In fiscal 2019, UNIFI adopted the new revenue recognition guidance. Details surrounding the impact of adoption and the additional disclosures follow.

	For the Fiscal Year Ended
	June 30, 2019		June 24, 2018		June 25, 2017
Third-party textile manufacturer	$	700,077	$	670,239	$	639,685
Service		8,727		8,673		7,585
Net sales	$	708,804	$	678,912	$	647,270

Third-party textile manufacturer revenue is primarily generated through sales to direct customers. Such sales represent satisfaction of UNIFI’s performance obligations required by the associated revenue contracts. Each of UNIFI’s reportable segments derives revenue from sales to third-party textile manufacturers.

Service revenue is primarily generated, as services are rendered, through fulfillment of toll manufacturing of textile products or transportation services governed by written agreements. Such toll manufacturing and transportation services represent satisfaction of UNIFI’s performance obligations required by the associated revenue contracts. The Polyester Segment derives service revenue for toll manufacturing, and the All Other category derives service revenue for transportation services.

Volume-based incentives involve rebates or refunds of cash that are redeemable if the customer satisfies certain order volume thresholds during a defined time period. Under these incentive programs, UNIFI estimates the anticipated rebate to be paid and allocates a portion of the estimated cost of the rebate to each underlying sales transaction with the customer.

UNIFI generally offers customers claims support or remuneration for defective products. UNIFI estimates the amount of its product sales that may be claimed as defective by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

For all variable consideration, where appropriate, UNIFI estimates the amount using the expected value, which takes into consideration historical experience, current contractual requirements, specific known market events and forecasted customer buying and payment patterns. Overall, these reserves reflect UNIFI’s best estimates of the amount of consideration to which the customer is entitled based on the terms of the contracts.

The following table summarizes the impact of the adoption of the new revenue recognition guidance on UNIFI's applicable financial statement line items for fiscal 2019. Any impact to other financial statement line items is insignificant and excluded from the below.

Financial Statement Line Item	Treatment under previous Revenue Recognition Guidance		Adjustments in connection with New Revenue Recognition Guidance			As reported under New Revenue Recognition Guidance
Revenue	$	709,538	$	(734	)	$	708,804
Cost of sales	$	643,212	$	(716	)	$	642,496
Gross profit (loss)	$	66,326	$	(18	)	$	66,308
Inventory	$	141,012	$	(7,231	)	$	133,781
Contract assets	$	—	$	7,794		$	7,794

Contract assets represents the estimated revenue attributable to UNIFI in connection with completed performance obligations under contracts with customers for which revenue is recognized over time. The contract assets are classified to receivables when the right to payment becomes unconditional. The $7,794 change in the contract assets balance from June 24, 2018 to June 30, 2019 represents the routine recognition of satisfied performance obligations, in connection with adoption of and treatment under the new revenue recognition guidance.