UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April ~~3, 2021~~2, 2022


☐			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)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, Par Value $0.01	HBI	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ 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

☒

Accelerated filer

☐

Non-accelerated filer

☐

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 ☒

As of ~~May 7, 2021,~~April 29, 2022, there were ~~349,115,441~~348,775,722 shares of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
Forward-Looking Statements		1

PART I
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Statements of Income for the quarters ended ~~April 3~~A ,pril 2, 202 12 and ~~March~~ April ~~28,~~ 3 , 20 2021	2
	Condensed Consolidated Statements of Comprehensive Income for the quarters ended April 3 ~~, 202~~1 2, 2022 and ~~March~~ 2 8, April 3, 20 2021	3
	Condensed Consolidated Balance Sheets at ~~Apr~~il April 32, 2022 , January 1, 202 1,2 ~~Janu~~a ry 2 ,and April 3, 20 21 ~~and~~ ~~March~~ ~~28,~~ 20 20	4
	Condensed Consolidated Statements of Stockholders’ Equity for the quarters ended April ~~ended~~ 2, 2022 and April 3, ~~202~~1 ~~and~~ ~~March~~ ~~28,~~ 20 2021	5
	Condensed Consolidated Statements of Cash Flows for the quarters ended April 3 ~~, 202~~1 2, 2022 and ~~March~~ ~~28,~~ April 3, 20 2021	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2123
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2831
Item 4.	Controls and Procedures	2831

PART II
Item 1.	Legal Proceedings	2931
Item 1A.	Risk Factors	2931
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2931
Item 3.	Defaults Upon Senior Securities	2932
Item 4.	Mine Safety Disclosures	2932
Item 5.	Other Information	2932
Item 6.	Exhibits	3033
Signatures		3134

Table of Contents

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains information that may constitute “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 (the “Exchange Act”). 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. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding our intent, belief and current expectations about our strategic direction, prospects and future results are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. In particular,

statements with respect to trends associated with our business, our Full Potential plan and our future financial performance ~~and the potential effects of the ongoing global COVID-19 coronavirus pandemic~~ included in this Quarterly Report on Form 10-Q specifically appearing under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” include forward-looking statements.

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 January ~~2, 2021,~~1, 2022, under the caption “Risk Factors,” and available on the “Investors” section of our corporate website, www.Hanes.com/investors. The contents of our corporate website are not incorporated by reference in this Quarterly Report on Form 10-Q.

Table of Contents

PART I


Item 1.			Financial Statements

HANESBRANDS INC.

Condensed Consolidated Statements of Income

(in thousands, except per share data)

(unaudited)

Quarters Ended
April 3,
2021 March 28,
2020
Net sales $ 1,508,029 $ 1,203,070
Cost of sales 905,348 784,902
Gross profit 602,681 418,168
Selling, general and administrative expenses 412,559 370,215
Operating profit 190,122 47,953
Other expenses 2,561 6,101
Interest expense, net 44,460 36,027
Income from continuing operations before income tax expense 143,101 5,825
Income tax expense 14,697 707
Income from continuing operations 128,404 5,118
Loss from discontinued operations, net of tax (391,666) (12,992)
Net loss $ (263,262) $ (7,874)
Earnings (loss) per share - basic:
Continuing operations $ 0.37 $ 0.01
Discontinued operations (1.12) (0.04)
Net loss $ (0.75) $ (0.02)
Earnings (loss) per share - diluted:
Continuing operations $ 0.37 $ 0.01
Discontinued operations (1.11) (0.04)
Net loss $ (0.75) $ (0.02)


	Quarters Ended
	April 2, 2022		April 3, 2021
Net sales	$	1,576,156	$	1,508,029
Cost of sales	991,978		905,348
Gross profit	584,178		602,681
Selling, general and administrative expenses	413,666		412,559
Operating profit	170,512		190,122
Other expenses	987		2,561
Interest expense, net	31,963		44,460
Income from continuing operations before income tax expense	137,562		143,101
Income tax expense	23,385		14,697
Income from continuing operations	114,177		128,404
Income (loss) from discontinued operations, net of tax	4,525		(391,666)
Net income (loss)	$	118,702	$	(263,262)

Earnings (loss) per share - basic:
Continuing operations	$	0.33	$	0.37
Discontinued operations	0.01		(1.12)
Net income (loss)	$	0.34	$	(0.75)

Earnings (loss) per share - diluted:
Continuing operations	$	0.32	$	0.37
Discontinued operations	0.01		(1.11)
Net income (loss)	$	0.34	$	(0.75)

See accompanying notes to Condensed Consolidated Financial Statements.

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HANESBRANDS INC.

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

Quarters Ended
April 3,
2021 March 28,
2020
Net loss $ (263,262) $ (7,874)
Other comprehensive income (loss):
Translation adjustments (25,201) (117,154)
Unrealized gain on qualifying cash flow hedges, net of tax of $(5,176) and $(7,280), respectively 8,540 7,783
Unrecognized income from pension and postretirement plans, net of tax of $(2,049) and $(1,272), respectively 6,735 3,594
Total other comprehensive loss (9,926) (105,777)
Comprehensive loss $ (273,188) $ (113,651)


	Quarters Ended
	April 2, 2022		April 3, 2021
Net income (loss)	$	118,702	$	(263,262)
Other comprehensive income (loss):
Translation adjustments	27,297		(25,201)
Unrealized gain on qualifying cash flow hedges, net of tax of $969 and $(5,176), respectively	3,354		8,540
Unrecognized income from pension and postretirement plans, net of tax of $(1,317) and $(2,049), respectively	4,261		6,735
Total other comprehensive income (loss)	34,912		(9,926)
Comprehensive income (loss)	$	153,614	$	(273,188)

See accompanying notes to Condensed Consolidated Financial Statements.

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HANESBRANDS INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

April 3,
2021 January 2,
2021 March 28,
2020
Assets
Cash and cash equivalents $ 530,403 $ 900,615 $ 1,069,490
Trade accounts receivable, net 807,738 768,221 666,603
Inventories 1,489,565 1,367,758 1,787,660
Other current assets 153,358 158,700 155,074
Current assets of discontinued operations 303,045 234,086 296,889
Total current assets 3,284,109 3,429,380 3,975,716
Property, net 458,434 477,821 502,167
Right-of-use assets 416,136 432,631 434,225
Trademarks and other identifiable intangibles, net 1,269,932 1,293,847 1,161,350
Goodwill 1,150,138 1,158,938 1,119,646
Deferred tax assets 355,826 367,976 181,807
Other noncurrent assets 54,678 64,773 113,263
Noncurrent assets of discontinued operations 0 494,501 479,927
Total assets $ 6,989,253 $ 7,719,867 $ 7,968,101
Liabilities and Stockholders’ Equity
Accounts payable $ 976,887 $ 891,868 $ 876,394
Accrued liabilities 571,410 609,864 357,514
Lease liabilities 132,127 136,510 138,298
Notes payable 0 0 1,660
Accounts Receivable Securitization Facility 0 0 152,153
Current portion of long-term debt 34,375 263,936 2,533
Current liabilities of discontinued operations 288,936 222,183 285,359
Total current liabilities 2,003,735 2,124,361 1,813,911
Long-term debt 3,649,631 3,739,434 4,236,955
Lease liabilities - noncurrent 315,382 331,577 327,745
Pension and postretirement benefits 333,460 381,457 331,205
Other noncurrent liabilities 202,564 216,091 272,780
Noncurrent liabilities of discontinued operations 0 112,989 111,934
Total liabilities 6,504,772 6,905,909 7,094,530
Stockholders’ equity:
Preferred stock (50,000,000 authorized shares; $.01 par value)
Issued and outstanding — None 0 0 0
Common stock (2,000,000,000 authorized shares; $.01 par value)
Issued and outstanding — 349,090,472, 348,802,220 and 348,035,310, respectively 3,491 3,488 3,480
Additional paid-in capital 304,090 307,883 297,456
Retained earnings 753,785 1,069,546 1,296,060
Accumulated other comprehensive loss (576,885) (566,959) (723,425)
Total stockholders’ equity 484,481 813,958 873,571
Total liabilities and stockholders’ equity $ 6,989,253 $ 7,719,867 $ 7,968,101


	April 2, 2022		January 1, 2022		April 3, 2021
Assets
Cash and cash equivalents	$	369,210	$	536,277	$	530,403
Trade accounts receivable, net	898,420		894,151		807,738
Inventories	1,819,974		1,584,015		1,489,565
Other current assets	202,015		186,503		153,358
Current assets held for sale	7,959		327,157		303,045
Total current assets	3,297,578		3,528,103		3,284,109
Property, net	443,817		441,401		458,434
Right-of-use assets	350,174		363,854		416,136
Trademarks and other identifiable intangibles, net	1,235,276		1,220,170		1,269,932
Goodwill	1,138,667		1,133,095		1,150,138
Deferred tax assets	326,677		327,804		355,826
Other noncurrent assets	67,520		57,009		54,678
Total assets	$	6,859,709	$	7,071,436	$	6,989,253

Liabilities and Stockholders’ Equity
Accounts payable	$	1,204,196	$	1,214,847	$	976,887
Accrued liabilities	575,911		660,778		571,410
Lease liabilities	117,465		109,526		132,127

Accounts Receivable Securitization Facility	135,500		—		—
Current portion of long-term debt	25,000		25,000		34,375
Current liabilities held for sale	7,959		316,902		288,936
Total current liabilities	2,066,031		2,327,053		2,003,735
Long-term debt	3,325,042		3,326,091		3,649,631
Lease liabilities - noncurrent	258,663		281,852		315,382
Pension and postretirement benefits	242,690		248,518		333,460
Other noncurrent liabilities	187,867		185,429		202,564
Total liabilities	6,080,293		6,368,943		6,504,772

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 — 348,775,722, 349,903,253 and 349,090,472, respectively	3,488		3,499		3,491
Additional paid-in capital	315,675		315,337		304,090
Retained earnings	976,944		935,260		753,785
Accumulated other comprehensive loss	(516,691)		(551,603)		(576,885)
Total stockholders’ equity	779,416		702,493		484,481
Total liabilities and stockholders’ equity	$	6,859,709	$	7,071,436	$	6,989,253

See accompanying notes to Condensed Consolidated Financial Statements.

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HANESBRANDS INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except per share data)

(unaudited)

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total
Shares Amount
Balances at January 2, 2021 348,802 $ 3,488 $ 307,883 $ 1,069,546 $ (566,959) $ 813,958
Net loss — — — (263,262) — (263,262)
Dividends ($0.15 per common share) — — — (52,499) — (52,499)
Other comprehensive loss — — — — (9,926) (9,926)
Stock-based compensation — — (1,534) — — (1,534)
Net exercise of stock options, vesting of restricted stock units and other 288 3 (2,259) — — (2,256)
Balances at April 3, 2021 349,090 $ 3,491 $ 304,090 $ 753,785 $ (576,885) $ 484,481


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balances at January 1, 2022	349,903	$	3,499	$	315,337	$	935,260	$	(551,603)	$	702,493
Net income	—	—		—		118,702		—		118,702
Dividends ($0.15 per common share)	—	—		—		(53,443)		—		(53,443)
Other comprehensive income	—	—		—		—		34,912		34,912
Stock-based compensation	—	—		5,329		—		—		5,329
Net exercise of stock options, vesting of restricted stock units and other	450	5		(3,564)		—		—		(3,559)
Share repurchases	(1,577)	(16)		(1,427)		(23,575)		—		(25,018)
Balances at April 2, 2022	348,776	$	3,488	$	315,675	$	976,944	$	(516,691)	$	779,416


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balances at January 2, 2021	348,802	$	3,488	$	307,883	$	1,069,546	$	(566,959)	$	813,958
Net loss	—	—		—		(263,262)		—		(263,262)
Dividends ($0.15 per common share)	—	—		—		(52,499)		—		(52,499)
Other comprehensive loss	—	—		—		—		(9,926)		(9,926)
Stock-based compensation	—	—		(1,534)		—		—		(1,534)
Net exercise of stock options, vesting of restricted stock units and other	288	3		(2,259)		—		—		(2,256)
Balances at April 3, 2021	349,090	$	3,491	$	304,090	$	753,785	$	(576,885)	$	484,481

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total
Shares Amount
Balances at December 28, 2019 362,449 $ 3,624 $ 304,395 $ 1,546,224 $ (617,648) $ 1,236,595
Net loss — — — (7,874) — (7,874)
Dividends ($0.15 per common share) — — — (54,421) — (54,421)
Other comprehensive loss — — — — (105,777) (105,777)
Stock-based compensation — — 4,641 — — 4,641
Net exercise of stock options, vesting of restricted stock units and other 50 1 675 — — 676
Share repurchases (14,464) (145) (12,255) (187,869) — (200,269)
Balances at March 28, 2020 348,035 $ 3,480 $ 297,456 $ 1,296,060 $ (723,425) $ 873,571

See accompanying notes to Condensed Consolidated Financial Statements.

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HANESBRANDS INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Quarters Ended
April 3, 2021(1)
March 28, 2020(1)
Operating activities:
Net loss $ (263,262) $ (7,874)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation 24,142 22,781
Amortization of acquisition intangibles 6,179 6,113
Other amortization 3,020 2,477
Impairment of intangible assets and goodwill 163,047 0
Loss on classification of assets held for sale 226,352 0
Amortization of debt issuance costs 4,580 2,123
Other (5,835) (5,258)
Changes in assets and liabilities:
Accounts receivable (63,955) 73,694
Inventories (122,781) (86,785)
Other assets 9,606 26,790
Accounts payable 109,197 (13,605)
Accrued pension and postretirement benefits (38,757) (21,481)
Accrued liabilities and other (34,587) (82,191)
Net cash from operating activities 16,946 (83,216)
Investing activities:
Capital expenditures (17,804) (25,759)
Proceeds from sales of assets 2,406 66
Other 1,794 1,216
Net cash from investing activities (13,604) (24,477)
Financing activities:
Repayments on Term Loan Facilities (300,000) 0
Borrowings on Accounts Receivable Securitization Facility 0 227,061
Repayments on Accounts Receivable Securitization Facility 0 (74,909)
Borrowings on Revolving Loan Facilities 0 1,638,000
Repayments on Revolving Loan Facilities 0 (688,000)
Borrowings on International Debt 0 31,222
Borrowings on notes payable 21,106 62,312
Repayments on notes payable (20,276) (64,352)
Share repurchases 0 (200,269)
Cash dividends paid (52,351) (53,683)
Payments of debt issuance costs 0 0
Other (2,902) 132
Net cash from financing activities (354,423) 877,514
Effect of changes in foreign exchange rates on cash (17,662) (15,061)
Change in cash, cash equivalents and restricted cash (368,743) 754,760
Cash, cash equivalents and restricted cash at beginning of year 910,603 329,923
Cash, cash equivalents and restricted cash at end of period 541,860 1,084,683
Less restricted cash at end of period 1,153 903
Cash and cash equivalents at end of period $ 540,707 $ 1,083,780
Balances included in the Condensed Consolidated Balance Sheets:
Cash and cash equivalents $ 530,403 $ 1,069,490
Cash and cash equivalents included in current assets of discontinued operations 10,304 14,290
Cash and cash equivalents at end of period $ 540,707 $ 1,083,780


	Quarters Ended
	April 2, 2022(1)		April 3, 2021(1)
Operating activities:
Net income (loss)	$	118,702	$	(263,262)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation	18,931		24,142
Amortization of acquisition intangibles	4,847		6,179
Other amortization	2,508		3,020
Impairment of intangible assets and goodwill	—		163,047
(Gain) loss on sale of business and classification of assets held for sale	(6,715)		226,352
Amortization of debt issuance costs	1,887		4,580
Other	6,940		(5,835)
Changes in assets and liabilities:
Accounts receivable	(6,090)		(63,955)
Inventories	(247,567)		(122,781)
Other assets	(489)		9,606
Accounts payable	(310)		109,197
Accrued pension and postretirement benefits	24		(38,757)
Accrued liabilities and other	(123,857)		(34,587)
Net cash from operating activities	(231,189)		16,946
Investing activities:
Capital expenditures	(19,337)		(17,804)
Proceeds from sales of assets	19		2,406

Other	(10,272)		1,794
Net cash from investing activities	(29,590)		(13,604)
Financing activities:
Repayments on Term Loan Facilities	(6,250)		(300,000)
Borrowings on Accounts Receivable Securitization Facility	290,000		—
Repayments on Accounts Receivable Securitization Facility	(154,500)		—
Borrowings on Revolving Loan Facilities	129,000		—
Repayments on Revolving Loan Facilities	(109,000)		—



Borrowings on notes payable	21,454		21,106
Repayments on notes payable	(21,713)		(20,276)
Share repurchases	(25,018)		—
Cash dividends paid	(52,297)		(52,351)


Other	(4,109)		(2,902)
Net cash from financing activities	67,567		(354,423)
Effect of changes in foreign exchange rates on cash	1,793		(17,662)
Change in cash, cash equivalents and restricted cash	(191,419)		(368,743)
Cash, cash equivalents and restricted cash at beginning of year	560,629		910,603
Cash, cash equivalents and restricted cash at end of period	369,210		541,860
Less restricted cash at end of period	—		1,153
Cash and cash equivalents at end of period	$	369,210	$	540,707

Balances included in the Condensed Consolidated Balance Sheets:
Cash and cash equivalents	$	369,210	$	530,403
Cash and cash equivalents included in current assets held for sale	—		10,304
Cash and cash equivalents at end of period	$	369,210	$	540,707

(1)The cash flows related to discontinued operations have not been segregated and remain included in the major classes of assets and ~~liabilities.~~liabilities in the periods prior the sale of the European Innerwear business on March 5, 2022. Accordingly, the Condensed Consolidated Statements of Cash Flows include the results of continuing and discontinued operations.

