interimfinancials.htm

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

GILDAN ACTIVEWEAR INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of U.S. dollars) - unaudited

		October 4,		October 5,
		2015		2014

Current assets:
	Cash and cash equivalents	$	47,097	$	65,163
	Trade accounts receivable		424,407		354,265
	Income taxes receivable		477		1,439
	Inventories (note 5)		826,781		779,407
	Prepaid expenses and deposits		18,152		17,507
	Assets held for sale		4,340		5,839
	Other current assets		17,966		23,784
Total current assets			1,339,220		1,247,404

Non-current assets:
	Property, plant and equipment		1,040,219		873,726
	Intangible assets		335,421		287,353
	Goodwill (note 8(a))		188,777		176,445
	Deferred income taxes		1,750		-
	Other non-current assets		5,990		8,116
Total non-current assets			1,572,157		1,345,640

Total assets		$	2,911,377	$	2,593,044

Current liabilities:
	Accounts payable and accrued liabilities	$	295,060	$	374,671
Total current liabilities			295,060		374,671

Non-current liabilities:
	Long-term debt (note 6)		462,000		157,000
	Deferred income taxes		-		349
	Employee benefit obligations		5,242		19,565
	Provisions		19,838		17,926
Total non-current liabilities			487,080		194,840

Total liabilities			782,140		569,511

Equity:
	Share capital		138,863		124,595
	Contributed surplus		16,718		20,778
	Retained earnings		1,981,231		1,885,892
	Accumulated other comprehensive income		(7,575)		(7,732)
Total equity attributable to shareholders of the Company			2,129,237		2,023,533

Total liabilities and equity		$	2,911,377	$	2,593,044


See accompanying notes to condensed interim consolidated financial statements.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.30

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 ended				Twelve months ended
	October 4,			October 5,		October 4,		October 5,
		2015		2014		2015		2014

Net sales	$	674,508	$	666,001	$	2,415,472	$	2,359,994
Cost of sales		462,553		473,934		1,830,135		1,701,311

Gross profit		211,955		192,067		585,337		658,683

Selling, general and administrative expenses		78,414		72,172		315,168		286,015
Restructuring and acquisition-related costs (note 7)		4,274		533		13,597		3,247

Operating income		129,267		119,362		256,572		369,421

Financial expenses, net (note 8(c))		4,872		1,637		15,376		2,897

Earnings before income taxes		124,395		117,725		241,196		366,524

Income tax expense (recovery)		1,325		(4,952)		3,896		6,972

Net earnings		123,070		122,677		237,300		359,552

Other comprehensive income (loss), net of related
income taxes (note 10):
Cash flow hedges		(7,499)		(4,802)		157		(7,076)
Actuarial loss on employee benefit obligations		-		(3,614)		-		(3,614)
		(7,499)		(8,416)		157		(10,690)

Comprehensive income	$	115,571	$	114,261	$	237,457	$	348,862


Earnings per share (note 11):
Basic(1)	$	0.51	$	0.50	$	0.98	$	1.48
Diluted(1)	$	0.50	$	0.50	$	0.97	$	1.46
(1) All earnings per share and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.

See accompanying notes to condensed interim consolidated financial statements.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.31

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

GILDAN ACTIVEWEAR INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Twelve months ended October 4, 2015 and October 5, 2014

(in thousands or thousands of U.S. dollars) - unaudited

						Accumulated
						other
	Share capital			Contributed		comprehensive		Retained		Total
	Number(1)	Amount		surplus		income (loss)		earnings		equity

Balance, October 5, 2014	244,648	$	124,595	$	20,778	$	(7,732)	$	1,885,892	$	2,023,533

Share-based compensation	-		-		10,875		-		-		10,875
Shares issued under employee share
purchase plan	47		1,408		-		-		-		1,408
Shares issued pursuant to exercise of
stock options	756		10,623		(3,458)		-		-		7,165
Shares issued or distributed pursuant to
vesting of restricted share units	1,013		19,031		(19,031)		-		-		-
Shares repurchased and cancelled	(3,050)		(1,555)		-		-		(78,188)		(79,743)
Share repurchases for future settlement
of non-Treasury RSUs	(560)		(15,239)		7,488		-		-		(7,751)
Dividends declared	-		-		66		-		(63,773)		(63,707)
Transactions with shareholders of the
Company recognized directly in equity	(1,794)		14,268		(4,060)		-		(141,961)		(131,753)

