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 December 29, 2013

 

OR

 

[ ] 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.)
7201 West Friendly Avenue Greensboro, NC		27419-9109
(Address of principal executive offices)		(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 such shorter period that the registrant was required to submit and post such files). Yes [ X ] 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 definitions 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 February 4, 2014 was 19,040,083.

  

  

UNIFI, INC.

FORM 10-Q FOR THE QUARTER ENDED DECEMBER 29, 2013

 

TABLE OF CONTENTS

 

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Part I. FINANCIAL INFORMATION
				Page
Item 1.		Financial Statements:
		Condensed Consolidated Balance Sheets as of December 29, 2013 and June 30, 2013		3
		Condensed Consolidated Statements of Income for the Three Months and Six Months Ended December 29, 2013 and December 23, 2012		4
		Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended December 29, 2013 and December 23, 2012		5
		Condensed Consolidated Statements of Shareholders’ Equity for the Six Months Ended December 29, 2013		6
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 29, 2013 and December 23, 2012		7
		Notes to Condensed Consolidated Financial Statements		8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3.		Quantitative and Qualitative Disclosures about Market Risk		43
Item 4.		Controls and Procedures		44
Part II. OTHER INFORMATION
Item 1.		Legal Proceedings		45
Item 1A.		Risk Factors		45
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		45
Item 3.		Defaults Upon Senior Securities		45
Item 4.		Mine Safety Disclosures		45
Item 5.		Other Information		45
Item 6.		Exhibits		46
		Signatures		47
		Exhibit Index		48

 

 

Part I.      FINANCIAL INFORMATION

 

Item 1.      FINANCIAL STATEMENTS

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(amounts in thousands, except share and per share amounts)

 

  

		December 29, 2013				June 30, 2013
ASSETS
Cash and cash equivalents		$	15,522			$	8,755
Receivables, net			77,536				98,392
Inventories			110,765				110,667
Income taxes receivable			1,374				1,388
Deferred income taxes			1,831				1,715
Other current assets			5,371				5,913
Total current assets			212,399				226,830
Property, plant and equipment, net			116,562				115,164
Deferred income taxes			2,590				2,196
Intangible assets, net			8,549				7,772
Investments in unconsolidated affiliates			101,562				93,261
Other non-current assets			4,510				10,243
Total assets		$	446,172			$	455,466
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable		$	35,740			$	45,544
Accrued expenses			12,517				18,485
Income taxes payable			417				851
Current portion of long-term debt			1,316				65
Total current liabilities			49,990				64,945
Long-term debt			101,508				97,688
Other long-term liabilities			6,950				5,053
Deferred income taxes			1,991				1,300
Total liabilities			160,439				168,986
Commitments and contingencies
Common stock, $0.10 par (500,000,000 shares authorized, 19,035,918 and 19,205,209 shares outstanding)			1,904				1,921
Capital in excess of par value			42,814				36,375
Retained earnings			248,242				252,112
Accumulated other comprehensive loss			(8,662	)			(5,500	)
Total Unifi, Inc. shareholders’ equity			284,298				284,908
Non-controlling interest			1,435				1,572
Total shareholders’ equity			285,733				286,480
Total liabilities and shareholders’ equity		$	446,172			$	455,466

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

  

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(amounts in thousands, except per share amounts)

 

  

		For the Three Months Ended								For the Six Months Ended
		December 29, 2013				December 23, 2012				December 29, 2013				December 23, 2012
Net sales		$	160,617			$	172,071			$	329,286			$	344,971
Cost of sales			142,120				155,380				290,804				310,260
Gross profit			18,497				16,691				38,482				34,711
Selling, general and administrative expenses			11,491				11,532				21,605				22,679
Provision for bad debts			87				73				49				183
Other operating expense, net			1,145				580				2,769				1,161
Operating income			5,774				4,506				14,059				10,688
Interest income			(142	)			(144	)			(1,356	)			(268	)
Interest expense			903				1,361				2,155				2,805
Loss on extinguishment of debt			—				114				—				356
Equity in earnings of unconsolidated affiliates			(5,122	)			(1,258	)			(11,245	)			(1,929	)
Income before income taxes			10,135				4,433				24,505				9,724
Provision for income taxes			3,924				2,216				9,675				5,449
Net income including non-controlling interest			6,211				2,217				14,830				4,275
Less: net (loss) attributable to non-controlling interest			(232	)			(209	)			(483	)			(445	)
Net income attributable to Unifi, Inc.		$	6,443			$	2,426			$	15,313			$	4,720
Net income attributable to Unifi, Inc. per common share:
Basic		$	0.34			$	0.12			$	0.80			$	0.23
Diluted		$	0.32			$	0.12			$	0.76			$	0.23

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(amounts in thousands)

 

 

		For the Three Months Ended								For the Six Months Ended
		December 29, 2013				December 23, 2012				December 29, 2013				December 23, 2012
Net income including non-controlling interest		$	6,211			$	2,217			$	14,830			$	4,275
Other comprehensive (loss) income:
Foreign currency translation adjustments			(3,140	)			(352	)			(3,462	)			(664	)
Gain on cash flow hedges for an unconsolidated affiliate			—				225				—				1,228
Gain (loss) on cash flow hedges, net of reclassification adjustments			145				159				300				(293	)
Other comprehensive (loss) income before income taxes			(2,995	)			32				(3,162	)			271
Income tax (provision) benefit provided on cash flow hedges			—				(62	)			—				116
Other comprehensive (loss) income, net			(2,995	)			(30	)			(3,162	)			387
Comprehensive income including non-controlling interest			3,216				2,187				11,668				4,662
Less: comprehensive (loss) attributable to non-controlling interest			(232	)			(209	)			(483	)			(445	)
Comprehensive income attributable to Unifi, Inc.		$	3,448			$	2,396			$	12,151			$	5,107

