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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 2020
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number: 001-32891
Hanesbrands Inc.
(Exact name of registrant as specified in its charter)
Maryland20-3552316
(State of incorporation)(I.R.S. employer identification no.)
1000 East Hanes Mill Road
Winston-Salem,North Carolina27105
(Address of principal executive office)(Zip code)
(336) 519-8080
(Registrant’s telephone number including area code)
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 classTrading SymbolName of each exchange on which registered
Common Stock, Par Value $0.01HBINew York Stock Exchange
As of October 30, 2020, there were 348,324,092 shares of the registrant’s common stock outstanding.

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


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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue” or similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding our intent, belief and current expectations about our strategic direction, prospects and future results are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. In particular, statements with respect to trends associated with our business, our future financial performance and the 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, our Quarterly Report on Form 10-Q for the quarter ended March 28, 2020 and our Annual Report on Form 10-K for the year ended December 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.
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PART I

Item 1.Financial Statements

HANESBRANDS INC.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Quarters EndedNine Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Net sales$1,808,266 $1,866,967 $4,863,507 $5,215,918 
Cost of sales1,191,553 1,149,934 3,140,050 3,203,331 
Gross profit616,713 717,033 1,723,457 2,012,587 
Selling, general and administrative expenses442,142 449,962 1,273,220 1,366,272 
Operating profit174,571 267,071 450,237 646,315 
Other expenses5,309 8,066 16,849 23,766 
Interest expense, net43,868 43,091 122,376 137,672 
Income before income tax expense125,394 215,914 311,012 484,877 
Income tax expense22,116 30,823 54,427 69,143 
Net income$103,278 $185,091 $256,585 $415,734 
Earnings per share:
Basic$0.29 $0.51 $0.73 $1.14 
Diluted$0.29 $0.51 $0.72 $1.14 

See accompanying notes to Condensed Consolidated Financial Statements.
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HANESBRANDS INC.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
Quarters EndedNine Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Net income$103,278 $185,091 $256,585 $415,734 
Other comprehensive income (loss):
Translation adjustments23,678 (44,997)1,557 (40,813)
Unrealized gain (loss) on qualifying cash flow hedges, net of tax of $3,035, $(920), $(214) and $2,653, respectively(11,250)2,059 (9,644)(7,018)
Unrecognized income from pension and postretirement plans, net of tax of $(1,396), $(1,358), $(4,462) and $(3,974), respectively3,798 3,605 10,952 10,555 
Total other comprehensive income (loss) 16,226 (39,333)2,865 (37,276)
Comprehensive income$119,504 $145,758 $259,450 $378,458 

See accompanying notes to Condensed Consolidated Financial Statements.
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HANESBRANDS INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
September 26,
2020		December 28,
2019		September 28,
2019
Assets
Cash and cash equivalents$731,481 $328,876 $317,024 
Trade accounts receivable, net984,571 815,210 1,033,938 
Inventories2,170,552 1,905,845 2,095,035 
Other current assets210,617 174,634 174,172 
Total current assets4,097,221 3,224,565 3,620,169 
Property, net553,748 587,896 581,971 
Right-of-use assets461,117 487,787 475,037 
Trademarks and other identifiable intangibles, net1,501,161 1,520,800 1,493,969 
Goodwill1,246,113 1,235,711 1,223,216 
Deferred tax assets200,877 203,331 213,649 
Other noncurrent assets99,447 93,896 115,821 
Total assets$8,159,684 $7,353,986 $7,723,832 
Liabilities and Stockholders’ Equity
Accounts payable$1,144,190 $959,006 $997,069 
Accrued liabilities716,590 531,184 587,932 
Lease liabilities156,709 166,091 145,055 
Notes payable5,257 4,244 4,275 
Accounts Receivable Securitization Facility— — 208,604 
Current portion of long-term debt— 110,914 151,909 
Total current liabilities2,022,746 1,771,439 2,094,844 
Long-term debt3,972,212 3,256,870 3,467,591 
Lease liabilities - noncurrent347,604 358,281 364,083 
Pension and postretirement benefits371,330 403,458 348,674 
Other noncurrent liabilities296,259 327,343 330,547 
Total liabilities7,010,151 6,117,391 6,605,739 
Stockholders’ equity:
Preferred stock (50,000,000 authorized shares; $.01 par value)
Issued and outstanding — None— — — 
Common stock (2,000,000,000 authorized shares; $.01 par value)
Issued and outstanding — 348,288,056, 362,449,037 and 361,612,383, respectively3,483 3,624 3,616 
Additional paid-in capital306,157 304,395 310,327 
Retained earnings1,454,676 1,546,224 1,416,109 
Accumulated other comprehensive loss(614,783)(617,648)(611,959)
Total stockholders’ equity1,149,533 1,236,595 1,118,093 
Total liabilities and stockholders’ equity$8,159,684 $7,353,986 $7,723,832 


