This management's discussion and analysis of financial condition and results of
operations, or MD&A, contains forward-looking statements that involve risks and
uncertainties. Please see "Forward-Looking Statements" in this Quarterly Report
on Form 10-Q for a discussion of the uncertainties, risks and assumptions
associated with these statements. This discussion should be read in conjunction
with our historical financial statements and related notes thereto and the other
disclosures contained elsewhere in this Quarterly Report on Form 10-Q. The
unaudited condensed interim consolidated financial statements and notes included
herein should be read in conjunction with our audited consolidated financial
statements and notes for the year ended December 28, 2019, which were included
in our Annual Report on Form 10-K filed with the SEC. The results of operations
for the periods reflected herein are not necessarily indicative of results that
may be expected for future periods, and our actual results may differ materially
from those discussed in the forward-looking statements as a result of various
factors, including but not limited to those included elsewhere in this Quarterly
Report on Form 10-Q and those included in the "Risk Factors" section and
elsewhere in our Annual Report on Form 10-K for the year ended December 28, 2019
and in our Quarterly Report on Form 10-Q for the quarter ended March 28, 2020.
In particular, statements with respect to trends associated with our business,
our future financial performance and the potential effects of the global
COVID-19 pandemic included in this Quarterly Report on Form 10-Q specifically
appearing under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" include forward-looking statements. The unaudited
condensed consolidated interim financial statements for the quarter and six
months ended June 29, 2019 have been revised to correct prior period errors as
discussed in Note, "Basis of Presentation" and Note, "Revisions of Previously
Issued Condensed Consolidated Interim Financial Statements" to our unaudited
condensed consolidated interim financial statements included in this Quarterly
Report on Form 10-Q. Accordingly, this MD&A reflects the impact of those
revisions.
Overview
Hanesbrands Inc. (collectively with its subsidiaries, "we," "us," "our," or the
"Company") is a socially responsible leading marketer of everyday basic
innerwear and activewear apparel in the Americas, Europe, Australia and
Asia/Pacific under some of the world's strongest apparel brands, including
Hanes, Champion, Bonds, DIM, Maidenform, Bali, Playtex, Lovable, Bras N Things,
Nur Die/Nur Der, Alternative, L'eggs, JMS/Just My Size, Wonderbra, Berlei and
Gear for Sports. We design, manufacture, source and sell a broad range of basic
apparel such as T-shirts, bras, panties, shapewear, underwear, socks, hosiery
and activewear, produced in our low-cost global supply chain. Our brands hold
either the number one or number two market position by units sold in many of the
product categories and geographies in which we compete.
Our operations are managed and reported in three operating segments, each of
which is a reportable segment for financial reporting purposes: Innerwear,
Activewear and International. These segments are organized principally by
product category and geographic location. Each segment has its own management
team that is responsible for the operations of the segment's businesses, but the
segments share a common supply chain and media and marketing platforms. Other
consists of our U.S.-based outlet stores and U.S. hosiery business.
Impact of COVID-19 on Our Business
On March 11, 2020, the World Health Organization declared the novel strain of
coronavirus (COVID-19) a global pandemic and recommended containment and
mitigation measures worldwide. The pandemic and these containment and mitigation
measures have led to adverse impacts on the U.S. and global economies. The
COVID-19 pandemic has impacted our business operations and results of operations
for the second quarter and six months of 2020 as described in more detail under
"Condensed Consolidated Results of Operations - Second Quarter Ended June 27,
2020 Compared with Second Quarter Ended June 29, 2019" and "Condensed
Consolidated Results of Operations - Six Months Ended June 27, 2020 Compared
with Six Months Ended June 29, 2019" below, due to decreased customer traffic
and temporary retail store closures worldwide. The evolving COVID-19 pandemic
could continue to have an adverse impact on our results of operations and
liquidity; the operations of our suppliers, vendors and customers; and on our
employees as a result of quarantines, facility closures, and travel and other
restrictions. While the ultimate global and economic impact of the COVID-19
pandemic remains highly uncertain, we expect that our business operations and
results of operations, including our net sales, earnings and cash flows, will be
materially impacted for at least the balance of 2020, as a result of:
•       decreased customer traffic in our retail stores and retail stores in
        which our products are sold;


•       changes in consumer confidence and consumer spending habits, including
        spending for the merchandise that we sell and negative trends in consumer
        purchasing patterns due to changes in consumers' disposable income,
        credit availability and debt levels;


•       decreased discretionary consumer-directed channel spending independent of
        store closures;



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•       decreased wholesale channel sales and increased likelihood of wholesale
        customer financial distress, including requests for extended payment
        terms or potential payment defaults;


•       disruption to our global supply chain including the manufacturing,
        supply, distribution, transportation and delivery of our products;


•       decreased productivity due to travel bans, work-from-home policies or
        shelter-in-place orders; and


•       a slowdown in the U.S. and global economies, and an uncertain global
        economic outlook or a potential credit crisis.


