Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
   
FORM 10-Q
   
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1,September 30, 2017
or
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number: 001-32891
   
Hanesbrands Inc.
(Exact name of registrant as specified in its charter)
   
Maryland 20-3552316
(State of incorporation) 
(I.R.S. employer
identification no.)
  
1000 East Hanes Mill Road
Winston-Salem, North Carolina
 27105
(Address of principal executive office) (Zip code)
(336) 519-8080
(Registrant’s telephone number including area code)
   
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ¨   
       
Non-accelerated filer 
¨  (Do not check if a smaller reporting company)
 Smaller reporting company ¨
Emerging growth company

 
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of July 28,October 27, 2017, there were 364,478,783364,584,181 shares of the registrant’s common stock outstanding.
 


Table of Contents

TABLE OF CONTENTS
 
  Page
   
  
Item 1. 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
   
PART II  
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



Table of Contents

FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue” or similar expressions. In particular, statements under the heading “Outlook” and other information appearing under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” include forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements.
Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management, expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that the expectation or belief will result or will be achieved or accomplished. More information on factors that could cause actual results or events to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2016, under the caption “Risk Factors,” and available on the “Investors” section of our corporate website, www.Hanes.com/investors.
All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K for the year ended December 31, 2016, particularly under the caption “Risk Factors.” We undertake no obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings over the Internet at the SEC’s website at www.sec.gov. To receive copies of public records not posted to the SEC’s web site at prescribed rates, you may complete an online form at www.sec.gov, send a fax to (202) 772-9337 or submit a written request to the SEC, Office of FOIA/PA Operations, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information.
We make available free of charge at www.Hanes.com/investors (in the “Investors” section) copies of materials we file with, or furnish to, the SEC. By referring to our corporate website, www.Hanes.com/corporate, or any of our other websites, we do not incorporate any such website or its contents into this Quarterly Report on Form 10-Q.


PART I

Item 1.Financial Statements

HANESBRANDS INC.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)

Quarter Ended Six Months EndedQuarter Ended Nine Months Ended
July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Net sales$1,646,610
 $1,472,731
 $3,026,965
 $2,691,871
$1,799,270
 $1,761,019
 $4,826,235
 $4,452,890
Cost of sales1,000,708
 915,440
 1,841,532
 1,677,324
1,120,813
 1,111,653
 2,962,345
 2,788,977
Gross profit645,902
 557,291
 1,185,433
 1,014,547
678,457
 649,366
 1,863,890
 1,663,913
Selling, general and administrative expenses417,225
 336,081
 835,488
 670,932
425,153
 421,014
 1,260,641
 1,091,946
Operating profit228,677
 221,210
 349,945
 343,615
253,304
 228,352
 603,249
 571,967
Other expenses1,394
 48,325
 2,778
 48,974
1,881
 1,559
 4,659
 50,533
Interest expense, net44,130
 36,540
 86,267
 68,106
43,917
 43,433
 130,184
 111,539
Income from continuing operations before income tax expense183,153
 136,345
 260,900
 226,535
207,506
 183,360
 468,406
 409,895
Income tax expense10,989
 8,202
 15,654
 18,123
4,150
 10,570
 19,804
 28,693
Income from continuing operations172,164
 128,143
 245,246
 208,412
203,356
 172,790
 448,602
 381,202
Income (loss) from discontinued operations, net of tax368
 
 (2,097) 

 1,068
 (2,097) 1,068
Net income$172,532
 $128,143
 $243,149
 $208,412
$203,356
 $173,858
 $446,505
 $382,270
              
Earnings per share — basic:              
Continuing operations$0.47
 $0.34
 $0.66
 $0.54
$0.56
 $0.46
 $1.22
 $1.00
Discontinued operations
 
 (0.01) 

 
 (0.01) 
Net income$0.47
 $0.34
 $0.66
 $0.54
$0.56
 $0.46
 $1.21
 $1.00
              
Earnings per share — diluted:              
Continuing operations$0.47
 $0.34
 $0.66
 $0.54
$0.55
 $0.45
 $1.21
 $0.99
Discontinued operations
 
 (0.01) 

 
 (0.01) 
Net income$0.47
 $0.34
 $0.65
 $0.54
$0.55
 $0.45
 $1.20
 $0.99


HANESBRANDS INC.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)

Quarter Ended Six Months EndedQuarter Ended Nine Months Ended
July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Net income$172,532
 $128,143
 $243,149
 $208,412
$203,356
 $173,858
 $446,505
 $382,270
Other comprehensive income (loss), net of tax of $2,351, ($1,893), $6,443 and ($454), respectively(11,928) 6,188
 4,298
 16,404
Other comprehensive income (loss), net of tax of $1,427, ($247), $7,870 and ($701), respectively5,051
 (2,713) 9,349
 13,691
Comprehensive income$160,604
 $134,331
 $247,447
 $224,816
$208,407
 $171,145
 $455,854
 $395,961


HANESBRANDS INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)

July 1,
2017
 December 31,
2016
September 30,
2017
 December 31,
2016
Assets      
Cash and cash equivalents$449,415
 $460,245
$400,045
 $460,245
Trade accounts receivable, net935,548
 836,924
1,009,188
 836,924
Inventories2,000,436
 1,840,565
1,953,918
 1,840,565
Other current assets192,603
 137,535
196,875
 137,535
Current assets of discontinued operations
 45,897

 45,897
Total current assets3,578,002
 3,321,166
3,560,026
 3,321,166
Property, net619,883
 692,464
624,602
 692,464
Trademarks and other identifiable intangibles, net1,346,369
 1,285,458
1,371,007
 1,285,458
Goodwill1,132,981
 1,098,540
1,141,942
 1,098,540
Deferred tax assets480,001
 464,872
504,059
 464,872
Other noncurrent assets79,735
 67,980
79,087
 67,980
Total assets$7,236,971
 $6,930,480
$7,280,723
 $6,930,480
      
Liabilities and Stockholders’ Equity      
Accounts payable$784,960
 $761,647
$852,671
 $761,647
Accrued liabilities565,143
 619,795
614,599
 619,795
Notes payable72,157
 56,396
23,969
 56,396
Accounts Receivable Securitization Facility203,609
 44,521
250,995
 44,521
Current portion of long-term debt152,719
 133,843
154,395
 133,843
Current liabilities of discontinued operations
 9,466

 9,466
Total current liabilities1,778,588
 1,625,668
1,896,629
 1,625,668
Long-term debt3,797,245
 3,507,685
3,566,547
 3,507,685
Pension and postretirement benefits377,715
 371,612
378,573
 371,612
Other noncurrent liabilities205,097
 201,601
207,807
 201,601
Total liabilities6,158,645
 5,706,566
6,049,556
 5,706,566
      
Stockholders’ equity:      
Preferred stock (50,000,000 authorized shares; $.01 par value)      
Issued and outstanding — None
 

 
Common stock (2,000,000,000 authorized shares; $.01 par value)      
Issued and outstanding — 364,435,404 and 378,687,052, respectively3,644
 3,787
Issued and outstanding — 364,571,559 and 378,687,052, respectively3,646
 3,787
Additional paid-in capital268,007
 260,002
267,675
 260,002
Retained earnings1,238,368
 1,396,116
1,386,488
 1,396,116
Accumulated other comprehensive loss(431,693) (435,991)(426,642) (435,991)
Total stockholders’ equity1,078,326
 1,223,914
1,231,167
 1,223,914
Total liabilities and stockholders’ equity$7,236,971
 $6,930,480
$7,280,723
 $6,930,480


HANESBRANDS INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

HANESBRANDS INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

HANESBRANDS INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Six Months EndedNine Months Ended
July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
Operating activities:      
Net income$243,149
 $208,412
$446,505
 $382,270
Adjustments to reconcile net income to net cash from operating activities:      
Depreciation and amortization of long-lived assets58,095
 46,827
89,762
 73,715
Net loss on disposition of businesses1,100
 
Write-off on early extinguishment of debt1,559
 11,794
2,153
 12,667
Charges incurred for amendments of credit facilities
 35,497

 34,624
Amortization of debt issuance costs5,437
 3,827
7,943
 6,401
Stock compensation expense4,388
 7,982
6,351
 16,292
Deferred taxes and other5,443
 (4,812)(12,744) (18,938)
Changes in assets and liabilities, net of acquisition of businesses:
      
Accounts receivable(79,429) (137,826)(147,933) (198,217)
Inventories(130,554) (129,636)(74,945) 4,557
Other assets(48,901) (21,022)(42,664) (6,167)
Accounts payable9,019
 (79,722)71,264
 (80,589)
Accrued pension and postretirement benefits11,025
 (36,115)15,021
 (34,419)
Accrued liabilities and other(46,081) (34,284)(29,623) 16,095
Net cash from operating activities34,250
 (129,078)331,090
 208,291
Investing activities:      
Purchases of property, plant and equipment(30,838) (42,679)(60,418) (65,439)
Proceeds from sales of assets4,378
 15,642
4,398
 68,701
Acquisition of businesses, net of cash acquired(524) (193,396)(524) (963,127)
Disposition of businesses40,285
 
40,285
 
Net cash from investing activities13,301
 (220,433)(16,259) (959,865)
Financing activities:      
Borrowings on notes payable141,384
 608,411
212,804
 854,915
Repayments on notes payable(128,987) (659,571)(249,708) (943,893)
Borrowings on Accounts Receivable Securitization Facility262,216
 109,849
342,315
 194,549
Repayments on Accounts Receivable Securitization Facility(103,128) (96,578)(135,841) (145,638)
Borrowings on Revolving Loan Facilities2,147,299
 2,180,500
2,957,799
 2,995,442
Repayments on Revolving Loan Facilities(1,747,500) (2,244,000)(2,738,000) (2,992,000)
Borrowings on Senior Notes
 2,359,347

 2,359,347
Repayments on Senior Notes
 (1,000,000)
 (1,000,000)
Borrowings on Term Loan Facilities
 301,272
Repayments on Term Loan Facilities(128,215) (24,781)(201,281) (154,670)
Borrowings on International Debt
 7,555

 8,368
Repayments on International Debt(43,141) (9,360)(44,073) (11,186)
Share repurchases(299,919) (379,901)(299,919) (379,901)
Cash dividends paid(110,529) (84,234)(165,211) (125,798)
Payments to amend and refinance credit facilities(447) (75,904)(559) (79,492)
Payment of contingent consideration(41,250) 
(41,250) 
Taxes paid related to net shares settlement of equity awards(6,228) (1,883)(8,075) (2,919)
Other3,234
 1,231
3,401
 1,529
Net cash from financing activities(55,211) 690,681
(367,598) 879,925
Effect of changes in foreign exchange rates on cash(3,170) 658
(7,433) 2,693
Change in cash and cash equivalents(10,830) 341,828
(60,200) 131,044
Cash and cash equivalents at beginning of year460,245
 319,169
460,245
 319,169
Cash and cash equivalents at end of period$449,415
 $660,997
$400,045
 $450,213

See accompanying notes to Condensed Consolidated Financial Statements.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements
(dollars and shares in thousands, except per share data)
(unaudited)



(1)Basis of Presentation
These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management believes that the disclosures made are adequate for a fair statement of the results of operations, financial condition and cash flows of Hanesbrands Inc., a Maryland corporation, and its consolidated subsidiaries (the “Company” or “Hanesbrands”). In the opinion of management, the condensed consolidated interim financial statements reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of operations, financial condition and cash flows for the interim periods presented herein. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. Three subsidiaries of the Company close on the calendar month-end, which is less than a week earlierdifferent than the Company’s consolidated quarter end. The difference in reporting of financial information for these subsidiaries did not have a material impact on the Company’s financial condition, results of operations or cash flows.
As a result of further policy harmonization related to acquired businesses, certain prior year amounts in the condensed consolidated financial statements, none of which are material, have been reclassified to conform with the current year presentation. The reclassification on the Condensed Consolidated Balance Sheet is between the “Trade accounts receivable, net” line and the “Accrued liabilities” line of $22,746 as of December 31, 2016. The reclassification on the Condensed Consolidated Statement of Cash Flow is between the “Accounts Receivable” and the “Accrued liabilities and other” line of $2,744 for the nine months ended October 1, 2016. This reclassification had no impact on the Company’s results of operations.
These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K. The year end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.
(2)Recent Accounting Pronouncements
Inventory
In July 2015, the FASB issued ASU 2015-11, “Inventory: Simplifying the Measurement of Inventory”, which requires inventory to be recorded at the lower of cost or net realizable value. The new standard was effective for the Company in the first quarter of 2017. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations or cash flows.
Hedge Accounting
In March 2016, the FASB issued ASU 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships”, which clarifies that a change in the counterparty to a derivative contract, in and of itself, does not require the dedesignation of a hedging relationship. The new standard, which can be adopted prospectively or on a modified retrospective basis, was effective for the Company in the first quarter of 2017. Also in March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments”, which clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The new standard was effective for the Company in the first quarter of 2017. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations and cash flows.

