Business Segment Information

6 Months Ended

Dec. 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 December 27, 2020
	Polyester		Asia		Brazil		Nylon		All Other		Total
Net sales	$	76,696	$	44,692	$	24,253	$	16,008	$	1,127	$	162,776
Cost of sales		65,801		38,164		16,276		15,613		988		136,842
Gross profit		10,895		6,528		7,977		395		139		25,934
Segment depreciation expense		4,470		—		321		438		164		5,393
Segment Profit	$	15,365	$	6,528	$	8,298	$	833	$	303	$	31,327

	For the Three Months Ended December 29, 2019
	Polyester		Asia		Brazil		Nylon		All Other		Total
Net sales	$	82,750	$	47,918	$	20,862	$	17,084	$	897	$	169,511
Cost of sales		76,090		42,401		17,432		17,038		885		153,846
Gross profit		6,660		5,517		3,430		46		12		15,665
Segment depreciation expense		4,183		—		357		503		124		5,167
Segment Profit	$	10,843	$	5,517	$	3,787	$	549	$	136	$	20,832

	For the Six Months Ended December 27, 2020
	Polyester		Asia		Brazil		Nylon		All Other		Total
Net sales	$	145,772	$	82,415	$	46,859	$	27,037	$	2,198	$	304,281
Cost of sales		130,245		71,309		34,269		25,977		1,986		263,786
Gross profit		15,527		11,106		12,590		1,060		212		40,495
Segment depreciation expense		8,873		—		751		880		328		10,832
Segment Profit	$	24,400	$	11,106	$	13,341	$	1,940	$	540	$	51,327

	For the Six Months Ended December 29, 2019
	Polyester		Asia		Brazil		Nylon		All Other		Total
Net sales	$	171,445	$	93,875	$	45,034	$	37,286	$	1,820	$	349,460
Cost of sales		156,990		84,076		37,445		36,062		1,779		316,352
Gross profit		14,455		9,799		7,589		1,224		41		33,108
Segment depreciation expense		8,224		—		732		994		163		10,113
Segment Profit	$	22,679	$	9,799	$	8,321	$	2,218	$	204	$	43,221

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

	For the Three Months Ended						For the Six Months Ended
	December 27, 2020			December 29, 2019			December 27, 2020			December 29, 2019
Polyester	$	10,895		$	6,660		$	15,527		$	14,455
Asia		6,528			5,517			11,106			9,799
Brazil		7,977			3,430			12,590			7,589
Nylon		395			46			1,060			1,224
All Other		139			12			212			41
Segment gross profit		25,934			15,665			40,495			33,108
Selling, general and administrative expenses		12,625			12,508			23,989			23,488
Benefit for bad debts		(259	)		(258	)		(1,146	)		(249	)
Other operating expense, net		476			854			1,654			962
Operating income		13,092			2,561			15,998			8,907
Interest income		(187	)		(212	)		(312	)		(422	)
Interest expense		833			1,101			1,704			2,358
Equity in (earnings) loss of unconsolidated affiliates		(130	)		756			(223	)		1,622
Income before income taxes	$	12,576		$	916		$	14,829		$	5,349

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

	December 27, 2020		June 28, 2020
Polyester	$	261,769	$	263,496
Asia		54,661		41,452
Brazil		60,006		49,967
Nylon		39,682		42,020
Segment total assets		416,118		396,935
Other current assets		68,900		48,600
Other PP&E		22,687		23,676
Other operating lease assets		1,308		1,503
Other non-current assets		3,985		3,448
Total assets	$	512,998	$	474,162