falsedesktopHBI2020-09-26000135984120000097{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large accelerated filer\t☒\tAccelerated filer\t☐\t\t\nNon-accelerated filer\t☐\tSmaller reporting company\t☐\tEmerging growth company\t☐\n", "q10k_tbl_1": "\t\tPage\nForward-Looking Statements\t\t1\nPART I\t\t\nItem 1.\tFinancial Statements (unaudited):\t\n\tCondensed Consolidated Statements of Income for the quarters and nine months ended September 26 2020 and September 28 2019\t2\n\tCondensed Consolidated Statements of Comprehensive Income for the quarters and nine months ended September 26 2020 and September 28 2019\t3\n\tCondensed Consolidated Balance Sheets at September 26 2020 December 28 2019 and September 28 2019\t4\n\tCondensed Consolidated Statements of Stockholders' Equity for the quarters and nine months ended September 26 2020 and September 28 2019\t5\n\tCondensed Consolidated Statements of Cash Flows for the nine months ended September 26 2020 and September 28 2019\t7\n\tNotes to Condensed Consolidated Financial Statements\t8\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t24\nItem 3.\tQuantitative and Qualitative Disclosures about Market Risk\t36\nItem 4.\tControls and Procedures\t36\nPART II\t\t\nItem 1.\tLegal Proceedings\t37\nItem 1A.\tRisk Factors\t37\nItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t38\nItem 3.\tDefaults Upon Senior Securities\t38\nItem 4.\tMine Safety Disclosures\t38\nItem 5.\tOther Information\t38\nItem 6.\tExhibits\t39\nSignatures\t\t41\n", "q10k_tbl_2": "\tQuarters Ended\t\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nNet sales\t1808266\t1866967\t4863507\t5215918\nCost of sales\t1191553\t1149934\t3140050\t3203331\nGross profit\t616713\t717033\t1723457\t2012587\nSelling general and administrative expenses\t442142\t449962\t1273220\t1366272\nOperating profit\t174571\t267071\t450237\t646315\nOther expenses\t5309\t8066\t16849\t23766\nInterest expense net\t43868\t43091\t122376\t137672\nIncome before income tax expense\t125394\t215914\t311012\t484877\nIncome tax expense\t22116\t30823\t54427\t69143\nNet income\t103278\t185091\t256585\t415734\nEarnings per share:\t\t\t\t\nBasic\t0.29\t0.51\t0.73\t1.14\nDiluted\t0.29\t0.51\t0.72\t1.14\n", "q10k_tbl_3": "\tQuarters Ended\t\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nNet income\t103278\t185091\t256585\t415734\nOther comprehensive income (loss):\t\t\t\t\nTranslation adjustments\t23678\t(44997)\t1557\t(40813)\nUnrealized gain (loss) on qualifying cash flow hedges net of tax of $3035 $(920) $(214) and $2653 respectively\t(11250)\t2059\t(9644)\t(7018)\nUnrecognized income from pension and postretirement plans net of tax of $(1396) $(1358) $(4462) and $(3974) respectively\t3798\t3605\t10952\t10555\nTotal other comprehensive income (loss)\t16226\t(39333)\t2865\t(37276)\nComprehensive income\t119504\t145758\t259450\t378458\n", "q10k_tbl_4": "\tSeptember 26 2020\tDecember 28 2019\tSeptember 28 2019\nAssets\t\t\t\nCash and cash equivalents\t731481\t328876\t317024\nTrade accounts receivable net\t984571\t815210\t1033938\nInventories\t2170552\t1905845\t2095035\nOther current assets\t210617\t174634\t174172\nTotal current assets\t4097221\t3224565\t3620169\nProperty net\t553748\t587896\t581971\nRight-of-use assets\t461117\t487787\t475037\nTrademarks and other identifiable intangibles net\t1501161\t1520800\t1493969\nGoodwill\t1246113\t1235711\t1223216\nDeferred tax assets\t200877\t203331\t213649\nOther noncurrent assets\t99447\t93896\t115821\nTotal assets\t8159684\t7353986\t7723832\nLiabilities and Stockholders' Equity\t\t\t\nAccounts payable\t1144190\t959006\t997069\nAccrued liabilities\t716590\t531184\t587932\nLease liabilities\t156709\t166091\t145055\nNotes payable\t5257\t4244\t4275\nAccounts Receivable Securitization Facility\t0\t0\t208604\nCurrent portion of long-term debt\t0\t110914\t151909\nTotal current liabilities\t2022746\t1771439\t2094844\nLong-term debt\t3972212\t3256870\t3467591\nLease liabilities - noncurrent\t347604\t358281\t364083\nPension and postretirement benefits\t371330\t403458\t348674\nOther noncurrent liabilities\t296259\t327343\t330547\nTotal liabilities\t7010151\t6117391\t6605739\nStockholders' equity:\t\t\t\nPreferred stock (50000000 authorized shares; $.01 par value)\t\t\t\nIssued and outstanding - None\t0\t0\t0\nCommon stock (2000000000 authorized shares; $.01 par value)\t\t\t\nIssued and outstanding - 348288056 362449037 and 361612383 respectively\t3483\t3624\t3616\nAdditional paid-in capital\t306157\t304395\t310327\nRetained earnings\t1454676\t1546224\t1416109\nAccumulated other comprehensive loss\t(614783)\t(617648)\t(611959)\nTotal stockholders' equity\t1149533\t1236595\t1118093\nTotal liabilities and stockholders' equity\t8159684\t7353986\t7723832\n", "q10k_tbl_5": "\tCommon Stock\t\tAdditional Paid-In Capital\tRetained Earnings\tAccumulated Other Comprehensive Loss\tTotal\n\tShares\tAmount\nBalances at June 27 2020\t348093\t3481\t302522\t1404326\t(631009)\t1079320\nNet income\t0\t0\t0\t103278\t0\t103278\nDividends ($0.15 per common share)\t0\t0\t0\t(52928)\t0\t(52928)\nOther comprehensive income\t0\t0\t0\t0\t16226\t16226\nStock-based compensation\t0\t0\t4538\t0\t0\t4538\nNet exercise of stock options vesting of restricted stock units and other\t195\t2\t(903)\t0\t0\t(901)\nBalances at September 26 2020\t348288\t3483\t306157\t1454676\t(614783)\t1149533\n", "q10k_tbl_6": "\tCommon Stock\t\tAdditional Paid-In Capital\tRetained Earnings\tAccumulated Other Comprehensive Loss\tTotal\n\tShares\tAmount\nBalances at December 28 2019\t362449\t3624\t304395\t1546224\t(617648)\t1236595\nNet income\t0\t0\t0\t256585\t0\t256585\nDividends ($0.45 per common share)\t0\t0\t0\t(160264)\t0\t(160264)\nOther comprehensive income\t0\t0\t0\t0\t2865\t2865\nStock-based compensation\t0\t0\t13572\t0\t0\t13572\nNet exercise of stock options vesting of restricted stock units and other\t303\t4\t445\t0\t0\t449\nShare