Business Segment Information

3 Months Ended

Sep. 27, 2020

Segment Reporting [Abstract]

Business Segment Information

21.  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 principal executive officer, who is the chief operating decision maker (the “CODM”), in order to assess performance and allocate resources. Characteristics of UNIFI which were relied upon in making the determination of reportable segments include the nature of the products sold, the internal organizational 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 four reportable segments (the Polyester Segment, the Asia Segment, the Brazil Segment and the Nylon Segment) based on similarities between the operating segments’ economic characteristics, nature of products sold, type of customer, methods of distribution and regulatory environment.

• The operations within the Polyester Segment exhibit similar long-term economic characteristics and primarily sell into an economic trading zone covered by the United States-Mexico-Canada Agreement (“USMCA”), North American Free Trade Agreement (“NAFTA”) and Dominican Republic—Central America Free Trade Agreement (“CAFTA-DR”) (collectively, the regions comprising these economic trading zones are referred to as “NACA”) to similar customers utilizing similar methods of distribution. These operations derive revenues primarily from manufacturing 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, automotive, industrial and other end-use markets. The Polyester Segment consists of sales and manufacturing operations in the U.S. and El Salvador.

• The operations within the Asia Segment exhibit similar long-term economic characteristics and sell to similar customers utilizing similar methods of distribution primarily in Asia and Europe, which are outside of the NACA region. The Asia Segment primarily sources polyester-based products from third-party suppliers and sells to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, automotive, industrial and other end-use markets principally in Asia.  The Asia Segment includes a sales office in China.

• The Brazil Segment primarily manufactures and sells polyester-based products to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial and other end-use markets principally in South America.  The Brazil Segment includes a manufacturing location and sales offices in Brazil.

• The operations within the Nylon Segment exhibit similar long-term economic characteristics and primarily sell into the NACA region to similar customers utilizing similar methods of distribution. These operations derive revenues primarily from manufacturing nylon-based products with sales to knitters and weavers that produce fabric primarily for the apparel, hosiery and medical markets.  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.  The Nylon Segment consists of sales and manufacturing operations in the U.S. and Colombia.

In addition to UNIFI’s reportable segments, an All Other category is included in the tables below. All Other consists primarily of for-hire transportation services. 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, 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 segment disclosures, 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 Three Months Ended September 27, 2020
	Polyester		Asia		Brazil		Nylon		All Other		Total
Net sales	$	69,076	$	37,723	$	22,606	$	11,029	$	1,071	$	141,505
Cost of sales		64,444		33,145		17,993		10,364		998		126,944
Gross profit		4,632		4,578		4,613		665		73		14,561
Segment depreciation expense		4,403		—		430		442		164		5,439
Segment Profit	$	9,035	$	4,578	$	5,043	$	1,107	$	237	$	20,000

	For the Three Months Ended September 29, 2019
	Polyester		Asia		Brazil		Nylon		All Other		Total
Net sales	$	88,695	$	45,957	$	24,172	$	20,202	$	923	$	179,949
Cost of sales		80,900		41,675		20,013		19,024		894		162,506
Gross profit		7,795		4,282		4,159		1,178		29		17,443
Segment depreciation expense		4,041		—		375		491		39		4,946
Segment Profit	$	11,836	$	4,282	$	4,534	$	1,669	$	68	$	22,389

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

	For the Three Months Ended
	September 27, 2020			September 29, 2019
Polyester	$	4,632		$	7,795
Asia		4,578			4,282
Brazil		4,613			4,159
Nylon		665			1,178
All Other		73			29
Segment gross profit		14,561			17,443
Selling, general and administrative expenses		11,364			10,980
(Benefit) provision for bad debts		(887	)		9
Other operating expense, net		1,178			108
Operating income		2,906			6,346
Interest income		(125	)		(210	)
Interest expense		871			1,257
Equity in (earnings) loss of unconsolidated affiliates		(93	)		866
Income before income taxes	$	2,253		$	4,433

The reconciliations of segment total assets to consolidated total assets are as follows:

	September 27, 2020		June 28, 2020
Polyester	$	263,493	$	263,496
Asia		48,139		41,452
Brazil		52,667		49,967
Nylon		41,222		42,020
Segment total assets		405,521		396,935
Other current assets		58,549		48,600
Other PP&E		23,093		23,676
Other operating lease assets		1,406		1,503
Other non-current assets		3,668		3,448
Total assets	$	492,237	$	474,162