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 September 27, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 1-10542
 UNIFI, INC.
  New York 
(State or other jurisdiction of 
incorporation or organization)
    
    11-2165495
(I.R.S. Employer
Identification No.)P.O. Box 19109  7201 West Friendly Avenue Greensboro, NC
(Address of principal executive offices)
    
    27419
(Zip Code)
 (336) 294-4410
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
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INDEX
 PagePart I
    
    Item 1.
    
    Financial Statements:Financial Information
    
    
    
    Condensed Consolidated Balance Sheets as of September 27, 2009 and June 28, 2009
    
    
    3Condensed
Consolidated Statements of Operations for the Quarters EndedSeptember 27, 2009 and September 28, 2008
    
    
    4Condensed
Consolidated Statements of Cash Flows for the Quarters EndedSeptember 27, 2009 and September 28, 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    41Item 4.
    
    Controls and Procedures
    
    
    42Part IIOther Information
    
    Item 1.
    
    Legal Proceedings
    
    
    43Item 1A.
    
    Risk Factors
    
    
    43Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43Item 3.
    
    Defaults Upon Senior Securities
    
    
    43Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    43Item 5.
    
    Other Information
    
    
    43Item 6.
    
    Exhibits
    
    
    44
  2




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##### 



September 27,
    
    
    June 28,2009
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    55,700
    
    
    $
    42,659Receivables, net
    
    
    79,358
    
    
    
    77,810Inventories
    
    
    99,414
    
    
    
    89,665Deferred income taxes
    
    
    1,261
    
    
    
    1,223Assets held for sale
    
    
    1,250
    
    
    
    1,350Restricted cash
    
    
    5,843
    
    
    
    6,477Other current assets
    
    
    5,214
    
    
    
    5,464Total current assets
    
    
    248,040
    
    
    
    224,648Property, plant and equipment
    
    
    751,837
    
    
    
    744,253Less accumulated depreciation
    
    
    (592,751
    )
    
    
    (583,610
    )159,086
    
    
    
    160,643Investments in unconsolidated affiliates
    
    
    60,641
    
    
    
    60,051Restricted cash
    
    
    
    
    
    
    453Intangible assets, net
    
    
    16,712
    
    
    
    17,603Other noncurrent assets
    
    
    13,439
    
    
    
    13,534Total assets
    
    $
    497,918
    
    
    $
    476,932LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    33,528
    
    
    $
    26,050Accrued expenses
    
    
    18,876
    
    
    
    15,269Income taxes payable
    
    
    727
    
    
    
    676Current
maturities of long-term debt and other current liabilities
    
    
    6,212
    
    
    
    6,845Total current liabilities
    
    
    59,343
    
    
    
    48,840Notes payable
    
    
    178,722
    
    
    
    179,222Other long-term debt and liabilities
    
    
    2,907
    
    
    
    3,485Deferred income taxes
    
    
    438
    
    
    
    416Commitments and contingenciesShareholders equity:Common stock
    
    
    6,206
    
    
    
    6,206Capital in excess of par value
    
    
    30,843
    
    
    
    30,250Retained earnings
    
    
    207,987
    
    
    
    205,498Accumulated other comprehensive income
    
    
    11,472
    
    
    
    3,015256,508
    
    
    
    244,969Total liabilities and shareholders equity
    
    $
    497,918
    
    
    $
    476,932
  3




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##### 



For the Quarters EndedSeptember 27,
    
    
    September 28,2009
    
    
    2008Summary of Operations:Net sales
    
    $
    142,851
    
    
    $
    169,009Cost of sales
    
    
    123,445
    
    
    
    155,584Write down of long-lived assets
    
    
    100
    
    
    
    Selling, general & administrative expenses
    
    
    11,164
    
    
    
    10,545Provision for bad debts
    
    
    576
    
    
    
    558Other operating (income) expense, net
    
    
    (87
    )
    
    
    (561
    )Non-operating (income) expense:Interest income
    
    
    (746
    )
    
    
    (913
    )Interest expense
    
    
    5,492
    
    
    
    5,965Gain on extinguishment of debt
    
    
    (54
    )
    
    
    Equity in earnings of unconsolidated affiliates
    
    
    (2,063
    )
    
    
    (3,482
    )Income from continuing operations before income taxes
    
    
    5,024
    
    
    
    1,313Provision for income taxes
    
    
    2,535
    
    
    
    1,885Income (loss) from continuing operations
    
    
    2,489
    
    
    
    (572
    )Loss from discontinued operations  net of tax
    
    
    
    
    
    
    (104
    )Net income (loss)
    
    $
    2,489
    
    
    $
    (676
    )Income (loss) per common share (basic and diluted):Income (loss)  continuing operations
    
    $
    .04
    
    
    $
    (.01
    )Loss  discontinued operations
    
    
    
    
    
    
    Net income (loss)  basic and diluted
    
    $
    .04
    
    
    $
    (.01
    )Weighted average outstanding shares of common stock (basic and diluted)
    
    
    62,057
    
    
    
    61,134
   4




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##### 



For the Quarters EndedSeptember 27,
    
    
    September 28,2009
    
    
    2008Cash and cash equivalents at beginning of year
    
    $
    42,659
    
    
    $
    20,248Operating activities:Net income (loss)
    
    
    2,489
    
    
    
    (676
    )Adjustments to reconcile net income (loss) to net cash
provided by continuing operating activities:Loss from discontinued operations
    
    
    
    
    
    
    104Earnings of unconsolidated affiliates, net of distributions
    
    
    (452
    )
    
    
    (1,417
    )Depreciation
    
    
    5,805
    
    
    
    8,980Amortization
    
    
    1,168
    
    
    
    1,069Stock-based compensation expense
    
    
    593
    
    
    
    282Deferred compensation expense (recovery), net
    
    
    177
    
    
    
    (81
    )Net gain on asset sales
    
    
    (94
    )
    
    
    (316
    )Gain on extinguishment of debt
    
    
    (54
    )
    
    
    Write down of long-lived assets
    
    
    100
    
    
    
    Deferred income tax
    
    
    63
    
    
    
    (115
    )Provision for bad debts
    
    
    576
    
    
    
    558Other
    
    
    40
    
    
    
    296Change in assets and liabilities, excluding effects of
foreign currency adjustments
    
    
    2,811
    
    
    
    (6,082
    )Net cash provided by continuing operating activities
    
    
    13,222
    
    
    
    2,602Investing activities:Capital expenditures
    
    
    (2,106
    )
    
    
    (3,569
    )Change in restricted cash
    
    
    1,763
    
    
    
    5,183Proceeds from sale of capital assets
    
    
    107
    
    
    
    101Other
    
    
    
    
    
    
    (94
    )Net cash (used in) provided by investing activities
    
    
    (236
    )
    
    
    1,621Financing activities:Payments of long-term debt
    
    
    (2,198
    )
    
    
    (9,080
    )Borrowings of long-term debt
    
    
    
    
    
    
    4,600Proceeds from stock option exercises
    
    
    
    
    
    
    3,551Other
    
    
    
    
    
    
    37Net cash used in financing activities
    
    
    (2,198
    )
    
    
    (892
    )Cash flows of discontinued operations:Operating cash flows
    
    
    
    
    
    
    (114
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    2,253
    
    
    
    (3,069
    )Net increase in cash and cash equivalents
    
    
    13,041
    
    
    
    148Cash and cash equivalents at end of period
    
    $
    55,700
    
    
    $
    20,396
  5




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1.
    
    Basis of Presentation
 The Condensed Consolidated Balance Sheet of Unifi, Inc. (the Company) at June 28, 2009 has
been derived from the audited financial statements at that date but does not include all of the
information and footnotes required by United States (U.S.) generally accepted accounting
principles (GAAP) for complete financial statements. Except as noted with respect to the
balance sheet at June 28, 2009, this information is unaudited and reflects all adjustments which
are, in the opinion of management, necessary to present fairly the financial position at
September 27, 2009, and the results of operations and cash flows for the periods ended September
27, 2009 and September 28, 2008. Such adjustments consisted of normal recurring items necessary
for fair presentation in conformity with U.S. GAAP. Preparing financial statements requires
management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from these estimates. Interim
results are not necessarily indicative of results for a full year. The information included in
this 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 28, 2009. Certain prior
period amounts have been reclassified to conform to current year presentation.
 The significant accounting policies followed by the Company are presented on pages 74 to 80 of
the Companys Annual Report on Form 10-K for the fiscal year ended June 28, 2009.
 2.
    