repurchases\t(14464)\t(145)\t(12255)\t(187869)\t0\t(200269)\nBalances at September 26 2020\t348288\t3483\t306157\t1454676\t(614783)\t1149533\n", "q10k_tbl_7": "\tCommon Stock\t\tAdditional Paid-In Capital\tRetained Earnings\tAccumulated Other Comprehensive Loss\tTotal\n\tShares\tAmount\nBalances at June 29 2019\t361531\t3615\t308555\t1285842\t(572626)\t1025386\nNet income\t0\t0\t0\t185091\t0\t185091\nDividends ($0.15 per common share)\t0\t0\t0\t(54824)\t0\t(54824)\nOther comprehensive loss\t0\t0\t0\t0\t(39333)\t(39333)\nStock-based compensation\t0\t0\t1467\t0\t0\t1467\nNet exercise of stock options vesting of restricted stock units and other\t81\t1\t305\t0\t0\t306\nBalances at September 28 2019\t361612\t3616\t310327\t1416109\t(611959)\t1118093\n", "q10k_tbl_8": "\tCommon Stock\t\tAdditional Paid-In Capital\tRetained Earnings\tAccumulated Other Comprehensive Loss\tTotal\n\tShares\tAmount\nBalances at December 29 2018\t361330\t3613\t284877\t1079503\t(495867)\t872126\nNet income\t0\t0\t0\t415734\t0\t415734\nDividends ($0.45 per common share)\t0\t0\t0\t(164500)\t0\t(164500)\nOther comprehensive loss\t0\t0\t0\t0\t(37276)\t(37276)\nStock-based compensation\t0\t0\t8506\t0\t0\t8506\nNet exercise of stock options vesting of restricted stock units and other\t282\t3\t2570\t0\t0\t2573\nModification of deferred compensation plans\t0\t0\t14374\t0\t0\t14374\nCumulative effect of change in adoption of leases standard\t0\t0\t0\t6556\t0\t6556\nStranded tax related to U.S. pension plan\t0\t0\t0\t78816\t(78816)\t0\nBalances at September 28 2019\t361612\t3616\t310327\t1416109\t(611959)\t1118093\n", "q10k_tbl_9": "\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\nOperating activities:\t\t\nNet income\t256585\t415734\nAdjustments to reconcile net income to net cash from operating activities:\t\t\nDepreciation\t67676\t71612\nAmortization of acquisition intangibles\t18503\t18709\nOther amortization\t8091\t7521\nImpairment of intangible assets\t20319\t0\nAmortization of debt issuance costs\t8303\t7021\nStock compensation expense\t13801\t8794\nDeferred taxes\t6853\t(3661)\nOther\t5004\t1662\nChanges in assets and liabilities:\t\t\nAccounts receivable\t(175879)\t(170348)\nInventories\t(259367)\t(56470)\nOther assets\t(43359)\t(26031)\nAccounts payable\t189566\t(11969)\nAccrued pension and postretirement benefits\t(18965)\t(14361)\nAccrued liabilities and other\t134091\t(3513)\nNet cash from operating activities\t231222\t244700\nInvesting activities:\t\t\nCapital expenditures\t(49033)\t(79950)\nProceeds from sales of assets\t331\t3530\nAcquisition of business\t0\t(21360)\nOther\t7618\t0\nNet cash from investing activities\t(41084)\t(97780)\nFinancing activities:\t\t\nBorrowings on notes payable\t166558\t250712\nRepayments on notes payable\t(166108)\t(252084)\nBorrowings on Accounts Receivable Securitization Facility\t227061\t207105\nRepayments on Accounts Receivable Securitization Facility\t(227061)\t(160110)\nBorrowings on Revolving Loan Facilities\t1638000\t2584277\nRepayments on Revolving Loan Facilities\t(1756189)\t(2585592)\nBorrowings on Senior Notes\t700000\t0\nRepayments on Term Loan Facilities\t0\t(152248)\nBorrowings on International Debt\t31222\t27680\nRepayments on International Debt\t(36383)\t(41424)\nShare repurchases\t(200269)\t0\nCash dividends paid\t(158132)\t(162689)\nPayments of debt issuance costs\t(14938)\t(1098)\nTaxes paid related to net shares settlement of equity awards\t(1615)\t(1523)\nOther\t1295\t1378\nNet cash from financing activities\t203441\t(285616)\nEffect of changes in foreign exchange rates on cash\t9052\t1008\nChange in cash cash equivalents and restricted cash\t402631\t(137688)\nCash cash equivalents and restricted cash at beginning of year\t329923\t455732\nCash cash equivalents and restricted cash at end of period\t732554\t318044\nLess restricted cash at end of period\t1073\t1020\nCash and cash equivalents per balance sheet at end of period\t731481\t317024\n", "q10k_tbl_10": "\tQuarters Ended\t\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nThird-party brick-and-mortar wholesale\t1277261\t1436935\t3600404\t4029352\nConsumer-directed\t531005\t430032\t1263103\t1186566\nTotal net sales\t1808266\t1866967\t4863507\t5215918\n", "q10k_tbl_11": "\tQuarters Ended\t\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nBasic weighted average shares outstanding\t350703\t364743\t353419\t364650\nEffect of potentially dilutive securities:\t\t\t\t\nStock options\t90\t437\t151\t463\nRestricted stock units\t809\t412\t380\t361\nEmployee stock purchase plan and other\t2\t5\t6\t4\nDiluted weighted average shares outstanding\t351604\t365597\t353956\t365478\n", "q10k_tbl_12": "\tSeptember 26 2020\tDecember 28 2019\tSeptember 28 2019\nRaw materials\t90386\t83545\t98374\nWork in process\t124902\t136592\t137248\nFinished goods\t1955264\t1685708\t1859413\n\t2170552\t1905845\t2095035\n", "q10k_tbl_13": "\tInterest Rate as of September 26 2020\tPrincipal Amount\t\tMaturity Date\n\tSeptember 26 2020\tDecember 28 2019\nSenior Secured Credit Facility:\t\t\t\t\nRevolving Loan Facility\t0\t0\t0\tDecember 2022\nTerm Loan A\t2.10%\t625000\t625000\tDecember 2022\nTerm Loan B\t1.91%\t300000\t300000\tDecember 2024\nAustralian Revolving Loan Facility\t0\t0\t0\tJuly 2021\n5.375% Senior Notes\t5.38%\t700000\t0\tMay 2025\n4.875% Senior Notes\t4.88%\t900000\t900000\tMay 2026\n4.625% Senior Notes\t4.63%\t900000\t900000\tMay 2024\n3.5% Senior Notes\t3.50%\t581531\t558847\tJune 2024\nEuropean Revolving Loan Facility\t0\t0\t110914\tDecember 2020\nAccounts Receivable Securitization Facility\t0\t0\t0\tMarch 2021\nTotal debt\t\t4006531\t3394761\t\nNotes payable\t\t5257\t4244\t\nTotal debt and notes payable\t\t4011788\t3399005\t\nLess long-term debt issuance costs\t\t34319\t26977\t\nLess notes payable\t\t5257\t4244\t\nLess current maturities\t\t0\t110914\t\nTotal long-term debt\t\t3972212\t3256870\t\n", "q10k_tbl_14": "\tCumulative Translation Adjustment(1)\tCash