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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 October 1, 2022
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number: 001-32891
Hanesbrands Inc.
(Exact name of registrant as specified in its charter)
Maryland20-3552316
(State of incorporation)(I.R.S. employer identification no.)
1000 East Hanes Mill Road
Winston-Salem,North Carolina27105
(Address of principal executive office)(Zip code)
(336) 519-8080
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, Par Value $0.01HBINew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
As of November 4, 2022, there were 348,948,690 shares of the registrant’s common stock outstanding.

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.


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,” “could,” “will,” “expect,” “outlook,” “potential,” “project,” “estimate,” “future,” “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, including statements with respect to trends associated with our business, our multi-year growth strategy (“Full Potential plan”), the impacts of the ransomware attack announced on May 31, 2022 and our future financial performance included in this Quarterly Report on Form 10-Q specifically appearing under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. 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.
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 our Quarterly Report on Form 10-Q for the quarter ended July 2, 2022 and our Annual Report on Form 10-K for the year ended January 1, 2022, under the caption “Risk Factors,” and available on the “Investors” section of our corporate website, www.Hanes.com/investors. The contents of our corporate website are not incorporated by reference in this Quarterly Report on Form 10-Q.
1
PART I

Item 1.Financial Statements

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

Quarters EndedNine Months Ended
October 1,
2022		October 2,
2021		October 1,
2022		October 2,
2021
Net sales$1,670,741 $1,789,551 $4,760,364 $5,048,891 
Cost of sales1,107,889 1,089,890 3,041,233 3,064,920 
Gross profit562,852 699,661 1,719,131 1,983,971 
Selling, general and administrative expenses421,408 465,015 1,259,921 1,341,809 
Operating profit141,444 234,646 459,210 642,162 
Other expenses3,212 1,811 6,088 6,227 
Interest expense, net41,721 40,860 107,408 127,760 
Income from continuing operations before income tax expense96,511 191,975 345,714 508,175 
Income tax expense16,410 15,228 58,775 55,161 
Income from continuing operations80,101 176,747 286,939 453,014 
Income (loss) from discontinued operations, net of tax— (24,970)3,965 (435,823)
Net income $80,101 $151,777 $290,904 $17,191 
Earnings (loss) per share - basic:
Continuing operations$0.23 $0.50 $0.82 $1.29 
Discontinued operations0.00 (0.07)0.01 (1.24)
Net income $0.23 $0.43 $0.83 $0.05 
Earnings (loss) per share - diluted:
Continuing operations$0.23 $0.50 $0.82 $1.29 
Discontinued operations0.00 (0.07)0.01 (1.24)
Net income $0.23 $0.43 $0.83 $0.05 

See accompanying notes to Condensed Consolidated Financial Statements.
2
HANESBRANDS INC.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)

Quarters EndedNine Months Ended
October 1,
2022		October 2,
2021		October 1,
2022		October 2,
2021
Net income $80,101 $151,777 $290,904 $17,191 
Other comprehensive income (loss):
Translation adjustments(76,756)(42,330)(171,581)(78,762)
Unrealized gain on qualifying cash flow hedges, net of tax of $(1,013), $(2,637), $(3,702) and $(8,953), respectively2,573 7,124 10,983 18,520 
Unrecognized income from pension and postretirement plans, net of tax of $(1,438), $(1,647), $(4,190) and $(5,262), respectively4,022 4,806 12,278 15,873 
Total other comprehensive loss(70,161)(30,400)(148,320)(44,369)
Comprehensive income (loss)$9,940 $121,377 $142,584 $(27,178)

See accompanying notes to Condensed Consolidated Financial Statements.
3
HANESBRANDS INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)

