HBI-2014.09.27-10Q
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 10-Q
 
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2014
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  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
x
 
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of October 24, 2014, there were 99,892,128 shares of the registrant’s common stock outstanding.
 


Table of Contents

TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Trademarks, Trade Names and Service Marks
We own or have rights to use the trademarks, service marks and trade names that we use in conjunction with the operation of our business. Some of the more important trademarks that we own or have rights to use that may appear in this Quarterly Report on Form 10-Q include the Hanes, Champion, C9 by Champion, Bali, Playtex, Maidenform, DIM, JMS/Just My Size, L’eggs, Nur Die/Nur Der, Flexees, barely there, Wonderbra, Gear for Sports, Lilyette, Lovable, Rinbros, Shock Absorber, Track N Field, Abanderado and Zorba marks, which may be registered in the United States and other jurisdictions. We do not own any trademark, trade name or service mark of any other company appearing in this Quarterly Report on Form 10-Q.


Table of Contents

FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes 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. 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. In particular, statements under the heading “Outlook” and other information appearing under “Management's Discussion and Analysis of Financial Condition and Results of Operations” include forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements.
Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management, expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that the expectation or belief will result or will be achieved or accomplished. More information on factors that could cause actual results or events to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the year ended December 28, 2013, under the caption “Risk Factors,” as well in the “Investors” section of our corporate website, www.Hanes.com/investors.
All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K for the year ended December 28, 2013, particularly under the caption “Risk Factors.” We undertake no obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings over the Internet at the SEC’s website at www.sec.gov. To receive copies of public records not posted to the SEC’s web site at prescribed rates, you may complete an online form at www.sec.gov, send a fax to (202) 772-9337 or submit a written request to the SEC, Office of FOIA/PA Operations, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information.
We make available free of charge at www.Hanes.com/investors (in the “Investors” section) copies of materials we file with, or furnish to, the SEC. By referring to our corporate website, www.Hanes.com/corporate, or any of our other websites, we do not incorporate any such website or its contents into this Quarterly Report on Form 10-Q.


1

Table of Contents

PART I

Item 1.
Financial Statements

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

 
Quarter Ended
 
Nine Months Ended
 
September 27,
2014
 
September 28,
2013
 
September 27,
2014
 
September 28,
2013
Net sales
$
1,400,728

 
$
1,197,346

 
$
3,802,150

 
$
3,342,012

Cost of sales
903,013

 
775,666

 
2,443,304

 
2,157,551

Gross profit
497,715

 
421,680

 
1,358,846

 
1,184,461

Selling, general and administrative expenses
343,823

 
244,782

 
926,042

 
740,973

Operating profit
153,892

 
176,898

 
432,804

 
443,488

Other expenses
795

 
795

 
1,890

 
2,010

Interest expense, net
23,528

 
25,002

 
66,465

 
75,846

Income before income tax expense
129,569

 
151,101

 
364,449

 
365,632

Income tax expense
10,625

 
25,838

 
49,367

 
67,404

Net income
$
118,944

 
$
125,263

 
$
315,082

 
$
298,228

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.18

 
$
1.25

 
$
3.14

 
$
2.99

Diluted
$
1.16

 
$
1.23

 
$
3.09

 
$
2.93



See accompanying notes to Condensed Consolidated Financial Statements.
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Table of Contents

HANESBRANDS INC.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)

 
Quarter Ended
 
Nine Months Ended
 
September 27,
2014
 
September 28,
2013
 
September 27,
2014
 
September 28,
2013
Net income
$
118,944

 
$
125,263

 
$
315,082

 
$
298,228

Other comprehensive income (loss), net of tax of $1,382, $1,342, $2,670 and $5,013, respectively
(1,684
)
 
1,062

 
1,503

 
(842
)
Comprehensive income
$
117,260

 
$
126,325

 
$
316,585

 
$
297,386



See accompanying notes to Condensed Consolidated Financial Statements.
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Table of Contents

HANESBRANDS INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)

 
September 27,
2014
 
December 28,
2013
Assets
 
 
 
Cash and cash equivalents
$
215,832

 
$
115,863

Trade accounts receivable, net
874,922

 
578,558

Inventories
1,666,008

 
1,283,331

Deferred tax assets
206,048

 
197,260

Other current assets
191,610

 
68,654

Total current assets
3,154,420

 
2,243,666

 
 
 
 
Property, net
673,295

 
579,883

Trademarks and other identifiable intangibles, net
715,824

 
377,751

Goodwill
721,160

 
626,392

Deferred tax assets
211,262

 
207,426

Other noncurrent assets
67,533

 
54,930

Total assets
$
5,543,494

 
$
4,090,048

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
Accounts payable
$
673,937

 
$
466,270

Accrued liabilities
619,249

 
315,026

Notes payable
137,948

 
36,192

Accounts Receivable Securitization Facility
225,000

 
181,790

Current portion of long-term debt
19,821

 

Total current liabilities
1,675,955

 
999,278

Long-term debt
1,908,733

 
1,467,000

Pension and postretirement benefits
242,890

 
263,819

Other noncurrent liabilities
251,246

 
129,328

Total liabilities
4,078,824

 
2,859,425

 
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock (50,000,000 authorized shares; $.01 par value)
 
 
 
Issued and outstanding — None

 

Common stock (500,000,000 authorized shares; $.01 par value)
 
 
 
Issued and outstanding — 99,891,867 and 99,455,478, respectively
999

 
995

Additional paid-in capital
293,770

 
285,227

Retained earnings
1,405,415

 
1,181,418

Accumulated other comprehensive loss
(235,514
)
 
(237,017
)
Total stockholders’ equity
1,464,670

 
1,230,623

Total liabilities and stockholders’ equity
$
5,543,494

 
$
4,090,048



See accompanying notes to Condensed Consolidated Financial Statements.
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Table of Contents

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

 
Nine Months Ended
 
September 27,
2014
 
September 28,
2013
Operating activities:
 
 
 
Net income
$
315,082

 
$
298,228

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization of long-lived assets
69,540

