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 ~~May 4, 2020,~~January 28, 2021, there were ~~18,446,436~~18,480,750 shares of the registrant’s common stock, par value $0.10 per share, outstanding.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that relate to our plans, objectives, estimates and goals. Statements expressing expectations regarding our future, or projections or estimates relating to products, sales, revenues, expenditures, costs, strategies, initiatives or earnings, are typical of such statements and are made under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s beliefs, assumptions and expectations about our future 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 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 ~~NINE~~SIX MONTHS ENDED ~~MARCH 29,~~DECEMBER 27, 2020

	March 29, 2020			June 30, 2019			December 27, 2020			June 28, 2020
ASSETS
Cash and cash equivalents	$	33,393		$	22,228		$	83,321		$	75,267
Receivables, net		86,376			88,884			83,124			53,726
Inventories		124,146			133,781			111,489			109,704
Income taxes receivable		589			4,373			9,283			4,033
Other current assets		18,477			16,356			10,282			11,763
Total current assets		262,981			265,622			297,499			254,493
Property, plant and equipment, net		206,993			206,787			199,884			204,246
Operating lease assets		6,084			—			8,082			8,940
Deferred income taxes		5,943			2,581			2,425			2,352
Investments in unconsolidated affiliates		58,854			114,320
Other non-current assets		2,187			2,841			5,108			4,131
Total assets	$	543,042		$	592,151		$	512,998		$	474,162

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	40,862		$	41,796		$	38,786		$	25,610
Accrued expenses		15,347			16,849			20,331			13,689
Income taxes payable		5,841			569			6,467			349
Current operating lease liabilities		1,709			—			1,685			1,783
Current portion of long-term debt		14,112			15,519			13,683			13,563
Total current liabilities		77,871			74,733			80,952			54,994
Long-term debt		118,827			111,541			78,621			84,607
Non-current operating lease liabilities		4,481			—			6,538			7,251
Other long-term liabilities		8,029			6,185			11,010			8,606
Deferred income taxes		5			6,847			1,004			2,549
Total liabilities		209,213			199,306			178,125			158,007

Commitments and contingencies

Common stock, $0.10 par value (500,000,000 shares authorized; 18,446,436 and 18,462,296 shares issued and outstanding as of March 29, 2020 and June 30, 2019, respectively)		1,845			1,846
Common stock, $0.10 par value (500,000,000 shares authorized; 18,480,750 and 18,446,436 shares issued and outstanding as of December 27, 2020 and June 28, 2020, respectively)								1,848			1,845
Capital in excess of par value		61,080			59,560			63,972			62,392
Retained earnings		335,971			374,668			326,620			315,724
Accumulated other comprehensive loss		(65,067	)		(43,229	)		(57,567	)		(63,806	)
Total shareholders’ equity		333,829			392,845			334,873			316,155
Total liabilities and shareholders’ equity	$	543,042		$	592,151		$	512,998		$	474,162

	For the Three Months Ended						For the Nine Months Ended							For the Three Months Ended						For the Six Months Ended
	March 29, 2020			March 31, 2019			March 29, 2020			March 31, 2019				December 27, 2020			December 29, 2019			December 27, 2020			December 29, 2019
Net sales	$	170,994		$	179,989		$	520,454		$	529,311			$	162,776		$	169,511		$	304,281		$	349,460
Cost of sales		155,611			166,198			471,963			481,345				136,842			153,846			263,786			316,352
Gross profit		15,383			13,791			48,491			47,966				25,934			15,665			40,495			33,108
Selling, general and administrative expenses		11,720			11,439			35,208			40,672				12,625			12,508			23,989			23,488
Provision for bad debts		580			218			331			381
Other operating (income) expense, net		(62	)		1,359			900			1,218
Benefit for bad debts															(259	)		(258	)		(1,146	)		(249	)
Other operating expense, net															476			854			1,654			962
Operating income		3,145			775			12,052			5,695				13,092			2,561			15,998			8,907
Interest income		(173	)		(149	)		(595	)		(448	)			(187	)		(212	)		(312	)		(422	)
Interest expense		1,231			1,256			3,589			4,078				833			1,101			1,704			2,358
Equity in earnings of unconsolidated affiliates		(3,526	)		(1,873	)		(1,904	)		(3,126	)
Impairment of investment in unconsolidated affiliate		45,194			—			45,194			—
Loss on extinguishment of debt		—			—			—			131
(Loss) income before income taxes		(39,581	)		1,541			(34,232	)		5,060
Equity in (earnings) loss of unconsolidated affiliates															(130	)		756			(223	)		1,622
Income before income taxes															12,576			916			14,829			5,349
Provision for income taxes		1,530			3,070			2,758			3,606				5,112			507			3,933			1,228
Net (loss) income	$	(41,111	)	$	(1,529	)	$	(36,990	)	$	1,454
Net income														$	7,464		$	409		$	10,896		$	4,121

Net (loss) income per common share:
Net income per common share:													Net income per common share:
Basic	$	(2.23	)	$	(0.08	)	$	(2.00	)	$	0.08			$	0.40		$	0.02		$	0.59		$	0.22
Diluted	$	(2.23	)	$	(0.08	)	$	(2.00	)	$	0.08			$	0.40		$	0.02		$	0.58		$	0.22

For the Three Months Ended

For the Nine Months Ended

March 29, 2020

March 31, 2019

March 29, 2020

March 31, 2019

Net (loss) income

$
(41,111
)

$
(1,529
)

$
(36,990
)

$
1,454

Other comprehensive loss:

Foreign currency translation adjustments

(15,684
)

55

(18,900
)

(1,454
)
Foreign currency translation adjustments for an
unconsolidated affiliate

(1,586
)

102

(1,450
)

144

Changes in interest rate swaps, net of tax of $434,
$173, $434 and $392, respectively

(1,449
)

(572
)

(1,488
)

(1,297
)
Other comprehensive loss, net

(18,719
)

(415
)

(21,838
)

(2,607
)
Comprehensive loss

$
(59,830
)

$
(1,944
)

$
(58,828
)

$
(1,153
)

	For the Three Months Ended				For the Six Months Ended
	December 27, 2020		December 29, 2019		December 27, 2020		December 29, 2019
Net income	$	7,464	$	409	$	10,896	$	4,121
Other comprehensive income (loss):
Foreign currency translation adjustments		5,912		3,248		5,730		(3,080	)
Changes in interest rate swaps, net of tax of $78, $0, $156 and $0, respectively		255		289		509		(39	)
Other comprehensive income (loss), net		6,167		3,537		6,239		(3,119	)
Comprehensive income	$	13,631	$	3,946	$	17,135	$	1,002

Shares

Common Stock

Capital in Excess of Par Value

Retained Earnings

Accumulated Other Comprehensive Loss

Total Shareholders’ Equity

Balance at December 29, 2019

18,505

$
1,851

$
61,187

$
378,789

$
(46,348
)

$
395,479

Options exercised

—

—

—

—

—

—

Conversion of restricted stock units

42

4

(4
)

—

—

—

Stock-based compensation

—

—

596

—

—

596

Common stock repurchased and retired under
  publicly announced program

(84
)

(8
)

(279
)

(1,707
)

—

(1,994
)
Common stock withheld in satisfaction of tax
  withholding obligations under net share settle
  transactions

(17
)

(2
)

(420
)

—

—

(422
)
Other comprehensive loss, net of tax

—

—

—

—

(18,719
)

(18,719
)
Net loss

—

—

—

(41,111
)

—

(41,111
)
Balance at March 29, 2020

18,446

$
1,845

$
61,080

$
335,971

$
(65,067
)

$
333,829

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at September 27, 2020		18,447		$	1,845		$	62,810		$	319,156	$	(63,734	)	$	320,077
Options exercised		1			—			—			—		—			—
Conversion of restricted stock units		36			4			(4	)		—		—			—
Stock-based compensation		—			—			1,223			—		—			1,223
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(3	)		(1	)		(57	)		—		—			(58	)
Other comprehensive income, net of tax		—			—			—			—		6,167			6,167
Net income		—			—			—			7,464		—			7,464
Balance at December 27, 2020		18,481		$	1,848		$	63,972		$	326,620	$	(57,567	)	$	334,873

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

76

8

(8
)

—

—

—

Stock-based compensation

4

1

2,298

—

—

2,299

Common stock repurchased and retired under
  publicly announced program

(84
)

(8
)

(279
)

(1,707
)

—

(1,994
)
Common stock withheld in satisfaction of tax
  withholding obligations under net share settle
  transactions

(22
)

(3
)

(519
)

—

—

(522
)
Other comprehensive loss, net of tax

—

—

—

—

(21,838
)

(21,838
)
Net loss

—

—

—

(36,990
)

—

(36,990
)
Balance at March 29, 2020

18,446

$
1,845

$
61,080

$
335,971

$
(65,067
)

$
333,829

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at June 28, 2020		18,446		$	1,845		$	62,392		$	315,724	$	(63,806	)	$	316,155
Options exercised		1			—			—			—		—			—
Conversion of restricted stock units		38			4			(4	)		—		—			—
Stock-based compensation		—			—			1,648			—		—			1,648
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(4	)		(1	)		(64	)		—		—			(65	)
Other comprehensive income, net of tax		—			—			—			—		6,239			6,239
Net income		—			—			—			10,896		—			10,896
Balance at December 27, 2020		18,481		$	1,848		$	63,972		$	326,620	$	(57,567	)	$	334,873

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity			Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at December 30, 2018		18,383		$	1,838		$	59,619		$	375,195		$	(42,725	)	$	393,927
Balance at September 29, 2019																				18,490		$	1,849		$	59,663		$	378,380	$	(49,885	)	$	390,007
Options exercised		6			—			29			—			—			29			—			—			—			—		—			—
Conversion of restricted stock units		24			3			(3	)		—			—			—			16			2			(2	)		—		—			—
Stock-based compensation		9			1			(314	)		—			—			(313	)		4			1			1,581			—		—			1,582
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(11	)		(1	)		(243	)		—			—			(244	)		(5	)		(1	)		(55	)		—		—			(56	)
Other comprehensive loss, net of tax		—			—			—			—			(415	)		(415	)
Net loss		—			—			—			(1,529	)		—			(1,529	)
Balance at March 31, 2019		18,411		$	1,841		$	59,088		$	373,666		$	(43,140	)	$	391,455
Other comprehensive income, net of tax																				—			—			—			—		3,537			3,537
Net income																				—			—			—			409		—			409
Balance at December 29, 2019																				18,505		$	1,851		$	61,187		$	378,789	$	(46,348	)	$	395,479

	Shares			Common Stock			Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity			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
Balance at June 30, 2019																			18,462		$	1,846		$	59,560		$	374,668	$	(43,229	)	$	392,845
Options exercised		22			2			271			—		—			273			10			1			28			—		—			29
Conversion of restricted stock units		41			4			(4	)		—		—			—			34			4			(4	)		—		—			—
Stock-based compensation		10			1			2,471			—		—			2,472			4			1			1,702			—		—			1,703
Common stock withheld in satisfaction of tax withholding obligations under net share settle transactions		(15	)		(1	)		(376	)		—		—			(377	)		(5	)		(1	)		(99	)		—		—			(100	)
Other comprehensive loss, net of tax		—			—			—			—		(2,607	)		(2,607	)		—			—			—			—		(3,119	)		(3,119	)
Adoption of the new revenue recognition guidance		—			—			—			459		—			459
Net income		—			—			—			1,454		—			1,454			—			—			—			4,121		—			4,121
Balance at March 31, 2019		18,411		$	1,841		$	59,088		$	373,666	$	(43,140	)	$	391,455
Balance at December 29, 2019																			18,505		$	1,851		$	61,187		$	378,789	$	(46,348	)	$	395,479

	For the Nine Months Ended						For the Six Months Ended
	March 29, 2020			March 31, 2019			December 27, 2020			December 29, 2019
Cash and cash equivalents at beginning of period	$	22,228		$	44,890		$	75,267		$	22,228
Operating activities:
Net (loss) income		(36,990	)		1,454
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Equity in earnings of unconsolidated affiliates		(1,904	)		(3,126	)
Net income								10,896			4,121
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in (earnings) loss of unconsolidated affiliates								(223	)		1,622
Distributions received from unconsolidated affiliates		10,437			1,380			—			10,437
Depreciation and amortization expense		17,685			17,242			12,187			11,610
Impairment of investment in unconsolidated affiliate		45,194			—
Non-cash compensation expense		2,510			2,758			1,816			1,837
Deferred income taxes		(10,029	)		(190	)		(1,700	)		(878	)
Other, net		(171	)		(459	)		(25	)		(64	)
Changes in assets and liabilities:
Receivables, net		(2,295	)		(5,877	)		(28,558	)		9,873
Inventories		2,126			(13,409	)		311			(1,330	)
Other current assets		(3,020	)		(1,338	)		1,862			(2,159	)
Income taxes		8,849			3,388			890			(249	)
Accounts payable and accrued expenses		(488	)		(4,523	)		18,830			(6,298	)
Other, net		201			1,183			3,440			113
Net cash provided by (used in) operating activities		32,105			(1,517	)
Net cash provided by operating activities								19,726			28,635

Investing activities:
Capital expenditures		(14,971	)		(19,199	)		(6,035	)		(8,335	)
Purchase of intangible asset								(1,088	)		—
Other, net		35			9			163			60
Net cash used in investing activities		(14,936	)		(19,190	)
Net cash used by investing activities								(6,960	)		(8,275	)

Financing activities:
Proceeds from ABL Revolver		79,000			93,300			—			41,100
Payments on ABL Revolver		(67,500	)		(97,400	)		—			(38,000	)
Proceeds from ABL Term Loan		—			20,000
Payments on ABL Term Loan		(7,500	)		(5,000	)		(5,000	)		(5,000	)
Payments on finance lease obligations		(4,606	)		(5,308	)		(1,725	)		(3,085	)
Common stock repurchased and retired under publicly announced program		(1,994	)		—
Proceeds from stock option exercises		29			273
Payments of debt financing fees		—			(720	)
Other		(521	)		(1,017	)
Net cash (used in) provided by financing activities		(3,092	)		4,128
Other, net								(64	)		(70	)
Net cash used by financing activities								(6,789	)		(5,055	)

Effect of exchange rate changes on cash and cash equivalents		(2,912	)		(413	)		2,077			(323	)
Net increase (decrease) in cash and cash equivalents		11,165			(16,992	)
Net increase in cash and cash equivalents								8,054			14,982
Cash and cash equivalents at end of period	$	33,393		$	27,898		$	83,321		$	37,210

Unifi, Inc., a New York corporation formed in 1969 (together with its subsidiaries, “UNIFI,” the “Company,” “we,” “us” or “our”), is a ~~multi-national~~multinational 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~~products 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”), polyester polymer beads (“Chip”) and staple fiber. Nylon ~~yarns~~products 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 Europe.

UNIFI has direct manufacturing operations in ~~four~~4 countries and participates in joint ventures with operations in Israel and the United States (“U.S.”). As of March 29, 2020, UNIFI owned 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. As further described in Note 19, “Investments in Unconsolidated Affiliates and Variable Interest Entities,” UNIFI sold the 34% interest on April 29, 2020.

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) for interim financial information. As contemplated by the instructions of the ~~Securities and Exchange Commission (the “SEC”)~~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 ~~30, 2019~~28, 2020 (the ~~“2019~~“2020 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 ~~March 29, 2020, the Sunday nearest to March 31, 2019.~~December 27, 2020. Unifi, Inc.’s remaining material operating subsidiaries’ fiscal quarter ended on ~~March~~December 31, 2020. 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 ended ~~March 29,~~December 27, 2020 and ~~March 31,~~December 29, 2019 both consisted of 13 weeks. ~~For the primary subsidiaries in the U.S.~~The six-month periods ended December 27, 2020 and ~~Central America, the nine-month period ended March~~December 29, ~~2020~~2019 both consisted of ~~39 weeks and the nine-month period ended March 31, 2019 consisted of 40~~26 weeks.

~~In 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 begin to 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~~June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses, ~~the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~.with an effective date consistent with UNIFI’s fiscal 2021. The new guidance ~~is intended~~requires a financial asset measured at amortized cost basis to ~~increase transparency~~be presented at the net amount expected to be collected and ~~comparability among organizations by recognizing lease assets and lease liabilities on~~eliminates the ~~balance sheet and disclosing key information about leasing arrangements. The new lease guidance was adopted in the first quarter~~probable initial recognition threshold to instead reflect an entity’s current estimate of ~~fiscal 2020, and adoption is described in more detail in Note 4, “Leases.”~~

Relating to the transition to ASU No. 2016-02, PAL expects to adopt the new lease guidance in its fiscal year 2021 ending on January 1, 2022. PAL is currently evaluating the impact of the new lease guidance.

~~In fiscal 2019,~~all expected credit losses. UNIFI adopted the ~~new revenue recognition guidance prescribed by~~ ASU ~~No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606). See Note 5,~~ “~~Revenue Recognition,” for further detail regarding~~in fiscal 2021 using the modified retrospective approach and the 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~~did not have a ~~significant subsidiary of Unifi, Inc., PAL adopted the new revenue recognition guidance on December 30, 2018, with no~~ material impact ~~on its consolidated~~to UNIFI’s financial position or results of ~~operations or cash flows in connection with the adoption.~~operations.

