Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~January 25, 2018,~~May 2, 2019, there were ~~18,297,602~~18,423,538 shares of the registrant’s common stock, par value $0.10 per share, outstanding.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that relate to our plans, objectives, estimates and goals. Statements expressing expectations regarding our future, or projections or estimates relating to products, sales, revenues, expenditures, costs, strategies, initiatives or earnings, are typical of such statements and are made under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s beliefs, assumptions and expectations about our future ~~economic~~ performance, considering the information currently available to management. The words “believe,” “may,” “could,” “will,” “should,” “would,” “anticipate,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek,” “strive” and words of similar import, or the negative of such words, identify or signal the presence of forward-looking statements. These statements are not statements of historical ~~fact, and~~fact; they involve risks and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition that we express or imply in any forward-looking statement. Factors that could contribute to such differences include, but are not limited to:

All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, except as may be required by federal securities law.

In light of all the above considerations, we reiterate that forward-looking statements are not guarantees of future performance, and we caution you not to rely on them as such.

FOR THE THREE MONTHS AND ~~SIX~~NINE MONTHS ENDED ~~DECEMBER 24, 2017~~MARCH 31, 2019

	December 24, 2017			June 25, 2017			March 31, 2019			June 24, 2018
ASSETS
Cash and cash equivalents	$	48,615		$	35,425		$	27,898		$	44,890
Receivables, net		80,847			81,121			91,701			86,273
Inventories		116,239			111,405			130,981			126,311
Income taxes receivable		10,612			9,218			13,039			10,291
Other current assets		6,854			6,468			16,365			6,529
Total current assets		263,167			243,637			279,984			274,294
Property, plant and equipment, net		203,699			203,388			207,303			205,516
Deferred income taxes		4,161			2,194			3,159			3,288
Investments in unconsolidated affiliates		113,623			119,513			114,747			112,639
Other non-current assets		2,815			2,771			3,598			6,070
Total assets	$	587,465		$	571,503		$	608,791		$	601,807

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	35,420		$	41,499		$	47,726		$	48,970
Accrued expenses		12,990			16,144			13,076			17,720
Income taxes payable		1,833			1,351			7,899			1,317
Current portion of long-term debt		17,112			17,060			16,054			16,996
Total current liabilities		67,355			76,054			84,755			85,003
Long-term debt		115,588			111,382			119,804			113,553
Other long-term liabilities		11,093			11,804			5,685			5,337
Income tax payable								—			470
Deferred income taxes		7,140			11,457			7,092			7,663
Total liabilities		201,176			210,697			217,336			212,026

Commitments and contingencies

Common stock, $0.10 par value (500,000,000 shares authorized; 18,290,935 and 18,229,777 shares issued and outstanding as of December 24, 2017 and June 25, 2017, respectively)		1,829			1,823
Common stock, $0.10 par value (500,000,000 shares authorized; 18,410,594 and 18,352,824 shares issued and outstanding as of March 31, 2019 and June 24, 2018, respectively)								1,841			1,835
Capital in excess of par value		55,215			51,923			59,088			56,726
Retained earnings		360,702			339,940			373,666			371,753
Accumulated other comprehensive loss		(31,457	)		(32,880	)		(43,140	)		(40,533	)
Total Unifi, Inc. shareholders’ equity		386,289			360,806
Non-controlling interest		—			—
Total shareholders’ equity		386,289			360,806			391,455			389,781
Total liabilities and shareholders’ equity	$	587,465		$	571,503		$	608,791		$	601,807

	For the Three Months Ended						For the Six Months Ended							For the Three Months Ended						For the Nine Months Ended
	December 24, 2017			December 25, 2016			December 24, 2017			December 25, 2016				March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Net sales	$	167,478		$	155,155		$	331,720		$	315,124			$	179,989		$	165,867		$	529,311		$	497,587
Cost of sales		144,802			133,025			285,752			269,447				166,198			149,311			481,345			435,063
Gross profit		22,676			22,130			45,968			45,677				13,791			16,556			47,966			62,524
Selling, general and administrative expenses		14,626			12,868			27,489			24,278				11,439			13,846			40,672			41,335
Benefit for bad debts		(72	)		(95	)		(131	)		(462	)
Provision (benefit) for bad debts															218			27			381			(104	)
Other operating expense, net		348			319			663			249				1,359			1,100			1,218			1,763
Operating income		7,774			9,038			17,947			21,612				775			1,583			5,695			19,530
Interest income		(181	)		(183	)		(262	)		(329	)			(149	)		(182	)		(448	)		(444	)
Interest expense		1,190			914			2,375			1,606				1,256			1,187			4,078			3,562
Loss on sale of business		—			1,662			—			1,662
Equity in (earnings) loss of unconsolidated affiliates		(211	)		367			(3,298	)		(473	)
Loss on extinguishment of debt															—			—			131			—
Equity in earnings of unconsolidated affiliates															(1,873	)		(544	)		(3,126	)		(3,842	)
Income before income taxes		6,976			6,278			19,132			19,146				1,541			1,122			5,060			20,254
(Benefit) provision for income taxes		(4,826	)		1,924			(1,630	)		5,650
Net income including non-controlling interest		11,802			4,354			20,762			13,496
Less: net loss attributable to non-controlling interest		—			(237	)		—			(498	)
Net income attributable to Unifi, Inc.	$	11,802		$	4,591		$	20,762		$	13,994
Provision (benefit) for income taxes															3,070			946			3,606			(684	)
Net (loss) income														$	(1,529	)	$	176		$	1,454		$	20,938

Net income attributable to Unifi, Inc. per common share:
Net (loss) income per common share:													Net (loss) income per common share:
Basic	$	0.65		$	0.25		$	1.14		$	0.78			$	(0.08	)	$	0.01		$	0.08		$	1.15
Diluted	$	0.63		$	0.25		$	1.12		$	0.76			$	(0.08	)	$	0.01		$	0.08		$	1.12

For the Three Months Ended

For the Six Months Ended

December 24, 2017

December 25, 2016

December 24, 2017

December 25, 2016

Net income including non-controlling interest

$
11,802

$
4,354

$
20,762

$
13,496

Other comprehensive (loss) income:

Foreign currency translation adjustments

(2,341
)

(780
)

524

(1,359
)
Foreign currency translation adjustments for an unconsolidated affiliate

(487
)

(280
)

(593
)

(523
)
Changes in interest rate swaps

1,077

19

1,492

38

Other comprehensive (loss) income, net

(1,751
)

(1,041
)

1,423

(1,844
)
Comprehensive income including non-controlling interest

10,051

3,313

22,185

11,652

Less: comprehensive loss attributable to non-controlling interest

—

(237
)

—

(498
)
Comprehensive income attributable to Unifi, Inc.

$
10,051

$
3,550

$
22,185

$
12,150

	For the Three Months Ended					For the Nine Months Ended
	March 31, 2019			March 25, 2018		March 31, 2019			March 25, 2018
Net (loss) income	$	(1,529	)	$	176	$	1,454		$	20,938
Other comprehensive (loss) income:
Foreign currency translation adjustments		55			1,047		(1,454	)		1,571
Foreign currency translation adjustments for an unconsolidated affiliate		102			439		144			(154	)
Changes in interest rate swaps, net of tax of $173, $0, $392 and $0, respectively		(572	)		1,142		(1,297	)		2,634
Other comprehensive (loss) income, net		(415	)		2,628		(2,607	)		4,051
Comprehensive (loss) income	$	(1,944	)	$	2,804	$	(1,153	)	$	24,989

	For the Six Months Ended						For the Nine Months Ended
	December 24, 2017			December 25, 2016			March 31, 2019			March 25, 2018
Cash and cash equivalents at beginning of year	$	35,425		$	16,646		$	44,890		$	35,425
Operating activities:
Net income including non-controlling interest		20,762			13,496
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Net income								1,454			20,938
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Equity in earnings of unconsolidated affiliates		(3,298	)		(473	)		(3,126	)		(3,842	)
Distributions received from unconsolidated affiliates		8,678			1,500			1,380			11,226
Depreciation and amortization expense		11,135			9,731			17,242			16,844
Non-cash compensation expense		3,569			1,862			2,758			4,878
Loss on sale of business		—			1,662
Excess tax benefit on stock-based compensation plans		—			(1,111	)
Deferred income taxes		(6,282	)		5,335			(190	)		(8,441	)
Other, net		(206	)		34			(459	)		(180	)
Changes in assets and liabilities:
Receivables, net		267			6,043			(5,877	)		(6,084	)
Inventories		(4,556	)		(6,751	)		(13,409	)		(9,424	)
Other current assets		(210	)		837			(1,338	)		(493	)
Accounts payable and accrued expenses								(4,523	)		(323	)
Income taxes		(945	)		(6,841	)		3,388			(464	)
Accounts payable and accrued expenses		(8,796	)		(8,160	)
Other, net		271			132			1,183			354
Net cash provided by operating activities		20,389			17,296
Net cash (used in) provided by operating activities								(1,517	)		24,989

Investing activities:
Capital expenditures		(11,360	)		(19,343	)		(19,199	)		(17,091	)
Other, net		15			(180	)		9			—
Net cash used in investing activities		(11,345	)		(19,523	)		(19,190	)		(17,091	)

Financing activities:
Proceeds from ABL Revolver		59,200			65,200			93,300			80,200
Payments on ABL Revolver		(46,600	)		(61,600	)		(97,400	)		(70,500	)
Proceeds from ABL Term Loan		—			14,500			20,000			—
Payments on ABL Term Loan		(5,000	)		(4,750	)		(5,000	)		(7,500	)
Payments on capital lease obligations		(3,528	)		(2,154	)		(5,308	)		(5,286	)
Proceeds from stock option exercises		219			2,481			273			219
Excess tax benefit on stock-based compensation plans		—			1,111
Payments of debt financing fees								(720	)		—
Other		(328	)		(368	)		(1,017	)		(597	)
Net cash provided by financing activities		3,963			14,420
Net cash provided by (used in) financing activities								4,128			(3,464	)

Effect of exchange rate changes on cash and cash equivalents		183			(349	)		(413	)		717
Net increase in cash and cash equivalents		13,190			11,844
Net (decrease) increase in cash and cash equivalents								(16,992	)		5,151
Cash and cash equivalents at end of period	$	48,615		$	28,490		$	27,898		$	40,576

Unifi, Inc., a New York corporation formed in 1969 (together with its subsidiaries, “UNIFI,” the “Company,” “we,” “us” or “our”), is a multi-national company that manufactures and sells innovative ~~synthetic~~recycled and ~~recycled~~synthetic products made from polyester and nylon primarily to other yarn manufacturers and knitters and weavers (UNIFI’s direct customers) that produce yarn and/or fabric for the apparel, hosiery, home furnishings, automotive, industrial and other end-use ~~markets.~~markets (UNIFI’s indirect customers). We refer to these indirect customers as “brand partners.” Polyester yarns include partially oriented yarn (“POY”), textured, solution and package dyed, twisted, beamed and draw wound yarns, and each is available in virgin or recycled varieties. Recycled solutions, made from both pre-consumer and post-consumer waste, include plastic bottle flake (“Flake”) and polyester polymer beads (“Chip”). Nylon ~~products~~yarns include virgin or recycled textured, solution dyed and spandex covered yarns.

UNIFI maintains one of the textile industry’s most comprehensive ~~yarn~~ product offerings that include a range of specialized, ~~yarns,~~ premium value-added (“PVA”) ~~yarns~~ and commodity ~~yarns,~~solutions, with principal geographic markets in the Americas and Asia.

UNIFI has direct manufacturing operations in four countries and participates in joint ventures in Israel and the United States, the most significant of which is a 34% non-controlling partnership interest in Parkdale America, LLC (“PAL”), a ~~producer of~~significant unconsolidated affiliate that produces cotton and synthetic yarns for sale to the global textile industry and apparel market.

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. As contemplated by the instructions of the Securities and Exchange Commission (the “SEC”) to Form 10-Q, the following notes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to UNIFI’s year-end audited consolidated financial statements and related notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended June ~~25, 2017~~24, 2018 (the ~~“2017~~“2018 Form 10-K”).

The financial information included in this report has been prepared by UNIFI, without audit. In the opinion of management, all adjustments, which consist of normal, recurring adjustments, considered necessary for a fair statement of the results for interim periods have been included. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the amounts reported and certain financial statement disclosures. Actual results may vary from these estimates.

All ~~currency and share~~ amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.

The fiscal quarter for Unifi, Inc. and all of its ~~subsidiary in El Salvador~~wholly owned subsidiaries ended on ~~December 24, 2017,~~March 31, 2019, the ~~second to~~ last Sunday in December. The fiscal quarter for Unifi, Inc.’s Brazilian, Chinese, Colombian and Sri Lankan subsidiaries ended on December 31, 2017. There were no significant transactions or events that occurred between Unifi, Inc.’s fiscal quarter end and such wholly owned subsidiaries’ subsequent fiscal quarter end.March. The three-month ~~and six-month~~ periods ended ~~December 24, 2017~~March 31, 2019 and ~~December~~March 25, ~~2016 each~~2018 consisted of 13 fiscal weeks. The nine-month periods ended March 31, 2019 and 26March 25, 2018 consisted of 40 and 39 fiscal weeks, respectively.

~~Certain reclassifications of prior years’ data have been made to conform to the current year presentation.~~

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. ~~2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~. Subsequent ASUs have been issued to provide clarity and defer the effective date of the new guidance. The new revenue recognition standard eliminates the transaction- and industry-specific revenue recognition guidance under current GAAP and replaces it with a principles-based approach. While UNIFI has not yet determined the effect of the new guidance on its ongoing financial reporting, UNIFI notes the following considerations: (i) UNIFI is primarily engaged in the business of manufacturing and delivering tangible products utilizing relatively straightforward contract terms without multiple performance obligations and (ii) transaction prices for UNIFI’s primary and material revenue activities are determinable and lack significant timing considerations. UNIFI is currently performing the following activities regarding implementation of the new guidance: (a) reviewing material contracts and (b) assessing accounting policy elections and disclosures under the new guidance. In

addition, implementation matters remaining include (x) evaluating the systems and processes to support revenue recognition and (y) selecting the method of adoption. The new revenue recognition guidance is effective for UNIFI’s fiscal 2019.

~~In February 2016, the FASB issued~~ ~~ASU No.~~ 2016-02, Leases (Topic 842). The new guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. While UNIFI has not yet determined the full effect of the new guidance on its ongoing financial reporting, as of June 25, 2017, UNIFI had approximately $6,400 of future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) and did not enter into any new material operating lease agreements during the six months ended December 24, 2017. The new lease guidance is effective for UNIFI’s fiscal ~~2020,~~2020.

Upon adoption, UNIFI expects to make an accounting policy election to not reflect leases with an initial term of 12 months or less in the Consolidated Balance Sheets, recognizing those respective lease payments in the Consolidated Statements of Operations on a straight-line basis over the respective lease term. UNIFI also plans to elect the package of transition practical expedients which would allow UNIFI to carry forward prior conclusions related to: (i) whether any expired or existing contracts are leases or contain leases, (ii) the lease classification for any expired or existing leases and ~~early~~(iii) initial direct costs for existing leases. UNIFI does not expect to elect the hindsight practical expedient.

UNIFI continues to assess the effect the guidance will have on its existing accounting policies and the Consolidated Financial Statements, and upon adoption, ~~is permitted.~~expects there will be approximately a 1% increase in total assets on the Consolidated Balance Sheets due to the recognition of right-of-use assets and corresponding lease liabilities.

~~In connection with~~Under the guidance in the SEC Staff Announcement on July 20, 2017 relating to the transition to ~~ASU No. 2014-09 and~~ ASU No. 2016-02, due to its status as a significant subsidiary of Unifi, Inc., PAL expects to adopt ~~(i) the new revenue recognition guidance in its fiscal 2019 and (ii)~~ the new lease guidance in its fiscal 2020. PAL is currently evaluating the impact of the new lease guidance.

In ~~August 2017,~~May 2014, the FASB issued ASU No. ~~2017-12,~~ 2014-09, ~~Derivatives~~Revenue from Contracts with Customers (Topic 606). Subsequent ASUs were issued to provide clarity and ~~Hedging (Topic 815): Targeted Improvements~~defer the effective date of the new guidance. The new revenue recognition guidance (the “New Revenue Recognition Guidance”) eliminated the transaction- and industry-specific revenue recognition guidance under previous GAAP and replaced it with a principles-based approach.

Upon adoption in fiscal 2019, UNIFI determined that the impact of the New Revenue Recognition Guidance is immaterial. Accordingly, UNIFI utilized the modified retrospective method of adoption and recorded the impact of open contracts as of June 24, 2018 as an adjustment to the opening balance of fiscal 2019 retained earnings, and prior period balances are not adjusted. Details of the fiscal 2019 adjustment follow. See Note 4, “Revenue Recognition,” for ~~Hedging Activities~~further detail regarding adoption and additional disclosures.~~. The ASU is intended~~

Under the guidance in the SEC Staff Announcement on July 20, 2017 relating to ~~improve and simplify~~ the ~~rules around hedge accounting, reduce complexity for certain hedging concepts and better align financial reporting with an entity’s risk management activities. UNIFI early adopted~~transition to ASU No. ~~2017-12~~2014-09, due to its status as a significant subsidiary of Unifi, Inc., PAL expects to adopt the New Revenue Recognition Guidance in its fiscal 2019. PAL is currently evaluating the three months ended December 24, 2017. Early adoption will allow UNIFI to (i) eliminate consideration for hedge ineffectiveness, (ii) utilize a qualitative effectiveness assessment prospectively and (iii) contemplate hedge accounting for additional risk management activities allowed by the simplified guidance. Due to a lack of complexity in UNIFI’s recent risk management activities, there are no applicable cumulative adjustments to UNIFI’s financial statements in connection with adoptionimpact of the ~~ASU.~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including the accounting and classification of the respective income tax impacts, forfeitures and statutory withholding requirements. UNIFI adopted the ASU in the three months ended September 24, 2017, on a prospective basis. The adoption resulted in a $148 decrease to the provision for income taxes for excess tax benefits and an immaterial increase in potential dilutive weighted average shares for the six months ended December 24, 2017. In connection with the adoption of the ASU, UNIFI has elected to recognize forfeitures as they occur, and there is no corresponding retrospective adjustment to retained earnings. Additionally, UNIFI is presenting the change in classification of excess tax benefits in the condensed consolidated statements of cash flows on a prospective basis.

~~In July 2015, the FASB issued ASU No. 2015-11,~~ ~~Inventory (Topic 330): Simplifying the Measurement of Inventory~~, which modifies the subsequent measurement of inventories recorded under a first-in, first-out or average cost method. Under the new standard, such inventories are required to be measured at the lower of cost and net realizable value. UNIFI adopted the ASU in the three months ended September 24, 2017, with prospective application. UNIFI’s historical principles for inventory measurement had utilized net realizable value, and, therefore, adoption of the ASU had no material impact on UNIFI’s consolidated financial statements.New Revenue Recognition Guidance.

Based on UNIFI’s review of ASUs issued since the filing of the ~~2017~~2018 Form 10-K, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on UNIFI’s consolidated financial statements.

