Unifi reported that net sales for the company’s fiscal fourth quarter fell 7.0% to $191.7 million compared to net sales of $206.1 million for the prior year. Gross margins were 5.9%, a 270 basis point decline from the 8.6% margins reported last year. Unifi reduced SG&A expenses by $3.2 million to just 5.6% of sales, a 120 basis point improvement over last year.

The company reported a net loss of $11.0 million, or 21 cents per share, for the quarter compared to a net loss of $30.5 million, or 57 cents per share, for the prior year.
Year-to-date, net sales were $746.5 million, a decrease of 12.1% compared to net sales of $849.1 million for the prior year. The company also reported a net loss of $74.8 million, or $1.43 per share, for the 2004 fiscal year versus a net loss of $27.2 million, or 51 cents per share, for the prior year.

Much of the decline in sales is a result of increased supply and competition coming out of Asia, and as a result, Unifi has made it their top priority to establish production facilities in the region. Last quarter, the company was embarking on a program to launch a wholly-owned facility in the ‘Greenfield’ region, but management has since found a better option.

“We were approached by several other Chinese companies about Unifi’s interest in establishing a joint venture with them for their existing texturing operations,” said Unifi Chairperson & CEO, Brian Parke. “We identified one particular company that appeared to be a good fit for us… We are currently working on the terms of a non-binding letter of intent.”

The funding for this Joint Venture is expected to come from the sale of assets related to the closure of Unifi’s facility in Letterkenny, Ireland. The closure, which marks Unifi’s exit from all of its European production facilities, will affect approximately 700 employees. The company expects a total charge associated with these actions to be in the range of $20 to $24 million.

In addition to the potential in China, Unifi has announced plans to buy certain Invista assets from Koch in a deal worth roughly $21 million, which will be seller financed. The two companies are also discussing options for Unifi to acquire other polyester filament assets from Invista.

The move will make Unifi more vertically integrated, giving them a production plant for certain raw materials used in day-to-day operations. Parke said that in their discussions with Koch, management discovered if an agreement were not finalized for the sale of the Invista facility, it would be closed down.

“We have less that 40% of our own capacity in terms of raw materials, so we have been dependent upon DuPont (Invista) for quite some time now,” Parke said in a conference call with analysts. He said if this facility were closed the whole market would be short 20-25%.