See accompanying notes to Condensed Consolidated Financial Statements.
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HANESBRANDS INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except per share data)
(unaudited)
 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at June 27, 2020348,093 $3,481 $302,522 $1,404,326 $(631,009)$1,079,320 
Net income— — — 103,278 — 103,278 
Dividends ($0.15 per common share)
— — — (52,928)— (52,928)
Other comprehensive income— — — — 16,226 16,226 
Stock-based compensation— — 4,538 — — 4,538 
Net exercise of stock options, vesting of restricted stock units and other
195 2 (903)— — (901)
Balances at September 26, 2020348,288 $3,483 $306,157 $1,454,676 $(614,783)$1,149,533 

 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at December 28, 2019362,449 $3,624 $304,395 $1,546,224 $(617,648)$1,236,595 
Net income— — — 256,585 — 256,585 
Dividends ($0.45 per common share)
— — — (160,264)— (160,264)
Other comprehensive income— — — — 2,865 2,865 
Stock-based compensation— — 13,572 — — 13,572 
Net exercise of stock options, vesting of restricted stock units and other
303 4 445 — — 449 
Share repurchases(14,464)(145)(12,255)(187,869)— (200,269)
Balances at September 26, 2020348,288 $3,483 $306,157 $1,454,676 $(614,783)$1,149,533 






















See accompanying notes to Condensed Consolidated Financial Statements.
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HANESBRANDS INC.
Condensed Consolidated Statements of Stockholders’ Equity - (Continued)
(in thousands, except per share data)
(unaudited)

 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at June 29, 2019361,531 $3,615 $308,555 $1,285,842 $(572,626)$1,025,386 
Net income— — — 185,091 — 185,091 
Dividends ($0.15 per common share)
— — — (54,824)— (54,824)
Other comprehensive loss— — — — (39,333)(39,333)
Stock-based compensation— — 1,467 — — 1,467 
Net exercise of stock options, vesting of restricted stock units and other
81 1 305 — — 306 
Balances at September 28, 2019361,612 $3,616 $310,327 $1,416,109 $(611,959)$1,118,093 

 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at December 29, 2018361,330 $3,613 $284,877 $1,079,503 $(495,867)$872,126 
Net income— — — 415,734 — 415,734 
Dividends ($0.45 per common share)
— — — (164,500)— (164,500)
Other comprehensive loss— — — — (37,276)(37,276)
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
— — — 6,556 — 6,556 
Stranded tax related to U.S. pension plan
— — — 78,816 (78,816)— 
Balances at September 28, 2019361,612 $3,616 $310,327 $1,416,109 $(611,959)$1,118,093 

