Leases

12 Months Ended

Jul. 02, 2023

Leases [Abstract]

Leases

4. Leases

UNIFI has adopted the following post-implementation practical expedients related to its accounting for leases:

•short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less and to recognize lease payments on a straight-line basis over the lease term and variable payments in the period the obligation is incurred; and

•the option not to separate lease and non-lease components for the transportation equipment asset class.

UNIFI leases sales and administrative office space, warehousing and distribution centers, manufacturing space, transportation equipment, manufacturing equipment, and other information technology and office equipment from third parties. The lease terms range from 1 to 15 years with various options for renewal. There are no residual value guarantees, restrictions, covenants, or sub-leases related to these leases. Variable lease payments are determined as the amounts included in the lease payment that are based on the change in index or usage. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included below.

The following table sets forth the balance sheet location and values of the Company’s lease assets and lease liabilities:

Classification	Balance Sheet Location	July 2, 2023		July 3, 2022
Lease Assets
Operating lease assets	Operating lease assets	$	7,791	$	8,829
Finance lease assets	Property, plant & equipment, net		10,947		7,017
Total lease assets		$	18,738	$	15,846
Lease Liabilities
Current operating lease liabilities	Current operating lease liabilities	$	1,813	$	2,190
Current finance lease liabilities	Current portion of long-term debt		2,806		1,726
Total current lease liabilities		$	4,619	$	3,916
Non-current operating lease liabilities	Non-current operating lease liabilities	$	6,146	$	6,736
Non-current finance lease liabilities	Long-term debt		7,961		5,535
Total non-current lease liabilities		$	14,107	$	12,271
Total lease liabilities		$	18,726	$	16,187

The following table sets forth the components of UNIFI’s total lease cost for fiscal 2023 and 2022:

Lease Cost	Fiscal 2023		Fiscal 2022
Operating lease cost	$	2,686	$	2,766
Variable lease cost		545		502
Finance lease cost:
Amortization of lease assets		1,546		1,981
Interest on lease liabilities		344		258
Short-term lease cost		1,013		967
Total lease cost	$	6,134	$	6,474

The following table presents supplemental information related to leases:

Other Information	Fiscal 2023		Fiscal 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases	$	2,686	$	2,766
Financing cash flows used by finance leases	$	2,123	$	3,707
Non-cash activities:
Leased assets obtained in exchange for new operating lease liabilities	$	2,733	$	1,662
Leased assets obtained in exchange for new finance lease liabilities	$	5,629	$	2,493

UNIFI calculates its operating lease liabilities and finance lease liabilities based upon UNIFI’s incremental borrowing rate (the “IBR”). When determining the IBR, we consider our centralized treasury function and our current credit profile. UNIFI makes adjustments to this rate for securitization, the length of the lease term (tenure), and leases denominated in foreign currencies. Generally, the IBR for each jurisdiction approximates the specific risk-free rate for the respective jurisdiction incremented for UNIFI’s corporate credit risk and adjusted for tenure.

The following table sets forth UNIFI's weighted average remaining lease term in years and discount rate percentage used in the calculation of its outstanding lease liabilities:

Weighted Average Remaining Lease Term and Discount Rate	July 2, 2023			July 3, 2022
Weighted average remaining lease term (years):
Operating leases		6.0			4.1
Finance leases		3.9			4.2
Weighted average discount rate (percentage):
Operating leases		3.0	%		5.0	%
Finance leases		4.8	%		3.6	%

Lease Maturity Analysis

Future minimum finance lease payments and future minimum payments under non-cancelable operating leases with initial lease terms in excess of one year as of July 2, 2023 by fiscal year were:

Maturity of Lease Liabilities	Finance Leases			Operating Leases
Fiscal 2024	$	3,339		$	2,181
Fiscal 2025		3,183			1,677
Fiscal 2026		2,688			1,384
Fiscal 2027		2,082			1,155
Fiscal 2028		949			1,040
Fiscal years thereafter		—			2,241
Total minimum lease payments	$	12,241		$	9,678
Less estimated executory costs		(338	)		—
Less imputed interest		(1,136	)		(1,719	)
Present value of net minimum lease payments		10,767			7,959
Less current portion of lease obligations		(2,806	)		(1,813	)
Long-term portion of lease obligations	$	7,961		$	6,146