 
67,201

Amortization of debt issuance costs
4,344

 
5,160

Stock compensation expense
11,998

 
7,742

Deferred taxes and other
(2,571
)
 
541

Changes in assets and liabilities, net of acquisition of business:
 
 
 
Accounts receivable
(169,053
)
 
(85,145
)
Inventories
(149,376
)
 
(68,389
)
Other assets
(6,022
)
 
(5,626
)
Accounts payable
131,280

 
42,718

Accrued liabilities and other
10,099

 
(5,445
)
Net cash from operating activities
215,321

 
256,985

 
 
 
 
Investing activities:
 
 
 
Purchases of property, plant and equipment
(46,562
)
 
(30,721
)
Proceeds from sales of assets
5,015

 
5,896

Acquisition of business, net of cash acquired
(352,986
)
 

Other
(8,779
)
 

Net cash from investing activities
(403,312
)
 
(24,825
)
 
 
 
 
Financing activities:
 
 
 
Borrowings on notes payable
109,313

 
68,333

Repayments on notes payable
(101,994
)
 
(89,168
)
Borrowings on Accounts Receivable Securitization Facility
115,609

 
100,731

Repayments on Accounts Receivable Securitization Facility
(72,399
)
 
(107,953
)
Borrowings on Revolving Loan Facility
2,639,000

 
2,629,000

Repayments on Revolving Loan Facility
(2,662,000
)
 
(2,696,500
)
Incurrence of debt under the Euro Term Loan Facility
476,566

 

Repayments of assumed debt related to acquisition of business
(111,193
)
 

Cash dividends paid
(89,638
)
 
(39,615
)
Taxes paid related to net shares settlement of equity awards
(32,294
)
 
(24,832
)
Excess tax benefit from stock-based compensation
26,162

 
18,220

Other
(4,431
)
 
365

Net cash from financing activities
292,701

 
(141,419
)
Effect of changes in foreign exchange rates on cash
(4,741
)
 
(1,217
)
Change in cash and cash equivalents
99,969

 
89,524

Cash and cash equivalents at beginning of year
115,863

 
42,796

Cash and cash equivalents at end of period
$
215,832

 
$
132,320



See accompanying notes to Condensed Consolidated Financial Statements.
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Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements
(dollars and shares 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., a Maryland corporation, 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 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 most recent Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.
(2)
Recent Accounting Pronouncements
Disclosures About Offsetting Assets and Liabilities
In December 2011, the Financial Accounting Standards Board (the “FASB”) issued new accounting rules related to new disclosure requirements regarding the nature of an entity’s rights of setoff and related arrangements associated with its financial instruments and derivative instruments. The new rules were effective for the Company in the first quarter of 2014 with retrospective application required. The adoption of the new accounting rules did not have a material effect on the Company’s financial condition, results of operations or cash flows.
Presentation of an Unrecognized Tax Benefit
In July 2013, the FASB issued new accounting rules related to standardizing the financial statement presentation of an unrecognized tax benefit, or a portion thereof, when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The new rules were effective for the Company in the first quarter of 2014 and applied prospectively. The adoption of the new accounting rules did not have a material effect on the Company’s financial condition, results of operations or cash flows.
Discontinued Operations
In April 2014, the FASB issued new accounting rules related to updating the criteria for reporting discontinued operations and enhancing related disclosures requirements. The new rules are effective for the Company in the first quarter of 2015. 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 or cash flows.
Revenue from Contracts with Customers
In May 2014, the FASB issued new accounting rules related to revenue recognition for contracts with customers requiring revenue recognition based on the transfer of promised goods or services to customers in an amount that reflects consideration the Company expects to be entitled to in exchange for goods or services. The new rules supercede prior revenue recognition requirements and most industry-specific accounting guidance. The new rules will be effective for the Company in the first quarter of 2017 with retrospective application required. 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 or cash flows.
(3)
Acquisitions
DBApparel Acquisition
In August 2014, MFB International Holdings S.à r.l. (“MF Lux”), a wholly owned subsidiary of the Company, acquired DBA Lux Holding S.A. (“DBA”) from SLB Brands Holdings, Ltd and certain individual DBA shareholders in an all-cash

6

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

transaction equal to €400,000 enterprise value less net debt and working capital adjustments as defined in the purchase agreement. Total purchase price was €297,031 (approximately $391,861 based on acquisition date exchange rates). The acquisition was financed through a combination of cash on hand and third party borrowings.
DBA contributed net revenues of $81,093 and immaterial pretax earnings as a result of acquisition and integration related charges since the date of acquisition. The results of DBA have been included in the Company’s consolidated financial statements since the date of acquisition and are reported as part of the International segment based on geographic location and distribution channel.
DBA is a leading marketer of intimate apparel, hosiery and underwear in Europe with a portfolio of strong brands including DIM, Nur Die/Nur Der and Lovable. The Company believes the acquisition will create growth and cost savings opportunities and increased scale to serve retailers. DBA utilizes a mix of self-owned manufacturing and third-party manufacturers. Factors that contribute to the amount of goodwill recognized for the acquisition include the value of the existing work force and cost savings by utilizing the Company’s low-cost supply chain and expected synergies with existing Company functions. Goodwill associated with the acquisition is not tax deductible.
The DIM, Nur Die/Nur Der, Lovable, Shock Absorber, Abanderado, Bellinda, Elbeo and Edoo trademarks and brand names, which management believes to have indefinite lives, have been valued at $272,653. Perpetual license agreements associated with the Playtex and Wonderbra brands, which management believes to have indefinite lives, have been valued at $37,821. Amortizable intangible assets have been assigned values of $40,193 for distribution networks, $12,255 for license and franchise agreements and $2,182 for computer software and other intangibles. Distributor relationships are being amortized over 10 years. License and franchise agreements are being amortized over three to 17 years, respectively. Computer software and other intangibles are amortized over one to three years.
The allocation of purchase price is preliminary and subject to change. The primary areas of the purchase price that are not yet finalized are related to certain income taxes, working capital adjustments as defined in the purchase agreement and residual goodwill. Accordingly, adjustments will be made to the values of the assets acquired and liabilities assumed as additional information is obtained about the facts and circumstances which existed at the valuation date. The acquired assets and assumed liabilities at the date of acquisition (August 29, 2014) include the following:
Cash and cash equivalents
$
38,875

