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 every Interactive Data File required to be submitted 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 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 ~~February 4,~~October 31, 2019, there were ~~18,385,553~~18,495,907 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~~“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 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;~~fact, and 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.~~laws.

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 MONTHS~~ ENDED ~~DECEMBER 30, 2018~~SEPTEMBER 29, 2019

	December 30, 2018			June 24, 2018			September 29, 2019			June 30, 2019
ASSETS
Cash and cash equivalents	$	26,653		$	44,890		$	34,118		$	22,228
Receivables, net		79,294			86,273			85,598			88,884
Inventories		134,642			126,311			129,447			133,781
Income taxes receivable		9,291			10,291			3,605			4,373
Other current assets		18,120			6,529			16,440			16,356
Total current assets		268,000			274,294			269,208			265,622
Property, plant and equipment, net		205,053			205,516			205,374			206,787
Operating lease assets								8,718			—
Deferred income taxes		3,166			3,288			2,520			2,581
Investments in unconsolidated affiliates		113,618			112,639			102,601			114,320
Other non-current assets		4,546			6,070			2,619			2,841
Total assets	$	594,383		$	601,807		$	591,040		$	592,151

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	43,527		$	48,970		$	41,131		$	41,796
Accrued expenses		12,463			17,720			16,162			16,849
Income taxes payable		1,818			1,317			657			569
Current operating lease liabilities								2,791			—
Current portion of long-term debt		13,982			16,996			14,738			15,519
Total current liabilities		71,790			85,003			75,479			74,733
Long-term debt		116,078			113,553			106,754			111,541
Noncurrent operating lease liabilities								6,224			—
Other long-term liabilities		5,457			5,337			6,465			6,185
Income tax payable		—			470
Deferred income taxes		7,131			7,663			6,111			6,847
Total liabilities		200,456			212,026			201,033			199,306

Commitments and contingencies

Common stock, $0.10 par value (500,000,000 shares authorized; 18,382,797 and 18,352,824 shares issued and outstanding as of December 30, 2018 and June 24, 2018, respectively)		1,838			1,835
Common stock, $0.10 par value (500,000,000 shares authorized; 18,489,842 and 18,462,296 shares issued and outstanding as of September 29, 2019 and June 30, 2019, respectively)								1,849			1,846
Capital in excess of par value		59,619			56,726			59,663			59,560
Retained earnings		375,195			371,753			378,380			374,668
Accumulated other comprehensive loss		(42,725	)		(40,533	)		(49,885	)		(43,229	)
Total shareholders’ equity		393,927			389,781			390,007			392,845
Total liabilities and shareholders’ equity	$	594,383		$	601,807		$	591,040		$	592,151

		For the Three Months Ended						For the Six Months Ended							For the Three Months Ended
		December 30, 2018			December 24, 2017			December 30, 2018			December 24, 2017				September 29, 2019			September 30, 2018
Net sales		$	167,711		$	167,478		$	349,322		$	331,720			$	179,949		$	181,611
Cost of sales			153,555			144,802			315,147			285,752				162,506			161,592
Gross profit			14,156			22,676			34,175			45,968				17,443			20,019
Selling, general and administrative expenses			14,822			14,626			29,233			27,489			��	10,980			14,411
Provision (benefit) for bad debts			32			(72	)		163			(131	)
Provision for bad debts																9			131
Other operating expense (income), net			99			348			(141	)		663				108			(240	)
Operating (loss) income			(797	)		7,774			4,920			17,947
Operating income																6,346			5,717
Interest income			(152	)		(181	)		(299	)		(262	)			(210	)		(147	)
Interest expense			1,355			1,190			2,822			2,375				1,257			1,467
Loss on extinguishment of debt			131			—			131			—
Equity in earnings of unconsolidated affiliates			(1,014	)		(211	)		(1,253	)		(3,298	)
(Loss) income before income taxes			(1,117	)		6,976			3,519			19,132
(Benefit) provision for income taxes			(2,288	)		(4,826	)		536			(1,630	)
Equity in loss (earnings) of unconsolidated affiliates																866			(239	)
Income before income taxes																4,433			4,636
Provision for income taxes																721			2,824
Net income		$	1,171		$	11,802		$	2,983		$	20,762			$	3,712		$	1,812

Net income per common share:	Net income per common share:													Net income per common share:
Basic		$	0.06		$	0.65		$	0.16		$	1.14			$	0.20		$	0.10
Diluted		$	0.06		$	0.63		$	0.16		$	1.12			$	0.20		$	0.10

For the Three Months Ended

For the Six Months Ended

December 30, 2018

December 24, 2017

December 30, 2018

December 24, 2017

Net income

$
1,171

$
11,802

$
2,983

$
20,762

Other comprehensive income (loss):

Foreign currency translation adjustments

1,986

(2,341
)

(1,509
)

524

Foreign currency translation adjustments for an unconsolidated affiliate

(303
)

(487
)

42

(593
)
Changes in interest rate swaps, net of tax of $219, $0, $219 and $0, respectively

(953
)

1,077

(725
)

1,492

Other comprehensive income (loss), net

730

(1,751
)

(2,192
)

1,423

Comprehensive income

$
1,901

$
10,051

$
791

$
22,185

	For the Three Months Ended
	September 29, 2019			September 30, 2018
Net income	$	3,712		$	1,812
Other comprehensive loss:
Foreign currency translation adjustments		(6,158	)		(3,495	)
Foreign currency translation adjustments for an unconsolidated affiliate		(170	)		345
Changes in interest rate swaps		(328	)		228
Other comprehensive loss, net		(6,656	)		(2,922	)
Comprehensive loss	$	(2,944	)	$	(1,110	)

	For the Six Months Ended						For the Three Months Ended
	December 30, 2018			December 24, 2017			September 29, 2019			September 30, 2018
Cash and cash equivalents at beginning of year	$	44,890		$	35,425
Cash and cash equivalents at beginning of period							$	22,228		$	44,890
Operating activities:
Net income		2,983			20,762			3,712			1,812
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Equity in earnings of unconsolidated affiliates		(1,253	)		(3,298	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in loss (earnings) of unconsolidated affiliates								866			(239	)
Distributions received from unconsolidated affiliates		630			8,678			10,437			504
Depreciation and amortization expense		11,652			11,135			5,685			6,036
Non-cash compensation expense		3,039			3,569			187			998
Deferred income taxes		(332	)		(6,282	)		(760	)		909
Other, net		(269	)		(206	)		(127	)		(201	)
Changes in assets and liabilities:
Receivables, net		6,504			267			1,543			(1,636	)
Inventories		(17,139	)		(4,556	)		1,981			(15,079	)
Other current assets		(3,163	)		(210	)		(486	)		(857	)
Income taxes								814			6,591
Accounts payable and accrued expenses		(8,263	)		(8,796	)		(119	)		(3,835	)
Income taxes		1,088			(945	)
Other, net		548			271			89			39
Net cash (used in) provided by operating activities		(3,975	)		20,389
Net cash provided by (used in) operating activities								23,822			(4,958	)

Investing activities:
Capital expenditures		(12,342	)		(11,360	)		(4,585	)		(6,384	)
Other, net		(20	)		15			(21	)		15
Net cash used in investing activities		(12,362	)		(11,345	)		(4,606	)		(6,369	)

Financing activities:
Proceeds from ABL Revolver		53,500			59,200			23,000			34,000
Payments on ABL Revolver		(65,100	)		(46,600	)		(25,400	)		(19,900	)
Proceeds from ABL Term Loan		20,000			—
Payments on ABL Term Loan		(5,000	)		(5,000	)		(2,500	)		(2,500	)
Payments on capital lease obligations		(3,583	)		(3,528	)
Payments on finance lease obligations								(1,608	)		(1,790	)
Proceeds from stock option exercises		244			219			29			244
Payments of debt financing fees		(665	)		—
Other		(690	)		(328	)		(44	)		(646	)
Net cash (used in) provided by financing activities		(1,294	)		3,963			(6,523	)		9,408

Effect of exchange rate changes on cash and cash equivalents		(606	)		183			(803	)		(776	)
Net (decrease) increase in cash and cash equivalents		(18,237	)		13,190
Net increase (decrease) in cash and cash equivalents								11,890			(2,695	)
Cash and cash equivalents at end of period	$	26,653		$	48,615		$	34,118		$	42,195

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 recycled and 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 (UNIFI’s indirect customers). We refer to these indirect customers as “brand partners.” Polyester filament 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”). and staple fiber. Nylon yarns include virgin or recycled textured, solution dyed and spandex covered yarns.

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

UNIFI has direct manufacturing operations in four countries and participates in joint ventures with operations in Israel, Mexico and the United States (“U.S.”), the most significant of which is a 34% non-controlling partnership interest in Parkdale America, LLC (“PAL”), a 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~~U.S. (“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 ~~24, 2018~~30, 2019 (the ~~“2018~~“2019 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 amounts, except per share amounts, are presented in thousands (000s), except as otherwise noted.

The fiscal quarter for each of Unifi, Inc., its primary domestic operating subsidiaries and its subsidiary in El Salvador ended on ~~December~~September 29, 2019, the Sunday nearest to September 30, ~~2018, the last Sunday in December. The~~2019. Unifi, Inc.’s remaining material operating subsidiaries’ fiscal quarter ~~for Unifi, Inc.’s Brazilian, Chinese, Colombian and Sri Lankan subsidiaries~~ ended on ~~December 31, 2018.~~September 30, 2019. 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. The three-month ~~periods~~period ended ~~December 30, 2018 and December 24, 2017~~September 29, 2019 consisted of 13 ~~fiscal weeks.~~weeks for the primary subsidiaries in the U.S. and Central America. The ~~six-month periods~~three-month period ended ~~December~~September 30, 2018 ~~and December 24, 2017~~ consisted of 2714 weeks for the primary subsidiaries in the U.S. and ~~26 fiscal weeks, respectively.~~Central America.

In ~~February~~June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses. The new guidance requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019 and for interim periods therein, thus beginning with UNIFI’s fiscal 2021 and associated first fiscal quarter. UNIFI has not and does not expect to early adopt this standard. UNIFI does not expect this standard will have a material impact on its consolidated financial position, results of operations or cash flows.

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 24, 2018, UNIFI had approximately $5,800 of future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year). The new lease guidance ~~is effective for UNIFI’s~~was adopted in the first quarter of fiscal 2020, and ~~early~~ adoption is ~~permitted.~~described in more detail in Note 4, “Leases.”

~~Under the guidance in the SEC Staff Announcement on July 20, 2017 relating~~Relating to the transition to ASU No. 2016-02, ~~due to its status as a significant subsidiary of Unifi, Inc.,~~ PAL expects to adopt the new lease guidance in its fiscal ~~2020.~~year 2021 ending on January 1, 2022. PAL is currently evaluating the impact of the new lease guidance.

In ~~May 2014,~~fiscal 2019, UNIFI adopted the ~~FASB issued~~new revenue recognition guidance prescribed by ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Subsequent ASUs were issued to provide clarity and 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 4,5, “Revenue Recognition,” for further detail regarding adoption and additional disclosures.

Under the guidance in the SEC Staff Announcement on July 20, 2017 relating to the transition to ASU No. 2014-09, due to its status as a significant subsidiary of Unifi, Inc., PAL expects to adopt the ~~New Revenue Recognition Guidance~~new revenue recognition guidance in its fiscal year 2019 ending on December 28, 2019. PAL is currently evaluating the impact of the ~~New Revenue Recognition Guidance.~~new revenue recognition guidance.

Based on UNIFI’s review of ASUs issued since the filing of the ~~2018~~2019 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.

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

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

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

The following table sets forth the balance sheet location and values of the Company’s lease assets and lease liabilities at September 29, 2019:

The following table sets forth the components of UNIFI’s total lease cost for the three months ended September 29, 2019:

As of September 29, 2019, UNIFI was committed to commence leasing certain transportation equipment during the second quarter of fiscal 2020. UNIFI anticipates this equipment will qualify as an estimated $5,400 in additional finance leases and will replace approximately $1,600 of existing operating lease assets under a penalty-free early termination agreement.

The following table presents supplemental information related to leases at September 29, 2019:

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

The following table sets forth UNIFI's weighted average remaining lease term in years and discount rate percentage used in the calculation of its outstanding lease liabilities as of September 29, 2019:

Future minimum finance lease payments and future minimum payments under non-cancelable operating leases (with initial lease terms in excess of one year) under Topic 842 as of September 29, 2019 by fiscal year were:

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

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

5. 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.

	For the Three Months Ended				For the Six Months Ended				For the Three Months Ended
	December 30, 2018		December 24, 2017		December 30, 2018		December 24, 2017		September 29, 2019		September 30, 2018
Third-party textile manufacturer	$	165,338	$	165,366	$	344,659	$	327,527
Third-party manufacturer									$	178,020	$	179,321
Service		2,373		2,112		4,663		4,193		1,929		2,290
Net sales	$	167,711	$	167,478	$	349,322	$	331,720	$	179,949	$	181,611

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 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 method, 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 six months ended December 30, 2018. 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 $10,537 change in the contract assets balance from June 24, 2018 to December 30, 2018 represents the routine recognition of satisfied performance obligations, in connection with adoption of and treatment under the New Revenue Recognition Guidance.

	December 30, 2018			June 24, 2018			September 29, 2019			June 30, 2019
Customer receivables	$	80,905		$	87,633		$	85,693		$	89,495
Allowance for uncollectible accounts		(2,186	)		(2,059	)		(2,205	)		(2,338	)
Reserves for yarn quality claims		(842	)		(564	)
Reserves for quality claims								(1,011	)		(961	)
Net customer receivables		77,877			85,010			82,477			86,196
Other receivables		1,417			1,263			3,121			2,688
Total receivables, net	$	79,294		$	86,273		$	85,598		$	88,884

There have been no material changes in UNIFI’s allowance for uncollectible accounts or reserves for yarn quality claims since June ~~24, 2018.~~30, 2019.