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

Revenue from Contracts with Customers
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, a new accounting standard on revenue recognition that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The FASB has subsequently issued updates to the standard to provide additional clarification on

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

specific topics. The new standard will be effective for the Company in the first quarter of 2018 and can be applied using a modified retrospective or full retrospective method. The Company has established an implementation team consisting of finance, accounting and front-end business partners to analyze the impact of the guidance across all of its revenue streams.sources. The Company is in the process of evaluatinghas evaluated the new standard against its existing accounting policies and practices, including reviewing standard purchase orders, invoices, shipping terms, conducting questionnaires with our global team and reviewing contracts with customers. While the Company’s evaluation has not been completed, theThe Company has not identified any information that would indicate that the new guidance will have a material impact on the Company’s financial statements. The Company is still assessing the overall impact on the Company’s disclosures.expects to have enhanced disclosures related to disaggregation of revenue sources and accounting policies. The Company expects to adopt the new standard in the first quarter of 2018 using the modified retrospective transition method.
Statement of Cash Flows
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. Issues addressed in the new guidance that are relevant to the Company include debt prepayment and extinguishment costs, contingent consideration payments made after a business combination and beneficial interests in securitization transactions. The new rules will be effective for the Company in the first quarter of 2018. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company’s cash flows.
Income Taxes
In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”. The new rules eliminate the exception for an intra-entity transfer of an asset other than inventory, which aligns the recognition of income tax consequences for such transfers. The new rules require the recognition of current and deferred income taxes resulting from these transfers when the transfer occurs rather than when it is sold to an external party. The new rules will be effective for the Company in the first quarter of 2018. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company’s financial condition, results of operations and cash flows.
Definition of a Business
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The new rules provide for the application of a screen test to consider whether substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If the screen test determines this to be true, the set is not a business. The new rules will be effective for the Company in the first quarter of 2018. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company’s financial condition, results of operations and cash flows.
Compensation Retirement Benefits
In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost”. The new rules require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The new rules will be effective for the Company in the first quarter of 2018. Early adoption is permitted. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company’s financial condition, results of operations and cash flows.
Stock Compensation
In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting”. The new rules provide guidance about which changes to the terms or conditions of a share-based payment award

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

require an entity to apply modification accounting. Under the new rules, an entity should account for the effects of a modification unless the fair value, vesting conditions and classification of the modified award are the same as the original award immediately before the original award is modified. The new rules will be effective for the Company in the first quarter of 2018. Early adoption is permitted. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company’s financial condition, results of operations and cash flows.

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

Lease Accounting
In February 2016, the FASB issued ASU 2016-02, “Leases”, which will require lessees to recognize a right-of-use asset and a lease liability for all leases that are not short-term in nature. The new rules will be effective for the Company in the first quarter of 2019. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations and cash flows.
Derivatives and Hedging
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. The new rules expand the hedging strategies that qualify for hedge accounting, including contractually-specified price components of a commodity purchase or sale, hedges of the benchmark rate component of the contractual coupon cash flows of fixed-rate assets and liabilities, hedges of the portion of a closed portfolio of prepayable assets and partial-term hedges of fixed-rate assets and liabilities. The new rules also allow additional time to complete hedge effectiveness testing and allow qualitative assessments subsequent to initial quantitative tests if there is a supportable expectation that the hedge will remain highly effective. The new rules will be effective for the Company in the first quarter of 2019, with early adoption permitted. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company’s financial condition, results of operations and cash flows.
Goodwill Impairment
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The new rules simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. The new rules will be effective for the Company in the first quarter of 2020. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company’s financial condition, results of operations and cash flows.
(3)Acquisitions
Hanes Australasia
On July 14, 2016, the Company acquired 100% of the outstanding shares of Pacific Brands Limited (“Hanes Australasia”) for a total purchase price of AUD$1,049,360 ($800,871). US dollar equivalents are based on acquisition date exchange rates. The Company funded the acquisition through a combination of cash on hand, a portion of the net proceeds from the 3.5% Senior Notes issued in June 2016 and borrowings under the Australian Term A-1 Loan Facility and the Australian Term A-2 Loan Facility.
As of July 1, 2017, the allocation of purchase price was preliminary and subject to change. The primary areas of the purchase price that are not yet finalized are related to certain income taxes and residual goodwill. Accordingly, adjustments may be made to the values of the assets acquired and liabilities assumed as additional information is obtained about the facts and circumstances, which existed at the valuation date.
The acquired assets and assumed liabilities at the date of acquisition (July 14, 2016) include the following:
Cash and cash equivalents$54,294
Accounts receivable, net36,019
Inventories104,806
Other current assets16,588
Current assets of discontinued operations50,839
Property, net34,835
Trademarks and other identifiable intangibles506,170
Deferred tax assets and other noncurrent assets18,471
Total assets acquired822,022
Accounts payable89,309
Accrued liabilities and other22,838
Current liabilities of discontinued operations14,564
Long-term debt41,976
Deferred tax liabilities and other noncurrent liabilities16,320
Total liabilities assumed185,007
Net assets acquired637,015
Goodwill163,856
Purchase price$800,871
Since July 14, 2016, goodwill decreased by $22,292 as a result of measurement period adjustments, primarily related to the valuation adjustments for the Dunlop Flooring and Tontine Pillow businesses.


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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

The acquired assets and assumed liabilities at the date of acquisition (July 14, 2016) include the following:
Cash and cash equivalents$54,294
Accounts receivable, net36,019
Inventories104,806
Other current assets16,588
Current assets of discontinued operations50,839
Property, net34,835
Trademarks and other identifiable intangibles506,170
Deferred tax assets and other noncurrent assets23,687
Total assets acquired827,238
Accounts payable89,309
Accrued liabilities and other24,912
Current liabilities of discontinued operations14,564
Long-term debt41,976
Deferred tax liabilities and other noncurrent liabilities16,320
Total liabilities assumed187,081
Net assets acquired640,157
Goodwill160,714
Purchase price$800,871
Since July 14, 2016, goodwill decreased by $25,434 as a result of measurement period adjustments, primarily related to the valuation adjustments for the Dunlop Flooring and Tontine Pillow businesses and completion of deferred tax balances. The purchase price allocation was finalized in the third quarter of 2017.
Champion Europe
On June 30, 2016, the Company acquired 100% of Champion Europe S.p.A. (“Champion Europe”), which owns the trademark for the Champion brand in Europe, the Middle East and Africa, from certain individual shareholders in an all-cash transaction valued at €220,751 ($245,554) on an enterprise value basis, less working capital adjustments as defined in the purchase agreement, which included €40,700 ($45,277) in estimated contingent consideration. US dollar equivalents are based on acquisition date exchange rates. The Company funded the acquisition through a combination of cash on hand and a portion of the net proceeds from the 3.5% Senior Notes issued in June 2016.
The estimated contingent consideration is included in the “Accrued liabilities” line in the accompanying Condensed Consolidated Balance Sheet and is based on 10 times Champion Europe’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) in excess of €18,600, calculated as defined by the purchase agreement, for the calendar year 2016 and is payable in 2017. The contingent consideration is required to be revalued each reporting period until paid. At July 1,September 30, 2017, the contingent consideration payment was pending finalization of Champion Europe’s calendar year 2016 EBITDA calculation in accordance with the purchase agreement. On April 28, 2017, an initial payment of €37,820 ($41,250) was made to the sellers towards the contingent consideration liability, which represents the mutually agreed portion of the contingent consideration. Management continues to evaluate and discuss the proposed adjustments to the EBITDA calculation with the sellers and believes the remaining accrual is consistent with management’s expectations for any additional amount that will be due in connection with the contingent consideration. In addition to the initial payment, additional contingent consideration payments could total up to approximately €46,600.

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

The acquired assets, contingent consideration and assumed liabilities at the date of acquisition (June 30, 2016) include the following:
Cash and cash equivalents$14,581
Trade accounts receivable, net27,926
Inventories53,816
Other current assets5,976
Property, net24,605
Trademarks and other identifiable intangibles135,277
Deferred tax assets and other noncurrent assets3,777
Total assets acquired265,958
Accounts payable66,594
Accrued liabilities and other (including contingent consideration)60,887
Notes payable27,748
Deferred tax liabilities and other noncurrent liabilities20,282
Total liabilities assumed and contingent consideration175,511
Net assets acquired90,447
Goodwill109,830
Initial consideration paid200,277
Estimated contingent consideration45,277
Total purchase price$245,554
Since June 30, 2016, goodwill increased by $1,665 as a result of measurement period adjustments primarily to working capital. The purchase price allocation was finalized in the second quarter of 2017.
Consolidated Pro Forma Results
Consolidated unaudited pro forma results of operations for the Company are presented below assuming that the 2016 acquisitions of Hanes Australasia and Champion Europe had occurred on January 4, 2015. Pro forma operating results for the quarter and nine months ended October 1, 2016 exclude expenses totaling $751 and $6,187 respectively, for acquisition-related adjustments primarily related to inventory and stock compensation.
 Quarter Ended Nine Months Ended
 September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Net sales$1,799,270
 $1,780,530
 $4,826,235
 $4,859,619
Net income from continuing operations203,356
 172,040
 448,602
 448,589
Earnings per share from continuing operations:       
Basic$0.56
 $0.45
 $1.22
 $1.17
Diluted0.55
 0.45
 1.21
 1.16
Subsequent Event
On October 13, 2017, the Company acquired 100% of Alternative Apparel, Inc. (“Alternative Apparel”) from Rosewood Capital V, L.P. and certain individual shareholders in an all-cash transaction valued at approximately $60,000 on an enterprise value basis. Alternative Apparel sells the Alternative brand better basics T-shirts, fleece and other tops and bottoms. Alternative is a lifestyle brand known for its comfort, style and social responsibility. The Company funded the acquisition with cash on hand and short term borrowing under the Revolving Loan Facility. The Company believes this acquisition will create growth opportunities by supporting its Activewear growth strategy by expanding its market and channel penetration, including online, supported by the Company’s global low-cost supply chain and manufacturing network. Due to the immaterial nature of this acquisition, the Company has not provided additional disclosures herein.

