EX-99.2 3 exhibit992q22023fs.htm EX-99.2 Document


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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

GILDAN ACTIVEWEAR INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of U.S. dollars) - unaudited
July 2,
2023		January 1,
2023
Current assets:
Cash and cash equivalents$68,608 $150,417 
Trade accounts receivable (note 4)525,208 248,785 
Income taxes receivable2,100 — 
Inventories (note 5)1,226,702 1,225,940 
Prepaid expenses, deposits and other current assets97,287 101,810 
Total current assets1,919,905 1,726,952 
Non-current assets:
Property, plant and equipment1,163,911 1,115,169 
Right-of-use assets75,682 77,958 
Intangible assets225,656 229,951 
Goodwill271,677 271,677 
Deferred income taxes6,051 16,000 
Other non-current assets8,950 2,507 
Total non-current assets1,751,927 1,713,262 
Total assets$3,671,832 $3,440,214 
Current liabilities:
Accounts payable and accrued liabilities$419,349 $471,208 
Income taxes payable— 6,637 
Current portion of lease obligations (note 8(d))
14,445 13,828 
Current portion of employee benefit obligations12,364 — 
Current portion of long-term debt (note 6)150,000 150,000 
Total current liabilities596,158 641,673 
Non-current liabilities:
Long-term debt (note 6)995,000 780,000 
Lease obligations (note 8(d))
79,109 80,162 
Other non-current liabilities47,809 56,217 
Total non-current liabilities1,121,918 916,379 
Total liabilities1,718,076 1,558,052 
Equity:
Share capital218,968 202,329 
Contributed surplus67,797 79,489 
Retained earnings1,650,299 1,590,499 
Accumulated other comprehensive income (note 10)16,692 9,845 
Total equity attributable to shareholders of the Company1,953,756 1,882,162 
Total liabilities and equity$3,671,832 $3,440,214 
See accompanying notes to unaudited condensed interim consolidated financial statements.
QUARTERLY REPORT - Q2 2023 35


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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
(in thousands of U.S. dollars, except per share data) - unaudited
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Net sales (note 14)$840,438 $895,581 $1,543,301 $1,670,452 
Cost of sales623,842 630,596 1,139,042 1,165,034 
Gross profit216,596 264,985 404,259 505,418 
Selling, general and administrative expenses(1)
78,064 89,431 159,909 170,440 
Gain on sale and leaseback (note 8(e))— — (25,010)— 
Net insurance gains (note 8(f))(74,172)— (74,172)— 
Restructuring and acquisition-related costs (recovery) (note 7)30,009 1,594 32,844 (1,200)
Operating income182,695 173,960 310,688 336,178 
Financial expenses, net (note 8(b))
20,731 7,350 37,683 14,364 
Earnings before income taxes 161,964 166,610 273,005 321,814 
Income tax expense6,676 8,369 20,100 17,210 
Net earnings155,288 158,241 252,905 304,604 
Other comprehensive income (loss), net of related income taxes (note 10):
Cash flow hedges1,537 (19,406)6,847 3,780 
Comprehensive income$156,825 $138,835 $259,752 $308,384 
Earnings per share (note 11):
Basic$0.87 $0.85 $1.42 $1.63 
Diluted$0.87 $0.85 $1.41 $1.62 
(1) The Company recasted comparative figures to conform to the current period's presentation by grouping Impairment (reversal of impairment) of trade accounts receivable in Selling, general and administrative expenses.

See accompanying notes to unaudited condensed interim consolidated financial statements.

QUARTERLY REPORT - Q2 2023 36


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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

