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Investments in Unconsolidated Affiliates and Variable Interest Entities | 12 Months Ended
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Jun. 24, 2018
Equity Method Investments And Joint Ventures [Abstract] |
Investments in Unconsolidated Affiliates and Variable Interest Entities | 22. Investments in Unconsolidated Affiliates and Variable Interest Entities Parkdale America, LLC In June 1997, UNIFI 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 PAL. In exchange for its contribution, UNIFI 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 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 global textile industry and apparel market. Per PAL’s fiscal 2017 audited financial statements, PAL had 13 manufacturing facilities located primarily in the southeast region of the United States and in Mexico, and PAL’s five largest customers accounted for approximately 78% of total revenues and 73% of total gross accounts receivable outstanding. As PAL’s fiscal year end is the Saturday nearest to December 31 and its results are considered significant, UNIFI files an amendment to each Annual Report on Form 10-K on or before 90 days subsequent to PAL’s fiscal year end to provide PAL’s audited financial statements for PAL’s most recent fiscal year. UNIFI filed an amendment to its Annual Report on Form 10-K for the fiscal year ended June 25, 2017 on March 30, 2018 to provide PAL’s audited financial statements for PAL’s fiscal year ended December 30, 2017. UNIFI expects to file an amendment to this Annual Report on Form 10-K on or before March 29, 2019 to provide PAL’s audited financial statements for PAL’s fiscal year ended December 29, 2018. The U.S. federal government maintains a program providing economic adjustment assistance to domestic users of upland cotton (the “cotton rebate program”). The cotton rebate program offers a subsidy for cotton consumed in domestic production, and the subsidy is paid the month after the eligible cotton is consumed. To be completely earned, the subsidy must be used within 18 months after the marketing year in which it is earned to purchase qualifying capital expenditures in the United States for production of goods from upland cotton. The marketing year is from August 1 to July 31. The program provides a subsidy of up to three cents per pound. In February 2014, the U.S. federal government extended the program for five years. The cotton subsidy will remain at three cents per pound for the life of the program. PAL recognizes its share of 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. PAL is subject to price risk related to anticipated fixed-price yarn sales. To protect the gross margin of these sales, PAL may enter into cotton futures to manage changes in raw material prices in order to protect the gross margin of fixed-priced yarn sales. 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. As of June 24, 2018, PAL had no futures contracts designated as cash flow hedges. As of June 24, 2018, UNIFI’s investment in PAL was $110,264, which was reflected within investments in unconsolidated affiliates in the accompanying consolidated balance sheets. The reconciliation between UNIFI’s share of the underlying equity of PAL and its investment is as follows:
Underlying equity as of June 24, 2018 |  | $ | 128,355 |
Initial excess capital contributions |  |  | 53,363 |
Impairment charge recorded by UNIFI in 2007 |  |  | (74,106 | )
Anti-trust lawsuit against PAL in which UNIFI did not participate |  |  | 2,652 |
Investment as of June 24, 2018 |  | $ | 110,264 |
U.N.F. Industries, Ltd. In September 2000, UNIFI 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. Raw material and production services for UNF are provided by Nilit under separate supply and services agreements. UNF’s fiscal year end is December 31 and it is a registered Israeli private company located in Migdal Ha-Emek, Israel. UNF America, LLC In October 2009, UNIFI and Nilit America Inc. (“Nilit America”) formed a 50/50 joint venture, UNF America LLC (“UNFA”), for the purpose of operating a nylon extrusion facility which manufactures nylon POY. Raw material and production services for UNFA are provided by Nilit America under separate supply and services agreements. UNFA’s fiscal year end is December 31 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 UNFA, UNIFI entered into a supply agreement with UNF and UNFA whereby UNIFI agreed to purchase all of its first quality nylon POY requirements for texturing (subject to certain exceptions) from either UNF or UNFA. The agreement has no stated minimum purchase quantities and pricing is negotiated every six months, based on market rates. As of June 24, 2018, UNIFI’s open purchase orders related to this agreement were $2,489. UNIFI’s raw material purchases under this supply agreement consist of the following:
|  | For the Fiscal Year Ended |
|  | June 24, 2018 |  |  | June 25, 2017 |  |  | June 26, 2016 |
UNF |  | $ | 1,800 |  |  | $ | 2,254 |  |  | $ | 2,828 |
UNFA |  |  | 21,731 |  |  |  | 20,493 |  |  |  | 24,319 |
Total |  | $ | 23,531 |  |  | $ | 22,747 |  |  | $ | 27,147 |
As of both June 24, 2018 and June 25, 2017, UNIFI had combined accounts payable due to UNF and UNFA of $2,301. UNIFI has determined that UNF and UNFA are variable interest entities and has also determined that UNIFI is the primary beneficiary of these entities, based on the terms of the supply agreement. As a result, these entities should be consolidated with UNIFI’s financial results. As UNIFI purchases substantially all of the output from the two entities, the two entities’ balance sheets constitute 3% or less of UNIFI’s current assets, total assets and total liabilities, and such balances are not expected to comprise a larger portion in the future, UNIFI has not included the accounts of UNF and UNFA in its consolidated financial statements. As of June 24 2018, UNIFI’s combined investments in UNF and UNFA were $2,375 and are shown within investments in unconsolidated affiliates in the accompanying consolidated balance sheets. The financial results of UNF and UNFA are included in UNIFI’s consolidated financial statements with a one-month lag, using the equity method of accounting and with intercompany profits eliminated in accordance with UNIFI’s accounting policy. Other than the supply agreement discussed above, UNIFI does not provide any other commitments or guarantees related to either UNF or UNFA. Condensed balance sheet and income statement information for UNIFI’s unconsolidated affiliates (including reciprocal balances) is presented in the following tables. PAL is defined as significant and its information is separately disclosed. PAL does not meet the criteria for segment reporting. For UNIFI’s fiscal 2018 and 2017, PAL’s corresponding fiscal periods both consisted of 52 weeks. Depreciation and amortization for PAL for the periods presented includes amounts for PAL’s foreign subsidiaries. PAL’s current assets and shareholders’ equity accounts as of June 25, 2017 reflect a $6,800 dividend distribution made to UNIFI on June 28, 2017, subsequent to UNIFI’s fiscal 2017.
