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Income Taxes | 12 Months Ended
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Jun. 30, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 15. Income Taxes Components of Income Before Income Taxes The components of income before income taxes consist of the following:
|  | For the Fiscal Year Ended |
|  | June 30, 2019 |  |  | June 24, 2018 |  |  | June 25, 2017 |
U.S. |  | $ | (13,326 | ) |  | $ | (7,852 | ) |  | $ | 2,689 |
Foreign |  |  | 23,337 |  |  |  | 38,063 |  |  |  | 40,586 |
Income before income taxes |  | $ | 10,011 |  |  | $ | 30,211 |  |  | $ | 43,275 |
Components of Provision (Benefit) for Income Taxes Provision (benefit) for income taxes consists of the following:
|  | For the Fiscal Year Ended |
|  | June 30, 2019 |  |  | June 24, 2018 |  |  | June 25, 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (178 | ) |  | $ | (4,918 | ) |  | $ | (6,082 | )
State |  |  | 28 |  |  |  | (416 | ) |  |  | (130 | )
Foreign |  |  | 7,282 |  |  |  | 9,639 |  |  |  | 10,224 |
Total current tax expense |  |  | 7,132 |  |  |  | 4,305 |  |  |  | 4,012 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (813 | ) |  |  | (5,315 | ) |  |  | 6,602 |
State |  |  | 1,097 |  |  |  | (872 | ) |  |  | 162 |
Foreign |  |  | 139 |  |  |  | 391 |  |  |  | 122 |
Total deferred tax expense |  |  | 423 |  |  |  | (5,796 | ) |  |  | 6,886 |
Provision (benefit) for income taxes |  | $ | 7,555 |  |  | $ | (1,491 | ) |  | $ | 10,898 |
U.S. Tax Reform On December 22, 2017, the U.S. government enacted comprehensive tax legislation H.R. 1, formerly known as the Tax Cuts and Jobs Act. H.R. 1 included significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, additional limitations on the deductions for executive compensation and interest expense, and the transition of the U.S. international tax system from a worldwide tax to a territorial tax system. As a fiscal-year taxpayer, certain provisions of H.R. 1 impacted UNIFI in fiscal 2018, including the change in the U.S. federal corporate income tax rate and the one-time transition tax (“toll charge”), while other provisions became effective for UNIFI at the beginning of fiscal 2019. The enactment of H.R. 1 resulted in recording a total provisional tax benefit of $396 for fiscal 2018. For a full description of the impact of H.R. 1 for fiscal 2018, refer to Note 14, “Income Taxes,” in UNIFI’s Annual Report on Form 10-K for fiscal 2018. In fiscal 2019, UNIFI recorded an additional tax benefit of $843 related to the enactment of H.R. 1, which decreased the effective tax rate for the period by 8.4%. The total tax benefit related to the enactment of H.R. 1 was $1,239, primarily consisting of $3,986 of tax benefit related to the re-measurement of deferred tax balances, and $2,747 of tax expense related to the toll charge, net of foreign tax credits. Although UNIFI no longer considers these amounts provisional, the income tax effects of H.R. 1 may change following future legislation or further interpretation of H.R. 1 based on the publication of guidance from the U.S. Internal Revenue Service (the “IRS”) and state tax authorities. The Global Intangible Low-Taxed Income (“GILTI”) provisions included in H.R. 1 require that certain income earned by foreign subsidiaries must be currently included in the gross income of the U.S. shareholder. These provisions were effective for UNIFI in fiscal 2019. The GILTI provisions are complex and subject to continuing regulatory interpretation by the IRS. UNIFI has elected to recognize GILTI as a current-period expense. Under this policy, UNIFI has not provided deferred taxes related to temporary differences that, upon their reversal, will affect the amount of income subject to GILTI in the period. Utilization of Net Operating Loss Carryforwards Domestic deferred tax expense includes the utilization of federal net operating loss (“NOL”) carryforwards of $3,122 and $843 for fiscal 2019 and 2018, respectively. Foreign deferred tax expense includes the utilization of NOL carryforwards of $655, $773 and $756 for fiscal 2019, 2018 and 2017, respectively. State deferred tax expense includes the utilization of NOL carryforwards of $106, $116 and $26 for fiscal 2019, 2018 and 2017, respectively. Effective Tax Rate Reconciliation from the federal statutory tax rate to the effective tax rate is as follows:
|  | For the Fiscal Year Ended |
|  | June 30, 2019 |  |  | June 24, 2018 |  |  | June 25, 2017 |
Federal statutory tax rate |  |  | 21.0 | % |  |  | 28.3 | % |  |  | 35.0 | %
Foreign income taxed at different rates |  |  | 16.1 |  |  |  | (2.4 | ) |  |  | (10.2 | )
Repatriation of foreign earnings and withholding taxes |  |  | 20.3 |  |  |  | 1.8 |  |  |  | 1.4 |
Repatriation of foreign earnings due to tax reform |  |  | 0.7 |  |  |  | 23.9 |  |  |  | — |
Revaluation of U.S. deferred balances due to tax reform |  |  | 3.1 |  |  |  | (14.2 | ) |  |  | — |
U.S. tax on GILTI |  |  | 32.5 |  |  |  | — |  |  |  | — |
Change in valuation allowance |  |  | (1.5 | ) |  |  | (12.9 | ) |  |  | (0.5 | )
Foreign tax credits |  |  | (11.9 | ) |  |  | (11.0 | ) |  |  | — |
Domestic production activities deduction |  |  | (5.6 | ) |  |  | 0.5 |  |  |  | 2.0 |
Research and other credits |  |  | (7.7 | ) |  |  | (1.8 | ) |  |  | (5.1 | )
State income taxes, net of federal tax benefit |  |  | (0.6 | ) |  |  | (3.9 | ) |  |  | 0.2 |
Change in uncertain tax positions |  |  | 8.2 |  |  |  | (15.1 | ) |  |  | 1.8 |
Nondeductible compensation |  |  | 5.1 |  |  |  | 1.6 |  |  |  | — |
Nontaxable income |  |  | (4.2 | ) |  |  | — |  |  |  | — |
Nondeductible expenses and other |  |  | — |  |  |  | 0.3 |  |  |  | 0.6 |
Effective tax rate |  |  | 75.5 | % |  |  | (4.9 | )% |  |  | 25.2 | %
Deferred Income Taxes The significant components of UNIFI’s deferred tax assets and liabilities consist of the following:
|  | June 30, 2019 |  |  | June 24, 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Investments, including unconsolidated affiliates |  | $ | 5,680 |  |  | $ | 5,429 |
Intangible assets |  |  | 1,679 |  |  |  | 2,141 |
Accrued compensation and benefits |  |  | 1,761 |  |  |  | 2,089 |
Tax credits |  |  | 17,237 |  |  |  | 5,845 |
NOL carryforwards |  |  | 4,381 |  |  |  | 10,008 |
Research and development costs |  |  | 4,081 |  |  |  | — |
Other items |  |  | 5,555 |  |  |  | 4,847 |
Total gross deferred tax assets |  |  | 40,374 |  |  |  | 30,359 |
Valuation allowance |  |  | (26,020 | ) |  |  | (15,143 | )
Net deferred tax assets |  |  | 14,354 |  |  |  | 15,216 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
PP&E |  |  | (18,325 | ) |  |  | (19,375 | )
Other |  |  | (295 | ) |  |  | (216 | )
Total deferred tax liabilities |  |  | (18,620 | ) |  |  | (19,591 | )
Net deferred tax liabilities |  | $ | (4,266 | ) |  | $ | (4,375 | )
Deferred Income Taxes – Valuation Allowance In assessing its ability to realize deferred tax assets, UNIFI considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. UNIFI considers the scheduled reversal of taxable temporary differences, taxable income in carryback years, projected future taxable income and tax planning strategies in making this assessment. Since UNIFI operates in multiple jurisdictions, the assessment is made on a jurisdiction-by-jurisdiction basis, taking into account the effects of local tax law. The balances and activity for UNIFI’s deferred tax valuation allowance are as follows:
|  | For the Fiscal Year Ended |
|  | June 30, 2019 |  |  | June 24, 2018 |  |  | June 25, 2017 |
Balance at beginning of year |  | $ | (15,143 | ) |  | $ | (17,957 | ) |  | $ | (13,550 | )
(Increase) decrease in valuation allowance |  |  | (10,877 | ) |  |  | 2,814 |  |  |  | (4,407 | )
Balance at end of year |  | $ | (26,020 | ) |  | $ | (15,143 | ) |  | $ | (17,957 | )
Components of UNIFI’s deferred tax valuation allowance are as follows:
|  | For the Fiscal Year Ended |
|  | June 30, 2019 |  |  | June 24, 2018 |  |  | June 25, 2017 |
Investments, including unconsolidated affiliates |  | $ | (5,696 | ) |  | $ | (5,522 | ) |  | $ | (7,789 | )
NOL carryforwards (1) |  |  | (4,048 | ) |  |  | (4,191 | ) |  |  | (9,379 | )
Tax credits |  |  | (16,276 | ) |  |  | (5,430 | ) |  |  | (789 | )
Total deferred tax valuation allowance |  | $ | (26,020 | ) |  | $ | (15,143 | ) |  | $ | (17,957 | )
(1) | Includes certain U.S. NOLs and capital losses outside the U.S. consolidated tax filing group.