 

  

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

For the Six Months Ended December 29, 2013

(amounts in thousands)

 

 

		Shares				Common Stock				Capital in Excess of Par Value				Retained Earnings				Accumulated Other Comprehensive Loss				Total Unifi, Inc. Shareholders’ Equity				Non- controlling Interest				Total Shareholders’ Equity
Balance at June 30, 2013			19,205			$	1,921			$	36,375			$	252,112			$	(5,500	)		$	284,908			$	1,572			$	286,480
Options exercised			767				77				6,339				—				—				6,416				—				6,416
Stock-based compensation			—				—				1,211				—				—				1,211				—				1,211
Conversion of restricted stock units			31				3				(3	)			—				—				—				—				—
Common stock repurchased and retired under publicly announced program			(771	)			(77	)			(1,104	)			(17,506	)			—				(18,687	)			—				(18,687	)
Common stock tendered to the Company for the exercise of stock options and retired			(134	)			(14	)			(3,540	)			(29	)			—				(3,583	)			—				(3,583	)
Common stock tendered to the Company for withholding tax obligations and retired			(62	)			(6	)			—				(1,648	)			—				(1,654	)			—				(1,654	)
Excess tax benefit on stock-based compensation plans			—				—				3,536				—				—				3,536				—				3,536
Other comprehensive loss, net			—				—				—				—				(3,162	)			(3,162	)			—				(3,162	)
Contributions from non-controlling interest			—				—				—				—				—				—				346				346
Net income (loss)			—				—				—				15,313				—				15,313				(483	)			14,830
Balance at December 29, 2013			19,036			$	1,904			$	42,814			$	248,242			$	(8,662	)		$	284,298			$	1,435			$	285,733

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(amounts in thousands)

 

 

		For The Six Months Ended
		December 29, 2013				December 23, 2012
Cash and cash equivalents at beginning of year		$	8,755			$	10,886
Operating activities:
Net income including non-controlling interest			14,830				4,275
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Equity in earnings of unconsolidated affiliates			(11,245	)			(1,929	)
Dividends received from unconsolidated affiliates			3,059				2,724
Depreciation and amortization expense			8,625				12,997
Loss on extinguishment of debt			—				356
Non-cash compensation expense			1,611				1,326
Excess tax benefit on stock-based compensation plans			(3,536	)			—
Deferred income taxes			25				3,159
Restructuring charges			1,118				—
Other			633				97
Changes in assets and liabilities, excluding effects of foreign currency adjustments:
Receivables, net			19,829				10,447
Inventories			(1,609	)			5,467
Other current assets and income taxes receivable			684				(784	)
Accounts payable and accrued expenses			(17,645	)			(12,235	)
Income taxes payable			3,137				(1,161	)
Other non-current assets			4,714				—
Net cash provided by operating activities			24,230				24,739
Investing activities:
Capital expenditures			(9,431	)			(2,872	)
Other investments			—				(1,901	)
Proceeds from other investments			392				281
Proceeds from sale of assets			268				56
Other			(60	)			(55	)
Net cash used in investing activities			(8,831	)			(4,491	)
Financing activities:
Proceeds from revolving credit facility			72,700				28,700
Payments on revolving credit facility			(74,800	)			(35,700	)
Proceeds from term loan			7,200				—
Payments on term loans			—				(10,516	)
Payments of debt financing fees			(3	)			(63	)
Proceeds from related party term loan			—				1,250
Common stock repurchased and retired under publicly announced program			(18,687	)			—
Common stock tendered to the Company for withholding tax obligations and retired			(1,654	)			—
Proceeds from stock option exercises			2,833				29
Contributions from non-controlling interest			346				480
Excess tax benefit on stock-based compensation plans			3,536				—
Other			(28	)			(39	)
Net cash used in financing activities			(8,557	)			(15,859	)
Effect of exchange rate changes on cash and cash equivalents			(75	)			(29	)
Net increase in cash and cash equivalents			6,767				4,360
Cash and cash equivalents at end of period		$	15,522			$	15,246

 

 

See accompanying Notes to Condensed Consolidated Financial Statements. 

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

 

1. Background

 

Unifi, Inc., a New York corporation formed in 1969 (together with its subsidiaries, “we”, the “Company” or “Unifi”), is a multi-national manufacturing company that processes and sells high-volume commodity yarns, specialized yarns designed to meet certain customer specifications, and premier value-added (“PVA”) yarns with enhanced performance characteristics. The Company sells yarns made from polyester and nylon to other yarn manufacturers and knitters and weavers that produce fabric for the apparel, hosiery, sock, home furnishings, automotive upholstery, industrial and other end-use markets. The Company’s polyester products include polyester polymer beads (“Chip”), partially oriented yarn (“POY”), textured, solution and package dyed, draw wound, twisted and beamed yarns; each is available in virgin or recycled varieties (made from both pre-consumer yarn waste and post-consumer waste, including plastic bottles). The Company’s nylon products include textured, solution dyed and covered spandex products.

 

The Company maintains one of the industry’s most comprehensive yarn product offerings, and it has ten manufacturing operations in four countries and participates in joint ventures in Israel and the United States (“U.S.”). The Company’s principal markets are located in the U.S., Canada, Mexico, Central America and South America. In addition, the Company has a wholly-owned subsidiary in the People’s Republic of China (“China”) focused on the sale and promotion of the Company’s PVA and other specialty products in the Asian textile market, primarily in China, as well as into the European market.