Cash flow hedges (note 10)	-		-		-		157		-		157
Net earnings	-		-		-		-		237,300		237,300
Comprehensive income	-		-		-		157		237,300		237,457

Balance, October 4, 2015	242,854	$	138,863	$	16,718	$	(7,575)	$	1,981,231	$	2,129,237


Balance, September 29, 2013	243,252	$	107,867	$	28,869	$	(656)	$	1,583,346	$	1,719,426

Share-based compensation	-		-		10,099		-		-		10,099
Shares issued under employee share
purchase plan	42		1,117		-		-		-		1,117
Shares issued pursuant to exercise of
stock options	236		4,617		(1,310)		-		-		3,307
Shares issued or distributed pursuant to
vesting of restricted share units	1,718		25,475		(25,475)		-		-		-
Share repurchases for future settlement
of non-Treasury RSUs	(600)		(14,481)		8,383		-		-		(6,098)
Dividends declared	-		-		212		-		(53,392)		(53,180)
Transactions with shareholders of the
Company recognized directly in equity	1,396		16,728		(8,091)		-		(53,392)		(44,755)

Cash flow hedges (note 10)	-		-		-		(7,076)		-		(7,076)
Actuarial loss on employee benefit
obligations	-		-		-		-		(3,614)		(3,614)
Net earnings	-		-		-		-		359,552		359,552
Comprehensive income (loss)	-		-		-		(7,076)		355,938		348,862

Balance, October 5, 2014	244,648	$	124,595	$	20,778	$	(7,732)	$	1,885,892	$	2,023,533
(1) All earnings per share and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.

See accompanying notes to condensed interim consolidated financial statements.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.32

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				Twelve months ended
		October 4,		October 5,		October 4,		October 5,
			2015		2014		2015		2014

Cash flows from (used in) operating activities:
	Net earnings	$	123,070	$	122,677	$	237,300	$	359,552
	Adjustments to reconcile net earnings to cash flows
	from operating activities (note 12(a))		24,638		14,930		122,603		93,629
			147,708		137,607		359,903		453,181
	Changes in non-cash working capital balances:
	Trade accounts receivable		25,270		20,362		(69,113)		(90,549)
	Income taxes		5,981		1,656		922		(628)
	Inventories		(4,634)		(24,231)		(15,170)		(149,231)
	Prepaid expenses and deposits		(377)		1,214		(576)		(1,863)
	Other current assets		5,417		(295)		1,119		(8,144)
	Accounts payable and accrued liabilities		11,113		49,172		(57,270)		61,334
Cash flows from operating activities			190,478		185,485		219,815		264,100

Cash flows from (used in) investing activities:
	Purchase of property, plant and equipment		(40,538)		(70,686)		(284,007)		(286,553)
	Purchase of intangible assets		(1,710)		(2,587)		(6,407)		(6,150)
	Business acquisitions		70		(101,732)		(103,800)		(101,732)
	Proceeds on disposal of assets held for sale and
	property, plant and equipment		1,001		299		3,479		4,894
Cash flows used in investing activities			(41,177)		(174,706)		(390,735)		(389,541)

Cash flows from (used in) financing activities:
	(Decrease) increase in amounts drawn under
	revolving long-term bank credit facility		(131,000)		22,000		305,000		157,000
	Dividends paid		(15,787)		(13,345)		(63,707)		(53,180)
	Proceeds from the issuance of shares		561		1,238		8,439		4,316
	Repurchase and cancellation of shares		-		-		(79,743)		-
	Share repurchases for future settlement of
	non-Treasury RSUs		-		-		(15,239)		(14,481)
Cash flows (used in) from financing activities			(146,226)		9,893		154,750		93,655

Effect of exchange rate changes on cash and cash
equivalents denominated in foreign currencies			(564)		(601)		(1,896)		(419)
Net increase (decrease) in cash and cash equivalents
during the period			2,511		20,071		(18,066)		(32,205)
Cash and cash equivalents, beginning of period			44,586		45,092		65,163		97,368
Cash and cash equivalents, end of period		$	47,097	$	65,163	$	47,097	$	65,163

Cash paid during the period (included in cash flows from operating activities):
	Interest	$	2,719	$	973	$	7,523	$	2,108
	Income taxes, net of refunds		(1,296)		2,185		5,419		10,704


Supplemental disclosure of cash flow information (note 12)

See accompanying notes to condensed interim consolidated financial statements.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.33

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the period ended October 4, 2015

(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") is domiciled in Canada and is incorporated under the Canada Business Corporations Act. Its principal business activity is the manufacture and sale of activewear, socks and underwear. Beginning in fiscal 2015, the Company’s fiscal year will end on the Sunday closest to December 31 of each year. As a result, fiscal 2015 will be a transition year, and will include 15 months of operations, beginning on October 6, 2014 and ending on January 3, 2016.

