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<SEC-DOCUMENT>0000950123-09-029544.txt : 20090928
<SEC-HEADER>0000950123-09-029544.hdr.sgml : 20090928
<ACCEPTANCE-DATETIME>20090804154643
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950123-09-029544
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20090804

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			UNIFI INC
		CENTRAL INDEX KEY:			0000100726
		STANDARD INDUSTRIAL CLASSIFICATION:	TEXTILE MILL PRODUCTS [2200]
		IRS NUMBER:				112165495
		STATE OF INCORPORATION:			NY
		FISCAL YEAR END:			0624

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		7201 WEST FRIENDLY RD
		STREET 2:		P O BOX 19109
		CITY:			GREENSBORO
		STATE:			NC
		ZIP:			27419-9109
		BUSINESS PHONE:		9192944410

	MAIL ADDRESS:	
		STREET 1:		7201 W FRIENDLY RD
		STREET 2:		PO BOX 19109
		CITY:			GREENSBORO
		STATE:			NC
		ZIP:			24719-9109

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	AUTOMATED ENVIRONMENTAL SYSTEMS INC
		DATE OF NAME CHANGE:	19720906
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
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<TR valign="bottom">
    <TD align="left" valign="top">VIA EDGAR
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">August&nbsp;4, 2009</TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;H. Christopher Owings</B><BR>
Assistant Director<BR>
United States Securities and Exchange Commission<BR>
Division of Corporation Finance<BR>
100 F Street N.E.<BR>
Mail Stop 3561<BR>
Washington, D.C. 20549

</DIV>

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    <TD width="3%" nowrap align="left"><B>RE:</B>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Unifi, Inc.</B><BR><B>
Form&nbsp;10-K for Fiscal Year Ended June&nbsp;29, 2008</B><BR><B>
Filed September&nbsp;12, 2008</B><BR><B>
File No.&nbsp;1-10542</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dear Mr.&nbsp;Owings:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Reference is made to the Staff of the Division of Corporate Finance&#146;s letter to Mr.&nbsp;William L.
Jasper, President and Chief Executive Officer of Unifi, Inc. (the &#147;Company&#148;), dated July&nbsp;21, 2009
(the &#147;Comment Letter&#148;). Set forth below is our response to the Staff&#146;s comments included in the
Comment Letter regarding the Annual Report on Form 10-K for the fiscal year ended June&nbsp;29, 2008
(the &#147;Form&nbsp;10-K&#148;) of the Company filed with the Securities and Exchange Commission (the &#147;SEC&#148;) on
September&nbsp;12, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For your convenience, we have repeated your comments exactly (in bold type) as set forth in the
Comment Letter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Note 9. Severance and Restructuring Charges, page 85</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>1. We have reviewed your response to comment one in our letter dated June&nbsp;23, 2009 and have the
following comments:</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Clarify why you reflected the $2.9&nbsp;million Dillon restructuring reserve as an assumed
liability in the purchase price allocation of your Dillon acquisition rather than as an
expense on your statement of operations. Considering this adjustment was made several
months after the acquisition date and the liability appears to be linked to your
post-acquisition decision to close the facility rather than representing an unfavorable
acquisition-date commitment, please clarify why you believe the adjustment falls within
the allocation period and confirm that the unfavorable change in value of this contract
relates to the period between contract inception and the acquisition date and not to a
post-acquisition period. In doing so, please identify the events and changes in
circumstance between the contract inception and acquisition dates that caused the contract
to be considered unfavorable. Please note that the allocation period, as defined in SFAS
141, ends when the acquiring entity is no longer waiting for information that it has
arranged to</B></TD>
</TR>

