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Note 23 - Investments in Unconsolidated Affiliates and Variable Interest Entities | 3 Months Ended
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Sep. 23, 2012
Equity Method Investments and Joint Ventures Disclosure [Text Block] | 23. Investments in Unconsolidated Affiliates and Variable Interest Entities Parkdale America, LLC In June 1997, the Company and Parkdale Mills, Inc. (“Mills”) entered into a Contribution Agreement that set forth the terms and conditions by which the two companies contributed all of the assets of their spun cotton yarn operations utilizing open-end and air-jet spinning technologies to create Parkdale America, LLC (“PAL”). In exchange for its contribution, the Company received a 34% ownership interest in PAL which is accounted for using the equity method of accounting. Effective January 1, 2012, Mills' interest in PAL was assigned to Parkdale Incorporated. PAL's fiscal year end is the Saturday nearest to December 31 and is a limited liability company treated as a partnership for income tax reporting purposes. PAL is a producer of cotton and synthetic yarns for sale to the textile and apparel markets located throughout North and South America. PAL has 13 manufacturing facilities located primarily in the southeast region of the U.S. According to its most recently issued audited financial statements, PAL's five largest customers accounted for approximately 80% of total revenues and 72% of total gross accounts receivable outstanding, with the largest customer accounting for approximately 37% of revenues and 37% of accounts receivable. In August 2008, a federal government program commenced providing economic adjustment assistance to domestic users of upland cotton. The program offers a subsidy for cotton consumed in domestic production and the subsidy is paid the month after the eligible cotton is consumed. The subsidy must be used within eighteen months after the marketing year earned to purchase qualifying capital expenditures in the U.S. for production of goods from upland cotton. The marketing year is from August 1 to July 31. The program provided a subsidy of four cents per pound through July 31, 2012 and provides a subsidy of three cents per pound for six years thereafter. The Company recognizes its share of PAL's income for the cotton subsidy when the cotton has been consumed and the qualifying assets have been acquired with an appropriate allocation methodology considering the dual criteria of the subsidy. On October 28, 2009, PAL acquired certain real property and machinery and equipment, as well as entered into lease agreements for certain real property, machinery and equipment, which constituted most of the yarn manufacturing operations of Hanesbrands Inc. (“HBI”). PAL also entered into a yarn supply agreement with HBI to supply at least 95% of the yarn used in the manufacturing of its apparel products at any of its locations in North America, Central America or the Caribbean Basin for a six-year period with an option for HBI to extend the agreement for two additional three-year periods. On March 30, 2011, PAL amended its revolving credit facility to increase the maximum borrowing capacity from $100,000 to $200,000 and extend the maturity date from October 28, 2012 to July 31, 2014. PAL's revolving credit facility charges a variable interest rate based on either the prime rate or LIBOR rate plus an applicable percentage. PAL's revolving credit facility also has covenants in place such as an annual limit on capital expenditures, a minimum fixed-charge coverage ratio and a maximum leverage ratio. PAL informed the Company that as of September 2012, PAL's cash on-hand was $62,819, PAL had no outstanding borrowings on its revolving credit facility and PAL was in compliance with all debt covenants. PAL is subject to price risk related to fixed-price yarn sales. To protect the gross margin of these sales, PAL may enter into cotton futures to manage changes in raw material costs. The derivative instruments used are listed and traded on an exchange and are thus valued using quoted prices classified within Level 1 of the fair value hierarchy. PAL may also designate certain futures contracts as cash flow hedges with the effective portion of gains and losses recorded in accumulated other comprehensive loss until the underlying transactions are recognized in income. As of September 2012, PAL's accumulated other comprehensive loss was comprised of losses related to futures contracts totaling $619. Any ineffective portion of changes in fair value of cash flow hedges are recognized in earnings as they occur. All of PAL's other derivatives not designated as hedges are marked-to-market each period with the changes in fair value recognized in current period earnings. In addition, PAL may enter into forward contracts for certain cotton purchases, which qualify as derivative instruments. However, these contracts meet the applicable criteria to qualify for the “normal purchases or normal sales” exemption. As of September 23, 2012, the Company's investment in PAL was $90,952 and shown within Investments in unconsolidated affiliates. The reconciliation between the Company's share of the underlying equity of PAL and its investment is as follows:
Underlying equity as of September 2012 |  | $ | 109,503 |
Initial excess capital contributions |  |  | 53,363 |
Impairment charge recorded in 2007 |  |  | (74,106 | )
Anti-trust lawsuit against PAL in which the Company did not participate |  |  | 2,652 |
EAP adjustments |  |  | (460 | )
Investment as of September 2012 |  | $ | 90,952 |