October 1,
2022		January 1,
2022		October 2,
2021
Assets
Cash and cash equivalents$253,131 $536,277 $873,628 
Trade accounts receivable, net926,666 894,151 928,039 
Inventories2,136,314 1,584,015 1,629,506 
Other current assets223,741 186,503 172,617 
Current assets held for sale14,906 327,157 304,124 
Total current assets3,554,758 3,528,103 3,907,914 
Property, net443,166 441,401 440,804 
Right-of-use assets335,473 363,854 372,212 
Trademarks and other identifiable intangibles, net1,210,581 1,220,170 1,227,457 
Goodwill1,084,581 1,133,095 1,136,173 
Deferred tax assets328,778 327,804 327,196 
Other noncurrent assets141,944 57,009 51,049 
Total assets$7,099,281 $7,071,436 $7,462,805 
Liabilities and Stockholders’ Equity
Accounts payable$1,130,649 $1,214,847 $1,239,960 
Accrued liabilities594,333 660,778 718,545 
Lease liabilities99,405 109,526 122,545 
Accounts Receivable Securitization Facility211,500 — — 
Current portion of long-term debt31,250 25,000 37,500 
Current liabilities held for sale14,906 316,902 299,498 
Total current liabilities2,082,043 2,327,053 2,418,048 
Long-term debt3,655,889 3,326,091 3,626,547 
Lease liabilities - noncurrent260,349 281,852 276,595 
Pension and postretirement benefits230,087 248,518 321,323 
Other noncurrent liabilities196,029 185,429 183,723 
Total liabilities6,424,397 6,368,943 6,826,236 
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 — 348,948,690, 349,903,253 and 349,204,407, respectively3,489 3,499 3,492 
Additional paid-in capital328,072 315,337 316,112 
Retained earnings1,043,246 935,260 928,293 
Accumulated other comprehensive loss(699,923)(551,603)(611,328)
Total stockholders’ equity674,884 702,493 636,569 
Total liabilities and stockholders’ equity$7,099,281 $7,071,436 $7,462,805 


See accompanying notes to Condensed Consolidated Financial Statements.
4
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 July 2, 2022348,826 $3,488 $322,305 $1,016,140 $(629,762)$712,171 
Net income— — — 80,101 — 80,101 
Dividends ($0.15 per common share)
— — — (52,995)— (52,995)
Other comprehensive loss— — — — (70,161)(70,161)
Stock-based compensation— — 5,593 — — 5,593 
Net exercise of stock options, vesting of restricted stock units and other123 1 174 — — 175 
Balances at October 1, 2022348,949 $3,489 $328,072 $1,043,246 $(699,923)$674,884 

 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at January 1, 2022349,903 $3,499 $315,337 $935,260 $(551,603)$702,493 
Net income— — — 290,904 — 290,904 
Dividends ($0.45 per common share)
— — — (159,343)— (159,343)
Other comprehensive loss— — — — (148,320)(148,320)
Stock-based compensation— — 16,949 — — 16,949 
Net exercise of stock options, vesting of restricted stock units and other
623 6 (2,787)— — (2,781)
Share repurchases(1,577)(16)(1,427)(23,575)— (25,018)
Balances at October 1, 2022348,949 $3,489 $328,072 $1,043,246 $(699,923)$674,884 



See accompanying notes to Condensed Consolidated Financial Statements.
5
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 July 3, 2021349,115 $3,491 $310,148 $829,479 $(580,928)$562,190 
Net income— — — 151,777 — 151,777 
Dividends ($0.15 per common share)
— — — (52,963)— (52,963)
Other comprehensive loss— — — — (30,400)(30,400)
Stock-based compensation— — 6,079 — — 6,079 
Net exercise of stock options, vesting of restricted stock units and other89 1 (115)— — (114)
Balances at October 2, 2021349,204 $3,492 $316,112 $928,293 $(611,328)$636,569 