 

2. Basis of Presentation; Condensed Notes

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. As contemplated by the instructions of the Securities and Exchange Commission to Form 10-Q, the following notes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to the Company’s year-end audited consolidated financial statements and notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended June 30, 2013 (the “2013 Form 10-K”).

 

The financial information included in this report has been prepared by the Company, without audit. In the opinion of management, all adjustments considered necessary for a fair statement of the results for interim periods have been included. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The June 30, 2013 condensed consolidated balance sheet data was derived from the audited financial statements, but does not include all disclosures required by GAAP. The preparation of financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the amounts reported and certain financial statement disclosures. Actual results may vary from these estimates.

 

All dollar and other currency amounts and share amounts, except per share amounts, are presented in thousands, except as otherwise noted. 

 

Fiscal Year

The Company’s current fiscal quarter ended on December 29, 2013. The Company’s Brazilian, Colombian and Chinese subsidiaries report on a calendar period basis, with their fiscal quarter ending on December 31, 2013. There were no significant transactions or events that occurred between the Company’s fiscal quarter end and its subsidiaries’ fiscal quarter end for this period. The three months ended December 29, 2013 and the three months ended December 23, 2012 each consisted of thirteen week periods. The six months ended December 29, 2013 and the six months ended December 23, 2012 each consisted of twenty-six week periods.

 

Reclassifications

Certain reclassifications of prior years’ data have been made to conform to the current year presentation.

 

3. Recent Accounting Pronouncements

 

There have been no newly issued or newly applicable accounting pronouncements that have, or are expected to have, a significant impact on the Company's financial statements. 

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

 

4. Acquisition

 

On December 2, 2013, the Company acquired certain draw wound assets and the associated business from American Drawtech, a division of Dillon Yarn Corporation (“Dillon”), pursuant to the exercise of an option granted to the Company under the terms of a commissioning agreement with Dillon, for $2,934, which amount included accounts payable and an accrued contingent liability.  The assets acquired include Dillon’s draw winding inventory and production machinery and equipment. This acquisition will increase the Company’s polyester production capacity and allow the Company to expand its presence in targeted industrial, belting, hose and thread markets by increasing its product offerings to include mid-tenacity flat yarns. Mr. Mitchel Weinberger, a member of the Board of Directors (the “Board”), is Dillon’s president and chief operating officer. Since the acquisition date, the business has generated $344 in net sales for the Company’s Polyester Segment.

 

The acquisition has been accounted for as a business combination, which requires assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date.  The Company concluded that the acquisition did not represent a material business combination. The Company's preliminary estimates of the fair value of the assets acquired, liabilities assumed and consideration transferred are as follows:

 

Assets:
Inventory		$	434
Machinery and equipment			835
Customer list			1,615
Non-compete agreement			50
Total assets		$	2,934
Liabilities:
Accounts payable		$	434
Contingent consideration			2,500
Total liabilities		$	2,934

 

The preliminary estimate for the contingent consideration liability represents the present value of the expected future payments due to Dillon over the five-year period following the acquisition date.  The payments are equal to one-half of the operating profit of the draw wound business, as calculated using an agreed upon definition. The preliminary assumptions for the contingent consideration liability were based on inputs not observable in the market and represent Level 3 fair value measurements. These estimates will be reviewed each quarter and any adjustment will be recorded through operating income.  The Company estimates that $500 of contingent consideration will be paid to Dillon over the next twelve months and has recorded this amount in accrued expenses, with the remainder of the contingent consideration liability recorded in other long-term liabilities. 

 

The customer list will be amortized over a nine year estimated useful life.  The non-compete agreement will be amortized over the five year term of the agreement. 

 

5. Receivables, Net

 

Receivables, net consist of the following:

		December 29, 2013				June 30, 2013
Customer receivables		$	78,695			$	99,324
Allowance for uncollectible accounts			(997	)			(972	)
Reserves for yarn quality claims			(808	)			(893	)
Net customer receivables			76,890				97,459
Related party receivables			67				204
Other receivables			579				729
Total receivables, net		$	77,536			$	98,392

 

Other receivables consist primarily of receivables for duty drawback, amounts due from customers for returnable packaging, interest, value-added tax and refunds from vendors.

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

 

The changes in the Company’s allowance for uncollectible accounts and reserves for yarn quality claims were as follows:

 

		Allowance for Uncollectible Accounts				Reserves for Yarn Quality Claims
Balance at June 30, 2013		$	(972	)		$	(893	)
Charged to costs and expenses			(49	)			(1,034	)
Charged to other accounts			15				7
Deductions			9				1,112
Balance at December 29, 2013		$	(997	)		$	(808	)

 

For the allowance for uncollectible accounts, amounts charged to costs and expenses are reflected in the provision for bad debts, and deductions represent amounts written off which were deemed to not be collectible, net of any recoveries. Amounts charged to costs and expenses for the reserves for yarn quality claims are primarily reflected as a reduction of net sales, and deductions represent adjustments to either increase or decrease claims based on negotiated amounts or actual versus estimated claim differences. Amounts charged to other accounts primarily include the impact of translating the activity of the Company’s foreign affiliates from their respective local currencies to the U.S. dollar.

 

6. Inventories

 

Inventories consist of the following:

		December 29, 2013				June 30, 2013
Raw materials		$	40,090			$	42,001
Supplies			5,453				5,286
Work in process			5,990				6,237
Finished goods			60,413				58,179
Gross inventories			111,946				111,703
Inventory reserves			(1,181	)			(1,036	)
Total inventories		$	110,765			$	110,667

 

The cost for the majority of the Company’s inventories is determined using the first-in, first-out method. Certain foreign inventories of $32,846 and $31,139 as of December 29, 2013 and June 30, 2013, respectively, were valued under the average cost method.

