Edgar Filing: UNIFI INC

unif_10q-032711.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 27, 2011

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-10542

UNIFI, INC.

(Exact name of registrant as specified in its charter)

New York	11-2165495
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

P.O. Box 19109 - 7201 West Friendly Avenue Greensboro, NC (Address of principal executive offices)	27419 (Zip Code)

Registrant’s telephone number, including area code: (336) 294-4410

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]	Accelerated filer [X]	Non-accelerated filer [ ]	Smaller Reporting Company [ ]
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The number of shares outstanding of the issuer’s common stock, par value $.10 per share, as of May 2, 2011 was 20,071,653.

UNIFI, INC.

Form 10-Q for the Quarterly Period Ended March 27, 2011

Table of Contents

		Page
Part I. Financial Information
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of
	March 27, 2011 and June 27, 2010	3

	Condensed Consolidated Statements of Operations for the Quarters and Nine-Months Ended
	March 27, 2011 and March 28, 2010	4

	Condensed Consolidated Statements of Cash Flows for the Nine-Months Ended
	March 27, 2011 and March 28, 2010	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	51

Item 4.	Controls and Procedures	52



Part II. Other Information
Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	54

Item 4.	[Removed and Reserved.]	54

Item 5.	Other Information	54

Item 6.	Exhibits	54

Part I. Financial Information

Item 1. Financial Statements

UNIFI, INC.

Condensed Consolidated Balance Sheets

(Amounts in thousands)

	March 27, 2011			June 27, 2010
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	19,142		$	42,691
Receivables, net of allowances of $2.9 million and $3.5 million, respectively		104,665			91,243
Inventories		136,715			111,007
Income taxes receivable		383			—
Deferred income taxes		2,126			1,623
Other current assets		6,216			6,119
Total current assets		269,247			252,683

Property, plant and equipment		749,580			747,857
Less accumulated depreciation		(596,735	)		(596,358	)
		152,845			151,499
Intangible assets, net		12,235			14,135
Investments in unconsolidated affiliates		89,854			73,543
Other non-current assets		9,051			12,605
Total assets	$	533,232		$	504,465

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	48,352		$	40,662
Accrued expenses		18,473			21,725
Income taxes payable		709			505
Current portion of notes payable		—			15,000
Current maturities of long-term debt and other liabilities		459			327
Total current liabilities		67,993			78,219

Notes payable, less current portion		133,722			163,722
Long-term debt and other liabilities		40,619			2,531
Deferred income taxes		384			97
Commitments and contingencies
Shareholders’ equity:
Common stock		2,007			2,006
Capital in excess of par value		32,318			31,579
Retained earnings		227,758			216,183
Accumulated other comprehensive income		28,431			10,128
		290,514			259,896
Total liabilities and shareholders’ equity	$	533,232		$	504,465

See accompanying notes to condensed consolidated financial statements.

UNIFI, INC.

Condensed Consolidated Statements of Operations

(Unaudited) (Amounts in thousands, except per share data)

	For the Quarters Ended						For the Nine-Months Ended
	March 27, 2011			March 28, 2010			March 27, 2011			March 28, 2010
Summary of Operations:
Net sales	$	178,164		$	154,687		$	512,986		$	439,793
Cost of sales		163,017			138,177			457,595			386,541
Restructuring charges		9			254			1,555			254
Write down of long-lived assets		—			—			—			100
Selling, general and administrative expenses		10,344			11,252			32,223			34,568
Provision (benefit) for bad debts		41			(105	)		86			(93	)
Other operating expense (income), net		158			(346	)		417			(542	)

Non-operating (income) expense:
Interest income		(584	)		(775	)		(1,995	)		(2,355	)
Interest expense		5,016			5,697			15,347			16,412
Other non-operating expense		78			—			528			—
Loss (gain) on extinguishment of debt		2,193			—			3,337			(54	)
Equity in losses (earnings) of unconsolidated affiliates		2,103			(2,175	)		(11,887	)		(5,847	)

Income (loss) from operations before income taxes		(4,211	)		2,708			15,780			10,809
Provision (benefit) for income taxes		(166	)		1,937			4,205			5,596
Net income (loss)	$	(4,045	)	$	771		$	11,575		$	5,213

Income (loss) per common share:
Basic	$	(.20	)	$	.04		$	.58		$	.26

Diluted	$	(.20	)	$	.04		$	.57		$	.25

Weighted average outstanding shares of common stock (a):
Basic		20,069			20,057			20,062			20,414

Diluted		20,069			20,274			20,477			20,518

(a) All outstanding share amounts and computations using such amounts have been retroactively adjusted to reflect the November 3, 2010 1-for-3 reverse stock split.

See accompanying notes to condensed consolidated financial statements.

UNIFI, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited) (Amounts in thousands)

	For the Nine-Months Ended
	March 27, 2011			March 28, 2010

Cash and cash equivalents at beginning of year	$	42,691		$	42,659
Operating activities:
Net income		11,575			5,213
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Earnings of unconsolidated affiliates, net of distributions		(7,568	)		(4,236	)
Depreciation		17,664			17,204
Amortization		2,636			3,454
Stock-based compensation expense		624			1,836
Deferred compensation expense		504			463
Loss on asset sales		242			953
Loss (gain) on extinguishment of debt		3,337			(54	)
Write down of long-lived assets		—			100
Restructuring charges		—			254
Deferred income tax		(63	)		(449	)
Provision (benefit) for bad debts		86			(93	)
Other		157			268
Change in assets and liabilities, excluding effects of foreign currency adjustments		(30,607	)		(4,089	)
Net cash (used in) provided by operating activities		(1,413	)		20,824

Investing activities:
Capital expenditures		(17,334	)		(7,963	)
Investment in unconsolidated affiliates		(707	)		(550	)
Return of capital from unconsolidated affiliate		500			—
Change in restricted cash		—			5,776
Proceeds from sale of capital assets		189			1,393
Proceeds from split dollar life insurance surrenders		3,241			—
Other		—			(246	)
Net cash used in investing activities		(14,111	)		(1,590	)

