Hanesbrands Earnings 2021-04-03

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

hbi-20210403

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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 April 3, 2021


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

For the transition period from to

Commission file number: 001-32891

Hanesbrands Inc.

(Exact name of registrant as specified in its charter)


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

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

(336) 519-8080

(Registrant’s telephone number including area code)

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


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

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of May 7, 2021, there were 349,115,441 shares of the registrant’s common stock outstanding.

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TABLE OF CONTENTS


		Page
Forward-Looking Statements		1

PART I
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Statements of Income for the quarters ended April 3 , 202 1 and March 28, 20 20	2
	Condensed Consolidated Statements of Comprehensive Income for the quarters ended April 3 , 202 1 and March 2 8, 20 20	3
	Condensed Consolidated Balance Sheets at Apr il 3 , 202 1, Janu a ry 2 , 20 21 and March 28, 20 20	4
	Condensed Consolidated Statements of Stockholders’ Equity for the quarters ended April 3, 202 1 and March 28, 20 20	5
	Condensed Consolidated Statements of Cash Flows for the quarters ended April 3 , 202 1 and March 28, 20 20	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	28

PART II
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
Signatures		31

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue” or similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding our intent, belief and current expectations about our strategic direction, prospects and future results are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. In particular, statements with respect to trends associated with our business, our Full Potential plan, our future financial performance and the potential effects of the ongoing global COVID-19 coronavirus pandemic included in this Quarterly Report on Form 10-Q specifically appearing under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” include forward-looking statements.

More information on factors that could cause actual results or events to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended January 2, 2021, under the caption “Risk Factors,” and available on the “Investors” section of our corporate website, www.Hanes.com/investors. The contents of our corporate website are not incorporated by reference in this Quarterly Report on Form 10-Q.

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PART I

Item 1. Financial Statements

HANESBRANDS INC.

Condensed Consolidated Statements of Income

(in thousands, except per share data)

(unaudited)


	Quarters Ended
	April 3, 2021		March 28, 2020
Net sales	$	1,508,029	$	1,203,070
Cost of sales	905,348		784,902
Gross profit	602,681		418,168
Selling, general and administrative expenses	412,559		370,215
Operating profit	190,122		47,953
Other expenses	2,561		6,101
Interest expense, net	44,460		36,027
Income from continuing operations before income tax expense	143,101		5,825
Income tax expense	14,697		707
Income from continuing operations	128,404		5,118
Loss from discontinued operations, net of tax	(391,666)		(12,992)
Net loss	$	(263,262)	$	(7,874)

Earnings (loss) per share - basic:
Continuing operations	$	0.37	$	0.01
Discontinued operations	(1.12)		(0.04)
Net loss	$	(0.75)	$	(0.02)

Earnings (loss) per share - diluted:
Continuing operations	$	0.37	$	0.01
Discontinued operations	(1.11)		(0.04)
Net loss	$	(0.75)	$	(0.02)

See accompanying notes to Condensed Consolidated Financial Statements.

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HANESBRANDS INC.

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)


	Quarters Ended
	April 3, 2021		March 28, 2020
Net loss	$	(263,262)	$	(7,874)
Other comprehensive income (loss):
Translation adjustments	(25,201)		(117,154)
Unrealized gain on qualifying cash flow hedges, net of tax of $(5,176) and $(7,280), respectively	8,540		7,783
Unrecognized income from pension and postretirement plans, net of tax of $(2,049) and $(1,272), respectively	6,735		3,594
Total other comprehensive loss	(9,926)		(105,777)
Comprehensive loss	$	(273,188)	$	(113,651)

See accompanying notes to Condensed Consolidated Financial Statements.

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HANESBRANDS INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	April 3, 2021		January 2, 2021		March 28, 2020
Assets
Cash and cash equivalents	$	530,403	$	900,615	$	1,069,490
Trade accounts receivable, net	807,738		768,221		666,603
Inventories	1,489,565		1,367,758		1,787,660
Other current assets	153,358		158,700		155,074
Current assets of discontinued operations	303,045		234,086		296,889
Total current assets	3,284,109		3,429,380		3,975,716
Property, net	458,434		477,821		502,167
Right-of-use assets	416,136		432,631		434,225
Trademarks and other identifiable intangibles, net	1,269,932		1,293,847		1,161,350
Goodwill	1,150,138		1,158,938		1,119,646
Deferred tax assets	355,826		367,976		181,807
Other noncurrent assets	54,678		64,773		113,263
Noncurrent assets of discontinued operations	—		494,501		479,927
Total assets	$	6,989,253	$	7,719,867	$	7,968,101

