Plant Closing Widens Unifi Loss

Don Hogsett, Staff Staff, October 25, 2004

Weighed down by a $22.6 million loss stemming from the shutdown of its Ireland-based operation, yarn producer Unifi Inc. recorded a first fiscal quarter loss of $22.6 million, compared with a prior-year deficit of $4.6 million.

But building sales at a double-digit pace and hacking strenuously away at costs, Unifi eked out an operating profit of $1 million, excluding one-time items, recovering from a $964,000 operating loss the year before.

Sales at Unifi, a producer of polyester and nylon-textured yarns, increased 10.1 percent, to $180.2 million from $163.7 million. Sales from continuing operations increased 7.4 percent.

Driving the gain in operating profits, along with the increase in sales, Unifi slashed costs 23.4 percent during the opening quarter, to $9.5 million from $12.4 million a year ago, generating a cash savings of $2.9 million. Measured as a percentage of sales, operating costs were whittled 230 basis points, or 2.3 percentage points, to 5.3 percent from 7.6 percent the preceding year.

But acting as a drag, average gross margin, hard hit by rising raw material costs, was throttled down 110 basis points, or 1.1 percentage points, to 5.9 percent from 7 percent during the same period of 2003.

Of the swing in operating profit, Bill Lowe, chief operating officer, commented, “The broad set of actions taken over this calendar year has strengthened our underlying business. This also marks the second consecutive quarter in which we posted an operating profit, which is significant in that we have accomplished this as raw materials have risen by approximately 25 percent since the prior comparable quarter. There are more challenges ahead, but we are making steady progress in stabilizing our base business.”

Separately, Unifi said it is cutting 490 jobs at a former DuPont plant in North Carolina it acquired last month from Koch Industries for $22.5 million. The job cuts come only a month after the company slashed wages at the plant 20 percent for its 740 full-time workers.

Unifi Inc.

Qtr. 9/26 (x000) 2004 2003 % change
a - First fiscal quarter results include interest income of $413,000, compared with $742,000 during the same period a year ago; miscellaneous expense of $458,000, compared with $576,000 last year; $1.1 million in income from the company's stake in an affiliate, compared with $257,000 last year; $188,000 in interest income from an affiliate, compared with $955,000 last year; a $1.1 million income tax benefit, compared with a prior-year tax benefit of $1.7 million; a loss from continuing operations of $1.3 million, compared with $2.6 million a year ago; and an after-tax loss from discontinued operations of $21.3 million, compared with $2 million last year.
Sales $180,155 $163,721 10.1
Oper. Income (EBIT) 1,046 (964)
Net income (22,555)a (4,562)a
Per share (diluted) (0.43) (0.09)
Average gross margin 5.9% 7.0%
SG&A expenses 5.3% 7.6%

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