Based on UNIFI’s review of ASUs issued since the filing of the ~~2019~~2020 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~~material impact on UNIFI’s consolidated financial statements.

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

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

UNIFI routinely leases sales and administrative office space, warehousing and distribution centers, manufacturing space, transportation equipment, manufacturing equipment, and other information technology and office equipment from third parties. The lease terms range from 1 to 15 years with various options for renewal. There are no residual value guarantees, restrictions, covenants or sub-leases related to these leases. Variable lease payments are determined as the amounts included in the lease payment that are based on the change in index or usage. 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.Revenue Recognition

The following ~~table sets forth the balance sheet location and values of the Company’s lease assets and lease liabilities at March 29, 2020:~~tables present disaggregated revenues for UNIFI:

Classification

Balance Sheet Location

March 29, 2020

Lease Assets

Operating lease assets

Operating lease assets

$
6,084

Finance lease assets

Property, plant & equipment, net

23,257

Total lease assets

$
29,341

Lease Liabilities

Current operating lease liabilities

Current operating lease liabilities

$
1,709

Current finance lease liabilities

Current portion of long-term debt

4,112

Total current lease liabilities

$
5,821

Non-current operating lease liabilities

Non-current operating lease liabilities

$
4,481

Non-current finance lease liabilities

Long-term debt

8,699

Total non-current lease liabilities

$
13,180

Total lease liabilities

$
19,001

	For the Three Months Ended				For the Six Months Ended
	December 27, 2020		December 29, 2019		December 27, 2020		December 29, 2019
Third-party manufacturer	$	160,146	$	167,537	$	298,987	$	345,557
Service		2,630		1,974		5,294		3,903
Net sales	$	162,776	$	169,511	$	304,281	$	349,460

~~The following table sets forth the components of UNIFI’s total lease cost for the three months and nine months ended March 29, 2020:~~

For the Three

For the Nine

Months Ended

Months Ended

Lease Cost

March 29, 2020

March 29, 2020

Operating lease cost

$
507

$
2,104

Variable lease cost

158

355

Finance lease cost:

Amortization of lease assets

669

1,874

Interest on lease liabilities

126

327

Short-term lease cost

316

863

Total lease cost

$
1,776

$
5,523

	For the Three Months Ended				For the Six Months Ended
	December 27, 2020		December 29, 2019		December 27, 2020		December 29, 2019
REPREVE^® Fiber	$	60,660	$	56,893	$	110,518	$	113,378
Non-REPREVE^® Fiber		102,116		112,618		193,763		236,082
Total	$	162,776	$	169,511	$	304,281	$	349,460

~~The following table presents supplemental information related to leases at March 29, 2020:~~

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 March 29, 2020:~~

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 March 29, 2020 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:~~

Third-party 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 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.

REPREVE^® Fiber represents UNIFI’s platform of recycled polyester and recycled nylon filament and staple fiber products in either base recycled form or with added technologies.

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.

	March 29, 2020			June 30, 2019			December 27, 2020			June 28, 2020
Customer receivables	$	87,091		$	89,495		$	69,796		$	53,307
Allowance for uncollectible accounts		(2,397	)		(2,338	)		(2,675	)		(3,796	)
Reserves for quality claims		(1,231	)		(961	)		(822	)		(928	)
Net customer receivables		83,463			86,196			66,299			48,583
Other receivables		2,913			2,688			16,825			5,143
Total receivables, net	$	86,376		$	88,884		$	83,124		$	53,726

9Other receivables includes $14,532 of banker’s acceptance notes (“BANs”) as of December 27, 2020 in connection with the settlement of customer receivables generated from trade activity in the Asia Segment. The BANs are redeemable upon maturity from the drawing financial institutions, or earlier at a discount. BANs of $1,596 previously reflected in customer receivables as of June 28, 2020 have been reclassified to other receivables to conform to the current presentation.

	March 29, 2020		June 30, 2019		December 27, 2020		June 28, 2020
Contract assets	$	9,909	$	7,794
Value-added taxes receivable		3,437		2,519
Vendor deposits		3,328		4,187	$	4,947	$	2,349
Prepaid expenses		1,803		1,856		2,392		1,857
Value-added taxes receivable						2,044		2,604
Contract assets						899		4,953
Total other current assets	$	18,477	$	16,356	$	10,282	$	11,763

	March 29, 2020			June 30, 2019			December 27, 2020			June 28, 2020
Land	$	3,164		$	3,138		$	3,176		$	3,154
Land improvements		16,333			15,249			16,371			16,344
Buildings and improvements		158,388			161,566			159,458			158,025
Assets under finance leases		30,749			31,897			22,000			29,857
Machinery and equipment		602,956			603,950			611,024			602,867
Computers, software and office equipment		22,355			23,011			23,216			22,677
Transportation equipment		6,929			5,809			10,447			7,806
Construction in progress		6,219			6,483			8,216			7,582
Gross PP&E		847,093			851,103			853,908			848,312
Less: accumulated depreciation		(632,608	)		(636,135	)		(649,064	)		(636,221	)
Less: accumulated amortization – finance leases		(7,492	)		(8,181	)		(4,960	)		(7,845	)
Total PP&E, net	$	206,993		$	206,787		$	199,884		$	204,246

~~Depreciation and amortization expense and repair and maintenance expenses were as follows:~~

	March 29, 2020		June 30, 2019		December 27, 2020		June 28, 2020
Payroll and fringe benefits	$	8,861	$	9,775	$	6,157	$	7,259
Incentive compensation						6,125		777
Deferred revenue		2,624		516		3,413		1,279
Severance		225		2,058		879		1,083
Other		3,637		4,500		3,757		3,291
Total accrued expenses	$	15,347	$	16,849	$	20,331	$	13,689

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	March 29, 2020	March 29, 2020			June 30, 2019			Maturity Date	December 27, 2020	December 27, 2020			June 28, 2020
ABL Revolver	December 2023	2.2%	$	30,900		$	19,400		December 2023	0.0%	$	—		$	—
ABL Term Loan ⁽¹⁾	December 2023	3.1%		90,000			97,500		December 2023	3.3%		82,500			87,500
Finance lease obligations	(2)	3.6%		12,811			11,118		(2)	3.6%		10,396			11,381
Total debt				133,711			128,018					92,896			98,881
Current ABL Term Loan				(10,000	)		(10,000	)				(10,000	)		(10,000	)
Current portion of finance lease obligations				(4,112	)		(5,519	)				(3,683	)		(3,563	)
Unamortized debt issuance costs				(772	)		(958	)				(592	)		(711	)
Total long-term debt			$	118,827		$	111,541				$	78,621		$	84,607

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,~~(together with all previous and subsequent amendments, 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~~ABL Facility borrowings bear interest at LIBOR plus an applicable margin of 1.25% to 1.75%, or the ~~following changes to the Credit Agreement, among others: (i) extended the maturity date from March 26, 2020 to December 18, 2023 and (ii) decreased the Applicable Margin~~Base Rate (as defined in the Credit Agreement) ~~pricing structure for Base Rate Loans (as defined in the Credit Agreement)~~plus an applicable margin of 0.25% to 0.75%, with interest currently being paid on a monthly basis. As of December 27, 2020 and June 28, 2020, ABL Facility borrowings carried interest at 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.

~~In connection and concurrent with the sale of UNIFI’s 34% interest in PAL on April 29, 2020, UNIFI entered into the Fourth Amendment to Amended and Restated Credit Agreement (“Fourth Amendment”)~~plus 1.50%. The Fourth Amendment among other things: (i) revised the definition of permitted dispositions within the Credit Agreement to include the sale by Unifi Manufacturing, Inc. of its equity interest in PAL so long as the aggregate net cash proceeds received equaled or exceeded $60,000 and such sale occurred on or before May 15, 2020; (ii) revised the terms of the Credit Agreement to allow (a) the net cash proceeds from the sale of PAL to be applied to the outstanding principal amount of the ABL Revolver until paid in full and (b) remaining net cash proceeds held by UNIFI, so long as certain conditions are met; and (iii) revised the terms of the Credit Agreement to allow the lenders to make changes to the benchmark interest rate without further amendment should LIBOR temporarily or permanently cease to exist and a transition to a new benchmark interest rate such as the Secured Overnight Financing Rate (“SOFR”) be required for future ABL facility borrowings.

UNIFI currently maintains ~~three~~3 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.

The following table presents the scheduled maturities of UNIFI’s outstanding debt obligations for the remainder of fiscal ~~2020,~~2021, the following four fiscal years and thereafter:

	Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Thereafter		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Fiscal 2025		Thereafter
ABL Revolver	$	—	$	—	$	—	$	—	$	30,900	$	—	$	—	$	—	$	—	$	—	$	—	$	—
ABL Term Loan		2,500		10,000		10,000		10,000		57,500		—		5,000		10,000		10,000		57,500		—		—
Finance lease obligations		1,429		3,563		3,388		1,094		1,132		2,205		1,921		3,545		1,257		1,301		1,195		1,177
Total	$	3,929	$	13,563	$	13,388	$	11,094	$	89,532	$	2,205	$	6,921	$	13,545	$	11,257	$	58,801	$	1,195	$	1,177

	March 29, 2020		June 30, 2019		December 27, 2020		June 28, 2020
Supplemental post-employment plan	$	2,843	$	2,695	$	3,022	$	3,019
Uncertain tax positions						2,778		1,112
Interest rate swaps		2,569		647		1,886		2,551
Uncertain tax positions		1,161		1,043
Other		1,456		1,800		3,324		1,924
Total other long-term liabilities	$	8,029	$	6,185	$	11,010	$	8,606

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Six Months Ended
	March 29, 2020			March 31, 2019			March 29, 2020			March 31, 2019			December 27, 2020			December 29, 2019			December 27, 2020			December 29, 2019
Provision for income taxes	$	1,530		$	3,070		$	2,758		$	3,606		$	5,112		$	507		$	3,933		$	1,228
Effective tax rate		(3.9	)%		199.2	%		(8.1	)%		71.3	%		40.6	%		55.3	%		26.5	%		23.0	%

On July 20, 2020, the U.S. Treasury issued and enacted final regulations related to global intangible low-tax income (“GILTI”) that allow certain U.S. taxpayers to elect to exclude foreign income that is subject to a high effective tax rate from their GILTI inclusions. The GILTI high-tax exclusion is an annual election and is retroactively available for tax years beginning after December 31, 2017. The three-month and six-month periods ended December 27, 2020 include discrete tax benefits of $359 and $5,148, respectively, related to the retroactive election.

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 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.

As a result of the newly enacted GILTI regulations, and their impact on prior tax periods, UNIFI does not expect to realize the full benefit of its U.S. federal net operating loss and research credit carryforwards. The three-month and six-month periods ended December 27, 2020 include discrete tax expense of $26 and $2,153, respectively, related to the change in valuation allowance.

UNIFI’s provision for income taxes for the ~~nine~~six months ended ~~March 29,~~December 27, 2020 and ~~March 31,~~December 29, 2019 was calculated by applying an estimate of the annual effective tax rate for the full fiscal year to year-to-date income from ordinary activity. Tax effects of significant and unusual, or infrequently occurring, items are excluded from the estimated annual effective tax rate calculation and recognized discretely in the interim period in which they occur.

The effective tax rate for the three months ~~and nine months~~ ended ~~March 29,~~December 27, 2020 was lower than the U.S. federal statutory rate primarily due to an increase in the valuation allowance for UNIFI’s investment in PAL as a result of the impairment charge, for which UNIFI does not expect to realize a future tax benefit.

~~The effective tax rate for the three months ended March 31, 2019~~ was higher than the U.S. federal statutory rate primarily due to current U.S. tax on Global Intangible Low-Tax Income (“GILTI”), adjustments to enactment date tax reform impacts, losses in tax jurisdictions for which no tax benefit could be recognized, and foreign withholding taxes.GILTI. The effective tax rate for the ~~nine~~six months ended ~~March 31,~~December 27, 2020 was higher than the U.S. federal statutory rate primarily due to current U.S. tax on GILTI, the change in valuation allowance for deferred tax assets, and earnings taxed at higher rates in foreign jurisdictions. These rate impacts were partially offset by the retroactive GILTI high-tax exclusion for prior periods.

The effective tax rate for the three months ended December 29, 2019 was higher than the U.S. federal statutory rate primarily due to U.S. tax on GILTI, losses in tax jurisdictions for which no tax benefit could be recognized, ~~earnings taxed at~~foreign withholding taxes, and lower-than-expected income before income taxes. These rate impacts were partially offset by the use of foreign tax credits generated in both current and prior tax years. The effective tax rate for the six months ended December 29, 2019 was higher ~~rates~~than the U.S. federal statutory rate primarily due to U.S. tax on GILTI, losses in ~~foreign~~tax jurisdictions for which no tax benefit could be recognized, and foreign withholding taxes. These rate ~~detriments~~impacts were partially offset by ~~adjustments to enactment date~~the use of foreign tax ~~reform impacts.~~ credits generated in both current and prior tax years.

The amount of unrecognized tax benefits for uncertain tax positions as of December 27, 2020 and June 28, 2020 was $2,855 and $1,218, respectively. Unrecognized benefits would generate a favorable impact of $1,893 on UNIFI’s effective tax rate when recognized. UNIFI does not expect material changes in unrecognized tax benefits within the next 12 months.

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 net operating losses, which could potentially be revised upon examination.

On ~~April 23, 2014,~~October 31, 2018, UNIFI announced that its Board of Directors (the “Board”) approved a share repurchase program (the “2014 SRP”) under which UNIFI was authorized to acquire up to $50,000 of its common stock. Through October 31, 2018 (the date the 2014 SRP was terminated, as 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 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~~may 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. Repurchases, if any, are expected to be financed through cash generated from operations and borrowings under the ABL Revolver, and are subject to applicable limitations and restrictions as set forth in the ABL Facility. UNIFI may discontinue repurchases at any time that management determines additional purchases are not beneficial or advisable.

The following table summarizes UNIFI’s repurchases and retirements of its common stock under the 2018 SRP for the fiscal periods noted:

	Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs		Average Price Paid per Share		Approximate Dollar Value that May Yet Be Repurchased Under Publicly Announced Plans or Programs		Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs		Average Price Paid per Share		Approximate Dollar Value that May Yet Be Repurchased Under Publicly Announced Plans or Programs
Fiscal 2019		—	$	—				—	$	—
Fiscal 2020 (through March 29, 2020)		84	$	23.72
Fiscal 2020								84	$	23.72
Fiscal 2021 (through December 27, 2020)								—	$	—
Total		84	$	23.72	$	48,008		84	$	23.72	$	48,008

Repurchased shares are retired and have the status of authorized and unissued shares. The cost of the repurchased shares is recorded as a reduction to common stock to the extent of the par value of the shares acquired and the remainder is allocated between capital in excess of par value and retained earnings, on a pro rata basis.

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”).

~~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~~“2018 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~~2018 Plan ~~increased~~set the number of shares available for future issuance pursuant to awards granted under the ~~Amended 2013~~2018 Plan to 1,250 ~~(subject to~~and updated 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~~for changes to Section 162(m) of the Internal Revenue Code of 1986, as amended.

On October 29, 2020, UNIFI’s shareholders approved the Unifi, Inc. Second Amended and Restated 2013 Incentive Compensation Plan (the “2020 Plan”). The ~~material terms and provisions~~2020 Plan set the number of shares available for future issuance pursuant to awards granted under the ~~Amended 2013~~2020 Plan ~~are otherwise similar~~ to ~~those of the 2013 Plan.~~850. No additional awards can be granted under the ~~2013~~2018 Plan or ~~the 2008 LTIP;~~other prior plans; however, awards outstanding under a respective prior plan remain subject to ~~each~~that plan’s ~~respective~~ provisions.

The following table provides information as of ~~March 29,~~December 27, 2020 with respect to the number of securities remaining available for future issuance under the ~~Amended 2013~~2020 Plan:

Stock-based compensation units granted or issued ~~was~~from the 2018 Plan and/or 2020 Plan were as follows:

	For the Nine Months Ended				For the Six Months Ended
	March 29, 2020		March 31, 2019		December 27, 2020		December 29, 2019
Stock options		83		223		155		83
Restricted stock units		77		74		110		77
Vested share units		24		47		—		24
Common stock		4		10		—		4

~~16.~~15. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

UNIFI ~~may use~~uses 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 currently maintains ~~three~~3 interest rate swaps that fix LIBOR at approximately 1.9% on $75,000 of variable-rate debt. UNIFI does not enter into derivative contracts for speculative purposes.

