19. 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 Chief Executive Officer, who is the chief operating decision maker (the “CODM”), in order to assess performance and allocate resources. Characteristics of the organization which were relied upon in making the determination of reportable segments include the nature of the products sold, the organization’s internal 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 three reportable segments based on similarities between the operating segments’ economic characteristics, nature of products sold, type of customer, methods of distribution and regulatory environment.

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The operations within the Polyester Segment exhibit similar long-term economic characteristics and sell into an economic trading zone covered by the North American Free Trade Agreement (“NAFTA”) and the Dominican Republic—Central America Free Trade Agreement (“CAFTA-DR”) to similar customers utilizing similar methods of distribution. These operations derive revenues from 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, industrial and other end-use markets. The Polyester Segment consists of sales and manufacturing operations in the United States and El Salvador.

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The operations within the Nylon Segment exhibit similar long-term economic characteristics and sell into an economic trading zone covered by NAFTA and CAFTA-DR to similar customers utilizing similar methods of distribution. 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. These operations derive revenues from nylon-based products with sales to knitters and weavers that produce fabric primarily for the apparel and hosiery markets. The Nylon Segment consists of sales and manufacturing operations in the United States and Colombia.

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The operations within the International Segment exhibit similar long-term economic characteristics and sell to similar customers utilizing similar methods of distribution in geographic regions that are outside of the economic trading zone covered by NAFTA and CAFTA-DR. The International Segment primarily sells polyester-based products to knitters and weavers that produce fabric for the apparel, automotive, home furnishings, industrial and other end-use markets primarily in the South American and Asian regions. The International Segment includes a manufacturing location in Brazil and sales offices in Brazil, China and Sri Lanka.

In addition to UNIFI’s reportable segments, the selected financial information presented below includes an All Other category. All Other consists primarily of for-hire transportation services and Repreve Renewables, LLC (“Renewables”) (up through December 23, 2016, the date of the sale by UNIFI of its 60% equity ownership interest in Renewables). For-hire transportation services revenue is derived from performing common carrier services utilizing UNIFI’s fleet of transportation equipment. Revenue for Renewables was primarily derived from (i) facilitating the use of miscanthus grass as bio-fuel through service agreements and (ii) delivering harvested miscanthus grass to poultry producers for animal bedding.

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 (Loss), 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 the below financial information, 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 24, 2017
	Polyester		Nylon		International		All Other		Total
Net sales	$	90,316	$	25,103	$	51,046	$	1,013	$	167,478
Cost of sales		81,740		22,027		40,072		963		144,802
Gross profit		8,576		3,076		10,974		50		22,676
Segment depreciation expense		3,973		552		397		64		4,986
Segment Profit	$	12,549	$	3,628	$	11,371	$	114	$	27,662

	For the Three Months Ended December 25, 2016
	Polyester		Nylon		International		All Other			Total
Net sales	$	86,671	$	28,302	$	38,868	$	1,314		$	155,155
Cost of sales		76,200		25,679		29,419		1,727			133,025
Gross profit (loss)		10,471		2,623		9,449		(413	)		22,130
Segment depreciation expense		3,384		530		228		244			4,386
Segment Profit (Loss)	$	13,855	$	3,153	$	9,677	$	(169	)	$	26,516

The reconciliations of segment gross profit (loss) to consolidated income before income taxes are as follows:

	For the Three Months Ended
	December 24, 2017			December 25, 2016
Polyester	$	8,576		$	10,471
Nylon		3,076			2,623
International		10,974			9,449
All Other		50			(413	)
Segment gross profit		22,676			22,130
Selling, general and administrative expenses		14,626			12,868
Benefit for bad debts		(72	)		(95	)
Other operating expense, net		348			319
Operating income		7,774			9,038
Interest income		(181	)		(183	)
Interest expense		1,190			914
Loss on sale of business		—			1,662
Equity in (earnings) loss of unconsolidated affiliates		(211	)		367
Income before income taxes	$	6,976		$	6,278

Selected financial information is presented below:

	For the Six Months Ended December 24, 2017
	Polyester		Nylon		International		All Other		Total
Net sales	$	178,054	$	51,930	$	99,705	$	2,031	$	331,720
Cost of sales		160,565		45,540		77,733		1,914		285,752
Gross profit		17,489		6,390		21,972		117		45,968
Segment depreciation expense		7,840		1,089		813		129		9,871
Segment Profit	$	25,329	$	7,479	$	22,785	$	246	$	55,839

	For the Six Months Ended December 25, 2016
	Polyester		Nylon		International		All Other			Total
Net sales	$	171,356	$	56,797	$	84,212	$	2,759		$	315,124
Cost of sales		152,435		51,037		62,493		3,482			269,447
Gross profit (loss)		18,921		5,760		21,719		(723	)		45,677
Segment depreciation expense		6,492		1,040		474		496			8,502
Segment Profit (Loss)	$	25,413	$	6,800	$	22,193	$	(227	)	$	54,179

The reconciliations of segment gross profit (loss) to consolidated income before income taxes are as follows:

	For the Six Months Ended
	December 24, 2017			December 25, 2016
Polyester	$	17,489		$	18,921
Nylon		6,390			5,760
International		21,972			21,719
All Other		117			(723	)
Segment gross profit		45,968			45,677
Selling, general and administrative expenses		27,489			24,278
Benefit for bad debts		(131	)		(462	)
Other operating expense, net		663			249
Operating income		17,947			21,612
Interest income		(262	)		(329	)
Interest expense		2,375			1,606
Loss on sale of business		—			1,662
Equity in earnings of unconsolidated affiliates		(3,298	)		(473	)
Income before income taxes	$	19,132		$	19,146

The reconciliations of segment total assets to consolidated total assets are as follows:

	December 24, 2017		June 25, 2017
Polyester	$	266,522	$	270,819
Nylon		60,210		57,789
International		95,198		80,824
Segment total assets		421,930		409,432
Other current assets		33,033		27,375
Other PP&E		15,988		14,904
Other non-current assets		2,891		279
Investments in unconsolidated affiliates		113,623		119,513
Total assets	$	587,465	$	571,503