	December 30, 2018			June 24, 2018			September 29, 2019			June 30, 2019
Raw materials	$	55,353		$	45,448		$	50,228		$	55,531
Supplies		8,036			7,314			9,107			9,020
Work in process		6,852			8,834			8,412			8,510
Finished goods		66,742			66,314			63,880			63,111
Gross inventories		136,983			127,910			131,627			136,172
Inventory reserves		(2,341	)		(1,599	)		(2,180	)		(2,391	)
Total inventories	$	134,642		$	126,311		$	129,447		$	133,781

In connection with UNIFI’s utilization of the modified retrospective method of adopting the New Revenue Recognition Guidance, prior period balances are 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 30, 2018		June 24, 2018		September 29, 2019		June 30, 2019
Contract assets	$	10,537	$	—	$	6,975	$	7,794
Vendor deposits		4,097		3,703		4,832		4,187
Value-added taxes receivable						3,051		2,519
Prepaid expenses		2,247		1,802		1,582		1,856
Value-added taxes receivable		1,239		1,024
Total other current assets	$	18,120	$	6,529	$	16,440	$	16,356

Vendor deposits primarily relates to down payments made toward the purchase of inventory. ~~Prepaid expenses consists of advance payments for insurance, professional fees, membership dues, subscriptions, marketing and information technology services.~~ Value-added taxes receivable relates to recoverable taxes associated with the sales and purchase activities of UNIFI’s foreign operations. Prepaid expenses consists of advance payments for routine operating expenses.

	December 30, 2018			June 24, 2018			September 29, 2019			June 30, 2019
Land	$	2,852		$	2,860		$	3,100		$	3,138
Land improvements		15,173			15,118			15,511			15,249
Buildings and improvements		159,089			157,354			160,581			161,566
Assets under capital leases		34,302			34,568
Assets under finance leases								27,601			31,897
Machinery and equipment		596,012			589,237			610,057			603,950
Computers, software and office equipment		20,418			19,723			22,429			23,011
Transportation equipment		4,984			5,029			5,838			5,809
Construction in progress		8,656			8,651			6,550			6,483
Gross PP&E		841,486			832,540			851,667			851,103
Less: accumulated depreciation		(628,009	)		(619,654	)		(639,679	)		(636,135	)
Less: accumulated amortization – capital leases		(8,424	)		(7,370	)
Less: accumulated amortization – finance leases								(6,614	)		(8,181	)
Total PP&E, net	$	205,053		$	205,516		$	205,374		$	206,787

	For the Three Months Ended				For the Six Months Ended				For the Three Months Ended
	December 30, 2018		December 24, 2017		December 30, 2018		December 24, 2017		September 29, 2019		September 30, 2018
Depreciation expense	$	5,261	$	5,237	$	10,924	$	10,360	$	5,410	$	5,663
Repair and maintenance expenses		4,987		4,779		10,847		9,504		4,474		5,860

	December 30, 2018		June 24, 2018		September 29, 2019		June 30, 2019
Payroll and fringe benefits	$	8,017	$	10,833	$	7,185	$	9,775
Severance						1,702		2,058
Other		4,446		6,887		7,275		5,016
Total accrued expenses	$	12,463	$	17,720	$	16,162	$	16,849

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.9

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 30, 2018	December 30, 2018			June 24, 2018			Maturity Date	September 29, 2019	September 29, 2019			June 30, 2019
ABL Revolver	December 2023	4.3%	$	16,500		$	28,100		December 2023	3.5%	$	17,000		$	19,400
ABL Term Loan ⁽¹⁾	December 2023	3.8%		100,000			85,000		December 2023	3.5%		95,000			97,500
Capital lease obligations	(2)	3.8%		14,604			18,107
Finance lease obligations									(2)	3.6%		10,387			11,118
Total debt				131,104			131,207					122,387			128,018
Current portion of capital lease obligations				(6,482	)		(6,996	)
Current portion of other long-term debt				(7,500	)		(10,000	)
Current ABL Term Loan												(10,000	)		(10,000	)
Current portion of finance lease obligations												(4,738	)		(5,519	)
Unamortized debt issuance costs				(1,044	)		(658	)				(895	)		(958	)
Total long-term debt			$	116,078		$	113,553				$	106,754		$	111,541

On December 18, 2018, Unifi, Inc. and certain of its subsidiaries entered into a 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, by and 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”), 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~~maturity date from March 26, 2020 to December 18, 2023 and (ii) decreased the Applicable Margin (as defined in the Credit Agreement) pricing structure for Base Rate Loans (as defined in the Credit Agreement) and LIBOR Rate Loans (as defined in the Credit Agreement) by 25 basis points. In addition, in connection with the 2018 Amendment, the principal amount of the ABL Term Loan was reset from $80,000 to $100,000. Net proceeds from this ABL 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 ~~2019,~~2020, the following four fiscal years and thereafter:

	Fiscal 2019		Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Thereafter		Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Thereafter
ABL Revolver	$	—	$	—	$	—	$	—	$	—	$	16,500	$	—	$	—	$	—	$	—	$	17,000	$	—
ABL Term Loan		2,500		10,000		10,000		10,000		10,000		57,500		7,500		10,000		10,000		10,000		57,500		—
Capital lease obligations		3,442		5,559		2,634		2,417		91		461
Finance lease obligations														3,978		2,738		2,536		214		222		699
Total	$	5,942	$	15,559	$	12,634	$	12,417	$	10,091	$	74,461	$	11,478	$	12,738	$	12,536	$	10,214	$	74,722	$	699

	December 30, 2018		June 24, 2018		September 29, 2019		June 30, 2019
Supplemental post-employment plan	$	2,940	$	3,045	$	2,711	$	2,695
Uncertain tax positions		541		131		1,084		1,043
Interest rate swaps						975		647
Other		1,976		2,161		1,695		1,800
Total other long-term liabilities	$	5,457	$	5,337	$	6,465	$	6,185

~~Other primarily includes certain retiree and post-employment medical and disability liabilities, deferred revenue and deferred energy incentive credits.~~

On December 22, 2017, the U.S. government enacted comprehensive tax legislation H.R. 1, formerly known as the Tax Cuts and Jobs 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 deduction of compensation paid to specified executive officers, and the transition of the U.S. international tax system from a worldwide tax to a territorial tax system. As a fiscal-year taxpayer, certain provisions of H.R. 1 impacted UNIFI in fiscal 2018, including the change in the U.S. federal corporate income tax rate and the one-time transition tax (“toll charge”), while other provisions became effective for UNIFI at the beginning of fiscal 2019.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of GAAP in situations where a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of H.R. 1. SAB 118 provides that when reasonable estimates can be made, the provisional accounting should be based on such estimates, and when reasonable estimates cannot be made, the provisional accounting may be based on the law in effect before H.R. 1. UNIFI has applied the guidance in SAB 118 when accounting for the enactment-date effects of H.R. 1. Accordingly, in fiscal 2018 UNIFI re-measured U.S. deferred tax assets and liabilities based on the income tax rates at which the deferred tax assets and liabilities are expected to reverse in the future, resulting in $4,297 of tax benefit for the year ended June 24, 2018. UNIFI also recorded $3,901 of tax expense related to the toll charge, net of foreign tax credits. For a description of the impact of H.R. 1 for the year ended June 24, 2018, reference is made to Note 14, “Income Taxes,” in UNIFI’s 2018 Annual Report on Form 10-K.

The SAB 118 measurement period for UNIFI ended on December 22, 2018. UNIFI did not make any final measurement period adjustments to the tax benefit recorded in the year ended June 24, 2018 to re-measure U.S. deferred tax assets and liabilities. During the three months ended December 30, 2018, UNIFI recorded a final measurement period adjustment of $(1,734) to decrease the amount of the toll charge, net of foreign tax credits, from

$3,901 to $2,167, a rate impact of 155.2%. 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.(Unaudited)

The ~~Global Intangible Low-Taxed Income (“GILTI”) provisions included in H.R. 1 require that certain~~provision for income ~~earned by foreign subsidiaries must be currently included in the gross income of the U.S. shareholder. These provisions are~~taxes and effective for UNIFI in fiscal 2019. The GILTI provisions are complex and subject to continuing regulatory interpretation by the IRS. UNIFI is required to make an accounting policy election to either treat taxes resulting from GILTItax rate were as a current-period expense when they are incurred or factor such amounts into the measurement of deferred taxes. 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.follows:

UNIFI’s provision for income taxes for the ~~six~~three months ended ~~December~~September 29, 2019 and September 30, 2018 ~~and December 24, 2017 has been~~was calculated by applying an estimate of the annual effective tax rate for the full fiscal year to year-to-date ~~income or loss.~~income. Tax effects of significant and unusual, or infrequently occurring, items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

The effective tax rate for the three months ended ~~December~~September 29, 2019 was lower than the U.S. federal statutory rate primarily due to the use of foreign tax credits generated in both current and prior tax years. These benefits were partially offset by earnings taxed at higher rates in foreign jurisdictions, U.S. tax on Global Intangible Low-Tax Income (“GILTI”), and foreign withholding taxes.

The effective tax rate for the three months ended September 30, 2018 was higher than the U.S. federal statutory rate primarily due to ~~the benefits of tax credits related to prior years which exceed the loss before income taxes. These benefits were partially offset by~~ earnings taxed at higher rates in foreign jurisdictions, losses in tax jurisdictions for which no tax benefit could be recognized, the effects of the GILTI provisions, ~~enacted in H.R. 1,~~ and non-deductible executive compensation.

The effective tax rate for the six months ended December 30, 2018 was lower than the U.S. federal statutory rate primarily due to the benefits of tax credits related to prior years. These benefits were partially offset by earnings taxed at higher rates in foreign jurisdictions, losses in tax jurisdictions for which no tax benefit could be recognized, the effects of the GILTI provisions enacted in H.R. 1, and non-deductible executive compensation.

The effective tax rate for the three and six months ended December 24, 2017 was lower than the U.S. federal statutory 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 could be recognized.

UNIFI regularly assesses the outcomes of both completed and ongoing examinations to ensure that 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,~~net operating losses, which could potentially be revised upon examination.

~~UNIFI 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~~14. Shareholders’ Equity

Shareholders’ equity for 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.

~~The components of UNIFI’s deferred tax valuation allowance are~~three months ended September 29, 2019 was as follows:

~~(1)~~

~~Certain U.S. NOLs and capital losses outside the U.S. consolidated tax filing group.~~

	Shares		Common Stock		Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at June 30, 2019		18,462	$	1,846	$	59,560		$	374,668	$	(43,229	)	$	392,845
Options exercised		10		1		28			—		—			29
Conversion of restricted stock units		18		2		(2	)		—		—			—
Stock-based compensation		—		—		121			—		—			121
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		—		—		(44	)		—		—			(44	)
Other comprehensive loss, net of tax		—		—		—			—		(6,656	)		(6,656	)
Net income		—		—		—			3,712		—			3,712
Balance at September 29, 2019		18,490	$	1,849	$	59,663		$	378,380	$	(49,885	)	$	390,007

Shareholders’ equity for the three months ended September 30, 2018 was as follows:

	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		16			2		242			—		—			244
Conversion of restricted stock units		14			1		(1	)		—		—			—
Stock-based compensation		1			—		872			—		—			872
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(4	)		—		(133	)		—		—			(133	)
Other comprehensive loss, net of tax		—			—		—			—		(2,922	)		(2,922	)
Adoption of the new revenue recognition guidance		—			—		—			459		—			459
Net income		—			—		—			1,812		—			1,812
Balance at September 30, 2018		18,380		$	1,838	$	57,706		$	374,024	$	(43,455	)	$	390,113

10No dividends were paid during the three months ended September 29, 2019 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 September 30, 2018

18,380

$
1,838

$
57,706

$
374,024

$
(43,455
)

$
390,113

Conversion of restricted stock units

3

—

—

—

—

—

Stock-based compensation

—

—

1,913

—

—

1,913

Other comprehensive income, net of tax

—

—

—

—

730

730

Net income

—

—

—

1,171

—

1,171

Balance at December 30, 2018

18,383

$
1,838

$
59,619

$
375,195

$
(42,725
)

$
393,927

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

16

2

242

—

—

244

Conversion of restricted stock units

17

1

(1
)

—

—

—

Stock-based compensation

1

—

2,785

—

—

2,785

Common stock withheld in satisfaction of
tax withholding obligations under net share
settle transactions

(4
)

—

(133
)

—

—

(133
)
Other comprehensive loss, net of tax

—

—

—

—

(2,192
)

(2,192
)
Adoption of the New Revenue Recognition Guidance

—

—

—

459

—

459

Net income

—

—

—

2,983

—

2,983

Balance at December 30, 2018

18,383

$
1,838

$
59,619

$
375,195

$
(42,725
)

$
393,927

Shares

Common Stock

Capital in Excess of Par Value

Retained Earnings

Accumulated Other Comprehensive Loss

Total Shareholders’ Equity

Balance at September 24, 2017

18,261

$
1,826

$
53,104

$
348,900

$
(29,706
)

$
374,124

Options exercised

23

3

(3
)

—

—

—

Conversion of restricted stock units

3

—

—

—

—

—

Stock-based compensation

4

—

2,114

—

—

2,114

Other comprehensive loss, net of tax

—

—

—

—

(1,751
)

(1,751
)
Net income

—

—

—

11,802

—

11,802

Balance at December 24, 2017

18,291

$
1,829

$
55,215

$
360,702

$
(31,457
)

$
386,289

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 30, 2018 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~~share 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 six months~~

~~ended December 30, 2018.~~ Through October 31, 2018 (the date the 2014 SRP was terminated, as ~~discussed~~noted 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~~share 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 or 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.

UNIFI made no repurchases of its shares of common stock during the three months ended September 29, 2019. As of ~~December 30, 2018,~~September 29, 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~~expired, were forfeited or otherwise ~~terminate~~terminated 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 (subject to certain increases in the event outstanding awards issued under the Amended 2013 Plan terminate unexercised) and removed provisions no longer applicable due to the recent changes to Section 162(m) of the Internal Revenue Code of 1986, as amended. 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 30, 2018~~September 29, 2019 with respect to the number of securities remaining available for future issuance under the Amended 2013 Plan:

During the ~~six~~three months ended ~~December~~September 29, 2019 and September 30, 2018, ~~and December 24, 2017,~~ UNIFI granted stock options to purchase ~~188~~15 and 540 shares of common stock, respectively.

During the ~~six~~three months ended ~~December~~September 29, 2019 and September 30, 2018, ~~and December 24, 2017,~~ UNIFI granted 6928 and 900 restricted stock units, respectively.

~~During the six months ended December 30, 2018 and December 24, 2017, UNIFI granted 47 and 0 vested share units, respectively.~~

~~15.~~16. 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.