    Inventories
 Inventories are comprised of the following (amounts in thousands):
 September 27,
    
    
    June 28,2009
    
    
    2009Raw materials and supplies
    
    $
    43,331
    
    
    $
    42,351Work in process
    
    
    6,462
    
    
    
    5,936Finished goods
    
    
    49,621
    
    
    
    41,378$
    99,414
    
    
    $
    89,665
 3.
    
    Accrued Expenses
 Accrued expenses are comprised of the following (amounts in thousands):
 September 27,
    
    
    June 28,2009
    
    
    2009Payroll and fringe benefits
    
    $
    6,494
    
    
    $
    6,957Severance
    
    
    1,292
    
    
    
    1,385Interest
    
    
    7,588
    
    
    
    2,496Utilities
    
    
    2,339
    
    
    
    2,085Retiree reserve
    
    
    130
    
    
    
    190Property taxes
    
    
    
    
    
    
    1,094Other
    
    
    1,033
    
    
    
    1,062$
    18,876
    
    
    $
    15,269
 6




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4.
    
    Other Operating (Income) Expense, Net
 The following table summarizes the Companys other operating (income) expense, net (amounts in
thousands):
 For the Quarters EndedSeptember 27,
    
    
    September 28,2009
    
    
    2008Gain on sale of fixed assets
    
    $
    (94
    )
    
    $
    (316
    )Currency (gains) losses, net
    
    
    13
    
    
    
    (304
    )Other, net
    
    
    (6
    )
    
    
    59Other operating (income) expense, net
    
    $
    (87
    )
    
    $
    (561
    )
 5.
    
    Intangible Assets, Net
 Other intangible assets subject to amortization consisted of customer relationships of $22.0
million and non-compete agreements of $4.0 million which were entered in connection with an
asset acquisition consummated in fiscal year 2007. The customer list is being amortized in a
manner which reflects the expected economic benefit that will be received over its thirteen year
life and the non-compete agreement is being amortized using the straight-line method over seven
years. There are no residual values related to these intangible assets. Accumulated
amortization at September 27, 2009 and June 28, 2009 for these intangible assets was $9.5
million and $8.7 million, respectively. These intangible assets relate to the polyester
segment.
 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 September 27, 2009 and June 28, 2009 was $0.3 million and $0.2 million,
respectively. These intangible assets relate to the polyester segment.
 The following table represents the expected intangible asset amortization for the next five
fiscal years (amounts in thousands):
 Aggregate Amortization Expenses2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015Customer lists
    
    $
    2,173
    
    
    $
    2,022
    
    
    $
    1,837
    
    
    $
    1,481
    
    
    $
    1,215Non-compete contract
    
    
    571
    
    
    
    571
    
    
    
    571
    
    
    
    286
    
    
    
    $
    2,744
    
    
    $
    2,593
    
    
    $
    2,408
    
    
    $
    1,767
    
    
    $
    1,215
 6.
    
    Recent Accounting Pronouncements
 In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 168 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles, a replacement of SFAS 162, The
Hierarchy of Generally Accepted Accounting Principles. The statement was effective for all
financial statements issued for interim and annual periods ending after September 15, 2009. On
June 30, 2009 the FASB issued its first Accounting Standard Update (ASU) No. 2009-01 Topic
105  Generally Accepted Accounting Principles amendments based on No. 168 the FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.
Accounting Standards Codification (ASC) 105-10 establishes a single source of GAAP which is to
be applied by nongovernmental entities. All guidance contained in the ASC carries an equal
level of authority; however there are standards that will remain authoritative until such time
that each is integrated into the ASC. The Securities and Exchange
Commission (SEC) also issues rules and interpretive releases that are also sources of
authoritative GAAP
 7




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##### 



for publicly traded registrants. The ASC superseded all existing non-SEC
accounting and reporting standards. All non-grandfathered accounting literature not included in
the ASC will be considered non-authoritative.Effective June 29, 2009, the Company adopted ASC 805-20, Business Combinations 
Identifiable Assets, Liabilities and Any Non-Controlling Interest (ASC 805-20). ASC 805-20
amends and clarifies ASC 805 which requires that the acquisition method of accounting, instead
of the purchase method, be applied to all business combinations and that an acquirer is
identified in the process. The guidance requires that fair market value be used to recognize
assets and assumed liabilities instead of the cost allocation method where the costs of an
acquisition are allocated to individual assets based on their estimated fair values. Goodwill
would be calculated as the excess purchase price over the fair value of the assets acquired;
however, negative goodwill will be recognized immediately as a gain instead of being allocated
to individual assets acquired. Costs of the acquisition will be recognized separately from the
business combination. The end result is that the statement improves the comparability,
relevance and completeness of assets acquired and liabilities assumed in a business combination.
The adoption of this guidance had no material effect on the Companys financial statements.
 In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements,
(ASU 2009-13) and ASU No. 2009-14, Certain Arrangements That Include Software Elements,
(ASU 2009-14). ASU 2009-13 requires entities to allocate revenues in the absence of
vendor-specific objective evidence or third party evidence of selling price for deliverables
using a selling price hierarchy associated with the relative selling price method. ASU 2009-14
removes tangible products from the scope of software revenue guidance and provides guidance on
determining whether software deliverables in an arrangement that includes a tangible product are
covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be
applied on a prospective basis for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company
does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a material impact on the
Companys consolidated results of operations or financial condition.
 7.
    
    Comprehensive Income (Loss)
 Comprehensive income amounted to $10.9 million for the first quarter of fiscal year 2010
compared to comprehensive loss of $16.5 million for the first quarter of fiscal year 2009.
Comprehensive income was comprised of net income of $2.5 million and positive cumulative
translation adjustments of $8.4 million for the first quarter of fiscal year 2010.
Comparatively, comprehensive losses for the corresponding period in the prior fiscal year were
derived from net loss of $0.7 million and negative cumulative translation adjustments of $15.8
million. 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 Affiliates
 The following table represents the Companys investments in unconsolidated affiliates:
 Affiliate Name
    
    Date Acquired
    
    Location
    
    Percent OwnershipYihua Unifi Fibre Company
Limited (YUFI) (1)
    
    Aug-05
    
    Yizheng, Jiangsu
Province, Peoples
Republic of China
    
    
    50
    %Parkdale America, LLC (PAL)
    
    Jun-97
    
    North and South Carolina
    
    
    34
    %U.N.F. Industries, LLC (UNF)
    
    Sep-00
    
    Migdal Ha  Emek, Israel
    
    
    50
    %
 
 (1)
    
    The Company completed the sale of YUFI during the fourth quarter of fiscal year 2009. 8




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##### 



Condensed income statement information for the quarters ended September 27, 2009 and September
28, 2008, of the combined unconsolidated equity affiliates are as follows (amounts in
thousands):
 For the Quarter Ended September 27, 2009YUFI (1)
    
    PAL
    
    UNF
    
    TotalNet sales
    
    
    
    
    
    $
    94,870
    
    
    $
    4,576
    
    
    $
    99,446Gross profit
    
    
    
    
    
    
    7,683
    
    
    
    726
    
    
    
    8,409Depreciation and amortization
    
    
    
    
    
    
    4,552
    
    
    
    474
    
    
    
    5,026Income from operations
    
    
    
    
    
    
    4,771
    
    
    
    394
    
    
    
    5,165Net income
    
    
    
    
    
    
    6,917
    
    
    
    355
    
    
    
    7,272For the Quarter Ended September 28, 2008YUFI
    
    PAL
    
    UNF
    
    TotalNet sales
    
    $
    39,881
    
    
    $
    122,083
    
    
    $
    5,892
    
    
    $
    167,856Gross profit (loss)
    
    
    (2,048
    )
    
    
    6,246
    
    
    
    (789
    )
    
    
    3,409Depreciation and amortization
    
    
    1,395
    
    
    
    4,457
    
    
    
    474
    
    
    
    6,326Income (loss) from operations
    
    
    (4,156
    )
    
    
    3,478
    
    
    
    (1,270
    )
    
    
    (1,948
    )Net income (loss)
    
    
    (4,617
    )
    
    
    10,146
    
    
    
    (1,143
    )
    