 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at January 2, 2021348,802 $3,488 $307,883 $1,069,546 $(566,959)$813,958 
Net income— — — 17,191 — 17,191 
Dividends ($0.45 per common share)
— — — (158,444)— (158,444)
Other comprehensive loss— — — — (44,369)(44,369)
Stock-based compensation— — 9,887 — — 9,887 
Net exercise of stock options, vesting of restricted stock units and other402 4 (1,658)— — (1,654)
Balances at October 2, 2021349,204 $3,492 $316,112 $928,293 $(611,328)$636,569 
See accompanying notes to Condensed Consolidated Financial Statements.
6
HANESBRANDS INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Nine Months Ended
October 1, 2022(1)
October 2, 2021(1)
Operating activities:
Net income $290,904 $17,191 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation56,140 63,183 
Amortization of acquisition intangibles14,045 15,696 
Other amortization8,121 8,610 
Impairment of intangible assets and goodwill— 163,047 
(Gain) loss on sale of business and classification of assets held for sale(6,185)266,742 
Amortization of debt issuance costs5,483 10,250 
Other11,717 (1,888)
Changes in assets and liabilities:
Accounts receivable(63,003)(201,925)
Inventories(612,544)(292,465)
Other assets(71,613)7,042 
Accounts payable(22,289)391,034 
Accrued pension and postretirement benefits(1,066)(40,468)
Accrued liabilities and other(101,392)121,327 
Net cash from operating activities(491,682)527,376 
Investing activities:
Capital expenditures(70,955)(55,320)
Purchase of trademarks(103,000)— 
Proceeds from sales of assets259 2,479 
Other(5,640)8,437 
Net cash from investing activities(179,336)(44,404)
Financing activities:
Repayments on Term Loan Facilities(18,750)(315,625)
Borrowings on Accounts Receivable Securitization Facility1,303,589 — 
Repayments on Accounts Receivable Securitization Facility(1,092,089)— 
Borrowings on Revolving Loan Facilities1,337,500 — 
Repayments on Revolving Loan Facilities(908,500)— 
Borrowings on notes payable21,454 109,397 
Repayments on notes payable(21,713)(109,597)
Share repurchases(25,018)— 
Cash dividends paid(156,962)(157,099)
Other(4,263)(3,000)
Net cash from financing activities435,248 (475,924)
Effect of changes in foreign exchange rates on cash(71,728)(27,207)
Change in cash and cash equivalents(307,498)(20,159)
Cash and cash equivalents at beginning of year560,629 910,603 
Cash and cash equivalents at end of period$253,131 $890,444 
Balances included in the Condensed Consolidated Balance Sheets:
Cash and cash equivalents$253,131 $873,628 
Cash and cash equivalents included in current assets held for sale— 16,816 
Cash and cash equivalents at end of period$253,131 $890,444 

(1)The cash flows related to discontinued operations have not been segregated and remain included in the major classes of assets and liabilities in the periods prior the sale of the European Innerwear business on March 5, 2022. Accordingly, the Condensed Consolidated Statements of Cash Flows include the results of continuing and discontinued operations.
Capital expenditures included in accounts payable at October 1, 2022 and January 1, 2022 were $31,895 and $24,164, respectively. For the nine months ended October 1, 2022 and October 2, 2021, right-of-use assets obtained in exchange for lease obligations were $67,588 and $46,039, respectively.
See accompanying notes to Condensed Consolidated Financial Statements.
7
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements
(amounts in thousands, except per share data)
(unaudited)