Trade accounts receivable, net
137,396

Inventories
245,161

Deferred tax assets
7,968

Other current assets
106,489

Property, net
104,868

Trademarks and other identifiable intangibles, net
365,104

Deferred tax assets, noncurrent
5,864

Other noncurrent assets
5,755

Total assets acquired
1,017,480

Accounts payables
79,785

Accrued liabilities and other
197,853

Notes payable
97,599

Deferred tax liabilities
4,352

Current portion of long-term debt
123,891

Long-term debt
8,683

Deferred tax liabilities, noncurrent
106,720

Other noncurrent liabilities
100,621

Total liabilities assumed
719,504

Net assets acquired
297,976

Goodwill
93,885

Purchase price
$
391,861


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Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are reported in the “Other current assets” line in the Condensed Consolidated Balance Sheet. DBA had restricted cash as of the opening balance sheet date of $8,348, which primarily included escrow deposits and cash restricted due to limitations of foreign currency conversions. As of September 27, 2014, the Company had total restricted cash of $17,546 related to DBA restricted cash items and additional acquisition related escrow deposits.
In connection with the DBA acquisition, the Company assumed debt, totaling $132,574 as of the acquisition date. Concurrent with the closing, $107,665 was repaid utilizing proceeds from the Euro Term Loan (See Note 6, “Debt”). In addition, $3,528 of debt assumed was repaid since the date of acquisition from operating cash flows. Notes payable of $97,599 is comprised of term loans in France, Italy and Germany as well as asset backed loans in Italy and Germany.
Unaudited pro forma results of operations for the Company are presented below for quarter-to-date and year-to-date assuming that the 2014 acquisition of DBA had occurred at the beginning of 2013. Pro forma operating results for the quarter ended September 28, 2013 include a net reversal of expenses of $2,506 for acquisition-related charges. Pro forma operating results for the nine months ended September 28, 2013 include expenses totaling $30,915 for acquisition-related charges.
 
Quarter Ended
 
Nine Months Ended
 
September 27, 2014
 
September 28, 2013
 
September 27, 2014
 
September 28, 2013
Net sales
$
1,535,174

 
$
1,424,647

 
$
4,350,352

 
$
3,965,351

Net income
129,218

 
128,422

 
325,383

 
314,353

Earnings per share:


 


 


 


Basic
$
1.28

 
$
1.28

 
$
3.24

 
$
3.18

Diluted
1.27

 
1.26

 
3.19

 
3.13

Pro forma financial information is not necessarily indicative of the Company’s operations results if the acquisition has been completed at the date indicated, nor is it necessarily an indication of future operating results. Amounts do not include any operating efficiencies or cost savings that the Company believes are achievable.
Maidenform Acquisition
In October 2013, the Company acquired 100% of the outstanding shares of Maidenform Brands, Inc. (“Maidenform”) at $23.50 per share for a total purchase price of $580,505. The acquisition was financed through a combination of cash on hand and short-term borrowing on the Company’s revolving credit facility.
Maidenform is a global intimate apparel brand with a portfolio of well-known brands including Maidenform, Flexees and Lilyette. The Company believes the acquisition will create growth and cost savings opportunities and increased scale to serve retailers. Maidenform sourced all of its products from manufacturers, while the Company utilizes its low cost supply chain supplemented by third party manufacturing to maximize the value of Maidenform to retailers and consumers.

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Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition:
Cash and cash equivalents
$
20,650

Trade accounts receivable, net
86,794

Inventories
125,179

Other current assets
29,860

Property, net
14,528

Trademarks and other identifiable intangibles, net
270,430

Other noncurrent assets
9,153

Total assets acquired
556,594

Accounts payables
34,101

Accrued liabilities and other
13,302

Deferred tax liabilities, noncurrent
118,189

Other noncurrent liabilities
8,429

Total liabilities assumed
174,021

Net assets acquired
382,573

Goodwill
197,932

Purchase price
$
580,505

Since December 2013, goodwill increased by $4,606 as a result of measurement period adjustments to the acquired income tax balances. The purchase price allocation was finalized in the third quarter 2014.
(4)
Earnings Per Share
Basic earnings per share (“EPS”) was computed by dividing net income by the number of weighted average shares of common stock outstanding. Diluted EPS was calculated to give effect to all potentially dilutive shares of common stock using the treasury stock method. The reconciliation of basic to diluted weighted average shares outstanding is as follows:
 
Quarter Ended
 
Nine Months Ended
 
September 27,
2014
 
September 28,
2013
 
September 27,
2014
 
September 28,
2013
Basic weighted average shares outstanding
100,598

 
100,066

 
100,492

 
99,764

Effect of potentially dilutive securities:
 
 
 
 
 
 
 
Stock options
1,057

 
1,259

 
1,098

 
1,484

Restricted stock units
476

 
661

 
424

 
675

Employee stock purchase plan and other

 
1

 

 

Diluted weighted average shares outstanding
102,131

 
101,987

 
102,014

 
101,923

For the quarter and nine months ended September 27, 2014, three restricted stock units were excluded from the diluted earnings per share calculation and for the quarter and nine months ended September 28, 2013, 14 restricted stock units were excluded from the diluted earnings per share calculation because their effect would be anti-dilutive.
(5)
Inventories
Inventories consisted of the following: 
 
September 27,
2014
 
December 28,
2013
Raw materials
$
225,702

 
$
170,524

Work in process
158,097

 
142,713

Finished goods
1,282,209

 
970,094

 
$
1,666,008

 
$
1,283,331


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Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

(6)
Debt
Debt consisted of the following: 
 
Interest
Rate as of
September 27,
2014
 
Principal Amount
 
Maturity Date
 
September 27,
2014
 
December 28,
2013
 
Senior Secured Credit Facility:
 
 
 
 
 
 
 
Revolving Loan Facility
1.96%
 
$
444,000

 
$
467,000

 
July 2018
Euro Term Loan
3.50%
 
463,898

 

