Table of Contents
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 July 3, 2021April 2, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number: 001-32891
Hanesbrands Inc.
(Exact name of registrant as specified in its charter)
Maryland20-3552316
(State of incorporation)(I.R.S. employer identification no.)
1000 East Hanes Mill Road
Winston-Salem,North Carolina27105
(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 classTrading SymbolName of each exchange on which registered
Common Stock, Par Value $0.01HBINew 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 filerAccelerated filer
Non-accelerated filerSmaller reporting companyEmerging 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 July 30, 2021,April 29, 2022, there were 349,151,707348,775,722 shares of the registrant’s common stock outstanding.


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



Table of Contents
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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 novel coronavirus (“COVID-19”) 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.
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PART I

Item 1.Financial Statements

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

Quarters EndedSix Months EndedQuarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
Net salesNet sales$1,751,311 $1,543,083 $3,259,340 $2,746,153 Net sales$1,576,156 $1,508,029 
Cost of salesCost of sales1,069,682 1,029,221 1,975,030 1,814,123 Cost of sales991,978 905,348 
Gross profitGross profit681,629 513,862 1,284,310 932,030 Gross profit584,178 602,681 
Selling, general and administrative expensesSelling, general and administrative expenses464,235 311,729 876,794 681,944 Selling, general and administrative expenses413,666 412,559 
Operating profitOperating profit217,394 202,133 407,516 250,086 Operating profit170,512 190,122 
Other expensesOther expenses1,855 4,653 4,416 10,754 Other expenses987 2,561 
Interest expense, netInterest expense, net42,440 41,075 86,900 77,102 Interest expense, net31,963 44,460 
Income from continuing operations before income tax expenseIncome from continuing operations before income tax expense173,099 156,405 316,200 162,230 Income from continuing operations before income tax expense137,562 143,101 
Income tax expenseIncome tax expense25,236 19,837 39,933 20,544 Income tax expense23,385 14,697 
Income from continuing operationsIncome from continuing operations147,863 136,568 276,267 141,686 Income from continuing operations114,177 128,404 
Income (loss) from discontinued operations, net of taxIncome (loss) from discontinued operations, net of tax(19,187)24,613 (410,853)11,621 Income (loss) from discontinued operations, net of tax4,525 (391,666)
Net income (loss)Net income (loss)$128,676 $161,181 $(134,586)$153,307 Net income (loss)$118,702 $(263,262)
Earnings (loss) per share - basic:Earnings (loss) per share - basic:Earnings (loss) per share - basic:
Continuing operationsContinuing operations$0.42 $0.39 $0.79 $0.40 Continuing operations$0.33 $0.37 
Discontinued operationsDiscontinued operations(0.05)0.07 (1.17)0.03 Discontinued operations0.01 (1.12)
Net income (loss)Net income (loss)$0.37 $0.46 $(0.38)$0.43 Net income (loss)$0.34 $(0.75)
Earnings (loss) per share - diluted:Earnings (loss) per share - diluted:Earnings (loss) per share - diluted:
Continuing operationsContinuing operations$0.42 $0.39 $0.79 $0.40 Continuing operations$0.32 $0.37 
Discontinued operationsDiscontinued operations(0.05)0.07 (1.17)0.03 Discontinued operations0.01 (1.11)
Net income (loss)Net income (loss)$0.37 $0.46 $(0.38)$0.43 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 EndedSix Months EndedQuarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
Net income (loss)Net income (loss)$128,676 $161,181 $(134,586)$153,307 Net income (loss)$118,702 $(263,262)
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Translation adjustmentsTranslation adjustments(11,231)95,033 (36,432)(22,121)Translation adjustments27,297 (25,201)
Unrealized gain (loss) on qualifying cash flow hedges, net of tax of $(1,140), $4,031, $(6,316) and $(3,249), respectively2,856 (6,177)11,396 1,606 
Unrecognized income from pension and postretirement plans, net of tax of $(1,566), $(1,794), $(3,615) and $(3,066), respectively4,332 3,560 11,067 7,154 
Unrealized gain on qualifying cash flow hedges, net of tax of $969 and $(5,176), respectivelyUnrealized gain on qualifying cash flow hedges, net of tax of $969 and $(5,176), respectively3,354 8,540 
Unrecognized income from pension and postretirement plans, net of tax of $(1,317) and $(2,049), respectivelyUnrecognized income from pension and postretirement plans, net of tax of $(1,317) and $(2,049), respectively4,261 6,735 
Total other comprehensive income (loss)Total other comprehensive income (loss)(4,043)92,416 (13,969)(13,361)Total other comprehensive income (loss)34,912 (9,926)
Comprehensive income (loss)Comprehensive income (loss)$124,633 $253,597 $(148,555)$139,946 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)

July 3,
2021
January 2,
2021
June 27,
2020
April 2,
2022
January 1,
2022
April 3,
2021
AssetsAssetsAssets
Cash and cash equivalentsCash and cash equivalents$667,298 $900,615 $556,099 Cash and cash equivalents$369,210 $536,277 $530,403 
Trade accounts receivable, netTrade accounts receivable, net960,993 768,221 1,139,130 Trade accounts receivable, net898,420 894,151 807,738 
InventoriesInventories1,530,622 1,367,758 1,774,139 Inventories1,819,974 1,584,015 1,489,565 
Other current assetsOther current assets159,715 158,700 171,435 Other current assets202,015 186,503 153,358 
Current assets of discontinued operations301,986 234,086 401,347 
Current assets held for saleCurrent assets held for sale7,959 327,157 303,045 
Total current assetsTotal current assets3,620,614 3,429,380 4,042,150 Total current assets3,297,578 3,528,103 3,284,109 
Property, netProperty, net446,356 477,821 496,933 Property, net443,817 441,401 458,434 
Right-of-use assetsRight-of-use assets398,526 432,631 438,683 Right-of-use assets350,174 363,854 416,136 
Trademarks and other identifiable intangibles, netTrademarks and other identifiable intangibles, net1,258,783 1,293,847 1,196,359 Trademarks and other identifiable intangibles, net1,235,276 1,220,170 1,269,932 
GoodwillGoodwill1,148,021 1,158,938 1,144,739 Goodwill1,138,667 1,133,095 1,150,138 
Deferred tax assetsDeferred tax assets351,309 367,976 193,100 Deferred tax assets326,677 327,804 355,826 
Other noncurrent assetsOther noncurrent assets54,380 64,773 118,296 Other noncurrent assets67,520 57,009 54,678 
Noncurrent assets of discontinued operations494,501 493,045 
Total assetsTotal assets$7,277,989 $7,719,867 $8,123,305 Total assets$6,859,709 $7,071,436 $6,989,253 
Liabilities and Stockholders’ EquityLiabilities and Stockholders’ EquityLiabilities and Stockholders’ Equity
Accounts payableAccounts payable$1,171,645 $891,868 $1,101,438 Accounts payable$1,204,196 $1,214,847 $976,887 
Accrued liabilitiesAccrued liabilities628,007 609,864 452,763 Accrued liabilities575,911 660,778 571,410 
Lease liabilitiesLease liabilities129,053 136,510 147,406 Lease liabilities117,465 109,526 132,127 
Notes payable13 
Accounts Receivable Securitization FacilityAccounts Receivable Securitization Facility135,500 — — 
Current portion of long-term debtCurrent portion of long-term debt37,500 263,936 Current portion of long-term debt25,000 25,000 34,375 
Current liabilities of discontinued operations289,751 222,183 310,972 
Current liabilities held for saleCurrent liabilities held for sale7,959 316,902 288,936 
Total current liabilitiesTotal current liabilities2,255,956 2,124,361 2,012,592 Total current liabilities2,066,031 2,327,053 2,003,735 
Long-term debtLong-term debt3,647,482 3,739,434 3,985,631 Long-term debt3,325,042 3,326,091 3,649,631 
Lease liabilities - noncurrentLease liabilities - noncurrent299,380 331,577 330,599 Lease liabilities - noncurrent258,663 281,852 315,382 
Pension and postretirement benefitsPension and postretirement benefits327,597 381,457 328,647 Pension and postretirement benefits242,690 248,518 333,460 
Other noncurrent liabilitiesOther noncurrent liabilities185,384 216,091 270,152 Other noncurrent liabilities187,867 185,429 202,564 
Noncurrent liabilities of discontinued operations112,989 116,364 
Total liabilitiesTotal liabilities6,715,799 6,905,909 7,043,985 Total liabilities6,080,293 6,368,943 6,504,772 
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Preferred stock (50,000,000 authorized shares; $.01 par value)Preferred stock (50,000,000 authorized shares; $.01 par value)Preferred stock (50,000,000 authorized shares; $.01 par value)
Issued and outstanding — NoneIssued and outstanding — NoneIssued and outstanding — None— — — 
Common stock (2,000,000,000 authorized shares; $.01 par value)Common stock (2,000,000,000 authorized shares; $.01 par value)Common stock (2,000,000,000 authorized shares; $.01 par value)
Issued and outstanding — 349,115,441, 348,802,220 and 348,092,986, respectively3,491 3,488 3,481 
Issued and outstanding — 348,775,722, 349,903,253 and 349,090,472, respectivelyIssued and outstanding — 348,775,722, 349,903,253 and 349,090,472, respectively3,488 3,499 3,491 
Additional paid-in capitalAdditional paid-in capital310,148 307,883 302,522 Additional paid-in capital315,675 315,337 304,090 
Retained earningsRetained earnings829,479 1,069,546 1,404,326 Retained earnings976,944 935,260 753,785 
Accumulated other comprehensive lossAccumulated other comprehensive loss(580,928)(566,959)(631,009)Accumulated other comprehensive loss(516,691)(551,603)(576,885)
Total stockholders’ equityTotal stockholders’ equity562,190 813,958 1,079,320 Total stockholders’ equity779,416 702,493 484,481 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$7,277,989 $7,719,867 $8,123,305 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 StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
SharesAmount SharesAmount
Balances at April 3, 2021349,090 $3,491 $304,090 $753,785 $(576,885)$484,481 
Balances at January 1, 2022Balances at January 1, 2022349,903 $3,499 $315,337 $935,260 $(551,603)$702,493 
Net incomeNet income— — — 128,676 — 128,676 Net income— — — 118,702 — 118,702 
Dividends ($0.15 per common share)Dividends ($0.15 per common share)— — — (52,982)— (52,982)Dividends ($0.15 per common share)— — — (53,443)— (53,443)
Other comprehensive loss— — — — (4,043)(4,043)
Other comprehensive incomeOther comprehensive income— — — — 34,912 34,912 
Stock-based compensationStock-based compensation— — 5,342 — — 5,342 Stock-based compensation— — 5,329 — — 5,329 
Net exercise of stock options, vesting of restricted stock units and otherNet exercise of stock options, vesting of restricted stock units and other25 716 — — 716 Net exercise of stock options, vesting of restricted stock units and other450 (3,564)— — (3,559)
Balances at July 3, 2021349,115 $3,491 $310,148 $829,479 $(580,928)$562,190 
Share repurchasesShare repurchases(1,577)(16)(1,427)(23,575)— (25,018)
Balances at April 2, 2022Balances at April 2, 2022348,776 $3,488 $315,675 $976,944 $(516,691)$779,416 