For the Three Months Ended

For the Nine Months Ended

March 29, 2020

March 31, 2019

March 29, 2020

March 31, 2019

Interest expense

$
1,231

$
1,256

$
3,589

$
4,078

Decrease in fair value of interest rate
swaps

1,883

745

1,922

1,689

Impact of interest rate swaps to
increase (decrease) interest expense

41

(111
)

(7
)

(217
)

	For the Three Months Ended						For the Six Months Ended
	December 27, 2020			December 29, 2019			December 27, 2020			December 29, 2019
Interest expense	$	833		$	1,101		$	1,704		$	2,358
(Increase) decrease in fair value of interest rate swaps		(333	)		(289	)		(665	)		39
Impact of interest rate swaps to increase (decrease) interest expense		335			15			664			(48	)

For the ~~nine~~six months ended ~~March 29,~~December 27, 2020 and ~~March 31,~~December 29, 2019, there were no significant changes to UNIFI’s assets and liabilities measured at fair value, and there were no0 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 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 ~~nine-month~~six-month periods ended ~~March 29,~~December 27, 2020 and ~~March 31,~~December 29, 2019 is included in the accompanying condensed consolidated statements of comprehensive ~~loss.~~income.

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

	For the Three Months Ended						For the Nine Months Ended					For the Three Months Ended				For the Six Months Ended
	March 29, 2020			March 31, 2019			March 29, 2020			March 31, 2019		December 27, 2020		December 29, 2019		December 27, 2020		December 29, 2019
Net (loss) income	$	(41,111	)	$	(1,529	)	$	(36,990	)	$	1,454
Net income												$	7,464	$	409	$	10,896	$	4,121
Basic weighted average shares		18,475			18,394			18,485			18,381		18,465		18,499		18,456		18,490
Net potential common share equivalents		—			—			—			361		267		273		273		255
Diluted weighted average shares		18,475			18,394			18,485			18,742		18,732		18,772		18,729		18,745
Excluded from diluted weighted average shares:
Excluded from the calculation of common share equivalents:
Anti-dilutive common share equivalents		403			359			371			388		706		362		747		373
Excluded from the calculation of diluted shares:
Unvested stock options that vest upon achievement of certain market conditions													333		—		333		—

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.

~~19.~~18. Investments in Unconsolidated Affiliates and Variable Interest Entities

As of ~~March 29,~~December 27, 2020, UNIFI maintained investments in ~~three~~2 entities classified as unconsolidated affiliates: ~~PAL;~~ U.N.F. Industries, Ltd. (“UNF”); and UNF America LLC (“UNFA”) (collectively known as “UNFs”). UNIFI’s combined investment in ~~PAL~~UNFs was ~~$56,641 and UNIFI’s combined investments in UNF and UNFA were $2,213, each of which is~~$2,532, reflected within ~~investments in unconsolidated affiliates~~other non-current assets in the accompanying condensed consolidated balance sheets.

~~PAL~~Parkdale America, LLC (“PAL”) is a limited liability company treated as a partnership for income tax reporting ~~purposes.~~purposes and in which UNIFI ~~has~~held a 34% ownership interest (the “PAL Investment”) until UNIFI sold the investment on April 29, 2020. UNIFI accounted for ~~this investment~~the PAL Investment using the equity method of ~~accounting.~~accounting and, because PAL was deemed a significant subsidiary in certain prior fiscal years, comparative prior year data 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 March 29, 2020, PAL had no futures contracts designated as cash flow hedges.

As of March 29, 2020, UNIFI owned a 34% interest in PAL (the “PAL Investment”) and Parkdale, Incorporated (“Parkdale”) owned the majority 66% interest. During March 2020, UNIFI commenced negotiations to sell the PAL Investment to Parkdale. Such negotiations indicated that the fair value of the PAL Investment was less than UNIFI’s carrying value and UNIFI no longer intended to hold the PAL Investment to allow recovery of the carrying value. UNIFI recorded an other-than-temporary impairment of $45,194 to adjust the PAL Investment to fair value.

In April 2020, UNIFI and Parkdale finalized negotiations to sell UNIFI’s PAL Investment to Parkdale for $60,000. The March 29, 2020 adjusted carrying value, after recording the other-than-temporary impairment of the PAL Investment, was comprised of (i) $56,641 reflected in investments in unconsolidated affiliates and (ii) $3,359 of cumulative translation adjustments reflected in other comprehensive loss, totaling the $60,000 fair value. The transaction closed on April 29, 2020 and UNIFI received $60,000 in cash.

~~The reconciliation between UNIFI’s share of the underlying equity of PAL and its investment is as follows:~~

~~UNIFI evaluated the events relating to the PAL Investment under the guidance in ASC 205 –~~ ~~Presentation of Financial Statements.~~ Disposition of the PAL Investment (i) did not represent a strategic shift for UNIFI and (ii) did not meet the criteria to be recorded as a discontinued operation. Accordingly, UNIFI continues to record the financial statement impacts of the PAL Investment in continuing operations.presented separately below.

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 ~~March 29,~~December 27, 2020, UNIFI’s open purchase orders related to this supply agreement were ~~$807.~~$1,545.

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

	For the Nine Months Ended				For the Six Months Ended
	March 29, 2020		March 31, 2019		December 27, 2020		December 29, 2019
UNFA					$	8,005	$	8,582
UNF	$	1,343	$	1,478		207		1,209
UNFA		13,219		17,199
Total	$	14,562	$	18,677	$	8,212	$	9,791

As of ~~March 29,~~December 27, 2020 and June ~~30, 2019,~~28, 2020, UNIFI had combined accounts payable due to UNF and UNFA of ~~$2,724~~$3,123 and ~~$1,728,~~$1,166, 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 (i) UNIFI purchases substantially all of the output from the two entities, (ii) the two entities’ balance sheets constitute 3% or less of UNIFI’s current assets, total assets and total liabilities, and (iii) 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) isare presented in the tables below. ~~PAL was defined as significant and its information is separately disclosed. PAL has not met the criteria for segment reporting.~~

	As of March 29, 2020						As of June 30, 2019						As of December 27, 2020						As of June 28, 2020
	PAL		Other		Total		PAL		Other		Total		PAL		UNFs		Total		PAL		UNFs		Total
Current assets	$	258,113	$	6,716	$	264,829	$	299,610	$	7,218	$	306,828	$	—	$	7,499	$	7,499	$	—	$	5,190	$	5,190
Non-current assets		151,720		583		152,303		158,304		696		159,000		—		731		731		—		561		561
Current liabilities		54,513		2,873		57,386		70,875		4,069		74,944		—		3,166		3,166		—		1,415		1,415
Non-current liabilities		2,602		—		2,602		3,252		—		3,252		—		—		—		—		—		—
Shareholders’ equity and capital accounts		352,718		4,426		357,144		383,787		3,845		387,632		—		5,064		5,064		—		4,336		4,336

UNIFI’s portion of undistributed earnings		34,230		1,334		35,564		43,343		821		44,164		—		2,041		2,041		—		1,424		1,424

	For the Three Months Ended March 29, 2020						For the Three Months Ended March 31, 2019						For the Three Months Ended December 27, 2020						For the Three Months Ended December 29, 2019
	PAL		Other		Total		PAL		Other		Total		PAL		UNFs		Total		PAL			UNFs		Total
Net sales	$	170,854	$	4,076	$	174,930	$	225,160	$	6,217	$	231,377	$	—	$	4,651	$	4,651	$	161,648		$	5,475	$	167,123
Gross profit		12,182		392		12,574		8,638		1,149		9,787
Income from operations		7,747		8		7,755		3,868		733		4,601
Net income		9,811		74		9,885		4,142		740		4,882
Gross profit (loss)														—		1,092		1,092		(186	)		812		626
Income (loss) from operations														—		673		673		(5,026	)		377		(4,649	)
Net income (loss)														—		674		674		(2,463	)		383		(2,080	)
Depreciation and amortization		8,647		23		8,670		9,285		48		9,333		—		42		42		11,393			43		11,436

Cash received by PAL under cotton rebate program		3,210		—		3,210		3,053		—		3,053		—		—		—		3,463			—		3,463
Earnings recognized by PAL for cotton rebate program		3,215		—		3,215		3,195		—		3,195		—		—		—		2,766			—		2,766

Distributions received		—		—		—		—		750		750		—		—		—		—			—		—

	For the Nine Months Ended March 29, 2020								For the Nine Months Ended March 31, 2019						For the Six Months Ended December 27, 2020						For the Six Months Ended December 29, 2019
	PAL			Other		Total			PAL		Other		Total		PAL		UNFs		Total		PAL			UNFs		Total
Net sales	$	531,669		$	14,212	$	545,881		$	626,812	$	19,256	$	646,068	$	—	$	7,864	$	7,864	$	360,815		$	10,136	$	370,951
Gross profit		13,067			1,745		14,812			18,841		3,587		22,428		—		1,533		1,533		885			1,353		2,238
(Loss) income from operations		(554	)		497		(57	)		5,663		2,284		7,947
Net income		3,893			581		4,474			6,334		2,381		8,715
Income (loss) from operations																—		719		719		(8,301	)		489		(7,812	)
Net income (loss)																—		723		723		(5,918	)		507		(5,411	)
Depreciation and amortization		30,671			113		30,784			30,576		143		30,719		—		78		78		22,024			90		22,114

Cash received by PAL under cotton rebate program		10,366			—		10,366			8,773		—		8,773		—		—		—		7,156			—		7,156
Earnings recognized by PAL for cotton rebate program		9,569			—		9,569			9,444		—		9,444		—		—		—		6,354			—		6,354

Distributions received		10,437			—		10,437			130		1,250		1,380		—		—		—		10,437			—		10,437

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 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, 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 UK of any future responsibility for environmental remediation, other than participation with DuPont, if so called upon, with regard to 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.

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. 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 UK, DuPont and UK had a duty to monitor and report the environmental status of the Kentec site to DEQ.

Effective April 10, 2019, UK assumed sole remediator responsibility of the Kentec site pursuant to its contractual obligations with INVISTA and received $180 of net monitoring and reporting costs due from DuPont. In connection with monitoring, UK expects to sample and report to DEQ annually. UNIFI expects minimal active site remediation may be required, but has no basis to determine any costs that may be associated with active remediation.

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

There were no0 related party receivables as of ~~March 29,~~December 27, 2020 or June ~~30, 2019.~~28, 2020.

Related party payables ~~consists~~for Salem Leasing Corporation consisted of the following:

~~Related~~The following are the Company’s significant related party ~~transactions in excess of $120 include:~~transactions:

		For the Three Months Ended				For the Nine Months Ended					For the Three Months Ended				For the Six Months Ended
Affiliated Entity	Transaction Type	March 29, 2020		March 31, 2019		March 29, 2020		March 31, 2019		Transaction Type	December 27, 2020		December 29, 2019		December 27, 2020		December 29, 2019
Salem Leasing Corporation	Transportation equipment costs and finance lease debt service	$	985	$	1,006	$	3,101	$	3,046	Payments for transportation equipment costs and finance lease debt service	$	924	$	1,108	$	1,863	$	2,116

UNIFI defines operating segments as components of the organization for which discrete financial information is available and operating results are evaluated on a regular basis by UNIFI’s principal executive officer, who is the chief operating decision maker (the “CODM”), in order to assess performance and allocate resources. Characteristics of ~~the organization~~UNIFI which were relied upon in making the determination of reportable segments include the nature of the products sold, the ~~organization’s~~ internal organizational structure, the trade policies in the geographic regions in which UNIFI operates and the information that is regularly reviewed by the CODM for the purpose of assessing performance and allocating resources.

UNIFI’s operating segments are aggregated into ~~four~~4 reportable segments (the Polyester Segment, the ~~Nylon~~Asia Segment, the Brazil Segment and the ~~Asia~~Nylon 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.~~category is included in the tables below. All Other consists primarily of for-hire transportation services. For-hire transportation services revenue is derived from performing common carrier services utilizing UNIFI’s fleet of transportation equipment.

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

UNIFI evaluates the operating performance of its segments based upon Segment Profit, which represents segment gross profit (loss) plus segment depreciation expense. This measurement of segment profit or loss best aligns segment reporting with the current assessments and evaluations performed by, and information provided to, the CODM.

The accounting policies for the segments are consistent with UNIFI’s accounting policies. Intersegment sales are omitted from segment disclosures, as they are (i) insignificant to UNIFI’s segments and eliminated from consolidated reporting and (ii) excluded from segment evaluations performed by the CODM.

	For the Three Months Ended March 29, 2020												For the Three Months Ended December 27, 2020
	Polyester		Nylon		Brazil		Asia		All Other		Total		Polyester		Asia		Brazil		Nylon		All Other		Total
Net sales	$	89,767	$	20,567	$	21,060	$	38,621	$	979	$	170,994	$	76,696	$	44,692	$	24,253	$	16,008	$	1,127	$	162,776
Cost of sales		82,735		20,234		17,644		34,038		960		155,611		65,801		38,164		16,276		15,613		988		136,842
Gross profit		7,032		333		3,416		4,583		19		15,383		10,895		6,528		7,977		395		139		25,934
Segment depreciation expense		4,301		471		421		—		137		5,330		4,470		—		321		438		164		5,393
Segment Profit	$	11,333	$	804	$	3,837	$	4,583	$	156	$	20,713	$	15,365	$	6,528	$	8,298	$	833	$	303	$	31,327

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

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

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

For the Three Months Ended March 31, 2019

Polyester

Nylon

Brazil

Asia

All Other

Total

Net sales

$
95,745

$
25,563

$
25,110

$
32,571

$
1,000

$
179,989

Cost of sales

90,941

23,251

22,334

28,730

942

166,198

Gross profit

4,804

2,312

2,776

3,841

58

13,791

Segment depreciation expense

3,858

516

420

—

47

4,841

Segment Profit

$
8,662

$
2,828

$
3,196

$
3,841

$
105

$
18,632

For the Nine Months Ended March 29, 2020

Polyester

Nylon

Brazil

Asia

All Other

Total

Net sales

$
261,212

$
57,853

$
66,094

$
132,496

$
2,799

$
520,454

Cost of sales

239,725

56,296

55,089

118,114

2,739

471,963

Gross profit

21,487

1,557

11,005

14,382

60

48,491

Segment depreciation expense

12,525

1,465

1,153

—

300

15,443

Segment Profit

$
34,012

$
3,022

$
12,158

$
14,382

$
360

$
63,934

For the Nine Months Ended March 31, 2019

Polyester

Nylon

Brazil

Asia

All Other

Total

Net sales

$
281,665

$
76,159

$
76,257

$
92,014

$
3,216

$
529,311

Cost of sales

265,748

69,671

62,654

80,317

2,955

481,345

Gross profit

15,917

6,488

13,603

11,697

261

47,966

Segment depreciation expense

12,047

1,576

1,146

—

190

14,959

Segment Profit

$
27,964

$
8,064

$
14,749

$
11,697

$
451

$
62,925

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

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Six Months Ended
	March 29, 2020			March 31, 2019			March 29, 2020			March 31, 2019			December 27, 2020			December 29, 2019			December 27, 2020			December 29, 2019
Polyester	$	7,032		$	4,804		$	21,487		$	15,917		$	10,895		$	6,660		$	15,527		$	14,455
Asia														6,528			5,517			11,106			9,799
Brazil														7,977			3,430			12,590			7,589
Nylon		333			2,312			1,557			6,488			395			46			1,060			1,224
Brazil		3,416			2,776			11,005			13,603
Asia		4,583			3,841			14,382			11,697
All Other		19			58			60			261			139			12			212			41
Segment gross profit		15,383			13,791			48,491			47,966			25,934			15,665			40,495			33,108
Selling, general and administrative expenses		11,720			11,439			35,208			40,672			12,625			12,508			23,989			23,488
Provision for bad debts		580			218			331			381
Other operating (income) expense, net		(62	)		1,359			900			1,218
Benefit for bad debts														(259	)		(258	)		(1,146	)		(249	)
Other operating expense, net														476			854			1,654			962
Operating income		3,145			775			12,052			5,695			13,092			2,561			15,998			8,907
Interest income		(173	)		(149	)		(595	)		(448	)		(187	)		(212	)		(312	)		(422	)
Interest expense		1,231			1,256			3,589			4,078			833			1,101			1,704			2,358
Equity in earnings of unconsolidated affiliates		(3,526	)		(1,873	)		(1,904	)		(3,126	)
Impairment of investment in unconsolidated affiliate		45,194			—			45,194			—
Loss on extinguishment of debt		—			—			—			131
(Loss) income before income taxes	$	(39,581	)	$	1,541		$	(34,232	)	$	5,060
Equity in (earnings) loss of unconsolidated affiliates														(130	)		756			(223	)		1,622
Income before income taxes													$	12,576		$	916		$	14,829		$	5,349

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

	March 29, 2020		June 30, 2019		December 27, 2020		June 28, 2020
Polyester	$	295,192	$	287,608	$	261,769	$	263,496
Asia						54,661		41,452
Brazil						60,006		49,967
Nylon		50,905		57,055		39,682		42,020
Brazil		54,040		67,490
Asia		45,530		35,219
Segment total assets		445,667		447,372		416,118		396,935
Other current assets		7,235		10,327		68,900		48,600
Other PP&E		24,412		18,664		22,687		23,676
Other non-current operating lease assets		1,599		—
Other operating lease assets						1,308		1,503
Other non-current assets		5,275		1,468		3,985		3,448
Investments in unconsolidated affiliates		58,854		114,320
Total assets	$	543,042	$	592,151	$	512,998	$	474,162

	For the Nine Months Ended				For the Six Months Ended
	March 29, 2020		March 31, 2019		December 27, 2020		December 29, 2019
Interest, net of capitalized interest of $86 and $178, respectively	$	3,535	$	4,053
Interest, net of capitalized interest of $92 and $56, respectively					$	1,610	$	2,357
Income tax payments, net		4,833		617		3,923		3,429

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.