	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended
	December 30, 2018			December 24, 2017			December 30, 2018			December 24, 2017			September 29, 2019			September 30, 2018
Interest expense	$	1,355		$	1,190		$	2,822		$	2,375		$	1,257		$	1,467
Decrease (increase) in fair value of interest rate swaps		1,173			(1,077	)		944			(1,492	)		328			(228	)
Impact of interest rate swaps on interest expense		(71	)		123			(106	)		254			(63	)		(34	)

For the ~~six~~three months ended ~~December~~September 29, 2019 and September 30, 2018, ~~and December 24, 2017,~~ 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~~values 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,~~loss, net for the three-month ~~and six-month~~ periods ended ~~December~~September 29, 2019 and September 30, 2018 ~~and December 24, 2017~~ is included in the accompanying condensed consolidated statements of comprehensive ~~(loss) income.~~loss.

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

	For the Three Months Ended				For the Six Months Ended				For the Three Months Ended
	December 30, 2018		December 24, 2017		December 30, 2018		December 24, 2017		September 29, 2019		September 30, 2018
Net income	$	1,171	$	11,802	$	2,983	$	20,762	$	3,712	$	1,812
Basic weighted average shares		18,382		18,273		18,374		18,260		18,481		18,368
Net potential common share equivalents – stock options and restricted stock units		323		378		327		338
Net potential common share equivalents										245		335
Diluted weighted average shares		18,705		18,651		18,701		18,598		18,726		18,703
Excluded from diluted weighted average shares:
Anti-dilutive common share equivalents		498		60		500		290		340		116

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.

~~18.~~19. 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 30, 2018,~~September 29, 2019, UNIFI’s investment in PAL was ~~$110,922~~$100,616 and UNIFI’s combined investments in UNF and UNFA were ~~$2,696,~~$1,985, 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 30, 2018,~~September 29, 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 30, 2018	$	129,013
Underlying equity as of September 29, 2019				$	118,707
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 30, 2018	$	110,922
Investment as of September 29, 2019				$	100,616

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 supply agreement has no stated minimum purchase quantities and pricing is negotiated every six months, based on market rates. As of ~~December 30, 2018,~~September 29, 2019, UNIFI’s open purchase orders related to this supply agreement were ~~$9,660.~~$3,143.

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

	For the Six Months Ended				For the Three Months Ended
	December 30, 2018		December 24, 2017		September 29, 2019		September 30, 2018
UNF	$	1,006	$	1,141	$	495	$	486
UNFA		12,558		10,406		4,448		5,530
Total	$	13,564	$	11,547	$	4,943	$	6,016

As of ~~December 30, 2018~~September 29, 2019 and June ~~24, 2018,~~30, 2019, UNIFI had combined accounts payable due to UNF and UNFA of ~~$3,264~~$1,708 and ~~$2,301,~~$1,728, respectively.

UNIFI has determined that UNF and UNFA are variable interest entities 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 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 30, 2018						As of June 24, 2018						As of September 29, 2019						As of June 30, 2019
	PAL		Other		Total		PAL		Other		Total		PAL		Other		Total		PAL		Other		Total
Current assets	$	298,674	$	9,000	$	307,674	$	289,683	$	7,598	$	297,281	$	268,804	$	6,311	$	275,115	$	299,610	$	7,218	$	306,828
Noncurrent assets		156,468		780		157,248		162,242		875		163,117		159,813		648		160,461		158,304		696		159,000
Current liabilities		72,544		4,388		76,932		71,026		3,722		74,748		76,280		2,991		79,271		70,875		4,069		74,944
Noncurrent liabilities		3,153		—		3,153		3,389		—		3,389		3,201		—		3,201		3,252		—		3,252
Shareholders’ equity and capital accounts		379,445		5,392		384,837		377,510		4,751		382,261		349,136		3,968		353,104		383,787		3,845		387,632

UNIFI’s portion of undistributed earnings		42,044		1,357		43,401		41,429		887		42,316		31,732		995		32,727		43,343		821		44,164

	For the Three Months Ended December 30, 2018						For the Three Months Ended December 24, 2017								For the Three Months Ended September 29, 2019								For the Three Months Ended September 30, 2018
	PAL		Other		Total		PAL			Other		Total			PAL			Other		Total			PAL			Other		Total
Net sales	$	191,150	$	7,274	$	198,424	$	176,577		$	6,756	$	183,333		$	199,167		$	4,661	$	203,828		$	210,502		$	5,765	$	216,267
Gross profit		5,695		1,484		7,179		2,379			1,628		4,007			1,071			541		1,612			4,508			954		5,462
Income (loss) from operations		1,163		1,039		2,202		(1,922	)		1,185		(737	)
Net income (loss)		2,241		1,115		3,356		(1,398	)		1,198		(200	)
(Loss) income from operations																(3,275	)		112		(3,163	)		632			513		1,145
Net (loss) income																(3,455	)		124		(3,331	)		(49	)		526		477
Depreciation and amortization		10,817		47		10,864		10,885			47		10,932			10,631			47		10,678			10,474			48		10,522

Cash received by PAL under cotton rebate program		3,402		—		3,402		4,701			—		4,701			3,693			—		3,693			2,318			—		2,318
Earnings recognized by PAL for cotton rebate program		3,035		—		3,035		3,191			—		3,191			3,588			—		3,588			3,214			—		3,214

Distributions received		126		—		126		—			1,500		1,500			10,437			—		10,437			4			500		504

For the Six Months Ended December 30, 2018

For the Six Months Ended December 24, 2017

PAL

Other

Total

PAL

Other

Total

Net sales

$
401,652

$
13,039

$
414,691

$
379,368

$
12,449

$
391,817

Gross profit

10,203

2,438

12,641

16,089

2,582

18,671

Income from operations

1,795

1,551

3,346

8,034

1,694

9,728

Net income

2,192

1,641

3,833

6,948

1,716

8,664

Depreciation and amortization

21,291

95

21,386

20,485

94

20,579

Cash received by PAL under
cotton rebate program

5,720

—

5,720

6,942

—

6,942

Earnings recognized by PAL for
cotton rebate program

6,249

—

6,249

6,446

—

6,446

Distributions received

130

500

630

7,178

1,500

8,678

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 (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~~

Effective April 10, 2019, UK assumed sole remediator responsibility of the Kentec site pursuant to ~~assume that responsibility by the end~~its contractual obligations with INVISTA and received $180 of ~~its third quarter of fiscal 2019 and will be entitled to receive from DuPont seven years of~~net monitoring and reporting costs ~~less certain adjustments. At that time,~~due from DuPont. In connection with monitoring, UK expects to sample and report to DEQ annually. UNIFI expects ~~to assume responsibility for any future~~no active site remediation ~~of the site. At this time, UNIFI~~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.~~

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 paymentscosts that ~~UNIFI is required to make under existing contractual arrangements, such as debt and lease agreements.~~may be associated with active remediation.

For details regarding the nature of certain related party relationships, see Note ~~24,~~25, “Related Party Transactions,” to the consolidated financial statements in the ~~2018~~2019 Form 10-K.

There were no related party receivables as of ~~December 30, 2018~~September 29, 2019 or June ~~24, 2018.~~30, 2019.

	December 30, 2018		June 24, 2018		September 29, 2019		June 30, 2019
Salem Leasing Corporation (included within accounts payable)	$	283	$	306	$	351	$	634
Salem Leasing Corporation (capital lease obligation)		844		875
Salem Leasing Corporation (operating lease obligations)						3,625		—
Salem Leasing Corporation (finance lease obligations)						1,663		806
Total related party payables	$	1,127	$	1,181	$	5,639	$	1,440

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

		For the Three Months Ended				For the Six Months Ended					For the Three Months Ended
Affiliated Entity	Transaction Type	December 30, 2018		December 24, 2017		December 30, 2018		December 24, 2017		Transaction Type	September 29, 2019		September 30, 2018
Salem Leasing Corporation	Transportation equipment costs and capital lease debt service	$	1,019	$	969	$	2,040	$	1,950	Transportation equipment costs and finance lease debt service	$	1,008	$	1,021
Salem Global Logistics, Inc.	Freight service income		—		50		—		92

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 Executive Officer,~~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~~four reportable segments (the Polyester Segment, the Nylon Segment, the Brazil Segment and the ~~International~~Asia 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. For-hire transportation services revenue is derived from performing common carrier services utilizing UNIFI’s fleet of transportation equipment.

The operations within All Other (i) are not subject to review by the CODM at a level consistent with UNIFI’s other operations, (ii) are not regularly evaluated using the same metrics applied to UNIFI’s other operations and (iii) do not qualify for aggregation with an existing reportable segment. Therefore, such operations are excluded from reportable segments.

UNIFI evaluates the operating performance of its segments based upon Segment Profit, which represents segment gross profit plus segment depreciation expense. This measurement of segment profit 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,~~segment disclosures, as they are (i) insignificant to UNIFI’s segments and eliminated from consolidated reporting and (ii) excluded from segment evaluations performed by the CODM.

	For the Three Months Ended December 30, 2018										For the Three Months Ended September 29, 2019
	Polyester		Nylon		International		All Other		Total		Polyester		Nylon		Brazil		Asia		All Other		Total
Net sales	$	85,789	$	22,647	$	58,237	$	1,038	$	167,711	$	88,695	$	20,202	$	24,172	$	45,957	$	923	$	179,949
Cost of sales		83,820		20,615		48,161		959		153,555		80,900		19,024		20,013		41,675		894		162,506
Gross profit		1,969		2,032		10,076		79		14,156		7,795		1,178		4,159		4,282		29		17,443
Segment depreciation expense		3,937		499		367		68		4,871		4,041		491		375		—		39		4,946
Segment Profit	$	5,906	$	2,531	$	10,443	$	147	$	19,027	$	11,836	$	1,669	$	4,534	$	4,282	$	68	$	22,389

	For the Three Months Ended September 30, 2018
	Polyester		Nylon		Brazil		Asia		All Other		Total
Net sales	$	100,131	$	27,949	$	26,913	$	25,440	$	1,178	$	181,611
Cost of sales		92,330		25,805		20,495		21,908		1,054		161,592
Gross profit		7,801		2,144		6,418		3,532		124		20,019
Segment depreciation expense		4,252		561		359		—		75		5,247
Segment Profit	$	12,053	$	2,705	$	6,777	$	3,532	$	199	$	25,266

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

	For the Three Months Ended
	September 29, 2019			September 30, 2018
Polyester	$	7,795		$	7,801
Nylon		1,178			2,144
Brazil		4,159			6,418
Asia		4,282			3,532
All Other		29			124
Segment gross profit		17,443			20,019
Selling, general and administrative expenses		10,980			14,411
Provision for bad debts		9			131
Other operating expense (income), net		108			(240	)
Operating income		6,346			5,717
Interest income		(210	)		(147	)
Interest expense		1,257			1,467
Equity in loss (earnings) of unconsolidated affiliates		866			(239	)
Income before income taxes	$	4,433		$	4,636

For the Three Months Ended December 24, 2017

Polyester

Nylon

International

All Other

Total

Net sales

$
90,316

$
25,103

$
51,046

$
1,013

$
167,478

Cost of sales

81,740

22,027

40,072

963

144,802

Gross profit

8,576

3,076

10,974

50

22,676

Segment depreciation expense

3,973

552

397

64

4,986

Segment Profit

$
12,549

$
3,628

$
11,371

$
114

$
27,662

For the Six Months Ended December 30, 2018

Polyester

Nylon

International

All Other

Total

Net sales

$
185,920

$
50,596

$
110,590

$
2,216

$
349,322

Cost of sales

177,223

46,420

89,491

2,013

315,147

Gross profit

8,697

4,176

21,099

203

34,175

Segment depreciation expense

8,189

1,060

726

143

10,118

Segment Profit

$
16,886

$
5,236

$
21,825

$
346

$
44,293

For the Six Months Ended December 24, 2017

Polyester

Nylon

International

All Other

Total

Net sales

$
178,054

$
51,930

$
99,705

$
2,031

$
331,720

Cost of sales

160,565

45,540

77,733

1,914

285,752

Gross profit

17,489

6,390

21,972

117

45,968

Segment depreciation expense

7,840

1,089

813

129

9,871

Segment Profit

$
25,329

$
7,479

$
22,785

$
246

$
55,839

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

For the Three Months Ended

For the Six Months Ended

December 30, 2018

December 24, 2017

December 30, 2018

December 24, 2017

Polyester

$
1,969

$
8,576

$
8,697

$
17,489

Nylon

2,032

3,076

4,176

6,390

International

10,076

10,974

21,099

21,972

All Other

79

50

203

117

Segment gross profit

14,156

22,676

34,175

45,968

Selling, general and administrative expenses

14,822

14,626

29,233

27,489

Provision (benefit) for bad debts

32

(72
)

163

(131
)
Other operating expense (income), net

99

348

(141
)

663

Operating (loss) income

(797
)

7,774

4,920

17,947

Interest income

(152
)

(181
)

(299
)

(262
)
Interest expense

1,355

1,190

2,822

2,375

Loss on extinguishment of debt

131

—

131

—

Equity in earnings of unconsolidated affiliates

(1,014
)

(211
)

(1,253
)

(3,298
)
(Loss) income before income taxes

$
(1,117
)

$
6,976

$
3,519

$
19,132

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

	December 30, 2018		June 24, 2018		September 29, 2019		June 30, 2019
Polyester	$	283,249	$	284,261	$	294,163	$	287,608
Nylon		61,517		57,378		54,947		57,055
International		96,648		95,006
Brazil						65,598		67,490
Asia						40,599		35,219
Segment total assets		441,414		436,645		455,307		447,372
Other current assets		17,222		30,945		8,857		10,327
Other PP&E		18,740		17,373		19,278		18,664
Other non-current operating lease assets						3,366		—
Other non-current assets		3,389		4,205		1,631		1,468
Investments in unconsolidated affiliates		113,618		112,639		102,601		114,320
Total assets	$	594,383	$	601,807	$	591,040	$	592,151

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

As of ~~December~~September 29, 2019 and June 30, 2019, $847 and $1,329, respectively, were included in accounts payable for unpaid capital expenditures. As of September 30, 2018 and June 24, 2018, ~~$1,702~~$1,607 and $3,187, respectively, were included in accounts payable for unpaid capital expenditures. ~~As of December 24, 2017~~

Non-cash investing and ~~June 25, 2017, $2,610 and $3,234, respectively, were included~~financing activities related to leases have been disclosed in ~~accounts payable for unpaid capital expenditures.~~Note 4, “Leases.”