Liabilities and Stockholders’ Equity
Accounts payable	$	976,887	$	891,868	$	876,394
Accrued liabilities	571,410		609,864		357,514
Lease liabilities	132,127		136,510		138,298
Notes payable	—		—		1,660
Accounts Receivable Securitization Facility	—		—		152,153
Current portion of long-term debt	34,375		263,936		2,533
Current liabilities of discontinued operations	288,936		222,183		285,359
Total current liabilities	2,003,735		2,124,361		1,813,911
Long-term debt	3,649,631		3,739,434		4,236,955
Lease liabilities - noncurrent	315,382		331,577		327,745
Pension and postretirement benefits	333,460		381,457		331,205
Other noncurrent liabilities	202,564		216,091		272,780
Noncurrent liabilities of discontinued operations	—		112,989		111,934
Total liabilities	6,504,772		6,905,909		7,094,530

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 — 349,090,472, 348,802,220 and 348,035,310, respectively	3,491		3,488		3,480
Additional paid-in capital	304,090		307,883		297,456
Retained earnings	753,785		1,069,546		1,296,060
Accumulated other comprehensive loss	(576,885)		(566,959)		(723,425)
Total stockholders’ equity	484,481		813,958		873,571
Total liabilities and stockholders’ equity	$	6,989,253	$	7,719,867	$	7,968,101

See accompanying notes to Condensed Consolidated Financial Statements.

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HANESBRANDS INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except per share data)

(unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balances at January 2, 2021	348,802	$	3,488	$	307,883	$	1,069,546	$	(566,959)	$	813,958
Net loss	—	—		—		(263,262)		—		(263,262)
Dividends ($0.15 per common share)	—	—		—		(52,499)		—		(52,499)
Other comprehensive loss	—	—		—		—		(9,926)		(9,926)
Stock-based compensation	—	—		(1,534)		—		—		(1,534)
Net exercise of stock options, vesting of restricted stock units and other	288	3		(2,259)		—		—		(2,256)
Balances at April 3, 2021	349,090	$	3,491	$	304,090	$	753,785	$	(576,885)	$	484,481


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balances at December 28, 2019	362,449	$	3,624	$	304,395	$	1,546,224	$	(617,648)	$	1,236,595
Net loss	—	—		—		(7,874)		—		(7,874)
Dividends ($0.15 per common share)	—	—		—		(54,421)		—		(54,421)
Other comprehensive loss	—	—		—		—		(105,777)		(105,777)
Stock-based compensation	—	—		4,641		—		—		4,641
Net exercise of stock options, vesting of restricted stock units and other	50	1		675		—		—		676
Share repurchases	(14,464)	(145)		(12,255)		(187,869)		—		(200,269)
Balances at March 28, 2020	348,035	$	3,480	$	297,456	$	1,296,060	$	(723,425)	$	873,571

See accompanying notes to Condensed Consolidated Financial Statements.

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HANESBRANDS INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Quarters Ended
	April 3, 2021(1)		March 28, 2020(1)
Operating activities:
Net loss	$	(263,262)	$	(7,874)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation	24,142		22,781
Amortization of acquisition intangibles	6,179		6,113
Other amortization	3,020		2,477
Impairment of intangible assets and goodwill	163,047		—
Loss on classification of assets held for sale	226,352		—
Amortization of debt issuance costs	4,580		2,123


Other	(5,835)		(5,258)
Changes in assets and liabilities:
Accounts receivable	(63,955)		73,694
Inventories	(122,781)		(86,785)
Other assets	9,606		26,790
Accounts payable	109,197		(13,605)
Accrued pension and postretirement benefits	(38,757)		(21,481)
Accrued liabilities and other	(34,587)		(82,191)
Net cash from operating activities	16,946		(83,216)
Investing activities:
Capital expenditures	(17,804)		(25,759)
Proceeds from sales of assets	2,406		66

Other	1,794		1,216
Net cash from investing activities	(13,604)		(24,477)
Financing activities:
Repayments on Term Loan Facilities	(300,000)		—
Borrowings on Accounts Receivable Securitization Facility	—		227,061
Repayments on Accounts Receivable Securitization Facility	—		(74,909)
Borrowings on Revolving Loan Facilities	—		1,638,000
Repayments on Revolving Loan Facilities	—		(688,000)