GILDAN ACTIVEWEAR INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Six months ended July 2, 2023 and July 3, 2022
(in thousands or thousands of U.S. dollars) - unaudited
Share capitalContributed
surplus		Accumulated
other
comprehensive
income		Retained
earnings		Total
equity
NumberAmount
Balance, January 1, 2023179,709 $202,329 $79,489 $9,845 $1,590,499 $1,882,162 
Share-based compensation— — 16,018 — — 16,018 
Shares issued under employee share purchase plan
27 806 — — — 806 
Shares issued pursuant to exercise of stock options
218 6,250 (846)— — 5,404 
Shares issued or distributed pursuant to vesting of restricted share units
648 14,429 (29,807)— — (15,378)
Shares repurchased for cancellation(3,553)(4,296)— — (105,993)(110,289)
Share repurchases for settlement of non-Treasury RSUs
(648)(550)— — (19,005)(19,555)
Deferred compensation to be settled in non-Treasury RSUs— — 2,075 — — 2,075 
Dividends declared— — 868 — (68,107)(67,239)
Transactions with shareholders of the Company recognized directly in equity
(3,308)16,639 (11,692)— (193,105)(188,158)
Cash flow hedges (note 10)— — — 6,847 — 6,847 
Net earnings— — — — 252,905 252,905 
Comprehensive income— — — 6,847 252,905 259,752 
Balance, July 2, 2023176,401 $218,968 $67,797 $16,692 $1,650,299 $1,953,756 
Balance, January 2, 2022192,267 $191,732 $58,128 $64,809 $1,604,736 $1,919,405 
Share-based compensation— — 15,651 — — 15,651 
Shares issued under employee share purchase plan
21 761 — — — 761 
Shares issued pursuant to exercise of stock options
43 1,343 (327)— — 1,016 
Shares issued or distributed pursuant to vesting of restricted share units
150 4,255 (8,319)— — (4,064)
Shares repurchased for cancellation
(8,697)(8,803)— — (302,927)(311,730)
Share repurchases for settlement of non-Treasury RSUs(148)(116)— — (5,593)(5,709)
Deferred compensation to be settled in non-Treasury RSUs— — 2,110 — — 2,110 
Dividends declared— — 742 — (63,373)(62,631)
Transactions with shareholders of the Company recognized directly in equity
(8,631)(2,560)9,857 — (371,893)(364,596)
Cash flow hedges (note 10)— — — 3,780 — 3,780 
Net earnings— — — — 304,604 304,604 
Comprehensive income— — — 3,780 304,604 308,384 
Balance, July 3, 2022183,636 $189,172 $67,985 $68,589 $1,537,447 $1,863,193 
See accompanying notes to unaudited condensed interim consolidated financial statements.
QUARTERLY REPORT - Q2 2023 37


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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars) - unaudited
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Cash flows from (used in) operating activities:
Net earnings$155,288 $158,241 $252,905 $304,604 
Adjustments for:
Depreciation and amortization (note 8(a))31,603 32,288 59,539 65,744 
Timing differences between settlement of financial derivatives and transfer of deferred gains or losses in accumulated OCI to inventory and net earnings4,232 36,394 10,049 37,673 
(Gain) Loss on disposal of property, plant and equipment, including insurance recoveries(88)(3,849)(25,121)(6,214)
Share-based compensation8,062 8,301 16,092 15,721 
Deferred income taxes2,545 — 9,939 4,000 
Other (note 12(a))14,595 2,683 4,006 (2,624)
Changes in non-cash working capital balances (note 12(c))(34,412)(24,320)(325,001)(260,631)
Cash flows from (used in) operating activities181,825 209,738 2,408 158,273 
Cash flows from (used in) investing activities:
Purchase of property, plant and equipment(54,105)(54,364)(127,062)(86,445)
Purchase of intangible assets(1,915)(1,199)(2,814)(3,108)
Proceeds from sale and leaseback and other disposals of property, plant and equipment252 5,301 51,273 5,299 
Cash flows from (used in) investing activities(55,768)(50,262)(78,603)(84,254)
Cash flows from (used in) financing activities:
Increase (decrease) in amounts drawn under long-term bank credit facility15,000 (30,000)215,000 215,000 
Payment of lease obligations(4,122)(4,489)(17,117)(9,121)
Dividends paid(67,239)(62,631)(67,239)(62,631)
Proceeds from the issuance of shares1,013 393 6,136 1,707 
Repurchase and cancellation of shares(75,704)(109,522)(107,722)(314,175)
Share repurchases for settlement of non-Treasury RSUs— — (19,555)(5,709)
Withholding taxes paid pursuant to the settlement of non-Treasury RSUs
(138)— (15,378)(4,064)
Cash flows from (used in) financing activities(131,190)(206,249)(5,875)(178,993)
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies
(96)(1,136)261 (606)
(Decrease) Increase in cash and cash equivalents during the period(5,229)(47,909)(81,809)(105,580)
Cash and cash equivalents, beginning of period73,837 121,575 150,417 179,246 
Cash and cash equivalents, end of period$68,608 $73,666 $68,608 $73,666 
Cash paid during the period (included in cash flows from (used in) operating activities):
Interest$15,138 $4,543 $29,397 $10,653 
Income taxes, net of refunds11,785 14,029 17,880 15,606 
Supplemental disclosure of cash flow information (note 12).
See accompanying notes to unaudited condensed interim consolidated financial statements.
QUARTERLY REPORT - Q2 2023 38


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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the period ended July 2, 2023
(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 six months ended July 2, 2023 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 2022 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 2, 2023 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 August 2, 2023.

