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 ~~September~~March 28, ~~2019~~2020



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

For the transition period from to

Commission file number: 001-32891

Hanesbrands Inc.

(Exact name of registrant as specified in its charter)



Maryland		20-3552316
(State of incorporation)		(I.R.S. employer identification no.)

1000 East Hanes Mill Road
Winston-Salem,	North Carolina	27105
(Address of principal executive office)		(Zip code)

(336) 519-8080

(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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



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

As of ~~October 25, 2019,~~April 24, 2020, there were ~~361,697,127~~348,035,310 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS



		Page
Forward-Looking Statements		1

PART I
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Statements of Income for the quarters ended March 28, 2020 and ~~nine months ended September 28,~~March 30, 2019 ~~and September 29, 2018~~	2
	Condensed Consolidated Statements of Comprehensive Income for the quarters ended March 28, 2020 and ~~nine months ended September 28,~~March 30, 2019 ~~and September 29, 2018~~	3
	Condensed Consolidated Balance Sheets at ~~September~~March 28, 2020, December 28, 2019 ~~December 29, 2018~~ and ~~September 29, 2018~~March 30, 2019	4
	Condensed Consolidated Statements of Stockholders’ Equity for the quarters ended March 28, 2020 and ~~nine months ended September 28,~~March 30, 2019 ~~and September 29, 2018~~	5
	Condensed Consolidated Statements of Cash Flows for the ~~nine months~~quarters ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018~~March 30, 2019	76
	Notes to Condensed Consolidated Financial Statements	87
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2225
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3134
Item 4.	Controls and Procedures	3134

PART II
Item 1.	Legal Proceedings	3235
Item 1A.	Risk Factors	3236
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3238
Item 3.	Defaults Upon Senior Securities	3238
Item 4.	Mine Safety Disclosures	3238
Item 5.	Other Information	3238
Item 6.	Exhibits	3339
Signatures		3440

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 ~~under~~with respect to trends associated with our business, our future financial performance and the ~~heading “Outlook” and other information~~potential effects of the global COVID-19 coronavirus outbreak 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 December ~~29, 2018~~28, 2019, 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.

PART I



Item 1.	Financial Statements

HANESBRANDS INC.

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)


	Quarter Ended				Nine Months Ended				Quarters Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018		March 28, 2020			March 30, 2019
Net sales	$	1,866,967	$	1,848,707	$	5,215,918	$	5,035,654	$	1,316,462		$	1,588,024
Cost of sales	1,154,629		1,136,040		3,208,025		3,084,110		842,730			967,993
Gross profit	712,338		712,667		2,007,893		1,951,544		473,732			620,031
Selling, general and administrative expenses	442,582		455,778		1,356,082		1,328,534		439,602			470,387
Operating profit	269,756		256,889		651,811		623,010		34,130			149,644
Other expenses	8,066		7,285		23,766		19,616		6,490			7,451
Interest expense, net	43,091		52,795		137,672		146,988		36,849			48,059
Income before income tax expense	218,599		196,809		490,373		456,406
Income tax expense	30,823		25,388		69,143		64,943
Net income	$	187,776	$	171,421	$	421,230	$	391,463
Income (loss) before income tax expense									(9,209		)	94,134
Income tax expense (benefit)									(1,335		)	13,046
Net income (loss)									$	(7,874	)	$	81,088

Earnings per share:
Earnings (loss) per share:
Basic	$	0.51	$	0.47	$	1.16	$	1.08	$	(0.02	)	$	0.22
Diluted	$	0.51	$	0.47	$	1.15	$	1.07	$	(0.02	)	$	0.22

HANESBRANDS INC.

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

Quarter Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Net income $ 187,776
$ 171,421
$ 421,230
$ 391,463
Other comprehensive income (loss), net of tax:
Translation adjustments (44,997 ) (19,887 ) (33,738 ) (82,664 )
Net unrealized gain (loss) on qualifying cash flow hedges 2,059
2,402
(7,018 ) 26,060
Net unrecognized income from pension and postretirement plans 3,605
3,541
10,555
9,312
Total other comprehensive loss, net of tax of ($2,278), ($1,236), ($1,321) and ($12,315), respectively (39,333 ) (13,944 ) (30,201 ) (47,292 )
Comprehensive income $ 148,443
$ 157,477
$ 391,029
$ 344,171



	Quarters Ended
	March 28, 2020			March 30, 2019
Net income (loss)	$	(7,874	)	$	81,088
Other comprehensive income (loss):
Translation adjustments	(117,154		)	7,386
Unrealized gain (loss) on qualifying cash flow hedges, net of tax of $(7,280) and $1,658, respectively	7,783			(3,919		)
Unrecognized income from pension and postretirement plans, net of tax of $(1,272) and $(1,205), respectively	3,594			3,397
Total other comprehensive income (loss)	(105,777		)	6,864
Comprehensive income (loss)	$	(113,651	)	$	87,952

HANESBRANDS INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)


	September 28, 2019			December 29, 2018			September 29, 2018			March 28, 2020			December 28, 2019			March 30, 2019
Assets
Cash and cash equivalents	$	317,024		$	433,022		$	398,499		$	1,083,780		$	328,876		$	287,080
Trade accounts receivable, net	1,033,938			870,878			1,044,516			725,092			815,210			932,875
Inventories	2,108,281			2,054,458			2,139,281			1,963,757			1,905,845			2,232,719
Other current assets	166,727			159,231			154,909			178,244			174,634			189,012
Total current assets	3,625,970			3,517,589			3,737,205			3,950,873			3,224,565			3,641,686
Property, net	581,971			607,688			607,649			571,005			587,896			601,689
Right-of-use assets	475,037			—			—			473,936			487,787			484,453
Trademarks and other identifiable intangibles, net	1,493,969			1,555,381			1,586,148			1,435,356			1,520,800			1,547,718
Goodwill	1,223,216			1,241,727			1,252,524			1,205,195			1,235,711			1,240,652
Deferred tax assets	257,314			249,693			191,649			188,004			203,331			213,728
Other noncurrent assets	115,821			83,880			80,331			118,890			93,896			94,233
Total assets	$	7,773,298		$	7,255,958		$	7,455,506		$	7,943,259		$	7,353,986		$	7,824,159

Liabilities and Stockholders’ Equity
Accounts payable	$	997,069		$	1,029,933		$	975,138		$	925,417		$	959,006		$	1,007,420
Accrued liabilities	589,992			553,901			531,740			447,401			531,184			568,450
Lease liabilities	145,055			—			—			150,568			166,091			140,435
Notes payable	4,275			5,824			14,051			2,170			4,244			5,753
Accounts Receivable Securitization Facility	208,604			161,608			221,979			152,153			—			200,000
Current portion of long-term debt	151,909			278,976			284,220			111,359			110,914			276,815
Total current liabilities	2,096,904			2,030,242			2,027,128			1,789,068			1,771,439			2,198,873
Long-term debt	3,467,591			3,534,183			3,863,580			4,236,955			3,256,870			3,615,493
Lease liabilities - noncurrent	364,083			—			—			358,848			358,281			373,365
Pension and postretirement benefits	348,674			378,972			386,647			375,511			403,458			352,069
Other noncurrent liabilities	265,804			342,278			307,563			309,306			327,343			351,368
Total liabilities	6,543,056			6,285,675			6,584,918			7,069,688			6,117,391			6,891,168

Stockholders’ equity:
Preferred stock (50,000,000 authorized shares; $.01 par value)
Issued and outstanding — None	—			—			—			—			—			—
Common stock (2,000,000,000 authorized shares; $.01 par value)
Issued and outstanding — 361,612,383, 361,330,128 and 360,660,993, respectively	3,616			3,613			3,607
Issued and outstanding — 348,035,310, 362,449,037 and 361,471,010, respectively										3,480			3,624			3,615
Additional paid-in capital	310,327			284,877			275,671			297,456			304,395			306,084
Retained earnings	1,528,258			1,184,735			1,077,808			1,296,060			1,546,224			1,191,111
Accumulated other comprehensive loss	(611,959		)	(502,942		)	(486,498		)	(723,425		)	(617,648		)	(567,819		)
Total stockholders’ equity	1,230,242			970,283			870,588			873,571			1,236,595			932,991
Total liabilities and stockholders’ equity	$	7,773,298		$	7,255,958		$	7,455,506		$	7,943,259		$	7,353,986		$	7,824,159

HANESBRANDS INC.

Condensed Consolidated Statements of Stockholders’ Equity

(dollars and shares in thousands, except per share data)

(unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total			Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total
	Shares	Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total			Shares		Amount			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balances at June 29, 2019	361,531	$	3,615	$	308,555	$	1,395,306		$	(572,626	)	$	1,134,850
Net income	—	—		—		187,776			—			187,776
Balances at December 28, 2019															362,449		$	3,624		$	304,395		$	1,546,224		$	(617,648	)	$	1,236,595
Net loss															—		—			—			(7,874		)	—			(7,874		)
Dividends ($0.15 per common share)	—	—		—		(54,824		)	—			(54,824		)	—		—			—			(54,421		)	—			(54,421		)
Other comprehensive loss	—	—		—		—			(39,333		)	(39,333		)	—		—			—			—			(105,777		)	(105,777		)
Stock-based compensation	—	—		1,467		—			—			1,467			—		—			4,641			—			—			4,641
Net exercise of stock options, vesting of restricted stock units and other	81	1		305		—			—			306			50		1			675			—			—			676
Balances at September 28, 2019	361,612	$	3,616	$	310,327	$	1,528,258		$	(611,959	)	$	1,230,242
Share repurchases															(14,464	)	(145		)	(12,255		)	(187,869		)	—			(200,269		)
Balances at March 28, 2020															348,035		$	3,480		$	297,456		$	1,296,060		$	(723,425	)	$	873,571

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total
Shares Amount
Balances at December 29, 2018 361,330
$ 3,613
$ 284,877
$ 1,184,735
$ (502,942 ) $ 970,283
Net income —
—
—
421,230
—
421,230
Dividends ($0.45 per common share) —
—
—
(164,500 ) —
(164,500 )
Other comprehensive loss —
—
—
—
(30,201 ) (30,201 )
Stock-based compensation —
—
8,506
—
—
8,506
Net exercise of stock options, vesting of restricted stock units and other 282
3
2,570
—
—
2,573
Modification of deferred compensation plans —
—
14,374
—
—
14,374
Cumulative effect of change in adoption of leases standard —
—
—
7,977
—
7,977
Stranded tax related to U.S. pension plan —
—
—
78,816
(78,816 ) —
Balances at September 28, 2019 361,612
$ 3,616
$ 310,327
$ 1,528,258
$ (611,959 ) $ 1,230,242

~~HANESBRANDS INC.~~

~~Condensed Consolidated Statements of Stockholders’ Equity — (Continued)~~

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total
Shares Amount
Balances at June 30, 2018 360,504
$ 3,605
$ 275,120
$ 961,020
$ (472,554 ) $ 767,191
Net income —
—
—
171,421
—
171,421
Dividends ($0.15 per common share) —
—
—
(54,633 ) —
(54,633 )
Other comprehensive loss —
—
—
—
(13,944 ) (13,944 )
Stock-based compensation —
—
1,498
—
—
1,498
Net exercise of stock options, vesting of restricted stock units and other 157
2
(947 ) —
—
(945 )
Balances at September 29, 2018 360,661
$ 3,607
$ 275,671
$ 1,077,808
$ (486,498 ) $ 870,588

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total
Shares Amount
Balances at December 30, 2017 360,126
$ 3,601
$ 271,462
$ 850,345
$ (439,206 ) $ 686,202
Net income —
—
—
391,463
—
391,463
Dividends ($0.45 per common share) —
—
—
(164,000 ) —
(164,000 )
Other comprehensive loss —
—
—
—
(47,292 ) (47,292 )
Stock-based compensation —
—
4,367
—
—
4,367
Net exercise of stock options, vesting of restricted stock units and other 535
6
(158 ) —
—
(152 )
Balances at September 29, 2018 360,661
$ 3,607
$ 275,671
$ 1,077,808
$ (486,498 ) $ 870,588



	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
	Shares	Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balances at December 29, 2018	361,330	$	3,613	$	284,877	$	1,079,503		$	(495,867	)	$	872,126
Net income	—	—		—		81,088			—			81,088
Dividends ($0.15 per common share)	—	—		—		(54,852		)	—			(54,852		)
Other comprehensive income	—	—		—		—			6,864			6,864
Stock-based compensation	—	—		5,057		—			—			5,057
Net exercise of stock options, vesting of restricted stock units and other	141	2		1,776		—			—			1,778
Modification of deferred compensation plans	—	—		14,374		—			—			14,374
Cumulative effect of change in adoption of leases standard	—	—		—		6,556			—			6,556
Stranded tax related to U.S. pension plan	—	—		—		78,816			(78,816		)	—
Balances at March 30, 2019	361,471	$	3,615	$	306,084	$	1,191,111		$	(567,819	)	$	932,991

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

	Nine Months Ended						Quarters Ended
	September 28, 2019			September 29, 2018			March 28, 2020			March 30, 2019
Operating activities:
Net income	$	421,230		$	391,463
Adjustments to reconcile net income to net cash from operating activities:
Net income (loss)							$	(7,874	)	$	81,088
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation	71,612			70,910			22,781			22,854
Amortization of acquisition intangibles	18,709			20,544			6,113			6,290
Other amortization	7,521			7,860			2,477			3,090
Amortization of debt issuance costs	7,021			6,951			2,123			2,440
Stock compensation expense	8,794			4,621			4,723			5,178
Deferred taxes	(3,661		)	(3,451		)	(461		)	(3,854		)
Other	8,737			(719		)	(9,520		)	4,247
Changes in assets and liabilities, net of acquisition of business:
Changes in assets and liabilities:
Accounts receivable	(170,348		)	(156,509		)	73,694			(62,278		)
Inventories	(72,096		)	(278,962		)	(86,785		)	(178,405		)
Other assets	(40,732		)	42,122			26,790			(32,372		)
Accounts payable	(11,969		)	116,189			(13,605		)	(18,213		)
Accrued pension and postretirement benefits	(14,361		)	(4,840		)	(21,481		)	(21,978		)
Accrued liabilities and other	14,243			(74,890		)	(82,191		)	(2,378		)
Net cash from operating activities	244,700			141,289			(83,216		)	(194,291		)
Investing activities:
Capital expenditures	(79,950		)	(63,472		)	(25,759		)	(25,269		)
Proceeds from sales of assets	3,530			1,779			66			136
Acquisition of business, net of cash acquired	(21,360		)	(334,916		)
Other							1,216			—
Net cash from investing activities	(97,780		)	(396,609		)	(24,477		)	(25,133		)
Financing activities:
Borrowings on notes payable	250,712			217,709			62,312			82,774
Repayments on notes payable	(252,084		)	(217,987		)	(64,352		)	(82,759		)
Borrowings on Accounts Receivable Securitization Facility	207,105			191,896			227,061			106,942
Repayments on Accounts Receivable Securitization Facility	(160,110		)	(95,126		)	(74,909		)	(68,550		)
Borrowings on Revolving Loan Facilities	2,584,277			2,841,860			1,638,000			772,500
Repayments on Revolving Loan Facilities	(2,585,592		)	(2,488,500		)	(688,000		)	(680,500		)
Repayments on Term Loan Facilities	(152,248		)	(22,500		)	—			(10,625		)
Borrowings on International Debt	27,680			—			31,222			7,141
Repayments on International Debt	(41,424		)	(1,105		)
Share repurchases							(200,269		)	—
Cash dividends paid	(162,689		)	(162,200		)	(53,683		)	(54,221		)
Payments to amend and refinance credit facilities	(1,098		)	(633		)	(232		)	(662		)
Payment of contingent consideration	—			(3,540		)
Taxes paid related to net shares settlement of equity awards	(1,523		)	(5,778		)	(62		)	(906		)
Other	1,378			486			426			573
Net cash from financing activities	(285,616		)	254,582			877,514			71,707
Effect of changes in foreign exchange rates on cash	1,008			879			(15,061		)	2,104
Change in cash, cash equivalents and restricted cash	(137,688		)	141			754,760			(145,613		)
Cash, cash equivalents and restricted cash at beginning of year	455,732			421,566			329,923			455,732
Cash, cash equivalents and restricted cash at end of period	318,044			421,707			1,084,683			310,119
Less restricted cash at end of period	1,020			23,208			903			23,039
Cash and cash equivalents per balance sheet at end of period	$	317,024		$	398,499		$	1,083,780		$	287,080

Capital expenditures included in accounts payable at ~~September~~March 28, 2020 and December 28, 2019, were $12,807 and ~~December 29, 2018,~~$19,327, respectively. At March 28, 2020 and March 30, 2019, right-of-use assets obtained in exchange for lease obligations were ~~$7,913~~$17,551 and ~~$20,275,~~$6,192, respectively.

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements

(~~dollars and shares~~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 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. Two subsidiaries of the Company close one day after the Company’s consolidated quarter end. The difference in reporting of financial information for these subsidiaries did not have a material impact on the Company’s financial condition, results of operations or cash flows.