Borrowings on International Debt	—		31,222

Borrowings on notes payable	21,106		62,312
Repayments on notes payable	(20,276)		(64,352)
Share repurchases	—		(200,269)
Cash dividends paid	(52,351)		(53,683)
Payments of debt issuance costs
Other	(2,902)		132
Net cash from financing activities	(354,423)		877,514
Effect of changes in foreign exchange rates on cash	(17,662)		(15,061)
Change in cash, cash equivalents and restricted cash	(368,743)		754,760
Cash, cash equivalents and restricted cash at beginning of year	910,603		329,923
Cash, cash equivalents and restricted cash at end of period	541,860		1,084,683
Less restricted cash at end of period	1,153		903
Cash and cash equivalents at end of period	$	540,707	$	1,083,780

Balances included in the Condensed Consolidated Balance Sheets:
Cash and cash equivalents	$	530,403	$	1,069,490
Cash and cash equivalents included in current assets of discontinued operations	10,304		14,290
Cash and cash equivalents at end of period	$	540,707	$	1,083,780

(1)The cash flows related to discontinued operations have not been segregated and remain included in the major classes of assets and liabilities. Accordingly, the Condensed Consolidated Statements of Cash Flows include the results of continuing and discontinued operations.

Capital expenditures included in accounts payable at April 3, 2021 and January 2, 2021 were $4,670 and $17,931, respectively. For the quarters ended April 3, 2021 and March 28, 2020, right-of-use assets obtained in exchange for lease obligations were $4,755 and $17,551, respectively.

See accompanying notes to Condensed Consolidated Financial Statements.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share data)

(unaudited)

(1) Basis of Presentation

These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management believes that the disclosures made are adequate for a fair statement of the results of operations, financial condition and cash flows of Hanesbrands Inc. and its consolidated subsidiaries (the “Company” or “Hanesbrands”). In the opinion of management, the condensed consolidated interim financial statements reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of operations, financial condition and cash flows for the interim periods presented herein. The preparation of condensed consolidated interim financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates.

These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 2, 2021. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.

In the first quarter of 2021, the Company announced that as part of its strategic plan, it was exploring alternatives for its European Innerwear business and subsequently reached the decision to exit this business. The Company determined that its European Innerwear business met held-for-sale and discontinued operations accounting criteria at the end of the first quarter of 2021. Accordingly, the Company began to separately report the results of its European Innerwear business as discontinued operations in its Condensed Consolidated Statements of Income, and to present the related assets and liabilities as held for sale in the Condensed Consolidated Balance Sheets. These changes have been applied to all periods presented. Unless otherwise noted, discussion within these notes to the condensed consolidated interim financial statements relates to continuing operations. See note “Discontinued Operations” for additional information on discontinued operations.

(2) Recent Accounting Pronouncements

Income Taxes

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The new accounting rules reduce complexity by removing specific exceptions to general principles related to intraperiod tax allocations, ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses. The new accounting rules also simplify accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The new accounting rules were effective for the Company in the first quarter of 2021. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations, cash flows or disclosures.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In January 2021, the FASB clarified the scope of that guidance with the issuance of ASU 2021-01, “Reference Rate Reform: Scope.” The new accounting rules provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this standard can be adopted any time before the fourth quarter of 2022. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations, cash flows and disclosures.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

Codification Improvements

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements.” The new accounting rules improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50) that had only been included in the Other Presentation Matters Section (Section 45) of the Codification. Additionally, the new rules also clarify guidance across various topics including defined benefit plans, foreign currency transactions, and interest expense. The new accounting rules were effective for the Company in the first quarter of 2021. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations, cash flows or disclosures.

(3) Discontinued Operations

In the first quarter of 2021, the Company announced that as part of its strategic plan, it was exploring alternatives for its European Innerwear business and subsequently reached the decision to exit this business. The Company determined that its European Innerwear business met held-for-sale and discontinued operations accounting criteria at the end of the first quarter of 2021. Accordingly, the Company began to separately report the results of its European Innerwear business as discontinued operations in its Condensed Consolidated Statements of Income, and to present the related assets and liabilities as held for sale in the Condensed Consolidated Balance Sheets. These changes have been applied to all periods presented. The Company is actively marketing the business to prospective buyers and expects to complete the sale of this business within one year.