Financing activities:
Payments of notes payable		(47,588	)		—
Payments of other long-term debt		(105,325	)		(6,211	)
Borrowings of other long-term debt		143,125			—
Proceeds from stock option exercises		118			—
Purchase and retirement of Company stock		(2	)		(4,995	)
Debt refinancing fees		(825	)		(381	)
Other		(364	)		—
Net cash used in financing activities		(10,861	)		(11,587	)

Effect of exchange rate changes on cash and cash equivalents		2,836			2,190
Net (decrease) increase in cash and cash equivalents		(23,549	)		9,837
Cash and cash equivalents at end of period	$	19,142		$	52,496

See accompanying notes to condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation

The Condensed Consolidated Balance Sheet of Unifi, Inc. together with its subsidiaries (the “Company”) at June 27, 2010 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by United States (“U.S.”) generally accepted accounting principles (“GAAP”) for complete financial statements. Except as noted with respect to the balance sheet at June 27, 2010, this information is unaudited and reflects all adjustments which are, in the opinion of management, necessary to present fairly the financial position at March 27, 2011, and the results of operations and cash flows for the periods ended March 27, 2011 and March 28, 2010. Such adjustments consisted of normal recurring items necessary for fair presentation in conformity with U.S. GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from these estimates. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2010, as recast in its Current Report on Form 8-K filed January 7, 2011 to reflect the reverse stock split of the Company’s common stock at a reverse stock split ratio of 1-for-3, which became effective November 3, 2010. All share and per share computations have been retroactively adjusted for all periods presented to reflect the decrease in shares as a result of the reverse stock split.

The significant accounting policies followed by the Company including a consolidation policy are presented on pages 67 to 73 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2010, as recast as discussed above.

2. Inventories

Inventories are comprised of the following (amounts in thousands):

	March 27, 2011		June 27, 2010

Raw materials and supplies	$	64,834	$	51,255
Work in process		7,022		6,726
Finished goods		64,859		53,026
	$	136,715	$	111,007

3. Other Current Assets

Other current assets are comprised of the following (amounts in thousands):

	March 27, 2011		June 27, 2010

Prepaid expenses:
Insurance	$	746	$	862
Value added tax		2,754		2,286
Information technology services		116		223
Other		569		368
Deposits		2,031		2,380
	$	6,216	$	6,119

Notes to Condensed Consolidated Financial Statements – (Continued)

4. Intangible Assets, Net

Intangible assets subject to amortization consist of a customer list of $22.0 million and non-compete agreement of $4.0 million which were entered into in connection with an asset acquisition consummated in fiscal year 2007. The customer list is being amortized in a manner which reflects the expected economic benefit that will be received over its thirteen year life. The non-compete agreements are being amortized using the straight-line method over ten years, which is equal to the term of the agreement and its extensions. There are no residual values related to these intangible assets. Accumulated amortization at March 27, 2011 and June 27, 2010 for these intangible assets was $13.8 million and $11.9 million, respectively. These intangible assets relate to the polyester segment.

The following table represents the expected intangible asset amortization for the next five fiscal years (amounts in thousands):

	Aggregate Amortization Expenses
	2012		2013		2014		2015		2016

Customer list	$	2,022	$	1,837	$	1,481	$	1,215	$	969
Non-compete agreements		317		317		317		317		317
	$	2,339	$	2,154	$	1,798	$	1,532	$	1,286

5. Investments in Unconsolidated Affiliates

The following table represents the Company’s investments in unconsolidated affiliates:

Affiliate Name	Date Acquired	Locations	Percent Ownership
Parkdale America, LLC (“PAL”)	Jun-97	North Carolina, South Carolina, Virginia, and Georgia	34%

U.N.F. Industries, LLC (“UNF”)	Sep-00	Migdal Ha – Emek, Israel	50%

UNF America, LLC (“UNF America”)	Oct-09	Ridgeway, Virginia	50%

Repreve Renewables, LLC (“Repreve Renewables”)	Apr-10	Soperton, Georgia	40%

Summarized balance sheet information as of March 27, 2011 and June 27, 2010 and summarized income statement information for the quarters and year-to-date periods ended March 27, 2011 and March 28, 2010 of the combined unconsolidated equity affiliates are as follows (amounts in thousands):

	March 27, 2011		June 27, 2010
	(Unaudited)		(Unaudited)
Current assets	$	342,532	$	211,220
Non-current assets		168,975		127,081
Current liabilities		92,678		53,458
Non-current liabilities		106,139		27,621
Shareholders’ equity and capital accounts		312,690		257,222

Notes to Condensed Consolidated Financial Statements – (Continued)

	For the Quarters Ended
	March 27, 2011				March 28, 2010
	(Unaudited)				(Unaudited)
Net sales		$	313,543			$	194,546
Gross profit			10,889				15,552
Income from operations			6,791				10,991
Net (loss) income			(3,068	)			10,980

	For the Nine-Months Ended
	March 27, 2011			March 28, 2010
	(Unaudited)			(Unaudited)
Net sales		$	757,852		$	411,758
Gross profit			58,867			35,289
Income from operations			46,528			21,329
Net income			37,201			22,411

The Company included in its equity in losses (earnings) of unconsolidated affiliates $1.2 million of additional losses for PAL related to PAL’s January 1, 2011 year end. The Company evaluated the effect of this adjustment on its current and prior quarter and determined the adjustment to be immaterial to both its balance sheets and statements of operations. Certain prior period amounts in the table above have been changed to reflect PAL’s final reported financial results.

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Codification No. 810-10, Consolidation of Variable Interest Entities (“ASC 810-10”), and issued Accounting Standards Update (“ASU”) No. 2009-17, Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“ASU 2009-17” which amends the ASC to include SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”. This amendment requires that an analysis be performed to determine whether a company has a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity (“VIE”) as the enterprise that has the power to direct the activities of a VIE. The statement requires an ongoing assessment of whether a company is the primary beneficiary of a VIE when the holders of the entity, as a group, lose power, through voting or similar rights, to direct the actions that most significantly affect the entity's economic performance. ASC 810-10 and ASU 2009-17 are effective for annual reporting beginning after November 15, 2009. The Company adopted ASC 810-10 and ASU 2009-17 as of June 28, 2010 and the adoption of these ASUs did not have a material effect on the Company’s financial position or results of operations.