These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s ~~2018~~2019 Annual Report on Form 10-K. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.


~~(2)~~	~~Recent Accounting Pronouncements~~

~~Lease Accounting~~Liquidity and Impact of COVID-19

~~In February 2016,~~The Company relies on its cash flows generated from operations and the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842),” which requires lessees~~borrowing capacity under its credit facilities to ~~recognize a right-of-use asset~~meet the cash requirements of its business. The primary cash requirements of its business are payments to employees and ~~a lease liability for all leases that are not short-term~~vendors in ~~nature.~~the normal course of business, capital expenditures, maturities of debt and related interest payments, business acquisitions, contributions to its pension plans, repurchases of its stock, regular quarterly dividend payments and income tax payments. The ~~standard also~~rapid expansion of the COVID-19 global pandemic has resulted in ~~enhanced quantitative~~a sharp decline in net sales and qualitative disclosures surrounding leases. The FASB subsequently issued updates to provide clarification on specific topics, including adoption guidance, practical expedients and interim transition disclosure requirements. The new rules were effective for the Companyearnings in the first quarter of ~~2019. The Company adopted the new rules utilizing the modified retrospective method and recognized~~2020, which has a $7,977 cumulative effect adjustment in retained earnings at the beginning of the period of adoption. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which among other things, allowed the Company to carry forward the historical lease classification. The Company did not elect the hindsight practical expedient to determine the lease term for existing leases. Adoption of the new standard resulted in the recording of lease assets and lease liabilities of $507,669 and $535,054, respectively as of December 30, 2018.

~~Derivatives and Hedging~~

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The new rules expand the hedging strategies that qualify for hedge accounting, including contractually-specified price components of a commodity purchase or sale, hedges of the benchmark rate component of the contractual coupon cash flows of fixed-rate assets and liabilities, hedges of the portion of a closed portfolio of prepayable assets and partial-term hedges of fixed-rate assets and liabilities. The new rules also allow additional time to complete hedge effectiveness testing and allow qualitative assessments subsequent to initial quantitative tests if there is a supportable expectation that the hedge will remain highly effective. The new standard was effective for the Company in the first quarter of 2019. The adoption of the new accounting rules did not have a materialcorresponding impact on the Company’s liquidity. The Company is focused on preserving its liquidity and managing its cash flow during these unprecedented conditions with preemptive actions to enhance its ability to meet its short-term liquidity needs. Such actions include, but are not limited to, operating manufacturing and distribution facilities on a demand-adjusted basis; reducing discretionary spending such as media and marketing expenses; focused working capital management; reducing capital expenditures; suspending its share buyback program until further notice; reducing payroll costs, through employee furloughs and pay cuts; drawing down on its Revolving Loan Facility and amending certain existing debt facilities.

In March 2020, in response to the uncertainty of the circumstances surrounding the COVID-19 global pandemic, the Company drew down $630,000 under the Revolving Loan Facility as a precautionary measure, to provide the Company with additional financial ~~condition, results~~flexibility to manage its business with a safety-first emphasis during the unknown duration and impact of ~~operations~~the COVID-19 global pandemic. The Company subsequently repaid $490,000 of its borrowings under the Revolving Loan Facility in April 2020.

As of March 28, 2020, the Company was in compliance with all financial covenants under its credit facilities and other outstanding indebtedness. In April 2020, given the rapidly changing environment and level of uncertainty being created by the COVID-19 global pandemic and the associated impact on future earnings, the Company amended its Senior Secured Credit Facility (as discussed in Note, “Debt and Notes Payable”) prior to any potential covenant violation in order to modify the financial covenants and to provide operating flexibility during the COVID-19 crisis. After obtaining the debt amendment, which provides relief from certain covenants for a 15-month period and adds additional financial and non-financial covenants, the Company expects to maintain compliance with its covenants for at least one year from the issuance of these financial statements based on its current expectations and forecasts. If economic conditions caused by the COVID-19 global pandemic worsen and the Company’s earnings and operating cash flows do not start to recover as currently estimated by management, this could impact the Company’s ability to maintain compliance with its amended 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 ~~cash flows.~~equity capital, or divest assets, to refinance or repay the lenders.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(~~dollars and shares~~amounts in thousands, except per share data)

(unaudited)

~~Comprehensive Income~~Revisions of Previously Issued Consolidated Financial Statements

As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 28, 2019, during the fourth quarter of 2019 the Company identified tax errors, which originated prior to 2017, in its previously issued 2018 and 2017 annual consolidated financial statements and quarterly condensed consolidated interim financial statements for each of the quarterly periods of 2018 and the first three quarterly periods of 2019. Although the Company assessed the materiality of the errors and concluded that the errors were not material to the previously issued annual or interim financial statements, the Company did revise its previously issued 2018 and 2017 annual financial statements to correct for such tax errors in connection with the filing of its 2019 Annual Report on Form 10-K, and disclosed that it would be revising its 2019 condensed consolidated interim financial statements in connection with the filing of its Quarterly Reports on Form 10-Q during 2020. In ~~February 2018,~~connection with such revision, the ~~FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification~~Company also corrected for certain other immaterial errors. In connection with the filing of ~~Certain Tax Effects from Accumulated Other Comprehensive Income.” The new rules allow a reclassification from accumulated other comprehensive income~~this Quarterly Report on Form 10-Q, the Company has revised the accompanying condensed consolidated interim financial statements as of and for the quarter ended March 30, 2019 to correct for the impact of such errors, including the impact to retained earnings ~~for stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”). The new rules were effective~~as of March 30, 2019 to correct for the ~~Company~~errors which originated in ~~the first quarter of 2019. The Company reclassified $78,816 from accumulated other comprehensive loss~~periods prior to ~~retained earnings for stranded tax effects~~2019, which primarily related to the ~~Company’s U.S. pension plan.~~

tax errors. The ~~Company uses a portfolio approach~~accompanying footnotes have also been corrected to ~~release~~reflect the income tax effects in accumulated other comprehensive loss related to pension and postretirement benefits. Under this approach, the income tax effects are released from accumulated other comprehensive loss based on the pre-tax adjustments to pension liabilities or assets recognized within other comprehensive income. Any tax effects remaining in accumulated other comprehensive loss are released only when the entire portfolioimpact of the ~~pension and postretirement benefits is liquidated, sold or extinguished.~~revisions of the previously filed condensed consolidated interim financial statements.

~~Codification Improvements~~

~~In July 2018,~~Additionally, in connection with the ~~FASB issued ASU 2018-09, “Codification Improvements.” The new rules clarify guidance around several subtopics by adopting enhanced verbiage~~filing of this Quarterly Report on Form 10-Q, the Company has disclosed the impact of the revisions to the following subtopics: reporting comprehensive income, debt modifications and extinguishments, distinguishing liabilities from equity, stock compensation, business combinations, derivatives and hedging, fair value measurement and defined contribution pension plans. The standard was effective for the Company in the first quarter of 2019. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations or cash flows.

~~Statements of Stockholders’ Equity~~

In August 2018, the SEC amended Rule 3-04 of Regulation S-X to extend the annual disclosure requirement for changes in stockholders’ equity and the amount of dividends per share for each class of shares to interim periods. The disclosures can be included either in a note to the financial statements or in a separate financial statement. The disclosures require both year to date information and subtotals for each interim period. The amendment was effective for the Company in the first quarter of 2019. The Company has elected to include condensed consolidated ~~statements of stockholders’ equity, which include disclosure of the dividends per share in each period, as a separate statement in its~~ interim financial statements ~~within all applicable SEC filings.~~as of and for the periods ended June 29, 2019 and September 28, 2019 to correct for the impact of such errors. The Company will effect the revision of its unaudited condensed consolidated interim financial statements as of and for the periods ended June 29, 2019 and September 28, 2019 with the future filings of its Quarterly Reports on Form 10-Q for the periods ended June 27, 2020 and September 26, 2020. See Note, "Revisions of Previously Issued Condensed Consolidated Interim Financial Statements," for reconciliations between as reported and as revised amounts as of and for the periods ended March 30, 2019, June 29, 2019 and September 28, 2019.


(2)	Recent Accounting Pronouncements

Financial Instruments - Credit Losses

In June 2016, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. The new accounting rules eliminate the probable initial recognition threshold and, instead, reflect an entity’s current estimate of all expected credit losses. The new accounting rules ~~will be~~were effective for the Company in the first quarter of ~~2020. The Company expects the new rules to apply~~2020 and applies to its trade receivables.

Under the new accounting rules, trade receivables ~~but does not expect~~are now evaluated on a collective (pool) basis and aggregated on the basis of similar risk characteristics. These classifications will be reassessed at each measurement date. A combination of factors, such as industry trends, customers’ financial strength, credit standing and payment and default history are considered in determining the appropriate estimate of expected credit losses. The adoption of the new accounting rules todid not have a material impact on the Company’s financial condition, results of operations or cash flows.

Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The new accounting rules simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment ~~test. Step 2 measures~~test which previously measured a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. The new accounting rules ~~will be~~were effective for the Company in the first quarter of 2020. ~~The~~As a result of adopting the new rules, the Company ~~does~~will compare the estimated fair value of its reporting units to their respective carrying values when evaluating the recoverability of goodwill. If the carrying value of a reporting unit exceeds its fair value, an impairment charge will be recognized for the amount by which its carrying value exceeds the reporting unit’s fair value; however, the loss recognized will not ~~expect~~exceed the goodwill allocated to the reporting unit. The adoption of the new accounting rules todid not have ~~a material~~an impact on the Company’s financial condition, results of operations or cash flows.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

Fair Value

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820),” which modifies the disclosure requirements on fair value measurements. The new accounting rules ~~will be~~were effective for the Company in the first quarter of 2020. The ~~Company does not expect the~~ adoption of the new accounting rules todid not have a material impact on the Company’s financial condition, results of operations or cash flows; however, its disclosures ~~will be impacted.~~

~~Table of Contents~~

~~HANESBRANDS INC.~~

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

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

were updated upon adoption.

Retirement Benefits

In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20).” The new ~~rule expands~~accounting rules expand disclosure requirements for employer sponsored defined benefit pension and other retirement plans. The new accounting rules ~~will be~~were effective for the Company in the first quarter of 2020. The ~~Company does not expect the~~ new accounting rules todid not have a material impact on the Company’s financial condition, results of operations or cash flows; however, expanded disclosures will be ~~required.~~required on the Company’s Annual Report on Form 10-K for the year ended January 2, 2021.

Internal-Use Software

In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 340-40),” which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new accounting rules ~~will be~~were effective for the Company in the first quarter of 2020. The ~~Company does not expect the~~ adoption of the new accounting rules todid not have a material impact on the Company’s financial condition, results of operations or cash flows.

Codification Improvements to Financial Instruments

In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments.” The new accounting rules clarify guidance around several subtopics by adopting enhanced verbiage to the following subtopics: fair value option disclosures, fair value measurement, investments - debt and equities securities, debt modifications and extinguishments, credit losses, and sales of financial assets. The standard was effective for the Company in the first quarter of 2020. The adoption of the new accounting rules did not have a material impact on the Company’s results of operations or cash flows.

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 will be effective for the Company in the first quarter of 2021. The Company is currently in the process of evaluating the impact of adoption of the new accounting rules on the Company’s financial condition, results of operations, cash flows and disclosures.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The new accounting rules provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this standard can be applied anytime between the first quarter of 2020 and 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.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)


(3)	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:


	Quarter Ended				Nine Months Ended				Quarters Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018		March 28, 2020		March 30, 2019
Third-party brick-and-mortar wholesale	$	1,436,935	$	1,458,126	$	4,029,352	$	3,968,426	$	978,127	$	1,231,423
Consumer-directed	430,032		390,581		1,186,566		1,067,228		338,335		356,601
Total net sales	$	1,866,967	$	1,848,707	$	5,215,918	$	5,035,654	$	1,316,462	$	1,588,024

Revenue Sources

Third-Party Brick-and-Mortar Wholesale Revenue

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

Consumer-Directed Revenue

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


(4)	Acquisitions

Bras N Things

On February 12, 2018, the Company acquired 100% of the outstanding equity of BNT Holdco Pty Limited (“Bras N Things”) for a total purchase price of A$498,236 (U.S.$391,572). During 2018, due to the final working capital adjustment, the purchase consideration was reduced by A$3,012 (U.S.$2,367), ultimately resulting in a revised purchase price of A$495,224

~~Table of Contents~~

~~HANESBRANDS INC.~~

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

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

(U.S.$389,205), which included a cash payment of A$428,956 (U.S.$337,123), an indemnification escrow of A$31,988 (U.S.$25,140) and debt assumed of A$34,280 (U.S.$26,942). U.S. dollar equivalents are based on acquisition date exchange rates.

The Company funded the acquisition with a combination of short-term borrowings under its existing revolving loan facility (the “Revolving Loan Facility”) and cash on hand. During the third quarter of 2019, A$31,425 (U.S.$21,360) of the indemnification escrow, including interest earned, was paid to the sellers. The remaining indemnification escrow, held in one of the Company’s bank accounts, is recognized and classified as restricted cash, with the balance as of ~~September~~March 28, ~~2019~~2020 included in the “Other current assets” line of the Condensed Consolidated Balance Sheet.

~~The acquired assets and liabilities as of the date of acquisition include the following:~~

Cash and cash equivalents $ 2,765
Accounts receivable, net 197
Inventories 9,610
Other current assets 1,637
Property, net 11,764
Trademarks and other identifiable intangibles 278,214
Deferred tax assets and other noncurrent assets 2,318
Total assets acquired 306,505
Accounts payable 4,929
Accrued liabilities and other 16,339
Deferred tax liabilities and other noncurrent liabilities 7,864
Total liabilities assumed 29,132
Net assets acquired 277,373
Goodwill 111,832
Total purchase price $ 389,205

~~Total purchase price of the Bras N Things acquisition consisted of the following components:~~

Cash consideration paid $ 337,123
Indemnification escrow asset 25,140
Debt assumed 26,942
Total purchase price $ 389,205

Since February 12, 2018, goodwill related to the Bras N Things acquisition decreased by $792 as a result of measurement period adjustments, primarily related to working capital adjustments. The purchase price allocation was finalized in the first quarter of 2019.

Unaudited pro forma results of operations for the Company are presented below for the quarter and nine months ended September 29, 2018, assuming that the acquisition of Bras N Things had occurred on January 1, 2017.

Quarter Ended Nine Months Ended
September 29,
2018 September 29,
2018
Net sales $ 1,848,707
$ 5,054,161
Net income 171,421
394,494
Earnings per share:
Basic $ 0.47
$ 1.09
Diluted 0.47
1.08
10


~~(5)~~	~~Leases~~

The Company determines whether an arrangement is a lease at inception. The Company has operating leases for real estate (primarily retail stores and operating facilities) and certain equipment. The Company’s finance leases are not material. Leases with a term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(~~dollars and shares~~amounts in thousands, except per share data)

(unaudited)

leases on a straight-line basis over the lease term. For lease agreements entered into after adoption of Topic 842, the Company combines lease and nonlease components as a single component for all asset classes.

The Company’s leases have remaining lease terms of one to 38 years, some of which include options to extend the leases for up to 15 years, and some of which include options to terminate the leases within one year. The exercise of lease renewal options is at the Company’s sole discretion. In general, for leased retail real estate, the Company will not include renewal options in the underlying lease term. However, if a situation arises where the lessor has control over the option periods, then the Company will include these periods within the lease term. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

Certain of the Company’s lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Total operating lease costs, which includes short-term leases and variable cost, were $53,023 and $168,784 for the quarter and nine months ended September 28, 2019, respectively. For the quarter and nine months ended September 28, 2019, variable costs of $20,001 and $49,303 were included in total operating lease costs, respectively. Short-term lease costs were immaterial for the quarter and nine months ended September 28, 2019.

~~The following table presents supplemental cash flow and non-cash information related to leases:~~

Nine Months Ended
September 28,
2019
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows from leases $ 114,805
Right-of-use assets obtained in exchange for lease obligations - non-cash activity $ 54,524

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. For operating leases that commenced prior to December 30, 2018, the Company used the incremental borrowing rate on December 27, 2018.

