Document

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934


For the month of: July 2020						Commission File Number: 1-14830

GILDAN ACTIVEWEAR INC.

(Translation of Registrant’s name into English)

600 de Maisonneuve Boulevard West

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:


Form 20-F o						Form 40-F þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GILDAN ACTIVEWEAR INC.

Date: July 30, 2020

By:

/s/ Lindsay Matthews

Name:

Lindsay Matthews

Title:

Vice-President, General Counsel and Corporate Secretary


SEC 1815 (04-09)			Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.


Exhibit						Description of Exhibit

99.1						Management's Discussion and Analysis
99.2						Interim Financial Statements
99.3						Certifications of Interim Filings - CEO
99.4						Certifications of Interim Filings - CFO


			Contents
			MD&A
			1.0 Preface			2
			2.0 Caution regarding forward-looking statements			2
			3.0 Our business			4
			4.0 Strategy and objectives			10
			5.0 Operating results			12
			6.0 Financial condition			20
			7.0 Cash flows			22
			8.0 Liquidity and capital resources			24
			9.0 Legal proceedings			29
			10.0 Outlook			29
			11.0 Financial risk management			29
			12.0 Critical accounting estimates and judgments			33
			13.0 Accounting policies and new accounting standards not yet applied			34
			14.0 Internal control over financial reporting			34
			15.0 Risks and uncertainties			34
			16.0 Definition and reconciliation of non-GAAP financial measures			36

			Condensed interim consolidated financial statements			41

			Notes to the condensed interim consolidated financial statements			45


			MANAGEMENT'S DISCUSSION AND ANALYSIS

In this Management’s Discussion and Analysis (MD&A), “Gildan”, the “Company”, or the words “we”, “us”, and “our” refer, depending on the context, either to Gildan Activewear Inc. or to Gildan Activewear Inc. together with its subsidiaries.

This MD&A comments on our operations, financial performance, and financial condition as at and for the three and six months ended June 28, 2020. All amounts in this MD&A are in U.S. dollars, unless otherwise noted. For a complete understanding of our business environment, trends, risks and uncertainties, and the effect of accounting estimates on our results of operations and financial condition, this MD&A should be read in conjunction with Gildan’s unaudited condensed interim consolidated financial statements as at and for the three and six months ended June 28, 2020, and the related notes, and with our MD&A for the year ended December 29, 2019 (2019 Annual MD&A).

In preparing this MD&A, we have taken into account all information available to us up to July 29, 2020, the date of this MD&A. The unaudited condensed interim consolidated financial statements as at and for the three and six months ended June 28, 2020 and this MD&A were reviewed by Gildan’s Audit and Finance Committee and were approved and authorized for issuance by our Board of Directors on July 29, 2020.

The unaudited condensed interim consolidated financial statements as at and for the three and six months ended June 28, 2020 has been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB). All financial information contained in this MD&A is consistent with International Financial Reporting Standards (IFRS), except for certain information discussed in the section entitled “Definition and reconciliation of non-GAAP financial measures” in this MD&A.

Additional information about Gildan, including our 2019 Annual Information Form, is available on our website at www.gildancorp.com, on the SEDAR website at www.sedar.com, and on the EDGAR section of the U.S. Securities and Exchange Commission website (which includes the Annual Report on Form 40-F) at www.sec.gov.

2.0 CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this MD&A constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities legislation and regulations and are subject to important risks, uncertainties, and assumptions. This forward-looking information includes, amongst others, information with respect to our objectives and the strategies to achieve these objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates, and intentions. In particular, information appearing under the headings “Our business”, “Strategy and objectives”, "Operating results", “Liquidity and capital resources - Long-term debt and net indebtedness”, “Outlook”, “Financial risk management”, and “Risk and uncertainties” contain forward looking statements. Forward-looking statements generally can be identified by the use of conditional or forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “project”, “assume”, “anticipate”, “plan”, “foresee”, “believe”, or “continue”, or the negatives of these terms or variations of them or similar terminology. We refer you to the Company’s filings with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission, as well as the risks described under the “Financial risk management”, “Critical accounting estimates and judgments”, and “Risks and uncertainties” sections of this MD&A and of the 2019 Annual MD&A for a discussion of the various factors that may affect the Company’s future results. Material factors and assumptions that were applied in drawing a conclusion or making a forecast or projection are also set out throughout this document.

Forward-looking information is inherently uncertain and the results or events predicted in such forward-looking information may differ materially from actual results or events. Material factors, which could cause actual results or events to differ materially from a conclusion, forecast, or projection in such forward-looking information, include, but are not limited to:

•the magnitude and length of economic disruption as a result of the worldwide coronavirus (COVID-19) pandemic, including the scope and duration of government mandated private sector shutdowns and social distancing measures;

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

•changes in general economic and financial conditions globally or in one or more of the markets we serve, including the severity and duration of the economic slowdown and recessions following the COVID-19 pandemic;

•our ability to implement our growth strategies and plans;

•our ability to successfully integrate acquisitions and realize expected benefits and synergies;

•the intensity of competitive activity and our ability to compete effectively;

•our reliance on a small number of significant customers;

•the fact that our customers do not commit to minimum quantity purchases;

•our ability to anticipate, identify, or react to changes in consumer preferences and trends;

•our ability to manage production and inventory levels effectively in relation to changes in customer demand;

•fluctuations and volatility in the price of raw materials used to manufacture our products, such as cotton, polyester fibres, dyes and other chemicals;

•our reliance on key suppliers and our ability to maintain an uninterrupted supply of raw materials and finished goods;

•the impact of climate, political, social, and economic risks, natural disasters, and pandemics, such as the COVID-19 pandemic, in the countries in which we operate or sell to, or from which we source production;

•disruption to manufacturing and distribution activities due to such factors as operational issues, disruptions in transportation logistic functions, labour disruptions, political or social instability, bad weather, natural disasters, pandemics, such as the COVID-19 pandemic, and other unforeseen adverse events;

•the impacts of the COVID-19 pandemic on our business and financial performance and consequently on our ability to comply with the financial covenants under our debt agreements;

•compliance with applicable trade, competition, taxation, environmental, health and safety, product liability, employment, patent and trademark, corporate and securities, licensing and permits, data privacy, bankruptcy, anti-corruption, and other laws and regulations in the jurisdictions in which we operate;

•the imposition of trade remedies, or changes to duties and tariffs, international trade legislation, bilateral and multilateral trade agreements and trade preference programs that the Company is currently relying on in conducting its manufacturing operations or the application of safeguards thereunder;

•factors or circumstances that could increase our effective income tax rate, including the outcome of any tax audits or changes to applicable tax laws or treaties;

•changes to and failure to comply with consumer product safety laws and regulations;

•changes in our relationship with our employees or changes to domestic and foreign employment laws and regulations;

•negative publicity as a result of actual, alleged, or perceived violations of labour and environmental laws or international labour standards, or unethical labour or other business practices by the Company or one of its third-party contractors;

•changes in third-party licensing arrangements and licensed brands;

•our ability to protect our intellectual property rights;

•operational problems with our information systems as a result of system failures, viruses, security and cyber security breaches, disasters, and disruptions due to system upgrades or the integration of systems;

•an actual or perceived breach of data security;

•our reliance on key management and our ability to attract and/or retain key personnel;

•changes in accounting policies and estimates; and

•exposure to risks arising from financial instruments, including credit risk on trade accounts receivables and other financial instruments, liquidity risk, foreign currency risk, and interest rate risk, as well as risks arising from commodity prices.

These factors may cause the Company’s actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. Forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made may have on the Company’s business. For example, they do not include the effect of business dispositions, acquisitions, other business transactions, asset write-downs, asset impairment losses, or other charges announced or occurring after forward-looking statements are made. The financial impact of such transactions and non-recurring and other special items can be complex and necessarily depends on the facts particular to each of them.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

There can be no assurance that the expectations represented by our forward-looking statements will prove to be correct. The purpose of the forward-looking statements is to provide the reader with a description of management’s expectations regarding the Company’s future financial performance and may not be appropriate for other purposes. Furthermore, unless otherwise stated, the forward-looking statements contained in this report are made as of the date hereof, and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events, or otherwise unless required by applicable legislation or regulation. The forward-looking statements contained in this report are expressly qualified by this cautionary statement.