    
    4,386
 PAL receives benefits under the Food, Conservation, and Energy Act of 2008 (2008 U.S.
Farm Bill) which extended the existing upland cotton and extra long staple cotton programs,
including economic adjustment assistance provisions for ten years. Beginning August 1, 2008,
the program provides textile mills a subsidy of four cents per pound on eligible upland cotton
consumed during the first four years and three cents per pound for the last six years. The
economic assistance received under this program must be used to acquire, construct, install,
modernize, develop, convert or expand land, plant, buildings, equipment, or machinery. Capital
expenditures must be directly attributable to the purpose of manufacturing upland cotton into
eligible cotton products in the U.S. The recipients have the marketing year from August 1 to
July 31, plus eighteen months to make the capital expenditures. In the period when both
criteria have been met; eligible upland cotton has been consumed, and qualifying capital
expenditures under the program have been made, the economic assistance is recognized as
reductions to cost of sales. PAL received economic assistance under the program of $14.0
million and $4.0 million during the eleven months ended June 28, 2009 and the quarter ended
September 27, 2009, respectively. Based on the previously discussed accounting treatment, PAL
recognized reductions to cost of sales of $9.7 million and $0.4 million for the same respective
periods. Accordingly as of September 27, 2009, $7.9 million of the received economic
assistance remains as deferred revenue to be recognized as future qualifying capital
expenditures are made.
 On October 19, 2009 PAL notified the Company that $8.2 million of the $9.7 million in
capital expenditures recognized for fiscal 2009 had been disqualified by the U.S. Department of
Agriculture. PAL has appealed the decision with the U.S. Department of Agriculture, but it is
unknown to the Company as to when a final ruling will be made. In the event that PALs appeal
is unsuccessful, PAL may be required to adjust prior period earnings, but PAL expects there
will be sufficient future qualifying capital expenditures to recapture any benefit that may
remain disqualified after the appeal process has been completed.
 In August 2005, the Company formed YUFI, a 50/50 joint venture with Sinopec Yizheng Chemical
Fiber Co., Ltd, (YCFC), to manufacture process and market polyester filament yarn in YCFCs
facilities in Yizheng, Jiangsu Province, Peoples Republic of China (China). During fiscal
year 2008, the Companys management explored strategic options with its joint venture partner in
China with the ultimate goal of determining if there was a viable path to profitability for
YUFI. The Companys management concluded that although YUFI had successfully grown its position
in high value and premier value-added (PVA) products, commodity sales would continue to be a
large and unprofitable portion of the joint ventures business. In addition, the Company
believed YUFI had focused too much attention and energy on non-value added issues, distracting
management from its primary PVA objectives. Based on these conclusions, the Company decided to
exit the joint venture and on July 30, 2008, the Company announced that it had reached a
proposed agreement to sell its 50% interest in YUFI to its partner for $10.0 million.
 9




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##### 



As a result of the agreement with YCFC, the Company initiated a review of the carrying value of
its investment in YUFI and determined that the carrying value of its investment in YUFI exceeded
its fair value. Accordingly, the Company recorded a non-cash impairment charge of $6.4 million
in the fourth quarter of fiscal year 2008.
 The Company expected to close the transaction in the second quarter of fiscal year 2009 pending
negotiation and execution of definitive agreements and Chinese regulatory approvals. The
agreement provided for YCFC to immediately take over operating control of YUFI, regardless of
the timing of the final approvals and closure of the equity sale transaction. During the first
quarter of fiscal year 2009, the Company gave up one of its senior staff appointees and YCFC
appointed its own designee as General Manager of YUFI, who assumed full responsibility for the
operating activities of YUFI at that time. As a result, the Company lost its ability to
influence the operations of YUFI and therefore the Company ceased recording its share of losses
commencing in the same quarter.
 In December 2008, the Company renegotiated the proposed agreement to sell its interest in YUFI
to YCFC for $9.0 million and recorded an additional impairment charge of $1.5 million, which
included approximately $0.5 million related to certain disputed accounts receivable and $1.0
million related to the fair value of its investment, as determined by the re-negotiated equity
interest sales price, which was lower than carrying value.
 On March 30, 2009, the Company closed on the sale and received $9.0 million in proceeds related
to its investment in YUFI. The Company continues to service customers in Asia through Unifi
Textiles Suzhou Co., Ltd. (UTSC), a wholly-owned subsidiary based in Suzhou, China, that is
focused on the development, sales and service of PVA yarns.
 On September 30, 2009, the Company completed an agreement with the Companys partner, Nilit Ltd.
(Nilit), to shift one-third of the spinning assets of UNF, to a newly formed joint venture,
UNF America, LLC, for the purpose of producing nylon POY in Nilits Martinsville, Virginia
plant. This new configuration will allow UNF America, LLC to produce Berry Amendment and North
American Free Trade Agreement (NAFTA) compliant yarns. The new agreement will shorten the
Companys supply chain resulting in improvements in the working capital, flexibility and the
financial results of its nylon joint ventures.
 9.
    
    Income Taxes
 The Companys income tax provision for the quarter ended September 27, 2009 resulted in tax
expense at an effective rate of 50.5% compared to the quarter ended September 28, 2008 which
resulted in a tax expense at an effective rate of 143.5%. The difference between the Companys
income tax expense and the U.S. statutory rate for the quarter ended September 27, 2009 was
primarily due to losses in the U.S. and other jurisdictions for which no tax benefit could be
recognized while operating profit was generated in other taxable jurisdictions. The difference
between the Companys income tax benefit and the U.S. statutory rate for the quarter ended
September 28, 2008 was also due to losses in the U.S. and other jurisdictions for which no tax
benefit could be recognized.
 Deferred income taxes have been provided for the temporary differences between financial
statement carrying amounts and the tax basis of existing assets and liabilities. The valuation
allowance on the Companys net domestic deferred tax assets is reviewed quarterly and will be
maintained until sufficient positive evidence exists to support the reversal of the valuation
allowance. In addition, until such time that the Company determines it is more likely than not
that it will generate sufficient taxable income to realize its deferred tax assets, income tax
benefits associated with future period losses will be fully reserved. The valuation allowance
increased $2.2 million in the quarter ended September 27, 2009 compared to a $0.6 million
increase in the quarter ended September 28, 2008.
 10




---



##### 



The Company believes it is reasonably possible unrecognized tax benefits will decrease by
approximately $1.2 million by the end of fiscal year 2010 as a result of expiring tax credit
carry forwards.
 The Company has elected to classify interest and penalties recognized as income tax expense.
The Company did not accrue interest or penalties related to uncertain tax positions during
fiscal year 2009 or during the quarter ended September 27, 2009.
 The Company is subject to income tax examinations for U.S. federal income taxes for fiscal years
2004 through 2009, for non-U.S. income taxes for tax years 2001 through 2009, and for state and
local income taxes for fiscal years 2001 through 2009.
 10.
    
    Stock-Based Compensation
 On October 29, 2008, the shareholders of the Company approved the 2008 Unifi, Inc. Long-Term
Incentive Plan (2008 Long-Term Incentive Plan). The 2008 Long-Term Incentive Plan authorized
the issuance of up to 6,000,000 shares of Common Stock pursuant to the grant or exercise of
stock options, including Incentive Stock Options (ISO), Non-Qualified Stock Options (NQSO)
and restricted stock, but not more than 3,000,000 shares may be issued as restricted stock.
Option awards are granted with an exercise price not less than the market price of the Companys
stock at the date of grant.
 During the second quarter of fiscal year 2009, the Compensation Committee (Committee) of the
Board of Directors (Board) authorized the issuance of 280,000 stock options from the 2008
Long-Term Incentive Plan to certain key employees. The stock options are subject to a market
condition which vests the options on the date that the closing price of the Companys common
stock shall have been at least $6.00 per share for thirty consecutive trading days. The
exercise price is $4.16 per share which is equal to the market price of the Companys stock on
the grant date. The Company used a Monte Carlo stock option model to estimate the fair value of
$2.49 per share and the derived vesting period of 1.2 years.
 During the first quarter of fiscal year 2010, the Committee authorized the issuance of 1,700,000
stock options from the 2008 Long-Term Incentive Plan to certain key employees and certain
members of the Board. The stock options vest ratably over a three year period and have 10-year
contractual terms. The Company used the Black-Scholes model to estimate the fair values of the
options granted. The following table provides detail of the number of options granted during
the first quarter of fiscal year 2010 and the related assumptions used in the valuation of these
awards:
 ExpectedOptions
    
    term
    
    Exercise
    
    Interest
    
    
    
    
    
    Dividend
    
    Fairgranted
    
    (years)
    
    price
    
    rate
    
    Volatility
    
    yield
    
    value1,660,000
    
    
    5.5
    
    
    $
    1.91
    
    
    
    2.8
    %
    
    
    63.6
    %
    
    
    
    
    
    $
    1.1040,000
    
    
    5.5
    
    
    $
    2.86
    
    
    
    2.5
    %
    
    
    63.9
    %
    
    
    
    
    
    $
    1.65
 The Company incurred $0.6 million and $0.3 million in the first quarter of fiscal years 2010 and
2009 respectively, in stock-based compensation expense which was recorded as selling, general
and administrative (SG&A) expenses with the offset to capital in excess of par value.
 During the first quarter of fiscal year 2009, the Company issued 1,268,300 shares of common
stock as a result of the exercise of stock options. There were no options exercised during the
first quarter of fiscal year 2010.
 11




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##### 



11.
    