See accompanying notes to Condensed Consolidated Financial Statements.
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HANESBRANDS INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 26,
2020		September 28,
2019
Operating activities:
Net income$256,585 $415,734 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation67,676 71,612 
Amortization of acquisition intangibles18,503 18,709 
Other amortization8,091 7,521 
Impairment of intangible assets20,319 — 
Amortization of debt issuance costs8,303 7,021 
Stock compensation expense13,801 8,794 
Deferred taxes6,853 (3,661)
Other5,004 1,662 
Changes in assets and liabilities:
Accounts receivable(175,879)(170,348)
Inventories(259,367)(56,470)
Other assets(43,359)(26,031)
Accounts payable189,566 (11,969)
Accrued pension and postretirement benefits(18,965)(14,361)
Accrued liabilities and other134,091 (3,513)
Net cash from operating activities231,222 244,700 
Investing activities:
Capital expenditures(49,033)(79,950)
Proceeds from sales of assets331 3,530 
Acquisition of business— (21,360)
Other7,618 — 
Net cash from investing activities(41,084)(97,780)
Financing activities:
Borrowings on notes payable166,558 250,712 
Repayments on notes payable(166,108)(252,084)
Borrowings on Accounts Receivable Securitization Facility227,061 207,105 
Repayments on Accounts Receivable Securitization Facility(227,061)(160,110)
Borrowings on Revolving Loan Facilities1,638,000 2,584,277 
Repayments on Revolving Loan Facilities(1,756,189)(2,585,592)
Borrowings on Senior Notes700,000 — 
Repayments on Term Loan Facilities— (152,248)
Borrowings on International Debt31,222 27,680 
Repayments on International Debt(36,383)(41,424)
Share repurchases(200,269)— 
Cash dividends paid(158,132)(162,689)
Payments of debt issuance costs(14,938)(1,098)
Taxes paid related to net shares settlement of equity awards(1,615)(1,523)
Other1,295 1,378 
Net cash from financing activities203,441 (285,616)
Effect of changes in foreign exchange rates on cash9,052 1,008 
Change in cash, cash equivalents and restricted cash402,631 (137,688)
Cash, cash equivalents and restricted cash at beginning of year329,923 455,732 
Cash, cash equivalents and restricted cash at end of period732,554 318,044 
Less restricted cash at end of period1,073 1,020 
Cash and cash equivalents per balance sheet at end of period$731,481 $317,024 
Capital expenditures included in accounts payable at September 26, 2020 and December 28, 2019, were $8,817 and $19,327, respectively. For the nine months ended September 26, 2020 and September 28, 2019, right-of-use assets obtained in exchange for lease obligations were $39,532 and $54,524, respectively.
See accompanying notes to Condensed Consolidated Financial Statements.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements
(amounts in thousands, except per share data)
(unaudited)