Capital expenditures included in accounts payable at April ~~3, 2021~~2, 2022 and January ~~2, 2021~~1, 2022 were ~~$4,670~~$27,960 and ~~$17,931,~~$24,164, respectively. For the quarters ended April 2, 2022 and April 3, 2021, ~~and March 28, 2020,~~ right-of-use assets obtained in exchange for lease obligations were ~~$4,755~~$16,035 and ~~$17,551,~~$4,755, respectively.

See accompanying notes to Condensed Consolidated Financial Statements.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements

(amounts 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. 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 interim 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.

These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January ~~2, 2021.~~1, 2022. 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. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.

In the first quarter of 2021, the Company announced that ~~as part of its strategic plan,~~ it ~~was exploring alternatives for its European Innerwear business and subsequently~~ reached the decision to exit ~~this business. The Company~~its European Innerwear business as part of its strategy to streamline its portfolio under its Full Potential plan and determined that ~~its European Innerwear~~this business met held-for-sale and discontinued operations accounting ~~criteria at the end of the first quarter of 2021.~~criteria. Accordingly, the Company began to separately report the results of its European Innerwear business as discontinued operations in its Condensed Consolidated Statements of Income, and to present the related assets and liabilities as held for sale in the Condensed Consolidated Balance Sheets. ~~These changes have been applied~~On November 4, 2021, the Company announced that it reached an agreement to ~~all periods presented.~~sell its European Innerwear business to an affiliate of Regent, L.P. and completed the sale on March 5, 2022. Unless otherwise noted, discussion within these notes to the condensed consolidated interim financial statements relates to continuing operations. See ~~note “Discontinued Operations”~~Note “Assets and Liabilities Held for Sale” for additional ~~information on discontinued operations.~~information.

In addition, in the fourth quarter of 2021, the Company reached the decision to divest its U.S. Sheer Hosiery business, including the L’eggs brand, as part of its strategy to streamline its portfolio under its Full Potential plan and determined that this business met held-for-sale accounting criteria. The related assets and liabilities are presented as held for sale in the Condensed Consolidated Balance Sheets at April 2, 2022 and January 1, 2022. The operations of the U.S. Sheer Hosiery business are reported in “Other” for all periods presented in Note “Business Segment Information”. The Company is currently exploring potential purchasers for this business and expects to complete the sale of this business during 2022. See Note “Assets and Liabilities Held for Sale” for additional information.

(2) Recent Accounting Pronouncements

~~Income Taxes~~

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The new accounting rules reduce complexity by removing specific exceptions to general principles related to intraperiod tax allocations, ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses. The new accounting rules also simplify accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The new accounting rules were effective for the Company in the first quarter of 2021. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations, cash flows or disclosures.

Reference Rate Reform

In March 2020, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In January 2021, the FASB clarified the scope of that guidance with the issuance of ASU 2021-01, “Reference Rate Reform: Scope.” The new accounting rules provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The ~~amendments in this standard~~new accounting rules can be adopted any time before the fourth quarter of 2022. 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, cash flows and ~~disclosures.~~disclosures and does not currently intend to early adopt the new rules.

Business Combinations

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The new accounting rules require entities to apply Topic 606 to

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

~~Codification Improvements~~

~~In October 2020, the FASB issued ASU 2020-10, “Codification Improvements.”~~recognize and measure contract assets and contract liabilities in a business combination. The new accounting rules improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50) that had only been included in the Other Presentation Matters Section (Section 45) of the Codification. Additionally, the new rules also clarify guidance across various topics including defined benefit plans, foreign currency transactions, and interest expense. The new accounting rules werewill be effective for the Company in the first quarter of ~~2021.~~2023, including interim periods. Early adoption is permitted. The adoption impact of the new accounting rules ~~did not have~~will depend on the magnitude of future acquisitions.

Derivatives and Hedging

In March 2022, the FASB issued ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method.” The new accounting rules allow entities to expand the use of the portfolio layer method to all financial assets and designate multiple hedged layers within a ~~material~~single closed portfolio. The new accounting rules also clarify guidance related to hedge basis adjustments and the related disclosures for these adjustments. The new accounting rules will be effective for the Company in the first quarter of 2023, including interim periods. Early adoption is permitted. 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, cash flows orand disclosures.

(3) Assets and Liabilities Held for Sale

Assets and liabilities classified as held for sale in the Condensed Consolidated Balance Sheets as of April 2, 2022, January 1, 2022 and April 3, 2021 consist of the following:


	April 2, 2022		January 1, 2022		April 3, 2021
U.S. Sheer Hosiery business - continuing operations	$	7,959	$	5,426	$	—
European Innerwear business - discontinued operations	—		321,731		303,045
Total current assets held for sale	$	7,959	$	327,157	$	303,045

U.S. Sheer Hosiery business - continuing operations	$	7,959	$	5,426	$	—
European Innerwear business - discontinued operations	—		311,476		288,936
Total current liabilities held for sale	$	7,959	$	316,902	$	288,936

U.S. Sheer Hosiery Business - Continuing Operations

In the fourth quarter of 2021, the Company reached the decision to divest its U.S. Sheer Hosiery business, including the L’eggs brand, as part of its strategy to streamline its portfolio under its Full Potential plan and determined that this business met held-for-sale accounting criteria. The related assets and liabilities are presented as held for sale in the Condensed Consolidated Balance Sheets at April 2, 2022 and January 1, 2022. The Company recorded a non-cash charge of $38,364 in the fourth quarter of 2021, to record a valuation allowance against the net assets held for sale to write down the carrying value of the disposal group to the estimated fair value less costs of disposal. In the quarter ended April 2, 2022, the Company recorded a non-cash gain of $6,528 to adjust the valuation allowance resulting from a decrease in carrying value due to changes in working capital. The operations of the U.S. Sheer Hosiery business are reported in “Other” for all periods presented in Note “Business Segment Information”. The Company is currently exploring potential purchasers for this business and expects to complete the sale of this business during 2022.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

European Innerwear Business - Discontinued Operations

In the first quarter of 2021, the Company announced that ~~as part of its strategic plan,~~ it ~~was exploring alternatives for its European Innerwear business and subsequently~~ reached the decision to exit ~~this business. The Company~~its European Innerwear business as part of its strategy to streamline its portfolio under its Full Potential plan and determined that ~~its European Innerwear~~this business met held-for-sale and discontinued operations accounting ~~criteria at the end of the first quarter of 2021.~~criteria. Accordingly, the Company began to separately report the results of its European Innerwear business as discontinued operations in its Condensed Consolidated Statements of Income, and to present the related assets and liabilities as held for sale in the Condensed Consolidated Balance Sheets. ~~These changes have been applied~~On November 4, 2021, the Company announced that it had reached an agreement to ~~all periods presented. The Company is actively marketing the~~sell its European Innerwear business to ~~prospective buyers~~an affiliate of Regent, L.P. and ~~expects to complete~~completed the sale on March 5, 2022. Under the agreement, the purchaser received all the assets and operating liabilities of ~~this business within one year.~~

the European Innerwear business. The operations of the European Innerwear business were previously reported primarily in the International segment. Certain expenses related to its operations were included in general corporate expenses, restructuring and other action-related charges and amortization of intangibles which were previously excluded from segment operating profit and have been reclassified to discontinued operations beginning in the first quarter of 2021 and for all periods presented. Discontinued operations does not include any allocation of corporate overhead expense or interest expense.

Upon meeting the criteria for ~~held for sale~~held-for-sale classification ~~which~~in the first quarter of 2021which qualified as a triggering event, the Company performed a full impairment analysis of the disposal group's indefinite-lived intangible assets and goodwill. As a result of the strategic decision to exit the European Innerwear business, ~~a strategic review was completed in the first quarter of 2021 with~~forecasts were revised ~~forecasts~~ to include updated market conditions and the removal of strategic operating decisions that would no longer occur under the Company's ownership. The revised forecasts indicated impairment ~~charges~~ of certain indefinite-lived trademarks and license agreements as well as the full goodwill ~~balance. A~~balance attributable to the European Innerwear business. As a result of this impairment analysis, a non-cash charge of $155,745 was recorded as "Impairment of intangible assets and goodwill" in the summarized discontinued operations financial information for the quarter ended April 3, 2021. In addition, the Company recorded a ~~non-cash charge of $226,352 as "Loss on classification of assets held for sale" in the summarized discontinued operations financial information for the quarter ended April 3, 2021 to record a~~ valuation allowance against the net assets held for sale to write down the carrying value of the disposal group to the estimated fair value less costs of ~~disposal.~~ disposal, resulting in a non-cash charge of $226,352 for the quarter ended April 3, 2021, as "(Gain) loss on sale of business and classification of assets held for sale" in the summarized discontinued operations financial information. In the quarter ended April 2, 2022, the Company recorded the final gain on the sale of the European Innerwear business of $187 primarily resulting from changes in working capital balances and foreign exchange rates.

Additionally, the Company recorded an impairment charge of $7,302 in continuing operations on an indefinite-lived trademark for the quarter ended April 3, 2021 which is reflected in the “Selling, general and administrative expenses” line in the Condensed Consolidated ~~Statement~~Statements of Income. This charge ~~relates~~related to the full impairment of an indefinite-lived trademark related to a specific brand within the European Innerwear business that was excluded from the disposal group as it iswas not ~~being~~ marketed for ~~sale. The~~sale and that the Company intends to ~~exit this brand subsequent to the sale of the European Innerwear business.~~exit.

The Company ~~expects to continue~~has continued certain sales from its supply chain to the European Innerwear business on a transitional basis after the sale of the business. ~~Those~~Under the terms of the Manufacturing and Supply Agreement, the Company will provide these services for periods up to 34 months from the closing date of the transaction. Additionally, the Company entered into a Transitional Services Agreement pursuant to which the Company will provide transitional services including information technology, human resources, facilities management, and limited finance and accounting services for periods up to 12 months from the closing date of the transaction. The sales and the related profit are included in continuing operations in the Condensed Consolidated Statements of Income and in “Other” in Note “Business Segment Information” in all periods presented and have not been eliminated as intercompany transactions in consolidation. The related receivables from the European Innerwear business ~~have been reclassified to~~are included in “Trade accounts receivable, net” in the Condensed Consolidated Balance Sheets for all periods presented.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

The operating results of the discontinued operations only reflect revenues and expenses that are directly attributable to the European Innerwear business that ~~will be~~are eliminated from continuing operations. Discontinued operations does not include any allocation of corporate overhead expense or interest expense. The key components from discontinued operations related to the European Innerwear business are as follows:

Quarters Ended
April 3,
2021 March 28,
2020
Net sales $ 135,845 $ 127,671
Cost of sales 75,523 72,107
Gross profit 60,322 55,564
Selling, general and administrative expenses 83,392 69,387
Impairment of intangible assets and goodwill 155,745 0
Loss on classification of assets held for sale 226,352 0
Operating loss (405,167) (13,823)
Interest expense, net 90 822
Other expenses 334 389
Loss from discontinued operations before income tax expense (405,591) (15,034)
Income tax benefit (13,925) (2,042)
Net loss from discontinued operations, net of tax $ (391,666) $ (12,992)

Assets and liabilities of discontinued operations classified as held for sale in the Condensed Consolidated Balance Sheets as of April 3, 2021, January 2, 2021 and March 28, 2020 consist of the following:

April 3,
2021
January 2, 2021(1)
March 28, 2020(1)
Cash and cash equivalents $ 10,304 $ 8,822 $ 14,290
Trade accounts receivable, net 80,458 84,632 83,331
Inventories 106,192 123,337 176,097
Other current assets 11,190 17,295 23,171
Property, net 61,763 67,950 68,838
Right-of-use assets 34,779 34,637 39,711
Trademarks and other identifiable intangibles, net 208,601 284,170 274,006
Goodwill 0 96,692 85,549
Deferred tax assets 8,505 5,438 6,197
Other noncurrent assets 4,860 5,614 5,626
Allowance to adjust assets to estimated fair value, less costs of disposal (223,607) 0 0
Total assets of discontinued operations $ 303,045 $ 728,587 $ 776,816
Accounts payable 62,199 77,636 73,866
Accrued liabilities 120,475 133,431 89,887
Lease liabilities 9,159 10,332 12,270
Notes payable 1,574 784 510
Current portion of long-term debt 0 0 108,826
Lease liabilities - noncurrent 27,038 28,775 31,103
Pension and postretirement benefits 44,428 46,569 44,306
Other noncurrent liabilities 24,063 37,645 36,525
Total liabilities of discontinued operations $ 288,936 $ 335,172 $ 397,293


	Quarters Ended
	April 2, 2022		April 3, 2021
Net sales	$	101,314	$	135,845
Cost of sales	60,415		75,523
Gross profit	40,899		60,322
Selling, general and administrative expenses	54,689		83,392
Impairment of intangible assets and goodwill	—		155,745
(Gain) loss on sale of business and classification of assets held for sale	(187)		226,352
Operating loss	(13,603)		(405,167)
Other expenses	283		334
Interest expense, net	10		90
Loss from discontinued operations before income tax expense	(13,896)		(405,591)
Income tax benefit	(18,421)		(13,925)
Net income (loss) from discontinued operations, net of tax	$	4,525	$	(391,666)

~~(1)Amounts at January 2, 2021 and March 28, 2020 have been classified as current and long-term in the Condensed Consolidated Balance Sheets.~~