    Assets Held for Sale
 The Company has assets held for sale related to the consolidation of its polyester manufacturing
capacity that are comprised of the remaining assets and structures in Kinston, North Carolina
(Kinston).
 During the first quarter of fiscal year 2010, the Company entered into a contract to sell
certain of the assets held for sale which is scheduled to close during the second quarter of
fiscal year 2010. Based on the contract price, the Company recorded $0.1 million in non-cash
impairment charges in the first quarter of fiscal year 2010.
 The following table summarizes by category assets held for sale (amounts in thousands):
 September 27,
    
    
    June 28,2009
    
    
    2009Machinery and equipment
    
    $
    1,250
    
    
    $
    1,350
 12.
    
    Severance and Restructuring Charges
 Severance
 The Company recorded severance expense of $2.4 million for its former President and Chief
Executive Officer (CEO) during the first quarter of fiscal year 2008 and $1.7 million of
severance expense related to its former Chief Financial Officer (CFO) during the second
quarter of fiscal year 2008.
 In the third quarter of fiscal year 2009, the Company reorganized, reducing its workforce due to
the economic downturn. Approximately 200 salaried and wage employees were affected by this
reorganization related to the Companys efforts to reduce costs. As a result, the Company
recorded $0.3 million in severance charges related to certain allocated salaried corporate and
manufacturing support staff.
 The table below summarizes changes to the accrued severance and accrued restructuring accounts
for the quarter ended September 27, 2009 (amounts in thousands):
 Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atJune 28, 2009
    
    Charges
    
    Adjustments
    
    Amounts Used
    
    September 27, 2009Accrued severance
    
    $
    1,687
    (1)
    
    
    20
    
    
    
    
    
    
    
    (415
    )
    
    $
    1,292
 
 (1)
    
    As of June 28, 2009, the Company classified $0.3 million of executive severance as
long-term. 13.
    
    Discontinued Operations
 The 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 is in the
process of filing the appropriate dissolution papers with the Irish government. For the quarter
ended September 28, 2008, the Company recorded losses of $0.1 million related to the closure.
 12




---



##### 



14.
    
    Derivatives and Fair Value Measurements
 The Company accounts for derivative contracts and hedging activities at fair value. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives are either offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or are recorded in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of a derivatives
change in fair value is immediately recognized in earnings. The Company does not enter into
derivative financial instruments for trading purposes nor is it a party to any leveraged
financial instruments.The Company conducts its business in various foreign currencies. As a result, it is
subject to the transaction exposure that arises from foreign exchange rate movements between the
dates that foreign currency transactions are recorded and the dates they are consummated. The
Company utilizes some natural hedging to mitigate these transaction exposures. The Company
primarily enters into foreign currency forward contracts for the purchase and sale of European,
North American and Brazilian currencies to use as economic hedges against balance sheet and
income statement currency exposures. These contracts are principally entered into for the
purchase of inventory and equipment and the sale of Company products into export markets.
Counter-parties for these instruments are major financial institutions.
 Currency forward contracts are used to hedge exposure for sales in foreign currencies based on
specific sales made to customers. Generally, 60-75% of the sales value of these orders is
covered by forward contracts. Maturity dates of the forward contracts are intended to match
anticipated receivable collections. The Company marks the forward contracts to market at month
end and any realized and unrealized gains or losses are recorded as other operating (income)
expense. The Company also enters currency forward contracts for committed inventory purchases
made by its Brazilian subsidiary. Generally 5% of these inventory purchases are covered by
forward contracts although 100% of the cost may be covered by individual contracts in certain
instances. The latest maturity for all outstanding purchase and sales foreign currency forward
contracts is November 2009.
 Under the ASC there is now a common definition of fair value to be used and a hierarchy for fair
value measurements based on the type of inputs that are used to value the assets or liabilities
at fair value.The levels of the fair value hierarchy are:
 
    
     Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities that the reporting entity has the ability to access at the measurement
date,
    
 Level 2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly, or
    
 Level 3 inputs are unobservable inputs for the asset or liability. Unobservable
inputs shall be used to measure fair value to the extent that observable inputs are not
available, thereby allowing for situations in which there is little, if any, market
activity for the asset or liability at the measurement date.
 13




---



##### 



The dollar equivalent of these forward currency contracts and their related fair values are
detailed below (amounts in thousands):
 September 27,
    
    
    June 28,2009
    
    
    2009Level 2
    
    
    Level 2Foreign currency purchase contracts:Notional amount
    
    $
    134
    
    
    $
    110Fair value
    
    
    141
    
    
    
    130Net gain
    
    $
    (7
    )
    
    $
    (20
    )Foreign currency sales contracts:Notional amount
    
    $
    628
    
    
    $
    1,121Fair value
    
    
    622
    
    
    
    1,167Net gain (loss)
    
    $
    6
    
    
    $
    (46
    )
 The fair values of the foreign exchange forward contracts at the respective quarter-end dates are
based on discounted quarter-end forward currency rates. The total impact of foreign currency
related items that are reported on the line item other operating (income) expense, net in the
Consolidated Statements of Operations, including transactions that were hedged and those that
were not hedged, was a pre-tax loss of $13 thousand for the quarter ended September 27, 2009 and
a pre-tax gain of $0.3 million for the quarter ended September 28, 2008.
 The Company calculates the fair values of its 2014 notes based on the traded price of
the notes on the latest trade date prior to its period end. These are considered Level 1 inputs
in the fair value hierarchy. The following table shows the fair values at September 27, 2009 and
June 28, 2009 which were calculated based on the latest trade price on September 15, 2009 and
June 19, 2009, respectively (amounts in thousands):
 September 27, 2009
    
    June 28, 2009Carrying Value
    
    Fair Value
    
    Carrying Value
    
    Fair Value2014 Notes Payable
    
    $
    178,722
    
    
    $
    164,424
    
    
    $
    179,222
    
    
    $
    112,910
 15.
    
    Contingencies
 On September 30, 2004, the Company completed its acquisition of the polyester filament
manufacturing assets located at Kinston from INVISTA S.a.r.l. (INVISTA). The land for the
Kinston site was leased pursuant to a 99 year ground lease (Ground Lease) with E.I. DuPont de
Nemours (DuPont). Since 1993, DuPont has been investigating and cleaning up the Kinston site
under the supervision of the U.S. Environmental Protection Agency (EPA) and the North Carolina
Department of Environment and Natural Resources (DENR) pursuant to the Resource Conservation
and Recovery Act Corrective Action program. The Corrective Action program requires DuPont to
identify all potential areas of environmental concern (AOCs), assess the extent of containment
at the identified AOCs and clean it up to comply with applicable regulatory standards.
Effective March 20, 2008, the Company entered into a Lease Termination Agreement associated with
conveyance of certain assets at Kinston to DuPont. This agreement terminated the Ground Lease
and relieved the Company of any future responsibility for environmental remediation, other than
participation with DuPont, if so called upon, with regard to the Companys period of operation
of the Kinston site. However, the Company continues to own a satellite service facility
acquired in the INVISTA transaction that has contamination from DuPonts operations and is
monitored by DENR. This site has been remediated by DuPont and DuPont has received authority
from DENR to discontinue remediation, other than natural attenuation. DuPonts duty to monitor
and report to DENR will be transferred to the Company in the future, at which time DuPont must
pay the Company for seven years of monitoring and reporting costs and the Company will assume
responsibility for any future remediation and
 14




---



##### 



monitoring of the site. At this time, the Company has no basis to determine if and when it will
have any responsibility or obligation with respect to the AOCs or the extent of any potential
liability for the same.
 16.
    
    Related Party Transaction
 In fiscal 2007, the Company purchased the polyester and nylon texturing operations of Dillon
Yarn Company (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 for certain sales and transitional services to be provided by
Dillons sales staff and executive management. On December 1, 2008, the Company entered into an
agreement to extend the polyester services portion of the 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 recorded $0.4 million and $0.3 million of SG&A expense for
the first quarter of fiscal years 2010 and 2009, respectively, related to this contract and the
related amendment. Mr. Stephen Wener is the President and CEO of Dillon. Mr. Wener has been a
member of the Companys Board since May 24, 2007. The terms of the Companys Sales and Service
Agreement with Dillon are, in managements opinion, no less favorable than the Company would
have been able to negotiate with an independent third party for similar services.
 17.
    
