Business Segment Information | 25. Business Segment Information UNIFI defines operating segments as components of the organization for which discrete financial information is available and operating results are evaluated on a regular basis by UNIFI’s Chief Executive Officer, who is the chief operating decision maker (“CODM”), in order to assess performance and allocate resources. Characteristics of the organization which were relied upon in making the determination of reportable segments include the nature of the products sold, the organization’s internal structure, the trade policies in the geographic regions in which UNIFI operates, and the information that is regularly reviewed by the CODM for the purpose of assessing performance and allocating resources. UNIFI’s operating segments are aggregated into three reportable segments based on similarities between the operating segments’ economic characteristics, nature of products sold, type of customer, methods of distribution and regulatory environment. • The operations within the Polyester Segment exhibit similar long-term economic characteristics and primarily sell into an economic trading zone covered by the North American Free Trade Agreement (“NAFTA”) and the Dominican Republic—Central America Free Trade Agreement (“CAFTA-DR”) to similar customers utilizing similar methods of distribution. These operations derive revenues primarily from polyester-based products with sales primarily to other yarn manufacturers and knitters and weavers that produce yarn and/or fabric for the apparel, hosiery, automotive, home furnishings, industrial and other end-use markets. The Polyester Segment consists of sales and manufacturing operations in the United States and El Salvador. • The operations within the Nylon Segment exhibit similar long-term economic characteristics and primarily sell into an economic trading zone covered by NAFTA and CAFTA-DR to similar customers utilizing similar methods of distribution. The Nylon Segment includes an immaterial operating segment in Colombia that sells similar nylon-based textile products to similar customers in Colombia and Mexico utilizing similar methods of distribution. These operations derive revenues primarily from nylon-based products with sales to knitters and weavers that produce fabric primarily for the apparel and hosiery markets. The Nylon Segment consists of sales and manufacturing operations in the United States and Colombia. • The operations within the International Segment exhibit similar long-term economic characteristics and sell to similar customers utilizing similar methods of distribution in geographic regions that are outside of the NAFTA and CAFTA-DR economic trading zone. The International Segment primarily sells polyester-based products to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial and other end-use markets primarily in the South American and Asian regions. The International Segment includes a manufacturing location in Brazil and sales offices in Brazil, China and Sri Lanka. In addition to UNIFI’s reportable segments, the selected financial information presented below includes an All Other category. All Other consists primarily of Renewables (up through December 23, 2016, the date of the sale by UNIFI of its 60% equity ownership interest in Renewables) and for-hire transportation services. Revenue for Renewables was primarily derived from (i) facilitating the use of miscanthus grass as bio-fuel through service agreements and (ii) delivering harvested miscanthus grass to poultry producers for animal bedding. 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 (Loss), which represents segment gross profit (loss) plus segment depreciation expense. This measurement of segment profit or loss best aligns segment reporting with the current assessments and evaluations performed by, and information provided to, the CODM. The accounting policies for the segments are consistent with UNIFI’s accounting policies. Intersegment sales are omitted from the below financial information, as they are (i) insignificant to UNIFI’s segments and eliminated from consolidated reporting and (ii) excluded from segment evaluations performed by the CODM. Selected financial information is presented below: For the Fiscal Year Ended June 24, 2018 Polyester Nylon International All Other Total Net sales $ 364,169 $ 102,639 $ 207,884 $ 4,220 $ 678,912 Cost of sales 333,078 92,155 163,300 3,951 592,484 Gross profit 31,091 10,484 44,584 269 86,428 Segment depreciation expense 15,893 2,197 1,648 256 19,994 Segment Profit $ 46,984 $ 12,681 $ 46,232 $ 525 $ 106,422 For the Fiscal Year Ended June 25, 2017 Polyester Nylon International All Other Total Net sales $ 355,740 $ 112,704 $ 173,686 $ 5,140 $ 647,270 Cost of sales 315,655 100,633 131,087 5,731 553,106 Gross