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 30, 2018,~~September 29, 2019, while a reference to the “prior period” refers to the three-month period ended ~~December 24, 2017. A reference to the “current six-month period” refers to the six-month period ended December~~September 30, ~~2018, while a reference to the “prior six-month period” refers to the six-month period ended December 24, 2017.~~2018. Such references may be accompanied by certain phrases for added clarity. The current period and the prior period ~~each~~ consisted of 13 ~~fiscal weeks. The current six-month period consisted of 27 fiscal~~ weeks while the prior six-month period consisted of 26 fiscal weeks. UNIFI’s seasonal shutdown period (which typically occurs around December 25 each year) (the “seasonal shutdown period”) occurred during the current period but fell immediately after the prior period. Accordingly, the current period included approximately one less shipping week than the prior period, while the number of shippingand 14 weeks, ~~were approximately equal for the current six-month period and the prior six-month period.~~respectively.

Our discussions in this Item 2 focus on our results during, or as of, the three months ended September 29, 2019 and ~~six months ended December~~September 30, 2018, ~~and December 24, 2017,~~ and, to the extent applicable, any material changes from the information discussed in the ~~2018~~2019 Form 10-K or other important intervening developments or information. These discussions should be read in conjunction with the ~~2018~~2019 Form 10-K for more detailed and background information about our business, operations and financial condition.

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

UNIFI’s business focuses on delivering 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 three supporting pillars: (1) engaging in strategic relationships with like-minded entities, (2) growing our existing portfolio of technologies and capabilities and (3) expanding our supply chain to best serve our direct and indirect customers. We refer to this three-pillared strategy as our “Partner, Innovate and ~~direct customers.~~Build” 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~~four reportable segments for its operations – the Polyester Segment, the Nylon Segment, the Brazil Segment and the ~~International~~Asia 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.

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

~~Consistent with~~During the market and financial trends that have affected its business in the last several quarters, UNIFI continued to experience a number of challenges. External pressures in the regional business included elevated raw material costs andcurrent period, (i) UNIFI’s NACA operations faced suppressed demand for certain ~~textured~~yarns and ~~covered yarns. The volatile nature of these external pressures made navigating the regional environment even more difficult. Internal pressures included the implementation of selling~~(ii) UNIFI’s operations in Brazil experienced a weaker gross margin as market 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~~declines (in connection with declining raw material ~~costs throughout most of calendar 2018, which peaked in October 2018. By November 2018,~~costs) outpaced inventory turnover.

However, UNIFI ~~experienced a pullback in those costs. As a result, UNIFI expects~~achieved favorable operating results and overall improvement compared to the ~~third quarter of fiscal 2019 to show a moderate gross margin recapture from this recent decline in raw material costs and improved~~prior period, despite one less sales ~~volumes from both the impact of (i) historical second-half seasonality and (ii) an additional shipping~~ week in the ~~third quarter due~~NACA region. The improvement was primarily attributable to (i) a declining raw material cost environment that benefited our NACA operations and (ii) lower selling, general and administrative expenses (“SG&A”) resulting from cost reduction efforts that began in the ~~timing~~second half of fiscal 2019.

Additionally, UNIFI’s operating cash flows and net debt (debt principal less cash and cash equivalents) improved significantly during the ~~seasonal shutdown period.~~current period as a result of better working capital management and $10,437 of distributions from PAL.

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. In connection with the anti-dumping and countervailing duties petitions we filed in October 2018, the preliminary duties imposed by the U.S. Department of Commerce during calendar 2019 have the potential to significantly improve UNIFI’s market share and competitive position against such imported yarns. Such an improvement could lead to better fixed cost leverage and higher gross margins for our NACA operations. While final determinations are expected at the end of calendar 2019, the positive announcements from the U.S. Department of Commerce earlier in calendar 2019 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:

EBITDA, Adjusted EBITDA, ~~and~~ Adjusted Working Capital and Net Debt (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.~~Fixed Charge Coverage Ratio (as defined in the Credit Agreement). Equity in ~~(earnings)~~ loss of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance.

Management uses Adjusted Working Capital as an indicator of UNIFI’s production efficiency and ability to manage ~~inventory~~inventories and receivables. ~~In the first quarter of fiscal 2019, in connection with changes~~

Management uses Net Debt as a liquidity and leverage metric to ~~balance sheet presentation required by the adoption of the New Revenue Recognition Guidance, UNIFI updated the definition of Adjusted Working Capital~~determine how much debt would remain if all cash and cash equivalents were used 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.pay down debt principal.

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

For the Three Months Ended

For the Six Months Ended

December 30, 2018

December 24, 2017

December 30, 2018

December 24, 2017

Net income

$
1,171

$
11,802

$
2,983

$
20,762

Interest expense, net

1,203

1,009

2,523

2,113

(Benefit) provision for income taxes

(2,288
)

(4,826
)

536

(1,630
)
Depreciation and amortization expense

5,532

5,532

11,480

10,949

EBITDA

5,618

13,517

17,522

32,194

Equity in (earnings) loss of PAL

(762
)

376

(745
)

(2,478
)
EBITDA excluding PAL

4,856

13,893

16,777

29,716

Other adjustments ⁽¹⁾

—

—

—

—

Adjusted EBITDA

$
4,856

$
13,893

$
16,777

$
29,716

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.

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

Three Months Ended ~~December 30, 2018~~September 29, 2019 Compared to Three Months Ended ~~December 24, 2017~~September 30, 2018

The components of Net 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

December 30, 2018

December 24, 2017

% of
Net Sales

% of
Net Sales

%
Change

Net sales

$
167,711

100.0

$
167,478

100.0

0.1

Cost of sales

153,555

91.6

144,802

86.5

6.0

Gross profit

14,156

8.4

22,676

13.5

(37.6
)
Selling, general and administrative expenses

14,822

8.8

14,626

8.7

1.3

Provision (benefit) for bad debts

32

—

(72
)

—

(144.4
)
Other operating expense, net

99

0.1

348

0.2

(71.6
)
Operating (loss) income

(797
)

(0.5
)

7,774

4.6

(110.3
)
Interest expense, net

1,203

0.7

1,009

0.6

19.2

Loss on extinguishment of debt

131

0.1

—

—

—

Equity in earnings of unconsolidated affiliates

(1,014
)

(0.6
)

(211
)

(0.1
)

nm

(Loss) income before income taxes

(1,117
)

(0.7
)

6,976

4.1

(116.0
)
Benefit for income taxes

(2,288
)

(1.4
)

(4,826
)

(2.9
)

(52.6
)
Net income

$
1,171

0.7

$
11,802

7.0

(90.1
)

	For the Three Months Ended
	September 29, 2019				September 30, 2018
			% of Net Sales					% of Net Sales			% Change
Net sales	$	179,949		100.0	$	181,611			100.0			(0.9	)
Cost of sales		162,506		90.3		161,592			89.0			0.6
Gross profit		17,443		9.7		20,019			11.0			(12.9	)
SG&A		10,980		6.1		14,411			7.9			(23.8	)
Provision for bad debts		9		—		131			0.1			(93.1	)
Other operating expense (income), net		108		0.1		(240	)		(0.1	)		(145.0	)
Operating income		6,346		3.5		5,717			3.1			11.0
Interest expense, net		1,047		0.6		1,320			0.7			(20.7	)
Equity in loss (earnings) of unconsolidated affiliates		866		0.4		(239	)		(0.2	)	nm
Income before income taxes		4,433		2.5		4,636			2.6			(4.4	)
Provision for income taxes		721		0.4		2,824			1.6			(74.5	)
Net income	$	3,712		2.1	$	1,812			1.0			104.9

Consolidated net sales for the current period ~~increased~~decreased by ~~$233,~~$1,662, or ~~0.1%~~0.9%, as compared to the prior ~~period. Net~~period primarily due to one less week of sales ~~were impacted by unfavorable foreign currency translation of approximately $5,300 and the timing of UNIFI’s seasonal shutdown period, which occurred~~ in the current period ~~but began immediately after~~for our NACA operations, partially offset by the ~~end~~sales growth of ~~the prior period.~~PVA products.

Consolidated sales volumes ~~were flat compared~~increased 16.1%, primarily attributable to continued sales growth of REPREVE^®-branded products, primarily Chip and staple fiber in the ~~prior period. Continued growth~~Asia Segment, partially offset by (i) one less week of sales in the current period for our NACA operations and (ii) softer yarn sales ~~of Flake~~ in the Polyester ~~Segment~~ and ~~growth in sales of staple fiber, recycled Chip and other PVA products~~Nylon Segments. Sales in the ~~International~~Asia Segment ~~were offset by (i) unfavorable foreign currency translation, (ii) soft market conditions in the U.S. and Brazil and (iii) one less shipping week domestically in the current period. Sales continue~~continued to expand ~~in the International Segment~~ as our ~~PVA~~REPREVE^® portfolio resonates with our brand partners that are focused on sustainable solutions. Soft Polyester Segment sales resulted from lower demand in certain market segments. Comparatively, lower Nylon Segment sales primarily reflect the loss of a customer program to overseas production during the fourth quarter of fiscal 2019.

We believe the softness in the domestic polyester environment and competition from imports continue to be challenges for the ~~domestic~~ textile supply ~~chain.~~chain and we have recently taken action in the form of trade petitions to help alleviate such competitive pressures. Our Nylon Segment results also reflect the current global trend of ~~declines in~~declining demand for nylon socks, ladies’ hosiery and intimate apparel.

Consolidated average sales prices ~~were flat, as price increases made in calendar 2018 in response~~decreased 17.0%, primarily attributable to ~~rising costs were offset by disproportionate~~(i) significant growth of ~~lower-priced Flake, recycled~~ Chip and staple ~~fiber.~~fiber in the Asia Segment, which have lower average sales prices, (ii) a decline in higher-priced nylon product sales and (iii) sales price declines associated with polyester raw material cost changes.

PVA products at the end of the current period comprised ~~approximately 47%~~54% of consolidated net sales, up from ~~45%~~47% for fiscal 2019 and from 43% at the end of ~~fiscal 2018, and higher than the 46% ratio for~~ the prior period. ~~Within~~Even with the relative growth in the proportion of PVA ~~product category,~~sales as a percentage of overall sales, our customers ~~can~~may choose between various ~~solutions,~~PVA products, 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 Brazilian Real (“BRL”) and the Chinese Renminbi (“RMB”) against the U.S. Dollar (“USD”).

Gross profit for the current period decreased by ~~$8,520,~~$2,576, or ~~37.6%~~12.9%, as compared to the prior period. ~~The~~

For the Asia Segment, gross profit ~~decline is~~increased as net sales increased but was partially offset by (i) a greater mix of lower-priced product sales and (ii) unfavorable foreign currency translation effects as the RMB weakened against the USD during the current period. For the Brazil Segment, gross profit decreased primarily ~~attributable~~due to (a) market price declines (in connection with declining raw material costs) outpacing inventory turnover, (b) lower sales volumes and (c) unfavorable foreign currency translation effects as the BRL weakened against the USD during the current period.

For the Polyester Segment, gross profit remained flat as the effects of (i) lower fixed cost absorption driven by lower textured yarn sales in connection with soft demand in certain market segments, and (ii) one less shipping week in the ~~Polyester and Nylon Segments due to lower regional yarn volumes, (ii) lower~~current period were offset by (a) an improved conversion margin in ~~each segment, in which~~connection with declining raw material costs during the current period ~~was unfavorably impacted by~~and (b) comparatively higher ~~raw material costs, (iii) unfavorable foreign currency translation~~technologies expense charged to the Asia Segment. For the Nylon Segment, gross profit decreased primarily due to a less favorable sales mix and weaker fixed cost absorption, due in part to the loss of ~~approximately $1,200 and (vi) disproportionate growth of lower margin products.~~

~~UNIFI expects~~a customer program to overseas production during the ~~third~~fourth quarter of fiscal ~~2019 to contain (i) moderate gross margin recapture from recent declines~~2019.

The changes in ~~raw material costs and (ii) improved sales and production volumes consistent with historical second-half seasonality.~~SG&A were as follows:

~~There was no material change in selling, general and administrative (“~~SG~~&A”) expenses~~&A decreased from the prior period to the current ~~period.~~period primarily as a result of significantly lower compensation expenses in connection with fewer executive officers in the current period as compared to the prior period and cost reduction efforts taken during the fourth quarter of fiscal 2019.

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

Other operating expense (income), net primarily reflects severance expenses recorded in the current period and foreign currency transaction gains recorded in both the current period and the prior period.

Interest expense, net decreased from the prior period to the current period, primarily as a result of lower debt principal and lower market interest rates on our variable-rate debt.

Equity in ~~other operating expense, net~~Loss (Earnings) of Unconsolidated Affiliates

The components of equity in loss (earnings) of unconsolidated affiliates were as follows:

The performance decline for unconsolidated affiliates was primarily attributable to ~~fluctuations in foreign currency transaction gains~~lower operating leverage and, ~~losses, along with severance expense recorded~~particularly for PAL, comparably higher costs.

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 and other rate impacting items is greater when pre-tax income is lower.

The decrease in the effective tax rate from the prior period to the current ~~period.~~period was primarily attributable to (i) the utilization of foreign tax credits, (ii) a decrease in U.S. tax on GILTI and (iii) a smaller impact from losses in tax jurisdictions for which no benefit could be recognized.

~~Interest on debt obligations~~Net income for the current period was $3,712, or $0.20 per share, compared to $1,812, or $0.10 per share, for the prior period. The increase was primarily attributable to lower SG&A and a more favorable effective tax rate, partially offset by lower gross profit and weaker results from PAL.

The reconciliations of the amounts reported under GAAP for Net income to EBITDA and Adjusted EBITDA were as follows:

Adjusted EBITDA increased from the prior period to the current period, primarily ~~due to~~as a ~~general increase in market interest rates and principal on the variable rate portion~~result of ~~our debt.~~

~~UNIFI’s 34% share of PAL’s earnings increased from a loss of $376 in the prior period to earnings of $762 in the current period. The increase was primarily attributable to~~ lower ~~raw material costs and improved fixed cost absorption.~~

The effective tax rate for the current period was primarily impacted by benefits of approximately $2,045 for tax credits related to prior years. In conjunction with a loss before income taxes of $1,117, these benefits impacted the effective tax rate by 183.1%.

The effective tax rate for the prior period was 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 in connection with implementation of December 2017 tax reform, the release of a $3,807 valuation allowance and foreign income being taxed at lower rates. These benefits wereSG&A, partially offset by a 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.

~~Net income for the current period was $1,171, or $0.06 per diluted share, compared to $11,802, or $0.63 per diluted share, for the prior period. The decrease was primarily attributable to~~ lower gross profit due to higher operating expenses and weaker sales volumes of higher value yarns, including one less shipping week due to the seasonal shutdown period, along with lower tax benefits recorded in the current period, partially offset by (i) higher earnings from PAL and (ii) comparatively favorable foreign currency transaction impacts.profit.