(b) Seasonality of the business:
The Company’s net sales are subject to seasonal variations. Net sales have historically been higher during the second and third quarters.

(c) Operating segments:
The Company manages its business on the basis of one reportable operating segment.


QUARTERLY REPORT - Q2 2023 39


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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:

In June 2023, the Company adopted the following new or amended accounting standards:
IAS 12 Amendment International Tax Reform - Pillar Two Model Rules
In May 2023, the International Accounting Standards Board (IASB) issued the IAS 12 Amendment International Tax Reform - Pillar Two Model Rules on mandatory relief for accounting for deferred taxes from the global minimum taxation. The amendments provide a temporary exception from the requirement to recognise and disclose deferred taxes arising from enacted or substantively enacted tax law that implements the Pillar Two model rules published by the OECD, including tax law that implements qualified domestic minimum top-up taxes described in those rules. The amendments also introduce targeted disclosure requirements in the notes for affected entities to enable users of financial statements to understand the extent to which an entity will be affected by the minimum tax, particularly before the legislation comes into force. The amendments to IAS 12 are effective for annual periods beginning on or after January 1, 2023. The Company is currently evaluating the impact of the amendment on its annual consolidated financial statements.

On January 2, 2023, the Company adopted the following new or amended accounting standards:
Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting Policy Information
In February 2021, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements. The amendments help entities provide accounting policy disclosures that are more useful to primary users of financial statements by:

–Replacing the requirement to disclose “significant” accounting policies under IAS 1 with a requirement to disclose “material” accounting policies. Under this, an accounting policy would be material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that primary users of general purpose financial statements make on the basis of those financial statements.
–Providing guidance in IFRS Practice Statement 2 to explain and demonstrate the application of the four-step materiality process to accounting policy disclosures.

The amendments shall be applied prospectively. The amendments to IAS 1 are effective for annual periods beginning on or after January 1, 2023. Earlier application is permitted. Once an entity applies the amendments to IAS 1, it is also permitted to apply the amendments to IFRS Practice Statement 2. The Company will update accounting policy information disclosures in the annual consolidated financial statements for the year ended December 31, 2023.

Amendments to IAS 8, Definition of Accounting Estimates
In February 2021, the IASB amended IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to introduce a new definition of “accounting estimates” to replace the definition of “change in accounting estimates” and also include clarifications intended to help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction is important because changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively. The amendments are effective for annual periods beginning on or after January 1, 2023. Earlier application is permitted. The amendment of IAS 8 had no impact on the Company’s consolidated financial statements.

Amendments to IAS 12, Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
On May 7, 2021, the IASB amended IAS 12 Income Taxes, to narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. The amendments are effective for annual periods beginning on or after January 1, 2023. The amendment of IAS 12 did not have a material impact on the Company’s consolidated financial statements. The changes will be reflected in the Income taxes note disclosure to the annual consolidated financial statements for the year ended December 31, 2023.

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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET APPLIED:
Amendments to IAS 1, Presentation of Financial Statements
On 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 will 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 2020 amendments and the 2022 amendments (collectively “the Amendments”) are effective for annual periods beginning on or after January 1, 2024. Early adoption is permitted. The Company is currently evaluating the impact of the amendment on its consolidated financial statements.

4. TRADE ACCOUNTS RECEIVABLE:
July 2,
2023		January 1,
2023
Trade accounts receivable$536,378 $264,179 
Allowance for expected credit losses(11,170)(15,394)
$525,208 $248,785 

As at July 2, 2023, trade accounts receivables being serviced under a receivables purchase agreement amounted to $213.3 million (January 1, 2023 - $193.2 million). The receivables purchase agreement, which allows for the sale of a maximum of $300 million of accounts receivables at any one time, expires on June 18, 2024, subject to annual extensions. The Company retains servicing responsibilities, including collection, 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 $3.8 million (2022 - $0.9 million) and $7.9 million (2022 - $1.3 million), respectively, for the three and six months ended July 2, 2023, and was recorded in bank and other financial charges.