The operations of the European Innerwear business were previously reported primarily in the International segment. Certain expenses related to its operations were included in general corporate expenses, restructuring and other action-related charges and amortization of intangibles which were previously excluded from segment operating profit and have been reclassified to discontinued operations beginning in the first quarter of 2021 and for all periods presented. Discontinued operations does not include any allocation of corporate overhead expense or interest expense.

Upon meeting the criteria for held for sale classification 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, a strategic review was completed in the first quarter of 2021 with revised forecasts to include updated market conditions and the removal of strategic operating decisions that would no longer occur under the Company's ownership. The revised forecasts indicated impairment charges of certain indefinite-lived trademarks and license agreements as well as the full goodwill balance. 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 quarter ended April 3, 2021. In addition, the Company recorded a non-cash charge of $226,352 as "Loss on classification of assets held for sale" in the summarized discontinued operations financial information for the quarter ended April 3, 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. Additionally, the Company recorded an impairment charge of $7,302 in continuing operations on an indefinite-lived trademark which is reflected in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income. This charge relates to the full impairment of an indefinite-lived trademark related to a specific brand within the European Innerwear business that was excluded from the disposal group as it is not being marketed for sale. The Company intends to exit this brand subsequent to the sale of the European Innerwear business.

The Company expects to continue certain sales from its supply chain to the European Innerwear business after the sale of the business. Those sales and the related profit are included in continuing operations in the Condensed Consolidated Statements of Income in all periods presented and have not been eliminated as intercompany transactions in consolidation. The related receivables from the European Innerwear business have been reclassified to “Trade accounts receivable, net” in the Condensed Consolidated Balance Sheets for all periods presented.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

The operating results of the discontinued operations only reflect revenues and expenses that are directly attributable to the European Innerwear business that will be eliminated from continuing operations. The key components from discontinued operations related to the European Innerwear business are as follows:


	Quarters Ended
	April 3, 2021		March 28, 2020
Net sales	$	135,845	$	127,671
Cost of sales	75,523		72,107
Gross profit	60,322		55,564
Selling, general and administrative expenses	83,392		69,387
Impairment of intangible assets and goodwill	155,745		—
Loss on classification of assets held for sale	226,352		—
Operating loss	(405,167)		(13,823)
Interest expense, net	90		822
Other expenses	334		389
Loss from discontinued operations before income tax expense	(405,591)		(15,034)
Income tax benefit	(13,925)		(2,042)
Net loss from discontinued operations, net of tax	$	(391,666)	$	(12,992)

Assets and liabilities of discontinued operations classified as held for sale in the Condensed Consolidated Balance Sheets as of April 3, 2021, January 2, 2021 and March 28, 2020 consist of the following:


	April 3, 2021		January 2, 2021(1)		March 28, 2020(1)
Cash and cash equivalents	$	10,304	$	8,822	$	14,290
Trade accounts receivable, net	80,458		84,632		83,331
Inventories	106,192		123,337		176,097
Other current assets	11,190		17,295		23,171
Property, net	61,763		67,950		68,838
Right-of-use assets	34,779		34,637		39,711
Trademarks and other identifiable intangibles, net	208,601		284,170		274,006
Goodwill	—		96,692		85,549
Deferred tax assets	8,505		5,438		6,197
Other noncurrent assets	4,860		5,614		5,626
Allowance to adjust assets to estimated fair value, less costs of disposal	(223,607)		—		—
Total assets of discontinued operations	$	303,045	$	728,587	$	776,816

Accounts payable	62,199		77,636		73,866
Accrued liabilities	120,475		133,431		89,887
Lease liabilities	9,159		10,332		12,270
Notes payable	1,574		784		510
Current portion of long-term debt	—		—		108,826
Lease liabilities - noncurrent	27,038		28,775		31,103
Pension and postretirement benefits	44,428		46,569		44,306
Other noncurrent liabilities	24,063		37,645		36,525
Total liabilities of discontinued operations	$	288,936	$	335,172	$	397,293

(1)Amounts at January 2, 2021 and March 28, 2020 have been classified as current and long-term in the Condensed Consolidated Balance Sheets.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

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 Ended
	April 3, 2021		March 28, 2020
Depreciation	$	2,608	$	2,665
Amortization	1,460		1,282
Capital expenditures	3,335		3,538
Impairment of intangible assets and goodwill	155,745		—
Loss on classification of assets held for sale	226,352		—
Other investing activities	1,794		1,216
Capital expenditures included in accounts payable	52		1,033

(4) Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with a customer are satisfied, which occurs at a point in time, upon either shipment or delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. Variable consideration includes trade discounts, rebates, volume-based incentives, cooperative advertising and product returns, which are offered within contracts between the Company and its customers, employing the practical expedient for contract costs. Incidental items that are immaterial to the context of the contract are recognized as expense at the transaction date.

