25. Business Segment Information

UNIFI defines operating segments as components of the organization for which discrete financial information is available and operating results are evaluated on a regular basis by UNIFI’s Chief Executive Officer, who is the chief operating decision maker (“CODM”), in order to assess performance and allocate resources. Characteristics of the organization which were relied upon in making the determination of reportable segments include the nature of the products sold, the organization’s internal structure, the trade policies in the geographic regions in which UNIFI operates, and the information that is regularly reviewed by the CODM for the purpose of assessing performance and allocating resources.

UNIFI’s operating segments are aggregated into three reportable segments based on similarities between the operating segments’ economic characteristics, nature of products sold, type of customer, methods of distribution and regulatory environment.

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The operations within the Polyester Segment exhibit similar long-term economic characteristics and sell into an economic trading zone covered by the North American Free Trade Agreement (“NAFTA”) and the Dominican Republic—Central America Free Trade Agreement (“CAFTA-DR”) to similar customers utilizing similar methods of distribution. These operations derive revenues from polyester-based products with sales primarily to other yarn manufacturers and knitters and weavers that produce yarn and/or fabric for the apparel, hosiery, automotive, home furnishings, industrial and other end-use markets. The Polyester Segment consists of sales and manufacturing operations in the United States and El Salvador.

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The operations within the Nylon Segment exhibit similar long-term economic characteristics and sell into an economic trading zone covered by NAFTA and CAFTA-DR to similar customers utilizing similar methods of distribution. The Nylon Segment includes an immaterial operating segment in Colombia that sells similar nylon-based textile products to similar customers in Colombia and Mexico utilizing similar methods of distribution. These operations derive revenues from nylon-based products with sales to knitters and weavers that produce fabric primarily for the apparel and hosiery markets. The Nylon Segment consists of sales and manufacturing operations in the United States and Colombia.

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The operations within the International Segment exhibit similar long-term economic characteristics and sell to similar customers utilizing similar methods of distribution in geographic regions that are outside of the NAFTA and CAFTA-DR economic trading zone. The International Segment primarily sells polyester-based products to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial and other end-use markets primarily in the South American and Asian regions. The International Segment includes a manufacturing location in Brazil and sales offices in Brazil, China and Sri Lanka.

In addition to UNIFI’s reportable segments, the selected financial information presented below includes an All Other category. All Other consists primarily of Renewables (up through the date of sale, December 23, 2016) and for-hire transportation services. Revenue for Renewables was primarily derived from (i) facilitating the use of miscanthus grass as bio-fuel through service agreements and (ii) delivering harvested miscanthus grass to poultry producers for animal bedding. For-hire transportation services revenue is derived from performing common carrier services utilizing UNIFI’s fleet of transportation equipment.

The operations within All Other (i) are not subject to review by the CODM at a level consistent with UNIFI’s other operations, (ii) are not regularly evaluated using the same metrics applied to UNIFI’s other operations and (iii) do not qualify for aggregation with an existing reportable segment. Therefore, such operations are excluded from reportable segments.

UNIFI evaluates the operating performance of its segments based upon Segment Profit (Loss), which represents segment gross profit (loss) plus segment depreciation expense. This measurement of segment profit or loss best aligns segment reporting with the current assessments and evaluations performed by, and information provided to, the CODM.

The accounting policies for the segments are consistent with UNIFI’s accounting policies. Intersegment sales are omitted from the below financial information, as they are (i) insignificant to UNIFI’s segments and eliminated from consolidated reporting and (ii) excluded from segment evaluations performed by the CODM.

Selected financial information is presented below:

	For the Fiscal Year Ended June 25, 2017
	Polyester		Nylon		International		All Other			Total
Net sales	$	355,740	$	112,704	$	173,686	$	5,140		$	647,270
Cost of sales		315,655		100,633		131,087		5,731			553,106
Gross profit (loss)		40,085		12,071		42,599		(591	)		94,164
Segment depreciation expense		13,921		2,125		1,119		638			17,803
Segment Profit	$	54,006	$	14,196	$	43,718	$	47		$	111,967

	For the Fiscal Year Ended June 26, 2016
	Polyester		Nylon		International		All Other			Total
Net sales	$	383,167	$	131,715	$	122,554	$	6,201		$	643,637
Cost of sales		333,638		113,906		95,666		6,795			550,005
Gross profit (loss)		49,529		17,809		26,888		(594	)		93,632
Segment depreciation expense		11,188		1,899		885		820			14,792
Segment Profit	$	60,717	$	19,708	$	27,773	$	226		$	108,424

	For the Fiscal Year Ended June 28, 2015
	Polyester		Nylon		International		All Other			Total
Net sales	$	396,239	$	149,612	$	134,992	$	6,278		$	687,121
Cost of sales		345,462		130,644		113,556		6,754			596,416
Gross profit (loss)		50,777		18,968		21,436		(476	)		90,705
Segment depreciation expense		10,579		1,798		1,997		473			14,847
Segment Profit (Loss)	$	61,356	$	20,766	$	23,433	$	(3	)	$	105,552