Update on COVID-19-related impacts and Back to Basics initiatives

The novel COVID-19 coronavirus was recognized as a pandemic by the World Health Organization in March 2020. As the situation unfolded, in order to limit the spread of the virus, various governments and public health organizations around the world imposed emergency containment measures such as restrictions on travel and business operations and advised or required physical and social distancing measures. These restrictions and other factors have caused a severe global economic downturn and recessions. Global debt and equity capital markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. Starting in the second half of March 2020, our business began to be impacted, with a major reduction in sales for both our imprintables and retail channels due to those restrictions, including the limitation of social gatherings, cancellation of various sporting, entertainment, promotional, and cultural events, school closures, significant restrictions on transborder and international travel, as well as various government mandated manufacturing and distribution facility closures and retail store closures throughout North America and internationally. Our net sales for the second quarter of fiscal 2020 continued to be significantly impacted by the continuation and acceleration of shutdown measures globally, particularly during the first two months of the quarter, before reopenings began to occur. Net sales in the second quarter declined 71% compared to the prior year quarter, due to a meaningful downturn in demand, particularly in the Company’s imprintable sales channels. As governments in North America and other regions of the world began easing restrictions in the latter part of the second quarter, we started to see some economic recovery with sell-through trends for our products starting to improve.

From the onset, as the situation of the COVID-19 pandemic unfolded, our first priority has been the health and welfare of our employees, customers, suppliers, and other partners. In this regard, we have taken several actions to safeguard our stakeholders while ensuring the continuity of our business.

Concurrent with global government mandated private sector shutdowns, we began to close our manufacturing facilities starting on March 17, 2020, to ensure the safety of our employees and align our operations and inventory levels with the demand environment. We continued to manage and align our operations and inventory levels with the demand environment and kept the majority of our production facilities idle or operating at low levels of capacity during the second quarter. However, in line with improving demand and the lifting of shut down restrictions, we started to resume production at various operating levels across the majority of our facilities later in the quarter. Our distribution centres, where we have implemented enhanced measures to safeguard the health, safety, and well-being of our employees, continued to be operational, initially at reduced capacity levels and adjusted in line with demand through the quarter. The majority of our office employees continue to working remotely.

In order to preserve cash and pre-emptively ensure that we maintain ample liquidity to manage through the current and anticipated future environment, we are deferring non-critical capital spend and discretionary expenses and have drawn down funds under our long-term bank credit facility. Further, on April 6, 2020, we took additional cautionary measures to enhance liquidity by securing an additional $400 million of long-term debt with members of our existing bank syndicate. At the end of the second quarter, the Company’s overall available liquidity position was approximately $1.2 billion.

Given the severity of the crisis and the uncertain economic outlook, out of an abundance of caution, in March we suspended share repurchases and starting with the first quarter of 2020 we suspended the quarterly cash dividend. We remain committed to returning capital to shareholders through our dividend and share repurchases on a long-term basis and expect to resume the programs when the environment normalizes and we are in compliance with the amended terms of our credit agreements as it relates to dividends and share repurchases, as described in section 8.2 of this MD&A.

At the end of March, various pay reductions were implemented, including a 50% reduction in pay for our Board of Directors, President and CEO, and Executive Vice Presidents, as well as pay reductions ranging from 20% to 35% of

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

our senior staff, while the majority of salaried employees moved to a four-day work week. At the end of June, the Company ended the employee furloughs, with salaried employees returning to a full working week, and pay reductions were lifted for senior staff, and effective July 1, 2020 for the Company' Board of Directors and senior executive team.

Despite improving demand trends during the second quarter and the restart of our production facilities, uncertainty remains with respect to the duration and impact of the virus and the pace at which global economies will recover. Consequently, during the second quarter we took a number of actions to drive market share in this environment, further reduce our cost base and strengthen our level of financial flexibility. We believe these actions will position us well as we continue to manage through the impact of the pandemic. The major COVID-19-related impacts on earnings in the second quarter and the key actions which we have taken guided by our Back to Basics strategy are highlighted below. Overall, as a result of these actions and COVID-19-related impacts, including a significant impact on sales, we reported a significant earnings loss in the second quarter.

COVID-related impacts and Back to Basics initiatives

•With the majority of our production facilities idle or operating at low levels of capacity during the second quarter we expensed approximately $86 million of manufacturing labour and overhead costs as period costs in the quarter. These cash and non-cash costs would have normally been absorbed into inventory if our facilities had been running at normal levels.

•In order to further lower our cost structure, we reduced our overall manufacturing workforce by an additional 6,000 employees, adjusting to the current demand environment. We also reduced our SG&A workforce by approximately 380 employees and announced the closure of a smaller specialty yarn-spinning operation in the U.S. during the quarter. We recorded restructuring charges of $29 million in the quarter primarily related to these cost reduction actions which we currently expect will generate $46 million of cost reduction savings on an annual go forward basis.

•Due to lower projected production requirements for 2020, we unwound excess commodity derivative hedge positions and marked to market excess cotton commitments with merchants resulting in a total charge of $24.6 million reflected in cost of sales.

•We incurred inventory charges of approximately $56 million in total related to imprintables and retail inventory in the quarter, as follows: $14 million was due to the decline in the net realizable value of certain retail end-of-line products due to the current market environment; $26 million was related to our imprintables SKU rationalization initiative; and $16 million was related to retail product-line inventory management as part of our Back to Basics strategy.

•In June, in order to drive market share in the imprintables channel, the Company announced and implemented certain promotional programs in the US providing discounts to distributors based on their June sell-through of our products to screenprinters. We subsequently announced the extension of these promotional incentives through July and August, and consequently, we recorded a sales discount accrual that reduced sales in the quarter by $24.6 million for the expected discounts to be earned by distributors on the future sell-through of their inventory held at the end of the second quarter.

•In June, we negotiated a 12-month covenant amendment to our existing credit agreements providing increased financial flexibility through the first quarter of 2021 as the Company continues to navigate through this pandemic. During the covenant relief period, our leverage covenant will exclude the financial results for the second quarter of 2020 from the ratio calculation. For the purpose of the net leverage ratio covenant, last twelve months (LTM) EBITDA will be based on the last three quarters (excluding the second quarter of 2020) preceding the date at which the ratio is calculated converted to an annualized four quarter number. Further, the net leverage ratio covenant has been increased to various maximum levels ranging from 3.5 to 4.5 for each quarter within the covenant relief period and 3.5 thereafter. Additional information on the covenant amendment can be found in section 8.0 of this MD&A.

While the trajectory of the pandemic remains uncertain, given recent increases in COVID-19 cases in various regions and renewed focus on social distancing measures, we believe we have taken timely and important actions to provide the necessary financial and operating flexibility to allow us to navigate through this environment.

The current and potential impacts of the COVID-19 pandemic on the Company’s liquidity, credit and other risks are described in the “Financial risk management” and “Risk and uncertainties” sections of this MD&A.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

Gildan is a leading manufacturer of everyday basic apparel, including activewear, underwear, socks, hosiery, and legwear products sold in North America, Europe, Asia-Pacific, and Latin America to wholesale distributors, screenprinters or embellishers, as well as to retailers in North America, including mass merchants, department stores, national chains, specialty retailers, craft stores, and pure-play online retailers that sell directly to consumers through their physical stores and/or e-commerce platforms, and to global lifestyle brand companies. Since its formation, the Company has made significant capital investments in developing its own large-scale, low-cost vertically integrated supply chain, encompassing yarn production, textile and sock manufacturing, and sewing operations. Gildan's manufacturing operations are located in Central America, the Caribbean Basin, North America, and Bangladesh.

We believe the skill set that we have developed in designing, constructing, and operating our own manufacturing facilities combined with the significant capital investments made over the years in that respect, which have been above industry average capital intensity levels, are factors that differentiate us from our competition. More than 90% of our sales are derived from products we manufacture ourselves. Owning and operating the vast majority of our manufacturing facilities allows us to exercise tighter control over our production processes, efficiency levels, costs and product quality, as well as to provide reliable service with short production/delivery cycle times. In addition, running our own operations allows us to ensure adherence to high standards for environmental and social responsibility practices throughout our supply chain.