 

7. Other Current Assets

 

Other current assets consist of the following:

		December 29, 2013				June 30, 2013
Vendor deposits		$	2,079			$	2,633
Value added taxes receivable			1,055				1,729
Prepaid expenses			1,740				1,376
Other investments			450				166
Other			47				9
Total other current assets		$	5,371			$	5,913

 

Vendor deposits primarily relate to down payments made toward the purchase of raw materials by the Company’s U.S., Brazilian and Chinese operations. Value added taxes receivable are recoverable taxes associated with the sales and purchasing activities of the Company’s foreign operations. Prepaid expenses consist of advance payments for insurance, professional fees, membership dues, subscriptions, non-income related tax payments and information technology services.  

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

  

Other investments relate to cash held by the Company’s Colombian subsidiary within an investment fund of a financial institution located in Colombia that is currently being liquidated. The Company was notified of this liquidation in December 2012 and the Company no longer has immediate access to these funds. The Company has recorded a total of $218 in impairment charges in other operating expense, net since the Company received notification of the liquidation of this investment, all of which was recorded in the fiscal year 2013.

 

8. Property, Plant and Equipment, Net

 

Property, plant and equipment, net consists of the following:

 

		December 29, 2013				June 30, 2013
Land		$	2,909			$	2,949
Land improvements			11,676				11,676
Buildings and improvements			145,243				144,833
Assets under capital lease			1,234				1,234
Machinery and equipment			521,030				526,910
Computers, software and office equipment			16,657				16,647
Transportation equipment			4,669				4,866
Construction in progress			7,208				5,691
Gross property, plant and equipment			710,626				714,806
Less: accumulated depreciation			(594,064	)			(599,642	)
Total property, plant and equipment, net		$	116,562			$	115,164

 

Depreciation expense, repair and maintenance expenses and capitalized interest were as follows:

 

		For the Three Months Ended								For the Six Months Ended
		December 29, 2013				December 23, 2012				December 29, 2013				December 23, 2012
Depreciation expense		$	3,634			$	5,779			$	7,455			$	11,591
Repair and maintenance expenses			4,286				4,300				8,516				8,665
Capitalized interest			41				—				83				—

 

9. Intangible Assets, Net

 

Intangible assets, net consist of the following:

 

		December 29, 2013				June 30, 2013
Customer lists		$	23,615			$	22,000
Non-compete agreements			4,293				4,243
Licenses			265				265
Trademarks			316				246
Total intangible assets, gross			28,489				26,754
Accumulated amortization - customer lists			(16,733	)			(15,993	)
Accumulated amortization - non-compete agreements			(3,052	)			(2,895	)
Accumulated amortization - licenses			(70	)			(55	)
Accumulated amortization - trademarks			(85	)			(39	)
Total accumulated amortization			(19,940	)			(18,982	)
Total intangible assets, net		$	8,549			$	7,772

 

In fiscal year 2007, the Company purchased the texturing operations of Dillon, which are included in the Company’s Polyester Segment. The valuation of the customer list acquired was determined by estimating the discounted net earnings attributable to the customer relationships that were purchased after considering items such as possible customer attrition. Based on the length and trend of the projected cash flows, an estimated useful life of thirteen years was determined. The customer list is being amortized in a manner that reflects the expected economic benefit that will be received over its thirteen year life. The Dillon non-compete agreements are amortized using the straight line method over the periods currently covered by the agreements. 

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

 

On October 6, 2011, the Company acquired a controlling interest in Repreve Renewables, LLC (“Renewables”). The non-compete agreement acquired is being amortized using the straight line method over the five year term of the agreement. The licenses acquired are being amortized using the straight line method over their estimated useful lives of four to eight years.

 

The Company capitalizes expenses incurred to register certain trademarks for its Repreve and other PVA products in various countries. The Company has determined that these trademarks have varying useful lives of up to three years.

 

Additions to customer lists and non-compete agreements during the current period relate to the December 2013 acquisition of the draw winding business from Dillon. See “Note 4. Acquisition” for further discussion.

 

Amortization expense for intangible assets consists of the following:

 

		For the Three Months Ended								For the Six Months Ended
		December 29, 2013				December 23, 2012				December 29, 2013				December 23, 2012
Customer lists		$	370			$	451			$	740			$	901
Non-compete agreements			79				78				157				157
Licenses			7				9				15				19
Trademarks			22				—				46				—
Total amortization expense		$	478			$	538			$	958			$	1,077

 

10. Other Non-Current Assets

 

Other non-current assets consist of the following:

 

		December 29, 2013				June 30, 2013
Long-term deposits		$	266			$	5,050
Debt financing fees			1,908				2,117
Biomass foundation and feedstock			1,841				1,852
Other investments			—				674
Other			495				550
Total other non-current assets		$	4,510			$	10,243

 

Long-term deposits consist primarily of vendor deposits. Biomass foundation and feedstock are currently being developed and propagated by Renewables for potential markets in the poultry bedding and bioenergy industries. See “Note 7. Other Current Assets” for further discussion of other investments. Other consists primarily of premiums on a split dollar life insurance policy that represents the value of the Company’s right of return on premiums paid for a retiree owned insurance contract that matures in 2015.

 

11. Accrued Expenses

 

Accrued expenses consist of the following:

 

		December 29, 2013				June 30, 2013
Payroll and fringe benefits		$	7,084			$	11,676
Utilities			1,966				3,058
Severance			1,377				1,049
Contingent consideration			500				—
Property taxes			102				798
Retiree medical liability			96				106
Interest			118				102
Other			1,274				1,696
Total accrued expenses		$	12,517			$	18,485

 

Accrued severance is comprised of the current portion of amounts due under severance agreements between the Company and two of its former executive officers and certain other employees. See “Note 20. Other Operating Expense, Net” for further discussion of severance costs. Contingent consideration is the current portion of the estimated amounts payable to Dillon related to the Company’s December 2013 acquisition of Dillon’s draw winding business. See “Note 4. Acquisition” for further discussion. Other consists primarily of unearned revenues related to returnable packaging, workers compensation and other employee related claims, marketing expenses, freight expenses, rent and other non-income related taxes.