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

Unaudited pro forma results of operations for the Company are presented below assuming that the 2016 acquisition of Champion Europe had occurred on January 4, 2015. Pro forma operating results for the quarter and six months ended July 2, 2016 exclude expenses totaling $2,778 and $2,742 respectively, for acquisition-related adjustments.
        
 Quarter Ended Six Months Ended
 July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
Net sales$1,646,610
 $1,520,013
 $3,026,965
 $2,800,512
Net income from continuing operations172,164
 134,738
 245,246
 218,780
Earnings per share from continuing operations:       
Basic$0.47
 $0.36
 $0.66
 $0.57
Diluted0.47
 0.35
 0.66
 0.57
(4)Discontinued Operations
As part of the Company’s acquisition of Hanes Australasia, the Company acquired Hanes Australasia’s legacy Dunlop Flooring and Tontine Pillow businesses. The Company concluded that these businesses were not a strategic fit; therefore, the decision was made to divest of the businesses.
In February 2017, the Company sold its Dunlop Flooring business for AUD$34,564 ($26,219) in net cash proceeds at the time of sale, with an additional AUD$1,334 ($1,012) of proceeds received in April 2017 related to a working capital adjustment, resulting in a pre-tax loss of AUD$2,715 ($2,083). US dollar equivalents are based on exchange rates on the date of the sale transaction. The Dunlop Flooring business was reported as part of discontinued operations since the date of acquisition.
In March 2017, the Company sold its Tontine Pillow business for AUD$13,500 ($10,363) in net cash proceeds at the time of sale. A working capital adjustment of AUD$966 ($742) was paid to the buyer in April 2017, resulting in a net pre-tax gain of AUD$2,415 ($1,856). US dollar equivalents are based on exchange rates on the date of the sale transaction. The Tontine Pillow business was reported as part of discontinued operations since the date of acquisition.
The operating results of these discontinued operations only reflect revenues and expenses that are directly attributable to these businesses that were eliminated from ongoing operations. The key components from discontinued operations related to the Dunlop Flooring and Tontine Pillow businesses were as follows:
Quarter Ended Six Months EndedQuarter Ended Nine Months Ended
July 1,
2017
 July 1,
2017
September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Net sales$
 $6,865
$
 $15,587
 $6,865
 $15,587
Cost of sales
 4,507

 9,996
 4,507
 9,996
Gross profit
 2,358

 5,591
 2,358
 5,591
Selling, general and administrative expenses(2) 3,729

 3,570
 3,729
 3,570
Operating profit (loss)2
 (1,371)
 2,021
 (1,371) 2,021
Other expenses
 303

 495
 303
 495
Net (gain) loss on disposal of businesses(524) 242
Net loss on disposal of businesses
 
 242
 
Income (loss) from discontinued operations before income tax expense526
 (1,916)
 1,526
 (1,916) 1,526
Income tax expense158
 181

 458
 181
 458
Net income (loss) from discontinued operations, net of tax$368
 $(2,097)$
 $1,068
 $(2,097) $1,068
(5)Stockholders’ Equity
Basic earnings per share (“EPS”) was computed by dividing net income by the number of weighted average shares of common stock outstanding. Diluted EPS was calculated to give effect to all potentially dilutive shares of common stock using the treasury stock method.
The reconciliation of basic to diluted weighted average shares outstanding is as follows:
 Quarter Ended Nine Months Ended
 September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Basic weighted average shares outstanding366,083
 379,368
 368,885
 382,235
Effect of potentially dilutive securities:       
Stock options1,541
 1,890
 1,591
 2,016
Restricted stock units535
 1,293
 470
 1,210
Employee stock purchase plan and other1
 7
 1
 17
Diluted weighted average shares outstanding368,160
 382,558
 370,947
 385,478
There were 28 and 58 restricted stock units excluded from the diluted earnings per share calculation because their effect would be anti-dilutive for the quarter and nine months ended September 30, 2017, respectively. For the quarter and nine months

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

The reconciliation of basic to diluted weighted average shares outstanding is as follows:
 Quarter Ended Six Months Ended
 July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
Basic weighted average shares outstanding365,911
 379,233
 370,075
 383,448
Effect of potentially dilutive securities:       
Stock options1,565
 2,029
 1,605
 2,090
Restricted stock units515
 1,244
 466
 1,205
Employee stock purchase plan and other1
 5
 1
 13
Diluted weighted average shares outstanding367,992
 382,511
 372,147
 386,756
For the quarters and six months ended JulyOctober 1, 2017 and July 2, 2016, there were no options or42 restricted stock units excluded from the diluted earnings per share calculation because their effect would be anti-dilutive. For the quarters and nine months ended September 30, 2017 and October 1, 2016, no options were excluded from the diluted earnings per share calculation because their effect would be anti-dilutive.
For the quarters ended July 1,September 30, 2017 and July 2,October 1, 2016, the Company declared cash dividends of $0.15 and $0.11 per share, respectively. For the sixnine months ended July 1,September 30, 2017 and July 2,October 1, 2016, the Company declared cash dividends of $0.30$0.45 and $0.22$0.33 per share, respectively.
On July 25,October 24, 2017, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.15 per share on outstanding shares of common stock to be paid on September 6,December 5, 2017 to stockholders of record at the close of business on August 15,November 14, 2017.
On April 27, 2016, the Company’s Board of Directors approved a new share repurchase program for up to 40,000 shares to be repurchased in open market transactions, subject to market conditions, legal requirements and other factors. The Company did not repurchase any shares during the quarters ended July 1,September 30, 2017 and July 2,October 1, 2016. For the sixnine months ended July 1,September 30, 2017, the Company entered into transactions to repurchase 14,696 shares at a weighted average repurchase price of $20.39 per share. The shares were repurchased at a total cost of $299,919. For the sixnine months ended July 2,October 1, 2016, the Company repurchased 14,243 shares under the previous share repurchase program at a weighted average purchase price of $26.65 per share. The shares were repurchased at a total cost of $379,901. At July 1,September 30, 2017, the remaining repurchase authorization totaled 25,304 shares. The program does not obligate the Company to acquire any particular amount of common stock and may be suspended or discontinued at any time at the Company’s discretion.
(6)Inventories
Inventories consisted of the following: 
July 1,
2017
 December 31,
2016
September 30,
2017
 December 31,
2016
Raw materials$136,532
 $131,228
$130,567
 $131,228
Work in process198,198
 185,066
201,729
 185,066
Finished goods1,665,706
 1,524,271
1,621,622
 1,524,271
$2,000,436
 $1,840,565
$1,953,918
 $1,840,565

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

(7)Debt
Debt consisted of the following: 
Interest
Rate as of
July 1,
2017
 Principal Amount Maturity DateInterest Rate as of September 30, 2017 Principal Amount Maturity Date
July 1,
2017
 December 31,
2016
 September 30,
2017
 December 31,
2016
 
Senior Secured Credit Facility:            
Revolving Loan Facility3.00% $391,000
 $
 April 20202.99% $211,000
 $
 April 2020
Term Loan A2.94% 623,750
 655,469
 April 20202.95% 605,625
 655,469
 April 2020
Term Loan B3.73% 318,625
 318,625
 April 20223.74% 318,625
 318,625
 April 2022
Australian Term A-13.17% 153,780
 143,544
 July 20193.15% 156,974
 143,544
 July 2019
Australian Term A-23.47% 53,823
 143,544
 July 2021—% 
 143,544
 July 2021
4.875% Senior Notes4.88% 900,000
 900,000
 May 20264.88% 900,000
 900,000
 May 2026
4.625% Senior Notes4.63% 900,000
 900,000
 May 20244.63% 900,000
 900,000
 May 2024
3.5% Senior Notes3.50% 571,298
 520,617
 June 20243.50% 587,268
 520,617
 June 2024
European Revolving Loan Facility1.50% 77,361
 62,474
 September 20171.50% 79,868
 62,474
 September 2018
Accounts Receivable Securitization Facility2.02% 203,609
 44,521
 March 20182.12% 250,995
 44,521
 March 2018
Other International DebtVarious 2,872
 43,789
 VariousVarious 2,027
 43,789
 Various
 4,196,118
 3,732,583
  4,012,382
 3,732,583
 
Less long-term debt issuance cost 42,545
 46,534
  40,445
 46,534
 
Less current maturities 356,328
 178,364
  405,390
 178,364
 
 $3,797,245
 $3,507,685
  $3,566,547
 $3,507,685
 
As of July 1,September 30, 2017, the Company had $604,317$784,117 of borrowing availability under the $1,000,000 Revolving Loan Facility after taking into account outstanding borrowings and $4,683$4,883 of standby and trade letters of credit issued and outstanding under this facility. The Company also had $71,391$24,005 of borrowing availability under the Accounts Receivable Securitization Facility,$36,405 $37,586 of borrowing availability under the European Revolving Loan Facility, and $49,660$51,016 of borrowing availability under the Australian Revolving Loan Facility and $60,648 of borrowing availability under other international lines of credit after taking into account outstanding borrowings and letters of credit outstanding under the applicable facility.
In March 2017, the Company amended the Accounts Receivable Securitization Facility that it entered into in November 2007 (the “Accounts Receivable Securitization Facility”). This amendment primarily extended the maturity date to March 2018.
In September 2017, the Company amended the European Revolving Loan Facility primarily to extend the maturity date to September 2018.
As of July 1,September 30, 2017, the Company was in compliance with all financial covenants under its credit facilities.
(8)Accumulated Other Comprehensive Loss
The components of Accumulated other comprehensive loss (“AOCI”) are as follows:
Cumulative Translation Adjustment Hedges Defined Benefit Plans Income Taxes Accumulated Other Comprehensive LossCumulative Translation Adjustment Hedges Defined Benefit Plans Income Taxes Accumulated Other Comprehensive Loss
   
Balance at December 31, 2016$(78,059) $13,772
 $(606,583) $234,879
 $(435,991)$(78,059) $13,772
 $(606,583) $234,879
 $(435,991)
Amounts reclassified from accumulated other comprehensive loss
 (2,934) 9,578
 (2,553) 4,091

 (3,348) 14,440
 (4,611) 6,481
Current-period other comprehensive income (loss) activity17,492
 (26,281) 
 8,996
 207
34,047
 (43,660) 
 12,481
 2,868
                  
Balance at July 1, 2017$(60,567) $(15,443) $(597,005) $241,322
 $(431,693)
Balance at September 30, 2017$(44,012) $(33,236) $(592,143) $242,749
 $(426,642)

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

The Company had the following reclassifications out of AOCI:
Component of AOCI Location of Reclassification into Income Amount of Reclassification
from AOCI
 Amount of Reclassification
from AOCI
 Location of Reclassification into Income Amount of Reclassification
from AOCI
 Amount of Reclassification
from AOCI
Quarter Ended Six Months Ended Quarter Ended Nine Months Ended
July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Gain on foreign exchange contracts Cost of sales $2,636
 $1,385
 $2,934
 $3,709
 Cost of sales $414
 $715
 $3,348
 $4,424

 Income tax (1,012) (539) (1,125) (1,443) Income tax 191
 (278) (934) (1,721)

 Net of tax 1,624
 846
 1,809
 2,266
 Net of tax 605
 437
 2,414
 2,703
Amortization of deferred actuarial loss and prior service cost Selling, general and administrative
expenses
 (4,768) (4,331) (9,578) (8,536) Selling, general and administrative
expenses
 (4,862) (4,307) (14,440) (12,843)