    Segment Disclosures
 The following is the Companys
segment information for the quarters
ended September 27, 2009 and September 28, 2008 (amounts in
thousands):
 Polyester
    
    Nylon
    
    TotalQuarter ended September 27, 2009:Net sales to external customers
    
    $
    104,460
    
    
    $
    38,391
    
    
    $
    142,851Inter-segment net sales
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    5,768
    
    
    
    893
    
    
    
    6,661Segment operating profit
    
    
    4,871
    
    
    
    3,271
    
    
    
    8,142Total assets
    
    
    325,162
    
    
    
    78,761
    
    
    
    403,923Quarter ended September 28, 2008:Net sales to external customers
    
    $
    122,979
    
    
    $
    46,030
    
    
    $
    169,009Inter-segment net sales
    
    
    
    
    
    
    71
    
    
    
    71Depreciation and amortization
    
    
    7,289
    
    
    
    2,434
    
    
    
    9,723Segment operating profit (loss)
    
    
    (161
    )
    
    
    3,041
    
    
    
    2,880Total assets
    
    
    366,181
    
    
    
    93,933
    
    
    
    460,114
 15




---



##### 



The following table provides reconciliations from segment data to consolidated reporting data
(amounts in thousands):
 For the Quarters EndedSeptember 27,
    
    
    September 28,2009
    
    
    2008Depreciation and amortization:Depreciation and amortization of specific reportable segment
assets
    
    $
    6,661
    
    
    $
    9,723Depreciation included in other operating (income) expense, net
    
    
    36
    
    
    
    36Amortization included in interest expense, net
    
    
    276
    
    
    
    290Consolidated depreciation and amortization
    
    $
    6,973
    
    
    $
    10,049Reconciliation of segment operating income to
income from continuing operations before income taxes:Reportable segments operating income
    
    $
    8,142
    
    
    $
    2,880Provision for bad debts
    
    
    576
    
    
    
    558Other operating (income) expense, net
    
    
    (87
    )
    
    
    (561
    )Interest expense, net
    
    
    4,746
    
    
    
    5,052Gain on extinguishment of debt
    
    
    (54
    )
    
    
    Equity in earnings of unconsolidated affiliates
    
    
    (2,063
    )
    
    
    (3,482
    )Income from continuing operations before income taxes
    
    $
    5,024
    
    
    $
    1,313
 For purposes of internal management reporting, segment operating profit (loss) represents
segment net sales less cost of sales, segment restructuring charges, segment impairments of
long-lived assets, goodwill impairments, and allocated SG&A expenses. Certain non-segment
manufacturing and unallocated SG&A costs are allocated to the operating segments based on
activity drivers relevant to the respective costs. This allocation methodology is updated as
part of the annual budgeting process.
 The primary differences between the segmented financial information of the operating segments,
as reported to management and the Companys consolidated reporting relate to the provision for
bad debts, other operating (income) expense, net and equity in earnings of unconsolidated
affiliates and related impairments.
 Segment operating profit (loss) excluded the provision for bad debts of $0.6 million for both
first quarter periods, respectively.
 The total assets for the polyester segment increased from $314.6 million at June 28, 2009 to
$325.2 million at September 27, 2009 primarily due to increases in cash, inventory, and accounts
receivable of $7.0 million, $6.3 million, and $0.5 million, respectively. These increases were
offset by decreases in other non-current assets, other current assets, property, plant, and
equipment, short-term restricted cash, and long-term restricted cash, of $0.7 million, $0.7
million, $0.7 million, $0.6 million, and $0.5 million, respectively. The total assets for the
nylon segment increased from $75.0 million at June 28, 2009 to $78.8 million at September 27,
2009 due primarily to increases in inventory and accounts receivable of $3.7 million and $0.7
million, respectively. These increases were offset by decreases in property, plant, and
equipment of $0.6 million.
 16




---



##### 



18.
    
    Subsequent Events
 The Company evaluated all events and material transactions for potential recognition or
disclosure through such time as these statements were filed with the SEC on October 30, 2009 and
has determined there were no items deemed reportable.
 19.
    
    Condensed Consolidated Guarantor and Non-Guarantor Financial Statements
 The guarantor subsidiaries presented below represent the Companys subsidiaries that are subject
to the terms and conditions outlined in the indenture governing the Companys issuance of the
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.
 17




---



##### 



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,820
    
    
    $
    (86
    )
    
    $
    38,966
    
    
    $
    
    
    
    $
    55,700Receivables, net
    
    
    160
    
    
    
    57,491
    
    
    
    21,707
    
    
    
    
    
    
    
    79,358Inventories
    
    
    
    
    
    
    69,852
    
    
    
    29,562
    
    
    
    
    
    
    
    99,414Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,261
    
    
    
    
    
    
    
    1,261Assets held for sale
    
    
    
    
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Restricted cash
    
    
    
    
    
    
    
    
    
    
    5,843
    
    
    
    
    
    
    
    5,843Other current assets
    
    
    115
    
    
    
    2,039
    
    
    
    3,060
    
    
    
    
    
    
    
    5,214Total current assets
    
    
    17,095
    
    
    
    130,546
    
    
    
    100,399
    
    
    
    
    
    
    
    248,040Property, plant and equipment
    
    
    11,356
    
    
    
    667,482
    
    
    
    72,999
    
    
    
    
    
    
    
    751,837Less accumulated depreciation
    
    
    (1,971
    )
    
    
    (539,128
    )
    
    
    (51,652
    )
    
    
    
    
    
    
    (592,751
    )9,385
    
    
    
    128,354
    
    
    
    21,347
    
    
    
    
    
    
    
    159,086Investments in unconsolidated affiliates
    
    
    
    
    
    
    57,848
    
    
    
    2,793
    
    
    
    
    
    
    
    60,641Investments in consolidated subsidiaries
    
    
    371,709
    
    
    
    
    
    
    
    
    
    
    
    (371,709
    )
    
    
    Intangible assets, net
    
    
    
    
    
    
    16,712
    
    
    
    
    
    
    
    
    
    
    
    16,712Other noncurrent assets
    
    
    44,974
    
    
    
    (29,061
    )
    
    
    (2,484
    )
    
    
    10
    
    
    
    13,439$
    443,163
    
    
    $
    304,399
    
    
    $
    122,055
    
    
    $
    (371,699
    )
    
    $
    497,918LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    86
    
    
    $
    28,117
    
    
    $
    5,325
    
    
    $
    
    
    
    $
    33,528Accrued expenses
    
    
    7,847
    
    
    
    8,505
    
    
    
    2,524
    
    
    
    
    
    
    
    18,876Income taxes payable
    
    
    
    
    
    
    
    
    
    
    727
    
    
    
    
    
    
    
    727Current maturities of long-term
debt and other current liabilities
    
    
    
    
    
    
    368
    
    
    
    5,844
    
    
    
    
    
    
    
    6,212Total current liabilities
    
    
    7,933
    
    
    
    36,990
    
    
    
    14,420
    
    
    
    
    
    
    
    59,343Long-term debt and other liabilities
    
    
    178,722
    
    
    
    2,907
    
    
    
    
    
    
    
    
    
    
    
    181,629Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    438
    
    
    
    
    
    
    
    438Shareholders/ invested equity
    
    
    256,508
    
    
    
    264,502
    
    
    
    107,197
    
    
    
    (371,699
    )
    
    
    256,508$
    443,163
    
    
    $
    304,399
    
    
    $
    122,055
    
    
    $
    (371,699
    )
    
    $
    497,918
 18




---



##### 



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,509
    
    
    $
    (813
    )
    
    $
    31,963
    
    
    $
    
    
    
    $
    42,659Receivables, net
    
    
    100
    
    
    
    56,031
    
    
    
    21,679
    
    
    
    
    
    
    
    77,810Inventories
    
    
    
    
    
    
    63,919
    
    
    
    25,746
    
    
    
    
    
    
    
    89,665Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,223
    
    
    
    
    
    
    
    1,223Assets held for sale
    
    
    
    
    
    
    1,350
    
    
    
    
    
    
    
    
    
    
    
    1,350Restricted cash
    
    
    
    
    
    
    
    
    
    
    6,477
    
    
    