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

As noted in the 2019 Form 10-K, segment gross profit includes the effect of certain technology-related expenses charged by the Polyester Segment to the Asia Segment. Such amounts are recorded as a benefit to cost of sales for the Polyester Segment and a charge to cost of sales for the Asia Segment, thereby impacting gross profit for each segment. Fiscal 2019 segment results have been revised to reflect comparability for this change.

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~~were as follows:

	For the Three Months Ended													For the Three Months Ended
	December 30, 2018					December 24, 2017								September 29, 2019					September 30, 2018
				% of Net Sales					% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	85,789			100.0	$	90,316			100.0		(5.0	)	$	88,695			100.0	$	100,131			100.0		(11.4	)
Cost of sales		83,820			97.7		81,740			90.5		2.5			80,900			91.2		92,330			92.2		(12.4	)
Gross profit		1,969			2.3		8,576			9.5		(77.0	)		7,795			8.8		7,801			7.8		(0.1	)
Depreciation expense		3,937			4.6		3,973			4.4		(0.9	)		4,041			4.5		4,252			4.2		(5.0	)
Segment Profit	$	5,906			6.9	$	12,549			13.9		(52.9	)	$	11,836			13.3	$	12,053			12.0		(1.8	)

Segment net sales as a percentage of consolidated amounts		51.2	%				53.9	%							49.3	%				55.1	%
Segment Profit as a percentage of consolidated amounts		31.0	%				45.4	%							52.9	%				47.7	%

Net sales for the prior period	$	90,316		$	100,131
Decrease in sales volumes		(9,819	)
Decrease due to an additional week of sales in fiscal 2019					(6,868	)
Net change in average selling price and sales mix		5,292			(2,350	)
Decrease in underlying sales volumes					(2,218	)
Net sales for the current period	$	85,789		$	88,695

The decrease in net sales for the Polyester Segment from the prior period to the current period was primarily attributable to ~~(i) one less shipping~~an additional week of sales in the ~~current period due to the timing of the seasonal shutdown~~prior period and ~~(ii) a weaker sales mix. These declines were partially offset by higher sales~~lower volumes of ~~(i) dyed~~higher-priced textured yarn in connection with the dyed yarn portfolio acquisition that closed in the fourth quarter of fiscal 2018 and (ii) Flake, along with higher selling prices in response to several months of raw material related price increases during calendar 2018.products.

Segment Profit for the prior period	$	12,549		$	12,053
Net decrease in underlying margins		(5,279	)		(294	)
Decrease in sales volumes		(1,364	)
Decrease due to an additional week of sales in fiscal 2019					(288	)
Decrease in underlying sales volumes					(280	)
Increase in technologies expense charged to Asia Segment					645
Segment Profit for the current period	$	5,906		$	11,836

The decrease in Segment Profit for the Polyester Segment from the prior period to the current period was primarily attributable to ~~(i) one less shipping week in the current period due to the timing of the seasonal shutdown period, (ii) lower conversion margin,~~ ~~in which the current period was unfavorably impacted by higher raw material costs,~~ ~~(iii) an unfavorable sales mix characterized by higher volumes of lower-margin products like Flake and lower volumes of higher-margin products like textured yarn and (iv)~~ weaker fixed cost ~~absorption.~~absorption resulting from lower textured yarn volumes, partially offset by (i) a net improvement for the conversion margin in connection with the current period’s declining raw material cost environment and (ii) the incremental technologies expense charged to the Asia Segment in connection with its higher sales volumes.

Three Months Ended September 29, 2019 Compared to Three Months Ended September 30, 2018

The components of Net 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
	September 29, 2019				September 30, 2018
			% of Net Sales					% of Net Sales			% Change
Net sales	$	179,949		100.0	$	181,611			100.0			(0.9	)
Cost of sales		162,506		90.3		161,592			89.0			0.6
Gross profit		17,443		9.7		20,019			11.0			(12.9	)
SG&A		10,980		6.1		14,411			7.9			(23.8	)
Provision for bad debts		9		—		131			0.1			(93.1	)
Other operating expense (income), net		108		0.1		(240	)		(0.1	)		(145.0	)
Operating income		6,346		3.5		5,717			3.1			11.0
Interest expense, net		1,047		0.6		1,320			0.7			(20.7	)
Equity in loss (earnings) of unconsolidated affiliates		866		0.4		(239	)		(0.2	)	nm
Income before income taxes		4,433		2.5		4,636			2.6			(4.4	)
Provision for income taxes		721		0.4		2,824			1.6			(74.5	)
Net income	$	3,712		2.1	$	1,812			1.0			104.9

Consolidated net sales for the current period decreased by $1,662, or 0.9%, as compared to the prior period primarily due to one less week of sales in the current period for our NACA operations, partially offset by the sales growth of PVA products.

Consolidated sales volumes increased 16.1%, primarily attributable to continued sales growth of REPREVE^®-branded products, primarily Chip and staple fiber in the Asia Segment, partially offset by (i) one less week of sales in the current period for our NACA operations and (ii) softer yarn sales in the Polyester and Nylon Segments. Sales in the Asia Segment continued to expand as our REPREVE^® portfolio resonates with our brand partners that are focused on sustainable solutions. Soft Polyester Segment sales resulted from lower demand in certain market segments. Comparatively, lower Nylon Segment sales primarily reflect the loss of a customer program to overseas production during the fourth quarter of fiscal 2019.

We believe the softness in the domestic polyester environment and competition from imports continue to be challenges for the textile supply chain and we have recently taken action in the form of trade petitions to help alleviate such competitive pressures. Our Nylon Segment results also reflect the current global trend of declining demand for nylon socks, ladies’ hosiery and intimate apparel.

Consolidated average sales prices decreased 17.0%, primarily attributable to (i) significant growth of Chip and staple fiber in the Asia Segment, which have lower average sales prices, (ii) a decline in higher-priced nylon product sales and (iii) sales price declines associated with polyester raw material cost changes.

PVA products at the end of the current period comprised 54% of consolidated net sales, up from 47% for fiscal 2019 and from 43% at the end of the prior period. Even with the relative growth in the proportion of PVA sales as a percentage of overall sales, our customers may choose between various PVA products, 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 Brazilian Real (“BRL”) and the Chinese Renminbi (“RMB”) against the U.S. Dollar (“USD”).

Gross profit for the current period decreased by $2,576, or 12.9%, as compared to the prior period.

For the Asia Segment, gross profit increased as net sales increased but was partially offset by (i) a greater mix of lower-priced product sales and (ii) unfavorable foreign currency translation effects as the RMB weakened against the USD during the current period. For the Brazil Segment, gross profit decreased primarily due to (a) market price declines (in connection with declining raw material costs) outpacing inventory turnover, (b) lower sales volumes and (c) unfavorable foreign currency translation effects as the BRL weakened against the USD during the current period.

For the Polyester Segment, gross profit remained flat as the effects of (i) lower fixed cost absorption driven by lower textured yarn sales in connection with soft demand in certain market segments, and (ii) one less shipping week in the current period were offset by (a) an improved conversion margin in connection with declining raw material costs during the current period and (b) comparatively higher technologies expense charged to the Asia Segment. For the Nylon Segment, gross profit decreased primarily due to a less favorable sales mix and weaker fixed cost absorption, due in part to the loss of a customer program to overseas production during the fourth quarter of fiscal 2019.

SG&A decreased from the prior period to the current period primarily as a result of significantly lower compensation expenses in connection with fewer executive officers in the current period as compared to the prior period and cost reduction efforts taken during the fourth quarter of fiscal 2019.

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

Interest expense, net decreased from the prior period to the current period, primarily as a result of lower debt principal and lower market interest rates on our variable-rate debt.

The components of equity in loss (earnings) of unconsolidated affiliates were as follows:

The performance decline for unconsolidated affiliates was primarily attributable to lower operating leverage and, particularly for PAL, comparably higher costs.

The decrease in the effective tax rate from the prior period to the current period was primarily attributable to (i) the utilization of foreign tax credits, (ii) a decrease in U.S. tax on GILTI and (iii) a smaller impact from losses in tax jurisdictions for which no benefit could be recognized.

Net income for the current period was $3,712, or $0.20 per share, compared to $1,812, or $0.10 per share, for the prior period. The increase was primarily attributable to lower SG&A and a more favorable effective tax rate, partially offset by lower gross profit and weaker results from PAL.

The reconciliations of the amounts reported under GAAP for Net income to EBITDA and Adjusted EBITDA were as follows:

Adjusted EBITDA increased from the prior period to the current period, primarily as a result of lower SG&A, partially offset by lower gross profit.

Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for the current period. As noted in the 2019 Form 10-K, segment gross profit includes the effect of certain technology-related expenses charged by the Polyester Segment to the Asia Segment. Such amounts are recorded as a benefit to cost of sales for the Polyester Segment and a charge to cost of sales for the Asia Segment, thereby impacting gross profit for each segment. Fiscal 2019 segment results have been revised to reflect comparability for this change.

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~~Polyester Segment, ~~are~~were as follows:

	For the Three Months Ended													For the Three Months Ended
	December 30, 2018					December 24, 2017								September 29, 2019					September 30, 2018
				% of Net Sales					% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	22,647			100.0	$	25,103			100.0		(9.8	)	$	88,695			100.0	$	100,131			100.0		(11.4	)
Cost of sales		20,615			91.0		22,027			87.7		(6.4	)		80,900			91.2		92,330			92.2		(12.4	)
Gross profit		2,032			9.0		3,076			12.3		(33.9	)		7,795			8.8		7,801			7.8		(0.1	)
Depreciation expense		499			2.2		552			2.2		(9.6	)		4,041			4.5		4,252			4.2		(5.0	)
Segment Profit	$	2,531			11.2	$	3,628			14.5		(30.2	)	$	11,836			13.3	$	12,053			12.0		(1.8	)

Segment net sales as a percentage of consolidated amounts		13.5	%				15.0	%							49.3	%				55.1	%
Segment Profit as a percentage of consolidated amounts		13.3	%				13.1	%							52.9	%				47.7	%

Net sales for the prior period	$	25,103		$	100,131
Decrease in sales volumes		(2,343	)
Decrease due to an additional week of sales in fiscal 2019					(6,868	)
Net change in average selling price and sales mix		(113	)		(2,350	)
Decrease in underlying sales volumes					(2,218	)
Net sales for the current period	$	22,647		$	88,695

The decrease in net sales for the ~~Nylon~~Polyester Segment from the prior period to the current period was primarily attributable to ~~(i) one less shipping~~an additional week of sales in the ~~current period due to the timing of the seasonal shutdown~~prior period and ~~(ii) a lower-priced sales mix.~~lower volumes of higher-priced textured yarn products.

The change in Segment Profit for the ~~Nylon~~Polyester Segment iswas as follows:

Segment Profit for the prior period	$	3,628		$	12,053
Net decrease in underlying margins		(758	)		(294	)
Decrease in sales volumes		(339	)
Decrease due to an additional week of sales in fiscal 2019					(288	)
Decrease in underlying sales volumes					(280	)
Increase in technologies expense charged to Asia Segment					645
Segment Profit for the current period	$	2,531		$	11,836

The decrease in Segment Profit for the ~~Nylon~~Polyester Segment from the prior period to the current period was primarily attributable to ~~(i) one less shipping week in the current period due to the timing of the seasonal shutdown period and (ii) a less profitable sales mix.~~

~~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

December 30, 2018

December 24, 2017

% of
Net Sales

% of
Net Sales

%
Change

Net sales

$
58,237

100.0

$
51,046

100.0

14.1

Cost of sales

48,161

82.7

40,072

78.5

20.2

Gross profit

10,076

17.3

10,974

21.5

(8.2
)
Depreciation expense

367

0.6

397

0.8

(7.6
)
Segment Profit

$
10,443

17.9

$
11,371

22.3

(8.2
)

Segment net sales as a percentage of
consolidated amounts

34.7
%

30.5
%

Segment Profit as a percentage of
consolidated amounts

54.9
%

41.1
%

~~The increase in net sales for the International Segment~~weaker fixed cost absorption resulting from ~~the prior period to the current period was primarily attributable to (i) higher sales~~lower textured yarn volumes, ~~at our Asian subsidiaries due to growth in our REPREVE~~^® ~~portfolios and (ii) higher pricing due to increased raw material costs,~~ partially offset by ~~(a) lower sales volumes~~(i) a net improvement for the conversion margin in ~~Brazil due to a softer economic~~connection with the current period’s declining raw material cost environment and ~~(b) unfavorable foreign currency translation primarily due~~(ii) the incremental technologies expense charged to the ~~weakening of the BRL and the RMB against the U.S. Dollar (“USD”) during the current period.~~

The RMB weighted average exchange rate was 6.92 RMB/USD and 6.61 RMB/USD for the current period and the prior period, respectively. The BRL weighted average exchange rate was 3.81 BRL/USD and 3.24 BRL/USD for the current period and the prior period, respectively.

~~The change~~Asia Segment in ~~Segment Profit for the International Segment is as follows:~~

~~The decrease in Segment Profit for the International Segment was primarily attributable to unfavorable foreign currency translation effectsas the BRL and the RMB weakened against the USD during the current period, along~~connection with ~~conversion margin pressure due to higher raw material costs, partially offset by overall~~its higher sales volumes.

