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Unifi, Inc.

Unifi, Inc.

P.O. Box 19109

7201 West Friendly Avenue

Greensboro, NC 27419-9109

November 22, 2004

Via EDGAR

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549

    RE:

    Form 10-K for the fiscal year ended June 27, 2004

    File Date: September 17, 2004

    File No. 001-10542

Ladies and Gentlemen:

     Reference is made to the comments to the Form 10-K (the “2004 Form 10-K”)
of Unifi, Inc. (the “Company”) for the fiscal year ended June 27, 2004
received from the Staff of the SEC in a letter from George F. Ohsiek, Jr.,
dated November 9, 2004 (the “Comment Letter”). The discussion below is
presented in the order of the numbered comments in the Comment Letter and we
have reproduced the comments for ease of reference. Certain capitalized terms
in this letter are used as defined in the 2004 Form 10-K.

     The Company’s responses to the Staff’s comments are as follows:

General

    1.

    Where a comment below requests additional disclosures or
other revisions to be made, these revisions should be included in
your future filings, as applicable.

Securities and Exchange Commission

     Response to Comment 1

     Our responses herein indicate, where applicable, the revisions to be
included in future filings.

Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.

    2.

    Please supplement your discussion of net sales, gross profit,
and selling, general and administrative expense on a segment basis
with a discussion of these items for your business as a whole.
Refer to Item 303(A) of Regulation S-K.

     Response to Comment 2

     Our discussion of net sales, gross profit, and selling, general and
administrative expense will be supplemented accordingly in our future filings.

    3.

    Please discuss the impact on overall net sales as well as net
sales by segment of movements in currency exchange rates, if
material.

     Response to Comment 3

     Our disclosure concerning currency exchange rates will be expanded in
future filings to include a discussion of the impact on overall net sales, if
material.

    4.

    In your summary table of operating income by segment, your
inclusion of a “total” column for consolidated segment amounts
represents the presentation of non-GAAP measures subject to the
disclosure and reconciliation requirements of Item 10(e) of
Regulation S-K. We note your reference to footnote 8 of the
financial statements where total segment operating income (loss) is
reconciled to pretax earnings. However, you still need to provide a
reconciliation from total cost of sales and total selling, general
and administrative expense on a segment basis, to cost of sales and
selling, general and administrative expense per your statements of
operations. Moreover, you should disclose the reasons why these
non-GAAP measures provide useful information to investors and how
management uses the non-GAAP measures. Please confirm that you will
revise your future filings accordingly. Refer to Question 21 of our
Frequently Asked Questions Regarding the Use of Non-GAAP Financial
Measures issued on June 13, 2013, available on our website at
www.sec.gov.

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Securities and Exchange Commission

     Response to Comment 4

     Our future filings will be revised to comply with the disclosure and
reconciliation requirements of Item 10(e) of Regulation S-K.

    5.

    Please refer to Rule 303(A)(3)(ii) of Regulation S-K, and
where appropriate describe any known trends or events that are
reasonably expected to have a material impact on future net sales or
income from continuing operations. For example, it appears that
your overall net sales, gross profits and net income have been
trending downward. Please identify the cause of these trends and
indicate whether you expect them to continue into the future and why
or why not. Similarly, with respect to the restructuring charges
recorded in fiscal years 2004 and 2003, discuss the likely effects
of these restructurings on future operating results and liquidity,
unless it is determined that a material effect is not reasonably
likely to occur. Also refer to SAB Topic 5.P.4.

     Response to Comment 5

     Our disclosure in future filings will include a description of material
known trends and events, as well as any material effects on future operating
results and liquidity of our restructuring charges.

    6.

    We note your brief discussion of the significant change in
the “equity in losses (earnings) of unconsolidated affiliates” line
item of your statements of operations. Given the magnitude of the
change, we would expect a more elaborate discussion of the change,
including your assessment as to whether the results of your equity
method investments are expected to continue to deteriorate into the
future and why or why not. Please revise your future filings
accordingly and show us supplementally what the revised disclosure
will look like for fiscal 2004 compared to fiscal 2003.