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

  

12. Long-Term Debt 

Debt Obligations
The following table presents the total balances outstanding for the Company’s debt obligations, their scheduled maturity dates and the weighted average interest rate for borrowings (including the effects of an interest rate swap) as well as the applicable current portion of long-term debt: 

 

	Scheduled			Weighted Average Interest Rate as of			Principal Amounts as of
	Maturity Date			December 29, 2013			December 29, 2013				June 30, 2013
ABL Revolver	May 2018			3.1%			$	50,400			$	52,500
ABL Term Loan	May 2018			3.1%				50,000				42,800
Term loan from unconsolidated affiliate	August 2014			3.0%				1,250				1,250
Capital lease obligation	November 2027			4.6%				1,174				1,203
Total debt								102,824				97,753
Current portion of long-term debt								(1,316	)			(65	)
Total long-term debt							$	101,508			$	97,688

 

ABL Facility

On May 24, 2012, the Company entered into a credit agreement (the “Credit Agreement”) to establish a $150,000 senior secured credit facility (“ABL Facility”) with Wells Fargo Bank, N.A. and Bank of America, N.A. The ABL Facility consists of a $100,000 revolving credit facility (“ABL Revolver”) and a $50,000 term loan (“ABL Term Loan”). In addition, the Company entered into a $30,000 term loan (“Term B Loan”) which was repaid on January 8, 2013. The Company entered into a First Amendment to Credit Agreement on December 27, 2012, a Second Amendment to Credit Agreement on June 25, 2013 and, as discussed below, a Third Amendment to Credit Agreement on January 16, 2014 (the “Third Amendment”). The ABL Facility, as amended, has a maturity date of May 24, 2018.  

 

The ABL Facility is secured by a first-priority security interest in substantially all property and assets of Unifi, Inc., Unifi Manufacturing, Inc. and certain subsidiary guarantors (the “Loan Parties”). It is also secured by a first-priority security interest in all (or 65% in the case of first tier controlled foreign corporations) of the stock of (or other ownership interests in) each of the Loan Parties (other than the Company) and certain subsidiaries of the Loan Parties, together with all proceeds and products thereof. The ABL Facility is further secured by a first-priority lien on the Company’s limited liability company membership interest in Parkdale America, LLC (“PAL”).

 

The Credit Agreement includes representations and warranties made by the Loan Parties, affirmative and negative covenants and events of default that are usual and customary for financings of this type. Should excess availability under the ABL Revolver fall below the greater of $10,000 or 20% of the maximum revolver amount, a financial covenant requiring the Loan Parties to maintain a fixed charge coverage ratio on a monthly basis of at least 1.05 to 1.0 becomes effective. In addition, the ABL Facility contains restrictions on certain payments and investments, including restrictions on the payment of dividends and share repurchases, unless excess availability is greater than $20,000 for the thirty day period prior to the making of such a distribution (as calculated on a pro forma basis as if the payment and any revolving loans made in connection therewith were made on the first day of such period).

 

The Company’s ability to borrow under the ABL Revolver is limited to a borrowing base equal to specified percentages of eligible accounts receivable and inventory and is subject to certain conditions and limitations. ABL Revolver borrowings bear interest at the London Interbank Offer Rate (“LIBOR”) plus an applicable margin of 1.75% to 2.25%, or the Base Rate plus an applicable margin of 0.75% to 1.25%, with interest currently being paid on a monthly basis. The applicable margin is based on the average quarterly excess availability under the ABL Revolver. The Base Rate means the greater of (i) the prime lending rate as publicly announced from time to time by Wells Fargo, (ii) the Federal Funds Rate plus 0.5%, and (iii) LIBOR plus 1.0%. There is also a monthly unused line fee under the ABL Revolver of 0.25% to 0.375% of the unused line amount.  

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

 

The ABL Term Loan bears interest at LIBOR plus an applicable margin of 2.25%, or the Base Rate plus an applicable margin of 1.25%, with interest currently being paid on a monthly basis. ABL Term Loan principal payments (if any) are based on the amount that the outstanding balance of the ABL Term Loan exceeds a calculation of eligible machinery and equipment and eligible real property collateral specific to the ABL Term Loan. Subject to certain provisions, the ABL Term Loan may be prepaid at par, in whole or in part, at any time before the maturity date, at the Company’s discretion.

 

Under the terms of the ABL Facility, the Company is required to hedge at least $50,000 of variable interest rate exposure so long as the outstanding principal of all indebtedness having variable rates of interest exceeds $75,000.

 

As of December 29, 2013, the Company was in compliance with all financial covenants, the excess availability under the ABL Revolver was $28,083, the fixed charge coverage ratio was 5.52 to 1.0 and the Company had $525 of standby letters of credit, none of which have been drawn upon.

 

Subsequent Event

The Third Amendment, which was entered into on January 16, 2014, among other things: (i) revised the definition of permitted indebtedness to allow the Company to enter into permitted sales and leaseback transactions of equipment in an aggregate amount not to exceed $4,000 per fiscal year; (ii) revised the definition of permitted dispositions to increase the amount of certain asset sales or dispositions from $500 to $4,000 per fiscal year; and (iii) revised the mandatory prepayment provision to increase the amount of net proceeds received from certain permitted dispositions that would be required to prepay the outstanding ABL Facility debt from $500 to $4,000 per fiscal year. No amendment fee was required.