~~The following table presents supplemental information related to leases at September 28, 2019:~~



~~Weighted average remaining lease term~~	~~5.4 years~~
~~Weighted average discount rate~~	~~5.00~~	%

~~The following table presents future minimum rental commitments under noncancelable operating leases as of December 29, 2018:~~

2019 $ 148,218
2020 129,660
2021 110,185
2022 91,411
2023 66,753
Thereafter 115,941
$ 662,168

~~Table of Contents~~

~~HANESBRANDS INC.~~

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

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

~~The following table presents maturities of operating lease liabilities as of September 28, 2019:~~

2019 $ 36,069
2020 155,343
2021 115,620
2022 83,524
2023 67,292
Thereafter 124,689
Total lease payments 582,537
Less interest 73,399
$ 509,138

~~As of September 28, 2019, the Company’s additional operating lease contracts that have not yet commenced are immaterial.~~


~~(6)~~(5)	Stockholders’ Equity

Basic earnings per share (“EPS”) was computed by dividing net income by the number of weighted average shares of common stock outstanding 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:


	Quarter Ended		Nine Months Ended		Quarters Ended
	September 28, 2019	September 29, 2018	September 28, 2019	September 29, 2018	March 28, 2020	March 30, 2019
Basic weighted average shares outstanding	364,743	363,510	364,650	363,338	359,017	364,570
Effect of potentially dilutive securities:
Stock options	437	723	463	882	—	471
Restricted stock units	412	401	361	303	—	254
Employee stock purchase plan and other	5	4	4	4	—	4
Diluted weighted average shares outstanding	365,597	364,638	365,478	364,527	359,017	365,299

For the quarter ended ~~September~~March 28, ~~2019, there~~2020, all potentially dilutive securities were ~~no anti-dilutive restricted stock units.~~excluded from the diluted earnings per share calculation because the Company incurred a net loss for this period and their inclusion would be anti-dilutive. Anti-dilutive securities excluded from the diluted earnings per share calculation for the quarter ended March 28, 2020 are not material. For the quarter ended ~~September 29, 2018, there were 84~~March 30, 2019, restricted stock units totaling five were excluded from the diluted earnings per share calculation because their effect would be anti-dilutive. For the ~~nine months~~quarter ended ~~September 28,~~March 30, 2019, and September 29, 2018, there were 5 and 84 restricted stock units excluded from the diluted earnings per share calculation, respectively, because their effect would be anti-dilutive. For the quarters and nine months ended September 28, 2019 and September 29, 2018, there were no anti-dilutive stock options to purchase shares of common stock.

On October 22, 2019, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.15 per share on outstanding shares of common stock to be paid on December 3, 2019 to stockholders of record at the close of business on November 12, 2019.

~~On April 27, 2016,~~February 6, 2020, the Company’s Board of Directors approved ~~the current~~a new share repurchase program for up to 40,000 shares to be repurchased in open market transactions, subject to market conditions, legal requirements and other factors. Additionally, management has been granted authority to establish a trading plan under Rule 10b5-1 of the Exchange Act in connection with share repurchases, which will allow the Company to repurchase shares in the open market during periods in which the stock trading window is otherwise closed for the Company and certain of the Company’s officers and employees pursuant to the Company’s insider trading policy. Unless terminated earlier by the Company’s Board of Directors, the new program will expire when the Company has repurchased all shares authorized for repurchase under the new program. The new program replaced the Company’s previous share repurchase program for up to 40,000 shares that was originally approved in 2016. For the quarter ended March 28, 2020, the Company entered into transactions to repurchase 14,464 shares at a weighted average repurchase price of $13.83 per share under the new program. The shares were repurchased at a total cost of $200,269. The Company did not repurchase any shares under the previous share repurchase program during the ~~quarters and nine months~~quarter ended ~~September~~March 28, ~~2019 and September 29, 2018.~~2020 or March 30, 2019. At ~~September~~March 28, ~~2019,~~2020, the remaining repurchase authorization under the current share repurchase program totaled ~~20,360~~25,536 shares. The primary objective of the share repurchase program is to utilize excess cash to generate shareholder value.


(6)	Inventories

Inventories consisted of the following:



	March 28, 2020		December 28, 2019		March 30, 2019
Raw materials	$	89,558	$	83,545	$	118,824
Work in process	124,725		136,592		170,746
Finished goods	1,749,474		1,685,708		1,943,149
	$	1,963,757	$	1,905,845	$	2,232,719

1311

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(~~dollars and shares~~amounts in thousands, except per share data)

(unaudited)


(7)	~~Inventories~~

~~Inventories consisted of the following:~~

September 28,
2019 December 29,
2018 September 29,
2018
Raw materials $ 98,373
$ 107,300
$ 134,684
Work in process 137,248
182,966
195,559
Finished goods 1,872,660
1,764,192
1,809,038
$ 2,108,281
$ 2,054,458
$ 2,139,281


~~(8)~~	Debt and Notes Payable

Debt and notes payable consisted of the following:


	Interest Rate as of September 28, 2019	Principal Amount				Maturity Date	Interest Rate as of March 28, 2020	Principal Amount				Maturity Date
		September 28, 2019		December 29, 2018				March 28, 2020		December 28, 2019
Senior Secured Credit Facility:
Revolving Loan Facility	—	$	—	$	—	December 2022	1.91%	$	950,000	$	—	December 2022
Term Loan A	3.48%	693,750		721,875		December 2022	1.89%	625,000		625,000		December 2022
Term Loan B	3.86%	492,500		496,250		December 2024	3.35%	300,000		300,000		December 2024
Australian Term A-1	—	—		122,968		—
Australian Revolving Loan Facility	2.07%	6,750		21,118		July 2021	1.67%	30,817		—		July 2021
4.875% Senior Notes	4.88%	900,000		900,000		May 2026	4.88%	900,000		900,000		May 2026
4.625% Senior Notes	4.63%	900,000		900,000		May 2024	4.63%	900,000		900,000		May 2024
3.5% Senior Notes	3.50%	547,106		572,213		June 2024	3.50%	556,793		558,847		June 2024
European Revolving Loan Facility	1.50%	109,421		113,520		September 2020	1.50%	111,359		110,914		September 2020
Accounts Receivable Securitization Facility	2.81%	208,604		161,608		March 2020	2.20%	152,153		—		March 2021
Other International Debt	Various	—		1		Various
Total debt		3,858,131		4,009,553				4,526,122		3,394,761
Notes payable		4,275		5,824				2,170		4,244
Total debt and notes payable		3,862,406		4,015,377				4,528,292		3,399,005
Less long-term debt issuance costs		30,015		34,774				25,655		26,977
Less notes payable		4,275		5,824				2,170		4,244
Less current maturities⁽¹⁾		360,525		440,596
Less current maturities								263,512		110,914
Total long-term debt		$	3,467,591	$	3,534,183			$	4,236,955	$	3,256,870


~~(1)~~	~~Current maturities excludes $12 of short-term debt issuance costs at September 28, 2019 and December 29, 2018.~~

~~Table of Contents~~

~~HANESBRANDS INC.~~

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

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

As of ~~September~~March 28, ~~2019,~~2020, the Company had ~~$995,565~~$45,924 of borrowing availability under the $1,000,000 Revolving Loan Facility after taking into account ~~$4,435~~$4,076 of standby and trade letters of credit issued and outstanding under this facility. In March 2020, in response to the uncertainty of the circumstances surrounding the COVID-19 global pandemic, the Company drew down $630,000 under the Revolving Loan Facility as a precautionary measure to provide the Company with additional financial flexibility to manage its business with a safety-first emphasis during the unknown duration and impact of the COVID-19 global pandemic. The Company subsequently repaid $490,000 of its borrowings under the Revolving Loan Facility in April 2020.

The Company entered into an accounts receivable securitization facility (the “Accounts Receivable Securitization Facility”) in November 2007. The Company’s maximum borrowing capacity under the Accounts Receivable Securitization Facility was ~~$300,000~~$175,000 as of ~~September~~March 28, ~~2019.~~2020. Borrowings under the Accounts Receivable Securitization Facility are permitted only to the extent that the face of the receivables in the collateral pool, net of applicable reserves and other deductions, exceeds the outstanding loans and also subject to a fluctuating facility limit, not to exceed ~~$300,000.~~$225,000. The Company had ~~$65,000 of~~0 borrowing availability under the Accounts Receivable Securitization Facility at ~~September~~March 28, ~~2019.~~2020.

The Company had ~~$33,749~~$5,958 of borrowing availability under the Australian Revolving Loan Facility, 0 borrowing availability under the European Revolving Loan Facility and ~~$119,072~~$134,716 of borrowing availability under other international ~~lines of~~ credit facilities after taking into account outstanding borrowings and letters of credit outstanding under the applicable ~~facility~~facilities at ~~September~~March 28, ~~2019.~~2020.

In March ~~2019,~~2020, the Company amended the Accounts Receivable Securitization Facility. This amendment primarily ~~increased~~decreased the fluctuating facility limit to ~~$300,000~~$225,000 (previously ~~$225,000)~~$300,000) and extended the maturity date to March ~~2020.~~2021.

~~In June 2019, the Company paid the outstanding balance and terminated the Australian Term A-1 loan which would have matured in July 2019.~~

~~In July 2019, the Company refinanced the European Revolving Loan Facility primarily to extend the maturity date to September 2020.~~

As of ~~September~~March 28, ~~2019,~~2020, the Company was in compliance with all financial covenants under its credit ~~facilities.~~facilities and other outstanding indebtedness. The Company continues to monitor its covenant compliance carefully. Under the terms of its Senior Secured Credit Facility, among other financial and non-financial covenants,the Company is required to maintain a minimum interest coverage ratio and a maximum leverage ratio. The interest coverage ratio covenant is the ratio 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 total debt to EBITDA for the preceding four fiscal quarters. EBITDA is defined as earnings before interest, income taxes, depreciation expense and amortization, as computed pursuant to the Senior Secured Credit Facility.

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

In April 2020, given the rapidly changing environment and level of uncertainty being created by the COVID-19 global pandemic and the associated impact on future earnings, the Company amended its Senior Secured Credit Facility prior to any potential covenant violation in order to modify the financial covenants and to provide operating flexibility during the COVID-19 crisis. The amendment effects changes to certain provisions and covenants under the Senior Secured Credit Facility during the period beginning with the fiscal quarter ending June 27, 2020 and continuing through the fiscal quarter ending July 3, 2021 (such period of time, the “Covenant Relief Period”), including: (a) suspension of compliance with the maximum leverage ratio; (b) reduction of the minimum interest coverage ratio from 3.00 to 1.00 to (i) 2.00 to 1.00 for the fiscal quarters ending June 27, 2020 through April 3, 2021 and (ii) 2.25 to 1.00 for the fiscal quarter ending July 3, 2021; (c) a minimum last twelve months EBITDA covenant of $625,000 as of June 27, 2020, $505,000 as of September 26, 2020, $445,000 as of January 2, 2021, $435,000 as of April 3, 2021 and $505,000 as of July 3, 2021; (d) a minimum liquidity covenant of $300,000, increasing to $400,000 upon certain conditions; (e) increased limitations on investments, acquisitions, restricted payments and the incurrence of indebtedness; and (f) anti-cash hoarding provisions. During the Covenant Relief Period, the applicable margin and applicable commitment fee margin will be calculated assuming the leverage ratio is greater than or equal to 4.50 to 1.00. The amendment also permanently amends the definition of “leverage ratio” for purposes of the financial covenant calculation to remove the maximum amount of cash allowed to be netted from the definition of “indebtedness” and to allow for the netting of cash from certain foreign subsidiaries. After obtaining the debt amendment, the Company expects to maintain compliance with its covenants for at least one year from the issuance of these financial statements based on its current expectations and forecasts. If economic conditions caused by the COVID-19 global pandemic worsen and the Company’s earnings and operating cash flows do not start to recover as currently estimated by management, this could impact the Company’s ability to maintain compliance with its amended 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.


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

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

Cumulative Translation Adjustment⁽¹⁾
Cash Flow Hedges Defined Benefit Plans Income Taxes Accumulated Other Comprehensive Loss
Balance at December 29, 2018 $ (157,060 ) $ 21,814
$ (595,307 ) $ 227,611
$ (502,942 )
Amounts reclassified from accumulated other comprehensive loss —
(21,355 ) 14,529
1,080
(5,746 )
Current-period other comprehensive income activity (33,738 ) 11,684
—
(2,401 ) (24,455 )
Total other comprehensive income (loss) (33,738 ) (9,671 ) 14,529
(1,321 ) (30,201 )
Reclassification of stranded tax related to U.S. pension plan to retained earnings —
—
—
(78,816 ) (78,816 )

Balance at September 28, 2019 $ (190,798 ) $ 12,143
$ (580,778 ) $ 147,474
$ (611,959 )



	Cumulative Translation Adjustment⁽¹⁾			Cash Flow Hedges			Defined Benefit Plans			Income Taxes			Accumulated Other Comprehensive Loss
Balance at December 28, 2019	$	(157,138	)	$	4,786		$	(629,360	)	$	164,064		$	(617,648	)
Amounts reclassified from accumulated other comprehensive loss	—			(5,017		)	4,866			—			(151		)
Current-period other comprehensive income (loss) activity	(117,154		)	20,080			—			(8,552		)	(105,626		)

Balance at March 28, 2020	$	(274,292	)	$	19,849		$	(624,494	)	$	155,512		$	(723,425	)


(1)	Cumulative Translation Adjustment includes translation adjustments and net investment hedges. See Note, ~~10,~~ “Financial Instruments and Risk Management” for additional disclosures about net investment hedges.

1513

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(~~dollars and shares~~amounts in thousands, except per share data)

(unaudited)

The Company had the following reclassifications out of AOCI:


Component of AOCI	Location of Reclassification into Income	Amount of Reclassification from AOCI												Location of Reclassification into Income	Amount of Reclassification from AOCI
		Quarter Ended						Nine Months Ended							Quarters Ended
		September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018				March 28, 2020			March 30, 2019
Gain (loss) on foreign exchange contracts designated as cash flow hedges	Cost of sales	$	6,991		$	(2,467	)	$	21,355		$	(9,686	)
Gain on foreign exchange contracts designated as cash flow hedges														Cost of sales	$	5,017		$	6,017
														Income tax	(1,272		)	(1,521		)
	Income tax	(1,646		)	455			(5,054		)	1,870			Net of tax	3,745			4,496
	Net of tax	5,345			(2,012		)	16,301			(7,816		)
Amortization of deferred actuarial loss and prior service cost	Selling, general, and administrative expenses	(4,963		)	(4,919		)	(14,529		)	(12,934		)	Other expenses	(4,866		)	(4,602		)
	Income tax	1,358			1,378			3,974			3,622			Income tax	1,272			1,205
	Net of tax	(3,605		)	(3,541		)	(10,555		)	(9,312		)	Net of tax	(3,594		)	(3,397		)

Total reclassifications		$	1,740		$	(5,553	)	$	5,746		$	(17,128	)		$	151		$	1,099


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

The Company uses forward foreign exchange contracts to manage its exposures to movements in foreign exchange rates. The Company also uses a combination of derivative instruments and long-term debt to manage its exposure to foreign currency risk associated with the Company’s net investment in its European subsidiaries.

As of ~~September~~March 28, ~~2019,~~2020, the notional U.S. dollar equivalent of the Company’s derivative portfolio of forward foreign exchange contracts was ~~$578,462,~~$553,575, consisting of contracts hedging exposures primarily related to the Euro, Australian dollar, ~~Euro,~~ Canadian dollar and Mexican peso. As of ~~September~~March 28, ~~2019,~~2020, the U.S. dollar equivalent carrying value of long-term debt designated as a partial European net investment hedge was ~~$547,106.~~$556,793. The notional U.S. dollar equivalent of the Company’s cross-currency swap contracts, which are also designated as partial European net investment hedges, was $335,940 as of ~~September~~March 28, ~~2019.~~2020.

Fair Values of Derivative Instruments

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


	Balance Sheet Location	Fair Value						Balance Sheet Location	Fair Value
		September 28, 2019			December 29, 2018				March 28, 2020			December 28, 2019
Derivatives designated as hedging instruments:
Forward foreign exchange contracts	Other current assets	$	7,729		$	18,381		Other current assets	$	17,312		$	2,716
Cross-currency swap contracts	Other current assets	1,672			—			Other current assets	2,873			926
Cross-currency swap contracts	Other noncurrent assets	8,699			—			Other noncurrent assets	18,868			2,975
Derivatives not designated as hedging instruments:
Forward foreign exchange contracts	Other current assets	13,915			12,410			Other current assets	15,747			5,314
Total derivative assets		32,015			30,791				54,800			11,931

Derivatives designated as hedging instruments:
Forward foreign exchange contracts	Accrued liabilities	(173		)	(286		)	Accrued liabilities	(6		)	(2,246		)
Derivatives not designated as hedging instruments:
Forward foreign exchange contracts	Accrued liabilities	(313		)	(114		)	Accrued liabilities	(3,263		)	(1,147		)
Total derivative liabilities		(486		)	(400		)		(3,269		)	(3,393		)

Net derivative asset		$	31,529		$	30,391			$	51,531		$	8,538

1614

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(~~dollars and shares~~amounts in thousands, except per share data)

(unaudited)

Cash Flow Hedges

The Company uses forward foreign exchange contracts to reduce the effect of fluctuating foreign currencies on short-term foreign currency-denominated transactions, foreign currency-denominated investments and other known foreign currency exposures. Gains and losses on these contracts are intended to offset losses and gains on the hedged transaction in an effort to reduce the earnings volatility resulting from fluctuating foreign currency exchange rates.

The Company expects to reclassify into earnings during the next 12 months a net gain from AOCI of ~~approximately$16,684.~~approximately $21,396. The Company is hedging exposure to the variability in future cash flows for forecasted transactions over the next 1514 months.

