Unifi Sees Q2 Sales Down 7.7%

Unifi, Inc. posted a net loss for the second quarter, including discontinued operations, of $3.8 million or 7 cents per share compared to a net loss of $7.7 million or 15 cents per share for the same period last year. Net income for the first half of the company's fiscal year 2006, including discontinued operations, was a net loss of $6.9 million or 13 cents per share compared to a net loss of $30.3 million or 58 cents per share for the prior year first half.

Net income from continuing operations for the current quarter was a net loss of $3.7 million or 7 cents per share compared to a net loss of $5.1 million or 10 cents per share for the prior December quarter. Net income from continuing operations for the first half of fiscal year 2006 was a net loss of $9.4 million or 18 cents per share compared to a net loss of $6.2 million or 12 cents per share for the prior year first half.

Net sales from continuing operations for the current December quarter of $192.3 million were down $16.1 million or 7.7% compared to net sales of $208.4 million for the prior year December quarter. Net sales for the first half of fiscal year 2006 were $377.7 million, which is a decrease of $10.3 million or 2.7% compared to net sales of $388.0 million for the first half of fiscal year 2005.

“While the damages caused by the hurricanes continued to affect raw materials and energy prices throughout the entire quarter, we were very pleased with our results for the quarter and the way that our operations handled the situation,” said Bill Lowe, COO and CFO for Unifi. “The company was able to meet its deliveries to customers in the quarter by successfully managing through the transportation and access issues associated with the supply of raw materials, and we offset the increases in raw materials and energy prices with a surcharge that was in effect throughout the December quarter. In addition, through actions taken previously to reduce operating costs, we were able to increase our operating margins slightly on similar volume over the previous quarter ended September 2005.”

Cash-on-hand at the end of the current December quarter was $85.0 million, down $5.7 million from the $90.7 million cash-on-hand at the end of the September quarter. The company funded the remaining $15.0 million investment in Yihua Unifi, which is the company's joint venture in China, in the December quarter.

Brian Parke, chairman and CEO of Unifi, said, “In China, we continue to focus on preparing the texturing equipment to produce yarn that meets Unifi quality standards, and we anticipate finishing this stage by the end of March. We believe we will meet our quality standards in May of this year. Interest remains very high from customers and potential customers looking to fulfill orders for their Chinese operations. We anticipate that the joint venture will achieve breakeven levels in the fourth fiscal quarter, and we will begin to build from this platform.”

UNIFI, INC.
          CONSOLIDATED STATEMENTS OF OPERATIONS
          (Unaudited) (In Thousands Except Per Share Data)

                                        For the Quarters   For the Six Months
                                             Ended               Ended
                                       Dec. 25,  Dec. 26,  Dec. 25,  Dec. 26,
                                         2005      2004      2005      2004

          Net sales                    $192,300  $208,412  $377,741  $388,002
          Cost of sales                 183,207   198,669   361,126   367,523
          Selling, general &
           administrative expenses       10,694    10,009    21,675    19,514
          Provisions for bad debts          604     3,828     1,131     4,648
          Interest expense                4,659     5,293     9,436     9,958
          Interest income                (1,144)     (467)   (2,421)     (840)
          Other (income) expense, net      (724)     (127)   (1,575)     (401)
          Equity in earnings of
           unconsolidated affiliates        (18)     (712)   (1,842)   (1,866)
          Minority interest income            -      (309)        -      (497)
          Restructuring charges               -         -        29         -
          Writedown of long-lived
           assets                             -         -     1,500         -
          Loss from continuing
           operations before income
           taxes and extraordinary item  (4,978)   (7,772)  (11,318)  (10,037)
          Benefit for income taxes       (1,272)   (2,710)   (1,953)   (3,815)
          Loss from continuing
           operations before
           extraordinary item            (3,706)   (5,062)   (9,365)   (6,222)
          Income (loss) from
           discontinued operations,
           net of tax                      (270)   (2,684)    2,511   (24,079)
          Extraordinary gain - net of
           taxes of $0                      208         -         -         -
          Net loss                      $(3,768)  $(7,746)  $(6,854) $(30,301)

          Earnings (losses) per common
           share (basic and diluted):
                  Net loss - continuing
                   operations            $(0.07)   $(0.10)   $(0.18)   $(0.12)
                  Net income (loss) -
                   discontinued
                   operations                 -     (0.05)     0.05     (0.46)
                  Extraordinary gain
                   (loss) - net of
                   taxes of $0                -         -         -         -
                  Net loss               $(0.07)   $(0.15)   $(0.13)   $(0.58)