    
    
    
    
    6,477Other current assets
    
    
    46
    
    
    
    2,199
    
    
    
    3,219
    
    
    
    
    
    
    
    5,464Total current assets
    
    
    11,655
    
    
    
    122,686
    
    
    
    90,307
    
    
    
    
    
    
    
    224,648Property, plant and equipment
    
    
    11,336
    
    
    
    665,724
    
    
    
    67,193
    
    
    
    
    
    
    
    744,253Less accumulated depreciation
    
    
    (1,899
    )
    
    
    (534,297
    )
    
    
    (47,414
    )
    
    
    
    
    
    
    (583,610
    )9,437
    
    
    
    131,427
    
    
    
    19,779
    
    
    
    
    
    
    
    160,643Investments in unconsolidated affiliates
    
    
    
    
    
    
    57,107
    
    
    
    2,944
    
    
    
    
    
    
    
    60,051Restricted cash
    
    
    
    
    
    
    
    
    
    
    453
    
    
    
    
    
    
    
    453Investments in consolidated subsidiaries
    
    
    360,897
    
    
    
    
    
    
    
    
    
    
    
    (360,897
    )
    
    
    Intangible assets, net
    
    
    
    
    
    
    17,603
    
    
    
    
    
    
    
    
    
    
    
    17,603Other noncurrent assets
    
    
    45,041
    
    
    
    (29,214
    )
    
    
    (2,293
    )
    
    
    
    
    
    
    13,534$
    427,030
    
    
    $
    299,609
    
    
    $
    111,190
    
    
    $
    (360,897
    )
    
    $
    476,932LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    37
    
    
    $
    19,888
    
    
    $
    6,125
    
    
    $
    
    
    
    $
    26,050Accrued expenses
    
    
    1,690
    
    
    
    11,033
    
    
    
    2,546
    
    
    
    
    
    
    
    15,269Income taxes payable
    
    
    
    
    
    
    
    
    
    
    676
    
    
    
    
    
    
    
    676Current maturities of long-term debt
and other current liabilities
    
    
    
    
    
    
    368
    
    
    
    6,477
    
    
    
    
    
    
    
    6,845Total current liabilities
    
    
    1,727
    
    
    
    31,289
    
    
    
    15,824
    
    
    
    
    
    
    
    48,840Long-term debt and other liabilities
    
    
    180,334
    
    
    
    1,920
    
    
    
    453
    
    
    
    
    
    
    
    182,707Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    416
    
    
    
    
    
    
    
    416Shareholders/ invested equity
    
    
    244,969
    
    
    
    266,400
    
    
    
    94,497
    
    
    
    (360,897
    )
    
    
    244,969$
    427,030
    
    
    $
    299,609
    
    
    $
    111,190
    
    
    $
    (360,897
    )
    
    $
    476,932
 19




---



##### 



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedSummary of Operations:Net sales
    
    $
    
    
    
    $
    104,547
    
    
    $
    38,358
    
    
    $
    (54
    )
    
    $
    142,851Cost of sales
    
    
    
    
    
    
    93,783
    
    
    
    29,630
    
    
    
    32
    
    
    
    123,445Write down of long-lived assets
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100Equity in subsidiaries
    
    
    (2,356
    )
    
    
    
    
    
    
    
    
    
    
    2,356
    
    
    
    Selling, general and administrative expenses
    
    
    (10
    )
    
    
    8,891
    
    
    
    2,337
    
    
    
    (54
    )
    
    
    11,164Provision for bad debts
    
    
    
    
    
    
    481
    
    
    
    95
    
    
    
    
    
    
    
    576Other operating (income) expense, net
    
    
    (5,474
    )
    
    
    5,517
    
    
    
    (130
    )
    
    
    
    
    
    
    (87
    )Non-operating (income) expenses:Interest income
    
    
    (62
    )
    
    
    
    
    
    
    (684
    )
    
    
    
    
    
    
    (746
    )Interest expense
    
    
    5,467
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    5,492Gain on extinguishment of debt
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )Equity in (earnings) losses of unconsolidated affiliates
    
    
    
    
    
    
    (2,352
    )
    
    
    (177
    )
    
    
    466
    
    
    
    (2,063
    )Income (loss) from continuing operations before income
taxes
    
    
    2,489
    
    
    
    (1,898
    )
    
    
    7,287
    
    
    
    (2,854
    )
    
    
    5,024Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    2,535
    
    
    
    
    
    
    
    2,535Net income (loss)
    
    $
    2,489
    
    
    $
    (1,898
    )
    
    $
    4,752
    
    
    $
    (2,854
    )
    
    $
    2,489
 20




---



##### 



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedSummary of Operations:Net sales
    
    $
    
    
    
    $
    129,691
    
    
    $
    39,667
    
    
    $
    (349
    )
    
    $
    169,009Cost of sales
    
    
    
    
    
    
    122,480
    
    
    
    33,435
    
    
    
    (331
    )
    
    
    155,584Equity in subsidiaries
    
    
    (3,891
    )
    
    
    
    
    
    
    
    
    
    
    3,891
    
    
    
    Selling, general and administrative expenses
    
    
    
    
    
    
    8,571
    
    
    
    2,035
    
    
    
    (61
    )
    
    
    10,545Provision for bad debts
    
    
    
    
    
    
    454
    
    
    
    104
    
    
    
    
    
    
    
    558Other operating (income) expense, net
    
    
    (2
    )
    
    
    21
    
    
    
    (361
    )
    
    
    (219
    )
    
    
    (561
    )Non-operating (income) expenses:Interest income
    
    
    (19
    )
    
    
    (47
    )
    
    
    (847
    )
    
    
    
    
    
    
    (913
    )Interest expense
    
    
    5,929
    
    
    
    31
    
    
    
    5
    
    
    
    
    
    
    
    5,965Equity in (earnings) losses of unconsolidated affiliates
    
    
    
    
    
    
    (3,450
    )
    
    
    572
    
    
    
    (604
    )
    
    
    (3,482
    )Income (loss) from continuing operations before income
taxes
    
    
    (2,017
    )
    
    
    1,631
    
    
    
    4,724
    
    
    
    (3,025
    )
    
    
    1,313Provision (benefit) for income taxes
    
    
    (1,341
    )
    
    
    1,374
    
    
    
    1,852
    
    
    
    
    
    
    
    1,885Income (loss) from continuing operations
    
    
    (676
    )
    
    
    257
    
    
    
    2,872
    
    
    
    (3,025
    )
    
    
    (572
    )Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (104
    )
    
    
    
    
    
    
    (104
    )Net income (loss)
    
    $
    (676
    )
    
    $
    257
    
    
    $
    2,768
    
    
    $
    (3,025
    )
    
    $
    (676
    )
 21




---



##### 



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net cash provided by (used in) continuing operating
activities
    
    $
    5,758
    
    
    $
    2,460
    
    
    $
    5,050
    
    
    $
    (46
    )
    
    $
    13,222Investing activities:Capital expenditures
    
    
    (12
    )
    
    
    (1,734
    )
    
    
    (360
    )
    
    
    
    
    
    
    (2,106
    )Change in restricted cash
    
    
    
    
    
    
    
    
    
    
    1,763
    
    
    
    
    
    
    
    1,763Proceeds from sale of capital assets
    
    
    
    
    
    
    1
    
    
    
    106
    
    
    
    
    
    
    
    107Net cash provided by (used in) investing activities
    
    
    (12
    )
    
    
    (1,733
    )
    
    
    1,509
    
    
    
    
    
    
    
    (236
    )Financing activities:Payments of long-term debt
    
    
    (435
    )
    
    
    
    
    
    
    (1,763
    )
    
    
    
    
    
    
    (2,198
    )Net cash provided by (used in) financing activities
    
    
    (435
    )
    
    
    
    
    
    
    (1,763
    )
    
    
    
    
    
    
    (2,198
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    2,207
    
    
    
    46
    
    
    
    2,253Net increase in cash and cash equivalents
    
    
    5,311
    
    
    
    727
    
    
    
    7,003
    
    
    
    
    
    
    
    13,041Cash and cash equivalents at beginning of period
    
    
    11,509
    
    
    
    (812
    )
    
    
    31,962
    
    
    
    
    
    
    
    42,659Cash and cash equivalents at end of period
    
    $
    16,820
    
    
    $
    (85
    )
    
    $
    38,965
    
    
    $
    
    
    
    $
    55,700
 22




---



##### 



UNIFI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net cash provided by (used in) continuing operating
activities
    
    $
    3,491
    
    
    $
    (4,031
    )
    