Flow Hedges\tDefined Benefit Plans\tIncome Taxes\tAccumulated Other Comprehensive Loss\nBalance at December 28 2019\t(157138)\t4786\t(629360)\t164064\t(617648)\nAmounts reclassified from accumulated other comprehensive loss\t0\t(15452)\t15717\t241\t506\nCurrent-period other comprehensive income (loss) activity\t1557\t6022\t(303)\t(4917)\t2359\nTotal other comprehensive income (loss)\t1557\t(9430)\t15414\t(4676)\t2865\nBalance at September 26 2020\t(155581)\t(4644)\t(613946)\t159388\t(614783)\n", "q10k_tbl_15": "Component of AOCI\t\tLocation of Reclassification into Income\t\tAmount of Reclassification from AOCI\t\t\t\t\t\n\tQuarters Ended\t\t\t\tNine Months Ended\t\t\n\tSeptember 26 2020\t\tSeptember 28 2019\t\tSeptember 26 2020\t\tSeptember 28 2019\nGain on foreign exchange contracts designated as cash flow hedges\t\tCost of sales\t\t7278\t\t6991\t\t15452\t21355\n\t\tIncome tax\t\t(2082)\t\t(1646)\t\t(4156)\t(5054)\n\t\tNet of tax\t\t5196\t\t5345\t\t11296\t16301\nAmortization of deferred actuarial loss and prior service cost\t\tOther expenses\t\t(5428)\t\t(4963)\t\t(15717)\t(14529)\n\t\tIncome tax\t\t1425\t\t1358\t\t3915\t3974\n\t\tNet of tax\t\t(4003)\t\t(3605)\t\t(11802)\t(10555)\nTotal reclassifications\t\t\t\t1193\t\t1740\t\t(506)\t5746\n", "q10k_tbl_16": "\tBalance Sheet Location\tFair Value\t\n\tSeptember 26 2020\tDecember 28 2019\nDerivatives designated as hedging instruments:\t\t\t\nForward foreign exchange contracts\tOther current assets\t1095\t2716\nCross-currency swap contracts\tOther current assets\t2706\t926\nCross-currency swap contracts\tOther noncurrent assets\t3139\t2975\nDerivatives not designated as hedging instruments:\t\t\t\nForward foreign exchange contracts\tOther current assets\t6442\t5314\nTotal derivative assets\t\t13382\t11931\nDerivatives designated as hedging instruments:\t\t\t\nForward foreign exchange contracts\tAccrued liabilities\t(5054)\t(2246)\nDerivatives not designated as hedging instruments:\t\t\t\nForward foreign exchange contracts\tAccrued liabilities\t(4335)\t(1147)\nTotal derivative liabilities\t\t(9389)\t(3393)\nNet derivative asset\t\t3993\t8538\n", "q10k_tbl_17": "\tAmount of Gain (Loss) Recognized in AOCI on Derivative Instruments\t\t\t\n\tQuarters Ended\t\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nForeign exchange contracts\t(7007)\t9970\t6022\t11684\n", "q10k_tbl_18": "\tLocation of Gain Reclassified from AOCI into Income\t\tAmount of Gain Reclassified from AOCI into Income\t\t\t\t\t\t\n\t\tQuarters Ended\t\t\t\tNine Months Ended\t\t\n\t\tSeptember 26 2020\t\tSeptember 28 2019\t\tSeptember 26 2020\t\tSeptember 28 2019\nForeign exchange contracts(1)\tCost of sales\t\t7278\t\t6991\t\t15452\t\t21355\n", "q10k_tbl_19": "\tQuarters Ended\t\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nTotal cost of sales in which the effects of cash flow hedges are recorded\t1191553\t1149934\t3140050\t3203331\n", "q10k_tbl_20": "\tAmount of Gain (Loss) Recognized in AOCI\t\t\t\n\tQuarters Ended\t\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nEuro-denominated long-term debt\t(13815)\t9845\t(15353)\t9845\nCross-currency swap contracts\t(10611)\t6436\t117\t6436\nTotal\t(24426)\t16281\t(15236)\t16281\n", "q10k_tbl_21": "\tLocation of Gain Recognized in Income\t\tAmount of Gain Recognized in Income (Amount Excluded from Effectiveness Testing)\t\t\t\t\t\t\n\t\tQuarters Ended\t\t\t\tNine Months Ended\t\t\n\t\tSeptember 26 2020\t\tSeptember 28 2019\t\tSeptember 26 2020\t\tSeptember 28 2019\nCross-currency swap contracts\tInterest expense net\t\t1805\t\t1672\t\t5772\t\t1672\n\t\t\tQuarters Ended\t\t\t\tNine Months Ended\t\t\n\t\t\tSeptember 26 2020\t\tSeptember 28 2019\t\tSeptember 26 2020\t\tSeptember 28 2019\nTotal interest expense net in which the amounts excluded from effectiveness testing for net investment hedges are recorded\t\t\t43868\t\t43091\t\t122376\t\t137672\n", "q10k_tbl_22": "\tLocation of Gain (Loss) Recognized in Income on Derivatives\tAmount of Gain (Loss) Recognized in Income\t\t\t\n\tQuarters Ended\t\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nForeign exchange contracts\tCost of sales\t(1611)\t(3055)\t(14594)\t(21813)\nForeign exchange contracts\tSelling general and administrative expenses\t3718\t2546\t4646\t1625\nTotal\t\t2107\t(509)\t(9948)\t(20188)\n", "q10k_tbl_23": "\tAssets (Liabilities) at Fair Value as of September 26 2020\t\t\t\n\tTotal\tQuoted Prices In Active Markets for Identical Assets (Level 1)\tSignificant Other Observable Inputs (Level 2)\tSignificant Unobservable Inputs (Level 3)\nForward foreign exchange contracts - assets\t7537\t0\t7537\t0\nCross-currency swap contracts - assets\t5845\t0\t5845\t0\nForward foreign exchange contracts - liabilities\t(9389)\t0\t(9389)\t0\n\t3993\t0\t3993\t0\nDeferred compensation plan liability\t(19890)\t0\t(19890)\t0\nTotal\t(15897)\t0\t(15897)\t0\n", "q10k_tbl_24": "\tAssets (Liabilities) at Fair Value as of December 28 2019\t\t\t\n\tTotal\tQuoted Prices In Active Markets for Identical Assets (Level 1)\tSignificant Other Observable Inputs (Level 2)\tSignificant Unobservable Inputs (Level 3)\nForward foreign exchange contracts - assets\t8030\t0\t8030\t0\nCross-currency swap contracts - assets\t3901\t0\t3901\t0\nForward foreign exchange contracts - liabilities\t(3393)\t0\t(3393)\t0\n\t8538\t0\t8538\t0\nDeferred compensation plan liability\t(31221)\t0\t(31221)\t0\nTotal\t(22683)\t0\t(22683)\t0\n", "q10k_tbl_25": "\tQuarters Ended\t\t\t\tNine Months Ended\t\t\nSeptember 26 2020\t\tSeptember 28 2019\t\tSeptember 26 2020\t\tSeptember 28 2019\nNet sales:\t\t\t\t\t\t\t\nInnerwear\t792600\t\t578453\t\t2309816\t\t1733002\nActivewear\t324921\t\t548117\t\t781300\t\t1401734\nInternational\t632117\t\t663525\t\t1644893\t\t1878568\nOther\t58628\t\t76872\t\t127498\t\t202614\nTotal net sales\t1808266\t\t1866967\t\t4863507\t\t5215918\n", "q10k_tbl_26": "\tQuarters Ended\t\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nSegment