~~Receivables, net consists~~In fiscal 2019, UNIFI adopted the New Revenue Recognition Guidance. Details surrounding the impact of adoption and the additional disclosures follow.

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, which primarily occurs at a point in time, upon either shipment or delivery to the customer. Revenue is also recognized over time for certain contracts in which the associated inventory produced has no alternative use and for which enforceable right to payment exists, or the associated services are rendered. Revenue is measured as the amount of consideration UNIFI expects to receive in exchange for completing its performance obligations (i.e., transferring goods or providing services), which includes estimates for variable consideration. Variable consideration includes volume-based incentives and product claims, which are offered within certain contracts between UNIFI and its customers. Sales taxes and value added taxes assessed by governmental entities are excluded from the measurement of consideration expected to be received. Shipping and handling costs incurred after a customer has taken possession of our goods are treated as a fulfillment cost and are not considered a separate performance obligation.

Third-party textile manufacturer revenue is primarily generated through sales to direct customers. Such sales represent satisfaction of UNIFI’s performance obligations required by the associated revenue contracts. Each of UNIFI’s reportable segments derives revenue from sales to third-party textile manufacturers.

Service revenue is primarily generated, as services are rendered, through fulfillment of toll manufacturing of textile products or transportation services governed by written agreements. Such toll manufacturing and transportation services represent satisfaction of UNIFI’s performance obligations required by the associated revenue contracts. The Polyester Segment derives service revenue for toll manufacturing, and the All Other category derives service revenue for transportation services.

Volume-based incentives involve rebates or refunds of cash that are redeemable if the customer satisfies certain order volume thresholds during a defined time period. Under these incentive programs, UNIFI estimates the anticipated rebate to be paid and allocates a portion of the ~~following:~~estimated cost of the rebate to each underlying sales transaction with the customer.

UNIFI generally offers customers claims support or remuneration for defective products. UNIFI estimates the amount of its product sales that may be claimed as defective by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

For all variable consideration, where appropriate, UNIFI estimates the amount using the expected value, which takes into consideration historical experience, current contractual requirements, specific known market events and forecasted customer buying and payment patterns. Overall, these reserves reflect UNIFI’s best estimates of the amount of consideration to which the customer is entitled based on the terms of the contracts.

The following table summarizes the impact of the adoption of the New Revenue Recognition Guidance on UNIFI's applicable financial statement line items for the nine months ended March 31, 2019. Any impact to other financial statement line items is insignificant and excluded from the below.

Contract assets represents the estimated revenue attributable to UNIFI in connection with completed performance obligations under contracts with customers for which revenue is recognized over time. The contract assets are classified to receivables when the right to payment becomes unconditional. The $9,454 change in the contract assets balance from June 24, 2018 to March 31, 2019 represents the routine recognition of satisfied performance obligations, in connection with adoption of and treatment under the New Revenue Recognition Guidance.

There have been no material changes in UNIFI’s allowance for uncollectible accounts ~~since June 25, 2017.~~

~~The changes in UNIFI’s~~or reserves for yarn quality claims ~~were as follows:~~

	December 24, 2017			June 25, 2017			March 31, 2019			June 24, 2018
Raw materials	$	38,342		$	36,748		$	49,725		$	45,448
Supplies		6,537			6,104			8,859			7,314
Work in process		6,819			7,399			9,034			8,834
Finished goods		66,872			63,121			65,912			66,314
Gross inventories		118,570			113,372			133,530			127,910
Inventory reserves		(2,331	)		(1,967	)		(2,549	)		(1,599	)
Total inventories	$	116,239		$	111,405		$	130,981		$	126,311

In connection with UNIFI’s utilization of the modified retrospective method of adopting the New Revenue Recognition Guidance, prior period balances were not adjusted to reflect the impact that the New Revenue Recognition Guidance would have had on prior periods. See Note 4, “Revenue Recognition,” for further detail regarding the impact of the New Revenue Recognition Guidance to fiscal 2019.

December 24, 2017

June 25, 2017

Land

$
2,931

$
2,931

Land improvements

15,099

15,066

Buildings and improvements

157,984

157,115

Assets under capital leases

34,568

34,568

Machinery and equipment

586,798

579,211

Computers, software and office equipment

19,850

19,360

Transportation equipment

4,780

4,798

Construction in progress

8,820

7,371

Gross property, plant and equipment

830,830

820,420

Less: accumulated depreciation

(621,107
)

(612,355
)
Less: accumulated amortization – capital leases

(6,024
)

(4,677
)
Total PP&E

$
203,699

$
203,388

	March 31, 2019		June 24, 2018
Contract assets	$	9,454	$	—
Vendor deposits		3,456		3,703
Prepaid expenses		1,847		1,802
Value-added taxes receivable		1,608		1,024
Total other current assets	$	16,365	$	6,529

7.Vendor deposits primarily relates to down payments made toward the purchase of inventory. Prepaid expenses consists of advance payments for general operating expenses. Value-added taxes receivable relates to recoverable taxes associated with the sales and purchase activities of UNIFI’s foreign operations.

	December 24, 2017		June 25, 2017		March 31, 2019		June 24, 2018
Payroll and fringe benefits	$	7,277	$	10,469	$	7,128	$	10,833
Severance						1,764		362
Other		5,713		5,675		4,184		6,525
Total accrued expenses	$	12,990	$	16,144	$	13,076	$	17,720

Other consists primarily of accruals for utilities, property taxes, employee-related claims and payments, interest, marketing expenses, freight expenses, rent, other non-income related taxes and deferred revenue.

The following table presents the total balances outstanding for UNIFI’s debt obligations, their scheduled maturity dates and the weighted average interest rates for borrowings as well as the applicable current portion of long-term debt:

		Weighted Average								Weighted Average
	Scheduled	Interest Rate as of	Principal Amounts as of						Scheduled	Interest Rate as of	Principal Amounts as of
	Maturity Date	December 24, 2017	December 24, 2017			June 25, 2017			Maturity Date	March 31, 2019	March 31, 2019			June 24, 2018
ABL Revolver	March 2020	3.3%	$	21,900		$	9,300		December 2023	3.7%	$	24,000		$	28,100
ABL Term Loan ⁽¹⁾	March 2020	3.3%		90,000			95,000		December 2023	3.3%		100,000			85,000
Capital lease obligations	(2)	3.7%		21,640			25,168		(2)	3.9%		12,879			18,107
Total debt				133,540			129,468					136,879			131,207
Current portion of capital lease obligations				(7,112	)		(7,060	)				(6,054	)		(6,996	)
Current portion of other long-term debt				(10,000	)		(10,000	)				(10,000	)		(10,000	)
Unamortized debt issuance costs				(840	)		(1,026	)				(1,021	)		(658	)
Total long-term debt			$	115,588		$	111,382				$	119,804		$	113,553

On ~~March 26, 2015,~~December 18, 2018, Unifi, Inc. and certain of its ~~subsidiary, Unifi Manufacturing, Inc.,~~subsidiaries entered into ana Third Amendment to Amended and Restated Credit Agreement and Second Amendment to Amended and Restated Guaranty and Security Agreement (the “2018 Amendment”). The 2018 Amendment amended the Amended and Restated Credit Agreement, dated as of March 26, 2015, among Unifi, Inc. and a syndicate of lenders, as previously amended (as further amended by the 2018 Amendment, the “Credit Agreement”). The Credit Agreement provides for a $200,000 senior secured credit facility (the “ABL Facility”) ~~with a syndicate of lenders. The ABL Facility consists of~~, including a $100,000 revolving credit facility (the “ABL Revolver”) and a term loan that can be reset up to a maximum amount of $100,000, once per fiscal year, if certain conditions are met (the “ABL Term Loan”). The ABL Facility has a maturity date of December 18, 2023.

The 2018 Amendment made the following changes to the Credit Agreement, among others: (i) extended the Maturity Date from March 26, ~~2020.~~2020 to December 18, 2023, and (ii) decreased the Applicable Margin pricing structure for Base Rate Loans and LIBOR Rate Loans by 25 basis points. In addition, in connection with the 2018 Amendment, the principal amount of the Term Loan was reset from $80,000 to $100,000. Net proceeds from this Term Loan reset were used to pay down the amount outstanding on the ABL Revolver.

The following table presents the scheduled maturities of UNIFI’s outstanding debt obligations for the remainder of fiscal ~~2018 and~~2019, the following four fiscal years and thereafter:

	Fiscal 2018		Fiscal 2019		Fiscal 2020		Fiscal 2021		Fiscal 2022		Thereafter		Fiscal 2019		Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Thereafter
ABL Revolver	$	—	$	—	$	21,900	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	24,000
ABL Term Loan		5,000		10,000		75,000		—		—		—		2,500		10,000		10,000		10,000		10,000		57,500
Capital lease obligations		3,533		6,996		5,519		2,624		2,417		551		1,704		5,559		2,633		2,417		90		476
Total	$	8,533	$	16,996	$	102,419	$	2,624	$	2,417	$	551	$	4,204	$	15,559	$	12,633	$	12,417	$	10,090	$	81,976

	December 24, 2017		June 25, 2017		March 31, 2019		June 24, 2018
Supplemental post-employment plan					$	2,674	$	3,045
Uncertain tax positions	$	5,293	$	5,077		1,121		131
Other		5,800		6,727		1,890		2,161
Total other long-term liabilities	$	11,093	$	11,804	$	5,685	$	5,337

Other primarily includes ~~UNIFI’s unfunded supplemental post-employment plan,~~ certain retiree and post-employment medical and disability liabilities, deferred revenue and deferred energy incentive credits.

	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Nine Months Ended
	December 24, 2017			December 25, 2016			December 24, 2017			December 25, 2016			March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
(Benefit) provision for income taxes	$	(4,826	)	$	1,924		$	(1,630	)	$	5,650
Provision (benefit) for income taxes													$	3,070		$	946		$	3,606		$	(684	)
Effective tax rate		(69.2	)%		30.6	%		(8.5	)%		29.5	%		199.2	%		84.3	%		71.3	%		(3.4	)%

On December 22, 2017, the U.S. government enacted comprehensive tax legislation H.R. 1, formerly known as the Tax Cuts and Jobs ~~Act, was enacted on December 22, 2017.~~Act. H.R. 1 includes significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, full expensing for investments in new and used qualified property, additional limitations on the deductions for executive compensation and interest expense, and the transition of the U.S. international tax system from a ~~one-time mandatory deemed repatriation~~worldwide tax to a territorial tax system. As a fiscal-year taxpayer, certain provisions of ~~foreign earning and profits (the “toll charge”), deductions, credits and business-related exclusions.~~

~~The permanent reduction to~~H.R. 1 impacted UNIFI in fiscal 2018, including the change in the U.S. federal corporate income tax rate ~~from 35%~~and the one-time transition tax (“toll charge”), while other provisions became effective for UNIFI at the beginning of fiscal 2019. The enactment of H.R. 1 resulted in recording a total provisional tax benefit of $396 for the period ending June 24, 2018. For a full description of the impact of H.R. 1 for the year ended June 24, 2018, refer to ~~21% was effective January~~Note 14, “Income Taxes,” in the 2018 Form 10-K.

In the second quarter of fiscal 2019, UNIFI recorded an additional tax benefit of $1,734 related to the enactment of H.R. 1. In the third quarter of fiscal 2019, UNIFI recorded tax expense of $880 related to the enactment of H.R. 1, ~~2018. When a U.S. federal~~which increased the tax ~~rate change occurs during a fiscal year, taxpayers are required to compute a weighted daily average~~ rate for the ~~fiscal year~~three-month period by 57.1%, for a total year-to-date benefit of ~~enactment. As a result~~$854. The total tax benefit related to the enactment of H.R. 1 was $1,322, primarily consisting of $3,997 of tax benefit related to the re-measurement of deferred tax balances, and $2,747 of tax expense related to the toll charge, net of foreign tax credits. Although UNIFI no longer considers these amounts to be provisional, the income tax effects of H.R. 1 may change following future legislation or further interpretation of H.R. 1 based on the publication of guidance from the U.S. Internal Revenue Service (the “IRS”) and state tax authorities.

The Global Intangible Low-Taxed Income (“GILTI”) provisions included in H.R. 1 require that certain income earned by foreign subsidiaries must be currently included in the gross income of the U.S. shareholder. These provisions are effective for UNIFI in fiscal 2019. The GILTI provisions are complex and subject to continuing regulatory interpretation by the IRS. UNIFI has elected to recognize GILTI as a current-period expense. Under this policy, UNIFI has not provided deferred taxes related to temporary differences that, upon their reversal, will affect the amount of income subject to GILTI in the period.

UNIFI’s provision for income taxes for the nine months ended March 31, 2019 and March 25, 2018 has been calculated ~~a U.S. federal corporate income~~by applying an estimate of the annual effective tax rate for the full fiscal year to year-to-date income. Tax effects of ~~28.25% for its fiscal 2018~~significant, unusual or infrequently occurring items are excluded from the estimated annual effective tax ~~year.~~rate calculation and recognized in the interim period in which they occur.

The effective tax ~~rates~~rate for the ~~periods presented above are~~three months ended March 31, 2019 was higher than the U.S. federal statutory rate primarily due to the effect of the GILTI provisions enacted in H.R. 1, adjustments to enactment date tax reform impacts, losses in tax jurisdictions for which no tax benefit could be recognized, and foreign withholding taxes.

The effective tax rate for the nine months ended March 31, 2019 was higher than the U.S. federal statutory rate primarily due to the effects of the GILTI provisions enacted in H.R. 1, losses in tax jurisdictions for which no tax benefit could be recognized, earnings taxed at higher rates in foreign jurisdictions, and foreign withholding taxes. These rate detriments were partially offset by adjustments to enactment date tax reform impacts.

The effective tax rate for the three months ended March 25, 2018 was higher than the U.S. federal statutory rate primarily due to an increase in the valuation allowance for the Company’s investment in PAL, the rate change impact on a U.S. net loss carryforward generated in that three-month period that will be used at a lower tax rate in the future, and additional limitations on the deductibility of compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “IRC”).

The effective tax rate for the nine months ended March 25, 2018 was lower than the U.S. federal statutory ~~tax~~ rate primarily due to the one-time tax benefit resulting from the revaluation of UNIFI’s domestic deferred tax balances for the lower U.S. statutory tax rate, the release of a valuation allowance on certain historical net operating losses (“NOLs”) and foreign income being taxed at lower rates. These benefits were partially offset by a provisional amount for the toll charge, net of foreign tax credits, and losses in tax jurisdictions for which no tax benefit can currently be recognized.

UNIFI revalued its measurable deferred tax balances based upon the new tax rate at which the temporary differences and carryforwards are expected to reverse. UNIFI recorded a tax benefit of approximately $4,500 as a result of the net change in deferred tax balances. UNIFI determined that the impact of the U.S. federal corporate income tax rate change on the U.S. deferred tax assets and liabilities is provisional because the number cannot be calculated until the underlying timing differences are known rather than estimated.

Specific to the toll charge, UNIFI has recorded a $1,700 provisional charge, net of foreign tax credits, based on the following estimates: (i) earnings and profits of foreign jurisdictions that will not be complete until the end of fiscal 2018, (ii) the aggregate cash position at June 24, 2018 and (iii) finalization of taxes paid in foreign jurisdictions. Additionally, the estimates have been made based on UNIFI’s interpretation of H.R. 1. The U.S. Treasury has indicated in Notice 2018-07 that it expects to issue further guidance to clarify certain technical aspects of H.R. 1, which could impact UNIFI’s computations and provisional amounts recorded.

Within the calculation of the annual effective tax rate, UNIFI has used assumptions and estimates that may change as a result of future guidance, interpretation, and rulemaking from the Internal Revenue Service, the SEC, the FASB and/or various other taxing authorities. For example, UNIFI anticipates that state taxing authorities will continue to determine and announce their conformity to H.R. 1 which could have an impact on UNIFI’s annual effective tax rate.

UNIFI continues to review the anticipated impacts of the global intangible low-taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”), which are not effective until fiscal 2019. UNIFI has not recorded any impact associated with either GILTI or BEAT.

UNIFI has recorded all known and estimable impacts of H.R. 1 that are effective for fiscal 2018. Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.

~~UNIFI~~ regularly assesses the outcomes of both completed and ongoing examinations to ensure that ~~UNIFI’s~~its provision for income taxes is sufficient. Certain returns that remain open to examination have utilized carryforward tax attributes generated in prior tax years, including NOLs, which could potentially be revised upon examination.

UNIFI ~~also~~ regularly assesses whether it is more-likely-than-not that some portion or all of its deferred tax assets will not be realized. UNIFI considers the scheduled reversal of taxable temporary differences, taxable income in carryback years, projected future taxable income and tax planning strategies in making this assessment. Since UNIFI operates in multiple jurisdictions, the assessment is made on a jurisdiction-by-jurisdiction basis, taking into account the effects of local tax law. Due to new facts and circumstances in the second quarter of fiscal 2018, UNIFI has determined it can utilize certain NOLs to offset future taxable income and has reduced the corresponding valuation allowance by $3,807. There was also a reduction to valuation allowances on U.S. deferred tax assets in the current period as a result of the lower U.S. statutory tax rate under H.R. 1.

