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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

Amendment No. 1

 

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

THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 30, 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	(I.R.S. Employer
incorporation or organization)	Identification No.)
P.O. Box 19109 – 7201 West Friendly Avenue	27419-9109
Greensboro, NC	(Zip Code)
(Address of principal executive offices)

 

Registrant’s telephone number, including area code:

(336) 294-4410

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Name of each exchange on which registered
Common Stock	New York Stock Exchange

  Securities registered pursuant to Section 12(g) of the Act:

None

 

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]

 

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

 

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 the 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 ]

 

As of December 23, 2012, the aggregate market value of the registrant’s voting common stock held by non-affiliates of the registrant was $223,746,607. The registrant has no non-voting stock.

 

As of September 3, 2013, the number of shares of the registrant’s common stock outstanding was 19,512,949.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the Definitive Proxy Statement filed with the Securities and Exchange Commission (the “SEC”) in connection with the solicitation of proxies for the Annual Meeting of Shareholders of Unifi, Inc., held on October 23, 2013, are incorporated by reference into Part III. (With the exception of those portions which are specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed or incorporated by reference as part of this report.)

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Amendment No. 1

 

Explanatory Note

 

Unifi, Inc. (the “Company” or the “Registrant”) is filing this Form 10-K/A to amend Item 15 of its Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended June 30, 2013 in order to, pursuant to Rule 3-09 of Regulation S-X under the Securities Exchange Act of 1934, as amended, include the financial statements and related notes of Parkdale America, LLC (“PAL”), an unconsolidated joint venture in which the Company holds a 34% equity ownership interest.

 

Rule 3-09 of Regulation S-X provides that if a 50%-or-less-owned person accounted for by the equity method meets the first or third condition of the significant subsidiary tests set forth in Rule 1-02(w), substituting 20% for 10%, separate financial statements for such 50%-or-less-owned person shall be filed.

 

PAL met the significant subsidiary test described above for the Company’s fiscal years ending June 30, 2013, June 24, 2012 and June 26, 2011 and the Company has included in this Form 10-K/A the required audited financial statements for PAL’s corresponding fiscal years ending December 28, 2013, December 29, 2012 and December 31, 2011. The Company’s significance test is calculated as of the end of its fiscal year and for its fiscal year.

 

Item 15 is also being amended by this Form 10-K/A to include reference to the PAL financial statements and the related report of PricewaterhouseCoopers LLP, PAL’s independent accountants (“PwC”), and to file PwC’s consent of independent accountants related to its opinion contained in this filing and certifications of officers of the Company under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. This Form 10-K/A does not otherwise update or amend any other items or disclosures as originally filed and does not otherwise reflect events occurring after the original filing date of the Annual Report. Accordingly, this Form 10-K/A should be read in conjunction with the Company’s filings with the Securities and Exchange Commission subsequent to the original filing of the Form 10-K. In accordance with Rule 12b-15 of the Securities Exchange Act of 1934, as amended, the text of the amended item (Item 15) is set forth in its entirety in the attached pages hereto.

 

PART IV

 

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

	(a)	1.	Financial Statements
			The financial statements and schedules listed in the accompanying Index to Consolidated Financial Statements on page F-1 are filed as part of this Report.
		2.	Financial Statement Schedules
			Parkdale America, LLC Financial Statements as of December 28, 2013 and December 29, 2012 and for PAL’s fiscal years ended December 28, 2013, December 29, 2012 and December 31, 2011.
		3.	Exhibits

 

Exhibit Number	Description
3.1(i)(a)	Restated Certificate of Incorporation of Unifi, Inc., as amended (incorporated by reference to Exhibit 3a to the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2004 (Reg. No. 001-10542) filed on September 17, 2004).
3.1(i)(b)	Certificate of Change to the Certificate of Incorporation of Unifi, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated July 25, 2006).
3.1(i)(c)	Certificate of Amendment to Restated Certificate of Incorporation of Unifi, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (Reg No. 001-10542) dated November 3, 2010).
3.1(ii) +	Restated By-laws of Unifi, Inc. (as amended on December 20, 2007 and corrected on July 24, 2013).
4.1	Registration Rights Agreement dated January 1, 2007 between Unifi, Inc. and Dillon Yarn Corporation (incorporated by reference from Exhibit 7.1 to the Schedule 13D dated January 2, 2007 filed by Dillon Yarn Corporation).

 

 

 