operating profit:\t\t\t\t\nInnerwear\t172000\t121467\t558075\t375623\nActivewear\t29568\t97314\t31925\t209686\nInternational\t96076\t107168\t227218\t288019\nOther\t1006\t9643\t(17389)\t16429\nTotal segment operating profit\t298650\t335592\t799829\t889757\nItems not included in segment operating profit:\t\t\t\t\nGeneral corporate expenses\t(62222)\t(49954)\t(177934)\t(173293)\nRestructuring and other action-related charges\t(52569)\t(9937)\t(145064)\t(43919)\nAmortization of intangibles\t(9288)\t(8630)\t(26594)\t(26230)\nTotal operating profit\t174571\t267071\t450237\t646315\nOther expenses\t(5309)\t(8066)\t(16849)\t(23766)\nInterest expense net\t(43868)\t(43091)\t(122376)\t(137672)\nIncome before income tax expense\t125394\t215914\t311012\t484877\n", "q10k_tbl_27": "\tQuarter Ended September 28 2019\t\t\nCondensed Consolidated Statement of Income Line Item\tAs Previously Reported\tAdjustments\tAs Revised\nCost of sales\t1154629\t(4695)\t1149934\nGross profit\t712338\t4695\t717033\nSelling general and administrative expenses\t442582\t7380\t449962\nOperating profit\t269756\t(2685)\t267071\nIncome before income tax expense\t218599\t(2685)\t215914\nNet income\t187776\t(2685)\t185091\nEarnings per share:\t\t\t\nBasic\t0.51\t(0.01)\t0.51\nDiluted\t0.51\t(0.01)\t0.51\n", "q10k_tbl_28": "\tNine Months Ended September 28 2019\t\t\nCondensed Consolidated Statement of Income Line Item\tAs Previously Reported\tAdjustments\tAs Revised\nCost of sales\t3208025\t(4694)\t3203331\nGross profit\t2007893\t4694\t2012587\nSelling general and administrative expenses\t1356082\t10190\t1366272\nOperating profit\t651811\t(5496)\t646315\nIncome before income tax expense\t490373\t(5496)\t484877\nNet income\t421230\t(5496)\t415734\nEarnings per share:\t\t\t\nBasic\t1.16\t(0.02)\t1.14\nDiluted\t1.15\t(0.02)\t1.14\n", "q10k_tbl_29": "\tQuarter Ended September 28 2019\t\t\nCondensed Consolidated Statement of Comprehensive Income Line Item\tAs Previously Reported\tAdjustments\tAs Revised\nNet income\t187776\t(2685)\t185091\nComprehensive income\t148443\t(2685)\t145758\n", "q10k_tbl_30": "\tNine Months Ended September 28 2019\t\t\nCondensed Consolidated Statement of Comprehensive Income Line Item\tAs Previously Reported\tAdjustments\tAs Revised\nNet income\t421230\t(5496)\t415734\nTranslation adjustments\t(33738)\t(7075)\t(40813)\nTotal other comprehensive loss\t(30201)\t(7075)\t(37276)\nComprehensive income\t391029\t(12571)\t378458\n", "q10k_tbl_31": "\tSeptember 28 2019\t\t\nCondensed Consolidated Balance Sheet Line Item\tAs Previously Reported\tAdjustments\tAs Revised\nInventories\t2108281\t(13246)\t2095035\nOther current assets\t166727\t7445\t174172\nTotal current assets\t3625970\t(5801)\t3620169\nDeferred tax assets\t257314\t(43665)\t213649\nTotal assets\t7773298\t(49466)\t7723832\nAccrued liabilities\t589992\t(2060)\t587932\nTotal current liabilities\t2096904\t(2060)\t2094844\nOther noncurrent liabilities\t265804\t64743\t330547\nTotal liabilities\t6543056\t62683\t6605739\nRetained earnings\t1528258\t(112149)\t1416109\nTotal stockholders' equity\t1230242\t(112149)\t1118093\nTotal liabilities and stockholders' equity\t7773298\t(49466)\t7723832\n", "q10k_tbl_32": "\tQuarter Ended September 28 2019\t\t\nCondensed Consolidated Statement of Stockholders' Equity Line Item\tAs Previously Reported\tAdjustments\tAs Revised\nBalance at June 29 2019\t1134850\t(109464)\t1025386\nNet income\t187776\t(2685)\t185091\nBalance at September 28 2019\t1230242\t(112149)\t1118093\n", "q10k_tbl_33": "\tNine Months Ended September 28 2019\t\t\nCondensed Consolidated Statement of Stockholders' Equity Line Item\tAs Previously Reported\tAdjustments\tAs Revised\nBalance at December 29 2018\t970283\t(98157)\t872126\nNet income\t421230\t(5496)\t415734\nOther comprehensive loss\t(30201)\t(7075)\t(37276)\nCumulative effect of change in adoption of leases standard\t7977\t(1421)\t6556\nBalance at September 28 2019\t1230242\t(112149)\t1118093\n", "q10k_tbl_34": "\tNine Months Ended September 28 2019\t\t\nCondensed Consolidated Statement of Cash Flows Line Item\tAs Previously Reported\tAdjustments\tAs Revised\nOperating activities:\t\t\t\nNet income\t421230\t(5496)\t415734\nAdjustments to reconcile net income to net cash from operating activities:\t\t\t\nOther\t8737\t(7075)\t1662\nChanges in assets and liabilities:\t\t\t\nInventories\t(72096)\t15626\t(56470)\nOther assets\t(40732)\t14701\t(26031)\nAccrued liabilities and other\t14243\t(17756)\t(3513)\nNet cash from operating activities\t244700\t0\t244700\n", "q10k_tbl_35": "\tQuarters Ended\t\t\t\n\tSeptember 26 2020\tSeptember 28 2019\tHigher (Lower)\tPercent Change\n\t(dollars in thousands)\t\t\t\nNet sales\t1808266\t1866967\t(58701)\t(3.1)%\nCost of sales\t1191553\t1149934\t41619\t3.6\nGross profit\t616713\t717033\t(100320)\t(14.0)\nSelling general and administrative expenses\t442142\t449962\t(7820)\t(1.7)\nOperating profit\t174571\t267071\t(92500)\t(34.6)\nOther expenses\t5309\t8066\t(2757)\t(34.2)\nInterest expense net\t43868\t43091\t777\t1.8\nIncome before income tax expense\t125394\t215914\t(90520)\t(41.9)\nIncome tax expense\t22116\t30823\t(8707)\t(28.2)\nNet income\t103278\t185091\t(81813)\t(44.2)%\n", "q10k_tbl_36": "\tNet Sales\t\t\t\n\tQuarters Ended\t\t\t\n\tSeptember 26 2020\tSeptember 28 2019\tHigher (Lower)\tPercent Change\n\t(dollars in thousands)\t\t\t\nInnerwear\t792600\t578453\t214147\t37.0%\nActivewear\t324921\t548117\t(223196)\t(40.7)\nInternational\t632117\t663525\t(31408)\t(4.7)\nOther\t58628\t76872\t(18244)\t(23.7)\nTotal\t1808266\t1866967\t(58701)\t(3.1)%\n", "q10k_tbl_37": "\tOperating Profit and Margin\t\t\t\t\t\n\tQuarters Ended\t\t\t\t\t\n\tSeptember 26 2020\t\tSeptember 28 2019\t\tHigher (Lower)\tPercent Change\n\t(dollars in