Leases

12 Months Ended

Jul. 03, 2022

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. UNIFI’s accounting for finance leases remained substantially unchanged. 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:

Classification	Balance Sheet Location	July 3, 2022		June 27, 2021
Lease Assets
Operating lease assets	Operating lease assets	$	8,829	$	8,772
Finance lease assets	Property, plant & equipment, net		7,017		16,037
Total lease assets		$	15,846	$	24,809
Lease Liabilities
Current operating lease liabilities	Current operating lease liabilities	$	2,190	$	1,856
Current finance lease liabilities	Current portion of long-term debt		1,726		3,545
Total current lease liabilities		$	3,916	$	5,401
Non-current operating lease liabilities	Non-current operating lease liabilities	$	6,736	$	7,032
Non-current finance lease liabilities	Long-term debt		5,535		4,930
Total non-current lease liabilities		$	12,271	$	11,962
Total lease liabilities		$	16,187	$	17,363

The following table sets forth the components of UNIFI’s total lease cost for fiscal 2022 and 2021:

	For The Fiscal Year		For The Fiscal Year
Lease Cost	July 3, 2022		June 27, 2021
Operating lease cost	$	2,766	$	2,465
Variable lease cost		502		503
Finance lease cost:
Amortization of lease assets		1,981		1,998
Interest on lease liabilities		258		365
Short-term lease cost		967		1,007
Total lease cost	$	6,474	$	6,338

As of July 3, 2022 and June 27, 2021, Unifi had not received any COVID-19 rent concessions.

The following table presents supplemental information related to leases:

	For The Fiscal Year		For The Fiscal Year
Other Information	July 3, 2022		June 27, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases	$	2,766	$	2,465
Financing cash flows used by finance leases	$	3,707	$	3,646
Non-cash activities:
Leased assets obtained in exchange for new operating lease liabilities	$	1,662	$	2,606
Leased assets obtained in exchange for new finance lease liabilities	$	2,493	$	740

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. UNIFI makes adjustments to this rate for securitization, the length of the lease term (tenure), and leases denominated in foreign currencies. Generally, the IBR for each jurisdiction approximates the specific risk-free rate for the respective jurisdiction incremented for UNIFI’s corporate credit risk and adjusted for tenure.

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:

Weighted Average Remaining Lease Term and Discount Rate	July 3, 2022			June 27, 2021
Weighted average remaining lease term (years):
Operating leases		4.1			5.9
Finance leases		4.2			3.8
Weighted average discount rate (percentage):
Operating leases		5.0	%		5.1	%
Finance leases		3.6	%		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 July 3, 2022 by fiscal year were:

Maturity of Lease Liabilities	Finance Leases			Operating Leases
Fiscal 2023	$	2,032		$	2,595
Fiscal 2024		2,032			2,004
Fiscal 2025		1,880			1,498
Fiscal 2026		1,385			1,201
Fiscal 2027		821			971
Fiscal years thereafter		100			1,788
Total minimum lease payments	$	8,250		$	10,057
Less estimated executory costs		(413	)		—
Less imputed interest		(576	)		(1,131	)
Present value of net minimum lease payments		7,261			8,926
Less current portion of lease obligations		(1,726	)		(2,190	)
Long-term portion of lease obligations	$	5,535		$	6,736