UNIFI currently maintains investments in three entities classified as unconsolidated affiliates: PAL; U.N.F. Industries, Ltd. (“UNF”); and UNF America LLC (“UNFA”). As of March 31, 2019, UNIFI’s investment in PAL was $112,431 and UNIFI’s combined investments in UNF and UNFA were $2,316, each of which is reflected within investments in unconsolidated affiliates in the accompanying condensed consolidated balance sheets.

PAL is a limited liability company treated as a partnership for income tax reporting purposes. UNIFI accounts for its investment in PAL using the equity method of accounting. PAL is subject to price risk related to anticipated fixed-price yarn sales. To protect the gross margin of these sales, PAL may enter into cotton futures to manage changes in raw material prices. The derivative instruments used are listed and traded on an exchange and are valued using quoted prices classified within Level 1 of the fair value hierarchy. As of March 31, 2019, PAL had no futures contracts designated as cash flow hedges.

The reconciliation between UNIFI’s share of the underlying equity of PAL and its investment is as follows:

Raw material and production services for UNF are provided by Nilit Ltd. under separate supply and services agreements. UNF’s fiscal year end is December 31, and it is a registered Israeli private company located in Migdal Ha-Emek, Israel.

Raw material and production services for UNFA are provided by Nilit America Inc. under separate supply and services agreements. UNFA’s fiscal year end is December 31, and it is a limited liability company treated as a partnership for income tax reporting purposes located in Ridgeway, Virginia.

In conjunction with the formation of UNFA, UNIFI entered into a supply agreement with UNF and UNFA whereby UNIFI agreed to purchase all of its first quality nylon POY requirements for texturing (subject to certain exceptions) from either UNF or UNFA. The agreement has no stated minimum purchase quantities and pricing is negotiated every six months, based on market rates. As of March 31, 2019, UNIFI’s open purchase orders related to this agreement were $4,269.

UNIFI’s raw material purchases under this supply agreement consist of the following:

As of March 31, 2019 and June 24, 2018, UNIFI had combined accounts payable due to UNF and UNFA of $1,831 and $2,301, respectively.

UNIFI has determined that UNF and UNFA are variable interest entities and that UNIFI is the primary beneficiary of these entities, based on the terms of the supply agreement discussed above. As a result, these entities should be consolidated with UNIFI’s financial results. As UNIFI purchases substantially all of the output from the two entities, the two entities’ balance sheets constitute 3% or less of UNIFI’s current assets, total assets and total liabilities, and such balances are not expected to comprise a larger portion in the future, UNIFI has not included the accounts of UNF and UNFA in its consolidated financial statements. The financial results of UNF and UNFA are included in UNIFI’s consolidated financial statements with a one-month lag, using the equity method of accounting and with intercompany profits eliminated in accordance with UNIFI’s accounting policy. Other than the supply agreement discussed above, UNIFI does not provide any other commitments or guarantees related to either UNF or UNFA.

Condensed balance sheet and income statement information for UNIFI’s unconsolidated affiliates (including reciprocal balances) is presented in the tables below. PAL is defined as significant and its information is separately disclosed. PAL does not meet the criteria for segment reporting.

	As of March 31, 2019						As of June 24, 2018
	PAL		Other		Total		PAL		Other		Total
Current assets	$	298,563	$	6,860	$	305,423	$	289,683	$	7,598	$	297,281
Noncurrent assets		158,033		732		158,765		162,242		875		163,117
Current liabilities		69,389		2,961		72,350		71,026		3,722		74,748
Noncurrent liabilities		3,321		—		3,321		3,389		—		3,389
Shareholders’ equity and capital accounts		383,886		4,631		388,517		377,510		4,751		382,261

UNIFI’s portion of undistributed earnings		43,452		1,040		44,492		41,429		887		42,316

	For the Three Months Ended March 31, 2019						For the Three Months Ended March 25, 2018
	PAL		Other		Total		PAL		Other		Total
Net sales	$	225,160	$	6,217	$	231,377	$	199,473	$	5,764	$	205,237
Gross profit		8,638		1,149		9,787		6,078		1,001		7,079
Income from operations		3,868		733		4,601		80		601		681
Net income		4,142		740		4,882		1,409		611		2,020
Depreciation and amortization		9,285		48		9,333		9,081		48		9,129

Cash received by PAL under cotton rebate program		3,053		—		3,053		3,220		—		3,220
Earnings recognized by PAL for cotton rebate program		3,195		—		3,195		3,386		—		3,386

Distributions received		—		750		750		1,798		750		2,548

	For the Nine Months Ended March 31, 2019						For the Nine Months Ended March 25, 2018
	PAL		Other		Total		PAL		Other		Total
Net sales	$	626,812	$	19,256	$	646,068	$	578,841	$	18,213	$	597,054
Gross profit		18,841		3,587		22,428		22,167		3,583		25,750
Income from operations		5,663		2,284		7,947		8,114		2,295		10,409
Net income		6,334		2,381		8,715		8,357		2,327		10,684
Depreciation and amortization		30,576		143		30,719		29,566		142		29,708

Cash received by PAL under cotton rebate program		8,773		—		8,773		10,162		—		10,162
Earnings recognized by PAL for cotton rebate program		9,444		—		9,444		9,832		—		9,832

Distributions received		130		1,250		1,380		8,976		2,250		11,226