thousands)\t\t\t\t\t\nInnerwear\t172000\t21.7%\t121467\t21.0%\t50533\t41.6%\nActivewear\t29568\t9.1\t97314\t17.8\t(67746)\t(69.6)\nInternational\t96076\t15.2\t107168\t16.2\t(11092)\t(10.4)\nOther\t1006\t1.7\t9643\t12.5\t(8637)\t(89.6)\nCorporate\t(124079)\tNM\t(68521)\tNM\t(55558)\t(81.1)\nTotal\t174571\t9.7%\t267071\t14.3%\t(92500)\t(34.6)%\n", "q10k_tbl_38": "\tQuarters Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\n\t(dollars in thousands)\t\nRestructuring and other action-related charges included in operating profit:\t\t\nSupply chain actions - 2019\t934\t9424\nSupply chain actions - 2020\t1201\t0\nProgram exit costs\t356\t0\nOther restructuring costs\t1185\t513\nCOVID-19 related charges:\t\t\nSupply chain re-startup\t48893\t0\nTotal restructuring and other action-related charges included in operating profit\t52569\t9937\n", "q10k_tbl_39": "\tNine Months Ended\t\t\t\n\tSeptember 26 2020\tSeptember 28 2019\tHigher (Lower)\tPercent Change\n\t(dollars in thousands)\t\t\t\nNet sales\t4863507\t5215918\t(352411)\t(6.8)%\nCost of sales\t3140050\t3203331\t(63281)\t(2.0)\nGross profit\t1723457\t2012587\t(289130)\t(14.4)\nSelling general and administrative expenses\t1273220\t1366272\t(93052)\t(6.8)\nOperating profit\t450237\t646315\t(196078)\t(30.3)\nOther expenses\t16849\t23766\t(6917)\t(29.1)\nInterest expense net\t122376\t137672\t(15296)\t(11.1)\nIncome before income tax expense\t311012\t484877\t(173865)\t(35.9)\nIncome tax expense\t54427\t69143\t(14716)\t(21.3)\nNet income\t256585\t415734\t(159149)\t(38.3)%\n", "q10k_tbl_40": "\tNet Sales\t\t\t\n\tNine Months Ended\t\t\t\n\tSeptember 26 2020\tSeptember 28 2019\tHigher (Lower)\tPercent Change\n\t(dollars in thousands)\t\t\t\nInnerwear\t2309816\t1733002\t576814\t33.3%\nActivewear\t781300\t1401734\t(620434)\t(44.3)\nInternational\t1644893\t1878568\t(233675)\t(12.4)\nOther\t127498\t202614\t(75116)\t(37.1)\nTotal\t4863507\t5215918\t(352411)\t(6.8)%\n", "q10k_tbl_41": "\tOperating Profit and Margin\t\t\t\t\t\n\tNine Months Ended\t\t\t\t\t\n\tSeptember 26 2020\t\tSeptember 28 2019\t\tHigher (Lower)\tPercent Change\n\t(dollars in thousands)\t\t\t\t\t\nInnerwear\t558075\t24.2%\t375623\t21.7%\t182452\t48.6%\nActivewear\t31925\t4.1\t209686\t15.0\t(177761)\t(84.8)\nInternational\t227218\t13.8\t288019\t15.3\t(60801)\t(21.1)\nOther\t(17389)\t(13.6)\t16429\t8.1\t(33818)\t(205.8)\nCorporate\t(349592)\tNM\t(243442)\tNM\t(106150)\t(43.6)\nTotal\t450237\t9.3%\t646315\t12.4%\t(196078)\t(30.3)%\n", "q10k_tbl_42": "\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\n\t(dollars in thousands)\t\nRestructuring and other action-related charges included in operating profit:\t\t\nSupply chain actions - 2019\t6632\t39714\nSupply chain actions - 2020\t14705\t0\nProgram exit costs\t9856\t0\nOther restructuring costs\t12799\t4205\nCOVID-19 related charges:\t\t\nSupply chain re-startup\t48893\t0\nBad debt\t11375\t0\nInventory\t20485\t0\nIntangible assets\t20319\t0\nTotal restructuring and other action-related charges included in operating profit\t145064\t43919\n", "q10k_tbl_43": "\tAs of September 26 2020\t\t\nBorrowing Capacity\t\tAvailable Liquidity\n\t(dollars in thousands)\t\t\nSenior Secured Credit Facility:\t\t\t\nRevolving Loan Facility\t1000000\t\t989097\nAustralian Revolving Loan Facility\t42433\t\t42433\nEuropean Revolving Loan Facility\t116604\t\t116604\nAccounts Receivable Securitization Facility(1)\t0\t\t0\nOther international credit facilities\t159525\t\t117953\nTotal liquidity from credit facilities\t1318562\t\t1266087\nCash and cash equivalents\t\t\t731481\nTotal liquidity\t\t\t1997568\n", "q10k_tbl_44": "\tNine Months Ended\t\n\tSeptember 26 2020\tSeptember 28 2019\n\t(dollars in thousands)\t\nOperating activities\t231222\t244700\nInvesting activities\t(41084)\t(97780)\nFinancing activities\t203441\t(285616)\nEffect of changes in foreign currency exchange rates on cash\t9052\t1008\nChange in cash cash equivalents and restricted cash\t402631\t(137688)\nCash cash equivalents and restricted cash at beginning of year\t329923\t455732\nCash cash equivalents and restricted cash at end of period\t732554\t318044\nLess restricted cash at end of period\t1073\t1020\nCash and cash equivalents per balance sheet at end of period\t731481\t317024\n", "q10k_tbl_45": "Exhibit Number\tDescription\n3.1\tArticles of Amendment and Restatement of Hanesbrands Inc. (incorporated by reference from Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 5 2006).\n3.2\tArticles Supplementary (Junior Participating Preferred Stock Series A) (incorporated by reference from Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 5 2006).\n3.3\tArticles of Amendment to Articles of Amendment and Restatement of Hanesbrands Inc. (incorporated by reference from Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 28 2015).\n3.4\tArticles Supplementary (Reclassifying Junior Participating Preferred Stock Series A) (incorporated by reference from Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 2 2015).\n3.5\tAmended and Restated Bylaws of Hanesbrands Inc. (incorporated by reference from Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26 2017).\n10.1\tInducement Restricted Stock Unit Grant Notice and Agreement with Stephen B. Bratspies (incorporated by reference to Exhibit 4.6 to the Registrant's Registration Statement on Form S-8 (Commission file number 333-240312) filed with the Securities and Exchange Commission on August 3 2020).*\n10.2\tInducement Performance Stock Unit Grant Notice and Agreement with Stephen B. Bratspies (incorporated by reference to Exhibit 4.7 to the Registrant's Registration Statement on Form S-8 (Commission file number 333-240312) filed with the Securities and Exchange Commission on August 3 2020).*\n10.3\tInducement Stock Option Grant Notice and Agreement with Stephen B. Bratspies (incorporated by reference to Exhibit 4.8 to the Registrant's Registration Statement on Form S-8 (Commission file number 333-240312) filed with the Securities and Exchange Commission on August 3 2020).*\n10.4\tLetter Agreement with Kristin Oliver dated August 15 2020.