6. Other Non-current Assets

Other non-current assets are comprised of the following (amounts in thousands):

	March 27, 2011		June 27, 2010

Cash surrender value of life insurance of former key employees	$	374	$	3,615
Bond issue costs and debt refinancing fees		2,924		3,585
Long-term deposits		5,591		5,281
Other		162		124
	$	9,051	$	12,605

Bond issue costs and refinancing fees have been amortized on the straight-line method over the life of the corresponding debt. On June 30, 2010, the Company redeemed $15 million of the Company’s 11.5% senior secured notes due May 15, 2014 (the “2014 notes”) at a redemption price of 105.75% of the principal amount of the redeemed 2014 notes. This redemption was financed through a combination of internally generated cash and borrowings under the Company’s senior secured asset-based revolving credit facility entered into with Bank of America, N.A. (as both Administrative Agent and Lender thereunder) (as amended, “revolving credit facility”). As a result, the Company recorded a $1.1 million charge for the early extinguishment of debt in the quarter ended September 26, 2010 of which $0.8 million related to the premium paid for the bonds and $0.3 million related to the write off of related bond issue costs.

Notes to Condensed Consolidated Financial Statements – (Continued)

On February 16, 2011, the Company redeemed an additional aggregate principal amount of $30 million of the 2014 notes at a redemption price of 105.75% of the principal amount of the redeemed 2014 notes in accordance with the indenture. As a result, the Company recorded a $2.2 million charge for the early extinguishment of debt in the March 2011 quarter of which $1.7 million related to the premium paid to redeem the bonds and $0.5 million related to the write off of related bond issuance costs.

As of March 27, 2011 and June 27, 2010, accumulated amortization for bond issue costs and refinancing fees was $5.4 million and $4.6 million, respectively.

7. Accrued Expenses

Accrued expenses are comprised of the following (amounts in thousands):

	March 27, 2011		June 27, 2010
Payroll and fringe benefits	$	8,852	$	14,127
Severance		—		301
Interest		5,785		2,429
Utilities		1,928		2,539
Retiree reserve		153		165
Property taxes		426		876
Other		1,329		1,288
	$	18,473	$	21,725

8. Income Taxes

The Company’s income tax provision for the quarter ended March 27, 2011 resulted in tax benefit at an effective rate of 4.0% compared to the quarter ended March 28, 2010 which resulted in tax expense at an effective rate of 71.5%. The Company’s income tax provision for the year-to-date period ended March 27, 2011 resulted in tax expense at an effective rate of 26.7% compared to the year-to-date period ended March 28, 2010 which resulted in tax expense at an effective rate of 51.8%.

The difference between the Company’s income tax benefit and the U.S. statutory rate for the quarter ended March 27, 2011 and the difference between the Company’s income tax expense and the U.S. statutory rate for the year-to-date period ended March 27, 2011was primarily due to losses from one of its equity affiliates, increases in uncertain tax positions, and foreign operations taxed at rates lower than the U.S., which was partially offset by foreign dividends taxed in the U.S. The differences between the Company’s income tax expense and the U.S. statutory rate for the quarter and year-to-date period ended March 28, 2010 was primarily due to losses in the U.S. and other jurisdictions for which no tax benefit could be recognized while operating profit was generated in other taxable jurisdictions.

During the third quarter ended March 27, 2011 the Company changed its indefinite reinvestment assertion related to a portion of the earnings and profits held by Unifi do Brasil, Ltda. (“UDB”). The Company plans to eventually repatriate approximately $16 million of earnings and profits currently held by UDB. Therefore the Company has established a deferred tax liability, net of estimated foreign tax credit, of approximately $2.3 million related to the additional income tax that would be due as a result of the current plan to repatriate in future periods.

During the quarter ended March 27, 2011, the Company identified additional uncertain tax positions of $0.4 million and also accrued interest and penalties related to uncertain tax positions of $0.3 million. The Company did not accrue any interest or penalties related to uncertain tax positions during the quarter or year-to-date period ending March 28, 2010.

Notes to Condensed Consolidated Financial Statements – (Continued)

Deferred income taxes have been provided for the temporary differences between financial statement carrying amounts and the tax basis of existing assets and liabilities. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income during the periods in which those temporary differences reverse. Management considers the scheduled reversal of taxable temporary differences, taxable income in carryback periods, projected future taxable income and tax planning strategies in making this assessment. The Company currently has a full valuation allowance against its net deferred tax assets in the U.S. and certain foreign subsidiaries due to negative evidence concerning the realization of those deferred tax assets in recent years. As results of operations improve, the Company continues to evaluate both positive and negative evidence to determine whether and when the valuation allowance, or a portion thereof, should be released. A release of the valuation allowance could have a material effect on earnings in the period of release.

The Company is subject to income tax examinations for U.S. federal income taxes for fiscal years 2004 through 2010, for non-U.S. income taxes for tax years 2001 through 2010, and for state and local income taxes for fiscal years 2001 through 2010.

9. Shareholders’ Equity

On October 27, 2010, the shareholders of the Company approved a reverse stock split of the Company’s common stock (the “reverse stock split”) at a reverse stock split ratio of 1-for-3. The reverse stock split became effective November 3, 2010 pursuant to a Certificate of Amendment to the Company’s Restated Certificate of Incorporation filed with the Secretary of State of New York. The Company had 20,059,544 shares of common stock issued and outstanding immediately following the completion of the reverse stock split. The Company is authorized in its Restated Certificate of Incorporation to issue up to a total of 500,000,000 shares of common stock at a $.10 par value per share which was unchanged by the amendment. The reverse stock split did not affect the registration of the common stock under the Securities Exchange Act of 1934, as amended or the listing of the common stock on the New York Stock Exchange under the symbol “UFI”, although the post-split shares are considered a new listing with a new CUSIP number. In the Condensed Consolidated Balance Sheets, the line item shareholders’ equity has been retroactively adjusted to reflect the reverse stock split for all periods presented by reducing the line item common stock and increasing the line item capital in excess of par value, with no change to shareholders’ equity in the aggregate.