~~Six~~Three Months Ended ~~December~~September 29, 2019 Compared to Three Months Ended September 30, 2018 ~~Compared to Six Months Ended December 24, 2017~~

The components of Net income, each component as a percentage of net sales and the percentage increase or decrease over the prior ~~six-month~~ period amounts, are as follows:

	For the Six Months Ended															For the Three Months Ended
	December 30, 2018						December 24, 2017									September 29, 2019				September 30, 2018
				% of Net Sales						% of Net Sales			% Change					% of Net Sales					% of Net Sales			% Change
Net sales	$	349,322			100.0		$	331,720			100.0			5.3		$	179,949		100.0	$	181,611			100.0			(0.9	)
Cost of sales		315,147			90.2			285,752			86.1			10.3			162,506		90.3		161,592			89.0			0.6
Gross profit		34,175			9.8			45,968			13.9			(25.7	)		17,443		9.7		20,019			11.0			(12.9	)
Selling, general and administrative expenses		29,233			8.4			27,489			8.3			6.3
Provision (benefit) for bad debts		163			—			(131	)		—		nm
Other operating (income) expense, net		(141	)		—			663			0.2			(121.3	)
SG&A																	10,980		6.1		14,411			7.9			(23.8	)
Provision for bad debts																	9		—		131			0.1			(93.1	)
Other operating expense (income), net																	108		0.1		(240	)		(0.1	)		(145.0	)
Operating income		4,920			1.4			17,947			5.4			(72.6	)		6,346		3.5		5,717			3.1			11.0
Interest expense, net		2,523			0.7			2,113			0.6			19.4			1,047		0.6		1,320			0.7			(20.7	)
Loss on extinguishment of debt		131			—			—			—			—
Equity in earnings of unconsolidated affiliates		(1,253	)		(0.4	)		(3,298	)		(1.0	)		(62.0	)
Equity in loss (earnings) of unconsolidated affiliates																	866		0.4		(239	)		(0.2	)	nm
Income before income taxes		3,519			1.1			19,132			5.8			(81.6	)		4,433		2.5		4,636			2.6			(4.4	)
Provision (benefit) for income taxes		536			0.2			(1,630	)		(0.5	)		(132.9	)
Provision for income taxes																	721		0.4		2,824			1.6			(74.5	)
Net income	$	2,983			0.9		$	20,762			6.3			(85.6	)	$	3,712		2.1	$	1,812			1.0			104.9

Consolidated net sales for the current ~~six-month~~ period ~~increased~~decreased by ~~$17,602,~~$1,662, or ~~5.3%~~0.9%, as compared to the prior ~~six-month period. Net~~period primarily due to one less week of sales were impacted by unfavorable currency translation of approximately $11,900. The current six-month period consisted of 27 fiscal weeks, while the prior six-month period consisted of 26 fiscal weeks. While the current six-month period contained an additional fiscal week, the current six-month period also included the seasonal shutdown period (which occurred immediately after the prior six-month period). As a result, the number of shipping weeks in the current ~~six-month~~ period ~~and~~for our NACA operations, partially offset by the ~~prior six-month period were approximately equal.~~sales growth of PVA products.

Consolidated sales volumes increased ~~6.1%~~16.1%, primarily attributable to continued sales growth of REPREVE^®-branded products, primarily Chip and staple fiber in the Asia Segment, partially offset by (i) one less week of sales ~~of Flake~~in the current period for our NACA operations and ~~recycled Chip~~(ii) softer yarn sales in the Polyester ~~Segment~~ and ~~growth in sales of REPREVE~~^® ~~staple fiber and other PVA products~~Nylon Segments. Sales in the ~~International Segment. Sales continue~~Asia Segment continued to expand ~~in the International Segment~~ as our ~~PVA~~REPREVE^® portfolio resonates with our brand partners that are focused on sustainable solutions. Soft Polyester Segment sales resulted from lower demand in certain market segments. Comparatively, lower Nylon Segment sales primarily reflect the loss of a customer program to overseas production during the fourth quarter of fiscal 2019.

Consolidated average sales prices ~~were flat, as~~decreased 17.0%, primarily attributable to (i) significant growth of Chip and staple fiber in the Asia Segment, which have lower average sales prices, (ii) a decline in higher-priced nylon product sales and (iii) sales price ~~increases made in response to rising~~declines associated with polyester raw material ~~costs during calendar 2018 were offset by foreign currency translation and the disproportionate growth of lower-priced Flake and recycled Chip in the current six-month period.~~cost changes.

PVA products at the end of the current ~~six-month~~ period comprised ~~approximately 45%~~54% of consolidated net sales, ~~equal to the 45% ratio~~up from 47% for fiscal 2019 and from 43% at the end of ~~fiscal 2018, and slightly higher than the 44% ratio for~~ the prior ~~six-month~~ period. ~~Within~~Even with the relative growth in the proportion of PVA ~~product category,~~sales as a percentage of overall sales, our customers ~~can~~may choose between various ~~solutions,~~PVA products, 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~~Brazilian Real (“BRL”) and ~~RMB.~~the Chinese Renminbi (“RMB”) against the U.S. Dollar (“USD”).

Gross profit for the current ~~six-month~~ period decreased by ~~$11,793,~~$2,576, or ~~25.7%~~12.9%, as compared to the prior ~~six-month~~ period. ~~The~~

For the Asia Segment, gross profit ~~decline is primarily attributable to~~increased as net sales increased but was partially offset by (i) ~~lower conversion margin in the Polyester~~a greater mix of lower-priced product sales and ~~International Segments, in which the current six-month period was unfavorably impacted by increasing raw material costs,~~ (ii) unfavorable foreign currency translation effects as the RMB weakened against the USD during the current period. For the Brazil Segment, gross profit decreased primarily due to (a) market price declines (in connection with declining raw material costs) outpacing inventory turnover, (b) lower sales volumes and (c) unfavorable foreign currency translation effects as the BRL weakened against the USD during the current period.

For the Polyester Segment, gross profit remained flat as the effects of ~~approximately $2,700, (iii) disproportionate growth of~~(i) lower fixed cost absorption driven by lower textured yarn sales in connection with soft demand in certain market segments, and (ii) one less shipping week in the current period were offset by (a) an improved conversion margin ~~products~~in connection with declining raw material costs during the current period and ~~(iv)~~(b) comparatively higher technologies expense charged to the Asia Segment. For the Nylon Segment, gross profit decreased primarily due to a less favorable sales mix and weaker fixed cost ~~absorption.~~absorption, due in part to the loss of a customer program to overseas production during the fourth quarter of fiscal 2019.

~~Total~~ SG&A ~~expenses were higher for~~decreased from the ~~current six-month~~prior period ~~compared~~ to the ~~prior six-month~~current period primarily as a result of ~~an additional week~~significantly lower compensation expenses in connection with fewer executive officers in the current period as compared to the prior period and cost reduction efforts taken during the fourth quarter of fiscal ~~2019 for our domestic operations and an increase in professional fees relating to external services for legal, marketing and finance.~~2019.

There was no significant activity reflected in the current ~~six-month~~ period or the prior ~~six-month period.~~period for bad debts.

~~The change in other~~Other operating ~~(income)~~ expense (income), net ~~was~~ primarily ~~attributable to fluctuations in the RMB, in which relative weakening~~reflects severance expenses recorded in the current ~~six-month~~ period ~~generated~~and foreign currency transaction gains ~~while relative strengthening~~recorded in both the current period and the prior ~~six-month period generated foreign currency transaction losses.~~period.

Interest ~~on debt obligations increased~~expense, net decreased from the prior ~~six-month~~ period to the current ~~six-month~~ period, primarily ~~due to~~as a ~~general increase in~~result of lower debt principal and lower market interest rates ~~and principal~~ on ~~the variable rate portion of~~ our variable-rate debt.

~~Consolidated Earnings from~~Equity in Loss (Earnings) of Unconsolidated Affiliates

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

The performance decline for unconsolidated affiliates was primarily attributable to lower operating leverage and, particularly for PAL, comparably higher costs.

UNIFI’s 34% share of PAL’s earnings decreased from $2,478 in the prior six-month period to $745 in the current six-month period. The decrease was primarily attributable to higher raw material costs and reduced operating leverage, most notably in the comparable first fiscal quarters of the current six-month period and the prior six-month period.

The effective tax rate for the current six-month period was lower than the U.S. federal statutory rate primarily due to the benefits of approximately $2,045 for tax credits related to prior years. These benefits were partially offset by earnings taxed at higher rates in foreign jurisdictions, losses in tax

~~jurisdictions for which no tax benefit could be recognized, the effects of the GILTI provisions enacted in H.R. 1, and non-deductible executive compensation.~~

The effective tax rate ~~for~~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 and other rate impacting items is greater when pre-tax income is lower.

The decrease in the effective tax rate from the prior ~~six-month~~period to the current period was ~~lower than~~primarily attributable to (i) 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 provisional charge for the deemed mandatory repatriation of foreign earnings and profits, netutilization of foreign tax credits, (ii) a decrease in U.S. tax on GILTI and by(iii) a smaller impact from losses in tax jurisdictions for which no ~~tax~~ benefit ~~can currently~~could be recognized.

Net income for the current ~~six-month~~ period was ~~$2,983,~~$3,712, or ~~$0.16~~$0.20 per ~~diluted~~ share, compared to ~~$20,762,~~$1,812, or ~~$1.12~~$0.10 per ~~diluted~~ share, for the prior ~~six-month~~ period. The ~~decrease~~increase was primarily attributable to ~~(i)~~ lower ~~gross profit relating to higher polyester raw material costs, weaker fixed costs absorption and weaker sales mix, (ii) lower earnings from PAL, (iii) an increase in~~ SG&A ~~expenses~~ and ~~(iv)~~ a ~~higher~~more favorable effective tax rate, partially offset by ~~comparatively favorable foreign currency transaction impacts.~~lower gross profit and weaker results from PAL.

The reconciliations of the amounts reported under GAAP for Net income to EBITDA and Adjusted EBITDA were as follows:

Adjusted EBITDA increased from the prior period to the current period, primarily as a result of lower SG&A, partially offset by lower gross profit.

Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for the current ~~six-month~~ period. As noted in the 2019 Form 10-K, segment gross profit includes the effect of certain technology-related expenses charged by the Polyester Segment to the Asia Segment. Such amounts are recorded as a benefit to cost of sales for the Polyester Segment and a charge to cost of sales for the Asia Segment, thereby impacting gross profit for each segment. Fiscal 2019 segment results have been revised to reflect comparability for this change.

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

	For the Six Months Ended													For the Three Months Ended
	December 30, 2018					December 24, 2017								September 29, 2019					September 30, 2018
				% of Net Sales					% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	185,920			100.0	$	178,054			100.0		4.4		$	88,695			100.0	$	100,131			100.0		(11.4	)
Cost of sales		177,223			95.3		160,565			90.2		10.4			80,900			91.2		92,330			92.2		(12.4	)
Gross profit		8,697			4.7		17,489			9.8		(50.3	)		7,795			8.8		7,801			7.8		(0.1	)
Depreciation expense		8,189			4.4		7,840			4.4		4.5			4,041			4.5		4,252			4.2		(5.0	)
Segment Profit	$	16,886			9.1	$	25,329			14.2		(33.3	)	$	11,836			13.3	$	12,053			12.0		(1.8	)

Segment net sales as a percentage of consolidated amounts		53.2	%				53.7	%							49.3	%				55.1	%
Segment Profit as a percentage of consolidated amounts		38.1	%				45.4	%							52.9	%				47.7	%

The ~~increase~~decrease in net sales for the Polyester Segment from the prior ~~six-month~~ period to the current ~~six-month~~ period was primarily attributable to ~~higher~~an additional week of sales in the prior period and lower volumes of (i) Flake, (ii) recycled Chip and (iii) dyed yarn in connection with the dyed yarn portfolio acquisition that closed in the fourth quarter of fiscal 2018, along with 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 lowerhigher-priced textured yarn ~~volumes.~~products.

The decrease in Segment Profit for the Polyester Segment from the prior ~~six-month~~ period to the current ~~six-month~~period was primarily attributable to weaker fixed cost absorption resulting from lower textured yarn volumes, partially offset by (i) a net improvement for the conversion margin in connection with the current period’s declining raw material cost environment and (ii) the incremental technologies expense charged to the Asia Segment in connection with its higher sales volumes.

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 were as follows:

	For the Three Months Ended
	September 29, 2019					September 30, 2018
				% of Net Sales					% of Net Sales		% Change
Net sales	$	20,202			100.0	$	27,949			100.0		(27.7	)
Cost of sales		19,024			94.2	��	25,805			92.3		(26.3	)
Gross profit		1,178			5.8		2,144			7.7		(45.1	)
Depreciation expense		491			2.5		561			2.0		(12.5	)
Segment Profit	$	1,669			8.3	$	2,705			9.7		(38.3	)

Segment net sales as a percentage of consolidated amounts		11.2	%				15.4	%
Segment Profit as a percentage of consolidated amounts		7.5	%				10.7	%

The decrease in net sales for the Nylon Segment from the prior period to the current period was primarily attributable to (i) ~~lower conversion margin,~~ continued demand declines in ~~which~~certain nylon product categories, (ii) a significant customer shifting a portion of its supply chain to overseas production during the fourth quarter of fiscal 2019 and (iii) an additional week of sales in the prior period for our NACA operations.

The decrease in Segment Profit for the Nylon Segment from the prior period to the current ~~six-month~~ period was ~~unfavorably impacted by increasing raw material costs,~~ ~~(ii) the unfavorable~~primarily attributable to a less profitable sales mix ~~shift towards lower-margin products discussed above in~~and weaker fixed cost absorption due to lower sales volumes, corresponding to the net sales analysis ~~and (iii) weaker fixed cost absorption.~~

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

	For the Six Months Ended													For the Three Months Ended
	December 30, 2018					December 24, 2017								September 29, 2019					September 30, 2018
				% of Net Sales					% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	50,596			100.0	$	51,930			100.0		(2.6	)	$	24,172			100.0	$	26,913			100.0		(10.2	)
Cost of sales		46,420			91.7		45,540			87.7		1.9			20,013			82.8		20,495			76.2		(2.4	)
Gross profit		4,176			8.3		6,390			12.3		(34.6	)		4,159			17.2		6,418			23.8		(35.2	)
Depreciation expense		1,060			2.1		1,089			2.1		(2.7	)		375			1.6		359			1.4		4.5
Segment Profit	$	5,236			10.4	$	7,479			14.4		(30.0	)	$	4,534			18.8	$	6,777			25.2		(33.1	)

Segment net sales as a percentage of consolidated amounts		14.5	%				15.7	%							13.4	%				14.8	%
Segment Profit as a percentage of consolidated amounts		11.8	%				13.4	%							20.3	%				26.8	%

The decrease in net sales for the ~~Nylon~~Brazil Segment from the prior ~~six-month~~ period to the current ~~six-month~~ period was primarily attributable to ~~a lower-priced~~lower selling prices and sales ~~mix, partially offset by higher sales volumes.~~volumes due to increased competition and declining raw material costs.

The BRL weighted average exchange rate was 3.98 BRL/USD and 3.96 BRL/USD for the current period and the prior period, respectively.