*\n10.5\tInducement Sign-On Restricted Stock Unit Grant Notice and Agreement with Kristin Oliver (incorporated by reference to Exhibit 4.6 to the Registrant's Registration Statement on Form S-8 (Commission file number 333-248667) filed with the Securities and Exchange Commission on September 8 2020).*\n10.6\tInducement Long-Term Incentive Plan Restricted Stock Unit Grant Notice and Agreement with Kristin Oliver (incorporated by reference to Exhibit 4.7 to the Registrant's Registration Statement on Form S-8 (Commission file number 333-248667) filed with the Securities and Exchange Commission on September 8 2020).*\n10.7\tInducement Long-Term Incentive Plan Performance Stock Unit Grant Notice and Agreement with Kristin Oliver (incorporated by reference to Exhibit 4.8 to the Registrant's Registration Statement on Form S-8 (Commission file number 333-248667) filed with the Securities and Exchange Commission on September 8 2020).*\n31.1\tCertification of Stephen B. Bratspies Chief Executive Officer.\n31.2\tCertification of M. Scott Lewis Interim Chief Financial Officer.\n32.1\tSection 1350 Certification of Stephen B. Bratspies Chief Executive Officer.\n32.2\tSection 1350 Certification of M. Scott Lewis Interim Chief Financial Officer.\n101.INS XBRL\tInstance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document\n101.SCH XBRL\tTaxonomy Extension Schema Document\n101.CAL XBRL\tTaxonomy Extension Calculation Linkbase Document\n"}{"bs": "q10k_tbl_4", "is": "q10k_tbl_2", "cf": "q10k_tbl_9"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 2020
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-32891
Hanesbrands Inc.
(Exact name of registrant as specified in its charter)
Maryland
20-3552316
(State of incorporation)
(I.R.S. employer identification no.)
1000 East Hanes Mill Road
Winston-Salem,
North Carolina
27105
(Address of principal executive office)
(Zip code)
(336) 519-8080
(Registrant’s telephone number including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐No☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, Par Value $0.01
HBI
New York Stock Exchange
As of October 30, 2020, there were 348,324,092 shares of the registrant’s common stock outstanding.
This Quarterly Report on Form 10-Q contains information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue” or similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding our intent, belief and current expectations about our strategic direction, prospects and future results are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. In particular, statements with respect to trends associated with our business, our future financial performance and the potential effects of the global COVID-19 coronavirus outbreak included in this Quarterly Report on Form 10-Q specifically appearing under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” include forward-looking statements.
More information on factors that could cause actual results or events to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including this Quarterly Report on Form 10-Q, our Quarterly Report on Form 10-Q for the quarter ended March 28, 2020 and our Annual Report on Form 10-K for the year ended December 28, 2019, under the caption “Risk Factors,” and available on the “Investors” section of our corporate website, www.Hanes.com/investors. The contents of our corporate website are not incorporated by reference in this Quarterly Report on Form 10-Q.
Adjustments to reconcile net income to net cash from operating activities:
Depreciation
67,676
71,612
Amortization of acquisition intangibles
18,503
18,709
Other amortization
8,091
7,521
Impairment of intangible assets
20,319
—
Amortization of debt issuance costs
8,303
7,021
Stock compensation expense
13,801
8,794
Deferred taxes
6,853
(3,661)
Other
5,004
1,662
Changes in assets and liabilities:
Accounts receivable
(175,879)
(170,348)
Inventories
(259,367)
(56,470)
Other assets
(43,359)
(26,031)
Accounts payable
189,566
(11,969)
Accrued pension and postretirement benefits
(18,965)
(14,361)
Accrued liabilities and other
134,091
(3,513)
Net cash from operating activities
231,222
244,700
Investing activities:
Capital expenditures
(49,033)
(79,950)
Proceeds from sales of assets
331
3,530
Acquisition of business
—
(21,360)
Other
7,618
—
Net cash from investing activities
(41,084)
(97,780)
Financing activities:
Borrowings on notes payable
166,558
250,712
Repayments on notes payable
(166,108)
(252,084)
Borrowings on Accounts Receivable Securitization Facility
227,061
207,105
Repayments on Accounts Receivable Securitization Facility
(227,061)
(160,110)
Borrowings on Revolving Loan Facilities
1,638,000
2,584,277
Repayments on Revolving Loan Facilities
(1,756,189)
(2,585,592)
Borrowings on Senior Notes
700,000
—
Repayments on Term Loan Facilities
—
(152,248)
Borrowings on International Debt
31,222
27,680
Repayments on International Debt
(36,383)
(41,424)
Share repurchases
(200,269)
—
Cash dividends paid
(158,132)
(162,689)
Payments of debt issuance costs
(14,938)
(1,098)
Taxes paid related to net shares settlement of equity awards
(1,615)
(1,523)
Other
1,295
1,378
Net cash from financing activities
203,441
(285,616)
Effect of changes in foreign exchange rates on cash
9,052
1,008
Change in cash, cash equivalents and restricted cash
402,631
(137,688)
Cash, cash equivalents and restricted cash at beginning of year
329,923
455,732
Cash, cash equivalents and restricted cash at end of period
732,554
318,044
Less restricted cash at end of period
1,073
1,020
Cash and cash equivalents per balance sheet at end of period
$
731,481
$
317,024
Capital expenditures included in accounts payable at September 26, 2020 and December 28, 2019, were $8,817 and $19,327, respectively. For the nine months ended September 26, 2020 and September 28, 2019, right-of-use assets obtained in exchange for lease obligations were $39,532 and $54,524, respectively.