The movement in the allowance for expected credit losses in respect of trade receivables was as follows:
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Allowance for expected credit losses, beginning of period$(12,731)$(14,315)$(15,394)$(13,704)
Reversal of impairment (Impairment) of trade accounts receivable1,554 (1,051)3,823 (1,547)
Write-off (Recoveries) of trade accounts receivable7 49 401 (66)
Allowance for expected credit losses, end of period$(11,170)$(15,317)$(11,170)$(15,317)


QUARTERLY REPORT - Q2 2023 41


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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5. INVENTORIES:
July 2,
2023		January 1,
2023
Raw materials and spare parts inventories$199,246 $251,700 
Work in progress60,801 77,726 
Finished goods966,655 896,514 
$1,226,702 $1,225,940 

6. LONG-TERM DEBT:
Effective interest rate(1)
Principal amountMaturity date
July 2,
2023		January 1,
2023
Non-current portion of long-term debt
Revolving long-term bank credit facility, interest at variable U.S. interest rate(2)(3)
6.2%$545,000 $330,000 March 2027
Term loan, interest at variable U.S. interest rate, payable monthly(2)(4)
4.6%300,000 300,000 June 2026
Notes payable, interest at fixed rate of 2.91%, payable semi-annually(5)
2.9%100,000 100,000 August 2026
Notes payable, interest at Adjusted LIBOR plus a spread of 1.57%, payable quarterly(5)(6)
2.9%50,000 50,000 August 2026
$995,000 $780,000 
Current portion of long-term debt
Notes payable, interest at fixed rate of 2.70%, payable semi-annually(5)
2.7%100,000 100,000 August 2023
Notes payable, interest at Adjusted LIBOR plus a spread of 1.53%, payable quarterly(5)(6)
2.7%50,000 50,000 August 2023
$150,000 $150,000 
Long-term debt$1,145,000 $930,000 
(1)Represents the annualized effective interest rate for the six months ended July 2, 2023, including the cash impact of interest rate swaps, where applicable.
(2)Secured Overnight Financing Rate (SOFR) advances at adjusted Term SOFR (includes a 0% to 0.25% reference rate adjustment) plus a spread ranging from 1% to 3%.
(3)The Company’s committed unsecured revolving long-term bank credit facility of $1 billion provides for an annual extension which is subject to the approval of the lenders. The spread added to the adjusted Term SOFR 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 $30.8 million (January 1, 2023 - $43.9 million) has been committed against this facility to cover various letters of credit.
(4)The unsecured term loan is non-revolving and can be prepaid in whole or in part at any time with no penalties. The spread added to the adjusted Term SOFR is a function of the total net debt to EBITDA ratio (as defined in the term loan agreements and its amendments).
(5)The unsecured notes issued for a total aggregate principal amount of $300 million 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 related thereto.
(6)Adjusted LIBOR rate is determined on the basis of floating rate notes that bear interest at a floating rate plus a spread of 1.53%.

On May 26, 2023, the Company amended its $300 million term loan to include an additional $300 million delayed draw term loan ("DDTL") with a one year maturity from the effective date. All other terms of the agreement remained unchanged. A portion of the DDTL is expected to be used to repay the current portion of notes payables due in August 2023. As at the end of the second quarter, the Company has not drawn on the DDTL.

QUARTERLY REPORT - Q2 2023 42


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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. LONG-TERM DEBT (continued):

On March 25, 2022, the Company amended and extended its unsecured revolving long-term bank credit facility of $1 billion to March 2027. As part of the amendment, LIBOR references were replaced with Term Secured Overnight Financing Rate (‘‘Term SOFR’’) and the revolving facility includes a sustainability-linked loan ("SLL") structure, whereby its applicable margins are adjusted upon achievement of certain sustainability targets, which commenced in 2022.

On March 25, 2022, the Company amended its $300 million term loan to replace LIBOR references by Term SOFR references.

On June 30, 2022, the Company amended its notes purchase agreement to include LIBOR fallback provisions to replace LIBOR with adjusted term SOFR, adjusted daily simple SOFR or any relevant alternate rate selected by the note holders and the Company upon a benchmark transition event or early opt-in election.

The Company was in compliance with all financial covenants at July 2, 2023 and expects to maintain compliance with its covenants over the next twelve months, based on its current expectations and forecasts.