(1)    Basis of Presentation
These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management believes that the disclosures made are adequate for a fair statement of the results of operations, financial condition and cash flows of Hanesbrands Inc. and its consolidated subsidiaries (the “Company” or “Hanesbrands”). In the opinion of management, the condensed consolidated interim financial statements reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of operations, financial condition and cash flows for the interim periods presented herein. The preparation of condensed consolidated interim financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates.
These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 1, 2022. The year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year or any future period.
Key Business Strategies
In the first quarter of 2021, the Company announced that it reached the decision to exit its European Innerwear business as part of its strategy to streamline its portfolio under its Full Potential plan and determined that this business met held-for-sale and discontinued operations accounting criteria. Accordingly, the Company began to separately report the results of its European Innerwear business as discontinued operations in its Condensed Consolidated Statements of Income, and to present the related assets and liabilities as held for sale in the Condensed Consolidated Balance Sheets. On November 4, 2021, the Company announced that it reached an agreement to sell its European Innerwear business to an affiliate of Regent, L.P. and completed the sale on March 5, 2022. Unless otherwise noted, discussion within these notes to the condensed consolidated interim financial statements relates to continuing operations. See Note “Assets and Liabilities Held for Sale” for additional information.
In addition, in the fourth quarter of 2021, the Company reached the decision to divest its U.S. Sheer Hosiery business, including the L’eggs brand, as part of its strategy to streamline its portfolio under its Full Potential plan and determined that this business met held-for-sale accounting criteria. The related assets and liabilities are presented as held for sale in the Condensed Consolidated Balance Sheets at October 1, 2022 and January 1, 2022. The operations of the U.S. Sheer Hosiery business are reported in “Other” for all periods presented in Note “Business Segment Information”. The Company is currently exploring potential purchasers for this business and expects to complete the sale within the next 12 months. See Note “Assets and Liabilities Held for Sale” for additional information.
In June of 2022, the Company purchased the Champion trademark for footwear in the United States, Puerto Rico and Canada from Keds, LLC (“KEDS”) for $102,500. The trademark was recorded in “Trademarks and other identifiable intangibles, net” line in the Condensed Consolidated Balance Sheets and has an indefinite life. The Company previously licensed the Champion trademark for footwear in these locations. The purchase of the trademark was part of an agreement with KEDS settling litigation between the two parties and is another step forward in the Company’s Full Potential plan of growing the global Champion brand.
Ransomware Attack
As previously disclosed, on May 24, 2022, the Company identified that it had become subject to a ransomware attack and activated its incident response and business continuity plans designed to contain the incident. As part of the Company’s forensic investigation and assessment of the impact, the Company determined that certain of its information technology systems were affected by the ransomware attack.
Upon discovering the incident, the Company took a series of measures to further safeguard the integrity of its information technology systems, including working with cybersecurity experts to contain the incident and implementing business continuity
8
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
plans to restore and support continued operations. These measures also included resecuring data, remediation of the malware across infected machines, rebuilding critical systems, global password reset and enhanced security monitoring. The Company notified appropriate law enforcement authorities as well as certain data protection regulators, and in, addition to the Company’s public announcements of the incident, the Company began a process to provide breach notifications and regulatory filings as may be required by applicable law starting in August 2022. While the notification process continues, at this time, the Company believes the incident has been contained, the Company has restored its critical information technology systems, and manufacturing, retail and other internal operations continue. There is no ongoing operational impact on the Company’s ability to provide its products and services. The Company maintains insurance, including coverage for cyber-attacks, subject to certain deductibles and policy limitations, in an amount that the Company believes appropriate.
The Company is named in two lawsuits in connection with the ransomware incident. On October 7, 2022, a putative class action was filed against “Hanes Brands [sic], Inc.” alleging, among other things, negligence, negligence per se, breach of implied contract, unjust enrichment, breach of implied covenant of good faith and fair dealing, unfair business practices under the California Business and Professions Code, and violations of the California Confidentiality of Medical Information Act in connection with the ransomware incident. The litigation is entitled, Ramon v. Hanes Brands, Inc., and is pending in the United States District Court for the Central District of California. On October 13, 2022, another putative class action was filed against HanesBrands, Inc. alleging, among other things, negligence, negligence per se, breach of implied contract, invasion of privacy, and unjust enrichment in connection with the ransomware incident. The litigation is entitled, Toussaint v. HanesBrands, Inc. and is pending in the United States District Court for the Middle District of North Carolina. The lawsuits seek, among other things, monetary and injunctive relief. The Company is vigorously defending these matters and believes the cases are without merit. However, at this early stage in the proceedings, the Company is not able to determine the probability of the outcome of these matters or a range of reasonably expected losses, if any.