3.2.1 Brands, Products and Customers

The products we manufacture and sell are marketed under our Company-owned brands, including Gildan®, American Apparel®, Comfort Colors®, Gildan® Hammer™, Prim + Preux®, GoldToe®, Anvil® by Gildan®, Alstyle®, Secret®, Silks®, Kushyfoot®, Secret Silky®, Therapy Plus®, Peds® and MediPeds®. Through a sock licensing agreement providing us exclusive distribution rights in the United States and Canada, we also sell socks under the Under Armour® brand. In addition, we manufacture for and supply products to select leading global athletic and lifestyle brands, as well as to certain retail customers who market these products under their own brands.

Our primary product categories include activewear tops and bottoms, hosiery, and underwear, the vast majority of which we manufacture. Some of our brands also extend to other categories such as intimates, sheer hosiery and shapewear, which are sourced through third-party suppliers.

We sell our activewear products primarily in “blank” or undecorated form, without imprints or embellishment. These activewear products are primarily sold to wholesale distributors within the imprintables channel, who then sell the blanks to screenprinters/embellishers who decorate the products with designs and logos, and in turn sell the embellished/imprinted activewear into a highly diversified range of end-use markets. These include educational institutions, athletic dealers, event merchandisers, promotional product distributors, charitable organizations, entertainment promoters, travel and tourism venues, and retailers. The activewear products have diverse applications, such as serving as work or school uniforms or athletic team wear or simply conveying individual, group, and team identity. We also sell activewear products to various retailers, in addition to underwear and socks for men, ladies, and kids, as well as other hosiery products such as pantyhose and leggings. These retailers include mass merchants, department stores, national chains, sports specialty stores, craft stores, food and drug retailers, dollar stores and price clubs, all of which sell to consumers through their brick and mortar outlets. Consumers also buy our products online through e-commerce platforms, including pure-play online retailers and brick and mortar retail customers’ e-commerce platforms. In addition to selling our products to retailers, we manufacture for and sell to select leading global athletic and lifestyle consumer brand companies who distribute these products within the retail channel.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

The following table summarizes our product and brand offerings:


Primary product categories	Product-line details	Brands
Activewear	T-shirts, fleece tops and bottoms, and sport shirts	Gildan®, Gildan Performance®, Gildan Platinum®⁽¹⁾, Gildan® Hammer™, Comfort Colors®⁽²⁾, American Apparel®, Anvil® by Gildan®, Alstyle®⁽²⁾, Prim + Preux®, GoldToe®
Hosiery	athletic, dress, casual and workwear socks, liner socks, socks for therapeutic purposes⁽⁴⁾, sheer panty hose⁽⁵⁾, tights⁽⁵⁾, and leggings⁽⁵⁾	Gildan®, Gildan Platinum®⁽¹⁾_,Under Armour®⁽³⁾, GoldToe®, PowerSox®, GT a GoldToe Brand®, Silver Toe®, Signature Gold by Goldtoe®, Peds®, MediPeds®, Kushyfoot®⁽¹⁾, Therapy Plus®⁽¹⁾, All Pro®, Secret®⁽¹⁾, Silks®⁽¹⁾, Secret Silky®, American Apparel®
Underwear	men's and boys' underwear (tops and bottoms) and ladies panties	Gildan®, Gildan Platinum®⁽¹⁾
Intimates	ladies' shapewear, intimates, and accessories	Secret®⁽¹⁾, Secret Silky®

(1) Gildan Platinum® and Kushyfoot® are registered trademarks in the U.S. Secret®, Silks®, and Therapy Plus® are registered trademarks in Canada.

(2) Comfort Colors® and Alstyle® are registered trademarks in the U.S.

(3) Under license agreement for socks only - with exclusive distribution rights in the U.S. and Canada.

(4) Applicable only to Therapy Plus® and MediPeds®.

(5) Applicable only to Secret®, Silks®, Secret Silky®, and Peds®.

The vast majority of our products are manufactured in facilities that we own and operate. To a lesser extent, we also use third-party contractors to supplement our requirements. Our vertically-integrated manufacturing operations include capital-intensive yarn-spinning, textile and sock manufacturing facilities, as well as labour-intensive sewing facilities. Our manufacturing operations are situated in four main hubs, specifically in the United States, Central America, the Caribbean Basin, and Bangladesh. All of our yarn-spinning operations are located in the United States, while textile, sewing, and sock manufacturing operations are situated in the other geographical hubs mentioned above, the largest of which is in Central America, in Honduras.

In order to support further sales growth, we have expanded our manufacturing capacity in Central America and have plans to significantly expand our manufacturing operations in Bangladesh. In 2019, we purchased land, in close proximity to our existing facility in Bangladesh, which is intended to be used for the development of a large multi-plant manufacturing complex expected to house two large textile facilities and related sewing operations. The manufacturing expansion is expected to service international markets and support other key sales growth drivers. By the end of the first quarter of 2020 we had ramped down production and closed our textile and sewing operations in Mexico. We are currently in the process of relocating the equipment from these facilities to our operations within our global manufacturing network. In light of the current COVID-19 pandemic and the impact it is having on global economic activity, including our own business, we are temporarily deferring non-critical capital investments, including major investments for capacity expansion. Investments towards the Bangladesh expansion is expected to be limited for the next six months to the construction of the foundation for the first plant in the complex, which in relation to the total estimated cost of the project is a relatively small investment.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

The following table provides a summary of our primary manufacturing operations by geographic area:

United States

Central America

Caribbean Basin

Asia

Yarn-spinning facilities⁽¹⁾:

conversion of cotton, polyester and other fibres into yarn

■ Clarkton, NC

■ Cedartown, GA

■ Salisbury, NC

(2 facilities)

■ Mocksville, NC

■ Eden, NC

Textile facilities: knitting yarn into fabric, dyeing and cutting fabric

■ Honduras

(4 facilities)

■ Dominican

Republic

■ Bangladesh

Sewing facilities⁽²⁾:

assembly and sewing of cut goods

■ Honduras

(3 facilities)

■ Nicaragua

(3 facilities)

■ Dominican

Republic

(3 facilities)

■ Bangladesh

Garment-dyeing⁽³⁾:

pigment dyeing or reactive dyeing process

■ Honduras

Hosiery manufacturing facilities:

conversion of yarn into finished socks

■ Honduras

(1) While the majority of our yarn requirements are internally produced, we also use third-party yarn-spinning suppliers, primarily in the U.S., to satisfy the remainder of our yarn needs.

(2) Although the majority of our sewing facilities are Company-operated, we also use the services of third-party sewing contractors, primarily in Haiti and other regions in Central America, to satisfy the remainder of our sewing requirements.

(3) Garment dyeing is a feature of our Comfort Colors® products only, which involves a different dyeing process than how we typically dye the majority

of our products. Our garment dyeing operations are located in our Rio Nance 3 facility in Honduras.

3.2.3 Genuine Responsibility®

Embedded in our long-term vision of 'Making Apparel Better', our commitment to operating responsibly and integrating sustainability into our business practices is a key part of our business strategy and has been an important element of our success. Over the past two decades, we have developed our Genuine Responsibility® Corporate Responsibility program, incorporating industry-leading guidelines to govern our business activities and operations, and to provide a framework for responsible labour practices, sustainability programs, and social initiatives. Our program is centered around three fundamental priorities, namely 'Caring for our People', 'Conserving the Environment', and 'Creating Stronger Communities'.

We are committed to empowering our people through training and development programs and providing industry leading working conditions and progressive compensation packages at each of our worldwide locations. Our efforts around conserving the environment include the investment in and implementation of innovative solutions that reduce the environmental impact of our operations throughout our supply chain, including responsibly managing water usage, wastewater, energy, carbon emissions, and solid waste. We also strive to create stronger communities in all regions where we operate through dedicated support for education, active living, entrepreneurship, and environmental stewardship initiatives.

Gildan recognizes that transparency is an important driver of our ongoing efforts, allowing closer engagement with a wide array of stakeholders, and is proud to have published its sixteenth consecutive annual Environmental, Social and Governance (ESG) Report in 2020. Reported under the stringent GRI-Comprehensive guidelines, this report describes our progress, challenges, and future goals and initiatives. We are proud of our accomplishments in the area of corporate responsibility and the recognitions we have earned, including our seventh consecutive inclusion in the Dow Jones Sustainability Index and our 12^th FundahRSE CSR seal. We remain committed to furthering our efforts in the areas of focus we have outlined as part of our Genuine Responsibility® program. Please refer to www.genuineresponsibility.com for more information.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

3.2.4 Sales, marketing and distribution

Our global sales and marketing office is located in Christ Church, Barbados, out of which we have established customer-related functions, including sales management, marketing, customer service, credit management, sales forecasting, and production planning, as well as inventory control and logistics. We also maintain sales support offices in the U.S. We have established extensive distribution operations primarily through internally managed and operated distribution centres. We distribute our products primarily out of large Company-operated U.S. distribution centres and smaller facilities in the U.S., as well as out of our Company-owned distribution facility in Honduras. To supplement some of our distribution needs, we also use third-party warehouses in North America, Europe, and Asia.