7. RESTRUCTURING AND ACQUISITION-RELATED COSTS (RECOVERY):
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Employee termination and benefit costs$15,324 $— $15,831 $584 
Exit, relocation and other costs7,192 409 9,903 803 
Net (gain) loss on disposal, write-downs, and accelerated depreciation of property, plant and equipment, right-of-use assets and computer software related to exit activities7,493 1,143 7,110 (2,734)
Acquisition-related transaction costs— 42 — 147 
$30,009 $1,594 $32,844 $(1,200)

Restructuring and acquisition-related costs for the six months ended July 2, 2023 related to the following: $28.5 million primarily for the consolidation and closure of manufacturing facilities in Central America, $2.9 million related to the December 2022 closure of a yarn-spinning plant in the U.S., and the exit cost from terminating a lease on a previously closed yarn facility, and $1.4 million mainly related to the completion of previously initiated restructuring activities. Restructuring and acquisition-related recovery for the six months ended July 3, 2022 mainly related to a gain of $3.4 million on the sale of a former manufacturing facility in Mexico, partly offset by $1.1 million in accelerated depreciation of right-of-use assets and $0.6 million in employee termination and benefit costs related to the closure of a distribution centre in the U.S.



QUARTERLY REPORT - Q2 2023 43


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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

8. OTHER INFORMATION:
(a) Depreciation and amortization:
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Depreciation of property, plant and equipment$25,021 $25,843 $49,626 $51,345 
Depreciation of right-of-use assets3,415 4,212 6,674 8,160 
Adjustment for the variation of depreciation included in inventories at the beginning and end of the period
(246)(2,593)(3,648)(3,431)
Amortization of intangible assets, excluding computer software
2,037 3,443 4,138 6,887 
Amortization of computer software1,376 1,383 2,749 2,783 
Depreciation and amortization included in net earnings$31,603 $32,288 $59,539 $65,744 

Included in property, plant and equipment as at July 2, 2023 is $194.5 million (January 1, 2023 - $172.8 million) of buildings and equipment not yet available for use in operations. Included in intangible assets as at July 2, 2023 is $2.8 million (January 1, 2023 - $4.4 million) of software not yet available for use in operations. Depreciation and amortization on these assets commence when the assets are available for use.

As at July 2, 2023, the Company has approximately $165.5 million in commitments to purchase property and equipment, mainly related to manufacturing capacity expansion projects.

(b) Financial expenses, net:
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Interest expense on financial liabilities recorded at amortized cost(1)
$14,671 $4,969 $26,077 $8,744 
Bank and other financial charges4,985 2,147 10,261 3,934 
Interest accretion on discounted lease obligations
885 769 1,588 1,557 
Interest accretion on discounted provisions53 51 105 102 
Foreign exchange (gain) loss137 (586)(348)27 
$20,731 $7,350 $37,683 $14,364 
(1) Net of capitalized borrowing costs of $1.0 million (2022 - $0.4 million) and $2.0 million (2022 - $0.7 million) respectively, for the three and six months ended July 2, 2023.

(c) Related party transaction:
The Company incurred expenses for aircraft usage of $0.3 million (2022 - $0.6 million) and $0.5 million (2022 - $1.5 million) respectively, for the three and six months ended July 2, 2023, with a company controlled 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 July 2, 2023, the amount in accounts payable and accrued liabilities related to the airplane usage was $0.3 million (January 1, 2023 - $0.1 million).

As at July 2, 2023, the Company has a commitment of $1.0 million under this agreement, which relates to minimum usage fees for the remainder of fiscal 2023.

QUARTERLY REPORT - Q2 2023 44


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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 following table presents lease obligations recorded in the statement of financial position:
July 2,
2023		January 1,
2023
Current$14,445 $13,828 
Non-current79,109 80,162 
$93,554 $93,990 

The following table presents the future minimum lease payments under non-cancellable leases (including short-term leases) as at July 2, 2023:
July 2,
2023
Less than one year$19,101 
One to five years57,449 
More than five years34,738 
$111,288 

For the three and six months ended July 2, 2023, the total cash outflow for recognized lease obligations (including interest) was $5.0 million and $18.7 million (2022 - $5.3 million and $10.7 million), of which $4.1 million and $17.1 million (2022 - $4.5 million and $9.1 million), was included as part of cash outflows used in financing activities. The increase in cash outflow is largely due to the termination of a lease related to a previously closed yarn spinning facility.