During the quarter and nine months ended October 1, 2022, the Company incurred costs of $921 and $16,430, net of expected insurance recoveries, respectively, related to the ransomware attack. The costs, net of expected insurance recoveries, incurred during the quarter ended October 1, 2022 related primarily to information technology and legal fees and are reflected in the “Selling, general and administrative expenses” line of the Condensed Consolidated Statements of Income. The costs for the nine months ended October 1, 2022 included $14,168 related primarily to supply chain disruptions, which are reflected in the “Cost of sales” line of the Condensed Consolidated Statements of Income and $2,262, net of expected insurance recoveries, related primarily to information technology, legal and consulting fees, which are reflected in the “Selling, general and administrative expenses” line of the Condensed Consolidated Statements of Income. The Company continues to assess the security event and cannot determine, at this time, the full extent of the impact from such event on its business, results of operations or financial condition or whether such impact will ultimately have a material adverse effect.
(2)    Recent Accounting Pronouncements
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In January 2021, the FASB clarified the scope of that guidance with the issuance of ASU 2021-01, “Reference Rate Reform: Scope.” The new accounting rules provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The new accounting rules must be adopted by 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.
Business Combinations
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The new accounting rules require entities to apply “Revenue from Contracts with Customers (Topic 606)” to recognize and measure contract assets and contract liabilities in a business combination. The new accounting rules will be effective for the Company in the first quarter of 2023, including interim periods.
9
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Early adoption is permitted. The adoption impact of the new accounting rules will depend on the magnitude of future acquisitions.
Derivatives and Hedging
In March 2022, the FASB issued ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method.” The new accounting rules allow entities to expand the use of the portfolio layer method to all financial assets and designate multiple hedged layers within a single closed portfolio. The new accounting rules also clarify guidance related to hedge basis adjustments and the related disclosures for these adjustments. The new accounting rules will be effective for the Company in the first quarter of 2023, including interim periods. Early adoption is permitted. The Company does not currently have any fair value hedging programs that leverage the portfolio layer method, therefore, the Company does not expect the new accounting rules to have an impact on our near term financial condition, results of operations, cash flows or disclosures.
Supplier Finance Program Obligations
In September 2022, the FASB issued ASU 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” The new accounting rules create certain disclosure requirements for a buyer in a supplier finance program. The new accounting rules require qualitative and quantitative disclosures including key terms of the program, balance sheet presentation of related amounts, and the obligation amount the buyer has confirmed as valid to the finance provider, including a rollforward of the obligation. Only the amount of the obligation outstanding is required to be disclosed in interim periods. The accounting rules do not impact the recognition, measurement, or financial statement presentation of supplier finance program obligations. The new accounting rules will be effective for the Company in the first quarter of 2023, including interim periods. Early adoption is permitted. While the new accounting rules will not have an impact on our financial condition, results of operations or cash flows, the Company is currently evaluating the impact the new accounting rules will have on the disclosures included in the notes to the consolidated financial statements beginning with the first quarter of 2023.
10
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
(3)    Assets and Liabilities Held for Sale
Assets and liabilities classified as held for sale in the Condensed Consolidated Balance Sheets as of October 1, 2022, January 1, 2022 and October 2, 2021 consist of the following:
October 1,
2022		January 1,
2022		October 2,
2021
U.S. Sheer Hosiery business - continuing operations$14,906 $5,426 $— 
European Innerwear business - discontinued operations— 321,731 304,124 
Total current assets held for sale$14,906 $327,157 $304,124 
U.S. Sheer Hosiery business - continuing operations$14,906 $5,426 $— 
European Innerwear business - discontinued operations— 311,476 299,498 
Total current liabilities held for sale$14,906 $316,902 $299,498 
U.S. Sheer Hosiery Business - Continuing Operations
In the fourth quarter of 2021, the Company reached the decision to divest its U.S. Sheer Hosiery business, including the L’eggs brand, as part of its strategy to streamline its portfolio under its Full Potential plan and determined that this business met held-for-sale accounting criteria. The related assets and liabilities are presented as held for sale in the Condensed Consolidated Balance Sheets at October 1, 2022 and January 1, 2022. The Company recorded a non-cash charge of $38,364 in the fourth quarter of 2021, to record a valuation allowance against the net assets held for sale to write down the carrying value of the disposal group to the estimated fair value less costs of disposal. The Company recognized a non-cash loss of $4,310 to adjust the valuation allowance resulting from an increase in carrying value due to changes in working capital in the quarter ended October 1, 2022. In the nine months ended October 1, 2022, the Company recognized a non-cash gain of $6,558 to adjust the valuation allowance resulting from a decrease in carrying value due to changes in working capital. The operations of the U.S. Sheer Hosiery business are reported in “Other” for all periods presented in Note “Business Segment Information”. The Company is currently exploring potential purchasers for this business and expects to complete the sale within the next 12 months.
European Innerwear Business - Discontinued Operations