 Income tax 1,831
 1,685
 3,678
 3,321
 Income tax 1,867
 1,675
 5,545
 4,996

 Net of tax (2,937) (2,646) (5,900) (5,215) Net of tax (2,995) (2,632) (8,895) (7,847)
                
Total reclassifications $(1,313) $(1,800) $(4,091) $(2,949) $(2,390) $(2,195) $(6,481) $(5,144)
(9)Financial Instruments and Risk Management
The Company uses forward foreign exchange contracts to manage its exposures to movements in foreign exchange rates. As of July 1,September 30, 2017, the notional U.S. dollar equivalent of commitments to sell foreign currencies within the Company’s derivative portfolio was $615,665588,866, primarily consisting of contracts hedging exposures to the Australian dollar, Euro, Canadian dollar, Mexican peso, and the New Zealand dollar.
Fair Values of Derivative Instruments
The fair values of derivative financial instruments recognized in the Condensed Consolidated Balance Sheets of the Company were as follows:
Balance Sheet Location Fair ValueBalance Sheet Location Fair Value
July 1,
2017
 December 31,
2016
September 30,
2017
 December 31,
2016
HedgesOther current assets $176
 $16,729
Other current assets $907
 $16,729
Non-hedgesOther current assets 120
 4,363
Other current assets 541
 4,363
Total derivative assets 296
 21,092
 1,448
 21,092
        
HedgesAccrued liabilities (11,560) (207)Accrued liabilities (21,169) (207)
Non-hedgesAccrued liabilities (2,626) (172)Accrued liabilities (4,503) (172)
Total derivative liabilities (14,186) (379) (25,672) (379)
        
Net derivative (liability) asset $(13,890) $20,713
 $(24,224) $20,713
Cash Flow Hedges
The Company uses forward foreign exchange contracts to reduce the effect of fluctuating foreign currencies on short-term foreign currency-denominated transactions, foreign currency-denominated investments and other known foreign currency exposures. Gains and losses on these contracts are intended to offset losses and gains on the hedged transaction in an effort to reduce the earnings volatility resulting from fluctuating foreign currency exchange rates.
The Company expects to reclassify into earnings during the next 12 months a net loss from AOCI of approximately $4,114.$16,432.
The changes in fair value of derivatives excluded from the Company’s effectiveness assessments and the ineffective portion of the changes in the fair value of derivatives used as cash flow hedges are reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statements of Income.

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

The effect of cash flow hedge derivative instruments on the Condensed Consolidated Statements of Income and AOCI is as follows:
 Amount of Gain (Loss)
Recognized in AOCI
(Effective Portion)
 Amount of Gain (Loss)
Recognized in AOCI
(Effective Portion)
 Quarter Ended Six Months Ended
 July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
Foreign exchange contracts$(8,167) $2,041
 $(26,281) $(3,537)
 Amount of Loss
Recognized in AOCI
(Effective Portion)
 Amount of Loss
Recognized in AOCI
(Effective Portion)
 Quarter Ended Nine Months Ended
 September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Foreign exchange contracts$(17,379) $(3,594) $(43,660) $(7,131)
 
 Location of
Gain Reclassified from AOCI into Income
(Effective Portion)
 Amount of Gain
Reclassified from AOCI
into Income
(Effective Portion)
 Amount of Gain
Reclassified from AOCI
into Income
(Effective Portion)
  Quarter Ended Six Months Ended
  July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
Foreign exchange contractsCost of sales $2,636
 $1,385
 $2,934
 $3,709
 Location of
Gain Reclassified from AOCI into Income
(Effective Portion)
 Amount of Gain
Reclassified from AOCI
into Income
(Effective Portion)
 Amount of Gain
Reclassified from AOCI
into Income
(Effective Portion)
  Quarter Ended Nine Months Ended
  September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Foreign exchange contractsCost of sales $414
 $715
 $3,348
 $4,424
Derivative Contracts Not Designated As Hedges
The Company uses foreign exchange derivative contracts as economic hedges against the impact of foreign exchange fluctuations on existing accounts receivable and payable balances and intercompany lending transactions denominated in foreign currencies. These contracts are not designated as hedges under the accounting standards and are recorded at fair value in the Condensed Consolidated Balance Sheet. Any gains or losses resulting from changes in fair value are recognized directly into earnings. Gains or losses on these contracts largely offset the net remeasurement gains or losses on the related assets and liabilities.
The effect of derivative contracts not designated as hedges on the Condensed Consolidated Statements of Income is as follows:
 Location of Gain (Loss)
Recognized in Income on
Derivative
 Amount of Gain (Loss)
Recognized in Income
 Amount of Gain (Loss)
Recognized in Income
 Quarter Ended Six Months Ended
 July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
Foreign exchange contractsSelling, general and administrative expenses $(411) $2,684
 $(4,675) $276
 Location of Gain (Loss)
Recognized in Income on
Derivative
 Amount of Gain
Recognized in Income
 Amount of Gain (Loss)
Recognized in Income
 Quarter Ended Nine Months Ended
 September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Foreign exchange contractsSelling, general and administrative expenses $3,277
 $7,694
 $(1,398) $7,970
(10)Fair Value of Assets and Liabilities
As of July 1,September 30, 2017, the Company held certain financial assets and liabilities that are required to be measured at fair value on a recurring basis. These consisted of the Company’s derivative instruments related to foreign exchange rates, deferred compensation plan liabilities and contingent consideration resulting from the Champion Europe acquisition. The fair values of foreign currency derivatives are determined using the cash flows of the foreign exchange contract, discount rates to account for the passage of time and current foreign exchange market data and are categorized as Level 2. The fair value of deferred compensation plans is based on readily available current market data and is categorized as Level 2. The fair value of the contingent consideration obligation iswas determined by applying a multiple of 10 times Champion Europe’s EBITDA for calendar year 2016 in excess of €18,600, as defined per the purchase agreement, as further described in Note 3 to the Company’s condensed consolidated financial statements, and is categorized as Level 3. An initial payment of €37,820 was made on April 28, 2017 to the sellers, which represents the mutually agreed portion of the contingent consideration. The remaining contingent consideration obligation will be revalued each reporting period until the related contingencies are resolved, with any adjustments to the fair value recognized in earnings. The Company’s defined benefit pension plan investments are not required to be measured at fair value on a recurring basis.

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

There were no changes during the quarter ended July 1,September 30, 2017 to the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis. There were no transfers into or out of Level 1, Level 2 or Level 3 during the quarter ended July 1,September 30, 2017. As of and during the quarter and sixnine months ended July 1,September 30, 2017, the Company did not have any non-financial assets or liabilities that were required to be measured at fair value on a recurring or non-recurring basis.
The following tables set forth, by level within the fair value hierarchy, the Company’s financial assets and liabilities accounted for at fair value on a recurring basis.
Assets (Liabilities) at Fair Value as of
July 1, 2017
Assets (Liabilities) at Fair Value as of
September 30, 2017
Total Quoted Prices In
Active Markets
for Identical
Assets
(Level 1)
 Significant
Other
Observable
Inputs
(Level 2)
 Significant
Unobservable
Inputs
(Level 3)
Total Quoted Prices In
Active Markets
for Identical
Assets
(Level 1)
 Significant
Other
Observable
Inputs
(Level 2)
 Significant
Unobservable
Inputs
(Level 3)
Foreign exchange derivative contracts$296
 $
 $296
 $
$1,448
 $
 $1,448
 $
Foreign exchange derivative contracts(14,186) 
 (14,186) 
(25,672) 
 (25,672) 
(13,890) 
 (13,890) 
(24,224) 
 (24,224) 
Champion Europe contingent consideration(3,276) 
 
 (3,276)(3,383) 
 
 (3,383)
Deferred compensation plan liability(50,744) 
 (50,744) 
(53,237) 
 (53,237) 
Total$(67,910) $
 $(64,634) $(3,276)$(80,844) $
 $(77,461) $(3,383)
 
 Assets (Liabilities) at Fair Value as of
December 31, 2016
 Total Quoted Prices In
Active Markets
for Identical
Assets
(Level 1)
 Significant
Other
Observable
Inputs
(Level 2)
 Significant
Unobservable
Inputs
(Level 3)
Foreign exchange derivative contracts$21,092
 $
 $21,092
 $
Foreign exchange derivative contracts(379) 
 (379) 
 20,713
 
 20,713
 
Champion Europe contingent consideration(42,378) 
 
 (42,378)
Deferred compensation plan liability(51,868) 
 (51,868) 
Total$(73,533) $
 $(31,155) $(42,378)
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, trade accounts receivable, notes receivable and accounts payable approximated fair value as of July 1,September 30, 2017 and December 31, 2016. The carrying amount of trade accounts receivable included allowance for doubtful accounts, chargebacks and other deductions of $22,45623,998 and $18,726 as of July 1,September 30, 2017 and December 31, 2016, respectively. The fair value of debt, which is classified as a Level 2 liability, was $4,275,070$4,206,792 and $3,729,270 as of July 1,September 30, 2017 and December 31, 2016, respectively. Debt had a carrying value of $4,196,1184,012,382 and $3,732,583 as of July 1,September 30, 2017 and December 31, 2016, respectively. The fair values were estimated using quoted market prices as provided in secondary markets, which consider the Company’s credit risk and market related conditions. The carrying amounts of the Company’s notes payable, which is classified as a Level 2 liability, approximated fair value as of July 1,September 30, 2017 and December 31, 2016, primarily due to the short-term nature of these instruments.
(11)Income Taxes
The Company’s effective income tax rate for continuing operations was 2% and 6% for the quarters ended July 1,September 30, 2017 and July 2,October 1, 2016, respectively. The Company’s effective income tax rate for continuing operations was 6%4% and 8%7% for the sixnine months ended July 1,September 30, 2017 and July 2,October 1, 2016, respectively. The lower effective income tax rate for the sixquarter and nine months ended July 1,September 30, 2017 compared to the sixquarter and nine months ended July 2,October 1, 2016 was primarily due to an income tax benefit related to the realization of an unrecognized tax benefitfavorable adjustments resulting from the effective settlementfinalization of positionsthe prior year federal tax return, resulting in the recognition of previously unrecognized foreign jurisdictions.tax credits, recognized discretely in the period ending September 30, 2017.