910

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

Assets and liabilities of discontinued operations classified as held for sale in the Condensed Consolidated Balance Sheets as of April 2, 2022, January 1, 2022 and April 3, 2021 consist of the following:


	April 2, 2022		January 1, 2022		April 3, 2021
Cash and cash equivalents	$	—	$	24,352	$	10,304
Trade accounts receivable, net	—		87,353		80,458
Inventories	—		141,653		106,192
Other current assets	—		21,926		11,190
Property, net	—		62,659		61,763
Right-of-use assets	—		32,603		34,779
Trademarks and other identifiable intangibles, net	—		205,204		208,601
Deferred tax assets	—		4,174		8,505
Other noncurrent assets	—		4,127		4,860
Allowance to adjust assets to estimated fair value, less costs of disposal	—		(262,320)		(223,607)
Total assets of discontinued operations	$	—	$	321,731	$	303,045

Accounts payable	$	—	$	84,327	$	62,199
Accrued liabilities	—		122,620		120,475
Lease liabilities	—		6,562		9,159
Notes payable	—		329		1,574
Lease liabilities - noncurrent	—		27,426		27,038
Pension and postretirement benefits	—		38,325		44,428
Other noncurrent liabilities	—		31,887		24,063
Total liabilities of discontinued operations	$	—	$	311,476	$	288,936

The cash flows related to discontinued operations have not been segregated and are included in the Condensed Consolidated Statements of Cash Flows. The following table presents cash flow and non-cash information related to discontinued operations:


		Quarters Ended				Quarters Ended
		April 3, 2021		March 28, 2020				April 2, 2022		April 3, 2021
Depreciation	Depreciation	$	2,608	$	2,665		Depreciation	$	—	$	2,608
Amortization	Amortization	1,460		1,282			Amortization	$	—	$	1,460
Capital expenditures	Capital expenditures	3,335		3,538			Capital expenditures	$	715	$	3,335
Impairment of intangible assets and goodwill	Impairment of intangible assets and goodwill	155,745		0			Impairment of intangible assets and goodwill	$	—	$	155,745
Loss on classification of assets held for sale		226,352		0
Other investing activities		1,794		1,216
Capital expenditures included in accounts payable		52		1,033
(Gain) loss on sale of business and classification of assets held for sale							(Gain) loss on sale of business and classification of assets held for sale	$	(187)	$	226,352
Capital expenditures included in accounts payable at end of period							Capital expenditures included in accounts payable at end of period	$	—	$	52
Right-of-use assets obtained in exchange for lease obligations							Right-of-use assets obtained in exchange for lease obligations	$	461	$	1,495

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

(4) Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with a customer are satisfied, which occurs at a point in time, upon either shipment or delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. Variable consideration includes trade discounts, rebates, volume-based incentives, cooperative advertising and product returns, which are offered within contracts between the Company and its customers, employing the practical expedient for contract costs. Incidental items that are immaterial to the context of the contract are recognized as expense at the transaction date.

The following table presents the Company’s revenues disaggregated by the customer’s method of purchase:


		Quarters Ended				Quarters Ended
		April 3, 2021		March 28, 2020				April 2, 2022		April 3, 2021
Third-party brick-and-mortar wholesale	Third-party brick-and-mortar wholesale	$	1,024,739	$	886,535		Third-party brick-and-mortar wholesale	$	1,126,266	$	1,024,739
Consumer-directed	Consumer-directed	483,290		316,535			Consumer-directed	449,890		483,290
Total net sales	Total net sales	$	1,508,029	$	1,203,070		Total net sales	$	1,576,156	$	1,508,029

Revenue Sources

Third-Party Brick-and-Mortar Wholesale Revenue

Third-party brick-and-mortar wholesale revenue is primarily generated by sales of the Company’s products to retailers to support their brick-and-mortar operations. ~~Also included within third-party~~Third-party brick-and-mortar wholesale revenue isalso includes royalty revenue from licensing agreements. The Company earns royalties through license agreements with manufacturers of other consumer products that incorporate certain of the Company’s brands. The Company accrues revenue earned under these contracts based upon reported sales from the licensees.

Consumer-Directed Revenue

Consumer-directed revenue is primarily generated through sales driven directly by the consumer through company-operated stores and e-commerce platforms, which include both owned sites and the sites of the Company’s retail customers.

(5) Stockholders’ Equity

Basic earnings per share (“EPS”) was computed by dividing net income (loss) by the number of weighted average shares of common stock outstanding during the period. Diluted EPS was calculated to give effect to all potentially issuable dilutive shares of common stock using the treasury stock method.

The reconciliation of basic to diluted weighted average shares outstanding is as follows:


	Quarters Ended
	April 2, 2022	April 3, 2021
Basic weighted average shares outstanding	350,251	351,003
Effect of potentially dilutive securities:
Stock options	7	9
Restricted stock units	1,190	671
Employee stock purchase plan and other	5	3
Diluted weighted average shares outstanding	351,453	351,686

The following securities were excluded from the diluted earnings per share calculation because their effect would be anti-dilutive:


	Quarters Ended
	April 2, 2022	April 3, 2021
Stock options	167	167
Restricted stock units	647	592

On April 26, 2022, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.15 per share of the Company’s outstanding common stock to be paid on May 31, 2022 to stockholders of record at the close of business on May 10, 2022.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

~~The reconciliation of basic to diluted weighted average shares outstanding is as follows:~~

Quarters Ended
April 3,
2021 March 28,
2020
Basic weighted average shares outstanding 351,003 359,017
Effect of potentially dilutive securities:
Stock options 9 220
Restricted stock units 671 188
Employee stock purchase plan and other 3 11
Diluted weighted average shares outstanding 351,686 359,436

For the quarter ended April 3, 2021, there were 592 restricted stock units and 167 stock options to purchase shares of common stock excluded from the diluted earnings per share calculation because their effect would be anti-dilutive. For the quarter ended March 28, 2020, there were 1,080 restricted stock units and 0 stock options to purchase shares of common stock excluded from the diluted earnings per share calculation because their effect would be anti-dilutive.

On May 11, 2021, 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 June 1, 2021 to stockholders of record at the close of business on May 21, 2021.

On February ~~6, 2020,~~2, 2022, the Company’s Board of Directors approved a new share repurchase program for up to ~~40,000~~$600,000 of shares to be repurchased in open market transactions or privately negotiated transactions, subject to market conditions, legal requirements and other factors. Additionally, management has been granted authority to establish ~~one or more~~a trading ~~plans~~plan under Rule 10b5-1 of the Exchange Act in connection with share repurchases, which will allow the Company to repurchase shares in the open market during periods in which the stock trading window is otherwise closed for the Company and certain of the Company’s officers and employees pursuant to the Company’s insider trading policy. ~~Unless terminated earlier by the Company’s Board of Directors, the new program will expire when the Company has repurchased all shares authorized for repurchase under the new program.~~ The new program replaced the Company’s previous share repurchase program for up to 40,000 shares that was originally approved ~~in 2016.~~on February 6, 2020. For the quarter ended April ~~3, 2021, the Company did not enter into any transactions to repurchase shares under the new program. For the quarter ended March 28, 2020,~~2, 2022, the Company entered into transactions to repurchase ~~14,464~~1,577 shares at a weighted average repurchase price of ~~$13.83~~$15.84 per share under the new program. The shares were repurchased at a total cost of ~~$200,269.~~$25,018 including broker’s commissions of $31. The Company did not repurchase any shares under the previous share repurchase program during the quarter ended April 2, 2022 or April 3, 2021. At April ~~3, 2021,~~2, 2022, the remaining repurchase authorization under the current share repurchase program totaled 25,536 shares. The primary objective of the share repurchase program is to utilize excess cash to generate shareholder value. Share repurchases are currently prohibited under the Senior Secured Credit Facility as a result of the amendment signed in April 2020. See Note “Debt” for additional information on the Company’s debt facilities.$575,013.

(6) Inventories

Inventories consisted of the following:


		April 3, 2021		January 2, 2021		March 28, 2020			April 2, 2022		January 1, 2022		April 3, 2021
Raw materials	Raw materials	$	74,123	$	67,111	$	73,450	Raw materials	$	84,734	$	68,683	$	74,123
Work in process	Work in process	99,619		108,844		115,129		Work in process	121,095		110,246		99,619
Finished goods	Finished goods	1,315,823		1,191,803		1,599,081		Finished goods	1,614,145		1,405,086		1,315,823
		$	1,489,565	$	1,367,758	$	1,787,660		$	1,819,974	$	1,584,015	$	1,489,565

(7) Debt

Debt consisted of the following:


	Interest Rate as of April 2, 2022	Principal Amount				Maturity Date
		April 2, 2022		January 1, 2022
Senior Secured Credit Facility:
Revolving Loan Facility	1.69%	$	20,000	$	—	November 2026
Term Loan A	1.75%	993,750		1,000,000		November 2026
4.875% Senior Notes	4.88%	900,000		900,000		May 2026
4.625% Senior Notes	4.63%	900,000		900,000		May 2024
3.5% Senior Notes	3.50%	552,425		568,634		June 2024
Accounts Receivable Securitization Facility	1.25%	135,500		—		June 2022
		3,501,675		3,368,634
Less long-term debt issuance costs		16,133		17,543
Less current maturities		160,500		25,000
		$	3,325,042	$	3,326,091

As of April 2, 2022, the Company had $975,824 of borrowing availability under the $1,000,000 Revolving Loan Facility after taking into account $20,000 of USD revolver loans and $4,176 of standby and trade letters of credit issued and outstanding under this facility.

Borrowings under the Company’s accounts receivable securitization facility (the “ARS Facility”) are permitted only to the extent that the face of the receivables in the collateral pool, net of applicable concentrations, reserves and other deductions, exceeds the outstanding loans and also subject to a quarterly fluctuating facility limit, which is not to exceed $175,000. The Company’s maximum borrowing capacity as per the fluctuating limit under the ARS Facility was $150,000 as of April 2, 2022. The Company had $14,500 of borrowing availability under the ARS Facility at April 2, 2022.

The Company had $56,056 of borrowing availability under other international credit facilities after taking into account outstanding borrowings and letters of credit outstanding under the applicable facilities at April 2, 2022.

1113

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

~~(7) Debt~~

~~Debt consisted of the following:~~

Interest Rate as of April 3,
2021 Principal Amount Maturity Date
April 3,
2021 January 2,
2021
Senior Secured Credit Facility:
Revolving Loan Facility 0 $ 0 $ 0 December 2022
Term Loan A 2.11% 625,000 625,000 December 2022
Term Loan B 0 0 300,000 December 2024
Australian Revolving Loan Facility 0 0 0 July 2021
5.375% Senior Notes 5.38% 700,000 700,000 May 2025
4.875% Senior Notes 4.88% 900,000 900,000 May 2026
4.625% Senior Notes 4.63% 900,000 900,000 May 2024
3.5% Senior Notes 3.50% 587,959 610,724 June 2024
Accounts Receivable Securitization Facility 0 0 0 June 2022
Total debt 3,712,959 4,035,724
Less long-term debt issuance costs 28,953 32,354
Less current maturities 34,375 263,936
Total long-term debt $ 3,649,631 $ 3,739,434

As of April 3, 2021, the Company had $995,824 of borrowing availability under the $1,000,000 Revolving Loan Facility after taking into account $4,176 of standby and trade letters of credit issued and outstanding under this facility. In March 2021, the Company repaid the outstanding balance of Term Loan B which consisted of a required excess cash flow prepayment of $238,936 and a voluntary prepayment of $61,064.

The Company’s accounts receivable securitization facility (the “Accounts Receivable Securitization Facility”) entered into in November 2007 was amended in March 2021. The latest amendment decreased the fluctuating facility limit to $175,000 (previously $225,000) and extended the maturity date to June 2022. Additionally, the amendment changed certain ratios and borrowing base calculations, raised pricing and added certain receivables to the pledged collateral pool for the facility. Borrowings under the Accounts Receivable Securitization Facility are permitted only to the extent that the face of the receivables in the collateral pool, net of applicable reserves and other deductions, exceeds the outstanding loans and also subject to a fluctuating facility limit, not to exceed $175,000. The Company’s maximum borrowing capacity under the Accounts Receivable Securitization Facility was $150,000 as of April 3, 2021. The Company had $87,403 of borrowing availability under the Accounts Receivable Securitization Facility at April 3, 2021.

The Company had $45,572 of borrowing availability under the Australian Revolving Loan Facility and $85,245 of borrowing availability under other international credit facilities after taking into account outstanding borrowings and letters of credit outstanding under the applicable facilities at April 3, 2021.

In April 2020, given the rapidly changing business environment and level of uncertainty being created by the COVID-19 pandemic and the associated impact on future earnings, the Company amended its Senior Secured Credit Facility prior to any potential covenant violation in order to modify the financial covenants and to provide operating flexibility during the COVID-19 crisis. The amendment changed certain provisions and covenants under the Senior Secured Credit Facility through the fiscal quarter ending July 3, 2021, after which the covenants revert to their original, pre-amendment levels.

~~As of April 3, 2021,~~2, 2022, the Company was in compliance with all financial covenants under its credit facilities and other outstanding indebtedness. Under the terms of its Senior Secured Credit Facility, among other financial and non-financial covenants, the Company is required to maintain a minimum interest coverage ratio and a maximum leverage ~~ratio. The interest coverage~~ ratio, ~~covenant is the ratio~~each of the Company’s EBITDA for the preceding four fiscal quarters to its consolidated total interest expense and the maximum leverage ratio covenant is the ratio of the Company’s net debt to EBITDA for the preceding four fiscal quarters. EBITDAwhich is defined ~~as earnings before interest, income taxes, depreciation expense and amortization, as computed pursuant to~~in the Senior Secured Credit Facility. The method of calculating all the components used in the covenants is included in the Senior Secured Credit Facility.

(8) Income Taxes

The ~~Company expects~~Company’s effective income tax rate was 17.0% and 10.3% for the quarters ended April 2, 2022 and April 3, 2021, respectively. The higher effective tax rate for the quarter April 2, 2022 was primarily due to ~~maintain compliance with its covenants~~a non-recurring discrete tax benefit for ~~at least one year from~~ the ~~date~~release of ~~these financial statements based on its current expectations and forecasts. If economic conditions caused~~reserves for unrecognized tax benefits totaling $7,034, partially offset by a discrete charge for changes in valuation allowances of $3,672 during the ~~COVID-19 pandemic worsen~~

~~Table of Contents~~quarter ended April 3, 2021.

~~HANESBRANDS INC.~~

~~Notes to Condensed Consolidated Financial Statements — (Continued)~~

~~(amounts in thousands, except per share data)~~

~~(unaudited)~~

and the Company’s earnings and operating cash flows do not recover as currently estimated by management, this could impact the Company’s ability to maintain compliance with its financial covenants and require the Company to seek additional amendments to its Senior Secured Credit Facility. If the Company is not able to obtain such necessary additional amendments, this would lead to an event of default and, if not cured timely, its lenders could require the Company to repay its outstanding debt. In that situation, the Company may not be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay the lenders.