See accompanying notes to Condensed Consolidated Financial Statements.
Notes to Condensed Consolidated Financial Statements
(amounts in thousands, except per share data)
(unaudited)
(1) Basis of Presentation
These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management believes that the disclosures made are adequate for a fair statement of the results of operations, financial condition and cash flows of Hanesbrands Inc. and its consolidated subsidiaries (the “Company” or “Hanesbrands”). In the opinion of management, the condensed consolidated interim financial statements reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of operations, financial condition and cash flows for the interim periods presented herein. The preparation of condensed consolidated interim financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. The duration and severity of the global novel coronavirus ("COVID-19") pandemic, which is subject to uncertainty, is having a significant impact on the Company’s business. Management's estimates and assumptions have contemplated both current and expected impacts related to COVID-19 based on available information. Actual results may vary from these estimates.
These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2019 Annual Report on Form 10-K. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.
Impact of COVID-19
The COVID-19 pandemic has impacted the Company’s business operations and financial results in 2020. During the nine months of 2020, the rapid expansion of the COVID-19 pandemic has resulted in a sharp decline in net sales and earnings in the Company’s apparel businesses due to decreased customer traffic and temporary retail store closures worldwide. While most of the Company’s retail stores were temporarily closed for varying periods of time throughout the second quarter, most reopened by the end of the second quarter but have experienced, and are expected to continue to experience, reductions in customer traffic and therefore, net sales. In addition, many of the Company’s wholesale customers have also experienced business disruptions, including lower traffic and consumer demand, resulting in decreased shipments to these customers. Sales of personal protective equipment (“PPE”), used to help mitigate the spread of the COVID-19 virus, partially offset the negative impact of the decline in net sales and earnings due to the COVID-19 pandemic on the Company’s financial results. In addition, the Company’s e-commerce sites have remained open in all regions and online sales have grown as consumer spending continued to shift towards online shopping experiences due to the changing retail landscape as a result of the COVID-19 pandemic. The Company’s operating results also reflected impairment charges related to intangible assets, charges to reserve for increased excess and obsolete inventory, bad debt charges and charges to re-start the Company’s supply chain following the extended shut-down of parts of its manufacturing network due to the ongoing effects of the COVID-19 pandemic. While many retail stores have reopened and many government restrictions have been removed or lightened, the ultimate impact of the COVID-19 pandemic remains highly uncertain and could continue to have a material adverse impact on the Company’s business operations and financial results, including net sales, earnings and cash flows for the remainder of 2020, and beyond.
Goodwill and indefinite-lived intangible assets are evaluated for impairment at least annually as of the first day of the third quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or intangible asset below its carrying values. During the second quarter of 2020, the Company completed a quantitative impairment analysis for certain indefinite-lived intangible assets as a result of the significant impact of the COVID-19 pandemic on their performance. Based on this analysis, the Company recorded impairment charges of $20,319 on trademarks and other intangible assets which are reflected in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income.
In connection with the annual goodwill impairment testing performed in the third quarter of 2020, the Company performed a quantitative assessment utilizing an income approach to estimate the fair value of each reporting unit. The most significant assumptions include the weighted average cost of capital, revenue growth rate, terminal growth rate and operating profit margin, all of which are used to estimate the fair value of the reporting units and indefinite-lived intangible assets. The tests indicated the reporting units had fair values that exceeded their carrying values. Certain reporting units, including Hanes
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Europe Innerwear and U.S. Hosiery, are considered to be at a higher risk for future impairment if any assumptions used in the estimate of the reporting units’ fair values change in the future given their respective fair values exceeded their carrying values by less than 20% and trends in the associated businesses indicate a declining fair value. In particular, as of September 26, 2020, the fair value of the Hanes Europe Innerwear reporting unit is slightly higher than its carrying value. The combined goodwill associated with these reporting units was approximately $120,000. Additionally, in connection with the annual impairment testing, the Company performed a quantitative assessment, utilizing an income approach to estimate the fair value of each indefinite-lived intangible asset. The tests indicated the indefinite-lived intangible assets have fair values that exceeded their carrying values. Certain indefinite-lived trademarks are considered to be at a higher risk for future impairment if any assumptions used in the estimate of the trademarks’ fair value change in the future given their respective fair values exceeded their carrying values by less than 20% and trends in the associated businesses indicate a declining fair value. As of September 26, 2020, the Company considered four trademarks within the Hanes Europe Innerwear business to be at a higher risk for future impairment. The carrying value of these four indefinite-lived trademarks was approximately $80,000. Although the Company determined that no impairment exists for the Company's goodwill or indefinite-lived intangible assets, these assets could be at risk for future impairment should global economic conditions continue to deteriorate beyond current expectations as a result of the COVID-19 pandemic.
Revisions of Previously Issued Consolidated Financial Statements
As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 28, 2019, during the fourth quarter of 2019 the Company identified tax errors, which originated prior to 2017, in its previously issued 2018 and 2017 annual consolidated financial statements and quarterly condensed consolidated interim financial statements for each of the quarterly periods of 2018 and the first three quarterly periods of 2019. Although the Company assessed the materiality of the errors and concluded that the errors were not material to the previously issued annual or interim financial statements, the Company did revise its previously issued 2018 and 2017 annual financial statements to correct for such tax errors in connection with the filing of its 2019 Annual Report on Form 10-K, and disclosed that it would be revising its 2019 condensed consolidated interim financial statements in connection with the filing of its Quarterly Reports on Form 10-Q during 2020. In connection with such revision, the Company also corrected for certain other immaterial errors. In connection with the filing of this Quarterly Report on Form 10-Q, the Company has revised the accompanying condensed consolidated interim financial statements as of and for the quarter and nine months ended September 28, 2019 to correct for the impact of such errors, including the impact to retained earnings as of September 28, 2019 to correct for the errors which originated in periods prior to 2019, which primarily related to the tax errors. The accompanying footnotes have also been corrected to reflect the impact of the revisions of the previously filed condensed consolidated interim financial statements. See Note, "Revisions of Previously Issued Condensed Consolidated Interim Financial Statements" for reconciliations between as reported and as revised amounts as of and for the quarter and nine months ended September 28, 2019.