 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at January 2, 2021348,802 $3,488 $307,883 $1,069,546 $(566,959)$813,958 
Net loss— — — (134,586)— (134,586)
Dividends ($0.30 per common share)— — — (105,481)— (105,481)
Other comprehensive loss— — — — (13,969)(13,969)
Stock-based compensation— — 3,808 — — 3,808 
Net exercise of stock options, vesting of restricted stock units and other313 (1,543)— — (1,540)
Balances at July 3, 2021349,115 $3,491 $310,148 $829,479 $(580,928)$562,190 






 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at January 2, 2021348,802 $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 other288 (2,259)— — (2,256)
Balances at April 3, 2021349,090 $3,491 $304,090 $753,785 $(576,885)$484,481 



See accompanying notes to Condensed Consolidated Financial Statements.
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HANESBRANDS INC.
Condensed Consolidated Statements of Stockholders’ Equity (Continued)
(in thousands, except per share data)
(unaudited)
 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at March 28, 2020348,035 $3,480 $297,456 $1,296,060 $(723,425)$873,571 
Net income— — — 161,181 — 161,181 
Dividends ($0.15 per common share)— — — (52,915)— (52,915)
Other comprehensive income— — — — 92,416 92,416 
Stock-based compensation— — 4,393 — — 4,393 
Net exercise of stock options, vesting of restricted stock units and other58 673 — — 674 
Balances at June 27, 2020348,093 $3,481 $302,522 $1,404,326 $(631,009)$1,079,320 

 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at December 28, 2019362,449 $3,624 $304,395 $1,546,224 $(617,648)$1,236,595 
Net income— — — 153,307 — 153,307 
Dividends ($0.30 per common share)— — — (107,336)— (107,336)
Other comprehensive loss— — — — (13,361)(13,361)
Stock-based compensation— — 9,034 — — 9,034 
Net exercise of stock options, vesting of restricted stock units and other108 1,348 — — 1,350 
Share repurchases(14,464)(145)(12,255)(187,869)— (200,269)
Balances at June 27, 2020348,093 $3,481 $302,522 $1,404,326 $(631,009)$1,079,320 