On November 25, 2009, the Company agreed to purchase 628,333 shares (adjusted for the November 2010 reverse stock split) of its common stock at a purchase price of $7.95 per share from Invemed Catalyst Fund, L.P. (based on an approximate 10% discount to the closing price of the common stock on November 24, 2009). The purchase of the shares pursuant to the transaction was not pursuant to the Company’s stock repurchase plan. The transaction closed on November 30, 2009 at a total purchase price of $5 million.

Notes to Condensed Consolidated Financial Statements – (Continued)

10. Income (Loss) Per Common Share

The following table sets forth the reconciliation of basic and diluted per share computations (amounts in thousands, except per share data). All share and per share computations have been retroactively adjusted for all periods presented to reflect the reverse stock split.

	For the Quarters Ended					For the Nine-Months Ended
	March 27, 2011			March 28, 2010		March 27, 2011		March 28, 2010
Determination of shares:
Weighted average common shares outstanding		20,069			20,057		20,062		20,414
Assumed conversion of dilutive stock options and restricted stock awards		—			217		415		104
Diluted weighted average common shares outstanding		20,069			20,274		20,477		20,518

Income (loss) per common share – basic	$	(.20	)	$	.04	$	.58	$	.26

Income (loss) per common share – diluted	$	(.20	)	$	.04	$	.57	$	.25

For the quarter ended March 27, 2011, no options or restricted stock awards were included in the computation of diluted loss per share because the Company reported a net loss. The following table represents the number of stock options to purchase shares of common stock which were not included in the calculation of diluted earnings per share because they were anti-dilutive (amounts in thousands):

	For the Quarters Ended				For the Nine-Months Ended
	March 27, 2011		March 28, 2010		March 27, 2011		March 28, 2010
Stock options		1,121		247		221		247
Restricted stock units		25		—		—		—
Total		1,146		247		221		247

11. Comprehensive (Loss) Income

The following is the Company’s comprehensive (loss) income for the quarters and year-to-date periods ending March 27, 2011 and March 28, 2010, respectively (amounts in thousands):

	For the Quarters Ended						For the Nine-Months Ended
	March 27, 2011			March 28, 2010			March 27, 2011			March 28, 2010

Net (loss) income	$	(4,045	)	$	771		$	11,575		$	5,213
Translation adjustments		2,277			(2,013	)		10,430			8,250
OCI – unconsolidated affiliate		1,403			—			8,129			—
Loss on hedging contracts		(256	)		—			(256	)		—
Comprehensive (loss) income	$	(621	)	$	(1,242	)	$	29,878		$	13,463

Other comprehensive income associated with an unconsolidated affiliate, PAL, has historically been immaterial to the Company and therefore the Company did not record its share of PAL’s other comprehensive income in its balance sheet in previous periods. Due to a significant increase in cotton prices and the large percentage of future cotton purchases that PAL has hedged in order to ensure availability of supply and protect the gross margin of its fixed-price yarn sales, PAL’s other comprehensive income has increased considerably.

Notes to Condensed Consolidated Financial Statements – (Continued)

During the quarter ended March 27, 2011, the Company changed its indefinite reinvestment assertion related to a portion of the earnings and profits held by UDB. Accordingly, the Company has established an income tax liability, net of estimated foreign tax credit in the amount of $0.4 million, on a portion of its currency translation adjustments. During the quarter ended March 27, 2011, the Company provided a deferred tax liability of $3.1 million on the other comprehensive income from unconsolidated affiliate. As discussed in “Footnote 8 - Income Taxes”, the Company currently has a full valuation allowance against its net deferred tax assets in the U.S. and certain foreign subsidiaries.

12. Segment Disclosures

The following is the Company’s segment information for the quarters ended March 27, 2011 and March 28, 2010 (amounts in thousands):

	Polyester		Nylon		Total
Quarter ended March 27, 2011:
Net sales to external customers	$	137,914	$	40,250	$	178,164
Depreciation and amortization		5,789		804		6,593
Segment operating profit		3,138		1,656		4,794

Quarter ended March 28, 2010:
Net sales to external customers	$	112,604	$	42,083	$	154,687
Depreciation and amortization		5,591		860		6,451
Segment operating profit		2,721		2,283		5,004

The following table provides reconciliations from segment data to consolidated reporting data (amounts in thousands):

	For the Quarters Ended
	March 27,			March 28,
	2011			2010
Depreciation and amortization:
Depreciation and amortization of specific reportable segment assets	$	6,593		$	6,451
Depreciation included in other operating (income) expense, net		6			34
Amortization included in interest expense, net		235			276
Consolidated depreciation and amortization	$	6,834		$	6,761

Reconciliation of segment operating income to (loss) income from operations before income taxes:
Reportable segments operating income	$	4,794		$	5,004
Provision (benefit) for bad debts		41			(105	)
Other operating expense (income), net		158			(346	)
Interest expense, net		4,432			4,922
Other non-operating expenses		78			—
Loss on extinguishment of debt		2,193			—
Equity in losses (earnings) of unconsolidated affiliates		2,103			(2,175	)
(Loss) income from operations before income taxes	$	(4,211	)	$	2,708

Notes to Condensed Consolidated Financial Statements – (Continued)

The following is the Company’s segment information for the nine-month periods ended March 27, 2011 and March 28, 2010 (amounts in thousands):

	Polyester		Nylon		Total
Nine-Months ended March 27, 2011:
Net sales to external customers	$	391,991	$	120,995	$	512,986
Depreciation and amortization		17,057		2,493		19,550
Segment operating profit		13,373		8,240		21,613