As of ~~March~~December 27, 2020 and June 28, 2020, $697 and $630, respectively, were included in accounts payable for unpaid capital expenditures. As of December 29, ~~2020~~2019 and June 30, 2019, ~~$619~~$1,127 and $1,329, respectively, were included in accounts payable for unpaid capital expenditures. As

During the six months ended December 27, 2020 and December 29, 2019, UNIFI recorded non-cash activity relating to finance leases of ~~March 31, 2019~~$740 and ~~June 24, 2018, $2,205 and $3,187, respectively, were included in accounts payable for unpaid capital expenditures.~~

~~Non-cash investing and financing activities related to leases have been disclosed in Note 4, “Leases.”~~$6,301, respectively.

Global demand declines and decreased economic activity caused by the COVID-19 pandemic led to a decline in demand for UNIFI products. Accordingly, during the fourth quarter of fiscal 2020, UNIFI’s manufacturing operations have been reduced from recent production levels to adjust for the change in demand. UNIFI’s facilities in El Salvador are currently not operational in connection with temporary government mandates in that country.

As further disclosed in Note 19, “Investment in Unconsolidated Affiliates and Variable Interest Entities,” in April 2020, UNIFI and Parkdale finalized negotiations to sell UNIFI’s PAL Investment to Parkdale for $60,000. The transaction closed on April 29, 2020 and UNIFI received $60,000 in cash.

As further disclosed in Note 11, “Long-Term Debt,” in connection and concurrent with the sale of the PAL Investment, UNIFI entered into the Fourth Amendment to Amended and Restated Credit Agreement.

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 ~~March 29,~~December 27, 2020, while a reference to the “prior period” refers to the three-month period ended ~~March 31,~~December 29, 2019. A reference to the “current ~~nine-month~~six-month period” refers to the ~~nine-month~~six-month period ended ~~March 29,~~December 27, 2020, while a reference to the “prior ~~nine-month~~six-month period” refers to the ~~nine-month~~six-month period ended ~~March 31,~~December 29, 2019. Such references may be accompanied by certain phrases for added clarity. The current period and the prior period each consisted of 13 weeks. The current ~~nine-month~~six-month period and the prior ~~nine-month~~six-month period each consisted of ~~39 weeks and 40 weeks, respectively.~~26 weeks.

Our discussions in this Item 2 focus on our results during, or as of, the three months and ~~nine~~six months ended ~~March 29,~~December 27, 2020 and ~~March 31,~~December 29, 2019, and, to the extent applicable, any material changes from the information discussed in the ~~2019~~2020 Form 10-K or other important intervening developments or information. These discussions should be read in conjunction with the ~~2019~~2020 Form 10-K for more detailed and background information about our business, operations and financial condition. Discussion of ~~unfavorable~~ foreign currency translation is primarily associated with the weakening of the Brazilian Real (“BRL”) and changes in the Chinese Renminbi (“RMB”) ~~against~~versus the U.S. Dollar (“USD”). 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 USMCA, NAFTA and CAFTA-DR.

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

~~Underlying Business and Operational Overview for the Nine Months Ending March 29, 2020~~

~~UNIFI’s business~~UNIFI focuses on delivering products and solutions to direct 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. UNIFI remains committed to this strategy, which we believe will increase profitability and generate improved cash flows from operations.

UNIFI has four reportable segments for its operations – the Polyester Segment, the ~~Nylon~~Asia Segment, the Brazil Segment and the ~~Asia~~Nylon 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 general matters for the current period and the current ~~nine-month~~six-month period, which include ~~the following, each of which is addressed in more detail below:~~

During the current nine-month period, (i) the Polyester Segment faced suppressed demand for certain yarns across the industrial, automotive and apparel sectors, (ii) the Nylon Segment experienced lower revenues and gross margin in connection with two customers shifting certain programs to overseas garment production during calendar 2019 and (iii) the Brazil Segment experienced lower gross margin as market price declines in connection with declining raw material costs outpaced inventory turnover.

However, UNIFI achieved favorable operating results and overall improvement compared to the prior nine-month period, despite one fewer sales week in the NACA region. The improvement was primarily attributable to (i) a declining raw material cost environment that benefited our Polyester Segment and (ii) lower selling, general and administrative expenses (“SG&A”) resulting from cost reduction efforts that began in the second half of fiscal 2019.

Additionally, UNIFI’s operating cash flows improved significantly during the current nine-month period primarily as a result of (i) comparatively less cash invested in inventories, which was influenced by lower raw material costs and (ii) $9,057 of increased distributions from equity affiliates.

~~UNIFI remains committed to pursuing relief~~pressures 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 U.S. Department of Commerce and the U.S. International Trade Commission completed their investigations and began imposing associated final duties on imports, subsequent to preliminary duties that were in effect from April 2019 to December 2019. Accordingly, subject imports from China and Indiaongoing COVID-19 pandemic, are being assessed combined antidumping and countervailing duty rates of 97% and higher and 18% and higher, respectively, in addition to normal course duties in effect. The positive developments in our pursuit of relief from low-cost and subsidized imports are critical steps in our efforts to compete against imported yarns that have flooded the U.S. market in recent years. UNIFI will continue to monitor whether polyester textured yarn from China or India is being shipped through third-party countries and then entering the U.S. market to avoid the increased duties.summarized below:

In March 2020, the World Health Organization declared the current ~~coronavirus disease (“COVID-19”)~~COVID-19 outbreak a global pandemic. Efforts to contain the spread of COVID-19 intensified during March and April 2020. Several states, including North Carolina, where UNIFI’s primary manufacturing and administrative operations are located, declared states of emergency. A number of foreign and local governments also enacted temporary business closures, issued quarantine orders and took other restrictive measures in response to the COVID-19 pandemic. The local and global measures significantly reduced economic activity and demand, thereby reducing overall demand for UNIFI’s products.

In an effort to protect the health and safety of our employees, customers and communities, UNIFI took proactive, aggressive actions from the earliest signs of the outbreak that included social distancing and travel restriction policies for all locations, along with reducing costs in both manufacturing and selling, general and administrative expenses (“SG&A”) without impacting our ability to service customers. These measures remain in effect and are evaluated regularly against local, state and federal recommendations.

Global measures taken to reduce the spread of the COVID-19 pandemic generated a significant decline in global business activity that may have a lasting impact on the global economy and consumer demand. The duration of the COVID-19 pandemic and its related impact on our business is currently unknown. Through ~~the current period and current nine-month period,~~March 2020, the COVID-19 pandemic had no significant adverse impact on UNIFI’s business, although sales growth for our Asia Segment was temporarily slowed by the extensive government shutdown in ~~China during~~China. Throughout calendar 2020, the ~~current period.~~

~~Efforts to contain the spread of COVID-19 intensified during March~~Asia Segment’s overall performance and April 2020, especially in the U.S. Several states, including North Carolina, where UNIFI’s primary manufacturing and administrative operations are located, have declared states of emergency. A number of national, state, and local governments also enacted temporary business closures, issued quarantine orders and took other restrictive measures in response to the COVID-19 pandemic. The local and global measures have significantly reduced economic activity and demand, thereby reducing overall demand for UNIFI’s products.

UNIFI’s U.S. manufacturing has continued operating as an essential business, allowing UNIFI to continue to serve customers that remain operational. However, UNIFI’s global manufacturing operations have adjusted to the declines in economic activity and global demandprofitability was moderately impacted by reducing production from recent levels. UNIFI’s facilities in El Salvador are currently not operational in connection with temporary government mandates in that country. In an effort to protect the health and safety of our employees, customers and communities, UNIFI has taken proactive, aggressive action from the earliest signs of the outbreak in the U.S. by adopting social distancing and travel restriction policies for all locations.

Global measures taken to reduce the spread of COVID-19 have generated a significant decline in global business activity in the immediate term that may have a lasting impact on the global economy and consumer demand. The duration of the COVID-19 pandemic, while our U.S., Brazil and ~~its related impact on our businesses are currently unknown.~~El Salvador operations were more adversely impacted by the COVID-19 pandemic, most notably in the June 2020 quarter during the most intense declines in global demand. UNIFI anticipates that the global disruption caused by the COVID-19 pandemic has negatively impacted, and will continue to negatively impact, overall global demand and business activity, including ~~for~~ textiles in both the Americas and Asia.

~~Significant~~While our operating results for the current six-month period indicate a robust recovery of the textile supply chain and increased activity from the considerably low levels of demand and production experienced in the June 2020 quarter, significant restoration of consumer spending and retail activity ~~levels~~

will be critical to ~~both~~ our end-markets to enable a full and ansustained economic rebound. UNIFI anticipates a ~~rebound~~recovery in global economic activity when the COVID-19 pandemic is ~~demonstrably~~sufficiently contained. The ~~business impact of such a~~economic rebound will depend on the pace and effectiveness of the containment efforts deployed by various international, national, state, and local governments, along with the speed and effectiveness with which potential treatment and vaccine methods are deployed. However, the anticipated economic rebound would be jeopardized by a significant degradation in local and global healthcare systems’ abilities to treat infections, mutations of the virus that generate further difficulty in containment efforts, or shelter-in-place orders in UNIFI’s primary geographic markets.

Textile demand and business activity levels in the second half of calendar 2020 exceeded our expectations set when we began the fiscal year, however there is no certainty that such levels will continue or increase during calendar 2021. Additionally, there is no clear indication that the demand and activity levels experienced in the second half of calendar 2020 were the result of economic restoration, as those levels could have been favorably impacted by pent up demand. UNIFI will continue to monitor the COVID-19 pandemic, prioritizing the health and safety of our employees, while delivering on customer ~~demand, but~~demand. Although our year-to-date fiscal 2021 results have exceeded our expectations and we ~~expect an adverse~~have experienced several improvements across certain financial metrics, our underlying sales volumes in certain core markets have not fully recovered. Therefore, we are unsure of the impact on our operational and financial results through at least fiscal 2021, based on present factors and conditions, along with the uncertainty surrounding global demand.

UNIFI remains committed to pursuing relief from the elevated levels of low-cost and subsidized polyester textured yarn entering the U.S. market from foreign countries. Efforts to slow low-cost and subsidized polyester textured yarn from China and India were successful during calendar 2019, which led to a temporary improvement in our U.S. polyester textured yarn sales prior to the ~~remainder~~onset of the COVID-19 pandemic in March 2020.

Subsequent to the completion of the trade initiatives against China and India, imports from Indonesia, Malaysia, Thailand, and Vietnam seemingly replaced the imports from China and India and surged into the U.S. market. Subject import volume from Indonesia, Malaysia, Thailand, and Vietnam increased from calendar 2017 to calendar 2019 by over 80%. Similar to the adverse impacts of imports from China and India in previous years, the subject imports from Indonesia, Malaysia, Thailand, and Vietnam undersold the domestic industry, taking sales from and exerting considerable downward pricing pressure on yarns produced by UNIFI. Accordingly, UNIFI is a petitioner to the United States Department of Commerce and the United States International Trade Commission (the "USITC") alleging dumping of polyester textured yarn in the U.S. market from Indonesia, Malaysia, Thailand, and Vietnam.

In December 2020, the USITC made affirmative determinations in its preliminary phase of antidumping duty investigations concerning polyester textured yarn from Indonesia, Malaysia, Thailand, and Vietnam. The entire investigative process will take approximately one year, with final determinations of dumping and injury likely occurring by the end of calendar 2021.

Prior to the COVID-19 pandemic, our ~~fiscal~~operations were achieving incremental sales volume growth from both (i) continued demand for sustainable products with our REPREVE^® platform and (ii) U.S. market share recapture from our trade initiatives that were finalized in January 2020. Additionally, we have recently benefited from a more favorable polyester raw material cost environment.

In the current six-month period, our Polyester and Nylon Segments were adversely impacted by the COVID-19 pandemic, as manufacturing activity in the U.S. has recovered less rapidly than in Asia and Brazil, while production activity in Central America surged following the June 2020 quarter. In Asia, although productivity remains pressured by lower global demand, our Asia Segment continues to perform well with both new and ~~at least~~existing customer programs. The Brazil Segment was able to navigate its domestic recovery more favorably than competitive importers, resulting in sales volume and market share growth compared to recent quarters. We believe the outperformance by the Brazil Segment includes temporary capture of market share from competitive imports and higher conversion margin due to the unfavorable dynamics facing competitors surrounding input and freight costs combined with weaker delivery speed. Competition and pricing are expected to normalize over the mid- to long-term.

Although sales volumes in the NACA region were pressured in the current six-month period, our operations benefited from raw material and selling price stability and sales mix improvements. Accordingly, we were able to achieve better-than-expected operating results in the current six-month period.

While sales and gross profit pressures from the COVID-19 pandemic have weighed on our financial results, we have remained diligent in managing our operations as efficiently and effectively as possible while delivering on customer demand. Accordingly, we generated operating cash flows in the current six-month period and continued to reduce our debt principal. Our performance in the first half of ~~our~~ fiscal 2021 ~~based on~~further strengthened our balance sheet and solidified the ~~present factors~~foundation for further growth subsequent to the negative impacts of the COVID-19 pandemic.

We believe that several facets of our business will remain drivers for growth once the COVID-19 pandemic subsides, including: (i) continued sales and ~~conditions.~~portfolio growth for our Asia Segment, (ii) U.S. market share recapture from our recent trade initiatives, (iii) continued commitments in sustainability by corporations, governments and other entities leading to further demand for our REPREVE^® platform, (iv) leading-edge innovation and commercialization efforts that deliver meaningful consumer products, and (v) continued expansion of our portfolio with additional markets, applications, and brand partners.

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, Adjusted Net Income, ~~(Loss),~~ Adjusted EPS, 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.~~operations and is relevant to our fixed charge coverage ratio. Equity in ~~earnings~~loss of PAL is excluded from Adjusted EBITDA because such results do not reflect our operating performance.

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

Management uses Adjusted Working Capital as an indicator of UNIFI’s production efficiency and ability to manage inventories and receivables.

Management uses Net Debt as a liquidity and leverage metric to determine how much debt would remain if all cash and cash equivalents were used to pay down debt principal.

Three Months Ended December 27, 2020 Compared to Three Months Ended December 29, 2019

Following the tables is a discussion and analysis of the significant components of net income.

	For the Three Months Ended
	December 27, 2020						December 29, 2019
				% of Net Sales						% of Net Sales			% Change
Net sales	$	162,776			100.0		$	169,511			100.0			(4.0	)
Cost of sales		136,842			84.1			153,846			90.8			(11.1	)
Gross profit		25,934			15.9			15,665			9.2			65.6
SG&A		12,625			7.8			12,508			7.4			0.9
Benefit for bad debts		(259	)		(0.2	)		(258	)		(0.2	)		0.4
Other operating expense, net		476			0.3			854			0.5			(44.3	)
Operating income		13,092			8.0			2,561			1.5		nm
Interest expense, net		646			0.4			889			0.5			(27.3	)
Equity in (earnings) loss of unconsolidated affiliates		(130	)		(0.1	)		756			0.5			(117.2	)
Income before income taxes		12,576			7.7			916			0.5		nm
Provision for income taxes		5,112			3.1			507			0.3		nm
Net income	$	7,464			4.6		$	409			0.2		nm

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

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

	For the Three Months Ended December 27, 2020									For the Three Months Ended December 29, 2019
	Pre-tax Income		Tax Impact			Net Income		Diluted EPS		Pre-tax Income		Tax Impact			Net Income		Diluted EPS
GAAP results	$	12,576	$	(5,112	)	$	7,464	$	0.40	$	916	$	(507	)	$	409	$	0.02
Severance ⁽¹⁾		—		—			—		—		383		(80	)		303		0.02
Adjusted results	$	12,576	$	(5,112	)	$	7,464	$	0.40	$	1,299	$	(587	)	$	712	$	0.04

Weighted average common shares outstanding									18,732									18,772

Consolidated net sales decreased $6,735, or 4.0%, for the current period in comparison to the prior period primarily attributable to (i) the COVID-19 pandemic, (ii) lower average selling prices, and (iii) unfavorable foreign currency translation.

Consolidated sales volumes increased 1.0%, primarily attributable to the Brazil Segment, which was agile and responsive to COVID-19 pandemic-related demand fluctuations in the current period, and generated volume growth by capturing market share from competitors. The increase was partially offset by the adverse impact of the COVID-19 pandemic on U.S. product demand, as our Americas and Asia markets have experienced significant, but not full recovery, since the June 2020 quarter.

Once the COVID-19 pandemic subsides, we believe incremental revenue for the Polyester Segment will be generated from our polyester textured yarn trade petitions (i) completed in early calendar 2020 and (ii) recently filed. However, our Nylon Segment results continue to reflect the current global trend of declining demand for nylon socks, ladies’ hosiery and intimate apparel.

Consolidated average sales prices decreased 5.0%, primarily attributable to (i) sales price declines associated with polyester raw material cost changes, and (ii) unfavorable foreign currency translation.

REPREVE^® Fiber products for the current period comprised 37% of consolidated net sales, up from 34% for the prior period and 31% for fiscal 2020.