profit (loss) 40,085 12,071 42,599 (591 ) 94,164 Segment depreciation expense 13,921 2,125 1,119 638 17,803 Segment Profit $ 54,006 $ 14,196 $ 43,718 $ 47 $ 111,967 For the Fiscal Year Ended June 26, 2016 Polyester Nylon International All Other Total Net sales $ 383,167 $ 131,715 $ 122,554 $ 6,201 $ 643,637 Cost of sales 333,638 113,906 95,666 6,795 550,005 Gross profit (loss) 49,529 17,809 26,888 (594 ) 93,632 Segment depreciation expense 11,188 1,899 885 820 14,792 Segment Profit $ 60,717 $ 19,708 $ 27,773 $ 226 $ 108,424 The reconciliations of segment gross profit (loss) to consolidated income before income taxes are as follows: For the Fiscal Year Ended June 24, 2018 June 25, 2017 June 26, 2016 Polyester $ 31,091 $ 40,085 $ 49,529 Nylon 10,484 12,071 17,809 International 44,584 42,599 26,888 All Other 269 (591 ) (594 ) Segment gross profit 86,428 94,164 93,632 SG&A expenses 56,077 50,829 47,502 (Benefit) provision for bad debts (38 ) (123 ) 1,684 Other operating expense (income), net 1,590 (310 ) 2,248 Operating income 28,799 43,768 42,198 Interest income (560 ) (517 ) (610 ) Interest expense 4,935 3,578 3,528 Loss on sale of business — 1,662 — Equity in earnings of unconsolidated affiliates (5,787 ) (4,230 ) (8,963 ) Income before income taxes $ 30,211 $ 43,275 $ 48,243 The reconciliations of segment depreciation and amortization expense to consolidated depreciation and amortization expense are as follows: For the Fiscal Year Ended June 24, 2018 June 25, 2017 June 26, 2016 Polyester $ 15,893 $ 13,921 $ 11,188 Nylon 2,197 2,125 1,899 International 1,648 1,119 885 All Other 256 638 820 Segment depreciation expense 19,994 17,803 14,792 Other depreciation and amortization expense 2,591 2,565 2,736 Depreciation and amortization expense $ 22,585 $ 20,368 $ 17,528 The reconciliations of segment capital expenditures to consolidated capital expenditures are as follows: For the Fiscal Year Ended June 24, 2018 June 25, 2017 June 26, 2016 Polyester $ 16,605 $ 25,442 $ 44,517 Nylon 1,366 1,247 2,548 International 3,099 4,734 2,755 Segment capital expenditures 21,070 31,423 49,820 Other capital expenditures 3,959 1,767 2,517 Capital expenditures $ 25,029 $ 33,190 $ 52,337 In addition to the capital expenditures noted above, Polyester assets were added in fiscal 2017 via a construction financing arrangement. During fiscal 2017, UNIFI changed the segmentation of cash and cash equivalents to better reflect its ability to expand operations in multiple regions. Thus, in the reconciliations below, cash and cash equivalents have been reclassified out of individual segments and into other current assets for the fiscal years presented. The reconciliations of segment total assets to consolidated total assets are as follows: June 24, 2018 June 25, 2017 June 26, 2016 Polyester $ 284,261 $ 270,819 $ 243,093 Nylon 57,378 57,789 63,141 International 95,006 80,824 66,998 Segment total assets 436,645 409,432 373,232 Other current assets 30,945 27,375 13,337 Other PP&E 17,373 14,904 16,597 Other non-current assets 4,205 279 4,864 Investments in unconsolidated affiliates 112,639 119,513 117,412 Total assets $ 601,807 $ 571,503 $ 525,442 Product sales (excluding the All Other category) are as follows: For the Fiscal Year Ended June 24, 2018 June 25, 2017 June 26, 2016 Polyester $ 572,053 $ 529,426 $ 505,721 Nylon 102,639 112,704 131,715 Total $ 674,692 $ 642,130 $ 637,436 Geographic Data Geographic information is set forth below, beginning with net sales. Brazil and China are reported separately from other foreign countries when corresponding net sales for a fiscal year exceed 10% of consolidated net sales. For the Fiscal Year Ended June 24, 2018 June 25, 2017 June 26, 2016 United States $ 420,920 $ 424,490 $ 472,287 Brazil 110,587 109,079 83,087 China 90,998 nm nm Remaining Foreign Countries 56,407 113,701 88,263 Total $ 678,912 $ 647,270 $ 643,637 Export sales from UNIFI’s U.S. operations to external customers $ 94,205 $ 104,229 $ 113,725 nm – Respective amount does not meet UNIFI’s 10% threshold for disclosure. The information for net sales is based on the operating locations from where the items were produced or distributed. Geographic information for long-lived assets is as follows: June 24, 2018 June 25, 2017 June 26, 2016 United States $ 305,229 $ 304,696 $ 292,854 Brazil 12,679 12,616 9,714 Remaining Foreign Countries 6,317 8,360 8,595 Total $ 324,225 $ 325,672 $ 311,163 Long-lived assets are comprised of PP&E, net; intangible assets, net; investments in unconsolidated affiliates; and other non-current assets. Geographic information for total assets is as follows: June 24, 2018 June 25, 2017 June 26, 2016 United States $ 455,963 $ 445,947 $ 427,679 Brazil 59,657 58,598 53,993 Remaining Foreign Countries 86,187 66,958 43,770 Total $ 601,807 $ 571,503 $ 525,442 |