	December 24, 2017			June 25, 2017			March 31, 2019			June 24, 2018
Investment in a former domestic unconsolidated affiliate	$	(3,958	)	$	(6,269	)	$	(3,942	)	$	(3,942	)
Equity-method investment in PAL		(1,217	)		(1,520	)		(1,443	)		(1,580	)
Certain losses carried forward ⁽¹⁾		(1,548	)		(5,924	)		(1,562	)		(1,562	)
State NOLs		(108	)		(108	)		(166	)		(169	)
Other foreign NOLs⁽²⁾		(2,963	)		(3,347	)		(1,695	)		(2,460	)
Foreign tax credits		(1,167	)		(789	)		(15,113	)		(5,430	)
Disallowed interest expense								(382	)		—
Total deferred tax valuation allowance	$	(10,961	)	$	(17,957	)	$	(24,303	)	$	(15,143	)

Shares

Common Stock

Capital in Excess of Par Value

Retained Earnings

Accumulated Other Comprehensive Loss

Total Shareholders’ Equity

Balance at June 25, 2017

18,230

$
1,823

$
51,923

$
339,940

$
(32,880
)

$
360,806

Options exercised

54

6

213

—

—

219

Conversion of restricted stock units

3

—

—

—

—

—

Stock-based compensation

4

—

3,079

—

—

3,079

Other comprehensive income, net of tax

—

—

—

—

1,423

1,423

Net income

—

—

—

20,762

—

20,762

Balance at December 24, 2017

18,291

$
1,829

$
55,215

$
360,702

$
(31,457
)

$
386,289

~~No dividends were paid during the six months ended December 24, 2017 or in the two most recently completed fiscal years.~~

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at December 30, 2018		18,383		$	1,838		$	59,619		$	375,195		$	(42,725	)	$	393,927
Options exercised		6			—			29			—			—			29
Conversion of restricted stock units		24			3			(3	)		—			—			—
Stock-based compensation		9			1			(314	)		—			—			(313	)
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(11	)		(1	)		(243	)		—			—			(244	)
Other comprehensive loss, net of tax		—			—			—			—			(415	)		(415	)
Net loss		—			—			—			(1,529	)		—			(1,529	)
Balance at March 31, 2019		18,411		$	1,841		$	59,088		$	373,666		$	(43,140	)	$	391,455

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at June 24, 2018		18,353		$	1,835		$	56,726		$	371,753	$	(40,533	)	$	389,781
Options exercised		22			2			271			—		—			273
Conversion of restricted stock units		41			4			(4	)		—		—			—
Stock-based compensation		10			1			2,471			—		—			2,472
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(15	)		(1	)		(376	)		—		—			(377	)
Other comprehensive loss, net of tax		—			—			—			—		(2,607	)		(2,607	)
Adoption of the New Revenue Recognition Guidance		—			—			—			459		—			459
Net income		—			—			—			1,454		—			1,454
Balance at March 31, 2019		18,411		$	1,841		$	59,088		$	373,666	$	(43,140	)	$	391,455

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at December 24, 2017		18,291		$	1,829		$	55,215		$	360,702	$	(31,457	)	$	386,289
Options exercised		17			1			(1	)		—		—			—
Conversion of restricted stock units		26			3			(3	)		—		—			—
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(6	)		(1	)		(196	)		—		—			(197	)
Stock-based compensation		—			1			1,184			—		—			1,185
Other comprehensive income, net of tax		—			—			—			—		2,628			2,628
Net income		—			—			—			176		—			176
Balance at March 25, 2018		18,328		$	1,833		$	56,199		$	360,878	$	(28,829	)	$	390,081

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at June 25, 2017		18,230		$	1,823		$	51,923		$	339,940	$	(32,880	)	$	360,806
Options exercised		71			7			212			—		—			219
Conversion of restricted stock units		29			3			(3	)		—		—			—
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(6	)		(1	)		(196	)		—		—			(197	)
Stock-based compensation		4			1			4,263			—		—			4,264
Other comprehensive income, net of tax		—			—			—			—		4,051			4,051
Net income		—			—			—			20,938		—			20,938
Balance at March 25, 2018		18,328		$	1,833		$	56,199		$	360,878	$	(28,829	)	$	390,081

No dividends were paid during the nine months ended March 31, 2019 or in the two most recently completed fiscal years.

On April 23, 2014, UNIFI announced that its Board of Directors (the “Board”) had approved a stock repurchase program (the “2014 SRP”) under which UNIFI was authorized to acquire up to $50,000 of its common stock. UNIFI made no repurchases of its shares of common stock during the nine months ended March 31, 2019. Through October 31, 2018 (the date the 2014 SRP was terminated, as discussed below), UNIFI had repurchased a total of 806 shares, at an average price of $27.79 (for a total of $22,409, inclusive of commission costs) pursuant to the 2014 SRP.

On October 31, 2018, UNIFI announced that the Board had terminated the 2014 SRP and approved a new stock repurchase program (the “2018 SRP”) under which UNIFI is authorized to acquire up to $50,000 of its common stock. Under the 2018 SRP, purchases will be made from time to time in the open market at prevailing market prices, through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements and other factors. The share repurchase authorization is discretionary and has no expiration date.

As of March 31, 2019, $50,000 remained available for repurchase under the 2018 SRP.

On October 23, 2013, UNIFI’s shareholders approved the Unifi, Inc. 2013 Incentive Compensation Plan (the “2013 Plan”). The 2013 Plan replaced the 2008 Unifi, Inc. Long-Term Incentive Plan (the “2008 LTIP”). No additional awards can be granted under the 2008 LTIP; however, prior awards outstanding under the 2008 LTIP remain subject to that plan’s provisions. The 2013 Plan authorized the issuance of 1,000 shares of common stock, subject to certain increases in the event outstanding awards under the 2008 LTIP expire, are forfeited or otherwise terminate unexercised.

The 2013 Plan expired in accordance with its terms on October 24, 2018, and the Unifi, Inc. Amended and Restated 2013 Incentive Compensation Plan (the “Amended 2013 Plan”) became effective on that same day, upon approval by shareholders at UNIFI’s annual meeting of shareholders held on October 31, 2018. The Amended 2013 Plan increased the number of shares available for future issuance pursuant to awards granted under the Amended 2013 Plan to 1,250 and removed provisions no longer applicable due to the recent changes to Section 162(m) of the IRC. The material terms and provisions of the Amended 2013 Plan are otherwise similar to those of the 2013 Plan. No additional awards can be granted under the 2013 Plan; however, prior awards outstanding under the 2013 Plan remain subject to that plan’s provisions.

The following table provides information as of ~~December 24, 2017~~March 31, 2019 with respect to the number of securities remaining available for future issuance under the ~~Unifi, Inc.~~Amended 2013 ~~Incentive Compensation Plan (the “2013 Plan”):~~Plan:

During the ~~six~~nine months ended ~~December 24, 2017~~March 31, 2019 and ~~December~~March 25, ~~2016,~~2018, UNIFI granted stock options to purchase 54223 and ~~128~~73 shares of common stock, respectively.

During the ~~six~~nine months ended ~~December 24, 2017~~March 31, 2019 and ~~December~~March 25, ~~2016,~~2018, UNIFI granted 9074 and 31116 restricted stock units, ~~(“RSUs”),~~ respectively.

During the nine months ended March 31, 2019 and March 25, 2018, UNIFI granted 47 and 0 vested share units, respectively.

During the nine months ended March 31, 2019 and March 25, 2018, UNIFI granted 10 and 4 shares of common stock, respectively.

~~13.~~15. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

UNIFI may use derivative financial instruments such as foreign currency forward contracts or interest rate swaps to reduce its ongoing business exposures to fluctuations in foreign currency exchange rates or interest rates. UNIFI does not enter into derivative contracts for speculative purposes. The following table presents details regarding UNIFI’s hedging activities:

	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Nine Months Ended
	December 24, 2017			December 25, 2016			December 24, 2017			December 25, 2016			March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Interest expense	$	1,190		$	914		$	2,375		$	1,606		$	1,256		$	1,187		$	4,078		$	3,562
Increase in fair value of interest rate swaps		(1,077	)		(89	)		(1,492	)		(188	)
Decrease (increase) in fair value of interest rate swaps														745			(1,142	)		1,689			(2,634	)
Impact of interest rate swaps on interest expense		123			65			254			137			(111	)		65			(217	)		319

For the ~~six~~nine months ended ~~December 24, 2017~~March 31, 2019 and ~~December~~March 25, ~~2016,~~2018, there were no significant changes to UNIFI’s assets and liabilities measured at fair value, and there were no transfers into or out of the levels of the fair value hierarchy.

UNIFI believes that there have been no significant changes to its credit risk profile or the interest rates available to UNIFI for debt issuances with similar terms and average maturities, and UNIFI estimates that the fair values of its debt obligations approximate the carrying amounts. Other financial instruments include cash and cash equivalents, receivables, accounts payable and accrued expenses. The financial statement carrying amounts of these items approximate the fair value due to their short-term nature.

The components of and the changes in accumulated other comprehensive loss, net of tax, as applicable, consist of the following:

A summary of the after-tax effects of the components of other comprehensive (loss) income, net for the three-month and ~~six-month~~nine-month periods ended ~~December 24, 2017~~March 31, 2019 and ~~December~~March 25, ~~2016~~2018 is included in the accompanying condensed consolidated statements of comprehensive (loss) income.

The components of the calculation of earnings (loss) per share (“EPS”) are as follows:

	For the Three Months Ended				For the Six Months Ended				For the Three Months Ended					For the Nine Months Ended
	December 24, 2017		December 25, 2016		December 24, 2017		December 25, 2016		March 31, 2019			March 25, 2018		March 31, 2019		March 25, 2018
Net income attributable to Unifi, Inc.	$	11,802	$	4,591	$	20,762	$	13,994
Net (loss) income									$	(1,529	)	$	176	$	1,454	$	20,938
Basic weighted average shares		18,273		18,128		18,260		18,045		18,394			18,309		18,381		18,275
Net potential common share equivalents – stock options and RSUs		378		314		338		346
Net potential common share equivalents – stock options and stock units										—			392		361		342
Diluted weighted average shares		18,651		18,442		18,598		18,391		18,394			18,701		18,742		18,617
Excluded from diluted weighted average shares:
Anti-dilutive common share equivalents		60		185		290		271		359			96		388		163

The calculation of EPS is based on the weighted average number of Unifi, Inc.’s common shares outstanding for the applicable period. The calculation of diluted EPS presents the effect of all potential dilutive common shares that were outstanding during the respective period, unless the effect of doing so is anti-dilutive.

~~16.~~18. Investments in Unconsolidated Affiliates and Variable Interest Entities

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 24, 2017,~~March 31, 2019, UNIFI’s investment in PAL was ~~$110,321~~$112,431 and UNIFI’s combined investments in UNF and UNFA were ~~$3,302,~~$2,316, 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 2017,~~March 31, 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:

Underlying equity as of December 24, 2017	$	128,412
Underlying equity as of March 31, 2019				$	130,522
Initial excess capital contributions		53,363			53,363
Impairment charge recorded by UNIFI in fiscal 2007		(74,106	)		(74,106	)
Anti-trust lawsuit against PAL in which UNIFI did not participate		2,652			2,652
Investment as of December 24, 2017	$	110,321
Investment as of March 31, 2019				$	112,431

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 agreement has no stated minimum purchase quantities and pricing is negotiated every six months, based on market rates. As of ~~December 24, 2017,~~March 31, 2019, UNIFI’s open purchase orders related to this agreement were ~~$3,158.~~$4,269.

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

	For the Six Months Ended				For the Nine Months Ended
	December 24, 2017		December 25, 2016		March 31, 2019		March 25, 2018
UNF	$	1,141	$	1,250	$	1,478	$	1,463
UNFA		10,406		9,579		17,199		16,291
Total	$	11,547	$	10,829	$	18,677	$	17,754

As of ~~December 24, 2017~~March 31, 2019 and June ~~25, 2017,~~24, 2018, UNIFI had combined accounts payable due to UNF and UNFA of ~~$1,483~~$1,831 and $2,301, respectively.

UNIFI has determined that UNF and UNFA are variable interest entities ~~(“VIEs”)~~ 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 ~~because~~ 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 24, 2017						As of March 31, 2019						As of June 24, 2018
	PAL		Other		Total		PAL		Other		Total		PAL		Other		Total
Current assets	$	265,491	$	8,797	$	274,288	$	298,563	$	6,860	$	305,423	$	289,683	$	7,598	$	297,281
Noncurrent assets		171,256		971		172,227		158,033		732		158,765		162,242		875		163,117
Current liabilities		56,134		3,262		59,396		69,389		2,961		72,350		71,026		3,722		74,748
Noncurrent liabilities		2,933		—		2,933		3,321		—		3,321		3,389		—		3,389
Shareholders’ equity and capital accounts		377,680		6,506		384,186		383,886		4,631		388,517		377,510		4,751		382,261

UNIFI’s portion of undistributed earnings		41,432		1,411		42,843		43,452		1,040		44,492		41,429		887		42,316

For the Three Months Ended December 24, 2017

PAL

Other

Total

Net sales

$
176,577

$
6,756

$
183,333

Gross profit

2,379

1,628

4,007

(Loss) income from operations

(1,922
)

1,185

(737
)
Net (loss) income

(1,398
)

1,198

(200
)
Depreciation and amortization

10,885

47

10,932

Cash received by PAL under cotton rebate program

4,701

—

4,701

Earnings recognized by PAL for cotton rebate program

3,191

—

3,191

Distributions received

—

1,500

1,500

For the Three Months Ended December 25, 2016

PAL

Other

Total

Net sales

$
153,074

$
5,056

$
158,130

Gross profit

1,765

983

2,748

(Loss) income from operations

(2,849
)

509

(2,340
)
Net (loss) income

(2,238
)

513

(1,725
)
Depreciation and amortization

11,708

45

11,753

Cash received by PAL under cotton rebate program

3,635

—

3,635

Earnings recognized by PAL for cotton rebate program

2,907

—

2,907

Distributions received

—

750

750

For the Six Months Ended December 24, 2017

PAL

Other

Total

Net sales

$
379,368

$
12,449

$
391,817

Gross profit

16,089

2,582

18,671

Income from operations

8,034

1,694

9,728

Net income

6,948

1,716

8,664

Depreciation and amortization

20,485

94

20,579

Cash received by PAL under cotton rebate program

6,942

—

6,942

Earnings recognized by PAL for cotton rebate program

6,446

—

6,446

Distributions received

7,178

1,500

8,678

For the Six Months Ended December 25, 2016

PAL

Other

Total

Net sales

$
358,974

$
11,058

$
370,032

Gross profit

7,261

2,528

9,789

(Loss) income from operations

(1,988
)

1,594

(394
)
Net (loss) income

(1,364
)

1,610

246

Depreciation and amortization

23,184

84

23,268

Cash received by PAL under cotton rebate program

7,762

—

7,762

Earnings recognized by PAL for cotton rebate program

6,796

—

6,796

Distributions received

—

1,500

1,500

	For the Three Months Ended March 31, 2019						For the Three Months Ended March 25, 2018
	PAL		Other		Total		PAL		Other		Total
Net sales	$	225,160	$	6,217	$	231,377	$	199,473	$	5,764	$	205,237
Gross profit		8,638		1,149		9,787		6,078		1,001		7,079
Income from operations		3,868		733		4,601		80		601		681
Net income		4,142		740		4,882		1,409		611		2,020
Depreciation and amortization		9,285		48		9,333		9,081		48		9,129

Cash received by PAL under cotton rebate program		3,053		—		3,053		3,220		—		3,220
Earnings recognized by PAL for cotton rebate program		3,195		—		3,195		3,386		—		3,386

Distributions received		—		750		750		1,798		750		2,548

	For the Nine Months Ended March 31, 2019						For the Nine Months Ended March 25, 2018
	PAL		Other		Total		PAL		Other		Total
Net sales	$	626,812	$	19,256	$	646,068	$	578,841	$	18,213	$	597,054
Gross profit		18,841		3,587		22,428		22,167		3,583		25,750
Income from operations		5,663		2,284		7,947		8,114		2,295		10,409
Net income		6,334		2,381		8,715		8,357		2,327		10,684
Depreciation and amortization		30,576		143		30,719		29,566		142		29,708

Cash received by PAL under cotton rebate program		8,773		—		8,773		10,162		—		10,162
Earnings recognized by PAL for cotton rebate program		9,444		—		9,444		9,832		—		9,832

Distributions received		130		1,250		1,380		8,976		2,250		11,226

While employees of UNIFI’s Brazilian operations are unionized, none of the labor force employed by UNIFI’s domestic or other foreign subsidiaries is currently covered by a collective bargaining agreement.

On September 30, 2004, ~~UNIFI~~Unifi Kinston, LLC (“UK”), a subsidiary of Unifi, Inc., completed its acquisition of polyester filament manufacturing assets located in Kinston, North Carolina from Invista S.a.r.l. (“INVISTA”). The land for the Kinston site was leased pursuant to a 99-year ground lease (the “Ground Lease”) with E.I. DuPont de Nemours (“DuPont”). Since 1993, DuPont has been investigating and cleaning up the Kinston site under the supervision of the U.S. Environmental Protection Agency and the North Carolina Department of Environmental Quality (“DEQ”) pursuant to the Resource Conservation and Recovery Act Corrective Action program. The program requires DuPont to identify all potential areas of environmental concern (“AOCs”), assess the extent of containment at the identified AOCs and remediate the AOCs to comply with applicable regulatory standards. Effective March 20, 2008, ~~UNIFI~~UK entered into a lease termination agreement associated with conveyance of certain assets at the Kinston site to DuPont. This agreement terminated the Ground Lease and relieved ~~UNIFI~~UK of any future responsibility for environmental remediation, other than participation with DuPont, if so called upon, with regard to ~~UNIFI’s~~UK’s period of operation of the Kinston site, which was from 2004 to 2008. At this time, UNIFI has no basis to determine if or when it will have any responsibility or obligation with respect to the AOCs or the extent of any potential liability for the same.

~~UNIFI~~UK continues to own property (referred to as the “Kentec site”) acquired in the 2004 transaction with INVISTA that has contamination from DuPont’s prior operations and is monitored by DEQ. ~~This~~The Kentec site has been remediated by DuPont, and DuPont has received authority from DEQ to discontinue further remediation, other than natural attenuation. Prior to transfer of responsibility to ~~UNIFI,~~UK, DuPont ~~has~~and UK had a duty to monitor and report the environmental status of the Kentec site to DEQ. ~~UNIFI expects~~UK expected to assume that responsibility in ~~fiscal 2018~~the first half of calendar 2019 and ~~will be~~was entitled to receive from DuPont seven years of monitoring and reporting costs, less certain adjustments. ~~At that time, UNIFI will~~UK would then assume sole responsibility for any future remediation of the site. ~~At this time,~~

Effective April 10, 2019 UK assumed sole remediator responsibility of the Kentec site pursuant to its contractual obligations with INVISTA and received $180 of net monitoring and reporting costs due from DuPont. In connection with monitoring, UK expects to sample and report to DEQ annually. UNIFI expects no active site remediation will be required and has no basis to determine ~~if or when it will have~~ any ~~obligation to perform further remediation or the potential cost thereof.~~costs that may be associated with active remediation.

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.

UNIFI has assumed various financial obligations and commitments in the normal course of its operating and financing activities. Financial obligations are considered to represent known future cash payments that UNIFI is required to make under existing contractual arrangements, such as debt and lease agreements.

For details regarding the nature of certain related party relationships, see Note 24, “Related Party Transactions,” to the consolidated financial statements in the ~~2017~~2018 Form 10-K.

~~Related~~There were no related party receivables ~~consists~~as of ~~the following:~~March 31, 2019 or June 24, 2018.

	December 24, 2017		June 25, 2017		March 31, 2019		June 24, 2018
Salem Leasing Corporation (included within accounts payable)	$	294	$	298	$	321	$	306
Salem Leasing Corporation (capital lease obligation)		911		947		831		875
Total related party payables	$	1,205	$	1,245	$	1,152	$	1,181

Related party transactions in excess of $120 for the current or prior two fiscal years consist of the following amounts for the periods presented:

		For the Six Months Ended					For the Three Months Ended				For the Nine Months Ended
Affiliated Entity	Transaction Type	December 24, 2017		December 25, 2016		Transaction Type	March 31, 2019		March 25, 2018		March 31, 2019		March 25, 2018
Salem Leasing Corporation	Transportation equipment costs and capital lease debt service	$	1,950	$	2,269	Transportation equipment costs and capital lease debt service	$	1,006	$	1,028	$	3,046	$	2,978
Salem Global Logistics, Inc.	Freight service income		92		52	Freight service income		—		35		—		127

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 ~~Chief~~Principal Executive Officer, who is the chief operating decision maker (the “CODM”), in order to assess performance and allocate resources. Characteristics of the organization which were relied upon in making the determination of reportable segments include the nature of the products sold, the organization’s internal 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 three reportable segments (the Polyester Segment, the Nylon Segment and the International Segment) based on similarities between the operating segments’ economic characteristics, nature of products sold, type of customer, methods of distribution and regulatory environment.