    $
    3,252
    
    
    $
    (110
    )
    
    $
    2,602Investing activities:Capital expenditures
    
    
    (68
    )
    
    
    (2,978
    )
    
    
    (523
    )
    
    
    
    
    
    
    (3,569
    )Change in restricted cash
    
    
    
    
    
    
    3,703
    
    
    
    1,480
    
    
    
    
    
    
    
    5,183Proceeds from sale of capital assets
    
    
    
    
    
    
    70
    
    
    
    31
    
    
    
    
    
    
    
    101Other
    
    
    (94
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (94
    )Net cash provided by (used in) investing activities
    
    
    (162
    )
    
    
    795
    
    
    
    988
    
    
    
    
    
    
    
    1,621Financing activities:Payments of long-term debt
    
    
    (7,600
    )
    
    
    
    
    
    
    (1,480
    )
    
    
    
    
    
    
    (9,080
    )Borrowings of long-term debt
    
    
    4,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,600Proceeds from stock exercises
    
    
    3,551
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,551Other
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    37Net cash provided by (used in) financing activities
    
    
    551
    
    
    
    37
    
    
    
    (1,480
    )
    
    
    
    
    
    
    (892
    )Cash flows of discontinued operations:Operating cash flow
    
    
    
    
    
    
    
    
    
    
    (114
    )
    
    
    
    
    
    
    (114
    )Net cash used in discontinued operations
    
    
    
    
    
    
    
    
    
    
    (114
    )
    
    
    
    
    
    
    (114
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (3,179
    )
    
    
    110
    
    
    
    (3,069
    )Net increase (decrease) in cash and cash equivalents
    
    
    3,880
    
    
    
    (3,199
    )
    
    
    (533
    )
    
    
    
    
    
    
    148Cash and cash equivalents at beginning of period
    
    
    689
    
    
    
    3,378
    
    
    
    16,181
    
    
    
    
    
    
    
    20,248Cash and cash equivalents at end of period
    
    $
    4,569
    
    
    $
    179
    
    
    $
    15,648
    
    
    $
    
    
    
    $
    20,396
 23




---



##### 



Business Overview
  Polyester Segment.
 Nylon Segment.
 Recent Developments and Outlook
  24




---



##### 



®
   ®
    25




---



##### 



Key Performance Indicators
  
    
    sales volume, which is an indicator of demand;
 
    
    margins, which are indicators of product mix and profitability;
 
    
    adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (adjusted
EBITDA), which the Company defines as 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
net of distributions, gains and losses on sales of property, plant and equipment,
currency and hedging gains and losses, asset consolidation and optimization expense,
goodwill impairment, gain and loss on extinguishment of debt, restructuring charges and
recoveries, 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
 
    
    adjusted working capital (accounts receivable plus inventory less accounts payable
and accruals) as a percentage of sales, which is an indicator of the Companys
production efficiency and ability to manage its inventory and receivables.
 Corporate Restructuring
 Severance
    Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atJune 28, 2009
    
    Charges
    
    Adjustments
    
    Amounts Used
    
    September 27, 2009Accrued severance
    
    $
    1,687
    (1)
    
    
    20
    
    
    
    
    
    
    
    (415
    )
    
    $
    1,292
 
 (1)
    
    As of June 28, 2009, the Company classified $0.3 million of executive severance as
long-term. 26




---



##### 



Joint Ventures and Other Equity Investments
  Date
    
    
    
    PercentAffiliate Name
    
    Acquired
    
    Location
    
    OwnershipYihua Unifi Fibre Company
Limited (YUFI) (1)
    
    Aug-05
    
    Yizheng, Jiangsu
Province, Peoples
Republic of China
    
    
    50
    %Parkdale America, LLC (PAL)
    
    Jun-97
    
    North and South Carolina
    
    
    34
    %U.N.F. Industries, LLC (UNF)
    
    Sep-00
    
    Migdal Ha  Emek, Israel
    
    
    50
    %
 
 (1)
    
    The Company completed the sale of YUFI during the fourth quarter of fiscal year 2009.  For the Quarter Ended September 27, 2009YUFI (1)
    
    PAL
    
    UNF
    
    TotalNet sales
    
    
    
    
    
    $
    94,870
    
    
    $
    4,576
    
    
    $
    99,446Gross profit
    
    
    
    
    
    
    7,683
    
    
    
    726
    
    
    
    8,409Depreciation and amortization
    
    
    
    
    
    
    4,552
    
    
    
    474
    
    
    
    5,026Income from operations
    
    
    
    
    
    
    4,771
    
    
    
    394
    
    
    
    5,165Net income
    
    
    
    
    
    
    6,917
    
    
    
    355
    
    
    
    7,272For the Quarter Ended September 28, 2008YUFI
    
    PAL
    
    UNF
    
    TotalNet sales
    
    $
    39,881
    
    
    $
    122,083
    
    
    $
    5,892
    
    
    $
    167,856Gross profit (loss)
    
    
    (2,048
    )
    
    
    6,246
    
    
    
    (789
    )
    
    
    3,409Depreciation and amortization
    
    
    1,395
    
    
    
    4,457
    
    
    
    474
    
    
    
    6,326Income (loss) from operations
    
    
    (4,156
    )
    
    
    3,478
    
    
    
    (1,270
    )
    
    
    (1,948
    )Net income (loss)
    
    
    (4,617
    )
    
    
    10,146
    
    
    
    (1,143
    )
    
    
    4,386
   27




---



##### 



28




---



##### 



Review of First Quarter Fiscal Year 2010 compared to First Quarter Fiscal Year 2009
  For the Quarters EndedSeptember 27, 2009
    
    
    September 28, 2008% to Total
    
    
    
    
    
    
    % to Total
    
    
    % ChangeNet salesPolyester
    
    $
    104,460
    
    
    
    73.1
    
    
    $
    122,979
    
    
    
    72.8
    
    
    
    (15.1
    )Nylon
    
    
    38,391
    
    
    
    26.9
    
    
    
    46,030
    
    
    
    27.2
    
    
    
    (16.6
    )Total
    
    $
    142,851
    
    
    
    100.0
    
    
    $
    169,009
    
    
    
    100.0
    
    
    
    (15.5
    )
 % to Sales
    
    
    
    
    
    
    % to SalesGross profitPolyester
    
    $
    13,803
    
    
    
    9.7
    
    
    $
    8,200
    
    
    
    4.8
    
    
    
    68.3Nylon
    
    
    5,603
    
    
    
    3.9
    
    
    
    5,225
    
    
    
    3.1
    
    
    
    7.2Total
    
    
    19,406
    
    
    
    13.6
    
    
    
    13,425
    
    
    
    7.9
    
    
    
    44.6Write down of long-lived assetsPolyester
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nylon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Selling, general and
administrative expensesPolyester
    
    
    8,832
    
    
    
    6.2
    
    
    
    8,361
    
    
    
    4.9
    
    
    
    5.6Nylon
    
    
    2,332
    
    
    
    1.6
    
    
    
    2,184
    
    
    
    1.3
    
    
    
    6.8Total
    
    
    11,164
    
    
    
    7.8
    
    
    
    10,545
    
    
    
    6.2
    
    
    
    5.9Provision for bad debts
    
    
    576
    
    
    
    0.4
    
    
    
    558
    
    
    
    
    
    
    
    3.2Other operating (income) expense, net
    
    
    (87
    )
    
    
    
    
    
    
    (561
    )
    
    
    
    
    
    
    (84.5
    )Non-operating (income) expense, net
    
    
    2,629
    
    
    
    1.9
    
    
    
    1,570
    
    
    
    0.9
    
    
    
    67.5Income from continuing
operations before income taxes
    
    
    5,024
    
    
    
    3.5
    
    
    
    1,313
    
    
    
    0.8
    
    
    
    282.6Provision for income taxes
    
    
    2,535
    
    
    
    1.8
    
    
    
    1,885
    
    
    
    1.1
    
    
    
    34.5Income (loss) from continuing
operations
    
    
    2,489
    
    
    
    1.7
    
    
    
    (572
    )
    
    
    (0.3
    )
    
    
    (535.0
    )Loss from discontinued
operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (104
    )
    
    
    (0.1
    )
    
    
    (100.0
    )Net income (loss)
    
    $
    2,489
    
    
    
    1.7
    
    
    $
    (676
    )
    
    
    (0.4
    )
    
    
    (468.2
    )
  29




---



##### 



Selling, General, and Administrative Expenses
  Other Operating (Income) Expense, Net
  For the Quarters EndedSeptember 27,
    