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
Quarter Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Foreign exchange contracts $ 9,970
$ (207 ) $ 11,684
$ 25,067



	Amount of Gain Recognized in AOCI on Derivative Instruments
	Quarters Ended
	March 28, 2020		March 30, 2019
Foreign exchange contracts	$	20,080	$	440

Location of Gain (Loss)
Reclassified from AOCI
into Income Amount of Gain (Loss) Reclassified from AOCI into Income
Quarter Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Foreign exchange contracts⁽¹⁾
Cost of sales $ 6,991
$ (2,467 ) $ 21,355
$ (9,686 )



	Location of Gain Reclassified from AOCI into Income	Amount of Gain Reclassified from AOCI into Income
		Quarters Ended
		March 28, 2020		March 30, 2019
Foreign exchange contracts⁽¹⁾	Cost of sales	$	5,017	$	6,017


(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.

Quarter Ended Nine Months Ended

September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Total cost of sales in which the effects of cash flow hedges are recorded $ 1,154,629
$ 1,136,040
$ 3,208,025
$ 3,084,110



	Quarters Ended
	March 28, 2020		March 30, 2019
Total cost of sales in which the effects of cash flow hedges are recorded	$	842,730	$	967,993

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 its European subsidiaries. These cross-currency swap contracts, which mature on May 15, 2024, swap U.S. ~~Dollar-denominated~~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 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.

Changes in the fair value of derivative and nonderivative instruments designated as net investment hedges are recognized in the cumulative translation adjustment component of AOCI, offsetting the translation adjustment of the net investment being hedged. Net investment hedge effectiveness is being assessed and hedge results are being measured on an after-tax basis. The interest component of the cross-currency swap contracts is excluded from the assessment of hedge effectiveness and is initially recorded in the cumulative translation adjustment component of AOCI. This excluded component is amortized in earnings using a systematic and rational method over the term of the cross-currency swap contracts and reported in the “Interest expense, net” line in the Condensed Consolidated Statements of Income. Cash flows from the periodic and final settlements of the cross-currency swap contracts will be reported as cash flows from investing activities in the Condensed Consolidated Statements of Cash Flows because the hedged item is a net investment in a foreign subsidiary, and the cash paid or received from acquiring or selling the subsidiary would typically be classified as investing.

1715

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(~~dollars and shares~~amounts in thousands, except per share data)

(unaudited)

The amount of after-tax gains included in AOCI in the Condensed Consolidated Balance Sheets related to derivative instruments and nonderivative financial instruments designated as net investment hedges and the amount of gains included in the “Interest expense, net” line in the Condensed Consolidated Statements of Income related to amounts excluded from the assessment of hedge effectiveness for derivative instruments designated as net investment hedges are as follows:


		Amount of Gain (Loss) Recognized in AOCI									Amount of Gain Recognized in AOCI
		Quarter Ended				Nine Months Ended					Quarters Ended
		September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018			March 28, 2020		March 30, 2019
Euro-denominated long-term debt	Euro-denominated long-term debt	$	9,845	$	—	$	9,845	$	—	Euro-denominated long-term debt	$	2,658	$	—
Cross-currency swap contracts	Cross-currency swap contracts	6,436		—		6,436		—		Cross-currency swap contracts	11,732		—
Total	Total	$	16,281	$	—	$	16,281	$	—	Total	$	14,390	$	—


	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income (Amount Excluded from Effectiveness Testing)								Location of Gain Recognized in Income	Amount of Gain Recognized in Income (Amount Excluded from Effectiveness Testing)
		Quarter Ended				Nine Months Ended					Quarters Ended
		September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018			March 28, 2020		March 30, 2019
Cross-currency swap contracts	Interest expense, net	$	1,672	$	—	$	1,672	$	—	Interest expense, net	$	1,947	$	—


		Quarter Ended				Nine Months Ended					Quarters Ended
		September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018			March 28, 2020		March 30, 2019
Total interest expense, net in which the amounts excluded from effectiveness testing for net investment hedges are recorded	Total interest expense, net in which the amounts excluded from effectiveness testing for net investment hedges are recorded	$	43,091	$	52,795	$	137,672	$	146,988	Total interest expense, net in which the amounts excluded from effectiveness testing for net investment hedges are recorded	$	36,849	$	48,059

Mark to Market Hedges

A derivative 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. The Company uses 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. Foreign exchange derivative contracts are recorded as mark to market hedges when the hedged item is a recorded asset or liability that is revalued in each accounting period. These contracts are not designated as hedges under the accounting standards and are recorded at fair value in the Condensed Consolidated Balance Sheets. Any gains or losses resulting from changes in fair value are recognized directly into earnings. Gains or losses on these contracts largely offset the net remeasurement gains or losses on the related assets and liabilities.

The effect of derivative contracts not designated as hedges on the Condensed Consolidated Statements of Income is as follows:


	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income											Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income
		Quarter Ended						Nine Months Ended						Quarters Ended
		September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018			March 28, 2020			March 30, 2019
Foreign exchange contracts	Cost of sales	$	(3,055	)	$	(2,241	)	$	(21,813	)	$	16,870	Cost of sales	$	6,121		$	(9,397	)
Foreign exchange contracts	Selling, general and administrative expenses	2,546			(445		)	1,625			330		Selling, general and administrative expenses	(1,031		)	(659		)
Total		$	(509	)	$	(2,686	)	$	(20,188	)	$	17,200		$	5,090		$	(10,056	)

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)


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

As of ~~September~~March 28, ~~2019,~~2020, 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 ~~rates,~~

~~Table of Contents~~

~~HANESBRANDS INC.~~

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

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

derivative contracts, cross-currency swap derivative contracts and deferred compensation plan liabilities. The fair values of forward foreign exchange ~~rate derivatives~~derivative contracts are determined using the cash flows of the ~~foreign exchange contract,~~forward contracts, discount rates to account for the passage of time and current foreign exchange market data which are all based on inputs readily available in public markets and are categorized as Level 2. The fair values of cross-currency swap derivative contracts are determined using the cash flows of the swap contracts, discount rates to account for the passage of time, current foreign exchange and interest rate market data and credit risk, which are all based on inputs readily available in public markets and are categorized as Level 2. The fair value of deferred compensation plans 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 nine months~~ ended ~~September~~March 28, ~~2019~~2020 to the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis. ~~There were no transfers into or out of Level 1, Level 2 or Level 3 during the quarter and nine months ended September 28, 2019.~~ As of and during the quarter ~~and nine months~~ ended ~~September~~March 28, ~~2019,~~2020, the Company did not have any non-financial assets or liabilities that were required to be measured at fair value on a recurring or non-recurring basis.

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

Assets (Liabilities) at Fair Value as of
September 28, 2019
Total Quoted Prices In
Active Markets
for Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Foreign exchange derivative contracts - assets $ 21,644
$ —
$ 21,644
$ —
Cross-currency swap derivative contracts - assets 10,371
—
10,371
—
Foreign exchange derivative contracts - liabilities (486 ) —
(486 ) —
31,529
—
31,529
—
Deferred compensation plan liability (30,107 ) —
(30,107 ) —
Total $ 1,422
$ —
$ 1,422
$ —



	Assets (Liabilities) at Fair Value as of March 28, 2020
	Total			Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Forward foreign exchange contracts - assets	$	33,059		$	—	$	33,059		$	—
Cross-currency swap contracts - assets	21,741			—		21,741			—
Forward foreign exchange contracts - liabilities	(3,269		)	—		(3,269		)	—
	51,531			—		51,531			—
Deferred compensation plan liability	(17,490		)	—		(17,490		)	—
Total	$	34,041		$	—	$	34,041		$	—


	Assets (Liabilities) at Fair Value as of December 29, 2018										Assets (Liabilities) at Fair Value as of December 28, 2019
	Total			Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total			Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Foreign exchange derivative contracts - assets	$	30,791		$	—	$	30,791		$	—
Foreign exchange derivative contracts - liabilities	(400		)	—		(400		)	—
Forward foreign exchange contracts - assets											$	8,030		$	—	$	8,030		$	—
Cross-currency swap contracts - assets											3,901			—		3,901			—
Forward foreign exchange contracts - liabilities											(3,393		)	—		(3,393		)	—
	30,391			—		30,391			—		8,538			—		8,538			—
Deferred compensation plan liability	(39,542		)	—		(39,542		)	—		(31,221		)	—		(31,221		)	—
Total	$	(9,151	)	$	—	$	(9,151	)	$	—	$	(22,683	)	$	—	$	(22,683	)	$	—

Table of Contents

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 ~~September~~March 28, ~~2019~~2020 and December ~~29, 2018.~~28, 2019. The carrying amount of trade accounts receivable included allowance for doubtful accounts, chargebacks and other deductions of ~~$38,937~~$46,079 and ~~$32,604~~$33,228 as of ~~September~~March 28, ~~2019~~2020 and December ~~29, 2018,~~28, 2019, respectively. The fair value of debt, which is classified as a Level 2 liability, was ~~$4,032,241~~$4,408,038 and ~~$3,863,299~~$3,560,623 as of ~~September~~March 28, ~~2019~~2020 and December ~~29, 2018,~~28, 2019, respectively. Debt had a carrying value of ~~$3,858,131~~$4,526,122 and ~~$4,009,553~~$3,394,761 as of ~~September~~March 28, ~~2019~~2020 and December ~~29, 2018,~~28, 2019, respectively. The fair values were estimated using quoted market prices as provided in secondary markets, which consider the Company’s credit risk and market related conditions. The carrying ~~amounts~~amount of the Company’s notes payable, which is classified as a Level 2 liability, approximated fair value as of ~~September~~March 28, ~~2019~~2020 and December ~~29, 2018,~~28, 2019, primarily due to the short-term nature of these instruments.

~~Table of Contents~~

~~HANESBRANDS INC.~~

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

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~


~~(12)~~(11)	Income Taxes

The Company’s effective income tax rate was ~~14.1%~~14.5% and ~~12.9%~~13.9% for the quarters ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018,~~March 30, 2019, respectively. The ~~Company’s~~ effective ~~income~~ tax rate was ~~14.1% and 14.2% for the nine months ended September 28, 2019 and September 29, 2018, respectively. The higher effective income tax rate~~lower for the quarter ended ~~September 28,~~March 30, 2019 ~~compared~~due to the inclusion of a net discrete benefit of $3,026.

During the quarter ended ~~September 29, 2018 was primarily due to a net benefit recorded in~~March 28, 2020, the ~~third quarter of 2018 related to a change in~~Internal Revenue Service closed the Company’s provisional estimate regarding the overall impact of the Tax Act. Pursuant to the one-year measurement period allowed by the SEC’s Staff Accounting Bulletin No. 118, the accounting for the impact of the Tax Act was completed in the fourth quarter of 2018.

~~The Company files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and foreign jurisdictions. In the United States, the IRS began an~~ examination of the ~~Company’s 2015 and 2016~~income tax years ~~during 2017~~ended January 2, 2016 and ~~2018, respectively.~~December 31, 2016. The examination resulted in an immaterial adjustment which had been accrued as an uncertain tax benefit in a prior period. The Company ~~is also~~remains subject to ~~examination~~examinations in other jurisdictions and believes that it maintains appropriate uncertain tax benefit reserves, which are re-evaluated each quarter. Management believes it is reasonably possible that the amount of uncertain tax benefits may decrease by approximately $25,318 in the next twelve months based on approvals of certain filings by tax authorities with approximately $15,261 of the reduction impacting the effective tax rate.

As a result of the COVID-19 pandemic, governments are offering various ~~state and foreign tax authorities.~~relief mechanisms to taxpayers to assist with the business disruption. The ~~tax years subject to examination~~measures vary by ~~jurisdiction.~~jurisdiction, but often include the ability to delay certain income tax payments. The Company ~~regularly assesses~~intends to use these provisions where eligible. As of March 28, 2020, the outcomes of both ongoing and future examinations for the current or prior years to ensure the Company’s provision for income taxes is sufficient. The Company recognizes liabilities based on estimates of whether additional taxes will be due and believes its reserves are adequate in relation to any potential assessments. The outcome of any one examination, some of which may conclude during the next 12 months, isCOVID-19 relief measures do not ~~expected to~~ have a material impact on the ~~Company’s financial position~~effective tax rate or ~~results of operations.~~other income tax accounts, including income taxes payable.


~~(13)~~(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. value-based (“outlet”) stores and U.S. hosiery business.

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

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

Activewear includes sales 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.


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

Table of Contents

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, ~~acquisition-related~~restructuring and ~~integration~~other action-related charges and amortization of intangibles. The accounting policies of the segments are consistent with those described in Note, 2“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 December ~~29, 2018.~~28, 2019.


	Quarter Ended				Nine Months Ended				Quarters Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018		March 28, 2020		March 30, 2019
Net sales:
Innerwear	$	578,453	$	599,726	$	1,733,002	$	1,785,498	$	422,402	$	475,945
Activewear	548,117		554,953		1,401,734		1,306,863		288,000		405,340
International	663,525		619,435		1,878,568		1,735,184		555,901		646,180
Other	76,872		74,593		202,614		208,109		50,159		60,559
Total net sales	$	1,866,967	$	1,848,707	$	5,215,918	$	5,035,654	$	1,316,462	$	1,588,024



	Quarters Ended
	March 28, 2020			March 30, 2019
Segment operating profit:
Innerwear	$	81,551		$	104,626
Activewear	8,108			43,593
International	52,018			99,773
Other	(6,125		)	754
Total segment operating profit	135,552			248,746
Items not included in segment operating profit:
General corporate expenses	(63,633		)	(68,349		)
Restructuring and other action-related charges	(29,199		)	(21,373		)
Amortization of intangibles	(8,590		)	(9,380		)
Total operating profit	34,130			149,644
Other expenses	(6,490		)	(7,451		)
Interest expense, net	(36,849		)	(48,059		)
Income (loss) before income tax expense	$	(9,209	)	$	94,134

For the quarter ended March 28, 2020, the Company incurred pre-tax restructuring and other action-related charges of $29,199, of which $21,813 is reported in the “Cost of sales” line and $7,386 is reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income. For the quarter ended March 30, 2019, the Company incurred pre-tax restructuring and other action-related charges of $21,373, of which $17,692 is reported in the “Cost of sales” line and $3,681 is reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income.

As of December 28, 2019, the Company had an accrual of $7,120 for expected benefit payments related to actions taken in prior years. During the quarter ended March 28, 2020, the Company approved actions related to corporate workforce reductions and incurred charges of $5,258 for employee termination and other benefits for employees affected by separation programs all of which are reflected in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income. During quarter ended March 28, 2020, benefit payments, other accrual adjustments and foreign currency adjustments of $2,616 have been made, resulting in an ending accrual of $9,762, of which $8,741 and $1,021 is included in the “Accrued liabilities” and “Other noncurrent liabilities” lines of the Condensed Consolidated Balance Sheet, respectively.

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)


(13)	Revisions of Previously Issued Condensed Consolidated Interim Financial Statements

As described in Note, "Basis of Presentation," the following tables set forth the impact of error corrections on the Company’s condensed consolidated interim financial statements as of and for the periods ended March 30, 2019, June 29, 2019 and September 28, 2019 by financial statement line item.