     Response to Comment 6

     Equity in net losses of our equity affiliates which include PAL, USTF and
UNF totaled $7.1 million in fiscal 2004 compared to equity in net income of
$10.6 million in fiscal 2003. The decrease in net income primarily relates to
our investment in PAL. The Company’s share of PAL’s net losses in fiscal 2004
was $6.9 million compared to net income of $11.7 million in fiscal 2003. PAL’s
earnings from operations decreased primarily due to increased cotton prices
that it was unable to pass on to its customers due to sales contract
commitments. In addition, PAL realized $4.7 million of net losses on futures
contracts for cotton purchases in the Company’s 2004 fiscal year compared to
$3.0 million in net gains on futures contracts in the Company’s 2003 fiscal
year. The Company does not expect PAL to report a loss for the Company’s 2005
fiscal year because PAL has been able to raise its average sales price
throughout calendar year 2004 and cotton prices have declined from their high
during the Company’s 2004 fiscal year returning the business directionally
toward more historical operating trends.

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Securities and Exchange Commission

    7.

    We note the significant impact on your effective tax rate in
each year presented of changes in your valuation allowance. Please
discuss such significant changes in your MD&A. Show us
supplementally what the revised disclosures will look like for
fiscal 2004 compared to fiscal 2003.

     Response to Comment 7

     The Company has established a valuation allowance against its deferred tax
assets relating to state income tax credits and a long term capital loss
carryforward. The valuation allowance increased $2.6 million in fiscal 2004
compared to an increase of $2.7 million in fiscal 2003. The gross increase of
$3.4 million in fiscal 2004 was partially offset by a $0.8 million deduction to
the valuation allowance due to the expiration of unused North Carolina state
income tax credits, which were written off in fiscal 2004. Due to lower
estimates of future state taxable income, the valuation allowance increased
$2.6 million and $2.7 million in fiscal years 2004 and 2003, respectively, to
reserve for North Carolina state income tax credits. In fiscal 2004, the
increase to the reserve also included $0.8 million that related to a long-term
capital loss carryforward that the Company does not expect to utilize before it
is scheduled to expire in fiscal year 2005. The net impact of changes in the
valuation allowance to the effective tax rate reconciliation for fiscal years
2004 and 2003 were 3.5% and 9.1%, respectively. The percentage decrease from
fiscal 2003 to 2004 is primarily attributable to the larger pre-tax loss in
fiscal 2004 compared to fiscal 2003.

Liquidity and Capital Resources, page 17

    8.

    Please supplement your current disclosure to include a
discussion of the impact on liquidity and capital resources related
to the $250 million of senior, unsecured debt securities and
associated interest payments. Because this appears to be your most
significant long-term obligation, we believe it should be discussed.

     Response to Comment 8

     Our disclosure of liquidity and capital resources in future filings will
be supplemented to include a discussion of our $250 million of senior unsecured
debt securities.

Contractual Obligations, page 19

    9.

    Please revise your contractual obligations table to include
the following:

          a.           estimated interest payments on your debt; and

          b.           planned funding of pension obligations.

Because the table is aimed at increasing transparency of cash
flow, we believe these payments should be included in the table.
If you choose not to include these payments, a footnote to the
table should clearly identify the excluded items and provide any
additional information that is material to an understanding of
your cash requirements. See Section IV.A and

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Securities and Exchange Commission

    footnote 46 to the Commission’s MD&A Guidance issued December 19,
2003 available at www.sec.gov.

     Response to Comment 9

     Our contractual obligations table will be revised accordingly in future
filings.

Item 8. Consolidated Financial Statements and Supplementary Data

General

    10.

    We note your inclusion of 2 years of financial statements for
your significant equity method investee, Parkdale America, LLC
(PAL). Please be advised that, pursuant to Rule 3-09 of Regulation
S-X, financial statements for significant equity method investees
are required for the same number of periods as required by Rules
3-01 and 3-02 of Regulation S-X. We understand that PAL has a
different fiscal year end than you and that fiscal 2004 financial
statements were not available for inclusion in your original Form
10-K filing. Nonetheless, please be advised that you are required
to file the separate fiscal 2004 financial statements of PAL within
90 days after PAL’s year-end. They should be filed as an amendment
to your fiscal 2004 Form 10-K. Please confirm to us that you intend
to amend your Form 10-K to file these financial statements. In this
regard, we note that you did not amend your fiscal 2003 Form 10-K to
include the fiscal 2003 financial statements for PAL.

     Response to Comment 10

     The Company agrees to file PAL financial statements, when PAL qualifies as
a significant subsidiary, in compliance with Rule 3-09 of Regulation S-X. The
Company acknowledges that it did include PAL’s 2003 financial statements in its
2004 Form 10-K, and in subsequent periods when PAL qualifies as a significant
subsidiary, we will fully comply with the significant subsidiary rules by
filing, in a timely manner, the financial statements that cover the Company’s
third and fourth fiscal quarters as an amendment to the corresponding Form
10-K.

