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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 September 30, 2023
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 3, 2023, there were 350,040,522 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 and are subject to risks and uncertainties that could cause actual results to differ materially from those implied or expressed by such statements. These risks and uncertainties include trends associated with our business; our ability to successfully implement our multi-year transformation strategy (“Full Potential transformation plan”) and our global Champion performance plan; our ability to identify, execute, and realize benefits from any potential strategic transaction involving Champion; the rapidly changing retail environment and the level of consumer demand; the effects of any geopolitical conflicts (including the ongoing Russia-Ukraine conflict and the Israel-Hamas war) or any potential ongoing effects of the COVID-19 pandemic, including effects on consumer spending, global supply chains and the financial markets; our ability to deleverage on the anticipated time frame or at all, which could negatively impact our ability to satisfy the financial covenants in our credit agreement or other contractual arrangements; any inadequacy, interruption, integration failure or security failure with respect to our information technology (including the ransomware attack announced May 31, 2022); future intangible assets or goodwill impairment due to changes in our business; legal, regulatory, political and economic risks related to our international operations; our ability to effectively manage our complex international tax structure; and our future financial performance. 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. Such statements speak only as of the date when made and 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.
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 31, 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 Operations
(in thousands, except per share data)
(unaudited)

Quarters EndedNine Months Ended
September 30,
2023		October 1,
2022		September 30,
2023		October 1,
2022
Net sales$1,511,306 $1,670,741 $4,339,696 $4,760,364 
Cost of sales1,040,995 1,107,889 2,936,955 3,041,233 
Gross profit470,311 562,852 1,402,741 1,719,131 
Selling, general and administrative expenses404,349 421,408 1,210,056 1,259,921 
Operating profit65,962 141,444 192,685 459,210 
Other expenses9,111 3,212 31,145 6,088 
Interest expense, net72,609 41,721 205,666 107,408 
Income (loss) from continuing operations before income tax expense(15,758)96,511 (44,126)345,714 
Income tax expense23,041 16,410 51,541 58,775 
Income (loss) from continuing operations(38,799)80,101 (95,667)286,939 
Income from discontinued operations, net of tax— — — 3,965 
Net income (loss)$(38,799)$80,101 $(95,667)$290,904 
Earnings (loss) per share - basic:
Continuing operations$(0.11)$0.23 $(0.27)$0.82 
Discontinued operations— — — 0.01 
Net income (loss)$(0.11)$0.23 $(0.27)$0.83 
Earnings (loss) per share - diluted:
Continuing operations$(0.11)$0.23 $(0.27)$0.82 
Discontinued operations— — — 0.01 
Net income (loss)$(0.11)$0.23 $(0.27)$0.83 

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

Quarters EndedNine Months Ended
September 30,
2023		October 1,
2022		September 30,
2023		October 1,
2022
Net income (loss)$(38,799)$80,101 $(95,667)$290,904 
Other comprehensive income (loss):
Translation adjustments(53,517)(76,756)(61,386)(171,581)
Unrealized gain on qualifying cash flow hedges, net of tax of $(1,761), $(1,013), $(1,192), and $(3,702), respectively8,490 2,573 5,955 10,983 
Unrecognized income from pension and postretirement plans, net of tax of $(20), $(1,438), $91 and $(4,190), respectively4,105 4,022 12,342 12,278 
Total other comprehensive loss(40,922)(70,161)(43,089)(148,320)
Comprehensive income (loss)$(79,721)$9,940 $(138,756)$142,584 

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

September 30,
2023		December 31,
2022		October 1,
2022
Assets
Cash and cash equivalents$191,091 $238,413 $253,131 
Trade accounts receivable, net712,828 721,396 926,666 
Inventories1,516,779 1,979,672 2,136,314 
Other current assets175,058 178,946 223,741 
Current assets held for sale— 13,327 14,906 
Total current assets2,595,756 3,131,754 3,554,758 
Property, net415,527 442,404 443,166 
Right-of-use assets427,610 414,894 335,473 
Trademarks and other identifiable intangibles, net1,201,008 1,255,693 1,210,581 
Goodwill1,093,099 1,108,907 1,084,581 
Deferred tax assets20,133 20,162 328,778 
Other noncurrent assets160,155 130,062 141,944 
Total assets$5,913,288 $6,503,876 $7,099,281 
Liabilities and Stockholders’ Equity
Accounts payable$789,923 $917,481 $1,130,649 
Accrued liabilities493,134 498,028 594,333 
Lease liabilities112,721 114,794 99,405 
Accounts Receivable Securitization Facility200,500 209,500 211,500 
Current portion of long-term debt59,000 37,500 31,250 
Current liabilities held for sale— 13,327 14,906 
Total current liabilities1,655,278 1,790,630 2,082,043 
Long-term debt3,310,256 3,612,077 3,655,889 
Lease liabilities - noncurrent348,072 326,644 260,349 
Pension and postretirement benefits107,539 116,167 230,087 
Other noncurrent liabilities218,107 260,094 196,029 
Total liabilities5,639,252 6,105,612 6,424,397 
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 — 350,022,378, 349,009,147 and 348,948,690, respectively3,500 3,490 3,489 
Additional paid-in capital348,837 334,676 328,072 
Retained earnings476,796 572,106 1,043,246 
Accumulated other comprehensive loss(555,097)(512,008)(699,923)
Total stockholders’ equity274,036 398,264 674,884 
Total liabilities and stockholders’ equity$5,913,288 $6,503,876 $7,099,281 


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 1, 2023349,840 $3,498 $343,042 $515,595 $(514,175)$347,960 
Net loss— — — (38,799)— (38,799)
Other comprehensive loss— — — — (40,922)(40,922)
Stock-based compensation— — 5,685 — — 5,685 
Net exercise of stock options, vesting of restricted stock units and other182 2 110 — — 112 
Balances at September 30, 2023350,022 $3,500 $348,837 $476,796 $(555,097)$274,036 

 Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
 SharesAmount
Balances at December 31, 2022349,009 $3,490 $334,676 $572,106 $(512,008)$398,264 
Net loss— — — (95,667)— (95,667)
Other comprehensive loss— — — — (43,089)(43,089)
Stock-based compensation— — 15,821 — — 15,821 
Net exercise of stock options, vesting of restricted stock units and other1,013 10 (1,660)357 — (1,293)
Balances at September 30, 2023350,022 $3,500 $348,837 $476,796 $(555,097)$274,036 



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 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 other623 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.