 

Term Loan from Unconsolidated Affiliate

On August 30, 2012, a foreign subsidiary of the Company entered into an unsecured loan agreement for $1,250 with its unconsolidated affiliate U.N.F. Industries Ltd. The loan bears interest at 3% with interest payable semi-annually. The loan does not amortize and has a maturity date of August 30, 2014, at which time the entire principal balance is due.

 

Capital Lease Obligation

On November 19, 2012, the Company entered into a capital lease with Salem Leasing Corporation for certain transportation equipment. The original amount due under the fifteen year term of the lease is $1,234 and payments are made monthly. The implicit annual interest rate under the lease is approximately 4.6%.

 

Scheduled Debt Maturities

The following table presents the scheduled maturities of the Company’s outstanding debt obligations for the remainder of fiscal year 2014 and the fiscal years thereafter:

 

		Scheduled Maturities on a Fiscal Year Basis
		2014				2015				2016				2017				2018				Thereafter
ABL Revolver		$	—			$	—			$	—			$	—			$	50,400			$	—
ABL Term Loan			—				—				—				—				50,000				—
Term loan from unconsolidated affiliate			—				1,250				—				—				—				—
Capital lease obligation			30				63				66				69				72				874
Total debt		$	30			$	1,313			$	66			$	69			$	100,472			$	874

 

Debt Financing Fees

Debt financing fees are classified within other non-current assets and consist of the following:

 

		December 29, 2013
Balance at beginning of year		$	2,117
Amounts paid related to debt modification			3
Amortization charged to interest expense			(212	)
Balance at end of period		$	1,908

  

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

 

Interest Expense

Interest expense consists of the following:

 

		For the Three Months Ended								For the Six Months Ended
		December 29, 2013				December 23, 2012				December 29, 2013				December 23, 2012
Interest on ABL Facility		$	812			$	839			$	1,665			$	1,740
Interest on Term B Loan			—				317				—				679
Amortization of debt financing fees			105				163				212				329
Marked to market adjustment for interest rate swap			(148	)			(73	)			(8	)			(73	)
Reclassification adjustment for interest rate swap			145				92				300				92
Interest capitalized to property, plant and equipment, net			(41	)			—				(83	)			—
Other			30				23				69				38
Total interest expense		$	903			$	1,361			$	2,155			$	2,805

 

Loss on Extinguishment of Debt

The components of loss on extinguishment of debt consist of the following:

 

		For the Three Months Ended								For the Six Months Ended
		December 29, 2013				December 23, 2012				December 29, 2013				December 23, 2012
Prepayment call premium and other costs for Term B Loan		$	—			$	66			$	—			$	201
Non-cash charges due to write-off of debt financing fees			—				48				—				155
Loss on extinguishment of debt		$	—			$	114			$	—			$	356

 

13. Other Long-Term Liabilities

 

Other long-term liabilities consist of the following:

 

		December 29, 2013				June 30, 2013
Supplemental post-employment plan		$	2,822			$	2,665
Contingent consideration			2,000				—
Income tax contingencies			1,233				1,275
Derivative instruments			315				324
Severance			—				137
Other			580				652
Total other long-term liabilities		$	6,950			$	5,053

 

Contingent consideration represents the long-term portion of contingent payments associated with the Company’s December 2013 acquisition of Dillon’s draw winding business. See “Note 4. Acquisition” for further discussion. Severance represents the long-term portion of monies due under severance agreements with former executive officers of the Company. See “Note 20. Other Operating Expense, Net” for further discussion of these charges. Other includes certain employee related liabilities.

 

The Company maintains an unfunded supplemental post-employment plan for certain management employees. Each employee's account is credited annually based upon a percentage of the participant's base salary, with each participant’s balance adjusted quarterly to reflect returns based upon a stock market index. Amounts are paid to participants only after termination of employment. The following table presents the expenses recorded for this plan:

 

		For the Three Months Ended								For the Six Months Ended
Classification		December 29, 2013				December 23, 2012				December 29, 2013				December 23, 2012
Selling general and administrative expenses		$	244			$	34			$	429			$	306
Other operating expense, net			57				—				91				—
Total		$	301			$	34			$	520			$	306

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

 

14. Income Taxes

 

The effective income tax rates for the three month and six month periods ended December 29, 2013 and December 23, 2012 were based upon the estimated effective income tax rate applicable for the full year after giving effect to any significant items related specifically to interim periods. The effective income tax rate can be impacted over the fiscal year by the mix and timing of actual earnings from our U.S. operations and foreign sources versus annual projections and changes in foreign currency exchange rates in relation to the U.S. dollar. As a result, the Company’s effective tax rate may fluctuate significantly on a quarterly basis.

 

The Company’s effective tax rate for the three month and six month periods ending December 29, 2013 was 38.7% and 39.5%, respectively, and its effective tax rate for the three month and six month periods ending December 23, 2012 was 50.0% and 56.0%, respectively.  The Company’s effective tax rate for each of the periods presented was higher than the U.S. federal statutory rate primarily due to the unfavorable effects of foreign dividends taxed in the U.S., the impact of state taxes, the timing of the Company’s recognition of higher taxable versus book income for an unconsolidated affiliate for which the Company maintains a full valuation allowance, and losses in tax jurisdictions for which no tax benefit could be recognized.

 

As of December 29, 2013, the Company’s valuation allowance was $17,531 and includes $14,656 related to reserves against certain deferred tax assets for unconsolidated affiliates and foreign tax credit carryforwards, as well as $2,875 for reserves against certain deferred tax assets of the Company’s foreign subsidiaries that are primarily related to net operating loss carryforwards. The Company’s valuation allowance as of June 30, 2013 was $16,690.