Exhibit Number	Description
4.2	Credit Agreement, by and among Wells Fargo Bank, N.A., as administrative agent, sole lead arranger, and sole book runner, the lenders that are parties thereto, as the lenders, and Unifi, Inc. and certain of its domestic subsidiaries, as borrowers, dated as of May 24, 2012 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated May 24, 2012).
4.3	Guaranty and Security Agreement, dated as of May 24, 2012, among the Grantors from time to time party thereto and Wells Fargo Bank, N.A., as administrative agent (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated May 24, 2012).
4.4	Trademark Security Agreement, dated as of May 24, 2012, among the Grantors from time to time party thereto and Wells Fargo Bank, N.A., as agent (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated May 24, 2012).
4.5	Patent Security Agreement, dated as of May 24, 2012, among the Grantors from time to time party thereto and Wells Fargo Bank, N.A., as agent (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated May 24, 2012).
4.6	Intercreditor Agreement, dated as of May 24, 2012, by and between Wells Fargo Bank, N.A., in its capacity as agent, and Wilmington Trust, National Association, as administrative agent, as acknowledged by Unifi, Inc., Unifi Manufacturing, Inc., Unifi Sales & Distribution, Inc., Spanco International, Inc., and Unifi Equipment Leasing, LLC (incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated May 24, 2012).
4.7	First Amendment to Credit Agreement, dated as of December 27, 2012, by and among Unifi, Inc. and Unifi Manufacturing, Inc., as borrowers, Wells Fargo Bank, N.A., as agent for the lenders, and certain lenders party thereto (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated December 27, 2012).
4.8	Second Amendment to Credit Agreement, dated as of June 25, 2013, by and among Unifi, Inc. and Unifi Manufacturing, Inc., as borrowers, Wells Fargo Bank, N.A., as agent for the lenders, and certain lenders party thereto (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated June 25, 2013).
4.9+	First Amendment to Guaranty and Security Agreement, dated as of June 25, 2013, by and among the Grantors listed therein and Wells Fargo Bank, N.A., as administrative agent.
10.1	*1999 Unifi, Inc. Long-Term Incentive Plan (incorporated by reference from Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-43158) filed on August 7, 2000).
10.2	*Form of Option Agreement for Incentive Stock Options granted under the 1999 Unifi, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated July 25, 2006).
10.3	*Unifi, Inc. Supplemental Key Employee Retirement Plan, effective July 26, 2006 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated July 25, 2006).
10.4	*Change of Control Agreement between Unifi, Inc. and Thomas H. Caudle, Jr., effective August 14, 2009 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated August 14, 2009).
10.5	*Change of Control Agreement between Unifi, Inc. and Charles F, McCoy, effective August 14, 2009 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated August 14, 2009).

 

 

Exhibit Number	Description
10.6	*Change of Control Agreement between Unifi, Inc. and Ronald L. Smith, effective August 14, 2009 (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated August 14, 2009).
10.7	*Change of Control Agreement between Unifi, Inc. and R. Roger Berrier, Jr., effective August 14, 2009 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated August 14, 2009).
10.8	*Change of Control Agreement between Unifi, Inc. and William L. Jasper, effective August 14, 2009 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated August 14, 2009).
10.9	Sales and Services Agreement dated January 1, 2007 between Unifi, Inc. and Dillon Yarn Corporation (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-3 (Reg. No. 333-140580) filed on February 9, 2007).
10.10	First Amendment to Sales and Service Agreement between Unifi Manufacturing, Inc. and Dillon Yarn Corporation, effective January 1, 2009 (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) filed on December 3, 2008).
10.11	*2008 Unifi, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-156090) filed on December 12, 2008).
10.12	*Form of Option Agreement for Incentive Stock Options granted under the 2008 Unifi, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s quarterly report on Form 10-Q for the quarterly period ended December 28, 2008 (Reg. No. 001-10542) filed on February 6, 2009).
10.13	*Amendment to the Unifi, Inc. Supplemental Key Employee Retirement Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) filed on December 31, 2008).
10.14	Yarn Purchase Agreement between Unifi Manufacturing, Inc. and Hanesbrands, Inc. effective November 6, 2009 (incorporated by reference to Exhibit 10.1 to the Company’s quarterly report on Form 10-Q for the quarterly period ended December 27, 2009 (Reg. No. 001-10542) filed on February 5, 2010) (portions of the exhibit have been redacted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request).
10.15	Second Amendment to Sales and Service Agreement between Unifi, Inc. and Dillon Yarn Corporation, effective January 1, 2010 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated December 11, 2009).
10.16	*Form of Restricted Stock Unit Agreement for restricted stock units granted under the 2008 Unifi, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 26, 2010 (Reg. No. 001-10542) filed on February 4, 2011).
10.17	*Unifi, Inc. Director Deferred Compensation Plan, dated as of December 14, 2010 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 26, 2010 (Reg. No. 001-10542) filed on February 4, 2011).
10.18	Third Amendment to Sales and Service Agreement between Unifi Manufacturing, Inc. and Dillon Yarn Corporation, effective January 1, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Reg No. 001-10542) dated December 20, 2010).
10.19	*Form of Restricted Stock Unit Agreement for Employees for restricted stock units granted under the 2008 Unifi, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 25, 2011 (Reg No. 001-10542) filed on November 4, 2011).

 

 

 