3.2.5 Employees and corporate office

During the second quarter of 2020, we continued to manage and align our operations with the current demand environment, and taking into consideration the uncertainty that remains with respect to the ultimate impact of the virus and the pace at which global economies will recover, we reduced our overall manufacturing workforce by approximately 6,000 employees adjusting to the current demand environment, and our SG&A workforce by approximately 380 employees.

We currently employ approximately 46,000 employees worldwide. Our corporate head office is located in Montreal, Canada.

3.3 Competitive environment

The basic apparel market for our products is highly competitive and continuously evolving. Changing market dynamics, such as the growth of online shopping, declining store traffic trends, as well as retailer closures and consolidation, are intensifying competition. Competition is generally based upon price, quality and consistency, comfort, fit, style, brand, and service. We compete on these factors by leveraging our competitive strengths, including our strategically located manufacturing operations and supply chain, scale, cost structure, global distribution, and our brand positioning in the markets we serve. Not all of our competitors manufacture their own products and among those competitors that do, we believe we are more vertically-integrated. More specifically, our vertical integration begins with owning and operating large-scale yarn-spinning facilities, where we produce yarn, which is then used to produce textile in our textile operations, before being cut and assembled in our Company-operated sewing facilities. We believe our manufacturing skill set together with the significant supply chain infrastructure that we have developed, and in which we have made significant capital investments over time, are key competitive strengths.

We face competition from large and smaller U.S.-based and foreign manufacturers or suppliers of basic family apparel. Among the larger competing North American-based manufacturers are Fruit of the Loom, Inc., a subsidiary of Berkshire Hathaway Inc., which competes through its own brand offerings and those of its subsidiary, Russell Corporation, as well as Hanesbrands Inc. These companies manufacture out of some of the same geographies as Gildan and compete primarily within the same basic apparel product categories in similar channels of distribution in North America and international markets. In socks and underwear, our competitors also include Renfro Corporation, Jockey International, Inc., and Kayser Roth Corporation. In addition, we compete with smaller U.S.-based companies selling to or operating as wholesale distributors of imprintable activewear products, including Next Level Apparel, Color Image Apparel, Inc. (owner of the Bella + Canvas brand), and Delta Apparel Inc., as well as Central American and Mexican manufacturers that supply products in the imprintables channel. Competing brands also include various private label brands controlled and sold by many of our customers, including wholesale distributors within the imprintables channel and retailers. In recent years, we have seen an increase in private label offerings, particularly within the mass retail channel, replacing branded offerings. While private brands may compete against our own brands, the shift to private brand offerings by retailers is also presenting the Company with revenue-generating opportunities, as these retailers seek strategic suppliers with the type of manufacturing capabilities that we can provide to support their offerings.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

4.0 STRATEGY AND OBJECTIVES

We execute our strategy by leveraging our competitive strengths, including our manufacturing excellence, our large-scale, low-cost vertically-integrated supply chain, our reputation for leading sustainable and ethical practices, our strong brands and long-standing customer relationships, as well as the talent of our people.

Two years ago, we embarked on our “Back to Basics” plan to simplify our business and optimize operations by removing some of the complexity that had built up into our business over the years through acquisitions. We started to execute on our plans early in 2018 when we realigned our organizational structure and consolidated our business segments into one front-end organization, streamlining administrative, marketing, and merchandising functions and consolidating certain warehouse distribution activities. In 2019, we began to expand on various optimization initiatives and have taken further actions in 2020. We are continuing to focus on the following main areas: i) simplifying our product portfolio and rationalizing less productive styles or stock-keeping-units (SKUs), while introducing new products in under-penetrated North American and international growth areas; ii) driving manufacturing cost advantage and flexibility by enhancing our production capabilities through new capacity expansion in Central America and Bangladesh and consolidating higher-cost textile, sock, and sewing facilities within our existing manufacturing base; and iii) optimizing our distribution network and infrastructure by leveraging our imprintables distributor network, including exiting ship-to-the-piece activities, as well as leveraging the distribution capabilities of our retail and e-commerce partners. Our Back to Basics approach is to focus on what we do best and remain close to the roots of our success, of being a world-class manufacturer of basic apparel and leveraging our core competencies to drive our four main strategic growth drivers.

4.1 Growing share with imprintable brands

Several trends in imprintables are contributing positively to overall growth prospects, including the arrival of online players offering custom printed products and making decorated apparel more accessible to individuals and small businesses. Furthermore, advancements in digital printing, in terms of speed, affordability and quality, as well as reducing the barriers to entry with lower set-up costs compared to traditional screen printing, have created new opportunities for decorators and online players.

4.1.1. Driving market share growth in higher value ring-spun products

In the North American imprintables channel, the Company historically focused on the basics category of activewear products, manufactured primarily from open-end cotton yarn and tubular manufacturing production, and over the years gained significant market share with the Gildan® brand becoming the leader in this category. In more recent years, we have seen an acceleration of demand for softer and lighter fabrics, often referred to as fashion basics products. These products are produced with higher quality ring-spun cotton yarns and/or blended yarn fibres and may feature more fitted silhouettes, side-seam stitching, and stretch attributes, among other characteristics. Over the last few years, we started to position ourselves to compete and gain market share in this category of imprintables. We developed and acquired brands which we believe are well positioned to drive growth in fashion basics. We invested in developing our own yarn-spinning manufacturing facilities, thereby securing our own cost-effective ring-spun yarn supply. In addition, in our newest textile facility Rio Nance 6, we have invested in new equipment geared for more efficient production of fashion basics. Our portfolio of fashion basics brands under the Gildan® brand umbrella for the value-oriented customer includes the Gildan® Softstyle®, Gildan® Hammer™, and Anvil® by Gildan® brands. In addition, under the Gildan Performance® line we market products featuring moisture wicking and anti-microbial properties for long-lasting comfort and performance. Our higher price point fashion offerings include the American Apparel® brand positioned as a premium brand in fashion basics, and the Comfort Colors® brand, also a premium brand, which features garment-dyed activewear products. With a comprehensive portfolio, covering a wide range of fabrications, weights, and styles at different price points, supported by cost-effective manufacturing operations, including yarn capabilities, we believe we are well positioned to drive market leadership for higher value ring-spun products, reinforce our core brands, and grow in under-penetrated categories.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

4.1.2. Driving international growth

We are also pursuing further growth within the imprintables channel of international markets, focusing on Europe, Asia-Pacific, and Latin America, where we estimate the addressable market opportunity in aggregate to be large. We have plans to expand our manufacturing capacity in Bangladesh, as described in Section 3.2.2 to support further penetration in these markets where our growth has been somewhat restricted by capacity availability. We believe the expansion of manufacturing capabilities in Bangladesh, with the development of a large multi-plant manufacturing complex, will enhance our positioning to service international markets and support other key sales growth drivers. The planned incremental capacity from Bangladesh is expected to allow us to fully service the European and Asian markets from Bangladesh and free up capacity in Central America, which is currently used to support some of our requirements for the European market. Freed up capacity in Central America is expected to be used to support incremental sales growth in North America and Latin America. Further to expanding manufacturing capacity in support of driving international imprintables growth, we also intend to leverage the breadth of our core North American product line to further develop and broaden our international product offering and enhance the profitability mix of our international sales.

4.2 Driving new opportunities with our retail brands

Gildan's retail brands, including Gildan®, American Apparel®, GoldToe®, Peds®, Secret® and related brand extensions, as well as Under Armour®, a licensed brand for socks, are well established within the retail channel, with presence in both brick and mortar stores and online platforms. E-commerce is increasingly gaining share in the retail industry and we recognize that there is opportunity to grow our brand presence online. We are targeting to grow the sales of our brands with retailers, focusing on customers with omni-channel presence. Under our Back to Basics strategy we are focusing on our core competencies, offering our customers large-scale reliable manufacturing for high quality products at attractive prices while we seek to leverage the reach and strength of our customers' e-commerce infrastructure and extensive distribution capabilities.