U.N.F. Industries, Ltd. In September 2000, the Company and Nilit Ltd. (“Nilit”) formed a 50/50 joint venture, U.N.F. Industries Ltd. (“UNF”), for the purpose of operating nylon extrusion assets to manufacture nylon POY. All raw material and production services for UNF are provided by Nilit under separate supply and services agreements. UNF's fiscal year end is December 31st and it is a registered Israeli private company located in Migdal Ha-Emek, Israel. UNF America, LLC In October 2009, the Company and Nilit America Inc. (“Nilit America”) formed a 50/50 joint venture, UNF America LLC (“UNF America”), for the purpose of operating a nylon extrusion facility which manufactures nylon POY. All raw material and production services for UNF America are provided by Nilit America under separate supply and services agreements. UNF America's fiscal year end is December 31st and it is a limited liability company treated as a partnership for income tax reporting purposes located in Ridgeway, Virginia. In conjunction with the formation of UNF America, the Company entered into a supply agreement with UNF and UNF America whereby the Company agreed to purchase all of its first quality nylon POY requirements for texturing (subject to certain exceptions) from either UNF or UNF America. The agreement has no stated minimum purchase quantities and pricing is negotiated every six months, based on market rates. As of September 23, 2012, the Company's open purchase orders related to this agreement were $8,013. The Company's raw material purchases under this supply agreement consist of the following:
|  | For the Three Months Ended |
|  | September 23, 2012 |  |  | September 25, 2011 |
UNF |  | $ | 3,263 |  |  | $ | 5,486 |
UNF America |  |  | 5,698 |  |  |  | 3,716 |
Total |  | $ | 8,961 |  |  | $ | 9,202 |
As of September 23, 2012 and June 24, 2012, the Company had combined accounts payable due to UNF and UNF America of $3,801 and $4,184, respectively. The Company is the primary beneficiary of these entities based on the terms of the supply agreement discussed above. As a result, the Company has determined that UNF and UNF America are variable interest entities (“VIEs”) and, in accordance with U.S. GAAP, should be consolidated in the Company's financial results. As the Company purchases substantially all of the output from the two entities, and, as the two entities' balance sheets constitutes 3% or less of the Company's current assets, total assets and total liabilities, the Company has not included the accounts of UNF and UNF America in its consolidated financial statements. As of September 23, 2012, the Company's combined investments in UNF and UNF America were $4,233 and are shown within Investments in unconsolidated affiliates. The financial results of UNF and UNF America are included in the Company's financial statements with a one month lag, using the equity method of accounting and with intercompany profits eliminated in accordance with the Company's accounting policy. Other than the supply agreement discussed above, the Company does not provide any other operating commitments or guarantees related to either UNF or UNF America. Unaudited, condensed balance sheet and income statement information for the Company's unconsolidated affiliates is presented in the following tables. As PAL is defined as significant, its information is separately disclosed. The operating results of Renewables are included through the end of the Company's first quarter of fiscal year 2012, and thereafter Renewables results have been consolidated.
|  | As of September 23, 2012 (Unaudited) |
|  | PAL |  |  | Other |  |  | Total |
Current assets |  | $ | 261,900 |  |  | $ | 9,952 |  |  | $ | 271,852 |
Noncurrent assets |  |  | 125,220 |  |  |  | 3,238 |  |  |  | 128,458 |
Current liabilities |  |  | 55,269 |  |  |  | 5,749 |  |  |  | 61,018 |
Noncurrent liabilities |  |  | 9,783 |  |  |  | — |  |  |  | 9,783 |
Shareholders' equity and capital accounts |  |  | 322,068 |  |  |  | 7,441 |  |  |  | 329,509 |
The Company's portion of undistributed earnings |  |  | 20,170 |  |  |  | 1,278 |  |  |  | 21,448 |
|  | As of June 24, 2012 (Unaudited) |
|  | PAL |  |  | Other |  |  | Total |
Current assets |  | $ | 259,558 |  |  | $ | 12,018 |  |  | $ | 271,576 |
Noncurrent assets |  |  | 130,677 |  |  |  | 759 |  |  |  | 131,436 |
Current liabilities |  |  | 56,899 |  |  |  | 4,512 |  |  |  | 61,411 |
Noncurrent liabilities |  |  | 7,717 |  |  |  | — |  |  |  | 7,717 |
Shareholders' equity and capital accounts |  |  | 325,619 |  |  |  | 8,265 |  |  |  | 333,884 |
|  | For the Three Months Ended September 23, 2012 (Unaudited) |
|  | PAL |  |  | Other |  |  | Total |
Net sales |  | $ | 201,390 |  |  | $ | 8,842 |  |  | $ | 210,232 |
Gross profit |  |  | 2,948 |  |  |  | 1,653 |  |  |  | 4,601 |
(Loss) income from operations |  |  | (571 | ) |  |  | 1,223 |  |  |  | 652 |
Net income |  |  | 38 |  |  |  | 1,200 |  |  |  | 1,238 |
Depreciation and amortization |  |  | 7,791 |  |  |  | 25 |  |  |  | 7,816 |
Cash received by PAL under EAP program |  |  | 4,926 |  |  |  | — |  |  |  | 4,926 |
Earnings recognized by PAL for EAP program |  |  | 2,319 |  |  |  | — |  |  |  | 2,319 |
Dividends and cash distributions received |  |  | 2,224 |  |  |  | — |  |  |  | 2,224 |
|  | For the Three Months Ended September 25, 2011 (Unaudited) |
|  | PAL |  |  | Other |  |  | Total |
Net sales |  | $ | 346,075 |  |  | $ | 10,267 |  |  | $ | 356,342 |
Gross profit |  |  | 13,077 |  |  |  | 664 |  |  |  | 13,741 |
Income (loss) from operations |  |  | 11,115 |  |  |  | (201 | ) |  |  | 10,914 |
Net income (loss) |  |  | 11,325 |  |  |  | (245 | ) |  |  | 11,080 |
Depreciation and amortization |  |  | 9,295 |  |  |  | 56 |  |  |  | 9,351 |
Cash received by PAL under EAP program |  |  | 6,171 |  |  |  | — |  |  |  | 6,171 |
Earnings recognized by PAL for EAP program |  |  | 5,956 |  |  |  | — |  |  |  | 5,956 |
Dividends and cash distributions received |  |  | 2,005 |  |  |  | — |  |  |  | 2,005 |

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=7658923&loc=d3e32787-111569 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 18 -Paragraph 20 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.12) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6382943&loc=d3e33918-111571 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=7658923&loc=d3e32847-111569 + Details
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