Unifi Inc. (UFI, Financial) filed Quarterly Report for the period ended 2008-12-28.
Unifi Inc. is one of the world's largest producers of textured polyester and nylon both natural and package dyed covered elastomeric yarns and twisted yarns. They are engaged in the business of processing yarns by: texturizing of synthetic filament polyester and nylon fiber; and spinning of cotton and cotton blend fibers. Unifi Inc. has a market cap of $105.5 million; its shares were traded at around $1.49 with and P/S ratio of 0.15.
In July 2008, the Company announced a proposed agreement to sell its 50% ownership interest in YUFI to its partner, YCFC, for $10.0 million. In connection with a review of the fair value of YUFI during negotiations related to the sale, the Company initiated a review of the carrying value of its investment in YUFI in accordance with Accounting Principles Board Opinion 18, The Equity Method of Accounting for Investments in Common Stock (APB 18). As a result of this review, the Company 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. During the second quarter of fiscal year 2009, the Company and YCFC renegotiated the proposed agreement to sell the Companys interest in YUFI to YCFC for $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. However, there can be no assurances that this transaction will occur upon these terms.
For the quarter and year-to-date periods ended December 23, 2007, the Company recognized equity losses net of technology and license fee income of $1.0 million and $1.7 million, respectively. In addition, the Company recognized $0.5 million and $1.3 million in operating expenses for the quarter and year-to-date periods ended December 23, 2007, respectively, which was primarily reflected on the Cost of sales line item in the Consolidated Statements of Operations, directly related to providing technological support in accordance with the Companys joint venture contract. The Company did not record its share of equity losses in YUFI for the year-to-date period ended December 28, 2008, since the carrying value of its investment reflects the lower fair value of $9.0 million as a result of the impairment charge described above.
In June 1997, the Company and Parkdale Mills, Inc. entered into a contribution agreement whereby both companies contributed all of the assets of their spun cotton yarn operations utilizing open-end and air jet spinning technologies to create PAL. In exchange for its contributions, the Company received a 34% ownership interest in the joint venture. PAL is a producer of cotton and synthetic yarns for sale to the textile and apparel industries primarily within North America. PAL has 12 manufacturing facilities primarily located in central and western North Carolina and in South Carolina. For the quarter and year-to-date periods ended December 28, 2008, the Company recognized net equity earnings of $0.6 million and $4.1 million, respectively, compared to equity earnings of $1.1 million and $1.6 million for the respective corresponding periods in the prior year. The Company received accumulated distributions from PAL of $2.1 million and $0.7 million for the year-to-date periods of fiscal years 2009 and 2008, respectively.
In September 2000, the Company and Nilit Ltd (Nilit) formed UNF; a 50/50 joint venture to produce nylon POY at Nilits manufacturing facility in Migdal Ha-Emek, Israel which is the Companys primary source of nylon POY for its texturing operations. For the quarter and year-to-date periods ended December 28, 2008, the Company recognized net equity losses of $0.4 million and $0.4 million, respectively, compared to net equity losses of $0.1 million and net equity earnings of $0.3 million for the respective corresponding periods in the prior year.
In 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 sales and transitional services to be provided by Dillons sales staff and executive management, of which $0.8 million was paid during the first and second quarters of both fiscal year 2009 and fiscal year 2008. On December 1, 2008, the Company entered into an agreement to extend 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. Mr. Stephen Wener is the President and Chief Executive Officer of Dillon and is a director of the Company.
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Unifi Inc. is one of the world's largest producers of textured polyester and nylon both natural and package dyed covered elastomeric yarns and twisted yarns. They are engaged in the business of processing yarns by: texturizing of synthetic filament polyester and nylon fiber; and spinning of cotton and cotton blend fibers. Unifi Inc. has a market cap of $105.5 million; its shares were traded at around $1.49 with and P/S ratio of 0.15.
Highlight of Business 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 which were reflected on the Selling, general, & administrative expense line item in the Consolidated Statements of Operations.In July 2008, the Company announced a proposed agreement to sell its 50% ownership interest in YUFI to its partner, YCFC, for $10.0 million. In connection with a review of the fair value of YUFI during negotiations related to the sale, the Company initiated a review of the carrying value of its investment in YUFI in accordance with Accounting Principles Board Opinion 18, The Equity Method of Accounting for Investments in Common Stock (APB 18). As a result of this review, the Company 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. During the second quarter of fiscal year 2009, the Company and YCFC renegotiated the proposed agreement to sell the Companys interest in YUFI to YCFC for $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. However, there can be no assurances that this transaction will occur upon these terms.
For the quarter and year-to-date periods ended December 23, 2007, the Company recognized equity losses net of technology and license fee income of $1.0 million and $1.7 million, respectively. In addition, the Company recognized $0.5 million and $1.3 million in operating expenses for the quarter and year-to-date periods ended December 23, 2007, respectively, which was primarily reflected on the Cost of sales line item in the Consolidated Statements of Operations, directly related to providing technological support in accordance with the Companys joint venture contract. The Company did not record its share of equity losses in YUFI for the year-to-date period ended December 28, 2008, since the carrying value of its investment reflects the lower fair value of $9.0 million as a result of the impairment charge described above.
In June 1997, the Company and Parkdale Mills, Inc. entered into a contribution agreement whereby both companies contributed all of the assets of their spun cotton yarn operations utilizing open-end and air jet spinning technologies to create PAL. In exchange for its contributions, the Company received a 34% ownership interest in the joint venture. PAL is a producer of cotton and synthetic yarns for sale to the textile and apparel industries primarily within North America. PAL has 12 manufacturing facilities primarily located in central and western North Carolina and in South Carolina. For the quarter and year-to-date periods ended December 28, 2008, the Company recognized net equity earnings of $0.6 million and $4.1 million, respectively, compared to equity earnings of $1.1 million and $1.6 million for the respective corresponding periods in the prior year. The Company received accumulated distributions from PAL of $2.1 million and $0.7 million for the year-to-date periods of fiscal years 2009 and 2008, respectively.
In September 2000, the Company and Nilit Ltd (Nilit) formed UNF; a 50/50 joint venture to produce nylon POY at Nilits manufacturing facility in Migdal Ha-Emek, Israel which is the Companys primary source of nylon POY for its texturing operations. For the quarter and year-to-date periods ended December 28, 2008, the Company recognized net equity losses of $0.4 million and $0.4 million, respectively, compared to net equity losses of $0.1 million and net equity earnings of $0.3 million for the respective corresponding periods in the prior year.
In 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 sales and transitional services to be provided by Dillons sales staff and executive management, of which $0.8 million was paid during the first and second quarters of both fiscal year 2009 and fiscal year 2008. On December 1, 2008, the Company entered into an agreement to extend 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. Mr. Stephen Wener is the President and Chief Executive Officer of Dillon and is a director of the Company.
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