4.3 Capitalizing on shift to private brands

In recent years, we have seen a resurgence of private label brands by traditional retailers trying to differentiate their offering and enhance profitability. While we continue to pursue sales growth with our own brands, in light of the rising trend of retailers shifting focus to proprietary private label brands, particularly mass merchants, we recognize our strong positioning to supply retailers who are seeking low-cost, large-scale reliable manufacturers to support their private label program requirements. We intend to pursue private label programs aligned with our operational and financial criteria, including product and SKU complexity and size of program, financial return targets, duration of the agreement, and working capital investment requirements, among other considerations. We have also developed strong relationships with, and are targeting to grow our sales as a supply chain partner to, select leading global athletic and lifestyle brands for which we manufacture products, but against which our brands do not compete directly. These customers market their brands through their own retail stores, online and/or in other retailer outlets. We believe we are well positioned to service global brands that are increasingly looking to source from manufacturers that meet rigorous quality and social compliance criteria and are strategically located in the Western Hemisphere. Additionally, the majority of our sales to global lifestyle brands is primarily derived from the sale of activewear products. In recent years, we have expanded to also selling sock products to one of our global brand customers. We believe there is an opportunity to leverage our relationships with these customers to continue to grow our sales in activewear and expand into the other product categories we manufacture, such as socks and underwear.

4.4 Enhancing sales and earnings growth with acquisitions that complement our strategy

We believe we can enhance our sales and earnings growth with complementary strategic acquisitions which meet our criteria. Over the past decade, we have completed acquisitions which have added brands to our portfolio or expanded our product offering, enhanced our manufacturing capabilities, or expanded our distribution or presence in geographical markets. The three main considerations around which we have developed our criteria for evaluating acquisition opportunities include: (1) strategic fit; (2) ease of integration; and (3) financial targets, including return on investment thresholds, based on our risk-adjusted cost of capital.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

5.0 OPERATING RESULTS

5.1 Non-GAAP financial measures

We use non-GAAP financial measures (non-GAAP measures) to assess our operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. In this MD&A, we use non-GAAP measures including adjusted net earnings, adjusted diluted EPS, adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted operating margin, adjusted EBITDA, free cash flow, total indebtedness and net indebtedness, and net debt leverage ratio to measure our performance and financial condition from one period to the next, which excludes the variation caused by certain adjustments that could potentially distort the analysis of trends in our operating performance, and because we believe such measures provide meaningful information on the Company’s financial condition and financial performance.

We refer the reader to section 16.0 entitled “Definition and reconciliation of non-GAAP financial measures” in this MD&A for the definition and complete reconciliation of all non-GAAP measures used and presented by the Company to the most directly comparable IFRS measures.

5.2 Summary of quarterly results

The table below sets forth certain summarized unaudited quarterly financial data for the eight most recently completed quarters. This quarterly information is unaudited and has been prepared in accordance with IFRS. The operating results for any quarter are not necessarily indicative of the results to be expected for any future period.


For the three months ended (in $ millions, except share and per share amounts or otherwise indicated)	Jun 28, 2020	Mar 29, 2020	Dec 29, 2019	Sep 29, 2019	Jun 30, 2019	Mar 31, 2019	Dec 30, 2018	Sep 30, 2018


Net sales	229.7	459.1	658.7	739.7	801.6	623.9	742.7	754.4
Net earnings (loss)	(249.7)	(99.3)	32.5	104.9	99.7	22.7	59.6	114.3
Net earnings (loss) per share:
Basic⁽¹⁾	(1.26)	(0.50)	0.16	0.51	0.49	0.11	0.29	0.55
Diluted⁽¹⁾	(1.26)	(0.50)	0.16	0.51	0.49	0.11	0.29	0.55
Weighted average number of shares outstanding (in ‘000s):
Basic	198,201	198,624	201,407	203,684	204,960	206,595	206,796	207,926
Diluted	198,201	198,624	201,593	204,263	205,520	207,057	207,122	208,161

(1) Quarterly EPS may not add to year-to-date EPS due to rounding.

Certain minor rounding variances exist between the unaudited condensed interim consolidated financial statements and this summary.

5.2.1 Seasonality and other factors affecting the variability of results and financial condition

Our results of operations for interim and annual periods are impacted by the variability of certain factors, including, but not limited to, changes in end-use demand and customer demand, our customers’ decision to increase or decrease their inventory levels, changes in our sales mix, and fluctuations in selling prices and raw material costs. While our products are sold on a year-round basis, our business experiences seasonal changes in demand which result in quarterly fluctuations in operating results. Although certain products have seasonal peak periods of demand, competitive dynamics may influence the timing of customer purchases causing seasonal trends to vary somewhat from year to year. Historically, demand for T-shirts is lowest in the fourth quarter and highest in the second quarter of the year, when distributors purchase inventory for the peak summer selling season. Demand for fleece is typically highest in advance of the fall and winter seasons, in the second and third quarters of the year. Sales of hosiery and underwear are higher during the second half of the year, during the back-to-school period and the Christmas holiday selling season. These seasonal sales trends of our business also result in fluctuations in our inventory levels throughout the year. For fiscal 2020, net sales and inventory levels are not expected to follow historical patterns of seasonality due to the impact of the COVID-19 pandemic.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

Our results are also impacted by fluctuations in the price of raw materials and other input costs. Cotton and polyester fibres are the primary raw materials used in the manufacture of our products, and we also use chemicals, dyestuffs, and trims, which we purchase from a variety of suppliers. Cotton prices are affected by consumer demand, global supply, which may be impacted by weather conditions in any given year, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus consumer countries, and other factors that are generally unpredictable. While we enter into purchase contracts and derivative financial instruments in advance of delivery to establish firm prices for the cotton component of our yarn requirements, our realized cotton costs can fluctuate significantly between interim and annual reporting periods. Energy costs in our results of operations are also affected by fluctuations in crude oil, natural gas, and petroleum prices, which can also influence transportation costs and the cost of related items used in our business, such as polyester fibres, chemicals, dyestuffs, and trims. Changes in raw material costs are initially reflected in the cost of inventory and only impact net earnings when the respective inventories are sold.

Business acquisitions may affect the comparability of results. There have not been any significant business acquisitions during the last eight quarters. In addition, management decisions to consolidate or reorganize operations, including the closure of facilities, may result in significant restructuring costs in an interim or annual period. Subsection 5.4.5 entitled “Restructuring and acquisition-related costs” in this MD&A contains a discussion of costs related to the Company’s restructuring actions and business acquisitions. The effect of asset write-downs, including allowances for expected credit losses, provisions for discontinued inventories, and impairments of long-lived assets can also affect the variability of our results. As part of our Back to Basics strategy, we recorded charges of $55 million that affected net earnings in the fourth quarter of fiscal 2019, related to the significant reduction of our imprintables product line SKU count in connection with our exit of all ship-to-the-piece activities and the discontinuance of overlapping and less productive styles and SKUs between brands. In the first and second quarters of 2020, we recorded additional charges of $8 million and $26.0 million, respectively, related to our strategic initiative to significantly reduce our imprintables product line SKU count. Subsection 5.4.4 entitled "Impairment of trade accounts receivable" in this MD&A contains a discussion of allowances for expected credit losses, including an impairment of trade accounts receivable of $20.8 million in the first quarter of fiscal 2020, followed by a recovery in the impairment of trade accounts receivable of $6.3 million in the second quarter of fiscal 2020, and an impairment of trade accounts receivable of $24.4 million in the first quarter of fiscal 2019. Subsection 5.4.6 entitled "Impairment of goodwill and intangible assets" in this MD&A contains a discussion relating to the impairment charge of $94.0 million for the Hosiery cash-generating unit (CGU) that was recorded in the first quarter of fiscal 2020.

Our results of operations for the three and six months ended June 28, 2020, were negatively affected by the significant downturn in demand as a result of the COVID-19 pandemic, as explained in section 3.0 of this MD&A entitled “Update on COVID-19-related impacts and Back to Basics initiatives" and in this section 5.

