Enhanced Investments - Financial Portal

Published: 2021-11-04

								CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
		(in thousands of U.S. dollars) - unaudited
			October 3,		January 3,
				2021		2021
							Current assets:
							Cash and cash equivalents	$	389,332 $		505,264
							Trade accounts receivable (note 4)		374,746		196,480
							Income taxes receivable		—	4,632
							Inventories (note 5)		725,421		727,992
							Prepaid expenses, deposits and other current assets		118,337		110,105
							Total current assets		1,607,836		1,544,473
							Non-current assets:
							Property, plant and equipment		911,925		896,800
							Right-of-use assets		54,675		59,445
							Intangible assets		278,011		289,901
							Goodwil		206,636		206,636
							Deferred income taxes		11,939		17,689
							Other non-current assets		4,718	6,004
							Total non-current assets		1,467,904		1,476,475
							Total assets	$	3,075,740 $		3,020,948
							Current liabilities:
							Accounts payable and accrued liabilities	$	469,365 $		343,722
							Income taxes payable		5,399		—
							Current portion of lease obligations (note 8(d))		14,679		15,884
							Total current liabilities		489,443		359,606
							Non-current liabilities:
							Long-term debt (note 6)		600,000		1,000,000
							Lease obligations (note 8(d))		61,093		66,580
							Other non-current liabilities		36,192		35,865
							Total non-current liabilities		697,285		1,102,445
							Total liabilities		1,186,728		1,462,051
							Equity:
							Share capital		186,475		183,938
							Contributed surplus		52,672		24,936
							Retained earnings		1,605,400		1,359,061
							Accumulated other comprehensive income (loss)		44,465		(9,038)
							Total equity attributable to shareholders of the Company		1,889,012		1,558,897
							Total liabilities and equity	$	3,075,740 $		3,020,948
							See accompanying notes to unaudited condensed interim consolidated financial statements.
			QUARTERLY REPORT - Q3 2021 33

						CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
		AND COMPREHENSIVE INCOME (LOSS)
			(in thousands of U.S. dollars, except per share data) - unaudited
				Three months ended	Nine months ended
				October 3,		September 27,	October 3,		September 27,
				2021			2020	2021			2020
									Net sales (note 14)	$	801,581 $			602,314 $	2,138,319 $		1,291,121
									Cost of sales (note 8(e))		519,915			466,823	1,427,366		1,197,569
									Gross profit		281,666			135,491	710,953			93,552
									Sel ing, general and administrative expenses		80,645			61,490	233,705			200,372
									(Reversal of impairment) Impairment of trade
									accounts receivable (note 4)		(1,280)			504	(1,619)			14,969
									Restructuring and acquisition-related costs
									(note 7)		964	4,747	4,044			43,897
									Impairment of goodwil and intangible assets
									(note 8(f))		—	—					—	93,989
									Operating income (loss)		201,337			68,750	474,823			(259,675)
									Financial expenses, net (note 8(b))		5,316			11,442	22,666			35,392
									Earnings (loss) before income taxes		196,021			57,308	452,157			(295,067)
									Income tax expense (recovery)		7,717			953	18,870			(2,433)
									Net earnings (loss)		188,304			56,355	433,287			(292,634)
									Other comprehensive income (loss), net of
									related income taxes (note 10):Cash flow hedges
											42,078			7,787	53,503			(11,583)
									Comprehensive income (loss)	$	230,382 $			64,142 $	486,790 $			(304,217)
									Earnings (loss) per share (note 11):
									Basic	$	0.95 $	0.28 $	2.19 $			(1.48)
									Diluted	$	0.95 $	0.28 $	2.18 $			(1.48)
									See accompanying notes to unaudited condensed interim consolidated financial statements.
					QUARTERLY REPORT - Q3 2021 34

				CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
		Nine months ended October 3, 2021 and September 27, 2020
			(in thousands or thousands of U.S. dollars) - unaudited
					Accumulated
Share capital						other
				Contributed	comprehensive		Retained	Total
				surplus	income (loss)		earnings	equity	Number							Amount
										Balance, January 3, 2021	198,407 $ 183,938 $		24,936 $		(9,038) $ 1,359,061 $ 1,558,897
										Share-based compensation								—	—	29,087		—			—	29,087
										Shares issued under employee share
										purchase plan								33	1,026				—	—			—	1,026
										Shares issued pursuant to exercise of
										stock options								83	2,727				(639)	—			—	2,088
										Shares issued or distributed pursuant to
										vesting of restricted share units								66	1,978	(3,549)		—			—	(1,571)
										Shares repurchased for cancel ation		(3,314)					(3,147)				—	—	(123,850)	(126,997)
										Share repurchases for settlement of non-
										Treasury RSUs		(65)					(47)				—	—	(1,710)	(1,757)
										Deferred compensation to be settled in
										non-Treasury RSUs								—	—	2,197		—			—	2,197
										Dividends declared								—	—						640	—	(61,388)	(60,748)
										Transactions with shareholders of the
										Company recognized directly in equity		(3,197)					2,537	27,736		—	(186,948)	(156,675)
										Cash flow hedges (note 10)								—	—						—	53,503				—	53,503
										Net earnings								—	—						—	—	433,287	433,287
										Comprehensive income								—	—						—	53,503	433,287	486,790
										Balance, October 3, 2021	195,210 $ 186,475 $		52,672 $		44,465 $ 1,605,400 $ 1,889,012
										Balance, December 29, 2019	199,012 $ 174,218 $		32,769 $		(535) $ 1,628,042 $ 1,834,494
										Share-based compensation								—	—	(1,066)		—			—	(1,066)
										Shares issued under employee share
										purchase plan								58	1,042				—	—			—	1,042
										Shares issued or distributed pursuant to
										vesting of restricted share units								77	2,495	(3,397)		—			—	(902)
										Shares repurchased for cancel ation		(843)					(744)				—	—	(22,472)	(23,216)
										Share repurchases for settlement of non-
										Treasury RSUs								(2)	(1)						—	—	(26)	(27)
										Dividends declared								—	—						336	—	(30,889)	(30,553)
										Transactions with shareholders of the
										Company recognized directly in equity		(710)					2,792	(4,127)		—	(53,387)	(54,722)
										Cash flow hedges (note 10)								—	—						—	(11,583)					—	(11,583)
										Net loss								—	—						—	—	(292,634)	(292,634)
										Comprehensive loss								—	—						—	(11,583)		(292,634)	(304,217)
										Balance, September 27, 2020	198,302 $ 177,010 $		28,642 $	(12,118) $ 1,282,021 $ 1,475,555
										See accompanying notes to unaudited condensed interim consolidated financial statements.
						QUARTERLY REPORT - Q3 2021 35

			CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
		(in thousands of U.S. dollars) - unaudited
			Three months ended	Nine months ended
			October 3,		September 27,	October 3,			September 27,
			2021			2020	2021				2020
									Cash flows from (used in) operating activities:
									Net earnings (loss)	$	188,304 $			56,355 $	433,287 $		(292,634)
									Adjustments to reconcile net earnings to cash flows
									from (used in) operating activities (note 12(a))		27,643			29,912	85,788		239,414
				215,947			86,267	519,075				(53,220)
									Changes in non-cash working capital balances:
									Trade accounts receivable		(32,509)			(50,844)	(179,454)		109,609
									Income taxes		4,349			(2,002)	10,020		(5,579)
									Inventories		(8,002)			95,694	(9,822)		114,402
									Prepaid expenses, deposits and other current assets		(5,510)			4,143	(9,952)		26,001
									Accounts payable and accrued liabilities		68,301			17,725	133,623		(67,831)
									Cash flows from operating activities		242,576			150,983	463,490		123,382
									Cash flows from (used in) investing activities:
									Purchase of property, plant and equipment		(48,056)			(12,955)	(90,067)		(37,608)
									Purchase of intangible assets		(579)			(1,143)	(1,750)		(7,319)
									Proceeds from insurance related to property, plant and
									equipment (PP&E) and other disposals of PP&E		38,180			250	106,358		779
									Cash flows (used in) from investing activities		(10,455)			(13,848)	14,541		(44,148)
									Cash flows from (used in) financing activities:
									Decrease in amounts drawn under long-term bank
									credit facilities			—	(367,000)	—	(245,000)
									(Payment of) proceeds from term loan			—	—	(400,000)		400,000
									Payment of lease obligations		(3,469)			(3,911)	(12,481)		(11,230)
									Dividends paid		(30,445)			—	(60,748)		(30,553)
									Proceeds from the issuance of shares		313			268	3,017		940
									Repurchase and cancel ation of shares		(119,715)			—	(119,715)		(23,216)
									Share repurchases for settlement of non-Treasury
									RSUs			—	—	(1,757)		(27)
									Withholding taxes paid pursuant to the settlement of
									non-Treasury RSUs			—	—	(1,571)		(133)
									Cash flows (used in) from financing activities		(153,316)			(370,643)	(593,255)		90,781
									Effect of exchange rate changes on cash and cash
									equivalents denominated in foreign currencies		(328)			477	(708)		(1,225)
									Increase (decrease) in cash and cash equivalents during
									the period		78,477			(233,031)	(115,932)		168,790
									Cash and cash equivalents, beginning of period		310,855			465,947	505,264		64,126
									Cash and cash equivalents, end of period	$	389,332 $			232,916 $	389,332 $		232,916
									Cash paid during the period (included in cash flows from (used in) operating activities):
									Interest	$	5,858 $			10,361 $	19,344 $		28,701
									Income taxes, net of refunds		1,136			3,589	2,979		7,087
									Supplemental disclosure of cash flow information (note 12).
									See accompanying notes to unaudited condensed interim consolidated financial statements.
				QUARTERLY REPORT - Q3 2021 36

	NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the period ended October 3, 2021 (Tabular amounts in thousands or thousands of U.S. dollars except per share data, unless otherwise indicated)
1. REPORTING ENTITY:
Gildan Activewear Inc. (the "Company" or "Gildan") is domiciled in Canada and is incorporated under the Canada Business Corporations Act. Its principal business activity is the manufacture and sale of activewear, hosiery, and underwear. The Company’s fiscal year ends on the Sunday closest to December 31 of each year.
The address of the Company’s registered office is 600 de Maisonneuve Boulevard West, Suite 3300, Montreal, Quebec. These unaudited condensed interim consolidated financial statements are as at and for the three and nine months ended October 3, 2021 and include the accounts of the Company and its subsidiaries. The Company is a publicly listed entity and its shares are traded on the Toronto Stock Exchange and New York Stock Exchange under the symbol GIL.
2. BASIS OF PREPARATION:
(a) Statement of compliance:
These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s fiscal 2020 audited consolidated financial statements. The Company applied the same accounting policies in the preparation of these unaudited condensed interim consolidated financial statements as those disclosed in note 3 of its most recent annual consolidated financial statements, except for the adoption of new standards effective as of January 4, 2021 as described below in note 2(d).
These unaudited condensed interim consolidated financial statements were authorized for issuance by the Board of Directors of the Company on November 3, 2021.
(b) Seasonality of the business:
The Company’s net sales are subject to seasonal variations. Net sales have historical y been higher during the second and third quarters, however in fiscal 2020 net sales did not fol ow historical patterns due to the impact of the coronavirus ("COVID-19") pandemic.
(c) Operating segments:
The Company manages its business on the basis of one reportable operating segment.
		QUARTERLY REPORT - Q3 2021 37

	NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. BASIS OF PREPARATION (continued):
(d) Initial application of new accounting standards and interpretations in the reporting period:
On January 4, 2021, the Company adopted the fol owing new amendment:
Interest Rate Benchmark Reform On August 27 2020, the IASB published "Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)" to address issues relating to the modification of financial assets, financial liabilities and lease liabilities, specific hedge accounting requirements, and disclosure requirements when an existing interest rate benchmark is actual y replaced. The amendment introduces a practical expedient for modifications required by the reform (modifications required as a direct consequence of the IBOR reform and made on an economical y equivalent basis). These modifications are accounted for by updating the effective interest rate. Al other modifications are accounted for using the current IFRS requirements. A similar practical expedient is proposed for lessee accounting under IFRS 16. Under the amendments, hedge accounting is not discontinued solely because of the IBOR reform. Hedging relationships (and related documentation) must be amended to reflect modifications to the hedged item, hedging instrument, and hedged risk. Amended hedging relationships should meet al qualifying criteria to apply hedge accounting, including effectiveness requirements. The amendments are effective for annual reporting periods beginning on or after January 1, 2021 and are to be applied retrospectively. The Company has begun discussions with its lenders to amend existing debt agreements to include LIBOR fal back provisions. To date, the adoption has not had an impact on the Company's consolidated financial statements as LIBOR is stil being used as the interest rate benchmark in its existing debt agreements. In addition, the Company and its counterparties under interest rate swap agreements are expected to negotiate the substitution of reference rates in such agreements. It is too early to determine if any upcoming potential modifications wil meet the requirements for the application of the practical expedient.
3. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET APPLIED:
Amendments to IAS 1, Presentation of Financial StatementsOn January 23, 2020, the IASB issued narrow-scope amendments to IAS 1, Presentation of Financial Statements, to clarify how to classify debt and other liabilities as current or non-current. The amendments (which affect only the presentation of liabilities in the statement of financial position) clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period to defer settlement by at least twelve months and make explicit that only rights in place at the end of the reporting period should affect the classification of a liability; clarify that classification is unaffected by expectations about whether an entity wil exercise its right to defer settlement of a liability; and make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets, or services. The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and are to be applied retrospectively. Earlier application is permitted. The Company is currently evaluating the impact of the amendment on its consolidated financial statements.
		QUARTERLY REPORT - Q3 2021 38

								NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. TRADE ACCOUNTS RECEIVABLE:
	October 3,		January 3,
		2021		2021
Trade accounts receivable	$	391,956 $		215,474
Al owance for expected credit losses		(17,210)		(18,994)
	$	374,746 $		196,480
As at October 3, 2021, trade accounts receivables being serviced under a receivables purchase agreement amounted to $129.5 mil ion (January 3, 2021 - $145.2 mil ion). The receivables purchase agreement, which al ows for the sale of a maximum of $225 mil ion of accounts receivables at any one time, expires on June 20, 2022, subject to annual extensions. The Company retains servicing responsibilities, including col ection, for these trade receivables but has not retained any credit risk with respect to any trade receivables that have been sold. The difference between the carrying amount of the receivables sold under the agreement and the cash received at the time of transfer was $0.4 mil ion (2020 - $0.5 mil ion) and $1.2 mil ion (2020 - $1.4 mil ion), respectively for the three and nine months ended October 3, 2021, and was recorded in bank and other financial charges.
The movement in the al owance for expected credit losses in respect of trade receivables was as fol ows:
					Three months ended	Nine months ended
					October 3,	September 27,	October 3,		September 27,
					2021		2020	2021		2020
Al owance for expected credit losses,
beginning of period								$	(18,495) $		(21,123) $	(18,994) $		(7,184)
Reversal of impairment (Impairment) of trade
accounts receivable									1,280		(504)	1,619	(14,969)
Write-off of trade accounts receivable									5	2,838	165	3,364
Al owance for expected credit losses, end of
period								$	(17,210) $		(18,789) $	(17,210) $		(18,789)
Impairment of trade accounts receivableThe reversal of impairment of trade accounts receivable for the three and nine months ended October 3, 2021 was due to a slight decrease in expected credit loss rates. The impairment of trade accounts receivable for the three and nine months ended September 27, 2020 was mainly related to an increase in expected credit loss rates attributable to the heightened credit risk caused by the COVID-19 pandemic.
5. INVENTORIES:
	October 3,		January 3,
		2021		2021
Raw materials and spare parts inventories	$	115,399 $		124,243
Work in progress		44,414		42,590
Finished goods		565,608		561,159
	$	725,421 $		727,992
	QUARTERLY REPORT - Q3 2021 39

							NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. LONG-TERM DEBT:
		Principal amount
	Effective
	interest		Maturity	October 3,	January 3,
	rate(1)		date	2021		2021
Revolving long-term bank credit facility, interest at variable U.S.
			June
LIBOR-based interest rate plus a spread ranging from 1% to	n/a				$	— $	—
			2026
3%(2)
Term loan, interest at variable U.S. LIBOR-based interest rate			June
	2.5%					300,000		300,000
plus a spread ranging from 1% to 3%, payable monthly(3)			2026
Term loan, interest at variable U.S. LIBOR-based interest rate			April
	n/a					—	400,000
plus a spread ranging from 1.7% to 3%, payable monthly(3)			2022
Notes payable, interest at fixed rate of 2.70%, payable semi-			August
	2.7%					100,000		100,000
annual y(4)			2023
Notes payable, interest at variable U.S. LIBOR-based interest			August
	2.7%					50,000		50,000
rate plus a spread of 1.53%, payable quarterly(4)			2023
Notes payable, interest at fixed rate of 2.91%, payable semi-			August
	2.9%					100,000		100,000
annual y(4)			2026
Notes payable, interest at variable U.S. LIBOR-based interest			August
	2.9%					50,000		50,000
rate plus a spread of 1.57%, payable quarterly(4)			2026
					$	600,000 $		1,000,000
(1) Represents the annualized effective interest rate for the nine months ended October 3, 2021, including the cash impact of
interest rate swaps, where applicable.
(2) The Company’s committed unsecured revolving long-term bank credit facility of $1 bil ion provides for an annual extension
which is subject to the approval of the lenders. The spread added to the U.S. LIBOR-based variable interest rate is a function of the total net debt to EBITDA ratio (as defined in the credit facility agreement and its amendments). In addition, an amount of $47.0 mil ion (January 3, 2021 - $7.2 mil ion) has been committed against this facility to cover various letters of credit.
(3) The unsecured term loans are non-revolving and can be prepaid in whole or in part at any time with no penalties. The spread
added to the U.S. LIBOR-based variable interest rate is a function of the total net debt to EBITDA ratio (as defined in the term loan agreements and its amendments).
(4) The unsecured notes issued for a total aggregate principal amount of $300 mil ion to accredited investors in the U.S. private
placement market can be prepaid in whole or in part at any time subject to the payment of a prepayment penalty as provided for in the Note Purchase Agreement.
On April 20, 2021, the Company ful y repaid its $400 mil ion unsecured two-year term loan which was due on April 6, 2022.
In June 2021, the Company amended its unsecured revolving long-term bank credit facility of $1 bil ion and its unsecured term loan of $300 mil ion to extend the maturity dates from April 2024 to June 2026.
The Company was in compliance with al financial covenants at October 3, 2021 and expects to maintain compliance with its covenants over the next twelve months, based on its current expectations and forecasts.
						QUARTERLY REPORT - Q3 2021 40

							NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7. RESTRUCTURING AND ACQUISITION-RELATED COSTS:
	Three months ended	Nine months ended
	October 3,		September 27,	October 3,			September 27,
	2021			2020	2021			2020
Employee termination and benefit costs	$		40 $	967 $	251 $			8,961
Exit, relocation and other costs		509			3,310	3,195			11,152
Net loss on disposal, write-downs, and accelerated
depreciation of property, plant and equipment,
right-of-use assets and computer software related
to exit activities		265			470	448			23,784
Acquisition-related transaction costs		150			—	150			—
	$	964 $			4,747 $	4,044 $			43,897
Restructuring and acquisition-related costs for the nine months ended October 3, 2021 mainly related to the completion of previously initiated restructuring activities.
Restructuring and acquisition-related costs for the nine months ended September 27, 2020 related to the fol owing: $22.1 mil ion for the closure of a yarn-spinning plant in the U.S., including accelerated depreciation of right-of-use assets and equipment; $9.4 mil ion for the closure of textile manufacturing and sewing operations in Mexico; $5.9 mil ion for the exit of ship-to-the-piece activities, including computer software write-downs and warehouse consolidation costs; $2.3 mil ion for sel ing, general and administrative workforce reductions; and $4.2 mil ion in other costs, including costs incurred to complete restructuring activities that were initiated in fiscal 2019.
8. OTHER INFORMATION:
(a) Depreciation and amortization:
	Three months ended	Nine months ended
	October 3,		September 27,	October 3,			September 27,
	2021			2020	2021			2020
Depreciation of property, plant and equipment	$	23,137 $			26,660 $	69,091 $			82,112
Depreciation of right-of-use assets		3,442			3,558	10,594			10,890
Adjustment for the variation of depreciation included
in inventories at the beginning and end of the
period		3,276			(1,565)	12,393			(922)
Amortization of intangible assets, excluding
computer software		3,132			3,306	9,687			10,994
Amortization of computer software		1,272			1,479	3,988			4,555
Depreciation and amortization included in net
earnings	$	34,259 $			33,438 $	105,753 $			107,629
Included in property, plant and equipment as at October 3, 2021 is $55.4 mil ion (January 3, 2021 - $16.2 mil ion) of buildings and equipment not yet available for use in operations. Included in intangible assets as at October 3, 2021 is $2.0 mil ion (January 3, 2021 - $1.9 mil ion) of software not yet available for use in operations. Depreciation and amortization on these assets commence when the assets are available for use.
		QUARTERLY REPORT - Q3 2021 41

							NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. OTHER INFORMATION (continued):
(b) Financial expenses, net:
	Three months ended	Nine months ended
	October 3,		September 27,	October 3,			September 27,
	2021			2020	2021			2020
Interest expense on financial liabilities recorded at
amortized cost(1)	$	3,274 $			7,475 $	13,031 $			23,159
Bank and other financial charges(2)		1,689			3,384	6,992			10,916
Interest accretion on discounted lease obligations		633			777	2,053			2,519
Interest accretion on discounted provisions			35	59	105			184
Foreign exchange (gain) loss		(315)			(253)	485			(1,386)
	$	5,316 $			11,442 $	22,666 $			35,392
(1) Net of capitalized borrowing costs of $0.4 mil ion (2020 - $0.4 mil ion) and $1.3 mil ion (2020 - $1.2 mil ion), respectively, for the three and nine months ended October 3, 2021.(2) For the nine months ended September 27, 2020, includes upfront costs of $3.9 mil ion for the June 2020 amendments of the loans and note agreements.
(c) Related party transaction:
The Company incurred expenses for airplane usage of $0.3 mil ion (2020 - $0.1 mil ion) and $1.1 mil ion (2020 - $0.6 mil ion) respectively, for the three and nine months ended October 3, 2021, with a company control ed by the President and Chief Executive Officer of the Company. The payments made are in accordance with the terms of the agreement established and agreed to by the related parties. As at October 3, 2021, the amount in accounts payable and accrued liabilities related to the airplane usage was $0.4 mil ion (January 3, 2021 - $0.1 mil ion).
On June 23, 2021, the agreement was amended with an effective date of January 1, 2021 to incorporate a minimum usage fee per year, which is calculated as the average usage in the two preceding fiscal years, excluding the years 2020 and 2021, multiplied by the hourly fee. As at October 3, 2021, the Company has a commitment of $0.3 mil ion under this amended agreement, which relates to minimum usage fees for the fourth quarter of fiscal 2021.
		QUARTERLY REPORT - Q3 2021 42

						NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. OTHER INFORMATION (continued):
(d) Lease obligations:
The Company’s leases are primarily for manufacturing, sales, distribution, and administrative facilities.
The fol owing table presents lease obligations recorded in the statement of financial position:
	October 3,		January 3,
		2021		2021
Current	$	14,679 $		15,884
Non-current		61,093		66,580
	$	75,772 $		82,464
The fol owing table presents the future minimum lease payments under non-cancel able leases (including short term leases) as at October 3, 2021:
			October 3,
				2021
Less than one year			$	24,822
One to five years				38,528
More than five years				26,977
			$	90,327
For the three and nine months ended October 3, 2021 the total cash outflow for recognized lease obligations (including interest) was $4.1 mil ion and $14.5 mil ion (2020 - $4.7 mil ion and $13.7 mil ion), respectively, of which $3.5 mil ion and $12.5 mil ion (2020 - $3.9 mil ion and $11.2 mil ion), respectively, was included as part of cash outflows used in financing activities.
(e) Cost of sales:
Included in cost of sales for the three and nine months ended October 3, 2021 are the fol owing items:
•					A reduction of cost of sales related to pandemic government assistance for users of U.S. cotton of $18.3 mil ion, for the nine months ended October 3, 2021.
•					Net insurance gains of $29.9 mil ion and $48.9 mil ion, for the three and nine months ended October 3, 2021, respectively, related to the two hurricanes which occurred in Central America in November 2020. The net insurance gains reflected costs of $11.0 mil ion and $50.6 mil ion, for the three and nine months ended October 3, 2021, respectively, (mainly attributable to equipment repairs, salary and benefits continuation for idle employees, and other costs and charges), which were more than offset by related accrued insurance recoveries of $40.9 mil ion and $99.5 mil ion for the three and nine months ended October 3, 2021, respectively. The insurance gains primarily relate to accrued insurance recoveries at replacement cost value for damaged equipment in excess of the write-off of the net book value of property plant and equipment.
					Since November 2020, the Company has recognized $210.5 mil ion of accrued insurance recoveries, of which $200.0 mil ion has been received as an advance ($50.0 mil ion in December 2020, $50.0 mil ion in March 2021, $50.0 mil ion in June 2021 and $50.0 mil ion in September 2021). As at October 3, 2021, $10.5 mil ion of insurance recoveries receivable are recorded in prepaid expenses, deposits and other current assets in the consolidated statement of financial position.
					The Company recognizes insurance recoveries for items that it has an unconditional contractual right to receive. The Company expects to recognize additional insurance recoveries as the insurance claim process progresses.
•					For the nine months ended October 3, 2021, charges of $1.2 mil ion related to the Company’s strategic initiatives to significantly reduce its product line stock-keeping unit ("SKU") counts.
	QUARTERLY REPORT - Q3 2021 43

		NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. OTHER INFORMATION (continued):
(e) Cost of sales (continued):
Included in cost of sales for the three and nine months ended September 27, 2020 are the fol owing items:
•	$15.0 mil ion and $108.4 mil ion respectively, for the three and nine months ended September 27, 2020, of manufacturing costs charged directly to cost of sales as a result of low production levels due to the temporary suspension of production at most of our manufacturing facilities starting in mid-March 2020 resulting from the COVID-19 pandemic. These manufacturing costs consisted mainly of salary and benefits continuation for suspended employees as a result of suspended production, severance for terminated employees, and unabsorbed salary, benefits, and overhead costs, including depreciation.
•	$11.3 mil ion mark-to-market loss for the nine months ended September 27, 2020 ($3.8 mil ion gain for the three months ended September 27, 2020), for excess commodity contracts with merchants that no longer met the own-use exemption based on a reduction of physical cotton consumption in line with reduced production requirements for the remainder of the year.
•	$9.4 mil ion transfer for the nine months ended September 27, 2020 from accumulated other comprehensive income to cost of sales for certain commodity forward, option, and swap contracts that no longer met the criteria for hedge accounting as the commodity purchases which the hedging instruments were respectively hedging were no longer expected to occur due to reduced production requirements.
•	Write-downs of inventory to net realizable value of nil and $29.2 mil ion, respectively, for the three and nine months ended September 27, 2020 related to the Company’s strategic initiative to significantly reduce its imprintables product line SKU count by exiting al ship to-the-piece activities and discontinuing overlapping and less productive styles and SKUs between brands, which the Company began implementing in the fourth quarter of fiscal 2019. The write-downs related to changes in estimates as wel as the impact of additional SKU reductions. In addition, $7.0 mil ion and $39.2 mil ion, respectively, was recorded for the three and nine months ended September 27, 2020 due to the decline in the net realizable value of certain retail end-of-line products due to the market environment and for retail product-line inventory management.
(f) Intangible assets and goodwill:
As a result of the adverse impact of the COVID-19 pandemic on the global economic environment and on the Company's market capitalization, the Company performed an impairment review of the Hosiery cash generating unit ("CGU") as at March 29, 2020, which resulted in an impairment charge of $94.0 mil ion in the first quarter of fiscal 2020, relating to goodwil and intangible assets (both definite and indefinite life) acquired in previous business acquisitions. The non-cash write-down of goodwil and intangible assets had no impact on the Company’s liquidity, cash flows from operating activities, or its compliance with debt covenants. The primary cause for the impairment charge was the deterioration in the global economic environment and the resulting decline in the Company’s share price, market capitalization, and forecasted earnings.
(g) Sales reserves:
During the third quarter of fiscal 2021, the Company recorded a reversal of $11.0 mil ion of sales discount accruals, which resulted in an increase in net sales and earnings for the quarter. The reversal relates to a change in estimate for sales discount accruals that were recorded in the first half of 2021.
			QUARTERLY REPORT - Q3 2021 44

						NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. FAIR VALUE MEASUREMENT:
Financial instruments – carrying amounts and fair values:The carrying amounts and fair values of financial assets and liabilities included in the unaudited condensed interim consolidated statements of financial position are as fol ows:
	October 3,		January 3,
		2021		2021
Financial assetsAmortized cost:
Cash and cash equivalents	$	389,332 $		505,264
Trade accounts receivable		374,746		196,480
Financial assets included in prepaid expenses, deposits and other current
					assets		36,820	88,781
Long-term non-trade receivables included in other non-current assets		977	1,435
Derivative financial assets included in prepaid expenses, deposits and other
current assets		55,949		4,947
Financial liabilitiesAmortized cost:
Accounts payable and accrued liabilities(1)		462,135		326,069
Long-term debt - bearing interest at variable rates		400,000		800,000
Long-term debt - bearing interest at fixed rates(2)		200,000		200,000
Derivative financial liabilities included in accounts payable and accrued liabilities		7,230	17,653
(1) Accounts payable and accrued liabilities include balances payable of $59.2 mil ion (January 3, 2021 - $27.6 mil ion) under supply-chain financing arrangements (reverse factoring) with a financial institution, whereby receivables due from the Company to certain suppliers can be col ected by the suppliers from a financial institution before their original due date. These balances are classified as accounts payable and accrued liabilities and the related payments as cash flows from operating activities, given the principal business purpose of the arrangement is to provide funding to the supplier and not the Company, the arrangement does not significantly extend the payment terms beyond the normal terms agreed with other suppliers, and no additional deferral or special guarantees to secure the payments are included in the arrangement.(2) The fair value of the long-term debt bearing interest at fixed rates was $214.2 mil ion as at October 3, 2021 (January 3, 2021 - $221.3 mil ion).
	QUARTERLY REPORT - Q3 2021 45

	NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. FAIR VALUE MEASUREMENT (continued):
Short-term financial assets and liabilitiesThe Company has determined that the fair value of its short-term financial assets and liabilities approximates their respective carrying amounts as at the reporting dates due to the short-term maturities of these instruments, as they bear variable interest-rates, or because the terms and conditions are comparable to current market terms and conditions for similar items.
Non-current assets and long-term debt bearing interest at variable ratesThe fair values of the long-term non-trade receivables included in other non-current assets and the Company’s long-term debt bearing interest at variable rates also approximate their respective carrying amounts because the interest rates applied to measure their carrying amounts approximate current market interest rates.
Long-term debt bearing interest at fixed ratesThe fair value of the long-term debt bearing interest at fixed rates is determined using the discounted future cash flows method and at discount rates based on yield to maturities for similar issuances. The fair value of the long-term debt bearing interest at fixed rates was measured using Level 2 inputs in the fair value hierarchy. In determining the fair value of the long-term debt bearing interest at fixed rates, the Company takes into account its own credit risk and the credit risk of the counterparties.
DerivativesDerivative financial instruments (most of which are designated as effective hedging instruments) consist of foreign exchange and commodity forward, option, and swap contracts, as wel as floating-to-fixed interest rate swaps to fix the variable interest rates on a designated portion of borrowings under the term loan and unsecured notes. The fair value of the forward contracts is measured using a general y accepted valuation technique which is the discounted value of the difference between the contract’s value at maturity based on the rate set out in the contract and the contract’s value at maturity based on the rate that the counterparty would use if it were to renegotiate the same contract terms at the measurement date under current conditions. The fair value of the option contracts is measured using option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs, including volatility estimates and option adjusted credit spreads. The fair value of the interest rate swaps is determined based on market data, by measuring the difference between the fixed contracted rate and the forward curve for the applicable floating interest rates.
The Company also has a total return swap (“TRS”) outstanding that is intended to reduce the variability of net earnings associated with deferred share units, which are settled in cash. The TRS is not designated as a hedging instrument and, therefore, the fair value adjustment at the end of each reporting period is recognized in sel ing, general and administrative expenses. The fair value of the TRS is measured by reference to the market price of the Company’s common shares, at each reporting date. The TRS has a one-year term, may be extended annual y, and the contract al ows for early termination at the option of the Company. As at October 3, 2021, the notional amount of TRS outstanding was 287,125 shares.
Derivative financial instruments were measured using Level 2 inputs in the fair value hierarchy. In determining the fair value of derivative financial instruments the Company takes into account its own credit risk and the credit risk of the counterparties.
		QUARTERLY REPORT - Q3 2021 46

								NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
10. OTHER COMPREHENSIVE INCOME (LOSS) (“OCI”):
	Three months ended	Nine months ended
	October 3,		September 27,	October 3,			September 27,
	2021			2020	2021				2020
Net gain (loss) on derivatives designated as cash flow hedges:
Foreign currency risk	$	3,062 $			(316) $	1,961 $				5,142
Commodity price risk		37,867			7,955	49,616				(15,659)
Interest rate risk		1,120			396	4,549				(13,514)
Income taxes							(31)	4	(20)		(51)
Amounts reclassified from OCI to inventory, related to
commodity price risk		884			298	(6,141)				6,861
Amounts reclassified from OCI to net earnings,
related to foreign currency risk, interest rate risk,
and commodity risk, and included in:Net sales
		522			308	4,281				(470)
Cost of sales			—	—	—	8,483
Sel ing, general and administrative expenses		(432)			76	(1,449)				518
Financial expenses, net		(923)			(939)	743				(2,924)
Income taxes			9	5	(37)				31
Other comprehensive income (loss)	$	42,078 $			7,787 $	53,503 $				(11,583)
The change in the time value element of option and swap contracts designated as cash flow hedges to reduce the exposure in movements of commodity prices was not significant for the three and nine months ended October 3, 2021 and for the three and nine months ended September 27, 2020. The change in the forward element of derivatives designated as cash flow hedges to reduce foreign currency risk was not significant for the three and nine months ended October 3, 2021 and for the three and nine months ended September 27, 2020. No ineffectiveness has been recognized in net earnings for the three and nine months ended October 3, 2021 and for the three and nine months ended September 27, 2020.
As at October 3, 2021, accumulated other comprehensive income of $44.5 mil ion consisted of net deferred losses on interest rate swap contracts of $6.2 mil ion, net deferred gains on commodity forward, option, and swap contracts of $47.7 mil ion, and net deferred gains on forward foreign exchange contracts of $3.0 mil ion. Approximately $43.5 mil ion of net gains presented in accumulated other comprehensive income (loss) are expected to be reclassified to inventory or net earnings within the next twelve months.
During fiscal 2020, the Company determined that it no longer met the criteria for hedge accounting for certain commodity forward, option, and swap contracts and certain forward foreign exchange contracts (col ectively the "hedging instruments") as the commodity purchases and foreign currency sales which the hedging instruments were respectively hedging, were no longer expected to occur due to economic conditions resulting from the COVID-19 pandemic. Changes in the fair value of such commodity forward, option, and swap contracts and forward foreign exchange contracts resulted in a net loss of $9.0 mil ion, which were transferred out of accumulated other comprehensive income and recognized immediately in net earnings during the nine months ended September 27, 2020.
		QUARTERLY REPORT - Q3 2021 47

								NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
11. EARNINGS (LOSS) PER SHARE:
Reconciliation between basic and diluted earnings (loss) per share is as fol ows:
	Three months ended	Nine months ended
	October 3,		September 27,	October 3,			September 27,
	2021			2020	2021				2020
Net earnings (loss) - basic and diluted	$ 188,304 $			56,355 $ 433,287 $		(292,634)
Basic earnings (loss) per share:
Basic weighted average number of common
							shares outstanding		197,334		198,257	198,072	198,360
Basic earnings (loss) per share	$	0.95 $			0.28 $	2.19 $				(1.48)
Diluted earnings (loss) per share:
Basic weighted average number of common
							shares outstanding		197,334		198,257	198,072	198,360
Plus dilutive impact of stock options, Treasury
							RSUs and common shares held in trust		725		47	469	—
Diluted weighted average number of common
shares outstanding		198,059			198,304	198,541				198,360
Diluted earnings (loss) per share	$	0.95 $			0.28 $	2.18 $				(1.48)
Excluded from the above calculation for the three months ended October 3, 2021 are nil stock options (2020 - 2,219,128) and nil Treasury RSUs (2020 - 17,500) which were deemed to be anti-dilutive. Excluded from the above calculation for the nine months ended October 3, 2021 are 850,000 stock options (2020 - 2,219,128) and 5,469 Treasury RSUs (2020 - 49,240) which were deemed to be anti-dilutive.
		QUARTERLY REPORT - Q3 2021 48

							NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12. SUPPLEMENTAL CASH FLOW DISCLOSURE:
(a) Adjustments to reconcile net earnings to cash flows from (used in) operating activities:
	Three months ended	Nine months ended
	October 3,		September 27,	October 3,			September 27,
	2021			2020	2021			2020
Depreciation and amortization (note 8(a))	$	34,259 $			33,438 $ 105,753 $		107,629
Restructuring charges related to property, plant and
equipment, right-of-use assets, and computer
software (note 7)		265			470	448			23,784
Impairment of goodwil and intangible assets (note 8(f))			—	—	—	93,989
(Gain) loss on disposal of property, plant and
equipment and computer software and lease
modifications		(28,008)			(647)	(48,324)			1,532
Share-based compensation(1)		12,708			1,695	29,184			(904)
Deferred income taxes		2,224			(680)	5,793			(4,046)
Unrealized net loss (gain) on foreign exchange and
financial derivatives		1,478			(7,289)	(3,698)			10,321
Timing differences between settlement of financial
derivatives and transfer of deferred gains and losses
in accumulated OCI to inventory and net earnings		2,851			(135)	(4,997)			5,754
Other non-current assets		460			405	1,286			(338)
Other non-current liabilities		1,406			2,655	343			1,693
	$	27,643 $			29,912 $	85,788 $			239,414
(1) During the nine months ended September 27, 2020, the Company revised its estimate for the achievement of performance factors relating to Non-Treasury RSUs to be settled in common shares purchased on the open market, resulting in a reduction of share-based compensation expense of $9 mil ion for the nine months ended September 27, 2020.
(b) Variations in non-cash transactions:
	Three months ended	Nine months ended
	October 3,		September 27,	October 3,			September 27,
	2021			2020	2021			2020
Additions to property, plant and equipment and
intangible assets included in accounts payable and
accrued liabilities	$	(1,048) $			(1,238) $	3,471 $			(12,372)
Proceeds on disposal of property, plant and equipment
and computer software included in other current
assets			—	(191)	—	(426)
Additions to right-of-use assets included in lease
obligations		6,056			760	5,892			13,377
Non-cash ascribed value credited to share capital from
shares issued or distributed pursuant to vesting of
restricted share units and exercise of stock options			—	2,108	2,617			2,495
Deferred compensation credited to contributed surplus			—		—	(2,197)			—
Non-cash ascribed value credited to contributed
surplus for dividends attributed to restricted share
units		325			—	640			336
		QUARTERLY REPORT - Q3 2021 49

								NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
13. CONTINGENT LIABILITIES:
Claims and litigation
The Company is a party to claims and litigation arising in the normal course of operations. The Company does not expect the resolution of these matters to have a material adverse effect on the financial position or results of operations of the Company.
14. DISAGGREGATION OF REVENUE:
Net sales by major product group were as fol ows:
	Three months ended	Nine months ended
	October 3,			September 27,	October 3,				September 27,
			2021		2020	2021				2020
Activewear								$	655,831 $			456,328 $	1,737,553 $		960,534
Hosiery and underwear									145,750			145,986	400,766		330,587
								$	801,581 $			602,314 $	2,138,319 $	1,291,121
Net sales were derived from customers located in the fol owing geographic areas:
	Three months ended	Nine months ended
	October 3,			September 27,	October 3,				September 27,
			2021		2020	2021				2020
United States	$	685,904 $				517,107 $	1,833,979 $			1,092,193
Canada		36,113				25,399	83,856				50,283
International		79,564				59,808	220,484				148,645
	$	801,581 $				602,314 $	2,138,319 $			1,291,121
		QUARTERLY REPORT - Q3 2021 50