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 March 28, 2021 Polyester Asia Brazil Nylon All Other Total Net sales $ 82,668 $ 48,483 $ 25,704 $ 20,778 $ 1,233 $ 178,866 Cost of sales 75,446 41,330 15,106 20,341 1,048 153,271 Gross profit 7,222 7,153 10,598 437 185 25,595 Segment depreciation expense 5,036 — 299 441 161 5,937 Segment Profit $ 12,258 $ 7,153 $ 10,897 $ 878 $ 346 $ 31,532 For the Three Months Ended March 29, 2020 Polyester Asia Brazil Nylon All Other Total Net sales $ 89,767 $ 38,621 $ 21,060 $ 20,567 $ 979 $ 170,994 Cost of sales 82,735 34,038 17,644 20,234 960 155,611 Gross profit 7,032 4,583 3,416 333 19 15,383 Segment depreciation expense 4,301 — 421 471 137 5,330 Segment Profit $ 11,333 $ 4,583 $ 3,837 $ 804 $ 156 $ 20,713 For the Nine Months Ended March 28, 2021 Polyester Asia Brazil Nylon All Other Total Net sales $ 228,440 $ 130,898 $ 72,563 $ 47,815 $ 3,431 $ 483,147 Cost of sales 205,691 112,639 49,375 46,318 3,034 417,057 Gross profit 22,749 18,259 23,188 1,497 397 66,090 Segment depreciation expense 13,909 — 1,050 1,321 489 16,769 Segment Profit $ 36,658 $ 18,259 $ 24,238 $ 2,818 $ 886 $ 82,859 For the Nine Months Ended March 29, 2020 Polyester Asia Brazil Nylon All Other Total Net sales $ 261,212 $ 132,496 $ 66,094 $ 57,853 $ 2,799 $ 520,454 Cost of sales 239,725 118,114 55,089 56,296 2,739 471,963 Gross profit 21,487 14,382 11,005 1,557 60 48,491 Segment depreciation expense 12,525 — 1,153 1,465 300 15,443 Segment Profit $ 34,012 $ 14,382 $ 12,158 $ 3,022 $ 360 $ 63,934 The reconciliations of segment gross profit to consolidated income (loss) before income taxes are as follows: For the Three Months Ended For the Nine Months Ended March 28, 2021 March 29, 2020 March 28, 2021 March 29, 2020 Polyester $ 7,222 $ 7,032 $ 22,749 $ 21,487 Asia 7,153 4,583 18,259 14,382 Brazil 10,598 3,416 23,188 11,005 Nylon 437 333 1,497 1,557 All Other 185 19 397 60 Segment gross profit 25,595 15,383 66,090 48,491 Selling, general and administrative expenses 14,581 11,720 38,570 35,208 (Benefit) provision for bad debts (184 ) 580 (1,330 ) 331 Other operating expense (income), net 2,582 (62 ) 4,236 900 Operating income 8,616 3,145 24,614 12,052 Interest income (159 ) (173 ) (471 ) (595 ) Interest expense 885 1,231 2,589 3,589 Equity in earnings of unconsolidated affiliates (528 ) (3,526 ) (751 ) (1,904 ) Impairment of investment in unconsolidated affiliate — 45,194 — 45,194 Income (loss) before income taxes $ 8,418 $ (39,581 ) $ 23,247 $ (34,232 ) The reconciliations of segment total assets to consolidated total assets are as follows: March 28, 2021 June 28, 2020 Polyester $ 271,682 $ 263,496 Asia 61,494 41,452 Brazil 62,898 49,967 Nylon 42,357 42,020 Segment total assets 438,431 396,935 Other current assets 62,460 48,600 Other PP&E 22,036 23,676 Other operating lease assets 1,210 1,503 Other non-current assets 4,235 3,448 Total assets $ 528,372 $ 474,162 |