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

Additionally, there was a lower proportion of earnings attributed to domestic subsidiaries, which are taxed at higher rates than foreign subsidiaries, for the nine months ending September 30, 2017 as compared to the nine months ending October 1, 2016.
(12)Business Segment Information
In the first quarter of 2017, the Company realigned its reporting segments to reflect the new model under which the business will be managed and results will be reviewed by the chief executive officer, who is the Company’s chief operating decision maker. The former Direct to Consumer segment, which consisted of the Company’s U.S. value-based (“outlet”) stores, legacy catalog business and U.S. retail Internet operations, was eliminated. The Company’s U.S. retail Internet operations, which sells products directly to consumers, is now reported in the respective Innerwear and Activewear segments. Other consists of the Company’s U.S. value-based (“outlet”) stores, U.S. hosiery business (previously reported in the Innerwear segment) and legacy catalog operations. Prior year segment sales and operating profit results have been revised to conform to the current year presentation.
The Company’s operations are managed and reported in three operating segments, each of which is a reportable segment for financial reporting purposes: Innerwear, Activewear and International. These segments are organized principally by product category and geographic location. Each segment has its own management that is responsible for the operations of the segment’s businesses, but the segments share a common supply chain and media and marketing platforms.
The types of products and services from which each reportable segment derives its revenues are as follows:
Innerwear sells basic branded products that are replenishment in nature under the product categories of men’s underwear, panties, children’s underwear, socks and intimate apparel, which includes bras and shapewear.
Activewear sells basic branded products that are primarily seasonal in nature under the product categories of branded printwear and retail activewear, as well as licensed logo apparel in collegiate bookstores, mass retail and other channels.
International primarily relates to the Europe, Australia, Asia, Latin America and Canada geographic locations that sell products that span across the Innerwear and Activewear reportable segments. 
The Company evaluates the operating performance of its segments based upon segment operating profit, which is defined as operating profit before general corporate expenses, acquisition-related and integration charges and amortization of intangibles. The accounting policies of the segments are consistent with those described in Note 2 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2016.
Quarter Ended Six Months EndedQuarter Ended Nine Months Ended
July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Net sales:              
Innerwear$719,006
 $737,690
 $1,224,196
 $1,274,711
$644,059
 $679,096
 $1,868,255
 $1,953,807
Activewear379,756
 374,511
 707,099
 691,054
519,496
 516,713
 1,226,595
 1,207,767
International475,242
 269,662
 952,640
 548,749
556,730
 478,122
 1,509,370
 1,026,871
Other72,606
 90,868
 143,030
 177,357
78,985
 87,088
 222,015
 264,445
Total net sales$1,646,610
 $1,472,731
 $3,026,965
 $2,691,871
$1,799,270
 $1,761,019
 $4,826,235
 $4,452,890


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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

Quarter Ended Six Months EndedQuarter Ended Nine Months Ended
July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
Segment operating profit:              
Innerwear$164,279
 $178,023
 $266,980
 $287,758
$141,002
 $147,902
 $407,982
 $435,660
Activewear49,630
 55,009
 83,038
 87,114
79,015
 72,962
 162,053
 160,076
International58,307
 23,153
 108,802
 47,872
76,414
 61,312
 185,216
 109,184
Other5,643
 12,530
 6,088
 18,209
10,162
 9,199
 16,250
 27,408
Total segment operating profit277,859
 268,715
 464,908
 440,953
306,593
 291,375
 771,501
 732,328
Items not included in segment operating profit:              
General corporate expenses(16,989) (18,587) (37,218) (40,022)(26,136) (14,776) (63,354) (54,798)
Acquisition-related and integration charges(26,062) (24,395) (64,429) (49,064)(16,874) (42,587) (81,303) (91,651)
Amortization of intangibles(6,131) (4,523) (13,316) (8,252)(10,279) (5,660) (23,595) (13,912)
Total operating profit228,677
 221,210
 349,945
 343,615
253,304
 228,352
 603,249
 571,967
Other expenses(1,394) (48,325) (2,778) (48,974)(1,881) (1,559) (4,659) (50,533)
Interest expense, net(44,130) (36,540) (86,267) (68,106)(43,917) (43,433) (130,184) (111,539)
Income from continuing operations before income tax expense$183,153
 $136,345
 $260,900
 $226,535
$207,506
 $183,360
 $468,406
 $409,895
For the quarter ended July 1,September 30, 2017, the Company incurred acquisition-related and integration charges of $26,062,$16,874, of which $4,284$2,230 is reported in the “Cost of sales” line and $21,778$14,644 is reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income. For the quarter ended July 2,October 1, 2016, the Company incurred acquisition-related and integration charges of $71,686,$42,587, of which $9,300$13,563 is reported in the “Cost of sales” line $15,095and $29,024 is reported in the “Selling, general and administrative expenses” line and $47,291 is reported in the “Other expenses” line in the Condensed Consolidated Statement of Income.
For the sixnine months ended July 1,September 30, 2017, the Company incurred acquisition-related and integration charges of $64,429,$81,303, of which $19,759$21,989 is reported in the “Cost of sales” line and $44,670$59,314 is reported in the “Selling, general and administrative expenses” line. For the sixnine months ended July 2,October 1, 2016, the Company incurred acquisition-related and integration charges of $96,355,$138,942, of which $14,169$27,732 is reported in the “Cost of sales” line, $34,895$63,919 is reported in the “Selling, general and administrative expenses” line and $47,291 is reported in the “Other expenses” line in the Condensed Consolidated Statement of Income.
As part of the Hanes Europe Innerwear acquisition strategy, in 2015 the Company identified management and administrative positions that were considered non-essential and/or duplicative that have or will be eliminated. As of December 31, 2016, the Company had accrued approximately $32,542 for expected benefit payments related to employee termination and other benefits for affected employees. During the sixnine months ended July 1,September 30, 2017, there were approximately $5,790$9,836 of benefit payments and foreign currency adjustments, resulting in an accrual of $26,752,$22,706, of which, $13,247$10,905 and $13,505,$11,801, is included in the “Accrued liabilities” and “Other noncurrent liabilities” lines of the Condensed Consolidated Balance Sheet, respectively.
In the first quarter of 2017, the Company approved an action to resize its U.S. corporate office workforce through separation programs affecting employees primarily in the Innerwear and Activewear segments. As of April 1, 2017, the Company accrued approximately $10,145 for employee termination and other benefits in accordance with expected benefit payments, with the majority of charges reflected in the “Selling, general and administrative expenses” line of the Condensed Consolidated Statements of Income. During the quarternine months ended July 1,September 30, 2017, there were approximately $3,370$8,477 of benefit payments and an additional accrual of $4,551,$4,653, resulting in an ending accrual of $11,326$6,321 included in the “Accrued liabilities” line of the Condensed Consolidated Balance sheet.Sheet.
The Company closed its Nanjing, China textile plant in the first quarter of 2017 as part of a plan to realign its Asia textile production in order to better support its global commercial footprint, which has evolved over the past 10 years through major acquisitions in the United States, Europe and Australia. As of April 1, 2017, the Company accrued approximately $8,534 for employee termination and other benefits in accordance with expected benefit payments for employees. The charges, along with other facility exit costs of $2,831, were reflected in the “Cost of sales” line of the Condensed Consolidated Statements of Income. During the quarternine months ended July 1,September 30, 2017, there were approximately $6,931$8,057 of benefit payments and foreign currency

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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

currency adjustments, resulting in an accrual of $1,603,$477, which is included in the “Accrued liabilities” line of the Condensed Consolidated Balance Sheet. As of July 1,September 30, 2017, the Nanjing, China textile plant, valued at $65,570, was classified as assets held for sale and reported within the “Other current assets” line of the Condensed Consolidated Balance Sheet.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management’s discussion and analysis of financial condition and results of operations, or MD&A, contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” in this Quarterly Report on Form 10-Q for a discussion of the uncertainties, risks and assumptions associated with these statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q. The unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with our audited consolidated financial statements and notes for the year ended December 31, 2016, which were included in our Annual Report on Form 10-K filed with the SEC. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those included elsewhere in this Quarterly Report on Form 10-Q and those included in the “Risk Factors” section and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2016.
Overview
We are a consumer goods company with a portfolio of leading apparel brands, including Hanes, Champion, DIM, Maidenform, Playtex, Bonds, Bali, JMS/Just My Size, Nur Die/Nur Der, L’eggs, Lovable, Wonderbra, Flexees, Berlei, Lilyette and Gear for Sports. We design, manufacture, source and sell a broad range of basic apparel such as T-shirts, bras, panties, men’s underwear, children’s underwear, activewear, socks and hosiery.
Our operations are managed and reported in three operating segments, each of which is a reportable segment for financial reporting purposes: Innerwear, Activewear and International. These segments are organized principally by product category and geographic location. Each segment has its own management that is responsible for the operations of the segment’s businesses, but the segments share a common supply chain and media and marketing platforms. In the first quarter of 2017, we realigned our reporting segments to reflect the new model under which the business will be managed and results will be reviewed by the chief executive officer, who is our chief operating decision maker. The former Direct to Consumer segment, which consisted of our U.S. value-based (“outlet”) stores, legacy catalog business and U.S. retail Internet operations, was eliminated. Our U.S. retail Internet operations, which sells products directly to consumers, is now reported in the respective Innerwear and Activewear segments. Other consists of our U.S. value-based (“outlet”) stores, U.S. hosiery business (previously reported in the Innerwear segment) and legacy catalog operations. Prior year segment sales and operating profit results have been revised to conform to the current year presentation.
Highlights from the SecondThird Quarter Ended July 1,September 30, 2017
Key financial highlights are as follows:
Total net sales in the secondthird quarter of 2017 were $1.65$1.80 billion, compared with $1.47$1.76 billion in the same period of 2016, representing a 12%2% increase.
Operating profit increased 3%11% to $229$253 million in the secondthird quarter of 2017, compared with $221$228 million in the same period of 2016. As a percentage of sales, operating profit was 13.9%14.1% in the secondthird quarter of 2017 compared to 15.0%13.0% in the same period of 2016. Included within operating profit for both the secondthird quarter of 2017 and 2016 were acquisition-related and integration charges of $26$17 million and $24$43 million, respectively.
Diluted earnings per share from continuing operations increased 38%22% to $0.47$0.55 in the secondthird quarter of 2017, compared with $0.34$0.45 in the same period of 2016.
In 2017, we began executing a multi-year program (“Project Booster”) to drive investment for sales growth, cost reduction and increased cash flow. Under Project Booster, we are investing to accelerate worldwide omnichannel and global Champion growth, while also investing in marketing and brand building for our leading lineup of brands globally. To fund growth initiatives, reduce costs and increase cash flow, we expect to reduce overhead, including headcount, to reflect market trends and needs; drive additional supply chain optimization beyond integration synergies; and focus on inventory turns and other working capital improvements. We intend to use our size and scale to drive supply chain optimization, including by investing in our domestic distribution center network to better serve the online channel, gaining procurement and product development savings, utilizing global fabric platforms and silhouettes, and continuing to internalize production.
The Project Booster initiative is expected to generate approximately $150 million in annualized cost savings. We expect to annually reinvest approximately $50 million of the savings in targeted growth opportunities, which would result in a run rate of net annualized savings of approximately $100 million startingof annual net cost savings and incremental cash from operations by the end of 2019. Project BoosterIn addition to the annual net cost savings, andwe also plan to drive approximately $200 million of non-recurring working capital initiatives are expectedimprovements which will result in a one-time benefit to generate an incremental annual run rate of $300 million of cash from operations starting by the end of 2019.

Outlook
We expect our 2017 full year net sales to be approximately $6.45$6.450 billion to $6.55$6.475 billion.
Interest and other expenses are expected to be approximately $175$180 million, combined.
We estimate our full year effective income tax rate to be comparable with prior year,approximately 5%, assuming no changes to U.S. tax law and policy.
We expect cash flow from operations to be in the range of $625 million to $725 million. We expect capital expenditures of approximately $90 million to $100 million.
Seasonality and Other Factors
Our operating results are subject to some variability due to seasonality and other factors. Generally, our diverse range of product offerings helps mitigate the impact of seasonal changes in demand for certain items. We generally have higher sales during the back-to-school and holiday shopping seasons and during periods of cooler weather, which benefits certain product categories such as fleece. Sales levels in any period are also impacted by customers’ decisions to increase or decrease their inventory levels in response to anticipated consumer demand. Our customers may cancel or change delivery schedules, manage on-hand inventory levels, or change the mix of products ordered with minimal notice to us. Media, advertising and promotion expenses may vary from period to period during a fiscal year depending on the timing of our advertising campaigns for retail selling seasons and product introductions.
Although the majority of our products are replenishment in nature and tend to be purchased by consumers on a planned, rather than on an impulse basis, our sales are impacted by discretionary spending by consumers. Discretionary spending is affected by many factors, including, among others, general business conditions, interest rates, inflation, consumer debt levels, the availability of consumer credit, taxation, gasoline prices, weather, unemployment trends and other matters that influence consumer confidence and spending. Many of these factors are outside of our control. Consumers’ purchases of discretionary items, including our products, could decline during periods when disposable income is lower, when prices increase in response to rising costs, or in periods of actual or perceived unfavorable economic conditions. These consumers may choose to purchase fewer of our products or to purchase lower-priced products of our competitors in response to higher prices for our products, or may choose not to purchase our products at prices that reflect our price increases that become effective from time to time.
Changes in product sales mix can impact our gross profit as the percentage of our sales attributable to higher margin products, such as intimate apparel and men’s underwear, and lower margin products, such as activewear, fluctuate from time to time. In addition, sales attributable to higher and lower margin products within the same product category fluctuate from time to time. Our customers may change the mix of products ordered with minimal notice to us, which makes trends in product sales mix difficult to predict. However, certain changes in product sales mix are seasonal in nature, as sales of socks, hosiery and fleece products generally have higher sales during the last two quarters (July to December) of each fiscal year as a result of cooler weather, back-to-school shopping and holidays, while other changes in product mix may be attributable to customers’ preferences and discretionary spending.