|  | As of June 24, 2018 |
|  | PAL |  |  | Other |  |  | Total |
Current assets |  | $ | 289,683 |  |  | $ | 7,598 |  |  | $ | 297,281 |
Noncurrent assets |  |  | 162,242 |  |  |  | 875 |  |  |  | 163,117 |
Current liabilities |  |  | 71,026 |  |  |  | 3,722 |  |  |  | 74,748 |
Noncurrent liabilities |  |  | 3,389 |  |  |  | — |  |  |  | 3,389 |
Shareholders’ equity and capital accounts |  |  | 377,510 |  |  |  | 4,751 |  |  |  | 382,261 |
UNIFI’s portion of undistributed earnings |  |  | 41,429 |  |  |  | 887 |  |  |  | 42,316 |
|  | As of June 25, 2017 |
|  | PAL |  |  | Other |  |  | Total |
Current assets |  | $ | 247,820 |  |  | $ | 10,340 |  |  | $ | 258,160 |
Noncurrent assets |  |  | 183,418 |  |  |  | 1,039 |  |  |  | 184,457 |
Current liabilities |  |  | 54,389 |  |  |  | 3,588 |  |  |  | 57,977 |
Noncurrent liabilities |  |  | 3,263 |  |  |  | — |  |  |  | 3,263 |
Shareholders’ equity and capital accounts |  |  | 373,586 |  |  |  | 7,791 |  |  |  | 381,377 |
|  | For the Fiscal Year Ended June 24, 2018 |
|  | PAL |  |  | Other |  |  | Total |
Net sales |  | $ | 796,010 |  |  | $ | 24,097 |  |  | $ | 820,107 |
Gross profit |  |  | 31,112 |  |  |  | 4,646 |  |  |  | 35,758 |
Income from operations |  |  | 12,032 |  |  |  | 2,917 |  |  |  | 14,949 |
Net income |  |  | 12,990 |  |  |  | 2,961 |  |  |  | 15,951 |
Depreciation and amortization |  |  | 39,404 |  |  |  | 190 |  |  |  | 39,594 |
Cash received by PAL under cotton rebate program |  |  | 13,797 |  |  |  | — |  |  |  | 13,797 |
Earnings recognized by PAL for cotton rebate program |  |  | 13,334 |  |  |  | — |  |  |  | 13,334 |
Distributions received |  |  | 9,236 |  |  |  | 3,000 |  |  |  | 12,236 |
|  | For the Fiscal Year Ended June 25, 2017 |
|  | PAL |  |  | Other |  |  | Total |
Net sales |  | $ | 754,285 |  |  | $ | 22,905 |  |  | $ | 777,190 |
Gross profit |  |  | 26,275 |  |  |  | 4,877 |  |  |  | 31,152 |
Income from operations |  |  | 10,406 |  |  |  | 3,061 |  |  |  | 13,467 |
Net income |  |  | 7,814 |  |  |  | 2,988 |  |  |  | 10,802 |
Depreciation and amortization |  |  | 42,801 |  |  |  | 177 |  |  |  | 42,978 |
Cash received by PAL under cotton rebate program |  |  | 14,293 |  |  |  | — |  |  |  | 14,293 |
Earnings recognized by PAL for cotton rebate program |  |  | 13,491 |  |  |  | — |  |  |  | 13,491 |
Distributions received |  |  | 822 |  |  |  | 1,500 |  |  |  | 2,322 |
|  | For the Fiscal Year Ended June 26, 2016 |
|  | PAL |  |  | Other |  |  | Total |
Net sales |  | $ | 824,248 |  |  | $ | 29,463 |  |  | $ | 853,711 |
Gross profit |  |  | 32,626 |  |  |  | 7,651 |  |  |  | 40,277 |
Income from operations |  |  | 15,143 |  |  |  | 5,772 |  |  |  | 20,915 |
Net income |  |  | 17,670 |  |  |  | 5,838 |  |  |  | 23,508 |
Depreciation and amortization |  |  | 46,235 |  |  |  | 150 |  |  |  | 46,385 |
Cash received by PAL under cotton rebate program |  |  | 17,057 |  |  |  | — |  |  |  | 17,057 |
Earnings recognized by PAL for cotton rebate program |  |  | 16,080 |  |  |  | — |  |  |  | 16,080 |
Distributions received |  |  | 1,732 |  |  |  | 3,000 |  |  |  | 4,732 |
As of the end of PAL’s corresponding 12-month fiscal periods ending in June, PAL’s amounts of deferred revenues related to the cotton rebate program were $0 for all periods.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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