Nine-Months ended March 28, 2010:
Net sales to external customers	$	321,340	$	118,453	$	439,793
Depreciation and amortization		17,109		2,615		19,724
Segment operating profit		10,509		7,821		18,330

The following table provides reconciliations from segment data to consolidated reporting data (amounts in thousands):

	For the Nine-Months Ended
	March 27,			March 28,
	2011			2010
Depreciation and amortization:
Depreciation and amortization of specific reportable segment assets	$	19,550		$	19,724
Depreciation included in other operating (income) expense, net		14			105
Amortization included in interest expense, net		736			829
Consolidated depreciation and amortization	$	20,300		$	20,658

Reconciliation of segment operating income to income from operations before income taxes:
Reportable segments operating income	$	21,613		$	18,330
Provision (benefit) for bad debts		86			(93	)
Other operating expense (income), net		417			(542	)
Interest expense, net		13,352			14,057
Other non-operating expenses		528			—
Loss (gain) on extinguishment of debt		3,337			(54	)
Equity in earnings of unconsolidated affiliates		(11,887	)		(5,847	)
Income from operations before income taxes	$	15,780		$	10,809

For purposes of segment reporting, segment operating profit represents segment net sales less cost of sales, segment restructuring charges, segment impairments of long-lived assets, and allocated selling, general and administrative (“SG&A”) expenses. Certain non-segment manufacturing and unallocated SG&A costs are allocated to the operating segments based on activity drivers relevant to the respective costs. This allocation methodology is updated as part of the annual budgeting process.

Restructuring charges in fiscal year 2011 include the cost of dismantling and relocating polyester machinery to UCA and the reinstallation of previously dismantled polyester texturing machines in Yadkinville, North Carolina.

The primary differences between the segmented financial information of the operating segments, as reported to management and the Company’s consolidated reporting relate to the provision (benefit) for bad debts, net other operating expense (income), net interest expense, other non-operating expenses, and equity in (earnings) losses of unconsolidated affiliates and related impairments.

Notes to Condensed Consolidated Financial Statements – (Continued)

13. Stock-Based Compensation

During the first quarter of fiscal year 2010, the Compensation Committee of the Board of Directors (“Board”) authorized the issuance of 566,659 stock options from the 2008 Unifi, Inc. Long-Term Incentive Plan (“2008 Long-Term Incentive Plan”) to certain key employees and certain members of the Board. The stock options vest ratably over a three year period and have ten year contractual terms. The Company used the Black-Scholes model to estimate the weighted-average grant date fair value of $3.34 per share.

During the second quarter of fiscal year 2011, the Board authorized the issuance of an aggregate of 25,200 restricted stock units (“RSUs”) under the 2008 Long-Term Incentive Plan to the Company’s non-employee directors. The RSUs are subject to a vesting restriction and convey no rights of ownership in shares of Company stock until such RSUs have vested and been distributed to the grantee in the form of Company stock. The RSUs will become fully vested on November 27, 2011, provided the grantee remains in continuous service as a member of the Board from the grant date until the vesting date. If prior to the vesting date, the grantee dies or has a separation from service as a result of disability, the grantee’s RSUs will become fully vested. The vested RSUs will be converted into an equivalent number of shares of Company common stock and distributed to the grantee following the grantee’s termination of services as a member of the Board. The Company estimated the grant-date fair value of the award to be $13.89 per RSU.

The Company incurred $0.2 million and $0.6 million in the third quarter of fiscal years 2011 and 2010 respectively, and $0.6 million and $1.8 million for the year-to-date periods respectively, in stock-based compensation expense which was recorded as SG&A expense with the offset to capital in excess of par value.

The Company issued 5,443 and 14,331 shares of common stock during the third quarter and year-to-date periods of fiscal year 2011 respectively, as a result of the exercise of stock options. There were no stock options exercised during the third quarter or the year-to-date periods of fiscal year 2010.

All share and per share amounts have been retroactively adjusted for all periods presented to reflect the decrease in shares as a result of the reverse stock split which became effective November 3, 2010.

14. Other Operating Expense (Income), Net

The following table summarizes the Company’s other operating expense (income), net (amounts in thousands):

	For the Quarters Ended						For the Nine-Months Ended
	March 27, 2011			March 28, 2010			March 27, 2011			March 28, 2010
Loss on sale or disposal of PP&E	$	189		$	1,010		$	242		$	953
Currency (gains) losses		(13	)		61			297			(59	)
Gain from sale of nitrogen credits		—			(1,400	)		—			(1,400	)
Other, net		(18	)		(17	)		(122	)		(36	)
Other operating expense (income), net	$	158		$	(346	)	$	417		$	(542	)

Notes to Condensed Consolidated Financial Statements – (Continued)

15. Derivatives Financial Instruments and Fair Value Measurements

The Company conducts a portion of its business in various foreign currencies. As a result, it is subject to the transaction exposure that arises from foreign exchange rate movements between the dates that foreign currency transactions are recorded and the dates they are consummated. The Company utilizes some natural hedging to mitigate these transaction exposures. The Company also enters into foreign currency forward contracts for the purchase and sale of European, North American and Brazilian currencies to use as economic hedges against balance sheet and income statement currency exposures. These forward contracts are principally entered into for the purchase of inventory and equipment and the sale of Company products into export markets. Counter-parties for these instruments are major financial institutions. The Company accounts for foreign currency forward contracts at fair value. Changes in the fair value of these contracts are recorded in the line item other operating expense (income), net in the Condensed Consolidated Statements of Operations.

Foreign currency forward contracts are used as economic hedges for the exposure for sales in foreign currencies based on specific sales made to customers. Generally, approximately 60% to 75% of the sales value of these orders is covered by forward contracts. Maturity dates of the forward contracts are intended to match anticipated receivable collections. The Company marks the forward contracts to market at month end and any realized and unrealized gains or losses are recorded as other operating expense (income). The Company also enters currency forward contracts for committed machinery and inventory purchases. Generally up to 5% of inventory purchases made by the Company’s Brazilian subsidiary are covered by forward contracts although 100% of the cost may be covered by individual contracts in certain instances. As of March 27, 2011, the latest maturity date for all outstanding sales and purchase foreign currency forward contracts is June 2011.