 

There have been no significant changes in the Company’s liability for uncertain tax positions since June 30, 2013. The Company’s estimate for the potential outcome for any uncertain tax issue is highly judgmental. Management believes that any reasonably foreseeable outcomes related to these matters have been adequately provided for. However, future results may include favorable or unfavorable adjustments to estimated tax liabilities in the period the assessments are made or resolved or when statutes of limitation on potential assessments expire.

 

The Company and its domestic subsidiaries file a consolidated federal income tax return, as well as income tax returns in numerous state and foreign jurisdictions. The tax years subject to examination vary by jurisdiction. The Company regularly assesses the outcomes of both completed and ongoing examinations to ensure that the Company’s provision for income taxes is sufficient. Currently, the Company is subject to examinations for U.S. federal income taxes for tax years 2010 through 2013, for foreign income taxes for tax years 2007 through 2013, and for state and local income taxes for tax years 2003 through 2013. The U.S. federal tax returns and state tax returns filed for the 2010 through 2013 tax years have utilized carryforward tax attributes generated in prior tax years, including net operating losses, which could potentially be revised upon examination.

 

15. Shareholders’ Equity

 

On January 22, 2013, the Board approved a stock repurchase program to acquire up to $50,000 of the Company’s common stock. Under the repurchase program, the Company is authorized to repurchase shares at prevailing market prices, through open market purchases or privately negotiated transactions at such times, manner and prices as determined by management, subject to market conditions, applicable legal requirements, contractual obligations and other factors. Repurchases are expected to be financed through cash generated from operations and borrowings under the Company’s ABL Revolver, and are subject to applicable limitations and restrictions as set forth in the ABL Facility. The repurchase program has no stated expiration or termination date, and there is no time limit or specific time frame otherwise for repurchases. The Company may discontinue repurchases at any time that management determines additional purchases are not beneficial or advisable. As of December 29, 2013, the Company had spent $37,982, excluding brokerage fees, to repurchase shares under this program.

 

The following table summarizes the Company’s repurchases and retirements of its common stock since the inception of its stock repurchase program.

 

		Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs				Average Price Paid per Share				Maximum Approximate Dollar Value that May Yet Be Repurchased Under the Plans or Programs
Fiscal year 2013			1,068			$ 18.08
Fiscal year 2014			771			$ 24.22
Total			1,839			$ 20.66				$ 12,018

 

All repurchased shares have been retired and have the status of authorized and unissued shares. The cost of the repurchased shares above par value has been allocated between capital in excess of par value and retained earnings.

 

No dividends were paid during the last two fiscal years.  

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

 

16. Stock Based Compensation

 

On October 23, 2013, the Company’s shareholders approved the Unifi, Inc. 2013 Incentive Compensation Plan (the “2013 Plan”). The 2013 Plan replaced the 2008 Unifi, Inc. Long-Term Incentive Plan (“2008 LTIP”). No additional awards will be granted under the 2008 LTIP; however, prior awards outstanding under the 2008 LTIP remain subject to that plan’s provisions. The 2013 Plan authorized the issuance of 1,000 shares of common stock, subject to certain increases in the event outstanding awards under the 2008 LTIP expire, are forfeited or otherwise terminate unexercised.

 

Stock options

During the six months ended December 29, 2013 and December 23, 2012, the Company granted stock options to purchase 97 and 138 shares of common stock, respectively, to certain key employees. The stock options vest ratably over the required three year service period. For the six months ended December 29, 2013 and December 23, 2012, the weighted average exercise price of the options granted was $22.31 and $11.15 per share, respectively. The Company used the Black-Scholes model to estimate the weighted average grant date fair value of $14.66 and $7.28 per share, respectively.

 

The valuation models used the following assumptions:

 

		For the Six Months Ended
		December 29, 2013				December 23, 2012
Expected term (years)			7.4				7.5
Interest rate			2.1%				1.0%
Volatility			65.9%				66.9%
Dividend yield			—				—

 

The Company uses historical data to estimate the expected term, volatility and forfeitures. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected term of the options.

 

A summary of stock option activity for the six months ended December 29, 2013 is as follows:

		Stock Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (Years)				Aggregate Intrinsic Value
Outstanding at June 30, 2013			1,541			$	8.41
Granted			97			$	22.31
Exercised			(767	)		$	8.36
Forfeited			(33	)		$	13.69
Expired			—			$	—
Outstanding at December 29, 2013			838			$	9.85				6.2			$	14,809
Vested and expected to vest as of December 29, 2013			833			$	9.81				6.2			$	14,766
Exercisable at December 29, 2013			626			$	7.79				5.4			$	12,355

 

At December 29, 2013, the remaining unrecognized compensation cost related to unvested stock options was $1,269, which is expected to be recognized over a weighted average period of 2.3 years.

 

For the six month periods ended December 29, 2013 and December 23, 2012, the total intrinsic value of options exercised was $12,521, and $26, respectively. The amount of cash received from the exercise of options was $2,833 and $29 for the six month periods ended December 29, 2013 and December 23, 2012, respectively. During the quarter ended December 29, 2013, the Company received and retired 134 shares of its common stock, with a fair value of $3,583, tendered in lieu of cash for the exercise of stock options. The tax benefit realized from stock options exercised was $4,905 and $2 for the six month periods ended December 29, 2013 and December 23, 2012, respectively.

