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Other Non-Current Assets | 12 Months Ended
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Jul. 03, 2022
Other Assets Noncurrent Disclosure [Abstract] |
Other Non-Current Assets | 10. Other Non-Current Assets Other non-current assets consists of the following:
|  | July 3, 2022 |  |  | June 27, 2021 |
Intangible assets, net |  | $ | 2,500 |  |  | $ | 3,978 |
Grantor trust |  |  | 2,196 |  |  |  | — |
Investments in unconsolidated affiliates |  |  | 2,072 |  |  |  | 2,159 |
Recovery of non-income taxes, net |  |  | — |  |  |  | 8,063 |
Other |  |  | 2,020 |  |  |  | 425 |
Total other non-current assets |  | $ | 8,788 |  |  | $ | 14,625 |
Grantor Trust During fiscal 2022, UNIFI established a grantor (or “rabbi”) trust to facilitate the payment of obligations under the Unifi, Inc. Deferred Compensation Plan (the “DCP”), which was also established in fiscal 2022. In addition to providing certain key employees with the ability to defer earned cash incentive compensation into the DCP, participants can generally choose the form and timing of deferred amounts. The DCP assumed the participants, obligations, and major terms of the Unifi, Inc. Supplemental Key Employee Retirement Plan (together with amendments, the “SERP”), an unfunded plan established in 2006 for purposes of generating supplemental retirement income for key employees of UNIFI. The amounts credited to participant accounts are reflected in selling, general, and administrative expenses. The assets of the trust are subject to the claims of UNIFI’s creditors in the event of insolvency. Investments held for the DCP consist of mutual funds and are recorded based on market values. A change in the value of the trust assets would substantially be offset by a change in the liability to the participants, resulting in an immaterial net impact on our consolidated financial statements. The fair value of the investment assets held by the trust were approximately $2,196 and $0 as of July 3, 2022 and June 27, 2021, respectively, and are classified as trading securities within Other non-current assets. Trading gains and losses associated with these investments are recorded to Other operating expense, net. The associated DCP liability is recorded within Other current liabilities and Other long-term liabilities based on expected payment timing, and any increase or decrease in the liability is reflected as compensation in Selling, general and administrative expenses. During fiscal 2022, we recorded losses on investments held by the trust of $48. Recovery of Non-Income Taxes, Net As previously described in Note 8, “Other Current Assets,” UNIFI recorded a recovery of non-income taxes and reflected current and non-current assets accordingly. Intangible Assets Intangible assets, net consists of the following:
|  | July 3, 2022 |  |  | June 27, 2021 |
Customer lists |  | $ | 5,220 |  |  | $ | 5,220 |
Non-compete agreement |  |  | 1,875 |  |  |  | 1,875 |
Trademarks |  |  | 104 |  |  |  | 411 |
Total intangible assets, gross |  |  | 7,199 |  |  |  | 7,506 |
Accumulated amortization – customer lists |  |  | (3,056 | ) |  |  | (2,049 | )
Accumulated amortization – non-compete agreement |  |  | (1,563 | ) |  |  | (1,188 | )
Accumulated amortization – trademarks |  |  | (80 | ) |  |  | (291 | )
Total accumulated amortization |  |  | (4,699 | ) |  |  | (3,528 | )
Total intangible assets, net |  | $ | 2,500 |  |  | $ | 3,978 |
UNIFI capitalizes costs incurred to register trademarks primarily for REPREVE in various countries. UNIFI has determined that these trademarks have varying useful lives of up to three years and are being amortized using the straight-line method. Amortization expense for intangible assets consists of the following:
|  | For the Fiscal Year Ended |
|  | July 3, 2022 |  |  | June 27, 2021 |  |  | June 28, 2020 |
Customer lists |  | $ | 1,007 |  |  | $ | 556 |  |  | $ | 326 |
Non-compete agreement |  |  | 375 |  |  |  | 375 |  |  |  | 375 |
Trademarks |  |  | 96 |  |  |  | 147 |  |  |  | 154 |
Total amortization expense |  | $ | 1,478 |  |  | $ | 1,078 |  |  | $ | 855 |
The following table presents the expected intangible asset amortization for the next five fiscal years:
|  | Fiscal 2023 |  |  | Fiscal 2024 |  |  | Fiscal 2025 |  |  | Fiscal 2026 |  |  | Fiscal 2027 |  |  | Thereafter |
Expected amortization |  | $ | 1,291 |  |  | $ | 528 |  |  | $ | 108 |  |  | $ | 108 |  |  | $ | 108 |  |  | $ | 357 |
Investments in Unconsolidated Affiliates 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 located in Ridgeway, Virginia. UNFA is treated as a partnership for its income tax reporting. In conjunction with the formation of UNFA, UNIFI entered into a supply agreement with UNF and UNFA (collectively, “UNFs”) 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 July 3, 2022, UNIFI’s open purchase orders related to this agreement were $896. UNIFI’s raw material purchases under this supply agreement consist of the following:
|  | For the Fiscal Year Ended |
|  | July 3, 2022 |  |  | June 27, 2021 |  |  | June 28, 2020 |
UNFA |  | $ | 29,637 |  |  | $ | 18,932 |  |  | $ | 14,583 |
UNF |  |  | 1,175 |  |  |  | 548 |  |  |  | 1,450 |
Total |  | $ | 30,812 |  |  | $ | 19,480 |  |  | $ | 16,033 |
As of July 3, 2022 and June 27, 2021, UNIFI had combined accounts payable due to UNF and UNFA of $5,565 and $2,955, 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 (i) UNIFI purchases substantially all of the output from the two entities so all intercompany sales would be eliminated in consolidation, (ii) the two entities’ balance sheets constitute 3% or less of UNIFI’s current assets and total assets, and (iii) 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 and instead is accounting for these entities as equity investments. As of July 3, 2022, UNIFI’s combined investments in UNF and UNFA were $2,072. 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. 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 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 2020 unaudited financial statements, PAL had 10 manufacturing facilities located primarily in the southeast region of the U.S. and in Mexico, and PAL’s five largest customers accounted for approximately 69% of total revenues and 68% of total gross accounts receivable outstanding. Condensed balance sheet and income statement information for UNFs (including reciprocal balances) is presented in the following tables. Fiscal 2020 PAL Investment income statement activity is reported for the ten months of fiscal 2020 ownership ending April 29, 2020.
|  | July 3, 2022 |  |  | June 27, 2021 |
Current assets |  | $ | 10,705 |  |  | $ | 7,931 |
Non-current assets |  |  | 605 |  |  |  | 659 |
Current liabilities |  |  | 8,056 |  |  |  | 3,967 |
Non-current liabilities |  |  | — |  |  |  | — |
Shareholders’ equity and capital accounts |  |  | 3,254 |  |  |  | 4,623 |
UNIFI’s portion of undistributed earnings |  |  | 2,013 |  |  |  | 2,100 |
|  | July 3, 2022 |  |  | June 27, 2021 |
Net sales |  | $ | 31,745 |  |  | $ | 19,649 |
Gross profit |  |  | 1,928 |  |  |  | 3,423 |
Income from operations |  |  | 148 |  |  |  | 1,777 |
Net income |  |  | 127 |  |  |  | 1,782 |
Depreciation and amortization |  |  | 121 |  |  |  | 151 |
Distributions received |  |  | 750 |  |  |  | 750 |
|  | For the Fiscal Year Ended June 28, 2020 |
|  | PAL |  |  | UNFs |  |  | 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 |

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