~~(8)~~(9) Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss (“AOCI”) are as follows:

Cumulative Translation Adjustment(1)
Cash Flow Hedges Defined Benefit Plans Income Taxes Accumulated Other Comprehensive Loss
Balance at January 2, 2021 $ (52,820) $ (26,538) $ (668,730) $ 181,129 $ (566,959)
Amounts reclassified from accumulated other comprehensive loss 0 5,242 7,085 (3,004) 9,323
Current-period other comprehensive income (loss) activity (25,201) 8,474 1,699 (4,221) (19,249)
Total other comprehensive income (loss) (25,201) 13,716 8,784 (7,225) (9,926)
Balance at April 3, 2021 $ (78,021) $ (12,822) $ (659,946) $ 173,904 $ (576,885)

Cumulative Translation Adjustment(1)
Cash Flow Hedges Defined Benefit Plans Income Taxes Accumulated Other Comprehensive Loss
Balance at December 28, 2019 $ (157,138) $ 4,786 $ (629,360) $ 164,064 $ (617,648)
Amounts reclassified from accumulated other comprehensive loss 0 (5,017) 4,866 0 (151)
Current-period other comprehensive income (loss) activity (117,154) 20,080 0 (8,552) (105,626)
Total other comprehensive income (loss) (117,154) 15,063 4,866 (8,552) (105,777)
Balance at March 28, 2020 $ (274,292) $ 19,849 $ (624,494) $ 155,512 $ (723,425)


	Cumulative Translation Adjustment(1)		Cash Flow Hedges		Defined Benefit Plans		Income Taxes		Accumulated Other Comprehensive Loss
Balance at January 1, 2022	$	(134,001)	$	5,244	$	(569,161)	$	146,315	$	(551,603)
Amounts reclassified from accumulated other comprehensive loss	(13,473)		9,789		5,618		(2,778)		(844)
Current-period other comprehensive income (loss) activity	40,770		(7,404)		(40)		2,430		35,756
Total other comprehensive income (loss)	27,297		2,385		5,578		(348)		34,912

Balance at April 2, 2022	$	(106,704)	$	7,629	$	(563,583)	$	145,967	$	(516,691)


	Cumulative Translation Adjustment(1)		Cash Flow Hedges		Defined Benefit Plans		Income Taxes		Accumulated Other Comprehensive Loss
Balance at January 2, 2021	$	(52,820)	$	(26,538)	$	(668,730)	$	181,129	$	(566,959)
Amounts reclassified from accumulated other comprehensive loss	—		5,242		7,085		(3,004)		9,323
Current-period other comprehensive income (loss) activity	(25,201)		8,474		1,699		(4,221)		(19,249)
Total other comprehensive income (loss)	(25,201)		13,716		8,784		(7,225)		(9,926)

Balance at April 3, 2021	$	(78,021)	$	(12,822)	$	(659,946)	$	173,904	$	(576,885)

(1)Cumulative Translation Adjustment includes translation adjustments and net investment hedges. See Note “Financial Instruments and Risk Management” for additional disclosures about net investment hedges.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

The Company had the following reclassifications out of AOCI:


Component of AOCI	Component of AOCI	Location of Reclassification into Income	Amount of Reclassification from AOCI				Component of AOCI	Location of Reclassification into Income	Amount of Reclassification from AOCI
			Quarters Ended						Location of Reclassification into Income		Quarters Ended
			April 3, 2021		March 28, 2020						Location of Reclassification into Income	April 2, 2022		April 3, 2021
Write-off of cumulative translation associated with sale of business												$	13,473	$	—

Gain (loss) on forward foreign exchange contracts designated as cash flow hedges	Gain (loss) on forward foreign exchange contracts designated as cash flow hedges	Cost of sales	$	(4,377)	$	2,869				Gain (loss) on forward foreign exchange contracts designated as cash flow hedges		Cost of sales		$	1,612	$	(4,377)
		Income tax	1,208		(762)						Income tax	(508)		1,208
		Loss from discontinued operations, net of tax	(244)		1,638						Income (loss) from discontinued operations, net of tax	(232)		(244)
		Net of tax	(3,413)		3,745						Net of tax	872		(3,413)

Loss on cross-currency swap contracts designated as cash flow hedges		Selling, general and administrative expenses	(557)		0
Gain (loss) on cross-currency swap contracts designated as cash flow hedges										Gain (loss) on cross-currency swap contracts designated as cash flow hedges	Selling, general and administrative expenses	(9,733)		(557)
											Interest expense, net	(1,361)		—
		Income tax	89		0						Income tax	1,886		89
		Net of tax	(468)		0						Net of tax	(9,208)		(468)

Amortization of deferred actuarial loss and prior service cost	Amortization of deferred actuarial loss and prior service cost	Other expenses	(7,707)		(2,762)					Amortization of deferred actuarial loss and prior service cost	Other expenses	(5,203)		(7,707)
		Income tax	1,746		1,233						Income tax	1,370		1,746
		Loss from discontinued operations, net of tax	519		(2,065)						Income (loss) from discontinued operations, net of tax	—		519
Pension activity associated with sale of business										Pension activity associated with sale of business	Income (loss) from discontinued operations, net of tax	(460)		—
		Net of tax	(5,442)		(3,594)						Net of tax	(4,293)		(5,442)

Total reclassifications	Total reclassifications		$	(9,323)	$	151				Total reclassifications		$	844	$	(9,323)

~~(9)~~(10) Financial Instruments and Risk Management

The Company uses forward foreign exchange contracts and cross-currency swap contracts to manage its exposures to movements in foreign exchange rates primarily related to the ~~Euro,~~ Australian dollar, Euro, Mexican peso and Canadian ~~dollar and Mexican peso.~~dollar. The Company also uses a combination of cross-currency swap contracts and long-term debt to manage its exposure to foreign currency risk associated with the Company’s net investment in ~~certain~~its European subsidiaries.


		Hedge Type	April 3, 2021		January 2, 2021			Hedge Type	April 2, 2022		January 2, 2021
U.S. dollar equivalent notional amount of derivative instruments:	U.S. dollar equivalent notional amount of derivative instruments:						U.S. dollar equivalent notional amount of derivative instruments:
Forward foreign exchange contracts	Forward foreign exchange contracts	Cash Flow and Mark to Market	$	426,204	$	617,912	Forward foreign exchange contracts	Cash Flow and Mark to Market	$	326,800	$	308,071
Cross-currency swap contracts	Cross-currency swap contracts	Cash Flow	$	352,920	$	0	Cross-currency swap contracts	Cash Flow	$	352,920	$	352,920
Cross-currency swap contracts	Cross-currency swap contracts	Net Investment	$	335,940	$	335,940	Cross-currency swap contracts	Net Investment	$	335,940	$	335,940

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

Fair Values of Derivative Instruments

The fair values of derivative ~~financial~~ instruments related to forward foreign exchange contracts and cross-currency swap contracts recognized in the Condensed Consolidated Balance Sheets of the Company were as follows:


		Balance Sheet Location	Fair Value					Balance Sheet Location	Fair Value
			April 3, 2021		January 2, 2021				April 2, 2022		January 1, 2022
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:						Derivatives designated as hedging instruments:
Forward foreign exchange contracts	Forward foreign exchange contracts	Other current assets	$	1,676	$	1	Forward foreign exchange contracts	Other current assets	$	1,037	$	2,898
Cross-currency swap contracts	Cross-currency swap contracts	Other current assets	2,817		918		Cross-currency swap contracts	Other current assets	2,986		974
Forward foreign exchange contracts	Forward foreign exchange contracts	Current assets of discontinued operations	226		40		Forward foreign exchange contracts	Other noncurrent assets	92		83
Forward foreign exchange contracts		Other noncurrent assets	488		0

Cross-currency swap contracts							Cross-currency swap contracts	Other noncurrent assets	4,585		1,979
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Forward foreign exchange contracts		Other current assets	1,564		2,459
Forward foreign exchange contracts	Forward foreign exchange contracts	Current assets of discontinued operations	64		198		Forward foreign exchange contracts	Other current assets	4,942		5,439
Total derivative assets	Total derivative assets		6,835		3,616		Total derivative assets		13,642		11,373

Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:						Derivatives designated as hedging instruments:
Forward foreign exchange contracts	Forward foreign exchange contracts	Accrued liabilities	(6,152)		(12,898)		Forward foreign exchange contracts	Accrued liabilities	(3,381)		(349)

Forward foreign exchange contracts		Current liabilities of discontinued operations	(656)		(4,747)
Cross-currency swap contracts							Cross-currency swap contracts	Accrued liabilities	(1,583)		(222)
Forward foreign exchange contracts	Forward foreign exchange contracts	Other noncurrent liabilities	0		(2,190)		Forward foreign exchange contracts	Other noncurrent liabilities	(329)		(14)
Cross-currency swap contracts	Cross-currency swap contracts	Other noncurrent liabilities	(6,530)		(16,526)		Cross-currency swap contracts	Other noncurrent liabilities	(14,244)		(11,387)
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Forward foreign exchange contracts	Forward foreign exchange contracts	Accrued liabilities	(5,327)		(16,488)		Forward foreign exchange contracts	Accrued liabilities	(1,862)		(331)
Forward foreign exchange contracts		Current liabilities of discontinued operations	(850)		(2,195)
Total derivative liabilities	Total derivative liabilities		(19,515)		(55,044)		Total derivative liabilities		(21,399)		(12,303)

Net derivative liability	Net derivative liability		$	(12,680)	$	(51,428)	Net derivative liability		$	(7,757)	$	(930)

Cash Flow Hedges

The Company uses forward foreign exchange contracts and cross-currency swap contracts to reduce the effect of fluctuating foreign currencies on 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.

On April 1, 2021, in connection with a reduction in the amount of the 3.5% Senior Notes designated in the European net investment hedge discussed below, the Company entered into 3 pay-fixed rate, receive-fixed rate cross-currency swap contracts with a total notional amount of €300,000. The Company designated these cross-currency swap contracts to hedge the undesignated portion of the foreign currency cash flow exposure related to the Company’s 3.5% Senior Notes, which had a carrying amount of €500,000 as of April ~~3, 2021.~~2, 2022. These cross-currency swap contracts, which mature on June 15, 2024, swap Euro-denominated interest payments for U.S. dollar-denominated interest payments, thereby economically converting €300,000 of the Company’s €500,000 fixed-rate 3.5% Senior Notes to a fixed-rate 4.7945% USD-denominated obligation.

The Company expects to reclassify into earnings during the next 12 months a net loss from AOCI of approximately ~~$18,182.~~$4,975. The Company is hedging exposure to the variability in future foreign currency-denominated cash flows for forecasted transactions over the next 1617 months and for long-term debt over the next 3927 months.

The effect of derivative instruments designated as cash flow hedges on the Condensed Consolidated Statements of Income and AOCI is as follows:


	Amount of Gain (Loss) Recognized in AOCI on Derivative Instruments
	Quarters Ended
	April 2, 2022		April 3, 2021

Forward foreign exchange contracts	$	(3,186)	$	8,486
Cross-currency swap contracts	(4,218)		(12)

Total	$	(7,404)	$	8,474

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts 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 on Derivative Instruments
Quarters Ended
April 3,
2021 March 28,
2020
Forward foreign exchange contracts $ 8,486 $ 20,080
Cross-currency swap contracts (12) 0
Total $ 8,474 $ 20,080


		Location of Gain (Loss) Reclassified from AOCI into Income		Amount of Gain (Loss) Reclassified from AOCI into Income								Location of Gain (Loss) Reclassified from AOCI into Income		Amount of Gain (Loss) Reclassified from AOCI into Income
			Quarters Ended										Location of Gain (Loss) Reclassified from AOCI into Income			Quarters Ended
			April 3, 2021			March 28, 2020									Location of Gain (Loss) Reclassified from AOCI into Income					April 2, 2022					April 3, 2021

Forward foreign exchange contracts(1)	Forward foreign exchange contracts(1)		Cost of sales			$	(4,377)			$	2,869									Forward foreign exchange contracts(1)		Cost of sales					$	1,612				$	(4,377)
Forward foreign exchange contracts(1)	Forward foreign exchange contracts(1)		Loss from discontinued operations, net of tax			(308)				2,148									Forward foreign exchange contracts(1)		Income (loss) from discontinued operations, net of tax					(307)					(308)
Cross-currency swap contracts(1)	Cross-currency swap contracts(1)	Selling, general and administrative expenses		(557)				0										Cross-currency swap contracts(1)	Selling, general and administrative expenses					(9,733)						(557)
Cross-currency swap contracts(1)																		Cross-currency swap contracts(1)	Interest expense, net					(1,361)						—

Total	Total			$	(5,242)			$	5,017								Total						$	(9,789)					$	(5,242)

(1)The Company does not exclude amounts from effectiveness testing for cash flow hedges that would require recognition into earnings based on changes in fair value.

Quarters Ended

April 3,
2021 March 28,
2020
Total cost of sales in which the effects of cash flow hedges are recorded $ 905,348 $ 784,902
Total selling, general and administrative expenses in which the effects of cash flow hedges are recorded $ 412,559 $ 370,215
Total loss from discontinued operations, net of tax in which the effects of cash flow hedges are recorded $ (391,666) $ (12,992)
The following table presents the amounts in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded:


	Quarters Ended
	April 2, 2022		April 3, 2021
Cost of sales	$	991,978	$	905,348
Selling, general and administrative expenses	$	413,666	$	412,559
Interest expense, net	$	31,963	$	44,460
Income (loss) from discontinued operations, net of tax	$	4,525	$	(391,666)

Net Investment Hedges

In July 2019, the Company entered into 2 pay-fixed rate, receive-fixed rate cross-currency swap contracts with a total notional amount of €300,000 that were designated as hedges of a portion of the beginning balance of the Company’s net investment in ~~certain~~its European subsidiaries. These cross-currency swap contracts, which mature on May 15, 2024, swap U.S. dollar-denominated interest payments for Euro-denominated interest payments, thereby economically converting a portion of the Company’s fixed-rate 4.625% Senior Notes to a fixed-rate 2.3215% Euro-denominated obligation.

In July 2019, the Company also designated the full amount of its 3.5% Senior Notes with a carrying value of €500,000, which is a nonderivative financial instrument, as a hedge of a portion of the beginning balance of the Company’s European net investment. As of April 1, 2021, the Company reduced the amount of its 3.5% Senior Notes designated in the European net investment hedge from €500,000 to €200,000. As of April ~~3, 2021~~2, 2022 and January ~~2, 2021,~~1, 2022, the U.S. dollar equivalent carrying value of Euro-denominated long-term debt designated as a partial European net investment hedge was ~~$235,183~~$220,970 and ~~$610,724,~~$227,454, respectively.