The address of the Company’s registered office is 600 de Maisonneuve Boulevard West, Suite 3300, Montreal, Quebec. These condensed interim consolidated financial statements are as at and for the three and twelve months ended October 4, 2015 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.

All earnings per share and share data in these condensed interim consolidated financial statements and notes are on a post-split basis, reflecting the effect of the two-for-one stock split of the Company’s outstanding common shares by way of a share dividend that took effect on March 27, 2015.

2. BASIS OF PREPARATION:

(a)	Statement of compliance:

These 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”). The Company applied the same accounting policies in the preparation of these condensed interim consolidated financial statements as those disclosed in note 3 of its most recent annual consolidated financial statements, except as noted below. These condensed interim consolidated financial statements should be read in conjunction with the Company’s 2014 audited annual consolidated financial statements. Certain prior year comparatives have been reclassified to conform to the current period’s presentation.

These condensed interim consolidated financial statements were authorized for issuance by the Board of Directors of the Company on November 11, 2015.

(b)	Seasonality of the business:

The Company’s net sales are subject to seasonal variations within our operating segments. For our Printwear segment, net sales have historically been higher during the second quarter of the calendar year. For our Branded Apparel segment, net sales have historically been higher during the third and fourth quarters of the calendar year.

(c)	Initial application of new or amended accounting standards in the reporting period:

On October 6, 2014, the Company adopted IFRIC 21, Levies. IFRIC 21 provides guidance on accounting for levies in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets. The interpretation defines a levy as an outflow of resources from an entity imposed by a government in accordance with legislation, other than income taxes within the scope of IAS 12, Income Taxes, and confirms that an entity recognizes a liability for a levy only when the triggering event specified in the legislation occurs. The adoption of IFRIC 21 did not have an impact on the Company’s consolidated financial statements.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.34

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

3. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET APPLIED:

Revenues from contracts with customers

In May 2014, the IASB released IFRS 15, Revenue from Contracts with Customers, which establishes principles for reporting and disclosing the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods and services.

IFRS 15 provides a single model in order to depict the transfer of promised goods or services to customers, and supersedes IAS 11, Construction Contracts, IAS 18, Revenue, and a number of revenue-related interpretations (IFRIC 13, Customer Loyalty Programmes, IFRIC 15, Agreements for the Construction of Real Estate, IFRIC 18, Transfers of Assets from Customers, and SIC-31, Revenue - Barter Transactions Involving Advertising Service). IFRS 15 is effective for the Company’s fiscal year beginning on January 1, 2018, with earlier application permitted. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.

Financial Instruments

In July 2014, the IASB issued the complete IFRS 9 (2014), Financial Instruments. IFRS 9 (2014) differs in some regards from IFRS 9 (2013) which the Company early adopted effective March 31, 2014. IFRS 9 (2014) includes updated guidance on the classification and measurement of financial assets. The final standard also amends the impairment model by introducing a new expected credit loss model for calculating impairment, and new general hedge accounting requirements. The mandatory effective date of IFRS 9 (2014) is for annual periods beginning on or after January 1, 2018 and must be applied retrospectively with some exemptions. Early adoption is permitted. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.

4. BUSINESS ACQUISITION:

On March 2, 2015, the Company acquired substantially all of the operating assets of a company operating under the Comfort Colors trade name for cash consideration of $103.3 million. The transaction also resulted in the effective settlement of $8.4 million of trade accounts receivable from Comfort Colors prior to the acquisition. The acquisition was financed by the utilization of the Company’s revolving long-term bank credit facility. Comfort Colors is the leading supplier of garment-dyed undecorated basic T-shirts and sweatshirts for the North American printwear market. The Comfort Colors® brand is highly recognized among consumers purchasing from college bookstores, specialty retail stores, and destination and resort shops. The acquisition of Comfort Colors reinforces Gildan’s strategy to increase its penetration of the growing fashion basics segment of the North American printwear market.