 
August 2021
6.375% Senior Notes
6.38%
 
1,000,000

 
1,000,000

 
December 2020
Accounts Receivable Securitization Facility
1.12%
 
225,000

 
181,790

 
March 2015
Other International Debt
Various
 
20,656

 

 
Various
 
 
 
2,153,554

 
1,648,790

 
 
Less current maturities
 
 
244,821

 
181,790

 
 
 
 
 
$
1,908,733

 
$
1,467,000

 
 
As of September 27, 2014, the Company had $640,305 of borrowing availability under the $1,100,000 revolving credit facility (the “Revolving Loan Facility”) under its senior secured credit facility (the “Senior Secured Credit Facility”) after taking into account outstanding borrowings and $15,695 of standby and trade letters of credit issued and outstanding under this facility.
In July 2014, the Company amended and restated the Senior Secured Credit Facility to provide for potential aggregate borrowings of $1,600,000, consisting of (a) the existing Revolving Loan Facility, and (b) a new term loan facility with an aggregate principal amount up to the Euro equivalent of $500,000 (the “Euro Term Loan”). The proceeds of the Euro Term Loan are denominated in Euros and were utilized in part to purchase DBA and pay fees and expenses associated with such purchase. The Euro Term Loan accrues interest utilizing the EURIBOR rate (as defined in the Senior Secured Credit Facility) plus 2.75%. and matures in August, 2021. Outstanding borrowings under the Euro Term Loan are repayable in quarterly payments of 0.25% of the original borrowings, with the remainder of the outstanding principal due at maturity. The Euro Term Loan will be secured by substantially all of the assets of the Company, the U.S. subsidiaries of the Company that guaranty the Revolving Loan Facility and MF Lux and its Luxembourg subsidiaries, subject to certain exceptions. The maturity and interest rate terms of the Revolving Loan Facility were unchanged by the amendment. The Senior Secured Credit Facility contains a minimum interest coverage ratio covenant and a maximum total debt to EBITDA (earnings before income taxes, depreciation expense and amortization), or leverage ratio covenant. The leverage ratio was increased from 3.75 to 1.00 for the preceding four fiscal quarters to 4.00 to 1.00 for the preceding four fiscal quarters through the third fiscal quarter of 2015 and 3.75 to 1.00 thereafter. The minimum interest coverage ratio was unchanged. The Company capitalized debt issuance costs of $5,450 in connection with the Euro Term Loan.
Additionally, in connection with the DBA acquisition, the Company assumed debt (the “Other International Debt”), totaling $132,574 as of the acquisition date. Concurrent with the closing, $107,665 was repaid utilizing proceeds from the Euro Term Loan. The long-term debt outstanding as of September 27, 2014 consists of mortgage loans and term loans collateralized by fixed assets. These loans have maturity dates ranging from September, 2014 to May, 2018, and bear interest primarily based on EURIBOR rates ranging from 1.38% to 6.25% as of September 27, 2014.
In March 2014, the Company amended the accounts receivable securitization facility that it entered into in November 2007 (the “Accounts Receivable Securitization Facility”). This amendment decreased certain fee rates, revised certain concentration limits and dilution triggers and extended the termination date to March 2015.
As of September 27, 2014, the Company was in compliance with all financial covenants under its credit facilities.

10

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

(7)
Accumulated Other Comprehensive Loss
The components of Accumulated other comprehensive loss (“AOCI”) are as follows:
 
Cumulative Translation Adjustment
 
Foreign Exchange Contracts
 
Defined Benefit Plans
 
Income Taxes
 
Accumulated Other Comprehensive Loss
 
 
 
 
Balance at December 28, 2013
$
(21,928
)
 
$
2,042

 
$
(357,503
)
 
$
140,372

 
$
(237,017
)
Amounts reclassified from accumulated other comprehensive loss

 
(1,398
)
 
7,809

 
(2,507
)
 
3,904

Current-period other comprehensive income (loss) activity
(3,291
)
 
1,053

 

 
(163
)
 
(2,401
)
Balance at September 27, 2014
$
(25,219
)
 
$
1,697

 
$
(349,694
)
 
$
137,702

 
$
(235,514
)
The Company had the following reclassifications out of Accumulated other comprehensive loss:
Component of AOCI
 
Location of Reclassification into Income
 
Amount of Reclassification from AOCI
 
Amount of Reclassification from AOCI
 
Quarter Ended
 
Nine Months Ended
 
September 27,
2014
 
September 28,
2013
 
September 27,
2014
 
September 28,
2013
Gain on foreign exchange contracts
 
Cost of sales
 
$
368

 
$
8

 
$
1,398

 
$
13

Gain on foreign exchange contracts
 
Income tax
 
(146
)
 
(3
)
 
(557
)
 
(5
)
Net of tax
 
 
 
222

 
5

 
841

 
8

 
 
 
 
 
 
 
 
 
 
 
Amortization of deferred actuarial loss and prior service cost
 
Selling, general and administrative expenses
 
(2,606
)
 
(3,852
)
 
(7,809
)
 
(11,561
)
Amortization of deferred actuarial loss and prior service cost
 
Income tax
 
1,024

 
1,512

 
3,064

 
4,537

Net of tax
 
 
 
(1,582
)
 
(2,340
)
 
(4,745
)
 
(7,024
)
 
 
 
 
 
 
 
 
 
 
 
Total reclassifications
 
 
 
$
(1,360
)
 
$
(2,335
)
 
$
(3,904
)
 
$
(7,016
)
(8)
Financial Instruments and Risk Management
The Company uses forward foreign exchange contracts to manage its exposures to movements in foreign exchange rates. As of September 27, 2014, the notional U.S. dollar equivalent of commitments to sell and purchase foreign currencies within the Company’s derivative portfolio was $102,376 and $10,702 respectively, primarily consisting of contracts hedging exposures to the Euro, Mexican peso, Canadian dollar, Australian dollar, Brazilian real and Japanese yen.