The amount of after-tax gains (losses) included in AOCI in the Condensed Consolidated Balance Sheets related to derivative instruments and nonderivative financial instruments designated as net investment hedges are as follows:


	Amount of Gain (Loss) Recognized in AOCI
	Quarters Ended
	April 2, 2022		April 3, 2021
Euro-denominated long-term debt	$	4,721	$	19,300
Cross-currency swap contracts	1,932		7,373
Total	$	6,653	$	26,673

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

The ~~amount~~effect of ~~after-tax gains (losses) included in AOCI in the Condensed Consolidated Balance Sheets related to~~ derivative ~~instruments~~ and ~~nonderivative financial~~non-derivative instruments designated as net investment hedges ~~and~~on the ~~amount~~Condensed Consolidated Statements of ~~gains included in~~Income are as follows:


	Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income
		Quarters Ended
		April 2, 2022		April 3, 2021
Euro-denominated long-term debt	Income (loss) from discontinued operations, net of tax	$	(13,348)	$	—
Cross-currency swap contracts	Income (loss) from discontinued operations, net of tax	(2,505)		—
Cross-currency swap contracts (amounts excluded from effectiveness testing)	Interest expense, net	2,012		1,899
Total		$	(13,841)	$	1,899

The following table presents the ~~“Interest expense, net” line~~amounts in the Condensed Consolidated Statements of Income ~~related to amounts excluded from~~in which the ~~assessment~~effects of ~~hedge effectiveness for derivative instruments designated as~~ net investment hedges are ~~as follows:~~recorded:

Amount of Gain Recognized in AOCI
Quarters Ended
April 3,
2021 March 28,
2020
Euro-denominated long-term debt $ 19,300 $ 2,658
Cross-currency swap contracts 7,373 11,732
Total $ 26,673 $ 14,390

Location of Gain Recognized in Income Amount of Gain Recognized in Income
(Amount Excluded from Effectiveness Testing)
Quarters Ended
April 3,
2021 March 28,
2020
Cross-currency swap contracts Interest expense, net $ 1,899 $ 1,947
Quarters Ended
April 3,
2021 March 28,
2020
Total interest expense, net in which the amounts excluded from effectiveness testing for net investment hedges are recorded $ 44,460 $ 36,027


	Quarters Ended
	April 2, 2022	April 3, 2021
Income (loss) from discontinued operations, net of tax	4,525	(391,666)
Interest expense, net (amounts excluded from effectiveness testing)	31,963	44,460

Mark to Market Hedges

~~A derivative~~Derivatives used ~~as a hedging instrument whose change~~ in ~~fair value is recognized to act as a hedge against changes in the values of the hedged item is designated as a~~ mark to market ~~hedge.~~hedges are not designated as hedges under the accounting standards. The Company uses forward foreign exchange derivative contracts as hedges against the impact of foreign exchange fluctuations on existing accounts receivable and payable balances and intercompany lending transactions denominated in foreign currencies. Forward foreign exchange derivative contracts are recorded as mark to market hedges when the hedged item is a recorded asset or liability that is revalued in each accounting period. ~~These contracts are not designated as hedges under the accounting standards and are recorded at fair value in the Condensed Consolidated Balance Sheets.~~ 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~~instruments not designated as hedges on the Condensed Consolidated Statements of Income is as follows:


		Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income				Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income
			Quarters Ended					Location of Gain (Loss) Recognized in Income on Derivatives		Quarters Ended
			April 3, 2021		March 28, 2020					Location of Gain (Loss) Recognized in Income on Derivatives	April 2, 2022		April 3, 2021
Forward foreign exchange contracts	Forward foreign exchange contracts	Cost of sales	$	12,995	$	6,549					$	(4,202)	$	12,995
Forward foreign exchange contracts	Forward foreign exchange contracts	Selling, general and administrative expenses	2,211		(1,034)				Forward foreign exchange contracts		292		2,211
Forward foreign exchange contracts	Forward foreign exchange contracts	Loss from discontinued operations, net of tax	2,639		(425)				Forward foreign exchange contracts	Income (loss) from discontinued operations, net of tax	—		2,639
Total	Total		$	17,845	$	5,090			Total		$	(3,910)	$	17,845

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

~~(10)~~(11) Fair Value of Assets and Liabilities

As of April ~~3, 2021,~~2, 2022 and January 1, 2022, 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 forward foreign exchange derivative contracts, cross-currency swap derivative contracts and deferred compensation plan liabilities. The fair values of forward foreign exchange derivative contracts are determined using the cash flows of the forward contracts, discount rates to account for the passage of time and current foreign exchange market data which are all based on inputs readily available in public markets and are categorized as Level 2. The fair values of cross-currency swap derivative contracts are determined using the cash flows of the swap contracts, discount rates to account for the passage of time, current foreign exchange and interest rate market data and credit risk, which are all based on inputs readily available in public markets and are categorized as Level 2. The fair value of deferred compensation ~~plans~~plan liabilities is based on readily available current market data and is categorized as Level 2. The Company’s defined benefit pension plan investments are not required to be measured at fair value on a quarterly recurring basis.

There were no changes during the quarter ended April ~~3, 2021~~2, 2022 to the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis. As of and during the quarter ended April ~~3, 2021,~~2, 2022, the Company did not have any non-financial assets or liabilities that were required to be measured at fair value on a recurring basis or non-recurring basis.

The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities ~~within continuing operations~~ accounted for at fair value on a recurring basis.


		Assets (Liabilities) at Fair Value as of April 3, 2021									Assets (Liabilities) at Fair Value as of April 2, 2022
		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)
Forward foreign exchange contracts - assets	Forward foreign exchange contracts - assets	$	3,728	$	0	$	3,728	$	0	Forward foreign exchange contracts - assets	$	6,071	$	—	$	6,071	$	—
Cross-currency swap contracts - assets	Cross-currency swap contracts - assets	2,817		0		2,817		0		Cross-currency swap contracts - assets	7,571		—		7,571		—
Forward foreign exchange contracts - liabilities	Forward foreign exchange contracts - liabilities	(11,479)		0		(11,479)		0		Forward foreign exchange contracts - liabilities	(5,572)		—		(5,572)		—
Cross-currency swap contracts - liabilities	Cross-currency swap contracts - liabilities	(6,530)		0		(6,530)		0		Cross-currency swap contracts - liabilities	(15,827)		—		(15,827)		—
		(11,464)		0		(11,464)		0
Total derivative contracts										Total derivative contracts	(7,757)		—		(7,757)		—
Deferred compensation plan liability	Deferred compensation plan liability	(18,809)		0		(18,809)		0		Deferred compensation plan liability	(18,030)		—		(18,030)		—
Total	Total	$	(30,273)	$	0	$	(30,273)	$	0	Total	$	(25,787)	$	—	$	(25,787)	$	—


		Assets (Liabilities) at Fair Value as of January 2, 2021									Assets (Liabilities) at Fair Value as of January 1, 2022
		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)
Forward foreign exchange contracts - assets	Forward foreign exchange contracts - assets	$	2,460	$	0	$	2,460	$	0	Forward foreign exchange contracts - assets	$	8,420	$	—	$	8,420	$	—
Cross-currency swap contracts - assets	Cross-currency swap contracts - assets	918		0		918		0		Cross-currency swap contracts - assets	2,953		—		2,953		—
Forward foreign exchange contracts - liabilities	Forward foreign exchange contracts - liabilities	(31,576)		0		(31,576)		0		Forward foreign exchange contracts - liabilities	(694)		—		(694)		—
Cross-currency swap contracts - liabilities	Cross-currency swap contracts - liabilities	(16,526)		0		(16,526)		0		Cross-currency swap contracts - liabilities	(11,609)		—		(11,609)		—
		(44,724)		0		(44,724)		0
Total derivative contracts										Total derivative contracts	(930)		—		(930)		—
Deferred compensation plan liability	Deferred compensation plan liability	(21,878)		0		(21,878)		0		Deferred compensation plan liability	(20,916)		—		(20,916)		—
Total	Total	$	(66,602)	$	0	$	(66,602)	$	0	Total	$	(21,846)	$	—	$	(21,846)	$	—

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

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 April ~~3, 2021~~2, 2022 and January ~~2, 2021.~~1, 2022. The carrying amount of trade accounts receivable included allowance for doubtful accounts, chargebacks and other deductions of ~~$55,543~~$66,142 and ~~$48,745~~$61,948 as of April ~~3, 2021~~2, 2022 and January ~~2, 2021,~~1, 2022, respectively. The fair value of debt, which is classified as a Level 2 liability, was ~~$3,912,331~~$3,487,963 and ~~$4,230,985~~$3,504,412 as of April ~~3, 2021~~2, 2022 and January ~~2, 2021,~~1, 2022, respectively. Debt had a carrying value of ~~$3,712,959~~$3,501,675 and ~~$4,035,724~~$3,368,634 as of April ~~3, 2021~~2, 2022 and January ~~2, 2021,~~1, 2022, 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 amount of the Company’s notes payable, which is classified as a Level 2 liability, approximated fair value primarily due to the short-term nature of these instruments.~~

~~(11) Income Taxes~~

The Company’s effective income tax rate was 10.3% and 12.1% for the quarters ended April 3, 2021 and March 28, 2020, respectively. The lower effective tax rate for the quarter ended April 3, 2021 was primarily due to a discrete benefit for the release of reserves for unrecognized tax benefits of $7,034, partially offset by a discrete charge for changes in valuation allowances of $3,672.

The Company is subject to examinations in the U.S., various state and foreign jurisdictions and believes that it maintains appropriate accruals for unrecognized tax benefits related to uncertain tax positions, which are evaluated each quarter. During the quarter ended April 3, 2021, the Company’s liability for unrecognized tax benefits, including interest and penalties, decreased by $8,414, of which $7,034 was a discrete reduction of the effective income tax rate. The decrease was related to expirations of statutes of limitations and approvals of certain filings with income tax authorities.

(12) Business Segment Information

The Company’s operations are managed and reported in 3 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 team that is responsible for the operations of the segment’s businesses, but the segments share a common supply chain and media and marketing platforms. Other consists of the Company’s U.S.-based outlet stores, U.S. Sheer Hosiery business and certain sales from its supply chain and transitional services with the European Innerwear business which was sold on March 5, 2022. In the fourth quarter of 2021, the Company reached the decision to divest its U.S. ~~hosiery business.~~Sheer Hosiery business, including the L’eggs brand, as part of its strategy to streamline its portfolio under its Full Potential plan. See Note “Assets and Liabilities Held for Sale” for additional information.

The types of products and services from which each reportable segment derives its revenues are as follows:

•Innerwear includes sales in the United States of basic branded apparel products that are replenishment in nature under the product categories of men’s underwear, women’s panties, children’s underwear and socks, and intimate apparel, which includes bras and shapewear.

•Activewear includes sales in the United States of ~~basic~~ branded products that are primarily seasonal in nature to both retailers and wholesalers, as well as licensed sports apparel and licensed logo ~~apparel in collegiate bookstores, mass retailers and other channels.~~apparel.

•International primarily includes sales of ~~products in all of~~ the Company’s ~~categories~~innerwear and activewear products outside the United States, primarily in Australasia, Europe, Asia, ~~Canada~~Latin America and ~~Latin America.~~Canada.

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~~HANESBRANDS INC.~~

~~Notes to Condensed Consolidated Financial Statements — (Continued)~~

~~(amounts in thousands, except per share data)~~

~~(unaudited)~~

The Company evaluates the operating performance of its segments based upon segment operating profit, which is defined as operating profit before general corporate expenses, restructuring and other action-related charges and amortization of intangibles. The accounting policies of the segments are consistent with those described in Note “Summary of Significant Accounting Policies” to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended January ~~2, 2021.~~1, 2022.


		Quarters Ended				Quarters Ended
		April 3, 2021		March 28, 2020			April 2, 2022			April 3, 2021
Net sales:	Net sales:
Innerwear	Innerwear	$	570,435	$	422,402		Innerwear	$	578,947		$	570,435
Activewear	Activewear	364,003		288,000			Activewear	386,937			364,003
International	International	506,261		428,230			International	510,129			506,261
Other	Other	67,330		64,438			Other	100,143			67,330
Total net sales	Total net sales	$	1,508,029	$	1,203,070		Total net sales	$	1,576,156		$	1,508,029

Quarters Ended
April 3,
2021 March 28,
2020
Segment operating profit:
Innerwear $ 127,417 $ 81,551
Activewear 60,594 8,108
International 87,180 50,745
Other 1,886 (3,393)
Total segment operating profit 277,077 137,011
Items not included in segment operating profit:
General corporate expenses (59,823) (57,426)
Restructuring and other action-related charges (19,393) (24,324)
Amortization of intangibles (7,739) (7,308)
Total operating profit 190,122 47,953
Other expenses (2,561) (6,101)
Interest expense, net (44,460) (36,027)
Income from continuing operations before income tax expense $ 143,101 $ 5,825

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~~For the quarter ended April 3, 2021, the~~HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)


	Quarters Ended
	April 2, 2022		April 3, 2021
Segment operating profit:
Innerwear	$	102,146	$	127,417
Activewear	48,984		60,594
International	89,438		87,180
Other	(671)		1,886
Total segment operating profit	239,897		277,077
Items not included in segment operating profit:
General corporate expenses	(57,228)		(59,823)
Restructuring and other action-related charges	(4,802)		(19,393)
Amortization of intangibles	(7,355)		(7,739)
Total operating profit	170,512		190,122
Other expenses	(987)		(2,561)
Interest expense, net	(31,963)		(44,460)
Income from continuing operations before income tax expense	$	137,562	$	143,101

The Company incurred ~~pre-tax~~ restructuring and other action-related charges ~~of $19,393, of which $2,807 is~~that were reported in the ~~“Cost~~following lines in the Condensed Consolidated Statements of ~~sales” line~~Income:


	Quarters Ended
	April 2, 2022		April 3, 2021
Cost of sales	$	499	$	2,807
Selling, general and administrative expenses	4,303		16,586
Total included in operating profit	4,802		19,393
Income tax expense	816		11,302
Total restructuring and other action-related charges	$	3,986	$	8,091

The components of restructuring and ~~$16,586~~other action-related charges were as follows:


	Quarters Ended
	April 2, 2022		April 3, 2021
Full Potential Plan:
Professional services	$	7,908	$	11,706
Gain on classification of assets held for sale	(6,528)		—
Operating model	(1,919)		—
Supply chain segmentation	1,020		—
Technology	4,459		—
Impairment of intangible assets	—		7,302
Other	(138)		385
Total included in operating profit	4,802		19,393
Discrete tax benefits	—		7,295
Tax effect on actions	816		4,007
Total benefit included in income tax expense	816		11,302
Total restructuring and other action-related charges	$	3,986	$	8,091

Restructuring and other action-related charges within operating profit included $4,802 and $19,393 of charges related to the implementation of the Company’s Full Potential plan in the quarters ended April 2, 2022 and April 3, 2021, respectively. Full Potential plan charges in the quarter ended April 2, 2022 included a non-cash gain of $6,528, which is ~~reported~~reflected in the “Selling, general and administrative expenses” line inof the Condensed Consolidated ~~Statement~~Statements of ~~Income. For~~Income, to adjust the valuation allowance related to the U.S. Sheer Hosiery business resulting from a decrease in carrying value due to changes in working capital. Full Potential plan charges in the quarter ended ~~March 28, 2020, the Company incurred pre-tax restructuring and other action-related~~April 3, 2021 included impairment charges of ~~$24,324, of~~$7,302, which ~~$21,811 is reported in the “Cost of sales” line and $2,513 is reported~~are reflected in the “Selling, general and administrative expenses” line inof the Condensed Consolidated ~~Statement~~Statements of ~~Income.~~Income,

2021

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

related to the full impairment of an indefinite-lived trademark related to a specific brand within the European Innerwear business that was excluded from the disposal group as it was not marketed for sale and that the Company intends to exit.

In the third quarter of 2021, the Company recorded a charge for an action to resize its U.S. corporate office workforce through a voluntary retirement program which was included in restructuring and other action-related charges. At January 1, 2022, the accrual for employee termination and other benefits related to the Company’s 2021 voluntary retirement program was $15,688. The Company made benefit payments of $3,066 during the quarter ended April 2, 2022, resulting in an ending accrual of $12,622 which is included in the “Accrued liabilities” line of the Condensed Consolidated Balance Sheets at April 2, 2022.

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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 interim ~~consolidated~~ financial statements and notes included herein should be read in conjunction with our audited consolidated financial statements and notes for the year ended January ~~2, 2021,~~1, 2022, 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 January ~~2, 2021.~~1, 2022. In particular, statements with respect to trends associated with our business, our Full Potential plan and our future financial performance ~~and the potential effects of the global novel coronavirus ("COVID-19") pandemic~~ included in this MD&A include forward-looking statements.