	Quarter Ended March 30, 2019
Condensed Consolidated Statement of Income Line Item	As Previously Reported		Adjustments			As Revised
Cost of sales	$	967,148	$	845		$	967,993
Gross profit	620,876		(845		)	620,031
Selling, general and administrative expenses	472,838		(2,451		)	470,387
Operating profit	148,038		1,606			149,644
Income before income tax expense	92,528		1,606			94,134
Net income	79,482		1,606			81,088

Earnings per share:
Basic	$	0.22	$	0.00		$	0.22
Diluted	$	0.22	$	0.00		$	0.22



	Quarter Ended March 30, 2019
Condensed Consolidated Statement of Comprehensive Income Line Item	As Previously Reported		Adjustments			As Revised
Net income	$	79,482	$	1,606		$	81,088
Translation adjustments	14,461		(7,075		)	7,386
Total other comprehensive income	13,939		(7,075		)	6,864
Comprehensive income	93,421		(5,469		)	87,952



	March 30, 2019
Condensed Consolidated Balance Sheet Line Item	As Previously Reported		Adjustments			As Revised
Inventories	$	2,235,809	$	(3,090	)	$	2,232,719
Other current assets	166,123		22,889			189,012
Total current assets	3,621,887		19,799			3,641,686
Deferred tax assets	257,393		(43,665		)	213,728
Total assets	7,848,025		(23,866		)	7,824,159
Accrued liabilities	552,012		16,438			568,450
Total current liabilities	2,182,435		16,438			2,198,873
Other noncurrent liabilities	286,625		64,743			351,368
Total liabilities	6,809,987		81,181			6,891,168
Retained earnings	1,296,158		(105,047		)	1,191,111
Total stockholders’ equity	1,038,038		(105,047		)	932,991
Total liabilities and stockholders’ equity	7,848,025		(23,866		)	7,824,159



	Quarter Ended March 30, 2019
Condensed Consolidated Statement of Stockholders’ Equity Line Item	As Previously Reported		Adjustments			As Revised
Balance at December 29, 2018	$	970,283	$	(98,157	)	$	872,126
Net income	79,482		1,606			81,088
Other comprehensive income	13,939		(7,075		)	6,864
Cumulative effect of change in adoption of leases standard	7,977		(1,421		)	6,556
Balance at March 30, 2019	1,038,038		(105,047		)	932,991

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(~~dollars and shares~~amounts in thousands, except per share data)

(unaudited)

Quarter Ended Nine Months Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Segment operating profit:
Innerwear $ 121,467
$ 132,244
$ 375,623
$ 392,792
Activewear 97,314
93,605
209,686
189,400
International 107,168
99,624
280,944
253,243
Other 9,643
8,400
16,429
18,187
Total segment operating profit 335,592
333,873
882,682
853,622
Items not included in segment operating profit:
General corporate expenses (47,269 ) (46,161 ) (160,722 ) (136,694 )
Acquisition, integration and other action-related charges (9,937 ) (20,732 ) (43,919 ) (65,514 )
Amortization of intangibles (8,630 ) (10,091 ) (26,230 ) (28,404 )
Total operating profit 269,756
256,889
651,811
623,010
Other expenses (8,066 ) (7,285 ) (23,766 ) (19,616 )
Interest expense, net (43,091 ) (52,795 ) (137,672 ) (146,988 )
Income before income tax expense $ 218,599
$ 196,809
$ 490,373
$ 456,406



	Quarter Ended March 30, 2019
Condensed Consolidated Statement of Cash Flows Line Item	As Previously Reported			Adjustments			As Revised
Operating activities:
Net income	$	79,482		$	1,606		$	81,088
Adjustments to reconcile net income to net cash from operating activities:
Other	11,322			(7,075		)	4,247
Changes in assets and liabilities:
Inventories	(183,875		)	5,470			(178,405		)
Other assets	(31,629		)	(743		)	(32,372		)
Accrued liabilities and other	(3,120		)	742			(2,378		)
Net cash from operating activities	(194,291		)	—			(194,291		)



	Quarter Ended June 29, 2019
Condensed Consolidated Statement of Income Line Item	As Previously Reported		Adjustments			As Revised
Cost of sales	$	1,086,248	$	(844	)	$	1,085,404
Gross profit	674,679		844			675,523
Selling, general and administrative expenses	440,662		5,261			445,923
Operating profit	234,017		(4,417		)	229,600
Income before income tax expense	179,246		(4,417		)	174,829
Net income	153,972		(4,417		)	149,555

Earnings per share:
Basic	$	0.42	$	(0.01	)	$	0.41
Diluted	$	0.42	$	(0.01	)	$	0.41



	Six Months Ended June 29, 2019
Condensed Consolidated Statement of Income Line Item	As Previously Reported		Adjustments			As Revised
Cost of sales	$	2,053,396	$	1		$	2,053,397
Gross profit	1,295,555		(1		)	1,295,554
Selling, general and administrative expenses	913,500		2,810			916,310
Operating profit	382,055		(2,811		)	379,244
Income before income tax expense	271,774		(2,811		)	268,963
Net income	233,454		(2,811		)	230,643

Earnings per share:
Basic	$	0.64	$	(0.01	)	$	0.63
Diluted	$	0.64	$	(0.01	)	$	0.63



	Quarter Ended June 29, 2019
Condensed Consolidated Statement of Comprehensive Income Line Item	As Previously Reported		Adjustments			As Revised
Net income	$	153,972	$	(4,417	)	$	149,555
Comprehensive income	149,165		(4,417		)	144,748

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)



	Six Months Ended June 29, 2019
Condensed Consolidated Statement of Comprehensive Income Line Item	As Previously Reported		Adjustments			As Revised
Net income	$	233,454	$	(2,811	)	$	230,643
Translation adjustments	11,259		(7,075		)	4,184
Total other comprehensive income	9,132		(7,075		)	2,057
Comprehensive income	242,586		(9,886		)	232,700



	June 29, 2019
Condensed Consolidated Balance Sheet Line Item	As Previously Reported		Adjustments			As Revised
Inventories	$	2,233,760	$	(10,561	)	$	2,223,199
Other current assets	152,925		23,371			176,296
Total current assets	3,656,442		12,810			3,669,252
Deferred tax assets	264,592		(43,665		)	220,927
Total assets	7,876,892		(30,855		)	7,846,037
Accrued liabilities	547,306		13,866			561,172
Total current liabilities	2,069,817		13,866			2,083,683
Other noncurrent liabilities	277,742		64,743			342,485
Total liabilities	6,742,042		78,609			6,820,651
Retained earnings	1,395,306		(109,464		)	1,285,842
Total stockholders’ equity	1,134,850		(109,464		)	1,025,386
Total liabilities and stockholders’ equity	7,876,892		(30,855		)	7,846,037



	Quarter Ended June 29, 2019
Condensed Consolidated Statement of Stockholders’ Equity Line Item	As Previously Reported		Adjustments			As Revised
Balance at March 30, 2019	$	1,038,038	$	(105,047	)	$	932,991
Net income	153,972		(4,417		)	149,555
Balance at June 29, 2019	1,134,850		(109,464		)	1,025,386



	Six Months Ended June 29, 2019
Condensed Consolidated Statement of Stockholders’ Equity Line Item	As Previously Reported		Adjustments			As Revised
Balance at December 29, 2018	$	970,283	$	(98,157	)	$	872,126
Net income	233,454		(2,811		)	230,643
Other comprehensive income	9,132		(7,075		)	2,057
Cumulative effect of change in adoption of leases standard	7,977		(1,421		)	6,556
Balance at June 29, 2019	1,134,850		(109,464		)	1,025,386



	Six Months Ended June 29, 2019
Condensed Consolidated Statement of Cash Flows Line Item	As Previously Reported			Adjustments			As Revised
Operating activities:
Net income	$	233,454		$	(2,811	)	$	230,643
Adjustments to reconcile net income to net cash from operating activities:
Other	12,550			(7,075		)	5,475
Changes in assets and liabilities:
Inventories	(178,453		)	12,941			(165,512		)
Other assets	(27,354		)	(1,225		)	(28,579		)
Accrued liabilities and other	(23,405		)	(1,830		)	(25,235		)
Net cash from operating activities	(57,363		)	—			(57,363		)

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)



	Quarter Ended September 28, 2019
Condensed Consolidated Statement of Income Line Item	As Previously Reported		Adjustments			As Revised
Cost of sales	1,154,629		(4,695		)	$	1,149,934
Gross profit	712,338		4,695			717,033
Selling, general and administrative expenses	442,582		7,380			449,962
Operating profit	269,756		(2,685		)	267,071
Income before income tax expense	218,599		(2,685		)	215,914
Net income	187,776		(2,685		)	185,091

Earnings per share:
Basic	$	0.51	$	(0.01	)	$	0.51
Diluted	$	0.51	$	(0.01	)	$	0.51



	Nine Months Ended September 28, 2019
Condensed Consolidated Statement of Income Line Item	As Previously Reported		Adjustments			As Revised
Cost of sales	$	3,208,025	$	(4,694	)	$	3,203,331
Gross profit	2,007,893		4,694			2,012,587
Selling, general and administrative expenses	1,356,082		10,190			1,366,272
Operating profit	651,811		(5,496		)	646,315
Income before income tax expense	490,373		(5,496		)	484,877
Net income	421,230		(5,496		)	415,734

Earnings per share:
Basic	$	1.16	$	(0.02	)	$	1.14
Diluted	$	1.15	$	(0.02	)	$	1.14



	Quarter Ended September 28, 2019
Condensed Consolidated Statement of Comprehensive Income Line Item	As Previously Reported		Adjustments			As Revised
Net income	$	187,776	$	(2,685	)	$	185,091
Comprehensive income	148,443		(2,685		)	145,758



	Nine Months Ended September 28, 2019
Condensed Consolidated Statement of Comprehensive Income Line Item	As Previously Reported			Adjustments			As Revised
Net income	$	421,230		$	(5,496	)	$	415,734
Translation adjustments	(33,738		)	(7,075		)	(40,813		)
Total other comprehensive loss	(30,201		)	(7,075		)	(37,276		)
Comprehensive income	391,029			(12,571		)	378,458

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)



	September 28, 2019
Condensed Consolidated Balance Sheet Line Item	As Previously Reported		Adjustments			As Revised
Inventories	$	2,108,281	$	(13,246	)	$	2,095,035
Other current assets	166,727		7,445			174,172
Total current assets	3,625,970		(5,801		)	3,620,169
Deferred tax assets	257,314		(43,665		)	213,649
Total assets	7,773,298		(49,466		)	7,723,832
Accrued liabilities	589,992		(2,060		)	587,932
Total current liabilities	2,096,904		(2,060		)	2,094,844
Other noncurrent liabilities	265,804		64,743			330,547
Total liabilities	6,543,056		62,683			6,605,739
Retained earnings	1,528,258		(112,149		)	1,416,109
Total stockholders’ equity	1,230,242		(112,149		)	1,118,093
Total liabilities and stockholders’ equity	7,773,298		(49,466		)	7,723,832



	Quarter Ended September 28, 2019
Condensed Consolidated Statement of Stockholders’ Equity Line Item	As Previously Reported		Adjustments			As Revised
Balance at June 29, 2019	$	1,134,850	$	(109,464	)	$	1,025,386
Net income	187,776		(2,685		)	185,091
Balance at September 28, 2019	1,230,242		(112,149		)	1,118,093



	Nine Months Ended September 28, 2019
Condensed Consolidated Statement of Stockholders’ Equity Line Item	As Previously Reported			Adjustments			As Revised
Balance at December 29, 2018	$	970,283		$	(98,157	)	$	872,126
Net income	421,230			(5,496		)	415,734
Other comprehensive income	(30,201		)	(7,075		)	(37,276		)
Cumulative effect of change in adoption of leases standard	7,977			(1,421		)	6,556
Balance at September 28, 2019	1,230,242			(112,149		)	1,118,093



	Nine Months Ended September 28, 2019
Condensed Consolidated Statement of Cash Flows Line Item	As Previously Reported			Adjustments			As Revised
Operating activities:
Net income	$	421,230		$	(5,496	)	$	415,734
Adjustments to reconcile net income to net cash from operating activities:
Other	8,737			(7,075		)	1,662
Changes in assets and liabilities, net of acquisition of businesses:
Inventories	(72,096		)	15,626			(56,470		)
Other assets	(40,732		)	14,701			(26,031		)
Accrued liabilities and other	14,243			(17,756		)	(3,513		)
Net cash from operating activities	244,700			—			244,700

For the quarter ended September 28, 2019, the Company incurred pre-tax acquisition, integration and other action-related charges of $9,937, of which $9,424 is reported in the “Cost of sales” line and $513 is reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income. For the quarter ended September 29, 2018, the Company incurred pre-tax acquisition, integration and other action-related charges of $20,732, of which $11,760 is reported in the “Cost of sales” line and $8,972 is reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income.

For the nine months ended September 28, 2019, the Company incurred pre-tax acquisition, integration and other action-related charges of $43,919, of which $39,714 is reported in the “Cost of sales” line and $4,205 is reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income. For the nine months ended September 29, 2018, the Company incurred pre-tax acquisition-related, integration and other action-related charges of $65,514, of which $33,596 is reported in the “Cost of sales” line and $31,918 is reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income.

As of December 29, 2018, the Company had an accrual of $10,806 for expected benefit payments related to actions taken in prior years. During the nine months ended September 28, 2019, the Company approved actions to close certain supply chain facilities and reduce overhead costs and incurred charges of $12,392 for employee termination and other benefits for employees affected by separation programs, with $9,720 and $2,672 of charges reflected in the “Cost of sales” and “Selling, general and administrative expenses” lines, respectively, in the Condensed Consolidated Statement of Income. During the nine months ended September 28, 2019, benefit payments, other accrual adjustments and foreign currency adjustments of $11,681 have been made, resulting in an ending accrual of $11,517, of which $9,548 and $1,969 is included in the “Accrued liabilities” and “Other noncurrent liabilities” lines of the Condensed Consolidated Balance Sheet, respectively.



Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis of financial condition and results of operations, or MD&A, contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” in this Quarterly Report on Form 10-Q for a discussion of the uncertainties, risks and assumptions associated with these statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q. The unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with our audited consolidated financial statements and notes for the year ended December ~~29, 2018,~~28, 2019, 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 in the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q and those included in the “Risk Factors” section and elsewhere in our Annual Report on Form 10-K for the year ended December ~~29, 2018~~28, 2019. In particular, statements with respect to trends associated with our business, our future financial performance and the potential effects of the global 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. The unaudited condensed consolidated interim financial statements for the quarter ended March 30, 2019 have been revised to correct prior period errors as discussed in Note, “Basis of Presentation” and Note, “Revisions of Previously Issued Condensed Consolidated Interim Financial Statements” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Accordingly, this MD&A reflects the impact of those revisions.

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, Europe, Australia and Asia/Pacific under some of the world’s strongest apparel brands, including Hanes, Champion, Bonds, DIM, Maidenform, ~~DIM,~~ Bali, Playtex, Lovable, Bras N Things, Nur Die/Nur Der, Alternative, L’eggs, JMS/Just My Size, ~~Lovable,~~ Wonderbra, Berlei and Gear for Sports. We design, manufacture, source and sell a broad range of basic apparel such as T-shirts, bras, panties, men’s underwear, children’s underwear, activewear, socks and hosiery. Our 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. value-based (“outlet”) stores and U.S. hosiery business.

Impact of COVID-19 on Our Business

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The pandemic and these containment and mitigation measures have led to adverse impacts on the U.S. and global economies. The COVID-19 pandemic has impacted our business operations and results of operations for the first quarter of 2020 as described in more detail under “Condensed Consolidated Results of Operations - First Quarter Ended March 28, 2020 Compared with First Quarter Ended March 30, 2019” below, due to decreased customer traffic and retail store closures worldwide. The evolving COVID-19 pandemic could continue to have an adverse impact on our results of operations and liquidity; the operations of our suppliers, vendors and customers; and on our employees as a result of quarantines, facility closures, and travel and logistics restrictions. While the ultimate health and economic impact of the COVID-19 pandemic is highly uncertain, we expect that our business operations and results of operations, including our net sales, earnings and cash flows, will be materially impacted for at least the balance of 2020, as a result of:

temporary closure of our owned and operated retail stores;

decreased customer traffic in retail stores;

changes in consumer confidence and consumer spending habits, including spending for the merchandise that we sell and negative trends in consumer purchasing patterns due to changes in consumers’ disposable income, credit availability and debt levels;

decreased discretionary consumer-directed channel spending independent of store closures;

decreased wholesale channel sales and increased likelihood of wholesale customer financial distress, including requests for extended payment terms or potential payment defaults;

disruption to our global supply chain including the manufacturing, supply, distribution, transportation and delivery of our products;

decreased productivity due to travel bans, work-from-home policies or shelter-in-place orders; and

a slowdown in the U.S. and global economies, and an uncertain global economic outlook or a potential credit crisis.

The extent to which the COVID-19 pandemic impacts our business operations, financial results, and liquidity will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the pandemic; our response to and ability to mitigate the impact of the pandemic; the negative impact it has on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; its short- and longer-term impact on the levels of consumer confidence; the ability of our suppliers, vendors and customers to successfully address the impacts of the pandemic; actions governments, businesses and individuals take in response to the pandemic; and how quickly economies recover after the COVID-19 pandemic subsides.

We expect the negative impact of the COVID-19 pandemic to lead to continued net sales decreases due to our retail store closures and reduced net sales and earnings for our wholesale customers, some of which may experience financial distress or declare bankruptcy. Reduced retail sales or additional customer store closures and customer bankruptcies could reduce or eliminate our anticipated income and cash flows, which would negatively affect our results of operations and liquidity. Even if customers do not declare bankruptcy, they may seek to extend payment terms or be unable or unwilling to pay us amounts that we are entitled to on a timely basis or at all, which would adversely affect our sales and liquidity. Also, we could be required to record increased excess and obsolete inventory reserves due to decreased net sales or noncash impairment charges related to our intangible assets or goodwill due to reduced cash flows. Additionally, our retail stores and many of our manufacturing facilities are closed. Accordingly, these operations are not generating sales sufficient to offset fixed operating expenses, which is adversely affecting our income and could in the future adversely affect the value of our owned and leased properties, potentially requiring us to recognize significant noncash impairment charges.