6

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

Nine Months Ended
September 30,
2023
October 1,
2022(1)
Operating activities:
Net income (loss)$(95,667)$290,904 
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation56,246 56,140 
Amortization of acquisition intangibles12,478 14,045 
Other amortization9,856 8,121 
Loss on extinguishment of debt8,466 — 
(Gain) loss on sale of business and classification of assets held for sale3,641 (6,185)
Amortization of debt issuance costs and debt discount6,577 5,483 
Other8,984 11,717 
Changes in assets and liabilities:
Accounts receivable12,169 (63,003)
Inventories444,592 (612,544)
Other assets(20,833)(71,613)
Accounts payable(125,411)(22,289)
Accrued pension and postretirement benefits4,181 (1,066)
Accrued liabilities and other(37,935)(101,392)
Net cash from operating activities287,344 (491,682)
Investing activities:
Capital expenditures(35,790)(70,955)
Purchase of trademarks— (103,000)
Proceeds from sales of assets172 259 
Other20,241 (5,640)
Net cash from investing activities(15,377)(179,336)
Financing activities:
Borrowings on Term Loan Facilities891,000 — 
Repayments on Term Loan Facilities(29,500)(18,750)
Borrowings on Accounts Receivable Securitization Facility1,728,500 1,303,589 
Repayments on Accounts Receivable Securitization Facility(1,737,500)(1,092,089)
Borrowings on Revolving Loan Facilities1,616,500 1,337,500 
Repayments on Revolving Loan Facilities(1,908,500)(908,500)
Borrowings on Senior Notes600,000 — 
Repayments on Senior Notes(1,436,884)— 
Borrowings on notes payable— 21,454 
Repayments on notes payable— (21,713)
Share repurchases— (25,018)
Cash dividends paid— (156,962)
Payments to amend and refinance credit facilities(28,503)(633)
Other(2,884)(3,630)
Net cash from financing activities(307,771)435,248 
Effect of changes in foreign exchange rates on cash(11,518)(71,728)
Change in cash and cash equivalents(47,322)(307,498)
Cash and cash equivalents at beginning of year238,413 560,629 
Cash and cash equivalents at end of period$191,091 $253,131 


(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 to 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 September 30, 2023 and December 31, 2022 were $12,691 and $10,549, respectively. For the nine months ended September 30, 2023 and October 1, 2022, right-of-use assets obtained in exchange for lease obligations were $95,275 and $67,588, 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 December 31, 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 or any future period.
Key Business Strategies
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.
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 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. In addition to the Company’s public announcements of the incident, the Company provided breach notifications and regulatory filings as required by applicable law starting in August 2022, and that notification process is complete. 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 a putative class action in connection with its previously disclosed ransomware incident, entitled Toussaint et al. v. HanesBrands,[sic] Inc. This lawsuit is pending in the United States District Court for the Middle District of North Carolina, and follows the consolidation of two previously pending lawsuits, entitled Roman v. Hanes Brands,[sic] Inc., and Toussaint v. HanesBrands,[sic] Inc. The lawsuit alleges, among other things, negligence, negligence per se, breach of implied contract, invasion of privacy, unjust enrichment, breach of implied covenant of good faith and fair dealing and unfair business practices under the California Business and Professions Code. The pending lawsuit seeks, among other things, monetary and injunctive relief. The Company is vigorously defending the pending matter and believes the case is without merit. The Company does not expect any of these claims, individually or in the aggregate, to have a material adverse effect on its
8
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
consolidated financial position or results of operations. However, at this early stage in the proceedings, the Company is not able to determine the probability of the outcome of this matter or a range of reasonably expected losses, if any.