The Company also, on occasion, enters into derivative instruments that it designates as a hedge, for a forecasted transaction, of the variability of cash flows to be received (“cash flow hedge”). The Company utilizes derivative financial instruments to hedge its exposure to changes in interest rates. All derivatives financial instruments are recorded on the balance sheet at their respective fair value. The Company does not use financial instruments or derivatives for any trading or other speculative purposes.

During the third quarter of fiscal year 2011, the Company adopted a strategy to utilize a combination of internally generated cash and borrowings on its revolving credit facility to repurchase and retire portions of its 11.5% 2014 notes. The Company’s policy to mitigate its exposure to the interest rate risk associated with the variable London Interbank Offered Rate (“LIBOR”) rate borrowings on its revolving credit facility while benefiting from a reduced fixed rate on its 2014 notes was effected through its entering a 27-month interest rate swap on the first $25 million of revolving credit facility borrowings as further discussed below.

On February 15, 2011, the Company entered into a 27-month, $25 million interest rate swap with Bank of America, N.A. to provide a hedge against the variability of cash flows (monthly interest expense payments) on the first $25 million of LIBOR-based variable rate borrowings under the Company’s revolving credit facility due to fluctuations in the LIBOR benchmark interest rate. The Company intends to maintain at least $25 million of LIBOR-based variable rate borrowings in place for the duration of the interest rate swap. The interest rate swap allows the Company to pay a fixed interest rate of 1.39% on such borrowings. The Company designated the swap as a cash flow hedge and formally documented all aspects of the relationship between the hedging instrument (the interest rate swap) and the item being hedged (the LIBOR-based variable rate borrowings). The Company assesses, both at the inception of the hedge and on an ongoing basis, whether derivatives designated as hedging instruments are highly effective in offsetting the changes in the cash flow of the hedge items. If it is determined that a derivative is not highly effective as a hedge or ceases to be highly effective, the Company will discontinue hedge accounting prospectively.

At inception and through the end of the March 2011 quarter, the interest rate swap was determined to be highly effective and the change in its fair value was reported on the balance sheet. For the quarter ended March 27, 2011, the Company recognized other comprehensive loss of $0.3 million based on the change in fair value of the interest rate swap; no hedge ineffectiveness was recognized in interest income or interest expense over the same period. The Company expects the interest rate swap to continue to be highly effective through its termination date and have no impact on future period earnings.

Notes to Condensed Consolidated Financial Statements – (Continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company has adopted the guidance issued by the Financial Accounting Standards Board (“FASB”) which established a framework for measuring and disclosing fair value measurements related to financial and non-financial assets. There is a common definition of fair value used and a hierarchy for fair value measurements based on the type of inputs that are used to value the assets or liabilities at fair value.

The levels of the fair value hierarchy are:

●	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date,

●	Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, or

●

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The fair value of the Company’s derivative instruments as of March 27, 2011 and June 27, 2010 were as follows (amounts in thousands):

	March 27, 2011			June 27, 2010
	Level 2			Level 2
Derivatives designated as cash flow hedges:
Interest rate swap (loss)	$	(256	)	$	—

Derivatives not designated as hedging instruments:

Foreign currency purchase contracts:
Notional amount	$	—		$	2,826
Fair value		—			2,873
Net unrealized gain	$	—		$	(47	)

Foreign currency sales contracts:
Notional amount	$	739		$	1,231
Fair value		747			1,217
Net unrealized (loss) gain	$	(8	)	$	14

The fair value of the interest rate swap held by the Company is based on using market expectations for future LIBOR rates at the measurement date to convert future cash flows to a single present value amount and is reported in the line item long-term debt and other liabilities in the Condensed Consolidated Balance Sheets. The fair values of the foreign exchange forward contracts held by the Company at the respective quarter-end dates are based on discounted quarter-end forward currency rates and are reported in line item receivables in the Condensed Consolidated Balance Sheet. The total impact of foreign currency related items that are reported on the line item other operating expense (income), net in the Condensed Consolidated Statements of Operations, including transactions that were hedged and those unrelated to hedging, was a pre-tax gain of $13 thousand and a pre-tax loss of $0.1 million for the quarters ended March 27, 2011 and March 28, 2010, respectively. For the year-to-date periods ended March 27, 2011 and March 28, 2010, the total impact of foreign currency related items resulted in a pre-tax loss of $0.3 million and a pre-tax gain of $0.1 million, respectively. These are considered Level 2 inputs in the fair value hierarchy.

The fair value of the Company’s 2014 notes is based on their traded price, in privately negotiated transactions, on the latest trade date prior to period end. The fair value of the Company’s 2014 notes was $139.4 million and $184.1 million as of the quarters ended March 27, 2011 and June 27, 2010, respectively. These are considered Level 1 inputs in the fair value hierarchy. The fair value of certain financial instruments held by the Company, including cash equivalents, trade receivables, accounts payable and accrued liabilities approximate the amounts recorded in the balance sheet because of the relatively short term nature of these financial instruments. The carrying amount of the revolving credit facility included in the line item long-term debt and other liabilities in the Condensed Consolidated Balance Sheets approximates fair value because the facility has a floating interest rate. These are considered Level 1 inputs in the fair value hierarchy.

Notes to Condensed Consolidated Financial Statements – (Continued)

There were no transfers into or out of Level 1 or Level 2 for the periods ended March 27, 2011 and June 27, 2010.