We have been taking steps to mitigate the potential risks to us posed by the spread and related circumstances and impacts of COVID-19. We are focused on addressing these recent challenges presented by the COVID-19 global pandemic by preserving our liquidity and managing our cash flow with preemptive actions designed to enhance our ability to meet our short-term liquidity needs. Such actions include, but are not limited to, focusing on channels that continue to generate sales, including mass retail and online; developing a product line of masks and other personal protective garments; operating our manufacturing and distribution facilities on a demand-adjusted basis; reducing our discretionary spending such as media and marketing expenses; focused working capital management; reducing capital expenditures; suspending our share buyback program until further notice; reducing payroll costs, through employee furloughs and pay cuts; drawing down on our Revolving Loan Facility and amending certain existing debt facilities. These efforts may not be enough to offset anticipated declines in net sales and we may not be able to access sufficient additional working capital to meet our liquidity needs. See “The novel coronavirus disease (COVID-19) global pandemic has had and is expected to continue to have an adverse impact on our business.”in Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q.

Outlook for ~~2019~~2020

We ~~estimate our 2019~~issued first-quarter and full-year 2020 guidance ~~as follows:~~

~~Net sales~~on February 7, 2020, which excluded any impact from the spread of ~~$6.935 billion~~the COVID-19 global pandemic. Due to ~~$6.985 billion, operating profit of $900 million~~the uncertainty and rapidly changing environment relating to ~~$925 million,~~the pandemic, on March 25, 2020, we withdrew the guidance for the first quarter and ~~net income of $590 to $612 million;~~

~~Pre-tax acquisition, integration~~full year and ~~other action-related costs of approximately $55 million reflected in operating profit;~~

~~Interest expense and other expenses of approximately $213 million combined;~~

~~An annual effective tax rate of approximately 14%;~~

~~Cash flow from operations of $700 million to $800 million; and~~

~~Capital expenditure investment of approximately $90 million to $100 million.~~are not providing an updated outlook at this time.

Seasonality and Other Factors

~~Our~~Absent the effects of the COVID-19 global pandemic, our operating results are typically subject to some variability due to seasonality and other factors. For instance, we ~~generally~~ 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. Sales levels in any period are also impacted by customer 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. We expect the duration and scope of the COVID-19 global pandemic to alter these patterns during 2020.

Although the majority of our products are replenishment in nature and tend to be purchased by consumers on a planned, rather than on an impulse, basis, our sales are impacted by discretionary spending by consumers. Discretionary spending is affected by many factors 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. ~~These~~In addition, the COVID-19 global pandemic may result in decreased consumer confidence and lower consumer spending. 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.

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~~Overview of the ~~Third~~First Quarter Ended ~~September~~March 28, ~~2019~~2020

The COVID-19 global pandemic adversely impacted our business operations and results of operations for the first quarter of 2020. Prior to the pandemic’s late-first quarter disruption of economies around the world, we experienced strong net sales and profit trends. As the COVID-19 virus spread around the world in March, net sales and profits across all our segments decreased dramatically.

Key financial ~~highlights~~results are as follows:

Total net sales in the ~~third~~first quarter of ~~2019~~2020 were ~~$1.87~~$1.3 billion, compared with ~~$1.85~~$1.6 billion in the same period of ~~2018,~~2019, representing a ~~1% increase.~~17% decrease.

Operating profit ~~increased 5%~~decreased 77% to ~~$270~~$34 million in the ~~third~~first quarter of ~~2019,~~2020, compared with ~~$257~~$150 million in the same period of ~~2018.~~2019. As a percentage of sales, operating profit was ~~14.4%~~2.6% in the ~~third~~first quarter of ~~2019~~2020 compared to ~~13.9%~~9.4% in the same period of ~~2018.~~2019. Included within operating profit were ~~acquisition, integration~~restructuring and other action-related charges of ~~$10~~$29 million and $21 million for the quarters ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018,~~March 30, 2019, respectively.

~~Diluted~~We estimate the impact of the COVID-19 global pandemic reduced net sales by approximately $181 million, operating profit by approximately $86 million and diluted earnings per share ~~was $0.51~~by approximately $0.20.


•	Operating cash flows increased $111 million in the first quarter of 2020 compared to the first quarter of 2019.

As part of our cash deployment strategy, prior to the global expansion of COVID-19, we entered into transactions to repurchase approximately 14.5 million shares at a weighted average repurchase price of $13.83 per share. The shares were repurchased at a total cost of $200 million.

In March 2020, in response to the uncertainty of the circumstances surrounding the COVID-19 global pandemic and ~~$0.47~~as a precautionary measure to further strengthen our cash position, we drew down $630 million under the Revolving Loan Facility to provide us with additional financial flexibility to manage our business with a safety-first emphasis during the unknown duration and impact of the COVID-19 global pandemic. We subsequently repaid $490 million of this borrowing in ~~the third quarters of 2019 and 2018, respectively.~~April 2020.

Condensed Consolidated Results of Operations — ~~Third~~First Quarter Ended ~~September~~March 28, ~~2019~~2020 Compared with ~~Third~~First Quarter Ended ~~September 29, 2018~~March 30, 2019


	Quarter Ended									Quarters Ended
	September 28, 2019		September 29, 2018		Higher (Lower)			Percent Change		March 28, 2020			March 30, 2019		Higher (Lower)			Percent Change
	(dollars in thousands)									(dollars in thousands)
Net sales	$	1,866,967	$	1,848,707	$	18,260		1.0	%	$	1,316,462		$	1,588,024	$	(271,562	)	(17.1	)%
Cost of sales	1,154,629		1,136,040		18,589			1.6		842,730			967,993		(125,263		)	(12.9	)
Gross profit	712,338		712,667		(329		)	0.0		473,732			620,031		(146,299		)	(23.6	)
Selling, general and administrative expenses	442,582		455,778		(13,196		)	(2.9	)	439,602			470,387		(30,785		)	(6.5	)
Operating profit	269,756		256,889		12,867			5.0		34,130			149,644		(115,514		)	(77.2	)
Other expenses	8,066		7,285		781			10.7		6,490			7,451		(961		)	(12.9	)
Interest expense, net	43,091		52,795		(9,704		)	(18.4	)	36,849			48,059		(11,210		)	(23.3	)
Income before income tax expense	218,599		196,809		21,790			11.1
Income tax expense	30,823		25,388		5,435			21.4
Net Income	$	187,776	$	171,421	$	16,355		9.5	%
Income (loss) before income tax expense										(9,209		)	94,134		(103,343		)	(109.8	)
Income tax expense (benefit)										(1,335		)	13,046		(14,381		)	(110.2	)
Net Income (loss)										$	(7,874	)	$	81,088	$	(88,962	)	(109.7	)%

Net Sales

Through mid-March, we saw strong net sales and profit performance across our businesses, particularly within the Innerwear and Activewear segments. Shipments slowed nearly to a halt worldwide in the final two weeks of March as we and our retail customers closed stores and customer orders were canceled in response to the global expansion of COVID-19 and net sales and profit trends across all segments decreased dramatically.

Net sales ~~increased 1%~~decreased 17% during the ~~third~~first quarter of ~~2019~~2020 primarily due to the following:

The disruption of our U.S. and International businesses related to the negative effects of the COVID-19 pandemic, including closures of retail stores owned and operated by us, as well as canceled orders from our wholesale brick- and-mortar customers, decreased sales an estimated $181 million;

•

~~Sales on a constant currency basis, defined as~~The exit of our C9 Champion program at Target and the DKNY Intimates license in 2019 which, together, represented approximately $94 million of net sales ~~excluding the impact of foreign exchange rates, increased 2%~~ in the first quarter ~~as a result~~ of ~~sales growth in Europe, Asia, Australia~~2019; and ~~the Americas driven primarily by strong sales growth in our global~~ ~~Champion~~ ~~brand and our international innerwear business.~~

~~Partially offset by:~~

~~Unfavorable~~The unfavorable impact from foreign exchange rates in our International ~~businesses~~business of approximately ~~$23 million;~~$20 million.

Excluding the negative impact of the COVID-19 global pandemic, the exited programs and

~~A decrease in U.S. innerwear sales driven by a decline in~~ foreign exchange rates, total constant-currency net sales ~~in our intimate apparel and basics businesses.~~

for the first quarter of 2020 would have increased 1.6%.

Operating Profit

Operating profit as a percentage of sales was ~~14.4%~~2.6%, ~~an increase~~representing a decrease from 9.4% in the prior ~~year of approximately 50 basis points. Increased~~year. Decreased operating profit ~~from price increases taken~~was the result of lower sales volume, higher manufacturing variances as a result of decreases in manufacturing facility production levels in our global supply chain due to the ~~first quarter of 2019~~business disruption caused by the COVID-19 global pandemic and higher ~~margin product sales mix~~bad debt expense, as well as the exit of our C9 Champion program at Target in 2019. These decreases were partially offset by ~~increased materials costs, planned investments to support our brands~~lower variable selling, general and ~~future growth initiatives, unfavorable impact from foreign exchange rates and higher variable compensation accruals.~~administrative expenses as a result of decreased sales volume. Included in operating profit in the ~~third~~first quarter of ~~2019~~2020 and ~~2018~~2019 were charges of ~~$10~~$29 million and $21 million, respectively, related to ~~acquisition, integration~~restructuring and other action-related ~~costs. In the quarter ended September 29, 2018, operating profit also included a bad debt charge of approximately $14 million related to the Sears bankruptcy filing.~~charges.

Other Highlights

Other Expenses – Other expenses ~~increased~~decreased $1 million in the ~~third~~first quarter of 2020 compared to the first quarter of 2019 ~~compared to the third quarter of 2018~~ primarily due to ~~higher~~lower pension expense and lower funding fees for sales of accounts receivable to financial institutions in ~~2019.~~2020.

Interest Expense – Interest expense was lower by ~~$10~~$11 million in the ~~third~~first quarter of 2020 compared to the first quarter of 2019 ~~compared to the third quarter of 2018~~ driven by ~~lower debt balances and~~ the impact of the cross-currency swap contracts entered into in July 2019, ~~partially offset by~~lower outstanding debt balances during the quarter and a ~~higher~~lower weighted average interest rate on our borrowings. Our weighted average interest rate on our outstanding debt was ~~4.10%~~3.85% for the ~~third~~first quarter of ~~2019,~~2020, compared to ~~3.95%~~4.17% for the ~~third~~first quarter of ~~2018.~~2019.

Income Tax Expense – Our effective income tax rate was ~~14.1%~~14.5% and ~~12.9%~~13.9% for the ~~third~~first quarters of ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~higher~~ effective ~~income~~ tax rate was lower for the quarter ended ~~September 28,~~March 30, 2019 ~~compared~~due to the inclusion of a net discrete benefit of $3 million. During the quarter ended ~~September 29, 2018 was primarily due to a net benefit recorded in~~March 28, 2020, the ~~third quarter of 2018 related to a change in~~Internal Revenue Service closed the ~~Company’s provisional estimate regarding the overall impact~~examination of the ~~Tax Cuts~~income tax years ended January 2, 2016 and ~~Jobs Act (the “Tax Act”).~~December 31, 2016. The examination resulted in an immaterial adjustment which had been accrued as an uncertain tax benefit in a prior period.

Operating Results by Business Segment — ~~Third~~First Quarter Ended ~~September~~March 28, ~~2019~~2020 Compared with ~~Third~~First Quarter Ended ~~September 29, 2018~~March 30, 2019


	Net Sales									Net Sales
	Quarter Ended									Quarters Ended
	September 28, 2019		September 29, 2018		Higher (Lower)			Percent Change		March 28, 2020		March 30, 2019		Higher (Lower)			Percent Change
	(dollars in thousands)									(dollars in thousands)
Innerwear	$	578,453	$	599,726	$	(21,273	)	(3.5	)%	$	422,402	$	475,945	$	(53,543	)	(11.2	)%
Activewear	548,117		554,953		(6,836		)	(1.2	)	288,000		405,340		(117,340		)	(28.9	)
International	663,525		619,435		44,090			7.1		555,901		646,180		(90,279		)	(14.0	)
Other	76,872		74,593		2,279			3.1		50,159		60,559		(10,400		)	(17.2	)
Total	$	1,866,967	$	1,848,707	$	18,260		1.0	%	$	1,316,462	$	1,588,024	$	(271,562	)	(17.1	)%


	Operating Profit and Margin															Operating Profit and Margin
	Quarter Ended															Quarters Ended
	September 28, 2019					September 29, 2018					Higher (Lower)			Percent Change		March 28, 2020					March 30, 2019					Higher (Lower)			Percent Change
	(dollars in thousands)															(dollars in thousands)
Innerwear	$	121,467		21.0	%	$	132,244		22.1	%	$	(10,777	)	(8.1	)%	$	81,551		19.3	%	$	104,626		22.0	%	$	(23,075	)	(22.1	)%
Activewear	97,314			17.8		93,605			16.9		3,709			4.0		8,108			2.8		43,593			10.8		(35,485		)	(81.4	)
International	107,168			16.2		99,624			16.1		7,544			7.6		52,018			9.4		99,773			15.4		(47,755		)	(47.9	)
Other	9,643			12.5		8,400			11.3		1,243			14.8		(6,125		)	(12.2	)	754			1.2		(6,879		)	(912.3	)
Corporate	(65,836		)	NM		(76,984		)	NM		11,148			14.5		(101,422		)	NM		(99,102		)	NM		(2,320		)	(2.3	)
Total	$	269,756		14.4	%	$	256,889		13.9	%	$	12,867		5.0	%	$	34,130		2.6	%	$	149,644		9.4	%	$	(115,514	)	(77.2	)%

Innerwear

Innerwear net sales decreased ~~less than 4%~~11% compared to the first quarter of 2019 driven by a 7%15% and 2%9% decline in net sales in our intimate apparel and basics businesses, ~~respectively. Net~~respectively, primarily as a result of the negative impact of the COVID-19 global pandemic. The rapid expansion of COVID-19 in March resulted in a sharp decline in net sales and obscured the turnaround underway in our Innerwear segment as our basics business innovations and intimate apparel business revitalization plans began to show strength across channels through mid-March. In addition, net sales in our ~~intimate apparel business~~Innerwear segment decreased as a result of ~~declines~~the exit of the C9 Champion program at Target in our bras product category, which continues to be impacted by door closings and the challenging retail landscape within the mid-tier and department store channel. The decline in the bras product category was partially offset by growth in our shapewear product category.

2019.

Innerwear operating margin was ~~21.0%~~19.3%, representing a decrease from ~~22.1%~~22.0% in the same period a year ago as a result of lower sales volume, ~~higher materials costs,~~ sales mix and ~~planned increases~~higher manufacturing variances caused by decreases in ~~investments~~manufacturing facility production levels in our global supply chain due to ~~support our brands partially~~the business disruption caused by the COVID-19 global pandemic. These decreases were slightly offset by price increases implemented in ~~the first quarter~~2019 and lower variable selling, general and administrative expenses as a result of ~~2019.~~decreased volume.

Activewear

Activewear net sales decreased ~~1%. Core~~ ~~Champion~~ ~~sales within~~29% compared to the ~~Activewear segment, which we define~~first quarter last year primarily as ~~Champion~~ ~~sales outside~~a result of the ~~mass retail channel, were up 18%~~negative impact of the COVID-19 global pandemic. In addition, the exit of the C9 Champion program at Target in 2019 represented approximately $85 million of the net sales decrease in the first quarter ~~driven by strong consumer demand and growth across channels. Sales declined in~~of 2020 compared to the ~~remainder~~first quarter of our activewear business due to our previous exit from commodity programs within the mass retail channel as we focused on remixing parts of our activewear business to branded products and softer trends in the printwear channel.2019.

Activewear operating margin was ~~17.8%~~2.8%, representing ~~an increase~~a decrease from ~~16.9%~~10.8% in the same period a year ~~ago~~ago. The decrease was a result of sales volume decreases including the exit of the C9 Champion program at Target, sales mix and higher manufacturing variances as a result of ~~improved~~ ~~Champion~~ ~~profitability, higher margin product sales mix from~~decreases in manufacturing facility production levels in our ~~remixing activity and pricing,~~global supply chain due to the business disruption caused by the COVID-19 global pandemic. These decreases were partially offset by ~~increased materials costs and higher~~lower variable selling, general and administrative expenses ~~reflecting an increase in investments to support our growth initiatives.~~as a result of decreased net sales.

International

Net sales in the International segment ~~increased 7%~~decreased 14% as a result of the ~~following:~~

negative impact of the COVID-19 global pandemic and the unfavorable impact of foreign currency exchange rates of approximately $20 million. Sales on a constant currency basis, defined as sales excluding the impact of foreign currency, ~~increased~~decreased 11% ~~driven by growth in both our innerwear and activewear businesses.~~

~~Partially offset by:~~

~~Unfavorable~~. The impact of foreign ~~currency~~ exchange rates ~~of approximately $23 million.~~is calculated by applying prior period exchange rates to the current year financial results.

International operating margin was ~~16.2%~~9.4%, ~~an increase~~a decrease from ~~16.1%~~15.4% in the same period a year ago, primarily due to ~~increased efficiencies of scale.~~decreased sales volume particularly in the Asia and Europe activewear businesses where operating margins have historically been higher than in other international businesses and regions.

Other

Other net sales were ~~higher~~lower as a result of ~~increased~~decreased traffic at our retail outlets ~~partially offset by~~due to store closures late in the first quarter of 2020 as a result of the COVID-19 global pandemic and continued declines in hosiery sales in the United States. Operating margin ~~increased~~decreased due to the ~~increase~~decrease in sales volume at our retail outlets.