See accompanying notes to Condensed Consolidated Financial Statements.
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HANESBRANDS INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Six Months EndedQuarters Ended
July 3, 2021(1)
June 27, 2020(1)
April 2, 2022(1)
April 3, 2021(1)
Operating activities:Operating activities:Operating activities:
Net income (loss)Net income (loss)$(134,586)$153,307 Net income (loss)$118,702 $(263,262)
Adjustments to reconcile net income (loss) to net cash from operating activities:Adjustments to reconcile net income (loss) to net cash from operating activities:Adjustments to reconcile net income (loss) to net cash from operating activities:
DepreciationDepreciation43,565 45,399 Depreciation18,931 24,142 
Amortization of acquisition intangiblesAmortization of acquisition intangibles10,978 12,199 Amortization of acquisition intangibles4,847 6,179 
Other amortizationOther amortization5,814 5,107 Other amortization2,508 3,020 
Impairment of intangible assets and goodwillImpairment of intangible assets and goodwill163,047 20,319 Impairment of intangible assets and goodwill— 163,047 
Loss on classification of assets held for sale236,180 
(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(6,715)226,352 
Amortization of debt issuance costsAmortization of debt issuance costs7,669 5,119 Amortization of debt issuance costs1,887 4,580 
OtherOther(14,224)16,247 Other6,940 (5,835)
Changes in assets and liabilities:Changes in assets and liabilities:Changes in assets and liabilities:
Accounts receivableAccounts receivable(200,106)(392,134)Accounts receivable(6,090)(63,955)
InventoriesInventories(175,149)(61,409)Inventories(247,567)(122,781)
Other assetsOther assets4,451 (31,570)Other assets(489)9,606 
Accounts payableAccounts payable300,318 210,338 Accounts payable(310)109,197 
Accrued pension and postretirement benefitsAccrued pension and postretirement benefits(39,176)(19,318)Accrued pension and postretirement benefits24 (38,757)
Accrued liabilities and otherAccrued liabilities and other3,475 18,603 Accrued liabilities and other(123,857)(34,587)
Net cash from operating activitiesNet cash from operating activities212,256 (17,793)Net cash from operating activities(231,189)16,946 
Investing activities:Investing activities:Investing activities:
Capital expendituresCapital expenditures(25,331)(46,512)Capital expenditures(19,337)(17,804)
Proceeds from sales of assetsProceeds from sales of assets2,455 66 Proceeds from sales of assets19 2,406 
OtherOther6,937 5,823 Other(10,272)1,794 
Net cash from investing activitiesNet cash from investing activities(15,939)(40,623)Net cash from investing activities(29,590)(13,604)
Financing activities:Financing activities:Financing activities:
Repayments on Term Loan FacilitiesRepayments on Term Loan Facilities(306,250)Repayments on Term Loan Facilities(6,250)(300,000)
Borrowings on Accounts Receivable Securitization FacilityBorrowings on Accounts Receivable Securitization Facility227,061 Borrowings on Accounts Receivable Securitization Facility290,000 — 
Repayments on Accounts Receivable Securitization FacilityRepayments on Accounts Receivable Securitization Facility(227,061)Repayments on Accounts Receivable Securitization Facility(154,500)— 
Borrowings on Revolving Loan FacilitiesBorrowings on Revolving Loan Facilities1,638,000 Borrowings on Revolving Loan Facilities129,000 — 
Repayments on Revolving Loan FacilitiesRepayments on Revolving Loan Facilities(1,638,000)Repayments on Revolving Loan Facilities(109,000)— 
Borrowings on Senior Notes700,000 
Borrowings on International Debt31,222 
Borrowings on notes payableBorrowings on notes payable42,638 116,669 Borrowings on notes payable21,454 21,106 
Repayments on notes payableRepayments on notes payable(43,066)(112,373)Repayments on notes payable(21,713)(20,276)
Share repurchasesShare repurchases(200,269)Share repurchases(25,018)— 
Cash dividends paidCash dividends paid(104,719)(105,896)Cash dividends paid(52,297)(52,351)
OtherOther(2,524)(14,035)Other(4,109)(2,902)
Net cash from financing activitiesNet cash from financing activities(413,921)415,318 Net cash from financing activities67,567 (354,423)
Effect of changes in foreign exchange rates on cashEffect of changes in foreign exchange rates on cash(16,780)(2,669)Effect of changes in foreign exchange rates on cash1,793 (17,662)
Change in cash, cash equivalents and restricted cashChange in cash, cash equivalents and restricted cash(234,384)354,233 Change in cash, cash equivalents and restricted cash(191,419)(368,743)
Cash, cash equivalents and restricted cash at beginning of yearCash, cash equivalents and restricted cash at beginning of year910,603 329,923 Cash, cash equivalents and restricted cash at beginning of year560,629 910,603 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period676,219 684,156 Cash, cash equivalents and restricted cash at end of period369,210 541,860 
Less restricted cash at end of periodLess restricted cash at end of period1,042 Less restricted cash at end of period— 1,153 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$676,219 $683,114 Cash and cash equivalents at end of period$369,210 $540,707 
Balances included in the Condensed Consolidated Balance Sheets:Balances included in the Condensed Consolidated Balance Sheets:Balances included in the Condensed Consolidated Balance Sheets:
Cash and cash equivalentsCash and cash equivalents$667,298 $556,099 Cash and cash equivalents$369,210 $530,403 
Cash and cash equivalents included in current assets of discontinued operations8,921 127,015 
Cash and cash equivalents included in current assets held for saleCash and cash equivalents included in current assets held for sale— 10,304 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$676,219 $683,114 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 July 3, 2021April 2, 2022 and January 2, 20211, 2022 were $11,477$27,960 and $17,931,$24,164, respectively. For the six monthsquarters ended JulyApril 2, 2022 and April 3, 2021, and June 27, 2020, right-of-use assets obtained in exchange for lease obligations were $37,725$16,035 and $23,769,$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 Companyits European Innerwear business as part of its strategy to streamline its portfolio under its Full Potential plan and determined that its European Innerwearthis 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 appliedOn 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.
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 FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting 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 standardnew 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 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)
recognize and measure contract assets and contract liabilities in a business combination. The new accounting rules will be effective for the Company in the first quarter of 2023, including interim periods. Early adoption is permitted. The adoption impact of the new accounting rules 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 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 and 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)
Codification Improvements
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements.” 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 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.
(3)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 Companyits European Innerwear business as part of its strategy to streamline its portfolio under its Full Potential plan and determined that its European Innerwearthis 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 appliedOn November 4, 2021, the Company announced that it had reached an agreement to all periods presented. The Company is actively marketing thesell its European Innerwear business to prospective buyersan affiliate of Regent, L.P. and expects to completecompleted the sale of this business beforeon March 5, 2022. Under the endagreement, the purchaser received all the assets and operating liabilities of the first quarter of 2022.
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 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 saleheld-for-sale classification whichin 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 withforecasts 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. Abalance 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 six monthsquarter ended JulyApril 3, 2021. In addition, the Company recorded non-cash charges of $9,828 and $236,180 as "Loss on classification of assets held for sale" in the summarized discontinued operations financial information for the quarter and the six months ended July 3, 2021, respectively, 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. Thedisposal, resulting in a non-cash charge recorded inof $226,352 for the quarter ended JulyApril 3, 2021, resultedas "(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. The Company will continue to assess the valuation allowance in each interim period until the European Innerwear business is sold.
Additionally, the Company recorded an impairment charge of $7,302 in continuing operations on an indefinite-lived trademark for the six monthsquarter ended JulyApril 3, 2021 which is reflected in the “Selling, general and administrative expenses” line in the Condensed Consolidated StatementStatements of Income. This charge relatesrelated 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. Thesale and that the Company intends to exit this brand subsequent to the sale of the European Innerwear business.
During the second quarter of 2020, the Company completed a quantitative impairment analysis for certain indefinite-lived intangible assets as a result of the significant impact of the COVID-19 pandemic on their performance. Based on this analysis, the Company recorded impairment charges of $20,319 on certain indefinite-lived trademarks and other intangible assets within the European Innerwear business which are reflected in the “Impairment of intangible assets and goodwill” line in the summarized discontinued operations financial information for the quarter and six months ended June 27, 2020.exit.
The Company expects to continuehas continued certain sales from its supply chain to the European Innerwear business on a transitional basis after the sale of the business. ThoseUnder 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 noteNote “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 toare 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 beare 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 EndedSix Months Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
Net sales$117,506 $205,591 $253,351 $333,262 
Cost of sales63,137 86,441 138,660 158,548 
Gross profit54,369 119,150 114,691 174,714 
Selling, general and administrative expenses61,134 59,428 144,526 128,815 
Impairment of intangible assets and goodwill20,319 155,745 20,319 
Loss on classification of assets held for sale9,828 236,180 
Operating income (loss)(16,593)39,403 (421,760)25,580 
Other expenses280 397 614 786 
Interest expense, net69 584 159 1,406 
Income (loss) from discontinued operations before income tax expense(16,942)38,422 (422,533)23,388 
Income tax expense (benefit)2,245 13,809 (11,680)11,767 
Net income (loss) from discontinued operations, net of tax$(19,187)$24,613 $(410,853)$11,621 
Assets and liabilities of discontinued operations classified as held for sale in the Condensed Consolidated Balance Sheets as of July 3, 2021, January 2, 2021 and June 27, 2020 consist of the following:
July 3,
2021
January 2, 2021(1)
June 27, 2020(1)
Cash and cash equivalents$8,921 $8,822 $127,015 
Trade accounts receivable, net70,432 84,632 68,041 
Inventories119,627 123,337 184,304 
Other current assets15,114 17,295 21,987 
Property, net63,222 67,950 68,916 
Right-of-use assets34,051 34,637 40,994 
Trademarks and other identifiable intangibles, net211,534 284,170 282,362 
Goodwill96,692 88,445 
Deferred tax assets10,376 5,438 6,947 
Other noncurrent assets4,421 5,614 5,381 
Allowance to adjust assets to estimated fair value, less costs of disposal(235,712)
Total assets of discontinued operations$301,986 $728,587 $894,392 
Accounts payable$70,185 $77,636 $61,179 
Accrued liabilities111,321 133,431 115,465 
Lease liabilities8,693 10,332 13,026 
Notes payable377 784 8,790 
Current portion of long-term debt112,512 
Lease liabilities - noncurrent26,766 28,775 31,971 
Pension and postretirement benefits44,328 46,569 45,405 
Other noncurrent liabilities28,081 37,645 38,988 
Total liabilities of discontinued operations$289,751 $335,172 $427,336 
Quarters Ended
April 2,
2022
April 3,
2021
Net sales$101,314 $135,845 
Cost of sales60,415 75,523 
Gross profit40,899 60,322 
Selling, general and administrative expenses54,689 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 expenses283 334 