Overview

Hanesbrands Inc. (collectively with its subsidiaries, “we,” “us,” “our,” or the “Company”) is a socially responsible leading marketer of everyday basic innerwear and activewear apparel in the Americas, ~~Australia,~~Australasia, Europe and ~~Asia/Pacific~~Asia under some of the world’s strongest apparel brands, including Hanes, Champion, Bonds, Bali, Maidenform, Playtex, Bras N Things, JMS/Just My Size, ~~Wonderbra,~~ Alternative, Berlei, ~~L’eggs~~Wonderbra, Gear for Sports and ~~Gear for Sports.~~Comfortwash. We design, manufacture, source and sell a broad range of basic apparel such as T-shirts, bras, panties, shapewear, underwear, socks ~~hosiery~~ and activewear produced in our low-cost global supply chain. Our products are marketed to consumers shopping in mass merchants, mid-tier and department stores, specialty stores and the consumer-directed channel, which includes our owned retail locations, as well as e-commerce sites. Our brands hold either the number one or number two market position by units sold in many of the product categories and geographies in which we compete.

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 team that is responsible for the operations of the segment’s businesses, but the segments share a common supply chain and media and marketing platforms. Other consists of our U.S.-based outlet stores, U.S. Sheer Hosiery business and certain sales from our supply chain to the European Innerwear business which was sold on March 5, 2022. In the fourth quarter of 2021, we reached the decision to divest our U.S. ~~hosiery business.~~Sheer Hosiery business, including the L’eggs brand, as part of our strategy to streamline our portfolio under our Full Potential plan. See Note “Assets and Liabilities Held for Sale” to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for additional information.

Our Key Business Strategies

Our business strategy integrates our brand superiority, industry-leading innovation and low-cost global supply chain to provide higher value products while lowering production costs. We operate in the global innerwear and global activewear apparel categories. These are stable, heavily branded categories where we have a strong consumer franchise based on a global portfolio of industry-leading brands that we have built over multiple decades, through hundreds of millions of direct interactions with consumers. ~~In 2020, we undertook a comprehensive global business review focused on building consumer-centric growth. The review resulted in our Full Potential plan, which is our~~Our multi-year growth strategy ~~that~~(“Full Potential plan”) focuses on four pillars to drive growth and enhance long-term profitability and identifies the initiatives to unlock growth. Our four pillars of growth are to grow the Champion brand globally, drive growth in Innerwear with brands and products that appeal to younger consumers, ~~drive consumer-centricity by delivering innovative products and improving awareness through investments in brand marketing and digital capabilities,~~build e-commerce excellence across channels and streamline our global portfolio. In order to deliver this growth and create a more efficient and productive business model, we have launched a multi-year cost savings program intended to self-fund the investments necessary to achieve the Full Potential plan’s objectives. We remain highly confident that our strong brand portfolio, world-class supply chain and diverse category and geographic footprint will help us unlock our full potential, deliver long-term growth and create stockholder value.

In the first quarter of 2021, we announced that ~~as part of our strategic plan,~~ we ~~were exploring alternatives for our European Innerwear business and subsequently~~ reached the decision to exit ~~this business. We~~our European Innerwear business as part of our strategy to streamline our portfolio under our Full Potential plan and determined that ~~our European Innerwear~~this business met held-for-sale and discontinued operations accounting ~~criteria during the first quarter of 2021.~~criteria. Accordingly, we began to separately report the results of our European Innerwear business as discontinued operations in our Condensed Consolidated Statements of Income, and to present the related assets and liabilities as held for sale in the Condensed Consolidated Balance Sheets. On November 4, 2021, we announced that we reached an agreement to sell our European Innerwear business to an affiliate of Regent, L.P. and completed the sale on March 5, 2022. See ~~note “Discontinued Operations”~~Note “Assets and Liabilities Held for Sale” to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for additional ~~information on discontinued operations.~~information.

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In addition, in the fourth quarter of 2021, we reached the decision to divest our U.S. Sheer Hosiery business, including the L’eggs brand, as part of our strategy to streamline our portfolio under our Full Potential plan and determined that this business met held-for-sale accounting criteria. The related assets and liabilities are presented as held for sale in the Condensed Consolidated Balance Sheets at April 2, 2022 and January 1, 2022. The operations of our U.S. Sheer Hosiery business are reported in “Other” for all periods presented in Note “Business Segment Information” to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q. We are currently exploring potential purchasers for this business and expect to complete the sale of this business during 2022. See Note “Assets and Liabilities Held for Sale” to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for additional information.

Impact of COVID-19 on Our Business

As the global impact of COVID-19 continues, our priority has been to protect the health and safety of our employees and customers around the world. To help mitigate the spread of the COVID-19 virus and in response to health advisories and governmental actions and regulations, we have modified our business practices and have implemented health and safety measures that are designed to protect employees in our corporate, retail, distribution and manufacturing facilities around the world.

The COVID-19 pandemic has impacted our business operations and financial results, ~~for the first quarter of 2021 and 2020~~ as described in more detail under “Condensed Consolidated Results of Operations - First Quarter Ended April ~~3, 2021~~2, 2022 Compared with First Quarter Ended ~~March 28, 2020”~~April 3, 2021” below, primarily through reduced traffic and closures of ~~company-operated~~Company-operated and third-party retail locations for portions of ~~each~~the first quarter of ~~the quarters~~2021 in certain ~~markets. While many retail~~markets and global supply chain disruptions and inflation in both periods due to factory disruptions, port congestion, transportation delays as well as labor and container shortages which resulted in higher operating costs and higher levels of inflation. These global supply chain disruptions have delayed and are expected to continue to delay inventory orders and, in turn, deliveries to our wholesale customers and availability in our company-operated stores and e-commerce sites. Supply chain disruptions resulted in the inability to fulfill certain customer orders which negatively impacted our net revenues. We anticipate these supply chain disruptions could impact our sales volumes in future periods. We have ~~reopened~~also incurred higher distribution costs including freight and ~~some government restrictions have been partially or fully removed, the~~labor costs to mitigate these delays. We continue to monitor these delays and other potential disruptions in our supply chain and will implement mitigation plans as needed. The future impact of the COVID-19 pandemic, ~~remains~~supply chain disruptions and inflation remain highly uncertain, and our business and results of operations, including our net revenues, earnings and cash flows, could continue to be adversely impacted.

Outlook for ~~2021~~of 2022

We estimate our ~~2021~~2022 guidance as follows:

•Net sales of ~~$6.2~~approximately $7.00 billion to ~~$6.3 billion;~~$7.15 billion, net of approximately $125 million of unfavorable foreign exchange impact;

•Operating profit of ~~$730~~approximately $780 million to ~~$760 million;~~$850 million, net of approximately $17 million of unfavorable foreign currency exchange impact;

•Full Potential plan-related charges of approximately ~~$85~~$60 million ~~reflected~~included in operating profit;

•Interest expense and other expenses of approximately ~~$185~~$148 million combined;

•An ~~annual~~ effective tax rate from continuing operations of approximately ~~14%~~17%;

•Diluted earnings per share from continuing operations ~~from $1.33~~of approximately $1.50 to ~~$1.41;~~$1.67;

•Cash flow from operating activities of ~~$500 million to $550~~approximately $400 million; and

•Capital expenditures of approximately ~~$140~~$150 million ~~which includes approximately $50 million related~~ to ~~our Full Potential plan.~~$175 million.

Seasonality and Other Factors

Absent the effects of the COVID-19 pandemic, our operating results are typically subject to some variability due to seasonality and other factors. For instance, we have historically generated 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. Our diverse range of product offerings, however, typically mitigates some of the impact of seasonal changes in demand for certain items. Sales levels in any period are also impacted by our customers’ decisions to increase or decrease their inventory levels in response to anticipated consumer demand. Our customers may cancel orders, change delivery schedules 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.

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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 consumer spending trends. Discretionary spending is affected by many factors that are outside our control, including, among others, general business conditions, interest rates, inflation, consumer debt levels, the availability of consumer credit, currency exchange rates, taxation, energy prices, unemployment trends and other matters that influence consumer confidence and spending. 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. As a result, consumers may choose to purchase fewer of our products, 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.

Inflation can have a long-term impact on us because increasing costs of materials and labor may impact our ability to maintain satisfactory margins. For example, the cost of the materials that are used in our manufacturing process, such as oil-related commodity prices and other raw materials, including cotton, dyes and chemicals, and other costs, such as fuel, energy and utility costs, can fluctuate as a result of inflation and other factors. Disruptions to the global supply chain due to factory closures, port congestion, transportation delays as well as labor and container shortages may negatively impact product availability, revenue growth and gross margins. We would work to mitigate the impact of the global supply chain disruptions through a combination of cost savings and operating efficiencies, as well as pricing actions, which could have an adverse impact on demand. Costs incurred for materials and labor are capitalized into inventory and impact our results as the inventory is sold. In addition, a significant portion of our products are manufactured in countries other than the United States and declines in the value of the U.S. dollar may result in higher manufacturing costs. Increases in inflation may not be matched by growth in consumer income, which also could have a negative impact on spending.

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 seasonal and replenishable 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 consumers’ preferences and discretionary spending.

Highlights from the First Quarter Ended April 2, 2022

Key financial highlights are as follows:

•Total net sales in the first quarter of 2022 were $1.58 billion, compared with $1.51 billion in the same period of 2021, representing a 5% increase.

•Operating profit decreased 10.3% to $170.5 million in the first quarter of 2022, compared with $190.1 million in the same period of 2021. As a percentage of sales, operating profit was 10.8% in the first quarter of 2022 compared to 12.6% in the same period of 2021.

•Diluted earnings per share from continuing operations was $0.32 and $0.37 in the first quarters of 2022 and 2021, respectively.

•As part of our strategy to streamline our portfolio under our Full Potential plan, we sold our European Innerwear business on March 5, 2022.

•We repurchased approximately 1.6 million shares at a weighted average repurchase price of $15.84 per share. The shares were repurchased at a total cost of $25 million including broker’s commissions.

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Condensed Consolidated Results of Operations — First Quarter Ended April ~~3, 2021~~2, 2022 Compared with First Quarter Ended ~~March 28, 2020~~April 3, 2021


		Quarters Ended									Quarters Ended
		April 3, 2021		March 28, 2020		Higher (Lower)		Percent Change			April 2, 2022		April 3, 2021		Higher (Lower)		Percent Change
		(dollars in thousands)									(dollars in thousands)
Net sales	Net sales	$	1,508,029	$	1,203,070	$	304,959	25.3	%	Net sales	$	1,576,156	$	1,508,029	$	68,127	4.5	%
Cost of sales	Cost of sales	905,348		784,902		120,446		15.3		Cost of sales	991,978		905,348		86,630		9.6
Gross profit	Gross profit	602,681		418,168		184,513		44.1		Gross profit	584,178		602,681		(18,503)		(3.1)
Selling, general and administrative expenses	Selling, general and administrative expenses	412,559		370,215		42,344		11.4		Selling, general and administrative expenses	413,666		412,559		1,107		0.3
Operating profit	Operating profit	190,122		47,953		142,169		296.5		Operating profit	170,512		190,122		(19,610)		(10.3)
Other expenses	Other expenses	2,561		6,101		(3,540)		(58.0)		Other expenses	987		2,561		(1,574)		(61.5)
Interest expense, net	Interest expense, net	44,460		36,027		8,433		23.4		Interest expense, net	31,963		44,460		(12,497)		(28.1)
Income from continuing operations before income tax expense	Income from continuing operations before income tax expense	143,101		5,825		137,276		2,356.7		Income from continuing operations before income tax expense	137,562		143,101		(5,539)		(3.9)
Income tax expense	Income tax expense	14,697		707		13,990		1,978.8		Income tax expense	23,385		14,697		8,688		59.1
Income from continuing operations	Income from continuing operations	128,404		5,118		123,286		2,408.9		Income from continuing operations	114,177		128,404		(14,227)		(11.1)
Loss from discontinued operations, net of tax		(391,666)		(12,992)		(378,674)		(2,914.7)
Net loss		$	(263,262)	$	(7,874)	$	(255,388)	(3,243.4)	%
Income (loss) from discontinued operations, net of tax										Income (loss) from discontinued operations, net of tax	4,525		(391,666)		396,191		(101.2)
Net income (loss)										Net income (loss)	$	118,702	$	(263,262)	$	381,964	(145.1)	%

Net Sales

Net sales increased ~~25%~~5% during the first quarter of 2022 versus the first quarter of 2021 primarily due to the following:

•~~The overlap of the initial COVID-19 pandemic shutdown~~Strong consumer demand in the ~~first quarter of 2020;~~U.S., Europe and the Americas.

Partially offset by:

•Global supply chain disruptions resulting in product delays;

•~~Retailers continuing to replenish inventory levels as stores reopened after temporary closures due to the COVID-19 pandemic~~Ongoing COVID-related pressures on consumer traffic in ~~2020 and incremental sales partially as a result of U.S. government stimulus spending;~~certain markets in Asia; and

•The ~~favorable~~unfavorable impact from foreign currency exchange rates in our International business of approximately ~~$43~~$30 million.

~~Partially offset by:~~

•The disruption of certain of our International businesses related to the negative effects of the COVID-19 pandemic. Net sales in Asia, Europe and the Americas continue to be impacted by COVID-19 related lockdowns.

Operating Profit

Operating profit as a percentage of net sales was ~~12.6%,~~10.8% during the first quarter of 2022, representing ~~an increase~~a decrease from ~~4.0%~~12.6% in the prior year. ~~Increased operating profit was the~~Operating margin decreased as a result of inflationary pressures, higher ~~sales, favorable product mix~~transportation and ~~the favorable impact from foreign exchange rates which more than offset higher freight~~distribution costs and ~~sourcing premiums to service demand.~~increased Full Potential-related investments in brand marketing and technology partially offset by cost reductions, pricing actions and favorable sales mix. Included in operating profit in the first quarter of 2022 and 2021 were charges of $5 million and $19 million, respectively, related to the implementation of our Full Potential plan. ~~Included in operating profit in the first quarter of 2020 were charges of $24 million related to supply chain, program exit and other restructuring actions.~~

Other Highlights

Other Expenses – Other expenses decreased $4$2 million in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020~~2021 due to lower pension expense ~~and lower funding fees for sales of accounts receivable to financial institutions~~ in ~~2021.~~2022.

Interest Expense – Interest expense was ~~higher~~lower by $8$12 million in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020 driven by~~2021 primarily due to lower outstanding debt balances and a ~~higher~~lower weighted average interest rate on our borrowings during the ~~quarter.~~first quarter of 2022 compared to the first quarter of 2021. Our weighted average interest rate on our outstanding debt was 3.53% for the first quarter of 2022 compared to 4.07% for the first quarter of ~~2021, compared to 3.92% for the first quarter of 2020.~~2021.

Income Tax Expense – Our effective income tax rate was ~~10.3%~~17.0% and ~~12.1%~~10.3% for the first quarters of ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~lower~~higher effective tax rate for the first quarter ~~ended April 3, 2021~~of 2022 was primarily due to a non-recurring discrete tax benefit for the release of reserves for unrecognized tax benefits of $7 million, partially offset by a discrete charge for changes in valuation allowances of $4 ~~million.~~million during the first quarter of 2021.

Discontinued Operations – The results of our discontinued operations include the operations of our European Innerwear business which we reached the decision to exit at the end of the first quarter of 2021 in connection with our Full Potential plan. On March 5, 2022, we completed the sale of the European Innerwear business. See ~~note “Discontinued Operations”~~Note “Assets and Liabilities Held for Sale” to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for a discussion of non-cash asset impairment charges and a non-cash charge to record a valuation allowance against the net assets held for sale to write down the carrying value to the estimated fair value less costs of disposal.additional information.