The reconciliations of segment gross profit (loss) to consolidated income before income taxes are as follows:

	For the Fiscal Year Ended
	June 25, 2017			June 26, 2016			June 28, 2015
Polyester	$	40,085		$	49,529		$	50,777
Nylon		12,071			17,809			18,968
International		42,599			26,888			21,436
All Other		(591	)		(594	)		(476	)
Segment gross profit		94,164			93,632			90,705
SG&A expenses		50,829			47,502			49,672
(Benefit) provision for bad debts		(123	)		1,684			947
Other operating (income) expense, net		(310	)		2,248			1,600
Operating income		43,768			42,198			38,486
Interest income		(517	)		(610	)		(916	)
Interest expense		3,578			3,528			4,025
Loss on sale of business		1,662			—			—
Loss on extinguishment of debt		—			—			1,040
Equity in earnings of unconsolidated affiliates		(4,230	)		(8,963	)		(19,475	)
Income before income taxes	$	43,275		$	48,243		$	53,812

The reconciliations of segment depreciation and amortization expense to consolidated depreciation and amortization expense are as follows:

	For the Fiscal Year Ended
	June 25, 2017		June 26, 2016		June 28, 2015
Polyester	$	13,921	$	11,188	$	10,579
Nylon		2,125		1,899		1,798
International		1,119		885		1,997
All Other		638		820		473
Segment depreciation expense		17,803		14,792		14,847
Other depreciation and amortization expense		2,565		2,736		3,196
Depreciation and amortization expense	$	20,368	$	17,528	$	18,043

The reconciliations of segment capital expenditures to consolidated capital expenditures are as follows:

	For the Fiscal Year Ended
	June 25, 2017		June 26, 2016		June 28, 2015
Polyester	$	25,442	$	44,517	$	21,267
Nylon		1,247		2,548		2,392
International		4,734		2,755		1,468
Segment capital expenditures		31,423		49,820		25,127
Other capital expenditures		1,767		2,517		839
Capital expenditures	$	33,190	$	52,337	$	25,966

In addition to the capital expenditures noted above, Polyester assets were added via a construction financing arrangement further described in Note 12, “Long-Term Debt.”

During fiscal 2017, UNIFI changed the segmentation of cash and cash equivalents to better reflect its ability to expand operations in multiple regions. Thus, in the reconciliations below, cash and cash equivalents have been reclassified out of individual segments and into other current assets for the fiscal years presented.

The reconciliations of segment total assets to consolidated total assets are as follows:

	June 25, 2017		June 26, 2016		June 28, 2015
Polyester	$	270,819	$	243,093	$	208,411
Nylon		57,789		63,141		66,490
International		80,824		66,998		60,809
Segment total assets		409,432		373,232		335,710
Other current assets		27,375		13,337		6,892
Other property, plant and equipment		14,904		16,597		13,544
Other non-current assets		279		4,864		4,714
Investments in unconsolidated affiliates		119,513		117,412		113,901
Total assets	$	571,503	$	525,442	$	474,761

Product sales (excluding the All Other category) are as follows:

	For the Fiscal Year Ended
	June 25, 2017		June 26, 2016		June 28, 2015
Polyester	$	529,426	$	505,721	$	531,231
Nylon		112,704		131,715		149,612
Total	$	642,130	$	637,436	$	680,843

Geographic Data

Geographic information is set forth below, beginning with net sales. Brazil is reported separately from other foreign countries because its net sales exceed 10% of consolidated net sales for each of the fiscal years presented.

	For the Fiscal Year Ended
	June 25, 2017		June 26, 2016		June 28, 2015
United States	$	424,490	$	472,287	$	509,490
Brazil		109,079		83,087		101,912
Remaining Foreign Countries		113,701		88,263		75,719
Total	$	647,270	$	643,637	$	687,121

Export sales from UNIFI’s U.S. operations to external customers	$	104,229	$	113,725	$	119,548

The information for net sales is based on the operating locations from where the items were produced or distributed.

Geographic information for long-lived assets is as follows:

	June 25, 2017		June 26, 2016		June 28, 2015
United States	$	304,696	$	292,854	$	240,431
Brazil		12,616		9,714		8,207
Remaining Foreign Countries		8,360		8,595		9,237
Total	$	325,672	$	311,163	$	257,875

Long-lived assets are comprised of PP&E, net; intangible assets, net; investments in unconsolidated affiliates; and other non-current assets.

Geographic information for total assets is as follows:

	June 25, 2017		June 26, 2016		June 28, 2015
United States	$	445,947	$	427,679	$	387,155
Brazil		58,598		53,993		50,300
Remaining Foreign Countries		66,958		43,770		37,306
Total	$	571,503	$	525,442	$	474,761