The following table presents the Company’s revenues disaggregated by the customer’s method of purchase:


	Quarters Ended
	April 3, 2021		March 28, 2020
Third-party brick-and-mortar wholesale	$	1,024,739	$	886,535
Consumer-directed	483,290		316,535
Total net sales	$	1,508,029	$	1,203,070

Revenue Sources

Third-Party Brick-and-Mortar Wholesale Revenue

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

Consumer-Directed Revenue

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

(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.

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HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

The reconciliation of basic to diluted weighted average shares outstanding is as follows:


	Quarters Ended
	April 3, 2021	March 28, 2020
Basic weighted average shares outstanding	351,003	359,017
Effect of potentially dilutive securities:
Stock options	9	220
Restricted stock units	671	188
Employee stock purchase plan and other	3	11
Diluted weighted average shares outstanding	351,686	359,436

For the quarter ended April 3, 2021, there were 592 restricted stock units and 167 stock options to purchase shares of common stock excluded from the diluted earnings per share calculation because their effect would be anti-dilutive. For the quarter ended March 28, 2020, there were 1,080 restricted stock units and no stock options to purchase shares of common stock excluded from the diluted earnings per share calculation because their effect would be anti-dilutive.

On May 11, 2021, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.15 per share on outstanding shares of common stock to be paid on June 1, 2021 to stockholders of record at the close of business on May 21, 2021.

On February 6, 2020, the Company’s Board of Directors approved a new share repurchase program for up to 40,000 shares to be repurchased in open market transactions, subject to market conditions, legal requirements and other factors. Additionally, management has been granted authority to establish one or more trading plans under Rule 10b5-1 of the Exchange Act in connection with share repurchases, which will allow the Company to repurchase shares in the open market during periods in which the stock trading window is otherwise closed for the Company and certain of the Company’s officers and employees pursuant to the Company’s insider trading policy. Unless terminated earlier by the Company’s Board of Directors, the new program will expire when the Company has repurchased all shares authorized for repurchase under the new program. The new program replaced the Company’s previous share repurchase program for up to 40,000 shares that was originally approved in 2016. For the quarter ended April 3, 2021, the Company did not enter into any transactions to repurchase shares under the new program. For the quarter ended March 28, 2020, the Company entered into transactions to repurchase 14,464 shares at a weighted average repurchase price of $13.83 per share under the new program. The shares were repurchased at a total cost of $200,269. At April 3, 2021, the remaining repurchase authorization under the current share repurchase program totaled 25,536 shares. The primary objective of the share repurchase program is to utilize excess cash to generate shareholder value. Share repurchases are currently prohibited under the Senior Secured Credit Facility as a result of the amendment signed in April 2020. See Note “Debt” for additional information on the Company’s debt facilities.

(6) Inventories

Inventories consisted of the following:


	April 3, 2021		January 2, 2021		March 28, 2020
Raw materials	$	74,123	$	67,111	$	73,450
Work in process	99,619		108,844		115,129
Finished goods	1,315,823		1,191,803		1,599,081
	$	1,489,565	$	1,367,758	$	1,787,660

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

(7) Debt

Debt consisted of the following:


	Interest Rate as of April 3, 2021	Principal Amount				Maturity Date
		April 3, 2021		January 2, 2021
Senior Secured Credit Facility:
Revolving Loan Facility	—	$	—	$	—	December 2022

Term Loan A	2.11%	625,000		625,000		December 2022
Term Loan B	—	—		300,000		December 2024