Gross profit for the current period increased by $10,269, or 65.6%, as compared to the prior period. Although the COVID-19 pandemic adversely impacted sales volumes in our Polyester Segment and Asia Segment, favorable raw material costs and manufacturing efficiencies helped drive gross profit improvement. Further, the Brazil Segment has outperformed in the current period, primarily due to a temporarily improved competitive position.

SG&A increased from the prior period, primarily due to higher accrued incentive compensation, partially offset by lower professional fees and travel and entertainment expenses in the current period.

The current period benefit for bad debts reflects general improvement in customer payment frequency following the adverse effects of the COVID-19 pandemic on customer health.

The current period and prior period both reflect foreign currency transaction losses of $324 in the current period and $486 in the prior period along with severance charges in the prior period.

Interest expense, net decreased from the prior period to the current period, primarily attributable to a lower average debt principal. The components of consolidated interest expense, net were as follows:

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

On April 29, 2020, UNIFI sold its 34% non-controlling partnership interest in PAL. The comparative decrease in loss from PAL reflects a loss recorded in the prior period with no results recorded in the current period.

The effective tax rate is subject to variation due to numerous factors, including variability in the amount of income before income taxes, 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 are greater when income before income taxes is lower.

The decrease in the effective tax rate from the prior period to the current period is primarily attributable to higher earnings in the current period, which lessens the impact of rate reconciling items including (i) current U.S. tax on GILTI, (ii) losses in tax jurisdictions for which no benefit can be recognized, and (iii) foreign withholding taxes. The comparative decrease is partially offset by certain foreign tax credits favorably impacting the prior period.

Net income for the current period was $7,464, or $0.40 per share, compared to net income of $409 or $0.02 per share, for the prior period. The change in net income was primarily due to (i) higher gross profit in the current period and (ii) the loss from PAL in the prior period.

Adjusted EBITDA increased from the prior period to the current period, commensurate with higher gross profit.

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

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

	For the Three Months Ended
	December 27, 2020					December 29, 2019
				% of Net Sales					% of Net Sales		% Change
Net sales	$	76,696			100.0	$	82,750			100.0		(7.3	)
Cost of sales		65,801			85.8		76,090			92.0		(13.5	)
Gross profit		10,895			14.2		6,660			8.0		63.6
Depreciation expense		4,470			5.8		4,183			5.1		6.9
Segment Profit	$	15,365			20.0	$	10,843			13.1		41.7

Segment net sales as a percentage of consolidated amounts		47.1	%				48.8	%
Segment Profit as a percentage of consolidated amounts		49.0	%				52.0	%

The decrease in net sales for the Polyester Segment from the prior period to the current period was primarily attributable to lower average selling prices associated with lower polyester raw material costs.

The increase in Segment Profit for the Polyester Segment from the prior period to the current period was primarily attributable to improved conversion margin, manufacturing efficiencies, and a better 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 Asia Segment, were as follows:

	For the Three Months Ended
	December 27, 2020					December 29, 2019
				% of Net Sales					% of Net Sales		% Change
Net sales	$	44,692			100.0	$	47,918			100.0		(6.7	)
Cost of sales		38,164			85.4		42,401			88.5		(10.0	)
Gross profit		6,528			14.6		5,517			11.5		18.3
Depreciation expense		—			—		—			—		—
Segment Profit	$	6,528			14.6	$	5,517			11.5		18.3

Segment net sales as a percentage of consolidated amounts		27.5	%				28.3	%
Segment Profit as a percentage of consolidated amounts		20.8	%				26.5	%

The decrease in net sales for the Asia Segment from the prior period to the current period was primarily attributable to overall lower sales volumes and average selling prices driven by the adverse impacts of the COVID-19 pandemic, partially offset by the continued momentum of REPREVE^®-branded products and favorable foreign currency translation effects.

The RMB weighted average exchange rate was 6.62 RMB/USD and 7.04 RMB/USD for the current period and the prior period, respectively.

Segment Profit for the Asia Segment increased from the prior period to the current period as raw material cost benefits achieved on certain product lines and sales mix improvements were partially offset by the decrease in sales volumes described in the net sales analysis above.

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 Brazil Segment, were as follows:

	For the Three Months Ended
	December 27, 2020					December 29, 2019
				% of Net Sales					% of Net Sales		% Change
Net sales	$	24,253			100.0	$	20,862			100.0		16.3
Cost of sales		16,276			67.1		17,432			83.6		(6.6	)
Gross profit		7,977			32.9		3,430			16.4		132.6
Depreciation expense		321			1.3		357			1.8		(10.1	)
Segment Profit	$	8,298			34.2	$	3,787			18.2		119.1

Segment net sales as a percentage of consolidated amounts		14.9	%				12.3	%
Segment Profit as a percentage of consolidated amounts		26.5	%				18.2	%

The increase in net sales for the Brazil Segment from the prior period to the current period was primarily attributable to an improvement in sales volumes due to the Brazil Segment’s ability to capture market share from competitors and maintain pricing levels, partially offset by unfavorable foreign currency translation effects.

The BRL weighted average exchange rate was 5.41 BRL/USD and 4.12 BRL/USD for the current period and the prior period, respectively.

The increase in Segment Profit for the Brazil Segment from the prior period to the current period was primarily attributable to the segment’s ability to achieve favorable pricing and utilization levels under a temporarily strengthened competitive position.

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
	December 27, 2020					December 29, 2019
				% of Net Sales					% of Net Sales		% Change
Net sales	$	16,008			100.0	$	17,084			100.0		(6.3	)
Cost of sales		15,613			97.5		17,038			99.7		(8.4	)
Gross profit		395			2.5		46			0.3		758.7
Depreciation expense		438			2.7		503			2.9		(12.9	)
Segment Profit	$	833			5.2	$	549			3.2		51.7

Segment net sales as a percentage of consolidated amounts		9.8	%				10.1	%
Segment Profit as a percentage of consolidated amounts		2.7	%				2.6	%

The decrease in net sales for the Nylon Segment from the prior period to the current period was primarily attributable to a shift in sales mix following declines in hosiery demand.

Segment Profit for the Nylon Segment in the current period was comparably stronger primarily due to manufacturing efficiencies.

~~Three~~Six Months Ended ~~March 29,~~December 27, 2020 Compared to ~~Three~~Six Months Ended ~~March 31,~~December 29, 2019

Following the tables is a discussion and analysis of the significant components of net income.

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

	For the Three Months Ended															For the Six Months Ended
	March 29, 2020						March 31, 2019									December 27, 2020						December 29, 2019
				% of Net Sales						% of Net Sales			% Change						% of Net Sales						% of Net Sales			% Change
Net sales	$	170,994			100.0		$	179,989			100.0			(5.0	)	$	304,281			100.0		$	349,460			100.0			(12.9	)
Cost of sales		155,611			91.0			166,198			92.3			(6.4	)		263,786			86.7			316,352			90.5			(16.6	)
Gross profit		15,383			9.0			13,791			7.7			11.5			40,495			13.3			33,108			9.5			22.3
SG&A		11,720			6.9			11,439			6.4			2.5			23,989			7.9			23,488			6.7			2.1
Provision for bad debts		580			0.3			218			0.1			166.1
Other operating (income) expense, net		(62	)		—			1,359			0.8			(104.6	)
Benefit for bad debts																	(1,146	)		(0.4	)		(249	)		(0.1	)	nm
Other operating expense, net																	1,654			0.5			962			0.3			71.9
Operating income		3,145			1.8			775			0.4		nm				15,998			5.3			8,907			2.6			79.6
Interest expense, net		1,058			0.6			1,107			0.6			(4.4	)		1,392			0.5			1,936			0.6			(28.1	)
Equity in earnings of unconsolidated affiliates		(3,526	)		(2.1	)		(1,873	)		(1.1	)		88.3
Impairment of investment in unconsolidated affiliate		45,194			26.4			—			—		nm
(Loss) income before income taxes		(39,581	)		(23.1	)		1,541			0.9		nm
Equity in (earnings) loss of unconsolidated affiliates																	(223	)		(0.1	)		1,622			0.5			(113.7	)
Income before income taxes																	14,829			4.9			5,349			1.5			177.2
Provision for income taxes		1,530			0.9			3,070			1.7			(50.2	)		3,933			1.3			1,228			0.3		nm
Net loss	$	(41,111	)		(24.0	)	$	(1,529	)		(0.8	)	nm
Net income																$	10,896			3.6		$	4,121			1.2			164.4

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

	For the Six Months Ended December 27, 2020									For the Six Months Ended December 29, 2019
	Pre-tax Income		Tax Impact			Net Income		Diluted EPS		Pre-tax Income		Tax Impact			Net Income		Diluted EPS
GAAP results	$	14,829	$	(3,933	)	$	10,896	$	0.58	$	5,349	$	(1,228	)	$	4,121	$	0.22
Severance ⁽¹⁾		—		—			—		—		383		(80	)		303		0.02
Adjusted results	$	14,829	$	(3,933	)	$	10,896	$	0.58	$	5,732	$	(1,308	)	$	4,424	$	0.24

Weighted average common shares outstanding									18,729									18,745

Consolidated net sales decreased $45,179, or 12.9%, for the current six-month period ~~decreased by $8,995, or 5.0%, as compared~~in comparison to the prior six-month period primarily ~~due~~attributable to (i) the COVID-19 pandemic, (ii) lower ~~demand for our~~ nylon ~~products in the NACA region, (ii)~~sales volumes, (iii) lower average selling prices, ~~for our polyester products in connection with lower polyester raw material costs~~ and ~~(iii)~~(iv) unfavorable foreign currency translation. ~~However, PVA product~~

Consolidated sales ~~growth remained strong for the Asia Segment, despite~~volumes decreased 4.1%, primarily attributable to (i) the adverse impact of the COVID-19 pandemic on ~~that region’s production~~product demand and ~~distribution abilities.~~

~~Consolidated sales volumes increased 6.5%, primarily attributable to continued sales growth of REPREVE~~^®~~-branded products, principally Chip and staple fiber in the Asia Segment, partially offset by~~(ii) lower ~~yarn~~ sales in the Nylon Segment. ~~Sales~~However, the overall volume decrease was partially offset by the Brazil Segment, which was agile and responsive to COVID-19 pandemic-related demand fluctuations in the ~~Asia Segment continued to expand as our REPREVE~~^® ~~portfolio resonates with our brand partners that are focused on sustainable solutions.~~current six-month period and generated volume growth by capturing market share from competitors.

WeOnce the COVID-19 pandemic subsides, we believe ~~the~~ incremental revenue for the Polyester Segment will be generated ~~in connection with~~from our ~~recently completed trade petitions relating to~~ polyester textured yarn ~~is helping to offset suppressed demand from certain market sectors.~~trade petitions (i) completed in early calendar 2020 and (ii) recently filed. However, our Nylon Segment results continue to reflect the adverse impacts of (i) ~~two~~ customers shifting certain programs to overseas garment production ~~during calendar 2019~~ and (ii) the current global trend of declining demand for nylon socks, ladies’ hosiery and intimate apparel.

Consolidated average sales prices decreased ~~11.5%~~8.8%, primarily attributable to (i) ~~significant sales growth of Chip and staple fiber in the Asia Segment, which have lower average selling prices, (ii)~~ a decline in higher-priced nylon product sales, ~~and (iii)~~(ii) sales price declines associated with polyester raw material cost changes, and ~~global pricing pressures.~~(iii) unfavorable foreign currency translation.

~~PVA~~REPREVE^® Fiber products ~~at the end of~~for the current six-month period comprised ~~52%~~36% of consolidated net sales, up from ~~47%~~32% for the prior six-month period and 31% for fiscal 2019 and from 47% at the end of the prior period. Even with the relative growth in the proportion of PVA sales as a percentage of overall sales, 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.2020.

Gross profit for the current six-month period increased by ~~$1,592,~~$7,387, or ~~11.5%~~22.3%, as compared to the prior six-month period.

~~For~~ The COVID-19 pandemic adversely impacted sales and production volumes in our Polyester and Nylon Segments, driving comparably lower profitability in the ~~Polyester Segment, gross profit improved, primarily due to a more favorable sales mix and raw material cost environment~~U.S. during the ~~current period. For~~September 2020 quarter. However, the Brazil Segment outperformed the prior six-month period by capturing market share and maintaining strong conversion margin. The COVID-19 pandemic also adversely impacted sales volumes in the Asia Segment, gross profit increased as net sales increased but was partially offset by a greater mix of lower-priced product sales and the adverse impact of COVID-19 on that region’s production and distribution abilities.Segment.

SG&A increased from the prior six-month period, primarily due to higher ~~conversion margin from an improved sales mix and stabilized market pricing,~~accrued incentive compensation, partially offset by ~~unfavorable~~lower professional fees and travel and entertainment expenses in the current six-month period.

The current six-month period benefit for bad debts reflects general improvement in customer payment frequency following the adverse effects of the COVID-19 pandemic on customer health.

The current six-month period and the prior six-month period both reflect severance charges, along with foreign currency ~~translation effects as the BRL weakened against the USD during~~transaction losses of $606 and $30 in the current ~~period. For~~six-month period and in the ~~Nylon Segment, gross profit~~prior six-month period, respectively.

Interest expense, net decreased ~~primarily due to lower revenues and weaker fixed cost absorption in connection with two customers shifting certain programs to overseas garment production during calendar 2019.~~

~~SG&A changed insignificantly~~ from the prior six-month period to the current six-month period, primarily ~~as prior period SG&A benefited from compensation forfeitures due~~attributable to ~~executive officer departures in fiscal 2019.~~

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

There was no significant activity reflected in the current period for other operating (income) expense, net. The prior period primarily reflects executive officer severance charges and foreign currency transaction losses.

~~There was no significant change in interest expense, net from the prior period to the current period.~~a lower average debt principal. The components of consolidated interest expense, net were as follows:

	For the Three Months Ended						For the Six Months Ended
	March 29, 2020			March 31, 2019			December 27, 2020			December 29, 2019
Interest and fees on the ABL Facility	$	977		$	1,073		$	1,497		$	2,049
Other interest		223			183			180			240
Subtotal of interest on debt obligations		1,200			1,256			1,677			2,289
Other components of interest expense		31			—			27			69
Total interest expense		1,231			1,256			1,704			2,358
Interest income		(173	)		(149	)		(312	)		(422	)
Interest expense, net	$	1,058		$	1,107		$	1,392		$	1,936

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

~~The comparative increase~~On April 29, 2020, UNIFI sold its 34% non-controlling partnership interest in ~~earnings from PAL primarily reflects lower input costs and fixed costs.~~PAL. The comparative decrease in ~~earnings~~loss from ~~nylon joint ventures primarily~~PAL reflects ~~lower utilization~~a loss recorded in ~~connection~~the prior six-month period with ~~lower sales volumes for~~no results recorded in the ~~Nylon Segment.~~current six-month period.

	For the Three Months Ended						For the Six Months Ended
	March 29, 2020			March 31, 2019			December 27, 2020			December 29, 2019
Provision for income taxes	$	1,530		$	3,070		$	3,933		$	1,228
Effective tax rate		(3.9	)%		199.2	%		26.5	%		23.0	%

The ~~significant change~~increase in the effective tax rate from the prior six-month period to the current six-month period is primarily attributable to (i) an ~~impairment charge~~expense recorded in the current six-month period to increase the valuation allowance for ~~which UNIFI does not expect to realize~~deferred tax assets, (ii) a ~~future tax benefit, (ii) lower~~higher rate impact of U.S. tax on GILTI in the current six-month period, and (iii) ~~adjustments to enactment date~~a benefit for foreign tax ~~reform impacts negatively impacting~~credits in the prior six-month period. This increase is partially offset by a discrete benefit in the current six-month period for the retroactive GILTI high-tax exclusion for prior periods.

Net ~~loss~~income for the current six-month period was ~~$41,111,~~$10,896, or ~~$2.23~~$0.58 per share, compared to a net ~~loss~~income of ~~$1,529~~$4,121 or ~~$0.08~~$0.22 per share, for the prior six-month period. The ~~decrease~~change in net income was primarily attributable to ~~an impairment charge for the PAL Investment. Excluding the impairment charge, UNIFI achieved comparably~~ higher gross profit in the Brazil and ~~a more favorable effective tax rate~~Asia Segments in the current six-month period ~~while~~and a loss from PAL in the prior six-month period, ~~included executive officer severance charges and~~partially offset by unfavorable foreign currency ~~transaction losses.~~impacts.