In addition to UNIFI’s reportable segments, the selected financial information presented below includes an All Other category. All Other consists primarily of for-hire transportation ~~services and Repreve Renewables, LLC (“Renewables”) (up through December 23, 2016, the date of the sale by UNIFI of its 60% equity ownership interest in Renewables).~~services. For-hire transportation services revenue is derived from performing common carrier services utilizing UNIFI’s fleet of transportation equipment. Revenue for Renewables was primarily derived from (i) facilitating the use of miscanthus grass as bio-fuel through service agreements and (ii) delivering harvested miscanthus grass to poultry producers for animal bedding.

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, ~~(Loss),~~ 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 the below financial information, as they are (i) insignificant to UNIFI’s segments and eliminated from consolidated reporting and (ii) excluded from segment evaluations performed by the CODM.

	For the Three Months Ended December 24, 2017										For the Three Months Ended March 31, 2019
	Polyester		Nylon		International		All Other		Total		Polyester		Nylon		International		All Other		Total
Net sales	$	90,316	$	25,103	$	51,046	$	1,013	$	167,478	$	95,745	$	25,563	$	57,681	$	1,000	$	179,989
Cost of sales		81,740		22,027		40,072		963		144,802		92,221		23,251		49,784		942		166,198
Gross profit		8,576		3,076		10,974		50		22,676		3,524		2,312		7,897		58		13,791
Segment depreciation expense		3,973		552		397		64		4,986		3,858		516		420		47		4,841
Segment Profit	$	12,549	$	3,628	$	11,371	$	114	$	27,662	$	7,382	$	2,828	$	8,317	$	105	$	18,632

	For the Three Months Ended December 25, 2016											For the Three Months Ended March 25, 2018
	Polyester		Nylon		International		All Other			Total		Polyester		Nylon		International		All Other		Total
Net sales	$	86,671	$	28,302	$	38,868	$	1,314		$	155,155	$	88,763	$	24,036	$	51,989	$	1,079	$	165,867
Cost of sales		76,200		25,679		29,419		1,727			133,025		83,948		23,023		41,317		1,023		149,311
Gross profit (loss)		10,471		2,623		9,449		(413	)		22,130
Gross profit													4,815		1,013		10,672		56		16,556
Segment depreciation expense		3,384		530		228		244			4,386		4,022		560		436		66		5,084
Segment Profit (Loss)	$	13,855	$	3,153	$	9,677	$	(169	)	$	26,516
Segment Profit												$	8,837	$	1,573	$	11,108	$	122	$	21,640

The reconciliations of segment gross profit ~~(loss)~~ to consolidated (loss) income before income taxes are as follows:

	For the Three Months Ended						For the Three Months Ended						For the Nine Months Ended
	December 24, 2017			December 25, 2016			March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Polyester	$	8,576		$	10,471		$	3,524		$	4,815		$	12,221		$	22,304
Nylon		3,076			2,623			2,312			1,013			6,488			7,403
International		10,974			9,449			7,897			10,672			28,996			32,644
All Other		50			(413	)		58			56			261			173
Segment gross profit		22,676			22,130			13,791			16,556			47,966			62,524
Selling, general and administrative expenses		14,626			12,868			11,439			13,846			40,672			41,335
Benefit for bad debts		(72	)		(95	)
Provision (benefit) for bad debts								218			27			381			(104	)
Other operating expense, net		348			319			1,359			1,100			1,218			1,763
Operating income		7,774			9,038			775			1,583			5,695			19,530
Interest income		(181	)		(183	)		(149	)		(182	)		(448	)		(444	)
Interest expense		1,190			914			1,256			1,187			4,078			3,562
Loss on sale of business		—			1,662
Equity in (earnings) loss of unconsolidated affiliates		(211	)		367
Loss on extinguishment of debt								—			—			131			—
Equity in earnings of unconsolidated affiliates								(1,873	)		(544	)		(3,126	)		(3,842	)
Income before income taxes	$	6,976		$	6,278		$	1,541		$	1,122		$	5,060		$	20,254

~~The reconciliations of segment gross profit (loss) to consolidated income before income taxes are as follows:~~

For the Six Months Ended

December 24, 2017

December 25, 2016

Polyester

$
17,489

$
18,921

Nylon

6,390

5,760

International

21,972

21,719

All Other

117

(723
)
Segment gross profit

45,968

45,677

Selling, general and administrative expenses

27,489

24,278

Benefit for bad debts

(131
)

(462
)
Other operating expense, net

663

249

Operating income

17,947

21,612

Interest income

(262
)

(329
)
Interest expense

2,375

1,606

Loss on sale of business

—

1,662

Equity in earnings of unconsolidated affiliates

(3,298
)

(473
)
Income before income taxes

$
19,132

$
19,146

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

	December 24, 2017		June 25, 2017		March 31, 2019		June 24, 2018
Polyester	$	266,522	$	270,819	$	291,625	$	284,261
Nylon		60,210		57,789		60,904		57,378
International		95,198		80,824		100,411		95,006
Segment total assets		421,930		409,432		452,940		436,645
Other current assets		33,033		27,375		19,496		30,945
Other PP&E		15,988		14,904		19,091		17,373
Other non-current assets		2,891		279		2,516		4,205
Investments in unconsolidated affiliates		113,623		119,513		114,748		112,639
Total assets	$	587,465	$	571,503	$	608,791	$	601,807

Cash payments for taxes shown above consist primarily of income and withholding tax payments made by UNIFI in both U.S. and foreign ~~jurisdictions.~~jurisdictions, net of refunds.

As of ~~December~~March 31, 2019 and June 24, ~~2017~~2018, $2,205 and $3,187, respectively, were included in accounts payable for unpaid capital expenditures. As of March 25, 2018 and June 25, 2017, ~~$2,610~~$2,308 and $3,234, respectively, were included in accounts payable for unpaid capital expenditures. As

On April 30, 2019, the Board approved an amendment to UNIFI’s Amended and Restated By-laws, effective as of ~~December 25, 2016~~that date, to change its fiscal year end from the last Sunday in the month of June to the Sunday in June or July nearest June 30 of each year. Because June 30, 2019 falls on a Sunday, UNIFI’s fiscal year end date for fiscal 2019 will remain June 30, 2019 as previously disclosed, and ~~June 26, 2016, $3,700 and $4,197, respectively, were included in accounts payable for unpaid capital expenditures.~~

~~During the six months ended December 25, 2016, UNIFI recorded $5,139 to construction in progress and long-term debt, in connection with a historical construction financing arrangement.~~ no transition report will be filed.

The following is management’s discussion and analysis of certain significant factors that have affected UNIFI’s operations, along with material changes in financial condition, during the periods included in the accompanying condensed consolidated financial statements. A reference to a “note” in this section refers to the accompanying notes to condensed consolidated financial statements. A reference to the “current period” refers to the three-month period ended ~~December 24, 2017,~~March 31, 2019, while a reference to the “prior period” refers to the three-month period ended ~~December~~March 25, ~~2016.~~2018. A reference to the “current ~~six-month~~nine-month period” refers to the ~~six-month~~nine-month period ended ~~December 24, 2017,~~March 31, 2019, while a reference to the “prior ~~six-month~~nine-month period” refers to the ~~six-month~~nine-month period ended ~~December~~March 25, ~~2016.~~2018. Such references may be accompanied by certain phrases for added clarity. The current period and prior period each consisted of 13 fiscal weeks.

The current nine-month period consisted of 40 fiscal weeks, while the prior nine-month period consisted of 39 fiscal weeks. UNIFI’s seasonal shutdown period for its operations in North and Central America (which typically occurs around December 25 each year) (the “seasonal shutdown period”) occurred in the second quarter of fiscal 2019 but fell in the third quarter of fiscal 2018. Accordingly, both the current period and the current nine-month period include one additional shipping week compared to both the respective prior period and the prior nine-month period.

Our discussions in this Item 2 ~~are based upon the more detailed discussions about our business, operations and financial condition included in the 2017 Form 10-K. These discussions~~ focus on our results during, or as of, the three months and ~~six~~nine months ended ~~December 24, 2017~~March 31, 2019 and ~~December~~March 25, ~~2016,~~2018, and, to the extent applicable, any material changes from the information discussed in the ~~2017~~2018 Form 10-K or other important intervening developments or information. These discussions should be read in conjunction with the ~~2017~~2018 Form 10-K for more detailed and background ~~information.~~information about our business, operations and financial condition.

All ~~currency and share~~ amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.

~~UNIFI remains focused~~UNIFI’s business focuses on delivering ~~PVA~~ products and solutions to customers and brand partners throughout the world, leveraging our internal manufacturing capabilities and an enhanced global supply chain that delivers a diverse range of synthetic and recycled fibers and polymers. This strategic and synergistic focus includes ~~a number of~~three supporting ~~pillars, such as investing~~pillars: (1) engaging in ~~commercial expansion;~~strategic relationships with like-minded entities, (2) growing our existing portfolio of technologies and ~~capabilities; engaging in strategic partnerships;~~capabilities and ~~investing in UNIFI’s people~~(3) expanding our supply chain to best serve indirect and ~~teams.~~direct customers. We refer to this three-pillared strategy as our “Partner, Innovate and Grow” strategy. UNIFI remains committed to ~~these strategic initiatives,~~this strategy, which it believes will increase profitability and generate improved cash flows from operations.

UNIFI has three reportable segments for its operations – the Polyester Segment, the Nylon Segment and the International Segment – as well as certain ancillary operations that include for-hire transportation services, which comprise an All Other category. The ancillary operations classified within All Other are insignificant for all periods presented; therefore, UNIFI’s discussion and analysis of those activities is generally limited to their impact on consolidated results, where appropriate. In discussion of its operating results in this report, UNIFI refers to its operations in the “NACA region,” which is the region comprised of the trade zones covered by NAFTA and CAFTA-DR. In previous reports, we have referred to these regions as “the Region,” and we have referred to our operations within this region as our “Regional operations.”

Significant ~~highlights~~general matters for the current period and the current ~~six-month~~nine-month period include the following, each of which is ~~outlined~~addressed in more detail below:

Consistent with the market and financial trends that have affected its business in the last several quarters, UNIFI continued to experience a number of challenges in the current period. External pressures in the NACA business included elevated raw material costs and suppressed demand for certain yarns, along with elevated levels of low-cost imports of polyester yarn from China into the U.S. The volatile nature of these external pressures made navigating the NACA environment even more difficult. Internal pressures included the implementation of selling price increases that left us less competitive, elevated inventory levels, and the result of weaker leverage of our cost structure. The combination of these external and internal pressures caused weaker fixed cost absorption and lower operating margins.

UNIFI experienced rising raw material costs throughout most of calendar 2018, which peaked in October 2018. By December 2018, UNIFI experienced a pullback in those costs and expected a slight decline in polyester raw material costs to favorably impact the current period. However, during the current period, raw material costs for UNIFI’s global operations had not retreated sufficiently enough to offset the ongoing gross margin pressure created by sustained and elevated levels of low-cost yarn imports into the U.S. textile market.

Amid these new and ongoing pressures, UNIFI has and is continuing to take actions to reduce costs. Prior to the current period, UNIFI’s annualized run-rate for selling, general and administrative expenses (“SG&A expenses”) was approaching $60,000. In connection with recent and ongoing cost

reduction efforts, UNIFI is targeting a decrease of approximately 15% to that $60,000 annualized run-rate, such that fiscal 2020 SG&A expenses are expected to be approximately $50,000.

In addition, UNIFI remains committed to pursuing relief from the competitive pressures that have resulted from the elevated levels of low-cost and subsidized polyester textured yarn entering the U.S. market from countries such as China and India, which increased approximately 79% from 2013 to 2017 and which continued to grow during the first half of 2018. Based on import data obtained prior to and subsequent to UNIFI’s filing of anti-dumping and countervailing duties petitions in October 2018, an increase of approximately 27% in polyester textured yarn imports from China into the U.S. placed even more pressure on UNIFI’s U.S. margins and competitiveness than had been anticipated in recent months. UNIFI believes this surge in imports was due to efforts to stockpile imported yarn before preliminary duties are imposed. Accordingly, we filed a “critical circumstances” allegation on April 2, 2019, asking the U.S. Department of Commerce (“Commerce”) to apply any countervailing and antidumping duties applicable to Chinese imports on a retroactive basis. Commerce preliminarily granted this request on April 19, 2019, and on April 29, 2019 announced preliminary countervailing duties on imports of polyester textured yarn from (i) China at rates of 32% or more and (ii) India at rates of 7% or more. For Chinese imports, these duties will apply retroactively dating 90 days prior to the date that the duties go into effect. Preliminary antidumping duty determinations are expected on June 26, 2019, and these duties will also apply retroactively for Chinese imports dating 90 days prior to the date that the duties go into effect. Final determinations of dumping, subsidization and injury are expected by the end of calendar 2019. These positive announcements are critical steps in UNIFI’s efforts to better compete against imported yarns that have flooded the U.S. market in recent years.

UNIFI continuously reviews performance indicators to measure its success. These performance indicators form the basis of management’s discussion and analysis included below:

Segment Profit, which represents segment gross profit plus segment depreciation expense;

•

~~Segment Profit (Loss), which represents segment gross profit (loss) plus segment depreciation expense;~~

unit conversion margin, which represents unit net sales price less unit raw material costs, for UNIFI and for each reportable segment;

working capital, which represents current assets less current liabilities;

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), which represents Net ~~Income~~(loss) income before net interest expense, income tax expense and depreciation and amortization expense;

Adjusted EBITDA, which represents EBITDA adjusted to exclude equity in ~~loss (earnings)~~earnings of PAL, and, from time to time, certain other adjustments necessary to understand and compare the underlying results of UNIFI;

Adjusted Net Income, which represents Net Income calculated under GAAP, adjusted to exclude the approximate after-tax impact of certain income or expense items (as well as specific impacts to the provision for income taxes) necessary to understand and compare the underlying results of UNIFI. Adjusted Net Income excludes certain amounts which management believes do not reflect the ongoing operations and performance of UNIFI;

~~Adjusted EPS, which represents Adjusted Net Income divided by UNIFI’s diluted weighted average common shares outstanding;~~ and

Adjusted Working Capital ~~which represents receivables~~(receivables plus inventory and other current assets, less accounts payable and accrued ~~expenses.~~expenses).

EBITDA, Adjusted EBITDA ~~Adjusted Net Income, Adjusted EPS~~ and Adjusted Working Capital (collectively, the “non-GAAP financial measures”) are not determined in accordance with GAAP and should not be considered a substitute for performance measures determined in accordance with GAAP. The calculations of the non-GAAP financial measures are subjective, based on management’s belief as to which items should be included or excluded in order to provide the most reasonable and comparable view of the underlying operating performance of the business. We may, from time to time, modify the amounts used to determine our non-GAAP financial measures. When applicable, management’s discussion and analysis includes specific consideration for items that comprise the reconciliations of its non-GAAP financial measures.

We believe that these non-GAAP financial measures better reflect UNIFI’s underlying operations and performance and that their use, as operating performance measures, provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets, among otherwise comparable companies.

Management uses Adjusted EBITDA (i) as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis, as it removes the impact of (a) items directly related to our asset base (primarily depreciation and amortization) and (b) items that we would not expect to occur as a part of our normal business on a regular basis; (ii) for planning purposes, including the preparation of our annual operating budget; (iii) as a valuation measure for evaluating our operating performance and our capacity to incur and service debt, fund capital expenditures and expand our business; and (iv) as one measure in determining the value of other acquisitions and dispositions. Adjusted EBITDA is a key performance metric utilized in the determination of variable compensation. We also believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because it serves as a high-level proxy for cash generated from operations and is relevant to our fixed charge coverage ratio. Equity in ~~loss (earnings)~~earnings of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance.

Management uses Adjusted Net Income and Adjusted EPS (i) as measurements of net operating performance because they assist us in comparing such performance on a consistent basis, as they remove the impact of (a) items that we would not expect to occur as a part of our normal business on a regular basis and (b) components of the provision for income taxes that we would not expect to occur as a part of our underlying taxable operations; (ii) for planning purposes, including the preparation of our annual operating budget; and (iii) as measures in determining the value of other acquisitions and dispositions.

Historically, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS aimed to exclude the impact of the non-controlling interest in Renewables, while the consolidated amounts for such entity were required to be included in UNIFI’s financial amounts reported under GAAP.

~~Management uses Adjusted~~ Working Capital as an indicator of UNIFI’s production efficiency and ability to manage inventory and receivables. In the first quarter of fiscal 2019, in connection with changes to balance sheet presentation required by the adoption of the New Revenue Recognition Guidance, UNIFI updated the definition of Adjusted Working Capital to include other current assets for current and historical calculations of the non-GAAP financial measure. Other current assets includes amounts capitalized for future conversion into inventory or receivables (e.g., vendor deposits and contract assets), and management believes that its inclusion in the definition of Adjusted Working Capital improves the understanding of UNIFI capital that is supporting production and sales activity.

Non-GAAP Reconciliations

EBITDA and Adjusted EBITDA

The reconciliations of the amounts reported under GAAP for Net ~~Income~~(loss) income to EBITDA and Adjusted EBITDA are as follows:

	For the Three Months Ended					For the Six Months Ended					For the Three Months Ended						For the Nine Months Ended
	December 24, 2017			December 25, 2016		December 24, 2017			December 25, 2016		March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Net income attributable to Unifi, Inc.	$	11,802		$	4,591	$	20,762		$	13,994
Net (loss) income											$	(1,529	)	$	176		$	1,454		$	20,938
Interest expense, net		1,009			716		2,113			1,246		1,107			1,005			3,630			3,118
(Benefit) provision for income taxes		(4,826	)		1,924		(1,630	)		5,650
Provision (benefit) for income taxes												3,070			946			3,606			(684	)
Depreciation and amortization expense		5,532			4,830		10,949			9,396		5,535			5,617			17,015			16,566
EBITDA		13,517			12,061		32,194			30,286		8,183			7,744			25,705			39,938

Equity in loss (earnings) of PAL		376			745		(2,478	)		431
Equity in earnings of PAL												(1,409	)		(479	)		(2,154	)		(2,957	)
EBITDA excluding PAL		13,893			12,806		29,716			30,717		6,774			7,265			23,551			36,981

Loss on sale of business ⁽¹⁾		—			1,662		—			1,662
Other adjustments ⁽¹⁾												—			—			—			—
Adjusted EBITDA	$	13,893		$	14,468	$	29,716		$	32,379	$	6,774		$	7,265		$	23,551		$	36,981

Amounts presented in the reconciliations above may not be consistent with amounts included in the accompanying condensed consolidated financial statements. Any such inconsistencies are insignificant and are integral to the reconciliations.