    
    September 28,2009
    
    
    2008Gain on sale of fixed assets
    
    $
    (94
    )
    
    $
    (316
    )Currency (gains) losses
    
    
    13
    
    
    
    (304
    )Other, net
    
    
    (6
    )
    
    
    59Other operating (income) expense, net
    
    $
    (87
    )
    
    $
    (561
    )
 Income Taxes
  30




---



##### 



Polyester Operations
      31




---



##### 



Nylon Operations
    Corporate
    32




---



##### 



ExpectedOptions
    
    term
    
    Exercise
    
    Interest
    
    
    
    
    
    Dividend
    
    Fairgranted
    
    (years)
    
    price
    
    rate
    
    Volatility
    
    yield
    
    value1,660,000
    
    
    5.5
    
    
    $
    1.91
    
    
    
    2.8
    %
    
    
    63.6
    %
    
    
    
    
    
    $
    1.1040,000
    
    
    5.5
    
    
    $
    2.86
    
    
    
    2.5
    %
    
    
    63.9
    %
    
    
    
    
    
    $
    1.65
   Liquidity and Capital Resources
 Liquidity Assessment
   
    
    Capital Expenditures. During the first quarter of fiscal 2010, the Company spent $2.1
million on capital expenditures compared to $3.6 million in the first quarter fiscal year
2009. The Company estimates its fiscal year 2010 capital expenditures will be within a
range of $8.0 million to $9.0 million. From time to time, the Company may have restricted
cash from the sale of certain nonproductive assets reserved for domestic capital
expenditures in accordance with its long-term borrowing agreements. As of September 27,
2009, the Company had no restricted cash funds that were required to be used for domestic
capital expenditures. The Companys capital expenditures primarily relate to maintenance
of existing assets and equipment and technology upgrades. Management continuously
evaluates opportunities to further reduce production costs, and the Company may incur
additional capital expenditures from time to time as it pursues new opportunities for
further cost reductions.
 
    
    Joint Venture Investments. During the first quarter of fiscal year 2010, the Company
received $1.6 million in dividend distributions from its joint ventures. Although
historically over the past five years the Company has received distributions from certain
of its joint ventures, there is no guarantee that it will continue to receive
distributions in the future. The Company may from time to time increase its interest in
its joint ventures, sell its interest in its joint ventures, invest in new joint ventures
or transfer idle equipment to its joint ventures.
 In December 2008, the Company renegotiated the proposed agreement to sell its interest in
YUFI to YCFC for $9.0 million and recorded an additional impairment charge of $1.5 million,
which included a $0.5 million adjustment related to certain disputed accounts receivable
and a $1.0 million adjustment related to the fair value of its investment, as determined by
the re-negotiated equity interest sales price. On March 30, 2009, the Company closed on
the sale and received $9.0 million in proceeds.
 33




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##### 



Investment.The Companys management decided that a fundamental change in its approach was
required to maximize its earnings and growth opportunities in the Chinese market.
Accordingly, the Company formed UTSC, a wholly-owned subsidiary based in Suzhou, China,
that is dedicated to the development, sales and service of PVA yarns. UTSC obtained its
business license in the second quarter of fiscal year 2009, was capitalized during the
third quarter of fiscal year 2009 with $3.3 million of registered capital and became
operational at the end of the third quarter of fiscal year 2009.
 The Company is executing its plans to
establish a wholly-owned base of operations in Central
America. The total investment in the initial stages is
expected to be $10.0 million or less. The Company expects to be operational over the next
six to nine months.
 PAL entered into an agreement for PAL to buy most of the spun cotton yarn manufacturing
operations from HBI. In addition, PAL will supply a substantial amount of HBIs yarn
demand in the western hemisphere. Under the agreement, PAL will take over the operations
of three HBI manufacturing plants, and will supply HBI from those facilities and other
existing U.S. production plants. While the funding required to finance this purchase and
the required working capital will likely limit the Companys ability to receive large
dividends from PAL, the Company does expect this agreement will substantially improve the
financial performance of the joint venture and ultimately the fair
value of its investment.
 As discussed below in Long-Term Debt, the Companys Amended Credit Agreement contains
customary covenants for asset based loans which restrict future borrowings and capital
spending. It includes a trailing twelve month fixed charge coverage ratio that restricts
the Companys ability to invest in certain assets if the ratio becomes less than 1.0 to
1.0, after giving effect to such investment on a pro forma basis. As of September 27,
2009, the Company had a fixed charge coverage ratio of less than 1.0 to 1.0 and was
therefore subjected to these restrictions. These restrictions will likely apply in future
quarters until such time as the Companys financial performance
improves.
 Cash Provided by Continuing Operations
  For the Quarters EndedSeptember 27, 
2009
    
    
    September 28, 
2008(Amounts in millions)Cash provided by continuing operationsCash Receipts:Receipts from customers
    
    $
    142.7
    
    
    $
    173.1Dividends from unconsolidated affiliates
    
    
    1.6
    
    
    
    2.1Other receipts
    
    
    0.3
    
    
    
    0.5Cash Payments:Payments to suppliers and other operating
cost
    
    
    101.8
    
    
    
    142.3Payments for salaries, wages, and benefits
    
    
    26.8
    
    
    
    28.5Payments for restructuring and severance
    
    
    0.4
    
    
    
    0.9Payments for taxes
    
    
    2.4
    
    
    
    1.4Cash provided by continuing operations
    
    $
    13.2
    
    
    $
    2.6
  34




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##### 



Cash Used In Investing Activities and Financing Activities
   Other Factors Affecting Liquidity
 Asset Sales.
 35




---



##### 



Note Repurchases from Sources Other than Sales of Collateral and Non-Collateral.
  Stock Repurchase Program
 Environmental Liabilities
 Market Conditions.
 36




---



##### 



Long-Term Debt
     37




---



##### 



38




---



##### 



Recent Accounting Pronouncements
    Off Balance Sheet Arrangements
  39




---



##### 



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.
  40




---



##### 



Interest Rate Risk:
 Currency Exchange Rate Risk:
     
    
    Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities that the reporting entity has the ability to access at the measurement
date,
 
    
    Level 2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly, or
 
    
    Level 3 inputs are unobservable inputs for the asset or liability. Unobservable
inputs shall be used to measure fair value to the extent that observable inputs are not
available, thereby allowing for situations in which there is little, if any, market
activity for the asset or liability at the measurement date.
 41




---



##### 



September 27,
    
    
    June 28,2009
    
    
    2009Level 2
    
    
    Level 2Foreign currency purchase contracts:Notional amount
    
    $
    134
    
    
    $
    110Fair value
    
    
    141
    
    
    
    130Net gain
    
    $
    (7
    )
    
    $
    (20
    )Foreign currency sales contracts:Notional amount
    
    $
    628
    
    
    $
    1,121Fair value
    
    
    622
    
    
    
    1,167Net gain (loss)
    
    $
    6
    
    
    $
    (46
    )
   Inflation and Other Risks:
 
    42




---



##### 



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
    
    Programs6/29/09 - 7/28/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,807,2417/29/09 - 8/28/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,807,2418/29/09 - 9/27/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,807,241Total
    
    
    
    
    
    
    
    
    
    
    
  
   
   
   43




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##### 



10.1
    
    Change of Control Agreement between Unifi, Inc. and Thomas H. Caudle, Jr., effective August
14, 2009 (incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form
8-K (Reg. No. 001-10542) dated August 14, 2009).10.2
    
    Change of Control Agreement between Unifi, Inc. and Charles F, McCoy, effective August 14,
2009 (incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K
(Reg. No. 001-10542) dated August 14, 2009).10.3
    
    Change of Control Agreement between Unifi, Inc. and Ronald L. Smith, effective August 14,
2009 (incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form 8-K
(Reg. No. 001-10542) dated August 14, 2009).10.4
    
    Change of Control Agreement between Unifi, Inc. and R. Roger Berrier, Jr., effective August
14, 2009 (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form
8-K (Reg. No. 001-10542) dated August 14, 2009).10.5
    
    Change of Control Agreement between Unifi, Inc. and William L. Jasper, effective August
14, 2009 (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form
8-K (Reg. No. 001-10542) dated August 14, 2009).31.1
    
    Chief Executive Officers certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Chief Financial Officers certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    Chief Executive Officers certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    Chief Financial Officers certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 44




---



##### 



UNIFI, INC.Date:  October 30, 2009
    /s/    RONALD L. SMITHRonald L. SmithVice President and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) 45