Corporate

Corporate expenses included certain administrative costs including ~~acquisition, integration~~restructuring and other action-related charges. Corporate expenses were lower in the ~~third~~first quarter of 2020 compared to the first quarter of 2019 ~~compared to the third quarter of 2018~~ due to lower ~~acquisition, integration and other action-related charges and lower~~variable compensation costs partially offset by higher bad debt expense as a result of ~~a charge~~$11 million of ~~approximately $14 million recorded in the third quarter of 2018 related to the Sears bankruptcy filing partially offset by an increase in variable compensation accruals.~~charges for anticipated bankruptcies and higher restructuring and other action-related charges. Supply chain actions include actions to reduce overhead costs. Program exit charges are costs associated with exiting the ~~reduction of overhead~~C9 Champion business with Target and the DKNY Intimates license. Other restructuring costs principally within our Western Hemisphere network. Acquisition and integration costs are expenses related directly to an acquisition and its integration into the organization. Other acquisitions and otherinclude action-related costs ~~include~~such as corporate workforce reductions, as well as acquisition and integration charges for smaller acquisitions ~~such as Bras N Things, as well as other action-related costs including corporate workforce reductions.~~

Quarter Ended
September 28,
2019 September 29,
2018
(dollars in thousands)
Acquisition, integration and other action-related costs included in operating profit:

Supply chain actions $ 9,424
$ —
Hanes Europe Innerwear —
7,076
Hanes Australasia —
1,444
Other acquisitions and other action-related costs 513
12,212
Total acquisition, integration and other action-related costs included in operating profit $ 9,937
$ 20,732

~~Condensed Consolidated Results of Operations —~~ ~~Nine Months EndedSeptember 28, 2019~~ ~~Compared with~~ ~~Nine Months EndedSeptember 29, 2018~~

Nine Months Ended
September 28,
2019 September 29,
2018
Higher
(Lower)

Percent
Change
(dollars in thousands)
Net sales $ 5,215,918
$ 5,035,654
$ 180,264
3.6 %
Cost of sales 3,208,025
3,084,110
123,915
4.0
Gross profit 2,007,893
1,951,544
56,349
2.9
Selling, general and administrative expenses 1,356,082
1,328,534
27,548
2.1
Operating profit 651,811
623,010
28,801
4.6
Other expenses 23,766
19,616
4,150
21.2
Interest expense, net 137,672
146,988
(9,316 ) (6.3 )
Income before income tax expense 490,373
456,406
33,967
7.4
Income tax expense 69,143
64,943
4,200
6.5
Net income $ 421,230
$ 391,463
$ 29,767
7.6 %

~~Net Sales~~

~~Net sales increased 4% during the nine months of 2019 primarily due to the following:~~

~~Our acquisition of Bras N Things in February 2018, which contributed non-organic net sales of $18 million in the nine months of 2019;~~


•	Organic sales on a constant currency basis, defined as sales excluding the impact of foreign exchange rates and businesses acquired within 12 months, increased 5% in the nine months of 2019, as a result of sales growth in Europe, Asia, Australia and the Americas driven primarily by strong sales growth in our global ~~Champion~~ ~~brand and our international innerwear business.~~

~~Partially offset by:~~

~~Unfavorable impact from foreign exchange rates in our International businesses of approximately $103 million; and~~

~~A decrease in U.S. innerwear sales driven by a decline in net sales in our intimate apparel business.~~

~~Operating Profit~~

Operating profit as a percentage of sales was 12.5%, an increase from the same period a year ago of approximately 10 basis points. Price increases taken in the nine months of 2019 and higher margin product sales mix were partially offset by increased materials costs, planned investments to support our brands and future growth initiatives, unfavorable impact from foreign exchange rates and higher variable compensation accruals. Included in operating profit in the nine months of 2019 and 2018 were charges of $44 million and $66 million, respectively, related to acquisition, integration and other action-related costs. Operating profit included a bad debt charge of approximately $14 million in the nine months ended September 29, 2018 related to the Sears bankruptcy filing.

~~Other Highlights~~

~~Other Expenses~~ – Other expenses were higher by $4 million in the nine months of 2019 compared to the same period in 2018 primarily due to higher pension expense and higher funding fees for sales of accounts receivable to financial institutions in 2019.

~~Interest Expense~~ – Interest expense was lower by $9 million in the nine months of 2019 compared to 2018, driven by lower debt balances and the impact of the cross-currency swap contracts entered into in July 2019 partially offset by a higher weighted average interest rate on our borrowings. Our weighted average interest rate on our outstanding debt was 4.13% for the nine months of 2019, compared to 3.86% for the nine months of 2018.

~~Income Tax Expense~~ – Our effective income tax rate was 14.1% and 14.2% for the nine months of 2019 and 2018, respectively. Income tax expense increased $4 million in the nine months of 2019 compared to 2018 due to the increase in pre-tax income.

~~Operating Results by Business Segment —~~ ~~Nine Months EndedSeptember 28, 2019~~ ~~Compared with~~ ~~Nine Months EndedSeptember 29, 2018~~

Net Sales
Nine Months Ended
September 28,
2019 September 29,
2018
Higher
(Lower)

Percent
Change
(dollars in thousands)
Innerwear $ 1,733,002
$ 1,785,498
$ (52,496 ) (2.9 )%
Activewear 1,401,734
1,306,863
94,871
7.3
International 1,878,568
1,735,184
143,384
8.3
Other 202,614
208,109
(5,495 ) (2.6 )
Total $ 5,215,918
$ 5,035,654
$ 180,264
3.6 %

Operating Profit and Margin
Nine Months Ended
September 28,
2019 September 29,
2018 Higher
(Lower) Percent
Change
(dollars in thousands)
Innerwear $ 375,623
21.7 % $ 392,792
22.0 % $ (17,169 ) (4.4 )%
Activewear 209,686
15.0
189,400
14.5
20,286
10.7
International 280,944
15.0
253,243
14.6
27,701
10.9
Other 16,429
8.1
18,187
8.7
(1,758 ) (9.7 )
Corporate (230,871 ) NM
(230,612 ) NM
(259 ) (0.1 )
Total $ 651,811
12.5 % $ 623,010
12.4 % $ 28,801
4.6 %

~~Innerwear~~

Innerwear net sales decreased 3% driven primarily by a 7% and 1% decline in net sales in our intimate apparel and basics businesses, respectively. Net sales in our intimate apparel business decreased as a result of declines in our bras product category, which continues to be impacted by door closings and the challenging retail landscape within the mid-tier and department store channel. The decline in the bras product category was partially offset by growth in our shapewear product category.

Innerwear operating margin was 21.7%, representing a decrease from 22.0% in the prior year period as a result of lower volume, higher materials costs, sales mix and planned increases in investments to support our brands partially offset by price increases implemented in the first quarter of 2019.

~~Activewear~~

~~Activewear net sales increased 7%. Core~~ ~~Champion~~ ~~sales within the Activewear segment, which we define as~~ ~~Champion~~ sales outside of the mass retail channel, were up over 40% in the nine months of 2019, driven by strong consumer demand and growth across channels. Sales declined in the remainder of our activewear business due to our previous exit from commodity programs within the mass retail channel as we focused on remixing parts of our activewear business to branded products and softer trends in the printwear channel.

~~Activewear operating margin was 15.0%, representing an increase from 14.5% in the prior year as a result of improved~~ ~~Champion~~ profitability, higher margin product sales mix from our remixing activity and pricing, partially offset by higher materials costs and higher selling, general and administrative expenses, reflecting an increase in investments to support our brands and growth initiatives.

~~International~~

~~Net sales in the International segment increased 8% as a result of the following:~~

~~Our acquisition of Bras N Things in the first quarter of 2018, which contributed non-organic net sales of $18 million;~~

Organic sales on a constant currency basis, defined as sales excluding the impact of foreign currency and businesses acquired within 12 months, increased 13%, driven by growth in both our innerwear and activewear businesses.

~~Partially offset by:~~

~~Unfavorable impact of foreign currency exchange rates of approximately $103 million.~~

International operating margin was 15.0%, an increase from prior year period of 14.6%, primarily due to increased efficiencies of scale and the continued realization of acquisition synergies, coupled with high margin contributions from the acquired Bras N Things business.

~~Other~~

Other net sales were lower as a result of continued declines in hosiery sales in the United States partially offset by increased traffic at our retail outlet stores. Operating margin decreased primarily due to the decrease in sales volume in hosiery.

~~Corporate~~

Corporate expenses included certain administrative costs including acquisition, integration and other action-related charges. Corporate expenses were flat in the nine months of 2019 compared to the same period in 2018 primarily due to lower acquisition, integration and other action-related charges and lower bad debt expense as a result of a charge of approximately $14 million recorded in the third quarter of 2018 related to the Sears bankruptcy filing offset by an increase in variable compensation accruals. Supply chain actions include the reduction of overhead costs, principally within our Western Hemisphere network. Acquisition and integration costs are expenses related directly to an acquisition and its integration into the organization. Other acquisitions and other action-related costs include acquisition and integration charges for smaller acquisitions such as Bras N Things, as well as other action-related costs including corporate workforce reductions.

Nine Months Ended
September 28,
2019 September 29,
2018
(dollars in thousands)
Acquisition, integration and other action-related costs:
Supply chain actions $ 39,714
$ —
Hanes Europe Innerwear —
24,107
Hanes Australasia —
14,183
Other acquisitions and other action-related costs 4,205
27,224
Total acquisition, integration and other action-related costs $ 43,919
$ 65,514



	Quarters Ended
	March 28, 2020		March 30, 2019
	(dollars in thousands)
Restructuring and other action-related charges included in operating profit:
Supply chain actions	$	14,065	$	17,692
Program exit costs	8,215		—
Other restructuring costs	6,919		3,681
Total restructuring and other action-related charges included in operating profit	$	29,199	$	21,373

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. The primary cash requirements of our business are payments to our employees and vendors in the normal course of business, capital expenditures, maturities of debt and related interest payments, business acquisitions, contributions to our pension plans, repurchases of our stock, regular quarterly dividend payments and income tax payments. The rapid expansion of the COVID-19 global pandemic has resulted in a sharp decline in net sales and earnings in the first quarter of 2020, which has a corresponding impact on our liquidity. We are focused on preserving our liquidity and managing our cash flow during these unprecedented conditions with preemptive actions to enhance our ability to meet our short-term liquidity needs. Such actions include, but are not limited to, operating our manufacturing and distribution facilities on a demand-adjusted basis; reducing our discretionary spending such as media and marketing expenses; focused working capital management; reducing capital expenditures; suspending our share buyback program until further notice; reducing payroll costs, through employee furloughs and pay cuts; drawing down on our Revolving Loan Facility and amending certain existing debt facilities.

In April 2020, given the rapidly changing environment and level of uncertainty being created by the COVID-19 global 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 effects changes to certain provisions and covenants under the Senior Secured Credit Facility during the period beginning with the fiscal quarter ending June 27, 2020 and continuing through the fiscal quarter ending July 3, 2021 (such period of time, the “Covenant Relief Period”), including: (a) suspension of compliance with the maximum leverage ratio; (b) reduction of the minimum interest coverage ratio from 3.00 to 1.00 to (i) 2.00 to 1.00 for the fiscal quarters ending June 27, 2020 through April 3, 2021 and (ii) 2.25 to 1.00 for the fiscal quarter ending July 3, 2021; (c) a minimum last twelve months EBITDA covenant of $625 million as of June 27, 2020, $505 million as of September 26, 2020, $445 million as of January 2, 2021, $435 million as of April 3, 2021 and $505 million as of July 3, 2021; (d) a minimum liquidity covenant of $300 million, increasing to $400 million upon certain conditions; (e) increased limitations on investments, acquisitions, restricted payments and the incurrence of indebtedness; and (f) anti-cash hoarding provisions. During the Covenant Relief Period, the applicable margin and applicable commitment fee margin will be calculated assuming the leverage ratio is greater than or equal to 4.50 to 1.00. The amendment also permanently amends the definition of “leverage ratio” for purposes of the financial covenant calculation to remove the maximum amount of cash allowed to be netted from the definition of “indebtedness” and to allow for the netting of cash from certain foreign subsidiaries. After obtaining the debt amendment, 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 global pandemic worsen and our earnings and operating cash flows do not start to recover as currently estimated by us, this could impact our ability to maintain compliance with our amended 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.

We cannot assure you that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 global pandemic. As a consequence, our estimates of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change and have a material impact on our results of operations and financial condition. We believe we have sufficient cash and available borrowings for our foreseeable liquidity needs.

We typically use cash during the first half of the year and generate most of our cash flow in the second half of the year. We expect our top priorities of our cash deployment strategy in the future to include organic growth (via capital expenditures), debt prepayments and dividends. After funding those priorities, to the extent there is remaining cash or borrowing capacity available, we generally intend to invest in strategic acquisitions and share repurchases.

~~There have been no significant changes in the cash requirements for our business from those described in our Annual Report on Form 10-K for the year ended December 29, 2018.~~

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

In March 2020, we drew down $630 million under our Revolving Loan Facility as a precautionary measure, to provide us with additional financial flexibility to manage our business with a safety-first emphasis during the unknown duration and impact of the COVID-19 global pandemic.

We had the following borrowing capacity and availability under our credit facilities as of ~~September~~March 28, ~~2019:~~2020:


	As of September 28, 2019				As of March 28, 2020
	Borrowing Capacity		Borrowing Availability		Borrowing Capacity		Borrowing Availability
	(dollars in thousands)				(dollars in thousands)
Senior Secured Credit Facility:
Revolving Loan Facility	$	1,000,000	$	995,565	$	1,000,000	$	45,924
Australian Revolving Loan Facility	40,499		33,749		36,775		5,958
European Revolving Loan Facility	109,421		—		111,359		—
Accounts Receivable Securitization Facility⁽¹⁾	273,604		65,000		152,153		—
Other international credit facilities	139,959		119,072		145,924		134,716
Total liquidity from credit facilities	$	1,563,483	$	1,213,386	$	1,446,211	$	186,598
Cash and cash equivalents							1,083,780
Total liquidity							$	1,270,378


(1)	Borrowing availability under the Accounts Receivable Securitization Facility is subject to a quarterly fluctuating facility limit, not to exceed ~~$300~~$225 million, and permitted only to the extent that the face of the receivables in the collateral pool, net of applicable reserves and other deductions, exceeds the outstanding loans.

We currently believe that our existing cash balances and cash generated by operations (typically in the second half of the year), together with our borrowing availability, will enable us to comply with the terms of our indebtedness and meet foreseeable liquidity requirements.

The following have impacted or may impact our liquidity:

The negative impact of the COVID-19 global pandemic on our business as discussed above under “Impact of COVID-19 on Our Business”.

For the quarter ended March 28, 2020 and prior to the expansion of COVID-19, we entered into transactions to repurchase approximately 14.5 million shares of our common stock at a total cost of $200 million. At March 28, 2020, the remaining repurchase authorization under our current share repurchase program totaled approximately 25.5 million shares. While we may repurchase additional shares of our common stock in the future, the program has been suspended in connection with the amendment to our Senior Secured Credit Facility described above.

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.~~debt and ongoing financial covenants under those debt facilities, even after taking into account recent amendments.

We ~~may pursue strategic business acquisitions in the future.~~

~~We expect to continue to invest~~have invested in efforts to accelerate worldwide omnichannel and global growth initiatives, as well as marketing and brand building. We anticipate capital expenditures to decrease for the remainder of the year compared to the prior year as we tightly manage spending to help mitigate the potential negative impact of the COVID-19 global pandemic on our business and liquidity.

We expect to continue to invest in efforts to improve operating efficiencies and lower costs.

We may pursue strategic business acquisitions in the future.

We made a contribution of ~~$26~~$25 million to our U.S. pension plan in the ~~nine months~~quarter ended ~~September~~March 28, ~~2019.~~2020. 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. ~~We have also reevaluated~~Consistent with our ~~reinvestment~~investment strategy ~~with regards~~as it pertains to our ~~historic~~historical foreign earnings ~~which were taxed~~ as ~~part~~ of ~~the Tax Act and~~December 28, 2019, we intend to remit historical foreign earnings totaling ~~$1.4~~approximately $1.0 billion.

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 Act, which began in 2018, in addition to any estimated income taxes due based on current year taxable income. In the ~~nine months~~quarters ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018,~~March 30, 2019, we made no installment payments ~~of $7 million and $13 million, respectively,~~ on our transition tax liability and have a remaining balance due of approximately ~~$100~~$101 million to be paid in installment payments through 2025.

~~Our Board~~In March 2020, we drew down $630 million under our Revolving Loan Facility as a precautionary measure to provide us with additional financial flexibility to manage our business with a safety-first emphasis during the unknown duration and impact of ~~Directors has authorized a regular quarterly dividend.~~the COVID-19 global pandemic. We subsequently repaid $490 million of this borrowing in April 2020.