Our reported amounts for net sales, cost of sales, SG&A expenses, and financial expenses/income are impacted by fluctuations in certain foreign currencies versus the U.S. dollar as described in the “Financial risk management” section of this MD&A. The Company periodically uses derivative financial instruments to manage risks related to fluctuations in foreign exchange rates.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

5.3 Selected financial information


(in $ millions, except per share amounts or otherwise indicated)	Three months ended												Six months ended
			Jun 28, 2020		Jun 30, 2019	Variation						Jun 28, 2020	Jun 30, 2019		Variation
								$		%						$	%
Net sales	229.7		801.6		(571.9)	(71.3)	%	688.8		1,425.6		(736.8)	(51.7)	%
Gross profit (loss)	(148.5)		222.8		(371.3)	n.m.		(41.9)		383.5		(425.4)	n.m.
Adjusted gross profit (loss)⁽¹⁾	(122.5)		222.8		(345.3)	n.m.		(7.9)		383.5		(391.4)	n.m.
SG&A expenses	64.9		92.0		(27.1)	(29.5)	%	138.9		185.0		(46.1)	(24.9)	%
Impairment (reversal of impairment) of trade accounts receivable	(6.3)		0.4		(6.7)	n.m.		14.5		24.8		(10.3)	(41.5)	%
Restructuring and acquisition-related costs	29.0		16.3		12.7	77.9	%	39.2		26.9		12.3	45.7	%
Impairment of goodwill and intangible assets	—		—		—	n.m.		94.0		—		94.0	n.m.
Operating income (loss)	(236.1)		114.1		(350.2)	n.m.		(328.4)		146.8		(475.2)	n.m.
Adjusted operating income (loss)⁽¹⁾	(181.1)		130.4		(311.5)	n.m.		(161.2)		173.7		(334.9)	n.m.
Adjusted EBITDA⁽¹⁾	(137.2)		174.5		(311.7)	n.m.		(87.0)		257.8		(344.8)	n.m.
Financial expenses	16.1		10.6		5.5	51.9	%	24.0		19.7		4.3	21.8	%
Income tax (recovery) expense	(2.5)		3.8		(6.3)	n.m.		(3.4)		4.7		(8.1)	n.m.
Net earnings (loss)	(249.7)		99.7		(349.4)	n.m.		(349.0)		122.4		(471.4)	n.m.
Adjusted net earnings⁽¹⁾	(196.6)		115.0		(311.6)	n.m.		(185.4)		147.8		(333.2)	n.m.
Basic EPS	(1.26)		0.49		(1.75)	n.m.		(1.76)		0.59		(2.35)	n.m.
Diluted EPS	(1.26)		0.49		(1.75)	n.m.		(1.76)		0.59		(2.35)	n.m.
Adjusted diluted EPS⁽¹⁾	(0.99)		0.56		(1.55)	n.m.		(0.93)		0.72		(1.65)	n.m.
Gross margin	(64.6)	%	27.8	%	n/a	(92.4) pp		(6.1)	%	26.9	%	n/a	(33.0) pp
Adjusted gross margin⁽¹⁾	(52.2)	%	27.8	%	n/a	(80.0) pp		(1.1)	%	26.9	%	n/a	(28.0) pp
SG&A expenses as a percentage of sales	28.3	%	11.5	%	n/a	16.8 pp		20.2	%	13.0	%	n/a	7.2 pp
Operating margin	(102.8)	%	14.2	%	n/a	(117.0) pp		(47.7)	%	10.3	%	n/a	(58.0) pp
Adjusted operating margin⁽¹⁾	(77.2)	%	16.3	%	n/a	(93.5) pp		(23.0)	%	12.2	%	n/a	(35.2) pp

n.m. = not meaningful

n/a = not applicable


	Jun 28, 2020	Dec 29, 2019	Variation
						$	%
Total assets	3,251.6	3,211.1	40.5	1.3	%
Total non-current financial liabilities	1,367.0	845.0	522.0	61.8	%
Net indebtedness⁽¹⁾	987.3	862.4	124.9	14.5	%

Quarterly cash dividend declared per common share	n/a	0.134	n/a	n/a
Net debt leverage ratio⁽¹⁾⁽²⁾	4.9	1.6	n/a	n/a

n/a = not applicable

(1) See section 16.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A.

(2) The Company's net debt to EBITDA ratio for purposes of its loan and note agreements was 2.0 at June 28, 2020.

Certain minor rounding variances exist between the unaudited condensed interim consolidated financial statements and this summary.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

5.4 Operating review


	Three months ended								Six months ended
(in $ millions, or otherwise indicated)	Jun 28, 2020	Jun 30, 2019	Variation				Jun 28, 2020	Jun 30, 2019	Variation
						$			%		$	%

Activewear	131.6	665.6	(534.0)	(80.2)	%	504.2	1,159.2	(655.0)	(56.5)	%
Hosiery and underwear⁽¹⁾	98.1	136.0	(37.9)	(27.9)	%	184.6	266.4	(81.8)	(30.7)	%
Total net sales	229.7	801.6	(571.9)	(71.3)	%	688.8	1,425.6	(736.8)	(51.7)	%

(1) Also includes intimates and other fringe products.

Certain minor rounding variances exist between the unaudited condensed interim consolidated financial statements and this summary.

Sales for the three and six months ended June 28, 2020 were down 71.3% and 51.7%, respectively, compared to the same periods last year, reflecting declines in activewear and in the hosiery and underwear categories. The decline in activewear sales in the second quarter and on a year-to-date basis stemmed primarily from lower sales volumes of imprintables in North America which were down approximately 75% in the quarter and 55% for the first six months of 2020 compared to the same periods last year. Internationally, unit sales volumes in activewear decreased approximately 55% in the second quarter and 45% on a year-to-date basis over the same periods in 2019. The unit sales volume declines were driven by the meaningful demand downturn as a result of the impact of the COVID-19 pandemic which resulted in negative POS for our products. In addition, we saw significant destocking by distributors as they serviced demand and managed working capital needs by drawing down their inventory levels. Consequently, inventories in the distributor channel at the end of the second quarter were meaningfully lower than last year. Sales in activewear also reflected the impact of higher promotional discounting in the quarter, including the sales discount accrual of $24.6 million related to the imprintables promotional incentives based on the ongoing sell-through of our products from distributors to screenprinters, as described in section 3.0 of this MD&A. Activewear sales volumes in retail were also down in the quarter and on a year-to-date basis as a result of the impacts of the COVID-19 pandemic which led to the widespread closure of retail stores starting during the latter part of March and extending through most of the second quarter, most notably impacting our business with department stores, national chains, sports specialty retailers and global lifestyle brand customers, partly offset by better sell-through in the craft, mass and online channels. The year-over-year decrease in sales in the hosiery and underwear category for the three and six months ended June 28, 2020, was also tied to retail store closures. The decline in this sales category was due to lower socks sales, which also included the impact of the exit of a sock program in the mass channel. Our sales performance in underwear was strong in the second quarter, up 23.5% over the prior year, reflecting double digit growth in private brand underwear and underwear products sold online, despite a decline in overall industry demand in the second quarter in this category according to data from NPD Retail tracking Service. Similarly, year-to-date underwear sales were up compared to last year driven primarily by higher sales of private brand men's underwear, partly offset by the COVID-19 impacted demand environment and the exit of a branded underwear program in the mass channel in 2019.

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

5.4.2 Gross profit and adjusted gross profit


	Three months ended									Six months ended
(in $ millions, or otherwise indicated)	Jun 28, 2020		Jun 30, 2019		Variation	Jun 28, 2020		Jun 30, 2019		Variation

Gross profit (loss)	(148.5)		222.8		(371.3)	(41.9)		383.5		(425.4)
Adjustment for:
Impact of strategic product line initiative⁽¹⁾	26.0		—		26.0	34.0		—		34.0
Adjusted gross profit (loss)⁽²⁾	(122.5)		222.8		(345.3)	(7.9)		383.5		(391.4)
Gross margin	(64.6)	%	27.8	%	(92.4) pp	(6.1)	%	26.9	%	(33.0) pp
Adjusted gross margin⁽²⁾	(52.2)	%	27.8	%	(80.0) pp	(1.1)	%	26.9	%	(28.0) pp

(1) For the three months ended June 28, 2020, includes $24.0 million of inventory write-downs included in cost of sales and the $2.0 million gross profit impact of a sales return allowance for anticipated product returns related to discontinued SKUs (which reduced net sales by $5.0 million and cost of sales by $3.0 million). For the six months ended June 28, 2020, includes $29.2 million of inventory write-downs included in cost of sales and the $4.8 million gross profit impact of a sales return allowance for anticipated product returns related to discontinued SKUs (which reduced net sales by $11.2 million and cost of sales by $6.4 million)

(2) See section 16.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A.

