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Investments in Unconsolidated Affiliates and Variable Interest Entities | 12 Months Ended
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Jun. 28, 2020
Equity Method Investments And Joint Ventures [Abstract] |
Investments in Unconsolidated Affiliates and Variable Interest Entities | 23. 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, a producer of cotton and synthetic yarns for sale to the global textile industry and apparel market. In exchange for its contribution, UNIFI received a 34% equity ownership interest in the PAL Investment, accounted for using the equity method of accounting. Effective January 1, 2012, Mills’ interest in PAL was assigned to Parkdale. During March 2020, UNIFI commenced negotiations to sell the PAL Investment to Parkdale. Such negotiations indicated that the fair value of the PAL Investment was less than UNIFI’s carrying value, and UNIFI no longer intended to hold the PAL Investment to allow recovery of the carrying value. UNIFI recorded an other-than-temporary impairment of $45,194 to adjust the PAL Investment to fair value. In April 2020, UNIFI and Parkdale finalized negotiations to sell UNIFI’s PAL Investment to Parkdale for $60,000. The transaction closed on April 29, 2020, and UNIFI received $60,000 in cash. During UNIFI’s period of ownership, PAL was a limited liability company treated as a partnership for income tax reporting purposes. Per PAL’s fiscal 2019 audited financial statements, PAL had 11 manufacturing facilities located primarily in the southeast region of the U.S. and in Mexico, and PAL’s five largest customers accounted for approximately 75% of total revenues and 79% of total gross accounts receivable outstanding. 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 U.S. 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 December 2018, the U.S. federal government extended the program at the same rate through July 31, 2021, and for subsequent years, subject to funding available through annual appropriations. 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 has been subject to price risk related to anticipated fixed-price yarn sales. To protect the gross margin of these sales, PAL may have entered 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 were listed and traded on an exchange and were thus valued using quoted prices classified within Level 1 of the fair value hierarchy. 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 28, 2020, UNIFI’s open purchase orders related to this agreement were $2,259. UNIFI’s raw material purchases under this supply agreement consist of the following:
|  | For the Fiscal Year Ended |
|  | June 28, 2020 |  |  | June 30, 2019 |  |  | June 24, 2018 |
UNF |  | $ | 1,450 |  |  | $ | 1,735 |  |  | $ | 1,800 |
UNFA |  |  | 14,583 |  |  |  | 23,089 |  |  |  | 21,731 |
Total |  | $ | 16,033 |  |  | $ | 24,824 |  |  | $ | 23,531 |
As of June 28, 2020 and June 30, 2019, UNIFI had combined accounts payable due to UNF and UNFA of $1,166 and $1,728, respectively. 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 28 2020, UNIFI’s combined investments in UNF and UNFA were $2,171 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 separately disclosed due to its status as a significant subsidiary for fiscal 2019 and 2018. PAL has not met the criteria for segment reporting. Below, (i) no PAL Investment amounts are reported for June 28, 2020 due to the associated divestiture on April 29, 2020, and (ii) fiscal 2020 PAL Investment income statement activity is reported for the ten months of fiscal 2020 ownership ending April 29, 2020.
|  | As of June 28, 2020 |
|  | PAL |  |  | Other |  |  | Total |
Current assets |  | $ | — |  |  | $ | 5,190 |  |  | $ | 5,190 |
Non-current assets |  |  | — |  |  |  | 561 |  |  |  | 561 |
Current liabilities |  |  | — |  |  |  | 1,415 |  |  |  | 1,415 |
Non-current liabilities |  |  | — |  |  |  | — |  |  |  | — |
Shareholders’ equity and capital accounts |  |  | — |  |  |  | 4,336 |  |  |  | 4,336 |
UNIFI’s portion of undistributed earnings |  |  | — |  |  |  | 1,424 |  |  |  | 1,424 |
|  | As of June 30, 2019 |
|  | PAL |  |  | Other |  |  | Total |
Current assets |  | $ | 299,610 |  |  | $ | 7,218 |  |  | $ | 306,828 |
Non-current assets |  |  | 158,304 |  |  |  | 696 |  |  |  | 159,000 |
Current liabilities |  |  | 70,875 |  |  |  | 4,069 |  |  |  | 74,944 |
Non-current liabilities |  |  | 3,252 |  |  |  | — |  |  |  | 3,252 |
Shareholders’ equity and capital accounts |  |  | 383,787 |  |  |  | 3,845 |  |  |  | 387,632 |
|  | For the Fiscal Year Ended June 28, 2020 |
|  | PAL |  |  | Other |  |  | Total |
Net sales |  | $ | 544,006 |  |  | $ | 17,068 |  |  | $ | 561,074 |
Gross profit |  |  | 7,592 |  |  |  | 2,056 |  |  |  | 9,648 |
(Loss) income from operations |  |  | (7,484 | ) |  |  | 410 |  |  |  | (7,074 | )
Net (loss) income |  |  | (2,823 | ) |  |  | 497 |  |  |  | (2,326 | )
Depreciation and amortization |  |  | 33,455 |  |  |  | 135 |  |  |  | 33,590 |
Cash received by PAL under cotton rebate program |  |  | 11,186 |  |  |  | — |  |  |  | 11,186 |
Earnings recognized by PAL for cotton rebate program |  |  | 9,697 |  |  |  | — |  |  |  | 9,697 |
Distributions received |  |  | 10,437 |  |  |  | — |  |  |  | 10,437 |
|  | For the Fiscal Year Ended June 30, 2019 |
|  | PAL |  |  | Other |  |  | Total |
Net sales |  | $ | 836,675 |  |  | $ | 25,621 |  |  | $ | 862,296 |
Gross profit |  |  | 24,455 |  |  |  | 4,713 |  |  |  | 29,168 |
Income from operations |  |  | 6,575 |  |  |  | 2,988 |  |  |  | 9,563 |
Net income |  |  | 7,534 |  |  |  | 3,093 |  |  |  | 10,627 |
Depreciation and amortization |  |  | 40,679 |  |  |  | 190 |  |  |  | 40,869 |
Cash received by PAL under cotton rebate program |  |  | 13,367 |  |  |  | — |  |  |  | 13,367 |
Earnings recognized by PAL for cotton rebate program |  |  | 12,896 |  |  |  | — |  |  |  | 12,896 |
Distributions received |  |  | 647 |  |  |  | 2,000 |  |  |  | 2,647 |
|  | 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 |

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SX 210.3A-04) -URI http://asc.fasb.org/extlink&oid=116822174&loc=d3e355119-122828 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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