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Leases
9 Months Ended
Mar. 29, 2020
Leases [Abstract]  
Leases

4.  Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).  UNIFI adopted the new lease guidance utilizing the modified retrospective transition method, applied at the date of adoption, recording existing leases as of the effective date, July 1, 2019. Under this method, no adjustment to comparative prior periods is required and, accordingly, financial statement information and disclosures required under Topic 842 will not be provided for dates and periods prior to July 1, 2019.  UNIFI made no adjustment to the July 1, 2019 opening retained earnings balance for fiscal 2020.

 

UNIFI adopted the following practical expedients and elected the following accounting policies related to this standard update:

 

carry forward of historical lease classifications and accounting treatment for existing land easements;

 

not to reassess whether any expired or existing contracts are or contain leases;

 

not to reassess initial direct costs for any existing leases;

 

the use of hindsight;

 

short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less and to recognize lease payments on a straight-line basis over the lease term and variable payments in the period the obligation is incurred; and

 

the option not to separate lease and non-lease components for the transportation equipment asset class.

UNIFI routinely leases sales and administrative office space, warehousing and distribution centers, manufacturing space, transportation equipment, manufacturing equipment, and other information technology and office equipment from third parties.  The lease terms range from 1 to 15 years with various options for renewal. There are no residual value guarantees, restrictions, covenants or sub-leases related to these leases.  Variable lease payments are determined as the amounts included in the lease payment that are based on the change in index or usage. The adoption of this standard resulted in the recognition of operating lease right-of-use assets of $9,802 and corresponding lease liabilities of $10,105 with the difference adjusting prepayments and accruals on the consolidated balance sheet as of July 1, 2019. UNIFI’s accounting for finance leases remained substantially unchanged. The standard did not materially impact operating results or liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included below.

The following table sets forth the balance sheet location and values of the Company’s lease assets and lease liabilities at March 29, 2020:

Classification

 

Balance Sheet Location

 

March 29, 2020

 

Lease Assets

 

 

 

 

 

 

Operating lease assets

 

Operating lease assets

 

$

6,084

 

Finance lease assets

 

Property, plant & equipment, net

 

 

23,257

 

Total lease assets

 

 

 

$

29,341

 

 

 

 

 

 

 

 

Lease Liabilities

 

 

 

 

 

 

Current operating lease liabilities

 

Current operating lease liabilities

 

$

1,709

 

Current finance lease liabilities

 

Current portion of long-term debt

 

 

4,112

 

Total current lease liabilities

 

 

 

$

5,821

 

 

 

 

 

 

 

 

Non-current operating lease liabilities

 

Non-current operating lease liabilities

 

$

4,481

 

Non-current finance lease liabilities

 

Long-term debt

 

 

8,699

 

Total non-current lease liabilities

 

 

 

$

13,180

 

 

 

 

 

 

 

 

Total lease liabilities

 

 

 

$

19,001

 

The following table sets forth the components of UNIFI’s total lease cost for the three months and nine months ended March 29, 2020:

 

 

For the Three

 

 

For the Nine

 

 

 

Months Ended

 

 

Months Ended

 

Lease Cost

 

March 29, 2020

 

 

March 29, 2020

 

Operating lease cost

 

$

507

 

 

$

2,104

 

Variable lease cost

 

 

158

 

 

 

355

 

Finance lease cost:

 

 

 

 

 

 

 

 

   Amortization of lease assets

 

 

669

 

 

 

1,874

 

   Interest on lease liabilities

 

 

126

 

 

 

327

 

Short-term lease cost

 

 

316

 

 

 

863

 

Total lease cost

 

$

1,776

 

 

$

5,523

 

The following table presents supplemental information related to leases at March 29, 2020:

 

 

For the Nine

 

 

 

Months Ended

 

Other Information

 

March 29, 2020

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

   Operating cash flows used by operating leases

 

$

2,104

 

   Financing cash flows used by finance leases

 