The tables below set forth reconciliations of (i) Income before income taxes (“Pre-tax Income”), Provision for income taxes (“Tax Impact”) and Net Income to Adjusted Net Income and (ii) Diluted EPS to Adjusted EPS:

For the Three Months Ended December 24, 2017

For the Three Months Ended December 25, 2016

Pre-tax Income

Tax Impact

Net Income

Diluted EPS

Pre-tax Income

Tax Impact

Net Income

Diluted EPS

GAAP results

$
6,976

$
4,826

$
11,802

$
0.63

$
6,278

$
(1,924
)

$
4,591

$
0.25

Certain tax valuation allowance reversal ⁽¹⁾

—

(3,807
)

(3,807
)

(0.20
)

—

—

—

—

Loss on sale of business⁽²⁾

—

—

—

—

1,662

—

1,662

0.09

Adjusted results

$
6,976

$
1,019

$
7,995

$
0.43

$
7,940

$
(1,924
)

$
6,253

$
0.34

Diluted weighted average common shares outstanding

18,651

18,442

For the Six Months Ended December 24, 2017

For the Six Months Ended December 25, 2016

Pre-tax Income

Tax Impact

Net Income

Diluted EPS

Pre-tax Income

Tax Impact

Net Income

Diluted EPS

GAAP results

$
19,132

$
1,630

$
20,762

$
1.12

$
19,146

$
(5,650
)

$
13,994

$
0.76

Certain tax valuation allowance reversal ⁽¹⁾

—

(3,807
)

(3,807
)

(0.21
)

—

—

—

—

Loss on sale of business⁽²⁾

—

—

—

—

1,662

—

1,662

0.09

Adjusted results

$
19,132

$
(2,177
)

$
16,955

$
0.91

$
20,808

$
(5,650
)

$
15,656

$
0.85

Diluted weighted average common shares outstanding

18,598

18,391

See the discussion under the heading “Working Capital” within “Liquidity and Capital Resources” below.

Three Months Ended ~~December 24, 2017~~March 31, 2019 Compared to Three Months Ended ~~December~~March 25, ~~2016~~2018

The components of Net ~~Income,~~(loss) income, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts, are as follows:

	For the Three Months Ended															For the Three Months Ended
	December 24, 2017						December 25, 2016									March 31, 2019						March 25, 2018
				% of Net Sales						% of Net Sales			% Change						% of Net Sales						% of Net Sales			% Change
Net sales	$	167,478			100.0		$	155,155			100.0			7.9		$	179,989			100.0		$	165,867			100.0			8.5
Cost of sales		144,802			86.5			133,025			85.7			8.9			166,198			92.3			149,311			90.0			11.3
Gross profit		22,676			13.5			22,130			14.3			2.5			13,791			7.7			16,556			10.0			(16.7	)
Selling, general and administrative expenses		14,626			8.7			12,868			8.3			13.7			11,439			6.4			13,846			8.3			(17.4	)
Benefit for bad debts		(72	)		—			(95	)		(0.1	)		(24.2	)
Provision for bad debts																	218			0.1			27			—		nm
Other operating expense, net		348			0.2			319			0.2			9.1			1,359			0.8			1,100			0.7			23.5
Operating income		7,774			4.6			9,038			5.9			(14.0	)		775			0.4			1,583			1.0			(51.0	)
Interest expense, net		1,009			0.6			731			0.5			38.0			1,107			0.6			1,005			0.6			10.1
Loss on sale of business		—			—			1,662			1.1		nm
Equity in (earnings) loss of unconsolidated affiliates		(211	)		(0.1	)		367			0.2			(157.5	)
Equity in earnings of unconsolidated affiliates																	(1,873	)		(1.1	)		(544	)		(0.3	)	nm
Income before income taxes		6,976			4.1			6,278			4.1			11.1			1,541			0.9			1,122			0.7			37.3
(Benefit) provision for income taxes		(4,826	)		(2.9	)		1,924			1.2			(350.8	)
Net income including non-controlling interest		11,802			7.0			4,354			2.9			171.1
Less: net loss attributable to non-controlling interest		—			—			(237	)		(0.1	)		(100.0	)
Net income attributable to Unifi, Inc.	$	11,802			7.0		$	4,591			3.0			157.1
Provision for income taxes																	3,070			1.7			946			0.6		nm
Net (loss) income																$	(1,529	)		(0.8	)	$	176			0.1		nm

Consolidated net sales for the current period increased by ~~$12,323,~~$14,122, or ~~7.9%~~8.5%, as compared to the prior ~~period.~~period due to (i) an additional shipping week for our NACA operations, caused by the timing of UNIFI’s seasonal shutdown period, (ii) sales growth of PVA products and (iii) increased sales pricing driven by higher raw material costs. This increase in net sales was partially offset by unfavorable foreign currency translation of approximately $5,300.

Consolidated sales volumes ~~increased 14.5%, attributable~~were 10.4% higher as compared to the prior period. The increase in net sales volumes was driven primarily by (i) the additional shipping week, (ii) continued growth in sales of ~~recycled polyester~~Flake and Chip ~~and plastic bottle flake~~ in the Polyester Segment and (iii) growth in sales of ~~staple fiber~~Chip and other PVA products in the International ~~Segment.~~Segment, partially offset by competitive pressures in the U.S. and Brazil. Sales continue to expand in the International Segment as our PVA portfolio resonates with ~~numerous customers. The increase in sales volumes in~~ our ~~Polyester and International Segments was partially offset by soft yarn sales in the Nylon Segment.~~brand partners that are focused on sustainable solutions. We believe the softness in the domestic environment ~~continues~~and competition from imports continue to be ~~a challenge~~challenges for the domestic textile supply ~~chain, while our nylon business~~chain. Our Nylon Segment results are also ~~reflect~~unfavorably impacted by the ~~current~~ongoing global trend of ~~declines in~~declining demand for nylon socks, ladies’ hosiery and intimate apparel.

Consolidated average sales prices decreased ~~6.3%~~1.8%, ~~attributable~~as price increases made in calendar 2018 in response to rising costs were more than offset by (i) unfavorable foreign currency translation and (ii) the disproportionate growth of lower-priced ~~recycled polyester Chip, plastic bottle flake~~Flake and ~~staple fiber among~~Chip.

PVA products at the ~~Polyester~~end of the current period comprised approximately 47% of consolidated net sales, up from 45% at the end of fiscal 2018, and ~~International Segments, as well as a lower proportion~~higher than the 44% ratio for the prior period. Within the PVA product category, our customers can choose between various solutions, some of ~~nylon products that~~which carry higher ~~selling prices. The decrease~~margins than others. Accordingly, growth in PVA sales does not necessarily translate into higher margins or increased profitability on a consolidated ~~average sales prices was partially offset by a net favorable~~basis.

Unfavorable foreign currency translation ~~compared to the prior period of approximately $900,~~is primarily associated with the ~~strengthening~~weakening of the Brazilian Real (“BRL”) and the Chinese Renminbi (“RMB”) ~~and the Brazilian Real (“BRL”)~~. ~~PVA products comprised more than 45% of net sales for the current period, while representing approximately 40% of net sales for fiscal 2017.~~

Gross profit for the current period ~~increased~~decreased by ~~$546,~~$2,765, or ~~2.5%~~16.7%, as compared to the prior period. ~~For~~The gross profit decline is primarily attributable to (i) lower fixed cost absorption in the Polyester Segment due to lower textured yarn volumes, (ii) lower conversion margin in the International Segment, (iii) unfavorable foreign currency translation of approximately $1,100 and (iv) disproportionate growth of lower margin products.

Total SG&A expenses were lower for the current period ~~gross margin rate was impacted by disproportionate growth in lower-margin sales mix and pressure brought by higher costs~~ compared to the prior period, primarily as a result of significant forfeitures of share-based compensation and variable compensation in connection with executive officer departures that occurred in fiscal 2019. The decrease was partially offset by higher fees paid to professional service providers, primarily for legal and audit services.

There is no significant activity reflected in the current period or the prior period for bad debts.

Other operating expense, net primarily reflects severance expense recorded in the current period and foreign currency transaction losses recorded in the prior period.

There is no significant change for interest expense, net from the prior period to the current period. ~~For~~The components of consolidated interest expense, net are as follows:

The increase in equity earnings of unconsolidated affiliates was primarily attributable to improved operating leverage and, particularly for PAL, an improved raw material cost environment.

The effective tax rate is subject to variation due to numerous factors, including variability in the ~~Polyester Segment,~~amount of pre-tax and taxable income, the ~~decline~~mix of income by jurisdiction, changes in ~~gross margin~~deferred tax valuation allowances, and changes in statutes, regulations and case law. Additionally, the impacts of discrete items, non-deductible expenses, and the tax on global intangible low taxed income is greater when pre-tax income is lower.

The effective tax rate for the current period was higher than the U.S. federal statutory rate primarily due to ~~a rise~~the effect of the GILTI provisions enacted in ~~raw material costs, a greater mix of lower margin product sales~~H.R. 1, losses in tax jurisdictions for which no tax benefit could be recognized, and incremental depreciation, primarily due to expanded recycling operations, partially offset by the conversion services performed for Eastman Chemical Company (“Eastman”) on bi-component machinery, a revenue stream that did not exist in the prior period. The Nylon Segment achieved an increase in gross margin rate due in part to a more favorable sales mix and cost management. Consolidated gross profitforeign withholding taxes. Tax expense for the current period also included ~~approximately $200~~$880 of ~~favorable foreign currency translation reflected~~expense related to the enactment of H.R. 1, which increased the effective tax rate by 57.1%.

The effective tax rate for the prior period was higher than the U.S. statutory tax rate primarily due to an increase in the ~~International Segment.~~valuation allowance for the Company’s investment in PAL, the rate change impact on a U.S. net loss carryforward generated in the prior period that would have been used at a lower tax rate in the future, and additional limitations on the deductibility of compensation under IRC Section 162(m).

Net (loss) income for the ~~changes in net sales and~~current period was $(1,529), or $(0.08) per share, compared to $176, or $0.01 per share, for the prior period. The decrease was primarily attributable to lower gross profit and a higher effective tax rate, partially offset by (i) higher earnings from PAL, (ii) lower SG&A expenses and (iii) one additional shipping week in the current period for our NACA operations.

Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable ~~segment, follow.~~segments for the current period.

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Polyester Segment, are as follows:

	For the Three Months Ended											For the Three Months Ended
	December 24, 2017				December 25, 2016							March 31, 2019					March 25, 2018
			% of Net Sales				% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	90,316		100.0	$	86,671		100.0		4.2		$	95,745			100.0	$	88,763			100.0		7.9
Cost of sales		81,740		90.5		76,200		87.9		7.3			92,221			96.3		83,948			94.6		9.9
Gross profit		8,576		9.5		10,471		12.1		(18.1	)		3,524			3.7		4,815			5.4		(26.8	)
Depreciation expense		3,973		4.4		3,384		3.9		17.4			3,858			4.0		4,022			4.6		(4.1	)
Segment Profit	$	12,549		13.9	$	13,855		16.0		(9.4	)	$	7,382			7.7	$	8,837			10.0		(16.5	)

Segment net sales as a percentage of consolidated amounts													53.2	%				53.5	%
Segment Profit as a percentage of consolidated amounts													39.6	%				40.8	%

Net sales for the prior period	$	86,671		$	88,763
Increase in sales volumes		6,192
Increase due to an additional shipping week in the current period					6,032
Net change in average selling price and sales mix		(2,547	)		1,633
Decrease in underlying sales volumes					(683	)
Net sales for the current period	$	90,316		$	95,745

The increase in net sales for the Polyester Segment from the prior period to the current period was primarily attributable to (i) one additional shipping week in the current period due to the timing of the seasonal shutdown period for our NACA operations, (ii) higher selling prices in response to several months of raw material related price increases during calendar 2018 and (iii) higher sales of ~~plastic bottle flake, recycled polyester Chip~~dyed yarn in connection with the dyed yarn portfolio acquisition that closed in the fourth quarter of fiscal 2018, partially offset by (a) a weaker sales mix and ~~POY and (ii) the conversion services performed for Eastman on bi-component machinery. The unfavorable change in sales price and mix was due to (a)~~(b) lower ~~sales~~ volumes of higher-priced textured ~~and dyed yarns and (b) higher sales volumes of lower-priced plastic bottle flake, recycled polyester Chip and POY.~~yarn products.

Segment Profit for the prior period	$	13,855		$	8,837
Net decrease in underlying margins		(2,296	)		(2,135	)
Increase in sales volumes		990
Decrease in underlying sales volumes					(66	)
Increase due to an additional shipping week in the current period					746
Segment Profit for the current period	$	12,549		$	7,382

The decrease in Segment Profit for the Polyester Segment from the prior period to the current period was primarily attributable to ~~the~~(i) an unfavorable sales mix ~~shift towards~~characterized by higher volumes of lower-margin products ~~discussed above in the net sales analysis, along with raw material~~like Flake, Chip and certain dyed yarns and lower volumes of higher-margin products like textured yarn and (ii) weaker fixed cost ~~pressures,~~absorption due to lower textured yarn volumes. These decreases were partially offset by the ~~benefit of the conversion services performed for Eastman on bi-component machinery and an increase~~additional shipping week in ~~sales volumes.~~

~~Polyester Segment net sales and Segment Profit, as a percentage of total consolidated amounts, were 53.9% and 45.4%, respectively, for~~our NACA operations in the current period ~~compared~~due to ~~55.9% and 52.3%, respectively, for~~ the ~~prior~~timing of the seasonal shutdown period.

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the Nylon Segment are as follows:

	For the Three Months Ended											For the Three Months Ended
	December 24, 2017				December 25, 2016							March 31, 2019					March 25, 2018
			% of Net Sales				% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	25,103		100.0	$	28,302		100.0		(11.3	)	$	25,563			100.0	$	24,036			100.0		6.4
Cost of sales		22,027		87.7		25,679		90.7		(14.2	)		23,251			91.0		23,023			95.8		1.0
Gross profit		3,076		12.3		2,623		9.3		17.3			2,312			9.0		1,013			4.2		128.2
Depreciation expense		552		2.2		530		1.8		4.2			516			2.1		560			2.3		(7.9	)
Segment Profit	$	3,628		14.5	$	3,153		11.1		15.1		$	2,828			11.1	$	1,573			6.5		79.8

Segment net sales as a percentage of consolidated amounts													14.2	%				14.5	%
Segment Profit as a percentage of consolidated amounts													15.2	%				7.3	%

Net sales for the prior period	$	28,302		$	24,036
Decrease in sales volumes		(1,993	)
Increase due to an additional shipping week in the current period					1,295
Net change in average selling price and sales mix		(1,206	)		705
Decrease in underlying sales volumes					(473	)
Net sales for the current period	$	25,103		$	25,563

The ~~decrease~~increase in net sales for the Nylon Segment from the prior period to the current period was primarily attributable to ~~(i) lower sales volumes as a result~~one additional shipping week in our NACA operations in the current period due to the timing of ~~soft domestic market conditions~~the seasonal shutdown period and raw material related price increases in ~~which nylon socks, ladies’ hosiery and intimates have experienced demand declines and (ii) a lower-priced sales mix.~~the current period.

Segment Profit for the prior period	$	3,153		$	1,573
Net improvement in underlying margins		697
Decrease in sales volumes		(222	)
Net increase in underlying margins					1,255
Segment Profit for the current period	$	3,628		$	2,828

The increase in Segment Profit for the Nylon Segment ~~was attributable~~from the prior period to ~~a more profitable sales mix and cost management.~~

~~Nylon Segment net sales and Segment Profit, as a percentage of total consolidated amounts, were 15.0% and 13.1%, respectively, for~~ the current period ~~compared~~was primarily attributable to ~~18.2%~~improved conversion margin based on the timing of raw material purchases and ~~11.9%, respectively, for the prior period.~~related price increases. Sales volumes impacts were insignificant to this comparison.

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior period amounts for the International Segment are as follows:

	For the Three Months Ended										For the Three Months Ended
	December 24, 2017				December 25, 2016						March 31, 2019					March 25, 2018
			% of Net Sales				% of Net Sales		% Change					% of Net Sales					% of Net Sales		% Change
Net sales	$	51,046		100.0	$	38,868		100.0		31.3	$	57,681			100.0	$	51,989			100.0		10.9
Cost of sales		40,072		78.5		29,419		75.7		36.2		49,784			86.3		41,317			79.5		20.5
Gross profit		10,974		21.5		9,449		24.3		16.1		7,897			13.7		10,672			20.5		(26.0	)
Depreciation expense		397		0.8		228		0.6		74.1		420			0.7		436			0.9		(3.7	)
Segment Profit	$	11,371		22.3	$	9,677		24.9		17.5	$	8,317			14.4	$	11,108			21.4		(25.1	)

Segment net sales as a percentage of consolidated amounts												32.0	%				31.3	%
Segment Profit as a percentage of consolidated amounts												44.6	%				51.3	%

Net sales for the prior period	$	38,868		$	51,989
Increase in sales volumes		11,985			7,852
Favorable foreign currency translation effects (RMB and BRL)		882
Net change in average selling price and sales mix		(689	)		3,060
Unfavorable foreign currency translation effects (primarily RMB and BRL)					(5,220	)
Net sales for the current period	$	51,046		$	57,681

The increase in net sales for the International Segment from the prior period to the current period was primarily attributable to (i) higher sales volumes ~~from~~for our Asian subsidiaries ~~primarily relating~~due to growth in our ~~recycled polyester Chip and staple fiber products, with strong demand for~~ REPREVE^®, portfolios and (ii) higher ~~sales volumes at our Brazilian subsidiary~~pricing due to increased ~~demand for synthetic yarns, including air-covered PVA products for use in applications such as stretch denim, and (iii) favorable~~raw material costs, partially offset by unfavorable foreign currency translation primarily due to the ~~strengthening~~weakening of the ~~RMB~~BRL and the ~~BRL. These benefits were partially offset by a decrease in~~RMB against the ~~average selling price in Asia due to a greater mix of lower-priced product sales.~~

The RMB ~~weighted~~ average exchange rate was ~~6.61~~6.75 RMB/~~U.S. Dollar (“USD”)~~USD and ~~6.84~~6.36 RMB/USD for the current period and the prior period, respectively. The BRL weighted average exchange rate was ~~3.24~~3.77 BRL/USD and ~~3.29~~3.25 BRL/USD for the current period and the prior period, respectively.

Segment Profit for the prior period	$	9,677		$	11,108
Net decrease in underlying margins					(3,294	)
Unfavorable foreign currency translation effects (primarily RMB and BRL)					(1,158	)
Increase in sales volumes		2,985			1,661
Favorable foreign currency translation effects (RMB and BRL)		221
Decrease in underlying margins		(1,512	)
Segment Profit for the current period	$	11,371		$	8,317

The ~~increase~~decrease in Segment Profit for the International Segment was primarily attributable to ~~(i) improved sales volumes~~lower conversion margin due to pressures from increased raw material costs and ~~(ii) favorable~~competition, along with unfavorable foreign currency translation effects ~~due to~~as the ~~strengthening of~~BRL and the RMB ~~and~~were comparably weaker during the ~~BRL versus the USD,~~current period, partially offset by ~~a greater mix~~margins associated with overall higher sales volumes.