11

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

Fair Values of Derivative Instruments
The fair values of derivative financial instruments recognized in the Condensed Consolidated Balance Sheets of the Company were as follows:
 
Balance Sheet Location
 
Fair Value
 
September 27,
2014
 
December 28,
2013
Hedges
Other current assets
 
$
2,120

 
$
32

Non-hedges
Other current assets
 
2,033

 
970

Total derivative assets
 
 
4,153

 
1,002

 
 
 
 
 
 
Hedges
Accrued liabilities
 
(92
)
 

Non-hedges
Accrued liabilities
 
(255
)
 
(28
)
Total derivative liabilities
 
 
(347
)
 
(28
)
 
 
 
 
 
 
Net derivative asset
 
 
$
3,806

 
$
974

Cash Flow Hedges
The Company uses forward foreign exchange contracts to reduce the effect of fluctuating foreign currencies on short-term foreign currency-denominated transactions, foreign currency-denominated investments and other known foreign currency exposures. Gains and losses on these contracts are intended to offset losses and gains on the hedged transaction in an effort to reduce the earnings volatility resulting from fluctuating foreign currency exchange rates.
The Company expects to reclassify into earnings during the next 12 months a net gain from Accumulated other comprehensive loss of approximately $2,094.
The changes in fair value of derivatives excluded from the Company’s effectiveness assessments and the ineffective portion of the changes in the fair value of derivatives used as cash flow hedges are reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statements of Income.
The effect of cash flow hedge derivative instruments on the Condensed Consolidated Statements of Income and Accumulated other comprehensive loss is as follows:
 
Amount of
Gain (Loss)
Recognized in
Accumulated Other
Comprehensive Loss
(Effective Portion)
 
Amount of
Gain (Loss)
Recognized in
Accumulated Other
Comprehensive Loss
(Effective Portion)
 
Quarter Ended
 
Nine Months Ended
 
September 27,
2014
 
September 28,
2013
 
September 27,
2014
 
September 28,
2013
Foreign exchange contracts
$
1,908

 
$
(513
)
 
$
1,053

 
$
1,111

 
 
Location of
Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Loss into Income
(Effective Portion)
 
Amount of
Gain (Loss)
Reclassified from
Accumulated
Other Comprehensive
Loss into Income
(Effective Portion)
 
Amount of
Gain (Loss)
Reclassified from
Accumulated
Other Comprehensive
Loss into Income
(Effective Portion)
 
 
Quarter Ended
 
Nine Months Ended
 
 
September 27,
2014
 
September 28,
2013
 
September 27,
2014
 
September 28,
2013
Foreign exchange contracts
Cost of sales
 
$
368

 
$
8

 
$
1,398

 
$
13


12

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

Derivative Contracts Not Designated As Hedges
The Company uses foreign exchange derivative contracts as economic hedges against the impact of foreign exchange fluctuations on existing accounts receivable and payable balances and intercompany lending transactions denominated in foreign currencies. These contracts are not designated as hedges under the accounting standards and are recorded at fair value in the Condensed Consolidated Balance Sheet. Any gains or losses resulting from changes in fair value are recognized directly into earnings. Gains or losses on these contracts largely offset the net remeasurement gains or losses on the related assets and liabilities.
The effect of derivative contracts not designated as hedges on the Condensed Consolidated Statements of Income is as follows:
 
Location of Loss
Recognized in Income on
Derivative
 
Amount of Gain (Loss)
Recognized in Income
 
Amount of Gain (Loss)
Recognized in Income
 
Quarter Ended
 
Nine Months Ended
 
September 27,
2014
 
September 28,
2013
 
September 27,
2014
 
September 28,
2013
Foreign exchange contracts
Selling, general and administrative expenses
 
$
(198
)
 
$
(502
)
 
$
(570
)
 
$
61

(9)
Fair Value of Assets and Liabilities
As of September 27, 2014, the Company held certain financial assets and liabilities that are required to be measured at fair value on a recurring basis. These consisted of the Company’s derivative instruments related to foreign exchange rates and deferred compensation plan liabilities. The fair values of foreign currency derivatives are determined using the cash flows of the foreign exchange contract, discount rates to account for the passage of time and current foreign exchange market data and are categorized as Level 2. The fair value of deferred compensation plans is based on readily available current market data and are categorized as Level 2. The Company’s defined benefit pension plan investments are not required to be measured at fair value on a recurring basis.
There were no changes during the quarter ended September 27, 2014 to the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis. There were no transfers between the three level categories and there were no Level 3 assets or liabilities measured on a quarterly basis during the quarter ended September 27, 2014. As of and during the quarter and nine months ended September 27, 2014, the Company did not have any non-financial assets or liabilities that were required to be measured at fair value on a recurring or non-recurring basis.
The following tables set forth, by level within the fair value hierarchy, the Company’s financial assets and liabilities accounted for at fair value on a recurring basis.
 
Assets (Liabilities) at Fair Value as of
September 27, 2014
 
Quoted Prices In
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Foreign exchange derivative contracts
$

 
$
4,153

 
$

Foreign exchange derivative contracts

 
(347
)
 

 

 
3,806

 

 
 
 
 
 
 
Deferred compensation plan liability

 
(18,919
)
 

 
 
 
 
 
 
Total
$

 
$
(15,113
)
 
$

 

13

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

 
Assets (Liabilities) at Fair Value as of
December 28, 2013
 
Quoted Prices In
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Foreign exchange derivative contracts
$

 
$
1,002

 
$

Foreign exchange derivative contracts

 
(28
)
 

 

 
974

 

 
 
 
 
 
 
Deferred compensation plan liability

 
(17,036
)
 

 
 
 
 
 
 
Total
$

 
$
(16,062
)
 