</TABLE>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>obtain and that is known to be available or obtainable. While the purchase price
allocation period usually should not exceed one year, a one-year allocation period cannot
be automatically assumed to apply to any business combination. Refer also to EITF 95-3.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Tell us the contract termination date related to the $1.5&nbsp;million Kinston restructuring
charge. If the termination date did not occur during the first quarter of fiscal 2008,
please clarify why you recorded the restructuring charge during the first quarter.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><I>Unfavorable contract related to Dillon sales and services agreement</I></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In order to provide appropriate perspective regarding the accounting for the $2.9&nbsp;million Dillon
restructuring reserve that was recorded as an assumed liability in purchase accounting, we have
summarized the background related to this transaction as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;25, 2006 the Company&#146;s Board of Directors approved the purchase of the assets of the
Dillon Yarn Division (&#147;Dillon&#148;) of Dillon Yarn Corporation. This approval was based on a business
plan which assumed certain significant synergies that were expected to be realized from the
elimination of redundant overhead, the rationalization of under-utilized assets and certain other
product optimization. The preliminary asset rationalization plan included exiting two of the three
production activities currently operating at the Dillon facility and moving them to other Unifi
manufacturing facilities. The plan was to be finalized once operations personnel from the Company
would have full access to the Dillon facility, in order to determine the optimal asset plan for the
Company&#146;s anticipated product mix. This plan was consistent with the Company&#146;s domestic market
consolidation strategy discussed in the Company&#146;s Annual Report on Form 10-K for the fiscal year
ended June&nbsp;25, 2006. On January&nbsp;1, 2007 the Company completed the Dillon asset acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Post acquisition, the Company gained information related to the Dillon facility&#146;s cost structures
and production capabilities that was not available to the Company prior to the consummation date
due to the market sensitivity of the information and time constraints. Once the Company took over
operating control of the Dillon facility, the personnel at the Dillon facility were asked to
develop an estimate of the cost to produce the anticipated product mix. Based on this estimate,
the Company determined the asset rationalization and consolidation would be optimized by closing
the entire Dillon facility and moving all three production activities to other Unifi facilities,
rather than only exiting two of the product activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">By mid-January, 2007, the Company had made preliminary estimates of the improvement to the business
plan which was potentially available to the Company through exiting the entire Dillon facility.
These preliminary estimates were provided to the Company&#146;s Board of Directors at its January&nbsp;24,
2007 meeting. By the end of April&nbsp;2007, the
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Company had finalized its rationalization plan to exit the entire Dillon facility and publicly
announced its plans to close the facility by the end of June&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Concurrent with the acquisition the Company entered into a Sales and Services Agreement (&#147;the
Agreement&#148;). The Agreement covered the services of certain Dillon personnel who were responsible
for product sales and certain other personnel that were primarily focused on the planning and
operations at the Dillon facility. The services would be provided over a period of two years at a
fixed cost of $6.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The
Company evaluated the guidance contained in Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;141: <I>Business Combinations</I>, as
well as the guidance contained in EITF Abstract Issue No.&nbsp;95-3
(&#147;EITF 95-3&#148;): <I>Recognition of Liabilities in Connection with a
Purchase Business Combination </I>in determining the appropriate accounting for the costs associated
with the Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Once the Company finalized its exit plan, the services under the Agreement were reviewed in detail.
The Company concluded that costs totaling approximately $3.1&nbsp;million relating to services provided
under the Agreement were for the ongoing benefit of the combined business and therefore should be
reflected as an expense in the Company&#146;s Statements of Operations, as incurred. The remaining
Agreement costs totaling approximately $2.9&nbsp;million were for the personnel involved in the planning
and operations of the Dillon facility and related to the time period after shutdown in June&nbsp;2007.
Therefore, these costs were reflected as an assumed purchase
liability in accordance with SFAS No.&nbsp;141,
since these costs no longer related to the generation of revenue and had no future economic benefit
to the combined business as a result of the plan to exit the facility. In addition, they were
incremental to other costs incurred by the Company in the conduct of activities prior to the
consummation date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Further, the Company believes these costs were properly treated as purchase price adjustments in
accordance with EITF 95-3 due to the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company had a preliminary plan to exit certain activities as of the
consummation date;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company immediately began obtaining and evaluating the information required to
finalize the plan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company completed the assessment of which activities to exit and chose to exit the
entire Dillon facility, instead of only two of the three former activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company finalized the exit plan as soon as the information became known; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company publicly announced the plan and its expected date of completion.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result, the Company believes that it was appropriate to reflect this $2.9&nbsp;million of costs
associated with the Agreement and the subsequent exit of the Dillon facility as an assumed
liability in purchase accounting.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><I>Unfavorable contract related to Kinston facility</I></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recorded a $1.5&nbsp;million restructuring charge in the first quarter of fiscal year 2008
related to the cost to exit a supply agreement and certain other miscellaneous lease obligations in
which the related vendors were notified of the plant closing at various times during the September
2007 quarter. For the largest of these contracts, representing $1.1&nbsp;million of the charge, the
Company gave a written termination notice on September&nbsp;18, 2007. The original termination date of
this contract was November 2016. The Company determined that the accrual of these charges was