The extent to which the COVID-19 pandemic impacts our business operations,
financial results, and liquidity will depend on numerous evolving factors that
we may not be able to accurately predict or assess, including the duration and
scope of the pandemic; our response to and ability to respond to and adjust our
business strategies to mitigate the impact of the pandemic; the negative impact
it has on global and regional economies and economic activity, including the
duration and magnitude of its impact on unemployment rates and consumer
discretionary spending; its short- and longer-term impact on the levels of
consumer confidence; the ability of our suppliers, vendors and customers to
successfully address the impacts of the pandemic; actions governments,
businesses and individuals take in response to the pandemic; and how quickly
economies recover after the COVID-19 pandemic subsides.
We expect the negative impact of the COVID-19 pandemic to lead to continued net
sales decreases due to decreased traffic at our retail stores and reduced net
sales and earnings for our wholesale customers, some of which have experienced
or may experience financial distress or declare bankruptcy. Reduced retail sales
or additional customer store closures and customer bankruptcies could reduce or
eliminate our anticipated income and cash flows, which would negatively affect
our results of operations and liquidity. Even if customers do not declare
bankruptcy, some have extended payment terms and more may seek to extend payment
terms or be unable or unwilling to pay us amounts that we are entitled to on a
timely basis or at all, which would adversely affect our earnings and liquidity.
In the quarter ended June 27, 2020, we recorded $11 million of bad debt charges
primarily related to the effects of the COVID-19 pandemic.
In the quarter ended June 27, 2020, we recorded $20 million of charges to
reserve for increased excess and obsolete inventory related primarily to
canceled orders of seasonal inventory and $20 million of charges for the
impairment of intangible assets primarily as a result of the COVID-19 pandemic.
We could be required to record increased excess and obsolete inventory reserves
due to continued decreased net sales or additional noncash impairment charges
related to our intangible assets or goodwill due to reductions in cash flows
that are more than short-term in nature. Additionally, the operations of our
retail stores and our manufacturing facilities may not generate sales sufficient
to offset fixed operating expenses, which could adversely affect our income and
could adversely affect the value of our owned and leased properties, potentially
requiring us to recognize significant noncash impairment charges.
We have been taking steps to mitigate the potential risks to us posed by the
spread and related circumstances and impacts of COVID-19. We are focused on
addressing these recent challenges by preserving our liquidity and managing our
cash flow with preemptive actions designed to enhance our ability to meet our
short-term liquidity needs. Such actions include, but are not limited to,
focusing on channels that continue to generate sales, including mass retail and
online; selling personal protective equipment ("PPE") such as cloth face
coverings and gowns; operating our manufacturing and distribution facilities on
a demand-adjusted basis; reducing our discretionary spending such as certain
media and marketing expenses; focused working capital management; reducing
capital expenditures; suspending our share repurchase program until further
notice; reducing payroll costs, through temporary employee furloughs and pay
cuts; working globally to maximize our participation in all eligible government
or other initiatives available to businesses or employees impacted by the
COVID-19 pandemic; engaging with landlords to negotiate rent deferrals or other
rent concessions; issuing new debt and amending certain existing debt
facilities. These efforts may not be enough to offset anticipated declines in
net sales and earnings and we may not be able to access sufficient additional
working capital to meet our liquidity needs.
Outlook for 2020
We issued first-quarter and full-year 2020 guidance on February 7, 2020, which
excluded any impact from the spread of the COVID-19 pandemic. Due to the
uncertainty and rapidly changing environment relating to the pandemic, on March
25, 2020, we withdrew the guidance for the first quarter and full year. We will
not provide a quarterly and full-year updated outlook until visibility of the
pandemic's effect on global economies improves. However, we have provided that
we expect more than $150 million of PPE sales, to generate positive cash flow
from operating activities and a tax rate of approximately 17.5% in the second
half of 2020.