Certain minor rounding variances exist between the unaudited condensed interim consolidated financial statements and this summary.

We reported negative gross profit in the second quarter and for the first six months of 2020 primarily as a result of COVID-19 and Back to Basics related impacts on our business. The decline in gross profit and adjusted gross profit performance in both periods compared to last year was primarily due to lower unit sales volumes, the impact of the sales discount accrual of $24.6 million in the second quarter, and various costs and charges relating to the economic impacts of the COVID-19 pandemic. These included $85.9 million in the second quarter and $99.2 million on a year-to-date basis primarily for unabsorbed fixed manufacturing costs while production facilities were idle or operating well below normal capacity levels, inventory provisions and other asset charges totaling $60.6 million for the second quarter and $70.8 million year-to-date (of which $34.6 million and $36.8 million impacted the adjusted gross loss for the second quarter and first six months of 2020, respectively), and the impact of unwinding excess commodity derivative hedges and cotton commitments of $24.6 million in the second quarter.

5.4.3 Selling, general and administrative expenses (SG&A)


	Three months ended									Six months ended
(in $ millions, or otherwise indicated)	Jun 28, 2020		Jun 30, 2019		Variation	Jun 28, 2020		Jun 30, 2019		Variation

SG&A expenses	64.9		92.0		(27.1)	138.9		185.0		(46.1)
SG&A expenses as a percentage of sales	28.3	%	11.5	%	16.8 pp	20.2	%	13.0	%	7.2 pp

Certain minor rounding variances exist between the unaudited condensed interim consolidated financial statements and this summary.

The decline in SG&A expenses for the second quarter and first six months of 2020 compared to the same periods last year was due mainly to lower compensation, lower volume-related distribution costs and cost containment efforts.

5.4.4 Impairment of trade accounts receivable

For the three months ended June 28, 2020, we recovered $6.3 million of impairment in trade accounts receivable, compared to an impairment of trade accounts receivable of $0.4 million for the three months ended June 30, 2019. For the six months ended June 28, 2020, impairment of trade accounts receivable was $14.5 million, reflecting an impairment in trade accounts receivable of $20.8 million in the first quarter of fiscal 2020, and a recovery in the impairment of trade accounts receivable of $6.3 million in the second quarter of fiscal 2020, compared to $24.8 million for the six months ended June 30, 2019, which largely related to the first quarter of fiscal 2019.

Although we did not incur any significant customer-specific write-offs of trade accounts receivable, the impairment of trade accounts receivable for the six months ended June 28, 2020 was mainly related to an increase in the estimate of expected credit losses (ECLs) attributable to the heightened credit risk caused by the COVID-19 pandemic as described in note 4 to the unaudited condensed interim consolidated financial statements as at and for the three and six months ended June 28, 2020. Following the impairment of trade accounts receivable of $20.8 million in the first quarter of fiscal 2020 to reflect additional ECLs due to the COVID-19 economic impacts and uncertainties, a partial

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			MANAGEMENT'S DISCUSSION AND ANALYSIS

recovery of the impairment of trade accounts receivable was recorded during the second quarter of fiscal 2020 due to a decrease in accounts receivable trade balances. The impairment of trade accounts receivable for the six months ended June 30, 2019 consisted primarily of a $21.7 million charge relating to the receivership and liquidation of one of the Company's U.S. distributor customers.

5.4.5 Restructuring and acquisition-related costs


	Three months ended					Six months ended
(in $ millions, or otherwise indicated)	Jun 28, 2020	Jun 30, 2019	Variation	Jun 28, 2020	Jun 30, 2019	Variation

Employee termination and benefit costs	5.0	5.7	(0.7)	8.0	7.1	0.9
Exit, relocation and other costs	2.8	6.4	(3.6)	7.8	9.3	(1.5)

Net loss on disposal, write-downs, and accelerated depreciation of property, plant and equipment, right-of-use assets and software related to exit activities	21.3	4.1	17.2	23.3	10.4	12.9

	29.1	16.2	12.9	39.1	26.8	12.3

Certain minor rounding variances exist between the unaudited condensed interim consolidated financial statements and this summary.

Restructuring and acquisition-related costs for the six months ended June 28, 2020 related to the following: $22.1 million for the closure of a yarn-spinning plant in the U.S., including accelerated depreciation of right-of-use assets and equipment; $6.5 million for the closure of textile manufacturing and sewing operations in Mexico; $5.2 million for the exit of ship-to-the-piece activities, including computer software write-downs and warehouse consolidation costs; $2.1 million for SG&A workforce reductions; and $3.3 million in other costs, including costs incurred to complete restructuring activities that were initiated in fiscal 2019.

Restructuring and acquisition-related costs for the six months ended June 30, 2019 related to the following: $6.0 million for the exit of yarn recycling activities, including the planned disposal of yarn recycling equipment; $5.5 million for the closure of a hosiery manufacturing plant in Canada; $5.4 million for the consolidation of sewing activities, primarily in Honduras; $2.6 million for the closure of a yarn-spinning plant in the U.S.; $1.4 million for the closure of an administrative office in the U.S.; $1.4 million for the closure of a distribution centre in the U.S.; and $4.6 million in other costs to complete restructuring activities that were initiated in fiscal 2018, including the closure of the AKH textile manufacturing facility and the consolidation of U.S. distribution centres.


(in $ millions)	Jun 28, 2020	Dec 29, 2019	Variation

Cash and cash equivalents	465.9	64.1	401.8
Trade accounts receivable	158.6	320.9	(162.3)
Income taxes receivable	2.2	—	2.2
Inventories	1,032.7	1,052.1	(19.4)
Prepaid expenses, deposits and other current assets	51.7	77.1	(25.4)


Accounts payable and accrued liabilities	(345.8)	(406.6)	60.8

Income tax payable	—	(1.3)	1.3

Current portion of lease obligations	(15.6)	(14.5)	(1.1)


Total working capital	1,349.7	1,091.8	257.9


(in $ millions)	Property, plant and equipment	Right-of-use assets	Intangible assets	Goodwill

Balance, December 29, 2019	995.0	73.5	383.9	227.9
Net capital additions	14.7	12.9	2.3	—


Depreciation and amortization	(55.5)	(7.3)	(10.8)	—

Write-downs, impairments, and accelerated depreciation	(6.0)	(15.7)	(74.6)	(21.3)
Balance, June 28, 2020	948.2	63.4	300.8	206.6


(in $ millions)	Jun 28, 2020	Dec 29, 2019	Variation

Deferred income tax assets	13.1	9.9	3.2
Other non-current assets	8.3	6.7	1.6
Long-term debt	(1,367.0)	(845.0)	(522.0)
Lease obligations	(70.6)	(67.0)	(3.6)

Other non-current liabilities	(42.4)	(42.2)	(0.2)


	Three months ended					Six months ended
(in $ millions)	Jun 28, 2020	Jun 30, 2019	Variation	Jun 28, 2020	Jun 30, 2019	Variation

Net earnings	(249.7)	99.7	(349.4)	(349.0)	122.4	(471.4)
Adjustments to reconcile net earnings to cash flows from (used in) operating activities⁽¹⁾	88.1	61.4	26.7	209.5	107.7	101.8
Changes in non-cash working capital balances	343.4	(81.6)	425.0	111.9	(255.8)	367.7

Cash flows from (used in) operating activities	181.8	79.5	102.3	(27.6)	(25.7)	(1.9)


	Three months ended					Six months ended
(in $ millions)	Jun 28, 2020	Jun 30, 2019	Variation	Jun 28, 2020	Jun 30, 2019	Variation

Purchase of property, plant and equipment	(3.9)	(53.6)	49.7	(24.7)	(73.4)	48.7
Purchase of intangible assets	(1.3)	(2.4)	1.1	(6.2)	(5.4)	(0.8)
Business acquisitions	—	—	—	—	(1.3)	1.3
Proceeds on disposal of property, plant and equipment	0.5	2.4	(1.9)	0.5	2.7	(2.2)
Cash flows used in investing activities	(4.7)	(53.6)	48.9	(30.4)	(77.4)	47.0