During fiscal 2019, UNIFI’s valuation allowance increased by $10,877. The increase was primarily driven by an increase in the valuation allowance on foreign tax credits and certain state NOLs and credit carryforwards. During fiscal 2018, UNIFI’s valuation allowance decreased by $2,814. The decrease was primarily driven by the release of a valuation allowance on NOLs outside the U.S. consolidated tax filing group that are now able to be utilized, and a decrease related to U.S. deferred tax assets to reflect the lower federal ending deferred tax rate. The decrease was partially offset by an increase related to foreign tax credit carryforwards for which no benefit can be realized. During fiscal 2017, UNIFI’s valuation allowance increased by $4,407. The increase consisted primarily of (i) $4,241 of foreign losses and (ii) $789 of foreign tax credit carryforwards for which no benefit can be recognized. The increase was partially offset by a net decrease of $582 related to UNIFI’s investment in PAL due to the timing of PAL’s taxable income versus book income. Unrecognized Tax Benefits A reconciliation of beginning and ending gross amounts of unrecognized tax benefits is as follows:
|  | For the Fiscal Year Ended |
|  | June 30, 2019 |  |  | June 24, 2018 |  |  | June 25, 2017 |
Balance at beginning of year |  | $ | 166 |  |  | $ | 4,463 |  |  | $ | 4,254 |
Gross increases related to current period tax positions |  |  | 26 |  |  |  | 26 |  |  |  | 124 |
Gross increases (decreases) related to tax positions in prior periods |  |  | 980 |  |  |  | (119 | ) |  |  | 524 |
Gross decreases related to settlements with tax authorities |  |  | — |  |  |  | (4,204 | ) |  |  | (439 | )
Gross decreases related to lapse of applicable statute of limitations |  |  | (89 | ) |  |  | — |  |  |  | — |
Balance at end of year |  | $ | 1,083 |  |  | $ | 166 |  |  | $ | 4,463 |
Unrecognized tax benefits would generate a favorable impact of $1,043 on UNIFI’s effective tax rate when recognized. UNIFI does not expect material changes in uncertain tax positions within the next 12 months. Expense (benefit) for interest and penalties recognized by UNIFI within the provision for income taxes was $22, $(1,030) and $(42) for fiscal 2019, 2018 and 2017, respectively. UNIFI had $63, $41 and $772 accrued for interest and/or penalties related to uncertain tax positions as of June 30, 2019, June 24, 2018 and June 25, 2017, respectively. Expiration of Net Operating Loss Carryforwards and Foreign Tax Credits As of June 30, 2019, UNIFI had U.S. state NOL carryforwards of $46,189 and foreign NOL carryforwards of $9,204, offset by a full valuation allowance. The NOL carryforwards begin expiring in varying amounts in fiscal 2020. As of June 30, 2019, UNIFI had the following carryforward attributes held outside of the U.S. consolidated tax filing group: U.S. federal NOL carryforwards of $4,806, U.S. federal capital loss carryforwards of $4,489, and U.S. state NOL carryforwards of $12,279. The U.S. federal capital loss carryforwards are offset with a full valuation allowance and the U.S. state NOL carryforwards are partially offset by a valuation allowance. The NOL carryforwards held outside of the U.S. consolidated tax filing group begin expiring in fiscal 2020. As of June 30, 2019, UNIFI had U.S. federal foreign tax credit carryforwards of $13,477 and foreign tax credit carryforwards in foreign jurisdictions of $2,437, offset with a full valuation allowance. The foreign tax credit carryforwards begin expiring in varying amounts in fiscal 2021. Tax Years Subject to Examination Unifi, Inc. and its domestic subsidiaries file a consolidated federal income tax return, as well as income tax returns in multiple state and foreign jurisdictions. The tax years subject to examination vary by jurisdiction. UNIFI regularly assesses the outcomes of both completed and ongoing examinations to ensure that UNIFI’s provision for income taxes is sufficient. In fiscal 2019, the IRS initiated an audit for fiscal year 2015, 2016 and 2017. The audit was not concluded at the end of fiscal 2019. No material assessment is anticipated. In fiscal 2018, the IRS examined UNIFI’s federal income tax returns for fiscal 2014 and 2015, and re-examined the federal income tax return for fiscal 2013. The examination closed with no proposed adjustments. In fiscal 2016, the North Carolina Department of Revenue initiated an audit for fiscal year 2012 through 2015. The audit was not concluded at the end of fiscal 2019. No material assessment is anticipated. UNIFI is currently under appeal in Colombia for tax years 2006 and 2007. UNIFI believes it is more-likely-than-not to conclude the appeal with no material assessment. Statutes related to material foreign jurisdictions are open from January 1, 2014 and material state jurisdictions from June 29, 2015. Certain carryforward tax attributes generated in years prior remain subject to examination and could change in subsequent tax years. Indefinite Reinvestment Assertion As of June 30, 2019, U.S. income taxes and foreign withholding taxes were not provided for on a cumulative total of approximately $131,386 of undistributed earnings of UNIFI’s foreign subsidiaries. UNIFI intends to reinvest these earnings indefinitely in its foreign subsidiaries. If at a later date, these earnings were to be repatriated to the U.S., UNIFI would be required to accrue and pay state income and/or foreign local withholding taxes on these amounts. Determination of the amount of any unrecognized deferred tax liability on these undistributed earnings is not practicable. UNIFI will continue to assess the existing circumstances, including any changes in tax laws, and reevaluate the necessity for any deferred tax liability.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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