(1)    Basis of Presentation
These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management believes that the disclosures made are adequate for a fair statement of the results of operations, financial condition and cash flows of Hanesbrands Inc. and its consolidated subsidiaries (the “Company” or “Hanesbrands”). In the opinion of management, the condensed consolidated interim financial statements reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of operations, financial condition and cash flows for the interim periods presented herein. The preparation of condensed consolidated interim financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. The duration and severity of the global novel coronavirus ("COVID-19") pandemic, which is subject to uncertainty, is having a significant impact on the Company’s business. Management's estimates and assumptions have contemplated both current and expected impacts related to COVID-19 based on available information. Actual results may vary from these estimates.
These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 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.
Impact of COVID-19
The COVID-19 pandemic has impacted the Company’s business operations and financial results in 2020. During the nine months of 2020, the rapid expansion of the COVID-19 pandemic has resulted in a sharp decline in net sales and earnings in the Company’s apparel businesses due to decreased customer traffic and temporary retail store closures worldwide. While most of the Company’s retail stores were temporarily closed for varying periods of time throughout the second quarter, most reopened by the end of the second quarter but have experienced, and are expected to continue to experience, reductions in customer traffic and therefore, net sales. In addition, many of the Company’s wholesale customers have also experienced business disruptions, including lower traffic and consumer demand, resulting in decreased shipments to these customers. Sales of personal protective equipment (“PPE”), used to help mitigate the spread of the COVID-19 virus, partially offset the negative impact of the decline in net sales and earnings due to the COVID-19 pandemic on the Company’s financial results. In addition, the Company’s e-commerce sites have remained open in all regions and online sales have grown as consumer spending continued to shift towards online shopping experiences due to the changing retail landscape as a result of the COVID-19 pandemic. The Company’s operating results also reflected impairment charges related to intangible assets, charges to reserve for increased excess and obsolete inventory, bad debt charges and charges to re-start the Company’s supply chain following the extended shut-down of parts of its manufacturing network due to the ongoing effects of the COVID-19 pandemic. While many retail stores have reopened and many government restrictions have been removed or lightened, the ultimate impact of the COVID-19 pandemic remains highly uncertain and could continue to have a material adverse impact on the Company’s business operations and financial results, including net sales, earnings and cash flows for the remainder of 2020, and beyond.
Goodwill and indefinite-lived intangible assets are evaluated for impairment at least annually as of the first day of the third quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or intangible asset below its carrying values. During the second quarter of 2020, the Company completed a quantitative impairment analysis for certain indefinite-lived intangible assets as a result of the significant impact of the COVID-19 pandemic on their performance. Based on this analysis, the Company recorded impairment charges of $20,319 on trademarks and other intangible assets which are reflected in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income.
In connection with the annual goodwill impairment testing performed in the third quarter of 2020, the Company performed a quantitative assessment utilizing an income approach to estimate the fair value of each reporting unit. The most significant assumptions include the weighted average cost of capital, revenue growth rate, terminal growth rate and operating profit margin, all of which are used to estimate the fair value of the reporting units and indefinite-lived intangible assets. The tests indicated the reporting units had fair values that exceeded their carrying values. Certain reporting units, including Hanes
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Europe Innerwear and U.S. Hosiery, are considered to be at a higher risk for future impairment if any assumptions used in the estimate of the reporting units’ fair values change in the future given their respective fair values exceeded their carrying values by less than 20% and trends in the associated businesses indicate a declining fair value. In particular, as of September 26, 2020, the fair value of the Hanes Europe Innerwear reporting unit is slightly higher than its carrying value. The combined goodwill associated with these reporting units was approximately $120,000. Additionally, in connection with the annual impairment testing, the Company performed a quantitative assessment, utilizing an income approach to estimate the fair value of each indefinite-lived intangible asset. The tests indicated the indefinite-lived intangible assets have fair values that exceeded their carrying values. Certain indefinite-lived trademarks are considered to be at a higher risk for future impairment if any assumptions used in the estimate of the trademarks’ fair value change in the future given their respective fair values exceeded their carrying values by less than 20% and trends in the associated businesses indicate a declining fair value. As of September 26, 2020, the Company considered four trademarks within the Hanes Europe Innerwear business to be at a higher risk for future impairment. The carrying value of these four indefinite-lived trademarks was approximately $80,000. Although the Company determined that no impairment exists for the Company's goodwill or indefinite-lived intangible assets, these assets could be at risk for future impairment should global economic conditions continue to deteriorate beyond current expectations as a result of the COVID-19 pandemic.
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 connection with such revision, the Company also corrected for certain other immaterial errors. In connection with the filing of this Quarterly Report on Form 10-Q, the Company has revised the accompanying condensed consolidated interim financial statements as of and for the quarter and nine months ended September 28, 2019 to correct for the impact of such errors, including the impact to retained earnings as of September 28, 2019 to correct for the errors which originated in periods prior to 2019, which primarily related to the tax errors. The accompanying footnotes have also been corrected to reflect the impact of the revisions of the previously filed condensed consolidated interim financial statements. 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 quarter and nine months ended September 28, 2019.
(2)    Recent Accounting Pronouncements
Financial Instruments - Credit Losses
In June 2016, the FASB issued Accounting Standards Update (“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 were effective for the Company in the first quarter of 2020 and apply to its trade receivables.
Under the new accounting rules, trade receivables 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 did 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
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
eliminating Step 2 from the goodwill impairment 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 were effective for the Company in the first quarter of 2020. As a result of adopting the new rules, the Company compared the estimated fair value of its reporting units to their respective carrying values when evaluating the recoverability of goodwill. When 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 exceed the goodwill allocated to the reporting unit. The adoption of the new accounting rules did not have an impact on the Company’s financial condition, results of operations or cash flows.
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 were 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 financial condition, results of operations or cash flows; however, its disclosures 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 accounting rules expand disclosure requirements for employer sponsored defined benefit pension and other retirement plans. The new accounting rules were 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 financial condition, results of operations or cash flows; however, expanded disclosures will be 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 were 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 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 does not expect the adoption of the new accounting rules to have a material impact on the Company’s financial condition, results of operations, cash flows or disclosures.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
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.
(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:

Quarters EndedNine Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Third-party brick-and-mortar wholesale$1,277,261 $1,436,935 $3,600,404 $4,029,352 
Consumer-directed531,005 430,032 1,263,103 1,186,566 
Total net sales$1,808,266 $1,866,967 $4,863,507 $5,215,918 
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 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. Additionally, in the quarter and nine months ended September 26, 2020, third-party brick-and-mortar wholesale revenue includes $4,053 and $645,776 of revenue from contracts with governments generated from the sale of both cloth face coverings and gowns for use to help mitigate the spread of the virus during the COVID-19 pandemic, respectively.
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 (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
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
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 26, 2020 included in the “Other current assets” line of the Condensed Consolidated Balance Sheet.
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.
(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:
Quarters EndedNine Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Basic weighted average shares outstanding350,703 364,743 353,419 364,650 
Effect of potentially dilutive securities:
Stock options90 437 151 463 
Restricted stock units809 412 380 361 
Employee stock purchase plan and other2 5 6 4 
Diluted weighted average shares outstanding351,604 365,597 353,956 365,478 
For the quarters ended September 26, 2020 and September 28, 2019, there were no anti-dilutive restricted stock units. For the nine months ended September 26, 2020 and September 28, 2019, there were 499 and 5 restricted stock units excluded from the diluted earnings per share calculation, respectively, because their effect would be anti-dilutive. For the quarter and nine months ended September 26, 2020, there were 151 and 50 stock options to purchase shares of common stock excluded from the diluted earnings per share calculation, respectively, because their effect would be anti-dilutive. For the quarter and nine months ended September 28, 2019, there were no anti-dilutive stock options to purchase shares of common stock.
On October 27, 2020, 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 1, 2020 to stockholders of record at the close of business on November 10, 2020.
On February 6, 2020, the Company’s Board of Directors approved a new share repurchase program for up to 40,000 shares to be repurchased in open market transactions, subject to market conditions, legal requirements and other factors. 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 September 26, 2020, the Company did not enter into any transactions to repurchase shares under the new program. For the nine months ended September 26, 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 2020 through the expiration of the program on February 6, 2020 or during the quarter or nine months ended September 28, 2019. At September 26, 2020, the remaining repurchase authorization under the current share repurchase program totaled 25,536 shares. The primary objective of the share repurchase program is to utilize excess cash to generate shareholder value. Share repurchases are currently prohibited under the Senior Secured Credit Facility.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
(6)    Inventories
Inventories consisted of the following: 
September 26,
2020		December 28,
2019		September 28,
2019
Raw materials$90,386 $83,545 $98,374 
Work in process124,902 136,592 137,248 
Finished goods1,955,264 1,685,708 1,859,413 
$2,170,552 $1,905,845 $2,095,035 
(7)    Debt and Notes Payable
Debt and notes payable consisted of the following: 
Interest Rate as of September 26,
2020		Principal AmountMaturity Date
 September 26,
2020		December 28,
2019
Senior Secured Credit Facility:
Revolving Loan Facility—$— $— December 2022
Term Loan A2.10%625,000 625,000 December 2022
Term Loan B1.91%300,000 300,000 December 2024
Australian Revolving Loan Facility—— — July 2021
5.375% Senior Notes5.38%700,000 — May 2025
4.875% Senior Notes4.88%900,000 900,000 May 2026
4.625% Senior Notes4.63%900,000 900,000 May 2024
3.5% Senior Notes3.50%581,531 558,847 June 2024
European Revolving Loan Facility—— 110,914 December 2020
Accounts Receivable Securitization Facility—— — March 2021
Total debt4,006,531 3,394,761 
Notes payable5,257 4,244 
Total debt and notes payable4,011,788 3,399,005 
Less long-term debt issuance costs34,319 26,977 
Less notes payable5,257 4,244 
Less current maturities— 110,914 
Total long-term debt$3,972,212 $3,256,870 
As of September 26, 2020, the Company had $989,097 of borrowing availability under the $1,000,000 Revolving Loan Facility after taking into account $10,903 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 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 pandemic. The Company repaid $490,000 of its borrowings under the Revolving Loan Facility in April 2020. The remaining outstanding balance on the Revolving Loan Facility was repaid in connection with the issuance of the 5.375% Senior Notes in May 2020 discussed below.
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 $225,000 as of September 26, 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 $225,000. The Company had no borrowing availability under the Accounts Receivable Securitization Facility at September 26, 2020.
The Company had $42,433 of borrowing availability under the Australian Revolving Loan Facility, $116,604 borrowing availability under the European Revolving Loan Facility and $117,953 of borrowing availability under other international credit
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
facilities after taking into account outstanding borrowings and letters of credit outstanding under the applicable facilities at September 26, 2020.