During the quarter ended September 30, 2023, the Company recognized a benefit related to business interruption insurance proceeds of $17,792, of which $15,000 was received in the quarter. During the nine months ended September 30, 2023, the Company recognized a benefit related to business interruption insurance proceeds of $24,062, of which $20,562 was received during the nine months ended September 30, 2023. The remaining receivable for the expected final payment was recognized in the “Other current assets” line in the Condensed Consolidated Balance Sheets at September 30, 2023 and was received in October 2023. The business interruption insurance proceeds received were primarily related to the recovery of lost profit from business interruptions. The Company recognized a benefit of $17,792 and $23,354, respectively, for the business interruption insurance proceeds in the “Cost of sales” line of the Condensed Consolidated Statements of Operations during the quarter and nine months ended September 30, 2023. The Company recognized a benefit of $708 for the reimbursement of costs related primarily to legal fees in the “Selling, general and administrative expenses” line of the Condensed Consolidated Statements of Operations during the nine months ended September 30, 2023.
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 primarily related to information technology and legal fees and are reflected in the “Selling, general and administrative expenses” line of the Condensed Consolidated Statements of Operations. The costs incurred during the nine months ended October 1, 2022 included $14,168 primarily related to supply chain disruptions, which are reflected in the “Cost of sales” line of the Condensed Consolidated Statements of Operations and $2,262, net of expected insurance recoveries, primarily related to information technology, legal and consulting fees, which are reflected in the “Selling, general and administrative expenses” line of the Condensed Consolidated Statements of Operations.
Although the Company expects to incur minimal costs, primarily for legal fees, related to the ransomware attack, the Company cannot determine, at this time, the full extent of any proceedings or additional costs or expenses related to the security event or whether such impact will ultimately have a material adverse effect.
Goodwill and Indefinite-lived Intangible Assets
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 value. In connection with the annual impairment analysis, the Company performs a quantitative assessment utilizing an income approach to estimate the fair values of its reporting units and certain indefinite-lived intangible assets. The most significant assumptions used to estimate the fair values of the reporting units and certain indefinite-lived intangible assets include the weighted average cost of capital, revenue growth rate, terminal growth rate and operating profit margin.
During the quarter ended September 30, 2023, the Company completed its annual quantitative impairment analysis for each reporting unit and the respective goodwill balances. While the analysis indicated that all reporting units had fair values that exceeded their carrying values, the Company noted meaningful declines in the fair value cushion above the carrying value for three reporting units. The decline in the U.S. Activewear reporting unit fair value cushion was driven by the continued challenging activewear market dynamics and the impact of continued strategic actions geared toward improving Champion’s brand position, regaining momentum and positioning the business for long-term profitable growth through a more disciplined product and channel segmentation approach, a shift in mix and assortment changes, which continue to weigh on the reporting unit’s financial results and resulted in a fair value that exceeded the carrying value by less than 10% at the time the analysis was performed. The decline in the fair value cushions of the Champion Europe and Australia reporting units was primarily driven by continued macroeconomic pressures impacting consumer spending which resulted in fair value cushions that exceeded their carrying values by less than 15% at the time the analysis was performed. As a result, the goodwill associated with these three reporting units was considered to be at a higher risk for future impairment if economic conditions worsen or reporting unit earnings and operating cash flows do not recover as currently estimated by management. As of September 30, 2023, the combined goodwill associated with these three reporting units was approximately $677,650.
The Company also completed its annual quantitative impairment analysis for certain indefinite-lived intangible assets during the quarter ended September 30, 2023. The analysis indicated that the indefinite-lived intangible assets had fair values that exceeded their carrying values by more than 20% at the time the analysis was performed.
9
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Although the Company determined that no impairment existed for the Company's goodwill or indefinite-lived intangible assets as of September 30, 2023, these assets could be at risk for future impairment due to changes in the Company’s business or global economic conditions.
(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. In December 2022, the FASB deferred the expiration date of Topic 848 with the issuance of ASU 2022-06, “Reference Rate Reform: Deferral of the Sunset Date of Topic 848.” The new accounting rules extend the relief in Topic 848 beyond the cessation date of USD London Interbank Offered Rate (“LIBOR”). The new accounting rules must be adopted by the fourth quarter of 2024. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations, cash flows and disclosures and does not currently intend to early adopt the new rules.
Business Combinations
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The new accounting rules require entities to apply “Revenue from Contracts with Customers (Topic 606)” to recognize and measure contract assets and contract liabilities in a business combination. The new accounting rules were effective for the Company in the first quarter of 2023. The adoption of the new accounting rules did not have any impact on the Company’s financial condition, results of operations, cash flows or disclosures.
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 were effective for the Company in the first quarter of 2023. As the Company does not currently have any fair value hedging programs that leverage the portfolio layer method, the adoption of the new accounting rules did not have any impact on the Company’s 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 were effective for the Company in the first quarter of 2023. While the new accounting rules did not have an impact on the Company’s financial condition, results of operations or cash flows, adoption of the new accounting rules did result in additional disclosures beginning in the first quarter of 2023 which are included below.
10
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
The Company reviews supplier terms and conditions on an ongoing basis and has negotiated payment term extensions in recent years in connection with its efforts to effectively manage working capital and improve cash flow. Separate from these payment term extension actions noted above, the Company and certain financial institutions facilitate voluntary supplier finance programs that enable participating suppliers the ability to request payment of their invoices from the financial institutions earlier than the terms stated in Company’s payment policy. The Company is not a party to the arrangements between the suppliers and the financial institutions and its obligations to suppliers, including amounts due and scheduled payment dates, are not impacted by the suppliers’ participation in the supplier finance programs. The Company’s payment terms to the financial institutions, including the timing and amount of payments, are based on the original supplier invoices. The Company has no economic interest in a supplier’s decision to participate in the supplier finance programs and has no financial impact in connection with the supplier finance programs. Accordingly, obligations under these programs continue to be trade payables and are not indicative of borrowing arrangements. As of September 30, 2023, the amounts due to suppliers participating in supplier finance programs totaled $191,889 and are included in the “Accounts Payable” line of the Condensed Consolidated Balance Sheets.
