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 December 29, 2019, UNIFI’s investment in PAL was $100,085 and UNIFI’s combined investments in UNF and UNFA were $2,176, 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 December 29, 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 supply agreement has no stated minimum purchase quantities and pricing is negotiated every six months, based on market rates. As of December 29, 2019, UNIFI’s open purchase orders related to this supply agreement were $2,240.

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

As of December 29, 2019 and June 30, 2019, UNIFI had combined accounts payable due to UNF and UNFA of $1,586 and $1,728, 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 December 29, 2019						As of June 30, 2019
	PAL		Other		Total		PAL		Other		Total
Current assets	$	262,412	$	7,118	$	269,530	$	299,610	$	7,218	$	306,828
Non-current assets		157,876		606		158,482		158,304		696		159,000
Current liabilities		69,152		3,373		72,525		70,875		4,069		74,944
Non-current liabilities		3,562		—		3,562		3,252		—		3,252
Shareholders’ equity and capital accounts		347,574		4,351		351,925		383,787		3,845		387,632

UNIFI’s portion of undistributed earnings		30,894		1,227		32,121		43,343		821		44,164

	For the Three Months Ended December 29, 2019								For the Three Months Ended December 30, 2018
	PAL			Other		Total			PAL		Other		Total
Net sales	$	161,648		$	5,475	$	167,123		$	191,150	$	7,274	$	198,424
Gross (loss) profit		(186	)		812		626			5,695		1,484		7,179
(Loss) income from operations		(5,026	)		377		(4,649	)		1,163		1,039		2,202
Net (loss) income		(2,463	)		383		(2,080	)		2,241		1,115		3,356
Depreciation and amortization		11,393			43		11,436			10,817		47		10,864

Cash received by PAL under cotton rebate program		3,463			—		3,463			3,402		—		3,402
Earnings recognized by PAL for cotton rebate program		2,766			—		2,766			3,035		—		3,035

Distributions received		—			—		—			126		—		126

	For the Six Months Ended December 29, 2019								For the Six Months Ended December 30, 2018
	PAL			Other		Total			PAL		Other		Total
Net sales	$	360,815		$	10,136	$	370,951		$	401,652	$	13,039	$	414,691
Gross profit		885			1,353		2,238			10,203		2,438		12,641
(Loss) income from operations		(8,301	)		489		(7,812	)		1,795		1,551		3,346
Net (loss) income		(5,918	)		507		(5,411	)		2,192		1,641		3,833
Depreciation and amortization		22,024			90		22,114			21,291		95		21,386

Cash received by PAL under cotton rebate program		7,156			—		7,156			5,720		—		5,720
Earnings recognized by PAL for cotton rebate program		6,354			—		6,354			6,249		—		6,249

Distributions received		10,437			—		10,437			130		500		630