We ~~may repurchase shares~~are making more than 320 million face masks and expect to make more than 20 million medical gowns for the U.S. government. We are also ramping up production to supply masks to large employers seeking to reopen business operations after being closed as a result of the ~~Company’s common stock under~~COVID-19 global pandemic.

We expect the ~~current share repurchase program, which has been previously approved by our Board of Directors. We did not repurchase any shares of common stock during the nine months ended September 28, 2019~~employee furloughs and ~~September 29, 2018. At September 28, 2019, the remaining repurchase authorization totaled~~pay cuts, as well as reductions in discretionary spending such as media and marketing expenses, to save approximately 20$200 million ~~shares.~~in 2020.

Sources and Uses of Our Cash

The information presented below regarding the sources and uses of our cash flows for the ~~nine months~~quarters ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018~~March 30, 2019 was derived from our condensed consolidated financial statements.


	Nine Months Ended						Quarters Ended
	September 28, 2019			September 29, 2018			March 28, 2020			March 30, 2019
	(dollars in thousands)						(dollars in thousands)
Operating activities	$	244,700		$	141,289		$	(83,216	)	$	(194,291	)
Investing activities	(97,780		)	(396,609		)	(24,477		)	(25,133		)
Financing activities	(285,616		)	254,582			877,514			71,707
Effect of changes in foreign currency exchange rates on cash	1,008			879			(15,061		)	2,104
Change in cash, cash equivalents and restricted cash	(137,688		)	141			754,760			(145,613		)
Cash, cash equivalents and restricted cash at beginning of year	455,732			421,566			329,923			455,732
Cash, cash equivalents and restricted cash at end of period	318,044			421,707			1,084,683			310,119
Less restricted cash at end of period	1,020			23,208			903			23,039
Cash and cash equivalents per balance sheet at end of period	$	317,024		$	398,499		$	1,083,780		$	287,080

Operating Activities

Our overall liquidity ~~is primarily~~has historically been driven by our ~~strong~~ cash flow provided by operating activities, which is dependent on net income and changes in our working ~~capital.~~capital, and is subject to certain risks related to the COVID-19 global pandemic. We typically use cash during the first half of the year and generate most of our cash flow in the second half of the year. As compared to the prior year, the ~~higher~~lower net cash ~~generated~~used by operating activities was due to ~~higher profitability and~~ improved working capital management, specifically related to ~~the reduction of~~ inventory ~~levels, offset~~and accounts receivable. Cash used by operating activities includes a $25 million and a $26 million pension contribution made in the first quarter of ~~2019. Cash generated by operating~~2020 and 2019, respectively.

Investing Activities

Investing activities ~~in the nine months ended September 29, 2018 included the final Champion Europe contingent consideration payment of $32 million made~~ in the first quarter of ~~2018~~2020 and ~~a $15 million pension contribution in the second quarter of 2018.~~

~~Investing Activities~~

~~The decrease in cash used by investing activities was~~2019 primarily the result of the acquisition of Bras N Things in the first quarter of 2018. During the third quarter of 2019, we paid $21 million of the indemnification escrow related to the Bras N Things acquisition. Additionally, we increasedinclude capital investments into our business to support our global growth initiatives. We anticipate capital expenditures to decrease for the remainder of the year compared to the prior ~~year.~~year as we tightly manage spending to help mitigate the potential negative impact of the COVID-19 global pandemic on our business and liquidity.

Financing Activities

Net cash from financing activities ~~decreased~~increased primarily as a result of ~~lower~~higher borrowings on our ~~loan facilities~~Revolving Loan Facilities in ~~2019~~the first quarter of 2020 as compared to the same period of ~~2018 including~~2019. We increased our ~~payment~~borrowings in the first quarter of 2020 primarily to strengthen our cash position and to provide us with additional financial flexibility to manage our business with a safety-first emphasis during the unknown duration and impact of the ~~outstanding balance and termination of the Australian Term A-1 loan in the second quarter of 2019.~~COVID-19 global pandemic.

Financing Arrangements

InAs discussed above, in March ~~2019,~~2020, we drew down $630 million under our Revolving Loan Facility to further strengthen our cash position. Additionally, in March 2020, we amended the Accounts Receivable Securitization Facility. This amendment primarily ~~increased~~decreased the fluctuating facility limit to ~~$300~~$225 million (previously ~~$225~~$300 million) and extended the maturity date to March ~~2020.~~2021.

We believe our financing structure provides a secure base to support our operations and key business strategies. As of ~~September~~March 28, ~~2019,~~2020, we were in compliance with all financial covenants under our credit facilities and other outstanding indebtedness. We continue to monitor our covenant compliance carefully. WeUnder the terms of our Senior Secured Credit Facility, we are required to maintain a minimum interest coverage ratio and a maximum leverage ratio. The interest coverage ratio covenant is the ratio of our EBITDA for the preceding four fiscal quarters to our consolidated total interest expense and the leverage ratio covenant is the ratio of our total debt to EBITDA for the preceding four fiscal quarters. EBITDA is defined as earnings before interest, income taxes, depreciation expense and amortization, as computed pursuant to the Senior Secured Credit Facility. In April 2020, given the rapidly changing environment and level of uncertainty being created by the COVID-19 global 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. After obtaining the debt amendment discussed above, we expect to maintain compliance with our covenants ~~for~~during the ~~foreseeable future,~~Covenant Relief Period, however economic conditions or the occurrence of events discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December ~~29, 2018~~28, 2019 and in this Quarterly Report on Form 10-Q or other SEC filings could cause noncompliance.

In July 2019, we entered into two pay-fixed rate, receive-fixed rate cross-currency swap contracts with a total notional amount of €300 million that were designated as hedges of a portion of the beginning balance of our net investment in our 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 our fixed-rate 4.625% Senior Notes to a fixed-rate 2.3215% Euro-denominated obligation.

~~In July 2019, we refinanced the European Revolving Loan Facility primarily to extend the maturity date to September 2020.~~

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements within the meaning of Item 303(a)(4) of SEC Regulation S-K.

Critical Accounting Policies and Estimates

We have chosen accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial condition in conformity with accounting principles generally accepted in the United States. We apply these accounting policies in a consistent manner. Our significant accounting policies are discussed in Note, 2, “Summary of Significant Accounting Policies,” to our financial statements included in our Annual Report on Form 10-K for the year ended December ~~29, 2018.~~28, 2019.

The application of critical accounting policies requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. These estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. We evaluate these estimates and assumptions on an ongoing basis and may retain outside consultants to assist in our evaluation. If actual results ultimately differ from previous estimates, the revisions are included in results of operations in the period in which the actual amounts become known. The critical accounting policies that involve the most significant management judgments and estimates used in preparation of our financial statements, or are the most sensitive to change from outside factors, are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December ~~29, 2018.~~28, 2019. There have been no material changes in these policies from those described in our Annual Report on Form 10-K for the year ended December ~~29, 2018.~~28, 2019.

Recently Issued Accounting Pronouncements

For a summary of recently issued accounting pronouncements, see Note, 2, “Recent Accounting Pronouncements” to our 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 December ~~29, 2018.~~28, 2019.



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 Interim 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 Interim Chief Financial Officer concluded that our disclosure controls and procedures were ~~effective.~~not effective as of March 28, 2020 due to a material weakness in internal control over financial reporting described in management’s annual report on internal control over financial reporting in our Annual Report on Form 10-K for the year ended December 28, 2019.

Notwithstanding the identified material weakness, management, including our principal executive officer and principal financial officer have determined, based on the procedures we have performed, that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at March 28, 2020 and for the periods presented in accordance with U.S. GAAP.

Remediation Plan for Material Weakness

Management continues to enhance its internal control over financial reporting and to take steps to remediate the material weakness identified during the year ended December 28, 2019 related to income taxes. During the quarter ended March 28, 2020, we made progress in our remediation of the control deficiency noted above. In order to remediate the material weakness in our internal controls related to accounting for income taxes, management is enhancing processes and internal controls related to deferred income taxes, effective income tax rate reconciliation and related disclosures. These enhanced controls include documentation evidencing the effective design and operation of annual and quarterly internal controls related to various aspects of deferred taxes and tax rate reconciliation. To assess our remediation progress, during the second quarter of 2020, we plan to test the operating effectiveness of the annual controls by performing our redesigned and enhanced year-end processes using first quarter financial information. These annual and quarterly controls will not be deemed effective until performed effectively for the year ended January 2, 2021.

We believe the measures described above will remediate the control deficiencies we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify certain of the remediation measures described above. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

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 Interim 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.

PART II



Item 1.	Legal Proceedings

Although we are subject to various claims and legal actions that occur from time to time in the ordinary course of our business, we are not party to any pending legal proceedings that we believe could have a material adverse effect on our business, results of operations, financial condition or cash flows.



Item 1A.	Risk Factors

~~The~~In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that affect our business and financial results that are discussed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December ~~29, 2018. There are no material changes to the risk~~28, 2019. These factors ~~previously disclosed, nor have we identified any previously undisclosed risks that~~ could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. Other than as set forth below, there have been no material changes to such risk factors.

The novel coronavirus disease (COVID-19) global pandemic has had and is expected to continue to have an adverse impact on our business.

The COVID-19 global pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial ~~results.~~markets. We expect the COVID-19 global pandemic to have a material impact on our business, including our results of operations, financial condition and liquidity. The extent of the impact of the COVID-19 global pandemic on our business, including our ability to execute our near-term and long-term business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and scope of the pandemic, which are uncertain and cannot be predicted, including the effect on our suppliers and disruptions to the global supply chain; our ability to sell and provide our products, including as a result of travel restrictions and people working from home; restrictions or disruptions to transportation, including reduced availability of ground or air transport; and the ability of our customers to pay for our services and products.

As a result of the COVID-19 global pandemic, and in response to government mandates or recommendations made by governmental or other authorities, as well as decisions we have made to protect the health and safety of our employees, consumers and communities, we have temporarily closed our retail stores globally. We may face longer term store closure requirements and other operational restrictions with respect to some or all of our physical locations for prolonged periods of time due to, among other factors, evolving and increasingly stringent governmental restrictions including public health directives, quarantine policies or social distancing measures. In addition, many of our customers, including significant customers in our wholesale distribution channels, have closed many of their stores, which will adversely impact our revenues from these customers. As a result, we expect our financial results to be materially adversely impacted.

In addition, consumer fears about becoming ill with the disease may continue, which will adversely affect traffic to our and our customers' stores. Consumer spending generally may also be negatively impacted by general macroeconomic conditions and consumer confidence, including the significant economic downturn, resulting from the COVID-19 global pandemic. This may negatively impact sales in our stores and our e-commerce channel and may cause our wholesale customers to purchase fewer products from us. The continued significant reduction in consumer visits to, and spending at, our and our customers' stores, caused by COVID-19, and any decreased spending at retail stores or online caused by decreased consumer confidence and spending following the pandemic, would result in a loss of sales and profits and other material adverse effects.

The COVID-19 global pandemic also has the potential to significantly impact our supply chain if the factories that manufacture our products, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers are disrupted, temporarily closed or experience worker shortages. We may also see disruptions or delays in shipments and negative impacts to pricing of certain components of our products.

In addition, the impact of COVID-19 on macroeconomic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, commodity prices, and interest rates. Even after the COVID-19 global pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.

The continued disruption of global financial markets as a result of the COVID-19 global pandemic could have a negative impact on our ability to access capital in the future.

As a result of the COVID-19 global pandemic, including related guidance or requirements of governmental or other authorities, we also have recently implemented a work from home policy for many of our corporate employees. This policy may negatively impact productivity and cause other disruptions to our business.

The extent of the impact of the COVID-19 global pandemic on our business is highly uncertain and difficult to predict, as information is rapidly evolving with respect to the duration and severity of the pandemic.

The COVID-19 global pandemic has disrupted our operations and if we are unable to re-commence normal operations, we may be out of compliance with our required covenants in certain of our debt facilities.

Under the terms of our Senior Secured Credit Facility, we are required to maintain a minimum interest coverage ratio and a maximum leverage ratio. Accordingly, in April 2020, given the impact on our earnings and the rapidly changing environment and level of uncertainty being created by the COVID-19 global pandemic, 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.

Any additional covenant waivers that may be required may lead to fees associated with obtaining the waiver, increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable to us under these debt facilities, and such increased costs, restrictions and modifications may vary among debt facilities. In addition, our ability to provide additional lender protections under these facilities if necessary, including the granting of security interests in collateral, will be limited by the restrictions in our debt facilities. There can be no assurance that we would be able to obtain future waivers in a timely manner, on acceptable terms or at all. If we were not able to obtain a covenant waiver under any one or more of these debt facilities, we would be in default of such agreements, which could result in cross defaults to our other debt agreements. As a consequence, we would need to refinance or repay the applicable debt facility or facilities, and would be required to raise additional debt or equity capital, or divest assets, to refinance or repay such facility or facilities. If we were to be unable to obtain a covenant waiver in the future under any one or more of these debt facilities, there can be no assurance that we would be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay such facility or facilities.

With respect to each of our debt facilities, if we were unable to comply with the covenants of any such facilities and were not to obtain a waiver, refinance or repay such debt facilities, it would lead to an event of default under such facilities, which could lead to an acceleration of the indebtedness under such debt facilities. In turn, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contract payables. As a result, the failure to obtain the covenant waivers described above would have a material adverse effect.



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 March 28, 2020.



	Total Number of Shares Purchased	Average Price Paid Per Share ⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased under the Program ⁽²⁾
December 29, 2019 to February 1, 2020	—	$	—	—	20,359,607
February 2, 2020 to February 29, 2020	12,240,906	14.01		12,240,906	27,759,094
March 1, 2020 to March 28, 2020	2,223,424	12.82		2,223,424	25,535,670
Total	14,464,330			14,464,330

(1) Average price paid per share for shares purchased as part of our publicly-announced plan.

(2) On February 6, 2020, our Board of Directors approved a share repurchase program for up to 40 million shares to be repurchased in open market transactions, subject to market conditions, legal requirements and other factors. Unless terminated earlier by our Board of Directors, the new program will expire when we have repurchased all shares authorized for repurchase under the new program. The new program replaced our previous share repurchase program for up to 40 million shares that was originally approved on April 27, 2016. We did not repurchase any shares under the previous program during the quarter ended March 28, 2020.

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.



Item 6.	Exhibits



Exhibit Number		Description

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

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

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

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

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

4.1		Description of Securities.

4.2		Supplemental Indenture No. 9 (to Indenture dated June 3, 2016), dated as of April 14, 2020, among Hanesbrands Finance Luxembourg S.C.A., Hanesbrands (HK) Limited, Hanesbrands Korea LLC and US Bank Trustees Limited.

31.1		Certification of Gerald W. Evans, Jr., Chief Executive Officer.

31.2		Certification of ~~Barry A. Hytinen,~~M. Scott Lewis, Interim Chief Financial Officer.

32.1		Section 1350 Certification of Gerald W. Evans, Jr., Chief Executive Officer.

32.2		Section 1350 Certification of ~~Barry A. Hytinen,~~M. Scott Lewis, Interim Chief Financial Officer.

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

101.SCH XBRL		Taxonomy Extension Schema Document

101.CAL XBRL		Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL		Taxonomy Extension Label Linkbase Document

101.PRE XBRL		Taxonomy Extension Presentation Linkbase Document

101.DEF XBRL		Taxonomy Extension Definition Linkbase Document

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/ ~~Barry A. Hytinen~~M. Scott Lewis
		~~Barry A. Hytinen~~M. Scott Lewis Interim Chief Financial Officer (Duly authorized officer and principal financial officer)

Date: ~~October 31, 2019~~April 30, 2020

3440



Cash and cash equivalents	$	2,765
Accounts receivable, net	197
Inventories	9,610
Other current assets	1,637
Property, net	11,764
Trademarks and other identifiable intangibles	278,214
Deferred tax assets and other noncurrent assets	2,318
Total assets acquired	306,505
Accounts payable	4,929
Accrued liabilities and other	16,339
Deferred tax liabilities and other noncurrent liabilities	7,864
Total liabilities assumed	29,132
Net assets acquired	277,373
Goodwill	111,832
Total purchase price	$	389,205



Cash consideration paid	$	337,123
Indemnification escrow asset	25,140
Debt assumed	26,942
Total purchase price	$	389,205



	Nine Months Ended
	September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows from leases	$	114,805
Right-of-use assets obtained in exchange for lease obligations - non-cash activity	$	54,524



2019	$	148,218
2020	129,660
2021	110,185
2022	91,411
2023	66,753
Thereafter	115,941
	$	662,168



2019	$	36,069
2020	155,343
2021	115,620
2022	83,524
2023	67,292
Thereafter	124,689
Total lease payments	582,537
Less interest	73,399
	$	509,138



	Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income
		Quarter Ended					Nine Months Ended
		September 28, 2019		September 29, 2018			September 28, 2019		September 29, 2018
Foreign exchange contracts⁽¹⁾	Cost of sales	$	6,991	$	(2,467	)	$	21,355	$	(9,686	)