In the first quarter of 2021, the Company announced that it reached the decision to exit its European Innerwear business as part of its strategy to streamline its portfolio under its Full Potential plan and determined that this business met held-for-sale and discontinued operations accounting criteria. Accordingly, the Company began to separately report the results of its European Innerwear business as discontinued operations in its Condensed Consolidated Statements of Income, and to present the related assets and liabilities as held for sale in the Condensed Consolidated Balance Sheets. On November 4, 2021, the Company announced that it had reached an agreement to sell its European Innerwear business to an affiliate of Regent, L.P. and completed the sale on March 5, 2022. Under the agreement, the purchaser received all the assets and operating liabilities of the European Innerwear business. The operations of the European Innerwear business were previously reported primarily in the International segment.
Upon meeting the criteria for held-for-sale classification in the first quarter of 2021 which qualified as a triggering event, the Company performed a full impairment analysis of the disposal group's indefinite-lived intangible assets and goodwill. As a result of the strategic decision to exit the European Innerwear business, forecasts were revised to include updated market conditions and the removal of strategic operating decisions that would no longer occur under the Company's ownership. The revised forecasts indicated impairment of certain indefinite-lived trademarks and license agreements as well as the full goodwill balance attributable to the European Innerwear business. As a result of this impairment analysis, a non-cash charge of $155,745 was recorded as "Impairment of intangible assets and goodwill" in the summarized discontinued operations financial information for the nine months ended October 2, 2021. In addition, the Company recorded a valuation allowance against the net assets held for sale to write down the carrying value of the disposal group to the estimated fair value less costs of disposal, resulting in non-cash charges of $30,562 and $266,742 for the quarter and nine months ended October 2, 2021, respectively, as "Loss on sale of business and classification of assets held for sale" in the summarized discontinued operations financial information. In the nine months ended October 1, 2022, the Company recorded the final loss on the sale of the European Innerwear business of $373 primarily resulting from changes in working capital balances and foreign exchange rates.
11
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Additionally, the Company recorded an impairment charge of $7,302 in continuing operations on an indefinite-lived trademark for the nine months ended October 2, 2021 which is reflected in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statements of Income. This charge related to the full impairment of an indefinite-lived trademark related to a specific brand within the European Innerwear business that was excluded from the disposal group as it was not marketed for sale.
The Company has continued certain sales from its supply chain to the European Innerwear business on a transitional basis after the sale of the business. Under the terms of the Manufacturing and Supply Agreement that was signed as part of closing the transaction, the Company will provide these services for periods up to 34 months from the closing date of the transaction. Additionally, the Company entered into a Transitional Services Agreement pursuant to which the Company will provide transitional services including information technology, human resources, facilities management, and limited finance and accounting services for periods up to 12 months from the closing date of the transaction. The sales and the related profit are included in continuing operations in the Condensed Consolidated Statements of Income and in “Other” in Note “Business Segment Information” in all periods presented and have not been eliminated as intercompany transactions in consolidation for the period when the European Innerwear business was owned by the Company. The related receivables from the European Innerwear business are included in “Trade accounts receivable, net” in the Condensed Consolidated Balance Sheets for all periods presented.
The operating results of the discontinued operations only reflect revenues and expenses that are directly attributable to the European Innerwear business. Discontinued operations does not include any allocation of corporate overhead expense or interest expense. The key components from discontinued operations related to the European Innerwear business are as follows:
Quarters EndedNine Months Ended
October 1,
2022		October 2,
2021		October 1,
2022		October 2,
2021
Net sales$— $147,529 $101,314 $400,880 
Cost of sales— 75,171 60,415 213,831 
Gross profit— 72,358 40,899 187,049 
Selling, general and administrative expenses— 64,941 54,689 209,467 
Impairment of intangible assets and goodwill— — — 155,745 
Loss on sale of business and classification of assets held for sale— 30,562 373 266,742 
Operating loss— (23,145)(14,163)(444,905)
Other expenses— 271 283 885 
Interest expense, net— 110 10 269 
Loss from discontinued operations before income tax expense (benefit)— (23,526)(14,456)(446,059)
Income tax expense (benefit)— 1,444 (18,421)(10,236)
Net income (loss) from discontinued operations, net of tax$— $(24,970)$3,965 $(435,823)

12
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Assets and liabilities of discontinued operations classified as held for sale in the Condensed Consolidated Balance Sheets as of October 1, 2022, January 1, 2022 and October 2, 2021 consist of the following:
October 1,
2022		January 1,
2022		October 2,
2021
Cash and cash equivalents$— $24,352 $16,816 
Trade accounts receivable, net— 87,353 88,684 
Inventories— 141,653 127,209 
Other current assets— 21,926 16,066 
Property, net— 62,659 61,898 
Right-of-use assets— 32,603 33,680 
Trademarks and other identifiable intangibles, net— 205,204 208,108 
Deferred tax assets— 4,174 7,990 
Other noncurrent assets— 4,127 4,360 
Allowance to adjust assets to estimated fair value, less costs of disposal— (262,320)(260,687)
Total assets of discontinued operations$— $321,731 $304,124 
Accounts payable$— $84,327 $69,122 
Accrued liabilities— 122,620 118,076 
Lease liabilities— 6,562 8,544 
Notes payable— 329 595 
Lease liabilities - noncurrent— 27,426 26,536 
Pension and postretirement benefits—