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Seasonality and Other Factors
Absent the effects of the COVID-19 pandemic, our operating results are typically
subject to some variability due to seasonality and other factors. For instance,
we have historically generated higher sales during the back-to-school and
holiday shopping seasons and during periods of cooler weather, which benefits
certain product categories such as fleece. Sales levels in any period are also
impacted by customer decisions to increase or decrease their inventory levels in
response to anticipated consumer demand. Our customers may cancel orders, change
delivery schedules or change the mix of products ordered with minimal notice to
us. Media, advertising and promotion expenses may vary from period to period
during a fiscal year depending on the timing of our advertising campaigns for
retail selling seasons and product introductions. We expect the duration and
scope of the COVID-19 pandemic to alter these patterns at least through the
remainder of 2020.
Although the majority of our products are replenishment in nature and tend to be
purchased by consumers on a planned, rather than on an impulse, basis, our sales
are impacted by discretionary consumer spending trends. Discretionary spending
is affected by many factors that are outside our control, including, among
others, general business conditions, interest rates, inflation, consumer debt
levels, the availability of consumer credit, currency exchange rates, taxation,
energy prices, unemployment trends and other matters that influence consumer
confidence and spending. Consumers' purchases of discretionary items, including
our products, could decline during periods when disposable income is lower, when
prices increase in response to rising costs, or in periods of actual or
perceived unfavorable economic conditions. In addition, the COVID-19 pandemic
may continue to result in decreased consumer confidence and lower consumer
spending. As a result, consumers may choose to purchase fewer of our products,
to purchase lower-priced products of our competitors in response to higher
prices for our products, or may choose not to purchase our products at prices
that reflect our price increases that become effective from time to time.
Changes in product sales mix can impact our gross profit as the percentage of
our sales attributable to higher margin products, such as intimate apparel and
men's underwear, and lower margin products, such as seasonal and replenishable
activewear, fluctuate from time to time. In addition, sales attributable to
higher and lower margin products within the same product category fluctuate from
time to time. Our customers may change the mix of products ordered with minimal
notice to us, which makes trends in product sales mix difficult to predict.
However, certain changes in product sales mix are seasonal in nature, as sales
of socks, hosiery and fleece products generally have higher sales during the
last two quarters (July to December) of each fiscal year as a result of cooler
weather, back-to-school shopping and holidays, while other changes in product
mix may be attributable to consumers' preferences and discretionary spending.
Overview of the Second Quarter Ended June 27, 2020
The COVID-19 pandemic adversely impacted our business operations and results of
operations for the second quarter of 2020. As the COVID-19 virus continued to
spread around the world in the second quarter of 2020, net sales and profits
across our apparel businesses decreased dramatically. During the second quarter
of 2020, we sold PPE globally to governments, large organizations,
business-to-business customers and consumers including more than 450 million
cloth face coverings and more than 20 million medical gowns for use during the
COVID-19 pandemic to the U.S. government.
Key financial results are as follows:
•       Total net sales in the second quarter of 2020 were $1.7 billion, compared
        with $1.8 billion in the same period of 2019, representing a 1% decrease.


•       Operating profit increased 5% to $242 million in the second quarter of
        2020, compared with $230 million in the same period of 2019. As a
        percentage of sales, operating profit was 13.9% in the second quarter of
        2020 compared to 13.0% in the same period of 2019. Included within
        operating profit were restructuring and other action-related charges of
        $63 million and $13 million for the quarters ended June 27, 2020 and
        June 29, 2019, respectively.


•       Sales of PPE used to help mitigate the spread of the COVID-19 virus were
        $752 million in the second quarter of 2020.


•       In April 2020, given the rapidly changing environment and level of
        uncertainty being created by the COVID-19 pandemic and the associated
        impact on future earnings, we amended our Senior Secured Credit Facility
        prior to any potential covenant violation in order to modify the
        financial covenants and to provide operating flexibility during the
        COVID-19 crisis.


•       In May 2020, we issued $700 million aggregate principal amount of 5.375%
        Senior Notes which mature in May 2025. The net proceeds from the issuance
        of $691 million were used to repay all outstanding borrowings under our
        Revolving Loan Facility, pay related fees and expenses, and for general
        corporate purposes.



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Condensed Consolidated Results of Operations - Second Quarter Ended June 27, 2020 Compared with Second Quarter Ended June 29, 2019

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