Interest expense, net10 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 $(391,666)
(1)Amounts at January 2, 2021 and June 27, 2020 have been classified as current and long-term in the Condensed Consolidated Balance Sheets.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Assets and liabilities of discontinued operations classified as held for sale in the Condensed Consolidated Balance Sheets as of April 2, 2022, January 1, 2022 and April 3, 2021 consist of the following:
April 2,
2022
January 1,
2022
April 3,
2021
Cash and cash equivalents$— $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 EndedSix Months EndedQuarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
DepreciationDepreciation$$2,682 $2,608 $5,347 Depreciation$— $2,608 
AmortizationAmortization1,262 1,460 2,544 Amortization$— $1,460 
Capital expendituresCapital expenditures735 1,862 4,070 5,400 Capital expenditures$715 $3,335 
Impairment of intangible assets and goodwillImpairment of intangible assets and goodwill20,319 155,745 20,319 Impairment of intangible assets and goodwill$— $155,745 
Loss on classification of assets held for sale9,828 236,180 
Other investing activities1,580 615 3,374 1,831 
(Gain) loss on sale of business and classification of assets held for sale(Gain) loss on sale of business and classification of assets held for sale$(187)$226,352 
Capital expenditures included in accounts payable at end of periodCapital expenditures included in accounts payable at end of period486 264 486 264 Capital expenditures included in accounts payable at end of period$— $52 
Right-of-use assets obtained in exchange for lease obligationsRight-of-use assets obtained in exchange for lease obligations1,642 3,137 201 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 EndedSix Months EndedQuarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
Third-party brick-and-mortar wholesaleThird-party brick-and-mortar wholesale$1,233,531 $1,164,078 $2,258,270 $2,050,613 Third-party brick-and-mortar wholesale$1,126,266 $1,024,739 
Consumer-directedConsumer-directed517,780 379,005 1,001,070 695,540 Consumer-directed449,890 483,290 
Total net salesTotal net sales$1,751,311 $1,543,083 $3,259,340 $2,746,153 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-partyThird-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. Additionally, in the quarter and six months ended June 27, 2020, third-party brick-and-mortar wholesale revenue included $514,256 of revenue from contracts with governments generated from the sale of both cloth face coverings and gowns for use during the COVID-19 pandemic. Receivables from government contracts of $484,162 were included in “Trade accounts receivable, net” in the Company’s Condensed Consolidated Balance Sheet at June 27, 2020.
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.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
(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 EndedSix Months EndedQuarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
Basic weighted average shares outstandingBasic weighted average shares outstanding350,987 350,538 350,995 354,778 Basic weighted average shares outstanding350,251 351,003 
Effect of potentially dilutive securities:Effect of potentially dilutive securities:Effect of potentially dilutive securities:
Stock optionsStock options24 143 16 182 Stock options
Restricted stock unitsRestricted stock units1,039 143 855 165 Restricted stock units1,190 671 
Employee stock purchase plan and otherEmployee stock purchase plan and otherEmployee stock purchase plan and other
Diluted weighted average shares outstandingDiluted weighted average shares outstanding352,052 350,829 351,869 355,133 Diluted weighted average shares outstanding351,453 351,686 
The following securities were excluded from the diluted earnings per share calculation because their effect would be anti-dilutive:
Quarters EndedSix Months EndedQuarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
Stock optionsStock options83 167 Stock options167 167 
Restricted stock unitsRestricted stock units45 1,599 44 1,330 Restricted stock units647 592 
On July 27, 2021,April 26, 2022, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.15 per share onof the Company’s outstanding shares of common stock to be paid on AugustMay 31, 20212022 to stockholders of record at the close of business on AugustMay 10, 2021.2022.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
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 morea trading plansplan 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 quartersquarter ended July 3, 2021 and June 27, 2020 and the six months ended July 3, 2021, the Company did not enter into any transactions to repurchase shares under the new program. For the six months ended June 27, 2020,April 2, 2022, the Company entered into transactions to repurchase 14,4641,577 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 July 3, 2021,April 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 were previously prohibited under the Senior Secured Credit Facility as a result of the amendment signed in April 2020. The Company terminated such amendment when it submitted its April 3, 2021 compliance certificate in order to reduce interest expense and increase flexibility for restricted payments, investments, indebtedness, and permitted acquisitions. See Note “Debt” for additional information on the Company’s debt facilities.$575,013.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
(6)    Inventories
Inventories consisted of the following: 
July 3,
2021
January 2,
2021
June 27,
2020
April 2,
2022
January 1,
2022
April 3,
2021
Raw materialsRaw materials$72,436 $67,111 $80,610 Raw materials$84,734 $68,683 $74,123 
Work in processWork in process101,862 108,844 127,924 Work in process121,095 110,246 99,619 
Finished goodsFinished goods1,356,324 1,191,803 1,565,605 Finished goods1,614,145 1,405,086 1,315,823 
$1,530,622 $1,367,758 $1,774,139 $1,819,974 $1,584,015 $1,489,565 
(7)    Debt
Debt consisted of the following: 
Interest Rate as of July 3,
2021
Principal AmountMaturity DateInterest Rate as of April 2,
2022
Principal AmountMaturity Date
July 3,
2021
January 2,
2021
April 2,
2022
January 1,
2022
Senior Secured Credit Facility:Senior Secured Credit Facility:Senior Secured Credit Facility:
Revolving Loan FacilityRevolving Loan Facility0$$December 2022Revolving Loan Facility1.69%$20,000 $— November 2026
Term Loan ATerm Loan A1.34%618,750 625,000 December 2022Term Loan A1.75%993,750 1,000,000 November 2026
Term Loan B0300,000 December 2024
Australian Revolving Loan Facility0July 2022
5.375% Senior Notes5.38%700,000 700,000 May 2025
4.875% Senior Notes4.875% Senior Notes4.88%900,000 900,000 May 20264.875% Senior Notes4.88%900,000 900,000 May 2026
4.625% Senior Notes4.625% Senior Notes4.63%900,000 900,000 May 20244.625% Senior Notes4.63%900,000 900,000 May 2024
3.5% Senior Notes3.5% Senior Notes3.50%593,261 610,724 June 20243.5% Senior Notes3.50%552,425 568,634 June 2024
Accounts Receivable Securitization FacilityAccounts Receivable Securitization Facility0June 2022Accounts Receivable Securitization Facility1.25%135,500 — June 2022
Total debt3,712,011 4,035,724 
3,501,675 3,368,634 
Less long-term debt issuance costsLess long-term debt issuance costs27,029 32,354 Less long-term debt issuance costs16,133 17,543 
Less current maturitiesLess current maturities37,500 263,936 Less current maturities160,500 25,000 
Total long-term debt$3,647,482 $3,739,434 
$3,325,042 $3,326,091 
As of July 3, 2021,April 2, 2022, the Company had $995,824$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. In March 2021,
Borrowings under 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“ARS 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 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 Accounts Receivable SecuritizationARS Facility was $150,000 as of July 3, 2021.April 2, 2022. The Company had $88,833$14,500 of borrowing availability under the Accounts Receivable SecuritizationARS Facility at July 3, 2021.April 2, 2022.
The Company had $44,994 of borrowing availability under the Australian Revolving Loan Facility and $33,610$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 July 3, 2021. The Australian Revolving Loan Facility, originally entered into in July 2016, was amended in July 2021 to extend the maturity date to July 2022 and to reduce the bilateral cash advance limit from A$50,000 to A$46,000 with an offsetting increase in the bank overdraft limit from A$10,000 to A$14,000.
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 any2, 2022.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
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 ended July 3, 2021, after which the covenants were to revert to their original, pre-amendment levels. The Company voluntarily terminated the covenant relief amendment when it submitted its April 3, 2021 compliance certificate in order to reduce interest expense and increase flexibility for restricted payments, investments, indebtedness, and permitted acquisitions. After termination, the covenants reverted to their original, pre-amendment levels for the fiscal quarter ended July 3, 2021.
As of July 3, 2021,April 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 ratioeach 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 toin 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 expectsCompany’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 covenantsa non-recurring discrete tax benefit for at least one year from the daterelease of these financial statements based on its current expectations and forecasts. If economic conditions causedreserves for unrecognized tax benefits totaling $7,034, partially offset by a discrete charge for changes in valuation allowances of $3,672 during the COVID-19 pandemic do not continue to improve or otherwise worsen, including as a result of any new virus variants or vaccine distribution or efficacy, and the Company’s earnings and operating cash flows do not continue to recover as currently estimated by management, this could impact the Company’s ability to maintain compliance with its financial covenants and require the Company to seek additional amendments to its Senior Secured Credit Facility. If the Company is not able to obtain such necessary additional amendments, this would lead to an event of default and, if not cured timely, its lenders could require the Company to repay its outstanding debt. In that situation, the Company may not be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay the lenders.quarter ended April 3, 2021.
(8)(9)    Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss (“AOCI”) are as follows:
Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at April 3, 2021$(78,021)$(12,822)$(659,946)$173,904 $(576,885)
Amounts reclassified from accumulated other comprehensive loss4,671 6,022 (2,993)7,700 
Current-period other comprehensive income (loss) activity(11,231)(675)(124)287 (11,743)
Total other comprehensive income (loss)(11,231)3,996 5,898 (2,706)(4,043)
Balance at July 3, 2021$(89,252)$(8,826)$(654,048)$171,198 $(580,928)
Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at January 2, 2021$(52,820)$(26,538)$(668,730)$181,129 $(566,959)
Amounts reclassified from accumulated other comprehensive loss9,913 13,107 (5,997)17,023 
Current-period other comprehensive income (loss) activity(36,432)7,799 1,575 (3,934)(30,992)
Total other comprehensive income (loss)(36,432)17,712 14,682 (9,931)(13,969)
Balance at July 3, 2021$(89,252)$(8,826)$(654,048)$171,198 $(580,928)
Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at January 1, 2022$(134,001)$5,244 $(569,161)$146,315 $(551,603)
Amounts reclassified from accumulated other comprehensive loss(13,473)9,789 5,618 (2,778)(844)
Current-period other comprehensive income (loss) activity40,770 (7,404)(40)2,430 35,756 
Total other comprehensive income (loss)27,297 2,385 5,578 (348)34,912 
Balance at April 2, 2022$(106,704)$7,629 $(563,583)$145,967 $(516,691)
Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at January 2, 2021$(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 $(576,885)
(1)Cumulative Translation Adjustment includes translation adjustments and net investment hedges. See Note “Financial Instruments and Risk Management” for additional disclosures about net investment hedges.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at March 28, 2020$(274,292)$19,849 $(624,494)$155,512 $(723,425)
Amounts reclassified from accumulated other comprehensive loss(3,157)5,423 (416)1,850 
Current-period other comprehensive income (loss) activity95,033 (7,051)(69)2,653 90,566 
Total other comprehensive income (loss)95,033 (10,208)5,354 2,237 92,416 
Balance at June 27, 2020$(179,259)$9,641 $(619,140)$157,749 $(631,009)

Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at December 28, 2019$(157,138)$4,786 $(629,360)$164,064 $(617,648)
Amounts reclassified from accumulated other comprehensive loss(8,174)10,289 (416)1,699 
Current-period other comprehensive income (loss) activity(22,121)13,029 (69)(5,899)(15,060)
Total other comprehensive income (loss)(22,121)4,855 10,220 (6,315)(13,361)
Balance at June 27, 2020$(179,259)$9,641 $(619,140)$157,749 $(631,009)
(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 AOCIComponent of AOCILocation of Reclassification into IncomeAmount of Reclassification from AOCIComponent of AOCILocation of Reclassification into IncomeAmount of Reclassification from AOCI
Quarters EndedSix Months EndedQuarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
Write-off of cumulative translation associated with sale of businessWrite-off of cumulative translation associated with sale of businessIncome (loss) from discontinued operations, net of tax$13,473 $— 
Gain (loss) on forward foreign exchange contracts designated as cash flow hedgesGain (loss) on forward foreign exchange contracts designated as cash flow hedgesCost of sales$(5,278)$1,758 $(9,655)$4,627 Gain (loss) on forward foreign exchange contracts designated as cash flow hedgesCost of sales$1,612 $(4,377)
Income tax1,444 (483)2,652 (1,245)Income tax(508)1,208 
Income (loss) from discontinued operations, net of tax(1,278)1,080 (1,522)2,718 Income (loss) from discontinued operations, net of tax(232)(244)
Net of tax(5,112)2,355 (8,525)6,100 Net of tax872 (3,413)
Gain (loss) on cross-currency swap contracts designated as cash flow hedgesGain (loss) on cross-currency swap contracts designated as cash flow hedgesSelling, general and administrative expenses3,168 2,611 Gain (loss) on cross-currency swap contracts designated as cash flow hedgesSelling, general and administrative expenses(9,733)(557)
Interest expense, net(1,018)(1,018)Interest expense, net(1,361)— 
Income tax(312)(223)Income tax1,886 89 
Net of tax1,838 1,370 Net of tax(9,208)(468)
Amortization of deferred actuarial loss and prior service costAmortization of deferred actuarial loss and prior service costOther expenses(6,081)(5,466)(13,788)(8,228)Amortization of deferred actuarial loss and prior service costOther expenses(5,203)(7,707)
Income tax1,596 1,261 3,342 2,494 Income tax1,370 1,746 
Income (loss) from discontinued operations, net of tax59 578 (2,065)Income (loss) from discontinued operations, net of tax— 519 
Pension activity associated with sale of businessPension activity associated with sale of businessIncome (loss) from discontinued operations, net of tax(460)— 
Net of tax(4,426)(4,205)(9,868)(7,799)Net of tax(4,293)(5,442)
Total reclassificationsTotal reclassifications$(7,700)$(1,850)$(17,023)$(1,699)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 certainits European subsidiaries.
Hedge TypeJuly 3,
2021
January 2,
2021
Hedge TypeApril 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 contractsForward foreign exchange contractsCash Flow and
Mark to Market
$355,633 $617,912 Forward foreign exchange contractsCash Flow and
Mark to Market
$326,800 $308,071 
Cross-currency swap contractsCross-currency swap contractsCash Flow$352,920 $Cross-currency swap contractsCash Flow$352,920 $352,920 
Cross-currency swap contractsCross-currency swap contractsNet Investment$335,940 $335,940 Cross-currency swap contractsNet 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 LocationFair ValueBalance Sheet LocationFair Value
July 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 contractsForward foreign exchange contractsOther current assets$1,989 $Forward foreign exchange contractsOther current assets$1,037 $2,898 
Cross-currency swap contractsCross-currency swap contractsOther current assets970 918 Cross-currency swap contractsOther current assets2,986 974 
Forward foreign exchange contractsForward foreign exchange contractsCurrent assets of discontinued operations17 40 Forward foreign exchange contractsOther noncurrent assets92 83 
Forward foreign exchange contractsOther noncurrent assets732 
Cross-currency swap contractsCross-currency swap contractsOther noncurrent assets1,723 Cross-currency swap contractsOther noncurrent assets4,585 1,979 
Derivatives not designated as hedging instruments:Derivatives not designated as hedging instruments:Derivatives not designated as hedging instruments:
Forward foreign exchange contractsOther current assets1,545 2,459 
Forward foreign exchange contractsForward foreign exchange contractsCurrent assets of discontinued operations24 198 Forward foreign exchange contractsOther current assets4,942 5,439 
Total derivative assetsTotal derivative assets7,000 3,616 Total derivative assets13,642 11,373 
Derivatives designated as hedging instruments:Derivatives designated as hedging instruments:Derivatives designated as hedging instruments:
Forward foreign exchange contractsForward foreign exchange contractsAccrued liabilities(2,329)(12,898)Forward foreign exchange contractsAccrued liabilities(3,381)(349)
Cross-currency swap contractsCross-currency swap contractsAccrued liabilities(223)Cross-currency swap contractsAccrued liabilities(1,583)(222)
Forward foreign exchange contractsForward foreign exchange contractsCurrent liabilities of discontinued operations(321)(4,747)Forward foreign exchange contractsOther noncurrent liabilities(329)(14)
Forward foreign exchange contractsOther noncurrent liabilities(2,190)
Cross-currency swap contractsCross-currency swap contractsOther noncurrent liabilities(9,300)(16,526)Cross-currency swap contractsOther 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 contractsAccrued liabilities(4,151)(16,488)
Forward foreign exchange contractsForward foreign exchange contractsCurrent liabilities of discontinued operations(589)(2,195)Forward foreign exchange contractsAccrued liabilities(1,862)(331)
Total derivative liabilitiesTotal derivative liabilities(16,913)(55,044)Total derivative liabilities(21,399)(12,303)
Net derivative liabilityNet derivative liability$(9,913)$(51,428)Net derivative liability$(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 July 3, 2021.April 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 $12,581.$4,975. The Company is hedging exposure to the variability in future foreign currency-denominated cash flows for forecasted transactions over the next 1517 months and for long-term debt over the next 3627 months.
The effect of derivative instruments designated as cash flow hedges on the Condensed Consolidated Statements of Income and AOCI is as follows:
Amount of Gain (Loss) Recognized in AOCI on Derivative Instruments
Quarters Ended
April 2,
2022
April 3,
2021
Forward foreign exchange contracts$(3,186)$8,486 
Cross-currency swap contracts(4,218)(12)
Total$(7,404)$8,474 