(2) Recent Accounting Pronouncements
Financial Instruments - Credit Losses
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. The new accounting rules eliminate the probable initial recognition threshold and, instead, reflect an entity’s current estimate of all expected credit losses. The new accounting rules were effective for the Company in the first quarter of 2020 and apply to its trade receivables.
Under the new accounting rules, trade receivables are now evaluated on a collective (pool) basis and aggregated on the basis of similar risk characteristics. These classifications will be reassessed at each measurement date. A combination of factors, such as industry trends, customers’ financial strength, credit standing and payment and default history are considered in determining the appropriate estimate of expected credit losses. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations or cash flows.
Goodwill Impairment
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The new accounting rules simplify how an entity is required to test goodwill for impairment by
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
eliminating Step 2 from the goodwill impairment test which previously measured a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. The new accounting rules were effective for the Company in the first quarter of 2020. As a result of adopting the new rules, the Company compared the estimated fair value of its reporting units to their respective carrying values when evaluating the recoverability of goodwill. When the carrying value of a reporting unit exceeds its fair value, an impairment charge will be recognized for the amount by which its carrying value exceeds the reporting unit’s fair value; however, the loss recognized will not exceed the goodwill allocated to the reporting unit. The adoption of the new accounting rules did not have an impact on the Company’s financial condition, results of operations or cash flows.
Fair Value
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820),” which modifies the disclosure requirements on fair value measurements. The new accounting rules were effective for the Company in the first quarter of 2020. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations or cash flows; however, its disclosures were updated upon adoption.
Retirement Benefits
In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20).” The new accounting rules expand disclosure requirements for employer sponsored defined benefit pension and other retirement plans. The new accounting rules were effective for the Company in the first quarter of 2020. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations or cash flows; however, expanded disclosures will be required on the Company’s Annual Report on Form 10-K for the year ended January 2, 2021.
Internal-Use Software
In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 340-40),” which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new accounting rules were effective for the Company in the first quarter of 2020. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations or cash flows.
Codification Improvements to Financial Instruments
In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments.” The new accounting rules clarify guidance around several subtopics by adopting enhanced verbiage to the following subtopics: fair value option disclosures, fair value measurement, investments - debt and equities securities, debt modifications and extinguishments, credit losses, and sales of financial assets. The standard was effective for the Company in the first quarter of 2020. The adoption of the new accounting rules did not have a material impact on the Company’s results of operations or cash flows.
Income Taxes
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The new accounting rules reduce complexity by removing specific exceptions to general principles related to intraperiod tax allocations, ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses. The new accounting rules also simplify accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The new accounting rules will be effective for the Company in the first quarter of 2021. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company’s financial condition, results of operations, cash flows or disclosures.
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The new accounting rules provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this standard can be applied anytime between the first quarter of 2020 and the fourth quarter of 2022. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations, cash flows and disclosures.
(3) Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with a customer are satisfied, which occurs at a point in time, upon either shipment or delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. Variable consideration includes trade discounts, rebates, volume-based incentives, cooperative advertising and product returns, which are offered within contracts between the Company and its customers, employing the practical expedient for contract costs. Incidental items that are immaterial to the context of the contract are recognized as expense at the transaction date.
The following table presents the Company’s revenues disaggregated by the customer’s method of purchase:
Quarters Ended
Nine Months Ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Third-party brick-and-mortar wholesale
$
1,277,261
$
1,436,935
$
3,600,404
$
4,029,352
Consumer-directed
531,005
430,032
1,263,103
1,186,566
Total net sales
$
1,808,266
$
1,866,967
$
4,863,507
$
5,215,918
Revenue Sources
Third-Party Brick-and-Mortar Wholesale Revenue
Third-party brick-and-mortar wholesale revenue is primarily generated by sales of the Company’s products to retailers to support their brick-and-mortar operations. Also included within third-party brick-and-mortar wholesale revenues is royalty revenue from licensing agreements. The Company earns royalties through license agreements with manufacturers of other consumer products that incorporate certain of the Company’s brands. The Company accrues revenue earned under these contracts based upon reported sales from the licensees. Additionally, in the quarter and nine months ended September 26, 2020, third-party brick-and-mortar wholesale revenue includes $4,053 and $645,776 of revenue from contracts with governments generated from the sale of both cloth face coverings and gowns for use to help mitigate the spread of the virus during the COVID-19 pandemic, respectively.
Consumer-Directed Revenue
Consumer-directed revenue is primarily generated through sales driven directly by the consumer through company-operated stores and e-commerce platforms, which include both owned sites and the sites of the Company’s retail customers.
(4) Acquisitions
Bras N Things
On February 12, 2018, the Company acquired 100% of the outstanding equity of BNT Holdco Pty Limited (“Bras N Things”) for a total purchase price of A$498,236 (U.S.$391,572). During 2018, due to the final working capital adjustment, the purchase consideration was reduced by A$3,012 (U.S.$2,367), ultimately resulting in a revised purchase price of A$495,224 (U.S.$389,205), which included a cash payment of A$428,956 (U.S.$337,123), an indemnification escrow of A$31,988 (U.S.$25,140) and debt assumed of A$34,280 (U.S.$26,942). U.S. dollar equivalents are based on acquisition date exchange rates.
The Company funded the acquisition with a combination of short-term borrowings under its existing revolving loan facility (the “Revolving Loan Facility”) and cash on hand. During the third quarter of 2019, A$31,425 (U.S.$21,360) of the
Notes to Condensed Consolidated Financial Statements — (Continued)
(amounts in thousands, except per share data)
(unaudited)
indemnification escrow, including interest earned, was paid to the sellers. The remaining indemnification escrow, held in one of the Company’s bank accounts, is recognized and classified as restricted cash, with the balance as of September 26, 2020 included in the “Other current assets” line of the Condensed Consolidated Balance Sheet.
Since February 12, 2018, goodwill related to the Bras N Things acquisition decreased by $792 as a result of measurement period adjustments, primarily related to working capital adjustments. The purchase price allocation was finalized in the first quarter of 2019.
(5) Stockholders’ Equity
Basic earnings per share (“EPS”) was computed by dividing net income by the number of weighted average shares of common stock outstanding during the period. Diluted EPS was calculated to give effect to all potentially issuable dilutive shares of common stock using the treasury stock method.
The reconciliation of basic to diluted weighted average shares outstanding is as follows: