Business Segment Information | 22. 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 four reportable segments (the Polyester Segment, the Nylon Segment, the Brazil Segment and the Asia 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, automotive, industrial and other end-use markets. The Polyester Segment consists of sales and manufacturing operations in the U.S. and El Salvador. • The operations within the Nylon Segment exhibit similar long-term economic characteristics and primarily sell into the NACA region to similar customers 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 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. The Nylon Segment consists of sales and manufacturing operations in the U.S. and Colombia. • The Brazil 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 principally in South America. The Brazil Segment includes a manufacturing location and sales offices in Brazil. • The operations within the Asia Segment exhibit similar long-term economic characteristics and sell to similar customers utilizing similar methods of distribution primarily in Asia and Europe, which are outside of the NACA region. The Asia Segment primarily sells polyester-based products to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, automotive, industrial and other end-use markets principally in Asia. The Asia Segment includes sales offices in 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 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. Selected financial information is presented below: For the Three Months Ended September 29, 2019 Polyester Nylon Brazil Asia All Other Total Net sales $ 88,695 $ 20,202 $ 24,172 $ 45,957 $ 923 $ 179,949 Cost of sales 80,900 19,024 20,013 41,675 894 162,506 Gross profit 7,795 1,178 4,159 4,282 29 17,443 Segment depreciation expense 4,041 491 375 — 39 4,946 Segment Profit $ 11,836 $ 1,669 $ 4,534 $ 4,282 $ 68 $ 22,389 For the Three Months Ended September 30, 2018 Polyester Nylon Brazil Asia All Other Total Net sales $ 100,131 $ 27,949 $ 26,913 $ 25,440 $ 1,178 $ 181,611 Cost of sales 92,330 25,805 20,495 21,908 1,054 161,592 Gross profit 7,801 2,144 6,418 3,532 124 20,019 Segment depreciation expense 4,252 561 359 — 75 5,247 Segment Profit $ 12,053 $ 2,705 $ 6,777 $ 3,532 $ 199 $ 25,266 The reconciliations of segment gross profit to consolidated income before income taxes are as follows: For the Three Months Ended September 29, 2019 September 30, 2018 Polyester $ 7,795 $ 7,801 Nylon 1,178 2,144 Brazil 4,159 6,418 Asia 4,282 3,532 All Other 29 124 Segment gross profit 17,443 20,019 Selling, general and administrative expenses 10,980 14,411 Provision for bad debts 9 131 Other operating expense (income), net 108 (240 ) Operating income 6,346 5,717 Interest income (210 ) (147 ) Interest expense 1,257 1,467 Equity in loss (earnings) of unconsolidated affiliates 866 (239 ) Income before income taxes $ 4,433 $ 4,636 The reconciliations of segment total assets to consolidated total assets are as follows: September 29, 2019 June 30, 2019 Polyester $ 294,163 $ 287,608 Nylon 54,947 57,055 Brazil 65,598 67,490 Asia 40,599 35,219 Segment total assets 455,307 447,372 Other current assets 8,857 10,327 Other PP&E 19,278 18,664 Other non-current operating lease assets 3,366 — Other non-current assets 1,631 1,468 Investments in unconsolidated affiliates 102,601 114,320 Total assets $ 591,040 $ 592,151 |