Leases
In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements.” The new accounting rules require that leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease. These leases should also be accounted for as a transfer between entities under common control through an adjustment to equity if, and when, the lessee no longer controls the use of the underlying asset. The new accounting rules will be effective for the Company in the first quarter of 2024, including interim periods. Early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations, cash flows and disclosures.
(3)    Assets and Liabilities Held for Sale
Total current assets and current liabilities classified as held for sale in the Condensed Consolidated Balance Sheets consist of the following:
September 30,
2023		December 31,
2022		October 1,
2022
Total current assets held for sale - U.S. Sheer Hosiery business $— $13,327 $14,906 
Total current liabilities held for sale - U.S. Sheer Hosiery business$— $13,327 $14,906 
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 transformation plan and determined that this business met held-for-sale accounting criteria. The Company recorded a non-cash charge in the fourth quarter of 2021 to record a valuation allowance against the net assets held for sale to write down the carrying value of the disposal group to the estimated fair value less costs of disposal. In the quarter and nine months ended October 1, 2022, the Company recognized a non-cash loss of $4,310 and a non-cash gain of $6,558, respectively, which were reflected in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statements of Operations, to adjust the valuation allowance resulting primarily from changes in carrying value due to changes in working capital. The operations of the U.S. Sheer Hosiery business were reported in “Other” for all periods presented in Note “Business Segment Information”. The related assets and liabilities were presented as held for sale in the Condensed Consolidated Balance Sheets at December 31, 2022 and October 1, 2022.
11
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
The Company completed the sale of its U.S. Sheer Hosiery business to AllStar Hosiery LLC (“AllStar”), an affiliate of AllStar Marketing Group, LLC, on September 29, 2023 for $3,300 in total proceeds. Proceeds from the sale included cash of $1,300, which was reported in “Net cash from investing activities” in the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and a receivable of $2,000, which will be paid by AllStar in two equal installments in six months and nine months after the date of sale and was reflected in the “Other current assets” line in the Condensed Consolidated Balance Sheets at September 30, 2023. In the quarter and nine months ended September 30, 2023, the Company recognized a gain of $1,558 and a loss, net of proceeds, of $3,641, respectively, which were reflected in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statements of Operations.
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 transformation 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 Operations, 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 which resulted in a non-cash charge to impair certain indefinite-lived trademarks and license agreements as well as the full goodwill balance attributable to the European Innerwear business. Additionally, 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 a non-cash charge in the first quarter of 2021. In the nine months ended October 1, 2022, the Company recorded the final loss on the sale of the European Innerwear business of $373 as "Loss on sale of business and classification of assets held for sale" in the summarized discontinued operations financial information below primarily resulting from changes in working capital balances and foreign exchange rates.
The Company continued certain sales from its supply chain to the European Innerwear business on a transitional basis after the sale of the business. The Company is contracted to provide services under the terms of the Manufacturing and Supply Agreement that was signed as part of closing the transaction through January 2024. Additionally, the Company entered into a Transitional Services Agreement pursuant to which the Company provided transitional services including information technology, human resources, facilities management, and limited finance and accounting services which expired in March of 2023. The sales and the related profit are included in continuing operations in the Condensed Consolidated Statements of Operations 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.
12
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
The operating results of the discontinued operations only reflect revenues and expenses that are directly attributable to the European Innerwear business. 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
September 30,
2023		October 1,
2022		September 30,
2023		October 1,
2022
Net sales$— $— $— $101,314 
Cost of sales— — — 60,415 
Gross profit— — — 40,899 
Selling, general and administrative expenses— — — 54,689 
Loss on sale of business and classification of assets held for sale— — — 373 
Operating loss— — — (14,163)
Other expenses— — — 283 
Interest expense, net— — — 10 
Loss from discontinued operations before income tax benefit— — — (14,456)
Income tax benefit— — — (18,421)
Net income from discontinued operations, net of tax$— $— $— $3,965 
There were no assets and liabilities of discontinued operations classified as held for sale in the Condensed Consolidated Balance Sheets as of September 30, 2023, December 31, 2022 and October 1, 2022.
The cash flows related to discontinued operations have not been segregated and are included in the Condensed Consolidated Statements of Cash Flows. The following table presents cash flow and non-cash information related to discontinued operations:
Quarters EndedNine Months Ended
September 30,
2023		October 1,
2022		September 30,
2023		October 1,
2022
Capital expenditures$— $— $— $715 
Loss on sale of business and classification of assets held for sale$— $— $— $373 
(4)    Revenue Recognition
The following table presents the Company’s revenues disaggregated by the customer’s method of purchase:

Quarters EndedNine Months Ended
September 30,
2023		October 1,
2022		September 30,
2023		October 1,
2022
Third-party brick-and-mortar wholesale$1,061,583 $1,200,636 $3,104,314 $3,356,547 
Consumer-directed449,723 470,105 1,235,382 1,403,817 
Total net sales$1,511,306 $1,670,741 $4,339,696 $4,760,364 
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. Third-party brick-and-mortar wholesale revenue also includes royalty revenue from licensing agreements. The Company earns royalties through license agreements with manufacturers of other consumer products that incorporate certain of the Company’s brands. The Company accrues revenue earned under these contracts based upon reported sales from the licensees.