Exhibit Number	Description
10.20	Fourth Amendment to Sales and Service Agreement between Unifi Manufacturing, Inc. and Dillon Yarn Corporation, effective January 1, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Reg No. 001-10542) dated December 19, 2011).
10.21	*Amendment No. 1 to the Change in Control Agreement for William L. Jasper effective December 31, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated January 3, 2012).
10.22	*Amendment No. 1 to the Change in Control Agreement for R. Roger Berrier, Jr., effective December 31, 2011 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated January 3, 2012).
10.23	*Amendment No. 1 to the Change in Control Agreement for Thomas H. Caudle, Jr. effective December 31, 2011 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated January 3, 2012).
10.24	*Amendment No. 1 to the Change in Control Agreement for Charles F. McCoy effective December 31, 2011 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated January 3, 2012).
10.25	*Amendment No. 1 to the Change in Control Agreement for Ronald L. Smith effective December 31, 2011 (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated January 3, 2012).
10.26	Deposit Account Control Agreement, dated as of May 24, 2012, among Unifi Manufacturing, Inc., Wells Fargo Bank, N.A., and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Reg. No. 001-10542) dated May 24, 2012).
10.27	First Amendment to Yarn Purchase Agreement between Unifi Manufacturing, Inc. and Hanesbrands, Inc. dated July 17, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 23, 2012 (Reg. No. 001-10542) filed on November 2, 2012) (portions of the exhibit have been redacted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request).
10.28+	*Severance Agreement and Waiver of Claims between Charles F. McCoy and Unifi, Inc., executed May 14, 2013.
10.29+	*Severance Agreement and Waiver of Claims between Ronald L. Smith and Unifi, Inc., effective August 23, 2013.
14.1	Unifi, Inc. Ethical Business Conduct Policy Statement as amended July 22, 2004, filed as Exhibit (14a) with the Company's Annual Report on Form 10-K for the fiscal year ended June 27, 2004 (Reg. No. 001-10542), which is incorporated herein by reference.
14.2	Unifi, Inc. Code of Business Conduct & Ethics adopted on July 22, 2004, filed as Exhibit (14b) with the Company's Annual Report on Form 10-K for the fiscal year ended June 27, 2004 (Reg. No. 001-10542), which is incorporated herein by reference.
21.1+	List of Subsidiaries.
23.1+	Consent of KPMG LLP, Independent Registered Public Accounting Firm.
23.2++	Consent of PricewaterhouseCoopers LLP, Independent Accountants to Parkdale America, LLC.
31.1++	Chief Executive Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

Exhibit Number	Description
31.2++	Chief Financial Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1++	Chief Executive Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2++	Chief Financial Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101+	The following materials from Unifi, Inc.’s Annual Report on Form 10-K for the annual period ended June 30, 2013, formatted in eXtensbile Business Reporting Language (“XBRL”): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

 

 

 

 

+ Previously filed.

++ Filed herewith.

*NOTE: These Exhibits are management contracts or compensatory plans or arrangements required to be filed as an exhibit to this Form 10-K pursuant to Item 15(b) of this report.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Unifi, Inc.
Date: March 27, 2014	By:	/s/ JAMES M. OTTERBERG
		James M. Otterberg Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer and Duly Authorized Officer)

 

Parkdale America, LLC (A Limited Liability Company) Financial Statements As of December 28, 2013 and December 29, 2012, and for the three years ended December 28, 2013

 

 

Parkdale America, LLC

(A Limited Liability Company)

Index

December 28, 2013, December 29, 2012 and December 31, 2011

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	Pages(s)
Independent Auditor’s Report	10
Financial Statements
Balance Sheets	11
Statements of Operations	12
Statements of Comprehensive Income	13
Statements of Members’ Equity	14
Statements of Cash Flows	15
Notes to Financial Statements	16-25

 

 

Independent Auditor’s Report

 

To the Board of Members of
Parkdale America, LLC

 

We have audited the accompanying financial statements of Parkdale America, LLC, which comprise the balance sheets as of December 28, 2013 and December 29, 2012 and the related statements of operations, comprehensive income, members’ equity and cash flows for the years ended December 28, 2013, December 29, 2012, and December 31, 2011.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements, referred to above present fairly, in all material respects, the financial position of Parkdale America, LLC at December 28, 2013 and December 29, 2012, and the results of its operations and its cash flows for the years ended December 28, 2013, December 29, 2012, and December 31, 2011 in accordance with accounting principles generally accepted in the United States of America.

 

 

/s/ PricewaterhouseCoopers LLP

Charlotte, NC

March 25, 2014

 

 

Parkdale America, LLC

(A Limited Liability Company)

Balance Sheets

December 28, 2013 and December 29, 2012

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		2013				2012
Assets
Current assets
Cash and cash equivalents		$	52,724,000			$	30,371,000
Trade accounts receivable (less allowance of $1,565,000 and $769,000 in 2013 and 2012, respectively)			106,038,000				91,530,000
Other receivables			5,718,000				4,268,000
Due from affiliates			146,000				69,000
Inventories			106,465,000				108,723,000
Prepaid expenses and other assets			149,000				84,000
Derivative assets			6,375,000				4,842,000
Total current assets			277,615,000				239,887,000
Property, plant and equipment, net			110,769,000				109,061,000
Investment in joint venture			8,744,000				8,585,000
Deferred financing costs, net			844,000				603,000
Other noncurrent assets			12,000				251,000
Total assets		$	397,984,000			$	358,387,000
Liabilities and Members' Equity
Current liabilities
Trade accounts payable		$	30,862,000			$	30,138,000
Accrued expenses			10,202,000				10,198,000
Due to affiliates			4,784,000				2,889,000
Due to broker			2,729,000				96,000
Derivative liabilities			2,917,000				2,301,000
Total current liabilities			51,494,000				45,622,000
Other long-term liabilities			2,115,000				1,429,000
Deferred revenue			4,310,000				11,460,000
Total liabilities			57,919,000				58,511,000
Commitments and contingencies (Note 12)
Members' equity			340,065,000				299,876,000
Total liabilities and members' equity		$	397,984,000			$	358,387,000

 

The accompanying notes are an integral part of these financial statements.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Statements of Operations