~~International Segment net sales and Segment Profit,~~Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 25, 2018

The components of Net income, each component as a percentage of ~~total consolidated~~net sales and the percentage increase or decrease over the prior nine-month period amounts, ~~were 30.5% and 41.1%, respectively,~~are as follows:

	For the Nine Months Ended
	March 31, 2019						March 25, 2018
				% of Net Sales						% of Net Sales			% Change
Net sales	$	529,311			100.0		$	497,587			100.0			6.4
Cost of sales		481,345			90.9			435,063			87.4			10.6
Gross profit		47,966			9.1			62,524			12.6			(23.3	)
Selling, general and administrative expenses		40,672			7.7			41,335			8.3			(1.6	)
Provision (benefit) for bad debts		381			0.1			(104	)		—		nm
Other operating expense, net		1,218			0.2			1,763			0.4			(30.9	)
Operating income		5,695			1.1			19,530			3.9			(70.8	)
Interest expense, net		3,630			0.7			3,118			0.6			16.4
Loss on extinguishment of debt		131			—			—			—			—
Equity in earnings of unconsolidated affiliates		(3,126	)		(0.6	)		(3,842	)		(0.8	)		(18.6	)
Income before income taxes		5,060			1.0			20,254			4.1			(75.0	)
Provision (benefit) for income taxes		3,606			0.7			(684	)		(0.1	)	nm
Net income	$	1,454			0.3		$	20,938			4.2			(93.1	)

Consolidated net sales for the current nine-month period increased by $31,724, or 6.4%, as compared to ~~25.1%~~the prior nine-month period. For our NACA operations, the current nine-month period consisted of 40 fiscal weeks, while the prior nine-month period consisted of 39 fiscal weeks. Net sales were adversely impacted by unfavorable foreign currency translation of approximately $17,200.

Consolidated sales volumes increased 7.6%, attributable to continued growth in sales of Flake and ~~36.5%~~Chip, along with higher sales of dyed yarn in connection with the dyed yarn portfolio acquisition that closed in the fourth quarter of fiscal 2018, in the Polyester Segment and growth in sales of REPREVE^® staple fiber and other PVA products in the International Segment. Sales continue to expand in the International Segment as our PVA portfolio resonates with our brand partners that are focused on sustainable solutions. We believe the softness in the domestic environment and competition from imports continue to be challenges for the domestic textile supply chain. Our Nylon Segment results are adversely impacted by the ongoing global trend of declining demand for nylon socks, ladies’ hosiery and intimate apparel.

Consolidated average sales prices decreased 1.1%, ~~respectively,~~as price increases made in response to rising raw material costs during calendar 2018 were more than offset by (i) unfavorable foreign currency translation and (ii) the disproportionate growth of lower-priced Flake and Chip in the current nine-month period.

PVA products at the end of the current nine-month period comprised approximately 45% of consolidated net sales, equal to the 45% ratio at the end of fiscal 2018, and slightly higher than the 44% ratio for the prior nine-month period. Within the PVA product category, our customers can choose between various solutions, some of which carry higher margins than others. Accordingly, growth in PVA sales does not necessarily translate into higher margins or increased profitability on a consolidated basis.

Unfavorable foreign currency translation is primarily associated with the weakening of the BRL and RMB.

Gross profit for the current nine-month period decreased by $14,558, or 23.3%, as compared to the prior nine-month period. The gross profit decline is primarily attributable to (i) lower conversion margin in the Polyester and International Segments, in which the current nine-month period was unfavorably impacted by increasing raw material costs, (ii) unfavorable foreign currency translation of approximately $3,800, (iii) disproportionate growth of lower margin products and (iv) weaker fixed cost absorption.

The change in ~~selling, general and administrative (“~~SG~~&A”)~~&A expenses is as follows:

Total SG&A expenses were ~~higher~~lower for the current nine-month period compared to the prior nine-month period, primarily as a result of significant forfeitures of share-based compensation and variable compensation in connection with executive officer departures that occurred in fiscal 2019, partially offset by (i) an increase in ~~compensation expenses due~~fees paid to ~~recent talent acquisition~~professional service providers for legal and ~~higher incentive compensation expenses~~audit services and (ii) an ~~increase~~additional week in supplemental retirement plan expenses due to comparatively higher performance of the stock market index benchmark, partially offset by other net decreases that include fees paid to external service providers and other administrative expenses.fiscal 2019.

There iswas no significant activity reflected in the current nine-month period or the prior ~~periods.~~nine-month period for bad debts.

~~The change in other~~Other operating expense, net is primarily ~~attributable to foreign currency losses~~reflects severance expense recorded in the current nine-month period ~~mostly resulting from changes~~and foreign currency transaction losses recorded in the ~~value of USDs held by our subsidiary in China, while the~~ prior ~~period includes executive relocation expenses.~~nine-month period.

Interest ~~expense, net~~on debt obligations increased from the prior nine-month period ~~as reflected below,~~to the current nine-month period primarily due to ~~(i)~~ a ~~higher weighted average~~general increase in market interest ~~rate resulting from fixing~~rates and principal on the variable rate portion of ~~the~~our debt. The components of consolidated interest rate on $75,000 of debt principal, beginning in May 2017, (ii) less interest capitalized to project costs and (iii) a prior period favorable mark-to-market adjustment on the historical interest rate swap that terminated in May 2017. expense, net are as follows:

	For the Three Months Ended						For the Nine Months Ended
	December 24, 2017			December 25, 2016			March 31, 2019			March 25, 2018
Interest and fees on the ABL Facility	$	932		$	806		$	3,467		$	2,789
Other interest		211			259			563			633
Subtotal of interest on debt obligations		1,143			1,065			4,030			3,422
Other components of interest expense		47			(151	)		48			140
Total interest expense		1,190			914			4,078			3,562
Interest income		(181	)		(183	)		(448	)		(444	)
Interest expense, net	$	1,009		$	731		$	3,630		$	3,118

On December 23, 2016, UNIFI, through a wholly owned foreign subsidiary, entered into an agreement to sell its historical 60% equity ownership interest in Renewables to the existing third-party joint venture partner for $500 in cash and release of certain debt obligations. In connection with the transaction, UNIFI recognized a loss on sale of business of $1,662.

The components of ~~(earnings) loss~~earnings from unconsolidated affiliates are as follows:

	For the Three Months Ended						For the Nine Months Ended
	December 24, 2017			December 25, 2016			March 31, 2019			March 25, 2018
Loss from PAL	$	376		$	745
Earnings from PAL							$	(2,154	)	$	(2,957	)
Earnings from nylon joint ventures		(587	)		(378	)		(972	)		(885	)
Total equity in (earnings) loss of unconsolidated affiliates	$	(211	)	$	367
Total equity in earnings of unconsolidated affiliates							$	(3,126	)	$	(3,842	)

As a percentage of consolidated income before income taxes		3.0	%		(5.8	)%		61.8	%		19.0	%

UNIFI’s 34% share of PAL’s ~~loss~~earnings decreased from $2,957 in the prior nine-month period to $2,154 in the current ~~period versus the prior period, which~~nine-month period. The decrease was primarily attributable to ~~lower depreciation expense. The earnings from~~higher raw material costs and reduced operating leverage, most notably in the ~~nylon joint ventures experienced an increase primarily due to higher volumes and improved margins for~~comparable first fiscal quarters of the current nine-month period ~~despite overall softness in~~and the ~~nylon market.~~prior nine-month period.

The effective tax rate is subject to variation due to numerous factors, including variability in the amount of pre-tax and taxable income, the mix of income by jurisdiction, changes in deferred tax valuation allowances, and changes in statutes, regulations and case law. Additionally, the impacts of discrete items, non-deductible expenses, and the tax on global intangible low taxed income is greater when pre-tax income is lower.

The effective tax rate for the current nine-month period was higher than the U.S. federal statutory rate primarily due to the effects of the GILTI provisions enacted in H.R. 1, losses in tax jurisdictions for which no tax benefit could be recognized, earnings taxed at higher rates in foreign jurisdictions, and foreign withholding taxes. Tax expense for the current period also included $880 of expense related to the enactment of H.R. 1. These rate detriments were partially offset by benefits of approximately $2,045 for tax credits related to prior years.

The effective tax rate for the ~~current~~prior nine-month period is lower than the U.S. statutory tax rate primarily due to the $4,500 tax benefit resulting from the revaluation of UNIFI’s domestic deferred tax balances for the lower U.S. statutory tax rate, the release of a $3,807 valuation allowance and foreign income being taxed at lower rates. These benefits were partially offset by a ~~$1,700~~$1,600 provisional charge for the deemed mandatory repatriation of foreign earnings and profits, net of foreign tax credits, and by losses in tax jurisdictions for which no tax benefit ~~can currently~~could be recognized.

The effective tax rate for the prior period is lower than the U.S. statutory tax rate primarily due to foreign income being taxed at lower rates and a decrease in the valuation allowance for UNIFI’s investment in PAL. These benefits were partially offset by losses in tax jurisdictions for which no tax benefit can currently be recognized and state and local income taxes net of federal benefits.

Net ~~Income~~income for the current nine-month period was ~~$11,802,~~$1,454, or ~~$0.63~~$0.08 per ~~diluted~~ share, compared to ~~$4,591,~~$20,938, or ~~$0.25~~$1.12 per diluted share, for the prior ~~period. The increase was primarily attributable to (i) a significantly lower effective tax rate and (ii) a prior period loss on sale of business, partially offset by higher operating expenses.~~

~~Adjusted EBITDA for the current period was $13,893, compared to $14,468 for the prior~~nine-month period. The decrease was primarily attributable to (i) lower gross profit primarily relating to higher ~~operating expenses, as described in the discussions above.~~polyester raw material costs and competitive pressures contributing to weaker fixed cost absorption and a weaker sales mix and (ii) a higher effective tax rate.

~~Six Months Ended December 24, 2017 Compared to Six Months Ended December 25, 2016~~

~~The components~~Following is a discussion and analysis of ~~Net Income, each component as a percentage~~the revenue and profitability performance of ~~net sales and the percentage increase or decrease over the prior six-month period amounts are as follows:~~

For the Six Months Ended

December 24, 2017

December 25, 2016

% of
Net Sales

% of
Net Sales

%
Change

Net sales

$
331,720

100.0

$
315,124

100.0

5.3

Cost of sales

285,752

86.1

269,447

85.5

6.1

Gross profit

45,968

13.9

45,677

14.5

0.6

Selling, general and administrative expenses

27,489

8.3

24,278

7.7

13.2

Benefit for bad debts

(131
)

—

(462
)

(0.1
)

(71.6
)
Other operating expense, net

663

0.2

249

0.1

166.3

Operating income

17,947

5.4

21,612

6.8

(17.0
)
Interest expense, net

2,113

0.6

1,277

0.4

65.5

Loss on sale of business

—

—

1,662

0.5

nm

Equity in earnings of unconsolidated affiliates

(3,298
)

(1.0
)

(473
)

(0.2
)

597.3

Income before income taxes

19,132

5.8

19,146

6.1

(0.1
)
(Benefit) provision for income taxes

(1,630
)

(0.5
)

5,650

1.8

(128.8
)
Net income including non-controlling interest

20,762

6.3

13,496

4.3

53.8

Less: net loss attributable to non-controlling interest

—

—

(498
)

(0.1
)

(100.0
)
Net income attributable to Unifi, Inc.

$
20,762

6.3

$
13,994

4.4

48.4

~~Consolidated net sales~~UNIFI’s reportable segments for the current ~~six-month period increased by $16,596, or 5.3%, as compared to the prior six-month~~nine-month period.

Consolidated sales volumes increased 11.0%, attributable to continued growth in sales of recycled polyester Chip and plastic bottle flake in the Polyester Segment and staple fiber and other PVA products in the International Segment. Sales continue to expand in the International Segment as our PVA portfolio resonates with numerous customers. The increase in sales volumes was partially offset by soft yarn sales in the Polyester and Nylon Segments. We believe the softness in the domestic environment continues to be a challenge for the textile supply chain. Our nylon business results also reflect the current global trend of declines in demand for nylon socks, ladies’ hosiery and intimate apparel.

Consolidated average sales prices decreased 5.5%, attributable to disproportionate growth of lower-priced recycled polyester Chip, plastic bottle flake and staple fiber among the Polyester and International Segments, as well as a lower proportion of nylon products

that carry higher selling prices. The decrease in consolidated sales pricing was partially offset by a benefit from net favorable foreign currency translation compared to the prior period of approximately $1,600, primarily associated with the strengthening of the BRL and the RMB.

Gross profit for the current six-month period increased by $291, or 0.6%, as compared to the prior six-month period. The Nylon Segment achieved an increase in gross margin rate due in part to a more favorable sales mix and cost management. For the International Segment, gross profit increased due to sales growth; however, margins were lower due to a less favorable sales mix and pressure from higher costs. For the Polyester Segment, the decline in gross margin rate was primarily due to a greater mix of lower margin product sales and incremental depreciation, primarily due to expanded recycling operations, partially offset by the conversion services performed for Eastman on bi-component machinery, a revenue stream that did not exist in the prior six-month period. Consolidated gross profit for the current six-month period also included approximately $400 of favorable foreign currency translation.

~~Further details regarding the changes in net sales and gross profit, by reportable segment, follow.~~

The components of Segment Profit, each component as a percentage of net sales and the percentage increase or decrease over the prior ~~six-month~~nine-month period amounts for the Polyester Segment, are as follows:

	For the Six Months Ended											For the Nine Months Ended
	December 24, 2017				December 25, 2016							March 31, 2019					March 25, 2018
			% of Net Sales				% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	178,054		100.0	$	171,356		100.0		3.9		$	281,665			100.0	$	266,817			100.0		5.6
Cost of sales		160,565		90.2		152,435		89.0		5.3			269,444			95.7		244,513			91.6		10.2
Gross profit		17,489		9.8		18,921		11.0		(7.6	)		12,221			4.3		22,304			8.4		(45.2	)
Depreciation expense		7,840		4.4		6,492		3.8		20.8			12,047			4.3		11,862			4.4		1.6
Segment Profit	$	25,329		14.2	$	25,413		14.8		(0.3	)	$	24,268			8.6	$	34,166			12.8		(29.0	)

Segment net sales as a percentage of consolidated amounts													53.2	%				53.6	%
Segment Profit as a percentage of consolidated amounts													38.6	%				44.1	%

The increase in net sales for the Polyester Segment from the prior nine-month period to the current nine-month period was primarily attributable to (i) ~~higher sales of plastic bottle flake, recycled polyester Chip and POY and~~an additional week in the current nine-month period, (ii) the conversion services performed for Eastman on bi-component machinery. The unfavorable change in sales mix was due to (a) lower sales volumes of higher-priced textured, dyed and beamed yarns and (b) higher sales volumes of ~~lower-priced plastic bottle flake, recycled polyester~~Flake and Chip, (iii) higher sales volumes of dyed yarn in connection with the dyed yarn portfolio acquisition that closed in the fourth quarter of fiscal 2018 and ~~POY.~~(iv) higher selling prices in response to several months of raw material related price increases during calendar 2018. However, this favorability was partially offset by a weaker sales mix, characterized by lower textured yarn volumes.

The decrease in Segment Profit for the Polyester Segment from the prior nine-month period to the current nine-month period was primarily attributable to (i) lower conversion margin, in which the current nine-month period was unfavorably impacted by higher raw material costs, (ii) the unfavorable sales mix shift towards lower-margin products discussed above in the net sales analysis ~~along with raw material~~and (iii) weaker fixed cost ~~pressures, partially offset by the benefit of the conversion services performed for Eastman on bi-component machinery and an increase in sales volumes.~~absorption.

Polyester Segment net sales and Segment Profit, as a percentage of total consolidated amounts, were 53.7% and 45.4%, respectively, for the current six-month period, compared to 54.4% and 46.9%, respectively, for the prior six-month period.

	For the Six Months Ended											For the Nine Months Ended
	December 24, 2017				December 25, 2016							March 31, 2019					March 25, 2018
			% of Net Sales				% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	51,930		100.0	$	56,797		100.0		(8.6	)	$	76,159			100.0	$	75,966			100.0		0.3
Cost of sales		45,540		87.7		51,037		89.9		(10.8	)		69,671			91.5		68,563			90.3		1.6
Gross profit		6,390		12.3		5,760		10.1		10.9			6,488			8.5		7,403			9.7		(12.4	)
Depreciation expense		1,089		2.1		1,040		1.9		4.7			1,576			2.1		1,649			2.2		(4.4	)
Segment Profit	$	7,479		14.4	$	6,800		12.0		10.0		$	8,064			10.6	$	9,052			11.9		(10.9	)

Segment net sales as a percentage of consolidated amounts													14.4	%				15.3	%
Segment Profit as a percentage of consolidated amounts													12.8	%				11.7	%

The ~~decrease~~increase in net sales for the Nylon Segment from the prior nine-month period to the current nine-month period was primarily attributable to ~~(i) lower~~the additional week of sales ~~volumes as a result of soft domestic market conditions~~ in ~~which nylon socks, ladies’ hosiery and intimates have experienced demand declines and (ii)~~fiscal 2019, partially offset by a lower-priced sales ~~mix.~~

The ~~increase~~decrease in Segment Profit for the Nylon Segment from the prior nine-month period to the current nine-month period was primarily attributable to a ~~more~~less profitable sales mix and weaker fixed cost ~~management.~~

Nylon Segment net sales and Segment Profit, as a percentage of total consolidated amounts, were 15.7% and 13.4%, respectively, for the current six-month period, compared to 18.0% and 12.6%, respectively, for the prior six-month period.absorption.

	For the Six Months Ended										For the Nine Months Ended
	December 24, 2017				December 25, 2016						March 31, 2019					March 25, 2018
			% of Net Sales				% of Net Sales		% Change					% of Net Sales					% of Net Sales		% Change
Net sales	$	99,705		100.0	$	84,212		100.0		18.4	$	168,271			100.0	$	151,694			100.0		10.9
Cost of sales		77,733		78.0		62,493		74.2		24.4		139,275			82.8		119,050			78.5		17.0
Gross profit		21,972		22.0		21,719		25.8		1.2		28,996			17.2		32,644			21.5		(11.2	)
Depreciation expense		813		0.9		474		0.6		71.5		1,146			0.7		1,249			0.8		(8.2	)
Segment Profit	$	22,785		22.9	$	22,193		26.4		2.7	$	30,142			17.9	$	33,893			22.3		(11.1	)

Segment net sales as a percentage of consolidated amounts												31.8	%				30.5	%
Segment Profit as a percentage of consolidated amounts												47.9	%				43.7	%

The increase in net sales for the International Segment from the prior nine-month period to the current nine-month period was primarily attributable to (i) higher sales volumes ~~from~~for our Asian subsidiaries due to growth in our REPREVE^® portfolios ~~particularly staple fiber~~ and ~~recycled polyester Chip,~~ (ii) higher ~~sales volumes at our Brazilian subsidiary~~pricing on a local currency basis due to increased ~~demand for synthetic yarns, including air-covered PVA products for use~~raw material costs, partially offset by (a) lower sales volumes in ~~applications such as stretch denim,~~Brazil due to a softer economic environment and ~~(iii) favorable~~(b) unfavorable foreign currency translation ~~due~~primarily attributable to the ~~strengthening~~weakening of the BRL and the ~~RMB. These benefits were partially offset by a decrease in~~RMB against the USD during the current nine-month period.