$

Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, trade accounts receivable, notes receivable and accounts payable approximated fair value as of September 27, 2014 and December 28, 2013. The carrying amount of trade accounts receivable includes allowance for doubtful accounts, chargebacks and other deductions of $21,120 and $13,336 as of September 27, 2014 and December 28, 2013, respectively. The fair value of debt, which is classified as a Level 2 liability, was $2,212,532 and $1,744,115 as of September 27, 2014 and December 28, 2013, respectively. Debt had a carrying value of $2,153,554 and $1,648,790 as of September 27, 2014 and December 28, 2013, respectively. The fair values were estimated using quoted market prices as provided in secondary markets which consider the Company’s credit risk and market related conditions. The carrying amounts of the Company’s notes payable, which is classified as a Level 2 liability, approximated fair value as of September 27, 2014 and December 28, 2013, primarily due to the short-term nature of these instruments.
(10)
Income Taxes
The Company’s effective income tax rate was 8% and 17% for the quarters ended September 27, 2014 and September 28, 2013, respectively. The Company’s effective tax rate was 14% and 18% for the nine months ended September 27, 2014 and September 28, 2013, respectively. The lower effective income tax rate for the quarter and nine months ended September 27, 2014 compared to the quarter and nine months ended September 28, 2013 was primarily due to a lower proportion of earnings attributed to domestic subsidiaries, which are taxed at rates higher than foreign subsidiaries.
The quarter ended September 27, 2014 included net discrete tax benefits of approximately $9,000 primarily related to the realization of unrecognized tax benefits resulting from the lapsing of domestic and foreign statutes of limitations. The quarter ended September 28, 2013 included net discrete tax benefits of approximately $10,000 primarily related to the realization of unrecognized tax benefits resulting from the lapsing of domestic and foreign statutes of limitations. During the third quarter of 2014, the Internal Revenue Service began an examination of the Company’s 2012 tax year.
(11)
Dividends
As part of the Company’s cash deployment strategy, in October 2014 the Company’s Board of Directors authorized a regular quarterly dividend of $0.30 per share to be paid December 9, 2014 to stockholders of record at the close of business on November 18, 2014. In January 2014, April 2014 and July 2014, the Board of Directors also declared dividends of $0.30 per share on outstanding common stock which were paid on March 11, 2014, June 3, 2014 and September 3, 2014, respectively.
Cash paid for dividends was $29,907 and $89,638 for the quarter and nine months ended September 27, 2014, respectively, and $19,818 and $39,615 for the quarter and nine months ended September 28, 2013.
(12)
Business Segment Information
The Company’s operations are managed and reported in four operating segments, each of which is a reportable segment for financial reporting purposes: Innerwear, Activewear, Direct to Consumer and International. These segments are organized principally by product category, geographic location and distribution channel. Each segment has its own management that is

14

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

responsible for the operations of the segment’s businesses, but the segments share a common supply chain and media and marketing platforms.
The types of products and services from which each reportable segment derives its revenues are as follows:
Innerwear sells basic branded products that are replenishment in nature under the product categories of men’s underwear, children’s underwear, socks, panties, hosiery and intimates, which includes bras and shapewear.
Activewear sells basic branded products that are primarily seasonal in nature under the product categories of branded printwear and retail activewear, as well as licensed logo apparel in collegiate bookstores and other channels.
Direct to Consumer includes the Company’s value-based (“outlet”) stores and Internet operations which sell products from the Company’s portfolio of leading brands. The Company’s Internet operations are supported by its catalogs.
International primarily relates to the Asia, Latin America, Canada, Europe and Australia geographic locations that sell products that span across the Innerwear and Activewear reportable segments. 
The Company evaluates the operating performance of its segments based upon segment operating profit, which is defined as operating profit before general corporate expenses and amortization of intangibles. The accounting policies of the segments are consistent with those described in Note 2 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 28, 2013.
 
Quarter Ended
 
Nine Months Ended
September 27,
2014
 
September 28,
2013
 
September 27,
2014
 
September 28,
2013
Net sales:
 
 
 
 
 
 
 
Innerwear
$
648,310

 
$
560,127

 
$
2,007,794

 
$
1,744,471

Activewear
424,745

 
405,091

 
1,037,063

 
966,508

Direct to Consumer
112,663

 
100,003

 
300,729

 
272,719

International
215,010

 
132,125

 
456,564

 
358,314

Total net sales
$
1,400,728

 
$
1,197,346

 
$
3,802,150

 
$
3,342,012

 
 
Quarter Ended
 
Nine Months Ended
 
September 27,
2014
 
September 28,
2013
 
September 27,
2014
 
September 28,
2013
Segment operating profit:
 
 
 
 
 
 
 
Innerwear
$
128,343

 
$
99,887

 
$
405,765

 
$
342,331

Activewear
68,224

 
68,591

 
145,928

 
127,020

Direct to Consumer
17,254

 
16,245

 
28,401

 
25,441

International
28,950

 
16,648

 
53,321

 
31,662

Total segment operating profit
242,771

 
201,371

 
633,415

 
526,454

Items not included in segment operating profit:
 
 
 
 
 
 
 
General corporate expenses
(21,024
)
 
(21,143
)
 
(57,955
)
 
(72,968
)
Acquisition, integration and other action related charges
(63,135
)
 

 
(129,817
)
 

Amortization of intangibles
(4,720
)
 
(3,330
)
 
(12,839
)
 
(9,998
)
Total operating profit
153,892

 
176,898

 
432,804

 
443,488

Other expenses
(795
)
 
(795
)
 
(1,890
)
 
(2,010
)
Interest expense, net
(23,528
)
 
(25,002
)
 
(66,465
)
 
(75,846
)
Income before income tax expense
$
129,569

 
$
151,101

 
$
364,449

 
$
365,632

The results of DBA have been included in the Company’s consolidated financial statements since the date of acquisition and are reported as part of the International segment based on geographic location and distribution channel. The results of Maidenform have been included in the Company’s consolidated financial statements since the date of acquisition and are reported as part of the Innerwear, Direct to Consumer and International segments based on geographic location and distribution channel. For the quarter ended September 27, 2014, the Company incurred acquisition, integration and other action related