Years Ended December 28, 2013, December 29, 2012 and December 31, 2011

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		2013				2012				2011
Net sales		$	827,735,000			$	816,860,000			$	1,304,911,000
Cost of goods sold			755,051,000				757,909,000				1,241,182,000
Gross profit			72,684,000				58,951,000				63,729,000
General and administrative expenses			15,699,000				13,513,000				12,685,000
Impairment of property, plant and equipment			-				-				726,000
(Gain) loss on disposals of property, plant and equipment			(395,000	)			(470,000	)			90,000
Income from operations			57,380,000				45,908,000				50,228,000
Interest expense			726,000				874,000				3,449,000
Interest income			(113,000	)			(96,000	)			(33,000	)
(Earnings) loss from investment in joint venture			(660,000	)			136,000				(335,000	)
Gain on foreign exchange contracts			(349,000	)			-				-
Other (income) expense, net			(10,000	)			985,000				936,000
Net income		$	57,786,000			$	44,009,000			$	46,211,000

 

The accompanying notes are an integral part of these financial statements.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Statements of Comprehensive Income

Years Ended December 28, 2013, December 29, 2012 and December 31, 2011

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		2013				2012				2011
Net income		$	57,786,000			$	44,009,000			$	46,211,000
Other comprehensive (loss) income:
Impact to net income for cash flow hedges			(694,000	)			11,959,000				(30,493,000	)
Change in unrealized gain (loss) on cash flow hedges			652,000				(9,638,000	)			5,180,000
Other comprehensive (loss) income			(42,000	)			2,321,000				(25,313,000	)
Comprehensive income		$	57,744,000			$	46,330,000			$	20,898,000

 

The accompanying notes are an integral part of these financial statements.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Statements of Members’ Equity

Years Ended December 28, 2013, December 29, 2012 and December 31, 2011

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		Accumulated Other Comprehensive Income				Members’ Equity				Total Members’ Equity
Balance at January 1, 2011		$	23,034,000			$	273,186,000			$	296,220,000
Net income			-				46,211,000				46,211,000
Changes related to derivative instruments			(25,313,000	)			-				(25,313,000	)
Dividends paid			-				(11,685,000	)			(11,685,000	)
Balance at December 31, 2011			(2,279,000	)			307,712,000				305,433,000
Net income			-				44,009,000				44,009,000
Changes related to derivative instruments			2,321,000				-				2,321,000
Dividends paid			-				(51,887,000	)			(51,887,000	)
Balance at December 29, 2012			42,000				299,834,000				299,876,000
Net income			-				57,786,000				57,786,000
Changes related to derivative instruments			(42,000	)			-				(42,000	)
Dividends paid			-				(17,555,000	)			(17,555,000	)
Balance at December 28, 2013		$	-			$	340,065,000			$	340,065,000

 

The accompanying notes are an integral part of these financial statements.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Statements of Cash Flows

Years Ended December 28, 2013, December 29, 2012 and December 31, 2011

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		2013				2012				2011
Cash flows from operating activities
Net income		$	57,786,000			$	44,009,000			$	46,211,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization			26,742,000				30,671,000				34,926,000
Amortization of deferred financing costs			697,000				411,000				364,000
(Gain) loss on disposals of property, plant and equipment			(395,000	)			(470,000	)			90,000
Impairment of property, plant and equipment			-				-				726,000
Net change in derivative instruments			1,674,000				1,939,000				(21,358,000	)
Dividends received from joint venture			501,000				400,000				-
(Earnings) loss from investment in joint venture			(660,000	)			136,000				(335,000	)
Changes in operating assets and liabilities
Trade accounts receivable, net			(14,508,000	)			49,118,000				(30,450,000	)
Other receivables			(1,450,000	)			(1,622,000	)			3,600,000
Due to/from affiliates, net			1,818,000				(1,193,000	)			(922,000	)
Inventories			2,258,000				33,221,000				(26,412,000	)
Prepaid expenses and other assets			(65,000	)			(63,000	)			(18,000	)
Other noncurrent assets			239,000				85,000				74,000
Trade accounts payable			(139,000	)			(2,097,000	)			(30,207,000	)
Accrued expenses			4,000				835,000				2,975,000
Other long-term liabilities			686,000				138,000				29,000
Deferred revenue			(7,150,000	)			2,830,000				(2,089,000	)
Net cash provided by (used in) operating activities			68,038,000				158,348,000				(22,796,000	)
Cash flows from investing activities
Purchases of property, plant and equipment			(27,774,000	)			(9,285,000	)			(16,733,000	)
Proceeds from disposal of property, plant and equipment			582,000				872,000				51,000
Net cash used in investing activities			(27,192,000	)			(8,413,000	)			(16,682,000	)
Cash flows from financing activities
Proceeds from revolving line of credit			-				-				55,000,000
Repayments on revolving line of credit			-				(100,000,000	)			-
Payment of deferred financing costs			(938,000	)			-				(880,000	)
Dividends paid			(17,555,000	)			(51,887,000	)			(11,685,000	)
Net cash (used in) provided by financing activities			(18,493,000	)			(151,887,000	)			42,435,000
Net increase (decrease) in cash and cash equivalents			22,353,000				(1,952,000	)			2,957,000
Cash and cash equivalents
Beginning of year			30,371,000				32,323,000				29,366,000
End of year		$	52,724,000			$	30,371,000			$	32,323,000
Supplemental disclosures of cash flow information
Cash paid during the year for interest		$	28,000			$	1,218,000			$	2,449,000
Accrued purchases of property, plant and equipment			947,000				84,000				349,000

 

The accompanying notes are an integral part of these financial statements.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Notes to Financial Statements

December 28, 2013, December 29, 2012 and December 31, 2011

---

 

1.         Nature of Business and Summary of Significant Accounting Policies

 

Organization

On June 30, 1997, Parkdale Mills, Inc. (“Mills”) and Unifi, Inc. (“Unifi”) entered into a Contribution Agreement (the “Agreement”) that set forth the terms and conditions by which the two companies contributed all of the assets of their spun cotton yarn operations utilizing open-end and air-jet spinning technologies to create Parkdale America, LLC (the “Company”). In exchange for their respective contributions, Mills and Unifi received a 66% and 34% ownership interest in the Company, respectively.