The RMB average ~~selling price in Asia due to a greater mix of lower-priced product sales.~~

exchange rate was 6.82 RMB/USD and 6.55 RMB/USD for the current nine-month period and the prior nine-month period, respectively. The BRL weighted average exchange rate was ~~3.20~~3.85 BRL/USD and ~~3.27~~3.21 BRL/USD for the current ~~six-month~~nine-month period and the prior ~~six-month period, respectively. The RMB weighted average exchange rate was 6.64 RMB/USD and 6.75 RMB/USD for the current six-month period and the prior six-month~~nine-month period, respectively.

The ~~increase~~decrease in Segment Profit for the International Segment was primarily attributable to (i) ~~improved sales volumes and~~margin pressure from higher raw material costs, (ii) ~~favorable~~unfavorable foreign currency translation effects ~~due to the strengthening of both~~as the BRL and the RMB ~~versus~~weakened against the USD during the current nine-month period and (iii) a less profitable sales mix in Asia, partially offset by ~~a greater mix of lower-margin product sales in Asia.~~

~~International Segment net sales and Segment Profit, as a percentage of total consolidated amounts, were 30.1% and 40.8%, respectively, for~~ the ~~current six-month period, compared to 26.7% and 41.0%, respectively, for the prior six-month period.~~

~~Total SG&A expenses were higher for the current six-month period compared to the prior six-month period, primarily as a result of an~~ increase in ~~compensation expenses due to recent talent acquisition and other net increases.~~

~~The benefit in the prior six-month period reflects a decrease in the reserve against specifically identified customer balances in the Polyester and International Segments.~~

The change in other operating expense, net is primarily attributable to foreign currency losses in the current six-month period, mostly resulting from changes in the value of USDs held by our subsidiary in China.

Interest expense, net increased from the prior six-month period, as reflected below, primarily due to (i) a higher weighted average interest rate resulting from fixing the variable portion of the interest rate on $75,000 of debt principal, beginning in May 2017, (ii) less interest capitalized to project costs and (iii) a prior period favorable mark-to-market adjustment on the historical interest rate swap that terminated in May 2017.

UNIFI’s 34% share of PAL’s earnings increased in the current six-month period versus the prior six-month period, which was primarily attributable to improved operating margins and lower depreciation expense. The earnings from the nylon joint ventures experienced a decrease primarily due to softness in the nylon market, consistent with the results of the Nylon Segment, as well as higher raw material costs.

The effective tax rate for the current six-month period is lower than the U.S. statutory tax rate primarily due to the $4,500 tax benefit resulting from the revaluation of UNIFI’s domestic deferred tax balances for the lower U.S. statutory tax rate, the release of a $3,807 valuation allowance and foreign income being taxed at lower rates. These benefits were partially offset by a $1,700 provisional charge for the deemed mandatory repatriation of foreign earnings and profits, net of foreign tax credits, and by losses in tax jurisdictions for which no tax benefit can currently be recognized.

The effective tax rate for the prior six-month period is lower than the U.S. statutory tax rate primarily due to foreign income being taxed at lower rates and a decrease in the valuation allowance for UNIFI’s investment in PAL. These benefits were partially offset by losses in tax jurisdictions for which no tax benefit can currently be recognized and state and local income taxes net of federal benefits.

Net Income for the current six-month period was $20,762, or $1.12 per diluted share, compared to $13,994, or $0.76 per diluted share, for the prior six-month period. The increase was primarily attributable to a significantly lower effective tax rate, higher earnings from PAL and a loss on sale of business in the prior six-month period, partially offset by higher operating expenses and interest expense.

~~Adjusted EBITDA for the current six-month period was $29,716, compared to $32,379 for the prior six-month period. The decrease was primarily attributable to higher operating expenses, as~~sales volumes described in the ~~discussions~~net sales analysis above.

UNIFI’s primary capital requirements are for working capital, capital expenditures, debt service and stock repurchases. UNIFI’s primary sources of capital are cash generated from operations and borrowings available under the ABL Revolver. For the current ~~six-month~~nine-month period, cash ~~generated from~~used in operations was ~~$20,389,~~$1,517, and, at ~~December 24, 2017,~~March 31, 2019, excess availability under the ABL Revolver was ~~$54,379.~~$62,735. As further described under “Cash (Used in) Provided by Operating Activities” below, the cash used in operating activities for the current nine-month period is attributable to several factors, including an increase in inventories due to domestic production rates that outpaced domestic sales during the current nine-month period, along with weaker cash-based earnings.

As of ~~December 24, 2017,~~March 31, 2019, all of UNIFI’s ~~$133,540~~$136,879 of debt obligations were guaranteed by certain of its domestic operating subsidiaries, while nearly all of UNIFI’s cash and cash equivalents were held by its foreign subsidiaries. Cash and cash equivalents held by such foreign subsidiaries may not be presently available to fund UNIFI’s domestic capital requirements, including its domestic debt obligations. UNIFI employs a variety of tax planning and financing strategies to ensure that its worldwide cash is available in the locations where it is needed. The following table presents a summary of cash and cash equivalents, borrowings available under financing arrangements, liquidity, working capital and total debt obligations as of ~~December 24, 2017~~March 31, 2019 for domestic and foreign operations:

	Domestic		Foreign		Total		Domestic		Foreign		Total
Cash and cash equivalents	$	14	$	48,601	$	48,615	$	14	$	27,884	$	27,898
Borrowings available under financing arrangements		54,379		—		54,379		62,735		—		62,735
Liquidity	$	54,393	$	48,601	$	102,994	$	62,749	$	27,884	$	90,633

Working capital	$	90,441	$	105,371	$	195,812	$	97,692	$	97,537	$	195,229
Total debt obligations	$	133,540	$	—	$	133,540	$	136,879	$	—	$	136,879

On ~~March 26, 2015,~~December 18, 2018, Unifi, Inc. and certain of its ~~subsidiary, Unifi Manufacturing, Inc.,~~subsidiaries entered into ~~an Amended and Restated~~the 2018 Amendment, which amended the Credit Agreement. The Credit Agreement ~~(as subsequently amended,~~provides for the ~~“Amended Credit Agreement”) for~~ABL Facility, which is a $200,000 senior secured credit facility ~~(the~~that includes the $100,000 ABL ~~Facility) with a syndicate of lenders. The~~Revolver and the ABL ~~Facility consists of a $100,000 revolving credit facility (the ABL Revolver) and a term loan that~~Term Loan, which can be reset up to a maximum amount of $100,000, once per fiscal year, if certain conditions are ~~met (the ABL Term Loan).~~met. The ABL Facility has a maturity date of December 18, 2023.

The ABL Facility is secured by a first-priority perfected security interest in substantially all owned property and assets (together with all proceeds and products) of Unifi, Inc., Unifi Manufacturing, Inc. and certain subsidiary guarantors ~~(the~~(collectively, the “Loan Parties”). It is also secured by a first-priority security interest in all (or 65% in the case of ~~certain~~UNIFI’s first-tier controlled foreign ~~corporations,~~subsidiary, as required by the lenders) of the stock of (or other ownership interests in) each of the Loan Parties (other than Unifi, Inc.) and certain subsidiaries of the Loan Parties, together with all proceeds and products thereof.

If excess availability under the ABL Revolver falls below the defined Trigger Level, a financial covenant requiring the Loan Parties to maintain a fixed charge coverage ratio on a ~~monthly~~quarterly basis of at least 1.05 to 1.00 becomes effective. The Trigger Level as of ~~December 24, 2017~~March 31, 2019 was ~~$23,750.~~$25,000. In addition, the ABL Facility contains restrictions on particular payments and investments, including

certain restrictions on the payment of dividends and share repurchases. Subject to specific provisions, the ABL Term Loan may be prepaid at par, in whole or in part, at any time before the maturity date, at UNIFI’s discretion.

ABL Facility borrowings bear interest at the London Interbank Offer Rate (“LIBOR”) plus an applicable margin of ~~1.50%~~1.25% to ~~2.00%~~1.75%, or the Base Rate (as defined below) plus an applicable margin of ~~0.50%~~0.25% to ~~1.00%~~0.75%, with interest currently being paid on a monthly basis. The applicable margin is based on (i) the excess availability under the ABL Revolver and (ii) the consolidated leverage ratio, calculated as of the end of each fiscal quarter. The Base Rate means the greater of (a) the prime lending rate as publicly announced from time to time by Wells Fargo Bank, National Association, (b) the Federal Funds Rate plus ~~0.50% or~~0.5% and (c) LIBOR plus ~~1.00%~~1.0%. UNIFI’s ability to borrow under the ABL Revolver is limited to a borrowing base equal to specified percentages of eligible accounts receivable and inventory and is subject to certain conditions and limitations. There is also a monthly unused line fee under the ABL Revolver of 0.25%.

As of ~~December 24, 2017,~~March 31, 2019, UNIFI was in compliance with all financial covenants in the ~~Amended~~ Credit Agreement and the excess availability under the ABL Revolver was ~~$54,379.~~$62,735. At ~~December 24, 2017,~~March 31, 2019, the fixed charge coverage ratio was ~~1.11~~1.00 to 1.00 and UNIFI had $400 of standby letters of credit, none of which ~~had~~have been drawn upon.

UNIFI currently maintains three interest rate swaps that fix LIBOR at approximately 1.9% on $75,000 of variable-rate ~~debt under the ABL Facility.~~debt. Such swaps are scheduled to terminate in May 2022.

		Weighted Average								Weighted Average
	Scheduled	Interest Rate as of	Principal Amounts as of						Scheduled	Interest Rate as of	Principal Amounts as of
	Maturity Date	December 24, 2017	December 24, 2017			June 25, 2017			Maturity Date	March 31, 2019	March 31, 2019			June 24, 2018
ABL Revolver	March 2020	3.3%	$	21,900		$	9,300		December 2023	3.7%	$	24,000		$	28,100
ABL Term Loan ⁽¹⁾	March 2020	3.3%		90,000			95,000		December 2023	3.3%		100,000			85,000
Capital lease obligations	(2)	3.7%		21,640			25,168		(2)	3.9%		12,879			18,107
Total debt				133,540			129,468					136,879			131,207
Current portion of capital lease obligations				(7,112	)		(7,060	)				(6,054	)		(6,996	)
Current portion of other long-term debt				(10,000	)		(10,000	)				(10,000	)		(10,000	)
Unamortized debt issuance costs				(840	)		(1,026	)				(1,021	)		(658	)
Total long-term debt			$	115,588		$	111,382				$	119,804		$	113,553

(2) Scheduled maturity dates for capital lease obligations range from ~~July 2018~~August 2019 to November 2027.

In addition to making payments in accordance with the scheduled maturities of debt required under its existing debt obligations, UNIFI may, from time to time, elect to repay additional amounts borrowed under the ABL Facility. Funds to make such repayments may come from the operating cash flows of the business or other sources and will depend upon UNIFI’s strategy, prevailing market conditions, liquidity requirements, contractual restrictions and other factors.

The following table presents the scheduled maturities of UNIFI’s outstanding debt obligations for the remainder of fiscal ~~2018 and~~2019, the following four fiscal years and thereafter:

	Fiscal 2018		Fiscal 2019		Fiscal 2020		Fiscal 2021		Fiscal 2022		Thereafter		Fiscal 2019		Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Thereafter
ABL Revolver	$	—	$	—	$	21,900	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	24,000
ABL Term Loan		5,000		10,000		75,000		—		—		—		2,500		10,000		10,000		10,000		10,000		57,500
Capital lease obligations		3,533		6,996		5,519		2,624		2,417		551		1,704		5,559		2,633		2,417		90		476
Total	$	8,533	$	16,996	$	102,419	$	2,624	$	2,417	$	551	$	4,204	$	15,559	$	12,633	$	12,417	$	10,090	$	81,976

The following table presents the components of working capital and the reconciliation of working capital to Adjusted Working Capital:

	December 24, 2017			June 25, 2017			March 31, 2019			June 24, 2018
Cash and cash equivalents	$	48,615		$	35,425		$	27,898		$	44,890
Receivables, net		80,847			81,121			91,701			86,273
Inventories		116,239			111,405			130,981			126,311
Income tax receivable								13,039			10,291
Other current assets		17,466			15,686			16,365			6,529
Accounts payable		(35,420	)		(41,499	)		(47,726	)		(48,970	)
Accrued expenses		(12,990	)		(16,144	)		(13,076	)		(17,720	)
Other current liabilities		(18,945	)		(18,411	)		(23,953	)		(18,313	)
Working capital	$	195,812		$	167,583		$	195,229		$	189,291

Less: Cash and cash equivalents		(48,615	)		(35,425	)		(27,898	)		(44,890	)
Less: Other current assets		(17,466	)		(15,686	)
Less: Income tax receivable								(13,039	)		(10,291	)
Less: Other current liabilities		18,945			18,411			23,953			18,313
Adjusted Working Capital	$	148,676		$	134,883		$	178,245		$	152,423

Working capital increased from ~~$167,583~~$189,291 as of June ~~25, 2017~~24, 2018 to ~~$195,812~~$195,229 as of ~~December 24, 2017,~~March 31, 2019, while Adjusted Working Capital increased from ~~$134,883~~$152,423 to ~~$148,676. Working capital and Adjusted Working Capital are within our range of expectations based on the composition of the underlying business and global structure.~~$178,245.

The ~~increase~~decrease in cash and cash equivalents ~~reflects~~was driven by the ~~strong performance~~utilization of ~~our international subsidiaries and~~cash to retire ABL Revolver debt in advance of UNIFI’s entering into the ~~intent to leave cash available in foreign jurisdictions for future expansion.~~2018 Amendment as described above. The ~~decrease~~increase in receivables, net iswas primarily attributable to ~~lower~~an increase in days sales ~~associated with the routine December shutdown period.~~outstanding due to a general increase in customer payment terms. The increase in inventories ~~is primarily~~was attributable to ~~increased international~~domestic finished goods production outpacing domestic sales ~~activity~~ and higher raw material costs. The increase in income tax receivable reflects the ~~impact~~timing of ~~the routine December shutdown period.~~tax payments and refunds. The increase in other current assets ~~is attributable~~reflects the addition of contract assets that relate to ~~an increase~~products on hand that have been reflected in ~~income taxes receivable.~~revenue but not yet shipped to the associated customer (in connection with the adoption of the New Revenue Recognition Guidance). The decrease in accounts payable ~~is mainly due to~~primarily reflects weaker seasonal demand in the ~~routine December shutdown period.~~current period, partially offset by more favorable vendor payment terms. The decrease in accrued expenses iswas primarily attributable to ~~a net decrease in amounts due to employees, resulting from~~ the ~~timing of accrual and~~fiscal 2019 payment of ~~(i)~~ variable compensation earned in fiscal ~~2017~~2018 and ~~(ii) routine payrolls.~~comparatively lower accrued variable compensation for fiscal 2019. The change in other current liabilities ~~is insignificant.~~reflects an increase in income taxes payable due to the timing of tax payments.

During the current ~~six-month~~nine-month period, UNIFI invested approximately ~~$11,400~~$19,200 in capital projects primarily relating to ~~routine maintenance expenditures as well as the completion~~(i) further improvements in production capabilities and ~~start-up of the fourth production line~~technology enhancements in the ~~REPREVE~~^® ~~Recycling Center, which is intended~~Americas and (ii) annual maintenance capital expenditures. UNIFI will seek to ~~increase UNIFI’s capacity~~ensure that maintenance capital expenditures are sufficient to ~~produce recycled polyester Chip for internal consumption and external sales.~~allow continued production at high efficiencies.

Through the remainder of fiscal ~~2018,~~2019, UNIFI expects to invest an additional ~~$18,600~~$5,800 in capital projects (for an aggregate fiscal ~~2018~~2019 estimate of ~~$30,000)~~$25,000), which include (i) making further improvements in production capabilities and technology enhancements in the Americas and (ii) routine annual maintenance capital expenditures to allow continued efficient production.

The total amount ultimately invested in fiscal ~~2018~~2019 could be more or less than the anticipated amount, depending on the timing and scale of contemplated initiatives and other factors, and is expected to be funded by a combination of cash from operations and borrowings under the ABL Revolver. UNIFI expects the recent capital projects to provide benefits to future profitability. The additional assets from these capital projects consist primarily of machinery and equipment.

As a result of our continued focus on REPREVE^® and other PVA ~~yarns~~products as part of our mix enrichment strategy, we may incur additional expenditures for capital projects beyond the currently estimated amount, as we pursue new, currently unanticipated opportunities in order to expand our manufacturing capabilities for these products, for other strategic growth initiatives or to further streamline our manufacturing process, in which case we may be required to increase the amount of our working capital and long-term borrowings. If our strategy is successful, we would expect higher gross profit as a result of the combination of ~~potentially~~ higher sales volumes and an improved mix from higher-margin products.

On April 23, 2014, UNIFI announced ~~a stock repurchase program (the “2014 SRP”) to authorize~~that the Board had approved the 2014 SRP under which UNIFI was authorized to acquire up to $50,000 of its common stock. Under the 2014 SRP, UNIFI is authorized to repurchase shares at prevailing market prices, through open market purchases or privately negotiated transactions at such times and prices and in such manner as determined by management, subject to market conditions, applicable legal requirements, contractual obligations and other factors. Repurchases, if any, are expected to be financed through cash generated from operations and borrowings under the ABL Revolver, and are subject to applicable limitations and restrictions as set forth in the ABL Facility. The 2014 SRP has no stated expiration or termination date, and there is no time limit or specific time frame otherwise for repurchases. UNIFI may discontinue repurchases at any time that management determines additional purchases are not beneficial or advisable.

UNIFI made no repurchases of its shares of common stock during the current ~~six-month~~nine-month period. ~~As of December 24, 2017,~~Through October 31, 2018 (the date the 2014 SRP was terminated, as discussed below), UNIFI ~~had~~ repurchased a total of 806 shares, at an average price of $27.79 (for a total of $22,409, inclusive of commission costs) pursuant to the 2014 SRP.

On October 31, 2018, UNIFI announced that the Board had terminated the 2014 SRP and approved the 2018 SRP under which UNIFI is authorized to acquire up to $50,000 of its common stock. Under the 2018 SRP, purchases will be made from time to time in the open market at prevailing market prices, through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements and other factors. The share repurchase authorization is discretionary and has no expiration date.

As of ~~December 24, 2017, $27,603 remained~~March 31, 2019, $50,000 remains available for ~~share repurchases~~repurchase under the ~~2014~~2018 SRP.

UNIFI has met its historical liquidity requirements for working capital, capital expenditures, debt service requirements and other operating needs from its cash flows from operations and available borrowings. UNIFI believes that its existing cash balances, cash ~~provided by operating activities~~flows from operations and borrowings available under the ABL Revolver will enable UNIFI to comply with the terms of its indebtedness and meet its foreseeable liquidity requirements. Domestically, UNIFI’s cash balances, cash provided by operating activities and borrowings available under the ABL Revolver continue to be sufficient to fund UNIFI’s domestic operating activities as well as cash commitments for its investing and financing activities. For its existing foreign operations, UNIFI expects its existing cash balances and cash provided by operating activities will provide the needed liquidity to fund its foreign operating activities and any foreign investing activities, such as future capital expenditures. However, any significant expansion of our foreign operations may require cash sourced from our domestic subsidiaries.

