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 December 27, 2020 Polyester Asia Brazil Nylon All Other Total Net sales $ 76,696 $ 44,692 $ 24,253 $ 16,008 $ 1,127 $ 162,776 Cost of sales 65,801 38,164 16,276 15,613 988 136,842 Gross profit 10,895 6,528 7,977 395 139 25,934 Segment depreciation expense 4,470 — 321 438 164 5,393 Segment Profit $ 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 The reconciliations of segment gross profit to consolidated income before income taxes are as follows: For the Three Months Ended For the Six Months Ended December 27, 2020 December 29, 2019 December 27, 2020 December 29, 2019 Polyester $ 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 395 46 1,060 1,224 All Other 139 12 212 41 Segment gross profit 25,934 15,665 40,495 33,108 Selling, general and administrative expenses 12,625 12,508 23,989 23,488 Benefit for bad debts (259 ) (258 ) (1,146 ) (249 ) Other operating expense, net 476 854 1,654 962 Operating income 13,092 2,561 15,998 8,907 Interest income (187 ) (212 ) (312 ) (422 ) Interest expense 833 1,101 1,704 2,358 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: December 27, 2020 June 28, 2020 Polyester $ 261,769 $ 263,496 Asia 54,661 41,452 Brazil 60,006 49,967 Nylon 39,682 42,020 Segment total assets 416,118 396,935 Other current assets 68,900 48,600 Other PP&E 22,687 23,676 Other operating lease assets 1,308 1,503 Other non-current assets 3,985 3,448 Total assets $ 512,998 $ 474,162 |