 

On January 1, 2012, Mills contributed its interest in the Company to its newly formed parent company, Parkdale, Incorporated (“Parkdale Inc.”).

 

Operations

The Company is a producer of cotton and synthetic yarns for sale to the textile and apparel industries, both foreign and domestic. As of December 28, 2013, the Company has 13 manufacturing facilities located primarily in the southeast region of the United States of America.

 

Fiscal Year

The Company’s fiscal year end is the Saturday nearest to December 31. The Company’s fiscal years 2013, 2012, and 2011 ended on December 28, 2013, December 29, 2012, and December 31, 2011, respectively, and contained 52 weeks.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Revenue Recognition

The Company recognizes revenues upon shipment of goods, when persuasive evidence of an arrangement exists, the price is fixed and determinable, and collectability is reasonably assured. Revenue for product sales is recognized as risk and title to the product transfers to the customer, which usually occurs at the time shipment is made. Product sales are typically under the terms of free on board shipping point. As such, title to the product passes when the product is delivered to the freight carrier. Revenue is recorded net of sales returns and allowances.

 

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents. The Company maintains cash deposits with major banks that may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and believes the risk of loss to be remote.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Notes to Financial Statements

December 28, 2013, December 29, 2012 and December 31, 2011

---

 

Concentration of Credit Risk

Substantially all of the Company’s accounts receivable is due from companies in the textile and apparel markets located primarily throughout North America. The Company generally does not require collateral for its accounts receivable. The Company performs ongoing credit evaluations of its customers’ financial condition and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Allowances provided for doubtful accounts were $1,565,000 and $769,000 for the years ended December 28, 2013 and December 29, 2012, respectively.

 

Sales to five customers accounted for approximately 74%, 82%, and 80% of total sales during fiscal years 2013, 2012, and 2011, respectively. As of December 28, 2013 and December 29, 2012, accounts receivable from five customers composed 78% and 77%, respectively, of total gross accounts receivable outstanding.

 

Fair Value Measurements

The Company follows the guidance in accordance with Accounting Standards Codification (“ASC”) 820 to account for fair value measurements. The guidance emphasizes that fair value is a market based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:

 

Level 1 – Observable inputs, such as quoted prices in active markets

 

Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly

 

Level 3 – Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions

 

The Company’s derivative instruments represent the only balances which are measured at fair value on a recurring basis. The fair value of derivative instruments is based primarily on either quoted prices in active markets (Level 1 for cotton futures contracts) or based on market observable inputs (Level 2 for cotton purchase agreements). See Note 8 for separate disclosure of derivatives measured at fair value.

 

The carrying amount of money market funds, receivables, accounts payable, and accrued expenses approximate fair value because of the short-term maturity of such instruments.

 

Self Insurance

The Company is self-insured for certain losses relating to workers’ compensation, and medical and dental claims. The Company has stop-loss coverage to limit the exposure arising from these claims. Self-insurance claims filed and claims incurred but not reported are accrued based upon management’s estimates of the ultimate cost for self-insured claims incurred using actuarial assumptions followed in the insurance industry and historical experience. Accruals for workers’ compensation are reported on a discounted basis.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Notes to Financial Statements

December 28, 2013, December 29, 2012 and December 31, 2011

---

 

Property, Plant, and Equipment

Property, plant, and equipment are recorded at cost. Repairs and maintenance, which do not extend the life of the applicable assets, are expensed. Provisions for depreciation are determined principally by an accelerated method over the estimated useful lives of the assets.

 

Impairment of Long-Lived Assets

The Company evaluates long-lived assets to determine impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

 

In fiscal year 2011, the Company recorded impairment charges of approximately $726,000 related to closed facilities whose carrying value was greater than their estimated fair value. In fiscal years 2013 and 2012, no impairment charges were recorded.

 

Economic Assistance Program

During August 2008, a federal government program commenced providing economic adjustment assistance to domestic users of upland cotton. A cotton subsidy is paid to manufacturers for cotton consumed in domestic production. The subsidy must be used within 18 months after the marketing year earned to purchase qualifying capital expenditures in the United States for production of goods from upland cotton. The marketing year is from August 1 to July 31. During the period beginning on August 1, 2008, and ending on July 31, 2012, the value of the assistance was four cents per pound of consumed cotton. Effective August 1, 2012, the value of the assistance decreased to three cents per pound of consumed cotton.

 

The Company recognizes income for the cotton subsidy when the cotton has been consumed and the qualifying assets have been acquired. The Company recognized income of $21,087,000, $14,716,000, and $25,112,000 for the cotton consumption portion of the subsidy earned during the fiscal years ended December 28, 2013, December 29, 2012, and December 31, 2011, respectively, as a reduction to cost of goods sold in the accompanying statements of operations. The Company records the portion of the cotton subsidy deemed to be associated with the qualifying capital expenditures as a reduction of the equipment cost. The portion of the subsidy earned associated with the qualifying capital expenditures for 2013 and 2012 was $963,000 and $321,000, respectively. This amount was capitalized and is amortized over the nine year useful life on a double declining methodology, consistent with the useful life of the assets acquired.