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Operating Results by Business Segment — First Quarter Ended April ~~3, 2021~~2, 2022 Compared with First Quarter Ended ~~March 28, 2020~~April 3, 2021


		Net Sales									Net Sales
		Quarters Ended									Quarters Ended
		April 3, 2021		March 28, 2020		Higher (Lower)		Percent Change			April 2, 2022		April 3, 2021		Higher (Lower)		Percent Change
		(dollars in thousands)									(dollars in thousands)
Innerwear	Innerwear	$	570,435	$	422,402	$	148,033	35.0	%	Innerwear	$	578,947	$	570,435	$	8,512	1.5	%
Activewear	Activewear	364,003		288,000		76,003		26.4		Activewear	386,937		364,003		22,934		6.3
International	International	506,261		428,230		78,031		18.2		International	510,129		506,261		3,868		0.8
Other	Other	67,330		64,438		2,892		4.5		Other	100,143		67,330		32,813		48.7
Total	Total	$	1,508,029	$	1,203,070	$	304,959	25.3	%	Total	$	1,576,156	$	1,508,029	$	68,127	4.5	%


		Operating Profit and Margin													Operating Profit and Margin
		Quarters Ended													Quarters Ended
		April 3, 2021				March 28, 2020				Higher (Lower)		Percent Change			April 2, 2022				April 3, 2021				Higher (Lower)		Percent Change
		(dollars in thousands)													(dollars in thousands)
Innerwear	Innerwear	$	127,417	22.3	%	$	81,551	19.3	%	$	45,866	56.2	%	Innerwear	$	102,146	17.6	%	$	127,417	22.3	%	$	(25,271)	(19.8)	%
Activewear	Activewear	60,594		16.6		8,108		2.8		52,486		647.3		Activewear	48,984		12.7		60,594		16.6		(11,610)		(19.2)
International	International	87,180		17.2		50,745		11.8		36,435		71.8		International	89,438		17.5		87,180		17.2		2,258		2.6
Other	Other	1,886		2.8		(3,393)		(5.3)		5,279		NM		Other	(671)		(0.7)		1,886		2.8		(2,557)		(135.6)
Corporate	Corporate	(86,955)		NM		(89,058)		NM		2,103		(2.4)		Corporate	(69,385)		NM		(86,955)		NM		17,570		(20.2)
Total	Total	$	190,122	12.6	%	$	47,953	4.0	%	$	142,169	296.5	%	Total	$	170,512	10.8	%	$	190,122	12.6	%	$	(19,610)	(10.3)	%

Innerwear

Innerwear net sales increased ~~35%~~more than 1% compared to the first quarter of ~~2020 driven~~2021 primarily due to retail space gains, a positive mix and the partial-quarter benefit of a price increase partially offset by ~~a 39%~~last year’s one-time sales benefits from retailer restocking and ~~a 27%~~government stimulus. This increase ~~in net~~includes sales growth in our ~~basics~~women’s, men’s and intimate apparel businesses, respectively, primarily as a result of the overlap of the initial COVID-19 pandemic shutdown in the first quarter of 2020, retailers continuing to replenish inventory levels as stores reopened after temporary closures due to the COVID-19 pandemic in 2020 and incremental sales partially as a result of U.S. government stimulus spending. In our basics business, we experienced growth in eachsocks product category. In our intimate apparel business, the increase in bra sales more than offset the decline in shapewear sales, which is a category that continues to be negatively impacted by the COVID-19 pandemic.categories.

Innerwear operating margin was ~~22.3%~~17.6%, ~~an increase~~a decrease from ~~19.3%~~22.3% in the same period a year ago. ~~Operating~~The operating margin ~~enhancement~~decline resulted ~~primarily~~ from ~~fixed cost leverage~~inflationary pressures, increased investments in brand marketing and increased distribution costs resulting from ~~higher sales and favorable product mix~~expedited freight to service new retail space gains partially offset by ~~higher costs to service demand, such as air freight~~increased sales volume, price increases and ~~sourcing premiums.~~business mix.

Activewear

Activewear net sales increased ~~26%~~6% compared to the first quarter ~~last year~~of 2021 primarily driven by growth in the ~~online and brick-and-mortar channels, the overlap of the initial COVID-19 pandemic shutdown~~collegiate channel. Net sales in the ~~first quarter of 2020 and incremental sales partially as~~Champion brand within the Activewear segment were consistent with the same period a ~~result of U.S. government stimulus spending. We experienced growth in all product categories except our sports apparel business which continues to be~~year ago despite being negatively impacted by ~~the COVID-19 pandemic.~~global supply chain disruptions resulting in product delays and unfulfilled customer orders.

Activewear operating margin was ~~16.6%~~12.7%, ~~an increase~~a decrease from ~~2.8%~~16.6% in the same period a year ago. ~~Operating~~The operating margin ~~enhancement~~decline resulted ~~primarily~~ from higher levels of inflation, merchandise mix and increased brand marketing investments partially offset by improvement in our fixed cost leverage from higher ~~sales and favorable product mix.~~sales.

International

Net sales in the International segment increased ~~18% as a result of~~1% driven by growth in Europe, the ~~negative impact of the COVID-19 pandemic~~Americas and certain markets in ~~the first quarter of 2020~~Asia, including China, partially offset by global supply chain disruptions resulting in product delays in Australia, ongoing COVID-related pressures on consumer traffic in certain markets in Asia, particularly Japan, and ~~the favorable~~unfavorable foreign currency exchange rates. The unfavorable impact of foreign currency exchange rates decreased net sales approximately $30 million in the first quarter of ~~approximately $43 million.~~2022. International net sales on a constant currency basis, defined as net sales excluding the impact of foreign currency, increased ~~8.2%~~6.8%. The impact of foreign currency exchange rates is calculated by applying prior period exchange rates to the current year financial results. ~~Net sales in our international markets continue to be negatively impacted by COVID-19 related lockdowns.~~

International operating margin was ~~17.2%~~17.5%, an increase from ~~11.8%~~17.2% in the same period a year ago. ~~Operating~~The increase in operating margin ~~enhancement~~primarily resulted ~~primarily~~ from fixed cost leverage from higher ~~sales.~~sales in Europe, the Americas and certain markets in Asia.

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Other

Other net sales increased ~~as a result of~~primarily due to increased sales from our supply chain to the European Innerwear business partially offset by lower sales at our retail outlets during the first quarter of 2021 as a result of stores reopening after temporary store closures during the first quarter of 2020 due to the COVID-19 pandemic partially offset by continued declines in hosiery sales in the United States. Operating margin increased due to the increase in sales volume.

~~Corporate~~

Corporate expenses in the first quarter of 2021 included incremental recurring COVID-19 related costs such as cleaning and health-related supplies to protect our employees and customers, as well as higher variable compensation expense2022 compared to the first quarter of ~~2020. Corporate expenses~~2021. We have continued certain sales from our supply chain to the European Innerwear business on a transitional basis after the sale of the business. These sales and the related profit are included in Other in all periods presented and have not been eliminated as intercompany transactions in consolidation. See Note “Assets and Liabilities Held for Sale” to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for additional information. Operating margin decreased due to the ~~first quarter of 2020 included $11 million of bad debt expense related to charges for anticipated bankruptcies.~~ decrease in sales volume in our retail outlets and U.S. Sheer Hosiery business.

Corporate

Corporate expenses were lower in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020~~2021 primarily due to lower restructuring and other action-related charges. Included in restructuring and other action-related charges within operating profit in the first quarter of 2022 and 2021 were $5 million and $19 million, respectively, of charges related to the implementation of our Full Potential plan. ~~We recorded~~Full Potential plan charges in the first quarter of 2022 included a non-cash gain of $7 million to adjust the valuation allowance related to the U.S. Sheer Hosiery business resulting from a decrease in carrying value due to changes in working capital. Full Potential plan charges in the first quarter of 2021 included impairment charges of $7 million related to the full impairment of an indefinite-lived trademark related to a specific brand within the European Innerwear business that was excluded from the disposal group ~~as it is not being marketed for sale. Supply chain actions include actions~~and that we intend to ~~reduce overhead costs. Program exit charges are costs associated with exiting our~~ ~~C9 Champion~~ ~~mass program and the DKNY intimate apparel license at the end of 2019. Other restructuring costs include action-related costs such as corporate workforce reductions.~~exit.

Quarters Ended
April 3,
2021 March 28,
2020
(dollars in thousands)
Restructuring and other action-related charges included in operating profit:
Full Potential Plan:
Professional services $ 11,706 $ —
Impairment of intangible assets 7,302 —
Other restructuring costs 385 —
2020 actions:
Supply chain actions — 14,065
Program exit costs — 8,213
Other restructuring costs — 2,046
Total restructuring and other action-related charges included in operating profit $ 19,393 $ 24,324


	Quarters Ended
	April 2, 2022		April 3, 2021
	(dollars in thousands)
Restructuring and other action-related charges:
Full Potential Plan:
Professional services	$	7,908	$	11,706
Gain on classification of assets held for sale	(6,528)		—
Operating model	(1,919)		—
Supply chain segmentation	1,020		—
Technology	4,459		—
Impairment of intangible assets	—		7,302
Other	(138)		385
Total included in operating profit	$	4,802	$	19,393
Discrete tax benefits	—		7,295
Tax effect on actions	816		4,007
Total benefit included in income tax expense	816		11,302
Total restructuring and other action-related charges	$	3,986	$	8,091

Liquidity and Capital Resources

Cash Requirements and Trends and Uncertainties Affecting Liquidity

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. Our primary uses of cash are payments to our employees and vendors in the normal course of business, capital expenditures, maturities of debt and related interest payments, contributions to our pension plans, repurchases of our stock, regular quarterly dividend payments and income tax payments.

In April 2020, given the rapidly changing business environment and level of uncertainty created by the COVID-19 pandemic and the associated impact on future earnings, we amended our Senior Secured Credit Facility prior to any potential covenant violation in order to modify the financial covenants and to provide operating flexibility during the COVID-19 crisis. The amendment changed certain provisions and covenants under the Senior Secured Credit Facility through the fiscal quarter ending July 3, 2021, after which our covenants revert to their original, pre-amendment levels.

We expect to maintain compliance with our covenants for at least one year from the issuance of these financial statements based on our current expectations and forecasts. If economic conditions caused by the COVID-19 pandemic worsen, our earnings and operating cash flows could be negatively impacted which could impact our ability to maintain compliance with our financial covenants and require us to seek additional amendments to our Senior Secured Credit Facility. If we are not able to obtain such necessary additional amendments, this would lead to an event of default and, if not cured timely, our lenders could require us to repay our outstanding debt. In that situation, we may not be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay the lenders.

Based on our current estimate of future earnings and cash flows, we believe we have sufficient cash and available borrowings to support our operations and key business strategies for at least one year from the issuance of these financial statements based on our current expectations and forecasts.

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Our ~~primary~~ sources of liquidity are cash generated from global operations and cash available under our Revolving Loan Facility, our ~~Australian Revolving Loan Facility, our~~ Accounts Receivable Securitization Facility and our other international credit facilities.

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We had the following borrowing capacity and available liquidity under our credit facilities as of April ~~3, 2021:~~2, 2022:


		As of April 3, 2021					As of April 2, 2022
		Borrowing Capacity		Available Liquidity			Borrowing Capacity		Available Liquidity
		(dollars in thousands)					(dollars in thousands)
Senior Secured Credit Facility:	Senior Secured Credit Facility:					Senior Secured Credit Facility:
Revolving Loan Facility(1)	Revolving Loan Facility(1)	$	1,000,000	$	995,824	Revolving Loan Facility(1)	$	1,000,000	$	975,824

Australian Revolving Loan Facility		45,572		45,572

Accounts Receivable Securitization Facility(1)		87,403		87,403
Accounts Receivable Securitization Facility(2)						Accounts Receivable Securitization Facility(2)	150,000		14,500
Other international credit facilities	Other international credit facilities	116,734		85,245		Other international credit facilities	75,803		56,056
Total liquidity from credit facilities	Total liquidity from credit facilities	$	1,249,709	$	1,214,044	Total liquidity from credit facilities	$	1,225,803	$	1,046,380
Cash and cash equivalents	Cash and cash equivalents			530,403		Cash and cash equivalents			369,210
Total liquidity	Total liquidity			$	1,744,447	Total liquidity			$	1,415,590

(1)A portion of the Revolving Loan Facility is available to be borrowed in Euros or Australian dollars.

(2)Borrowing availability under the Accounts Receivable Securitization Facility is subject to a quarterly fluctuating facility limit, not to exceed $175 million, and permitted only to the extent that the face of the receivables in the collateral pool, net of applicable concentrations, reserves and other deductions, exceeds the outstanding loans.

The following have impacted or may impact our liquidity:

•The COVID-19 pandemic which resulted in supply chain disruptions and inflationary pressures has had, and may continue to have, a negative impact ~~of the COVID-19 pandemic~~ on our business.

•For the quarter ended April 2, 2022, we entered into transactions to repurchase approximately 1.6 million shares of our common stock at a total cost of $25 million including broker’s commissions. At April 2, 2022, the remaining repurchase authorization under our current share repurchase program announced on February 2, 2022 totaled approximately $575 million.

•We have historically paid a regular quarterly dividend. The declaration of any future dividends and, if declared, the amount of any such dividends, will be subject to our actual future earnings, capital requirements, regulatory restrictions, debt covenants, other contractual restrictions and to the discretion of our Board of Directors.

•We have principal and interest obligations under our debt and ongoing financial covenants under those debt facilities, even after taking into account recent amendments. In March 2021, we repaid the outstanding balance of Term Loan B which consisted of a required excess cash flow prepayment of $239 million and a voluntary prepayment of $61 million.facilities.

•We have invested in efforts to accelerate worldwide omnichannel and global growth initiatives, as well as marketing and brand building.

•~~As part of our Full Potential plan, we~~We have launched a multi-year cost savings program intended to self-fund the investments necessary to achieve ~~the~~our Full Potential plan’s objectives.

•~~Although currently prohibited under our Senior Secured Credit Facility,~~We expect capital investments of approximately $150 million to $175 million in 2022.

•In the future, we may pursue strategic business ~~acquisitions.~~acquisitions or divestitures.

•We ~~made a contribution of $40 million~~expect to have no required cash contributions to our U.S. pension plan in ~~the quarter ended April 3, 2021. We~~2022 based on a preliminary calculation by our actuary but we may ~~also~~ elect to make ~~additional~~ voluntary contributions.

•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 impact our effective income tax rate. ~~Consistent~~We have not changed our reinvestment strategy from the prior year with ~~our investment strategy as it pertains~~regards to our ~~historical~~unremitted foreign earnings ~~as of January 2, 2021, we~~and intend to remit foreign earnings totaling ~~$668~~$579 million.

•We are obligated to make installment payments over an eight-year period related to our transition tax liability resulting from the implementation of the Tax Cuts and Jobs Act, which began in 2018, in addition to any estimated income taxes due based on current year taxable income. In the quarter ended April 3, 2021, we made no installment payments on our transition tax liability. On April 13, 2021, we made an installment payment of $10 million on our transition tax liability. We currently have a remaining balance due of approximately $42 million to be paid in installment payments through 2025.

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Sources and Uses of Our Cash

The information presented below regarding the sources and uses of our cash flows for the quarters ended April 2, 2022 and April 3, 2021 ~~and March 28, 2020~~ was derived from our condensed consolidated interim financial statements.