The Company accounted for the acquisition using the acquisition method in accordance with IFRS 3, Business Combinations. The Company has determined the fair value of the assets acquired and liabilities assumed based on management's preliminary best estimate of their fair values and taking into account all relevant information available at that time. The Company has not yet finalized the assessment of the estimated fair value of inventories acquired, which the Company expects to finalize by the end of fiscal 2015. Goodwill is attributable primarily to Comfort Colors’ assembled workforce and expected synergies, which were not recorded separately since they did not meet the recognition criteria for identifiable intangible assets. Goodwill recorded in connection with this acquisition is partially deductible for tax purposes.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.35

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

4. BUSINESS ACQUISITION (continued):

The following table summarizes the provisional amounts recognized for the assets acquired and liabilities assumed at the date of acquisition:


Assets acquired:
	Trade accounts receivable	$	14,595
	Inventories		22,778
	Prepaid expenses and deposits		69
	Property, plant and equipment		1,668
	Intangible assets (i)		62,300
			101,410

Liabilities assumed:
	Accounts payable and accrued liabilities		(2,064)
			(2,064)

Goodwill			12,332
Net assets acquired at fair value			111,678

Cash consideration paid			103,300
Settlement of pre-existing relationship			8,378
		$	111,678
(i) The intangible assets acquired are comprised of customer relationships in the amount of $25.0 million, which are being amortized on a straight line basis over their estimated useful lives, and trademarks in the amount of $37.3 million, which are not being amortized as they are considered to be indefinite life intangible assets.

The consolidated results of the Company for fiscal 2015 include net sales of $42.2 million and net earnings of $11.6 million relating to Comfort Colors’ results of operations since the date of acquisition, adjusted to reflect the elimination of intercompany sales. If the acquisition of Comfort Colors was accounted for on a pro forma basis as if it had occurred at the beginning of the Company’s fiscal year, the Company’s consolidated net sales and net earnings for the twelve months ended October 4, 2015 would have been $2,442.8 million and $242.1 million, respectively. These pro forma figures have been estimated based on the results of Comfort Colors’ operations prior to being purchased by the Company, adjusted to reflect the elimination of intercompany sales, and fair value adjustments which arose on the date of acquisition, as if the acquisition occurred on October 6, 2014, and should not be viewed as indicative of the Company’s future results.

The operating results of Comfort Colors are included in the Printwear segment.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.36

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

5. INVENTORIES:

	October 4,		October 5,
	2015		2014

Raw materials and spare parts inventories	$	116,893	$	98,767
Work in progress		59,433		58,658
Finished goods		650,455		621,982
	$	826,781	$	779,407

6. LONG-TERM DEBT:

The Company has a committed unsecured revolving long-term bank credit facility of $1 billion. The facility provides for an annual extension which is subject to the approval of the lenders, and amounts drawn under the facility bear interest at a variable banker’s acceptance or U.S. LIBOR-based interest rate plus a spread ranging from 1% to 2%, such range being a function of the total debt to EBITDA ratio (as defined in the credit facility agreement). In December 2014, the Company amended its revolving long-term bank credit facility to increase the facility to $1 billion from $800 million, and to extend the maturity date from January 2019 to April 2020. As at October 4, 2015, $462.0 million (October 5, 2014 - $157.0 million) was drawn under the facility, and the effective interest rate for the twelve months ended October 4, 2015 was 1.4%. In addition, an amount of $10.4 million (October 5, 2014 - $7.9 million) has been committed against this facility to cover various letters of credit. The revolving long-term bank credit facility requires the Company to comply with certain covenants including maintenance of financial ratios. The Company was in compliance with all covenants as at October 4, 2015.