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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 EndedSix Months Ended
July 3,
2021
June 27,
2020
July 3,
2021
 June 27,
2020
Forward foreign exchange contracts$(1,392)$(7,051)$7,094 $13,029 
Cross-currency swap contracts717 705 
Total$(675)$(7,051)$7,799 $13,029 

Location of Gain (Loss)
Reclassified from AOCI 
into Income
Amount of Gain (Loss) Reclassified from AOCI into IncomeLocation of Gain (Loss)
Reclassified from AOCI 
into Income
Amount of Gain (Loss) Reclassified from AOCI into Income
Quarters EndedSix Months EndedQuarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
Forward foreign exchange contracts(1)
Forward foreign exchange contracts(1)
Cost of sales$(5,278)$1,758 $(9,655)$4,627 
Forward foreign exchange contracts(1)
Cost of sales$1,612 $(4,377)
Forward foreign exchange contracts(1)
Forward foreign exchange contracts(1)
Income (loss) from discontinued operations, net of tax(1,543)1,399 $(1,851)$3,547 
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 expenses3,168 $2,611 $
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(1,018)$(1,018)$
Cross-currency swap contracts(1)
Interest expense, net(1,361)— 
TotalTotal$(4,671)$3,157 $(9,913)$8,174 Total$(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 EndedSix Months Ended
  
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
Total cost of sales in which the effects of cash flow hedges are recorded$1,069,682 $1,029,221 $1,975,030 $1,814,123 
Total selling, general and administrative expenses in which the effects of cash flow hedges are recorded$464,235 $311,729 $876,794 $681,944 
Total interest expense, net in which the effects of cash flow hedges are recorded$42,440 $41,075 $86,900 $77,102 
Total income (loss) from discontinued operations, net of tax in which the effects of cash flow hedges are recorded$(19,187)$24,613 $(410,853)$11,621 
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 certainits 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 July 3, 2021April 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 $237,304$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 contracts1,932 7,373 
Total$6,653 $26,673 
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
The amounteffect of after-tax gains (losses) included in AOCI in the Condensed Consolidated Balance Sheets related to derivative instruments and nonderivative financialnon-derivative instruments designated as net investment hedges andon the amountCondensed Consolidated Statements of gains included inIncome are as follows:
Location of Gain (Loss) Reclassified from AOCI into IncomeAmount of Gain (Loss) Reclassified from AOCI into Income
Quarters Ended
April 2,
2022
April 3,
2021
Euro-denominated long-term debtIncome (loss) from discontinued operations, net of tax$(13,348)$— 
Cross-currency swap contractsIncome (loss) from discontinued operations, net of tax(2,505)— 
Cross-currency swap contracts (amounts excluded from effectiveness testing)Interest expense, net2,012 1,899 
Total$(13,841)$1,899 
The following table presents the “Interest expense, net” lineamounts in the Condensed Consolidated Statements of Income related to amounts excluded fromin which the assessmenteffects of hedge effectiveness for derivative instruments designated as net investment hedges are as follows:recorded:
Amount of Gain (Loss) Recognized in AOCI
Quarters EndedSix Months Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
Euro-denominated long-term debt$(1,544)$(4,196)$17,756 $(1,538)
Cross-currency swap contracts(2,066)(1,004)5,307 10,728 
Total$(3,610)$(5,200)$23,063 $9,190 
Location of Gain Recognized in IncomeAmount of Gain Recognized in Income
(Amount Excluded from Effectiveness Testing)
Quarters EndedSix Months Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
Cross-currency swap contractsInterest expense, net$1,715 $2,020 $3,614 $3,967 
Quarters EndedSix Months Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
Total interest expense, net in which the amounts excluded from effectiveness testing for net investment hedges are recorded$42,440 $41,075 $86,900 $77,102 
Quarters Ended
April 2,
2022
April 3,
2021
Income (loss) from discontinued operations, net of tax4,525 (391,666)
Interest expense, net (amounts excluded from effectiveness testing)31,963 44,460 
Mark to Market Hedges
A derivativeDerivatives 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 contractsinstruments 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 IncomeLocation of Gain (Loss)
Recognized in Income
on Derivatives
Amount of Gain (Loss) Recognized in Income
Quarters EndedSix Months EndedQuarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
Forward foreign exchange contractsForward foreign exchange contractsCost of sales$5,629 $(16,081)$18,624 $(9,532)Forward foreign exchange contractsCost of sales$(4,202)$12,995 
Forward foreign exchange contractsForward foreign exchange contractsSelling, general and administrative expenses880 1,962 3,091 928 Forward foreign exchange contractsSelling, general and administrative expenses292 2,211 
Forward foreign exchange contractsForward foreign exchange contractsIncome (loss) from discontinued operations, net of tax1,314 (3,026)3,953 (3,451)Forward foreign exchange contractsIncome (loss) from discontinued operations, net of tax— 2,639 
TotalTotal$7,823 $(17,145)$25,668 $(12,055)Total$(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 July 3, 2021,April 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 plansplan 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 and six months ended July 3, 2021April 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 and six months ended July 3, 2021,April 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 July 3, 2021Assets (Liabilities) at Fair Value as of April 2, 2022
TotalQuoted Prices In
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
TotalQuoted Prices In
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Forward foreign exchange contracts - assetsForward foreign exchange contracts - assets$4,266 $$4,266 $Forward foreign exchange contracts - assets$6,071 $— $6,071 $— 
Cross-currency swap contracts - assetsCross-currency swap contracts - assets2,693 2,693 Cross-currency swap contracts - assets7,571 — 7,571 — 
Forward foreign exchange contracts - liabilitiesForward foreign exchange contracts - liabilities(6,480)(6,480)Forward foreign exchange contracts - liabilities(5,572)— (5,572)— 
Cross-currency swap contracts - liabilitiesCross-currency swap contracts - liabilities(9,523)(9,523)Cross-currency swap contracts - liabilities(15,827)— (15,827)— 
(9,044)(9,044)
Total derivative contractsTotal derivative contracts(7,757)— (7,757)— 
Deferred compensation plan liabilityDeferred compensation plan liability(19,634)(19,634)Deferred compensation plan liability(18,030)— (18,030)— 
TotalTotal$(28,678)$$(28,678)$Total$(25,787)$— $(25,787)$— 
 
Assets (Liabilities) at Fair Value as of January 2, 2021Assets (Liabilities) at Fair Value as of January 1, 2022
TotalQuoted Prices In
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
TotalQuoted Prices In
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Forward foreign exchange contracts - assetsForward foreign exchange contracts - assets$2,460 $$2,460 $Forward foreign exchange contracts - assets$8,420 $— $8,420 $— 
Cross-currency swap contracts - assetsCross-currency swap contracts - assets918 918 Cross-currency swap contracts - assets2,953 — 2,953 — 
Forward foreign exchange contracts - liabilitiesForward foreign exchange contracts - liabilities(31,576)(31,576)Forward foreign exchange contracts - liabilities(694)— (694)— 
Cross-currency swap contracts - liabilitiesCross-currency swap contracts - liabilities(16,526)(16,526)Cross-currency swap contracts - liabilities(11,609)— (11,609)— 
(44,724)(44,724)
Total derivative contractsTotal derivative contracts(930)— (930)— 
Deferred compensation plan liabilityDeferred compensation plan liability(21,878)(21,878)Deferred compensation plan liability(20,916)— (20,916)— 
TotalTotal$(66,602)$$(66,602)$Total$(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 July 3, 2021April 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 $60,504$66,142 and $48,745$61,948 as of July 3, 2021April 2, 2022 and January 2, 2021,1, 2022, respectively. The fair value of debt, which is classified as a Level 2 liability, was $3,921,200$3,487,963 and $4,230,985$3,504,412 as of July 3, 2021April 2, 2022 and January 2, 2021,1, 2022, respectively. Debt had a carrying value of $3,712,011$3,501,675 and $4,035,724$3,368,634 as of July 3, 2021April 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 14.6% and 12.7% for the quarters ended July 3, 2021 and June 27, 2020, respectively. The Company’s effective income tax rate was 12.6% and 12.7% for the six months ended July 3, 2021 and June 27, 2020, respectively. The higher effective tax rate for the quarter ended July 3, 2021 was primarily due to the COVID-19 related change in jurisdictional mix of income experienced during the quarter ended June 27, 2020.
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 six months ended July 3, 2021, the Company’s liability for unrecognized tax benefits, including interest and penalties, decreased by $8,060, of which $6,679 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. hosierySheer Hosiery business and certain sales from its supply chain toand transitional services with the European Innerwear business.business which was sold on March 5, 2022. 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. 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. Innerwear also includes sales of personal protective equipment including products such as cloth face coverings and gowns in 2020.
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 categoriesinnerwear and activewear products outside the United States, primarily in Australasia, Europe, Asia, CanadaLatin 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 EndedSix Months Ended Quarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
Net sales:Net sales:Net sales:
InnerwearInnerwear$780,650 $1,094,814 $1,351,085 $1,517,216 Innerwear$578,947 $570,435 
ActivewearActivewear404,189 168,379 768,192 456,379 Activewear386,937 364,003 
InternationalInternational478,923 251,285 985,184 679,515 International510,129 506,261 
OtherOther87,549 28,605 154,879 93,043 Other100,143 67,330 
Total net salesTotal net sales$1,751,311 $1,543,083 $3,259,340 $2,746,153 Total net sales$1,576,156 $1,508,029 