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

Adjusted EBITDA increased from the prior six-month period to the current six-month period, primarily ~~as a result of (i)~~attributable to higher gross ~~profit in the current period and (ii) executive officer severance charges and foreign currency transaction losses in the prior period.~~

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

For the Three Months Ended March 29, 2020

For the Three Months Ended March 31, 2019

Pre-tax
(Loss) Income

Tax Impact

Net (Loss) Income

Basic EPS

Pre-tax Income

Tax Impact

Net Loss

Basic EPS

GAAP results

$
(39,581
)

$
(1,530
)

$
(41,111
)

$
(2.23
)

$
1,541

$
(3,070
)

$
(1,529
)

$
(0.08
)
Impairment of investment in
unconsolidated affiliate ⁽¹⁾

45,194

—

45,194

2.45

—

—

—

—

Adjusted results

$
5,613

$
(1,530
)

$
4,083

$
0.22

$
1,541

$
(3,070
)

$
(1,529
)

$
(0.08
)

Weighted average common shares outstanding

18,475

18,394

Adjusted Net Income (Loss) and Adjusted EPS improved from the prior period to the current period, primarily as a result of (i) higher gross profit in the current period, (ii) executive officer severance charges and foreign currency transaction losses in the prior period, (iii) higher earnings from PAL in the current period and (iv) a more favorable effective tax rate in the current period.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. The prior period 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, were as follows:

	For the Three Months Ended													For the Six Months Ended
	March 29, 2020					March 31, 2019								December 27, 2020					December 29, 2019
				% of Net Sales					% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	89,767			100.0	$	95,745			100.0		(6.2	)	$	145,772			100.0	$	171,445			100.0		(15.0	)
Cost of sales		82,735			92.2		90,941			95.0		(9.0	)		130,245			89.4		156,990			91.6		(17.0	)
Gross profit		7,032			7.8		4,804			5.0		46.4			15,527			10.6		14,455			8.4		7.4
Depreciation expense		4,301			4.8		3,858			4.0		11.5			8,873			6.1		8,224			4.8		7.9
Segment Profit	$	11,333			12.6	$	8,662			9.0		30.8		$	24,400			16.7	$	22,679			13.2		7.6

Segment net sales as a percentage of consolidated amounts		52.5	%				53.2	%							47.9	%				49.1	%
Segment Profit as a percentage of consolidated amounts		54.7	%				46.5	%							47.5	%				52.5	%

The decrease in net sales for the Polyester Segment from the prior six-month period to the current six-month period was primarily attributable to (i) the adverse impact of COVID-19 pandemic on market demand, (ii) lower average selling prices ~~in connection~~associated with lower polyester raw material costs, and moderate competitive pricing pressures. Textured yarn volume increases are recapturing market share from our recent trade actions, but such volume increases were offset by (i) weaker demand from certain customers in the industrial, automotive and apparel sectors and (ii)(iii) a higher proportion of Flake sales, which carry lower sales ~~of partially oriented yarn due to greater internal consumption for conversion to textured yarn.~~prices than other products.

The increase in Segment Profit for the Polyester Segment from the prior six-month period to the current six-month period was primarily attributable to a ~~more favorable~~better sales mix, stable conversion margin and ~~raw material~~manufacturing cost ~~environment.~~improvements, partially offset by lower sales volumes experienced in the September 2020 quarter in connection with the COVID-19 pandemic.

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~~Asia Segment, were as follows:

For the Three Months Ended

March 29, 2020

March 31, 2019

% of
Net Sales

% of
Net Sales

%
Change

Net sales

$
20,567

100.0

$
25,563

100.0

(19.5
)
Cost of sales

20,234

98.4

23,251

91.0

(13.0
)
Gross profit

333

1.6

2,312

9.0

(85.6
)
Depreciation expense

471

2.3

516

2.1

(8.7
)
Segment Profit

$
804

3.9

$
2,828

11.1

(71.6
)

Segment net sales as a percentage of
consolidated amounts

12.0
%

14.2
%

Segment Profit as a percentage of
consolidated amounts

3.9
%

15.2
%

	For the Six Months Ended
	December 27, 2020					December 29, 2019
				% of Net Sales					% of Net Sales		% Change
Net sales	$	82,415			100.0	$	93,875			100.0		(12.2	)
Cost of sales		71,309			86.5		84,076			89.6		(15.2	)
Gross profit		11,106			13.5		9,799			10.4		13.3
Depreciation expense		—			—		—			—		—
Segment Profit	$	11,106			13.5	$	9,799			10.4		13.3

Segment net sales as a percentage of consolidated amounts		27.1	%				26.9	%
Segment Profit as a percentage of consolidated amounts		21.6	%				22.7	%

The decrease in net sales for the ~~Nylon~~Asia Segment from the prior six-month period to the current six-month period was primarily attributable to ~~(i) two customers shifting~~ ~~certain programs~~ ~~to overseas garment production during calendar 2019~~overall lower sales volumes and ~~(ii)~~average selling prices driven by the adverse impacts of the COVID-19 pandemic, partially offset by the continued ~~demand declines in certain nylon product categories.~~momentum of REPREVE^®-branded products.

The RMB weighted average exchange rate was 6.75 RMB/USD and 7.03 RMB/USD for the current six-month period and the prior six-month period, respectively.

The ~~decrease~~increase in Segment Profit for the ~~Nylon~~Asia Segment from the prior six-month period to the current six-month period was primarily attributable to ~~lower~~raw material cost benefits achieved on certain product lines and sales ~~and weaker fixed cost absorption, as~~mix improvements, partially offset by the decrease in sales volumes described in the net sales analysis above.

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 Brazil Segment, were as follows:

	For the Three Months Ended													For the Six Months Ended
	March 29, 2020					March 31, 2019								December 27, 2020					December 29, 2019
				% of Net Sales					% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	21,060			100.0	$	25,110			100.0		(16.1	)	$	46,859			100.0	$	45,034			100.0		4.1
Cost of sales		17,644			83.8		22,334			88.9		(21.0	)		34,269			73.1		37,445			83.1		(8.5	)
Gross profit		3,416			16.2		2,776			11.1		23.1			12,590			26.9		7,589			16.9		65.9
Depreciation expense		421			2.0		420			1.6		0.2			751			1.6		732			1.6		2.6
Segment Profit	$	3,837			18.2	$	3,196			12.7		20.1		$	13,341			28.5	$	8,321			18.5		60.3

Segment net sales as a percentage of consolidated amounts		12.3	%				14.0	%							15.4	%				12.9	%
Segment Profit as a percentage of consolidated amounts		18.5	%				17.2	%							26.0	%				19.3	%

The ~~decrease~~increase in net sales for the Brazil Segment from the prior six-month period to the current six-month period was primarily attributable to an improvement in sales volumes due to the Brazil Segment’s ability to capture market share from competitors during the first six months of fiscal 2021, partially offset by unfavorable foreign currency translation ~~effects and lower selling prices due to lower raw material costs.~~effects.

The BRL weighted average exchange rate was ~~4.44~~5.40 BRL/USD and ~~3.77~~4.04 BRL/USD for the current six-month period and the prior six-month period, respectively.

Segment Profit for the prior period	$	3,196
Segment Profit for the prior six-month period				$	8,321
Increase in underlying margins		979			5,437
Increase in sales volumes		150			1,685
Unfavorable foreign currency translation effects		(488	)		(2,102	)
Segment Profit for the current period	$	3,837
Segment Profit for the current six-month period				$	13,341

The increase in Segment Profit for the Brazil Segment from the prior six-month period to the current six-month period was primarily attributable to ~~higher conversion margin from~~ an improved sales mix and ~~stabilized market pricing~~,conversion margin combined with higher sales volumes stemming from a temporarily improved competitive position in Brazil, partially offset by unfavorable foreign currency translation ~~effects as the BRL weakened significantly against the USD during the current period.~~effects.

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 Asia Segment were as follows:~~

For the Three Months Ended

March 29, 2020

March 31, 2019

% of
Net Sales

% of
Net Sales

%
Change

Net sales

$
38,621

100.0

$
32,571

100.0

18.6

Cost of sales

34,038

88.1

28,730

88.2

18.5

Gross profit

4,583

11.9

3,841

11.8

19.3

Depreciation expense

—

—

—

—

—

Segment Profit

$
4,583

11.9

$
3,841

11.8

19.3

Segment net sales as a percentage of
consolidated amounts

22.6
%

18.1
%

Segment Profit as a percentage of
consolidated amounts

22.1
%

20.6
%

~~The increase in net sales for the Asia Segment from the prior period to the current period was primarily attributable to higher sales volumes of REPREVE~~^®~~-branded products, primarily Chip and staple fiber.~~

~~The RMB weighted average exchange rate was 6.98 RMB/USD and 6.75 RMB/USD for the current period and the prior period, respectively.~~

~~The increase in Segment Profit for the Asia Segment from the prior period to the current period was primarily attributable to the increase in sales volumes described in the net sales analysis above.~~

~~Nine Months Ended March 29, 2020 Compared to Nine Months Ended March 31, 2019~~

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

For the Nine Months Ended

March 29, 2020

March 31, 2019

% of
Net Sales

% of
Net Sales

%
Change

Net sales

$
520,454

100.0

$
529,311

100.0

(1.7
)
Cost of sales

471,963

90.7

481,345

90.9

(1.9
)
Gross profit

48,491

9.3

47,966

9.1

1.1

SG&A

35,208

6.8

40,672

7.7

(13.4
)
Provision for bad debts

331

—

381

0.1

(13.1
)
Other operating expense, net

900

0.2

1,218

0.2

(26.1
)
Operating income

12,052

2.3

5,695

1.1

111.6

Interest expense, net

2,994

0.6

3,630

0.7

(17.5
)
Equity in earnings of unconsolidated affiliates

(1,904
)

(0.4
)

(3,126
)

(0.6
)

(39.1
)
Impairment of investment in unconsolidated affiliate

45,194

8.7

—

—

nm

Loss on extinguishment of debt

—

—

131

—

(100.0
)
(Loss) income before income taxes

(34,232
)

(6.6
)

5,060

1.0

nm

Provision for income taxes

2,758

0.5

3,606

0.7

(23.5
)
Net (loss) income

$
(36,990
)

(7.1
)

$
1,454

0.3

nm

Consolidated net sales for the current nine-month period were slightly lower in comparison to the prior nine-month period, as the impacts of (i) one fewer week of sales in the current nine-month period for our NACA operations, (ii) lower nylon sales volumes, (iii) lower average selling prices and (iv) unfavorable foreign currency translation were offset by the sales growth of PVA products and the Asia Segment.

~~Consolidated sales volumes increased 13.4%, primarily attributable to continued sales growth of REPREVE~~^®-branded products, principally Chip and staple fiber in the Asia Segment, partially offset by (i) one fewer week of sales in the current nine-month period for our NACA operations and (ii) lower yarn sales in the Nylon Segment. Sales in the Asia Segment continued to expand, despite the adverse impacts from COVID-19, as our REPREVE^® ~~portfolio resonates with our brand partners that are focused on sustainable solutions.~~

We believe the incremental revenue generated in connection with our recently completed trade petitions relating to polyester textured yarn is helping to offset suppressed demand from certain market sectors. However, our Nylon Segment results reflect (i) two customers shifting certain programs to overseas garment production during calendar 2019 and (ii) the current global trend of declining demand for nylon socks, ladies’ hosiery and intimate apparel.

Consolidated average sales prices decreased 15.1%, primarily attributable to (i) 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 lower polyester raw material costs.

PVA products at the end of the current nine-month period comprised 54% of consolidated net sales, up from 47% for fiscal 2019 and from 45% at the end of the prior nine-month period. Even with the relative growth in the proportion of PVA sales as a percentage of overall sales, 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.

~~Gross profit for the current nine-month period increased by $525, or 1.1%, as compared to the prior nine-month period.~~

For the Polyester Segment, gross profit improved, primarily due to an improved conversion margin in connection with the comparative impact of (i) a declining raw material cost environment during the current nine-month period and (ii) an unfavorable raw material cost environment in the prior nine-month period. For the Asia Segment, gross profit increased as net sales increased, but was partially offset by a greater mix of lower-priced product sales.

For the Brazil Segment, gross profit decreased primarily due to (i) market price declines (in connection with declining raw material costs) outpacing inventory turnover and (ii) unfavorable foreign currency translation effects as the BRL weakened against the USD. For the Nylon Segment, gross profit decreased primarily due to weaker fixed cost absorption in connection with two customers shifting certain programs to overseas garment production during calendar 2019.

SG&A decreased from the prior nine-month period to the current nine-month period primarily as a result of (i) lower professional fees and marketing expenses primarily due to cost reduction efforts undertaken during the fourth quarter of fiscal 2019 and (ii) lower compensation expenses in connection with fewer executive officers in the current nine-month period as compared to the prior nine-month period.

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

~~Other operating expense, net primarily reflects severance expenses recorded in both the current nine-month period and the prior nine-month period.~~

Interest expense, net decreased from the prior nine-month period to the current nine-month period, primarily as a result of lower market interest rates on our variable-rate debt and a more favorable pricing structure on the ABL Facility in connection with the 2018 Amendment.

As of March 29, 2020, UNIFI owned a 34% interest in PAL (the “PAL Investment”) and Parkdale, Incorporated (“Parkdale”) owned the majority 66% interest. In April 2020, UNIFI and Parkdale finalized negotiations to sell UNIFI’s PAL Investment to Parkdale for $60,000. UNIFI recorded an impairment charge of $45,194 to adjust the PAL Investment to fair value. The transaction closed on April 29, 2020 and UNIFI received $60,000 in cash.

~~The components of equity in 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 effective tax rate is subject to variation due to numerous factors, including variability in the amount of income before income taxes, 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 are greater when income before income taxes is lower.

The significant change in the effective tax rate from the prior period to the current period is primarily attributable to (i) an impairment charge in the current period for which UNIFI does not expect to realize a future tax benefit, (ii) lower U.S. tax on GILTI in the current period and (iii) adjustments to enactment date tax reform impacts negatively impacting the prior period.

Net loss for the current nine-month period was $(36,990), or $(2.00) per share, compared to net income of $1,454, or $0.08 per share, for the prior nine-month period. The decrease was primarily attributable to the impairment charge for the PAL Investment. Excluding the impairment charge, net income improved over the prior nine-month period primarily due to lower SG&A.

~~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 nine-month period to the current nine-month period, primarily as a result of lower SG&A.~~

For the Nine Months Ended March 29, 2020

For the Nine Months Ended March 31, 2019

Pre-tax
(Loss) Income

Tax Impact

Net (Loss) Income

Basic EPS

Pre-tax Income

Tax Impact

Net Income

Basic EPS

GAAP results

$
(34,232
)

$
(2,758
)

$
(36,990
)

$
(2.00
)

$
5,060

$
(3,606
)

$
1,454

$
0.08

Impairment of investment in
unconsolidated affiliate ⁽¹⁾

45,194

—

45,194

2.44

—

—

—

—

Adjusted results

$
10,962

$
(2,758
)

$
8,204

$
0.44

$
5,060

$
(3,606
)

$
1,454

$
0.08

Weighted average common shares outstanding

18,485

18,381

Adjusted Net Income and Adjusted EPS increased from the prior period to the current period, primarily as a result of (i) lower SG&A and (ii) a more favorable effective tax rate in the current nine-month period.

Following is a discussion and analysis of the revenue and profitability performance of UNIFI’s reportable segments for the current nine-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. The prior nine-month period 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 nine-month period amounts for the Polyester Segment, were as follows:

For the Nine Months Ended

March 29, 2020

March 31, 2019

% of
Net Sales

% of
Net Sales

%
Change

Net sales

$
261,212

100.0

$
281,665

100.0

(7.3
)
Cost of sales

239,725

91.8

265,748

94.3

(9.8
)
Gross profit

21,487

8.2

15,917

5.7

35.0

Depreciation expense

12,525

4.8

12,047

4.2

4.0

Segment Profit

$
34,012

13.0

$
27,964

9.9

21.6

Segment net sales as a percentage of
consolidated amounts

50.2
%

53.2
%

Segment Profit as a percentage of
consolidated amounts

53.2
%

44.4
%

The decrease in net sales for the Polyester Segment from the prior nine-month period to the current nine-month period was primarily attributable to (i) lower average selling prices associated with polyester raw material cost changes, (ii) one fewer week of sales in the current nine-month period and (iii) lower sales of Flake due to increased internal consumption.

The increase in Segment Profit for the Polyester Segment from the prior nine-month period to the current nine-month period was primarily attributable to an improved conversion margin in connection with the comparative impact of (i) a declining raw material cost environment during the current nine-month period and (ii) an unfavorable raw material cost environment in the prior nine-month period.

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

	For the Nine Months Ended													For the Six Months Ended
	March 29, 2020					March 31, 2019								December 27, 2020					December 29, 2019
				% of Net Sales					% of Net Sales		% Change						% of Net Sales					% of Net Sales		% Change
Net sales	$	57,853			100.0	$	76,159			100.0		(24.0	)	$	27,037			100.0	$	37,286			100.0		(27.5	)
Cost of sales		56,296			97.3		69,671			91.5		(19.2	)		25,977			96.1		36,062			96.7		(28.0	)
Gross profit		1,557			2.7		6,488			8.5		(76.0	)		1,060			3.9		1,224			3.3		(13.4	)
Depreciation expense		1,465			2.5		1,576			2.1		(7.0	)		880			3.3		994			2.7		(11.5	)
Segment Profit	$	3,022			5.2	$	8,064			10.6		(62.5	)	$	1,940			7.2	$	2,218			6.0		(12.5	)

Segment net sales as a percentage of consolidated amounts		11.1	%				14.4	%							8.9	%				10.7	%
Segment Profit as a percentage of consolidated amounts		4.7	%				12.8	%							3.8	%				5.1	%

The decrease in net sales for the Nylon Segment from the prior ~~nine-month~~six-month period to the current ~~nine-month~~six-month period was primarily attributable to (i) ~~continued~~ demand declines in ~~certain nylon product categories,~~connection with the COVID-19 pandemic and (ii) ~~two customers~~a customer shifting certain programs to overseas garment production ~~during calendar 2019 and (iii) an additional week of sales in~~subsequent to the prior ~~nine-month period.~~six-month period, contributing to (iii) a weaker sales mix following declines in hosiery demand.