	Effective interest rate ⁽¹⁾	Principal amount			Maturity date
(in $ millions, or otherwise indicated)			Jun 28, 2020	Dec 29, 2019

Revolving long-term bank credit facility, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 3%⁽²⁾	2.3%	367.0	245.0	April 2025

Term loan, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 3%, payable monthly⁽³⁾	2.2%	300.0	300.0	April 2025
Term loan, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1.7% to 3%, payable monthly⁽³⁾	2.2%	400.0	—	April 2022
Notes payable, interest at fixed rate of 2.70%, payable semi-annually⁽⁴⁾	2.7%	100.0	100.0	August 2023
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.53%, payable quarterly⁽⁴⁾	2.7%	50.0	50.0	August 2023
Notes payable, interest at fixed rate of 2.91%, payable semi-annually⁽⁴⁾	2.9%	100.0	100.0	August 2026
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.57%, payable quarterly⁽⁴⁾	2.9%	50.0	50.0	August 2026
		1,367.0	845.0


(in $ millions)	Carrying amount	Contractual cash flows	Less than 1 year	1 to 3 years	4 to 5 years	More than 5 years

Accounts payable and accrued liabilities	345.8	345.8	345.8	—	—	—
Long-term debt⁽¹⁾	1,367.0	1,367.0	—	400.0	817.0	150.0
Purchase and other obligations	—	396.4	290.6	85.3	20.4	0.1
Lease obligations	86.2	101.3	20.3	29.0	17.5	34.5
Total contractual obligations	1,799.0	2,210.5	656.7	514.3	854.9	184.6


	June 28, 2020		December 29, 2019
Current assets:
Cash and cash equivalents	$	465,947	$	64,126
Trade accounts receivable (note 4)	158,562		320,931
Income taxes receivable	2,244		—
Inventories (note 5)	1,032,701		1,052,052
Prepaid expenses, deposits and other current assets	51,655		77,064

Total current assets	1,711,109		1,514,173
Non-current assets:
Property, plant and equipment	948,236		994,980
Right-of-use assets	63,352		73,539
Intangible assets (note 6)	300,845		383,864
Goodwill (note 6)	206,636		227,865
Deferred income taxes	13,102		9,917
Other non-current assets	8,310		6,732
Total non-current assets	1,540,481		1,696,897
Total assets	$	3,251,590	$	3,211,070
Current liabilities:
Accounts payable and accrued liabilities	$	345,761	$	406,631

Income taxes payable	—		1,255
Current portion of lease obligations (note 9(d))	15,553		14,518


Total current liabilities	361,314		422,404
Non-current liabilities:
Long-term debt (note 7)	1,367,000		845,000
Lease obligations (note 9(d))	70,634		66,982

Other non-current liabilities	42,363		42,190
Total non-current liabilities	1,479,997		954,172
Total liabilities	1,841,311		1,376,576
Equity:
Share capital	174,604		174,218
Contributed surplus	29,914		32,769
Retained earnings	1,225,666		1,628,042
Accumulated other comprehensive income (loss)	(19,905)		(535)
Total equity attributable to shareholders of the Company	1,410,279		1,834,494
Total liabilities and equity	$	3,251,590	$	3,211,070


	Share capital					Contributed surplus	Accumulated other comprehensive income (loss)				Retained earnings		Total equity
	Number	Amount
Balance, December 29, 2019	199,012	$	174,218	$	32,769		$	(535)	$	1,628,042	$	1,834,494


Share-based compensation	—	—		(2,671)			—		—		(2,671)
Shares issued under employee share purchase plan	40	744		—			—		—		744

Shares issued or distributed pursuant to vesting of restricted share units	11	387		(520)			—		—		(133)

Shares repurchased for cancellation	(843)	(744)		—			—		(22,472)		(23,216)

Share repurchases for settlement of non-Treasury RSUs	(2)	(1)		—			—		(26)		(27)

Dividends declared	—	—		336			—		(30,889)		(30,553)
Transactions with shareholders of the Company recognized directly in equity	(794)	386		(2,855)			—		(53,387)		(55,856)
Cash flow hedges (note 11)	—	—		—			(19,370)		—		(19,370)

Net loss	—	—		—			—		(348,989)		(348,989)
Comprehensive loss	—	—		—			(19,370)		(348,989)		(368,359)
Balance, June 28, 2020	198,218	$	174,604	$	29,914		$	(19,905)	$	1,225,666	$	1,410,279
Balance, December 30, 2018	206,732	$	159,858	$	32,490		$	3,382	$	1,740,342	$	1,936,072
Adjustments relating to the adoption of new accounting standards	—	—		—			—		(2,176)		(2,176)
Adjusted balance, December 31, 2018	206,732	159,858		32,490			3,382		1,738,166		1,933,896
Share-based compensation	—	—		12,314			—		—		12,314
Shares issued under employee share purchase plan	23	817		—			—		—		817
Shares issued pursuant to exercise of stock options	407	11,508		(3,115)			—		—		8,393
Shares issued or distributed pursuant to vesting of restricted share units	11	275		(754)			—		—		(479)

Shares repurchased for cancellation	(3,494)	(2,827)		—			—		(125,614)		(128,441)



Dividends declared	—	—		502			—		(56,117)		(55,615)
Transactions with shareholders of the Company recognized directly in equity	(3,053)	9,773		8,947			—		(181,731)		(163,011)
Cash flow hedges (note 11)	—	—		—			(11,925)		—		(11,925)

Net earnings	—	—		—			—		122,414		122,414
Comprehensive income (loss)	—	—		—			(11,925)		122,414		110,489
Balance, June 30, 2019	203,679	$	169,631	$	41,437		$	(8,543)	$	1,678,849	$	1,881,374


			NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


	June 28, 2020		December 29, 2019
Raw materials and spare parts inventories	$	152,327	$	152,584
Work in progress	60,047		75,535
Finished goods	820,327		823,933
	$	1,032,701	$	1,052,052


	June 28, 2020		December 29, 2019
Textile & Sewing:
Goodwill	$	206,636	$	206,637
Definite life intangible assets (excluding computer software)	30,292		33,066
Indefinite life intangible assets	93,400		93,400
	$	330,328	$	333,103
Hosiery:
Goodwill	$	—	$	21,228
Definite life intangible assets (excluding computer software)	67,420		101,906
Indefinite life intangible assets	86,129		129,272
	$	153,549	$	252,406


	Effective interest rate⁽¹⁾	Principal amount					Maturity date
				June 28, 2020		December 29, 2019
Revolving long-term bank credit facility, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 3%⁽²⁾	2.3%	$	367,000	$	245,000	April 2025
Term loan, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 3%, payable monthly⁽³⁾	2.2%	300,000		300,000		April 2025
Term loan, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1.7% to 3%, payable monthly⁽³⁾	2.2%	400,000		—		April 2022
Notes payable, interest at fixed rate of 2.70%, payable semi-annually⁽⁴⁾	2.7%	100,000		100,000		August 2023
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.53%, payable quarterly⁽⁴⁾	2.7%	50,000		50,000		August 2023
Notes payable, interest at fixed rate of 2.91%, payable semi-annually⁽⁴⁾	2.9%	100,000		100,000		August 2026
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.57%, payable quarterly⁽⁴⁾	2.9%	50,000		50,000		August 2026
		$	1,367,000	$	845,000


	June 28, 2020
Less than one year	$	20,320
One to five years	46,515
More than five years	34,518
	$	101,353


	June 28, 2020		December 29, 2019
Financial assets
Amortized cost:
Cash and cash equivalents	$	465,947	$	64,126
Trade accounts receivable	158,562		320,931
Financial assets included in prepaid expenses, deposits and other current assets	20,095		45,950
Long-term non-trade receivables included in other non-current assets	2,694		2,933
Derivative financial assets included in prepaid expenses, deposits and other current assets	6,744		9,816

Financial liabilities
Amortized cost:
Accounts payable and accrued liabilities⁽¹⁾	297,733		395,564

Long-term debt - bearing interest at variable rates	1,167,000		645,000
Long-term debt - bearing interest at fixed rates⁽²⁾	200,000		200,000
Derivative financial liabilities included in accounts payable and accrued liabilities	48,028		11,067