13
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Consumer-Directed Revenue
Consumer-directed revenue is primarily generated through sales driven directly by the consumer through company-operated stores and e-commerce platforms, which include both owned sites and the sites of the Company’s retail customers.
(5)    Stockholders’ Equity
Basic earnings per share (“EPS”) was computed by dividing net income (loss) by the number of weighted average shares of common stock outstanding during the period. Diluted EPS was calculated to give effect to all potentially issuable dilutive shares of common stock using the treasury stock method.
The reconciliation of basic to diluted weighted average shares outstanding is as follows:
Quarters EndedNine Months Ended
September 30,
2023		October 1,
2022		September 30,
2023		October 1,
2022
Basic weighted average shares outstanding350,667 349,884 350,534 349,969 
Effect of potentially dilutive securities:
Stock options— — — 2 
Restricted stock units— 420 — 712 
Employee stock purchase plan and other— 12 — 8 
Diluted weighted average shares outstanding350,667 350,316 350,534 350,691 
The following securities were excluded from the diluted earnings per share calculation because their effect would be anti-dilutive:
Quarters EndedNine Months Ended
September 30,
2023		October 1,
2022		September 30,
2023		October 1,
2022
Stock options250 250 250 250 
Restricted stock units4,592 1,646 4,343 1,252 
Employee stock purchase plan and other8 — 12 — 
In the quarter and nine months ended September 30, 2023, all potentially dilutive securities were excluded from the diluted earnings per share calculation because the Company incurred a net loss for the quarter and nine months and their inclusion would be anti-dilutive.
On February 2, 2022, the Company’s Board of Directors approved a new share repurchase program for up to $600,000 of shares to be repurchased in open market transactions or privately negotiated transactions, subject to market conditions, legal requirements and other factors. Additionally, management has been granted authority to establish a trading plan under Rule 10b5-1 of the Exchange Act in connection with share repurchases, which allows the Company to repurchase shares in the open market during periods in which the stock trading window is otherwise closed for the Company, the Company’s directors and certain of the Company’s officers and employees pursuant to the Company’s insider trading policy. The new program replaced the Company’s previous share repurchase program for up to 40,000 shares that was originally approved on February 6, 2020. For the quarter and nine months ended September 30, 2023, the Company did not enter into any transactions to repurchase shares under the new program. For the quarter ended October 1, 2022, the Company did not enter into any transactions to repurchase shares under the new program. For the nine months ended October 1, 2022, the Company entered into transactions to repurchase 1,577 shares at a weighted average repurchase price of $15.84 per share under the new program. The shares were repurchased at a total cost of $25,018 including broker’s commissions of $31. The Company did not repurchase any shares under the previous share repurchase program during 2022 through the expiration of the program on February 2, 2022. At September 30, 2023, the remaining repurchase authorization under the current share repurchase program totaled $575,013.
14
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 30,
2023		December 31,
2022		October 1,
2022
Raw materials$60,274 $69,279 $90,411 
Work in process84,515 107,904 118,573 
Finished goods1,371,990 1,802,489 1,927,330 
$1,516,779 $1,979,672 $2,136,314 
(7)    Debt
Debt consisted of the following: 
Interest Rate as of September 30,
2023		Principal AmountMaturity Date
 September 30,
2023		December 31,
2022
Senior Secured Credit Facility:
Revolving Loan Facility9.75%$60,500 $352,500 November 2026
Term Loan A7.67%950,000 975,000 November 2026
Term Loan B9.07%895,500 — March 2030
9.000% Senior Notes9.00%600,000 — February 2031
4.875% Senior Notes4.88%900,000 900,000 May 2026
4.625% Senior Notes—— 900,000 —
3.5% Senior Notes—— 535,275 —
Accounts Receivable Securitization Facility6.79%200,500 209,500 May 2024
3,606,500 3,872,275 
Less long-term debt issuance costs and debt discount36,744 13,198 
Less current maturities259,500 247,000 
$3,310,256 $3,612,077 
Debt Refinancing and Amendments
In February and March of 2023, the Company refinanced its debt structure to provide greater near-term financial flexibility given the uncertainty within the current macroeconomic environment. The refinancing consisted of entering into a new senior secured term loan B facility in an aggregate principal amount of $900,000 due in 2030 (the “Term Loan B”), issuing $600,000 aggregate principal amount of 9.000% senior unsecured notes due in 2031 (the “9.000% Senior Notes”) and redeeming the Company’s 4.625% senior notes due in May 2024 (the “4.625% Senior Notes”) and 3.5% senior notes due in June 2024 (the “3.5% Senior Notes”).