7. RESTRUCTURING AND ACQUISITION-RELATED COSTS:

	Three months ended				Twelve months ended
	October 4,		October 5,		October 4,		October 5,
		2015		2014	2015		2014

Employee termination and benefit costs	$	1,302	$	92	$	5,011	$	521
Loss on settlement on wind-up of defined benefit
pension plan		-		-		-		1,898
Exit, relocation and other costs		2,996		444		7,159		410
Gains on disposal of assets held for sale		(262)		(7)		(592)		(345)
Remeasurement of contingent consideration in
connection with a business acquisition		196		-		917		-
Acquisition-related transaction costs		42		4		1,102		763
	$	4,274	$	533	$	13,597	$	3,247

Restructuring and acquisition-related costs for the twelve months ended October 4, 2015 relate primarily to costs incurred in connection with the integration of acquired businesses, including the integration of the more recent Doris and Comfort Colors acquisitions, and the completion of the integration of other businesses acquired in previous years, involving consolidation of customer service, distribution and administrative functions, and screenprinting operations. Restructuring and acquisition-related costs also include transaction costs related to the acquisition of the operating assets of Comfort Colors as well as costs incurred in connection with the consolidation of sewing operations.

Restructuring and acquisition-related costs for the twelve months ended October 5, 2014 relate primarily to a loss incurred on the final settlement on the wind-up of the former Gold Toe defined benefit pension plan, and transaction costs incurred in connection with the acquisition of the operating assets of Doris.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.37

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

8. OTHER INFORMATION:

(a) Goodwill
	October 4,
	2015

Balance, October 5, 2014	$	176,445
Goodwill acquired (note 4)		12,332
Balance, October 4, 2015	$	188,777

(b) Depreciation and amortization:
	Three months ended				Twelve months ended
	October 4,		October 5,		October 4,		October 5,
	2015		2014		2015		2014

Depreciation of property, plant and equipment	$	28,356	$	23,071	$	105,418	$	84,561
Adjustment for the variation of depreciation of property,
plant and equipment included in inventories at the
beginning and end of the period		(3,499)		(3,536)		(9,426)		(6,168)
Depreciation of property, plant and equipment included
in net earnings		24,857		19,535		95,992		78,393
Amortization of intangible assets, excluding software		4,678		4,152		17,846		15,216
Amortization of software		710		567		2,793		2,009
Depreciation and amortization included in net earnings	$	30,245	$	24,254	$	116,631	$	95,618

Property, plant and equipment includes $140.8 million (October 5, 2014 - $166.9 million) of assets not yet utilized in operations. Depreciation on these assets commences when the assets are available for use.


(c) Financial expenses, net:
	Three months ended				Twelve months ended
	October 4,		October 5,		October 4,		October 5,
	2015		2014		2015		2014

Interest expense on financial liabilities
recorded at amortized cost	$	2,262	$	957	$	6,708	$	2,061
Bank and other financial charges		994		801		3,755		3,299
Interest accretion on discounted provisions		82		82		327		323
Foreign exchange loss (gain)		1,534		(203)		4,586		(2,786)
	$	4,872	$	1,637	$	15,376	$	2,897

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.38

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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 condensed interim consolidated statements of financial position are as follows:

	October 4,		October 5,
	2015			2014

Financial assets
Amortized cost:
Cash and cash equivalents	$	47,097	$	65,163
Trade accounts receivable		424,407		354,265
Other current assets		15,364		17,824
Long-term non-trade receivables included in other
non-current assets		2,513		4,008
Derivative financial instruments designated as effective
hedging instruments included in other current assets		1,238		920
Derivative financial instruments included in other
current assets - total return swap		450		-

Financial liabilities
Amortized cost:
Accounts payable and accrued liabilities	$	281,545	$	361,377
Long-term debt - bearing interest at variable rates		462,000		157,000
Derivative financial instruments designated as effective
hedging instruments included in accounts payable
and accrued liabilities		7,541		7,335
Contingent consideration included in accounts payable
and accrued liabilities		5,974		5,959

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

The fair values of the long-term non-trade receivables included in other non-current assets and the Company’s interest-bearing financial liabilities also approximate their respective carrying amounts because the interest rates applied to measure their carrying amounts approximate current market interest rates.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.39

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

9. FAIR VALUE MEASUREMENT (continued):

Contingent consideration

The contingent consideration in connection with a business combination is payable based on the achievement of targets for growth in sales revenues for a three-year period from the date of the acquisition. The fair value measurement of the contingent consideration is determined using unobservable (Level 3) inputs. These inputs include (i) the estimated amount and timing of projected cash flows; (ii) the probability of the achievement of the factors on which the contingency is based; and (iii) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Fair value has been estimated based on the best estimate of the probability of the revenue targets being achieved, as well as using a discount rate which is based on the risk associated with the revenue targets being met. The discount rate applied to the contingent consideration was 13.5%. Significant increases (decreases) in any of the inputs in isolation could result in a significantly lower (higher) fair value measurement. There has been no significant change in any of the inputs used to measure the fair value of the contingent consideration since the date of the acquisition. The contingent consideration is classified as a financial liability and is included in accounts payable and accrued liabilities.