The decrease in Segment Profit for the Nylon Segment from the prior ~~nine-month~~six-month period to the current ~~nine-month~~six-month period was primarily attributable to lower sales, ~~and weaker fixed cost absorption,~~ as described in the net sales analysis above.

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

For the Nine Months Ended

March 29, 2020

March 31, 2019

% of
Net Sales

% of
Net Sales

%
Change

Net sales

$
66,094

100.0

$
76,257

100.0

(13.3
)
Cost of sales

55,089

83.3

62,654

82.2

(12.1
)
Gross profit

11,005

16.7

13,603

17.8

(19.1
)
Depreciation expense

1,153

1.7

1,146

1.5

0.6

Segment Profit

$
12,158

18.4

$
14,749

19.3

(17.6
)

Segment net sales as a percentage of
consolidated amounts

12.7
%

14.4
%

Segment Profit as a percentage of
consolidated amounts

19.0
%

23.4
%

The decrease in net sales for the Brazil Segment from the prior nine-month period to the current nine-month period was primarily attributable to unfavorable foreign currency translation effects, along with lower selling prices associated with declining raw material costs and competitive pricing pressures.

~~The BRL weighted average exchange rate was 4.17 BRL/USD and 3.85 BRL/USD for the current nine-month period and the prior nine-month period, respectively.~~

The decrease in Segment Profit for the Brazil Segment from the prior nine-month period to the current nine-month period was primarily attributable to competitive pricing pressures during a declining raw material cost environment and unfavorable foreign currency translation. For the Brazil Segment, declining raw material costs place immediate downward market pressure on selling prices and, 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 nine-month period amounts for the Asia Segment were as follows:~~

For the Nine Months Ended

March 29, 2020

March 31, 2019

% of
Net Sales

% of
Net Sales

%
Change

Net sales

$
132,496

100.0

$
92,014

100.0

44.0

Cost of sales

118,114

89.1

80,317

87.3

47.1

Gross profit

14,382

10.9

11,697

12.7

23.0

Depreciation expense

—

—

—

—

—

Segment Profit

$
14,382

10.9

$
11,697

12.7

23.0

Segment net sales as a percentage of
consolidated amounts

25.5
%

17.4
%

Segment Profit as a percentage of
consolidated amounts

22.5
%

18.6
%

~~The increase in net sales for the Asia Segment from the prior nine-month period to the current nine-month period was primarily attributable to higher sales volumes of REPREVE~~^®-branded products, primarily Chip and staple fiber, partially offset by (i) the impact of lower-priced Chip and staple fiber sales on average selling price and sales mix and (ii) unfavorable foreign currency translation effects due to the comparable weakening of the RMB.

~~The RMB weighted average exchange rate was 7.02 RMB/USD and 6.82 RMB/USD for the current nine-month period and the prior nine-month period, respectively.~~

The increase in Segment Profit for the Asia Segment from the prior nine-month period to the current nine-month period was primarily attributable to the increase in sales volumes and related sales mix change described in the net sales analysis above.

UNIFI’s primary capital requirements are for working capital, capital expenditures, debt service and share repurchases. UNIFI’s primary sources of capital are cash generated from operations and borrowings available under the ABL Revolver of its credit facility. For the current ~~nine-month~~six-month period, cash generated from operations was ~~$32,105,~~$19,726, and, at ~~March 29,~~December 27, 2020, excess availability under the ABL Revolver was ~~$47,793.~~ $56,039.

As of ~~March 29,~~December 27, 2020, all of UNIFI’s ~~$133,711~~$92,896 of debt obligations were guaranteed by certain of its domestic operating subsidiaries, while ~~nearly all~~40% of UNIFI’s cash and cash equivalents were held by its foreign subsidiaries. Cash and cash equivalents held by foreign subsidiaries may not be presently available to fund UNIFI’s domestic capital requirements, including its domestic debt obligations. UNIFI employs a variety of 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 ~~March 29,~~December 27, 2020 for domestic operations compared to foreign operations:

	Domestic		Foreign		Total		Domestic		Foreign		Total
Cash and cash equivalents	$	347	$	33,046	$	33,393	$	50,180	$	33,141	$	83,321
Borrowings available under financing arrangements		47,793		—		47,793		56,039		—		56,039
Liquidity	$	48,140	$	33,046	$	81,186	$	106,219	$	33,141	$	139,360

Working capital	$	87,262	$	97,848	$	185,110	$	105,791	$	110,756	$	216,547
Total debt obligations	$	133,711	$	—	$	133,711	$	92,896	$	—	$	92,896

Because global economic activity slowed within a short period of time, the COVID-19 pandemic ~~has~~ introduced liquidity risk that was not present prior to calendar 2020. UNIFI believes that aggressive and prudent actions are necessary to preserve liquidity in the current economic environment, which is pressured by ~~significant~~ global demand declines that began in ~~the current period and which are expected to continue for the remainder of calendar 2020 and potentially beyond.~~March 2020. Accordingly, to minimize ~~further~~the disruption to operations that could result from outbreaks among UNIFI employees, UNIFI has prioritized health and safety measures that include ~~suspending~~restricting travel and group meetings, enforcing social distancing and healthy habits, increased sanitation and disinfection and increased wellness monitoring. Additionally, the following aid in reducing risk and ensuring adequate cash is available to fund ongoing operations and obligations:

While we currently expect ~~these measures~~our significant cash balances and available borrowings to provide adequate liquidity ~~under~~during the ~~currently anticipated pressures of the~~on-going COVID-19 pandemic, should global demand and economic activity remain subdued beyond the ~~short term,~~short-term, UNIFI maintains the ability to (i) ~~utilize~~pursue aid and lending programs from governmental entities, (ii) seek additional credit or financing arrangements or extensions of existing arrangements, and (iii) ~~explore~~implement further cost reduction initiatives to preserve cash and secure the longevity of the business and operations. ~~Further, we do not currently expect our cost~~

The following further describe the current strength of orUNIFI’s liquidity position and access to capital resources:

Lastly, the Coronavirus Aid, Relief, and ~~funding sources~~Economic Security Act (“CARES Act”) allowed UNIFI to ~~materially change as~~defer certain employer payroll tax payments to future periods, extend utilization of a ~~result~~net operating loss carryback, and attain certain employee retention credits, all of ~~the COVID-19 pandemic.~~which are not material to our short- and long-term liquidity position. We have not applied for or obtained any other material federal or state assistance.

~~On December 18, 2018, Unifi, Inc. and certain of its subsidiaries entered into~~The following table presents the ~~2018 Amendment, which amended the Credit Agreement. The Credit Agreement provides~~total balances outstanding for ~~the ABL Facility, which is a $200,000 senior secured credit facility that includes the $100,000 ABL Revolver~~UNIFI’s debt obligations, their scheduled maturity dates and the ~~ABL Term Loan, which can be reset up~~weighted average interest rates for borrowings as well as the applicable current portion of long-term debt:

		Weighted Average
	Scheduled	Interest Rate as of	Principal Amounts as of
	Maturity Date	December 27, 2020	December 27, 2020			June 28, 2020
ABL Revolver	December 2023	0.0%	$	—		$	—
ABL Term Loan ⁽¹⁾	December 2023	3.3%		82,500			87,500
Finance lease obligations	(2)	3.6%		10,396			11,381
Total debt				92,896			98,881
Current ABL Term Loan				(10,000	)		(10,000	)
Current portion of finance lease obligations				(3,683	)		(3,563	)
Unamortized debt issuance costs				(592	)		(711	)
Total long-term debt			$	78,621		$	84,607

(2) Scheduled maturity dates for finance lease obligations range from May 2022 to ~~a maximum amount of $100,000, once per fiscal year, if certain conditions are met. The ABL Facility has a maturity date~~November 2027.

The 2018 Amendment made the following changes to the Credit Agreement, among others: (i) extended the 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.

~~In connection and concurrent with the sale of UNIFI’s 34% interest in PAL on April 29, 2020,~~ UNIFI entered into the Fourth Amendment to Amended and Restated Credit Agreement (“Fourth Amendment”). The Fourth Amendment among other things: (i) revised the definition of permitted dispositions within the Credit Agreement to include the sale by Unifi Manufacturing, Inc. of its equity interest in PAL so long as the aggregate net cash proceeds received equaled or exceeded $60,000 and such sale occurred on or before May 15, 2020; (ii) revised the terms of the Credit Agreement to allow (a) the net cash proceeds from the sale of PAL to be applied to the outstanding principal amount of the ABL Revolver until paid in full and (b) remaining net cash proceeds held by UNIFI, so long as certain conditions are met; and (iii) revised the terms of the Credit Agreement to allow the lenders to make changes to the benchmarkcurrently maintains three interest rate ~~without further amendment should~~swaps that fix LIBOR ~~temporarily or permanently cease~~at approximately 1.9% on $75,000 of variable-rate debt. Such swaps are scheduled to ~~exist and a transition to a new benchmark interest rate such as the Secured Overnight Financing Rate (“SOFR”) be required for future ABL facility borrowings.~~

UNIFI currently utilizes variable-rate borrowings under the ABL Facility that are made with reference to USD LIBOR Rate Loans and is party to LIBOR-based interest rate swaps. Management recognizes the potential challenges posed by the previously announced termination of LIBOR. The Credit Agreement, as amended, includes fallback language to allow for a conversion of LIBOR Rate Loans to a mutually agreed upon alternative rate of interest, such as the Secured Overnight Financing Rate.terminate in May 2022. 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 Trigger Level (as defined in the Credit Agreement), a financial covenant requiring the Loan Parties to maintain a Fixed Charge Coverage Ratio on a quarterly basis of at least 1.05 to 1.00 becomes effective. The Trigger Level as of March 29, 2020 was $23,750. In addition, the ABL Facility contains restrictions on particular payments and investments, including certain restrictions on share repurchases and the payment of 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 LIBOR plus an Applicable Margin of 1.25% to 1.75%, or the Base Rate (as defined below) plus an Applicable Margin of 0.25% to 0.75%, with interest currently being paid on a monthly basis. The Applicable Margin is based on (i) the excess availability under the ABL Revolver and (ii) the consolidated leverage ratio, calculated as of the end of each fiscal quarter. The Base Rate means the greater of (a) the prime lending rate as publicly announced from time to time by Wells Fargo Bank, National Association, (b) the Federal Funds Rate (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 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 March 29, 2020, UNIFI was in compliance with all financial covenants in the Credit Agreement and the excess availability under the ABL Revolver was $47,793. At March 29, 2020, the Fixed Charge Coverage Ratio was 0.94 to 1.00 and UNIFI had $200 of standby letters of credit, none of which 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

Scheduled

Interest Rate as of

Principal Amounts as of

Maturity Date

March 29, 2020

March 29, 2020

June 30, 2019

ABL Revolver

December 2023

2.2%

$
30,900

$
19,400

ABL Term Loan ⁽¹⁾

December 2023

3.1%

90,000

97,500

Finance lease obligations

(2)

3.6%

12,811

11,118

Total debt

133,711

128,018

Current ABL Term Loan

(10,000
)

(10,000
)
Current portion of finance lease obligations

(4,112
)

(5,519
)
Unamortized debt issuance costs

(772
)

(958
)
Total long-term debt

$
118,827

$
111,541

~~(2) Scheduled maturity dates for finance lease obligations range from June 2020 to November 2027, as further outlined in Note 4, “Leases.”~~

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 ~~2020,~~2021, the following four fiscal years and thereafter:

	Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Thereafter		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Fiscal 2025		Thereafter
ABL Revolver	$	—	$	—	$	—	$	—	$	30,900	$	—	$	—	$	—	$	—	$	—	$	—	$	—
ABL Term Loan		2,500		10,000		10,000		10,000		57,500		—		5,000		10,000		10,000		57,500		—		—
Finance lease obligations		1,429		3,563		3,388		1,094		1,132		2,205		1,921		3,545		1,257		1,301		1,195		1,177
Total	$	3,929	$	13,563	$	13,388	$	11,094	$	89,532	$	2,205	$	6,921	$	13,545	$	11,257	$	58,801	$	1,195	$	1,177

	March 29, 2020		June 30, 2019		December 27, 2020		June 28, 2020
Long-term debt	$	118,827	$	111,541	$	78,621	$	84,607
Current portion of long-term debt		14,112		15,519		13,683		13,563
Unamortized debt issuance costs		772		958		592		711
Debt principal		133,711		128,018		92,896		98,881
Less: cash and cash equivalents		33,393		22,228		83,321		75,267
Net Debt	$	100,318	$	105,790	$	9,575	$	23,614

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

	March 29, 2020			June 30, 2019			December 27, 2020			June 28, 2020
Cash and cash equivalents	$	33,393		$	22,228		$	83,321		$	75,267
Receivables, net		86,376			88,884			83,124			53,726
Inventories		124,146			133,781			111,489			109,704
Income taxes receivable		589			4,373			9,283			4,033
Other current assets		18,477			16,356			10,282			11,763
Accounts payable		(40,862	)		(41,796	)		(38,786	)		(25,610	)
Accrued expenses		(15,347	)		(16,849	)		(20,331	)		(13,689	)
Other current liabilities		(21,662	)		(16,088	)		(21,835	)		(15,695	)
Working capital	$	185,110		$	190,889		$	216,547		$	199,499

Less: Cash and cash equivalents		(33,393	)		(22,228	)		(83,321	)		(75,267	)
Less: Income taxes receivable		(589	)		(4,373	)		(9,283	)		(4,033	)
Less: Other current liabilities		21,662			16,088			21,835			15,695
Adjusted Working Capital	$	172,790		$	180,376		$	145,778		$	135,894

Working capital ~~decreased~~increased from ~~$190,889~~$199,499 as of June ~~30, 2019~~28, 2020 to ~~$185,110~~$216,547 as of ~~March 29,~~December 27, 2020, while Adjusted Working Capital ~~decreased~~increased from ~~$180,376~~$135,894 to ~~$172,790.~~$145,778.

The increase in cash and cash equivalents was driven by the operating cash flows generated by our ~~foreign~~global operations. The ~~decrease~~increase in receivables, net was primarily attributable to increased sales in the ~~timing of cash receipts.~~current six-month period following low sales activity in the June 2020 quarter due to significantly suppressed demand levels caused by the COVID-19 pandemic. The ~~decrease~~increase in inventories was ~~primarily attributable to the impact of lower raw material costs, partially offset by an increase in inventory units.~~insignificant. The decrease ~~in income taxes receivable was due to the timing and magnitude of tax impacts recognized in the current period, primarily relating to changes in deferred taxes. The increase~~ in other current assets was primarily due to the amount and timing of contract assets revenue recognition. The ~~decrease~~increase in accounts payable was ~~primarily attributable to~~consistent with the ~~timing of purchase~~increase in sales and ~~payment~~production activity. The ~~decrease~~increase in accrued expenses was primarily attributable to ~~(i) the timing of payroll and variable compensation accruals and payments and (ii) severance payments made during fiscal 2020, partially offset by~~ an increase in deferred revenue for increased sales activity in the Asia ~~Segment. The increase in other current liabilities primarily reflects an increase in income taxes payable due to the timing~~Segment and ~~magnitude of tax impacts recognized~~higher incentive compensation accruals in the current six-month period.

During the current ~~nine-month~~six-month period, UNIFI invested ~~$14,971~~$6,035 in capital projects, primarily relating to (i) further improvements in production capabilities and technology enhancements in the Americas, (ii) eAFK Evo texturing machinery, and ~~(ii)~~(iii) 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.

For the remainder of fiscal ~~2020 and in response to the adverse liquidity impacts of COVID-19,~~2021, we ~~have reduced our expected capital project outlay for fiscal 2020. We now~~ expect to invest approximately ~~$4,000~~$18,000 in capital projects ~~during the fourth quarter of fiscal 2020~~ for an aggregate annual estimate of approximately ~~$19,000, with a priority on safety~~$24,000, to include (i) making further improvements in production capabilities and technology enhancements in the Americas, (ii) continuing the purchase and installation of new eAFK Evo texturing machines, and (iii) annual maintenance capital ~~expenditures to allow continued efficient production.~~expenditures.

The total amount ultimately invested for fiscal ~~2020~~2021 could be more or less than the currently estimated amount depending on the timing and scale of contemplated initiatives and is expected to be funded primarily by ~~a combination of~~existing cash ~~flows from operations~~ and ~~borrowings under the ABL Revolver.~~cash equivalents. UNIFI expects recent and future capital projects to provide benefits to future profitability. The additional assets from these capital projects consist primarily of machinery and equipment.

On October 31, 2018, the Board 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 ~~March 29,~~December 27, 2020, UNIFI repurchased a total of 84 shares, at an average price of $23.72 (for a total of $1,994 inclusive of commission costs) pursuant to

the 2018 SRP. $48,008 remains available under the 2018 SRP as of ~~March 29,~~December 27, 2020.