(e) Sale and leaseback
During the six months ended July 2, 2023, the Company entered into an agreement to sell and leaseback one of its distribution centres located in the U.S. The proceeds of disposition of $51.0 million, which represent the fair value of the distribution centre, were recognized in the Consolidated Statement of Cash Flows as proceeds from sale and leaseback and other disposals of property, plant and equipment within investing activities. The Company recognized a right-of-use asset of $3.9 million and a lease obligation of $15.5 million. In addition, a pre-tax gain on sale of $25.0 million ($15.5 million after tax) was recognized in the condensed interim consolidated statements of earnings and comprehensive income in gain on sale and leaseback.

(f) Net insurance gains
During the second quarter, the Company finalized an agreement with the insurer to close its insurance claims related to the two hurricanes which occurred in Central America in November 2020, and received a final insurance claims payment of $74.0 million, relating to the business interruption portion of its claims. This payment resulted in the recognition of a corresponding gain in the Company’s consolidated statement of earnings and comprehensive income in the second quarter of 2023.

QUARTERLY REPORT - Q2 2023 45


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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 follows:
July 2,
2023		January 1,
2023
Financial assets
Amortized cost:
Cash and cash equivalents$68,608 $150,417 
Trade accounts receivable525,208 248,785 
Financial assets included in prepaid expenses, deposits and other current assets
54,763 48,274 
Long-term non-trade receivables included in other non-current assets7,517 118 
Fair value through other comprehensive income:
Derivative financial assets included in prepaid expenses, deposits and other current assets
17,954 23,765 
Financial liabilities
Amortized cost:
Accounts payable and accrued liabilities(1)
411,698 462,496 
Long-term debt - bearing interest at variable rates945,000 730,000 
Long-term debt - bearing interest at fixed rates(2)
200,000 200,000 
Fair value through other comprehensive income:
Derivative financial liabilities included in accounts payable and accrued liabilities
7,651 8,712 
(1) Accounts payable and accrued liabilities include $7.3 million (January 1, 2023 - $17.9 million) under supply-chain financing arrangements (reverse factoring) with a financial institution, whereby receivables due from the Company to certain suppliers can be collected 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. Accounts payable and accrued liabilities also include balances payable of $53.9 million (January 1, 2023 - $35.7 million) resulting mainly from a one-week timing difference between the collection of sold receivables and the weekly remittance to the bank counterparty under the receivables purchase agreement that is disclosed in note 4 to these condensed interim consolidated financial statements.
(2) The fair value of the long-term debt bearing interest at fixed rates was $196.1 million as at July 2, 2023 (January 1, 2023 - $197.1 million).


QUARTERLY REPORT - Q2 2023 46


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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. FAIR VALUE MEASUREMENT (continued):

Short-term financial assets and liabilities
The 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 rates
The 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 rates
The 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.

Derivatives
Derivative financial instruments are designated as effective hedging instruments and consist of foreign exchange and commodity forward, option, and swap contracts, as well 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 generally 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 selling, 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 annually, and the contract allows for early termination at the option of the Company. As at July 2, 2023, the notional amount of TRS outstanding was 366,914 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 - Q2 2023 47


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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

10. OTHER COMPREHENSIVE INCOME (LOSS) (“OCI”):
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Net (loss) gain on derivatives designated as cash flow hedges:
Foreign currency risk$(831)$7,127 $(3,009)$9,243 
Commodity price risk3,706 9,668 8,931 54,626 
Interest rate risk2,004 1,571 (759)12,405 
Income taxes8 (71)30 (92)
Amounts reclassified from OCI to inventory, related to commodity price risk
(4,579)(32,581)(1,731)(65,170)
Amounts reclassified from OCI to net earnings, related to foreign currency risk, commodity price risk, and interest rate risk, and included in:
Net sales653 (3,087)1,193 (4,826)
Cost of sales(33)(6)(88)(6)
Selling, general and administrative expenses
325 (55)1,095 (41)
Financial expenses, net296 (2,022)1,219 (2,430)
Income taxes(12)50 (34)71 
Other comprehensive income (loss) $1,537 $(19,406)$6,847 $3,780 

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 six months ended July 2, 2023. 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 six months ended July 2, 2023. No ineffectiveness has been recognized in net earnings for the three and six months ended July 2, 2023.