Derivatives

The derivatives consist mainly of foreign exchange and commodity forward and option contracts. 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 at the measurement date under the same 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 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.

The fair values of financial assets, financial liabilities and derivative financial instruments were measured using Level 1 or 2 inputs in the fair value hierarchy, with the exception of the contingent consideration which was measured using Level 3 inputs. In determining the fair value of financial assets and financial liabilities, including derivative financial instruments, the Company takes into account its own credit risk and the credit risk of the counterparties.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.40

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

10. OTHER COMPREHENSIVE INCOME (“OCI”):

	Three months ended				Twelve months ended
	October 4,		October 5,		October 4,		October 5,
		2015		2014	2015		2014

Net gain (loss) on derivatives designated as cash flow
hedges:
Foreign currency risk	$	470	$	(4,407)	$	1,101	$	(9,465)
Commodity price risk		(7,784)		-		(7,133)		-

Income taxes		(5)		44		(11)		95

Amounts reclassified from OCI to property, plant and
equipment, related to foreign currency risk		-		-		-		(991)

Amounts reclassified from OCI to inventory,
related to commodity price risk		501		-		7,903		-

Amounts reclassified from OCI to net earnings,
related to foreign currency risk, and included in:
Net sales		(461)		283		(1,393)		3,272
Selling, general and administrative expenses		139		-		139		113
Financial expenses, net		(367)		(727)		(466)		(67)
Income taxes		8		5		17		(33)
Other comprehensive income (loss)	$	(7,499)	$	(4,802)	$	157	$	(7,076)

The change in the time value element of option contracts designated as cash flow hedges to reduce the exposure in movements of commodity prices was $2.4 million for the three and twelve months ended October 4, 2015.

The change in the forward element of derivatives designated as cash flow and fair value hedges to reduce foreign currency risk was not significant for the three and twelve months ended October 4, 2015.

For the three and twelve months ended October 4, 2015, the derivatives designated as either cash flow hedges or fair value hedges were considered to be fully effective and no ineffectiveness has been recognized in net earnings.

As at October 4, 2015, approximately $6.2 million of net losses presented in accumulated other comprehensive income are expected to be reclassified to net earnings within the next twelve months.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.41

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

11. EARNINGS PER SHARE:

Reconciliation between basic and diluted earnings per share is as follows:

	Three months ended				Twelve months ended
	October 4,		October 5,		October 4,		October 5,
		2015		2014	2015		2014

Net earnings - basic and diluted	$	123,070	$	122,677	$	237,300	$	359,552

Basic earnings per share:
Basic weighted average number of common
shares outstanding	242,257		243,968		242,331		243,530
Basic earnings per share	$	0.51	$	0.50	$	0.98	$	1.48

Diluted earnings per share:
Basic weighted average number of common
shares outstanding	242,257		243,968		242,331		243,530
Plus dilutive impact of stock options, Treasury RSUs
and common shares held in trust		1,806		2,590		1,902		2,828
Diluted weighted average number of common
shares outstanding	244,063		246,558		244,233		246,358
Diluted earnings per share	$	0.50	$	0.50	$	0.97	$	1.46
All earnings per share and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.

Excluded from the above calculation for the three months ended October 4, 2015 are 282,737 stock options (2014 - 346,452) which were deemed to be anti-dilutive. Excluded from the above calculation for the twelve months ended October 4, 2015 are 578,939 stock options (2014 - 346,452) and 61,919 Treasury RSU’s (2014 - nil) which were deemed to be anti-dilutive.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.42

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

12. SUPPLEMENTAL CASH FLOW DISCLOSURE:

(a) Adjustments to reconcile net earnings to cash flows from operating activities:
	Three months ended				Twelve months ended
	October 4,		October 5,		October 4,		October 5,
	2015		2014		2015		2014