appropriate in the September&nbsp;2007 quarter, after giving appropriate consideration to the provisions
of SFAS No.&nbsp;146,
&#147;Accounting for Costs Associated with Exit or Disposal
Activities&#148; (i.e. evaluation of a respective asset&#146;s cease use date when appropriate, timing of
contract terminations, etc.) as they would continue to be incurred without future economic benefit
to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Note
10. Discontinued Operations, page 86</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2.&nbsp;We have reviewed your response to comment two in our letter dated June&nbsp;23, 2009. Please note
that paragraph 2 of ARB 51 precludes consolidation of a majority&#151;owned subsidiary where control
does not rest with the majority owners, for instance, where the subsidiary is in legal
reorganization or in bankruptcy. Additionally, paragraph </B><B>15(d)</B><B> of SFAS 94 amends APB 18 to clarify
that the limitations to the application of consolidation accounting, including bankruptcy, should
also be applied as limitations to use of the equity method. Considering this guidance, please
clarify why you did not account for Unifi Dyed Yarns Limited subsequent to being placed into
liquidation using the cost method.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Response:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company acknowledges that Unifi Dyed Yard Limited (&#147;UDYL&#148;) should have been deconsolidated
in June&nbsp;2005 when it was placed into liquidation based on the
guidance contained in Accounting Research Bulletin No.&nbsp;51
(&#147;ARB 51&#148;)
paragraph 2 (which was later superseded by SFAS No.&nbsp;94, paragraph 13) and disclosed such in its Annual
Report on Form 10-K for the fiscal year ended June&nbsp;26, 2005. However, the Company does not believe
such treatment would have resulted in a material change to its financial statements, as per the
discussion below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company notes that the deconsolidation of UDYL would have resulted in a gain on deconsolidation
(since the fair value of the consideration received at the date of the deconsolidation was zero,
and the net carrying value of UDYL at the date of deconsolidation was a deficit of approximately
$2.9&nbsp;million). However, if the Company had deconsolidated UDYL and released the liability recorded
by UDYL related to preferential transfer claims, the Company has concluded that it would have been
appropriate for Unifi Textured Yarns Europe (&#147;UTYE&#148;) to then record a contingent reserve in
accordance with SFAS No.&nbsp;5, &#147;Accounting for Contingencies&#148;
on the UTYE books to reflect the Company&#146;s assessment that
claims from the liquidators related to preferential transfers with UTYE were probable and
estimable. The Company determined
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">that the amount previously recorded by UDYL, which totaled $2.9&nbsp;million, represented its then best
estimate of the potential exposure related to the preferential transfers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company notes further that UTYE has been accounted for as a discontinued operation since July,
2004 and is still under the control of the Company. Accordingly, had the Company deconsolidated
UDYL, the resulting $2.9&nbsp;million gain arising from the deconsolidation and established a
corresponding $2.9&nbsp;million contingent liability on UTYE&#146;s balance sheet, the impact would have both
been reflected in the Discontinued Operations line item of the Consolidated Statement of Operations
for the fiscal year ended June&nbsp;26, 2005, as both subsidiaries were being accounted for as
discontinued operations under SFAS No.&nbsp;144, &#147;Accounting for
the Impairment or Disposal of Long-Lived Assets&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In
preparing the financial statements for the fiscal year ended June&nbsp;29, 2008, based on the
assertion by the liquidators that there were no other assets or claims to assets outstanding, the
Company concluded that the potential for third parties to make a claim related to preferential
transfers with UTYE was remote. Accordingly, the Company eliminated the contingent liability
established in 2005, which totaled approximately $3.2&nbsp;million as a result of subsequent fluctuation
in foreign currency translation rates, with the release of this liability being reflected on the
Discontinued Operations line item of the Company&#146;s Consolidated Statement of Operations for the
year ended June&nbsp;29, 2008. Had the Company deconsolidated UDYL under ARB 51 and recorded the
contingent liability on UTYE&#146;s books as noted above, the Company would have likely reached the same
conclusion as it did for UDYL and recorded the same $3.2&nbsp;million elimination of the contingent
liability on the Discontinued Operations line item of the Company&#146;s Consolidated Statement of
Operations for the year ended June&nbsp;29, 2008; therefore the results would have been the same.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based on the analysis described above, the Company has concluded that the application of the
provisions of ARB 51 would have no material impact on the Company&#146;s accounting for its discontinued
operations. In the future, if the Company loses control over one of its subsidiaries, it will
deconsolidate the subsidiary in accordance with SFAS No.&nbsp;94 and account for the investment under the
cost method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In order
to help expedite the process if you have any questions about or desire any additional information regarding the matters
discussed in this response, we respectfully request an opportunity to confer with you prior to
issuance of any written response, and ask that you contact our outside counsel, Marc Corredor of
McGuireWoods LLP, (704)&nbsp;343-2145, to set up a conference call.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company appreciates the comments of the SEC in assisting us in the Company&#146;s compliance with
the applicable disclosure requirements and enhancement in the overall disclosure in its filings.
We further acknowledge that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is responsible for the adequacy and accuracy of the disclosure in
the filing;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and</TD>
</TR>


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</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company may not assert staff comments as a defense in any proceeding
initiated by the commission or any person under the federal securities laws of the United
States.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The goal and philosophy of the Company is, and has been in the past, to provide the public with
effective, materially accurate and consistent financial reporting and disclosures. Thank you for
your attention to this matter.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Very truly yours,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>

<TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/
&nbsp;Ronald L. Smith&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Ronald L. Smith&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Unifi, Inc.<BR>
Vice President and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


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