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 UNIFI which were relied upon in making the determination of reportable segments include the nature of the products sold, the 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 reportable segments (the Polyester Segment, the Asia Segment, the Brazil Segment and the Nylon 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 United States-Mexico-Canada Agreement (“USMCA”), North American Free Trade Agreement (“NAFTA”) and 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 manufacturing 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 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 sources polyester-based products from third-party suppliers and sells 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 a sales office in China. • The Brazil Segment primarily manufactures and 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 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 manufacturing nylon-based products with sales to knitters and weavers that produce fabric primarily for the apparel, hosiery and medical 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. In addition to UNIFI’s reportable segments, an All Other 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. Selected financial information is presented below: For the Three Months Ended September 27, 2020 Polyester Asia Brazil Nylon All Other Total Net sales $ 69,076 $ 37,723 $ 22,606 $ 11,029 $ 1,071 $ 141,505 Cost of sales 64,444 33,145 17,993 10,364 998 126,944 Gross profit 4,632 4,578 4,613 665 73 14,561 Segment depreciation expense 4,403 — 430 442 164 5,439 Segment Profit $ 9,035 $ 4,578 $ 5,043 $ 1,107 $ 237 $ 20,000 For the Three Months Ended September 29, 2019 Polyester Asia Brazil Nylon All Other Total Net sales $ 88,695 $ 45,957 $ 24,172 $ 20,202 $ 923 $ 179,949 Cost of sales 80,900 41,675 20,013 19,024 894 162,506 Gross profit 7,795 4,282 4,159 1,178 29 17,443 Segment depreciation expense 4,041 — 375 491 39 4,946 Segment Profit $ 11,836 $ 4,282 $ 4,534 $ 1,669 $ 68 $ 22,389 The reconciliations of segment gross profit to consolidated income before income taxes are as follows: For the Three Months Ended September 27, 2020 September 29, 2019 Polyester $ 4,632 $ 7,795 Asia 4,578 4,282 Brazil 4,613 4,159 Nylon 665 1,178 All Other 73 29 Segment gross profit 14,561 17,443 Selling, general and administrative expenses 11,364 10,980 (Benefit) provision for bad debts (887 ) 9 Other operating expense, net 1,178 108 Operating income 2,906 6,346 Interest income (125 ) (210 ) Interest expense 871 1,257 Equity in (earnings) loss of unconsolidated affiliates (93 ) 866 Income before income taxes $ 2,253 $ 4,433 The reconciliations of segment total assets to consolidated total assets are as follows: September 27, 2020 June 28, 2020 Polyester $ 263,493 $ 263,496 Asia 48,139 41,452 Brazil 52,667 49,967 Nylon 41,222 42,020 Segment total assets 405,521 396,935 Other current assets 58,549 48,600 Other PP&E 23,093 23,676 Other operating lease assets 1,406 1,503 Other non-current assets 3,668 3,448 Total assets $ 492,237 $ 474,162 |