Australian Revolving Loan Facility	—	—		—		July 2021
5.375% Senior Notes	5.38%	700,000		700,000		May 2025
4.875% Senior Notes	4.88%	900,000		900,000		May 2026
4.625% Senior Notes	4.63%	900,000		900,000		May 2024
3.5% Senior Notes	3.50%	587,959		610,724		June 2024
Accounts Receivable Securitization Facility	—	—		—		June 2022
Total debt		3,712,959		4,035,724
Less long-term debt issuance costs		28,953		32,354
Less current maturities		34,375		263,936
Total long-term debt		$	3,649,631	$	3,739,434

As of April 3, 2021, the Company had $995,824 of borrowing availability under the $1,000,000 Revolving Loan Facility after taking into account $4,176 of standby and trade letters of credit issued and outstanding under this facility. In March 2021, the Company repaid the outstanding balance of Term Loan B which consisted of a required excess cash flow prepayment of $238,936 and a voluntary prepayment of $61,064.

The Company’s accounts receivable securitization facility (the “Accounts Receivable Securitization Facility”) entered into in November 2007 was amended in March 2021. The latest amendment decreased the fluctuating facility limit to $175,000 (previously $225,000) and extended the maturity date to June 2022. Additionally, the amendment changed certain ratios and borrowing base calculations, raised pricing and added certain receivables to the pledged collateral pool for the facility. Borrowings under the Accounts Receivable Securitization Facility are permitted only to the extent that the face of the receivables in the collateral pool, net of applicable reserves and other deductions, exceeds the outstanding loans and also subject to a fluctuating facility limit, not to exceed $175,000. The Company’s maximum borrowing capacity under the Accounts Receivable Securitization Facility was $150,000 as of April 3, 2021. The Company had $87,403 of borrowing availability under the Accounts Receivable Securitization Facility at April 3, 2021.

The Company had $45,572 of borrowing availability under the Australian Revolving Loan Facility and $85,245 of borrowing availability under other international credit facilities after taking into account outstanding borrowings and letters of credit outstanding under the applicable facilities at April 3, 2021.

In April 2020, given the rapidly changing business environment and level of uncertainty being created by the COVID-19 pandemic and the associated impact on future earnings, the Company amended its Senior Secured Credit Facility prior to any potential covenant violation in order to modify the financial covenants and to provide operating flexibility during the COVID-19 crisis. The amendment changed certain provisions and covenants under the Senior Secured Credit Facility through the fiscal quarter ending July 3, 2021, after which the covenants revert to their original, pre-amendment levels.

As of April 3, 2021, the Company was in compliance with all financial covenants under its credit facilities and other outstanding indebtedness. Under the terms of its Senior Secured Credit Facility, among other financial and non-financial covenants, the Company is required to maintain a minimum interest coverage ratio and a maximum leverage ratio. The interest coverage ratio covenant is the ratio of the Company’s EBITDA for the preceding four fiscal quarters to its consolidated total interest expense and the maximum leverage ratio covenant is the ratio of the Company’s net debt to EBITDA for the preceding four fiscal quarters. EBITDA is defined as earnings before interest, income taxes, depreciation expense and amortization, as computed pursuant to the Senior Secured Credit Facility.

The Company expects to maintain compliance with its covenants for at least one year from the date of these financial statements based on its current expectations and forecasts. If economic conditions caused by the COVID-19 pandemic worsen

Table of Contents

HANESBRANDS INC.

Notes to Condensed Consolidated Financial Statements — (Continued)

(amounts in thousands, except per share data)

(unaudited)

and the Company’s earnings and operating cash flows do not recover as currently estimated by management, this could impact the Company’s ability to maintain compliance with its financial covenants and require the Company to seek additional amendments to its Senior Secured Credit Facility. If the Company is not able to obtain such necessary additional amendments, this would lead to an event of default and, if not cured timely, its lenders could require the Company to repay its outstanding debt. In that situation, the Company may not be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay the lenders.