Quarters EndedSix Months Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
Segment operating profit:
Innerwear$186,169 $304,524 $313,586 $386,075 
Activewear41,047 (5,751)101,641 2,357 
International61,900 5,162 149,080 55,907 
Other9,220 (11,929)11,106 (15,322)
Total segment operating profit298,336 292,006 575,413 429,017 
Items not included in segment operating profit:
General corporate expenses(54,685)(50,140)(114,508)(107,566)
Restructuring and other action-related charges(18,664)(32,279)(38,057)(56,603)
Amortization of intangibles(7,593)(7,454)(15,332)(14,762)
Total operating profit217,394 202,133 407,516 250,086 
Other expenses(1,855)(4,653)(4,416)(10,754)
Interest expense, net(42,440)(41,075)(86,900)(77,102)
Income from continuing operations before income tax expense$173,099 $156,405 $316,200 $162,230 
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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 
Activewear48,984 60,594 
International89,438 87,180 
Other(671)1,886 
Total segment operating profit239,897 277,077 
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 profit170,512 190,122 
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 that were reported in the following lines in the Condensed Consolidated Statements of Income:
Quarters EndedSix Months Ended Quarters Ended
July 3,
2021
June 27,
2020
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
Cost of salesCost of sales$1,900 $18,418 $4,707 $40,229 Cost of sales$499 $2,807 
Selling, general and administrative expensesSelling, general and administrative expenses16,764 13,861 33,350 16,374 Selling, general and administrative expenses4,303 16,586 
Total$18,664 $32,279 $38,057 $56,603 
Total included in operating profitTotal included in operating profit4,802 19,393 
Income tax expenseIncome tax expense816 11,302 
Total restructuring and other action-related chargesTotal restructuring and other action-related charges$3,986 $8,091 
The components of restructuring and 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 segmentation1,020 — 
Technology4,459 — 
Impairment of intangible assets— 7,302 
Other(138)385 
Total included in operating profit4,802 19,393 
Discrete tax benefits— 7,295 
Tax effect on actions816 4,007 
Total benefit included in income tax expense816 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 reflected in the “Selling, general and administrative expenses” line of the Condensed Consolidated Statements of 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 April 3, 2021 included impairment charges of $7,302, which are reflected in the “Selling, general and administrative expenses” line of the Condensed Consolidated Statements of Income,
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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 ongoing 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/PacificAsia 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’eggsWonderbra, 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. hosierySheer Hosiery business and certain sales from our supply chain to the European Innerwear business.business which was sold on March 5, 2022. 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. 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 ourOur 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 fourthfirst quarter of 2020,2021, we beganannounced that we reached the implementation ofdecision to exit our Full Potential plan andEuropean Innerwear business as part of our strategy to streamline our portfolio weunder our Full Potential plan and determined that our personal protective equipment (“PPE”) business was no longer a growth opportunity for our company and recorded a charge to write down our entire PPE inventory balance to its estimated net realizable 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 determined that our European Innerwear 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
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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 informationinformation.
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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 discontinued operations.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 second quarter and six months ended 2021 and 2020 as described in more detail under “Condensed Consolidated Results of Operations - SecondFirst Quarter Ended July 3, 2021April 2, 2022 Compared with SecondFirst Quarter Ended June 27, 2020” and “Condensed Consolidated Results of Operations - Six Months Ended JulyApril 3, 2021 Compared with Six Months Ended June 27, 2020”2021” below, primarily through reduced traffic and closures of company-operatedCompany-operated and third-party retail locations for portions of eachthe first quarter of the periods2021 in certain markets. Globalmarkets and global supply chain disruptions have alsoand 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 also incurred higher distribution costs including freight and 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, remainssupply 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 2021of 2022
We estimate our 20212022 guidance as follows:
Net sales of $6.75approximately $7.00 billion to $6.85 billion;$7.15 billion, net of approximately $125 million of unfavorable foreign exchange impact;
Operating profit of $795approximately $780 million to $825 million;$850 million, net of approximately $17 million of unfavorable foreign currency exchange impact;
Full Potential plan-related charges of approximately $85$60 million reflectedincluded in operating profit;
Interest expense and other expenses of approximately $182$148 million combined;
An annual effective tax rate from continuing operations of approximately 13%17%;
Diluted earnings per share from continuing operations fromof approximately $1.50 to $1.58;$1.67;
Cash flow from operating activities of approximately $550$400 million; and
Capital expenditures of approximately $100$150 million to $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 — SecondFirst Quarter Ended JulyApril 2, 2022 Compared with First Quarter Ended April 3, 2021 Compared with Second Quarter Ended June 27, 2020
 
Quarters EndedQuarters Ended
July 3,
2021
June 27,
2020
Higher
(Lower)
Percent
Change
April 2,
2022
April 3,
2021
Higher
(Lower)
Percent
Change
(dollars in thousands)(dollars in thousands)
Net salesNet sales$1,751,311 $1,543,083 $208,228 13.5 %Net sales$1,576,156 $1,508,029 $68,127 4.5 %
Cost of salesCost of sales1,069,682 1,029,221 40,461 3.9 Cost of sales991,978 905,348 86,630 9.6 
Gross profitGross profit681,629 513,862 167,767 32.6 Gross profit584,178 602,681 (18,503)(3.1)
Selling, general and administrative expensesSelling, general and administrative expenses464,235 311,729 152,506 48.9 Selling, general and administrative expenses413,666 412,559 1,107 0.3 
Operating profitOperating profit217,394 202,133 15,261 7.5 Operating profit170,512 190,122 (19,610)(10.3)
Other expensesOther expenses1,855 4,653 (2,798)(60.1)Other expenses987 2,561 (1,574)(61.5)
Interest expense, netInterest expense, net42,440 41,075 1,365 3.3 Interest expense, net31,963 44,460 (12,497)(28.1)
Income from continuing operations before income tax expenseIncome from continuing operations before income tax expense173,099 156,405 16,694 10.7 Income from continuing operations before income tax expense137,562 143,101 (5,539)(3.9)
Income tax expenseIncome tax expense25,236 19,837 5,399 27.2 Income tax expense23,385 14,697 8,688 59.1 
Income from continuing operationsIncome from continuing operations147,863 136,568 11,295 8.3 Income from continuing operations114,177 128,404 (14,227)(11.1)
Income (loss) from discontinued operations, net of taxIncome (loss) from discontinued operations, net of tax(19,187)24,613 (43,800)(178.0)Income (loss) from discontinued operations, net of tax4,525 (391,666)396,191 (101.2)
Net income$128,676 $161,181 $(32,505)(20.2)%
Net income (loss)Net income (loss)$118,702 $(263,262)$381,964 (145.1)%
Net Sales
Net sales increased 13%5% during the secondfirst quarter of 20212022 versus the secondfirst quarter of 20202021 primarily due to the following:
Retailers continuing to replenish inventory levels as well as pent-upStrong consumer demand as stores reopened after temporary closures due toin the COVID-19 pandemicU.S., Europe and the Americas.
Partially offset by:
Global supply chain disruptions resulting in 2020 and incremental sales partially as a result of higher U.S. government stimulus spending;product delays;
Lower second quarter 2020 sales due to COVID-19 pandemic-related shutdowns;Ongoing COVID-related pressures on consumer traffic in certain markets in Asia; and
The favorableunfavorable impact from foreign currency exchange rates in our International business of approximately $51$30 million.
Partially offset by:
The exit of the PPE business, which contributed net sales of $614 million in the second quarter of 2020.
Operating Profit
Operating profit as a percentage of net sales was 12.4%,10.8% during the first quarter of 2022, representing a decrease from 13.1%12.6% in the prior year. Operating margins benefited from fixed cost leverage frommargin decreased as a result of inflationary pressures, higher sales of core appareltransportation and the favorable impact from foreign exchange rates, which was more than offset by higher freightdistribution costs and sourcing premiums to service demand, higherincreased Full Potential-related investments in brand marketing and higher compensation costs. Selling, generaltechnology partially offset by cost reductions, pricing actions and administrative expenses in the second quarter of 2020 benefited from temporary cost savings initiatives implemented in response to the COVID-19 pandemic. The second quarter of 2020 included operating profit related to the PPE business that was exited.
favorable sales mix. Included in operating profit in the secondfirst 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 second quarter of 2020 were charges of $32 million related to supply chain actions, program exits, asset write-down charges recorded as a result of the effects of the COVID-19 pandemic and other actions.
Other Highlights
Other Expenses – Other expenses decreased $3$2 million in the secondfirst quarter of 20212022 compared to the secondfirst quarter of 2020 primarily2021 due to lower pension expense in 2021.2022.
Interest Expense – Interest expense was higherlower by $1$12 million in the secondfirst quarter of 2022 compared to the first quarter of 2021 primarily due to lower outstanding debt balances and a lower weighted average interest rate on our borrowings during the first quarter of 2022 compared to the secondfirst quarter of 2020 due to interest expense on cross-currency swap contracts entered into on April 1, 2021 that are being used to hedge foreign currency cash flows.2021. Our weighted average interest rate on our outstanding debt was 4.17%3.53% for the secondfirst quarter of 2021,2022 compared to 3.71%4.07% for the secondfirst quarter of 2020. The increase in interest expense due to a higher weighted average interest rate during the quarter was offset by lower outstanding debt balances during the second quarter of 2021 compared to the second quarter of 2020.2021.
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Income Tax Expense – Our effective income tax rate was 14.6%17.0% and 12.7%10.3% for the secondfirst quarters of 20212022 and 2020,2021, respectively. The higher effective tax rate for the secondfirst quarter of 20212022 was primarily due to a non-recurring discrete tax benefit for the COVID-19 related changerelease of reserves for unrecognized tax benefits of $7 million, partially offset by a discrete charge for changes in jurisdictional mixvaluation allowances of income experienced$4 million during the first quarter ended June 27, 2020.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 discussionadditional information.
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Table of 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.Contents
Operating Results by Business Segment — SecondFirst Quarter Ended JulyApril 2, 2022 Compared with First Quarter Ended April 3, 2021 Compared with Second Quarter Ended June 27, 2020
 
Net SalesNet Sales
Quarters EndedQuarters Ended
July 3,
2021
June 27,
2020
Higher
(Lower)
Percent
Change
April 2,
2022
April 3,
2021
Higher
(Lower)
Percent
Change
(dollars in thousands)(dollars in thousands)
InnerwearInnerwear$780,650 $1,094,814 $(314,164)(28.7)%Innerwear$578,947 $570,435 $8,512 1.5 %
ActivewearActivewear404,189 168,379 235,810 140.0 Activewear386,937 364,003 22,934 6.3 
InternationalInternational478,923 251,285 227,638 90.6 International510,129 506,261 3,868 0.8 
OtherOther87,549 28,605 58,944 206.1 Other100,143 67,330 32,813 48.7 
TotalTotal$1,751,311 $1,543,083 $208,228 13.5 %Total$1,576,156 $1,508,029 $68,127 4.5 %

