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NC yarn manufacturer completes fiscal comeback

Tue, 08/10/2010 - 9:26pm
Manufacturing.net

Unifi Inc. is back in the black, a survivor of 10 years in textile-manufacturing limbo.

To appreciate the Greensboro yarn manufacturer's comeback -- culminating in a $10.7 million profit in its fiscal year 2010 -- requires understanding the depths of its decline.

Since 2000, Unifi had lost $422.6 million and eliminated at least 2,800 jobs in North Carolina and surrounding states.

It went through a painful management and board shake-up in August 2007, one that had its few remaining analysts questioning its direction and existence.

Its share price dipped as low as 47 cents in March 2009 -- a point from which most companies, much less textile manufacturers struggling against fierce foreign competition, never recover.

"They were very close to going out of business," said Peter Tourtellot, the managing director of Anderson Bauman Tourtellot Vos & Co., a turnaround-management company in Greensboro.

"All indicators were bad, and it appeared management at the time could not move fast enough to correct their problems," Tourtellot said.

Yet, remarkably, Unifi still exists while several larger rivals -- Burlington Industries Inc., Cone Mills Corp., Guilford Mills Inc., Galey & Lord Inc. -- went bankrupt and emerged only after being bought by corporate cherry-pickers. Each is a shell of a once dominant global presence.

Meanwhile, Unifi's share price has rebounded to a 52-week high of $4.37 on April 26. It was trading in the neighborhood of $4.00 last week.

Its operations in Yadkinville are running 24 hours a day, seven days a week, with 945 employees overseeing highly automated equipment making both commodity yarns and specialty yarns from recyclable plastic products. Expanded production in Brazil and China also contributed significantly to its comeback.

The emphasis on premium, value-added yarns over the past four years proved that Unifi heard what many competitors ignored -- the voices of industry observers saying that niche yarn was the only legitimate production path left to domestic manufacturers.

"Unifi's success tells us that the textile industry in North Carolina is not dead, and it can compete," said Michael Walden, an economics professor at N.C. State University in Raleigh.

The Repreve line, introduced in 2006, has been a major sales and branding factor in Unifi's turnaround. The company makes polyester chips -- about the size of a Tic Tac breath mint -- from fiber waste, a byproduct of yarn production.

A percentage of post-consumer plastics, such as soda, water and 100 percent PET bottles, have been used, along with recycled filament nylon, staple polyester and performance fibers.

Unifi plans to add used garments to the mix, with stripping zippers and buttons an obstacle.

Four major apparel customers -- Eddie Bauer, the North Face, Patagonia and Polartec -- sell outdoor and sportswear featuring Repreve.

The yarn has been featured in documentaries on CNBC, the Discovery Channel and the Science Channel.

Given the consumer scrutiny that comes with marketing 100 percent recyclable, some of Unifi's customers conduct occasional audits of the supply chain.

"Patagonia can't afford for its apparel products to not live up to its marketing," said Roger Berrier, an executive vice president for Unifi.

Analysts consider the management and board shake-up in 2007 as one of the largest in Triad history, especially considering that it didn't involve Unifi being bought by another company.

Brian Parke was ousted as chairman, chief executive and president in August 2007, which led to the resignation of five board members.

Bill Jasper, who joined Unifi in 2004, was named the chief executive and president in September 2007.

Jasper said he doesn't believe in blaming Unifi's struggles solely on Brian Parke.

"We believed all along we could be a competitive manufacturer in the United States despite all the global challenges," Jasper said. "We, as a company, had lost our focus.

"We refocused on being as efficient as possible. We took a disciplined approach to improving and diversifying our product mix, which led to sales gains. We maintained good cash flow. We consolidated our operations as necessary, which has led us to a production work-force balance that is effective and sustainable."

Unifi's faith in Repreve convinced management and the board not to follow through on one more consolidation opportunity in April 2008 even as the country headed toward a deep recession.

"We could have cut out our future," Jasper said. "We knew that as retailers and customers cut back on their inventory in 2008 and 2009 that there would be demand for building them back up.

"It was a gutsy call, but it proved to be the right call, as we able to meet the demand for orders quicker than many of our competitors."

The company plans to spend $20 million this year on capital projects, the bulk in Yadkinville.

For example, Unifi is building a 50,000-square-foot center where the company plans to handle the cleansing of post-consumer plastic bottles to increase product development and production. It expects to hire up to 20 employees for that operation, which is expected to debut in February.

Jasper said he envisions having recycling bins throughout Yadkin County, if not the Triad, within the next few years, where consumers' plastic bottles can go directly into the supply chain for Repreve yarns.

The effort should receive a boost over time from the state law that requires plastic containers be recycled rather than thrown away.

Unifi's return to profitability has brought a sigh of relief to employees and within Yadkin County.

Unifi and Yadkin -- as employer and community -- are as intertwined as any in the Triad, possibly North Carolina. Walden said that Unifi represents 8 percent of the county's work force.

"That's huge," Walden said.

Jeff Gage and Hugh Reavis, both employees in Unifi's research-and-development operations in Yadkinville, said they feel fortunate to be working for a manufacturer dedicated to U.S. production.

"We know that morale is much better now than it was in 2007," Gage said. "We have been feeling more secure about our jobs, but to see the company turn a profit and management say that's not the end of it, but just the beginning wow."

Reavis said that even when the share price dropped to 47 cents, he wasn't worried because "I could see the changes coming, and I knew they were good ones."

Bobby Todd, the executive director of the Yadkin Chamber of Commerce, said he "feels good about Unifi and its status in Yadkinville as our largest employer and taxpayer."

"It's also pretty cool to go to a retail store and see the Repreve tag hang on clothing, knowing that Yadkin County contributed to that happening," Todd said.

Michael Lord, an associate professor of management at Wake Forest University, said that despite Unifi's comeback, "it isn't on Easy Street yet by any means."

"Unifi is not a company that can easily buck the trend of the overall economy," Lord said.

"Few companies have that luxury," he said. "But Unifi's turnaround does put them in a much better position to keep chugging along even if the economy is not as strong as it would like."

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Information from: Winston-Salem Journal, http://www.journalnow.com

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