15

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

charges of $63,135, of which $22,565 is reported in the “Cost of sales” line and $40,570 is reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income. For the nine months ended September 27, 2014, the Company incurred acquisition, integration and other action related charges of $129,817, of which $41,227 is reported in the “Cost of sales” line and $88,590 is reported in the “Selling, general and administrative expenses” line in the Condensed Consolidated Statement of Income.
(13)
Consolidating Financial Information
In accordance with the indenture governing the Company’s $1,000,000 6.375% Senior Notes issued on November 9, 2010, as supplemented from time to time, certain of the Company’s subsidiaries have guaranteed the Company’s obligations under the 6.375% Senior Notes. The following presents the condensed consolidating financial information separately for:
(i) Parent Company, the issuer of the guaranteed obligations. Parent Company includes Hanesbrands Inc. and its 100% owned operating divisions which are not legal entities, and excludes its subsidiaries which are legal entities;
(ii) Guarantor subsidiaries, on a combined basis, as specified in the Indentures;
(iii) Non-guarantor subsidiaries, on a combined basis;
(iv) Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries, (b) eliminate intercompany profit in inventory, (c) eliminate the investments in the Company’s subsidiaries and (d) record consolidating entries; and
(v) The Company, on a consolidated basis.
The 6.375% Senior Notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary, each of which is 100% owned, directly or indirectly, by Hanesbrands Inc. A guarantor subsidiary’s guarantee can be released in certain customary circumstances. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use by the Parent Company and guarantor subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation.
 
Condensed Consolidating Statement of Comprehensive Income
Quarter Ended September 27, 2014
 
Parent
Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Net sales
$
1,107,886

 
$
234,995

 
$
755,136

 
$
(697,289
)
 
$
1,400,728

Cost of sales
870,321

 
117,351

 
581,667

 
(666,326
)
 
903,013

Gross profit
237,565

 
117,644

 
173,469

 
(30,963
)
 
497,715

Selling, general and administrative expenses
248,132

 
54,329

 
32,742

 
8,620

 
343,823

Operating profit
(10,567
)
 
63,315

 
140,727

 
(39,583
)
 
153,892

Equity in earnings of subsidiaries
147,709

 
117,451

 

 
(265,160
)
 

Other expenses
795

 

 

 

 
795

Interest expense, net
19,042

 
278

 
4,860

 
(652
)
 
23,528

Income before income tax expense
117,305

 
180,488

 
135,867

 
(304,091
)
 
129,569

Income tax expense
(1,639
)
 
8,267

 
3,997

 

 
10,625

Net income
$
118,944

 
$
172,221

 
$
131,870

 
$
(304,091
)
 
$
118,944

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
117,260

 
$
172,221

 
$
128,702

 
$
(300,923
)
 
$
117,260

 

16

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

 
Condensed Consolidating Statement of Comprehensive Income
Quarter Ended September 28, 2013
 
Parent
Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Net sales
$
1,006,219

 
$
201,097

 
$
621,751

 
$
(631,721
)
 
$
1,197,346

Cost of sales
788,512

 
100,344

 
493,115

 
(606,305
)
 
775,666

Gross profit
217,707

 
100,753

 
128,636

 
(25,416
)
 
421,680

Selling, general and administrative expenses
184,566

 
34,010

 
27,715

 
(1,509
)
 
244,782

Operating profit
33,141

 
66,743

 
100,921

 
(23,907
)
 
176,898

Equity in earnings of subsidiaries
127,032

 
70,951

 

 
(197,983
)
 

Other expenses
795

 

 

 

 
795

Interest expense, net
23,049

 

 
1,953

 

 
25,002

Income before income tax expense
136,329

 
137,694

 
98,968

 
(221,890
)
 
151,101

Income tax expense
11,066

 
7,962

 
6,810

 

 
25,838

Net income
$
125,263

 
$
129,732

 
$
92,158

 
$
(221,890
)
 
$
125,263

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
126,325

 
$
129,732

 
$
91,023

 
$
(220,755
)
 
$
126,325

 
 
Condensed Consolidating Statement of Comprehensive Income
Nine Months Ended September 27, 2014
 
Parent
Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Net sales
$
3,186,705

 
$
645,891

 
$
1,923,295

 
$
(1,953,741
)
 
$
3,802,150

Cost of sales
2,488,843

 
341,010

 
1,470,885

 
(1,857,434
)
 
2,443,304

Gross profit
697,862

 
304,881

 
452,410

 
(96,307
)
 
1,358,846

Selling, general and administrative expenses
654,311

 
178,274

 
88,840

 
4,617

 
926,042

Operating profit
43,551

 
126,607

 
363,570

 
(100,924
)
 
432,804

Equity in earnings of subsidiaries
353,096

 
285,924

 


 
(639,020
)
 

Other expenses
1,890

 

 

 

 
1,890

Interest expense, net
55,984

 
2,176

 
8,895

 
(590
)
 
66,465

Income before income tax expense
338,773

 
410,355

 
354,675

 
(739,354
)
 
364,449

Income tax expense
23,691

 
14,023

 
11,653

 

 
49,367

Net income
$
315,082

 
$
396,332

 
$
343,022

 
$
(739,354
)
 
$
315,082

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
316,585

 
$
396,332

 
$
340,073

 
$
(736,405
)
 
$
316,585

 

17

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

 
Condensed Consolidating Statement of Comprehensive Income
Nine Months Ended September 28, 2013
 
Parent
Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Net sales
$
2,921,292

 
$
502,179

 
$
1,769,432

 
$
(1,850,891
)
 
$
3,342,012

Cost of sales
2,286,074

 
242,603

 
1,395,191

 
(1,766,317
)
 
2,157,551

Gross profit
635,218

 
259,576

 
374,241

 
(84,574
)
 
1,184,461

Selling, general and administrative expenses
547,403

 
108,141

 
89,463

 
(4,034
)
 
740,973

Operating profit
87,815

 
151,435

 
284,778

 
(80,540
)
 
443,488

Equity in earnings of subsidiaries
314,898

 
198,981

 

 
(513,879
)
 

Other expenses
2,010

 

 

 

 
2,010

Interest expense, net
70,958

 

 
4,888

 

 
75,846

Income before income tax expense
329,745

 
350,416

 
279,890

 
(594,419
)
 
365,632

Income tax expense
31,517

 
17,091

 
18,796

 

 
67,404

Net income
$
298,228

 
$
333,325

 
$
261,094

 
$
(594,419
)
 