Condensed Consolidated Results of Operations — SecondThird Quarter Ended July 1,September 30, 2017 Compared with SecondThird Quarter Ended July 2,October 1, 2016
 
Quarter Ended    Quarter Ended    
July 1,
2017
 July 2,
2016
 
Higher
(Lower)
 
Percent
Change
September 30,
2017
 October 1,
2016
 
Higher
(Lower)
 
Percent
Change
(dollars in thousands)(dollars in thousands)
Net sales$1,646,610
 $1,472,731
 $173,879
 11.8 %$1,799,270
 $1,761,019
 $38,251
 2.2 %
Cost of sales1,000,708
 915,440
 85,268
 9.3
1,120,813
 1,111,653
 9,160
 0.8
Gross profit645,902
 557,291
 88,611
 15.9
678,457
 649,366
 29,091
 4.5
Selling, general and administrative expenses417,225
 336,081
 81,144
 24.1
425,153
 421,014
 4,139
 1.0
Operating profit228,677
 221,210
 7,467
 3.4
253,304
 228,352
 24,952
 10.9
Other expenses1,394
 48,325
 (46,931) (97.1)1,881
 1,559
 322
 20.7
Interest expense, net44,130
 36,540
 7,590
 20.8
43,917
 43,433
 484
 1.1
Income from continuing operations before income tax expense183,153
 136,345
 46,808
 34.3
207,506
 183,360
 24,146
 13.2
Income tax expense10,989
 8,202
 2,787
 34.0
4,150
 10,570
 (6,420) (60.7)
Income from continuing operations172,164
 128,143
 44,021
 34.4
203,356
 172,790
 30,566
 17.7
Income from discontinued operations, net of tax368
 
 368
 NM

 1,068
 (1,068) NM
Net income$172,532
 $128,143
 $44,389
 34.6 %$203,356
 $173,858
 $29,498
 17.0 %
Net Sales
Net sales increased 12%2% during the secondthird quarter of 2017 primarily due to the following:
AcquisitionsAcquisition of Hanes Australasia, Champion Europe and It’s Greek to Me and GTM Retail, Inc. (“GTM”) in 2016, which added incremental net sales of approximately $223$15 million in the secondthird quarter of 2017;
Increased net sales driven by our global Champion sales growth;and global online growth initiatives;
Increased net sales in the online channel globally;our Hanes Australasia business;
Increased net sales within our sock product category; and
Increased net sales withinFavorable impact of foreign exchange rates in our Hanes activewear apparel.
International businesses.
Partially offset by:
Lower net sales in our intimatesremaining U.S. product categorycategories as a result of challenging consumersofter-than-expected back-to-school trends driven by weak traffic at retail and the continued impact from store closures within the mid-tier and department store channel;
Lower net sales in our licensed sports apparel business driven by a timing shift of orders in the mass merchant channel into the third quarter of 2017;
Lower net sales in Other driven by continued declines in Hosiery, slower traffic at our outlet stores and the planned exit from our legacy catalog business in the third quarter of 2016;overall apparel category; and
Unfavorable impact of foreign currency exchange ratesDeclines in our International businesses.hosiery sales within the U.S. and certain European markets.
Gross Profit
The increase in gross profit was attributable to higher sales volume primarily from acquisitions, supply chain efficiencies and synergies recognized from the integration of our acquisitions and lower acquisition-related and integration charges. Included in gross profit in the second quarterthird quarters of 2017 and 2016 are charges of approximately $4$2 million and $9$14 million, respectively, related to acquisition-related and integration costs.
Selling, General and Administrative Expenses
As a percentage of net sales, our selling, general and administrative expenses were 25.3%23.6% for the secondthird quarter of 2017 compared to 22.8%23.9% in the same period of 2016. Included in selling, general and administrative expenses were charges of $22$15 million and $15$29 million of acquisition-related and integration costs for the second quarterthird quarters of 2017 and 2016, respectively. Selling, general and administrative expenses, as a percentage of net sales, increaseddecreased slightly due to lower acquisition-related and integration costs for the third quarter of 2017 compared to 2016, offset partially by the higher proportion of selling, general and administrative expenses for the recently acquired entities, primarily Hanes Australasia, Champion Europe and GTM, and expenses related to our Project Booster initiative including our U.S. corporate office headcount reductions and related severance charges, offset by synergy benefits from the integration of prior acquisitions and continued cost control.

GTM.
Other Highlights
Other ExpensesInterest Expense lower by $47 million relatively flat in the secondthird quarter of 2017 compared to the secondthird quarter of 2016, primarily due to costs associated with the redemption of our 6.375% Senior Notes2016. A higher weighted average interest rate in 2016, which included a call premium and write-off of unamortized debt issuance costs.
Interest Expense – higher by $8 million in the second quarter of 2017 compared to the second quartersame period of 2016 primarily due to higherwas nearly offset in full by lower debt balances from prior year acquisitions and share repurchases in 2017.balances. Our weighted average interest rate on our outstanding debt was 3.76%3.84% during the secondthird quarter of 2017, compared to 3.66%3.69% in secondthird quarter of 2016.

Income Tax Expense – our effective income tax rate was 2% and 6% for the second quarterthird quarters of 2017 and 2016.  
Discontinued Operations 2016, respectively. The lower tax rate in 2017 compared to the resultssame period of our discontinued operations include2016 is primarily driven by favorable adjustments due to the operationsfinalization of two businesses, Dunlop Flooring and Tontine Pillow, which were purchasedthe prior year federal tax return, resulting in the Hanes Australasia acquisitionrecognition of previously unrecognized foreign tax credits, recognized discretely in 2016 and sold during the firstquarter. Additionally, there was a lower proportion of earnings attributed to domestic subsidiaries in the quarter, of 2017.which are taxed at higher rates than foreign subsidiaries.  
Operating Results by Business Segment — SecondThird Quarter Ended July 1,September 30, 2017 Compared with SecondThird Quarter Ended July 2,October 1, 2016
 
Net Sales Operating ProfitNet Sales Operating Profit
Quarter Ended Quarter EndedQuarter Ended Quarter Ended
July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
(dollars in thousands)(dollars in thousands)
Innerwear$719,006
 $737,690
 $164,279
 $178,023
$644,059
 $679,096
 $141,002
 $147,902
Activewear379,756
 374,511
 49,630
 55,009
519,496
 516,713
 79,015
 72,962
International475,242
 269,662
 58,307
 23,153
556,730
 478,122
 76,414
 61,312
Other72,606
 90,868
 5,643
 12,530
78,985
 87,088
 10,162
 9,199
Corporate
 
 (49,182) (47,505)
 
 (53,289) (63,023)
Total$1,646,610
 $1,472,731
 $228,677
 $221,210
$1,799,270
 $1,761,019
 $253,304
 $228,352
Innerwear 
Quarter Ended    Quarter Ended    
July 1,
2017
 July 2,
2016
 
Higher
(Lower)
 
Percent
Change
September 30,
2017
 October 1,
2016
 
Higher
(Lower)
 
Percent
Change
(dollars in thousands)(dollars in thousands)
Net sales$719,006
 $737,690
 $(18,684) (2.5)%$644,059
 $679,096
 $(35,037) (5.2)%
Segment operating profit164,279
 178,023
 (13,744) (7.7)141,002
 147,902
 (6,900) (4.7)
Innerwear net sales decreased due to lower net sales in both our basics and intimates apparel businesses. Strength in our sock businessand licensed intimate apparel businesses was more than offset by declines in other product categories due to challenging consumeras a result of softer-than-expected back-to-school trends driven by weak traffic at retail. Our intimate apparel business experienced salesretail and continued declines as store closures, primarily in the mid-tier and department store channel, in the first and second quarter of 2017 continue to impact sales,overall apparel category. Declines at retail were partially offset by strong online channel growth across all Innerwear product categories.
Decreased operating profit was largely driven by lower sales volume coupled with lower margins from unfavorable product mix, and expenses associated with Project Booster, partially offset by lower selling, general and administrative expenses from continued cost control.
Activewear 
Quarter Ended    Quarter Ended    
July 1,
2017
 July 2,
2016
 
Higher
(Lower)
 
Percent
Change
September 30,
2017
 October 1,
2016
 
Higher
(Lower)
 
Percent
Change
(dollars in thousands)(dollars in thousands)
Net sales$379,756
 $374,511
 $5,245
 1.4 %$519,496
 $516,713
 $2,783
 0.5%
Segment operating profit49,630
 55,009
 (5,379) (9.8)79,015
 72,962
 6,053
 8.3
Activewear net sales increased with our expansion into the teamwear and fanware space with the acquisition of GTM in 2016, increased net sales in our Hanes activewearthe licensed sports apparel business within the college bookstore business and solid growth in the online channel across Activewear product categories in the online channel. The increase wascategories. Sales increases were offset partially by sales declines in our licensed sportsHanes activewear apparel, business driven by an unexpected

timing shift of ordersprimarily in the mass merchant channel into the third quarter of 2017, as well as decreased Champion net sales due to the prior year sporting goods retailer bankruptcies.channel.
Operating profit decreasedincreased primarily as a result of the impact of retailer bankruptciesproduct mix favoring higher gross margin businesses, sales volume and higher proportion of selling, general and administrative expenses at our recently acquired GTM business, offset partially by continued cost control.