(8) Accumulated Other Comprehensive Loss

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


	Cumulative Translation Adjustment(1)		Cash Flow Hedges		Defined Benefit Plans		Income Taxes		Accumulated Other Comprehensive Loss
Balance at January 2, 2021	$	(52,820)	$	(26,538)	$	(668,730)	$	181,129	$	(566,959)
Amounts reclassified from accumulated other comprehensive loss	—		5,242		7,085		(3,004)		9,323
Current-period other comprehensive income (loss) activity	(25,201)		8,474		1,699		(4,221)		(19,249)
Total other comprehensive income (loss)	(25,201)		13,716		8,784		(7,225)		(

Price	15.04	EPS	2
Shares	366	P/E	9
MCap	5,499	P/FCF	22
Net Debt	3,544	EBIT	652
TEV	9,043	TEV/EBIT	14
TTM 2019-09-28, in MM, except price, ratios

10-Q	2021-04-03	Filed 2021-05-12
10-K	2021-01-02	Filed 2021-02-12
10-Q	2020-09-26	Filed 2020-11-05
10-Q	2020-06-27	Filed 2020-07-31
10-Q	2020-03-28	Filed 2020-04-30
10-K	2019-12-28	Filed 2020-02-11
10-Q	2019-09-28	Filed 2019-10-31
10-Q	2019-06-29	Filed 2019-08-02
10-Q	2019-03-30	Filed 2019-05-02
10-K	2018-12-29	Filed 2019-02-11
10-Q	2018-09-29	Filed 2018-11-01
10-Q	2018-06-30	Filed 2018-08-02
10-Q	2018-03-31	Filed 2018-05-01
10-K	2017-12-30	Filed 2018-02-09
10-Q	2017-09-30	Filed 2017-11-03
10-Q	2017-07-01	Filed 2017-08-02
10-Q	2017-04-01	Filed 2017-05-03
10-K	2016-12-31	Filed 2017-02-03
10-Q	2016-10-01	Filed 2016-10-28
10-Q	2016-07-02	Filed 2016-08-04
10-Q	2016-04-02	Filed 2016-04-26
10-K	2016-01-02	Filed 2016-02-05
10-Q	2015-10-03	Filed 2015-10-29
10-Q	2015-07-04	Filed 2015-07-31
10-Q	2015-04-04	Filed 2015-05-01
10-K	2015-01-03	Filed 2015-02-06
10-Q	2014-09-27	Filed 2014-10-30
10-Q	2014-06-28	Filed 2014-07-24
10-Q	2014-03-29	Filed 2014-04-25
10-K	2013-12-28	Filed 2014-02-06
10-Q	2013-09-28	Filed 2013-10-31
10-Q	2013-06-29	Filed 2013-07-31
10-Q	2013-03-30	Filed 2013-04-24
10-K	2012-12-29	Filed 2013-02-06
10-Q	2012-09-29	Filed 2012-10-24
10-Q	2012-06-30	Filed 2012-08-02
10-Q	2012-03-31	Filed 2012-04-25
10-K	2011-12-31	Filed 2012-02-17
10-Q	2011-10-01	Filed 2011-11-03
10-Q	2011-07-02	Filed 2011-07-28
10-Q	2011-04-02	Filed 2011-04-28
10-K	2011-01-01	Filed 2011-02-16
10-Q	2010-10-02	Filed 2010-10-28
10-Q	2010-07-03	Filed 2010-07-28
10-Q	2010-04-03	Filed 2010-04-29
10-K	2010-01-02	Filed 2010-02-09

8-K	2021-02-10	Regulation FD, Exhibits
8-K	2021-02-09	Earnings, Regulation FD, Exhibits
8-K	2021-01-15	Officers, Exhibits
8-K	2020-12-08	Officers, Exhibits
8-K	2020-11-05
8-K	2020-11-05
8-K	2020-08-06
8-K	2020-07-28
8-K	2020-06-09
8-K	2020-05-04
8-K	2020-05-04
8-K	2020-04-30
8-K	2020-04-28
8-K	2020-04-27
8-K	2020-03-25
8-K	2020-03-05
8-K	2020-02-07
8-K	2020-01-28
8-K	2020-01-09
8-K	2019-11-21
8-K	2019-10-31
8-K	2019-08-01
8-K	2019-08-01
8-K	2019-05-02
8-K	2019-04-23
8-K	2019-02-07
8-K	2018-11-01
8-K	2018-08-01
8-K	2018-07-24
8-K	2018-05-15
8-K	2018-05-03
8-K	2018-05-01
8-K	2018-04-24
8-K	2018-02-02

EX-4.1	hbi-20210403xex41.htm
EX-10.1	hbi-20210403xex101.htm
EX-31.1	hbi-20210403xex311.htm
EX-31.2	hbi-20210403xex312.htm
EX-32.1	hbi-20210403xex321.htm
EX-32.2	hbi-20210403xex322.htm

HBI 10Q Quarterly Report

Hanesbrands Earnings 2021-04-03