16. Related Party Transaction

In each of December 2008, 2009, and 2010, the Company and Dillon Yarn Company (“Dillon”) extended the polyester services portion of an agreement for sales and services, each time for a term of one year. As a result, the Company recorded $0.3 million and $0.3 million of SG&A expense for the third quarter of fiscal years 2011 and 2010, respectively, related to this contract and the related amendments and $1.0 million and $1.2 million for the year-to-date period of fiscal year 2011 and 2010, respectively. On March 9, 2011, the Company appointed Mr. Mitchel Weinberger, the President and Chief Operating Officer of Dillon, to its Board following the unexpected death of Mr. Stephen Wener, the former President and Chief Executive Officer of Dillon. Mr. Wener had been a member of the Company’s Board since May 24, 2007. The terms of the Company’s sales and service agreement with Dillon are, in management’s opinion, no less favorable than the Company would have been able to negotiate with an independent third party for similar services.

17. Commitments and Contingencies

On September 30, 2004, the Company completed its acquisition of the polyester filament manufacturing assets located at Kinston, North Carolina from INVISTA S.a.r.l. (“INVISTA”). The land for the Kinston site was leased pursuant to a 99 year ground lease (“Ground Lease”) with E.I. DuPont de Nemours (“DuPont”). Since 1993, DuPont has been investigating and cleaning up the Kinston site under the supervision of the U.S. Environmental Protection Agency (“EPA”) and the North Carolina Department of Environment and Natural Resources (“DENR”) pursuant to the Resource Conservation and Recovery Act Corrective Action program. The Corrective Action program requires DuPont to identify all potential areas of environmental concern (“AOCs”), assess the extent of containment at the identified AOCs and clean it up to comply with applicable regulatory standards. Effective March 20, 2008, the Company entered into a Lease Termination Agreement associated with conveyance of certain assets at Kinston to DuPont. This agreement terminated the Ground Lease and relieved the Company of any future responsibility for environmental remediation, other than participation with DuPont, if so called upon, with regard to the Company’s period of operation of the Kinston site. However, the Company continues to own a satellite service facility acquired in the INVISTA transaction that has contamination from DuPont’s operations and is monitored by DENR. This site has been remediated by DuPont and DuPont has received authority from DENR to discontinue remediation, other than natural attenuation. DuPont’s duty to monitor and report to DENR will be transferred to the Company in the future, at which time DuPont must pay the Company for seven years of monitoring and reporting costs and the Company will assume responsibility for any future remediation and monitoring of the site. At this time, the Company has no basis to determine if and when it will have any responsibility or obligation with respect to the AOCs or the extent of any potential liability for the same.

The Company is aware of certain claims and potential claims against it for the alleged use of non-compliant “Berry Amendment” nylon POY in yarns that the Company sold which may have ultimately been used to manufacture certain U.S. military garments (the “Military Claims”). As of June 27, 2010, the Company recorded an accrual for the Military Claims of which $0.3 million was paid or settled during the quarter ended September 26, 2010.

18. Recent Accounting Pronouncements

The FASB has issued ASU No. 2010-28, “Intangibles - Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts”. This ASU reflects the decision reached in EITF Issue No. 10-A. The amendments in this ASU modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with the existing guidance and examples, which require that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The Company does not expect that this ASU will have a material effect on its financial position or its results of operations.

Notes to Condensed Consolidated Financial Statements – (Continued)

The FASB has issued ASU 2010-29, “Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations”. This ASU reflects the decision reached in EITF Issue No. 10-G. The amendments in this ASU affect any public entity, as defined by Topic 805 Business Combinations, that enters into business combinations that are material on an individual or aggregate basis. The amendments in this ASU specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company does not expect this ASU will have a material effect on its financial position or results of operations.

In July 2010, the FASB issued Accounting Standards Update No. 2010-20 “Receivables (Topic 310) Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” to amend the disclosure requirements related to financing receivables. The guidance requires additional disclosures about the nature of an entity’s credit risk as it relates to its receivables, how that risk is analyzed for purposes of providing a credit loss provision, and the reasons for changes in the loss provision. These disclosures are intended to provide financial statement users with more transparency related to an entity’s credit risk practices and the related allowances for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. Accordingly, the Company adopted the guidance for period-end disclosures effective as of the end of its second quarter of fiscal year 2011 with the guidance for period activity disclosures to be implemented during its third quarter of fiscal year 2011. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.

19. Subsequent Events

The Company evaluated all events and material transactions for potential recognition or disclosure through such time as these statements were filed with the Securities and Exchange Commission (“SEC”) and determined there were no other items deemed reportable.

20. Condensed Consolidated Guarantor and Non-Guarantor Financial Statements

The guarantor subsidiaries presented below represent the Company’s subsidiaries that are subject to the terms and conditions outlined in the indenture governing the Company’s issuance of the 2014 notes and the guarantees, jointly and severally, on a senior secured basis. The non-guarantor subsidiaries presented below represent the foreign subsidiaries which do not guarantee the notes. Each subsidiary guarantor is 100% owned, directly or indirectly, by Unifi, Inc. and all guarantees are full and unconditional.

Supplemental financial information for the Company and its guarantor subsidiaries and non-guarantor subsidiaries of the 2014 notes is presented below.

Notes to Condensed Consolidated Financial Statements – (Continued)

Balance Sheet Information as of March 27, 2011 (amounts in thousands):

	Parent				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	126			$	160			$	18,856			$	—			$	19,142
Receivables, net			—				72,180				32,485				—				104,665
Intercompany accounts receivable			522,254				(514,038	)			831				(9,047	)			—
Inventories			—				86,725				49,889				101				136,715
Income taxes receivable			353				—				30				—				383
Deferred income taxes			—				—				2,126				—				2,126
Other current assets			126				883				5,207				—				6,216
Total current assets			522,859				(354,090	)			109,424				(8,946	)			269,247

Property, plant and equipment			11,348				627,304				110,928				—				749,580
Less accumulated depreciation			(2,400	)			(510,061	)			(84,274	)			—				(596,735	)
			8,948				117,243				26,654				—				152,845

Intangible assets, net			—				12,235				—				—				12,235
Investments in unconsolidated affiliates			—				81,263				8,591				—				89,854
Investments in consolidated subsidiaries			422,838				—				—				(422,838	)			—
Other non-current assets			3,298				3,048				19,094				(16,389	)			9,051
		$	957,943			$	(140,301	)		$	163,763			$	(448,173	)		$	533,232

