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 primarily 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 primarily 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 primarily 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 primarily 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 December 23, 2016, the date of the sale by UNIFI of its 60% equity ownership interest in Renewables) 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 24, 2018
	Polyester		Nylon		International		All Other		Total
Net sales	$	364,169	$	102,639	$	207,884	$	4,220	$	678,912
Cost of sales		333,078		92,155		163,300		3,951		592,484
Gross profit		31,091		10,484		44,584		269		86,428
Segment depreciation expense		15,893		2,197		1,648		256		19,994
Segment Profit	$	46,984	$	12,681	$	46,232	$	525	$	106,422

	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

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

	For the Fiscal Year Ended
	June 24, 2018			June 25, 2017			June 26, 2016
Polyester	$	31,091		$	40,085		$	49,529
Nylon		10,484			12,071			17,809
International		44,584			42,599			26,888
All Other		269			(591	)		(594	)
Segment gross profit		86,428			94,164			93,632
SG&A expenses		56,077			50,829			47,502
(Benefit) provision for bad debts		(38	)		(123	)		1,684
Other operating expense (income), net		1,590			(310	)		2,248
Operating income		28,799			43,768			42,198
Interest income		(560	)		(517	)		(610	)
Interest expense		4,935			3,578			3,528
Loss on sale of business		—			1,662			—
Equity in earnings of unconsolidated affiliates		(5,787	)		(4,230	)		(8,963	)
Income before income taxes	$	30,211		$	43,275		$	48,243

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

	For the Fiscal Year Ended
	June 24, 2018		June 25, 2017		June 26, 2016
Polyester	$	15,893	$	13,921	$	11,188
Nylon		2,197		2,125		1,899
International		1,648		1,119		885
All Other		256		638		820
Segment depreciation expense		19,994		17,803		14,792
Other depreciation and amortization expense		2,591		2,565		2,736
Depreciation and amortization expense	$	22,585	$	20,368	$	17,528

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

	For the Fiscal Year Ended
	June 24, 2018		June 25, 2017		June 26, 2016
Polyester	$	16,605	$	25,442	$	44,517
Nylon		1,366		1,247		2,548
International		3,099		4,734		2,755
Segment capital expenditures		21,070		31,423		49,820
Other capital expenditures		3,959		1,767		2,517
Capital expenditures	$	25,029	$	33,190	$	52,337

In addition to the capital expenditures noted above, Polyester assets were added in fiscal 2017 via a construction financing arrangement.

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 24, 2018		June 25, 2017		June 26, 2016
Polyester	$	284,261	$	270,819	$	243,093
Nylon		57,378		57,789		63,141
International		95,006		80,824		66,998
Segment total assets		436,645		409,432		373,232
Other current assets		30,945		27,375		13,337
Other PP&E		17,373		14,904		16,597
Other non-current assets		4,205		279		4,864
Investments in unconsolidated affiliates		112,639		119,513		117,412
Total assets	$	601,807	$	571,503	$	525,442

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

	For the Fiscal Year Ended
	June 24, 2018		June 25, 2017		June 26, 2016
Polyester	$	572,053	$	529,426	$	505,721
Nylon		102,639		112,704		131,715
Total	$	674,692	$	642,130	$	637,436

Geographic Data

Geographic information is set forth below, beginning with net sales. Brazil and China are reported separately from other foreign countries when corresponding net sales for a fiscal year exceed 10% of consolidated net sales.

	For the Fiscal Year Ended
	June 24, 2018		June 25, 2017		June 26, 2016
United States	$	420,920	$	424,490	$	472,287
Brazil		110,587		109,079		83,087
China		90,998	nm		nm
Remaining Foreign Countries		56,407		113,701		88,263
Total	$	678,912	$	647,270	$	643,637

Export sales from UNIFI’s U.S. operations to external customers	$	94,205	$	104,229	$	113,725

nm – Respective amount does not meet UNIFI’s 10% threshold for disclosure.

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 24, 2018		June 25, 2017		June 26, 2016
United States	$	305,229	$	304,696	$	292,854
Brazil		12,679		12,616		9,714
Remaining Foreign Countries		6,317		8,360		8,595
Total	$	324,225	$	325,672	$	311,163

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 24, 2018		June 25, 2017		June 26, 2016
United States	$	455,963	$	445,947	$	427,679
Brazil		59,657		58,598		53,993
Remaining Foreign Countries		86,187		66,958		43,770
Total	$	601,807	$	571,503	$	525,442