As at July 2, 2023, accumulated other comprehensive income of $16.7 million consisted of net deferred gains on commodity forward, option, and swap contracts of $3.1 million, net deferred gains on interest rate swap contracts of $15.3 million, and net deferred losses on forward foreign exchange contracts of $1.7 million. Approximately $9.3 million of net gains presented in accumulated other comprehensive income are expected to be reclassified to inventory or net earnings within the next twelve months.


QUARTERLY REPORT - Q2 2023 48


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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

11. EARNINGS PER SHARE:
Reconciliation between basic and diluted earnings per share is as follows:
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Net earnings - basic and diluted$155,288 $158,241 $252,905 $304,604 
Basic earnings per share:
Basic weighted average number of common shares outstanding
177,624 185,506 178,584 187,425 
Basic earnings per share$0.87 $0.85 $1.42 $1.63 
Diluted earnings per share:
Basic weighted average number of common shares outstanding
177,624 185,506 178,584 187,425 
Plus dilutive impact of stock options, Treasury RSUs and common shares held in trust
278 363 289 627 
Diluted weighted average number of common shares outstanding
177,902 185,869 178,873 188,052 
Diluted earnings per share$0.87 $0.85 $1.41 $1.62 

Excluded from the above calculation for the three months ended July 2, 2023 are 1,132,737 stock options (2022 - 1,132,737) and nil Treasury RSUs (2022 - 25,614) which were deemed to be anti-dilutive. Excluded from the above calculation for the six months ended July 2, 2023 are 1,132,737 stock options (2022 - nil) and nil treasury RSUs (2022 - 25,614) which were deemed to be anti-dilutive.

12. SUPPLEMENTAL CASH FLOW DISCLOSURE:
(a) Adjustments to reconcile net earnings to cash flows from (used in) operating activities - other items:
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Unrealized net loss (gain) on foreign exchange and financial derivatives$(451)$(582)$(551)$(847)
Non-cash restructuring costs (recoveries) related to property, plant and equipment, right-of-use assets, and computer software (note 7)
7,493 1,143 7,110 (2,734)
Other non-current assets198 744 (6,443)1,030 
Other non-current liabilities7,355 1,378 3,890 (73)
$14,595 $2,683 $4,006 $(2,624)
QUARTERLY REPORT - Q2 2023 49


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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

12. SUPPLEMENTAL CASH FLOW DISCLOSURE (continued):
(b) Variations in non-cash transactions:
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Dividends payable$(33,566)$(31,451)$— $— 
Shares repurchased for cancellation included in accounts payable and accrued liabilities
2,567 971 2,567 (2,445)
Net additions to property, plant and equipment and intangible assets included in accounts payable and accrued liabilities(703)4,723 (7,874)10,911 
Proceeds on disposal of property, plant and equipment and computer software included in other current assets(313)(53)(313)(55)
Additions to right-of-use assets included in lease obligations138 6,142 4,323 7,430 
Non-cash ascribed value credited to share capital from shares issued or distributed pursuant to vesting of restricted share units and exercise of stock options96 — 15,275 4,582 
Deferred compensation credited to contributed surplus— — (2,075)(2,110)
Non-cash ascribed value credited to contributed surplus for dividends attributed to restricted share units868 742 868 742 

(c) Changes in non-cash working capital balances:
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Trade accounts receivable$(125,323)$(2,806)$(274,630)$(133,154)
Income taxes(8,904)(5,706)(8,633)(2,441)
Inventories88,313 (78,919)2,886 (193,235)
Prepaid expenses, deposits and other current assets2,889 3,495 (901)9,425 
Accounts payable and accrued liabilities8,613 59,616 (43,723)58,774 
$(34,412)$(24,320)$(325,001)$(260,631)

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.

QUARTERLY REPORT - Q2 2023 50


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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

14. DISAGGREGATION OF REVENUE:
Net sales by major product group were as follows:
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
Activewear$691,758 $757,813 $1,279,558 $1,425,073 
Hosiery and underwear148,680 137,768 263,743 245,379 
$840,438 $895,581 $1,543,301 $1,670,452 

Net sales were derived from customers located in the following geographic areas:
Three months endedSix months ended
July 2,
2023		July 3,
2022		July 2,
2023		July 3,
2022
United States$745,907 $796,074 $1,370,963 $1,477,894 
Canada28,110 31,444 53,781 61,638 
International66,421 68,063 118,557 130,920 
$840,438 $895,581 $1,543,301 $1,670,452 

QUARTERLY REPORT - Q2 2023 51