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	142			$	39,676			$	8,534			$	—			$	48,352
Intercompany accounts payable			490,986				(490,382	)			8,443				(9,047	)			—
Accrued expenses			6,060				9,102				3,311				—				18,473
Income taxes payable			(1,537	)			—				2,246				—				709
Current maturities of long-term debt and other liabilities			—				459				—				—				459
Total current liabilities			495,651				(441,145	)			22,534				(9,047	)			67,993

Notes payable			133,722				—				—				—				133,722
Long-term debt and other liabilities			38,056				2,563				—				—				40,619
Deferred income taxes			—				—				384				—				384
Shareholders’/ invested equity			290,514				298,281				140,845				(439,126	)			290,514
		$	957,943			$	(140,301	)		$	163,763			$	(448,173	)		$	533,232

Notes to Condensed Consolidated Financial Statements – (Continued)

Balance Sheet Information as of June 27, 2010 (amounts in thousands):

	Parent				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	9,938			$	1,832			$	30,921			$	—			$	42,691
Receivables, net			—				67,979				23,264				—				91,243
Intercompany accounts receivable			221,670				(209,991	)			720				(12,399	)			—
Inventories			—				69,930				41,077				—				111,007
Deferred income taxes			—				—				1,623				—				1,623
Other current assets			79				1,052				4,988				—				6,119
Total current assets			231,687				(69,198	)			102,593				(12,399	)			252,683

Property, plant and equipment			11,348				643,930				92,579				—				747,857
Less accumulated depreciation			(2,185	)			(523,771	)			(70,402	)			—				(596,358	)
			9,163				120,159				22,177				—				151,499

Intangible assets, net			—				14,135				—				—				14,135
Investments in unconsolidated affiliates			—				65,446				8,097				—				73,543
Investments in consolidated subsidiaries			407,605				—				—				(407,605	)			—
Other non-current assets			7,200				2,999				7,446				(5,040	)			12,605
		$	655,655			$	133,541			$	140,313			$	(425,044	)		$	504,465

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	218			$	33,158			$	7,286			$	—			$	40,662
Intercompany accounts payable			214,087				(213,457	)			11,769				(12,399	)			—
Accrued expenses			2,732				15,699				3,294				—				21,725
Income taxes payable			—				(44	)			549				—				505
Current portion of notes payable			15,000				—				—				—				15,000
Current maturities of long-term debt and other liabilities			—				327				—				—				327
Total current liabilities			232,037				(164,317	)			22,898				(12,399	)			78,219

Notes payable, less current portion			163,722				—				—				—				163,722
Long-term debt and other liabilities			—				2,531				5,040				(5,040	)			2,531
Deferred income taxes			—				—				97				—				97
Shareholders’/ invested equity			259,896				295,327				112,278				(407,605	)			259,896
		$	655,655			$	133,541			$	140,313			$	(425,044	)		$	504,465

Notes to Condensed Consolidated Financial Statements – (Continued)

Statement of Operations Information for the Quarter Ended March 27, 2011 (amounts in thousands):

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Summary of Operations:
Net sales	$	—		$	126,051		$	52,676		$	(563	)	$	178,164
Cost of sales		—			119,023			44,870			(876	)		163,017
Restructuring charges		—			9			—			—			9
Equity in subsidiaries		6,292			—			—			(6,292	)		—
Selling, general and administrative expenses		—			7,563			2,781			—			10,344
(Benefit) provision for bad debts		—			(357	)		398			—			41
Other operating (income) expense, net		(7,244	)		7,322			100			(20	)		158

Non-operating (income) expenses:
Interest income		—			(63	)		(670	)		149			(584	)
Interest expense		4,873			9			283			(149	)		5,016
Other non-operating expenses		78			—			—			—			78
Loss on extinguishment of debt		2,193			—			—			—			2,193
Equity in (earnings) losses of unconsolidated affiliates		—			2,450			(419	)		72			2,103
(Loss) income from operations before income taxes		(6,192	)		(9,905	)		5,333			6,553			(4,211	)
(Benefit) provision for income taxes		(2,147	)		—			1,981			—			(166	)
Net (loss) income	$	(4,045	)	$	(9,905	)	$	3,352		$	6,553		$	(4,045	)

Notes to Condensed Consolidated Financial Statements – (Continued)

Statement of Operations Information for the Quarter Ended March 28, 2010 (amounts in thousands):

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Summary of Operations:
Net sales	$	—		$	117,116		$	38,063		$	(492	)	$	154,687
Cost of sales		—			107,416			31,294			(533	)		138,177
Restructuring charges		—			254			—			—			254
Equity in subsidiaries		(905	)		—			—			905			—
Selling, general and administrative expenses		—			9,050			2,197			5			11,252
Benefit for bad debts		—			(11	)		(94	)		—			(105	)
Other operating (income) expense, net		(5,782	)		5,380			56			—			(346	)

Non-operating (income) expenses:
Interest income		(11	)		1			(765	)		—			(775	)
Interest expense		5,681			16			—			—			5,697
Equity in (earnings) losses of unconsolidated affiliates		—			(1,994	)		(197	)		16			(2,175	)
Income (loss) from operations before income taxes		1,017			(2,996	)		5,572			(885	)		2,708
Provision for income taxes		246			4			1,687			—			1,937
Net income (loss)	$	771		$	(3,000	)	$	3,885		$	(885	)	$	771

Notes to Condensed Consolidated Financial Statements – (Continued)

Statement of Operations Information for the Nine-Months Ended March 27, 2011 (amounts in thousands):

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Summary of Operations:
Net sales	$	—		$	360,748		$	153,591	$	(1,353	)	$	512,986
Cost of sales		—			326,791			132,765		(1,961	)		457,595
Restructuring charges		—			1,555			—		—			1,555
Equity in subsidiaries		(10,711	)		—			—		10,711			—
Selling, general and administrative expenses		—			23,526			8,697		—			32,223
(Benefit) provision for bad debts		—			(559	)