Unifi Posts Widened Q1 Loss on Sales Decrease

Unifi, Inc. reported that net income for the current quarter, including discontinued operations, was actually a net loss of $13.2 million or 22 cents per share, expanding from a loss in the year-ago quarter of $2.1 million or 4 cents per share. Net income from continuing operations for the current quarter was a net loss of $13.9 million or 23 cents per share compared to a net loss of $1.3 million or 3 cents per share for the prior March quarter. Included in the current quarter are pre-tax impairment charges totaling $12.9 million related to the write down of certain plants and equipment, as well as bankruptcy related charges of $3.5 million related to a customer that filed a voluntary petition to reorganize under Chapter 11 of the United States Bankruptcy Code.

Net sales from continuing operations for the current March quarter, including the sales from the company's Dillon acquisition on January 1, 2007, of $178.2 million, were down $3.2 million or 1.8% compared to net sales of $181.4 million for the prior year March quarter.

Bill Lowe, COO and CFO for Unifi, said, “Volumes rebounded in the March quarter as expected, and our pre-tax income for the current quarter would have been slightly positive, excluding the facility and equipment impairment charges and the customer bankruptcy charges. Nevertheless, we are taking steps to further maximize our facility utilization rate and improve operating results by moving all of our production from the recently acquired facility in Dillon, South Carolina, to our larger facility in Yadkinville, North Carolina, which will allow us to remain competitive in the marketplace through lower overall manufacturing costs.”

Net income for the first nine months of the company's fiscal year 2007, including discontinued operations, was a net loss of $40.8 million or 75 cents per share compared to a net loss of $9.0 million or 17 cents per share for the prior year period. Net income from continuing operations for the first nine months of fiscal year 2007 was a net loss of $41.3 million or 75 cents per share compared to a net loss of $9.5 million or 18 cents per share for the prior year period. Net sales for fiscal year-to-date 2007 of $505.0 were down $50.6 million or 9.1% compared to net sales of $555.6 million for fiscal year-to- date 2006.

Total debt at the end of the current March quarter was $247.2 million, which is an increase of $41.1 million over the $206.1 million in debt at the end of the December 2006 quarter. Cash-on-hand at the end of the current March quarter was $26.8 million, which is down from the $35.6 million cash-on- hand at the end of the December 2006 quarter.

Subsequent to the close of the current March quarter, the company received a $5.8 million dividend from its equity affiliate partner Parkdale America, which will be reported in the company's fiscal year 2007 fourth quarter results.

Brian Parke, chairman of the Board and CEO, said, “While import pressures persist across many of our supply chains, we are pleased by the growth of our premium value-added product offering. In addition to strong volumes on existing premium value-added programs during the quarter, we also successfully launched Repreve, our 100% recycled polyester yarn. Our joint venture in China has significantly improved its capabilities in this area as well, and we now offer many of our innovative products to brands and retailers on a global basis.”

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

                                   For the Quarters      For the Nine Months
                                        Ended                 Ended
                                  March 25, March 26,   March 25, March 26,
                                      2007      2006        2007      2006

    Net sales                     $178,202   $181,398   $505,041   $555,617
    Cost of sales                  164,752    168,261    479,931    524,707
    Selling, general &
     administrative expenses        11,177     10,184     32,854     31,132
    Provision for bad debts          2,274        218      2,872      1,349
    Interest expense                 6,610      4,606     18,786     14,063
    Interest income                   (707)    (1,542)    (2,217)    (5,012)
    Other (income) expense, net     (2,462)      (589)    (2,705)    (1,138)
    Equity in (earnings) losses
     of unconsolidated affiliates     (352)       564      4,473     (1,278)
    Write down of long-lived
     assets                         12,870        815     16,072      2,315
    Restructuring charges                -          -          -         29
    Loss from continuing
     operations before
     income taxes                  (15,960)    (1,119)   (45,025)   (10,550)
    Provision (benefit) from
     income taxes                   (2,075)       208     (3,748)    (1,023)
    Loss from continuing
     operations                    (13,885)    (1,327)   (41,277)    (9,527)
     Income (loss) from
     discontinued operations,
     net of tax                        666       (790)       463        556
        Net loss                  $(13,219)   $(2,117)  $(40,814)   $(8,971)

    Earnings (losses) per common
     share (basic and diluted):
        Net loss - continuing
         operations                 $(0.23)    $(0.03)    $(0.75)    $(0.18)
        Net income (loss) -
         discontinued operations      0.01      (0.01)         -       0.01
        Net loss - basic and
         diluted                    $(0.22)    $(0.04)    $(0.75)    $(0.17)

    Weighted average basic and
           diluted shares
           outstanding              59,803     52,177     54,733     52,144