$

4,606

 

Non-cash activities:

 

 

 

 

Leased assets obtained in exchange for new operating lease liabilities

 

$

175

 

Leased assets obtained in exchange for new finance lease liabilities

 

$

6,301

 

UNIFI calculates its operating lease liabilities and finance lease liabilities entered into after the adoption of the new lease standard based upon UNIFI’s incremental borrowing rate (the “IBR”). When determining the IBR, we consider our centralized treasury function and our current credit profile. We then make adjustments to this rate for securitization, the length of the lease term, and leases denominated in foreign currencies. Generally, the IBR for each jurisdiction is the specific risk-free rate for the respective jurisdiction incremented for UNIFI’s corporate credit risk.

The following table sets forth UNIFI's weighted average remaining lease term in years and discount rate percentage used in the calculation of its outstanding lease liabilities as of March 29, 2020:

Weighted Average Remaining Lease Term and Discount Rate

 

March 29, 2020

 

Weighted average remaining lease term (years):

 

 

 

 

  Operating leases

 

 

4.2

 

  Finance leases

 

 

4.2

 

Weighted average discount rate (percentage):

 

 

 

 

  Operating leases

 

 

3.8

%

  Finance leases

 

 

3.6

%

Lease Maturity Analysis

Future minimum finance lease payments and future minimum payments under non-cancelable operating leases with initial lease terms in excess of one year under Topic 842 as of March 29, 2020 by fiscal year were:

Maturity of Lease Liabilities

 

Finance Leases

 

 

Operating Leases

 

Fiscal 2020

 

$

1,560

 

 

$

495

 

Fiscal 2021

 

 

3,989

 

 

 

1,870

 

Fiscal 2022

 

 

3,684

 

 

 

1,425

 

Fiscal 2023

 

 

1,260

 

 

 

1,231

 

Fiscal 2024

 

 

1,307

 

 

 

1,086

 

Fiscal years thereafter

 

 

2,625

 

 

 

628

 

Total minimum lease payments

 

$

14,425

 

 

$

6,735

 

Less estimated executory costs

 

 

(588

)

 

 

 

Less imputed interest

 

 

(1,026

)

 

 

(545

)

Present value of net minimum lease payments

 

 

12,811

 

 

 

6,190

 

Less current portion of lease obligations

 

 

(4,112

)

 

 

(1,709

)

Long-term portion of lease obligations

 

$

8,699

 

 

$

4,481

 

Prior Year Disclosure

As reported in the 2019 Form 10-K under the previous accounting guidance, future minimum capital lease payments and future minimum lease payments under non-cancelable operating leases with initial lease terms in excess of one year as of June 30, 2019 by fiscal year were:

 

 

Capital Leases

 

 

Operating Leases

 

Fiscal 2020

 

$

5,917

 

 

$

3,164

 

Fiscal 2021

 

 

2,870

 

 

 

2,731

 

Fiscal 2022

 

 

2,565

 

 

 

1,492

 

Fiscal 2023

 

 

189

 

 

 

878

 

Fiscal 2024

 

 

189

 

 

 

755

 

Fiscal years thereafter

 

 

675

 

 

 

309

 

Total minimum lease payments

 

$

12,405

 

 

$

9,329

 

Less estimated executory costs

 

 

(644

)

 

 

 

 

Less interest

 

 

(643

)

 

 

 

 

Present value of net minimum capital lease payments

 

 

11,118

 

 

 

 

 

Less current portion of capital lease obligations

 

 

(5,519

)

 

 

 

 

Long-term portion of capital lease obligations

 

$

5,599

 

 

 

 

 

 

Rental expenses incurred under the operating leases and included in operating income consist of the following:

 

 

For the Fiscal Year Ended

 

 

 

June 30, 2019

 

 

June 24, 2018

 

 

June 25, 2017

 

Rental expenses

 

$

4,915

 

 

$

4,835

 

 

$

4,357