 

The Company had receivables totaling $4,081,000 and $2,506,000 related to the subsidy program as of December 28, 2013 and December 29, 2012, respectively, which is included as a component of other receivables on the accompanying balance sheets. Deferred income is classified as a long-term liability, consistent with the terms of the government program and uncertainty around the timing of qualifying asset purchases. There was no deferred income recorded as of December 28, 2013. As of December 29, 2012, the Company had $4,990,000 of deferred income related to this program.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Notes to Financial Statements

December 28, 2013, December 29, 2012 and December 31, 2011

---

 

Shipping Costs

The costs to ship products to customers of approximately $17,873,000, $15,397,000, and $19,120,000 during the fiscal years ended December 28, 2013, December 29, 2012, and December 31, 2011, respectively, are included as a component of cost of goods sold in the accompanying statements of operations.

 

2.         Inventories

 

Inventories are stated at the lower of cost or market. Cost was determined using the specific identification method for raw materials, yarn-in-process, and finished yarn inventories. The Company performs periodic assessments to determine the existence of obsolete and slow-moving inventories and records necessary provisions to reduce such inventories to net realizable value. Inventories as of December 28, 2013 and December 29, 2012, consist of the following:

 

		2013				2012
Cotton and synthetics		$	55,766,000			$	61,137,000
Yarn in process			7,994,000				6,446,000
Finished yarn			42,659,000				42,714,000
Supplies			939,000				992,000
			107,358,000				111,289,000
Less: Valuation allowance			(893,000	)			(2,566,000	)
		$	106,465,000			$	108,723,000

 

3.         Property, Plant and Equipment, Net

 

A summary of property, plant, and equipment as of December 28, 2013 and December 29, 2012, is as follows:

 

		Useful Lives in Years					2013				2012
Land and land improvements			15				$	9,686,000			$	9,643,000
Buildings		15	-	39				82,267,000				81,435,000
Machinery and equipment		5	-	9				449,700,000				444,449,000
Office furniture and fixtures		3	-	7				14,921,000				14,877,000
								556,574,000				550,404,000
Less: Accumulated depreciation								(466,634,000	)			(442,037,000	)
Construction in progress								20,829,000				694,000
Property, plant and equipment, net							$	110,769,000			$	109,061,000

 

Depreciation expense for the fiscal years ended December 28, 2013, December 29, 2012, and December 31, 2011, was $26,742,000, $30,671,000, and $34,926,000, respectively.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Notes to Financial Statements

December 28, 2013, December 29, 2012 and December 31, 2011

---

 

4.         Income Taxes

 

The Company is a limited liability company treated as a partnership for federal and state income tax reporting purposes. As a result, the Company’s results of operations are included in the income tax returns of its individual members. Accordingly, no provision for federal or state income taxes has been recorded in the accompanying financial statements.

 

5.         Deferred Revenue

 

In connection with a 2009 business combination, the Company received equipment from Hanesbrands, Inc. in 2010 having a fair value of $12,111,000. This equipment was contributed to the Company by Hanesbrands, Inc. in connection with a vendor managed inventory program between the Company and Hanesbrands, Inc. The Company recorded the equipment received at its fair value at the date acquired, and recorded deferred revenue which is being amortized over the life of the yarn supply agreement. The remaining deferred revenue related to this agreement was $3,831,000 at December 28, 2013 and $5,920,000 at December 29, 2012.

 

6.         Deferred Financing Costs

 

The Company capitalized financing costs of $938,000 in 2013 related to a new revolving credit facility (see Note 7). No costs were capitalized during 2012. These new costs are being amortized on a straight-line basis over the term of the debt agreement, which matures on June 28, 2018. Amortization was $299,000, $411,000, and $364,000 for fiscal years 2013, 2012, and 2011, respectively, and is included as a component of interest expense in the accompanying statements of operations. In addition, deferred financing costs of $398,000 were written off in 2013 related to the extinguished credit facility, which are also included in interest expense.

 

Estimated amortization expense for the next five years and thereafter as of December 28, 2013, is summarized as follows:

 

Fiscal Years
2014		$	190,000
2015			188,000
2016			188,000
2017			188,000
2018			90,000

 

7.         Long-Term Debt

 

On June 28, 2013, the Company entered into a $175,000,000 revolving credit facility with its parent Company, having a maturity date of June 28, 2018. At the Company’s option, borrowings under the facility may be maintained as (1) “Base Rate” loans or (2) “Eurodollar” (LIBOR) loans, plus applicable margins ranging from 0.00% to 2.49%. The agreement includes customary covenants that require the Company to maintain a minimum fixed-charge coverage ratio and restrict its leverage ratio. The Company was in compliance with these covenants as of December 28, 2013. There were no outstanding borrowings on the credit facility as of December 28, 2013.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Notes to Financial Statements

December 28, 2013, December 29, 2012 and December 31, 2011

---

 

Previously, the Company had a line of credit with a group of banks with a borrowing capacity of $200,000,000. The Company terminated that facility during June 2013. There were no borrowings outstanding under that facility at December 29, 2012.