The decrease in Segment Profit for the ~~Nylon~~Brazil Segment from the prior ~~six-month~~ period to the current ~~six-month~~ period was primarily attributable to competitive pricing pressures during a ~~less profitable sales mix~~declining raw material cost environment. For the Brazil Segment, declining raw material costs place immediate downward market pressure on selling prices and, ~~weaker fixed cost absorption.~~since the Brazil Segment’s supply chain is generally longer, average inventory costs decline slower than selling prices. Additionally, the Brazil Segment accelerated certain raw material purchases in the fourth quarter of fiscal 2019, which exacerbated the above impact.

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

	For the Six Months Ended													For the Three Months Ended
	December 30, 2018					December 24, 2017								September 29, 2019					September 30, 2018
				% of Net Sales					% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	110,590			100.0	$	99,705			100.0		10.9		$	45,957			100.0	$	25,440			100.0		80.6
Cost of sales		89,491			80.9		77,733			78.0		15.1			41,675			90.7		21,908			86.1		90.2
Gross profit		21,099			19.1		21,972			22.0		(4.0	)		4,282			9.3		3,532			13.9		21.2
Depreciation expense		726			0.6		813			0.9		(10.7	)		—			—		—			—		—
Segment Profit	$	21,825			19.7	$	22,785			22.9		(4.2	)	$	4,282			9.3	$	3,532			13.9		21.2

Segment net sales as a percentage of consolidated amounts		31.7	%				30.1	%							25.5	%				14.0	%
Segment Profit as a percentage of consolidated amounts		49.3	%				40.8	%							19.1	%				14.0	%

The increase in net sales for the ~~International~~Asia Segment from the prior ~~six-month~~ period to the current ~~six-month~~ period was primarily attributable to ~~(i)~~ higher sales volumes ~~at our Asian subsidiaries due to growth in our~~of REPREVE^® ~~portfolios~~-branded products, primarily Chip and (ii) higher pricing due to increased raw material costs, partially offset by (a) lower sales volumes in Brazil due to a softer economic environment and (b) unfavorable foreign currency translation primarily attributable to the weakening of the BRL and the RMB against the USD~~during the current six-month period.~~staple fiber.

The RMB weighted average exchange rate was ~~6.86~~7.02 RMB/USD and ~~6.64~~6.81 RMB/USD for the current ~~six-month~~ period and the prior ~~six-month period, respectively. The BRL weighted average exchange rate was 3.88 BRL/USD and 3.20 BRL/USD for the current six-month period and the prior six-month~~ period, respectively.

The change in Segment Profit for the ~~International~~Asia Segment iswas as follows:

The ~~decrease~~increase in Segment Profit for the ~~International~~Asia Segment from the prior period to the current period was primarily attributable to unfavorable foreign currency translation effects as the BRL and the RMB weakened against the USD during the current six-month period and conversion margin pressure from higher raw material costs, partially offset by the increase in sales volumes described in the net sales analysis above.

UNIFI’s primary capital requirements are for working capital, capital expenditures, debt service and ~~stock~~share repurchases. UNIFI’s primary sources of capital are cash generated from operations and borrowings available under the ABL ~~Revolver.~~Revolver of its credit facility. For the current ~~six-month~~ period, cash ~~used in~~generated from operations was ~~$3,975,~~$23,822, and, at ~~December 30, 2018,~~September 29, 2019, excess availability under the ABL Revolver was $64,147. As further described under “Cash (Used in) Provided by Operating Activities” below, the cash used in operating activities for the current six-month period is attributable to several factors, including an increase in inventories due to domestic production rates that outpaced domestic sales during the period.$62,765.

As of ~~December 30, 2018,~~September 29, 2019, all of UNIFI’s ~~$131,104~~$122,387 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 30, 2018~~September 29, 2019 for domestic ~~and~~operations compared to foreign operations:

	Domestic		Foreign		Total		Domestic		Foreign		Total
Cash and cash equivalents	$	16	$	26,637	$	26,653	$	9	$	34,109	$	34,118
Borrowings available under financing arrangements		64,147		—		64,147		62,765		—		62,765
Liquidity	$	64,163	$	26,637	$	90,800	$	62,774	$	34,109	$	96,883

Working capital	$	101,965	$	94,245	$	196,210	$	94,249	$	99,480	$	193,729
Total debt obligations	$	131,104	$	—	$	131,104	$	122,387	$	—	$	122,387

On December 18, 2018, Unifi, Inc. and certain of its subsidiaries entered into the 2018 Amendment, which amended the Credit Agreement. The Credit Agreement provides for the ABL Facility, which is a $200,000 senior secured credit facility that includes the $100,000 ABL Revolver and the ABL 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 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~~maturity date from March 26, 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 ABL Term Loan was reset from $80,000 to $100,000. Net proceeds from this ABL Term Loan reset were used to pay down the amount outstanding on the ABL Revolver.

UNIFI currently utilizes variable-rate borrowings under the ABL Facility that are made with reference to USD LIBOR Rate Loans for and is party to London Interbank Offer Rate (“LIBOR”)-based interest rate swaps. Management recognizes the potential challenges posed by the previously announced termination of LIBOR. The 2018 Amendment includes fallback language to allow for a conversion of LIBOR Rate Loans to Base Rate Loans or a mutually agreed upon alternative rate of interest, such as the Secured Overnight Financing Rate. Management will continue to monitor the potential termination of LIBOR and the potential impact on UNIFI’s operations. However, management does not expect (i) significant efforts are necessary to accommodate a termination of LIBOR or (ii) a significant impact to UNIFI’s operations upon a termination of LIBOR.

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 (collectively, the “Loan Parties”). It is also secured by a first-priority security interest in all (or 65% in the case of UNIFI’s first-tier controlled foreign 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 (as defined in the Credit Agreement), a financial covenant requiring the Loan Parties to maintain a ~~fixed charge coverage ratio~~Fixed Charge Coverage Ratio on a quarterly basis of at least 1.05 to 1.00 becomes effective. The Trigger Level as of ~~December 30, 2018~~September 29, 2019 was ~~$25,000.~~$24,375. In addition, the ABL Facility contains restrictions on particular payments and investments, including certain restrictions on share repurchases and the payment of ~~dividends and share repurchases.~~dividends. 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”)~~LIBOR plus an ~~applicable margin~~Applicable Margin of 1.25% to 1.75%, or the Base Rate (as defined below) plus an ~~applicable margin~~Applicable Margin of 0.25% to 0.75%, with interest currently being paid on a monthly basis. The ~~applicable margin~~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 (as defined in the Credit Agreement) plus 0.5% and (c) LIBOR plus 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~~inventories 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 30, 2018,~~September 29, 2019, UNIFI was in compliance with all financial covenants in the Credit Agreement and the excess availability under the ABL Revolver was ~~$64,147.~~$62,765. At ~~December 30, 2018,~~September 29, 2019, the ~~fixed charge coverage ratio~~Fixed Charge Coverage Ratio was ~~1.16~~1.90 to 1.00 and UNIFI had ~~$400~~$200 of standby letters of credit, none of which ~~have~~had been drawn upon. Management maintains the capability to quickly and easily improve the Fixed Charge Coverage Ratio utilizing existing cash and cash equivalents.

UNIFI currently maintains three interest rate swaps that fix LIBOR at approximately 1.9% on $75,000 of variable-rate 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 30, 2018	December 30, 2018			June 24, 2018			Maturity Date	September 29, 2019	September 29, 2019			June 30, 2019
ABL Revolver	December 2023	4.3%	$	16,500		$	28,100		December 2023	3.5%	$	17,000		$	19,400
ABL Term Loan ⁽¹⁾	December 2023	3.8%		100,000			85,000		December 2023	3.5%		95,000			97,500
Capital lease obligations	(2)	3.8%		14,604			18,107
Finance lease obligations									(2)	3.6%		10,387			11,118
Total debt				131,104			131,207					122,387			128,018
Current portion of capital lease obligations				(6,482	)		(6,996	)
Current portion of other long-term debt				(7,500	)		(10,000	)
Current ABL Term Loan												(10,000	)		(10,000	)
Current portion of finance lease obligations												(4,738	)		(5,519	)
Unamortized debt issuance costs				(1,044	)		(658	)				(895	)		(958	)
Total long-term debt			$	116,078		$	113,553				$	106,754		$	111,541

(2) Scheduled maturity dates for ~~capital~~finance lease obligations range from ~~January~~December 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 ~~2019,~~2020, the following four fiscal years and thereafter:

	Fiscal 2019		Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Thereafter		Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Thereafter
ABL Revolver	$	—	$	—	$	—	$	—	$	—	$	16,500	$	—	$	—	$	—	$	—	$	17,000	$	—
ABL Term Loan		2,500		10,000		10,000		10,000		10,000		57,500		7,500		10,000		10,000		10,000		57,500		—
Capital lease obligations		3,442		5,559		2,634		2,417		91		461
Finance lease obligations														3,978		2,738		2,536		214		222		699
Total	$	5,942	$	15,559	$	12,634	$	12,417	$	10,091	$	74,461	$	11,478	$	12,738	$	12,536	$	10,214	$	74,722	$	699

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

	December 30, 2018			June 24, 2018			September 29, 2019			June 30, 2019
Cash and cash equivalents	$	26,653		$	44,890		$	34,118		$	22,228
Receivables, net		79,294			86,273			85,598			88,884
Inventories		134,642			126,311			129,447			133,781
Income tax receivable		9,291			10,291
Income taxes receivable								3,605			4,373
Other current assets		18,120			6,529			16,440			16,356
Accounts payable		(43,527	)		(48,970	)		(41,131	)		(41,796	)
Accrued expenses		(12,463	)		(17,720	)		(16,162	)		(16,849	)
Other current liabilities		(15,800	)		(18,313	)		(18,186	)		(16,088	)
Working capital	$	196,210		$	189,291		$	193,729		$	190,889

Less: Cash and cash equivalents		(26,653	)		(44,890	)		(34,118	)		(22,228	)
Less: Income tax receivable		(9,291	)		(10,291	)
Less: Income taxes receivable								(3,605	)		(4,373	)
Less: Other current liabilities		15,800			18,313			18,186			16,088
Adjusted Working Capital	$	176,066		$	152,423		$	174,192		$	180,376

Working capital increased from ~~$189,291~~$190,889 as of June ~~24, 2018~~30, 2019 to ~~$196,210~~$193,729 as of ~~December 30, 2018,~~September 29, 2019, while Adjusted Working Capital ~~increased~~decreased from ~~$152,423~~$180,376 to ~~$176,066.~~$174,192.

The ~~decrease~~increase in cash and cash equivalents was driven by the ~~utilization of~~operating cash ~~to retire ABL Revolver debt in advance of UNIFI’s entering into the 2018 Amendment as described above.~~flows generated by our foreign operations. The decrease in receivables, net was primarily attributable to an improvement in days’ sales outstanding due to a greater mix of sales generated from our Asia Segment, where days’ sales outstanding were lower ~~sales associated with~~than the ~~timing of the seasonal shutdown period.~~Company average. The ~~increase~~decrease in inventories was primarily attributable to ~~domestic finished goods production outpacing domestic sales and higher~~the decline in raw material ~~costs.~~costs during the current period. The ~~decrease~~changes in income tax receivable, ~~reflects the timing of tax payments~~other current assets, accounts payable and ~~refunds.~~accrued expenses were insignificant. The increase in other current ~~assets~~liabilities primarily reflects adding operating lease liabilities in the ~~addition of contract assets that relate to products on hand that have been reflected~~current period in ~~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 was primarily attributable to the timing of purchase activity associated with the seasonal shutdown period. The decrease in accrued expenses was primarily attributable to the payment of variable compensation earned in fiscal 2018 and the impact of the December shutdown period. The change in other current liabilities reflects one less current ABL Term Loan principal payment in connection with the 2018 Amendment.new lease guidance.

During the current ~~six-month~~ period, UNIFI invested ~~approximately $12,300~~$4,585 in capital projects, primarily relating to (i) making further improvements in production capabilities and technology enhancements in the Americas and (ii) annual maintenance capital expenditures. UNIFI will seek to ensure that maintenance capital expenditures are sufficient to allow continued production at high efficiencies.

~~Through the remainder of fiscal 2019, UNIFI expects to invest an additional $12,700 in capital projects (for an aggregate fiscal 2019 estimate of $25,000), which include (i) making~~ further improvements in production capabilities and technology enhancements in the Americas and (ii) routine annual maintenance capital expenditures. Maintenance capital expenditures are necessary to support UNIFI’s current operations, capacities and capabilities and exclude expenses relating to repairs and costs that do not extend an asset’s useful life.

Through the remainder of fiscal 2020, UNIFI expects to invest an additional $20,415 in capital projects (for an aggregate fiscal 2020 estimate of $25,000), which includes (i) making further improvements in production capabilities and technology enhancements in the Americas, including the purchase and installation of new eAFK Evo texturing machines, and (ii) routine annual maintenance capital expenditures to allow continued efficient production.

The total amount ultimately invested infor fiscal ~~2019~~2020 could be more or less than the ~~anticipated~~currently estimated amount depending on the timing and scale of contemplated initiatives, and ~~other factors, and~~ is expected to be funded by a combination of cash flows 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 products, ~~as part of our mix enrichment strategy,~~ we may incur additional capital 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,~~processes, 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 higher sales volumes and an improved mix from higher-margin products.

On April 23, 2014, UNIFI announced that the Board had approved 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 current six-month period. Through October 31, 2018 (the date the 2014 SRP was terminated, as discussed below), UNIFI 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 or 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 30, 2018,~~September 29, 2019, $50,000 remains available for repurchase under the 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 ~~flows from operations~~provided by operating activities, and borrowings available under the ABL Revolver will enable UNIFI to comply with the terms of its indebtedness and to meet its foreseeable liquidity requirements. Domestically, UNIFI’s existing 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~~ expansion of our foreign operations may require cash sourced from our domestic subsidiaries.

The significant components of net cash provided by (used in) ~~provided by~~ operating activities are summarized below. UNIFI analyzes net cash provided by (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 Three Months Ended
	December 30, 2018			December 24, 2017			September 29, 2019			September 30, 2018
Net income	$	2,983		$	20,762		$	3,712		$	1,812
Equity in earnings of unconsolidated affiliates		(1,253	)		(3,298	)
Equity in loss (earnings) of unconsolidated affiliates								866			(239	)
Depreciation and amortization expense		11,652			11,135			5,685			6,036
Non-cash compensation expense		3,039			3,569			187			998
Deferred income taxes		(332	)		(6,282	)		(760	)		909
Subtotal		16,089			25,886			9,690			9,516

Distributions received from unconsolidated affiliates		630			8,678			10,437			504
Inventories		(17,139	)		(4,556	)
Change in inventories								1,981			(15,079	)
Other changes in assets and liabilities		(3,555	)		(9,619	)		1,714			101
Net cash (used in) provided by operating activities	$	(3,975	)	$	20,389
Net cash provided by (used in) operating activities							$	23,822		$	(4,958	)

The ~~decrease~~increase in net cash provided by (used in) ~~provided by~~ operating activities from the prior ~~six-month period to the current six-month~~ period was primarily due to (i) ~~the significant increase in inventories and other current assets as shown and discussed above under “Working Capital,” (ii) approximately $8,000 less in dividends~~$10,437 of distributions received from ~~unconsolidated affiliates and (iii) lower Adjusted EBITDA. The decrease was partially offset by approximately $8,500 of tax refunds received~~PAL in the current ~~six-month period.~~period and (ii) improved management of receivables and inventories.