15
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
In February and March of 2023, the Company used the net proceeds from borrowings under the Term Loan B together with the net proceeds from the offering of the 9.000% Senior Notes to redeem all of its outstanding 4.625% Senior Notes and 3.5% Senior Notes and pay the related fees and expenses which resulted in total charges of $8,466. The charges, which are recorded in the “Other expenses” line in the Condensed Consolidated Statements of Operations, included a payment of $4,632 for a required make-whole premium related to the redemption of the 3.5% Senior Notes, a non-cash charge of $1,654 for the write-off of unamortized debt issuance costs related to the redemption of the 3.5% Senior Notes and a non-cash charge of $2,180 for the write-off of unamortized debt issuance costs related to the redemption of the 4.625% Senior Notes. The refinancing activities resulted in a debt discount of $9,000 related to the Term Loan B and total capitalized debt issuance costs of $22,965 which included $11,909 related to the Term Loan B and $11,056 related to the 9.000% Senior Notes. The debt discount and debt issuance costs are amortized into interest expense over the respective terms of the debt instruments. The cash payments for the make-whole premium and fees capitalized as debt issuance costs are reported in “Net cash from financing activities” in the Condensed Consolidated Statements of Cash Flows.
Term Loan B
In March 2023, the Company entered into the Term Loan B in an aggregate principal amount of $900,000 as an incremental term loan facility under the credit agreement that governs the Company’s existing Senior Secured Credit Facility. The issuance of the Term Loan B resulted in proceeds, net of the debt discount of $9,000 and debt issuance costs of $11,909, of approximately $879,091. The Term Loan B bears interest based on the Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 3.75%, subject to a floor of 0.50%. The Term Loan B Facility is guaranteed by each domestic subsidiary of the Company which guarantees the other facilities under the Senior Secured Credit Facility (the “U.S. Subsidiary Guarantors”) and is secured by substantially all of the assets of the Company and the U.S. Subsidiary Guarantors, on a pari passu basis with the other facilities under the Senior Secured Credit Facility. Outstanding borrowings under the Term Loan B are repayable in 0.25% quarterly installments, with the remainder of the outstanding principal to be repaid at maturity. If the Term Loan B is repriced or refinanced on or prior to the six month anniversary of its funding and as a result of such repricing or refinancing the effective interest rate of the Term Loan B decreases, the Company shall be required to pay a prepayment fee equal to 1.0% of the aggregate principal amount of the Term Loan B subject to such repricing or refinancing. Additionally, the Company is required to prepay any outstanding amounts in connection with (i) the incurrence of certain indebtedness and (ii) non-ordinary course asset sales or other dispositions (including as a result of casualty or condemnation) that exceed certain thresholds in any period of twelve-consecutive months, with customary reinvestment provisions. The Term Loan B also requires the Company, as applicable, to prepay any outstanding term loans under the Term Loan B in connection with excess cash flow, which percentage will be based upon the Company’s leverage ratio during the relevant fiscal period. All such prepayments will be made on a pro rata basis under each of the applicable term loans that are subject to such prepayments. The Term Loan B matures on March 8, 2030.
9.000% Senior Notes
In February 2023, the Company issued $600,000 aggregate principal amount of 9.000% Senior Notes, with interest payable on February 15 and August 15 of each year. The issuance of the 9.000% Senior Notes resulted in proceeds, net of debt issuance costs of $11,056, of approximately $588,944. The 9.000% Senior Notes mature on February 15, 2031.
Prior to February 15, 2026, the Company has the right to redeem all or of a portion of the 9.000% 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 February 15, 2026, 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 109.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. On and after February 15, 2026, the Company has the right to redeem all or a portion of the 9.000% Senior Notes, at the redemption prices set forth in the indenture governing the 9.000% Senior Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. 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 9.000% Senior Notes at a purchase price in cash equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
The 9.000% Senior Notes are senior unsecured obligations of the Company and are guaranteed by the Company and certain of its domestic subsidiaries that guarantee its credit facilities and certain other material indebtedness. The indenture contains customary covenants and events of default. The 9.000% Senior Notes were issued in a transaction exempt from
16
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
registration under the Securities Act of 1933 and do not require disclosure of separate financial information for the guarantor subsidiaries.
Senior Secured Credit Facility Amendments
In November 2022 and in February 2023, given the economic conditions and the associated potential impact on future earnings, the Company amended the credit agreement governing its Senior Secured Credit Facility to modify the financial covenants in order to avoid a potential covenant violation and to provide operating flexibility. The November 2022 and February 2023 amendments effected changes to certain provisions and covenants under the Senior Secured Credit Facility during the period beginning with the fiscal quarter ending December 31, 2022 and continuing through the fiscal quarter ending March 30, 2024 or such earlier date as the Company may elect (such period of time, the “Covenant Relief Period”), including: (a) an increase in the maximum consolidated net total leverage ratio to 5.25 to 1.00 for the quarter ending December 31, 2022, 6.75 to 1.00 for the quarter ending April 1, 2023, 7.25 to 1.00 for the quarter ending July 1, 2023, 6.75 to 1.00 for the quarter ending September 30, 2023, 5.25 to 1.00 for the quarter ending December 30, 2023, and 5.00 to 1.00 for the quarter ending March 30, 2024, and reverting back to 4.50 to 1.00 for each quarter after the Covenant Relief Period has ended; (b) a reduction of the minimum interest coverage ratio from 3.00 to 1.00 to 2.60 to 1.00 for the quarter ending December 31, 2022 and the quarter ending April 1, 2023, 2.00 to 1.00 for the quarters ending July 1, 2023, September 30, 2023 and December 30, 2023, and 2.50 to 1.00 for the quarter ending March 30, 2024, with an increase to 2.75 to 1.00 for each quarter after the Covenant Relief Period has ended; (c) suspension of restricted payments in connection with share repurchases; (d) suspension of restricted payments pursuant to the Company's leverage ratio-based and "Available Amount" restricted payments baskets; (e) a cap on annual dividend payments of $75,000, which will revert back to the greater of (x) $350,000 and (y) 8.0% of Total Tangible Assets after the Covenant Relief Period has ended; (f) suspension of the Company’s “Available Amount” basket for investments in foreign subsidiaries and other investments; (g) suspension of the 0.50 to 1.00 increase in the maximum permitted consolidated net total leverage ratio resulting from a material permitted acquisition; and (h) the addition of two new tiers to the top of the pricing grid if the maximum consolidated net total leverage ratio exceeds 5.00 to 1.00 and 5.50 to 1.00. In conjunction with the November 2022 Amendment, the Company transitioned the Senior Secured Credit Facility from LIBOR to SOFR with a 10 basis points credit spread adjustment already included in the Senior Secured Credit Facility. In addition, the February 2023 Amendment limited the Company's ability to incur incremental secured indebtedness during the Covenant Relief Period to $1,750,000, subject to compliance with the financial covenants.