 

8.         Derivative Instruments

 

All derivatives, whether designated in hedging relationships or not, are required to be recorded in the balance sheet at fair value. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative is recorded in accumulated other comprehensive income or loss and are recognized in earnings when the hedged item affects earnings. Ineffective portions of changes in the fair value of derivatives designated as cash flow hedges are recognized in earnings as they occur.

 

The Company is subject to price risk related to anticipated fixed-price yarn sales. In the normal course of business, under procedures and controls established by the Company’s financial risk management framework, the Company may enter into cotton futures to manage changes in raw materials prices in order to protect the gross margin of fixed-price yarn sales. The changes related to these cotton futures are reflected as an operating activity in the accompanying statement of cash flows. As of December 28, 2013 and December 29, 2012, the Company has recorded these instruments at their fair value of $729,000 and $2,445,000, respectively, in the accompanying balance sheets.

 

		Balance Sheet Location				Fair Value December 28, 2013				Fair Value December 29, 2012
Derivative assets, commodity contracts
Hedges		Derivative assets				$	-			$	889,000
Nonhedges		Derivative assets					6,375,000				3,953,000
Total derivative assets							6,375,000				4,842,000
Derivative liabilities, commodity contracts
Hedges		Derivative liabilities					-				(195,000	)
Nonhedges		Derivative liabilities					(2,917,000	)			(2,106,000	)
Total derivative liability							(2,917,000	)			(2,301,000	)
(Due to) due from broker							(2,729,000	)			(96,000	)
Net derivative asset						$	729,000			$	2,445,000

 

The Company’s derivative instruments are listed and traded on an exchange and are thus valued using quoted prices classified within Level 1 of the fair value hierarchy. The fair value of the derivative instruments are classified as current assets and liabilities as of December 28, 2013 and December 29, 2012. The Company did not have any assets or liabilities classified as Level 3 at December 28, 2013 or December 29, 2012.

 

During the first quarter of 2013, the Company elected to discontinue designating futures contracts as cash flow hedges. The amount remaining in accumulated other comprehensive income was released over time based on when the sale occurred or ineffectiveness occurred. As of December 28, 2013, there were no unrealized gains or losses recorded in members’ equity. As of December 29, 2012, the Company had net unrealized gains on futures contracts designated as cash flow hedges of $42,000 recorded in members’ equity.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Notes to Financial Statements

December 28, 2013, December 29, 2012 and December 31, 2011

---

 

		Amount of Gain in Members' Equity Related to Cash Flow Hedging Derivatives									Amount of (Loss) Gain in Statement of Operations Related to Derivative Instruments
		2013				2012					2013				2012				2011
Commodity contracts		$	-			$	42,000		Cost of goods sold		$	(2,154,000	)		$	10,464,000			$	30,196,000

 

The Company enters into forward contracts for certain cotton purchases, which qualify as derivative instruments. However, these contracts meet the applicable criteria to qualify for the “normal purchases or normal sales” exemption. Therefore, the derivative accounting requirements are not applicable to these contracts.

 

The Company does not elect the “normal purchases or normal sales” exemption for certain other cotton purchase agreements, which qualify as derivatives for accounting purposes. As a result, such contracts are recorded at fair value on the Company’s balance sheets and changes in fair value for these contracts are included in cost of goods sold in the accompanying statements of operations. The Company uses futures contracts to economically hedge changes in fair value of these contracts. As of December 28, 2013 and December 29, 2012, $3,082,000 and $3,897,000, respectively, of realized gains on these contracts are recorded as a reduction to inventory.

 

Collateral is settled daily on these contracts and is shown on the balance sheet as “Due to broker” or “Due from broker.”

 

9.         Investment in Summit Yarn Joint Venture

 

On June 4, 1998, Mills and Burlington Industries, Inc. (“Burlington”) entered into a Joint Venture and Contribution Agreement (the “JV Agreement”) whereby Mills and Burlington agreed to contribute certain assets and cash for the purpose of constructing, operating, and managing a yarn manufacturing facility (the “Joint Venture”), which qualifies under the Maquiladora program in accordance with applicable Mexican law and for the marketing and sale of yarn manufactured by Summit Yarn, LLC (“Summit”). In exchange for their respective contributions, Mills and Burlington each received a 50% ownership interest in Summit. Concurrent with the formation of Summit, Mills and Burlington formed Summit Yarn Holding I, which serves as the holding company for Mills’ and Burlington’s investment in various Mexican corporations related to the Joint Venture. Mills and Burlington each received a 50% ownership interest in Summit Yarn Holding I. Effective January 15, 2002, Mills transferred its ownership in Summit to the Company. The investment was transferred at Mills’ historical basis of $14,257,000, which included notes receivable from Summit totaling $5,227,000. The JV Agreement expires in 2018 and has stated renewal options. The Company accounts for its investment in Summit and Summit Yarn Holding I, based on the equity method of accounting.