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

UNIFI utilized ~~$12,362~~$4,606 for investing activities and utilized ~~$1,294 (net) from~~$6,523 for financing activities during the current ~~six-month~~ period.

Investing activities include ~~$12,342~~$4,585 for capital expenditures, which primarily ~~relating~~relate to ongoing maintenance capital expenditures ~~and~~along with production capabilities and technology enhancements in the Americas.

Significant financing activities include net payments ~~relating~~against the ABL Facility primarily to ~~long-term obligations, partially offset by receipts of $244 relating to stock option exercises.~~retire ABL Revolver debt upon receiving $10,437 in distributions from PAL.

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 have been no 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 ~~2018~~2019 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~~estimate from quarter to quarter could materially impact the presentation of the financial statements. UNIFI’s critical accounting policies are discussed in the ~~2018~~2019 Form 10-K. There were no material changes to these policies during the current ~~six-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 30, 2018,~~September 29, 2019, UNIFI had borrowings under its ABL Revolver and ABL Term Loan that totaled ~~$116,500~~$112,000 and contain variable rates of interest; however, UNIFI hedges a significant portion of such interest rate variability using interest rate swaps. 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 30, 2018~~September 29, 2019 would result in an increase in annual interest expense of less than $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 30, 2018,~~September 29, 2019, UNIFI had no outstanding foreign currency forward contracts.

A significant portion of raw materials purchased by UNIFI’s Brazilian subsidiary are denominated in 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. Also, the RMB experienced fluctuations in ~~the~~ value ~~of the RMB have~~at times during fiscal 2020 and 2019, which generated foreign currency ~~transaction impacts~~translation losses in certain fiscal quarters. Discussion and analysis surrounding the impact of ~~fluctuations~~the devaluation of the BRL and fluctuations in the value of 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 30, 2018,~~September 29, 2019, UNIFI’s foreign subsidiaries, ~~outside the United States,~~ whose functional currency is other than the USD, held approximately ~~16.6%~~18.1% 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 30, 2018, $24,861,~~September 29, 2019, $29,625, or ~~93.3%~~86.8%, of UNIFI’s cash and cash equivalents was held outside the ~~United States,~~U.S., of which ~~$18,071~~$16,202 was held in ~~USDs, $1,511~~USD, $988 was held in ~~RMBs~~RMB and ~~$5,047~~$12,009 was held in ~~BRLs.~~BRL. Approximately $4,300 of USD were held inside the U.S. by a foreign subsidiary.

A significant portion of UNIFI’s raw 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 fiscal quarter. Pricing adjustments for other customers must be negotiated independently. ~~At times,~~ UNIFI ~~is unable~~attempts to pass on to its customers ~~rises~~increases in raw material costs ~~and, when it~~but due to market pressures, this is not always possible. When price increases can be implemented, there is typically is a time lag that adversely affects UNIFI and its margins during one or more ~~periods.~~quarters. 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 its index priced customers and within two fiscal quarters of the raw material price increase for its non-index priced customers.

During the first quarter of fiscal ~~2018,~~2020, UNIFI experienced a favorable, declining raw material cost environment, in contrast to a generally elevated ~~polyester~~raw material cost environment in fiscal 2019 and 2018. However, our raw material costs ~~in connection with heightened petroleum prices,~~remain subject to the volatility described above 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 costs drove a decline in gross profit for the first six months of fiscal 2019. However, UNIFI’s outlook for the second half of fiscal 2019 includes a more favorable raw material cost and selling price relationship due to a meaningful decline inshould raw material costs ~~during November~~spike unexpectedly, UNIFI’s results of operations and ~~December 2018.~~cash flows are likely to be adversely impacted.

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 30, 2018,~~September 29, 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 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 UNIFI 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 30, 2018~~September 29, 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 2018 Form 10-K and in “Item 1A. Risk Factors” in UNIFI’s Quarterly Report on Form 10-Q for the quarterly period ended on September 30, 2018.

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~~		(Zip Code)

PART I—FINANCIAL INFORMATION
		Page

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of ~~December 30, 2018~~September 29, 2019 and June ~~24, 2018~~30, 2019	1

	Condensed Consolidated Statements of Income for the Three Months Ended September 29, 2019 and ~~Six Months Ended December~~September 30, 2018 ~~and December 24, 2017~~	2

	Condensed Consolidated Statements of Comprehensive ~~Income~~Loss for the Three Months Ended September 29, 2019 and ~~Six Months Ended December~~September 30, 2018 ~~and December 24, 2017~~	3

	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~December~~September 29, 2019 and September 30, 2018 ~~and December 24, 2017~~	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1918

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3329

Item 4.	Controls and Procedures	3329

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	34

~~Item 1A.~~	~~Risk Factors~~	3431

Item 6.	Exhibits	3532

	Signatures	3633

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

Classification	Balance Sheet Location	September 29, 2019
Lease Assets
Operating lease assets	Operating lease assets	$	8,718
Finance lease assets	Property, plant & equipment, net		27,601
Total lease assets		$	36,319

Lease Liabilities
Current operating lease liabilities	Current operating lease liabilities	$	2,791
Current finance lease liabilities	Current portion of long-term debt		4,738
Total current lease liabilities		$	7,529

Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	$	6,224
Noncurrent finance lease liabilities	Long-term debt		5,649
Total noncurrent lease liabilities		$	11,873

Total lease liabilities		$	19,402

	For the Three Months Ended
Lease Cost	September 29, 2019
Operating lease cost	$	853
Variable lease cost		90
Finance lease cost:
Amortization of lease assets		527
Interest on lease liabilities		100
Short-term lease cost		341
Total lease cost	$	1,911


(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

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

	For the Three Months Ended
Other Information	September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases	$	853
Financing cash flows used by finance leases	$	1,608
Non-cash activities:
Leased assets obtained in exchange for new operating lease liabilities	$	85
Leased assets obtained in exchange for new finance lease liabilities	$	878

Weighted Average Remaining Lease Term and Discount Rate	September 29, 2019
Weighted average remaining lease term (years):
Operating leases		4.1
Finance leases		3.1
Weighted average discount rate:
Operating leases		3.7	%
Finance leases		3.8	%

Maturity of Lease Liabilities	Finance Leases			Operating Leases
Fiscal 2020 (excluding the three months ended September 29, 2019)	$	4,274		$	2,330
Fiscal 2021		3,011			2,709
Fiscal 2022		2,706			1,679
Fiscal 2023		331			1,247
Fiscal 2024		331			1,110
Fiscal years thereafter		1,015			680
Total minimum lease payments	$	11,668		$	9,755
Less estimated executory costs		(626	)		—
Less interest		(655	)		(740	)
Present value of net minimum lease payments		10,387			9,015
Less current portion of lease obligations		(4,738	)		(2,791	)
Long-term portion of lease obligations	$	5,649		$	6,224

	Capital Leases			Operating Leases
Fiscal 2020	$	5,917		$	3,164
Fiscal 2021		2,870			2,731
Fiscal 2022		2,565			1,492
Fiscal 2023		189			878
Fiscal 2024		189			755
Fiscal years thereafter		675			309
Total minimum lease payments	$	12,405		$	9,329
Less estimated executory costs		(644	)
Less interest		(643	)
Present value of net minimum capital lease payments		11,118
Less current portion of capital lease obligations		(5,519	)
Long-term portion of capital lease obligations	$	5,599

	For the Fiscal Year Ended
	June 30, 2019		June 24, 2018		June 25, 2017
Rental expenses	$	4,915	$	4,835	$	4,357

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	$	347,311	$	2,011		$	349,322
Cost of sales	$	313,115	$	2,032		$	315,147
Gross profit (loss)	$	34,196	$	(21	)	$	34,175
Inventory	$	144,619	$	(9,977	)	$	134,642
Contract assets	$	—	$	10,537		$	10,537

	December 30, 2018			June 24, 2018
Investment in a former domestic unconsolidated affiliate	$	(3,942	)	$	(3,942	)
Equity-method investment in PAL		(1,470	)		(1,580	)
Certain losses carried forward ⁽¹⁾		(1,562	)		(1,562	)
State NOLs		(166	)		(169	)
Other foreign NOLs		(1,903	)		(2,460	)
Foreign tax credits		(13,713	)		(5,430	)
Total deferred tax valuation allowance	$	(22,756	)	$	(15,143	)

Authorized under the Amended 2013 Plan	1,250
Plus: Awards expired, forfeited or otherwise terminated unexercised	17153
Less: Awards granted to employees	(~~257~~308	)
Less: Awards granted to non-employee directors	(4789	)
Available for issuance under the Amended 2013 Plan	~~963~~1,006

	Foreign Currency Translation Adjustments			Changes in Interest Rate Swaps			Accumulated Other Comprehensive Loss
Balance at June 24, 2018	$	(42,268	)	$	1,735		$	(40,533	)
Other comprehensive loss, net of tax		(1,467	)		(725	)		(2,192	)
Balance at December 30, 2018	$	(43,735	)	$	1,010		$	(42,725	)

SG&A for the prior period	$	14,411
Decrease in compensation expenses		(1,663	)
Other net decreases		(927	)
Impact of an additional week in fiscal 2019		(841	)
SG&A for the current period	$	10,980

Net sales for the prior period	$	51,046
Increase in sales volumes		7,199
Net change in average selling price and sales mix		5,198
Unfavorable foreign currency translation effects (primarily RMB and BRL)		(5,206	)
Net sales for the current period	$	58,237

Segment Profit for the prior period	$	11,371
Net decrease in underlying margins		(1,288	)
Unfavorable foreign currency translation effects (primarily RMB and BRL)		(1,224	)
Increase in sales volumes		1,584
Segment Profit for the current period	$	10,443

SG&A expenses for the prior six-month period	$	27,489
Increase due to an additional week in fiscal 2019		841
Increase in professional fees		697
Other net increases		776
Decrease due to foreign currency translation		(570	)
SG&A expenses for the current six-month period	$	29,233

Net sales for the prior six-month period	$	178,054
Net change in average selling price and sales mix		7,366
Increase in sales volumes		500
Net sales for the current six-month period	$	185,920

Segment Profit for the prior six-month period	$	25,329
Net decrease in underlying margins		(8,514	)
Increase in sales volumes		71
Segment Profit for the current six-month period	$	16,886

Net sales for the prior period	$	26,913
Decrease in average selling price		(1,602	)
Decrease in sales volumes		(973	)
Unfavorable foreign currency translation effects		(166	)
Net sales for the current period	$	24,172

Segment Profit for the prior period	$	6,777
Decrease in underlying margins		(1,960	)
Decrease in sales volumes		(245	)
Unfavorable foreign currency translation effects		(38	)
Segment Profit for the current period	$	4,534

Net sales for the prior six-month period	$	99,705
Net increase in sales volumes		12,822
Net change in average selling price and sales mix		9,921
Unfavorable foreign currency translation effects (primarily RMB and BRL)		(11,858	)
Net sales for the current six-month period	$	110,590

Net sales for the prior period	$	25,440
Increase in sales volumes of Chip and staple fiber		16,169
Increase in sales volumes of certain other PVA products		6,891
Change in average selling price and sales mix		(1,698	)
Unfavorable foreign currency translation effects		(845	)
Net sales for the current period	$	45,957

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)).

~~4.1~~3.3		~~Third~~Declaration of Amendment to the Amended and Restated ~~Credit Agreement and Second Amendment to Amended and Restated Guaranty and Security Agreement, dated as~~By-laws of ~~December 18, 2018, by and among~~ Unifi, Inc. and Unifi Manufacturing, Inc., as borrowers, Unifi Sales & Distribution, Inc. and See 4 Process Improvement Solutions, LLC, as guarantors, Wells Fargo Bank, National Association, as agent for the lenders party thereto, and the lenders party theretoeffective April 30, 2019 (incorporated by reference to Exhibit ~~4.1~~3.1 to the Current Report on Form 8-K filed ~~December 20, 2018~~May 1, 2019 (File No. 001-10542)).

10.1*		Employment Agreement by and between Unifi, Inc. ~~Amended~~ and ~~Restated 2013 Incentive Compensation Plan~~Craig A. Creaturo, effective as of August 28, 2019 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed ~~November 1, 2018~~September 3, 2019 (File No. 001-10542)).

10.2*		Form of Vested Share Unit Agreement for Non-Employee Directors for use in connection with the Unifi, Inc. Amended and Restated 2013 Incentive Compensation Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed November 8, 2018 (File No. 001-10542)).

10.3*		Form of Restricted Stock Unit Agreement for Employees for use in connection with the Unifi, Inc. Amended and Restated 2013 Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed November 8, 2018 (File No. 001-10542)).

10.4*		Form of Incentive Stock Option Agreement for Employees for use in connection with the Unifi, Inc. Amended and Restated 2013 Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed November 8, 2018 (File No. 001-10542)).

~~10.5~~⁺*		~~Form of Stock Option Agreement for Non-Employee Directors for use in connection with the Unifi, Inc. Amended and Restated 2013 Incentive Compensation Plan~~.

~~10.6~~⁺*		~~Form of Cash-Settled Restricted Stock Unit Agreement for use in connection with the Unifi, Inc. Amended and Restated 2013 Incentive Compensation Plan.~~

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 30, 2018,~~September 29, 2019, filed ~~February 6,~~November 7, 2019, formatted in eXtensible Business Reporting Language: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive ~~Income,~~Loss, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.

	UNIFI, INC.
	(Registrant)

Date: ~~February 6,~~November 7, 2019	By:	/s/ ~~CHRISTOPHER~~CRAIG A. ~~SMOSNA~~CREATURO
		~~Christopher~~Craig A. ~~Smosna~~Creaturo
		Executive Vice President ~~Treasurer~~ & ~~Interim~~ Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)