Depreciation and amortization (note 8(b))	$	30,245	$	24,254	$	116,631	$	95,618
Restructuring charges related to assets held
for sale (note 7)		(262)		(7)		(592)		(345)
Remeasurement of contingent consideration in
connection with a business acquisition (note 7)		196		-		917		-
Loss (gain) on disposal of property, plant and equipment		114		361		721		(548)
Share-based compensation		3,322		2,913		11,009		10,207
Deferred income taxes		(2,663)		(9,007)		(1,521)		(3,080)
Unrealized net (gain) loss on foreign exchange and
financial derivatives		(75)		(1,001)		713		(1,783)
Timing differences between settlement of financial
derivatives and transfer of deferred loss in
accumulated OCI to net earnings		983		(5,863)		4,393		(5,863)
Other non-current assets		2,221		421		2,126		(125)
Employee benefit obligations		(10,629)		847		(13,706)		(2,053)
Provisions		1,186		2,012		1,912		1,601
	$	24,638	$	14,930	$	122,603	$	93,629

(b)Variations in non-cash transactions:
	Three months ended				Twelve months ended
	October 4,		October 5,		October 4,		October 5,
	2015		2014		2015		2014

Additions to property, plant and equipment included in
accounts payable and accrued liabilities		917		8,200		(11,357)		13,993
Proceeds on disposal of property, plant and equipment
included in other current assets		21		248		(298)		(79)
Amounts payable relating to business acquisitions		-		(6,400)		-		(6,400)
Settlement of pre-existing relationship		-		-		8,378		-
Transfer from accounts payable and accrued liabilities to
contributed surplus in connection with share repurchases
for future settlement of non-Treasury RSUs		-		-		7,488		8,383
Non-cash ascribed value credited to contributed
surplus for dividends attributed to Treasury RSUs		4		37		66		212
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		14,834		16,221		22,489		26,785

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.43

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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. SEGMENT INFORMATION:

The Company manages and reports its business as two operating segments, Printwear and Branded Apparel, each of which is a reportable segment for financial reporting purposes. Each segment has its own management that is accountable and responsible for the segment’s operations, results and financial performance. These segments are principally organized by the major customer markets they serve. The following summary describes the operations of each of the Company’s operating segments:

Printwear: The Printwear segment, headquartered in Christ Church, Barbados, designs, manufactures, sources, markets and distributes undecorated activewear products in large quantities primarily to wholesale distributors in printwear markets in over 30 countries across North America, Europe, Asia-Pacific and Latin America.

Branded Apparel: The Branded Apparel segment, headquartered in Charleston, South Carolina, designs, manufactures, sources, markets and distributes branded family apparel, which includes athletic, casual and dress socks, sheer hosiery, legwear, shapewear, underwear and activewear products, primarily to U.S. and Canadian retailers.

The chief operating decision-maker assesses segment performance based on segment operating income which is defined as operating income before corporate head office expenses, restructuring and acquisition-related costs, and amortization of intangible assets, excluding software. The accounting policies of the segments are the same as those described in note 3 of the Company’s 2014 audited annual consolidated financial statements, and note 2 (c) of these condensed interim consolidated financial statements.

		Three months ended				Twelve months ended
		October 4,		October 5,		October 4,		October 5,
		2015		2014		2015		2014

Segmented net sales:
	Printwear	$	440,467	$	435,775	$	1,509,903	$	1,559,549
	Branded Apparel		234,041		230,226		905,569		800,445
Total net sales		$	674,508	$	666,001	$	2,415,472	$	2,359,994

Segment operating income:
	Printwear	$	124,361	$	118,920	$	300,817	$	389,022
	Branded Apparel		30,203		22,460		60,070		73,236
Total segment operating income		$	154,564	$	141,380	$	360,887	$	462,258

Reconciliation to consolidated earnings before income taxes:
	Total segment operating income	$	154,564	$	141,380	$	360,887	$	462,258
	Amortization of intangible assets,
	excluding software		(4,678)		(4,152)		(17,846)		(15,216)
	Corporate expenses		(16,345)		(17,333)		(72,872)		(74,374)
	Restructuring and acquisition-related costs		(4,274)		(533)		(13,597)		(3,247)
	Financial expenses, net		(4,872)		(1,637)		(15,376)		(2,897)
Earnings before income taxes		$	124,395	$	117,725	$	241,196	$	366,524

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.44