Business Segment Information | 21. 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 Principal Executive Officer, who is the chief operating decision maker (the “CODM”), in order to assess performance and allocate resources. Characteristics of the organization which were relied upon in making the determination of reportable segments include the nature of the products sold, the organization’s internal structure, the trade policies in the geographic regions in which UNIFI operates, and the information that is regularly reviewed by the CODM for the purpose of assessing performance and allocating resources. UNIFI ’s operating segments are aggregated into three reportable segments (the Polyester Segment, the Nylon Segment and the International Segment) based on similarities between the operating segments’ economic characteristics, nature of products sold, type of customer, methods of distribution and regulatory environment. • 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”) (collectively, the regions comprising these economic trading zones are referred to as “NACA”) 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 NACA 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 NACA. 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 for-hire transportation services. For-hire transportation services revenue is derived from performing common carrier services utilizing UNIFI’s fleet of transportation equipment. The operations within All Other (i) are not subject to review by the CODM at a level consistent with UNIFI’s other operations, (ii) are not regularly evaluated using the same metrics applied to UNIFI’s other operations and (iii) do not qualify for aggregation with an existing reportable segment. Therefore, such operations are excluded from reportable segments. UNIFI evaluates the operating performance of its segments based upon Segment Profit, which represents segment gross profit plus segment depreciation expense. This measurement of segment profit best aligns segment reporting with the current assessments and evaluations performed by, and information provided to, the CODM. The accounting policies for the segments are consistent with UNIFI’s accounting policies. Intersegment sales are omitted from the below financial information, 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 Three Months Ended March 31, 2019 Polyester Nylon International All Other Total Net sales $ 95,745 $ 25,563 $ 57,681 $ 1,000 $ 179,989 Cost of sales 92,221 23,251 49,784 942 166,198 Gross profit 3,524 2,312 7,897 58 13,791 Segment depreciation expense 3,858 516 420 47 4,841 Segment Profit $ 7,382 $ 2,828 $ 8,317 $ 105 $ 18,632 For the Three Months Ended March 25, 2018 Polyester Nylon International All Other Total Net sales $ 88,763 $ 24,036 $ 51,989 $ 1,079 $ 165,867 Cost of sales 83,948 23,023 41,317 1,023 149,311 Gross profit 4,815 1,013 10,672 56 16,556 Segment depreciation expense 4,022 560 436 66 5,084 Segment Profit $ 8,837 $ 1,573 $ 11,108 $ 122 $ 21,640 For the Nine Months Ended March 31, 2019 Polyester Nylon International All Other Total Net sales $ 281,665 $ 76,159 $ 168,271 $ 3,216 $ 529,311 Cost of sales 269,444 69,671 139,275 2,955 481,345 Gross profit 12,221 6,488 28,996 261 47,966 Segment depreciation expense 12,047 1,576 1,146 190 14,959 Segment Profit $ 24,268 $ 8,064 $ 30,142 $ 451 $ 62,925 For the Nine Months Ended March 25, 2018 Polyester Nylon International All Other Total Net sales $ 266,817 $ 75,966 $ 151,694 $ 3,110 $ 497,587 Cost of sales 244,513 68,563 119,050 2,937 435,063 Gross profit 22,304 7,403 32,644 173 62,524 Segment depreciation expense 11,862 1,649 1,249 195 14,955 Segment Profit $ 34,166 $ 9,052 $ 33,893 $ 368 $ 77,479 The reconciliations of segment gross profit to consolidated (loss) income before income taxes are as follows: For the Three Months Ended For the Nine Months Ended March 31, 2019 March 25, 2018 March 31, 2019 March 25, 2018 Polyester $ 3,524 $ 4,815 $ 12,221 $ 22,304 Nylon 2,312 1,013 6,488 7,403 International 7,897 10,672 28,996 32,644 All Other 58 56 261 173 Segment gross profit 13,791 16,556 47,966 62,524 Selling, general and administrative expenses 11,439 13,846 40,672 41,335 Provision (benefit) for bad debts 218 27 381 (104 ) Other operating expense, net 1,359 1,100 1,218 1,763 Operating income 775 1,583 5,695 19,530 Interest income (149 ) (182 ) (448 ) (444 ) Interest expense 1,256 1,187 4,078 3,562 Loss on extinguishment of debt — — 131 — Equity in earnings of unconsolidated affiliates (1,873 ) (544 ) (3,126 ) (3,842 ) Income before income taxes $ 1,541 $ 1,122 $ 5,060 $ 20,254 The reconciliations of segment total assets to consolidated total assets are as follows: March 31, 2019 June 24, 2018 Polyester $ 291,625 $ 284,261 Nylon 60,904 57,378 International 100,411 95,006 Segment total assets 452,940 436,645 Other current assets 19,496 30,945 Other PP&E 19,091 17,373 Other non-current assets 2,516 4,205 Investments in unconsolidated affiliates 114,748 112,639 Total assets $ 608,791 $ 601,807 |