UNIFI has met its historical liquidity requirements for working capital, capital expenditures, debt service requirements and other operating needs from its cash flows from operations and available borrowings. UNIFI believes that its existing cash balances, cash provided by operating activities 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, expansion of our foreign operations may require cash sourced from our domestic subsidiaries.

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

For the Nine Months Ended

March 29, 2020

March 31, 2019

Net (loss) income

$
(36,990
)

$
1,454

Equity in earnings of unconsolidated affiliates

(1,904
)

(3,126
)
Depreciation and amortization expense

17,685

17,242

Impairment of investment in unconsolidated affiliate

45,194

—

Non-cash compensation expense

2,510

2,758

Deferred income taxes

(10,029
)

(190
)
Subtotal

16,466

18,138

Distributions received from unconsolidated affiliates

10,437

1,380

Change in inventories

2,126

(13,409
)
Other changes in assets and liabilities

3,076

(7,626
)
Net cash provided by (used in) operating activities

$
32,105

$
(1,517
)

	For the Six Months Ended
	December 27, 2020			December 29, 2019
Net income	$	10,896		$	4,121
Equity in (earnings) loss of unconsolidated affiliates		(223	)		1,622
Depreciation and amortization expense		12,187			11,610
Non-cash compensation expense		1,816			1,837
Deferred income taxes		(1,700	)		(878	)
Subtotal		22,976			18,312

Distributions received from unconsolidated affiliates		—			10,437
Other changes		(3,250	)		(114	)
Net cash provided by operating activities	$	19,726		$	28,635

The ~~increase~~decrease in net cash provided by ~~(used in)~~ operating activities from the prior ~~nine-month~~six-month period was primarily due to ~~(i)~~ $10,437 of distributions received from PAL in September 2019, while higher Adjusted EBITDA was partially offset by an increase in Adjusted Working Capital in the current ~~nine-month~~six-month period, ~~and (ii) the impact on working capital of a more favorable raw material cost environment.~~both commensurate with business recovery since June 2020.

~~UNIFI utilized $14,936 for investing activities and utilized $3,092 for financing activities during the current nine-month period.~~Flows

Investing activities include ~~$14,971~~$6,035 for capital expenditures, which primarily relate to ongoing maintenance capital expenditures along with production capabilities and technology enhancements in the Americas.

Financing activities include ~~net~~ payments against the ABL ~~Facility~~Term Loan and finance leases during fiscal ~~2020 and $1,994 for share repurchases.~~2021.

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.

~~Except for the finance leases that commenced during fiscal 2020, as disclosed in Note 4. “Leases,” there~~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 ~~2019~~2020 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 estimate from quarter to quarter could materially impact the presentation of the financial statements. UNIFI’s critical accounting policies are discussed in the ~~2019~~2020 Form 10-K. There were no material changes to these policies during the current ~~nine-month~~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 ~~March 29,~~December 27, 2020, UNIFI had borrowings under its ABL Revolver and ABL Term Loan that totaled ~~$120,900~~$82,500 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 ~~March 29,~~December 27, 2020 would result in an increase in annual interest expense of less than ~~$300.~~$100.

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 ~~March~~ 29,December 27, 2020, 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 value at times during fiscal 2021, 2020 and 2019, which generated foreign currency translation losses in certain fiscal quarters. Discussion and analysis surrounding the impact of 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 ~~March 29,~~December 27, 2020, UNIFI’s ~~foreign~~ subsidiaries outside the U.S., whose functional currency is other than the USD, held approximately ~~18.5%~~22.4% 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 ~~March 29,~~December 27, 2020, ~~$27,398,~~$29,268, or ~~82.0%~~35.1%, of UNIFI’s cash and cash equivalents ~~was~~were held outside the U.S., of which ~~$9,742~~$12,866 was held in ~~USD, $6,318~~USDs, $6,245 was held in RMB and ~~$11,150~~$9,730 was held in BRL. Approximately ~~$5,400~~$3,700 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 related 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. UNIFI attempts to pass on to its customers increases in raw material costs but due to market pressures, this is not always possible. When price increases can be implemented, there is typically a time lag that adversely affects UNIFI and its margins during one or more 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 fiscal 2019 and 2018, UNIFI operated in a predominantly increasing raw material cost environment. UNIFI believes those higher costs were primarily a result of volatility in the crude oil markets, along with periods of supply and demand constraints for certain polyester feedstock.

During fiscal 2020 and the first ~~nine~~six months of fiscal ~~2020,~~2021, UNIFI has experienced a predominantly favorable, declining raw material cost ~~environment, in contrast to a generally elevated raw material cost environment in fiscal 2019 and 2018.~~environment. However, our raw material costs remain subject to the volatility described above and, should raw material costs ~~spike~~increase unexpectedly, UNIFI’s results of operations and 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 ~~March 29,~~December 27, 2020, 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 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 ~~March 29,~~December 27, 2020 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.

~~In addition to the risk factors previously disclosed in the 2019 Form 10-K, the following risk factor was identified:~~

Catastrophic or extraordinary events, including epidemics or pandemics such as the recent coronavirus disease (“COVID-19”), could disrupt global economic activity and/or demand and negatively impact our financial performance and results of operations.

~~In March 2020, the World Health Organization declared the current coronavirus disease (“COVID-19”) outbreak a global pandemic.~~

Global measures taken to reduce the spread of COVID-19 have generated a significant decline in global business activity in the immediate term that may have a lasting impact on the global economy and consumer demand. The duration of the COVID-19 pandemic and its related impact on our businesses are currently unknown. UNIFI anticipates that the global disruption caused by COVID-19 has impacted and will continue to impact overall global demand and business activity negatively, especially for textiles in both the Americas and Asia.

Significant restoration of consumer spending and retail activity levels will be critical to both our end-markets and an economic rebound. UNIFI anticipates a rebound in global economic activity when COVID-19 is demonstrably contained. The business impact of such a rebound will depend on the pace and effectiveness of the containment efforts deployed by various national, state, and local governments, along with the speed and effectiveness with which potential treatment and vaccine methods are deployed.

UNIFI will continue to monitor the COVID-19 pandemic by prioritizing health and safety while delivering on customer demand, but we expect an adverse impact to the remainder of our fiscal 2020 and the first half of our fiscal 2021 based on the present factors and conditions.

(c) The following table summarizes UNIFI’s purchases of its common stock during the fiscal quarter ended March 29, 2020, all of which purchases were made under the 2018 SRP approved by the Board on October 31, 2018, under which UNIFI is authorized to acquire up to $50,000 of common stock. 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.

Repurchases are subject to applicable limitations and requirements set forth in the ABL Facility. For additional information, including information regarding limitations on payment of dividends and share repurchases, s~~ee Note 13,~~ ~~“Long-Term Debt” contained in UNIFI’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019.~~

Exhibit No.		Description

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

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

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

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~~⁺101.INS		~~The following financial information (unaudited) from Unifi, Inc.’s Quarterly Report on Form 10-Q for~~Inline XBRL Instance Document – the ~~quarter ended March 29, 2020, filed May 7, 2020, formatted~~instance document does not appear in ~~eXtensible Business Reporting Language: (i)~~ the ~~Condensed Consolidated Balance Sheets, (ii)~~Interactive Data File because XBRL tags are embedded within the ~~Condensed Consolidated Statements of Operations, (iii)~~Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Condensed Consolidated Statements of Shareholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.Inline XBRL document)

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

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

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

PART I—FINANCIAL INFORMATION
		Page

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of ~~March 29,~~December 27, 2020 and June ~~30, 2019~~28, 2020	1

	Condensed Consolidated Statements of ~~Operations~~Income for the Three Months and ~~Nine~~Six Months Ended ~~March 29,~~December 27, 2020 and ~~March 31,~~December 29, 2019	2

	Condensed Consolidated Statements of Comprehensive ~~Loss~~Income for the Three Months and ~~Nine~~Six Months Ended ~~March 29,~~December 27, 2020 and ~~March 31, 201~~December 29, 20199	3

	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months and ~~Nine~~Six Months Ended ~~March 29,~~December 27, 2020 and ~~March 31,~~December 29, 2019	4

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~March 29,~~December 27, 2020 and ~~March 31,~~December 29, 2019	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2017

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3834

Item 4.	Controls and Procedures	3835

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	39

~~Item 1A.~~	~~Risk Factors~~	3936

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3936

Item 6.	Exhibits	4036

	Signatures	4137

	For the Nine
	Months Ended
Other Information	March 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases	$	2,104
Financing cash flows used by finance leases	$	4,606
Non-cash activities:
Leased assets obtained in exchange for new operating lease liabilities	$	175
Leased assets obtained in exchange for new finance lease liabilities	$	6,301

~~Weighted Average Remaining Lease Term and Discount Rate~~	~~March 29, 2020~~
~~Weighted average remaining lease term (years):~~
~~Operating leases~~		~~4.2~~
~~Finance leases~~		~~4.2~~
~~Weighted average discount rate (percentage):~~
~~Operating leases~~		~~3.8~~	%
~~Finance leases~~		~~3.6~~	%

Maturity of Lease Liabilities	Finance Leases			Operating Leases
Fiscal 2020	$	1,560		$	495
Fiscal 2021		3,989			1,870
Fiscal 2022		3,684			1,425
Fiscal 2023		1,260			1,231
Fiscal 2024		1,307			1,086
Fiscal years thereafter		2,625			628
Total minimum lease payments	$	14,425		$	6,735
Less estimated executory costs		(588	)		—
Less imputed interest		(1,026	)		(545	)
Present value of net minimum lease payments		12,811			6,190
Less current portion of lease obligations		(4,112	)		(1,709	)
Long-term portion of lease obligations	$	8,699		$	4,481


(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	☐

Classification	Balance Sheet Location	March 29, 2020
Lease Assets
Operating lease assets	Operating lease assets	$	6,084
Finance lease assets	Property, plant & equipment, net		23,257
Total lease assets		$	29,341

Lease Liabilities
Current operating lease liabilities	Current operating lease liabilities	$	1,709
Current finance lease liabilities	Current portion of long-term debt		4,112
Total current lease liabilities		$	5,821

Non-current operating lease liabilities	Non-current operating lease liabilities	$	4,481
Non-current finance lease liabilities	Long-term debt		8,699
Total non-current lease liabilities		$	13,180

Total lease liabilities		$	19,001

	For the Three		For the Nine
	Months Ended		Months Ended
Lease Cost	March 29, 2020		March 29, 2020
Operating lease cost	$	507	$	2,104
Variable lease cost		158		355
Finance lease cost:
Amortization of lease assets		669		1,874
Interest on lease liabilities		126		327
Short-term lease cost		316		863
Total lease cost	$	1,776	$	5,523

	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

	December 27, 2020			June 28, 2020
Raw materials	$	42,636		$	42,758
Supplies		9,561			9,294
Work in process		6,432			6,267
Finished goods		57,061			55,609
Gross inventories		115,690			113,928
Net realizable value adjustment		(4,201	)		(4,224	)
Total inventories	$	111,489		$	109,704

Authorized under the ~~Amended 2013~~2020 Plan	~~1,250~~850
Plus: Awards expired, forfeited or otherwise terminated unexercised	~~156~~—
Less: Awards granted to employees	(~~425~~75	)
Less: Awards granted to non-employee directors	~~(117~~—	)
Available for issuance under the ~~Amended 2013~~2020 Plan	~~864~~775

	Foreign Currency Translation Adjustments			Changes in Interest Rate Swaps			Accumulated Other Comprehensive Loss
Balance at June 30, 2019	$	(42,729	)	$	(500	)	$	(43,229	)
Other comprehensive loss		(20,350	)		(1,488	)		(21,838	)
Balance at March 29, 2020	$	(63,079	)	$	(1,988	)	$	(65,067	)

Underlying equity as of March 29, 2020	$	119,926
Initial excess capital contributions		53,363
Impairment charge recorded by UNIFI in fiscal 2007		(74,106	)
Anti-trust lawsuit against PAL in which UNIFI did not participate		2,652
Impairment charge recorded by UNIFI in fiscal 2020		(45,194	)
Investment as of March 29, 2020	$	56,641

	March 29, 2020		June 30, 2019
Salem Leasing Corporation (included within accounts payable)	$	403	$	634
Salem Leasing Corporation (operating lease obligations)		1,578		—
Salem Leasing Corporation (finance lease obligations)		6,765		806
Total related party payables	$	8,746	$	1,440

Net sales for the prior period	$	82,750
Net change in average selling price and sales mix		(5,128	)
Decrease in sales volumes		(926	)
Net sales for the current period	$	76,696

Segment Profit for the prior period	$	10,843
Net increase in underlying margins		4,643
Decrease in sales volumes		(121	)
Segment Profit for the current period	$	15,365

Net sales for the prior period	$	47,918
Decrease in sales volumes of Chip and staple fiber		(5,090	)
Change in average selling price and sales mix		(4,180	)
Net increase in sales volumes of certain other products		3,034
Favorable foreign currency translation effects		3,010
Net sales for the current period	$	44,692

Segment Profit for the prior period	$	5,517
Change in underlying margins and sales mix		1,177
Favorable foreign currency translation effects		343
Decrease in sales volumes		(509	)
Segment Profit for the current period	$	6,528

	For the Three Months Ended March 29, 2020												For the Three Months Ended March 31, 2019
	Pre-tax (Loss) Income			Tax Impact			Net (Loss) Income			Basic EPS			Pre-tax Income		Tax Impact			Net Loss			Basic EPS
GAAP results	$	(39,581	)	$	(1,530	)	$	(41,111	)	$	(2.23	)	$	1,541	$	(3,070	)	$	(1,529	)	$	(0.08	)
Impairment of investment in unconsolidated affiliate ⁽¹⁾		45,194			—			45,194			2.45			—		—			—			—
Adjusted results	$	5,613		$	(1,530	)	$	4,083		$	0.22		$	1,541	$	(3,070	)	$	(1,529	)	$	(0.08	)

Weighted average common shares outstanding											18,475											18,394

Net sales for the prior six-month period	$	171,445
Net change in average selling price and sales mix		(13,377	)
Decrease in sales volumes		(12,296	)
Net sales for the current six-month period	$	145,772

Net sales for the prior period	$	25,563
Decrease in underlying sales volumes		(4,093	)
Net change in average selling price and sales mix		(903	)
Net sales for the current period	$	20,567

Segment Profit for the prior period	$	2,828
Net decrease in underlying margins		(1,571	)
Decrease in underlying sales volumes		(453	)
Segment Profit for the current period	$	804

Net sales for the prior period	$	32,571
Increase in sales volumes of Chip and staple fiber		6,315
Change in average selling price and sales mix		1,161
Unfavorable foreign currency translation effects		(1,044	)
Change in sales volumes of other PVA products		(382	)
Net sales for the current period	$	38,621

Segment Profit for the prior period	$	3,841
Increase in underlying margins and sales mix		815
Increase in sales volumes of Chip and staple fiber		448
Change in sales volumes of other PVA products		(354	)
Unfavorable foreign currency translation effects		(167	)
Segment Profit for the current period	$	4,583

SG&A for the prior nine-month period	$	40,672
Decrease in professional fees and marketing expenses		(2,699	)
Decrease in salaries and fringe expenses		(2,159	)
Impact of an additional week in fiscal 2019		(841	)
Change in cash-based incentive compensation expense		1,932
Other net decreases		(1,697	)
SG&A for the current nine-month period	$	35,208

Net sales for the prior nine-month period	$	281,665
Net change in average selling price and sales mix		(9,311	)
Decrease due to an additional week of sales in fiscal 2019		(6,868	)
Decrease in underlying sales volumes		(4,274	)
Net sales for the current nine-month period	$	261,212

Segment Profit for the prior nine-month period	$	27,964
Net increase in underlying margins		6,767
Decrease in underlying sales volumes		(431	)
Decrease due to an additional week of sales in fiscal 2019		(288	)
Segment Profit for the current nine-month period	$	34,012

Net sales for the prior nine-month period	$	76,257
Unfavorable foreign currency translation effects		(5,892	)
Decrease in average selling price		(5,386	)
Increase in sales volumes		1,115
Net sales for the current nine-month period	$	66,094

Segment Profit for the prior nine-month period	$	14,749
Decrease in underlying margins		(1,909	)
Unfavorable foreign currency translation effects		(899	)
Increase in sales volumes		217
Segment Profit for the current nine-month period	$	12,158

Net sales for the prior nine-month period	$	92,014
Increase in sales volumes of Chip and staple fiber		34,530
Net increase in sales volumes of other PVA products		8,419
Change in average selling price and sales mix		41
Unfavorable foreign currency translation effects		(2,508	)
Net sales for the current nine-month period	$	132,496

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
12/30/19 – 1/29/20		—	$	—		—	$	50,000
1/30/20 – 2/29/20		84	$	23.72		84		48,008
3/1/20 – 3/29/20		—	$	—		—		48,008
Total		84	$	23.72		84

	UNIFI, INC.
	(Registrant)

Date: ~~May 7, 2020~~February 3, 2021	By:	/s/ CRAIG A. CREATURO
		Craig A. Creaturo
		Executive Vice President & Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)