Additionally, in November 2023, given the continuing uncertain economic environment and the associated potential impact on future earnings, the Company further amended the credit agreement governing its Senior Secured Credit Facility prior to any potential future covenant violation in order to modify the financial covenants and to provide greater strategic financial flexibility. The November 2023 amendment effects additional changes to certain provisions and covenants under the Senior Secured Credit Facility, including changes to certain covenants and provisions that were previously amended in November 2022 and February 2023, during the period beginning with the fiscal quarter ending December 30, 2023 and continuing through the fiscal quarter ending September 27, 2025, or such earlier date as the Company may elect (such period of time, the “Extended Covenant Relief Period”), including: (a) an extension of the original Covenant Relief Period from March 30, 2024 to September 27, 2025; (b) an increase in the maximum leverage ratio to 6.75 to 1.00 for the quarters ending December 30, 2023 and March 30, 2024, 6.63 to 1.00 for the quarters ending June 29, 2024 and September 28, 2024, 6.38 to 1.00 for the quarter ending December 28, 2024, 5.63 to 1.00 for the quarter ending March 29, 2025, 5.25 to 1.00 for the quarter ending June 28, 2025, and 5.00 to 1.00 for the quarter ending September 27, 2025, reverting back to 4.50 to 1.00 for each quarter after the Extended Covenant Relief Period has ended; and (c) a reduction of the minimum interest coverage ratio to 1.63 to 1.00 for the quarters ending December 30, 2023 through September 28, 2024, 1.75 to 1.00 for the quarter ending December 28, 2024, 2.00 to 1.00 for the quarter ending March 29, 2025, 2.25 to 1.00 for the quarter ending June 28, 2025, and 2.50 to 1.00 for the quarter ending September 27, 2025 and each quarter after the Extended Covenant Relief Period has ended. The November 2023 amendment also includes the following additional baskets and restrictions: (a) an additional basket for permitted asset sales of $60,000; (b) suspends the Company’s reinvestment rights with respect to net proceeds in respect of certain asset sales (including the additional asset sale basket described in (a) above) and casualty and condemnation events (requiring the Company to prepay the credit agreement term loan obligations with such net proceeds, subject to step-downs for such prepayment requirement based on the leverage ratio); (c) reduces the cap on the Company’s general lien basket from $165,000 to $85,000 during the Extended Covenant Relief Period; (d) reduces the maximum amount for incremental facilities secured by a lien to $100,000 during the Extended Covenant Relief Period; and (e) suspends the payment of annual dividends during the Extended Covenant Relief Period, which will revert back to the greater of (x) $350,000 and (y) 8.0% of Total
17
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Tangible Assets after the Extended Covenant Relief Period has ended. In addition, the November 2023 amendment increases the applicable interest rate margins and commitment fee rates based on the leverage ratio during the Extended Covenant Relief Period.
Other Debt Related Activity
As of September 30, 2023, the Company had $935,913 of borrowing availability under the $1,000,000 Revolving Loan Facility after taking into account $60,500 of USD revolver loans and $3,587 of standby and trade letters of credit issued and outstanding under this facility.
The Company’s accounts receivable securitization facility (the “ARS Facility”) entered into in November 2007 was amended in June 2023. The amendment extended the maturity date to May 2024 with no change to the quarterly fluctuating facility limit. Additionally, the amendment created two pricing tiers based on a consolidated net total leverage ratio of 4.50 to 1.00. Borrowing availability under the ARS Facility is subject to a quarterly fluctuating facility limit ranging from $200,000 in the first and second quarters to $225,000 in the third and fourth quarters and permitted only to the extent that the face of the receivables in the collateral pool, net of applicable concentrations, reserves and other deductions, exceeds the outstanding loans. As of September 30, 2023, the quarterly fluctuating facility limit was $225,000, the maximum borrowing capacity was $200,891 and the Company had $391 of borrowing availability under the ARS Facility.
The Company had $35,994 of borrowing availability under other international credit facilities after taking into account outstanding borrowings and letters of credit outstanding under the applicable facilities at September 30, 2023.