 

Effective August 2, 2004, Burlington transferred its ownership in Summit Yarn to Cone Denim LLC (“Cone”), a wholly-owned subsidiary of International Textile Group, Inc. (“ITG”). ITG was formed in August 2004 by certain entities affiliated with W.L. Ross & Co. LLC to consolidate the businesses of Burlington and Cone. Cone assumed responsibility of ITG’s Burlmex denim plant in Mexico, which is the ITG affiliated manufacturing facility that receives yarn purchased from Summit Yarn and renders services to ITG pursuant to a maquiladora agreement. Cone Denim and Burlington operate under separate business units of ITG.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Notes to Financial Statements

December 28, 2013, December 29, 2012 and December 31, 2011

---

 

Summarized financial information of Summit as of and for the fiscal years ended December 28, 2013, December 29, 2012, and December 31, 2011 are as follows:

 

		2013				2012				2011
Total assets		$	21,944,000			$	21,980,000			$	21,539,000
Total liabilities			4,455,000				4,810,000				3,298,000
Equity			17,489,000				17,170,000				18,241,000
Total liabilities and equity			21,944,000				21,980,000				21,539,000
Revenue			60,379,000				62,457,000				88,138,000
Expenses			59,059,000				62,729,000				87,468,000
Net income (loss)			1,320,000				(272,000	)			670,000

 

10.       Defined Contribution Plan

 

The Company maintains a defined contribution retirement plan available to substantially all employees. The Company’s contributions are based on a formula for matching employee contributions. The Company incurred costs for this plan of $641,000, $585,000, and $621,000 during the fiscal years ended December 28, 2013, December 29, 2012, and December 31, 2011, respectively.

 

11.       Related-Party Transactions

 

Cotton Purchases and Commitments

From time to time, the Company purchases and sells cotton to and from Mills. During fiscal years 2013, 2012, and 2011, the Company sold cotton to Mills at cost, amounting to $230,000, $4,037,000, and $3,403,000, respectively. The cost of cotton transferred between the Company and Mills is determined on a specific identification basis for each cotton bale sold or purchased. During fiscal years 2013, 2012 and 2011, the Company purchased cotton from Mills at cost, amounting to $565,000, and $2,045,000, and $115,000, respectively.

 

Shared Expenses Allocation

The Company and Mills share certain accounting and administrative expenses. Mills and Unifi have agreed to allocate these accounting and administrative expenses based upon a weighted average of certain key indicators, including, but not limited to, pounds of yarn sold and net sales. Amounts charged to the Company for these services were approximately $17,788,000, $15,358,000, and $15,552,000 for the fiscal years ended December 28, 2013, December 29, 2012, and December 31, 2011, respectively.

 

 

Parkdale America, LLC

(A Limited Liability Company)

Notes to Financial Statements

December 28, 2013, December 29, 2012 and December 31, 2011

---

 

Due to and from Affiliates

Due to and from affiliates as of December 28, 2013 and December 29, 2012, consists of the following:

 

		2013				2012
Due from U.S. Cotton LLC		$	-			$	24,000
Due from Summit Yarn LLC			41,000				45,000
Due from Parkdale Mills de Honduras			105,000				-
Due from affiliates		$	146,000			$	69,000
Due to Mills		$	(3,218,000	)		$	(2,451,000	)
Due to Alliance Real Estate III			-				(2,000	)
Due to Parkdale Mills de Honduras			-				(86,000	)
Due to D'sky DSC S.R.L.			(110,000	)			(189,000	)
Due to Parkdale Mills de El Salvador			(26,000	)			(116,000	)
Due to Parkale Incorporated			(1,430,000	)			(34,000	)
Due to U.S. Cotton LLC			-				(11,000	)
Due to affiliates		$	(4,784,000	)		$	(2,889,000	)

 

Amounts due to and from affiliates result from intercompany charges related to inventory purchases, accounts receivable collections, equipment sales, payroll tax payments, and the administrative expense allocation.

 

Fixed Asset Transfers

Periodically the Company and Mills transfer equipment to one another. All transfers are made at net book value of the equipment. During the fiscal years ended December 28, 2013 and December 29, 2012, no significant transfers were made between the companies.

 

Other

The Company sells waste fibers to Henry Fibers, a company owned by a stockholder of Parkdale, Inc. Total sales amounted to $206,000, $259,000, and $200,000 for the fiscal years ended December 28, 2013, December 29, 2012, and December 31, 2011, respectively.

 

The Company entered into a revolving credit facility with a related party in fiscal year 2013. See also Note 7.

 

12.       Commitments and Contingencies

 

Operating Leases

The Company has entered into operating leases for various buildings, vehicles, and office equipment. Future minimum lease payments during the remaining noncancelable lease terms as of December 28, 2013, are as follows:

 

Fiscal Years
2014		$	134,000
2015			11,000
Total minimum lease payments		$	145,000

 

 

Parkdale America, LLC

(A Limited Liability Company)

Notes to Financial Statements

December 28, 2013, December 29, 2012 and December 31, 2011

---

 

Rent expense for the fiscal years ended December 28, 2013, December 29, 2012, and December 31, 2011, was $570,000, $828,000, and $1,471,000, respectively.

 

Purchase and Sales Commitments

At December 28, 2013 and December 29, 2012, the Company had unfulfilled cotton purchase commitments, at varying prices, for approximately 298,101,000 and 378,119,000 pounds of cotton, respectively, to be used in the production process. At December 28, 2013, December 29, 2012, and December 31, 2011, the Company had unfulfilled yarn sales contracts, at varying prices, with various customers that are not expected to result in any loss to the Company.

 

Contingencies

The Company is involved in various legal actions and claims arising in the normal course of business. Management believes that the resolution of such matters will not have a material effect on the financial condition, results of operations, or cash flows of the Company.

 

13.       Subsequent Events

 

The Company evaluated transactions occurring after December 28, 2013 in accordance with ASC Topic 855, Subsequent Events, through March 25, 2014, which is the date the financial statements were available for issuance.

 

 

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