		Quarters Ended					Quarters Ended
		April 3, 2021		March 28, 2020			April 2, 2022		April 3, 2021
		(dollars in thousands)					(dollars in thousands)
Operating activities	Operating activities	$	16,946	$	(83,216)	Operating activities	$	(231,189)	$	16,946
Investing activities	Investing activities	(13,604)		(24,477)		Investing activities	(29,590)		(13,604)
Financing activities	Financing activities	(354,423)		877,514		Financing activities	67,567		(354,423)
Effect of changes in foreign exchange rates on cash	Effect of changes in foreign exchange rates on cash	(17,662)		(15,061)		Effect of changes in foreign exchange rates on cash	1,793		(17,662)
Change in cash, cash equivalents and restricted cash	Change in cash, cash equivalents and restricted cash	(368,743)		754,760		Change in cash, cash equivalents and restricted cash	(191,419)		(368,743)
Cash, cash equivalents and restricted cash at beginning of year	Cash, cash equivalents and restricted cash at beginning of year	910,603		329,923		Cash, cash equivalents and restricted cash at beginning of year	560,629		910,603
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	541,860		1,084,683		Cash, cash equivalents and restricted cash at end of period	369,210		541,860
Less restricted cash at end of period	Less restricted cash at end of period	1,153		903		Less restricted cash at end of period	—		1,153
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	540,707	$	1,083,780	Cash and cash equivalents at end of period	$	369,210	$	540,707

Balances included in the Condensed Consolidated Balance Sheets:
Cash and cash equivalents		$	530,403	$	1,069,490
Cash and cash equivalents included in current assets of discontinued operations		10,304		14,290
Cash and cash equivalents at end of period		$	540,707	$	1,083,780

Operating Activities

Our overall liquidity has historically been driven by our cash flow provided by operating activities, which is dependent on net income and 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 the prior year, ~~the~~ higher net cash ~~provided~~used by operating activities was ~~primarily~~ due to ~~higher income from continuing operations~~changes in working capital primarily accounts payable, accruals and inventory due to supply chain disruptions and inflationary increases, partially offset by ~~changes~~improvement in ~~working capital. Cash used by~~accounts receivable and lower pension plan contributions in the first quarter of 2022. Net cash from operating activities includes a $40 ~~million and a $25~~ million contribution to our U.S. pension plan made in the first quarter of ~~2021 and 2020, respectively.~~2021.

Investing Activities

~~Investing activities in the first quarter of 2021 and 2020 primarily include capital investments into our business.~~ The ~~decrease~~increase in cash used by investing activities in the first quarter of ~~2021~~2022 compared to ~~2020~~2021 was primarily the result of ~~a decrease~~the sale of the European Innerwear business which resulted in an $11 million cash outflow and an increase in capital investments into our ~~business as we manage our spending on our focused strategic goals.~~business.

Financing Activities

Net cash from financing activities ~~decreased~~increased in the first quarter of 2022 primarily as a result of ~~lower~~increased borrowings ~~as compared to~~on our Accounts Receivable Securitization Facility and our Revolving Loan Facility coupled with the ~~same period~~repayment of 2020. We increased our borrowings in the first quarter of 2020 primarily to strengthen our cash position and to provide us with additional financial flexibility to manage our business with a safety-first emphasis during the unknown duration and impact of the COVID-19 pandemic. Additionally, in the first quarter of 2021, we repaid the outstanding balance of Term Loan B in the first quarter of 2021, which consisted of a required excess cash flow prepayment of $239 million and a voluntary prepayment of $61 million. WeNet cash from financing activities in the first quarter of 2022 also included shares repurchased ~~shares~~ at a total cost of ~~$200 million in the first quarter of 2020.~~$25 million.

Financing Arrangements

In March 2021, we amended the Accounts Receivable Securitization Facility. This amendment primarily decreased the fluctuating facility limit to $175 million (previously $225 million) and extended the maturity date to June 2022. Additionally, the amendment changed certain ratios and borrowing base calculations, raised pricing and added certain receivables to the pledged collateral pool for the facility.

We believe our financing structure provides a secure base to support our operations and key business strategies. As of April ~~3, 2021,~~2, 2022, we were in compliance with all financial covenants under our credit facilities and other outstanding indebtedness. ~~We continue to monitor our covenant compliance carefully.~~ Under the terms of our Senior Secured Credit Facility, among other financial and non-financial covenants, we are required to maintain a minimum interest coverage ratio and a maximum ~~leverage ratio. The interest coverage ratio covenant is the ratio of our EBITDA for the preceding four fiscal quarters to our consolidated~~ total ~~interest expense and the leverage ratio covenant is the ratio of our net~~ debt to EBITDA ~~for the preceding four fiscal quarters. EBITDA is defined as earnings~~(earnings before interest, income taxes, depreciation expense and amortization, as computed pursuant to the Senior Secured Credit ~~Facility. In April 2020, given~~Facility), or leverage ratio, each of which is defined in the ~~rapidly changing business environment and level of uncertainty being created by the COVID-19 pandemic and the associated impact on future earnings, we amended our~~ Senior Secured Credit ~~Facility prior to any potential~~

~~Table~~Facility. The method of ~~Contents~~

~~covenant violation~~calculating all of the components used in ~~order to modify~~ the ~~financial~~ covenants ~~and to provide operating flexibility during~~is included in the ~~COVID-19 crisis.~~Senior Secured Credit Facility. We expect to maintain compliance with our covenants for at least one year from the issuance date of these financial statements based on our current expectations and forecasts, however economic conditions or the occurrence of events discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended January ~~2, 2021~~1, 2022 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.~~For further details regarding our liquidity from our available cash balances and credit facilities see “Cash Requirements and Trends and Uncertainties Affecting Liquidity” above.

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 accounting principles generally accepted in the United States. We apply these accounting policies in a

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consistent manner. Our significant accounting policies are discussed in Note “Summary of Significant Accounting ~~Policies,”~~Policies” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended January ~~2, 2021.~~1, 2022.

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 consolidated 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 January ~~2, 2021.~~1, 2022. There have been no material changes in these policies from those described in our Annual Report on Form 10-K for the year ended January ~~2, 2021.~~1, 2022.

Recently Issued Accounting Pronouncements

For a summary of recently issued accounting pronouncements, see Note “Recent Accounting Pronouncements” to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q.


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 January ~~2, 2021.~~1, 2022.


Item 4.			Controls and Procedures

Disclosure Controls and Procedures

As required by Exchange Act Rule 13a-15(b), our management, including our Chief Executive Officer and Chief ~~Accounting~~Financial Officer, ~~(who is currently serving as our Principal 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 Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief ~~Accounting~~Financial Officer concluded that our disclosure controls and procedures were effective as of April ~~3, 2021.~~2, 2022.

Changes in Internal Control over Financial Reporting

In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, including our Chief Executive Officer and Chief ~~Accounting~~Financial Officer, ~~(who is currently serving as our Principal 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

~~Table of Contents~~


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 January ~~2, 2021.~~1, 2022.


Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~Issuer Repurchases of Equity Securities

The following table sets forth information in connection with purchases made by, or on behalf of, the Company or any affiliate purchaser of the Company, of shares of the Company’s common stock during the quarter ended April 2, 2022.

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	Total Number of Shares Purchased	Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Value of Shares that May Yet Be Purchased under the Program (2)
January 2, 2022 to February 5, 2022	—	$	—	—	$	600,000,000
February 6, 2022 to March 5, 2022	1,577,386	$	15.84	1,577,386	$	575,013,357
March 6, 2022 to April 2, 2022	—	$	—	—	$	575,013,357
Total	1,577,386			1,577,386

(1)Average price paid per share for shares purchased excluding any broker commissions as part of our publicly-announced program.

(2)On February 2, 2022, our Board of Directors approved a new share repurchase program for up to $600 million of shares to be repurchased in open market transactions or privately negotiated transactions, subject to market conditions, legal requirements and other factors. Unless terminated earlier by our Board of Directors, the new program will expire on December 28, 2024. The new program replaced our previous share repurchase program for up to 40 million shares that was originally approved on February 6, 2020. We did not repurchase any shares under the previous program during the quarter ended April 2, 2022 or April 3, 2021.

We net settle our employee stock option exercises and restricted stock unit and performance stock unit vestings, which result in the withholding of shares to cover the option exercise price and the minimum statutory withholding tax obligations that we are required to pay in cash to the applicable taxing authorities on behalf of our employees. We do not consider these transactions to be common stock repurchases.


Item 3.			Defaults Upon Senior Securities

None.


Item 4.			Mine Safety Disclosures

Not applicable.


Item 5.			Other Information

None.

2932

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Item 6.			Exhibits


Exhibit Number						Description

3.1						Articles of Amendment and Restatement of Hanesbrands Inc. (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 5, 2006).

3.2						Articles Supplementary (Junior Participating Preferred Stock, Series A) (incorporated by reference from Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 5, 2006).

3.3						Articles of Amendment to Articles of Amendment and Restatement of Hanesbrands Inc. (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 28, 2015).

3.4						Articles Supplementary (Reclassifying Junior Participating Preferred Stock, Series A) (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 2, 2015).

3.5						Amended and Restated Bylaws of Hanesbrands Inc. (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2017).

~~4.1~~						~~Supplemental Indenture No. 10 (to Indenture dated June 3, 2016), dated as of April 12, 2021, among Hanesbrands Finance Luxembourg S.C.A., HBI Holdings Switzerland GmbH and U.S. Bank Trustees Limited.~~

~~10.1~~						~~Letter Agreement with~~ ~~Tracy M. Preston~~ ~~dated~~ ~~February~~ 1 2 ~~, 202~~1 .*

31.1						Certification of Stephen B. Bratspies, Chief Executive Officer.

31.2						Certification of ~~M. Scott Lewis,~~ Michael P. Dastugue, Chief ~~Accounting~~ ~~Officer~~ ~~and Principal~~ Financial ~~Officer~~.Officer.

32.1						Section 1350 Certification of Stephen B. Bratspies, Chief Executive Officer.

32.2						Section 1350 Certification of ~~M. Scott Lewis,~~ Michael P. Dastugue, Chief ~~Accounting~~ ~~Officer~~ ~~and Principal~~ Financial ~~Officer~~.Officer.

101.INS XBRL						Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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

104						Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)

* Management contract or compensatory plans or arrangements.

3033

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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/ ~~M. Scott Lewis~~Michael P. Dastugue
						~~M. Scott Lewis~~Michael P. Dastugue Chief ~~Accounting Officer and Principal~~ Financial Officer (Duly authorized officer and principal financial officer)

Date: May ~~12, 2021~~5, 2022

3134


	Quarters Ended
	April 3, 2021(1)		March 28, 2020(1)
Operating activities:
Net loss	$	(263,262)	$	(7,874)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation	24,142		22,781
Amortization of acquisition intangibles	6,179		6,113
Other amortization	3,020		2,477
Impairment of intangible assets and goodwill	163,047		0
Loss on classification of assets held for sale	226,352		0
Amortization of debt issuance costs	4,580		2,123


Other	(5,835)		(5,258)
Changes in assets and liabilities:
Accounts receivable	(63,955)		73,694
Inventories	(122,781)		(86,785)
Other assets	9,606		26,790
Accounts payable	109,197		(13,605)
Accrued pension and postretirement benefits	(38,757)		(21,481)
Accrued liabilities and other	(34,587)		(82,191)
Net cash from operating activities	16,946		(83,216)
Investing activities:
Capital expenditures	(17,804)		(25,759)
Proceeds from sales of assets	2,406		66

Other	1,794		1,216
Net cash from investing activities	(13,604)		(24,477)
Financing activities:
Repayments on Term Loan Facilities	(300,000)		0
Borrowings on Accounts Receivable Securitization Facility	0		227,061
Repayments on Accounts Receivable Securitization Facility	0		(74,909)
Borrowings on Revolving Loan Facilities	0		1,638,000
Repayments on Revolving Loan Facilities	0		(688,000)

Borrowings on International Debt	0		31,222

Borrowings on notes payable	21,106		62,312
Repayments on notes payable	(20,276)		(64,352)
Share repurchases	0		(200,269)
Cash dividends paid	(52,351)		(53,683)
Payments of debt issuance costs	0		0
Other	(2,902)		132
Net cash from financing activities	(354,423)		877,514
Effect of changes in foreign exchange rates on cash	(17,662)		(15,061)
Change in cash, cash equivalents and restricted cash	(368,743)		754,760
Cash, cash equivalents and restricted cash at beginning of year	910,603		329,923
Cash, cash equivalents and restricted cash at end of period	541,860		1,084,683
Less restricted cash at end of period	1,153		903
Cash and cash equivalents at end of period	$	540,707	$	1,083,780

Balances included in the Condensed Consolidated Balance Sheets:
Cash and cash equivalents	$	530,403	$	1,069,490
Cash and cash equivalents included in current assets of discontinued operations	10,304		14,290
Cash and cash equivalents at end of period	$	540,707	$	1,083,780


	April 3, 2021		January 2, 2021(1)		March 28, 2020(1)
Cash and cash equivalents	$	10,304	$	8,822	$	14,290
Trade accounts receivable, net	80,458		84,632		83,331
Inventories	106,192		123,337		176,097
Other current assets	11,190		17,295		23,171
Property, net	61,763		67,950		68,838
Right-of-use assets	34,779		34,637		39,711
Trademarks and other identifiable intangibles, net	208,601		284,170		274,006
Goodwill	0		96,692		85,549
Deferred tax assets	8,505		5,438		6,197
Other noncurrent assets	4,860		5,614		5,626
Allowance to adjust assets to estimated fair value, less costs of disposal	(223,607)		0		0
Total assets of discontinued operations	$	303,045	$	728,587	$	776,816

Accounts payable	62,199		77,636		73,866
Accrued liabilities	120,475		133,431		89,887
Lease liabilities	9,159		10,332		12,270
Notes payable	1,574		784		510
Current portion of long-term debt	0		0		108,826
Lease liabilities - noncurrent	27,038		28,775		31,103
Pension and postretirement benefits	44,428		46,569		44,306
Other noncurrent liabilities	24,063		37,645		36,525
Total liabilities of discontinued operations	$	288,936	$	335,172	$	397,293


	Interest Rate as of April 3, 2021	Principal Amount				Maturity Date
		April 3, 2021		January 2, 2021
Senior Secured Credit Facility:
Revolving Loan Facility	0	$	0	$	0	December 2022

Term Loan A	2.11%	625,000		625,000		December 2022
Term Loan B	0	0		300,000		December 2024

Australian Revolving Loan Facility	0	0		0		July 2021
5.375% Senior Notes	5.38%	700,000		700,000		May 2025
4.875% Senior Notes	4.88%	900,000		900,000		May 2026
4.625% Senior Notes	4.63%	900,000		900,000		May 2024
3.5% Senior Notes	3.50%	587,959		610,724		June 2024
Accounts Receivable Securitization Facility	0	0		0		June 2022
Total debt		3,712,959		4,035,724
Less long-term debt issuance costs		28,953		32,354
Less current maturities		34,375		263,936
Total long-term debt		$	3,649,631	$	3,739,434


	Amount of Gain Recognized in AOCI
	Quarters Ended
	April 3, 2021		March 28, 2020
Euro-denominated long-term debt	$	19,300	$	2,658
Cross-currency swap contracts	7,373		11,732
Total	$	26,673	$	14,390


	Location of Gain Recognized in Income	Amount of Gain Recognized in Income (Amount Excluded from Effectiveness Testing)
		Quarters Ended
		April 3, 2021		March 28, 2020
Cross-currency swap contracts	Interest expense, net	$	1,899	$	1,947


		Quarters Ended
		April 3, 2021		March 28, 2020
Total interest expense, net in which the amounts excluded from effectiveness testing for net investment hedges are recorded		$	44,460	$	36,027