Consolidated Balance Sheets, page 26

    11.

    Please consider the need to separately state the components
of accrued expenses in the footnotes if an individual item meets the
materiality threshold (5% of total current liabilities). Refer to
rule 5-02.20 of Regulation S-X.

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Securities and Exchange Commission

     Response to Comment 11

     Our future filings will separately state the components of accrued
expenses in the footnotes if required under rule 5-02.20 of

Regulation S-X.

Consolidated Statements of Operations, page 27

    12.

    Please present the goodwill impairment charge as a separate
line item. Refer to paragraph 43 of SFAS 142.

     Response to Comment 12

     Our Consolidated Statements of Operations will be revised accordingly in
future filings.

Note 6. Retirement Plans, page 40

    13.

    Please revise your pension plan disclosures to include two
years of information related to balance sheet disclosures and three
years of information for disclosures related to your results of
operations. Refer to paragraph 5 of SFAS 132®.

     Response to Comment 13

     As stated in Footnote 6 in the Notes to Consolidated Financial Statements,
the Company determined during the fourth quarter of fiscal 2004 that it had not
properly recorded or disclosed the defined benefit plan maintained by the
Company’s Irish subsidiary. The Company corrected the error in the fourth
quarter of fiscal 2004 by recording a pension asset of $4.1 million. The
Company has evaluated the effect of not recording the error and determined that
the differences were not material for all periods presented in the Consolidated
Financial Statements in the 2004 Form 10-K. Subsequent to fiscal 2004, the
Company announced the closure of its Irish subsidiary whose employees are the
participants in the defined benefit plan. All of the employees are scheduled
to be terminated no later than December 31, 2004 and the Company expects to
wind up the defined benefit plan by the end of fiscal 2005. Accordingly, the
Company will provide the required comparative disclosures relating to the
balance sheets for future filings applicable to continuing operations. Since
the defined benefit plan is associated with discontinued operations that are
expected to be fully liquidated by June 26, 2005, the Company respectfully
proposes to provide only two years of information because, on balance, the FAS
132R disclosures applicable to the second preceding year of a discontinued
operation are not material to an investor.

Note 10. Investments in Unconsolidated Affiliates, page 48

    14.

    Please disclose the difference between the amount at which
your investment in PAL is carried and the amount of your underlying
equity in the net assets of PAL and your accounting treatment of the
difference. It appears to us, based on a review of PAL’s balance
sheet, that the

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Securities and Exchange Commission

    difference may be significant. Refer to paragraph 20.a of APB 18.
Additionally, tell us any consideration that you have given to
whether you have incurred an other than temporary decline in the
value of this investment. In this regard, we note that the
operating results and operating cash flows for PAL have diminished
significantly in recent years. We also understand from your MD&A
disclosures that the US textile industry continues to suffer from
disparate worldwide production capacity and demand, weakness at
retail and the direct sourcing of garments and fabrics from lower
wage-based countries. While we understand that none of these
factors are necessarily determinate of a loss in value that is
other than temporary, they do seem to be indicators that would
cause you to assess the recoverability of the investment.

     Response to Comment 14

     The Company’s investment in PAL at June 27, 2004 is $142.1 million and the
underlying equity in the net assets of PAL at June 27, 2004 is $131.4 million
or a difference of $10.7 million. The difference is accounted for as goodwill
and the Company includes this amount in its investment in PAL disclosures. We
will clarify our disclosure in future periods to indicate the dollar amount of
this difference and how it is accounted for (i.e. embedded goodwill). This
will confirm that the Company monitors all of its equity investments, including
PAL, for other than temporary declines in value. In our most recent review of
PAL, we concluded that there was no such decline. PAL’s earnings have been
lower recently due to higher cotton prices which PAL was unable to pass on to
its customers in a timely fashion due to sales contracts. PAL is forecasting a
profitable calendar year 2005 and the Company expects to continue to receive
cash distributions from PAL. Our view is that the entire carrying value of our
investment in PAL is recoverable from our share of future cash distributions
from the venture plus a terminal exit value. We acknowledge that PAL’s
business is expected to be impacted by the World Trade Organization’s staged
quota removal which will eliminate all remaining textile and apparel quot