International
Quarter Ended    Quarter Ended    
July 1,
2017
 July 2,
2016
 
Higher
(Lower)
 
Percent
Change
September 30,
2017
 October 1,
2016
 
Higher
(Lower)
 
Percent
Change
(dollars in thousands)(dollars in thousands)
Net sales$475,242
 $269,662
 $205,580
 76.2%$556,730
 $478,122
 $78,608
 16.4%
Segment operating profit58,307
 23,153
 35,154
 151.8
76,414
 61,312
 15,102
 24.6
Net sales in the International segment were higher as a result of the following:
Incremental
Increased net sales fromdriven by our global Champion sales growth, primarily in the acquisitions ofEurope and Asia markets;
Increased innerwear net sales within our Hanes Australasia and Champion Europe in 2016;Latin America businesses; and
Continued growth in Asia within our Activewear product category, primarily driven by Champion and Hanes sales growth.
Favorable impact of foreign currency exchange rates.
Partially offset by:
Lower net sales in Hanes Europe Innerwear due to decliningDeclining hosiery sales and slower traffic at retail in certain markets; and
Unfavorable impact of foreign currency exchange rates.European markets.
Operating profit increased primarily due to higher sales volume, coupled with cost synergies realized in our Hanes Europe Innerwear and Hanes Australasia businesses.
Other
Quarter Ended    Quarter Ended    
July 1,
2017
 July 2,
2016
 
Higher
(Lower)
 
Percent
Change
September 30,
2017
 October 1,
2016
 
Higher
(Lower)
 
Percent
Change
(dollars in thousands)(dollars in thousands)
Net sales$72,606
 $90,868
 $(18,262) (20.1)%$78,985
 $87,088
 $(8,103) (9.3)%
Segment operating profit5,643
 12,530
 (6,887) (55.0)10,162
 9,199
 963
 10.5
Other net sales were lower as a result of continued declines in hosiery sales in the U.S., and slower traffic at our outlet stores and the planned exitimpact from our legacy catalog business in the third quarter of 2016.weather-related store closures. Operating profit decreasedincreased as a result of continued cost control partially offset by lower sales volume, offset, in part, by continued cost control.volume.
Corporate
Corporate expenses included certain administrative costs and acquisition-related and integration charges. Acquisition-related and integration costs are expenses related directly to an acquisition and its integration into the organization. These costs include legal fees, consulting fees, bank fees, severance costs, certain purchase accounting items, facility closures, inventory write-offs, information technology costs and similar charges. Acquisition-related currency transactions represent the foreign exchange gain from financing activities related to the Champion Europe and Hanes Australasia acquisitions.
Quarter EndedQuarter Ended
July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
(dollars in thousands)(dollars in thousands)
Acquisition-related and integration costs:
  
  
Hanes Australasia$9,383
 $19,575
Hanes Europe Innerwear$10,514
 $22,212
8,136
 18,673
Hanes Australasia5,970
 1,157
Champion Europe2,528
 6,032
Knights Apparel5,075
 6,125
(3,429) 5,588
Champion Europe4,399
 1,518
Other acquisitions104
 1,192
256
 549
Acquisition-related currency transactions
 (7,809)
 (7,830)
Total acquisition-related and integration costs$26,062
 $24,395
$16,874
 $42,587

Condensed Consolidated Results of Operations — SixNine Months Ended July 1,September 30, 2017 Compared with SixNine Months Ended July 2,October 1, 2016
 
Six Months Ended    Nine Months Ended    
July 1,
2017
 July 2,
2016
 
Higher
(Lower)
 
Percent
Change
September 30,
2017
 October 1,
2016
 
Higher
(Lower)
 
Percent
Change
(dollars in thousands)(dollars in thousands)
Net sales$3,026,965
 $2,691,871
 $335,094
 12.4 %$4,826,235
 $4,452,890
 $373,345
 8.4 %
Cost of sales1,841,532
 1,677,324
 164,208
 9.8
2,962,345
 2,788,977
 173,368
 6.2
Gross profit1,185,433
 1,014,547
 170,886
 16.8
1,863,890
 1,663,913
 199,977
 12.0
Selling, general and administrative expenses835,488
 670,932
 164,556
 24.5
1,260,641
 1,091,946
 168,695
 15.4
Operating profit349,945
 343,615
 6,330
 1.8
603,249
 571,967
 31,282
 5.5
Other expenses2,778
 48,974
 (46,196) (94.3)4,659
 50,533
 (45,874) (90.8)
Interest expense, net86,267
 68,106
 18,161
 26.7
130,184
 111,539
 18,645
 16.7
Income from continuing operations before income tax expense260,900
 226,535
 34,365
 15.2
468,406
 409,895
 58,511
 14.3
Income tax expense15,654
 18,123
 (2,469) (13.6)19,804
 28,693
 (8,889) (31.0)
Income from continuing operations245,246
 208,412
 36,834
 17.7
448,602
 381,202
 67,400
 17.7
Income from discontinued operations, net of tax(2,097) 
 (2,097) NM
(2,097) 1,068
 (3,165) NM
Net income$243,149
 $208,412
 $34,737
 16.7 %$446,505
 $382,270
 $64,235
 16.8 %
Net Sales
Net sales increased 12%8% in the sixnine months of 2017 compared to the same period of 2016 as a result of the following:
Acquisitions of Hanes Australasia, Champion Europe and GTM in 2016, which added incremental net sales of approximately $436$451 million in the sixnine months of 2017;
Increased net sales driven by our global Champion growth;and global online growth initiatives;
Increased net sales in the online channel globally; and
Increased net sales in our sock product category.category; and
Sales growth in licensed sports apparel in the college bookstore business.
Partially offset by:
Lower net sales in our remaining Innerwear product categories as a result of challenging consumer traffic at retail, cautious inventory management by retailers and store closures within the mid-tier and department store channel;
Lower net sales in our licensed sports apparel business driven by a timing shift of orders inand Hanes activewear apparel within the mass merchant channel into the third quarter of 2017;channel; and
Lower net sales in Other driven by continued declines in Hosiery,hosiery, slower traffic at our outlet stores and the planned exit from our legacy catalog business in the third quarter of 2016; and
Unfavorable impact of foreign currency exchange rates in our International businesses.2016.
Gross Profit
Gross profit increased in the sixnine months of 2017 compared to the same period in 2016 due to higher sales volume primarily from acquisitions, supply chain efficiencies and synergies recognized from the integration of our acquisitions, offset slightly by higherand lower acquisition-related and integration charges. Included in gross profit in the sixnine months of 2017 and 2016 are charges of approximately $20$22 million and $14$28 million, respectively, related to acquisition-related and integration costs.
Selling, General and Administrative Expenses
As a percentage of net sales, our selling, general and administrative expenses were 27.6%26.1% for the sixnine months of 2017 compared to 24.9%24.5% in the same period of 2016. Included in selling, general and administrative expenses were charges of $45$59 million and $35$64 million of acquisition-related and integration costs for the sixnine months of 2017 and 2016, respectively. The higher selling, general and administrative expenses, as a percentage of net sales, resulted from the increase in acquisition-related and integration costs, higher proportion of selling, general and administrative expenses for theour recently acquired entities,businesses, primarily Hanes Australasia, Champion Europe and GTM, and expenses related to our Project Booster initiative including our U.S. corporate office headcount reduction efforts, offset partially by synergy benefits from the integration of prior acquisitions, cost savings from the planned reduction of our legacy catalog distribution, lower acquisition-related and integration costs and continued cost control.

Other Highlights
Other Expenses lower by $46 million in the sixnine months of 2017 compared to 2016, primarily due to costs associated with the redemption of our 6.375% Senior Notes in 2016, which included a call premium and write-off of unamortized debt issuance costs.
Interest Expense – higher by $18$19 million for the sixnine months of 2017 compared to 2016 primarily due to higher debt balances to help fund acquisitions and share repurchases.repurchases coupled with a higher weighted average interest rate. Our weighted average interest rate on our outstanding debt was 3.75%3.78% for the sixnine months of 2017 and 3.63%3.65% for the sixnine months of 2016.
Income Tax Expense – our effective income tax rate was 6%4% and 8%7% for the sixnine months of 2017 and 2016, respectively. The lower effective income tax rate for the sixnine months ended July 1,September 30, 2017 compared to the sixnine months ended July 2,October 1, 2016 was primarily due to an income tax benefit recognizedfavorable adjustments related to the realizationfinalization of anthe prior year federal tax return, resulting in the recognition of previously unrecognized foreign tax benefit resulting fromcredits, recognized discretely in the effective settlementthird quarter of positions2017. Additionally, there was a lower proportion of earnings attributed to domestic subsidiaries in 2017, which are taxed at higher rates than foreign jurisdictions.subsidiaries.
Discontinued Operations – the results of our discontinued operations include the operations of two businesses, Dunlop Flooring and Tontine Pillow, which were purchased in the Hanes Australasia acquisition in 2016 and sold during the first quarter of 2017.
Operating Results by Business Segment — SixNine Months Ended July 1,September 30, 2017 Compared with SixNine Months Ended July 2,October 1, 2016
Net Sales Operating ProfitNet Sales Operating Profit
Six Months Ended Six Months EndedNine Months Ended Nine Months Ended
July 1,
2017
 July 2,
2016
 July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
 September 30,
2017
 October 1,
2016
(dollars in thousands)(dollars in thousands)
Innerwear$1,224,196
 $1,274,711
 $266,980
 $287,758
$1,868,255
 $1,953,807
 $407,982
 $435,660
Activewear707,099
 691,054
 83,038
 87,114
1,226,595
 1,207,767
 162,053
 160,076
International952,640
 548,749
 108,802
 47,872
1,509,370
 1,026,871
 185,216
 109,184
Other143,030
 177,357
 6,088
 18,209
$222,015
 264,445
 16,250
 27,408
Corporate
 
 (114,963) (97,338)
 
 (168,252) (160,361)
Total net sales$3,026,965
 $2,691,871
 $349,945
 $343,615
$4,826,235
 $4,452,890
 $603,249
 $571,967
Innerwear
Six Months Ended    Nine Months Ended    
July 1,
2017
 July 2,
2016
 
Higher
(Lower)
 
Percent
Change
September 30,
2017
 October 1,
2016
 
Higher
(Lower)
 
Percent
Change
(dollars in thousands)(dollars in thousands)
Net sales$1,224,196
 $1,274,711
 $(50,515) (4.0)%$1,868,255
 $1,953,807
 $(85,552) (4.4)%
Segment operating profit266,980
 287,758
 (20,778) (7.2)407,982
 435,660
 (27,678) (6.4)

Innerwear net sales decreased in both our basics and intimates apparel businesses. Strength in our sock product category,and licensed intimate apparel businesses, as well as growth in the online channel was more than offset by declines in other product categories due to challenging consumer traffic at retail and cautious inventory management by retailers. Our intimate apparel business also experienced sales declines driven by the continued impact from retail store closures in the mid-tier and department store channel, partially offset by strong performance from our new Maidenform sport and millennial product offerings.
Decreased operating profit was driven largely by lower sales volume coupled with lower margins from unfavorable product mix, as well as expenses related to Project Booster, offset partially by continued cost control.