The significant components of net cash (used in) provided by operating activities are summarized below. UNIFI analyzes net cash (used in) provided by operating activities utilizing the major components of the statements of cash flows prepared under the indirect method.

	For the Six Months Ended						For the Nine Months Ended
	December 24, 2017			December 25, 2016			March 31, 2019			March 25, 2018
Net income including non-controlling interest	$	20,762		$	13,496
Loss on sale of business		—			1,662
Net income							$	1,454		$	20,938
Equity in earnings of unconsolidated affiliates		(3,298	)		(473	)		(3,126	)		(3,842	)
Depreciation and amortization expense		11,135			9,731			17,242			16,844
Non-cash compensation expense		3,569			1,862			2,758			4,878
Deferred income taxes		(6,282	)		5,335			(190	)		(8,441	)
Subtotal		25,886			31,613			18,138			30,377

Distributions received from unconsolidated affiliates		8,678			1,500			1,380			11,226
Other changes		(14,175	)		(15,817	)
Net cash provided by operating activities	$	20,389		$	17,296
Change in inventories								(13,409	)		(9,424	)
Other changes in assets and liabilities								(7,626	)		(7,190	)
Net cash (used in) provided by operating activities							$	(1,517	)	$	24,989

The ~~increase~~decrease in net cash (used in) provided by operating activities from the prior ~~six-month~~nine-month period to the current ~~six-month~~nine-month period was primarily due to ~~distributions received~~(i) the significant increase in inventories and other current assets as shown and discussed above under “Working Capital,” (ii) approximately $9,800 less in dividends from ~~PAL of $7,178~~unconsolidated affiliates and ~~a comparably~~(iii) lower ~~build of working capital.~~Adjusted EBITDA. The ~~increase~~decrease was partially offset by ~~lower consolidated earnings, consistent with~~approximately $8,900 of tax refunds received in the ~~comparable decrease in Adjusted EBITDA discussed above.~~current nine-month period.

Cash Used in Investing Activities and ~~Cash~~(Used in) Provided by Financing Activities

UNIFI utilized ~~$11,345 (net)~~$19,190 for investing activities and was provided ~~$3,963~~$4,128 (net) from financing activities during the current ~~six-month~~nine-month period.

~~Significant investing~~Investing activities include ~~$11,360~~$19,199 for capital expenditures, primarily relating to ongoing maintenance capital expenditures and ~~the completion~~production capabilities and ~~start-up of the fourth production line~~technology enhancements in the ~~REPREVE~~^® ~~Recycling Center, which is intended to increase UNIFI’s capacity to produce recycled polyester Chip for internal consumption and external sales.~~Americas.

Significant financing activities include ~~$7,600 for net~~ borrowings against ~~long-term debt. The borrowings helped~~the ABL Facility primarily to fund ~~the investing activities described above.~~ capital expenditure activities.

UNIFI has incurred various financial obligations and commitments in its normal course of business. Financial obligations are considered to represent known future cash payments that UNIFI is required to make under existing contractual arrangements, such as debt and lease agreements.

~~There~~Except as effected by the 2018 Amendment to the Credit Agreement described under “Debt Obligations” above, there have been no further material changes in the scheduled maturities of UNIFI’s contractual obligations as disclosed in the table under the heading “Contractual Obligations” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the ~~2017~~2018 Form 10-K.

UNIFI is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on UNIFI’s financial condition, results of operations, liquidity or capital expenditures.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The SEC has defined a company’s most critical accounting policies as those involving accounting estimates that require management to make assumptions about matters that are highly uncertain at the time and where different reasonable estimates or changes in the accounting estimates from quarter to quarter could materially impact the presentation of the financial statements. UNIFI’s critical accounting policies are discussed in the ~~2017~~2018 Form 10-K. There were no material changes to these policies during the current nine-month period.

UNIFI is exposed to market risks associated with changes in interest rates, fluctuations in foreign currency exchange rates, and raw material and commodity costs, which may adversely affect its financial position, results of operations or cash flows. UNIFI does not enter into derivative financial instruments for trading purposes, nor is it a party to any leveraged financial instruments.

UNIFI is exposed to interest rate risk through its borrowing activities. As of ~~December 24, 2017,~~March 31, 2019, UNIFI had borrowings under its ABL Revolver and ABL Term Loan that totaled ~~$111,900~~$124,000 and contain variable rates of interest; however, UNIFI hedges a significant portion of such interest rate variability using interest rate swaps. ~~As of December 24, 2017, after~~After considering the variable rate debt obligations that have been hedged and UNIFI’s outstanding debt obligations with fixed rates of interest, UNIFI’s sensitivity analysis indicates that a 50-basis point increase in LIBOR as of ~~December 24, 2017~~March 31, 2019 would result in an increase in annual interest expense of less than ~~$200.~~$300.

UNIFI conducts its business in various foreign countries and in various foreign currencies. Each of UNIFI’s subsidiaries may enter into transactions (sales, purchases, fixed purchase commitments, etc.) that are denominated in currencies other than the subsidiary’s functional currency and thereby expose UNIFI to foreign currency exchange rate risk. UNIFI may enter into foreign currency forward contracts to hedge this exposure. UNIFI may also enter into foreign currency forward contracts to hedge its exposure for certain equipment or inventory purchase commitments. As of ~~December 24, 2017,~~March 31, 2019, UNIFI had no outstanding foreign currency forward contracts.

A significant portion of raw materials purchased by UNIFI’s Brazilian subsidiary are denominated in ~~USD,~~USDs, requiring UNIFI to regularly exchange BRL. A significant portion of sales and asset balances for our Asian subsidiaries are denominated in USDs. During recent fiscal years, UNIFI was negatively impacted by a devaluation of the BRL. ~~Predicting~~Also, fluctuations in the ~~BRL is impracticable.~~value of the RMB have generated foreign currency transaction impacts in certain fiscal quarters. Discussion and analysis surrounding the impact of fluctuations of the BRL ~~as well as~~and the RMB on UNIFI’s results of operations are included above in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

As of ~~December 24, 2017,~~March 31, 2019, UNIFI’s subsidiaries outside the United States, whose functional currency is other than the USD, held approximately 16.7% of UNIFI’s consolidated total assets. UNIFI does not enter into foreign currency derivatives to hedge its net investment in its foreign operations.

As of ~~December 24, 2017, $44,996,~~March 31, 2019, $24,361, or ~~92.6%~~87.3%, of UNIFI’s cash and cash equivalents was held outside the United States, of which ~~$31,061~~$16,688 was held in ~~USD and $12,439~~USDs, $1,152 was held in ~~BRL.~~RMBs and $6,301 was held in BRLs.

A significant portion of UNIFI’s raw ~~materials~~material and energy costs are derived from petroleum-based chemicals. The prices for petroleum and petroleum-related products and energy costs are volatile and dependent on global supply and demand dynamics, including certain geo-political risks. A sudden rise in the price of petroleum and petroleum-based products could have a material impact on UNIFI’s profitability. UNIFI does not use financial instruments to hedge its exposure to changes in these costs. The costs of the primary raw materials that UNIFI uses throughout all of its operations are generally based on USD pricing, and such materials are purchased at market or at fixed prices that are established with individual vendors as part of the purchasing process for quantities expected to be consumed in the ordinary course of business. UNIFI manages fluctuations in the cost of raw materials primarily by making corresponding adjustments to the prices charged to its customers. Certain customers are subject to an index-based pricing model in which UNIFI’s prices are adjusted based on the change in the cost of raw materials in the prior quarter. Pricing adjustments for other customers must be negotiated independently. At times, UNIFI is unable to pass on to its customers rises in raw material costs and, when it can, there typically is a time lag that adversely affects UNIFI and its margins during one or more periods. In ordinary market conditions in which raw material price increases have stabilized and sales volumes are consistent with traditional levels, UNIFI has historically been successful in implementing price adjustments within one to two fiscal quarters of the raw material price increase for index priced customers and within two fiscal quarters of the raw material price increase for non-index priced customers.

During fiscal 2018, UNIFI experienced elevated polyester raw material costs in connection with heightened petroleum prices, and these costs continued to increase during the first four months of fiscal 2019 due to a tighter global supply of polyester and increased demand for polyester feedstock. In combination with a difficult operating environment characterized by lower textured yarn volumes in the domestic market, where sufficient corresponding price increases were difficult to achieve, these higher costs drove a decline in gross profit for the first six months of fiscal 2019. Further, UNIFI had expected raw material costs to decline during the third quarter of fiscal 2019. However, those costs remained elevated, and UNIFI was unable to realize a more favorable raw material cost and selling price relationship during the third quarter of fiscal 2019.

UNIFI is also exposed to political risk, including changing laws and regulations governing international trade, such as quotas, tariffs and tax laws. The degree of impact and the frequency of these events cannot be predicted.

As of ~~December 24, 2017,~~March 31, 2019, an evaluation of the effectiveness of UNIFI’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was performed under the supervision and with the participation of UNIFI’s management, including the principal executive officer and the principal financial officer. Based on that evaluation, UNIFI’s principal executive officer and principal financial officer concluded that UNIFI’s disclosure controls and procedures are effective to ensure that information required to be disclosed by UNIFI in ~~the~~its reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that information required to be disclosed by UNIFI in the reports itUNIFI files or submits under the Exchange Act is accumulated and communicated to UNIFI’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in UNIFI’s internal control over financial reporting during the three months ended ~~December 24, 2017~~March 31, 2019 that have materially affected, or are reasonably likely to materially affect, UNIFI’s internal control over financial reporting.

We are from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to all such lawsuits, claims and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our results of operations, financial position or cash flows. We maintain liability insurance for certain risks that is subject to certain self-insurance limits.

~~There have been no material changes in UNIFI’s risk factors from those disclosed in “Item 1A. Risk Factors” in the 2017 Form 10-K.~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

New York		11-2165495
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

7201 West Friendly Avenue
Greensboro, North Carolina 27410
(Address of principal executive offices) (Zip Code)

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐

		Emerging growth company	☐

PART I—FINANCIAL INFORMATION
		Page

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of ~~December 24, 2017~~March 31, 2019 and June ~~25, 2017~~24, 2018	1

	Condensed Consolidated Statements of ~~Income~~Operations for the Three Months and ~~Six~~Nine Months Ended ~~December 24, 2017~~March 31, 2019 and ~~December~~March 25, ~~2016~~2018	2

	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three Months and ~~Six~~Nine Months Ended ~~December 24, 2017~~March 31, 2019 and ~~December~~March 25, ~~2016~~2018	3

	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~December 24, 2017~~March 31, 2019 and ~~December~~March 25, ~~2016~~2018	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2019

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3734

Item 4.	Controls and Procedures	3834

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	39

~~Item 1A.~~	~~Risk Factors~~	3935

Item 6.	Exhibits	4036

	Signatures	4137

Revenue earned in fourth quarter fiscal 2018 related to contracts open at June 24, 2018	$	8,593
Less associated cost of sales		7,992
Less associated income tax		142
Adjustment to retained earnings for contracts open at June 24, 2018	$	459

	December 24, 2017			June 25, 2017
Customer receivables	$	82,637		$	83,291
Allowance for uncollectible accounts		(2,089	)		(2,222	)
Reserves for yarn quality claims		(731	)		(1,278	)
Net customer receivables		79,817			79,791
Other receivables		1,030			1,330
Total receivables, net	$	80,847		$	81,121


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Financial Statement Line Item	Treatment under previous Revenue Recognition Guidance		Adjustments in connection with New Revenue Recognition Guidance			As reported under New Revenue Recognition Guidance
Revenue	$	528,414	$	897		$	529,311
Cost of sales	$	480,680	$	665		$	481,345
Gross profit (loss)	$	47,734	$	232		$	47,966
Inventory	$	139,610	$	(8,629	)	$	130,981
Contract assets	$	—	$	9,454		$	9,454

	Reserves for Yarn Quality Claims
Balance at June 25, 2017	$	(1,278	)
Charged to costs and expenses		(616	)
Translation activity		(12	)
Deductions		1,175
Balance at December 24, 2017	$	(731	)

	December 24, 2017			June 25, 2017
Land	$	2,931		$	2,931
Land improvements		15,099			15,066
Buildings and improvements		157,984			157,115
Assets under capital leases		34,568			34,568
Machinery and equipment		586,798			579,211
Computers, software and office equipment		19,850			19,360
Transportation equipment		4,780			4,798
Construction in progress		8,820			7,371
Gross property, plant and equipment		830,830			820,420
Less: accumulated depreciation		(621,107	)		(612,355	)
Less: accumulated amortization – capital leases		(6,024	)		(4,677	)
Total PP&E	$	203,699		$	203,388

Authorized under the Amended 2013 Plan	~~1,000~~1,250
Plus: ~~Certain awards~~Awards expired, forfeited or otherwise terminated unexercised	~~343~~125
Less: Awards granted to employees	(~~678~~265	)
Less: Awards granted to non-employee directors	(~~133~~89	)
Available for issuance under the Amended 2013 Plan	~~532~~1,021

	Foreign Currency Translation Adjustments			Changes in Interest Rate Swaps			Accumulated Other Comprehensive Loss
Balance at June 25, 2017	$	(32,372	)	$	(508	)	$	(32,880	)
Other comprehensive (loss) income, net of tax		(69	)		1,492			1,423
Balance at December 24, 2017	$	(32,441	)	$	984		$	(31,457	)

	As of June 25, 2017
	PAL		Other		Total
Current assets	$	247,820	$	10,340	$	258,160
Noncurrent assets		183,418		1,039		184,457
Current liabilities		54,389		3,588		57,977
Noncurrent liabilities		3,263		—		3,263
Shareholders’ equity and capital accounts		373,586		7,791		381,377

	For the Three Months Ended December 24, 2017											For the Three Months Ended December 25, 2016
	Pre-tax Income		Tax Impact			Net Income			Diluted EPS			Pre-tax Income		Tax Impact			Net Income		Diluted EPS
GAAP results	$	6,976	$	4,826		$	11,802		$	0.63		$	6,278	$	(1,924	)	$	4,591	$	0.25
Certain tax valuation allowance reversal ⁽¹⁾		—		(3,807	)		(3,807	)		(0.20	)		—		—			—		—
Loss on sale of business⁽²⁾		—		—			—			—			1,662		—			1,662		0.09
Adjusted results	$	6,976	$	1,019		$	7,995		$	0.43		$	7,940	$	(1,924	)	$	6,253	$	0.34

Diluted weighted average common shares outstanding										18,651										18,442

	For the Six Months Ended December 24, 2017											For the Six Months Ended December 25, 2016
	Pre-tax Income		Tax Impact			Net Income			Diluted EPS			Pre-tax Income		Tax Impact			Net Income		Diluted EPS
GAAP results	$	19,132	$	1,630		$	20,762		$	1.12		$	19,146	$	(5,650	)	$	13,994	$	0.76
Certain tax valuation allowance reversal ⁽¹⁾		—		(3,807	)		(3,807	)		(0.21	)		—		—			—		—
Loss on sale of business⁽²⁾		—		—			—			—			1,662		—			1,662		0.09
Adjusted results	$	19,132	$	(2,177	)	$	16,955		$	0.91		$	20,808	$	(5,650	)	$	15,656	$	0.85

Diluted weighted average common shares outstanding										18,598										18,391

SG&A expenses for the prior period	$	13,846
Decrease in compensation expenses		(2,672	)
Decrease due to foreign currency translation		(261	)
Other net decreases		(200	)
Increase in professional fees		726
SG&A expenses for the current period	$	11,439

SG&A expenses for the prior period	$	12,868
Increase in compensation expenses		1,895
Increase in supplemental retirement plan expenses		141
Other net decreases		(278	)
SG&A expenses for the current period	$	14,626

SG&A expenses for the prior nine-month period	$	41,335
Decrease in compensation expenses		(2,805	)
Decrease due to foreign currency translation		(831	)
Increase in professional fees		1,423
Increase due to an additional week in fiscal 2019		841
Other net increases		709
SG&A expenses for the current nine-month period	$	40,672

Net sales for the prior six-month period	$	171,356
Increase in sales volumes		12,200
Decrease in average selling price and change in sales mix		(5,502	)
Net sales for the current six-month period	$	178,054

Net sales for the prior nine-month period	$	266,817
Net change in average selling price and sales mix		9,135
Increase due to an additional week of sales in fiscal 2019		6,622
Decrease in underlying sales volumes		(909	)
Net sales for the current nine-month period	$	281,665

~~Segment Profit for the prior six-month period~~	$	~~25,413~~
~~Net decrease in underlying margins~~		~~(1,893~~	)
~~Increase in sales volumes~~		~~1,809~~
~~Segment Profit for the current six-month period~~	$	~~25,329~~

Segment Profit for the prior nine-month period	$	34,166
Net decrease in underlying margins		(9,950	)
Net impact of additional fiscal week and underlying sales volumes decline		52
Segment Profit for the current nine-month period	$	24,268

Segment Profit for the prior six-month period	$	6,800
Increase in underlying margins		1,072
Decrease in sales volumes		(393	)
Segment Profit for the current six-month period	$	7,479

Net sales for the prior nine-month period	$	151,694
Net increase in sales volumes		20,675
Net change in average selling price and sales mix		12,981
Unfavorable foreign currency translation effects (primarily RMB and BRL)		(17,079	)
Net sales for the current nine-month period	$	168,271

SG&A expenses for the prior six-month period	$	24,278
Increase in compensation expenses		3,115
Other net increases		96
SG&A expenses for the current six-month period	$	27,489

Exhibit No.		Description

3.1		Restated Certificate of Incorporation of Unifi, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed October 31, 2016 (File No. 001-10542)).

3.2		Amended and Restated By-laws of Unifi, Inc., as of October 26, 2016 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed October 31, 2016 (File No. 001-10542)).

3.3		Declaration of Amendment to Amended and Restated By-laws of Unifi, Inc. dated as of April 30, 2019 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed May 1, 2019 (File No. 001-10542)).

10.1⁺*		~~Employment Agreement by and between~~ Unifi, Inc. ~~and Mark McNeill,~~Director Compensation Policy, effective ~~as of November 3, 2017.~~April 30, 2019.

31.1⁺		Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2⁺		Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1⁺⁺		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2⁺⁺		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101⁺		The following financial information (unaudited) from Unifi, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~December 24, 2017,~~March 31, 2019, filed ~~January 31, 2018,~~May 8, 2019, formatted in eXtensible Business Reporting Language: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of ~~Income,~~Operations, (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.

	UNIFI, INC.
	(Registrant)

Date: ~~January 31, 2018~~May 8, 2019	By:	/s/ ~~JEFFREY C. ACKERMAN~~CHRISTOPHER A. SMOSNA
		~~Jeffrey C. Ackerman~~Christopher A. Smosna
		~~Executive~~ Vice President, Treasurer & Interim Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)