In March 2020, the Company amended the Accounts Receivable Securitization Facility. This amendment primarily decreased the fluctuating facility limit to $225,000 (previously $300,000) and extended the maturity date to March 2021. As a result of the COVID-19 pandemic, in May 2020, the Company amended the Accounts Receivable Securitization Facility which changed certain ratios, inserted a floor and raised pricing, as well as removed certain receivables from being pledged as collateral for the facility, increased limits on other receivables pledged as collateral and required the Company to maintain the same minimum liquidity covenant contained in the Senior Secured Credit Facility.
In May 2020, the Company issued $700,000 aggregate principal amount of 5.375% Senior Notes, with interest payable on May 15 and November 15 of each year commencing on November 15, 2020. The 5.375% Senior Notes will mature on May 15, 2025. The sale of the 5.375% Senior Notes resulted in net proceeds of $691,250 which were used to repay all outstanding borrowings under its Revolving Loan Facility, pay related fees and expenses, and for general corporate purposes. The issuance of the 5.375% Senior Notes resulted in $12,223 of capitalized debt issuance costs. Debt issuance costs are amortized to interest expense over the life of the debt instrument.
On and after May 15, 2022, the Company has the right to redeem all or a portion of the 5.375% Senior Notes, at the redemption prices set forth in the indenture governing the 5.375% Senior Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
Prior to May 15, 2022, the Company has the right to redeem all or of a portion of the 5.375% Senior Notes at a redemption price equal to 100% of the principal amount plus a “make-whole” premium and accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, prior to May 15, 2022, the Company may on any one or more occasions redeem up to 40% of the notes with the net proceeds from certain equity offerings at a redemption price equal to 105.375% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
The 5.375% Senior Notes are senior unsecured obligations of the Company and are fully and unconditionally guaranteed by the Company and each of its domestic subsidiaries that guarantee the Company’s Senior Secured Credit Facility. The indenture governing the 5.375% Senior Notes includes covenants that limit the ability of the Company and its subsidiaries to incur certain liens, enter into certain sale and leaseback transactions and the ability of the Company and the guarantors to consolidate, merge or sell all or substantially all of their assets. The indenture also contains customary events of default which include (subject in certain cases to customary grace and cure periods), among others, nonpayment of principal or interest; breach of other agreements in the indenture; failure to pay certain other indebtedness; certain events of bankruptcy, insolvency or reorganization; failure to pay certain final judgments; and failure of certain guarantees to be enforceable.
In the event of a change of control of the Company and a rating downgrade, the Company will be required to offer to repurchase all outstanding 5.375% Senior Notes at 101% of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
The 5.375% Senior Notes were issued in a transaction exempt from registration under the Securities Act and do not require disclosure of separate financial information for the guarantor subsidiaries.
In September 2020, the Company amended the European Revolving Loan Facility primarily to extend the maturity date to December 2020.
As of September 26, 2020, the Company was in compliance with all financial covenants under its credit facilities and other outstanding indebtedness. The Company continues to monitor its covenant compliance. 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 net 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 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.
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HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
The amendment effects changes to certain provisions and covenants under the Senior Secured Credit Facility during the period beginning with the fiscal quarter ended 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 $400,000 upon certain conditions; (e) increased limitations on investments, acquisitions, restricted payments and the incurrence of indebtedness; and (f) anti-cash hoarding provisions. During the Covenant Relief Period, the applicable margin and applicable commitment fee margin will be calculated assuming the leverage ratio is greater than or equal to 4.50 to 1.00. The amendment also permanently amends the definition of “leverage ratio” for purposes of the financial covenant calculation to remove the maximum amount of cash allowed to be netted from the definition of “indebtedness” and to allow for the netting of cash from certain foreign subsidiaries. The Company expects to maintain compliance with its covenants for at least one year from the date of these financial statements based on its current expectations and forecasts. If economic conditions caused by the COVID-19 pandemic worsen and the Company’s earnings and operating cash flows do not start to recover as currently estimated by management, this could impact the Company’s ability to maintain compliance with its financial covenants and require the Company to seek additional amendments to its Senior Secured Credit Facility. If the Company is not able to obtain such necessary additional amendments, this would lead to an event of default and, if not cured timely, its lenders could require the Company to repay its outstanding debt. In that situation, the Company may not be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay the lenders.
(8)    Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss (“AOCI”) are as follows:
Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at December 28, 2019$(157,138)$4,786 $(629,360)$164,064 $(617,648)
Amounts reclassified from accumulated other comprehensive loss
— (15,452)15,717 241 506 
Current-period other comprehensive income (loss) activity
1,557 6,022 (