Activewear 
Six Months Ended    Nine Months Ended    
July 1,
2017
 July 2,
2016
 
Higher
(Lower)
 
Percent
Change
September 30,
2017
 October 1,
2016
 
Higher
(Lower)
 
Percent
Change
(dollars in thousands)(dollars in thousands)
Net sales$707,099
 $691,054
 $16,045
 2.3 %$1,226,595
 $1,207,767
 $18,828
 1.6%
Segment operating profit83,038
 87,114
 (4,076) (4.7)162,053
 160,076
 1,977
 1.2
Activewear net sales increased as a result of our expansion into the teamwear and fanware space with the acquisition of GTM in 2016, andgrowth in our core Champion sales growth withinbrand outside of the mass merchant channel, increased licensed sports apparel sales in the college bookstore business, and growth across Activewear product categories online, partially offset by sales declines in Hanes activewear apparel and licensed sports apparel within the mass merchant channel and lower sales in our licensed sports apparel business driven by a timing shift of orders in the mass merchant channel into the third quarter of 2017.channel.
Operating profit decreasedincreased primarily as a result of increased sales volume and continued cost control offset, in part, by the impact of retailer bankruptcies and higher proportion of selling, general and administrative expenses at our recently acquired GTM business, offset partially by continued cost control.business.
International
Six Months Ended    Nine Months Ended    
July 1,
2017
 July 2,
2016
 
Higher
(Lower)
 
Percent
Change
September 30,
2017
 October 1,
2016
 
Higher
(Lower)
 
Percent
Change
(dollars in thousands)(dollars in thousands)
Net sales$952,640
 $548,749
 $403,891
 73.6%$1,509,370
 $1,026,871
 $482,499
 47.0%
Segment operating profit108,802
 47,872
 60,930
 127.3
185,216
 109,184
 76,032
 69.6
Net sales in the International segment were higher as a result of the following:
Incremental net sales from the acquisitions of Hanes Australasia and Champion Europe in 2016; and
Continued growth in Asia within our Activewear product category, primarily driven by Champion and Hanes sales growth.
Partially offset by:
Lower net sales in Hanes Europe Innerwear, due to decliningDeclining hosiery sales and slower traffic at retail in certain markets; and
Unfavorable impact of foreign currency exchange rates.European markets.
Operating profit increased primarily due to higher sales volume, coupled with cost synergies realized in our Hanes Europe Innerwear and Hanes Australasia businesses.
Other
Six Months Ended    Nine Months Ended    
July 1,
2017
 July 2,
2016
 
Higher
(Lower)
 
Percent
Change
September 30,
2017
 October 1,
2016
 
Higher
(Lower)
 
Percent
Change
(dollars in thousands)(dollars in thousands)
Net sales$143,030
 $177,357
 $(34,327) (19.4)%$222,015
 $264,445
 $(42,430) (16.0)%
Segment operating profit6,088
 18,209
 (12,121) (66.6)16,250
 27,408
 (11,158) (40.7)
Other net sales were lower as a result of continued declines in hosiery sales in the U.S., slower traffic at our outlet stores and the planned exit from our legacy catalog business in 2016. Operating profit decreased as a result of lower sales volume, offset, in part, by continued cost control.

Corporate
Corporate expenses included certain administrative costs and acquisition-related and integration charges. Acquisition-related and integration costs are expenses related directly to an acquisition and its integration into the organization. These costs include legal fees, consulting fees, bank fees, severance costs, certain purchase accounting items, facility closures, inventory write-offs, infrastructure (including information technology), and similar charges. Acquisition-related currency transactions represent the foreign exchange gain from financing activities related to the Champion Europe and Hanes Australasia acquisitions.
Six Months EndedNine Months Ended
July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
(dollars in thousands)(dollars in thousands)
Acquisition-related and integration costs:      
Hanes Europe Innerwear$30,392
 $41,246
$38,528
 $59,919
Hanes Australasia17,978
 1,156
27,361
 20,732
Champion Europe8,096
 7,550
Knights Apparel10,314
 10,035
6,885
 15,623
Champion Europe5,567
 1,518
Other acquisitions178
 2,918
433
 3,466
Acquisition-related currency transactions
 (7,809)
 (15,639)
Total acquisition-related and integration costs$64,429
 $49,064
$81,303
 $91,651
Liquidity and Capital Resources
Trends and Uncertainties Affecting Liquidity
Our primary sources of liquidity are cash generated by operations and availability under our $1.0 billion revolving credit facility (the “Revolving Loan Facility”), our senior secured credit facility (the “Senior Secured Credit Facility”), our accounts receivable securitization facility (the “Accounts Receivable Securitization Facility”) and our international loan facilities.
At July 1,September 30, 2017, we had $604784 million of borrowing availability under our Revolving Loan Facility (after taking into account outstanding letters of credit), $71$24 million borrowing availability under our Accounts Receivable Securitization Facility, $88$149 million of borrowing availability under our international loan facilities, which includes our European Revolving Loan Facility, our Australian Revolving Loan Facility and other international notes payable and debt facilities, and $449400 million in cash and cash equivalents. We currently believe that our existing cash balances and cash generated by operations, typically in the second half of the year, together with our available credit capacity, will enable us to comply with the terms of our indebtedness and meet foreseeable liquidity requirements.
The following have impacted or may impact our liquidity:
we have principal and interest obligations under our debt;
we acquired Champion Europe in June 2016 and Hanes Australasia in July 2016 and we may pursue additional strategic business acquisitions in the future;
the amount of contingent consideration we are required to pay in connection with the Champion Europe acquisition may be inconsistent with management’s expectations;
we expect to continue to invest in efforts to improve operating efficiencies and lower costs;
contributions to our pension plans;
we may increase or decrease the portion of the current-year income of our foreign subsidiaries that we remit to the United States, which could significantly impact our effective income tax rate;
our Board of Directors has authorized a regular quarterly dividend; and
our Board of Directors has authorized share repurchases.
Dividends
In January, April and AprilJuly of 2017, our Board of Directors declared a regular quarterly dividend of $0.15 per share, which were paid in March, June and JuneSeptember of 2017, respectively. On July 25,October 24, 2017, our Board of Directors declared a regular quarterly cash dividend of $0.15 per share to be paid on September 6,December 5, 2017 to stockholders of record at the close of business on August 15,November 14, 2017.

Share Repurchase Program
In April 2016, our Board of Directors approved a new share repurchase program for up to 40 million shares to be repurchased in open market transactions, subject to market conditions, legal requirements and other factors. For the sixnine months ended July 1,September 30, 2017, we entered into transactions to repurchase approximately 15 million shares at a weighted average repurchase price of $20.39 per share. The shares were repurchased at a total cost of $300 million. For the sixnine months ended July 2,October 1, 2016 we repurchased approximately 14 million shares under the previous share repurchase program at a weighted average purchase price of $26.65. The shares were repurchased at a total cost of $380 million. At July 1,September 30, 2017, the remaining repurchase authorization under the current share repurchase program totaled approximately 25 million shares. The program does not obligate us to acquire any particular amount of common stock and may be suspended or discontinued at any time at our discretion.
Cash Requirements for Our Business
We rely on our cash flows generated from operations and the borrowing capacity under our credit facilities to meet the cash requirements of our business. The primary cash requirements of our business are payments to vendors in the normal course of business, capital expenditures, maturities of debt and related interest payments, business acquisitions, contributions to our pension plans, repurchases of our stock and regular quarterly dividend payments. We believe we have sufficient cash and available borrowings for our foreseeable liquidity needs.
There have been no significant changes in the cash requirements for our business from those described in our Annual Report on Form 10-K for the year ended December 31, 2016.
Sources and Uses of Our Cash
The information presented below regarding the sources and uses of our cash flows for the sixnine months ended July 1,September 30, 2017 and July 2,October 1, 2016 was derived from our condensed consolidated financial statements.
Six Months EndedNine Months Ended
July 1,
2017
 July 2,
2016
September 30,
2017
 October 1,
2016
(dollars in thousands)(dollars in thousands)
Operating activities$34,250
 $(129,078)$331,090
 $208,291
Investing activities13,301
 (220,433)(16,259) (959,865)
Financing activities(55,211) 690,681
(367,598) 879,925
Effect of changes in foreign currency exchange rates on cash(3,170) 658
(7,433) 2,693
Change in cash and cash equivalents(10,830) 341,828
(60,200) 131,044
Cash and cash equivalents at beginning of year460,245
 319,169
460,245
 319,169
Cash and cash equivalents at end of period$449,415
 $660,997
$400,045
 $450,213
Operating Activities
Our overall liquidity is primarily driven by our cash flow from operations, which is dependent on net income, as well as changes in our working capital. We typically use cash during the first half of the year and generate most of our cash flow in the second half of the year. As compared to prior year, the higher net cash provided by operating activities is due to strong working capital management, specifically related to increased accounts receivable collections, extension of our accounts payable terms and no voluntary pension contribution in the first halfnine months of 2017 compared to $40 million in the same period of 2016.
Investing Activities
The higherlower net cash providedused by investing activities is primarily the result of cash received from our dispositions of the Dunlop Flooring and Tontine Pillow businesses as well as our acquisitionacquisitions of Champion Europe and Pacific Brands in the second quarterfirst nine months of 2016.
Financing Activities
The lower net cash from financing activities was primarily the result of lower borrowings on our loan facilities in the first halfnine months of 2017.2017 and the issuance of our three Senior Notes and incurrence of debt under our Australia term loan facilities in 2016 to help fund the acquisitions of Champion Europe and Hanes Australasia.

Financing Arrangements
In March 2017, we amended the Accounts Receivable Securitization Facility. This amendment primarily extended the maturity date to March 2018.

In September 2017, we amended the European Revolving Loan Facility to extend the maturity date to September 2018.
As of July 1,September 30, 2017, we were in compliance with all financial covenants under our credit facilities. We expect to maintain compliance with these covenants for the foreseeable future, however economic conditions or the occurrence of events discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 or other SEC filings could cause noncompliance.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements within the meaning of Item 303(a)(4) of SEC Regulation S-K.
Critical Accounting Policies and Estimates
We have chosen accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial condition in conformity with U.S. GAAP. We apply these accounting policies in a consistent manner. Our significant accounting policies are discussed in Note 2, “Summary of Significant Accounting Policies,” to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.
The application of critical accounting policies requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. These estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. We evaluate these estimates and assumptions on an ongoing basis and may retain outside consultants to assist in our evaluation. If actual results ultimately differ from previous estimates, the revisions are included in results of operations in the period in which the actual amounts become known. The critical accounting policies that involve the most significant management judgments and estimates used in preparation of our financial statements, or are the most sensitive to change from outside factors, are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2016. There have been no material changes in these policies from those described in our Annual Report on Form 10-K for the year ended December 31, 2016.
Recently Issued Accounting Pronouncements
For a summary of recently issued accounting pronouncements, see Note, “Recent Accounting Pronouncements” to our financial statements.
Item 3.Quantitative and Qualitative Disclosures about Market Risk
There have been no significant changes in our market risk exposures from those described in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2016.
Item 4.Controls and Procedures
As required by Exchange Act Rule 13a-15(b), our management, including our Chief Executive Officer and ChiefPrincipal Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and ChiefPrincipal Financial Officer concluded that our disclosure controls and procedures were effective.
In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, including our Chief Executive Officer and ChiefPrincipal Financial Officer, concluded that no changes in our internal control over financial reporting occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1.Legal Proceedings
Although we are subject to various claims and legal actions that occur from time to time in the ordinary course of our business, we are not party to any pending legal proceedings that we believe could have a material adverse effect on our business, results of operations, financial condition or cash flows.
Item 1A.Risk Factors
The risk factors that affect our business and financial results are discussed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. There are no material changes to the risk factors previously disclosed, nor have we identified any previously undisclosed risks that could materially adversely affect our business and financial results.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.Defaults Upon Senior Securities
None.
Item 4.Mine Safety Disclosures
Not applicable.
Item 5.Other Information
At our Annual Meeting of Stockholders in April 2017, our stockholders recommended, by a non-binding advisory vote, that we have an annual advisory vote regarding executive compensation. After considering this, as well as the recommendation of the Compensation Committee of our Board of Directors that we should have an annual stockholder advisory vote on executive compensation, our Board of Directors determined that future stockholder advisory votes on executive compensation will be held annually.None.

Item 6.Exhibits
The exhibits listed in the accompanying Exhibit Index are filed or furnished as part of this Quarterly Report on Form 10-Q.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HANESBRANDS INC.
By:/s/ Richard D. Moss
Richard D. Moss
Chief Financial Officer
(Duly authorized officer and principal financial officer)
Date: August 2, 2017

INDEX TO EXHIBITS
Exhibit
Number
 Description
   
2.1 
   
3.1 
   
3.2 
   
3.3 
   
3.4 
   
3.5 
   
31.1 
   
31.2 
   
32.1 
   
32.2 
 
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HANESBRANDS INC.
  
By:/s/ Richard D. Moss
Richard D. Moss
Duly Appointed Officer and Principal Financial Officer

Date: November 2, 2017

E-133