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

 

Restricted stock units

During the six months ended December 29, 2013 and December 23, 2012, the Company granted 22 and 32 restricted stock units (“RSUs”), respectively, to certain key employees. 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 vest over a three year period, and will be converted into an equivalent number of shares of stock (for distribution to the grantee) on each vesting date, unless the grantee has elected to defer the receipt of the shares of stock until separation from service. If, after the first anniversary of the grant date and prior to the final vesting date, the grantee has a separation from service without cause for any reason other than the employee’s resignation, the remaining unvested RSUs will become fully vested and will be converted to an equivalent number of shares of stock and issued to the grantee. The Company estimated the fair value of the awards granted during the six months ended December 29, 2013 and December 23, 2012 to be $22.08 and $11.23 per RSU, respectively.

 

During the six months ended December 29, 2013 and December 23, 2012, the Company granted 25 and 30 RSUs, respectively, to the Company’s non-employee directors. The RSUs became fully vested on the grant date. The RSUs convey no rights of ownership in shares of Company stock until such RSUs have been distributed to the grantee in the form of Company stock. 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 service as a member of the Board. The grantee may elect to defer receipt of the shares of stock in accordance with the deferral options provided under the Unifi, Inc. Director Deferred Compensation Plan. The Company estimated the fair value of the awards granted during the six months ended December 29, 2013 and December 23, 2012 to be $23.23 and $13.57 per RSU, respectively.

 

The Company estimates the fair value of RSUs based on the market price of the Company’s common stock at the award grant date.

 

A summary of the RSU activity for the six months ended December 29, 2013 is as follows:

 

		Non-vested				Weighted Average Grant Date Fair Value				Vested				Total				Weighted Average Grant Date Fair Value
Outstanding at June 30, 2013			75			$	11.94				112				187			$	11.78
Granted			47			$	22.68				—				47			$	22.68
Vested			(71	)		$	15.96				71				—			$	15.96
Converted			—			$	—				(31	)			(31	)		$	12.06
Forfeited			(2	)		$	22.08				—				(2	)		$	22.08
Outstanding at December 29, 2013			49			$	16.11				152				201			$	14.19

 

At December 29, 2013, the number of RSUs vested and expected to vest was 201, with an aggregate intrinsic value of $5,540. The aggregate intrinsic value of the 152 vested RSUs at December 29, 2013 was $4,186.

 

The remaining unrecognized compensation cost related to the unvested RSUs at December 29, 2013 is $402, which is expected to be recognized over a weighted average period of 2.4 years.

 

For the six month periods ended December 29, 2013 and December 23, 2012, the total intrinsic value of RSUs converted was $696 and $114, respectively. The tax benefit realized from the conversion of RSUs was $275 and $45 for the six months ended December 29, 2013 and December 23, 2012, respectively.

 

Summary

The total cost charged against income related to all stock-based compensation arrangements was as follows:

 

		For the Three Months Ended								For the Six Months Ended
		December 29, 2013				December 23, 2012				December 29, 2013				December 23, 2012
Stock options		$	282			$	222			$	438			$	459
RSUs			670				449				773				561
Total compensation cost		$	952			$	671			$	1,211			$	1,020

 

The total income tax benefit recognized for stock based compensation was $376 and $282 for the six months ended December 29, 2013 and December 23, 2012, respectively. 

 

 

Unifi, Inc.

Notes to Condensed Consolidated Financial Statements - (Continued)

(amounts in thousands, except per share amounts)

 

As of December 29, 2013, a summary of the number of securities currently available for future issuance under equity compensation plans is as follows:

 

Authorized under the 2013 Plan			1,000
Plus: Awards expired, forfeited or otherwise terminated unexercised from the 2008 LTIP			—
Less: Service condition options granted			(5	)
Less: RSUs granted to non-employee directors			(25	)
Available for issuance under the 2013 Plan			970

 

17. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

 

Financial Instruments

The Company uses derivative financial instruments, such as foreign currency contracts or interest rate swaps, to reduce its ongoing business exposures to fluctuations in foreign currency exchange rates or interest rates. The Company does not enter into derivative contracts for speculative purposes.

 

Foreign currency contracts

The Company enters into foreign currency contracts as economic hedges for exposures related to certain sales, inventory purchases and equipment purchases that are denominated in currencies that are not its functional currency. As of December 29, 2013, the latest maturity date for all outstanding foreign currency contracts is during July 2014. These items are not designated as hedges by the Company and are marked to market each period and offset by the foreign exchange (gains) losses included in other operating expense, net resulting from the underlying exposures of the foreign currency denominated assets and liabilities.

 

Interest rate swap

On May 18, 2012, the Company entered into a five year, $50,000 interest rate swap with Wells Fargo to provide a hedge against the variability of cash flows related to LIBOR-based variable rate borrowings under the Company’s ABL Revolver and ABL Term Loan. The swap increased to $85,000 in May 2013 and began decreasing $5,000 per quarter in August 2013 and will continue to do so until the balance again reaches $50,000 in February 2015, where it will remain through the life of the instrument. This interest rate swap allows the Company to fix LIBOR at 1.06% and terminates on May 24, 2017.

 

On November 26, 2012, the Company de-designated this interest rate swap as a cash flow hedge. For the year-to-date period ended December 29, 2013, the Company reclassified pre-tax unrealized losses of $300 from accumulated other comprehensive loss to interest expense; the Company expects to reclassify additional losses of $446 during the next twelve months.

 

The Company’s financial assets and liabilities accounted for at fair value on a recurring basis, and the level within the fair value hierarchy used to measure these items, are as follows:

 

 

As of December 29, 2013	Notional Amount								USD Equivalent			Balance Sheet Location		Fair Value Hierarchy		Fair Value
Foreign currency contracts	MXN			1,500					$	114		Accrued expenses		Level 2		$	—
Foreign currency contracts	EUR			615					$	829		Other current assets		Level 2		$	18
Interest rate swap	USD		$	75,000					$	75,000		Other long-term liabilities		Level 2		$	(315	)
Contingent consideration (1)