$
298,228

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
297,386

 
$
333,325

 
$
253,660

 
$
(586,985
)
 
$
297,386

 

18

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

 
Condensed Consolidating Balance Sheet
September 27, 2014
 
Parent
Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
6,099

 
$
9,469

 
$
200,264

 
$

 
$
215,832

Trade accounts receivable, net
49,369

 
80,201

 
745,741

 
(389
)
 
874,922

Inventories
1,102,277

 
131,389

 
656,696

 
(224,354
)
 
1,666,008

Deferred tax assets
179,123

 
15,372

 
11,553

 

 
206,048

Other current assets
42,962

 
10,844

 
124,964

 
12,840

 
191,610

Total current assets
1,379,830

 
247,275

 
1,739,218

 
(211,903
)
 
3,154,420

Property, net
85,718

 
45,164

 
542,413

 

 
673,295

Trademarks and other identifiable intangibles, net
5,052

 
81,432

 
629,340

 

 
715,824

Goodwill
232,882

 
124,247

 
364,031

 

 
721,160

Investments in subsidiaries
3,265,453

 
1,425,220

 

 
(4,690,673
)
 

Deferred tax assets
138,962

 
53,317

 
18,983

 

 
211,262

Receivables from related entities
4,895,844

 
4,376,669

 
2,077,607

 
(11,350,120
)
 

Other noncurrent assets
49,034

 
376

 
18,126

 
(3
)
 
67,533

Total assets
$
10,052,775

 
$
6,353,700

 
$
5,389,718

 
$
(16,252,699
)
 
$
5,543,494

 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ 
Equity
 
 
 
 
 
 
 
 
 
Accounts payable
$
385,857

 
$
16,078

 
$
272,002

 
$

 
$
673,937

Accrued liabilities
221,471

 
59,322

 
326,679

 
11,777

 
619,249

Notes payable

 

 
137,948

 

 
137,948

Accounts Receivable Securitization Facility

 

 
225,000

 

 
225,000

Current portion of long-term debt

 

 
19,821

 

 
19,821

Total current liabilities
607,328

 
75,400

 
981,450

 
11,777

 
1,675,955

Long-term debt
1,444,000

 

 
464,733

 

 
1,908,733

Pension and postretirement benefits
188,106

 

 
54,784

 

 
242,890

Payables to related entities
6,231,694

 
3,266,673

 
1,556,259

 
(11,054,626
)
 

Other noncurrent liabilities
116,977

 
12,600

 
121,671

 
(2
)
 
251,246

Total liabilities
8,588,105

 
3,354,673

 
3,178,897

 
(11,042,851
)
 
4,078,824

Stockholders’ equity
1,464,670

 
2,999,027

 
2,210,821

 
(5,209,848
)
 
1,464,670

Total liabilities and stockholders’ equity
$
10,052,775

 
$
6,353,700

 
$
5,389,718

 
$
(16,252,699
)
 
$
5,543,494



19

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

 
Condensed Consolidating Balance Sheet
December 28, 2013
 
Parent
Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
5,695

 
$
7,811

 
$
102,357

 
$

 
$
115,863

Trade accounts receivable, net
44,366

 
69,944

 
465,662

 
(1,414
)
 
578,558

Inventories
825,300

 
208,250

 
405,756

 
(155,975
)
 
1,283,331

Deferred tax assets
178,732

 
15,373

 
3,155

 

 
197,260

Other current assets
37,429

 
14,354

 
16,871

 

 
68,654

Total current assets
1,091,522

 
315,732

 
993,801

 
(157,389
)
 
2,243,666

Property, net
82,786

 
50,193

 
446,904

 

 
579,883

Trademarks and other identifiable intangibles, net
8,385

 
88,716

 
280,650

 

 
377,751

Goodwill
232,882

 
124,247

 
269,263

 

 
626,392

Investments in subsidiaries
2,881,739

 
1,535,404

 

 
(4,417,143
)
 

Deferred tax assets
139,102

 
53,317

 
15,007

 

 
207,426

Receivables from related entities
4,706,001

 
4,065,909

 
1,987,603

 
(10,759,513
)
 

Other noncurrent assets
52,712

 
412

 
1,806

 

 
54,930

Total assets
$
9,195,129

 
$
6,233,930

 
$
3,995,034

 
$
(15,334,045
)
 
$
4,090,048

 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ 
Equity
 
 
 
 
 
 
 
 
 
Accounts payable
$
253,494

 
$
61,964

 
$
150,812

 
$

 
$
466,270

Accrued liabilities
184,653

 
63,906

 
66,497

 
(30
)
 
315,026

Notes payable

 

 
36,192

 

 
36,192

Accounts Receivable Securitization Facility

 

 
181,790

 

 
181,790

Total current liabilities
438,147

 
125,870

 
435,291

 
(30
)
 
999,278

Long-term debt
1,467,000

 

 

 

 
1,467,000

Pension and postretirement benefits
253,299

 
2,159

 
8,361

 

 
263,819

Payables to related entities
5,699,670

 
3,114,701

 
1,673,828

 
(10,488,199
)
 

Other noncurrent liabilities
106,390

 
11,318

 
11,620

 

 
129,328

Total liabilities
7,964,506

 
3,254,048

 
2,129,100

 
(10,488,229
)
 
2,859,425

Stockholders’ equity
1,230,623

 
2,979,882

 
1,865,934

 
(4,845,816
)
 
1,230,623

Total liabilities and stockholders’ equity
$
9,195,129

 
$
6,233,930

 
$
3,995,034

 
$
(15,334,045
)
 
$
4,090,048


20

Table of Contents
HANESBRANDS INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)

 
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 27, 2014
 
Parent
Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Net cash from operating activities
$
425,011

 
$
273,268

 
$
147,250

 
$
(630,208
)
 
$
215,321

Investing activities:
 
 
 
 
 
 
 
 
 
Purchases of property, plant and equipment
(13,451
)
 
(4,741
)
 
(28,370
)
 

 
(46,562
)
Proceeds from sales of assets

 
47

 
4,968

 

 
5,015

Acquisition of business, net of cash acquired

</