005, the Company
transferred an additional $15.0 million to YUFI to complete the capitalization of the joint
venture.In July 2008, the Company reached an agreement in principal with YCFC to sell its 50% ownership
interest in YUFI to YCFC for $10.0 million, pending final negotiation and execution of
definitive agreements. The internal YCFC and external governmental approval process was
expected to take approximately two to three months. In the interim, the partners agreed that
YCFC would immediately take over operating control of YUFI. 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 first quarter of fiscal year 2009
in
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accordance with the authoritative guidance provided by Accounting Principles Board Opinion
18, The Equity Method of Accounting for Investments in Common Stock (APB 18).In December 2008, the Company renegotiated the proposed agreement to sell its interest in YUFI
to YCFC for $9.0 million, pending final approval by the appropriate authorities and execution of
definitive agreements and recorded an additional impairment charge of $1.5 million. See
Footnote 12-Impairment Charges.9.
    
    Income TaxesThe Companys income tax provision for the quarter ended March 29, 2009 resulted in tax benefit
at an effective tax rate of 0.3% as compared to the quarter ended March 23, 2008, which resulted
in tax expense at an effective tax rate of 95.4%. The Companys income tax provision for the
year-to-date period ended March 29, 2009 resulted in tax expense at an effective tax rate of
5.9% compared to the year-to-date period ended March 23, 2008, which resulted in tax benefit at
an effective tax rate of 40.0%. The Companys effective tax rate for the quarter and
year-to-date period ended March 29, 2009 differed from the U.S. statutory rate primarily due to
an increase in valuation allowance related to losses in the U.S. and certain other foreign
countries and state income taxes. The Companys effective tax rate for the quarter ended March
23, 2008 differed from the U.S. statutory rate primarily due to foreign operations taxed at a
lower effective rate, stock based compensation, and an increase in the valuation allowance. The
Companys effective tax rate for the year-to-date period ended March 23, 2008 differed from the
U.S. statutory rate primarily due to foreign operations taxed at a lower effective rate, state
income taxes, and a decrease 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 Company has
continued to record a valuation allowance against its net domestic deferred tax assets, and
certain foreign deferred tax assets related to net operating losses, as those net deferred tax
assets are more likely than not to be unrealizable for income tax purposes. The valuation
allowance increased by $13.1 million and $17.2 million in the quarter and year-to-date period
ended March 29, 2009, respectively, compared to an increase of $0.2 million and a decrease of
$6.7 million in the quarter and year-to-date period ended March 23, 2008, respectively. The net
increase in the valuation allowance for the quarter ended March 29, 2009 primarily consisted of
an increase of $7.0 million for net operating losses generated this quarter (federal and state),
and an increase of $6.1 million related to other temporary differences this quarter. The net
increase in the valuation allowance for the year-to-date period ended March 29, 2009 primarily
consisted of a $10.7 million increase for net operating losses generated year-to-date (federal
and state), and a $6.5 million increase related to other temporary differences.On June 25, 2007, the Company adopted Financial Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes
(FIN 48). During the third quarter ended March 29, 2009, the Company did not have an increase
or decrease in its FIN 48 liability.There was no change in the amount of interest and penalties during the quarter and year-to-date
period ended March 29, 2009 due to the Companys federal and state net operating loss carry
forwards.The Company is subject to income tax examinations for U.S. federal income taxes for fiscal years
2007 and 2008. The IRS recently concluded its exam for fiscal years 2003 through 2006. The
Company is also subject to income tax examinations for non-U.S. income taxes for tax years 2000
through 2008, and for state and local income taxes for fiscal years 2001 through 2008.
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10.
    
    Stock-Based CompensationDuring the second quarter of fiscal year 2008, the Compensation Committee (Committee) of the
Board of Directors (Board) authorized the issuance of 1,570,000 stock options from the 1999
Long-Term Incentive Plan of which 120,000 were issued to certain Board members and the remaining
options were issued to certain key employees. The stock options issued to key employees 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 stock options issued to certain Board members are subject to a similar market
condition in that one half of each members options vest on the date that the closing price of
the Companys common stock shall have been at least $8.00 per share for thirty consecutive
trading days and the remaining one half vest on the date that the closing price of the Companys
common stock shall have been at least $10.00 per share for thirty consecutive trading days. The
Company used a Monte Carlo stock option model to estimate the fair value and the derived vesting
periods which range from 2.4 to 3.9 years.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 Committee of the 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. 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.The Company incurred $0.4 million and $0.3 million in the third quarter of fiscal years
2009 and 2008, and $1.0 million and $0.7 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 1,368,300 shares of common stock during the 2009 fiscal year-to-date period
as a result of the exercise of an equivalent number of stock options for which it received
proceeds of $3.8 million. There were no stock options exercised during the third quarter of
fiscal year 2009. The Company issued 147,500 shares of common stock during the fiscal year
ended June 29, 2008 due to the exercise of stock options for which it received proceeds of $0.4
million.11.
    
    Assets Held for SaleAs of June 29, 2008, the Company had assets held for sale related to the consolidation of its
polyester manufacturing capacity which included the remaining assets and structures at the
Kinston site which have a carrying value of $1.7 million and certain real property and related
assets located in Yadkinville, North Carolina which had a carrying value of $2.4 million.
During the first quarter of fiscal year 2009, the Company reclassified $0.4 million of these
Yadkinville assets back to a held and used status. During the second quarter of fiscal year
2009, the Company transferred $0.6 million of the Yadkinville assets held for sale to its
Brazilian subsidiary.On September 29, 2008, the Company entered into an agreement to sell the remaining Yadkinville
assets held for sale for $7.0 million. On December 19, 2008, the Company completed the sale
which resulted in net proceeds of $6.6 million and a net pre-tax gain of $5.2 million in the
second quarter of fiscal year 2009.
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The following table summarizes by category assets held for sale (amounts in thousands):
 March 29,
    
    
    June 29,2009
    
    
    2008Land and building
    
    
    
    
    
    
    1,378Machinery and equipment
    
    
    1,700
    
    
    
    2,746$
    1,700
    
    
    $
    4,124
 12.
    
    Impairment ChargesWrite down of long-lived assetsDuring the first quarter of fiscal year 2008, the Companys Brazilian polyester operation
continued the modernization plan for its facilities by abandoning four of its older machines and
replacing them with newer machines transferred from the Companys domestic polyester division.
As a result, the Company recognized $0.5 million in non-cash impairment charges on the older
machines.During the second quarter of fiscal year 2008, the Company evaluated the carrying value of the
remaining machinery and equipment at its Dillon, South Carolina facility and determined that a
$1.6 million non-cash impairment charge was required.In addition, the Company negotiated with a third party to sell the manufacturing facility
located in Kinston, North Carolina. As a result of these negotiations, management concluded
that the carrying value of the real estate exceeded its fair value. Accordingly, the Company
recorded $0.7 million in non-cash impairment charges in the second quarter of fiscal year 2008.Write down of investment of unconsolidated affiliatesDuring the first quarter of fiscal year 2008, the Company performed a review of the fair value
of USTF as part of the negotiations related to the sale. The Company determined that the
carrying value exceeded its fair value and recorded a non-cash impairment charge of $4.5
million. The investment was sold in the second quarter of fiscal year 2008.During the second quarter of fiscal year 2009, the Company and YCFC renegotiated the proposed
agreement to sell the Companys interest in YUFI to YCFC from $10.0 million to $9.0 million,
pending final negotiation and execution of definitive agreements and the receipt of Chinese
regulatory approvals. As a result, the Company recorded an additional impairment charge of $1.5
million due to the decline in the value of its investment and other related assets. During the
fourth quarter of fiscal year 2009, the Company completed the sale of YUFI to YCFC with no
further financial impact. See Footnote 19-Subsequent Events for further discussion.Goodwill ImpairmentThe Company accounts for its goodwill and other intangibles under the provisions of SFAS
No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 142 requires that these
assets be reviewed for impairment annually, unless specific circumstances indicate that a more
timely review is warranted. This impairment test involves estimates and judgments that are
critical in determining whether any impairment charge should be recorded and the amount of such
charge if an impairment loss is deemed to be necessary. In accordance with the provisions of
SFAS 142, the Company determined that its reportable segments were comprised of three reporting
units; nylon, domestic polyester, and non-domestic polyester.The Companys balance sheet at December 28, 2008 reflected $18.6 million of goodwill, all of
which related to the acquisition of Dillon Yarn Corporation (Dillon) in January, 2007. The
Company previously determined that all of this goodwill should be allocated to the domestic
polyester reporting unit. Based on a decline in its market capitalization during the third quarter of fiscal year
2009 and difficult market conditions, the Company determined that it was appropriate to
re-evaluate the carrying
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##### Table of Contents



value of its goodwill during the quarter ended March 29, 2009. In
connection with this third quarter interim impairment analysis, the Company updated its cash
flow forecasts based upon the latest market intelligence, its discount rate and its market
capitalization values. The fair value of the domestic polyester reporting unit was determined
based upon a combination of a discounted cash flow analysis and a market approach. As a result
of the findings, the Company determined that the goodwill was impaired and recorded an
impairment charge of $18.6 million in the third quarter of fiscal year 2009.13.
    
    Severance and Restructuring ChargesSeveranceIn the first quarter of fiscal year 2008, the Company announced the closure of its polyester
facility in Kinston, North Carolina. The Kinston facility produced partially oriented yarn
(POY) for internal consumption and third party sales. The Company now purchases its commodity
POY needs from external suppliers for conversion in its texturing operations. The Company
continues to produce POY in its Yadkinville, North Carolina facility for specialty and premier
valued-added (PVA) yarns and certain other commodity yarns. During the first quarter of fiscal
year 2008, the Company recorded $0.8 million for severance related to its Kinston consolidation.
Approximately 231 employees, which included 31 salaried positions and 200 wage positions, were
affected as a result of the reorganization. The severance expense is included in the cost of
sales line item in the Consolidated Statements of Operations.In the second quarter of fiscal year 2008, the Company recorded an additional $0.4 million in
severance costs related to Kinston employees who were associated with providing site services.
These severance expenses are included in the cost of sales line item in the Consolidated
Statements of Operations.The Company recorded severance of $2.4 million for its former President and Chief Executive
Officer during the first quarter of fiscal year 2008 and $1.7 million for severance related to
its former Chief Financial Officer during the second quarter of fiscal year 2008. These
severance expenses are included in the selling, general and administrative expense line item in
the Consolidated Statements of Operations.On May 14, 2008, the Company announced the closure of its polyester facility located in
Staunton, Virginia and the transfer of all its production to its facility in Yadkinville, North
Carolina which was completed in November 2008. During the first quarter of fiscal year 2009,
the Company recorded $0.1 million for severance related to its Staunton consolidation.
Approximately 40 salaried and wage employees were affected by this reorganization. The
severance expenses are included in the cost of sales line item in the Consolidated Statements of
Operations.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 salaried corporate and
manufacturing support staff. The severance expenses are included in the restructuring expense
line item in the Consolidated Statements of Operations.RestructuringIn the first quarter of fiscal year 2008, the Company recorded $1.5 million for restructuring
charges related to unfavorable Kinston contracts for obligations which extended beyond the date
of the facilitys closing. These charges were reduced by $0.5 million in the fourth quarter of
fiscal year 2008 as a result of favorable contract negotiations and settlements. See the
Severance discussion above for further details related to Kinston.In fiscal year 2007, the Company recorded a $2.9 million unfavorable contract reserve
related to a portion of the sales and service contract which it entered into with Dillon for
continued support of the Dillon business through December 2008. A portion of the sales and
service contract was deemed to be
unfavorable, after the Company announced its plan to
consolidate the Dillon capacity into its other facilities.
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Restructuring charges are included in the restructuring expense line item in the
Consolidated Statement of operations for all periods presented.The table below summarizes changes to the accrued severance and accrued restructuring accounts
for the year-to-date period ended March 29, 2009 (amounts in thousands):
 Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atJune 29, 2008
    
    Charges
    
    Adjustments
    
    Amounts Used
    
    March 29, 2009Accrued severance
    
    $
    3,668
    
    
    
    371
    
    
    
    5
    
    
    
    (1,886
    )
    
    $
    2,158
    (1)Accrued restructuring
    
    $
    1,414
    
    
    
    
    
    
    
    245
    
    
    
    (1,040
    )
    
    $
    619
 
 (1)
    
    As of March 29, 2009, the Company classified $0.6 million of accrued executive severance as
long term. 14.
    
    Discontinued OperationsThe manufacturing facilities in Ireland ceased operations on October 31, 2004. On March 31,
2009, the Company completed the final accounting for the closure of the subsidiary and filed the
appropriate dissolution papers with the Irish government. The Company recorded losses of $45
thousand and $0.1 million for the third quarter of fiscal years 2009 and 2008, respectively, and
income of $0.1 million and $22 thousand for the year-to-date periods, respectively.15.
    
    Derivative Financial InstrumentsThe Company accounts for derivative contracts and hedging activities under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities which requires all derivatives to
be recorded on the balance sheet 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 hedge 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 orders with customers or for anticipated sales activity for a future time period.
Generally, 50% to 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 outstanding accounts receivable and forward contracts to
market at month end and any realized and unrealized gains or losses are
recorded as other income and expense. The Company also enters currency forward contracts for
committed or anticipated equipment and inventory purchases. Generally, 50% of the asset cost is
covered by forward contracts although 100% of the asset cost may be covered by contracts in
certain instances. Forward contracts are matched with the anticipated date of delivery of the
assets and gains and losses are recorded
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as a component of the asset cost for purchase
transactions when the Company is firmly committed. The latest maturity for all outstanding
purchase and sales foreign currency forward contracts are August 2009 and July 2009,
respectively.
  March 29,
    
    
    June 29,2009
    
    
    2008Foreign currency purchase contracts:Notional amount
    
    $
    883
    
    
    $
    492Fair value
    
    
    885
    
    
    
    499Net (gain) loss
    
    $
    (2
    )
    
    $
    (7
    )Foreign currency sales contracts:Notional amount
    
    $
    656
    
    
    $
    620Fair value
    
    
    691
    
    
    
    642Net gain (loss)
    
    $
    (35
    )
    
    $
    (22
    )
 For the quarters ended March 29, 2009 and March 23, 2008, the total impact of foreign currency
related items on the Condensed Consolidated Statements of Operations, including transactions
that were hedged and those that were not hedged, resulted in a pre-tax profit of $0.1 million
and $0.2 million, respectively. For the year-to-date periods ended March 29, 2009 and March 23,
2008, the total impact of foreign currency related items resulted in a pre-tax profit of $23
thousand and a pre-tax loss of $0.3 million, respectively. These amounts are included in the
other operating (income) expense, net in the Consolidated Statements of Operations.16.
    
    ContingenciesOn 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 E.I. DuPont de
Nemours (DuPont). Since 1993, DuPont has been investigating and cleaning up the Kinston site
under the supervision of the United States 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. Under the terms of the Ground Lease, upon completion by DuPont of required remedial
action, ownership of the Kinston site was to pass to the Company and after seven years of
sliding scale shared responsibility with DuPont, the Company would have had sole responsibility
for future remediation requirements, if any. 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.
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##### Table of Contents



17.
    
    Related Party TransactionIn fiscal year 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 a Sales and Services Agreement for a term of two years from January 1, 2007, pursuant to
which the Company agreed to pay Dillon an aggregate amount of $6.0 million in exchange for
certain polyester segment sales and Dillon transitional services to be provided by Dillons
sales staff and executive management. The Company announced on April 26, 2007 its plan to close
its Dillon polyester facility. As a result of this announcement, the Company evaluated all
contract obligations associated with the facility and determined that this contract obligation
partially included services to be rendered specifically to that facility and therefore the
Company would not receive any future economic benefit from that portion of the contract once the
facility was closed. As a result, the Company recorded a $2.9 million restructuring charge
related to that portion of the contract obligation. The contract termination date was December
2008. The Company recorded nil and $0.3 million for the third quarter of fiscal years 2009 and
2008 and $0.5 million and $0.8 million for the year-to-date periods, respectively, related to
this contract.On December 1, 2008, the Company entered into an agreement to extend the polyester services
portion of the Sales and Service agreement for a term of one year effective January 1, 2009
pursuant to which the Company will pay Dillon an aggregate amount of $1.7 million. The Company
recognized $0.4 million in expenses related to this contract in the March 2009 quarter. Mr.
Stephen Wener is the President and Chief Executive Officer of Dillon and is a director of the
Company.In fiscal year 2008, Unifi Manufacturing, Inc. (UMI), a wholly owned subsidiary of the
Company, sold certain real and personal property held by UMI located in Dillon, South Carolina,
to 1019 Realty LLC (the Buyer) for a sale price of $4.0 million. The real and personal
property being sold by UMI was acquired by the Company pursuant to the Transaction. Mr. Wener,
is a manager of the Buyer, and has a 13.5% ownership interest in and is the sole manager of an
entity which owns 50% of the Buyer.18.
    
    Segment DisclosuresThe following is the Companys selected segment information for the
quarters and nine-month periods ended March 29, 2009 and March 23,
2008 (amounts in thousands):
 Polyester
    
    Nylon
    
    TotalQuarter ended March 29, 2009:Net sales to external customers
    
    $
    85,480
    
    
    $
    33,614
    
    
    $
    119,094Depreciation and amortization
    
    
    5,407
    
    
    
    1,542
    
    
    
    6,949Segment operating loss
    
    
    (26,823
    )
    
    
    (1,185
    )
    
    
    (28,008
    )Total assets
    
    
    310,036
    
    
    
    80,141
    
    
    
    390,177Quarter ended March 23, 2008:Net sales to external customers
    
    $
    126,247
    
    
    $
    43,589
    
    
    $
    169,836Intersegment net sales
    
    
    1,735
    
    
    
    491
    
    
    
    2,226Depreciation and amortization
    
    
    6,298
    
    
    
    3,291
    
    
    
    9,589Segment operating income
    
    
    3,072
    
    
    
    2,479
    
    
    
    5,551Total assets
    
    
    380,948
    
    
    
    96,569
    
    
    
    477,517
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The following table provides reconciliations from segment data to consolidated reporting data
(amounts in thousands):
 For the Quarters EndedMarch 29,
    
    
    March 23,2009
    
    
    2008Depreciation and amortization:Depreciation
and amortization of specific reportable segment assets
    
    $
    6,949
    
    
    $
    9,589Depreciation included in other operating (income) expense, net
    
    
    35
    
    
    
    Amortization included in interest expense, net
    
    
    290
    
    
    
    291Consolidated depreciation and amortization
    
    $
    7,274
    
    
    $
    9,880Reconciliation of segment operating income (loss) to
income (loss) from continuing operations before income taxes:Reportable segments operating income (loss)
    
    $
    (28,008
    )
    
    $
    5,551Provision for bad debts
    
    
    735
    
    
    
    87Other operating (income) expense, net
    
    
    (89
    )
    
    
    (897
    )Interest expense, net
    
    
    5,223
    
    
    
    5,657Equity in earnings of unconsolidated affiliates
    
    
    (825
    )
    
    
    (757
    )Income (loss) from continuing operations before income taxes
    
    $
    (33,052
    )
    
    $
    1,461
 Polyester
    
    Nylon
    
    TotalNine-Months ended March 29, 2009:Net sales to external customers
    
    $
    302,443
    
    
    $
    111,387
    
    
    $
    413,830Intersegment net sales
    
    
    
    
    
    
    71
    
    
    
    71Depreciation and amortization
    
    
    18,379
    
    
    
    5,889
    
    
    
    24,268Segment operating income (loss)
    
    
    (33,750
    )
    
    
    1,630
    
    
    
    (32,120
    )Nine-Months ended March 23, 2008:Net sales to external customers
    
    $
    390,743
    
    
    $
    132,998
    
    
    $
    523,741Intersegment net sales
    
    
    4,955
    
    
    
    2,011
    
    
    
    6,966Depreciation and amortization
    
    
    20,062
    
    
    
    10,120
    
    
    
    30,182Segment operating income (loss)
    
    
    (15,147
    )
    
    
    3,932
    
    
    
    (11,215
    )
 The following table represents reconciliations from segment data to consolidated reporting data
(amounts in thousands):
 For the Nine-Months EndedMarch 29,
    
    
    March 23,2009
    
    
    2008Depreciation and amortization:Depreciation
and amortization of specific reportable segment assets
    
    $
    24,268
    
    
    $
    30,182Depreciation included in other operating (income) expense, net
    
    
    107
    
    
    
    Amortization included in interest expense, net
    
    
    868
    
    
    
    872Consolidated depreciation and amortization
    
    $
    25,243
    
    
    $
    31,054Reconciliation of segment operating loss to
loss from continuing operations before income taxes:Reportable segments operating loss
    
    $
    (32,120
    )
    
    $
    (11,215
    )Provision for bad debts
    
    
    1,794
    
    
    
    152Other operating (income) expense, net
    
    
    (5,862
    )
    
    
    (4,087
    )Interest expense, net
    
    
    15,343
    
    
    
    17,367Equity in earnings of unconsolidated affiliates
    
    
    (4,469
    )
    
    
    (914
    )Write down of investment in unconsolidated affiliate
    
    
    1,483
    
    
    
    4,505Loss from continuing operations before income taxes
    
    $
    (40,409
    )
    
    $
    (28,238
    )
 17




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##### Table of Contents



For purposes of internal management reporting, segment operating loss represents segment net
sales less cost of sales, segment restructuring charges, segment impairments of long-lived
assets, goodwill impairments, and allocated selling, general and administrative expenses.
Certain non-segment manufacturing and unallocated selling, general and administrative costs are
allocated to the operating segments based on activity drivers relevant to the respective costs.
In the prior year, consolidated intersegment sales were recorded at market. Beginning in fiscal
year 2009, the Company changed its domestic intersegment transfer pricing of inventory from a
market value approach to a cost approach. Using the new methodology, no intersegment sales are
recorded for domestic transfers of inventory. The amounts of domestic intersegment sales that
were included in the prior third quarter and year-to-date financial statements totaled $1.7
million and $5.0 million, respectively, for domestic polyester and $0.5 million and $2.0
million, respectively, for domestic nylon. The remaining intersegment sales relate to sales to
the Companys foreign subsidiaries which are still recorded at market.The primary differences between the segmented financial information of the operating segments,
as reported to management and the Companys consolidated reporting, relate to intersegment sales
of yarn and the associated fiber costs, the provision for bad debts, other operating (income)
expense, net and equity in earnings of unconsolidated affiliates and related impairments.Segment operating income (loss) excluded the provision (recovery) for bad debts of $0.7 million
and $0.1 million for the current and prior year third quarter periods, respectively, and $1.8
million and $0.2 million for the year-to-date periods, respectively.The total assets for the polyester segment decreased from $387.0 million at June 29, 2008 to
$310.0 million at March 29, 2009 primarily due to decreases in accounts receivable, goodwill,
inventory, property, plant, and equipment, long-term restricted cash, short-term restricted
cash, other non-current assets, and deferred taxes of $22.1 million, $18.6 million, $19.0
million, $13.2 million, $6.4 million, $3.5 million, $1.2 million, and $0.9 million,
respectively. These decreases were offset by increases in other current assets and cash of $7.1
million and $0.8 million, respectively. The changes included above in the polyester segment
assets include an overall $36.4 million reduction due to an increase in the Brazilian currency
exchange rate. The total assets for the nylon segment decreased from $92.5 million at June 29,
2008 to $80.1 million at March 29, 2009 due primarily to decreases in accounts receivable,
property, plant, and equipment, inventory and other current assets of $6.7 million, $5.0
million, $1.9 million, and $0.1 million, respectively. These decreases were offset by increases
in other non-current assets and cash of $0.9 million and $0.4 million, respectively.19.
    
    Subsequent EventsDuring the fourth quarter of fiscal year 2009, the Company announced that it had closed on the
sale and received $9 million in proceeds related to its investment in YUFI. The Company will
continue to service customers in Asia through Unifi Textiles Suzhou Co., Ltd. (UTSC), a
wholly-owned subsidiary based in Suzhou, China, that is dedicated to the development, sales and
service of PVA yarns. UTSC is located in the Gold River Center (room 1101), No. 88 Shishan
Road, Suzhou New District, Suzhou, which is in Jiangsu Province.On March 2, 2009, the Company announced that it had commenced a cash tender offer for up to $8.8
million aggregate principal amount of its 11.5% senior secured notes due in 2014. On April 3,
2009, the Company successfully repurchased $8.8 million of the notes at par value.20.
    
    Condensed Consolidated Guarantor and Non-Guarantor Financial StatementsThe 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
notes due in 2014 (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.
 18




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##### Table of Contents



UNIFI, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Balance Sheet Information as of March 29, 2009 (amounts in thousands):
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,110
    
    
    $
    (4,773
    )
    
    $
    17,207
    
    
    $
    3⁄4
    
    
    $
    23,544Receivables, net
    
    
    41
    
    
    
    53,840
    
    
    
    17,617
    
    
    
    3⁄4
    
    
    
    71,498Inventories
    
    
    3⁄4
    
    
    
    80,931
    
    
    
    20,652
    
    
    
    3⁄4
    
    
    
    101,583Deferred income taxes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1,474
    
    
    
    3⁄4
    
    
    
    1,474Assets held for sale
    
    
    3⁄4
    
    
    
    1,700
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1,700Investment in unconsolidated affiliate
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    9,000
    
    
    
    3⁄4
    
    
    
    9,000Restricted cash
    
    
    3⁄4
    
    
    
    8,809
    
    
    
    5,776
    
    
    
    3⁄4
    
    
    
    14,585Other current assets
    
    
    73
    
    
    
    1,739
    
    
    
    3,134
    
    
    
    3⁄4
    
    
    
    4,946Total current assets
    
    
    11,224
    
    
    
    142,246
    
    
    
    74,860
    
    
    
    3⁄4
    
    
    
    228,330Property, plant and equipment
    
    
    11,336
    
    
    
    700,675
    
    
    
    58,483
    
    
    
    3⁄4
    
    
    
    770,494Less accumulated depreciation
    
    
    (1,829
    )
    
    
    (567,275
    )
    
    
    (42,088
    )
    
    
    3⁄4
    
    
    
    (611,192
    )9,507
    
    
    
    133,400
    
    
    
    16,395
    
    
    
    3⁄4
    
    
    
    159,302Investments in unconsolidated affiliates
    
    
    3⁄4
    
    
    
    58,589
    
    
    
    3,478
    
    
    
    3⁄4
    
    
    
    62,067Restricted cash
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1,394
    
    
    
    3⁄4
    
    
    
    1,394Investments in consolidated subsidiaries
    
    
    375,606
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (375,606
    )
    
    
    3⁄4Intangible assets, net
    
    
    3⁄4
    
    
    
    18,465
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    18,465Other noncurrent assets
    
    
    43,688
    
    
    
    (27,676
    )
    
    
    (2,275
    )
    
    
    3⁄4
    
    
    
    13,737$
    440,025
    
    
    $
    325,024
    
    
    $
    93,852
    
    
    $
    (375,606
    )
    
    $
    483,295LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and other
    
    $
    180
    
    
    $
    19,501
    
    
    $
    5,223
    
    
    $
    3⁄4
    
    
    $
    24,904Accrued expenses
    
    
    8,604
    
    
    
    9,648
    
    
    
    2,109
    
    
    
    3⁄4
    
    
    
    20,361Income taxes payable
    
    
    3,139
    
    
    
    (3,199
    )
    
    
    67
    
    
    
    3⁄4
    
    
    
    7Current maturities of long-term debt and other current
liabilities
    
    
    3⁄4
    
    
    
    343
    
    
    
    5,776
    
    
    
    3⁄4
    
    
    
    6,119Total current liabilities
    
    
    11,923
    
    
    
    26,293
    
    
    
    13,175
    
    
    
    3⁄4
    
    
    
    51,391Long-term debt and other liabilities
    
    
    190,000
    
    
    
    1,995
    
    
    
    1,394
    
    
    
    3⁄4
    
    
    
    193,389Deferred income taxes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    413
    
    
    
    3⁄4
    
    
    
    413Shareholders/ invested equity
    
    
    238,102
    
    
    
    296,736
    
    
    
    78,870
    
    
    
    (375,606
    )
    
    
    238,102$
    440,025
    
    
    $
    325,024
    
    
    $
    93,852
    
    
    $
    (375,606
    )
    
    $
    483,295
 19




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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
    
    $
    689
    
    
    $
    3,377
    
    
    $
    16,182
    
    
    $
    3⁄4
    
    
    $
    20,248Receivables, net
    
    
    66
    
    
    
    82,040
    
    
    
    21,166
    
    
    
    3⁄4
    
    
    
    103,272Inventories
    
    
    3⁄4
    
    
    
    92,581
    
    
    
    30,309
    
    
    
    3⁄4
    
    
    
    122,890Deferred income taxes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    2,357
    
    
    
    3⁄4
    
    
    
    2,357Assets held for sale
    
    
    3⁄4
    
    
    
    4,124
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    4,124Restricted cash
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    9,314
    
    
    
    3⁄4
    
    
    
    9,314Other current assets
    
    
    26
    
    
    
    733
    
    
    
    2,934
    
    
    
    3⁄4
    
    
    
    3,693Total current assets
    
    
    781
    
    
    
    182,855
    
    
    
    82,262
    
    
    
    3⁄4
    
    
    
    265,898Property, plant and equipment
    
    
    11,273
    
    
    
    765,710
    
    
    
    78,341
    
    
    
    3⁄4
    
    
    
    855,324Less accumulated depreciation
    
    
    (1,616
    )
    
    
    (623,262
    )
    
    
    (53,147
    )
    
    
    3⁄4
    
    
    
    (678,025
    )9,657
    
    
    
    142,448
    
    
    
    25,194
    
    
    
    3⁄4
    
    
    
    177,299Investments in unconsolidated affiliates
    
    
    3⁄4
    
    
    
    60,853
    
    
    
    9,709
    
    
    
    3⁄4
    
    
    
    70,562Restricted cash
    
    
    3⁄4
    
    
    
    18,246
    
    
    
    7,802
    
    
    
    3⁄4
    
    
    
    26,048Investments in consolidated subsidiaries
    
    
    417,503
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (417,503
    )
    
    
    3⁄4Intangible assets, net
    
    
    3⁄4
    
    
    
    38,965
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    38,965Other noncurrent assets
    
    
    74,271
    
    
    
    (60,879
    )
    
    
    (633
    )
    
    
    3⁄4
    
    
    
    12,759$
    502,212
    
    
    $
    382,488
    
    
    $
    124,334
    
    
    $
    (417,503
    )
    
    $
    591,531LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and other
    
    $
    172
    
    
    $
    39,328
    
    
    $
    5,053
    
    
    $
    3⁄4
    
    
    $
    44,553Accrued expenses
    
    
    3,371
    
    
    
    18,011
    
    
    
    4,149
    
    
    
    3⁄4
    
    
    
    25,531Income taxes payable
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    681
    
    
    
    3⁄4
    
    
    
    681Current maturities of long-term debt and other current
liabilities
    
    
    3⁄4
    
    
    
    491
    
    
    
    9,314
    
    
    
    3⁄4
    
    
    
    9,805Total current liabilities
    
    
    3,543
    
    
    
    57,830
    
    
    
    19,197
    
    
    
    3⁄4
    
    
    
    80,570Long-term debt and other liabilities
    
    
    193,000
    
    
    
    3,563
    
    
    
    7,803
    
    
    
    3⁄4
    
    
    
    204,366Deferred income taxes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    926
    
    
    
    3⁄4
    
    
    
    926Shareholders/ invested equity
    
    
    305,669
    
    
    
    321,095
    
    
    
    96,408
    
    
    
    (417,503
    )
    
    
    305,669$
    502,212
    
    
    $
    382,488
    
    
    $
    124,334
    
    
    $
    (417,503
    )
    
    $
    591,531
 20




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
 Statement of Operations Information for the Fiscal Quarter Ended March 29, 2009 (amounts in
thousands):
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedSummary of Operations:Net sales
    
    $
    3⁄4
    
    
    $
    96,238
    
    
    $
    22,885
    
    
    $
    (29
    )
    
    $
    119,094Cost of sales
    
    
    3⁄4
    
    
    
    96,048
    
    
    
    22,424
    
    
    
    250
    
    
    
    118,722Restructuring charges
    
    
    3⁄4
    
    
    
    293
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    293Equity in subsidiaries
    
    
    23,188
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (23,188
    )
    
    
    3⁄4Goodwill impairment
    
    
    3⁄4
    
    
    
    18,580
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    18,580Selling, general and administrative expenses
    
    
    23
    
    
    
    7,686
    
    
    
    1,801
    
    
    
    (3
    )
    
    
    9,507Provision for bad debts
    
    
    3⁄4
    
    
    
    577
    
    
    
    158
    
    
    
    3⁄4
    
    
    
    735Other operating (income) expense, net
    
    
    (31
    )
    
    
    147
    
    
    
    (205
    )
    
    
    3⁄4
    
    
    
    (89
    )Non-operating (income) expenses:Interest income
    
    
    (51
    )
    
    
    3⁄4
    
    
    
    (605
    )
    
    
    3⁄4
    
    
    
    (656
    )Interest expense
    
    
    5,924
    
    
    
    23
    
    
    
    (68
    )
    
    
    3⁄4
    
    
    
    5,879Equity in (earnings) losses of unconsolidated affiliates
    
    
    3⁄4
    
    
    
    (1,342
    )
    
    
    312
    
    
    
    205
    
    
    
    (825
    )Income (loss) from continuing operations before income
taxes
    
    
    (29,053
    )
    
    
    (25,774
    )
    
    
    (932
    )
    
    
    22,707
    
    
    
    (33,052
    )Provision (benefit) for income taxes
    
    
    3,943
    
    
    
    (3,964
    )
    
    
    (80
    )
    
    
    3⁄4
    
    
    
    (101
    )Income (loss) from continuing operations
    
    
    (32,996
    )
    
    
    (21,810
    )
    
    
    (852
    )
    
    
    22,707
    
    
    
    (32,951
    )Loss from discontinued operations, net of tax
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (45
    )
    
    
    3⁄4
    
    
    
    (45
    )Net income (loss)
    
    $
    (32,996
    )
    
    $
    (21,810
    )
    
    $
    (897
    )
    
    $
    22,707
    
    
    $
    (32,996
    )
 21




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
 Statement of Operations Information for the Fiscal Quarter Ended March 23, 2008 (amounts in
thousands):
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedSummary of Operations:Net sales
    
    $
    3⁄4
    
    
    $
    137,176
    
    
    $
    33,428
    
    
    $
    (768
    )
    
    $
    169,836Cost of sales
    
    
    3⁄4
    
    
    
    127,829
    
    
    
    29,391
    
    
    
    (816
    )
    
    
    156,404Restructuring recoveries
    
    
    3⁄4
    
    
    
    (2,199
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (2,199
    )Equity in subsidiaries
    
    
    (10,290
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    10,290
    
    
    
    3⁄4Selling, general and administrative expenses
    
    
    3⁄4
    
    
    
    8,509
    
    
    
    1,863
    
    
    
    (292
    )
    
    
    10,080Provision (recovery) for bad debts
    
    
    3⁄4
    
    
    
    98
    
    
    
    (11
    )
    
    
    3⁄4
    
    
    
    87Other operating (income) expense, net
    
    
    6,055
    
    
    
    (6,499
    )
    
    
    (243
    )
    
    
    (210
    )
    
    
    (897
    )Non-operating (income) expenses:Interest income
    
    
    (229
    )
    
    
    (1
    )
    
    
    (421
    )
    
    
    3⁄4
    
    
    
    (651
    )Interest expense
    
    
    6,176
    
    
    
    108
    
    
    
    24
    
    
    
    3⁄4
    
    
    
    6,308Equity in (earnings) losses of unconsolidated affiliates
    
    
    3⁄4
    
    
    
    (2,933
    )
    
    
    2,226
    
    
    
    (50
    )
    
    
    (757
    )Income (loss) from continuing operations before income
taxes
    
    
    (1,712
    )
    
    
    12,264
    
    
    
    599
    
    
    
    (9,690
    )
    
    
    1,461Provision (benefit) for income taxes
    
    
    (1,724
    )
    
    
    1,977
    
    
    
    1,141
    
    
    
    3⁄4
    
    
    
    1,394Income (loss) from continuing operations
    
    
    12
    
    
    
    10,287
    
    
    
    (542
    )
    
    
    (9,690
    )
    
    
    67Loss from discontinued operations, net of tax
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (55
    )
    
    
    3⁄4
    
    
    
    (55
    )Net income (loss)
    
    $
    12
    
    
    $
    10,287
    
    
    $
    (597
    )
    
    $
    (9,690
    )
    
    $
    12
 22




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
 Statement of Operations Information for the Nine-Months Ended March 29, 2009 (amounts in
thousands):
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedSummary of Operations:Net sales
    
    $
    3⁄4
    
    
    $
    329,252
    
    
    $
    85,138
    
    
    $
    (560
    )
    
    $
    413,830Cost of sales
    
    
    3⁄4
    
    
    
    322,283
    
    
    
    75,609
    
    
    
    (171
    )
    
    
    397,721Restructuring charges
    
    
    3⁄4
    
    
    
    293
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    293Equity in subsidiaries
    
    
    21,938
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (21,938
    )
    
    
    3⁄4Goodwill impairment
    
    
    3⁄4
    
    
    
    18,580
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    18,580Selling, general and administrative expenses
    
    
    213
    
    
    
    23,925
    
    
    
    5,374
    
    
    
    (156
    )
    
    
    29,356Provision for bad debts
    
    
    3⁄4
    
    
    
    1,651
    
    
    
    143
    
    
    
    3⁄4
    
    
    
    1,794Other operating (income) expense, net
    
    
    (46
    )
    
    
    (5,075
    )
    
    
    (566
    )
    
    
    (175
    )
    
    
    (5,862
    )Non-operating (income) expense:Interest income
    
    
    (97
    )
    
    
    (48
    )
    
    
    (2,104
    )
    
    
    3⁄4
    
    
    
    (2,249
    )Interest expense
    
    
    17,569
    
    
    
    85
    
    
    
    (62
    )
    
    
    3⁄4
    
    
    
    17,592Equity in (earnings) losses of unconsolidated affiliates
    
    
    3⁄4
    
    
    
    (5,403
    )
    
    
    1,518
    
    
    
    (584
    )
    
    
    (4,469
    )Write down of investment in unconsolidated affiliate
    
    
    3⁄4
    
    
    
    483
    
    
    
    1,000
    
    
    
    3⁄4
    
    
    
    1,483Income (loss) from continuing operations before income
taxes
    
    
    (39,577
    )
    
    
    (27,522
    )
    
    
    4,226
    
    
    
    22,464
    
    
    
    (40,409
    )Provision (benefit) for income taxes
    
    
    3,163
    
    
    
    (3,162
    )
    
    
    2,397
    
    
    
    3⁄4
    
    
    
    2,398Income (loss) from continuing operations
    
    
    (42,740
    )
    
    
    (24,360
    )
    
    
    1,829
    
    
    
    22,464
    
    
    
    (42,807
    )Income from discontinued operations, net of tax
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    67
    
    
    
    3⁄4
    
    
    
    67Net income (loss)
    
    $
    (42,740
    )
    
    $
    (24,360
    )
    
    $
    1,896
    
    
    $
    22,464
    
    
    $
    (42,740
    )
 23




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
 Statement of Operations Information for the Nine-Months Ended March 23, 2008 (amounts in
thousands):
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedSummary of Operations:Net sales
    
    $
    3⁄4
    
    
    $
    427,406
    
    
    $
    98,004
    
    
    $
    (1,669
    )
    
    $
    523,741Cost of sales
    
    
    3⁄4
    
    
    
    405,700
    
    
    
    86,810
    
    
    
    (1,514
    )
    
    
    490,996Restructuring charges, net
    
    
    3⁄4
    
    
    
    4,638
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    4,638Write down of long-lived assets
    
    
    3⁄4
    
    
    
    2,247
    
    
    
    533
    
    
    
    3⁄4
    
    
    
    2,780Equity in subsidiaries
    
    
    (6,241
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    6,241
    
    
    
    3⁄4Selling, general and administrative expenses
    
    
    3⁄4
    
    
    
    31,385
    
    
    
    5,610
    
    
    
    (453
    )
    
    
    36,542Provision for bad debts
    
    
    3⁄4
    
    
    
    145
    
    
    
    7
    
    
    
    3⁄4
    
    
    
    152Other operating (income) expense, net
    
    
    (6,698
    )
    
    
    2,404
    
    
    
    173
    
    
    
    34
    
    
    
    (4,087
    )Non-operating (income) expense:Interest income
    
    
    (565
    )
    
    
    (137
    )
    
    
    (1,529
    )
    
    
    3⁄4
    
    
    
    (2,231
    )Interest expense
    
    
    19,054
    
    
    
    423
    
    
    
    121
    
    
    
    3⁄4
    
    
    
    19,598Equity in (earnings) losses of unconsolidated affiliates
    
    
    3⁄4
    
    
    
    (5,184
    )
    
    
    4,692
    
    
    
    (422
    )
    
    
    (914
    )Write down of investment in unconsolidated affiliate
    
    
    3⁄4
    
    
    
    4,505
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    4,505Income (loss) from continuing operations before income
taxes
    
    
    (5,550
    )
    
    
    (18,720
    )
    
    
    1,587
    
    
    
    (5,555
    )
    
    
    (28,238
    )Provision (benefit) for income taxes
    
    
    11,372
    
    
    
    (24,928
    )
    
    
    2,262
    
    
    
    3⁄4
    
    
    
    (11,294
    )Income (loss) from continuing operations
    
    
    (16,922
    )
    
    
    6,208
    
    
    
    (675
    )
    
    
    (5,555
    )
    
    
    (16,944
    )Income from discontinued operations, net of tax
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    22
    
    
    
    3⁄4
    
    
    
    22Net income (loss)
    
    $
    (16,922
    )
    
    $
    6,208
    
    
    $
    (653
    )
    
    $
    (5,555
    )
    
    $
    (16,922
    )
 24




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
 Statements of Cash Flows Information for the Nine-Months Ended March 29, 2009 (amounts in
thousands):
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net cash provided by (used in) continuing operating
activities
    
    $
    14,824
    
    
    $
    (14,347
    )
    
    $
    4,292
    
    
    $
    (163
    )
    
    $
    4,606Investing activities:Capital expenditures
    
    
    (68
    )
    
    
    (9,311
    )
    
    
    (1,539
    )
    
    
    3⁄4
    
    
    
    (10,918
    )Acquisition
    
    
    3⁄4
    
    
    
    (500
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (500
    )Investment in subsidiary
    
    
    (4,950
    )
    
    
    3⁄4
    
    
    
    4,950
    
    
    
    3⁄4
    
    
    
    3⁄4Change in restricted cash
    
    
    3⁄4
    
    
    
    9,436
    
    
    
    4,599
    
    
    
    3⁄4
    
    
    
    14,035Proceeds from sale of capital assets
    
    
    3⁄4
    
    
    
    6,916
    
    
    
    43
    
    
    
    3⁄4
    
    
    
    6,959Collection of notes receivable
    
    
    1
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1Split dollar life insurance premiums
    
    
    (217
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (217
    )Net cash provided by (used in) investing activities
    
    
    (5,234
    )
    
    
    6,541
    
    
    
    8,053
    
    
    
    3⁄4
    
    
    
    9,360Financing activities:Borrowings of long term debt
    
    
    14,600
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    14,600Payments of long term debt
    
    
    (17,600
    )
    
    
    3⁄4
    
    
    
    (4,599
    )
    
    
    3⁄4
    
    
    
    (22,199
    )Proceeds
from stock option exercises
    
    
    3,830
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3,830Other
    
    
    3⁄4
    
    
    
    (343
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (343
    )Net cash provided by (used in) financing activities
    
    
    830
    
    
    
    (343
    )
    
    
    (4,599
    )
    
    
    3⁄4
    
    
    
    (4,112
    )Cash flows of discontinued operations:Operating cash flow
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (308
    )
    
    
    3⁄4
    
    
    
    (308
    )Net cash used in discontinued operations
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (308
    )
    
    
    3⁄4
    
    
    
    (308
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (6,413
    )
    
    
    163
    
    
    
    (6,250
    )Net increase (decrease) in cash and cash equivalents
    
    
    10,420
    
    
    
    (8,149
    )
    
    
    1,025
    
    
    
    3⁄4
    
    
    
    3,296Cash and cash equivalents at beginning of period
    
    
    689
    
    
    
    3,377
    
    
    
    16,182
    
    
    
    3⁄4
    
    
    
    20,248Cash and cash equivalents at end of period
    
    $
    11,109
    
    
    $
    (4,772
    )
    
    $
    17,207
    
    
    $
    3⁄4
    
    
    $
    23,544
 25




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##### Table of Contents



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
 Statements of Cash Flows Information for the Nine-Months Ended March 23, 2008 (amounts in
thousands):
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net cash provided by (used in) continuing operating
    
    $
    6,623
    
    
    $
    (9,437
    )
    
    $
    1,391
    
    
    $
    3⁄4
    
    
    $
    (1,423
    )Investing activities:Capital expenditures
    
    
    3⁄4
    
    
    
    (4,878
    )
    
    
    (3,272
    )
    
    
    840
    
    
    
    (7,310
    )Change in restricted cash
    
    
    3⁄4
    
    
    
    (12,338
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (12,338
    )Proceeds from sale of capital assets
    
    
    3⁄4
    
    
    
    16,363
    
    
    
    274
    
    
    
    (840
    )
    
    
    15,797Proceeds from sale of equity affiliate
    
    
    3⁄4
    
    
    
    8,750
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    8,750Collection of notes receivable
    
    
    9
    
    
    
    260
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    269Split dollar life insurance premiums
    
    
    (217
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (217
    )Other
    
    
    4,187
    
    
    
    (793
    )
    
    
    (4,187
    )
    
    
    3⁄4
    
    
    
    (793
    )Net cash provided by (used in) investing activities.
    
    
    3,979
    
    
    
    7,364
    
    
    
    (7,185
    )
    
    
    3⁄4
    
    
    
    4,158Financing activities:Payment of long term debt
    
    
    (16,000
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (16,000
    )Dividend payment
    
    
    5,307
    
    
    
    3⁄4
    
    
    
    (5,307
    )
    
    
    3⁄4
    
    
    
    3⁄4Other
    
    
    (1,146
    )
    
    
    (247
    )
    
    
    (749
    )
    
    
    3⁄4
    
    
    
    (2,142
    )Net cash provided by (used in) financing activities
    
    
    (11,839
    )
    
    
    (247
    )
    
    
    (6,056
    )
    
    
    3⁄4
    
    
    
    (18,142
    )Cash flows of discontinued operations:Operating cash flow
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (230
    )
    
    
    3⁄4
    
    
    
    (230
    )Net cash used in discontinued operations
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (230
    )
    
    
    3⁄4
    
    
    
    (230
    )Effect of exchange rate changes on cash and cash equivalents.
    
    
    3⁄4
    
    
    
    (43
    )
    
    
    1,836
    
    
    
    3⁄4
    
    
    
    1,793Net decrease in cash and cash equivalents
    
    
    (1,237
    )
    
    
    (2,363
    )
    
    
    (10,244
    )
    
    
    3⁄4
    
    
    
    (13,844
    )Cash and cash equivalents at beginning of period
    
    
    17,808
    
    
    
    1,645
    
    
    
    20,578
    
    
    
    3⁄4
    
    
    
    40,031Cash and cash equivalents at end of period
    
    $
    16,571
    
    
    $
    (718
    )
    
    $
    10,334
    
    
    $
    3⁄4
    
    
    $
    26,187
 26




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##### Table of Contents



Business Overview
  Polyester Segment.
 Nylon Segment.
 Recent Developments and Outlook
   27




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##### Table of Contents



® ® ®
 ® ® ® ® ®
   28




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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 EBITDA, which the Company defines as pre-tax income before interest expense,
depreciation and amortization expense and loss or income from discontinued operations,
adjusted to exclude equity in earnings and losses of unconsolidated affiliates, write
down of long-lived assets and unconsolidated affiliate, non-cash compensation expense,
gains and losses on sales of property, plant and equipment, hedging gains and losses,
asset consolidation and optimization expense, goodwill impairment, restructuring charges
and Kinston shutdown costs, as revised from time to time, which the Company believes is
a supplemental measure of its performance and ability to service debt; and
    
    working capital of each business unit as a percentage of sales, which is an indicator
of the Companys production efficiency and ability to manage its inventory and
receivables.
 Corporate Restructuring
 Severance
     29




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##### Table of Contents



Restructuring
    Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atJune 29, 2008
    
    Charges
    
    Adjustments
    
    Amounts Used
    
    March 29, 2009Accrued severance
    
    $
    3,668
    
    
    
    371
    
    
    
    5
    
    
    
    (1,886
    )
    
    $
    2,158Accrued restructuring
    
    $
    1,414
    
    
    
    
    
    
    
    245
    
    
    
    (1,040
    )
    
    $
    619
  Joint Ventures and Other Equity Investments
  Date
    
    
    
    
    
    PercentAffiliate Name
    
    Acquired
    
    Location
    
    OwnershipYihua Unifi Fibre Company Ltd (YUFI) (A)
    
    Aug-05
    
    Yizheng, Jiangsu Province, Peoples Republic of China
    
    
    50
    %Parkdale America, LLC (PAL)
    
    Jun-97
    
    North and South Carolina
    
    
    34
    %Unifi-SANS Technical Fibers, LLC (USTF) (B)
    
    Sep-00
    
    Stoneville, North Carolina
    
    
    50
    %U.N.F. Industries, LLC (UNF)
    
    Sep-00
    
    Migdal Ha  Emek, Israel
    
    
    50
    %
 
 (A)
    
    The Company completed the sale of YUFI during the fourth quarter of fiscal year 2009.(B)
    
    The Company completed the sale of USTF during the second quarter of fiscal year 2008. 30




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##### Table of Contents



For the Quarter Ended March 29, 2009YUFI (1)
    
    PAL
    
    UNF
    
    TotalNet sales
    
    
    
    
    
    $
    89,998
    
    
    $
    3,638
    
    
    $
    93,636Gross profit (loss)
    
    
    
    
    
    
    13,439
    
    
    
    (581
    )
    
    
    12,858Depreciation and amortization
    
    
    
    
    
    
    4,573
    
    
    
    474
    
    
    
    5,047Income (loss) from operations
    
    
    
    
    
    
    11,955
    
    
    
    (682
    )
    
    
    11,273Net income (loss)
    
    
    
    
    
    
    3,949
    
    
    
    (624
    )
    
    
    3,325
 For the Nine-Months Ended March 29, 2009YUFI
    
    PAL
    
    UNF
    
    TotalNet sales
    
    
    
    
    
    $
    309,276
    
    
    $
    16,073
    
    
    $
    325,349Gross profit (loss)
    
    
    
    
    
    
    25,510
    
    
    
    (2,247
    )
    
    
    23,263Depreciation and amortization
    
    
    
    
    
    
    14,477
    
    
    
    1,422
    
    
    
    15,899Income (loss) from operations
    
    
    
    
    
    
    17,979
    
    
    
    (3,306
    )
    
    
    14,673Net income (loss)
    
    
    
    
    
    
    15,889
    
    
    
    (3,036
    )
    
    
    12,853
 For the Quarter Ended March 23, 2008YUFI
    
    PAL
    
    UNF
    
    TotalNet sales
    
    $
    30,618
    
    
    $
    116,258
    
    
    $
    6,747
    
    
    $
    153,623Gross profit (loss)
    
    
    (1,800
    )
    
    
    6,251
    
    
    
    (473
    )
    
    
    3,978Depreciation and amortization
    
    
    1,085
    
    
    
    3,850
    
    
    
    474
    
    
    
    5,409Income (loss) from operations
    
    
    (3,275
    )
    
    
    3,242
    
    
    
    (643
    )
    
    
    (676
    )Net income (loss)
    
    
    (3,912
    )
    
    
    7,578
    
    
    
    (562
    )
    
    
    3,104
 For the Nine-Months Ended March 23, 2008USTF (2)
    
    YUFI
    
    PAL
    
    UNF
    
    TotalNet sales
    
    $
    6,455
    
    
    $
    103,738
    
    
    $
    331,797
    
    
    $
    18,577
    
    
    $
    460,567Gross profit (loss)
    
    
    571
    
    
    
    (2,334
    )
    
    
    16,700
    
    
    
    (318
    )
    
    
    14,619Depreciation and amortization
    
    
    578
    
    
    
    3,703
    
    
    
    13,520
    
    
    
    1,264
    
    
    
    19,065Income (loss) from operations
    
    
    188
    
    
    
    (6,903
    )
    
    
    6,832
    
    
    
    (785
    )
    
    
    (668
    )Net income (loss)
    
    
    148
    
    
    
    (8,757
    )
    
    
    12,144
    
    
    
    (649
    )
    
    
    2,886
 
 (1)
    
    The Company completed the sale of its investment in YUFI during the fourth quarter of
fiscal year 2009 and as a result its financial statements were unavailable to the Company
for the quarter ended March 29, 2009. See below and Footnote 12-Impairment Charges and
Footnote 19- Subsequent Events for further discussion.(2)
    
    Sold in the second quarter of fiscal year 2008.
   31




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32




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##### Table of Contents



Review of Third Quarter Fiscal Year 2009 compared to Third Quarter Fiscal Year 2008
  For the Quarters EndedMarch 29, 2009
    
    
    March 23, 2008% to Total
    
    
    
    
    
    
    % to Total
    
    
    % ChangeNet salesPolyester
    
    $
    85,480
    
    
    
    71.8
    
    
    $
    126,247
    
    
    
    74.3
    
    
    
    (32.3
    )Nylon
    
    
    33,614
    
    
    
    28.2
    
    
    
    43,589
    
    
    
    25.7
    
    
    
    (22.9
    )Total
    
    $
    119,094
    
    
    
    100.0
    
    
    $
    169,836
    
    
    
    100.0
    
    
    
    (29.9
    )
 % to Sales
    
    
    
    
    
    
    % to SalesGross profit (loss)Polyester
    
    $
    (430
    )
    
    
    (0.4
    )
    
    $
    9,508
    
    
    
    5.6
    
    
    
    (104.5
    )Nylon
    
    
    802
    
    
    
    0.7
    
    
    
    3,924
    
    
    
    2.3
    
    
    
    (79.6
    )Total
    
    
    372
    
    
    
    0.3
    
    
    
    13,432
    
    
    
    7.9
    
    
    
    (97.2
    )Restructuring charges (recoveries)Polyester
    
    
    220
    
    
    
    0.2
    
    
    
    (2,199
    )
    
    
    (1.3
    )
    
    
    (110.0
    )Nylon
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    293
    
    
    
    0.2
    
    
    
    (2,199
    )
    
    
    (1.3
    )
    
    
    (113.3
    )Goodwill ImpairmentPolyester
    
    
    18,580
    
    
    
    15.6
    
    
    
    
    
    
    
    
    
    
    
    Nylon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    18,580
    
    
    
    15.6
    
    
    
    
    
    
    
    
    
    
    
    Selling, general and administrative
expensesPolyester
    
    
    7,593
    
    
    
    6.4
    
    
    
    8,635
    
    
    
    5.1
    
    
    
    (12.1
    )Nylon
    
    
    1,914
    
    
    
    1.6
    
    
    
    1,445
    
    
    
    0.8
    
    
    
    32.5Total
    
    
    9,507
    
    
    
    8.0
    
    
    
    10,080
    
    
    
    5.9
    
    
    
    (5.7
    )Provision for bad debts
    
    
    735
    
    
    
    0.6
    
    
    
    87
    
    
    
    
    
    
    
    744.8Other operating (income) expense, net
    
    
    (89
    )
    
    
    
    
    
    
    (897
    )
    
    
    (0.5
    )
    
    
    (90.1
    )Non-operating (income) expense, net
    
    
    4,398
    
    
    
    3.7
    
    
    
    4,900
    
    
    
    2.9
    
    
    
    (10.2
    )Income (loss) from continuing
operations before income taxes
    
    
    (33,052
    )
    
    
    (27.8
    )
    
    
    1,461
    
    
    
    0.9
    
    
    
    Provision (benefit) for income taxes
    
    
    (101
    )
    
    
    (0.1
    )
    
    
    1,394
    
    
    
    0.9
    
    
    
    (107.2
    )Income (loss) from continuing
operations
    
    
    (32,951
    )
    
    
    (27.7
    )
    
    
    67
    
    
    
    
    
    
    
    Loss from discontinued
operations, net of tax
    
    
    (45
    )
    
    
    
    
    
    
    (55
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    (32,996
    )
    
    
    (27.7
    )
    
    $
    12
    
    
    
    
    
    
    
    
 33




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Severance and Restructuring Charges
   Goodwill Impairment
   34




---



##### Table of Contents



Related Party Transactions
   Selling, General, and Administrative Expenses
  Other Operating (Income) Expense, Net
  For the Quarters EndedMarch 29,
    
    
    March 23,2009
    
    
    2008(Gain) loss on sale of fixed assets
    
    $
    44
    
    
    $
    (459
    )Technology fee from China joint venture
    
    
    
    
    
    
    (187
    )Currency (gains) losses
    
    
    (100
    )
    
    
    (153
    )Other, net
    
    
    (33
    )
    
    
    (98
    )Other operating (income) expense, net
    
    $
    (89
    )
    
    $
    (897
    )
 35




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##### Table of Contents



Income Taxes
    Polyester Operations
     36




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##### Table of Contents



Nylon Operations
     Corporate
  37




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##### Table of Contents



Review of Year-To-Date Fiscal Year 2009 compared to Year-To-Date Fiscal Year 2008
  For the Nine-Months EndedMarch 29, 2009
    
    
    March 23, 2008% to Total
    
    
    
    
    
    
    % to Total
    
    
    % ChangeNet salesPolyester
    
    $
    302,443
    
    
    
    73.1
    
    
    $
    390,743
    
    
    
    74.6
    
    
    
    (22.6
    )Nylon
    
    
    111,387
    
    
    
    26.9
    
    
    
    132,998
    
    
    
    25.4
    
    
    
    (16.2
    )Total
    
    $
    413,830
    
    
    
    100.0
    
    
    $
    523,741
    
    
    
    100.0
    
    
    
    (21.0
    )
 % to Sales
    
    
    
    
    
    
    % to SalesGross profitPolyester
    
    $
    8,298
    
    
    
    2.0
    
    
    $
    23,263
    
    
    
    4.4
    
    
    
    (64.3
    )Nylon
    
    
    7,811
    
    
    
    1.9
    
    
    
    9,482
    
    
    
    1.8
    
    
    
    (17.6
    )Total
    
    
    16,109
    
    
    
    3.9
    
    
    
    32,745
    
    
    
    6.2
    
    
    
    (50.8
    )Restructuring chargesPolyester
    
    
    220
    
    
    
    0.1
    
    
    
    4,420
    
    
    
    0.9
    
    
    
    (95.0
    )Nylon
    
    
    73
    
    
    
    
    
    
    
    218
    
    
    
    
    
    
    
    (66.5
    )Total
    
    
    293
    
    
    
    0.1
    
    
    
    4,638
    
    
    
    0.9
    
    
    
    (93.7
    )Write downs of long-lived assetsPolyester
    
    
    
    
    
    
    
    
    
    
    2,780
    
    
    
    0.5
    
    
    
    Nylon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    2,780
    
    
    
    0.5
    
    
    
    Goodwill ImpairmentPolyester
    
    
    18,580
    
    
    
    4.5
    
    
    
    
    
    
    
    
    
    
    
    Nylon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    18,580
    
    
    
    4.5
    
    
    
    
    
    
    
    
    
    
    
    Selling, general and administrative
expensesPolyester
    
    
    23,248
    
    
    
    5.6
    
    
    
    31,210
    
    
    
    6.0
    
    
    
    (25.5
    )Nylon
    
    
    6,108
    
    
    
    1.5
    
    
    
    5,332
    
    
    
    1.0
    
    
    
    14.6Total
    
    
    29,356
    
    
    
    7.1
    
    
    
    36,542
    
    
    
    7.0
    
    
    
    (19.7
    )Provision for bad debt
    
    
    1,794
    
    
    
    0.4
    
    
    
    152
    
    
    
    
    
    
    
    Other operating (income) expense, net
    
    
    (5,862
    )
    
    
    (1.4
    )
    
    
    (4,087
    )
    
    
    (0.8
    )
    
    
    43.4Non-operating (income) expense, net
    
    
    12,357
    
    
    
    3.0
    
    
    
    20,958
    
    
    
    4.0
    
    
    
    (41.0
    )Loss from continuing
operations before income taxes
    
    
    (40,409
    )
    
    
    (9.8
    )
    
    
    (28,238
    )
    
    
    (5.4
    )
    
    
    43.1Provision (benefit) for income taxes
    
    
    2,398
    
    
    
    0.5
    
    
    
    (11,294
    )
    
    
    (2.2
    )
    
    
    (121.2
    )Loss from continuing operations
operations
    
    
    (42,807
    )
    
    
    (10.3
    )
    
    
    (16,944
    )
    
    
    (3.2
    )
    
    
    152.6Income from discontinued
operations, net of tax
    
    
    67
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    Net loss
    
    $
    (42,740
    )
    
    
    (10.3
    )
    
    $
    (16,922
    )
    
    
    (3.2
    )
    
    
    152.6
 38




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Severance and Restructuring Charges
   Write downs of Long-Lived Assets
    39




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##### Table of Contents



Goodwill Impairment
   Related Party Transactions
   Selling, General, and Administrative Expenses
  40




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##### Table of Contents



Other Operating (Income) Expense, Net
  For the Nine-Months EndedMarch 29,
    
    
    March 23,2009
    
    
    2008Gain on sale of fixed assets
    
    $
    (5,865
    )
    
    $
    (1,872
    )Gain from sale of nitrogen credits
    
    
    
    
    
    
    (1,614
    )Technology fee from China joint venture
    
    
    
    
    
    
    (875
    )Currency (gains) losses
    
    
    (22
    )
    
    
    305Other, net
    
    
    25
    
    
    
    (31
    )Other operating (income) expense, net
    
    $
    (5,862
    )
    
    $
    (4,087
    )
 Write downs of Investment in Unconsolidated Affiliates
   Income Taxes
    41




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##### Table of Contents



Polyester Operations
      Nylon Operations
   42




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##### Table of Contents



Corporate
  Liquidity and Capital Resources
 Liquidity Assessment
   Capital Expenditures
 43




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##### Table of Contents



Joint Venture Investments
  Cash Provided by (Used In) Continuing Operations
    44




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##### Table of Contents



Cash Provided By (Used In) Investing Activities and Financing Activities
   Other Factors Affecting Liquidity
 Asset Sales.
 45




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##### Table of Contents



1.
    
    The Company must receive fair market value for the Collateral sold or disposed of;2.
    
    Fair market value must be certified by the Companys Chief Executive Officer or Chief
Financial Officer and for sales of Collateral in excess of $5.0 million, by the Companys
Board of Directors;3.
    
    At least 75% of the consideration for the sale of the Collateral must be in the form of
cash or cash equivalents and 100% of the proceeds must be deposited by the Company into a
specified account designated under the Indenture (the Collateral Account); and4.
    
    Any remaining consideration from an asset sale that is not cash or cash equivalents
must be pledged as Collateral.
    1.
    
    The Company must receive fair market value for the Non-Collateral sold or disposed of;2.
    
    Fair market value must be certified by the Companys Chief Executive Officer or Chief
Financial Officer and for asset sales in excess of $5.0 million, by the Companys Board of
Directors; and,3.
    
    At least 75% of the consideration for the sale of Non-Collateral must be in the form of
cash or cash equivalents.
  pari
passu
 pari passu pari passu
 46




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##### Table of Contents



Other Potential Resources
 Stock Repurchase Program.
 Environmental Liabilities.
 47




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##### Table of Contents



Market Conditions.
 Long-Term Debt
   48




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##### Table of Contents



49




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##### Table of Contents



Recent Accounting Pronouncements
   Off Balance Sheet Arrangements
  50




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##### Table of Contents



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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##### Table of Contents



Interest Rate Risk:
 Currency Exchange Rate Risk:
   March 29,
    
    
    June 29,2009
    
    
    2008Foreign currency purchase contracts:Notional amount
    
    $
    883
    
    
    $
    492Fair value
    
    
    885
    
    
    
    499Net (gain) loss
    
    $
    (2
    )
    
    $
    (7
    )Foreign currency sales contracts:Notional amount
    
    $
    656
    
    
    $
    620Fair value
    
    
    691
    
    
    
    642Net gain (loss)
    
    $
    (35
    )
    
    $
    (22
    )
  Inflation and Other Risks:
 52




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53




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The Company is dependent on a relatively small number of customers for a significant portion of
its net sales.
   
    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
    
    Programs12/29/08 - 01/28/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,807,24101/29/09 - 02/28/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,807,24103/01/09 - 03/29/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,807,241Total
    
    
    
    
    
    
    
    
    
    
    
 54




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##### Table of Contents



10.1
    
    Amendment to the Unifi, Inc. Supplemental Key Employee Retirement Plan (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K (Reg. No. 001-10542)
filed on December 31, 2008).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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##### Table of Contents



UNIFI, INC.Date:  May 8, 2009
    /s/    RONALD L. SMITHRonald L. SmithVice President and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) 
 56