Operating Profit and MarginOperating Profit and Margin
Quarters EndedQuarters Ended
July 3,
2021
June 27,
2020
Higher
(Lower)
Percent
Change
April 2,
2022
April 3,
2021
Higher
(Lower)
Percent
Change
(dollars in thousands)(dollars in thousands)
InnerwearInnerwear$186,169 23.8 %$304,524 27.8 %$(118,355)(38.9)%Innerwear$102,146 17.6 %$127,417 22.3 %$(25,271)(19.8)%
ActivewearActivewear41,047 10.2 (5,751)(3.4)46,798 NMActivewear48,984 12.7 60,594 16.6 (11,610)(19.2)
InternationalInternational61,900 12.9 5,162 2.1 56,738 1,099.1 International89,438 17.5 87,180 17.2 2,258 2.6 
OtherOther9,220 10.5 (11,929)(41.7)21,149 NMOther(671)(0.7)1,886 2.8 (2,557)(135.6)
CorporateCorporate(80,942)NM(89,873)NM8,931 (9.9)Corporate(69,385)NM(86,955)NM17,570 (20.2)
TotalTotal$217,394 12.4 %$202,133 13.1 %$15,261 7.5 %Total$170,512 10.8 %$190,122 12.6 %$(19,610)(10.3)%
Innerwear 
Innerwear net sales decreased 29%increased more than 1% compared to the secondfirst quarter of 20202021 primarily due to our exitretail space gains, a positive mix and the partial-quarter benefit of the PPE business in 2021 as a result of the implementation of our Full Potential plan. Net sales of PPE represented $614 million of the decrease in the second quarter of 2021 compared to the second quarter of 2020. This decrease wasprice increase partially offset by a 48%last year’s one-time sales benefits from retailer restocking and a 150%government stimulus. This increase in netincludes sales growth in our basicswomen’s, men’s and intimate apparel businesses, respectively, primarily as a result of lower sales in the second quarter of 2020 due to COVID-19 pandemic-related shutdowns, retailers continuing to replenish inventory levels and pent-up consumer demand as stores reopened after temporary closures due to the COVID-19 pandemic in 2020 and incremental sales partially as a result of higher U.S. government stimulus spending.socks product categories.
Innerwear operating margin was 23.8%17.6%, a decrease from 27.8% in the same period a year ago due to fixed cost deleverage from lower sales, higher freight costs and sourcing premiums to service demand, higher investments in brand marketing and higher compensation costs. The second quarter of 2020 included operating profit related to the PPE business that was exited.
Activewear
Activewear net sales increased 140% compared to the second quarter last year driven by lower sales in the second quarter of 2020 due to COVID-19 pandemic-related shutdowns and incremental sales partially as a result of higher U.S. government stimulus spending. We experienced growth in all product categories.
Activewear operating margin was 10.2%, an increase from (3.4)%22.3% in the same period a year ago. OperatingThe operating margin decline resulted from inflationary pressures, increased investments in brand marketing and increased distribution costs resulting from expedited freight to service new retail space gains partially offset by increased sales volume, price increases and business mix.
Activewear
Activewear net sales increased 6% compared to the first quarter of 2021 primarily driven by growth in the collegiate channel. Net sales in the Champion brand within the Activewear segment were consistent with the same period a year ago despite being negatively impacted by global supply chain disruptions resulting in product delays and unfulfilled customer orders.
Activewear operating margin was 12.7%, a decrease from 16.6% in the same period a year ago. The operating margin decline resulted from higher levels of inflation, merchandise mix and increased brand marketing investments partially offset by improvement resulted primarily fromin our fixed cost leverage from higher sales, which more than offset higher investments in brand marketing.
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sales.
International
Net sales in the International segment increased 91% as a result of lower sales1% driven by growth in Europe, the second quarter of 2020 due to the negative impact of the COVID-19 pandemicAmericas and the favorablecertain markets in 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 unfavorable foreign currency exchange rates. The unfavorable impact of foreign currency exchange rates ofdecreased net sales approximately $51$30 million in the secondfirst quarter of 2021.2022. International net sales on a constant currency basis, defined as net sales excluding the impact of foreign currency, increased 70%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 certain of our international markets continue to be negatively impacted by COVID-19 related shutdowns.
International operating margin was 12.9%17.5%, an increase from 2.1%17.2% in the same period a year ago. OperatingThe increase in operating margin improvementprimarily resulted primarily from fixed cost leverage from higher sales sales mixin Europe, the Americas and the favorable impact from foreign exchange rates.certain markets in Asia.
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Other
Other net sales increased as a result ofprimarily due to increased sales from our supply chain to the European Innerwear business partially offset by lower sales at our retail outlets during the secondfirst quarter of 2021 as a result of stores reopening after temporary store closures during2022 compared to the secondfirst quarter of 2020 due to the COVID-19 pandemic. Operating margin increased due to the increase in sales volume.
2021. We expect to continuehave continued certain sales from our supply chain to the European Innerwear business on a transitional basis after the sale of the business. ThoseThese sales and the related profit are included in Other in all periods presented and have not been eliminated as intercompany transactions in consolidation.
Corporate
Corporate expenses were lower in the second quarter of 2021 compared to the second quarter of 2020 due to lower restructuring See Note “Assets and other action-related charges. Included in restructuring and other action-related charges in the second quarter of 2021 were $19 million of charges related to the implementation of our Full Potential plan. Included in restructuring and other action-related charges in the second quarter of 2020 were $24 million of asset write-down charges recorded as a result of the effects of the COVID-19 pandemic. Supply chain actions include actions to reduce overhead costs. Program exit charges are costs associated with exiting the C9 Champion mass program and the DKNY intimate apparel license at the end of 2019. Other charges in the second quarter of 2020 include action-related costs such as workforce reductions.
Quarters Ended
July 3,
2021
June 27,
2020
(dollars in thousands)
Restructuring and other action-related charges included in operating profit:
Full Potential Plan:
Professional services$13,804 $— 
Other4,860 — 
2020 actions:
Supply chain actions— 2,637 
Program exit costs— 1,285 
Other— 4,070 
COVID-19 related charges:
Bad debt— 9,418 
Inventory— 14,869 
Total restructuring and other action-related charges included in operating profit$18,664 $32,279 
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Condensed Consolidated Results of Operations — Six Months Ended July 3, 2021 Compared with Six Months Ended June 27, 2020
Six Months Ended
July 3,
2021
June 27,
2020
Higher
(Lower)
Percent
Change
(dollars in thousands)
Net sales$3,259,340 $2,746,153 $513,187 18.7 %
Cost of sales1,975,030 1,814,123 160,907 8.9 
Gross profit1,284,310 932,030 352,280 37.8 
Selling, general and administrative expenses876,794 681,944 194,850 28.6 
Operating profit407,516 250,086 157,430 63.0 
Other expenses4,416 10,754 (6,338)(58.9)
Interest expense, net86,900 77,102 9,798 12.7 
Income from continuing operations before income tax expense316,200 162,230 153,970 94.9 
Income tax expense39,933 20,544 19,389 94.4 
Income from continuing operations276,267 141,686 134,581 95.0 
Income (loss) from discontinued operations, net of tax(410,853)11,621 (422,474)(3,635.4)
Net income (loss)$(134,586)$153,307 $(287,893)(187.8)%
Net Sales
Net sales increased 19% during the six months of 2021 versus the six months of 2020 primarily due to the following:
Retailers continuing to replenish inventory levels as well as pent-up consumer demand as stores reopened after temporary closures due to the COVID-19 pandemic in 2020 and incremental sales partially as a result of higher U.S. government stimulus spending;
Lower sales in the six months of 2020 due to COVID-19 pandemic-related shutdowns; and
The favorable impact from foreign exchange rates in our International business of approximately $94 million.
Partially offset by:
The exit of the PPE business, which contributed net sales of $614 million in the six months of 2020.
Operating Profit
Operating profit as a percentage of net sales was 12.5%, representing an increase from 9.1% in the prior year. Increased operating profit was the result of higher sales and the favorable impact from foreign exchange rates, which more than offset higher freight costs and sourcing premiums to service demand, higher investments in brand marketing, higher distribution and selling expenses related to higher sales volume and higher compensation costs. Selling, general and administrative expenses in the six months of 2020 benefited from temporary cost savings initiatives implemented in response to the COVID-19 pandemic. The six months of 2020 included operating profit related to the PPE business that was exited.
Included in operating profit in the six months of 2021 were charges of $38 million related to the implementation of our Full Potential plan. Included in operating profit in the six months of 2021 were charges of $57 million related to supply chain actions, program exits, asset write-down charges recorded as a result of the effects of the COVID-19 pandemic and other actions.
Other Highlights
Other Expenses – Other expenses decreased $6 million in the six months of 2021 compared to the same period in 2020 due to lower pension expense and lower funding feesLiabilities Held for sales of accounts receivable to financial institutions in 2021.
Interest Expense – Interest expense was higher by $10 million in the six months of 2021 compared to the same period in 2020, driven by a higher weighted average interest rate on our borrowings during the six months of 2021 and interest expense on cross-currency swap contracts entered into on April 1, 2021 that are being used to hedge foreign currency cash flows. Our weighted average interest rate on our outstanding debt was 4.12% for the six months of 2021, compared to 3.81% for the six months of 2020.
Income Tax Expense – Our effective income tax rate was 12.6% and 12.7% for the six months of 2021 and 2020, respectively. The effective tax rate for the six months of 2021 is consistent with the effective tax rate for the six months of 2020.
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DiscontinuedOperations – 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. See note “Discontinued Operations”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 non-cash charges 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. Operating Results by Business Segment — Six Months Ended July 3, 2021 Compared with Six Months Ended June 27, 2020
Net Sales
Six Months Ended
July 3,
2021
June 27,
2020
Higher
(Lower)
Percent
Change
(dollars in thousands)
Innerwear$1,351,085 $1,517,216 $(166,131)(10.9)%
Activewear768,192 456,379 311,813 68.3 
International985,184 679,515 305,669 45.0 
Other154,879 93,043 61,836 66.5 
Total$3,259,340 $2,746,153 $513,187 18.7 %
Operating Profit and Margin
Six Months Ended
July 3,
2021
June 27,
2020
Higher
(Lower)
Percent
Change
(dollars in thousands)
Innerwear$313,586 23.2 %$386,075 25.4 %$(72,489)(18.8)%
Activewear101,641 13.2 2,357 0.5 99,284 4,212.3 
International149,080 15.1 55,907 8.2 93,173 166.7 
Other11,106 7.2 (15,322)(16.5)26,428 NM
Corporate(167,897)NM(178,931)NM11,034 (6.2)
Total$407,516 12.5 %$250,086 9.1 %$157,430 63.0 %
Innerwear
Innerwear net salesmargin decreased 11% compared to the six months of 2020 primarily due to our exit of the PPE business in 2021 as a result of the implementation of our Full Potential plan. Net sales of PPE represented $614 million of the decrease in the six months of 2021 compared to the six months of 2020. This decrease was partially offset by a 44% and a 77% increasesales volume in net sales in our basics and intimate apparel businesses, respectively, primarily as a result of lower sales in the six months of 2020 due to COVID-19 pandemic-related shutdowns, retailers continuing to replenish inventory levels and pent-up consumer demand as stores reopened after temporary closures due to the COVID-19 pandemic in 2020 and incremental sales partially as a result of higher U.S. government stimulus spending.
Innerwear operating margin was 23.2%, a decrease from 25.4% in the same period a year ago due to fixed cost deleverage from lower sales, higher freight costs and sourcing premiums to service demand, higher investments in brand marketing and higher compensation costs. The six months of 2020 included operating profit related to the PPE business that was exited.
Activewear 
Activewear net sales increased 68% compared to the six months of 2020 driven by lower sales in the six months of 2020 due to COVID-19 pandemic-related shutdowns and incremental sales partially as a result of higher U.S. government stimulus spending. We experienced growth in all product categories.
Activewear operating margin was 13.2%, an increase from 0.5% in the same period a year ago. Operating margin improvement resulted primarily from fixed cost leverage from higher sales.
International
Net sales in the International segment increased 45% as a result of lower sales in the six months of 2020 due to the negative impact of the COVID-19 pandemic and the favorable impact of foreign currency exchange rates of approximately $94 million in the six months of 2021. International net sales on a constant currency basis, defined as net sales excluding the impact of foreign currency, increased 31%. The impact of foreign exchange rates is calculated by applying prior period exchange rates to the current year financial results. Net sales in certain of our international markets continue to be negatively impacted by COVID-19 related shutdowns.
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International operating margin was 15.1%, an increase from 8.2% in the same period a year ago. Operating margin improvement resulted primarily from fixed cost leverage from higher sales, sales mix and the favorable impact from foreign exchange rates.
Other
Other net sales increased as a result of increased sales at our retail outlets during the six months of 2021 as a result of stores reopening after temporary store closures during the six months of 2020 due to the COVID-19 pandemic. Operating margin increased due to the increase in sales volume.
We expect to continue certain sales from our supply chain to the European Innerwear business after the sale of theand U.S. Sheer Hosiery business. Those sales and the related profit are included in Other in all periods presented and have not been eliminated as intercompany transactions in consolidation.
Corporate
Corporate expenses in the six months 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 compensation expense compared to the six months of 2020. Corporate expenses were lower in the six monthsfirst quarter of 20212022 compared to the same periodfirst quarter of 20202021 primarily due to lower restructuring and other action-related charges and bad debt expense.charges. Included in restructuring and other action-related charges within operating profit in the six monthsfirst quarter of 2022 and 2021 were $38$5 million and $19 million, respectively, of charges related to the implementation of our Full Potential plan. Full Potential plan includingcharges 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. Included in restructuring and other action-related charges in the six months of 2020 were $24 million of asset write-down charges recorded as a result of the effects of the COVID-19 pandemic. Supply chain actions include actionsthat we intend to reduce overhead costs. Program exit charges are costs associated with exiting the C9 Champion mass program and the DKNY intimate apparel license at the end of 2019. Other charges in the six months of 2020 include action-related costs such as workforce reductions.exit.
Six Months Ended
July 3,
2021
June 27,
2020
(dollars in thousands)
Restructuring and other action-related charges included in operating profit:
Full Potential Plan:
Professional services$25,510 $— 
Impairment of intangible assets7,302 — 
Other5,245 — 
2020 actions:
Supply chain actions— 16,702 
Program exit costs— 9,498 
Other— 6,116 
COVID-19 related charges:
Bad debt— 9,418 
Inventory— 14,869 
Total restructuring and other action-related charges included in operating profit$38,057 $56,603 
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 segmentation1,020 — 
Technology4,459 — 
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 actions816 4,007 
Total benefit included in income tax expense816 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 ended July 3, 2021, after which our covenants were to revert to their original, pre-amendment levels. We voluntarily terminated the covenant relief amendment when we submitted our April 3, 2021 compliance certificate in order to reduce interest expense and increase flexibility for restricted payments, investments, indebtedness, and permitted acquisitions. After termination, the covenants reverted to their original, pre-amendment levels for the fiscal quarter ended July 3, 2021.
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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 do not continue to improve or otherwise worsen, including as a result of any new virus or vaccine distribution or efficacy, and our earnings and operating cash flows do not continue to recover as currently estimated by management, this 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.
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 July 3, 2021:April 2, 2022:
As of July 3, 2021 As of April 2, 2022
Borrowing
Capacity
Available LiquidityBorrowing
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 Facility44,994 44,994 
Accounts Receivable Securitization Facility(1)
88,833 88,833 
Accounts Receivable Securitization Facility(2)
Accounts Receivable Securitization Facility(2)
150,000 14,500 
Other international credit facilitiesOther international credit facilities90,315 33,610 Other international credit facilities75,803 56,056 
Total liquidity from credit facilitiesTotal liquidity from credit facilities$1,224,142 $1,163,261 Total liquidity from credit facilities$1,225,803 $1,046,380 
Cash and cash equivalentsCash and cash equivalents667,298 Cash and cash equivalents369,210 
Total liquidityTotal liquidity$1,830,559 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. 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.
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, weWe have launched a multi-year cost savings program intended to self-fund the investments necessary to achieve theour Full Potential plan’s objectives.
We expect capital investments of approximately $185$150 million per year through 2024 as part of our Full Potential plan.to $175 million in 2022.
In the future, we may pursue strategic business acquisitions.acquisitions or divestitures.
We made a contribution of $40 millionexpect to have no required cash contributions to our U.S. pension plan in the six months ended July 3, 2021. We2022 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. ConsistentWe have not changed our reinvestment strategy from the prior year with our investment strategy as it pertainsregards to our historicalunremitted foreign earnings as of January 2, 2021, weand intend to remit foreign earnings totaling $668$579 million.
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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 six months ended July 3, 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.
Sources and Uses of Our Cash
The information presented below regarding the sources and uses of our cash flows for the six monthsquarters ended JulyApril 2, 2022 and April 3, 2021 and June 27, 2020 was derived from our condensed consolidated interim financial statements.
Six Months EndedQuarters Ended
July 3,
2021
June 27,
2020
April 2,
2022
April 3,
2021
(dollars in thousands)(dollars in thousands)
Operating activitiesOperating activities$212,256 $(17,793)Operating activities$(231,189)$16,946 
Investing activitiesInvesting activities(15,939)(40,623)Investing activities(29,590)(13,604)
Financing activitiesFinancing activities(413,921)415,318 Financing activities67,567 (354,423)
Effect of changes in foreign exchange rates on cashEffect of changes in foreign exchange rates on cash(16,780)(2,669)Effect of changes in foreign exchange rates on cash1,793 (17,662)
Change in cash, cash equivalents and restricted cashChange in cash, cash equivalents and restricted cash(234,384)354,233 Change in cash, cash equivalents and restricted cash(191,419)(368,743)
Cash, cash equivalents and restricted cash at beginning of yearCash, cash equivalents and restricted cash at beginning of year910,603 329,923 Cash, cash equivalents and restricted cash at beginning of year560,629 910,603 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period676,219 684,156 Cash, cash equivalents and restricted cash at end of period369,210 541,860 
Less restricted cash at end of periodLess restricted cash at end of period— 1,042 Less restricted cash at end of period— 1,153 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$676,219 $683,114 Cash and cash equivalents at end of period$369,210 $540,707 
Balances included in the Condensed Consolidated Balance Sheets:
Cash and cash equivalents$667,298 $556,099 
Cash and cash equivalents included in current assets of discontinued operations8,921 127,015 
Cash and cash equivalents at end of period$676,219 $683,114 
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. As compared to the prior year, higher net cash providedused by operating activities was due to changes in working capital primarily accounts receivablepayable, accruals and payables,inventory due to supply chain disruptions and inflationary increases, partially offset by inventory. Higher profitability also drove improved year over year cash flow.improvement in 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 six months of 2021 and 2020 primarily include capital investments into our business. The decreaseincrease in cash used by investing activities in the six monthsfirst quarter of 20212022 compared to 20202021 was primarily the result of a decreasethe 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 decreasedincreased in the first quarter of 2022 primarily as a result of lowerincreased borrowings as compared toon our Accounts Receivable Securitization Facility and our Revolving Loan Facility coupled with the same periodrepayment of 2020. We increased our borrowings in the six months of 2020 primarily to strengthen our cash position and to provide us with additional financial flexibility to manage our business during the COVID-19 pandemic. Additionally, in the six months 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 six months 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. In July 2021, the Australian Revolving Loan Facility, originally entered into in July 2016, was amended to extend the maturity date to July 2022 and to reduce the bilateral cash advance limit from A$50 million to A$46 million with an offsetting increase in the bank overdraft limit from A$10 million to A$14 million.
We believe our financing structure provides a secure base to support our operations and key business strategies. As of July 3, 2021,April 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
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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), or leverage ratio, each of which is defined in the Senior Secured Credit Facility. The method of calculating all of the components used in the covenants is included in the 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, 20211, 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 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 Financial Officer concluded that our disclosure controls and procedures were effective as of July 3, 2021.April 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 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.
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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, 20221,577,386 $15.84 1,577,386 $575,013,357 
March 6, 2022 to April 2, 2022— $— — $575,013,357 
Total1,577,386 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.
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Item 6.Exhibits
Exhibit
Number
Description
3.1
3.2
3.3
3.4
3.5
10.1
31.1
31.2
32.1
32.2
101.INS XBRLInstance 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 XBRLTaxonomy Extension Schema Document
101.CAL XBRLTaxonomy Extension Calculation Linkbase Document
101.LAB XBRLTaxonomy Extension Label Linkbase Document
101.PRE XBRLTaxonomy Extension Presentation Linkbase Document
101.DEF XBRLTaxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)
*    Management contract or compensatory plans or arrangements.
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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/ Michael P. Dastugue
Michael P. Dastugue
Chief Financial Officer
(Duly authorized officer and principal financial officer)
Date: August 6, 2021May 5, 2022
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