As of September 30, 2023, the Company was in compliance with all financial covenants under its credit facilities and other outstanding indebtedness. Under the terms of its Senior Secured Credit Facility, among other financial and non-financial covenants, the Company is required to maintain a minimum interest coverage ratio and a maximum leverage ratio, each of which is defined in the Senior Secured Credit Facility. The method of calculating all the components used in the covenants is included in the Senior Secured Credit Facility.
(8)    Income Taxes
In the quarter ended September 30, 2023, income tax expense was $23,041 resulting in an effective income tax rate of (146.2)% and in the quarter ended October 1, 2022, income tax expense was $16,410 resulting in an effective income tax rate of 17.0%. In the nine months ended September 30, 2023, income tax expense was $51,541 resulting in an effective income tax rate of (116.8)% and in the nine months ended October 1, 2022, income tax expense was $58,775 resulting in an effective income tax rate of 17.0%. The Company's effective tax rate for the quarter and nine months ended September 30, 2023 primarily differs from the U.S. statutory rate due to valuation allowances against certain net deferred tax assets. Additionally, the Company had favorable discrete items of $3,355 and unfavorable discrete items of $3,860 for the quarter and nine months ended September 30, 2023, respectively, and unfavorable discrete items of $3,174 and $9,217 for the quarter and nine months ended October 1, 2022, respectively.
The Organization for Economic Co-operation and Development (the “OECD”), an international association of 38 countries including the U.S., has proposed changes to numerous long-standing tax principles, including a global minimum tax initiative. On December 12, 2022, the European Union member states agreed to implement the OECD’s Pillar 2 global corporate minimum tax rate of 15% on companies with revenues of at least $790,000, which would go into effect in 2024. Currently, South Korea, Japan, Mauritius and the United Kingdom are the only countries to enact legislation consistent with the rules, while other countries including Switzerland, Canada and Australia are also actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. The Company will continue to monitor the developing laws.
In August 2022, the U.S. enacted the Inflation Reduction Act of 2022 (“IR Act”), which, among other things, introduces a 15% minimum tax based on adjusted financial statement income of certain large corporations with a three year average adjusted financial statement income in excess of $1,000,000, a 1% excise tax on the fair market stock repurchases by covered corporations and several tax incentives to promote clean energy. The Company is continuing to evaluate the IR Act and its potential impact on future periods, and at this time the Company does not expect the IR Act to have a material impact on its consolidated financial statements.
18
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
(9)    Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss (“AOCI”) are as follows:
Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at July 1, 2023$(236,672)$5,605 $(429,227)$146,119 $(514,175)
Amounts reclassified from accumulated other comprehensive loss
— (1,818)4,077 136 2,395 
Current-period other comprehensive income (loss) activity(53,517)12,069 48 (1,917)(43,317)
Total other comprehensive income (loss)(53,517)10,251 4,125 (1,781)(40,922)
Balance at September 30, 2023$(290,189)$15,856 $(425,102)$144,338 $(555,097)

Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at December 31, 2022$(228,803)$8,709 $(437,353)$145,439 $(512,008)
Amounts reclassified from accumulated other comprehensive loss
— (7,887)12,231 1,422 5,766 
Current-period other comprehensive income (loss) activity
(61,386)15,034 20 (2,523)(48,855)
Total other comprehensive income (loss)(61,386)7,147 12,251 (1,101)(43,089)
Balance at September 30, 2023$(290,189)$15,856 $(425,102)$144,338 $(555,097)
(1)Cumulative Translation Adjustment includes translation adjustments and net investment hedges. See Note, “Financial Instruments and Risk Management” for additional disclosures about net investment hedges.
19
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at July 2, 2022$(228,826)$16,343 $(558,153)$140,874 $(629,762)
Amounts reclassified from accumulated other comprehensive loss
— 17,917 5,202 (4,109)19,010 
Current-period other comprehensive income (loss) activity
(76,756)(14,331)258 1,658 (89,171)
Total other comprehensive income (loss)(76,756)3,586 5,460 (2,451)(70,161)
Balance at October 1, 2022$(305,582)$19,929 $(552,693)$138,423 $(699,923)
Cumulative Translation Adjustment(1)
Cash Flow HedgesDefined Benefit PlansIncome TaxesAccumulated Other Comprehensive Loss
Balance at January 1, 2022$(134,001)$5,244 $(569,161)$146,315 $(551,603)
Amounts reclassified from accumulated other comprehensive loss
(13,473)45,345 16,023 (10,935)36,960 
Current-period other comprehensive income (loss) activity
(158,108)(30,660)445 3,043 (185,280)
Total other comprehensive income (loss)(171,581)14,685 16,468 (7,892)(148,320)
Balance at October 1, 2022$(305,582)$19,929 $(552,693)$138,423 $(699,923)
(1)Cumulative Translation Adjustment includes translation adjustments and net investment hedges. See Note, “Financial Instruments and Risk Management” for additional disclosures about net investment hedges.
20
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
The Company had the following reclassifications out of AOCI:
Component of AOCI Location of Reclassification into IncomeAmount of Reclassification from AOCI
Quarters EndedNine Months Ended
September 30,
2023		October 1,
2022		September 30,
2023		October 1,
2022
Write-off of cumulative translation associated with sale of businessIncome from discontinued operations, net of tax